UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 000-23575
COMMUNITY WEST BANCSHARES
(Exact name of registrant as specified in its charter)
California 77-0446957
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
445 Pine Avenue, Goleta, California 93117
(Address of principal executive offices) (Zip Code)
(805) 692-5821
(Registrant's telephone number, including area code)
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 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.
[X] YES [ ] NO
Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Exchange Act). [ ] YES [X] NO
Number of shares of common stock of the registrant outstanding as of May
10, 2004: 5,713,269
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED INCOME STATEMENTS 4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL 7
STATEMENTS
The financial statements included in this Form 10-Q should be read
with reference to Community West Bancshares' Annual Report on Form
10-K for the fiscal year ended December 31, 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 19
ITEM 4. CONTROLS AND PROCEDURES 19
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 20
SECURITY HOLDERS
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES
- ----------
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
COMMUNITY WEST BANCSHARES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2004 2003
(UNAUDITED)
----------- --------------
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from banks $ 4,910 $ 5,758
Interest-earning deposits in other financial institutions 5,059 5,031
Federal funds sold 4,515 11,267
----------- --------------
Cash and cash equivalents 14,484 22,056
Time deposits in other financial institutions 594 792
Investment securities available-for-sale, at fair value; amortized cost of $21,192 at
March 31, 2004 and $15,455 at December 31, 2003 21,312 15,432
Investment securities held-to-maturity, at amortized cost; fair value of $4,061 at March 31,
2004 and $5,035 at December 31, 2003 4,031 5,036
Interest only strips, at fair value 3,352 3,548
Loans:
Loans held for sale, at lower of cost or fair value 44,643 42,038
Loans held for investment, net of allowance for loan losses of $2,858 at March 31, 2004 and
$2,652 at December 31, 2003 181,654 166,874
Securitized loans, net of allowance for loan losses of $1,515 at March 31, 2004 and $2,204
at December 31, 2003 32,501 35,362
----------- --------------
Total loans 258,798 244,274
Federal Home Loan Bank stock, at cost 805 -
Federal Reserve Bank stock, at cost 812 812
Servicing assets 2,860 2,499
Other real estate owned, net - 527
Premises and equipment, net 1,594 1,632
Other assets 6,656 7,642
----------- --------------
TOTAL ASSETS $ 315,298 $ 304,250
=========== ==============
LIABILITIES
Deposits:
Non-interest-bearing demand $ 38,518 $ 42,417
Interest-bearing demand 37,194 38,115
Savings 24,557 15,559
Time certificates of $100,000 or more 23,572 19,673
Other time certificates 113,517 109,091
----------- --------------
Total deposits 237,358 224,855
Securities sold under agreements to repurchase 14,255 14,394
Bonds payable in connection with securitized loans 22,876 26,100
Other liabilities 5,492 4,570
----------- --------------
Total liabilities 279,981 269,919
----------- --------------
STOCKHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares authorized; shares issued and outstanding,
5,710,969 at March 31, 2004 and 5,706,769 at December 31, 2003 29,901 29,874
Retained earnings 5,346 4,472
Accumulated other comprehensive income (loss), net 70 (15)
----------- --------------
Total stockholders' equity 35,317 34,331
----------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 315,298 $ 304,250
=========== ==============
See accompanying notes.
3
COMMUNITY WEST BANCSHARES
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------
2004 2003
----------- ----------
(IN THOUSANDS)
INTEREST INCOME
Loans $ 4,894 $ 5,011
Investment securities 207 93
Other 60 75
----------- ----------
Total interest income 5,161 5,179
----------- ----------
INTEREST EXPENSE
Deposits 1,154 1,226
Bonds payable and other borrowings 785 1,392
----------- ----------
Total interest expense 1,939 2,618
----------- ----------
NET INTEREST INCOME 3,222 2,561
Provision for loan losses 95 344
----------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,127 2,217
NON-INTEREST INCOME
Gains from loan sales, net 928 1,126
Other loan fees 631 713
Loan servicing fees, net 516 318
Document processing fees 145 212
Other 214 300
----------- ----------
Total non-interest income 2,434 2,669
----------- ----------
NON-INTEREST EXPENSES
Salaries and employee benefits 2,797 3,078
Occupancy and equipment expenses 505 546
Professional services 187 194
Other operating expenses 587 537
----------- ----------
Total non-interest expenses 4,076 4,355
----------- ----------
Income before provision for income taxes 1,485 531
Provision for income taxes 611 183
----------- ----------
NET INCOME $ 874 $ 348
=========== ==========
INCOME PER SHARE - BASIC $ 0.15 $ 0.06
=========== ==========
INCOME PER SHARE - DILUTED $ 0.15 $ 0.06
=========== ==========
See accompanying notes.
4
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
ACCUMULATED
COMMON COMMON OTHER TOTAL
STOCK STOCK RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT EARNINGS INCOME (LOSS) EQUITY
-------------- ------- --------- --------------- --------------
(IN THOUSANDS)
BALANCES AT
JANUARY 1, 2004 5,707 $29,874 $ 4,472 $ (15) $ 34,331
Exercise of stock options 4 27 - - 27
Comprehensive income:
Net income - - 874 - 874
Other comprehensive income - - - 85 85
Comprehensive income - - - - 959
-------------- ------- --------- --------------- --------------
BALANCES AT
MARCH 31, 2004 5,711 $29,901 $ 5,346 $ 70 $ 35,317
============== ======= ========= =============== ==============
See accompanying notes.
