Community West Bancshares Earnings Increase 32.4% to $1.4 Million in First Quarter of 2014

        Print
| Source: Community West Bancshares

GOLETA, Calif., April 24, 2014 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (Nasdaq:CWBC), parent company of Community West Bank (Bank), today reported net income increased 32.4% to $1.4 million in the first quarter of 2014 (1Q14) compared to $1.1 million in the first quarter a year ago (1Q13). Community West's net income in the fourth quarter of 2013 (4Q13) was $3.1 million, which included a $2.8 million tax benefit as a result of the reversal of its deferred tax asset valuation allowance.

"Our first quarter profits were fueled by ongoing improvement in credit quality and solid loan growth, as we continue to focus on expanding our banking franchise in the coastal communities of central California," stated Martin E. Plourd, President and Chief Executive Officer. "The loan portfolio increased 7% compared to a year ago. We continue to strengthen our capital and improve credit quality metrics, while maintaining a strong net interest margin. We will continue to increase and refine our marketing outreach in the communities we serve while focusing on increasing shareholder value."

1Q14 Financial Highlights

  • Net income increased 32.4% to $1.4 million from a year ago.
  • Earnings increased 36.4% to $0.15 per diluted share from $0.11 per diluted share a year ago.
  • Net interest margin improved 25 basis points to 4.65% in 1Q14, compared to 4.40% in 4Q13. The net interest margin was 4.57% in 1Q13.
  • Net loans increased 6.9% to $473.1 million, compared to $442.4 million a year earlier.
  • Nonaccrual loans were $15.7 million at March 31, 2014, compared to $16.8 million at December 31, 2013 and $19.7 million at March 31, 2013.
  • The total allowance for loan losses equaled 2.71% of total loans held for investment at March 31, 2014, compared to 2.98% at December 31, 2013 and 3.54% a year ago.
  • Community West Bank's capital ratios continue to be strong - Total risk-based capital ratio was 16.52% and Tier 1 leverage ratio was 12.36% at March 31, 2014.

Including $273,000 of preferred stock dividends, the net income available to common stockholders was $1.2 million, or $0.15 per diluted share, in 1Q14 compared to $2.9 million, or $0.34 per diluted share, in 4Q13 and $827,000, or $0.11 per diluted share, in 1Q13. Book value per common share was $6.70 at March 31, 2014, compared to $6.60 at December 31, 2013, and $6.41 at March 31, 2013.

Credit Quality

"As credit quality metrics continue to improve, and our reserve level remains substantial, we reduced the allowance by $1.4 million during the first quarter of 2014," said Plourd. "In the preceding quarter, we added $899,000 to our reserves, and in 1Q13 we released $196,000 in reserves." Contributing to the 1Q14 allowance reduction were net loan recoveries of $519,000, compared to net loan charge-offs of $345,000 in 4Q13 and net loan charge-offs of $318,000 in 1Q13.

The allowance for loan losses totaled $11.4 million at March 31, 2014, equal to 2.71% of total loans held for investment, compared to 2.98% at December 31, 2013, and 3.54% a year ago. Nonaccrual loans were $15.7 million, or 3.25% of total loans at March 31, 2014, compared to $16.8 million, or 3.55% of total loans, three months earlier, and $19.7 million, or 4.32% of total loans, a year ago.

Of the $15.7 million in nonaccrual loans, $6.3 million (39.8%) were manufactured housing loans, $3.5 million (22.2%) were commercial loans, $2.6 million (16.8%) were commercial real estate loans, $1.7 million (10.9%) were SBA loans, $654,000 (4.2%) were single family real estate loans and, $579,000 (3.7%) were home equity line of credit loans, $254,000 (1.6%) were SBA 504 1st loans and $140,000 (0.9%) were land loans.

REO and repossessed assets totaled $3.8 million at March 31, 2014, which was unchanged from three months earlier. This amount consists of $3.4 million in REO and $0.4 from repossessed manufactured housing loans. REO consists of 2 properties for which $2.2 million is guaranteed by the SBA/USDA. Nonaccrual loans plus REO and repossessed assets, net of SBA/USDA guarantees, totaled $17.3 million, or 3.2% of total assets, at March 31, 2014, compared to $18.4 million, or 3.4% of total assets, three months earlier and $21.6 million, or 4.1% of total assets, a year ago.

Income Statement

Community West's first quarter net interest income increased 4.7% to $6.1 million compared to $5.8 million in both 4Q13 and 1Q13. The first quarter net interest margin remained healthy, and well above its peer group average, at 4.65%, compared to 4.40% in 4Q13 and 4.57% in 1Q13. 

"Our net interest margin remains strong primarily because our loan mix provides yields that are above industry average. Consequently, we are able to maintain our net interest margin in the mid-4% range, despite continued pressure on these yields," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer.  

