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.
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.
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 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 $12.00 on September 28, 2018, was 1.7%.
Community West Bancshares is a financial services company with headquarters in Goleta, California. The Company is the holding company for Community West Bank, the largest publicly traded community bank serving California’s Central Coast area of Ventura, Santa Barbara and San Luis Obispo counties. Community West Bank has eight full-service California branch banking offices in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village, San Luis Obispo, Oxnard and Paso Robles. The principal business activities of the Company are Relationship banking, Manufactured Housing lending and Government Guaranteed lending.
In April 2018, Community West was awarded a “Premier” rating by The Findley Reports. For 50 years, The Findley Reports has been recognizing the financial performance of banking institutions in California and the Western United States. In making their selections, The Findley Reports focuses on these four ratios: growth, return on beginning equity, net operating income as a percentage of average assets, and loan losses as a percentage of gross loans.
Safe Harbor Disclosure
This release contains forward-looking statements that reflect management’s current views of future events and operations. These forward-looking statements are based on information currently available to the Company as of the date of this release. It is important to note that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including, but not limited to, the ability of the Company to implement its strategy and expand its lending operations.
|COMMUNITY WEST BANCSHARES|
|CONDENSED CONSOLIDATED INCOME STATEMENTS|
|(in 000’s, except per share data)|
|Three Months Ended||Nine Months Ended|
|September 30,||June 30,||September 30,||September 30,||September 30,|
|Loans, including fees||$||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|
|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|
|Other loan fees||379||323||354||998||999|
|Document processing fees||120||130||146||367||430|
|Total non-interest income||641||688||716||1,968||2,054|
|Salaries and employee benefits||4,147||4,042||3,839||12,338||11,566|
|Advertising and marketing||154||163||137||487||488|
|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|
|Earnings per share:|
|COMMUNITY WEST BANCSHARES|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|(in 000’s, except per share data)|
|September 30,||June 30,||September 30,||December 31,|
|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|
|Commercial real estate||353,136||364,679||343,770||354,617|
|Single family real estate||11,153||10,682||10,022||10,346|
|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|
|Certificates of deposit ($250,000 or more)||92,934||88,752||81,160||81,985|
|Other certificates of deposit||239,997||231,460||218,370||238,397|
|TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Book value per common share||$||9.13||$||8.90||$||8.54||$||8.55|
|ADDITIONAL FINANCIAL INFORMATION|
|(Dollars in thousands except per share amounts)(Unaudited)|
|Three Months Ended||Three Months Ended||Three Months Ended|
|PERFORMANCE MEASURES AND RATIOS||Sep. 30, 2018||Jun. 30, 2018||Sep. 30, 2017|
|Return on average common equity||12.57||%||10.26||%||8.88||%|
|Return on average assets||1.08||%||0.90||%||0.78||%|
|Net interest margin||4.02||%||4.06||%||4.27||%|
|Three Months Ended||Three Months Ended||Three Months Ended|
|AVERAGE BALANCES||Sep. 30, 2018||Jun. 30, 2018||Sep. 30, 2017|
|Average earning assets||852,083||820,854||778,412|
|Average total loans||755,146||750,575||708,244|
|Average common equity||74,799||72,993||69,438|
|EQUITY ANALYSIS||Sep. 30, 2018||Jun. 30, 2018||Sep. 30, 2017|
|Total common equity||$||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