Community West Bancshares 3Q2018 Earnings Increase 52.4% Year-Over-Year to $2.4 Million; Book Value Per Common Share Increases to $9.13; Declares Quarterly Cash Dividend of $0.05 Per Common Share

GOLETA, Calif., Oct. 26, 2018 (GLOBE NEWSWIRE) — Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported net income increased 52.4% to $2.4 million, or $0.27 per diluted share, in the third quarter of 2018 (3Q18), compared to $1.6 million, or $0.18 per diluted share in the third quarter of 2017 (3Q17) and increased 26.9% when compared to $1.9 million, or $0.21 per diluted share, the second quarter of 2018 (2Q18). 

In the first nine months of 2018, net income increased 35.5% to $6.1 million, or $0.69 per diluted share, compared to $4.5 million, or $0.52 per diluted share, in the first nine months of 2017.

“Our record third quarter financial results reflect the stability and strength of our Central California banking franchise and the lower corporate tax rates enacted last year,” stated Martin E. Plourd, President and Chief Executive Officer.  “We are pleased with these results as they demonstrate the continued successful execution of our strategic expansion within our three county footprint.  These expansion initiatives position the bank to provide an unparalleled service delivery experience.” 

Third Quarter 2018 Financial Highlights

  • Net income increased 52.4% to $2.4 million, or $0.27 per diluted share, in 3Q18, compared to $1.6 million, or $0.18 per diluted share in 3Q17.
  • Return on average common equity improved to 12.57%, up from 10.26% for 2Q18 and 8.88% for 3Q17.
  • Return on average assets increased to 1.08%, up from 0.90% for 2Q18 and 0.78% for 3Q17.
  • Total deposits increased to $719.9 million at September 30, 2018, compared to $702.6 million at June 30, 2018, and increased $22.8 million, or 3.3% compared to $697.2 million at September 30, 2017. 
  • Core deposits which include non-interest bearing checking, interest bearing checking, money market, savings and retail certificates of deposit increased to $508.0 million at September 30, 2018, compared to $500.2 million at June 30, 2018 and $476.2 million at September 30, 2018.
  • Total loans were $753.7 million at September 30, 2018, compared to $759.9 million at June 30, 2018, and increased $31.1 million compared to $722.7 million at September 30, 2017. 
  • Net interest margin for 3Q18 was 4.02%, compared to 4.06% for 2Q18 and 4.27% for 3Q17.
  • Book value per common share increased to $9.13 at September 30, 2018, compared to $8.90 at June 30, 2018 and $8.54 at September 30, 2017. 
  • The Bank continues to be well-capitalized per banking regulations with its total capital ratio at 10.79%, its Tier 1 capital ratio at 9.64% and Tier 1 leverage ratio at 8.23% at September 30, 2018.

Income Statement

Third quarter net interest income increased to $8.6 million, compared to $8.3 million in 2Q2018 and $8.4 million in 3Q17.  During the first nine months of 2018, net interest income increased to $25.3 million, compared to $24.2 million in the first nine months of 2017.

Non-interest income was $641,000 in 3Q18, compared to $688,000 in 2Q18 and $716,000 in 3Q17.  In the first nine months of 2018, non-interest income was $2.0 million, compared to $2.1 million in the first nine months of 2017.

“Our net interest margin continued to compress during the third quarter as a result of the flat yield curve and increased competition for core deposits in our markets,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  “Margin is expected to continue compressing throughout the cycle until rates stabilize.”  Third quarter net interest margin was 4.02% compared to 4.06% in 2Q18 and 4.27% in 3Q17.  In the first nine months of the year, net interest margin was 4.11% compared to 4.36% in the first nine months a year ago.  

Non-interest expenses totaled $6.4 million in 3Q18, which was unchanged compared to a year ago.  Non-interest expenses totaled $6.3 million in 2Q18.  In the first nine months of 2018, non-interest expenses totaled $19.2 million, compared to $18.3 million in the first nine months of 2017.  This increase reflects increased salary, employee benefits and occupancy costs as the result of the bank’s expansion.

Balance Sheet

Total loans were $753.7 million at September 30, 2018, compared to $759.9 million at June 30, 2018, and increased $31.1 million compared to $722.7 million at September 30, 2017.  “While total loans declined slightly during the third quarter, they were negatively impacted by the payoff of two large commercial real estate loans totaling $14.5 million.  Manufactured housing, commercial real estate and commercial loan categories experienced the most growth during the past year,” said Plourd.

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 2.7% from year ago levels to $353.1 million at September 30, 2018 and comprise 46.9% of the total loan portfolio.  Manufactured housing loans were up 10.8% from year ago levels to $240.0 million and represent 31.8% of total loans.  Commercial loans increased 6.1% from year ago levels to $119.3 million and represent 15.8% of the total loan portfolio.

Total deposits increased to $719.9 million at September 30, 2018, compared to $702.6 million at June 30, 2018, and increased $22.8 million, or 3.3% compared to $697.2 million at September 30, 2017. 