5
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------
2004 2003
----------- -----------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 874 $ 348
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 95 344
Provision for losses on real estate owned - 14
Depreciation and amortization 342 530
Net amortization of discounts and premiums for securities (128) 15
Gains on:
Sale of other real estate owned (2) (132)
Sale of loans held for sale (891) (1,126)
Changes in:
Fair value of interest only strips, net of accretion 196 278
Servicing assets, net of amortization and valuation adjustments (361) (63)
Other assets 986 4,298
Other liabilities 1,007 (1,741)
----------- -----------
Net cash provided by operating activities 2,118 2,765
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of held-to-maturity securities - (6,246)
Purchase of available-for-sale securities (5,933) (5,577)
Principal paydowns and maturities of held-to-maturity securities 996 1,138
Principal paydowns and maturities of available-for-sale securities 190 -
Loan originations and principal collections, net (13,728) 5,908
Purchase of Federal Home Loan Bank stock (805) -
Proceeds from sale of other real estate owned 529 617
Net decrease (increase) in time deposits in other financial institutions 198 (99)
Purchase of premises and equipment, net (100) (36)
----------- -----------
Net cash used in investing activities (18,653) (4,295)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 27 -
Net increase in demand deposits and savings accounts 4,178 661
Net increase (decrease) in time certificates of deposit 8,325 (3,991)
Repayments of securities sold under agreements to repurchase (139) -
Repayments of bonds payable in connection with securitized loans (3,428) (6,427)
----------- -----------
Net cash provide by (used in) financing activities 8,963 (9,757)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (7,572) (11,287)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,056 31,094
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,484 $ 19,807
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 1,526 $ 1,942
Cash paid for income taxes - 3
Supplemental Disclosure of Noncash Investing Activity:
Transfers to other real estate owned - 643
See accompanying notes.
6
COMMUNITY WEST BANCSHARES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The interim consolidated financial statements reflect all adjustments and
reclassifications that, in the opinion of management, are necessary for the fair
presentation of the results of operations and financial condition for the
interim periods. The unaudited consolidated financial statements include
Community West Bancshares ("Company") and its wholly-owned subsidiary, Goleta
National Bank ("GNB"). All adjustments and reclassifications in the periods
presented are of a normal and recurring nature. Results for the period ended
March 31, 2004 are not necessarily indicative of results that may be expected
for any other interim period or for the year as a whole.
These unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of Community West
Bancshares included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ALLOWANCE FOR LOAN LOSSES - The Company maintains a detailed, systematic
analysis and procedural discipline to determine the amount of the allowance for
loan losses ("ALL"). The ALL is based on estimates and is intended to be
adequate to provide for probable losses inherent in the loan portfolio. This
process involves deriving probable loss estimates that are based on individual
loan loss estimation, migration analysis/historical loss rates and management's
judgment.
The Company employs several methodologies for estimating probable losses.
Methodologies are determined based on a number of factors, including type of
asset, risk rating, concentrations, collateral value and the input of the
Special Assets group, functioning as a workout unit.
INTEREST ONLY STRIPS AND SERVICING ASSETS - The guaranteed portion of certain
SBA loans can be sold into the secondary market. Servicing assets are
recognized as separate assets when loans are sold with servicing retained.
Servicing assets are amortized in proportion to, and over the period of,
estimated future net servicing income. Also, at the time of the loan sale, it
is the Company's policy to recognize the related gain on the loan sale in
accordance with generally accepted accounting principals ("GAAP"). The Company
uses industry prepayment statistics and its own prepayment experience in
estimating the expected life of the loans. Management periodically evaluates
servicing assets for impairment. Servicing assets are evaluated for impairment
based upon the fair value of the rights as compared to amortized cost on a
loan-by-loan basis. Fair value is determined using discounted future cash flows
calculated on a loan-by-loan basis and aggregated to the total asset level.
Impairment to the asset is recorded if the aggregate fair value calculation
drops below the net book value of the asset.
Additionally, on certain SBA loan sales, the Company has retained interest only
("I/O Strips"), which represent the present value of excess net cash flows
generated by 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 and (ii) contractual servicing fees. The initial servicing assets and
resulting gain on sale are calculated based on the difference between the best
actual par and premium bids on an individual loan basis. This same methodology
would apply to the initial valuation of any new I/O strip assets. As the Company
did not sell any loans for par during the first quarter of 2004 or 2003, there
were no additions to the I/O strips using these assumptions. Quarterly, the
Company verifies the reasonableness of its valuation estimates by comparison to
the results of an independent third party valuation analysis.
The I/O strips are classified as trading securities. Accordingly, the Company
records the I/O's strips at fair value with the resulting increase or decrease
in fair value being recorded through operations in the current period.
SECURITIZED LOANS AND BONDS PAYABLE - In 1999 and 1998, respectively, the
Company transferred $122 million and $81 million in loans to special purpose
trusts ("Trusts"). The transfers have been accounted for as secured borrowings
and, accordingly, the mortgage loans and related bonds issued are included in
the Company's Balance Sheets. Such loans are accounted for in the same manner
as loans held to maturity. Deferred debt issuance costs and bond discount
related to the bonds are amortized on a method that approximates the level-yield
method over the estimated life of the bonds.
OTHER REAL ESTATE OWNED - Other real estate owned ("OREO") is real estate
acquired through foreclosure on the collateral property and is recorded at fair
value at the time of foreclosure less estimated costs to sell. Any excess of
loan balance over the fair value of the OREO is charged-off against the
allowance for loan losses. Subsequent to foreclosure, management periodically
performs a new valuation and the asset is carried at the lower of carrying
amount or fair value. Operating expenses or income, and gains or losses on
disposition of such properties, are charged to current operations.
7
STOCK-BASED COMPENSATION - GAAP permits the Company to use either of two
methodologies to account for compensation cost in connection with employee stock
options. The first method requires issuers to record compensation expense over
the period the options are expected to be outstanding prior to exercise,
expiration or cancellation. The amount of compensation expense to be recognized
over this term is the "fair value" of the options at the time of the grant as
determined by the Black-Scholes valuation model. Black-Scholes computes fair
value of the options based on the length of their term, the volatility of the
stock price in past periods and other factors. Under this method, the issuer
recognizes compensation expense regardless of whether or not the employee
eventually exercises the options.
