QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Large accelerated filer ☐
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Accelerated filer ☐
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Smaller reporting company
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Emerging growth company
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Index
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Page
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||
Part I. Financial Information
|
|||
Item 1 – Financial Statements
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|||
3
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|||
4
|
|||
5
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|||
6
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|||
7
|
|||
8
|
|||
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, 2022.
|
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36
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52
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53
|
|||
Part II. Other Information
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54
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54
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54
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54
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54
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54
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55
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56
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Item 1. |
Financial Statements
|
September 30,
2023
|
December 31,
2022
|
|||||||
(unaudited)
|
||||||||
(in thousands, except share amounts)
|
||||||||
Assets:
|
||||||||
Cash and due from banks
|
$
|
|
$
|
|
||||
Interest-earning demand deposits in other financial institutions
|
|
|
||||||
Cash and cash equivalents
|
|
|
||||||
Investment securities - available-for-sale, at fair value, net of allowance for credit losses of $
|
|
|
||||||
Investment securities - held-to-maturity, at amortized cost; fair value of $
|
|
|
||||||
Investment securities - measured at fair value; amortized cost of $
|
|
|
||||||
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
|
||||||||
Loans held for sale, at lower of cost or fair value
|
||||||||
Loans held for investment
|
||||||||
Allowance for credit losses(1)
|
( |
) | ( |
) | ||||
Total loans held for investment, net
|
|
|
||||||
Other assets acquired through foreclosure, net
|
|
|
||||||
Premises and equipment, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
Liabilities:
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing demand
|
$
|
|
$
|
|
||||
Interest-bearing demand
|
|
|
||||||
Savings
|
|
|
||||||
Certificates of deposit ($250,000 or more)
|
|
|
||||||
Other certificates of deposit
|
|
|
||||||
Total deposits
|
|
|
||||||
Federal Home Loan Bank advances and other borrowings
|
|
|
||||||
Other liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Stockholders’ equity:
|
||||||||
Common stock —
|
|
|
||||||
Retained earnings
|
|
|
||||||
Accumulated other comprehensive loss, net
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Interest and dividend income:
|
(in thousands, except per share amounts)
|
|||||||||||||||
Loans, including fees
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Investment securities and other
|
|
|
|
|
||||||||||||
Total interest and dividend income
|
|
|
|
|
||||||||||||
Interest expense:
|
||||||||||||||||
Deposits
|
|
|
|
|
||||||||||||
FHLB advances and other
borrowings
|
|
|
|
|
||||||||||||
Total interest expense
|
|
|
|
|
||||||||||||
Net interest income
|
|
|
|
|
||||||||||||
Provision (credit) for credit losses
|
|
|
(
|
)
|
|
|||||||||||
Net interest income after provision (credit) for credit losses
|
|
|
|
|
||||||||||||
Non-interest income:
|
||||||||||||||||
Other loan fees
|
|
|
|
|
||||||||||||
Gains from loan sales, net
|
|
|
|
|
||||||||||||
Document processing fees
|
|
|
|
|
||||||||||||
Service charges
|
|
|
|
|
||||||||||||
Other
|
|
|
|
|
||||||||||||
Total non-interest income
|
|
|
|
|
||||||||||||
Non-interest expenses:
|
||||||||||||||||
Salaries and employee benefits
|
|
|
|
|
||||||||||||
Occupancy, net
|
|
|
|
|
||||||||||||
Professional services
|
|
|
|
|
||||||||||||
Data processing
|
|
|
|
|
||||||||||||
Depreciation
|
|
|
|
|
||||||||||||
FDIC assessment
|
|
|
|
|
||||||||||||
Advertising and marketing
|
|
|
|
|
||||||||||||
Other
|
|
|
|
|
||||||||||||
Total non-interest expenses
|
|
|
|
|
||||||||||||
Income before provision for income taxes
|
|
|
|
|
||||||||||||
Provision for income taxes
|
|
|
|
|
||||||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Diluted
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Weighted average number of common shares outstanding:
|
||||||||||||||||
Basic
|
|
|
|
|
||||||||||||
Diluted
|
|
|
|
|
||||||||||||
Dividends declared per common share
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other comprehensive income (loss), net:
|
||||||||||||||||
Unrealized gain (loss) on securities available-for-sale (“AFS”), net (tax effect of ($
|
( |
) | ( |
) | ( |
) | ||||||||||
Net other comprehensive income (loss)
|
( |
) | ( |
) | ( |
) | ||||||||||
Comprehensive income
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended September 30, 2023
|
Common Stock
|
Accumulated Other
Comprehensive
|
Retained
|
Total
Stockholders’
|
||||||||||||||||
Shares
|
Amount
|
Loss
|
Earnings
|
Equity
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Balance, July 1, 2023
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
Net income
|
—
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|||||||||||||||
Stock based compensation
|
|
|
|
|
|
|||||||||||||||
Dividends on common stock
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Other comprehensive income, net
|
—
|
|
|
|
|
|||||||||||||||
Balance, September 30, 2023
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
Three Months Ended September 30, 2022
|
Common Stock
|
Accumulated Other
Comprehensive
|
Retained
|
Total
Stockholders’
|
||||||||||||||||
Shares
|
Amount
|
Loss
|
Earnings
|
Equity
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Balance, July 1, 2022
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
Net income
|
—
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|||||||||||||||
Stock based compensation
|
|
|
|
|
|
|||||||||||||||
Dividends on common stock
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Other comprehensive loss, net
|
—
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
Balance, September 30, 2022
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
Nine Months Ended September 30, 2023
|
Common Stock
|
Accumulated Other
Comprehensive
|
Retained
|
Total
Stockholders’
|
||||||||||||||||
Shares
|
Amount
|
Loss
|
Earnings
|
Equity
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Balance, January 1, 2023
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
(net of taxes of $
|
( |
) | ( |
) | ||||||||||||||||
Net income
|
—
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|||||||||||||||
Stock based compensation
|
|
|
|
|
|
|||||||||||||||
Dividends on common stock
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Other comprehensive loss, net
|
—
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
Balance, September 30, 2023
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
Nine
Months Ended September 30, 2022
|
Common Stock
|
Accumulated Other
Comprehensive
|
Retained
|
Total
Stockholders’
|
||||||||||||||||
Shares
|
Amount
|
(Loss) Income
|
Earnings
|
Equity
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Balance, January 1, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||
Net income
|
—
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|||||||||||||||
Stock based compensation
|
|
|
|
|
|
|||||||||||||||
Dividends on common stock
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Other comprehensive loss, net
|
—
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
Balance, September 30, 2022
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
Nine Months Ended
September 30,
|
||||||||
2023
|
2022
|
|||||||
(in thousands)
|
||||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to cash provided by operating activities:
|
||||||||
Provision (credit) for credit losses
|
(
|
)
|
|
|||||
Depreciation
|
|
|
||||||
Stock based compensation
|
|
|
||||||
Deferred taxes
|
(
|
)
|
|
|||||
Net (amortization) accretion of discounts and premiums for investment securities
|
(
|
)
|
(
|
)
|
||||
Gains on:
|
||||||||
Sale of other assets acquired through foreclosure, net
|
( |
) | ( |
) | ||||
Sale of loans, net
|
(
|
)
|
(
|
)
|
||||
Loans originated for sale
|
(
|
)
|
(
|
)
|
||||
Proceeds from sales of loans held for sale
|
||||||||
Proceeds from principal paydowns on loans held for sale
|
||||||||
Changes in:
|
||||||||
Investment securities measured at fair value
|
(
|
)
|
|
|||||
Servicing assets, net
|
||||||||
Other assets
|
|
|
||||||
Other liabilities
|
|
|
||||||
Net cash provided by operating activities
|
|
|
||||||
Cash flows from investing activities:
|
||||||||
Principal pay downs and maturities of available-for-sale securities
|
|
|
||||||
Purchase of available-for-sale securities
|
( |
) | ( |
) | ||||
Principal pay downs and maturities of held-to-maturity securities
|
|
|
||||||
Purchase of FHLB stock
|
( |
) | ( |
) | ||||
Loan originations and principal collections, net
|
(
|
)
|
(
|
)
|
||||
Purchase of premises and equipment, net
|
(
|
)
|
(
|
)
|
||||
Proceeds from sale of other assets acquired through foreclosure, net
|
||||||||
Net cash provided by (used in) investing activities
|
|
(
|
)
|
|||||
Cash flows from financing activities:
|
||||||||
Net increase (decrease) in deposits
|
|
(
|
)
|
|||||
Proceeds from FHLB advances
|
||||||||
Repayments of FHLB advances
|
( |
) | ||||||
Proceeds from advances from line of credit
|
||||||||
Repayments of advances from line of credit
|
( |
) | ||||||
Proceeds from exercise of stock options
|
|
|
||||||
Cash dividends paid on common stock
|
(
|
)
|
(
|
)
|
||||
Net cash provided by (used in) financing activities
|
|
(
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
|
(
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
|
|
||||||
Cash and cash equivalents at end of period
|
$
|
|
$
|
|
||||
Supplemental disclosure:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
|
$
|
|
||||
Income taxes
|
|
|
||||||
Noncash items:
|
||||||||
Transfers from loans to loans held for sale
|
|
|
||||||
Transfers from loans to other assets acquired through foreclosure, net
|
1. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
• |
Commercial real estate, commercial, commercial agriculture, SBA,
HELOC, single family residential, and consumer: Migration analysis combined with risk rating of the loans was used to determine the required allowance for loan losses for all non-impaired loans. In addition, the migration results
were adjusted based upon qualitative factors that affect the specific portfolio category. Reserves on impaired loans were determined based upon the individual characteristics of the loan.
