Community West Bancshares
For the period ended Dec 31, 2024. Filed Mar 17, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 17, 2025
CWBC$25.97-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-15.
0001628280-24-011417
ITEM 7. -MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSLiquidityCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-17.
0001628280-25-013157
ITEM 7. -MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSLiquidityThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 205 previous paragraphs and 211 current paragraphs.
107 unchanged; 85 reworded; 17 added; 12 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 20 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Effective April 1, 2024, Central Valley Community Bancorp, completed its merger transaction with Community West Bancshares. Shortly thereafter, Community West Bank, a wholly owned subsidiary of Community West Bancshares, merged with and into Central Valley Community Bank, a wholly owned subsidiary of Central Valley Community Bancorp, with Central Valley Community Bank being the surviving banking institution. Effective with these mergers, the names of Central Valley Community Bancorp and Central Valley Community Bank were changed to Community West Bancshares and Community West Bank, respectively.
Current report
•Net income for 2024 was $7,666,000 compared to $25,536,000 and $26,645,000 for the years ended December 31, 2023 and 2022, respectively.
Current report
•Net loans increased $1.03 billion or 81%, and total assets increased $1.09 billion or 45% at December 31, 2024 compared to December 31, 2023.
Current report
•Total equity was $363 million at December 31, 2024 compared to $207 million at December 31, 2023.
Current report
Non-interest expenses increased $39,401,000 or 71.25% to $94,701,000 in 2024 compared to $55,300,000 in 2023. The net increase year over year was driven by the merger, which added seven banking centers and 131 additional full-time equivalent employees on April 1, 2024. The most notable increases were salaries and employee benefits of $17,103,000, merger related expenses of $8,423,000, occupancy expenses of $3,753,000, information technology of $2,324,000 and $1,127,000 in data processing.
Current report
Statement Regarding use of Non-GAAP Financial Measures
Current report
Community West Bancshares’s financial results are presented in accordance with GAAP and refer to certain non-GAAP financial measures. Management believes that presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of the Company’s core operating results and comparison of operating results across reporting periods. Management also uses non-GAAP financial measures to establish budgets and manage the Company’s business. A reconciliation of the GAAP financial measures to comparable non-GAAP financial measures is presented below.
Current report
Reconciliation of GAAP and Non-GAAP Financial Measures
Current report
Interchange fees totaled $2,078,000 in 2024 compared to $1,780,000 and $1,847,000 in 2023 and 2022, respectively.
Current report
Total loans, net of discount and deferred costs, increased $1,043,424,000 or 80.8% to $2,334,221,000 as of December 31, 2024, compared to $1,290,797,000 as of December 31, 2023.
Current report
In order to mitigate these risks, the Board reviews and approves concentration limits proposed by management. Exceptions to limitations of concentrations are reported to the Board of Directors at least quarterly. Additionally, the Company maintains policy guidelines for maximum loan to value ratios to mitigate the risk of general declines in real estate values. The Company performs regular risk assessments, portfolio monitoring of loans, and stress tests as part of its risk management policies to identify any negative trends within the portfolio. Within the commercial real estate portfolio, there is diversification of collateral type and geography throughout our footprint. The Company did not engage in any sub-prime mortgage lending activities during the years ended December 31, 2024 and 2023.
Current report
The following table presents the commercial real estate owner and non-owner occupied loan balances, associated percentage of commercial real estate concentrations of those sub-categories by collateral type as of the dates indicated.
Current report
As of December 31, 2024, the Company had $329,761,000 in brokered time deposits compared to $93,134,000 as of December 31, 2023. The increase in brokered time deposits was due to the brokered time deposits held by Community West Bank, which we acquired in April 2024.
Current report
As of December 31, 2024 and December 31, 2023, uninsured deposits totaled $1,029,929,000 and $821,756,000, respectively.
Current report
Business combinations are recorded using the acquisition method. We assign the value of the consideration transferred to acquire a business to the tangible assets, identifiable intangible assets acquired, and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill.
Current report
The Company assesses the fair value of assets, including intangible assets, using a variety of methods, and each asset is measured at fair value from the perspective of a market participant. The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset. Some of the most significant assumptions used include the discount rate, forward-looking financial information, and estimated customer attrition rates. A change in one of these assumptions could have material changes on the value of the intangible assets and goodwill which will impact the amortization expense in future periods and the goodwill impairment evaluation.
Removed paragraphs (12)
Previous report
•Net income for 2023 was $25,536,000 compared to $26,645,000 and $28,401,000 for the years ended December 31, 2022 and 2021, respectively.
Previous report
•Net loans increased $30.7 million or 2.46%, and total assets increased $10.9 million or 0.45% at December 31, 2023 compared to December 31, 2022. During the fourth quarter, net loans increased $16.3 million or 1.29%.
Previous report
•Total equity was $207,064,000 at December 31, 2023 compared to $174,660,000 at December 31, 2022.
Previous report
•Return on average assets;
Previous report
•Development of revenue streams, including net interest income and non-interest income;
Previous report
Non-interest expenses increased $6,816,000 or 14.06% to $55,300,000 in 2023 compared to $48,484,000 in 2022. The net increase year over year resulted from increased salaries and employee benefits of $2,450,000 and $1,906,000 in professional services. The increase in salaries and benefits, including director expenses, was primarily due to credits of $550,000 in post-retirement costs recorded in the prior year, a result of changes in the discount rate, compared to expense of $910,000 recorded in the current year. Additionally, increases in salaries and benefits were a reflection of salary adjustments due to market conditions. The increase in professional services was due to non-recurring legal and professional fees, including $1,191,000 related to the announced merger.
