Community West Bancshares Earns $2.9 Million, or $0.33 Per Diluted Share, in 3Q20; Increases Quarterly Cash Dividend to $0.05 Per Common Share; Provides COVID-19 Response Update

Goleta, California, UNITED STATES


GOLETA, Calif., Oct. 26, 2020 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (the “Bank”), today reported net income increased to $2.9 million, or $0.33 per diluted share, for the third quarter of 2020 (3Q20), compared to $1.2 million, or $0.14 per diluted share, for the second quarter of 2020 (2Q20), and compared to $2.2 million, or $0.25 per diluted share, for the third quarter of 2019 (3Q19). For the first nine months of 2020, net income increased 7.1% to $5.6 million, or $0.66 per diluted share, compared to $5.2 million, or $0.61 per diluted share, for the first nine months of 2019.

Third Quarter 2020 Financial Highlights:

  • Net income of $2.9 million, or $0.33 per diluted share, in 3Q20, compared to $1.2 million, or $0.14 per diluted share in 2Q20, and $2.2 million, or $0.25 per diluted share in 3Q19.
  • Net interest income was $9.6 million for the quarter, compared to $8.8 million for both 2Q20 and 3Q19, respectively.
  • Provision for loan losses was $113,000 for the quarter, compared to $762,000 for 2Q20, and a credit to the provision for loan losses of $75,000 for 3Q19. The resulting allowance was 1.24% of total loans held for investment at September 30, 2020 (1.37% of total loans held for investment at September 30, 2020 excluding the $75.7 million of Paycheck Protection Program (“PPP”) loans which are 100% guaranteed by the Small Business Administration (“SBA”)).*
  • Net interest margin was 3.76% for 3Q20, compared to 3.72% for 2Q20, and 4.10% for 3Q19.
  • Total demand deposits increased $41.2 million to $545.2 million at September 30, 2020, compared to $504.1 million at June 30, 2020, and increased $97.2 million compared to $448.0 million at September 30, 2019. Total demand deposits represented 72.8% of total deposits at September 30, 2020, compared to 67.2% at June 30, 2020, and 58.8% at September 30, 2019.
  • Total loans were $854.5 million at September 30, 2020, compared to $856.0 million at June 30, 2020, and $789.5 million at September 30, 2019.
  • Book value per common share increased to $10.23 at September 30, 2020, compared to $9.93 at June 30, 2020, and $9.40 at September 30, 2019.
  • Total risked-based capital improved to 12.21% for the Bank at September 30, 2020, compared to 11.63% at June 30, 2020 and 11.18% at September 30, 2019.
  • Net non-accrual loans were $2.3 million at September 30, 2020 compared to $2.6 million and at June 30, 2020, and $5.5 million at September 30, 2019.
  • Other assets acquired through foreclosure, net, was $2.7 million at September 30, 2020 and at June 30, 2020, compared to $317,000 at September 30, 2019.

*Non GAAP

COVID-19 Pandemic Update

“We produced strong earnings for the third quarter, with solid top and bottom line results, core deposit growth and a slightly expanded net interest margin,” stated Martin E. Plourd, President and Chief Executive Officer. “Additionally, we generated 517 SBA PPP loans totaling $75.7 million to our clients since the program’s inception in April to the conclusion of the program on August 8, 2020. We are now starting to process applications for PPP loan forgiveness for clients. We anticipate the timing of such forgiveness to occur during the fourth quarter 2020 and 2021.”

“The effect of the pandemic on our employees, clients and communities remains our primary concern,” Plourd continued. “Since the start of the pandemic, we have maintained all branch activity, taking conservative measures to keep our employees, clients, and communities safe. We remain focused on assessing the risks in our loan portfolio and working with our clients to minimize losses, and have implemented a loan modification program to assist clients impacted by the pandemic with loan deferrals. The Bank initially granted 90 or 180 day deferral requests under the Disaster Relief Program beginning in April. By late May, as our local markets began easing restrictions, including the reopening of some businesses, the volume of requests had significantly diminished. At that time, we reverted to a standard 90-day payment deferral, with a longer term considered an exception and requiring additional approval. As a result, we have a mixture of payment deferral terms, with a significant portion of loans coming off deferrals each week. We are carefully monitoring these clients closely to make sure payments resume on schedule,” said Plourd.

