10-24-13 9:00 AM EDT | Email Article

GOLETA, Calif., Oct. 24, 2013 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company), (Nasdaq:CWBC), parent company of Community West Bank (Bank), today reported net income increased to $2.6 million in the third quarter of 2013 (3Q13) compared to $2.1 million in the second quarter of 2013 (2Q13) and $613,000 in the third quarter a year ago (3Q12). In the first nine months of the year, Community West earned $5.9 million compared to $841,000 in the first nine months of 2012.

"Our third quarter results marked our fifth consecutive quarter of profitability, and showed meaningful progress with credit quality improvements, and continued net interest margin expansion," stated Martin E. Plourd, President and Chief Executive Officer. "Nonaccrual loans were down 26% compared to three months earlier, and our capital ratios continue to strengthen. As we look forward, we continue to focus on growing lending, strengthening operations and increasing our marketing outreach in the communities we serve."

3Q13 Financial Highlights

  • Net income of $2.6 million.
  • Earnings of $0.29 per diluted share.
  • Net interest margin expanded to 4.89% in 3Q13, an eight basis point improvement compared to 4.81% in 2Q13 and a 24 basis point improvement compared to 4.65% in 3Q12.
  • Nonaccrual loans declined 26.1% to $15.3 million at September 30, 2013, compared to $20.7 million at June 30, 2013 and decreased 54.2% compared to $33.3 million at September 30, 2012.
  • Net real estate owned (REO) and repossessed assets, excluding USDA/SBA guarantees, totaled $1.7 million at September 30, 2013, compared to $1.5 million three months earlier and $3.8 million a year earlier.
  • The total allowance for loan losses equaled 3.01% of total loans held for investment at September 30, 2013, compared to 3.14% at June 30, 2013 and 3.65% a year ago.
  • Community West Bank's capital ratios continue to strengthen - Total risk-based capital ratio was 17.16% and Tier 1 leverage ratio was 12.06% at September 30, 2013. Both ratios are well above the minimum levels of 12% and 9%, respectively, called for in the Bank's regulatory agreement.

Including $262,000 of dividends and accretion on preferred stock, the net income available to common stockholders was $2.4 million, or $0.29 per diluted share, in 3Q13 compared to $1.9 million, or $0.23 per diluted share, in 2Q13 and $360,000, or $0.06 per diluted share, in 3Q12. In the first nine months of the year, including $786,000 of dividends and accretion on preferred stock, the net income available to common stockholders was $5.1 million, or $0.60 per diluted share, compared to $56,000, or $0.01 per diluted share, in the first nine months of 2012. Book value per common share was $6.24 at September 30, 2013, compared to $5.98 at June 30, 2013 and $5.93 at September 30, 2012.

Credit Quality

"Our asset quality continues to strengthen on virtually every metric, with nonaccrual loans, REO and repossessed assets and net loan charge-off levels all declining compared to the prior quarter end," said Plourd. "Recoveries on several previously charged-off loans totaling $1.5 million, as well as substantial reserves already in place, allowed us to release $1.6 million in reserves in the third quarter, bringing the released reserve provision for the first nine months of 2013 to $2.8 million. Of the release, net loan recoveries for 3Q13 were $761,000. This compares to a $1.3 million increase in the reserve recorded in 3Q12 and a $5.2 million increase to the reserve recorded in the first nine months of 2012."

The allowance for loan losses totaled $11.7 million at September 30, 2013, equal to 3.01% of total loans held for investment, compared to 3.14% at June 30, 2013 and 3.65% a year ago.

Nonaccrual loans improved 26.1% to $15.3 million, or 3.39% of total loans at September 30, 2013 compared to $20.7 million, or 4.48% of total loans, three months earlier, and $33.3 million, or 7.01% of total loans, a year ago. The decrease in nonaccrual loans compared to the preceding quarter end was primarily due to the continuing efforts to work with borrowers and achieving successful resolutions, including payoffs and paydowns. The short-term effect of this is to decrease total Company loans.

Of the $15.3 million in nonaccrual loans, $5.3 million (34.9%) were manufactured housing loans, $3.2 million (20.8%) were commercial real estate loans, $4.0 million (26.3%) were commercial loans, $1.5 million (10.1%) were SBA loans, $693,000 (4.5%) were other installment loans and $522,000 (3.4%) were home equity line of credit loans.

