Community West Bancshares (CWBC, Financial) filed Quarterly Report for the period ended 2009-03-31.
Community West Bancshares is a bank holding company. Through its subsidiaries Goleta National Bank and Palomar Community Bank they are engaged in providing general banking services. They provide commercial and retail financial services including the acceptance of demand savings and time deposits and the origination of commercial U.S. Small Business Administration accounts receivable real estate construction home improvement short term consumer and other installment and term loans. Community West Bancshares has a market cap of $16.3 million; its shares were traded at around $2.76 with and P/S ratio of 0.3. Community West Bancshares had an annual average earning growth of 2.8% over the past 10 years.
Net interest income declined by $398,000 for the first quarter 2009 compared to 2008. Total interest income decreased $1.8 million, or 14.9%, for the first quarter 2009 compared to 2008. While average loan balances increased by $46.9 million, the margin on loans declined from 8.27% to 6.60% for the first quarter 2009 compared to 2008. Overall, the yield on interest earning assets declined from 7.95% for the first quarter 2008 to 6.31% for 2009. These declines were partly offset by lower interest expense which was $4.5 million for the first quarter 2009 compared to $5.9 million for the same period in 2008, a reduction of $1.4 million, also primarily due to lower rates paid on deposits and borrowings. The resulting net interest margin was 3.56% for the first quarter 2009 compared to 4.08% for 2008.
The provision for loan losses increased $11.9 million to $12.6 million for the first quarter 2009 compared to $673,000 for the first quarter 2008. The substantially higher comparable loan loss provision for the first quarter 2009 reflected the effect of increases in losses on specific credits as well as experienced loss frequency and severity on the provision calculation. During the first quarter 2009, the Company experienced significant deterioration and downgrades to specific loans in its portfolio, including net charge-offs of $6.5 million, generally related to the current economic circumstances. A major component of the allowance calculation relates to historical loan losses. The Company has experienced elevated levels of loan losses over the past four quarters thereby resulting in a significantly higher allowance requirement. The migration of the losses through the loan portfolio has resulted in a calculated increase in the allowance of $7.3 million at December 31, 2008 to $13.4 million at March 31, 2009. This increase is directly related to increased inherent loss in our loan portfolio and the effect of historical loan loss experience on our estimate of losses inherent in the portfolio as of the balance sheet date and does not necessarily reflect expected future losses. Non-performing loans significantly decreased from $16.9 million at December 31, 2008 to $8.7 million at March 31, 2009, due to a combination of charge-offs, upgrades and payoffs. While total past due loans increased from $12.0 million to $18.9 million over the same period, $7.4 million of this increase fell within the less than 60 days past due category.
Total non-interest income declined by $246,000 or 17.4%, for the first quarter 2009 compared to 2008. Non-interest income includes loan document fees, service charges on deposit accounts, gains on sale of loans, loan servicing fees and other revenues not derived from interest on earning assets. Other loan fees declined $279,000 due to lower referral fees on 504 loans and gain on loan sales declined $164,000 as the Bank did not sell SBA loans in the first quarter 2009. Net loan servicing increased by $156,000, primarily due to a valuation adjustment to the interest only strip as the prepayment speeds on SBA loans declined.
Total non-interest expenses increased by $627,000, or 12.1% for the first quarter 2009 compared to 2008. Although salaries and employee benefits and occupancy declined, other non-interest expense increased. These expenses include other loan expense related to the reserve for undisbursed loans, which increased $300,000 due to the increase in migration factors as discussed above in the “Provision for Loan Losses”. The FDIC assessment and the loss on the sale of other foreclosed assets increased $157,000 and $66,000, respectively. As part of the decision to discontinue SBA lending east of the Rocky Mountains, the Company expensed severance, included in salaries and employee benefits, and lease commitments of $117,000 and $43,000, respectively. Also contributing to the difference between the first quarter 2009 and 2008 was a recovery of $200,000 of sublease costs in the first quarter 2008 on a former loan which reduced other expenses.
