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Community West Bancshares Earns $1.6 Million, or $0.18 Per Diluted Share, in 2Q19; Highlighted by Continued Net Interest Margin Improvement; Declares Quarterly Cash Dividend of $0.055 Per Common Share

GOLETA, Calif., July 26, 2019 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (CWBC), parent company of Community West Bank (Bank), today reported earnings of $1.6 million, or $0.18 per diluted share, for the second quarter of 2019 (2Q19), compared to $1.5 million, or $0.18 per diluted share, in 1Q19, and $1.9 million, or $0.21 per diluted share, in 2Q18.

In the first six months of 2019, net income was $3.1 million, or $0.36 per diluted share, compared to $3.7 million, or $0.42 per diluted share, in the first six months of 2018.

“Our operating performance in the second quarter generated solid net interest income and an improved net interest margin, due to strong loan growth, higher loan yields and an improved asset mix,” stated Martin E. Plourd, President and Chief Executive Officer.  “While our earnings have been impacted by branch expansion costs over these last several quarters, we are now beginning to see the positive results of our efforts, with total demand deposits increasing 24% year-over-year.  With an appreciation for the patience of our shareholders and our recent office expansion completed, our focus moving forward is growing revenue, reducing reliance on expensive non-core funding, and intently rationalizing our non-interest expenses.”

Second Quarter 2019 Financial Highlights:

  • Net income was $1.6 million, or $0.18 per diluted share, in 2Q19, compared to $1.5 million, or $0.18 per diluted share in 1Q19, and $1.9 million, or $0.21 per diluted share in 2Q18.
  • Net interest margin improved to 4.07% for 2Q19, compared to 3.99% for 1Q19 and compared to 4.06% for 2Q18.
  • Total demand deposits increased $33.7 million to $456.3 million at June 30, 2019, compared to $422.6 million at March 31, 2019, and increased $88.4 million compared to $367.9 million at June 30, 2018. 
  • Total loans increased $18.8 million to $788.9 million at June 30, 2019, compared to $770.1 million at March 31, 2019, and increased $29.0 million compared to $759.9 million at June 30, 2018. 
  • Book value per common share increased to $9.19 at June 30, 2019, compared to $9.05 at March 31, 2019, and $8.90 at June 30, 2018. 
  • Provision for loan losses was $177,000 for the quarter, compared to a credit for loan losses of ($57,000) for 1Q19, and provision for loan losses of $117,000 for 2Q18.
  • Net nonaccrual loans decreased to $3.0 million at June 30, 2019, compared to $3.3 million at March 31, 2019, and $3.7 million at June 30, 2018.  The Bank had $1.1 million of other real estate owned at June 30, 2019.

Income Statement

Second quarter net interest income increased to $8.5 million, compared to $8.2 million in 1Q19 and $8.3 million in 2Q18.  In the first six months of 2019 net interest income was $16.7 million, which was unchanged compared to the first six months of 2018. 

Non-interest income was $692,000 in 2Q19, compared to $604,000 in 1Q19 and $688,000 in 2Q18.  Non-interest income was $1.3 million in both the first six months of 2019 and 2018.

“Our net interest margin improved eight basis points in the second quarter compared to the preceding quarter as a result of improved yields on earning assets and stabilization in our cost of funds,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  Second quarter net interest margin improved to 4.07%, from 3.99% in 1Q19, and 4.06% in 2Q18.  In the first six months of 2019, the net interest margin was 4.03%, compared to 4.15% in the prior year period.

Non-interest expenses totaled $6.8 million in 2Q19, compared to $6.7 million in the preceding quarter and $6.3 million in the prior year second quarter.  In the first six months of 2019, non-interest expense was $13.5 million, compared to $12.8 million in the first six months of 2018.  The year-over-year increase for the six-month period was primarily attributable to the Company’s expansion, including the most recent opening of our full-service branch in Paso Robles in the fourth quarter of 2018.

Balance Sheet

Total loans increased $18.8 million, or 2.4% to $788.9 million at June 30, 2019, compared to $770.1 million at March 31, 2019, and increased $29.0 million, or 3.8%, compared to $759.9 million at June 30, 2018.  

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 7.3% from year ago levels to $391.3 million at June 30, 2019 and comprise 49.6% of the total loan portfolio.  Manufactured housing loans were up 8.0% from year ago levels to $253.3 million and represent 32.1% of total loans.  Commercial loans (which include agriculture loans) were down 8.2% from year ago levels to $108.6 million and represent 13.8% of the total loan portfolio.

Total deposits increased $30.4 million, or 4.1% to $765.1 million at June 30, 2019, compared to $734.7 million at March 31, 2019, and increased $62.5 million, or 8.9% compared to $702.6 million at June 30, 2018.  Non-interest bearing demand deposits decreased to $112.5 million at June 30, 2019 compared to $135.5 million at March 31, 2019, but increased $5.3 million compared to $107.2 million at June 30, 2018.  Interest-bearing demand deposits increased $56.7 million to $343.8 million compared to $287.1 million at March 31, 2019 and increased $83.1 million compared to $260.7 million at June 30, 2018.  Certificates of deposit which include broker deposits decreased $4.5 million to $292.5 million at June 30, 2019 compared to $297.0 million at March 31, 2019 and decreased $27.7 million compared to $320.2 million at June 30, 2018.