REO and repossessed assets stood at $4.0 million at September 30, 2013 compared to $4.1 million three months earlier and $3.8 million a year earlier.  This amount consists of $3.5 million in REO and $500,000 from repossessed manufactured housing loans. REO consists of four properties for which $2.3 million is guaranteed by the SBA/USDA. Nonaccrual loans plus REO and repossessed assets, net of SBA/USDA guarantees, totaled $17.0 million, or 3.2% of total assets, at September 30, 2013 compared to $22.1million, or 4.1% of total assets, three months earlier and $37.1 million, or 6.7% of total assets, a year ago.  

Net charge-offs continued to improve with third quarter net loan recoveries of $761,000, compared to net charge-offs of $410,000 in 2Q13 and net charge-offs of $1.7 million in 3Q12.  

Income Statement

Community West's third quarter net interest income was $6.0 million compared to $5.9 million in 2Q13 and $6.1 million in 3Q12. The third quarter net interest margin improved eight basis points to 4.89%, compared to 4.81% in 2Q13 and expanded 24 basis points compared to 4.65% in 3Q12. In the first nine months of the year, the net interest margin expanded 19 basis points to 4.82% compared to 4.63% in the first nine months of 2012.

"Having a high-yielding mix of loan products and a deposit base that has more than 72% in low-cost core deposits continues to keep our net interest margin healthy and above peer levels," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. "Also, the debenture conversion near the end of 2Q13 decreased the cost of funds for 3Q13 and going forward. Our 3Q13 net interest margin of 4.89% is well above the average for the SNL U.S. Bank Index of 2.92% for 2Q13." 

Non-interest income was $684,000 in 3Q13 compared to $802,000 in 2Q13 and $1.1 million in 3Q12. In the first nine months of 2013 non-interest income was $2.3 million compared to $3.5 million in the first nine months of 2012, which included a $1.25 million gain on sale of SBA loans.

3Q13 operating or non-interest expenses stood at $5.6 million, the same as in 2Q13.  In 3Q12 non-interest expenses were $5.3 million.  Year-to-date non-interest expenses were $16.9 million compared to $16.6 million in the first nine months of 2012. Salaries and employee benefits increased due to the additions to staff, primarily lenders and credit administration, and the 2013 payroll tax increase.

Balance Sheet

Mr. Plourd commented, "While net loan growth has been flat in recent quarters, and down slightly due to moving several problem loans off the books, we are encouraged by new loan originations in the pipeline." Net loans were $439.4 million at September 30, 2013 compared to $448.4 million at June 30, 2013 and $459.9 million a year ago. Manufactured housing loans were down 4.4% from year ago levels to $172.1 million and represent 38.2% of total loans.  Commercial real estate loans outstanding were down 3.8% from year ago levels to $132.0 million at September 30, 2013 and comprise 29.3% of the total loan portfolio.  SBA loans decreased 15.8% from a year ago to $74.3 million and represent 16.5% of the total loan portfolio and commercial loans increased 33.0% from year ago levels to $45.6 million and represent 10.1% of the total loan portfolio.

"Non-interest-bearing deposit accounts increased 4.4% compared to the prior quarter end. We continue to change the deposit mix by focusing on growing low cost deposits and letting higher cost interest-bearing certificates of deposit run off," said Baltuskonis. 

Non-interest-bearing deposit accounts increased 4.4% to $55.5 million at September 30, 2013, compared to $53.1 million at June 30, 2013 and $54.5 million a year ago. Interest-bearing deposit accounts decreased to $254.0 million at the end of September, compared to $257.8 million at June 30, 2013 and $274.9 million a year ago. Total deposits were $431.1 million at September 30, 2013 compared to $434.9 million at June 30, 2013 and $460.0 million a year ago. Core deposits, defined as non-interest-bearing checking, interest-bearing checking, money market accounts, savings accounts and retail certificates of deposit totaled $355.3 million at September 30, 2013 compared to $356.7 million at June 31, 2013, and $377.2 million a year ago.

Total assets were $535.5 million at September 30, 2013 compared to $536.1 million at June 30, 2013, and $556.8 million a year ago. Stockholders' equity improved to $64.6 million at September 30, 2013, compared to $62.1 million at June 30, 2012 and $50.8 million a year ago. Book value per common share increased 4.3% to $6.24 at September 30, 2013, compared to $5.98 at the end of June, and increased 5.2% compared to $5.93 a year earlier. 

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 five full-service California branch banking offices, in Goleta, Santa Barbara, Santa Maria, Ventura and Westlake Village. The principal business activities of the Company are Relationship banking, Mortgage lending and SBA lending.

The Company is prohibited from paying dividends on its common or preferred stock without the prior approval of the Federal Reserve Board (FRB). The FRB has denied payment of the quarterly $195,000 dividend on the preferred shares that were due from May 15, 2012 to August 15, 2013. Such amounts continue to be accrued as incurred and deducted from capital.

