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CST: 11/12/2019 18:41:10   

Community West Bancshares Earns $2.2 Million, or $0.25 Per Diluted Share, in 3Q19; Results Highlighted by Net Interest Margin Expansion; Declares Quarterly Cash Dividend of $0.055 Per Common Share

47 Days ago

GOLETA, Calif., Oct. 25, 2019 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported earnings of $2.2 million, or $0.25 per diluted share, for the third quarter of 2019 (3Q19), compared to $1.6 million, or $0.18 per diluted share, in 2Q19, and $2.4 million, or $0.27 per diluted share, in 3Q18.

In the first nine months of 2019, net income was $5.2 million, or $0.61 per diluted share, compared to $6.1 million, or $0.69 per diluted share, in the first nine months of 2018.

“We delivered solid third quarter results, fueled by growing revenues and an expanding net interest margin,” stated Martin E. Plourd, President and Chief Executive Officer.  “Loan growth remains steady, with a 5% increase in the loan portfolio compared to a year ago, and strong total demand deposits, which increased 20% year-over-year as we continue to improve our core funding position.  We will continue to focus on high quality earnings growth, while managing our operating efficiencies and expanding our brand throughout California’s Central Coast.”

Third Quarter 2019 Financial Highlights:

  • Net income was $2.2 million, or $0.25 per diluted share, in 3Q19, compared to $1.6 million, or $0.18 per diluted share in 2Q19, and $2.4 million, or $0.27 per diluted share in 3Q18.
  • Net interest margin improved to 4.10% for 3Q19, compared to 4.07% for 2Q19 and 4.02% for 3Q18.
  • Total non-interest expense was $6.5 million in 3Q19, compared to $6.8 million in 2Q19 and $6.4 million in 3Q18.
  • Total demand deposits decreased slightly to $448.0 million at September 30, 2019, compared to $456.3 million at June 30, 2019, and increased $75.4 million compared to $372.6 million at September 30, 2018. 
  • Total loans increased to $789.5 million at September 30, 2019, compared to $788.9 million at June 30, 2019, and increased $35.7 million compared to $753.7 million at September 30, 2018. 
  • Book value per common share increased to $9.40 at September 30, 2019, compared to $9.19 at June 30, 2019, and $9.13 at September 30, 2018. 
  • Provision (credit) for loan losses was ($75,000) for the quarter, compared to a provision for loan losses of $177,000 for 2Q19, and a credit for loan losses of ($197,000) for 3Q18.
  • Total risked based capital improved to 11.18% for the Bank at September 30, 2019, compared to 10.67% at June 30, 2019 and 10.79% at September 30, 2018.
  • Net nonaccrual loans totaled $5.5 million at September 30, 2019, compared to $3.0 million at June 30, 2019, and $3.8 million at September 30, 2018. 
  • Other real estate owned was $317,000 at September 30, 2019, compared to $1.1 million at June 30, 2019, and zero at September 30, 2018.

Income Statement

Third quarter net interest income increased to $8.8 million, compared to $8.5 million in 2Q19 and $8.6 million in 3Q18.  For 3Q19, net interest income benefited by both collection of interest on previously impaired loans and a net decrease in the cost of funds.  In the first nine months of 2019, net interest income was $25.5 million, compared to $25.3 million in the first nine months of 2018. 

Non-interest income was $647,000 in 3Q19, compared to $692,000 in 2Q19 and $641,000 in 3Q18.  Non-interest income was $1.9 million in the first nine months of 2019, compared to $2.0 million in the first nine months of 2018.

“The continued improvement in the margin for the current quarter was due, in part, to our on-going efforts to reduce our cost of funds,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  Third quarter net interest margin improved to 4.10%, from 4.07% in 2Q19, and 4.02% in 3Q18.  In the first nine months of 2019, the net interest margin was 4.06%, compared to 4.11% in the prior year period.

Non-interest expenses totaled $6.5 million in 3Q19, compared to $6.8 million in the preceding quarter and $6.4 million in 3Q18.  In the first nine months of 2019, non-interest expense was $19.9 million, compared to $19.2 million in the first nine months of 2018. 

Balance Sheet

Total loans increased modestly to $789.5 million at September 30, 2019, compared to $788.9 million at June 30, 2019, and increased $35.8 million, or 4.7%, compared to $753.7 million at September 30, 2018.  

