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Community West Bancshares Earns $1.7 Million in Second Quarter of 2014

GOLETA, Calif., July 24, 2014 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (Nasdaq:CWBC), parent company of Community West Bank (Bank), today reported net income of $1.7 million in the second quarter of 2014 (2Q14) compared to $1.4 million in the first quarter of 2014 (1Q14) and $2.1 million in the second quarter a year ago (2Q13). In the first six months of 2014, Community West earned $3.1 million compared to $3.2 million in the first six months a year ago.

Pretax income was $5.4 million for the first six months of 2014 compared to $3.2 million for the first six months a year ago. The net income for the comparative periods was virtually the same, however, due to the Company's tax position in 2013, there was no income tax expense recorded.

"Community West's second quarter success was fueled by ongoing improvements in credit quality coupled with solid loan and deposit growth," stated Martin E. Plourd, President and Chief Executive Officer. "We have seen improvements across all areas of our operations during the first six months of the year and continue to benefit from a healthy net interest margin. The improvement in operating efficiencies enhances our profitability. We remain focused on expanding our banking franchise and refining our marketing outreach in the communities we serve while continuing to increase shareholder value."

2Q14 Financial Highlights

  • Net income was $1.7 million.
  • Earnings of $0.18 per diluted share.
  • Net interest margin was 4.55% in 2Q14, compared to 4.65% in 1Q14 and 4.53% in 2Q13.
  • Net loans increased 8.0% to $484.1 million, compared to $448.4 million a year earlier.
  • Nonaccrual loans were $15.8 million at June 30, 2014, compared to $15.7 million at March 31, 2014 and $20.7 million a year ago.
  • The total allowance for loan losses equaled 2.48% of total loans held for investment at June 30, 2014, compared to 2.71% at March 31, 2014 and 3.14% a year ago.
  • Redeemed $7,804,000 of 9% cumulative perpetual preferred stock Series A, leaving remaining balance of $7,796,000.
  • Community West Bank's capital ratios continue to be strong - Total risk-based capital ratio was 15.30% and Tier 1 leverage ratio was 11.13% at June 30, 2014.

Including $329,000 of preferred stock dividends, and a discount on partial redemption of preferred stock of $144,000, the net income available to common stockholders was $1.5 million, or $0.18 per diluted share, in 2Q14 compared to $1.2 million, or $0.15 per diluted share, in 1Q14 and $1.9 million, or $0.23 per diluted share, in 2Q13.

Credit Quality

"Most asset quality metrics continue to stabilize and/or improve, with real estate owned decreasing and nonaccrual loans unchanged during the quarter," said Plourd. "As asset quality continues to improve, we recorded a negative provision for loan losses of $1.0 million in 2Q14, compared to a negative provision of $1.4 million in 1Q14, and a negative provision of $1.1 million in the second quarter a year ago." Contributing to the 2Q14 allowance reduction were net loan recoveries of $151,000, compared to net loan recoveries of $519,000 in 1Q14 and net loan charge-offs of $410,000 in 2Q13.

Community West's allowance for loan losses totaled $10.5 million at June 30, 2014, equal to 2.48% of total loans held for investment, compared to 2.71% at March 31, 2014, and 3.14% a year ago. Nonaccrual loans were $15.8 million, or 3.19% of total loans at June 30, 2014, compared to $15.7 million, or 3.25% of total loans, three months earlier, and $20.7 million, or 4.48% of total loans, a year ago.

Of the $15.8 million in nonaccrual loans, $5.8 million (37.0%) were manufactured housing loans, $3.5 million (22.0%) were commercial loans, $2.5 million (16.0%) were commercial real estate loans, $1.7 million (10.5%) were SBA loans, $1.1 million (6.8%) were SBA 504 1st loans, $636,000 (4.0%) were single family real estate loans and $575,000 (3.7%) were home equity line of credit loans.

REO and repossessed assets decreased 83.9% to $610,000 at June 30, 2014, compared to $3.8 million three months earlier and decreased 85.1% compared to $4.1 million a year earlier. Nonaccrual loans plus REO and repossessed assets, net of SBA/USDA guarantees, totaled $16.4 million, or 2.9% of total assets, at June 30, 2014, compared to $17.3 million, or 3.2% of total assets, three months earlier and $22.1 million, or 4.1% of total assets, a year ago.

