Community West Bancshares Earnings Grow 20% to $1.9 Million in 2Q18 Over 2Q17; Book Value Per Common Share Increases to $8.90; Declares Quarterly Cash Dividend of $0.05 Per Common Share

Community West Bancshares Earnings Grow 20% to $1.9 Million in 2Q18 Over 2Q17; Book Value Per Common Share Increases to $8.90; Declares Quarterly Cash Dividend of $0.05 Per Common Share

GOLETA, Calif., July 27, 2018 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported net income increased 20.0% to $1.9 million, or $0.21 per diluted share, in the second quarter of 2018 (2Q18), compared to $1.6 million, or $0.18 per diluted share in the second quarter of 2017 (2Q17) and increased slightly by 2.9% when compared to the first quarter of 2018 (1Q18). 

In the first six months of 2018, net income increased 26.4% to $3.7 million, or $0.42 per diluted share, compared to $2.9 million, or $0.34 per diluted share, in the first six months of 2017.

“In the second quarter we shifted our focus to emphasize core deposit growth which include non-interest bearing checking, interest bearing checking, money market accounts, savings accounts and retail certificates of deposits, gaining 7.3% over the prior year,” stated Martin E. Plourd, President and Chief Executive Officer.  “We extended our momentum from the first quarter, producing solid performance metrics including return on average assets of 0.90% and a return on average common equity of 10.26% for the second quarter.”

Second Quarter 2018 Financial Highlights

  • Net income increased 20.0% to $1.9 million, or $0.21 per diluted share, in 2Q18, compared to $1.6 million, or $0.18 per diluted share in 2Q17.
  • Return on average common equity of 10.26%, down from 10.30% three months earlier and up from 9.20% a year ago.
  • Return on average assets of 0.90%, down slightly from 0.91% three months earlier and up from 0.83% a year ago.
  • Total loans increased $14.1 million to $759.9 million at June 30, 2018, compared to $745.8 million three months earlier and increased $67.1 million compared to $692.8 million a year ago.
  • Total deposits were $702.6 million at June 30, 2018, compared to $710.0 million three months earlier and increased $32.3 million compared to $670.3 million a year ago.
  • Core deposits increased to $500.2 million at June 30, 2018, compared to $485.7 million three months earlier and increased $36.6 million compared to $463.6 million a year ago.
  • Net interest margin was 4.06%, compared to 4.25% three months earlier and 4.39% a year ago.
  • Book value per common share increased to $8.90 at June 30, 2018, compared to $8.36 a year ago and $8.73 three months earlier. 
  • The Bank continues to be well-capitalized per banking regulations with its total capital ratio at 11.29%, its Tier 1 capital ratio at 10.11% and Tier 1 leverage ratio at 8.88% at June 30, 2018.

Income Statement

Net interest income for 2Q18 was $8.3 million, compared to $8.4 million in the preceding quarter and a 3.4% increase compared to $8.0 million in 2Q17.  In the first six months of 2018, net interest income increased 5.4% to $16.7 million, compared to $15.8 million in the first six months of 2017.

Non-interest income was $688,000 in 2Q18, compared to $639,000 in 1Q18 and $697,000 in 2Q17.  In the first six months of 2018, non-interest income was $1.3 million, which was unchanged compared to the first six months of 2017.

Second quarter net interest margin was 4.06% compared to 4.25% in 1Q18 and 4.39% in 2Q17.  In the first six months of the year, net interest margin was 4.15% compared to 4.42% in the first six months a year ago.  “The net interest margin continued to compress as the yield curve flattened further in the second quarter,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer. 

Non-interest expenses totaled $6.3 million in 2Q18, compared to $6.0 million in 2Q17 and decreased compared to $6.5 million in the preceding quarter.  In the first six months of 2018, non-interest expenses totaled $12.8 million, compared to $11.9 million in the first six months of 2017.  The year-over-year increase was primarily attributable to an increase in salary and employee benefits as the result of expansion.