Under the second methodology, if options are granted at an exercise price equal
to the market value of the stock at the time of the grant, no compensation
expense is recognized. The Company believes that this method better reflects
the motivation for its issuance of stock options, as they are intended as
incentives for future performance rather than compensation for past performance.
GAAP requires that issuers electing the second method must present pro forma
disclosure of net income and earnings per share as if the first method had been
elected.
The fair value of stock-based compensation to employees is calculated using the
option pricing models that were developed to estimate the fair value of freely
tradable and fully transferable options without vesting restrictions, which
differ from the Company's stock option program. These models may require
subjective assumptions, including future stock price volatility and expected
time to exercise, which greatly affect calculated value.
The fair value of each stock option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions:
THREE MONTHS ENDED
MARCH 31,
------------------
2004 2003
---------- ------
Annual dividend yield 0.0% 0.0%
Expected volatility 30.6% 30.8%
Risk-free interest rate 3.8% 4.0%
Expected life (in years) 6.8 7.3
Statement of Financial Accounting Standards No. 123 requires pro forma
disclosure of net income and earnings per share using the fair value method. If
the computed fair values of the awards had been amortized to expense over the
vesting period of the awards, the Company's net income, basic net income per
share and diluted net income per share would have been reduced to the pro forma
amounts following:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
----------------------
2004 2003
---------- ----------
Income:
As reported $ 874 $ 348
Pro forma 838 316
Income per common share - basic
As reported .15 .06
Pro forma .15 .06
Income per common share - diluted
As reported .15 .06
Pro forma .14 .06
The following schedule reflects comprehensive income for the periods indicated:
COMPREHENSIVE INCOME
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
----------------------
2004 2003
---------- ----------
Net income $ 874 $ 348
Other comprehensive income, net of tax:
Unrealized gains on investment securities, net of tax 85 7
---------- ----------
Comprehensive income $ 959 $ 355
========== ==========
2. LOAN SALES AND SERVICING
SBA LOAN SALES - The Company sells the guaranteed portion of selected SBA loans
into the secondary market, on a servicing retained basis, in exchange for a
8
combination of a cash premium, servicing assets and/or I/O strips. The Company
retains the unguaranteed portion of these loans and services the loans as
required under the SBA programs to retain specified yield amounts. The SBA
program stipulates that the Company retains a minimum of 5% of the loan balance,
which is unguaranteed. The percentage of each unguaranteed loan in excess of 5%
may be periodically sold to a third party for a cash premium. A portion of the
yield is recognized as servicing fee income as it occurs and the remainder is
capitalized as excess servicing and is included in the gain on sale calculation.
The balances of all servicing assets are subsequently amortized over the
estimated life of the loans using an estimated prepayment rate of 20-25%.
Quarterly, the servicing and I/O strip assets are analyzed for impairment.
The Company also periodically sells SBA loans originated under the 504 loan
program into the secondary market, on a servicing released basis, in exchange
for a cash premium.
As of March 31, 2004 and December 31, 2003, the Company had approximately $41.9
and $36.9 million, respectively, in SBA loans held for sale.
3. LOANS HELD FOR INVESTMENT AND SECURITIZED LOANS
The composition of the Company's loans held for investment and securitized loan
portfolio follows:
MARCH 31, DECEMBER 31,
2004 2003
----------- --------------
(IN THOUSANDS)
Commercial $ 28,492 $ 24,592
Real estate 74,740 71,010
SBA 31,437 30,698
Manufactured housing 44,997 39,073
Other installment 6,639 5,770
Securitized 33,302 36,563
----------- --------------
219,607 207,706
Less:
Allowance for loan losses 4,373 4,676
Deferred fees, net of costs (75) (65)
Purchased premiums on securitized loans (597) (689)
Discount on SBA loans 1,751 1,548
----------- --------------
Loans held for investment, net $ 214,155 $ 202,236
=========== ==============
An analysis of the allowance for loan losses for loans held for investment loans
follows:
THREE MONTHS ENDED
MARCH 31,
------------------
2004 2003
-------- --------
(IN THOUSANDS)
Balance, beginning of period $ 2,652 $ 3,379
Provision for loan losses 152 (62)
Loans charged off (1) (1,182)
Recoveries on loans previously charged off 55 609
-------- --------
Balance, end of period $ 2,858 $ 2,744
======== ========
An analysis of the allowance for loan losses for securitized loans follows:
THREE MONTHS ENDED
MARCH 31,
------------------
2004 2003
-------- --------
(IN THOUSANDS)
Balance, beginning of period $ 2,024 $ 2,571
Provision for loan losses (57) 406
Loans charged off (579) (688)
Recoveries on loans previously charged off 127 65
-------- --------
Balance, end of period $ 1,515 $ 2,354
======== ========
9
The recorded investment in loans that is considered to be impaired:
MARCH 31, DECEMBER 31,
2004 2003
----------- -----------
(IN THOUSANDS)
Impaired loans without specific valuation allowances $ - $ -
Impaired loans with specific valuation allowances 6,915 6,843
Specific valuation allowances allocated to impaired loans (657) (640)
----------- -----------
Impaired loans, net $ 6,258 $ 6,203
=========== ===========
Average investment in impaired loans $ 6,905 $ 6,584
=========== ===========
4. EARNINGS PER SHARE
Earnings per share - Basic has been computed based on the weighted average
number of shares outstanding during each period. Earnings 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:
THREE MONTHS ENDED
MARCH 31,
2004 2003
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Weighted average shares - Basic 5,707 5,690
Dilutive effect of options 127 21
----------- -----------
Weighted average shares - Diluted 5,834 5,711
=========== ===========
Net income $ 874 $ 348
Earnings per share - Basic .15 .06
Earnings per share - Diluted .15 .06
5. REPURCHASE AGREEMENTS
The Company has entered into a financing arrangement with a third party by which
its government-guaranteed securities can be pledged as collateral for short-term
borrowings. As of March 31, 2004 and December 31, 2003, under this agreement,
the Company had $14.3 million and $14.4 million, respectively of outstanding
repurchase agreements, with interest rates of 1.25% to 1.43%, all of which
mature within one year.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion is designed to provide insight into management's assessment of
significant trends related to the Company's consolidated financial condition,
results of operations, liquidity, capital resources and interest rate
sensitivity. It should be read in conjunction with the unaudited interim
consolidated financial statements and notes thereto and the other financial
information appearing elsewhere in this report. See discussion under "Factors
That May Affect Future Results of Operations" for further information on risks
and uncertainties as well as information on the strategies adopted by the
Company to address these risks.
