Community West Bancshares Announces Restatement and Changes in Response to Regulatory Issues.

Business Editors

GOLETA, Calif.--(BUSINESS WIRE)--Dec. 24, 1999

In an effort to enhance shareholder value and to better address the current regulatory issues as they relate to the Company's HLTV business area, Lew Stone, President & CEO of Community West Bancshares (Nasdaq:CWBC), announced a number of major changes for the organization.

Because of current regulatory attention directed at Banks dealing with loan securitizations and HLTV loans, by the Office of the Comptroller of the Currency (OCC), it is believed prudent to not only divest Goleta National Bank (GNB) of its existing HLTV loans, but also to eliminate securitizations from its operational business model. The Company has also determined the need to restate its existing securitization transactions as financings as opposed to sales. The impact of these changes, which includes mark-to-market write-downs on nearly $160 million of HLTV loans being held for sale (that were previously to be part of a planned third securitization by the Bank), and utilizing more conservative assumptions for the valuations of the existing securitization transactions, will be significant. In particular, the total estimated unforeseen write-down is expected to be as much as $8 million, net of taxes. With the previously announced net profit year to date of $4.1 million, a preliminary estimate of losses for FY99 will be as much as $.65 - $.70 per share, fully diluted. Prior to this write-down, and one additional unexpected event described below, the estimated Q4 net income for Community West would have been about $1 million, which would have resulted in earnings for the year of about $5.1 million or about $.85 - $.90 per share, in line with analysts expectations.

Lew Stone said, "It is important to note that because of the directors' infusion of over $11 million in new capital (of which approximately $8 million was in the form of equity), even after this write-down, the overall book value of Community West Bancshares will still be slightly higher than the $4.96 per share book value reported at the end of our third quarter, at which time we reported record earnings."

Because GNB's current regulatory supervision is occurring from Washington DC, it has been told by the OCC to expect some type of consent or enforcement letter in January or February requiring the Board to commit to actions being stated here along with responding to other non-financial internal issues.

It will also be necessary to restate the merger transaction between the Company and Palomar Savings and Loan from a pooling to a purchase transaction. Preliminary analysis indicates that the restatement will have the effect of decreasing earnings for 1999 and into future years by approximately $.06 - $.08 per share. The details of these actions will be documented in the restated 1998 10K, and 1999 10Q filings. Accordingly, the Company's previously issued year-end 1998 financial statements and interim financial statements for 1998 and 1999 and the related 1998 auditors report should not be relied upon.

In spite of the numerous issues being dealt with currently and the significant restructuring charges, GNB at the end of this fiscal year is expected to remain adequately capitalized without any further cash infusion. As its existing HLTV loans are sold over the next three to six months, GNB expects to return to a well-capitalized status. A $.04 per share dividend for the fourth quarter has been approved by the Board for shareholders of record as of January 4, 2000 and payable on January 20, 2000. A continuation of this quarterly dividend policy is anticipated. The Company has already made numerous changes in its strategic plans so that it will be able to return to its excellent earnings profile. It plans to originate and sell an expanded mix of loan products. The personnel previously working on the HLTV originations and securitizations will now concentrate on these new loan products. With the expansion of GNB's SBA preferred lender status into five additional states, SBA lending is expected to increase significantly in 2000 and beyond. The conversion of Palomar Community Bank to a state-chartered bank will allow it to also offer expanded products and services.

John Markel, Chairman of the Board of Community West Bancshares stated "We believe that with this very difficult year behind us, we will be able to continue providing value for our shareholders into the future. We have significant ongoing successful business areas not impacted by this reorganization. As an example, our SBA operations are strong and growing, and we expect to see new revenue by using our existing HLTV loan processing infrastructure to create and sell a variety of loans to other organizations on a flow basis with forward commitments, mitigating the risk of holding a significant amount of loans without immediate buyers.

Statements in this news release that are not historical facts are forward-looking and based on management's' projections, assumptions and estimates; actual results may vary materially. Forward-looking statements are subject to certain risks and uncertainties, which include but are not limited to: (1) potential changes in banking regulations: (2) competitive forces; (3) changes in prevailing interest rates and borrowing costs; (4) changes in the economic climate or in real estate values; and (5) potential complications with computer conversions and Year 2000 issues. Further factors concerning financial risks and results may be found in documents filed by the Company with the Securities and Exchange Commission.