Community West Bancshares, parent company of Community West Bank, on Monday reported net income of $69,000 for the third quarter, ended Sept. 30, compared with net income of $675,000 for the quarter in 2008.

For the first nine months of the year, the company reported a net loss of $5.86 million, compared with net income of $1.42 million for the nine months in 2008. Net income per diluted share available to common shareholders, after the preferred stock dividends, was 3 cents for the third quarter of 2009, down from 11 cents in 2008.

Net interest income for the comparative quarter increased $1.14 million as the company’s net interest margin increased 52 basis points, to 4.12 percent for the quarter in 2009 from 3.60 percent for 2008.

Total interest income for the comparative quarter decreased $958,000. A $1.32 million decrease is attributed to lower interest rates and is partially offset by a $363,000 increase attributed to loan growth.

Interest expense on deposits for the comparative quarter decreased by $1.77 million. $1.64 million of the decrease is attributed to lower interest rates. Interest expense on borrowings decreased $326,000, primarily because of lower interest rates.

The company recorded a $2.59 million loan loss provision in the third quarter, reflecting the detailed evaluation of its loan portfolio in the context of the overall challenging economic environment. While a substantial part of the deterioration and downgrades to specific loans in its portfolio was recognized in the first quarter, there continues to be ongoing credit problems primarily relating to business loans, elevating the component of the allowance calculation related to historical loan losses.

In general, the company has 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 $13.3 million at Sep. 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. In addition, nonaccrual loans slightly increased from $16.9 million in 2008 to $17.8 million.

The company’s total assets increased $17.4 million to $674.4 million at Sept. 30. Net loans increased $12.1 million, and combined liquid assets and investment securities decreased by a net of $1.1 million.

On the funding side, deposits increased $54.3 million, while FHLB and FRB advances decreased $30 million compared with Dec. 31, 2008.

“Our 2009 ongoing margin improvement and Q1 cost reductions continue to enhance our positive operating earnings,” president and CEO Lynda Nahra said. “With the banking and operating environment still unsettled, our resources are remaining focused on credit quality and our overall balance sheet strength.”

— Lynnette Coverly is the vice president of marketing for Community West Bank.