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 Nine Months Ended 
  September 30, June 30, September 30, September 30, September 30,
  2013 2013 2012 2013 2012
           
Interest income          
Loans, including fees  $ 6,871  $ 6,850  $ 7,324  $ 20,515  $ 23,236
Investment securities and other  187  175  188  532  631
Total interest income  7,058  7,025  7,512  21,047  23,867
Interest expense          
Deposits  719  760  970  2,238  3,287
Other borrowings and convertible debt  328  401  433  1,136  1,386
Total interest expense  1,047  1,161  1,403  3,374  4,673
Net interest income  6,011  5,864  6,109  17,673  19,194
Provision for credit losses  (1,563)  (1,084)  1,293  (2,843)  5,176
Net interest income after provision for credit losses  7,574  6,948  4,816  20,516  14,018
Non-interest income          
Other loan fees  229  385  302  844  847
Gains from loan sales, net  62  111  366  334  1,521
Document processing fees  114  145  109  369  283
Service Charges  75  85  98  245  327
Loan servicing, net  70  24  105  169  180
Other  134  52  77  292  300
Total non-interest income  684  802  1,057  2,253  3,458
Non-interest expenses          
Salaries and employee benefits   3,114  3,371  2,899  9,999  8,526
Occupancy expense, net  452  458  451  1,365  1,365
Loan servicing and collection  511  347  366  1,111  1,257
Professional services  308  290  372  913  993
FDIC assessment  283  261  311  809  1,046
Advertising and marketing  94  187  59  374  218
Depreciation   78  74  78  226  231
Net loss on sales/write-downs of foreclosed real estate and repossessed assets  168  22  189  274  969
Data processing  128  125  127  403  407
Other   487  489  408  1,445  1,623
Total non-interest expenses  5,623  5,624  5,260  16,919  16,635
Income before provision for income taxes  2,635  2,126  613  5,850  841
Income tax expense  --  --  --  --  --
Net Income  $ 2,635  $ 2,126  $ 613  $ 5,850  $ 841
Dividends and accretion on preferred stock   262  262  253  786  785
Net income available to common stockholders  $ 2,373  $ 1,864  $ 360  $ 5,064  $ 56
Earnings per share:          
Basic  $ 0.30  $ 0.30  $ 0.06  $ 0.75  $ 0.01
Diluted  $ 0.29  $ 0.23  $ 0.06  $ 0.60  $ 0.01
           
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
         
  September 30, June 30, September 30, December 31,
  2013 2013 2012 2012
         
Cash and cash equivalents  $ 42,570  $ 34,072  $ 32,306  $ 27,891
Time and interest-earning deposits in other financial institutions  3,282  3,311  3,890  3,653
Investment securities  25,585  25,671  24,823  24,040
Loans:        
Commercial  45,623  42,658  34,291  37,266
Commercial real estate  132,034  138,393  137,230  126,676
SBA  74,327  78,648  88,257  85,957
Manufactured housing  172,126  172,365  180,105  177,391
Single family real estate  10,011  9,873  9,953  9,945
HELOC  15,616  17,036  19,018  17,852
Consumer  186  195  250  232
Mortgage loans held for sale  1,088  1,526  5,733  8,223
Deferred fees  88  112  156  123
Total loans  451,099  460,806  474,993  463,665
         
Loans, net        
 Held for sale  64,187  64,133  62,894  68,694
 Held for investment  386,912  396,673  412,099  394,971
 Less: Allowance  (11,654)  (12,456)  (15,055)  (14,464)
 Net held for investment  375,258  384,217  397,044  380,507
 NET LOANS  439,445  448,350  459,938  449,201
         
Other assets  24,599  24,694  35,839  27,316
         
 TOTAL ASSETS  $ 535,481  $ 536,098  $ 556,796  $ 532,101
         
Deposits        
 Non-interest-bearing demand  $ 55,462  $ 53,124  $ 54,466  $ 53,605
 Interest-bearing demand  253,978  257,785  274,894  269,466
 Savings  16,176  16,273  16,443  16,351
 CDs over 100K  92,351  94,397  98,362  80,710
 CDs under 100K  13,124  13,292  15,801  14,088
Total Deposits  431,091  434,871  459,966  434,220
Other borrowings  35,442  35,667  41,852  41,852
Other liabilities  4,300  3,474  4,165  2,980
 TOTAL LIABILITIES  470,833  474,012  505,983  479,052
         
Stockholders' equity  64,648  62,086  50,813  53,049
         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 535,481  $ 536,098  $ 556,796  $ 532,101
         
