Company Quick10K Filing
Community West Bancshares
Price9.80 EPS1
Shares9 P/E13
MCap84 P/FCF9
Net Debt-56 EBIT21
TEV28 TEV/EBIT1
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-03-10
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-03
10-K 2018-12-31 Filed 2019-03-08
10-Q 2018-09-30 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-03-02
10-Q 2017-09-30 Filed 2017-11-06
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-03
10-K 2016-12-31 Filed 2017-03-03
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-01
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-04
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-09
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-07
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-13
10-K 2012-12-31 Filed 2013-03-29
10-Q 2012-09-30 Filed 2012-11-13
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-14
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-10
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-25
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-12
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-26
8-K 2020-04-24 Officers
8-K 2020-04-24 Earnings, Exhibits
8-K 2020-02-27 Delisting
8-K 2020-01-24 Earnings, Exhibits
8-K 2019-11-22 Regulation FD, Exhibits
8-K 2019-10-25 Earnings, Exhibits
8-K 2019-07-26 Earnings, Exhibits
8-K 2019-05-23 Shareholder Vote
8-K 2019-05-10 Regulation FD, Exhibits
8-K 2019-04-26 Earnings, Exhibits
8-K 2019-03-04 Other Events, Exhibits
8-K 2019-01-25 Earnings, Exhibits
8-K 2018-11-13 Regulation FD, Exhibits
8-K 2018-10-26 Earnings, Exhibits
8-K 2018-07-30 Officers, Exhibits
8-K 2018-07-27 Earnings, Exhibits
8-K 2018-07-23 Officers, Exhibits
8-K 2018-07-02 Officers
8-K 2018-05-24 Shareholder Vote
8-K 2018-05-10 Regulation FD, Exhibits
8-K 2018-04-27 Earnings, Exhibits
8-K 2018-01-26 Earnings, Exhibits

CWBC 10Q Quarterly Report

Part I - 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 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.50 ex10_50.htm
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32.1 ex32_1.htm

Community West Bancshares Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
91072854636418202012201420172020
Assets, Equity
2.41.91.41.00.50.02016201720182020
Rev, G Profit, Net Income
45279-9-27-452012201420172020
Ops, Inv, Fin

10-Q 1 form10q.htm 10-Q

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 March 31, 2020 or

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:  000-23575

COMMUNITY WEST BANCSHARES
(Exact name of registrant as specified in its charter)

California
 
77-0446957
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

445 Pine Avenue, Goleta, California
 
93117
(Address of principal executive offices)
 
(Zip Code)

(805) 692-5821
(Registrant’s telephone number, including area code)

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 preceding 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 every Interactive Data File required to be submitted 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 such files). ☒YES ☐NO

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

Large accelerated filer ☐
 
Accelerated filer ☐
     
Non-accelerated filer ☐ (Do not check if a smaller reporting company)
 
Smaller reporting company ☒
     
Emerging growth 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 ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock of the registrant issued and outstanding of 8,472,463 as of April 24, 2020.



Table of Contents

Index
Page
Part I.  Financial Information
 
 
Item 1 – Financial Statements
 
   
2
   
3
   
4
   
5
   
6
   
7
 
The financial statements included in this Form 10-Q should be read in conjunction with Community West Bancshares’ Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
 
     
 
34
 
51
 
51
     
Part II. Other Information
 
 
52
 
52
 
53
 
53
 
53
 
53
 
54
     
54

PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

COMMUNITY WEST BANCSHARES
CONSOLIDATED BALANCE SHEETS

   
March 31,
2020
   
December 31,
2019
 
   
(unaudited)
       
   
(in thousands, except share amounts)
 
Assets:
           
Cash and due from banks
 
$
3,000
   
$
2,536
 
Federal funds sold
   
2
     
3
 
Interest-earning demand in other financial institutions
   
86,663
     
80,122
 
Cash and cash equivalents
   
89,665
     
82,661
 
Investment securities - available-for-sale, at fair value; amortized cost of $18,226 at March 31, 2020 and $19,382 at December 31, 2019
   
18,059
     
19,264
 
Investment securities - held-to-maturity, at amortized cost; fair value of $6,019 at March 31, 2020 and $6,302 at December 31, 2019
   
5,739
     
6,132
 
Investment securities - measured at fair value; amortized cost of $66 at March 31, 2020 and December 31, 2019.
   
111
     
167
 
Federal Home Loan Bank stock, at cost
   
2,970
     
2,714
 
Federal Reserve Bank stock, at cost
   
1,373
     
1,373
 
Loans:
               
Held for sale, at lower of cost or fair value
   
39,458
     
42,046
 
Held for investment, net of allowance for loan losses of $9,167 at March 31, 2020 and $8,717 at December 31, 2019
   
733,371
     
724,800
 
Total loans
   
772,829
     
766,846
 
Other assets acquired through foreclosure, net
   
2,707
     
2,524
 
Premises and equipment, net
   
7,501
     
7,655
 
Other assets
   
24,254
     
24,534
 
Total assets
 
$
925,208
   
$
913,870
 
Liabilities:
               
Deposits:
               
Non-interest-bearing demand
 
$
121,293
   
$
110,843
 
Interest-bearing demand
   
286,736
     
314,278
 
Savings
   
16,016
     
15,689
 
Certificates of deposit ($250,000 or more)
   
93,615
     
96,431
 
Other certificates of deposit
   
193,939
     
213,693
 
Total deposits
   
711,599
     
750,934
 
Other borrowings
   
115,000
     
65,000
 
Other liabilities
   
15,448
     
15,958
 
Total liabilities
   
842,047
     
831,892
 
Commitments and Contingencies (Note 12)
               
Stockholders’ equity:
               
Common stock — no par value, 60,000,000 shares authorized; 8,472,463 shares issued and outstanding at March 31, 2020 and 8,472,463 at December 31, 2019
   
42,671
     
42,586
 
Retained earnings
   
40,602
     
39,470
 
Accumulated other comprehensive (loss)
   
(112
)
   
(78
)
Total stockholders’ equity
   
83,161
     
81,978
 
Total liabilities and stockholders’ equity
 
$
925,208
   
$
913,870
 

See the accompanying notes.

