GOLETA, Calif., July 26, 2019 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported earnings of $1.6 million, or $0.18 per diluted share, for the second quarter of 2019 (2Q19), compared to $1.5 million, or $0.18 per diluted share, in 1Q19, and $1.9 million, or $0.21 per diluted share, in 2Q18.
In the first six months of 2019, net income was $3.1 million, or $0.36 per diluted share, compared to $3.7 million, or $0.42 per diluted share, in the first six months of 2018.
“Our operating performance in the second quarter generated solid net interest income and an improved net interest margin, due to strong loan growth, higher loan yields and an improved asset mix,” stated Martin E. Plourd, President and Chief Executive Officer. “While our earnings have been impacted by branch expansion costs over these last several quarters, we are now beginning to see the positive results of our efforts, with total demand deposits increasing 24% year-over-year. With an appreciation for the patience of our shareholders and our recent office expansion completed, our focus moving forward is growing revenue, reducing reliance on expensive non-core funding, and intently rationalizing our non-interest expenses.”
Second Quarter 2019 Financial Highlights:
- Net income was $1.6 million, or $0.18 per diluted share, in 2Q19, compared to $1.5 million, or $0.18 per diluted share in 1Q19, and $1.9 million, or $0.21 per diluted share in 2Q18.
- Net interest margin improved to 4.07% for 2Q19, compared to 3.99% for 1Q19 and compared to 4.06% for 2Q18.
- Total demand deposits increased $33.7 million to $456.3 million at June 30, 2019, compared to $422.6 million at March 31, 2019, and increased $88.4 million compared to $367.9 million at June 30, 2018.
- Total loans increased $18.8 million to $788.9 million at June 30, 2019, compared to $770.1 million at March 31, 2019, and increased $29.0 million compared to $759.9 million at June 30, 2018.
- Book value per common share increased to $9.19 at June 30, 2019, compared to $9.05 at March 31, 2019, and $8.90 at June 30, 2018.
- Provision for loan losses was $177,000 for the quarter, compared to a credit for loan losses of ($57,000) for 1Q19, and provision for loan losses of $117,000 for 2Q18.
- Net nonaccrual loans decreased to $3.0 million at June 30, 2019, compared to $3.3 million at March 31, 2019, and $3.7 million at June 30, 2018. The Bank had $1.1 million of other real estate owned at June 30, 2019.
Income Statement
Second quarter net interest income increased to $8.5 million, compared to $8.2 million in 1Q19 and $8.3 million in 2Q18. In the first six months of 2019 net interest income was $16.7 million, which was unchanged compared to the first six months of 2018.
Non-interest income was $692,000 in 2Q19, compared to $604,000 in 1Q19 and $688,000 in 2Q18. Non-interest income was $1.3 million in both the first six months of 2019 and 2018.
“Our net interest margin improved eight basis points in the second quarter compared to the preceding quarter as a result of improved yields on earning assets and stabilization in our cost of funds,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer. Second quarter net interest margin improved to 4.07%, from 3.99% in 1Q19, and 4.06% in 2Q18. In the first six months of 2019, the net interest margin was 4.03%, compared to 4.15% in the prior year period.
Non-interest expenses totaled $6.8 million in 2Q19, compared to $6.7 million in the preceding quarter and $6.3 million in the prior year second quarter. In the first six months of 2019, non-interest expense was $13.5 million, compared to $12.8 million in the first six months of 2018. The year-over-year increase for the six-month period was primarily attributable to the Company’s expansion, including the most recent opening of our full-service branch in Paso Robles in the fourth quarter of 2018.
Balance Sheet
Total loans increased $18.8 million, or 2.4% to $788.9 million at June 30, 2019, compared to $770.1 million at March 31, 2019, and increased $29.0 million, or 3.8%, compared to $759.9 million at June 30, 2018.
Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 7.3% from year ago levels to $391.3 million at June 30, 2019 and comprise 49.6% of the total loan portfolio. Manufactured housing loans were up 8.0% from year ago levels to $253.3 million and represent 32.1% of total loans. Commercial loans (which include agriculture loans) were down 8.2% from year ago levels to $108.6 million and represent 13.8% of the total loan portfolio.
Total deposits increased $30.4 million, or 4.1% to $765.1 million at June 30, 2019, compared to $734.7 million at March 31, 2019, and increased $62.5 million, or 8.9% compared to $702.6 million at June 30, 2018. Non-interest bearing demand deposits decreased to $112.5 million at June 30, 2019 compared to $135.5 million at March 31, 2019, but increased $5.3 million compared to $107.2 million at June 30, 2018. Interest-bearing demand deposits increased $56.7 million to $343.8 million compared to $287.1 million at March 31, 2019 and increased $83.1 million compared to $260.7 million at June 30, 2018. Certificates of deposit which include broker deposits decreased $4.5 million to $292.5 million at June 30, 2019 compared to $297.0 million at March 31, 2019 and decreased $27.7 million compared to $320.2 million at June 30, 2018.
Total assets were $905.6 million at June 30, 2019, compared to $882.4 million at March 31, 2019 and increased $40.4 million, or 4.7%, compared to $865.1 million at June 30, 2018. Stockholders’ equity increased to $77.8 million at June 30, 2019, compared to $76.5 million at March 31, 2019, and $73.4 million at June 30, 2018. Book value per common share increased to $9.19 at June 30, 2019, compared to $9.05 at March 31, 2019, and $8.90 at June 30, 2018.
Credit Quality
Due to strong loan growth in the second quarter, the Company recorded a provision for loan losses of $177,000. This compares to a credit to the provision for loan losses of ($57,000) in 1Q19 and provision for loan losses of $117,000 in 2Q18. The allowance for loan losses including the reserve for undisbursed loans was $9.0 million at June 30, 2019, or 1.20% of total loans held for investment, compared to 1.20% at March 31, 2019, and 1.22% a year ago. Net nonaccrual loans plus net other assets acquired through foreclosure were $4.1 million at June 30, 2019, compared to $3.3 million at March 31, 2019, and $3.9 million at June 30, 2018.
At June 30, 2019, net nonaccrual loans consisted of $2.3 million of commercial loans including commercial agriculture, $0.3 million of manufactured housing loans, $0.2 million of home equity loans, $0.1 million of SBA loans, and $0.1 million of commercial real estate loans.
There was $1.1 million in other assets acquired through foreclosure as of June 30, 2019. This compares to no other assets acquired through foreclosure at March 31, 2019, and $213,000 in other assets acquired through foreclosure a year ago.
Cash Dividend Declared
The Company’s Board of Directors declared a cash dividend of $0.055 per common share, payable August 30, 2019 to common shareholders of record on August 13, 2019. The current annualized yield, based on the closing price of CWBC shares of $9.65 on June 30, 2019, was 2.23%.
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 eight full-service California branch banking offices in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village, San Luis Obispo, Oxnard and Paso Robles. The principal business activities of the Company are Relationship Banking, Manufactured Housing lending and Government Guaranteed lending.
Industry Accolades
In April 2019, Community West was awarded a “Premier” rating by The Findley Reports. For 51 years, The Findley Reports has been recognizing the financial performance of banking institutions in California and the Western United States. In making their selections, The Findley Reports focuses on these four ratios: growth, return on beginning equity, net operating income as a percentage of average assets, and loan losses as a percentage of gross loans.
