Community West Bancshares Earns $1.6 Million in Third Quarter; Highlighted by Strong Loan Growth and a Decrease in Net Nonaccrual Loans to Lowest Level Since 2007; Declared Quarterly Cash Dividend of $0.03 Per Common Share


GOLETA, Calif., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported net income of $1.6 million in the third quarter of 2015 (3Q15) compared to net income of $1.7 million in the third quarter a year ago (3Q14). In the first nine months of the year, Community West reported net income of $1.0 million compared to net income of $4.9 million in the first nine months of 2014. Excluding the $7.1 million net loan litigation settlement, Community West's net income for the nine-month period would have been $5.2 million. (See page 8 – "Non-Gaap Financial Information")

"Our third quarter results were generated by solid loan growth and a healthy net interest margin," said Martin E. Plourd, President and Chief Executive Officer. "We are making meaningful progress in building our franchise by strengthening our balance sheet and positioning the Bank for all future growth opportunities.

"Another highlight of the quarter was the announcement of our final redemption of preferred stock. We believe this redemption is further confirmation of the Company's continued operating improvement, financial strength and appropriate capital management," added Plourd.

3Q15 Financial Highlights

  • Nonaccrual loans, net, decreased 51.7% to $5.3 million at September 30, 2015, compared to $10.9 million a year ago, representing the lowest level since 3Q07.
  • Net income available to common stockholders was $1.5 million.
  • Annualized return on average assets was 1.05%.
  • Annualized return on average common equity was 10.54%.
  • Net interest margin was 4.55% for 3Q15 compared to 4.31% for 3Q14.
  • Net loans increased 7.3% to $526.0 million at September 30, 2015, compared to $490.0 million a year earlier.
  • Total deposits increased 8.7% to $526.8 million at September 30, 2015, compared to $484.8 million a year ago.
  • Other assets acquired through foreclosure totaled $206,000 at September 30, 2015, a decrease of 56.6% compared to $475,000 a year earlier.
  • Book value per common share was $7.36 at September 30, 2015, compared to $7.07 a year ago.
  • Community West Bank's capital ratios continue to be strong with its total risk-based capital ratio at 14.26% and Tier 1 leverage ratio at 10.73% at September 30, 2015.

Including $125,000 of preferred stock dividends the net income available to common stockholders was $1.5 million, or $0.17 per diluted share, in 3Q15 compared to net loss attributable to common stockholders of $2.4 million, or $0.29 loss per diluted share, in 2Q15 and net income available to common stockholders of $1.5 million, or $0.18 per diluted share, in 3Q14.

Income Statement

"Higher than industry average loan yields continue to contribute to a strong net interest margin," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer.

Community West's third quarter net interest margin improved 24 basis points to 4.55% compared to 4.31% in 3Q14. In the first nine months of the year, net interest margin improved 26 basis points to 4.76% compared to 4.50% in the first nine months of 2014.

Third quarter net interest income was $6.8 million, compared to $7.1 million in the preceding quarter and increased 11.8% compared to $6.1 million in 3Q14. Year-to-date, net interest income increased 9.9% to $20.2 million compared to $18.4 million in the same period a year ago.

Non-interest income was $554,000 in 3Q15 compared to $737,000 in 2Q15 and $552,000 in 3Q14.  The decrease compared to the preceding quarter was largely due to lower other loan fees. In the first nine months of 2015, non-interest income increased modestly to $1.8 million compared to $1.7 million in the first nine months of 2014.

Third quarter non-interest expenses totaled $5.0 million, compared to $4.9 million in 3Q14. Primarily due to the $7.1 million loan litigation settlement, Community West's 2Q15 non-interest expenses totaled $12.4 million. Year-to-date non-interest expenses were $22.2 million compared to $15.4 million a year ago.  (See page 8 – "Non-Gaap Financial Information")

Balance Sheet

Net loans increased 2.8% to $526.0 million at September 30, 2015, compared to $511.9 million at June 30, 2015, and increased 7.3% compared to $490.0 million a year ago. Commercial real estate loans outstanding were up 7.9% from year ago levels to $177.3 million at September 30, 2015, and comprise 33.3% of the total loan portfolio. Manufactured housing loans were up modestly from year ago levels to $173.4 million and represent 32.5% of total loans.  Commercial loans increased 37.2% from year ago levels to $99.9 million and represent 18.7% of the total loan portfolio and SBA loans decreased 19.1% from a year ago to $50.4 million and represent 9.5% of the total loan portfolio.

