FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND 12CFR16.3
For the Quarter Ended September 30, 1999 Commission File Number: 000-23575
COMMUNITY WEST BANCSHARES
(Exact name of registrant as specified in its charter)
California 77-0446957
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5638 Hollister Ave., Goleta, California 93117
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (805) 692-1862
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 and
12CFR16.3 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Number of shares of common stock of the registrant: 5,453,181 outstanding as of
September 30, 1999
This Form 10-Q contains 22 pages.
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
COMMUNITY WEST BANCSHARES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
- - -----------------------------------------------------------------------------------------------------------------------
ASSETS September 30, 1999 December 31, 1998
<S> <C> <C>
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,215,000 $ 6,124,000
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,035,000 43,355,000
-------------------- -------------------
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 11,250,000 49,479,000
Time deposits in other financial institutions. . . . . . . . . . . . . . . . - 1,500,000
Federal Reserve Bank and Federal Home Loan Bank stock, at cost . . . . . . . 769,000 810,000
Investment securities held to maturity, at amortized cost; fair value of
$500,000 at September 30, 1999 and $503,000 at December 31, 1998 . . . . . 496,000 501,000
Investment securities available for sale, at fair value; cost of $5,252,000
at September 30, 1999 and $8,298,000 at December 31, 1998. . . . . . . . . 5,134,000 8,295,000
Investment securities held for trading, at fair value. . . . . . . . . . . . 26,010,000 10,665,000
Servicing assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,406,000 1,722,000
Loans
Held for investment, net of allowance for loan
losses of $2,048,000 in 1999 and $2,129,000 in 1998. . . . . . . . . . 106,527,000 107,099,000
Available for sale, at lower of cost or fair value. . . . . . . . . . . . 172,906,000 58,836,000
Other real estate owned, net . . . . . . . . . . . . . . . . . . . . . . . . 393,000 241,000
Premises and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . 4,763,000 4,539,000
Accrued interest receivable and other assets . . . . . . . . . . . . . . . . 12,714,000 8,347,000
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 343,368,000 $ 252,034,000
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand. . . . . . . . . . . . . . . . . . . . . . . . $ 19,306,000 $ 19,487,000
Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . . . 25,337,000 19,976,000
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,736,000 26,861,000
Time certificates of $100,000 or more . . . . . . . . . . . . . . . . . . 103,682,000 61,742,000
Other time certificates . . . . . . . . . . . . . . . . . . . . . . . . . 132,676,000 95,479,000
-------------------- -------------------
Total deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,737,000 223,545,000
Accrued interest payable and other liabilities . . . . . . . . . . . . . . . 9,558,000 3,936,000
-------------------- -------------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 316,295,000 227,481,000
-------------------- -------------------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
STOCKHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares authorized; 5,590,618
and 5,479,710 shares issued and outstanding at September 30, 1999
and December 31, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . 17,615,000 17,304,000
Less: Treasury stock, at cost 137,437 shares at September 30, 1999
and 14,807 shares at December 31, 1998 . . . . . . . . . . . . . . . . . . (1,236,000) (141,000)
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,763,000 7,393,000
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . (69,000) (3,000)
-------------------- -------------------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . 27,073,000 24,553,000
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 343,368,000 $ 252,034,000
==================== ===================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees. . . . . . . . . . . . . $6,753,000 $5,092,000 $19,205,000 $12,949,000
Federal funds sold . . . . . . . . . . . . . . 331,000 69,000 883,000 427,000
Time deposits in other financial institutions. 10,000 7,000 30,000 99,000
Investment securities. . . . . . . . . . . . . 786,000 467,000 1,708,000 950,000
---------- ---------- ----------- -----------
Total interest income. . . . . . . . . 7,880,000 5,635,000 21,826,000 14,425,000
INTEREST EXPENSE ON DEPOSITS . . . . . . . . . . 3,331,000 2,477,000 9,483,000 6,453,000
---------- ---------- ----------- -----------
NET INTEREST INCOME. . . . . . . . . . . . . . . 4,549,000 3,158,000 12,343,000 7,972,000
PROVISION FOR LOAN LOSSES. . . . . . . . . . . . 355,000 175,000 1,775,000 339,000
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES . . . . . . . . . . . . . . . . . . . . 4,194,000 2,983,000 10,568,000 7,633,000
OTHER INCOME:
Gains from loan sales. . . . . . . . . . . . . 3,024,000 1,761,000 12,512,000 4,542,000
Loan origination fees - sold or brokered loans 529,000 907,000 2,134,000 2,725,000
Document processing fees . . . . . . . . . . . 433,000 426,000 1,606,000 1,133,000
Service charges. . . . . . . . . . . . . . . . 108,000 253,000 375,000 765,000
Loan servicing income. . . . . . . . . . . . . 160,000 157,000 362,000 800,000
Other income . . . . . . . . . . . . . . . . . 208,000 123,000 469,000 311,000
Total other income . . . . . . . . . . 4,462,000 3,627,000 17,458,000 10,276,000
---------- ---------- ----------- -----------
OTHER EXPENSES:
Salaries and employee benefits . . . . . . . . 4,599,000 3,449,000 14,113,000 9,152,000
Occupancy expense. . . . . . . . . . . . . . . 986,000 774,000 2,800,000 1,994,000
Other operating expenses . . . . . . . . . . . 546,000 22,000 1,835,000 944,000
Professional services. . . . . . . . . . . . . 363,000 294,000 838,000 623,000
Advertising expense. . . . . . . . . . . . . . 329,000 296,000 731,000 611,000
Data processing/ ATM processing. . . . . . . . 100,000 209,000 359,000 270,000
Postage and freight. . . . . . . . . . . . . . 89,000 72,000 265,000 394,000
Office supply expense. . . . . . . . . . . . . 109,000 170,000 253,000 203,000
Total other expenses . . . . . . . . . 7,121,000 5,286,000 21,194,000 14,191,000
---------- ---------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME
TAXES . . . . . . . . . . . . . . . . . . . . 1,535,000 1,324,000 6,832,000 3,718,000
PROVISION FOR INCOME TAXES . . . . . . . . . . . 609,000 485,000 2,811,000 1,363,000
---------- ---------- ----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . $ 926,000 $ 839,000 $ 4,021,000 $ 2,355,000
========== ========== =========== ===========
NET INCOME PER SHARE (Note 5):
BASIC . . . . . . . . . . . . . . . . . . . . $ 0.17 $ 0.16 $ 0.74 $ 0.48
========== ========== =========== ===========
DILUTED . . . . . . . . . . . . . . . . . . . $ 0.17 $ 0.15 $ 0.73 $ 0.46
========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months
Ended September 30,
1999 1998
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,021,000 $ 2,355,000
Adjustments to reconcile net income to net cash used in operating activities:
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . 1,775,000 339,000
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . 1,221,000 776,000
Provisions for deferred income taxes . . . . . . . . . . . . . . . . . . . . - (259,000)
Loss on disposal of fixed assets . . . . . . . . . . . . . . . . . . . . . . 10,000 -
Loss (Gain) on sale / write down of other real estate owned. . . . . . . . . 133,000 (25,000)
Gain on sale of loans held for sale. . . . . . . . . . . . . . . . . . . . . (12,512,000) (4,542,000)
Origination of servicing and interest only strip assets, net of amortization (16,029,000) (582,000)
Gain on early retirement of debt . . . . . . . . . . . . . . . . . . . . . . - (14,000)
FRB/FHLB stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . (21,000) (26,000)
Changes in operating assets and liabilities:
Accrued interest receivable and other assets . . . . . . . . . . . . . . . (4,367,000) (1,770,000)
Accrued interest payable and other liabilities . . . . . . . . . . . . . . 5,622,000 (966,000)
-------------- -------------
Net cash used in operating activities . . . . . . . . . . . . . . . . . (20,147,000) (4,714,000)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of held-to-maturity securities . . . . . . . . . . . . . . . . . . . (500,000) (516,000)
Purchase of available-for-sale securities . . . . . . . . . . . . . . . . . . - (3,029,000)
Purchase of FRB stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,000) -
Paydown of principal on available-for-sale securities . . . . . . . . . . . . 3,068,000 2,260,000
Maturities of held-to-maturity securities . . . . . . . . . . . . . . . . . . 500,000 1,000,000
Redemption of FHLB stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 -
Net decrease in time deposits in other financial institutions . . . . . . . . 1,500,000 2,477,000
Net increase in loans and loans held for sale . . . . . . . . . . . . . . . . (103,046,000) (77,610,000)
Proceeds from sale of other real estate owned . . . . . . . . . . . . . . . . - 113,000
Proceeds from early retirement of debt. . . . . . . . . . . . . . . . . . . . - 750,000
Purchase of premises and equipment. . . . . . . . . . . . . . . . . . . . . . (1,423,000) (2,115,000)
-------------- -------------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . (99,839,000) (76,670,000)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, and savings accounts. . . . . . . . . . . . . . 4,055,000 1,372,000
Net increase in time certificates. . . . . . . . . . . . . . . . . . . . . . . . 79,137,000 70,386,000
Exercise of stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,807,000
Exercise of stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 311,000 337,000
Net increase in borrowings from FHLB . . . . . . . . . . . . . . . . . . . . . . - 1,500,000
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,095,000) -
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (651,000) (1,000)
-------------- -------------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . 81,757,000 77,401,000
-------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . (38,229,000) (3,983,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . . . 49,479,000 18,837,000
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 11,250,000 $ 14,854,000
============== =============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,144,000 $ 4,969,000
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,483,000 $ 869,000
Supplemental Disclosure of Noncash Investing Activity:
Transfers to other real-estate owned . . . . . . . . . . . . . . . . . . . . . . . $ 285,000 $ 371,000
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
COMMUNITY WEST BANCSHARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 1999
1. The interim consolidated financial statements are unaudited and reflect
all adjustments and reclassifications which, in the opinion of management, are
necessary for a fair presentation of the results of operations and financial
condition for the interim period. All adjustments and reclassifications are of a
normal and recurring nature. Results for the period ending September 30, 1999,
are not necessarily indicative of results which may be expected for any other
interim period or for the year as a whole. Certain reclassifications have been
made in the 1998 financial information to conform to the presentation used in
1999.
2. Summary of Significant Accounting Policies. See Note 1 of the Notes to
Financial Statements in Community West Bancshares' (the "Company") 1998 Annual
Report on Form 10-K.
Statements concerning future performance, developments or events, concerning
expectations for growth and market forecasts, and any other guidance on future
periods, constitute forward-looking statements which are subject to a number of
risks and uncertainties which might cause actual results to differ materially
from stated expectations. These factors include, but are not limited to, the
approval of regulatory agencies and shareholders, the effect of interest rate
changes, the expansion of the Company and its subsidiaries, changes in SBA
policy or funding, competition in the financial services market for both
deposits and loans, and general economic conditions.
Loans Held for Sale - Loans that are originated and are intended for sale in the
secondary market, are carried at the lower of cost or fair value on an aggregate
basis. Funding for SBA programs depends on annual appropriations by the U.S.
Congress, and accordingly, the sale of loans under these programs is dependent
on the continuation of such programs.
5
<PAGE>
Investment Securities - The Company classifies as held to maturity those
debt securities it has the positive intent and ability to hold to maturity.
Securities held to maturity are accounted for at cost and adjusted for
amortization of premiums and accretion of discounts. Securities to be held for
indefinite periods of time, but not necessarily to be held-to-maturity or on a
long term basis are classified as available-for-sale and carried at fair value
with unrealized gains or losses reported as a separate component of accumulated
other comprehensive income, net of any applicable income taxes. Realized gains
or losses on the sale of securities available-for-sale, if any, are determined
on a specific identification basis.
Investment Securities, Held for Trading-Interest Only Strips - The Company
originates certain loans for the purpose of selling either a portion or all of
the loan into either the secondary market or a securitization. The guaranteed
portion of SBA loans and FHA Title 1 loans may be sold into the secondary
market, servicing retained. Second mortgages ("HLTV") loans may be sold into
securitizations. On these sales, the Company retains interest only ("I/O")
strips, which represent the present value of the right to the excess cash flows
generated by the serviced loans which represents the difference between (a)
interest at the stated rate paid by borrowers and (b) the sum of (i)
pass-through interest paid to third-party investors, (ii) trustee fees, (iii)
FHA insurance fees (if applicable), (iv) third-party credit enhancement fees (if
applicable), and (v) stipulated servicing fees. The Company determines the
present value of this anticipated cash flow stream at the time each loan sale
transaction closes, utilizing valuation assumptions appropriate for each
particular transaction. Loan sales are discussed in detail in Note 3.
The I/O Strips are subject to significant prepayment risk, and accordingly
have an undetermined maturity date; and therefore cannot be classified as held
to maturity. The Company has chosen to classify these assets as trading
securities. Based on this classification, the Company is required to mark these
securities to fair value with the accompanying increases or decreases in fair
value being recorded as earnings or losses in the current period. The
determination of fair value is based on the previously mentioned basis.
As the gain recognized in the year of sale is equal to the net estimated
future cash flows from the I/O Strips, discounted at a market interest rate, the
amount of cash actually received over the lives of the loans is expected to
exceed the gain previously recognized at the time the loans are sold. The I/O
Strips are marked to market on a quarterly basis. The Company may retain the
right to service loans it originates, or purchases, and subsequently sells.
