Market Overview

Community West Bancshares Earns $1.6 Million in 3Q17; Highlighted by 20% Loan Growth and 32% Non-Interest Demand Deposit Growth YOY; Declares Quarterly Cash Dividend of $0.04 Per Share

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GOLETA, Calif., Oct. 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 was $1.6 million, or $0.18 per diluted share, in the third quarter of 2017 (3Q17), unchanged from earnings in the second quarter of 2017 (2Q17) and increased 4.9% compared to $1.5 million, or $0.18 per diluted share, in the third quarter of 2016 (3Q16). 

In the first nine months of 2017 net income increased 14.8% to $4.5 million, or $0.52 per diluted share, compared to $3.9 million, or $0.46 per diluted share, in the first nine months of 2016.

"Our expansion in our market in California's Central Coastal region continues to deliver strong loan and deposit growth and is supporting our strong net interest margin," stated Martin E. Plourd, President and Chief Executive Officer.  "Profitability in our third quarter was consistent with our strong results posted in the preceding quarter, and year-to-date earnings grew 14.8% compared to the first nine months of fiscal 2016, reflecting the growth initiatives we are implementing."

Third Quarter 2017 Financial Highlights

  • Net income was $1.6 million, or $0.18 per diluted share. 
  • Net interest margin was 4.27%.
  • Net loans increased $29.5 million to $714.4 million at September 30, 2017, compared to $684.8 million three months earlier and increased $119.7 million compared to $594.7 million a year ago.
  • Non-interest-bearing deposits increased 32.0% to $116.2 million at September 30, 2017, compared to $88.0 million a year ago.
  • Book value per common share increased to $8.54 at September 30, 2017, compared to $7.93 a year ago. 
  • Annualized return on average assets was 0.78%.
  • Annualized return on average common equity was 8.88%.
  • The Bank continues to be well-capitalized per banking regulations with its total capital ratio at 11.48% and Tier 1 leverage ratio at 8.90% at September 30, 2017.

Income Statement
"While our net interest margin remains well above industry averages, net interest margin contracted in the third quarter, due to the current interest rate environment which raised our cost of funds," said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  Third quarter net interest margin was 4.27% compared to 4.39% in 2Q17 and 4.81% in 3Q16, which included a 39 basis point asset yield increase from one large relationship which paid in full.  In the first nine months of 2017, Community West's net interest margin was 4.36% compared to 4.58% in the first nine months of 2016.

Net interest income for 3Q17 was $8.4 million, a 4.2% increase compared to $8.0 million in the preceding quarter and a 8.7% increase compared to $7.7 million in 3Q16.  In the first nine months of 2017, net interest income increased 13.4% to $24.2 million compared to $21.3 million in the first nine months of 2016.

Non-interest income increased 2.7% to $716,000 in 3Q17, compared to $697,000 in 2Q17 and increased 28.1% compared to $559,000 in 3Q16, primarily due to increased loan originations.  Year-to-date, non-interest income increased 19.8% to $2.1 million compared to $1.7 million in the first nine months of 2016.

Third quarter non-interest expenses totaled $6.4 million, compared to $6.0 million in 2Q17 and $5.8 million in 3Q16.  The increase was largely due to costs associated with the expansion of the Bank's Northern and Southern regions. 

Balance Sheet
"Balance sheet growth reflects the solid demographics in our home markets, which are generating population growth and household incomes above both the state and national averages," said Plourd.  "Commercial real estate and manufactured housing loans continue to generate the majority of loan growth in both the quarter and year-to-date periods."

Net loans increased 4.3% to $714.4 million at September 30, 2017, compared to $684.8 million at June 30, 2017, and increased 20.1% compared to $594.7 million a year ago.  Commercial real estate loans outstanding were up 52.4% from year ago levels to $343.8 million at September 30, 2017, and comprise 47.6% of the total loan portfolio.  Manufactured housing loans were up 12.8% from year ago levels to $216.6 million and represent 30.0% of total loans. Commercial loans decreased 6.4% from year ago levels to $112.4 million and represent 15.6% of the total loan portfolio.

Deposits increased 4.0% to $697.2 million at September 30, 2017, compared to $670.3 million at June 30, 2017, and increased 18.0% compared to $590.6 million a year earlier.  Non-interest bearing demand deposits increased to $116.2 million, or 8.5% compared to June 30, 2017 and increased by 32% 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 $476.2 million at September 30, 2017 and comprise 68.2% of total deposits, compared to $427.3 million, or 72.2% of total deposits, a year ago. 

Total assets were $829.5 million at September 30, 2017, compared to $785.0 million three months earlier and $664.5 million one year ago.  Stockholders' equity improved to $69.8 million at September 30, 2017, compared to $68.2 million at June 30, 2017, and $64.2 million a year ago.  Book value per common share improved to $8.54 at September 30, 2017, compared to $8.36 at June 30, 2017, and $7.93 a year ago. 