Previous report
Management’s review of all investments before purchase includes an analysis of how the security will perform under several interest rate scenarios to monitor whether investments are consistent with our investment policy. The policy addresses issues of average life, duration, and concentration guidelines, prohibited investments, impairment, and prohibited practices.
Previous report
Interchange fees totaled $1,780,000 in 2023 compared to $1,847,000 and $1,784,000 in 2022 and 2021, respectively.
Previous report
Our investment portfolio as a percentage of total assets is generally higher than our peers due primarily to our comparatively low loan-to-deposit ratio. Our loan-to-deposit ratio at December 31, 2023 was 63.22% compared to 59.83% at December 31, 2022. The loan to deposit ratio of our peers was 78.00% at December 31, 2023. Peer group information from S&P Global Market Intelligence data includes bank holding companies in central California with assets from $1 billion to $3.5 billion.
Previous report
Total gross loans increased $34,493,000 or 2.75% to $1,290,797,000 as of December 31, 2023, compared to $1,256,304,000 as of December 31, 2022.
Previous report
The Board of Directors review and approve concentration limits and exceptions to limitations of concentration are reported to the Board of Directors at least quarterly.
Previous report
As of December 31, 2023, the Company had $93,134,000 in Brokered CD deposits. The Company had no Brokered CD deposits as of December 31, 2022.
Reworded paragraphs (85)
Previous wording
Central Valley Community Bancorp (NASDAQ: CVCY) (the Company) was incorporated on February 7, 2000. The formation of the holding company offered the Company more flexibility in meeting the long-term needs of customers, shareholders, and the communities it serves. The Company currently has one bank subsidiary, Central Valley Community Bank (the Bank) and one business trust subsidiary, Service 1 st Capital Trust 1. The Company’s market area includes the Central Valley area from Sacramento, California to Bakersfield, California.
Current wording
Community West Bancshares (NASDAQ: CWBC) (the Company) was incorporated on February 7, 2000. The formation of the holding company offered the Company more flexibility in meeting the long-term needs of customers, shareholders, and the communities it serves. The Company currently has one bank subsidiary, Community West Bank (the Bank) and one business trust subsidiary, Service 1 st Capital Trust 1. The Company’s market area includes Central California from Sacramento, California in the north to Bakersfield, California in the south and west to the Central California Coast.
Previous wording
As of December 31, 2023, the Bank operated 19 full-service offices. Additionally, the Bank maintains a Commercial Real Estate Division, an Agribusiness Center, and a SBA Lending Division. The Real Estate Division processes or assists in processing the majority of the Bank’s real estate related transactions, including interim construction loans for single family residences and commercial buildings. We offer permanent single family residential loans through our mortgage broker services.
Current wording
As of December 31, 2024, the Bank operated 26 full-service offices. Additionally, the Bank maintains an Agribusiness Center, and an SBA Lending Division.
Previous wording
•Diluted earnings per share (EPS) for the year ended December 31, 2023 was $2.17, compared to $2.27 and $2.31 for the years ended December 31, 2022 and 2021, respectively.
Current wording
•Diluted earnings per share (EPS) for the year ended December 31, 2024 was $0.45, compared to $2.17 and $2.27 for the years ended December 31, 2023 and 2022, respectively.
Previous wording
•Total assets at December 31, 2023 were $2,433,426,000 compared to $2,422,519,000 at December 31, 2022.
Current wording
•Total assets at December 31, 2024 were $3.52 billion compared to $2.43 billion at December 31, 2023.
Previous wording
•Total deposits decreased 2.76% to $2.04 billion at December 31, 2023 compared to December 31, 2022.
Current wording
•Total deposits increased 43% to $2.91 billion at December 31, 2024 compared to $2.04 billion at December 31, 2023.
Previous wording
•Total cost of deposits increased to 0.72% for the year ended December 31, 2023 compared to 0.06% for the year ended December 31, 2022.
Current wording
•Total cost of deposits increased to 1.53% for the year ended December 31, 2024 compared to 0.72% for the year ended December 31, 2023.
Previous wording
•Average non-interest bearing demand deposit accounts as a percentage of total average deposits was 46.61% and 50.42% for the quarters ended December 31, 2023 and December 31, 2022, respectively.
Current wording
•Average non-interest bearing demand deposit accounts as a percentage of total average deposits was 38.62% and 45.84% for the years ended December 31, 2024 and December 31, 2023, respectively.
Previous wording
•Net interest margin increased to 3.58% for the year ended December 31, 2023, from 3.52% for the year ended December 31, 2022.
Current wording
•Net interest margin increased to 3.76% for the year ended December 31, 2024, from 3.58% for the year ended December 31, 2023.
Previous wording
•Return on average equity (“ROE”) for 2023 was 13.81% compared to 14.25% and 11.5% for 2022 and 2021, respectively.
Current wording
•Return on average equity (“ROE”) for 2024 was 2.42% compared to 13.81% and 14.25% for 2023 and 2022, respectively.
Previous wording
•Return on average assets (“ROA”) for 2023 was 1.04% compared to 1.09% and 1.25% for 2022 and 2021, respectively.
Current wording
•Return on average assets (“ROA”) for 2024 was 0.24% compared to 1.04% and 1.09% for 2023 and 2022, respectively.
Previous wording
•There were no non-performing assets for the year ended December 31, 2023. Additionally, net loan charge-offs were $20,000 and loans delinquent more than 30 days were $769,000, compared to net loan recoveries of $248,000 and loans delinquent more than 30 days of $5,895,000 for the year ended December 31, 2022.