3. Loan Sales
HLTV Loan Sales
- - -----------------
During June 1999, the Company completed the securitization of a $122 million
pool of HLTV loans. The Company retained a residual participation interest in
the investor trust, reflecting the excess of the total amount of loans
transferred to the trust over the portion represented by certificates sold to
investors. As a result of the securitization, the Company also recorded
interest-only strips (I/O Strips). At origination and at September 30, 1999,
the present value of these assets was calculated assuming a 13% discount rate,
an annual loss rate of 2.25%, and an 18.25% conditional prepayment rate (CPR).
As of September 30, 1999, the Company had recorded a receivable from the
underwriter of the securitization for $3 million, which represents the amount
due to the Company upon the final sale of the remaining bonds.
As of December 31, 1998, the Company had $24 million in HLTV loans held for
sale. As of September 30, 1999, the Company had $152 million in HLTV loans held
for sale.
6
<PAGE>
SBA Loan Sales
- - ----------------
The Company sells the guaranteed portion of Small Business Administration
("SBA") loans into the secondary market in exchange for cash premium, servicing
assets, and I/O strips. The Company retains the servicing rights. The present
value of the interest only strips and servicing assets was calculated assuming
an 11% discount rate, and an 8% CPR.
As of December 31, 1998, the Company had approximately $5 million in SBA loans
held for sale. As of September 30, 1999, the Company had approximately
$9 million in SBA loans held for sale.
FHA Title 1 Loan Sales
- - --------------------------
Since 1995, the Company has sold FHA Title 1 loans into the secondary market, on
a whole loan basis, in exchange for cash premium, servicing assets, and I/O
strips. The Company retains the servicing rights. In 1999, the present value
of the interest only strips was calculated assuming an 11% discount rate, and a
15% CPR.
As of December 31, 1998, and September 30, 1999, the Company had approximately
$1 million in FHA Title 1 loans held for sale.
Traditional Mortgages
- - ----------------------
The amounts in the table below represent servicing purchased by Palomar
Community Bank, a wholly-owned subsidiary of the Company, in 1998.
The balances of these assets are as follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
----------------------- -----------------------
Servicing Servicing
Asset I/O Strip Asset I/O Strip
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
HLTV. . . . . . . . . . . $ 585,000 $21,337,000 $ 250,000 $ 7,900,000
Guaranteed Portion of SBA 1,623,000 3,751,000 1,194,000 1,030,000
FHA Title 1 . . . . . . . - 922,000 22,000 1,735,000
Traditional Mortgages . . 198,000 - 256,000 -
---------- ----------- ---------- -----------
Total . . . . . . . . . . $2,406,000 $26,010,000 $1,722,000 $10,665,000
========== =========== ========== ===========
</TABLE>
7
<PAGE>
4. In the ordinary course of business, the Company enters into commitments
to extend credit to its customers. These commitments are not reflected in the
accompanying financial statements. As of September 30, 1999, the Company had
entered into commitments with certain customers amounting to $18.4 million
compared to $20.5 million at December 31, 1998. There were $78,000 of letters of
credit outstanding at September 30, 1999; there were no letters of credit
outstanding at December 31, 1998.
5. Net income per share - Basic, has been computed based on the weighted
average number of shares outstanding during each period. Net income per share -
Diluted, has been computed based on the weighted average number of shares
outstanding during each period plus the dilutive effect of granted options.
Earnings per share were computed as follows:
<TABLE>
<CAPTION>
For the three months ended
September September
30, 1999 30, 1998
---------- ----------
<S> <C> <C>
Basic weighted average shares outstanding . 5,433,102 5,403,537
Dilutive effect of options. . . . . . . . . 170,948 151,879
---------- ----------
Diluted weighted average shares outstanding 5,604,050 5,555,416
========== ==========
Net income. . . . . . . . . . . . . . . . . $ 926,000 $ 839,000
Net income per share - Basic. . . . . . . . $ 0.17 $ 0.16
Net income per share - Diluted. . . . . . . $ 0.17 $ 0.15
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended
September September
30, 1999 30, 1998
---------- ----------
<S> <C> <C>
Basic weighted average shares outstanding . 5,400,297 4,936,604
Dilutive effect of options. . . . . . . . . 118,177 154,998
---------- ----------
Diluted weighted average shares outstanding 5,518,474 5,091,602
========== ==========
Net income. . . . . . . . . . . . . . . . . $4,021,000 $2,355,000
Net income per share - Basic. . . . . . . . $ 0.74 $ 0.48
Net income per share - Diluted. . . . . . . $ 0.73 $ 0.46
</TABLE>
On April 26, 1999, the Company paid a quarterly dividend of $0.04 for
shareholders of record as of April 12, 1999. The Company also paid a quarterly
dividend on of $.04 on July 20, 1999 for shareholders of record on July 9, 1999.
On October 1, 1999, the Company declared a quarterly dividend of $0.04 for
shareholders of record October 11, 1999, payable on October 22, 1999. Each
quarterly dividend totaled approximately $220,000.
8
<PAGE>
6. The Company adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), Disclosures about Segments of an Enterprise and Related
Information in 1998. SFAS 131 established standards for reporting information
about operating segments. The September 30, 1999, and 1998 information is
presented in the following table.
The Company's management, while managing the overall company, also, looks at
individual areas considered "significant" to revenue and net income. These
significant areas, or segments, are: SBA Lending, Alternative Lending, Mortgage
Division, Goleta National Bank Branch Operations, and Palomar Community Bank.
For this discussion, the remaining divisions are considered immaterial and are
consolidated into "Other." The Other segment includes the administration areas,
human resources, and tech support, along with others. The accounting policies
of the individual segments are the same as those described in the summary of
significant accounting policies.
The SBA Lending, Alternative Lending, and Mortgage Divisions from Goleta
National Bank are considered individual segments because of the different loan
products involved and the significance of the associated revenue. Goleta
National Bank Branch Operation, includes the deposits and commercial lending.
Management analyzes Palomar separately from Goleta National Bank, as they are
two different subsidiaries under Community West Bancshares.
All of the Company's assets and operations are located within the United States.
The assets shown for each segment are estimates.
9
<PAGE>
The following table sets forth various revenue and expense items that management
relies on in decision making.
<TABLE>
<CAPTION>
Goleta National Palomar
Nine Months Ended SBA Alternative Mortgage Bank Branch Community Consolidated
SEPTEMBER 30, 1999 Lending Lending Division Operations Bank Other Total
----------- ------------ ---------- ---------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income. . . . . . $ 2,264,000 $ 10,367,000 $ 499,000 $ 4,262,000 $ 4,434,000 $ - $ 21,826,000
Interest Expense . . . . . 932,000 4,266,000 205,000 1,754,000 2,326,000 - 9,483,000
----------- ------------ ---------- ---------------- ----------- ------------ -------------
Net Interest Income. . . . 1,332,000 6,101,000 294,000 2,508,000 2,108,000 - 12,343,000
Provision For Loan Losses 217,000 995,000 48,000 410,000 105,000 - 1,775,000
Noninterest Income . . . . 2,991,000 4,740,000 3,295,000 203,000 631,000 5,598,000 17,458,000
Noninterest Expense. . . . 1,518,000 2,861,000 2,331,000 1,118,000 2,193,000 11,173,000 21,194,000
Segment Profit . . . . . . $ 2,588,000 $ 6,985,000 $1,210,000 $ 1,183,000 $ 441,000 $(5,575,000) $ 6,832,000
=========== ============ ========== ================ =========== ============ =============
SEPTEMBER 30, 1999
Segment Assets . . . . . . $33,297,000 $185,168,000 $7,440,000 $ 37,617,000 $75,679,000 $ 4,167,000 $ 343,368,000
=========== ============ ========== ================ =========== ============ =============
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Goleta National Palomar
Nine Months Ended SBA Alternative Mortgage Bank Branch Community Consolidated
SEPTEMBER 30, 1998 Lending Lending Division Operations Bank Other Total
----------- ------------ ---------- ---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 2,039,000 $3,915,000 $ 532,000 $ 3,732,000 $ 4,207,000 $ - $ 14,425,000
Interest Expense 774,000 1,485,000 202,000 1,416,000 2,576,000 - 6,453,000
----------- ------------ ---------- ---------------- ------------ ------------ -------------
Net Interest Income 1,265,000 2,430,000 330,000 2,316,000 1,631,000 - 7,972,000
Provision For Loan Losses 80,000 153,000 21,000 146,000 (61,000) - 339,000
Noninterest Income 2,676,000 2,252,000 3,710,000 312,000 669,000 657,000 10,276,000
Noninterest Expense 1,237,000 2,318,000 2,853,000 632,000 1,722,000 5,429,000 14,191,000
----------- ------------ ---------- ---------------- ------------ ------------ -------------
Segment Profit $ 2,624,000 $ 2,211,000 $1,166,000 $ 1,850,000 $ 639,000 $(4,772,000) $ 3,718,000
=========== ============ ========== ================ ============ ============ =============
SEPTEMBER 30, 1998
Segment Assets $31,134,000 $ 84,530,000 $9,555,000 $ 42,698,000 $81,062,000 $ 3,055,000 $ 252,034,000
=========== ============ ========== ================ ============ ============ =============
</TABLE>
7. In October 1998, FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise." SFAS No. 134 amends SFAS No.
65, "Accounting for Certain Mortgage Banking Activities," which establishes
accounting and reporting standards for certain activities of mortgage banking
enterprises and other enterprises that conduct operations that are substantially
similar. SFAS No. 134 requires that after the securitization of mortgage loans
held for sale, the resulting mortgage-backed securities and other retained
interests should be classified in accordance with SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," based on the company's
ability and intent to sell or hold those investments. SFAS No. 134 is effective
for the first fiscal quarter beginning after December 15, 1998. The adoption of
SFAS No. 134 did not have an impact on the Bank's results of operations or
financial position.
10
<PAGE>
COMMUNITY WEST BANCSHARES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis is written to provide greater insight into
the results of operations and the financial condition of Community West
Bancshares, (the "Company").
RESULTS OF OPERATIONS
For the Third Quarter Ended September 30
- - ----------------------------------------------
The following table sets forth for the periods indicated, certain items in the
consolidated statements of income of the Company and the related changes between
those periods:
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------
September 30, September 30, Amount of Percent of
1999 1998 Increase Increase
-------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income. . . . . . . $ 7,880,000 $ 5,635,000 $2,245,000 39.8%
Interest Expense . . . . . . 3,331,000 2,477,000 854,000 34.5%
-------------- -------------- ----------
Net Interest Income . . . 4,549,000 3,158,000 1,391,000 44.0%
Provision for Loan Losses. . 355,000 175,000 180,000 102.9%
-------------- -------------- ----------
Net Interest Income after
Provision for Loan Losses 4,194,000 2,983,000 1,211,000 40.6%
Other Income . . . . . . . . 4,462,000 3,627,000 835,000 23.0%
Other Expense. . . . . . . . 7,121,000 5,286,000 1,835,000 34.7%
-------------- -------------- ----------
Income before Provision
for Income Taxes. . . . . 1,535,000 1,324,000 211,000 15.9%
Provision for Income Taxes . 609,000 485,000 124,000 25.6%
-------------- -------------- ----------
Net Income. . . . . . . . $ 926,000 $ 839,000 $ 87,000 10.4%
============== ============== ==========
Net Income Per Share - Basic $ 0.17 $ 0.16 $ 0.01 6.3%
============== ============== ==========
Net Income Per Share -
Diluted . . . . . . . . . $ 0.17 $ 0.15 $ 0.02 13.3%
============== ============== ==========
</TABLE>
Net Income Per Share -- Basic is calculated using weighted average number of
shares outstanding for the period. Net Income Per Share -- Diluted is calculated
using the weighted average number of shares outstanding for the period, plus the
net effect of stock options using the treasury stock method.
The annualized return on average equity was 13.9% for the three months ended
September 30, 1999, and 14.2% for the three months ended September 30, 1998.
Average assets for the three months ended September 30, 1999, were $334,219,000
compared to $241,743,000 for the same period in 1998; average equity increased
to $26,674,000 for the three months ended September 30, 1999, from $23,640,000
for the same period in 1998.
