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Community West Bancshares Earnings Grow 20% to $1.9 Million in 2Q18 Over 2Q17; Book Value Per Common Share Increases to $8.90; Declares Quarterly Cash Dividend of $0.05 Per Common Share

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GOLETA, Calif., July 27, 2018 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported net income increased 20.0% to $1.9 million, or $0.21 per diluted share, in the second quarter of 2018 (2Q18), compared to $1.6 million, or $0.18 per diluted share in the second quarter of 2017 (2Q17) and increased slightly by 2.9% when compared to the first quarter of 2018 (1Q18). 

In the first six months of 2018, net income increased 26.4% to $3.7 million, or $0.42 per diluted share, compared to $2.9 million, or $0.34 per diluted share, in the first six months of 2017.

"In the second quarter we shifted our focus to emphasize core deposit growth which include non-interest bearing checking, interest bearing checking, money market accounts, savings accounts and retail certificates of deposits, gaining 7.3% over the prior year," stated Martin E. Plourd, President and Chief Executive Officer.  "We extended our momentum from the first quarter, producing solid performance metrics including return on average assets of 0.90% and a return on average common equity of 10.26% for the second quarter."

Second Quarter 2018 Financial Highlights

  • Net income increased 20.0% to $1.9 million, or $0.21 per diluted share, in 2Q18, compared to $1.6 million, or $0.18 per diluted share in 2Q17.
  • Return on average common equity of 10.26%, down from 10.30% three months earlier and up from 9.20% a year ago.
  • Return on average assets of 0.90%, down slightly from 0.91% three months earlier and up from 0.83% a year ago.
  • Total loans increased $14.1 million to $759.9 million at June 30, 2018, compared to $745.8 million three months earlier and increased $67.1 million compared to $692.8 million a year ago.
  • Total deposits were $702.6 million at June 30, 2018, compared to $710.0 million three months earlier and increased $32.3 million compared to $670.3 million a year ago.
  • Core deposits increased to $500.2 million at June 30, 2018, compared to $485.7 million three months earlier and increased $36.6 million compared to $463.6 million a year ago.
  • Net interest margin was 4.06%, compared to 4.25% three months earlier and 4.39% a year ago.
  • Book value per common share increased to $8.90 at June 30, 2018, compared to $8.36 a year ago and $8.73 three months earlier. 
  • The Bank continues to be well-capitalized per banking regulations with its total capital ratio at 11.29%, its Tier 1 capital ratio at 10.11% and Tier 1 leverage ratio at 8.88% at June 30, 2018.

Income Statement

Net interest income for 2Q18 was $8.3 million, compared to $8.4 million in the preceding quarter and a 3.4% increase compared to $8.0 million in 2Q17.  In the first six months of 2018, net interest income increased 5.4% to $16.7 million, compared to $15.8 million in the first six months of 2017.

Non-interest income was $688,000 in 2Q18, compared to $639,000 in 1Q18 and $697,000 in 2Q17.  In the first six months of 2018, non-interest income was $1.3 million, which was unchanged compared to the first six months of 2017.

Second quarter net interest margin was 4.06% compared to 4.25% in 1Q18 and 4.39% in 2Q17.  In the first six months of the year, net interest margin was 4.15% compared to 4.42% in the first six months a year ago.  "The net interest margin continued to compress as the yield curve flattened further in the second quarter," said Susan C. Thompson, Executive Vice President and Chief Financial Officer. 

Non-interest expenses totaled $6.3 million in 2Q18, compared to $6.0 million in 2Q17 and decreased compared to $6.5 million in the preceding quarter.  In the first six months of 2018, non-interest expenses totaled $12.8 million, compared to $11.9 million in the first six months of 2017.  The year-over-year increase was primarily attributable to an increase in salary and employee benefits as the result of expansion.

Balance Sheet

"Total loans increased 1.9% during the quarter and increased 9.7% year over year, with solid production in commercial real estate, manufactured housing and commercial loans," said Plourd.

Total loans increased to $759.9 million at June 30, 2018, compared to $745.8 million at March 31, 2018, and increased $67.1 million compared to $692.8 million a year ago.  Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 14.8% from year ago levels to $364.7 million at June 30, 2018, and comprise 48.0% of the total loan portfolio.  Manufactured housing loans were up 12.2% from year ago levels to $234.6 million and represent 30.9% of total loans.  Commercial loans increased 5.9% from year ago levels to $118.3 million and represent 15.6% of the total loan portfolio.

Core deposits totaled $500.2 million at June 30, 2018 and comprise 71.1% of total deposits compared to $485.7 million and 68.4% of total deposits at March 31, 2018 and compared to $463.6 million and 69.1% of total deposits a year ago. A strategic focus for the Company in 2018 is core deposit growth.  Total deposits declined modestly to $702.6 million at June 30, 2018, compared to $710.0 million at March 31, 2018, and increased $32.3 million, or 4.8% compared to $670.3 million a year earlier. 