Income Statement

Community West's second quarter net interest income increased 6.6% to $6.3 million compared to $5.9 million in the second quarter a year ago, and increased 3.1% compared to $6.1 million three months earlier. In the first six months of 2014, Community West's net interest income increased 5.7% to $12.4 million compared to $11.7 million in the first six months of 2013.

"Despite continued pressure on our loan yields, our net interest margin remains well above peer levels due to higher than industry average yields on our loan mix," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. Community West's second quarter net interest margin remained strong at 4.55%, compared to 4.65% in 1Q14 and 4.53%in 2Q13. Year-to-date, the net interest margin improved five basis points to 4.60% compared to 4.55% in the same period a year ago. The net interest margin for the SNL Bank and Thrift Index, comprised of 440 banks at the end of the first quarter of 2014, was 2.83%. "Similar to most financial institutions, the Bank will experience some future pressure on loan yields if the current low-interest rate environment persists," added Baltuskonis.

Non-interest income was $656,000 in 2Q14 compared to $518,000 in 1Q14 and $836,000 in 2Q13. In the first six months of the year, non-interest income was $1.2 million compared to $1.6 million in the first six months of 2013.

Second quarter non-interest expenses were $5.0 million, an 8.9% decrease compared to $5.5 million in 1Q14 and an 11.4% decrease compared to $5.7 million in 2Q13. In the first six months of the year, non-interest expenses decreased 7.1% to $10.6 million compared to $11.4 million in the first six months of 2013. The decrease in non-interest expenses for the quarter and year-to-date period is in part due to the improved credit metrics, which resulted in the decline in loan collection expenses and costs associated with real estate owned.

Balance Sheet

Total assets increased 4.0% to $557.7 million at June 30, 2014, compared to $536.1 million a year ago. Total assets were $550.3 million at March 31, 2014.

"The loan pipeline has been fairly active in 2014 within the commercial loans and commercial real estate loan sectors. As a result, net loans increased 2.3% at June 30, 2014, compared to three months earlier and increased 8.0% compared to a year earlier," said Baltuskonis. Net loans were $484.1 million at June 30, 2014, compared to $473.1 million at March 31, 2014, and $448.4 million a year ago. Commercial real estate loans outstanding were up 14.6% from year ago levels to $158.6 million at June 30, 2014, and comprise 32.1% of the total loan portfolio. Manufactured housing loans were down 1.0% from year ago levels to $170.7 million and represent 34.5% of total loans. SBA loans decreased 14.7% from a year ago to $67.1 million and represent 13.6% of the total loan portfolio and commercial loans increased 62.1% from year ago levels to $69.1 million and represent 14.0% of the total loan portfolio.

Total deposits increased 5.8% to $472.3 million at June 30, 2014, compared to $446.5 million at March 31, 2014, and increased 8.6 % compared to $434.9 million a year ago. Non-interest-bearing deposit accounts increased 6.2% to $56.8 million at June 30, 2014, compared to $53.5 million at March 30, 2014, and increased 6.9% from $53.1 million a year ago. Interest-bearing deposit accounts increased 7.4% to $275.4 million at June 30, 2014, compared to $256.3 million three months earlier, and were up 6.8% compared to $257.8 million a year ago. Core deposits, defined as non-interest-bearing checking, interest-bearing checking, money market accounts, savings accounts and retail certificates of deposit totaled $380.0 million at June 30, 2014 and comprise 80.4% of total deposits, compared to $356.5 million, or 79.8% of total deposits, at March 31, 2014, and $356.6 million, or 82.0% of total deposits, a year ago.

Stockholders' equity was $64.3 million at June 30, 2014, compared to $70.5 million at March 31, 2014, and $62.1 million a year ago. Book value per common share was $6.90 at June 30, 2014, compared to $6.70 at March 31, 2014, and $5.98 a year ago.

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, which has five full-service California branch banking offices, in Goleta, Santa Barbara, Santa Maria, Ventura and Westlake Village. The principal business activities of the Company are Relationship banking, Mortgage lending and SBA lending.