Current wording
•There were $6.46 million non-performing assets for the year ended December 31, 2024. Additionally, net loan charge-offs were $463,000 and loans delinquent more than 30 days were $9.84 million, compared to net loan charge-offs of $20,000 and loans delinquent more than 30 days of $3.74 million for the year ended December 31, 2023.
Previous wording
•Capital positions remain strong at December 31, 2023 with a 9.18% Tier 1 Leverage Ratio; a 12.78% Common Equity Tier 1 Ratio; a 13.07% Tier 1 Risk-Based Capital Ratio; and a 16.08% Total Risk-Based Capital Ratio.
Current wording
•Capital positions remain strong at December 31, 2024 with a 9.17% Tier 1 Leverage Ratio; a 11.15% Common Equity Tier 1 Ratio; a 11.33% Tier 1 Risk-Based Capital Ratio; and a 13.58% Total Risk-Based Capital Ratio.
Previous wording
One measure of our return to our shareholders is the return on average equity (ROE), which is a ratio that measures net income divided by average shareholders’ equity. Our ROE was 13.81% for the year ended 2023 compared to 14.25% and 11.5% for the years ended 2022 and 2021, respectively.
Current wording
One measure of our return to our shareholders is the return on average equity (ROE), which is a ratio that measures net income divided by average shareholders’ equity. Our ROE was 2.42% for the year ended 2024 compared to 13.81% and 14.25% for the years ended 2023 and 2022, respectively.
Previous wording
Our net income for the year ended December 31, 2023 decreased $1,109,000 compared to 2022 and decreased $1,756,000 in 2022 compared to 2021. Contributing to the decrease during 2023, compared to 2022, was an increase in salary and employee benefits and non-interest expenses primarily attributed to increases in professional services. During 2022, net income compared to 2021 was primarily impacted by a provision for credit losses of $995,000 in 2022, compared to a credit to credit losses of $4,435,000 in 2021.
Current wording
Our net income for the year ended December 31, 2024 decreased $17,870,000 compared to 2023 and decreased $1,109,000 in 2023 compared to 2022. Contributing to the decrease during 2024, compared to 2023, was due to merger related expenses of $20,491,000, including a one-time provision for the expected credit losses of the acquired portfolio of $10,877,000. During 2023, net income compared to 2022 was primarily impacted by higher non-interest expenses, including $1,191,000 in merger related expenses.
Previous wording
Net interest income increased primarily due to loan and fee income and increases in interest income on investments, partially offset by an increase in interest expense. For 2023, our net interest margin (NIM) increased 6 basis points to 3.58% compared to 2022 as a result of yield and asset mix changes. Net interest income was positively impacted by the accretion of the loan marks on acquired loans in the amount of $325,000 and $521,000 for the year ended December 31, 2023 and 2022, respectively. In addition, net interest income before the provision for credit losses for the year ended December 31, 2023 benefited by approximately $165,000 in nonrecurring income from prepayment penalties and payoff of loans, as compared to $649,000 for the year ended December 31, 2022. Excluding these reversals and benefits, net interest income for the year ended December 31, 2023 increased by $3,543,000 compared to the year ended December 31, 2022.
Current wording
Net interest income increased $27,938,000 primarily due to increased volume and rates from the merger with Community West Bancshares. For 2024, our net interest margin (NIM) increased 18 basis points to 3.76% compared to 3.58% in 2023 as a result of yield and asset mix changes. Net interest income was positively impacted by the accretion of the loan marks on acquired loans in the amount of $9,849,000 and $325,000 for the twelve months ended December 31, 2024 and 2023, respectively. In addition, net interest income before the provision for credit losses for the twelve months ended December 31, 2024 benefited by approximately $83,000 in nonrecurring income from prepayment penalties and payoff of loans, as compared to $165,000 for the twelve months ended December 31, 2023. Excluding these benefits, net interest income for the twelve months ended December 31, 2024 increased by $18,496,000 compared to the twelve months ended December 31, 2023.
Previous wording
Non-interest income increased 38.90% in 2023 compared to 2022 primarily due to a $823,000 decrease in net realized losses on sales and calls of investment securities and an increase of $1,468,000 in other income, offset by a decrease in loan placement fees of $315,000 and a decrease in service charge income of $511,000. The increase in other income is primarily attributed to changes in fair value of other equity investments and increase in certain merchant fee activity.
Current wording
Non-interest income decreased $575,000, or 8.19% in 2024 compared to 2023 primarily due to a $3,292,000 increase in net realized losses on sales and calls of investment securities partially offset by an increase of $1,629,000 in other income, an increase in loan placement fees of $309,000 and a increase in service charge income of $295,000. The increase in other income is primarily attributed to changes in fair value of other equity investments and increase in certain merchant fee activity.
Previous wording
The Company recorded an income tax provision of $8,304,000 for the year ended December 31, 2023, compared to $8,496,000 for the year ended December 31, 2022, and $9,616,000 for the year ended December 31, 2021. Basic EPS was $2.17 for 2023 compared to $2.27 and $2.32 for 2022 and 2021, respectively. Diluted EPS was $2.17 for 2023 compared to $2.27 and $2.31 for 2022 and 2021, respectively.
Current wording
The Company recorded an income tax provision of $3,332,000 for the twelve months ended December 31, 2024, compared to $8,304,000 for the twelve months ended December 31, 2023, and $8,496,000 for the twelve months ended December 31, 2022. Basic EPS was $0.45 for 2024 compared to $2.17 and $2.27 for 2023 and 2022, respectively. Diluted EPS was $0.45 for 2024 compared to $2.17 and $2.27 for 2023 and 2022, respectively.