FORWARD LOOKING STATEMENTS
This 2004 quarterly report on Form 10-Q contains statements that constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Those forward-looking statements include statements regarding the
intent, belief or current expectations of the Company and its management. Any
such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and actual results may differ materially from
those projected in the forward-looking statements. The Company does not
undertake any obligation to revise or update publicly any forward-looking
statements for any reason.
The following discussion should be read in conjunction with the Company's
financial statements and the related notes provided under "Item 1-Financial
Statements" above.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
RESULTS OF OPERATIONS-FIRST QUARTER COMPARISON
The Company recorded net income of $874,000 for the three months ended March 31,
2004, or $.15 per share basic, compared to net income of $348,000, or $.06 per
share basic, during the three months ended March 31, 2003.
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:
THREE MONTHS ENDED
MARCH 31,
------------------------------------- INCREASE
2004 2003 (DECREASE)
------------------ ----------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Interest income $ 5,161 $ 5,179 $ (18)
Interest expense 1,939 2,618 (679)
------------------ ----------------- ---------------
Net interest income 3,222 2,561 661
------------------ ----------------- ---------------
Provision for loan losses 95 344 (249)
------------------ ----------------- ---------------
Net interest income after provision for loan losses 3,127 2,217 910
Non-interest income 2,434 2,669 (235)
Non-interest expenses 4,076 4,355 (279)
------------------ ----------------- ---------------
Income before provision for income taxes 1,485 531 954
Provision for income taxes 611 183 428
------------------ ----------------- ---------------
Net income $ 874 $ 348 $ 526
================== ================= ===============
Earnings per share - Basic $ .15 $ .06 $ .09
================== ================= ===============
Earnings per share - Diluted $ .15 $ .06 $ .09
================== ================= ===============
Comprehensive income $ 959 $ 355 $ 604
================== ================= ===============
General
The Company continues to be impacted both positively and negatively by the pay
downs in the securitized loan portfolio. Also impacting the first quarter of
2004 is the comparative industry-wide decline in mortgage-related business and
the decrease in non-interest expenses as a result of the Company's continued
cost-cutting efforts.
Interest Income
Interest income decreased slightly by .35% for the first quarter of 2004
compared to the first quarter of 2003. The securitized loan interest income
decreased by $766,000, or 41.6%, from $1.84 million for the first quarter of
2003 to $1.07 million for the first quarter 2004. Mortgage loan interest income
also decreased for the first quarter of 2004 by $122,000, or 71.7%, for the
11
first quarter of 2004 compared to the first quarter of 2003. These decreases
were offset by increases in SBA, commercial, commercial real estate and
manufactured housing loan interest income of $158,000, or 17.8%, $169,000, or
50.6%, $255,000, or 23.3% and $294,000, or 41.1%, respectively, from the first
quarter of 2003 compared to 2004.
Interest Expense
The decline in interest expense for the first quarter of 2004 compared to the
first quarter of 2003 was primarily due to the payoffs in the securitized loan
portfolio and the correlated pay downs in the high-interest securitized bonds.
The bond interest expense for the three months ended March 31, 2004 declined to
$737,000 from $1.4 million for the three months ended March 31, 2003. Interest
expense on deposits decreased slightly for the first quarter of 2004 compared to
2003, but was mostly offset by a slight increase in interest expense on the
repurchase agreement borrowings. Annualized weighted average cost of deposits
has declined by .35% or 12.9%, from 2.78% to 2.42%, respectively, for the
comparable first quarters of 2003 and 2004.
Provision for Loan Losses
The provision for loan losses for the first quarter of 2004 decreased by 72.5%
from the first quarter of 2003. This decrease was due to a $463,000 decrease in
the provision for loan losses for the securitized loans. Partially offsetting
the decrease in provision for securitized loans were the slight increases in
certain other loan products as a result of loan growth. The provision for loan
losses for the first quarter of 2003 also included a one-time recovery credit of
$153,000 that was the result of the final loan settlements received on the
short-term consumer loans.
Non-Interest Income
Non-interest income includes loan document fees, service charges on deposit
accounts, gains on sale of loans, servicing fees and other revenues not derived
from interest on earning assets. The $235,000, or 8.8%, decrease in
non-interest revenue for the three months ended March 31, 2004 as compared to
the same period in 2003 is primarily due to the decrease in mortgage loan volume
due to the decline in refinancing activities. Net gains on mortgage loan sales
decreased by 48.3%, to $165,000, mortgage loan document processing fees
decreased 31.6%, to $145,000, and other mortgage loan fees decreased by 11.5%,
to $631,000. These decreases were partially offset by the increases in net
gains from the sale of SBA loans of 13.1%, to $726,000, and loan servicing of
62.3%, to $516,000.
