425: Community West Bancshares to Acquire United Security Bancshares

Community West Bancshares will acquire United Security Bancshares in an all-stock merger valued at approximately $191.9 million, creating a dominant community bank in Central California.

Summary

• Community West Bancshares (Acquiror) entered into an Agreement and Plan of Merger with United Security Bancshares (Target) on December 16, 2025, for an all-stock merger.
• Target shareholders will receive 0.4520 shares of Acquiror common stock for each Target common stock share.
• Based on Acquiror's closing share price of $24.06 on December 16, 2025, the implied total deal value is approximately $191.9 million, or $10.88 per Target common share.
• Upon consummation, Target shareholders will own approximately 29.4% of the combined company, and Acquiror shareholders will own approximately 70.6%.
• United Security Bank, Target's banking subsidiary, will merge into Community West Bank, Acquiror's banking subsidiary, with its branches becoming Community West Bank branches.
• As of September 30, 2025, Target had total assets of $1.24 billion, total net loans of $942.1 million, and total deposits of $1.08 billion.
• The combined company is projected to have approximately $5 billion in total assets.
• The merger is expected to close in the second quarter of 2026, subject to customary closing conditions, including regulatory and shareholder approvals from both parties.
• A termination fee of $7.7 million is payable by Target to Acquiror under certain circumstances.

Sentiment

Score: 8

Explanation: The filing announces a strategic merger with significant projected financial accretion and market expansion, positioning the combined entity for stronger performance, despite some tangible book value dilution and integration risks.

Positives

• The merger is expected to materially accelerate scale and profitability for the combined entity.
• It solidifies the combined company's presence in attractive Central California markets.
• The transaction is projected to result in 15.6% EPS accretion for 2027 and approximately 10.9% for the six-month period following transaction close in 2026.
• Pro forma Return on Average Assets (ROAA) is estimated at 1.50% and Return on Average Tangible Common Equity (ROATCE) at 16.4% for 2027, indicating strong profitability.
• The combined company will have approximately $5 billion in total assets, $3.5 billion in loans, and $4.2 billion in deposits, creating a more robust banking franchise.
• The merger maintains a well-capitalized status for the combined entity with enhanced capital generation going forward.
• The current valuation of Acquiror at 8.3x pro forma 2027 earnings suggests a compelling value proposition.
• The combination offers an increased legal lending limit and a deeper product base, expanding resources and capabilities for community service.
• Both institutions share complementary cultures, experienced leadership, and a strong community focus, facilitating integration.
• The pro forma company will surpass $4 billion in total deposits and achieve over 12% market share in Fresno County, positioning it as a market leader.

Negatives

• The transaction is expected to result in a (9.5%) tangible book value (TBV) dilution at close for Acquiror shareholders.
• The TBV earn-back period is estimated at 3.0 years using the cross-over method.
• Integration of operations may be materially delayed, more costly, or difficult than expected.
• There is a risk of lower than expected revenues, credit quality deterioration, or a reduction in real estate values post-merger.
• Higher than anticipated operating expenses could impact financial performance.
• Challenges may arise in integrating and retaining key employees.

Risks

• The anticipated benefits of the proposed merger may not be realized or may not be realized within the expected time period.
• Integration of the Target's operations with those of the Acquiror may be materially delayed or will be more costly or difficult than expected.
• The parties may be unable to meet expectations regarding the timing of the proposed merger.
• Changes to tax legislation and their potential effects on the accounting for the merger could occur.
• The proposed merger may not be completed due to the failure of the Target's shareholders to adopt the Merger Agreement, or the failure of the Acquiror's shareholders to adopt the Merger Agreement or to approve the issuance of Acquiror's common stock.
• Failure to satisfy other conditions to completion of the proposed merger, including receipt of required regulatory and other approvals, could prevent closing.
• Diversion of management's attention from ongoing business operations and opportunities due to the proposed merger is a possibility.
• Challenges in integrating and retaining key employees could arise.
• The announcement of the proposed merger may affect customer and employee relationships and operating results.
• The proposed merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events.
• Dilution caused by the Acquiror's issuance of additional shares of common stock in connection with the merger is a factor.
• Changes in the global economy and financial market conditions and the business, results of operations, and financial condition of the Acquiror, the Target, and the combined company could occur.
• Lower than expected revenues, credit quality deterioration, or a reduction in real estate values could cause an increase in the provision for credit losses and allowance for credit losses and a reduction in net earnings.
• Increased competitive pressure among depository institutions is a risk.
• Changes in the interest rate environment may reduce net interest margins.
• The effectiveness of the parties' risk management framework, asset/liability repricing risks, and liquidity risks could be impacted.

Future Outlook

The merger is expected to close in the second quarter of 2026, subject to regulatory and shareholder approvals. It is anticipated to materially accelerate scale and profitability, solidify market presence in Central California, and diversify customer and product offerings. The combined company is projected to achieve 15.6% EPS accretion and 1.50% ROAA by 2027, positioning it as a dominant community bank in the region.

