10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2018 or

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

For the transition period from _________ to _________

Commission File Number:  000-23575

COMMUNITY WEST BANCSHARES

(Exact name of registrant as specified in its charter)

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

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

(805) 692-5821

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒YES ☐NO

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

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒
Emerging growth company ☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock of the registrant issued and outstanding of 8,279,882 as of October 26, 2018.

Table of Contents

Index			Page
Part I.  Financial Information
	Item 1 – Financial Statements
		Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017	3
		Consolidated Income Statements for the three and nine months ended September 30, 2018 and 2017 (unaudited)	4
		Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (unaudited)	5
		Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2018 (unaudited)	6
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)	7
		Notes to Unaudited Consolidated Financial Statements	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, 2017.
	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
	Item 3 – Quantitative and Qualitative Disclosures About Market Risk		53
	Item 4 – Controls and Procedures		53
Part II. Other Information
	Item 1 – Legal Proceedings		54
	Item 1A – Risk Factors		54
	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		54
	Item 3 – Defaults Upon Senior Securities		54
	Item 4 – Mine Safety Disclosures		54
	Item 5 – Other Information		54
	Item 6 – Exhibits		55
Signatures			56

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

COMMUNITY WEST BANCSHARES

CONSOLIDATED BALANCE SHEETS

	September 30, 2018			December 31, 2017
	(unaudited)
	(in thousands, except share amounts)
Assets:
Cash and due from banks	$	2,308		$	3,639
Federal funds sold		9			12
Interest-earning demand in other financial institutions		45,436			42,218
Cash and cash equivalents		47,753			45,869
Investment securities - available-for-sale, at fair value; amortized cost of $26,058 at September 30, 2018 and $28,742 at December 31, 2017		25,802			28,783
Investment securities - held-to-maturity, at amortized cost; fair value of $7,395 at September 30, 2018 and $7,671 at December 31, 2017		7,475			7,565
Investment securities - measured at fair value; amortized cost of $66 at September 30, 2018 and December 31, 2017.		144			—
Federal Home Loan Bank stock, at cost		2,714			2,347
Federal Reserve Bank stock, at cost		1,373			1,373
Loans:
Held for sale, at lower of cost or fair value		50,944			55,094
Held for investment, net of allowance for loan losses of $8,519 at September 30, 2018 and $8,420 at December 31, 2017		694,278			671,095
Total loans		745,222			726,189
Other assets acquired through foreclosure, net		-			372
Premises and equipment, net		6,207			5,581
Other assets		18,019			15,236
Total assets	$	854,709		$	833,315
Liabilities:
Deposits:
Non-interest-bearing demand	$	105,580		$	108,500
Interest-bearing demand		267,046			256,717
Savings		14,385			14,085
Certificates of deposit ($250,000 or more)		92,934			81,985
Other certificates of deposit		239,997			238,397
Total deposits		719,942			699,684
Other borrowings		50,000			56,843
Other liabilities		9,210			6,718
Total liabilities		779,152			763,245
Stockholders’ equity:
Common stock — no par value, 60,000,000 shares authorized; 8,274,882 shares issued and outstanding at September 30, 2018 and 8,193,339 at December 31, 2017		43,318			42,604
Retained earnings		32,398			27,441
Accumulated other comprehensive income (loss)		(159	)		25
Total stockholders’ equity		75,557			70,070
Total liabilities and stockholders’ equity	$	854,709		$	833,315

See the accompanying notes.

3

COMMUNITY WEST BANCSHARES

CONSOLIDATED INCOME STATEMENTS (unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017
Interest income:	(in thousands, except per share amounts)
Loans, including fees	$	10,612		$	9,340	$	30,283		$	26,570
Investment securities and other		589			355		1,307			894
Total interest income		11,201			9,695		31,590			27,464
Interest expense:
Deposits		2,222			1,185		5,373			2,984
Other borrowings		351			134		928			294
Total interest expense		2,573			1,319		6,301			3,278
Net interest income		8,628			8,376		25,289			24,186
Provision (credit) for loan losses		(197	)		159		(224	)		423
Net interest income after provision for loan losses		8,825			8,217		25,513			23,763
Non-interest income:
Other loan fees		379			354		998			999
Document processing fees		120			146		367			430
Service charges		113			118		351			326
Other		29			98		252			299
Total non-interest income		641			716		1,968			2,054
Non-interest expenses:
Salaries and employee benefits		4,147			3,839		12,338			11,566
Occupancy, net		778			754		2,303			2,085
Professional services		326			281		931			759
Data processing		201			192		619			525
Depreciation		199			168		552			519
FDIC assessment		169			172		547			461
Advertising and marketing		154			137		487			488
Stock based compensation		81			283		284			454
Other		347			561		1,131			1,460
Total non-interest expenses		6,402			6,387		19,192			18,317
Income before provision for income taxes		3,064			2,546		8,289			7,500
Provision for income taxes		695			992		2,239			3,034
Net income	$	2,369		$	1,554	$	6,050		$	4,466
Earnings per share:
Basic	$	0.29		$	0.19	$	0.73		$	0.55
Diluted	$	0.27		$	0.18	$	0.69		$	0.52
Weighted average number of common shares outstanding:
Basic		8,261			8,165		8,233			8,134
Diluted		8,761			8,598		8,724			8,569
Dividends declared per common share	$	0.050		$	0.040	$	0.140		$	0.115

See the accompanying notes.

4

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Net income	$	2,369		$	1,554		$	6,050		$	4,466
Other comprehensive income, net:
Unrealized income (loss) on securities available-for-sale (AFS), net (tax effect of $34, $11, $82 and ($70) for each respective period presented)		(48	)		(17	)		(125	)		99
Net other comprehensive income (loss)		(48	)		(17	)		(125	)		99
Comprehensive income	$	2,321		$	1,537		$	5,925		$	4,565

See the accompanying notes.

5

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)

	Common Stock				Accumulated Other Comprehensive			Retained			Total Stockholders'
	Shares		Amount		Income (Loss)			Earnings			Equity
	(in thousands)
Balance, December 31, 2017:		8,193	$	42,604	$	25		$	27,441		$	70,070
Net income		—		—		—			6,050			6,050
Exercise of stock options		82		430		—			—			430
Stock based compensation		—		284		—			—			284
Dividends on common stock		—		—		—			(1,152	)		(1,152	)
Other comprehensive income, net		—		—		(125	)		—			(125	)
Impact of ASU 2016-01 and 2018-02 as of January 1, 2018		—		—		(59	)		59			—
Balance, September 30, 2018		8,275	$	43,318	$	(159	)	$	32,398		$	75,557

See the accompanying notes.

6

COMMUNITY WEST BANCSHARES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Nine Months Ended September 30,
	2018			2017
	(in thousands)
Cash flows from operating activities:
Net income	$	6,050		$	4,466
Adjustments to reconcile net income to cash provided by operating activities:
(Credit) provision for loan losses		(224	)		423
Depreciation		552			519
Stock based compensation		284			454
Deferred income taxes		(466	)		(714	)
Net accretion of discounts and premiums for investment securities		70			65
Losses/(Gains) on:
Sale of repossessed assets, net		62			(150	)
Loans originated for sale and principal collections, net		4,150			2,855
Changes in:
Investment securities held at fair value		12			—
Other assets		(2,464	)		(1,222	)
Other liabilities		2,570			2,338
Servicing assets, net		67			54
Net cash provided by operating activities		10,663			9,088
Cash flows from investing activities:
Principal pay downs and maturities of available-for-sale securities		2,646			2,315
Purchase of available-for-sale securities		—			(9,413	)
Purchase of held-to-maturity securities		(794	)		—
Principal pay downs and maturities of held-to-maturity securities		869			796
Loan originations and principal collections, net		(23,132	)		(94,808	)
Purchase of restricted stock, net		(367	)		(277	)
Purchase of premises and equipment, net		(1,178	)		(1,720	)
Proceeds from sale of other real estate owned and repossessed assets, net		484			303
Net cash used in investing activities		(21,472	)		(102,804	)
Cash flows from financing activities:
Net increase in deposits		20,258			84,918
Net (decrease) increase in borrowings		(6,843	)		26,843
Exercise of stock options		430			347
Cash dividends paid on common stock		(1,152	)		(936	)
Net cash provided by financing activities		12,693			111,172
Net increase cash and cash equivalents		1,884			17,456
Cash and cash equivalents at beginning of year		45,869			34,116
Cash and cash equivalents at end of period	$	47,753		$	51,572
Supplemental disclosure:
Cash paid during the period for:
Interest	$	5,586		$	3,118
Income taxes		2,010			2,380
Non-cash investing and financing activity:
Transfers to other assets acquired through foreclosure, net		174			502

See the accompanying notes.

7

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

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

Basis of Presentation

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

Use of Estimates

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

Interim Financial Information

The accompanying unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2018 and 2017 have been prepared in a condensed format, and therefore do not include all of the information and footnotes required by GAAP for complete financial statements.  These statements have been prepared on a basis that is substantially consistent with the accounting principles applied to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.

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

Reclassifications

Certain amounts in the consolidated financial statements as of December 31, 2017 and for the three and nine months ended September 30, 2017 have been reclassified to conform to the current presentation.  The reclassifications have no effect on net income, comprehensive income or stockholders’ equity as previously reported.

Loans Held For Sale

Loans which are originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value determined on an aggregate basis.  Valuation adjustments, if any, are recognized through a valuation allowance by charges to lower of cost or fair value provision.  Loans held for sale are mostly comprised of commercial agriculture and SBA.  The Company did not incur any lower of cost or fair value provision in the three and nine months ended September 30, 2018 and 2017.

Loans Held for Investment and Interest and Fees from Loans

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

8

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

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

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

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

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

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

Allowance for Loan Losses and Provision for Loan Losses

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

Outstanding – This is the highest quality rating that is assigned to any loan in the portfolio.  These loans are made to the highest quality borrowers with strong financial statements and unquestionable repayment sources.  Collateral securing these types of credits are generally cash deposits in the bank or marketable securities held in custody.

Good – Loans rated in this category are strong loans, underwritten well, that bear little risk of loss to the Company.  Loans in this category are loans to quality borrowers with very good financial statements that present an identifiable strong primary source and good secondary source of repayment.  Generally, these credits are well collateralized by good quality and liquid assets or low loan to value market real estate.

9

Pass - Loans rated in this category are acceptable loans, appropriately underwritten, bearing an ordinary risk of loss to the Company.  Loans in this category are loans to quality borrowers with financial statements presenting a good primary source as well as an adequate secondary source of repayment.  In the case of individuals, borrowers with this rating are quality borrowers demonstrating a reasonable level of secure income, a net worth adequate to support the loan and presenting a good primary source as well as an adequate secondary source of repayment.

Watch – Acceptable credit that requires a temporary increase in attention by management.  This can be caused by declines in sales, margins, liquidity or working capital.  Generally the elevated risk comes from lack of current financial statements and industry issues.

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

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

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

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

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

Commercial, CRE and SBA Loans

Charge-offs on these loan categories are taken as soon as all or a portion of any loan balance is deemed to be uncollectible.  A loan is considered impaired when, based on current information, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest under the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and/or interest payments.  Loans that experience insignificant payment delays or payment shortfalls generally are not classified as impaired. Generally, loan balances are charged-down to the fair value of the collateral, if, based on a current assessment of the value, an apparent deficiency exists.  In the event there is no perceived equity, the loan is charged-off in full.  Unsecured loans which are delinquent over 90 days are also charged-off in full.

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

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

Consumer Loans

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

10

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

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

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

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

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

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

· The loan’s observable market price.

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

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

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

· Concentrations of credit

· International risk

· Trends in volume, maturity, and composition of loans

· Volume and trend in delinquency, nonaccrual, and classified assets

· Economic conditions

· Geographic distance

· Policy and procedures or underwriting standards

· Staff experience and ability

· Value of underlying collateral

· Competition, legal, or regulatory environment

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

Off Balance Sheet and Credit Exposure

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit.  Such financial instruments are recorded in the consolidated financial statements when they are funded.  They involve, to varying degrees, elements of credit risk in excess of amounts recognized in the consolidated balance sheets.  Losses would be experienced when the Company is contractually obligated to make a payment under these instruments and must seek repayment from the borrower, which may not be as financially sound in the current period as they were when the commitment was originally made.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The Company enters into credit arrangements that generally provide for the termination of advances in the event of a covenant violation or other event of default.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party.  The commitments are collateralized by the same types of assets used as loan collateral.

11

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

Foreclosed Real Estate and Repossessed Assets

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

Income Taxes

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

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

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

Earnings Per Share

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

Recent Accounting Pronouncements

In May 2014, the FASB issued guidance codified within ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers,” which amends the guidance in former Topic 605, Revenue Recognition. The new revenue recognition standardsuperseded virtually all revenue guidance in U.S. GAAP, including industry specific guidance. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. ASU 2014-09 is effective for the Company for annual reporting periods beginning after December 15, 2016. In August 2015, this effective date was extended for the Company to December 15, 2017. This Update allowed for using one of the following two adoption methods: 1) retrospectively to each prior reporting period presented or 2) retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application with the cumulative effect of initially applying the standard. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and noninterest income. The contracts that are in scope of the guidance are primarily related to service charges on deposit accounts, cardholder income, and other service charge fees. The Company adopted this standard effective January 1, 2018 using the modified retrospective approach.  Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary.  See Note 10 Revenue Recognition for further information.

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In January 2016, the FASB issued guidance codified within ASU 2016-01, “Financial Instruments – Overall, Subtopic 825-10: Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends certain guidance on classification and measurement of financial instruments. The update is intended to enhance the reporting model for financial instruments to provide users of financial instruments with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for the Company for annual reporting periods beginning after December 15, 2017. The Company has evaluated the impact of the provisions in this standard on the Company's Consolidated Financial Statements. The adoption of ASU 2016-01 on January 1, 2018 did not have material impact on the Company's Consolidated Financial Statements.  In accordance with the guidance, the Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion (see Note 6 Fair Value Measurement).

In February 2016, the FASB amended its standards with respect to the accounting for leases. The amended guidance serves to replace all current U.S. GAAP guidance on this topic and requires that an operating lease be recognized on the statement of financial condition as a “right-to-use” asset along with a corresponding liability representing the rent obligation. Key aspects of current lessor accounting remain unchanged from existing guidance. This standard is expected to result in an increase to assets and liabilities recognized and, therefore, increase risk-weighted assets for regulatory capital purposes. The guidance requires the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application and will become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The standard is effective for the Company as of January 1, 2019. The Company is currently implementing lease accounting software to determine how our financial statements will be affected, and we believe the primary effect of adopting the new standard will be to record right-of-use assets and obligations for our leases currently classified as operating leases and does not anticipate these to be significant.

In June of 2016, the FASB issued update guidance codified within ASU-2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which amends the guidance for recognizing credit losses from an “incurred loss” methodology that delays recognition of credit losses until it is probable a loss has been incurred to an expected credit loss methodology. The guidance requires the use of the modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted.  The standard is effective for the Company as of January 1, 2020.  The Company is currently evaluating the impact of the amended guidance and has not yet determined the effect of the standard on its ongoing financial reporting.

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

In February 2018, the FASB issued guidance codified within ASU-2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," to address the income tax accounting treatment of the standard tax effects within other comprehensive income due to the prohibition of backward tracing due to an income tax rate change that was initially recorded in other comprehensive income. This issue came about from the enactment of the Tax Cuts and Jobs Act on December 22, 2017 that changed the Company's income tax rate from 34% to 21%. The ASU changed current accounting whereby an entity may elect to reclassify the standard tax effect from accumulated other comprehensive income to retained earnings. The ASU is effective for periods beginning after December 15, 2018 although early adoption is permitted. The Company elected to early adopt ASU-2018-02 in the first quarter of 2018 and elected to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income ("AOCI") to retained earnings.  The reclassification did not have a material impact to the Consolidated Financial Statements.

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2. INVESTMENT SECURITIES

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

	September 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	12,722	$	—	$	(202	)	$	12,520
U.S. government agency collateralized mortgage obligations ("CMO")		13,336		28		(82	)		13,282
Total	$	26,058	$	28	$	(284	)	$	25,802
Securities held-to-maturity
U.S. government agency mortgage backed securities ("MBS")	$	7,475	$	125	$	(205	)	$	7,395
Total	$	7,475	$	125	$	(205	)	$	7,395

Securities measured at fair value
Equity securities: Farmer Mac class A stock	$	66	$	78	$	—	$	144
Total	$	66	$	78	$	—	$	144

	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	14,035	$	35	$	(92	)	$	13,978
U.S. government agency collateralized mortgage obligations ("CMO")		14,641		66		(58	)		14,649
Equity securities: Farmer Mac class A stock		66		90		—			156
Total	$	28,742	$	191	$	(150	)	$	28,783
Securities held-to-maturity
U.S. government agency mortgage backed securities ("MBS")	$	7,565	$	216	$	(110	)	$	7,671
Total	$	7,565	$	216	$	(110	)	$	7,671

At September 30, 2018 and December 31, 2017, $33.3 million and $36.2 million of securities at carrying value, respectively, were pledged to the Federal Home Loan Bank (“FHLB”), as collateral for current and future advances.

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

	September 30, 2018
	Less than One Year					One to Five Years					Five to Ten Years					Over Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale	(dollars in thousands)
U.S. government agency notes	$	1,912		2.6	%	$	1,411		2.3	%	$	9,197		2.8	%	$	—		—		$	12,520		2.7	%
U.S. government agency CMO		—		—			2,237		2.3	%		8,158		2.5	%		2,887		3	%		13,282		2.6	%
Total	$	1,912		2.6	%	$	3,648		2.3	%	$	17,355		2.7	%	$	2,887		3.0	%	$	25,802		2.7	%
Securities held-to-maturity
U.S. government agency MBS	$	—		—		$	1,751		4.2	%	$	4,927		3.3	%	$	797		3.6	%	$	7,475		3.6	%
Total	$	—		—		$	1,751		4.2	%	$	4,927		3.3	%	$	797		3.6	%	$	7,475		3.6	%
Securities measured at fair value
Farmer Mac class A stock	$	—		—		$	—		—		$	—		—		$	—		—		$	144		—
Total	$	—		—		$	—		—		$	—		—		$	—		—		$	144		—

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	December 31, 2017
	Less than One Year					One to Five Years					Five to Ten Years					Over Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale	(dollars in thousands)
U.S. government agency notes	$	1,967		2.6	%	$	1,833		1.6	%	$	10,178		2.0	%	$	—		—		$	13,978		2.0	%
U.S. government agency CMO		—		—			3,362		1.9	%		8,361		1.9	%		2,926		2.3	%		14,649		1.9	%
Farmer Mac class A stock		—		—			—		—			—		—			—		—			156		—
Total	$	1,967		2.6	%	$	5,195		1.8	%	$	18,539		1.9	%	$	2,926		2.3	%	$	28,783		2.0	%
Securities held-to-maturity
U.S. government agency MBS	$	—		—		$	2,802		3.6	%	$	4,763		3.1	%	$	—		—		$	7,565		3.3	%
Total	$	—		—		$	2,802		3.6	%	$	4,763		3.1	%	$	—		—		$	7,565		3.3	%

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

	September 30,				December 31,
	2018				2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Securities available-for-sale	(in thousands)
Due in one year or less	$	1,997	$	1,912	$	1,997	$	1,967
After one year through five years		3,687		3,648		5,220		5,195
After five years through ten years		17,443		17,355		18,506		18,539
After ten years		2,931		2,887		2,953		2,926
Farmer Mac class A stock		—		—		66		156
Total	$	26,058	$	25,802	$	28,742	$	28,783
Securities held-to-maturity
Due in one year or less	$	—	$	—	$	—	$	—
After one year through five years		1,751		1,837		2,802		2,938
After five years through ten years		4,927		4,775		4,763		4,733
After ten years		797		783		—		—
Total	$	7,475	$	7,395	$	7,565	$	7,671
Securities measured at fair value
Farmer Mac class A stock	$	66	$	144	$	—	$	—
Total	$	66	$	144	$	—	$	—

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

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

	September 30, 2018
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	113	$	6,185	$	89	$	6,335	$	202	$	12,520
U.S. government agency CMO		30		774		52		2,629		82		3,403
Total	$	143	$	6,959	$	141	$	8,964	$	284	$	15,923
Securities held-to-maturity
U.S. Government-agency MBS	$	31	$	2,504	$	174	$	2,074	$	205	$	4,578
Total	$	31	$	2,504	$	174	$	2,074	$	205	$	4,578
Securities measured at fair value
Farmer Mac class A stock	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	—	$	—

	December 31, 2017
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	70	$	6,324	$	22	$	3,106	$	92	$	9,430
U.S. government agency CMO		8		985		50		3,430		58		4,415
Equity securities: Farmer Mac class A stock		—		—		—		—		—		—
Total	$	78	$	7,309	$	72	$	6,536	$	150	$	13,845
Securities held-to-maturity
U.S. Government-agency MBS	$	—	$	—	$	110	$	2,496	$	110	$	2,496
Total	$	—	$	—	$	110	$	2,496	$	110	$	2,496

As of September 30, 2018 and December 31, 2017, there were 19 and 14 securities, respectively, in an unrealized loss position.  Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things (i) the length of time and the extent to which the fair value has been less than cost (ii) the financial condition and near-term prospects of the issuer and (iii) the Company’s intent to sell an impaired security and if it is not more likely than not it will be required to sell the security before the recovery of its amortized basis.

The unrealized losses are primarily due to increases in market interest rates over the yields available at the time the underlying securities were purchased.  The fair value is expected to recover as the bonds approach their maturity date, repricing date or if market yields for such investments decline.  Management does not believe any of the securities are impaired due to reasons of credit quality.  Accordingly, as of September 30, 2018 and December 31, 2017, management believes the impairments detailed in the table above are temporary and no other-than-temporary impairment loss has been realized in the Company’s consolidated income statements. 

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3. LOANS HELD FOR SALE

SBA and Agriculture Loans

As of September 30, 2018 and December 31, 2017, the Company had approximately $15.0 million and $18.9 million, respectively, of SBA loans included in loans held for sale.  As of September 30, 2018 and December 31, 2017, the principal balance of SBA loans serviced for others was $8.0 million and $10.8 million, respectively.

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

As of September 30, 2018 and December 31, 2017, the Company had $35.9 million and $36.2 million of USDA loans included in loans held for sale, respectively. As of September 30, 2018 and December 31, 2017, the principal balance of USDA loans serviced for others was $2.0 million. 

4. LOANS HELD FOR INVESTMENT

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

	September 30,			December 31,
	2018			2017
	(in thousands)
Manufactured housing	$	240,010		$	223,115
Commercial real estate		353,136			354,617
Commercial		83,328			75,282
SBA		6,131			7,424
HELOC		9,446			9,422
Single family real estate		11,153			10,346
Consumer		73			83
		703,277			680,289
Allowance for loan losses		(8,519	)		(8,420	)
Deferred fees, net		(402	)		(652	)
Discount on SBA loans		(78	)		(122	)
Total loans held for investment, net	$	694,278		$	671,095

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

	September 30, 2018
	Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Total		Recorded Investment Over 90 Days and Accruing
	(in thousands)
Manufactured housing	$	239,574	$	144	$	—	$	—	$	144	$	292	$	240,010	$	—
Commercial real estate:
Commercial real estate		258,807		235		—		—		235		107		259,149		—
SBA 504 1st trust deed		24,333		—		—		—		—		—		24,333		—
Land		6,070		—		—		—		—		—		6,070		—
Construction		62,257		1,327		—		—		1,327		—		63,584		—
Commercial		79,141		99		—		—		99		4,088		83,328		—
SBA		5,275		—		—		—		—		856		6,131		—
HELOC		9,244		—		—		—		—		202		9,446		—
Single family real estate		10,946		17		—		25		42		165		11,153		25
Consumer		73		—		—		—		—		—		73		—
Total	$	695,720	$	1,822	$	—	$	25	$	1,847	$	5,710	$	703,277	$	25

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	December 31, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Total		Recorded Investment Over 90 Days and Accruing
	(in thousands)
Manufactured housing	$	222,342	$	355	$	—	$	—	$	355	$	418	$	223,115	$	—
Commercial real estate:
Commercial real estate		271,134		—		—		—		—		122		271,256		—
SBA 504 1st trust deed		26,463		—		—		—		—		184		26,647		—
Land		5,092		—		—		—		—		—		5,092		—
Construction		51,622		—		—		—		—		—		51,622		—
Commercial		70,481		15		—		—		15		4,786		75,282		—
SBA		6,461		19		—		—		19		944		7,424		—
HELOC		9,208		—		—		—		—		214		9,422		—
Single family real estate		10,170		—		—		—		—		176		10,346		—
Consumer		83		—		—		—		—		—		83		—
Total	$	673,056	$	389	$	—	$	—	$	389	$	6,844	$	680,289	$	—

Allowance for Loan Losses

The following table summarizes the changes in the allowance for loan losses:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Beginning balance	$	8,622		$	7,994		$	8,420		$	7,464
Charge-offs		—			(33	)		(6	)		(203	)
Recoveries		94			192			329			628
Net recoveries		94			159			323			425
Provision (credit)		(197	)		159			(224	)		423
Ending balance	$	8,519		$	8,312		$	8,519		$	8,312

As of September 30, 2018 and December 31, 2017, the Company had reserves for credit losses on undisbursed loans of $80,000 and $95,000, respectively, which were included in other liabilities.

The following tables summarize the changes in the allowance for loan losses by portfolio type:

	For the Three Months Ended September 30,
	Manufactured Housing			Commercial Real Estate			Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,145		$	5,007		$	1,221		$	57		$	93		$	99		$	—	$	8,622
Charge-offs		—			—			—			—			—			—			—		—
Recoveries		6			—			19			34			35			—			—		94
Net (charge-offs) recoveries		6			—			19			34			35			—			—		94
Provision (credit)		17			(134	)		4			(38	)		(36	)		(10	)		—		(197	)
Ending balance	$	2,168		$	4,873		$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,124		$	4,332		$	1,262		$	91		$	98		$	87		$	—	$	7,994
Charge-offs		—			—			—			—			—			(33	)		—		(33	)
Recoveries		38			—			43			104			7			—			—		192
Net (charge-offs) recoveries		38			—			43			104			7			(33	)		—		159
Provision (credit)		(15	)		359			(100	)		(108	)		(11	)		34			—		159
Ending balance	$	2,147		$	4,691		$	1,205		$	87		$	94		$	88		$	—	$	8,312

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	For the Nine Months Ended September 30,
	Manufactured Housing			Commercial Real Estate		Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,180		$	4,844	$	1,133		$	73		$	92		$	98		$	—	$	8,420
Charge-offs		(6	)		—		—			—			—			—			—		(6	)
Recoveries		114			15		43			102			54			1			—		329
Net (charge-offs) recoveries		108			15		43			102			54			1			—		323
Provision (credit)		(120	)		14		68			(122	)		(54	)		(10	)		—		(224	)
Ending balance	$	2,168		$	4,873	$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,201		$	3,707	$	1,241		$	106		$	100		$	109		$	—	$	7,464
Charge-offs		(119	)		—		—			(30	)		—			(54	)		—		(203	)
Recoveries		105			227		116			168			11			1			—		628
Net (charge-offs) recoveries		(14	)		227		116			138			11			(53	)		—		425
Provision (credit)		(40	)		757		(152	)		(157	)		(17	)		32			—		423
Ending balance	$	2,147		$	4,691	$	1,205		$	87		$	94		$	88		$	—	$	8,312

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The following tables present impairment method information related to loans and allowance for loan losses by loan portfolio segment:

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Loans Held for Investment as of September 30, 2018:	(in thousands)
Recorded Investment:
Impaired loans with an allowance recorded	$	5,906	$	245	$	219	$	1	$	—	$	282	$	—	$	6,653
Impaired loans with no allowance recorded		2,330		107		6,978		865		203		1,980		—		12,463
Total loans individually evaluated for impairment		8,236		352		7,197		866		203		2,262		—		19,116
Loans collectively evaluated for impairment		231,774		352,784		76,131		5,265		9,243		8,891		73		684,161
Total loans held for investment	$	240,010	$	353,136	$	83,328	$	6,131	$	9,446	$	11,153	$	73	$	703,277
Unpaid Principal Balance
Impaired loans with an allowance recorded	$	5,906	$	245	$	219	$	20	$	—	$	282	$	—	$	6,672
Impaired loans with no allowance recorded		3,520		162		7,082		1,470		249		2,030		—		14,513
Total loans individually evaluated for impairment		9,426		407		7,301		1,490		249		2,312		—		21,185
Loans collectively evaluated for impairment		231,774		352,784		76,131		5,265		9,243		8,891		73		684,161
Total loans held for investment	$	241,200	$	353,191	$	83,432	$	6,755	$	9,492	$	11,203	$	73	$	705,346
Related Allowance for Credit Losses
Impaired loans with an allowance recorded	$	429	$	9	$	1	$	—	$	—	$	20	$	—	$	459
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		429		9		1		—		—		20		—		459
Loans collectively evaluated for impairment		1,739		4,864		1,243		53		92		69		—		8,060
Total loans held for investment	$	2,168	$	4,873	$	1,244	$	53	$	92	$	89	$	—	$	8,519

20

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Loans Held for Investment as of December 31, 2017:	(in thousands)
Recorded Investment:
Impaired loans with an allowance recorded	$	5,830	$	557	$	3,551	$	281	$	—	$	2,133	$	—	$	12,352
Impaired loans with no allowance recorded		2,163		—		5,023		699		214		176		—		8,275
Total loans individually evaluated for impairment		7,993		557		8,574		980		214		2,309		—		20,627
Loans collectively evaluated for impairment		215,122		354,060		66,708		6,444		9,208		8,037		83		659,662
Total loans held for investment	$	223,115	$	354,617	$	75,282	$	7,424	$	9,422	$	10,346	$	83	$	680,289
Unpaid Principal Balance
Impaired loans with an allowance recorded	$	5,836	$	661	$	3,551	$	281	$	—	$	2,133	$	—	$	12,462
Impaired loans with no allowance recorded		3,328		—		5,042		1,026		249		220		—		9,865
Total loans individually evaluated for impairment		9,164		661		8,593		1,307		249		2,353		—		22,327
Loans collectively evaluated for impairment		215,122		354,060		66,708		6,444		9,208		8,037		83		659,662
Total loans held for investment	$	224,286	$	354,721	$	75,301	$	7,751	$	9,457	$	10,390	$	83	$	681,989
Related Allowance for Credit Losses
Impaired loans with an allowance recorded	$	427	$	11	$	50	$	1	$	—	$	35	$	—	$	524
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		427		11		50		1		—		35		—		524
Loans collectively evaluated for impairment		1,753		4,833		1,083		72		92		63		—		7,896
Total loans held for investment	$	2,180	$	4,844	$	1,133	$	73	$	92	$	98	$	—	$	8,420

Included in impaired loans are $2.4 million and $2.6 million of loans guaranteed by government agencies at September 30, 2018 and December 31, 2017, respectively.  A valuation allowance is established for an impaired loan when the fair value of the loan is less than the recorded investment.  In certain cases, portions of impaired loans are charged-off to realizable value instead of establishing a valuation allowance and are included, when applicable in the table below as “Impaired loans without specific valuation allowance under ASC 310.”  The valuation allowance disclosed above is included in the allowance for loan losses reported in the consolidated balance sheets as of September 30, 2018 and December 31, 2017.

The table below reflects recorded investment in loans classified as impaired:

	September 30,		December 31,
	2018		2017
	(in thousands)
Impaired loans with a specific valuation allowance under ASC 310	$	6,653	$	12,352
Impaired loans without a specific valuation allowance under ASC 310		12,463		8,275
Total impaired loans	$	19,116	$	20,627
Valuation allowance related to impaired loans	$	459	$	524

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The following table summarizes impaired loans by class of loans:

	September 30,		December 31,
	2018		2017
	(in thousands)
Manufactured housing	$	8,236	$	7,993
Commercial real estate :
Commercial real estate		107		122
SBA 504 1st trust deed		245		435
Land		—		—
Construction		—		—
Commercial		7,197		8,574
SBA		866		980
HELOC		203		214
Single family real estate		2,262		2,309
Consumer		—		—
Total	$	19,116	$	20,627

The following tables summarize average investment in impaired loans by class of loans and the related interest income recognized:

	Three Months Ended September 30,
	2018				2017
	Average Investment in Impaired Loans		Interest Income		Average Investment in Impaired Loans		Interest Income
	(in thousands)
Manufactured housing	$	8,175	$	162	$	7,483	$	174
Commercial real estate:
Commercial real estate		111		—		120		1
SBA 504 1st trust deed		407		5		402		5
Land		—		—		—		—
Construction		—		—		—		—
Commercial		7,444		47		4,789		54
SBA		902		17		662		1
HELOC		203		11		214		—
Single family real estate		2,223		27		1,951		25
Consumer		—		—		—		—
Total	$	19,465	$	269	$	15,621	$	260

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	Nine Months Ended September 30,
	2018				2017
	Average Investment in Impaired Loans		Interest Income		Average Investment in Impaired Loans		Interest Income
	(in thousands)
Manufactured housing	$	8,226	$	497	$	7,634	$	488
Commercial real estate:
Commercial real estate		116		—		123		1
SBA 504 1st trust deed		378		14		523		15
Land		—		—		—		—
Construction		—		—		—		—
Commercial		7,737		145		4,486		155
SBA		921		18		767		3
HELOC		207		12		273		—
Single family real estate		2,276		81		1,973		75
Consumer		—		—		—		—
Total	$	19,861	$	767	$	15,779	$	737

The Company is not committed to lend additional funds on these impaired loans.

The following table reflects the recorded investment in certain types of loans at the periods indicated:

	September 30,			December 31,
	2018			2017
	(in thousands)
Nonaccrual loans	$	5,710		$	6,844
Government guaranteed portion of loans included above	$	1,955		$	2,372
Troubled debt restructured loans, gross	$	17,644		$	16,603
Loans 30 through 89 days past due with interest accruing	$	1,822		$	389
Loans 90 days or more past due with interest accruing	$	25		$	—
Allowance for loan losses to gross loans held for investment		1.21	%		1.24	%

The accrual of interest is discontinued when substantial doubt exists as to collectability of the loan; generally at the time the loan is 90 days delinquent.  Any unpaid but accrued interest is reversed at that time.  Thereafter, interest income is no longer recognized on the loan.  Interest income may be recognized on impaired loans to the extent they are not past due by 90 days.  Interest on nonaccrual loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are reasonably assured.  Foregone interest on nonaccrual and TDR loans for the three months endedSeptember 30, 2018 and 2017 was $0.1 million.  Foregone interest on nonaccrual and TDR loans for the nine months endedSeptember 30,2018 and 2017 was $0.3 million.

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The following table presents the composition of nonaccrual loans by class of loans:

	September 30,		December 31,
	2018		2017
	(in thousands)
Manufactured housing	$	292	$	418
Commercial real estate:
Commercial real estate		107		122
SBA 504 1st trust deed		—		184
Land		—		—
Construction		—		—
Commercial		4,088		4,786
SBA		856		944
HELOC		202		214
Single family real estate		165		176
Consumer		—		—
Total	$	5,710	$	6,844

Included in nonaccrual loans are $2.0 million of loans guaranteed by government agencies at September 30, 2018 and $2.4 million at December 31, 2017.

The guaranteed portion of each SBA loan is repurchased from investors when those loans become past due 120 days by either CWB or the SBA directly.  After the foreclosure and collection process is complete, the principal balance of loans repurchased by CWB are reimbursed by the SBA.  Although these balances do not earn interest during this period, they generally do not result in a loss of principal to CWB; therefore a repurchase reserve has not been established related to these loans.

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans.  Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Special Mention,” “Substandard,” “Doubtful” and “Loss”.  For a detailed discussion on these risk classifications see “Note 1 Summary of Significant Accounting Policies - Allowance for Loan Losses and Provision for Loan Losses”.   Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution's credit position at some future date.  Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.  Risk ratings are updated as part of our normal loan monitoring process, at a minimum, annually.

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The following tables present gross loans by risk rating:

	September 30, 2018
	Pass		Special Mention		Substandard		Doubtful		Total
	(in thousands)
Manufactured housing	$	239,459	$	—	$	551	$	—	$	240,010
Commercial real estate:
Commercial real estate		259,042		—		107		—		259,149
SBA 504 1st trust deed		23,854		—		479		—		24,333
Land		6,070		—		—		—		6,070
Construction		62,257		1,327		—		—		63,584
Commercial		75,838		350		5,655		—		81,843
SBA		4,474		44		374		—		4,892
HELOC		9,243		—		203		—		9,446
Single family real estate		10,983		—		170		—		11,153
Consumer		73		—		—		—		73
Total, net		691,293		1,721		7,539		—		700,553
Government guarantee		—		—		2,724		—		2,724
Total	$	691,293	$	1,721	$	10,263	$	—	$	703,277

	December 31, 2017
	Pass		Special Mention		Substandard		Doubtful		Total
	(in thousands)
Manufactured housing	$	222,429	$	—	$	686	$	—	$	223,115
Commercial real estate:
Commercial real estate		271,134		—		122		—		271,256
SBA 504 1st trust deed		25,973		—		674		—		26,647
Land		5,092		—		—		—		5,092
Construction		49,832		1,790		—		—		51,622
Commercial		64,543		817		8,083		—		73,443
SBA		4,221		102		1,752				6,075
HELOC		9,208		—		214		—		9,422
Single family real estate		10,165		—		181		—		10,346
Consumer		83		—		—		—		83
Total, net		662,680		2,709		11,712	$	—		677,101
Government guarantee		—		—		3,188		—		3,188
Total	$	662,680	$	2,709	$	14,900	$	—	$	680,289

Troubled Debt Restructured Loan (TDR)

A TDR is a loan on which the bank, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the bank would not otherwise consider.  The loan terms that have been modified or restructured due to a borrower’s financial situation include, but are not limited to, a reduction in the stated interest rate, an extension of the maturity or renewal of the loan at an interest rate below current market, a reduction in the face amount of the debt, a reduction in the accrued interest, extensions, deferrals, renewals and rewrites.  The majority of the bank’s modifications are extensions in terms or deferral of payments which result in no lost principal or interest followed by reductions in interest rates or accrued interest.  A TDR is also considered impaired.  Generally, a loan that is modified at an effective market rate of interest may no longer be disclosed as a troubled debt restructuring in years subsequent to the restructuring if it is not impaired based on the terms specified by the restructuring agreement.

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The following tables summarize the financial effects of TDR loans by loan class for the periods presented:

	For the Three Months Ended September 30, 2018
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		2	$	—	$	166	$	53	$	166	$	3
Total		2	$	—	$	166	$	53	$	166	$	3

	For the Nine Months Ended September 30, 2018
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		12	$	1,047	$	1,213	$	1,100	$	1,213	$	66
Commercial		3		1,781		1,781		—		1,781		—
Total		15	$	2,828	$	2,994	$	1,100	$	2,994	$	66

	For the Three Months Ended September 30, 2017
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		2	$	363	$	363	$	363	$	363	$	24
Commercial		1		14		14		-		14		-
Total		3	$	377	$	377	$	363	$	377	$	24

	For the Nine Months Ended September 30, 2017
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		9	$	807	$	807	$	807	$	807	$	45
Commercial		2	$	102	$	102	$	—	$	102	$	2
SBA		1	$	17	$	17	$	—	$	17	$	1
Total		12	$	926	$	926	$	807	$	926	$	48

The average rate concessions were 50 basis points and 73 basis points, for the three and nine months ended September 30, 2018 and 100 basis points and 97 basis points for the three and nine months ended September 30, 2017, respectively.  The average term extension in months was 180 and 151 for the three and nine months ended September 30, 2018 and 126 and 138 for the three and nine months ended September 30, 2017, respectively.

A TDR loan is deemed to have a payment default when the borrower fails to make - consecutive payments or the collateral is transferred to repossessed assets.  The Company had no TDR’s with payment defaults for the three or nine months ended September 30, 2018 or 2017.

At September 30, 2018 there were no material loan commitments outstanding on TDR loans. 

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5. OTHER ASSETS ACQUIRED THROUGH FORECLOSURE

The following table summarizes the changes in other assets acquired through foreclosure:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Balance, beginning of period	$	213		$	362		$	372		$	137
Additions		—			132			174			502
Proceeds from dispositions		(213	)		(60	)		(484	)		(303	)
(Loss) gain on sales, net		—			52			(62	)		150
Balance, end of period	$	—		$	486		$	—		$	486

6. FAIR VALUE MEASUREMENT

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities.  FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) established a framework for measuring fair value using a three-level valuation hierarchy for disclosure of fair value measurement.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset as of the measurement date.  ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available.  Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.  Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would consider in pricing the asset or liability developed based on the best information available in the circumstances.  The hierarchy is broken down into three levels based on the reliability of inputs, as follows:

● 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 all 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.

The availability of observable inputs varies based on the nature of the specific financial instrument.  To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure.  When market assumptions are available, ASC 820 requires the Company to make assumptions regarding the assumptions that market participants would use to estimate the fair value of the financial instrument at the measurement date.

