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Community West Bancshares Earns $1.3 Million in 4th Quarter, $5.2 Million for the Year

Community West Bancshares, (NASDAQ: CWBC), parent company of Community West Bank, today reported net income of $1.3 million in the fourth quarter of 2016 compared to $1.5 million in the third quarter of 2016 and $1.9 million in the fourth quarter of 2015.

For the full year, Community West reported net income of $5.2 million compared to $2.9 million in 2015.

“Solid profitability, a healthy net interest margin, improving asset quality and robust loan and deposit growth were the highlights of our 2016 financial results,” stated Martin E. Plourd, president and chief executive officer. “The strength of the economy in our local marketplace continues to sustain and build our community banking franchise with strong on- going demand for our high-service approach to lending and deposit programs.

"Our focus in the coming year remains on the local markets and expanding our franchise through organic growth. The increase in non-interest expenses in 4Q16 compared to 4Q15 is primarily due to additional lenders and staff. We will continue to invest in our future, with the opening of the San Luis Obispo branch in November 2016, the relocated branch in Santa Maria in January 2017 and the new Oxnard branch scheduled to open next week.”

4Q16 Financial Highlights

»  Total loans increased $28.9 million for 4Q16 to $630.8 million at Dec. 31, 2016, and 16.1 percent compared to $543.5 million a year ago.

»  Total assets surpassed $700 million for the first time in the Company’s history and increased 14.4 percent to $710.6 million at Dec. 31, 2016, compared to $621.2 million a year ago.

»  Nonaccrual loans, net, decreased 52.6% to $2.4 million, or 0.38 percent of net loans at Dec. 31, 2016, compared to $5.0 million, or 0.92% of net loans, a year ago, representing the lowest level since 3Q07.

»  Net income available to common stockholders for 4Q16 was $1.3 million, or $0.16 per diluted share.

»  Return on average assets for 2016 was 0.81 percent.

»  Return on average common equity for 2016 was 8.19 percent.

»  Net interest margin for 2016 was 4.60 percent.

»  Non-interest-bearing deposits increased 31.2 percent to $100.4 million at Dec. 31, 2016, compared to $76.5 million a year ago.

»  Book value per common share increased 6.9 percent to $8.07 at Dec. 31, 2016, compared to $7.55 a year ago.

»  The bank continues to be well-capitalized per banking regulations with its total risk-based capital ratio at 12.27 percent and Tier 1 leverage ratio at 10.08 percent at Dec. 31, 2016.

Income Statement

“While we had a modest decrease in the net interest margin during the fourth quarter, we have been able to maintain a net interest margin in the mid-4 percent range, largely due to our above industry-average loan yields and periodic loan interest recoveries,” said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer.

Fourth quarter net interest margin was 4.63 percent compared to 4.81 percent in 3Q16 and 4.90% in 4Q15. For all of 2016, Community West’s net interest margin was 4.60 percent compared to 4.80 percent in 2015.

Of the asset yields for all of 2016, eight basis points of asset yields was attributable to one large past due loan relationship that was paid in full and, for all of 2015, 22 basis points were attributable to two large past due loan relationships that were paid in full.

Net interest income for 4Q16 was $7.8 million, a slight increase compared to $7.7 million in the preceding quarter and a 4.0 percent increase compared to $7.5 million in 4Q15.

For the year, net interest income increased 5.0 percent to $29.1 million compared to $27.7 million a year ago.

Non-interest income was $538,000 in 4Q16, a slight decrease compared to $559,000 in 3Q16 and unchanged compared to 4Q15. For the year, non-interest income was $2.3 million, which was unchanged compared to 2015.

Non-interest expenses totaled $5.9 million in 4Q16, compared to $5.8 million in 3Q16 and $5.1 million in 4Q15. 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.

For all of 2016, noninterest expenses were $22.6 million. In the second quarter of 2015, Community West settled a claim for $7.1 million, net, which increased non-interest expenses for 2015 to $27.3 million.