Deposits totaled $526.8 million at September 30, 2015, up 5.2% compared to $500.6 million at June 30, 2015 and grew 8.7% compared to $484.8 million a year earlier. Non-interest-bearing deposit accounts increased 15.6% to $73.1 million at September 30, 2015, compared to $63.2 million a year earlier. Core deposits, defined as non-interest-bearing checking, interest-bearing checking, money market accounts, savings accounts and retail certificates of deposit totaled $405.2 million at September 30, 2015 and comprise 76.9% of total deposits, compared to $388.7 million, or 80.2% of total deposits, a year ago. 

Community West's total assets were $601.0 million at September 30, 2015, a 2.3% increase compared to three months earlier and a 5.1% increase compared to a year ago. Stockholders' equity was $65.9 million at September 30, 2015, compared to $64.5 million at June 30, 2015, and $65.8 million a year ago. Book value per common share was $7.36 at September 30, 2015 compared to $7.19 at June 30, 2015, and $7.07 a year ago. 

Credit Quality

"As a result of strong asset quality, including the solid loan loss reserves already in place, we recorded a negative provision for loan losses in the last seven quarters and net loan loss recoveries in six of the past seven quarters," said Plourd. The negative loan loss provision was $445,000 in 3Q15, compared to $584,000 in 2Q15, and $1.2 million in 3Q14. Net loan recoveries were $214,000 in 3Q15 compared to $552,000 in 2Q15 and net loan charge-offs of $82,000 in 3Q14. 

The total allowance for loan losses was $7.0 million at September 30, 2015, or 1.50% of total loans held for investment, compared to 1.60% at June 30, 2015, and 2.14% a year ago. Net nonaccrual loans decreased 33.5% to $5.3 million, or 0.99% of total loans at September 30, 2015, compared to $7.9 million, or 1.53% of total loans, three months earlier, and decreased 51.7% compared to $10.9 million, or 2.19% of total loans, a year ago. 

Of the $5.3 million in net nonaccrual loans, $2.6 million were commercial real estate loans, $1.6 million were manufactured housing loans, $429,000 were SBA loans, $318,000 were home equity line of credit loans, $289,000 were single family real estate loans and $44,000 were commercial loans.

Other assets acquired through foreclosure totaled $206,000 at September 30, 2015, a decrease of 56.6% compared to $475,000 a year earlier. Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $5.5 million, or 0.91% of total assets, at September 30, 2015, compared to $8.2 million, or 1.40% of total assets, three months earlier and $11.4 million, or 1.99% of total assets, a year ago. 

Final Redemption of Preferred Stock

On October 1, 2015, the Company announced that the Federal Reserve Bank approved its request for permission to redeem the remaining $5,574,000 of its 9%, Cumulative Perpetual Preferred Stock, Series A. The Company is finalizing a $10 million line of credit at a rate of one-month Libor plus 3.75% to assist in paying for this final redemption and use for other future corporate purposes. The preferred stock redemption is expected to occur on November 2, 2015.

The Company originally issued 15,600 shares of Fixed Rate Cumulative Perpetual Stock, Series A, to Treasury under the Troubled Asset Relief Program (TARP) Capital Purchase Program. In December 2012, Treasury auctioned the preferred shares to private investors. The Bank will continue to be considered well-capitalized under all regulatory guidelines.  

Declares Cash Dividend of $0.03 Per Common Share

The Company's Board of Directors declared a quarterly cash dividend of $0.03 per common share.  The dividend will be payable November 30, 2015, to common shareholders of record on November 12, 2015.

Stock Repurchase Program

On August 31, 2015, the Company announced that the Board of Directors authorized a common stock repurchase program of up to $3 million. As of September 30, 2015, 3,000 shares had been repurchased, leaving outstanding common stock shares of 8,201,158.

Use of Non-GAAP Financial Information

This press release contains both financial measures based on accounting principles generally accepted in the United States ("GAAP") and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

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, Manufactured Housing 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,
  2015 2015 2014 2015 2014
           
