8-K: Community West Bancshares Reports Strong Q4 2025 Earnings

Community West Bancshares announced robust fourth-quarter 2025 earnings, with net income increasing to $11.17 million and diluted EPS of $0.58, alongside a declared $0.12 cash dividend and progress on its merger with United Security Bancshares.

Summary

• Unaudited consolidated net income for the three months ended December 31, 2025, was $11,170,000, with diluted earnings per share of $0.58, compared to $6,895,000 and $0.36 per diluted common share for the same period in 2024.
• Unaudited consolidated net income for the twelve months ended December 31, 2025, was $38,168,000, with diluted earnings per common share of $2.00, significantly up from $7,666,000 and $0.45 per diluted share for the same period in 2024.
• A $0.12 per common share cash dividend was declared, payable on February 20, 2026, to shareholders of record as of February 6, 2026.
• The Company announced a definitive merger agreement with United Security Bancshares (USB) on December 17, 2025, with the combined entity expected to have approximately $5 billion in total assets upon closing in the second quarter of 2026.
• Net interest margin increased to 4.24% for the quarter ended December 31, 2025, from 3.95% for the same period in 2024, marking the seventh consecutive quarter of improvement.
• Gross loans increased by $89.7 million (3.66%) for the quarter ended December 31, 2025, compared to the prior quarter, and by $206.6 million (8.85%) year-to-date.
• Total deposits increased by $19.3 million (0.63%) quarter-over-quarter and $184.5 million (6.34%) year-to-date.
• Return on average assets (ROAA) was 1.23% for Q4 2025, up from 0.78% in Q4 2024, and Return on average equity (ROAE) was 11.03% for Q4 2025, up from 7.55% in Q4 2024.
• Capital positions remained strong with a 9.80% Tier 1 Leverage Ratio, 11.56% Common Equity Tier 1 Ratio, 11.73% Tier 1 Risk-Based Capital Ratio, and 13.97% Total Risk-Based Capital Ratio at December 31, 2025.
• The allowance for credit losses as a percentage of total loans increased to 1.18% at December 31, 2025, from 1.11% at December 31, 2024, while non-performing assets to total assets slightly increased to 0.19% from 0.18%.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance with significant increases in net income and EPS, consistent improvement in net interest margin, and robust capital positions. The announced strategic merger further enhances future growth prospects, despite some increases in non-performing loan categories.

Positives

• Net income for Q4 2025 significantly increased to $11.17 million from $6.895 million in Q4 2024, representing a 62% year-over-year increase.
• Diluted EPS rose to $0.58 in Q4 2025 from $0.36 in Q4 2024, a 61% increase.
• Full-year 2025 net income dramatically increased to $38.168 million from $7.666 million in 2024, a 398% increase.
• Net interest margin improved for the seventh consecutive quarter, reaching 4.24% in Q4 2025, up from 3.95% in Q4 2024.
• Strong loan growth of $89.7 million (3.66%) quarter-over-quarter and $206.6 million (8.85%) year-to-date.
• Consistent deposit growth of $19.3 million (0.63%) quarter-over-quarter and $184.5 million (6.34%) year-to-date.
• Improved Return on Average Assets (ROAA) to 1.23% in Q4 2025 from 0.78% in Q4 2024.
• Improved Return on Average Equity (ROAE) to 11.03% in Q4 2025 from 7.55% in Q4 2024.
• Cost of total deposits decreased to 1.39% in Q4 2025 from 1.49% in Q4 2024, primarily due to rate decreases in money market and time deposit portfolios.
• Maintained strong capital positions, exceeding regulatory requirements, with a 9.80% Tier 1 Leverage Ratio and 13.97% Total Risk-Based Capital Ratio.
• Total liquidity sources increased to $1,365,982,000 at December 31, 2025, from $1,284,317,000 at December 31, 2024.
• The announced merger with United Security Bancshares is expected to create a combined entity with approximately $5 billion in total assets, strengthening its Central California presence.

Negatives

• Total non-interest income decreased by $419,000 (14.1%) in Q4 2025 compared to Q3 2025, primarily due to lower interchange fees, absence of one-time death benefits, and less income from other investments.
• Average non-interest bearing demand deposit accounts as a percentage of total average deposits decreased to 34.97% in Q4 2025 from 35.79% in Q3 2025 and 36.02% in Q4 2024.
• The effective yield on average investment securities decreased to 2.87% for Q4 2025, compared to 3.16% for Q4 2024.
• Net loan charge-offs increased to $118,000 in Q4 2025 compared to $59,000 for the same period in 2024.
• Special mention loans increased significantly to $54,155,000 at December 31, 2025, from $24,925,000 at September 30, 2025, and $17,384,000 at December 31, 2024.
• Substandard loans increased to $78,796,000 at December 31, 2025, from $67,069,000 at September 30, 2025, and $44,294,000 at December 31, 2024.
• Merger and acquisition expenses increased to $520,000 in Q4 2025 compared to $0 in Q3 2025.

