CENTRAL VALLEY COMMUNITY BANCORP (Form: 10-Q, Received: 11/14/2005 09:41:11)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000—31977

CENTRAL VALLEY COMMUNITY BANCORP

(Exact name of registrant as specified in its charter)

California		77-0539125
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

600 Pollasky Avenue, Clovis, California		93612
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number (559) 298-1775

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

State the number of shares outstanding of each of the issuer’s classes of common stock, as of November 10, 2005: 5,875,560 shares

CENTRAL VALLEY COMMUNITY BANCORP

2005 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART 1: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5 OTHER INFORMATION

ITEM 6 EXHIBITS

SIGNATURES

PART 1: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

CENTRAL VALLEY COMMUNITY BANCORP

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(In thousands, except share amounts)	September 30, 2005			December 31, 2004

ASSETS
Cash and due from banks	$	20,790		$	17,507
Federal funds sold	17,765			26,307
Total cash and cash equivalents	38,555			43,814
Interest bearing deposits with other banks	1,949			2,605
Available-for-sale investment securities (Amortized cost of $107,319 at September 30, 2005 and $98,421 at December 31, 2004)	106,948			98,983
Loans, less allowance for credit losses of $3,523 at September 30, 2005 and $2,697 at December 31, 2004	287,597			206,582
Bank premises and equipment, net	2,899			2,724
Bank owned life insurance	6,668			6,075
Federal Home Loan Bank stock	1,641			1,420
Goodwill	8,955
Intangible assets	1,339
Accrued interest receivable and other assets	5,137			5,944

Total assets	$	461,688		$	368,147

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	123,830		$	105,235
Interest bearing	286,876			220,951
Total deposits	410,706			326,186

Short-term borrowings	2,938			2,000
Long-term debt	3,562			6,500
Accrued interest payable and other liabilities	4,434			3,855

Total liabilities	421,640			338,541
Commitments and contingencies	—			—
Shareholders’ equity:
Preferred stock, no par value: 10,000,000 shares authorized, no shares issued or outstanding	—			—
Common stock, no par value; 80,000,000 shares authorized, 5,873,560 and 5,257,734 shares issued and outstanding at September 30, 2005 and December 31, 2004	12,962			6,343
Retained earnings	27,309			22,933
Accumulated other comprehensive (loss) income, net of tax	(223		)	330
Total shareholders’ equity	40,048			29,606

Total liabilities and shareholders’ equity	$	461,688		$	368,147

See notes to unaudited condensed consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANK

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

	For the Three Months Ended Sept. 30				For the Nine Months Ended Sept. 30
(In thousands except earnings per share amounts)	2005		2004		2005		2004
INTEREST INCOME:
Interest and fees on loans	$	5,521	$	3,393	$	15,180	$	9,530
Interest on Federal funds sold	136		56		418		112
Interest and dividends on investment securities:
Taxable	730		632		2,342		1,803
Exempt from Federal income taxes	297		210		884		626
Interest on deposits with other banks	20		13		49		23
Total interest income	6,704		4,304		18,873		12,094
INTEREST EXPENSE:	—
Interest on deposits	1,047		441		2,701		1,294
Other	65		42		186		149
Total interest expense	1,112		483		2,887		1,443
Net interest income before provision for credit losses	5,592		3,821		15,986		10,651
PROVISION FOR CREDIT LOSSES	10		—		10		—
Net interest income after provision for credit losses	5,582		3,821		15,976		10,651
NON-INTEREST INCOME:	—
Service charges	606		592		1,806		1,761
Loan placement fees	91		65		283		241
Net realized gain on sales of investment securities	10		—		82		483
Appreciation in cash surrender value of bank owned life insurance	54		38		157		146
Federal Home Loan Bank stock dividends	17		16		49		27
Other income	182		131		450		427
Total non-interest income	960		842		2,827		3,085
NON-INTEREST EXPENSES:	—
Salaries and employee benefits	2,353		1,897		7,098		5,650
Occupancy and equipment	534		413		1,593		1,197
Other expenses	1,066		841		3,291		2,776
Total non-interest expenses	3,953		3,151		11,982		9,623
Income before provision for income taxes	2,589		1,512		6,821		4,113
PROVISION FOR INCOME TAXES	940		544		2,445		1,459
Net income	$	1,649	$	968	$	4,376	$	2,654

Basic earnings per share	$	0.28	$	0.18	$	0.75	$	0.50
Diluted earnings per share	$	0.26	$	0.16	$	0.69	$	0.45

See notes to unaudited condensed consolidated financial statements

CENTRAL VALLEY COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2004

AND THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005

(Unaudited)

(In thousands, except share and per share amounts)						Retained Earnings			Accumulated Other Comprehensive Income (Loss) (Net of Taxes)			Shareholders’ Equity			Comprehensive Income

	Common Stock
	Shares		Amount

Balance, January 1, 2004	5,197,854		$	6,096		$	19,501		$	1,123		$	26,720
Comprehensive income
Net income						3,695						3,695			$	3,695
Other comprehensive income, net of tax:
Net change in unrealized gains on available-for-sale investment securities									(793		)	(793		)	(793		)
Total comprehensive income															$	2,902
Cash dividend - $0.05 per share						(263		)				(263		)
Stock options exercised and related tax benefit	77,880		460									460
Repurchase and retirement of common stock	(18,000	)	(213		)							(213		)

Balance, December 31, 2004	5,257,734		6,343			22,933			330			29,606
Comprehensive income
Net income						4,376						4,376			$	4,376
Other comprehensive loss, net of tax:
Net change in unrealized gains on available-for-sale investment securities									(553		)	(553		)	(553		)
Total comprehensive income															$	3,823
Stock issued for acquisition	522,106		6,079									6,079
Stock options exercised and related tax benefit	93,720		540									540

Balance, September 30, 2005	5,873,560		$	12,962		$	27,309		$	(223	)	$	40,048

See notes to unaudited condensed consolidated financial statements.

CENTRAL VALLEY COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2005 and 2004

(In thousands)	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,376		$	2,654
Adjustments to reconcile net income to net cash provided by operating activities:
Net increase in deferred loan fees	90			17
Depreciation, amortization and accretion, net	1,808			1,640
Provision for loan losses	10			—
Net realized gains on sales and calls of available-for-sale investment securities	(82		)	(483		)
Increase in bank owned life insurance, net of expenses	(153		)	(143		)
FHLB stock dividends	(49		)	(27		)
Loss on sale of equipment	—			1
Net decrease (increase) in accrued interest receivable and other assets	1,585			(1,263		)
Net increase (decrease) in accrued interest payable and other liabilities	301			(175		)

Net cash provided by operating activities	7,886			2,221

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in acquisition	13,844			—
Purchases of available for sale investment securities	(41,989		)	(22,756		)
Proceeds from sales or calls of available-for-sale investment securities	14,977			4,774
Proceeds from maturity of available-for-sale investment securities	—			1,000
Proceeds from principal repayments of available-for-sale investment securities	17,292			21,193
Net decrease (increase) in interest bearing deposits in other banks	656			(3,172		)
Net increase in loans	(36,087		)	(21,691		)
Purchases of premises and equipment	(527		)	(434		)
Purchases of bank owned life insurance	(440		)	—
Proceeds from sale of equipment	—			5
Net cash used in investing activities	(32,274		)	(21,081		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand, interest bearing and savings deposits	11,023			28,176
Net increase (decrease) in time deposits	9,728			(1,213		)
Proceeds from borrowings from Federal Home Loan Bank	—			6,000
Repayments to Federal Home Loan Bank	(2,000		)	(6,000		)
Cash paid for dividends	—			(263		)
Share repurchase and retirement	—			(213		)
Proceeds from exercise of stock options	378			301
Net cash provided by financing activities	19,129			26,788

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(5,259		)	7,928
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	43,814			35,331
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	38,555		$	43,259
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest expense	$	2,754		$	1,529
Income taxes	$	2,423		$	1,627
Non-Cash Investing Activities:
Net change in unrealized gain on available-for-sale investment securities	$	(933	)	$	(203	)
Non-Cash Financing Activities:
Tax benefit from stock options exercised	$	161		$	136
Supplemental Schedule Related to Acquisition:
Acquisition of Bank of Madera County:
Deposits	$	63,769
Other liabilities	439
Loans, net	(45,028		)
Goodwill and intangibles	(10,455		)
Premises and equipment	(390		)
Federal Home Loan Bank stock	(172		)
Other assets	(398		)
Stock issued	6,079
Cash acquired, net of cash paid to Bank of Madera County shareholders	$	13,844

See notes to unaudited condensed consolidated financial statements

CENTRAL VALLEY COMMUNITY BANCORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The interim unaudited condensed consolidated financial statements of Central Valley Community Bancorp and subsidiary have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These interim condensed consolidated financial statements include the accounts of Central Valley Community Bancorp and its wholly owned subsidiary Central Valley Community Bank (the “Bank”) (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The Company believes that the disclosures are adequate to make the information presented not misleading. These interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2004 Annual Report to Shareholders on Form 10-KSB. In the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly the Company’s financial position and shareholders’ equity at September 30, 2005 and December 31, 2004, and the results of its operations for the 3 and 9 month interim periods ended September 30, 2005 and September 30, 2004 and its cash flows for the 9 month interim periods ended September 30, 2005 and 2004, have been included. Certain reclassifications have been made to prior year amounts to conform to the 2005 presentation. The results of operations for interim periods are not necessarily indicative of results for the full year.

The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Management has determined that since all of the banking products and services offered by the Company are available in each branch of the Bank, all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment. No customer accounts for more than 10 percent of revenues for the Company or the Bank.

On September 21, 2005 the Company’s Board of directors approved a two-for-one stock split for shareholders of record at the close of business on October 5, 2005 and effective on October 31, 2005. All share and per share data in the consolidated financial statements and the following management’s discussion and analysis have been retroactively restated to give effect to the stock split.

Note 2. Stock-Based Compensation

The Company has three stock-based compensation plans, the Central Valley Community Bancorp 2005 Omnibus Incentive Plan and 2000 and 1992 Stock Option Plans. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees , and related Interpretations. No stock-based compensation cost is reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

In February 2005 the Company accelerated the vesting of 186,000 options previously granted to certain directors and executive officers. The pro-forma consolidated net earnings and earnings per share information for the nine months of 2005, presented in the table below, reflects the acceleration. No stock-based compensation cost is reflected in net income as a result of the acceleration of the vesting as it is expected that all of the directors and executive management whose options were accelerated will remain with the Company through the original vesting period.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provision of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based compensation.

Pro forma adjustments to the Company’s consolidated net earnings and earnings per share are disclosed during the years in which the options become vested.

	For the Quarter Ended Sept. 30,				For the Nine Months Ended Sept. 30,
(In thousands, except per share amounts)	2005		2004		2005		2004

Net earnings as reported	$	1,649	$	968	$	4,376	$	2,654
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects	54		61		446		189

Pro forma net income	$	1,595	$	907	$	3,930	$	2,465

Basic earnings per share - as reported	$	0.28	$	0.18	$	0.75	$	0.50
Basic earnings per share - pro forma	$	0.27	$	0.17	$	0.67	$	0.47

Diluted earnings per share - as reported	$	0.26	$	0.16	$	0.69	$	0.45
Diluted earnings per share - pro forma	$	0.25	$	0.16	$	0.62	$	0.43

The fair value of each option is estimated on the date of grant using an option-pricing model with the following assumptions:

	2005		2004
Dividend yield	0.50	%	0.50	%
Expected volatility	19.73	%	66.27	%
Risk-free interest rate	4.16	%	4.17	%
Expected option life	6.5 years		10 years

Note 3. Earnings per share

Basic earnings per share (EPS), which excludes dilution, is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, result in the issuance of common stock which shares in the earnings of the Company. There was no difference in the net income used in the calculation of basic earnings per share and diluted earnings per share.

