Community West Bancshares Reports First Quarter 2023 Earnings of $2.5 Million, or $0.27 Per Diluted Share; Declares Quarterly Cash Dividend of $0.08 Per Common Share

Community West Bancshares Reports First Quarter 2023 Earnings of $2.5 Million, or $0.27 Per Diluted Share; Declares Quarterly Cash Dividend of $0.08 Per Common Share

GOLETA, Calif., April 28, 2023 (GLOBE NEWSWIRE) -- Community West Bancshares (“Community West” or the “Company”), (NASDAQ: CWBC), parent company of Community West Bank (the “Bank”), today reported net income of $2.5 million, or $0.27 per diluted share, for the first quarter of 2023, compared to $3.4 million, or $0.38 per diluted share, for the preceding quarter, and $4.0 million, or $0.45 per diluted share, for the first quarter of 2022.

The Company’s Board of Directors declared a quarterly cash dividend of $0.08 per common share, payable May 31, 2023, to common shareholders of record on May 12, 2023.

“Our first quarter 2023 results reflected a strong balance sheet, net interest margin and stable credit quality metrics” stated Martin E. Plourd, President & Chief Executive Officer of Community West Bancshares. “With the destabilization of our industry we quickly moved to secure liquidity to cover all uninsured deposits. We benefited by previously having approximately 78% of our deposits fully insured or collateralized, which is the direct result of our community-focused business model. We will continue to focus on funding our balance sheet primarily through core deposits. Our outlook over the next few quarters remains cautious, as we anticipate a leaner loan pipeline, as recessionary concerns continue, and deposit pricing pressures persist. While recent developments in the banking industry have been unsettling in the short term, we believe that with our resilient deposit franchise, margin, sound capital levels and stable credit quality we are well positioned to capitalize on new market opportunities.”

First Quarter 2023 Financial Highlights:

  • Net income was $2.5 million, or $0.27 per diluted share in the first quarter 2023, compared to $3.4 million, or $0.38 per diluted share in fourth quarter 2022, and $4.0 million, or $0.45 per diluted share in first quarter 2022.
  • Net interest income decreased $1.1 million to $11.0 million for first quarter 2023, compared to $12.1 million in fourth quarter 2022, and increased $294,000 compared to $10.7 million in first quarter 2022.
  • Net interest margin was 4.25% for the first quarter 2023, compared to 4.58% in fourth quarter 2022, and 3.86% in first quarter 2022.
  • Return on average assets was 0.92% for the first quarter 2023, compared to 1.24% in fourth quarter 2022, and 1.39% in first quarter 2022.
  • Return on average common equity was 8.84% for the first quarter 2023, compared to 11.98% in fourth quarter 2022, and 15.52% in first quarter 2022.
  • The Company adopted and implemented Accounting Standard Update (ASU) 2016-13 (“CECL”) on January 1, 2023. The “Day 1” impact of the adoption was a $1.8 million increase to the Allowance for Credit Losses (“ACL”) and a $421,000 increase to the reserve for unfunded commitments resulting in a $1.6 million decrease to retained earnings net of tax.
  • The Company recorded a negative provision for credit loss expense of $607,000 for first quarter 2023, compared to a negative provision for loan losses of $461,000 for fourth quarter 2022, and a negative provision for loan losses of $284,000 for first quarter 2022.
  • The ACL was 1.30% of total loans held for investment at March 31, 2023 compared to 1.15% at December 31, 2022, and 1.22% at March 31, 2022.
  • Net non-accrual loans increased to $1.6 million at March 31, 2023, compared to $211,000 at December 31, 2022, and $536,000 at March 31, 2022.
  • Total loans decreased by $3.8 million to $951.5 million at March 31, 2023, compared to $955.3 million at December 31, 2022, and increased $61.2 million compared to $890.3 million at March 31, 2022.
  • Total deposits increased by $45.7 million during the quarter to $920.8 million at March 31, 2023, compared to $875.1 million at December 31, 2022. Non-interest-bearing demand deposits decreased $11.2 million, or 5%, to $205.3 million at March 31, 2023, compared to $216.5 million at December 31, 2022.
  • The Bank’s uninsured or uncollateralized deposits totaled approximately 22% of total deposits at March 31, 2023, compared to 25% at December 31, 2022.
  • Available borrowing capacity was $178 million at March 31, 2023.
  • Stockholders’ equity increased $139,000 to $112.8 million at March 31, 2023, compared to $112.7 million at December 31, 2022, and increased $7.9 million compared to $104.8 million at March 31, 2022.
  • Book value per common share decreased to $12.77 at March 31, 2023, compared to $12.80 at December 31, 2022, and $12.07 at March 31, 2022.
  • The Bank’s Tier 1 leverage ratio* was 10.41% at March 31, 2023, compared to 10.34% at December 31, 2022, and 8.88% at March 31, 2022.

