GOLETA, Calif, July 29, 2016 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported net income of $1.1 million in the second quarter of 2016 (2Q16) compared to net income of $1.3 million in the first quarter of 2016 (1Q16) and a net loss of $2.3 million in the second quarter of 2015 (2Q15).
In the first six months of the year, Community West reported net income of $2.4 million compared to a net loss of $572,000 in the first six months of 2015. Excluding the net loan litigation settlement, Community West’s net income for the second quarter and the six-month period in 2015 would have been $1.9 million and $3.6 million, respectively. (See “NON-GAAP FINANCIAL INFORMATION”)
“Our momentum during the first half of the year has been fueled by robust loan and deposit growth, and continued improvements in credit quality,” stated Martin E. Plourd, President and Chief Executive Officer. “Our results reflect the investment in our future, with new branches in San Luis Obispo and Oxnard scheduled to open later this year, as well as the relocation of our Santa Maria branch. With the consolidation among banks in our market areas in recent years, we continue to offer responsive and flexible service from a locally-owned and operated bank.”
2Q16 Financial Highlights
- Nonaccrual loans, net, decreased 49.4% to $4.0 million, or 0.70% of net loans at June 30, 2016, compared to $7.9 million, or 1.53% of net loans, a year ago, representing the lowest level since 3Q07.
- Net income available to common stockholders for 2Q16 was $1.1 million, or $0.13 per diluted share.
- Annualized return on average assets was 0.72%.
- Annualized return on average common equity was 7.15%.
- Net interest margin was 4.47%.
- Net loans increased 10.3% to $564.8 million at June 30, 2016, compared to $511.9 million a year ago.
- Non-interest-bearing deposits increased 15.5% to $83.5 million at June 30, 2016, compared to $72.3 million a year ago.
- Book value per common share was $7.81 at June 30, 2016, compared to $7.19 a year ago.
- The Bank continues to be well-capitalized per banking regulations with its total risk-based capital ratio at 13.53% and Tier 1 leverage ratio at 10.53% at June 30, 2016.
- Received approval to open a full-service branch office in Oxnard.
Income Statement
“Higher than industry average loan yields and periodic loan interest recoveries continue to contribute to our net interest margin remaining in the mid-4% range,” said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. Second quarter net interest margin was 4.47% compared to 4.45% in 1Q16 and 5.08% in 2Q15. In 2Q15, 51 basis points of the asset yields were attributable to two large past due loan relationships which were paid in full. In the first six months of 2016, the net interest margin was 4.46%. In the first six months of 2015, the same two loans contributed 26 basis points to the asset yields.
Net interest income for 2Q16 was $6.9 million, a 3.0% increase compared to $6.7 million in the preceding quarter and a 2.8% decrease compared to $7.1 million in 2Q15. Year-to-date, net interest income increased to $13.6 million compared to $13.5 million in the same period a year ago. Non-interest income was $577,000 in 2Q16, a slight decrease compared to $579,000 in 1Q16 and a 21.7% decrease compared to $737,000 in 2Q15. In the first six months of 2016, non-interest income was $1.2 million, which was relatively unchanged compared to the first six months of 2015.
Non-interest expenses totaled $5.5 million in 2Q16, compared to $5.3 million in 1Q16. The increase compared to the preceding quarter is largely due to the business development of the Bank’s Northern region, consisting of San Luis Obispo and north Santa Barbara counties. In the second quarter of 2015, we settled a claim for $7.2 million, net, and, primarily as a result of this settlement, Community West’s 2Q15 non-interest expenses totaled $12.4 million and non-interest expenses for the first six months of 2015 totaled $17.2 million. Excluding this one-time settlement, non-interest expenses would have been approximately $5.2 million in 2Q15 and would have been approximately $10.0 million for the first six months of 2015. (See “NON-GAAP FINANCIAL INFORMATION”) Year-to-date non-interest expenses were $10.8 million compared to $17.2 million in the like period a year ago.
Balance Sheet
Total assets were $642.6 million at June 30, 2016, a 3.2% increase compared to three months earlier and a 9.4% increase compared to one year ago. Net loans increased 4.6% to $564.8 million at June 30, 2016, compared to $540.2 million at March 31, 2016, and increased 10.3% compared to $511.9 million a year ago. Commercial real estate loans outstanding were up 21.2% from year ago levels to $207.7 million at June 30, 2016, and comprise 36.3% of the total loan portfolio. Manufactured housing loans were up 10.2% from year ago levels to $188.3 million and represent 32.9% of total loans. Commercial loans increased 14.0% from year ago levels to $106.7 million and represent 18.7% of the total loan portfolio and SBA loans decreased 22.8% from a year ago to $41.2 million and represent 7.2% of the total loan portfolio.
