Community West Bank(CWBC) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides the unaudited consolidated financial information, including statements, notes, and management's discussion and analysis Item 1 – Financial Statements This section presents unaudited consolidated financial statements, notes on accounting policies, and key financial highlights Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, at specific dates | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $130,555 | $64,690 | | Investment securities - AFS | $14,766 | $26,688 | | Total assets | $1,131,430 | $1,091,502 | | Total deposits | $911,724 | $875,084 | | Total liabilities | $1,017,489 | $978,852 | | Total stockholders' equity | $113,941 | $112,650 | Consolidated Income Statements Details the company's revenues, expenses, and net income over specific reporting periods | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income | $2,121 | $2,635 | $4,585 | $6,595 | | Basic earnings per share | $0.24 | $0.30 | $0.52 | $0.76 | | Diluted earnings per share | $0.24 | $0.30 | $0.51 | $0.74 | | Total interest and dividend income | $14,715 | $11,706 | $28,300 | $23,206 | | Total interest expense | $3,998 | $696 | $6,553 | $1,460 | | Net interest income | $10,717 | $11,010 | $21,747 | $21,746 | Consolidated Statements of Comprehensive Income Reports net income and other comprehensive income items, reflecting total non-owner changes in equity | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income | $2,121 | $2,635 | $4,585 | $6,595 | | Unrealized loss on AFS securities, net | $(427) | $(289) | $(909) | $(539) | | Comprehensive income | $1,694 | $2,346 | $3,676 | $6,056 | Consolidated Statements of Stockholders' Equity Shows changes in equity accounts, including net income, dividends, and other comprehensive income | Metric | January 1, 2023 (in thousands) | June 30, 2023 (in thousands) | | :----------------------------------- | :----------------------------- | :--------------------------- | | Balance, January 1, 2023 | $112,650 | N/A | | Cumulative effect of ASC 326 adoption | $(1,573) | N/A | | Net income | N/A | $4,585 | | Dividends on common stock | N/A | $(1,411) | | Other comprehensive loss, net | N/A | $(909) | | Balance, June 30, 2023 | N/A | $113,941 | Consolidated Statements of Cash Flows Reports cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $20,824 | $8,422 | | Net cash provided by (used in) investing activities | $9,533 | $(58,621) | | Net cash provided by (used in) financing activities | $35,508 | $(55,900) | | Net increase (decrease) in cash and cash equivalents | $65,865 | $(106,099) | | Cash and cash equivalents at end of period | $130,555 | $102,276 | Notes to Unaudited Consolidated Financial Statements Provides detailed explanations of accounting policies, estimates, and financial statement line items 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Outlines the key accounting principles and methods used in preparing the financial statements - The Company adopted ASC 326 (CECL) on January 1, 2023, resulting in a net decrease of $1.6 million to retained earnings for the cumulative effect adjustment[84][106] - The CECL model applies to credit losses on financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and off-balance sheet credit exposures[82] - For available-for-sale securities, unrealized losses deemed non-credit related are recorded, net of tax, through accumulated other comprehensive income[33] 2. INVESTMENT SECURITIES Details the composition, fair value, and credit quality of the company's investment portfolio | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Total investment securities | $17,241 | $29,470 | | Securities available-for-sale | $14,766 | $26,688 | | Securities held-to-maturity | $2,188 | $2,557 | - Unrealized losses on available-for-sale and held-to-maturity securities were determined to be non-credit related, primarily due to changes in interest rates and market conditions[60][108][137] - No allowance for credit losses was recorded for investment securities as of June 30, 2023[137] 3. LOANS HELD FOR SALE AND LOANS SERVICED FOR OTHERS Provides information on loans intended for sale and those managed on behalf of other entities | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Loans held for sale | $19,126 | $21,033 | | SBA loans held for sale | $4,800 | $5,200 | | USDA loans held for sale | $14,400 | $15,900 | | Total loans serviced for others | $161,288 | $158,183 | 4. LOANS HELD FOR INVESTMENT Details the portfolio of loans retained by the company for long-term investment purposes | Loan Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Gross loans held for investment | $938,025 | $935,123 | | Manufactured housing | $321,127 | $315,825 | | Commercial real estate | $559,677 | $545,317 | | Total past due loans | $4,314 | $2,880 | - Loan modifications for borrowers experiencing financial difficulty during the six months ended June 30, 2023, totaled $3,651 thousand, primarily consisting of term extensions[213] 5. OTHER ASSETS ACQUIRED THROUGH FORECLOSURE Reports assets obtained through foreclosure, including their carrying value and disposition activities | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Balance, beginning of period | $2,250 | $2,518 | | Proceeds from dispositions | $(2,505) | $(372) | | Gain on sales, net | $255 | $104 | | Balance, end of period | $65 | $2,250 | 6. FAIR VALUE MEASUREMENT Explains the methodologies and hierarchy used to determine the fair value of financial instruments - The Company uses a three-level valuation hierarchy for fair value measurements: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[216][217] - Investment securities available-for-sale are classified as Level 2, while servicing assets and interest-only strips are classified as Level 3 due to significant unobservable inputs[207][222][247] - Other assets acquired through foreclosure are measured on a non-recurring basis, classified as Level 2 or Level 3 depending on the availability of current appraised values[250] 7. BORROWINGS Details the company's debt obligations, including FHLB advances and other credit facilities | Borrowing Source | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | FHLB advances | $90,000 | $90,000 | - FHLB advances are collateralized by eligible loans and securities, with $9.8 million of securities and $360.2 million of loans pledged at June 30, 2023[181][370] - Available FHLB borrowing capacity was $77.4 million and FRB borrowing capacity was $94.7 million as of June 30, 2023[181][229][370][371] - The Company borrowed and subsequently repaid $10.0 million from its revolving line of credit during the first and second quarters of 2023[188][372] 8. STOCKHOLDERS' EQUITY Outlines the components of equity, including retained earnings and accumulated other comprehensive loss | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Total stockholders' equity | $113,941 | $112,650 | | Retained earnings | $69,328 | $67,727 | | Accumulated other comprehensive loss, net | $(1,680) | $(771) | - The cumulative effect of ASC 326 adoption resulted in a $1.6 million decrease to retained earnings as of January 1, 2023[168] - Dividends declared per common share for the six months ended June 30, 2023, were $0.160, up from $0.145 in the prior year[165] 9. CAPITAL REQUIREMENTS Presents the company's regulatory capital ratios and compliance with well-capitalized requirements | Capital Ratio | June 30, 2023 | December 31, 2022 | Well-Capitalized Requirement | | :----------------------------------- | :------------ | :---------------- | :--------------------------- | | Total Capital (to Risk-Weighted Assets) | 13.09% | 12.56% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 11.91% | 11.44% | 8.00% | | Common Equity Tier 1 (to Risk-Weighted Assets) | 11.91% | 11.44% | 6.50% | | Leverage Ratio/Tier 1 Capital (to Average Assets) | 10.38% | 10.34% | 5.00% | - The Company elected to phase in the full effect of CECL on regulatory capital over a three-year transition period, starting Q1 2023[257][353] 10. REVENUE RECOGNITION Describes the company's policies for recognizing revenue from various sources, including service charges - The majority of the Company's revenue is from sources outside the scope of ASC 606[183] - Revenue from service charges and fees and interchange fees on credit and debit cards are within the scope of ASC 606 and are recognized when services are rendered or upon completion[183][258][259] | Non-Interest Income Category | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | In-scope of Topic 606 | $509 | $388 | | Out-of-scope of Topic 606 | $1,399 | $1,954 | 11. LEASES Provides details on the company's lease agreements, including right-of-use assets and lease liabilities | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Right-of-use assets | $4,800 | $5,200 | | Lease liabilities | $4,800 | $5,300 | | Year | Total Future Minimum Lease Payments (in thousands) | | :----------------------------------- | :----------------------------------------------- | | 2023 | $508 | | 2024 | $1,026 | | 2025 | $976 | | 2026 | $876 | | 2027 | $473 | | Thereafter | $1,538 | | Total | $5,397 | - The weighted average remaining lease term for operating leases was 6.67 years as of June 30, 2023[283] 12. SUBSEQUENT EVENTS Reports significant events that occurred after the balance sheet date but before the financial statements were issued - On July 28, 2023, the Board of Directors declared a quarterly cash dividend of $0.08 per common share, payable on August 31, 2023[284][349] Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, liquidity, capital, and market risks, highlighting key performance Forward Looking Statements Highlights that the report contains statements about future events that involve risks and uncertainties - The report contains forward-looking statements that are not guarantees of future performance and involve significant risks, contingencies, and uncertainties[242] - Key risks include general economic conditions, liquidity, interest rate policies, inflation, natural disasters, and regulatory changes[243][286] - The Company disclaims any obligation to update or alter such forward-looking statements, except as required by law[287] Financial Overview and Highlights Summarizes key financial performance metrics and