Total assets were $854.7 million at September 30, 2018, compared to $865.1 million at June 30, 2018 and increased $25.6 million, or 3.1%, compared to $829.2 million at September 30, 2017.  Stockholders’ equity improved to $75.6 million at September 30, 2018, compared to $73.4 million at June 30, 2018, and $69.8 million at September 30, 2017.  Book value per common share was $9.13 at September 30, 2018, compared to $8.90 at June 30, 2018, and $8.54 at September 30, 2017. 

Credit Quality

“Credit quality remained strong during the third quarter with net nonaccrual loans down to 0.50% of total loans, net recoveries of $94,000 and no foreclosed assets remaining on the books,” said Thompson.  The provision for 3Q2018 was a credit of $197,000 compared to a provision for loan losses of $117,000 in 2Q18 and a provision for loan losses of $159,000 in 3Q17.  The allowance for loan losses was $8.5 million at September 30, 2018, or 1.21% of total loans held for investment, compared to 1.22% at June 30, 2018, and 1.25% a year ago.  Net nonaccrual loans were $3.8 million at September 30, 2018, compared to $3.7 million at June 30, 2017, and $1.8 million at September 30, 2017.  

Of the $3.8 million in net nonaccrual loans, $2.3 million were commercial loans primarily from one relationship and not systemic to the portfolio, $527,000 were commercial agricultural loans, $292,000 were manufactured housing loans, $203,000 were home equity loans, $165,000 was one single-family real estate loan, $155,000 were SBA 7A loans and $107,000 was one commercial real estate loans.

There were no other assets acquired through foreclosure as of September 30, 2018.  This compares to other assets acquired through foreclosure of $213,000 three months earlier and $486,000 a year ago.

Cash Dividend Declared

The Company’s Board of Directors declared a cash dividend of $0.05 per common share, payable November 30, 2018 to common shareholders of record on November 15, 2018.  The current annualized yield, based on the closing price of CWBC shares of $12.00 on September 28, 2018, was 1.7%.

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 2018, Community West was awarded a “Premier” rating by The Findley Reports.  For 50 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,
    2018   2018   2017   2018 2017
                   
Interest income                  
Loans, including fees   $   10,612     $   10,020   $   9,340   $   30,283   $   26,570
Investment securities and other       589         381       355       1,307       894
Total interest income       11,201         10,401       9,695       31,590       27,464
Interest expense                  
Deposits       2,222         1,708       1,185       5,373       2,984
Other borrowings       351         382       134       928       294
Total interest expense       2,573         2,090       1,319       6,301       3,278
Net interest income       8,628         8,311       8,376       25,289       24,186
Provision (credit) for loan losses       (197 )       117       159       (224 )     423
Net interest income after provision for loan losses       8,825         8,194       8,217       25,513       23,763
Non-interest income                  
Other loan fees       379         323       354       998       999
Document processing fees       120         130       146       367       430
Service charges       113         122       118       351       326
Other       29         113       98       252       299
Total non-interest income       641         688       716       1,968       2,054
Non-interest expenses                  
Salaries and employee benefits        4,147         4,042       3,839       12,338       11,566
Occupancy, net       778         741       754       2,303       2,085
Professional services       326         301       281       931       759
Data processing       201         206       192       619       525
Depreciation        199         186       168       552       519
FDIC assessment       169         164       172       547       461
Advertising and marketing       154         163       137       487       488
Stock-based compensation       81         87       283       284       454
Other        347         367       561       1,131       1,460
Total non-interest expenses       6,402         6,257       6,387       19,192       18,317
Income before provision for income taxes       3,064         2,625       2,546       8,289       7,500
Provision for income taxes       695         758       992       2,239       3,034
Net income   $   2,369     $   1,867   $   1,554   $   6,050   $   4,466
Earnings per share:                  
Basic   $   0.29     $   0.23   $   0.19   $   0.73   $   0.55
Diluted   $   0.27     $   0.21   $   0.18   $   0.69   $   0.52
                   

 

COMMUNITY WEST BANCSHARES                
CONDENSED CONSOLIDATED BALANCE SHEETS                
(unaudited)                
(in 000’s, except per share data)                
                 
    September 30,   June 30,   September 30,   December 31,
    2018   2018   2017   2017
                 
Cash and cash equivalents   $   2,317     $   3,385     $   2,356     $   3,651  
Time and interest-earning deposits in other financial institutions       45,436         50,977         49,215         42,218  
Investment securities       33,421         33,720         38,117         36,348  
Loans:                
Commercial       119,270         118,263         112,399         111,459  
Commercial real estate       353,136         364,679         343,770         354,617  
SBA       21,057         22,724         30,944         26,219  
Manufactured housing       240,010         234,598         216,572         223,115  
Single family real estate       11,153         10,682         10,022         10,346  
HELOC       9,446         9,502         9,656         9,422  
Other       (331 )       (558 )       (668 )       (569 )
Total loans       753,741         759,890         722,695         734,609  
                 
