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Community West Bancshares Earns $1.7 Million in Third Quarter of 2014; Net Loans and Deposits Both Increase 12% Year Over Year and Nonaccrual Loans Decline in 3Q14 by 31%; Quarterly Common Stock Dividend Declared

GOLETA, Calif., Oct. 23, 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 third quarter of 2014 (3Q14) compared to $1.7 million in the second quarter of 2014 (2Q14) and $2.6 million in the third quarter a year ago (3Q13). Third quarter pretax income increased 10.8% to $2.9 million, compared to $2.6 million in the third quarter a year ago.

In the first nine months of 2014, Community West earned $4.9 million compared to $5.9 million in the first nine months a year ago. Pretax income increased 41.4% to $8.3 million for the first nine months of 2014 compared to $5.9 million for the first nine months a year ago. Due to the Company's tax position in 2013, there was no income tax expense recorded for the nine months ended September 30, 2013.

"The core earnings capacity of our franchise is evident in our financial results this quarter, with strong profitability, improving asset quality, solid net interest margin and double-digit loan and deposit growth," stated Martin E. Plourd, President and Chief Executive Officer. "Our focus over the last several quarters has been to grow our base, and the 12% year-over-year growth in both net loans and deposits illustrates that this focus on developing new client relationships is working and, together with our continued progress in reducing nonaccrual loans, demonstrate the dedication and teamwork of our employees. We will continue to work on expanding our banking franchise and refining our marketing outreach to become the premier community bank in the markets we serve."

3Q14 Financial Highlights

  • Net income was $1.7 million, compared to $2.6 million in 3Q13.
  • Pretax income was $2.9 million, compared to $2.6 million in 3Q13.
  • Net interest margin was 4.31% in 3Q14, compared to 4.55% in 2Q14 and 4.54% in 3Q13.
  • Annualized return on average assets was 1.19%.
  • Annualized return on average common equity was 11.86%.
  • Non-interest expenses decreased 13.5% to $4.9 million, compared to $5.6 million in 3Q13.
  • Total deposits increased 12.4% to $484.8 million at September 30, 2014, compared to $431.1 million a year ago.
  • Net loans increased 11.5% to $490.0 million at September 30, 2014, compared to $439.4 million a year earlier.
  • Nonaccrual loans declined 30.6% to $10.9 million at September 30, 2014, compared to $15.8 million three months earlier and decreased 28.4% compared to $15.3 million a year ago.
  • Book value per common share increased 13.3% to $7.07 at September 30, 2014, compared to $6.24 a year ago.
  • Community West Bank's capital ratios continue to be strong with its total risk-based capital ratio at 15.45% and Tier 1 leverage ratio at 11.29% at September 30, 2014.

Including $176,000 of preferred stock dividends, the net income available to common stockholders was $1.5 million, or $0.18 per diluted share, in 3Q14 compared to $1.5 million, or $0.18 per diluted share, in 2Q14 and $2.4 million, or $0.29 per diluted share, in 3Q13.

Credit Quality

"All of our asset quality metrics improved during the quarter, with both nonaccrual loan balances and real estate owned declining compared to the prior quarter end," said Plourd. "As a result of this strength, along with the loan loss reserves already in place, we recorded a negative provision for loan losses of $1.2 million in 3Q14, compared to a negative provision of $1.0 million in 2Q14, and a negative provision of $1.6 million in the third quarter a year ago." Contributing to the 3Q14 allowance reduction were net loan charge-offs of only $82,000, compared to net loan recoveries of $151,000 in 2Q14 and net loan recoveries of $761,000 in 3Q13. The decline in nonaccrual loans for 3Q14 was primarily due to manufactured housing loans being upgraded for sustained payment performance.

Community West's allowance for loan losses totaled $9.2 million at September 30, 2014, equal to 2.14% of total loans held for investment, compared to 2.48% at June 30, 2014, and 3.01% a year ago. Nonaccrual loans declined 30.6% to $10.9 million, or 2.19% of total loans at September 30, 2014, compared to $15.8 million, or 3.19% of total loans, three months earlier, and decreased 28.4% compared to $15.3 million, or 3.39% of total loans, a year ago.

Of the $10.9 million in nonaccrual loans, $3.3 million (30.3%) were commercial loans, $2.4 million (22.0%) were commercial real estate loans, $1.6 million (14.8%) were SBA loans, $1.5 million (14.0%) were manufactured housing loans, $1.1 million (9.6%) were SBA 504 1st loans, $629,000 (5.8%) were single family real estate loans and $381,000 (3.5%) were home equity line of credit loans.

