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

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		Other		Loans 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	%	$	290	1.53	%	$	10,026	52.80	%
	General Healthcare	$	2,108	$	2,474	$	620	$	1,191	$	6,393	$	1,657	25.92	%	$	1,735	27.14	%	$	4,206	65.79	%
	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	%	$	33,229	80.75	%
	Restaurants	$	5,918	$	615	$	3,976	$	616	$	11,125	$	3	0.03	%	$	1,673	15.04	%	$	6,968	62.63	%
	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 RATIOS	June 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 Ended				Six Months Ended
AVERAGE BALANCES	June 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 ANALYSIS	June 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 QUALITY	June 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 ANALYSIS	June 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