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The Bank has also received regulatory approvals for a de-novo branch in Sanger, California, which is scheduled to open
in the second quarter of 2016, and another branch in Bakersfield, California, although the timing of that opening remains
uncertain. In addition to our stand-alone offices the Bank has specialized lending units which include a real estate
industries center, an agricultural credit center, and an SBA lending unit. We also have ATMs at all branch locations
and offsite ATMs at six different non-branch locations. Furthermore, the Bank is a member of the Allpoint network,
which provides our customers with surcharge-free access to over 43,000 ATMs across the nation and another 12,000
ATMs in foreign countries, and our customers have access to electronic point-of-sale payment alternatives nationwide
via the Pulse EFT network. To ensure that account access preferences are addressed for all customers, we provide the
following options: an internet branch which provides the ability to open deposit accounts online; an online banking
option with bill-pay and mobile banking capabilities, including mobile check deposit; a customer service center that is
accessible by toll-free telephone during business hours; and an automated telephone banking system that is usually
accessible 24 hours a day, seven days a week. We offer a multitude of other banking products and services to comple-
ment and support our lending and deposit products, including remote deposit capture and automated payroll services
for business customers.
We have not engaged in any material research activities related to the development of new products or services during
the last two fiscal years. However, our officers and employees are continually searching for ways to increase public
convenience, enhance customer access to payment systems, and enable us to improve our competitive position. The
cost to the Bank for these development, operations, and marketing activities cannot be calculated with any degree of
certainty. We hold no patents or licenses (other than licenses required by bank regulatory agencies), franchises, or
concessions. Our business has a modest seasonal component due to the heavy agricultural orientation of the Central
Valley, but as our branches in more metropolitan areas have expanded we have become less reliant on the agriculture-
related base. We are not dependent on a single customer or group of related customers for a material portion of our
core deposits, but for loans we do have what could be considered to be industry concentrations in loans to the dairy
industry (10% of total loans), and to mortgage companies in the form of mortgage warehouse loans (16% of total loans).
Our efforts to comply with government and regulatory mandates on consumer protection and privacy, anti-terrorism,
and other initiatives have resulted in significant ongoing expense to the Bank, including staffing additions and costs
associated with compliance-related software. However, as far as can be determined there has been no material effect
upon our capital expenditures, earnings, or competitive position as a result of environmental regulation at the Federal,
state, or local level.
Recent Developments
In January 2016 the Company entered into a definitive agreement to acquire Coast Bancorp, the holding company for
Coast National Bank, which as of December 31, 2015 had $145 million in total assets, $94 million in loans, $24 million
in investment securities, and $127 million in deposits. Coast maintains offices in San Luis Obispo, Paso Robles, Arroyo
Grande, and Atascadero, California. We expect the transaction to be completed in the second quarter of 2016, subject
to customary closing conditions including the receipt of required regulatory approvals and the consent of Coast Bancorp
shareholders. One-time acquisition costs are expected to add roughly $3.2 million to the Company’s pre-tax non-
interest expense in 2016. Also announced in January 2016 was the Company’s agreement to acquire the Porterville
branch of Citizens Business Bank, including approximately $22 million in deposits and $1 million in loans which we
plan to consolidate into our Porterville Main office. Pending regulatory approvals, that transaction is also scheduled
for completion in the second quarter of 2016.
Recent Accounting Pronouncements
Information on recent accounting pronouncements is contained in Note 2 to the consolidated financial statements.
Competition
The banking business in California in general, and more specifically in many of our market areas, is highly competitive.
The industry continues to consolidate, particularly with the relatively large number of FDIC-assisted takeovers of failed
banks and other acquisitions of troubled banks in recent years. There are also many unregulated companies competing
for business in our markets with financial products targeted at profitable customer segments. Many of those companies
are able to compete across geographic boundaries and provide meaningful alternatives to significant banking products
and services. These competitive trends are likely to continue.