FASB ASC 825, Financial Instruments (“ASC 825”) requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at September 30, 2018 and December 31, 2017.  The estimated fair value amounts for September 30, 2018 and December 31, 2017 have been measured as of period-end, and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those dates.  As such, the estimated fair values of these financial instruments subsequent to the reporting date may be different than the amounts reported at the period-end.

This information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities.

27

Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimate, comparisons between the Company’s disclosures and those of other companies or banks may not be meaningful.

The following tables summarize the fair value of assets measured on a recurring basis:

	Fair Value Measurements at the End of the Reporting Period Using:
September 30, 2018	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 available-for-sale	$	144	$	25,802	$	—	$	25,946
Interest only strips		—		—		62		62
Servicing assets		—		—		56		56
	$	144	$	25,802	$	118	$	26,064

	Fair Value Measurements at the End of the Reporting Period Using:
December 31, 2017	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 available-for-sale	$	156	$	28,627	$	—	$	28,783
Interest only strips		—		—		87		87
Servicing assets		—		—		97		97
	$	156	$	28,627	$	184	$	28,967

Market valuations of our investment securities which are classified as level 2 are provided by an independent third party.  The fair values are determined by using several sources for valuing fixed income securities.  Their techniques include pricing models that vary based on the type of asset being valued and incorporate available trade, bid and other market information.  In accordance with the fair value hierarchy, the market valuation sources include observable market inputs and are therefore considered Level 2 inputs for purposes of determining the fair values.

On certain SBA loan sales, the Company retained interest only strip assets (‘I/O strips”) which represent the present value of excess net cash flows generated by the difference between (a) interest at the stated rate paid by borrowers and (b) the sum of (i) pass-through interest paid to third-party investors and (ii) contractual servicing fees.  I/O strips are classified as Level 3 in the fair value hierarchy.  The fair value is determined on a quarterly basis through a discounted cash flow analysis prepared by an independent third party using industry prepayment speeds.  I/O strip valuation adjustments are recorded as additions or offsets to loan servicing income.

Historically, the Company has elected to use the amortizing method for the treatment of servicing assets and has measured for impairment on a quarterly basis through a discounted cash flow analysis prepared by an independent third party using industry prepayment speeds.  In connection with the sale of certain SBA and USDA loans the Company recorded servicing assets and elected to measure those assets at fair value in accordance with ASC 825-10.  Significant assumptions in the valuation of servicing assets include estimated loan repayment rates, the discount rate, and servicing costs, among others.  Servicing assets are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.

The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis.  These assets include loans held for sale, foreclosed real estate and repossessed assets and certain loans that are considered impaired per generally accepted accounting principles.

28

The following summarizes the fair value measurements of assets measured on a non-recurring basis:

			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, 2018:
Impaired loans	$	4,746	$	—	$	4,746	$	—
Loans held for sale		51,558		—		51,558		—
Foreclosed real estate and repossessed assets		—		—		—		—
	$	56,304	$	—	$	56,304	$	—

			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, 2017:
Impaired loans	$	6,323	$	—	$	6,323	$	—
Loans held for sale		56,222		—		56,222		—
Foreclosed real estate and repossessed assets		372		—		372		—
	$	62,917		—		62,917		—

The Company records certain loans at fair value on a non-recurring basis.  When a loan is considered impaired an allowance for a loan loss is established.  The fair value measurement and disclosure requirement applies to loans measured for impairment using the practical expedients method permitted by accounting guidance for impaired loans.  Impaired loans are measured at an observable market price, if available or at the fair value of the loan’s collateral, if the loan is collateral dependent.  The fair value of the loan’s collateral is determined by appraisals or independent valuation.  When the fair value of the loan’s collateral is based on an observable market price or current appraised value, given the current real estate markets, the appraisals may contain a wide range of values and accordingly, the Company classifies the fair value of the impaired loans as a non-recurring valuation within Level 2 of the valuation hierarchy.  For loans in which impairment is determined based on the net present value of cash flows, the Company classifies these as a non-recurring valuation within Level 3 of the valuation hierarchy.

Foreclosed real estate and repossessed assets are carried at the lower of book value or fair value less estimated costs to sell.  Fair value is based upon independent market prices obtained from certified appraisers or the current listing price, if lower.  When the fair value of the collateral is based on a current appraised value, the Company reports the fair value of the foreclosed collateral as non-recurring Level 2.  When a current appraised value is not available or if management determines the fair value of the collateral is further impaired, the Company reports the foreclosed collateral as non-recurring Level 3.

29

FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies.  However, considerable judgment is required to interpret market data to develop estimates of fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The estimated fair value of the Company’s financial instruments are as follows:

	September 30, 2018
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:	(in thousands)
Cash and cash equivalents	$	47,753	$	47,753	$	—	$	—	$	47,753
FRB and FHLB stock		4,087		—		4,087		—		4,087
Investment securities		33,421		144		33,197		—		33,341
Loans, net		745,222		—		725,139		14,076		739,215
Financial liabilities:
Deposits		719,942		—		701,534		—		701,534
Other borrowings		50,000		—		49,799		—		49,799

	December 31, 2017
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:	(in thousands)
Cash and cash equivalents	$	45,869	$	45,869	$	—	$	—	$	45,869
FRB and FHLB stock		3,720		—		3,720		—		3,720
Investment securities		36,348		156		36,298		—		36,454
Loans, net		726,189		—		705,723		13,779		719,502
Financial liabilities:
Deposits		699,684		—		699,211		—		699,211
Other borrowings		56,843		—		56,842		—		56,842

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash and cash equivalents

The carrying amounts reported in the consolidated balance sheets for cash and due from banks approximate their fair value.

Money market investments

The carrying amounts reported in the consolidated balance sheets for money market investments approximate their fair value.

Investment securities

The fair value of Farmer Mac class A stock is based on quoted market prices and are categorized as Level 1 of the fair value hierarchy.

The fair value of other investment securities were determined based on matrix pricing.  Matrix pricing is a mathematical technique that utilizes observable market inputs including, for example, yield curves, credit ratings and prepayment speeds.  Fair values determined using matrix pricing are generally categorized as Level 2 in the fair value hierarchy.

Federal Reserve Stock and Federal Home Loan Bank Stock

CWB is a member of the FHLB system and maintains an investment in capital stock of the FHLB.  CWB also maintains an investment in capital stock of the Federal Reserve Bank (“FRB”).  These investments are carried at cost since no ready market exists for them, and they have no quoted market value.  The Company conducts a periodic review and evaluation of our FHLB stock to determine if any impairment exists.  The fair values have been categorized as Level 2 in the fair value hierarchy.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value.  The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics or based on the agreed-upon sale price.  As such, the Company classifies the fair value of loans held for sale as a non-recurring valuation within Level 2 of the fair value hierarchy.  At September 30, 2018 and December 31, 2017, the Company had loans held for sale with an aggregate carrying value of $50.9 million and $55.1 million respectively.

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Loans

Fair value of loans is estimated by calculating loan level fair values for all loans utilizing a discounted cash flow methodology incorporating “exit pricing” analytics in conformance with ASU 2016-01.  All active loans were valued in the portfolio as of date of exercise, excluding any loans held for sale, and utilized assumptions such as probability of default, loss given default, recovery delay and prepayment assumptions.  Fair value was calculated in accordance with ASC 820.  The fair value for loans is categorized as Level 2 in the fair value hierarchy.  Fair values of impaired loans using a discounted cash flow method to measure impairment have been categorized as Level 3.

Deposits

The amount payable at demand at report date is used to estimate the fair value of demand and savings deposits. The estimated fair values of fixed-rate time deposits are determined by discounting the cash flows of segments of deposits that have similar maturities and rates, utilizing a discount rate that approximates the prevailing rates offered to depositors as of the measurement date.  The fair value measurement of deposit liabilities is categorized as Level 2 in the fair value hierarchy.

Federal Home Loan Bank advances and other borrowings

The fair values of the Company’s borrowings are estimated using discounted cash flow analyses, based on the market rates for similar types of borrowing arrangements.  The FHLB advances have been categorized as Level 2 in the fair value hierarchy.

Off-balance sheet instruments

Fair values for the Company’s off-balance sheet instruments (lending commitments and standby letters of credit) are based on quoted fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

There were no standby letters of credit outstanding at September 30, 2018 or at December 31, 2017.  Unfunded loan commitments at September 30, 2018 and December 31, 2017 were $61.6 million and $68.8 million, respectively. 

7. OTHER BORROWINGS

Federal Home Loan Bank Advances – The Company through the bank has a blanket lien credit line with the FHLB.  FHLB advances are collateralized in the aggregate by CWB’s eligible loans and securities.  Total FHLB advances were $47.0 million and $50.0 million at September 30, 2018 and December 31, 2017, respectively, borrowed at fixed rates.  The Company also had $125.0 million of letters of credit with FHLB at September 30, 2018 to secure public funds.  At September 30, 2018, CWB had pledged to the FHLB, $33.3 million of securities and $239.0 million of loans.  At September 30, 2018, CWB had $70.2 million available for additional borrowing.  At December 31, 2017, CWB had pledged to the FHLB, $36.2 million of securities and $235.4 million of loans.  At December 31, 2017, CWB had $56.8 million available for additional borrowing.  Total FHLB interest expense for the three months ended September 30, 2018 and 2017 was $0.3 million and $0.1 million, respectively.  Total FHLB interest expense for the nine months ended September 30, 2018 and 2017 was $0.7 million and $0.2 million, respectively.

Federal Reserve Bank – The Company has established a credit line with the FRB.  Advances are collateralized in the aggregate by eligible loans for up to 28 days.  There were no outstanding FRB advances as of September 30, 2018 and December 31, 2017.  Available borrowing capacity was $105.1 million and $104.3 million as of September 30, 2018 and December 31, 2017, respectively.

Federal Funds Purchased Lines– The Company has federal funds borrowing lines at correspondent banks totaling $20.0 million.    There was no amount outstanding as of September 30, 2018 and December 31, 2017.

Line of Credit - In July of 2017, the Company entered into a one-year revolving line of credit agreement for up to $15.0 million.  The Company must maintain a compensating deposit with the lender of 25% of the outstanding principal balance in a non-interest-bearing deposit account which was $0.8 million at September 30, 2018.  In addition, the Company must maintain a minimum debt service coverage ratio of 1.65, a minimum Tier 1 leverage ratio of 7.0% and a minimum total risked based capital ratio of 10.0%.  At September 30, 2018, the line of credit balance was $3.0 million at a rate of 5.85%. 

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8. STOCKHOLDERS’ EQUITY

The following table summarizes the changes in other comprehensive income (loss) by component, net of tax for the period indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	Unrealized holding gains (losses) on AFS						Unrealized holding gains (losses) on AFS
	(in thousands)
Beginning balance	$	(111	)	$	87		$	25		$	(29	)
Other comprehensive income before reclassifications		(48	)		(17	)		(125	)		99
Amounts reclassified from accumulated other comprehensive income		—			—			(59	)		—
Net current-period other comprehensive income		(48	)		(17	)		(184	)		99
Ending Balance	$	(159	)	$	70		$	(159	)	$	70

The adoption of ASU-2018-02 during the first quarter of 2018 created a $6,000 reclassification within accumulated other comprehensive income to retained earnings.  The Company also recorded a $53,000 adjustment during the first quarter of 2018 from AOCI to retained earnings on adoption of ASU 2016-01.

Common Stock

On August 24, 2017, the Board of Directors extended the common stock repurchase program of up to $3.0 million for two additional years.  Under this program the Company has repurchased 187,569 common stock shares for $1.4 million at an average price of $7.25 per share.  There were no repurchases of common stock under this program during the three or nine months ended September 30, 2018.

During the three and nine months ended September 30, 2018, the Company paid common stock dividends of $0.4 million and $1.2 million, respectively. During the three and nine months ended September 30, 2017, the Company paid common stock dividends of $0.3 million and $0.9 million, respectively.

Common Stock Warrant

The Warrant issued as part of the TARP provides for the purchase of up to 521,158 shares of the common stock, at an exercise price of $4.49 per share (“Warrant Shares”).  The Warrant is immediately exercisable and expires on December 19, 2018.  The exercise price and the ultimate number of shares of common stock that may be issued under the Warrant are subject to certain anti-dilution adjustments, such as upon stock splits or distributions of securities or other assets to holders of the common stock, and upon certain issuances of the common stock at or below a specified price relative to the then current market price of the common stock.  In the second quarter of 2013, the Treasury sold its warrant position to a private investor.  Pursuant to the Securities Purchase Agreement, the private investor has agreed not to exercise voting power with respect to any Warrant Shares. 

9. CAPITAL REQUIREMENT

The Federal Reserve has adopted capital adequacy guidelines that are used to assess the adequacy of capital in supervising a bank holding company.  In July 2013, the federal banking agencies approved the final rules (“Final Rules”) to establish a new comprehensive regulatory capital framework with a phase-in period beginning January 1, 2015 and ending January 1, 2019.  The Final Rules implement the third installment of the Basel Accords (“Basel III”) regulatory capital reforms and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and substantially amend the regulatory risk-based capital rules applicable to the Company.  Basel III redefines the regulatory capital elements and minimum capital ratios, introduces regulatory capital buffers above those minimums, revises rules for calculating risk-weighted assets and adds a new component of Tier 1 capital called Common Equity Tier 1, which includes common equity and retained earnings and excludes preferred equity.

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The following tables illustrates the Bank’s regulatory ratios and the Federal Reserve’s current adequacy guidelines as of September 30, 2018 and December 31, 2017.  The Federal Reserve’s fully phased-in guidelines applicable in 2019 are also summarized.

	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, 2018
CWB's actual regulatory ratios		10.78	%		9.63	%		9.63	%		8.22	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

	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, 2017
CWB's actual regulatory ratios		11.31	%		10.10	%		10.10	%		8.83	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

The Company has evaluated the impact of the Final Rules and believes that, as of September 30, 2018, the Company would meet all capital adequacy requirements under the Basel III capital rules on a fully phased-in basis as if all such requirements were currently in effect.  There are no conditions or events since September 30, 2018 that management believes have changed the Company’s or the Bank’s risk-based capital category.

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10. REVENUE RECOGNITION

The Company adopted ASU No, 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all subsequent ASUs that modified Topic 606 on January 1, 2018.  The implementation of the new standard did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities.  In addition, certain non-interest income streams such as servicing rights, financial guarantees and certain credit card fees are also not in scope of the new guidance.  Topic 606 is applicable to non-interest income streams such as deposit related fees, interchange fees and merchant income.  However the recognition of these income streams did not change upon the adoption of Topic 606.  Substantially all of the Company’s revenue is generated from contracts with customers.  Non-interest revenue streams in-scope of Topic 606 are discussed below.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of monthly service fees, check orders, account analysis fees, and other deposit account related fees.  The Company’s performance obligation for monthly service fees and account analysis fees is generally satisfied, and the related income recognized, over the period in which the service is provided.  Check orders and other deposit related fees are largely transactional based and therefore, the Company’s performance obligation is satisfied and related income recognized, at a point in time.  Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Exchange Fees and Other Service Charges

Exchange fees and other service charges are primarily comprised of debit and credit card income, merchant services income, ATM fees and other service charges.  Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa or MasterCard.  Merchant services income is primarily fees charged to merchants to process their debit and credit card transactions.  ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM.  Other service charges include fees from processing wire transfers, cashier’s checks and other services.  The Company’s performance obligation for exchange and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.  Payment is typically received immediately or in the following month.

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for periods indicated.

Non-interest income	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
In-scope of Topic 606:	(in thousands)
Service charges on deposit accounts	$	95	$	89	$	281	$	248
Exchange fees and other service charges		43		46		142		113
Non-interest income (in-scope of Topic 606)		138		135		423		361
Non-interest income (out-of-scope of Topic 606)		503		581		1,545		1,693
	$	641	$	716	$	1,968	$	2,054

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset).  A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer.  The Company’s non-interest income streams are largely based on transactional activity.  Consideration is often received immediately or shortly after the Company satisfies its performance obligation and income is recognized.  The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.  As of September 30, 2018 and December 31, 2017, the Company did not have any signficant contract balances.

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Contract Acquisition Costs

In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered.  The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained.  The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less.  Upon adoption of Topic 606, the Company did not capitalize any contract acquisition cost.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion is designed to provide insight into management’s assessment of significant trends related to the Company's consolidated financial condition, results of operations, liquidity, capital resources and interest rate sensitivity.  It should be read in conjunction with the Company’s unaudited interim consolidated financial statements and notes thereto included herein and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and the other financial information appearing elsewhere in this report.

Forward Looking Statements

This report contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995.  These statements may include statements that expressly or implicitly predict future results, performance or events.  Statements other than statements of historical fact are forward-looking statements.  In addition, the words “anticipates,” “expects,” “believes,” “estimates” and “intends” or the negative of these terms or other comparable terminology constitute “forward-looking statements.”  Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  Except as required by law, the Company disclaims any obligation to update any such forward-looking statements or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Forward-looking statements contained in this Quarterly Report on Form 10-Q involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company and may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement.  Risks and uncertainties include those set forth in our filings with the Securities and Exchange Commission and the following factors that could cause actual results to differ materially from those presented:

· 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;

· 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;

· the water shortage in certain areas of California and its impact on the economy;

· the Company’s success in implementing its new 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;

· 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; and

· a failure or breach of our operational or security systems or infrastructure.

For additional information regarding risks that may cause our actual results to differ materially from any forward-looking statements, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 and in item 1A of Part II of this Quarterly Report.

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Financial Overview and Highlights

Community West Bancshares (“CWBC”) incorporated under the laws of the state of California, is a bank holding company headquartered in Goleta, California providing full service banking and lending through its wholly-owned subsidiary Community West Bank (“CWB” or the “Bank”), which has eight California branch banking offices in Goleta, Ventura, Santa Maria, Santa Barbara, Westlake Village, San Luis Obispo, Oxnard, and Paso Robles.  These entities are collectively referred to herein as the “Company”.

Financial Result Highlights for the Third Quarter of 2018

Net income of $2.4 million, or $0.27 per diluted share in the third quarter of 2018 (3Q18) compared to a net income of $1.6 million or $0.18 per diluted share in the third quarter a year ago (3Q17).

The significant factors impacting the Company’s third quarter earnings performance were:

· Net income of $2.4 million in 3Q18 compared to $1.6 million in 3Q17.

· Net interest margin for 3Q18 was 4.02% compared to 4.27% in 3Q17.

· Total loans increased $19.0 million to $745.2 million at September 30, 2018 compared to $726.2 million at December 31, 2017.

· Total deposits increased $20.2 million to $719.9 million at September 30, 2018, compared to $699.7 at December 31, 2017.

· Allowance for loan losses was $8.5 million at September 30, 2018, or 1.21% of total loans held for investment compared to 1.24% at December 31, 2017 and 1.25% at September 30, 2017.

The impact to the Company from these items, and others of both a positive and negative nature, will be discussed in more detail as they pertain to the Company’s overall comparative performance for the three and nine months ended September 30, 2018 throughout the analysis sections of this report.

Critical Accounting Policies

A number of critical accounting policies are used in the preparation of the Company’s consolidated financial statements.  These policies relate to areas of the financial statements that involve estimates and judgments made by management.  These include provision and allowance for loan losses and investment securities.  These critical accounting policies are discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 with a description of how the estimates are determined and an indication of the consequences of an over or under estimate.

RESULTS OF OPERATIONS

A summary of our results of operations and financial condition and select metrics is included in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands, except per share amounts)
Net income	$	2,369		$	1,554		$	6,050		$	4,466
Basic earnings per share		0.29			0.19			0.73			0.55
Diluted earnings per share		0.27			0.18			0.69			0.52
Total assets		854,709			829,150			854,709			829,150
Total loans		745,222			714,383			745,222			714,383
Total deposits		719,942			697,154			719,942			697,154
Total stockholders' equity		75,557			69,766			75,557			69,766
Book value per common share		9.13			8.54			9.13			8.54
Net interest margin		4.02	%		4.27	%		4.11	%		4.36	%
Return on average assets		1.08	%		0.78	%		0.96	%		0.79	%
Return on average stockholders' equity		12.57	%		8.88	%		11.07	%		8.80	%

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The following table sets forth a summary financial overview for the comparable three and nine months ended September 30, 2018 and 2017:

	Three Months Ended September 30,					Increase			Nine Months Ended September 30,					Increase
	2018			2017		(Decrease)			2018			2017		(Decrease)
	(in thousands, except per share amounts)
Consolidated Income Statement Data:
Interest income	$	11,201		$	9,695	$	1,506		$	31,590		$	27,464	$	4,126
Interest expense		2,573			1,319		1,254			6,301			3,278		3,023
Net interest income		8,628			8,376		252			25,289			24,186		1,103
Credit (provision) for loan losses		(197	)		159		(356	)		(224	)		423		(647	)
Net interest income after provision for loan losses		8,825			8,217		608			25,513			23,763		1,750
Non-interest income		641			716		(75	)		1,968			2,054		(86	)
Non-interest expenses		6,402			6,387		15			19,192			18,317		875
Income before income taxes		3,064			2,546		518			8,289			7,500		789
Provision for income taxes		695			992		(297	)		2,239			3,034		(795	)
Net income	$	2,369		$	1,554	$	815		$	6,050		$	4,466	$	1,584
Income per share - basic	$	0.29		$	0.19	$	0.10		$	0.73		$	0.55	$	0.18
Income per share - diluted	$	0.27		$	0.18	$	0.09		$	0.69		$	0.52	$	0.17

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Interest Rates and Differentials

The following table illustrates average yields on interest-earning assets and average rates on interest-bearing liabilities for the periods indicated:

	Three Months Ended September 30,
	2018								2017
	Average Balance			Interest		Average Yield/Cost(2)			Average Balance			Interest		Average Yield/Cost(2)
Interest-Earning Assets	(in thousands)
Federal funds sold and interest-earning deposits	$	59,087		$	229		1.54	%	$	27,787		$	77		1.10	%
Investment securities		37,850			360		3.77	%		42,382			278		2.60	%
Loans (1)		755,146			10,612		5.58	%		708,244			9,340		5.23	%
Total earnings assets		852,083			11,201		5.22	%		778,413			9,695		4.94	%
Nonearning Assets
Cash and due from banks		2,824								2,419
Allowance for loan losses		(8,589	)							(8,159	)
Other assets		20,856								19,606
Total assets	$	867,174							$	792,279
Interest-Bearing Liabilities
Interest-bearing demand deposits		271,314			617		0.90	%		265,546			294		0.44	%
Savings deposits		14,303			32		0.89	%		14,266			29		0.81	%
Time deposits		339,405			1,573		1.84	%		294,385			862		1.16	%
Total interest-bearing deposits		625,022			2,222		1.41	%		574,197			1,185		0.82	%
Other borrowings		49,831			351		2.79	%		29,677			134		1.79	%
Total interest-bearing liabilities		674,853			2,573		1.51	%		603,874			1,319		0.87	%
Noninterest-Bearing Liabilities
Noninterest-bearing demand deposits		109,369								113,598
Other liabilities		8,153								5,369
Stockholders' equity		74,799								69,438
Total Liabilities and Stockholders' Equity	$	867,174							$	792,279
Net interest income and margin (3)				$	8,628		4.02	%				$	8,376		4.27	%
Net interest spread (4)							3.71	%							4.07	%

(1) Includes nonaccrual loans.

(2) Annualized.

(3) Net interest margin is computed by dividing net interest income by total average earning assets.

(4) Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.

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	Nine Months Ended September 30,
	2018								2017
	Average Balance			Interest		Average Yield/Cost(2)			Average Balance			Interest		Average Yield/Cost(2)
Interest-Earning Assets	(in thousands)
Federal funds sold and interest-earning deposits	$	37,476		$	418		1.49	%	$	23,827		$	162		0.91	%
Investment securities		38,613			889		3.08	%		39,717			732		2.46	%
Loans (1)		747,518			30,283		5.42	%		677,445			26,570		5.24	%
Total earnings assets		823,607			31,590		5.13	%		740,989			27,464		4.96	%
Nonearning Assets
Cash and due from banks		3,294								2,275
Allowance for loan losses		(8,513	)							(7,870	)
Other assets		20,567								18,746
Total assets	$	838,955							$	754,140
Interest-Bearing Liabilities
Interest-bearing demand deposits		264,994			1,412		0.71	%		260,754			790		0.41	%
Savings deposits		14,339			92		0.86	%		14,154			83		0.78	%
Time deposits		323,050			3,869		1.60	%		273,979			2,111		1.03	%
Total interest-bearing deposits		602,383			5,373		1.19	%		548,887			2,984		0.73	%
Other borrowings		44,828			928		2.77	%		27,660			294		1.42	%
Total interest-bearing liabilities		647,211			6,301		1.30	%		576,547			3,278		0.76	%
Noninterest-Bearing Liabilities
Noninterest-bearing demand deposits		111,407								104,998
Other liabilities		7,250								4,704
Stockholders' equity		73,087								67,891
Total Liabilities and Stockholders' Equity	$	838,955							$	754,140
Net interest income and margin (3)				$	25,289		4.11	%				$	24,186		4.36	%
Net interest spread (4)							3.83	%							4.20	%

(1) Includes nonaccrual loans.

(2) Annualized.

(3) Net interest margin is computed by dividing net interest income by total average earning assets.

(4) Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.

39

The table below sets forth the relative impact on net interest income of changes in the volume of earning assets and interest-bearing liabilities and changes in rates earned and paid by the Company on such assets and liabilities.  For purposes of this table, nonaccrual loans have been included in the average loan balances.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2018 versus 2017								2018 versus 2017
	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	$	121		$	31		$	152	$	152		$	104		$	256
Investment securities		(43	)		125			82		(25	)		182			157
Loans, net		660			612			1,272		2,841			872			3,713
Total interest income		738			768			1,506		2,968			1,158			4,126
Interest expense:
Interest-bearing demand deposits		13			310			323		23			599			622
Savings deposits		—			3			3		1			8			9
Time deposits		209			502			711		587			1,171			1,758
Short-term borrowings		142			75			217		356			278			634
Total interest expense		364			890			1,254		967			2,056			3,023
Net increase	$	374		$	(122	)	$	252	$	2,001		$	(898	)	$	1,103

(1) Changes due to both volume and rate have been allocated to volume changes.

Comparison of interest income, interest expense and net interest margin

The Company’s primary source of revenue is interest income.  Interest income for the three and nine months ended September 30, 2018 was $11.2 million and $31.6 million, respectively, compared to $9.7 million and $27.5 million for the three and nine months ended September 30, 2017.  Total interest income in the third quarter of 2018 benefited from loan growth of $30.8 million compared to the third quarter of 2017.  Interest income from interest-bearing deposits in other institutions increased primarily due to an increased average balance held with the Federal Reserve Bank during the third quarter of 2018 compared to 2017.  The annualized yield on interest-earning assets for the third quarter 2018 compared to 2017 was 5.22% and 4.94%, respectively. Fed rate increases of 25 basis points each in December 2017, March 2018, June 2018, and September 2018 were partially responsible for the increased yield on interest-earning assets, primarily through the loan portfolio.

Interest expense for the three and nine months ended September 30, 2018 compared to 2017 increased by $1.3 million and $3.0 million, respectively.  This increase for the comparable periods was primarily due to increased time deposit balances, repricing of maturing time deposits, increase in interest-bearing demand deposits costs, and increased cost of borrowings.  The annualized average cost of interest-bearing liabilities increased by 64 basis points to 1.51% for the three months ended September 30, 2018 compared to the same period in 2017.  The increase in deposit interest expense for the nine months ended September 30, 2018 compared to 2017 was due to both growth in interest bearing certificates of deposits and increased average cost of those deposits due to the 100 basis points of Federal Reserve rate increases.  The cost of other borrowings for the comparable periods increased by 100 basis points to 2.79% for the three months ended September 30, 2018 compared to the same period in 2017 due to the increased use of longer term FHLB borrowings to manage interest rate risk.

The net impact of the changes in yields on interest-earning assets and the rates paid on interest-bearing liabilities were decreases in the interest margin for the three and nine months ended September 30, 2018 to 4.02% and 4.11%, respectively, compared to 4.27% and 4.36% in the three and nine months ended September 30, 2017, respectively.

Provision for loan losses

The provision for loan losses in each period is reflected as a charge against earnings in that period.  The provision for loan losses is equal to the amount required to maintain the allowance for loan losses at a level that is adequate to absorb probable losses inherent in the loan portfolio.  The provision (credit) for loan losses was $(0.2) million and $0.2 million for the third quarter of 2018 and 2017, respectively.  The provision (credit) for the nine months ended September 30, 2018 was $(0.2) million compared to $0.4 million for the nine months ended September 30, 2017.  The improvements in credit quality, historical loss rates and net recoveries resulted in the decrease in the ratio of allowance for loan losses to loans held for investment from 1.25% at September 30, 2017 to 1.21% at September 30, 2018.

40

The following schedule summarizes the provision, charge-offs (recoveries) by loan category for the three and nine months ended September 30, 2018 and 2017:

	For the Three Months Ended September 30,
	Manufactured Housing			Commercial Real Estate			Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,145		$	5,007		$	1,221		$	57		$	93		$	99		$	—	$	8,622
Charge-offs		—			—			—			—			—			—			—		—
Recoveries		6			—			19			34			35			—			—		94
Net (charge-offs) recoveries		6			—			19			34			35			—			—		94
Provision (credit)		17			(134	)		4			(38	)		(36	)		(10	)		—		(197	)
Ending balance	$	2,168		$	4,873		$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,124		$	4,332		$	1,262		$	91		$	98		$	87		$	—	$	7,994
Charge-offs		—			—			—			—			—			(33	)		—		(33	)
Recoveries		38			—			43			104			7			—			—		192
Net (charge-offs) recoveries		38			—			43			104			7			(33	)		—		159
Provision (credit)		(15	)		359			(100	)		(108	)		(11	)		34			—		159
Ending balance	$	2,147		$	4,691		$	1,205		$	87		$	94		$	88		$	—	$	8,312

	For the Nine Months Ended September 30,
	Manufactured Housing			Commercial Real Estate		Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,180		$	4,844	$	1,133		$	73		$	92		$	98		$	—	$	8,420
Charge-offs		(6	)		—		—			—			—			—			—		(6	)
Recoveries		114			15		43			102			54			1			—		329
Net (charge-offs) recoveries		108			15		43			102			54			1			—		323
Provision (credit)		(120	)		14		68			(122	)		(54	)		(10	)		—		(224	)
Ending balance	$	2,168		$	4,873	$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,201		$	3,707	$	1,241		$	106		$	100		$	109		$	—	$	7,464
Charge-offs		(119	)		—		—			(30	)		—			(54	)		—		(203	)
Recoveries		105			227		116			168			11			1			—		628
Net (charge-offs) recoveries		(14	)		227		116			138			11			(53	)		—		425
Provision (credit)		(40	)		757		(152	)		(157	)		(17	)		32			—		423
Ending balance	$	2,147		$	4,691	$	1,205		$	87		$	94		$	88		$	—	$	8,312

The percentage of net nonaccrual loans to the total loan portfolio has decreased to 0.50% as of September 30, 2018 from 0.61% at December 31, 2017.

The allowance for loan losses compared to net nonaccrual loans has increased to 226.9% as of September 30, 2018 from 188.3% as of December 31, 2017.  Total past due loans increased to $1.8 million as of September 30, 2018 from $0.4 million as of December 31, 2017.  This increase was primarily from one $1.3 million commercial real estate loan.

41

Non-Interest Income

The Company earned non-interest income primarily through fees related to services provided to loan and deposit customers.

The following table summarizes the Company's non-interest income for the periods indicated:

	Three Months Ended September 30,				Increase			Nine Months Ended September 30,				Increase
	2018		2017		(Decrease)			2018		2017		(Decrease)
	(in thousands)
Other loan fees	$	379	$	354	$	25		$	998	$	999	$	(1	)
Document processing fees		120		146		(26	)		367		430		(63	)
Service charges		113		118		(5	)		351		326		25
Other		29		98		(69	)		252		299		(47	)
Total non-interest income	$	641	$	716	$	(75	)	$	1,968	$	2,054	$	(86	)

Total non-interest income decreased slightly to $0.6 million for the three months ended September 30, 2018 compared to 2017.  Document processing fees for the three months ended September 30, 2018 were lower due to decreased loan originations compared to the same period in 2017. Other fees decreased during the three months ended September 30, 2018 compared to the three months ended September 30, 2017 primarily due to a $34,000 mark-down on securities held at fair value.

Total non-interest income decreased slightly to $2.0 million for the nine months ended September 30, 2018 compared to 2017.  Document processing fees for the nine months ended September 30, 2018 were lower due to decreased loan originations compared to the nine months ended September 30, 2017. Other fees decreased during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 primarily due to reduced loan servicing fees of $54,000.

 Non-Interest Expenses

The following table summarizes the Company's non-interest expenses for the periods indicated:

	Three Months Ended September 30,				Increase			Nine Months Ended September 30,				Increase
	2018		2017		(Decrease)			2018		2017		(Decrease)
	(in thousands)
Salaries and employee benefits	$	4,147	$	3,839	$	308		$	12,338	$	11,566	$	772
Occupancy, net		778		754		24			2,303		2,085		218
Professional services		326		281		45			931		759		172
Data processing		201		192		9			619		525		94
Depreciation		199		168		31			552		519		33
FDIC assessment		169		172		(3	)		547		461		86
Advertising and marketing		154		137		17			487		488		(1	)
Stock based compensation		81		283		(202	)		284		454		(170	)
Other		347		561		(214	)		1,131		1,460		(329	)
Total non-interest expenses	$	6,402	$	6,387	$	15		$	19,192	$	18,317	$	875

Total non-interest expenses remained unchanged between the three months ended September 30, 2018 and 2017, and increased $0.9 million in the nine months ended September 30, 2018 compared to 2017, respectively.  The increase in non-interest expenses for the year to date 2018 is primarily due to increased salaries and employee benefits, and occupancy as a result of the Bank’s expansions in the Northern and Southern regions, and addition of customer relationship and support positions.  FDIC assessment increased $0.1 million the nine months ended September 30, 2018 compared to 2017 due to a higher asset base for assessment and increased assessment factor. Professional services increased $0.2 million in the nine months ended September 30, 2018 compared to 2017 due to increased consulting costs for operational training and project implementation.  Stock based compensation decreased $0.2 million for the three and nine months ended September 30, 2018 compared to 2017 due to $0.2 million of non-qualified stock options granted during the third quarter 2017. The decrease in other expenses were mainly due to higher loan origination cost deferrals during the nine months ended September 30, 2018 compared to 2017.

42

Income Taxes

Income tax provision for the three and nine months ended September 30, 2018 was $0.7 million and $2.2 million, respectively, compared to $1.0 million and $3.0 million in the same periods during 2017.  The combined state and federal effective income tax rates for the nine months ended September 30, 2018 and 2017 were 27.0% and 40.5%, respectively.  The effective tax rate decreased in 2018 primarily as a result of the enacted tax rate change from 34% to 21% under the Tax Cuts and Jobs Act of December 2017.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and their respective tax basis including operating losses and tax credit carryforwards.  Net deferred tax assets of $3.2 million at September 30, 2018 are reported in the consolidated balance sheet as a component of total assets.

Accounting standards Codification Topic 740, Income Taxes, requires that companies assess whether a valuation allowance should be established against their deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard.

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

There was no valuation allowance on deferred tax assets at September 30, 2018 or December 31, 2017.

The Company is subject to the provisions of ASC 740, Income Taxes (ASC 740).  ASC 740 prescribes a more likely than not threshold for the financial statement recognition of uncertain tax positions.  ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  On a quarterly basis, the Company undergoes a process to evaluate whether income tax accruals are in accordance with ASC 740 guidance on uncertain tax positions.  There were no uncertain tax positions at September 30, 2018 and December 31, 2017.

BALANCE SHEET ANALYSIS

Total assets increased $21.4 million to $854.7 million at September 30, 2018 from $833.3 million at December 31, 2017.  Net loans increased by $19.0 million to $745.2 million at September 30, 2018 from $726.2 million at December 31, 2017.  The majority of the loan increase was due to increases of $8.0 million and $16.9 million in our commercial and manufactured housing portfolios, respectively. This increase was partially offset by a decrease of $3.0 million in investment securities available-for-sale.

Total liabilities increased $15.9 million to $779.2 million at September 30, 2018 from $763.2 million at December 31, 2017 mostly due to increased total deposits of $20.3 million.  Non-interest-bearing demand deposits decreased by $2.9 million and interest-bearing demand deposits increased by $10.3 million, while certificates of deposit increased $12.5 million due to a certificate of deposit promotion that ran during the third quarter of 2018.

Total stockholders’ equity increased $5.5 million to $75.6 million at September 30, 2018 from $70.1 million at December 31, 2017.  The $6.1 million increase in retained earnings from net income was offset by a $1.2 million decrease from common stock dividends.  The book value per common share was $9.13 at September 30, 2018 compared to $8.55 at December 31, 2017.

Selected Balance Sheet Accounts

	September 30, 2018		December 31, 2017		Increase (Decrease)			Percent Increase (Decrease)
	(dollars in thousands)
Cash and cash equivalents	$	47,753	$	45,869	$	1,884			4.1	%
Investment securities available-for-sale		25,802		28,783		(2,981	)		(10.4	)%
Investment securities held-to-maturity		7,475		7,565		(90	)		(1.2	)%
Loans - held for sale		50,944		55,094		(4,150	)		(7.5	)%
Loans - held for investment, net		694,278		671,095		23,183			3.5	%
Total assets		854,709		833,315		21,394			2.6	%
Total deposits		719,942		699,684		20,258			2.9	%
Other borrowings		50,000		56,843		(6,843	)		(12.0	)%
Total stockholder's equity		75,557		70,070		5,487			7.8	%

43

The table below summarizes the distribution of the Company’s loans held for investment at the end of each of the periods indicated.

	September 30, 2018			December 31, 2017
	(in thousands)
Manufactured housing	$	240,010		$	223,115
Commercial real estate		353,136			354,617
Commercial		83,328			75,282
SBA		6,131			7,424
HELOC		9,446			9,422
Single family real estate		11,153			10,346
Consumer		73			83
		703,277			680,289
Allowance for loan losses		(8,519	)		(8,420	)
Deferred costs, net		(402	)		(652	)
Discount on SBA loans		(78	)		(122	)
Total loans held for investment, net	$	694,278		$	671,095

The Company had $50.9 million of loans held for sale at September 30, 2018 compared to $55.1 million at December 31, 2017.  Loans held for sale at September 30, 2018 consisted of $15.0 million SBA loans and $35.9 million commercial agriculture loans.  Loans held for sale at December 31, 2017, were $18.9 million SBA loans and $36.2 million commercial agriculture loans.

Concentrations of Lending Activities

The Company’s lending activities are primarily driven by the customers served in the market areas where the Company has branch offices in the Central Coast of California.  The Company monitors concentrations within selected categories such as geography and product.  The Company originates manufactured housing, commercial, SBA, construction, real estate and consumer loans to customers through branch offices located in the Company’s primary markets.  The Company’s business is concentrated in these areas and the loan portfolio includes significant credit exposure to the manufactured housing and commercial real estate markets of these areas.  As of September 30, 2018 and December 31, 2017, manufactured housing loans comprised 32.2% and 30.7%, respectively, of total loans.  As of September 30, 2018 and December 31, 2017, commercial real estate loans accounted for approximately 47.4% and 48.8% of total loans, respectively.  Approximately 34.1% and 33.9% of these commercial real estate loans were owner-occupied at September 30, 2018 and December 31, 2017, respectively.  Substantially all of these loans are secured by first liens with an average loan to value ratios of 55.0% at September 30, 2018 and December 31, 2017.  The Company was within established concentration policy limits at September 30, 2018 and December 31, 2017.

Asset Quality

For all banks and bank holding companies, asset quality plays a significant role in the overall financial condition of the institution and results of operations.  The Company measures asset quality in terms of nonaccrual loans as a percentage of gross loans, and net charge-offs as a percentage of average loans.  Net charge-offs are calculated as the difference between charged-off loans and recovery payments received on previously charged-off loans.

	September 30, 2018			December 31, 2017
	(in thousands)
Nonaccrual loans (net of government guaranteed portion)	$	3,755		$	4,472
Troubled debt restructured loans, gross		17,644			16,603
Nonaccrual loans (net of government guaranteed portion) to gross loans		0.50	%		0.93	%
Net charge-offs (recoveries) (annualized) to average loans		(0.05	)%		(0.03	)%
Allowance for loan losses to nonaccrual loans (net of government guaranteed portion)		226.87	%		314.27	%
Allowance for loan losses to gross loans		1.21	%		1.24	%

44

The following table reflects the recorded investment in certain types of loans at the dates indicated:

	September 30, 2018			December 31, 2017
	(in thousands)
Total nonaccrual loans	$	5,710		$	6,844
Government guaranteed portion of loans included above		(1,955	)		(2,372	)
Total nonaccrual loans, without guarantees	$	3,755		$	4,472
Troubled debt restructured loans, gross	$	17,644		$	16,603
Loans 30 through 89 days past due with interest accruing	$	1,822		$	389
Loans 90 days or more past due with interest accruing	$	25		$	—
Allowance for loan losses to gross loans held for investment		1.21	%		1.24	%

Impaired loans

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

A loan is considered a troubled debt restructured loan (“TDR”) when concessions have been made to the borrower and the borrower is in financial difficulty.  These concessions include but are not limited to term extensions, rate reductions and principal reductions.  Forgiveness of principal is rarely granted and modifications for all classes of loans are predominantly term extensions.  TDR loans are also considered impaired.

