8-K: Community West Bancshares to Acquire United Security Bancshares

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

Summary

• United Security Bancshares (UBFO) will merge with and into Community West Bancshares (CWBC) in an all-stock transaction.
• UBFO shareholders will receive 0.4520 shares of CWBC common stock for each share of UBFO common stock.
• Based on CWBC'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 UBFO common share.
• UBFO shareholders are expected to own approximately 29.4% of the combined company, while existing CWBC shareholders will own approximately 70.6%.
• United Security Bank, UBFO's banking subsidiary, will merge with and into Community West Bank, CWBC's banking subsidiary, immediately following the holding company merger.
• As of September 30, 2025, UBFO 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, $3.5 billion in total loans, and $4.2 billion in total deposits.
• The transaction is expected to be completed in the second quarter of 2026, subject to customary closing conditions, including regulatory and shareholder approvals from both parties.
• Estimated pre-tax cost savings are approximately $14.7 million in 2027, representing 45% of UBFO's noninterest expense, with 75% phased-in during 2026.
• Estimated pre-tax transaction expenses are $20.8 million.
• The merger is expected to be 10.9% accretive to EPS in 2026 (for a six-month period post-close) and 15.6% accretive to EPS in 2027.
• Tangible book value dilution at close is estimated at (9.5%), with a 3.0-year earn-back period.

Sentiment

Score: 8

Explanation: The merger is strategically sound, creating a larger, more profitable entity with significant EPS accretion and strong pro forma financial metrics that compare favorably to industry peers, despite initial tangible book value dilution. The clear strategic rationale and experienced management team support a positive outlook.

Positives

• Significant EPS accretion of 15.6% in 2027 and 10.9% in 2026 (six-month period post-close).
• Improved profitability metrics with a Pro Forma ROAA of 1.50% and ROATCE of 16.4% in 2027, outperforming peer medians.
• Increased scale, creating a combined entity with approximately $5 billion in total assets, positioning it as a top 10 community bank under $10 billion in assets in California.
• Expanded geographic footprint with 40 branches across Central California, serving nearly 10 million residents.
• Enhanced capital generation and maintained well-capitalized status for the combined entity.
• Strong asset quality for the pro forma company, with NPAs/Assets of 0.42%, which is better than the median of Western Peers.
• Strategic in-market expansion, solidifying market leadership in Fresno County with over $2.3 billion in deposits and more than 12% market share.
• Complementary cultures and experienced leadership from both organizations, with a shared community focus.
• Diversification of customer mix and products, along with expanded resources and capabilities to serve communities.

Negatives

• Tangible book value dilution of (9.5%) at closing.
• Estimated pre-tax transaction expenses of $20.8 million.
• Potential for integration of operations to be materially delayed, more costly, or difficult than expected.
• Risk of diversion of management's attention from ongoing business operations and opportunities due to the merger process.
• Challenges in integrating and retaining key employees.
• Dilution caused by CWBC's issuance of additional shares of common stock in connection with the merger.
• A termination fee of $7.7 million is payable by UBFO to CWBC under certain circumstances if the merger agreement is terminated.

Risks

• The anticipated benefits of the proposed merger may not be realized or may not be realized within the expected time period.
• Integration of UBFO's operations with CWBC's may be materially delayed or prove 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.
• The inability to complete the proposed merger due to the failure of either company's shareholders to adopt the Merger Agreement or approve the issuance of CWBC's common stock.
• Failure to satisfy other conditions to completion of the proposed merger, including receipt of required regulatory and other approvals.
• The proposed merger may not close for any other reason.
• Diversion of management's attention from ongoing business operations and opportunities due to the proposed merger.
• Challenges of integrating and retaining key employees.
• The effect of the announcement of the proposed merger on CWBC's, UBFO's, or the combined company's respective customer and employee relationships and operating results.
• The possibility that the proposed merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events.
• Dilution caused by CWBC's issuance of additional shares of CWBC's common stock in connection with the merger.
• Changes in the global economy and financial market conditions and the business, results of operations, and financial condition of CWBC, UBFO, and the combined company.
• 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.
• The possibility that changes in the interest rate environment may reduce net interest margins.
• Higher than anticipated operating expenses.
• The effectiveness of the parties' risk management framework, asset/liability repricing risks, and liquidity risks.

Future Outlook

The merger is expected to close in the second quarter of 2026, subject to regulatory and shareholder approvals. The combined entity anticipates significant EPS accretion and improved profitability metrics, aiming to become a dominant community bank in Central California with expanded resources and capabilities.

