GlobeNewswire Inc | Oct 26, 2020 09:00AM EDT

October 26, 2020

GOLETA, Calif., Oct. 26, 2020 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (the Bank), today reported net income increased to $2.9 million, or $0.33 per diluted share, for the third quarter of 2020 (3Q20), compared to $1.2 million, or $0.14 per diluted share, for the second quarter of 2020 (2Q20), and compared to $2.2 million, or $0.25 per diluted share, for the third quarter of 2019 (3Q19). For the first nine months of 2020, net income increased 7.1% to $5.6 million, or $0.66 per diluted share, compared to $5.2 million, or $0.61 per diluted share, for the first nine months of 2019.

Third Quarter 2020 Financial Highlights:

-- Net income of $2.9 million, or $0.33 per diluted share, in 3Q20, compared to $1.2 million, or $0.14 per diluted share in 2Q20, and $2.2 million, or $0.25 per diluted share in 3Q19. -- Net interest income was $9.6 million for the quarter, compared to $8.8 million for both 2Q20 and 3Q19, respectively. -- Provision for loan losses was $113,000 for the quarter, compared to $762,000 for 2Q20, and a credit to the provision for loan losses of $75,000 for 3Q19. The resulting allowance was 1.24% of total loans held for investment at September 30, 2020 (1.37% of total loans held for investment at September 30, 2020 excluding the $75.7 million of Paycheck Protection Program (PPP) loans which are 100% guaranteed by the Small Business Administration (SBA)).* -- Net interest margin was 3.76% for 3Q20, compared to 3.72% for 2Q20, and 4.10% for 3Q19. -- Total demand deposits increased $41.2 million to $545.2 million at September 30, 2020, compared to $504.1 million at June 30, 2020, and increased $97.2 million compared to $448.0 million at September 30, 2019. Total demand deposits represented 72.8% of total deposits at September 30, 2020, compared to 67.2% at June 30, 2020, and 58.8% at September 30, 2019. -- Total loans were $854.5 million at September 30, 2020, compared to $856.0 million at June 30, 2020, and $789.5 million at September 30, 2019. -- Book value per common share increased to $10.23 at September 30, 2020, compared to $9.93 at June 30, 2020, and $9.40 at September 30, 2019. -- Total risked-based capital improved to 12.21% for the Bank at September 30, 2020, compared to 11.63% at June 30, 2020 and 11.18% at September 30, 2019. -- Net non-accrual loans were $2.3 million at September 30, 2020 compared to $2.6 million and at June 30, 2020, and $5.5 million at September 30, 2019. -- Other assets acquired through foreclosure, net, was $2.7 million at September 30, 2020 and at June 30, 2020, compared to $317,000 at September 30, 2019.

*Non GAAP

COVID-19 Pandemic Update

We produced strong earnings for the third quarter, with solid top and bottom line results, core deposit growth and a slightly expanded net interest margin, stated Martin E. Plourd, President and Chief Executive Officer. Additionally, we generated 517 SBA PPP loans totaling $75.7 million to our clients since the programs inception in April to the conclusion of the program on August 8, 2020. We are now starting to process applications for PPP loan forgiveness for clients. We anticipate the timing of such forgiveness to occur during the fourth quarter 2020 and 2021.

The effect of the pandemic on our employees, clients and communities remains our primary concern, Plourd continued. Since the start of the pandemic, we have maintained all branch activity, taking conservative measures to keep our employees, clients, and communities safe. We remain focused on assessing the risks in our loan portfolio and working with our clients to minimize losses, and have implemented a loan modification program to assist clients impacted by the pandemic with loan deferrals. The Bank initially granted 90 or 180 day deferral requests under the Disaster Relief Program beginning in April. By late May, as our local markets began easing restrictions, including the reopening of some businesses, the volume of requests had significantly diminished. At that time, we reverted to a standard 90-day payment deferral, with a longer term considered an exception and requiring additional approval. As a result, we have a mixture of payment deferral terms, with a significant portion of loans coming off deferrals each week. We are carefully monitoring these clients closely to make sure payments resume on schedule, said Plourd.