Non-Interest Expenses
Total non-interest expenses decreased $279,000 for the first quarter of 2004
compared to the first quarter of 2003. This decrease is primarily related to a
$281,000 decrease in salaries and employee benefits from $3.1 million for the
three months ended March 31, 2003 to $2.8 million for the three months ended
March 31, 2004. Of the salary and employee benefit decrease, the majority of
the decrease is related to commissions, which were lower primarily as a result
of the decline in mortgage loan volume.
12
INTEREST RATES AND DIFFERENTIALS
The following table illustrates average yields on our interest-earning assets
and average rates on our interest-bearing liabilities for the periods indicated.
These average yields and rates are derived by dividing interest income by the
average balances of interest-earning assets and by dividing interest expense by
the average balances of interest-bearing liabilities for the periods indicated.
Amounts outstanding are averages of daily balances during the applicable
periods.
THREE MONTHS
ENDED MARCH 31,
-----------------------
2004 2003
----------- ----------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS:
Interest-earning deposits in other financial institutions:
Average balance $ 5,793 $ 1,924
Interest income 32 11
Average yield 2.21% 2.29%
Federal funds sold:
Average balance $ 10,935 $ 17,843
Interest income 28 53
Average yield 1.02% 1.19%
Investment securities:
Average balance $ 22,974 $ 10,309
Interest income 207 104
Average yield 3.60% 4.04%
Gross loans, excluding securitized:
Average balance $ 218,284 $ 184,845
Interest income 3,821 3,173
Average yield 7.00% 6.87%
Securitized loans:
Average balance $ 35,686 $ 63,617
Interest income 1,073 1,838
Average yield 12.03% 11.56%
TOTAL INTEREST-EARNING ASSETS:
Average balance $ 293,672 $ 278,538
Interest income 5,161 5,179
Average yield 7.03% 7.44%
13
THREE MONTHS
ENDED MARCH 31,
------------------------
2004 2003
----------- -----------
(DOLLARS IN THOUSANDS)
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits:
Average balance $ 34,446 $ 32,631
Interest expense 105 99
Average cost of funds 1.22% 1.21%
Savings deposits:
Average balance $ 19,769 $ 13,778
Interest expense 58 53
Average cost of funds 1.17% 1.54%
Time certificates of deposit:
Average balance $ 136,941 $ 130,390
Interest expense 991 1,074
Average cost of funds 2.89% 3.29%
Bonds payable:
Average balance $ 24,657 $ 48,325
Interest expense 737 1,392
Average cost of funds 11.96% 11.52%
Other borrowings:
Average balance $ 14,340 -
Interest expense 48 -
Average cost of funds 1.34% -
TOTAL INTEREST-BEARING LIABILITIES:
Average balance $ 230,153 $ 225,124
Interest expense 1,939 2,618
Average cost of funds 3.37% 4.65%
NET INTEREST INCOME $ 3,222 $ 2,561
NET INTEREST SPREAD 3.66% 2.79%
AVERAGE NET MARGIN 4.39% 3.68%
Nonaccrual loans are included in the average balance of loans outstanding.
Net interest income is the difference between the interest and fees earned on
loans and investments and the interest expense paid on deposits and other
liabilities. The amount by which interest income will exceed interest expense
depends on the volume or balance of earning assets compared to the volume or
balance of interest-bearing deposits and liabilities and the interest rate
earned on those interest-earning assets compared to the interest rate paid on
those interest-bearing liabilities.
Net interest margin is net interest income expressed as a percentage of average
earning assets. It is used to measure the difference between the average rate
of interest earned on assets and the average rate of interest that must be paid
on liabilities used to fund those assets. To maintain its net interest margin,
the Company must manage the relationship between interest earned and paid.
FINANCIAL CONDITION
Average assets for the three months ended March 31, 2004 were $310.2 million
compared to $296.5 million for the three months ended March 31, 2003. Average
equity increased to $35.1 million for the three months ended March 31, 2004,
from $33.3 million for the same period in 2003.
The book value per share increased to $6.18 at March 31, 2004 from $6.02 at
December 31, 2003.
14
PERCENT OF
SELECTED BALANCE SHEET ACCOUNTS MARCH 31, DECEMBER 31, INCREASE INCREASE
(DOLLARS IN THOUSANDS) 2004 2003 (DECREASE) (DECREASE)
----------- ------------- ---------- -----------
Cash and cash equivalents $ 14,484 $ 22,056 $ (7,572) (34.3%)
Time deposits in other financial institutions 594 792 (198) (25.0%)
Investment securities available-for-sale 21,312 15,432 5,880 38.1%
Investment securities held-to-maturity 4,031 5,036 (1,005) (20.0%)
I/O strips 3,352 3,548 (196) (5.5%)
Loans-Held for sale 44,643 42,038 2,605 6.2%
Loans-Held for investment, net 181,654 166,874 14,780 8.9%
Securitized loans, net 32,501 35,362 (2,861) (8.1%)
Federal Home Loan Bank stock, at cost 805 - 805 -
Federal Reserve Bank stock, at cost 812 812 - -
Total Assets 315,298 304,250 11,048 3.6%
Total Deposits 237,358 224,855 12,503 5.6%
Securities sold under agreements to repurchase 14,255 14,394 (139) 0.1%
Bonds payable in connection with securitized loans 22,876 26,100 (3,224) (12.4%)
Total Stockholders' Equity $ 35,317 $ 34,331 $ 986 2.9%
=========== ============= =========== ==========
The securitized loans are paying off at a current annualized rate of 35.7%. The
Company has effectively focused on replacing these loans with growth in the
manufactured housing, SBA, commercial and commercial real estate loan
portfolios.