|
• |
Manufactured housing: The allowance for loan losses was
calculated on the basis of loss history and risk rating, which was primarily a function of delinquency. In addition, the loss results were adjusted based upon qualitative factors that affected this specific portfolio.
|
• |
Concentrations of credit
|
• |
Trends in volume, maturity, and composition of loans
|
• |
Volume and trend in delinquency, nonaccrual, and classified assets
|
• |
Economic conditions
|
• |
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
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||||
|
2023
|
2022 | 2023 | 2022 | ||||||||||||
(dollars in thousands, except per share amounts)
|
||||||||||||||||
Net income available to common stockholders
|
$
|
|
$
|
|
$ | $ | ||||||||||
Weighted average number of common shares outstanding - basic
|
|
|
||||||||||||||
Add: Dilutive effects of assumed exercises of stock options
|
|
|
||||||||||||||
Weighted average number of common shares outstanding - diluted
|
|
|
||||||||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$
|
|
$
|
|
$ | $ | ||||||||||
Diluted
|
$
|
|
$
|
|
$ | $ |
Pre-CECL
Adoption
|
Impact of
CECL
Adoption |
As Reported
Under CECL
|
||||||||||
(in thousands)
|
||||||||||||
Assets:
|
||||||||||||
Allowance for credit losses on securities:
|
||||||||||||
Available-for-sale
|
$
|
|
$
|
|
$
|
|
||||||
Held-to-maturity
|
|
|
|
|||||||||
Allowance for credit losses - loans
|
|
|
|
|||||||||
Deferred tax assets
|
|
|
|
|||||||||
Liabilities:
|
||||||||||||
Allowance for credit losses for off-balance sheet commitments
|
|
|
|
|||||||||
Stockholders’ equity:
|
||||||||||||
Retained earnings
|
|
(
|
)
|
|
2. |
INVESTMENT SECURITIES
|
September 30, 2023 | ||||||||||||||||||||
Amortized
Cost
|
Allowance
for Credit
Losses
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
||||||||||||||||
Securities available-for-sale |
(in thousands) | |||||||||||||||||||
U.S. government agency notes
|
$
|
|
$ |
$
|
|
$
|
|
$
|
|
|||||||||||
U.S. government agency collateralized mortgage obligations (“CMO”)
|
|
|
(
|
)
|
|
|||||||||||||||
Corporate debt securities
|
|
( |
) |
|
(
|
)
|
|
|||||||||||||
Total
|
$
|
|
$ | ( |
) |
$
|
|
$
|
(
|
)
|
$
|
|
||||||||
Securities held-to-maturity
|
||||||||||||||||||||
U.S. government agency mortgage-backed securities (“MBS”)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
September 30, 2023 | ||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
(Losses)
|
Fair
Value
|
|||||||||||||
Securities measured at fair value
|
(in thousands) |
|||||||||||||||
Equity securities: Farmer Mac class A stock
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
December 31, 2022
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
(Losses)
|
Fair
Value
|
|||||||||||||
Securities available-for-sale
|
(in thousands)
|
|||||||||||||||
U.S. government agency notes
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
U.S. government agency CMO
|
|
|
(
|
)
|
|
|||||||||||
U.S. Treasury securities
|
( |
) | ||||||||||||||
Corporate debt securities
|
|
|
(
|
)
|
|
|||||||||||
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
Securities held-to-maturity
|
||||||||||||||||
U.S. government agency MBS
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
Securities measured at fair value
|
||||||||||||||||
Equity securities: Farmer Mac class A stock
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30, 2023
|
||||||||||||||||||||||||||||||||||||||||
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
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||||||||||||
U.S. government agency CMO
|
|
|
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||||||||||||||
Corporate debt securities
|
|
|
|
|
|
% |
|
|
|
|
%
|
|||||||||||||||||||||||||||||
Total
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||||||||||||
Securities held-to-maturity
|
||||||||||||||||||||||||||||||||||||||||
U.S. government agency MBS
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||||||||||||
Total
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
December 31, 2022
|
||||||||||||||||||||||||||||||||||||||||
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
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||||||||||||
U.S. government agency CMO
|
|
|
|
|
|
|
|
|
%
|
|
|
%
|
||||||||||||||||||||||||||||
U.S. Treasury securities
|
% | % | ||||||||||||||||||||||||||||||||||||||
Corporate debt securities
|
|
|
|
|
|
|
%
|
|
|
|
|
%
|
||||||||||||||||||||||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
|||||||||||||||||||||
Securities held-to-maturity
|
||||||||||||||||||||||||||||||||||||||||
U.S. government agency MBS
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||||||||||||
Total
|
$
|
|
|
$
|
|
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
September 30,
2023
|
December 31,
2022
|
|||||||||||||||
Amortized
Cost
|
Estimated
Fair Value
|
Amortized
Cost
|
Estimated
Fair Value
|
|||||||||||||
Securities available-for-sale
|
(in thousands)
|
|||||||||||||||
Due in less than one year
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
After one year through five years
|
|
|
|
|
||||||||||||
After five years through ten years
|
|
|
|
|
||||||||||||
After ten years
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Securities held-to-maturity
|
||||||||||||||||
Due in less than one year
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
After one year through five years
|
|
|
|
|
||||||||||||
After five years through ten years
|
|
|
|
|
||||||||||||
After ten years
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30, 2023
|
||||||||||||||||||||||||
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 CMO
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Corporate debt securities
|
|
|
(
|
)
|
|
(
|
)
|
|
||||||||||||||||
Total
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Securities held-to-maturity
|
||||||||||||||||||||||||
U.S. government agency MBS
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Total
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
December 31, 2022
|
||||||||||||||||||||||||
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 CMO
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
U.S. Treasury securities
|
( |
) | ( |
) | ||||||||||||||||||||
Corporate debt securities
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||
Total
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Securities held-to-maturity
|
||||||||||||||||||||||||
U.S. government agency MBS
|
$ | ( |
) | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
Total
|
$ | ( |
) | $ | $ | $ | $ | ( |
) | $ |
3. |
LOANS HELD FOR SALE AND LOANS SERVICED FOR OTHERS
|
September 30,
2023
|
December 31,
2022
|
|||||||
(in thousands)
|
||||||||
SBA
|
$
|
|
$
|
|
||||
USDA, FSA, and USDA Business and Industry
|
|
|
||||||
Farmer Mac
|
|
|
||||||
Total loans serviced for others
|
$
|
|
$
|
|
4. |
LOANS HELD FOR INVESTMENT
|
September 30, | December 31, | |||||||
2023
|
2022
|
|||||||
(in thousands)
|
||||||||
Manufactured housing
|
$
|
|
$
|
|
||||
Commercial real estate
|
|
|
||||||
Commercial
|
|
|
||||||
SBA
|
|
|
||||||
HELOC
|
|
|
||||||
Single family real estate
|
|
|
||||||
Consumer
|
|
|
||||||
Gross loans held for investment
|
|
|
||||||
Deferred fees, net
|
(
|
)
|
(
|
)
|
||||
Discount on SBA loans
|
(
|
)
|
(
|
)
|
||||
Loans held for investment
|
||||||||
Allowance for credit losses | ( |
) | ( |
) | ||||
Loans held for investment, net
|
$
|
|
$
|
|
September 30, 2023
|
||||||||||||||||||||||||
Current
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Over 90 Days
Past Due
|
Total
Past Due
|
Total
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
Manufactured housing
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Commercial real estate
|
|
|
|
|
|
|
||||||||||||||||||
SBA 504 1st trust deed
|
|
|
|
|
|
|
||||||||||||||||||
Land
|
|
|
|
|
|
|
||||||||||||||||||
Construction
|
|
|
|
|
|
|
||||||||||||||||||
Commercial
|
|
|
|
|
|
|
||||||||||||||||||
SBA
|
|
|
|
|
|
|
||||||||||||||||||
HELOC
|
|
|
|
|
|
|
||||||||||||||||||
Single family real estate
|
|
|
|
|
|
|
||||||||||||||||||
Consumer
|
|
|
|
|
|
|
||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
December 31, 2022
|
||||||||||||||||||||||||
Current
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Over 90 Days
Past Due
|
Total
Past Due
|
Total
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
Manufactured housing
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Commercial real estate
|
|
|
|
|
|
|
||||||||||||||||||
SBA 504 1st trust deed
|
|
|
|
|
|
|
||||||||||||||||||
Land
|
|
|
|
|
|
|
||||||||||||||||||
Construction
|
|
|
|
|
|
|
||||||||||||||||||
Commercial
|
|
|
|
|
|
|
||||||||||||||||||
SBA
|
|
|
|
|
|
|
||||||||||||||||||
HELOC
|
|
|
|
|
|
|
||||||||||||||||||
Single family real estate
|
|
|
|
|
|
|
||||||||||||||||||
Consumer
|
|
|
|
|
|
|