The table below shows the breakdown of current deferrals by loan type:

October 20, 2020 September 30, 2020 June 30, 2020Loan segment Count Balance Count Balance Count Balance (in (in (in thousands) thousands) thousands)Manufactured 74 $ 10,593 116 $ 15,984 142 $ 19,903housingCommercial 37 74,969 60 104,492 78 124,629real estateCommercial 16 6,590 24 8,520 36 10,825SBA 0 0 0 0 1 17HELOC 0 0 0 0 0 0Single family 3 716 3 717 5 1,027real estateConsumer 0 0 0 0 0 0Totalpandemic 130 $ 92,868 203 $ 129,713 262 $ 156,401deferments

Additionally, we are optimistic with the loan resumption progress, as approximately 88% of loans have resumed payments as deferral periods end, Plourd continued.

The table below reflects the high risk industry loans by type at September 30, 2020. The industries in our markets most heavily impacted include retail, healthcare, hospitality, schools and energy. The Companys management team continues to evaluate the loans related to the affected industries and at September 30, 2020, the Banks loans to these industries were $185 million, which is 21.7% of its $854.5 million loan portfolio.

Of the selected industry loans, $1.6 million or 0.86% are on non-accrual. Also, of the selected industries loans, the classified loans are $17.1 million or 9.26%. The Bank has accommodated $75.2 million of these loans with payment deferrals or 40.65% of the selected industries. Additional detail by industry at September 30, 2020 is included in the table below.

Sectors Under Focus (Excluding PPP Loans) LoansAs of 9/30/ Outstanding20 (in (includes $ % $ % $ %thousands) $11 million Non-accrual Non-accrual Classified Classified Deferrals Deferral of guarantees)Healthcare $ 49,080 $ 1,571 3.20 % $ 1,928 3.93 % $ 12,181 24.82 %Senior/Assted $ 23,219 $ 0 0.00 % $ 0 0.00 % $ 0 0.00 %LivingFacilitiesMedical $ 18,736 $ 0 0.00 % $ 283 1.51 % $ 9,736 51.96 %OfficesGeneral $ 7,125 $ 1,571 22.05 % $ 1,644 23.07 % $ 2,445 34.32 %HealthcareHospitality $ 54,844 $ 2 0.00 % $ 5,366 9.78 % $ 39,842 72.65 %Lodging $ 40,505 $ 0 0.00 % $ 2,609 6.44 % $ 34,534 85.26 %Restaurants $ 11,025 $ 2 0.02 % $ 2,757 25.01 % $ 5,308 48.15 %RV-Mobile $ 3,314 $ 0 0.00 % $ 0 0.00 % $ 0 0.00 %Home ParksRetailCommercial $ 57,173 $ 21 0.04 % $ 9,701 16.97 % $ 20,360 35.61 %Real EstateRetail $ 22,033 $ 0 0.00 % $ 19 0.09 % $ 2,827 12.83 %ServicesSchools $ 1,189 $ 0 0.00 % $ 0 0.00 % $ 0 0.00 %Energy $ 681 $ 0 0.00 % $ 114 16.74 % $ 0 0.00 %Total $ 185,000 $ 1,594 0.86 % $ 17,128 9.26 % $ 75,210 40.65 %

Income Statement

Net interest income was $9.6 million in 3Q20 compared to $8.8 million in both 2Q20 and in 3Q19, primarily due to decreased deposit costs. In the first nine months of 2020, net interest income increased 5.0% to $26.8 million, compared to $25.5 million in the first nine months of 2019.

Non-interest income increased 111% to $1.4 million in 3Q20, compared to $640,000 in 2Q20, and increased 109% compared to $647,000 in 3Q19. Other loan fees were $539,000 for 3Q20, a 90.5% increase compared to 2Q20, and a 78.5% increase compared to 3Q19. Gain on sale of loans was $424,000 in 3Q20 compared to $97,000 in the preceding quarter. There were no gains on sales of loans in 3Q19. Non-interest income increased 51.4% to $2.9 million in the first nine months of 2020 compared to $1.9 million in the first nine months of 2019.

Net interest margin was 3.76% in 3Q20, compared to 3.72% in 2Q20, and 4.10% in 3Q19. Our continued focus on reducing our cost of funds contributed to the net interest margin expansion during the third quarter, said Susan C. Thompson, Executive Vice President and Chief Financial Officer. The Companys cost of funds for 3Q20 improved 31 basis points to 0.83% compared to 1.14% for 2Q20 and improved by 93 basis points compared to 3Q19. In the first nine months of 2020, the net interest margin was 3.81%, compared to 4.06% in the prior year period.

