DEFM14A: Community West Bancshares to Acquire United Security Bancshares

Community West Bancshares and United Security Bancshares announce a definitive merger agreement, with USB merging into CWB in an all-stock transaction valued at approximately $193.3 million.

Summary

• Community West Bancshares (CWB) will acquire United Security Bancshares (USB) in an all-stock merger, with USB merging into CWB.
• Each issued and outstanding share of USB common stock will be converted into the right to receive 0.4520 shares of CWB common stock, with cash paid in lieu of fractional shares.
• Based on CWB's closing price of $24.06 on December 16, 2025, the implied merger consideration per USB share was $10.88, with an aggregate transaction value of approximately $191.9 million.
• Based on CWB's closing price of $24.28 on February 18, 2026, the implied merger consideration per USB share was $10.97, with an aggregate transaction value of approximately $193.3 million.
• Following the merger, current CWB shareholders are expected to own approximately 70.6%, and current USB shareholders approximately 29.4%, of the outstanding common stock of the combined company.
• The merger is anticipated to be consummated in the second quarter of 2026.
• Immediately following the holding company merger, USB's wholly-owned banking subsidiary, United Security Bank, will merge with and into CWB's Community West Bank, with Community West Bank as the surviving bank.
• The boards of directors of both CWB and USB have unanimously approved the merger agreement and recommend that their respective shareholders vote in favor of the proposals.
• The merger is intended to qualify as a reorganization for U.S. federal income tax purposes, meaning USB shareholders generally will not recognize gain or loss upon the exchange of their USB common stock for CWB common stock, except for cash received in lieu of fractional shares.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a strategically sound merger for both parties, offering growth opportunities and financial benefits, despite typical integration risks and a modest market premium for USB shareholders. The expected EPS accretion and reasonable tangible book value payback period are positive indicators.

Positives

• Both CWB and USB boards of directors unanimously approved the merger, indicating strong internal support.
• CWB anticipates the merger will further its strategic growth plans, enhance earnings, and improve other financial metrics, potentially driving a higher share price for CWB common stock.
• USB believes the merger offers an attractive return on investment and substantial benefits for its shareholders.
• The transaction is expected to create a premier California business bank with a complementary geographic footprint, leading to growth opportunities.
• Anticipated efficiencies and cost savings are expected from integrating USB's operations into CWB's existing structure.
• The merger is expected to be accretive to CWB's estimated earnings per share (EPS) in 2026 and beyond, excluding one-time transaction costs and day 1 CECL provision.
• The transaction has an estimated 3.0-year payback period for CWB's tangible book value.
• The exchange of CWB common stock for USB common stock is expected to be tax-free for federal income tax purposes for USB shareholders (except for fractional shares).
• The combined company is expected to continue CWB's regular quarterly dividend rate, providing consistent income for former USB shareholders.
• The merger is expected to positively impact depositors, customers, and communities by providing expanded product offerings and continued quality service.

Negatives

• USB shareholders will experience a reduced ownership and voting interest in the combined company, holding approximately 29.4% of the outstanding shares.
• The market price of CWB common stock after the merger may be influenced by factors different from those currently affecting CWB or USB independently.
• The issuance of approximately 7,963,215 new shares of CWB common stock to USB shareholders may result in dilution and potentially adversely affect CWB's market price.
• There is no assurance that the anticipated benefits and cost savings of the merger will be fully realized or realized within the expected timeframe, potentially leading to increased costs or decreased revenues.
• The integration process could disrupt ongoing businesses, cause inconsistencies in standards, controls, procedures, and policies, and lead to employee attrition.
• Regulatory approvals may be delayed, denied, or impose conditions that are not presently anticipated or cannot be met, potentially delaying or abandoning the merger.
• The merger agreement contains provisions, such as a termination fee of $7,700,000 and no-solicitation clauses, that may discourage alternative acquisition proposals for USB.
• The financial advisors' opinions on fairness do not reflect changes in circumstances that may occur between the signing of the merger agreement and its consummation.
• Both companies will incur significant, non-recurring transaction and integration costs.
• The unaudited pro forma combined financial information is preliminary, and the actual financial condition and results of operations of the combined company may differ materially.
• The transaction is expected to be dilutive to CWB's estimated tangible book value per share at closing and through the year ending December 31, 2028.
• Most shareholders of CWB and USB will not have dissenters' rights under California law due to their shares being listed on national securities exchanges.

