CalWest Bancorp (OTCBB: CALW), the holding company for South County Bank N.A., has reported December 31, 2010 year end financials and second quarter results for 2011. Trends show improved net interest income after loan loss provisions, increased net income, reduced operating expenses, improved loan loss reserves, lower cost of funds and increased core deposits. The Company's year-to-date net loss was $694,000 for the six months ended June 30, 2011, compared to net loss of $3.7 million for the same six months ended June 30, 2010. This represents over a $3.0 million improvement over the prior year-to-date.
The Bank continues to improve credit quality metrics by improving asset quality, reducing expenses and remaining flexible in this changing economic environment. Our loan loss provision, net charge-offs, other credit costs and non-performing assets are all trending lower. Net income has also improved. This is a reflection of decreases in interest expense and loan loss provision expense. For the six months ending June 2011, net interest income after provisions was $2.2 million compared to a total of two thousand dollars ($2,000) for the same period for 2010.
The Board of Directors and Management have engaged strategic initiatives (even prior to entering into agreements with the bank regulators on January 20, 2011) to improve the overall financial stability of the Bank. As the Bank continues to weather the economic tsunami that fell upon the banking industry in 2008, CalWest Bancorp has been able to accomplish the following:
- Bank continues its Focus on Lower Cost of Funds. Non-interest bearing deposits grew from $38 million for the period ending June 2010 to $54 million for the same period for 2011. (42.1% positive increase).
- Net Interest Income Increased. Net interest income increased after loan loss provisions from a twelve month total of $1.58 million in 2008 to $2.2 million for a six month period of 2011. (annualized this is a 178% positive increase).
- Reduced Overall Non-interest Operating Expenses. Non-interest operating expenses were reduced from $10.1 million in 2008 to $3.6 million as of June 30, 2011. If annualized, this represents an expense reduction of approximately $3 million. (28.7% positive decrease).
- Liquidity continues at Historically High Levels. Liquidity is represented by cash and cash equivalents, marketable securities, and the availability of alternative funding sources. During these volatile economic times the Bank has elected to take a conservative approach to managing its securities. The securities portfolio for the most part is classified: “Held-to-Maturity”. This insulates the evaluation of the securities portfolio from any unfavorable rate swings in the market. It should be noted at present the securities portfolio shows an approximate “unrealized gain” in overall value exceeding $600,000.
- Decreased Loan Loss Provisions. Loan loss provisions for the six months ended June 30, 2011 decreased to $189,000 from $3.1 million in 2010 for the same period. (94% decrease in loan loss provision expense).
- Allowance for Loan and Lease (ALLL) Reserves. ALLL were $3.9 million, or 4.48% of total loans as of June 2011, compared to $3.2 million, or 2.63% of total loans at the end of June 2010. (a surplus).
- Cost of Funds Drop. Cost of Funds for June 2010 were 1.19% compared to 0.83% as of June 2011. (30.2% reduction in overall cost of funds).
- Salary/Benefits Declined. The Bank’s staffing has decreased from a high of 55 employees at the end of 2008 to the present level of 39 employees on a full-time equivalent basis. This has led to a reduction in overall salary and benefits from a high of $4.9 million at the end of 2008 to its present level of $1.5 million through June 2011. If annualized the Bank would have a total salary and benefits expense for 2011 of $3.0 million. (38.8% reduction).
- Bank is Vigilant. The Bank continues to experience higher expense rates in categories it does not control, (regulatory assessments, occupancy expense, Insurance, etc). It maintains a vigilant oversight of all other costs for further reductions going forward.
“In summary, we continue to work closely with all customers and communities to boost local growth, improve our customers' profitability and add significant value to these relationships. Additionally, the Board of Directors is focused strategically upon completing a capital raise which is expected to begin in the first quarter of 2012,” said Kent Falk, President.
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