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

By GlobeNewswire,  January 28, 2014, 09:00:00 AM EDT


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.com
Source: Community West Bancshares

This article appears in: News Headlines

Referenced Stocks: CWBC


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