11
<PAGE>
For the Nine Months Ended September 30
- - --------------------------------------------
The following table sets forth for the periods indicated, certain items in the
consolidated statements of income of the Company and the related changes between
those periods:
<TABLE>
<CAPTION>
For the Nine Months Ended
------------------------------
September 30, September 30, Amount of Percent of
1999 1998 Increase Increase
-------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income. . . . . . . $ 21,826,000 $ 14,425,000 $7,401,000 51.3%
Interest Expense . . . . . . 9,483,000 6,453,000 3,030,000 47.0%
-------------- -------------- ----------
Net Interest Income . . . 12,343,000 7,972,000 4,371,000 54.8%
Provision for Loan Losses. . 1,775,000 339,000 1,436,000 423.6%
-------------- -------------- ----------
Net Interest Income after
Provision for Loan Losses 10,568,000 7,633,000 2,935,000 38.5%
Other Income . . . . . . . . 17,458,000 10,276,000 7,182,000 69.9%
Other Expense. . . . . . . . 21,194,000 14,191,000 7,003,000 49.3%
-------------- -------------- ----------
Income before Provision
for Income Taxes. . . . . 6,832,000 3,718,000 3,114,000 83.8%
Provision for Income Taxes . 2,811,000 1,363,000 1,448,000 106.2%
-------------- -------------- ----------
Net Income. . . . . . . . $ 4,021,000 $ 2,355,000 $1,666,000 70.7%
============== ============== ==========
Net Income Per Share - Basic $ 0.74 $ 0.48 $ 0.26 54.2%
============== ============== ==========
Net Income Per Share -
Diluted . . . . . . . . . $ 0.72 $ 0.46 $ 0.26 56.5%
============== ============== ==========
</TABLE>
The annualized return on average equity was 21.0% for the nine months ended
September 30, 1999, and 14.9% for the nine months ended September 30, 1998.
The book value per share increased from $4.49 at December 31, 1998, to $4.96 at
September 30, 1999.
Average assets for the nine months ended September 30, 1999, were $308,107,000
compared to $218,681,000 for the same period in 1998; average equity increased
to $25,560,000 for the nine months ended September 30, 1999, from $21,028,000
for the same period in 1998.
NET INTEREST INCOME/NET INTEREST MARGIN
One component of the Company's earnings is net interest income, which is the
difference between the interest and fees earned on loans and investments and the
interest paid for deposits and borrowed funds. The net interest margin is net
interest income expressed as a percentage of average earning assets.
The annualized net interest margin was 5.9% for the three months ended September
30, 1999, compared to an annualized net interest margin of 5.6% for the three
months ended September 30, 1998. The annualized net interest margin was 5.8%
for the nine months ended September 30, 1999, compared to an annualized net
interest margin of 5.2% for the nine months ended September 30, 1998. Earning
12
<PAGE>
assets averaged $285,409,000 for the nine months ended September 30, 1999. This
represented an increase of $82,055,000, or 40.4%, over average earning assets of
$203,354,000 for the nine months ended September 30, 1998. During the second
quarter of 1999, the Company completed the securitization of $122 million in
HLTV loans. While holding these loans the Company recognized substantial
interest income that has had the effect of increasing the Company's net interest
margin.
The net interest income figures above include income from the Company's
securities. The following table shows the interest and fees and corresponding
yields for loans only.
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September September September September
30, 1999 30, 1998 30, 1999 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest and Fees $ 6,753,000 $ 5,092,000 $ 19,205,000 $ 12,949,000
Average Loans . . 240,114,000 195,176,000 228,216,000 170,542,000
Annualized Yield. 11.2% 10.4% 11.2% 10.1%
</TABLE>
CREDIT LOSS EXPERIENCE
As a natural corollary to the Company's lending activities, some loan losses are
experienced. The risk of loss varies with the type of loan being made and the
creditworthiness of the borrower over the term of the loan. The degree of
perceived risk is taken into account in establishing the structure of, and
interest rates and security for, specific loans and for various types of loans.
The Company attempts to minimize its credit risk exposure by use of thorough
loan application and approval procedures.
The Company maintains a program of systematic review of its existing loans.
Loans are graded for their overall quality. Those loans which the Company's
management determines require further monitoring and supervision are segregated
and reviewed on a periodic basis. Significant problem loans are reviewed on a
monthly basis by the Company's Loan Committee.
The Company charges off that portion of any loan which management considers to
represent a loss. A loan is generally considered by management to represent a
loss in whole or in part when an exposure beyond any collateral value is
apparent, servicing of the unsecured portion has been discontinued or collection
is not anticipated based on the borrower's financial condition and general
economic conditions in the borrower's industry. The principal amount of any loan
which is declared a loss is charged against the Company's allowance for loan
losses.
The Company's allowance for loan losses is designed to provide for loan losses
which can be reasonably anticipated. The allowance for loan losses is
established through charges to operating expenses in the form of provisions for
loan losses. Actual loan losses or recoveries are charged or credited, directly
to the allowance for loan losses. The amount of the allowance is determined by
management of the Company. Among the factors considered in determining the
allowance for loan losses are the current financial condition of the Company's
borrowers and the value of the security, if any, for their loans. Estimates of
future economic conditions and their impact on various industries and individual
13
<PAGE>
borrowers are also taken into consideration, as are the Company's historical
loan loss experience and reports of banking regulatory authorities. Because
these estimates, factors and evaluations are primarily judgmental, no assurance
can be given as to whether or not the Company will sustain loan losses
substantially higher in relation to the size of the allowance for loan losses or
that subsequent evaluation of the loan portfolio may not require substantial
changes in such allowance.
The following table summarizes the Company's allowance for loan loss for the
dates indicated:
<TABLE>
<CAPTION>
Amount of Percent of
September December Increase Increase
30, 1999 31, 1998 (Decrease) (Decrease)
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
BALANCES:
Gross loans. . . . . . . . . . . . . . . $281,481,000 $168,064,000 $113,417,000 67.5%
Allowance for loan losses. . . . . . . . 2,048,000 2,129,000 (81,000) (3.8%)
Nonaccrual loans . . . . . . . . . . . . 2,628,000 2,971,000 (343,000) (11.5%)
RATIOS:
Allowance for loan losses to gross loans .73% 1.27%
Net loans charged to allowance for
loan losses. . . . . . . . . . . . . . 90.6% 17.2%
</TABLE>
The provision for loan losses was $1,775,000 for the nine months ended September
30, 1999. This is an increase of $1,436,000, or 423.6%, over the $339,000 for
the nine months ended September 30, 1998, primarily to reflect the
classification of two loans in the commercial portfolio, which management
believes were isolated occurrences. Gross loans outstanding increased 67.5%
from December 1998 to September 1999. For the nine months ended September 30,
1999, losses charged to the allowance for loan losses totaled $1,946,000. This
was offset by $90,000 recovery; with the net effect being $1,856,000 loans were
charged to the allowance. The decrease in the ratio of allowance for loan
losses to gross loans was due to the increase in loans available for sale, which
are carried at the lower of cost or market and as such no allowance is recorded.
The increase in the ratio of net loans charged to allowance for loan losses is
due to two individual write offs of significant loan balances.
Management of the Company reviews with the Board of Directors the adequacy of
the allowance for possible loan losses on a quarterly basis. The loan loss
provision is adjusted when specific items reflect a need for such an adjustment.
Management believes that there were no material loan losses during the last
fiscal year that has not been charged off. Management also believes that the
Company has adequately provided for all individual items in its portfolio which
may result in a material loss to the Company.
OTHER INCOME
Other income includes service charges on deposit accounts, gains on sale of
loans, servicing fees, and other revenues not derived from interest on earning
assets. Other income for the three months ended September 30, 1999, increased
23.0% over the three months ended September 30, 1998. Other income for the nine
months ended September 30, 1999, increased 69.9% over the nine months ended
September 30, 1998. A significant part of this increase was from gains on the
sale of loans. This increase was partly because the Company completed the
14
<PAGE>
securitization of $122 million in HLTV loans in the second quarter of 1999. The
Company continued to emphasize the generation of noninterest income. The
Company's percentage coverage of other expenses with other income was 82.4% for
the nine months ended September 30, 1999, an increase from 72.4% for the same
period in 1998.
OTHER EXPENSES
Other expenses include salaries and employee benefits, occupancy and equipment,
and other operating expenses. The continued growth of the Company required
additional staff and overhead expense to support the continued high level of
customer service, increasing the cost of occupying the Company's offices.
Although compensation expenses have grown, approximately 40% of the Company's
personnel derive some or all of their compensation based on income production.
This means that a significant portion of compensation is tied to increases in
revenues instead of being a fixed expense.
Other expenses for the three months ended September 30, 1999, increased 34.7%
over the three months ended September 30, 1998. Other expenses for the nine
months ended September 30, 1999, increased 49.3% over the nine months ended
September 30, 1998. The increase in other expenses for the periods compared was
primarily because of compensation related to loan originations and sales, the
continued upgrading of data processing hardware and software, and an increase in
occupancy costs. The increase in other expense of 49.3% was offset by the 69.9%
increase in other income.
<TABLE>
<CAPTION>
BALANCE SHEET ANALYSIS
Amount of Percent of
September December Increase Increase
30, 1999 31, 1998 (Decrease) (Decrease)
------------ ------------ ------------- ----------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents. $ 11,250,000 $ 49,479,000 $(38,229,000) (77.3%)
Investment Securities. . . 32,409,000 21,771,000 10,638,000 48.9%
Loans, held for investment 106,527,000 107,099,000 (572,000) (0.5%)
Loans, held for sale . . . 172,906,000 58,836,000 114,070,000 193.9%
Total Assets . . . . . . . 343,368,000 252,034,000 91,334,000 36.2%
Total Deposits . . . . . . 306,737,000 223,545,000 83,192,000 37.2%
Total Stockholders' Equity 27,073,000 24,553,000 2,520,000 10.3%
</TABLE>
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are made up of cash and federal funds sold. The 77.3%
decrease is because the Company increased loans held for sale.
INVESTMENT SECURITIES
The investment securities are made up of time deposits held in other financial
institutions, Federal Reserve Bank and Federal Home Loan Bank stock, U.S.
Treasury Notes and Bills, mortgage-backed securities and interest only strips.
The increase of 48.9% is from an increase in interest only strips created
through the securitization of $122 million in loans in the second quarter.
15
<PAGE>
LOANS
The 193.9% increase in loans held for sale is because of increased demand for
loans offered by the Company.
DEPOSITS
The following shows the balance and percentage change in the various deposits:
<TABLE>
<CAPTION>
Amount of Percent of
September December Increase Increase
30, 1999 31, 1998 (Decrease) (Decrease)
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Noninterest-Bearing Deposits. . $ 19,306,000 $ 19,487,000 $ (181,000) (0.9%)
Interest-Bearing Deposits . . . 25,337,000 19,976,000 5,361,000 26.8%
Savings . . . . . . . . . . . . 25,736,000 26,861,000 (1,125,000) (4.2%)
Time Certificates over $100,000 103,682,000 61,742,000 41,940,000 67.9%
Other Time Certificates . . . . 132,676,000 95,479,000 37,197,000 39.0%
------------ ------------ ------------
Total Deposits. . . . . . . . . $306,737,000 $223,545,000 $83,192,000 37.2%
============ ============ ============
</TABLE>
The increase in deposits is a result of the Company using short-term time
deposits, along with available cash, to fund the planned increase in loans
available for sale.
LIQUIDITY
The Company has an asset and liability management program that aids management
in maintaining its interest margins during times of both rising and falling
interest rates and in maintaining sufficient liquidity. Liquidity of the Company
at September 30, 1999, was 63.1% and at December 31, 1998, was 51.7%, based on
liquid assets (consisting of cash and due from banks, federal funds sold,
deposits in other financial institutions, investments, and loans held for sale)
divided by total assets. Management believes it maintains adequate liquidity
levels.
At times when the Company has more funds than it needs for its reserve
requirements or short term liquidity needs, the Company increases its securities
investments and sells federal funds. It is management's policy to maintain a
substantial portion of its portfolio of assets and liabilities on a short-term
or highly liquid basis in order to maintain rate flexibility and to meet loan
funding and liquidity needs. The Company has two federal funds lines of credit
with its correspondent banks totaling $6,500,000. In addition, the Company has a
line of credit with the Federal Home Loan Bank. This line had $18,920,000
available at September 30, 1999. On September 30, 1999, the Company borrowed
$4,000,000 under an additional line of credit which bears interest at the
lender's prime rate and is payable on January 3, 2000.
16
<PAGE>
CAPITAL RESOURCES
The Company's equity capital was $27,073,000 at September 30, 1999. The primary
source of capital for the Company has been the retention of net income.
On January 20, 1999, the Company paid a quarterly cash divided of $.04 per
share for shareholders of record on January 5, 1999. On April 26, 1999, the
Company paid a quarterly cash divided of $.04 per share for shareholders of
record on April 12, 1999. On July 20, 1999, the Company paid a quarterly cash
divided of $.04 per share for shareholders of record on July 9, 1999.
Additionally on October 1, 1999 the Company declared a cash dividend of $0.04
for shareholders of record on October 11, 1999, payable on October 22, 1999.
Each quarterly dividend is approximately $220,000.
On December 28, 1998, the Board of Directors of the Company authorized a stock
buy-back plan. Under this plan management is authorized to repurchase up to
$2,000,000 worth of the outstanding shares of its common stock . As of September
30, 1999, management had repurchased 137,437 shares of common stock at a cost of
$1,236,000. As of December 31, 1998, management had repurchased 14,807 shares
of common stock at a cost of $141,000.
Since the Company acquired a 70% interest in Electronic Paycheck (EP) during the
fourth quarter of 1997, EP has continued to develop its proprietary software and
card systems. The software, based on internet protocol, is currently being
utilized for payments in the payroll, cruise line, network marketing, bill
paying and check cashing industries. In addition, EP is now in the testing
phase of a process to use its software and cards as part of a national loyalty
card program, whereby customers earn reward points by patronizing participating
merchants. EP has recently announced major contracts in the network marketing
and loyalty card industries. EP is now in the process of converting from a
development stage company to an operational company. As this transition is made
it is expected that EP will need additional capital in order to finance the
anticipated growth. The Company is currently exploring the various methods
available to supply the needed cash. EP may need to tap the equity markets,
possibly in the form of an IPO, although management of the Company may very well
consider a private placement of EP debt or equity first. The actual timing or
nature of any potential offering has not been determined at this time.