Credit Quality
"Asset quality continues to improve on every metric, reflecting the strong economy in our market.  We continue to increase reserves to provide for the strong growth in the loan portfolio," said Plourd.  The loan loss provision was $159,000 in 3Q17, compared to $120,000 in 2Q17, and $22,000 in 3Q16.  Net loan recoveries were $159,000 in 3Q17 compared to $88,000 in 2Q17 and $140,000 in 3Q16.

The allowance for loan losses was $8.3 million at September 30, 2017, or 1.25% of total loans held for investment, compared to 1.27% at June 30, 2017, and 1.33% a year ago.  Net nonaccrual loans decreased 7.6% to $1.8 million, or 0.25% of total loans at June 30, 2017, compared to $2.0 million, or 0.29% of total loans, three months earlier, and decreased 39.3% compared to $3.0 million, or 0.50% of total loans, a year ago.

Of the $1.8 million in net nonaccrual loans, $526,000 were commercial loans, $488,000 were manufactured housing loans, $219,000 were home equity loans, $194,000 were SBA 504 1st loans, $180,000 were single family real estate loans, $127,000 were commercial real estate loans and $104,000 were SBA 7A loans.

Other assets acquired through foreclosure totaled $486,000 at September 30, 2017, compared to $362,000 three months earlier and $55,000 a year earlier.   

Cash Dividend Declared
The Company's Board of Directors declared a quarterly cash dividend of $0.04 per common share, payable November 30, 2017 to common shareholders of record on November 14, 2017.  The current annualized yield, based on the closing price of CWBC shares of $10.40 on September 30, 2017, was 1.54%.

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 September 30, 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   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,   September 30,
      2017     2017     2016     2017     2016  
                     
Interest income                    
Loans, including fees   $   9,340   $   8,788   $   8,228   $   26,570   $   22,817  
Investment securities and other       355       278       288       894       817  
Total interest income       9,695       9,066       8,516       27,464       23,634  
Interest expense                    
Deposits       1,185       941       733       2,984       2,088  
Other borrowings       134       89       74       294       219  
Total interest expense       1,319       1,030       807       3,278       2,307  
Net interest income       8,376       8,036       7,709       24,186       21,327  
Provision (credit) for loan losses       159       120       22       423       (164 )
Net interest income after provision for loan losses       8,217       7,916       7,687       23,763       21,491  
Non-interest income                    
Other loan fees       354       342       270       999       827  
Document processing fees       146       151       130       430       381  
Service charges       118       112       100       326       292  
Other       98       92       59       299       215  
Total non-interest income       716       697       559       2,054       1,715  
Non-interest expenses                    
Salaries and employee benefits        3,839       3,796       3,809       11,566       10,755  
Occupancy, net       754       686       564       2,085       1,631  
                     
Stock-based compensation       283       87       97       454       261  
Professional services       281       299       196       759       653  
Data processing       192       165       173       525       513  
FDIC assessment       172       179       74       461       270  
Depreciation        168       188       162       519       486  
Advertising and marketing       137       195       154       488       447  
Loan servicing and collection       35       55       108       196       198  
Other        526       357       499       1,264       1,464  
Total non-interest expenses       6,387       6,007       5,836       18,317       16,678  
Income before provision for income taxes       2,546       2,606       2,410       7,500       6,528  
Provision for income taxes       992       1,050       929       3,034       2,639  
Net income   $   1,554   $   1,556   $   1,481   $   4,466   $   3,889  
Earnings per share:                    
Basic   $   0.19   $   0.19   $   0.18   $   0.55   $   0.48  
Diluted   $   0.18   $   0.18   $   0.18   $   0.52   $   0.46  
                     

 

COMMUNITY WEST BANCSHARES                
CONDENSED CONSOLIDATED BALANCE SHEETS                
(unaudited)                
(in 000's, except per share data)                
                 
    September 30,   June 30,   September 30,   December 31,
      2017       2017       2016       2016  
                 
Cash and cash equivalents   $   2,356     $   1,919     $   2,595     $   2,401  
Time and interest-earning deposits in other financial institutions       49,215         36,085         15,164         31,715  
Investment securities       38,117         39,326         31,200         31,683  
Loans:                
Commercial       112,399         111,655         120,043         105,290  
Commercial real estate       343,770         317,793         225,572         272,142  
SBA       30,944         34,670         39,295         36,488  
Manufactured housing       216,572         209,119         191,946         194,222  
Single family real estate       10,022         10,161         14,335         12,750  
HELOC       9,656         9,974         10,789         10,292  
Other       (668 )       (542 )       (78 )       (365 )
Total loans       722,695         692,830         601,902         630,819  
                 
Loans, net                
Held for sale       58,561         60,933         62,381         61,416  
Held for investment       664,134         631,897         539,521         569,403  
Less: Allowance for loan losses       (8,312 )       (7,994 )       (7,190 )       (7,464 )
Net held for investment       655,822         623,903         532,331         561,939  
NET LOANS       714,383         684,836         594,712         623,355  
                 