COMMUNITY WEST BANCSHARES
CONSOLIDATED INCOME STATEMENTS (unaudited)

   
Three Months Ended
March 31,
 
   
2020
   
2019
 
Interest income:
 
(in thousands, except per share amounts)
 
Loans, including fees
 
$
10,664
   
$
10,541
 
Investment securities and other
   
311
     
484
 
Total interest income
   
10,975
     
11,025
 
Interest expense:
               
Deposits
   
2,122
     
2,444
 
Other borrowings
   
390
     
358
 
Total interest expense
   
2,512
     
2,802
 
Net interest income
   
8,463
     
8,223
 
(Credit) provision for loan losses
   
392
     
(57
)
Net interest income after provision for loan losses
   
8,071
     
8,280
 
Non-interest income:
               
Other loan fees
   
341
     
258
 
Gains from loan sales, net
   
190
     
 
Document processing fees
   
124
     
87
 
Service charges
   
134
     
139
 
Other
   
161
     
120
 
Total non-interest income
   
950
     
604
 
Non-interest expenses:
               
Salaries and employee benefits
   
4,398
     
4,381
 
Occupancy, net
   
758
     
782
 
Professional services
   
383
     
381
 
Data processing
   
283
     
224
 
Depreciation
   
208
     
213
 
FDIC assessment
   
144
     
170
 
Advertising and marketing
   
153
     
129
 
Stock based compensation
   
85
     
95
 
Other
   
317
     
342
 
Total non-interest expenses
   
6,729
     
6,717
 
Income before provision for income taxes
   
2,292
     
2,167
 
Provision for income taxes
   
694
     
657
 
Net income
 
$
1,598
   
$
1,510
 
Earnings per share:
               
Basic
 
$
0.19
   
$
0.18
 
Diluted
 
$
0.19
   
$
0.18
 
Weighted average number of common shares outstanding:
               
Basic
   
8,472
     
8,491
 
Diluted
   
8,579
     
8,604
 
Dividends declared per common share
 
$
0.055
   
$
0.050
 

See the accompanying notes.

COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

   
Three Months Ended
March 31,
 
   
2020
   
2019
 
   
(in thousands)
 
Net income
 
$
1,598
   
$
1,510
 
Other comprehensive (loss) income, net:
               
Unrealized (loss) income on securities available-for-sale (AFS), net (tax effect of $14 and $(5) for each respective period presented)
   
(34
)
   
7
 
Net other comprehensive (loss) income
   
(34
)
   
7
 
Comprehensive income
 
$
1,564
   
$
1,517
 

See the accompanying notes.

COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

Three Months Ended March 31, 2020
 
Common Stock
   
Accumulated
Other
Comprehensive
   
Retained
   
Total
Stockholders’
 
   
Shares
   
Amount
   
Income (Loss)
   
Earnings
   
Equity
 
   
(in thousands)
 
Balance, December 31, 2019:
   
8,472
   
$
42,586
   
$
(78
)
 
$
39,470
   
$
81,978
 
Net income
   
     
     
     
1,598
     
1,598
 
Exercise of stock options
   
     
     
     
     
 
Stock based compensation
   
     
85
     
     
     
85
 
Common stock repurchase
   
     
     
     
     
 
Dividends on common stock
   
     
     
     
(466
)
   
(466
)
Other comprehensive (loss), net
   
     
     
(34
)
   
     
(34
)
Balance, March 31, 2020
   
8,472
   
$
42,671
   
$
(112
)
 
$
40,602
   
$
83,161
 

Three Months Ended March 31, 2019
 
Common Stock
   
Accumulated
Other
Comprehensive
   
Retained
   
Total
Stockholders’
 
   
Shares
   
Amount
   
Income (Loss)
   
Earnings
   
Equity
 
   
(in thousands)
 
Balance, December 31, 2018:
   
8,533
   
$
42,964
   
$
(141
)
 
$
33,328
   
$
76,151
 
Net income
   
     
     
     
1,510
     
1,510
 
Exercise of stock options
   
6
     
43
     
     
     
43
 
Stock based compensation
   
     
95
     
     
     
95
 
Common stock repurchase
   
(89
)
   
(929
)
   
     
     
(929
)
Dividends on common stock
   
     
     
     
(424
)
   
(424
)
Other comprehensive income, net
   
     
     
7
     
     
7
 
Balance, March 31, 2019
   
8,450
   
$
42,173
   
$
(134
)
 
$
34,414
   
$
76,453
 

See the accompanying notes.

COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

   
Three Months Ended March 31,
 
   
2020
   
2019
 
   
(in thousands)
 
Cash flows from operating activities:
           
Net income
 
$
1,598
   
$
1,510
 
Adjustments to reconcile net income to cash provided by operating activities:
               
Provision (credit) for loan losses
   
392
     
(57
)
Depreciation
   
208
     
213
 
Stock based compensation
   
85
     
95
 
Deferred income taxes
   
226
     
212
 
Net accretion of discounts and premiums for investment securities
   
29
     
20
 
(Gains) Losses on:
               
Sale of loans, net
   
(190
)
   
 
Sale of assets, net
   
     
7
 
Loans originated for sale and principal collections, net
   
2,588
     
1,360
 
Changes in:
               
Investment securities held at fair value
   
56
     
(24
)
Other assets
   
(113
)
   
401
 
Other liabilities
   
(282
)
   
(22
)
Servicing assets, net
   
(124
)
   
8
 
Net cash provided by operating activities
   
4,473
     
3,723
 
Cash flows from investing activities:
               
Principal pay downs and maturities of available-for-sale securities
   
1,136
     
582
 
Principal pay downs and maturities of held-to-maturity securities
   
385
     
225
 
Loan originations and principal collections, net
   
(8,879
)
   
(3,169
)
Purchase of restricted stock, net
   
(256
)
   
 
Purchase of premises and equipment, net
   
(54
)
   
(33
)
Net cash used in investing activities
   
(7,668
)
   
(2,395
)
Cash flows from financing activities:
               
Net (decrease) increase in deposits
   
(39,335
)
   
18,723
 
Net increase (decrease) in borrowings
   
50,000
     
(22,250
)
Exercise of stock options
   
     
43
 
Cash dividends paid on common stock
   
(466
)
   
(424
)
Common stock repurchase
   
     
(929
)
Net cash provided (used) by financing activities
   
10,199
     
(4,837
)
Net increase cash and cash equivalents
   
7,004
     
(3,509
)
Cash and cash equivalents at beginning of period
   
82,661
     
56,915
 
Cash and cash equivalents at end of period
 
$
89,665
   
$
53,406
 
Supplemental disclosure:
               
Cash paid during the period for:
               
Interest
 
$
2,134
   
$
2,521
 
Non-cash investing and financing activity:
               
Transfers to other assets acquired through foreclosure, net
   
106
     
 
Operating lease right-of-use asset
   
     
8,350
 
Operating lease liability
   
     
8,350
 

See the accompanying notes.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Community West Bancshares (“CWBC”), incorporated under the laws of the state of California, is a bank holding company providing full service banking through its wholly-owned subsidiary Community West Bank, N.A. (“CWB” or the “Bank”). Unless indicated otherwise or unless the context suggests otherwise, these entities are referred to herein collectively and on a consolidated basis as the “Company.”

Basis of Presentation

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States (“GAAP”) and conform to practices within the financial services industry.  The accounts of the Company and its consolidated subsidiary are included in these Consolidated Financial Statements.  All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent 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.  Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses and the fair value of securities available for sale.  Although Management believes these estimates to be reasonably accurate, actual amounts may differ.  In the opinion of Management, all necessary adjustments have been reflected in the financial statements during their preparation.

Interim Financial Information

The accompanying unaudited consolidated financial statements as of March 31, 2020 and 2019, and for the three months, have been prepared in a condensed format, and therefore do not include all of the information and footnotes required by GAAP for complete financial statements.  These statements have been prepared on a basis that is substantially consistent with the accounting principles applied to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

The information furnished in these interim statements reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for each respective period presented.  Such adjustments are of a normal recurring nature.  The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year.  The interim financial information should be read in conjunction with the Company’s audited consolidated financial statements.

Reclassifications

Certain amounts in the consolidated financial statements as of December 31, 2019 and for the three months ended March 31, 2019 have been reclassified to conform to the current presentation.  The reclassifications have no effect on net income, comprehensive income or stockholders’ equity as previously reported.

Loans Held For Sale

Loans which are originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value determined on an aggregate basis.  Valuation adjustments, if any, are recognized through a valuation allowance by charges to lower of cost or fair value provision.  Loans held for sale are mostly comprised of commercial agriculture and Small Business Association (“SBA”).  The Company did not incur any lower of cost or fair value provision in the three months ended March 31, 2020 and 2019.

Loans Held for Investment and Interest and Fees from Loans

Loans are recognized at the principal amount outstanding, net of unearned income, loan participations and amounts charged off.  Unearned income includes deferred loan origination fees reduced by loan origination costs.  Unearned income on loans is amortized to interest income over the life of the related loan using the level yield method.

Interest income on loans is accrued daily using the effective interest method and recognized over the terms of the loans.  Loan fees collected for the origination of loans less direct loan origination costs (net deferred loan fees) are amortized over the contractual life of the loan through interest income.  If the loan has scheduled payments, the amortization of the net deferred loan fee is calculated using the interest method over the contractual life of the loan.  If the loan does not have scheduled payments, such as a line of credit, the net deferred loan fee is recognized as interest income on a straight-line basis over the contractual life of the loan commitment.  Commitment fees based on a percentage of a customer’s unused line of credit and fees related to standby letters of credit are recognized over the commitment period.

When loans are repaid, any remaining unamortized balances of unearned fees, deferred fees and costs and premiums and discounts paid on purchased loans are accounted for through interest income.

Nonaccrual loans:  For all loan types, when a borrower discontinues making payments as contractually required by the note, the Company must determine whether it is appropriate to continue to accrue interest.  Generally, the Company places loans in a nonaccrual status and ceases recognizing interest income when the loan has become delinquent by more than 90 days or when Management determines that the full repayment of principal and collection of interest is unlikely.  The Company may decide to continue to accrue interest on certain loans more than 90 days delinquent if they are well secured by collateral and in the process of collection.  Other personal loans are typically charged off no later than 120 days delinquent.

