GOLETA, Calif., Oct. 23, 2014 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (Nasdaq:CWBC), parent company of Community West Bank (Bank), today reported net income of $1.7 million in the third quarter of 2014 (3Q14) compared to $1.7 million in the second quarter of 2014 (2Q14) and $2.6 million in the third quarter a year ago (3Q13). Third quarter pretax income increased 10.8% to $2.9 million, compared to $2.6 million in the third quarter a year ago.
In the first nine months of 2014, Community West earned $4.9 million compared to $5.9 million in the first nine months a year ago. Pretax income increased 41.4% to $8.3 million for the first nine months of 2014 compared to $5.9 million for the first nine months a year ago. Due to the Company's tax position in 2013, there was no income tax expense recorded for the nine months ended September 30, 2013.
"The core earnings capacity of our franchise is evident in our financial results this quarter, with strong profitability, improving asset quality, solid net interest margin and double-digit loan and deposit growth," stated Martin E. Plourd, President and Chief Executive Officer. "Our focus over the last several quarters has been to grow our base, and the 12% year-over-year growth in both net loans and deposits illustrates that this focus on developing new client relationships is working and, together with our continued progress in reducing nonaccrual loans, demonstrate the dedication and teamwork of our employees. We will continue to work on expanding our banking franchise and refining our marketing outreach to become the premier community bank in the markets we serve."
3Q14 Financial Highlights
- Net income was $1.7 million, compared to $2.6 million in 3Q13.
- Pretax income was $2.9 million, compared to $2.6 million in 3Q13.
- Net interest margin was 4.31% in 3Q14, compared to 4.55% in 2Q14 and 4.54% in 3Q13.
- Annualized return on average assets was 1.19%.
- Annualized return on average common equity was 11.86%.
- Non-interest expenses decreased 13.5% to $4.9 million, compared to $5.6 million in 3Q13.
- Total deposits increased 12.4% to $484.8 million at September 30, 2014, compared to $431.1 million a year ago.
- Net loans increased 11.5% to $490.0 million at September 30, 2014, compared to $439.4 million a year earlier.
- Nonaccrual loans declined 30.6% to $10.9 million at September 30, 2014, compared to $15.8 million three months earlier and decreased 28.4% compared to $15.3 million a year ago.
- Book value per common share increased 13.3% to $7.07 at September 30, 2014, compared to $6.24 a year ago.
- Community West Bank's capital ratios continue to be strong with its total risk-based capital ratio at 15.45% and Tier 1 leverage ratio at 11.29% at September 30, 2014.
Including $176,000 of preferred stock dividends, the net income available to common stockholders was $1.5 million, or $0.18 per diluted share, in 3Q14 compared to $1.5 million, or $0.18 per diluted share, in 2Q14 and $2.4 million, or $0.29 per diluted share, in 3Q13.
Credit Quality
"All of our asset quality metrics improved during the quarter, with both nonaccrual loan balances and real estate owned declining compared to the prior quarter end," said Plourd. "As a result of this strength, along with the loan loss reserves already in place, we recorded a negative provision for loan losses of $1.2 million in 3Q14, compared to a negative provision of $1.0 million in 2Q14, and a negative provision of $1.6 million in the third quarter a year ago." Contributing to the 3Q14 allowance reduction were net loan charge-offs of only $82,000, compared to net loan recoveries of $151,000 in 2Q14 and net loan recoveries of $761,000 in 3Q13. The decline in nonaccrual loans for 3Q14 was primarily due to manufactured housing loans being upgraded for sustained payment performance.
Community West's allowance for loan losses totaled $9.2 million at September 30, 2014, equal to 2.14% of total loans held for investment, compared to 2.48% at June 30, 2014, and 3.01% a year ago. Nonaccrual loans declined 30.6% to $10.9 million, or 2.19% of total loans at September 30, 2014, compared to $15.8 million, or 3.19% of total loans, three months earlier, and decreased 28.4% compared to $15.3 million, or 3.39% of total loans, a year ago.
