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Community West Bancshares Earns $1.4 Million in 4Q18 and $7.4 Million For the Year; Highlighted by Loan Growth; Declares Quarterly Cash Dividend of $0.05 Per Common Share

GOLETA, Calif., Jan. 25, 2019 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (CWBC), parent company of Community West Bank (Bank), today reported earnings of $1.4 million, or $0.16 per diluted share, for the fourth quarter of 2018 (4Q18), compared to $2.4 million, or $0.27 per diluted share, in 3Q18, and $449,000 or $0.05 per diluted share in 4Q17 following a revaluation of deferred tax assets due to tax reform enacted in 2017.  For the full year 2018, net income was $7.4 million, or $0.88 per diluted share, compared to $4.9 million, or $0.57 per diluted share, in 2017.

“During the fourth quarter, we continued to improve loan originations with solid net interest income and a healthy net interest margin.  Lower corporate tax rates and the ongoing market strength of our three-county footprint contributed to earnings growth in 2018,” stated Martin E. Plourd, President and Chief Executive Officer.  “Our new full-service branch in San Luis Obispo County in Paso Robles, which opened in October 2018, is doing well.  And, as we look to 2019, we will continue to focus on improving profitability.  Lower earnings over prior quarter were largely due to margin compression and expenses associated with the opening of our new office.”

Fourth Quarter 2018 Financial Highlights

  • Net income was $1.4 million, or $0.16 per diluted share, in 4Q18, compared to $449,000, or $0.05 per diluted share in 4Q17.
  • Core deposits which include non-interest-bearing checking, interest-bearing checking, money market, savings and retail certificates of deposit, were $505.9 million at December 31, 2018, compared to $452.2 million at December 31, 2017, and represent 64.6 % of total deposits.
  • Total loans increased $14.5 million to $768.2 million at December 31, 2018, compared to $753.7 million at September 30, 2018, and increased $33.6 million compared to $734.6 million at December 31, 2017.
  • Net interest margin for 4Q18 was 3.97%, compared to 4.02% for 3Q18 and 4.26% for 4Q17.
  • Book value per common share was $8.92 at December 30, 2018, compared to $9.13 at September 30, 2018, and $8.55 at December 31, 2017.  The December 30, 2018 decrease was largely due to the conversion of the common stock warrants issued as part of the TARP.
  • The Bank continues to be well-capitalized per banking regulations with its total capital ratio at 10.82%, its Tier 1 capital ratio at 9.67%, and Tier 1 leverage ratio at 8.57% at December 31, 2018.
  • Net nonaccrual loans were $3.4 million at December 31, 2018, compared to $3.8 million at September 30, 2018, and $4.8 million at December 31, 2017.  The Bank had no foreclosed assets at December 31, 2018.

Income Statement

Fourth quarter net interest income was $8.4 million, compared to $8.6 million in 3Q18 and $8.5 million in 4Q17.  For the year, net interest income increased to $33.6 million, compared to $32.7 million in 2017.

Non-interest income was $660,000 in 4Q18, compared to $641,000 in 3Q18 and $703,000 in 4Q17.  For the year, non-interest income was $2.6 million, compared to $2.8 million in 2017.

“Our net interest margin compressed during the fourth quarter due to the current interest rate environment and the flat yield curve,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  Fourth quarter net interest margin was 3.97% compared to 4.02% in 3Q18, and 4.26% in 4Q17.  For the year, net interest margin was 4.07% compared to 4.34% in 2017. 

Non-interest expenses totaled $6.8 million in 4Q18, compared to $6.4 million in the preceding quarter and $6.2 million in the prior year fourth quarter.  For the year, non-interest expenses totaled $26.0 million, compared to $24.5 million in 2017.  The year over year increase reflects increased salary, employee benefits and occupancy costs as a result of the Bank’s expansion of its Northern and Southern regions. 

Balance Sheet

“Total loans increased $14.5 million during the quarter, with solid production in targeted loan types,” said Plourd. Total loans increased to $768.2 million at December 31, 2018, compared to $753.7 million at September 30, 2018, and increased $33.6 million compared to $734.6 million at December 31, 2017.  

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 3.2% from year ago levels to $365.8 million at December 31, 2018 and comprise 47.6% of the total loan portfolio.  Manufactured housing loans were up 10.8% from year ago levels to $247.1 million and represent 32.2% of total loans.  Commercial loans increased 6.3% from year ago levels to $118.5 million and represent 15.4% of the total loan portfolio.

Total deposits were $716.0 million at December 31, 2018, compared to $719.9 million at September 30, 2018, and increased $16.3 million, or 2.3% compared to $699.7 million at December 31, 2017. 