45

The following schedule summarizes impaired loans and specific reserves by loan class as of the periods indicated:

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Impaired Loans as of September 30, 2018:	(in thousands)
Recorded Investment:
Impaired loans with an allowance recorded	$	5,906	$	245	$	219	$	1	$	—	$	282	$	—	$	6,653
Impaired loans with no allowance recorded		2,330		107		6,978		865		203		1,980		—		12,463
Total loans individually evaluated for impairment		8,236		352		7,197		866		203		2,262		—		19,116
Related Allowance for Credit Losses
Impaired loans with an allowance recorded		429		9		1		—		—		20		—		459
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		429		9		1		—		—		20		—		459
Total impaired loans, net	$	7,807	$	343	$	7,196	$	866	$	203	$	2,242	$	—	$	18,657

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Impaired Loans as of December 31, 2017:
Recorded Investment:
Impaired loans with an allowance recorded	$	5,830	$	557	$	3,551	$	281	$	—	$	2,133	$	—	$	12,352
Impaired loans with no allowance recorded		2,163		—		5,023		699		214		176		—		8,275
Total loans individually evaluated for impairment		7,993		557		8,574		980		214		2,309		—		20,627
Related Allowance for Credit Losses
Impaired loans with an allowance recorded		427		11		50		1		—		35		—		524
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		427		11		50		1		—		35		—		524
Total impaired loans, net	$	7,566	$	546	$	8,524	$	979	$	214	$	2,274	$	—	$	20,103

Total impaired loans decreased $1.5 million in the third quarter of 2018 compared to December 31, 2017.  An increase in impaired manufactured housing loans of $0.2 million was offset by a decrease in impaired commercial loans of $1.4 million and a decrease of $0.2 in impaired commercial real estate loans. The increase in impaired manufactured housing loans was due to the addition of three new impaired loans.  The decrease in impaired commercial loans was due to five loans that paid off and pay downs throughout the rest of the portfolio.

46

The following table summarizes the composite of nonaccrual loans net of government guarantee:

	At September 30, 2018								At December 31, 2017
	Nonaccrual Balance		%			Percent of Total Loans			Nonaccrual Balance		%			Percent of Total Loans
	(dollars in thousands)
Manufactured housing	$	292		5.12	%		0.04	%	$	418		6.11	%		0.06	%
Commercial real estate		107		1.87	%		0.02	%		306		4.47	%		0.04	%
Commercial		4,088		71.59	%		0.58	%		4,786		69.93	%		0.65	%
SBA		856		14.99	%		0.12	%		944		13.79	%		0.13	%
HELOC		202		3.54	%		0.03	%		214		3.13	%		0.03	%
Single family real estate		165		2.89	%		0.02	%		176		2.57	%		0.02	%
Consumer		—		—			—			—		—			—
Total nonaccrual loans	$	5,710		100.00	%		0.81	%	$	6,844		100.00	%		0.93	%

Nonaccrual balances include $2.0 million and $2.4 million, respectively, of loans that are government guaranteed at September 30, 2018 and December 31, 2017, respectively.  Nonaccrual loans net of government guarantees decreased $0.7 million or 16%, from $4.5 million at December 31, 2017 to $3.8 million at September 30, 2018  The percentage of nonaccrual loans net of government guarantees to the total loan portfolio has decreased to 0.53% as of September 30, 2018 from 0.66% at December 31, 2017.

CWB or the SBA repurchases the guaranteed portion of SBA loans from investors when those loans become past due 120 days.  After the foreclosure and collection process is complete, the SBA reimburses CWB for this principal balance.  Therefore, although these balances do not earn interest during this period, they generally do not result in a loss of principal to CWB.

47

Allowance For Loan Losses

The following table summarizes the allocation of allowance for loan losses by loan type.  However allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Allowance for loan losses:							(in thousands)
Balance at beginning of period	$	8,622		$	7,994		$	8,420		$	7,464
Provisions charged to operating expenses:
Manufactured housing		17			(15	)		(120	)		(40	)
Commercial real estate		(134	)		359			14			757
Commercial		4			(100	)		68			(152	)
SBA		(38	)		(108	)		(122	)		(157	)
HELOC		(36	)		(11	)		(54	)		(17	)
Single family real estate		(10	)		34			(10	)		32
Consumer		—			—			—			—
Total Provision (credit)		(197	)		159			(224	)		423
Recoveries of loans previously charged-off:
Manufactured housing		6			38			114			105
Commercial real estate		—			—			15			227
Commercial		19			43			43			116
SBA		34			104			102			168
HELOC		35			7			54			11
Single family real estate		—			—			1			1
Consumer		—			—			—			—
Total recoveries		94			192			329			628
Loans charged-off:
Manufactured housing		—			—			6			119
Commercial real estate		—			—			—			—
Commercial		—			—			—			—
SBA		—			—			—			30
HELOC		—			—			—			—
Single family real estate		—			33			—			54
Consumer		—			—			—			—
Total charged-off		—			33			6			203
Net charge-offs (recoveries)		(94	)		(159	)		(323	)		(425	)
Balance at end of period	$	8,519		$	8,312		$	8,519		$	8,312

48

Potential Problem Loans

The Company classifies loans consistent with federal banking regulations.  These loan grades are described in further detail in Note 1, “Summary of Significant Accounting Policies” of this Form 10-Q.  The following table presents information regarding potential problem loans consisting of loans graded watch or worse, but still performing:

	September 30, 2018
	Number of Loans		Loan Balance (1)		Percent			Percent of Total Loans
	(dollars in thousands)
Manufactured housing		—	$	—		0.00	%		0.00	%
Commercial real estate		2		1,560		55.91	%		0.21	%
Commercial		2		292		10.47	%		0.04	%
SBA		5		933		33.44	%		0.13	%
HELOC		—		—		0.00	%		0.00	%
Single family real estate		1		5		0.18	%		0.00	%
Total		10	$	2,790		100.00	%		0.38	%

(1) Of the $2.8 million of potential problem loans, $0.9 million are guaranteed by government agencies.

	December 31, 2017
	Number of Loans		Loan Balance (1)		Percent			Percent of Total Loans
	(dollars in thousands)
Manufactured housing		—	$	—		0.00	%		0.00	%
Commercial real estate		2		2,028		53.38	%		0.28	%
Commercial		3		374		9.84	%		0.05	%
SBA		7		1,393		36.65	%		0.19	%
HELOC		—		—		0.00	%		0.00	%
Single family real estate		1		5		0.13	%		0.00	%
Total		13	$	3,800		100.00	%		0.52	%

(1) Of the $3.8 million of potential problem loans, $1.5 million are guaranteed by government agencies.

Investment Securities

Investment securities are classified at the time of acquisition as either held-to-maturity or available-for-sale based upon various factors, including asset/liability management strategies, liquidity and profitability objectives, and regulatory requirements.  Held-to-maturity securities are carried at amortized cost, adjusted for amortization of premiums or accretion of discounts.  Available-for-sale securities are securities that may be sold prior to maturity based upon asset/liability management decisions.  Investment securities identified as available-for-sale are carried at fair value.  Unrealized gains or losses on available-for-sale securities are recorded as accumulated other comprehensive income in stockholders’ equity.  Amortization of premiums or accretion of discounts on mortgage-backed securities is periodically adjusted for estimated prepayments.

The investment securities portfolio of the Company is utilized as collateral for borrowings, required collateral for public deposits and to manage liquidity, capital, and interest rate risk.

The carrying value of investment securities was as follows:

	September 30, 2018		December 31, 2017
	(in thousands)
U.S. government agency notes	$	12,520	$	13,978
U.S. government agency mortgage backed securities ("MBS")		7,475		7,565
U.S. government agency collateralized mortgage obligations ("CMO")		13,282		14,649
Equity securities: Farmer Mac class A stock		144		156
	$	33,421	$	36,348

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Other Assets Acquired Through Foreclosure

The following table represents the changes in other assets acquired through foreclosure:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Balance, beginning of period	$	213		$	362		$	372		$	137
Additions		—			132			174			502
Proceeds from dispositions		(213	)		(60	)		(484	)		(303	)
(Loss) Gain on sales, net		—			52			(62	)		150
Balance, end of period	$	—		$	486		$	—		$	486

Other assets acquired through foreclosure consist primarily of properties acquired as a result of, or in-lieu-of, foreclosure.  Properties or other assets (primarily manufactured housing) are classified as other real estate owned and other repossessed assets and are reported at fair value at the time of foreclosure less estimated costs to sell.  Costs relating to development or improvement of the assets are capitalized and costs related to holding the assets are charged to expense.  The Company had a valuation allowance on foreclosed assets of $0 at September 30, 2018 and $5,000 at September 30, 2017.  At September 30, 2018, the Company had no loans in process of foreclosure.

Deposits

The following table provides the balance and percentage change in the Company’s deposits:

	September 30, 2018		December 31, 2017		Increase (Decrease)			Percent Increase (Decrease)
	(dollars in thousands)
Non-interest bearing demand deposits	$	105,580	$	108,500	$	(2,920	)		(2.7	)%
Interest-bearing demand deposits		267,046		256,717		10,329			4.0	%
Savings		14,385		14,085		300			2.1	%
Certificates of deposit ($250,000 or more)		92,934		81,985		10,949			13.4	%
Other certificates of deposit		239,997		238,397		1,600			0.7	%
Total deposits	$	719,942	$	699,684	$	20,258			2.9	%

Total deposits increased to $719.9 million at September 30, 2018 from $699.7 million at December 31, 2017, an increase of $20.3 million.  This increase was primarily from interest-bearing demand deposits and certificates of deposit, and slightly offset by a decline in non-interest bearing demand deposits.  The increase in certificates of deposit is attributable to a deposit promotion that ran throughout the third quarter of 2018. Deposits are the primary source of funding the Company’s asset growth.  In addition, the Bank is a member of Certificate of Deposit Account Registry Service (“CDARS”).  CDARS provides a mechanism for obtaining FDIC insurance for large deposits.  At September 30, 2018 and December 31, 2017, the Company had $22.5 million and $32.1 million, respectively, of CDARS deposits.

Liquidity and Capital Resources

Liquidity Management

Liquidity is the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates.  Liquidity management involves forecasting funding requirements and maintaining sufficient capacity to meet the needs and accommodate fluctuations in asset and liability levels due to changes in our business operations or unanticipated events.

The ability to have readily available funds sufficient to repay fully maturing liabilities is of primary importance to depositors, creditors and regulators.  Our liquidity, represented by cash and amounts due from banks, federal funds sold and non-pledged marketable securities, is a result of our operating, investing and financing activities and related cash flows.  To ensure funds are available when necessary, on at least a quarterly basis, we project the amount of funds that will be required, and we strive to maintain relationships with a diversified customer base.  Liquidity requirements can also be met through short-term borrowings or the disposition of short-term assets.

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The Company has established policies as well as analytical tools to manage liquidity.  Proper liquidity management ensures that sufficient funds are available to meet normal operating demands in addition to unexpected customer demand for funds, such as high levels of deposit withdrawals or increased loan demand, in a timely and cost effective manner.  The most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of core deposits.  Ultimately, public confidence is gained through profitable operations, sound credit quality and a strong capital position.  The Company’s liquidity management is viewed from a long-term and short-term perspective, as well as from an asset and liability perspective.  Management monitors liquidity through regular reviews of maturity profiles, funding sources and loan and deposit forecasts to minimize funding risk.

The Company has asset and liability management committees (“ALCO”) at the Board and Bank management level to review asset and liability management and liquidity issues.

CWB has a blanket lien credit line with the Federal Home Loan Bank (“FHLB”).  Advances are collateralized in the aggregate by CWB’s eligible loans and securities.  CWB had $47.0 million and $50.0 million of FHLB advances at September 30, 2018 and December 31, 2017, respectively, borrowed at fixed rates.  The Company also had $125.0 million of letters of credit with FHLB at September 30, 2018 to secure public funds.  At September 30, 2018, CWB had pledged to the FHLB, $33.3 million of securities and $239.0 million of loans.  At September 30, 2018, CWB had $70.2 million available for additional borrowing.  At December 31, 2017, CWB had pledged to the FHLB, securities of $36.2 million at carrying value and $235.4 million of loans.

CWB has established a credit line with the Federal Reserve Bank (“FRB”).  There were no outstanding FRB advances as of September 30, 2018 and December 31, 2017.  CWB had $105.1 million and $104.3 million in borrowing capacity as of September 30, 2018 and December 31, 2017, respectively.

The Company has federal funds purchased lines at correspondent banks with a total borrowing capacity of $20.0 million.  There was no amount outstanding as of September 30, 2018 and December 31, 2017.

The Company continues to face strong competition for core deposits.  The liquidity ratio of the Company was 14.6% and 15.6% at September 30, 2018 and December 31, 2017, respectively.  The Company’s liquidity ratio fluctuates in conjunction with loan funding demands.  The liquidity ratio consists of the sum of cash and due from banks, deposits in other financial institutions, available for sale investments, federal funds sold and loans held for sale, divided by total assets.

CWBC’s routine funding requirements primarily consist of certain operating expenses and common stock dividends.  Normally, CWBC obtains funding to meet its obligations from dividends collected from the Bank and has the capability to issue debt securities.  Federal banking laws regulate the amount of dividends that may be paid by banking subsidiaries without prior approval.

Capital Resources

Maintaining capital strength continues to be a long-term objective for the Company.  Ample capital is necessary to sustain growth, provide protection against unanticipated declines in asset values, and to safeguard depositor funds.  Capital is also a source of funds for loan demand and enables the Company to effectively manage its assets and liabilities.  The Company has the capacity to issue 60,000,000 shares of common stock of which 8,274,882 have been issued at September 30, 2018.  Conversely, the Company may decide to repurchase shares of its outstanding common stock, depending on the market price and other relevant factors.

The Federal Reserve has adopted capital adequacy guidelines that are used to assess the adequacy of capital in supervising a bank holding company.  In July 2013, the federal banking agencies approved the final rules (“Final Rules”) to establish a new comprehensive regulatory capital framework with a phase-in period beginning January 1, 2015 and ending January 1, 2019.  The Final Rules implement the third installment of the Basel Accords (“Basel III”) regulatory capital reforms and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and substantially amend the regulatory risk-based capital rules applicable to the Company.  Basel III redefines the regulatory capital elements and minimum capital ratios, introduces regulatory capital buffers above those minimums, revises rules for calculating risk-weighted assets and adds a new component of Tier 1 capital called Common Equity Tier 1, which includes common equity and retained earnings and excludes preferred equity.

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The following tables illustrates the Bank’s regulatory ratios and the Federal Reserve’s current adequacy guidelines as of September 30, 2018 and December 31, 2017.  The Federal Reserve’s fully phased-in guidelines applicable in 2019 are also summarized.

	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, 2018
CWB's actual regulatory ratios		10.78	%		9.63	%		9.63	%		8.22	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

	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, 2017
CWB's actual regulatory ratios		11.31	%		10.10	%		10.10	%		8.83	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

The Company has evaluated the impact of the Final Rules and believes that, as of September 30, 2018, the Company would meet all capital adequacy requirements under the Basel III capital rules on a fully phased-in basis as if all such requirements were currently in effect.  There are no conditions or events since September 30, 2018 that management believes have changed the Company’s or the Bank’s risk-based capital category.

Supervision and Regulation

Banking is a complex, highly regulated industry.  The primary goals of the regulatory scheme are to maintain a safe and sound banking system, protect depositors and the Federal Deposit Insurance Corporation’s (“FDIC”) insurance fund, and facilitate the conduct of sound monetary policy.  In furtherance of these goals, Congress and the states have created several largely autonomous regulatory agencies and enacted numerous laws that govern banks, bank holding companies and the financial services industry. Consequently, the growth and earnings performance of the Company can be affected not only by management decisions and general economic conditions, but also by the requirements of applicable state and federal statutes, regulations and the policies of various governmental regulatory authorities, including the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (“OCC”), and FDIC.

The system of supervision and regulation applicable to financial services businesses governs most aspects of the business of CWBC and CWB, including: (i) the scope of permissible business; (ii) investments; (iii) reserves that must be maintained against deposits; (iv) capital levels that must be maintained; (v) the nature and amount of collateral that may be taken to secure loans; (vi) the establishment of new branches; (vii) mergers and consolidations with other financial institutions; and (viii) the payment of dividends.

From time to time laws or regulations are enacted which have the effect of increasing the cost of doing business, limiting or expanding the scope of permissible activities, or changing the competitive balance between banks and other financial and non-financial institutions.  Proposals to change the laws and regulations governing the operations of banks and bank holding companies are frequently made in Congress and by various bank and other regulatory agencies.  Future changes in the laws, regulations or policies that impact the Company cannot necessarily be predicted, but they may have a material effect on the Company’s business and earnings.

For a detailed discussion of the regulatory scheme governing the Company and CWB, please see the discussion in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation – Supervision and Regulation."

52

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Certain qualitative and quantitative disclosures about market risk is set forth in Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.  There has been no material change in these disclosures as previously disclosed in the Company’s Form 10-K.  For further discussion of interest rate risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity - Interest Rate Risk.”

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e).  Based upon that evaluation, the Company’s management, which includes the Company's Chief Executive Officer and the Chief Financial Officer, has concluded that, as of the end of the period covered by this report, disclosure controls and procedures are effective in ensuring that information relating to the Company (including its consolidated subsidiary) required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives.  The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures.  These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or intentional circumvention of the established process.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated whether there was any change in internal control over financial reporting that occurred during the quarter ended September 30, 2018 and determined that there was no change in internal control over financial reporting that occurred during the quarter ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

53

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various other litigation matters of a routine nature that are being handled and defended in the ordinary course of the Company’s business.  In the opinion of Management, based in part on consultation with legal counsel, the resolution of these litigation matters are not expected to have a material impact on the Company’s financial position or results of operations.

ITEM 1A. RISK FACTORS

Investing in our common stock involves various risks which are particular to our Company, our industry and our market area.  Several risk factors that may have a material adverse impact on our business, operating results and financial condition are discussed in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.  There has been no material change in the Company’s risk factors as previously disclosed in the Company’s Form 10-K.

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

On August 24, 2017, the Board of Directors extended the common stock repurchase program of up to $3.0 million for two additional years.  Under this program the Company has repurchased 187,569 common stock shares for $1.4 million at an average price of $7.25 per share.  There were no repurchases of common stock under this program during the three or nine months ended September 30, 2018.  The repurchase program is effective until August 2019.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following Exhibits are filed herewith.

Exhibit Number	.
10.47	Employment and Confidentiality Agreement, dated July 23, 2018, among Community West Bank, Community West Bancshares and T. Joseph Stronks.
10.48	Employment and Confidentiality Agreement, dated July 30, 2018, among Community West Bank, Community West Bancshares and Paul S. Ulrich.
10.49	Salary Continuation Agreement, dated September 28, 2018, between Community West Bank and William Filippin.
31.1	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.
31.2	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.
32.1*	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	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* 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.

55

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COMMUNITY WEST BANCSHARES

(Registrant)

Date: November 2, 2018	BY:	/s/ Susan C. Thompson
	Susan C. Thompson
	Executive Vice President and Chief Financial Officer
	On Behalf of Registrant and as a Duly Authorized Officer
	and as Principal Financial and Accounting Officer

56

EXHIBIT INDEX

Exhibit Number
10.47	Employment and Confidentiality Agreement, dated July 23, 2018, among Community West Bank, Community West Bancshares and T. Joseph Stronks.
10.48	Employment and Confidentiality Agreement, dated July 30, 2018, among Community West Bank, Community West Bancshares and Paul S. Ulrich.
10.49	Salary Continuation Agreement, dated September 28, 2018, between Community West Bank and William Filippin.
31.1	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.
31.2	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.
32.1*	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	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* 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.

57

EX-10.47

Exhibit 10.47

COMMUNITY WEST BANK

Employment Agreement

THIS EMPLOYMENT AGREEMENT (the “Agreement”) including Exhibits A-C attached hereto, is entered into by and between Community West Bank, including its directors, officers, employees, contractors, agents, representatives, successors and assigns (collectively, “the Bank”) and T. Joseph Stronks, an individual, and his/her heirs, agents, representatives and assigns (collectively, “Employee”).

RECITALS

WHEREAS, the Bank is a California National Banking Association duly organized, validly existing and in good standing under the laws of the United States of America, with power to own property and carry on its business as it is now being conducted, with its principal place of business located at 445 Pine Street, Goleta, California 93117;

WHEREAS, the Bank wishes to employ Employee; and Employee agrees to accept employment with the Bank, all on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises set forth herein, and for other good and valuable consideration, the parties agree as follows:

1.          EMPLOYMENT. The Bank hereby employs Employee as the Executive Vice President, Chief Operating Officer under the terms and conditions contained herein. Employee’s employment shall commence on July 23, 2018.  Employee’s employment shall continue until terminated by either party pursuant to the terms contained herein (the “Term”).

2.          AT-WILL EMPLOYMENT STATUS. Employee’s employment with the Bank is and shall remain “at will,” meaning that either the Bank or Employee shall have the right at any time, for any reason or no reason at all, to terminate Employee’s employment with the Bank upon written notice to the other party, subject to the termination provisions contained herein.

3. POSITION AND DUTIES

3.1.         Position and Reporting Relationship. During the Term, Employee shall serve the Bank in the position of Executive Vice President, Chief Operating Officer. Employee shall report directly to the President and CEO.  Employee shall perform his/her duties at the Bank’s facility in Goleta, California, or such other location as the Bank may designate in its sole discretion.

3.2.         Duties and Responsibilities. During the Term, Employee’s duties and responsibilities shall include, without limitation, those duties set forth in Exhibit A hereto, as well as those additional duties and responsibilities which the Bank may from time to time assign to Employee. In acting on the Bank's behalf, Employee shall observe and be governed by all of the Bank’s rules and policies as established by the Bank from time to time in the Bank’s sole discretion.

3.3.         Schedule.  Employee shall be employed on a full-time basis, which shall mean that Employee is expected to devote approximately forty (40) hours per week to their work, or as needed to complete their duties. Employee is expected to be reasonably available to the Bank for business purposes between the hours of 8 am to 5 pm, Monday through Friday, except as agreed by Bank.  As an exempt employee, Employee shall not be paid additional compensation for overtime or excessive work hours.  Employee shall not keep time records, but shall be required to record absences for illness, personal time off, or other periods in which Employee is not performing work for the Bank.

3.4.         Best Efforts During Employment. At all times during the Term, Employee shall use their best efforts, skills, judgment and abilities, and shall at all times promote the Bank's interests and perform and discharge well and faithfully those duties. Employee shall devote Employee’s full and exclusive business time, attention and energies to the Bank's business in accordance with Employee’s anticipated schedule and duties hereunder. At no time during the Term shall Employee directly or indirectly engage in any activity that could or does materially interfere with or adversely affect Employee's performance of Employee's duties under this Agreement, or compete with or damage in any way the business of the Bank.

4. COMPENSATION

4.1.         Base Salary. In consideration of Employee’s services hereunder, the Bank shall pay to Employee an annual base salary (the “Base Salary”) of Two Hundred and Twenty Five Thousand Dollars ($225,000.00), payable in such installments and on such schedule as the Bank may from time to time implement for general payroll purposes. Such Base Salary shall be subject to required tax and other withholdings and shall be prorated for any partial periods of employment. The Bank, acting in its sole and absolute discretion, may review Employee’s performance and/or may adjust the Base Salary from time to time based upon the performance of Employee and/or the Bank, market conditions, or other factors in the Bank’s sole discretion.    Nothing in this section shall obligate the Bank to increase the Base Salary payable as a result of such review.  The Bank will not reduce the Base Salary payable to Executive without good cause.

1

4.2.        Bonuses. Employee shall be considered for an annual bonus based upon, without limitation, such factors as Employee’s performance and the overall performance of the Bank. Such annual bonus shall be paid to Employee, if at all, by no later than March 15th  after the close of the calendar year for performance achieved in the prior calendar year, provided Employee is actively employed and has not given notice of resignation at the time the bonus is paid. The existence and amount of any bonus provided to Employee in any given year is solely within the discretion of the Bank. The provision of a bonus in any given year does not guarantee any future bonus in any amount and does not alter the at-will status of Employee’s employment.

4.3          Deferred Compensation.  The bank has established a liability account for the benefit of the Employee as a participant in the Community West Bank Executive Deferred Compensation Agreement dated July 23, 2018.

4.4        Equity. Employee shall be eligible to participate in the Community West Bancshares Stock Option Plan in accordance with the express terms of that plan.  Employee will be granted an initial 20,000 share options upon the approval of the bank’s Board of Directors at the first board meeting after employee’s hire date.

5.          BENEFITS. Upon commencement of the Term, Employee shall be entitled to receive those benefits to which Employee may be entitled by law. In addition to such legally-mandated benefits, Employee shall also be eligible to receive the Bank-sponsored benefits, including but not limited to vacation and sick leave, health insurance and 401k benefits, as set forth in the Bank’s Employee Handbook and in accordance with company policies. The terms and conditions of such benefits shall be governed by the plan descriptions and/or the Bank’s policies as applicable. Such benefits shall be provided in the sole discretion of the Bank, and may be altered or revoked at any time.

6.          EXPENSES. The Bank shall reimburse Employee for all reasonable and necessary expenses incurred by Employee during the Term in the course of performing Employee’s services under this Agreement including the use of personal cell phone for bank business per the bank’s reimbursement policies. Employee must submit appropriate expense statements, receipts or such other supporting information in accordance with the Bank's reimbursement policies, as established by the Bank from time to time.

7.          RETURN OF COMPANY PROPERTY. Upon separation from employment for any reason, or at the request of the Bank at any time, Employee shall immediately return to the Bank all originals and copies of any and all Bank information as well as any and all Bank property in Employee’s possession. Employee agrees that all information and property provided to Employee by the Bank or as a result of Employee’s employment with the Bank shall at all times remain the sole and exclusive property of the Bank.

8.          PROTECTION OF COMPANY’S CONFIDENTIAL AND TRADE SECRET INFORMATION. Employee agrees and understands that the Bank’s protection of its confidential and trade secret information is critical to the protection of Bank’s clients and the security of Bank’s business. To demonstrate Employee’s commitment to the protection of such information, and to ensure Bank’s sole ownership and protection of all confidential information, trade secrets, inventions, works for hire and other materials, Employee shall execute the Bank’s Inventions Assignment and Confidentiality Agreement, attached hereto as Exhibit B, as a condition of employment.

9.          NO EXPECTATION OF PRIVACY. Employee recognizes and agrees that Employee has no expectation of privacy with respect to the Bank's communications equipment, telecommunications, networking or information processing systems (including stored computer files, desktop or laptop systems, personal digital assistants, e-mail messages, voice messages, text messages, posts, blogs, tweets, cellular telephone communications, internet activity, computer activity, photos, and any other communications equipment, methodology or output utilized by Employee on behalf of or regarding the Bank or its Related Persons, created or received upon equipment or technology owned by the Bank or used by Employee on the Bank’s behalf). Employee understands that all such activity and communications may be monitored, viewed, retrieved, recovered and accessed by the Bank at any time without notice.

10.         SOCIAL MEDIA. Employee has the right to engage in personal social media activities to express Employee’s thoughts or ideas on Employee’s personal time and using Employee’s personal equipment, so long as such activities are not performed on working time or while using the Bank computers, cell phones, personal digital assistants or other electronic communications equipment, and do not conflict with the Bank policies or business or harm the goodwill and reputation of the Bank. Employee may not (a) disclose the Bank Confidential Information on social media sites; (b) make defamatory or harassing statements about the Bank or its Related Persons; (c) defame the Bank, its activities or its Related Persons; (d) use or reproduce any the Bank logo, website link or other the Bank name or information; or (e) use the Bank’s name or information in connection with the expression of any individual opinion or position. Employee’s social media content must reflect that it is the opinion or content of Employee and must not imply any connection to or origination from the Bank (including without limitation the use of Employee’s the Bank e-mail address as the source of such communication). If Employee uses social media to promote the efforts or initiatives of the Bank, Employee must disclose Employee’s employment relationship to the Bank or connection to the Bank’s Related Persons within the social media content or communication. For the purposes of this Agreement, the term “social media” refers to on-line blogs, forums, chat rooms and social networking sites such as Yelp, Facebook, Twitter, LinkedIn, Pinterest and YouTube, as well as all other similar sites, communications or activities.

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11.          BINDING ARBITRATION. Employee agrees that any disputes arising out of Employee’s employment with the Bank shall be submitted to binding arbitration pursuant to the provisions set forth in the Arbitration Agreement attached hereto as Exhibit C.

12.        TERMINATION.  In keeping with Employee’s at-will status of employment, Bank shall be entitled to terminate Employee’s employment (and Employee shall be entitled to resign) at any time, with or without advance notice or cause.  Notwithstanding this at-will status, in the event that Bank terminates Employee’s employment without notice or cause, Employee shall be entitled to severance pay equal to three (3) months of Employee’s usual base wages.  Such severance shall be payable to Employee only after Employee executes Bank’s standard severance agreement, including a release of claims.   If Employee is terminated for cause, no severance shall be paid.  For the purposes of this section, “cause” shall be defined as (a) Employee’s disability which prevents Employee from being able to perform the essential functions of Employee’s position, with or without reasonable accommodation, to the extent that it causes an undue hardship to Bank; (b) Employee’s death; (c) Employee’s negligence, fraud, misrepresentation or gross dereliction of duties; (d) Employee’s conviction of a crime; or (e) any conduct of Employee which causes, or is likely to cause, significant or material harm to the Bank in the Bank’s sole discretion.

12.1     Termination on Change in Control.  “Change in Control”means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Code Section 409A and regulations thereunder.

(a)         If, within twelve (12) months following a Change of Control, Employee’s employment is terminated by Bank or Employee voluntarily resigns with good cause, Employee shall receive:

1. The sum of twelve (12) months of the Employee’s annual Base Salary hereof in effect as of the date of termination,

2. any incentive compensation earned but not yet paid, and

3. any business expenses incurred but not yet reimbursed.

(b)         The payment to which Employee is entitled pursuant to this Agreement shall be paid in a single installment within forty-five (45) days of Employee’s termination by Bank or voluntary resignation with good cause, unless Employee and Bank agree to a later payment date in writing.  The timing of the payment to Employee shall have no impact on the amount or value of the payment, and shall not increase or decrease the total amount of the payment due to Employee under this Section 12.1.

(c)          For the purposes of this section, Employee’s “voluntary resignation with good cause” shall be defined as Employee’s voluntary resignation after one of the following occurrences within twelve (12) months after a change in control:

1. Employee’s annual base salary is reduced without good cause; or a material change occurs in the functions, duties, responsibilities, reporting relationship or title.

2. Employee is required to relocate to a work location which is more than fifty (50) miles from Employee’s usual place of work.

12.2      Benefits upon Termination due to Change in Control.   During the twelve (12) month period commencing on the date the Term of Employment ends under this Agreement due to Change in Control, Employee (and, where applicable, Employee’s dependents) shall be entitled to continue participation in the group health insurance plans maintained by the Bank in the Consolidated Omnibus Budget Reconciliation Act of 1986 under “COBRA” with the Bank contributing the cost of the COBRA premiums.  After the twelve (12) month period ends, the employee may continue participation in the group health insurance plans per COBRA requirements by paying the COBRA premium rates in effect.

13.         ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement, including Exhibits A – C hereto, sets forth the entire agreement and understanding of the parties with regard to the subject matter hereof and supersedes all prior agreements, arrangements and understandings, written or oral, between the parties. No representation, promise or inducement has been made by either party that is not embodied in this Agreement. This Agreement shall be effective as of the last date this Agreement is executed by either party below and shall continue until modified by a writing signed by both parties or until Employee’s employment is terminated by either party. No waiver by either party of the breach of any term or covenant contained in this Agreement shall be deemed to be a continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

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14.          GOVERNING LAW; VENUE. California law, without regard to conflict or choice of law principles, shall govern the construction and interpretation of this Agreement and all claims, controversies and other disputes and proceedings concerning or arising out of this Agreement. The parties to this Agreement agree that all actions or proceedings in any forum which arise directly or indirectly from this Agreement shall be arbitrated or litigated within Los Angeles County, California.

15.          ATTORNEYS’ FEES. If any party to this Agreement commences an action against another party to this Agreement related in any way to the Bank’s employment of Employee, Employee’s separation from employment or the terms of this Agreement, the losing party shall pay the prevailing party's reasonable attorneys' fees, costs and expenses, court costs and other costs of action incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment, as well as reasonable attorneys' fees incurred in any post judgment proceeding to enforce any judgment in connection with this Agreement, except as otherwise provided by law.

16.          SEVERABILITY; BINDING EFFECT; ASSIGNMENT. If any of the provisions of this Agreement are determined to be unlawful or otherwise unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, executors, administrators, successors and assigns. Employee may not assign any rights under this Agreement without the express written permission of the Bank.

17.          NOTICES. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given (a) if delivered personally, when delivered; (b) if delivered by overnight carrier, on the date of delivery; or (c) if delivered by registered or certified mail, return receipt requested, on the third business day after having been mailed in Santa Barbara County, California. Notices and communications to the Bank shall be addressed to Martin Plourd, President/CEO, 445 Pine Ave. Goleta, CA  93117. Notices to the Employee shall be addressed to Employee at the address designated by Employee for employment purposes.

18.          COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement, to produce or account for more than one such counterpart.

19.          ADVICE OF COUNSEL; KNOWING AND VOLUNTARY EXECUTION. The parties to this Agreement have each sought the advice of counsel to the extent deemed necessary by that party with regard to the terms of this Agreement. Each party voluntarily enters into this Agreement with full knowledge and understanding of its terms.

IN WITNESS WHEREOF, the parties have duly executed this Agreement, including Exhibits A -C hereto, as of the date set forth below.

Dated:	Community West Bank
	By:
	Its:
Dated:	T. Joseph Stronks (“Employee”)
	T. Joseph Stronks

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Exhibit A

Job Description – Chief Operating Officer

As a Chief Operating Officer, Employee shall be responsible for the following duties, without limitation:

· Work closely with the President/CEO to develop and accomplish goals and strategic plans established by the Board of Directors and company executives.

· Management responsibility for the strategic planning process and oversight of the reporting function to the Board of the implementations of the plan by the various business units.

· Provide clear directions and oversight on strategic goals and their accomplishments, translating and prioritizing them into business and performance measures for responsible business units.

· Ensure strategic objectives are translated into tactical business plans with mechanisms for key measurements in place to monitor progress to completion.

· Contribute to the development of business unit strategy by providing a view on potential improvement for products or services and an assessment of the existing situation and anticipated changes in the external environment.

· Develop and implement plans for the operational infrastructure of systems, processes, and personnel designed to accommodate the growth objectives of the Bank.

· Maintain overall responsibility to provide for the continuance of the daily operation of the Bank regarding network services, connectivity for data processing/item processing and customized computer equipment.

· Ensure that business projects are delivered in line with directions from Management.

· Develop and establish operating policies consistent with the Bank’s broad policies and objectives to insure execution.

· Coordinate the efforts of the different operational areas under management to ensure minimal duplication of efforts, maximum efficiency & effectiveness, and maximum value.

· Ensure that a proper infrastructure (building, systems, technology and staff complement) is maintained and developed for the Bank.

· Ensure effective organization infrastructure for the information technology activities by selecting and implementing management systems and workplace methods and procedures that are standards of best practices in the banking industry and supportive attainment of organizational goals.

· Manage and direct the Bank's Disaster Recovery Plan, and serve as Chairman of the IT Steering Committee.

· Member of the Bank’s ALCO committee.

· Assist the CBO in supporting the development, communication, and implementation of effective growth strategies and processes; driving the achievement of sales, profitability, business goals, and objectives.

· Implement policy and procedure improvements and changes, and respond to issues presented by the Relationship Banking Group.

· Maintain knowledge of market and industry trends, competitors, and all aspects of the market.

· Establish and monitor key performance indicators for management of the Operations group.

· Facilitate leases, vendor contracts and maintenance.

· Lead, inspire and coach a team of high caliber professionals, creating succession to key roles and enhancing the Bank’s management capability.

· Foster a success-oriented, open, and accountable environment within the Bank emphasizing a culture of empowerment and teamwork.

· Lead by example, uphold and take actions in alignment with the Community West Bank Statement of Values on a daily basis

· Build an environment that enhances task accomplishment through positive and supportive cooperation. Places goals of company foremost when interacting with others at all levels

· Represent the Bank with clients, prospects, investors, and business partners in a professional and knowledgeable manner.

· Complete all required regulatory training as assigned within deadlines established including BSA, Bank Security and any other training as assigned.

· Additional assignments as designated by the President/CEO.

In addition to these duties and responsibilities, Employee shall be responsible for carrying out those duties which may be requested or assigned by the Company from time to time in the Company’s sole discretion.  Based on business needs, Community West Bank may make changes to this job description or job assignments at any time with or without notice, to accommodate the business objectives of the bank based on the sole discretion of management.

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	T. Joseph Stronks
Date	Employee Name
	Employee Signature

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Exhibit B

Inventions Assignment and Confidentiality Agreement

I, T. Joseph Stronks (“Employee”), as a condition of my continued at-will employment with Community West Bank (the “Bank”) agree that:

I. OWNERSHIP AND PROTECTION OF WORK PRODUCT

A.          Employee shall promptly and fully inform Bank of, and disclose to Bank, any and all ideas, processes, trademarks, trade names, service marks, service mark applications, copyrights, mask work rights, fictitious business names, technology, patents, knowhow, trade secrets, computer programs, original works of authorship, formulae, concepts, themes, inventions, designs, creations, new works, derivative works and disco-veries, and all applications, improvements, rights and claims related to any the foregoing, and all other intellectual property, proprietary rights and work product, whether or not patentable or copyrighta-ble, registered or unregistered or domestic or foreign, and whether or not relating to a published work, that Employee develops, makes, creates, conceives or reduces to practice during the Term, whether alone or in collaboration with others (collectively, “Invention Ideas”).

B.          Each of the items described in the immediately preceding paragraph shall constitute Invention Ideas even if they do not relate to the duties Employee performs for Bank or to Bank’s Proprietary Information (as defined below), and regardless of whether or not created while Employee is performing duties for Bank or acting on Bank’s behalf or while using Bank’s equipment, supplies, facilities or Proprietary Information.

C.          All right, title and interest in and to all Invention Ideas shall be Bank's sole and exclusive property, and Employee shall have no interest therein. To the extent permitted by law, all Invention Ideas shall be produced as works made for hire. Employee shall not assert any right, title or interest in or to any Inventions Ideas, and Employee shall not undertake any other act or omission that would reduce the value to Bank of any Invention Ideas.

D.          Employee shall assist Bank, to the extent necessary, in obtaining patent or copyright registration on all Invention Ideas, and shall execute and deliver all documents, instruments and agreements, including the formal execution of an assignment of copyright, and do all things necessary or proper (or otherwise reasonably required by Bank), to the extent lawfully permitted, in order to enable Bank to obtain and enforce full and exclusive title to all Invention Ideas and all rights granted or assigned pursuant to this Agreement.

E.          If any of the Invention Ideas or any part of the duties Employee performs for Bank is based on, incorporates or is an improvement or derivative of, or cannot be reasonably and fully made, used, reproduced, distributed or otherwise exploited without using or violating, technology or intellectual property rights owned or licensed by Employee and not assigned under this Agreement, Employee grants to Bank a perpetual, irrevocable, worldwide, royalty-free, non-exclusive, sub-licensable right and license to exploit and exercise all such technology and intellectual property rights in support of Bank's exercise or exploitation of the Invention Ideas or exploitation of other work performed by Employee for Bank or any assigned rights (including any modifications, improvements and derivatives of any of them).

F.          Because of the difficulty of establishing when Employee first conceives of or develops intellectual property, proprietary rights or work product or whether such intellectual property, proprietary rights or work product results from access to Bank’s confidential and proprietary information or equipment, facilities or data, Employee agrees that any intellectual property, proprietary rights and work product shall be presumed to be an Invention Idea if it is conceived, developed, used, sold, exploited or reduced to practice by Employee or with the aid of Employee within one year after the termination of Employee’s employment with Bank. Employee can rebut that presumption if Employee proves that the intellectual property, proprietary rights and work product (i) was first conceived or developed after termination of Employee’s employment with and by Bank; (ii) was conceived or developed entirely on Employee's own time without using Bank's equipment, supplies, facilities or confidential and proprietary information; and (iii) did not result from any concepts or ideas developed or work performed by Employee for or on behalf of Bank or during the Term.

G.          Employee acknowledges that there is no intellectual property, proprietary right or work product that Employee desires not to be deemed Invention Ideas and thus to exclude from the above provisions of this Agreement. To the best of Employee’s knowledge, there is no existing contract in conflict with this Agreement or any other contract to assign ideas, processes, trademarks, service marks, inventions, technology, computer programs, original works of authorship, designs, formulas, discoveries, patents or copyrights that is now in existence between Employee and any other person or entity.