Deposits totaled $565.2 million at June 30, 2016, up 3.5% compared to $546.1 million at March 31, 2016 and grew 12.9% compared to $500.6 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 $424.5 million at June 30, 2016 and comprise 75.1% of total deposits, compared to $392.8 million, or 78.5% of total deposits, a year ago.
Stockholders’ equity was $63.2 million at June 30, 2016, compared to $62.4 million at March 31, 2016, and $64.5 million a year ago. Book value per common share improved to $7.81 at June 30, 2016 compared to $7.71 at March 31, 2016, and $7.19 a year ago.
Credit Quality
“Asset quality continues to improve and is now better than the average for both national banks and banks of our size. Due to robust loan growth, especially during the end of the quarter, we recorded a provision for loan losses during the second quarter,” said Plourd. The loan loss provision was $61,000 in 2Q16, compared to a negative loan loss provision of $247,000 in 1Q16, and a negative provision of $584,000 in 2Q15. Net loan recoveries were $148,000 in 2Q16 compared to $150,000 in 1Q16 and $552,000 in 2Q15.
The allowance for loan losses was $7.0 million at June 30, 2016, or 1.37% of total loans held for investment, compared to 1.41% at March 31, 2016, and 1.60% a year ago. Net nonaccrual loans decreased 16.7% to $4.0 million, or 0.70% of total loans at June 30, 2016, compared to $4.8 million, or 0.88% of total loans, three months earlier, and decreased 49.4% compared to $7.9 million, or 1.53% of total loans, a year ago.
Of the $4.0 million in net nonaccrual loans, $1.2 million were manufactured housing loans, $966,000 were SBA 504 1st loans, $852,000 were commercial real estate loans, $541,000 were home equity loans, $224,000 were SBA loans and $199,000 were single family real estate loans.
Other assets acquired through foreclosure totaled $129,000 at June 30, 2016, compared to $176,000 three months earlier and $267,000 a year earlier. Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $4.1 million, or 0.64% of total assets, at June 30, 2016, compared to $5.0 million, or 0.80% of total assets, three months earlier and $8.2 million, or 1.40% of total assets, a year ago.
Cash Dividend Declared
The Company’s Board of Directors declared a quarterly cash dividend of $0.035 per common share, payable August 31, 2016 to common shareholders of record on August 12, 2016.
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. During 2Q16, the Company bought back 30,530 shares. As of June 30, 2016, 141,783 shares had been repurchased at an average price of $7.08 per share.
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 and one loan production office in San Luis Obispo. The principal business activities of the Company are Relationship business 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 | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | |||||||||||||||
| 2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Interest income | |||||||||||||||||||
| Loans, including fees | $ | 7,414 | $ | 7,175 | $ | 7,410 | $ | 14,589 | $ | 14,122 | |||||||||
| Investment securities and other | 260 | 269 | 285 | 529 | 590 | ||||||||||||||
| Total interest income | 7,674 | 7,444 | 7,695 | 15,118 | 14,712 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 704 | 651 | 569 | 1,355 | 1,174 | ||||||||||||||
| Other borrowings and convertible debt | 73 | 72 | 15 | 145 | 76 | ||||||||||||||
| Total interest expense | 777 | 723 | 584 | 1,500 | 1,250 | ||||||||||||||
| Net interest income | 6,897 | 6,721 | 7,111 | 13,618 | 13,462 | ||||||||||||||
