Community West Bancshares (NASDAQ: CWBC) grows to $5.0B in assets after USB merger
Community West Bancshares reported significantly larger scale but lower profitability for the quarter ended June 30, 2026. Total assets reached $5.03 billion, up from $3.69 billion at December 31, 2025, driven primarily by the completed merger with United Security Bancshares (USB) on April 1, 2026 and strong loan growth.
Quarterly net interest income rose to $50.9 million from $33.3 million a year earlier, reflecting a higher loan portfolio of $3.54 billion. However, net income for the quarter declined to $2.7 million from $7.8 million, pressured by a $5.9 million realized loss on investment securities, a higher $5.6 million provision for credit losses, and non-interest expenses of $39.1 million, up from $22.3 million.
The USB acquisition added about $1.20 billion of assets, $1.06 billion of deposits, $57.8 million of goodwill, and $26.6 million of core deposit intangibles, with total merger consideration of $184.7 million. Loans acquired included sizable purchased credit deteriorated and purchased seasoned portfolios, and the allowance for credit losses increased to $49.4 million, or 1.39% of total loans. Deposits grew to $4.12 billion, including $1.53 billion of uninsured balances.
Positive
- Total assets grew to $5.03 billion, up from $3.69 billion at year-end 2025, reflecting substantial balance sheet expansion.
- Net interest income for the quarter increased to $50.9 million from $33.3 million, supported by higher loan balances.
- The USB merger closed on April 1, 2026 with $1.20 billion of assets and $1.06 billion of deposits acquired, expanding the Central California footprint.
- Comprehensive income for the quarter was $7.0 million, aided by $4.3 million of positive other comprehensive income from securities.
Negative
- Quarterly net income fell to $2.7 million from $7.8 million a year earlier, reflecting weaker bottom-line performance.
- The company realized $5.9 million in net losses on sales and calls of investment securities in the quarter.
- Non-interest expenses rose to $39.1 million from $22.3 million, reflecting higher operating and integration costs.
- Nonaccrual loans increased to $19.8 million from $7.0 million at year-end 2025, and the allowance for credit losses rose to $49.4 million.
- Uninsured deposits totaled $1.53 billion at June 30, 2026, up from $1.19 billion, increasing exposure to large deposit outflows.
Filing Explained
The completed merger increased the common-share count, reducing existing holders’ percentage ownership; acquisition accounting remains adjustable for up to one year.
Community West Bancshares’s Form 10-Q is an unaudited quarterly report, and it confirms that the United Security Bancshares merger completed on
The merger issued
The filing says acquisition-date fair values for assets, liabilities, loans, deposits and other items may be revised during the measurement period of up to one year after the merger date, so the reported purchase-accounting amounts are not necessarily final.
The acquired portfolio also included
Key Figures
Total assets: $5,034,240,000
Net income Q2 2026: $2,695,000
Net interest income Q2 2026: $50,912,000
+5 more
8 metrics
Total assets
$5,034,240,000
Balance at June 30, 2026
Net income Q2 2026
$2,695,000
For the three months ended June 30, 2026
Net interest income Q2 2026
$50,912,000
For the three months ended June 30, 2026
Total loans
$3,543,273,000
Gross loans at June 30, 2026
Total deposits
$4,119,462,000
Deposits at June 30, 2026
Allowance for credit losses on loans
$49,422,000
Ending balance at June 30, 2026
USB merger consideration
$184,672,000
Total fair value of consideration transferred April 1, 2026
Uninsured deposits
$1,526,017,000
Uninsured deposit balances at June 30, 2026
Key Terms
purchased credit deteriorated, purchased seasoned loans, core deposit intangibles, allowance for credit losses, +2 more
6 terms
purchased credit deteriorated financial
"Purchased loans that exhibited more-than-insignificant deterioration of credit quality from origination were classified as purchased credit deteriorated"
Purchased credit deteriorated (PCD) describes a debt asset bought when its borrower’s ability to repay has already worsened since the loan was first issued. Under accounting rules, buyers must immediately account for the full expected loss rather than spreading it out, so PCD holdings lower reported earnings and capital right away and signal higher credit risk—similar to buying a used car with known damage that you must account for in your budget.
purchased seasoned loans financial
"non-PCD loans that qualified as purchased seasoned loans (“PSL”) under the guidance"
Purchased seasoned loans are existing loans that an investor buys after they have been outstanding for some time and have a track record of payments. Like buying a used car with a known service history, these loans give buyers clearer information about how likely borrowers are to keep paying, which helps investors estimate future cash flow, potential losses, and the returns they can expect.
core deposit intangibles financial
"Core deposit intangibles represent the estimated future benefit of deposits related to an acquisition"
Core deposit intangibles are the recorded value placed on a bank’s customer deposits when one financial institution buys another, reflecting the extra worth of stable, low-cost accounts that are expected to stay after the sale. Investors care because this value is written into the buyer’s books and gradually expensed over time, which affects reported earnings and signals how much the market values the predictability and cost advantage of those customer relationships—similar to paying extra for a neighborhood store because its regular customers keep coming back.
allowance for credit losses financial
"The allowance for credit losses as a percentage of total loans was 1.39% as of June 30, 2026"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
nonaccrual loans financial
"The following tables present the composition of nonaccrual loans as of June 30, 2026"
Nonaccrual loans are loans a lender has stopped counting toward interest income because the borrower is overdue or unlikely to pay; the lender only records cash payments received and may set aside extra funds to cover potential losses. For investors, a rising number or amount of nonaccrual loans signals weaker credit quality, lower future interest revenue and larger potential write-downs — similar to pausing expected subscription income when many customers stop paying.
uninsured deposits financial
"As of June 30, 2026 and December 31, 2025, uninsured deposits totaled $1,526,017,000 and $1,185,118,000"
Uninsured deposits are customer funds held at a bank that exceed the amount protected by a government-backed deposit insurance program, meaning they would not be automatically reimbursed if the bank fails. For investors, the level of uninsured deposits signals how vulnerable a bank is to sudden withdrawals and depositor losses—high uninsured exposure can increase liquidity risk, contagion concerns, and potential losses for creditors and equity holders.
Earnings Snapshot
Net income: $2,695,000
quarter ended June 30, 2026
Net income
$2,695,000
down from $7,832,000 in the prior-year quarter
Net interest income
$50,912,000
up from $33,304,000 in the prior-year quarter
Total assets
$5,034,240,000
up from $3,690,317,000 at December 31, 2025
Total loans
$3,543,273,000
up from $2,540,570,000 at December 31, 2025
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FAQ
How did Community West Bancshares (CWBC) perform financially in Q2 2026?
Community West Bancshares reported net income of $2.7 million for Q2 2026, down from $7.8 million a year earlier. Net interest income rose to $50.9 million, but higher credit loss provisions, securities losses, and expenses reduced overall profitability.
What impact did the United Security Bancshares merger have on CWBC?
On April 1, 2026, CWBC completed its merger with United Security Bancshares, issuing 7,922,108 shares and recording total consideration of $184.7 million. The deal added $1.20 billion in assets, $1.06 billion in deposits, $57.8 million goodwill, and expanded its Central California banking footprint.
How did CWBC’s loans and deposits change by June 30, 2026?
Total loans increased to $3.54 billion from $2.54 billion at December 31, 2025, reflecting organic growth and acquired portfolios. Total deposits rose to $4.12 billion from $3.10 billion, with non-interest-bearing deposits at $1.45 billion and interest-bearing deposits at $2.67 billion.
What is CWBC’s credit quality and allowance for credit losses position?
The allowance for credit losses on loans increased to $49.4 million, or 1.39% of total loans, from $30.1 million. Nonaccrual loans rose to $19.8 million. The increase mainly reflects acquired USB portfolios and updated modeling for the larger asset base.
How much securities-related loss did CWBC record in Q2 2026?
For Q2 2026, CWBC recorded $5.9 million of net realized losses on sales and calls of investment securities. These losses helped drive total non-interest income to a negative $2.0 million for the quarter, compared with positive non-interest income a year earlier.
What are CWBC’s uninsured deposit levels as of June 30, 2026?
Uninsured deposits totaled $1.53 billion at June 30, 2026, up from $1.19 billion at December 31, 2025. This represents deposits above applicable insurance limits and is relevant to assessing the bank’s funding stability and potential sensitivity to large depositor behavior.
What goodwill and core deposit intangibles did CWBC record from the USB merger?
CWBC recorded $57.8 million of goodwill and $26.6 million of core deposit intangibles from the USB merger. Total goodwill reached $154.6 million, while core deposit intangibles totaled $32.7 million, to be amortized over an estimated 10-year life.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2026
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 000-31977
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip code) | |||||||
Registrant’s telephone number (559 ) 298-1775
Securities registered pursuant to Section 12(b) of the Act:
| (Title of Each Class) | (Trading Symbol) | (Name of Each Exchange on which Registered) | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☒ | Emerging growth company | ||||||||||||||||||||
| Non-accelerated filer | ☐ | Small reporting company | |||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
1
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 10, 2026 there were 27,131,078 shares of the registrant’s common stock outstanding.
2
COMMUNITY WEST BANCSHARES
2026 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART 1 | FINANCIAL INFORMATION | 5 | ||||||
ITEM 1 | Financial Statements (Unaudited) | 5 | ||||||
Consolidated Balance Sheets | 5 | |||||||
Consolidated Statements of Income | 6 | |||||||
Consolidated Statements of Comprehensive Income | 7 | |||||||
Consolidated Statements of Changes in Shareholders’ Equity | 8 | |||||||
Consolidated Statements of Cash Flows | 9 | |||||||
Notes to Consolidated Financials | 11 | |||||||
ITEM 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 42 | ||||||
ITEM 3 | Quantitative and Qualitative Disclosure about Market Risk | 63 | ||||||
ITEM 4 | Controls and Procedures | 63 | ||||||
PART II | OTHER INFORMATION | 64 | ||||||
ITEM 1 | Legal Proceedings | 64 | ||||||
ITEM 1A | Risk Factors | 64 | ||||||
ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 64 | ||||||
ITEM 3 | Defaults Upon Senior Securities | 64 | ||||||
ITEM 4 | Mine Safety Disclosures | 64 | ||||||
ITEM 5 | Other Information | 64 | ||||||
ITEM 6 | Exhibits | 65 | ||||||
SIGNATURES | 66 | |||||||
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to:
•current and future business, economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values and overall slowdowns in economic growth should these events occur;
•economic uncertainty attributable to the imposition of tariffs;
•inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make, whether held in the portfolio or in the secondary market;
•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 such as wars; including the Iran war, that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, and increase the volatility of financial markets;
•changes in the level of nonperforming assets and charge offs and other credit quality measures, and their impact on the adequacy of our allowance for credit losses and our provision for credit losses;
•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers, and the success of construction projects that we finance;
•our ability to achieve loan growth and attract deposits in our market area, competition for deposits, the impact of the cost of deposits and our ability to retain deposits;
•liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary;
•continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;
•challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;
•restraints on the ability of Community West Bank to pay dividends to us, which could limit our liquidity;
•increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;
•inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance;
•changes in our management personnel or our inability to retain, motivate and hire qualified management personnel;
•disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems;
•disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our 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, drought, pandemic diseases (such as the coronavirus) or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business;
•compliance with governmental and regulatory requirements, relating to banking, consumer protection, securities and tax matters; and
•our ability to the manage the foregoing.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this report. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Further information on other factors that could affect the financial results of the Company are
3
included in Item 1A of the Company’s Annual Report on Form 10-K and in the Company’s other filings with the Securities and Exchange Commission (“SEC”). These documents are available free of charge at the SEC website at http://www.sec.gov.
4
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
COMMUNITY WEST BANCSHARES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In thousands, except share amounts) | June 30, 2026 | December 31, 2025 | ||||||||||||
| ASSETS | ||||||||||||||
| Cash and due from banks | $ | $ | ||||||||||||
| Interest-earning deposits in other banks | ||||||||||||||
| Total cash and cash equivalents | ||||||||||||||
Available-for-sale debt securities, at fair value, net of allowance for credit losses of $ | ||||||||||||||
Held-to-maturity debt securities, at amortized cost less allowance for credit losses of $ | ||||||||||||||
| Equity securities, at fair value | ||||||||||||||
Loans, less allowance for credit losses of $ | ||||||||||||||
| Bank premises and equipment, net | ||||||||||||||
| Bank-owned life insurance | ||||||||||||||
| Federal Home Loan Bank stock | ||||||||||||||
| Goodwill | ||||||||||||||
| Core deposit intangibles | ||||||||||||||
| Accrued interest receivable and other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
| Deposits: | ||||||||||||||
| Non-interest bearing | $ | $ | ||||||||||||
| Interest bearing | ||||||||||||||
| Total deposits | ||||||||||||||
| Borrowings | ||||||||||||||
Senior debt and subordinated debentures, less debt issuance costs of $ | ||||||||||||||
| Accrued interest payable and other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Commitments and contingencies (Note 9) | ||||||||||||||
| Shareholders’ equity: | ||||||||||||||
Preferred stock, no par value; | ||||||||||||||
Non-voting common stock, | ||||||||||||||
Common stock, no par value; | ||||||||||||||
| Retained earnings | ||||||||||||||
| Accumulated other comprehensive loss, net of tax | ( | ( | ||||||||||||
| Total shareholders’ equity | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||||||
See notes to unaudited consolidated financial statements.
5
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (In thousands, except share and per-share amounts) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| INTEREST INCOME: | ||||||||||||||||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest on deposits in other banks | ||||||||||||||||||||||||||
| Interest and dividends on investment securities: | ||||||||||||||||||||||||||
| Taxable | ||||||||||||||||||||||||||
| Exempt from Federal income taxes | ||||||||||||||||||||||||||
| Total interest income | ||||||||||||||||||||||||||
| INTEREST EXPENSE: | ||||||||||||||||||||||||||
| Interest on deposits | ||||||||||||||||||||||||||
| Interest on borrowings | ||||||||||||||||||||||||||
| Interest on senior debt and subordinated debentures | ||||||||||||||||||||||||||
| Total interest expense | ||||||||||||||||||||||||||
| Net interest income before provision for credit losses | ||||||||||||||||||||||||||
| PROVISION FOR CREDIT LOSSES | ||||||||||||||||||||||||||
| Net interest income after provision for credit losses | ||||||||||||||||||||||||||
| NON-INTEREST INCOME: | ||||||||||||||||||||||||||
| Service charges | ||||||||||||||||||||||||||
| Net realized losses on sales and calls of investment securities | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||
| Total non-interest income | ( | |||||||||||||||||||||||||
| NON-INTEREST EXPENSES: | ||||||||||||||||||||||||||
| Salaries and employee benefits | ||||||||||||||||||||||||||
| Occupancy and equipment | ||||||||||||||||||||||||||
| Other expense | ||||||||||||||||||||||||||
| Total non-interest expenses | ||||||||||||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Earnings per common share: | ||||||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average common shares used in basic computation | ||||||||||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average common shares used in diluted computation | ||||||||||||||||||||||||||
| Cash dividend per common share | $ | $ | $ | $ | ||||||||||||||||||||||
See notes to unaudited consolidated financial statements.