Interest income          
Loans, including fees  $ 7,131  $ 7,410  $ 6,695  $ 21,253  $ 20,367
Investment securities and other  244  285  208  834  619
Total interest income  7,375  7,695  6,903  22,087  20,986
Interest expense          
Deposits  587  569  709  1,761  2,039
Other borrowings  6  15  126  82  524
Total interest expense  593  584  835  1,843  2,563
Net interest income  6,782  7,111  6,068  20,244  18,423
Provision for loan losses  (445)  (584)  (1,178)  (1,997)  (3,560)
Net interest income after provision for loan losses  7,227  7,695  7,246  22,241  21,983
Non-interest income          
Other loan fees  244  370  279  789  720
Document processing fees  141  131  103  364  297
Service charges  92  87  72  252  215
Other  77  149  98  366  494
Total non-interest income  554  737  552  1,771  1,726
Non-interest expenses          
Salaries and employee benefits  3,412  3,202  2,888  9,729  9,308
Occupancy, net  507  487  479  1,439  1,377
Professional services  212  276  436  736  1,167
Data processing  135  134  144  388  425
Advertising and marketing  116  152  129  348  429
Depreciation  103  96  82  290  238
Stock based compensation  73  218  29  333  270
FDIC assessment  99  82  83  252  253
Loan servicing and collection  10  182  187  281  586
Loan litigation settlement, net  (50)  7,153  --  7,103  --
Other  421  399  422  1,291  1,382
Total non-interest expenses  5,038  12,381  4,879  22,190  15,435
Income (loss) before provision for income taxes  2,743  (3,949)  2,919  1,822  8,274
Provision (benefit) for income taxes  1,152  (1,607)  1,207  803  3,414
Net Income (loss)  1,591  (2,342)  1,712  1,019  4,860
Dividends and accretion on preferred stock  125  136  176  401  778
Discount on partial redemption of preferred stock  --  (110)  --  (129)  (144)
Net income (loss) available (attributable) to common stockholders  $ 1,466  $ (2,368)  $ 1,536  $ 747  $ 4,226
Earnings per share:          
Basic  $ 0.18  $ (0.29)  $ 0.19  $ 0.09  $ 0.52
Diluted  $ 0.17  $ (0.29)  $ 0.18  $ 0.09  $ 0.51
           
           
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
         
  September 30, June 30, September 30, December 31,
  2015 2015 2014 2014
         
Cash and cash equivalents  $ 1,876  $ 1,379  $ 1,486  $ 1,631
Time and interest-earning deposits in other financial institutions  21,916  22,008  27,955  17,427
Investment securities  31,201  31,940  31,104  30,641
Loans:        
Commercial  99,871  93,582  72,804  74,792
Commercial real estate  177,302  171,258  164,277  159,432
SBA  50,381  53,381  62,267  61,963
Manufactured housing  173,432  170,860  169,910  169,662
Single family real estate  20,671  18,215  14,065  15,744
HELOC  11,134  11,226  14,820  13,481
Other  207  595  1,134  59
Total loans  532,998  519,117  499,277  495,133
         
Loans, net        
Held for sale  65,491  65,484  67,376  66,759
Held for investment  467,507  453,633  431,901  428,374
Less: Allowance  (7,012)  (7,243)  (9,236)  (7,877)
Net held for investment  460,495  446,390  422,665  420,497
NET LOANS  525,986  511,874  490,041  487,256
         
Other assets  20,058  20,073  21,557  20,363
         
TOTAL ASSETS  $ 601,037  $ 587,274  $ 572,143  $ 557,318
         
Deposits        
Non-interest-bearing demand  $ 73,073  $ 72,256  $ 63,185  $ 57,364
Interest-bearing demand  250,738  251,238  277,743  275,631
Savings  13,943  14,312  16,218  15,265
Certificates of deposit ($250,000 or more)  56,745  44,694  15,089  13,601
Other certificates of deposit  132,287  118,097  112,515  115,223
Total deposits  526,786  500,597  484,750  477,084
Other borrowings  5,000  20,000  18,000  10,000
Other liabilities  3,339  2,129  3,639  3,227
TOTAL LIABILITIES  535,125  522,726  506,389  490,311
         
Stockholders' equity  65,912  64,548  65,754  67,007
         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        
   $ 601,037  $ 587,274  $ 572,143  $ 557,318
         
Shares outstanding  8,201  8,204  8,203  8,203
         
Book value per common share  $ 7.36  $ 7.19  $ 7.07  $ 7.31
         
         
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 Sep. 30, 2015 Jun. 30, 2015 Sep. 30, 2014 Sep. 30, 2015 Sep. 30, 2014
Return on average common equity 10.54% -15.07% 11.86% 2.23% 11.73%
Return on average assets 1.05% -1.64% 1.19% 0.24% 1.16%
Efficiency ratio 68.68% 157.64% 73.70% 100.79% 76.60%
Net interest margin 4.55% 5.08% 4.31% 4.76% 4.50%
           
  Three Months Ended Three Months Ended Three Months Ended Nine Months Ended
AVERAGE BALANCES Sep. 30, 2015 Jun. 30, 2015 Sep. 30, 2014 Sep. 30, 2015 Sep. 30, 2014
Average assets  $ 601,776  $ 572,077  $ 571,895  $ 579,501  $ 561,747
Average earning assets  591,018  561,447  559,156  568,938  547,644
Average total loans  526,119  496,691  495,213  505,708  487,033
Average deposits  523,108  493,414  484,359  499,504  465,635
Average equity (including preferred stock)  65,478  68,322  65,059  66,999  68,125
Average common equity (excluding preferred stock)  59,904  62,336  57,263  61,054  55,413
           
