Irvine, California – July 25, 2018 – CommerceWest Bank reported net income for the three months ended June 30, 2018 of $1,032,000 or $0.25 per common share, compared with net income of $1,078,000 or $0.26 per common share for the three months ended June 30, 2017, an EPS decrease of 4%. Net income for the six months ended June 30, 2018 of $2,669,000 or $0.65 per common share, compared with net income of $2,587,000 or $0.63 per common share for the six months ended June 30, 2017, an EPS increase of 3%.
Key Financial Results for the three months ended June 30, 2018:
- Interest income up 16%
- Net interest income up 9%
- Non-interest income up 36%
- Efficiency ratio of 55.11%
- Net interest margin of 4.16%
- Loan growth up 16%
- Record loans outstanding at $437 million
- 34 quarters of consecutive profits
Key Financial Results for the six months ended June 30, 2018:
- Interest income up 14%
- Net interest income up 8%
- Net income up 3%
- EPS up 3%
- Return on asset (ROA) of 1.00%
- Noninterest-bearing deposits as percent of total deposits at 51%
Mr. Ivo Tjan, Chairman and CEO commented on the financial results, “The results for the quarter are mixed. We had record loans outstanding at $437 million, strong loan growth increasing $61.7 million and a solid net interest margin of 4.16% for the quarter. Pretax pre-provision income was also up 5% quarter over quarter.” Mr. Tjan continued, “However, we are disappointed with the deposit results for the quarter. In addition to seasonal outflows, we are seeing our clients operating at lower deposit levels than we have experienced in recent years because of the positive economic outlook and tax relief. We have strategically added a larger team during the first half of 2018 to accelerate deposit growth. The Bank’s core earnings are strong and we are confident in continuing to build shareholder value for the remaining part of 2018.”
Total assets decreased $1.8 million as of June 30, 2018, a decrease of less than one percent as compared to the same period one year ago. Total loans increased $61.7 million as of June 30, 2018, an increase of 16% over the prior year. Cash and due from banks decreased $83.6 million or 71% from the prior year. Total investment securities increased $18.0 million, an increase of 40% from the prior year.
Total deposits decreased $2.7 million as of June 30, 2018, a decrease of 1% from June 30, 2017. Non-interest-bearing deposits decreased $27.2 million as of June 30, 2018, a decrease of 10% over the prior year. Interest bearing deposits increased $24.5 million as of June 30, 2018, an increase of 12% over the prior period.
Interest income was $5,900,000 for the three months ended June 30, 2018 as compared to $5,104,000 for the three months ended June 30, 2017, an increase of 16%. Interest income was $11,515,000 for the six months ended June 30, 2018 as compared to $10,103,000 for the six months ended June 30, 2017, an increase of 14%. Interest expense was $715,000 for the three months ended June 30, 2018 as compared to $349,000 for the three months ended June 30, 2017, an increase of 105%. Interest expense was $1,285,000 for the six months ended June 30, 2018 as compared to $658,000 for the six months ended June 30, 2017, an increase of 95%.
Net interest income for the three months ended June 30, 2018 was $5,185,000 as compared to $4,755,000 for the three months ended June 30, 2017, an increase of 9%. The net interest margin increased for the three months ended June 30, 2018. It increased from 4.11% in 2017 to 4.16% in 2018, an increase of 1%. Net interest income for the six months ended June 30, 2018 was $10,230,000 as compared to $9,445,000 for the six months ended June 30, 2017, an increase of 8%. The net interest margin decreased for the six months ended June 30, 2018. It decreased from 4.19% in 2017 to 4.11% in 2018, a decrease of 2%.
Provision for loan losses for the three months ended June 30, 2018 was $1,200,000 compared to $755,000 for the three months ended June 30, 2017, an increase of 59%. The provision for loan losses has increased during Q2 of 2018 due to the identification of a problem loan relationship and also because of the increase in loans outstanding. Provision for loan losses for the six months ended June 30, 2018 was $1,555,000 compared to $855,000 for the six months ended June 30, 2017, an increase of 82%.
Non-interest income for the three months ended June 30, 2018 was $706,000 compared to $518,000 for the same period last year, an increase of 36%. The Bank collected approximately $113,000 in prepayment penalty fee income on loans during the three months ended June 30, 2018 as compared to $23,000 for the three months ended June 30, 2017. Non-interest income for the six months ended June 30, 2018 was $1,384,000 compared to $1,468,000 for the same period last year, a decrease of 6%. The Bank collected approximately $236,000 in prepayment penalty fee income on loans during the six months ended June 30, 2018 as compared to $516,000 for the six months ended June 30, 2017.
Non-interest expense for the three months ended June 30, 2018 was $3,280,000 compared to $2,792,000 for the same period last year, an increase of 17%. During the second quarter of 2017, the Bank reversed an accrual of $280,000 for CRM software it decided not to purchase. The quarter over quarter increase in non-interest expense without the accrual reversal would have been 6.77%. Non-interest expense for the six months ended June 30, 2018 was $6,532,000 compared to $5,862,000 for the same period last year, an increase of 11%. Excluding the accrual reversal, year over year non-interest expense increased 6.35%. This expense increase was largely due to additional sales team members added during the first half of 2018 to assist with deposit acquisition.
The Bank’s efficiency ratio for the three months ended June 30, 2018 was 55.11% compared to 51.78% in 2017, which represents an increase of 6%. The efficiency ratio illustrates, that for every dollar the Bank made for the three-month period ending June 30, 2018, the Bank spent $0.55 to make it, as compared to $0.52 one year ago. The Bank’s efficiency ratio for the six months ended June 30, 2018 was 55.62% compared to 52.64% in 2017, which also represents an increase of 6%.
Capital ratios for the Bank remain well above the levels required for a “well capitalized” institution as designated by regulatory agencies. As of June 30, 2018, the tier 1 leverage ratio was 10.69%, the common equity tier 1 capital ratio was 12.34%, the tier 1 risk based capital ratio was 12.34%, and the total risk-based capital ratio was 13.37%.
CommerceWest Bank is a California based full service commercial bank with a unique vision and culture of focusing exclusively on the business community. Founded in 2001 and headquartered in Irvine, California. The Bank serves businesses throughout the state with an emphasis on clients in Orange County, San Diego, Los Angeles, and Riverside Counties. We are a full service business bank and offer a wide range of commercial banking services, including concierge services, remote deposit solution, online banking, mobile banking, lines of credit, working capital loans, commercial real estate loans, SBA loans, and cash management services.
Mission Statement: CommerceWest Bank will create a complete banking experience for each client, catering to businesses and their specific banking needs, while accommodating our clients and providing them high-quality, low stress and personally tailored banking and financial services.
Please visit www.cwbk.com to learn more about the bank. “BANK ON THE DIFFERENCE”
Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, loan production, balance sheet management, expanded net interest margin, the ability to control costs and expenses, interest rate changes, financial policies of the United States government and general economic conditions. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained in this release to reflect future events or developments.