Of the $10.9 million in nonaccrual loans, $3.3 million (30.3%) were commercial loans, $2.4 million (22.0%) were commercial real estate loans, $1.6 million (14.8%) were SBA loans, $1.5 million (14.0%) were manufactured housing loans, $1.1 million (9.6%) were SBA 504 1st loans, $629,000 (5.8%) were single family real estate loans and $381,000 (3.5%) were home equity line of credit loans.
REO and repossessed assets decreased 22.1% to $475,000 at September 30, 2014, compared to $610,000 three months earlier and decreased 88.1% compared to $4.0 million a year earlier. Nonaccrual loans plus REO and repossessed assets, net of SBA/USDA guarantees, totaled $11.4 million, or 2.0% of total assets, at September 30, 2014, compared to $16.4 million, or 2.9% of total assets, three months earlier and $17.0 million, or 3.2% of total assets, a year ago.
Income Statement
Community West's third quarter net interest income was $6.1 million compared to $6.0 million in the third quarter a year ago and $6.3 million three months earlier. In the first nine months of 2014, Community West's net interest income increased 3.9% to $18.4 million compared to $17.7 million in the first nine months of 2013.
"Continued pressure on loan yields led to some net interest margin contraction during the quarter, although, our margin still remains well above peer levels," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. "Like most financial institutions, we expect continued pressure on loan yields in the near future if the current low-interest rate environment persists." Community West's third quarter net interest margin was 4.31%, compared to 4.55% in 2Q14 and 4.54% in 3Q13. Year-to-date, the net interest margin declined five basis points to 4.50% compared to 4.55% in the same period a year ago. The average net interest margin was 2.81% for the 324 banks that make up the SNL U.S. Bank Index as of June 30, 2014. Non-interest income was $552,000 in 3Q14 compared to $656,000 in 2Q14 and $677,000 in 3Q13. In the first nine months of the year, non-interest income was $1.7 million compared to $2.3 million in the first nine months of 2013.
Third quarter non-interest expenses were $4.9 million, a 3.0% decrease compared to $5.0 million in 2Q14 and a 13.5% decrease compared to $5.6 million in 3Q13. In the first nine months of the year, non-interest expenses decreased 9.2% to $15.4 million compared to $17.0 million in the first nine months of 2013. The decrease in non-interest expenses for the quarter and year-to-date period is in part due to the improved credit metrics, which resulted in the decline in loan collection expenses and costs associated with real estate owned.
Balance Sheet
Total assets increased 2.6% to $572.1 million at September 30, 2014, compared to $557.7 million at June 30, 2014 and increased 6.8% compared to $535.5 million a year ago.
"As a result of growth in both the commercial loans and commercial real estate loan sectors, net loans increased 11.5% year over year. The loan pipeline has been fairly active this year, and we expect the trend to continue," said Baltuskonis. Net loans were $490.0 million at September 30, 2014, compared to $484.1 million at June 30, 2014, and $439.4 million a year ago. Commercial real estate loans outstanding were up 24.4% from year ago levels to $164.3 million at September 30, 2014, and comprise 32.9% of the total loan portfolio. Manufactured housing loans were down 1.3% from year ago levels to $169.9 million and represent 34.0% of total loans. Commercial loans increased 59.6% from year ago levels to $72.8 million and represent 14.6% of the total loan portfolio and SBA loans decreased 16.2% from a year ago to $62.3 million and represent 12.5% of the total loan portfolio.
Total deposits increased 2.6% to $484.8 million at September 30, 2014, compared to $472.3 million at June 30, 2014, and increased 12.4% compared to $431.1 million a year ago. Non-interest-bearing deposit accounts increased 11.2% to $63.2 million at September 30, 2014, compared to $56.8 million at June 30, 2014, and increased 13.9% from $55.5 million a year ago. Interest-bearing deposit accounts increased modestly to $277.7 million at September 30, 2014, compared to $275.4 million three months earlier, and were up 9.4% compared to $254.0 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 $388.7 million at September 30, 2014 and comprise 80.2% of total deposits, compared to $380.0 million, or 80.4% of total deposits, at June 30, 2014, and $355.2 million, or 82.4% of total deposits, a year ago.