A reconciliation of the numerators and denominators of the basic and diluted EPS computations is as follows:

In thousands (except share and per share	Three Months Ended September 30,				Nine Months Ended September 30,
amounts)	2005		2004		2005		2004
Basic Earnings Per Share:
Net income	$	1,649	$	968	$	4,376	$	2,654
Weighted average shares outstanding	5,873,027		5,253,854		5,830,044		5,252,410
Net income per share	$	0.28	$	0.18	$	0.75	$	0.50

In thousands (except share and per share	Three Months Ended September 30,				Nine Months Ended September 30,
amounts)	2005		2004		2005		2004
Diluted Earnings Per Share:
Net income	$	1,649	$	968	$	4,376	$	2,654
Weighted average shares outstanding	5,873,027		5,253,854		5,830,044		5,252,410
Effect of dilutive stock options	553,547		567,092		567,257		584,990
Weighted average shares of common stock and common stock equivalents	6,426,574		5,820,946		6,397,301		5,837,400
Net income per diluted share	$	0.26	$	0.16	$	0.69	$	0.45

Note 4. Comprehensive Income

Total comprehensive income is comprised of net earnings and net unrealized gains and losses on available-for-sale securities, which is the Company’s only source of other comprehensive income. Total comprehensive income for the three-month periods ended September 30, 2005 and 2004 was $1,152,000 and $2,156,000 and for the nine month periods ended September 30, 2005 and 2004 was $3,823,000 and $2,516,000 respectively.

Note 5. Merger of Bank of Madera County into Central Valley Community Bancorp

After the close of business on December 31, 2004, Central Valley Community Bancorp and Bank of Madera County (“BMC”) completed their previously announced merger and BMC was merged into Central Valley Community Bank, the wholly owned subsidiary of Central Valley Community Bancorp. Management believes that the merger will allow Central Valley Community Bank to further accommodate a growing customer base in Madera County, provide Bank of Madera County customers with more convenient locations in the Central Valley, as well as offer new advancement and geographic opportunities for their employees. As a result of the above factors, management believes that the potential for the combined performance exceeds what each entity could accomplish independently and the goodwill in this transaction arose from the synergies associated with the merger. The acquisition is part of Central Valley Community Bancorp’s long-term strategy to increase its presence from Sacramento to Bakersfield along the Highway 99 corridor and the surrounding foothills.

As of the date of acquisition, BMC had total assets of $68,080,000, comprised of $2,842,000 in cash and due from banks, $19,250,000 in Federal funds sold, $45,028,000 in loans (net of allowance for credit losses of $751,000), $390,000 in premises and equipment and $570,000 in other assets. Total liabilities acquired amounted to $64,208,000, including $63,769,000 in deposits.

The total consideration paid to Bank of Madera County shareholders and option holders was approximately $14,311,000 which was comprised of $1,911,000 in payment to holders of outstanding Bank of Madera County stock options, $6,200,000 in cash and 261,053 shares of Central Valley Community Bancorp common stock (valued at $6,200,000 for purposes of the merger agreement). Total consideration paid to the Bank of Madera County shareholders was established under the terms of the merger agreement based on a value of $26.22 per share of Bank of Madera County common stock.

The excess of the purchase price over the estimated fair value of the net assets acquired was $8,955,000, which was recorded as goodwill and is not subject to amortization. In addition, assets acquired also included a core deposit intangible of $1,500,000 which is being amortized using a straight-line method over a period of seven years with no significant residual value.

The accompanying unaudited condensed consolidated financial statements include the accounts of BMC since January 1, 2005. The following supplemental pro forma information discloses selected financial information for the periods indicated as though the BMC merger had been completed as of the beginning of each of the periods being reported. Dollars are in thousands except per share data. 2004 pro forma income includes non-recurring merger expenses for legal, accounting and other professional fees, net of tax , totaling $46,000.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004

Revenue	$	7,664	$	6,080	$	21,700	$	17,920

Net income	$	1,649	$	980	$	4,376	$	3,014

Diluted earnings per share	$	0.26	$	0.15	$	0.69	$	0.47

Note 6. Commitments and Contingencies

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit . These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract or notional amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for loans.

Commitments to extend credit amounting to $125,104,000 and $107,816,000 were outstanding at September 30, 2005 and December 31, 2004, respectively. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Company has undisbursed portions of construction loans totaling $21,288,000 and $18,099,000 as of September 30, 2005 and December 31, 2004, respectively. These commitments are agreements to lend to a customer, subject to meeting certain construction progress requirements. The underlying construction loans have fixed expiration dates.

Standby letters of credit and financial guarantees amounting to $99,000 and $1,255,000 were outstanding at September 30, 2005 and December 31, 2004, respectively. Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements. Most guarantees carry a one year term or less. The fair value of the liability related to these standby letters of credit, which represents the fees received for issuing the guarantees, was not significant at September 30, 2005 and December 31, 2004. The Company recognizes these fees as revenue over the term of the commitment or when the commitment is used.

Undisbursed lines of credit amounting to $61,528,000 and $41,664,000 were outstanding at September 30, 2005 and December 31, 2004, respectively. Undisbursed lines of credit are revolving lines of credit whereby customers can repay principal and advance principal during the term of the loan at their discretion and most expire between one and twelve months.

The Company generally requires collateral or other security to support financial instruments with credit risk. Management does not anticipate any material loss will result from the outstanding commitments to extend credit, standby letters of credit and financial guarantees.

During the first nine months of 2005, the Company wrote down its investment in a title and insurance company by an additional $100,000 to its current estimated fair value of $250,000. This investment is included in other assets in the condensed consolidated balance sheet. The title and insurance company was sold in July 2005 and although the Company expects payment for its investment, the final settlement is not yet known and any additional adjustment to fair value is not currently estimateable.

The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or consolidated results of operations of the Company.

Note 7. Recent Accounting Developments

Share-Based Payments

In December 2004 the FASB issued Statement Number 123 (revised 2004) (FAS 123 (R)), Share-Based Payments . FAS 123 (R) requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments such as stock options granted to employees. In April 2005, the Securities and Exchange Commission adopted a rule that defers the compliance date of FAS 123(R) from the first reporting period beginning after June 15, 2005 to the first fiscal year beginning after June 15, 2005, January 1, 2006 for the Company. Management has not completed its evaluation of the effect that FAS 123 (R) will have on its financial statements. FAS 123 (R) allows for either a modified prospective recognition of compensation expense or a modified retrospective recognition. The Company currently intends to apply the modified prospective recognition method and implement the provisions of FAS 123 (R) beginning in the first quarter of 2006. Management has completed its evaluation of the effect that FAS 123 (R) will have and does not expect it to have a significant impact on its financial position or results of operations

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain matters discussed in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained herein that are not historical facts, such as statements regarding the Company’s current business strategy and the Company’s plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Such risks and uncertainties include, but are not limited to (1) significant increases in competitive pressure in the banking industry; (2) the impact of changes in interest rates, a decline in economic conditions at the international, national or local level on the Company’s results of operations, the Company’s ability to continue its internal growth at historical rates, the Company’s ability to maintain its net interest margin, and the quality of the Company’s earning assets; (3) changes in the regulatory environment; (4) fluctuations in the real estate market; (5) changes in business conditions and inflation; (6) changes in securities markets; and (7) risks associated with acquisitions, relating to difficulty in integrating combined operations and related negative impact on earnings, and incurrence of substantial expenses. Therefore, the information set forth in such forward-looking statements should be carefully considered when evaluating the business prospects of the Company.

When the Company uses in this Quarterly Report on Form 10-Q the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “commit,” “believe” and similar expressions, the Company intends to identify forward-looking statements. Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. The future results and shareholder values of the Company may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no changes to the Company’s critical accounting policies from those discussed in the Company’s 2004 Annual Report to Shareholders’ on Form 10-KSB.

This discussion should be read in conjunction with our unaudited condensed consolidated financial statements, including the notes thereto, appearing elsewhere in this report.

STOCK SPLIT

OVERVIEW

Third Quarter 2005

In the third quarter of 2005, net income reflected a 70.4% increase from net income in the third quarter of 2004. This increase can be mainly attributed to the 41.6% increase in quarterly average loans and the 57 basis point increase in the net interest margin (tax equivalent). Diluted EPS increased 62.5% to $0.26 per share for the third quarter of 2005 compared to $0.16 per share for the third quarter of 2004. Moreover, the increase in EPS was generated after the 8% dilutive impact of the additional 522,106 shares of common stock issued as a result of the Bank of Madera County (“BMC”) merger. Net income for the third quarter of 2005 was $1,649,000 compared to $968,000 for the third quarter of 2004.

Return on average equity for the third quarter of 2005 was 16.67% compared to 13.55% for the same period of 2004.

First Nine Months of 2005

We are extremely pleased to report in the first nine months of 2005 that both our operations and the completed merger, which includes the data system conversion of Bank of Madera County (BMC), were accretive to our diluted earnings per share (EPS). Diluted EPS for the first nine months of 2005 was $0.69 compared to $0.45 for the first nine months of 2004 (adjusted for the two-for-one stock split). Again, the increase in EPS was generated after the 8% dilutive impact of the additional 522,106 shares of common stock issued as a result of the BMC merger. Net income for the first nine months of 2005 was $4,376,000 compared to $2,654,000 for the same period in 2004. In 2004, the $2,654,000 in earnings included a gain of $483,000 from the sale of securities compared to $82,000 in the first nine months of 2005. Further discussion of operations and the effects of the merger are discussed below.

Return on average equity for the first nine months of 2005 was 15.40% compared to 12.75% for the same period of 2004. Total goodwill and core deposit intangible, resulting from the BMC merger, at September 30, 2005 was $10,294,000 compared to none at September 30, 2004. Total equity was $40,048,000 at September 30, 2005 compared to $29,197,000 at September 30, 2004.

Total loans continued to grow at a double digit pace in the first nine months of 2005. Average total loans increased $79,377,000 or 41.4% in the first nine months of 2005 compared to the first nine months of 2004 of which $45,779,000 can be attributed to the BMC merger. Asset quality continues to be strong, however in the first nine months of 2005, we reflect the first non-accrual loans for the Bank since February 2004. The Bank had one non-accrual loan at September 30, 2005 totaling $591,000 compared to none at September 30, 2004 and had no real estate owned at September 30, 2005 and September 30, 2004.

Central Valley Community Bancorp (Company)

We are a central California-based bank holding company for a one-bank subsidiary, Central Valley Community Bank (the “Bank”). We provide traditional commercial banking services to small and medium-sized businesses and individuals in the communities along the Highway 99 corridor in the Fresno and Madera Counties of central California. Additionally, we have a private banking office in Sacramento County. As a holding company, the Company is subject to supervision, examination and regulations of the Federal Reserve Bank.

After the close of business on December 31, 2004, we completed our merger with BMC. The Madera and Oakhurst branches of BMC were merged into the Bank bringing the total number of branches of the Bank to nine (9). For details of the merger, refer to Note 5 of Unaudited Condensed Consolidated Financial Statements herein.

At September 30, 2005, we had total loans of $291,120,000, total assets of $461,688,000, total deposits of $410,706,000 and stockholders’ equity of $40,048,000. The result of the merger added $45,779,000 in loans, $63,769,000 in deposits, and $68,080,000 in assets to the Company.

Central Valley Community Bank (Bank)

The Bank commenced operations in January 1980 as a state-chartered bank. As a state-chartered bank, the Bank is subject to primary supervision, examination and regulation by the Department of Financial Institutions. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation up to the applicable limits thereof, and is also subject to supervision, examination and regulations of the FDIC.

The Bank has nine (9) full service branches serving the communities of Fresno, Clovis, Kerman, Prather, Oakhurst, Madera, and Sacramento. Additionally the Bank operates Real Estate, Agribusiness and SBA departments that originate loans in California. According to the June 30, 2005 FDIC data, the six (6) branches in Fresno County (Clovis, Fresno, Kerman, and Prather branches) have a 5.0% combined deposit market share of all banks and 4.0% of all depositories including credit unions, thrifts, and savings banks.

The Bank anticipates additional branch openings to meet the growing service needs of its customers. The branch expansions provide the Company with opportunities to expand its loan and deposit base; however, based on past experience, management expects these new offices will initially have a negative impact on earnings until the volume of business grows to cover fixed overhead expenses. The Bank anticipates opening a new full-service office in the downtown area of Fresno sometime in the fourth quarter of 2005 or first quarter of 2006.

Key Factors in Evaluating Financial Condition and Operating Performance

As a publicly traded community bank holding company, we focus on several key factors including:

• Return to our stockholders;

• Return on average assets;

• Development of core revenue streams, including net interest income and non-interest income;

• Asset quality;

• Asset growth; and

• Operating efficiency.

Return to Our Stockholders.