Management Comments

• "This merger represents a major step forward in our long-term growth strategy and our commitment to the communities we serve throughout Central California. Both institutions share a strong, long-term foundation of relationship banking, local decision-making and responsible growth. By bringing our organizations together, we are creating a more robust and more visible banking franchise, with greater depth of expertise, expanded resources and enhanced capacity to support businesses, families and communities. At the same time, we expect the combination to further deliver lasting value to our shareholders." James J. Kim, CEO of Community West Bancshares.
• "Joining with Community West Bank is a natural partnership for our bank, our clients and our employees. With shared values and cultures centered on integrity, personal service and community commitment, this combination strengthens our ability to serve with greater scale, expanded lending capacity and broader market reach. Together, we are creating new opportunities for our clients, enhanced career paths for our employees and a stronger banking franchise across Central California." Dennis R. Woods, Chairman, President and CEO for United Security Bancshares.

Industry Context

This merger is part of a broader trend of consolidation in the banking sector, particularly among community banks seeking to achieve greater scale, expand market reach, and enhance profitability in competitive environments. The combined entity aims to become a dominant community bank in Central California, leveraging increased assets and diversified offerings to compete more effectively with larger regional and money center banks. The focus on local decision-making and relationship banking aligns with the value proposition often emphasized by community banks in their growth strategies.

Comparison to Industry Standards

• The Pro Forma ROAA of 1.50% for 2027 is at the top quartile (1.55%) compared to Western Peers ($3.5B $7.5B in total assets).
• The Pro Forma ROATCE of 16.4% for 2027 significantly exceeds the top quartile (14.3%) of Western Peers.
• The Pro Forma Loans / Deposits of 82.9% is below the median (85.8%) and top quartile (94.3%) of Western Peers, suggesting potential for loan growth.
• The Pro Forma CET1 of 12.0% is below the median (12.7%) and top quartile (14.9%) of Western Peers, but still indicates a well-capitalized position.
• The Pro Forma Leverage Ratio of 9.9% is below the median (10.6%) and top quartile (11.0%) of Western Peers.
• The Pro Forma NPAs / Assets of 0.42% is better than the median (0.51%) and top quartile (0.94%) of Western Peers, indicating strong asset quality.
• The Pro Forma Price / Forward 2027E EPS of 8.3x is significantly lower than the median (10.3x) and top quartile (11.8x) of Western Peers, suggesting a potentially undervalued combined entity post-merger.

Management Changes

Corporate Governance

Legal Proceedings

• The filing mentions the possibility of 'shareholder litigation contemplated by Section 7.9' challenging the merger or seeking damages, which both parties agree to manage collaboratively.

Related Party Transactions

• Directors and certain officers of both Community West Bancshares and United Security Bancshares executed voting and support agreements in favor of the merger.
• Dennis R. Woods, United Security Bancshares' Chairman, President and Chief Executive Officer, will join Community West Bank as Chairman Emeritus for a period of two years to assist in the successful transition of customer relationships.

Stakeholder Impact

• **Shareholders (Target)**: Will receive 0.4520 shares of Community West Bancshares common stock for each share, collectively owning approximately 29.4% of the combined company, and are expected to benefit from the projected EPS accretion and increased scale.
• **Shareholders (Acquiror)**: Will own approximately 70.6% of the combined company and are expected to benefit from significant EPS accretion, improved profitability metrics (ROAA, ROATCE), and a stronger market position, despite an initial tangible book value dilution.
• **Employees (Target)**: All employees will become employees of Community West Bancshares. They will initially be provided employee benefit plans and compensation opportunities substantially comparable to similarly-situated Acquiror employees, with years of service credited for eligibility and vesting in new plans. Severance policies will be terminated, but eligible employees may receive severance under Acquiror's policy if involuntarily terminated within 12 months post-closing.
• **Customers (Target)**: United Security Bank branches will become Community West Bank branches. Customers are expected to benefit from expanded resources, greater depth of expertise, and enhanced capacity to support businesses, families, and communities.
• **Community**: The merger is presented as a strategic move to create a more robust and visible banking franchise in Central California, reinforcing commitment to the communities served through expanded resources and local decision-making.

Next Steps

• Community West Bancshares will prepare and file a registration statement on Form S-4 with the SEC, which will include a joint proxy statement/prospectus.
• Both Community West Bancshares and United Security Bancshares will hold shareholder meetings to obtain necessary approvals for the merger and stock issuance.
• The parties will seek all required regulatory approvals from applicable authorities.
• Upon consummation of the merger, two current directors from United Security Bancshares, including Jagroop Jay Gill, will be appointed to the Community West Bancshares board of directors.
• Dennis R. Woods, United Security Bancshares' Chairman, President and CEO, will join Community West Bank as Chairman Emeritus for a period of two years to assist in the transition of customer relationships.

Key Dates

Recommendation

The merger is highly accretive to EPS (15.6% in 2027) and significantly improves key profitability metrics like ROAA (1.50%) and ROATCE (16.4%), positioning the combined entity as a top-performing community bank compared to peers. While there is tangible book value dilution, the earn-back period is a manageable 3.0 years. The strategic rationale of increased scale, market presence in attractive California markets, and diversification of offerings creates a stronger, more visible banking franchise. The current valuation of 8.3x pro forma 2027 EPS is attractive relative to industry peers, suggesting significant upside potential for investors.

Keywords

Community West Bancshares, United Security Bancshares, Merger, Acquisition, Bank Holding Company, Financial Services, California Banking, Regional Bank, Stock Merger, SEC Filing, Form 8-K, Banking Industry, Central California, Fresno, NASDAQ