Total assets were $905.6 million at June 30, 2019, compared to $882.4 million at March 31, 2019 and increased $40.4 million, or 4.7%, compared to $865.1 million at June 30, 2018.  Stockholders’ equity increased to $77.8 million at June 30, 2019, compared to $76.5 million at March 31, 2019, and $73.4 million at June 30, 2018.  Book value per common share increased to $9.19 at June 30, 2019, compared to $9.05 at March 31, 2019, and $8.90 at June 30, 2018. 

Credit Quality

Due to strong loan growth in the second quarter, the Company recorded a provision for loan losses of $177,000.  This compares to a credit to the provision for loan losses of ($57,000) in 1Q19 and provision for loan losses of $117,000 in 2Q18.  The allowance for loan losses including the reserve for undisbursed loans was $9.0 million at June 30, 2019, or 1.20% of total loans held for investment, compared to 1.20% at March 31, 2019, and 1.22% a year ago.  Net nonaccrual loans plus net other assets acquired through foreclosure were $4.1 million at June 30, 2019, compared to $3.3 million at March 31, 2019, and $3.9 million at June 30, 2018.  

At June 30, 2019, net nonaccrual loans consisted of $2.3 million of commercial loans including commercial agriculture, $0.3 million of manufactured housing loans, $0.2 million of home equity loans, $0.1 million of SBA loans, and $0.1 million of commercial real estate loans.

There was $1.1 million in other assets acquired through foreclosure as of June 30, 2019.  This compares to no other assets acquired through foreclosure at March 31, 2019, and $213,000 in other assets acquired through foreclosure a year ago. 

Cash Dividend Declared

The Company’s Board of Directors declared a cash dividend of $0.055 per common share, payable August 30, 2019 to common shareholders of record on August 13, 2019.  The current annualized yield, based on the closing price of CWBC shares of $9.65 on June 30, 2019, was 2.23%.

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 eight full-service California branch banking offices in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village, 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 2019, 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.

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,
  2019   2019   2018   2019   2018
                                       
Interest income                                      
Loans, including fees $ 10,907     $ 10,541     $ 10,020     $ 21,448     $ 19,671  
Investment securities and other   460       484       381       944       718  
Total interest income   11,367       11,025       10,401       22,392       20,389  
Interest expense                                      
Deposits   2,583       2,444       1,708       5,027       3,151  
Other borrowings   286       358       382       644       577  
Total interest expense   2,869       2,802       2,090       5,671       3,728  
Net interest income   8,498       8,223       8,311       16,721       16,661  
Provision (credit) for loan losses   177       (57 )     117       120       (27 )
Net interest income after provision for loan losses   8,321       8,280       8,194       16,601       16,688  
Non-interest income                                      
Other loan fees   323       258       323       581       619  
Document processing fees   124       87       130       211       247  
Service charges   139       139       122       278       238  
Other   106       120       113       226       223  
Total non-interest income   692       604       688       1,296       1,327  
Non-interest expenses                                      
Salaries and employee benefits   4,318       4,381       4,042       8,699       8,191  
Occupancy, net   768       782       741       1,550       1,525  
Professional services   405       381       301       786       605  
Data processing   201       224       206       425       418  
Depreciation   218       213       186       431       353  
FDIC assessment   154       170       164       324       378  
Advertising and marketing   230       129       163       359       333  
Stock-based compensation   97       95       87       192       203  
Other   369       342       367       711       784  
Total non-interest expenses   6,760       6,717       6,257       13,477       12,790  
Income before provision for income taxes   2,253       2,167       2,625       4,420       5,225  
Provision for income taxes   673       657       758       1,330       1,544  
Net income $ 1,580     $ 1,510     $ 1,867     $ 3,090     $ 3,681  
Earnings per share:                                      
Basic $ 0.19     $ 0.18     $ 0.23     $ 0.37     $ 0.45  
Diluted $ 0.18     $ 0.18     $ 0.21     $ 0.36     $ 0.42  
                                       


COMMUNITY WEST BANCSHARES              
CONDENSED CONSOLIDATED BALANCE SHEETS              
(unaudited)              
(in 000's, except per share data)              
               
  June 30,   March 31,   June 30,   December 31,
    2019       2019       2018       2018  
                               
Cash and cash equivalents $ 2,032     $ 1,907     $ 3,376     $ 2,983  
Interest-earning deposits in other financial institutions   55,149       51,499       50,986       53,932  
Investment securities   30,414       31,562       33,720       32,353  
Loans:                              
Commercial   108,599       116,103       118,263       118,518  
Commercial real estate   391,293       369,206       364,679       365,809  
SBA   17,560       18,070       22,724       19,077  
Manufactured housing   253,250       248,669       234,598       247,114  
Single family real estate   11,575       11,611       10,682       11,261  
HELOC   6,696       6,585       9,502       6,756  
Other   (65 )     (178 )     (558 )     (292 )
Total loans   788,908       770,066       759,890       768,243  
                               