Other assets       25,079         22,806         20,865         21,418  
                 
TOTAL ASSETS   $   829,150     $   784,972     $   664,536     $   710,572  
                 
Deposits                
Non-interest-bearing demand   $   116,170     $   107,049     $   88,024     $   100,372  
Interest-bearing demand       266,835         262,475         258,360         253,023  
Savings       14,619         14,011         14,388         14,007  
Certificates of deposit ($250,000 or more)       81,160         82,156         92,319         77,509  
Other certificates of deposit       218,370         204,589         137,510         167,325  
Total deposits       697,154         670,280         590,601         612,236  
Other borrowings       55,843         41,800         5,500         29,000  
Other liabilities       6,387         4,676         4,223         4,000  
  TOTAL LIABILITIES       759,384         716,756         600,324         645,236  
                 
Stockholders' equity       69,766         68,216         64,212         65,336  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                
  $   829,150     $   784,972     $   664,536     $   710,572  
                 
Shares outstanding       8,169         8,160         8,094         8,096  
                 
Book value per common share   $   8.54     $   8.36     $   7.93     $   8.07  
                 

 

ADDITIONAL FINANCIAL INFORMATION                  
(Dollars in thousands except per share amounts) (Unaudited)                  
  Three Months Ended   Three Months Ended   Three Months Ended   Nine Months Ended  
PERFORMANCE MEASURES AND RATIOS Sep. 30, 2017   Jun. 30, 2017   Sep. 30, 2016   Sep. 30, 2017 Sep. 30, 2016  
Return on average common equity    8.88 %     9.20 %     9.17 %     8.80 %   8.19 %  
Return on average assets    0.78 %     0.83 %     0.91 %     0.79 %   0.82 %  
Efficiency ratio   70.25 %     68.79 %     70.59 %     69.81 %   72.38 %  
Net interest margin   4.27 %     4.39 %     4.81 %     4.36 %   4.58 %  
                   
  Three Months Ended   Three Months Ended   Three Months Ended   Nine Months Ended  
AVERAGE BALANCES Sep. 30, 2017   Jun. 30, 2017   Sep. 30, 2016   Sep. 30, 2017 Sep. 30, 2016  
Average assets $   792,279     $   747,790     $   649,134     $   754,140   $   632,946    
Average earning assets     778,412         735,041         637,525         740,990       621,899    
Average total loans     708,244         672,677         581,477         677,445       561,365    
Average deposits     687,794         646,316         571,094         653,885       555,250    
Average common equity     69,438         67,820         64,260         67,891       63,395    
                   
EQUITY ANALYSIS Sep. 30, 2017   Jun. 30, 2017   Sep. 30, 2016        
Total common equity $   69,766     $   68,216     $   64,212          
Common stock outstanding     8,169         8,160         8,094          
                   
Book value per common share $   8.54     $   8.36     $   7.93          
                   
ASSET QUALITY Sep. 30, 2017   Jun. 30, 2017   Sep. 30, 2016        
Nonaccrual loans, net $   1,837     $   1,988     $   3,026          
Nonaccrual loans, net/total loans   0.25 %     0.29 %     0.50 %        
Other assets acquired through foreclosure, net $   486     $   362     $   55          
                   
Nonaccrual loans plus other assets acquired through foreclosure, net $   2,323     $   2,350     $   3,081          
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets   0.28 %     0.30 %     0.46 %        
Net loan (recoveries)/charge-offs in the quarter $   (159 )   $   (159 )   $   (140 )        
Net (recoveries)/charge-offs in the quarter/total loans    (0.02 %)     (0.01 %)     (0.02 %)        
                   
Allowance for loan losses $   8,312     $   7,994     $   7,190          
Plus: Reserve for undisbursed loan commitments     96         99         83          
Total allowance for credit losses $   8,408     $   8,093     $   7,273          
Allowance for loan losses/total loans held for investment   1.25 %     1.27 %     1.33 %        
Allowance for loan losses/nonaccrual loans, net   452.48 %     402.11 %     237.61 %        
                   
Community West Bank *                  
Tier 1 leverage ratio   8.90 %     9.23 %     10.48 %        
Tier 1 capital ratio   10.26 %     10.39 %     11.83 %        
Total capital ratio   11.48 %     11.62 %     13.08 %        
                   
INTEREST SPREAD ANALYSIS Sep. 30, 2017   Jun. 30, 2017   Sep. 30, 2016        
Yield on total loans   5.23 %     5.24 %     5.63 %        
Yield on investments   2.60 %     2.31 %     3.10 %        
Yield on interest earning deposits   1.10 %     0.83 %     0.45 %        
Yield on earning assets   4.94 %     4.95 %     5.31 %        
                   
Cost of interest-bearing deposits   0.44 %     0.69 %     0.60 %        
Cost of total deposits   0.68 %     0.58 %     0.51 %        
Cost of borrowings   1.79 %     1.22 %     2.82 %        
Cost of interest-bearing liabilities   0.87 %     0.72 %     0.65 %        
                   
* Capital ratios are preliminary until the Call Report is filed.                  
                   

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

 

 

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