6
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income: | ||||||||||||||||||||||||||
| Unrealized gains on securities: | ||||||||||||||||||||||||||
| Unrealized holding (losses) gains arising during the period | ( | ( | ||||||||||||||||||||||||
| Reclassification of net losses included in net income | ||||||||||||||||||||||||||
| Amortization of net unrealized losses transferred | ||||||||||||||||||||||||||
| Other comprehensive income, before tax | ||||||||||||||||||||||||||
| Tax effect | ( | ( | ( | ( | ||||||||||||||||||||||
| Total other comprehensive income | ||||||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||||||||||||
See notes to unaudited consolidated financial statements.
7
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
| Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Retained Earnings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share amounts) | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock granted, net of forfeitures | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock due to business combination, net of issuance costs | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock forfeitures | ( | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to unaudited consolidated financial statements.
8
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
SIX MONTHS ENDED JUNE 30, 2026 AND 2025
| Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) (Net of Taxes) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share amounts) | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock granted, net of forfeitures | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options exercised and related tax benefit | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock due to business combination, net of issuance costs | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock forfeitures | ( | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options exercised and related tax benefit | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to unaudited consolidated financial statements.
9
COMMUNITY WEST BANCSHARES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||||||||
| (In thousands) | 2026 | 2025 | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Net (increase) decrease in deferred loan costs | ( | |||||||||||||
| Depreciation | ||||||||||||||
| Accretion of discounts on investments | ( | ( | ||||||||||||
| Amortization of premiums on investments | ||||||||||||||
| Amortization of debt issuance costs | ||||||||||||||
| Accretion of premiums and discounts on acquired loans, net | ( | ( | ||||||||||||
| Amortization of core deposit intangibles | ||||||||||||||
| Amortization of fair value marks on liabilities assumed | ||||||||||||||
| Stock-based compensation | ||||||||||||||
| Provision for credit losses | ||||||||||||||
| Net realized losses on sales and calls of available-for-sale investment securities | ||||||||||||||
| Net loss on disposal of premises and equipment | ||||||||||||||
| Net gain on sale of foreclosed assets | ( | |||||||||||||
| Net change in equity securities | ( | |||||||||||||
| Increase in bank-owned life insurance, net of expenses | ( | ( | ||||||||||||
| Net (increase) decrease in accrued interest receivable and other assets | ( | |||||||||||||
| Net (decrease) increase in accrued interest payable and other liabilities | ( | |||||||||||||
| Net change for deferred income taxes | ||||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||
| Net cash and cash equivalents acquired in acquisition | ||||||||||||||
| Purchases of available-for-sale investment securities | ( | ( | ||||||||||||
| Proceeds from sales or calls of available-for-sale investment securities | ||||||||||||||
| Proceeds from calls of held-to-maturity investment securities | ||||||||||||||
| Proceeds from maturity and principal repayments of available-for-sale investment securities | ||||||||||||||
| Proceeds from maturity and principal repayments of held-to-maturity investment securities | ||||||||||||||
| Net increase in loans | ( | ( | ||||||||||||
| Proceeds from sale of foreclosed assets | ||||||||||||||
| Purchases of premises and equipment | ( | ( | ||||||||||||
| Proceeds from sale of premises and equipment | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||
| Net (decrease) increase in demand, interest bearing and savings deposits | ( | |||||||||||||
| Net (decrease) increase in time deposits | ( | |||||||||||||
| Proceeds from borrowings from Federal Home Loan Bank | ||||||||||||||
| Repayments of borrowings to Federal Home Loan Bank | ( | ( | ||||||||||||
| Repayments of senior debt | ( | |||||||||||||
| Repurchase and retirement of common stock | ( | ( | ||||||||||||
| Proceeds from stock issued under employee stock purchase plan | ||||||||||||||
| Proceeds from exercise of stock options | ||||||||||||||
| Cash dividend payments on common stock | ( | ( | ||||||||||||
| Net cash provided by financing activities | ||||||||||||||
| Increase in cash and cash equivalents | ||||||||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | ||||||||||||
See notes to unaudited consolidated financial statements.
10
| For the Six Months Ended June 30, | ||||||||||||||
| (In thousands) | 2026 | 2025 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | ||||||||||||||
Cash paid during the period for: | ||||||||||||||
| Interest | $ | $ | ||||||||||||
| Income taxes, net of refunds | ( | |||||||||||||
| Operating cash flows from operating leases | ||||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||
| Unrealized gain on securities available for sale | $ | $ | ||||||||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | ||||||||||||
| Acquisition: | ||||||||||||||
| Assets acquired | $ | $ | ||||||||||||
| Liabilities assumed | $ | ( | $ | |||||||||||
See notes to unaudited consolidated financial statements.
11
COMMUNITY WEST BANCSHARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
Note 1. Basis of Presentation
Description of Business and Basis of Presentation
The interim unaudited condensed consolidated financial statements of Community West Bancshares and subsidiary have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These interim condensed consolidated financial statements include the accounts of Community West Bancshares and its wholly owned subsidiary Community West Bank (the “Bank”) (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The Company believes that the disclosures are adequate to make the information presented not misleading. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2025 Annual Report to Shareholders on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position at June 30, 2026, and the results of its operations and its cash flows for the three and six month interim periods ended June 30, 2026 and 2025 have been included. The results of operations for interim periods are not necessarily indicative of results for the full year.
Use of Estimates in the Preparation of Financial Statements
The preparation of these interim unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Segment and Significant Group Concentration of Credit Risk
The Company has one reportable segment: banking operations. Loans and leases, investment securities, interest-bearing deposits and non-interest income provide the revenues of the banking operation. Loans and leases generate a majority of the Company’s interest and fee income. Interest income earned on investment securities and interest-bearing deposits are another source of revenue. Non-interest income is derived from deposit products offered to customers that generate fees and service charge income. Additional other sources of non-interest income include earnings from bank owned life insurance, merchant card services, and other investments. Interest expense, provisions for credit losses, salaries and employee benefits, and data processing provide the significant expenses in banking operations. These significant expenses are the same as those disclosed in the Company’s Consolidated Statements of Income and Consolidated Statements of Cash Flows.
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM is provided with consolidated balance sheets, income statements, and net interest margin analyses in order to evaluate the revenue streams, significant expenses, and budget-to-actual results in assessing the Company’s segment and determining the allocation of resources. Additionally, the CODM reviews performance of various components of banking operations, such as asset mix, funding sources for assets, and overhead costs, in order to assess product pricing, profitability and evaluate return on assets. The CODM uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring budget-to-actual results are used in assessing performance and in establishing compensation.
Recently Issued or Adopted Accounting Pronouncements
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”), amending disclosure or presentation requirements related to various subtopics in the FASB’s ASC. ASU 2023-06 was issued in response to the SEC’s initiative to update and simplify disclosure requirements. The SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into U.S. GAAP. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations as the FASB incorporated them into the relevant ASC subtopics. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC. ASU 2023-06 is to be applied prospectively, and early adoption is prohibited. For reporting entities subject to the SEC’s existing disclosure requirements, the effective dates of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the ASC and will
12
not become effective for any entities. ASU 2023-06 is not expected to have a significant impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03 (updated in January 2025 to ASU No. 2025-01), Income Statement —Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments are intended to improve income statement expense disclosure requirements, primarily through enhanced disclosures about certain costs and expenses included in income statement expense captions. The amendments are effective for annual reporting periods beginning after December 15, 2026 (i.e., 2027 Form 10-K) and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
On November 12 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans. The new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model (CECL). The Board decided not to change the existing models for originated assets, purchased credit deteriorated assets (PCD) or other acquired assets. Under the ASU, the initial allowance for credit losses recorded upon the acquisition of loans in scope is recognized as an adjustment to the amortized cost basis of the loan–similar to the PCD model. For these loans, the “day-one” credit loss estimate does not impact earnings immediately but rather is amortized over time as an adjustment to interest income. Subsequent changes in the allowance for credit losses are reported in earnings within credit loss expense. The amendments apply prospectively and will be effective for fiscal periods beginning after December 15, 2026 (and interim periods within). Early adoption is permitted.
The Company adopted ASU 2025-08 effective January 1, 2026, on a prospective basis. Upon completion of the merger with United Security Bancshares ("USB") on April 1, 2026, the Company applied the provisions of ASU 2025-08 to account for loans acquired in the transaction. Under the new guidance, the initial allowance for credit losses for these acquired loans was recognized as an adjustment to the amortized cost basis of the loans at the acquisition date, rather than being recognized immediately as a charge to earnings. As a result, the Company recorded a Day 1 allowance for credit losses of $19.4 million for acquired loans at the Merger date, which was established as an adjustment to the loans' amortized cost basis across all loan portfolio segments.
In December 2025, the FASB issued ASU 2025-11, which clarifies interim disclosure requirements by providing a comprehensive list of disclosures that are required in interim periods. The amendments also introduce a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amended guidance is effective for the Company on January 1, 2028, with early adoption permitted. The amendments should be applied on either a prospective or retrospective basis. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
Note 2. Business Combinations
On April 1, 2026, the Company completed its previously announced merger (“Merger”) with United Security Bancshares (“USB”) pursuant to which USB merged with and into the Company, with the Company continuing as the surviving entity. Following the Merger, United Security Bank, a wholly owned subsidiary of USB, merged with and into Community West Bank (the “Bank”), a wholly owned subsidiary of the Company, with the Bank continuing as the surviving entity.
Pursuant to the terms of the Merger, each outstanding share of USB capital stock was automatically converted as a result of the Merger into the right to receive 0.4520 shares of the Company’s common stock, with cash to be paid in lieu of fractional shares. Each outstanding share of the Company’s common stock remains outstanding and was unaffected by the Merger. As a result of the Merger, the Company issued approximately 7,922,108 shares of Company common stock.
The acquisition improves the Company’s footprint in Central California and diversifies the Company’s commercial banking business, adds additional revenue enhancing products, and creates operational efficiencies.
The acquisition of USB has been accounted for using the acquisition method of accounting in accordance with ASC Topic 805. Assets acquired, liabilities assumed, intangibles recognized and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions used to calculate estimated fair values. We recorded the fair values based on the valuations available as of reporting date. In accordance with business combination accounting guidance, we will continue to evaluate these fair values for up to one year following the Merger date of April 1, 2026. While management believes the information available and presented below provides a reasonable basis for estimating fair value, we may obtain additional information and evidence during the
13
measurement period that could result in changes to the estimated fair value amounts. Valuations subject to change include, but are not limited to, loans and leases, deposits, deferred tax items, and certain other assets and liabilities.
The following table summarizes the consideration paid for USB and the amounts of assets acquired and liabilities assumed that were recorded at the acquisition date (in thousands):
| United Security Bancshares | |||||||||||
| April 1, 2026 | |||||||||||
| Fair value of consideration transferred: | |||||||||||
| Fair value of shares issued | $ | ||||||||||
| Cash consideration | |||||||||||
| Total merger consideration | $ | ||||||||||
| Assets acquired: | |||||||||||
| Cash and cash equivalents | $ | ||||||||||
| Available-for-sale debt securities | |||||||||||
| Marketable equity securities | |||||||||||
| Loans and leases | |||||||||||
| Premises and equipment | |||||||||||
| Cash value of life insurance | |||||||||||
| Core deposit intangibles | |||||||||||
| Other assets | |||||||||||
| Total assets acquired | |||||||||||
| Liabilities assumed: | |||||||||||
| Deposits | ( | ||||||||||
| Other liabilities | ( | ||||||||||
| Total liabilities assumed | ( | ||||||||||
| Total net assets acquired | |||||||||||
| Goodwill created from transaction | $ | ||||||||||
The acquisition resulted in goodwill of $57.8 million, which is nondeductible for tax purposes, as this acquisition was a non taxable transaction. Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired and reflects the related synergies from the combined operations. Revenues and earnings of the acquired company since the acquisition date have not been disclosed as it is not practicable as USB was merged into the Company and separate financial information is not readily available.
Purchased loans that exhibited more-than-insignificant deterioration of credit quality from origination were classified as purchased credit deteriorated (“PCD”) loans. For PCD loans, the initial estimate of expected credit losses is recognized through allowance for credit losses (“ACL”) with an offsetting gross-up adjustment to the acquired loan balances and the related purchase accounting mark. In addition, the Company adopted ASU 2025-08 effectively January 1, 2026. Accordingly, the initial ACL established on acquired loans included both PCD and non-PCD loans that qualified as purchased seasoned loans (“PSL”) under the guidance.
The following table provides a summary of the acquired PCD and PSL loans as of April 1, 2026:
| (Dollars in thousands) | Unpaid principal balance | Premium/(discount) | Loans | ACL | Fair value | |||||||||||||||||||||||||||
| PCD loans | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| PSL loans | ( | ( | ||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | — | $ | ( | $ | — | $ | |||||||||||||||||||||
14
Note 3. Investments
The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at June 30, 2026 and December 31, 2025 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrealized gains and losses (in thousands):
| June 30, 2026 | |||||||||||||||||||||||
| Available-for-Sale Securities | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | ||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ( | $ | $ | |||||||||||||||||
| U.S. Government agencies | ( | ||||||||||||||||||||||
| Obligations of states and political subdivisions | ( | ||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ( | ||||||||||||||||||||||
| Private label mortgage and asset backed securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total available-for-sale | $ | $ | $ | ( | $ | $ | |||||||||||||||||
| June 30, 2026 | |||||||||||||||||||||||
| Held-to-Maturity Securities | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | ||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | $ | $ | ( | $ | $ | |||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ( | ||||||||||||||||||||||
| Private label mortgage and asset backed securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Total held-to-maturity | $ | $ | $ | ( | $ | $ | |||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Available-for-Sale Securities | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | |||||||||||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| U.S. Government agencies | ( | |||||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | ( | |||||||||||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ( | |||||||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ( | |||||||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||||||||
| Total available-for-sale | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
15
| December 31, 2025 | |||||||||||||||||||||||||||||
| Held-to-Maturity Securities | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | ||||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ( | ||||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ( | ||||||||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||||||||
| Total held-to-maturity | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Proceeds and gross realized gains (losses) from the sales or calls of investment securities for the three and six months ended June 30, 2026 and 2025 are shown below (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| Investment Securities | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Proceeds from sales or calls | $ | $ | $ | $ | ||||||||||||||||||||||
| Gross realized gains from sales or calls | ||||||||||||||||||||||||||
| Gross realized losses from sales or calls | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The amortized cost and estimated fair value of available-for-sale and held-to-maturity investment securities at June 30, 2026 by contractual maturity is shown below (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
| June 30, 2026 | ||||||||||||||||||||||||||
| Available-for-Sale Securities | Amortized Cost | Estimated Fair Value | ||||||||||||||||||||||||
| Within one year | $ | $ | ||||||||||||||||||||||||
| After one year through five years | ||||||||||||||||||||||||||
| After five years through ten years | ||||||||||||||||||||||||||
| After ten years | ||||||||||||||||||||||||||
| Investment securities not due at a single maturity date: | ||||||||||||||||||||||||||
| U.S. Government agencies | ||||||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||
| Total available-for-sale | $ | $ | ||||||||||||||||||||||||
16
| June 30, 2026 | ||||||||||||||||||||||||||
| Held-to-Maturity Securities | Amortized Cost | Estimated Fair Value | ||||||||||||||||||||||||
| Within one year | $ | $ | ||||||||||||||||||||||||
| After one year through five years | ||||||||||||||||||||||||||
| After five years through ten years | ||||||||||||||||||||||||||
| After ten years | ||||||||||||||||||||||||||
| Investment securities not due at a single maturity date: | ||||||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||
| Total held-to-maturity | $ | $ | ||||||||||||||||||||||||
At June 30, 2026 there were no issuers of private label mortgage securities in which the Company had holdings of securities in amounts greater than 10 % of shareholders’ equity.
