Community West Bancshares Earns $3.1 Million in Fourth Quarter and $9.0 Million in 2013; Year Highlighted by Improved Credit Quality Metrics, Strong Loan Growth and Subsequent OCC Agreement Termination

GOLETA, Calif., Jan. 28, 2014 (GLOBE NEWSWIRE) -- Community West Bancshares (Community West or the Company) (Nasdaq:CWBC), parent company of Community West Bank (Bank), today reported net income was $3.1 million in the fourth quarter of 2013 (4Q13) compared to $2.6 million in the third quarter of 2013 (3Q13) and $2.3 million in the fourth quarter a year ago (4Q12). For the full year, Community West earned $9.0 million compared to $3.2 million a year ago. Community West's results for 4Q13 include a $2.8 million tax benefit as a result of the reversal of its deferred tax asset valuation allowance.

"Our operational restructuring plan is delivering favorable results, with our fourth quarter results marking our sixth consecutive quarter of profitability. Our team's success in executing this plan enabled us to end 2013 on a high note, with nonaccrual loans and net loan charge-offs declining substantially compared to 2012, while net REO and repossessed assets also decreased. As a result of this improvement in profitability and asset quality, we reversed the deferred tax asset valuation allowance in the fourth quarter, reflecting our expectation of sustainable profitability in the future," stated Martin E. Plourd, President and Chief Executive Officer. "Another highlight of the quarter was our balance sheet growth. The loan portfolio increased 5% during the quarter compared to three months earlier, and core deposits remained strong at 82% of total deposits. We continue to improve our capital ratios and credit quality metrics compared to a year ago, while maintaining a strong net interest margin. We will continue to increase our marketing outreach in the communities we serve while focusing on increasing shareholder value."

Yesterday, the Company announced that, as a result of improvement of its financial condition over the past 24 months, and the Bank's effective compliance with the Written Consent Agreement (Agreement), the Office of the Comptroller of the Currency (OCC), its primary regulator, has terminated its Agreement with Community West Bank entered into on January 26, 2012. Effective immediately, the Bank will no longer be subject to the terms and conditions of the Agreement. "The termination of our Agreement with the OCC is an independent confirmation of the improvements we have achieved over the past two years. This important milestone substantiates that our efforts to reduce problem assets, document the allowance for loan losses and return to profitability have been successful," said Plourd.

4Q13 Financial Highlights

  • Net income totaled $3.1 million.
  • Earnings were $0.34 per diluted share.
  • Net interest margin remained strong at 4.40% in 4Q13, compared to 4.54% in 3Q13 and 4.60% in 4Q12.
  • Nonaccrual loans were $16.8 million at December 31, 2013, compared to $15.3 million at September 30, 2013 and $22.4 million at December 31, 2012.
  • Net real estate owned (REO) and repossessed assets, excluding USDA/SBA guarantees, totaled $1.6 million at December 31, 2013, compared to $1.7 million three months earlier and $1.9 million a year earlier.
  • The total allowance for loan losses equaled 2.98% of total loans held for investment at December 31, 2013, compared to 3.01% at September 30, 2013 and 3.66% a year ago.
  • Community West Bank's capital ratios continue to strengthen - Total risk-based capital ratio was 16.84% and Tier 1 leverage ratio was 12.68% at December 31, 2013.

Including $253,000 of dividends and accretion on preferred stock, the net income available to common stockholders was $2.9 million, or $0.34 per diluted share, in 4Q13 compared to $2.4 million, or $0.29 per diluted share, in 3Q13 and $2.1 million, or $0.26 per diluted share, in 4Q12. In 2013, including $1.0 million of dividends and accretion on preferred stock, the net income available to common stockholders was $7.9 million, or $0.98 per diluted share, compared to $2.1 million, or $0.31 per diluted share, in 2012. Book value per common share was $6.60 at December 31, 2013, compared to $6.24 at September 30, 2013, and $6.29 at December 31, 2012.

On December 26, 2013, Community West announced that the Federal Reserve Board (FRB) approved its request for permission to pay outstanding, cumulative dividends on the Company's Series A Preferred Stock, which were deferred from May 15, 2012, through November 15, 2013. The $1.4 million in deferred dividend payments were accrued when due and were deducted from capital. The payment, along with the February 15, 2014 payment, are expected to be remitted on February 18, 2014. Now that Community West's Agreement has been terminated it expects to pay future dividends.