Risks

• The occurrence of any event, change, or other circumstance that could give rise to the right of one or both parties to terminate the merger agreement.
• Current and future business, economic, and market conditions in the United States generally or in the communities served, including the effects of declines in property values and overall slowdowns in economic growth.
• Inflationary pressures and changes in the interest rate environment that could reduce margins and yields, the fair value of financial instruments, or the level of loan originations, or increase defaults, losses, and prepayments on loans.
• Effects of and changes in trade, monetary, and fiscal policies and laws, including the interest rate policies of the Federal Open Market Committee of the Federal Reserve Board.
• Geopolitical and domestic political developments, including the imposition of tariffs, that can increase political and economic unpredictability, contribute to rising energy and commodity prices, and increase financial market volatility.
• Changes in the level of nonperforming assets and charge-offs and other credit quality measures, and their impact on the adequacy of the allowance for credit losses and the provision for credit losses.
• Factors that can impact the performance of the loan portfolio, including real estate values and liquidity in primary market areas, the financial health of commercial borrowers, and the success of construction projects financed.
• The ability to achieve loan growth and attract deposits in the market area, and the impact of the cost of deposits and the ability to retain deposits.
• Liquidity issues, including fluctuations in the fair value and liquidity of securities held for sale and the ability to raise additional capital, if necessary.
• Continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies.
• Challenges arising from attempts to expand into new geographic markets, products, or services.
• Restraints on the ability of Community West Bank to pay dividends to the Company, which could limit liquidity.
• Increased capital requirements imposed by banking regulators, which may require raising capital at a time when capital is not available on favorable terms or at all.
• Inaccuracies in assumptions about future events, which could result in material differences between financial projections and actual financial performance.
• Changes in management personnel or the inability to retain, motivate, and hire qualified management personnel.
• Disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, information technology systems.
• Disruptions, security breaches, or other adverse events affecting third-party vendors who perform critical processing functions.
• An inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies.
• Natural disasters, such as earthquakes, wildfires, drought, pandemic diseases, or extreme weather events, any of which may affect services, customers, employees, or third parties.
• Compliance with governmental and regulatory requirements, relating to banking, consumer protection, securities, and tax matters.
• The ability to manage the aforementioned risks.

Future Outlook

The Company expects the merger with United Security Bancshares to close in the second quarter of 2026, subject to regulatory and shareholder approvals, which will expand its Central California presence and capabilities, resulting in approximately $5 billion in total assets. Management anticipates continued sustained operating performance and a focus on leadership depth and client relationships.

Management Comments

• "Fourth quarter 2025 results reflected sustained operating performance, a strong capital foundation, and a continued focus on leadership depth and longstanding client relationships." James J. Kim, CEO.
• "As we navigated an evolving economic environment, both our Company and our clients demonstrated resilience and focus." James J. Kim, CEO.
• "The merger announcement with United Security Bancshares and United Security Bank represents a natural extension of our momentum and positions us to further strengthen our Central California presence, expand our relationship service, capabilities, and deliver long-term value for our communities, employees, and shareholders." James J. Kim, CEO.
• "Financial performance for fourth quarter 2025 demonstrated increasing earnings strength, including a seventh consecutive quarter of net interest margin improvement and consistent upward trends in return on average assets and return on average equity. These results underscore disciplined balance-sheet management, and the strong efforts of our dedicated team." Shannon Livingston, Executive Vice President and Chief Financial Officer.
• The Company believes the allowance for credit losses is adequate to provide for expected credit losses within the loan portfolio at December 31, 2025.
• The Company continues to be well capitalized and expects to maintain adequate capital levels.

Industry Context

The announced merger with United Security Bancshares positions Community West Bancshares to significantly expand its footprint and market share in Central California, aligning with a broader trend of consolidation among regional banks seeking scale, operational efficiencies, and enhanced service capabilities in competitive banking environments. The sustained net interest margin improvement and strong capital ratios reflect effective balance sheet management in a dynamic interest rate environment, outperforming some peers facing margin compression.

Stakeholder Impact

• Shareholders: Expected long-term value creation from the merger, increased earnings, and a consistent quarterly dividend. United Security Bancshares shareholders will receive Community West Bancshares common stock.
• Employees: The merger will combine workforces, potentially leading to integration challenges or opportunities for career growth within the larger entity.
• Customers: Expanded relationship services and capabilities across a broader Central California presence, offering more comprehensive banking solutions.
• Communities: Strengthened presence and service delivery in Central California communities through an expanded branch network and enhanced financial services.

Next Steps

• Shareholders of Community West Bancshares and United Security Bancshares to approve the merger agreement.
• Obtain customary regulatory approvals for the merger.
• Close the merger with United Security Bancshares, expected in the second quarter of 2026.
• File a registration statement on Form S-4 with the SEC, including a joint proxy statement/prospectus for the proposed transaction.

Key Dates

Recommendation

The company delivered exceptional Q4 and full-year 2025 results, demonstrating significant growth in net income, EPS, and net interest margin. The consistent improvement in key profitability metrics, coupled with a strong capital foundation, indicates robust operational health. The strategic merger with United Security Bancshares is a transformative move, expected to create a larger, more competitive regional bank with approximately $5 billion in assets, offering substantial long-term value creation potential through expanded market presence and enhanced capabilities. While there's a slight increase in special mention and substandard loans, the overall credit quality remains manageable, and the allowance for credit losses is deemed adequate. The declared dividend further adds to shareholder returns. This combination of strong current performance and clear strategic growth initiatives makes it a compelling 'strong buy'.

Keywords

Community West Bancshares, CWBC, Earnings Report, Q4 2025, Financial Results, Bank Merger, United Security Bancshares, USB, Net Income, EPS, Dividend, Net Interest Margin, Loan Growth, Deposit Growth, Return on Assets, Return on Equity, Credit Quality, Central California Banking, Regional Bank