Risks

• The value of the merger consideration will fluctuate based on the trading price of CWB common stock.
• The market price of CWB common stock after the merger may be affected by factors different from those currently affecting the shares of CWB or USB.
• The issuance of approximately 7,963,215 shares of CWB common stock may adversely affect the market price of CWB common stock due to dilution.
• USB shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.
• CWB may fail to realize the anticipated benefits of the merger, including growth opportunities, revenue synergies, expanded market reach, and operating efficiencies.
• The integration process could disrupt ongoing businesses, cause inconsistencies in standards, controls, procedures, and policies, or lead to employee attrition.
• Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or cannot be met.
• The merger agreement may be terminated in accordance with its terms, and the merger may not be consummated, leading to negative impacts on both companies.
• USB will be subject to business uncertainties and contractual restrictions while the merger is pending, potentially preventing it from pursuing attractive business opportunities.
• USB directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of USB shareholders.
• Provisions in the merger agreement, such as the no-solicitation clause and the $7,700,000 termination fee, may discourage other companies from trying to acquire USB for greater merger consideration.
• The opinions of CWB's and USB's respective financial advisors will not reflect changes in circumstances between the signing of the merger agreement and the consummation of the merger.
• CWB and USB will incur significant transaction and integration costs in connection with the merger.
• The shares of CWB common stock to be received by USB shareholders will have different rights from the shares of USB common stock.
• The unaudited pro forma condensed combined financial information is preliminary, and the actual financial condition and results of operations of the combined company after the merger may differ materially.
• Litigation may be filed against CWB or USB (or their respective boards of directors) that could prevent or delay the consummation of the merger or result in the payment of damages.
• The merger may have adverse tax consequences if it fails to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.
• Holders of CWB common stock and USB common stock will generally not have dissenters' rights in connection with the merger, unless their shares are subject to restrictions on transfer.

Future Outlook

The merger is expected to be accretive to CWB's estimated EPS in 2026 and beyond, excluding one-time transaction costs and day 1 CECL provision. The transaction is projected to have a 3.0-year payback period for CWB's tangible book value. The combined company aims for enhanced revenues, revenue synergies, expanded market reach, and operating efficiencies, with the goal of creating a premier California business bank.

Management Comments

• James J. Kim, Chief Executive Officer of Community West Bancshares, stated that CWB believes the merger will further its strategic growth plans and provide CWB shareholders with substantial benefits.
• Dennis R. Woods, President and Chief Executive Officer of United Security Bancshares, commented that USB believes the merger will provide USB shareholders with an attractive return on their investment and other substantial benefits.
• Mr. Woods and Jagroop Jay Gill, Vice Chairman of the USB Board, engaged in informal conversations with CWB counterparts over several years, noting that a combination was 'both logical and strategically compelling for USB shareholders, employees and customers'.

Industry Context

StockSavvy.ai notes this merger reflects the ongoing trend of consolidation within the highly competitive banking landscape, particularly among community banks in California. The strategic fit, complementary geographic footprints, and pursuit of enhanced scale and operating efficiencies are common drivers for such transactions in the sector. The increasing prevalence of technology and the cost of deployment also contribute to consolidation pressures, making larger, more diversified entities more resilient.

Comparison to Industry Standards

• USB's Transaction Value / LTM Earnings (17.0x) is higher than the median (14.5x) and mean (15.4x) of Nationwide Precedent Transactions (bank targets, $1.0B-$2.0B assets, announced Jan 1, 2025 Dec 15, 2025).
• USB's Transaction Value / Tangible Book Value (145.3%) is higher than the median (134.6%) but slightly lower than the mean (146%) of Nationwide Precedent Transactions.
• USB's Core Deposit Premium (5.9%) is higher than the median (4.5%) and mean (5.6%) of Nationwide Precedent Transactions.
• USB's 1-Day Market Premium (5.2%) is significantly lower than the median (18.7%) and mean (25.2%) of Nationwide Precedent Transactions, suggesting a modest premium relative to other deals or that market expectations were already partially priced in.
• USB's Transaction Value / LTM Earnings (17.0x) is lower than the 75th percentile (24.4x) but higher than the median (17.3x) and 25th percentile (10.7x) of Regional Transactions (Western region bank targets, $500M-$3.0B assets, announced March 1, 2023 Dec 15, 2025).
• USB's Transaction Value / Tangible Book Value (145.3%) is lower than the 75th percentile (168.5%) and median (146.4%) but higher than the 25th percentile (122.3%) of Regional Transactions.
• USB's Core Deposit Premium (5.9%) is lower than the 75th percentile (11.0%) but higher than the median (5.3%) and 25th percentile (2.0%) of Regional Transactions.
• USB's 1-Day Market Premium (5.2%) is significantly lower than the 75th percentile (77.2%), median (47.6%), and 25th percentile (9.4%) of Regional Transactions, indicating a relatively low immediate market reaction premium.