Management Comments

• James J. Kim, CEO of Community West Bancshares, stated: "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."
• Dennis R. Woods, Chairman, President, and CEO for United Security Bancshares, commented: "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."

Industry Context

This merger represents a strategic consolidation within the Central California banking sector, creating a larger, more robust banking franchise. The combined entity will be a top 10 community bank under $10 billion in assets in California, enhancing its competitive position, market reach, and lending capacity in a region characterized by projected population growth and strong household income. This move aligns with broader industry trends where regional banks seek scale and efficiency to navigate competitive pressures and regulatory demands.

Comparison to Industry Standards

• The Pro Forma 2027E Return on Average Assets (ROAA) of 1.50% is at the top quartile (1.55%) of publicly traded Western Peers with $3.5B $7.5B in total assets.
• The Pro Forma 2027E Return on Average Tangible Common Equity (ROATCE) of 16.4% is above the top quartile (14.3%) of Western Peers.
• The Pro Forma Loans / Deposits ratio of 82.9% is below the median (85.8%) and top quartile (94.3%) of Western Peers, suggesting a healthy liquidity position.
• The Pro Forma Common Equity Tier 1 (CET1) ratio of 12.0% and Leverage Ratio of 9.9% are below the median (12.7% and 10.6% respectively) of Western Peers, but still indicate a well-capitalized institution.
• The Pro Forma Non-Performing Assets to Total Assets (NPAs / Assets) of 0.42% is significantly better than the median (0.51%) and top quartile (0.94%) of Western Peers, indicating strong asset quality.
• The Pro Forma Price / Forward EPS (2027E) of 8.3x is substantially below the median (10.3x) and top quartile (11.8x) of Western Peers, suggesting potential undervaluation relative to its projected earnings performance.

Management Changes

Corporate Governance

Legal Proceedings

• No specific pending or threatened legal proceedings against either company are detailed, beyond general risks related to 'Transaction Litigation' that could challenge the merger or seek damages.

Related Party Transactions

• All transactions required to be disclosed by the Company and Acquiror pursuant to Item 404 of Regulation S-K since January 1, 2024, have been disclosed in their respective SEC Reports. No new proposed related party transactions are mentioned.

Stakeholder Impact

• Shareholders (UBFO): Will receive CWBC common stock, gaining ownership in a larger, more diversified entity with projected EPS accretion, but will experience initial tangible book value dilution.
• Shareholders (CWBC): Will benefit from significant EPS accretion and improved profitability metrics, enhancing long-term value, while maintaining majority ownership of the combined company.
• Employees: Potential for enhanced career paths within the larger organization, but also face integration challenges and risks related to employee retention.
• Customers: Will benefit from expanded resources, capabilities, and lending capacity, while maintaining community bank levels of service. UBFO branches will transition to Community West Bank branding.
• Communities: The merger aims to create a stronger banking franchise across Central California, reinforcing commitment to small and medium-sized businesses and fostering economic growth.

Next Steps

• Prepare and file a Registration Statement on Form S-4 with the SEC, which will include a joint proxy statement/prospectus.
• Hold shareholder meetings for both Community West Bancshares and United Security Bancshares to obtain necessary approvals for the merger and stock issuance.
• Obtain all required regulatory approvals from applicable authorities.
• Complete the integration planning for the efficient combination of the parties and their banking operations.
• Appoint Jagroop Jay Gill and one additional individual recommended by UBFO to the CWBC board of directors.
• Dennis R. Woods will serve as Chairman Emeritus for Community West Bank for two years to assist in the transition of customer relationships.

Key Dates

Recommendation

The merger is highly accretive to EPS and profitability metrics for Community West Bancshares, with a manageable tangible book value earn-back period. The combined entity will achieve significant scale, a stronger market position in Central California, and superior asset quality compared to industry peers. The current valuation of CWBC relative to its pro forma 2027 EPS suggests substantial upside potential. The strategic rationale is compelling, and the management teams have a history of successful acquisitions, indicating a high probability of effective integration and value creation.

Keywords

Merger, Acquisition, Banking, Financial Services, Community Bank, California, Central Valley, Fresno, Stock-for-Stock, Bank Holding Company, SEC Filing, 8-K, Community West Bancshares, United Security Bancshares, UBFO, CWBC, Financial Integration, Regulatory Approval, Shareholder Approval, Board of Directors, Executive Leadership, Asset Growth, Deposit Growth, Loan Growth, EPS Accretion, TBV Dilution, Cost Savings, Market Share