Our return to our stockholders is measured in the form of return on average equity (“ROE”). Our net income for the nine months ended September 30, 2005 increased $1,722,000 or 64.9% to $4,376,000 compared to $2,654,000 for the nine months ended September 30, 2004. Net income increased mainly due to an increase in net interest income provided by the increase in interest rates and the additional loan volume from the BMC merger and our own organic growth. This increase was partially offset by an increase in interest expenses and operating expenses and a decrease in non-interest income. We announced a two-for-one stock split for shareholders of record on October 5, 2005 and effective October 31, 2005. Basic EPS increased to $0.75 for the nine months ended September 30, 2005 compared to $0.50 for the nine months ended September 30, 2004. Diluted EPS increased to $0.69 for the nine months ended September 30, 2005 compared to $0.45 for the nine months ended September 30, 2004. The increase in EPS was due primarily to the increase in net income, partially offset by the increase in average shares outstanding as a result of the merger and the exercise of stock options. Our ROE was 15.40% for the nine months ended September 30, 2005 compared to 13.10% for the year ended December 31, 2004 and 12.75% for the nine months ended September 30, 2004. The increase in ROE is due to the increase in income and partially offset by the increase in average equity outstanding, as a result of the BMC merger.

Return on Average Assets

Our return on average assets (“ROA”) is a measure we use to compare our performance with other banks and bank holding companies. Our ROA for the nine months ended September 30, 2005 increased to 1.30% compared to 1.07% for the year ended December 31,2004 and 1.04% for the nine months ended September 30, 2004. The increase in ROA is due to the increase in net income relative to our increase in average assets. ROA for our peer group was 1.50% at June 30, 2005. Peer group from the FDIC call report data includes all commercial banks in California with assets from $300M to $500M.

Development of Core Earnings

Over the past several years, we have focused on not only improving net income, but improving the consistency of our revenue streams in order to create more predictable future earnings and reduce the effect of changes in our operating environment on our net income. Specifically, we have focused on net interest income through a variety of processes, including increases in average interest earning assets as a result of loan generation and retention and improved net interest margin by focusing on core deposit growth and managing the cost of funds. As a result, our net interest income before provision for credit losses increased $5,335,000 or 50.1% to $15,986,000 for the nine months ended September 30, 2005 compared to $10,651,000 for the nine months ended September 30, 2004. Our net interest margin has also improved 58 basis points to 5.39% for the nine months ended September 30, 2005 compared to 4.81% for the nine months ended September 30, 2004.

Our non-interest income is generally made up of service charges and fees on deposit accounts and fee income from loan placements and gain on sale from investment securities. Non-interest income for the first nine months of 2005 decreased $258,000 or 8.4% to $2,827,000 compared to $3,085,000 for the first nine months of 2004. Non-interest income in the first nine months of 2005 included gains from the sale of investments of $82,000 compared to $483,000 for the first nine months of 2004. Customer service charges increased slightly to $1,806,000 for the first nine months of 2005 compared to $1,761,000 for the same period in 2004, mainly due to an increase in the number of transaction accounts. Further detail on non-interest income is provided below.

Asset Quality

For all banks and bank holding companies, asset quality has a significant impact on the overall financial condition and results of operations. Asset quality is measured in terms of percentage of total loans and total assets, and is a key element in estimating the future earnings of a company. Non-performing loans totaled $591,000 as of September 30, 2005 compared to none as of December 31, 2004. One loan comprised the $591,000 in non-performing loans and as of September 30, 2005 it was not current. Management maintains certain loans that have been brought current by the borrower (less than 30 days delinquent) on non-accrual status until such time as management has determined that the loans are likely to remain current in future periods. Non-performing loans as a percentage of gross loans was 0.2% as of September 30, 2005 compared to none at December 31, 2004. The Company did not have any other real estate owned at September 30, 2005 or December 31, 2004.

Asset Growth

As revenues from both net interest income and non-interest income are a function of asset size, the continued growth in assets has a direct impact in increasing net income and therefore ROE and ROA. The majority of our assets are loans and investment securities, and the majority of our liabilities are deposits, and therefore the ability to generate deposits as a funding source for loans and investments is fundamental to our asset growth. Total assets increased 25.4% during the first nine months of 2005 from $368,147,000 as of December 31, 2004 to $461,688,000 as of September 30, 2005. Total gross loans increased 39.1% to $291,120,000 as of September 30, 2005 compared to $209,279,000 as of December 31, 2004. Total investment securities increased 8.0% to $106,948,000 as of September 30, 2005 compared to $98,983,000 as of December 31, 2004 as deposit growth exceeded loan growth. Total deposits increased 25.9% to $410,706,000 as of September 30, 2005 compared to $326,186,000 as of December 31, 2004. We continue to under perform in our loan to deposit ratio compared to our peers. Our loan to deposit ratio at September 30, 2005 was 70.9% compared to 64.2% at December 31, 2004. The loan to deposit ratio of our peers is 87.9% at June 30, 2005. Refer to above for discussion of the increase in loans and deposits volumes resulting from the BMC merger.

Operating Efficiency

Operating efficiency is the measure of how efficiently earnings before taxes are generated as a percentage of revenue. The Bank’s efficiency ratio (operating expenses divided by net interest income plus non-interest income) improved to 60.8% for the first nine months of 2005 compared to 70.1% for the first nine months of 2004. The improvement in the efficiency ratio is due to the increase in revenues exceeding the increase in operating expenses. The Bank’s net interest income before provision for credit losses plus non-interest income increased 42.2% to $18,841,000 for the nine months ended September 30, 2005 compared to $13,250,000 for the same period in 2004, while operating expenses increased 23.5% to $11,463,000 from $9,283,000 for the same period in 2004.

RESULTS OF OPERATIONS

Net Income for the First Nine Months of 2005 Compared to the First Nine Months of 2004:

Net income increased to $4,376,000 for the nine months ended September 30, 2005 compared to $2,654,000 for the nine months ended September 30, 2004. Basic earnings per share were $0.75 and $0.50 for the nine months ended September 30, 2005 and 2004, respectively. Diluted earnings per share were $0.69 and $0.45 for the nine months ended September 30, 2005 and 2004, respectively. ROE was 15.40% for the nine months ended September 30, 2005 compared to 12.75% for the nine months ended September 30, 2004. ROA for the nine months ended September 30, 2005 was 1.30% compared to 1.04% for the nine months ended September 30, 2004.

The increase in net income and profitability for the nine months ended September 30, 2005 compared to the same period in the prior year was mainly due to the increases in net interest income and was partially offset by decreases in non-interest income and increases in non-interest expense. Net interest income increased due to an increase in average interest earning assets provided by our organic growth, the merger, and the positive effect of our asset sensitive position expanding our net interest margin in response to the eleven increases in the Federal funds interest rate since June 30, 2004. Non-interest income, in the first nine months of 2004 included a gain from the sale of investments of $483,000 compared to the gain from the sale of investments of $82,000 for the first nine months of 2005. Non-interest expenses increased primarily due to salaries and benefits and occupancy expenses which were all affected by the BMC merger.

Net Income For the third quarter of 2005 compared to the third quarter of 2004:

Net income increased to $1,649,000 for third quarter of 2005 compared to $968,000 for the third quarter of 2004. Basic earnings per share were $0.28 and $0.18 for the third quarter of 2005 and 2004, respectively. Diluted earnings per share were $0.26 and $0.16 for the third quarter of 2005 and 2004, respectively. ROE was 16.67% for the third quarter of 2005 compared to 13.55% for the third quarter of 2004. ROA for the third quarter of 2005 was 1.45% compared to 1.10% for the third quarter of 2004.

Interest Income and Expense

Net interest income is the most significant component of our income from operations. Net interest income (the “interest rate spread”) is the difference between the gross interest and fees earned on the loan and investment portfolios and the interest paid on deposits and other borrowings. Net interest income depends on the volume of and interest rate earned on interest earning assets and the volume of and interest rate paid on interest bearing liabilities.

The following table sets forth a summary of average balances with corresponding interest income and interest expense as well as average yield and cost information for the periods presented. Average balances are derived from daily balances, and non-accrual loans are not included as interest earning assets for purposes of this table.

CENTRAL VALLEY COMMUNITY BANCORP

SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES

	FOR THE NINE MONTHS ENDED							FOR THE NINE MONTHS ENDED
	SEPTEMBER 30, 2005							SEPTEMBER 30, 2004
	Average					Yield/		Average					Yield/
(Unaudited)	Balance			Interest		Rate		Balance			Interest		Rate
ASSETS
Interest-earning deposits in other banks	$	2,475		$	49	2.64	%	$	1,973		$	23	1.55	%
Securities
Taxable securities	90,191			2,342		3.46	%	77,796			1,803		3.09	%
Non-taxable securities (1)	23,865			1,339		7.48	%	18,666			948		6.78	%
Total investment securities	114,056			3,681		4.30	%	96,462			2,751		3.80	%
Federal funds sold	19,306			418		2.89	%	13,234			112		1.13	%
Total securities	135,837			4,148		4.07	%	111,669			2,886		3.45	%
Loans (2) (3)	270,436			15,180		7.48	%	191,921			9,530		6.62	%
Federal Home Loan Bank stock	1,611			49		4.06	%	1,128			27		3.19	%
Total interest-earning assets	407,884			19,377		6.33	%	304,718			12,443		5.44	%
Allowance for credit losses	(3,502		)					(2,551		)
Non-accrual loans	910							48
Cash and due from banks	19,258							24,391
Bank premises and equipment	3,037							2,892
Other non-earning assets	21,737							10,634
Total average assets	$	449,324		19,377				$	340,132		12,443
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Savings and NOW accounts	$	84,250		$	113	0.18	%	$	65,213		$	85	0.17	%
Money market accounts	109,491			1,006		1.23	%	83,140			467		0.75	%
Time certificates of deposit, under $100,000	48,619			730		2.00	%	35,078			404		1.54	%
Time certificates of deposit, $100,000 and over	38,557			852		2.95	%	23,765			338		1.90	%
Total interest-bearing deposits	280,917			2,701		1.28	%	207,196			1,294		0.83	%
Other borrowed funds	6,800			186		3.65	%	7,562			149		2.63	%
Federal funds purchased	—			—		—		3			—		—
Total interest-bearing liabilities	287,717			2,887		1.34	%	214,761			1,443		0.90	%
Non-interest bearing demand deposits	120,791							94,553
Other liabilities	2,921							3,065
Shareholders’ equity	37,895							27,753
Total average liabilities and shareholders’ equity	$	449,324		2,887				$	340,132		1,443

Interest income and rate earned on average earning assets				19,377		6.33	%				12,443		5.44	%

Interest expense and interest cost related to average interest-bearing liabilities				2,887		1.34	%				1,443		0.90	%

Net interest income and net interest margin (4)				$	16,490	5.39	%				$	11,000	4.81	%

(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $455 and $322 in 2005 and 2004, respectively.

(2) Loan interest income includes loan fees of $755 in 2005 and $552 in 2004.

(3) Average loans do not include non-accrual loans.

(4) Net interest margin is computed by dividing net interest income by total average interest-earning assets.

Interest and fee income from loans increased 59.3% in the first nine months of 2005 compared to the same period of 2004. As stated above, the combination of the increased volume from the merger with BMC, our organic growth from the focus on building relationships, and the eleven interest rate increases that have occurred since June 30, 2004, were the major components of the $5,650,000 increase. Average total loans for the first nine months of 2005 was $271,346,000 compared to $191,969,000 for the same period in 2004. The yield on loans for the first nine months of 2005 was 7.48% compared to 6.62% for the same period of 2004.

Interest income from total investments, (total investments include investment securities, Federal funds, interest bearing deposits with other banks, and other securities) increased $1,129,000 in the first nine months of 2005 compared to the same period of 2004, mainly due to the 21.6% increase in average balances of these investments and the eleven interest rate increases that have occurred since June 30, 2004. In the first nine months of 2005, we sold $14,895,000 in investment securities due to funding of several new loans and some portfolio restructuring. The gain on sale of available for sale investments is discussed in non-interest income below. Due to our low loan to deposit ratio, a significant contributor to interest income is provided by the investment portfolio and represents 23.1% of net interest income.