Loans, net                              
Held for sale   45,447       46,995       52,886       48,355  
Held for investment   743,461       723,071       707,004       719,888  
Less: Allowance for loan losses   (8,887 )     (8,648 )     (8,622 )     (8,691 )
Net held for investment   734,574       714,423       698,382       711,197  
NET LOANS   780,021       761,418       751,268       759,552  
                               
Other assets   37,951       36,008       25,777       28,471  
                               
TOTAL ASSETS $ 905,567     $ 882,394     $ 865,127     $ 877,291  
                               
Deposits                              
Non-interest-bearing demand $ 112,463     $ 135,495     $ 107,168     $ 108,161  
Interest-bearing demand   343,841       287,095       260,708       270,431  
Savings   16,264       15,128       14,515       14,641  
Certificates of deposit ($250,000 or more)   90,170       91,580       88,752       93,439  
Other certificates of deposit   202,373       205,431       231,460       229,334  
Total deposits   765,111       734,729       702,603       716,006  
Other borrowings   46,000       52,750       81,843       75,000  
Other liabilities   16,627       18,462       7,233       10,134  
TOTAL LIABILITIES   827,738       805,941       791,679       801,140  
                               
Stockholders' equity   77,829       76,453       73,448       76,151  
                               
                               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 905,567     $ 882,394     $ 865,127     $ 877,291  
                               
Common shares outstanding   8,465       8,450       8,254       8,533  
                               
Book value per common share $ 9.19     $ 9.05     $ 8.90     $ 8.92  
                               


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 June 30, 2019   March 31, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Return on average common equity   8.18 %     7.99 %     10.26 %     8.09 %     10.28 %
Return on average assets   0.73 %     0.71 %     0.90 %     0.72 %     0.90 %
Efficiency ratio   73.56 %     76.10 %     69.54 %     74.80 %     71.11 %
Net interest margin   4.07 %     3.99 %     4.06 %     4.03 %     4.15 %
                                       
  Three Months Ended   Three Months Ended   Three Months Ended   Six Months Ended
AVERAGE BALANCES June 30, 2019   March 31, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Average assets $ 864,583     $ 859,684     $ 836,394     $ 862,146     $ 824,611  
Average earning assets   838,104       834,944       820,854       836,533       809,133  
Average total loans   777,828       768,253       750,575       773,067       743,640  
Average deposits   726,366       716,953       704,251       721,685       703,319  
Average common equity   77,432       76,683       72,993       77,059       72,217  
                                       
EQUITY ANALYSIS June 30, 2019   March 31, 2019   June 30, 2018        
Total common equity $ 77,829     $ 76,453     $ 73,448          
Common stock outstanding   8,465       8,450       8,254          
                               
Book value per common share $ 9.19     $ 9.05     $ 8.90          
                               
ASSET QUALITY June 30, 2019   March 31, 2019   June 30, 2018        
Nonaccrual loans, net $ 3,016     $ 3,257     $ 3,704          
Nonaccrual loans, net/total loans   0.38 %     0.42 %     0.49 %        
Other assets acquired through foreclosure, net $ 1,074     $ -     $ 213          
                               
Nonaccrual loans plus other assets acquired through foreclosure, net $ 4,090     $ 3,257     $ 3,917          
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets   0.45 %     0.37 %     0.45 %        
Net loan (recoveries)/charge-offs in the quarter $ (62 )   $ (14 )   $ (47 )        
Net (recoveries)/charge-offs in the quarter/total loans   (0.01 %)     0.00 %     (0.01 %)        
                               
Allowance for loan losses $ 8,887     $ 8,648     $ 8,622          
Plus: Reserve for undisbursed loan commitments   81       87       97          
Total allowance for credit losses $ 8,968     $ 8,735     $ 8,719          
Allowance for loan losses/total loans held for investment   1.20 %     1.20 %     1.22 %        
Allowance for loan losses/nonaccrual loans, net   294.66 %     265.52 %     232.78 %        
                               
Community West Bank *                              
Tier 1 leverage ratio   8.66 %     8.63 %     8.88 %        
Tier 1 capital ratio   9.53 %     9.62 %     10.10 %        
Total capital ratio   10.67 %     10.76 %     11.28 %        
                               
INTEREST SPREAD ANALYSIS June 30, 2019   March 31, 2019   June 30, 2018        
Yield on total loans   5.62 %     5.56 %     5.35 %        
Yield on investments   3.89 %     3.55 %     2.74 %        
Yield on interest earning deposits   1.89 %     2.22 %     1.49 %        
Yield on earning assets   5.44 %     5.36 %     5.08 %        
                               
Cost of interest-bearing deposits   1.70 %     1.64 %     1.16 %        
Cost of total deposits   1.43 %     1.38 %     0.97 %        
Cost of borrowings   2.64 %     2.91 %     2.90 %        
Cost of interest-bearing liabilities   1.76 %     1.74 %     1.30 %        
                               
* Capital ratios are preliminary until the Call Report is filed.                              


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