||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30, 2023
|
December 31, 2022 | |||||||||||||||||||||||
With an ACL
|
Without an ACL
|
Total Nonaccrual
|
With an Allowance | Without an Allowance | Total Nonaccrual | |||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
Manufactured housing
|
$
|
|
$
|
|
$
|
|
$ | $ | $ | |||||||||||||||
Commercial real estate
|
|
|
|
|||||||||||||||||||||
Construction
|
||||||||||||||||||||||||
Commercial
|
||||||||||||||||||||||||
HELOC
|
||||||||||||||||||||||||
Single family real estate
|
|
|
|
|||||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$ | $ | $ |
For the Three Months Ended September 30,
|
||||||||||||||||||||||||||||||||
Manufactured
Housing
|
Commercial
Real Estate
|
Commercial
|
SBA
|
HELOC
|
Single Family
Real Estate
|
Consumer
|
Total
|
|||||||||||||||||||||||||
2023
|
(in thousands)
|
|||||||||||||||||||||||||||||||
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Charge-offs
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Recoveries
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net recoveries
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Provision
(credit) for credit losses
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
2022
|
||||||||||||||||||||||||||||||||
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Charge-offs
|
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Recoveries
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net recoveries (charge-offs)
|
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Provision (credit) for credit losses
|
(
|
)
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
For the Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||
Manufactured
Housing
|
Commercial
Real Estate
|
Commercial
|
SBA
|
HELOC
|
Single Family
Real Estate
|
Consumer
|
Total
|
|||||||||||||||||||||||||
2023
|
(in thousands)
|
|||||||||||||||||||||||||||||||
Beginning balance,
prior to adoption of ASC 326
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Impact of adoption of ASC 326
|
( |
) | ( |
) | ||||||||||||||||||||||||||||
Charge-offs
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Recoveries
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net recoveries
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Provision (credit)
for credit losses
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
2022
|
||||||||||||||||||||||||||||||||
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Charge-offs
|
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Recoveries
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net recoveries
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Provision (credit) for credit losses
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
|
|
|||||||||||||||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Manufactured
Housing
|
Commercial
Real Estate
|
Commercial
|
SBA
|
HELOC
|
Single Family
Real Estate
|
Consumer
|
Total
Loans
|
||||||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||||||||||
Amortized Cost Basis:
|
||||||||||||||||||||||||||||||||
Individually evaluated loans with an allowance for credit losses recorded
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Individually evaluated loans with no allowance for credit losses recorded
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total individually evaluated loans
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Collectively evaluated loans
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total loans held for investment
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Allowance for Credit Losses:
|
||||||||||||||||||||||||||||||||
Individually evaluated loans
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Collectively evaluated loans
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total allowance for credit losses
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Manufactured
Housing
|
Commercial
Real Estate
|
Commercial
|
SBA
|
HELOC
|
Single Family
Real Estate
|
Consumer
|
Total
Loans
|
|||||||||||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||||||||||
Recorded Investment:
|
||||||||||||||||||||||||||||||||
Impaired loans with an allowance
recorded
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Impaired loans with no allowance
recorded
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total loans individually evaluated for
impairment
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Loans collectively evaluated for
impairment
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total loans held for investment
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||
Related Allowance for
Loan Losses
|
||||||||||||||||||||||||||||||||
Loans individually evaluated for
impairment
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Loans collectively evaluated for
impairment
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total allowance for loan losses
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Manufactured
Homes
|
Single Family
Residence
|
Machinery
&
Equipment
|
Total
|
|||||||||||||
September 30, 2023 |
(in thousands)
|
|||||||||||||||
Manufactured housing
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Commercial real estate |
||||||||||||||||
Commercial
|
|
|
|
|
||||||||||||
Single family real estate
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Manufactured
Homes
|
Single Family
Residence
|
Machinery
&
Equipment
|
Total
|
||||||||||||
December 31, 2022
|
(in thousands)
|
|||||||||||||||
Manufactured housing
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Commercial
|
|
|
|
|
||||||||||||
Single family real estate
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
Term Loans Amortized Cost Basis by Origination Year
|
||||||||||||||||||||||||||||||||
2023
|
2022
|
2021
|
2020
|
2019
|
Prior
|
Revolving
|
Total
|
|||||||||||||||||||||||||
September 30, 2023 |
(in thousands)
|
|||||||||||||||||||||||||||||||
Manufactured housing:
|
||||||||||||||||||||||||||||||||
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Special mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Commercial:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Special mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
SBA:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Special mention | ||||||||||||||||||||||||||||||||
Loss
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
HELOC:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Single family real estate:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total loans
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Term Loans Amortized Cost Basis by Origination Year
|
||||||||||||||||||||||||||||||||
2022
|
2021
|
2020
|
2019
|
2018
|
Prior
|
Revolving
|
Total
|
|||||||||||||||||||||||||
December 31, 2022
|
(in thousands)
|
|||||||||||||||||||||||||||||||
(Manufactured housing:
|
||||||||||||||||||||||||||||||||
Pass
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Special mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Commercial:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Special mention
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
SBA:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
HELOC:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Single family real estate:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Substandard
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||||||||||
Pass
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total loans
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
For the Nine Months Ended September 30, 2023
|
||||||||||||
Amortized
Cost of
Modified
Loans
|
% of Total
Class of
Loans
|
Term
Extension
(Weighted
Average
years)
|
||||||||||
(dollars in thousands)
|
||||||||||||
Commercial real estate
|
$
|
|
|
%
|
|
|||||||
Commercial
|
|
|
%
|
|
||||||||
Total
|
$
|
|
|
%
|
|
5. |
OTHER ASSETS ACQUIRED THROUGH FORECLOSURE
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Balance, beginning of period
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Additions |
||||||||||||||||
Proceeds from dispositions
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||
(Loss)/gain on sales, net
|
(
|
)
|
|
|
|
|||||||||||
Balance, end of period
|
$
|
|
$
|
|
$
|
|
$
|
|
6.
|
FAIR VALUE MEASUREMENT
|
• |
Level 1— Observable quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
|
• |
Level 2— Observable quoted prices for similar instruments in active markets, quoted
prices for identical or similar instruments in markets that are not active, matrix pricing, or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly in the market.
|
• |
Level 3— Model-based techniques where significant assumptions are not observable, either
directly or indirectly, in the market. These unobservable assumptions reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of
discounted cash flow models and similar techniques.