Total assets were $865.1 million at June 30, 2018, which was unchanged compared to three months earlier and a $80.2 million, or 10.2% increase compared to $785.0 million one year ago.  Stockholders' equity improved to $73.4 million at June 30, 2018, compared to $71.7 million at March 31, 2018, and $68.2 million a year ago.  Book value per common share improved to $8.90 at June 30, 2018, compared to $8.73 at March 31, 2018, and $8.36 a year ago. 

Credit Quality

"We had another solid quarter of loan growth and as a result recorded a $117,000 provision for loan losses during the second quarter," said Thompson.  This compares to a negative provision for loan losses of $144,000 in 1Q18 and a provision for loan losses of $120,000 in 2Q17.  Net loan recoveries were $47,000 in 2Q18 compared to $182,000 in 1Q18 and $89,000 in 2Q17.

The allowance for loan losses was $8.6 million at June 30, 2018, or 1.22% of total loans held for investment, compared to 1.22% at March 31, 2018, and 1.27% a year ago.  Net nonaccrual loans decreased to $3.7 million, or 0.49% of total loans at June 30, 2018, compared to $4.2 million, or 0.57% of total loans, three months earlier, and increased compared to $2.0 million, or 0.29% of total loans, a year ago.  

Of the $3.7 million in net nonaccrual loans, $2.1 million were commercial loans primarily from one relationship and not systemic to the portfolio, $527,000 were commercial agricultural loans, $259,000 were manufactured housing loans, $207,000 were home equity loans, $168,000 were single-family real estate loans, $166,000 were SBA 504 1st loans, $160,000 were SBA 7A loans and $112,000 were commercial real estate loans.

Other assets acquired through foreclosure totaled $213,000 at June 30, 2018, compared to $233,000 three months earlier and $362,000 a year ago. 

Cash Dividend Declared

The Company's Board of Directors declared a cash dividend of $0.05 per common share, payable August 31, 2018 to common shareholders of record on August 14, 2018.  The current annualized yield, based on the closing price of CWBC shares of $11.80 on June 30, 2018, was 1.7%.

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 2018, Community West was awarded a "Premier" rating by The Findley Reports.  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.

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.

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

                 
                 
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,
  2018   2018   2017   2018 2017
                 
Interest income                
Loans, including fees $ 10,020     $ 9,651     $ 8,788   $ 19,671   $ 17,230
Investment securities and other   381       337       278     718     539
Total interest income   10,401       9,988       9,066     20,389     17,769
Interest expense                
Deposits   1,708       1,443       941     3,151     1,799
Other borrowings   382       195       89     577     160
Total interest expense   2,090       1,638       1,030     3,728     1,959
Net interest income   8,311       8,350       8,036     16,661     15,810
Provision (credit) for loan losses   117       (144 )     120     (27 )   264
Net interest income after provision for loan losses   8,194       8,494       7,916     16,688     15,546
Non-interest income                
Other loan fees   323       296       342     619     645
Document processing fees   130       117       151     247     284
Service charges   122       116       112     238     208
Other   113       110       92     223     201
Total non-interest income   688       639       697     1,327     1,338
Non-interest expenses                
Salaries and employee benefits   4,042       4,149       3,796     8,191     7,727
Occupancy, net   741       784       686     1,525     1,331
Professional services   301       304       299     605     478
Data processing   206       212       165     418     333
Depreciation   186       167       188     353     351
FDIC assessment   164       214       179     378     289
Advertising and marketing   163       170       195     333     351
Stock-based compensation   87       116       87     203     171
Loan servicing and collection   (19 )     70       55     51     161
Other   386       347       357     733     738
Total non-interest expenses   6,257       6,533       6,007     12,790     11,930
Income before provision for income taxes   2,625       2,600       2,606     5,225     4,954
Provision for income taxes   758       786       1,050     1,544     2,042
Net income $ 1,867     $ 1,814     $ 1,556   $ 3,681   $ 2,912
Earnings per share:                
Basic $ 0.23     $ 0.22     $ 0.19   $ 0.45   $ 0.36
Diluted $ 0.21     $ 0.21     $ 0.18   $ 0.42   $ 0.34
                 


COMMUNITY WEST BANCSHARES  
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
 
  June 30,   March 31,   June 30,   December 31,
  2018   2018   2017   2017
               
Cash and cash equivalents $ 3,385     $ 3,473     $ 1,919     $ 3,651  
Time and interest-earning deposits in other financial institutions   50,977       65,336       36,085       42,218  
Investment securities   33,720       34,988       39,326       36,348  
Loans:              
Commercial   118,263       109,819       111,655       111,459  
Commercial real estate   364,679       362,197       317,793       354,617  
SBA   22,724       24,989       34,670       26,219  
Manufactured housing   234,598       229,194       209,119       223,115  
Single family real estate   10,682       10,609       10,161       10,346  
HELOC   9,502       9,483       9,974       9,422  
Other   (558 )     (514 )     (542 )     (569 )
Total loans   759,890       745,777       692,830       734,609  
               