The Company recorded a provision for loan losses of $113,000 in 3Q20. This compares to a provision for loan losses of $762,000 in 2Q20, and a credit to the provision for loan losses of $75,000 in 3Q19. In the first nine months of 2020, the provision for loan losses totaled $1.3 million, compared to $45,000 in the first nine months of 2019. The increase in the provision in the year-to-date period was to reflect the estimated losses due to the current economic uncertainties resulting from the pandemic currently masked by loan deferrals, PPP loans and other stimulus subsidies.

Non-interest expense totaled $6.7 million in 3Q20, compared to $7.0 million in the preceding quarter and $6.5 million in 3Q19. In the first nine months of 2020, non-interest expense was $20.5 million, compared to $19.9 million in the first nine months of 2019.

Balance Sheet

Total assets were down slightly to $1.04 billion at September 30, 2020, compared to $1.06 billion at June 30, 2020, and increased $138.8 million, or 15.4%, compared to $903.3 million at September 30, 2019. Total loans were $854.5 million at September 30, 2020, compared to $856.0 million at June 30, 2020, and increased $65.0 million, or 8.2% compared to $789.5 million at September 30, 2019.

Commercial real estate loans outstanding (which include SBA 504, construction and land) were up modestly from year ago levels to $394.5 million at September 30, 2020 and comprise 46.2% of the total loan portfolio. Manufactured housing loans were up 8.8% from year ago levels to $275.5 million and represent 32.2% of total loans. SBA PPP loans originated during 2Q20 and 3Q20 were $75.7 million at September 30, 2020 and represent 8.9% of total loans. Commercial loans (which include agriculture loans) were down 23.6% from year ago levels to $84.1 million and represent 9.8% of the total loan portfolio. The majority of this decrease was in the agriculture portfolio as the Company has switched its production focus from on-balance sheet to off-balance sheet Farmer Mac loans.

Total deposits were $749.2 million at September 30, 2020, compared to $750.2 million at June 30, 2020, and $761.7 million at September 30, 2019. Non-interest-bearing demand deposits were $190.1 million at September 30, 2020, a slight decrease compared to $192.8 million at June 30, 2020, and a $75.8 million increase compared to $114.4 million at September 30, 2019. Interest-bearing demand deposits increased $43.8 million to $355.1 million at September 30, 2020, compared to $311.3 million at June 30, 2020, and increased $21.4 million compared to $333.7 million at September 30, 2019. Certificates of deposit, which include brokered deposits, decreased $42.8 million during the quarter to $185.4 million at September 30, 2020, compared to $228.2 million at June 30, 2020 and decreased $112.8 million compared to $298.1 million at September 30, 2019. The reduction in deposits was due to divesting of some high-priced municipal and brokered certificate of deposits funding to lower cost funding sources.

Stockholders equity increased to $86.7 million at September 30, 2020, compared to $84.1 million at June 30, 2020, and $79.6 million at September 30, 2019. Book value per common share increased to $10.23 at September 30, 2020, compared to $9.93 at June 30, 2020, and $9.40 at September 30, 2019. In an abundance of caution, 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

We are closely monitoring credit metrics and performing stress testing on our loan portfolio. In addition, resources have been reallocated to credit administration to closely analyze higher risk segments within the portfolio, as well as monitor and track loan payment deferrals and client liquidity, said Plourd. Based on our capital levels, company resources, current economic climate, and underwriting policies, we expect 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 $113,000 in 3Q20. This compares to a provision for loan losses of $762,000 in 2Q20, and a credit to the provision for loan losses of $75,000 in 3Q19. The allowance for credit losses, including the reserve for undisbursed loans, was $10.3 million, or 1.24% of total loans held for investment, at September 30, 2020. The allowance for loan losses was 1.37% of total loans held for investment at September 30, 2020 when excluding the $75.7 million of PPP loans, which are 100% guaranteed by the SBA. Net non-accrual loans, plus net other assets acquired through foreclosure, were $5.0 million at September 30, 2020, compared to $5.3 million at June 30, 2020, and $5.8 million at September 30, 2019.

Net non-accrual loans totaled $2.3 million at September 30, 2020, compared to $2.6 million at June 30, 2020, and $5.5 million at September 30, 2019. Of the $2.3 million of net non-accrual loans at September 30, 2020, $1.5 million were commercial loans, $0.6 million were manufactured housing loans, $0.1 million were commercial real estate loans and $0.1 million were SBA loans.

There was $2.7 million in other assets acquired through foreclosure as of September 30, 2020 and at June 30, 2020. This compares to $317,000 of other assets acquired through foreclosure at September 30, 2019. The majority of this balance relates to one property in the amount of $2.5 million.