* Capital Ratios are preliminary.

Income Statement

Total interest income increased $307,000 in the first quarter to $13.6 million, compared to $13.3 million in the preceding quarter, and increased by $2.1 million compared to the first quarter of 2022. Interest income from loans remained unchanged at $12.5 million compared to the prior quarter. Interest income from securities and interest-earning deposits increased $285,000 compared to the prior quarter, primarily due to increased average interest-earning deposit balances and higher yields due to increased market rates. Total interest expenses for the quarter increased $1.4 million compared to the prior quarter due to increased average balances and rates paid on interest-bearing demand deposits and time deposits. The increase in deposit expense was largely due to increased levels of wholesale funding as the Bank utilized wholesale funding sources to increase on-balance sheet liquidity. Net interest income decreased 9.2% to $11.0 million in the first quarter 2023, compared to $12.1 million in the preceding quarter, and increased 2.7% compared to $10.7 million in first quarter 2022.

Net interest margin was 4.25% for first quarter 2023, a 33-basis point decrease compared to fourth quarter 2022, and a 39-basis point increase compared to first quarter 2022. The yield on loans for the first quarter 2023 increased 11 basis points to 5.32%, compared to 5.21% for the fourth quarter 2022, resulting from increased loan rates on new originations and the impact of higher market rates. The yield on federal funds and interest-earning deposits increased 102 bps to 4.41% for the first quarter 2023 due to increases in rates earned for overnight deposits and money market deposits. The cost of funds for the first quarter increased 62 basis points to 1.09%, compared to 0.47% for the preceding quarter due to higher rates paid on deposit accounts and changes in the portfolio mix. Non-interest income for the first quarter 2023 remained relatively unchanged at $762,000 compared to $764,000 in fourth quarter 2022. Other loan fees were $169,000 for the first quarter 2023 compared to $246,000 in fourth quarter 2022. Gain on sale of loans increased $18,000 to $30,000 in the first quarter 2023 compared to $12,000 in the fourth quarter of 2022 as a result of higher sales during the quarter.

Non-interest expenses increased $140,000 to $8.7 million in the first quarter 2023 compared to $8.6 million in fourth quarter 2022. The increase is primarily due to an increase in salaries and benefits of $381,000 due to annual merit increases, seasonal increases in payroll taxes and increased benefit costs; increased stock-based compensation of $214,000 primarily due to annual stock awards; and increased FDIC assessments of $71,000 because of higher assessment rates. The increases were partially offset by lower professional fees of $317,000 due to less consulting expense during the quarter and lower other non-interest expenses of $174,000.

Income tax expense decreased $195,000 to $1.2 million in the first quarter of 2023 compared to $1.4 million in the fourth quarter of 2022. The $1.2 million included a one-time deferred tax expense adjustment of $158,000. The effective tax rate for the first quarter of 2023 was 33.0% compared to 29.5% in the fourth quarter of 2022.

Balance Sheet

Total assets increased $76.1 million, or 7%, to $1.17 billion at March 31, 2023, compared to $1.09 billion at December 31, 2022, and increased $30.9 million, or 2.7%, compared to $1.14 billion, at March 31, 2022. Total interest-earning deposits in other financial institutions increased $103.0 million to $166.3 million at March 31, 2023, compared to $63.3 million at December 31, 2022, and decreased $24.8 million compared to March 31, 2022. Total investment securities were $18.2 million at quarter end, compared to $29.5 million in the prior quarter.

