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 | |||||