The following schedule shows the balance and percentage change in the various
deposits:
PERCENT OF
MARCH 31, DECEMBER 31, INCREASE INCREASE
2004 2003 (DECREASE) (DECREASE)
----------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS)
Non-interest-bearing deposits $ 38,518 $ 42,417 $ (3,899) (9.2%)
Interest-bearing deposits 37,194 38,115 (921) (2.4%)
Savings 24,557 15,559 8,998 57.8%
Time certificates of $100,000 or more 23,572 19,673 3,899 19.8%
Other time certificates 113,517 109,091 4,426 4.1%
----------- ------------- ----------- ----------
Total deposits $ 237,358 $ 224,855 $ 12,503 5.6%
=========== ============= =========== ==========
The Company's deposits increased by $12.5 million, or 5.6%, from December 31,
2003 to March 31, 2004.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
A loan is considered impaired when, based on current information, it is probable
that the Company will be unable to collect the scheduled payments of principal
or interest under the contractual terms of the loan agreement. Factors
considered by management in determining impairment include payment status,
collateral value and the probability of collecting scheduled principal and
interest payments. Loans that experience insignificant payment delays or
payment shortfalls generally are not classified as impaired. Management
determines the significance of payment delays or payment shortfalls on a
case-by-case basis. When determining the possibility of impairment, management
considers the circumstances surrounding the loan and the borrower, including the
length of the delay, the reasons for the delay, the borrower's prior payment
record and the amount of the shortfall in relation to the principal and interest
owed. For collateral-dependent loans, the Company uses the fair value of
collateral method to measure impairment. All other loans, except for
securitized loans, are measured for impairment based on the present value of
future cash flows. Impairment is measured on a loan-by-loan basis for all loans
in the portfolio except for the securitized loans, which are evaluated for
impairment on a collective basis.
15
The recorded investment in loans that is considered to be impaired:
MARCH 31, DECEMBER 31,
----------- --------------
2004 2003
(IN THOUSANDS)
Impaired loans without specific valuation allowances $ - $ -
Impaired loans with specific valuation allowances 6,915 6,843
Specific valuation allowances allocated to impaired loans (657) (640)
----------- --------------
Impaired loans, net $ 6,258 $ 6,203
=========== ==============
Average investment in impaired loans $ 6,905 $ 6,584
=========== ==============
The following schedule reflects recorded investment at the dates indicated in
certain types of loans:
MARCH 31, DECEMBER 31,
2004 2003
----------- --------------
(DOLLARS IN THOUSANDS)
Nonaccrual loans $ 7,875 $ 7,174
SBA guaranteed portion of loans included above (4,839) (4,106)
----------- --------------
Nonaccrual loans, net $ 3,036 $ 3,068
=========== ==============
Troubled debt restructured loans, gross $ 130 $ 193
Loans 30 through 89 days past due with interest accruing 2,156 3,907
Allowance for loan losses to gross loans 1.7% 1.9%
GNB generally repurchases the guaranteed portion of SBA loans from investors
when those loans become past due 120 days. After the foreclosure and collection
process is complete, the SBA reimburses GNB for this principal balance.
Therefore, although these balances do not earn interest during this period, they
generally do not result in a loss of principal to GNB.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
LIQUIDITY MANAGEMENT
The Company has established policies as well as analytical tools to manage
liquidity. Proper liquidity management ensures that sufficient funds are
available to meet normal operating demands in addition to unexpected customer
demand for funds, such as high levels of deposit withdrawals or increased loan
demand, in a timely and cost effective manner. The Company's liquidity
management is viewed from both a long-term and short-term perspective as well as
from an asset and liability perspective. Management monitors liquidity through
regular reviews of maturity profiles, funding sources and loan and deposit
forecasts to minimize funding risk. The Company has asset/liability committees
("ALCO") at the Board and GNB management levels to review asset/liability
management and liquidity issues. The Company maintains strategic liquidity and
contingency plans. The liquidity ratio of the Company was 26% at December 31,
2003 and March 31, 2004. The liquidity ratio consists of cash and due from
banks, deposits in other financial institutions, available for sale investments,
federal funds sold and loans held for sale, divided by total assets. The
Company has obtained a financing arrangement allowing it to pledge securities as
collateral for short-term borrowings. During the first quarter of 2004, the
Company did not borrow additional funds under this arrangement. At March 31,
2004 and December 31, 2003, the Company had outstanding repurchase borrowings of
$14.3 million and $14.4 million, respectively. The interest rates range from
1.25% to 1.43%, all of which mature within one year. This arrangement allows
for additional borrowing capacity and provides improved flexibility in managing
the Company's liquidity.
The Company, through GNB, also has the ability as a member of the Federal
Reserve System, to borrow at the discount window a portion of what is pledged at
the Federal Reserve Bank. The facility is available on a short-term basis,
typically overnight. GNB qualifies for primary credit as it has been deemed to
be in sound financial condition. The rate on primary credit is currently at 100
basis points above the Federal Open Market Committee's (FOMC) target federal
funds rate (currently at 1%). As the rate is currently not attractive, it is
unlikely it will be used as a regular source of funding, but is noted as
available as an alternative funding source.
16
During the first quarter of 2004, GNB became a member of the Federal Home Loan
Bank. This membership allows for additional borrowing capacity and provides an
additional source to utilize in managing the Company's liquidity. GNB also
maintains two unsecured federal funds purchased credit lines of $6 million each
from other financial institutions, which it may periodically use for short-term
liquidity needs.
CAPITAL RESOURCES
The Company's equity capital was $35.3 million at March 31, 2004. Under the
Prompt Corrective Action provisions of the Federal Deposit Insurance Act
("FDICIA"), national banks are assigned regulatory capital classifications based
on the specified capital ratios of the institutions. The capital classifications
are "well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized".
To be considered "well capitalized", an institution must have a core capital
ratio of at least 5% and a total risk-based capital ration of at least 10%.