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,
2014 2014 2013 2014 2013
Interest income
Loans, including fees $ 6,911 $ 6,761 $ 6,850 $ 13,672 $ 13,644
Investment securities and other 211 200 194 411 376
Total interest income 7,122 6,961 7,044 14,083 14,020
Interest expense
Deposits 688 642 760 1,330 1,519
Other borrowings and convertible debt 161 237 401 398 808
Total interest expense 849 879 1,161 1,728 2,327
Net interest income 6,273 6,082 5,883 12,355 11,693
Provision for credit losses (1,011) (1,371) (1,084) (2,382) (1,280)
Net interest income after provision for credit losses 7,284 7,453 6,967 14,737 12,973
Non-interest income
Other loan fees 266 175 385 441 615
Document processing fees 116 78 145 194 255
Service Charges 71 72 85 143 170
Loan servicing, net 63 32 24 95 99
Gains from loan sales, net 28 65 111 93 272
Other 112 96 86 208 197
Total non-interest income 656 518 836 1,174 1,608
Non-interest expenses
Salaries and employee benefits 3,193 3,227 3,355 6,420 6,854
Occupancy, net 459 439 458 898 913
Professional services 371 360 290 731 605
Advertising and marketing 179 121 187 300 280
Loan servicing and collection 134 265 347 399 600
Data processing 109 172 125 281 275
FDIC assessment 90 80 261 170 526
Depreciation 81 75 74 156 148
Stock options 30 211 16 241 31
Net (gain) loss on sales/write-downs of foreclosed real
estate and repossessed assets (190) 40 75 (150) 176
Other 575 535 489 1,110 958
Total non-interest expenses 5,031 5,525 5,677 10,556 11,366
Income before provision for income taxes 2,909 2,446 2,126 5,355 3,215
Income taxes 1,203 1,004 -- 2,207 --
Net Income 1,706 1,442 2,126 3,148 3,215
Dividends and accretion on preferred stock 329 273 262 602 524
Discount on partial redemption of preferred stock (144) -- -- (144) --
Net income available to common stockholders $ 1,521 $ 1,169 $ 1,864 $ 2,690 $ 2,691
Earnings per share:
Basic $ 0.19 $ 0.15 $ 0.30 $ 0.33 $ 0.44
Diluted $ 0.18 $ 0.15 $ 0.23 $ 0.33 $ 0.35
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
June 30, March 31, June 30, December 31,
2014 2014 2013 2013
Cash and cash equivalents $ 1,807 $ 1,945 $ 1,023 $ 1,472
Time and interest-earning deposits in other financial institutions 15,695 17,204 36,360 18,105
Investment securities 30,030 29,602 25,671 28,160
Loans:
Commercial 69,149 67,237 42,658 62,420
Commercial real estate 158,594 151,793 138,393 142,678
SBA 67,119 68,542 78,648 71,352
Manufactured housing 170,712 170,754 172,365 172,055
Single family real estate 13,696 10,646 9,873 10,150
HELOC 15,179 15,056 17,036 15,418
Other 109 451 1,833 140
Total loans 494,558 484,479 460,806 474,213
Loans, net
Held for sale 70,530 65,931 64,133 64,399
Held for investment 424,028 418,548 396,673 409,814
Less: Allowance (10,496) (11,356) (12,456) (12,208)
Net held for investment 413,532 407,192 384,217 397,606
NET LOANS 484,062 473,123 448,350 462,005
Other assets 26,147 28,383 24,694 29,258
TOTAL ASSETS $ 557,741 $ 550,257 $ 536,098 $ 539,000
Deposits
Non-interest-bearing demand $ 56,796 $ 53,470 $ 53,124 $ 52,461
Interest-bearing demand 275,418 256,329 257,785 258,445
Savings 15,917 16,161 16,273 16,158
CDs over 100K 110,170 107,217 94,397 95,979
CDs under 100K 13,993 13,348 13,292 13,092
Total Deposits 472,294 446,525 434,871 436,135
Other borrowings 18,000 30,000 35,667 31,442
Other liabilities 3,167 3,270 3,474 3,867