| Provision for loan losses | 61 | (247 | ) | (584 | ) | (186 | ) | (1,552 | ) | ||||||||||
| Net interest income after provision for loan losses | 6,836 | 6,968 | 7,695 | 13,804 | 15,014 | ||||||||||||||
| Non-interest income | |||||||||||||||||||
| Other loan fees | 282 | 275 | 370 | 557 | 545 | ||||||||||||||
| Document processing fees | 136 | 115 | 131 | 251 | 223 | ||||||||||||||
| Service charges | 102 | 90 | 87 | 192 | 160 | ||||||||||||||
| Other | 57 | 99 | 149 | 156 | 289 | ||||||||||||||
| Total non-interest income | 577 | 579 | 737 | 1,156 | 1,217 | ||||||||||||||
| Non-interest expenses | |||||||||||||||||||
| Salaries and employee benefits | 3,494 | 3,452 | 3,202 | 6,946 | 6,317 | ||||||||||||||
| Occupancy, net | 581 | 486 | 487 | 1,067 | 932 | ||||||||||||||
| Professional services | 278 | 179 | 276 | 457 | 524 | ||||||||||||||
| Advertising and marketing | 212 | 81 | 152 | 293 | 232 | ||||||||||||||
| Depreciation | 175 | 149 | 96 | 324 | 187 | ||||||||||||||
| Data processing | 169 | 171 | 134 | 340 | 253 | ||||||||||||||
| FDIC assessment | 99 | 97 | 82 | 196 | 153 | ||||||||||||||
| Stock-based compensation | 84 | 80 | 218 | 164 | 260 | ||||||||||||||
| Loan servicing and collection | (89 | ) | 179 | 182 | 90 | 271 | |||||||||||||
| Loan litigation settlement, net | - | - | 7,153 | - | 7,153 | ||||||||||||||
| Other | 503 | 462 | 399 | 965 | 870 | ||||||||||||||
| Total non-interest expenses | 5,506 | 5,336 | 12,381 | 10,842 | 17,152 | ||||||||||||||
| Income (loss) before provision for income taxes | 1,907 | 2,211 | (3,949 | ) | 4,118 | (921 | ) | ||||||||||||
| Provision for income taxes | 782 | 928 | (1,607 | ) | 1,710 | (349 | ) | ||||||||||||
| Net income (loss) | 1,125 | 1,283 | (2,342 | ) | 2,408 | (572 | ) | ||||||||||||
| Dividends and accretion on preferred stock | - | - | 136 | - | 276 | ||||||||||||||
| Discount on partial redemption of preferred stock | - | - | (110 | ) | - | (129 | ) | ||||||||||||
| Net income (loss) available (attributable) to common stockholders | $ | 1,125 | $ | 1,283 | $ | (2,368 | ) | $ | 2,408 | $ | (719 | ) | |||||||
| Earnings per share: | |||||||||||||||||||
| Basic | $ | 0.14 | $ | 0.16 | $ | (0.29 | ) | $ | 0.30 | $ | (0.09 | ) | |||||||
| Diluted | $ | 0.13 | $ | 0.16 | $ | (0.29 | ) | $ | 0.29 | $ | (0.09 | ) | |||||||
| COMMUNITY WEST BANCSHARES | ||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| (in 000's, except per share data) | ||||||||||||||||||
| June 30, | March 31, | June 30, | December 31, | |||||||||||||||
| 2016 | 2016 | 2015 | 2015 | |||||||||||||||
| Cash and cash equivalents | $ | 2,665 | $ | 2,499 | $ | 1,379 | $ | 2,789 | ||||||||||
| Time and interest-earning deposits in other financial institutions | 24,604 | 26,538 | 22,008 | 32,829 | ||||||||||||||
| Investment securities | 30,782 | 35,633 | 31,940 | 30,466 | ||||||||||||||
| Loans: | ||||||||||||||||||
| Commercial | 106,650 | 107,386 | 93,582 | 107,510 | ||||||||||||||
| Commercial real estate | 207,664 | 185,458 | 171,258 | 179,491 | ||||||||||||||
| SBA | 41,176 | 42,890 | 53,381 | 47,880 | ||||||||||||||
| Manufactured housing | 188,315 | 182,018 | 170,860 | 177,891 | ||||||||||||||
| Single family real estate | 17,203 | 17,919 | 18,215 | 19,073 | ||||||||||||||
| HELOC | 10,803 | 10,885 | 11,226 | 10,934 | ||||||||||||||
| Other | 43 | 425 | 595 | 683 | ||||||||||||||
| Total loans | 571,854 | 546,981 | 519,117 | 543,462 | ||||||||||||||
| Loans, net | ||||||||||||||||||
| Held for sale | 60,086 | 61,897 | 65,484 | 64,488 | ||||||||||||||
