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Community West Bancshares Earns $1.1 Million in First Quarter, Nonaccrual Loans Decrease 48% Compared to a Year Ago

GOLETA, Calif., April 25, 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 33.0% to $1.1 million in the first quarter of 2013 (1Q13) compared to $819,000 in the first quarter a year ago (1Q12). Community West earned $2.3 million in fourth quarter of 2012 (4Q12).

"We were profitable for the third consecutive quarter and have worked diligently, doing what we set out to do, to improve the overall health of the Company," stated Martin E. Plourd, President and Chief Executive Officer. "Credit quality metrics improved substantially, with total nonaccrual loans at nearly half the levels that they were a year ago, and our capital ratios continue to improve. Now that profitability appears sustainable, we can sharpen our focus on responsible balance sheet growth."

1Q13 Financial Highlights

  • Net income of $1.1 million.
  • Earnings of $0.11 per diluted share.
  • Net interest margin continued to be strong and was 4.78% in 1Q13, compared to 4.91% in 4Q12 and 4.48% in 1Q12.
  • Nonaccrual loans declined 12.0% to $19.7 million at March 31, 2013, compared to $22.4 million at December 31, 2012 and $38.3 million at March 31, 2012.
  • Net real estate owned (REO) and repossessed assets, after subtracting the USDA guarantee, totaled $1.9 million at March 31, 2013, the same as three months earlier. The net REO was $4.9 million at March 31, 2012.
  • The total allowance for loan losses equaled 3.54% of total loans held for investment at March 31, 2013, compared to 3.66% at December 31, 2012 and 3.19% a year ago. The quantitative historical loss allocation portion of the allowance calculation showed some improvement during 1Q13.
  • Community West Bank's capital ratios continue to strengthen - Total risk-based capital ratio was 15.63% and Tier 1 leverage ratio was 11.34% at March 31, 2013, an increase compared to a Total risk-based capital ratio of 15.27% and Tier 1 leverage ratio of 10.69% at December 31, 2012. The Bank's regulatory agreement requires that ratios of 12% and 9%, respectively, be maintained.

Including $262,000 of dividends and accretion on preferred stock, the net income available to common stockholders was $827,000, or $0.11 per diluted share, in 1Q13 compared to net income available to common stockholders of $2.1 million, or $0.26 per diluted share, in 4Q12 and net income available to common stockholders of $557,000, or $0.08 per diluted share, in 1Q12. Book value per common share was $6.41 at March 31, 2013, compared to $6.29 at December 31, 2012 and $6.01 at March 31, 2012.

Credit Quality

"Community West's credit costs continued to decline and were significantly below those of a year ago. As a result of this progress all of our key credit quality metrics have improved and our reserve levels remain substantial," said Plourd.

In the first quarter of 2013, $196,000 was taken as a credit to the loan loss provision. This compares to $895,000 taken as a credit to the loan loss provision in 4Q12 and a $2.0 million provision recorded in 1Q12.

The allowance for loan losses totaled $14.0 million at March 31, 2013, equal to 3.54% of total loans held for investment, compared to 3.66% at December 31, 2012 and 3.19% a year ago.

Nonaccrual loans totaled $19.7 million, or 4.32% of total loans at March 31, 2013 compared to $22.4 million, or 4.84% of total loans, at December 31, 2012, and $38.3 million, or 7.37% of total loans, a year ago. Of the $19.7 million in nonaccrual loans, $10.5 million (53.3%) were commercial real estate loans, $6.6 million (33.7%) were manufactured housing loans, $1.8 million (9.4%) were commercial loans, $348,000 (1.8%) were SBA loans, $228,000 (1.2%) were home equity line of credit loans and $117,000 (0.6%) were other installment loans.

REO and repossessed assets stood at $4.4 million at March 31, 2013 compared to $1.9 million three months earlier and $5.8 million a year earlier. This amount consists of $3.5 million REO and $900,000 from repossessed manufactured housing loans. REO consists of only one property for which $2.5 million is guaranteed by the USDA. Nonaccrual loans plus REO and repossessed assets, net of SBA/USDA guarantees, totaled $21.6 million, or 4.1% of total assets, at March 31, 2013 compared to $24.3 million, or 4.6% of total assets, three months earlier and $43.2 million, or 6.9% of total assets, a year ago.

Net charge-offs totaled $318,000 in 1Q13 compared to net recoveries of $304,000 in 4Q12 and net charge-offs of $2.5 million in 1Q12.

Income Statement

Community West's first quarter net interest income was $5.8 million compared to $6.2 million in 4Q12 and $6.5 million in 1Q12. The first quarter net interest margin improved 30 basis points to 4.78%, compared to 4.48% in 1Q12. The net interest margin was 4.91% in 4Q12. The margin remains strong and 4Q12 was positively impacted by one large interest recovery.