|
Fair Value Measurements at the End of the
Reporting Period Using: |
||||||||||||||||
September 30, 2023
|
Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Fair
Value
|
||||||||||||
Assets:
|
(in thousands)
|
|||||||||||||||
Investment securities - measured at fair value
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Investment securities - available-for-sale:
|
||||||||||||||||
U.S. government agency notes
|
||||||||||||||||
U.S. government agency CMO
|
||||||||||||||||
Corporate debt securities
|
||||||||||||||||
Interest only strips
|
|
|
|
|
||||||||||||
Servicing assets
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
Fair Value Measurements at the End of the
Reporting Period Using:
|
||||||||||||||||
December 31, 2022
|
Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Fair
Value
|
||||||||||||
Assets:
|
(in thousands)
|
|||||||||||||||
Investment securities - measured at fair value
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Investment securities - available-for-sale:
|
||||||||||||||||
U.S. government agency notes
|
||||||||||||||||
U.S. government agency CMO
|
||||||||||||||||
U.S. Treasury securities
|
||||||||||||||||
Corporate debt securities
|
||||||||||||||||
Interest only strips
|
|
|
|
|
||||||||||||
Servicing assets
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Three Months Ended September 30,
|
Nine
Months Ended September 30,
|
||||||||||||||
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
(in thousands) | ||||||||||||||||
Servicing Assets:
|
|
|||||||||||||||
Balance, beginning of period
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Valuation adjustments
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Balance, end of period
|
$
|
|
$
|
|
$
|
|
$
|
|
Fair Value Measurements at the End of the
Reporting Period Using:
|
||||||||||||||||
Total
|
Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)
|
Active Markets
for Similar
Assets
(Level 2)
|
Unobservable
Inputs
(Level 3)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
September 30, 2023:
|
||||||||||||||||
Other
assets acquired through foreclosure
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
Fair Value Measurements at the End of the
Reporting Period Using:
|
||||||||||||||||
Total
|
Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)
|
Active Markets
for Similar
Assets
(Level 2)
|
Unobservable
Inputs
(Level 3)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
December 31, 2022:
|
||||||||||||||||
Impaired loans
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other assets acquired through foreclosure
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30, 2023
|
||||||||||||||||||||
Carrying
|
Fair Value
|
|||||||||||||||||||
Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
Financial assets:
|
(in thousands)
|
|||||||||||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
FHLB and FRB stock
|
|
|
|
|
|
|||||||||||||||
Investment securities - available-for-sale
|
|
|
|
|
|
|||||||||||||||
Investment securities -
held-to-maturity
|
||||||||||||||||||||
Investment securities - measured at fair value
|
||||||||||||||||||||
Loans, net and loans held for sale
|
|
|
|
|
|
|||||||||||||||
Accrued
interest receivable
|
||||||||||||||||||||
Servicing assets |
||||||||||||||||||||
Interest only strips |
||||||||||||||||||||
Financial liabilities:
|
||||||||||||||||||||
Deposits
|
|
|
|
|
||||||||||||||||
FHLB advances
|
|
|
|
|
|
|||||||||||||||
Accrued interest payable |
December 31, 2022
|
||||||||||||||||||||
Carrying
|
Fair Value
|
|||||||||||||||||||
Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
Financial assets:
|
(in thousands)
|
|||||||||||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
FHLB and FRB stock
|
|
|
|
|
|
|||||||||||||||
Investment securities - available-for-sale
|
|
|
|
|
|
|||||||||||||||
Investment securities -
held-to-maturity
|
||||||||||||||||||||
Investment securities - measured at fair value
|
||||||||||||||||||||
Loans, net and loans held for
sale
|
|
|
|
|
|
|||||||||||||||
Accrued
interest receivable
|
||||||||||||||||||||
Servicing assets
|
||||||||||||||||||||
Interest only strips
|
||||||||||||||||||||
Financial liabilities:
|
||||||||||||||||||||
Deposits
|
|
|
|
|
|
|||||||||||||||
FHLB advances
|
|
|
|
|
|
|||||||||||||||
Accrued interest payable |
7. |
BORROWINGS
|
8. |
STOCKHOLDERS’ EQUITY
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Unrealized holding
gains (losses) on AFS
|
Unrealized holding
gains (losses) on AFS
|
|||||||||||||||
(in thousands)
|
||||||||||||||||
Beginning balance
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||
Other comprehensive income (loss) before reclassifications
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Amounts reclassified from accumulated other comprehensive income
|
|
|
|
|
||||||||||||
Net current-period other comprehensive income (loss)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Ending balance
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
9. |
CAPITAL REQUIREMENTS
|
Total Capital
(To Risk-
Weighted
Assets)
|
Tier 1 Capital
(To Risk-
Weighted
Assets)
|
Common Equity
Tier 1 (To Risk-
Weighted
Assets)
|
Leverage
Ratio/Tier 1
Capital
(To Average
Assets)
|
|||||||||||||
September 30, 2023
|
||||||||||||||||
CWB’s actual regulatory ratios
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|||||||
Minimum capital requirements
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
Well-capitalized requirements
|
|
%
|
|
%
|
|
%
|
|
%
|
Total Capital
(To Risk-
Weighted
Assets)
|
Tier 1 Capital
(To Risk-
Weighted
Assets)
|
Common Equity
Tier 1 (To Risk-
Weighted
Assets)
|
Leverage
Ratio/Tier 1
Capital
(To Average
Assets)
|
|||||||||||||
December 31, 2022
|
||||||||||||||||
CWB’s actual regulatory ratios
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
Minimum capital requirements
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
Well-capitalized requirements
|
|
%
|
|
%
|
|
%
|
|
%
|
10. |
REVENUE RECOGNITION
|
Non-interest income
|
Three Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
In-scope
of Topic 606:
|
(in thousands)
|
|||||||||||||||
Service charges on deposit accounts
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Exchange fees and other service charges
|
|
|
|
|
||||||||||||
Non-interest income (in-scope of ASC 606)
|
|
|
|
|
||||||||||||
Non-interest income (out-of-scope of ASC 606)
|
|
|
|
|
||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
11.
|
LEASES
|
Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
(in thousands) | ||||||||
Lease cost: | ||||||||
Operating lease cost
|
$
|
|
$
|
|
||||
Sublease income
|
|
|
||||||
Total lease cost
|
$
|
|
$
|
|
||||
Other information:
|
||||||||
Operating cash flows from operating leases
|
$
|
|
$
|
|
||||
Weighted average remaining lease term - operating leases
|
|
|
||||||
Weighted average discount rate - operating leases
|
|
%
|
|
%
|
2023
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter
|
|
|||
Total future minimum lease payments
|
|
|||
Less remaining imputed interest
|
|
|||
Total lease liabilities
|
$
|
|
ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
• |
general economic conditions, either nationally or locally in some or all areas in which business is conducted, or conditions in the real estate or securities markets or the banking industry which could affect
liquidity in the capital markets, the volume of loan origination, deposit flows, real estate values, the levels of non-interest income and the amount of loan losses;
|
• |
liquidity of banking institutions both domestically and internationally, including sources and availability of funds, depositor behavior in response adverse economic developments, and the ability to attract and retain deposits and
manage liquidity;
|
• |
the reduction in the value of securities portfolios due to rising interest rates;
|
• |
recent bank failures and other adverse developments in the financial sector that affects customer and investor confidence and resulting deposit volatility and uncertainty and disruption in capital markets;
|
• |
changes in existing loan portfolio composition and credit quality, and changes in loan loss requirements;
|
• |
legislative or regulatory changes which may adversely affect the Company’s business, including the interest rate policies of the Board of Governors of the Federal Reserve and regulatory pressure to increase
capital levels;
|
• |
continued inflation, including the rising cost of oil and gas, and its impact on our customers’ businesses and ability to repay loans;
|
• |
climate conditions, including the drought experienced in California over the past several years followed by the flooding due to the unusually large amounts of precipitation experienced this past winter, and
their impact on the economy;
|
• |
the Company’s success in implementing its business initiatives, including expanding its product line, adding new branches, and successfully building its brand image;
|
• |
changes in interest rates which may reduce or increase net interest margin and net interest income;
|
• |
increases in competitive pressure among financial institutions or non-financial institutions;
|
• |
technological changes which may be more difficult to implement or more expensive than anticipated;
|
• |
changes in borrowing facilities, capital markets, and investment opportunities which may adversely affect the business;
|
• |
changes in accounting principles, policies, or guidelines which may cause conditions to be perceived differently;
|
• |
litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, which may delay the occurrence or non-occurrence of events longer than anticipated along with the
costs and effects of litigation and of adverse outcomes of such litigation;
|
• |
the occurrence or non-occurrence of events longer than anticipated;
|
• |
the ability to originate loans with attractive terms and acceptable credit quality;
|
• |
the ability to attract and retain key members of management;
|
• |
the ability to realize cost efficiencies;
|
• |
a failure or breach of our operational or security systems or infrastructure, including cyber-attacks on us or third party vendors or service providers;
|
• |
a return of recessionary conditions and increased unemployment that could result in deterioration in credit quality of our loan portfolio and/or the value of the collateral securing the repayment of those loans,
and/or reduce demand for our products and services;
|
• |
United States tax policies, including our effective income tax rate;
|
• |
loss of key personnel;
|
• |
possible impact by the transition from London Inter-bank Offering Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) or other indices as a reference rate;
|
• |
risks related to natural disasters, earthquakes, wildfires, terrorist attacks, threats of war or actual war, including the current military actions involving the Russian Federation and Ukraine and the recent conflict in the Middle East, supply
chain interruptions, and health epidemics may impact our operations, revenues, costs, and stock price; and
|
• |
risks related to the transaction that is the subject of the Agreement of Reorganization
and Merger dated October 10, 2023, by and among Central Valley Community Bancorp and Community West Bancshares (the “Reorganization Agreement”) pursuant to which the companies will combine in an all-stock merger transaction not
satisfying the conditions to closing the transaction, including the companies not receiving the regulatory approvals and the shareholder approvals of the transaction and as a result not completing the transaction in accordance with the
terms of the Reorganization Agreement.