Additionally, FDICIA imposed in 1994 a new Tier 1 risk-based capital ration of
at least 6% to be considered "well capitalized". Tier I risk-based capital is,
defined as common stock and retained earnings net of goodwill and other
intangible assets.
To be categorized as "well capitalized" or "adequately capitalized", GNB must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios
and values as set forth in the tables below:
Risk- Adjusted Total Tier 1 Tier 1
Total Tier 1 Weighted Average Capital Capital Leverage
(dollars in thousands) Capital Capital Assets Assets Ratio Ratio Ratio
-------- --------- --------- -------- -------- -------- ---------
March 31, 2004
CWBC (Consolidated) $ 38,269 $ 34,961 $ 263,307 $316,247 14.53% 13.28% 11.05%
GNB 35,805 32,506 262,836 312,646 13.62 12.37 10.40
December 31, 2003
CWBC (Consolidated) 37,150 34,096 242,730 305,666 15.31 14.05 11.15
GNB 34,695 31,648 242,170 301,024 14.33 13.07 10.51
Well capitalized ratios 10.00 6.00 5.00
Minimum capital ratios 8.00 4.00 4.00
SUPERVISION AND REGULATION
- --------------------------
Banking is a complex, highly regulated industry. The banking regulatory scheme
serves not to protect investors, but is designed to maintain a safe and sound
banking system, to protect depositors and the FDIC insurance fund, and to
facilitate the conduct of sound monetary policy. In furtherance of these goals,
Congress and the states have created several largely autonomous regulatory
agencies and enacted numerous laws that govern banks, bank holding companies and
the banking industry. Consequently, the Company's growth and earnings
performance, as well as that of GNB, may be affected not only by management
decisions and general economic conditions, but also by the requirements of
applicable state and federal statutes and regulations and the policies of
various governmental regulatory authorities, including the Board of Governors of
the Federal Reserve Bank ("FRB"), the FDIC, the Office of the Comptroller of the
Currency ("OCC") and the California Department of Financial Institutions
("DFI"). For a detailed discussion of the regulatory scheme governing the
Company and GNB, please see the discussion in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003 under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operation - Supervision and Regulation."
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
- ----------------------------------------------------
The Company's short and long-term success is subject to many factors that are
beyond its control. Shareholders and prospective investors in the Company
should carefully consider the following risk factors, in addition to other
information contained in this report. This Report on Form 10-Q contains
forward-looking statements. Actual results could differ materially from those
anticipated in these forward-looking statements as a result of numerous risks
and uncertainties, including those described below.
INTEREST RATE RISK
The Company is exposed to different types of interest rate risks. These risks
include: lag, repricing, basis and prepayment risk.
17
- Lag Risk- lag risk results from the inherent timing difference between
the repricing of the Company's adjustable rate assets and liabilities.
For instance, certain loans tied to the prime rate index may only
reprice on a quarterly basis. However, at a community bank such as
GNB, when rates are rising, funding sources tend to reprice more
slowly than the loans. Therefore, for GNB, the effect of this timing
difference is generally favorable during a period of rising interest
rates and unfavorable during a period of declining interest rates.
This lag can produce some short-term volatility, particularly in times
of numerous prime rate changes. The last prime rate change was
effected on June 27, 2003.
- Repricing Risk - repricing risk is caused by the mismatch in the
maturities / repricing periods between interest-earning assets and
interest-bearing liabilities. If GNB was perfectly matched, the net
interest margin would generally expand during rising rate periods and
generally contract during falling rate periods. This is so since loans
tend to reprice more quickly than do funding sources. Typically, since
GNB is somewhat asset sensitive, this would also tend to expand the
net interest margin during times of interest rate increases. However,
to some extent, banks are also subject to the steepness of the yield
curve that is, the spread between rates at different maturity points.
- Basis Risk - item pricing tied to different indices may tend to react
differently, however, all GNB's variable products are priced off the
prime rate.
- Prepayment Risk - prepayment risk results from borrowers paying down /
off their loans prior to maturity. Prepayments on fixed-rate products
increase in falling interest rate environments and decrease in rising
interest rate environments. Since a majority of GNB's loan
originations are adjustable rate and set based on prime, and there is
little lag time on the reset, GNB does not experience significant
prepayments. However, GNB does have more prepayment risk on its
securitized and manufactured housing loans and its mortgage-backed
investment securities. Offsetting the prepayment risk on the
securitized loans are the related bonds payable, which were issued at
a fixed rate. When the bonds payable prepay, given the current
interest rate environment, this reduces GNB's interest expense as a
higher, fixed rate is, in effect, traded for a lower, variable rate
funding source.
Management of Interest Rate Risk
To mitigate the impact of changes in market interest rates on the Company's
interest-earning assets and interest-bearing liabilities, the amounts and
maturities are actively managed. Short-term, adjustable-rate assets are
generally retained as they have similar repricing characteristics as our funding
sources. GNB sells mortgage products and a portion of its SBA loan
originations. While the Company has some interest rate exposure in excess of
five years, it has internal policy limits designed to minimize risk should
interest rates rise. Currently, the Company does not use derivative instruments
to help manage risk, but will consider such instruments in the future if the
perceived need should arise.
Loan sales- The Company's ability to originate, purchase and sell loans is also
significantly impacted by changes in interest rates. Increases in interest
rates may also reduce the amount of loan and commitment fees received by GNB. A
significant decline in interest rates could also decrease the size of the GNB's
servicing portfolio and the related servicing income by increasing the level of
prepayments.
DEPENDENCE ON REAL ESTATE
Approximately 46% of the loan portfolio of the Company is secured by various
forms of real estate, including residential and commercial real estate. A
decline in current economic conditions or rising interest rates could have an
adverse effect on the demand for new loans, the ability of borrowers to repay
outstanding loans and the value of real estate and other collateral securing
loans. The real estate securing the Company's loan portfolio is concentrated in
California. If real estate values decline significantly, especially in
California, the change could harm the financial condition of the Company's
borrowers, the collateral for its loans will provide less security, and the
Company would be more likely to suffer losses on defaulted loans.
