CWBC Community West Bancshares New

Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported earnings of $2.2 million, or $0.25 per diluted share, for the third quarter of 2019 (3Q19), compared to $1.6 million, or $0.18 per diluted share, in 2Q19, and $2.4 million, or $0.27 per diluted share, in 3Q18.

In the first nine months of 2019, net income was $5.2 million, or $0.61 per diluted share, compared to $6.1 million, or $0.69 per diluted share, in the first nine months of 2018.

“We delivered solid third quarter results, fueled by growing revenues and an expanding net interest margin,” stated Martin E. Plourd, President and Chief Executive Officer.  “Loan growth remains steady, with a 5% increase in the loan portfolio compared to a year ago, and strong total demand deposits, which increased 20% year-over-year as we continue to improve our core funding position.  We will continue to focus on high quality earnings growth, while managing our operating efficiencies and expanding our brand throughout California’s Central Coast.”

Third Quarter 2019 Financial Highlights:

• Net income was $2.2 million, or $0.25 per diluted share, in 3Q19, compared to $1.6 million, or $0.18 per diluted share in 2Q19, and $2.4 million, or $0.27 per diluted share in 3Q18.
• Net interest margin improved to 4.10% for 3Q19, compared to 4.07% for 2Q19 and 4.02% for 3Q18.
• Total non-interest expense was $6.5 million in 3Q19, compared to $6.8 million in 2Q19 and $6.4 million in 3Q18.
• Total demand deposits decreased slightly to $448.0 million at September 30, 2019, compared to $456.3 million at June 30, 2019, and increased $75.4 million compared to $372.6 million at September 30, 2018. 
• Total loans increased to $789.5 million at September 30, 2019, compared to $788.9 million at June 30, 2019, and increased $35.7 million compared to $753.7 million at September 30, 2018. 
• Book value per common share increased to $9.40 at September 30, 2019, compared to $9.19 at June 30, 2019, and $9.13 at September 30, 2018. 
• Provision (credit) for loan losses was ($75,000) for the quarter, compared to a provision for loan losses of $177,000 for 2Q19, and a credit for loan losses of ($197,000) for 3Q18.
• Total risked based capital improved to 11.18% for the Bank at September 30, 2019, compared to 10.67% at June 30, 2019 and 10.79% at September 30, 2018.
• Net nonaccrual loans totaled $5.5 million at September 30, 2019, compared to $3.0 million at June 30, 2019, and $3.8 million at September 30, 2018. 
• Other real estate owned was $317,000 at September 30, 2019, compared to $1.1 million at June 30, 2019, and zero at September 30, 2018.

Income Statement

Third quarter net interest income increased to $8.8 million, compared to $8.5 million in 2Q19 and $8.6 million in 3Q18.  For 3Q19, net interest income benefited by both collection of interest on previously impaired loans and a net decrease in the cost of funds.  In the first nine months of 2019, net interest income was $25.5 million, compared to $25.3 million in the first nine months of 2018. 

Non-interest income was $647,000 in 3Q19, compared to $692,000 in 2Q19 and $641,000 in 3Q18.  Non-interest income was $1.9 million in the first nine months of 2019, compared to $2.0 million in the first nine months of 2018.

“The continued improvement in the margin for the current quarter was due, in part, to our on-going efforts to reduce our cost of funds,” said Susan C. Thompson, Executive Vice President and Chief Financial Officer.  Third quarter net interest margin improved to 4.10%, from 4.07% in 2Q19, and 4.02% in 3Q18.  In the first nine months of 2019, the net interest margin was 4.06%, compared to 4.11% in the prior year period.

Non-interest expenses totaled $6.5 million in 3Q19, compared to $6.8 million in the preceding quarter and $6.4 million in 3Q18.  In the first nine months of 2019, non-interest expense was $19.9 million, compared to $19.2 million in the first nine months of 2018. 

Balance Sheet

Total loans increased modestly to $789.5 million at September 30, 2019, compared to $788.9 million at June 30, 2019, and increased $35.8 million, or 4.7%, compared to $753.7 million at September 30, 2018.  

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up 11.1% from year ago levels to $392.3 million at September 30, 2019 and comprise 49.7% of the total loan portfolio.  Manufactured housing loans were up 5.5% from year ago levels to $253.2 million and represent 32.1% of total loans.  Commercial loans (which include agriculture loans) were down 7.6% from year ago levels to $110.2 million and represent 13.9% of the total loan portfolio.

Total deposits decreased slightly to $761.7 million at September 30, 2019, compared to $765.1 million at June 30, 2019, and increased $41.8 million, or 5.8% compared to $719.9 million at September 30, 2018.  Non-interest-bearing demand deposits increased $1.9 million, or 1.7% to $114.4 million at September 30, 2019 compared to $112.5 million at June 30, 2019 and increased $8.8 million compared to $105.6 million at September 30, 2018.  Interest-bearing demand deposits decreased to $333.7 million compared to $343.8 million at June 30, 2019 but increased $66.6 million compared to $267.0 million at September 30, 2018.  Certificates of deposit, which include broker deposits increased $5.6 million to $298.1 million at September 30, 2019 compared to $292.5 million at June 30, 2019 and decreased $34.8 million compared to $332.9 million at September 30, 2018 as the Company divests itself from wholesale funding.

