Community West Bancshares Earns $1.3 Million in 4Q16 and $5.2 Million for the Year

Assets Surpass $700 Million and Book Value Increases to $8.07 per Share

Declares Quarterly Cash Dividend of $0.035 Per Common Share

GOLETA, Calif., Jan. 27, 2017 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported net income of $1.3 million in the fourth quarter of 2016 (4Q16) compared to $1.5 million in the third quarter of 2016 (3Q16) and $1.9 million in the fourth quarter of 2015 (4Q15). For the full year, Community West reported net income of $5.2 million compared to $2.9 million in 2015.

“Solid profitability, a healthy net interest margin, improving asset quality and robust loan and deposit growth were the highlights of our 2016 financial results,” stated Martin E. Plourd, President and Chief Executive Officer. “The strength of the economy in our local marketplace continues to sustain and build our community banking franchise with strong on-going demand for our high-service approach to lending and deposit programs. Our focus in the coming year remains on the local markets and expanding our franchise through organic growth. The increase in non-interest expenses in 4Q16 compared to 4Q15 is primarily due to additional lenders and staff. We will continue to invest in our future, with the opening of the San Luis Obispo branch in November 2016, the relocated branch in Santa Maria in January 2017 and the new Oxnard branch scheduled to open next week.”

4Q16 Financial Highlights

  • Total loans increased $28.9 million for 4Q16 to $630.8 million at December 31, 2016, and 16.1% compared to $543.5 million a year ago.
  • Total assets surpassed $700 million for the first time in the Company’s history and increased 14.4% to $710.6 million at December 31, 2016, compared to $621.2 million a year ago.
  • Nonaccrual loans, net, decreased 52.6% to $2.4 million, or 0.38% of net loans at December 31, 2016, compared to $5.0 million, or 0.92% of net loans, a year ago, representing the lowest level since 3Q07.
  • Net income available to common stockholders for 4Q16 was $1.3 million, or $0.16 per diluted share.
  • Return on average assets for 2016 was 0.81%.
  • Return on average common equity for 2016 was 8.19%.
  • Net interest margin for 2016 was 4.60%.
  • Non-interest-bearing deposits increased 31.2% to $100.4 million at December 31, 2016, compared to $76.5 million a year ago.
  • Book value per common share increased 6.9% to $8.07 at December 31, 2016, compared to $7.55 a year ago.
  • The Bank continues to be well-capitalized per banking regulations with its total risk-based capital ratio at 12.27% and Tier 1 leverage ratio at 10.08% at December 31, 2016.

Income Statement

“While we had a modest decrease in the net interest margin during the fourth quarter, we have been able to maintain a net interest margin in the mid-4% range, largely due to our above industry-average loan yields and periodic loan interest recoveries,” said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. Fourth quarter net interest margin was 4.63% compared to 4.81% in 3Q16 and 4.90% in 4Q15. For all of 2016, Community West’s net interest margin was 4.60% compared to 4.80% in 2015. Of the asset yields for all of 2016, eight basis points of asset yields was attributable to one large past due loan relationship that was paid in full and, for all of 2015, 22 basis points were attributable to two large past due loan relationships that were paid in full.

Net interest income for 4Q16 was $7.8 million, a slight increase compared to $7.7 million in the preceding quarter and a 4.0% increase compared to $7.5 million in 4Q15. For the year, net interest income increased 5.0% to $29.1 million compared to $27.7 million a year ago. Non-interest income was $538,000 in 4Q16, a slight decrease compared to $559,000 in 3Q16 and unchanged compared to 4Q15. For the year, non-interest income was $2.3 million, which was unchanged compared to 2015.