Stockholders' equity was $65.8 million at September 30, 2014, compared to $64.3 million at June 30, 2014, and $64.6 million a year ago. Book value per common share was $7.07 at September 30, 2014, a 2.5% increase compared to $6.90 at June 30, 2014, and a 13.3% increase compared to $6.24 a year ago.
Company Announces Partial Redemption of Preferred Stock
In furtherance of its previously announced Preferred Stock Repayment Strategy, the Company redeemed another $782,000 of its 9% Cumulative Perpetual Preferred Stock, Series A, on October 6, 2014, leaving a remaining balance of $7,014,000. After this latest redemption, 2014 redemptions now total $8,586,000 out of the original Preferred Stock balance of $15,600,000. The Company's Board of Directors will continue to consider regular redemptions, and that any such redemptions are subject to regulatory approvals and will be based on the Company's financial condition and results of operations at the time. It is anticipated that any future redemptions would be payable from future earnings.
Company Declares Cash Dividend of $0.02 Per Common Share
The Company's Board of Directors has declared a quarterly cash dividend of $0.02 per common share. The dividend will be payable November 28, 2014, to common shareholders of record on November 10, 2014.
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 | Nine Months Ended | ||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |
| 2014 | 2014 | 2013 | 2014 | 2013 | |
| Interest income | |||||
| Loans, including fees | $ 6,695 | $ 6,911 | $ 6,871 | $ 20,367 | $ 20,515 |
| Investment securities and other | 208 | 211 | 210 | 619 | 586 |
| Total interest income | 6,903 | 7,122 | 7,081 | 20,986 | 21,101 |
| Interest expense | |||||
| Deposits | 709 | 688 | 719 | 2,039 | 2,238 |
| Other borrowings and convertible debt | 126 | 161 | 328 | 524 | 1,136 |
| Total interest expense | 835 | 849 | 1,047 | 2,563 | 3,374 |
| Net interest income | 6,068 | 6,273 | 6,034 | 18,423 | 17,727 |
| Provision for credit losses | (1,178) | (1,011) | (1,563) | (3,560) | (2,843) |
| Net interest income after provision for credit losses | 7,246 | 7,284 | 7,597 | 21,983 | 20,570 |
| Non-interest income | |||||
| Other loan fees | 279 | 266 | 229 | 720 | 844 |
| Document processing fees | 103 | 116 | 114 | 297 | 369 |
| Service charges | 72 | 71 | 75 | 215 | 245 |
| Gains from loan sales, net | 57 | 28 | 62 | 150 | 334 |
| Other | 41 | 175 | 197 | 344 | 493 |
| Total non-interest income | 552 | 656 | 677 | 1,726 | 2,285 |
| Non-interest expenses | |||||
| Salaries and employee benefits | 2,888 | 3,193 | 3,102 | 9,308 | 9,956 |
| Occupancy, net | 479 | 459 | 452 | 1,377 | 1,365 |
| Professional services | 436 | 371 | 308 | 1,167 | 913 |
| Advertising and marketing | 129 | 179 | 94 | 429 | 374 |
| Loan servicing and collection | 187 | 134 | 511 | 586 | 1,111 |
| Data processing | 144 | 109 | 128 | 425 | 403 |
| FDIC assessment | 83 | 90 | 283 | 253 | 809 |
| Depreciation | 82 | 81 | 78 | 238 | 226 |
| Stock options | 29 | 30 | 12 | 270 | 43 |
| Net (gain) loss on sales/write-downs of foreclosed real estate and repossessed assets | (18) | (190) | 184 | (168) | 360 |
| Other | 440 | 575 | 487 | 1,550 | 1,445 |
| Total non-interest expenses | 4,879 | 5,031 | 5,639 | 15,435 | 17,005 |