Management Changes

Corporate Governance

Legal Proceedings

• There is a potential risk of shareholder litigation being filed against CWB or USB (or their respective boards of directors) challenging the merger, which could prevent or delay its consummation or result in damages.
• A condition to closing the merger is the absence of any order, injunction, decree, statute, rule, regulation, or other legal restraint or prohibition preventing or making illegal the consummation of the merger.

Related Party Transactions

• USB's directors and executive officers have interests in the merger that are different from, or in addition to, those of general USB shareholders.
• These interests include payments pursuant to change in control agreements for executive officers.
• Dennis R. Woods, USB's President and CEO, has entered into a two-year employment agreement with Community West Bank to serve as Chairman Emeritus, with an annual salary of $708,412.
• Jagroop Jay Gill and Dora Westerlund, current USB directors, will join the CWB Board post-merger.
• Equity awards (stock options, restricted stock units, restricted stock awards) held by USB directors and executive officers will undergo accelerated vesting immediately prior to the merger.
• Current USB and United Security Bank directors and officers will receive continued indemnification, advancement of expenses, and directors and officers insurance coverage for six years following the merger.

Stakeholder Impact

• **Shareholders (USB)**: Will receive CWB common stock, resulting in a reduced ownership and voting interest in the combined entity. They are expected to benefit from an attractive return on investment and generally tax-free exchange of shares, along with the continuation of CWB's quarterly dividend.
• **Shareholders (CWB)**: Will experience dilution from the issuance of new shares but are expected to benefit from strategic growth, enhanced earnings, and improved financial metrics, potentially leading to a higher share price.
• **Employees (USB)**: All individuals employed by USB or its subsidiaries immediately prior to closing will automatically become CWB employees. They will be eligible for substantially comparable employee benefit plans and compensation opportunities (excluding certain 'Excluded Benefits') and a severance policy for qualifying involuntary terminations. There is a risk of employee attrition during integration.
• **Customers**: Expected to benefit from expanded product offerings and continued quality service from the combined, larger banking entity.
• **Communities**: The combined company is expected to continue providing quality service and expanded offerings to the communities currently served by both banks.
• **Creditors**: CWB will assume USB's obligations under the indenture for the $6,000,000 in trust preferred securities, ensuring continuity for these creditors.

Next Steps

• CWB and USB shareholders will hold special meetings on March 30, 2026, to vote on the merger agreement and related proposals.
• CWB and USB must obtain all necessary regulatory approvals from the Federal Reserve, FDIC, and California Department of Financial Protection & Innovation (DFPI).
• The merger is expected to be consummated in the second quarter of 2026.
• Immediately following the holding company merger, United Security Bank will merge into Community West Bank.
• The exchange agent will mail letters of transmittal to USB shareholders within 10 business days after the closing date for the exchange of shares.
• CWB and USB intend to announce preliminary voting results at their respective special meetings and publish final results on a Current Report on Form 8-K within four business days following the meetings.
• CWB will assume USB's obligations under the indenture relating to the $6,000,000 in trust preferred securities.

Key Dates

Recommendation

The merger presents a clear strategic growth opportunity for CWB and a reasonable return for USB shareholders. While the transaction is expected to be accretive to CWB's EPS and has a manageable tangible book value payback period, the modest market premium for USB shareholders and the inherent integration risks suggest a 'hold' recommendation for existing shareholders of both entities, awaiting successful integration and realization of synergies. New investors might consider entry post-merger once integration progress is clearer.

Keywords

Bank Merger, Community West Bancshares, United Security Bancshares, CWBC, UBFO, Financial Services, Acquisition, Stock Exchange, Regulatory Approval, Shareholder Vote, California Banking, Financial Integration, Corporate Governance, Risk Factors, SEC Filing, DEFM14A