Total assets were $903.3 million at September 30, 2019, compared to $905.6 million at June 30, 2019 and increased $48.6 million, or 5.7%, compared to $854.7 million at September 30, 2018.  Stockholders’ equity increased to $79.6 million at September 30, 2019, compared to $77.8 million at June 30, 2019, and $75.6 million at September 30, 2018.  Book value per common share increased to $9.40 at September 30, 2019, compared to $9.19 at June 30, 2019, and $9.13 at September 30, 2018. 

Credit Quality

The Company recorded a credit to its provision for loan losses of ($75,000) in 3Q19.  This compares to a provision for loan losses of $177,000 in 2Q19 and credit to the provision for loan losses of ($197,000) in 3Q18.  The allowance for loan losses, including the reserve for undisbursed loans, was $8.9 million at September 30, 2019, or 1.19% of total loans held for investment, compared to 1.20% at June 30, 2019, and 1.21% a year ago.  Net nonaccrual loans plus net other assets acquired through foreclosure were $5.8 million at September 30, 2019, compared to $4.1 million at June 30, 2019, and $3.8 million at September 30, 2018.  

At September 30, 2019, net nonaccrual loans consisted of $4.7 million of commercial loans including commercial agriculture, $0.3 million of manufactured housing loans, $0.4 million of SBA loans, and $0.1 million of commercial real estate loans.

There was $317,000 in other assets acquired through foreclosure as of September 30, 2019.  This compares to $1.1 million of other assets acquired through foreclosure at June 30, 2019, and no 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 November 29, 2019 to common shareholders of record on November 14, 2019.  The current annualized yield, based on the closing price of CWBC shares of $9.89 on September 30, 2019, was 2.17%.

Stock Repurchase ProgramThe Company, under the Board of Directors authorized common stock repurchase program of up to $4.5 million, bought back 10,233 shares during 3Q19.  As of September 30, 2019, 350,189 shares had been repurchased at an average price of $8.71 per share.

Company OverviewCommunity 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											Nine Months Ended
		September 30,				June 30,			September 30,				September 30,			September 30,
			2019				2019			2018				2019			2018
Interest income
Loans, including fees		$	11,306			$	10,907		$	10,612			$	32,754		$	30,283
Investment securities and other			413				460			589				1,357			1,307
Total interest income			11,719				11,367			11,201				34,111			31,590
Interest expense
Deposits			2,615				2,583			2,222				7,642			5,373
Other borrowings			306				286			351				950			928
Total interest expense			2,921				2,869			2,573				8,592			6,301
Net interest income			8,798				8,498			8,628				25,519			25,289
Provision (credit) for loan losses			(75	)			177			(197	)			45			(224	)
Net interest income after provision for loan losses			8,873				8,321			8,825				25,474			25,513
Non-interest income
Other loan fees			302				323			379				883			998
Service charges			129				139			113				407			351
Document processing fees			96				124			120				307			367
Other			120				106			29				346			252
Total non-interest income			647				692			641				1,943			1,968
Non-interest expenses
Salaries and employee benefits			4,254				4,318			4,147				12,953			12,338
Occupancy, net			788				768			778				2,338			2,303
Professional services			341				405			326				1,127			931
Data processing			215				201			201				640			619
Depreciation			219				218			199				650			552
Advertising and marketing			187				230			154				546			487
FDIC assessment			(15	)			154			169				309			547
Stock-based compensation			90				97			81				282			284
Other			385				369			347				1,096			1,131
Total non-interest expenses			6,464				6,760			6,402				19,941			19,192
Income before provision for income taxes			3,056				2,253			3,064				7,476			8,289
Provision for income taxes			902				673			695				2,232			2,239
Net income		$	2,154			$	1,580		$	2,369			$	5,244		$	6,050
Earnings per share:
Basic		$	0.25			$	0.19		$	0.29			$	0.62		$	0.73
Diluted		$	0.25			$	0.18		$	0.27			$	0.61		$	0.69

COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
		September 30,				June 30,				September 30,				December 31,
			2019				2019				2018				2018
Cash and interest-earning deposits in other financial institutions		$	56,347			$	57,181			$	47,753			$	56,915
Investment securities			28,707				30,414				33,421				32,353
Loans:
Commercial			110,153				108,599				119,270				118,518
Commercial real estate			392,288				391,293				353,136				365,809
SBA			17,018				17,560				21,057				19,077
Manufactured housing			253,229				253,250				240,010				247,114
Single family real estate			11,936				11,575				11,153				11,261
HELOC			4,847				6,696				9,446				6,756
Other			(14	)			(65	)			(331	)			(292	)
Total loans			789,457				788,908				753,741				768,243
Loans, net
Held for sale			44,816				45,447				50,944				48,355
Held for investment			744,641				743,461				702,797				719,888
Less: Allowance for loan losses			(8,868	)			(8,887	)			(8,519	)			(8,691	)
Net held for investment			735,773				734,574				694,278				711,197
NET LOANS			780,589				780,021				745,222				759,552
Other assets			37,609				37,951				28,313				28,471
TOTAL ASSETS		$	903,252			$	905,567			$	854,709			$	877,291
Deposits
Non-interest-bearing demand		$	114,366			$	112,463			$	105,580			$	108,161
Interest-bearing demand			333,679				343,841				267,046				270,431
Savings			15,481				16,264				14,385				14,641
Certificates of deposit ($250,000 or more)			90,298				90,170				92,934				93,439
Other certificates of deposit			207,848				202,373				239,997				229,334
Total deposits			761,672				765,111				719,942				716,006
Other borrowings			45,000				46,000				50,000				75,000
Other liabilities			16,984				16,627				9,210				10,134
TOTAL LIABILITIES			823,656				827,738				779,152				801,140
Stockholders' equity			79,596				77,829				75,557				76,151
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	903,252			$	905,567			$	854,709			$	877,291
Common shares outstanding			8,467				8,465				8,275				8,533
Book value per common share		$	9.40			$	9.19			$	9.13			$	8.92

ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
	Three Months Ended				Three Months Ended				Three Months Ended				Nine Months Ended
PERFORMANCE MEASURES AND RATIOS	September 30, 2019				June 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Return on average common equity		10.85	%			8.18	%			12.57	%			9.03	%			11.07	%
Return on average assets		0.97	%			0.73	%			1.08	%			0.81	%			96.00	%
Efficiency ratio		68.44	%			73.56	%			69.07	%			72.61	%			70.41	%
Net interest margin		4.10	%			4.07	%			4.02	%			4.06	%			4.11	%
	Three Months Ended				Three Months Ended				Three Months Ended				Nine Months Ended
AVERAGE BALANCES	September 30, 2019				June 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Average assets	$	877,505			$	864,583			$	867,174			$	867,322			$	838,955
Average earning assets		850,948				838,104				852,083				841,391				823,607
Average total loans		788,965				777,828				755,146				778,425				747,518
Average deposits		735,545				726,366				734,391				726,356				713,790
Average common equity		78,763				77,432				74,799				77,633				73,087
EQUITY ANALYSIS	September 30, 2019				June 30, 2019				September 30, 2018
Total common equity	$	79,596			$	77,829			$	75,557
Common stock outstanding		8,467				8,465				8,275
Book value per common share	$	9.40			$	9.19			$	9.13
ASSET QUALITY	September 30, 2019				June 30, 2019				September 30, 2018
Nonaccrual loans, net	$	5,476			$	3,016			$	3,755
Nonaccrual loans, net/total loans		0.69	%			0.38	%			0.50	%
Other assets acquired through foreclosure, net	$	317			$	1,074			$	-
Nonaccrual loans plus other assets acquired through foreclosure, net	$	5,793			$	4,090			$	3,755
Nonaccrual loans plus other assets acquired through foreclosure, net/total assets		0.64	%			0.45	%			0.44	%
Net loan (recoveries)/charge-offs in the quarter	$	(69	)		$	(62	)		$	(94	)
Net (recoveries)/charge-offs in the quarter/total loans		(0.01	%)			(0.01	%)			(0.01	%)
Allowance for loan losses	$	8,868			$	8,887			$	8,519
Plus: Reserve for undisbursed loan commitments		81				81				80
Total allowance for credit losses	$	8,949			$	8,968			$	8,599
Allowance for loan losses/total loans held for investment		1.19	%			1.20	%			1.21	%
Allowance for loan losses/nonaccrual loans, net		161.94	%			294.66	%			226.87	%
Community West Bank *
Tier 1 leverage ratio		9.02	%			8.66	%			8.23	%
Tier 1 capital ratio		10.04	%			9.53	%			9.64	%
Total capital ratio		11.18	%			10.67	%			10.79	%
INTEREST SPREAD ANALYSIS	September 30, 2019				June 30, 2019				September 30, 2018
Yield on total loans		5.69	%			5.62	%			5.58	%
Yield on investments		3.06	%			3.89	%			3.77	%
Yield on interest earning deposits		2.14	%			1.89	%			1.54	%
Yield on earning assets		5.46	%			5.44	%			5.22	%
Cost of interest-bearing deposits		1.69	%			1.70	%			1.41	%
Cost of total deposits		1.41	%			1.43	%			1.20	%
Cost of borrowings		2.64	%			2.64	%			2.79	%
Cost of interest-bearing liabilities		1.76	%			1.76	%			1.51	%
* Capital ratios are preliminary until the Call Report is filed.

Contact: Susan C. Thompson, EVP & CFO805.692.5821www.communitywestbank.com