Cash Dividend Declared

The Companys Board of Directors declared a cash dividend of $0.05 per common share, payable November 30, 2020 to common shareholders of record on November 13, 2020.

Stock Repurchase Program

The Company did not repurchase shares during the third 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 Californias 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 Bank 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 BANCSHARESCONDENSED CONSOLIDATED INCOME STATEMENTS(unaudited)(in 000's, except per share data) Three Months Ended Nine Months Ended September June 30, September 30, September 30, September 30, 30, 2020 2020 2019 2020 2019 Interest incomeLoans,including $ 10,909 $ 10,585 $ 11,306 $ 32,158 $ 32,754 feesInvestmentsecurities 207 192 413 710 1,357 and otherTotalinterest 11,116 10,777 11,719 32,868 34,111 income Deposits 1,046 1,500 2,615 4,668 7,642 Other 518 496 306 1,404 950 borrowingsTotalinterest 1,564 1,996 2,921 6,072 8,592 expenseNet interest 9,552 8,781 8,798 26,796 25,519 incomeProvision(credit) for 113 762 (75 ) 1,267 45 loan lossesNet interestincome afterprovision 9,439 8,019 8,873 25,529 25,474 for loanlossesNon-interest incomeOther loan 539 283 302 1,163 883 feesGains fromloan sales, 424 97 - 711 - netDocumentprocessing 152 108 96 384 307 feesService 75 62 129 271 407 chargesOther 162 90 120 413 346 Totalnon-interest 1,352 640 647 2,942 1,943 incomeNon-interest expensesSalaries andemployee 4,402 4,574 4,254 13,374 12,953 benefitsOccupancy, 751 776 788 2,285 2,338 netProfessional 460 559 341 1,402 1,127 servicesData 258 260 215 801 640 processingDepreciation 205 206 219 619 650 FDIC 123 133 (15 ) 400 309 assessmentAdvertisingand 145 265 187 563 546 marketingStock-based 71 95 90 251 282 compensationOther 307 135 385 759 1,096 Totalnon-interest 6,722 7,003 6,464 20,454 19,941 expensesIncomebeforeprovision 4,069 1,656 3,056 8,017 7,476 for incometaxesProvisionfor income 1,209 496 902 2,399 2,232 taxesNet income $ 2,860 $ 1,160 $ 2,154 $ 5,618 $ 5,244 Earnings per share:Basic $ 0.34 $ 0.14 $ 0.25 $ 0.66 $ 0.62 Diluted $ 0.33 $ 0.14 $ 0.25 $ 0.66 $ 0.61

COMMUNITY WEST BANCSHARESCONDENSED CONSOLIDATED BALANCE SHEETS(unaudited)(in 000's, except per share data) September 30, June 30, September 30, December 31, 2020 2020 2019 2019 Cash and cash $ 4,974 $ 4,679 $ 1,758 $ 2,539 equivalentsInterest-earningdeposits in other 124,590 142,823 54,489 80,122 financialinstitutionsInvestment 23,562 24,221 28,707 25,563 securitiesLoans: Commercial 84,133 95,114 110,153 101,485 Commercial real 394,547 392,789 392,288 385,642 estateSBA 12,547 13,013 17,018 14,777 Paycheck Protection 75,683 75,149 - - Program (PPP)Manufactured housing 275,472 267,343 253,229 257,247 Single family real 10,232 11,078 11,936 11,668 estateHELOC 3,857 3,918 4,847 4,531 Other (1) (2,001 ) (2,375 ) (14 ) 213 Total loans 854,470 856,029 789,457 775,563 Loans, net Held for sale 32,562 35,090 44,816 42,046 Held for investment 821,908 820,939 744,641 733,517 Less: Allowance for (10,197 ) (10,008 ) (8,868 ) (8,717 )loan lossesNet held for 811,711 810,931 735,773 724,800 investmentNET LOANS 844,273 846,021 780,589 766,846 Other assets 44,700 43,103 37,609 38,800 TOTAL ASSETS $ 1,042,099 $ 1,060,847 $ 903,252 $ 913,870 Deposits Non-interest-bearing $ 190,133 $ 192,806 $ 114,366 $ 110,843 demandInterest-bearing 355,111 311,266 333,679 314,278 demandSavings 18,555 17,862 15,481 15,689 Certificates ofdeposit ($250,000 or 81,426 86,046 90,298 96,431 more)Other certificates 103,955 142,178 207,848 213,693 of depositTotal deposits 749,180 750,158 761,672 750,934 Other borrowings 190,103 210,103 45,000 65,000 Other liabilities 16,099 16,493 16,984 15,958 TOTAL LIABILITIES 955,382 976,754 823,656 831,892 Stockholders' equity 86,717 84,093 79,596 81,978 TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 1,042,099 $ 1,060,847 $ 903,252 $ 913,870