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, | |||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Interest income | |||||||||||||||||||
| Loans, including fees | $ | 10,907 | $ | 10,541 | $ | 10,020 | $ | 21,448 | $ | 19,671 | |||||||||
| Investment securities and other | 460 | 484 | 381 | 944 | 718 | ||||||||||||||
| Total interest income | 11,367 | 11,025 | 10,401 | 22,392 | 20,389 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 2,583 | 2,444 | 1,708 | 5,027 | 3,151 | ||||||||||||||
| Other borrowings | 286 | 358 | 382 | 644 | 577 | ||||||||||||||
| Total interest expense | 2,869 | 2,802 | 2,090 | 5,671 | 3,728 | ||||||||||||||
| Net interest income | 8,498 | 8,223 | 8,311 | 16,721 | 16,661 | ||||||||||||||
| Provision (credit) for loan losses | 177 | (57 | ) | 117 | 120 | (27 | ) | ||||||||||||
| Net interest income after provision for loan losses | 8,321 | 8,280 | 8,194 | 16,601 | 16,688 | ||||||||||||||
| Non-interest income | |||||||||||||||||||
| Other loan fees | 323 | 258 | 323 | 581 | 619 | ||||||||||||||
| Document processing fees | 124 | 87 | 130 | 211 | 247 | ||||||||||||||
| Service charges | 139 | 139 | 122 | 278 | 238 | ||||||||||||||
| Other | 106 | 120 | 113 | 226 | 223 | ||||||||||||||
| Total non-interest income | 692 | 604 | 688 | 1,296 | 1,327 | ||||||||||||||
| Non-interest expenses | |||||||||||||||||||
| Salaries and employee benefits | 4,318 | 4,381 | 4,042 | 8,699 | 8,191 | ||||||||||||||
| Occupancy, net | 768 | 782 | 741 | 1,550 | 1,525 | ||||||||||||||
| Professional services | 405 | 381 | 301 | 786 | 605 | ||||||||||||||
| Data processing | 201 | 224 | 206 | 425 | 418 | ||||||||||||||
| Depreciation | 218 | 213 | 186 | 431 | 353 | ||||||||||||||
| FDIC assessment | 154 | 170 | 164 | 324 | 378 | ||||||||||||||
| Advertising and marketing | 230 | 129 | 163 | 359 | 333 | ||||||||||||||
| Stock-based compensation | 97 | 95 | 87 | 192 | 203 | ||||||||||||||
| Other | 369 | 342 | 367 | 711 | 784 | ||||||||||||||
| Total non-interest expenses | 6,760 | 6,717 | 6,257 | 13,477 | 12,790 | ||||||||||||||
| Income before provision for income taxes | 2,253 | 2,167 | 2,625 | 4,420 | 5,225 | ||||||||||||||
| Provision for income taxes | 673 | 657 | 758 | 1,330 | 1,544 | ||||||||||||||
| Net income | $ | 1,580 | $ | 1,510 | $ | 1,867 | $ | 3,090 | $ | 3,681 | |||||||||
| Earnings per share: | |||||||||||||||||||
| Basic | $ | 0.19 | $ | 0.18 | $ | 0.23 | $ | 0.37 | $ | 0.45 | |||||||||
| Diluted | $ | 0.18 | $ | 0.18 | $ | 0.21 | $ | 0.36 | $ | 0.42 | |||||||||
| COMMUNITY WEST BANCSHARES | |||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||
| (unaudited) | |||||||||||||||
| (in 000's, except per share data) | |||||||||||||||
| June 30, | March 31, | June 30, | December 31, | ||||||||||||
| 2019 | 2019 | 2018 | 2018 | ||||||||||||
| Cash and cash equivalents | $ | 2,032 | $ | 1,907 | $ | 3,376 | $ | 2,983 | |||||||
| Interest-earning deposits in other financial institutions | 55,149 | 51,499 | 50,986 | 53,932 | |||||||||||
