425: Community West Bancshares to Acquire United Security Bancshares

Community West Bancshares announced a definitive agreement to 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) has entered into an Agreement and Plan of Merger with United Security Bancshares (Target), an all-stock transaction.
• 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.
• 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 merger is expected to close in the second quarter of 2026, subject to regulatory and shareholder approvals from both parties.
• The transaction is intended to qualify as a tax-free reorganization under Section 368(a) of the Code.

Sentiment

Score: 8

Explanation: The filing announces a strategic all-stock merger with significant expected financial accretion, increased market presence, and strong pro forma profitability metrics that position the combined entity favorably against industry peers, despite initial tangible book value dilution.

Positives

• The merger represents a major step forward in the long-term growth strategy and commitment to communities throughout Central California.
• The combined company will create a more robust and visible banking franchise with greater depth of expertise, expanded resources, and enhanced capacity.
• Expected to deliver lasting value to shareholders, with an estimated 15.6% EPS accretion in 2027 and 10.9% in 2026 (for the six-month period post-close).
• Anticipated ~300 basis points improvement in Return on Average Tangible Common Equity (ROATCE) and ~25 basis points improvement in Return on Average Assets (ROAA) in 2027.
• Pro forma assets are expected to be approximately $5.0 billion, loans $3.5 billion, and deposits $4.2 billion, solidifying market presence.
• Cost savings are projected to be approximately 45% of Target's noninterest expense, totaling $14.7 million in pre-tax savings expected in 2027.
• The combined entity maintains a well-capitalized status with enhanced capital generation going forward.
• The pro forma company will surpass $4 billion in total deposits and become a top 10 community bank under $10 billion in assets in California.
• The merger provides diversification of customer mix and products, and an opportunity to serve nearly 10 million residents across Central California markets.

Negatives

• The transaction is expected to result in a (9.5%) tangible book value (TBV) dilution at close.
• There is a risk that the integration of Target's operations with Acquiror's will be materially delayed or will be more costly or difficult than expected.
• Challenges exist in integrating and retaining key employees.
• Adverse regulatory conditions may be imposed in connection with governmental approvals of the merger.

Risks

• The possibility that any of the anticipated benefits of the proposed Merger will not be realized or will not be realized within the expected time period.
• The risk that integration of the Target's operations with those of the Company will be materially delayed or will be more costly or difficult than expected.
• The parties' inability 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 the Target's shareholders to adopt the Merger Agreement, or the failure of the Company's shareholders to adopt the Merger Agreement or to approve the issuance of the Company's common stock in connection with the Merger.
• The failure to satisfy other conditions to completion of the proposed Merger, including receipt of required regulatory and other approvals.
• The failure of the proposed Merger to close for any other reason.
• Diversion of management's attention from ongoing business operations and opportunities due to the proposed Merger.
• The challenges of integrating and retaining key employees.
• The effect of the announcement of the proposed Merger on the Company's, the Target'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.
• The dilution caused by the Company's issuance of additional shares of the Company'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 the Company, the Target 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 customary closing conditions, including regulatory and shareholder approvals. The parties intend for the merger to qualify as a tax-free reorganization. The combined company anticipates materially accelerating its scale and profitability, solidifying its presence in attractive California markets, and diversifying its customer mix and products.

Management Comments

• James J. Kim (CEO of Community West Bancshares): "This merger represents a major step forward in our long-term growth strategy and our commitment to the communities we serve throughout Central California. 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): "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 signifies a strategic consolidation within the Central California banking sector, creating a larger, more competitive regional bank. The combined entity, with approximately $5 billion in assets, will become a dominant community bank in the region, positioning it among the top 10 community banks under $10 billion in assets in California. This move aligns with broader industry trends of regional banks seeking increased scale, operational efficiencies, and expanded market reach to better compete and serve growing communities.

Comparison to Industry Standards

• The Pro Forma 2027 ROAA of 1.50% is at the top quartile of Western Peers ($3.5B $7.5B in total assets), which has a median of 1.31% and a top quartile threshold of 1.55%.
• The Pro Forma 2027 ROATCE of 16.4% is above the top quartile of Western Peers, which has a median of 11.5% and a top quartile threshold of 14.3%.
• The Pro Forma Loans / Deposits ratio of 82.9% is below the median of Western Peers (85.8%) and significantly below the top quartile (94.3%), suggesting good liquidity.
• The Pro Forma NPAs / Assets of 0.42% is better than the median of Western Peers (0.51%) and significantly better than the top quartile (0.94%), indicating strong asset quality.
• The Pro Forma Price / Forward EPS (2027E) of 8.3x is significantly below the median of Western Peers (10.3x) and the top quartile (11.8x), suggesting an attractive valuation for the combined entity.

Management Changes

Corporate Governance

Legal Proceedings

• No specific legal proceedings are mentioned as pending or threatened against either company or their subsidiaries, other than general shareholder litigation that may arise in connection with the merger, which both parties agree to manage collaboratively.

Related Party Transactions

• All transactions required to be disclosed by the Company pursuant to Item 404 of Regulation S-K since January 1, 2024, have been disclosed in the Company SEC Reports. No new transactions requiring such disclosure are currently proposed.

Stakeholder Impact

• Shareholders (Target): Will receive 0.4520 shares of Community West Bancshares common stock for each share, owning approximately 29.4% of the combined company, and are expected to benefit from the projected EPS accretion and increased profitability.
• Shareholders (Acquiror): Will own approximately 70.6% of the combined company and are expected to benefit from significant EPS accretion, improved ROAA and ROATCE, and an attractive valuation relative to peers.
• Customers: Anticipated to benefit from greater scale, expanded lending capacity, broader market reach, a deeper product base, and further upgrades in technology offerings and facilities.
• Employees: Covered Employees will become employees of Acquiror, with initial employee benefit plans and compensation opportunities substantially comparable to similarly-situated Acquiror employees, and enhanced career paths are expected.
• Community: The merger is expected to strengthen the ability to serve communities throughout Central California, maintaining local decision-making and responsible growth, with a shared commitment to Fresno-centered markets.

Next Steps

• Community West Bancshares will file a registration statement on Form S-4 with the SEC, which will include a joint proxy statement/prospectus.
• The registration statement must be declared effective by the SEC.
• The joint proxy statement/prospectus will be mailed to shareholders of both Community West Bancshares and United Security Bancshares.
• Shareholder meetings for both companies will be held to obtain necessary approvals for the merger and stock issuance.
• All required regulatory approvals must be obtained from applicable authorities.
• The merger is expected to be completed in the second quarter of 2026.
• Dennis R. Woods will join Community West Bank as Chairman Emeritus for two years to assist in the successful transition of customer relationships.
• Community West Bancshares will assume the due and punctual performance and observance of covenants under the Trust Preferred Securities Indenture.

Key Dates

Recommendation

The all-stock merger is highly accretive to Community West Bancshares' EPS and key profitability metrics (ROAA, ROATCE), positioning the combined entity as a top-performing community bank in Central California. The strategic rationale is sound, focusing on increased scale, market leadership, and diversification. While there is initial tangible book value dilution, the earn-back period is a reasonable 3 years, and the pro forma valuation (Price/Forward EPS) appears attractive relative to peers. The strong asset quality and expected cost savings further bolster the positive outlook, making this a compelling investment opportunity.

Keywords

Community West Bancshares, United Security Bancshares, merger, acquisition, banking, financial services, California, regional bank, stock merger, bank holding company, SEC filing, Form 8-K, financial integration, shareholder approval, regulatory approval, Central Valley, Central California, EPS accretion, ROATCE, ROAA, cost savings