Non-interest expenses totaled $5.9 million in 4Q16, compared to $5.8 million in 3Q16 and $5.1 million in 4Q15. The increase is largely due to the business development of the Bank’s Northern region, consisting of San Luis Obispo and north Santa Barbara counties. For all of 2016, noninterest expenses were $22.6 million. In the second quarter of 2015, Community West settled a claim for $7.1 million, net, which increased non-interest expenses for 2015 to $27.3 million. Excluding this one-time settlement, non-interest expenses would have been $20.2 million for 2015. (See page 7 – “Non-GAAP Financial Information”)

Balance Sheet

Net loans increased 4.8% to $623.4 million at December 31, 2016, compared to $594.7 million at September 30, 2016, and increased 16.2% compared to $536.5 million a year ago. Commercial real estate loans outstanding were up 51.6% from year ago levels to $272.1 million at December 31, 2016, and comprise 43.1% of the total loan portfolio. Manufactured housing loans were up 9.2% from year ago levels to $194.2 million and represent 30.8% of total loans. Commercial loans decreased 2.1% from year ago levels to $105.3 million and represent 16.7% of the total loan portfolio and SBA loans decreased 23.8% from a year ago to $36.5 million and represent 5.8% of the total loan portfolio.

Total assets were $710.6 million at December 31, 2016, a 6.9% increase compared to three months earlier and a 14.4% increase compared to one year ago. Deposits totaled $612.2 million at December 31, 2016, up 3.7% compared to $590.6 million at September 30, 2016, and grew 12.5% compared to $544.3 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 $457.3 million at December 31, 2016 and comprise 74.7% of total deposits, compared to $408.7 million, or 75.1% of total deposits, a year ago.

Stockholders’ equity was $65.3 million at December 31, 2016, compared to $64.2 million at September 30, 2016, and $62.0 million a year ago. Book value per common share improved to $8.07 at December 31, 2016 compared to $7.93 at September 30, 2016, and $7.55 a year ago.

Credit Quality

“This year, we were able to cut in half our nonaccrual loans and nonaccrual loans plus other assets acquired through foreclosure, both net of SBA/USDA guarantees, reflecting the hard work of our lenders and the credit management team, as well as the continuing improvement in our local markets,” said Plourd.

The allowance for loan losses was $7.5 million at December 31, 2016, or 1.31% of total loans held for investment, compared to 1.33% at September 30, 2016, and 1.44% a year ago. Net nonaccrual loans decreased 21.5% to $2.4 million, or 0.38% of total loans at December 31, 2016, compared to $3.0 million, or 0.50% of total loans, three months earlier, and decreased 52.6% compared to $5.0 million, or 0.92% of total loans, a year ago.

Of the $2.4 million in net nonaccrual loans, $799,000 were manufactured housing loans, $712,000 were SBA 504 1st loans, $373,000 were home equity loans, $192,000 were single family real estate loans, $141,000 were commercial real estate loans, $128,000 were SBA loans and $30,000 were commercial loans.

Other assets acquired through foreclosure totaled $137,000 at December 31, 2016, compared to $55,000 three months earlier and $198,000 a year earlier. Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $2.5 million, or 0.35% of total assets, at December 31, 2016, compared to $3.1 million, or 0.46% of total assets, three months earlier and $5.2 million, or 0.84% of total assets, a year ago.

“Due to strong loan growth, we recorded a provision for loan losses for the third consecutive quarter,” added Plourd. The loan loss provision was $116,000 in 4Q16, compared to $22,000 in 3Q16, and a credit to provision of $277,000 in 4Q15. Net loan recoveries were $158,000 in 4Q16 compared to $140,000 in 3Q16 and $181,000 in 4Q15.

Cash Dividend Declared

The Company’s Board of Directors declared a quarterly cash dividend of $0.035 per common share, payable February 28, 2017 to common shareholders of record on February 10, 2017. The current annualized yield, based on the closing price of CWBC shares of $9.24 on December 31, 2016, was 1.5%.

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. As of December 31, 2016, 187,569 shares (none in 4Q16) had been cumulatively repurchased at an average price of $7.25 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 six full-service California branch banking offices, in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village and San Luis Obispo. The principal business activities of the Company are Relationship business banking, Manufactured Housing lending and Government Guaranteed lending.

In September 2016, Community West was named to Sandler O’Neill and Partners Bank and Thrift Sm-All Stars – Class of 2016. This award recognized Community West as one of the top 27 best performing small capitalization institutions from a list of publicly traded banks and thrifts in the U.S. with market capitalizations less than $2.5 billion. In making their selections, Sandler focused on growth, profitability, credit quality and capital strength.

