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Community West Bancshares Earnings Grow 38% YOY to $1.6 Million in 2Q17 Highlighted by 21% Loan Growth YOY and 28% Non-Interest Bearing Deposit Growth YOY; Quarterly Common Stock Dividend Declared

GOLETA, Calif., July 28, 2017 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported net income increased 14.7% to $1.6 million, or $0.18 per diluted share, in the second quarter of 2017 (2Q17) compared to $1.4 million, or $0.16 per diluted share, in the first quarter of 2017 (1Q17) and increased 38.3% compared to $1.1 million, or $0.13 per diluted share, in the second quarter of 2016 (2Q16).

In the first six months of 2017 net income increased 20.9% to $2.9 million, or $0.34 per diluted share, compared to $2.4 million, or $0.29 per diluted share, in the first six months of 2016.

“Although we have been focused on organically growing our franchise (opening in San Luis Obispo last November, Oxnard in January, and a loan production office in Paso Robles in June 2017) we’ve concurrently delivered improved operating results,” stated Martin E. Plourd, President and Chief Executive Officer. “The strong year-over-year loan growth of 21% together with 28% non-interest-bearing deposits growth was a result of our expansion. We remain focused on competing for business in our local markets and expanding our franchise throughout California’s Central Coast. We also appreciate the continued support of our shareholders as we pursue these market share growth opportunities.”

Second Quarter 2017 Financial Highlights

  • Net income was $1.6 million, or $0.18 per diluted share.
  • Net interest margin was 4.39%.
  • Net loans increased $24.1 million to $684.8 million at June 30, 2017, compared to $660.8 million three months earlier and increased $120.0 million compared to $564.8 million a year ago.
  • Non-interest-bearing deposits increased 28.2% to $107.0 million at June 30, 2017, compared to $83.5 million a year ago.
  • Book value per common share increased to $8.36 at June 30, 2017, compared to $7.81 a year ago.
  • The Bank continues to be well-capitalized per banking regulations with its total risk-based capital ratio at 11.62% and Tier 1 leverage ratio at 9.23% at June 30, 2017.
  • Annualized return on average assets was 0.83%.
  • Annualized return on average common equity was 9.20%.

Income Statement

“Our net interest margin, although contracting slightly during the quarter, still remains above industry averages due to our higher loan yields,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer. Second quarter net interest margin was 4.39% compared to 4.45% in 1Q17 and 4.47% in 2Q16. In the first six months of 2017, Community West’s net interest margin was 4.42% compared to 4.46% in the first six months of 2016.

Net interest income for 2Q17 was $8.0 million, a 3.4% increase compared to $7.8 million in the preceding quarter and a 16.5% increase compared to $6.9 million in 2Q16.

Non-interest income increased 8.7% to $697,000 in 2Q17, compared to $641,000 in 1Q17 and increased 20.8% compared to $577,000 in 2Q16, primarily due to increased loan volumes.

Second quarter non-interest expenses totaled $6.0 million, compared to $5.9 million in 1Q17 and $5.5 million in 2Q16. The increase is largely due to costs associated with the expansion of the Bank’s Northern region, and the addition of the Oxnard location in the Southern region.

Balance Sheet

Total assets were $785.0 million at June 30, 2017, a 4.9% increase compared to three months earlier and a 22.2% increase compared to $642.6 million one year ago.

“The loan portfolio continues to benefit from a strong regional economy and demand for our diverse lending products,” said Plourd. “The commercial real estate loan portfolio and manufactured housing portfolio generated the most increases during the current quarter.”

Net loans increased 3.1% to $684.8 million at June 30, 2017, compared to $660.8 million at March 31, 2017, and increased 21.2% compared to $564.8 million a year ago. Commercial real estate loans outstanding were up 53.0% from year ago levels to $317.8 million at June 30, 2017, and comprise 45.9% of the total loan portfolio. Manufactured housing loans were up 11.0% from year ago levels to $209.1 million and represent 30.2% of total loans. Commercial loans increased 4.7% from year ago levels to $111.7 million and represent 16.1% of the total loan portfolio and SBA loans decreased 15.8% from a year ago to $34.7 million and represent 5.0% of the total loan portfolio.

Deposits increased 4.7% to $670.3 million at June 30, 2017, compared to $640.1 million at March 31, 2017, and increased 18.6% compared to $565.2 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 $463.6 million at June 30, 2017 and comprise 69.1% of total deposits, compared to $419.1 million, or 73.9% of total deposits, a year ago.

Stockholders’ equity was $68.2 million at June 30, 2017, compared to $66.6 million at March 31, 2017, and $63.2 million a year ago. Book value per common share improved to $8.36 at June 30, 2017, compared to $8.22 at March 31, 2017, and $7.81 a year ago.