Credit Quality

"Even though credit quality metrics continue to improve substantially compared to a year ago, we decided to add $899,000 to our provision for loan losses to compensate for the growth in the loan portfolio," said Plourd. "In the preceding quarter, we released $1.6 million in reserves, following recoveries of previously charged-off loans of $1.5 million, and in 4Q12 we released $895,000 in reserves."

The allowance for loan losses totaled $12.2 million at December 31, 2013, equal to 2.98% of total loans held for investment, compared to 3.01% at September 30, 2013, and 3.66% a year ago. Nonaccrual loans were $16.8 million, or 3.55% of total loans at December 31, 2013, compared to $15.3 million, or 3.39% of total loans, three months earlier, and $22.4 million, or 4.84% of total loans, a year ago.

Of the $16.8 million in nonaccrual loans, $6.2 million (37.0%) were manufactured housing loans, $3.8 million (22.8%) were commercial loans, $3.7 million (21.8%) were commercial real estate loans, $1.8 million (10.7%) were SBA loans, $675,000 (4.0%) were single family real estate loans and $615,000 (3.7%) were home equity line of credit loans.

REO and repossessed assets totaled $3.8 million at December 31, 2013, compared to $4.0 million three months earlier and $1.9 million a year earlier. This amount consists of $3.5 million in REO and $300,000 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 $18.4 million, or 3.4% of total assets, at December 31, 2013, compared to $17.0 million, or 3.2% of total assets, three months earlier and $24.3 million, or 4.6% of total assets, a year ago.

Net charge-offs were $345,000 in 4Q13, compared to net loan recoveries of $761,000 in 3Q13 and net loan recoveries of $304,000 in 4Q12.

Income Statement

Community West's fourth quarter net interest income was $5.8 million compared to $6.0 million in 3Q13 and $6.2 million in 4Q12. For the full year, net interest income was $23.5 million compared to $25.4 million in 2012. The fourth quarter net interest margin remained healthy, and well above its peer group average, at 4.40%, compared to 4.54% in 3Q13 and 4.60% in 4Q12. In 2013, the net interest margin was 4.51% compared to 4.49% in 2012.

"Continued pressure on asset yields led to some margin compression during the fourth quarter. However, our margin remains strong primarily as a result of our higher than peer asset yields, which continue to keep our net interest margin in the mid-4% range," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. "New loans are being recorded at lower rates, but some of the margin decline in the last two quarters and in 4Q12 was due to the high cash balances in overnight funds which only earn 25 basis points. By the end of 2013, the Company returned to a more normal level of cash balances."

Non-interest income was $632,000 in 4Q13 compared to $661,000 in 3Q13 and $754,000 in 4Q12. In 2013, non-interest income was $2.8 million compared to $4.3 million in 2012, which included a $1.7 million gain on sale of SBA loans.

Operating or non-interest expenses improved to $5.2 million in 4Q13, compared to $5.6 million in 3Q13 and $5.5 million in 4Q12. In 2013, non-interest expenses were $22.1 million compared to $22.2 million in 2012. Salaries and employee benefits increased due to the additions to staff, primarily lenders and credit administration, but were more than offset by declining costs associated with foreclosed real estate.

Balance Sheet

"The loan pipeline has been active in recent quarters, with net loans increasing 5.1% at December 31, 2013, compared to three months earlier," said Plourd. Net loans were $462.0 million at December 31, 2013, compared to $439.4 million at September 30, 2013, and $449.2 million a year ago. Manufactured housing loans were down 3.0% from year ago levels to $172.1 million and represent 36.3% of total loans. Commercial real estate loans outstanding were up 12.6% from year ago levels to $142.7 million at December 31, 2013, and comprise 30.1% of the total loan portfolio. SBA loans decreased 17.0% from a year ago to $71.4 million and represent 15.0% of the total loan portfolio and commercial loans increased 67.5% from year ago levels to $62.4 million and represent 13.2% of the total loan portfolio.

Total deposits increased slightly to $436.1 million at December 31, 2013, compared to $431.1 million at September 30, 2013, and $434.2 million a year ago. Non-interest-bearing deposit accounts decreased slightly to $52.5 million at December 31, 2013, compared to $55.5 million at September 30, 2013, and $53.6 million a year ago. Interest-bearing deposit accounts increased 1.7% to $258.4 million at December 31, 2013, compared to $254.0 million three months earlier, but were down 4.1% compared to $269.5 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 $359.0 million at December 31, 2013, compared to $355.2 million at September 30, 2013, and $368.9 million a year ago.