|
• |
Net income was $2.3 million, or $0.25 per diluted share in the third quarter of 2023, compared to $3.5 million, or $0.39 per diluted share in the third quarter of 2022.
|
• |
Net interest income was $10.5 million for the third quarter of 2023, compared to $11.9 million in the third quarter of 2022.
|
• |
A provision (credit) for credit losses of $43 thousand was recorded for the third quarter of 2023, compared to $298 thousand for the third quarter of 2022.
|
• |
Net interest margin was 3.98% for the third quarter of 2023, compared to 4.39% for the third quarter of 2022.
|
• |
Return on average assets was 0.83% for the third quarter of 2023, compared to 1.25% for the third quarter of 2022.
|
• |
Return on average common equity was 7.72% for the third quarter of 2023, compared to 12.65% for the third quarter 2022.
|
• |
Cash and cash equivalents increased $75.9 million to $140.6 million at September 30, 2023 from $64.7 million at December 31, 2022 as management took steps to increase on-balance sheet liquidity during 2023.
|
• |
Loans held for investment were $934.2 million at September 30, 2023, compared to $934.3 million at December 31, 2022.
|
• |
Total assets increased by $48.8 million at September 30, 2023 to $1.14 billion, compared to $1.09 billion at December 31, 2022.
|
• |
Total demand deposits decreased $3.6 million to $664.5 million at September 30, 2023, compared to $668.2 million at December 31, 2022. During the same period, certificates of deposit balances increased $44.6 million to $251.6 million
at September 30, 2023 from $206.9 million at December 31, 2022.
|
• |
Book value per common share increased to $13.11 at September 30, 2023, compared to $12.80 at December 31, 2022.
|
• |
The Bank remains well-capitalized with a Tier 1 leverage ratio of 10.84% at September 30, 2023, compared to 10.34% at December 31, 2022.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30, |
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||
Net income
|
$
|
2,252
|
$
|
3,478
|
$
|
6,837
|
$
|
10,073
|
||||||||
Basic earnings per share
|
$
|
0.25
|
$
|
0.40
|
$
|
0.77
|
$
|
1.16
|
||||||||
Diluted earnings per share
|
$
|
0.25
|
$
|
0.39
|
$
|
0.76
|
$
|
1.13
|
||||||||
Net interest margin
|
3.98
|
%
|
4.39
|
%
|
4.07
|
%
|
4.09
|
%
|
||||||||
Return on average assets
|
0.83
|
%
|
1.25
|
%
|
0.84
|
%
|
1.19
|
%
|
||||||||
Return on average common equity
|
7.72
|
%
|
12.65
|
%
|
8.01
|
%
|
12.66
|
%
|
Three Months Ended
September 30,
|
Increase
|
Nine Months Ended
September 30,
|
Increase
|
|||||||||||||||||||||
2023
|
2022
|
(Decrease)
|
2023
|
2022
|
(Decrease)
|
|||||||||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||||||||||
Consolidated Income Statement Data:
|
||||||||||||||||||||||||
Interest and dividend income
|
$
|
14,553
|
$
|
12,654
|
$
|
1,899
|
$
|
42,853
|
$
|
35,860
|
$
|
6,993
|
||||||||||||
Interest expense
|
4,034
|
731
|
3,303
|
10,587
|
2,191
|
8,396
|
||||||||||||||||||
Net interest income
|
10,519
|
11,923
|
(1,404
|
)
|
32,266
|
33,669
|
(1,403
|
)
|
||||||||||||||||
Provision (credit) for credit losses
|
43
|
298
|
(255
|
)
|
(667
|
)
|
266
|
(933
|
)
|
|||||||||||||||
Net interest income after provision (credit) for credit losses
|
10,476
|
11,625
|
(1,149
|
)
|
32,933
|
33,403
|
(470
|
)
|
||||||||||||||||
Non-interest income
|
1,081
|
872
|
209
|
2,989
|
3,214
|
(225
|
)
|
|||||||||||||||||
Non-interest expenses
|
8,363
|
7,610
|
753
|
26,051
|
22,693
|
3,358
|
||||||||||||||||||
Income before provision for income taxes
|
3,194
|
4,887
|
(1,693
|
)
|
9,871
|
13,924
|
(4,053
|
)
|
||||||||||||||||
Provision for income taxes
|
942
|
1,409
|
(467
|
)
|
3,034
|
3,851
|
(817
|
)
|
||||||||||||||||
Net income
|
$
|
2,252
|
$
|
3,478
|
$
|
(1,226
|
)
|
$
|
6,837
|
$
|
10,073
|
$
|
(3,236
|
)
|
||||||||||
Earnings per share - basic
|
$
|
0.25
|
$
|
0.40
|
$
|
(0.15
|
)
|
$
|
0.77
|
$
|
1.16
|
$
|
(0.39
|
)
|
||||||||||
Earnings per share - diluted
|
$
|
0.25
|
$
|
0.39
|
$
|
(0.14
|
)
|
$
|
0.76
|
$
|
1.13
|
$
|
(0.37
|
)
|
Three Months Ended September 30,
|
||||||||||||||||||||||||
2023
|
2022
|
|||||||||||||||||||||||
Average
Balance
|
Interest
|
Average
Yield/Cost(1)
|
Average
Balance
|
Interest
|
Average
Yield/Cost(1)
|
|||||||||||||||||||
Interest-Earning Assets
|
(in thousands)
|
|||||||||||||||||||||||
Federal funds sold and interest-earning deposits
|
$
|
70,564
|
$
|
903
|
5.08
|
%
|
$
|
76,265
|
$
|
401
|
2.09
|
%
|
||||||||||||
Investment securities
|
22,568
|
319
|
5.61
|
%
|
65,148
|
386
|
2.35
|
%
|
||||||||||||||||
Loans (2)
|
955,609
|
13,331
|
5.53
|
%
|
935,169
|
11,867
|
5.03
|
%
|
||||||||||||||||
Total interest-earning assets
|
1,048,741
|
14,553
|
5.51
|
%
|
1,076,582
|
12,654
|
4.66
|
%
|
||||||||||||||||
Nonearning Assets
|
||||||||||||||||||||||||
Cash and due from banks
|
2,114
|
2,177
|
||||||||||||||||||||||
Allowance for credit losses
|
(12,107
|
)
|
(11,031
|
)
|
||||||||||||||||||||
Other assets
|
35,121
|
38,022
|
||||||||||||||||||||||
Total Assets
|
$
|
1,073,869
|
$
|
1,105,750
|
||||||||||||||||||||
Interest-Bearing Liabilities
|
||||||||||||||||||||||||
Interest-bearing demand deposits
|
388,385
|
1,908
|
1.95
|
%
|
465,317
|
325
|
0.28
|
%
|
||||||||||||||||
Savings deposits
|
17,797
|
13
|
0.29
|
%
|
25,133
|
14
|
0.22
|
%
|
||||||||||||||||
Time deposits
|
242,794
|
1,909
|
3.12
|
%
|
151,130
|
189
|
0.50
|
%
|
||||||||||||||||
Total interest-bearing deposits
|
648,976
|
3,830
|
2.34
|
%
|
641,580
|
528
|
0.33
|
%
|
||||||||||||||||
FHLB advances and other borrowings
|
90,217
|
204
|
0.90
|
%
|
90,764
|
203
|
0.89
|
%
|
||||||||||||||||
Total interest-bearing liabilities
|
739,193
|
4,034
|
2.17
|
%
|
732,344
|
731
|
0.40
|
%
|
||||||||||||||||
Noninterest-Bearing Liabilities
|
||||||||||||||||||||||||
Noninterest-bearing demand deposits
|
200,804
|
248,538
|
||||||||||||||||||||||
Other liabilities
|
18,209
|
15,789
|
||||||||||||||||||||||
Stockholders' equity
|
115,663
|
109,079
|
||||||||||||||||||||||
Total Liabilities and Stockholders' Equity
|
$
|
1,073,869
|
$
|
1,105,750
|
||||||||||||||||||||
Net interest income and margin (3)
|
$
|
10,519
|
3.98
|
%
|
$
|
11,923
|
4.39
|
%
|
||||||||||||||||
Net interest spread (4)
|
3.34
|
%
|
4.26
|
%
|
||||||||||||||||||||
Total cost of funds (including the effect of non-interest bearing demand deposits) (5)
|
1.70
|
%
|
0.30
|
%
|
(1) |
Annualized.
