Community West Bancshares Earns $2.2 Million, or $0.25 Per Diluted Share, in 3Q19; Results Highlighted by Net Interest Margin Expansion; Declares Quarterly Cash Dividend of $0.055 Per Common Share

Goleta, California, UNITED STATES


GOLETA, Calif., Oct. 25, 2019 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported earnings of $2.2 million, or $0.25 per diluted share, for the third quarter of 2019 (3Q19), compared to $1.6 million, or $0.18 per diluted share, in 2Q19, and $2.4 million, or $0.27 per diluted share, in 3Q18.

In the first nine months of 2019, net income was $5.2 million, or $0.61 per diluted share, compared to $6.1 million, or $0.69 per diluted share, in the first nine months of 2018.

“We delivered solid third quarter results, fueled by growing revenues and an expanding net interest margin,” stated Martin E. Plourd, President and Chief Executive Officer.  “Loan growth remains steady, with a 5% increase in the loan portfolio compared to a year ago, and strong total demand deposits, which increased 20% year-over-year as we continue to improve our core funding position.  We will continue to focus on high quality earnings growth, while managing our operating efficiencies and expanding our brand throughout California’s Central Coast.”

Third Quarter 2019 Financial Highlights:

  • Net income was $2.2 million, or $0.25 per diluted share, in 3Q19, compared to $1.6 million, or $0.18 per diluted share in 2Q19, and $2.4 million, or $0.27 per diluted share in 3Q18.
  • Net interest margin improved to 4.10% for 3Q19, compared to 4.07% for 2Q19 and 4.02% for 3Q18.
  • Total non-interest expense was $6.5 million in 3Q19, compared to $6.8 million in 2Q19 and $6.4 million in 3Q18.
  • Total demand deposits decreased slightly to $448.0 million at September 30, 2019, compared to $456.3 million at June 30, 2019, and increased $75.4 million compared to $372.6 million at September 30, 2018. 
  • Total loans increased to $789.5 million at September 30, 2019, compared to $788.9 million at June 30, 2019, and increased $35.7 million compared to $753.7 million at September 30, 2018. 
  • Book value per common share increased to $9.40 at September 30, 2019, compared to $9.19 at June 30, 2019, and $9.13 at September 30, 2018. 
  • Provision (credit) for loan losses was ($75,000) for the quarter, compared to a provision for loan losses of $177,000 for 2Q19, and a credit for loan losses of ($197,000) for 3Q18.
  • Total risked based capital improved to 11.18% for the Bank at September 30, 2019, compared to 10.67% at June 30, 2019 and 10.79% at September 30, 2018.
  • Net nonaccrual loans totaled $5.5 million at September 30, 2019, compared to $3.0 million at June 30, 2019, and $3.8 million at September 30, 2018. 
  • Other real estate owned was $317,000 at September 30, 2019, compared to $1.1 million at June 30, 2019, and zero at September 30, 2018.

Income Statement

Third quarter net interest income increased to $8.8 million, compared to $8.5 million in 2Q19 and $8.6 million in 3Q18.  For 3Q19, net interest income benefited by both collection of interest on previously impaired loans and a net decrease in the cost of funds.  In the first nine months of 2019, net interest income was $25.5 million, compared to $25.3 million in the first nine months of 2018. 

Non-interest income was $647,000 in 3Q19, compared to $692,000 in 2Q19 and $641,000 in 3Q18.  Non-interest income was $1.9 million in the first nine months of 2019, compared to $2.0 million in the first nine months of 2018.

“The continued improvement in the margin for the current quarter was due, in part, to our on-going efforts to reduce our cost of funds,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  Third quarter net interest margin improved to 4.10%, from 4.07% in 2Q19, and 4.02% in 3Q18.  In the first nine months of 2019, the net interest margin was 4.06%, compared to 4.11% in the prior year period.

Non-interest expenses totaled $6.5 million in 3Q19, compared to $6.8 million in the preceding quarter and $6.4 million in 3Q18.  In the first nine months of 2019, non-interest expense was $19.9 million, compared to $19.2 million in the first nine months of 2018. 

Balance Sheet

Total loans increased modestly to $789.5 million at September 30, 2019, compared to $788.9 million at June 30, 2019, and increased $35.8 million, or 4.7%, compared to $753.7 million at September 30, 2018.  

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 11.1% from year ago levels to $392.3 million at September 30, 2019 and comprise 49.7% of the total loan portfolio.  Manufactured housing loans were up 5.5% from year ago levels to $253.2 million and represent 32.1% of total loans.  Commercial loans (which include agriculture loans) were down 7.6% from year ago levels to $110.2 million and represent 13.9% of the total loan portfolio.