| Investment securities | 30,414 | 31,562 | 33,720 | 32,353 | |||||||||||
| Loans: | |||||||||||||||
| Commercial | 108,599 | 116,103 | 118,263 | 118,518 | |||||||||||
| Commercial real estate | 391,293 | 369,206 | 364,679 | 365,809 | |||||||||||
| SBA | 17,560 | 18,070 | 22,724 | 19,077 | |||||||||||
| Manufactured housing | 253,250 | 248,669 | 234,598 | 247,114 | |||||||||||
| Single family real estate | 11,575 | 11,611 | 10,682 | 11,261 | |||||||||||
| HELOC | 6,696 | 6,585 | 9,502 | 6,756 | |||||||||||
| Other | (65 | ) | (178 | ) | (558 | ) | (292 | ) | |||||||
| Total loans | 788,908 | 770,066 | 759,890 | 768,243 | |||||||||||
| Loans, net | |||||||||||||||
| Held for sale | 45,447 | 46,995 | 52,886 | 48,355 | |||||||||||
| Held for investment | 743,461 | 723,071 | 707,004 | 719,888 | |||||||||||
| Less: Allowance for loan losses | (8,887 | ) | (8,648 | ) | (8,622 | ) | (8,691 | ) | |||||||
| Net held for investment | 734,574 | 714,423 | 698,382 | 711,197 | |||||||||||
| NET LOANS | 780,021 | 761,418 | 751,268 | 759,552 | |||||||||||
| Other assets | 37,951 | 36,008 | 25,777 | 28,471 | |||||||||||
| TOTAL ASSETS | $ | 905,567 | $ | 882,394 | $ | 865,127 | $ | 877,291 | |||||||
| Deposits | |||||||||||||||
| Non-interest-bearing demand | $ | 112,463 | $ | 135,495 | $ | 107,168 | $ | 108,161 | |||||||
| Interest-bearing demand | 343,841 | 287,095 | 260,708 | 270,431 | |||||||||||
| Savings | 16,264 | 15,128 | 14,515 | 14,641 | |||||||||||
| Certificates of deposit ($250,000 or more) | 90,170 | 91,580 | 88,752 | 93,439 | |||||||||||
| Other certificates of deposit | 202,373 | 205,431 | 231,460 | 229,334 | |||||||||||
| Total deposits | 765,111 | 734,729 | 702,603 | 716,006 | |||||||||||
| Other borrowings | 46,000 | 52,750 | 81,843 | 75,000 | |||||||||||
| Other liabilities | 16,627 | 18,462 | 7,233 | 10,134 | |||||||||||
| TOTAL LIABILITIES | 827,738 | 805,941 | 791,679 | 801,140 | |||||||||||
| Stockholders' equity | 77,829 | 76,453 | 73,448 | 76,151 | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 905,567 | $ | 882,394 | $ | 865,127 | $ | 877,291 | |||||||
| Common shares outstanding | 8,465 | 8,450 | 8,254 | 8,533 | |||||||||||
| Book value per common share | $ | 9.19 | $ | 9.05 | $ | 8.90 | $ | 8.92 | |||||||
| 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 | June 30, 2019 | March 31, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||||
| Return on average common equity | 8.18 | % | 7.99 | % | 10.26 | % | 8.09 | % | 10.28 | % | |||||||||
| Return on average assets | 0.73 | % | 0.71 | % | 0.90 | % | 0.72 | % | 0.90 | % | |||||||||
| Efficiency ratio | 73.56 | % | 76.10 | % | 69.54 | % | 74.80 | % | 71.11 | % | |||||||||
| Net interest margin | 4.07 | % | 3.99 | % | 4.06 | % | 4.03 | % | 4.15 | % | |||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||
| AVERAGE BALANCES | June 30, 2019 | March 31, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||||
| Average assets | $ | 864,583 | $ | 859,684 | $ | 836,394 | $ | 862,146 | $ | 824,611 | |||||||||
| Average earning assets | 838,104 | 834,944 | 820,854 | 836,533 | 809,133 | ||||||||||||||