|
(2) |
Includes nonaccrual loans and loans held for sale, and is net of deferred fees, related direct costs, premiums, and discounts, but excludes the ACL. Interest income includes net accretion/(amortization) of
deferred fees, costs, premiums, and discounts of $70 thousand and $112 thousand for the three months ended September 30, 2023 and 2022, respectively.
|
(3) |
Net interest margin is computed by dividing net interest income by total average interest earning assets.
|
(4) |
Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
|
(5) |
Total cost of funds (including the effect of noninterest-bearing demand deposits) is calculated by dividing total interest expense by the sum of total interest-bearing liabilities and noninterest-bearing demand
deposits.
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
2023
|
2022
|
|||||||||||||||||||||||
Average
Balance
|
Interest
|
Average
Yield/Cost(1)
|
Average
Balance
|
Interest
|
Average
Yield/Cost(1)
|
|||||||||||||||||||
Interest-Earning Assets
|
(in thousands)
|
|||||||||||||||||||||||
Federal funds sold and interest-earning deposits
|
$
|
81,525
|
$
|
2,924
|
4.80
|
%
|
$
|
143,455
|
$
|
812
|
0.76
|
%
|
||||||||||||
Investment securities
|
24,911
|
948
|
5.09
|
%
|
45,903
|
858
|
2.50
|
%
|
||||||||||||||||
Loans (2)
|
953,511
|
38,981
|
5.47
|
%
|
912,414
|
34,190
|
5.01
|
%
|
||||||||||||||||
Total interest-earning assets
|
1,059,947
|
42,853
|
5.41
|
%
|
1,101,772
|
35,860
|
4.35
|
%
|
||||||||||||||||
Nonearning Assets
|
||||||||||||||||||||||||
Cash and due from banks
|
2,037
|
2,177
|
||||||||||||||||||||||
Allowance for credit losses
|
(12,199
|
)
|
(10,805
|
)
|
||||||||||||||||||||
Other assets
|
36,848
|
38,195
|
||||||||||||||||||||||
Total Assets
|
$
|
1,086,633
|
$
|
1,131,339
|
||||||||||||||||||||
Interest-Bearing Liabilities
|
||||||||||||||||||||||||
Interest-bearing demand deposits
|
401,262
|
5,032
|
1.68
|
%
|
493,332
|
917
|
0.25
|
%
|
||||||||||||||||
Savings deposits
|
20,148
|
38
|
0.25
|
%
|
24,827
|
47
|
0.25
|
%
|
||||||||||||||||
Time deposits
|
235,437
|
4,788
|
2.72
|
%
|
163,666
|
634
|
0.52
|
%
|
||||||||||||||||
Total interest-bearing deposits
|
656,847
|
9,858
|
2.01
|
%
|
681,825
|
1,598
|
0.31
|
%
|
||||||||||||||||
FHLB advances and other borrowings
|
93,352
|
729
|
1.04
|
%
|
90,257
|
593
|
0.88
|
%
|
||||||||||||||||
Total interest-bearing liabilities
|
750,199
|
10,587
|
1.89
|
%
|
772,082
|
2,191
|
0.38
|
%
|
||||||||||||||||
Noninterest-Bearing Liabilities
|
||||||||||||||||||||||||
Noninterest-bearing demand deposits
|
204,719
|
236,531
|
||||||||||||||||||||||
Other liabilities
|
17,535
|
16,352
|
||||||||||||||||||||||
Stockholders' equity
|
114,180
|
106,374
|
||||||||||||||||||||||
Total Liabilities and Stockholders' Equity
|
$
|
1,086,633
|
$
|
1,131,339
|
||||||||||||||||||||
Net interest income and margin (3)
|
$
|
32,266
|
4.07
|
%
|
$
|
33,669
|
4.09
|
%
|
||||||||||||||||
Net interest spread (4)
|
3.52
|
%
|
3.97
|
%
|
||||||||||||||||||||
Total cost of funds (including the effect of non-interest bearing demand deposits) (5)
|
1.48
|
%
|
0.29
|
%
|
(1) |
Annualized.
|
(2) |
Includes nonaccrual loans and loans held for sale, and is net of deferred fees, related direct costs, premiums, and discounts, but excludes the ACL. Interest income includes net accretion/(amortization) of
deferred fees, costs, premiums, and discounts of $316 thousand and $784 thousand for the nine months ended September 30, 2023 and 2022, respectively.
|
(3) |
Net interest margin is computed by dividing net interest income by total average interest earning assets.
|
(4) |
Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
|
(5) |
Total cost of funds (including the effect of noninterest-bearing demand deposits) is calculated by dividing total interest expense by the sum of total interest-bearing liabilities and noninterest-bearing demand
deposits.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||
2023 versus 2022
|
2023 versus 2022
|
|||||||||||||||||||||||
Increase (Decrease)
Due to Changes in (1)
|
Increase (Decrease)
Due to Changes in (1)
|
|||||||||||||||||||||||
Volume
|
Rate
|
Total
|
Volume
|
Rate
|
Total
|
|||||||||||||||||||
(in thousands)
|
(in thousands)
|
|||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||
Federal funds sold and interest-earning deposits
|
$
|
(30
|
)
|
$
|
532
|
$
|
502
|
$
|
(352
|
)
|
$
|
2,464
|
$
|
2,112
|
||||||||||
Investment securities
|
(252
|
)
|
185
|
(67
|
)
|
(393
|
)
|
483
|
90
|
|||||||||||||||
Loans, net
|
259
|
1,205
|
1,464
|
1,530
|
3,261
|
4,791
|
||||||||||||||||||
Total interest income
|
(23
|
)
|
1,922
|
1,899
|
785
|
6,208
|
6,993
|
|||||||||||||||||
Interest expense:
|
||||||||||||||||||||||||
Interest-bearing demand deposits
|
(54
|
)
|
1,637
|
1,583
|
(172
|
)
|
4,287
|
4,115
|
||||||||||||||||
Savings deposits
|
(4
|
)
|
3
|
(1
|
)
|
(9
|
)
|
—
|
(9
|
)
|
||||||||||||||
Time deposits
|
116
|
1,604
|
1,720
|
279
|
3,875
|
4,154
|
||||||||||||||||||
FHLB advances and other borrowings
|
(1
|
)
|
2
|
1
|
21
|
115
|
136
|
|||||||||||||||||
Total interest expense
|
57
|
3,246
|
3,303
|
119
|
8,277
|
8,396
|
||||||||||||||||||
Net increase
|
$
|
(80
|
)
|
$
|
(1,324
|
)
|
$
|
(1,404
|
)
|
$
|
666
|
$
|
(2,069
|
)
|
$
|
(1,403
|
)
|
(1) |
Changes due to both volume and rate have been allocated proportionately between changes in volume and rate.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||
Provision (credit) for credit losses for:
|
||||||||||||||||
Loans
|
$
|
(58
|
)
|
$
|
298
|
$
|
(680
|
)
|
$
|
266
|
||||||
Available-for-sale securities
|
103
|
-
|
103
|
-
|
||||||||||||
Off-balance sheet commitments
|
(2
|
)
|
2
|
(90
|
)
|
2
|
||||||||||
Total provision (credit) for credit losses(1)
|
$
|
43
|
$
|
300
|
$
|
(667
|
)
|
$
|
268
|
Three Months Ended
September 30,
|
Increase
|
Nine Months Ended
September 30,
|
Increase
|
|||||||||||||||||||||
2023
|
