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Community West Bancshares Earns $2.1 Million in Second Quarter

GOLETA, Calif., July 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 to $2.1 million in the second quarter of 2013 (2Q13) compared to $1.1 million in the first quarter of 2013 (1Q13) and a net loss of $591,000 in the second quarter a year ago (2Q12). In the first six months of the year, Community West earned $3.2 million compared to $228,000 in the first six months of 2012.

"We were profitable for the fourth consecutive quarter and have made progress with operating efficiencies while keeping a strong net interest margin," stated Martin E. Plourd, President and Chief Executive Officer. "Credit quality metrics have stabilized, with total nonaccrual loans at just over half the levels that they were as of March 31, 2012, and our capital ratios continue to strengthen. As we look forward, we continue to focus on growing the Bank operations and increasing our lending outreach in the communities we serve."

2Q13 Financial Highlights

  • Net income of $2.1 million.
  • Earnings of $0.23 per diluted share.
  • Net interest margin continued to be strong and was 4.81% in 2Q13, compared to 4.78% in both 1Q13 and 2Q12.
  • Nonaccrual loans were $20.7 million at June 30, 2013, compared to $19.7 million at March 31, 2013 and $32.8 million at June 30, 2012.
  • Net real estate owned (REO) and repossessed assets, after subtracting the USDA/SBA guarantees, totaled $1.5 million at June 30, 2013, compared to $1.9 million at March 31, 2013 and $2.1 million at June 30, 2012.
  • The total allowance for loan losses equaled 3.14% of total loans held for investment at June 30, 2013, compared to 3.54% at March 31, 2013 and 3.59% a year ago.
  • Community West Bank's capital ratios continue to strengthen - Total risk-based capital ratio was 16.10% and Tier 1 leverage ratio was 11.65% at June 30, 2013, an increase compared to a Total risk-based capital ratio of 15.63% and Tier 1 leverage ratio of 11.34% at March 31, 2013. 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 $1.9 million, or $0.23 per diluted share, in 2Q13 compared to net income available to common stockholders of $827,000, or $0.11 per diluted share, in 1Q13 and a net loss to common stockholders of $859,000, or $0.14 per diluted share, in 2Q12. Book value per common share was $5.98 at June 30, 2013, compared to $6.41 at March 31, 2013 and $5.87 at June 30, 2012. The decrease was attributable to the increased outstanding shares from Debenture conversions.

Credit Quality

"Community West's key credit quality metrics have improved over the last year, including further progress during the current quarter, while our reserve levels remain substantial," said Plourd. As a result of substantial reserves already in place representing 3.14% of total loans outstanding, as well as declining net charge-offs, Community West released $1.1 million in reserves during the second quarter of 2013 due to improved historical experience. This compares to $196,000 released in 1Q13 and a $1.9 million increase in the reserve recorded in 2Q12.

The allowance for loan losses totaled $12.5 million at June 30, 2013, equal to 3.14% of total loans held for investment, compared to 3.54% at March 31, 2013 and 3.59% a year ago.

Nonaccrual loans totaled $20.7 million, or 4.48% of total loans at June 30, 2013 compared to $19.7 million, or 4.32% of total loans, at March 31, 2013, and $32.8 million, or 6.66% of total loans, a year ago. The modest increase in nonaccrual loans compared to the preceding quarter end was primarily due to one loan relationship for $2.6 million placed on nonaccrual status near quarter end even though it was current on all payments and believed to be fully secured as of June 30, 2013.

Of the $20.7 million in nonaccrual loans, $11.7 million (56.8%) were commercial real estate loans, $5.8 million (28.1%) were manufactured housing loans, $1.8 million (8.6%) were SBA loans, $565,000 (2.7%) were commercial loans, $557,000 (2.7%) were other installment loans and $226,000 (1.1%) were home equity line of credit loans.

REO and repossessed assets stood at $4.1 million at June 30, 2013 compared to $4.4 million three months earlier and $2.3 million a year earlier. This amount consists of $3.6 million in REO and $500,000 from repossessed manufactured housing loans. REO consists of three properties for which $2.6 million is guaranteed by the SBA/USDA. Nonaccrual loans plus REO and repossessed assets, net of SBA/USDA guarantees, totaled $22.1 million, or 4.1% of total assets, at June 30, 2013 compared to $21.6 million, or 4.1% of total assets, three months earlier and $34.9 million, or 6.1% of total assets, a year ago.