TOTAL LIABILITIES 493,461 479,795 474,012 471,444
Stockholders' equity 64,280 70,462 62,086 67,556
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 557,741 $ 550,257 $ 536,098 $ 539,000
Shares outstanding 8,190 8,184 7,800 7,867
Book value per common share $ 6.90 $ 6.70 $ 5.98 $ 6.60
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
Quarter Ended Quarter Ended Quarter Ended Six Months Ended
PERFORMANCE MEASURES AND RATIOS Jun. 30, 2014 Mar. 31, 2014 Jun. 30, 2013 Jun. 30, 2014 Jun. 30, 2013
Return on average common equity 12.30% 10.97% 21.21% 11.65% 16.71%
Return on average assets 1.21% 1.07% 1.61% 1.14% 1.23%
Efficiency ratio 72.61% 83.71% 84.37% 78.02% 85.38%
Net interest margin 4.55% 4.65% 4.53% 4.60% 4.55%
Quarter Ended Quarter Ended Quarter Ended Six Months Ended
AVERAGE BALANCES Jun. 30, 2014 Mar. 31, 2014 Jun. 30, 2013 Jun. 30, 2014 Jun. 30, 2013
Average assets $ 567,147 $ 545,777 $ 530,607 $ 556,521 $ 527,694
Average earning assets 552,653 530,811 520,991 541,791 518,751
Average total loans 489,338 476,341 456,783 482,875 458,751
Average deposits 469,963 442,119 430,770 456,118 428,600
Average equity (including preferred stock) 70,469 68,891 55,632 69,684 54,170
Average common equity (excluding preferred stock) 55,641 53,291 40,201 54,472 38,805
EQUITY ANALYSIS Jun. 30, 2014 Mar. 31, 2014 Jun. 30, 2013
Total equity $ 64,280 $ 70,462 $ 62,086
Less: senior preferred stock 7,796 15,600 15,475
Total common equity $ 56,484 $ 54,862 $ 46,611
Common stock outstanding 8,190 8,184 7,800
Book value per common share $ 6.90 $ 6.70 $ 5.98
ASSET QUALITY Jun. 30, 2014 Mar. 31, 2014 Jun. 30, 2013
Nonaccrual loans $ 15,772 $ 15,722 $ 20,660
Nonaccrual loans/total loans 3.19% 3.25% 4.48%
REO and repossessed assets $ 610 $ 3,781 $ 4,100
Less: SBA/USDA-guaranteed amounts 0 2,165 2,640
Net REO and repossessed assets $ 610 $ 1,616 $ 1,460
Nonaccrual loans plus net REO $ 16,382 $ 17,338 $ 22,120
Nonaccrual loans plus net REO/total assets 2.94% 3.15% 4.13%
Net loan (recoveries)/charge-offs in the quarter $ (151) $ (519) $ 410
Net (recoveries)/charge-offs in the quarter/total loans -0.03% -0.11% 0.09%
Allowance for loan losses $ 10,496 $ 11,356 $ 12,456
Plus: Reserve for undisbursed loan commitments 57 61 76
Total allowance for credit losses $ 10,553 $ 11,417 $ 12,532
Total allowance for loan losses/total loans held for investment 2.48% 2.71% 3.14%
Total allowance for loan losses/nonaccrual loans 66.55% 72.23% 60.29%
Community West Bancshares
Tier 1 leverage ratio 11.35% 12.94% 11.71%
Tier 1 risk-based capital ratio 14.30% 15.96% 15.00%
Total risk-based capital ratio 15.57% 17.23% 16.68%
Community West Bank
Tier 1 leverage ratio 11.13% 12.36% 11.65%
Tier 1 risk-based capital ratio 14.03% 15.25% 14.83%
Total risk-based capital ratio 15.30% 16.52% 16.10%
INTEREST SPREAD ANALYSIS Jun. 30, 2014 Mar. 31, 2014 Jun. 30, 2013
Yield on total loans 5.66% 5.76% 6.01%
Yield on investments 2.28% 2.38% 2.40%
Yield on interest-earning deposits 0.31% 0.22% 0.23%
Yield on earning assets 5.17% 5.32% 5.42%
Cost of interest-bearing deposits 0.66% 0.67% 0.80%
Cost of total deposits 0.59% 0.59% 0.71%
Cost of FHLB advances 2.79% 2.80% 2.93%
Cost of interest-bearing liabilities 0.78% 0.85% 1.11%

CONTACT: Charles G. Baltuskonis, EVP & CFO 805.692.5821 www.communitywestbank.comSource:Community West Bancshares