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H.          This section shall not operate to require Employee to assign to Bank any of Employee's rights to inventions, intellectual properties or work products that would not be assignable under the provisions of California Labor Code Section 2870, which provides that:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

Employee represents and warrants to Bank that this paragraph constitutes Bank's written notification to Employee of the provisions of Section 2870 of the California Labor Code, and that Employee has reviewed Section 2870 of the California Labor Code.

II. UNFAIR COMPETITION; PROTECTION OF CONFIDENTIAL AND TRADE SECRET INFORMATION

A.          As used in this Agreement, “Bank’s Confidential Information” means all Invention Ideas, knowledge and information that is, or would logically be considered, confidential, secret or proprietary relating to the operations, business, finances, affairs or property of Bank or any of its subsidiaries, affiliates or divisions; knowledge, information and materials directly or indirectly useful in, or directly or indirectly relating to, Bank or any of its subsidiaries, affiliates or divisions or any aspect of their business; and any other confidential or secret aspect of the business of Bank or its subsidiaries, affiliates or divisions, in whatever form it exists, whether or not marked as confidential or proprietary. Without limiting the generality of the foregoing, Bank’s Confidential Information includes (a) all trade secrets (including “trade secrets” as that term is defined under state or federal law) of Bank; (b) proprietary rights, processes, and other intellectual property and intangible assets or property (whether or not copyrighted or copyrightable or patented or patentable), owned or licensed by Bank, or directly or indirectly useful in any aspect of the business or affairs of Bank; (c) the names, locations, practices and requirements of any of Bank’s customers, prospective customers, vendors, suppliers and personnel and any other persons having a business relationship with Bank; (d) confidential or secret development or research work of Bank, including information concerning any future or proposed services or products; (e) Bank’s accounting, billing, cost, revenue and other financial records, documents and information and the contents thereof; (f) Bank’s documents, contracts, agreements, corres-pondence and other similar business records; (g) confidential or secret designs, software code, know how, processes, formulae, plans and devices; and (h) Bank’s service mark applications, patents, patent applications and works of authorship.

B.         Employee also understands that Bank has received and in the future will receive from third parties their confidential and proprietary information subject to a duty on Bank's part to maintain the confidentiality of such information and to use it only for certain limited purposes. Employee agrees that all such information shall constitute “Bank's Confidential Information” for all purposes of this Agreement and shall be subject to all restrictions under this Agreement applicable to Bank's Confidential Information.

C.          Employee shall not at any time during the Term divulge, furnish or make accessible to anyone any of Bank’s Confidential Information, or use in any way any of Bank’s Confidential Information other than as reasonably required to perform Employee’s duties under this Agreement. Employee shall not undertake any other acts or omissions that would reduce the value to Bank of Bank’s Confidential Information. The restrictions on Employee’s use of Bank’s Confidential Information shall not apply to knowledge or information that Employee can prove is part of the public domain through no fault of Employee.

D.          Employee agrees that after the termination of Employee's employment with Bank Employee shall promptly discontinue any use of any of Bank’s Confidential Information and promptly return to Bank all tangible information, including documents, records, notebooks, computer tape or other stored information of any form or type (for example, without limitation, written information that has been converted to electronic format), and any copies thereof, that constitutes or relates to Bank’s Confidential Information.

E.          Employee agrees that Bank’s Confidential Information constitutes a unique and valuable asset of Bank that Bank acquired at great time and expense, and which is secret and proprietary and will only be available to or communicated to Employee in confidence in the course of Employee’s provision of services to Bank. Employee also agrees that any disclosure or other use of Bank’s Confidential Information other than for Bank's sole benefit would be wrongful, would constitute unfair competition and will cause irreparable and incalculable harm to Bank and to its subsidiaries, affiliates and divisions.

F.          Employee agrees that Bank's clients, potential clients, service providers, employees, vendors, independent contractors and other related persons or entities (collectively, “Related Persons”) constitute a valuable asset of Bank. During the Term and at all times thereafter, Employee shall not, directly or indirectly, for Employee or on behalf of any other person or entity, use Bank’s Trade Secrets (as that term is defined in state and federal law) to (a) solicit any Related Persons for a competing business, (b) induce or attempt to induce any Related Persons to terminate employment or other relationship(s) with Bank, or (c) in any way disrupt or interfere, or attempt to disrupt or interfere, with Bank's employment or other relationship with any Related Persons. Employee agrees that any such activity or conduct by use of Bank’s Trade Secrets would be wrongful and would constitute unfair competition, and will cause irreparable and incalculable harm to Bank, and therefore agrees that such restrictions are fair and reasonable.

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III.          NON-COMPETITION

A.          During the Term, neither Employee nor any person or entity acting with or on Employee’s behalf, shall directly or indirectly (whether for compensation or otherwise), in any capacity (whether individual or representative), seek to compete with Bank’s business within any location in which Bank at any time conducts or seeks to conduct business.

B.          Employee agrees that if during the Term Employee has any business to transact on Employee’s own account that is similar to the business entrusted to Employee by Bank, Employee shall first disclose such business to Bank and shall always give preference to Bank's business.

C.          After the Term, neither Employee nor any person or entity acting with or on Employee’s behalf, shall directly or indirectly (whether for compensation or otherwise), in any capacity (whether individual or representative), seek to compete with Bank’s business within any location in which Bank at any time conducts or seeks to conduct business by use of Bank’s trade secrets.  Nothing in this section shall prohibit Employee from competing with Bank’s business without using Bank’s trade secrets.

D.          For purposes of this Agreement, “Compete” means doing any of the following, whether directly or indirectly or individually or through or by assisting any other person or entity: (a) calling on, soliciting, taking away or accepting business, selling products or services to, or engaging in any business or activity with any Related Persons of Bank or prospective Related Persons of Bank; or (b) entering into, or any attempt or offer to enter into, any business, enterprise or activity that is in any way similar to or otherwise competitive with the business that the Bank conducted at any time during the Term.

E.          Notwithstanding anything else in this agreement to the contrary, Employee will not be liable for disclosing trade secrets in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or disclosing trade secrets in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

IV. OTHER TERMS

A.          Employee acknowledges that Employee’s compliance with this agreement is necessary to protect the business and goodwill of the Bank and that the Bank will pursue legal action against Employee to remedy any damages caused by Employee’s breach of this Agreement.

B.          If any portion of this Agreement is held to be void or unenforceable, the remainder of the Agreement shall remain in effect. This Agreement shall apply to the Bank as well as to its successors, assigns, parent or subsidiary companies or other related persons. No alteration or modification to any of the provisions of this Agreement will be valid unless made in writing and signed by Employee and the Bank.

C.          This Agreement shall be subject to and governed by the laws of the State of California. Any claim, charge or action arising under this Agreement or between Employee and the Bank shall be brought in Los Angeles County, California. Subject to applicable law, in any legal action between Employee and the Bank to enforce any provision of this Agreement, the prevailing party shall recover its attorneys’ fees.

D.          This Agreement constitutes the complete understanding between Employee and the Bank regarding the matters addressed, and all prior representations or agreements regarding confidential information and unfair competition are superseded by this Agreement.

E. Nothing in this agreement alters Employee’s at-will employment relationship with the Bank.

Date:
	T. Joseph Stronks

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Exhibit C

Arbitration Agreement

Although Community West Bank ("the Bank") hopes that employment disputes will not occur, the Bank believes that where such disputes do arise, it is in the mutual interest of everyone involved to handle them in binding arbitration, which generally resolves disputes quicker than court litigation and with a minimum of disturbance to all parties involved.

By entering into this Agreement, the Bank and the undersigned Employee are waiving the right to a jury trial for most employment‑related disputes. The Employee further understands that entering into this Arbitration Agreement does not alter the Employee's at‑will employment with the Bank.

The Bank and the undersigned Employee hereby agree that any dispute with any party (including the Bank, its affiliates, successors, and representatives) that may arise from Employee's employment with the Bank or the termination of Employee's employment with the Bank shall be resolved by mandatory, binding arbitration before a retired judge or other arbitrator selected by mutual agreement of the Bank and the Employee.

This Arbitration Agreement does not cover the following claims:

· Administrative claims properly presented to an administrative agency, such as the Equal Employment Opportunity Commission (EEOC) or federal Department of Labor (Wage and Hour Division), or any equivalent state administrative agency, except that if any such claim is dismissed from the administrative agency's jurisdiction, the parties must then submit to binding arbitration pursuant to this Agreement. The Employee may (but is not required to) choose arbitration to resolve the Employee’s dispute rather than pursuing a claim with an administrative agency.

· Workers’ Compensation benefits;

· Unemployment compensation benefits;

· Claims based on the National Labor Relations Act;

· Claims based upon any Bank employee benefit and/or welfare plan that contains an appeal procedure or other procedure for the resolution of disputes under the plan.

· Claims brought under the Private Attorneys General Act (“PAGA”) as set forth in California Labor Code sections 2698 et seq.

The arbitration requirement does apply to all statutory, contractual and/or common law claims arising from employment with the Bank including, but not limited to, the following:

· Any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement, including but not limited to any claim that all or any part of this Agreement is void or voidable;

· Claims that could be asserted in court, including breach of any express or implied contract or covenant; tort claims; claims for retaliation, discrimination or harassment of any kind, including claims based on sex, pregnancy, race, national or ethnic origin, age, religion, creed, marital status, sexual orientation, mental or physical disability, medical condition or other characteristics protected by law. This includes claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the federal Fair Labor Standards Act, the California Fair Employment and Housing Act, the California Constitution, the California Labor Code, or any other federal or state statute on these subjects;

· Claims for violation of any statutory leave law, including the federal Family and Medical Leave Act (FMLA), the California Family Rights Act (CFRA), California Paid Leave or any related federal or state statute;

· Violations of confidentiality or breaches of trade secrets;

· Violation of any other federal, state, or other governmental law, regulation or ordinance, whether based on statute or common law;

· Claims made against the Bank or any of its subsidiary or affiliated entities, or its individual officers, directors or employees for any matters arising out of any of the above claims.

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Except as otherwise required by applicable law, the parties agree that all claims subject to binding arbitration under this Agreement, including as set forth more specifically above, shall be conducted on an individual basis, and not as a class action.

Binding arbitration under this Agreement shall be conducted in accordance with any applicable state statutes providing for arbitration procedures. Alternatively, if no such state statutes exist, then arbitration shall be conducted pursuant to the rules of the American Arbitration Association (“AAA”) for employment law disputes. A copy of these AAA rules can be found at www.adr.org under “Rules & Procedures”. The parties may mutually agree upon another arbitration procedure.

The arbitrator shall be a retired superior or appellate court judge or other professional arbitrator chosen by agreement of the parties or any local dispute resolution service administered by the Superior Court of the county in which the dispute arose. The arbitrator shall not have any authority to consolidate, combine or aggregate the claims of the undersigned employee with those of any other employee. The arbitrator shall have no authority to create an arbitration proceeding on a class basis, nor to award relief to a class of employees in one arbitration proceeding.

Any dispute with any party that arises from Employee's employment with the Bank or termination of employment with the Bank must be submitted to binding arbitration within the applicable statute of limitations prescribed by law. With the exception of a filing fee that shall not exceed the cost to file a comparable claim in state or federal court, the Bank shall pay the fees and costs of the Arbitrator, and each party shall pay for its own costs and attorneys' fees. However, the Arbitrator may award costs and/or attorneys' fees to the prevailing party to the extent permitted by law and shall follow any applicable statutory requirements regarding an award of attorneys’ fees and costs.

The parties will be permitted to conduct discovery as provided by the applicable state statute(s). In the absence of any such statute(s), the parties shall follow the discovery procedures set forth by the American Arbitration Association. Within 30 days of the conclusion of the arbitration, the Arbitrator shall issue a written opinion setting forth the factual and legal basis for his or her decision. The Arbitrator shall have the power and discretion to award to the prevailing party all damages provided under the applicable law.

If any provision of this Agreement is held to be unenforceable, it shall be stricken from the Agreement and the remainder of the Agreement shall be fully enforceable. If any provision of this Agreement is held to be in conflict with a mandatory provision of applicable law, the conflicting provision of this Agreement shall be modified automatically to comply with the applicable law until such time as the provision can be formally modified to comply with the law.

I acknowledge that I have carefully read this agreement, and that I understand and agree to its terms. I have entered into this agreement voluntarily and have not relied upon any promises or representations other than those contained herein. I understand that I am giving up my right to a court or jury trial by entering into this agreement. I understand that this arbitration agreement does not change my at‑will employment status with the Bank.

	T. Joseph Stronks
Date
	Employee Signature
	Martin Plourd, President/CEO

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EX-10.48

Exhibit 10.48

COMMUNITY WEST BANK

Employment Agreement

THIS EMPLOYMENT AGREEMENT (the “Agreement”) including Exhibits A-C attached hereto, is entered into by and between Community West Bank, including its directors, officers, employees, contractors, agents, representatives, successors and assigns (collectively, “the Bank”) and Paul S. Ulrich, an individual, and his/her heirs, agents, representatives and assigns (collectively, “Employee”).

RECITALS

WHEREAS, the Bank is a California National Banking Association duly organized, validly existing and in good standing under the laws of the United States of America, with power to own property and carry on its business as it is now being conducted, with its principal place of business located at 445 Pine Street, Goleta, California 93117;

WHEREAS, the Bank wishes to employ Employee; and Employee agrees to accept employment with the Bank, all on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises set forth herein, and for other good and valuable consideration, the parties agree as follows:

12.          EMPLOYMENT. The Bank hereby employs Employee as the Executive Vice President, Chief Credit Officer under the terms and conditions contained herein. Employee’s employment shall commence on July 30, 2018.  Employee’s employment shall continue until terminated by either party pursuant to the terms contained herein (the “Term”).

13.          AT-WILL EMPLOYMENT STATUS. Employee’s employment with the Bank is and shall remain “at will,” meaning that either the Bank or Employee shall have the right at any time, for any reason or no reason at all, to terminate Employee’s employment with the Bank upon written notice to the other party, subject to the termination provisions contained herein.

14. POSITION AND DUTIES

14.1.      Position and Reporting Relationship. During the Term, Employee shall serve the Bank in the position of Executive Vice President, Chief Credit Officer. Employee shall report directly to the President and CEO.  Employee shall perform his/her duties at the Bank’s facility in Goleta, California, or such other location as the Bank may designate in its sole discretion.

14.2.       Duties and Responsibilities. During the Term, Employee’s duties and responsibilities shall include, without limitation, those duties set forth in Exhibit A hereto, as well as those additional duties and responsibilities which the Bank may from time to time assign to Employee. In acting on the Bank’s behalf, Employee shall observe and be governed by all of the Bank’s rules and policies as established by the Bank from time to time in the Bank’s sole discretion.

14.3.       Schedule.  Employee shall be employed on a full-time basis, which shall mean that Employee is expected to devote approximately forty (40) hours per week to their work, or as needed to complete their duties. Employee is expected to be reasonably available to the Bank for business purposes between the hours of 8 am to 5 pm, Monday through Friday, except as agreed by Bank.  As an exempt employee, Employee shall not be paid additional compensation for overtime or excessive work hours.  Employee shall not keep time records, but shall be required to record absences for illness, personal time off, or other periods in which Employee is not performing work for the Bank.

14.4.       Best Efforts During Employment. At all times during the Term, Employee shall use their best efforts, skills, judgment and abilities, and shall at all times promote the Bank’s interests and perform and discharge well and faithfully those duties. Employee shall devote Employee’s full and exclusive business time, attention and energies to the Bank’s business in accordance with Employee’s anticipated schedule and duties hereunder. At no time during the Term shall Employee directly or indirectly engage in any activity that could or does materially interfere with or adversely affect Employee’s performance of Employee’s duties under this Agreement, or compete with or damage in any way the business of the Bank.

15. COMPENSATION

15.1.       Base Salary. In consideration of Employee’s services hereunder, the Bank shall pay to Employee an annual base salary (the “Base Salary”) of Two Hundred and Twenty Five Thousand Dollars ($225,000.00), payable in such installments and on such schedule as the Bank may from time to time implement for general payroll purposes. Such Base Salary shall be subject to required tax and other withholdings and shall be prorated for any partial periods of employment. The Bank, acting in its sole and absolute discretion, may review Employee’s performance and/or may adjust the Base Salary from time to time based upon the performance of Employee and/or the Bank, market conditions, or other factors in the Bank’s sole discretion.    Nothing in this section shall obligate the Bank to increase the Base Salary payable as a result of such review.  The Bank will not reduce the Base Salary payable to Executive without good cause.

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15.2.      Bonuses. Employee shall be considered for an annual bonus based upon, without limitation, such factors as Employee’s performance and the overall performance of the Bank. Such annual bonus shall be paid to Employee, if at all, by no later than March 15th  after the close of the calendar year for performance achieved in the prior calendar year, provided Employee is actively employed and has not given notice of resignation at the time the bonus is paid. The existence and amount of any bonus provided to Employee in any given year is solely within the discretion of the Bank. The provision of a bonus in any given year does not guarantee any future bonus in any amount and does not alter the at-will status of Employee’s employment.

4.3          Deferred Compensation.  The bank has established a liability account for the benefit of the Employee as a participant in the Community West Bank Executive Deferred Compensation Agreement dated July 30, 2018.

4.4        Equity. Employee shall be eligible to participate in the Community West Bancshares Stock Option Plan in accordance with the express terms of that plan.  Employee will be granted an initial 20,000 share options upon the approval of the bank’s Board of Directors at the first board meeting after employee’s hire date.

16.         BENEFITS. Upon commencement of the Term, Employee shall be entitled to receive those benefits to which Employee may be entitled by law. In addition to such legally-mandated benefits, Employee shall also be eligible to receive the Bank-sponsored benefits, including but not limited to vacation and sick leave, health insurance and 401k benefits, as set forth in the Bank’s Employee Handbook and in accordance with company policies. The terms and conditions of such benefits shall be governed by the plan descriptions and/or the Bank’s policies as applicable. Such benefits shall be provided in the sole discretion of the Bank, and may be altered or revoked at any time.

17.          EXPENSES. The Bank shall reimburse Employee for all reasonable and necessary expenses incurred by Employee during the Term in the course of performing Employee’s services under this Agreement including the use of personal cell phone for bank business per the bank’s reimbursement policies. Employee must submit appropriate expense statements, receipts or such other supporting information in accordance with the Bank’s reimbursement policies, as established by the Bank from time to time.

18.          RETURN OF COMPANY PROPERTY. Upon separation from employment for any reason, or at the request of the Bank at any time, Employee shall immediately return to the Bank all originals and copies of any and all Bank information as well as any and all Bank property in Employee’s possession. Employee agrees that all information and property provided to Employee by the Bank or as a result of Employee’s employment with the Bank shall at all times remain the sole and exclusive property of the Bank.

19.         PROTECTION OF COMPANY’S CONFIDENTIAL AND TRADE SECRET INFORMATION. Employee agrees and understands that the Bank’s protection of its confidential and trade secret information is critical to the protection of Bank’s clients and the security of Bank’s business. To demonstrate Employee’s commitment to the protection of such information, and to ensure Bank’s sole ownership and protection of all confidential information, trade secrets, inventions, works for hire and other materials, Employee shall execute the Bank’s Inventions Assignment and Confidentiality Agreement, attached hereto as Exhibit B, as a condition of employment.

20.          NO EXPECTATION OF PRIVACY. Employee recognizes and agrees that Employee has no expectation of privacy with respect to the Bank’s communications equipment, telecommunications, networking or information processing systems (including stored computer files, desktop or laptop systems, personal digital assistants, e-mail messages, voice messages, text messages, posts, blogs, tweets, cellular telephone communications, internet activity, computer activity, photos, and any other communications equipment, methodology or output utilized by Employee on behalf of or regarding the Bank or its Related Persons, created or received upon equipment or technology owned by the Bank or used by Employee on the Bank’s behalf). Employee understands that all such activity and communications may be monitored, viewed, retrieved, recovered and accessed by the Bank at any time without notice.

21.          SOCIAL MEDIA. Employee has the right to engage in personal social media activities to express Employee’s thoughts or ideas on Employee’s personal time and using Employee’s personal equipment, so long as such activities are not performed on working time or while using the Bank computers, cell phones, personal digital assistants or other electronic communications equipment, and do not conflict with the Bank policies or business or harm the goodwill and reputation of the Bank. Employee may not (a) disclose the Bank Confidential Information on social media sites; (b) make defamatory or harassing statements about the Bank or its Related Persons; (c) defame the Bank, its activities or its Related Persons; (d) use or reproduce any the Bank logo, website link or other the Bank name or information; or (e) use the Bank’s name or information in connection with the expression of any individual opinion or position. Employee’s social media content must reflect that it is the opinion or content of Employee and must not imply any connection to or origination from the Bank (including without limitation the use of Employee’s the Bank e-mail address as the source of such communication). If Employee uses social media to promote the efforts or initiatives of the Bank, Employee must disclose Employee’s employment relationship to the Bank or connection to the Bank’s Related Persons within the social media content or communication. For the purposes of this Agreement, the term “social media” refers to on-line blogs, forums, chat rooms and social networking sites such as Yelp, Facebook, Twitter, LinkedIn, Pinterest and YouTube, as well as all other similar sites, communications or activities.

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22.          BINDING ARBITRATION. Employee agrees that any disputes arising out of Employee’s employment with the Bank shall be submitted to binding arbitration pursuant to the provisions set forth in the Arbitration Agreement attached hereto as Exhibit C.

12.         TERMINATION.  In keeping with Employee’s at-will status of employment, Bank shall be entitled to terminate Employee’s employment (and Employee shall be entitled to resign) at any time, with or without advance notice or cause.  Notwithstanding this at-will status, in the event that Bank terminates Employee’s employment without notice or cause during the first six (6) months of employment from date of hire, Employee shall be entitled to severance pay equal to six (6) months of Employee’s usual base wages.  Such severance shall be payable to Employee only after Employee executes Bank’s standard severance agreement, including a release of claims.   If Employee is terminated for cause, no severance shall be paid.  Notwithstanding this at-will status, in the event that Bank terminates Employee’s employment without notice or cause after six (6) months of employment, Employee shall be entitled to severance pay equal to three (3) months of Employee’s usual base wages.  Such severance shall be payable to Employee only after Employee executes Bank’s standard severance agreement, including a release of claims.   If Employee is terminated for cause, no severance shall be paid.  For the purposes of this section, “cause” shall be defined as (a) Employee’s disability which prevents Employee from being able to perform the essential functions of Employee’s position, with or without reasonable accommodation, to the extent that it causes an undue hardship to Bank; (b) Employee’s death; (c) Employee’s negligence, fraud, misrepresentation or gross dereliction of duties; (d) Employee’s conviction of a crime; or (e) any conduct of Employee which causes, or is likely to cause, significant or material harm to the Bank in the Bank’s sole discretion.

12.2         Termination on Change in Control.  “Change in Control”means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Code Section 409A and regulations thereunder.

(a)          If, within twelve (12) months following a Change of Control, Employee’s employment is terminated by Bank or Employee voluntarily resigns with good cause, Employee shall receive:

4. The sum of twelve (12) months of the Employee’s annual Base Salary hereof in effect as of the date of termination,

5. any incentive compensation earned but not yet paid, and

6. any business expenses incurred but not yet reimbursed.

(b)         The payment to which Employee is entitled pursuant to this Agreement shall be paid in a single installment within forty-five (45) days of Employee’s termination by Bank or voluntary resignation with good cause, unless Employee and Bank agree to a later payment date in writing.  The timing of the payment to Employee shall have no impact on the amount or value of the payment, and shall not increase or decrease the total amount of the payment due to Employee under this Section 12.1.

(c)          For the purposes of this section, Employee’s “voluntary resignation with good cause” shall be defined as Employee’s voluntary resignation after one of the following occurrences within twelve (12) months after a change in control:

3. Employee’s annual base salary is reduced without good cause; or a material change occurs in the functions, duties, responsibilities, reporting relationship or title.

4. Employee is required to relocate to a work location which is more than fifty (50) miles from Employee’s usual place of work.

12.2        Benefits upon Termination due to Change in Control.   During the twelve (12) month period commencing on the date the Term of Employment ends under this Agreement due to Change in Control, Employee (and, where applicable, Employee’s dependents) shall be entitled to continue participation in the group health insurance plans maintained by the Bank in the Consolidated Omnibus Budget Reconciliation Act of 1986 under “COBRA” with the Bank contributing the cost of the COBRA premiums.  After the twelve (12) month period ends, the employee may continue participation in the group health insurance plans per COBRA requirements by paying the COBRA premium rates in effect.

13.          ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement, including Exhibits A – C hereto, sets forth the entire agreement and understanding of the parties with regard to the subject matter hereof and supersedes all prior agreements, arrangements and understandings, written or oral, between the parties. No representation, promise or inducement has been made by either party that is not embodied in this Agreement. This Agreement shall be effective as of the last date this Agreement is executed by either party below and shall continue until modified by a writing signed by both parties or until Employee’s employment is terminated by either party. No waiver by either party of the breach of any term or covenant contained in this Agreement shall be deemed to be a continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

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20.          GOVERNING LAW; VENUE. California law, without regard to conflict or choice of law principles, shall govern the construction and interpretation of this Agreement and all claims, controversies and other disputes and proceedings concerning or arising out of this Agreement. The parties to this Agreement agree that all actions or proceedings in any forum which arise directly or indirectly from this Agreement shall be arbitrated or litigated within Los Angeles County, California.

21.          ATTORNEYS’ FEES. If any party to this Agreement commences an action against another party to this Agreement related in any way to the Bank’s employment of Employee, Employee’s separation from employment or the terms of this Agreement, the losing party shall pay the prevailing party’s reasonable attorneys’ fees, costs and expenses, court costs and other costs of action incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment, as well as reasonable attorneys’ fees incurred in any post judgment proceeding to enforce any judgment in connection with this Agreement, except as otherwise provided by law.

22.          SEVERABILITY; BINDING EFFECT; ASSIGNMENT. If any of the provisions of this Agreement are determined to be unlawful or otherwise unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, executors, administrators, successors and assigns. Employee may not assign any rights under this Agreement without the express written permission of the Bank.

23.          NOTICES. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given (a) if delivered personally, when delivered; (b) if delivered by overnight carrier, on the date of delivery; or (c) if delivered by registered or certified mail, return receipt requested, on the third business day after having been mailed in Santa Barbara County, California. Notices and communications to the Bank shall be addressed to Martin Plourd, President/CEO, 445 Pine Ave. Goleta, CA  93117. Notices to the Employee shall be addressed to Employee at the address designated by Employee for employment purposes.

24.          COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement, to produce or account for more than one such counterpart.

25.          ADVICE OF COUNSEL; KNOWING AND VOLUNTARY EXECUTION. The parties to this Agreement have each sought the advice of counsel to the extent deemed necessary by that party with regard to the terms of this Agreement. Each party voluntarily enters into this Agreement with full knowledge and understanding of its terms.

IN WITNESS WHEREOF, the parties have duly executed this Agreement, including Exhibits A -C hereto, as of the date set forth below.

Dated:	Community West Bank
	By:
	Its:
Dated:	Paul S. Ulrich (“Employee”)
	Paul S. Ulrich

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Exhibit A

Job Description – Chief Credit Officer

As a Chief Credit Officer, Employee shall be responsible for the following duties, without limitation:

· Works closely with the President/CEO to develop and accomplish goals and strategic plans established by the Board of Directors and company executives

· Management responsibility for the strategic planning process and oversight of the reporting function to the Board of the implementations of the plan by the business unit

· Provides clear directions and oversight on strategic goals and their accomplishments, translating and prioritizing them into business and performance measures for responsible business units

· Ensures strategic objectives are translated into a tactical business plan with mechanisms for key measurements in place to monitor progress to completion

· Contributes to the development of business unit strategy by providing a view on potential improvement for products or services and an assessment of the existing situation and anticipated changes in the external environment

· Develops and implements plans for the operational infrastructure of Credit systems, processes, and personnel designed to accommodate the growth objectives of the Bank

· Ensures that Credit projects are delivered in line with directions from Management

· Formulates, reviews, and updates loan policy and presents changes to Directors Loan Committee for approval

· Approves loans within established limits in the area of commercial lending and Small Business Administration loans, and makes recommendations to Directors Loan Committee for loans that exceed those limits

· Advises Relationship Managers, Portfolio Management, Loan Servicing and Special Assets staff regarding structure, documentation, compliance, and loan workouts.

· Serves as primary contact for the credit function on regulatory exams and credit review

· Provides credit training directly or through other resources

· Recommends and monitors loan concentration limits

· Develops/enhances loan products and underwriting

· In concert with the Finance Department, analyzes and determines the allowance for loan and lease loss (ALLL) and makes recommendations for Loan Loss Reserves to the ALLL Committee

· Develop and maintain effective communication and working relationships with direct reports and inter-departmental staff

· Serves as a member of the Executive Management Team

· Lead, inspire and coach a team of high caliber professionals, creating succession to key roles and enhancing the Bank’s management capability.

· Foster a success-oriented, open, and accountable environment within the Bank emphasizing a culture of empowerment and teamwork.

· Lead by example, uphold and take actions in alignment with the Community West Bank Statement of Values on a daily basis

· Build an environment that enhances task accomplishment through positive and supportive cooperation. Places goals of company foremost when interacting with others at all levels

· Represent the Bank with clients, prospects, investors, and business partners in a professional and knowledgeable manner.

· Completes all required regulatory training as assigned within deadlines established including BSA, Bank Security and any other training as assigned, within required timeframes and on an annual basis

· Additional assignments as designated by the President/CEO

In addition to these duties and responsibilities, Employee shall be responsible for carrying out those duties which may be requested or assigned by the Company from time to time in the Company’s sole discretion.  Based on business needs, Community West Bank may make changes to this job description or job assignments at any time with or without notice, to accommodate the business objectives of the bank based on the sole discretion of management.

	Paul S. Ulrich
Date	Employee Name
	Employee Signature

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Exhibit B

Inventions Assignment and Confidentiality Agreement

I, Paul S. Ulrich (“Employee”), as a condition of my continued at-will employment with Community West Bank (the “Bank”) agree that:

V. OWNERSHIP AND PROTECTION OF WORK PRODUCT

I.            Employee shall promptly and fully inform Bank of, and disclose to Bank, any and all ideas, processes, trademarks, trade names, service marks, service mark applications, copyrights, mask work rights, fictitious business names, technology, patents, knowhow, trade secrets, computer programs, original works of authorship, formulae, concepts, themes, inventions, designs, creations, new works, derivative works and disco-veries, and all applications, improvements, rights and claims related to any the foregoing, and all other intellectual property, proprietary rights and work product, whether or not patentable or copyrighta-ble, registered or unregistered or domestic or foreign, and whether or not relating to a published work, that Employee develops, makes, creates, conceives or reduces to practice during the Term, whether alone or in collaboration with others (collectively, “Invention Ideas”).

J.            Each of the items described in the immediately preceding paragraph shall constitute Invention Ideas even if they do not relate to the duties Employee performs for Bank or to Bank’s Proprietary Information (as defined below), and regardless of whether or not created while Employee is performing duties for Bank or acting on Bank’s behalf or while using Bank’s equipment, supplies, facilities or Proprietary Information.

K.          All right, title and interest in and to all Invention Ideas shall be Bank’s sole and exclusive property, and Employee shall have no interest therein. To the extent permitted by law, all Invention Ideas shall be produced as works made for hire. Employee shall not assert any right, title or interest in or to any Inventions Ideas, and Employee shall not undertake any other act or omission that would reduce the value to Bank of any Invention Ideas.

L.          Employee shall assist Bank, to the extent necessary, in obtaining patent or copyright registration on all Invention Ideas, and shall execute and deliver all documents, instruments and agreements, including the formal execution of an assignment of copyright, and do all things necessary or proper (or otherwise reasonably required by Bank), to the extent lawfully permitted, in order to enable Bank to obtain and enforce full and exclusive title to all Invention Ideas and all rights granted or assigned pursuant to this Agreement.

M.          If any of the Invention Ideas or any part of the duties Employee performs for Bank is based on, incorporates or is an improvement or derivative of, or cannot be reasonably and fully made, used, reproduced, distributed or otherwise exploited without using or violating, technology or intellectual property rights owned or licensed by Employee and not assigned under this Agreement, Employee grants to Bank a perpetual, irrevocable, worldwide, royalty-free, non-exclusive, sub-licensable right and license to exploit and exercise all such technology and intellectual property rights in support of Bank’s exercise or exploitation of the Invention Ideas or exploitation of other work performed by Employee for Bank or any assigned rights (including any modifications, improvements and derivatives of any of them).

N.          Because of the difficulty of establishing when Employee first conceives of or develops intellectual property, proprietary rights or work product or whether such intellectual property, proprietary rights or work product results from access to Bank’s confidential and proprietary information or equipment, facilities or data, Employee agrees that any intellectual property, proprietary rights and work product shall be presumed to be an Invention Idea if it is conceived, developed, used, sold, exploited or reduced to practice by Employee or with the aid of Employee within one year after the termination of Employee’s employment with Bank. Employee can rebut that presumption if Employee proves that the intellectual property, proprietary rights and work product (i) was first conceived or developed after termination of Employee’s employment with and by Bank; (ii) was conceived or developed entirely on Employee’s own time without using Bank’s equipment, supplies, facilities or confidential and proprietary information; and (iii) did not result from any concepts or ideas developed or work performed by Employee for or on behalf of Bank or during the Term.

O.          Employee acknowledges that there is no intellectual property, proprietary right or work product that Employee desires not to be deemed Invention Ideas and thus to exclude from the above provisions of this Agreement. To the best of Employee’s knowledge, there is no existing contract in conflict with this Agreement or any other contract to assign ideas, processes, trademarks, service marks, inventions, technology, computer programs, original works of authorship, designs, formulas, discoveries, patents or copyrights that is now in existence between Employee and any other person or entity.

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P.          This section shall not operate to require Employee to assign to Bank any of Employee’s rights to inventions, intellectual properties or work products that would not be assignable under the provisions of California Labor Code Section 2870, which provides that:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

Employee represents and warrants to Bank that this paragraph constitutes Bank’s written notification to Employee of the provisions of Section 2870 of the California Labor Code, and that Employee has reviewed Section 2870 of the California Labor Code.

VI. UNFAIR COMPETITION; PROTECTION OF CONFIDENTIAL AND TRADE SECRET INFORMATION

G.          As used in this Agreement, “Bank’s Confidential Information” means all Invention Ideas, knowledge and information that is, or would logically be considered, confidential, secret or proprietary relating to the operations, business, finances, affairs or property of Bank or any of its subsidiaries, affiliates or divisions; knowledge, information and materials directly or indirectly useful in, or directly or indirectly relating to, Bank or any of its subsidiaries, affiliates or divisions or any aspect of their business; and any other confidential or secret aspect of the business of Bank or its subsidiaries, affiliates or divisions, in whatever form it exists, whether or not marked as confidential or proprietary. Without limiting the generality of the foregoing, Bank’s Confidential Information includes (a) all trade secrets (including “trade secrets” as that term is defined under state or federal law) of Bank; (b) proprietary rights, processes, and other intellectual property and intangible assets or property (whether or not copyrighted or copyrightable or patented or patentable), owned or licensed by Bank, or directly or indirectly useful in any aspect of the business or affairs of Bank; (c) the names, locations, practices and requirements of any of Bank’s customers, prospective customers, vendors, suppliers and personnel and any other persons having a business relationship with Bank; (d) confidential or secret development or research work of Bank, including information concerning any future or proposed services or products; (e) Bank’s accounting, billing, cost, revenue and other financial records, documents and information and the contents thereof; (f) Bank’s documents, contracts, agreements, corres-pondence and other similar business records; (g) confidential or secret designs, software code, know how, processes, formulae, plans and devices; and (h) Bank’s service mark applications, patents, patent applications and works of authorship.

H.          Employee also understands that Bank has received and in the future will receive from third parties their confidential and proprietary information subject to a duty on Bank’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Employee agrees that all such information shall constitute “Bank’s Confidential Information” for all purposes of this Agreement and shall be subject to all restrictions under this Agreement applicable to Bank’s Confidential Information.

I.           Employee shall not at any time during the Term divulge, furnish or make accessible to anyone any of Bank’s Confidential Information, or use in any way any of Bank’s Confidential Information other than as reasonably required to perform Employee’s duties under this Agreement. Employee shall not undertake any other acts or omissions that would reduce the value to Bank of Bank’s Confidential Information. The restrictions on Employee’s use of Bank’s Confidential Information shall not apply to knowledge or information that Employee can prove is part of the public domain through no fault of Employee.

J.          Employee agrees that after the termination of Employee’s employment with Bank Employee shall promptly discontinue any use of any of Bank’s Confidential Information and promptly return to Bank all tangible information, including documents, records, notebooks, computer tape or other stored information of any form or type (for example, without limitation, written information that has been converted to electronic format), and any copies thereof, that constitutes or relates to Bank’s Confidential Information.

K.          Employee agrees that Bank’s Confidential Information constitutes a unique and valuable asset of Bank that Bank acquired at great time and expense, and which is secret and proprietary and will only be available to or communicated to Employee in confidence in the course of Employee’s provision of services to Bank. Employee also agrees that any disclosure or other use of Bank’s Confidential Information other than for Bank’s sole benefit would be wrongful, would constitute unfair competition and will cause irreparable and incalculable harm to Bank and to its subsidiaries, affiliates and divisions.

L.          Employee agrees that Bank’s clients, potential clients, service providers, employees, vendors, independent contractors and other related persons or entities (collectively, “Related Persons”) constitute a valuable asset of Bank. During the Term and at all times thereafter, Employee shall not, directly or indirectly, for Employee or on behalf of any other person or entity, use Bank’s Trade Secrets (as that term is defined in state and federal law) to (a) solicit any Related Persons for a competing business, (b) induce or attempt to induce any Related Persons to terminate employment or other relationship(s) with Bank, or (c) in any way disrupt or interfere, or attempt to disrupt or interfere, with Bank’s employment or other relationship with any Related Persons. Employee agrees that any such activity or conduct by use of Bank’s Trade Secrets would be wrongful and would constitute unfair competition, and will cause irreparable and incalculable harm to Bank, and therefore agrees that such restrictions are fair and reasonable.

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VII. NON-COMPETITION

F.          During the Term, neither Employee nor any person or entity acting with or on Employee’s behalf, shall directly or indirectly (whether for compensation or otherwise), in any capacity (whether individual or representative), seek to compete with Bank’s business within any location in which Bank at any time conducts or seeks to conduct business.

G.          Employee agrees that if during the Term Employee has any business to transact on Employee’s own account that is similar to the business entrusted to Employee by Bank, Employee shall first disclose such business to Bank and shall always give preference to Bank’s business.

H.          After the Term, neither Employee nor any person or entity acting with or on Employee’s behalf, shall directly or indirectly (whether for compensation or otherwise), in any capacity (whether individual or representative), seek to compete with Bank’s business within any location in which Bank at any time conducts or seeks to conduct business by use of Bank’s trade secrets.  Nothing in this section shall prohibit Employee from competing with Bank’s business without using Bank’s trade secrets.

I.            For purposes of this Agreement, “Compete” means doing any of the following, whether directly or indirectly or individually or through or by assisting any other person or entity: (a) calling on, soliciting, taking away or accepting business, selling products or services to, or engaging in any business or activity with any Related Persons of Bank or prospective Related Persons of Bank; or (b) entering into, or any attempt or offer to enter into, any business, enterprise or activity that is in any way similar to or otherwise competitive with the business that the Bank conducted at any time during the Term.

J.          Notwithstanding anything else in this agreement to the contrary, Employee will not be liable for disclosing trade secrets in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or disclosing trade secrets in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

VIII. OTHER TERMS

A.          Employee acknowledges that Employee’s compliance with this agreement is necessary to protect the business and goodwill of the Bank and that the Bank will pursue legal action against Employee to remedy any damages caused by Employee’s breach of this Agreement.

B.          If any portion of this Agreement is held to be void or unenforceable, the remainder of the Agreement shall remain in effect. This Agreement shall apply to the Bank as well as to its successors, assigns, parent or subsidiary companies or other related persons. No alteration or modification to any of the provisions of this Agreement will be valid unless made in writing and signed by Employee and the Bank.

C.          This Agreement shall be subject to and governed by the laws of the State of California. Any claim, charge or action arising under this Agreement or between Employee and the Bank shall be brought in Los Angeles County, California. Subject to applicable law, in any legal action between Employee and the Bank to enforce any provision of this Agreement, the prevailing party shall recover its attorneys’ fees.

D.          This Agreement constitutes the complete understanding between Employee and the Bank regarding the matters addressed, and all prior representations or agreements regarding confidential information and unfair competition are superseded by this Agreement.

E.          Nothing in this agreement alters Employee’s at-will employment relationship with the Bank.

Date:
	Paul S. Ulrich

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Exhibit C

Arbitration Agreement

Although Community West Bank (“the Bank”) hopes that employment disputes will not occur, the Bank believes that where such disputes do arise, it is in the mutual interest of everyone involved to handle them in binding arbitration, which generally resolves disputes quicker than court litigation and with a minimum of disturbance to all parties involved.

