Community West Bancshares [CWBC] Filings

10-Q 1 cvcy-20240630.htm 10-Q cvcy-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

☐ 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

COMMUNITY WEST BANCSHARES

(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.)


7100 N. Financial Dr., Suite 101, Fresno, California						93720
(Address of principal executive offices)						(Zip code)

Registrant’s telephone number (559) 298-1775

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, no par value

CWBC

NASDAQ Capital Market

(Title of Each Class)

(Trading Symbol)

(Name of Each Exchange on which Registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☒

Small reporting company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2024 there were 18,940,558 shares of the registrant’s common stock outstanding.

COMMUNITY WEST BANCSHARES

2024 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


PART 1	FINANCIAL INFORMATION	5

ITEM 1	FINANCIAL STATEMENTS (Unaudited)	5

ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	41

ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	59

ITEM 4	CONTROLS AND PROCEDURES	59

PART II	OTHER INFORMATION	60

ITEM 1	LEGAL PROCEEDINGS	60

ITEM 1A	RISK FACTORS	60

ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	60

ITEM 3	DEFAULTS UPON SENIOR SECURITIES	60

ITEM 4	MINE SAFETY DISCLOSURES	60

ITEM 5	OTHER INFORMATION	60

ITEM 6	EXHIBITS	61

SIGNATURES		62

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to:

•current and future business, economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values and overall slowdowns in economic growth should these events occur;

•inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make, whether held in the portfolio or in the secondary market;

•effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Open Market Committee of the Federal Reserve Board;

•geopolitical and domestic political developments that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, and increase the volatility of financial markets;

•changes in the level of nonperforming assets and charge offs and other credit quality measures, and their impact on the adequacy of our allowance for credit losses and our provision for credit losses;

•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers, and the success of construction projects that we finance;

•our ability to achieve loan growth and attract deposits in our market area, the impact of the cost of deposits and our ability to retain deposits;

•liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary;

•continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

•challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;

•restraints on the ability of Community West Bank to pay dividends to us, which could limit our liquidity;

•increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

•inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance;

•changes in our management personnel or our inability to retain, motivate and hire qualified management personnel;

•disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems;

•disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions;

•an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies;

•risks related to the proposed merger with Community West Bancshares, including, among others, conditions to the closing of the merger may not be satisfied; the expected business expansion may be less successful as projected; the integration of each party’s management, personnel and operations may not be successfully achieved or may be materially delayed or may be more costly or difficult than expected, deposit attrition, customer or employee loss and/or revenue loss as a result of the announcement of the proposed merger, and expenses related to the proposed merger may be greater than expected;

•natural disasters, such as earthquakes, drought, pandemic diseases (such as the coronavirus) or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business;

•compliance with governmental and regulatory requirements, relating to banking, consumer protection, securities and tax matters; and

•our ability to the manage the foregoing.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this report. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Further information on other factors that could affect the financial results of the Company are included in Item 1A of this Annual Report on Form 10-K and in the Company’s other filings with the Securities and Exchange Commission (“SEC”). These documents are available free of charge at the SEC website at http://www.sec.gov.

PART 1: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

COMMUNITY WEST BANCSHARES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except share amounts)	June 30, 2024		December 31, 2023

ASSETS
Cash and due from banks	$	26,437	$	30,017
Interest-earning deposits in other banks	83,232		23,711

Total cash and cash equivalents	109,669		53,728

Available-for-sale debt securities, at fair value, net of allowance for credit losses of $0, with an amortized cost of $598,174 at June 30, 2024 and $669,646 at December 31, 2023, respectively	531,972		597,196
Held-to-maturity debt securities, at amortized cost less allowance for credit losses of $1,076 at June 30, 2024 and $1,051 at December 31, 2023, respectively	301,898		302,442
Equity securities, at fair value	6,551		6,649
Loans, less allowance for credit losses of $24,940 at June 30, 2024 and $14,653 at December 31, 2023, respectively	2,231,631		1,276,144
Bank premises and equipment, net	21,752		14,042