Management is consulting with its financial and legal advisors to best address
these cash needs.
Under the Prompt Corrective Action provisions of the Federal Deposit Insurance
Act, national banks are assigned regulatory capital classifications based on
specified capital ratios of the institutions. The capital classifications are
"well capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized."
The relevant capital ratios of the institution in this determination are (i) the
ratio of Tier I capital (primarily common stock and retained earnings less
goodwill and other intangible assets) to adjusted average total assets (the
"Tier I capital to average assets ratio"), (ii) the ratio of Tier I capital to
risk-weighted assets (the "Tier I risk-based capital ratio"), and (iii) the
ratio of qualifying total capital to risk-weighted assets (the "total risk-based
capital ratio"). To be considered "well capitalized," an institution must have
a Tier I capital to average assets ratio of at least 5%, a Tier I risk-based
capital ratio of at least 6%, and a total risk-based capital ratio of at least
10%. Generally, for an institution to be considered "adequately capitalized"
these three ratios must be at least 4%, 4% and 8%, respectively. An institution
will generally be considered (1) "undercapitalized" if any one of these three
ratios is less than 4%, 4% and 8%, respectively, and (2) "significantly
undercapitalized" if any one of these three ratios is less than 3%, 3% and 6%,
respectively.
In November 1999, the Office of the Comptroller of the Currency (the "OCC")
notified Goleta National Bank ("Goleta") that it did not properly calculate the
amount of regulatory capital required to be held by Goleta in respect of
residual interests retained by Goleta in two securitizations of loans that were
consummated by Goleta in the fourth quarter of 1998 and the second quarter of
1999. Accordingly, the OCC informed Goleta that it was deemed significantly
undercapitalized at September 30, 1999 and in troubled condition under FIRREA.
Consistent with the OCC's instruction as to how to calculate the capital
required to be held in respect of the residual interests, the Company
recalculated the regulatory capital ratios for the Company and Goleta at
December 31, 1998, March 31, 1999 and June 30, 1999. As a result, the Company
has determined that Goleta was adequately capitalized at December 31, 1998 and
significantly undercapitalized at March 31, 1999 and June 30, 1999. Goleta's
actual capital amounts and ratios at September 30, 1999 and December 31, 1998
are as follows:
17
<PAGE>
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt
Adequacy Corrective Action
AS OF SEPTEMBER 30, 1999: Actual Purposes Provisions
------------------- ------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted assets)
CONSOLIDATED . . . . . . . . . . . . . . . $28,722,000 5.87% $39,162,000 8.00% $48,950,000 10.00%
Goleta National Bank . . . . . . . . . . . $24,949,000 5.83% $34,215,000 8.00% $42,769,000 10.00%
Palomar Savings and Loan . . . . . . . . . $ 6,763,000 11.70% $ 4,625,000 8.00% $ 5,781,000 10.00%
Tier I Capital (to Risk Weighted assets)
CONSOLIDATED . . . . . . . . . . . . . . . $26,675,000 5.45% $19,580,000 4.00% $29,371,000 6.00%
Goleta National Bank . . . . . . . . . . . $23,539,000 5.50% $17,108,000 4.00% $25,661,000 6.00%
Palomar Savings and Loan . . . . . . . . . $ 6,125,000 10.60% N/A N/A $ 3,468,000 6.00%
Tier I Capital (to Average Assets)
CONSOLIDATED . . . . . . . . . . . . . . . $26,675,000 7.98% $13,369,000 4.00% $16,711,000 5.00%
Goleta National Bank . . . . . . . . . . . $23,539,000 9.95% $ 9,459,000 4.00% $11,824,000 5.00%
Core Capital (to Adjusted Tangible Assets)
Palomar Savings and Loan . . . . . . . . . $ 6,125,000 8.08% $ 3,034,000 4.00% $ 3,793,000 5.00%
Tangible Capital (to Tangible Assets)
Palomar Savings and Loan . . . . . . . . . $ 6,125,000 8.08% $ 1,138,000 1.50% N/A N/A
</TABLE>
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt
Adequacy Corrective Action
AS OF DECEMBER 31, 1998: Actual Purposes Provisions
------------------- ------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted assets)
CONSOLIDATED . . . . . . . . . . . . . . . $26,289,000 11.13% $18,892,000 8.00% $23,615,000 10.00%
Goleta National Bank . . . . . . . . . . . $16,364,000 8.54% $15,328,000 8.00% $19,160,000 10.00%
Palomar Savings and Loan . . . . . . . . . $ 6,492,000 12.45% $ 4,172,000 8.00% $ 5,215,000 10.00%
Tier I Capital (to Risk Weighted assets)
CONSOLIDATED . . . . . . . . . . . . . . . $24,118,000 10.21% $ 9,446,000 4.00% $14,169,000 6.00%
Goleta National Bank . . . . . . . . . . . $14,820,000 7.73% $ 7,664,000 4.00% $11,496,000 6.00%
Palomar Savings and Loan . . . . . . . . . $ 5,865,000 11.25% N/A N/A $ 3,128,000 6.00%
Tier I Capital (to Average Assets)
CONSOLIDATED . . . . . . . . . . . . . . . $24,118,000 8.84% $10,913,000 4.00% $13,641,000 5.00%
Goleta National Bank . . . . . . . . . . . $14,820,000 8.11% $ 7,311,000 4.00% $ 9,139,000 5.00%
Core Capital (to Adjusted Tangible Assets)
Palomar Savings and Loan . . . . . . . . . $ 5,865,000 7.11% $ 3,299,000 4.00% $ 4,124,000 5.00%
Tangible Capital (to Tangible Assets)
Palomar Savings and Loan . . . . . . . . . $ 5,865,000 7.11% $ 1,237,000 1.50% N/A N/A
</TABLE>
On November 16, 1999, certain members of the Board of Directors of the Company
agreed to furnish additional capital to Goleta in order to address the
regulatory capital issue raised by the OCC. The capital was provided to the
Company in the form of approximately $7,583,000 of common stock equity and
approximately $3,566,000 in the form of a promissory note, all of which has been
contributed by the Company to Goleta in the form of equity. The promissory note
bears interest at 8.25% per annum and is due and payable on May 16, 2001.
Certain of the directors will also provide approximately $280,000 in additional
equity to the Company, which will be used to prepay a portion of the outstanding
debt. Based on this capital infusion, the OCC has notified Goleta that it is
deemed adequately capitalized as of November 16, 1999. As of this date,
Goleta's key capital ratios, as calculated by the OCC, were as follows:
Total Capital to Risk-Weighted Assets 8.41%
Tier I Capital to Risk-Weighted Assets 8.08%
Tier I Capital to Adjusted Total Assets 15.28%
Certain regulatory restrictions remain on Goleta based on its current adequately
capitalized status. Federal regulations prohibit adequately capitalized banks
from accepting or renewing brokered deposits unless the bank obtains a waiver
from the Federal Deposit Insurance Corporation. This restriction will also
prohibit Goleta from paying "excessive interest rates" on deposits.
In addition to the restrictions on accepting or renewing brokered deposits and
the payment of excessive interest rates on deposits applicable to an institution
that is adequately undercapitalized, an institution that is significantly
undercapitalized faces restrictions on (i) its ability to pay dividends and
management fees, (ii) its ability to pay bonuses and raises to senior executive
officers, and (iii) asset growth and expansion.
Goleta's capital amounts and classification are subject to review by federal
regulators concerning components, risk-weightings and other factors. Rapid
growth, poor loan portfolio performance, poor earnings performance, or a
combination of these factors, could change Goleta's capital position in a
relatively short period of time. Currently, there are no conditions or events
since November 16, 1999 that management believes have changed Goleta's capital
classification.
18
<PAGE>
YEAR 2000
As the year 2000 approaches, a critical issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. In brief, many existing application software products in the marketplace
were designed to only accommodate a two digit date position which represents the
year (for example, '98' is stored on the system and represents the year as
1998). As a result, the year 1999 could be the maximum date value these systems
will be able to accurately process. A time-sensitive software may recognize a
date using "00" as the year 1900 rather than year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions or engage in
similar normal business activities. The Company believes it has adequately
tested all its systems and is well prepared for the year 2000. However,
unexpected issues could arise as a result of the date change which might result
in operational delays.
The Company has adopted a plan of action to minimize the risk of the year 2000
event including the establishment of an oversight committee. This plan is fully
supported by management and the Board of Directors. The committee's goal is to
achieve a year 2000 date conversion with no effect on customers or disruption to
business operations. The plan consists of five phases; awareness, assessment,
renovation, validation, and implementation. In the awareness phase, the
committee was formed consisting of members from all departments within the
Company. This team defined the Year 2000 issue, how and where it would impact
the Company. The assessment phase determined the size of the issue and which
systems were determined as critical to the operations of the Company. During the
renovation phase, systems, hardware, and software were tested for compliance and
any non-compliant systems were replaced. Nothing determined as critical needed
replacement. The Company is currently in the validation phase, where further
testing is being done on any new equipment or systems installed. At the end of
1998, the Company re-tested all systems in a mock exercise as if it was January
2000. During 1999, customer awareness of the Year 2000 issue and what the
Company has done to address the issue has intensified. This includes, but is not
limited to, mailings to our customers, public announcements, and training for
Company employees to address customer concerns.
The Company has initiated formal communications with all of its vendors,
including the U.S. Government, to determine their Year 2000 compliance
readiness. The Company is reviewing the extent the interface systems are
vulnerable to any third parties' year 2000 issues. There can be no guarantee
that the systems of other companies on which the Company systems rely will be
timely converted and would not have an adverse effect on the Company's systems.
Many of the Company's systems include new hardware and software purchased from
vendors who have represented that these systems are already year 2000 compliant.
The Company is in the process of obtaining assurances from vendors that timely
updates will be made available to make all remaining systems compliant.
19
<PAGE>
Management does not anticipate the Company will be required to purchase any
additional hardware or software to be year 2000 compliant. However, management
has incurred and will continue to incur some administrative costs relative to
the identification and testing of the Company's electronic data processing
systems. The costs and timing of the year 2000 project is based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources, third party
modification plans and other factors. As of September 30, 1999, the Company had
incurred $285,612 in expenses getting Year 2000 compliant and anticipates
spending another $50,168 in 1999. However, there can be no guarantee that these
estimates will be achieved and actual results could differ from these plans.
COMMUNITY WEST BANCSHARES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's market risk since the end of
the last fiscal year end of December 31, 1998. For details, reference the
Company's annual filing on Form 10K.
20
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Not Applicable
Item 2 - Changes in Securities and Use of Proceeds
Not Applicable
Item 3 - Defaults upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5 - Other Information
Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10-Material Contracts
27 - Financial Data Schedule
(b) Reports on Form 8-K
Not Applicable
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
12CFR16.3, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
COMMUNITY WEST BANCSHARES
-------------------------
(Registrant)
/s/ Lynda Pullon Radke
-------------------------
Date: November 19, 1999 Lynda Pullon Radke
Senior Vice President
Chief Financial Officer
22
<PAGE>
- - --------------------------------------------------------------------------------
STOCK AND NOTE PURCHASE AGREEMENT
BY AND AMONG
COMMUNITY WEST BANCSHARES,
A CALIFORNIA CORPORATION
AND
MICHAEL A. ALEXANDER, MOUNIR R. ASHAMALLA,
ROBERT H. BARTLEIN, JEAN W. BLOIS, JOHN D. ILLGEN,
JOHN D. MARKEL, WILLIAM R. PEEPLES, AND JAMES R. SIMS
________________
NOVEMBER 16, 1999
- - --------------------------------------------------------------------------------
<PAGE>
STOCK AND NOTE PURCHASE AGREEMENT
---------------------------------
This Stock and Note Purchase Agreement, dated as of November 16, 1999 (the
"AGREEMENT"), is entered into by and among Community West Bancshares, a
California corporation (the "COMPANY"), and Michael A. Alexander, Mounir R.
Ashamalla, Robert H. Bartlein, Jean W. Blois, John D. Illgen, John D. Markel,
William R. Peeples and James R. Sims (collectively, the "PURCHASERS").
RECITALS
--------
WHEREAS, on the terms and conditions set forth in this Agreement, the
Purchasers desire to purchase and the Company desires to issue and sell 582,924
shares (the "SHARES") of common stock of the Company, no par value ("COMMON
STOCK"), for an aggregate price of $12.925;
WHEREAS, certain of the Purchasers and C. Randy Shaffer (collectively,
"OPTIONEES") intend to exercise currently outstanding options to acquire 40,257
shares of Common Stock (the "OPTION SHARES") for aggregate cash consideration to
the Company of $328,296.25;
WHEREAS, on the terms and conditions set forth in this Agreement and a
promissory note, the form of which is attached hereto as Exhibit B, William R.