Net charge-offs continued to improve and totaled $410,000 in 2Q13 compared to net charge-offs of $318,000 in 1Q13 and net charge-offs of $1.2 million in 2Q12.

Income Statement

Community West's second quarter net interest income was $5.9 million compared to $5.8 million in 1Q13 and $6.6 million in 2Q12. The second quarter net interest margin improved three basis points to 4.81%, compared to 4.78% in both 1Q13 and in 2Q12. In the first six months of the year, the net interest margin was 4.79% compared to 4.63% in the first six months of 2012.

Non-interest income was $802,000 in 2Q13 compared to $767,000 in 1Q13 and $513,000 in 2Q12. In the first six months of 2013 non-interest income was $1.6 million compared to $2.4 million in the first six months of 2012, which included a $1.2 million gain on sale of loans.

Second quarter operating or non-interest expenses improved to $5.6 million compared to $5.7 million in 1Q13 and $5.8 million in 2Q12. Year-to-date non-interest expenses were $11.3 million compared to $11.4 million in the first six 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

"While net loan growth has been flat in recent quarters, we are encouraged by new loan originations in the pipeline. We expect to see moderate loan growth in the second half of 2013," said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer.

Net loans were $448.4 million at June 30, 2013 compared to $442.4 million at March 31, 2013 and $477.2 million a year ago. Commercial real estate loans outstanding were down 4.4% from year ago levels to $138.4 million at June 30, 2013 and comprise 30.0% of the total loan portfolio. Manufactured housing loans were down 6.0% from year ago levels to $172.4 million and represent 37.4% of total loans. SBA loans decreased 13.6% from a year ago to $78.6 million and represent 17.1% of the total loan portfolio and commercial loans increased 13.9% from year ago levels to $42.7 million and represent 9.3% of the total loan portfolio.

"While total deposits were flat during the quarter, non-interest-bearing deposit accounts increased 8.6% 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 8.6% to $53.1 million at June 30, 2013 compared to $48.9 million three months earlier. Non-interest-bearing deposits were $51.3 million a year ago. Interest-bearing deposit accounts decreased to $257.8 million at the end of June, compared to $264.0 million at March 31, 2013 and $280.6 million a year ago. Total deposits were $434.9 million at June 30, 2013 compared to $434.0 million at March 31, 2013 and $478.3 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 $356.7 million at June 30, 2013 compared to $359.2 million at March 31, 2013, and $380.8 million a year ago.

Total assets were $536.1 million at June 30, 2013 compared to $533.1 million at March 31, 2013, and $573.0 million a year ago. Stockholders' equity improved to $62.1 million at June 30, 2013, compared to $54.1 million at March 31, 2012 and $50.4 million at June 30, 2012. Book value per common share was $5.98 at June 30, 2013, compared to $6.41 at March 31, 2013 and $5.87 at June 30, 2012.

Convertible Subordinated Debentures

On August 9, 2010, the Company completed an offering of $8,085,000 convertible subordinated debentures (Debentures). The Debentures pay interest at 9% until conversion, redemption or maturity and will mature on August 9, 2020. The Debentures may be redeemed by the Company after January 1, 2014. Prior to maturity or redemption, the Debentures were convertible into common stock at the election of the holder at $3.50 per share if converted on or prior to July 1, 2013 and, subsequently, at $4.50 per share between July 2, 2013 and July 1, 2016 and $6.00 per share from July 2, 2016 until maturity or redemption.

On or before June 30, 2013, $6,418,000 of the Debentures was converted into common stock, leaving a Debenture balance of $1,667,000 as of June 30, 2013. Common shares outstanding were 7,800,155 as of June 30, 2013.

On July 1, 2013, an additional $222,000 of the Debentures was converted into common stock, leaving a Debenture balance of $1,445,000 as of July 1, 2013. Common shares outstanding were 7,864,385 as of July 25, 2013.

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 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, February 15, 2013 and May 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. The Treasury also sold at auction on June 6, 2013 its warrant to purchase up to 521,158 shares of the Company's common stock at $4.49 per share.