For all loan types, when a loan is placed on nonaccrual status, all interest accrued but uncollected is reversed against interest income in the period in which the status is changed.  Subsequent payments received from the customer are applied to principal and no further interest income is recognized until the principal has been paid in full or until circumstances have changed such that payments are again consistently received as contractually required.  The Company occasionally recognizes income on a cash basis for non-accrual loans in which the collection of the remaining principal balance is not in doubt.

Impaired loans:  A loan is considered impaired when, based on current information, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest under the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and/or interest payments.  Loans that experience insignificant payment delays or payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays or payment shortfalls on a case-by-case basis.  When determining the possibility of impairment, management considers the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  For collateral-dependent loans, the Company uses the fair value of collateral method to measure impairment.  The collateral-dependent loans that recognize impairment are charged down to the fair value less costs to sell.  All other loans are measured for impairment either based on the present value of future cash flows or the loan’s observable market price.

Troubled debt restructured loan (“TDR”): A TDR is a loan on which the Company, for reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider.  These concessions include but are not limited to term extensions, rate reductions and principal reductions.  Forgiveness of principal is rarely granted and modifications for all classes of loans are predominately term extensions.  A TDR loan is also considered impaired.  Generally, a loan that is modified at an effective market rate of interest may no longer be disclosed as a troubled debt restructuring in years subsequent to the restructuring if it is not impaired based on the terms specified by the restructuring agreement.

Guidance on Non-TDR Loan Modifications due to COVID-19
On March 22, 2020, a statement was issued by banking regulators and titled “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19.  Additionally, Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (Cares Act) that passed on March 27, 2020 further provides that a qualified loan modification is exempt by law from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by the President of the United States under the National Emergencies Act (50 U.S.C. 1601 et seq.) terminates.  Accordingly, we are offering short-term modifications made in response to COVID-19 to borrowers who are current and otherwise not past due.  These include short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers, extension of repayment terms, or other delays in payment that are insignificant.  The modifications completed in the three months ended March 31, 2020 were immaterial.

Allowance for Loan Losses and Provision for Loan Losses

The Company maintains a detailed, systematic analysis and procedural discipline to determine the amount of the allowance for loan losses (“ALL”). The ALL is based on estimates and is intended to be appropriate to provide for probable losses inherent in the loan portfolio. This process involves deriving probable loss estimates that are based on migration analysis and historical loss rates, in addition to qualitative factors that are based on management’s judgment. The migration analysis and historical loss rate calculations are based on the annualized loss rates and the Company extended its time horizon for the ALL methodology in 2019. Migration analysis is utilized for the Commercial Real Estate (“CRE”), Commercial, Commercial Agriculture, Small Business Administration (“SBA”), Home Equity Line of Credit (“HELOC”), Single Family Residential, and Consumer portfolios. The historical loss rate method is utilized primarily for the Manufactured Housing portfolio. The migration analysis takes into account the risk rating of loans that are charged off in each loan category. Loans that are considered Doubtful are typically charged off. The following is a description of the characteristics of loan ratings. Loan ratings are reviewed as part of our normal loan monitoring process, but, at a minimum, updated on an annual basis.

Substantially Risk Free –   These borrowers have virtually no probability of default or loss given default and present no identifiable or potential adverse risk to the Company.  Documented repayment is either backed by the full faith and credit of the United States Government, or secured by cash collateral of the principal borrowed.  The collateral must be in the possession of the Company and free from potential claim.  In addition, these credits will conform in all aspects to established loan policies and procedures, laws, rules, and regulations.

Nominal Risk – This rating is for the highest quality borrowers with nominal probability of default or loss given default from the transaction.  Typically this is a borrower with a well-established record of financial performance, a strong equity position, abundant liquidity and excellent debt service ability.  The Borrower’s financial outlook is stable due to a broad range of operations or products and is able to weather an economic downturn without significant impact to liquidity or net worth.  Typically, this borrower will be publicly owned or have access to public debt or equity, all investment grade.  In addition, these credits will conform in all aspects to established loan policies and procedures, laws, rules, and regulations.  Transaction can include marketable securities as collateral, properly margined.

Pass/Management Attention Risk – The loans in the four remaining pass categories range from minimal risk to moderate risk to acceptable risk to management attention risk. Loans rated in the first three categories are acceptable loans, appropriately underwritten, bearing an ordinary risk of loss to the Company. Loans in the minimal and moderate risk categories are loans to quality borrowers with financial statements presenting a good primary source as well as an adequate secondary source of repayment. In the case of individuals, borrowers with this rating are quality borrowers demonstrating a reasonable level of secure income, a net worth adequate to support the loan and presenting a good primary source as well as an adequate secondary source of repayment. Loans rated management attention risk indicate that although the borrower meets the criteria for a rating of acceptable risk or better, the credit possesses an identified and elevated risk level that should be resolved in a short period of time.  Technical risks include, but are not limited to, inadequate or improperly executed documentation, which may be material, serious delays in the submission of financial reporting or covenant violations that are not indicative of a protracted trend.

Special Mention - A Special Mention loan has potential weaknesses that require management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date.  Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard - A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  These loans have a well-defined weakness or weaknesses that jeopardize full collection of amounts due.  They are characterized by the distinct possibility that the Company will sustain some loss if the borrower’s deficiencies are not corrected.

Doubtful - A loan classified Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined.  Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.

Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable loans is not warranted.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this loan even though partial recovery may be realized in the future.  Losses are taken in the period in which they are considered uncollectible.

The Company’s ALL is maintained at a level believed appropriate by management to absorb known and inherent probable losses on existing loans.  The allowance is charged for losses when management believes that full recovery on the loan is unlikely.  The following is the Company’s policy regarding charging off loans.