ECONOMIC CONDITIONS
The effects of deterioration in economic conditions particularly in California
may have an impact on the future performance of the Company. The costs of
workers' compensation and medical insurance premiums continue to rise. While a
workers' compensation bill was recently passed in California, its effect on the
Company is unknown. The conditions for the California banking sector were
generally healthy and stable in the first quarter of 2004. Overall demand for
commercial loans improved slightly particularly for loans to small businesses.
Although, mortgage loan volume, particularly refinancings, was reported as
unusually low for January activity increased in early February.
18
INCREASED COMPETITION
The financial services industry is extremely competitive. As new competitors
and new products enter the market, the increase in competition may reduce market
share or cause the prices the Company can charge for products and services to
fall.
CURTAILMENT OF GOVERNMENT GUARANTEED LOAN PROGRAMS
A major segment of the Company's business consists of originating and selling
loans guaranteed by the SBA. From time to time, the government agencies that
guarantee these loans reach their internal limits and cease to guarantee loans.
In addition, these agencies may change their rules for loans or Congress may
adopt legislation that would have the effect of discontinuing or changing the
programs. Non-governmental programs could replace government programs for some
borrowers, but the terms might not be equally acceptable. Therefore, if these
changes occur, the volume of loans to small businesses that now qualify for
government guaranteed loans could decline. Also, the profitability of these
loans could decline. From January 2004 to April 2004, the SBA implemented a
maximum loan size of $750,000 in its 7(a) loan program. A bill was passed in
April 2004 by Congress approving changes to the 7(a) program that take effect
immediately and it is scheduled to expire on September 30, 2004. The major
program changes include: an increase in the 7(a) loan limit back to $2.0
million, an increase in the guarantee limit to $1.5 million, restoration of the
piggyback loan structure, and approval of new fees for lenders, that include an
increase in the ongoing annual lender fee paid to the SBA from .25% to .36%.
The effects from changes to SBA lending from the new bill structure on the
Company's future performance and results of operations are not practical to
quantify at this time.
ITEM 3. 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. For information about the Company's market risk, see the
information contained in the Company's Annual Report on Form 10-K under the
caption "Item 7A. Quantitative and Qualitative Disclosure about Market Risk,"
which is incorporated herein by this reference.
ITEM 4. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer, with the
participation of the Company's management, carried out an evaluation of the
effectiveness of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive
Officer and the Chief Financial Officer believe that, as of the end of the
period covered by this report, the Company's disclosure controls and procedures
are effective in making known to them material information relating to the
Company (including its consolidated subsidiaries) required to be included in
this report.
Disclosure controls and procedures, no matter how well designed and implemented,
can provide only reasonable assurance of achieving an entity's disclosure
objectives. The likelihood of achieving such objections is affected by
limitations inherent in disclosure controls and procedures. These include the
fact that human judgment in decision-making can be faulty and that breakdowns in
internal control can occur because of human failures such as simple errors or
mistakes or intentional circumvention of the established process.
There was no change in the Company's internal control over financial reporting,
known to the Chief Executive Officer or the Chief Financial Officer, that
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------ ------------------
The Company is involved in various litigation of a routine nature that is being
handled and defended in the ordinary course of the Company's business. In the
opinion of management, based in part on consultation with legal counsel, the
resolution of these litigation matters will not have a material impact on the
Company's financial position or results of operations.
ITEM 2. CHANGES IN SECURTIES AND USE OF PROCEEDS
- ------- ----------------------------------------------
Not applicable
19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ------- ----------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
- ------- -------------------------------------------
Not applicable
ITEM 5. OTHER INFORMATION
- ------- -----------------
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
31.1 Certification by the Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification by the Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32 Certification Pursuant to 18 U.S.C. 1350 adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
January 21, 2004: The Company furnished a Current Report on Form 8-K
to report that, on January 21, 2004, the Company issued a press
release announcing its financial results for the quarter and year
ended December 31, 2003.
January 28, 2004: The Company filed a Current Report on Form 8-K to
report the announcement of the death of Michael A. Alexander, Chairman
of the Board of Directors and Chief Executive Officer of Community
West Bancshares and Chairman of the Board of Directors of Goleta
National Bank. The Company named William R. Peeples, Acting Chairman
of the Board of Community West Bancshares, Robert H. Bartlein, Acting
Chairman of the Board of Goleta National Bank; and, Lynda J. Nahra,
President and Chief Executive Officer of Community West Bancshares.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY WEST BANCSHARES
-------------------------
(Registrant)
Date: May 10, 2004 /s/Charles G. Baltuskonis
---------------------------
Charles G. Baltuskonis
Executive Vice President and
Chief Financial Officer
On Behalf of Registrant and as
Principal Financial and Accounting
Officer
21
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
========= ==========================================================
31.1 Certification of Chief Executive Officer of the Registrant
pursuant to Rule 13a-14(a) and Rule 15d- 14(a), promulgated under
the Securities and Exchange Act of 1934, as amended.
31.2 Certification of Chief Financial Officer of the Registrant
pursuant to Rule 13a-14(a) and Rule 15d- 14(a), promulgated under
the Securities and Exchange Act of 1934, as amended.
32* Certification of Chief Executive Officer and Chief Financial
Officer of the Registrant pursuant to Rule 13a-13(b) and Rule
15d-14(b), promulgated under the Securities Exchange Act of 1934,
as amended, and 18 U.S.C.1350.
====================
* This certification is furnished to, but not filed, with the Commission.
This certification shall not be deemed to be incorporated by reference into
any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that the Registrant specifically incorporates
it by reference.
22