Non-interest income was $767,000 in 1Q13 compared to $761,000 in 4Q12 and $1.9 million in 1Q12. The non-interest income total for 1Q12 included $1.1 million in gains on sales of loans.

First quarter operating or non-interest expenses totaled $5.7 million compared to $5.5 million in 4Q12 and $5.6 million in 1Q12. Salaries and employee benefits were higher due to the increase in staff, primarily lenders and credit administration, and the payroll tax reinstatement.

Balance Sheet

Net loans were $442.4 million at March 31, 2013 compared to $449.2 million at December 31, 2012 and $504.6 million a year ago. Commercial real estate loans outstanding were down 19.7% from year ago levels to $132.0 million at March 31, 2013 and comprise 28.9% of the total loan portfolio. Manufactured housing loans were down 5.7% from year ago levels to $174.9 million and represent 38.3% of total loans. SBA loans decreased 16.7% from a year ago to $80.1 million and represent 17.6% of the total loan portfolio and commercial loans increased 1.0% from year ago levels to $40.3 million and represent 8.8% of the total loan portfolio.

"On the liability side of the balance sheet, our total deposits declined during the quarter as the Bank's balance sheet streamlining was managed and we continue to change the deposit mix by letting higher cost interest-bearing certificates of deposit run off," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer.

Non-interest-bearing deposit accounts were $48.9 million at March 31, 2013 compared to $53.6 million at December 31, 2012 and $55.0 million at March 31, 2012. Interest-bearing accounts decreased to $264.0 million at the end of March, compared to $269.5 million at December 31, 2012 and $291.5 million a year ago. Total deposits were $434.0 million at March 31, 2013 compared to $434.2 million at December 31, 2012 and $510.8 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 $359.2 million at March 31, 2013 compared to $368.9 million at December 31, 2012, and $402.8 million at March 31, 2012.

Total assets were $533.1 million at March 31, 2013 compared to $532.1 million at December 31, 2012, and $623.2 million a year ago. Stockholders' equity improved to $54.1 million at March 31, 2013, compared to $53.0 million at December 31, 2012 and $51.1 million at March 31, 2012.

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 denied the paying of the $195,000 dividend payments on the preferred shares that were due on May 15, 2012, August 15, 2012, November 15, 2012 and February 15, 2013. Such amounts continue to be accrued as incurred and deducted from capital.

On December 11, 2012, the U.S. Treasury sold its shares of the Company's perpetual preferred stock in a non-public offering as part of a modified Dutch auction. Such shares were all purchased by third parties unaffiliated with the Company. The Treasury continues to hold a warrant to purchase up to 521,158 shares of the Company's common stock at $4.49 per share.