2022
|
(Decrease)
|
2023
|
2022
|
(Decrease)
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
Other loan fees
|
$
|
248
|
$
|
292
|
$
|
(44
|
)
|
$
|
703
|
$
|
915
|
$
|
(212
|
)
|
||||||||||
Gains from loan sales, net
|
24
|
49
|
(25
|
)
|
110
|
245
|
(135
|
)
|
||||||||||||||||
Document processing fees
|
88
|
114
|
(26
|
)
|
268
|
337
|
(69
|
)
|
||||||||||||||||
Service charges
|
149
|
114
|
35
|
470
|
295
|
175
|
||||||||||||||||||
Other
|
572
|
303
|
269
|
1,438
|
1,422
|
16
|
||||||||||||||||||
Total non-interest income
|
$
|
1,081
|
$
|
872
|
$
|
209
|
$
|
2,989
|
$
|
3,214
|
$
|
(225
|
)
|
Three Months Ended
September 30,
|
Increase
|
Nine Months Ended
September 30,
|
Increase
|
|||||||||||||||||||||
2023
|
2022
|
(Decrease)
|
2023
|
2022
|
(Decrease)
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
Salaries and employee benefits
|
$
|
5,114
|
$
|
4,823
|
$
|
291
|
$
|
15,864
|
$
|
14,784
|
$
|
1,080
|
||||||||||||
Occupancy, net
|
1,093
|
1,046
|
47
|
3,326
|
3,064
|
262
|
||||||||||||||||||
Professional services
|
672
|
653
|
19
|
2,442
|
1,687
|
755
|
||||||||||||||||||
Data processing
|
349
|
302
|
47
|
1,075
|
919
|
156
|
||||||||||||||||||
Depreciation
|
180
|
173
|
7
|
543
|
535
|
8
|
||||||||||||||||||
FDIC assessment
|
331
|
131
|
200
|
789
|
466
|
323
|
||||||||||||||||||
Advertising and marketing
|
179
|
196
|
(17
|
)
|
671
|
687
|
(16
|
)
|
||||||||||||||||
Other
|
445
|
286
|
159
|
1,341
|
551
|
790
|
||||||||||||||||||
Total non-interest expenses
|
$
|
8,363
|
$
|
7,610
|
$
|
753
|
$
|
26,051
|
$
|
22,693
|
$
|
3,358
|
September 30,
2023
|
December 31,
2022
|
Increase
(Decrease)
|
Percent
Increase
(Decrease)
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Cash and cash equivalents
|
$
|
140,619
|
$
|
64,690
|
$
|
75,929
|
117.4
|
%
|
||||||||
Investment securities available-for-sale
|
15,124
|
26,688
|
(11,564
|
)
|
(43.3
|
)%
|
||||||||||
Investment securities held-to-maturity
|
2,158
|
2,557
|
(399
|
)
|
(15.6
|
)%
|
||||||||||
Loans held for sale
|
18,435
|
21,033
|
(2,598
|
)
|
(12.4
|
)%
|
||||||||||
Loans held for investment, net
|
922,112
|
923,544
|
(1,432
|
)
|
(0.2
|
)%
|
||||||||||
Total assets
|
1,140,299
|
1,091,502
|
48,797
|
4.5
|
%
|
|||||||||||
Total deposits
|
916,093
|
875,084
|
41,009
|
4.7
|
%
|
|||||||||||
FHLB advances and other borrowings
|
90,000
|
90,000
|
—
|
0.0
|
%
|
|||||||||||
Total stockholder's equity
|
116,062
|
112,650
|
3,412
|
3.0
|
%
|
September 30,
2023
|
December 31,
2022
|
|||||||
(in thousands)
|
||||||||
Manufactured housing
|
$
|
325,068
|
$
|
315,825
|
||||
Commercial real estate
|
556,945
|
545,317
|
||||||
Commercial
|
38,232
|
59,070
|
||||||
SBA
|
1,687
|
3,482
|
||||||
HELOC
|
2,556
|
2,613
|
||||||
Single family real estate
|
10,615
|
8,709
|
||||||
Consumer
|
52
|
107
|
||||||
Gross loans held for investment
|
935,155
|
935,123
|
||||||
Deferred costs, net
|
(883
|
)
|
(787
|
)
|
||||
Discount on SBA loans
|
(25
|
)
|
(27
|
)
|
||||
Loans held for investment
|
934,247
|
934,309
|
||||||
Allowance for credit losses
|
(12,135
|
)
|
(10,765
|
)
|
||||
Loans held for investment, net
|
$
|
922,112
|
$
|
923,544
|
September 30,
2023
|
December 31,
2022
|
|||||||
(in thousands)
|
||||||||
Nonaccrual loans
|
$
|
3,195
|
$
|
211
|
||||
Nonaccrual loans to gross loans
|
0.34
|
%
|
0.02
|
%
|
||||
Net charge-offs (recoveries) (annualized) to average loans
|
(0.03
|
)%
|
(0.06
|
)%
|
||||
Allowance for credit losses to nonaccrual loans (net of government guaranteed portion)
|
380
|
%
|
5,102
|
%
|
||||
Allowance for credit losses to gross loans
|
1.30
|
%
|
1.15
|
%
|
At September 30, 2023
|
At December 31, 2022
|
|||||||||||||||||||||||
Nonaccrual
Balance
|
% of Total Nonaccrual
|
% of
Total Loans
|
Nonaccrual
Balance
|
% of Total Nonaccrual
|
% of
Total Loans
|
|||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Manufactured housing
|
$
|
727
|
22.76
|
%
|
0.08
|
%
|
$
|
61
|
28.91
|
%
|
0.01
|
%
|
||||||||||||
Commercial real estate
|
2,277
|
71.27
|
%
|
0.24
|
%
|
—
|
0.00
|
%
|
0.00
|
%
|
||||||||||||||
Commercial
|
50
|
1.56
|
%
|
0.01
|
%
|
—
|
0.00
|
%
|
0.00
|
%
|
||||||||||||||
HELOC
|
141
|
4.41
|
%
|
0.02
|
%
|
—
|
0.00
|
%
|
0.00
|
%
|
||||||||||||||
Single family real estate
|
—
|
0.00
|
%
|
0.00
|
%
|
150
|
71.09
|
%
|
0.01
|
%
|
||||||||||||||
Total nonaccrual loans
|
$
|
3,195
|
100.00
|
%
|
0.35
|
%
|
$
|
211
|
100.00
|
%
|
0.02
|
%
|
September 30,
2023
|
December 31,
2022
|
|||||||
(in thousands)
|
||||||||
Loans 30 through 89 days past due
|
$
|
4,461
|
$
|
2,880
|
||||
Loans 90 days or more past due
|
178
|
—
|
||||||
Total past due loans
|
$
|
4,639
|
$
|
2,880
|
Manufactured
Homes
|
Single Family Residence
|
Machinery & Equipment
|
Total
|
|||||||||||||
Manufactured housing
|
$
|
1,014
|
$
|
—
|
$
|
—
|
$
|
1,014
|
||||||||
Commercial real estate
|
2,277
|
—
|
—
|
2,277
|
||||||||||||
Commercial
|
—
|
—
|
1,210
|
1,210
|
||||||||||||
Single family real estate
|
—
|
141
|
—
|
141
|
||||||||||||
Total
|
$
|
3,291
|
$
|
141
|
$
|
1,210
|
$
|
4,642
|
Manufactured
Housing
|
Commercial
Real Estate
|
Commercial
|
SBA
|
HELOC
|
Single Family
Real Estate
|
Consumer
|
Total
Loans
|
|||||||||||||||||||||||||
Recorded Investment:
|
(in thousands)
|
|||||||||||||||||||||||||||||||
Impaired loans with an allowance recorded
|
$
|
2,918
|
$
|
209
|
$
|
67
|
$
|
41
|
$
|
—
|
$
|
208
|
$
|
—
|
$
|
3,443
|
||||||||||||||||
Impaired loans with no allowance recorded
|
1,166
|
—
|
1,297
|
—
|
—
|
151
|
—
|
2,614
|
||||||||||||||||||||||||
Total loans individually evaluated for impairment
|
4,084
|
209
|
1,364
|
41
|
—
|
359
|
—
|
6,057
|
||||||||||||||||||||||||
Related allowance for impaired loans
|
157
|
18
|
—
|
1
|
—
|
8
|
—
|
184
|
||||||||||||||||||||||||
Total impaired loans, net
|
$
|
3,927
|
$
|
191
|
$
|
1,364
|
$
|
40
|
$
|
—
|
$
|
351
|
$
|
—
|
$
|
5,873
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Allowance for credit losses:
