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Community West Bancshares Achieves Profitability and Earns $613,000 in Third Quarter, Results Highlight Success of Operational Restructuring Plan

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GOLETA, Calif.--(BUSINESS WIRE)--

Community West Bancshares (Community West or the Company), (NASDAQ: CWBC), parent company of Community West Bank (Bank), today reported net income of $613,000 in the third quarter of 2012 (3Q12) compared to a net loss of $591,000 in the second quarter of 2012 (2Q12) and a net loss of $2.3 million in the third quarter a year ago (3Q11). In the first nine months of 2012, Community West reported net income of $841,000 compared to a net loss of $1.9 million in the first nine months a year ago.

“We continued to make meaningful progress with strengthening the balance sheet and returning the organization to sustainable profitability during the third quarter, with strong net interest income and improved operating efficiencies,” stated Martin E. Plourd, President and Chief Executive Officer. “Our efforts have been focused on refining our core banking strategy while streamlining the Company's balance sheet and diligently working to improve asset quality and reduce problem assets.”

3Q12 Financial Highlights

  • Net interest margin was 4.65% in 3Q12, compared to 4.78% in 2Q12 and up from 4.38% in 3Q11.
  • Nonaccrual loans were $33.3 million, or 7.0% of total loans at September 30, 2012, up slightly from $32.8 million, or 6.7% of total loans at June 30, 2012.
  • Net real estate owned (REO) and repossessed assets, after subtracting the SBA guarantee, was $3.8 million at September 30, 2012 compared to $2.1 million three months earlier and $4.8 million a year earlier.
  • The total allowance for loan losses equaled 3.65% of total loans held for investment at September 30, 2012, compared to 3.59% at June 30, 2012 and 2.94% a year ago.
  • Community West Bank's capital ratios continue to strengthen - Total risk-based capital ratio was 13.89% and Tier 1 leverage ratio was 9.84% at September 30, 2012, an increase compared to Total risk-based capital ratio of 13.41% and Tier 1 leverage ratio of 9.38% at June 30, 2012. The Bank's regulatory agreement requires that ratios of 12% and 9%, respectively, be maintained.

Including $253,000 of dividends and accretion on preferred stock, the net income applicable to common stockholders in 3Q12 was $360,000, or $0.06 per diluted share, compared to a net loss applicable to common stockholders in 2Q12 of $859,000, or $0.14 per diluted share, and a net loss applicable to common stockholders in 3Q11 of $2.6 million, or $0.43 per diluted share. Book value per common share was $5.93 at September 30, 2012, compared to $5.87 at June 30, 2012 and $7.41 at September 30, 2011.

Credit Quality

Community West's loan loss provision was $1.3 million in 3Q12 compared to $1.9 million in the preceding quarter and $4.5 million in 3Q11. The allowance for loan losses totaled $15.1 million at September 30, 2012, equal to 3.65% of total loans held for investment, compared to 3.59% at June 30, 2012 and 2.94% at September 30, 2011.

Nonaccrual loans totaled $33.3 million, or 7.0% of total loans at September 30, 2012 compared to $32.8 million, or 6.7% of total loans, at June 30, 2012, and $36.6 million, or 6.5% of total loans, a year ago.

Of the $33.3 million in nonaccrual loans, $20.1 million (60.3%) were commercial real estate loans, $1.3 million (3.9%) were SBA loans, $9.0 million, (26.9%) were manufactured housing loans, $2.0 million (6.1%) were commercial loans, $656,000 (2.0%) were home equity line of credit loans and $289,000 (0.87%) were other installment loans.

REO and repossessed assets was $3.8 million at September 30, 2012 compared to $2.1 million three months earlier and $4.8 million a year earlier. “As we move troubled real estate loans through the foreclosure process, we are taking ownership and facilitating the sales of these properties,” Plourd said.

Nonaccrual loans plus net REO and repossessed assets totaled $37.1 million, or 6.7% of total assets, at September 30, 2012 compared to $34.9 million, or 6.1% of total assets, three months earlier and $41.4 million, or 6.4% of total assets, a year ago. Net charge-offs totaled $1.7 million in 3Q12, compared to $1.2 million in 2Q12 and $5.5 million in 3Q11.