Excluding this one-time settlement, non-interest expenses would have been $20.2 million for 2015. (See page 7 – “Non- GAAP Financial Information”)

Balance Sheet

Net loans increased 4.8 percent to $623.4 million at Dec. 31, 2016, compared to $594.7 million at Sept. 30, 2016, and increased 16.2 percent compared to $536.5 million a year ago.

Commercial real estate loans outstanding were up 51.6 percent from year ago levels to $272.1 million at Dec. 31, 2016, and comprise 43.1 percent of the total loan portfolio.

Manufactured housing loans were up 9.2 percent from year ago levels to $194.2 million and represent 30.8 percent of total loans.

Commercial loans decreased 2.1 percent from year ago levels to $105.3 million and represent 16.7 percent of the total loan portfolio and SBA loans decreased 23.8 percent from a year ago to $36.5 million and represent 5.8 percent of the total loan portfolio.

Total assets were $710.6 million at Dec. 31, 2016, a 6.9 percent increase compared to three months earlier and a 14.4 percent increase compared to one year ago.

Deposits totaled $612.2 million at Dec. 31, 2016, up 3.7 percent compared to $590.6 million at Sept. 30, 2016, and grew 12.5 percent compared to $544.3 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 $457.3 million at Dec. 31, 2016 and comprise 74.7 percent of total deposits, compared to $408.7 million, or 75.1 percent of total deposits, a year ago.

Stockholders’ equity was $65.3 million at Dec. 31, 2016, compared to $64.2 million at Sept. 30, 2016, and $62.0 million a year ago. Book value per common share improved to $8.07 at Dec. 31, 2016, compared to $7.93 at Sept. 30, 2016, and $7.55 a year ago.

Credit Quality

“This year, we were able to cut in half our nonaccrual loans and nonaccrual loans plus other assets acquired through foreclosure, both net of SBA/USDA guarantees, reflecting the hard work of our lenders and the credit management team, as well as the continuing improvement in our local markets,” said Plourd.

The allowance for loan losses was $7.5 million at Dec. 31, 2016, or 1.31 percent of total loans held for investment, compared to 1.33 percent at Sept. 30, 2016, and 1.44 percent a year ago.

Net nonaccrual loans decreased 21.5 percent to $2.4 million, or 0.38 percent of total loans at Dec. 31, 2016, compared to $3.0 million, or 0.50 percent of total loans, three months earlier, and decreased 52.6 percent compared to $5.0 million, or 0.92 percent of total loans, a year ago.

Of the $2.4 million in net nonaccrual loans, $799,000 were manufactured housing loans, $712,000 were SBA 504 1st loans, $373,000 were home equity loans, $192,000 were single family real estate loans, $141,000 were commercial real estate loans, $128,000 were SBA loans and $30,000 were commercial loans.

Other assets acquired through foreclosure totaled $137,000 at Dec. 31, 2016, compared to $55,000 three months earlier and $198,000 a year earlier. Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $2.5 million, or 0.35 percent of total assets, at Dec. 31, 2016, compared to $3.1 million, or 0.46 percent of total assets, three months earlier and $5.2 million, or 0.84 percent of total assets, a year ago.

“Due to strong loan growth, we recorded a provision for loan losses for the third consecutive quarter,” added Plourd.

The loan loss provision was $116,000 in 4Q16, compared to $22,000 in 3Q16, and a credit to provision of $277,000 in 4Q15. Net loan recoveries were $158,000 in 4Q16 compared to $140,000 in 3Q16 and $181,000 in 4Q15.

Cash Dividend Declared

The Company’s Board of Directors declared a quarterly cash dividend of $0.035 per common share, payable Feb. 28, 2017, to common shareholders of record on February 10, 2017. The current annualized yield, based on the closing price of CWBC shares of $9.24 on December 31, 2016, was 1.5%.

Stock Repurchase Program

On Aug. 31, 2015, the company announced that the Board of Directors authorized a common stock repurchase program of up to $3 million. As of Dec. 31, 2016, 187,569 shares (none in 4Q16) 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 six full-service California branch banking offices, in Goleta, Santa Barbara, Santa Maria, Ventura, Westlake Village and 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.

Charles G. Baltuskonis is executive vice president and chief financial officer of Community West Bancshares

 

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