Total assets increased $22.6 million, or 2.6%, to $877.3 million at December 31, 2018, compared to $854.7 million at September 30, 2018 and increased $44.0 million, or 5.3%, compared to $833.3 million at December 31, 2017.  Stockholders’ equity improved to $76.2 million at December 31, 2018, compared to $75.6 million at September 30, 2018, and $70.1 million at December 31, 2017.  Book value per common share was $8.92 at December 31, 2018, compared to $9.13 at September 30, 2018, and $8.55 at December 31, 2017. 

Credit Quality

“Credit quality improved during the fourth quarter with net nonaccrual loans down to $3.4 million, or 0.39% of total loans, and no foreclosed assets remained on the books,” said Thompson. 

Due to the growth in the loan portfolio during the fourth quarter, Community West recorded a $238,000 provision for loan losses in 4Q18. This compares to a credit to the provision for loan losses of $197,000 in 3Q18 and a credit to the provision of $12,000 in 4Q17. The allowance for loan losses was $8.7 million at December 31, 2018, or 1.21% of total loans held for investment, compared to 1.21% at September 30, 2018, and 1.24% a year ago.  Net nonaccrual loans improved to $3.4 million at December 31, 2018, compared to $3.8 million at September 30, 2017, and $4.5 million at December 31, 2017.  

At December 31, 2018, net nonaccrual loans consisted of; $2.7 million of commercial loans including commercial agriculture, $229,000 of manufactured housing loans, $198,000 of home equity loans, $147,000 SBA loans, and $102,000 of commercial real estate loans.

There were no other assets acquired through foreclosure as of December 31, 2018, or at September 30, 2018.  This compares to other assets acquired through foreclosure of $372,000 a year ago. 

Cash Dividend Declared

The Company’s Board of Directors declared a cash dividend of $0.05 per common share, payable February 28, 2019 to common shareholders of record on February 11, 2019.  The current annualized yield, based on the closing price of CWBC shares of $10.03 on December 31, 2018, was 2.0%.

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 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.

                       
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,  
     2018    2018     2017     2018    2017  
                       
Interest income                      
Loans, including fees   $   10,582   $   10,612     $   9,622     $   40,865   $   36,192  
Investment securities and other       459       589         305         1,766       1,199  
Total interest income       11,041       11,201         9,927         42,631       37,391  
Interest expense                      
Deposits       2,329       2,222         1,299         7,702       4,283  
Other borrowings       358       351         152         1,286       446  
Total interest expense       2,687       2,573         1,451         8,988       4,729  
Net interest income       8,354       8,628         8,476         33,643       32,662  
Provision (credit) for loan losses       238       (197 )       (12 )       14       411  
Net interest income after provision for loan losses     8,116       8,825         8,488         33,629       32,251  
Non-interest income                      
Other loan fees       350       379         301         1,348       1,300  
Document processing fees       122       120         128         489       558  
Service charges       108       113         132         459       458  
Other       80       29         142         332       441  
Total non-interest income       660       641         703         2,628       2,757  
Non-interest expenses                      
Salaries and employee benefits        3,991       4,147         4,310         16,329       15,339  
Occupancy, net       829       778         777         3,132       2,862  
Professional services       425       326         310         1,356       1,069  
Data processing       233       201         200         852       725  
Depreciation        212       199         166         764       685  
FDIC assessment       223       169         203         770       664  
Advertising and marketing       198       154         262         685       750  
Stock-based compensation       194       81         83         478       537  
Other        542       347         (83 )       1,673       1,914  
Total non-interest expenses       6,847       6,402         6,228         26,039       24,545  
Income before provision for income taxes       1,929       3,064         2,963         10,218       10,463  
Provision for income taxes       570       695         2,514         2,809       5,548  
Net income   $   1,359   $   2,369     $   449     $   7,409   $   4,915  
Earnings per share:                      
Basic   $   0.16   $   0.29     $   0.05     $   0.89   $   0.60  
Diluted   $   0.16   $   0.27     $   0.05     $   0.88   $   0.57  
                       

 

COMMUNITY WEST BANCSHARES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(unaudited) 
(in 000's, except per share data) 
               
    December 31,   September 30,   December 31,  
     2018     2018     2017   
               
Cash and cash equivalents   $   2,983     $   2,317     $   3,651    
Time and interest-earning deposits in other financial institutions       53,932         45,436         42,218    
Investment securities       32,353         33,421         36,348    
Loans:              
Commercial       118,518         119,270         111,459    
Commercial real estate       365,809         353,136         354,617    
SBA       19,077         21,057         26,219    
Manufactured housing       247,114         240,010         223,115    
Single family real estate       11,261         11,153         10,346    
HELOC       6,756         9,446         9,422    
Other       (292 )       (331 )       (569 )  
Total loans       768,243         753,741         734,609    
               