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 Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2013 2013 2012 2013 2012
Interest income
Loans, including fees $ 6,850 $ 6,794 $ 7,830 $ 13,644 $ 15,912
Investment securities and other 175 170 204 345 443
Total interest income 7,025 6,964 8,034 13,989 16,355
Interest expense
Deposits 760 759 1,052 1,519 2,317
Other borrowings and convertible debt 401 407 425 808 953
Total interest expense 1,161 1,166 1,477 2,327 3,270
Net interest income 5,864 5,798 6,557 11,662 13,085
Provision for credit losses (1,084) (196) 1,900 (1,280) 3,883
Net interest income after provision for credit losses 6,948 5,994 4,657 12,942 9,202
Non-interest income
Other loan fees 385 230 295 615 545
Gains from loan sales, net 111 161 58 272 1,155
Document processing fees 145 110 82 255 174
Service Charges 85 85 109 170 229
Loan servicing, net 24 75 (76) 99 75
Other 52 106 45 158 223
Total non-interest income 802 767 513 1,569 2,401
Non-interest expenses
Salaries and employee benefits 3,371 3,514 2,742 6,885 5,627
Occupancy expense, net 458 455 419 913 914
Loan servicing and collection 347 253 422 600 891
Professional services 290 315 296 605 621
FDIC assessment 261 265 309 526 735
Advertising and marketing 187 93 102 280 159
Depreciation 74 74 76 148 153
Net loss on sales/write-downs of foreclosed real estate and repossessed assets 22 84 371 106 780
Data processing 125 150 145 275 280
Other 489 469 879 958 1,215
Total non-interest expenses 5,624 5,672 5,761 11,296 11,375
Income (loss) before provision for income taxes 2,126 1,089 (591) 3,215 228
Income tax expense -- -- -- -- --
Net Income (loss) $ 2,126 $ 1,089 $ (591) $ 3,215 $ 228
Dividends and accretion on preferred stock 262 262 268 524 530
Net income (loss) available to common stockholders $ 1,864 $ 827 $ (859) $ 2,691 $ (302)
Earnings (loss) per common share:
Basic $ 0.30 $ 0.14 $ (0.14) $ 0.44 $ (0.05)
Diluted $ 0.23 $ 0.11 $ (0.14) $ 0.35 $ (0.05)
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
June 30, March 31, June 30, December 31,
2013 2013 2012 2012
Cash and cash equivalents $ 34,072 $ 35,689 $ 28,438 $ 27,891
Time and interest-earning deposits in other financial institutions 3,311 3,537 4,187 3,653
Investment securities 25,671 23,902 29,474 24,040
Loans:
Commercial 42,658 40,311 37,464 37,266
Commercial real estate 138,393 132,009 144,799 126,676
SBA 78,648 80,123 91,036 85,957
Manufactured housing 172,365 174,923 183,343 177,391
Single family real estate 9,873 9,096 11,469 9,945
HELOC 17,036 17,318 20,490 17,852
Consumer 195 194 310 232
Mortgage loans held for sale 1,526 2,312 3,593 8,223
Deferred fees 112 70 160 123
Total loans 460,806 456,356 492,664 463,665
Loans, net
Held for sale 64,133 61,753 62,070 68,694
Held for investment 396,673 394,603 430,594 394,971
Less: Allowance (12,456) (13,950) (15,446) (14,464)
Net held for investment 384,217 380,653 415,148 380,507
NET LOANS 448,350 442,406 477,218 449,201
Other assets 24,694 27,589 33,696 27,316
TOTAL ASSETS $ 536,098 $ 533,123 $ 573,013 $ 532,101
Deposits
Non-interest-bearing demand $ 53,124 $ 48,920 $ 51,296 $ 53,605
Interest-bearing demand 257,785 264,044 280,639 269,466
Savings 16,273 16,621 16,128 16,351
CDs over 100K 94,397 90,708 113,407 80,710
CDs under 100K 13,292 13,726 16,841 14,088