|
(in thousands)
|
|||||||||||||||
Balance at beginning of period
|
$
|
12,148
|
$
|
10,866
|
$
|
10,765
|
$
|
10,404
|
||||||||
Impact of adoption of ASC 326
|
—
|
—
|
1,811
|
—
|
||||||||||||
Provision (credit) for credit losses:
|
||||||||||||||||
Manufactured housing
|
(54
|
)
|
(77
|
)
|
(151
|
)
|
1,258
|
|||||||||
Commercial real estate
|
44
|
182
|
(110
|
)
|
(467
|
)
|
||||||||||
Commercial
|
(46
|
)
|
24
|
(372
|
)
|
(475
|
)
|
|||||||||
SBA
|
(4
|
)
|
174
|
(70
|
)
|
(67
|
)
|
|||||||||
HELOC
|
1
|
(6
|
)
|
(2
|
)
|
7
|
||||||||||
Single family real estate
|
1
|
—
|
26
|
10
|
||||||||||||
Consumer
|
—
|
1
|
(1
|
)
|
—
|
|||||||||||
Total provision (credit) for credit losses
|
(58
|
)
|
298
|
(680
|
)
|
266
|
||||||||||
Recoveries of loans previously charged-off:
|
||||||||||||||||
Manufactured housing
|
8
|
88
|
74
|
123
|
||||||||||||
Commercial real estate
|
20
|
20
|
59
|
60
|
||||||||||||
Commercial
|
13
|
13
|
37
|
183
|
||||||||||||
SBA
|
4
|
4
|
69
|
246
|
||||||||||||
HELOC
|
—
|
6
|
—
|
12
|
||||||||||||
Single family real estate
|
—
|
—
|
—
|
—
|
||||||||||||
Consumer
|
—
|
—
|
—
|
1
|
||||||||||||
Total recoveries
|
45
|
131
|
239
|
625
|
||||||||||||
Loans charged-off:
|
||||||||||||||||
Manufactured housing
|
—
|
—
|
—
|
—
|
||||||||||||
Commercial real estate
|
—
|
—
|
—
|
—
|
||||||||||||
Commercial
|
—
|
—
|
—
|
—
|
||||||||||||
SBA
|
—
|
182
|
—
|
182
|
||||||||||||
HELOC
|
—
|
—
|
—
|
—
|
||||||||||||
Single family real estate
|
—
|
—
|
—
|
—
|
||||||||||||
Consumer
|
—
|
—
|
—
|
—
|
||||||||||||
Total charged-off
|
—
|
182
|
—
|
182
|
||||||||||||
Net charge-offs (recoveries)
|
(45
|
)
|
51
|
(239
|
)
|
(443
|
)
|
|||||||||
Balance at end of period
|
$
|
12,135
|
$
|
11,113
|
$
|
12,135
|
$
|
11,113
|
September 30,
2023
|
December 31,
2022
|
|||||||
(in thousands)
|
||||||||
Securities available-for-sale (at fair value)
|
||||||||
U.S. government agency notes
|
$
|
3,493
|
$
|
4,107
|
||||
U.S. government agency CMO
|
3,978
|
4,296
|
||||||
U.S. Treasury securities
|
—
|
9,970
|
||||||
Corporate debt securities
|
7,653
|
8,315
|
||||||
Total securities available for sale
|
15,124
|
26,688
|
||||||
Securities held-to-maturity (at amortized cost): US government agency MBS
|
2,158
|
2,557
|
||||||
Equity securities (at fair value): Farmer Mac class A stock
|
309
|
225
|
||||||
Total investment securities
|
$
|
17,591
|
$
|
29,470
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Balance, beginning of period
|
$
|
65
|
$
|
2,250
|
$
|
2,250
|
$
|
2,518
|
||||||||
Additions
|
1,511
|
—
|
1,576
|
—
|
||||||||||||
Proceeds from dispositions
|
(46
|
)
|
—
|
(2,551
|
)
|
(372
|
)
|
|||||||||
(Loss)/gain on sales, net
|
(19
|
)
|
—
|
236
|
104
|
|||||||||||
Balance, end of period
|
$
|
1,511
|
$
|
2,250
|
$
|
1,511
|
$
|
2,250
|
September 30,
2023
|
December 31,
2022
|
Increase
(Decrease)
|
Percent
Increase
(Decrease)
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Noninterest-bearing demand deposits
|
$
|
190,817
|
$
|
216,494
|
$
|
(25,677
|
)
|
(11.9
|
)%
|
|||||||
Interest-bearing demand deposits
|
456,808
|
428,173
|
28,635
|
6.7
|
%
|
|||||||||||
Savings
|
16,905
|
23,490
|
(6,585
|
)
|
(28.0
|
)%
|
||||||||||
Certificates of deposit ($250,000 or more)
|
14,911
|
6,693
|
8,218
|
122.8
|
%
|
|||||||||||
Other certificates of deposit
|
236,652
|
200,234
|
36,418
|
18.2
|
%
|
|||||||||||
Total deposits
|
$
|
916,093
|
$
|
875,084
|
$
|
41,009
|
4.7
|
%
|
At September 30, 2023
|
||||||||||||
Less than
1 year
|
More than
1 year
|
Total
|
||||||||||
(dollars in thousands)
|
||||||||||||
Time deposits
|
$
|
183,127
|
$
|
68,436
|
$
|
251,563
|
||||||
FHLB advances and other borrowings
|
—
|
90,000
|
90,000
|
|||||||||
Operating lease obligations
|
1,040
|
4,185
|
5,225
|
|||||||||
Total
|
$
|
184,167
|
$
|
162,621
|
$
|
346,788
|
At September 30, 2023
|
||||||||||||
Less than
1 year
|
More than
1 year
|
Total
|
||||||||||
(dollars in thousands)
|
||||||||||||
Loan commitments to extend credit
|
$
|
59,960
|
$
|
37,112
|
$
|
97,072
|
||||||
Standby letters of credit
|
—
|
—
|
—
|
|||||||||
Total
|
$
|
59,960
|
$
|
37,112
|
$
|
97,072
|
Total Capital
(To Risk-
Weighted
Assets)
|
Tier 1
Capital
(To Risk-
Weighted
Assets)
|
Common
Equity
Tier 1
(To Risk-
Weighted
Assets)
|
Leverage
Ratio/Tier 1
Capital
(To Average
Assets)
|
|||||||||||||
September 30, 2023
|
||||||||||||||||
CWB's actual regulatory ratios
|
13.27
|
%
|
12.09
|
%
|
12.09
|
%
|
10.84
|
%
|
||||||||
Minimum capital requirements
|
8.00
|
%
|
6.00
|
%
|
4.50
|
%
|
4.00
|
%
|
||||||||
Well-capitalized requirements
|
10.00
|
%
|
8.00
|
%
|
6.50
|
%
|
5.00
|
%
|
||||||||
December 31, 2022
|
||||||||||||||||
CWB's actual regulatory ratios
|
12.56
|
%
|
11.44
|
%
|
11.44
|
%
|
10.34
|
%
|
||||||||
Minimum capital requirements
|
8.00
|
%
|
6.00
|
%
|
4.50
|
%
|
4.00
|
%
|
||||||||
Well-capitalized requirements
|
10.00
|
%
|
8.00
|
%
|
6.50
|
%
|
5.00
|
%
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4. |
CONTROLS AND PROCEDURES
|
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
|
Exhibit Number
|
|
Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
|
|
Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
|
|
Certification of Chief Executive Officer and Chief Financial Officer of the Registrant pursuant to Rule 13a-14(b) or Rule 15d-14(b), promulgated under the Securities Exchange Act of 1934, as
Amended, and 18 U.S.C. 1350.
|
|
101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
|
* |
This certification is furnished to, but shall not be deemed filed, with the Commission. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference.
|
Date: November 13, 2023
|
BY:
|
/s/ Richard Pimentel |
Richard Pimentel
|
||
Executive Vice President and Chief Financial Officer
|
||
On Behalf of Registrant and as a Duly Authorized Officer
|
||
and as Principal Financial and Accounting Officer
|