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Community West Bancshares Earns $1.2 Million, or $0.14 Per Diluted Share, in 2Q20; Declares Quarterly Cash Dividend of $0.045 Per Common Share; Provides COVID-19 Response Update

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GOLETA, Calif., July 24, 2020 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ:CWBC), parent company of Community West Bank (Bank), today reported net income of $1.2 million, or $0.14 per diluted share, for the second quarter of 2020 (2Q20), compared to $1.6 million, or $0.19 per diluted share, for the first quarter of 2020 (1Q20), and $1.6 million, or $0.18 per diluted share, for the second quarter of 2019 (2Q19).  For the first six months of 2020, Community West reported net income of $2.8 million, or $0.32 per diluted share, compared to $3.1 million, or $0.36 per diluted share, for the first six months of 2019.

COVID-19 Pandemic Update

"Our second quarter earnings were affected by a number of items, including the impact of the Coronavirus pandemic on the economy, and the subsequent increase in our loan loss reserve," stated Martin E. Plourd, President and Chief Executive Officer.  "Highlighting the quarter was net interest income growth and increased core deposits.  Additionally, we generated over 500 Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans to our customers for $75.1 million during the quarter which had a meaningful impact on loan and related deposit growth.  Gross PPP loan fees are estimated to be $2.8 million based on current loan forgiveness expectations.  The PPP income will be recorded as loans are repaid."  

"The effect of the pandemic on our employees, customers and communities remains our primary concern and we believe the full economic impact has yet to be realized" Plourd continued. "Since the start of the pandemic, we have maintained all branch activity, taking conservative measures to keep our employees, customers, and communities safe.  Currently, approximately 40% of our employees are working remotely while keeping our high level of customer service.  We are intently focused on assessing the risks in our loan portfolio and working with our customers to minimize losses. We have implemented a loan modification program, in line with regulatory guidance, allowing impacted customers to defer loan payments."  As of June 30, 2020, requests to defer loan payments totaled approximately $156 million or 18% of the Bank's total loan portfolio. 

The industries most heavily impacted include retail, healthcare, hospitality, schools and energy.  The Company's management team has evaluated the loans related to the affected industries and at June 30, 2020, the Bank's loans to these industries were $187.3 million which is 21.9% of our $856.0 million loan portfolio.

Importantly, of the selected industry loans, $1.7 million or 0.9% are on non-accrual.  Also, of the selected industries loans the classified loans are $12.1 Million or 6.5%.  Lastly, the Bank has accommodated $81.8 million of these loans with payment deferrals or 43.7% of the selected industries.  Additional detail by industry is included in the table below.

  Sectors Under Focus (Excluding PPP Loans)  
  As of 6/30/20
(in thousands)
Ventura/Los
Angeles
Counties
Santa
Barbara
County
San Luis
Obispo
County
Other Loans Outstanding
(includes $11 million of
guarantees)
$ Non-
accrual
% Non-
accrual
$ Classified %
Classified
$ Deferrals %
Deferral
 
  Healthcare $   9,135 $   9,695 $   27,205 $   2,431 $   48,466 $   1,657 3.42 % $   2,025 4.18 % $   14,232 29.36 %  
  Senior/Assted Living Facilities $ 1,695 $ 612 $ 20,779 $ - $ 23,086 $ - 0.00 % $ - 0.00 % $ - 0.00 %  
  Medical Offices $ 5,332 $ 6,609 $ 5,806 $ 1,240 $ 18,987 $ - 0.00 % $ 290 1.53 % $ 10,026 52.80 %  
  General Healthcare $ 2,108 $ 2,474 $ 620 $ 1,191 $ 6,393 $ 1,657 25.92 % $ 1,735 27.14 % $ 4,206 65.79 %  
  Hospitality $   9,011 $   16,446 $   27,941 $   2,209 $   55,607 $   3 0.01 % $   1,673 3.01 % $   40,197 72.29 %  
  Lodging $ 3,093 $ 12,497 $ 23,965 $ 1,593 $ 41,148 $ - 0.00 % $ - 0.00 % $ 33,229 80.75 %  
  Restaurants $ 5,918 $ 615 $ 3,976 $ 616 $ 11,125 $ 3 0.03 % $ 1,673 15.04 % $ 6,968 62.63 %  
  RV-Mobile Home Parks $ - $ 3,334 $ - $ - $ 3,334 $ - 0.00 % $ - 0.00 % $ - 0.00 %  
  Retail Commercial Real Estate $   23,590 $   16,991 $   9,980 $   8,275 $   58,836 $   25 0.04 % $   8,415 14.30 % $   24,405 41.48 %  
  Retail Services $   5,242 $   5,948 $    6,072 $   5,724 $   22,986 $   - 0.00 % $   19 0.08 % $   2,844 12.37 %  
  Schools $   - $   50 $   1,088 $   107 $   1,245 $   - 0.00 % $   - 0.00 % $   - 0.00 %  
  Energy $   149 $    - $   - $   - $   149 $   - 0.00 % $   - 0.00 % $   149 100.00 %  
                           