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 Twelve Months Ended
December 31, September 30, December 31, December 31,December 31,
2016 2016 2015 2016 2015
Interest income
Loans, including fees $ 8,280 $ 8,228 $ 7,886 $ 31,097 $ 29,139
Investment securities and other 302 288 249 1,119 1,083
Total interest income 8,582 8,516 8,135 32,216 30,222
Interest expense
Deposits 763 733 622 2,851 2,383
Other borrowings and convertible debt 57 74 51 276 133
Total interest expense 820 807 673 3,127 2,516
Net interest income 7,762 7,709 7,462 29,089 27,706
Provision (credit) for loan losses 116 22 (277) (48) (2,274)
Net interest income after provision for loan losses 7,646 7,687 7,739 29,137 29,980
Non-interest income
Other loan fees 215 270 225 1,042 1,014
Document processing fees 115 130 102 496 466
Service charges 95 105 104 403 372
Gains from loan sales, net - - 15 - 132
Other 113 54 92 312 325
Total non-interest income 538 559 538 2,253 2,309
Non-interest expenses
Salaries and employee benefits 3,628 3,809 3,175 14,383 12,904
Occupancy, net 633 564 519 2,264 1,943
Data processing 280 173 145 793 533
Professional services 220 196 257 873 993
Depreciation 192 162 109 678 399
Advertising and marketing 169 154 118 616 466
FDIC assessment 106 74 90 376 342
Stock-based compensation 77 97 79 338 412
Loan servicing and collection 11 108 114 209 395
Net loss (gain) on sales/write-downs of foreclosed real estate
and repossessed assets (1) 7 42 16 10
Loan litigation settlement, net - - (8) - 7,095
Other 555 492 451 2,002 1,789
Total non-interest expenses 5,870 5,836 5,091 22,548 27,281
Income before provision for income taxes 2,314 2,410 3,186 8,842 5,008
Provision for income taxes 974 929 1,335 3,613 2,138
Net income 1,340 1,481 1,851 5,229 2,870
Dividends and accretion on preferred stock - - 44 - 445
Discount on partial redemption of preferred stock - - - - (129)
Net income available to common stockholders $ 1,340 $ 1,481 $ 1,807 $ 5,229 $ 2,554
Earnings per share:
Basic $ 0.16 $ 0.18 $ 0.22 $ 0.64 $ 0.31
Diluted $ 0.16 $ 0.18 $ 0.21 $ 0.62 $ 0.30

COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
December 31, September 30, December 31,
2016 2016 2015
Cash and cash equivalents $ 2,401 $ 2,595 $ 2,789
Time and interest-earning deposits in other financial institutions 31,715 15,164 32,829
Investment securities 31,683 31,200 30,466
Loans:
Commercial 105,290 120,043 107,510
Commercial real estate 272,142 225,572 179,491
SBA 36,488 39,295 47,880
Manufactured housing 194,222 191,946 177,891
Single family real estate 12,750 14,335 19,073
HELOC 10,292 10,789 10,934
Other (365) (78) 683
Total loans 630,819 601,902 543,462
Loans, net
Held for sale 61,416 62,381 64,488
Held for investment 569,403 539,521 478,974
Less: Allowance for loan losses (7,464) (7,190) (6,916)
Net held for investment 561,939 532,331 472,058
NET LOANS 623,355 594,712 536,546
Other assets 21,418 20,865 18,583
TOTAL ASSETS $ 710,572 $ 664,536 $ 621,213
Deposits
Non-interest-bearing demand $ 100,372 $ 88,024 $ 76,469
Interest-bearing demand 253,023 258,360 250,509
Savings 14,007 14,388 13,690
Certificates of deposit ($250,000 or more) 77,509 92,319 66,722
Other certificates of deposit 167,325 137,510 136,948
Total deposits 612,236 590,601 544,338
Other borrowings 29,000 5,500 10,500
Other liabilities 4,000 4,223 4,431
TOTAL LIABILITIES 645,236 600,324 559,269
Stockholders' equity 65,336 64,212 61,944
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 710,572 $ 664,536 $ 621,213
Shares outstanding 8,096 8,094 8,206
Book value per common share $ 8.07 $ 7.93 $ 7.55