Commercial, CRE and SBA Loans

Charge-offs on these loan categories are taken as soon as all or a portion of any loan balance is deemed to be uncollectible.  A loan is considered impaired when, based on current information, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest under the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and/or interest payments.  Loans that experience insignificant payment delays or payment shortfalls generally are not classified as impaired. Generally, loan balances are charged-down to the fair value of the collateral, if, based on a current assessment of the value, an apparent deficiency exists.  In the event there is no perceived equity, the loan is charged-off in full.  Unsecured loans which are delinquent over 90 days are, without clear support, also charged-off in full.

Single Family Real Estate, HELOC’s and Manufactured Housing Loans

Consumer loans and residential mortgages secured by one-to-four family residential properties, HELOC and manufactured housing loans in which principal or interest is due and unpaid for 90 days, are evaluated for impairment.  Loan balances are charged-off to the fair value of the property, less estimated selling costs, if, based on a current appraisal, an apparent deficiency exists.  In the event there is no perceived equity, the loan is generally fully charged-off.

Consumer Loans

All consumer loans (excluding real estate mortgages, HELOCs and cash secured loans) are charged-off or charged-down to net recoverable value before becoming 120 days or five payments delinquent.

The ALL calculation for the different loan portfolios is as follows:


Commercial Real Estate, Commercial, Commercial Agriculture, SBA, HELOC, Single Family Residential, and Consumer – Migration analysis combined with risk rating is used to determine the required ALL for all non-impaired loans.  In addition, the migration results are adjusted based upon qualitative factors that affect the specific portfolio category.  Reserves on impaired loans are determined based upon the individual characteristics of the loan.

Manufactured Housing – The ALL is calculated on the basis of loss history and risk rating, which is primarily a function of delinquency.  In addition, the loss results are adjusted based upon qualitative factors that affect this specific portfolio.

The Company evaluates and individually assesses for impairment loans classified as substandard or doubtful in addition to loans either on nonaccrual, considered a TDR or when other conditions exist which lead management to review for possible impairment.   Measurement of impairment on impaired loans is determined on a loan-by-loan basis and in total establishes a specific reserve for impaired loans.  The amount of impairment is determined by comparing the recorded investment in each loan with its value measured by one of three methods:


The expected future cash flows are estimated and then discounted at the effective interest rate.

The value of the underlying collateral net of selling costs.  Selling costs are estimated based on industry standards, the Company’s actual experience or actual costs incurred as appropriate.  When evaluating real estate collateral, the Company typically uses appraisals or valuations, no more than twelve months old at time of evaluation.  When evaluating non-real estate collateral securing the loan, the Company will use audited financial statements or appraisals no more than twelve months old at time of evaluation.  Additionally, for both real estate and non-real estate collateral, the Company may use other sources to determine value as deemed appropriate.

The loan’s observable market price.

Interest income is not recognized on impaired loans except for limited circumstances in which a loan, although impaired, continues to perform in accordance with the loan contract and the borrower provides financial information to support maintaining the loan on accrual.

The Company determines the appropriate ALL on a monthly basis.  Any differences between estimated and actual observed losses from the prior month are reflected in the current period in determining the appropriate ALL determination and adjusted as deemed necessary.  The review of the appropriateness of the allowance takes into consideration such factors as concentrations of credit, changes in the growth, size and composition of the loan portfolio, overall and individual portfolio quality, review of specific problem loans, collateral, guarantees and economic and environmental conditions that may affect the borrowers’ ability to pay and/or the value of the underlying collateral.  Additional factors considered include: geographic location of borrowers, changes in the Company’s product-specific credit policy and lending staff experience.  These estimates depend on the outcome of future events and, therefore, contain inherent uncertainties.

Another component of the ALL considers qualitative factors related to non-impaired loans. The qualitative portion of the allowance on each of the loan pools is based on changes in any of the following factors:


Concentrations of credit

Trends in volume, maturity, and composition of loans

Volume and trend in delinquency, nonaccrual, and classified assets

Economic conditions

Geographic distance

Policy and procedures or underwriting standards

Staff experience and ability

Value of underlying collateral

Competition, legal, or regulatory environment

Results of outside exams and quality of loan review and Board oversight

Off Balance Sheet and Credit Exposure

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit.  Such financial instruments are recorded in the consolidated financial statements when they are funded.  They involve, to varying degrees, elements of credit risk in excess of amounts recognized in the consolidated balance sheets.  Losses would be experienced when the Company is contractually obligated to make a payment under these instruments and must seek repayment from the borrower, which may not be as financially sound in the current period as they were when the commitment was originally made.  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 enters into credit arrangements that generally provide for the termination of advances in the event of a covenant violation or other event of default.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party.  The commitments are collateralized by the same types of assets used as loan collateral.

As with outstanding loans, the Company applies qualitative factors to its off-balance sheet obligations in determining an estimate of losses inherent in these contractual obligations.  The estimate for loan losses on off-balance sheet instruments is included within other liabilities and the charge to income that establishes this liability is included in non-interest expense.

Foreclosed Real Estate and Repossessed Assets

Foreclosed real estate and other repossessed assets are recorded at fair value at the time of foreclosure less estimated costs to sell.  Any excess of loan balance over the fair value less estimated costs to sell of the other assets is charged-off against the allowance for loan losses.  Any excess of the fair value less estimated costs to sell over the loan balance is recorded as a loan loss recovery to the extent of the loan loss previously charged-off against the allowance for loan losses; and, if greater, recorded as a gain on foreclosed assets.  Subsequent to the legal ownership date, the Company periodically performs a new valuation and the asset is carried at the lower of carrying amount or fair value less estimated costs to sell.  Operating expenses or income, and gains or losses on disposition of such properties, are recorded in current operations.