Previous wording
Our ROA is a ratio that measures our performance as a comparable figure with other banks and bank holding companies. Our ROA for the year ended 2023 was 1.04% compared to 1.09% and 1.25% for the years ended December 31, 2022 and 2021, respectively. The 2023 decrease in ROA is primarily due to the decrease in net income coupled with the increase in average assets. Annualized ROA for our peer group was 1.04% at December 31, 2023. Peer group information from S&P Global Market Intelligence data includes bank holding companies in central California with assets from $1 billion to $3.5 billion.
Current wording
Our ROA is a ratio that measures our performance as a comparable figure with other banks and bank holding companies. Our ROA for the year ended 2024 was 0.24% compared to 1.04% and 1.09% for the years ended December 31, 2023 and 2022, respectively. The 2024 decrease of 80 basis points in ROA is primarily due to the decrease in net income due to merger related expenses, including a one-time provision for the expected credit losses of the acquired portfolio of $10,877,000.
Previous wording
Our net interest margin (fully tax equivalent basis) was 3.58% for the year ended December 31, 2023, compared to 3.52% and 3.54% for the years ended December 31, 2022 and 2021, respectively. The increase in 2023 net interest margin compared to 2022, resulted from the increase in the yield on the Company’s loan portfolio, and an increase in the balance of average interest earning assets. The effective tax equivalent yield on total earning assets increased 77 basis points. This increase was impacted however as the cost of total interest-bearing liabilities increased 131 basis points to 1.59% for the year ended December 31, 2023. Our cost of total deposits in 2023 and 2022 was 0.72% and 0.06%, respectively, compared to 0.05% for the same period in 2021. Our net interest income before provision for credit losses increased $2,863,000 or 3.60% to $82,429,000 for the year ended 2023 compared to $79,566,000 and $72,554,000 for the years ended 2022 and 2021, respectively.
Current wording
Our net interest margin (fully tax equivalent basis) was 3.76% for the year ended December 31, 2024, compared to 3.58% and 3.52% for the years ended December 31, 2023 and 2022, respectively. The increase in 2024 net interest margin compared to 2023, resulted from the increase in the yield on the Company’s loan portfolio and an increase in the balance of average interest earning assets. The effective tax equivalent yield on total earning assets increased 101 basis points. This increase was partially offset by an increase in the cost of total interest-bearing liabilities, which increased 117 basis points to 2.76% for the year ended December 31, 2024. Our cost of total deposits in 2024 and 2023 was 1.53% and 0.72%, respectively, compared to 0.06% for the same period in 2022. Our net interest income before provision for credit losses increased $27,938,000 or 33.89% to $110,367,000 for the year ended 2024 compared to $82,429,000 and $79,566,000 for the years ended 2023 and 2022, respectively.
Previous wording
For all banks and bank holding companies, asset quality has a significant impact on the overall financial condition and results of operations. Asset quality is measured in terms of classified and nonperforming loans, and is a key element in estimating the future earnings of a company. There were no nonperforming assets or nonperforming loans at December 31, 2023 or December 31, 2022.
Current wording
For all banks and bank holding companies, asset quality has a significant impact on the overall financial condition and results of operations. Asset quality is measured in terms of classified and nonperforming loans, and is a key element in estimating the future earnings of a company. There were $6.46 million nonperforming assets or nonperforming loans at December 31, 2024. There were no non-performing loans at December 31, 2023. The increase in nonperforming assets was primarily due to nonperforming assets acquired as of April 1, 2024 in connection with the merger. Also during 2024, there were $2.26 million in single family residential mortgages placed on non-accrual.
Previous wording
The allowance for credit losses as a percentage of outstanding loan balance was 1.14% as of December 31, 2023 and 0.86% as of December 31, 2022. The ratio of net charge-offs/(recoveries) to average loans was 0.002% as of December 31, 2023 and (0.02)% as of December 31, 2022.
Current wording
The allowance for credit losses as a percentage of outstanding loan balance was 1.11% as of December 31, 2024 and 1.14% as of December 31, 2023. The ratio of net charge-offs/(recoveries) to average loans was 0.02% as of December 31, 2024 and (0.002)% as of December 31, 2023.
Previous wording
As revenues from both net interest income and non-interest income are a function of asset size, the continued growth in assets has a direct impact in increasing net income and therefore ROE and ROA. The majority of our assets are loans and investment securities, and the majority of our liabilities are deposits, and therefore the ability to generate deposits as a funding source for loans and investments is fundamental to our asset growth. Total assets increased 0.45% during 2023 to $2,433,426,000 as of December 31, 2023 from $2,422,519,000 as of December 31, 2022. Total gross loans increased 2.75% to $1,290,797,000 as of December 31, 2023, compared to $1,256,304,000 at December 31, 2022. Total investment securities decreased 5.64% to $906,287,000 as of December 31, 2023 compared to $960,490,000 as of December 31, 2022. Total deposits decreased 2.76% to $2,041,612,000 as of December 31, 2023 compared to $2,099,649,000 as of December 31, 2022.
Current wording
As revenues from both net interest income and non-interest income are a function of asset size, the continued growth in assets has a direct impact in increasing net income and therefore ROE and ROA. The majority of our assets are loans and investment securities, and the majority of our liabilities are deposits, and therefore the ability to generate deposits as a funding source for loans and investments is fundamental to our asset growth. Due to the merger that closed on April 1, 2024, total assets increased 45% during 2024 to $3,521,771,000 as of December 31, 2024 from $2,433,426,000 as of December 31, 2023. Total loans, net of discount increased 80.84% to $2,334,221,000 as of December 31, 2024, compared to $1,290,797,000 at December 31, 2023. Total investment securities decreased $121,229,000 to $785,058,000 as of December 31, 2024 compared to $906,287,000 as of December 31, 2023. Total deposits increased 43% to $2,910,777,000 as of December 31, 2024 compared to $2,041,612,000 as of December 31, 2023.