REO and repossessed assets decreased 22.1% to $475,000 at September 30, 2014, compared to $610,000 three months earlier and decreased 88.1% compared to $4.0 million a year earlier. Nonaccrual loans plus REO and repossessed assets, net of SBA/USDA guarantees, totaled $11.4 million, or 2.0% of total assets, at September 30, 2014, compared to $16.4 million, or 2.9% of total assets, three months earlier and $17.0 million, or 3.2% of total assets, a year ago.

Income Statement

Community West's third quarter net interest income was $6.1 million compared to $6.0 million in the third quarter a year ago and $6.3 million three months earlier. In the first nine months of 2014, Community West's net interest income increased 3.9% to $18.4 million compared to $17.7 million in the first nine months of 2013.

"Continued pressure on loan yields led to some net interest margin contraction during the quarter, although, our margin still remains well above peer levels," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. "Like most financial institutions, we expect continued pressure on loan yields in the near future if the current low-interest rate environment persists." Community West's third quarter net interest margin was 4.31%, compared to 4.55% in 2Q14 and 4.54% in 3Q13. Year-to-date, the net interest margin declined five basis points to 4.50% compared to 4.55% in the same period a year ago. The average net interest margin was 2.81% for the 324 banks that make up the SNL U.S. Bank Index as of June 30, 2014. Non-interest income was $552,000 in 3Q14 compared to $656,000 in 2Q14 and $677,000 in 3Q13. In the first nine months of the year, non-interest income was $1.7 million compared to $2.3 million in the first nine months of 2013.

Third quarter non-interest expenses were $4.9 million, a 3.0% decrease compared to $5.0 million in 2Q14 and a 13.5% decrease compared to $5.6 million in 3Q13. In the first nine months of the year, non-interest expenses decreased 9.2% to $15.4 million compared to $17.0 million in the first nine 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 2.6% to $572.1 million at September 30, 2014, compared to $557.7 million at June 30, 2014 and increased 6.8% compared to $535.5 million a year ago.

"As a result of growth in both the commercial loans and commercial real estate loan sectors, net loans increased 11.5% year over year. The loan pipeline has been fairly active this year, and we expect the trend to continue," said Baltuskonis. Net loans were $490.0 million at September 30, 2014, compared to $484.1 million at June 30, 2014, and $439.4 million a year ago. Commercial real estate loans outstanding were up 24.4% from year ago levels to $164.3 million at September 30, 2014, and comprise 32.9% of the total loan portfolio. Manufactured housing loans were down 1.3% from year ago levels to $169.9 million and represent 34.0% of total loans. Commercial loans increased 59.6% from year ago levels to $72.8 million and represent 14.6% of the total loan portfolio and SBA loans decreased 16.2% from a year ago to $62.3 million and represent 12.5% of the total loan portfolio.

Total deposits increased 2.6% to $484.8 million at September 30, 2014, compared to $472.3 million at June 30, 2014, and increased 12.4% compared to $431.1 million a year ago. Non-interest-bearing deposit accounts increased 11.2% to $63.2 million at September 30, 2014, compared to $56.8 million at June 30, 2014, and increased 13.9% from $55.5 million a year ago. Interest-bearing deposit accounts increased modestly to $277.7 million at September 30, 2014, compared to $275.4 million three months earlier, and were up 9.4% compared to $254.0 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 $388.7 million at September 30, 2014 and comprise 80.2% of total deposits, compared to $380.0 million, or 80.4% of total deposits, at June 30, 2014, and $355.2 million, or 82.4% of total deposits, a year ago.

Stockholders' equity was $65.8 million at September 30, 2014, compared to $64.3 million at June 30, 2014, and $64.6 million a year ago. Book value per common share was $7.07 at September 30, 2014, a 2.5% increase compared to $6.90 at June 30, 2014, and a 13.3% increase compared to $6.24 a year ago.

Company Announces Partial Redemption of Preferred Stock

In furtherance of its previously announced Preferred Stock Repayment Strategy, the Company redeemed another $782,000 of its 9% Cumulative Perpetual Preferred Stock, Series A, on October 6, 2014, leaving a remaining balance of $7,014,000. After this latest redemption, 2014 redemptions now total $8,586,000 out of the original Preferred Stock balance of $15,600,000. The Company's Board of Directors will continue to consider regular redemptions, and that any such redemptions are subject to regulatory approvals and will be based on the Company's financial condition and results of operations at the time. It is anticipated that any future redemptions would be payable from future earnings.