Total assets increased moderately to $539.0 million at year end, compared to $535.5 million at September 30, 2013, and $532.1 million a year ago. Stockholders' equity improved to $67.6 million at December 31, 2013, compared to $64.6 million at September 30, 2012, and $53.0 million a year ago. Book value per common share increased 5.8% to $6.60 at December 31, 2013, compared to $6.24 at the end of September, and increased 4.9% compared to $6.29 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.

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 Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2013 2013 2012 2013 2012
Interest income
Loans, including fees $ 6,556 $ 6,871 $ 7,254 $ 27,071 $ 30,490
Investment securities and other 209 210 210 795 878
Total interest income 6,765 7,081 7,464 27,866 31,368
Interest expense
Deposits 678 719 842 2,916 4,130
Other borrowings and convertible debt 280 328 434 1,416 1,819
Total interest expense 958 1,047 1,276 4,332 5,949
Net interest income 5,807 6,034 6,188 23,534 25,419
Provision for credit losses 899 (1,563) (895) (1,944) 4,281
Net interest income after provision for credit losses 4,908 7,597 7,083 25,478 21,138
Non-interest income
Other loan fees 189 229 277 1,033 1,124
Gains from loan sales, net 27 62 139 361 1,660
Document processing fees 93 114 124 463 407
Service Charges 73 75 83 318 410
Loan servicing, net 29 70 88 198 268
Other 221 111 43 458 412
Total non-interest income 632 661 754 2,831 4,281
Non-interest expenses
Salaries and employee benefits 2,843 3,114 3,026 12,842 11,552
Occupancy expense, net 449 452 539 1,814 1,829
Loan servicing and collection 333 511 236 1,444 1,492
Professional services 306 308 491 1,219 1,484
FDIC assessment 238 283 296 1,046 1,342
Advertising and marketing 138 94 149 512 367
Depreciation 74 78 76 300 306
Net loss on sales/write-downs of foreclosed real estate and repossessed assets 113 168 71 388 1,161
Data processing 146 128 126 549 533
Other 576 487 495 2,021 2,180
Total non-interest expenses 5,216 5,623 5,505 22,135 22,246
Income before provision for income taxes 324 2,635 2,332 6,174 3,173
Income tax expense (2,812) -- -- (2,812) --
Net Income $ 3,136 $ 2,635 $ 2,332 $ 8,986 $ 3,173
Dividends and accretion on preferred stock 253 262 263 1,039 1,046
Net income available to common stockholders $ 2,883 $ 2,373 $ 2,069 $ 7,947 $ 2,127
Earnings per share:
Basic $ 0.37 $ 0.30 $ 0.35 $ 1.13 $ 0.36
Diluted $ 0.34 $ 0.29 $ 0.26 $ 0.98 $ 0.31
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
December 31, September 30, December 31,
2013 2013 2012
Cash and cash equivalents $ 1,472 $ 1,241 $ 1,128
Time and interest-earning deposits in other financial institutions 18,105 44,611 30,416
Investment securities 28,160 25,585 24,040
Loans:
Commercial 62,420 45,623 37,266
Commercial real estate 142,678 132,034 126,677
SBA 71,352 74,327 85,957
Manufactured housing 172,055 172,126 177,391
Single family real estate 10,150 10,007 9,939
HELOC 15,418 15,616 17,852
Consumer 184 186 232
Mortgage loans held for sale -- 1,088 8,223
Deferred fees (44) 92 128
Total loans 474,213 451,099 463,665
Loans, net
Held for sale 64,399 64,187 68,694
Held for investment 409,814 386,912 394,971
Less: Allowance (12,208) (11,654) (14,464)
Net held for investment 397,606 375,258 380,507
NET LOANS 462,005 439,445 449,201
Other assets 29,258 24,599 27,316
TOTAL ASSETS $ 539,000 $ 535,481 $ 532,101
Deposits
Non-interest-bearing demand $ 52,461 $ 55,462 $ 53,605
Interest-bearing demand 258,445 253,978 269,466
Savings 16,158 16,176 16,351
CDs over 100K 95,979 92,351 80,710
CDs under 100K 13,092 13,124 14,088