Credit Quality

“Due to another quarter of robust loan growth, we recorded a provision for loan losses for the fifth consecutive quarter,” said Plourd. The loan loss provision was $120,000 in 2Q17, compared to $144,000 in 1Q17, and $61,000 in 2Q16. Net loan recoveries were $88,000 in 2Q17 compared to $177,000 in 1Q17 and $148,000 in 2Q16.

The allowance for loan losses was $8.0 million at June 30, 2017, or 1.27% of total loans held for investment, compared to 1.28% at March 31, 2017, and 1.37% a year ago. Net nonaccrual loans decreased 13.6% to $2.0 million, or 0.29% of total loans at June 30, 2017, compared to $2.3 million, or 0.34% of total loans, three months earlier, and decreased 50.2% compared to $4.0 million, or 0.70% of total loans, a year ago.

Of the $2.0 million in net nonaccrual loans, $560,000 were manufactured housing loans, $527,000 were commercial loans, $263,000 were home equity loans, $203,000 were SBA 504 1st loans, $183,000 were single family real estate loans, $144,000 were commercial real estate loans and $108,000 were SBA 7A loans.

Other assets acquired through foreclosure totaled $362,000 at June 30, 2017, compared to $145,000 three months earlier and $129,000 a year earlier.

Cash Dividend Declared

The Company’s Board of Directors declared a quarterly cash dividend of $0.04 per common share, payable August 31, 2017 to common shareholders of record on August 14, 2017. The current annualized yield, based on the closing price of CWBC shares of $10.10 on June 30, 2017, was 1.6%.

Stock Repurchase Program
On August 31, 2015, the Company announced that the Board of Directors authorized a common stock repurchase program of up to $3.0 million. As of June 30, 2017, 187,569 shares (none in 2Q17) had been cumulatively repurchased (last repurchase was in 3Q16) 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, 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 seven full-service California branch banking offices, in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village, San Luis Obispo and Oxnard and a loan production office in Paso Robles. The principal business activities of the Company are Relationship business banking, Manufactured Housing lending and Government Guaranteed lending.

Industry Accolades

In April 2017, Community West was awarded a “Super Premier” rating by The Findley Reports, the highest ranking for a community bank. 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.

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 Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
Interest income
Loans, including fees $ 8,788 $ 8,442 $ 7,414 $ 17,230 $ 14,589
Investment securities and other 278 261 260 539 529
Total interest income 9,066 8,703 7,674 17,769 15,118
Interest expense
Deposits 941 858 704 1,799 1,355
Other borrowings and convertible debt 89 71 73 160 145
Total interest expense 1,030 929 777 1,959 1,500
Net interest income 8,036 7,774 6,897 15,810 13,618
Provision (credit) for loan losses 120 144 61 264 (186)
Net interest income after provision for loan losses 7,916 7,630 6,836 15,546 13,804
Non-interest income
Other loan fees 342 303 282 645 557
Document processing fees 151 133 136 284 251
Service charges 112 96 102 208 192
Other 92 109 57 201 156
Total non-interest income 697 641 577 1,338 1,156
Non-interest expenses
Salaries and employee benefits 3,796 3,931 3,494 7,727 6,946
Occupancy, net 686 645 581 1,331 1,067
Professional services 299 179 278 478 457
Advertising and marketing 195 156 212 351 293
Depreciation 188 163 175 351 324
FDIC assessment 179 110 99 289 196
Data processing 165 168 169 333 340
Stock-based compensation 87 84 84 171 164
Loan servicing and collection 55 106 (89) 161 90
Other 357 381 503 738 965
Total non-interest expenses 6,007 5,923 5,506 11,930 10,842
Income before provision for income taxes 2,606 2,348 1,907 4,954 4,118
Provision for income taxes 1,050 992 782 2,042 1,710
Net income $ 1,556 $ 1,356 $ 1,125 $ 2,912 $ 2,408
Earnings per share:
Basic $ 0.19 $ 0.17 $ 0.14 $ 0.36 $ 0.30
Diluted $ 0.18 $ 0.16 $ 0.13 $ 0.34 $ 0.29

COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
June 30, March 31, June 30, December 31,
2017 2017 2016 2016
Cash and cash equivalents $ 1,919 $ 1,811 $ 2,665 $ 2,401
Time and interest-earning deposits in other financial institutions 36,085 28,366 24,604 31,715
Investment securities 39,326 35,389 30,782 31,683
Loans:
Commercial 111,655 103,581 106,650 105,290
Commercial real estate 317,793 303,795 207,664 272,142
SBA 34,670 37,036 41,176 36,488
Manufactured housing 209,119 202,332 188,315 194,222
Single family real estate 10,161 11,728 17,203 12,750
HELOC 9,974 10,462 10,803 10,292
Other (542) (388) 43 (365)
Total loans 692,830 668,546 571,854 630,819
Loans, net
Held for sale 60,933 59,811 60,086 61,416
Held for investment 631,897 608,735 511,768 569,403
Less: Allowance for loan losses (7,994) (7,785) (7,028) (7,464)
Net held for investment 623,903 600,950 504,740 561,939
NET LOANS 684,836 660,761 564,826 623,355
Other assets 22,806 21,973 19,747 21,418
TOTAL ASSETS $ 784,972 $ 748,300 $ 642,624 $ 710,572
Deposits
Non-interest-bearing demand $ 107,049 $ 102,553 $ 83,524 $ 100,372
Interest-bearing demand 262,475 262,008 250,036 253,023
Savings 14,011 14,072 14,173 14,007
Certificates of deposit ($250,000 or more) 82,156 80,293 74,622 77,509
Other certificates of deposit 204,589 181,204 142,829 167,325
Total deposits 670,280 640,130 565,184 612,236
Other borrowings 41,800 37,000 10,500 29,000
Other liabilities 4,676 4,603 3,702 4,000
TOTAL LIABILITIES 716,756 681,733 579,386 645,236
Stockholders' equity 68,216 66,567 63,238 65,336
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 784,972 $ 748,300 $ 642,624 $ 710,572
Shares outstanding 8,160 8,103 8,098 8,096
Book value per common share $ 8.36 $ 8.22 $ 7.81 $ 8.07

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, 2017 Mar. 31, 2017 Jun. 30, 2016 Jun. 30, 2017Jun. 30, 2016
Return on average common equity 9.20% 8.28% 7.15% 8.75% 7.69%
Return on average assets 0.83% 0.76% 0.72% 0.80% 0.78%
Efficiency ratio 68.79% 70.39% 73.67% 69.57% 73.39%
Net interest margin 4.39% 4.45% 4.47% 4.42% 4.46%
Three Months Ended Three Months Ended Three Months Ended Six Months Ended
AVERAGE BALANCESJun. 30, 2017 Mar. 31, 2017 Jun. 30, 2016 Jun. 30, 2017Jun. 30, 2016
Average assets$ 747,790 $ 721,630 $ 631,318 $ 734,782 $ 624,808
Average earning assets 735,041 708,751 620,125 721,969 613,999
Average total loans 672,677 650,784 558,841 661,791 551,198
Average deposits 646,316 626,876 553,943 636,650 547,241
Average common equity 67,820 66,381 63,277 67,105 62,958
EQUITY ANALYSISJun. 30, 2017 Mar. 31, 2017 Jun. 30, 2016
Total common equity$ 68,216 $ 66,567 $ 63,238
Common stock outstanding 8,160 8,103 8,098
Book value per common share$ 8.36 $ 8.22 $ 7.81
ASSET QUALITYJun. 30, 2017 Mar. 31, 2017 Jun. 30, 2016
Nonaccrual loans, net$ 1,988 $ 2,302 $ 3,988
Nonaccrual loans, net/total loans 0.29% 0.34% 0.70%
Other assets acquired through foreclosure, net$ 362 $ 145 $ 129
Nonaccrual loans plus other assets acquired through foreclosure, net$ 2,350 $ 2,447 $ 4,117
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.30% 0.33% 0.64%
Net loan (recoveries)/charge-offs in the quarter$ (88) $ (177) $ (148)
Net (recoveries)/charge-offs in the quarter/total loans (0.01%) (0.03%) (0.03%)
Allowance for loan losses$ 7,994 $ 7,785 $ 7,028
Plus: Reserve for undisbursed loan commitments 99 113 89
Total allowance for credit losses$ 8,093 $ 7,898 $ 7,117
Allowance for loan losses/total loans held for investment 1.27% 1.28% 1.37%
Allowance for loan losses/nonaccrual loans, net 402.11% 338.18% 176.23%
Community West Bank *
Tier 1 leverage ratio 9.23% 9.41% 10.53%
Tier 1 capital ratio 10.39% 10.38% 12.28%
Total capital ratio 11.62% 11.60% 13.53%
INTEREST SPREAD ANALYSISJun. 30, 2017 Mar. 31, 2017 Jun. 30, 2016
Yield on total loans 5.24% 5.26% 5.34%
Yield on investments 2.31% 2.48% 2.57%
Yield on interest earning deposits 0.83% 0.74% 0.46%
Yield on earning assets 4.95% 4.98% 4.98%
Cost of interest-bearing deposits 0.69% 0.66% 0.59%
Cost of total deposits 0.58% 0.56% 0.51%
Cost of borrowings 1.22% 1.20% 2.80%
Cost of interest-bearing liabilities 0.72% 0.68% 0.64%
* Capital ratios are preliminary until the Call Report is filed.

Contact: Susan C.Thompson, EVP & CFO 805.692.5821 www.communitywestbank.com

Source:Community West Bancshares

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