| Income before provision for income taxes | 2,919 | 2,909 | 2,635 | 8,274 | 5,850 |
| Income tax expense | 1,207 | 1,203 | -- | 3,414 | -- |
| Net Income | $ 1,712 | $ 1,706 | $ 2,635 | $ 4,860 | $ 5,850 |
| Dividends and accretion on preferred stock | $ 176 | $ 329 | $ 262 | $ 778 | $ 786 |
| Discount on partial redemption of preferred stock | -- | (144) | -- | (144) | -- |
| Net income available to common stockholders | $ 1,536 | $ 1,521 | $ 2,373 | $ 4,226 | $ 5,064 |
| Earnings per share: | |||||
| Basic | $ 0.19 | $ 0.19 | $ 0.30 | $ 0.52 | $ 0.75 |
| Diluted | $ 0.18 | $ 0.18 | $ 0.29 | $ 0.51 | $ 0.60 |
| COMMUNITY WEST BANCSHARES | ||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
| (unaudited) | ||||
| (in 000's, except per share data) | ||||
| September 30, | June 30, | September 30, | December 31, | |
| 2014 | 2014 | 2013 | 2013 | |
| Cash and cash equivalents | $ 1,486 | $ 1,807 | $ 1,241 | $ 1,472 |
| Time and interest-earning deposits in other financial institutions | 27,955 | 15,695 | 44,611 | 18,105 |
| Investment securities | 31,104 | 30,030 | 25,585 | 28,160 |
| Loans: | ||||
| Commercial | 72,804 | 69,149 | 45,623 | 62,420 |
| Commercial real estate | 164,277 | 158,594 | 132,034 | 142,678 |
| SBA | 62,267 | 67,119 | 74,327 | 71,352 |
| Manufactured housing | 169,910 | 170,712 | 172,126 | 172,055 |
| Single family real estate | 14,065 | 13,696 | 10,011 | 10,150 |
| HELOC | 14,820 | 15,179 | 15,616 | 15,418 |
| Other | 1,134 | 109 | 1,362 | 140 |
| Total loans | 499,277 | 494,558 | 451,099 | 474,213 |
| Loans, net | ||||
| Held for sale | 67,376 | 70,530 | 64,187 | 64,399 |
| Held for investment | 431,901 | 424,028 | 386,912 | 409,814 |
| Less: Allowance | (9,236) | (10,496) | (11,654) | (12,208) |
| Net held for investment | 422,665 | 413,532 | 375,258 | 397,606 |
| NET LOANS | 490,041 | 484,062 | 439,445 | 462,005 |
| Other assets | 21,557 | 26,147 | 24,599 | 29,258 |
| TOTAL ASSETS | $ 572,143 | $ 557,741 | $ 535,481 | $ 539,000 |
| Deposits | ||||
| Non-interest-bearing demand | $ 63,185 | $ 56,796 | $ 55,462 | $ 52,461 |
| Interest-bearing demand | 277,743 | 275,418 | 253,978 | 258,445 |
| Savings | 16,218 | 15,917 | 16,176 | 16,158 |
| CDs over 100K | 113,694 | 110,170 | 92,351 | 95,979 |
| CDs under 100K | 13,910 | 13,993 | 13,124 | 13,092 |
| Total Deposits | 484,750 | 472,294 | 431,091 | 436,135 |
| Other borrowings | 18,000 | 18,000 | 35,442 | 31,442 |
| Other liabilities | 3,639 | 3,167 | 4,300 | 3,867 |
| TOTAL LIABILITIES | 506,389 | 493,461 | 470,833 | 471,444 |
| Stockholders' equity | 65,754 | 64,280 | 64,648 | 67,556 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 572,143 | $ 557,741 | $ 535,481 | $ 539,000 |
| Shares outstanding | 8,203 | 8,190 | 7,866 | 7,867 |
| Book value per common share | $ 7.07 | $ 6.90 | $ 6.24 | $ 6.60 |
| ADDITIONAL FINANCIAL INFORMATION | |||||
| (Dollars in thousands except per share amounts)(Unaudited) | |||||
| Quarter Ended | Quarter Ended | Quarter Ended | Nine Months Ended | ||
| PERFORMANCE MEASURES AND RATIOS | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
| Return on average common equity | 11.86% | 12.30% | 21.91% | 11.73% | 18.62% |
| Return on average assets | 1.19% | 1.21% | 1.95% | 1.16% | 1.47% |