Bank-owned life insurance	51,166		41,572
Federal Home Loan Bank stock	10,978		7,136
Goodwill	96,379		53,777

Accrued interest receivable and other assets	122,675		80,740
Total assets	$	3,484,671	$	2,433,426

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	1,075,882	$	951,541
Interest bearing	1,793,418		1,090,071
Total deposits	2,869,300		2,041,612

Borrowings	150,638		80,000

Senior debt and subordinated debentures, less debt issuance costs of $375 at June 30, 2024 and $411 at December 31, 2023	69,817		69,744
Accrued interest payable and other liabilities	44,674		35,006
Total liabilities	3,134,429		2,226,362
Commitments and contingencies (Note 9)

Shareholders’ equity:

Preferred stock, no par value; 10,000,000 shares authorized, none issued and outstanding	—		—
Common stock, no par value; 80,000,000 shares authorized; issued and outstanding: 18,939,531 at June 30, 2024 and 11,818,039 at December 31, 2023	206,821		62,550

Retained earnings	204,250		210,548
Accumulated other comprehensive loss, net of tax	(60,829)		(66,034)
Total shareholders’ equity	350,242		207,064
Total liabilities and shareholders’ equity	$	3,484,671	$	2,433,426

See notes to unaudited consolidated financial statements.

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In thousands, except share and per-share amounts)	2024		2023		2024		2023
INTEREST INCOME:
Interest and fees on loans	$	36,197	$	17,382	$	54,497	$	34,159
Interest on deposits in other banks	1,076		1,374		1,507		1,449

Interest and dividends on investment securities:
Taxable	5,328		5,826		10,828		11,712
Exempt from Federal income taxes	1,396		1,405		2,792		2,810
Total interest income	43,997		25,987		69,624		50,130
INTEREST EXPENSE:
Interest on deposits	12,266		4,871		17,285		5,876
Interest on borrowings	1,758		—		2,379		661
Interest on senior debt and subordinated debentures	916		911		1,831		1,807
Total interest expense	14,940		5,782		21,495		8,344
Net interest income before provision for credit losses	29,057		20,205		48,129		41,786
PROVISION (CREDIT) FOR CREDIT LOSSES	9,831		(343)		10,407		290
Net interest income after provision for credit losses	19,226		20,548		37,722		41,496
NON-INTEREST INCOME:
Service charges	480		367		864		755

Net realized losses on sales and calls of investment securities	(1,974)		(39)		(2,346)		(257)






Other income	2,894		1,266		4,519		2,671
Total non-interest income	1,400		1,594		3,037		3,169
NON-INTEREST EXPENSES:
Salaries and employee benefits	13,451		7,976		22,090		16,010
Occupancy and equipment	2,423		1,264		3,966		2,521













Other	12,629		4,565		17,780		8,479
Total non-interest expenses	28,503		13,805		43,836		27,010
(Loss) income before (benefit) provision for income taxes	(7,877)		8,337		(3,077)		17,655
(Benefit) provision for income taxes	(1,587)		2,055		(463)		4,403


Net (loss) income	$	(6,290)	$	6,282	$	(2,614)	$	13,252
Earnings per common share:
Basic earnings per share	$	(0.33)	$	0.54	$	(0.17)	$	1.13
Weighted average common shares used in basic computation	18,814,020		11,723,127		15,282,274		11,713,524
Diluted earnings per share	$	(0.33)	$	0.54	$	(0.17)	$	1.13
Weighted average common shares used in diluted computation	18,937,036		11,740,390		15,369,528		11,738,037
Cash dividend per common share	$	0.12	$	0.12	$	0.24	$	0.24

See notes to unaudited consolidated financial statements.

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Net (loss) income	$	(6,290)	$	6,282	$	(2,614)	13,252
Other comprehensive income:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during the period	1,815		(282)		3,902		6,152
Reclassification of net losses included in net income	1,974		39		2,346		257


Amortization of net unrealized losses transferred	555		573		1,142		1,200
Other comprehensive income, before tax	4,344		330		7,390		7,609
Tax effect	(1,284)		(97)		(2,185)		(2,250)
Total other comprehensive income	3,060		233		5,205		5,359
Comprehensive (loss) income	$	(3,230)	$	6,515	$	2,591	$	18,611

See notes to unaudited consolidated financial statements.