Income Taxes

The Company uses the asset and liability method, which recognizes an asset or liability representing the tax effects of future deductible or taxable amounts that have been recognized in the consolidated financial statements.  Due to tax regulations, certain items of income and expense are recognized in different periods for tax return purposes than for financial statement reporting.  These items represent “temporary differences.”  Deferred income taxes are recognized for the tax effect of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  A valuation allowance is established for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets may not be realized.  Any interest or penalties assessed by the taxing authorities is classified in the financial statements as income tax expense.  Deferred tax assets are included in other assets on the consolidated balance sheets.

Management evaluates the Company’s deferred tax asset for recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including the Company’s historical profitability and projections of future taxable income.  The Company is required to establish a valuation allowance for deferred tax assets and record a charge to income if management determines, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets may not be realized.

The Company is subject to the provisions of ASC 740, Income Taxes (“ASC 740”).  ASC 740 prescribes a more likely than not threshold for the financial statement recognition of uncertain tax positions.  ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  On a quarterly basis, the Company evaluates income tax accruals in accordance with ASC 740 guidance on uncertain tax positions.

Earnings Per Share

Basic earnings per common share is computed using the weighted average number of common shares outstanding for the period divided into the net income.  Diluted earnings per share include the effect of all dilutive potential common shares for the period.  Potentially dilutive common shares include stock options.

Recent Accounting Pronouncements

Effective January 1, 2019, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-02, Leases (Topic 842).  This update amends the accounting requirements for leases by requiring recognition of lease liabilities and related right-of-use assets on the balance sheet.  Lessees are required to recognize a lease liability measured on a discounted basis, which is the lessee’s right to use, or control the use of, a specified asset for the lease term.  We adopted Topic 842 using the modified retrospective approach.  We have recorded the cumulative effects on our balance sheet as of the effective date. As a result of the adoption, there was no impact on net income.  We recorded operating lease right-of-use assets of $8.4 million and lease liabilities of $8.4 million upon adoption. As of March 31, 2020, the operating lease right-of-use assets was $6.1 million and lease liabilities of $6.1 million. As part of the adoption, we elected the package of practical expedients permitted under the transition guidance within Topic 842, which among other things, allowed us to carry forward the historical lease classifications.  Leases with a term of 12 months or less are not recorded on the balance sheet.  See Note 11, Leases for further information.

In June of 2016, the FASB issued updated guidance codified within ASU-2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which amends the guidance for recognizing credit losses from an “incurred loss” methodology that delays recognition of credit losses until it is probable a loss has been incurred to an expected credit loss methodology. The guidance requires the use of the modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The standard is effective for the Company as of January 1, 2023. The Company is currently evaluating the impact of the amended guidance and has not yet determined the effect of the standard on its ongoing financial reporting.

In March 2017, the FASB issued updated guidance codified within ASU-2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20),” which is intended to enhance the accounting for the amortization of premiums for purchased callable debt securities. The Company adopted this guidance as of January 1, 2019, which did not have a material impact on the Company’s Consolidated Financial Statements.

In March 2020, the FASB issued updated guidance codified within ASU-2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In response to the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The Company is currently evaluating the impact of the amended guidance and has not yet determined the effect of the standard on its ongoing financial reporting.

2.
INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities are as follows:

   
March 31, 2020
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
(Losses)
   
Fair
Value
 
Securities available-for-sale
 
(in thousands)
 
U.S. government agency notes
 
$
7,513
   
$
   
$
(51
)
 
$
7,462
 
U.S. government agency collateralized mortgage obligations (“CMO”)
   
10,713
     
27
     
(143
)
   
10,597
 
Total
 
$
18,226
   
$
27
   
$
(194
)
 
$
18,059
 
                                 
Securities held-to-maturity
                               
U.S. government agency mortgage backed securities (“MBS”)
 
$
5,739
   
$
280
   
$
   
$
6,019
 
Total
 
$
5,739
   
$
280
   
$
   
$
6,019
 
                                 
Securities measured at fair value
                               
Equity securities: Farmer Mac class A stock
 
$
66
   
$
45
   
$
   
$
111
 
Total
 
$
66
   
$
45
   
$
   
$
111
 

   
December 31, 2019
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
(Losses)
   
Fair
Value
 
Securities available-for-sale
 
(in thousands)
 
U.S. government agency notes
 
$
8,112
   
$
   
$
(64
)
 
$
8,048
 
U.S. government agency collateralized mortgage obligations (“CMO”)
   
11,270
     
23
     
(77
)
   
11,216
 
Total
 
$
19,382
   
$
23
   
$
(141
)
 
$
19,264
 
                                 
Securities held-to-maturity
                               
U.S. government agency mortgage backed securities (“MBS”)
 
$
6,132
   
$
189
   
$
(19
)
 
$
6,302
 
Total
 
$
6,132
   
$
189
   
$
(19
)
 
$
6,302
 
                                 
Securities measured at fair value
                               
Equity securities: Farmer Mac class A stock
 
$
66
   
$
101
   
$
   
$
167
 
Total
 
$
66
   
$
101
   
$
   
$
167
 

At March 31, 2020 and December 31, 2019, $23.8 million and $25.6 million of securities at carrying value, respectively, were pledged to the Federal Home Loan Bank (“FHLB”), as collateral for current and future advances.