By entering into this Agreement, the Bank and the undersigned Employee are waiving the right to a jury trial for most employment‑related disputes. The Employee further understands that entering into this Arbitration Agreement does not alter the Employee’s at‑will employment with the Bank.

The Bank and the undersigned Employee hereby agree that any dispute with any party (including the Bank, its affiliates, successors, and representatives) that may arise from Employee’s employment with the Bank or the termination of Employee’s employment with the Bank shall be resolved by mandatory, binding arbitration before a retired judge or other arbitrator selected by mutual agreement of the Bank and the Employee.

This Arbitration Agreement does not cover the following claims:

· Administrative claims properly presented to an administrative agency, such as the Equal Employment Opportunity Commission (EEOC) or federal Department of Labor (Wage and Hour Division), or any equivalent state administrative agency, except that if any such claim is dismissed from the administrative agency’s jurisdiction, the parties must then submit to binding arbitration pursuant to this Agreement. The Employee may (but is not required to) choose arbitration to resolve the Employee’s dispute rather than pursuing a claim with an administrative agency.

· Workers’ Compensation benefits;

· Unemployment compensation benefits;

· Claims based on the National Labor Relations Act;

· Claims based upon any Bank employee benefit and/or welfare plan that contains an appeal procedure or other procedure for the resolution of disputes under the plan.

· Claims brought under the Private Attorneys General Act (“PAGA”) as set forth in California Labor Code sections 2698 et seq.

The arbitration requirement does apply to all statutory, contractual and/or common law claims arising from employment with the Bank including, but not limited to, the following:

· Any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement, including but not limited to any claim that all or any part of this Agreement is void or voidable;

· Claims that could be asserted in court, including breach of any express or implied contract or covenant; tort claims; claims for retaliation, discrimination or harassment of any kind, including claims based on sex, pregnancy, race, national or ethnic origin, age, religion, creed, marital status, sexual orientation, mental or physical disability, medical condition or other characteristics protected by law. This includes claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the federal Fair Labor Standards Act, the California Fair Employment and Housing Act, the California Constitution, the California Labor Code, or any other federal or state statute on these subjects;

· Claims for violation of any statutory leave law, including the federal Family and Medical Leave Act (FMLA), the California Family Rights Act (CFRA), California Paid Leave or any related federal or state statute;

· Violations of confidentiality or breaches of trade secrets;

· Violation of any other federal, state, or other governmental law, regulation or ordinance, whether based on statute or common law;

· Claims made against the Bank or any of its subsidiary or affiliated entities, or its individual officers, directors or employees for any matters arising out of any of the above claims.

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Except as otherwise required by applicable law, the parties agree that all claims subject to binding arbitration under this Agreement, including as set forth more specifically above, shall be conducted on an individual basis, and not as a class action.

Binding arbitration under this Agreement shall be conducted in accordance with any applicable state statutes providing for arbitration procedures. Alternatively, if no such state statutes exist, then arbitration shall be conducted pursuant to the rules of the American Arbitration Association (“AAA”) for employment law disputes. A copy of these AAA rules can be found at www.adr.org under “Rules & Procedures”. The parties may mutually agree upon another arbitration procedure.

The arbitrator shall be a retired superior or appellate court judge or other professional arbitrator chosen by agreement of the parties or any local dispute resolution service administered by the Superior Court of the county in which the dispute arose. The arbitrator shall not have any authority to consolidate, combine or aggregate the claims of the undersigned employee with those of any other employee. The arbitrator shall have no authority to create an arbitration proceeding on a class basis, nor to award relief to a class of employees in one arbitration proceeding.

Any dispute with any party that arises from Employee’s employment with the Bank or termination of employment with the Bank must be submitted to binding arbitration within the applicable statute of limitations prescribed by law. With the exception of a filing fee that shall not exceed the cost to file a comparable claim in state or federal court, the Bank shall pay the fees and costs of the Arbitrator, and each party shall pay for its own costs and attorneys’ fees. However, the Arbitrator may award costs and/or attorneys’ fees to the prevailing party to the extent permitted by law and shall follow any applicable statutory requirements regarding an award of attorneys’ fees and costs.

The parties will be permitted to conduct discovery as provided by the applicable state statute(s). In the absence of any such statute(s), the parties shall follow the discovery procedures set forth by the American Arbitration Association. Within 30 days of the conclusion of the arbitration, the Arbitrator shall issue a written opinion setting forth the factual and legal basis for his or her decision. The Arbitrator shall have the power and discretion to award to the prevailing party all damages provided under the applicable law.

If any provision of this Agreement is held to be unenforceable, it shall be stricken from the Agreement and the remainder of the Agreement shall be fully enforceable. If any provision of this Agreement is held to be in conflict with a mandatory provision of applicable law, the conflicting provision of this Agreement shall be modified automatically to comply with the applicable law until such time as the provision can be formally modified to comply with the law.

I acknowledge that I have carefully read this agreement, and that I understand and agree to its terms. I have entered into this agreement voluntarily and have not relied upon any promises or representations other than those contained herein. I understand that I am giving up my right to a court or jury trial by entering into this agreement. I understand that this arbitration agreement does not change my at‑will employment status with the Bank.

	Paul S. Ulrich
Date
	Employee Signature
	Martin Plourd, President/CEO

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EX-10.49

Exhibit 10.49

SALARY CONTINUATION AGREEMENT

This Salary Continuation Agreement (this “Agreement”) by and between Community West Bank, a national banking association located in Goleta, California (hereinafter referred to as the “Employer”), and William Filippin (hereinafter referred to as the “Executive”), is effective as of the 28^th of September, 2018, with reference to the following:

WITNESSETH:

WHEREAS, the Executive is employed by the Employer;

WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to encourage the Executive’s continued employment and to provide the Executive with additional incentive to achieve corporate objectives;

WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to the Executive;

WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and

WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Executive, a member of select group of management or highly compensated employee of the Employer.

NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:

1.1          “Accrued Benefit” means the dollar value of the liability that should be accrued by the Employer for each Plan Year, under Generally Accepted Accounting Principles, as consistently applied in accordance with the practices of the Employer, for the Employer’s obligation to the Executive under this Agreement, calculated by applying Accounting Standards Codification 710-10and the Discount Rate, provided, however, that in the event a Separation of Service occurs during a Plan Year, the Accrued Benefit shall include an amount equal to the Accrued Benefit for that Plan Year divided by twelve (12) and multiplied by the number of full calendar months in that Plan Year prior to the date of the Separation of Service.

1.2          “Administrator” means the Board or its designee.

1.3         “Affiliate” means any business entity with whom the Employer would be considered a single employer under Code Section 414(b) and 414(c).  Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

1.4          “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.

1.5          “Board” means the Board of Directors of the Employer.

1.6         “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Employer, as determined by at least 2/3rds of the Independent Board Members, and if requested in writing by the Executive within twenty (20) days of such determination, an Independent Lawyer or Law Firm shall review the determination of the Independent Board Members and render a final and binding opinion as to whether or not the Cause definition has met; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Employer; or fraud, disloyalty, dishonesty or willful violation of any law or significant Employer policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Employer, as determined by at least 2/3rds of the Independent Board Members, and if requested by the Executive within twenty (20) days of such determination, an Independent Lawyer or Law Firm shall review the determination of the Independent Board Members and render a final and binding opinion as to whether or not the Cause definition has met.

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1.7         “Change in Control” means a change in the ownership or effective control of the Employer or Corporation, or in the ownership of a substantial portion of the assets of the Employer or Corporation, as such change is defined in Code Section 409A and regulations thereunder.

1.8          “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.9          “Code” means the Internal Revenue Code of 1986, as amended, and the rules regulations, and guidance of general application issued thereunder by the Department of the Treasury.

1.10        “Constructive Termination” means a Separation from Service caused by the Executive’s resignation within ninety (90) days following the Executive’s discovery of the occurrence of one or more of the following events:

(a) the assignment to the Executive, without the Executive’s written consent, of any duties inconsistent in any respect (including title, status, office and reporting requirements) with the Executive’s position, duties, responsibilities and status with the Employer prior to such assignment, or any subsequent removal of the Executive from, or any failure to re-elect him to, any such position;

(b) the termination and/or reduction, without the Executive’s written consent, in the Executive’s facilities (including office space and general location) and staff reporting and available to the Executive;

(c) the reduction by the Employer of the Executive’s total cash compensation, base salary or of any incentive compensation formula applicable to him or the failure by the Employer to increase the Executive’s base salary each year by an amount which equals at least one-half (1/2), on a percentage basis, of the percentage increase in base salary for all executive officers, excluding the Chief Executive Officer and the Executive, or any successors thereof, during the prior two (2) calendar years;

(d) the failure by the Employer to maintain any of the employee benefits to which the Executive is entitled at a substantially equal level, through the continuation of the same or  substantially similar plans, programs or policies; or the taking of any action by the Employer which would materially affect the Executive’s participation in or reduce the Executive’s benefits under any such plans, programs or policies, or deprive the Executive of any material fringe benefits previously enjoyed by the Executive;

(e) a failure by the Employer to provide the Executive with at least the same number of paid vacation days and leave to which the Executive would have been entitled as a salaried employee of the Employer or any parent or successor of the Employer with the same tenure; and

(f) the Employer requiring the Executive to be based anywhere other than within thirty-five (35) miles of the office where the Executive is currently based, except for required travel on the Employer’s business to the extent substantially consistent with the Executive’s business travel obligations.

1.11 “Corporation” means Community West Bancshares.

1.12       “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.  The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive shall be entitled to submit his own reports to the Administrator concerning his Disability and the Administrator shall take such reports into consideration. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section; and provided further that Executive shall be required to submit proof to the Administrator of the disability insurance program’s determination of disability.

1.13       “Discount Rate” means the rate used by the Administrator for determining the Accrued Benefit.  The initial Discount Rate is 4.5%.  The rate is based on the 20 year AAA bond rate and shall be adjusted quarterly on the first day of each calendar quarter or at the discretion of the Board. Administrator may further adjust the Discount Rate to maintain the rate within reasonable standards according to Generally Accepted Accounting Principles and applicable bank regulatory guidance.

1.14       “Early Involuntary Termination” means that the Executive, prior to Normal Retirement Age, has experienced a Constructive Termination or a Separation from Service, following receipt of a written notification from the Employer that such Separation from Service has occurred for reasons other than Cause, Disability, Early Voluntary Termination, or within twenty-four (24) months following a Change in Control.

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1.15       “Early Voluntary Termination” means that the Executive, prior to Normal Retirement Age, experiences a Separation from Service for reasons other than Cause, Disability, Early Involuntary Termination, Constructive Termination, or within twenty-four (24) months following a Change in Control.

1.16 “Effective Date” means September 1, 2018.

1.17 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.18       “Independent Board Member” means a member of the Board that is not an employee of the Employer or an Affiliate of the Employer and has not been an employee of the Employer or an Affiliate of the Employer at any time during the immediately preceding three (3) year period.

1.19 “Normal Retirement Age” means the date the Executive attains age sixty-six (66).

1.20       “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year.  The initial Plan Year shall commence on the Effective Date and end on the following December 31.

1.21      “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability.  A Separation from Service may occur as of a specified date for purposes of this Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months).  A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer.  If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation of Service on the next day following the expiration of such six (6) month period.  In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury Regulation §1.409A-1(h)(3).  The Administrator shall have full and final authority to determine conclusively whether a Separation from Service occurs and the date of such Separation from Service.

1.22      “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m).  If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

ARTICLE 2

PAYMENT OF BENEFITS

2.1          Normal Retirement Benefit.  Upon Separation from Service after Normal Retirement Age, the Employer shall pay the Executive an annual benefit for fifteen (15) years in the amount of Fifty Thousand Dollars ($50,000) ($750,000 in the aggregate) in lieu of any other benefit hereunder.  The annual benefit will be paid in one hundred eighty (180) equal monthly installments commencing the month following the date of Executive’s Separation from Service.

2.2          Early Voluntary Termination Benefit.  If Early Voluntary Termination occurs, neither the Executive nor the Beneficiary shall be due any benefit hereunder and the Employer’s obligations under this Agreement shall terminate.

2.3         Early Involuntary Termination Benefit.  If Early Involuntary Termination occurs, the Employer shall pay the Executive 100% of the Accrued Benefit, calculated as of the date of Separation from Service. The benefit will be paid in a lump sum within thirty (30) days following Separation of Service.

2.4         Disability Benefit.  In the event the Executive suffers a Disability prior to Normal Retirement Age, the Employer shall pay the Executive 100% of the Accrued Benefit in lieu of any other benefit hereunder.  The benefit will be paid to Executive in one hundred eighty (180) equal monthly installments commencing the month following Normal Retirement Age.

2.5        Change in Control Benefit.  If a Change in Control occurs, followed within twenty-four (24) months by Separation of Service prior to Normal Retirement Age, the Employer shall pay the Executive a lump sum benefit in the amount of Five Hundred Thirty-Eight Thousand Five Hundred Eighty-Five Dollars ($538,585) and the Gross-Up Payment specified in Section 2.14 in lieu of any other benefit hereunder.  The benefit in this Section 2.5 will be paid in a lump sum within thirty (30) days following Separation from Service, with the precise date of payment determined by the Employer in its sole discretion and the Gross-Up Payment due under Section 2.14 shall be paid according to the provisions of that Section.

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2.6          Death Prior to Commencement of Benefit Payments.  In the event the Executive dies prior to Separation from Service, the Employer shall pay the Beneficiary an annual benefit for fifteen (15) years in the amount of Fifty Thousand Dollars ($50,000) ($750,000 in the aggregate) in lieu of any other benefit hereunder.  The annual benefit will be paid in one hundred eighty (180) equal monthly installments commencing the month following the date of Executive’s death.

2.7          Death Subsequent to Commencement of Benefit Payments.  In the event the Executive dies while receiving payments under Section 2.1, 2.3 or 2.5, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive had the Executive survived.  In the event the Executive dies after being disabled, all payments, if any under Section 2.4 shall cease and in lieu thereof, the Employer shall pay the Beneficiary a benefit equal to Seven Hundred Fifty Thousand Dollars ($750,000) less the aggregate of all amounts paid (if any) to Executive under Section 2.4 by Employer to the date of Executive’s death (the “Section 2.7 Benefit”) paid in one hundred eighty (180) equal monthly installments commencing the month following the date of Executive’s death; provided, however, that if the Section 2.7 Benefit is less than $250,000, then the Section 2.7 Benefit shall be paid in a lump sum payment to Beneficiary within thirty (30) days following the Employer’s determination of the amount of the Section 2.7 Benefit.

2.8          Termination for Cause.  If: (i) the Employer terminates the Executive’s employment for Cause; or (ii) the Executive is removed from office or permanently prohibited from participating in the Employer’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(e)(4) or (g)(1), then the Executive shall not be entitled to any benefits under the terms of this Agreement and all obligations of the Employer under this Agreement shall terminate as of the effective date of the Separation from Service.

2.9          Restriction on Commencement of Distributions.  Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder.  Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service.  Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death.  All subsequent distributions shall be paid as they would have had this Section not applied.

2.10        Acceleration of Payments.  Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder.  Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cash-outs (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that this Agreement fails to meet the requirements of Code Section 409A.

2.11        Delays in Payment by Employer.  A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and invoking such a delay will not fail to meet the requirements of establishing a permissible payment event.  The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated employees on a reasonably consistent basis.

(a)          Payments subject to Code Section 162(m).  If the Employer reasonably anticipates that the Employer’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution from this Agreement is deductible, the Employer may delay payment of any amount that would otherwise be distributed under this Agreement.  The delayed amounts shall be distributed to the Executive (or the Beneficiary in the event of the Executive’s death) at the earliest date the Employer reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

(b)          Payments that would violate Federal securities laws or other applicable law.  A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation.  The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(c)          Solvency.  Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.

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2.12       Treatment of Payment as Made on Designated Payment Date.  Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15^th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if the Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

2.13        Facility of Payment.  If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee.  Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

2.14          Excise Tax Gross Up.  In the event any payment or benefits provided or to be provided by the Employer to or on behalf of the Executive under this Agreement, when added to all other payments and benefits provided to or on behalf of the Executive pursuant to all other plans, programs, agreements and understandings with the Executive in connection with his Separation from Service constitute parachute payments within the meaning of Code Section 280G and will be subject to the excise tax under Code Section 4999 (or any successor provision thereto) or any interest or penalties with respect to such excise tax, then the Employer shall pay the Executive, within five (5) days of the date such tax, interest or penalties is required to be paid by the Executive or withheld by the Employer, an additional cash payment (the “Gross-Up Payment”) in an amount such that the after-tax proceeds of the Gross-Up Payment (including any income tax or excise tax on the Gross-Up Payment) will be equal to the amount of the excise tax, interest and/or penalties.

2.15          Changes in Form of Timing of Benefit Payments.  The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments.  Any such amendment:

(a)        must take effect not less than twelve (12) months after the amendment is made;

(b)        must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c)        must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d)        may not accelerate the time or schedule of any distribution.

ARTICLE 3

BENEFICIARIES

3.1        Designation of Beneficiaries.  The Executive may designate any person to receive any benefits payable under this Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation.  Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator, and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime.  If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator.  The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

3.2        Absence of Beneficiary Designation.  In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse.  If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there no living descendants, to the Executive’s estate.  In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.

ARTICLE 4

ADMINISTRATION

4.1         Administrator Duties.  The Administrator shall be responsible for the management, operation, and administration of this Agreement.  When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary.  No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

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4.2          Administrator Authority.  The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

4.3          Binding Effect of Decision.  Except as otherwise provided in this Agreement, the decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.

4.4          Compensation, Expenses and Indemnity.  The Administrator shall serve without compensation for services rendered hereunder.  The Administrator is authorized at the expense of the Employer to employ such legal counsel and/or recordkeeper as it may deem advisable to assist in the performance of its duties hereunder.  Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

4.5          Employer Information.  The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

4.6          Compliance with Code Section 409A.  The Employer and the Executive intend that this Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary.  This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

ARTICLE 5

CLAIMS AND REVIEW PROCEDURES

5.1          Claims Procedure.  A Claimant shall make a claim for any benefits under this Agreement as follows.

(a)          Initiation – Written Claim.  The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits.  If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant.  All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred.  The claim must state with particularity the determination desired by the Claimant.

(b)        Timing of Administrator Response.  The Administrator shall respond to such Claimant within forty-five (45) days after receiving the claim.  If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional thirty (30) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required.  The extension notice shall specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information.

(c)         Notice of Decision.  If the Administrator denies all or a part of the claim, the Administrator shall notify the Claimant in writing of such denial in a culturally and linguistically appropriate manner.  The Administrator shall write the notification in a manner calculated to be understood by the Claimant.  The notification shall set forth:  (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a notice that the Claimant has a right to request a review of the claim denial and an explanation of the Agreement’s review procedures and the time limits applicable to such procedures; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, and a description of any time limit for bringing such an action; (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist; and (viii) for any Disability claim, a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by Department of Labor Regulation Section 2560.503-1(m)(8).

6

5.2          Review Procedure.  If the Administrator denies all or a part of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

(a)          Additional Evidence.  Prior to the review of the denied claim, the Claimant shall be given, free of charge, any new or additional evidence considered, relied upon, or generated by the Administrator, or any new or additional rationale, as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to give the Claimant a reasonable opportunity to respond prior to that date.

(b)          Initiation – Written Request.  To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(c)          Additional Submissions – Information Access.  After such request the Claimant may submit written comments, documents, records and other information relating to the claim.  The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(d)          Considerations on Review.  In considering the review, the Administrator shall consider all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Additional considerations shall be required in the case of a claim for Disability benefits. The claim shall be reviewed by an individual or committee who did not make the initial determination that is subject of the appeal and who is not a subordinate of the individual who made the determination.  Additionally, the review shall be made without deference to the initial adverse benefit determination. If the initial adverse benefit determination was based in whole or in part on a medical judgment, the Administrator will consult with a health care professional with appropriate training and experience in the field of medicine involving the medical judgment. The health care professional who is consulted on appeal will not be the same individual who was consulted during the initial determination and will not be the subordinate of such individual. If the Administrator obtained the advice of medical or vocational experts in making the initial adverse benefits determination (regardless of whether the advice was relied upon), the Administrator will identify such experts.

(d)          Timing of Administrator Response.  The Administrator shall respond in writing to such Claimant within forty-five (45) days after receiving the request for review.  If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional forty-five (45) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(e)         Notice of Decision.  The Administrator shall notify the Claimant in writing of its decision on review.  The Administrator shall write the notification in a culturally and linguistically appropriate manner calculated to be understood by the Claimant.  The notification shall set forth:  (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a); (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration; and (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist;.

5.3          Exhaustion of Remedies.  The Claimant must follow these claims review procedures and exhaust all administrative remedies before taking any further action with respect to a claim for benefits.

5.4         Failure to Follow Procedures. In the case of a claim for Disability benefits, if the Administrator fails to strictly adhere to all the requirements of this claims procedure with respect to a Disability claim, the Claimant is deemed to have exhausted the administrative remedies available under the Agreement, and shall be entitled to pursue any available remedies under ERISA Section 502(a) on the basis that the Administrator has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, except where the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the Administrator’s control; (d) in the context of an ongoing good-faith exchange of information; and (e) not reflective of a pattern or practice of noncompliance.  The Claimant may request a written explanation of the violation from the Administrator, and the Administrator must provide such explanation within ten (10) days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies to be deemed exhausted. If a court rejects the Claimant’s request for immediate review on the basis that the Administrator met the standards for the exception, the claim shall be considered as re-filed on appeal upon the Administrator’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the Administrator shall provide the claimant with notice of the resubmission.

7

5.5          Timing of Review Procedure and Statute of Limitations. The foregoing provisions of this Article shall not bind Claimant if Claimant could possibly lose rights to pursue any other course of action.

ARTICLE 6

AMENDMENT AND TERMINATION

6.1          Agreement Amendment Generally.  Except as provided in Section 6.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.

6.2          Amendment to Insure Proper Characterization of Agreement.  Notwithstanding anything in this Agreement to the contrary, this Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, i) to ensure that this Agreement is characterized as a plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, ii) to conform this Agreement to the requirements of any applicable law or iii) to comply with the written instructions of the Employer’s auditors or banking regulators so long as any such modification does not result in the Executive receiving less than he would otherwise be entitled to receive in the absence of any such modification.

6.3          Agreement Termination Generally.  This Agreement may be terminated only by a written agreement signed by the Employer and the Executive.  Such termination shall not cause a distribution of benefits under this Agreement.  Rather, upon such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2.

ARTICLE 7

GENERAL LIMITATIONS

7.1         Default.  Despite any contrary provision of this Agreement, if the Employer is in “default” or “in danger of default,” as those terms are defined in Section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(x), all obligations under this Agreement shall terminate.

7.2          FDIC Open-Bank Assistance.  All obligations under this Agreement shall terminate, except to the extent determined that continuation of the contract is necessary for the continued operation of the Employer, when the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Employer under the authority contained in Federal Deposit Insurance Act Section 13(c), 12 U.S.C. § 1823(c).  Rights of the parties that have already vested shall not be affected by such action, however.

7.3          OCC Troubled Condition Designation.  In the event that the Employer is deemed by the Federal Deposit Insurance Corporation to be in “troubled condition,” as defined in 12 C.F.R. Section 5.51(6), any payment to be paid pursuant to this Agreement will be made only as permitted by applicable federal law and regulations.

ARTICLE 8

MISCELLANEOUS

8.1         No Effect on Other Rights.  This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof.  No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.  Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.

8.2          State Law.  To the extent not governed by ERISA, the provisions of this Agreement shall be construed and interpreted according to the internal law of the State of California without regard to its conflicts of laws principles.

8.3         Validity.  In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

8.4          Nonassignability.  Except as provided in this Agreement with respect to any Beneficiary, benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

8.5          Unsecured General Creditor Status.  Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement.  The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future.  In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom except as may be specifically provided in any such policy.

8

8.6          Life Insurance.  If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

8.7         Unclaimed Benefits.  The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary.  If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years.  Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary.  If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate.  If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.

8.8          Suicide or Misstatement.  No benefit shall be distributed hereunder if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage for material misstatements of fact made by the Executive on an application for life insurance.

8.9          Removal.Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act.  Furthermore, any payments made to the Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.

8.10        Notice.  Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office.  Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate.  Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

8.11        Headings and Interpretation.  Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement.  Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

8.12        Alternative Action.  In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

8.13        Coordination with Other Benefits.  The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer.  This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

8.14        Inurement.  This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.

8.15       Tax Withholding.  The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under this Agreement.  Except as provided in Section 2.14, the Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

8.16        Aggregation of Agreement.  If the Employer offers other non-account balance deferred compensation plans, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

8.17        Attorney’s Fees. Except as otherwise specifically provided in this Agreement, In the event of any dispute between the parties concerning the terms and provisions of this Agreement, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute including reasonable attorney’s fees.

9

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:

Executive:	Employer:
	By:
	Its:

SALARY CONTINUATION AGREEMENT

Beneficiary Designation

I designate the following as Beneficiary under this Agreement:

Primary
	%
	%
Contingent
	%
	%

I understand that I may change this beneficiary designation by delivering a new written designation to the Administrator, which shall be effective only upon receipt by the Administrator prior to my death.  I further understand that the designation will be automatically revoked if the Beneficiary predeceases me or if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

Signature: Date:

SPOUSAL CONSENT (Required only if Administrator requests and someone other than spouse is named Beneficiary)
I consent to the beneficiary designation above.  I also acknowledge that if I am named Beneficiary and my marriage is subsequently dissolved, the beneficiary designation will be automatically revoked.
Spouse Name:
Signature:	Date:

Received by the Administrator this ________ day of ___________________, 20__

By:          _________________________________

Title:       _________________________________

10

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Martin E. Plourd, President and Chief Executive Officer of Community West Bancshares, a California corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Community West Bancshares;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Martin E. Plourd
	Martin E. Plourd
	President and Chief Executive Officer
	Community West Bancshares
November 2, 2018

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Susan C. Thompson, Executive Vice President and Chief Financial Officer of Community West Bancshares, a California corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Community West Bancshares;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Susan C. Thompson
	Susan C. Thompson
	Executive Vice President and Chief Financial Officer
	Community West Bancshares
November 2, 2018

EX-32.1

Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350,

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (“Report”) by Community West Bancshares (“Registrant”), each of the undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of and for the periods presented in the Report.

	/s/Martin E. Plourd
	Martin E. Plourd
	President and Chief Executive Officer
	/s/Susan C. Thompson
	Susan C. Thompson
	Executive Vice President and Chief Financial Officer
November 2, 2018

A signed original of this written statement required by Section 906 has been provided to Community West Bancshares and will be furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 26, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	COMMUNITY WEST BANCSHARES /
Entity Central Index Key	0001051343
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		8,279,882
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3

XML

CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets:
Cash and due from banks	$ 2,308	$ 3,639
Federal funds sold	9	12
Interest-earning demand in other financial institutions	45,436	42,218
Cash and cash equivalents	47,753	45,869
Investment securities - available-for-sale, at fair value; amortized cost of $26,058 at September 30, 2018 and $28,742 at December 31, 2017	25,802	28,783
Investment securities - held-to-maturity, at amortized cost; fair value of $7,395 at September 30, 2018 and $7,671 at December 31, 2017	7,475	7,565
Investment securities - measured at fair value; amortized cost of $66 at September 30, 2018 and December 31, 2017.	144	0
Federal Home Loan Bank stock, at cost	2,714	2,347
Federal Reserve Bank stock, at cost	1,373	1,373
Loans:
Held for sale, at lower of cost or fair value	50,944	55,094
Held for investment, net of allowance for loan losses of $8,519 at September 30, 2018 and $8,420 at December 31, 2017	694,278	671,095
Total loans	745,222	726,189
Other assets acquired through foreclosure, net	0	372
Premises and equipment, net	6,207	5,581
Other assets	18,019	15,236
Total assets	854,709	833,315
Deposits:
Non-interest-bearing demand	105,580	108,500
Interest-bearing demand	267,046	256,717
Savings	14,385	14,085
Certificates of deposit ($250,000 or more)	92,934	81,985
Other certificates of deposit	239,997	238,397
Total deposits	719,942	699,684
Other borrowings	50,000	56,843
Other liabilities	9,210	6,718
Total liabilities	779,152	763,245
Stockholders' equity:
Common stock - no par value, 60,000,000 shares authorized; 8,274,882 shares issued and outstanding at September 30, 2018 and 8,193,339 at December 31, 2017	43,318	42,604
Retained earnings	32,398	27,441
Accumulated other comprehensive income (loss)	(159)	25
Total stockholders' equity	75,557	70,070
Total liabilities and stockholders' equity	$ 854,709	$ 833,315

XML

CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets:
Investment securities available-for-sale, amortized cost	$ 26,058	$ 28,742
Investment securities held-to-maturity, fair value	7,395	7,671
Investment securities measured at fair value, amortized cost	66	66
Loans:
Held for investment, allowance for loan losses	$ 8,519	$ 8,420
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	60,000,000	60,000,000
Common stock, shares issued (in shares)	8,274,882	8,193,339
Common stock, shares outstanding (in shares)	8,274,882	8,193,339

XML

CONSOLIDATED INCOME STATEMENTS (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest income:
Loans, including fees	$ 10,612	$ 9,340	$ 30,283	$ 26,570
Investment securities and other	589	355	1,307	894
Total interest income	11,201	9,695	31,590	27,464
Interest expense:
Deposits	2,222	1,185	5,373	2,984
Other borrowings	351	134	928	294
Total interest expense	2,573	1,319	6,301	3,278
Net interest income	8,628	8,376	25,289	24,186
Provision (credit) for loan losses	(197)	159	(224)	423
Net interest income after provision for loan losses	8,825	8,217	25,513	23,763
Non-interest income:
Other loan fees	379	354	998	999
Document processing fees	120	146	367	430
Service charges	113	118	351	326
Other	29	98	252	299
Total non-interest income	641	716	1,968	2,054
Non-interest expenses:
Salaries and employee benefits	4,147	3,839	12,338	11,566
Occupancy, net	778	754	2,303	2,085
Professional services	326	281	931	759
Data processing	201	192	619	525
Depreciation	199	168	552	519
FDIC assessment	169	172	547	461
Advertising and marketing	154	137	487	488
Stock-based compensation	81	283	284	454
Other	347	561	1,131	1,460
Total non-interest expenses	6,402	6,387	19,192	18,317
Income before provision for income taxes	3,064	2,546	8,289	7,500
Provision for income taxes	695	992	2,239	3,034
Net income	$ 2,369	$ 1,554	$ 6,050	$ 4,466
Earnings per share:
Basic (in dollars per share)	$ 0.29	$ 0.19	$ 0.73	$ 0.55
Diluted (in dollars per share)	$ 0.27	$ 0.18	$ 0.69	$ 0.52
Weighted average number of common shares outstanding:
Basic (in shares)	8,261	8,165	8,233	8,134
Diluted (in shares)	8,761	8,598	8,724	8,569
Dividends declared per common share (in dollars per share)	$ 0.050	$ 0.040	$ 0.140	$ 0.115

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) [Abstract]
Net income	$ 2,369	$ 1,554	$ 6,050	$ 4,466
Other comprehensive income, net:
Unrealized income (loss) on securities available-for-sale (AFS), net (tax effect of $34, $11, $82 and ($70) for each respective period presented)	(48)	(17)	(125)	99
Net other comprehensive income (loss)	(48)	(17)	(125)	99
Comprehensive income	$ 2,321	$ 1,537	$ 5,925	$ 4,565

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Other comprehensive income, net:
Unrealized income (loss) on securities available-for-sale (AFS), tax effect	$ 34	$ 11	$ 82	$ (70)

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Total
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income				$ 4,466
Other comprehensive income, net				99
Net income				1,554
Other comprehensive income, net				(17)
Impact of ASU 2016-01 and 2018-02 as of January 1, 2018 | Accounting Standards Update 2016-01 and Accounting Standards Update 2018-02 [Member]	$ 0	$ (59)	$ 59	0
Balance at Dec. 31, 2017	$ 42,604	25	27,441	$ 70,070
Balance (in shares) at Dec. 31, 2017	8,193,000			8,193,339
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 0	0	6,050	$ 6,050
Exercise of stock options	$ 430	0	0	430
Exercise of stock options (in shares)	82,000
Stock based compensation	$ 284	0	0	284
Stock based compensation (in shares)	0
Dividends on common stock	$ 0	0	(1,152)	(1,152)
Other comprehensive income, net	0	(125)	0	(125)
Balance at Sep. 30, 2018	$ 43,318	(159)	32,398	$ 75,557
Balance (in shares) at Sep. 30, 2018	8,275,000			8,274,882
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income				$ 2,369
Other comprehensive income, net				(48)
Balance at Sep. 30, 2018	$ 43,318	$ (159)	$ 32,398	$ 75,557
Balance (in shares) at Sep. 30, 2018	8,275,000			8,274,882

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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net income	$ 6,050	$ 4,466
Adjustments to reconcile net income to cash provided by operating activities:
(Credit) provision for loan losses	(224)	423
Depreciation	552	519
Stock-based compensation	284	454
Deferred income taxes	(466)	(714)
Net accretion of discounts and premiums for investment securities	70	65
Losses/(Gains) on:
Sale of repossessed assets, net	62	(150)
Loans originated for sale and principal collections, net	4,150	2,855
Changes in:
Investment securities held at fair value	12	0
Other assets	(2,464)	(1,222)
Other liabilities	2,570	2,338
Servicing assets, net	67	54
Net cash provided by operating activities	10,663	9,088
Cash flows from investing activities:
Principal pay downs and maturities of available-for-sale securities	2,646	2,315
Purchase of available-for-sale securities	0	(9,413)
Purchase of held-to-maturity securities	(794)	0
Principal pay downs and maturities of held-to-maturity securities	869	796
Loan originations and principal collections, net	(23,132)	(94,808)
Purchase of restricted stock, net	(367)	(277)
Purchase of premises and equipment, net	(1,178)	(1,720)
Proceeds from sale of other real estate owned and repossessed assets, net	484	303
Net cash used in investing activities	(21,472)	(102,804)
Cash flows from financing activities:
Net increase in deposits	20,258	84,918
Net (decrease) increase in borrowings	(6,843)	26,843
Exercise of stock options	430	347
Cash dividends paid on common stock	(1,152)	(936)
Net cash provided by financing activities	12,693	111,172
Net increase cash and cash equivalents	1,884	17,456
Cash and cash equivalents at beginning of year	45,869	34,116
Cash and cash equivalents at end of period	47,753	51,572
Cash paid during the period for:
Interest	5,586	3,118
Income taxes	2,010	2,380
Non-cash investing and financing activity:
Transfers to other assets acquired through foreclosure, net	$ 174	$ 502

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

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

Basis of Presentation

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

Use of Estimates

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

Interim Financial Information

The accompanying unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2018 and 2017 have been prepared in a condensed format, and therefore do not include all of the information and footnotes required by GAAP for complete financial statements.  These statements have been prepared on a basis that is substantially consistent with the accounting principles applied to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.

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

Reclassifications

Certain amounts in the consolidated financial statements as of December 31, 2017 and for the three and nine months ended September 30, 2017 have been reclassified to conform to the current presentation.  The reclassifications have no effect on net income, comprehensive income or stockholders’ equity as previously reported.

Loans Held For Sale

Loans which are originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value determined on an aggregate basis.  Valuation adjustments, if any, are recognized through a valuation allowance by charges to lower of cost or fair value provision.  Loans held for sale are mostly comprised of commercial agriculture and SBA.  The Company did not incur any lower of cost or fair value provision in the three and nine months ended September 30, 2018 and 2017.

Loans Held for Investment and Interest and Fees from Loans

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

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

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

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

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

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

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

Allowance for Loan Losses and Provision for Loan Losses

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

Outstanding – This is the highest quality rating that is assigned to any loan in the portfolio.  These loans are made to the highest quality borrowers with strong financial statements and unquestionable repayment sources.  Collateral securing these types of credits are generally cash deposits in the bank or marketable securities held in custody.

Good – Loans rated in this category are strong loans, underwritten well, that bear little risk of loss to the Company.  Loans in this category are loans to quality borrowers with very good financial statements that present an identifiable strong primary source and good secondary source of repayment.  Generally, these credits are well collateralized by good quality and liquid assets or low loan to value market real estate.

Pass - Loans rated in this category are acceptable loans, appropriately underwritten, bearing an ordinary risk of loss to the Company.  Loans in this category are loans to quality borrowers with financial statements presenting a good primary source as well as an adequate secondary source of repayment.  In the case of individuals, borrowers with this rating are quality borrowers demonstrating a reasonable level of secure income, a net worth adequate to support the loan and presenting a good primary source as well as an adequate secondary source of repayment.

Watch – Acceptable credit that requires a temporary increase in attention by management.  This can be caused by declines in sales, margins, liquidity or working capital.  Generally the elevated risk comes from lack of current financial statements and industry issues.

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

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

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

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

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

Commercial, CRE and SBA Loans

Charge-offs on these loan categories are taken as soon as all or a portion of any loan balance is deemed to be uncollectible.  A loan is considered impaired when, based on current information, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest under the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and/or interest payments.  Loans that experience insignificant payment delays or payment shortfalls generally are not classified as impaired. Generally, loan balances are charged-down to the fair value of the collateral, if, based on a current assessment of the value, an apparent deficiency exists.  In the event there is no perceived equity, the loan is charged-off in full.  Unsecured loans which are delinquent over 90 days are also charged-off in full.

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

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

Consumer Loans

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

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

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

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

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

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

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

· The loan’s observable market price.

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

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

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

· Concentrations of credit

· International risk

· Trends in volume, maturity, and composition of loans

· Volume and trend in delinquency, nonaccrual, and classified assets

· Economic conditions

· Geographic distance

· Policy and procedures or underwriting standards

· Staff experience and ability

· Value of underlying collateral

· Competition, legal, or regulatory environment

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

Off Balance Sheet and Credit Exposure

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit.  Such financial instruments are recorded in the consolidated financial statements when they are funded.  They involve, to varying degrees, elements of credit risk in excess of amounts recognized in the consolidated balance sheets.  Losses would be experienced when the Company is contractually obligated to make a payment under these instruments and must seek repayment from the borrower, which may not be as financially sound in the current period as they were when the commitment was originally made.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The Company enters into credit arrangements that generally provide for the termination of advances in the event of a covenant violation or other event of default.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party.  The commitments are collateralized by the same types of assets used as loan collateral.

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

Foreclosed Real Estate and Repossessed Assets

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

Income Taxes

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

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

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

Earnings Per Share

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

Recent Accounting Pronouncements

In May 2014, the FASB issued guidance codified within ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers,” which amends the guidance in former Topic 605, Revenue Recognition. The new revenue recognition standardsuperseded virtually all revenue guidance in U.S. GAAP, including industry specific guidance. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. ASU 2014-09 is effective for the Company for annual reporting periods beginning after December 15, 2016. In August 2015, this effective date was extended for the Company to December 15, 2017. This Update allowed for using one of the following two adoption methods: 1) retrospectively to each prior reporting period presented or 2) retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application with the cumulative effect of initially applying the standard. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and noninterest income. The contracts that are in scope of the guidance are primarily related to service charges on deposit accounts, cardholder income, and other service charge fees. The Company adopted this standard effective January 1, 2018 using the modified retrospective approach.  Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary.  See Note 10 Revenue Recognition for further information.

In January 2016, the FASB issued guidance codified within ASU 2016-01, “Financial Instruments – Overall, Subtopic 825-10: Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends certain guidance on classification and measurement of financial instruments. The update is intended to enhance the reporting model for financial instruments to provide users of financial instruments with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for the Company for annual reporting periods beginning after December 15, 2017. The Company has evaluated the impact of the provisions in this standard on the Company's Consolidated Financial Statements. The adoption of ASU 2016-01 on January 1, 2018 did not have material impact on the Company's Consolidated Financial Statements.  In accordance with the guidance, the Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion (see Note 6 Fair Value Measurement).

In February 2016, the FASB amended its standards with respect to the accounting for leases. The amended guidance serves to replace all current U.S. GAAP guidance on this topic and requires that an operating lease be recognized on the statement of financial condition as a “right-to-use” asset along with a corresponding liability representing the rent obligation. Key aspects of current lessor accounting remain unchanged from existing guidance. This standard is expected to result in an increase to assets and liabilities recognized and, therefore, increase risk-weighted assets for regulatory capital purposes. The guidance requires the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application and will become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The standard is effective for the Company as of January 1, 2019. The Company is currently implementing lease accounting software to determine how our financial statements will be affected, and we believe the primary effect of adopting the new standard will be to record right-of-use assets and obligations for our leases currently classified as operating leases and does not anticipate these to be significant.