Total loans decreased $3.8 million, or 0.4%, to $951.5 million at March 31, 2023, compared to $955.3 million at December 31, 2022, and increased $61.2 million, or 6.9%, compared to $890.3 million at March 31, 2022. Commercial real estate loans outstanding (which include SBA 504, construction and land) increased $10 million during the quarter to $555.3 million at March 31, 2023, compared to $545.3 million at December 31, 2022, and increased $63.2 million compared to $492.2 million at March 31, 2022. Manufactured housing loans decreased $499,000 during the quarter to $315.3 million at March 31, 2023, compared to $315.8 million at December 31, 2022, and increased $15.4 million compared to $300 million at March 31, 2022. Commercial loans decreased $12.5 million during the quarter to $62.5 million at March 31, 2023, compared to $75 million at December 31, 2022, and decreased $8 million compared to $70.5 million at March 31, 2022.

Total deposits increased $45.7 million, or 5.2%, to $920.8 million at March 31, 2023, compared to $875.1 million at December 31, 2022, and decreased $4.9 million, or 0.5%, compared to $925.7 million at March 31, 2022. Non-interest-bearing demand deposits were $205.3 million at March 31, 2023, a $11.2 million decrease compared to $216.5 million at December 31, 2022, and a $20.7 million increase compared to $226.1 million at March 31, 2022. Interest-bearing demand deposits increased $9.6 million to $437.8 million at March 31, 2023, compared to $428.2 million at December 31, 2022, and decreased $66.4 million compared to $504.2 million at March 31, 2022. Certificates of deposit, which include brokered deposits, increased $49.9 million during the quarter to $256.8 million at March 31, 2023, compared to $206.9 million at December 31, 2022, and increased $85.6 million compared to $171.2 million at March 31, 2022.

Total borrowings increased $25 million, or 28%, to $115 million at March 31, 2023, compared to $90 million at December 31, 2022, and March 31, 2022. The increase was due to $15 million in additional FHLB overnight advances and $10 million in unsecured borrowing to support on-balance sheet liquidity.

Stockholders’ equity increased to $112.8 million at March 31, 2023, compared to $112.7 million at December 31, 2022, and $104.8 million at March 31, 2022. Book value per common share decreased to $12.77 at March 31, 2023, compared to $12.80 at December 31, 2022, and $12.07 at March 31, 2022.

Credit Quality

In accordance with changes in generally accepted accounting principles, the Company adopted the new credit loss accounting standard known as Current Expected Credit Loss (“CECL”) on January 1, 2023. With the adoption, the allowance for credit losses ("ACL") for loans increased by $1.8 million and the reserve on unfunded commitments increased $420,000. Under CECL, the ACL is based on expected credit losses rather than on incurred losses. Adoption of CECL resulted in a cumulative effect after-tax adjustment to stockholders’ equity as of January 1, 2023, of $1.6 million, which had no impact on earnings.

The Company recorded a negative provision for loan loss expense of $607,000 in the first quarter 2023, compared to a negative provision for loan loss expense of $461,000 in fourth quarter 2022, and a negative provision expense of 284,000 in first quarter 2022. The total allowance for credit losses was $12.1 million, or 1.30% of total loans held for investment, at March 31, 2023. Net non-accrual loans, plus net other assets acquired through foreclosure, were $3.8 million at March 31, 2023, $2.5 million at December 31, 2022, and $2.9 million at March 31, 2022.

Net non-accrual loans were $1.6 million as of March 31, 2023, compared to $211,000 at December 31, 2022, and $536,000 at March 31, 2022. Of the $1.6 million of net non-accrual loans at March 31, 2023, $817,000 were agriculture loans, $628,000 were manufactured housing loans and $148,000 were single family loans. The $817,000 in agriculture loans includes a guaranteed balance of $735,000.

There was $2.3 million in other assets acquired through foreclosure as of March 31, 2023 and on December 31, 2022. This compared to $2.4 million at March 31, 2022. The OREO balance relates to one property the Bank is currently marketing and expects to sell this year.