Company Declares Cash Dividend of $0.02 Per Common Share

The Company's Board of Directors has declared a quarterly cash dividend of $0.02 per common share. The dividend will be payable November 28, 2014, to common shareholders of record on November 10, 2014.

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 Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2014 2014 2013 2014 2013
Interest income
Loans, including fees $ 6,695 $ 6,911 $ 6,871 $ 20,367 $ 20,515
Investment securities and other 208 211 210 619 586
Total interest income 6,903 7,122 7,081 20,986 21,101
Interest expense
Deposits 709 688 719 2,039 2,238
Other borrowings and convertible debt 126 161 328 524 1,136
Total interest expense 835 849 1,047 2,563 3,374
Net interest income 6,068 6,273 6,034 18,423 17,727
Provision for credit losses (1,178) (1,011) (1,563) (3,560) (2,843)
Net interest income after provision for credit losses 7,246 7,284 7,597 21,983 20,570
Non-interest income
Other loan fees 279 266 229 720 844
Document processing fees 103 116 114 297 369
Service charges 72 71 75 215 245
Gains from loan sales, net 57 28 62 150 334
Other 41 175 197 344 493
Total non-interest income 552 656 677 1,726 2,285
Non-interest expenses
Salaries and employee benefits 2,888 3,193 3,102 9,308 9,956
Occupancy, net 479 459 452 1,377 1,365
Professional services 436 371 308 1,167 913
Advertising and marketing 129 179 94 429 374
Loan servicing and collection 187 134 511 586 1,111
Data processing 144 109 128 425 403
FDIC assessment 83 90 283 253 809
Depreciation 82 81 78 238 226
Stock options 29 30 12 270 43
Net (gain) loss on sales/write-downs of foreclosed real estate and repossessed assets (18) (190) 184 (168) 360
Other 440 575 487 1,550 1,445
Total non-interest expenses 4,879 5,031 5,639 15,435 17,005
Income before provision for income taxes 2,919 2,909 2,635 8,274 5,850
Income tax expense 1,207 1,203 -- 3,414 --
Net Income $ 1,712 $ 1,706 $ 2,635 $ 4,860 $ 5,850
Dividends and accretion on preferred stock $ 176 $ 329 $ 262 $ 778 $ 786
Discount on partial redemption of preferred stock -- (144) -- (144) --
Net income available to common stockholders $ 1,536 $ 1,521 $ 2,373 $ 4,226 $ 5,064
Earnings per share:
Basic $ 0.19 $ 0.19 $ 0.30 $ 0.52 $ 0.75
Diluted $ 0.18 $ 0.18 $ 0.29 $ 0.51 $ 0.60
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
September 30, June 30, September 30, December 31,
2014 2014 2013 2013
Cash and cash equivalents $ 1,486 $ 1,807 $ 1,241 $ 1,472
Time and interest-earning deposits in other financial institutions 27,955 15,695 44,611 18,105
Investment securities 31,104 30,030 25,585 28,160
Loans:
Commercial 72,804 69,149 45,623 62,420
Commercial real estate 164,277 158,594 132,034 142,678
SBA 62,267 67,119 74,327 71,352
Manufactured housing 169,910 170,712 172,126 172,055
Single family real estate 14,065 13,696 10,011 10,150
HELOC 14,820 15,179 15,616 15,418
Other 1,134 109 1,362 140
Total loans 499,277 494,558 451,099 474,213
Loans, net
Held for sale 67,376 70,530 64,187 64,399
Held for investment 431,901 424,028 386,912 409,814
Less: Allowance (9,236) (10,496) (11,654) (12,208)
Net held for investment 422,665 413,532 375,258 397,606
NET LOANS 490,041 484,062 439,445 462,005
Other assets 21,557 26,147 24,599 29,258
TOTAL ASSETS $ 572,143 $ 557,741 $ 535,481 $ 539,000
Deposits
Non-interest-bearing demand $ 63,185 $ 56,796 $ 55,462 $ 52,461
Interest-bearing demand 277,743 275,418 253,978 258,445
Savings 16,218 15,917 16,176 16,158
CDs over 100K 113,694 110,170 92,351 95,979