In an effort to increase yields, without accepting unreasonable risk, a significant portion of the investment purchases have been in high quality mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”). At September 30, 2005, we held $50,927,000 or 47.6% of the total market value of the investment portfolio in MBS and CMOs with an average yield of 3.7%. We understand the interest rate risks and prepayment risks associated with MBS and CMOs. In a declining interest rate environment, prepayments from MBS and CMOs could be expected to increase and the expected life of the investment could be expected to shorten. Conversely, if interest rates increase, prepayments could be expected to decline and the average life of the MBS and CMOs could be expected to extend. Additionally, changes in interest rates are reflected in the market value of the investment portfolio. During declining interest rates, the investment portfolio could be expected to have market value gains and in increasing rate environments, the market value could be expected to be negative. The net of tax-effect of the change in market value of the available-for-sale investment portfolio is also reflected in the Company’s equity. At September 30, 2005, the average life of the investment portfolio was 4.6 years and the market value reflected a pre-tax loss of $371,000.

A component of the Company’s strategic plan has been to use its investment portfolio to offset, in part, its interest rate risk relating to variable rate loans. At September 30, 2005, an immediate rate increase of 200 basis points would result in an estimated decrease in the market value of the investment portfolio by approximately $7,406,000. Conversely, with an immediate rate decrease of 200 basis points, the estimated increase in the market value of the investment portfolio is $6,223,000. The modeling environment assumes management would take no action during an immediate shock of 200 basis points. The likelihood of immediate changes of 200 basis points is contrary to expectation, as evidenced by the changes in interest rates in the past year, which were in 25 basis point increments. However, the Company uses those increments to measure its interest rate risk in accordance with regulatory requirements and to measure the possible future risk in the investment portfolio. For further discussion of the Company’s market risk, refer to Item 3 - Quantitative and Qualitative Disclosures about Market Risk.

Management’s review of all investments before purchase includes an analysis of how the security will perform under several interest rate scenarios to monitor whether investments are consistent with our investment policy. The policy addresses issues of average life, duration, and concentration guidelines, prohibited investments, impairment, and prohibited practices.

Total interest income for the first nine months of 2005 increased $6,779,000, to $18,873,000 compared to $12,094,000 for the nine months ended September 30, 2004. The increase was due to the 33.9% increase in the average balance of interest earning assets, combined with the 58 basis point increase in the yield on those assets. Average interest earning assets increased to $407,884,000 for the nine months ended September 30, 2005 compared to $304,718,000 for the nine months ended September 30, 2004. The yield on interest earning assets increased to 6.33% for the nine months ended September 30, 2005 compared to 5.44% for the nine months ended September 30, 2004. The $103,166,000 increase in average earning assets was the result of our own organic growth and the approximate $45,779,000 in loans and $19,250,000 in investments as the result of the merger of BMC.

Interest expense on deposits for the nine months ended September 30, 2005 increased $1,407,000 or 108.7% to $2,701,000 compared to $1,294,000 for the nine months ended September 30, 2004. This increase was due to the repricing of interest bearing deposits as a result of the increases in the Federal funds interest rate and the $73,721,000 increase in volume of average interest bearing deposits. Average interest-bearing deposits were $280,917,000 for the nine months ended September 30, 2005 compared to $207,196,000 for the same period ended September 30, 2004. The increase was the result of our own internal growth and the addition of approximately $63,769,000 in deposits as the result of the merger of BMC.

Average other borrowings decreased to $6,800,000 with an effective rate of 3.65% for the nine months ended September 30, 2005 compared to $7,562,000 with an effective rate of 2.61% for the nine months ended September 30, 2004. Included in other borrowings are advances from the Federal Home Loan Bank (FHLB) and a loan from a major bank, primarily to provide additional capital for the Bank in conjunction with the merger of BMC. Additionally, we borrowed funds from the Federal Home Loan Bank during a period of low interest rates. The effective rate of the FHLB advances was 2.34% for the first nine months of 2005 compared to 2.61% for the same period 2004.

In partial offset to the increase in the cost of interest bearing deposits and other borrowings, the increase in non-interest bearing demand deposits has contributed significantly to the lowered cost of funds. Average demand deposits increased 27.8% from an average $94,553,000 for the nine months ended September 30, 2004 to $120,791,000 for the nine months ended September 30, 2005. The merger with BMC added approximately $19,173,000 in non-interest bearing deposits to our portfolio. The cost of all of our interest bearing liabilities increased 44 basis points to 1.34% for the nine months ended September 30, 2005 compared to 0.90% for the nine months ended September 30, 2004. Average transaction accounts (including interest bearing checking, money market accounts and non interest bearing demand deposits) increased 28.6% to $288,490,000 for the nine months ended September 30, 2005 compared to $224,263,000 for the nine months ended September 30, 2004

Net Interest Income before Provision for Credit Losses

Net interest income before provision for credit losses for the nine months ended September 30, 2005 increased $5,325,000 or 50.0% to $15,976,000 compared to $10,651,000 for the nine months ended September 30 2004. This increase was primarily due to the increase in the net interest margin, combined with an increase in average interest earning assets partially offset by the increase in average interest bearing liabilities. Average interest earning assets were $407,884,000 for the nine months ended September 30, 2005 with a net interest margin of 5.39% compared to $304,718,000 with a net interest margin of 4.81% for the nine months ended September 30, 2004. For a discussion of the repricing of our assets and liabilities, see “Item 3 - Quantitative and Qualitative Disclosure about Market Risk.”

Provision for Credit Losses

We provide for possible credit losses by a charge to operating income based upon the composition of the loan portfolio, past delinquency levels, losses and non-performing assets, economic and environmental conditions and other factors which, in management’s judgement, deserve recognition in estimating credit losses. Loans are charged off when they are considered uncollectible or of such little value that continuance as an active earning bank asset is not warranted.

The establishment of an adequate credit allowance is based on both an accurate risk rating system and loan portfolio management tools. The Board has established initial responsibility for the accuracy of credit risk grades with the individual credit officer. The grading is then submitted to the Chief Credit Administrator (“CCA”), who reviews the grades for accuracy and makes recommendations to Credit Review who gives final approval. The risk grading and reserve allocation is analyzed annually by a third party credit reviewer and by various regulatory agencies.

Quarterly, the CCA sets the specific reserve for all adversely risk-graded credits. This process includes the utilization of loan delinquency reports, classified asset reports, and portfolio concentration reports to assist in accurately assessing credit risk and establishing appropriate reserves. Reserves are also allocated to credits that are not adversely graded. Historical loss experience within the portfolio along with peer bank loss experiences are used in determining the level of the reserves held.

The allowance for credit losses is reviewed at least quarterly by the Board’s Audit/Compliance Committee and by the Board of Directors. Reserves are allocated to loan portfolio categories using percentages which are based on both historical risk elements such as delinquencies and losses and predictive risk elements such as economic, competitive and environmental factors. We have adopted the specific reserve approach to allocate reserves to each adversely graded asset, as well as to each impaired asset for the purpose of estimating potential loss exposure. Although the allowance for credit losses is allocated to various portfolio categories, it is general in nature and available for the loan portfolio in its entirety. Additions may be required based on the results of independent loan portfolio examinations, regulatory agency examinations, or our own internal review process. Additions are also required when, in management’s judgement, the allowance does not properly reflect the portfolio’s potential loss exposure.

The allocation of the allowance for credit losses is set forth below:

Loan Type(Dollars in Thousands)	September 30, 2005 Amount		Percent of Loans in Each Category to Total Loans		December 31, 2004 Amount		Percent of Loans in Each Category to Total Loans

Commercial & Industrial	$	1,477	27.6	%	$	786	27.5	%
Real Estate	1,197		40.5	%	898		35.9	%
Real Estate – construction, land development and other land loans	311		13.8	%	197		16.9	%
Equity Lines of Credit	178		7.6	%	136		8.9	%
Consumer & Installment	70		2.6	%	178		3.1	%
Agricultural	225		7.8	%	151		7.6	%
Other	2		0.1	%	51		0.1	%
Non-specific reserve	63				300
	$	3,523			$	2,697

Managing credits identified through the risk evaluation methodology includes developing a business strategy with the customer to mitigate our potential losses. Management continues to monitor these credits with a view to identifying as early as possible when, and to what extent, additional provisions may be necessary.

Additions to the allowance for credit losses in the first nine months of 2005 were $10,000 and there were no additions in 2004, due mainly to improvements in our credit quality and supported by the historical net charge-off ratio, which reflects net charge-offs or net recoveries to beginning loan balances for the past three (3) years and recoveries on prior charged-off loans. For 2004, we had a net recovery ratio of 0.146% and net charge-off ratios of 0.005% for 2003 and 0.031% for 2002. For the first nine months of 2005, we had a net recovery ratio of 0.032% compared to a net recovery ratio of 0.067% for the same period in 2004. The potential for a future net recovery position is not likely as we have been very successful in collection of those loans charged off in prior years. Refer to the allowance for credit losses section for further discussion of credit quality.

The completion of the merger of BMC into the Bank provided an additional $751,000 to the allowance for credit losses. Based on information currently available, management believes that the allowance for credit losses should be adequate to absorb estimated probable losses in the portfolio. However, no assurance can be given that we may not sustain charge-offs which are in excess of the allowance in any given period. Refer to “Allowance for Credit Losses” below for further information of the allowance for credit losses.

Non-Interest Income

Non-interest income is comprised of customer service charges, loan placement fees, gain on sales of investments and other income. Non-interest income was $2,827,000 for the nine months ended September 30, 2005 compared to $3,085,000 for the same period ended September 30, 2004. The $258,000 decrease in non-interest income comparing the nine months ended September 30, 2005 to the same period in 2004 was primarily due to the decrease in gain realized on sale of investment securities of $401,000.

Customer service charges increased $45,000 to $1,806,000 for the first nine months of 2005 compared to $1,761,000 for the same period in 2004, mainly due to an increase in the average number of transaction accounts. The increase is due to the increase in deposit accounts from the BMC merger and from our existing retail branches.

We earn loan placement fees from the brokerage of single-family residential mortgage loans which is mainly for the convenience of our customers. Loan placement fees increased $42,000 in the first nine months of 2005 to $283,000 compared to $241,000 for the first nine months of 2004. Normal home sales due to “moving up” or relocating are still fairly strong and Fresno and Madera counties continue to reflect affordable housing compared to other parts of California. Commissions paid for personnel involved in generating loan placement fees are reflected as commissions in salary expense.

Appreciation in cash surrender value of bank owned life insurance (BOLI) increased $11,000 mainly due to $440,000 in BOLI purchased in the first nine months of 2005. The Bank purchased the additional insurance in connection with increases to the split-dollar life insurance policies related to salary continuation benefits for four key executives. Offsetting the increase in volume was a decrease in the interest rate received. This interest rate is reviewed annually by the Board of Directors. Salary continuation and the related BOLI are used as a retention tool for directors and key executives of the Bank.

The Bank holds stock from the Federal Home Loan Bank in relationship with the borrowing capacity and generally receives quarterly dividends. We currently hold $1,641,000 in FHLB stock of which $172,000 was the result of the merger with BMC. Dividends in the first nine months of 2005 increased $22,000 compared to the same period in 2004.

Other income increased $23,000 for the first nine months of 2005 compared to the same period in 2004. The increase can be attributed to an increase in merchant fees from bank cards and fees from investment services provided by a third party, offset by a decrease in rental income from equipment leased to others as a result of the Company’s decision to no longer participate in operating lease arrangements.

Non-Interest Expenses

Salaries and employee benefits, occupancy, professional services, and data processing are the major categories of non-interest expenses. Non-interest expenses increased $2,359,000 to $11,982,000 for the nine months ended September 30, 2005 compared to $9,623,000 for the nine months ended September 30, 2004.

The Bank’s efficiency ratio, measured as the percentage of non-interest expenses to net interest income before provision for credit losses plus non-interest income, improved to 60.8% for the first nine months of 2005 compared to 70.1% for the first nine months of 2004.

Salaries and employee benefits increased $1,448,000 or 25.6% to $7,098,000 for the first nine months of 2005 compared to $5,650,000 for the first nine months of 2004. The increase in salaries and employee benefits for the nine month period ended September 30, 2005 can be attributed to normal cost increases for salaries and benefits and incentive based compensation due to increased loan and deposit production, profitability, and the additional personnel costs from the merger with BMC which includes the salary of one former BMC executive officer retained by the Company following the merger. Commissions paid for loan placements increased $21,000 in the periods under review.