---------
Peeples (the "LENDER") also desires to lend $3,565,625 to the Company, and the
Company desires to accept the loan; and
WHEREAS, the parties desire that the Company contribute the proceeds from the
sale of stock and the loan to Goleta National Bank (the "BANK"), a direct
wholly-owned subsidiary of the Company, as a capital contribution in order to
increase the capital ratios and the regulatory classification of the Bank;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants
and promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
PURCHASE OF STOCK; REGISTRATION RIGHTS
--------------------------------------
1.1 Purchase of Shares for Cash. Upon the terms and subject to the
-------------------------------
conditions contained herein, each Purchaser shall purchase from the Company, and
the Company shall issue and sell to each Purchaser, the number of Shares set
forth opposite such Purchaser's name in Schedule 1 hereto, at the price per
Share set forth in Section 1.2.
1.2 Purchase Price. The price per Share shall be $12.925. Each
---------------
Purchaser shall pay the aggregate amount set forth opposite such Purchaser's
name in Schedule 1 hereto.
1.3 Registration Rights. The Purchasers shall have the right to
--------------------
require the registration of their Shares under the Securities Act of 1933, as
amended, and the parties hereto shall have the other rights and obligations, set
forth in Exhibit A hereto.
----------
1.4 Share Certificates. Until May 16, 2001, certificates evidencing the
-------------------
Shares, together with stock powers relating thereto executed by each of the
Purchasers, shall be held by the Company to facilitate the Redemption Right (as
defined in Article IX).
ARTICLE II
ISSUANCE OF LOAN
----------------
2.1 Issuance of Loan. Upon the terms and subject to the conditions
------------------
contained herein, Lender agrees to lend to the Company at the First Closing (as
defined below) an amount equal to $3,565,625 (the "Loan").
2.2 Promissory Note. The Loan shall be evidenced by a promissory note
----------------
in the form of Exhibit B hereto, payable to the order of Lender in the original
---------
principal amount of $3,565,625 (together with any replacement, modification,
renewal, amendment or substitution thereof, the "PROMISSORY NOTE").
ARTICLE III
CLOSING
-------
3.1 First Closing. The first closing of the purchase and sale of a
--------------
portion of the Shares and the issuance of the Loan (the "FIRST CLOSING") shall
take place on November 16, 1999 at the offices of Community West Bancshares,
5638 Hollister Avenue, Goleta, California 93117, after the satisfaction or
waiver of all the conditions contained in Articles VI and VII hereof.
(a) Deliveries. At the First Closing,
----------
(i) each Purchaser shall pay to the Company in cash the amount
set forth as the purchase price opposite such Purchaser's name in
Schedule 2 hereto and the Company will issue to each Purchaser the
number of Shares set forth opposite such Purchaser's name in Schedule
2 hereto
(ii) the Optionees shall exercise options to acquire 40,257
Option Shares and shall pay to the Company aggregate cash
consideration therefor of $328,296.25; and
(iii) the Lender will lend to the Company in cash the entire
amount of the Loan, and the Company shall deliver to the Lender the
Promissory Note duly executed by the Company.
(b) Contribution to Bank. Simultaneously with the First Closing, the
---------------------
Company shall contribute all of the proceeds from the sale of the Shares
and from the Loan to the Bank as an equity capital contribution in order to
increase the capital ratios and the regulatory classification of the Bank.
<PAGE>
3.2(a) Second Closing. On or before November 22, 1999, each of the
---------------
Purchasers listed in Schedule 3 hereto, will pay to the Company in cash the
amount set forth as the purchase price opposite such Purchaser's name in
Schedule 3 hereto and the Company will issue to each Purchaser the number of
Shares set forth opposite such Purchaser's name in Schedule 3 hereto (the
"SECOND CLOSING").
(b) Prepayment of Loan. Simultaneously with the Second Closing, the
------------------
Company shall prepay $279,981.35 of the unpaid principal balance of the
Loan, together with interest accrued thereunder on the amount of principal
so prepaid, to the Lender.
ARTICLE IV
REPRESENTATIONS OF THE COMPANY
------------------------------
4.1 The Company hereby represents and warrants to each Purchaser and
the Lender as follows:
(a) Capitalization; Title to Shares. The authorized capital stock of
---------------------------------
the Company consists solely of 10,000,000 shares of Common Stock, no par
value per share. There are 5,479,149 shares of Common Stock issued and
outstanding, all of which have been duly authorized and are validly issued,
fully paid and non-assessable. Except for options to acquire 320,324 shares
and shares to be issued pursuant to this Agreement, there are outstanding
no securities convertible into, exchangeable for, or carrying the right to
acquire, equity securities of the Company, or subscriptions, warrants,
options, rights, calls, agreements, demands or other arrangements or
commitments of any character obligating the Company to issue or dispose of
any of its equity securities or any ownership interest therein or otherwise
relating to the capital stock of the Company. The Shares have been duly
authorized, and, upon receipt by the Company of the purchase price therefor
in accordance with terms of this Agreement, will be validly issued, fully
paid, nonassessable. The sale and delivery of the Shares to the Purchasers
pursuant to this Agreement will vest in the Purchasers legal and valid
title to the Shares, free and clear of any and all liens, security
interests, pledges, mortgages, charges, limitations, claims, restrictions,
rights of first refusal, rights of first offer, rights of first negotiation
or other encumbrances of any kind or nature whatsoever (collectively,
"ENCUMBRANCES"), other than Encumbrances created by any such Purchaser or
under applicable securities laws.
(b) Organization. The Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of California and
has all requisite corporate power and authority to own its properties and
carry on its business as it is now being conducted. The Company is duly
qualified to do business and is in good standing as a foreign corporation
in all jurisdictions where its ownership of property or assets or the
nature of its business makes such qualification necessary, except where the
failure to so qualify would not in the aggregate have a material adverse
effect on the condition (financial or otherwise), business, net worth,
results of operations, earnings, properties or prospects, whether or not
arising in the ordinary course of business, of the Company and its
subsidiaries considered as a whole.
(c) Power and Authority; Effect of Agreement. The Company has all
-------------------------------------------
requisite power and authority to execute and deliver this Agreement and the
agreements, certificates, instruments or other documents to be executed and
delivered in connection herewith, including, but not limited to, the
Promissory Note of even date herewith (collectively, the "ANCILLARY
DOCUMENTS"), and to consummate the transactions contemplated hereby and
thereby. Each of this Agreement and the Ancillary Documents has been duly
and validly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, in each case enforceable against the
Company in accordance with its terms, except to the extent that such
enforceability may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or similar laws of
general application now or hereafter in effect relating to creditors'
rights generally, and (B) general principles of equity. The execution,
delivery and performance by the Company of this Agreement and the Ancillary
Documents and the consummation by the Company of the transactions
contemplated hereby and thereby will not, with or without the giving of
notice or the lapse of time, or both, (i) violate or conflict with any
provision of law, rule or regulation to which the Company or the Bank is
subject or by which any of the property of the Company or the Bank is
encumbered, (ii) violate or conflict with any order, judgment or decree
applicable to the Company or the Bank, (iii) violate or conflict with any
provision of the charter or the Bylaws of the Company or the Bank or (iv)
result in a violation or breach of, or permit any third party to modify,
terminate or rescind any term or provision of, or constitute a default
under, any material contract or instrument, including, without limitation,
any indenture, mortgage, deed of trust, promissory note, loan agreement or
industrial revenue bond, if any, to which the Company or the Bank is a
party or by which any of the property of the Company or the Bank is
encumbered, or result in the creation of an Encumbrance on any of the
assets of the Company or the Bank.
ARTICLE V
REPRESENTATIONS OF THE PURCHASERS AND THE LENDER
------------------------------------------------
5.1 Each Purchaser and the Lender severally hereby represents and
warrants that:
(a) He or she is an individual and has all requisite legal capacity
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
(b) This Agreement has been duly and validly authorized, executed and
delivered by such Purchaser or Lender and constitutes a valid and binding
obligation of such Purchaser or Lender, enforceable against such Purchaser
or Lender in accordance with its terms, except as such enforcement may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium (whether
general or specific) or similar laws of general application now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity.
(c) Such Purchaser is acquiring the Shares for his or her own account,
not as a nominee or agent for any other person, with no present intention
to transfer, sell, convey, or dispose of any of the Shares.
(d) Such Purchaser or Lender has had an opportunity to ask questions
of and to receive answers from the officers of the Company, or a person or
persons acting on the Company's behalf, concerning the terms and conditions
of the purchase of the Shares and issuance of the Loan pursuant hereto.
(e) Such Purchaser or Lender is an "accredited investor" (as defined
in Regulation D promulgated under the Securities Act of 1933, as amended
(the "1933 ACT")) and is able to bear the economic risk of his or her
investment in the Shares and/or the Loan pursuant to this Agreement and
such Purchaser has given consideration as to whether he or she can afford
to hold the Shares for an indefinite period and whether, at this time, such
Purchaser could afford a complete loss of his or her investment in the
Shares.
(f) Such Purchaser understands that there is no public market for the
Shares and that the Shares have not been registered under 1933 Act or under
any state securities ("BLUE SKY") laws, and therefore the Shares cannot be
resold unless registered and qualified under the 1933 Act and Blue Sky laws
or unless an exemption from registration and qualification is available.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATIONS
---------------------------------------
The obligations of the Company contained herein with respect to the
issuance of the Shares to a Purchaser and the issuance of the Promissory Note to
the Lender are subject to the satisfaction, on or prior to the First Closing, of
the following conditions:
6.1 Additional Documents. Such Purchaser and Lender shall execute and
---------------------
deliver such additional documents reasonably requested by the Company that are
necessary or advisable to carry out the provisions of this Agreement.
6.2 Representations and Warranties True. Such Purchaser's and Lender's
-----------------------------------
representations and warranties contained in Article V hereof shall be true at
and as of the First Closing, as if made on and as of such date.
ARTICLE VII
CONDITIONS TO EACH PURCHASER'S AND LENDER'S OBLIGATIONS
-------------------------------------------------------
The obligations of each Purchaser contained herein to purchase the Shares
from the Company and the obligation of the Lender to make the Loan to the
Company are subject to the satisfaction, on or prior to the First Closing, of
the following conditions:
7.1 Additional Documents. The Company shall execute and deliver such
---------------------
additional documents reasonably requested by any Purchaser or the Lender that
are necessary or advisable to carry out the provisions of this Agreement.
7.2. Representations and Warranties True. The Company's
--------------------------------------
representations and warranties contained in Article IV hereof shall be true at
and as of the First Closing, as if made on and as of such date.
7.3 Ancillary Documents. Simultaneously with the sale to the
--------------------
Purchasers of the Shares and the issuance of the Loan at the Closing, the
Company shall have executed and delivered to the Lender the Promissory Note
substantially in the form attached hereto as Exhibit B.
----------
7.4 Closing by All Purchasers. The Purchasers collectively shall have
--------------------------
purchased the aggregate number of Shares set forth in Schedule 2 hereto and the
Optionees shall have performed in accordance with the provisions of Section
3.1(a)(ii) hereof.
7.5 Contribution to Bank. The Company shall have performed its
----------------------
obligation under Section 3.1(b) hereof.
7.6 Notification from OCC. The Bank shall have received written
-----------------------
notification from the Office of the Comptroller of the Currency that, upon
consummation of the First Closing and the Company's performance of its
obligation under Section 3.1(b) hereof, the Bank is deemed "adequately
capitalized" under the Prompt Corrective Action provisions of the Federal
Deposit Insurance Act, as amended.
ARTICLE VIII
RESTRICTIONS ON TRANSFER
------------------------
8.1 Restrictions on Transfer. Each Purchaser agrees that:
--------------------------
(a) It shall not sell, assign, convey, hypothecate or in any other
manner transfer any of the Shares except in compliance with the 1933 Act
and any applicable Blue Sky laws.
(b) Each certificate representing the Shares issued pursuant to this
Agreement shall bear legends in substantially the following form: THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED UNDER THE SECURITIES LAWS
OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY, HYPOTHECATION AND RESALE AND MAY NOT BE TRANSFERRED,
HYPOTHECATED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR QUALIFICATION THEREUNDER
OR EXEMPTION THEREFROM. THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
THE TERMS OF THAT CERTAIN STOCK AND NOTE PURCHASE AGREEMENT, DATED AS OF
NOVEMBER 16, 1999, BY AND AMONG COMMUNITY WEST BANCSHARES AND CERTAIN
PURCHASERS, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF THE
COMPANY.
ARTICLE IX
REDEMPTION RIGHT
----------------
9.1. Redemption Right. The Company shall have the right to repurchase
-----------------
and redeem (the "REDEMPTION RIGHT") all or any portion of the Shares, together
with any rights, securities or additional stock that may be issued in respect of
Shares pursuant to a stock dividend, stock split, reorganization,
reclassification or other similar transaction, which shall also be deemed Shares
for purposes of the Redemption Right. The Redemption Right shall be exercisable
at any time and from time to time after the payment in full of all indebtedness
evidenced by the Promissory Note and on or before May 16, 2001, upon the
affirmative vote of a majority of those directors of the Company who are not
Purchasers or holders of Shares subject to the Redemption Right (the
"INDEPENDENT DIRECTORS"); provided, however, that the Redemption Right shall not
be exercisable if the purchase price per share for such redemption calculated
pursuant to Section 9.2 hereof equals less than $12.925.
