Community West Bancshares Achieves Profitability and Earns $613,000 in Third Quarter, Results Highlight Success of Operational Restructuring Plan
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.
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.
“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.
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|
|(in 000's, except per share data)|
|Three Months Ended||Nine Months Ended|
|September 30,||June 30,||September 30,||September 30,||September 30,|
|Investment securities and other||188||204||268||631||825|
|Total interest income||7,512||8,034||8,768||23,867||27,234|
|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
|Other loan fees||302||295||345||847||986|
|Gain on loan sales||366||58||104||1,521||271|
|Total non-interest income||1,057||513||801||3,458||2,354|
|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|
Loss on sale and write-down of foreclosed real estate and repossessed assets
|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
|Earnings (loss) per common share:|
|COMMUNITY WEST BANCSHARES|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|(in 000's, except per share data)|
|September 30,||December 31,||September 30,|
|Cash and cash equivalents||$||32,306||$||22,572||$||11,127|
|Interest-earning deposits in other financial institutions||3,890||347||240|
|Commercial real estate||137,230||168,812||172,211|
|Single family real estate||9,953||11,789||11,158|
|Mortgage loans held for sale||5,733||3,179||1,912|
|Held for sale||62,894||77,303||79,265|
|Held for investment||412,099||470,683||484,838|
|Net held for investment||397,044||455,413||470,589|
|CDs over 100K||98,362||128,254||123,379|
|CDs under 100K||15,801||23,889||30,507|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|Book value per common share||$||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||%|
|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 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 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|
|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/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
Community West Bancshares
Charles G. Baltuskonis, EVP & CFO, 805-692-5821