Community West Bancshares (NASDAQ: CWBC), parent company of Community West Bank, reported net income of $61,000 for the quarter ended Dec. 31, 2008, compared to net income of $748,000 for the same period in 2007. For the year, the Goleta-based company reported net income of $1,481,000 compared to $3,789,000 in 2007. Net income per diluted share available to common shareholders was $.00 for the 2008 fourth quarter compared to $.12 for the same period in 2007.
“Our Q4 and 2008 results reflect the impact the current recession has had on our economy and our industry,” said Lynda Nahra, Community West Bancshares president and CEO. “Although the results are disappointing, our excess capital and strong levels of reserves should keep us ahead of future economic challenges.”
Net Interest Income
Net interest income for the fourth quarter of 2008 decreased by $544,000 from the same period in 2007, primarily because the decline in the net interest margin — which decreased by 72 basis points, to 3.49 percent for the 2008 fourth quarter from 4.21 percent in 2007 — exceeded the net interest income related to the company’s new business. The quick decline in interest rates due to Federal Reserve decisions and subsequent market moves had a greater downward effect on interest income for the short term while the decline in interest expense is spread over a longer period.
Total interest income for the 2008 fourth quarter decreased by $1,334,000 from the same period in 2007. A $2,441,000 decrease is attributed to lower interest rates as the prime rate at end of 2008 was 400 basis points less than at end of 2007. This is partially offset by a $1,107,000 increase attributed to the comparative growth in interest-earning assets, primarily in the commercial lending, SBA and manufactured housing portfolios.
Interest expense on deposits for the 2008 fourth quarter decreased by $574,000 compared to the same period in 2007. A $1,288,000 decrease is attributed to lower interest rates and is partially offset by a $714,000 increase attributed to interest-bearing deposit growth. Interest expense on borrowings decreased by $216,000.
Provision for Loan Losses
The company recorded a $1,408,000 loan loss provision for the 2008 fourth quarter compared to $528,000 for the same period in 2007, reflecting management’s assessment of credit risk for the company related to the current California and national economic recession. The heightened provision, particularly related to 2008, is primarily a result of increased qualitative factors that reflect the aforementioned economic circumstances. Nonaccrual loans increased to $16.9 million at Dec. 31 from $12.0 million at Sept. 30.
Non-Interest Income and Non-Interest Expenses
Non-interest income decreased $227,000 from the 2007 fourth quarter to 2008, primarily due to decreased loan fees. Non-interest expenses decreased $475,000, primarily due to decreased staff expenses and general cost reductions.
Balance Sheet
The company’s total assets increased $47.1 million to $657.0 million at Dec. 31, compared to $609.9 million at Dec. 31, 2007. Net loans increased by $41.9 million and combined liquid assets and investment securities increased by a net of $2.7 million.
On the funding side, as of Dec. 31 deposits increased by $41.7 million while FHLB advances decreased by $11.0 million.
Capital
As of Dec. 31, the company had $66.6 million in total shareholders’ equity, or 10.14 percent of consolidated total assets, and book value per common share was $8.84. Common shareholders’ equity was $52.3 million.
On Dec. 19, 2008, the company received $15.6 million of capital through the U.S. Treasury’s TARP Capital Purchase program.
Dividend Policy
The bank’s board of directors has announced it will not pay a dividend this quarter. Currently, the company is focused on preserving capital amid turbulence in the financial markets, and will continue to review the dividend policy on a quarterly basis.
Community West Bancshares is the holding company for Community West Bank, which has five full-service branch-banking offices, in Old Town Goleta, Santa Barbara, Santa Maria, Ventura and Westlake Village.
Lynnette Coverly is vice president of marketing for Community West Bank.