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 11.1% from year ago levels to $392.3 million at September 30, 2019 and comprise 49.7% of the total loan portfolio.  Manufactured housing loans were up 5.5% from year ago levels to $253.2 million and represent 32.1% of total loans.  Commercial loans (which include agriculture loans) were down 7.6% from year ago levels to $110.2 million and represent 13.9% of the total loan portfolio.

Total deposits decreased slightly to $761.7 million at September 30, 2019, compared to $765.1 million at June 30, 2019, and increased $41.8 million, or 5.8% compared to $719.9 million at September 30, 2018.  Non-interest-bearing demand deposits increased $1.9 million, or 1.7% to $114.4 million at September 30, 2019 compared to $112.5 million at June 30, 2019 and increased $8.8 million compared to $105.6 million at September 30, 2018.  Interest-bearing demand deposits decreased to $333.7 million compared to $343.8 million at June 30, 2019 but increased $66.6 million compared to $267.0 million at September 30, 2018.  Certificates of deposit, which include broker deposits increased $5.6 million to $298.1 million at September 30, 2019 compared to $292.5 million at June 30, 2019 and decreased $34.8 million compared to $332.9 million at September 30, 2018 as the Company divests itself from wholesale funding.

Total assets were $903.3 million at September 30, 2019, compared to $905.6 million at June 30, 2019 and increased $48.6 million, or 5.7%, compared to $854.7 million at September 30, 2018.  Stockholders’ equity increased to $79.6 million at September 30, 2019, compared to $77.8 million at June 30, 2019, and $75.6 million at September 30, 2018.  Book value per common share increased to $9.40 at September 30, 2019, compared to $9.19 at June 30, 2019, and $9.13 at September 30, 2018. 

Credit Quality

The Company recorded a credit to its provision for loan losses of ($75,000) in 3Q19.  This compares to a provision for loan losses of $177,000 in 2Q19 and credit to the provision for loan losses of ($197,000) in 3Q18.  The allowance for loan losses, including the reserve for undisbursed loans, was $8.9 million at September 30, 2019, or 1.19% of total loans held for investment, compared to 1.20% at June 30, 2019, and 1.21% a year ago.  Net nonaccrual loans plus net other assets acquired through foreclosure were $5.8 million at September 30, 2019, compared to $4.1 million at June 30, 2019, and $3.8 million at September 30, 2018.  

At September 30, 2019, net nonaccrual loans consisted of $4.7 million of commercial loans including commercial agriculture, $0.3 million of manufactured housing loans, $0.4 million of SBA loans, and $0.1 million of commercial real estate loans.

There was $317,000 in other assets acquired through foreclosure as of September 30, 2019.  This compares to $1.1 million of other assets acquired through foreclosure at June 30, 2019, and no other assets acquired through foreclosure a year ago. 

Cash Dividend Declared

The Company’s Board of Directors declared a cash dividend of $0.055 per common share, payable November 29, 2019 to common shareholders of record on November 14, 2019.  The current annualized yield, based on the closing price of CWBC shares of $9.89 on September 30, 2019, was 2.17%.

Stock Repurchase Program
The Company, under the Board of Directors authorized common stock repurchase program of up to $4.5 million, bought back 10,233 shares during 3Q19.  As of September 30, 2019, 350,189 shares had been repurchased at an average price of $8.71 per share.

Company Overview
Community West Bancshares is a financial services company with headquarters in Goleta, California. The Company is the holding company for Community West Bank, the largest publicly traded community bank serving California’s Central Coast area of Ventura, Santa Barbara and San Luis Obispo counties.  Community West Bank has eight full-service California branch banking offices in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village, San Luis Obispo, Oxnard and Paso Robles.  The principal business activities of the Company are Relationship Banking, Manufactured Housing lending and Government Guaranteed lending.

Industry Accolades

In April 2019, Community West was awarded a “Premier” rating by The Findley Reports.  For 51 years, The Findley Reports has been recognizing the financial performance of banking institutions in California and the Western United States.  In making their selections, The Findley Reports focuses on these four ratios: growth, return on beginning equity, net operating income as a percentage of average assets, and loan losses as a percentage of gross loans.

Safe Harbor Disclosure

This release contains forward-looking statements that reflect management's current views of future events and operations.  These forward-looking statements are based on information currently available to the Company as of the date of this release.  It is important to note that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including, but not limited to, the ability of the Company to implement its strategy and expand its lending operations.