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED JUNE 30, 2024 AND 2023

(Unaudited)


								Accumulated Other Comprehensive Loss (Net of Taxes)		Total Shareholders’ Equity
	Common Stock	Retained Earnings
(In thousands, except share amounts)				Shares			Amount
Balance, March 31, 2023			11,754,938		$	61,924		$	196,229	$	(76,101)	182,052
Net income			—		—			6,282		—		6,282
Other comprehensive income			—		—			—		233		233

Stock issued under employee stock purchase plan			3,649		47			—		—		47

Restricted stock granted net of forfeitures			53,877		—			—		—		—

Stock-based compensation expense			—		158			—		—		158
Cash dividend			—		—			(1,411)		—		(1,411)
Repurchase and retirement of common stock			(39)		(1)			—		—		(1)
Balance, June 30, 2023			11,812,425		$	62,128		$	201,100	$	(75,868)	$	187,360

Balance, March 31, 2024			11,831,994		$	62,801		$	212,805	$	(63,889)	$	211,717
Net loss			—		—			(6,290)		—		(6,290)
Other comprehensive income			—		—			—		3,060		3,060

Issuance of common stock due to business combination, net of issuance costs			7,037,202		143,712			—		—		143,712
Stock issued under employee stock purchase plan			3,654		77			—		—		77
Restricted stock granted net of forfeitures			62,785		—			—		—		—

Stock-based compensation expense			—		187			—		—		187
Cash dividend			—		—			(2,265)		—		(2,265)
Stock options exercised			5,017		63			—		—		63
Repurchase and retirement of common stock			(1,121)		(19)			—		—		(19)
Balance, June 30, 2024			18,939,531		$	206,821		$	204,250	$	(60,829)	$	350,242

See notes to unaudited consolidated financial statements.

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2024 AND 2023



	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss) (Net of Taxes)	Total Shareholders’ Equity
(In thousands, except share amounts)						Shares		Amount
Balance, December 31, 2022			11,735,291	$	61,487	$	194,400	$	(81,227)	$	174,660
Implementation of ASU 2016-13, Current Expected Credit Loss (CECL) Day 1 Adjustment			—	—		(3,731)		—		(3,731)
Adjusted Balance, January 1, 2023			11,735,291	$	61,487	$	190,669	$	(81,227)	$	170,929
Net income			—	—		13,252		—		13,252
Other comprehensive loss			—	—		—		5,359		5,359

Stock issued under employee stock purchase plan			7,792	123		—		—		123
Stock awarded to employees			10,347	—		—		—		—
Restricted stock granted net of forfeitures			59,034	—		—		—		—

Stock-based compensation expense			—	519		—		—		519
Cash dividend			—	—		(2,821)		—		(2,821)
Repurchase and retirement of common stock			(39)	(1)		—		—		(1)

Balance, June 30, 2023			11,812,425	$	62,128	$	201,100	$	(75,868)	$	187,360

Balance, December 31, 2023			11,818,039	$	62,550	$	210,548	$	(66,034)	$	207,064
Net loss			—	—		(2,614)		—		(2,614)
Other comprehensive income			—	—		—		5,205		5,205

Issuance of common stock due to business combination, net of issuance costs			7,037,202	143,712		—		—		143,712
Stock issued under employee stock purchase plan			8,034	147		—		—		147

Restricted stock granted net of forfeitures			72,360	—		—		—		—
Stock-based compensation expense			—	368		—		—		368
Cash dividend			—	—		(3,684)		—		(3,684)
Stock options exercised and related tax benefit			5,017	63		—		—		63
Repurchase and retirement of common stock			(1,121)	(19)		—		—		(19)
Balance, June 30, 2024			18,939,531	$	206,821	$	204,250	$	(60,829)	$	350,242

See notes to unaudited consolidated financial statements.