The table below shows the breakdown of current deferrals by loan type:

 October 20, 2020 September 30, 2020 June 30, 2020
Loan segmentCount Balance Count Balance Count Balance
   (in thousands)   (in thousands)   (in thousands)
Manufactured housing74$10,593 116$15,984 142$19,903
Commercial real estate37 74,969 60 104,492 78 124,629
Commercial16 6,590 24 8,520 36 10,825
SBA0 0 0 0 1 17
HELOC0 0 0 0 0 0
Single family real estate3 716 3 717 5 1,027
Consumer0 0 0 0 0 0
Total pandemic deferments130$92,868 203$129,713 262$156,401

“Additionally, we are optimistic with the loan resumption progress, as approximately 88% of loans have resumed payments as deferral periods end,” Plourd continued.

The table below reflects the high risk industry loans by type at September 30, 2020. The industries in our markets most heavily impacted include retail, healthcare, hospitality, schools and energy. The Company’s management team continues to evaluate the loans related to the affected industries and at September 30, 2020, the Bank’s loans to these industries were $185 million, which is 21.7% of its $854.5 million loan portfolio.

Of the selected industry loans, $1.6 million or 0.86% are on non-accrual. Also, of the selected industries loans, the classified loans are $17.1 million or 9.26%. The Bank has accommodated $75.2 million of these loans with payment deferrals or 40.65% of the selected industries. Additional detail by industry at September 30, 2020 is included in the table below.

Sectors Under Focus (Excluding PPP Loans)
As of 9/30/20 (in thousands) Loans Outstanding (includes $11 million of guarantees) $ Non-accrual% Non-accrual $ Classified% Classified $ Deferrals% Deferral
Healthcare$49,080$1,5713.20%$1,9283.93%$12,18124.82%
Senior/Assted Living Facilities$23,219$00.00%$00.00%$00.00%
Medical Offices$18,736$00.00%$2831.51%$9,73651.96%
General Healthcare$7,125$1,57122.05%$1,64423.07%$2,44534.32%
Hospitality$54,844$20.00%$5,3669.78%$39,84272.65%
Lodging$40,505$00.00%$2,6096.44%$34,53485.26%
Restaurants$11,025$20.02%$2,75725.01%$5,30848.15%
RV-Mobile Home Parks$3,314$00.00%$00.00%$00.00%
Retail Commercial Real Estate$57,173$210.04%$9,70116.97%$20,36035.61%
Retail Services$22,033$00.00%$190.09%$2,82712.83%
Schools$1,189$00.00%$00.00%$00.00%
Energy$681$00.00%$11416.74%$00.00%
  Total$185,000$1,5940.86%$17,1289.26%$75,21040.65%

Income Statement

Net interest income was $9.6 million in 3Q20 compared to $8.8 million in both 2Q20 and in 3Q19, primarily due to decreased deposit costs. In the first nine months of 2020, net interest income increased 5.0% to $26.8 million, compared to $25.5 million in the first nine months of 2019.

Non-interest income increased 111% to $1.4 million in 3Q20, compared to $640,000 in 2Q20, and increased 109% compared to $647,000 in 3Q19. Other loan fees were $539,000 for 3Q20, a 90.5% increase compared to 2Q20, and a 78.5% increase compared to 3Q19. Gain on sale of loans was $424,000 in 3Q20 compared to $97,000 in the preceding quarter. There were no gains on sales of loans in 3Q19. Non-interest income increased 51.4% to $2.9 million in the first nine months of 2020 compared to $1.9 million in the first nine months of 2019.

Net interest margin was 3.76% in 3Q20, compared to 3.72% in 2Q20, and 4.10% in 3Q19. “Our continued focus on reducing our cost of funds contributed to the net interest margin expansion during the third quarter,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer. “The Company’s cost of funds for 3Q20 improved 31 basis points to 0.83% compared to 1.14% for 2Q20 and improved by 93 basis points compared to 3Q19.” In the first nine months of 2020, the net interest margin was 3.81%, compared to 4.06% in the prior year period.

The Company recorded a provision for loan losses of $113,000 in 3Q20. This compares to a provision for loan losses of $762,000 in 2Q20, and a credit to the provision for loan losses of $75,000 in 3Q19. In the first nine months of 2020, the provision for loan losses totaled $1.3 million, compared to $45,000 in the first nine months of 2019. The increase in the provision in the year-to-date period was to reflect the estimated losses due to the current economic uncertainties resulting from the pandemic currently masked by loan deferrals, PPP loans and other stimulus subsidies.