Total deposits decreased slightly to $761.7 million at September 30, 2019, compared to $765.1 million at June 30, 2019, and increased $41.8 million, or 5.8% compared to $719.9 million at September 30, 2018.  Non-interest-bearing demand deposits increased $1.9 million, or 1.7% to $114.4 million at September 30, 2019 compared to $112.5 million at June 30, 2019 and increased $8.8 million compared to $105.6 million at September 30, 2018.  Interest-bearing demand deposits decreased to $333.7 million compared to $343.8 million at June 30, 2019 but increased $66.6 million compared to $267.0 million at September 30, 2018.  Certificates of deposit, which include broker deposits increased $5.6 million to $298.1 million at September 30, 2019 compared to $292.5 million at June 30, 2019 and decreased $34.8 million compared to $332.9 million at September 30, 2018 as the Company divests itself from wholesale funding.

Total assets were $903.3 million at September 30, 2019, compared to $905.6 million at June 30, 2019 and increased $48.6 million, or 5.7%, compared to $854.7 million at September 30, 2018.  Stockholders’ equity increased to $79.6 million at September 30, 2019, compared to $77.8 million at June 30, 2019, and $75.6 million at September 30, 2018.  Book value per common share increased to $9.40 at September 30, 2019, compared to $9.19 at June 30, 2019, and $9.13 at September 30, 2018. 

Credit Quality

The Company recorded a credit to its provision for loan losses of ($75,000) in 3Q19.  This compares to a provision for loan losses of $177,000 in 2Q19 and credit to the provision for loan losses of ($197,000) in 3Q18.  The allowance for loan losses, including the reserve for undisbursed loans, was $8.9 million at September 30, 2019, or 1.19% of total loans held for investment, compared to 1.20% at June 30, 2019, and 1.21% a year ago.  Net nonaccrual loans plus net other assets acquired through foreclosure were $5.8 million at September 30, 2019, compared to $4.1 million at June 30, 2019, and $3.8 million at September 30, 2018.  

At September 30, 2019, net nonaccrual loans consisted of $4.7 million of commercial loans including commercial agriculture, $0.3 million of manufactured housing loans, $0.4 million of SBA loans, and $0.1 million of commercial real estate loans.

There was $317,000 in other assets acquired through foreclosure as of September 30, 2019.  This compares to $1.1 million of other assets acquired through foreclosure at June 30, 2019, and no 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 November 29, 2019 to common shareholders of record on November 14, 2019.  The current annualized yield, based on the closing price of CWBC shares of $9.89 on September 30, 2019, was 2.17%.

Stock Repurchase Program
The Company, under the Board of Directors authorized common stock repurchase program of up to $4.5 million, bought back 10,233 shares during 3Q19.  As of September 30, 2019, 350,189 shares had been repurchased at an average price of $8.71 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, 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 Nine Months Ended
  September 30, June 30, September 30, September 30, September 30,
   2019   2019  2018   2019  2018 
           
Interest income          
Loans, including fees $11,306  $10,907 $10,612  $32,754 $30,283 
Investment securities and other  413   460  589   1,357  1,307 
Total interest income  11,719   11,367  11,201   34,111  31,590 
Interest expense          
Deposits  2,615   2,583  2,222   7,642  5,373 
Other borrowings  306   286  351   950  928 
Total interest expense  2,921   2,869  2,573   8,592  6,301 
Net interest income  8,798   8,498  8,628   25,519  25,289 
Provision (credit) for loan losses  (75)  177  (197)  45  (224)
Net interest income after provision for loan losses  8,873   8,321  8,825   25,474  25,513 
Non-interest income          
Other loan fees  302   323  379   883  998 
Service charges  129   139  113   407  351 
Document processing fees  96   124  120   307  367 
Other  120   106  29   346  252 
Total non-interest income  647   692  641   1,943  1,968 
Non-interest expenses          
Salaries and employee benefits  4,254   4,318  4,147   12,953  12,338 
Occupancy, net  788   768  778   2,338  2,303 
Professional services  341   405  326   1,127  931 
Data processing  215   201  201   640  619 
Depreciation  219   218  199   650  552 
Advertising and marketing  187   230  154   546  487 
FDIC assessment  (15)  154  169   309  547 
Stock-based compensation  90   97  81   282  284 
Other  385   369  347   1,096  1,131 
Total non-interest expenses  6,464   6,760  6,402   19,941  19,192 
Income before provision for income taxes  3,056   2,253  3,064   7,476  8,289 
Provision for income taxes  902   673  695   2,232  2,239 
Net income $2,154  $1,580 $2,369  $5,244 $6,050 
Earnings per share:          
Basic $0.25  $0.19 $0.29  $0.62 $0.73 
Diluted $0.25  $0.18 $0.27  $0.61 $0.69 
           


COMMUNITY WEST BANCSHARES        
CONDENSED CONSOLIDATED BALANCE SHEETS        
(unaudited)        
(in 000's, except per share data)        
         