| Held for investment | 511,768 | 485,084 | 453,633 | 478,974 | ||||||||||||||
| Less: Allowance for loan losses | (7,028 | ) | (6,819 | ) | (7,243 | ) | (6,916 | ) | ||||||||||
| Net held for investment | 504,740 | 478,265 | 446,390 | 472,058 | ||||||||||||||
| NET LOANS | 564,826 | 540,162 | 511,874 | 536,546 | ||||||||||||||
| Other assets | 19,747 | 17,923 | 20,073 | 18,583 | ||||||||||||||
| TOTAL ASSETS | $ | 642,624 | $ | 622,755 | $ | 587,274 | $ | 621,213 | ||||||||||
| Deposits | ||||||||||||||||||
| Non-interest-bearing demand | $ | 83,524 | $ | 70,587 | $ | 72,256 | $ | 76,469 | ||||||||||
| Interest-bearing demand | 250,036 | 250,404 | 251,238 | 250,509 | ||||||||||||||
| Savings | 14,173 | 14,294 | 14,312 | 13,690 | ||||||||||||||
| Certificates of deposit ($250,000 or more) | 74,622 | 67,995 | 44,694 | 66,722 | ||||||||||||||
| Other certificates of deposit | 142,829 | 142,795 | 118,097 | 136,948 | ||||||||||||||
| Total deposits | 565,184 | 546,075 | 500,597 | 544,338 | ||||||||||||||
| Other borrowings | 10,500 | 10,500 | 20,000 | 10,500 | ||||||||||||||
| Other liabilities | 3,702 | 3,741 | 2,129 | 4,431 | ||||||||||||||
| TOTAL LIABILITIES | 579,386 | 560,316 | 522,726 | 559,269 | ||||||||||||||
| Stockholders' equity | 63,238 | 62,439 | 64,548 | 61,944 | ||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||
| $ | 642,624 | $ | 622,755 | $ | 587,274 | $ | 621,213 | |||||||||||
| Shares outstanding | 8,098 | 8,103 | 8,204 | 8,206 | ||||||||||||||
| Book value per common share | $ | 7.81 | $ | 7.71 | $ | 7.19 | $ | 7.55 | ||||||||||
| 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 RATIOS | Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |||||||||||||
| Return on average common equity | 7.15 | % | 8.23 | % | -15.07 | % | 7.69 | % | -1.87 | % | ||||||||
| Return on average assets | 0.72 | % | 0.83 | % | -1.64 | % | 0.78 | % | -0.20 | % | ||||||||
| Efficiency ratio | 73.67 | % | 73.10 | % | 157.64 | % | 73.39 | % | 116.83 | % | ||||||||
| Net interest margin | 4.47 | % | 4.45 | % | 5.08 | % | 4.46 | % | 4.87 | % | ||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||
| AVERAGE BALANCES | Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |||||||||||||
| Average assets | $ | 631,318 | $ | 618,283 | $ | 572,077 | $ | 624,808 | $ | 568,198 | ||||||||
| Average earning assets | 620,125 | 607,872 | 561,447 | 613,999 | 557,714 | |||||||||||||
| Average total loans | 558,841 | 543,555 | 496,691 | 551,198 | 495,333 | |||||||||||||
| Average deposits | 553,943 | 540,539 | 493,414 | 547,241 | 487,506 | |||||||||||||
| Average equity (including preferred stock) | 63,277 | 62,678 | 68,322 | 62,958 | 67,773 | |||||||||||||
| Average common equity (excluding preferred stock) | 63,277 | 62,678 | 62,336 | 62,958 | 61,639 | |||||||||||||
| EQUITY ANALYSIS | Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | |||||||||||||||
| Total equity | $ | 63,238 | $ | 62,439 | $ | 64,548 | ||||||||||||
| Less: senior preferred stock | - | - | (5,574 | ) | ||||||||||||||
| Total common equity | $ | 63,238 | $ | 62,439 | $ | 58,974 | ||||||||||||
| Common stock outstanding | 8,098 | 8,103 | 8,204 | |||||||||||||||
| Book value per common share | $ | 7.81 | $ | 7.71 | $ | 7.19 | ||||||||||||
| ASSET QUALITY | Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | |||||||||||||||
| Nonaccrual loans, net | $ | 3,988 | $ | 4,807 | $ | 7,949 | ||||||||||||
| Nonaccrual loans, net/total loans | 0.70 | % | 0.88 | % | 1.53 | % | ||||||||||||