9.2 Redemption Price. The purchase price per Share payable by the
-----------------
Company to the holder of a Share to be redeemed upon exercise of the Redemption
Right shall be determined in accordance with the following provisions:
(a) If the Common Stock of the Company at the time is listed or
admitted to trading on any stock exchange, then the purchase price per
Share shall be the average of the closing prices per share of Common Stock
during the most recent five trading days preceding the decision of the
Independent Directors to redeem the Shares on which shares of Common Stock
were actually traded, as such prices are officially quoted in the composite
tape of transactions on such exchange.
(b) If the Common Stock of the Company at the time is neither listed
nor admitted to trading on any stock exchange but is traded in the
over-the-counter market, then the purchase price per Share shall be the
average of the mean between the highest bid and lowest asked prices (or, if
such information is available, the closing selling price) of one share of
Common Stock during the most recent five trading days preceding the
decision of the Independent Directors to redeem the Shares on which shares
of Common Stock were actually traded, as such prices are reported by the
National Association of Securities Dealers through its Nasdaq system or any
successor system.
(c) If the Shares include securities other than Common Stock, the
price per Share to be paid in redemption of such securities shall be
determined in a manner similar to that described above for Common Stock.
9.3 Partial Redemptions. If the Company elects to exercise the
--------------------
Redemption Right with respect to only a portion of the outstanding Shares, the
redemption by the Company shall be made on a pro rata basis from each holder of
Shares based on the total number of Shares then held by each holder, unless the
Company and all of the holders agree to an alternate basis.
9.4 Share Certificates. All certificates evidencing any of the Shares,
------------------
together with stock powers relating thereto executed by each of the Purchasers
and any subsequent holders, shall be held by the Company until May 16, 2001, and
each Purchaser hereby consents and agrees that the Company shall be constituted
as such Purchaser's attorney-in-fact to redeem and cancel Shares and replace
Share certificates pursuant to exercise of the Redemption Right without any
further act of such Purchaser.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the others shall be in writing and delivered in
person or by courier, telegraphed, telexed or by facsimile transmission or
mailed by certified mail, postage prepaid, return receipt requested (such mailed
notice to be effective on the date of such receipt is acknowledged), as follows:
Community West Bancshares
5638 Hollister Avenue
Goleta, California 93117
Attention: Lynda Radke
If to the Company: Telecopy: (805) 698-8092
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Dhiya El-Saden
With a copy to: Telecopy: (213) 229-7520
-------------------------------------
-------------------------------------
Attention:
-------------------------------------
If to Purchasers: Telecopy:
-------------------------------------
-------------------------------------
-------------------------------------
Attention:
-------------------------------------
Telecopy:
-------------------------------------
10.2 Governing Law; Choice of Forum. This Agreement shall be
----------------------------------
construed, interpreted and the rights of the parties determined in accordance
with the internal laws of the State of California without regard to the conflict
of law principles thereof.
10.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.4 Complete Agreement. This Agreement, the Schedules and Exhibits
-------------------
hereto and the documents delivered or to be delivered pursuant to this Agreement
contain or will contain the entire agreement among the parties hereto with
respect to the transactions contemplated herein and shall supersede all previous
oral and written and all contemporaneous oral negotiations, commitments and
understandings.
10.5 Modifications, Amendments and Waivers. The parties may, but only
--------------------------------------
by written agreement:
(a) Extend the time for the performance of any of the obligations or
other acts of the parties hereto;
(b) Waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement;
(c) Waive compliance with any of the covenants or agreements contained
in this Agreement; or
(d) Amend or supplement any of the provisions of this Agreement.
10.6 Headings and Interpretation. The headings contained in this
-----------------------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. No party hereto, nor its
respective counsel, shall be deemed the drafter of this Agreement for purposes
of construing the provisions hereof. The language in all parts of this
Agreement shall in all cases be construed according to its fair meaning, and not
strictly for or against any party hereto.
10.7 Equitable Remedies. In addition to legal remedies, in recognition
------------------
of the fact that remedies at law may not be sufficient, the parties hereto (and
their permitted successors) shall be entitled to equitable remedies for breaches
or defaults hereunder, including, without limitation, specific performance and
injunction.
10.8 Successors. This rights and obligations under this Agreement
----------
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. It shall be a condition to the valid transfer of
any Shares that the transferee agree in writing with the Company to be bound by
the terms of this Agreement applicable to the Purchasers; any purported transfer
of Shares in violation of this provision shall be void.
10.9 Gender and Number. In this Agreement, unless the context
-------------------
otherwise requires, the masculine, feminine and neuter genders and the singular
and the plural include one another.
10.10 Attorneys' Fees and Costs. Should any party hereto institute
----------------------------
any action or proceeding in any court to enforce any provision of this
Agreement, the prevailing party shall be entitled to receive from the losing
party reasonable attorneys' fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to judgment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have
caused this Agreement to be duly executed on their respective behalf by their
respective officers thereunto duly authorized, as of the day and year first
above written.
COMPANY:
COMMUNITY WEST BANCSHARES
By:
Its:
PURCHASERS:
By: /s/ Michael A. Alexander By: /s/ John D. Illgen
---------------------------- ----------------------------
Michael A. Alexander John D. Illgen
By: /s/ Mounir R. Ashamalla By: /s/ John D. Markel
---------------------------- ----------------------------
Mounir R. Ashamalla John D. Markel
By: /s/ Robert H. Bartlein By: /s/ William R. Peeples
---------------------------- ----------------------------
Robert H. Bartlein William R. Peeples
By: /s/ Jean W. Blois By: /s/ James R. Sims
---------------------------- ----------------------------
Jean W. Blois James R. Sims
LENDER:
By:
William R. Peeples
<PAGE>
SCHEDULE 1
TOTAL SHARE PURCHASE
PURCHASER NUMBER OF SHARES PURCHASE PRICE
- - -------------------- ---------------- ---------------
Michael A. Alexander 30,946 $ 399,977.05
Mounir R. Ashamalla 7,736 $ 99,987.80
Robert H. Bartlein 7,736 $ 99,987.80
Jean W. Blois 7,736 $ 99,987.80
John D. Illgen 7,736 $ 99,987.80
John D. Markel 232,108 $ 2,999,995.90
William R. Peeples 275,000 $ 3,554,375.00
James R. Sims 13,926 $ 179,993.55
- - -------------------- ---------------- ---------------
TOTAL 582,924 $ 7,534,292.60
<PAGE>
SCHEDULE 2
FIRST CLOSING
PURCHASER NUMBER OF SHARES PURCHASE PRICE
- - -------------------- ---------------- ---------------
Michael A. Alexander 30,946 $ 399,977.05
Mounir R. Ashamalla 7,736 $ 99,987.80
Robert H. Bartlein 7,736 $ 99,987.80
Jean W. Blois 7,736 $ 99,987.80
John D. Markel 232,108 $ 2,999,995.90
William R. Peeples 275,000 $ 3,554,375.00
- - -------------------- ---------------- ---------------
TOTAL 561,262 $ 7,254,311.30
<PAGE>
SCHEDULE 3
SECOND CLOSING
PURCHASER NUMBER OF SHARES PURCHASE PRICE
- - -------------- ---------------- --------------
John D. Illgen 7,736 $ 99,987.80
James R. Sims 13,926 $ 179,993.55
- - -------------- ---------------- --------------
TOTAL 21,662 $ 279,981.35
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS
ARTICLE I
DEFINITIONS
As used in this Exhibit A, the following capitalized terms shall have the
following respective meanings:
Agreement: The Agreement to which this Exhibit A is attached.
---------
Appraiser: A nationally recognized or major regional investment banking
---------
firm or firm of independent certified public accountants of recognized standing.
Business Day: A day other than a Saturday, Sunday or other day on which
-------------
state chartered banks in the State of California are authorized by law to remain
closed.
Common Stock: Common Stock, no par value, of the Company.
-------------
Company: Community West Bancshares, a California corporation, and any successor
- - -------
thereto.
Demand Registration: The meaning set forth in Section 2.02.
--------------------
Exchange Act: The Securities Exchange Act of 1934, as amended from time to
------------
time.
Expiration Date: 11:59 p.m., Los Angeles, California time, on November
----------------
16, 2009.
Holder: A holder of Registrable Securities.
------
NASD: National Association of Securities Dealers, Inc.
----
Nasdaq: The automated quotation system of the NASD.
------
Majority Holders: At any time of determination, the holders of a majority
-----------------
of the Registrable Securities.
Per Share Market Value: As of any particular date of determination, (i) if
----------------------
the Common Stock is then listed on a United States securities exchange or on
Nasdaq, the average of the closing sales prices (or, if no trade occurs on a
relevant day, the average of the closing bid and asked prices on such day) per
share of Common Stock (as reported by Bloomberg Information Services, Inc., or
any successor reporting service) on the principal United States securities
exchange on which the Common Stock is traded (or, if not traded on a national
securities exchange, on Nasdaq) on the five (5) consecutive Business Days
immediately preceding such date of determination, (ii) if the Common Stock is
not then listed on a United States securities exchange or on Nasdaq, the average
of the closing bid and asked prices per share of Common Stock in the United
States domestic over-the-counter market, as reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), on the five (5) consecutive Business Days
immediately preceding such date of determination, or (iii) if the Common Stock
is not then publicly traded, the fair market value of a share of Common Stock as
of such date of determination as determined by an Appraiser selected in good
faith by the Company, whose fees and expenses shall be borne by the Company.
Person: An individual, partnership, joint venture, corporation, trust,
------
limited liability company, unincorporated organization or government or any
department or agency thereof.
Piggyback Registration and Piggyback Registration Rights: The respective
----------------------- -----------------------------
meanings set forth in Section 2.01.
Prospectus: Any prospectus included in any Registration Statement, as
----------
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments and all material incorporated by
reference in such Prospectus.
Public Offering: A public offering of any of the Company's equity or debt
----------------
securities pursuant to a registration statement under the Securities Act.
Purchasers: The meaning set forth in the Agreement.
----------
Registrable Securities: The shares of Common Stock acquired by the
-----------------------
Purchasers pursuant to the Agreement (unless and until such securities have been
sold in a Public Offering or pursuant to Rule 144(k) promulgated under the
Securities Act), including, without limitation, securities that may thereafter
be issued by the Company in respect of any such securities by means of any stock
splits, stock dividends, recapitalizations, reclassifications or the like.
Registration Expenses: Any and all expenses incurred in connection with
----------------------
any registration or action incident to performance of or compliance by the
Company with Article II, including, without limitation, (i) all SEC, national
securities exchange and NASD registration and filing fees; all listing fees and
all transfer agent fees; (ii) all fees and expenses of complying with state
securities or blue sky laws (including the fees and disbursements of counsel for
the underwriters in connection with blue sky qualifications of the Registrable
Securities); (iii) all printing, mailing, messenger and delivery expenses and
(iv) all fees and disbursements of counsel for the Company and of its
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, but
excluding underwriting discounts and commissions applicable to Registrable
Securities and fees of counsel or accountants retained by the holders of
Registrable Securities to advise them in their capacity as Holders of
Registrable Securities.
Registration Statement: Any registration statement of the Company filed or to
- - -----------------------
be filed with the SEC under the Securities Act that covers any class of
securities included in the Registrable Securities, including all amendments
(including post-effective amendments) and supplements thereto, all exhibits
thereto and all material incorporated therein by reference.
SEC: The Securities and Exchange Commission or any other federal agency at the
- - ---
time administering the Securities Act or the Exchange Act.
Securities Act: The Securities Act of 1933, as amended from time to time.
- - ---------------
ARTICLE II
REGISTRATION UNDER THE SECURITIES ACT OF 1933
SECTION 2.01: PIGGYBACK REGISTRATION.
------------- -----------------------
(a) Right to Include Registrable Securities. If, at any time or from
-----------------------------------------
time to time, the Company proposes to register any of its Common Stock under the
Securities Act on any form for the registration of securities under such Act,
whether or not for its own account (other than by a registration statement on
Form S-4 or S-8 or any successor to such forms) (a "Piggyback Registration"), it
----------------------
shall as expeditiously as possible give written notice to all Holders of its
intention to do so and of such Holders' rights under this Section 2.01
("Piggyback Registration Rights"). Upon the written request of any such Holder
------------------------------
made within 20 days after receipt of any such notice for the inclusion in such
registration of a number of Registrable Securities specified in such notice, the
Company shall include in the applicable Registration Statement the Registrable
Securities so specified by such Holder in such notice, and the Company shall
keep such registration statement in effect and maintain compliance with all
applicable Federal and state laws and regulations for the period necessary for
such Holder to effect the proposed sale or other disposition (but in no event
for a period greater than 180 days). Such Piggyback Registration Rights shall
expire on the Expiration Date.
(b) Withdrawal of Piggyback Registration by Company. If, at any time
-------------------------------------------------
after giving written notice of its intention to register any securities in a
Piggyback Registration but prior to the effective date of the related
Registration Statement, the Company shall determine for any reason not to
register such securities, the Company shall give written notice of such
determination to each Holder and, thereupon, shall be relieved of its obligation
to register any Registrable Securities in connection with such Piggyback
Registration.