Previous wording
Our loan to deposit ratio at December 31, 2023 was 63.22% compared to 59.83% at December 31, 2022. The loan to deposit ratio of our peers was 78.00% at December 31, 2023. Peer group information from S&P Global Market Intelligence data includes bank holding companies in central California with assets from $1 billion to $3.5 billion.
Current wording
Our loan to deposit ratio at December 31, 2024 was 80.19% compared to 63.22% at December 31, 2023.
Previous wording
At December 31, 2023, we had a total capital to risk-weighted assets ratio of 16.08%, a Tier 1 risk-based capital ratio of 13.07%, common equity Tier 1 ratio of 12.78%, and a leverage ratio of 9.18%. At December 31, 2022, we had a total capital to risk-weighted assets ratio of 14.92%, a Tier 1 risk-based capital ratio of 12.22%, common equity Tier 1 ratio of 11.92%, and a leverage ratio of 8.37%. At December 31, 2023, on a stand-alone basis, the Bank had a total risk-based capital ratio of 17.74%, a Tier 1 risk based capital ratio of 16.76%, common equity Tier 1 ratio of 16.76%, and a leverage ratio of 11.75%. At December 31, 2022, the Bank had a total risk-based capital ratio of 16.53%, Tier 1 risk-based capital of 15.87% and a leverage ratio of 10.86%. Note 12 of the audited Consolidated Financial Statements provides more detailed information concerning the Company’s capital amounts and ratios.
Current wording
At December 31, 2024, we had a total capital to risk-weighted assets ratio of 13.58%, a Tier 1 risk-based capital ratio of 11.33%, common equity Tier 1 ratio of 11.15%, and a leverage ratio of 9.17%. At December 31, 2023, we had a total capital to risk-weighted assets ratio of 16.08%, a Tier 1 risk-based capital ratio of 13.07%, common equity Tier 1 ratio of 12.78%, and a leverage ratio of 9.18%. At December 31, 2024, on a stand-alone basis, the Bank had a total risk-based capital ratio of 14.54%, a Tier 1 risk based capital ratio of 13.54%, common equity Tier 1 ratio of 13.54%, and a leverage ratio of 11.04%. At December 31, 2023, the Bank had a total risk-based capital ratio of 17.74%, Tier 1 risk-based capital of 16.76% and a leverage ratio of 11.75%. Note 13 of the audited Consolidated Financial Statements provides more detailed information concerning the Company’s capital amounts and ratios.
Previous wording
Operating efficiency is the measure of how efficiently earnings before taxes are generated as a percentage of revenue. A lower ratio represents greater efficiency. The Company’s efficiency ratio (operating expenses, excluding amortization of intangibles and foreclosed property expense, divided by net interest income plus non-interest income, excluding net gains and losses from sale of securities) was 60.49% for 2023 compared to 54.51% for 2022 and 57.16% for 2021. The decline in the efficiency ratio in 2023 was due to the growth in non-interest expense outpacing the increase in non-interest income. The combination of the Company’s net interest income before provision for credit losses, plus non-interest income, increased 5.71% to $89,449,000 in 2023 compared to $84,620,000 in 2022 and $81,559,000 in 2021, while operating expenses increased 14.06% in 2023, 1.06% in 2022, and 0.33% in 2021.
Current wording
Operating efficiency is the measure of how efficiently earnings before taxes are generated as a percentage of revenue. A lower ratio represents greater efficiency. The Company’s efficiency ratio (operating expenses divided by net interest income plus non-interest income) was 81.07% for 2024 compared to 61.82% for 2023 and 57.30% for 2022. The decline in the efficiency ratio in 2024 was due to the merger related expenses. The combination of the Company’s net interest income before provision for credit losses, plus non-interest income, increased 30.59% to $116,812,000 in 2024 compared to $89,449,000 in 2023 and $84,620,000 in 2022, while operating expenses increased 71.25% in 2024, 14.06% in 2023, and 1.06% in 2022.
Previous wording
Liquidity management involves our ability to meet cash flow requirements arising from fluctuations in deposit levels and demands of daily operations, which include providing for customers’ credit needs, funding of securities purchases, and ongoing repayment of borrowings. Our liquidity is actively managed on a daily basis and reviewed periodically by our management and Directors’ Asset/Liability Committee. This process is intended to ensure the maintenance of sufficient funds to meet our needs, including adequate cash flows for off-balance sheet commitments. Our primary sources of liquidity are derived from financing activities which include the acceptance of customer and, to a lesser extent, broker deposits, Federal funds facilities and advances from the Federal Home Loan Bank of San Francisco, the Federal Reserve, or the Federal Reserve’s Bank Term Funding Program. We have available unsecured lines of credit with correspondent banks totaling approximately $110,000,000 and secured borrowing lines of approximately $342,483,000 with the Federal Home Loan Bank. These funding sources are augmented by collection of principal and interest on loans, the routine maturities and pay downs of securities from our investment securities portfolio, the stability of our core deposits, and the ability to sell investment securities. Primary uses of funds include origination and purchases of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and payment of operating expenses.