The following table summarizes the Company’s available-for-sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||||||||||||||
| Available-for-Sale Securities | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||
| U.S. Government agencies | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Corporate debt securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total available-for-sale | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||||||||||||||
| Available-for-Sale Securities | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||
| U.S. Government agencies | ( | ( | ||||||||||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total available-for-sale | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
17
As of June 30, 2026, the Company had a total of 149 available-for-sale debt securities in a gross unrealized loss position with no credit impairment, consisting of 1 U.S. Treasury security, 52 obligations of states and political subdivisions, 63 U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations, and 31 private label mortgage and asset backed securities.
Allowance for Credit Losses on Available-for-Sale Debt Securities
Each reporting period, the Company assesses each available-for-sale debt security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis results from a credit loss or other factors. The Company did not record an ACL on any available for sale securities at June 30, 2026. As of that date, the Company considers the unrealized losses across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value. As of June 30, 2026, the Company determined that it is not more likely than not that there is an intention to sell securities or that the Company would be required to sell securities.
The gross unrealized losses presented in the preceding tables were primarily attributable to interest rate increases and liquidity and were mainly comprised of the following:
•Obligations of States and Political Subdivisions: The unrealized losses on investments in obligations of states and political subdivisions are caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment.
•U.S. Treasury and Government Sponsored Entities and Agencies Collateralized by Residential Mortgage Obligations: The unrealized losses on the Company’s investments in U.S. treasuries and government sponsored entities and agencies collateralized by residential mortgage obligations were caused by interest rate changes. The contractual cash flows of those investments are guaranteed or supported by an agency or sponsored entity of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment.
•Private Label Mortgage and Asset Backed Securities: The Company has invested exclusively in AA and AAA tranches of various private label mortgage and asset backed securities. Each purchase is subject to a credit and structure review prior to their purchase. Ratings are reviewed on a quarterly basis in addition to other metrics provided through third-party services. Following review of the financial metrics and ratings, management concluded that the unrealized loss position of the private label mortgage and asset backed securities related exclusively to the fluctuation in market conditions and were not reflective of any credit concerns with the tranches comprising the Company’s investments.
•Corporate Debt Securities: Ratings are reviewed on a quarterly basis in addition to other metrics provided through third-party services. Following review of the financial metrics and ratings, management concluded that the unrealized loss position of the corporate debt securities related exclusively to the fluctuation in market interest rates and were not reflective of any credit concerns with the Company’s investments.
Allowance for Credit Losses on Held-to-Maturity Debt Securities
The Company separately evaluates its held-to-maturity debt securities for any credit losses based on probability of default and loss given default utilizing historical industry data based on investment category, while also considering reasonable and supportable forecasts. The probability of default and loss given default are incorporated into the present value of expected cash flows and compared against amortized cost.
The allowance for credit losses on held-to-maturity securities was $353,000 at June 30, 2026. The allowance for credit losses on held-to-maturity securities is driven by economic scenarios, estimated probabilities of default and loss given default. Economic scenarios are updated quarterly.
The following table shows the summary of activities for the allowance for credit losses related to held-to-maturity debt securities for the for the three and six months ended June 30, 2026 and 2025 (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||
| Debt Securities Held-to-Maturity | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Beginning ACL balance | $ | $ | $ | $ | ||||||||||||||||
| (Credit) to credit losses | ( | ( | ( | ( | ||||||||||||||||
| Total Ending ACL balance | $ | $ | $ | $ | ||||||||||||||||
18
During the three month period ended June 30, 2026, the credit to credit losses for held-to-maturity securities was primarily driven by the passage of time. Management believes that the allowance for credit losses for held-to-maturity securities at June 30, 2026 appropriately reflected expected credit losses at that date.
The Company monitors credit quality of debt securities held-to-maturity through the use of credit ratings. The Company monitors the credit ratings on a quarterly basis. For non-rated investment securities, management receives quarterly performance updates to monitor for any credit concerns. There were no held-to-maturity securities on nonaccrual or past due over 89 days and still on accrual. The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator. U.S. Government sponsored agencies are not included in the below tables as credit ratings are not applicable.
| June 30, 2026 | ||||||||||||||
| Debt Securities Held-to-Maturity (in thousands) | AAA/AA/A | BBB | Unrated | |||||||||||
| Obligations of states and political subdivisions | $ | $ | $ | |||||||||||
| Private label mortgage and asset backed securities | ||||||||||||||
| Corporate debt securities | ||||||||||||||
| Total debt securities held-to-maturity | $ | $ | $ | |||||||||||
Note 4. Loans and Allowance for Credit Losses on Loans
The majority of the disclosures in this footnote are prepared at the class level, which is equivalent to the call report or call code classification. The roll forward of the allowance for credit losses is presented at the portfolio segment level. Accrued interest receivable on loans of $17,758,000 and $11,625,000 at June 30, 2026 and December 31, 2025 respectively is not included in the loan tables below and is included in other assets on the Company’s consolidated balance sheets. Outstanding loans are summarized by class as follows:
| Loan Type (Dollars in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | ||||||||||||||||||||||||
| Agricultural production | ||||||||||||||||||||||||||
| Total commercial | ||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||
| Construction & other land loans | ||||||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||
| Multi-family residential | ||||||||||||||||||||||||||
| 1-4 family - close-ended | ||||||||||||||||||||||||||
| 1-4 family - revolving | ||||||||||||||||||||||||||
| Total real estate | ||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||
| Manufactured housing | ||||||||||||||||||||||||||
| Other installment | ||||||||||||||||||||||||||
| Total consumer | ||||||||||||||||||||||||||
| Total gross loans | ||||||||||||||||||||||||||
| Net deferred origination costs | ||||||||||||||||||||||||||
| Loans, net of deferred origination costs | ||||||||||||||||||||||||||
| Allowance for credit losses | ( | ( | ||||||||||||||||||||||||
| Total loans, net | $ | $ | ||||||||||||||||||||||||
19
At June 30, 2026 and December 31, 2025, loans originated under Small Business Administration (SBA) programs totaling $27,506,000 and $21,161,000 , respectively, were included in the real estate and commercial categories, of which, $20,709,000 or 75 % and $16,044,000 or 76 %, respectively, were secured by government guarantees.
Allowance for Credit Losses on Loans
The measurement of the allowance for credit losses on collectively evaluated loans is based on modeled expectations of lifetime expected credit losses utilizing national and local peer group historical losses, weighting of economic scenarios, and other relevant factors. The Company incorporates forward-looking information using macroeconomic scenarios, which include variables that are considered key drivers of credit losses within the portfolio. The Company uses a probability-weighted, multiple scenario forecast approach. These scenarios may consist of a base forecast representing the most likely outcome, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions.
When a loan no longer shares similar risk characteristics with other loans, such as in the case of certain nonaccrual loans, the Company estimates the allowance for credit losses on an individual loan basis.
The following table shows the summary of activities for the allowance for credit losses for the three months ended June 30, 2026 and 2025 by portfolio segment (in thousands):
| Commercial | Commercial Real Estate | 1-4 Family Real Estate | Consumer | Total | ||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||
| Beginning balance, April 1, 2026 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Merger Day 1 ACL | ||||||||||||||||||||||||||||||||||||||
| Provision for credit losses (1) | ||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||
| Ending balance, June 30, 2026 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
(1) Represents provision (credit) to credit losses for loans only. The provision for credit losses on the Consolidated Statements of Income of $5,635 includes a $(54 ) credit for held-to-maturity securities and a $430 provision for unfunded loan commitments.
| Commercial | Commercial Real Estate | 1-4 Family Real Estate | Consumer | Total | ||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||
| Beginning balance, April 1, 2025 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Provision (credit) for credit losses (1) | ( | |||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | |||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||
| Ending balance, June 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1) Represents provision (credit) to credit losses for loans only. The credit for credit losses on the Consolidated Statements of Income of $2,613 includes a $(188 ) credit for held-to-maturity securities and a $161 provision for unfunded loan commitments.
During the three month period ended June 30, 2026, the increase in allowance for credit losses was primarily driven by the acquisition of USB, which contributed $19.4 million in Day 1 allowance balances across all portfolio segments. As a result of the Company's early adoption of ASU 2025-08, a Day 1 allowance for credit losses was established for acquired loans at the Merger date. Excluding the impact of the Day 1 allowance, the allowance grew modestly, reflecting a provision for credit losses of $5,259,000 , partially offset by net charge-offs of $5,498,000 during the quarter. The provision for loan losses during the quarter ended June 30, 2026 was primarily due to an update of the Company’s peer group based on its larger asset size following the completion of the Merger and also from organic loan growth during the quarter. Charge-offs during the quarter were associated with loans previously fully reserved or absorbed within the Day 1 allowance recorded at the time of the Merger.
20
The following table shows the summary of activities for the allowance for credit losses for the six months ended June 30, 2026 and 2025 by portfolio segment (in thousands):
| Commercial | Commercial Real Estate | 1-4 Family Real Estate | Consumer | Total | ||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||
| Beginning balance, January 1, 2026 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Merger Day 1 ACL | ||||||||||||||||||||||||||||||||
| Provision (credit) for credit losses (1) | ( | |||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||
| Ending balance, June 30, 2026 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1) Represents credit losses for loans only. The provision for credit losses on the Consolidated Statements of Income of $5,725 includes a $(87 ) credit for held-to-maturity securities and a $431 provision for unfunded loan commitments.
| Commercial | Commercial Real Estate | 1-4 Family | Consumer | Total | ||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||
| Beginning balance, January 1, 2025 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Provision (credit) for credit losses (1) | ( | |||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||
| Ending balance, June 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
During the three and six month periods ended June 30, 2026, the increase in the allowance for credit losses was primarily driven by the acquisition of USB, which contributed $19.4 million in Day 1 allowance balances across all portfolio segments. The allowance for credit losses as a percentage of total loans was 1.39 % as of June 30, 2026 compared to 1.18 % at December 31, 2025. The provision for loan losses during the quarter ended June 30, 2026 was due to an update of the Company’s peer group based on its larger asset size following the completion of the Merger and also from organic loan growth during the quarter. The Company believes the allowance for credit losses is adequate to provide for expected credit losses within the loan portfolio at June 30, 2026. Charge-offs during the quarter were associated with loans previously fully reserved or absorbed within the Day 1 allowance recorded at the time of the Merger.
The following tables present the composition of nonaccrual loans as of June 30, 2026 and December 31, 2025 respectively (in thousands).
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| With an ACL | Without an ACL | Total Nonaccrual | ||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||||||||
| 1-4 family real estate | ||||||||||||||||||||||||||||||||||||||
| Manufactured housing | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||||||||||||||
21
| December 31, 2025 | ||||||||||||||||||||
| With an ACL | Without an ACL | Total Nonaccrual | ||||||||||||||||||
| Commercial and industrial | $ | $ | $ | |||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||
| Farmland | ||||||||||||||||||||
| 1-4 family real estate | ||||||||||||||||||||
| Manufactured housing | ||||||||||||||||||||
| Other installment | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
The following tables present the amortized cost basis of collateral dependent loans by class of loans and by collateral type as of the dates indicated as of June 30, 2026 and December 31, 2025 (in thousands).
| June 30, 2026 | ||||||||||||||||||||||||||||||||
| Manufactured Homes | Real Estate | Machinery & Equipment | Automobiles | Total | ||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||
| 1-4 family real estate | ||||||||||||||||||||||||||||||||
| Manufactured housing | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Manufactured Homes | Real Estate | Machinery & Equipment | Automobiles | Total | ||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||
| 1-4 family real estate | ||||||||||||||||||||||||||||||||
| Manufactured housing | ||||||||||||||||||||||||||||||||
| Other installment | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Loan ratings are reviewed as part of the Company's normal loan monitoring process, but, at a minimum, updated on an annual basis. Under the Company’s risk rating system, the Company rates loans with potential problems as “Special Mention,” “Substandard,” “Doubtful,” and “Loss”. The following is a description of the characteristics of loan ratings.
Special Mention - A Special Mention loan has potential weaknesses that require management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company's credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.
Substandard - A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the full collection
22
of amounts due. They are characterized by the distinct possibility that the Company will sustain some loss if the borrower’s deficiencies are not corrected.
Doubtful - A loan classified Doubtful has all the weaknesses inherent in one classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.
Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable loans is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this loan even though partial recovery may be realized in the future. Losses are taken in the period in which they are considered uncollectible.
Loans not meeting the criteria above are considered to be pass or watch rated loans.
The following table shows the loan portfolio by class, net of deferred costs, allocated by management’s internal risk ratings for the period indicated. The following table also shows the gross charge-offs recognized during the six months ended June 30, 2026 (in thousands):
Term Loans Amortized Cost Basis by Origination Year As of June 30, 2026 | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Revolving Converted to Term | Total | ||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Agricultural production | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Construction & other land loans | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
23
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Multi-family residential | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| 1-4 family - close-ended | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| 1-4 family - revolving | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Manufactured Housing | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
24
| Other installment | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total loans outstanding (risk rating): | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period total gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
The following table shows the loan portfolio by class, net of deferred costs, allocated by management’s internal risk ratings for the period indicated. The following table also shows the charge-offs recognized during the twelve months ended December 31, 2025 (in thousands):
| Term Loans Amortized Cost Basis by Origination Year As of December 31, 2025 | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans | Revolving Converted to Term | Total | ||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Agricultural production | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Construction & other land loans | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||||||||
25
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Multi-family residential | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| 1-4 family - close-ended | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| 1-4 family - revolving | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Manufactured Housing | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
26
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Other installment | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Total loans outstanding (risk rating): | ||||||||||||||||||||||||||||||||
| Pass/Watch | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Grand Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Current period total gross write-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Student Loans
Included in installment loans are $24,237,000 and $0 in student loans at June 30, 2026, and December 31, 2025, respectively, made to medical and pharmacy school students. The student loan portfolio was acquired on April 1, 2026 through the Merger. Accrued interest on student loans totaled $2,456,000 and $0 at June 30, 2026, and December 31, 2025, respectively. Upon graduation the loan is automatically placed in a grace period of six months . This may be extended up to 48 months for graduates enrolling in internship, medical residency, or fellowship. As approved, the student may receive additional deferment for hardship or administrative reasons in the form of forbearance for a maximum of 36 months throughout the life of the loan. USB had not originated or purchased student loans since 2019.
