Community West Bancshares Earnings Grew 36.4% to $1.5 Million in 3Q16 from 2Q16 Highlighted by Strong Loan Growth, Improved Asset Quality and 4.81% Net Interest Margin; Book Value Per Common Share Inc

GOLETA, Calif., Oct. 28, 2016 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported net income of $1.5 million in the third quarter of 2016 (3Q16) compared to $1.1 million in the second quarter of 2016 (2Q16) and $1.6 million in the third quarter of 2015 (3Q15). In the first nine months of the year, Community West reported net income of $3.9 million compared to $1.0 million in the first nine months of 2015. Excluding the net loan litigation settlement, Community West’s net income for the nine-month period in 2015 would have been $5.2 million. (See “Non-GAAP Financial Information”)

“Community West’s third quarter results were fueled by robust loan growth, continued improvements in credit quality and a healthy net interest margin,” stated Martin E. Plourd, President and Chief Executive Officer. “Our Central Coast markets continue to grow, with commercial real estate projects generating strong demand for business services in our markets. We are taking advantage of this growth by building our relationships with existing clients, as well as developing new client relationships. We will continue to invest in our future, with the new San Luis Obispo branch scheduled to open later this year and the relocated branch in Santa Maria and the new Oxnard branch scheduled to open in early 2017.”

3Q16 Financial Highlights

• Total loans increased $30.0 million for 3Q16 to $601.9 million at September 30, 2016, and 12.9% compared to $533.0 million a year ago.
• Nonaccrual loans, net, decreased 42.8% to $3.0 million, or 0.50% of net loans at September 30, 2016, compared to $5.3 million, or 0.99% of net loans, a year ago, representing the lowest level since 3Q07.
• Net income available to common stockholders for 3Q16 was $1.5 million, or $0.18 per diluted share. 
• Annualized return on average assets was 0.91%.
• Annualized return on average common equity was 9.17%.
• Net interest margin was 4.81%.
• Non-interest-bearing deposits increased 20.4% to $88.0 million at September 30, 2016, compared to $73.1 million a year ago.
• Book value per common share increased 7.7% to $7.93 at September 30, 2016, compared to $7.36 a year ago. 
• The Bank continues to be well-capitalized per banking regulations with its total risk-based capital ratio at 13.08% and Tier 1 leverage ratio at 10.48% at September 30, 2016.

Income Statement

“We have been able to maintain a net interest margin in the mid-4% range largely due to our above industry average loan yields, but also supplemented with periodic loan interest recoveries,” said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. Third quarter net interest margin was 4.81% compared to 4.47% in 2Q16 and 4.55% in 3Q15. Of the increase in asset yields in 3Q16, 39 basis points were attributable to one large past due loan relationship which was paid in full. In the first nine months of 2016 the net interest margin was 4.58% compared to 4.76% in the first nine months of 2015. Of the increase in asset yields in the first nine months of 2016, the same loan contributed 13 basis points. In the first nine months of 2015, 26 basis points of asset yields were attributable to two large past due loan relationships that were paid in full.

Net interest income for 3Q16 was $7.7 million, an 11.6% increase compared to $6.9 million in the preceding quarter and a 13.2% increase compared to $6.8 million in 3Q15. Year-to-date, net interest income increased 5.4% to $21.3 million compared to $20.2 million in the same period a year ago. Non-interest income was $559,000 in 3Q16, a slight decrease compared to $577,000 in 2Q16 and a modest increase compared to $554,000 in 3Q15. In the first nine months of 2016, non-interest income was $1.7 million, compared to $1.8 million the first nine months of 2015.

Non-interest expenses totaled $5.8 million in 3Q16, compared to $5.5 million in 2Q16 and $5.0 million in 3Q15. The increase is largely due to the business development of the Bank’s Northern region, consisting of San Luis Obispo and north Santa Barbara counties. Year-to-date noninterest expenses were $16.7 million. In the second quarter of 2015, Community West settled a claim for $7.2 million, net, and, primarily as a result of this settlement, non-interest expenses for the first nine months of 2015 totaled $22.2 million. Excluding this one-time settlement, non-interest expenses would have been approximately $15.1 million for the first nine months of 2015. (See “Non-GAAP Financial Information”) 