The maturity periods and weighted average yields of investment securities at the period ends indicated were as follows:

   
March 31, 2020
 
   
Less than One Year
   
One to Five Years
   
Five to Ten Years
   
Over Ten Years
   
Total
 
   
Amount
   
Yield
   
Amount
   
Yield
   
Amount
   
Yield
   
Amount
   
Yield
   
Amount
   
Yield
 
Securities available-for-sale
 
(dollars in thousands)
 
U.S. government agency notes
 
$
     
   
$
1,073
     
2.1
%
 
$
6,389
     
2.6
%
 
$
     
   
$
7,462
     
2.5
%
U.S. government agency CMO
   
516
     
2.3
%
   
8,773
     
1.4
%
   
1,308
     
1.4
%
   
     
     
10,597
     
1.4
%
Total
 
$
516
     
2.3
%
 
$
9,846
     
1.4
%
 
$
7,697
     
2.4
%
 
$
     
   
$
18,059
     
1.9
%
                                                                                 
Securities held-to-maturity
                                                                               
U.S. government agency MBS
 
$
     
   
$
4,963
     
3.2
%
 
$
     
0.0
%
 
$
776
     
3.6
%
 
$
5,739
     
3.3
%
Total
 
$
     
   
$
4,963
     
3.2
%
 
$
     
0.0
%
 
$
776
     
3.6
%
 
$
5,739
     
3.3
%
                                                                                 
Securities measured at fair value
                                                                               
Farmer Mac class A stock
 
$
     
   
$
     
   
$
     
   
$
     
   
$
111
     
 
Total
 
$
     
   
$
     
   
$
     
   
$
     
   
$
111
     
 

   
December 31, 2019
 
   
Less than One Year
   
One to Five Years
   
Five to Ten Years
   
Over Ten Years
   
Total
 
   
Amount
   
Yield
   
Amount
   
Yield
   
Amount
   
Yield
   
Amount
   
Yield
   
Amount
   
Yield
 
Securities available-for-sale
 
(dollars in thousands)
 
U.S. government agency notes
 
$
     
   
$
1,094
     
2.3
%
 
$
6,954
     
2.8
%
 
$
     
   
$
8,048
     
2.8
%
U.S. government agency CMO
   
     
     
3,766
     
2.1
%
   
6,121
     
2.3
%
   
1,329
     
2.4
%
   
11,216
     
2.3
%
Total
 
$
     
   
$
4,860
     
2.2
%
 
$
13,075
     
2.6
%
 
$
1,329
     
2.4
%
 
$
19,264
     
2.5
%
                                                                                 
Securities held-to-maturity
                                                                               
U.S. government agency MBS
 
$
     
   
$
2,465
     
4.2
%
 
$
2,887
     
2.9
%
 
$
780
     
3.6
%
 
$
6,132
     
3.5
%
Total
 
$
     
   
$
2,465
     
4.2
%
 
$
2,887
     
2.9
%
 
$
780
     
3.6
%
 
$
6,132
     
3.5
%
                                                                                 
Securities measured at fair value
                                                                               
Farmer Mac class A stock
 
$
     
   
$
     
   
$
     
   
$
     
   
$
167
     
 
Total
 
$
     
   
$
     
   
$
     
   
$
     
   
$
167
     
 

The amortized cost and fair value of investment securities by contractual maturities as of the periods presented were as shown below:

   
March 31,
   
December 31,
 
   
2020
   
2019
 
   
Amortized
Cost
   
Estimated
Fair Value
   
Amortized
Cost
   
Estimated
Fair Value
 
Securities available-for-sale
 
(in thousands)
 
Due in one year or less
 
$
505
   
$
516
   
$
   
$
 
After one year through five years
   
9,930
     
9,846
     
4,884
     
4,860
 
After five years through ten years
   
7,791
     
7,697
     
13,121
     
13,075
 
After ten years
   
     
     
1,377
     
1,329
 
Total
 
$
18,226
   
$
18,059
   
$
19,382
   
$
19,264
 
                                 
Securities held-to-maturity
                               
Due in one year or less
 
$
   
$
   
$
   
$
 
After one year through five years
   
4,963
     
5,119
     
2,465
     
2,565
 
After five years through ten years
   
     
     
2,887
     
2,892
 
After ten years
   
776
     
900
     
780
     
845
 
Total
 
$
5,739
   
$
6,019
   
$
6,132
   
$
6,302
 
                                 
Securities measured at fair value
                               
Farmer Mac class A stock
 
$
66
   
$
111
   
$
66
   
$
167
 
Total
 
$
66
   
$
111
   
$
66
   
$
167
 

Actual maturities may differ from contractual maturities as borrowers or issuers have the right to prepay or call the investment securities.  Changes in interest rates may also impact prepayments.

The following tables show all securities that are in an unrealized loss position:

   
March 31, 2020
 
   
Less Than Twelve Months
   
More Than Twelve Months
   
Total
 
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
 
Securities available-for-sale
 
(in thousands)
 
U.S. government agency notes
 
$
2
   
$
1,117
   
$
49
   
$
6,344
   
$
51
   
$
7,461
 
U.S. government agency CMO
   
18
     
2,075
     
125
     
6,524
     
143
     
8,599
 
Total
 
$
20
   
$
3,192
   
$
174
   
$
12,868
   
$
194
   
$
16,060
 
                                                 
Securities held-to-maturity
                                               
U.S. Government-agency MBS
 
$
   
$
   
$
   
$
   
$
   
$
 
Total
 
$
   
$
   
$
   
$
   
$
   
$
 
                                                 
Securities measured at fair value
                                               
Farmer Mac class A stock
 
$
   
$
   
$
   
$
   
$
   
$
 
Total
 
$
   
$
   
$
   
$
   
$
   
$
 

   
December 31, 2019
 
   
Less Than Twelve Months
   
More Than Twelve Months
   
Total
 
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
 
Securities available-for-sale
 
(in thousands)
 