| Other assets acquired through foreclosure, net | $ | 129 | $ | 176 | $ | 267 | ||||||||||||
| Nonaccrual loans plus other assets acquired through foreclosure, net | $ | 4,117 | $ | 4,983 | $ | 8,216 | ||||||||||||
| Nonaccrual loans plus other assets acquired through foreclosure, net/total assets | 0.64 | % | 0.80 | % | 1.40 | % | ||||||||||||
| Net loan (recoveries)/charge-offs in the quarter | $ | (148 | ) | $ | (150 | ) | $ | (552 | ) | |||||||||
| Net (recoveries)/charge-offs in the quarter/total loans | -0.03 | % | -0.30 | % | -0.11 | % | ||||||||||||
| Allowance for loan losses | $ | 7,028 | $ | 6,819 | $ | 7,243 | ||||||||||||
| Plus: Reserve for undisbursed loan commitments | 89 | 74 | 40 | |||||||||||||||
| Total allowance for credit losses | $ | 7,117 | $ | 6,893 | $ | 7,283 | ||||||||||||
| Allowance for loan losses/total loans held for investment | 1.37 | % | 1.41 | % | 1.60 | % | ||||||||||||
| Allowance for loan losses/nonaccrual loans, net | 176.23 | % | 141.86 | % | 91.12 | % | ||||||||||||
| Community West Bank * | ||||||||||||||||||
| Tier 1 leverage ratio | 10.53 | % | 10.55 | % | 11.06 | % | ||||||||||||
| Tier 1 risk-based capital ratio | 12.28 | % | 12.59 | % | 13.14 | % | ||||||||||||
| Total risk-based capital ratio | 13.53 | % | 13.84 | % | 14.40 | % | ||||||||||||
| INTEREST SPREAD ANALYSIS | Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | |||||||||||||||
| Yield on total loans | 5.34 | % | 5.31 | % | 5.98 | % | ||||||||||||
| Yield on investments | 2.57 | % | 2.58 | % | 2.98 | % | ||||||||||||
| Yield on interest earning deposits | 0.46 | % | 0.57 | % | 0.32 | % | ||||||||||||
| Yield on earning assets | 4.98 | % | 4.93 | % | 5.50 | % | ||||||||||||
| Cost of interest-bearing deposits | 0.59 | % | 0.56 | % | 0.54 | % | ||||||||||||
| Cost of total deposits | 0.51 | % | 0.48 | % | 0.46 | % | ||||||||||||
| Cost of borrowings | 2.80 | % | 2.76 | % | 0.94 | % | ||||||||||||
| Cost of interest-bearing liabilities | 0.64 | % | 0.61 | % | 0.55 | % | ||||||||||||
| * Capital ratios are preliminary until the Call Report is filed. | ||||||||||||||||||
| NON-GAAP FINANCIAL INFORMATION | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | Six Months Ended | |||||||
| NON-GAAP PERFORMANCE MEASURES | Jun. 30, 2015 | Jun. 30, 2015 | ||||||
| Return on average common equity, excluding loan litigation settlement, net (1) | 12.02 | % | 11.90 | % | ||||
| Return on average assets, excluding loan litigation settlement, net (1) | 1.31 | % | 1.29 | % | ||||
| Efficiency ratio, excluding loan litigation settlement, net (2) | 66.62 | % | 68.12 | % | ||||
| NON-GAAP EARNINGS PER SHARE | ||||||||
| Basic (3) | $ | 0.22 | $ | 0.43 | ||||
| Diluted (3) | $ | 0.22 | $ | 0.41 | ||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | Six Months Ended | |||||||
| Jun. 30, 2015 | Jun. 30, 2015 | |||||||
| (in thousands) | ||||||||
| Net income | $ | (2,342 | ) | $ | (572 | ) | ||
| Loan litigation settlement, net | 7,153 | 7,153 | ||||||
| Tax effect on loan litigation settlement, net | (2,943 | ) | (2,943 | ) | ||||
| Net income, excluding loan litigation settlement, net (3) | $ | 1,868 | $ | 3,638 | ||||
| Three Months Ended | Six Months Ended | |||||||
| Jun. 30, 2015 | Jun. 30, 2015 | |||||||
| (in thousands) | ||||||||
| Total non-interest expenses | $ | 12,381 | $ | 17,152 | ||||
| Loan litigation settlement, net | (7,153 | ) | (7,153 | ) | ||||
| Total non-interest expenses, excluding loan litigation settlement, net (3) | $ | 5,228 | $ | 9,999 | ||||
| (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 | ||||||||