Balance Sheet

“Total loans increased 1.9% during the quarter and increased 9.7% year over year, with solid production in commercial real estate, manufactured housing and commercial loans,” said Plourd.

Total loans increased to $759.9 million at June 30, 2018, compared to $745.8 million at March 31, 2018, and increased $67.1 million compared to $692.8 million a year ago.  Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 14.8% from year ago levels to $364.7 million at June 30, 2018, and comprise 48.0% of the total loan portfolio.  Manufactured housing loans were up 12.2% from year ago levels to $234.6 million and represent 30.9% of total loans.  Commercial loans increased 5.9% from year ago levels to $118.3 million and represent 15.6% of the total loan portfolio.

Core deposits totaled $500.2 million at June 30, 2018 and comprise 71.1% of total deposits compared to $485.7 million and 68.4% of total deposits at March 31, 2018 and compared to $463.6 million and 69.1% of total deposits a year ago. A strategic focus for the Company in 2018 is core deposit growth.  Total deposits declined modestly to $702.6 million at June 30, 2018, compared to $710.0 million at March 31, 2018, and increased $32.3 million, or 4.8% compared to $670.3 million a year earlier. 

Total assets were $865.1 million at June 30, 2018, which was unchanged compared to three months earlier and a $80.2 million, or 10.2% increase compared to $785.0 million one year ago.  Stockholders’ equity improved to $73.4 million at June 30, 2018, compared to $71.7 million at March 31, 2018, and $68.2 million a year ago.  Book value per common share improved to $8.90 at June 30, 2018, compared to $8.73 at March 31, 2018, and $8.36 a year ago. 

Credit Quality

“We had another solid quarter of loan growth and as a result recorded a $117,000 provision for loan losses during the second quarter,” said Thompson.  This compares to a negative provision for loan losses of $144,000 in 1Q18 and a provision for loan losses of $120,000 in 2Q17.  Net loan recoveries were $47,000 in 2Q18 compared to $182,000 in 1Q18 and $89,000 in 2Q17.

The allowance for loan losses was $8.6 million at June 30, 2018, or 1.22% of total loans held for investment, compared to 1.22% at March 31, 2018, and 1.27% a year ago.  Net nonaccrual loans decreased to $3.7 million, or 0.49% of total loans at June 30, 2018, compared to $4.2 million, or 0.57% of total loans, three months earlier, and increased compared to $2.0 million, or 0.29% of total loans, a year ago.  

Of the $3.7 million in net nonaccrual loans, $2.1 million were commercial loans primarily from one relationship and not systemic to the portfolio, $527,000 were commercial agricultural loans, $259,000 were manufactured housing loans, $207,000 were home equity loans, $168,000 were single-family real estate loans, $166,000 were SBA 504 1st loans, $160,000 were SBA 7A loans and $112,000 were commercial real estate loans.

Other assets acquired through foreclosure totaled $213,000 at June 30, 2018, compared to $233,000 three months earlier and $362,000 a year ago. 

Cash Dividend Declared

The Company’s Board of Directors declared a cash dividend of $0.05 per common share, payable August 31, 2018 to common shareholders of record on August 14, 2018.  The current annualized yield, based on the closing price of CWBC shares of $11.80 on June 30, 2018, was 1.7%.

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 seven full-service California branch banking offices in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village, San Luis Obispo and Oxnard and a loan production office in Paso Robles. The principal business activities of the Company are Relationship business banking, Manufactured Housing lending and Government Guaranteed lending.

Industry Accolades

In April 2018, Community West was awarded a “Premier” rating by The Findley Reports.  For 50 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.