As of June 30, 2026 and December 31, 2025, the allowance for credit losses for the student loan portfolio was $7,042,000 and $0 , respectively. There were no
The following tables summarize the credit quality indicators for outstanding student loans as of June 30, 2026 and December 31, 2025:
June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Number of Loans | Principal Amount | Accrued Interest | Number of Loans | Principal Amount | Accrued Interest | ||||||||||||||||||||||||||||||||
| School | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Grace | ||||||||||||||||||||||||||||||||||||||
| Repayment | ||||||||||||||||||||||||||||||||||||||
| Deferment | ||||||||||||||||||||||||||||||||||||||
| Forbearance | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
School - The time in which the borrower is still actively in school at least half time. No payments are expected during this stage, though the borrower may begin immediate payments.
Grace - A six month period of time granted to the borrower immediately upon graduation, or withdrawal from school. Interest continues to accrue. Upon completion of the six month grace period the loan is transferred to repayment status. This status may also represent a borrower activated to military duty during their time in school. The borrower must return to at least half-time status within six-months of the active duty end-date in order to return to in-school status.
27
Repayment - The time in which the borrower is no longer actively in school at least half time, and has not received an approved grace, deferment, or forbearance. Regular payment is expected from these borrowers under an allotted payment plan.
Deferment - May be granted up to 48 months for borrowers who have begun the repayment period on their loans but are (1) actively enrolled in an eligible school at least half time, or (2) are actively enrolled in an approved and verifiable medical residency, internship, or fellowship program.
Forbearance - The period of time during which the borrower may postpone making principal and interest payments due to hardship or administrative reasons. Interest continues to accrue on loans during periods of authorized forbearance. If the borrower is delinquent at the time the forbearance is granted, accrued and unpaid interest from the date of delinquency, if any, will be capitalized at the end of the forbearance period. The loan-term will not change and payments may be increased to allow the loan to pay off in the required time frame. A forbearance that results in an insignificant payment delay is not considered a concessionary change in terms, provided the borrower affirms the obligation. Forbearance is not an uncommon status designation; this designation is standard industry practice, and is consistent with a student’s migration to the medical profession. However, additional risk is associated with this designation.
Student Loan Aging
Student loans are generally charged off at the end of the month during which an account becomes 120 days contractually past due. Accrued but unpaid interest related to charged off student loans is reversed and charged against interest income. As of June 30, 2026, $595,000 in accrued interest receivable was reversed due to charge-offs of $2.3 million within the student loan portfolio.
The following tables summarize the student loan aging for loans in repayment and forbearance as of June 30, 2026 and December 31, 2025:
June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| (Dollars in thousands) | Number of Borrowers | Principal Amount | Number of Borrowers | Principal Amount | ||||||||||||||||||||||
| Current or less than 31 days | $ | $ | ||||||||||||||||||||||||
| 31 - 60 days | ||||||||||||||||||||||||||
| 61 - 90 days | ||||||||||||||||||||||||||
| Greater than 90 days | ||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
28
The following table shows an aging analysis of the loan portfolio by class at June 30, 2026 (in thousands):
| 30-59 Days Past Due | 60-89 Days Past Due | Greater Than 89 Days Past Due | Total Past Due | Current | Total Loans | Loans Past Due > 89 Days, Still Accruing | Non-accrual | |||||||||||||||||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Agricultural production | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction & other land loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Multi-family residential | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-4 family - close-ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-4 family - revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Manufactured housing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other installment | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred costs | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
The following table shows an aging analysis of the loan portfolio by class at December 31, 2025 (in thousands):
| 30-59 Days Past Due | 60-89 Days Past Due | Greater Than 89 Days Past Due | Total Past Due | Current | Total Loans | Loans Past Due > 89 Days, Still Accruing | Non- accrual | |||||||||||||||||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Agricultural production | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction & other land loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Multi-family residential | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-4 family - close-ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-4 family - revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Manufactured housing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other installment | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred costs | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
29
Foregone interest on nonaccrual loans was $342,000 and $769,000 for the three and six months ended June 30, 2026 compared to $118,000 and $199,000 for the for the three and six months ended June 30, 2025. Interest income recognized on non-accrual loans for the six months ended June 30, 2026 and 2025 was $16,000 and $34,000 , respectively.
Occasionally, the Company modifies loans to borrowers in financial distress by providing reductions of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. There were no loan modifications granted to borrowers experiencing financial difficulty for the three and six months ended June 30, 2026 and 2025.
Note 5. Investment in York Monterey Properties
30
Note 6. Goodwill and Intangible Assets
Goodwill is the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and the liabilities assumed as of the acquisition date. Core deposit intangibles represent the estimated future benefit of deposits related to an acquisition, are recorded separately as an asset and are amortized over an estimated useful life of 10 years. Goodwill and other intangible assets are evaluated for impairment annually or whenever events or circumstances indicate the carrying amount may be impaired.
The following tables summarize the changes in the Company’s goodwill and core deposit intangible assets for the three and six months ended June 30, 2026 and 2025 (in thousands):
For Three Months Ended June 30, | |||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| Goodwill | Core Deposit Intangibles | Goodwill | Core Deposit Intangibles | ||||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | |||||||||||||||||||||||||
| Additions | |||||||||||||||||||||||||||||
| Amortizations | — | ( | — | ( | |||||||||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | |||||||||||||||||||||||||
For Six Months Ended June 30, | |||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| Goodwill | Core Deposit Intangibles | Goodwill | Core Deposit Intangibles | ||||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | |||||||||||||||||||||||||
| Additions | |||||||||||||||||||||||||||||
| Amortizations | — | ( | — | ( | |||||||||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | |||||||||||||||||||||||||
The following tables presents the estimated amortization expense for core deposit intangible assets remaining at June 30, 2026 (in thousands):
| Estimated Amortization | ||||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
31
Note 7. Deposits
The composition of the deposits at June 30, 2026 and December 31, 2025 is summarized in the table below (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Savings and NOW accounts | $ | $ | ||||||||||||
| MMA accounts | ||||||||||||||
| Time deposits | ||||||||||||||
| Total interest-bearing | ||||||||||||||
| Non-interest bearing | ||||||||||||||
| Total deposits | $ | $ | ||||||||||||
| Brokered deposits included in time deposits | $ | $ | ||||||||||||
As of June 30, 2026 and December 31, 2025, uninsured deposits totaled $1,526,017,000 and $1,185,118,000 , respectively.
Aggregate annual maturities of time deposits are as follows (in thousands):
| Years Ending December 31, | ||||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
Interest expense recognized on interest-bearing deposits consisted of the following (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Savings | $ | $ | $ | $ | ||||||||||||||||||||||
| Money market | ||||||||||||||||||||||||||
| NOW accounts | ||||||||||||||||||||||||||
| Time certificates of deposit | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Note 8. Borrowing Arrangements
Lines of Credit - The Company has unsecured lines of credit available with its correspondent banks which, in the aggregate, amounted to $150,000,000 at June 30, 2026 and December 31, 2025, respectively, at interest rates which vary with market conditions. As of June 30, 2026 and December 31, 2025, the Company had no
Federal Home Loan Bank Advances - As of June 30, 2026, the Company had an overnight borrowing for $135,000,000 with an interest rate of 4.08 % compared to $73,000,000 with an interest rate of 4.02 % at December 31, 2025. As of June 30, 2026, the Company had four short-term advances outstanding totaling $40,000,000 with a weighted average interest rate of 3.93 % compared to no short-term advances as of December 31, 2025.
Approximately $1,308,871,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Company’s remaining borrowing capacity of $703,907,000 as of June 30, 2026. FHLB advances are also secured by investment securities with a borrowing capacity totaling $199,836,000 and $156,669,000 and market values, as assigned by FHLB, totaling $235,414,000 and $198,374,000 at June 30, 2026 and December 31, 2025, respectively. The Company’s credit limit varies according to the amount and composition of the investment and loan portfolios pledged as collateral.
32
Federal Reserve Line of Credit - The Company has a line of credit through the discount window in the amount of $3,101,000 and $3,411,000 with the Federal Reserve Bank of San Francisco (FRB) at June 30, 2026 and December 31, 2025, respectively, which bears interest at the prevailing discount rate collateralized by investment securities with amortized costs totaling $3,600,000 and $3,910,000 and market values totaling $3,204,000 and $3,536,000 , respectively.
The following table reflects the Company’s credit lines, balances outstanding, and pledged collateral at June 30, 2026 and December 31, 2025:
| Credit Lines (In thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Unsecured Credit Lines | ||||||||||||||
| Total credit limit | $ | $ | ||||||||||||
| Balance outstanding | ||||||||||||||
| Federal Home Loan Bank | ||||||||||||||
| Total credit limit | ||||||||||||||
| Balance outstanding | ||||||||||||||
| Letters of credit | ||||||||||||||
| Collateral pledged | ||||||||||||||
| Fair value of collateral | ||||||||||||||
| Federal Reserve Bank | ||||||||||||||
| Credit limit | ||||||||||||||
| Balance outstanding | ||||||||||||||
| Collateral pledged | ||||||||||||||
| Fair value of collateral | ||||||||||||||
Note 9. Senior Debt & Subordinated Debentures
The following table summarizes the Company’s long-term debt:
| (Dollars in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Fixed - floating rate subordinated debentures, due 2031 | $ | $ | ||||||||||||
| Unamortized debt issuance costs | ( | ( | ||||||||||||
| Floating rate senior debt bank loan, due 2032 | ||||||||||||||
| Junior subordinated deferrable interest debentures, due October 2036 | ||||||||||||||
| Junior subordinated deferrable interest debentures, due June 2037 | ||||||||||||||
| Total subordinated debentures | $ | $ | ||||||||||||
Subordinated Debentures
On November 12, 2021, the Company completed a private placement of $35,000,000 aggregate principal amount of its fixed-to-floating rate subordinated notes (“Subordinated Debt”) due December 1, 2031. The Subordinated Debt initially bears a fixed interest rate of 3.13 % per year. Commencing on December 1, 2026, the interest rate on the Subordinated Debt will reset each quarter at a floating interest rate equal to the then-current three month term SOFR plus 2.10 %. The Company may at its option redeem in whole or in part the Subordinated Debt on or after November 12, 2026 without a premium. The Subordinated Debt is treated as Tier 2 Capital for regulatory purposes.
Interest expense recognized by the Company for the Subordinated Debentures for both three months ended June 30, 2026 and 2025 was $309,000 . Interest expense recognized by the Company for the Subordinated Debentures for both for the six months ended June 30, 2026 and 2025 was $619,000 .
33
Senior Debt
On September 15, 2022, the Company entered into a $30,000,000 loan agreement with Bell Bank. Initially, payments of interest only are payable in 12 quarterly payments commencing December 31, 2022. Commencing December 31, 2025, 27 equal quarterly principal and interest payments are payable based on the outstanding balance of the loan on August 30, 2025 and an amortization of 48 quarters. A final payment of outstanding principal and accrued interest is due at maturity on September 30, 2032. Variable interest is payable at the Prime Rate (published by the Wall Street Journal) less 50 basis points. The loan is secured by the assets of the Company and a pledge of the outstanding common stock of Community West Bank, the Company’s banking subsidiary. The Company may prepay the loan without penalty with one exception. The loan contains customary representations, covenants, and events of default.
Interest expense recognized by the Company for the Senior Debt for the three and six months ended June 30, 2026 was $460,000 and $921,000 compared to $512,000 and $1,018,000 for the for the three and six months ended June 30, 2025.
Junior Subordinated Debentures
Service 1st Capital Trust I is a Delaware business trust formed by Service 1st. The Company succeeded to all of the rights and obligations of Service 1st in connection with the merger with Service 1st as of November 12, 2008. The Trust was formed on August 17, 2006 for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by Service 1st. Under applicable regulatory guidance, the amount of trust preferred securities that is eligible as Tier 1 capital is limited to 25 % of the Company’s Tier 1 capital on a pro forma basis. At June 30, 2026, all of the trust preferred securities that have been issued qualify as Tier 1 capital. The trust preferred securities mature on October 7, 2036, are redeemable at the Company’s option, and require quarterly distributions by the Trust to the holder of the trust preferred securities at a variable interest rate which will adjust quarterly to equal the three month SOFR plus 1.60 %.
The Trust used the proceeds from the sale of the trust preferred securities to purchase approximately $5,155,000 in aggregate principal amount of Service 1st’s junior subordinated notes (the Notes). The Notes bear interest at the same variable interest rate during the same quarterly periods as the trust preferred securities. The Notes are redeemable by the Company on any January 7, April 7, July 7, or October 7 or at any time within 90 days following the occurrence of certain events, such as: (i) a change in the regulatory capital treatment of the Notes (ii) in the event the Trust is deemed an investment company or (iii) upon the occurrence of certain adverse tax events. In each such case, the Company may redeem the Notes for their aggregate principal amount, plus any accrued but unpaid interest.
The Notes may be declared immediately due and payable at the election of the trustee or holders of 25 % of the aggregate principal amount of outstanding Notes in the event that the Company defaults in the payment of any interest following the nonpayment of any such interest for 20 or more consecutive quarterly periods.
Holders of the trust preferred securities are entitled to a cumulative cash distribution on the liquidation amount of $1,000 per security. For each January 7, April 7, July 7 or October 7 of each year, the rate will be adjusted to equal the three month SOFR plus 1.60 %. As of June 30, 2026, the rate was 5.53 %.
As part of the Merger on April 1, 2026, the Company acquired a wholly-owned special purpose entity, USB Capital Trust II, for the purpose of issuing Trust Preferred Securities. USB Capital Trust II is a Variable Interest Entity and a deconsolidated entity pursuant to current accounting standards related to variable interest entities. These securities have a thirty-year maturity and bear a floating rate of interest (repricing quarterly) of 1.29 % over the forward 3-month SOFR rate. Interest is payable quarterly.
The Company has a contractual principal balance of $6,464,000 at June 30, 2026. The Company may redeem the junior subordinated debentures at any time at par.
Interest expense recognized by the Company for the Junior Subordinated Debentures for the three and six months ended June 30, 2026 was $167,000 and $238,000 compared to interest expense recognized by the Company for the Junior Subordinated debentures for the three and six months ended June 30, 2025 of $81,000 and $160,000 .
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Note 10. Commitments and Contingencies
Financial Instruments with Off-Balance-Sheet Risk - In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract or notional amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for loans.
Commitments to extend credit amounting to $798,806,000 and $491,413,000 were outstanding at June 30, 2026 and December 31, 2025, respectively. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract unless waived by the Bank. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
Included in commitments to extend credit are undisbursed lines of credit totaling $791,538,000 and $486,408,000 at June 30, 2026 and December 31, 2025, respectively. Undisbursed lines of credit include credits whereby customers can repay principal and request principal advances during the term of the loan at their discretion and most expire between one and 12 months.