Current wording
Liquidity management involves our ability to meet cash flow requirements arising from fluctuations in deposit levels and demands of daily operations, which include providing for customers’ credit needs, funding of securities purchases, and ongoing repayment of borrowings. Our liquidity is actively managed on a daily basis and reviewed periodically by our management and Directors’ Asset/Liability Committee. This process is intended to ensure the maintenance of sufficient funds to meet our needs, including adequate cash flows for off-balance sheet commitments. Our primary sources of liquidity are derived from financing activities which include the acceptance of customer and, to a lesser extent, broker deposits, Federal funds facilities and advances from the Federal Home Loan Bank of San Francisco, or the Federal Reserve. We have available unsecured lines of credit with correspondent banks totaling approximately $110,000,000 and secured borrowing lines of approximately $738,556,000 with the Federal Home Loan Bank. These funding sources are augmented by collection of principal and interest on loans, the routine maturities and pay downs of securities from our investment securities portfolio, the stability of our core deposits, and the ability to sell investment securities. Primary uses of funds include origination and purchases of loans, withdrawals of and interest payments on deposits, purchases of investment securities, and payment of operating expenses.
Previous wording
We had liquid assets (cash and due from banks, interest-earning deposits in other banks, Federal funds sold, equity securities, and available-for-sale securities) totaling $657,573,000 or 27.02% of total assets at December 31, 2023 and $686,553,000 or 28.34% of total assets as of December 31, 2022.
Current wording
We had liquid assets (cash and due from banks, interest-earning deposits in other banks, Federal funds sold, equity securities, and available-for-sale securities) totaling $604,097,000 or 17.15% of total assets at December 31, 2024 and $657,573,000 or 27.02% of total assets as of December 31, 2023.
Previous wording
Net income was $25,536,000 in 2023 compared to $26,645,000 and $28,401,000 in 2022 and 2021, respectively. Basic earnings per share was $2.17, $2.27, and $2.32 for 2023, 2022, and 2021, respectively. Diluted earnings per share was $2.17, $2.27, and $2.31 for 2023, 2022, and 2021, respectively. ROE was 13.81% for 2023 compared to 14.25% for 2022 and 11.50% for 2021. ROA for 2023 was 1.04% compared to 1.09% for 2022 and 1.25% for 2021.
Current wording
Net income was $7,666,000 in 2024 compared to $25,536,000 and $26,645,000 in 2023 and 2022, respectively. Basic earnings per share was $0.45, $2.17, and $2.27 for 2024, 2023, and 2022, respectively. Diluted earnings per share was $0.45, $2.17, and $2.27 for 2024, 2023, and 2022, respectively. ROE was 2.42% for 2024 compared to 13.81% for 2023 and 14.25% for 2022. ROA for 2024 was 0.24% compared to 1.04% for 2023 and 1.09% for 2022.
Previous wording
Net income for the year ended December 31, 2023 decreased $1,109,000 compared to 2022 and decreased $1,756,000 in 2022 compared to 2021. Contributing to the decrease during 2023, compared to 2022, was an increase in salary and employee benefits and non-interest expenses primarily attributed to increases in professional services. During 2022, net income compared to 2021 was primarily impacted by a provision for credit losses of $995,000 in 2022, compared to a credit to credit losses of $4,435,000 in 2021.
Current wording
Net income for the year ended December 31, 2024 decreased $17,870,000 compared to 2023 and decreased $1,109,000 in 2023 compared to 2022. Contributing to the decrease during 2024, compared to 2023, were merger related expenses, including a one-time provision for the expected credit losses of the acquired portfolio of $10,877,000. During 2023, net income compared to 2022 was primarily impacted by higher non-interest expenses, including $1,191,000 of merger related expenses.
Previous wording
(1)Interest income is calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $1,489, $1,775, and $1,490 in 2023, 2022, and 2021, respectively.
Current wording
(1)Interest income is calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $1,457, $1,489, and $1,775 in 2024, 2023, and 2022, respectively.
Previous wording
(2)Loan interest income includes loan (costs)fees of $(11) in 2023, $274 in 2022, and $6,474 in 2021.
Current wording
(2)Loan interest income includes loan (costs)fees of $(622) in 2024, $(11) in 2023, and $274 in 2022.
Previous wording
Interest and fee income from loans increased $13,896,000 or 24.86% in 2023 compared to 2022. Interest and fee income from loans increased $1,830,000 or 3.38% in 2022 compared to 2021. The increase in 2023 is attributable to rate increases and an increase in average total loans outstanding.
Current wording
Interest and fee income from loans increased $60,363,000 or 86.48% in 2024 compared to 2023. Interest and fee income from loans increased $13,896,000 or 24.86% in 2023 compared to 2022. The increase in 2024 is attributable to rate increases and an increase of $717,581,000 in average total loans outstanding.
Previous wording
Average total loans, including nonaccrual loans, for 2023 increased $129,307,000 to $1,263,226,000 compared to $1,133,919,000 for 2022 and $1,069,653,000 for 2021. The yield on loans for 2023 was 5.53% compared to 4.93% and 5.07% for 2022 and 2021, respectively. The impact to interest income from the accretion of the loan marks on acquired loans was a decrease to $325,000 from $521,000 for the years ended December 31, 2023 and 2022, respectively.
Current wording
Average total loans, including nonaccrual loans, for 2024 increased $717,581,000 to $1,980,807,000 compared to $1,263,226,000 for 2023 and $1,133,919,000 for 2022. The yield on loans for 2024 was 6.58% compared to 5.53% and 4.93% for 2023 and 2022, respectively. The impact to interest income from the accretion of the loan marks on acquired loans was an increase to $9,849,000 from $325,000 for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Interest income from total investment securities increased $2,063,000 in the year ended December 31, 2023 to $30,528,000 compared to $28,465,000 for 2022 and $21,140,000 for 2021. The yield on average total investment securities increased 49 basis points to 3.00% for the year ended December 31, 2023 compared to 2.51% for 2022 and 2.31% for 2021. Average total book value of investment securities for the year ended December 31, 2023 decreased $115,757,000 or 10.23% to $1,016,336,000 compared to $1,132,093,000 for 2022 and $916,963,000 for 2021.