Occupancy and equipment expense increased $396,000 to $1,593,000 for the first nine months of 2005 compared to $1,197,000 for the first nine months of 2004. The 33.1% increase in occupancy expense for the nine months ended September 30, 2005 was due mainly to the addition of the two branches resulting from the merger, normal increases in rent on existing leaseholds, and other occupancy related expenses.

Other non-interest expenses increased $515,000 or 18.6% in the period under review. Contributing to the increase in other non-interest expense was an additional $100,000 write down to the Company’s investment in Diversified Capital Holdings, the parent company of a title and escrow insurance company. To date, the Company has written down a total of $250,000 of the original $500,000 investment. The title and insurance company was sold in July 2005 and, although the Company expects payment for its investment, the final settlement is not yet known and any additional adjustment to the fair value is not currently estimateable.

The following table describes significant components of other non-interest expense as a percentage of average assets.

For the nine month periods ended September 30,	Other Expense 2005		Annualized % Avg. Assets		Other Expense 2004		Annualized % Avg. Assets
(Dollars in thousands)
Advertising	$	316	0.09	%	$	269	0.11	%
Audit/accounting	207		0.06	%	180		0.07	%
Data/item processing	615		0.18	%	575		0.23	%
ATM/debit card expenses	15		0.00	%	22		0.01	%
Director fees	102		0.03	%	100		0.04	%
Donations	84		0.02	%	68		0.03	%
Education/training	45		0.01	%	43		0.02	%
General Insurance	88		0.03	%	86		0.03	%
Legal fees	149		0.04	%	92		0.04	%
Postage	116		0.03	%	109		0.04	%
Regulatory assessments	107		0.03	%	69		0.03	%
Stationery/supplies	155		0.05	%	118		0.05	%
Telephone	94		0.03	%	76		0.03	%
Travel expense	35		0.01	%	37		0.01	%
Operating losses	11		0.00	%	52		0.02	%
Fair value write down	100		0.02	%	—		—
Reversal of REIT tax benefit	—		—		127		0.04	%
Other	1,052		0.31	%	753		0.30	%
Total other non-interest expense	$	3,291			$	2,776

Provision for Income Taxes

The effective income tax rate was 35.8% for the nine months ended September 30, 2005 compared to 35.5% for the nine months ended September 30, 2004. Provision for income taxes totaled $2,445,000 and $1,459,000 for the nine months ended September 30, 2005, and 2004, respectively.

For the third quarter of 2005 compared to the third quarter of 2004:

The following table sets forth a summary of average balances with corresponding interest income and interest expense as well as average yield and cost information for the third quarter of 2005 compared to the third quarter of 2004. Average balances are derived from daily balances, and non-accrual loans are not included as interest earning assets for purposes of this table.

CENTRAL VALLEY COMMUNITY BANCORP

SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES

	FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005							FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
	AVERAGE BALANCE			INTEREST		YIELD/RATE		AVERAGE BALANCE			INTEREST		YIELD/RATE
ASSETS
Interest-earning deposits in other banks	$	2,281		$	20	3.51	%	$	3,223		$	13	1.61	%
Securities
Taxable securities	82,355			730		3.55	%	75,275			632		3.36	%
Non-taxable securities (1)	7,196			450		6.62	%	18,727			318		6.79	%
Total investment securities	109,551			1,180		4.31	%	94,002			950		4.04	%
Federal funds sold	15,841			136		3.43	%	16,049			56		1.40	%
Total securities	127,673			1,336		4.19	%	113,274			1,019		3.60	%
Loans (2) (3)	284,154			5,521		7.77	%	201,102			3,393		6.75	%
Federal Home Loan Bank stock	1,631			17		4.17	%	1,399			16		4.57	%
Total interest-earning assets	413,458			6,874		6.65	%	315,775			4,428		5.61	%
Allowance for credit losses	(3,541		)					(2,544		)
Non-accrual loans	636							0
Cash and due from banks	20,257							24,268
Bank premises & equipment	2,853							2,653
Other non-earning assets	22,092							10,887
Total average assets	$	455,755		6,874				$	351,039		4,428
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Savings and NOW accounts	$	81,730		$	38	0.19	%	$	67,683		$	30	0.18	%
Money market accounts	111,458			394		1.41	%	85,581			163		0.76	%
Time certificates of deposit, under $100,000	47,895			269		2.25	%	33,163			135		1.63	%
Time certificates of deposit, $100,000 and over	41,493			346		3.34	%	26,000			113		1.74	%
Total interest-bearing deposits	282,576			1,047		1.48	%	212,427			441		0.83	%
Other borrowed funds	6,500			65		4.00	%	7,000			42		2.40	%
Total interest-bearing liabilities	289,076			1,112		1.54	%	219,427			483		0.88	%
Non-interest bearing demand deposits	124,044							99,988
Other liabilities	3,068							3,065
Shareholders’ equity	39,567							28,559
Total average liabilities and shareholders’ equity	$	455,755		1,112				$	351,039		483

Interest income and rate earned on average earning assets				6,874		6.65	%				4,428		5.61	%
Interest expense and interest cost related to average interest-bearing liabilities				1,112		1.54	%				483		0.88	%

Net interest income and net interest margin (4)				$	5,762	5.57	%				$	3,945	5.00	%

(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $153 and $108 in 2005 and 2004, respectively.

(2) Loan interest income includes loan fees of $219 in 2005 and $185 in 2004.

(3) Average loans do not include non-accrual loans.

(4) Net interest margin is computed by dividing net interest income by total average interest-earning assets.

Interest and fee income from loans increased 62.7% in the third quarter of 2005 compared to the same period of 2004. As stated above, the combination of the increased volume from the merger with BMC and our organic growth from the focus on building relationships and the eleven interest rate increases that have occurred since June 30, 2004, were the major components of the $2,128,000 increase. Average total loans for the third quarter of 2005 were $284,154,000 compared to $201,102,000 for the same period 2004. The yield on loans for the third quarter of 2005 was 7.77% compared to 6.75% for the third quarter of 2004.

Total interest income for the three months ended September 30, 2005 increased $2,400,000, to $6,704,000 compared to $4,304,000 for the three months ended September 30, 2004. The increase was due to the 30.9% increase in the average balance of interest earning assets, combined with the 57 basis point increase in the net interest margin. Average interest earning assets increased to $413,458,000 for the third quarter of 2005 compared to $315,775,000 for the third quarter of 2004. The yield on interest earning assets increased to 6.65% for the third quarter of 2005 compared to 5.61% for the same period in 2004. The $97,683,000 increase in average earning assets was the result of our own organic growth and the approximate $45,028,000 in loans and $19,250,000 in investments as the result of the merger of BMC.

Interest expense on deposits for the third quarter of 2005 increased $606,000 or 137.4% to $1,047,000 compared to $441,000 for the third quarter of 2004. This increase was due to the repricing of interest bearing deposits as a result of the increases in the Federal funds interest rate and the $70,149,000 increase in volume of average interest bearing deposits. Average interest-bearing deposits were $282,576,000 for the third quarter of 2005 compared to $212,427,000 for the same period ended September 30, 2004. The increase was the result of our own internal growth and the addition of approximately $63,769,000 in deposits as the result of the merger of BMC.

Average other borrowings decreased to $6,500,000 with an effective rate of 4.00% for the third quarter of 2005 compared to $7,000,000 with an effective rate of 2.40% for the same period ended September 30, 2004. As stated above, included in other borrowings are advances from the Federal Home Loan Bank (FHLB) and a loan from a major bank, primarily to provide additional capital for the Bank in conjunction with the merger of BMC. Additionally, we borrowed funds from the FHLB during a period of low interest rates. The effective rate of the FHLB advances was 2.43% for the third quarter of 2005 compared to 2.40% for the same period 2004.

In partial offset to the increase in the cost of interest bearing deposits and other borrowings, the increase in non-interest bearing demand deposits has contributed significantly to the lowered cost of funds. Average demand deposits increased 24.1% from an average $99,988,000 for the third quarter of 2004 to $124,044,000 for the third quarter of 2005. The merger with BMC added approximately $19,173,000 in non-interest bearing deposits to our portfolio. The cost of all of our interest bearing liabilities increased 66 basis points to 1.54% for the third quarter of 2005 compared to 0.88% for the third quarter of 2004. Average transaction accounts (including interest bearing checking, money market accounts and non-interest bearing demand deposits) increased 24.8% to $291,126,000 for the third quarter of 2005 compared to $233,280,000 for the third quarter of 2004.

Net Interest Income before Provision for Credit Losses

Net interest income before provision for credit losses for the third quarter of 2005 increased $1,771,000 or 46.4% to $5,592,000 compared to $3,821,000 for the third quarter of 2004. This increase was primarily due to the increase in the net interest margin, combined with an increase in average interest earning assets partially offset by the increase in average interest bearing liabilities. Average interest earning assets were $413,458,000 for the third quarter of 2005 with a net interest margin of 5.57% compared to $315,775,000 with a net interest margin of 5.00% for the third quarter of 2004.

Provision for Credit Losses

Other than a minor $10,000 addition to the allowance for credit losses in the third quarter of 2005 to re-align an overdraft reserve account, we made no additions to the allowance for credit losses in the third quarters 2005 and 2004 due mainly to improvements in our credit quality supported by the historical net charge-off ratio, which reflect net charge-offs or net recoveries to beginning loan balances for the past three (3) years and recoveries on prior charged-off loans. For 2004, we had a net recovery ratio of 0.146% and net charge-off ratios of 0.005% for 2003 and 0.031% for 2002. For the third quarter of 2005, we had a net charge-off ratio of 0.001% compared to a net recovery ratio of 0.010% for the same period in 2004.

Non-Interest Income

As stated above, non-interest income represents non-interest types of revenue and is comprised of customer service charges, loan placement fees, gain on sales of investments and other income. Non-interest income was $960,000 for the third quarter of 2005 compared to $842,000 for the third quarter of 2004. The $118,000 increase in non-interest income comparing the third quarter of 2005 to the same period in 2004 was primarily due to increases in loan placement fees and other non-interest income.

Customer service charges increased slightly to $606,000 for the third quarter of 2005 compared to $592,000 for the same period in 2004, mainly due to an increase in average number of transaction accounts.

We earn loan placement fees from the brokerage of single-family residential mortgage loans which is mainly for the convenience of our customers. Loan placement fees increased $26,000 in the third quarter of 2005 compared to the third quarter of 2004 even as less refinancing opportunities may exist with 30 year mortgages remaining at or below 6% in spite of the 275 basis point increase in the prime rate since June 30, 2004. Again, normal home sales due to “moving up” or relocating are still fairly strong and Fresno County continues to reflect very affordable housing compared to other parts of California. Commissions paid for personnel involved in generating loan placement fees are reflected as commissions in salary expense.

Appreciation in cash surrender value of bank owned life insurance (BOLI) increased $16,000 mainly due to $440,000 in BOLI purchased in the first nine months of 2005. The Bank purchased the additional insurance in connection with increases to the split-dollar life insurance policies related to salary continuation benefits for four key executives. Offsetting the increase in volume was a decrease in the interest rate received. This interest rate is reviewed annually by the Board of Directors. As mentioned above, salary continuation and the related BOLI is used as a retention tool for directors and key executives of the Bank.

Non-Interest Expenses

As discussed above, salaries and employee benefits, occupancy and equipment expense, professional services, and data processing are the major categories of non-interest expenses. Non-interest expenses increased $802,000 to $3,953,000 for the third quarter of 2005 compared to $3,151,000 for the same period of 2004. The increase can mainly be attributed to the merger with BMC.

Salaries and employee benefits increased $456,000 or 24.0% to $2,353,000 for the third quarter of 2005 compared to $1,897,000 for the third quarter of 2004. The increase in salaries and employee benefits for the three month period ended September 30, 2005 can be attributed to normal cost increases for salaries and benefits and incentive based compensation due to increased loan and deposit production, profitability, and the additional personnel costs from the merger with BMC. Commissions paid for loan placements increased $15,000 in the periods under review.

Occupancy and equipment expense increased $121,000 to $534,000 for the quarter ended September 30, 2005 compared to $413,000 for the quarter ended September 30, 2004. The 29.3% increase in occupancy and equipment expense for the three months ended September 30, 2005 was due mainly to the addition of the two branches resulting from the merger, normal increases in rent on existing leaseholds, and other occupancy related expenses.

Other non-interest expenses increased $225,000 or 26.8% in the third quarter of 2005 compared to the third quarter of 2004.

The following table describes significant components of other non-interest expense as a percentage of average assets.