Second Quarter 2020 Financial Highlights:

  • Net income was $1.2 million, or $0.14 per diluted share, in 2Q20, compared to $1.6 million, or $0.19 per diluted share in 1Q20, and $1.6 million, or $0.18 per diluted share in 2Q19.
  • Net interest income was $8.8 million for the quarter, compared to $8.5 million for 1Q20, and $8.5 million for 2Q19.
  • Provision for loan losses was $762,000 for the quarter, compared to $392,000 for 1Q20, and $177,000 for 2Q19. The resulting allowance was 1.34% of total loans held for investment at June 30, 2020 (excluding the $75.1 million of PPP loans which are 100% guaranteed by the SBA).
  • Net interest margin was 3.72% for 2Q20, compared to 3.97% for 1Q20, and 4.07% for 2Q19.
  • Total demand deposits increased $96.0 million to $504.0 million at June 30, 2020, compared to $408.0 million at March 31, 2020, and increased $47.7 million compared to $456.3 million at June 30, 2019.  Total demand deposits represented 67.2% of total deposits at June 30, 2020. 
  • Non-interest-bearing demand deposits increased $71.5 million to $192.8 million at June 30, 2020, compared to $121.3 million at March 31, 2020 and increased $80.3 million compared to $112.5 million at June 30, 2019.
  • Total loans increased $74.0 million during the quarter to $856.0 million at June 30, 2020, compared to $782.0 million at March 31, 2020, and increased $67.1 million from $788.9 million at June 30, 2019. 
  • Book value per common share increased to $9.93 at June 30, 2020, compared to $9.82 at March 31, 2020, and $9.19 at June 30, 2019. 
  • Total risked-based capital improved to 11.63% for the Bank at June 30, 2020, compared to 11.60% at March 31, 2020 and 10.67% at June 30, 2019.
  • Net non-accrual loans of $2.6 million at June 30, 2020 and at March 31, 2020, compared to $3.0 million at June 30, 2019.
  • Other assets acquired through foreclosure, net was $2.7 million at June 30, 2020 and at March 31, 2020, compared to $1.1 million at June 30, 2019.

Income Statement

Net interest income was $8.8 million in 2Q20 compared to $8.5 million in 1Q20 and $8.5 million in 2Q19, primarily due to decreased deposit costs.  In the first six months of 2020, net interest income increased 3.1% to $17.2 million, compared to $16.7 million in the first six months of 2019. 

Non-interest income was $640,000 in 2Q20, compared to $950,000 in 1Q20, and $692,000 in 2Q19.  Other loan fees were $283,000 for 2Q20 a 17% decline compared to $341,000 for 1Q20, and a 5.2% increase compared to 2Q19.  Gain on sale of loans was $97,000 in 2Q20 compared to $190,000 in the preceding quarter.  There were no gains on sales of loans in 2Q19.  Non-interest income increased 22.7% to $1.6 million in the first six months of 2020 compared to $1.3 million in the first six months of 2019.

Second quarter net interest margin was 3.72%, compared to 3.97% in 1Q20, and 4.07% in 2Q19.  "The 150-basis point reduction in interest rates in March 2020 and the resulting effect on yields on earning assets contributed to the net interest margin decline during the quarter," said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  In the first six months of 2020, the net interest margin was 3.84%, compared to 4.03% in the prior year period.

"While our asset quality at quarter end remained solid, we are being proactive in our approach to the COVID-19 pandemic and its impact on the local economy.  Consequently, we booked a $762,000 loan loss provision during the second quarter, which is higher than the provisions booked over the past few years," said Thompson.  The provision for loan losses was $392,000 for 1Q20, and $177,000 for 2Q19.  The increase in the current quarter was primarily the result of management's qualitative adjustment to reflect the estimated losses due to the current economic uncertainties and some growth in the loan portfolio.

Non-interest expense totaled $7.0 million in 2Q20, compared to $6.7 million in the preceding quarter and $6.8 million in 2Q19.  2Q20 included some additional pandemic related expenses.  In the first six months of 2020, non-interest expense was $13.7 million, compared to $13.5 million in the first six months of 2019. 