significant changes in the company's financial position | Metric | Q2 2023 | Q2 2022 | | :----------------------------------- | :------ | :------ | | Net income | $2.1M | $2.6M | | Diluted EPS | $0.24 | $0.30 | | Net interest income | $10.7M | $11.0M | | Net interest margin | 3.99% | 4.01% | | Return on average assets | 0.77% | 0.93% | | Return on average stockholders' equity | 7.47% | 9.92% | - Cash and cash equivalents increased by $65.9 million to $130.6 million at June 30, 2023, reflecting management's efforts to increase on-balance sheet liquidity[288] - Nonaccrual loans increased to $1.7 million at June 30, 2023, from $211 thousand at December 31, 2022[288] Critical Accounting Estimates Discusses accounting estimates requiring significant judgment, such as the allowance for credit losses - Management's financial reporting relies on significant judgments, assumptions, and estimates, particularly for the allowance for credit losses (ACL) and the fair value of securities available-for-sale[192][269] - Changes in these estimates and assumptions could result in adjustments to the ACL in future periods and impact reported financial performance[269] Results of Operations Analyzes the company's financial performance, including interest income, expenses, and net income trends Comparison of interest income, interest expense, and net interest margin Compares interest income, interest expense, and net interest margin across different reporting periods | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Total interest income | $14,715 | $11,706 | $28,300 | $23,206 | | Total interest expense | $3,998 | $696 | $6,553 | $1,460 | | Net interest income | $10,717 | $11,010 | $21,747 | $21,746 | | Net interest margin | 3.99% | 4.01% | 4.12% | 3.93% | - Interest income increased due to higher rates earned on interest-earning assets and an increase in average outstanding loan balances[297] - Interest expense significantly increased, primarily due to higher rates paid on deposit accounts (cost of interest-bearing deposits rose from 0.29% to 2.21% YoY in Q2) and other borrowings[275][276] Provision for credit losses Discusses the provision for credit losses, reflecting changes in the allowance for loan losses | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Provision (credit) for credit losses | $12 | $252 | $(710) | $(32) | | Net loan recoveries | $98 | $67 | $194 | $494 | - The provision for credit losses for the six months ended June 30, 2023, included a credit for loan losses of $(622) thousand and a provision for off-balance sheet commitments of $(88) thousand[278] Non-Interest Income Analyzes revenue generated from sources other than interest, such as service charges and gains on sales | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Total non-interest income | $1,146 | $1,051 | $1,908 | $2,342 | | Gains from loan sales, net | $56 | $136 | $86 | $196 | | Other non-interest income | $535 | $323 | $866 | $1,119 | - The increase in Q2 2023 non-interest income was primarily due to a $255 thousand gain on the sale of other assets acquired through foreclosure[279] - The decrease in YTD 2023 non-interest income was mainly due to a $0.5 million non-taxable gain from a bank-owned life insurance policy in the prior year and lower Farmer Mac loan origination fees and loan sale volumes[322] Non-Interest Expenses Examines operating expenses not directly related to interest, including salaries and professional services | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Total non-interest expenses | $8,854 | $8,112 | $17,688 | $15,083 | | Salaries and employee benefits | $5,302 | $4,981 | $10,750 | $9,919 | | Professional services | $851 | $635 | $1,770 | $1,034 | - Increases in salaries and employee benefits were due to merit increases and wage competition[303] - Professional services expenses rose due to increased accounting and consulting costs related to internal control testing and strategic/technology initiatives[303] Income Taxes Reports the company's income tax provision and effective tax rates for the reporting periods | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision (in thousands) | $876 | $1,062 | $2,092 | $2,442 | | Effective income tax rate | 29.2% | 28.7% | 31.3% | 27.0% | - The lower effective tax rate for the year-to-date period in 2022 was due to non-taxable income from a bank-owned life insurance policy[325] - There was no valuation allowance on deferred tax assets at June 30, 2023, or December 31, 2022[326] Balance Sheet Analysis Analyzes significant changes in balance sheet accounts, including assets, liabilities, and equity Selected Balance Sheet Accounts Provides a detailed comparison of key balance sheet accounts and their period-over-period changes | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Increase (Decrease) (in thousands) | Percent Increase (Decrease) | | :----------------------------------- | :----------------------------- | :------------------------------- | :--------------------------------- | :-------------------------- | | Cash and cash equivalents | $130,555 | $64,690 | $65,865 | 101.8% | | Investment securities available-for-sale | $14,766 | $26,688 | $(11,922) | (44.7)% | | Loans held for investment, net | $924,976 | $923,544 | $1,432 | 0.2% | | Total assets | $1,131,430 | $1,091,502 | $39,928 | 3.7% | | Total deposits | $911,724 | $875,084 | $36,640 | 4.2% | - The increase in cash and cash equivalents was part of management's plans to solidify the Company's on-balance sheet liquidity position[328] Loans Held for Sale Details the composition and changes in loans designated for sale, including government-guaranteed portions | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Loans held for sale | $19,126 | $21,033 | | SBA loans held for sale | $4,800 | $5,200 | | Commercial agriculture FSA guaranteed loans | $14,400 | $15,900 | Loans Held for Investment Provides a breakdown of the loan portfolio held for investment by type and changes over time | Loan Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Gross loans held for investment | $938,025 | $935,123 | | Manufactured housing | $321,127 | $315,825 | | Commercial real estate | $559,677 | $545,317 | Concentrations of Lending Activities Identifies the geographic and industry concentrations within the company's loan portfolio - The Company's lending activities are concentrated in the Central Coast of California[309] - Manufactured housing loans comprised 34.2% of gross loans held for investment at June 30, 2023[309] - Commercial real estate loans accounted for approximately 59.7% of gross loans held for investment at June 30, 2023[309] Asset Quality Assesses the quality of the loan portfolio, including nonaccrual loans and past due balances | Metric | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :---------------- | | Nonaccrual loans (net of government guaranteed portions) | $974k | $211k | | Nonaccrual loans (net of government guaranteed portions) to gross loans | 0.10% | 0.02% | | Allowance for credit losses to nonaccrual loans (net of government guaranteed portion) | 1,247% | 5,102% | | Total past due loans | $4,314k | $2,880k | - Nonaccrual loans increased by $1.5 million from December 31, 2022, to June 30, 2023, including $735 thousand of commercial loans guaranteed by a U.S. government agency[314] Collateral Dependent Loans Discusses loans for which repayment is expected primarily from the sale or operation of collateral - Collateral dependent loans are individually evaluated for an Allowance for Credit Losses (ACL) based on the estimated fair value of the underlying collateral, less estimated costs to sell[316] | Collateral Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Manufactured Homes | $1,141 | $574 | | Single Family Residence | $144 | $150 | | Land | $82 | $0 | | Machinery & Equipment | $1,205 | $1,297 | | Total | $2,572 | $2,021 | - There was no associated allowance for credit losses for collateral dependent loans as of June 30, 2023, or December 31, 2022[152] Allowance For Credit Losses Explains the methodology and changes in the allowance for credit losses on loans and off-balance sheet exposures - The Allowance for Credit Losses (ACL) on loans increased by $1.4 million from $10.8 million at December 31, 2022, to $12.1 million at June 30, 2023[122][360] - The adoption of ASC 326 on January 1, 2023, resulted in a $1.8 million increase directly to retained earnings (net of tax)[122][360] - The increase in ACL during Q2 2023 was primarily due to a $107 thousand increase in qualitative factors related to substandard loans, partially offset by a decrease in factors related to the California drought and historical losses[145][315][342] Investment Securities Analyzes the company's investment securities portfolio, including available-for-sale and held-to-maturity | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Total investment securities | $17,241 | $29,470 | | Securities available-for-sale | $14,766 | $26,688 | | Securities held-to-maturity | $2,188 | $2,557 | - No credit impairment was recorded for any investment securities for the three or six months ended June 30, 2023[364] Other Assets Acquired Through Foreclosure Discusses the balance and disposition of assets obtained through foreclosure, and related gains or losses | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Balance, end of period | $65 | $2,250 | - Other assets acquired through foreclosure decreased significantly due to dispositions, resulting in a net gain on sales of $255 thousand for the six months ended June 30, 2023[319] - These assets are reported at fair value at the time of foreclosure less estimated costs to sell, with no valuation allowances against them[345] Deposits Analyzes the composition and changes in the company's deposit base, including interest-bearing and noninterest-bearing accounts | Deposit Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Increase (Decrease) (in thousands) | Percent Increase (Decrease) | | :----------------------------------- | :----------------------------- | :------------------------------- | :--------------------------------- | :-------------------------- | | Total deposits | $911,724 | $875,084 | $36,640 | 4.2% | | Noninterest-bearing demand deposits | $195,612 | $216,494 | $(20,882) | (9.6)% | | Interest-bearing demand deposits | $460,597 | $428,173 | $32,424 | 7.6% | | Certificates of deposit | $237,000 | $206,927 | $30,073 | 14.5% | - The increase in total deposits was primarily driven by a rise in interest-bearing demand deposits and certificates of deposit, including a $75.0 million increase in brokered deposits[346] - CDARS and ICS deposits, providing FDIC insurance for large deposits, increased to $177.8 million at June 30, 2023, from $120.3 million at December 31, 2022[367] Liquidity and Capital Resources Evaluates the company's ability to meet financial obligations and maintain adequate capital levels Liquidity Assesses the company's short-term cash flow management and access to funding sources - The Company's liquidity ratio increased to 14.5% at June 30, 2023, from 10.4% at December 31, 2022[374] - Available borrowing capacity from FHLB was $77.4 million and from FRB was $94.7 million as of June 30, 2023[370][371] - The Company utilized and repaid a $10.0 million revolving line of credit during the first and second quarters of 2023[372] Capital Resources Details the company's capital structure, regulatory capital ratios, and compliance status | Capital Ratio | June 30, 2023 | December 31, 2022 | Well-Capitalized Requirement | | :----------------------------------- | :------------ | :---------------- | :--------------------------- | | Total Capital (to Risk-Weighted Assets) | 13.09% | 12.56% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 11.91% | 11.44% | 8.00% | | Common Equity Tier 1 (to Risk-Weighted Assets) | 11.91% | 11.44% | 6.50% | | Leverage Ratio/Tier 1 Capital (to Average Assets) | 10.38% | 10.34% | 5.00% | - The Company elected to phase in the $1.6 million reduction to stockholders' equity from the adoption of CECL over a three-year period for regulatory capital purposes[353] - The Company has 60,000,000 total shares of common stock authorized, with 8,849,112 shares issued at June 30, 2023[377] Supervision and Regulation Describes the regulatory environment and oversight bodies governing the company's banking operations - The Company operates in a complex, highly regulated banking industry, subject to various federal and state laws and regulatory agencies (e.g., Federal Reserve System, OCC, FDIC)[354][393] - Regulatory changes can significantly affect the Company's business and earnings by increasing costs, limiting activities, or changing the competitive landscape[381] Item 3 – Quantitative and Qualitative Disclosures About Market Risk This section refers to the Company's Annual Report on Form 10-K for detailed market risk disclosures, stating that there have been no material changes since the previous report - There has been no material change in market risk disclosures as previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[382] Item 4 – Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023. Furthermore, no material changes in internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were effective as of the end of the period covered by this report (June 30, 2023)[176] - No change in internal control over financial reporting occurred during the quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting[396] Part II. Other Information This section provides additional information not covered in the financial statements, including legal, risk, and equity matters Item 1 – Legal Proceedings The Company is involved in various routine litigation matters, but management, in consultation with legal counsel, does not expect their resolution to have a material impact on the Company's financial position or results of operations - The resolution of routine litigation matters is not expected to have a material impact on the Company's financial position or results of operations[177] Item 1A – Risk Factors This section refers to the Company's Annual Report on Form 10-K for a comprehensive discussion of risk factors, indicating that there has been no material change in these factors since the previous report - There has been no material change in the Company's risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[397] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds The Company reported no unregistered sales of equity securities or use of proceeds for the period - None[178] Item 3 – Defaults Upon Senior Securities The Company reported no defaults upon senior securities for the period - None[178] Item 4 – Mine Safety Disclosures This item is not applicable to the Company's operations - Not applicable[178] Item 5 – Other Information The Company reported no other information for the period - None[178] Item 6 – Exhibits This section lists the exhibits filed with the quarterly report, including certifications from the Chief Executive Officer and Chief Financial Officer, and various Inline XBRL documents - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1)[179] - Various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are filed[179] Signatures The report is duly signed on behalf of the registrant by the Executive Vice President and Chief Financial Officer - The report is signed by Richard Pimentel, Executive Vice President and Chief Financial Officer, on behalf of Community West Bancshares[180]