Included in undisbursed lines of credit are commitments for the undisbursed portions of construction loans totaling $230,000,000 and $89,745,000 as of June 30, 2026 and December 31, 2025, respectively. These commitments are agreements to lend to customers, subject to meeting certain construction progress requirements established in the contracts. The underlying construction loans have fixed expiration dates.
Standby letters of credit and financial guarantees amounting to $7,268,000 and $5,005,000 were outstanding at June 30, 2026 and December 31, 2025, respectively. Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private financial arrangements. Standby letters of credit and guarantees carry a one year term or less, many have auto-renewal features. The fair value of the liability related to these standby letters of credit, which represents the fees received for their issuance, was not significant at June 30, 2026 or December 31, 2025. The Company recognizes these fees as revenue over the term of the commitment or when the commitment is used.
The Company generally requires collateral or other security to support financial instruments with credit risk. Management does not anticipate any material loss will result from the outstanding commitments to extend credit, standby letters of credit and financial guarantees. At June 30, 2026 and December 31, 2025, the allowance for credit losses of unfunded commitments was $1,757,000 and $1,325,000 , respectively. The allowance for credit losses of unfunded commitments is calculated by management using an appropriate, systematic, and consistently applied process. While related to credit losses, this allocation is not a part of the allowance for credit losses on loans and is considered separately as a liability for accounting and regulatory reporting purposes, and is included in Other Liabilities on the Company’s balance sheet.
The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or consolidated results of operations of the Company.
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Note 11. Other Income and Expense
The following table shows significant components of other non-interest income for the periods indicated:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Service charges | $ | $ | $ | $ | ||||||||||||||||||||||
| Interchange Fees | ||||||||||||||||||||||||||
| Appreciation in cash surrender value of bank owned life insurance | ||||||||||||||||||||||||||
| Loan placement fees | ||||||||||||||||||||||||||
| Federal Home Loan Bank dividends | ||||||||||||||||||||||||||
| Net realized loss on sales and calls of investment securities | ( | ( | ( | ( | ||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total other non-interest income | $ | ( | $ | $ | $ | |||||||||||||||||||||
The following table shows significant components of other non-interest expense for the periods indicated:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Merger and acquisition expense | $ | $ | $ | $ | ||||||||||||||||||||||
| Information technology | ||||||||||||||||||||||||||
| Amortization of core deposit intangibles | ||||||||||||||||||||||||||
| Data processing expense | ||||||||||||||||||||||||||
| Professional services | ||||||||||||||||||||||||||
| Regulatory assessments | ||||||||||||||||||||||||||
| ATM/Debit card expenses | ||||||||||||||||||||||||||
| Directors’ expenses | ||||||||||||||||||||||||||
| Loan related expenses | ||||||||||||||||||||||||||
| Advertising | ||||||||||||||||||||||||||
| Personnel other | ||||||||||||||||||||||||||
| Other expense | ||||||||||||||||||||||||||
| Total other non-interest expense | $ | $ | $ | $ | ||||||||||||||||||||||
Note 12. Earnings Per Share
Basic earnings per share (“EPS”), which excludes dilution, is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options or restricted stock awards, result in the issuance of common stock which shares in the earnings of the Company.
A reconciliation of the numerators and denominators of the basic and diluted EPS computations is as follows:
| Basic Earnings Per Share | For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||
| (In thousands, except share and per share amounts) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | ||||||||||||||||||||||
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| Diluted Earnings Per Share | For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||
| (In thousands, except share and per share amounts) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
| Effect of dilutive stock options and restricted stock | ||||||||||||||||||||||||||
| Weighted average shares of common stock and common stock equivalents | ||||||||||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | ||||||||||||||||||||||
Options to purchase 133,916 shares of common stock were outstanding as of June 30, 2026, compared to 217,210 outstanding as of June 30, 2025. There were 115,122 and 118,165 restricted stock awards and units unvested and outstanding at June 30, 2026 and 2025, respectively. For the three months ended June 30, 2026 and 2025, there were no
Holders of unvested restricted stock accrue dividends at the same rate as common shareholders and they both share equally in undistributed earnings. Unvested restricted stock awards that are time-based contain non-forfeitable rights to dividends or dividend equivalents and are considered to be participating securities in the earnings per share computation using the two-class method. Under the two-class method, earnings are allocated to common shareholders and participating securities according to their respective rights to earnings. Holders of restricted stock awards under the 2025 plan receive forfeitable dividends at the same rate as common stockholders and they both share equally in undistributed earnings. Under the two-class method, the difference in EPS is not significant for these participating securities.
Note 13. Share-Based Compensation
In May 2025, the Company adopted the Community West Bancshares 2025 Omnibus Incentive Plan (the “2025 Plan”). The plan provides for awards in the form of stock options, restricted stock, restricted stock units, and other types of awards. The plan also allows for performance awards that may be in the form of cash or shares of the Company’s common stock. With respect to stock options and restricted stock or units, the exercise price in the case of stock options and the grant value in the case of restricted stock and units may not be less than the fair market value at the date of the award. The options and awards under the plan expire on dates determined by the Board of Directors, but not later than ten years from the date of grant. The vesting period for stock options and restricted stock rights is determined by the Board of Directors and ranges one to five years . The maximum number of shares that can be issued with respect to all awards under the plan is 500,000 . Currently under the 2025 Plan, 438,748 shares remain reserved for future grants as of June 30, 2026.
Share-based compensation cost recognized was $305,000 and $583,000 for the three and six months ended June 30, 2026, respectively, and $292,000 and $600,000 for the three and six months ended June 30, 2025.
Stock Option Awards
The Company bases the fair value of the stock options granted on the date of grant using a Black-Scholes Merton option pricing model that uses assumptions based on expected option life and the level of estimated forfeitures, expected stock volatility, risk free interest rate, and dividend yield. The expected term and level of estimated forfeitures of the Company’s stock options are based on the Company’s own historical experience. Stock volatility is based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the U.S. Treasury yield curve for the periods within the contractual life of the stock options in effect at the time of grant. The compensation cost for stock options granted is based on the weighted average grant date fair value per share.
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A summary of the activity of the Company’s stock options for the six months ended June 30, 2026 follows:
| Number of Shares | Weighted Average Exercise Price | |||||||||||||||||||||||||
| Options outstanding at December 31, 2025 | $ | |||||||||||||||||||||||||
| Exercised | ( | |||||||||||||||||||||||||
| Expired | ( | |||||||||||||||||||||||||
| Options outstanding at June 30, 2026 | $ | |||||||||||||||||||||||||
As of June 30, 2026, there is no unrecognized compensation cost related to stock options granted under the Plan. All options are fully vested and exercisable.
Restricted Stock Awards (RSAs) and Restricted Stock Units (RSUs)
The 2025 Plan provides for the issuance of restricted common stock and units to directors and officers based on the achievement of performance goals as determined by the Board of Directors or in accordance with executive employment agreements. Restricted common stock grants and units typically vest over a one to five-year period. Restricted common stock grants and units are subject to forfeiture if employment terminates prior to vesting. The cost of these awards is recognized over the vesting period of the awards based on the fair value of our common stock on the date of the grant.
The shares or units awarded to employees and directors under the restricted stock agreements vest on applicable vesting dates only to the extent the recipient of the shares is then an employee or a director of the Company or one of its subsidiaries, and each recipient will forfeit all of the shares that have not vested on the date his or her employment or service is terminated. Under restricted stock awards, shares are issued on the grant date and held subject to vesting restrictions, whereas restricted stock units represent a right to receive shares only upon vesting. Under the 2025 Plan, holders of restricted stock awards and units receive or accrue forfeitable dividends at the same rate as common stockholders and they both share equally in undistributed earnings. Therefore, under the two-class method the difference in EPS is not significant for these participating securities.
The following table summarizes restricted stock activity for the six months ended June 30, 2026 as follows:
| Shares | Weighted Average Grant-Date Fair Value | |||||||||||||
| Nonvested outstanding shares at December 31, 2025 | $ | |||||||||||||
| Granted | ||||||||||||||
| Vested | ( | |||||||||||||
| Forfeited | ( | |||||||||||||
| Nonvested outstanding shares at June 30, 2026 | $ | |||||||||||||
As of June 30, 2026, there were 53,870 shares of restricted stock that are nonvested and expected to vest. As of June 30, 2026, there was $878,000 of total unrecognized compensation cost related to nonvested restricted common stock awards. Restricted stock compensation expense is recognized on a straight-line basis over the vesting period. This cost is expected to be recognized over a weighted-average remaining period of 2.01 years and will be adjusted for subsequent changes in estimated forfeitures.
The following table summarizes restricted stock unit activity for the six months ended June 30, 2026 as follows:
| Shares | Weighted Average Grant-Date Fair Value | |||||||||||||
| Nonvested units at December 31, 2025 | $ | |||||||||||||
| Granted | ||||||||||||||
| Vested | ||||||||||||||
| Forfeited | ||||||||||||||
| Nonvested units at June 30, 2026 | $ | |||||||||||||
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As of June 30, 2026, there were 61,252 shares of restricted stock units that are nonvested and expected to vest. As of June 30, 2026, there was $1,360,000 of total unrecognized compensation cost related to nonvested restricted common stock awards. Restricted stock compensation expense is recognized on a straight-line basis over the vesting period. This cost is expected to be recognized over a weighted-average remaining period of 2.33 years and will be adjusted for subsequent changes in estimated forfeitures.
Note 14. Fair Value Measurements
Fair Value Hierarchy
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 — Quoted market prices (unadjusted) for identical instruments traded in active markets that the entity has the ability to access as of the measurement date.
Level 2 —Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The estimated carrying and fair values of the Company’s financial instruments not carried at fair value are as follows (in thousands):
| June 30, 2026 | ||||||||||||||||||||||||||||||||
| Carrying Amount | Fair Value | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Interest-earning deposits in other banks | ||||||||||||||||||||||||||||||||
| Held-to-maturity investment securities | ||||||||||||||||||||||||||||||||
| Loans, net | ||||||||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Time deposits | ||||||||||||||||||||||||||||||||
| Borrowings | ||||||||||||||||||||||||||||||||
| Senior debt and subordinated debentures | ||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Carrying Amount | Fair Value | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Interest-earning deposits in other banks | ||||||||||||||||||||||||||||||||
| Held-to-maturity investment securities | ||||||||||||||||||||||||||||||||
| Loans, net | ||||||||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Time deposits | ||||||||||||||||||||||||||||||||
| Borrowings | ||||||||||||||||||||||||||||||||
| Senior debt and subordinated debentures | ||||||||||||||||||||||||||||||||
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The methods and assumptions used to estimate fair values are described as follows:
(a) Cash and Cash Equivalents — The carrying amounts of cash and due from banks, interest-earning deposits in other banks, and Federal funds sold approximate fair values and are classified as Level 1.
(b) Investment securities — The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).
(c) Loans — Fair values of loans are estimated as follows: fixed and variable loans are estimated using discounted cash flow analyses, taking into consideration various factors including loan type, credit loss and prepayment expectations. The loan cash flows are discounted to present value using a combination of existing market rates and liquidity spreads as well as underlying index rates and margins on variable rate loans resulting in a Level 3 classification.
(d) Individually evaluated loans — Loans are not recorded at fair value on a recurring basis. However, from time to time, certain loans have individual risk characteristics not consistent with a pool of loans and are individually evaluated for credit reserves. Loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual terms of the loan agreement are typically individually evaluated. The fair value of these loans is estimated using one of several methods, including collateral value, fair value of similar debt, enterprise value, liquidation value and discounted cash flows. Those loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the loan as nonrecurring Level 3.
(e) Time Deposits — Fair value for fixed and variable rate certificates of deposit are estimated using discounted cash flow analyses using interest rates offered at each reporting date by the Company for certificates with similar remaining maturities resulting in a Level 2 classification.
(f) Short-Term Borrowings — The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification.
(g) Subordinated Debentures and Senior Debt — The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.
Assets Recorded at Fair Value
The Company is required or permitted to record the following assets at fair value on a recurring basis. The following tables present information about the Company’s assets measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 (in thousands):
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| Fair Value Measurements Using | ||||||||||||||||||||||||||
| June 30, 2026 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Available-for-sale debt securities: | ||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. Government agencies | ||||||||||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||
| Equity securities | ||||||||||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | $ | $ | $ | ||||||||||||||||||||||
| Fair Value Measurements Using | ||||||||||||||||||||||||||
| December 31, 2025 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Available-for-sale debt securities: | ||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. Government agencies | ||||||||||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||||
| U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations | ||||||||||||||||||||||||||
| Private label mortgage and asset backed securities | ||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||
| Equity securities | ||||||||||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | $ | $ | $ | ||||||||||||||||||||||
The table below presents the recorded investment in assets and liabilities measured at fair value on a nonrecurring basis, as of the dates indicated (in thousands):
| Fair Value Measurements Using | ||||||||||||||||||||||||||
| June 30, 2026 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Individually evaluated loans | ||||||||||||||||||||||||||
| Commercial real estate | $ | $ | ||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||
| Other installment loans | ||||||||||||||||||||||||||
| Total collateral dependent loans | $ | $ | ||||||||||||||||||||||||
| Fair Value Measurements Using | ||||||||||||||||||||||||||
December 31, 2025 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Individually evaluated loans | ||||||||||||||||||||||||||
| Commercial real estate | $ | $ | ||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||
| Other installment loans | ||||||||||||||||||||||||||
| Total collateral dependent loans | $ | $ | ||||||||||||||||||||||||
41
The following tables present quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at June 30, 2026 and December 31, 2025 (in thousands):
| Fair Value Measurements Using | ||||||||||||||||||||||||||
June 30, 2026 | Fair Value | Valuation Technique | Unobservable Inputs | Range, Weighted Average | ||||||||||||||||||||||
| Collateral dependent loans | $ | Fair value of property | Cost to sell | Not meaningful N/A | ||||||||||||||||||||||
| Fair Value Measurements Using | ||||||||||||||||||||||||||
December 31, 2025 | Fair Value | Valuation Technique | Unobservable Inputs | Range, Weighted Average | ||||||||||||||||||||||
| Collateral dependent loans | $ | Fair value of property | Cost to sell | Not meaningful N/A | ||||||||||||||||||||||
The individually evaluated loan amounts above represent collateral dependent loans that have been adjusted to fair value. When the Company identifies a collateral dependent loan with unique risk characteristics, the Company evaluates the need for an allowance using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is generally estimated by obtaining external appraisals. If the Company determines that the value of the loan is less than the recorded investment in the loan, the Company recognizes this impairment and adjusts the carrying value of the loan to fair value through the allowance for credit losses. The loss represents charge-offs or impairments on collateral dependent loans for fair value adjustments based on the fair value of collateral. The carrying value of loans fully charged-off is zero.
There were no
There were no changes in valuation techniques used during the periods ended June 30, 2026 or December 31, 2025.
Note 15. Subsequent Events
Dividend Declared
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We are a central California-based bank holding company for a bank subsidiary, Community West Bank (the “Bank”). We offer 31 full-service banking centers covering greater Sacramento in the north, throughout the San Joaquin Valley south to Bakersfield, and west to the Central Coast. We provide traditional commercial banking services to small and medium-sized businesses and individuals in the communities that we serve. On April 1, 2026, the Company completed its previously announced merger of United Security Bancshares pursuant to which USB merged with and into the Company, with the Company continuing as the surviving entity. Refer to Note 2 - Business Combinations for further discussion of this transaction.