(c) Piggyback Registration of Underwritten Public Offerings. If a
-------------------------------------------------------
Piggyback Registration involves an offering by or through underwriters, then,
(i) all Holders requesting to have their Registrable Securities included in the
Company's Registration Statement must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as apply
to other selling shareholders and (ii) any Holder requesting to have his or her
Registrable Securities included in such Registration Statement may elect in
writing, not later than three Business Days prior to the effectiveness of the
Registration Statement filed in connection with such registration, not to have
his or her Registrable Securities so included in connection with such
registration.
(d) Payment of Registration Expenses for Underwritten Piggyback
-----------------------------------------------------------------
Registration. The Company shall pay all Registration Expenses associated with
- - ------------
each Piggyback Registration and the sale of shares thereunder.
(e) Priority in Piggyback Registration. If a Piggyback Registration
-------------------------------------
involves an underwritten offering and the managing underwriter advises the
Company and the Holders requesting registration that, in its opinion, the number
of securities requested to be included in such registration by the Holders and
other shareholders having the contractual right to do so exceeds the number that
can be sold in such offering without jeopardizing the success of the offering,
the Company will include in such registration (i) first, the securities the
Company proposes to register, issue and sell, (ii) second, securities of any
shareholders whose exercise of registration rights initiated the Company's
preparation of the applicable Registration Statement, and (iii) third, the
number of shares requested for inclusion in such registration by Holders, and by
any other shareholders having the contractual right to do so, that, in the
opinion of such underwriter, can be sold without jeopardizing the success of the
offering, with the number of shares to be included in such registration from
each such Holder and other shareholder to be reduced pro rata on the basis of
the relative number of shares each such Holder and other shareholder originally
requested to be included in such registration.
SECTION 2.02: DEMAND REGISTRATION.
------------- ---------------------
(a) Request for Registration. At any time after 180 days following the
------------------------
effective date of any Public Offering of Common Stock and prior to the
Expiration Date, the Majority Holders may demand registration by the Company for
a Public Offering of their Registrable Securities under the Securities Act so
long as the aggregate value (based on the Per Share Market Value) as of the date
of such demand of the Registrable Securities requested for inclusion in such
registration and Public Offering equals or exceeds $1 million (a "Demand
------
Registration"). Promptly after receiving such a demand, the Company shall
- - ------------
notify all other Holders in writing of such demand and shall allow all other
Holders to participate in such Demand Registration. The Company shall be
obligated to undertake two Demand Registrations through effectiveness with the
SEC and closing; provided, however, that such obligation shall expire on the
Expiration Date.
(b) Nature of Offering. The Majority Holders may elect to have each
--------------------
Demand Registration cover either an underwritten Public Offering or a shelf
registration. The Company shall maintain any such shelf registration effective
with the SEC for a minimum of 180 days. The Majority Holders shall have the
right to select one or more managing underwriters for any underwritten Public
Offering with the consent of the Company, which consent shall not be
unreasonably withheld.
(c) Payment of Registration Expenses for Demand Registration. The
-------------------------------------------------------------
Company shall pay all Registration Expenses associated with each Demand
Registration and the sale of shares thereunder.
SECTION 2.03: REGISTRATION PROCEDURES. If and whenever the Company is
------------- -----------------------
required to effect or cause the registration of any Registrable Securities under
the Securities Act as provided in this Article II, the Company shall use its
best efforts to take action pursuant to all applicable Federal and state laws
and regulations to permit the sale or other disposition of the applicable
Registrable Securities and shall, as expeditiously as practicable:
(a) promptly prepare and file with the SEC, and use its best efforts to
have declared effective by the SEC, the applicable Registration Statement, which
shall comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith;
(b) furnish to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Registration
Statement, the Prospectus or the Prospectuses (including each preliminary
prospectus) and any amendment or supplement thereto as they may reasonably
request no later than two days following its filing with the SEC, which, in any
event will be no later than two business days prior to the effective date of
such Registration Statement;
(c) (i) use its best efforts to prepare and file with the SEC such
amendments to the Registration Statement as may be necessary to keep it
effective for the applicable period; (ii) cause any Prospectus to be amended or
supplemented as required and to be filed as required by Rule 424 or any similar
rule that may be adopted under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the SEC with respect to the
Registration Statement or any amendments thereto; and (iv) comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statements during the applicable period
in accordance with the intended method or methods of distribution by the
Holders;
(d) furnish to the selling Holders and underwriters, upon request and
without charge, as many copies of any Prospectus and any amendment or supplement
thereto as they may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities;
(e) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or blue sky laws of such
jurisdictions in the United States and its territories and possessions as the
selling Holders and managing underwriters may reasonably request and keep such
registration or qualification effective during the period the Registration
Statement is required to be kept effective; provided, however, that in
connection therewith, the Company shall not be required to (i) qualify as a
foreign corporation to do business or to register as a broker or dealer in any
such jurisdiction where it would not otherwise be required to qualify or
register but for this Section 2.03(e), (ii) subject itself to taxation in any
such jurisdiction with respect to such registration or qualification, or (iii)
file a general consent to service of process in any such jurisdiction;
(f) notify the selling Holders and managing underwriters promptly (i) when
the Registration Statement and any post-effective amendment thereto has become
effective, (ii) when any amendment or supplement to a Prospectus has been filed
with the SEC, except for an amendment via incorporation by reference of
subsequent filings under the Exchange Act, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
the Registration Statement or any part thereof or the initiation of any
proceedings for that purpose, (iv) if the Company receives any notification with
respect to the suspension of the qualification of the Registrable Securities for
offer or sale in any jurisdiction or the initiation of any proceeding for such
purpose, and (v) of the happening of any event during the period the
Registration Statement is effective as a result of which (A) the Registration
Statement contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or (B) a Prospectus as then amended or supplemented
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(g) use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of the Registration Statement by the SEC or any state
securities authority as promptly as possible;
(h) enter into such agreements (including an underwriting agreements) and
take all such other actions reasonably required in connection therewith in order
to expedite or facilitate the disposition of such Registrable Securities and in
such connection, if the registration is in connection with an underwritten
offering (i) make such representations and warranties to the underwriters in
such form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions in form, scope and substance shall be reasonably
satisfactory to the underwriters) addressed to the underwriters and the Holders
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (iii) obtain "cold comfort" letters and updates thereof from the
Company's accountants addressed to the underwriters and the Holders, such
letters to be in customary form and to cover matters of the type customarily
covered in "cold comfort" letters to underwriters in connection with
underwritten offerings; (iv) set forth in full, in any underwriting agreement
entered into, the indemnification provisions and procedures of Section 2.04
hereof with respect to all parties to be indemnified pursuant to said Section;
and (v) deliver such documents and certificates as may be reasonably requested
by the underwriters to evidence compliance with clause (i) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company; the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
(i) make available for inspection by one or more representatives of the
selling Holders, any underwriter participating in any disposition pursuant to
such registration, and any attorney or accountant retained by such Holders or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
representatives in connection therewith;
(j) cooperate with the selling Holders and managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend and
enable certificates for such shares to be issued for such numbers of shares and
registered in such names as the selling Holders and managing underwriters may
reasonably request; and
(k)use its best efforts to cause all Registrable Securities to be listed on
any securities exchange on which the Common Stock is then listed, or included on
Nasdaq if the Common Stock is then so included.
Each Holder of Registrable Securities as to which any registration is being
effected shall furnish to the Company such information regarding the
distribution of such securities and such other information as may otherwise be
required by the Securities Act to be included in such Registration Statement.
SECTION 2.04: INDEMNIFICATION.
------------- ---------------
(a) Indemnification by Company. In connection with each Registration
----------------------------
Statement relating to disposition of Registrable Securities, the Company shall
indemnify and hold harmless each Holder and each underwriter of Registrable
Securities and each Person, if any, who controls such Holder or underwriter
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), and each of their respective officers, directors, employees,
agents and attorneys, against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other fees and expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject under the Securities Act, the Exchange
Act or other Federal or state law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus or
any amendment thereof or supplement thereto, or arise out of or are based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that such indemnity shall not inure to the benefit of any
Holder or underwriter (or any Person controlling such Holder or underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) on account of any losses, claims, damages or liabilities arising
from the sale of Registrable Securities if such untrue statement or omission or
alleged untrue statement or omission was made in such Registration Statement,
Prospectus or preliminary prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in writing to the
Company by the Holder or underwriter specifically for use therein andprovided,
further, that with respect to any preliminary prospectus, the foregoing
indemnification shall not inure to the benefit of any Holder from whom the
person asserting any loss, claim, damage, liability or expense purchased
Registrable Securities, or to any person controlling such Holder, if copies of
the Prospectus were timely delivered to such Holder and a copy of the Prospectus
(as then amended or supplemented if the Company shall have timely furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Holder to such person, if required by law to have been so delivered, at or prior
to the written confirmation of the sale of the Registrable Securities to such
person, and if such Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or expense. This
indemnity agreement shall be in addition to any liability that the Company may
otherwise have.
(b) Indemnification by Holder. In connection with each Registration
---------------------------
Statement, each selling Holder shall indemnify, to the same extent as the
indemnification provided by the Company in Section 2.04(a), the Company, its
directors and each officer who signs the Registration Statement and each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act) but only insofar as such losses, claims,
damages and liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission that was made in the
Registration Statement, the Prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, in reliance upon and in conformity with
information furnished in writing by such Holder to the Company specifically for
use therein. In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Procedure. Any party that proposes to
------------------------------------
assert the right to be indemnified hereunder will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or parties
under this Section, notify each such indemnifying party of the commencement of
such action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in Section 2.04(a) or 2.04(b) shall be available to
any party who shall fail to give notice as provided in this Section 2.04(c) if
and to the extent that the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from any
liability that it may have to any indemnified party for contribution or
otherwise than under this Section. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and the approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses, except as provided below and except for the reasonable costs
of investigation subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of counsel
by such indemnified party has been authorized in writing by the indemnifying
party, (ii) the indemnified party shall have reasonably concluded, based on the
advice of its counsel, that there may be a conflict of interest between the
indemnifying party and the indemnified party in the conduct of the defense of
such action (in which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified party) or (iii)
the indemnifying party shall not have employed counsel to assume the defense of
such action within a reasonable time after notice of the commencement thereof,
in each of which cases the fees and expenses of counsel shall be at the expense
of the indemnifying party, it being understood, however, that the indemnifying
party shall only be liable for the expenses of one separate counsel and local
counsel in each relevant jurisdiction, which counsel shall be reasonably
approved by the indemnifying party. An indemnifying party shall not be liable
for any settlement of any action, suit, proceeding or claim effected without its
written consent.
(d) Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnification provided for in
Section 2.04(a) and 2.04(b) is due in accordance with its terms but for any
reason is held to be unavailable from the Company or any Holder, the Company and
the selling Holders shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other fees and expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claims asserted, but after deducting any
contribution received by the Company from persons other than the Holders, such
as persons who control the Company within the meaning of the Securities Act,
officers of the Company who signed any Registration Statement and directors of
the Company, who may also be liable for contribution) to which the Company and
one or more of the Holders may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and
each such Holder on the other from the offering of the Registrable Securities
or, if such allocation is not permitted by applicable law or indemnification is
not available as a result of the indemnifying party not having received notice
as provided in Section 2.04(c) hereof, in such proportion as is appropriate to
reflect not only the relative benefits referred to above but also the relative
fault of the Company on the one hand and each such Holder on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and each
such Holder shall be deemed to be in the same proportion as (x) the total
proceeds from the offering (net of underwriting discounts but before deducting
expenses) received by the Company, bear to (y) the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation. The relative fault of the
Company or any such Holder shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
related to information supplied by the Company or any such Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Holders agree
that it would not be just and equitable if contribution pursuant to this Section
2.04(d) were determined by pro rata allocation (even if the Holders were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 2.04(d), (i) in no case shall any
Holder be liable or responsible for any amount in excess of the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation, and (ii) the Company
shall be liable and responsible for any amount in excess of such dollar amount;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 2.04, each person, if any, who
controls a Holder within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
such Holder, and each person, if any, who controls the Company within the
meaning of the Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed any Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) in the
immediately preceding sentence of this Section 2.04(d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section 2.04. No party shall be liable for contribution with respect to any
action, suit, proceeding or claim settled without its written consent. Each
Holder's obligations to contribute pursuant to this Section 2.04(d) are several
in proportion to their respective shares sold and not joint.
(e) Specific Performance. The Company and the Holder acknowledge
---------------------
that remedies at law for the enforcement of this Section 2.04 may be inadequate
and intend that this Section 2.04 shall be specifically enforceable.