Total deposits 434,871 434,019 478,311 434,220
Other borrowings 35,667 41,735 41,852 41,852
Other liabilities 3,474 3,299 2,472 2,980
TOTAL LIABILITIES 474,012 479,053 522,635 479,052
Stockholders' equity 62,086 54,070 50,378 53,049
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 536,098 $ 533,123 $ 573,013 $ 532,101
Shares outstanding 7,800 6,033 5,990 5,995
Book value per common share $ 5.98 $ 6.41 $ 5.87 $ 6.29
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
Quarter Ended Quarter Ended Quarter Ended Six Months Ended
PERFORMANCE MEASURES AND RATIOS Jun. 30, 2013 Mar. 31, 2013 Jun. 30, 2012 Jun. 30, 2013 Jun. 30, 2012
Return on average common equity 21.15% 11.46% -6.71% 16.57% 1.28%
Return on average assets 1.60% 0.83% -0.41% 1.22% 0.08%
Efficiency ratio 84.37% 86.40% 81.49% 85.38% 73.45%
Net interest margin 4.81% 4.78% 4.78% 4.79% 4.63%
Quarter Ended Quarter Ended Quarter Ended Six Months Ended
AVERAGE BALANCES Jun. 30, 2013 Mar. 31, 2013 Jun. 30, 2012 Jun. 30, 2013 Jun. 30, 2012
Average assets $ 530,607 $ 524,572 $ 583,443 $ 527,694 $ 607,487
Average earning assets 489,278 492,304 551,239 490,868 568,831
Average total loans 456,783 460,741 509,505 458,751 525,144
Average deposits 430,770 426,367 489,035 428,600 500,326
Average equity (including preferred stock) 55,632 53,363 50,360 54,170 50,785
Average common equity (excluding preferred stock) 40,201 37,998 35,220 38,805 35,667
EQUITY ANALYSIS Jun. 30, 2013 Mar. 31, 2013 Jun. 30, 2012
Total equity $ 62,086 $ 54,070 $ 50,378
Less: senior preferred stock 15,475 15,408 15,214
Total common equity $ 46,611 $ 38,662 $ 35,164
Common stock outstanding 7,800 6,033 5,990
Book value per common share $ 5.98 $ 6.41 $5.87
ASSET QUALITY Jun. 30, 2013 Mar. 31, 2013 Jun. 30, 2012
Nonaccrual loans $ 20,660 $ 19,707 $ 32,790
Nonaccrual loans/total loans 4.48% 4.32% 6.66%
REO and repossessed assets $ 4,100 $ 4,389 $ 2,292
Less: SBA/USDA-guaranteed amounts 2,640 2,481 $ 230
Net REO and repossessed assets $ 1,460 $ 1,908 $ 2,062
Nonaccrual loans plus net REO 22,120 21,615 $ 34,852
Nonaccrual loans plus net REO/total assets 4.13% 4.05% 6.08%
Net loan charge-offs in the quarter $ 410 $ 318 $ 1,159
Net charge-offs in the quarter/total loans 0.09% 0.07% 0.24%
Allowance for loan losses $ 12,456 $ 13,950 $ 15,446
Plus: Reserve for undisbursed loan commitments 76 90 181
Total allowance for credit losses $ 12,532 $ 14,040 $ 15,627
Total allowance for loan losses/total loans held for investment 3.14% 3.54% 3.59%
Total allowance for loan losses/nonaccrual loans 60.29% 70.79% 47.11%
Community West Bancshares
Tier 1 leverage ratio 11.71% 10.29% 8.62%
Tier 1 risk-based capital ratio 15.00% 13.12% 11.24%
Total risk-based capital ratio 16.68% 16.27% 14.27%
Community West Bank
Tier 1 leverage ratio 11.65% 11.34% 9.38%
Tier 1 risk-based capital ratio 14.83% 14.35% 12.13%
Total risk-based capital ratio 16.10% 15.63% 13.41%
INTEREST SPREAD ANALYSIS Jun. 30, 2013 Mar. 31, 2013 Jun. 30, 2012
Yield on interest-bearing deposits 0.80% 0.82% 0.97%
Yield on total loans 6.01% 5.98% 6.18%
Yield on investments 2.40% 2.44% 2.25%
Yield on earning assets 5.76% 5.74% 5.86%
Cost of deposits 0.80% 0.72% 0.87%
Cost of FHLB advances 2.93% 2.92% 2.93%
Cost of interest-bearing liabilities 1.11% 1.14% 1.24%

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