Shares outstanding  7,865  7,800  5,990  5,995
         
Book value per common share  $ 6.24  $ 5.98  $ 5.93  $ 6.29
         
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
 Quarter EndedQuarter EndedQuarter EndedNine Months Ended
PERFORMANCE MEASURES AND RATIOSSep. 30, 2013Jun. 30, 2013Sep. 30, 2012Sep. 30, 2013Sep. 30, 2012
Return on average common equity  21.91% 21.15% 6.89% 18.62% 4.72%
Return on average assets  1.95% 1.60% 0.43% 1.47% 0.28%
Efficiency ratio 83.99% 84.37% 73.40% 84.91% 73.44%
Net interest margin 4.89% 4.81% 4.65% 4.82% 4.63%
           
 Quarter EndedQuarter EndedQuarter EndedNine Months Ended
AVERAGE BALANCESSep. 30, 2013Jun. 30, 2013Sep. 30, 2012Sep. 30, 2013Sep. 30, 2012
Average assets  $ 535,552  $ 530,607  $ 564,609  $ 530,284  $ 593,091
Average earning assets  487,755  489,278  522,819  489,762  553,382
Average total loans  455,646  456,783  484,944  457,705  511,646
Average deposits  432,725  430,770  469,236  429,977  489,888
Average equity (including preferred stock)  63,214  55,632  50,796  57,439  50,789
Average common equity (excluding preferred stock)  47,716  40,201  35,564  42,007  35,632
           
EQUITY ANALYSISSep. 30, 2013Jun. 30, 2013Sep. 30, 2012    
Total equity  $ 64,648  $ 62,086  $ 50,813    
Less: senior preferred stock  15,542  15,475  15,275    
Total common equity  $ 49,106  $ 46,611  $ 35,538    
           
Common stock outstanding  7,866  7,800  5,990    
Book value per common share  $ 6.24  $ 5.98  $ 5.93    
           
ASSET QUALITYSep. 30, 2013Jun. 30, 2013Sep. 30, 2012    
Nonaccrual loans  $ 15,277  $ 20,660  $ 33,320    
Nonaccrual loans/total loans 3.39% 4.48% 7.01%    
REO and repossessed assets  $ 3,975  $ 4,100  $ 3,761    
Less: SBA/USDA-guaranteed amounts 2,282 2,640 0    
           
Net REO and repossessed assets  $ 1,693  $ 1,460  $ 3,761    
Nonaccrual loans plus net REO 16,970 22,120 37,081    
Nonaccrual loans plus net REO/total assets 3.17% 4.13% 6.66%    
Net loan charge-offs in the quarter  $ (761)  $ 410  $ 1,684    
Net charge-offs in the quarter/total loans  -0.17% 0.09% 0.35%    
           
Allowance for loan losses  $ 11,654  $ 12,456  $ 15,055    
Plus: Reserve for undisbursed loan commitments  73  76  127    
Total allowance for credit losses  $ 11,727  $ 12,532  $ 15,182    
Total allowance for loan losses/total loans held for investment 3.01% 3.14% 3.65%    
Total allowance for loan losses/nonaccrual loans 76.28% 60.29% 45.18%    
           
Community West Bancshares          
Tier 1 leverage ratio 12.10% 11.71% 8.98%    
Tier 1 risk-based capital ratio 16.05% 15.00% 11.59%    
Total risk-based capital ratio 17.68% 16.68% 14.66%    
           
Community West Bank          
Tier 1 leverage ratio 12.06% 11.65% 9.84%    
Tier 1 risk-based capital ratio 15.89% 14.83% 12.62%    
Total risk-based capital ratio 17.16% 16.10% 13.89%    
           
INTEREST SPREAD ANALYSISSep. 30, 2013Jun. 30, 2013Sep. 30, 2012    
Yield on interest-bearing deposits 0.76% 0.80% 0.93%    
Yield on total loans 5.98% 6.01% 6.01%    
Yield on investments 2.56% 2.40% 2.22%    
Yield on earning assets 5.74% 5.76% 5.72%    
           
Cost of deposits 0.66% 0.71% 0.82%    
Cost of FHLB advances 2.93% 2.93% 2.93%    
Cost of interest-bearing liabilities 1.01% 1.11% 1.22%    
CONTACT: Charles G. Baltuskonis, EVP & CFO
         805.692.5821
         www.communitywestbank.com
GlobeNewswire, Inc. 2013
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Morningstar - 2013/10/24 - Community West Bancshares Earns $2.6 Million in Third Quarter Highlighted by 26% Decline in Nonaccrual Loans
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