Dividend Declared
On July 22, 2026, the Board of Directors declared a $0.12 per share cash dividend payable on August 21, 2026 to shareholders of record as of August 6, 2026.
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Critical Accounting Policies and Estimates
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that the Company’s most critical accounting policies are those which the Company’s financial condition depends upon, and which involve the most complex or subjective decisions or assessments.
Business Combinations
We account for business combinations under the acquisition method of accounting in accordance with ASC 805. We recognize the fair value of the assets acquired and liabilities assumed as of the date of acquisition, with any excess of the fair value of consideration provided over the fair value of the identifiable net tangible and intangible assets acquired recorded as goodwill. Transaction costs are expensed as incurred. Application of the acquisition method requires extensive use of accounting estimates and judgments to determine the fair values of the identifiable assets acquired and liabilities assumed at the acquisition date.
In accordance with ASC 805, the acquiring company retains the right to make appropriate adjustments to the assets and liabilities of the acquired entity for information obtained during the measurement period about facts and circumstances that existed as of the acquisition date. The measurement period ends as of the earlier of (i) one year from the acquisition date or (ii) the date when the acquirer receives the information necessary to complete the business combination accounting.
Goodwill and intangible assets acquired in a business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Core deposit intangible assets arising from business combinations are amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 8-10 years.
Allowance for Credit Losses
The Current Expected Credit Loss (“CECL”) approach requires an estimate of the credit losses expected over the life of a financial asset carried at amortized cost. It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred”.
The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable.
Management’s evaluation of the appropriateness of the allowance for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the allowance for credit losses is a critical accounting estimate as it requires significant reliance on the use of estimates and significant judgment as to the amount and timing of expected future cash flows on criticized loans, significant reliance on historical loss rates, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts.
The allowance for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), economic trends and conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans.
The impact of utilizing the CECL approach to calculate the reserve for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings. See Note 4 to the Consolidated Financial Statements and the “Allowance for Credit Losses on Loans” section below.
Please refer to the Company’s 2025 Annual Report on Form 10-K for a complete listing of critical accounting policies.
43
Financial Highlights
The significant highlights for the Company as of or for the period ended June 30, 2026 included the following:
•On April 1, 2026, the Company completed its previously announced merger (“Merger”) with United Security Bancshares (“USB”) pursuant to which USB merged with and into the Company, with the Company continuing as the surviving entity. Following the Merger, United Security Bank, a wholly owned subsidiary of USB, merged with and into Community West Bank, a wholly owned subsidiary of the Company, with the Bank continuing as the surviving entity.
•Net income during the second quarter decreased to $2.70 million, or $0.10 per diluted common share, compared to net income of $11.49 million and $0.60 per diluted common share, respectively, in the first quarter of 2026. The decrease in net income was due to an increase in non-recurring items: an increase in merger expenses of $7,458,000 and a net realized loss on sales and calls of investment securities of $5,899,000, in addition to an increase to the provision for credit losses of $5,545,000 as compared to the trailing quarter.
•The Company recorded a provision for credit losses of $5,635,000 during the quarter ended June 30, 2026, as compared to $90,000 during the trailing quarter. The current quarter provision is attributed to a provision for loan losses totaling $5,259,000, a provision for unfunded commitments of $430,000, partially offset by a credit to the reserve for held-to-maturity securities of $54,000. The provision for loan losses during the quarter ended June 30, 2026 was primarily due to an update of the Company’s peer group based on its larger asset size following the completion of the Merger and also from organic loan growth during the quarter. Charge-offs during the quarter were associated with loans previously fully reserved or absorbed within the Day 1 allowance recorded at the time of the Merger.
•Gross loans increased by $992.7 million or 38.91% for the quarter ended June 30, 2026 compared to the quarter ended March 31, 2026 and increased $1.0 billion or 39.47% year-to-date. The fair value of loans acquired from USB was $878.5 million as of April 1, 2026.
•Total deposits increased by $977.9 million or 31.13% for the quarter ended June 30, 2026 compared to the quarter ended March 31, 2026 and $1.0 billion or 33.09% year-to-date. Total deposits acquired as a result of the Merger was $1.1 billion as of April 1, 2026. Brokered deposits decreased by $73.1 million or 14.30% for the quarter ended June 30, 2026 compared to the quarter ended March 31, 2026 and decreased $80.5 million or 15.53% year-to-date.
•Total cost of deposits decreased to 1.31% for the quarter ended June 30, 2026 compared to 1.40% for the quarter ended March 31, 2026, and decreased from 1.39% for the quarter ended December 31, 2025.
•Average non-interest bearing demand deposits as a percentage of total average deposits totaled 34.14% and 33.32% for the quarters ended June 30, 2026 and March 31, 2026, respectively.
•Net interest margin (calculated on a fully tax equivalent basis) increased to 4.56% for the quarter ended June 30, 2026, from 4.30% for the quarter ended March 31, 2026.
•There were $27.9 million of non-performing assets as of June 30, 2026. Net loan charge offs were $5,498,000 for the quarter ended June 30, 2026 and loans delinquent 30 days or more were $34.3 million as of June 30, 2026.
•Capital positions remain strong at June 30, 2026 with a 9.79% Tier 1 Leverage Ratio; a 11.41% Common Equity Tier 1 Ratio; a 11.53% Tier 1 Risk-Based Capital Ratio; and a 13.63% Total Risk-Based Capital Ratio.
•The Company declared a $0.12 per common share cash dividend, payable on August 21, 2026 to shareholders of record as of August 6, 2026.
Overview
The following is management’s discussion and analysis of the Company’s financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the Condensed Consolidated Financial Statements of the Company and the Notes thereto located at Item 1 of this report.
44
RESULTS OF OPERATIONS
| Three months ended | Six months ended | |||||||||||||||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | |||||||||||||||||||||||||||||
| (In thousands, except share and per-share amounts) | 2026 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||
| Net interest income before provision for credit losses | $ | 50,912 | $ | 36,003 | $ | 33,304 | $ | 86,916 | $ | 65,486 | ||||||||||||||||||||||
| Provision for credit losses | 5,635 | 90 | 2,613 | 5,725 | 2,572 | |||||||||||||||||||||||||||
| Net interest income after provision for credit losses | 45,277 | 35,913 | 30,691 | 81,191 | 62,914 | |||||||||||||||||||||||||||
| Total non-interest income | (1,970) | 2,788 | 2,364 | 817 | 4,975 | |||||||||||||||||||||||||||
| Total non-interest expenses | 39,143 | 22,987 | 22,296 | 62,130 | 45,766 | |||||||||||||||||||||||||||
| Income before provision for income taxes | 4,164 | 15,714 | 10,759 | 19,878 | 22,123 | |||||||||||||||||||||||||||
| Provision for income taxes | 1,469 | 4,225 | 2,927 | 5,694 | 5,998 | |||||||||||||||||||||||||||
| Net income | $ | 2,695 | $ | 11,489 | $ | 7,832 | $ | 14,184 | $ | 16,125 | ||||||||||||||||||||||
During the three months ended June 30, 2026, the Company reported net income of $2,695,000. Basic and diluted earnings per share for the three months ended June 30, 2026 were $0.10 compared to $0.41 for the three months ended June 30, 2025. During the three months ended June 30, 2026, the Company recorded a $5,635,000 provision for credit losses compared to a $2,613,000 provision for credit losses during the three months ended June 30, 2025. During the quarter ended June 30, 2026, the Company realized a net loss on sales and calls of securities of $5,899,000 compared to a net loss of $15,000 during the prior year quarter ended June 30, 2025 as part of a strategic repositioning of the investment portfolio. The increase in both quarter-to-date and year-to-date non-interest expense categories was driven primarily by increases in merger expenses, salary and employee benefits, and amortization of core deposit intangibles as a result of the Merger.
Statement Regarding use of Non-GAAP Financial Measures
Community West Bancshares’s financial results are presented in accordance with GAAP and refer to certain non-GAAP financial measures. Management believes that presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of the Company’s core operating results and comparison of operating results across reporting periods. Management also uses non-GAAP financial measures to establish budgets and manage the Company’s business. A reconciliation of the GAAP financial measures to comparable non-GAAP financial measures is presented below.
45
Reconciliation of GAAP and Non-GAAP Financial Measures
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (In thousands, except share and per-share amounts) | 2026 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||
| NET INCOME ADJUSTED FOR NON-CORE ITEMS | ||||||||||||||||||||||||||||||||
| Net income (GAAP) | $ | 2,695 | $ | 11,489 | $ | 7,832 | $ | 14,184 | $ | 16,125 | ||||||||||||||||||||||
| Merger and conversion related costs: | ||||||||||||||||||||||||||||||||
| Personnel and severance | 4,824 | — | — | 4,824 | — | |||||||||||||||||||||||||||
| Professional services | 2,361 | 289 | — | 2,650 | 278 | |||||||||||||||||||||||||||
| Data processing and technology | 502 | — | — | 502 | — | |||||||||||||||||||||||||||
| Other | 60 | — | — | 60 | — | |||||||||||||||||||||||||||
| Total merger and conversion related costs | 7,747 | 289 | — | 8,036 | 278 | |||||||||||||||||||||||||||
| Loss on sales/calls of investment securities | 5,899 | — | 15 | 5,899 | 15 | |||||||||||||||||||||||||||
| Income tax impact of non-core items | (4,034) | (85) | (4) | (4,119) | (87) | |||||||||||||||||||||||||||
| Comparable net income (non-GAAP) | $ | 12,307 | $ | 11,693 | $ | 7,843 | $ | 24,000 | $ | 16,331 | ||||||||||||||||||||||
| DILUTED EARNINGS PER SHARE | ||||||||||||||||||||||||||||||||
| Weighted average diluted shares | 27,108,920 | 19,137,134 | 19,042,750 | 23,145,947 | 19,028,425 | |||||||||||||||||||||||||||
| Diluted earnings per share (GAAP) | $ | 0.10 | $ | 0.60 | $ | 0.41 | $ | 0.61 | $ | 0.85 | ||||||||||||||||||||||
| Comparable diluted earnings per share (non-GAAP) | $ | 0.45 | $ | 0.61 | $ | 0.41 | $ | 1.04 | $ | 0.86 | ||||||||||||||||||||||
| RETURN ON AVERAGE ASSETS | ||||||||||||||||||||||||||||||||
| Average assets | $ | 4,927,433 | $ | 3,695,982 | $ | 3,553,327 | $ | 4,315,110 | $ | 3,540,901 | ||||||||||||||||||||||
| Return on average assets (GAAP) | 0.22 | % | 1.24 | % | 0.88 | % | 0.66 | % | 0.91 | % | ||||||||||||||||||||||
| Impact of non-core items | 0.78 | % | 0.03 | % | — | % | 0.45 | % | 0.01 | % | ||||||||||||||||||||||
| Comparable return on average assets (non-GAAP) | 1.00 | % | 1.27 | % | 0.88 | % | 1.11 | % | 0.92 | % | ||||||||||||||||||||||
| RETURN ON AVERAGE EQUITY | ||||||||||||||||||||||||||||||||
| Average stockholders' equity | $ | 607,758 | $ | 418,172 | $ | 377,413 | $ | 513,490 | $ | 373,735 | ||||||||||||||||||||||
| Return on average equity (GAAP) | 1.77 | % | 10.99 | % | 8.30 | % | 5.52 | % | 8.63 | % | ||||||||||||||||||||||
| Impact of non-core items | 6.34 | % | 0.19 | % | 0.01 | % | 3.82 | % | 0.11 | % | ||||||||||||||||||||||
| Comparable return on average equity (non-GAAP) | 8.10 | % | 11.18 | % | 8.31 | % | 9.35 | % | 8.74 | % | ||||||||||||||||||||||
| EFFICIENCY RATIO | ||||||||||||||||||||||||||||||||
| Non-interest expense (GAAP) | $ | 39,143 | $ | 22,987 | $ | 22,296 | $ | 62,130 | $ | 45,766 | ||||||||||||||||||||||
| Merger-related non-interest expenses | (7,747) | (289) | — | (8,036) | (278) | |||||||||||||||||||||||||||
| Comparable non-interest expense (non-GAAP) | 31,396 | 22,698 | 22,296 | 54,094 | 45,488 | |||||||||||||||||||||||||||
| Net interest income (GAAP) | 50,912 | 36,003 | 33,304 | 86,916 | 65,486 | |||||||||||||||||||||||||||
| Non-interest income (GAAP) | (1,970) | 2,788 | 2,364 | 817 | 4,975 | |||||||||||||||||||||||||||
| Loss on sales/calls of investment securities | 5,899 | — | 15 | 5,899 | 15 | |||||||||||||||||||||||||||
| Comparable non-interest income (non-GAAP) | $ | 3,929 | $ | 2,788 | $ | 2,379 | $ | 6,716 | $ | 4,990 | ||||||||||||||||||||||
| Efficiency ratio (GAAP) | 79.98 | % | 59.26 | % | 62.51 | % | 70.82 | % | 64.95 | % | ||||||||||||||||||||||
| Comparable efficiency ratio (non-GAAP) | 57.25 | % | 58.51 | % | 62.48 | % | 57.77 | % | 64.54 | % | ||||||||||||||||||||||
46
| Three months ended | Six months ended | |||||||||||||||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2026 | 2026 | 2026 | 2026 | |||||||||||||||||||||||||||
| PRE-TAX PRE-PROVISION RETURN ON AVERAGE ASSETS OR EQUITY | ||||||||||||||||||||||||||||||||
| Net income (GAAP) | $ | 2,695 | $ | 11,489 | $ | 7,832 | $ | 14,184 | $ | 16,125 | ||||||||||||||||||||||
| Exclude provision for income taxes | 1,469 | 4,225 | 2,927 | 5,694 | 5,998 | |||||||||||||||||||||||||||
| Exclude provision for credit losses | 5,635 | 90 | 2,613 | 5,725 | 2,572 | |||||||||||||||||||||||||||
| Net income before income tax and provision expense (Non-GAAP) | $ | 9,799 | $ | 15,804 | $ | 13,372 | $ | 25,603 | $ | 24,695 | ||||||||||||||||||||||
| Net income excluding non-core items (Non-GAAP) | 12,307 | 11,693 | 7,843 | 24,000 | 16,331 | |||||||||||||||||||||||||||
| Exclude provision for income taxes (Non-GAAP) (1) | 5,503 | 4,310 | 2,931 | 9,813 | 6,085 | |||||||||||||||||||||||||||
| Exclude provision for credit losses | 5,635 | 90 | 2,613 | 5,725 | 2,572 | |||||||||||||||||||||||||||
| Net income excluding non-core items before income tax and provision expense (Non-GAAP) | $ | 23,445 | $ | 16,093 | $ | 13,387 | $ | 39,538 | $ | 24,988 | ||||||||||||||||||||||
| RETURN ON AVERAGE ASSETS (Annualized) | ||||||||||||||||||||||||||||||||
| Average assets | $ | 4,927,433 | $ | 3,695,982 | $ | 3,553,327 | $ | 4,315,110 | $ | 3,540,901 | ||||||||||||||||||||||
| Return on average assets (GAAP) | 0.22 | % | 1.24 | % | 0.88 | % | 0.66 | % | 0.91 | % | ||||||||||||||||||||||
| Pre-tax pre-provision return on average assets (Non-GAAP) | 0.80 | % | 1.71 | % | 1.51 | % | 1.19 | % | 1.39 | % | ||||||||||||||||||||||
| Pre-tax pre-provision excluding non-core items return on average assets (Non-GAAP) | 1.90 | % | 1.74 | % | 1.51 | % | 1.83 | % | 1.41 | % | ||||||||||||||||||||||
| RETURN ON AVERAGE EQUITY (Annualized) | ||||||||||||||||||||||||||||||||
| Average stockholders' equity | $ | 607,758 | $ | 418,172 | $ | 377,413 | $ | 513,490 | $ | 373,735 | ||||||||||||||||||||||
| Return on average equity (GAAP) | 1.77 | % | 10.99 | % | 8.30 | % | 5.52 | % | 8.63 | % | ||||||||||||||||||||||
| Pre-tax pre-provision return on average equity (Non-GAAP) | 6.45 | % | 15.12 | % | 14.17 | % | 4.99 | % | 13.22 | % | ||||||||||||||||||||||
| Pre-tax pre-provision excluding non-core items return on average equity (Non-GAAP) | 15.43 | % | 15.39 | % | 14.19 | % | 15.40 | % | 13.37 | % | ||||||||||||||||||||||
| (1) Calculated as GAAP provision for income taxes plus income tax impact of non-core items at statutory tax rate of 29.56%. | ||||||||||||||||||||||||||||||||
47
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2026 | 2025 | 2025 | 2025 | |||||||||||||||||||||||||||
| TANGIBLE COMMON EQUITY | ||||||||||||||||||||||||||||||||
| Shareholders’ equity (GAAP) | $ | 607,820 | $ | 419,203 | $ | 409,588 | $ | 397,576 | $ | 380,002 | ||||||||||||||||||||||
| Exclude goodwill | 154,600 | 96,828 | 96,828 | 96,828 | 96,828 | |||||||||||||||||||||||||||
| Exclude other intangibles assets | 32,723 | 8,015 | 8,266 | 8,516 | 8,767 | |||||||||||||||||||||||||||
| Tangible common shareholders’ equity (Non-GAAP) | $ | 420,497 | $ | 314,360 | $ | 304,494 | $ | 292,232 | $ | 274,407 | ||||||||||||||||||||||
| TANGIBLE COMMON EQUITY PER SHARE | ||||||||||||||||||||||||||||||||
| Tangible common shareholders’ equity (Non-GAAP) | $ | 420,497 | $ | 314,360 | $ | 304,494 | $ | 292,232 | $ | 274,407 | ||||||||||||||||||||||
| Common shares outstanding at end of period | 27,131,078 | 19,185,275 | 19,163,452 | 19,138,677 | 19,130,508 | |||||||||||||||||||||||||||
| Common shareholders’ equity (book value) per share (GAAP) | $ | 22.40 | $ | 21.85 | $ | 21.37 | $ | 20.77 | $ | 19.86 | ||||||||||||||||||||||
| Tangible common shareholders’ equity (tangible book value) per share (Non-GAAP) | $ | 15.50 | $ | 16.39 | $ | 15.89 | $ | 15.27 | $ | 14.34 | ||||||||||||||||||||||
Net Interest Income and Net Interest Margin
The level of net interest income depends on several factors in combination, including yields on earning assets, the cost of interest-bearing liabilities, the relative volumes of earning assets and interest-bearing liabilities, and the mix of products which comprise the Company’s earning assets, deposits, and other interest-bearing liabilities. To maintain its net interest margin, the Company must manage the relationship between interest earned and paid.