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Community West Bancshares is a bank holding company. Through its subsidiaries Goleta National Bank and Palomar Community Bank they are engaged in providing general banking services. They provide commercial and retail financial services including the acceptance of demand savings and time deposits and the origination of commercial U.S. Small Business Administration accounts receivable real estate construction home improvement short term consumer and other installment and term loans. Community West Bancshares has a market cap of $16.3 million; its shares were traded at around $2.76 with and P/S ratio of 0.3. Community West Bancshares had an annual average earning growth of 2.8% over the past 10 years.
Highlight of Business Operations:
For the first quarter 2009, net loss was $6,729,000 compared to net income of $997,000 for the first quarter 2008.Net interest income declined by $398,000 for the first quarter 2009 compared to 2008. Total interest income decreased $1.8 million, or 14.9%, for the first quarter 2009 compared to 2008. While average loan balances increased by $46.9 million, the margin on loans declined from 8.27% to 6.60% for the first quarter 2009 compared to 2008. Overall, the yield on interest earning assets declined from 7.95% for the first quarter 2008 to 6.31% for 2009. These declines were partly offset by lower interest expense which was $4.5 million for the first quarter 2009 compared to $5.9 million for the same period in 2008, a reduction of $1.4 million, also primarily due to lower rates paid on deposits and borrowings. The resulting net interest margin was 3.56% for the first quarter 2009 compared to 4.08% for 2008.
The provision for loan losses increased $11.9 million to $12.6 million for the first quarter 2009 compared to $673,000 for the first quarter 2008. The substantially higher comparable loan loss provision for the first quarter 2009 reflected the effect of increases in losses on specific credits as well as experienced loss frequency and severity on the provision calculation. During the first quarter 2009, the Company experienced significant deterioration and downgrades to specific loans in its portfolio, including net charge-offs of $6.5 million, generally related to the current economic circumstances. A major component of the allowance calculation relates to historical loan losses. The Company has experienced elevated levels of loan losses over the past four quarters thereby resulting in a significantly higher allowance requirement. The migration of the losses through the loan portfolio has resulted in a calculated increase in the allowance of $7.3 million at December 31, 2008 to $13.4 million at March 31, 2009. This increase is directly related to increased inherent loss in our loan portfolio and the effect of historical loan loss experience on our estimate of losses inherent in the portfolio as of the balance sheet date and does not necessarily reflect expected future losses. Non-performing loans significantly decreased from $16.9 million at December 31, 2008 to $8.7 million at March 31, 2009, due to a combination of charge-offs, upgrades and payoffs. While total past due loans increased from $12.0 million to $18.9 million over the same period, $7.4 million of this increase fell within the less than 60 days past due category.
Total non-interest income declined by $246,000 or 17.4%, for the first quarter 2009 compared to 2008. Non-interest income includes loan document fees, service charges on deposit accounts, gains on sale of loans, loan servicing fees and other revenues not derived from interest on earning assets. Other loan fees declined $279,000 due to lower referral fees on 504 loans and gain on loan sales declined $164,000 as the Bank did not sell SBA loans in the first quarter 2009. Net loan servicing increased by $156,000, primarily due to a valuation adjustment to the interest only strip as the prepayment speeds on SBA loans declined.
Total non-interest expenses increased by $627,000, or 12.1% for the first quarter 2009 compared to 2008. Although salaries and employee benefits and occupancy declined, other non-interest expense increased. These expenses include other loan expense related to the reserve for undisbursed loans, which increased $300,000 due to the increase in migration factors as discussed above in the “Provision for Loan Losses”. The FDIC assessment and the loss on the sale of other foreclosed assets increased $157,000 and $66,000, respectively. As part of the decision to discontinue SBA lending east of the Rocky Mountains, the Company expensed severance, included in salaries and employee benefits, and lease commitments of $117,000 and $43,000, respectively. Also contributing to the difference between the first quarter 2009 and 2008 was a recovery of $200,000 of sublease costs in the first quarter 2008 on a former loan which reduced other expenses.
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