U.S. government agency notes
 
$
3
   
$
1,126
   
$
61
   
$
6,922
   
$
64
   
$
8,048
 
U.S. government agency CMO
   
25
     
5,275
     
52
     
2,264
     
77
     
7,539
 
Total
 
$
28
   
$
6,401
   
$
113
   
$
9,186
   
$
141
   
$
15,587
 
Securities held-to-maturity
                                               
U.S. Government-agency MBS
 
$
   
$
   
$
19
   
$
2,139
   
$
19
   
$
2,139
 
Total
 
$
   
$
   
$
19
   
$
2,139
   
$
19
   
$
2,139
 
                                                 
Securities measured at fair value
                                               
Farmer Mac class A stock
 
$
   
$
   
$
   
$
   
$
   
$
 
Total
 
$
   
$
   
$
   
$
   
$
   
$
 

As of March 31, 2020 and December 31, 2019, there were 21 and 20 securities, respectively, in an unrealized loss position.  Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things: (i) the length of time and the extent to which the fair value has been less than cost; (ii) the financial condition and near-term prospects of the issuer; and (iii) the Company’s intent to sell an impaired security and if it is not more likely than not it will be required to sell the security before the recovery of its amortized basis.

The unrealized losses are primarily due to increases in market interest rates over the yields available at the time the underlying securities were purchased.  The fair value is expected to recover as the bonds approach their maturity date, repricing date or if market yields for such investments decline.  Management does not believe any of the securities are impaired due to reasons of credit quality.  Accordingly, as of March 31, 2020 and December 31, 2019, management believes the impairments detailed in the table above are temporary and no other-than-temporary impairment loss has been realized in the Company’s consolidated income statements.

3.
LOANS HELD FOR SALE

SBA and Agriculture Loans

As of March 31, 2020 and December 31, 2019, the Company had approximately $9.4 million and $10.4 million, respectively, of SBA loans included in loans held for sale.  As of March 31, 2020 and December 31, 2019, the principal balance of SBA loans serviced for others was $4.6 million and $5.2 million, respectively.

The Company’s agricultural lending program includes loans for agricultural land, agricultural operational lines, and agricultural term loans for crops, equipment and livestock.  The primary products are supported by guarantees issued from the USDA, FSA, and the USDA Business and Industry loan program.

As of March 31, 2020 and December 31, 2019, the Company had $30.1 million and $31.6 million of USDA loans included in loans held for sale, respectively. As of March 31, 2020 and December 31, 2019, the principal balance of USDA loans serviced for others was $1.9 million.

4.
LOANS HELD FOR INVESTMENT

The composition of the Company’s loans held for investment loan portfolio follows:

   
March 31,
2020
   
December 31,
2019
 
   
(in thousands)
 
Manufactured housing
 
$
263,484
   
$
257,247
 
Commercial real estate
   
391,207
     
385,642
 
Commercial
   
68,271
     
69,843
 
SBA
   
4,019
     
4,429
 
HELOC
   
4,196
     
4,531
 
Single family real estate
   
11,357
     
11,845
 
Consumer
   
71
     
94
 
     
742,605
     
733,631
 
Allowance for loan losses
   
(9,167
)
   
(8,717
)
Deferred fees, net
   
(14
)
   
(58
)
Discount on SBA loans
   
(53
)
   
(56
)
Total loans held for investment, net
 
$
733,371
   
$
724,800
 

The following table presents the contractual aging of the recorded investment in past due held for investment loans by class of loans:

   
March 31, 2020
 
   
Current
   
30-59 Days
Past Due
   
60-89 Days
Past Due
   
Over 90 Days
Past Due
   
Total
Past Due
   
Nonaccrual
   
Total
   
Recorded
Investment
Over 90 Days
and Accruing
 
   
(in thousands)
 
Manufactured housing
 
$
262,159
   
$
362
   
$
34
   
$
   
$
396
   
$
929
   
$
263,484
   
$
 
Commercial real estate:
                                                               
Commercial real estate
   
329,864
     
     
     
     
     
84
     
329,948
     
 
SBA 504 1st trust deed
   
21,450
     
     
     
     
     
     
21,450
     
 
Land
   
4,862
     
     
     
     
     
     
4,862
     
 
Construction
   
34,947
     
     
     
     
     
     
34,947
     
 
Commercial
   
66,725
     
1
     
     
     
1
     
1,545
     
68,271
     
 
SBA
   
3,644
     
     
17
     
     
17
     
358
     
4,019
     
 
HELOC
   
4,196
     
     
     
     
     
     
4,196
     
 
Single family real estate
   
11,331
     
26
     
     
     
26
     
     
11,357
     
 
Consumer
   
71
     
     
     
     
     
     
71
     
 
Total
 
$
739,249
   
$
389
   
$
51
   
$
   
$
440
   
$
2,916
   
$
742,605
   
$
 

   
December 31, 2019
 
   
Current
   
30-59 Days
Past Due
   
60-89 Days
Past Due
   
Over 90 Days
Past Due
   
Total
Past Due
   
Nonaccrual
   
Total
   
Recorded
Investment
Over 90 Days
and Accruing
 
   
(in thousands)
 
Manufactured housing
 
$
256,251
   
$
156
   
$
246
   
$
   
$
402
   
$
594
   
$
257,247
   
$
 
Commercial real estate:
                                                               
Commercial real estate
   
327,255
     
     
     
     
     
84
     
327,339
     
 
SBA 504 1st trust deed
   
17,151
     
1,401
     
     
     
1,401