CDs under 100K 13,910 13,993 13,124 13,092
Total Deposits 484,750 472,294 431,091 436,135
Other borrowings 18,000 18,000 35,442 31,442
Other liabilities 3,639 3,167 4,300 3,867
TOTAL LIABILITIES 506,389 493,461 470,833 471,444
Stockholders' equity 65,754 64,280 64,648 67,556
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 572,143 $ 557,741 $ 535,481 $ 539,000
Shares outstanding 8,203 8,190 7,866 7,867
Book value per common share $ 7.07 $ 6.90 $ 6.24 $ 6.60
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
Quarter Ended Quarter Ended Quarter Ended Nine Months Ended
PERFORMANCE MEASURES AND RATIOS Sep. 30, 2014 Jun. 30, 2014 Sep. 30, 2013 Sep. 30, 2014 Sep. 30, 2013
Return on average common equity 11.86% 12.30% 21.91% 11.73% 18.62%
Return on average assets 1.19% 1.21% 1.95% 1.16% 1.47%
Efficiency ratio 73.70% 72.61% 83.99% 76.60% 84.97%
Net interest margin 4.31% 4.55% 4.54% 4.50% 4.55%
Quarter Ended Quarter Ended Quarter Ended Nine Months Ended
AVERAGE BALANCES Sep. 30, 2014 Jun. 30, 2014 Sep. 30, 2013 Sep. 30, 2014 Sep. 30, 2013
Average assets $ 571,895 $ 567,147 $ 535,552 $ 561,747 $ 530,284
Average earning assets 559,156 552,653 526,716 547,644 521,252
Average total loans 495,213 489,338 455,646 487,033 457,705
Average deposits 484,359 469,963 432,725 465,635 429,977
Average equity (including preferred stock) 65,059 70,469 63,214 68,125 57,439
Average common equity (excluding preferred stock) 57,263 55,641 47,716 55,413 42,007
EQUITY ANALYSIS Sep. 30, 2014 Jun. 30, 2014 Sep. 30, 2013
Total equity $ 65,754 $ 64,280 $ 64,648
Less: senior preferred stock 7,796 7,796 15,542
Total common equity $ 57,958 $ 56,484 $ 49,106
Common stock outstanding 8,203 8,190 7,866
Book value per common share $ 7.07 $ 6.90 $ 6.24
ASSET QUALITY Sep. 30, 2014 Jun. 30, 2014 Sep. 30, 2013
Nonaccrual loans $ 10,939 $ 15,772 $ 15,277
Nonaccrual loans/total loans 2.19% 3.19% 3.39%
REO and repossessed assets $ 475 $ 610 $ 3,975
Less: SBA/USDA-guaranteed amounts 0 0 2,282
Net REO and repossessed assets $ 475 $ 610 $ 1,693
Nonaccrual loans plus net REO $ 11,414 $ 16,382 16,970
Nonaccrual loans plus net REO/total assets 1.99% 2.94% 3.17%
Net loan (recoveries)/charge-offs in the quarter $ 82 $ (151) $ (761)
Net (recoveries)/charge-offs in the quarter/total loans 0.02% -0.03% -0.17%
Allowance for loan losses $ 9,236 $ 10,496 $ 11,654
Plus: Reserve for undisbursed loan commitments 61 57 73
Total allowance for credit losses $ 9,297 $ 10,553 $ 11,727
Total allowance for loan losses/total loans held for investment 2.14% 2.48% 3.01%
Total allowance for loan losses/nonaccrual loans 84.43% 66.55% 76.28%
Community West Bancshares *
Tier 1 leverage ratio 11.51% 11.35% 12.10%
Tier 1 risk-based capital ratio 14.47% 14.30% 16.05%
Total risk-based capital ratio 15.73% 15.57% 17.68%
Community West Bank *
Tier 1 leverage ratio 11.29% 11.13% 12.06%
Tier 1 risk-based capital ratio 14.19% 14.03% 15.89%
Total risk-based capital ratio 15.45% 15.30% 17.16%
INTEREST SPREAD ANALYSIS Sep. 30, 2014 Jun. 30, 2014 Sep. 30, 2013
Yield on total loans 5.36% 5.66% 5.98%
Yield on investments 2.18% 2.28% 2.56%
Yield on interest earning deposits 0.28% 0.31% 0.23%
Yield on earning assets 4.90% 5.17% 5.33%
Cost of interest-bearing deposits 0.67% 0.66% 0.76%
Cost of total deposits 0.58% 0.59% 0.66%
Cost of FHLB advances 2.78% 2.79% 2.93%
Cost of interest-bearing liabilities 0.75% 0.78% 1.01%
* Capital ratios are preliminary until the Call Report is filed.

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