Income Statement Review

Third quarter net interest income was $6.1 million compared to $6.6 million in 2Q12 and $6.8 million in 3Q11. In the first nine months of 2012, net interest income was $19.2 million compared to $20.9 million in the first nine months of 2011. The third quarter net interest margin was 4.65%, compared to 4.78% in 2Q12 and 4.38% in 3Q11. In the first nine months of 2012, the net interest margin increased 14 basis points to 4.63% compared to 4.49% in the first nine months of 2011 as fewer loans continue to be placed on nonaccrual in 2012.

Non-interest income increased to $1.1 million in 3Q12 primarily due to increases in loan sale gains and servicing income. Non-interest income was $513,000 in 2Q12 and $801,000 in 3Q11. In the first nine months of 2012, non-interest income was $3.5 million compared to $2.4 million in the first nine months of 2011. Year-to-date non-interest income included $1.5 million gains on sales of loans.

Third quarter non-interest expenses decreased 8.7% to $5.3 million when compared to $5.8 million in 2Q12 and decreased 24.7% when compared to $7.0 million in 3Q11. 2Q12 non-interest expense included a FHLB advance prepayment fee of $431,000. In the first nine months of 2012, non-interest expenses decreased 7.1% to $16.6 million compared to $17.9 million in the first nine months of 2011. The decrease in non-interest expenses for the year to date period is in part due to the decline in costs associated with other real estate owned, which declined 52.0% to $969,000 in the first nine months of the year, compared to $2.0 million in the same period a year earlier.

Balance Sheet

“We continue to let higher interest-bearing certificates of deposit run off as we focus our efforts on growing lower-cost core deposits,” said Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer. “This is part of our ongoing effort to strengthen the Company and its core banking strategy, which we have been working on throughout the year.”

Net loans were $459.9 million at September 30, 2012 compared to $477.2 million at June 30, 2012 and $549.9 million a year ago. Commercial real estate loans outstanding were down 20.3% from year ago levels to $137.2 million at September 30, 2012 and comprise 28.9% of the total loan portfolio. Manufactured housing loans were down 5.6% from year ago levels to $180.1 million and represent 37.9% of total loans. SBA loans decreased 26.3% from a year ago to $88.3 million and represent 18.6% of the total loan portfolio and commercial loans were down 27.4% from year ago levels to $34.3 million and represent 7.2% of the total loan portfolio.

Non-interest-bearing deposit accounts increased 7.4% to $54.5 million at September 30, 2012 compared to $50.7 million at September 30, 2011. Interest-bearing accounts decreased to $274.9 million at the end of September, compared to $282.7 million a year ago. Total deposits were $460.0 million at September 30, 2012 compared to $478.3 million at June 30, 2012, and $507.5 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 $377.2 million at September 30, 2012 compared to $396.8 million at September 30, 2011.

Total assets were $556.8 million at September 30, 2012 compared to $573.0 million at June 30, 2012, and $643.2 million a year ago. Stockholders' equity was $50.8 million at September 30, 2012, compared to $50.4 million at June 30, 2012 and $59.4 million at September 30, 2011.

Among the actions that will require prior Federal Reserve Board (FRB) approval, the Company will not be allowed to pay any dividends on its common or preferred. The FRB has denied approving payment of the dividends in the preferred shares. $195,000 was due on each of May 15, 2012 and August 15, 2012. Such amounts continue to be accrued as incurred and deducted from capital.

