Community West Bancshares has a market cap of $17.7 million; its shares were traded at around $3 with and P/S ratio of 0.4.
Highlight of Business Operations:For the 1Q10, net income was $51,000 compared to net loss of $6.7 million for 1Q09.
On May 4, 2010, the Company announced its intention to offer $8 million, and up to $8.8 million with oversubscription privileges, of convertible subordinated debentures which will pay interest at 9% until conversion, redemption or maturity. The Company has filed a registration statement (including a prospectus) with the SEC for this offering. The effective date of the prospectus was May 10, 2010. The debentures, which will mature 10 years from the date of issuance, will be sold in $1,000 increments and pay interest quarterly on January 15, April 15, July 15 and October 15. The debentures may be redeemed by the Company after January 1, 2014. Prior to maturity or redemption, the debentures can be converted into common stock at $3.50 per share if converted prior to July 1, 2013, $4.50 per share between July 2, 2013 and July 1, 2016 and $6.00 per share from July 2, 2016 until maturity or redemption. The debentures will be initially offered to shareholders as of April 30, 2010 on a pro-rata basis. Each shareholder will be given the right to purchase one $1,000 debenture for each 750 shares owned. All remaining debentures not subscribed for in the offering will be offered to the general public and to existing shareholders alike. The debentures are unsecured obligations of Community West Bancshares and are subordinated to all other present and future debts including deposits and borrowings and are not insured by the Federal Deposit Insurance Corporation. Proceeds from the offering will be used to further strengthen the capital position of the Company and support its strategic growth opportunities. The Company s Board of Directors will retain discretion in the allocation and use of the proceeds of the offering.
Net interest income increased by $1.5 million for 1Q10 compared to 1Q09. Total interest income declined by $275,000. While average interest earning assets grew to $661 million for 1Q10 compared to $656 million for 1Q09, yields declined to 6.10% from 6.31%.
Included in the Company s held for investment portfolio is the category “Other installment” which consists primarily of home equity lines of credit (HELOC) loans. Recent guidance issued by the SEC characterized these types of loans as higher-risk. The HELOC portfolio of $20.7 million consists of credits secured by residential real estate in Santa Barbara and Ventura counties. In 1Q10, there were charge-offs of $244,000 in this portfolio. As of March 31, 2010, 0.5% of the portfolio is past due and 0.7% is on non-accrual status. The allowance for loan losses for this portfolio is $378,000, or 1.8%. The Company believes that, overall, this portfolio is adequately supported by real estate collateral.
Non-interest income includes gains from sale of loans, loan document fees, service charges on deposit accounts, loan servicing fees and other revenues not derived from interest on earning assets. Total non-interest income decreased by $329,000, or 28.2%, for 1Q10 compared to 1Q09, primarily due to lower loan servicing fee income. Of the $306,000 decline in loan servicing fees, $261,000 resulted from higher amortization of the servicing assets and adjustments to the value of the I/O strip for 1Q10 compared to 1Q09.
Non-interest expenses declined $836,000, or 14.4%, for 1Q10 compared to 1Q09. The strategic decision to discontinue SBA lending east of the Rocky Mountains as of April 1, 2009 contributed to a decline in salaries and employee benefits to $3.0 million for 1Q10 from $3.5 million for 1Q09. Also contributing to a reduction in non-interest expenses for 1Q10 was the decline of $435,000 in the reserve for unfunded loan commitments compared to 1Q09.
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