In June of 2016, the FASB issued update guidance codified within ASU-2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which amends the guidance for recognizing credit losses from an “incurred loss” methodology that delays recognition of credit losses until it is probable a loss has been incurred to an expected credit loss methodology. The guidance requires the use of the modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted.  The standard is effective for the Company as of January 1, 2020.  The Company is currently evaluating the impact of the amended guidance and has not yet determined the effect of the standard on its ongoing financial reporting.

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

In February 2018, the FASB issued guidance codified within ASU-2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," to address the income tax accounting treatment of the standard tax effects within other comprehensive income due to the prohibition of backward tracing due to an income tax rate change that was initially recorded in other comprehensive income. This issue came about from the enactment of the Tax Cuts and Jobs Act on December 22, 2017 that changed the Company's income tax rate from 34% to 21%. The ASU changed current accounting whereby an entity may elect to reclassify the standard tax effect from accumulated other comprehensive income to retained earnings. The ASU is effective for periods beginning after December 15, 2018 although early adoption is permitted. The Company elected to early adopt ASU-2018-02 in the first quarter of 2018 and elected to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income ("AOCI") to retained earnings.  The reclassification did not have a material impact to the Consolidated Financial Statements.

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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2018

INVESTMENT SECURITIES [Abstract]

INVESTMENT SECURITIES

2. INVESTMENT SECURITIES

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

	September 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	12,722	$	—	$	(202	)	$	12,520
U.S. government agency collateralized mortgage obligations ("CMO")		13,336		28		(82	)		13,282
Total	$	26,058	$	28	$	(284	)	$	25,802
Securities held-to-maturity
U.S. government agency mortgage backed securities ("MBS")	$	7,475	$	125	$	(205	)	$	7,395
Total	$	7,475	$	125	$	(205	)	$	7,395

Securities measured at fair value
Equity securities: Farmer Mac class A stock	$	66	$	78	$	—	$	144
Total	$	66	$	78	$	—	$	144

	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	14,035	$	35	$	(92	)	$	13,978
U.S. government agency collateralized mortgage obligations ("CMO")		14,641		66		(58	)		14,649
Equity securities: Farmer Mac class A stock		66		90		—			156
Total	$	28,742	$	191	$	(150	)	$	28,783
Securities held-to-maturity
U.S. government agency mortgage backed securities ("MBS")	$	7,565	$	216	$	(110	)	$	7,671
Total	$	7,565	$	216	$	(110	)	$	7,671

At September 30, 2018 and December 31, 2017, $33.3 million and $36.2 million of securities at carrying value, respectively, were pledged to the Federal Home Loan Bank (“FHLB”), as collateral for current and future advances.

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

	September 30, 2018
	Less than One Year					One to Five Years					Five to Ten Years					Over Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale	(dollars in thousands)
U.S. government agency notes	$	1,912		2.6	%	$	1,411		2.3	%	$	9,197		2.8	%	$	—		—		$	12,520		2.7	%
U.S. government agency CMO		—		—			2,237		2.3	%		8,158		2.5	%		2,887		3	%		13,282		2.6	%
Total	$	1,912		2.6	%	$	3,648		2.3	%	$	17,355		2.7	%	$	2,887		3.0	%	$	25,802		2.7	%
Securities held-to-maturity
U.S. government agency MBS	$	—		—		$	1,751		4.2	%	$	4,927		3.3	%	$	797		3.6	%	$	7,475		3.6	%
Total	$	—		—		$	1,751		4.2	%	$	4,927		3.3	%	$	797		3.6	%	$	7,475		3.6	%
Securities measured at fair value
Farmer Mac class A stock	$	—		—		$	—		—		$	—		—		$	—		—		$	144		—
Total	$	—		—		$	—		—		$	—		—		$	—		—		$	144		—

	December 31, 2017
	Less than One Year					One to Five Years					Five to Ten Years					Over Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale	(dollars in thousands)
U.S. government agency notes	$	1,967		2.6	%	$	1,833		1.6	%	$	10,178		2.0	%	$	—		—		$	13,978		2.0	%
U.S. government agency CMO		—		—			3,362		1.9	%		8,361		1.9	%		2,926		2.3	%		14,649		1.9	%
Farmer Mac class A stock		—		—			—		—			—		—			—		—			156		—
Total	$	1,967		2.6	%	$	5,195		1.8	%	$	18,539		1.9	%	$	2,926		2.3	%	$	28,783		2.0	%
Securities held-to-maturity
U.S. government agency MBS	$	—		—		$	2,802		3.6	%	$	4,763		3.1	%	$	—		—		$	7,565		3.3	%
Total	$	—		—		$	2,802		3.6	%	$	4,763		3.1	%	$	—		—		$	7,565		3.3	%

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

	September 30,				December 31,
	2018				2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Securities available-for-sale	(in thousands)
Due in one year or less	$	1,997	$	1,912	$	1,997	$	1,967
After one year through five years		3,687		3,648		5,220		5,195
After five years through ten years		17,443		17,355		18,506		18,539
After ten years		2,931		2,887		2,953		2,926
Farmer Mac class A stock		—		—		66		156
Total	$	26,058	$	25,802	$	28,742	$	28,783
Securities held-to-maturity
Due in one year or less	$	—	$	—	$	—	$	—
After one year through five years		1,751		1,837		2,802		2,938
After five years through ten years		4,927		4,775		4,763		4,733
After ten years		797		783		—		—
Total	$	7,475	$	7,395	$	7,565	$	7,671
Securities measured at fair value
Farmer Mac class A stock	$	66	$	144	$	—	$	—
Total	$	66	$	144	$	—	$	—

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

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

	September 30, 2018
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	113	$	6,185	$	89	$	6,335	$	202	$	12,520
U.S. government agency CMO		30		774		52		2,629		82		3,403
Total	$	143	$	6,959	$	141	$	8,964	$	284	$	15,923
Securities held-to-maturity
U.S. Government-agency MBS	$	31	$	2,504	$	174	$	2,074	$	205	$	4,578
Total	$	31	$	2,504	$	174	$	2,074	$	205	$	4,578
Securities measured at fair value
Farmer Mac class A stock	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	—	$	—

	December 31, 2017
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	70	$	6,324	$	22	$	3,106	$	92	$	9,430
U.S. government agency CMO		8		985		50		3,430		58		4,415
Equity securities: Farmer Mac class A stock		—		—		—		—		—		—
Total	$	78	$	7,309	$	72	$	6,536	$	150	$	13,845
Securities held-to-maturity
U.S. Government-agency MBS	$	—	$	—	$	110	$	2,496	$	110	$	2,496
Total	$	—	$	—	$	110	$	2,496	$	110	$	2,496

As of September 30, 2018 and December 31, 2017, there were 19 and 14 securities, respectively, in an unrealized loss position.  Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things (i) the length of time and the extent to which the fair value has been less than cost (ii) the financial condition and near-term prospects of the issuer and (iii) the Company’s intent to sell an impaired security and if it is not more likely than not it will be required to sell the security before the recovery of its amortized basis.

The unrealized losses are primarily due to increases in market interest rates over the yields available at the time the underlying securities were purchased.  The fair value is expected to recover as the bonds approach their maturity date, repricing date or if market yields for such investments decline.  Management does not believe any of the securities are impaired due to reasons of credit quality.  Accordingly, as of September 30, 2018 and December 31, 2017, management believes the impairments detailed in the table above are temporary and no other-than-temporary impairment loss has been realized in the Company’s consolidated income statements. 

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LOANS HELD FOR SALE

9 Months Ended

Sep. 30, 2018

LOANS HELD FOR SALE [Abstract]

LOANS HELD FOR SALE

3. LOANS HELD FOR SALE

SBA and Agriculture Loans

As of September 30, 2018 and December 31, 2017, the Company had approximately $15.0 million and $18.9 million, respectively, of SBA loans included in loans held for sale.  As of September 30, 2018 and December 31, 2017, the principal balance of SBA loans serviced for others was $8.0 million and $10.8 million, respectively.

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

As of September 30, 2018 and December 31, 2017, the Company had $35.9 million and $36.2 million of USDA loans included in loans held for sale, respectively. As of September 30, 2018 and December 31, 2017, the principal balance of USDA loans serviced for others was $2.0 million. 

XML

LOANS HELD FOR INVESTMENT

9 Months Ended

Sep. 30, 2018

LOANS HELD FOR INVESTMENT [Abstract]

LOANS HELD FOR INVESTMENT

4. LOANS HELD FOR INVESTMENT

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

	September 30,			December 31,
	2018			2017
	(in thousands)
Manufactured housing	$	240,010		$	223,115
Commercial real estate		353,136			354,617
Commercial		83,328			75,282
SBA		6,131			7,424
HELOC		9,446			9,422
Single family real estate		11,153			10,346
Consumer		73			83
		703,277			680,289
Allowance for loan losses		(8,519	)		(8,420	)
Deferred fees, net		(402	)		(652	)
Discount on SBA loans		(78	)		(122	)
Total loans held for investment, net	$	694,278		$	671,095

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

	September 30, 2018
	Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Total		Recorded Investment Over 90 Days and Accruing
	(in thousands)
Manufactured housing	$	239,574	$	144	$	—	$	—	$	144	$	292	$	240,010	$	—
Commercial real estate:
Commercial real estate		258,807		235		—		—		235		107		259,149		—
SBA 504 1st trust deed		24,333		—		—		—		—		—		24,333		—
Land		6,070		—		—		—		—		—		6,070		—
Construction		62,257		1,327		—		—		1,327		—		63,584		—
Commercial		79,141		99		—		—		99		4,088		83,328		—
SBA		5,275		—		—		—		—		856		6,131		—
HELOC		9,244		—		—		—		—		202		9,446		—
Single family real estate		10,946		17		—		25		42		165		11,153		25
Consumer		73		—		—		—		—		—		73		—
Total	$	695,720	$	1,822	$	—	$	25	$	1,847	$	5,710	$	703,277	$	25

	December 31, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Total		Recorded Investment Over 90 Days and Accruing
	(in thousands)
Manufactured housing	$	222,342	$	355	$	—	$	—	$	355	$	418	$	223,115	$	—
Commercial real estate:
Commercial real estate		271,134		—		—		—		—		122		271,256		—
SBA 504 1st trust deed		26,463		—		—		—		—		184		26,647		—
Land		5,092		—		—		—		—		—		5,092		—
Construction		51,622		—		—		—		—		—		51,622		—
Commercial		70,481		15		—		—		15		4,786		75,282		—
SBA		6,461		19		—		—		19		944		7,424		—
HELOC		9,208		—		—		—		—		214		9,422		—
Single family real estate		10,170		—		—		—		—		176		10,346		—
Consumer		83		—		—		—		—		—		83		—
Total	$	673,056	$	389	$	—	$	—	$	389	$	6,844	$	680,289	$	—

Allowance for Loan Losses

The following table summarizes the changes in the allowance for loan losses:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Beginning balance	$	8,622		$	7,994		$	8,420		$	7,464
Charge-offs		—			(33	)		(6	)		(203	)
Recoveries		94			192			329			628
Net recoveries		94			159			323			425
Provision (credit)		(197	)		159			(224	)		423
Ending balance	$	8,519		$	8,312		$	8,519		$	8,312

As of September 30, 2018 and December 31, 2017, the Company had reserves for credit losses on undisbursed loans of $80,000 and $95,000, respectively, which were included in other liabilities.

The following tables summarize the changes in the allowance for loan losses by portfolio type:

	For the Three Months Ended September 30,
	Manufactured Housing			Commercial Real Estate			Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,145		$	5,007		$	1,221		$	57		$	93		$	99		$	—	$	8,622
Charge-offs		—			—			—			—			—			—			—		—
Recoveries		6			—			19			34			35			—			—		94
Net (charge-offs) recoveries		6			—			19			34			35			—			—		94
Provision (credit)		17			(134	)		4			(38	)		(36	)		(10	)		—		(197	)
Ending balance	$	2,168		$	4,873		$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,124		$	4,332		$	1,262		$	91		$	98		$	87		$	—	$	7,994
Charge-offs		—			—			—			—			—			(33	)		—		(33	)
Recoveries		38			—			43			104			7			—			—		192
Net (charge-offs) recoveries		38			—			43			104			7			(33	)		—		159
Provision (credit)		(15	)		359			(100	)		(108	)		(11	)		34			—		159
Ending balance	$	2,147		$	4,691		$	1,205		$	87		$	94		$	88		$	—	$	8,312

	For the Nine Months Ended September 30,
	Manufactured Housing			Commercial Real Estate		Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,180		$	4,844	$	1,133		$	73		$	92		$	98		$	—	$	8,420
Charge-offs		(6	)		—		—			—			—			—			—		(6	)
Recoveries		114			15		43			102			54			1			—		329
Net (charge-offs) recoveries		108			15		43			102			54			1			—		323
Provision (credit)		(120	)		14		68			(122	)		(54	)		(10	)		—		(224	)
Ending balance	$	2,168		$	4,873	$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,201		$	3,707	$	1,241		$	106		$	100		$	109		$	—	$	7,464
Charge-offs		(119	)		—		—			(30	)		—			(54	)		—		(203	)
Recoveries		105			227		116			168			11			1			—		628
Net (charge-offs) recoveries		(14	)		227		116			138			11			(53	)		—		425
Provision (credit)		(40	)		757		(152	)		(157	)		(17	)		32			—		423
Ending balance	$	2,147		$	4,691	$	1,205		$	87		$	94		$	88		$	—	$	8,312

The following tables present impairment method information related to loans and allowance for loan losses by loan portfolio segment:

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Loans Held for Investment as of September 30, 2018:	(in thousands)
Recorded Investment:
Impaired loans with an allowance recorded	$	5,906	$	245	$	219	$	1	$	—	$	282	$	—	$	6,653
Impaired loans with no allowance recorded		2,330		107		6,978		865		203		1,980		—		12,463
Total loans individually evaluated for impairment		8,236		352		7,197		866		203		2,262		—		19,116
Loans collectively evaluated for impairment		231,774		352,784		76,131		5,265		9,243		8,891		73		684,161
Total loans held for investment	$	240,010	$	353,136	$	83,328	$	6,131	$	9,446	$	11,153	$	73	$	703,277
Unpaid Principal Balance
Impaired loans with an allowance recorded	$	5,906	$	245	$	219	$	20	$	—	$	282	$	—	$	6,672
Impaired loans with no allowance recorded		3,520		162		7,082		1,470		249		2,030		—		14,513
Total loans individually evaluated for impairment		9,426		407		7,301		1,490		249		2,312		—		21,185
Loans collectively evaluated for impairment		231,774		352,784		76,131		5,265		9,243		8,891		73		684,161
Total loans held for investment	$	241,200	$	353,191	$	83,432	$	6,755	$	9,492	$	11,203	$	73	$	705,346
Related Allowance for Credit Losses
Impaired loans with an allowance recorded	$	429	$	9	$	1	$	—	$	—	$	20	$	—	$	459
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		429		9		1		—		—		20		—		459
Loans collectively evaluated for impairment		1,739		4,864		1,243		53		92		69		—		8,060
Total loans held for investment	$	2,168	$	4,873	$	1,244	$	53	$	92	$	89	$	—	$	8,519

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Loans Held for Investment as of December 31, 2017:	(in thousands)
Recorded Investment:
Impaired loans with an allowance recorded	$	5,830	$	557	$	3,551	$	281	$	—	$	2,133	$	—	$	12,352
Impaired loans with no allowance recorded		2,163		—		5,023		699		214		176		—		8,275
Total loans individually evaluated for impairment		7,993		557		8,574		980		214		2,309		—		20,627
Loans collectively evaluated for impairment		215,122		354,060		66,708		6,444		9,208		8,037		83		659,662
Total loans held for investment	$	223,115	$	354,617	$	75,282	$	7,424	$	9,422	$	10,346	$	83	$	680,289
Unpaid Principal Balance
Impaired loans with an allowance recorded	$	5,836	$	661	$	3,551	$	281	$	—	$	2,133	$	—	$	12,462
Impaired loans with no allowance recorded		3,328		—		5,042		1,026		249		220		—		9,865
Total loans individually evaluated for impairment		9,164		661		8,593		1,307		249		2,353		—		22,327
Loans collectively evaluated for impairment		215,122		354,060		66,708		6,444		9,208		8,037		83		659,662
Total loans held for investment	$	224,286	$	354,721	$	75,301	$	7,751	$	9,457	$	10,390	$	83	$	681,989
Related Allowance for Credit Losses
Impaired loans with an allowance recorded	$	427	$	11	$	50	$	1	$	—	$	35	$	—	$	524
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		427		11		50		1		—		35		—		524
Loans collectively evaluated for impairment		1,753		4,833		1,083		72		92		63		—		7,896
Total loans held for investment	$	2,180	$	4,844	$	1,133	$	73	$	92	$	98	$	—	$	8,420

Included in impaired loans are $2.4 million and $2.6 million of loans guaranteed by government agencies at September 30, 2018 and December 31, 2017, respectively.  A valuation allowance is established for an impaired loan when the fair value of the loan is less than the recorded investment.  In certain cases, portions of impaired loans are charged-off to realizable value instead of establishing a valuation allowance and are included, when applicable in the table below as “Impaired loans without specific valuation allowance under ASC 310.”  The valuation allowance disclosed above is included in the allowance for loan losses reported in the consolidated balance sheets as of September 30, 2018 and December 31, 2017.

The table below reflects recorded investment in loans classified as impaired:

	September 30,		December 31,
	2018		2017
	(in thousands)
Impaired loans with a specific valuation allowance under ASC 310	$	6,653	$	12,352
Impaired loans without a specific valuation allowance under ASC 310		12,463		8,275
Total impaired loans	$	19,116	$	20,627
Valuation allowance related to impaired loans	$	459	$	524

The following table summarizes impaired loans by class of loans:

	September 30,		December 31,
	2018		2017
	(in thousands)
Manufactured housing	$	8,236	$	7,993
Commercial real estate :
Commercial real estate		107		122
SBA 504 1st trust deed		245		435
Land		—		—
Construction		—		—
Commercial		7,197		8,574
SBA		866		980
HELOC		203		214
Single family real estate		2,262		2,309
Consumer		—		—
Total	$	19,116	$	20,627

The following tables summarize average investment in impaired loans by class of loans and the related interest income recognized:

	Three Months Ended September 30,
	2018				2017
	Average Investment in Impaired Loans		Interest Income		Average Investment in Impaired Loans		Interest Income
	(in thousands)
Manufactured housing	$	8,175	$	162	$	7,483	$	174
Commercial real estate:
Commercial real estate		111		—		120		1
SBA 504 1st trust deed		407		5		402		5
Land		—		—		—		—
Construction		—		—		—		—
Commercial		7,444		47		4,789		54
SBA		902		17		662		1
HELOC		203		11		214		—
Single family real estate		2,223		27		1,951		25
Consumer		—		—		—		—
Total	$	19,465	$	269	$	15,621	$	260

	Nine Months Ended September 30,
	2018				2017
	Average Investment in Impaired Loans		Interest Income		Average Investment in Impaired Loans		Interest Income
	(in thousands)
Manufactured housing	$	8,226	$	497	$	7,634	$	488
Commercial real estate:
Commercial real estate		116		—		123		1
SBA 504 1st trust deed		378		14		523		15
Land		—		—		—		—
Construction		—		—		—		—
Commercial		7,737		145		4,486		155
SBA		921		18		767		3
HELOC		207		12		273		—
Single family real estate		2,276		81		1,973		75
Consumer		—		—		—		—
Total	$	19,861	$	767	$	15,779	$	737

The Company is not committed to lend additional funds on these impaired loans.

The following table reflects the recorded investment in certain types of loans at the periods indicated:

	September 30,			December 31,
	2018			2017
	(in thousands)
Nonaccrual loans	$	5,710		$	6,844
Government guaranteed portion of loans included above	$	1,955		$	2,372
Troubled debt restructured loans, gross	$	17,644		$	16,603
Loans 30 through 89 days past due with interest accruing	$	1,822		$	389
Loans 90 days or more past due with interest accruing	$	25		$	—
Allowance for loan losses to gross loans held for investment		1.21	%		1.24	%

The accrual of interest is discontinued when substantial doubt exists as to collectability of the loan; generally at the time the loan is 90 days delinquent.  Any unpaid but accrued interest is reversed at that time.  Thereafter, interest income is no longer recognized on the loan.  Interest income may be recognized on impaired loans to the extent they are not past due by 90 days.  Interest on nonaccrual loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are reasonably assured.  Foregone interest on nonaccrual and TDR loans for the three months endedSeptember 30, 2018 and 2017 was $0.1 million.  Foregone interest on nonaccrual and TDR loans for the nine months endedSeptember 30,2018 and 2017 was $0.3 million.

The following table presents the composition of nonaccrual loans by class of loans:

	September 30,		December 31,
	2018		2017
	(in thousands)
Manufactured housing	$	292	$	418
Commercial real estate:
Commercial real estate		107		122
SBA 504 1st trust deed		—		184
Land		—		—
Construction		—		—
Commercial		4,088		4,786
SBA		856		944
HELOC		202		214
Single family real estate		165		176
Consumer		—		—
Total	$	5,710	$	6,844

Included in nonaccrual loans are $2.0 million of loans guaranteed by government agencies at September 30, 2018 and $2.4 million at December 31, 2017.

The guaranteed portion of each SBA loan is repurchased from investors when those loans become past due 120 days by either CWB or the SBA directly.  After the foreclosure and collection process is complete, the principal balance of loans repurchased by CWB are reimbursed by the SBA.  Although these balances do not earn interest during this period, they generally do not result in a loss of principal to CWB; therefore a repurchase reserve has not been established related to these loans.

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans.  Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Special Mention,” “Substandard,” “Doubtful” and “Loss”.  For a detailed discussion on these risk classifications see “Note 1 Summary of Significant Accounting Policies - Allowance for Loan Losses and Provision for Loan Losses”.   Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution's credit position at some future date.  Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.  Risk ratings are updated as part of our normal loan monitoring process, at a minimum, annually.

The following tables present gross loans by risk rating:

	September 30, 2018
	Pass		Special Mention		Substandard		Doubtful		Total
	(in thousands)
Manufactured housing	$	239,459	$	—	$	551	$	—	$	240,010
Commercial real estate:
Commercial real estate		259,042		—		107		—		259,149
SBA 504 1st trust deed		23,854		—		479		—		24,333
Land		6,070		—		—		—		6,070
Construction		62,257		1,327		—		—		63,584
Commercial		75,838		350		5,655		—		81,843
SBA		4,474		44		374		—		4,892
HELOC		9,243		—		203		—		9,446
Single family real estate		10,983		—		170		—		11,153
Consumer		73		—		—		—		73
Total, net		691,293		1,721		7,539		—		700,553
Government guarantee		—		—		2,724		—		2,724
Total	$	691,293	$	1,721	$	10,263	$	—	$	703,277

	December 31, 2017
	Pass		Special Mention		Substandard		Doubtful		Total
	(in thousands)
Manufactured housing	$	222,429	$	—	$	686	$	—	$	223,115
Commercial real estate:
Commercial real estate		271,134		—		122		—		271,256
SBA 504 1st trust deed		25,973		—		674		—		26,647
Land		5,092		—		—		—		5,092
Construction		49,832		1,790		—		—		51,622
Commercial		64,543		817		8,083		—		73,443
SBA		4,221		102		1,752				6,075
HELOC		9,208		—		214		—		9,422
Single family real estate		10,165		—		181		—		10,346
Consumer		83		—		—		—		83
Total, net		662,680		2,709		11,712	$	—		677,101
Government guarantee		—		—		3,188		—		3,188
Total	$	662,680	$	2,709	$	14,900	$	—	$	680,289

Troubled Debt Restructured Loan (TDR)

A TDR is a loan on which the bank, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the bank would not otherwise consider.  The loan terms that have been modified or restructured due to a borrower’s financial situation include, but are not limited to, a reduction in the stated interest rate, an extension of the maturity or renewal of the loan at an interest rate below current market, a reduction in the face amount of the debt, a reduction in the accrued interest, extensions, deferrals, renewals and rewrites.  The majority of the bank’s modifications are extensions in terms or deferral of payments which result in no lost principal or interest followed by reductions in interest rates or accrued interest.  A TDR is also considered impaired.  Generally, a loan that is modified at an effective market rate of interest may no longer be disclosed as a troubled debt restructuring in years subsequent to the restructuring if it is not impaired based on the terms specified by the restructuring agreement.

The following tables summarize the financial effects of TDR loans by loan class for the periods presented:

	For the Three Months Ended September 30, 2018
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		2	$	—	$	166	$	53	$	166	$	3
Total		2	$	—	$	166	$	53	$	166	$	3

	For the Nine Months Ended September 30, 2018
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term  Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		12	$	1,047	$	1,213	$	1,100	$	1,213	$	66
Commercial		3		1,781		1,781		—		1,781		—
Total		15	$	2,828	$	2,994	$	1,100	$	2,994	$	66

	For the Three Months Ended September 30, 2017
	Number of Loans		Pre- Modification Recorded  Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		2	$	363	$	363	$	363	$	363	$	24
Commercial		1		14		14		-		14		-
Total		3	$	377	$	377	$	363	$	377	$	24

	For the Nine Months Ended September 30, 2017
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		9	$	807	$	807	$	807	$	807	$	45
Commercial		2	$	102	$	102	$	—	$	102	$	2
SBA		1	$	17	$	17	$	—	$	17	$	1
Total		12	$	926	$	926	$	807	$	926	$	48

The average rate concessions were 50 basis points and 73 basis points, for the three and nine months ended September 30, 2018 and 100 basis points and 97 basis points for the three and nine months ended September 30, 2017, respectively.  The average term extension in months was 180 and 151 for the three and nine months ended September 30, 2018 and 126 and 138 for the three and nine months ended September 30, 2017, respectively.

A TDR loan is deemed to have a payment default when the borrower fails to make - consecutive payments or the collateral is transferred to repossessed assets.  The Company had no TDR’s with payment defaults for the three or nine months ended September 30, 2018 or 2017.

At September 30, 2018 there were no material loan commitments outstanding on TDR loans. 

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OTHER ASSETS ACQUIRED THROUGH FORECLOSURE

9 Months Ended

Sep. 30, 2018

OTHER ASSETS ACQUIRED THROUGH FORECLOSURE [Abstract]

OTHER ASSETS ACQUIRED THROUGH FORECLOSURE

5. OTHER ASSETS ACQUIRED THROUGH FORECLOSURE

The following table summarizes the changes in other assets acquired through foreclosure:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Balance, beginning of period	$	213		$	362		$	372		$	137
Additions		—			132			174			502
Proceeds from dispositions		(213	)		(60	)		(484	)		(303	)
(Loss) gain on sales, net		—			52			(62	)		150
Balance, end of period	$	—		$	486		$	—		$	486

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FAIR VALUE MEASUREMENT

9 Months Ended

Sep. 30, 2018

FAIR VALUE MEASUREMENT [Abstract]

FAIR VALUE MEASUREMENT

6. FAIR VALUE MEASUREMENT

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities.  FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) established a framework for measuring fair value using a three-level valuation hierarchy for disclosure of fair value measurement.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset as of the measurement date.  ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available.  Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.  Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would consider in pricing the asset or liability developed based on the best information available in the circumstances.  The hierarchy is broken down into three levels based on the reliability of inputs, as follows:

 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 all 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.

The availability of observable inputs varies based on the nature of the specific financial instrument.  To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure.  When market assumptions are available, ASC 820 requires the Company to make assumptions regarding the assumptions that market participants would use to estimate the fair value of the financial instrument at the measurement date.

FASB ASC 825, Financial Instruments (“ASC 825”) requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at September 30, 2018 and December 31, 2017.  The estimated fair value amounts for September 30, 2018 and December 31, 2017 have been measured as of period-end, and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those dates.  As such, the estimated fair values of these financial instruments subsequent to the reporting date may be different than the amounts reported at the period-end.

This information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities.

Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimate, comparisons between the Company’s disclosures and those of other companies or banks may not be meaningful.

The following tables summarize the fair value of assets measured on a recurring basis:

	Fair Value Measurements at the End of the Reporting Period Using:
September 30, 2018	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 available-for-sale	$	144	$	25,802	$	—	$	25,946
Interest only strips		—		—		62		62
Servicing assets		—		—		56		56
	$	144	$	25,802	$	118	$	26,064

	Fair Value Measurements at the End of the Reporting Period Using:
December 31, 2017	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 available-for-sale	$	156	$	28,627	$	—	$	28,783
Interest only strips		—		—		87		87
Servicing assets		—		—		97		97
	$	156	$	28,627	$	184	$	28,967

Market valuations of our investment securities which are classified as level 2 are provided by an independent third party.  The fair values are determined by using several sources for valuing fixed income securities.  Their techniques include pricing models that vary based on the type of asset being valued and incorporate available trade, bid and other market information.  In accordance with the fair value hierarchy, the market valuation sources include observable market inputs and are therefore considered Level 2 inputs for purposes of determining the fair values.

On certain SBA loan sales, the Company retained interest only strip assets (‘I/O strips”) which represent the present value of excess net cash flows generated by the difference between (a) interest at the stated rate paid by borrowers and (b) the sum of (i) pass-through interest paid to third-party investors and (ii) contractual servicing fees.  I/O strips are classified as Level 3 in the fair value hierarchy.  The fair value is determined on a quarterly basis through a discounted cash flow analysis prepared by an independent third party using industry prepayment speeds.  I/O strip valuation adjustments are recorded as additions or offsets to loan servicing income.

Historically, the Company has elected to use the amortizing method for the treatment of servicing assets and has measured for impairment on a quarterly basis through a discounted cash flow analysis prepared by an independent third party using industry prepayment speeds.  In connection with the sale of certain SBA and USDA loans the Company recorded servicing assets and elected to measure those assets at fair value in accordance with ASC 825-10.  Significant assumptions in the valuation of servicing assets include estimated loan repayment rates, the discount rate, and servicing costs, among others.  Servicing assets are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.

The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis.  These assets include loans held for sale, foreclosed real estate and repossessed assets and certain loans that are considered impaired per generally accepted accounting principles.

The following summarizes the fair value measurements of assets measured on a non-recurring basis:

			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, 2018:
Impaired loans	$	4,746	$	—	$	4,746	$	—
Loans held for sale		51,558		—		51,558		—
Foreclosed real estate and repossessed assets		—		—		—		—
	$	56,304	$	—	$	56,304	$	—

			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, 2017:
Impaired loans	$	6,323	$	—	$	6,323	$	—
Loans held for sale		56,222		—		56,222		—
Foreclosed real estate and repossessed assets		372		—		372		—
	$	62,917		—		62,917		—

The Company records certain loans at fair value on a non-recurring basis.  When a loan is considered impaired an allowance for a loan loss is established.  The fair value measurement and disclosure requirement applies to loans measured for impairment using the practical expedients method permitted by accounting guidance for impaired loans.  Impaired loans are measured at an observable market price, if available or at the fair value of the loan’s collateral, if the loan is collateral dependent.  The fair value of the loan’s collateral is determined by appraisals or independent valuation.  When the fair value of the loan’s collateral is based on an observable market price or current appraised value, given the current real estate markets, the appraisals may contain a wide range of values and accordingly, the Company classifies the fair value of the impaired loans as a non-recurring valuation within Level 2 of the valuation hierarchy.  For loans in which impairment is determined based on the net present value of cash flows, the Company classifies these as a non-recurring valuation within Level 3 of the valuation hierarchy.

Foreclosed real estate and repossessed assets are carried at the lower of book value or fair value less estimated costs to sell.  Fair value is based upon independent market prices obtained from certified appraisers or the current listing price, if lower.  When the fair value of the collateral is based on a current appraised value, the Company reports the fair value of the foreclosed collateral as non-recurring Level 2.  When a current appraised value is not available or if management determines the fair value of the collateral is further impaired, the Company reports the foreclosed collateral as non-recurring Level 3.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies.  However, considerable judgment is required to interpret market data to develop estimates of fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The estimated fair value of the Company’s financial instruments are as follows:

	September 30, 2018
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:	(in thousands)
Cash and cash equivalents	$	47,753	$	47,753	$	—	$	—	$	47,753
FRB and FHLB stock		4,087		—		4,087		—		4,087
Investment securities		33,421		144		33,197		—		33,341
Loans, net		745,222		—		725,139		14,076		739,215
Financial liabilities:
Deposits		719,942		—		701,534		—		701,534
Other borrowings		50,000		—		49,799		—		49,799

	December 31, 2017
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:	(in thousands)
Cash and cash equivalents	$	45,869	$	45,869	$	—	$	—	$	45,869
FRB and FHLB stock		3,720		—		3,720		—		3,720
Investment securities		36,348		156		36,298		—		36,454
Loans, net		726,189		—		705,723		13,779		719,502
Financial liabilities:
Deposits		699,684		—		699,211		—		699,211
Other borrowings		56,843		—		56,842		—		56,842

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash and cash equivalents

The carrying amounts reported in the consolidated balance sheets for cash and due from banks approximate their fair value.

Money market investments

The carrying amounts reported in the consolidated balance sheets for money market investments approximate their fair value.

Investment securities

The fair value of Farmer Mac class A stock is based on quoted market prices and are categorized as Level 1 of the fair value hierarchy.

The fair value of other investment securities were determined based on matrix pricing.  Matrix pricing is a mathematical technique that utilizes observable market inputs including, for example, yield curves, credit ratings and prepayment speeds.  Fair values determined using matrix pricing are generally categorized as Level 2 in the fair value hierarchy.

Federal Reserve Stock and Federal Home Loan Bank Stock

CWB is a member of the FHLB system and maintains an investment in capital stock of the FHLB.  CWB also maintains an investment in capital stock of the Federal Reserve Bank (“FRB”).  These investments are carried at cost since no ready market exists for them, and they have no quoted market value.  The Company conducts a periodic review and evaluation of our FHLB stock to determine if any impairment exists.  The fair values have been categorized as Level 2 in the fair value hierarchy.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or fair value.  The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics or based on the agreed-upon sale price.  As such, the Company classifies the fair value of loans held for sale as a non-recurring valuation within Level 2 of the fair value hierarchy.  At September 30, 2018 and December 31, 2017, the Company had loans held for sale with an aggregate carrying value of $50.9 million and $55.1 million respectively.

Loans

Fair value of loans is estimated by calculating loan level fair values for all loans utilizing a discounted cash flow methodology incorporating “exit pricing” analytics in conformance with ASU 2016-01.  All active loans were valued in the portfolio as of date of exercise, excluding any loans held for sale, and utilized assumptions such as probability of default, loss given default, recovery delay and prepayment assumptions.  Fair value was calculated in accordance with ASC 820.  The fair value for loans is categorized as Level 2 in the fair value hierarchy.  Fair values of impaired loans using a discounted cash flow method to measure impairment have been categorized as Level 3.

Deposits

The amount payable at demand at report date is used to estimate the fair value of demand and savings deposits. The estimated fair values of fixed-rate time deposits are determined by discounting the cash flows of segments of deposits that have similar maturities and rates, utilizing a discount rate that approximates the prevailing rates offered to depositors as of the measurement date.  The fair value measurement of deposit liabilities is categorized as Level 2 in the fair value hierarchy.

Federal Home Loan Bank advances and other borrowings

The fair values of the Company’s borrowings are estimated using discounted cash flow analyses, based on the market rates for similar types of borrowing arrangements.  The FHLB advances have been categorized as Level 2 in the fair value hierarchy.

Off-balance sheet instruments

Fair values for the Company’s off-balance sheet instruments (lending commitments and standby letters of credit) are based on quoted fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

There were no standby letters of credit outstanding at September 30, 2018 or at December 31, 2017.  Unfunded loan commitments at September 30, 2018 and December 31, 2017 were $61.6 million and $68.8 million, respectively. 

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OTHER BORROWINGS

9 Months Ended

Sep. 30, 2018

OTHER BORROWINGS [Abstract]

OTHER BORROWINGS

7. OTHER BORROWINGS

Federal Home Loan Bank Advances – The Company through the bank has a blanket lien credit line with the FHLB.  FHLB advances are collateralized in the aggregate by CWB’s eligible loans and securities.  Total FHLB advances were $47.0 million and $50.0 million at September 30, 2018 and December 31, 2017, respectively, borrowed at fixed rates.  The Company also had $125.0 million of letters of credit with FHLB at September 30, 2018 to secure public funds.  At September 30, 2018, CWB had pledged to the FHLB, $33.3 million of securities and $239.0 million of loans.  At September 30, 2018, CWB had $70.2 million available for additional borrowing.  At December 31, 2017, CWB had pledged to the FHLB, $36.2 million of securities and $235.4 million of loans.  At December 31, 2017, CWB had $56.8 million available for additional borrowing.  Total FHLB interest expense for the three months ended September 30, 2018 and 2017 was $0.3 million and $0.1 million, respectively.  Total FHLB interest expense for the nine months ended September 30, 2018 and 2017 was $0.7 million and $0.2 million, respectively.

Federal Reserve Bank – The Company has established a credit line with the FRB.  Advances are collateralized in the aggregate by eligible loans for up to 28 days.  There were no outstanding FRB advances as of September 30, 2018 and December 31, 2017.  Available borrowing capacity was $105.1 million and $104.3 million as of September 30, 2018 and December 31, 2017, respectively.

Federal Funds Purchased Lines– The Company has federal funds borrowing lines at correspondent banks totaling $20.0 million.    There was no amount outstanding as of September 30, 2018 and December 31, 2017.

Line of Credit - In July of 2017, the Company entered into a one-year revolving line of credit agreement for up to $15.0 million.  The Company must maintain a compensating deposit with the lender of 25% of the outstanding principal balance in a non-interest-bearing deposit account which was $0.8 million at September 30, 2018.  In addition, the Company must maintain a minimum debt service coverage ratio of 1.65, a minimum Tier 1 leverage ratio of 7.0% and a minimum total risked based capital ratio of 10.0%.  At September 30, 2018, the line of credit balance was $3.0 million at a rate of 5.85%. 

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2018

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

8. STOCKHOLDERS’ EQUITY

The following table summarizes the changes in other comprehensive income (loss) by component, net of tax for the period indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	Unrealized holding gains (losses) on AFS						Unrealized holding gains (losses) on AFS
	(in thousands)
Beginning balance	$	(111	)	$	87		$	25		$	(29	)
Other comprehensive income before reclassifications		(48	)		(17	)		(125	)		99
Amounts reclassified from accumulated other comprehensive income		—			—			(59	)		—
Net current-period other comprehensive income		(48	)		(17	)		(184	)		99
Ending Balance	$	(159	)	$	70		$	(159	)	$	70

The adoption of ASU-2018-02 during the first quarter of 2018 created a $6,000 reclassification within accumulated other comprehensive income to retained earnings.  The Company also recorded a $53,000 adjustment during the first quarter of 2018 from AOCI to retained earnings on adoption of ASU 2016-01.

Common Stock

On August 24, 2017, the Board of Directors extended the common stock repurchase program of up to $3.0 million for two additional years.  Under this program the Company has repurchased 187,569 common stock shares for $1.4 million at an average price of $7.25 per share.  There were no repurchases of common stock under this program during the three or nine months ended September 30, 2018.

During the three and nine months ended September 30, 2018, the Company paid common stock dividends of $0.4 million and $1.2 million, respectively. During the three and nine months ended September 30, 2017, the Company paid common stock dividends of $0.3 million and $0.9 million, respectively.

Common Stock Warrant

The Warrant issued as part of the TARP provides for the purchase of up to 521,158 shares of the common stock, at an exercise price of $4.49 per share (“Warrant Shares”).  The Warrant is immediately exercisable and expires on December 19, 2018.  The exercise price and the ultimate number of shares of common stock that may be issued under the Warrant are subject to certain anti-dilution adjustments, such as upon stock splits or distributions of securities or other assets to holders of the common stock, and upon certain issuances of the common stock at or below a specified price relative to the then current market price of the common stock.  In the second quarter of 2013, the Treasury sold its warrant position to a private investor.  Pursuant to the Securities Purchase Agreement, the private investor has agreed not to exercise voting power with respect to any Warrant Shares. 

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CAPITAL REQUIREMENT

9 Months Ended

Sep. 30, 2018

CAPITAL REQUIREMENT [Abstract]

CAPITAL REQUIREMENT

9. CAPITAL REQUIREMENT

The Federal Reserve has adopted capital adequacy guidelines that are used to assess the adequacy of capital in supervising a bank holding company.  In July 2013, the federal banking agencies approved the final rules (“Final Rules”) to establish a new comprehensive regulatory capital framework with a phase-in period beginning January 1, 2015 and ending January 1, 2019.  The Final Rules implement the third installment of the Basel Accords (“Basel III”) regulatory capital reforms and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and substantially amend the regulatory risk-based capital rules applicable to the Company.  Basel III redefines the regulatory capital elements and minimum capital ratios, introduces regulatory capital buffers above those minimums, revises rules for calculating risk-weighted assets and adds a new component of Tier 1 capital called Common Equity Tier 1, which includes common equity and retained earnings and excludes preferred equity.

The following tables illustrates the Bank’s regulatory ratios and the Federal Reserve’s current adequacy guidelines as of September 30, 2018 and December 31, 2017.  The Federal Reserve’s fully phased-in guidelines applicable in 2019 are also summarized.