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
Three Months Ended Three Months Ended Three Months Ended Twelve Months Ended
PERFORMANCE MEASURES AND RATIOSDec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015 Dec. 31, 2016Dec. 31, 2015
Return on average common equity 8.17% 9.17% 11.96% 8.19% 4.69%
Return on average assets 0.78% 0.91% 1.19% 0.81% 0.49%
Efficiency ratio 70.72% 70.59% 63.64% 71.94% 90.89%
Net interest margin 4.63% 4.81% 4.90% 4.60% 4.80%
Three Months Ended Three Months Ended Three Months Ended Twelve Months Ended
AVERAGE BALANCESDec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015 Dec. 31, 2016Dec. 31, 2015
Average assets$679,201 $649,134 $614,688 $644,549 $588,369
Average earning assets 666,280 637,525 603,921 633,054 577,755
Average total loans 607,989 581,477 537,917 573,084 513,826
Average deposits 598,197 571,094 537,269 566,046 509,022
Average equity (including preferred stock) 65,247 64,260 63,334 63,857 66,076
Average common equity (excluding preferred stock) 65,247 64,260 61,395 63,857 61,140
EQUITY ANALYSISDec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015
Total equity$65,336 $64,212 $61,944
Less: senior preferred stock - - -
Total common equity$65,336 $64,212 $61,944
Common stock outstanding 8,096 8,094 8,206
Book value per common share$8.07 $7.93 $7.55
ASSET QUALITYDec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015
Nonaccrual loans, net$2,375 $3,026 $5,013
Nonaccrual loans, net/total loans 0.38% 0.50% 0.92%
Other assets acquired through foreclosure, net$137 $55 $198
Nonaccrual loans plus other assets acquired through foreclosure, net$2,512 $3,081 $5,211
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.35% 0.46% 0.84%
Net loan (recoveries)/charge-offs in the quarter$(158) $(140) $(181)
Net (recoveries)/charge-offs in the quarter/total loans (0.03%) (0.02%) (0.03%)
Allowance for loan losses$7,464 $7,190 $6,916
Plus: Reserve for undisbursed loan commitments 125 83 61
Total allowance for credit losses$7,589 $7,273 $6,977
Allowance for loan losses/total loans held for investment 1.31% 1.33% 1.44%
Allowance for loan losses/nonaccrual loans, net 314.27% 237.61% 137.96%
Community West Bank *
Tier 1 leverage ratio 10.08% 10.48% 10.38%
Tier 1 capital ratio 11.04% 11.83% 12.45%
Total capital ratio 12.27% 13.08% 13.70%
INTEREST SPREAD ANALYSISDec. 31, 2016 Sep. 30, 2016 Dec. 31, 2015
Yield on total loans 5.42% 5.63% 5.82%
Yield on investments 3.23% 3.10% 2.60%
Yield on interest earning deposits 0.43% 0.45% 0.32%
Yield on earning assets 5.12% 5.31% 5.34%
Cost of interest-bearing deposits 0.60% 0.60% 0.53%
Cost of total deposits 0.54% 0.51% 0.46%
Cost of borrowings 2.00% 2.82% 2.31%
Cost of interest-bearing liabilities 0.63% 0.65% 0.57%
* Capital ratios are preliminary until the Call Report is filed.

NON-GAAP FINANCIAL INFORMATION
(Unaudited)
Three Months Ended Tweve Months Ended
NON-GAAP PERFORMANCE MEASURESDec. 31, 2015 Dec. 31, 2015
Return on average common equity, excluding loan litigation settlement, net (1) 11.93% 11.52%
Return on average assets, excluding loan litigation settlement, net (1) 1.19% 1.20%
Efficiency ratio, excluding loan litigation settlement, net (2) 63.74% 67.25%
NON-GAAP EARNINGS PER SHARE
Basic (3)$0.22 $0.82
Diluted (3)$0.21 $0.79
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended Tweve Months Ended
Dec. 31, 2015 Dec. 31, 2015
(in thousands)
Net income$1,851 $2,870
Loan litigation settlement, net (8) 7,095
Tax effect on loan litigation settlement, net 3 (2,920)
Net income, excluding loan litigation settlement, net (3)$1,846 $7,045
Three Months Ended Tweve Months Ended
Dec. 31, 2015 Dec. 31, 2015
(in thousands)
Total non-interest expenses$5,091 $27,281
Loan litigation settlement, net 8 (7,095)
Total non-interest expenses, excluding loan litigation settlement, net (3)$5,099 $20,186
(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