| Average total loans | 777,828 | 768,253 | 750,575 | 773,067 | 743,640 | ||||||||||||||
| Average deposits | 726,366 | 716,953 | 704,251 | 721,685 | 703,319 | ||||||||||||||
| Average common equity | 77,432 | 76,683 | 72,993 | 77,059 | 72,217 | ||||||||||||||
| EQUITY ANALYSIS | June 30, 2019 | March 31, 2019 | June 30, 2018 | ||||||||||||||||
| Total common equity | $ | 77,829 | $ | 76,453 | $ | 73,448 | |||||||||||||
| Common stock outstanding | 8,465 | 8,450 | 8,254 | ||||||||||||||||
| Book value per common share | $ | 9.19 | $ | 9.05 | $ | 8.90 | |||||||||||||
| ASSET QUALITY | June 30, 2019 | March 31, 2019 | June 30, 2018 | ||||||||||||||||
| Nonaccrual loans, net | $ | 3,016 | $ | 3,257 | $ | 3,704 | |||||||||||||
| Nonaccrual loans, net/total loans | 0.38 | % | 0.42 | % | 0.49 | % | |||||||||||||
| Other assets acquired through foreclosure, net | $ | 1,074 | $ | - | $ | 213 | |||||||||||||
| Nonaccrual loans plus other assets acquired through foreclosure, net | $ | 4,090 | $ | 3,257 | $ | 3,917 | |||||||||||||
| Nonaccrual loans plus other assets acquired through foreclosure, net/total assets | 0.45 | % | 0.37 | % | 0.45 | % | |||||||||||||
| Net loan (recoveries)/charge-offs in the quarter | $ | (62 | ) | $ | (14 | ) | $ | (47 | ) | ||||||||||
| Net (recoveries)/charge-offs in the quarter/total loans | (0.01 | %) | 0.00 | % | (0.01 | %) | |||||||||||||
| Allowance for loan losses | $ | 8,887 | $ | 8,648 | $ | 8,622 | |||||||||||||
| Plus: Reserve for undisbursed loan commitments | 81 | 87 | 97 | ||||||||||||||||
| Total allowance for credit losses | $ | 8,968 | $ | 8,735 | $ | 8,719 | |||||||||||||
| Allowance for loan losses/total loans held for investment | 1.20 | % | 1.20 | % | 1.22 | % | |||||||||||||
| Allowance for loan losses/nonaccrual loans, net | 294.66 | % | 265.52 | % | 232.78 | % | |||||||||||||
| Community West Bank * | |||||||||||||||||||
| Tier 1 leverage ratio | 8.66 | % | 8.63 | % | 8.88 | % | |||||||||||||
| Tier 1 capital ratio | 9.53 | % | 9.62 | % | 10.10 | % | |||||||||||||
| Total capital ratio | 10.67 | % | 10.76 | % | 11.28 | % | |||||||||||||
| INTEREST SPREAD ANALYSIS | June 30, 2019 | March 31, 2019 | June 30, 2018 | ||||||||||||||||
| Yield on total loans | 5.62 | % | 5.56 | % | 5.35 | % | |||||||||||||
| Yield on investments | 3.89 | % | 3.55 | % | 2.74 | % | |||||||||||||
| Yield on interest earning deposits | 1.89 | % | 2.22 | % | 1.49 | % | |||||||||||||
| Yield on earning assets | 5.44 | % | 5.36 | % | 5.08 | % | |||||||||||||
| Cost of interest-bearing deposits | 1.70 | % | 1.64 | % | 1.16 | % | |||||||||||||
| Cost of total deposits | 1.43 | % | 1.38 | % | 0.97 | % | |||||||||||||
| Cost of borrowings | 2.64 | % | 2.91 | % | 2.90 | % | |||||||||||||
| Cost of interest-bearing liabilities | 1.76 | % | 1.74 | % | 1.30 | % | |||||||||||||
| * Capital ratios are preliminary until the Call Report is filed. | |||||||||||||||||||
| Contact: | Susan C. Thompson, EVP & CFO |
| 805.692.5821 | |
| www.communitywestbank.com |