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

         
         
COMMUNITY WEST BANCSHARES        
CONDENSED CONSOLIDATED INCOME STATEMENTS        
(unaudited)        
(in 000's, except per share data)        
         
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,June 30,
 2018 2018 2017 20182017
         
Interest income        
Loans, including fees$10,020  $9,651  $8,788 $19,671 $17,230
Investment securities and other 381   337   278  718  539
Total interest income 10,401   9,988   9,066  20,389  17,769
Interest expense        
Deposits 1,708   1,443   941  3,151  1,799
Other borrowings 382   195   89  577  160
Total interest expense 2,090   1,638   1,030  3,728  1,959
Net interest income 8,311   8,350   8,036  16,661  15,810
Provision (credit) for loan losses 117   (144)  120  (27) 264
Net interest income after provision for loan losses 8,194   8,494   7,916  16,688  15,546
Non-interest income        
Other loan fees 323   296   342  619  645
Document processing fees 130   117   151  247  284
Service charges 122   116   112  238  208
Other 113   110   92  223  201
Total non-interest income 688   639   697  1,327  1,338
Non-interest expenses        
Salaries and employee benefits 4,042   4,149   3,796  8,191  7,727
Occupancy, net 741   784   686  1,525  1,331
Professional services 301   304   299  605  478
Data processing 206   212   165  418  333
Depreciation 186   167   188  353  351
FDIC assessment 164   214   179  378  289
Advertising and marketing 163   170   195  333  351
Stock-based compensation 87   116   87  203  171
Loan servicing and collection (19)  70   55  51  161
Other 386   347   357  733  738
Total non-interest expenses 6,257   6,533   6,007  12,790  11,930
Income before provision for income taxes 2,625   2,600   2,606  5,225  4,954
Provision for income taxes 758   786   1,050  1,544  2,042
Net income$1,867  $1,814  $1,556 $3,681 $2,912
Earnings per share:        
Basic$0.23  $0.22  $0.19 $0.45 $0.36
Diluted$0.21  $0.21  $0.18 $0.42 $0.34
         


COMMUNITY WEST BANCSHARES  
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
 
 June 30, March 31, June 30, December 31,
 2018 2018 2017 2017
        
Cash and cash equivalents$3,385  $3,473  $1,919  $3,651 
Time and interest-earning deposits in other financial institutions 50,977   65,336   36,085   42,218 
Investment securities 33,720   34,988   39,326   36,348 
Loans:       
Commercial 118,263   109,819   111,655   111,459 
Commercial real estate 364,679   362,197   317,793   354,617 
SBA 22,724   24,989   34,670   26,219 
Manufactured housing 234,598   229,194   209,119   223,115 
Single family real estate 10,682   10,609   10,161   10,346 
HELOC 9,502   9,483   9,974   9,422 
Other (558)  (514)  (542)  (569)
Total loans 759,890   745,777   692,830   734,609 
        
Loans, net       
Held for sale 52,886   52,767   60,933   55,094 
Held for investment 707,004   693,010   631,897   679,515 
Less: Allowance for loan losses (8,622)  (8,458)  (7,994)  (8,420)
Net held for investment 698,382   684,552   623,903   671,095 
NET LOANS 751,268   737,319   684,836   726,189 
        
Other assets 25,777   24,573   22,806   24,909 
        
TOTAL ASSETS$865,127  $865,689  $784,972  $833,315 
        
Deposits       
Non-interest-bearing demand$107,168  $118,206  $107,049  $108,500 
Interest-bearing demand 260,708   258,717   262,475   256,717 
Savings 14,515   14,347   14,011   14,085 
Certificates of deposit ($250,000 or more) 88,752   81,690   82,156   81,985 
Other certificates of deposit 231,460   237,077   204,589   238,397 
Total deposits 702,603   710,037   670,280   699,684 
Other borrowings 81,843   76,843   41,800   56,843 
Other liabilities 7,233   7,098   4,676   6,718 
TOTAL LIABILITIES 791,679   793,978   716,756   763,245 
        
Stockholders' equity 73,448   71,711   68,216   70,070 
        
        
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$865,127  $865,689  $784,972  $833,315 
        