	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, 2018
CWB's actual regulatory ratios		10.78	%		9.63	%		9.63	%		8.22	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

	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, 2017
CWB's actual regulatory ratios		11.31	%		10.10	%		10.10	%		8.83	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

The Company has evaluated the impact of the Final Rules and believes that, as of September 30, 2018, the Company would meet all capital adequacy requirements under the Basel III capital rules on a fully phased-in basis as if all such requirements were currently in effect.  There are no conditions or events since September 30, 2018 that management believes have changed the Company’s or the Bank’s risk-based capital category.

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REVENUE RECOGNITION

9 Months Ended

Sep. 30, 2018

REVENUE RECOGNITION [Abstract]

REVENUE RECOGNITION

10. REVENUE RECOGNITION

The Company adopted ASU No, 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all subsequent ASUs that modified Topic 606 on January 1, 2018.  The implementation of the new standard did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities.  In addition, certain non-interest income streams such as servicing rights, financial guarantees and certain credit card fees are also not in scope of the new guidance.  Topic 606 is applicable to non-interest income streams such as deposit related fees, interchange fees and merchant income.  However the recognition of these income streams did not change upon the adoption of Topic 606.  Substantially all of the Company’s revenue is generated from contracts with customers.  Non-interest revenue streams in-scope of Topic 606 are discussed below.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of monthly service fees, check orders, account analysis fees, and other deposit account related fees.  The Company’s performance obligation for monthly service fees and account analysis fees is generally satisfied, and the related income recognized, over the period in which the service is provided.  Check orders and other deposit related fees are largely transactional based and therefore, the Company’s performance obligation is satisfied and related income recognized, at a point in time.  Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Exchange Fees and Other Service Charges

Exchange fees and other service charges are primarily comprised of debit and credit card income, merchant services income, ATM fees and other service charges.  Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa or MasterCard.  Merchant services income is primarily fees charged to merchants to process their debit and credit card transactions.  ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM.  Other service charges include fees from processing wire transfers, cashier’s checks and other services.  The Company’s performance obligation for exchange and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.  Payment is typically received immediately or in the following month.

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for periods indicated.

Non-interest income	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
In-scope of Topic 606:	(in thousands)
Service charges on deposit accounts	$	95	$	89	$	281	$	248
Exchange fees and other service charges		43		46		142		113
Non-interest income (in-scope of Topic 606)		138		135		423		361
Non-interest income (out-of-scope of Topic 606)		503		581		1,545		1,693
	$	641	$	716	$	1,968	$	2,054

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset).  A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer.  The Company’s non-interest income streams are largely based on transactional activity.  Consideration is often received immediately or shortly after the Company satisfies its performance obligation and income is recognized.  The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.  As of September 30, 2018 and December 31, 2017, the Company did not have any signficant contract balances.

Contract Acquisition Costs

In connection with the adoption of Topic 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered.  The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained.  The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less.  Upon adoption of Topic 606, the Company did not capitalize any contract acquisition cost.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Nature of Operations

Nature of Operations

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

Basis of Presentation

Basis of Presentation

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

Use of Estimates

Use of Estimates

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

Interim Financial Information

Interim Financial Information

The accompanying unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2018 and 2017 have been prepared in a condensed format, and therefore do not include all of the information and footnotes required by GAAP for complete financial statements.  These statements have been prepared on a basis that is substantially consistent with the accounting principles applied to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.

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

Reclassifications

Reclassifications

Certain amounts in the consolidated financial statements as of December 31, 2017 and for the three and nine months ended September 30, 2017 have been reclassified to conform to the current presentation.  The reclassifications have no effect on net income, comprehensive income or stockholders’ equity as previously reported.

Loans Held for Sale

Loans Held For Sale

Loans which are originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value determined on an aggregate basis.  Valuation adjustments, if any, are recognized through a valuation allowance by charges to lower of cost or fair value provision.  Loans held for sale are mostly comprised of commercial agriculture and SBA.  The Company did not incur any lower of cost or fair value provision in the three and nine months ended September 30, 2018 and 2017.

Loans Held for Investment and Interest and Fees from Loans

Loans Held for Investment and Interest and Fees from Loans

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

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

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

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

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

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

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

Allowance for Loan Losses and Provision for Loan Losses

Allowance for Loan Losses and Provision for Loan Losses

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

Outstanding – This is the highest quality rating that is assigned to any loan in the portfolio.  These loans are made to the highest quality borrowers with strong financial statements and unquestionable repayment sources.  Collateral securing these types of credits are generally cash deposits in the bank or marketable securities held in custody.

Good – Loans rated in this category are strong loans, underwritten well, that bear little risk of loss to the Company.  Loans in this category are loans to quality borrowers with very good financial statements that present an identifiable strong primary source and good secondary source of repayment.  Generally, these credits are well collateralized by good quality and liquid assets or low loan to value market real estate.

Pass - Loans rated in this category are acceptable loans, appropriately underwritten, bearing an ordinary risk of loss to the Company.  Loans in this category are loans to quality borrowers with financial statements presenting a good primary source as well as an adequate secondary source of repayment.  In the case of individuals, borrowers with this rating are quality borrowers demonstrating a reasonable level of secure income, a net worth adequate to support the loan and presenting a good primary source as well as an adequate secondary source of repayment.

Watch – Acceptable credit that requires a temporary increase in attention by management.  This can be caused by declines in sales, margins, liquidity or working capital.  Generally the elevated risk comes from lack of current financial statements and industry issues.

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

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

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

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

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

Commercial, CRE and SBA Loans

Charge-offs on these loan categories are taken as soon as all or a portion of any loan balance is deemed to be uncollectible.  A loan is considered impaired when, based on current information, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest under the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and/or interest payments.  Loans that experience insignificant payment delays or payment shortfalls generally are not classified as impaired. Generally, loan balances are charged-down to the fair value of the collateral, if, based on a current assessment of the value, an apparent deficiency exists.  In the event there is no perceived equity, the loan is charged-off in full.  Unsecured loans which are delinquent over 90 days are also charged-off in full.

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

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

Consumer Loans

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

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

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

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

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

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

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

· The loan’s observable market price.

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

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

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

· Concentrations of credit

· International risk

· Trends in volume, maturity, and composition of loans

· Volume and trend in delinquency, nonaccrual, and classified assets

· Economic conditions

· Geographic distance

· Policy and procedures or underwriting standards

· Staff experience and ability

· Value of underlying collateral

· Competition, legal, or regulatory environment

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

Off Balance Sheet and Credit Exposure

Off Balance Sheet and Credit Exposure

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit.  Such financial instruments are recorded in the consolidated financial statements when they are funded.  They involve, to varying degrees, elements of credit risk in excess of amounts recognized in the consolidated balance sheets.  Losses would be experienced when the Company is contractually obligated to make a payment under these instruments and must seek repayment from the borrower, which may not be as financially sound in the current period as they were when the commitment was originally made.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The Company enters into credit arrangements that generally provide for the termination of advances in the event of a covenant violation or other event of default.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party.  The commitments are collateralized by the same types of assets used as loan collateral.

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

Foreclosed Real Estate and Repossessed Assets

Foreclosed Real Estate and Repossessed Assets

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

Income Taxes

Income Taxes

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

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

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

Earnings Per Share

Earnings Per Share

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

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued guidance codified within ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers,” which amends the guidance in former Topic 605, Revenue Recognition. The new revenue recognition standardsuperseded virtually all revenue guidance in U.S. GAAP, including industry specific guidance. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. ASU 2014-09 is effective for the Company for annual reporting periods beginning after December 15, 2016. In August 2015, this effective date was extended for the Company to December 15, 2017. This Update allowed for using one of the following two adoption methods: 1) retrospectively to each prior reporting period presented or 2) retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application with the cumulative effect of initially applying the standard. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and noninterest income. The contracts that are in scope of the guidance are primarily related to service charges on deposit accounts, cardholder income, and other service charge fees. The Company adopted this standard effective January 1, 2018 using the modified retrospective approach.  Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary.  See Note 10 Revenue Recognition for further information.

In January 2016, the FASB issued guidance codified within ASU 2016-01, “Financial Instruments – Overall, Subtopic 825-10: Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends certain guidance on classification and measurement of financial instruments. The update is intended to enhance the reporting model for financial instruments to provide users of financial instruments with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for the Company for annual reporting periods beginning after December 15, 2017. The Company has evaluated the impact of the provisions in this standard on the Company's Consolidated Financial Statements. The adoption of ASU 2016-01 on January 1, 2018 did not have material impact on the Company's Consolidated Financial Statements.  In accordance with the guidance, the Company measured the fair value of its loan portfolio as of March 31, 2018 using an exit price notion (see Note 6 Fair Value Measurement).

In February 2016, the FASB amended its standards with respect to the accounting for leases. The amended guidance serves to replace all current U.S. GAAP guidance on this topic and requires that an operating lease be recognized on the statement of financial condition as a “right-to-use” asset along with a corresponding liability representing the rent obligation. Key aspects of current lessor accounting remain unchanged from existing guidance. This standard is expected to result in an increase to assets and liabilities recognized and, therefore, increase risk-weighted assets for regulatory capital purposes. The guidance requires the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application and will become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The standard is effective for the Company as of January 1, 2019. The Company is currently implementing lease accounting software to determine how our financial statements will be affected, and we believe the primary effect of adopting the new standard will be to record right-of-use assets and obligations for our leases currently classified as operating leases and does not anticipate these to be significant.

In June of 2016, the FASB issued update guidance codified within ASU-2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which amends the guidance for recognizing credit losses from an “incurred loss” methodology that delays recognition of credit losses until it is probable a loss has been incurred to an expected credit loss methodology. The guidance requires the use of the modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted.  The standard is effective for the Company as of January 1, 2020.  The Company is currently evaluating the impact of the amended guidance and has not yet determined the effect of the standard on its ongoing financial reporting.

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

In February 2018, the FASB issued guidance codified within ASU-2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," to address the income tax accounting treatment of the standard tax effects within other comprehensive income due to the prohibition of backward tracing due to an income tax rate change that was initially recorded in other comprehensive income. This issue came about from the enactment of the Tax Cuts and Jobs Act on December 22, 2017 that changed the Company's income tax rate from 34% to 21%. The ASU changed current accounting whereby an entity may elect to reclassify the standard tax effect from accumulated other comprehensive income to retained earnings. The ASU is effective for periods beginning after December 15, 2018 although early adoption is permitted. The Company elected to early adopt ASU-2018-02 in the first quarter of 2018 and elected to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income ("AOCI") to retained earnings.  The reclassification did not have a material impact to the Consolidated Financial Statements.

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INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2018

INVESTMENT SECURITIES [Abstract]

Amortized Cost and Estimated Fair Value of Investment Securities

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

	September 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	12,722	$	—	$	(202	)	$	12,520
U.S. government agency collateralized mortgage obligations ("CMO")		13,336		28		(82	)		13,282
Total	$	26,058	$	28	$	(284	)	$	25,802
Securities held-to-maturity
U.S. government agency mortgage backed securities ("MBS")	$	7,475	$	125	$	(205	)	$	7,395
Total	$	7,475	$	125	$	(205	)	$	7,395

Securities measured at fair value
Equity securities: Farmer Mac class A stock	$	66	$	78	$	—	$	144
Total	$	66	$	78	$	—	$	144

	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	14,035	$	35	$	(92	)	$	13,978
U.S. government agency collateralized mortgage obligations ("CMO")		14,641		66		(58	)		14,649
Equity securities: Farmer Mac class A stock		66		90		—			156
Total	$	28,742	$	191	$	(150	)	$	28,783
Securities held-to-maturity
U.S. government agency mortgage backed securities ("MBS")	$	7,565	$	216	$	(110	)	$	7,671
Total	$	7,565	$	216	$	(110	)	$	7,671

Maturity Periods and Weighted Average Yields of Investment Securities

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

	September 30, 2018
	Less than One Year					One to Five Years					Five to Ten Years					Over Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale	(dollars in thousands)
U.S. government agency notes	$	1,912		2.6	%	$	1,411		2.3	%	$	9,197		2.8	%	$	—		—		$	12,520		2.7	%
U.S. government agency CMO		—		—			2,237		2.3	%		8,158		2.5	%		2,887		3	%		13,282		2.6	%
Total	$	1,912		2.6	%	$	3,648		2.3	%	$	17,355		2.7	%	$	2,887		3.0	%	$	25,802		2.7	%
Securities held-to-maturity
U.S. government agency MBS	$	—		—		$	1,751		4.2	%	$	4,927		3.3	%	$	797		3.6	%	$	7,475		3.6	%
Total	$	—		—		$	1,751		4.2	%	$	4,927		3.3	%	$	797		3.6	%	$	7,475		3.6	%
Securities measured at fair value
Farmer Mac class A stock	$	—		—		$	—		—		$	—		—		$	—		—		$	144		—
Total	$	—		—		$	—		—		$	—		—		$	—		—		$	144		—

	December 31, 2017
	Less than One Year					One to Five Years					Five to Ten Years					Over Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale	(dollars in thousands)
U.S. government agency notes	$	1,967		2.6	%	$	1,833		1.6	%	$	10,178		2.0	%	$	—		—		$	13,978		2.0	%
U.S. government agency CMO		—		—			3,362		1.9	%		8,361		1.9	%		2,926		2.3	%		14,649		1.9	%
Farmer Mac class A stock		—		—			—		—			—		—			—		—			156		—
Total	$	1,967		2.6	%	$	5,195		1.8	%	$	18,539		1.9	%	$	2,926		2.3	%	$	28,783		2.0	%
Securities held-to-maturity
U.S. government agency MBS	$	—		—		$	2,802		3.6	%	$	4,763		3.1	%	$	—		—		$	7,565		3.3	%
Total	$	—		—		$	2,802		3.6	%	$	4,763		3.1	%	$	—		—		$	7,565		3.3	%

Amortized Cost and Fair Value of Investment Securities by Contractual Maturities

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

	September 30,				December 31,
	2018				2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Securities available-for-sale	(in thousands)
Due in one year or less	$	1,997	$	1,912	$	1,997	$	1,967
After one year through five years		3,687		3,648		5,220		5,195
After five years through ten years		17,443		17,355		18,506		18,539
After ten years		2,931		2,887		2,953		2,926
Farmer Mac class A stock		—		—		66		156
Total	$	26,058	$	25,802	$	28,742	$	28,783
Securities held-to-maturity
Due in one year or less	$	—	$	—	$	—	$	—
After one year through five years		1,751		1,837		2,802		2,938
After five years through ten years		4,927		4,775		4,763		4,733
After ten years		797		783		—		—
Total	$	7,475	$	7,395	$	7,565	$	7,671
Securities measured at fair value
Farmer Mac class A stock	$	66	$	144	$	—	$	—
Total	$	66	$	144	$	—	$	—

Fair Value and Unrealized Losses of Securities in Unrealized Loss Position

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

	September 30, 2018
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	113	$	6,185	$	89	$	6,335	$	202	$	12,520
U.S. government agency CMO		30		774		52		2,629		82		3,403
Total	$	143	$	6,959	$	141	$	8,964	$	284	$	15,923
Securities held-to-maturity
U.S. Government-agency MBS	$	31	$	2,504	$	174	$	2,074	$	205	$	4,578
Total	$	31	$	2,504	$	174	$	2,074	$	205	$	4,578
Securities measured at fair value
Farmer Mac class A stock	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	—	$	—

	December 31, 2017
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities available-for-sale	(in thousands)
U.S. government agency notes	$	70	$	6,324	$	22	$	3,106	$	92	$	9,430
U.S. government agency CMO		8		985		50		3,430		58		4,415
Equity securities: Farmer Mac class A stock		—		—		—		—		—		—
Total	$	78	$	7,309	$	72	$	6,536	$	150	$	13,845
Securities held-to-maturity
U.S. Government-agency MBS	$	—	$	—	$	110	$	2,496	$	110	$	2,496
Total	$	—	$	—	$	110	$	2,496	$	110	$	2,496

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LOANS HELD FOR INVESTMENT (Tables)

9 Months Ended

Sep. 30, 2018

LOANS HELD FOR INVESTMENT [Abstract]

Composition of Loans Held for Investment Loan Portfolio

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

	September 30,			December 31,
	2018			2017
	(in thousands)
Manufactured housing	$	240,010		$	223,115
Commercial real estate		353,136			354,617
Commercial		83,328			75,282
SBA		6,131			7,424
HELOC		9,446			9,422
Single family real estate		11,153			10,346
Consumer		73			83
		703,277			680,289
Allowance for loan losses		(8,519	)		(8,420	)
Deferred fees, net		(402	)		(652	)
Discount on SBA loans		(78	)		(122	)
Total loans held for investment, net	$	694,278		$	671,095

Contractual Aging of Recorded Investment in Past Due Held for Investment Loans by Class of Loans

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

	September 30, 2018
	Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Total		Recorded Investment Over 90 Days and Accruing
	(in thousands)
Manufactured housing	$	239,574	$	144	$	—	$	—	$	144	$	292	$	240,010	$	—
Commercial real estate:
Commercial real estate		258,807		235		—		—		235		107		259,149		—
SBA 504 1st trust deed		24,333		—		—		—		—		—		24,333		—
Land		6,070		—		—		—		—		—		6,070		—
Construction		62,257		1,327		—		—		1,327		—		63,584		—
Commercial		79,141		99		—		—		99		4,088		83,328		—
SBA		5,275		—		—		—		—		856		6,131		—
HELOC		9,244		—		—		—		—		202		9,446		—
Single family real estate		10,946		17		—		25		42		165		11,153		25
Consumer		73		—		—		—		—		—		73		—
Total	$	695,720	$	1,822	$	—	$	25	$	1,847	$	5,710	$	703,277	$	25

	December 31, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Total		Recorded Investment Over 90 Days and Accruing
	(in thousands)
Manufactured housing	$	222,342	$	355	$	—	$	—	$	355	$	418	$	223,115	$	—
Commercial real estate:
Commercial real estate		271,134		—		—		—		—		122		271,256		—
SBA 504 1st trust deed		26,463		—		—		—		—		184		26,647		—
Land		5,092		—		—		—		—		—		5,092		—
Construction		51,622		—		—		—		—		—		51,622		—
Commercial		70,481		15		—		—		15		4,786		75,282		—
SBA		6,461		19		—		—		19		944		7,424		—
HELOC		9,208		—		—		—		—		214		9,422		—
Single family real estate		10,170		—		—		—		—		176		10,346		—
Consumer		83		—		—		—		—		—		83		—
Total	$	673,056	$	389	$	—	$	—	$	389	$	6,844	$	680,289	$	—

Analysis of Allowance for Loan Losses for Loans Held for Investment

The following table summarizes the changes in the allowance for loan losses:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Beginning balance	$	8,622		$	7,994		$	8,420		$	7,464
Charge-offs		—			(33	)		(6	)		(203	)
Recoveries		94			192			329			628
Net recoveries		94			159			323			425
Provision (credit)		(197	)		159			(224	)		423
Ending balance	$	8,519		$	8,312		$	8,519		$	8,312

As of September 30, 2018 and December 31, 2017, the Company had reserves for credit losses on undisbursed loans of $80,000 and $95,000, respectively, which were included in other liabilities.

The following tables summarize the changes in the allowance for loan losses by portfolio type:

	For the Three Months Ended September 30,
	Manufactured Housing			Commercial Real Estate			Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,145		$	5,007		$	1,221		$	57		$	93		$	99		$	—	$	8,622
Charge-offs		—			—			—			—			—			—			—		—
Recoveries		6			—			19			34			35			—			—		94
Net (charge-offs) recoveries		6			—			19			34			35			—			—		94
Provision (credit)		17			(134	)		4			(38	)		(36	)		(10	)		—		(197	)
Ending balance	$	2,168		$	4,873		$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,124		$	4,332		$	1,262		$	91		$	98		$	87		$	—	$	7,994
Charge-offs		—			—			—			—			—			(33	)		—		(33	)
Recoveries		38			—			43			104			7			—			—		192
Net (charge-offs) recoveries		38			—			43			104			7			(33	)		—		159
Provision (credit)		(15	)		359			(100	)		(108	)		(11	)		34			—		159
Ending balance	$	2,147		$	4,691		$	1,205		$	87		$	94		$	88		$	—	$	8,312

	For the Nine Months Ended September 30,
	Manufactured Housing			Commercial Real Estate		Commercial			SBA			HELOC			Single Family Real Estate			Consumer		Total
2018	(in thousands)
Beginning balance	$	2,180		$	4,844	$	1,133		$	73		$	92		$	98		$	—	$	8,420
Charge-offs		(6	)		—		—			—			—			—			—		(6	)
Recoveries		114			15		43			102			54			1			—		329
Net (charge-offs) recoveries		108			15		43			102			54			1			—		323
Provision (credit)		(120	)		14		68			(122	)		(54	)		(10	)		—		(224	)
Ending balance	$	2,168		$	4,873	$	1,244		$	53		$	92		$	89		$	—	$	8,519
2017
Beginning balance	$	2,201		$	3,707	$	1,241		$	106		$	100		$	109		$	—	$	7,464
Charge-offs		(119	)		—		—			(30	)		—			(54	)		—		(203	)
Recoveries		105			227		116			168			11			1			—		628
Net (charge-offs) recoveries		(14	)		227		116			138			11			(53	)		—		425
Provision (credit)		(40	)		757		(152	)		(157	)		(17	)		32			—		423
Ending balance	$	2,147		$	4,691	$	1,205		$	87		$	94		$	88		$	—	$	8,312

Impairment Method Information Related to Loans and Allowance for Loan Losses by Loan Portfolio Segment

The following tables present impairment method information related to loans and allowance for loan losses by loan portfolio segment:

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Loans Held for Investment as of September 30, 2018:	(in thousands)
Recorded Investment:
Impaired loans with an allowance recorded	$	5,906	$	245	$	219	$	1	$	—	$	282	$	—	$	6,653
Impaired loans with no allowance recorded		2,330		107		6,978		865		203		1,980		—		12,463
Total loans individually evaluated for impairment		8,236		352		7,197		866		203		2,262		—		19,116
Loans collectively evaluated for impairment		231,774		352,784		76,131		5,265		9,243		8,891		73		684,161
Total loans held for investment	$	240,010	$	353,136	$	83,328	$	6,131	$	9,446	$	11,153	$	73	$	703,277
Unpaid Principal Balance
Impaired loans with an allowance recorded	$	5,906	$	245	$	219	$	20	$	—	$	282	$	—	$	6,672
Impaired loans with no allowance recorded		3,520		162		7,082		1,470		249		2,030		—		14,513
Total loans individually evaluated for impairment		9,426		407		7,301		1,490		249		2,312		—		21,185
Loans collectively evaluated for impairment		231,774		352,784		76,131		5,265		9,243		8,891		73		684,161
Total loans held for investment	$	241,200	$	353,191	$	83,432	$	6,755	$	9,492	$	11,203	$	73	$	705,346
Related Allowance for Credit Losses
Impaired loans with an allowance recorded	$	429	$	9	$	1	$	—	$	—	$	20	$	—	$	459
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		429		9		1		—		—		20		—		459
Loans collectively evaluated for impairment		1,739		4,864		1,243		53		92		69		—		8,060
Total loans held for investment	$	2,168	$	4,873	$	1,244	$	53	$	92	$	89	$	—	$	8,519

	Manufactured Housing		Commercial Real Estate		Commercial		SBA		HELOC		Single Family Real Estate		Consumer		Total Loans
Loans Held for Investment as of December 31, 2017:	(in thousands)
Recorded Investment:
Impaired loans with an allowance recorded	$	5,830	$	557	$	3,551	$	281	$	—	$	2,133	$	—	$	12,352
Impaired loans with no allowance recorded		2,163		—		5,023		699		214		176		—		8,275
Total loans individually evaluated for impairment		7,993		557		8,574		980		214		2,309		—		20,627
Loans collectively evaluated for impairment		215,122		354,060		66,708		6,444		9,208		8,037		83		659,662
Total loans held for investment	$	223,115	$	354,617	$	75,282	$	7,424	$	9,422	$	10,346	$	83	$	680,289
Unpaid Principal Balance
Impaired loans with an allowance recorded	$	5,836	$	661	$	3,551	$	281	$	—	$	2,133	$	—	$	12,462
Impaired loans with no allowance recorded		3,328		—		5,042		1,026		249		220		—		9,865
Total loans individually evaluated for impairment		9,164		661		8,593		1,307		249		2,353		—		22,327
Loans collectively evaluated for impairment		215,122		354,060		66,708		6,444		9,208		8,037		83		659,662
Total loans held for investment	$	224,286	$	354,721	$	75,301	$	7,751	$	9,457	$	10,390	$	83	$	681,989
Related Allowance for Credit Losses
Impaired loans with an allowance recorded	$	427	$	11	$	50	$	1	$	—	$	35	$	—	$	524
Impaired loans with no allowance recorded		—		—		—		—		—		—		—		—
Total loans individually evaluated for impairment		427		11		50		1		—		35		—		524
Loans collectively evaluated for impairment		1,753		4,833		1,083		72		92		63		—		7,896
Total loans held for investment	$	2,180	$	4,844	$	1,133	$	73	$	92	$	98	$	—	$	8,420

Recorded Investment in Loans Classified as Impaired

The table below reflects recorded investment in loans classified as impaired:

	September 30,		December 31,
	2018		2017
	(in thousands)
Impaired loans with a specific valuation allowance under ASC 310	$	6,653	$	12,352
Impaired loans without a specific valuation allowance under ASC 310		12,463		8,275
Total impaired loans	$	19,116	$	20,627
Valuation allowance related to impaired loans	$	459	$	524

Impaired Loans by Class

The following table summarizes impaired loans by class of loans:

	September 30,		December 31,
	2018		2017
	(in thousands)
Manufactured housing	$	8,236	$	7,993
Commercial real estate :
Commercial real estate		107		122
SBA 504 1st trust deed		245		435
Land		—		—
Construction		—		—
Commercial		7,197		8,574
SBA		866		980
HELOC		203		214
Single family real estate		2,262		2,309
Consumer		—		—
Total	$	19,116	$	20,627

Average Investment in Impaired Loans by Class and Related Interest Income Recognized

The following tables summarize average investment in impaired loans by class of loans and the related interest income recognized:

	Three Months Ended September 30,
	2018				2017
	Average Investment in Impaired Loans		Interest Income		Average Investment in Impaired Loans		Interest Income
	(in thousands)
Manufactured housing	$	8,175	$	162	$	7,483	$	174
Commercial real estate:
Commercial real estate		111		—		120		1
SBA 504 1st trust deed		407		5		402		5
Land		—		—		—		—
Construction		—		—		—		—
Commercial		7,444		47		4,789		54
SBA		902		17		662		1
HELOC		203		11		214		—
Single family real estate		2,223		27		1,951		25
Consumer		—		—		—		—
Total	$	19,465	$	269	$	15,621	$	260

	Nine Months Ended September 30,
	2018				2017
	Average Investment in Impaired Loans		Interest Income		Average Investment in Impaired Loans		Interest Income
	(in thousands)
Manufactured housing	$	8,226	$	497	$	7,634	$	488
Commercial real estate:
Commercial real estate		116		—		123		1
SBA 504 1st trust deed		378		14		523		15
Land		—		—		—		—
Construction		—		—		—		—
Commercial		7,737		145		4,486		155
SBA		921		18		767		3
HELOC		207		12		273		—
Single family real estate		2,276		81		1,973		75
Consumer		—		—		—		—
Total	$	19,861	$	767	$	15,779	$	737

Recorded Investment in Certain Types of Loans

The following table reflects the recorded investment in certain types of loans at the periods indicated:

	September 30,			December 31,
	2018			2017
	(in thousands)
Nonaccrual loans	$	5,710		$	6,844
Government guaranteed portion of loans included above	$	1,955		$	2,372
Troubled debt restructured loans, gross	$	17,644		$	16,603
Loans 30 through 89 days past due with interest accruing	$	1,822		$	389
Loans 90 days or more past due with interest accruing	$	25		$	—
Allowance for loan losses to gross loans held for investment		1.21	%		1.24	%

Composition of Net Nonaccrual Loans

The following table presents the composition of nonaccrual loans by class of loans:

	September 30,		December 31,
	2018		2017
	(in thousands)
Manufactured housing	$	292	$	418
Commercial real estate:
Commercial real estate		107		122
SBA 504 1st trust deed		—		184
Land		—		—
Construction		—		—
Commercial		4,088		4,786
SBA		856		944
HELOC		202		214
Single family real estate		165		176
Consumer		—		—
Total	$	5,710	$	6,844

Gross Loans by Risk Rating

The following tables present gross loans by risk rating:

	September 30, 2018
	Pass		Special Mention		Substandard		Doubtful		Total
	(in thousands)
Manufactured housing	$	239,459	$	—	$	551	$	—	$	240,010
Commercial real estate:
Commercial real estate		259,042		—		107		—		259,149
SBA 504 1st trust deed		23,854		—		479		—		24,333
Land		6,070		—		—		—		6,070
Construction		62,257		1,327		—		—		63,584
Commercial		75,838		350		5,655		—		81,843
SBA		4,474		44		374		—		4,892
HELOC		9,243		—		203		—		9,446
Single family real estate		10,983		—		170		—		11,153
Consumer		73		—		—		—		73
Total, net		691,293		1,721		7,539		—		700,553
Government guarantee		—		—		2,724		—		2,724
Total	$	691,293	$	1,721	$	10,263	$	—	$	703,277

	December 31, 2017
	Pass		Special Mention		Substandard		Doubtful		Total
	(in thousands)
Manufactured housing	$	222,429	$	—	$	686	$	—	$	223,115
Commercial real estate:
Commercial real estate		271,134		—		122		—		271,256
SBA 504 1st trust deed		25,973		—		674		—		26,647
Land		5,092		—		—		—		5,092
Construction		49,832		1,790		—		—		51,622
Commercial		64,543		817		8,083		—		73,443
SBA		4,221		102		1,752				6,075
HELOC		9,208		—		214		—		9,422
Single family real estate		10,165		—		181		—		10,346
Consumer		83		—		—		—		83
Total, net		662,680		2,709		11,712	$	—		677,101
Government guarantee		—		—		3,188		—		3,188
Total	$	662,680	$	2,709	$	14,900	$	—	$	680,289

Troubled Debt Restructurings

The following tables summarize the financial effects of TDR loans by loan class for the periods presented:

	For the Three Months Ended September 30, 2018
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		2	$	—	$	166	$	53	$	166	$	3
Total		2	$	—	$	166	$	53	$	166	$	3

	For the Nine Months Ended September 30, 2018
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term  Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		12	$	1,047	$	1,213	$	1,100	$	1,213	$	66
Commercial		3		1,781		1,781		—		1,781		—
Total		15	$	2,828	$	2,994	$	1,100	$	2,994	$	66

	For the Three Months Ended September 30, 2017
	Number of Loans		Pre- Modification Recorded  Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		2	$	363	$	363	$	363	$	363	$	24
Commercial		1		14		14		-		14		-
Total		3	$	377	$	377	$	363	$	377	$	24

	For the Nine Months Ended September 30, 2017
	Number of Loans		Pre- Modification Recorded Investment		Post Modification Recorded Investment		Balance of Loans with Rate Reduction		Balance of Loans with Term Extension		Effect on Allowance for Loan Losses
	(dollars in thousands)
Manufactured housing		9	$	807	$	807	$	807	$	807	$	45
Commercial		2	$	102	$	102	$	—	$	102	$	2
SBA		1	$	17	$	17	$	—	$	17	$	1
Total		12	$	926	$	926	$	807	$	926	$	48

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OTHER ASSETS ACQUIRED THROUGH FORECLOSURE (Tables)

9 Months Ended

Sep. 30, 2018

OTHER ASSETS ACQUIRED THROUGH FORECLOSURE [Abstract]

Other Assets Acquired through Foreclosure

The following table summarizes the changes in other assets acquired through foreclosure:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Balance, beginning of period	$	213		$	362		$	372		$	137
Additions		—			132			174			502
Proceeds from dispositions		(213	)		(60	)		(484	)		(303	)
(Loss) gain on sales, net		—			52			(62	)		150
Balance, end of period	$	—		$	486		$	—		$	486

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FAIR VALUE MEASUREMENT (Tables)

9 Months Ended

Sep. 30, 2018

FAIR VALUE MEASUREMENT [Abstract]

Fair Value Measurements of Assets Measured on a Recurring Basis

The following tables summarize the fair value of assets measured on a recurring basis:

	Fair Value Measurements at the End of the Reporting Period Using:
September 30, 2018	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 available-for-sale	$	144	$	25,802	$	—	$	25,946
Interest only strips		—		—		62		62
Servicing assets		—		—		56		56
	$	144	$	25,802	$	118	$	26,064

	Fair Value Measurements at the End of the Reporting Period Using:
December 31, 2017	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 available-for-sale	$	156	$	28,627	$	—	$	28,783
Interest only strips		—		—		87		87
Servicing assets		—		—		97		97
	$	156	$	28,627	$	184	$	28,967

Fair Value Measurements of Assets Measured on a Non-recurring Basis

The following summarizes the fair value measurements of assets measured on a non-recurring basis:

			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, 2018:
Impaired loans	$	4,746	$	—	$	4,746	$	—
Loans held for sale		51,558		—		51,558		—
Foreclosed real estate and repossessed assets		—		—		—		—
	$	56,304	$	—	$	56,304	$	—

			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, 2017:
Impaired loans	$	6,323	$	—	$	6,323	$	—
Loans held for sale		56,222		—		56,222		—
Foreclosed real estate and repossessed assets		372		—		372		—
	$	62,917		—		62,917		—

Estimated Fair Values and Carrying Values of Financial Instruments

The estimated fair value of the Company’s financial instruments are as follows:

	September 30, 2018
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:	(in thousands)
Cash and cash equivalents	$	47,753	$	47,753	$	—	$	—	$	47,753
FRB and FHLB stock		4,087		—		4,087		—		4,087
Investment securities		33,421		144		33,197		—		33,341
Loans, net		745,222		—		725,139		14,076		739,215
Financial liabilities:
Deposits		719,942		—		701,534		—		701,534
Other borrowings		50,000		—		49,799		—		49,799

	December 31, 2017
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:	(in thousands)
Cash and cash equivalents	$	45,869	$	45,869	$	—	$	—	$	45,869
FRB and FHLB stock		3,720		—		3,720		—		3,720
Investment securities		36,348		156		36,298		—		36,454
Loans, net		726,189		—		705,723		13,779		719,502
Financial liabilities:
Deposits		699,684		—		699,211		—		699,211
Other borrowings		56,843		—		56,842		—		56,842

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STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2018

STOCKHOLDERS' EQUITY [Abstract]

Changes in Other Comprehensive Income (Loss) by Component, Net of Tax

The following table summarizes the changes in other comprehensive income (loss) by component, net of tax for the period indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	Unrealized holding gains (losses) on AFS						Unrealized holding gains (losses) on AFS
	(in thousands)
Beginning balance	$	(111	)	$	87		$	25		$	(29	)
Other comprehensive income before reclassifications		(48	)		(17	)		(125	)		99
Amounts reclassified from accumulated other comprehensive income		—			—			(59	)		—
Net current-period other comprehensive income		(48	)		(17	)		(184	)		99
Ending Balance	$	(159	)	$	70		$	(159	)	$	70

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CAPITAL REQUIREMENT (Tables)

9 Months Ended

Sep. 30, 2018

CAPITAL REQUIREMENT [Abstract]

Bank's Regulatory Ratios and Federal Reserve's Current Adequacy Guidelines

The following tables illustrates the Bank’s regulatory ratios and the Federal Reserve’s current adequacy guidelines as of September 30, 2018 and December 31, 2017.  The Federal Reserve’s fully phased-in guidelines applicable in 2019 are also summarized.

	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, 2018
CWB's actual regulatory ratios		10.78	%		9.63	%		9.63	%		8.22	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

	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, 2017
CWB's actual regulatory ratios		11.31	%		10.10	%		10.10	%		8.83	%
Minimum capital requirements		8.00	%		6.00	%		4.50	%		4.00	%
Well-capitalized requirements		10.00	%		8.00	%		6.50	%		5.00	%
Minimum capital requirements including fully-phased in capital conservation buffer (2019)		10.50	%		8.50	%		7.00	%		N/A

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REVENUE RECOGNITION (Tables)

9 Months Ended

Sep. 30, 2018

REVENUE RECOGNITION [Abstract]

Non-Interest Income

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for periods indicated.

