Press Release

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

Company Release - 7/24/2020 9:00 AM ET

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
OtherLoans 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%$2901.53%$10,02652.80% 
 General Healthcare$2,108$2,474$620$1,191$6,393$1,65725.92%$1,73527.14%$4,20665.79% 
 Hospitality$  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%$33,22980.75% 
 Restaurants$5,918$615$3,976$616$11,125$30.03%$1,67315.04%$6,96862.63% 
 RV-Mobile Home Parks$-$3,334$-$-$3,334$-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 RATIOSJune 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 EndedSix Months Ended 
AVERAGE BALANCESJune 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 ANALYSISJune 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 QUALITYJune 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 ANALYSISJune 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


CWBC logo.jpg

Source: Community West Bancshares