Loans, net              
Held for sale   52,886       52,767       60,933       55,094  
Held for investment   707,004       693,010       631,897       679,515  
Less: Allowance for loan losses   (8,622 )     (8,458 )     (7,994 )     (8,420 )
Net held for investment   698,382       684,552       623,903       671,095  
NET LOANS   751,268       737,319       684,836       726,189  
               
Other assets   25,777       24,573       22,806       24,909  
               
TOTAL ASSETS $ 865,127     $ 865,689     $ 784,972     $ 833,315  
               
Deposits              
Non-interest-bearing demand $ 107,168     $ 118,206     $ 107,049     $ 108,500  
Interest-bearing demand   260,708       258,717       262,475       256,717  
Savings   14,515       14,347       14,011       14,085  
Certificates of deposit ($250,000 or more)   88,752       81,690       82,156       81,985  
Other certificates of deposit   231,460       237,077       204,589       238,397  
Total deposits   702,603       710,037       670,280       699,684  
Other borrowings   81,843       76,843       41,800       56,843  
Other liabilities   7,233       7,098       4,676       6,718  
TOTAL LIABILITIES   791,679       793,978       716,756       763,245  
               
Stockholders' equity   73,448       71,711       68,216       70,070  
               
               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 865,127     $ 865,689     $ 784,972     $ 833,315  
               
Shares outstanding   8,254       8,216       8,160       8,193  
               
Book value per common share $ 8.90     $ 8.73     $ 8.36     $ 8.55  
 


 
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 RATIOS Jun. 30, 2018   Mar. 31, 2018   Jun. 30, 2017       Jun. 30, 2018   Jun. 30, 2017
Return on average common equity    10.26%       10.30%       9.20%           10.28%       8.75%  
Return on average assets    0.90%       0.91%       0.83%           0.90%       0.80%  
Efficiency ratio   69.53%       72.68%       68.79%           71.10%       69.57%  
Net interest margin   4.06%       4.25%       4.39%           4.15%       4.42%  
                       
  Three Months Ended   Three Months Ended   Three Months Ended       Six Months Ended
AVERAGE BALANCES Jun. 30, 2018   Mar. 31, 2018   Jun. 30, 2017       Jun. 30, 2018   Jun. 30, 2017
Average assets $   836,394     $   812,698     $   747,790         $   824,611     $   734,782  
Average earning assets     820,854         797,281         735,041             809,133         721,969  
Average total loans     750,575         736,628         672,677             743,640         661,791  
Average deposits     704,251         702,376         646,316             703,319         636,650  
Average common equity     72,993         71,433         67,820             72,217         67,105  
                       
EQUITY ANALYSIS Jun. 30, 2018   Mar. 31, 2018   Jun. 30, 2017            
Total common equity $   73,448     $   71,711     $   68,216              
Common stock outstanding     8,254         8,216       8,160              
                       
Book value per common share $   8.90     $   8.73     $   8.36              
                       
ASSET QUALITY Jun. 30, 2018   Mar. 31, 2018   Jun. 30, 2017            
Nonaccrual loans, net $   3,704     $   4,220     $   1,988              
Nonaccrual loans, net/total loans   0.49%       0.57%       0.29%              
Other assets acquired through foreclosure, net $   213     $   233     $   362              
                       
Nonaccrual loans plus other assets acquired through foreclosure, net $   3,917     $   4,453     $   2,350              
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets   0.45%       0.51%       0.30%              
Net loan (recoveries)/charge-offs in the quarter $   (47 )   $   (182 )   $   (89 )            
Net (recoveries)/charge-offs in the quarter/total loans    (0.01% )     (0.02% )     (0.01% )            
                       
Allowance for loan losses $   8,622     $   8,458     $   7,994              
Plus: Reserve for undisbursed loan commitments     97         101         99              
Total allowance for credit losses $   8,719     $   8,559     $   8,093              
Allowance for loan losses/total loans held for investment   1.22%       1.22%       1.27%              
Allowance for loan losses/nonaccrual loans, net   232.78%       200.43%       402.11%              
                       
Community West Bank *                      
Tier 1 leverage ratio   8.88%       8.96%       9.23%              
Tier 1 capital ratio   10.11%       10.19%       10.39%              
Total capital ratio   11.29%       11.38%       11.62%              
                       
INTEREST SPREAD ANALYSIS Jun. 30, 2018   Mar. 31, 2018   Jun. 30, 2017            
Yield on total loans   5.35%       5.31%       5.24%              
Yield on investments   2.74%       2.73%       2.31%              
Yield on interest earning deposits   1.49%       1.36%       0.83%              
Yield on earning assets   5.08%       5.08%       4.95%              
                       
Cost of interest-bearing deposits   1.16%       0.99%       0.69%              
Cost of total deposits   0.97%       0.83%       0.58%              
Cost of borrowings   2.90%       2.50%       1.22%              
Cost of interest-bearing liabilities   1.30%       1.07%       0.72%              
                       
* Capital ratios are preliminary until the Call Report is filed.                      

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