Non-interest expense totaled $6.7 million in 3Q20, compared to $7.0 million in the preceding quarter and $6.5 million in 3Q19. In the first nine months of 2020, non-interest expense was $20.5 million, compared to $19.9 million in the first nine months of 2019.

Balance Sheet

Total assets were down slightly to $1.04 billion at September 30, 2020, compared to $1.06 billion at June 30, 2020, and increased $138.8 million, or 15.4%, compared to $903.3 million at September 30, 2019. Total loans were $854.5 million at September 30, 2020, compared to $856.0 million at June 30, 2020, and increased $65.0 million, or 8.2% compared to $789.5 million at September 30, 2019.

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up modestly from year ago levels to $394.5 million at September 30, 2020 and comprise 46.2% of the total loan portfolio. Manufactured housing loans were up 8.8% from year ago levels to $275.5 million and represent 32.2% of total loans. SBA PPP loans originated during 2Q20 and 3Q20 were $75.7 million at September 30, 2020 and represent 8.9% of total loans. Commercial loans (which include agriculture loans) were down 23.6% from year ago levels to $84.1 million and represent 9.8% of the total loan portfolio. The majority of this decrease was in the agriculture portfolio as the Company has switched its production focus from on-balance sheet to off-balance sheet Farmer Mac loans.

Total deposits were $749.2 million at September 30, 2020, compared to $750.2 million at June 30, 2020, and $761.7 million at September 30, 2019. Non-interest-bearing demand deposits were $190.1 million at September 30, 2020, a slight decrease compared to $192.8 million at June 30, 2020, and a $75.8 million increase compared to $114.4 million at September 30, 2019. Interest-bearing demand deposits increased $43.8 million to $355.1 million at September 30, 2020, compared to $311.3 million at June 30, 2020, and increased $21.4 million compared to $333.7 million at September 30, 2019. Certificates of deposit, which include brokered deposits, decreased $42.8 million during the quarter to $185.4 million at September 30, 2020, compared to $228.2 million at June 30, 2020 and decreased $112.8 million compared to $298.1 million at September 30, 2019. The reduction in deposits was due to divesting of some high-priced municipal and brokered certificate of deposits funding to lower cost funding sources.

Stockholders’ equity increased to $86.7 million at September 30, 2020, compared to $84.1 million at June 30, 2020, and $79.6 million at September 30, 2019.   Book value per common share increased to $10.23 at September 30, 2020, compared to $9.93 at June 30, 2020, and $9.40 at September 30, 2019. In an abundance of caution, the Company drew down $10 million on its line of credit in 1Q20, which can be down streamed to the Bank as additional capital if needed in the future.

Credit Quality

“We are closely monitoring credit metrics and performing stress testing on our loan portfolio. In addition, resources have been reallocated to credit administration to closely analyze higher risk segments within the portfolio, as well as monitor and track loan payment deferrals and client liquidity,” said Plourd. “Based on our capital levels, company resources, current economic climate, and underwriting policies, we expect to be able to manage the economic risks and uncertainties associated with the COVID-19 pandemic and remain adequately capitalized.”

The Company recorded a provision for loan losses of $113,000 in 3Q20. This compares to a provision for loan losses of $762,000 in 2Q20, and a credit to the provision for loan losses of $75,000 in 3Q19. The allowance for credit losses, including the reserve for undisbursed loans, was $10.3 million, or 1.24% of total loans held for investment, at September 30, 2020. The allowance for loan losses was 1.37% of total loans held for investment at September 30, 2020 when excluding the $75.7 million of PPP loans, which are 100% guaranteed by the SBA. Net non-accrual loans, plus net other assets acquired through foreclosure, were $5.0 million at September 30, 2020, compared to $5.3 million at June 30, 2020, and $5.8 million at September 30, 2019.

Net non-accrual loans totaled $2.3 million at September 30, 2020, compared to $2.6 million at June 30, 2020, and $5.5 million at September 30, 2019. Of the $2.3 million of net non-accrual loans at September 30, 2020, $1.5 million were commercial loans, $0.6 million were manufactured housing loans, $0.1 million were commercial real estate loans and $0.1 million were SBA loans.

There was $2.7 million in other assets acquired through foreclosure as of September 30, 2020 and at June 30, 2020. This compares to $317,000 of other assets acquired through foreclosure at September 30, 2019. The majority of this balance relates to one property in the amount of $2.5 million.