COMMUNITY WEST BANCSHARES                    
CONDENSED CONSOLIDATED INCOME STATEMENTS                
(unaudited)                    
(in 000's, except per share data)                    
                     
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,   September 30,
      2019       2019     2018       2019     2018  
                     
Interest income                    
Loans, including fees   $ 11,306     $ 10,907   $ 10,612     $ 32,754   $ 30,283  
Investment securities and other     413       460     589       1,357     1,307  
Total interest income     11,719       11,367     11,201       34,111     31,590  
Interest expense                    
Deposits     2,615       2,583     2,222       7,642     5,373  
Other borrowings     306       286     351       950     928  
Total interest expense     2,921       2,869     2,573       8,592     6,301  
Net interest income     8,798       8,498     8,628       25,519     25,289  
Provision (credit) for loan losses     (75 )     177     (197 )     45     (224 )
Net interest income after provision for loan losses     8,873       8,321     8,825       25,474     25,513  
Non-interest income                    
Other loan fees     302       323     379       883     998  
Service charges     129       139     113       407     351  
Document processing fees     96       124     120       307     367  
Other     120       106     29       346     252  
Total non-interest income     647       692     641       1,943     1,968  
Non-interest expenses                    
Salaries and employee benefits     4,254       4,318     4,147       12,953     12,338  
Occupancy, net     788       768     778       2,338     2,303  
Professional services     341       405     326       1,127     931  
Data processing     215       201     201       640     619  
Depreciation     219       218     199       650     552  
Advertising and marketing     187       230     154       546     487  
FDIC assessment     (15 )     154     169       309     547  
Stock-based compensation     90       97     81       282     284  
Other     385       369     347       1,096     1,131  
Total non-interest expenses     6,464       6,760     6,402       19,941     19,192  
Income before provision for income taxes     3,056       2,253     3,064       7,476     8,289  
Provision for income taxes     902       673     695       2,232     2,239  
Net income   $ 2,154     $ 1,580   $ 2,369     $ 5,244   $ 6,050  
Earnings per share:                    
Basic   $ 0.25     $ 0.19   $ 0.29     $ 0.62   $ 0.73  
Diluted   $ 0.25     $ 0.18   $ 0.27     $ 0.61   $ 0.69  
                     


COMMUNITY WEST BANCSHARES                
CONDENSED CONSOLIDATED BALANCE SHEETS                
(unaudited)                
(in 000's, except per share data)                
                 
    September 30,   June 30,   September 30,   December 31,
      2019       2019       2018       2018  
                 
Cash and interest-earning deposits in other financial institutions   $ 56,347     $ 57,181     $ 47,753     $ 56,915  
Investment securities     28,707       30,414       33,421       32,353  
Loans:                
Commercial     110,153       108,599       119,270       118,518  
Commercial real estate     392,288       391,293       353,136       365,809  
SBA     17,018       17,560       21,057       19,077  
Manufactured housing     253,229       253,250       240,010       247,114  
Single family real estate     11,936       11,575       11,153       11,261  
HELOC     4,847       6,696       9,446       6,756  
Other     (14 )     (65 )     (331 )     (292 )
Total loans     789,457       788,908       753,741       768,243  
                 
Loans, net                
Held for sale     44,816       45,447       50,944       48,355  
Held for investment     744,641       743,461       702,797       719,888  
Less: Allowance for loan losses     (8,868 )     (8,887 )     (8,519 )     (8,691 )
Net held for investment     735,773       734,574       694,278       711,197  
NET LOANS     780,589       780,021       745,222       759,552  
                 
Other assets     37,609       37,951       28,313       28,471  
                 
TOTAL ASSETS   $ 903,252     $ 905,567     $ 854,709     $ 877,291  
                 
Deposits                
Non-interest-bearing demand   $ 114,366     $ 112,463     $ 105,580     $ 108,161  
Interest-bearing demand     333,679       343,841       267,046       270,431  
Savings     15,481       16,264       14,385       14,641  
Certificates of deposit ($250,000 or more)     90,298       90,170       92,934       93,439  
Other certificates of deposit     207,848       202,373       239,997       229,334  
Total deposits     761,672       765,111       719,942       716,006  
Other borrowings     45,000       46,000       50,000       75,000  
Other liabilities     16,984       16,627       9,210       10,134  
TOTAL LIABILITIES     823,656       827,738       779,152       801,140  
                 