EQUITY ANALYSIS Sep. 30, 2015 Jun. 30, 2015 Sep. 30, 2014    
Total equity  $ 65,912  $ 64,548  $ 65,754    
Less: senior preferred stock  (5,574)  (5,574)  (7,796)    
Total common equity  $ 60,338  $ 58,974  $ 57,958    
           
Common stock outstanding  8,201  8,204  8,203    
Book value per common share  $ 7.36  $ 7.19  $ 7.07    
           
ASSET QUALITY Sep. 30, 2015 Jun. 30, 2015 Sep. 30, 2014    
Nonaccrual loans, net  $ 5,287  $ 7,949  $ 10,939    
Nonaccrual loans, net/total loans 0.99% 1.53% 2.19%    
Other assets acquired through foreclosure, net  $ 206  $ 267  $ 475    
           
Nonaccrual loans plus other assets acquired through foreclosure, net  $ 5,493  $ 8,216  $ 11,414    
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.91% 1.40% 1.99%    
Net loan (recoveries)/charge-offs in the quarter  $ (214)  $ (552)  $ 82    
Net (recoveries)/charge-offs in the quarter/total loans -0.04% -0.11% 0.02%    
           
Allowance for loan losses  $ 7,012  $ 7,243  $ 9,236    
Plus: Reserve for undisbursed loan commitments  50  40  61    
Total allowance for credit losses  $ 7,062  $ 7,283  $ 9,297    
Total allowance for loan losses/total loans held for investment 1.50% 1.60% 2.14%    
Total allowance for loan losses/nonaccrual loans 132.63% 91.12% 84.43%    
           
Community West Bank *          
Tier 1 leverage ratio 10.73% 11.06% 11.29%    
Tier 1 risk-based capital ratio 13.01% 13.14% 14.19%    
Total risk-based capital ratio 14.26% 14.40% 15.45%    
           
INTEREST SPREAD ANALYSIS Sep. 30, 2015 Jun. 30, 2015 Sep. 30, 2014    
Yield on total loans 5.38% 5.98% 5.36%    
Yield on investments 2.52% 2.98% 2.18%    
Yield on interest earning deposits 0.30% 0.32% 0.28%    
Yield on earning assets 4.95% 5.50% 4.90%    
           
Cost of interest-bearing deposits 0.52% 0.54% 0.67%    
Cost of total deposits 0.45% 0.46% 0.58%    
Cost of FHLB advances 0.23% 0.94% 2.78%    
Cost of interest-bearing liabilities 0.51% 0.55% 0.75%    
           
* Capital ratios are preliminary until the Call Report is filed.
           
NON-GAAP FINANCIAL INFORMATION
(Unaudited)
  Three Months Ended Nine Months Ended
NON-GAAP PERFORMANCE MEASURES Sep. 30, 2015 Sep. 30, 2015
Return on average common equity, excluding loan litigation settlement, net (1) 10.34% 11.39%
Return on average assets, excluding loan litigation settlement, net (1) 1.03% 1.20%
Efficiency ratio, excluding loan litigation settlement, net (2) 69.36% 68.53%
     
     
NON-GAAP EARNINGS PER SHARE    
Basic (3)  $ 0.18  $ 0.60
Diluted (3)  $ 0.17  $ 0.58
     
     
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES    
(Unaudited)    
  Three Months Ended Nine Months Ended
  Sep. 30, 2015 Sep. 30, 2015
  (in thousands)
Net income  $ 1,591  $ 1,019
Loan litigation settlement, net  (50)  7,103
Tax effect on loan litigation settlement, net  21  (2,923)
Net income, excluding loan litigation settlement, net (3)  $ 1,562  $ 5,199
     
     
  Three Months Ended Nine Months Ended
  Sep. 30, 2015 Sep. 30, 2015
  (in thousands)
Total non-interest expenses  $ 5,038  $ 22,190
Loan litigation settlement, net  50  (7,103)
Total non-interest expenses, excluding loan litigation settlement, net (3)  $ 5,088  $ 15,087
     
(1) The Company believes these non-GAAP ratios provide a useful metric with which to analyze and evaluate the financial condition of the Company
(2) The Company believes this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company
(3) The Company believes these non-GAAP measurements are a key indicator of the ongoing earnings power of the Company
     

            

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