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Community West Bancshares Earns $449,000 in 4Q17 and $4.9 Million For The Year After Revalue of Net Deferred Tax Asset; Declares Quarterly Cash Dividend of $0.04 Per Common Share

GOLETA, Calif., Jan. 26, 2018 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported that following a revaluation of its net deferred tax asset due to the “Tax Cuts and Jobs Act Bill of 2017” which resulted in additional tax expense of $1.3 million, or $0.15 per diluted share, net income was $449,000, or $0.05 per diluted share, in the fourth quarter of 2017 (4Q17). This compares to net income of $1.6 million, or $0.18 per diluted share, in the third quarter of 2017 (3Q17) and $1.3 million, or $0.16 per diluted share, in the fourth quarter of 2016 (4Q16). Pre-tax income for 4Q17 was $3.0 million, which was a 16.4% increase compared to the preceding quarter and a 28.0% increase compared to 4Q16.

For the full year 2017 net income was $4.9 million, or $0.57 per diluted share, compared to $5.2 million, or $0.62 per diluted share, in 2016. Pre-tax income for the year increased 18.3% to $10.5 million, compared to $8.8 million, in 2016.

“The organic expansion in our market along California’s Central Coast and the loan and deposit growth generated as a result of this expansion was a highlight of our 2017 results,” stated Martin E. Plourd, President and Chief Executive Officer. “Total loans increased 16.5% year over year and our above-industry net interest margin fueled our core operating results during the quarter. The strength of the economy in our marketplace continues to sustain and build our community banking franchise with strong on-going demand for our high-service approach to lending, deposit and cash management programs. Our focus in the coming year remains on the local markets and expanding our franchise. We will continue to look for local opportunities to grow while adding long-term shareholder value.”

Fourth Quarter 2017 Financial Highlights

  • Net loans increased $11.8 million to $726.2 million at December 31, 2017, compared to $714.4 million three months earlier and increased $102.8 million compared to $623.4 million a year ago.
  • Net income was $449,000, or $.05 per diluted share, net of $1.3 million, or $0.15 per diluted share revaluation of net deferred tax asset.
  • Net interest margin for 2017 was 4.34%.
  • Book value per common share increased to $8.55 at December 31, 2017, compared to $8.07 a year ago.
  • The Bank continues to be well-capitalized per banking regulations with its total capital ratio at 11.31% and Tier 1 leverage ratio at 8.83% at December 31, 2017.

As a result of the Tax Cuts and Job Act enacted December 22, 2017, the Company revalued its deferred tax assets and liabilities to account for the decrease in the federal corporate rate to 21%. The Company recorded a one-time net tax charge of $1.3 million, or $0.15 per share. This increase in income tax expense was reflected in Community West’s operating results for the fourth quarter of 2017 and was in addition to the normal provision for income tax related to pre-tax net operating income.

Income Statement
“Our net interest margin remained stable during the quarter and remains well-above industry averages, despite compression compared to the fourth quarter of 2016,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer. Fourth quarter net interest margin was 4.26% compared to 4.27% in 3Q17 and 4.63% in 4Q16. For all of 2017, Community West’s net interest margin was 4.34% compared to 4.60% in 2016 which included eight basis points of asset yields attributable to one large past due relationship which paid in full.

Net interest income for 4Q17 was $8.5 million, a 1.2% increase compared to $8.4 million in the preceding quarter and a 9.2% increase compared to $7.8 million in 4Q16. For the year, net interest income increased 12.3% to $32.7 million compared to $29.1 million in 2016. Non-interest income increased 25.1% to $896,000 in 4Q17, compared to $716,000 in 3Q17 and increased 66.5% compared to $538,000 in 4Q16. For the year, non-interest income increased 30.9% to $3.0 million compared to $2.3 million in 2016.

Non-interest expenses totaled $6.4 million in 4Q17, which were unchanged compared to the preceding quarter. Non-interest expenses totaled $5.9 million in 4Q16. For the year, non-interest expenses were $24.7 million compared to $22.5 million in 2016. The increase was largely due to costs associated with the expansion of the Bank’s Northern and Southern regions.

Balance Sheet
“Loan growth was robust during the quarter, fueled by our strong local economy,” said Plourd. “We continue to see strong loan demand in our local markets, with loan originations totaling $38.2 million during the quarter.”

Net loans increased 1.7% to $726.2 million at December 31, 2017, compared to $714.4 million at September 30, 2017, and increased $102.8 million, or 16.5% compared to $623.4 million a year ago. Commercial real estate loans outstanding were up 30.3% from year ago levels to $354.6 million at December 31, 2017, and comprise 48.3% of the total loan portfolio. Manufactured housing loans were up 14.9% from year ago levels to $223.1 million and represent 30.4% of total loans. Commercial loans increased 5.9% from year ago levels to $111.5 million and represent 15.2% of the total loan portfolio.

