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Community West Bancshares Earns $1.1 Million in Second Quarter 2016; Fueled by Loan and Deposit Growth, Strong Net Interest Margin and Improving Asset Quality; Book Value Per Common Share Increases to $7.81; Declares Quarterly Cash Dividend of $0.035 Pe

GOLETA, Calif, July 29, 2016 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported net income of $1.1 million in the second quarter of 2016 (2Q16) compared to net income of $1.3 million in the first quarter of 2016 (1Q16) and a net loss of $2.3 million in the second quarter of 2015 (2Q15).

In the first six months of the year, Community West reported net income of $2.4 million compared to a net loss of $572,000 in the first six months of 2015. Excluding the net loan litigation settlement, Community West’s net income for the second quarter and the six-month period in 2015 would have been $1.9 million and $3.6 million, respectively. (See “NON-GAAP FINANCIAL INFORMATION”)

“Our momentum during the first half of the year has been fueled by robust loan and deposit growth, and continued improvements in credit quality,” stated Martin E. Plourd, President and Chief Executive Officer. “Our results reflect the investment in our future, with new branches in San Luis Obispo and Oxnard scheduled to open later this year, as well as the relocation of our Santa Maria branch. With the consolidation among banks in our market areas in recent years, we continue to offer responsive and flexible service from a locally-owned and operated bank.”

2Q16 Financial Highlights

  • Nonaccrual loans, net, decreased 49.4% to $4.0 million, or 0.70% of net loans at June 30, 2016, compared to $7.9 million, or 1.53% of net loans, a year ago, representing the lowest level since 3Q07.
  • Net income available to common stockholders for 2Q16 was $1.1 million, or $0.13 per diluted share.
  • Annualized return on average assets was 0.72%.
  • Annualized return on average common equity was 7.15%.
  • Net interest margin was 4.47%.
  • Net loans increased 10.3% to $564.8 million at June 30, 2016, compared to $511.9 million a year ago.
  • Non-interest-bearing deposits increased 15.5% to $83.5 million at June 30, 2016, compared to $72.3 million a year ago.
  • Book value per common share was $7.81 at June 30, 2016, compared to $7.19 a year ago.
  • The Bank continues to be well-capitalized per banking regulations with its total risk-based capital ratio at 13.53% and Tier 1 leverage ratio at 10.53% at June 30, 2016.
  • Received approval to open a full-service branch office in Oxnard.

Income Statement

“Higher than industry average loan yields and periodic loan interest recoveries continue to contribute to our net interest margin remaining in the mid-4% range,” said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. Second quarter net interest margin was 4.47% compared to 4.45% in 1Q16 and 5.08% in 2Q15. In 2Q15, 51 basis points of the asset yields were attributable to two large past due loan relationships which were paid in full. In the first six months of 2016, the net interest margin was 4.46%. In the first six months of 2015, the same two loans contributed 26 basis points to the asset yields.

Net interest income for 2Q16 was $6.9 million, a 3.0% increase compared to $6.7 million in the preceding quarter and a 2.8% decrease compared to $7.1 million in 2Q15. Year-to-date, net interest income increased to $13.6 million compared to $13.5 million in the same period a year ago. Non-interest income was $577,000 in 2Q16, a slight decrease compared to $579,000 in 1Q16 and a 21.7% decrease compared to $737,000 in 2Q15. In the first six months of 2016, non-interest income was $1.2 million, which was relatively unchanged compared to the first six months of 2015.

Non-interest expenses totaled $5.5 million in 2Q16, compared to $5.3 million in 1Q16. The increase compared to the preceding quarter is largely due to the business development of the Bank’s Northern region, consisting of San Luis Obispo and north Santa Barbara counties. In the second quarter of 2015, we settled a claim for $7.2 million, net, and, primarily as a result of this settlement, Community West’s 2Q15 non-interest expenses totaled $12.4 million and non-interest expenses for the first six months of 2015 totaled $17.2 million. Excluding this one-time settlement, non-interest expenses would have been approximately $5.2 million in 2Q15 and would have been approximately $10.0 million for the first six months of 2015. (See “NON-GAAP FINANCIAL INFORMATION”) Year-to-date non-interest expenses were $10.8 million compared to $17.2 million in the like period a year ago.