Shares outstanding 8,254   8,216   8,160   8,193 
        
Book value per common share$8.90  $8.73  $8.36  $8.55 
 


 
ADDITIONAL FINANCIAL INFORMATION           
(Dollars in thousands except per share amounts)(Unaudited)           
 Three Months Ended Three Months Ended Three Months Ended   Six Months Ended
PERFORMANCE MEASURES AND RATIOSJun. 30, 2018 Mar. 31, 2018 Jun. 30, 2017   Jun. 30, 2018 Jun. 30, 2017
Return on average common equity  10.26%   10.30%   9.20%     10.28%   8.75% 
Return on average assets  0.90%   0.91%   0.83%     0.90%   0.80% 
Efficiency ratio 69.53%   72.68%   68.79%     71.10%   69.57% 
Net interest margin 4.06%   4.25%   4.39%     4.15%   4.42% 
            
 Three Months Ended Three Months Ended Three Months Ended   Six Months Ended
AVERAGE BALANCESJun. 30, 2018 Mar. 31, 2018 Jun. 30, 2017   Jun. 30, 2018 Jun. 30, 2017
Average assets$  836,394  $  812,698  $  747,790    $  824,611  $  734,782 
Average earning assets   820,854     797,281     735,041       809,133     721,969 
Average total loans   750,575     736,628     672,677       743,640     661,791 
Average deposits   704,251     702,376     646,316       703,319     636,650 
Average common equity   72,993     71,433     67,820       72,217     67,105 
            
EQUITY ANALYSISJun. 30, 2018 Mar. 31, 2018 Jun. 30, 2017      
Total common equity$  73,448  $  71,711  $  68,216       
Common stock outstanding   8,254     8,216   8,160       
            
Book value per common share$  8.90  $  8.73  $  8.36       
            
ASSET QUALITYJun. 30, 2018 Mar. 31, 2018 Jun. 30, 2017      
Nonaccrual loans, net$  3,704  $  4,220  $  1,988       
Nonaccrual loans, net/total loans 0.49%   0.57%   0.29%       
Other assets acquired through foreclosure, net$  213  $  233  $  362       
            
Nonaccrual loans plus other assets acquired through foreclosure, net$  3,917  $  4,453  $  2,350       
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.45%   0.51%   0.30%       
Net loan (recoveries)/charge-offs in the quarter$  (47) $  (182) $  (89)      
Net (recoveries)/charge-offs in the quarter/total loans  (0.01%)  (0.02%)  (0.01%)      
            
Allowance for loan losses$  8,622  $  8,458  $  7,994       
Plus: Reserve for undisbursed loan commitments   97     101     99       
Total allowance for credit losses$  8,719  $  8,559  $  8,093       
Allowance for loan losses/total loans held for investment 1.22%   1.22%   1.27%       
Allowance for loan losses/nonaccrual loans, net 232.78%   200.43%   402.11%       
            
Community West Bank *           
Tier 1 leverage ratio 8.88%   8.96%   9.23%       
Tier 1 capital ratio 10.11%   10.19%   10.39%       
Total capital ratio 11.29%   11.38%   11.62%       
            
INTEREST SPREAD ANALYSISJun. 30, 2018 Mar. 31, 2018 Jun. 30, 2017      
Yield on total loans 5.35%   5.31%   5.24%       
Yield on investments 2.74%   2.73%   2.31%       
Yield on interest earning deposits 1.49%   1.36%   0.83%       
Yield on earning assets 5.08%   5.08%   4.95%       
            
Cost of interest-bearing deposits 1.16%   0.99%   0.69%       
Cost of total deposits 0.97%   0.83%   0.58%       
Cost of borrowings 2.90%   2.50%   1.22%       
Cost of interest-bearing liabilities 1.30%   1.07%   0.72%       
            
* Capital ratios are preliminary until the Call Report is filed.