Non-interest income was $518,000 in 1Q14 compared to $632,000 in 4Q13 and $772,000 in 1Q13. Non-interest expenses were $5.5 million in 1Q14, compared to $5.2 million in 4Q13 and $5.7 million in 1Q13.

Balance Sheet

"The loan pipeline has been active in recent quarters, particularly within the commercial loans and commercial real estate loan sectors. As a result, net loans increased 2.4% at March 31, 2014, compared to three months earlier and increased 6.9% compared to a year earlier," said Plourd.  Net loans were $473.1million at March 31, 2014, compared to $462.0 million at December 31, 2013, and $442.4 million a year ago. Commercial real estate loans outstanding were up 15.0% from year ago levels to $151.8 million at March 31, 2014, and comprise 31.3% of the total loan portfolio. Manufactured housing loans were down 2.4% from year ago levels to $170.8 million and represent 35.2% of total loans.  SBA loans decreased 14.5% from a year ago to $68.5 million and represent 14.1% of the total loan portfolio and commercial loans increased 66.8% from year ago levels to $67.2 million and represent 13.9% of the total loan portfolio.

Total deposits increased 2.4% to $446.5 million at March 31, 2014, compared to $436.1 million at December 31, 2013, and increased 2.9% compared to $434.0 million a year ago. Non-interest-bearing deposit accounts increased slightly to $53.5 million at March 31, 2014, compared to $52.5 million at December 31, 2013, and a 9% increase from $48.9 million a year ago. Interest-bearing deposit accounts declined slightly to $256.3 million at March 31, 2014, compared to $258.5 million three months earlier, and were down 2.9% compared to $264.0 million a year ago. Core deposits, defined as non-interest-bearing checking, interest-bearing checking, money market accounts, savings accounts and retail certificates of deposit totaled $356.5 million at March 31, 2014, compared to $355.9 million at December 31, 2013, and $359.1 million a year ago.

Total assets increased moderately to $550.3 million at March 31, 2014, compared to $539.0 million at December 31, 2013, and $533.1 million a year ago. Stockholders' equity improved to $70.5 million at March 31, 2014, compared to $67.6 million at December 31, 2013, and $54.1 million a year ago. Book value per common share increased to $6.70 at March 31, 2014, compared to $6.60 at the end of December, and increased 4.5% compared to $6.41 a year earlier. 

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, which has five full-service California branch banking offices, in Goleta, Santa Barbara, Santa Maria, Ventura and Westlake Village. The principal business activities of the Company are Relationship banking, Mortgage lending and SBA lending.

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
  March 31, December 31, March 31,
  2014 2013 2013
       
Interest income      
Loans, including fees  $ 6,761  $ 6,556  $ 6,794
Investment securities and other  200  209  182
Total interest income  6,961  6,765  6,976
Interest expense      
Deposits  642  678  759
Other borrowings and convertible debt  237  280  407
Total interest expense  879  958  1,166
Net interest income  6,082  5,807  5,810
Provision for credit losses  (1,371)  899  (196)
Net interest income after provision for credit losses  7,453  4,908  6,006
Non-interest income      
Other loan fees  175  189  230
Document processing fees  78  93  110
Gains from loan sales, net  65  27  161
Service Charges  72  73  85
Loan servicing, net  32  29  75
Other  96  221  111
Total non-interest income  518  632  772
Non-interest expenses      
Salaries and employee benefits  3,227  2,843  3,499
Occupancy expense, net  439  449  455
Professional services  360  306  315
Loan servicing and collection  265  333  253
Stock Option Expense  211  16  15
Data processing  172  146  150
Advertising and marketing  121  138  93
FDIC assessment  80  238  265
Depreciation  75  74  74
Net loss on sales/write-downs of foreclosed real estate      
and repossessed assets  40  113  101
Other  535  560  469
Total non-interest expenses  5,525  5,216  5,689
Income before provision for income taxes  2,446  324  1,089
Income tax expense  1,004  (2,812)  --
Net Income  $ 1,442  $ 3,136  $ 1,089
Dividends and accretion on preferred stock  273  253  262
Net income available to common stockholders  $ 1,169  $ 2,883  $ 827
Earnings per share:      
Basic  $ 0.15  $ 0.37  $ 0.14
Diluted  $ 0.15  $ 0.34  $ 0.11
 
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
       
  March 31, December 31, March 31,
  2014 2013 2013
       
Cash and cash equivalents  $ 1,945  $ 1,472  $ 1,027
Time and interest-earning deposits in other financial institutions  17,204  18,105  38,199
Investment securities  29,602  28,160  23,902
Loans:      
Commercial  67,237  62,420  40,311
Commercial real estate  151,793  142,678  132,009
SBA  68,542  71,352  80,123
Manufactured housing  170,754  172,055  174,923
Single family real estate  10,646  10,150  9,096
HELOC  15,056  15,418  17,318
Other 451 140 2,576
Total loans  484,479  474,213  456,356
       