Balance Sheet

Total assets increased $135.6 million, or 14.7%, to $1.06 billion at June 30, 2020, compared to $925.2 million at March 31, 2020 and increased $155.3 million, or 17.1%, compared to $905.6 million at June 30, 2019.  Total loans increased $74.0 million, or 9.5%, to $856.0 million at June 30, 2020, compared to $782.0 million at March 31, 2020, and increased $67.1 million, or 8.5% compared to $788.9 million at June 30, 2019.  

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up modestly from year ago levels to $392.8 million at June 30, 2020 and comprise 45.9% of the total loan portfolio.  Manufactured housing loans were up 5.6% from year ago levels to $267.3 million and represent 31.2% of total loans.  SBA PPP loans originated during the second quarter were $75.1 million at June 30, 2020 and represent 8.8% of total loans.  Commercial loans (which include agriculture loans) were down 12.4% from year ago levels to $95.1 million and represent 11.1% of the total loan portfolio.  The majority of this decrease was in the commercial agriculture portfolio as the Company has switched its production focus from on-balance sheet Federal Service Agency loans with guarantees to off-balance sheet Farmer Mac loans for which we receive servicing income for the life of the loan.

Total deposits were $750.2 million at June 30, 2020, compared to $711.6 million at March 31, 2020, and $765.1 million at June 30, 2019.  Non-interest-bearing demand deposits increased $71.5 million, or 59.0%, during the quarter to $192.8 million at June 30, 2020, compared to $121.3 million at March 31, 2020, and increased $80.3 million, or 71.4%, compared to $112.5 million at June 30, 2019.  Interest-bearing demand deposits increased $24.5 million to $311.3 million at June 30, 2020, compared to $286.7 million at March 31, 2020, and decreased $32.6 million compared to $343.8 million at June 30, 2019.  Certificates of deposit, which include brokered deposits, decreased $59.3 million during the quarter to $228.2 million at June 30, 2020, compared to $287.6 million at March 31, 2020 and decreased $64.3 million compared to $292.5 million at June 30, 2019.  The reduction in deposits was due to divesting of some high-priced municipal funding to lower cost non-deposit funding sources.  

Stockholders' equity increased to $84.1 million at June 30, 2020, compared to $83.2 million at March 31, 2020, and $77.8 million at June 30, 2019.  Book value per common share increased to $9.93 at June 30, 2020, compared to $9.82 at March 31, 2020, and $9.19 at June 30, 2019.  In an effort to be conservative, the Company drew down $10 million on its line of credit in 1Q20, which can be down streamed to the Bank as additional capital if needed in the future.

Credit Quality

Management is closely monitoring credit metrics and performing stress testing on the Bank's loan portfolio.  In addition, resources have been reallocated to credit administration to closely analyze higher risk segments within the portfolio, monitoring and tracking loan payment deferrals and customer liquidity, and provide timely reporting to management and the Board of Directors.  The management team continues to analyze economic conditions in its markets.  Based on the Company's resources, capital levels, current economic climate, and underwriting policies, management expects to be able to manage the economic risks and uncertainties associated with the COVID-19 pandemic and remain adequately capitalized.

The Company recorded a provision for loan losses of $762,000 in 2Q20.  This compares to a provision for loan losses of $392,000 in 1Q20, and $177,000 in 2Q19.  The allowance for loan losses, including the reserve for undisbursed loans, was $10.1 million, or 1.22% of total loans held for investment, at June 30, 2020.  The allowance for loan losses was 1.34% of total loans held for investment at June 30, 2020 when excluding the $75.1 million of PPP loans, which are 100% guaranteed by the SBA.  Net non-accrual loans plus net other assets acquired through foreclosure were $5.3 million at June 30, 2020, which was unchanged from March 31, 2020.  Net non-accrual loans plus net other assets acquired through foreclosure were $4.1 million at June 30, 2019. 

Net non-accrual loans totaled $2.6 million at June 30, 2020, which was unchanged from March 31, 2020.  Net non-accrual loans were $3.0 million a year ago.  Of the $2.6 million of net non-accrual loans at June 30, 2020, $1.5 million were commercial loans, $0.9 million were manufactured housing loans, $0.1 million were SBA loans, and $0.1 million were commercial real estate loans.

There was $2.7 million in other assets acquired through foreclosure as of June 30, 2020 and at March 31, 2020.  This compares to $1.1 million of other assets acquired through foreclosure at June 30, 2019.  The majority of this balance relates to one property of $2.5 million.

Cash Dividend Declared

The Company's Board of Directors declared a cash dividend of $0.045 per common share, payable August 31, 2020 to common shareholders of record on August 14, 2020. 