Stockholders' equity     79,596       77,829       75,557       76,151  
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 903,252     $ 905,567     $ 854,709     $ 877,291  
                 
Common shares outstanding     8,467       8,465       8,275       8,533  
                 
Book value per common share   $ 9.40     $ 9.19     $ 9.13     $ 8.92  
                 


ADDITIONAL FINANCIAL INFORMATION                  
(Dollars in thousands except per share amounts)(Unaudited)                  
  Three Months Ended   Three Months Ended   Three Months Ended   Nine Months Ended
PERFORMANCE MEASURES AND RATIOS September 30, 2019   June 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
Return on average common equity   10.85 %     8.18 %     12.57 %     9.03 %     11.07 %
Return on average assets   0.97 %     0.73 %     1.08 %     0.81 %     96.00 %
Efficiency ratio   68.44 %     73.56 %     69.07 %     72.61 %     70.41 %
Net interest margin   4.10 %     4.07 %     4.02 %     4.06 %     4.11 %
                   
  Three Months Ended   Three Months Ended   Three Months Ended   Nine Months Ended
AVERAGE BALANCES September 30, 2019   June 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
Average assets $ 877,505     $ 864,583     $ 867,174     $ 867,322     $ 838,955  
Average earning assets   850,948       838,104       852,083       841,391       823,607  
Average total loans   788,965       777,828       755,146       778,425       747,518  
Average deposits   735,545       726,366       734,391       726,356       713,790  
Average common equity   78,763       77,432       74,799       77,633       73,087  
                   
EQUITY ANALYSIS September 30, 2019   June 30, 2019   September 30, 2018        
Total common equity $ 79,596     $ 77,829     $ 75,557          
Common stock outstanding   8,467       8,465       8,275          
                   
Book value per common share $ 9.40     $ 9.19     $ 9.13          
                   
ASSET QUALITY September 30, 2019   June 30, 2019   September 30, 2018        
Nonaccrual loans, net $ 5,476     $ 3,016     $ 3,755          
Nonaccrual loans, net/total loans   0.69 %     0.38 %     0.50 %        
Other assets acquired through foreclosure, net $ 317     $ 1,074     $ -          
                   
Nonaccrual loans plus other assets acquired through foreclosure, net $ 5,793     $ 4,090     $ 3,755          
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets   0.64 %     0.45 %     0.44 %        
Net loan (recoveries)/charge-offs in the quarter $ (69 )   $ (62 )   $ (94 )        
Net (recoveries)/charge-offs in the quarter/total loans   (0.01 %)     (0.01 %)     (0.01 %)        
                   
Allowance for loan losses $ 8,868     $ 8,887     $ 8,519          
Plus: Reserve for undisbursed loan commitments   81       81       80          
Total allowance for credit losses $ 8,949     $ 8,968     $ 8,599          
Allowance for loan losses/total loans held for investment   1.19 %     1.20 %     1.21 %        
Allowance for loan losses/nonaccrual loans, net   161.94 %     294.66 %     226.87 %        
                   
Community West Bank *                  
Tier 1 leverage ratio   9.02 %     8.66 %     8.23 %        
Tier 1 capital ratio   10.04 %     9.53 %     9.64 %        
Total capital ratio   11.18 %     10.67 %     10.79 %        
                   
INTEREST SPREAD ANALYSIS September 30, 2019   June 30, 2019   September 30, 2018        
Yield on total loans   5.69 %     5.62 %     5.58 %        
Yield on investments   3.06 %     3.89 %     3.77 %        
Yield on interest earning deposits   2.14 %     1.89 %     1.54 %        
Yield on earning assets   5.46 %     5.44 %     5.22 %        
                   
Cost of interest-bearing deposits   1.69 %     1.70 %     1.41 %        
Cost of total deposits   1.41 %     1.43 %     1.20 %        
Cost of borrowings   2.64 %     2.64 %     2.79 %        
Cost of interest-bearing liabilities   1.76 %     1.76 %     1.51 %        
                   
* Capital ratios are preliminary until the Call Report is filed.                  

Contact:
Susan C. Thompson, EVP & CFO
805.692.5821
www.communitywestbank.com

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