For the three month periods ended September 30,	Other Expense 2005			Annualized % Avg. Assets		Other Expense 2004		Annualized % Avg. Assets
(Dollars in thousands)
Advertising	$	96		0.08	%	$	100	0.09	%
Audit/accounting	87			0.08	%	60		0.05	%
Data/item processing	191			0.17	%	190		0.17	%
ATM/debit card expenses	(7		)	0.00	%	2		0.00	%
Director fees	34			0.03	%	34		0.03	%
Donations	36			0.03	%	23		0.02	%
Education/training	12			0.01	%	7		0.01	%
General Insurance	35			0.03	%	29		0.03	%
Legal fees	78			0.07	%	26		0.02	%
Postage	42			0.04	%	38		0.03	%
Regulatory assessments	57			0.05	%	26		0.02	%
Stationery/supplies	46			0.04	%	36		0.03	%
Telephone	30			0.03	%	25		0.02	%
Travel expense	14			0.01	%	7		0.01	%
Operating losses	—			0.00	%	27		0.02	%
Other	315			0.28	%	211		0.24	%
Total other non-interest expense	$	1,066				$	841

Provision for Income Taxes

The effective income tax rate was 36.3% for the third quarter of 2005 compared to 35.9% for the third quarter of 2004. Provision for income taxes totaled $940,000 and $544,000 for the quarter ended September 30, 2005, and 2004, respectively.

FINANCIAL CONDITION

Summary of Changes in Consolidated Balance Sheets

September 30, 2005 compared to December 31, 2004

The merger of BMC along with the demand for our banking products has led to continued increases in loans and deposits during the first nine months of 2005. As of September 30, 2005, total assets were $461,688,000, an increase of 25.4%, or $93,541,000, compared to $368,147,000 as of December 31, 2004. Total gross loans increased 39.1% or $81,841,000, to $291,120,000 as of September 30, 2005 compared to $209,279,000 as of December 31, 2004. Total deposits increased 25.9% or, $84,520,000 to $410,706,000 as of September 30, 2005 compared to $326,186,000 as of December 31, 2004. Stockholders’ equity increased to $40,048,000 as of September 30, 2005 compared to $29,606,000 as of December 31, 2004.

As stated previously, we completed the merger with BMC into the Bank on January 1, 2005. The merger added $45,779,000 in loans, $63,769,000 in deposits, and $68,080,000 in total assets to our balance sheet as of January 1, 2005.

Investments

Our investment portfolio consists primarily of agency securities, mortgage backed securities, municipal securities, and overnight investments in the Federal Funds market and are all classified as available-for-sale. As of September 30, 2005, $29,299,000 was held as collateral for public funds, treasury, tax, and for other purposes. Our investment policies are established by the Board of Directors and implemented by our Investment/Asset Liability Committee. It is designed primarily to provide and maintain liquidity, to enable us to meet our pledging requirements for public money and borrowing arrangements, to generate a favorable return on investments without incurring undue interest rate and credit risk, and to complement our lending activities.

The volume of our investment portfolio is generally considered higher than our peers due mostly to our relatively low loan to deposit ratio. The total investment portfolio decreased 1.0.% from $127,895,000 at December 31, 2004 to $126,662,000 at September 30, 2005. The market value of the portfolio reflected a loss of $371,000 at September 30, 2005 compared to a gain of $562,000 at December 31, 2004 which reflects the increase in the Federal funds rate of 150 basis points since the end of the year.

We held $1,641,000 in Federal Home Loan Bank stock as of September 30, 2005 compared to $1,420,000 as of December 31, 2004. The increase is the result of dividends received and the merger with BMC.

The following table sets forth the carrying values and estimated fair values of our investment securities portfolio at the dates indicated:

			Gross		Gross			Estimated
September 30, 2005	Amortized		Unrealized		Unrealized			Market
Investment Type (Dollars in thousands)	Cost		Gain		(Loss)			Value

U.S. Government agencies	$	23,370			$	(545	)	$	22,825
Obligations of states and political subdivisions	29,402		$	495	(289		)	29,608
U.S. Government agencies collateralized by mortgage obligations	50,934		279		(286		)	50,927
Other securities	3,613		—		(25		)	3,588

	$	107,319	$	774	$	(1,145	)	$	106,948

			Gross		Gross			Estimated
December 31, 2004	Amortized		Unrealized		Unrealized			Market
Investment Type (Dollars in thousands)	Cost		Gain		(Loss)			Value

U.S. Government agencies	$	22,492	$	119	$	(267	)	$	22,344
Obligations of states and political subdivisions	19,993		637		(121		)	20,509
U.S. Government agencies collateralized by mortgage obligations	52,292		466		(255		)	52,503
Other securities	3,644		—		(17		)	3,627

	$	98,421	$	1,222	$	(660	)	$	98,983

Management periodically evaluates each investment security for other than temporary impairment, relying primarily on industry analyst reports, observation of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities and that the noted decline in fair value is considered temporary and due only to interest rate fluctuations.

Loans

Total gross loans have increased to $291,120,000 as of September 30, 2005 compared to $209,279,000 as of December 31, 2004.

The following table sets forth information concerning the composition of our loan portfolio at the dates indicated:

Loan Type	September 30, 2005			% of Total loans		December 31, 2004			% of Total loans
(Dollars in Thousands)
Commercial & Industrial	$	80,371		27.6	%	$	57,669		27.5	%
Real Estate	118,250			40.5	%	75,424			35.9	%
Real Estate – construction, land development and other land loans	40,304			13.8	%	35,364			16.9	%
Equity Lines of Credit	22,251			7.6	%	18,714			8.9	%
Consumer & Installment	7,507			2.6	%	6,420			3.1	%
Agricultural	22,830			7.8	%	15,946			7.6	%
Other	195			0.1	%	240			0.1	%

	291,708			100.0	%	209,777			100.0	%
Deferred loan fees, net	(588		)			(498		)
Total loans	$	291,120				$	209,279

As of September 30, 2005, a concentration of loans existed in loans collateralized by real estate (real estate, real estate construction, land development and other land loans, and equity lines of credit) comprising 61.9% of total loans. This level of concentration is consistent with December 31, 2004. Although management believes the loans within this concentration have no more than the normal risk of collectibility, a substantial decline in the performance of the economy in general or a decline in real estate values in the our primary market areas, in particular, could have an adverse impact on collectibility, increase the level of real estate-related non-performing loans, or have other adverse effects which alone or in the aggregate could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We believe that our commercial real estate loan underwriting policies and practices result in prudent extensions of credit, but recognize that our lending activities result in relatively high reported commercial real estate lending levels. Commercial real estate loans include certain loans which represent low to moderate risk and certain loans with higher risks.

The Board of Directors reviews and approves concentration limits and exceptions to limitations of concentration are reported to the Board of Directors at least quarterly.

Non-performing assets . Non-performing assets consist of non-performing loans, other real estate owned (“OREO”) and repossessed assets. Non-performing loans are those loans which have (i) been placed on non-accrual status, (ii) been subject to troubled debt restructurings, (iii) been classified as doubtful under our asset classification system, or (iv) become contractually past due 90 days or more with respect to principal or interest and have not been restructured or otherwise placed on non-accrual status. A loan is classified as non-accrual when 1) it is maintained on a cash basis because of deterioration in the financial condition of the borrower, 2) payment in full of principal or interest under the original contractual terms is not expected, or 3) principal or interest has been in default for a period of 90 days or more unless the asset is both well secured and in the process of collection.

At September 30, 2005 and December 31, 2004, we had no OREO, repossessed assets or restructured loans. At September 30, 2005, we had one non-accrual loan totaling $591,000 compared to no non-accrual loans at December 31, 2004. At September 30, 2005, we estimated the potential for any losses from this credit would have a minimal impact on the allowance for credit losses.

A summary of non-accrual, restructured, and past due loans at September 30, 2005 and December 31, 2004 is set forth below. The Company had no restructured loans and no accruing loans past due more than 90 days at September 30, 2005 and December 31, 2004. Management can give no assurance that non-accrual and other non-performing loans will not increase in the future.

Composition of Non-accrual, Past Due and Restructured Loans

(Dollars in Thousands)	September 30, 2005			December 31, 2004
Non-accrual Loans
Commercial and Industrial	$	591		$	-0-
Total non-accrual	591			-0-
Accruing loans past due 90 days or more	-0-			-0-
Restructured loans	-0-			-0-
Total non-performing loans	$	591		$	-0-
Nonperforming loans to total loans	0.20		%	0.0		%
Ratio of non-performing loans to allowance for credit losses	16.8		%	0.0		%
Loans considered to be impaired	$	591		$	-0-
Related allowance for credit losses on impaired loans	$	-0-		$	-0-

We measure our impaired loans by using the fair value of the collateral if the loan is collateral-dependent and the present value of the expected future cash flows discounted at the loan’s effective interest rate if the loan is not collateral-dependent. As of September 30, 2005, the only impaired loan was the $591,000 non-accrual loan, which is collateral-dependent. We place loans on non-accrual status that are delinquent 90 days or more or when a reasonable doubt exists as to the collectibility of interest and principal. . Management maintains certain loans that have been brought current by the borrower (less than 30 days delinquent) on non-accrual status until such time as management has determined that the loans are likely to remain current in future periods.

Classified Assets . From time to time, management has reason to believe that certain borrowers may not be able to repay their loans within the parameters of the present repayment terms, even though, in some cases, the loans are current at the time. These loans are graded in the classified loan grades of “substandard,” “doubtful,” or “loss” and include non-performing loans. Each classified loan is monitored monthly. Classified assets, consisting of non-accrual loans, loans graded as substandard or lower, other real estate owned and repossessed assets, (all net of government guarantees), totaled $2,367,000 as of September 30, 2005 compared to $1,564,000 as of December 31, 2004.

Allowance for Credit Losses . We have established a methodology for the determination of provisions for credit losses. The methodology is set forth in a formal policy and takes into consideration the need for an overall allowance for credit losses as well as specific allowances that are tied to individual loans. Our methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formula allowance and a specific allowance for identified problem loans.

In originating loans, we recognize that losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the collateral securing the loan. The allowance is increased by provisions charged against earnings and reduced by net loan charge offs. Loans are charged off when they are deemed to be uncollectible, or partially charged off when portions of a loan are deemed to be uncollectible. Recoveries are generally recorded only when cash payments are received.

The allowance for credit losses is maintained to cover losses inherent in the loan portfolio. The responsibility for the review of our assets and the determination of the adequacy lies with management and our Directors’ Audit Committee. They delegate the authority to the CCA to determine the loss reserve ratio for each type of asset and reviews, at least quarterly, the adequacy of the allowance based on an evaluation of the portfolio, past experience, prevailing market conditions, amount of government guarantees, concentration in loan types and other relevant factors.

The allowance for credit losses is an estimate of the losses that may be sustained in our loan and lease portfolio. The allowance is based on two principles of accounting: (1) Statement of Financial Accounting Standards (SFAS) No. 5, ‘‘Accounting for Contingencies,’’ which requires that losses be accrued when they are probable of occurring and estimable; and (2) SFAS No. 114, ‘‘Accounting by Creditors for Impairment of a Loan’’ and SFAS No. 118, ‘‘Accounting by Creditors for Impairment of a Loan—Income Recognition and Disclosures,’’ which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

The Bank under SFAS No. 5 establishes reserves. Credit Administration adheres to an internal asset review system and loss allowance methodology designed to provide for timely recognition of problem assets and adequate valuation allowances to cover expected asset losses. The Bank’s asset monitoring process includes the use of asset classifications to segregate the assets, largely loans and real estate, into various risk categories. The Bank uses the various asset classifications as a means of measuring risk and determining the adequacy of valuation allowances by using a nine-grade system to classify assets. All credit facilities exceeding 90 days of delinquency require classification.

The allowance for credit losses has seven components: the general valuation allowance, criticized and classified allowance, the specific valuation allowance, large borrower risk allowance, pool loan allowance, Q factor allowance and the model risk allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur.

• General valuation allowances (“GVA”): This element relates to assets with no well-defined deficiency or weakness (i.e. assets classified pass) and takes into consideration losses that are imbedded within the portfolio but have not yet been recognized. Generally, borrowers are impacted by events well in advance of a lender’s knowledge that may ultimately result in loan default and eventual loss. An example of such a loss-causing event would be the loss of a major tenant in the case of commercial real estate loan. General valuation allowances are determined through consideration of past loss experience

• GVA is calculated by applying loss factors to outstanding loans, in each case based on the internal risk grade of pass of such loans and commercial leases. Changes in risk grades affect the amount of the allowance. Loss factors are based on our historical loss experience and may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date.