Deposits increased modestly to $699.7 million at December 31, 2017, compared to $697.2 million at September 30, 2017, and increased 14.3% compared to $612.2 million a year earlier. Non-interest-bearing demand deposits increased 8.1% to $108.5 million, at December 31, 2017, when compared to the prior year. Core deposits, defined as non-interest-bearing checking, interest-bearing checking, money market accounts, savings accounts and retail certificates of deposit totaled $452.2 million at December 31, 2017 and comprise 64.6% of total deposits.

Total assets were $833.3 million at December 31, 2017, a $4.2 million increase compared to three months earlier and a $122.7 million, or 17.3% increase compared to $710.6 million one year ago. Stockholders’ equity improved to $70.1 million at December 31, 2017, compared to $69.8 million at September 30, 2017, and $65.3 million a year ago. Book value per common share improved to $8.55 at December 31, 2017, compared to $8.54 at September 30, 2017, and $8.07 a year ago.

Credit Quality
“Due to another quarter of net credit recovery, we recorded a negative provision for loan losses of $12,000 in the fourth quarter,” added Plourd. The provision for loan losses was $159,000 in 3Q17, and $116,000 in 4Q16. For the year, the provision for loan losses was $411,000, compared to a net provision credit of $48,000 in 2016. Net loan recoveries were $120,000 in 4Q17 compared to $159,000 in 3Q17 and $158,000 in 4Q16.

The allowance for loan losses was $8.4 million at December 31, 2017, or 1.24% of total loans held for investment, compared to 1.25% at September 30, 2017, and 1.31% a year ago. Net nonaccrual loans were $4.5 million, or 0.61% of total loans at December 31, 2017, compared to $1.8 million, or 0.25% of total loans, three months earlier, and to $2.4 million, or 0.38% of total loans, a year ago. The increase in nonaccrual loans was primarily in the commercial loan segment.

Of the $4.5 million in net nonaccrual loans, $2.6 million were commercial loans, $565,000 were commercial agricultural loans, $418,000 were manufactured housing loans, $214,000 were home equity loans, $184,000 were SBA 504 1st loans, $176,000 were single-family real estate loans, $170,000 were SBA 7A loans and $122,000 were commercial real estate loans.

Other assets acquired through foreclosure totaled $372,000 at December 31, 2017, compared to $486,000 three months earlier and $137,000 a year earlier. Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $4.8 million, or 0.58% of total assets, at December 31, 2017, compared to $2.3 million, or 0.28% of total assets, three months earlier and $2.5 million, or 0.35% of total assets, a year ago.

Cash Dividend Declared
The Company’s Board of Directors declared a quarterly cash dividend of $0.04 per common share, payable February 28, 2018 to common shareholders of record on February 9, 2018. The current annualized yield, based on the closing price of CWBC shares of $10.65 on December 31, 2017, was 1.50%.

Stock Repurchase Program
On August 24, 2017, the Board of Directors extended the common stock repurchase program of up to $3.0 million for two additional years. As of December 31, 2017, 187,569 shares had been cumulatively repurchased at an average price of $7.25 per share. The last repurchase was in 3Q16.

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 Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2017 2017 2016 2017 2016
Interest income
Loans, including fees $ 9,622 $ 9,340 $ 8,280 $ 36,192 $ 31,097
Investment securities and other 305 355 302 1,199 1,119
Total interest income 9,927 9,695 8,582 37,391 32,216
Interest expense
Deposits 1,299 1,185 763 4,283 2,851
Other borrowings 152 134 57 446 276
Total interest expense 1,451 1,319 820 4,729 3,127
Net interest income 8,476 8,376 7,762 32,662 29,089
Provision (credit) for loan losses (12) 159 116 411 (48)
Net interest income after provision for loan losses 8,488 8,217 7,646 32,251 29,137
Non-interest income
Other loan fees 301 354 215 1,300 1,042
Service charges 132 118 95 458 403
Document processing fees 128 146 115 558 496
Other 335 98 113 634 312
Total non-interest income 896 716 538 2,950 2,253
Non-interest expenses
Salaries and employee benefits 3,773 3,839 3,628 15,339 14,383
Occupancy, net 777 754 633 2,862 2,264
Professional services 310 281 220 1,069 873
Advertising and marketing 262 137 169 750 616
FDIC assessment 203 172 106 664 376
Data processing 200 192 280 725 793
Depreciation 166 168 192 685 678
Stock-based compensation 83 283 77 537 338
Loan servicing and collection 57 35 11 253 209
Other 590 526 554 1,854 2,018
Total non-interest expenses 6,421 6,387 5,870 24,738 22,548
Income before provision for income taxes 2,963 2,546 2,314 10,463 8,842
Provision for income taxes 2,514 992 974 5,548 3,613
Net income $ 449 $ 1,554 $ 1,340 $ 4,915 $ 5,229
Earnings per share:
Basic $ 0.05 $ 0.19 $ 0.16 $ 0.60 $ 0.64
Diluted $ 0.05 $ 0.18 $ 0.16 $ 0.57 $ 0.62

COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
December 31, September 30, December 31,
2017 2017 2016
Cash and cash equivalents $ 3,651 $ 2,356 $ 2,401
Time and interest-earning deposits in other financial institutions 42,218 49,215 31,715
Investment securities 36,348 38,117 31,683
Loans:
Commercial 111,459 112,399 105,290
Commercial real estate 354,617 343,770 272,142
SBA 26,219 30,944 36,488
Manufactured housing 223,115 216,572 194,222
Single family real estate 10,346 10,022 12,750
HELOC 9,422 9,656 10,292
Other (569) (668) (365)
Total loans 734,609 722,695 630,819
Loans, net
Held for sale 55,094 58,561 61,416
Held for investment 679,515 664,134 569,403
Less: Allowance for loan losses (8,420) (8,312) (7,464)
Net held for investment 671,095 655,822 561,939
NET LOANS 726,189 714,383 623,355
Other assets 24,909 25,079 21,418
TOTAL ASSETS $ 833,315 $ 829,150 $ 710,572
Deposits
Non-interest-bearing demand $ 108,500 $ 116,170 $ 100,372
Interest-bearing demand 256,717 266,835 253,023
Savings 14,085 14,619 14,007
Certificates of deposit ($250,000 or more) 86,985 81,160 77,509
Other certificates of deposit 233,397 218,370 167,325
Total deposits 699,684 697,154 612,236
Other borrowings 56,843 55,843 29,000
Other liabilities 6,718 6,387 4,000
TOTAL LIABILITIES 763,245 759,384 645,236
Stockholders' equity 70,070 69,766 65,336
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 833,315 $ 829,150 $ 710,572
Shares outstanding 8,193 8,169 8,096
Book value per common share $ 8.55 $ 8.54 $ 8.07

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, 2017 Sep. 30, 2017 Dec. 31, 2016 Dec. 31, 2017Dec. 31, 2016
Return on average common equity 2.51% 8.88% 8.17% 7.16% 8.19%
Return on average assets 0.22% 0.78% 0.78% 0.64% 0.81%
Efficiency ratio 68.51% 70.25% 70.72% 69.47% 71.94%
Net interest margin 4.26% 4.27% 4.63% 4.34% 4.60%
Three Months Ended Three Months Ended Three Months Ended Twelve Months Ended
AVERAGE BALANCESDec. 31, 2017 Sep. 30, 2017 Dec. 31, 2016 Dec. 31, 2017Dec. 31, 2016
Average assets$ 805,105 $ 792,279 $ 679,201 $ 766,834 $ 644,549
Average earning assets 789,111 778,412 666,280 753,120 633,054
Average total loans 729,865 708,244 607,989 690,658 573,084
Average deposits 697,500 687,794 598,197 664,878 566,046
Average common equity 71,038 69,438 65,247 68,684 63,857
EQUITY ANALYSISDec. 31, 2017 Sep. 30, 2017 Dec. 31, 2016
Total common equity$ 70,070 $ 69,766 $ 65,336
Common stock outstanding 8,193 8,169 8,096
Book value per common share$ 8.55 $ 8.54 $ 8.07
ASSET QUALITYDec. 31, 2017 Sep. 30, 2017 Dec. 31, 2016
Nonaccrual loans, net$ 4,472 $ 1,837 $ 2,375
Nonaccrual loans, net/total loans 0.61% 0.25% 0.38%
Other assets acquired through foreclosure, net$ 372 $ 486 $ 137
Nonaccrual loans plus other assets acquired through foreclosure, net$ 4,844 $ 2,323 $ 2,512
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets 0.58% 0.28% 0.35%
Net loan (recoveries)/charge-offs in the quarter$ (120) $ (159) $ (158)
Net (recoveries)/charge-offs in the quarter/total loans (0.02%) (0.02%) (0.03%)
Allowance for loan losses$ 8,420 $ 8,312 $ 7,464
Plus: Reserve for undisbursed loan commitments 95 96 125
Total allowance for credit losses$ 8,515 $ 8,408 $ 7,589
Allowance for loan losses/total loans held for investment 1.24% 1.25% 1.31%
Allowance for loan losses/nonaccrual loans, net 188.28% 452.48% 314.27%
Community West Bank *
Tier 1 leverage ratio 8.83% 8.90% 10.08%
Tier 1 capital ratio 10.10% 10.26% 11.04%
Total capital ratio 11.31% 11.48% 12.27%
INTEREST SPREAD ANALYSISDec. 31, 2017 Sep. 30, 2017 Dec. 31, 2016
Yield on total loans 5.23% 5.23% 5.42%
Yield on investments 2.53% 2.60% 3.23%
Yield on interest earning deposits 0.92% 1.10% 0.43%
Yield on earning assets 4.99% 4.94% 5.12%
Cost of interest-bearing deposits 0.89% 0.44% 0.60%
Cost of total deposits 0.74% 0.68% 0.54%
Cost of borrowings 2.05% 1.79% 2.00%
Cost of interest-bearing liabilities 0.94% 0.87% 0.63%
* 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