Cash Dividend Declared

The Company’s Board of Directors declared a cash dividend of $0.05 per common share, payable November 30, 2020 to common shareholders of record on November 13, 2020.  

Stock Repurchase Program

The Company did not repurchase shares during the third quarter of 2020, leaving $1.4 million available under the previously announced repurchase program. The Company has suspended its repurchase program until further notice.

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 seven full-service California branch banking offices in Goleta, Santa Barbara, Santa Maria, Ventura, 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 2020, Community West Bank 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. We are also rated 5 star Superior by Bauer Financial.

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,
   2020   2020   2019   2020   2019 
           
Interest income          
Loans, including fees $10,909  $10,585  $11,306  $32,158  $32,754 
Investment securities and other  207   192   413   710   1,357 
Total interest income  11,116   10,777   11,719   32,868   34,111 
           
Deposits  1,046   1,500   2,615   4,668   7,642 
Other borrowings  518   496   306   1,404   950 
Total interest expense  1,564   1,996   2,921   6,072   8,592 
Net interest income  9,552   8,781   8,798   26,796   25,519 
Provision (credit) for loan losses  113   762   (75)  1,267   45 
Net interest income after provision for loan losses  9,439   8,019   8,873   25,529   25,474 
Non-interest income          
Other loan fees  539   283   302   1,163   883 
Gains from loan sales, net  424   97   -   711   - 
Document processing fees  152   108   96   384   307 
Service charges  75   62   129   271   407 
Other  162   90   120   413   346 
Total non-interest income  1,352   640   647   2,942   1,943 
Non-interest expenses          
Salaries and employee benefits  4,402   4,574   4,254   13,374   12,953 
Occupancy, net  751   776   788   2,285   2,338 
Professional services  460   559   341   1,402   1,127 
Data processing  258   260   215   801   640 
Depreciation  205   206   219   619   650 
FDIC assessment  123   133   (15)  400   309 
Advertising and marketing  145   265   187   563   546 
Stock-based compensation  71   95   90   251   282 
Other  307   135   385   759   1,096 
Total non-interest expenses  6,722   7,003   6,464   20,454   19,941 
Income before provision for income taxes  4,069   1,656   3,056   8,017   7,476 
Provision for income taxes  1,209   496   902   2,399   2,232 
Net income $2,860  $1,160  $2,154  $5,618  $5,244 
Earnings per share:          
Basic $0.34  $0.14  $0.25  $0.66  $0.62 
Diluted $0.33  $0.14  $0.25  $0.66  $0.61 
           



COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
         
  September 30,June 30, September 30, December 31,
   2020   2020   2019   2019 
         
Cash and cash equivalents $4,974  $4,679  $1,758  $2,539 
Interest-earning deposits in other financial institutions  124,590   142,823   54,489   80,122 
Investment securities  23,562   24,221   28,707   25,563 
Loans:        
Commercial  84,133   95,114   110,153   101,485 
Commercial real estate  394,547   392,789   392,288   385,642 
SBA  12,547   13,013   17,018   14,777 
Paycheck Protection Program (PPP)  75,683   75,149   -   - 
Manufactured housing  275,472   267,343   253,229   257,247 
Single family real estate  10,232   11,078   11,936   11,668 
HELOC  3,857   3,918   4,847   4,531 
Other (1)  (2,001)  (2,375)  (14)  213 
Total loans  854,470   856,029   789,457   775,563 
         
Loans, net        
Held for sale  32,562   35,090   44,816   42,046 
Held for investment  821,908   820,939   744,641   733,517 
Less: Allowance for loan losses  (10,197)  (10,008)  (8,868)  (8,717)
Net held for investment  811,711   810,931   735,773   724,800 
NET LOANS  844,273   846,021   780,589   766,846 
         
Other assets  44,700   43,103   37,609   38,800 
         
TOTAL ASSETS $1,042,099  $1,060,847  $903,252  $913,870 
         
Deposits        
Non-interest-bearing demand $190,133  $192,806  $114,366  $110,843 
Interest-bearing demand  355,111   311,266   333,679   314,278 
Savings  18,555   17,862   15,481   15,689 
Certificates of deposit ($250,000 or more)  81,426   86,046   90,298   96,431 
Other certificates of deposit  103,955   142,178   207,848   213,693 
Total deposits  749,180   750,158   761,672   750,934 
Other borrowings  190,103   210,103   45,000   65,000 
Other liabilities  16,099   16,493   16,984   15,958 
TOTAL LIABILITIES  955,382   976,754   823,656   831,892 
         