• Loss factors are developed in the following ways:

• pass graded loss factors for commercial, financial, and industrial loans along with real estate construction [participated, commercial or consumer] derive from a migration model that tracks historical losses over a period (usually the last thirty six calendar months) which we believe captures the inherent losses in our loan portfolio;

• pass graded loss factors for commercial real estate loans are based on the average annual net charge-off rate over a period reflective of a full economic cycle; the past seven years.

We believe that an economic cycle is a period in which both upturns and downturns in the economy have been reflected. We calculate a loss factor over a time interval that spans what we believe constitutes a complete and representative economic cycle.

• Criticized and classified allowance: At the time of credit analysis and risk determination, credits, which have been determined to contain a weakness higher than management’s overall risk appetite, are graded as criticized or classified. Once validated that the credit is not impaired, a risk of loss is calculated and applied.

• The CCA identifies credits that have a risk level of special mention or worse, however not inclusive of Impaired Assets. The calculation uses the credit’s expected default frequency (EDF) as estimated by Moody’s risk for private companies. In each case use of the loan maturity defines if the one or five year default component is employed. Default is defined by Moody’s as a statistical probability that the credit will either miss or delay interest and/or principal payment, bankruptcy or receivership will occur, or exchange security where the exchange has the apparent purpose of helping the borrower avoid default. The exception to use of the EDF is found in the watch credits whereby the loan has an automatic 1% reserve held on outstanding balance. If the EDF has not been calculated, the Bank maintains an allocation equal to the sum of:

100% of those loans classified loss

50% of those loans classified doubtful

15% of those loans classified substandard

5% of those loans classified special mention

1% of those loans classified watch

• Pool loan allowance (“PLA”): Our residential and consumer loans and leases are relatively homogeneous with no single loan individually significant in terms of its size or potential risk of loss. Therefore, we review our residential and consumer portfolios by analyzing their performance as a pool of loans. Generally, borrowers become impacted by events well in advance of a lender’s knowledge that may ultimately result in loan default and eventual loss. Examples of such loss-causing events would be borrower job loss, divorce or medical crisis in the case of single family residential and consumer loans.

• Risk grade is not a component of this computation.

• Loss factors are developed in the following ways:

• Pooled loan loss factors (not individually graded loans) are based on expected net charge-offs for one year. Pooled loans are loans that are homogeneous in nature, such as consumer installment, home equity, residential mortgage loans and consumer leases.

• Large borrower risk allowance (“LBA”): CVCB has a number of borrowers with large loan balances which may create an additional risk if one or two of these borrowers were to unexpectedly default. Therefore an additional allowance for this risk is analyzed and applied.

• LBA identifies those credits that are larger than $2,000,000 and not collateralized by real estate: thereby, risk of loss may have a significant impact on capital.

• Q factor allowances (“QFA”): The methodology applied in all other allowance sections does not account for both quantitative and qualitative factors and documentation. Any methodology falls subject to some uncertainties. All loans and commercial leases contain, in management’s judgment, factors where loss recognition exists due to effects of the national and local economies, trends in nature and volume, changes in mix, consumer credit score migration, loan administration, concentrations, changes in internal lending policies, and collection practices to mention just a few.

• QFA is subjective by definition. The factors reflect management’s overall estimate of the additional rate of loss over the next four quarters that differ from either the historical loss experience or other valuations. The factors ever evolve and expectation of change from quarter to quarter is expected, both in inclusion and in value. As multiple factors exist which may be evaluated in connection with this allowance, topics noted below are examples only:

• general economic and business conditions affecting our key lending areas;

• credit quality trends (including trends in nonperforming loans expected to result from existing conditions);

• collateral values;

• loan volumes and concentrations;

• seasoning of the loan portfolio;

• specific industry conditions within portfolio segments;

• recent loss experience in particular segments of the portfolio;

• duration of the current economic cycle;

• government regulation

• bank regulatory examination results; and

• findings of our internal and external credit reviewers.

Model risk allowance (“MRA”): The allowance methodologies noted above are by definition imprecise. Any methodology is subject to some uncertainties. Estimating future losses inherent in a loan portfolio will vary with each method. Therefore, one applies a model risk component to determine a loss provision. This allowance is also used to establish a minimum floor by which the provision for credit loss would not decline below 1% of total gross loans.

The following table sets forth information regarding our allowance for credit losses at the dates and for the periods indicated:

	For the Nine Month Period Ended			For the Twelve Month Period Ended
(In thousands)	September 30, 2005			December 31, 2004

Balance, beginning of the year	$	2,697		$	2,425
Addition from merger with BMC	751			—
Provision charged to operations	10			—
Losses charged to the allowance	(56		)	(24		)
Recoveries on loans previously charged off	121			296

Balance, end of period	$	3,523		$	2,697

Ratio of non-performing loans to allowance for credit losses	16.8		%	N/A
Allowance for credit losses to total loans	1.21		%	1.29		%

As of September 30, 2005 the balance in the allowance for credit losses was $3,523,000 compared to $2,697,000 as of December 31, 2004. The majority of the increase was the result of incorporating the allowance for credit losses from the merger with BMC into the Bank’s allowance. The balance of commitments to extend credit on undisbursed construction and other loans and letters of credit was $125,104,000 as of September 30, 2005 compared to $107,816,000 as of December 31, 2004. Risks and uncertainties exist in all lending transactions, and even though there have historically been no charge offs on construction and other loans that have not been fully disbursed, our management and Directors’ Loan Committee have established reserve levels based on historical losses as well as economic uncertainties and other risks that exist as of each reporting period.

As of September 30, 2005 the allowance was 1.21% of total gross loans compared to 1.29% as of December 31, 2004. During the nine months ended September 30, 2005, there were no major changes in loan concentrations that significantly affected the allowance for credit losses. There have been no significant changes in estimation methods during the periods presented. Assumptions regarding the collateral value of various under performing loans may affect the level and allocation of the allowance for credit losses in future periods. The allowance may also be affected by trends in the amount of charge offs experienced or expected trends within different loan portfolios. The allowance for credit losses as a percentage of non-performing loans was 596% as of September 30, 2005. There were no non-performing loans as of December 31, 2004. Management believes the allowance at September 30, 2005 is adequate based upon its ongoing analysis of the loan portfolio, historical loss trends and other factors. However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period.

Deposits and Borrowings

Total deposits increased $84,520,000 or 25.9% to $410,706,000 as of September 30, 2005 compared to $326,186,000 as of December 31, 2004. Interest bearing deposits increased $65,925,000 or 29.8% to $286,876,000 as of September 30, 2005 compared to $220,951,000 as of December 31, 2004. Non-interest bearing deposits increased $18,595,000 or 17.7% to $123,830,000 as of September 30, 2005 compared to $105,235,000 as of December 31, 2004. The increase in deposits attributable to the BMC merger is approximately $63,769,000. The remaining growth is consistent with our strategy to grow our core deposit base and has occurred because of growth in our retail banking offices. In the merger with BMC we acquired 2 branches located in Oakhurst and Madera, California. We plan to open an additional branch in the first quarter of 2006 in downtown Fresno, California.

The composition of the deposits and average interest rates paid at September 30, 2005 and December 31, 2004 is summarized in the table below.

(Dollars in thousands)	September 30, 2005		%of Total Deposits		Effective Rate		December 31, 2004		%of Total Deposits		Effective Rate

NOW Accounts	$	57,154	13.9	%	0.10	%	$	52,571	16.1	%	0.10	%
MMDA Accounts	114,190		27.8	%	1.23	%	89,904		27.5	%	0.78	%
Time Deposits	89,274		21.7	%	2.42	%	57,958		17.8	%	1.72	%
Savings Deposits	26,258		6.4	%	0.34	%	20,518		6.3	%	0.35	%
Total Interest-bearing	286,876		69.8	%	1.28	%	220,951		67.7	%	0.85	%

Non-interest bearing	123,830		30.2	%			105,235		32.3	%
Total deposits	$	410,706	100.0	%			$	326,186	100.0	%

Short-term borrowings totaled $2,938,000 as of September 30, 2005 compared to $2,000,000 as of December 31, 2004. Short-term borrowings include $938,000 in principal payments due on the loan with a major bank and $2,000,000 in FHLB advances maturing in the next twelve months. We maintain a line of credit with the FHLB collateralized by commercial loans and government securities. Refer to Liquidity below for further discussion of FHLB advances.

Long term debt, which consisted of FHLB advances and a loan with a major bank, described below, totaled $3,562,000 as of September 30, 2005 compared to $6,500,000 as of December 31, 2004.

On December 17, 2004, the Company entered into a non-revolving loan agreement with a major bank under which the Company borrowed $2,500,000 and contributed $2,000,000 of additional capital to the Bank. The loan bears interest indexed to prime or LIBOR, at the Company’s election. Further terms and conditions of the loan agreement were outlined in Report on Form 8-K filed on December 22, 2004. The purpose of the borrowing was to ensure the Bank’s capital ratios remain at or above well capitalized after the effective date of the merger with BMC.

Capital

Our stockholders’ equity increased to $40,048,000 as of September 30, 2005 compared to $29,606,000 as of December 31, 2004. The increase in stockholders’ equity is a result of net income of $4,376,000 for the nine months ended September 30, 2005 combined with the increase in common stock from the merger with BMC, and proceeds from the exercise of stock options.

During the period the Company’s borrowing remains outstanding, which is expected to be until approximately 2007, the Bank does not anticipate paying dividends to the Company except for dividends that are necessary to meet the ordinary and usual operating expenses of the Company provided that the Bank would not pay any dividend that would cause it to be deemed not “well capitalized” under applicable banking laws and regulations.

Management considers capital requirements as part of its strategic planning process. The strategic plan calls for continuing increases in assets and liabilities, and the capital required may therefore be in excess of retained earnings. The ability to obtain capital is dependent upon the capital markets as well as our performance. Management regularly evaluates sources of capital and the timing required to meet its strategic objectives

The following table presents the Company’s and the Bank’s capital ratios as of September 30, 2005 and December 31, 2004.

	September 30, 2005				December 31,2004
(Dollars in thousands)	Amount		Ratio		Amount		Ratio
Tier 1 Leverage Ratio

Central Valley Community Bancorp and Subsidiary	$	29,962	6.73	%	$	29,259	8.03	%
Minimum regulatory requirement	17,818		4.00	%	14,574		4.00	%
Central Valley Community Bank	30,685		6.89	%	29,913		8.24	%
Minimum requirement for “Well-Capitalized” institution	22,259		5.00	%	18,155		5.00	%
Minimum regulatory requirement	17,807		4.00	%	14,524		4.00	%

Tier 1 Risk-Based Capital Ratio

Central Valley Community Bancorp and Subsidiary	29,962		9.37	%	29,259		11.55	%
Minimum regulatory requirement	12,791		4.00	%	10,137		4.00	%
Central Valley Community Bank	30,685		9.60	%	29,913		11.83	%
Minimum requirement for “Well-Capitalized” institution	19,170		6.00	%	15,166		6.00	%
Minimum regulatory requirement	12,780		4.00	%	10,111		4.00	%

Total Risk-Based Capital Ratio

Central Valley Community Bancorp and Subsidiary	33,485		10.47	%	31,956		12.61	%
Minimum regulatory requirement	25,582		8.00	%	20,273		8.00	%
Central Valley Community Bank	34,208		10.71	%	32,610		12.90	%
Minimum requirement for “Well-Capitalized” institution	31,950		10.00	%	25,277		10.00	%
Minimum regulatory requirement	25,560		8.00	%	20,222		8.00	%

Liquidity

Liquidity management involves our ability to meet cash flow requirements arising from fluctuations in deposit levels and demands of daily operations, which include funding of securities purchases, providing for customers’ credit needs and ongoing repayment of borrowings. Our liquidity is actively managed on a daily basis and reviewed periodically by our management and Director’s Asset/Liability Committees. This process is intended to ensure the maintenance of sufficient funds to meet our needs, including adequate cash flow for off-balance sheet commitments.