Balance Sheet

Total assets were $642.6 million at June 30, 2016, a 3.2% increase compared to three months earlier and a 9.4% increase compared to one year ago. Net loans increased 4.6% to $564.8 million at June 30, 2016, compared to $540.2 million at March 31, 2016, and increased 10.3% compared to $511.9 million a year ago. Commercial real estate loans outstanding were up 21.2% from year ago levels to $207.7 million at June 30, 2016, and comprise 36.3% of the total loan portfolio. Manufactured housing loans were up 10.2% from year ago levels to $188.3 million and represent 32.9% of total loans. Commercial loans increased 14.0% from year ago levels to $106.7 million and represent 18.7% of the total loan portfolio and SBA loans decreased 22.8% from a year ago to $41.2 million and represent 7.2% of the total loan portfolio.

Deposits totaled $565.2 million at June 30, 2016, up 3.5% compared to $546.1 million at March 31, 2016 and grew 12.9% compared to $500.6 million a year earlier. Core deposits, defined as non-interest-bearing checking, interest-bearing checking, money market accounts, savings accounts and retail certificates of deposit totaled $424.5 million at June 30, 2016 and comprise 75.1% of total deposits, compared to $392.8 million, or 78.5% of total deposits, a year ago.

Stockholders’ equity was $63.2 million at June 30, 2016, compared to $62.4 million at March 31, 2016, and $64.5 million a year ago. Book value per common share improved to $7.81 at June 30, 2016 compared to $7.71 at March 31, 2016, and $7.19 a year ago.

Credit Quality

“Asset quality continues to improve and is now better than the average for both national banks and banks of our size. Due to robust loan growth, especially during the end of the quarter, we recorded a provision for loan losses during the second quarter,” said Plourd. The loan loss provision was $61,000 in 2Q16, compared to a negative loan loss provision of $247,000 in 1Q16, and a negative provision of $584,000 in 2Q15. Net loan recoveries were $148,000 in 2Q16 compared to $150,000 in 1Q16 and $552,000 in 2Q15.

The allowance for loan losses was $7.0 million at June 30, 2016, or 1.37% of total loans held for investment, compared to 1.41% at March 31, 2016, and 1.60% a year ago. Net nonaccrual loans decreased 16.7% to $4.0 million, or 0.70% of total loans at June 30, 2016, compared to $4.8 million, or 0.88% of total loans, three months earlier, and decreased 49.4% compared to $7.9 million, or 1.53% of total loans, a year ago.

Of the $4.0 million in net nonaccrual loans, $1.2 million were manufactured housing loans, $966,000 were SBA 504 1st loans, $852,000 were commercial real estate loans, $541,000 were home equity loans, $224,000 were SBA loans and $199,000 were single family real estate loans.

Other assets acquired through foreclosure totaled $129,000 at June 30, 2016, compared to $176,000 three months earlier and $267,000 a year earlier. Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $4.1 million, or 0.64% of total assets, at June 30, 2016, compared to $5.0 million, or 0.80% of total assets, three months earlier and $8.2 million, or 1.40% of total assets, a year ago.

Cash Dividend Declared

The Company’s Board of Directors declared a quarterly cash dividend of $0.035 per common share, payable August 31, 2016 to common shareholders of record on August 12, 2016.

Stock Repurchase Program
On August 31, 2015, the Company announced that the Board of Directors authorized a common stock repurchase program of up to $3 million. During 2Q16, the Company bought back 30,530 shares. As of June 30, 2016, 141,783 shares had been repurchased at an average price of $7.08 per share.