Loans, net                
Held for sale       50,944         52,886         58,561         55,094  
Held for investment       702,797         707,004         664,134         679,515  
Less: Allowance for loan losses       (8,519 )       (8,622 )       (8,312 )       (8,420 )
Net held for investment       694,278         698,382         655,822         671,095  
 NET LOANS       745,222         751,268         714,383         726,189  
                 
Other assets       28,313         25,777         25,079         24,909  
                 
 TOTAL ASSETS   $   854,709     $   865,127     $   829,150     $   833,315  
                 
Deposits                
Non-interest-bearing demand   $   105,580     $   107,168     $   116,170     $   108,500  
Interest-bearing demand       267,046         260,708         266,835         256,717  
Savings       14,385         14,515         14,619         14,085  
Certificates of deposit ($250,000 or more)       92,934         88,752         81,160         81,985  
Other certificates of deposit       239,997         231,460         218,370         238,397  
Total deposits       719,942         702,603         697,154         699,684  
Other borrowings       50,000         81,843         55,843         56,843  
Other liabilities       9,210         7,233         6,387         6,718  
    TOTAL LIABILITIES       779,152         791,679         759,384         763,245  
                 
Stockholders’ equity       75,557         73,448         69,766         70,070  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                
  $   854,709     $   865,127     $   829,150     $   833,315  
                 
Shares outstanding       8,275         8,254         8,169         8,193  
                 
Book value per common share   $   9.13     $   8.90     $   8.54     $   8.55  
                 

 

ADDITIONAL FINANCIAL INFORMATION          
(Dollars in thousands except per share amounts)(Unaudited)          
  Three Months Ended   Three Months Ended   Three Months Ended
PERFORMANCE MEASURES AND RATIOS Sep. 30, 2018   Jun. 30, 2018   Sep. 30, 2017
Return on average common equity    12.57 %     10.26 %     8.88 %
Return on average assets    1.08 %     0.90 %     0.78 %
Efficiency ratio   69.07 %     69.53 %     70.25 %
Net interest margin   4.02 %     4.06 %     4.27 %
           
  Three Months Ended   Three Months Ended   Three Months Ended
AVERAGE BALANCES Sep. 30, 2018   Jun. 30, 2018   Sep. 30, 2017
Average assets $   867,174     $   836,394     $   792,279  
Average earning assets     852,083         820,854         778,412  
Average total loans     755,146         750,575         708,244  
Average deposits     734,391         704,251         687,794  
Average common equity     74,799         72,993         69,438  
           
EQUITY ANALYSIS Sep. 30, 2018   Jun. 30, 2018   Sep. 30, 2017
Total common equity $   75,557     $   73,448     $   69,766  
Common stock outstanding     8,275         8,254         8,169  
           
Book value per common share $   9.13     $   8.90     $   8.54  
           
ASSET QUALITY Sep. 30, 2018   Jun. 30, 2018   Sep. 30, 2017
Nonaccrual loans, net $   3,755     $   3,704     $   1,837  
Nonaccrual loans, net/total loans   0.50 %     0.49 %     0.25 %
Other assets acquired through foreclosure, net $   –      $   213     $   486  
           
Nonaccrual loans plus other assets acquired through foreclosure, net $   3,755     $   3,917     $   2,323  
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets   0.44 %     0.45 %     0.28 %
Net loan (recoveries)/charge-offs in the quarter $   (94 )   $   (47 )   $   (159 )
Net (recoveries)/charge-offs in the quarter/total loans    (0.01 %)     (0.01 %)     (0.02 %)
           
Allowance for loan losses $   8,519     $   8,622     $   8,312  
Plus: Reserve for undisbursed loan commitments     80         97         96  
Total allowance for credit losses $   8,599     $   8,719     $   8,408  
Allowance for loan losses/total loans held for investment   1.21 %     1.22 %     1.25 %
Allowance for loan losses/nonaccrual loans, net   226.87 %     232.78 %     452.48 %
           
Community West Bank *          
Tier 1 leverage ratio   8.23 %     8.88 %     8.90 %
Tier 1 capital ratio   9.64 %     10.11 %     10.26 %
Total capital ratio   10.79 %     11.29 %     11.48 %
           
INTEREST SPREAD ANALYSIS Sep. 30, 2018   Jun. 30, 2018   Sep. 30, 2017
Yield on total loans   5.58 %     5.35 %     5.23 %
Yield on investments   3.77 %     2.74 %     2.60 %
Yield on interest earning deposits   1.54 %     1.49 %     1.10 %
Yield on earning assets   5.22 %     5.08 %     4.94 %
           
Cost of interest-bearing deposits   1.41 %     1.16 %     0.44 %
Cost of total deposits   1.20 %     0.97 %     0.68 %
Cost of borrowings   2.79 %     2.90 %     1.79 %
Cost of interest-bearing liabilities   1.51 %     1.30 %     0.87 %
           
* Capital ratios are preliminary until the Call Report is filed.          
           

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

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