Our primary sources of liquidity are derived from financing activities which include the acceptance of customer and, to a lesser extent, broker deposits, federal funds facilities and advances from the Federal Home Loan Bank of San Francisco. These funding sources are augmented by payments of principal and interest on loans, the routine maturities and paydowns of securities from the securities portfolio, the stability of our core deposits and the ability to sell investment securities. Primary uses of funds include withdrawal of and interest payments on deposits, originations and purchases of loans, purchases of investment securities, and payment of operating expenses.

As a means of augmenting our liquidity, we have established federal funds lines with correspondent banks. At September 30, 2005 our available borrowing capacity includes approximately $14,100,000 in federal funds lines with our correspondent banks and $3,241,000 in unused FHLB advances. We believe our liquidity sources to be stable and adequate. At September 30, 2005, we were not aware of any information that was reasonably likely to have a material effect on our liquidity position.

The following table reflects the Company’s credit lines, balances outstanding, and pledged collateral at September 30, 2005 and December 31, 2004:

Credit Lines	September 30, 2005	Balance at September 30, 2005		December 31, 2004	Balance at December 31,2004

Unsecured Credit Lines (interest rate varies with market)	$14,100,000	$	-0-	$10,100,000	$	-0-

Federal Home Loan Bank (interest rate at prevailing interest rate)	Collateral pledged $7,181,000 Market Value of Collateral $7,110,000	$	4,000,000	Collateral pledged $9,668,000 Market Value of Collateral $9,822,000	$	6,000,000

Federal Reserve Bank (interest rate at prevailing discount interest rate)	Collateral pledged $3,399,000 Market Value of Collateral $3,317,000	$	-0-	Collateral pledged $3,504,000 Market Value of Collateral $3,456,000	$	-0-

The liquidity of the parent company, Central Valley Community Bancorp is primarily dependent on the payment of cash dividends by its subsidiary, Central Valley Community Bank, subject to limitations imposed by the regulations.

OFF-BALANCE SHEET ITEMS

In the ordinary course of business, the Company is a party to financial instruments with off-balance risk. These financial instruments include commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received. For a fuller discussion of these financial instruments, refer to Note 6 – Commitments and Contingencies of the Company’s condensed consolidated financial statements included herein and Note 9 – Commitments and Contingencies in the Company’s 2004 Annual Report to Shareholders’ on Form 10-KSB.

In the ordinary course of business, the Company is party to various operating leases. For a fuller discussion of these financial instruments, refer to Note 9 – Commitments and Contingencies in the Company’s 2004 Annual Report to Shareholders’ on Form 10-KSB.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk (“IRR”) and credit risk constitute the two greatest sources of financial exposure for insured financial institutions. IRR represents the impact that changes in absolute and relative levels of market interest rates may have upon our net interest income (“NII”). Changes in the NII are the result of changes in the net interest spread between interest-earning assets and interest-bearing liabilities (timing risk), the relationship between various rates (basis risk), and changes in the shape of the yield curve.

We realize income principally from the differential or spread between the interest earned on loans, investments, other interest-earning assets and the interest incurred on deposits and borrowings. The volumes and yields on loans, deposits and borrowings are affected by market interest rates. As of September 30, 2005, 83% of our loan portfolio was tied to adjustable rate indices. The majority of theses adjustable rate loans are tied to prime and reprice within 90 days. The majority of our time deposits have a fixed rate of interest. As of September 30, 2005, 80% of our time deposits mature within one year or less. As of September 30, 2005, $2,000,000 of our long term debt was fixed rate with an average remaining term of 1.4 years and $1,562,000 of long term debt reprices on a quarterly basis.

Changes in the market level of interest rates directly and immediately affect our interest spread, and therefore profitability. Sharp and significant changes to market rates can cause the interest spread to shrink or expand significantly in the near term, principally because of the timing differences between the adjustable rate loans and the maturities (and therefore repricing) of the deposits and borrowings.

Our management and Board of Director’s Asset/Liability Committees (“ALCO”) are responsible for managing our assets and liabilities in a manner that balances profitability, IRR and various other risks including liquidity. The ALCO operates under policies and within risk limits prescribed by, reviewed and approved by the Board of Directors.

The ALCO seeks to stabilize our NII by matching rate-sensitive assets and liabilities through maintaining the maturity and repricing of these assets and liabilities at appropriate levels given the interest rate environment. When the amount of rate-sensitive liabilities exceeds rate-sensitive assets within specified time periods, NII generally will be negatively impacted by an increasing interest rate environment and positively impacted by a decreasing interest rate environment. Conversely, when the amount of rate-sensitive assets exceeds the amount of rate-sensitive liabilities within specified time periods, net interest income will generally be positively impacted by an increasing interest rate environment and negatively impacted by a decreasing interest rate environment. The speed and velocity of the repricing of assets and liabilities will also contribute to the effects on our NII, as will the presence or absence of periodic and lifetime interest rate caps and floors.

Simulation of earnings is the primary tool used to measure the sensitivity of earnings to interest rate changes. Earnings simulations are produced using a software model that is based on actual cash flows and repricing characteristics for all of our financial instruments and incorporate market-based assumptions regarding the impact of changing interest rates on current volumes of applicable financial instruments.

Interest rate simulations provide us with an estimate of both the dollar amount and percentage change in NII under various rate scenarios. All assets and liabilities are normally subjected to up to 300 basis point increases and decreases in interest rates in 100 basis point increments. Under each interest rate scenario, we project our net interest income. From these results, we can then develop alternatives in dealing with the tolerance thresholds.

Approximately 83% of our loan portfolio is tied to adjustable rate indices and 60% of our loan portfolio reprices within 90 days. As of September 30, 2005, we had 264 loans totaling $53,754,000 with floors ranging from 1% to 8% and ceilings ranging from 9% to 25%. In the current rate environment, the number of loans affected by floors and ceilings is minimal.

The following table shows the effects of changes in projected net interest income for the twelve months ending September 30, 2006 under the interest rate shock scenarios stated. The table was prepared as of September 30, 2005, at which time prime interest rate was 6.75%.

	PROJECTED		CHANGE FROM			% CHANGE
CHANGE	NET INTEREST		RATES			FROM RATES
IN RATES	INCOME		UNCHANGED			UNCHANGED
UP 300 bp	$	28,063	$	4,517		19.18	%
UP 200 bp	26,082		2,536			10.77	%
UP 100 bp	24,161		614			2.61	%
UNCHANGED	23,546		—			—
DOWN 100 bp	22,766		(780		)	-3.31	%
DOWN 200 bp	21,028		(2,521		)	-10.71	%
DOWN 300 bp	19,631		(3,916		)	-16.63	%

Assumptions are inherently uncertain, and, consequently, the model cannot precisely measure net interest income or precisely predict the impact of changes in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes, as well as changes in market conditions and management strategies which might moderate the negative consequences of interest rate deviations. In the model above, the simulation shows that the Company is neutral over the one-year horizon. If interest rates increase or decline, there will be similar positive and negative impact to net interest income.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures with respect to the information generated for use in this Quarterly Report. The evaluation was based in part upon reports provided by a number of executives. Based upon, and as of the date of that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There was no change in the Company’s internal controls over financial reporting during the quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

In designing and evaluating disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurances of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS		None to report .

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS		None to report.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES		None to report .

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.		None to report.

ITEM 5 OTHER INFORMATION		None to report.

ITEM 6 EXHIBITS

(a) Exhibits

Exhibit No.		Description

3(i)		Amended Articles of Incorporation, as filed with California Secretary of State on October 31, 2005.
31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Central Valley Community Bancorp.

Date November 10, 2005	/s/ Daniel J. Doyle
	Daniel J. Doyle
	President and Chief Executive Officer

Date November 10, 2005	/s/ G. Graham
	Gayle Graham
	Chief Financial Officer

EXHIBIT INDEX

3(i)		Amended Articles of Incorporation, as filed with California Secretary of State on October 31, 2005.
31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EXHIBIT 3(i)

CERTIFICATE OF AMENDMENT OF

ARTICLES OF INCORPORATION

The undersigned certify that:

1. They are the President and Chief Executive Officer, and Chief Financial Officer, respectively, of CENTRAL VALLEY COMMUNITY BANCORP , a California corporation.

2. Article IV of the Articles of Incorporation of this corporation is amended in its entirety to read as follows:

“IV.

(a) Central Valley Community Bancorp (hereinafter the “Corporation”) is authorized to issue two classes of shares designated “Preferred Stock” and “Common Stock” respectively. The number of shares of Common Stock authorized to be issued is 80,000,000 and the number of shares of Preferred Stock authorized to be issued is 10,000,000.

(b) The shares of Preferred Stock may be divided into such number of series as the Board of Directors may determine. The Board of Directors is authorized to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon any wholly unissued series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.

Upon the filing of the Certificate of Amendment of Articles of Incorporation, each share of Common Stock that is outstanding is split up and converted into two (2) shares of Common Stock.”

3. The foregoing amendment of Articles of Incorporation has been duly approved by the Board of Directors.

4. The foregoing amendment of Articles of Incorporation is one that may be adopted with approval by the Board of Directors alone, because the foregoing amendment effects a stock split in accordance with Section 902(c) of the California Corporations Code. This corporation has two authorized classes of shares, of which 2,935,980 shares of Common Stock are outstanding and no shares of Preferred Stock are outstanding.

They further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of their own knowledge.

DATE: October 31, 2005.	/s/ Daniel J. Doyle
	Daniel J. Doyle, President and Chief
	Executive Officer


	/s / Gayle Graham
	Gayle Graham, Chief Financial Officer

EXHIBIT 31.1

RULE 13a-14(a) [SECTION 302] CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Daniel J. Doyle, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the Quarter Ended September 30, 2005 of CENTRAL VALLEY COMMUNITY BANCORP;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant , including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. [Paragraph reserved pursuant to SEC Release 33-8238];

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Daniel J. Doyle		Date: November 10, 2005
Daniel J. Doyle,
President and Chief Executive Officer (principal executive officer)

EXHIBIT 31.2

RULE 13a-14(a) [SECTION 302] CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Gayle Graham, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the Quarter Ended September 30, 2005 of CENTRAL VALLEY COMMUNITY BANCORP;

b. [Paragraph reserved pursuant to SEC Release 33-8238];

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Gayle Graham		Date: November 10, 2005
Gayle Graham,
Senior Vice President and Chief Financial Officer (principal accounting officer and principal financial officer)

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The following certification accompanies the issuer’s Quarterly Report on Form 10-Q and is not filed, as provided in Release 33-8212, 34-47551 dated June 30, 2003.

In connection with the accompanying Quarterly Report of Central Valley Community Bancorp (“CVCB”) on Form 10-Q for the quarter ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel J. Doyle, President and Chief Executive Officer of CVCB, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CVCB.

A signed original of this written statement required by Section 906 has been provided to Central Valley Community Bancorp and will be retained by Central Valley Community Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: November 10, 2005

	/s/ Daniel J. Doyle .
	DANIEL J. DOYLE
	President and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The following certification accompanies the issuer’s Quarterly Report on Form 10-Q and is not filed, as provided in Release 33-8212, 34-47551 dated June 30, 2003.

In connection with the accompanying Quarterly Report of Central Valley Community Bancorp (“CVCB”) on Form 10-Q for the quarter ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gayle Graham, Chief Financial Officer of CVCB, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CVCB.

Dated: November 10, 2005

	/s/ Gayle Graham
	GAYLE GRAHAM
	Chief Financial Officer

ITEM 1: FINANCIAL STATEMENTS

CENTRAL VALLEY COMMUNITY BANCORP

For the Nine Months Ended September 30, 2005 and 2004

Note 5. Merger of Bank of Madera County into Central Valley Community Bancorp

Note 6. Commitments and Contingencies

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

First Nine Months of 2005

Key Factors in Evaluating Financial Condition and Operating Performance

Interest Income and Expense

Net Interest Income before Provision for Credit Losses

Provision for Credit Losses

Non-Interest Income

Non-Interest Expenses

Provision for Income Taxes

CENTRAL VALLEY COMMUNITY BANCORP

Net Interest Income before Provision for Credit Losses

Provision for Credit Losses

Non-Interest Income

Non-Interest Expenses

Provision for Income Taxes

FINANCIAL CONDITION

Loans

Composition of Non-accrual, Past Due and Restructured Loans

Capital

Liquidity

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

None to report .

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS

None to report.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None to report .

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None to report.

ITEM 6 EXHIBITS

SIGNATURES