Stock Repurchase Program

On August 27, 2021, the Company announced that its Board of Directors had extended the stock repurchase plan until August 31, 2023. The Company did not repurchase shares during the first quarter of 2023, leaving $1.4 million available under the previously announced repurchase program.

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, San Luis Obispo, Oxnard and Paso Robles. The principal business activities of the Company are Relationship Banking, Manufactured Housing lending and Government Guaranteed lending.

Safe Harbor Disclosure

This release contains certain forward-looking statements about the Company and the Bank that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements 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 and are subject to significant risks, contingencies, and uncertainties, many of which are difficult to predict and are generally beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in such statements, including, but not limited to, risks from the COVID-19 pandemic, deterioration in the strength of the United States economy in general and of the local economies in which we conduct operations, the effect of, and changes in, trade, monetary and fiscal policies and laws, including changes in the interest rate policies of the Board of Governors of the Federal Reserve System, continued high inflation,, disruptions in credit and capital markets and government policies that could lead to a tightening of credit and an increase in credit losses, our ability to attract and retain deposits and other sources of funding and liquidity, the impact of recent bank failures and other adverse developments to financial institutions and the general reaction by bank customers and by investors in the capital markets regarding the stability and ability of banks to meet ongoing liquidity demands, risks from the COVID-19 pandemic, weather, natural disasters, climate change, increased unemployment, deterioration in credit quality of our loan portfolio and/or the value of the collateral securing the repayment of those loans, including those involving real estate, reduction in the value of our investment securities, the costs and effects of litigation and of adverse outcomes of such litigation, the cost and ability to attract and retain key employees, a breach of our operational or security systems, policies or procedures including cyber-attacks on us or third party vendors or service providers, regulatory or legal developments, United States tax policies, including our effective income tax rate, and our ability to implement and execute our business plan and strategy and expand our operations as provided therein. Actual results may differ materially from those set forth or implied in the forward-looking statements as a result of a variety of factors including the risk factors contained in documents filed by the Company with the Securities and Exchange Commission and are available in the “Investor Relations” section of our website, https://www.communitywest.com/sec-filings/documents/default.aspx. The Company is under no obligation (and expressly disclaims any obligation) to update or alter such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

COMMUNITY WEST BANCSHARES      
CONDENSED CONSOLIDATED BALANCE SHEETS      
(unaudited)      
(in 000's, except per share data)      
       
 March 31, December 31,  March 31,
  2023   2022    2022 
       
Cash and cash equivalents$1,533  $1,379   $2,043 
Interest-earning deposits in other financial institutions 166,342   63,311    191,145 
Investment securities 18,225   29,470    21,805 
Loans:      
Commercial 62,477   74,929    70,480 
Commercial real estate 555,339   545,317    492,181 
SBA 6,418   6,855    8,403 
Paycheck Protection Program (PPP) 684   1,773    7,504 
Manufactured housing 315,326   315,825    299,969 
Single family real estate 9,582   8,678    8,824 
HELOC 2,557   2,613    3,475 
Other (1) (890)  (648)   (528)
Total loans 951,493   955,342    890,308 
       
Loans, net      
Held for sale 21,045   21,033    24,193 
Held for investment 930,448   934,309    866,115 
Less: Allowance for credit losses (12,065)  (10,765)   (10,547)
Net held for investment 918,383   923,544    855,568 
NET LOANS 939,428   944,577    879,761 
       
Other assets 42,055   52,765    41,849 
       
TOTAL ASSETS$1,167,583  $1,091,502   $1,136,603 
       
Deposits      
Non-interest-bearing demand$205,324  $216,494   $226,073 
Interest-bearing demand 437,770   428,173    504,209 
Savings 20,929   23,490    24,239 
Certificates of deposit ($250,000 or more) 6,268   6,693    13,197 
Other certificates of deposit 250,513   200,234    158,022 
Total deposits 920,804   875,084    925,740 
Other borrowings 115,000   90,000    90,000 
Other liabilities 18,990   13,768    16,035 
TOTAL LIABILITIES 1,054,794   978,852    1,031,775 
       
Stockholders' equity 112,789   112,650    104,828 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      
$1,167,583  $1,091,502   $1,136,603 
       
