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.com