<PAGE>
EXHIBIT B
PROMISSORY NOTE
---------------
$3,565,625.00 Goleta, California
November 16, 1999
FOR VALUE RECEIVED, Community West Bancshares, a California corporation
("PAYOR"), promises to pay to the order of William R. Peeples ("PAYEE"), in
lawful currency of the United States of America, the principal sum of Three
Million, Five Hundred Sixty-Five Thousand, Six Hundred, Twenty-Five Dollars
($3,565,625.00) and to pay interest on the outstanding principal of this
Promissory Note (this "NOTE") in accordance with the terms of this Note. This
Note is delivered in connection with that certain Stock and Note Purchase
Agreement of even date (the "PURCHASE AGREEMENT") among Payor, Payee and the
other Purchasers (as defined in the Purchase Agreement). All payments of
principal, interest and other amounts payable under this Note shall be made by
wire transfer of immediately available funds to an account specified in writing
by Payee from time to time, without set-off or counterclaim whatsoever, and free
from, and without reduction for, any and all present or future taxes, levies,
imposts, duties, fees, charges, deductions, withholdings, restrictions or
conditions of any nature.
1. INTEREST. Interest shall begin to accrue on the unpaid principal
--------
balance of this Note commencing on the date hereof and continuing until
repayment of this Note in full at the rate of eight and one-quarter percent
(8.25%) per annum calculated on the basis of a 360 day year and actual days
elapsed. From and after the earlier of the Maturity Date or the Acceleration
Date (each as defined below), interest shall accrue on the unpaid principal
balance of this Note and on all unpaid interest accrued through the earlier of
the Maturity Date or the Acceleration Date under this Note until payment of this
Note in full at the rate of ten percent (10.00%) per annum calculated on the
basis of a 360 day year and actual days elapsed.
2. MATURITY. Subject to Section 4 hereof, the entire unpaid principal
--------
balance of this Note together with all accrued and unpaid interest under this
Note shall be due and payable on May 16, 2001 (the "MATURITY DATE"). All
payments received by Payee in respect of this Note shall be applied first
against costs of collection (if any), then against accrued and unpaid interest,
and then against principal.
3. PREPAYMENT. Payor shall be permitted to prepay the unpaid principal
----------
balance of this Note, in whole or in part, together with accrued but unpaid
interest under this Note at any time and from time to time without premium or
penalty. All prepayments received by Payee shall be applied in the order
provided in Section 2. Notwithstanding the foregoing, the prepayment of
$-----279,981.35 of the unpaid principal balance of this Note required by
Section 3.2 of the Purchase Agreement shall be accompanied by the payment of
only the interest accrued on the amount of principal so prepaid.
4. DEFAULT. Payor will be deemed to be in default under this Note, and
-------
the unpaid principal balance of this Note, together with all interest accrued
under this Note, will become immediately due and payable, upon any material
breach or default by the Company under this Note or the Purchase Agreement (such
due date being referred to herein as the "ACCELERATION DATE").
5. MISCELLANEOUS.
-------------
(a) Payor hereby waives presentment, demand, protest, notice of dishonor,
diligence and all other notices, any release or discharge arising from any
extension of time, discharge of a prior party, release of any or all of any
security given from time to time for this Note, or other cause of release or
discharge other than actual payment in full hereof.
(b) Payee shall not be deemed, by any act or omission, to have waived any
of its rights or remedies hereunder unless such waiver is in writing and signed
by Payee and then only to the extent specifically set forth in such writing. A
waiver with reference to one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy as to a subsequent event. No delay or
omission of Payee in exercising any right, whether before or after a default
hereunder, shall impair any such right or shall be construed to be a waiver of
any right or default, and the acceptance at any time by Payee of any past-due
amount shall not be deemed to be a waiver of the right to require prompt payment
when due of any other amounts then or thereafter due and payable.
(c) Time is of the essence hereof. Upon any default hereunder, Payee may
exercise all rights and remedies provided for herein and by law or equity,
including, but not limited to, the right to immediate payment in full of this
Note.
(d) The remedies of Payee as provided herein, or any one or more of them,
or in law or in equity, shall be cumulative and concurrent, and may be pursued
singularly, successively or together at Payee's sole discretion, and may be
exercised as often as occasion therefor shall occur.
(e) It is expressly agreed that if this Note is referred to an attorney or
if suit is brought to collect or interpret this Note or any part hereof or to
enforce or protect any rights conferred upon Payee by this Note or any other
document evidencing or securing this Note, then Payor promises and agrees to pay
all costs, including attorneys' fees, incurred by Payee.
6. NO USURY. Nothing contained in this Note or in any agreements
---------
between Payor and Payee shall be deemed to require the payment by Payor of
interest on the indebtedness evidenced by this Note in excess of the rate that
Payee may lawfully contract to charge under applicable usury and other laws (the
"MAXIMUM LEGAL RATE"). All agreements between Payor and Payee deemed to pertain
to this Note are expressly limited so that in no contingency or event shall the
amount paid or agreed to be paid to Payee for the use, forbearance, or detention
of money to be loaned hereunder exceed the Maximum Legal Rate. If, under any
circumstance whatsoever, the fulfillment of any obligation under this Note or
any other agreement between Payor and Payee deemed to pertain to this Note shall
involve exceeding the Maximum Legal Rate, then the obligation to be fulfilled by
Payor shall be reduced by the minimum amount necessary so that such obligation
shall not exceed the Maximum Legal Rate.
7. WAIVER OF JURY TRIAL. EACH OF PAYOR AND PAYEE HEREBY AGREES NOT TO
---------------------
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE BY JURY, AND EACH WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THIS NOTE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY PAYOR AND PAYEE, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY
WOULD OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
8. GOVERNING LAW. The Note shall be governed by and construed in
--------------
accordance with the internal laws, and not the laws of conflicts or choice of
law, of the State of California and the applicable federal laws of the United
States of America.
9. AMENDMENTS AND WAIVERS. This Note may not be modified, amended,
------------------------
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of Payor or Payee, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.
10. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and
------------------------
inure to the benefit of Payor and Payee, and their respective successors,
assigns, heirs, executors and administrators.
11. SEVERABILITY. Whenever possible, each provision of this Note shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this Note shall be held to be prohibited or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note.
IN WITNESS WHEREOF, Payor has executed this Note as of the date first above
written.
COMMUNITY WEST BANCSHARES
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE>
PROMISSORY NOTE
---------------
$3,565,625.00 Goleta, California
November 16, 1999
FOR VALUE RECEIVED, Community West Bancshares, a California corporation
("PAYOR"), promises to pay to the order of William R. Peeples ("PAYEE"), in
lawful currency of the United States of America, the principal sum of Three
Million, Five Hundred Sixty-Five Thousand, Six Hundred, Twenty-Five Dollars
($3,565,625.00) and to pay interest on the outstanding principal of this
Promissory Note (this "NOTE") in accordance with the terms of this Note. This
Note is delivered in connection with that certain Stock and Note Purchase
Agreement of even date (the "PURCHASE AGREEMENT") among Payor, Payee and the
other Purchasers (as defined in the Purchase Agreement). All payments of
principal, interest and other amounts payable under this Note shall be made by
wire transfer of immediately available funds to an account specified in writing
by Payee from time to time, without set-off or counterclaim whatsoever, and free
from, and without reduction for, any and all present or future taxes, levies,
imposts, duties, fees, charges, deductions, withholdings, restrictions or
conditions of any nature.
1. INTEREST. Interest shall begin to accrue on the unpaid principal
--------
balance of this Note commencing on the date hereof and continuing until
repayment of this Note in full at the rate of eight and one-quarter percent
(8.25%) per annum calculated on the basis of a 360 day year and actual days
elapsed. From and after the earlier of the Maturity Date or the Acceleration
Date (each as defined below), interest shall accrue on the unpaid principal
balance of this Note and on all unpaid interest accrued through the earlier of
the Maturity Date or the Acceleration Date under this Note until payment of this
Note in full at the rate of ten percent (10.00%) per annum calculated on the
basis of a 360 day year and actual days elapsed.
2. MATURITY. Subject to Section 4 hereof, the entire unpaid principal
--------
balance of this Note together with all accrued and unpaid interest under this
Note shall be due and payable on May 16, 2001 (the "MATURITY DATE"). All
payments received by Payee in respect of this Note shall be applied first
against costs of collection (if any), then against accrued and unpaid interest,
and then against principal.
3. PREPAYMENT. Payor shall be permitted to prepay the unpaid principal
----------
balance of this Note, in whole or in part, together with accrued but unpaid
interest under this Note at any time and from time to time without premium or
penalty. All prepayments received by Payee shall be applied in the order
provided in Section 2. Notwithstanding the foregoing, the prepayment of
$279,981.35 of the unpaid principal balance of this Note required by
Section 3.2 of the Purchase Agreement shall be accompanied by the payment of
only the interest accrued on the amount of principal so prepaid.
4. DEFAULT. Payor will be deemed to be in default under this Note, and
-------
the unpaid principal balance of this Note, together with all interest accrued
under this Note, will become immediately due and payable, upon any material
breach or default by the Company under this Note or the Purchase Agreement (such
due date being referred to herein as the "ACCELERATION DATE").
5. MISCELLANEOUS.
-------------
(a) Payor hereby waives presentment, demand, protest, notice of
dishonor, diligence and all other notices, any release or discharge arising from
any extension of time, discharge of a prior party, release of any or all of any
security given from time to time for this Note, or other cause of release or
discharge other than actual payment in full hereof.
(b) Payee shall not be deemed, by any act or omission, to have waived
any of its rights or remedies hereunder unless such waiver is in writing and
signed by Payee and then only to the extent specifically set forth in such
writing. A waiver with reference to one event shall not be construed as
continuing or as a bar to or waiver of any right or remedy as to a subsequent
event. No delay or omission of Payee in exercising any right, whether before or
after a default hereunder, shall impair any such right or shall be construed to
be a waiver of any right or default, and the acceptance at any time by Payee of
any past-due amount shall not be deemed to be a waiver of the right to require
prompt payment when due of any other amounts then or thereafter due and payable.
(c) Time is of the essence hereof. Upon any default hereunder, Payee
may exercise all rights and remedies provided for herein and by law or equity,
including, but not limited to, the right to immediate payment in full of this
Note.
(d) The remedies of Payee as provided herein, or any one or more of
them, or in law or in equity, shall be cumulative and concurrent, and may be
pursued singularly, successively or together at Payee's sole discretion, and may
be exercised as often as occasion therefor shall occur.
(e) It is expressly agreed that if this Note is referred to an attorney
or if suit is brought to collect or interpret this Note or any part hereof or to
enforce or protect any rights conferred upon Payee by this Note or any other
document evidencing or securing this Note, then Payor promises and agrees to pay
all costs, including attorneys' fees, incurred by Payee.
6. NO USURY. Nothing contained in this Note or in any agreements
---------
between Payor and Payee shall be deemed to require the payment by Payor of
interest on the indebtedness evidenced by this Note in excess of the rate that
Payee may lawfully contract to charge under applicable usury and other laws (the
"MAXIMUM LEGAL RATE"). All agreements between Payor and Payee deemed to pertain
to this Note are expressly limited so that in no contingency or event shall the
amount paid or agreed to be paid to Payee for the use, forbearance, or detention
of money to be loaned hereunder exceed the Maximum Legal Rate. If, under any
circumstance whatsoever, the fulfillment of any obligation under this Note or
any other agreement between Payor and Payee deemed to pertain to this Note shall
involve exceeding the Maximum Legal Rate, then the obligation to be fulfilled by
Payor shall be reduced by the minimum amount necessary so that such obligation
shall not exceed the Maximum Legal Rate.
7. WAIVER OF JURY TRIAL. EACH OF PAYOR AND PAYEE HEREBY AGREES NOT TO
---------------------
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE BY JURY, AND EACH WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THIS NOTE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY PAYOR AND PAYEE, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY
WOULD OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
8. GOVERNING LAW. The Note shall be governed by and construed in
--------------
accordance with the internal laws, and not the laws of conflicts or choice of
law, of the State of California and the applicable federal laws of the United
States of America.
9. AMENDMENTS AND WAIVERS. This Note may not be modified, amended,
------------------------
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of Payor or Payee, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.
10. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and inure
-----------------------
to the benefit of Payor and Payee, and their respective successors, assigns,
heirs, executors and administrators.
11. SEVERABILITY. Whenever possible, each provision of this Note shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this Note shall be held to be prohibited or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note.
IN WITNESS WHEREOF, Payor has executed this Note as of the date first above
written.
COMMUNITY WEST BANCSHARES
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 5215
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6035
<TRADING-ASSETS> 26010
<INVESTMENTS-HELD-FOR-SALE> 5134
<INVESTMENTS-CARRYING> 496
<INVESTMENTS-MARKET> 500
<LOANS> 279433
<ALLOWANCE> 2048
<TOTAL-ASSETS> 343368
<DEPOSITS> 306737
<SHORT-TERM> 0
<LIABILITIES-OTHER> 9558
<LONG-TERM> 0
0
0
<COMMON> 17615
<OTHER-SE> 9458
<TOTAL-LIABILITIES-AND-EQUITY> 343368
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<INTEREST-DEPOSIT> 9483
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<EXPENSE-OTHER> 21194
<INCOME-PRETAX> 6832
<INCOME-PRE-EXTRAORDINARY> 6832
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4021
<EPS-BASIC> .74
<EPS-DILUTED> .73
<YIELD-ACTUAL> 5
<LOANS-NON> 2628
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2129
<CHARGE-OFFS> 1946
<RECOVERIES> 90
<ALLOWANCE-CLOSE> 2048
<ALLOWANCE-DOMESTIC> 2048
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