Stock Repurchase Program

The Company did not repurchase shares during the second quarter of 2020, leaving $1.4 million available under the previously announced repurchase program.  The Company has suspended its repurchase program until further notice.

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, San Luis Obispo, Oxnard and Paso Robles.  The principal business activities of the Company are Relationship Banking, Manufactured Housing lending and Government Guaranteed lending.

Industry Accolades

In April 2020, Community West was awarded a "Premier" rating by The Findley Reports.  For 51 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. We are also rated 5 star Superior by Bauer Financial.

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,
      2020     2020     2019     2020     2019
                     
Interest income                    
Loans, including fees   $ 10,585   $ 10,664   $ 10,907   $ 21,249   $ 21,448
Investment securities and other     192     311     460     503     944
Total interest income     10,777     10,975     11,367     21,752     22,392
                     
Deposits     1,500     2,122     2,583     3,622     5,027
Other borrowings     496     390     286     886     644
Total interest expense     1,996     2,512     2,869     4,508     5,671
Net interest income     8,781     8,463     8,498     17,244     16,721
Provision (credit) for loan losses     762     392     177     1,154     120
Net interest income after provision for loan losses     8,019     8,071     8,321     16,090     16,601
Non-interest income                    
Other loan fees     283     341     269     624     476
Gains from loan sales, net     97     190     -     287     -
Document processing fees     108     124     124     232     211
Service charges     62     134     139     196     278
Other     90     161     160     251     331
Total non-interest income     640     950     692     1,590     1,296
Non-interest expenses                    
Salaries and employee benefits     4,574     4,398     4,318     8,972     8,699
Occupancy, net     776     758     768     1,534     1,550
Professional services     559     383     405     942     786
Data processing     260     283     201     543     425
Depreciation     206     208     218     414     431
FDIC assessment     133     144     154     277     324
Advertising and marketing     265     153     230     418     359
Stock-based compensation     95     85     97     180     192
Other     135     317     369     452     711
Total non-interest expenses     7,003     6,729     6,760     13,732     13,477
Income before provision for income taxes     1,656     2,292     2,253     3,948     4,420
Provision for income taxes     496     694     673     1,190     1,330
Net income   $ 1,160   $ 1,598   $ 1,580   $ 2,758   $ 3,090
Earnings per share:                    
Basic   $ 0.14   $ 0.19   $ 0.19   $ 0.33   $ 0.37
Diluted   $ 0.14   $ 0.19   $ 0.18   $ 0.32   $ 0.36


COMMUNITY WEST BANCSHARES                
CONDENSED CONSOLIDATED BALANCE SHEETS                
(unaudited)                
(in 000's, except per share data)                
                 
    June 30,   March 31,   December 31,   June 30,
      2020       2020       2019       2019  
                 
Cash and cash equivalents   $ 4,679     $ 3,002     $ 2,539     $ 2,038  
Interest-earning deposits in other financial institutions     142,823       86,663       80,122       55,143  
Investment securities     24,221       23,909       25,563       30,414  
Loans:                
Commercial     95,114       98,365       101,485       108,599  
Commercial real estate     392,789       391,207       385,642       391,293  
SBA     13,013       13,330       14,777       17,560  
Paycheck Protection Program (PPP)     75,149       -       -       -  
Manufactured housing     267,343       263,484       257,247       253,250  
Single family real estate     11,078       11,191       11,668       11,351  
HELOC     3,918       4,196       4,531       6,696  
Other (1)     (2,375 )     223       213       159  
Total loans     856,029       781,996       775,563       788,908  
                 
Loans, net                
Held for sale     35,090       39,458       42,046       45,447  
Held for investment     820,939       742,538       733,517       743,461  
Less: Allowance for loan losses     (10,008 )     (9,167 )     (8,717 )     (8,887 )
Net held for investment     810,931       733,371       724,800       734,574  
NET LOANS     846,021       772,829       766,846       780,021  
                 
Other assets     43,103       38,805       38,800       37,951  
                 
TOTAL ASSETS   $ 1,060,847     $ 925,208     $ 913,870     $ 905,567  
                 
Deposits                
Non-interest-bearing demand   $ 192,806     $ 121,293       110,843     $ 112,463  
Interest-bearing demand     311,266       286,736       314,278       343,841  
Savings     17,862       16,016       15,689       16,264  
Certificates of deposit ($250,000 or more)     86,046       93,615       96,431       90,170  
Other certificates of deposit     142,178       193,939       213,693       202,373  
Total deposits     750,158       711,599       750,934       765,111  
Other borrowings     210,103       115,000       65,000       46,000  
Other liabilities     16,493       15,448       15,958       16,627  
TOTAL LIABILITIES     976,754       842,047       831892       827,738  
                 
