Community West Bancshares (NASDAQ: CWBC), parent company of Community West Bank, on Wednesday reported net income of $800,000 for the second quarter ended June 30, compared with a net loss of $252,000 for the quarter ended June 30, 2008.
For the six months ended June 30 this year, the company reported a net loss of $5,929,000 compared with net income of $745,000 for the six months ended June 30, 2008. Net income per diluted share available to common shareholders was 9 cents for the quarter compared with a net loss of 4 cents for the second quarter of 2008.
Net Interest Income
Net interest income for the comparative quarter ended June 30 increased $431,000, as the company’s net interest margin increased by 5 basis points, to 3.78 percent for second quarter of 2009 from 3.73 percent in 2008.
Total interest income for the comparative quarter ended June 30 decreased $1,180,000. A $1,656,000 decrease is attributed to lower interest rates and is partially offset by a $476,000 increase attributed to loan growth.
Interest expense on deposits for the comparative quarter decreased by $1,389,000, of which $1,336,000 is attributed to lower interest rates. Interest expense on borrowings decreased $222,000, primarily because of lower interest rates.
Provision for Loan Losses
The company recorded a $743,000 loan loss provision in the second quarter of 2009, reflecting the detailed evaluation of its loan portfolio in the context of the overall challenging economic environment. During the first quarter of 2009, the company experienced deterioration and downgrades to specific loans in its portfolio, elevating the component of the allowance calculation related to historical loan losses.
In general, the company experienced elevated levels of loan losses in the past year, thereby resulting in a significantly higher allowance requirement. The migration of the losses through the loan portfolio resulted in a calculated increase in the allowance from $7.3 million at Dec. 31, 2008, to $13.4 million at June 30, 2009. The increase is directly related to the effect of historical loan losses on the company’s estimate of losses inherent in the portfolio as of the balance sheet dates and does not necessarily reflect expected future losses.
In addition, nonaccrual loans slightly decreased from $16.9 million at Dec. 31, 2008, to $16.0 million at June 30, 2009.
Non-Interest Income and Non-Interest Expenses
Noninterest income decreased $385,000 in the second quarter of 2009 compared with 2008, primarily because the second quarter of 2008 included gains on loan and other asset sales.
Noninterest expenses increased $70,000 in the second quarter of 2009 compared with 2008. While salaries and employee benefits decreased $515,000, it was offset primarily by an increase of $198,000 in the FDIC regular deposit insurance assessment and $306,000 in the FDIC special deposit insurance assessment.
— Lynnette Coverly is the vice president of marketing for Community West Bank.