Total Deposits 436,135 431,091 434,220
Other borrowings 31,442 35,442 41,852
Other liabilities 3,867 4,300 2,980
TOTAL LIABILITIES 471,444 470,833 479,052
Stockholders' equity 67,556 64,648 53,049
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 539,000 $ 535,481 $ 532,101
Shares outstanding 7,867 7,865 5,995
Book value per common share $ 6.60 $ 6.24 $ 6.29
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts) (Unaudited)
Quarter Ended Quarter Ended Quarter Ended Twelve Months Ended
PERFORMANCE MEASURES AND RATIOS Dec. 31, 2013 Sep. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012
Return on average common equity 25.27% 21.91% 25.52% 20.50% 8.85%
Return on average assets 2.33% 1.95% 1.71% 1.69% 0.55%
Efficiency ratio 81.01% 83.99% 79.26% 83.96% 74.80%
Net interest margin 4.40% 4.54% 4.60% 4.51% 4.49%
Quarter Ended Quarter Ended Quarter Ended Twelve Months Ended
AVERAGE BALANCES Dec. 31, 2013 Sep. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012
Average assets $ 534,434 $ 535,552 $ 544,847 $ 531,338 $ 580,964
Average earning assets 523,706 526,717 535,537 521,870 566,603
Average total loans 458,270 455,646 466,401 457,847 500,273
Average deposits 431,862 432,725 447,827 430,452 479,315
Average equity (including preferred stock) 64,800 63,214 51,844 59,302 51,054
Average common equity (excluding preferred stock) 49,234 47,716 36,545 43,836 35,861
EQUITY ANALYSIS Dec. 31, 2013 Sep. 30, 2013 Dec. 31, 2012
Total equity $ 67,556 $ 64,648 $ 53,049
Less: senior preferred stock 15,600 15,542 15,341
Total common equity $ 51,956 $ 49,106 $ 37,708
Common stock outstanding 7,867 7,866 5,995
Book value per common share $ 6.60 $ 6.24 $ 6.29
ASSET QUALITY Dec. 31, 2013 Sep. 30, 2013 Dec. 31, 2012
Nonaccrual loans $ 16,837 $ 15,277 $ 22,425
Nonaccrual loans/total loans 3.55% 3.39% 4.84%
REO and repossessed assets $ 3,811 $ 3,975 $ 1,889
Less: SBA/USDA-guaranteed amounts 2,250 2,282 0
Net REO and repossessed assets $ 1,561 $ 1,693 $ 1,889
Nonaccrual loans plus net REO $ 18,398 $ 16,970 $ 24,314
Nonaccrual loans plus net REO/total assets 3.41% 3.17% 4.57%
Net loan charge-offs in the quarter $ 345 $ (761) $ (304)
Net charge-offs in the quarter/total loans 0.07% -0.17% -0.07%
Allowance for loan losses $ 12,208 $ 11,654 $ 14,464
Plus: Reserve for undisbursed loan commitments 68 73 102
Total allowance for credit losses $ 12,276 $ 11,727 $ 14,566
Total allowance for loan losses/total loans held for investment 2.98% 3.01% 3.66%
Total allowance for loan losses/nonaccrual loans 72.51% 76.28% 64.50%
Community West Bancshares
Tier 1 leverage ratio 12.68% 12.10% 9.72%
Tier 1 risk-based capital ratio 15.65% 16.05% 12.81%
Total risk-based capital ratio 17.26% 17.68% 15.98%
Community West Bank
Tier 1 leverage ratio 12.68% 12.06% 10.69%
Tier 1 risk-based capital ratio 15.57% 15.89% 13.99%
Total risk-based capital ratio 16.84% 17.16% 15.27%
INTEREST SPREAD ANALYSIS Dec. 31, 2013 Sep. 30, 2013 Dec. 31, 2012
Yield on total loans 5.68% 5.98% 6.19%
Yield on investments 2.37% 2.56% 2.54%
Yield on loans and investments 5.44% 5.74% 5.92%
Yield on interest-earning deposits 0.28% 0.23% 0.27%
Yield on earning assets 5.12% 5.33% 5.54%
Cost of interest-bearing deposits 0.71% 0.76% 0.85%
Cost of total deposits 0.62% 0.66% 0.75%
Cost of FHLB advances 2.87% 2.93% 2.93%
Cost of interest-bearing liabilities 0.92% 1.01% 1.17%
Certain amounts have been reclassified to conform to the current presentation, which may have changed the ratios for the affected periods

CONTACT: Charles G. Baltuskonis, EVP & CFO 805.692.5821 www.communitywestbank.comSource:Community West Bancshares