Stockholders' equity  86,717   84,093   79,596   81,978 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        
 $1,042,099  $1,060,847  $903,252  $913,870 
         
Common shares outstanding  8,473   8,472   8,467   8,472 
         
Book value per common share $10.23  $9.93  $9.40  $9.68 
         
(1) Includes consumer, other loans, securitized loans, and deferred fees
         



ADDITIONAL FINANCIAL INFORMATION
(Dollars and shares in thousands except per share amounts)(Unaudited)
 
 Three Months
Ended
 Three Months
Ended
 Three Months
Ended
 Nine Months
Ended
 Nine Months
Ended
PERFORMANCE MEASURES AND RATIOSSeptember 30,
2020
 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Return on average common equity 13.33%  5.57%  10.85%  13.45%  9.03%
Return on average assets 1.09%  0.48%  0.97%  1.16%  0.81%
Efficiency ratio 61.65%  74.33%  68.44%  68.78%  72.61%
Net interest margin 3.76%  3.72%  4.10%  3.81%  4.06%
          
 Three Months
Ended
 Three Months
Ended
 Three Months
Ended
 Nine Months
Ended
Nine Months
Ended
AVERAGE BALANCESSeptember 30, 2020 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Average assets$1,044,807  $978,250  $877,505  $970,099  $867,322 
Average earning assets 1,011,765   949,149   850,948   939,959   841,391 
Average total loans 854,273   839,625   788,965   827,244   778,425 
Average deposits 733,486   745,644   735,545   732,449   726,356 
Average common equity 85,328   83,757   78,763   83,972   77,633 
          
EQUITY ANALYSISSeptember 30,
2020
 June 30,
2020
 September 30,
2019
    
Total common equity$86,717  $84,093  $79,596     
Common stock outstanding 8,473   8,472   8,467     
          
Book value per common share$10.23  $9.93  $9.40     
          
ASSET QUALITYSeptember 30,
2020
 June 30,
2020
 September 30,
2019
    
Nonaccrual loans, net$2,258  $2,640  $5,476     
Nonaccrual loans, net/total loans 0.26%  0.31%  0.69%    
Other assets acquired through foreclosure, net$2,707  $2,707  $317     
          
Nonaccrual loans plus other assets acquired through foreclosure, net$4,965  $5,347  $5,793     
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.48%  0.50%  0.64%    
Net loan (recoveries)/charge-offs in the quarter$(76) $(79) $(69)    
Net (recoveries)/charge-offs in the quarter/total loans (0.01%)  (0.01%)  (0.01%)    
          
Allowance for loan losses$10,197  $10,008  $8,868     
Plus: Reserve for undisbursed loan commitments 92   91   81     
Total allowance for credit losses$10,289  $10,099  $8,949     
Allowance for loan losses/total loans held for investment 1.24%  1.22%  1.19%    
Allowance for loan losses/total loans held for investment excluding PPP loans 1.37%  1.34%  1.19%    
Allowance for loan losses/nonaccrual loans, net 451.59%  379.09%  161.94%    
          
          
Community West Bank *         
Community bank leverage ratio 8.79%  8.94% N/A     
Tier 1 leverage ratio 8.79%  8.94%  9.02%    
Tier 1 capital ratio 10.96%  10.38%  10.04%    
Total capital ratio 12.21%  11.63%  11.18%    
          
INTEREST SPREAD ANALYSISSeptember 30,
2020
 June 30,
2020
 September 30,
2019
    
Yield on total loans 5.08%  5.07%  5.69%    
Yield on investments 1.89%  1.88%  3.06%    
Yield on interest earning deposits 0.23%  0.29%  2.14%    
Yield on earning assets 4.37%  4.57%  5.46%    
          
Cost of interest-bearing deposits 0.77%  1.06%  1.69%    
Cost of total deposits 0.57%  0.81%  1.41%    
Cost of borrowings 0.98%  1.50%  2.64%    
Cost of interest-bearing liabilities 0.83%  1.14%  1.76%    
          
* Capital ratios are preliminary until the Call Report is filed.
          


Contact:
Susan C. Thompson, EVP & CFO
805.692.5821
www.communitywestbank.com