Stockholders' equity     84,093       83,161       81,978       77,829  
                 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 1,060,847     $ 925,208     $ 913,870     $ 905,567  
                 
Common shares outstanding     8,472       8,472       8,472       8,465  
                 
Book value per common share   $ 9.93     $ 9.82     $ 9.68     $ 9.19  
                 
                 
(1) Includes consumer, other loans, securitized loans, and deferred fees                


ADDITIONAL FINANCIAL INFORMATION                    
(Dollars in thousands except per share amounts)(Unaudited)                    
  Three Months Ended   Three Months Ended   Three Months Ended   Six Months Ended   Six Months Ended  
PERFORMANCE MEASURES AND RATIOS June 30, 2020   March 31, 2020   June 30, 2019   June 30, 2020   June 30, 2019  
Return on average common equity   5.57 %     7.76 %     8.18 %     6.66 %     8.09 %  
Return on average assets   0.48 %     0.73 %     0.73 %     0.59 %     0.72 %  
Efficiency ratio   74.33 %     71.49 %     73.56 %     72.91 %     74.80 %  
Net interest margin   3.72 %     3.97 %     4.07 %     3.84 %     4.03 %  
                     
  Three Months Ended   Three Months Ended   Three Months Ended   Six Months Ended Six Months Ended  
AVERAGE BALANCES June 30, 2020   March 31, 2020   June 30, 2019   June 30, 2020   June 30, 2019  
Average assets $ 978,250     $ 886,418     $ 864,583     $ 932,334     $ 862,146    
Average earning assets   949,149       858,064       838,104       903,661       836,533    
Average total loans   839,625       787,537       777,828       813,581       773,067    
Average deposits   745,644       718,205       726,366       731,925       721,685    
Average common equity   83,757       82,815       77,432       83,286       77,059    
                     
EQUITY ANALYSIS June 30, 2020   March 31, 2020   June 30, 2019          
Total common equity $ 84,093     $ 83,161     $ 77,829            
Common stock outstanding   8,472       8,472       8,465            
                     
Book value per common share $ 9.93     $ 9.82     $ 9.19            
                     
ASSET QUALITY June 30, 2020   March 31, 2020   June 30, 2019          
Nonaccrual loans, net $ 2,640     $ 2,644     $ 3,016            
Nonaccrual loans, net/total loans   0.31 %     0.34 %     0.38 %          
Other assets acquired through foreclosure, net $ 2,707     $ 2,707     $ 1,074            
                     
Nonaccrual loans plus other assets acquired through foreclosure, net $ 5,347     $ 5,351     $ 4,090            
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets   0.50 %     0.58 %     0.45 %          
Net loan (recoveries)/charge-offs in the quarter $ (79 )   $ (58 )   $ (62 )          
Net (recoveries)/charge-offs in the quarter/total loans   (0.01 %)     (0.01 %)     (0.01 %)          
                     
Allowance for loan losses $ 10,008     $ 9,167     $ 8,887            
Plus: Reserve for undisbursed loan commitments   91       76       81            
Total allowance for credit losses $ 10,099     $ 9,243     $ 8,968            
Allowance for loan losses/total loans held for investment   1.22 %     1.23 %     1.20 %          
Allowance for loan losses/total loans held for investment excluding PPP loans   1.34 %     1.23 %     1.20 %          
Allowance for loan losses/nonaccrual loans, net   379.09 %     346.71 %     294.66 %          
                     
                     
Community West Bank *                    
Community bank leverage ratio   8.94 %     9.21 %   N/A            
Tier 1 leverage ratio   8.94 %     9.21 %     8.66 %          
Tier 1 capital ratio   10.38 %     10.42 %     9.53 %          
Total capital ratio   11.63 %     11.60 %     10.67 %          
                     
INTEREST SPREAD ANALYSIS June 30, 2020   March 31, 2020   June 30, 2019          
Yield on total loans   5.07 %     5.45 %     5.62 %          
Yield on investments   1.88 %     2.56 %     3.89 %          
Yield on interest earning deposits   0.29 %     1.22 %     1.89 %          
Yield on earning assets   4.57 %     5.14 %     5.44 %          
                     
Cost of interest-bearing deposits   1.06 %     1.42 %     1.70 %          
Cost of total deposits   0.81 %     1.19 %     1.43 %          
Cost of borrowings   1.50 %     2.29 %     2.64 %          
Cost of interest-bearing liabilities   1.14 %     1.51 %     1.76 %          
                     
* 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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