Common shares outstanding 8,835   8,798    8,682 
       
Book value per common share$12.77  $12.80   $12.07 
       
(1) Includes consumer, other loans, securitized loans, and deferred fees      
       


COMMUNITY WEST BANCSHARES        
CONDENSED CONSOLIDATED INCOME STATEMENTS        
(unaudited)          
(in 000's, except per share data)          
           
  Three Months Ended
  March 31, December 31,September 30,June 30, March 31,
   2023   2022   2022  2022  2022 
Interest income          
Loans, including fees $12,489  $12,467  $11,867 $11,129 $11,194 
Investment securities and other  1,096   811   787  577  306 
Total interest income  13,585   13,278   12,654  11,706  11,500 
           
Deposits  2,277   913   528  500  570 
Other borrowings  278   224   203  196  194 
Total interest expense  2,555   1,137   731  696  764 
Net interest income  11,030   12,141   11,923  11,010  10,736 
Provision (credit) for credit losses  (607)  (461)  298  252  (284)
Net interest income after provision (credit) for credit losses  11,637   12,602   11,625  10,758  11,020 
Non-interest income          
Other loan fees  169   246   292  377  246 
Gains from loan sales, net  30   12   49  136  60 
Document processing fees  78   85   114  122  101 
Service charges  154   143   114  93  88 
Other  331   278   303  323  796 
Total non-interest income  762   764   872  1,051  1,291 
Non-interest expenses          
Salaries and employee benefits  5,202   4,821   4,752  4,910  4,865 
Occupancy, net  1,098   1,116   1,046  1,021  997 
Professional services  919   1,236   653  635  399 
Data processing  349   346   302  307  310 
Depreciation  180   176   173  179  183 
FDIC assessment  182   111   131  164  171 
Advertising and marketing  210   234   196  233  258 
Stock-based compensation  246   32   71  94  92 
Other  333   507   286  569  (304)
Total non-interest expenses  8,719   8,579   7,610  8,112  6,971 
Income before provision for income taxes  3,680   4,787   4,887  3,697  5,340 
Provision for income taxes  1,216   1,411   1,409  1,062  1,380 
Net income $2,464  $3,376  $3,478 $2,635 $3,960 
Earnings per share:          
Basic $0.28  $0.38  $0.40 $0.30 $0.46 
Diluted $0.27  $0.38  $0.39 $0.30 $0.45 
           



COMMUNITY WEST BANCSHARES        
Average Balance, Average Yield Earned, and Average Rate Paid
        
(unaudited)           
(in 000's)           
            
 Three Months Ended Three Months Ended Three Months Ended
 March 31, 2023 December 31, 2022 March 31, 2022
 Average
Balance
InterestAverage
Yield/Cost
 Average
Balance
InterestAverage
Yield/Cost
 Average
Balance
InterestAverage
Yield/Cost
  Interest-Earning Assets           
Federal funds sold and interest-earning deposits$73,179 $7954.41% $48,512 $4153.39% $205,815 $1090.21%
Investment securities 27,213  3014.49%  54,022  3962.91%  26,897  1972.97%
Loans (1) 952,192  12,4895.32%  949,007  12,4675.21%  894,539  11,1945.08%
Total earnings assets 1,052,584  13,5855.23%  1,051,541  13,2785.01%  1,127,251  11,5004.14%
  Nonearning Assets           
Cash and due from banks 1,976     2,145     2,161   
Allowance for credit losses (12,479)    (11,204)    (10,615)  
Other assets 38,716     36,432     39,138   
        Total assets$1,080,797    $1,078,914    $1,157,935   
  Interest-Bearing Liabilities           
Interest-bearing demand deposits$417,662 $1,2981.26% $442,313 $5910.53% $519,454 $3190.25%
Savings deposits 23,230  120.21%  22,801  130.23%  23,931  160.27%
Time deposits 200,875  9671.95%  152,249  3090.81%  175,448  2350.54%
Total interest-bearing deposits 641,767  2,2771.44%  617,363  9130.59%  718,833  5700.32%
Other borrowings 96,333  2781.17%  92,391  2240.96%  90,000  1940.87%
Total interest-bearing liabilities$738,100 $2,5551.40% $709,754 $1,1370.64% $808,833 $7640.38%
  Noninterest-Bearing Liabilities           
Noninterest-bearing demand deposits 211,940     241,759     227,980   
Other liabilities 17,766     15,555     17,640   
Stockholders' equity 112,991     111,846     103,482   
Total Liabilities and Stockholders' Equity$1,080,797    $1,078,914    $1,157,935   
Net interest income and margin $11,0304.25%  $12,1414.58%  $10,7363.86%
Net interest spread  3.83%   4.37%   3.76%
            