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   Nine Months Ended
September 30,   June 30,   September 30, September 30, September 30,
2012 2012 2011 2012 2011
 
Interest income
Loans $ 7,324 $ 7,830 $ 8,500 $ 23,236 $ 26,409
Investment securities and other   188   204     268     631   825  
Total interest income   7,512   8,034     8,768     23,867   27,234  
Interest expense
Deposits 970 1,052 1,414 3,287 4,556
Other borrowings and convertible debentures   433   425     575     1,386   1,744  
Total interest expense   1,403   1,477     1,989     4,673   6,300  
Net interest income 6,109 6,557 6,779 19,194 20,934
Provision for loan losses   1,293   1,900     4,511     5,176   8,651  

Net interest income after provision for loan losses

4,816 4,657 2,268 14,018 12,283
Non-interest income
Other loan fees 302 295 345 847 986
Gain on loan sales 366 58 104 1,521 271
Other   389   160     352     1,090   1,097  
Total non-interest income   1,057   513     801     3,458   2,354  
Non-interest expenses
Salaries and employee benefits 2,899 2,742 3,079 8,526 8,895
Occupancy and equipment expenses 451 419 487 1,365 1,486
FDIC assessment 311 309 217 1,046 741
Professional services 372 296 306 993 757

Loss on sale and write-down of foreclosed real estate and repossessed assets

189 371 1,361 969 2,019
Other operating expenses   1,038   1,624     1,535     3,736   4,011  
Total non-interest expenses   5,260   5,761     6,985     16,635   17,909  
Income (loss) before income taxes 613 (591 ) (3,916 ) 841 (3,272 )
Benefit for income taxes   -   -     (1,609 )   -   (1,340 )
 
NET INCOME (LOSS) $ 613 $ (591 ) $ (2,307 ) $ 841 $ (1,932 )
 
Dividends and accretion on preferred stock   253   268     261     785   785  
 

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS

$ 360 $ (859 ) $ (2,568 ) $ 56 $ (2,717 )
 
Earnings (loss) per common share:
Basic $ 0.06 $ (0.14 ) $ (0.43 ) $ 0.01 $ (0.45 )
Diluted $ 0.06 $ (0.14 ) $ (0.43 ) $ 0.01 $ (0.45 )

 
COMMUNITY WEST BANCSHARES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in 000's, except per share data)
     
September 30, December 31, September 30,
2012 2011 2011
 
Cash and cash equivalents $ 32,306 $ 22,572 $ 11,127
Interest-earning deposits in other financial institutions 3,890 347 240
Investment securities 24,823 38,923 39,640
Loans:
Commercial 34,291 42,058 47,252
Commercial real estate 137,230 168,812 172,211
SBA 88,257 111,786 119,750
Manufactured housing 180,105 189,331 190,699
Single family real estate 9,953 11,789 11,158
HELOC 19,018 20,719 20,555
Consumer 406 312 566
Mortgage loans held for sale   5,733     3,179     1,912  
Total loans 474,993 547,986 564,103
 
Loans, net
Held for sale   62,894     77,303     79,265  
Held for investment 412,099 470,683 484,838
Less: Allowance   (15,055 )   (15,270 )   (14,249 )
Net held for investment   397,044     455,413     470,589  
NET LOANS   459,938     532,716     549,854  
 
Other assets   35,839     38,790     42,295  
 
TOTAL ASSETS $ 556,796   $ 633,348   $ 643,156  
 
Deposits
Non-interest-bearing $ 54,466 $ 49,894 $ 50,716
Interest-bearing 274,894 289,796 282,745
Savings 16,443 19,429 20,189
CDs over 100K 98,362 128,254 123,379
CDs under 100K   15,801     23,889     30,507  
Total Deposits 459,966 511,262 507,536
Other borrowings 41,852 68,852 72,852
Other liabilities   4,165     2,608     3,399  
TOTAL LIABILITIES 505,983 582,722 583,787
 
Stockholders' equity   50,813     50,626     59,369  
 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 556,796   $ 633,348   $ 643,156  
 
Shares outstanding 5,990 5,990 5,990
 
Book value per common share $ 5.93 $ 5.94 $ 7.41

 
ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands except per share amounts)(Unaudited)
 