Balance Sheet

Total assets were $664.5 million at September 30, 2016, a 3.4% increase compared to three months earlier and a 10.6% increase compared to one year ago. Net loans increased 5.3% to $594.7 million at September 30, 2016, compared to $564.8 million at June 30, 2016, and increased 13.1% compared to $526.0 million a year ago. Commercial real estate loans outstanding were up 27.2% from year ago levels to $225.6 million at September 30, 2016, and comprise 37.5% of the total loan portfolio. Manufactured housing loans were up 10.7% from year ago levels to $191.9 million and represent 31.9% of total loans. Commercial loans increased 20.1% from year ago levels to $120.0 million and represent 19.9% of the total loan portfolio and SBA loans decreased 22.0% from a year ago to $39.3 million and represent 6.5% of the total loan portfolio.

Deposits totaled $590.6 million at September 30, 2016, up 4.5% compared to $565.2 million at June 30, 2016, and grew 12.1% compared to $526.8 million a year earlier. Core deposits, defined as non-interest-bearing checking, interest-bearing checking, money market accounts, savings accounts and retail certificates of deposit totaled $437.6 million at September 30, 2016 and comprise 74.1% of total deposits, compared to $405.2 million, or 76.9% of total deposits, a year ago. 

Stockholders’ equity was $64.2 million at September 30, 2016, compared to $63.2 million at June 30, 2016, and $65.9 million a year ago. Book value per common share improved to $7.93 at September 30, 2016 compared to $7.81 at June 30, 2016, and $7.36 a year ago. 

Credit Quality

“Asset quality improved again this quarter, with net nonaccrual loans and other assets acquired through foreclosure both declining compared to three months earlier,” said Plourd. “Our credit metrics remain better than the average for both national banks and banks of our size.”

The allowance for loan losses was $7.2 million at September 30, 2016, or 1.33% of total loans held for investment, compared to 1.37% at June 30, 2016, and 1.50% a year ago. Net nonaccrual loans decreased 25.0% to $3.0 million, or 0.50% of total loans at September 30, 2016, compared to $4.0 million, or 0.70% of total loans, three months earlier, and decreased 43.4% compared to $5.3 million, or 0.99% of total loans, a year ago.

Of the $3.0 million in net nonaccrual loans, $1.0 million were manufactured housing loans, $933,000 were SBA 504 1st loans, $536,000 were home equity loans, $223,000 were commercial real estate loans, $195,000 were single family real estate loans and $133,000 were SBA loans.

Other assets acquired through foreclosure totaled $55,000 at September 30, 2016, compared to $129,000 three months earlier and $206,000 a year earlier.  Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $3.1 million, or 0.46% of total assets, at September 30, 2016, compared to $4.1 million, or 0.64% of total assets, three months earlier and $5.5 million, or 0.91% of total assets, a year ago. 

“Due to strong loan growth, we recorded a provision for loan losses for the second consecutive quarter,” noted Plourd. The loan loss provision was $22,000 in 3Q16, compared to $61,000 in 2Q16, and a negative provision of $445,000 in 3Q15. Net loan recoveries were $140,000 in 3Q16 compared to $148,000 in 2Q16 and $214,000 in 3Q15.

Cash Dividend Declared

The Company’s Board of Directors declared a quarterly cash dividend of $0.035 per common share, payable November 30, 2016 to common shareholders of record on November 14, 2016. The current annualized yield, based on the closing price of CWBC shares of $8.29 on September 30, 2016, was 1.7%.

Stock Repurchase Program

On August 31, 2015, the Company announced that the Board of Directors authorized a common stock repurchase program of up to $3 million. During 3Q16, the Company bought back 45,786 shares. As of September 30, 2016, 187,569 shares had been cumulatively repurchased at an average price of $7.25 per share.

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, which has five full-service California branch banking offices, in Goleta, Santa Barbara, Santa Maria, Ventura and Westlake Village and one loan production office in San Luis Obispo. The principal business activities of the Company are Relationship business banking, Manufactured Housing lending and Government Guaranteed lending.

In September 2016, Community West was named to Sandler O’Neill and Partners Bank and Thrift Sm-All Stars – Class of 2016. This award recognized Community West as one of the top 27 best performing small capitalization institutions from a list of publicly traded banks and thrifts in the U.S. with market capitalizations less than $2.5 billion. In making their selections, Sandler focused on growth, profitability, credit quality and capital strength.

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:
Charles G. Baltuskonis, EVP & CFO
805.692.5821
www.communitywestbank.com

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