Non-interest income	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
In-scope of Topic 606:	(in thousands)
Service charges on deposit accounts	$	95	$	89	$	281	$	248
Exchange fees and other service charges		43		46		142		113
Non-interest income (in-scope of Topic 606)		138		135		423		361
Non-interest income (out-of-scope of Topic 606)		503		581		1,545		1,693
	$	641	$	716	$	1,968	$	2,054

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2018 Quarter Payment	Dec. 31, 2017
Loans Held for Investment and Interest and Fees from Loans [Abstract]
Period of delinquency after which a loan is placed in a nonaccrual status	90 days
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period of loss history used for determining the amount of allowance of loan losses | Quarter	12
Recent Accounting Pronouncements [Abstract]
Corporate income tax rate	21.00%	34.00%
Minimum [Member]
Loans Held for Investment and Interest and Fees from Loans [Abstract]
Period of delinquency after which a loan is placed in a nonaccrual status	90 days
Other Personal Loans [Member] | Maximum [Member]
Loans Held for Investment and Interest and Fees from Loans [Abstract]
Threshold period past due for write-off of loans	120 days
Consumer [Member]
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period past due for unsecured loans to be charged off	120 days
Number of delinquent payments for unsecured loans to be charged off | Payment	5
Commercial [Member]
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period past due for unsecured loans to be charged off	90 days
Commercial Real Estate [Member]
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period past due for unsecured loans to be charged off	90 days
SBA [Member]
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period past due for unsecured loans to be charged off	90 days
Single Family Real Estate [Member]
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period past due after which loans are evaluated for impairment	90 days
HELOC [Member]
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period past due after which loans are evaluated for impairment	90 days
Manufactured Housing [Member]
Allowance for Loan Losses and Provision for Loan Losses [Abstract]
Period past due after which loans are evaluated for impairment	90 days

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INVESTMENT SECURITIES, Amortized Cost and Estimated Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Available-for-sale Debt Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	$ 26,058
Gross unrealized gains	28
Gross unrealized (losses)	(284)
Fair value	25,802	$ 28,783
Available-for-sale Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	26,058	28,742
Gross unrealized gains		191
Gross unrealized (losses)		(150)
Fair value		28,783
Securities held-to-maturity [Abstract]
Amortized cost	7,475	7,565
Gross unrealized gains	125	216
Gross unrealized (losses)	(205)	(110)
Fair value	7,395	7,671
Securities Measured at Fair Value, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	66	66
Gross unrealized gains	78
Gross unrealized (losses)	0
Fair value	144	0
Securities pledged as collateral	33,300	36,200
U.S. Government Agency Notes [Member]
Available-for-sale Debt Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	12,722	14,035
Gross unrealized gains	0	35
Gross unrealized (losses)	(202)	(92)
Fair value	12,520	13,978
U.S. Government Agency Collateralized Mortgage Obligations ("CMO") [Member]
Available-for-sale Debt Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	13,336	14,641
Gross unrealized gains	28	66
Gross unrealized (losses)	(82)	(58)
Fair value	13,282	14,649
Equity Securities: Farmer Mac Class A Stock [Member]
Available-for-sale Equity Securities, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost		66
Gross unrealized gains		90
Gross unrealized (losses)		0
Fair value		156
Securities Measured at Fair Value, Fair Value to Amortized Cost Basis [Abstract]
Amortized cost	66
Gross unrealized gains	78
Gross unrealized (losses)	0
Fair value	144
U.S. Government Agency Mortgage Backed Securities ("MBS") [Member]
Securities held-to-maturity [Abstract]
Amortized cost	7,475	7,565
Gross unrealized gains	125	216
Gross unrealized (losses)	(205)	(110)
Fair value	$ 7,395	$ 7,671

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INVESTMENT SECURITIES, Maturity Periods and Weighted Average Yields (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Maturity periods and weighted average yields of investment securities available-for-sale [Abstract]
Less than one year, amount	$ 1,912	$ 1,967
Less than one year, yield	2.60%	2.60%
One to five years, amount	$ 3,648	$ 5,195
One to five years, yield	2.30%	1.80%
Five to ten years, amount	$ 17,355	$ 18,539
Five to ten years, yield	2.70%	1.90%
Over ten years, amount	$ 2,887	$ 2,926
Over ten years, yield	3.00%	2.30%
Without single maturity date, total amount	$ 0	$ 156
Securities measured at fair value, total amount	$ 144	0
Securities measured at fair value, total yield	0.00%
Fair value	$ 25,802	28,783
Total yield	2.70%
Fair value		$ 28,783
Total yield		2.00%
Maturity periods and weighted average yields of investment securities held-to-maturity [Abstract]
Less than one year, amount	$ 0	$ 0
Less than one year, yield	0.00%	0.00%
One to five years, amount	$ 1,751	$ 2,802
One to five years, yield	4.20%	3.60%
Five to ten years, amount	$ 4,927	$ 4,763
Five to ten years, yield	3.30%	3.10%
Over ten years, amount	$ 797	$ 0
Over ten years, yield	3.60%	0.00%
Total amount	$ 7,475	$ 7,565
Total yield	3.60%	3.30%
U.S. Government Agency Notes [Member]
Maturity periods and weighted average yields of investment securities available-for-sale [Abstract]
Less than one year, amount	$ 1,912	$ 1,967
Less than one year, yield	2.60%	2.60%
One to five years, amount	$ 1,411	$ 1,833
One to five years, yield	2.30%	1.60%
Five to ten years, amount	$ 9,197	$ 10,178
Five to ten years, yield	2.80%	2.00%
Over ten years, amount	$ 0	$ 0
Over ten years, yield	0.00%	0.00%
Single maturity date, total amount	$ 12,520	$ 13,978
Single maturity date, total yield	2.70%	2.00%
Fair value	$ 12,520	$ 13,978
U.S. government agency CMO [Member]
Maturity periods and weighted average yields of investment securities available-for-sale [Abstract]
Less than one year, amount	$ 0	$ 0
Less than one year, yield	0.00%	0.00%
One to five years, amount	$ 2,237	$ 3,362
One to five years, yield	2.30%	1.90%
Five to ten years, amount	$ 8,158	$ 8,361
Five to ten years, yield	2.50%	1.90%
Over ten years, amount	$ 2,887	$ 2,926
Over ten years, yield	3.00%	2.30%
Single maturity date, total amount	$ 13,282	$ 14,649
Single maturity date, total yield	2.60%	1.90%
Fair value	$ 13,282	$ 14,649
U.S. government agency MBS [Member]
Maturity periods and weighted average yields of investment securities held-to-maturity [Abstract]
Less than one year, amount	$ 0	$ 0
Less than one year, yield	0.00%	0.00%
One to five years, amount	$ 1,751	$ 2,802
One to five years, yield	4.20%	3.60%
Five to ten years, amount	$ 4,927	$ 4,763
Five to ten years, yield	3.30%	3.10%
Over ten years, amount	$ 797	$ 0
Over ten years, yield	3.60%	0.00%
Total amount	$ 7,475	$ 7,565
Total yield	3.60%	3.30%
Farmer Mac Class A Stock [Member]
Maturity periods and weighted average yields of investment securities available-for-sale [Abstract]
Less than one year, amount		$ 0
Less than one year, yield		0.00%
One to five years, amount		$ 0
One to five years, yield		0.00%
Five to ten years, amount		$ 0
Five to ten years, yield		0.00%
Over ten years, amount		$ 0
Over ten years, yield		0.00%
Without single maturity date, total amount		$ 156
Without single maturity date, yield		0.00%
Securities measured at fair value, total amount	$ 144
Securities measured at fair value, total yield	0.00%

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INVESTMENT SECURITIES, Investment Securities by Contractual Maturities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Securities available-for-sale, Amortized Cost [Abstract]
Due in one year or less	$ 1,997	$ 1,997
After one year through five years	3,687	5,220
After five years through ten years	17,443	18,506
After ten years	2,931	2,953
Farmer Mac class A stock	0	66
Amortized cost	26,058
Amortized cost	26,058	28,742
Securities available for sale, Estimated Fair Value [Abstract]
Due in one year or less	1,912	1,967
After one year through five years	3,648	5,195
After five years through ten years	17,355	18,539
After ten years	2,887	2,926
Farmer Mac class A stock	0	156
Estimated fair value	25,802	28,783
Estimated fair value		28,783
Securities held to maturity, Amortized Cost [Abstract]
Due in one year or less	0	0
After one year through five years	1,751	2,802
After five years through ten years	4,927	4,763
After ten years	797	0
Amortized cost	7,475	7,565
Securities held to maturity, Estimated Fair Value [Abstract]
Due in one year or less	0	0
After one year through five years	1,837	2,938
After five years through ten years	4,775	4,733
After ten years	783	0
Estimated fair value	7,395	7,671
Securities measured at fair value [Abstract]
Amortized cost	66	66
Fair value	$ 144	$ 0

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INVESTMENT SECURITIES, Unrealized Loss Positions (Details) $ in Thousands	Sep. 30, 2018 USD ($) Security	Dec. 31, 2017 USD ($) Security
Securities available-for-sale, continuous unrealized loss position [Abstract]
Less than twelve months, gross unrealized losses	$ 143
Less than twelve months, fair value	6,959
More than twelve months, gross unrealized losses	141
More than twelve months, fair value	8,964
Total, gross unrealized losses	284
Total, fair value	15,923
Less than twelve months, gross unrealized losses	0	$ 78
Less than twelve months, fair value	0	7,309
More than twelve months, gross unrealized losses	0	72
More than twelve months, fair value	0	6,536
Total, gross unrealized losses	0	150
Total, fair value	0	13,845
Securities held-to-maturity, continuous unrealized loss position [Abstract]
Less than twelve months, gross unrealized losses	31	0
Less than twelve months, fair value	2,504	0
More than twelve months, gross unrealized losses	174	110
More than twelve months, fair value	2,074	2,496
Total, gross unrealized losses	205	110
Total, fair value	$ 4,578	$ 2,496
Securities in unrealized loss positions | Security	19	14
U.S. Government Agency Notes [Member]
Securities available-for-sale, continuous unrealized loss position [Abstract]
Less than twelve months, gross unrealized losses	$ 113
Less than twelve months, fair value	6,185
More than twelve months, gross unrealized losses	89
More than twelve months, fair value	6,335
Total, gross unrealized losses	202
Total, fair value	12,520
Less than twelve months, gross unrealized losses		$ 70
Less than twelve months, fair value		6,324
More than twelve months, gross unrealized losses		22
More than twelve months, fair value		3,106
Total, gross unrealized losses		92
Total, fair value		9,430
U.S. government agency CMO [Member]
Securities available-for-sale, continuous unrealized loss position [Abstract]
Less than twelve months, gross unrealized losses	30
Less than twelve months, fair value	774
More than twelve months, gross unrealized losses	52
More than twelve months, fair value	2,629
Total, gross unrealized losses	82
Total, fair value	3,403
Less than twelve months, gross unrealized losses		8
Less than twelve months, fair value		985
More than twelve months, gross unrealized losses		50
More than twelve months, fair value		3,430
Total, gross unrealized losses		58
Total, fair value		4,415
Farmer Mac Class A Stock [Member]
Securities available-for-sale, continuous unrealized loss position [Abstract]
Less than twelve months, gross unrealized losses	0	0
Less than twelve months, fair value	0	0
More than twelve months, gross unrealized losses	0	0
More than twelve months, fair value	0	0
Total, gross unrealized losses	0	0
Total, fair value	0	0
U.S. government agency MBS [Member]
Securities held-to-maturity, continuous unrealized loss position [Abstract]
Less than twelve months, gross unrealized losses	31	0
Less than twelve months, fair value	2,504	0
More than twelve months, gross unrealized losses	174	110
More than twelve months, fair value	2,074	2,496
Total, gross unrealized losses	205	110
Total, fair value	$ 4,578	$ 2,496

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LOAN HELD FOR SALE (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Loans Held for Sale [Abstract]
Loans included in loans held for sale	$ 50,944	$ 55,094
SBA [Member]
Loans Held for Sale [Abstract]
Loans included in loans held for sale	15,000	18,900
Principal balance of loan serviced	8,000	10,800
US Department of Agriculture [Member]
Loans Held for Sale [Abstract]
Loans included in loans held for sale	35,900	36,200
Principal balance of loan serviced	$ 2,000	$ 2,000

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LOANS HELD FOR INVESTMENT (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Loans held for investment [Abstract]
Loans held for investment, gross	$ 703,277		$ 680,289
Allowance for loan losses	(8,519)	$ (8,622)	(8,420)	$ (8,312)	$ (7,994)	$ (7,464)
Deferred fees, net	(402)		(652)
Discount on SBA loans	(78)		(122)
Total loans held for investment, net	694,278		671,095
Manufactured Housing [Member]
Loans held for investment [Abstract]
Loans held for investment, gross	240,010		223,115
Allowance for loan losses	(2,168)	(2,145)	(2,180)	(2,147)	(2,124)	(2,201)
Commercial Real Estate [Member]
Loans held for investment [Abstract]
Loans held for investment, gross	353,136		354,617
Allowance for loan losses	(4,873)	(5,007)	(4,844)	(4,691)	(4,332)	(3,707)
Commercial [Member]
Loans held for investment [Abstract]
Loans held for investment, gross	83,328		75,282
Allowance for loan losses	(1,244)	(1,221)	(1,133)	(1,205)	(1,262)	(1,241)
SBA [Member]
Loans held for investment [Abstract]
Loans held for investment, gross	6,131		7,424
Allowance for loan losses	(53)	(57)	(73)	(87)	(91)	(106)
HELOC [Member]
Loans held for investment [Abstract]
Loans held for investment, gross	9,446		9,422
Allowance for loan losses	(92)	(93)	(92)	(94)	(98)	(100)
Single Family Real Estate [Member]
Loans held for investment [Abstract]
Loans held for investment, gross	11,153		10,346
Allowance for loan losses	(89)	(99)	(98)	(88)	(87)	(109)
Consumer [Member]
Loans held for investment [Abstract]
Loans held for investment, gross	73		83
Allowance for loan losses	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0

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LOANS HELD FOR INVESTMENT, Financing Receivables Past Due (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Aging of loans held for investment [Abstract]
Current	$ 695,720	$ 673,056
Total past due	1,847	389
Nonaccrual	5,710	6,844
Total loans held for investment	703,277	680,289
Recorded investment over 90 days and accruing	25	0
30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	1,822	389
60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	25	0
Manufactured Housing [Member]
Aging of loans held for investment [Abstract]
Current	239,574	222,342
Total past due	144	355
Nonaccrual	292	418
Total loans held for investment	240,010	223,115
Recorded investment over 90 days and accruing	0	0
Manufactured Housing [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	144	355
Manufactured Housing [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Manufactured Housing [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member]
Aging of loans held for investment [Abstract]
Total loans held for investment	353,136	354,617
Commercial Real Estate [Member] | Commercial Real Estate [Member]
Aging of loans held for investment [Abstract]
Current	258,807	271,134
Total past due	235	0
Nonaccrual	107	122
Total loans held for investment	259,149	271,256
Recorded investment over 90 days and accruing	0	0
Commercial Real Estate [Member] | Commercial Real Estate [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	235	0
Commercial Real Estate [Member] | Commercial Real Estate [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | Commercial Real Estate [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member]
Aging of loans held for investment [Abstract]
Current	24,333	26,463
Total past due	0	0
Nonaccrual	0	184
Total loans held for investment	24,333	26,647
Recorded investment over 90 days and accruing	0	0
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | Land [Member]
Aging of loans held for investment [Abstract]
Current	6,070	5,092
Total past due	0	0
Nonaccrual	0	0
Total loans held for investment	6,070	5,092
Recorded investment over 90 days and accruing	0	0
Commercial Real Estate [Member] | Land [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | Land [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | Land [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | Construction [Member]
Aging of loans held for investment [Abstract]
Current	62,257	51,622
Total past due	1,327	0
Nonaccrual	0	0
Total loans held for investment	63,584	51,622
Recorded investment over 90 days and accruing	0	0
Commercial Real Estate [Member] | Construction [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	1,327	0
Commercial Real Estate [Member] | Construction [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial Real Estate [Member] | Construction [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial [Member]
Aging of loans held for investment [Abstract]
Current	79,141	70,481
Total past due	99	15
Nonaccrual	4,088	4,786
Total loans held for investment	83,328	75,282
Recorded investment over 90 days and accruing	0	0
Commercial [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	99	15
Commercial [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Commercial [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
SBA [Member]
Aging of loans held for investment [Abstract]
Current	5,275	6,461
Total past due	0	19
Nonaccrual	856	944
Total loans held for investment	6,131	7,424
Recorded investment over 90 days and accruing	0	0
SBA [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	19
SBA [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
SBA [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
HELOC [Member]
Aging of loans held for investment [Abstract]
Current	9,244	9,208
Total past due	0	0
Nonaccrual	202	214
Total loans held for investment	9,446	9,422
Recorded investment over 90 days and accruing	0	0
HELOC [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
HELOC [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
HELOC [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Single Family Real Estate [Member]
Aging of loans held for investment [Abstract]
Current	10,946	10,170
Total past due	42	0
Nonaccrual	165	176
Total loans held for investment	11,153	10,346
Recorded investment over 90 days and accruing	25	0
Single Family Real Estate [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	17	0
Single Family Real Estate [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Single Family Real Estate [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	25	0
Consumer [Member]
Aging of loans held for investment [Abstract]
Current	73	83
Total past due	0	0
Nonaccrual	0	0
Total loans held for investment	73	83
Recorded investment over 90 days and accruing	0	0
Consumer [Member] | 30-59 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Consumer [Member] | 60-89 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	0	0
Consumer [Member] | Over 90 Days Past Due [Member]
Aging of loans held for investment [Abstract]
Total past due	$ 0	$ 0

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LOANS HELD FOR INVESTMENT, Allowance for Credit Losses by Portfolio Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Summary of allowance for loan losses [Roll Forward]
Beginning balance	$ 8,622	$ 7,994	$ 8,420	$ 7,464
Charge-offs	0	(33)	(6)	(203)
Recoveries	94	192	329	628
Net (charge-offs) recoveries	94	159	323	425
Provision (credit)	(197)	159	(224)	423
Ending balance	8,519	8,312	8,519	8,312
Reserve for credit losses on undisbursed loans	80		80		$ 95
Manufactured Housing [Member]
Summary of allowance for loan losses [Roll Forward]
Beginning balance	2,145	2,124	2,180	2,201
Charge-offs	0	0	(6)	(119)
Recoveries	6	38	114	105
Net (charge-offs) recoveries	6	38	108	(14)
Provision (credit)	17	(15)	(120)	(40)
Ending balance	2,168	2,147	2,168	2,147
Commercial Real Estate [Member]
Summary of allowance for loan losses [Roll Forward]
Beginning balance	5,007	4,332	4,844	3,707
Charge-offs	0	0	0	0
Recoveries	0	0	15	227
Net (charge-offs) recoveries	0	0	15	227
Provision (credit)	(134)	359	14	757
Ending balance	4,873	4,691	4,873	4,691
Commercial [Member]
Summary of allowance for loan losses [Roll Forward]
Beginning balance	1,221	1,262	1,133	1,241
Charge-offs	0	0	0	0
Recoveries	19	43	43	116
Net (charge-offs) recoveries	19	43	43	116
Provision (credit)	4	(100)	68	(152)
Ending balance	1,244	1,205	1,244	1,205
SBA [Member]
Summary of allowance for loan losses [Roll Forward]
Beginning balance	57	91	73	106
Charge-offs	0	0	0	(30)
Recoveries	34	104	102	168
Net (charge-offs) recoveries	34	104	102	138
Provision (credit)	(38)	(108)	(122)	(157)
Ending balance	53	87	53	87
HELOC [Member]
Summary of allowance for loan losses [Roll Forward]
Beginning balance	93	98	92	100
Charge-offs	0	0	0	0
Recoveries	35	7	54	11
Net (charge-offs) recoveries	35	7	54	11
Provision (credit)	(36)	(11)	(54)	(17)
Ending balance	92	94	92	94
Single Family Real Estate [Member]
Summary of allowance for loan losses [Roll Forward]
Beginning balance	99	87	98	109
Charge-offs	0	(33)	0	(54)
Recoveries	0	0	1	1
Net (charge-offs) recoveries	0	(33)	1	(53)
Provision (credit)	(10)	34	(10)	32
Ending balance	89	88	89	88
Consumer [Member]
Summary of allowance for loan losses [Roll Forward]
Beginning balance	0	0	0	0
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Net (charge-offs) recoveries	0	0	0	0
Provision (credit)	0	0	0	0
Ending balance	$ 0	$ 0	$ 0	$ 0

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LOANS HELD FOR INVESTMENT, Impaired Financing Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	$ 6,653	$ 12,352
Impaired loans with no allowance recorded	12,463	8,275
Total loans individually evaluated for impairment	19,116	20,627
Loans collectively evaluated for impairment	684,161	659,662
Total loans held for investment	703,277	680,289
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	6,672	12,462
Impaired loans with no allowance recorded	14,513	9,865
Total loans individually evaluated for impairment	21,185	22,327
Loans collectively evaluated for impairment	684,161	659,662
Total loans held for investment	705,346	681,989
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	459	524
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	459	524
Loans collectively evaluated for impairment	8,060	7,896
Total loans held for investment	8,519	8,420
Impaired loans with a specific valuation allowance under ASC 310	6,653	12,352
Impaired loans without a specific valuation allowance under ASC 310	12,463	8,275
Total impaired loans	19,116	20,627
Valuation allowance related to impaired loans	459	524
Loans Guaranteed by Government Agencies [Member]
Related Allowance for Credit Losses [Abstract]
Total impaired loans	2,400	2,600
Manufactured Housing [Member]
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	5,906	5,830
Impaired loans with no allowance recorded	2,330	2,163
Total loans individually evaluated for impairment	8,236	7,993
Loans collectively evaluated for impairment	231,774	215,122
Total loans held for investment	240,010	223,115
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	5,906	5,836
Impaired loans with no allowance recorded	3,520	3,328
Total loans individually evaluated for impairment	9,426	9,164
Loans collectively evaluated for impairment	231,774	215,122
Total loans held for investment	241,200	224,286
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	429	427
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	429	427
Loans collectively evaluated for impairment	1,739	1,753
Total loans held for investment	2,168	2,180
Impaired loans with a specific valuation allowance under ASC 310	5,906	5,830
Impaired loans without a specific valuation allowance under ASC 310	2,330	2,163
Total impaired loans	8,236	7,993
Valuation allowance related to impaired loans	429	427
Commercial Real Estate [Member]
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	245	557
Impaired loans with no allowance recorded	107	0
Total loans individually evaluated for impairment	352	557
Loans collectively evaluated for impairment	352,784	354,060
Total loans held for investment	353,136	354,617
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	245	661
Impaired loans with no allowance recorded	162	0
Total loans individually evaluated for impairment	407	661
Loans collectively evaluated for impairment	352,784	354,060
Total loans held for investment	353,191	354,721
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	9	11
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	9	11
Loans collectively evaluated for impairment	4,864	4,833
Total loans held for investment	4,873	4,844
Impaired loans with a specific valuation allowance under ASC 310	245	557
Impaired loans without a specific valuation allowance under ASC 310	107	0
Valuation allowance related to impaired loans	9	11
Commercial [Member]
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	219	3,551
Impaired loans with no allowance recorded	6,978	5,023
Total loans individually evaluated for impairment	7,197	8,574
Loans collectively evaluated for impairment	76,131	66,708
Total loans held for investment	83,328	75,282
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	219	3,551
Impaired loans with no allowance recorded	7,082	5,042
Total loans individually evaluated for impairment	7,301	8,593
Loans collectively evaluated for impairment	76,131	66,708
Total loans held for investment	83,432	75,301
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	1	50
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	1	50
Loans collectively evaluated for impairment	1,243	1,083
Total loans held for investment	1,244	1,133
Impaired loans with a specific valuation allowance under ASC 310	219	3,551
Impaired loans without a specific valuation allowance under ASC 310	6,978	5,023
Total impaired loans	7,197	8,574
Valuation allowance related to impaired loans	1	50
SBA [Member]
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	1	281
Impaired loans with no allowance recorded	865	699
Total loans individually evaluated for impairment	866	980
Loans collectively evaluated for impairment	5,265	6,444
Total loans held for investment	6,131	7,424
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	20	281
Impaired loans with no allowance recorded	1,470	1,026
Total loans individually evaluated for impairment	1,490	1,307
Loans collectively evaluated for impairment	5,265	6,444
Total loans held for investment	6,755	7,751
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	0	1
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	0	1
Loans collectively evaluated for impairment	53	72
Total loans held for investment	53	73
Impaired loans with a specific valuation allowance under ASC 310	1	281
Impaired loans without a specific valuation allowance under ASC 310	865	699
Total impaired loans	866	980
Valuation allowance related to impaired loans	0	1
HELOC [Member]
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	0	0
Impaired loans with no allowance recorded	203	214
Total loans individually evaluated for impairment	203	214
Loans collectively evaluated for impairment	9,243	9,208
Total loans held for investment	9,446	9,422
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	0	0
Impaired loans with no allowance recorded	249	249
Total loans individually evaluated for impairment	249	249
Loans collectively evaluated for impairment	9,243	9,208
Total loans held for investment	9,492	9,457
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	0	0
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	92	92
Total loans held for investment	92	92
Impaired loans with a specific valuation allowance under ASC 310	0	0
Impaired loans without a specific valuation allowance under ASC 310	203	214
Total impaired loans	203	214
Valuation allowance related to impaired loans	0	0
Single Family Real Estate [Member]
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	282	2,133
Impaired loans with no allowance recorded	1,980	176
Total loans individually evaluated for impairment	2,262	2,309
Loans collectively evaluated for impairment	8,891	8,037
Total loans held for investment	11,153	10,346
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	282	2,133
Impaired loans with no allowance recorded	2,030	220
Total loans individually evaluated for impairment	2,312	2,353
Loans collectively evaluated for impairment	8,891	8,037
Total loans held for investment	11,203	10,390
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	20	35
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	20	35
Loans collectively evaluated for impairment	69	63
Total loans held for investment	89	98
Impaired loans with a specific valuation allowance under ASC 310	282	2,133
Impaired loans without a specific valuation allowance under ASC 310	1,980	176
Total impaired loans	2,262	2,309
Valuation allowance related to impaired loans	20	35
Consumer [Member]
Recorded Investment [Abstract]
Impaired loans with an allowance recorded	0	0
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	73	83
Total loans held for investment	73	83
Unpaid Principal Balance [Abstract]
Impaired loans with an allowance recorded	0	0
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	73	83
Total loans held for investment	73	83
Related Allowance for Credit Losses [Abstract]
Impaired loans with an allowance recorded	0	0
Impaired loans with no allowance recorded	0	0
Total loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	0	0
Total loans held for investment	0	0
Impaired loans with a specific valuation allowance under ASC 310	0	0
Impaired loans without a specific valuation allowance under ASC 310	0	0
Total impaired loans	0	0
Valuation allowance related to impaired loans	$ 0	$ 0

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LOANS HELD FOR INVESTMENT, Impaired Loans by Class of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	$ 19,116	$ 20,627
Manufactured Housing [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	8,236	7,993
Commercial Real Estate [Member] | Commercial Real Estate [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	107	122
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	245	435
Commercial Real Estate [Member] | Land [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	0	0
Commercial Real Estate [Member] | Construction [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	0	0
Commercial [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	7,197	8,574
SBA [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	866	980
HELOC [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	203	214
Single Family Real Estate [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	2,262	2,309
Consumer [Member]
Impaired financing receivable recorded investment net [Abstract]
Impaired loans	$ 0	$ 0

XML

LOANS HELD FOR INVESTMENT, Average Investment in Impaired Loans by Class (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	$ 19,465	$ 15,621	$ 19,861	$ 15,779
Interest income	269	260	767	737
Manufactured Housing [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	8,175	7,483	8,226	7,634
Interest income	162	174	497	488
Commercial Real Estate [Member] | Commercial Real Estate [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	111	120	116	123
Interest income	0	1	0	1
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	407	402	378	523
Interest income	5	5	14	15
Commercial Real Estate [Member] | Land [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	0	0	0	0
Interest income	0	0	0	0
Commercial Real Estate [Member] | Construction [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	0	0	0	0
Interest income	0	0	0	0
Commercial [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	7,444	4,789	7,737	4,486
Interest income	47	54	145	155
SBA [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	902	662	921	767
Interest income	17	1	18	3
HELOC [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	203	214	207	273
Interest income	11	0	12	0
Single Family Real Estate [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	2,223	1,951	2,276	1,973
Interest income	27	25	81	75
Consumer [Member]
Average recorded investment and interest income recognized [Abstract]
Average investment in impaired loans	0	0	0	0
Interest income	$ 0	$ 0	$ 0	$ 0

XML

LOANS HELD FOR INVESTMENT, Recorded Investment in Certain Types of Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Financing receivable recorded investment [Abstract]
Nonaccrual loans	$ 5,710		$ 5,710		$ 6,844
Financing Receivable Recorded Investment Nonaccrual Status guaranteed amount	1,955		1,955		2,372
Troubled debt restructured loans, gross	17,644		17,644		16,603
Loans 30 through 89 days past due with interest accruing	1,822		1,822		389
Loans 90 days or more past due with interest accruing	$ 25		$ 25		$ 0
Allowance for loan losses to gross loans held for investment	1.21%		1.21%		1.24%
Period past due after which accrual of interest is discontinued			90 days
Foregone interest on nonaccrual and troubled debt restructured loans	$ 100	$ 100	$ 300	$ 300

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LOANS HELD FOR INVESTMENT, Nonaccrual Loans, Net of SBA Guarantee (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	$ 5,710	$ 6,844
Period past due after which guaranteed portion of SBA loan is repurchased from investors	120 days
Loans Guaranteed by Government Agencies [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	$ 2,000	2,400
Manufactured Housing [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	292	418
Commercial Real Estate [Member] | Commercial Real Estate [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	107	122
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	0	184
Commercial Real Estate [Member] | Land [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	0	0
Commercial Real Estate [Member] | Construction [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	0	0
Commercial [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	4,088	4,786
SBA [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	856	944
HELOC [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	202	214
Single Family Real Estate [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	165	176
Consumer [Member]
Composition of Nonaccrual Loans, net of SBA guarantee [Abstract]
Nonaccrual loans	$ 0	$ 0

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LOANS HELD FOR INVESTMENT, Gross Loans by Risk Rating (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Gross loans by risk rating [Abstract]
Total loans held for investment, net	$ 700,553	$ 677,101
Total loans held for investment	703,277	680,289
Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	691,293	662,680
Total loans held for investment	691,293	662,680
Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	1,721	2,709
Total loans held for investment	1,721	2,709
Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	7,539	11,712
Total loans held for investment	10,263	14,900
Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Total loans held for investment	0	0
Government Guarantee [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment	2,724	3,188
Government Guarantee [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment	0	0
Government Guarantee [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment	0	0
Government Guarantee [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment	2,724	3,188
Government Guarantee [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment	0	0
Manufactured Housing [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	240,010	223,115
Total loans held for investment	240,010	223,115
Manufactured Housing [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	239,459	222,429
Manufactured Housing [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Manufactured Housing [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	551	686
Manufactured Housing [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment	353,136	354,617
Commercial Real Estate [Member] | Commercial Real Estate [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	259,149	271,256
Total loans held for investment	259,149	271,256
Commercial Real Estate [Member] | Commercial Real Estate [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	259,042	271,134
Commercial Real Estate [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | Commercial Real Estate [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	107	122
Commercial Real Estate [Member] | Commercial Real Estate [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	24,333	26,647
Total loans held for investment	24,333	26,647
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	23,854	25,973
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	479	674
Commercial Real Estate [Member] | SBA 504 1st Trust Deed [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | Land [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	6,070	5,092
Total loans held for investment	6,070	5,092
Commercial Real Estate [Member] | Land [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	6,070	5,092
Commercial Real Estate [Member] | Land [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | Land [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | Land [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | Construction [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	63,584	51,622
Total loans held for investment	63,584	51,622
Commercial Real Estate [Member] | Construction [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	62,257	49,832
Commercial Real Estate [Member] | Construction [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	1,327	1,790
Commercial Real Estate [Member] | Construction [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial Real Estate [Member] | Construction [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Commercial [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment	83,328	75,282
Commercial [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	81,843	73,443
Commercial [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	75,838	64,543
Commercial [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	350	817
Commercial [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	5,655	8,083
Commercial [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
SBA [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	4,892	6,075
Total loans held for investment	6,131	7,424
SBA [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	4,474	4,221
SBA [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	44	102
SBA [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	374	1,752
SBA [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
HELOC [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	9,446	9,422
Total loans held for investment	9,446	9,422
HELOC [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	9,243	9,208
HELOC [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
HELOC [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	203	214
HELOC [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Single Family Real Estate [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	11,153	10,346
Total loans held for investment	11,153	10,346
Single Family Real Estate [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	10,983	10,165
Single Family Real Estate [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Single Family Real Estate [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	170	181
Single Family Real Estate [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Consumer [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	73	83
Total loans held for investment	73	83
Consumer [Member] | Pass [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	73	83
Consumer [Member] | Special Mention [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Consumer [Member] | Substandard [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	0	0
Consumer [Member] | Doubtful [Member]
Gross loans by risk rating [Abstract]
Total loans held for investment, net	$ 0	$ 0

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LOANS HELD FOR INVESTMENT, Troubled Debt Restructuring (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) Loan	Sep. 30, 2017 USD ($) Loan	Sep. 30, 2018 USD ($) Loan	Sep. 30, 2017 USD ($) Loan	Dec. 31, 2017 USD ($)
Troubled Debt Restructured Loans [Abstract]
Number of loans | Loan	2	3	15	12
Pre-modification recorded investment	$ 0	$ 377	$ 2,828	$ 926
Post modification recorded investment	166	377	2,994	926
Balance of loans	17,644		17,644		$ 16,603
Effect on allowance for loan losses	$ 3	$ 24	$ 66	$ 48
Average rate concessions	0.50%	1.00%	0.73%	0.97%
Average extension	180 months	126 months	151 months	138 months
Rate Reduction [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment			$ 1,100	$ 807
Balance of loans	$ 53	$ 363	53	363
Term Extension [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment			2,994	926
Balance of loans	$ 166	$ 377	$ 166	$ 377
Manufactured Housing [Member]
Troubled Debt Restructured Loans [Abstract]
Number of loans | Loan	2	2	12	9
Pre-modification recorded investment	$ 0	$ 363	$ 1,047	$ 807
Post modification recorded investment	166	363	1,213	807
Effect on allowance for loan losses	3	24	66	45
Manufactured Housing [Member] | Rate Reduction [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment			1,100	807
Balance of loans	53	363	53	363
Manufactured Housing [Member] | Term Extension [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment			1,213	807
Balance of loans	$ 166	$ 363	$ 166	$ 363
Commercial [Member]
Troubled Debt Restructured Loans [Abstract]
Number of loans | Loan		1	3	2
Pre-modification recorded investment		$ 14	$ 1,781	$ 102
Post modification recorded investment		14	1,781	102
Effect on allowance for loan losses		0	0	2
Commercial [Member] | Rate Reduction [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment		0	0	0
Commercial [Member] | Term Extension [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment		$ 14	$ 1,781	$ 102
SBA [Member]
Troubled Debt Restructured Loans [Abstract]
Number of loans | Loan				1
Pre-modification recorded investment				$ 17
Post modification recorded investment				17
Effect on allowance for loan losses				1
SBA [Member] | Rate Reduction [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment				0
SBA [Member] | Term Extension [Member]
Troubled Debt Restructured Loans [Abstract]
Post modification recorded investment				$ 17

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LOANS HELD FOR INVESTMENT, Trouble Debt Restructured Loans With Payment Defaults (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) Nonpayment	Sep. 30, 2017 USD ($)
LOANS HELD FOR INVESTMENT [Abstract]
Number of consecutive non-payments for a TDR loan to be deemed default | Nonpayment			0
Trouble debt restructurings with payment defaults | $	$ 0	$ 0	$ 0	$ 0

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OTHER ASSETS ACQUIRED THROUGH FORECLOSURE (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
OTHER ASSETS ACQUIRED THROUGH FORECLOSURE [Abstract]
Balance, beginning of period	$ 213	$ 362	$ 372	$ 137
Additions	0	132	174	502
Proceeds from dispositions	(213)	(60)	(484)	(303)
(Loss) gain on sales, net	0	52	(62)	150
Balance, end of period	$ 0	$ 486	$ 0	$ 486

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FAIR VALUE MEASUREMENT, Fair Value of Assets Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets [Abstract]
Investment securities available-for-sale		$ 28,783
Recurring [Member]
Assets [Abstract]
Investment securities available-for-sale	$ 25,946	28,783
Interest only strips	62	87
Servicing assets	56	97
Total	26,064	28,967
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Investment securities available-for-sale	144	156
Interest only strips	0	0
Servicing assets	0	0
Total	144	156
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Investment securities available-for-sale	25,802	28,627
Interest only strips	0	0
Servicing assets	0	0
Total	25,802	28,627
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets [Abstract]
Investment securities available-for-sale	0	0
Interest only strips	62	87
Servicing assets	56	97
Total	$ 118	$ 184

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FAIR VALUE MEASUREMENT, Assets Measured on Non-recurring Basis (Details) - Non-recurring [Member] - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Summary of fair value measurements of assets measured on a non-recurring basis [Abstract]
Impaired loans	$ 4,746	$ 6,323
Loans held for sale	51,558	56,222
Foreclosed real estate and repossessed assets	0	372
Total	56,304	62,917
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Summary of fair value measurements of assets measured on a non-recurring basis [Abstract]
Impaired loans	0	0
Loans held for sale	0	0
Foreclosed real estate and repossessed assets	0	0
Total	0	0
Significant Other Observable Inputs (Level 2) [Member]
Summary of fair value measurements of assets measured on a non-recurring basis [Abstract]
Impaired loans	4,746	6,323
Loans held for sale	51,558	56,222
Foreclosed real estate and repossessed assets	0	372
Total	56,304	62,917
Significant Unobservable Inputs (Level 3) [Member]
Summary of fair value measurements of assets measured on a non-recurring basis [Abstract]
Impaired loans	0	0
Loans held for sale	0	0
Foreclosed real estate and repossessed assets	0	0
Total	$ 0	$ 0

XML

FAIR VALUE MEASUREMENT, Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Loans Held for Sale [Abstract]
Loans held-for-sale at carrying value	$ 50,944	$ 55,094
Carrying Amount [Member]
Financial assets [Abstract]
Cash and cash equivalents	47,753	45,869
FRB and FHLB stock	4,087	3,720
Investment securities	33,421	36,348
Loans, net	745,222	726,189
Financial liabilities [Abstract]
Deposits	719,942	699,684
Other borrowings	50,000	56,843
Fair Value [Member]
Financial assets [Abstract]
Cash and cash equivalents	47,753	45,869
FRB and FHLB stock	4,087	3,720
Investment securities	33,341	36,454
Loans, net	739,215	719,502
Financial liabilities [Abstract]
Deposits	701,534	699,211
Other borrowings	49,799	56,842
Fair Value [Member] | Level 1 [Member]
Financial assets [Abstract]
Cash and cash equivalents	47,753	45,869
FRB and FHLB stock	0	0
Investment securities	144	156
Loans, net	0	0
Financial liabilities [Abstract]
Deposits	0	0
Other borrowings	0	0
Fair Value [Member] | Level 2 [Member]
Financial assets [Abstract]
Cash and cash equivalents	0	0
FRB and FHLB stock	4,087	3,720
Investment securities	33,197	36,298
Loans, net	725,139	705,723
Financial liabilities [Abstract]
Deposits	701,534	699,211
Other borrowings	49,799	56,842
Fair Value [Member] | Level 3 [Member]
Financial assets [Abstract]
Cash and cash equivalents	0	0
FRB and FHLB stock	0	0
Investment securities	0	0
Loans, net	14,076	13,779
Financial liabilities [Abstract]
Deposits	0	0
Other borrowings	0	0
Standby Letters of Credit [Member]
Off-balance sheet instruments [Abstract]
Off-balance sheet risks outstanding	0	0
Unfunded Loan Commitments [Member]
Off-balance sheet instruments [Abstract]
Off-balance sheet risks outstanding	$ 61,600	$ 68,800

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OTHER BORROWINGS (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Jul. 31, 2017
Financial Home Loan Bank Advances [Abstract]
FHLB advances	$ 47.0		$ 47.0		$ 50.0
Letter of credit with FHLB	125.0		125.0
Securities pledged to FHLB	33.3		33.3		36.2
Loans pledged to FHLB	239.0		239.0		235.4
Available for additional borrowing	70.2		70.2		56.8
Total FHLB interest expense	0.3	$ 0.1	0.7	$ 0.2
Federal Funds Purchased Lines [Abstract]
Federal funds borrowing lines at correspondent banks	20.0		20.0
Federal funds amount outstanding	0.0		$ 0.0		0.0
Federal Reserve Bank Advances [Member]
Line of Credit [Abstract]
Period for advances to be collateralized			28 days
Outstanding balance	0.0		$ 0.0		0.0
Available borrowing capacity	105.1		105.1		$ 104.3
Line of Credit [Member]
Line of Credit [Abstract]
Outstanding balance	3.0		$ 3.0
Term of agreement			1 year
Maximum borrowing capacity						$ 15.0
Percentage of compensating deposit with the lender			25.00%
Compensating deposit	$ 0.8		$ 0.8
Minimum debt service coverage ratio	1.65		1.65
Minimum Tier 1 leverage ratio	7.00%		7.00%
Minimum total risk-based capital ratio	10.00%		10.00%
Interest rate	5.85%		5.85%

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STOCKHOLDERS' EQUITY, Changes in Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Changes in other comprehensive income (loss) by component, net of tax [Roll Forward]
Balance		$ 70,070		$ 70,070
Net other comprehensive income (loss)	$ (48)		$ (17)	(125)	$ 99
Balance	75,557			75,557
Unrealized Holding Gains (Losses) on AFS [Member]
Changes in other comprehensive income (loss) by component, net of tax [Roll Forward]
Balance	(111)	25	87	25	(29)
Other comprehensive income before reclassifications	(48)		(17)	(125)	99
Amounts reclassified from accumulated other comprehensive income	0		0	(59)	0
Net other comprehensive income (loss)	(48)		(17)	(184)	99
Balance	$ (159)		$ 70	$ (159)	$ 70
ASU 2018-02 [Member]
Changes in other comprehensive income (loss), net of tax [Abstract]
Reclassification within accumulated other comprehensive income to retained earnings		6
ASU 2016-01 [Member]
Changes in other comprehensive income (loss), net of tax [Abstract]
Adjustment from AOCI to retained earnings		$ 53

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STOCKHOLDERS' EQUITY, Common Stock Warrants and Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Common Stock [Abstract]
Common stock dividend paid			$ 1,152	$ 936
Common Stock Warrant [Member]
Common Stock Warrant [Abstract]
Number of shares that can be issued against warrants (in shares)	521,158		521,158
Exercise price of warrants (in dollars per share)	$ 4.49		$ 4.49
Expiration date of warrants			Dec. 19, 2018
Common Stock [Member]
Common Stock [Abstract]
Common stock dividend paid	$ 400	$ 300	$ 1,200	$ 900
Common Stock [Member] | Stock Repurchase Program [Member]
Common Stock [Abstract]
Period in which common stock repurchase program is expected to be executed			2 years
Common stock shares repurchased to date (in shares)	187,569		187,569
Common stock shares repurchased to date, value	$ 1,400		$ 1,400
Common stock shares repurchased to date, average price (in dollars per share)			$ 7.25
Common stock shares repurchased during the period (in shares)	0		0
Common Stock [Member] | Stock Repurchase Program [Member] | Maximum [Member]
Common Stock [Abstract]
Amount of common stock repurchase program authorized	$ 3,000		$ 3,000

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CAPITAL REQUIREMENT (Details)	Sep. 30, 2018	Dec. 31, 2017
Regulatory Ratios [Abstract]
Total capital ratio, minimum capital ratios	8.00%	8.00%
Total capital ratio, well-capitalized ratios	10.00%	10.00%
Total capital ratio, minimum capital requirements including fully-phased in capital conservation buffer (2019)	10.50%	10.50%
Tier 1 risk-based capital ratio, minimum capital ratios	6.00%	6.00%
Tier 1 risk-based capital ratio, well-capitalized ratios	8.00%	8.00%
Tier 1 risk-based capital ratio, minimum capital requirements including fully-phased in capital conservation buffer (2019)	8.50%	8.50%
Common Equity Tier 1 ratio, minimum capital ratios	4.50%	4.50%
Common Equity Tier 1 ratio, well-capitalized ratios	6.50%	6.50%
Common Equity Tier 1 ratio, minimum capital requirements including fully-phased in capital conservation buffer (2019)	7.00%	7.00%
Tier 1 leverage ratio, minimum capital ratios	4.00%	4.00%
Tier 1 leverage ratio, well-capitalized ratios	5.00%	5.00%
CWB [Member]
Regulatory Ratios [Abstract]
Total capital ratio	10.78%	11.31%
Tier 1 risk-based capital ratio	9.63%	10.10%
Common Equity Tier 1 ratio	9.63%	10.10%
Tier 1 leverage ratio	8.22%	8.83%

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REVENUE RECOGNITION (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Noninterest Income [Abstract]
Non-interest income (in-scope of Topic 606)	$ 138	$ 135	$ 423	$ 361
Non-interest income (out-of-scope of Topic 606)	503	581	1,545	1,693
Total non-interest income	641	716	1,968	2,054
Service Charges on Deposit Accounts [Member]
Noninterest Income [Abstract]
Non-interest income (in-scope of Topic 606)	95	89	281	248
Exchange Fees and Other Service Charges [Member]
Noninterest Income [Abstract]
Non-interest income (in-scope of Topic 606)	$ 43	$ 46	$ 142	$ 113