48
The following Distribution, Rate and Yield table presents the average amounts outstanding for the major categories of the Company’s balance sheet, the average interest rates earned or paid thereon, and the resulting net interest margin on average interest earning assets for the periods indicated. Average balances are based on daily averages.
COMMUNITY WEST BANCSHARES
SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES
| For the Three Months Ended June 30, 2026 | For the Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest Income/ Expense | Average Interest Rate | Average Balance | Interest Income/ Expense | Average Interest Rate | ||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits in other banks | $ | 121,366 | $ | 1,099 | 3.62 | % | $ | 96,136 | $ | 1,054 | 4.39 | % | ||||||||||||||||||||||||||
| Securities | ||||||||||||||||||||||||||||||||||||||
| Taxable securities | 669,406 | 5,126 | 3.06 | % | 590,791 | 4,127 | 2.79 | % | ||||||||||||||||||||||||||||||
| Non-taxable securities (1) | 236,050 | 1,601 | 2.71 | % | 239,197 | 1,654 | 2.77 | % | ||||||||||||||||||||||||||||||
| Total investment securities | 905,456 | 6,727 | 2.97 | % | 829,988 | 5,781 | 2.79 | % | ||||||||||||||||||||||||||||||
| Total securities and interest-earning deposits | 1,026,822 | 7,826 | 3.05 | % | 926,124 | 6,835 | 2.95 | % | ||||||||||||||||||||||||||||||
| Loans (2) (3) | 3,480,401 | 58,630 | 6.76 | % | 2,364,456 | 39,537 | 6.71 | % | ||||||||||||||||||||||||||||||
| Total interest-earning assets | 4,507,223 | $ | 66,456 | 5.91 | % | 3,290,580 | $ | 46,372 | 5.65 | % | ||||||||||||||||||||||||||||
| Allowance for credit losses | (46,951) | (26,151) | ||||||||||||||||||||||||||||||||||||
| Non-accrual loans | 21,711 | 5,869 | ||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 46,239 | 35,607 | ||||||||||||||||||||||||||||||||||||
| Bank premises and equipment | 30,551 | 23,939 | ||||||||||||||||||||||||||||||||||||
| Other assets | 368,660 | 223,483 | ||||||||||||||||||||||||||||||||||||
| Total average assets | $ | 4,927,433 | $ | 3,553,327 | ||||||||||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Savings and NOW accounts | $ | 1,057,005 | $ | 1,641 | 0.62 | % | $ | 601,559 | $ | 1,034 | 0.69 | % | ||||||||||||||||||||||||||
| Money market accounts | 1,129,539 | 7,244 | 2.57 | % | 876,609 | 5,070 | 2.32 | % | ||||||||||||||||||||||||||||||
| Time certificates of deposit | 569,449 | 4,847 | 3.41 | % | 463,151 | 4,434 | 3.84 | % | ||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 2,755,993 | 13,732 | 2.00 | % | 1,941,319 | 10,538 | 2.18 | % | ||||||||||||||||||||||||||||||
| Other borrowed funds | 129,945 | 1,475 | 4.54 | % | 167,636 | 2,183 | 5.15 | % | ||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 2,885,938 | $ | 15,207 | 2.11 | % | 2,108,955 | $ | 12,721 | 2.42 | % | ||||||||||||||||||||||||||||
| Non-interest bearing demand deposits | 1,428,442 | 1,021,513 | ||||||||||||||||||||||||||||||||||||
| Other liabilities | 5,295 | 45,446 | ||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 607,758 | 377,413 | ||||||||||||||||||||||||||||||||||||
| Total average liabilities and shareholders’ equity | $ | 4,927,433 | $ | 3,553,327 | ||||||||||||||||||||||||||||||||||
| Interest income and rate earned on average earning assets | $ | 66,456 | 5.91 | % | $ | 46,372 | 5.65 | % | ||||||||||||||||||||||||||||||
| Interest expense and interest cost related to average interest-bearing liabilities | 15,207 | 2.11 | % | 12,721 | 2.42 | % | ||||||||||||||||||||||||||||||||
| Net interest income and net interest margin (4) | $ | 51,249 | 4.56 | % | $ | 33,651 | 4.10 | % | ||||||||||||||||||||||||||||||
(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $336 and $347 at June 30, 2026 and June 30, 2025, respectively.
(2) Loan interest income includes loan (costs) fees of $(280) and $217 at June 30, 2026 and June 30, 2025, respectively. Loan interest income includes an accretion on loan marks of $5,163 and $2,987 at June 30, 2026 and June 30, 2025, respectively.
(3) Average loans do not include non-accrual loans but do include interest income recovered from previously charged off loans.
(4) Net interest margin is computed by dividing net interest income by total average interest-earning assets.
49
| For the Six Months Ended June 30, 2026 | For the Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest Income/ Expense | Average Interest Rate | Average Balance | Interest Income/ Expense | Average Interest Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits in other banks | $ | 106,128 | $ | 1,949 | 3.67 | % | $ | 94,684 | $ | 2,110 | 4.46 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Taxable securities | 617,862 | 8,998 | 2.91 | % | 596,577 | 8,477 | 2.84 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Non-taxable securities (1) | 236,352 | 3,203 | 2.71 | % | 239,600 | 3,309 | 2.76 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total investment securities | 854,214 | 12,201 | 2.86 | % | 836,177 | 11,786 | 2.82 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total securities and interest-earning deposits | 960,342 | 14,150 | 2.95 | % | 930,861 | 13,896 | 2.99 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loans (2) (3) | 3,008,254 | 100,535 | 6.74 | % | 2,346,244 | 77,962 | 6.70 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 3,968,596 | $ | 114,685 | 5.83 | % | 3,277,105 | $ | 91,858 | 5.65 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (38,569) | (26,005) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-accrual loans | 17,277 | 6,017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 39,997 | 35,762 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank premises and equipment | 27,227 | 24,131 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 300,582 | 223,891 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total average assets | $ | 4,315,110 | $ | 3,540,901 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings and NOW accounts | $ | 876,752 | $ | 2,809 | 0.65 | % | $ | 594,170 | $ | 1,893 | 0.64 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Money market accounts | 1,000,060 | 12,328 | 2.49 | % | 874,763 | 10,170 | 2.34 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Time certificates of deposit | 552,558 | 9,430 | 3.44 | % | 456,593 | 8,863 | 3.91 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 2,429,370 | 24,567 | 2.04 | % | 1,925,526 | 20,926 | 2.19 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other borrowed funds | 110,738 | 2,529 | 4.57 | % | 186,792 | 4,751 | 5.09 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 2,540,108 | $ | 27,096 | 2.15 | % | 2,112,318 | 25,677 | 2.45 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest bearing demand deposits | 1,239,637 | 1,009,228 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 21,875 | 45,620 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 513,490 | 373,735 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total average liabilities and shareholders’ equity | $ | 4,315,110 | $ | 3,540,901 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income and rate earned on average earning assets | $ | 114,685 | 5.83 | % | $ | 91,858 | 5.65 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense and interest cost related to average interest-bearing liabilities | 27,096 | 2.15 | % | 25,677 | 2.45 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income and net interest margin (4) | $ | 87,589 | 4.45 | % | $ | 66,181 | 4.07 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $673 and $695 at June 30, 2026 and June 30, 2025, respectively.
(2) Loan interest income includes loan fees (costs) of $309 and $316 at June 30, 2026 and June 30, 2025, respectively. Loan interest income includes an accretion on loan marks of $7,416 and $6,326 at June 30, 2026 and June 30, 2025, respectively.
(3) Average loans do not include non-accrual loans but do include interest income recovered from previously charged off loans.
(4) Net interest margin is computed by dividing net interest income by total average interest-earning assets.
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The Volume and Rate Variances table below sets forth the dollar difference in interest earned and paid for each major category of interest-bearing assets and interest-bearing liabilities for the noted periods, and the amount of such change attributable to changes in average balances (volume) or changes in average interest rates. Volume variances are equal to the increase or decrease in the average balance times the prior period rate, and rate variances are equal to the increase or decrease in the average rate times the prior period average balance. Variances attributable to both rate and volume changes are equal to the change in rate times the change in average balance and are included below in the average volume column.
| Changes in Volume/Rate | For the Three Months Ended June 30, 2026 and 2025 | For the Six Months Ended June 30, 2026 and 2025 | ||||||||||||||||||||||||||||||||||||
| (In thousands) | Volume | Rate | Net | Volume | Rate | Net | ||||||||||||||||||||||||||||||||
| Increase (decrease) due to changes in: | ||||||||||||||||||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits in other banks | $ | 276 | $ | (231) | $ | 45 | $ | 255 | $ | (416) | $ | (161) | ||||||||||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||||||||||
| Taxable | 550 | 449 | 999 | 303 | 218 | 521 | ||||||||||||||||||||||||||||||||
| Non-taxable (1) | (22) | (31) | (53) | (45) | (61) | (106) | ||||||||||||||||||||||||||||||||
| Total investment securities | 528 | 418 | 946 | 258 | 157 | 415 | ||||||||||||||||||||||||||||||||
| Loans | 18,660 | 433 | 19,093 | 21,998 | 575 | 22,573 | ||||||||||||||||||||||||||||||||
| Total earning assets (1) | 19,464 | 620 | 20,084 | 22,511 | 316 | 22,827 | ||||||||||||||||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||||||||||||||
| Savings and NOW | 781 | (174) | 607 | 901 | 15 | 916 | ||||||||||||||||||||||||||||||||
| MMA | 1,463 | 711 | 2,174 | 1,457 | 701 | 2,158 | ||||||||||||||||||||||||||||||||
| Time certificate of deposits | 1,017 | (604) | 413 | 1,862 | (1,295) | 567 | ||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 3,261 | (67) | 3,194 | 4,220 | (579) | 3,641 | ||||||||||||||||||||||||||||||||
| Other borrowed funds | (489) | (219) | (708) | (1,918) | (304) | (2,222) | ||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 2,772 | (286) | 2,486 | 2,302 | (883) | 1,419 | ||||||||||||||||||||||||||||||||
| Net interest income (1) | $ | 16,692 | $ | 906 | $ | 17,598 | $ | 20,209 | $ | 1,199 | $ | 21,408 | ||||||||||||||||||||||||||
(1) Computed on a tax equivalent basis for securities exempt from federal income taxes.
Comparison of the quarter ended June 30, 2026 and June 30, 2025
The Company’s net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, increased 46 basis points to 4.56% for the second quarter of 2026, from 4.10% for the second quarter of 2025. Average interest earning assets were $4,507,223,000 for the three months ended June 30, 2026 compared to $3,290,580,000 for the three months ended June 30, 2025. The $1,216,643,000 increase in average earning assets was attributed to the $1,115,945,000 or 47.20% increase in average loans, a $25,230,000 increase in interest-earning deposits and $75,468,000 increase in investment securities. For the three months ended June 30, 2026, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks increased 10 basis points. The effective yield on loans increased 5 basis points. Average interest bearing liabilities increased 36.84% to $2,885,938,000 for the three months ended June 30, 2026, compared to $2,108,955,000 for the same period in 2025.
