Community West Bancshares : Reports Second Quarter Results;

Thursday, July 23, 2015

Community West Bancshares Reports Second Quarter Results; Goleta, California, July 23, 2015 - Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported that following a net $7.2 million loan litigation settlement, it had a net loss of $2.3 million in the second quarter of 2015 (2Q15) compared to net income of $1.8 million in the first quarter of 2015 (1Q15) and $1.7 million in the second quarter a year ago (2Q14). In the first six months of the year, Community West reported a net loss of $572,000 compared to net income of $3.1 million in the first six months of 2014. Excluding the net loan litigation settlement, Community West's net income for the second quarter and the six-month period would have been $1.9 million and $3.6 million, respectively. (See page 8 - "NON-GAAP FINANCIAL INFORMATION")

"Community West's second quarter results included solid loan and deposit growth and strong top-line results," said Martin E. Plourd, President and Chief Executive Officer. "We are making meaningful progress in building our franchise, and we believe that we are well positioned in our market place to continue to grow. Our results for the quarter again showed strong operating results (excluding net loan litigation settlement - see page 8, "NON-GAAP FINANCIAL INFORMATION"), improving asset quality trends, including a substantial decrease in nonaccrual loans, and year-overyear loan and deposit growth. We continue to position the Bank for future growth by strengthening our balance sheet, liquidity and capital base and exploring all growth opportunities."

2Q15 Financial Highlights

• Nonaccrual loans, net, decreased 49.6% to $7.9 million at June 30, 2015, compared to $15.8 million a year ago, representing the lowest level since 3Q07.
  
• Net interest margin was 5.08% in 2Q15, a 43 basis point improvement compared to 1Q15 and a 53 basis point improvement compared to 2Q14. Two large past due loan relationships were paid off during the quarter and back interest was recorded, increasing yield on earning assets by 51 basis points.
  
• Net loans increased 5.7% to $511.9 million at June 30, 2015, compared to $484.1 million a year earlier.
  
• Total deposits increased 6.0% to $500.6 million at June 30, 2015, compared to $472.3 million a year ago.
  
• Other assets acquired through foreclosure totaled $267,000 at June 30, 2015, a decrease of 56.2% compared to $610,000 a year earlier.
  
• The Company redeemed $421,000 of its preferred stock during 2Q15, leaving a remaining balance of $5,574,000.
  
• Book value per common share was $7.19 at June 30, 2015, compared to $6.90 a year ago.
  
• Community West Bank's capital ratios continue to be strong with its total risk-based capital ratio at 14.40% and Tier 1 leverage ratio at 11.06% at June 30, 2015.

Including $26,000 of preferred stock dividends and discount on partial redemptions, the net loss attributable to common stockholders was $2.4 million, or $0.29 loss per diluted share, in 2Q15 compared to net income available to common stockholders of $1.6 million, or $0.19 per diluted share, in 1Q15 and $1.5 million, or $0.18 per diluted share, in 2Q14.

Income Statement

"Higher than industry average loan yields and loan interest recoveries continue to contribute to a strong net interest margin," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. Community West's second quarter net interest margin improved 43 basis points to 5.08%, compared to 4.65% in 1Q15 and improved 53 basis points compared to 4.55% in 2Q14. Of the increase in asset yields in 2Q15, 51 basis points was attributable to two large past due loan relationships which were paid in full. In the first six months of the year, the net interest margin improved 27 basis points to 4.87% compared to 4.60% in the first six months of 2014. Of the increase in asset yields in the first six months of 2015, the same two loans contributed 26 basis points.

Second quarter net interest income increased 12.0% to $7.1 million, compared to $6.4 million in the preceding quarter and increased 13.4% compared to $6.3 million in 2Q14. Year-to-date, net interest income increased 9.0% to $13.5 million compared to $12.4 million in the same period a year ago.

Non-interest income was $753,000 in 2Q15 compared to $481,000 in 1Q15 and $846,000 in 2Q14. The increase compared to the preceding quarter was largely due to higher loan fees associated with the robust loan growth during the current quarter. In the first six months of 2015, non-interest income declined modestly to $1.2 million compared to $1.3 million in the first six months of 2014.

Primarily due to the $7.2 million loan litigation settlement, Community West's first quarter non-interest expenses totaled $12.4 million. This compares to $4.8 million in 1Q15 and $5.2 million in 2Q14. Excluding the loan litigation settlement, non-interest expenses would have been approximately $5.2 million. (See page 8 - "NON-GAAP FINANCIAL INFORMATION") Year-to-date non-interest expenses were $17.2 million compared to $10.7 million in the like period a year ago.