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 and one loan production office in San Luis Obispo. The principal business activities of the Company are Relationship business banking, Manufactured Housing 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,
2016 2016 2015 2016 2015
Interest income
Loans, including fees $ 7,414 $ 7,175 $ 7,410 $ 14,589 $ 14,122
Investment securities and other 260 269 285 529 590
Total interest income 7,674 7,444 7,695 15,118 14,712
Interest expense
Deposits 704 651 569 1,355 1,174
Other borrowings and convertible debt 73 72 15 145 76
Total interest expense 777 723 584 1,500 1,250
Net interest income 6,897 6,721 7,111 13,618 13,462
Provision for loan losses 61 (247) (584) (186) (1,552)
Net interest income after provision for loan losses 6,836 6,968 7,695 13,804 15,014
Non-interest income
Other loan fees 282 275 370 557 545
Document processing fees 136 115 131 251 223
Service charges 102 90 87 192 160
Other 57 99 149 156 289
Total non-interest income 577 579 737 1,156 1,217
Non-interest expenses
Salaries and employee benefits 3,494 3,452 3,202 6,946 6,317
Occupancy, net 581 486 487 1,067 932
Professional services 278 179 276 457 524
Advertising and marketing 212 81 152 293 232
Depreciation 175 149 96 324 187
Data processing 169 171 134 340 253
FDIC assessment 99 97 82 196 153
Stock-based compensation 84 80 218 164 260
Loan servicing and collection (89) 179 182 90 271
Loan litigation settlement, net - - 7,153 - 7,153
Other 503 462 399 965 870
Total non-interest expenses 5,506 5,336 12,381 10,842 17,152
Income (loss) before provision for income taxes 1,907 2,211 (3,949) 4,118 (921)
Provision for income taxes 782 928 (1,607) 1,710 (349)
Net income (loss) 1,125 1,283 (2,342) 2,408 (572)
Dividends and accretion on preferred stock - - 136 - 276
Discount on partial redemption of preferred stock - - (110) - (129)
Net income (loss) available (attributable) to common stockholders $ 1,125 $ 1,283 $ (2,368) $ 2,408 $ (719)
Earnings per share:
Basic $ 0.14 $ 0.16 $ (0.29) $ 0.30 $ (0.09)
Diluted $ 0.13 $ 0.16 $ (0.29) $ 0.29 $ (0.09)

COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
June 30, March 31, June 30, December 31,
2016 2016 2015 2015
Cash and cash equivalents $ 2,665 $ 2,499 $ 1,379 $ 2,789
Time and interest-earning deposits in other financial institutions 24,604 26,538 22,008 32,829
Investment securities 30,782 35,633 31,940 30,466
Loans:
Commercial 106,650 107,386 93,582 107,510
Commercial real estate 207,664 185,458 171,258 179,491
SBA 41,176 42,890 53,381 47,880
Manufactured housing 188,315 182,018 170,860 177,891
Single family real estate 17,203 17,919 18,215 19,073
HELOC 10,803 10,885 11,226 10,934
Other 43 425 595 683
Total loans 571,854 546,981 519,117 543,462
Loans, net
Held for sale 60,086 61,897 65,484 64,488
Held for investment 511,768 485,084 453,633 478,974
Less: Allowance for loan losses (7,028) (6,819) (7,243) (6,916)
Net held for investment 504,740 478,265 446,390 472,058
NET LOANS 564,826 540,162 511,874 536,546
Other assets 19,747 17,923 20,073 18,583
TOTAL ASSETS $ 642,624 $ 622,755 $ 587,274 $ 621,213
Deposits
Non-interest-bearing demand $ 83,524 $ 70,587 $ 72,256 $ 76,469
Interest-bearing demand 250,036 250,404 251,238 250,509
Savings 14,173 14,294 14,312 13,690
Certificates of deposit ($250,000 or more) 74,622 67,995 44,694 66,722
Other certificates of deposit 142,829 142,795 118,097 136,948
Total deposits 565,184 546,075 500,597 544,338
Other borrowings 10,500 10,500 20,000 10,500
Other liabilities 3,702 3,741 2,129 4,431
TOTAL LIABILITIES 579,386 560,316 522,726 559,269
Stockholders' equity 63,238 62,439 64,548 61,944
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 642,624 $ 622,755 $ 587,274 $ 621,213
Shares outstanding 8,098 8,103 8,204 8,206
Book value per common share $ 7.81 $ 7.71 $ 7.19 $ 7.55