Loans, net              
Held for sale       48,355         50,944         55,094    
Held for investment       719,888         702,797         679,515    
Less: Allowance for loan losses       (8,691 )       (8,519 )       (8,420 )  
Net held for investment       711,197         694,278         671,095    
NET LOANS       759,552         745,222         726,189    
               
Other assets       28,471         28,313         24,909    
               
TOTAL ASSETS   $   877,291     $   854,709     $   833,315    
               
Deposits              
Non-interest-bearing demand   $   108,161     $   105,580     $   108,500    
Interest-bearing demand       270,431         267,046         256,717    
Savings       14,641         14,385         14,085    
Certificates of deposit ($250,000 or more)       93,439         92,934         81,985    
Other certificates of deposit       229,334         239,997         238,397    
Total deposits       716,006         719,942         699,684    
Other borrowings       75,000         50,000         56,843    
Other liabilities       10,134         9,210         6,718    
TOTAL LIABILITIES       801,140         779,152         763,245    
               
Stockholders' equity       76,151         75,557         70,070    
               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              
  $   877,291     $   854,709     $   833,315    
               
Shares outstanding       8,533         8,275         8,193    
               
Book value per common share   $   8.92     $   9.13     $   8.55    
               

 

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 RATIOS Dec. 31, 2018   Sep. 30, 2018   Dec. 31, 2017   Dec. 31, 2018   Dec. 31, 2017  
Return on average common equity    7.06 %     12.57 %     2.51 %     10.02 %     7.16 %  
Return on average assets    0.63 %     1.08 %     0.22 %     0.88 %     0.64 %  
Efficiency ratio   75.96 %     69.07 %     68.51 %     71.79 %     69.47 %  
Net interest margin   3.97 %     4.02 %     4.26 %     4.07 %     4.34 %  
                     
  Three Months Ended   Three Months Ended   Three Months Ended   Twelve Months Ended  
AVERAGE BALANCES Dec. 31, 2018   Sep. 30, 2018   Dec. 31, 2017   Dec. 31, 2018   Dec. 31, 2017  
Average assets $   852,892     $   867,174     $   805,105     $   842,468     $   766,834    
Average earning assets     834,259         852,083         789,111         826,292         753,120    
Average total loans     764,411         755,146         729,865         751,775         690,658    
Average deposits     717,205         734,391         697,500         714,651         664,878    
Average common equity     76,334         74,799         71,038         73,906         68,684    
                     
EQUITY ANALYSIS Dec. 31, 2018   Sep. 30, 2018   Dec. 31, 2017          
Total common equity $   76,151     $   75,557     $   70,070            
Common stock outstanding     8,533         8,275         8,193            
                     
Book value per common share $   8.92     $   9.13     $   8.55            
                     
ASSET QUALITY Dec. 31, 2018   Sep. 30, 2018   Dec. 31, 2017          
Nonaccrual loans, net $   3,378     $   3,755     $   4,472            
Nonaccrual loans, net/total loans   0.44 %     0.50 %     0.61 %          
Other assets acquired through foreclosure, net $   -      $   -      $   372            
                     
Nonaccrual loans plus other assets acquired through foreclosure, net $   3,378     $   3,755     $   4,844            
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets   0.39 %     0.44 %     0.58 %          
Net loan (recoveries)/charge-offs in the quarter $   66     $   (94 )   $   (120 )          
Net (recoveries)/charge-offs in the quarter/total loans    0.01 %     (0.01 %)     (0.02 %)          
                     
Allowance for loan losses $   8,691     $   8,519     $   8,420            
Plus: Reserve for undisbursed loan commitments     73         80         95            
Total allowance for credit losses $   8,764     $   8,599     $   8,515            
Allowance for loan losses/total loans held for investment   1.21 %     1.21 %     1.24 %          
Allowance for loan losses/nonaccrual loans, net   257.28 %     226.87 %     188.28 %          
                     
Community West Bank *                    
Tier 1 leverage ratio   8.57 %     8.23 %     8.83 %          
Tier 1 capital ratio   9.67 %     9.64 %     10.10 %          
Total capital ratio   10.82 %     10.79 %     11.31 %          
                     
INTEREST SPREAD ANALYSIS Dec. 31, 2018   Sep. 30, 2018   Dec. 31, 2017          
Yield on total loans   5.49 %     5.58 %     5.23 %          
Yield on investments   2.53 %     3.77 %     2.53 %          
Yield on interest earning deposits   2.70 %     1.54 %     0.92 %          
Yield on earning assets   5.25 %     5.22 %     4.99 %          
                     
Cost of interest-bearing deposits   1.52 %     1.41 %     0.89 %          
Cost of total deposits   1.29 %     1.20 %     0.74 %          
Cost of borrowings   2.87 %     2.79 %     2.05 %          
Cost of interest-bearing liabilities   1.63 %     1.51 %     0.94 %          
                     
* Capital ratios are preliminary until the Call Report is filed.                    

 

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