Current wording
Interest income from total investment securities decreased $3,204,000 in the twelve months ended December 31, 2024 to $27,324,000 compared to $30,528,000 for 2022 and $28,465,000 for 2022. The yield on average total investment securities decreased one basis point to 2.99% for the twelve months ended December 31, 2024 compared to 3.00% for 2023 and 2.51% for 2022. Average total amortized cost of investment securities for the twelve months ended December 31, 2024 decreased $103,522,000 or 10.19% to $912,814,000 compared to $1,016,336,000 for 2023 and $1,132,093,000 for 2022.
Previous wording
Our investment portfolio primarily consists of securities issued by U.S. Government sponsored entities and agencies collateralized by mortgage backed obligations and obligations of states and political subdivision securities. However, a significant portion of the investment portfolio is mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs). At December 31, 2023, we held $407,925,000 or 45.34% of the total market value of the investment portfolio in MBS and CMOs with an average yield of 3.14%. We invested in CMOs and MBS as part of our overall strategy to increase our net interest margin. CMOs and MBS by their nature are affected by prepayments which are impacted by changes in interest rates. In a normal declining rate environment, prepayments from MBS and CMOs would be expected to increase and the expected life of the investment would be expected to shorten. However, as interest rates have increased, prepayments have declined and the average life of the MBS and CMOs have extended. Premium amortization and discount accretion of these investments affects our net interest income. Management monitors the prepayment trends of these investments and adjusts premium amortization and discount accretion based on several factors. These factors include the type of investment, the investment structure, interest rates, interest rates on new mortgage loans, expectation of interest rate changes, current economic conditions, the level of principal remaining on the bond, the bond coupon rate, the bond origination date, and volume of available bonds in market. The calculation of premium amortization and discount accretion is by its nature inexact, and represents management’s best estimate of principal pay downs inherent in the total investment portfolio.
Current wording
A significant portion of the investment portfolio is mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs). At December 31, 2024, we held $302,857,000 or 38.90% of the total market value of the investment portfolio in MBS and CMOs with an average book yield of 2.94%. We invested in CMOs and MBS as part of our overall strategy to increase our net interest margin. CMOs and MBS by their nature are affected by prepayments which are impacted by changes in interest rates. In a normal declining rate environment, prepayments from MBS and CMOs would be expected to increase and the expected life of the investment would be expected to shorten. However, as interest rates have increased, prepayments have declined and the average life of the MBS and CMOs have extended. Premium amortization and discount accretion of these investments affects our net interest income. Management monitors the prepayment trends of these investments and adjusts premium amortization and discount accretion based on several factors. These factors include the type of investment, the investment structure, interest rates, interest rates on new mortgage loans, expectation of interest rate changes, current economic conditions, the level of principal remaining on the bond, the bond coupon rate, the bond origination date, and volume of available bonds in market. The calculation of premium amortization and discount accretion is by its nature inexact, and represents management’s best estimate of principal pay downs inherent in the total investment portfolio.
Previous wording
The cumulative net-of-tax effect of the change in market value of the available-for-sale investment portfolio as of December 31, 2023 was an unrealized loss of $66,034,000 and is reflected in the Company’s equity. At December 31, 2023, the effective duration of the available-for-sale investment portfolio was 4.56 years and the market value reflected a pre-tax unrealized loss of $72,450,000. Management reviews market value declines on individual investment securities to determine whether there is a need to record impairment. For the years ended December 31, 2023, 2022, and 2021, no impaired was recorded. Future deterioration in the market values of our investment securities may require the Company to recognize unrealized losses.
Current wording
The cumulative net-of-tax effect of the change in market value of the available-for-sale investment portfolio as of December 31, 2024 was an unrealized loss of $55,115,000 and is reflected in the Company’s equity. At December 31, 2024, the effective duration of the available-for-sale investment portfolio was 4.02 years and the market value reflected a pre-tax unrealized loss of $59,221,000. Management reviews market value declines on individual investment securities to determine whether there is a need to record impairment. For the years ended December 31, 2024, 2023, and 2022, no impairment was recorded. Future deterioration in the market values of our investment securities may require the Company to recognize unrealized losses.
Previous wording
Total interest income in 2023 increased $19,430,000 to $102,418,000 compared to $82,988,000 in 2022 and $73,856,000 in 2021, respectively. The increase in 2023 was the result of yield changes and asset mix changes. The tax-equivalent yield on interest earning assets increased to 4.43% for the year ended December 31, 2023 from 3.66% for the year ended December 31, 2022. Average interest earning assets increased to $2,347,311,000 for the year ended December 31, 2023 compared to $2,313,766,000 for the year ended December 31, 2022. Average interest-earning deposits in other banks increased $19,717,000 in 2023 compared to 2022. Average yield on these deposits was 5.28% compared to 0.81% on December 31, 2023 and December 31, 2022 respectively. Average investments and interest-earning deposits decreased $96,040,000 and the tax equivalent yield on those assets increased 70 basis points. Average total loans increased $129,307,000 while the yield on average loans increased 60 basis points.