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
Three Months Ended Three Months Ended Three Months Ended Six Months Ended
PERFORMANCE MEASURES AND RATIOSJun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015 Jun. 30, 2016Jun. 30, 2015
Return on average common equity 7.15% 8.23% -15.07% 7.69% -1.87%
Return on average assets 0.72% 0.83% -1.64% 0.78% -0.20%
Efficiency ratio 73.67% 73.10% 157.64% 73.39% 116.83%
Net interest margin 4.47% 4.45% 5.08% 4.46% 4.87%
Three Months Ended Three Months Ended Three Months Ended Six Months Ended
AVERAGE BALANCESJun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015 Jun. 30, 2016Jun. 30, 2015
Average assets$ 631,318 $ 618,283 $ 572,077 $ 624,808 $ 568,198
Average earning assets 620,125 607,872 561,447 613,999 557,714
Average total loans 558,841 543,555 496,691 551,198 495,333
Average deposits 553,943 540,539 493,414 547,241 487,506
Average equity (including preferred stock) 63,277 62,678 68,322 62,958 67,773
Average common equity (excluding preferred stock) 63,277 62,678 62,336 62,958 61,639
EQUITY ANALYSISJun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015
Total equity$ 63,238 $ 62,439 $ 64,548
Less: senior preferred stock - - (5,574)
Total common equity$ 63,238 $ 62,439 $ 58,974
Common stock outstanding 8,098 8,103 8,204
Book value per common share$ 7.81 $ 7.71 $ 7.19
ASSET QUALITYJun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015
Nonaccrual loans, net$ 3,988 $ 4,807 $ 7,949
Nonaccrual loans, net/total loans 0.70% 0.88% 1.53%
Other assets acquired through foreclosure, net$ 129 $ 176 $ 267
Nonaccrual loans plus other assets acquired through foreclosure, net$ 4,117 $ 4,983 $ 8,216
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.64% 0.80% 1.40%
Net loan (recoveries)/charge-offs in the quarter$ (148) $ (150) $ (552)
Net (recoveries)/charge-offs in the quarter/total loans -0.03% -0.30% -0.11%
Allowance for loan losses$ 7,028 $ 6,819 $ 7,243
Plus: Reserve for undisbursed loan commitments 89 74 40
Total allowance for credit losses$ 7,117 $ 6,893 $ 7,283
Allowance for loan losses/total loans held for investment 1.37% 1.41% 1.60%
Allowance for loan losses/nonaccrual loans, net 176.23% 141.86% 91.12%
Community West Bank *
Tier 1 leverage ratio 10.53% 10.55% 11.06%
Tier 1 risk-based capital ratio 12.28% 12.59% 13.14%
Total risk-based capital ratio 13.53% 13.84% 14.40%
INTEREST SPREAD ANALYSISJun. 30, 2016 Mar. 31, 2016 Jun. 30, 2015
Yield on total loans 5.34% 5.31% 5.98%
Yield on investments 2.57% 2.58% 2.98%
Yield on interest earning deposits 0.46% 0.57% 0.32%
Yield on earning assets 4.98% 4.93% 5.50%
Cost of interest-bearing deposits 0.59% 0.56% 0.54%
Cost of total deposits 0.51% 0.48% 0.46%
Cost of borrowings 2.80% 2.76% 0.94%
Cost of interest-bearing liabilities 0.64% 0.61% 0.55%
* Capital ratios are preliminary until the Call Report is filed.

NON-GAAP FINANCIAL INFORMATION
(Unaudited)
Three Months Ended Six Months Ended
NON-GAAP PERFORMANCE MEASURESJun. 30, 2015 Jun. 30, 2015
Return on average common equity, excluding loan litigation settlement, net (1) 12.02% 11.90%
Return on average assets, excluding loan litigation settlement, net (1) 1.31% 1.29%
Efficiency ratio, excluding loan litigation settlement, net (2) 66.62% 68.12%
NON-GAAP EARNINGS PER SHARE
Basic (3)$ 0.22 $ 0.43
Diluted (3)$ 0.22 $ 0.41
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended Six Months Ended
Jun. 30, 2015 Jun. 30, 2015
(in thousands)
Net income$ (2,342) $ (572)
Loan litigation settlement, net 7,153 7,153
Tax effect on loan litigation settlement, net (2,943) (2,943)
Net income, excluding loan litigation settlement, net (3)$ 1,868 $ 3,638
Three Months Ended Six Months Ended
Jun. 30, 2015 Jun. 30, 2015
(in thousands)
Total non-interest expenses$ 12,381 $ 17,152
Loan litigation settlement, net (7,153) (7,153)
Total non-interest expenses, excluding loan litigation settlement, net (3)$ 5,228 $ 9,999
(1) The Company believes these non-GAAP ratios provide a useful metric with which to analyze and evaluate the financial condition of the Company
(2) The Company believes this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company
(3) The Company believes these non-GAAP measurements are a key indicator of the ongoing earnings power of the Company

Contact: Charles G. Baltuskonis, EVP & CFO 805.692.5821 www.communitywestbank.com

Source:Community West Bancshares