Cost of total deposits  1.08%   0.42%   0.24%
Cost of funds  1.09%   0.47%   0.30%
            


ADDITIONAL FINANCIAL INFORMATION     
(Dollars and shares in thousands except per share amounts)(Unaudited)     
 Three Months Ended Three Months Ended Three Months Ended
PERFORMANCE MEASURES AND RATIOSMarch 31, 2023 December 31, 2022 March 31, 2022
Return on average common equity 8.84%   11.98%   15.52% 
Return on average assets 0.92%   1.24%   1.39% 
Efficiency ratio 73.94%   66.48%   57.97% 
Net interest margin 4.25%   4.58%   3.86% 
      
 Three Months Ended Three Months Ended Three Months Ended
AVERAGE BALANCESMarch 31, 2023 December 31, 2022 March 31, 2022
Average assets$1,080,797  $1,078,914  $1,157,935 
Average earning assets 1,052,584   1,051,541   1,127,251 
Average total loans 952,192   949,007   894,539 
Average deposits 853,707   859,122   946,813 
Average common equity 112,991   111,846   103,482 
      
EQUITY ANALYSISMarch 31, 2023 December 31, 2022 March 31, 2022
Total common equity$112,789  $112,650  $104,828 
Common stock outstanding 8,835   8,798   8,682 
      
Book value per common share$12.77  $12.80  $12.07 
      
ASSET QUALITYMarch 31, 2023 December 31, 2022 March 31, 2022
Nonaccrual loans, net$1,592  $211  $536 
Nonaccrual loans, net/total loans 0.17%   0.02%   0.06% 
Other assets acquired through foreclosure, net$2,250  $2,250  $2,389 
      
Nonaccrual loans plus other assets acquired through foreclosure, net$3,842  $2,461  $2,925 
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.33%   0.23%   0.26% 
Net loan (recoveries)/charge-offs in the quarter$(96)  $(113)  $(427) 
Net (recoveries)/charge-offs in the quarter/total loans (0.01%)   (0.01%)   (0.05%) 
      
Allowance for credit losses$12,065  $10,765  $10,547 
Plus: Reserve for undisbursed loan commitments 400   94   90 
Total allowance for credit losses$12,465  $10,859  $10,637 
Allowance for credit losses/total loans held for investment 1.30%   1.15%   1.22% 
Allowance for credit losses/nonaccrual loans, net 757.85%   5101.90%   1966.82% 
      
Community West Bank *     
Tier 1 leverage ratio 10.41%   10.34%   8.88% 
Tier 1 capital ratio 11.76%   11.44%   11.33% 
Total capital ratio 12.89%   12.56%   12.50% 
      
INTEREST SPREAD ANALYSISMarch 31, 2023 December 31, 2022 March 31, 2022
Yield on total loans 5.32%   5.21%   5.08% 
Yield on investments 4.49%   2.91%   2.97% 
Yield on interest earning deposits 4.41%   3.39%   0.21% 
Yield on earning assets 5.23%   5.01%   4.14% 
      
Cost of interest-bearing deposits 1.44%   0.59%   0.32% 
Cost of total deposits 1.08%   0.42%   0.24% 
Cost of borrowings 1.17%   0.96%   0.87% 
Cost of interest-bearing liabilities 1.40%   0.64%   0.38% 
Cost of funds 1.09%   0.47%   0.30% 
      
* Capital ratios are preliminary until the Call Report is filed.     
      

Contact:

Richard Pimentel, EVP & CFO
805.692.4410
www.communitywestbank.com