Common shares 8,473 8,472 8,467 8,472 outstanding Book value per $ 10.23 $ 9.93 $ 9.40 $ 9.68 common share (1) Includes consumer, other loans, securitized loans, and deferred fees

ADDITIONAL FINANCIAL INFORMATION(Dollars and shares in thousands except per share amounts)(Unaudited)

Three Months Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended EndedPERFORMANCE September 30, June 30, September 30, September 30, September 30,MEASURES AND 2020 2020 2019 2020 2019RATIOSReturn onaverage common 13.33 % 5.57 % 10.85 % 13.45 % 9.03 %equityReturn on 1.09 % 0.48 % 0.97 % 1.16 % 0.81 %average assetsEfficiency ratio 61.65 % 74.33 % 68.44 % 68.78 % 72.61 %Net interest 3.76 % 3.72 % 4.10 % 3.81 % 4.06 %margin Three Months Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended EndedAVERAGE BALANCES September 30, June 30, September 30, September 30, September 30, 2020 2020 2019 2020 2019Average assets $ 1,044,807 $ 978,250 $ 877,505 $ 970,099 $ 867,322 Average earning 1,011,765 949,149 850,948 939,959 841,391 assetsAverage total 854,273 839,625 788,965 827,244 778,425 loansAverage deposits 733,486 745,644 735,545 732,449 726,356 Average common 85,328 83,757 78,763 83,972 77,633 equity EQUITY ANALYSIS September 30, June 30, September 30, 2020 2020 2019Total common $ 86,717 $ 84,093 $ 79,596 equityCommon stock 8,473 8,472 8,467 outstanding Book value per $ 10.23 $ 9.93 $ 9.40 common share ASSET QUALITY September 30, June 30, September 30, 2020 2020 2019Nonaccrual $ 2,258 $ 2,640 $ 5,476 loans, netNonaccrualloans, net/total 0.26 % 0.31 % 0.69 % loansOther assetsacquired through $ 2,707 $ 2,707 $ 317 foreclosure, net Nonaccrual loansplus otherassets acquired $ 4,965 $ 5,347 $ 5,793 throughforeclosure, netNonaccrual loansplus otherassets acquired 0.48 % 0.50 % 0.64 % throughforeclosure, net/total assetsNet loan(recoveries)/ $ (76 ) $ (79 ) $ (69 ) charge-offs inthe quarterNet (recoveries)/charge-offs in (0.01 %) (0.01 %) (0.01 %) the quarter/total loans Allowance for $ 10,197 $ 10,008 $ 8,868 loan lossesPlus: Reservefor undisbursed 92 91 81 loan commitmentsTotal allowancefor credit $ 10,289 $ 10,099 $ 8,949 lossesAllowance forloan losses/ 1.24 % 1.22 % 1.19 % total loans heldfor investmentAllowance forloan losses/total loans held 1.37 % 1.34 % 1.19 % for investmentexcluding PPPloansAllowance forloan losses/ 451.59 % 379.09 % 161.94 % nonaccrualloans, net Community West Bank *Community bank 8.79 % 8.94 % N/A leverage ratioTier 1 leverage 8.79 % 8.94 % 9.02 % ratioTier 1 capital 10.96 % 10.38 % 10.04 % ratioTotal capital 12.21 % 11.63 % 11.18 % ratio INTEREST SPREAD September 30, June 30, September 30, ANALYSIS 2020 2020 2019Yield on total 5.08 % 5.07 % 5.69 % loansYield on 1.89 % 1.88 % 3.06 % investmentsYield oninterest earning 0.23 % 0.29 % 2.14 % depositsYield on earning 4.37 % 4.57 % 5.46 % assets Cost ofinterest-bearing 0.77 % 1.06 % 1.69 % depositsCost of total 0.57 % 0.81 % 1.41 % depositsCost of 0.98 % 1.50 % 2.64 % borrowingsCost ofinterest-bearing 0.83 % 1.14 % 1.76 % liabilities * Capital ratios are preliminary until the Call Report is filed.

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