Community West Bancshares, Goleta, CA (CWBC)

A Case of Opportunity's Last Knock?

Can Community West reasonably expect to climb out from under its NPAs and TARP obligations? Much as I wish it weren't so, seems to me there's no way out without a highly diluted capital raise or a sale. Had CWBC sold last summer for 80% of book and taken PacWest stock, its value today would be close to $9 per share vs today's $2.30. I submit it's more likely than not that an interested buyer's share price will continue to outperform CWBC's.

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Disclosure: As of this posting, I own significant shares of CWBC and may subsequently either dispose of them or purchase more.

Prospective Buyers	PacWest Bancorp, Los Angeles, CA (PACW) has expressed interest in filling out franchise, and recently hired CWBC's former President, Lynda Nahra Umpqua Holdings, Portland, OR (UMPQ) recently tried and failed to buy nearby American Perspective Bank of San Luis Obispo, CA (APBA), suggesting interest in a regional acquisition AmericanWest Bank, Spokane, WA (private) Chairman Scott Kisting has said he'd like to triple in size over next several years mainly via acquisition
Financial Snapshot (as of 3/31/2012)	Total assets: $623M Tangible book value per share: $6.00 NPAs to assets: 6.9% Price to book: 38% Market cap: $13.8M Dividend yield: 0.00% Trailing 12-month return on assets: -1.59% Trailing 12-month return on equity: -17.4% TARP $15.6M
The Crew	William Peeples, Chairman Martin Plourd, Acting President and CEO Robert Bartlein, Vice Chairman
Red Flags	In January, CWBC signed a highly restrictive consent order with the OCC and regulators have indicated they won't allow payment of TARP dividends. NPAs are up from 4.6% a year ago, 5.4% at year end, and climbing. Retained earnings are pretty much gone. And of $51M of remaining equity $15.6M (30%) is TARP. CEO Marty Plourd was the COO and a Director of Temecula Valley Bank from July 2005 until the bank was seized in 2009, attracting criticism of the FDIC Inspector General for "risk controls related to concentrations in commercial real estate and land development loans" and "inadequate supervision of lending units." I want to believe it was CEO Wacknitz's fault, but is that naive? Chairman William Peeples seems to be a decent guy, was a founder of the bank, clearly believes in it, is constantly buying Community West's stock in the open market, and now owns 840,000 shares, yet appears oddly disinterested in prospective buyers knocking at the door: Knock knock. In the mid-2000s, Jim Dierberg of First Banks, Inc. Clayton, MO (private) made several friendly acquisition overtures. Community West was performing well and Peeples was still having fun. CWBC opted to await a "better opportunity." Knock knock. Last summer 2011, or so I've been told, PacWest expressed an interest in an acquisition, but Peeples declined, allowing President Lynda Nahra to be lured away PacWest, instead. Knock knock. Who's next, our Better Opportunity? — or, the Grim Regulator?
Sources	Form 10-K Annual Report Proxy Statement Q1 Press Release SNL Financial Confidential interviews with major investors