GOLETA, Calif., Jan. 25, 2019 (GLOBE NEWSWIRE) — Community West Bancshares (Community West or the Company), (NASDAQ: 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 |