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months Ended June 30,
(In thousands)	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(2,614)	$	13,252
Adjustments to reconcile net income to net cash provided by operating activities:
Net (decrease) increase in deferred loan fees	(299)		94
Depreciation	937		311
Accretion	(942)		(971)
Amortization	2,154		4,562
Stock-based compensation	368		519


Provision for credit losses	10,407		290

Net realized losses on sales and calls of available-for-sale investment securities	2,346		257

Net gain on disposal of premises and equipment	14		—

Net change in equity securities	98		—

Increase in bank-owned life insurance, net of expenses	(623)		(503)


Net decrease in accrued interest receivable and other assets	2,506		(2,069)

Net increase in accrued interest payable and other liabilities	(1,284)		(649)
(Benefit) provision for deferred income taxes	(2,762)		381
Net cash provided by operating activities	10,306		15,474
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash and cash equivalents acquired in acquisition	58,523		—

Proceeds from sales or calls of available-for-sale investment securities	38,289		12,376
Proceeds from calls of held-to-maturity investment securities	—		20
Proceeds from maturity and principal repayments of available-for-sale investment securities	29,144		20,166
Proceeds from maturity and principal repayments of held-to-maturity investment securities	875		1,180

Net (increase) decrease in loans	(45,127)		556


Purchases of premises and equipment	(880)		(3,263)

FHLB stock purchased	(350)		(967)


Net cash provided by investing activities	80,474		30,068
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand, interest bearing and savings deposits	(38,089)		(40,296)
Net increase in time deposits	21,743		140,941
Proceeds from short-term borrowings from Federal Home Loan Bank	714,500		3,346,500
Repayments of short-term borrowings to Federal Home Loan Bank	(728,565)		(3,392,500)

Repayments of borrowings from FRB Bank Term Funding Program	(935)		—
Repurchase and retirement of common stock	(19)		(1)
Proceeds from stock issued under employee stock purchase plan	147		123


Excess tax benefit from exercise of stock options	63		—
Cash dividend payments on common stock	(3,684)		(2,821)

Net cash (used in) provided by financing activities	(34,839)		51,946
Increase in cash and cash equivalents	55,941		97,488
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	53,728		31,170
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	109,669	$	128,658

See notes to unaudited consolidated financial statements.


	For the Six Months Ended June 30,
(In thousands)	2024		2023
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest	$	18,366	$	8,621
Income taxes	2,380		5,400
Operating cash flows from operating leases	1,157		1,231

Non-cash investing and financing activities:





Unrealized gain on securities available for sale	$	6,248	$	6,652
Acquisition:
Assets acquired	$	1,041,385	$	—
Liabilities assumed	$	(940,276)	$	—

See notes to unaudited consolidated financial statements.

COMMUNITY WEST BANCSHARES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Note 1.

Description of Business and Basis of Presentation

The interim unaudited condensed consolidated financial statements of Community West Bancshares 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 Community West Bancshares and its wholly owned subsidiary Community West 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 (GAAP) have been omitted. The Company believes that the disclosures are adequate to make the information presented not misleading. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2023 Annual Report to Shareholders on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position at June 30, 2024, and the results of its operations and its cash flows for the three and six month interim periods ended June 30, 2024 and 2023 have been included. The results of operations for interim periods are not necessarily indicative of results for the full year.

Use of Estimates in the Preparation of Financial Statements

The preparation of these interim unaudited 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 periods. Actual results could differ from those estimates.

Segment and Significant Group Concentration of Credit Risk

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.

Recently Issued or Adopted Accounting Pronouncements

Compensation—Stock Compensation (Topic 718) - In March 2024, the Financial Accounting Standards Board (FASB) issued guidance within Accounting Standards Update (ASU) 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. The amendments in the ASU apply to companies that provide employees and non-employees with profits interest and similar awards to align compensation with the company’s operating performance and provide those holders with the opportunity to participate in future profits and/or equity appreciation of the company. The purpose of the ASU is to clarify the application of the scope guidance in Accounting Standards Codification (ASC) paragraph 718-10-15-3 in determining if a profit interest award should be accounted for in accordance with Topic 718: Compensation—Stock Compensation. The amendment in ASC paragraph 718-10-15-3 is solely intended to improve the overall clarity and does not change the guidance.

The ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If the Company adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes the interim period. The amendments should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) on a prospective basis. The Company has evaluated this ASU and does not expect the adoption to have a material impact on the Company’s Consolidated Financial Statements, as the Company does not typically provide these types of awards.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This ASU extends the period of time preparers can utilize the reference rate reform relief guidance in Topic 848. ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company is in the process of evaluating the provisions of this ASU but does not expect it to have a material impact on the Company's consolidated financial statements.

FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU was issued to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. This ASU is effective for fiscal years beginning after December 15, 2024. The adoption of this accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements but will result in the expansion of the income tax disclosures.

FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This ASU was issued to address stakeholder requests for more detailed information about expenses within each reportable segment and address disclosure requirements there within. The amendments retain existing disclosure requirements, and expand upon them for both interim and annual reporting periods. In addition, entities with a single reportable segment must now provide all segment disclosures required, including the new disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of this accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements but will result in inclusion of certain segment reporting requirements not previously required.

Note 2. Business Combinations

Effective on April 1, 2024, Central Valley Community Bancorp (“Central Valley”) completed its merger transaction with Community West Bancshares (“Community West”). Shortly thereafter Community West Bank (“CWB”), a wholly owned subsidiary of Community West, merged with and into Central Valley Community Bank (“CVCB”), a wholly-owned subsidiary of Central Valley, with CVCB being the surviving banking institution. Effective with these mergers, the corporate name of Central Valley and CVCB were changed to Community West Bancshares and Community West Bank, respectively.

Pursuant to the terms of the merger, holders of Community West common stock received 0.79 of a share of common stock of Central Valley for each share of Community West common stock held immediately prior to the effective time of the mergers, with cash to be paid in lieu of any fractional shares of common stock of Central Valley. As a result of the mergers, Central Valley issued approximately 7,037,202 shares of Central Valley common stock. The financial condition and results of operation of the combined companies is reported in the second quarter results.

The acquisition of Community West has been accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed, intangibles recognized and consideration exchanged was recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions used to calculate estimated fair values. We recorded the fair values based on the valuations available as of reporting date. In accordance with business combination accounting guidance, we will continue to evaluate these fair values for up to one year following the merger date of April 1, 2024. While management believes the information available and presented below provide a reasonable basis for estimating fair value, we may obtain additional information and evidence during the

measurement period that could result in changes to the estimated fair value amounts. Valuation subject to change include, but not limited to, loans and leases, deposits, deferred tax items, and certain other assets and liabilities.

The following table summarizes the consideration paid for Community West Bank and the amounts of assets acquired and liabilities assumed that were recorded at the acquisition date (in thousands):


	Community West
	April 1, 2024
Fair value of consideration transferred:
Fair value of shares issued	$	139,970
Cash consideration	2
Fair value of options assumed	3,742
Total merger consideration	$	143,714

Assets acquired:
Cash and cash equivalents	$	58,523
Securities available-for-sale	846
Loans and leases	920,094
Premises and equipment	7,608
Cash value of life insurance	8,971
Other assets	45,343
Total assets acquired	1,041,385
Liabilities assumed:
Deposits	(844,035)
Borrowings	(85,638)
Other liabilities	(10,603)
Total liabilities assumed	(940,276)
Total net assets acquired	101,109
Goodwill created from transaction	$	42,605

The acquisition resulted in goodwill of $42.6 million, which is nondeductible for tax purposes, as this acquisition was a nontaxable transaction. Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired and reflects the related synergies from the combined operations.

The following table presents the fair value and gross contractual amounts receivable of acquired non-credit deteriorated loans from the recent acquisition on April 1, 2024, and their respective expected contractual cash flows as of the acquisition date:


	Community West
	April 1, 2024
Fair value	$	892,090
Gross contractual amounts receivable	1,124,200
Estimate of contractual cash flows not expected to be collected (1)	13,375
Estimate of contractual cash flows expected to be collected	1,110,825
(1) Includes interest payments not expected to be collected due to loan prepayments as well as principal and interest payments not expected to be collected due to customer default.