  Quarter Ended   Quarter Ended   Quarter Ended   Nine Months Ended
PERFORMANCE MEASURES AND RATIOS Sep. 30, 2012 Jun. 30, 2012 Sep. 30, 2011 Sep. 30, 2012   Sep. 30, 2011
Return on average common equity 6.89 % -6.71 % -19.58 % 4.72 % -5.41 %
Return on average assets 0.43 % -0.41 % -1.43 % 0.28 % -0.39 %
Efficiency ratio 73.40 % 81.49 % 92.15 % 73.44 % 76.90 %
Net interest margin 4.65 % 4.78 % 4.38 % 4.63 % 4.49 %
 
Quarter Ended Quarter Ended Quarter Ended Nine Months Ended
AVERAGE BALANCES Sep. 30, 2012 Jun. 30, 2012 Sep. 30, 2011 Sep. 30, 2012 Sep. 30, 2011
Average assets $ 564,609 $ 583,443 $ 646,336 $ 593,091 $ 659,232
Average earning assets 522,819 551,239 614,417 553,382 622,728
Average total loans 484,944 509,505 567,149 511,646 576,055
Average deposits 469,236 489,035 509,667 489,888 522,179
Average equity (including preferred stock) 50,796 50,360 62,104 50,789 62,551
Average common equity (excluding preferred stock) 35,564 35,220 47,140 35,632 47,655
 
EQUITY ANALYSIS Sep. 30, 2012 Jun. 30, 2012 Sep. 30, 2011
Total equity $ 50,813 $ 50,378 $ 59,369
Less: senior preferred stock   15,275     15,214     15,007  
Total common equity $ 35,538 $ 35,164 $ 44,362
 
Common stock outstanding 5,990 5,990 5,990
Book value per common share $ 5.93 $ 5.87 $ 7.41
 
ASSET QUALITY Sep. 30, 2012 Jun. 30, 2012 Sep. 30, 2011
Nonaccrual loans $ 33,320 $ 32,790 $ 36,642
Nonaccrual loans/total loans 7.01 % 6.66 % 6.50 %
REO and repossessed assets $ 3,761 $ 2,292 $ 6,427
Less: SBA-guaranteed amounts   0     230   $ 1,662  
 
Net REO and repossessed assets $ 3,761 $ 2,062 $ 4,765
Nonaccrual loans plus net REO 37,081 34,852 $ 41,407
Nonaccrual loans plus net REO/total assets 6.66 % 6.08 % 6.44 %
Net loan charge-offs in the quarter $ 1,684 $ 1,159 $ 5,499
Net charge-offs in the quarter/total loans 0.35 % 0.24 % 0.97 %
 
Allowance for loan losses $ 15,055 $ 15,446 $ 14,249
Plus: Reserve for undisbursed loan commitments   127     181     591  
Total allowance for credit losses $ 15,182 $ 15,627 $ 14,840
Total allowance for loan losses/total loans held for investment 3.65 % 3.59 % 2.94 %
Total allowance for loan losses/nonperforming loans 45.18 % 47.11 % 38.89 %
 
Community West Bancshares
Tier 1 leverage ratio 8.98 % 8.62 % 9.15 %
Tier 1 risk-based capital ratio 11.59 % 11.24 % 11.50 %
Total risk-based capital ratio 14.66 % 14.27 % 14.30 %
 
Community West Bank
Tier 1 leverage ratio 9.84 % 9.38 % 9.45 %
Tier 1 risk-based capital ratio 12.62 % 12.13 % 11.88 %
Total risk-based capital ratio 13.89 % 13.41 % 13.15 %
 
INTEREST SPREAD ANALYSIS Sep. 30, 2012 Jun. 30, 2012 Sep. 30, 2011
Yield on interest-bearing deposits 0.93 % 0.97 % 1.22 %
Yield on total loans 6.01 % 6.18 % 5.95 %
Yield on investments 2.22 % 2.25 % 2.30 %
Yield on earning assets 5.72 % 5.86 % 5.66 %
 
Cost of deposits 0.82 % 0.87 % 1.10 %
Cost of FHLB advances 2.93 % 2.93 % 2.43 %

Cost of interest-bearing liabilities

1.22

%

1.24

%

1.49

%

Community West Bancshares
Charles G. Baltuskonis, EVP & CFO, 805-692-5821
www.communitywestbank.com

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