Balance Sheet

"The loan portfolio grew in 2Q15, with a $26 million increase in total loans, which included a $27.7 million increase in commercial and commercial real estate loans, as we continue to emphasize growing this relationship banking line," said Baltuskonis. Net loans increased 5.4% to $511.9 million at June 30, 2015, compared to $485.8 million at March 31, 2015, and increased 5.7% compared to $484.1 million a year ago. Manufactured housing loans remained relatively unchanged from year ago levels at $170.9 million and represent 32.9% of total loans. Commercial real estate loans outstanding were up 8.0% from year ago levels to $171.3 million at June 30, 2015, and comprise 33.0% of the total loan portfolio. Commercial loans increased 35.3% from year ago levels to $93.6 million and represent 18.0% of the total loan portfolio and SBA loans decreased 20.5% from a year ago to $53.4 million and represent 10.3% of the total loan portfolio.

Deposits totaled $500.6 million at June 30, 2015, a modest increase compared to $495.7 million at March 31, 2015 and a 6.0% increase compared to $472.3 million a year earlier. Non-interest-bearing deposit accounts increased 27.2% to $72.3 million at June 30, 2015, compared to $56.8 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 $392.8 million at June 30, 2015 and comprise 78.5% of total deposits, compared to $380.0 million, or 80.4% of total deposits, a year ago.

Community West's total assets were $587.3 million at June 30, 2015, a 2.6% increase compared to three months earlier and a 5.3% increase compared to a year earlier. Stockholders' equity was $64.5 million at June 30, 2015, compared to $67.5 million at March 31, 2015, and $64.3 million a year ago. Book value per common share was $7.19 at June 30, 2015 compared to $7.50 at March 31, 2015, and $6.90 a year ago.

Credit Quality

"As a result of strong asset quality, including the solid loan loss reserves already in place, we recorded a negative provision for loan losses in the last six quarters and net loan loss recoveries in five of the past six quarters," said Plourd. The negative loan loss provision was $584,000 in 2Q15, compared to $968,000 in 1Q15, and $1.0 million in 2Q14. Net loan recoveries were $552,000 in 2Q15 compared to $366,000 in 1Q15 and $151,000 in 2Q14.

The total allowance for loan losses was $7.3 million at June 30, 2015, or 1.60% of total loans held for investment, compared to 1.69% at March 31, 2015, and 2.48% a year ago. Nonaccrual loans, net, decreased 24.2% to $7.9 million, or 1.53% of total loans at June 30, 2015, compared to $10.5 million, or 2.13% of total loans, three months earlier, and decreased 49.6% compared to $15.8 million, or 3.19% of total loans, a year ago.

Of the $7.9 million in net nonaccrual loans, $2.8 million were commercial loans, $1.8 million were manufactured housing loans, $691,000 were SBA loans, $1.3 million were SBA 504 1st loans, $890,000 were commercial real estate loans, $448,000 were single family real estate loans and $74,000 were home equity line of credit loans.

Other assets acquired through foreclosure totaled $267,000 at June 30, 2015, a decrease of 56.2% compared to $610,000 a year earlier. Nonaccrual loans plus other assets acquired through foreclosure, net of SBA/USDA guarantees, totaled $8.2 million, or 1.40% of total assets, at June 30, 2015, compared to $10.8 million, or 1.89% of total assets, three months earlier and $16.4 million, or 2.94% of total assets, a year ago.

Announces Partial Redemption of Preferred Stock

In furtherance of its previously announced Preferred Stock Repayment Strategy, the Company redeemed another $421,000 of its 9% Cumulative Perpetual Preferred Stock, Series A, on June 29, 2015, leaving a remaining balance of $5,574,000. The Company's Board of Directors will continue to consider redemptions, and that any such redemptions are subject to regulatory approvals and will be based on the Company's financial condition and results of operations and overall corporate strategy at the time. It is anticipated that any future redemptions would be payable from future earnings.

Declares Cash Dividend of $0.03 Per Common Share

The Company's Board of Directors declared a quarterly cash dividend of $0.03 per common share. The dividend will be payable August 31, 2015, to common shareholders of record on August 12, 2015.

Recent Developments

As previously announced, on June 8, 2015, Community West Bank reached a settlement with Residential Funding Company, LLC ("RFC") resolving the litigation concerning residential mortgage loans it sold to RFC. Under the settlement, Community West Bank paid RFC $7.5 million, which fully resolved the case against the Company. This action was just one of many filed by RFC against various banks still pending in courts in New York and Minnesota. "After extensive consideration, including the costs involved, we believe that this settlement resolved the uncertainties inherent in complex litigation, eliminated any additional exposure and put this issue behind us," said Plourd. "We believe that this decision to settle was in the best interest of shareholders to move forward and focus our efforts on the future."

Use of Non-GAAP Financial Information

This press release contains both financial measures based on accounting principles generally accepted in the United States ("GAAP") and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.