The acquisition improves the Company’s footprint in Central California, expanding to the Central Coast. The acquisition diversifies its commercial banking business, adds additional revenue enhancing products, improves the Bank’s loan to deposit ratio, and creates operational efficiencies. Revenues and earnings of the acquired company since the acquisition date have not been disclosed as it is not practicable as Community West was merged into the Company and separate financial information is not readily available.

Note 3. Investments

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at June 30, 2024 and December 31, 2023 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrealized gains and losses (in thousands):


	June 30, 2024
Available-for-Sale Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses
Debt securities:
U.S. Treasury securities	$	9,993	$	—	$	(1,070)	$	8,923	$	—
U.S. Government agencies	99		—		(7)		92		—
Obligations of states and political subdivisions	196,230		—		(19,586)		176,644		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	83,098		10		(4,853)		78,255		—
Private label mortgage and asset backed securities	308,285		7		(40,706)		267,586		—
Corporate debt securities	469		3		—		472		—
Total available-for-sale	$	598,174	$	20	$	(66,222)	$	531,972	$	—

	June 30, 2024
Held-to-Maturity Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses
Debt securities:
Obligations of states and political subdivisions	$	192,112	$	73	$	(15,732)	$	176,453	$	15
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,925		—		(1,971)		8,954		—
Private label mortgage and asset backed securities	53,812		—		(5,777)		48,035		34
Corporate debt securities	46,125		—		(4,174)		41,951		1,027
Total held-to-maturity	$	302,974	$	73	$	(27,654)	$	275,393	$	1,076


	December 31, 2023
Available-for-Sale Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses
Debt securities:
U.S. Treasury securities	$	9,990	$	—	$	(1,036)	$	8,954	$	—
U.S. Government agencies	102		—		(7)		95		—
Obligations of states and political subdivisions	198,070		—		(17,848)		180,222		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	88,874		3		(5,525)		83,352		—
Private label mortgage and asset backed securities	372,610		10		(48,047)		324,573		—

Total available-for-sale	$	669,646	$	13	$	(72,463)	$	597,196	$	—


	December 31, 2023
Held-to-Maturity Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses
Debt securities:
Obligations of states and political subdivisions	$	192,070	$	70	$	(14,188)	$	177,952	$	20
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,758		—		(1,692)		9,066		—
Private label mortgage and asset backed securities	54,579		—		(5,944)		48,635		11
Corporate debt securities	46,086		—		(4,736)		41,350		1,020
Total held-to-maturity	$	303,493	$	70	$	(26,560)	$	277,003	$	1,051

Proceeds and gross realized gains (losses) from the sales or calls of available-for-sale investment securities for the periods ended June 30, 2024 and 2023 are shown below (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Available-for-Sale Securities	2024		2023		2024		2023
Proceeds from sales or calls	$	32,589	$	310	$	38,289	$	12,376
Gross realized gains from sales or calls	—		—		—		—
Gross realized losses from sales or calls	$	(1,974)	$	(39)	$	(2,346)	$	(257)

The provision for income taxes includes a $584,000 and $12,000 income tax benefit from security sales for the three months ended June 30, 2024 and 2023. The provision for income taxes includes a $693,000 and $76,000 income tax benefit from security sales for the six months ended June 30, 2024 and 2023.

The amortized cost and estimated fair value of available-for-sale and held-to maturity investment securities at June 30, 2024 by contractual maturity is shown below (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.


	June 30, 2024				December 31, 2023
Available-for-Sale Securities	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within one year	$	—	$	—	$	—	$	—
After one year through five years	15,662		13,888		9,992		8,954
After five years through ten years	34,050		29,911		40,264		35,379
After ten years	156,511		141,768		157,804		144,843
	206,223		185,567		208,060		189,176
Investment securities not due at a single maturity date:

U.S. Government agencies	99		92		102		95
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	83,098		78,255		88,874		83,352
Private label mortgage and asset backed securities	308,285		267,586		372,610		324,573
Corporate debt securities	469		472
Total available-for-sale	$	598,174	$	531,972	$	669,646	$	597,196