| Efficiency ratio | 73.70% | 72.61% | 83.99% | 76.60% | 84.97% |
| Net interest margin | 4.31% | 4.55% | 4.54% | 4.50% | 4.55% |
| Quarter Ended | Quarter Ended | Quarter Ended | Nine Months Ended | ||
| AVERAGE BALANCES | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
| Average assets | $ 571,895 | $ 567,147 | $ 535,552 | $ 561,747 | $ 530,284 |
| Average earning assets | 559,156 | 552,653 | 526,716 | 547,644 | 521,252 |
| Average total loans | 495,213 | 489,338 | 455,646 | 487,033 | 457,705 |
| Average deposits | 484,359 | 469,963 | 432,725 | 465,635 | 429,977 |
| Average equity (including preferred stock) | 65,059 | 70,469 | 63,214 | 68,125 | 57,439 |
| Average common equity (excluding preferred stock) | 57,263 | 55,641 | 47,716 | 55,413 | 42,007 |
| EQUITY ANALYSIS | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2013 | ||
| Total equity | $ 65,754 | $ 64,280 | $ 64,648 | ||
| Less: senior preferred stock | 7,796 | 7,796 | 15,542 | ||
| Total common equity | $ 57,958 | $ 56,484 | $ 49,106 | ||
| Common stock outstanding | 8,203 | 8,190 | 7,866 | ||
| Book value per common share | $ 7.07 | $ 6.90 | $ 6.24 | ||
| ASSET QUALITY | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2013 | ||
| Nonaccrual loans | $ 10,939 | $ 15,772 | $ 15,277 | ||
| Nonaccrual loans/total loans | 2.19% | 3.19% | 3.39% | ||
| REO and repossessed assets | $ 475 | $ 610 | $ 3,975 | ||
| Less: SBA/USDA-guaranteed amounts | 0 | 0 | 2,282 | ||
| Net REO and repossessed assets | $ 475 | $ 610 | $ 1,693 | ||
| Nonaccrual loans plus net REO | $ 11,414 | $ 16,382 | 16,970 | ||
| Nonaccrual loans plus net REO/total assets | 1.99% | 2.94% | 3.17% | ||
| Net loan (recoveries)/charge-offs in the quarter | $ 82 | $ (151) | $ (761) | ||
| Net (recoveries)/charge-offs in the quarter/total loans | 0.02% | -0.03% | -0.17% | ||
| Allowance for loan losses | $ 9,236 | $ 10,496 | $ 11,654 | ||
| Plus: Reserve for undisbursed loan commitments | 61 | 57 | 73 | ||
| Total allowance for credit losses | $ 9,297 | $ 10,553 | $ 11,727 | ||
| Total allowance for loan losses/total loans held for investment | 2.14% | 2.48% | 3.01% | ||
| Total allowance for loan losses/nonaccrual loans | 84.43% | 66.55% | 76.28% | ||
| Community West Bancshares * | |||||
| Tier 1 leverage ratio | 11.51% | 11.35% | 12.10% | ||
| Tier 1 risk-based capital ratio | 14.47% | 14.30% | 16.05% | ||
| Total risk-based capital ratio | 15.73% | 15.57% | 17.68% | ||
| Community West Bank * | |||||
| Tier 1 leverage ratio | 11.29% | 11.13% | 12.06% | ||
| Tier 1 risk-based capital ratio | 14.19% | 14.03% | 15.89% | ||
| Total risk-based capital ratio | 15.45% | 15.30% | 17.16% | ||
| INTEREST SPREAD ANALYSIS | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2013 | ||
| Yield on total loans | 5.36% | 5.66% | 5.98% | ||
| Yield on investments | 2.18% | 2.28% | 2.56% | ||
| Yield on interest earning deposits | 0.28% | 0.31% | 0.23% | ||
| Yield on earning assets | 4.90% | 5.17% | 5.33% | ||
| Cost of interest-bearing deposits | 0.67% | 0.66% | 0.76% | ||
| Cost of total deposits | 0.58% | 0.59% | 0.66% | ||
| Cost of FHLB advances | 2.78% | 2.79% | 2.93% | ||
| Cost of interest-bearing liabilities | 0.75% | 0.78% | 1.01% | ||
| * Capital ratios are preliminary until the Call Report is filed. | |||||