Current wording
Total interest income in 2024 increased $57,970,000 to $160,388,000 compared to $102,418,000 in 2023 and $82,988,000 in 2022, respectively. The increase in 2024 was the result of the merger, yield changes and asset mix changes. The tax-equivalent yield on interest earning assets increased to 5.44% for the year ended December 31, 2024 from 4.43% for the year ended December 31, 2023. Average interest earning assets increased to $2,974,451,000 for the year ended December 31, 2024 compared to $2,347,311,000 for the year ended December 31, 2023. Average interest-earning deposits in other banks increased $15,502,000 in 2024 compared to 2023. Average yield on these deposits was 5.23% compared to 5.28% on December 31, 2024 and December 31, 2023 respectively. Average investments and interest-earning deposits decreased $88,020,000 and the tax equivalent yield on those assets increased three basis points. Average total loans increased $717,581,000 while the yield on average loans increased 105 basis points.
Previous wording
Interest expense on deposits in 2023 increased $14,330,000 or 1,197.16% to $15,527,000 compared to $1,197,000 in 2022 and increased $14,491,000 as compared to 2021. The yield on interest-bearing deposits increased to 1.33% for the year ended December 31, 2023, compared to 0.10% for the year ended December 31, 2022. The yield on interest-bearing deposits was unchanged at 0.10% when comparing 2022 to 2021. Average interest-bearing deposits were $1,167,335,000 for 2023 compared to $1,149,581,000 and $1,074,493,000 for 2022 and 2021, respectively.
Current wording
Interest expense on deposits in 2024 increased $25,139,000 or 161.91% to $40,666,000 compared to $15,527,000 in 2023 and increased $39,469,000 as compared to 2022. The yield on interest-bearing deposits increased to 2.49% for the year ended December 31, 2024, compared to 1.33% for the year ended December 31, 2023. The yield on interest-bearing deposits increased 123 basis points from 0.10% when comparing 2023 to 2022. Average interest-bearing deposits were $1,630,317,000 for 2024 compared to $1,167,335,000 and $1,149,581,000 for 2023 and 2022, respectively.
Previous wording
Average other borrowings were $86,250,000 with an effective rate of 5.17% for 2023 compared to $63,752,000 with an effective rate of 3.49% for 2022. Included in other borrowings are the junior subordinated debentures acquired from Service 1 st, subordinated debt, senior debt, advances on lines of credit, advances from the Federal Reserve’s Bank Term Funding Program (BTFP), advances from the Federal Home Loan Bank (FHLB), and overnight borrowings. The junior subordinated debentures carry a floating rate based on the three month SOFR plus a margin of 1.60%. The rate was 7.26% for 2023 and 5.68% for 2022. The subordinated debt, issued in 2021, bears a fixed interest rate of 3.125% per year. The senior debt has an interest rate cap of 6.75% which was reached in 2022. At December 31, 2023 the interest rate on the BTFP advance was 4.81%. The interest rate on FHLB advances outstanding as of December 31, 2023 was 5.70%.
Current wording
Average other borrowings were $178,627,000 with an effective rate of 5.24% for 2024 compared to $86,250,000 with an effective rate of 5.17% for 2023. Included in other borrowings are the junior subordinated debentures acquired from Service 1 st Bancorp (“Service 1 st”), subordinated debt, senior debt, advances on lines of credit, advances from the Federal Home Loan Bank (FHLB), and overnight borrowings. The junior subordinated debentures carry a floating rate based on the three month SOFR plus a margin of 1.60%. The rate was 6.52% for 2024 and 7.26% for 2023. The subordinated debt, issued in 2021, bears a fixed interest rate of 3.130% per year. The senior debt has an interest rate cap of 6.75% which was reached in 2022. The FHLB long-term advances were recorded at fair value as of April 1, 2024 and included a discount of $4.4 million that is being amortized over the remaining life of the advances, which mature in April and June 2025. Additionally, there was one short-term FHLB advance outstanding as of December 31, 2024 with an interest rate of 4.52%.
Previous wording
The cost of all interest-bearing liabilities was 1.59% for 2023, compared to 0.28% and 0.12% for 2022 and 2021, respectively. The cost of total deposits was 0.72% for the year ended December 31, 2023, compared to 0.06% and 0.05% for the years ended December 31, 2022 and 2021, respectively. Average demand deposits decreased 1.85% to $987,906,000 in 2023 compared to $1,006,511,000 for 2022 and $900,083,000 for 2021. The ratio of average non-interest demand deposits to average total deposits decreased to 45.84% for 2023 compared to 46.68% and 45.58% for 2022 and 2021, respectively.
Current wording
The cost of all interest-bearing liabilities was 2.76% for 2024, compared to 1.59% and 0.28% for 2023 and 2022, respectively. The cost of total deposits was 1.53% for the year ended December 31, 2024, compared to 0.72% and 0.06% for the years ended December 31, 2023 and 2022, respectively. Average non-interest bearing demand deposits increased $37,705,000 to $1,025,611,000 in 2024 compared to $987,906,000 for 2023 and $1,006,511,000 for 2022. The ratio of average non-interest demand deposits to average total deposits decreased to 38.62% for 2024 compared to 45.84% and 46.68% for 2023 and 2022, respectively.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Return on Average Assets and Net Interest Margin
Current report — wording carried from elsewhere
Madera, San Joaquin, and Tulare counties was 4.10% in 2024 compared to 4.15% in 2023. Our total market share of deposits in San Luis Obispo, Santa Barbara, and Ventura counties was 1.61% in 2024. Our total market share of deposits in Merced County was 1.66% as of June 2024. Our total market share in the other counties as of June 2024 and 2023 we operate in (Kern, Placer, Sacramento, and Stanislaus) was less than 1.00%.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We believe that our commercial real estate loan underwriting policies and practices result in prudent extensions of credit, but recognize that our lending activities result in relatively high reported commercial real estate lending levels. Commercial real estate loans include certain loans which represent low to moderate risk and certain loans with higher risks.