  September 30, June 30, September 30, December 31,
   2019   2019   2018   2018 
         
Cash and interest-earning deposits in other financial institutions $56,347  $57,181  $47,753  $56,915 
Investment securities  28,707   30,414   33,421   32,353 
Loans:        
Commercial  110,153   108,599   119,270   118,518 
Commercial real estate  392,288   391,293   353,136   365,809 
SBA  17,018   17,560   21,057   19,077 
Manufactured housing  253,229   253,250   240,010   247,114 
Single family real estate  11,936   11,575   11,153   11,261 
HELOC  4,847   6,696   9,446   6,756 
Other  (14)  (65)  (331)  (292)
Total loans  789,457   788,908   753,741   768,243 
         
Loans, net        
Held for sale  44,816   45,447   50,944   48,355 
Held for investment  744,641   743,461   702,797   719,888 
Less: Allowance for loan losses  (8,868)  (8,887)  (8,519)  (8,691)
Net held for investment  735,773   734,574   694,278   711,197 
NET LOANS  780,589   780,021   745,222   759,552 
         
Other assets  37,609   37,951   28,313   28,471 
         
TOTAL ASSETS $903,252  $905,567  $854,709  $877,291 
         
Deposits        
Non-interest-bearing demand $114,366  $112,463  $105,580  $108,161 
Interest-bearing demand  333,679   343,841   267,046   270,431 
Savings  15,481   16,264   14,385   14,641 
Certificates of deposit ($250,000 or more)  90,298   90,170   92,934   93,439 
Other certificates of deposit  207,848   202,373   239,997   229,334 
Total deposits  761,672   765,111   719,942   716,006 
Other borrowings  45,000   46,000   50,000   75,000 
Other liabilities  16,984   16,627   9,210   10,134 
TOTAL LIABILITIES  823,656   827,738   779,152   801,140 
         
Stockholders' equity  79,596   77,829   75,557   76,151 
         
         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $903,252  $905,567  $854,709  $877,291 
         
Common shares outstanding  8,467   8,465   8,275   8,533 
         
Book value per common share $9.40  $9.19  $9.13  $8.92 
         


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 RATIOSSeptember 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Return on average common equity 10.85%  8.18%  12.57%  9.03%  11.07%
Return on average assets 0.97%  0.73%  1.08%  0.81%  96.00%
Efficiency ratio 68.44%  73.56%  69.07%  72.61%  70.41%
Net interest margin 4.10%  4.07%  4.02%  4.06%  4.11%
          
 Three Months Ended Three Months Ended Three Months Ended Nine Months Ended
AVERAGE BALANCESSeptember 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Average assets$877,505  $864,583  $867,174  $867,322  $838,955 
Average earning assets 850,948   838,104   852,083   841,391   823,607 
Average total loans 788,965   777,828   755,146   778,425   747,518 
Average deposits 735,545   726,366   734,391   726,356   713,790 
Average common equity 78,763   77,432   74,799   77,633   73,087 
          
EQUITY ANALYSISSeptember 30, 2019 June 30, 2019 September 30, 2018    
Total common equity$79,596  $77,829  $75,557     
Common stock outstanding 8,467   8,465   8,275     
          
Book value per common share$9.40  $9.19  $9.13     
          
ASSET QUALITYSeptember 30, 2019 June 30, 2019 September 30, 2018    
Nonaccrual loans, net$5,476  $3,016  $3,755     
Nonaccrual loans, net/total loans 0.69%  0.38%  0.50%    
Other assets acquired through foreclosure, net$317  $1,074  $-     
          
Nonaccrual loans plus other assets acquired through foreclosure, net$5,793  $4,090  $3,755     
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.64%  0.45%  0.44%    
Net loan (recoveries)/charge-offs in the quarter$(69) $(62) $(94)    
Net (recoveries)/charge-offs in the quarter/total loans (0.01%)  (0.01%)  (0.01%)    
          
Allowance for loan losses$8,868  $8,887  $8,519     
Plus: Reserve for undisbursed loan commitments 81   81   80     
Total allowance for credit losses$8,949  $8,968  $8,599     
Allowance for loan losses/total loans held for investment 1.19%  1.20%  1.21%    
Allowance for loan losses/nonaccrual loans, net 161.94%  294.66%  226.87%    
          
Community West Bank *         
Tier 1 leverage ratio 9.02%  8.66%  8.23%    
Tier 1 capital ratio 10.04%  9.53%  9.64%    
Total capital ratio 11.18%  10.67%  10.79%    
          
INTEREST SPREAD ANALYSISSeptember 30, 2019 June 30, 2019 September 30, 2018    
Yield on total loans 5.69%  5.62%  5.58%    
Yield on investments 3.06%  3.89%  3.77%    
Yield on interest earning deposits 2.14%  1.89%  1.54%    
Yield on earning assets 5.46%  5.44%  5.22%    
          
Cost of interest-bearing deposits 1.69%  1.70%  1.41%    
Cost of total deposits 1.41%  1.43%  1.20%    
Cost of borrowings 2.64%  2.64%  2.79%    
Cost of interest-bearing liabilities 1.76%  1.76%  1.51%    
          
* Capital ratios are preliminary until the Call Report is filed.         


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