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
INCOME STATEMENTS
(unaudited)
(in 000's, except per share data)
Three Months Ended
March 31, December 31, March 31,
2013 2012 2012
Interest income
Loans $ 6,794 $ 7,254 $ 8,082
Investment securities and other 170 188 239
Total interest income 6,964 7,442 8,321
Interest expense
Deposits 759 843 1,265
Other borrowings and convertible debentures 407 433 528
Total interest expense 1,166 1,276 1,793
Net interest income 5,798 6,166 6,528
Provision for loan losses (196) (895) 1,983
Net interest income after
provision for loan losses 5,994 7,061 4,545
Non-interest income
Other loan fees 230 277 250
Gain from loan sales, net 161 139 1,097
Other 376 345 541
Total non-interest income 767 761 1,888
Non-interest expenses
Salaries and employee benefits 3,514 3,026 2,885
Occupancy and equipment expenses 455 464 495
FDIC assessment 265 296 426
Professional services 315 491 325
Loss on sale and write-down of foreclosed real estate
and repossessed assets 84 71 409
Other operating expenses 1,039 1,142 1,074
Total non-interest expenses 5,672 5,490 5,614
Income before income taxes 1,089 2,332 819
Provision for income taxes -- -- --
NET INCOME $ 1,089 $ 2,332 $ 819
Dividends and accretion on preferred stock 262 263 262
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 827 $ 2,069 $ 557
Earnings per common share:
Basic $ 0.14 $ 0.35 $ 0.09
Diluted $ 0.11 $ 0.26 $ 0.08
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
March 31, December 31, March 31,
2013 2012 2012
Cash and cash equivalents $ 35,689 $ 27,891 $ 43,145
Time and interest-earning deposits in other financial institutions 3,537 3,653 5,403
Investment securities 23,902 24,040 32,146
Loans:
Commercial 40,311 37,266 39,906
Commercial real estate 132,009 126,676 164,437
SBA 80,123 85,957 96,239
Manufactured housing 174,923 177,391 185,539
Single family real estate 9,096 9,945 11,518
HELOC 17,318 17,852 20,527
Consumer 264 355 362
Mortgage loans held for sale 2,312 8,223 818
Total loans 456,356 463,665 519,346
Loans, net
Held for sale 61,753 68,694 58,460
Held for investment 394,603 394,971 460,886
Less: Allowance (13,950) (14,464) (14,705)
Net held for investment 380,653 380,507 446,181
NET LOANS 442,406 449,201 504,641
Other assets 27,589 27,316 37,890
TOTAL ASSETS $ 533,123 $ 532,101 $ 623,225
Deposits
Non-interest-bearing demand $ 48,920 $ 53,605 $ 54,986
Interest-bearing demand 264,044 269,466 291,529
Savings 16,621 16,351 19,579
CDs over 100K 90,708 80,710 121,993
CDs under 100K 13,726 14,088 22,712
Total Deposits 434,019 434,220 510,799
Other borrowings 41,735 41,852 58,852
Other liabilities 3,299 2,980 2,464
TOTAL LIABILITIES 479,053 479,052 572,115
Stockholders' equity 54,070 53,049 51,110
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 533,123 $ 532,101 $ 623,225
Shares outstanding 6,033 5,995 5,990
Book value per common share $ 6.41 $ 6.29 $ 6.01
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
Quarter Ended Quarter Ended Quarter Ended
PERFORMANCE MEASURES AND RATIOS Mar. 31, 2013 Dec. 31, 2012 Mar. 31, 2012
Return on average common equity 11.46% 25.52% 9.07%
Return on average assets 0.83% 1.71% 0.52%
Efficiency ratio 86.40% 79.26% 66.71%
Net interest margin 4.78% 4.91% 4.48%
Quarter Ended Quarter Ended Quarter Ended
AVERAGE BALANCES Mar. 31, 2013 Dec. 31, 2012 Mar. 31, 2012
Average assets $ 524,572 $ 544,847 $ 631,547
Average earning assets 492,304 499,855 586,399
Average total loans 460,741 466,401 540,763
Average deposits 426,367 447,827 511,634
Average equity (including preferred stock) 53,363 51,844 51,209
Average common equity (excluding preferred stock) 37,998 36,545 36,112
EQUITY ANALYSIS Mar. 31, 2013 Dec. 31, 2012 Mar. 31, 2012
Total equity $ 54,070 $ 53,049 $ 51,110
Less: senior preferred stock 15,408 15,341 15,141
Total common equity $ 38,662 $ 37,708 $ 35,969
Common stock outstanding 6,033 5,995 5,990
Book value per common share $ 6.41 $ 6.29 $ 6.01
ASSET QUALITY Mar. 31, 2013 Dec. 31, 2012 Mar. 31, 2012
Nonaccrual loans $ 19,707 $ 22,425 $ 38,290
Nonaccrual loans/total loans 4.32% 4.84% 7.37%
REO and repossessed assets $ 4,389 $ 1,889 $ 5,776
Less: SBA/USDA-guaranteed amounts 2,481 0 $ 844
Net REO and repossessed assets $ 1,908 $ 1,889 $ 4,932
Nonaccrual loans plus net REO 21,615 24,314 $ 43,222
Nonaccrual loans plus net REO/total assets 4.05% 4.57% 6.94%
Net loan charge-offs in the quarter $ 318 $ (304) $ 2,548
Net charge-offs in the quarter/total loans 0.07% -0.07% 0.49%
Allowance for loan losses $ 13,950 $ 14,464 $ 14,705
Plus: Reserve for undisbursed loan commitments 90 102 206
Total allowance for credit losses $ 14,040 $ 14,566 $ 14,911
Total allowance for loan losses/total loans held for investment 3.54% 3.66% 3.19%
Total allowance for loan losses/nonaccrual loans 70.79% 64.50% 38.40%
Community West Bancshares
Tier 1 leverage ratio 10.29% 9.72% 8.08%
Tier 1 risk-based capital ratio 13.12% 12.81% 10.61%
Total risk-based capital ratio 16.27% 15.98% 13.52%
Community West Bank
Tier 1 leverage ratio 11.34% 10.69% 8.52%
Tier 1 risk-based capital ratio 14.35% 13.99% 11.15%
Total risk-based capital ratio 15.63% 15.27% 12.43%
INTEREST SPREAD ANALYSIS Mar. 31, 2013 Dec. 31, 2012 Mar. 31, 2012
Yield on interest-bearing deposits 0.82% 0.85% 1.10%
Yield on total loans 5.98% 6.19% 6.01%
Yield on investments 2.44% 2.55% 2.23%
Yield on earning assets 5.74% 5.92% 5.71%
Cost of deposits 0.72% 0.75% 0.99%
Cost of FHLB advances 2.92% 2.94% 2.43%
Cost of interest-bearing liabilities 1.14% 1.17% 1.37%

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