Loans, net      
Held for sale  65,931  64,399  61,753
Held for investment  418,548  409,814  394,603
Less: Allowance  (11,356)  (12,208)  (13,950)
Net held for investment  407,192  397,606  380,653
NET LOANS  473,123  462,005  442,406
       
Other assets  28,383  29,258  27,589
       
TOTAL ASSETS  $ 550,257  $ 539,000  $ 533,123
       
Deposits      
Non-interest-bearing demand  $ 53,470  $ 52,461  $ 48,920
Interest-bearing demand  256,329  258,445  264,044
Savings  16,161  16,158  16,621
CDs over 100K  107,217  95,979  90,708
CDs under 100K  13,348  13,092  13,726
Total Deposits  446,525  436,135  434,019
Other borrowings  30,000  31,442  41,735
Other liabilities  3,270  3,867  3,299
TOTAL LIABILITIES  479,795  471,444  479,053
       
Stockholders' equity  70,462  67,556  54,070
       
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      
   $ 550,257  $ 539,000  $ 533,123
       
Shares outstanding  8,184  7,867  6,033
       
Book value per common share  $ 6.70  $ 6.60  $ 6.41
       
ADDITIONAL FINANCIAL INFORMATION      
(Dollars in thousands except per share amounts)(Unaudited)      
  Quarter Ended Quarter Ended Quarter Ended
PERFORMANCE MEASURES AND RATIOS Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013
Return on average common equity 10.97% 25.27% 11.46%
Return on average assets 1.07% 2.33% 0.83%
Efficiency ratio 83.71% 81.01% 86.40%
Net interest margin 4.65% 4.40% 4.57%
       
  Quarter Ended Quarter Ended Quarter Ended
AVERAGE BALANCES Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013
Average assets  $ 545,777  $ 534,434  $ 524,572
Average earning assets  530,811  523,706  515,927
Average total loans  476,341  458,270  460,741
Average deposits  442,119  431,862  426,368
Average equity (including preferred stock)  68,891  64,800  53,363
Average common equity (excluding preferred stock)  53,291  49,234  37,998
       
EQUITY ANALYSIS Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013
Total equity  $ 70,462  $ 67,556  $ 54,070
Less: senior preferred stock  15,600  15,600  15,408
Total common equity  $ 54,862  $ 51,956  $ 38,662
       
Common stock outstanding  8,184  7,867  6,033
Book value per common share  $ 6.70  $ 6.60  $ 6.41
       
ASSET QUALITY Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013
Nonaccrual loans  $ 15,722  $ 16,837  $ 19,707
Nonaccrual loans/total loans 3.25% 3.55% 4.32%
REO and repossessed assets  $ 3,781  $ 3,811  $ 4,389
Less: SBA/USDA-guaranteed amounts 2,165 2,250 2,481
Net REO and repossessed assets  $ 1,616  $ 1,561  $ 1,908
       
Nonaccrual loans plus net REO  $ 17,338  $ 18,398 21,615
Nonaccrual loans plus net REO/total assets 3.15% 3.41% 4.05%
Net loan (recoveries)/charge-offs in the quarter  $ (519)  $ 345  $ 318
Net (recoveries)/charge-offs in the quarter/total loans -0.11% 0.07% 0.07%
       
Allowance for loan losses  $ 11,356  $ 12,208  $ 13,950
Plus: Reserve for undisbursed loan commitments  61  68  90
Total allowance for credit losses  $ 11,417  $ 12,276  $ 14,040
Total allowance for loan losses/total loans held for investment 2.71% 2.98% 3.54%
Total allowance for loan losses/nonaccrual loans 72.23% 72.51% 70.79%
       
Community West Bancshares      
Tier 1 leverage ratio 12.94% 12.68% 10.29%
Tier 1 risk-based capital ratio 15.96% 15.65% 13.12%
Total risk-based capital ratio 17.23% 17.26% 16.27%
       
Community West Bank      
Tier 1 leverage ratio 12.36% 12.68% 11.34%
Tier 1 risk-based capital ratio 15.25% 15.57% 14.35%
Total risk-based capital ratio 16.52% 16.84% 15.63%
       
INTEREST SPREAD ANALYSIS Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013
Yield on total loans 5.76% 5.68% 5.98%
Yield on investments 2.38% 2.37% 2.45%
Yield on interest earning deposits 0.22% 0.28% 0.19%
Yield on earning assets 5.32% 5.12% 5.48%
       
Cost of interest-bearing deposits 0.67% 0.71% 0.82%
Cost of total deposits 0.59% 0.62% 0.72%
Cost of FHLB advances 2.80% 2.87% 2.92%
Cost of interest-bearing liabilities 0.85% 0.92% 1.14%
Charles G. Baltuskonis, EVP & CFO
805.692.5821
www.communitywestbank.com