Interest and fee income from loans increased $19,093,000 or 48.29% for the three months ended June 30, 2026 compared to the same period in 2025. The yield on average loans, excluding nonaccrual loans, was 6.76% for the three months ended June 30, 2026 compared to 6.71% for the same period in 2025. The accretion from fair value marks on loans contributed 60 basis points to the loan yield for the three months ended June 30, 2026 compared to 31 basis points for the same period in 2025.
Interest income from interest-earning deposits in other banks increased $45,000 in the three months ended June 30, 2026 to $1,099,000 compared to $1,054,000 for the same period in 2025. The yield on average interest-earning deposits decreased 77 basis points to 3.62% for the three month period ended June 30, 2026 compared to 4.39% for the same period in 2025. Average interest-earning deposits for the three month period ended June 30, 2026 increased $25,230,000 or 26.24% to $121,366,000 compared to $96,136,000 for the same period in 2025.
51
Interest income from total investment securities increased $946,000 in the three months ended June 30, 2026 to $6,727,000 compared to $5,781,000 for the same period in 2025. The yield on average total investment securities increased 18 basis points to 2.97% for the three month period ended June 30, 2026 compared to 2.79% for the same period in 2025. Average total investment securities for the three month period ended June 30, 2026 increased $75,468,000 or 9.09% to $905,456,000 compared to $829,988,000 for the same period in 2025.
Total interest income for the three months ended June 30, 2026 increased $20,094,000 or 43.66% to $66,119,000 compared to $46,025,000 for the three months ended June 30, 2025. The yield on interest earning assets increased 26 basis points to 5.91% on a fully tax equivalent basis for the three months ended June 30, 2026 from 5.65% for the period ended June 30, 2025. The increase was the result of yield changes, increases in interest rates, asset mix changes, and the Merger.
Interest expense on deposits for the three months ended June 30, 2026 and 2025 was $13,732,000 and $10,538,000, respectively. The average interest rate on interest bearing deposits decreased to 2.00% for the three months ended June 30, 2026 compared to 2.18% for the period ended June 30, 2025. Average interest-bearing deposits increased 41.96% or $814,674,000 to $2,755,993,000 for the three months ended June 30, 2026 compared to $1,941,319,000 for the period ended June 30, 2025.
Average other borrowed funds were $129,945,000 with an effective rate of 4.54% for the three months ended June 30, 2026 compared to $167,636,000 with an effective rate of 5.15% for the three months ended June 30, 2025. Total interest expense on other borrowed funds was $1,475,000 for the three months ended June 30, 2026 and $2,183,000 for the three months ended June 30, 2025.
The cost of interest-bearing liabilities decreased 31 basis points to 2.11% for the three month period ended June 30, 2026 compared to 2.42% for the same period in 2025. The cost of total deposits decreased to 1.31% compared to 1.43% for the three month periods ended June 30, 2026 and 2025, respectively. The decrease in cost of deposits was due to reduction of rates paid for money market and time deposit accounts over the two time periods. Average non-interest bearing demand deposits increased 39.84% to $1,428,442,000 for the three month period ended June 30, 2026 compared to $1,021,513,000 for the same period in 2025. The ratio of average non-interest bearing demand deposits to average total deposits decreased to 34.14% in the three month period ended June 30, 2026 compared to 34.48% for the same period in 2025.
Net interest income before the provision for credit losses for the three months ended June 30, 2026 increased by $17,608,000 or 52.87% to $50,912,000 compared to $33,304,000 for the same period in 2025. The increase was a result of increased interest income on average earnings assets and an increase in interest expense on average interest bearing liabilities.
Comparison of the six months ended June 30, 2026 and June 30, 2025
The Company’s net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, increased 38 basis points to 4.45% for the six months ended June 30, 2026, from 4.07% for the same period of 2025. Average interest earning assets were $3,968,596,000 for the six months ended June 30, 2026 compared to $3,277,105,000 for the six months ended June 30, 2025. The $691,491,000 increase in average earning assets was attributed to the $662,010,000 or 28.22% increase in average loans, partially offset by the $3,248,000 decrease in average non-taxable investment securities. For the six months ended June 30, 2026, the effective yield on loans increased 4 basis points. Average interest bearing liabilities increased 20.25% to $2,540,108,000 for the six months ended June 30, 2026, compared to $2,112,318,000 for the same period in 2025.
Interest and fee income from loans increased $22,573,000 or 28.95% for the six months ended June 30, 2026 compared to the same period in 2025. Net interest income during the first six months of 2026 was impacted by an increase in average total loans of $662,010,000 or 28.22% to $3,008,254,000 compared to $2,346,244,000 for the same period in 2025. The yield on average loans, excluding nonaccrual loans, was 6.74% for the six months ended June 30, 2026 compared to 6.70% for the same period in 2025. The accretion from fair value marks on loans contributed 50 basis points to the loan yield for the six months ended June 30, 2026 compared to 54 basis points for the same period in 2025.
Total interest income for the six months ended June 30, 2026 increased $22,849,000 or 25.06% to $114,012,000 compared to $91,163,000 for the six months ended June 30, 2025. The yield on interest earning assets increased 18 basis points to 5.83% on a fully tax equivalent basis for the six months ended June 30, 2026 from 5.65% for the six months ended June 30, 2025. The increase to interest income was the result of the acquisition of United Security Bancshares as of April 1, 2026, yield changes, increase in interest rates, and asset mix changes.
Interest expense on deposits for the six months ended June 30, 2026 and 2025 was $24,567,000 and $20,926,000, respectively. The average interest rate on interest bearing deposits decreased 15 basis points to 2.04% for the six months ended ended
52
June 30, 2026 compared to 2.19% for the same period ended June 30, 2025. Average interest-bearing deposits increased 26.17% or $503,844,000 to $2,429,370,000 for the six months ended June 30, 2026 compared to $1,925,526,000 for the same period ended June 30, 2025.
Average other borrowed funds were $110,738,000 with an effective rate of 4.57% for the six months ended June 30, 2026 compared to $186,792,000 with an effective rate of 5.09% for the six months ended June 30, 2025. Total interest expense on other borrowed funds was $2,529,000 for the six months ended June 30, 2026 and $4,751,000 for the six months ended June 30, 2025.
Net interest income before the provision for credit losses for the six months ended June 30, 2026 increased by $21,430,000 or 32.72% to $86,916,000 compared to $65,486,000 for the same period in 2025. The increase was a result of the acquisition of United Security Bancshares as of April 1, 2026, yield changes, asset mix changes, and an increase in average earning assets, offset by an increase in interest expense on average interest bearing liabilities.
Provision for Credit Losses on Loans
The following table sets forth information regarding our provisions for credit losses on loans, charge-offs and recoveries and ending allowance for credit losses for loans at the dates and for the periods indicated:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Balance, beginning of period | $ | 30,230 | $ | 26,095 | $ | 30,071 | $ | 25,803 | ||||||||||||||||||
| Merger Day 1 ACL | 19,431 | — | 19,431 | — | ||||||||||||||||||||||
| Provision for credit losses | 5,259 | 2,640 | 5,381 | 2,808 | ||||||||||||||||||||||
| Losses charged to allowance | (5,813) | (135) | (5,824) | (164) | ||||||||||||||||||||||
| Recoveries | 315 | 122 | 363 | 275 | ||||||||||||||||||||||
| Balance, end of period | $ | 49,422 | $ | 28,722 | $ | 49,422 | $ | 28,722 | ||||||||||||||||||
| Allowance for credit losses to total loans at end of period | 1.39 | % | 1.20 | % | 1.39 | % | 1.20 | % | ||||||||||||||||||
Managing high-risk credits includes developing a business strategy with the customer to mitigate our potential losses. Management continues to monitor these credits with a view to identifying as early as possible when, and to what extent, additional provisions may be necessary. Management believes that the level of allowance for credit losses has been adjusted accordingly.
During the second quarter of 2026, the Company recorded net loan charge-offs of $5,498,000 compared to $13,000 for the same period in 2025. The primary reason for the increase in loan charge-offs during the quarter was due to $2.6 million in charge-offs within an acquired student loan portfolio from the Merger, in which the Company recorded a Day 1 allowance of $9.5 million in anticipation of future charge-offs in this portfolio segment. Additionally, the Company charged off one commercial real estate loan that was individually evaluated and had a specific reserve in prior quarters. The net charge-off ratio reflects annualized net charge-offs to average loans of 0.63% for the quarter ended June 30, 2026, compared to annualized net charge-offs of 0.00% for the quarter ended June 30, 2025. During the quarter ended June 30, 2026, non-accrual loans decreased $3,240,000 to $19,757,000 compared to $22,997,000 at March 31, 2026 and increased $12,802,000 year-to-date to $19,757,000 compared to $6,955,000 at December 31, 2025. The quarter-to-date increase in substandard loans is attributable primarily to the Merger with USB, which contributed $30 million in substandard loan balances. While total dollar balances of substandard loans increased relative to the prior quarter, the ratio of substandard loans to total loans remained consistent with the trailing quarter.
During the quarter ended June 30, 2026, the Company recorded a $5,259,000 provision for loan losses, compared to $2,640,000 for the same period in 2025. The provision for loan losses during the quarter ended June 30, 2026 was primarily due to an update of the Company’s peer group based on its larger asset size following the completion of the Merger and also from organic loan growth during the quarter. In addition to the provision for credit losses on loans for the quarter ended June 30, 2026, the Company recorded a credit to the provision for credit losses on held-to-maturity securities of $54,000 as compared to $188,000 in the prior year quarter. The Company recorded a provision for for unfunded loan commitments totaling $430,000 for the quarter ended June 30, 2026 compared to a provision for unfunded loan commitments of $161,000 in the prior year quarter.
The Company has been and will continue to be proactive in looking for signs of deterioration within the loan portfolio in an effort to manage credit quality and work with borrowers where possible to mitigate losses.
53
The following table shows classified loans for the periods indicated:
| Loan Type (Dollars in thousands) | June 30, 2026 | % of Classified loans | December 31, 2025 | % of Classified loans | ||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||
| Commercial and industrial | $ | 15,325 | 13.9 | % | $ | 8,878 | 11.3 | % | ||||||||||||||||||
| Agricultural production | 255 | 0.2 | % | — | — | % | ||||||||||||||||||||
| Total commercial | 15,580 | 14.1 | % | 8,878 | 11.3 | % | ||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||
| Construction & other land loans | 15,765 | 14.3 | % | 82 | 0.1 | % | ||||||||||||||||||||
| Commercial real estate - owner occupied | 5,220 | 4.7 | % | 4,736 | 6.0 | % | ||||||||||||||||||||
| Commercial real estate - non-owner occupied | 40,923 | 37.1 | % | 29,163 | 37.0 | % | ||||||||||||||||||||
| Farmland | 19,476 | 17.7 | % | 22,124 | 28.1 | % | ||||||||||||||||||||
| Multi-family residential | 7,265 | 6.6 | % | 7,283 | 9.2 | % | ||||||||||||||||||||
| 1-4 family - close-ended | 2,562 | 2.3 | % | 2,530 | 3.2 | % | ||||||||||||||||||||
| 1-4 family - revolving | 36 | — | % | 37 | — | % | ||||||||||||||||||||
| Total real estate | 91,247 | 82.7 | % | 65,955 | 83.6 | % | ||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||
| Manufactured Housing | 2,971 | 2.7 | % | 3,394 | 4.3 | % | ||||||||||||||||||||
| Other installment loans | 462 | 0.4 | % | 569 | 0.7 | % | ||||||||||||||||||||
| Total consumer | 3,433 | 3.1 | % | 3,963 | 5.0 | % | ||||||||||||||||||||
| Total classified loans | $ | 110,260 | $ | 78,796 | ||||||||||||||||||||||
Non-Interest Income
The following table shows significant components of non-interest income for the periods indicated:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||
| Federal Home Loan Bank dividends | $ | 217 | $ | 237 | $ | (20) | (8.4) | % | $ | 773 | $ | 478 | $ | 295 | 61.7 | % | ||||||||||||||||||||||||||||||||||
| Service charges | 1,038 | 505 | 533 | 105.5 | % | 1,556 | 1,007 | 549 | 54.5 | % | ||||||||||||||||||||||||||||||||||||||||
| Interchange fees | 836 | 492 | 344 | 69.9 | % | 1,300 | 1,008 | 292 | 29.0 | % | ||||||||||||||||||||||||||||||||||||||||
| Appreciation in cash surrender value of bank owned life insurance | 522 | 372 | 150 | 40.3 | % | 899 | 738 | 161 | 21.8 | % | ||||||||||||||||||||||||||||||||||||||||
| Loan placement fees | 299 | 180 | 119 | 66.1 | % | 445 | 417 | 28 | 6.7 | % | ||||||||||||||||||||||||||||||||||||||||
| Net realized losses on sales and calls of investment securities | (5,899) | (15) | (5,884) | 39226.7 | % | (5,899) | (15) | (5,884) | 39226.7 | % | ||||||||||||||||||||||||||||||||||||||||
| Other income | 1,017 | 593 | 424 | 71.5 | % | 1,743 | 1,342 | 401 | 29.9 | % | ||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | $ | (1,970) | $ | 2,364 | $ | (4,334) | (183.3) | % | $ | 817 | $ | 4,975 | $ | (4,158) | (83.6) | % | ||||||||||||||||||||||||||||||||||
The decreases in non-interest income quarter-to-date and year-to-date were primarily due to net realized losses on sales and calls of investment securities as part of the Company’s strategic repositioning of the balance sheet. The investment sales proceeds were reinvested into higher yielding investment securities and will be accretive to income in future quarters. Partially offsetting these losses were increases in service charges, interchange fees, loan placement fees, bank-owned life insurance income, and other income, all of which benefited from the expanded customer and asset base resulting from the Merger with USB completed on April 1, 2026.
The Bank currently holds $17,250,000 in stock from the Federal Home Loan Bank (“FHLB”) of San Francisco in conjunction with our borrowing capacity and generally earns quarterly dividends. We received dividends totaling $773,000 for the three months ended June 30, 2026 compared to $478,000 for the three months ended June 30, 2025.
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Non-Interest Expenses
The following table shows significant components of non-interest expense for the periods indicated:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 16,318 | $ | 12,260 | $ | 4,058 | 33.1 | % | $ | 29,081 | $ | 25,219 | $ | 3,862 | 15.3 | % | ||||||||||||||||||||||||||||||||||
| Merger and acquisition expense | 7,746 | — | 7,746 | — | % | 8,036 | 278 | 7,758 | 2790.6 | % | ||||||||||||||||||||||||||||||||||||||||
| Occupancy and equipment | 3,803 | 2,794 | 1,009 | 36.1 | % | 6,658 | 5,621 | 1,037 | 18.4 | % | ||||||||||||||||||||||||||||||||||||||||
| Information technology | 2,658 | 1,791 | 867 | 48.4 | % | 4,371 | 3,693 | 678 | 18.4 | % | ||||||||||||||||||||||||||||||||||||||||
| Amortization of core deposit intangibles | 1,873 | 250 | 1,623 | 649.2 | % | 2,124 | 501 | 1,623 | 324.0 | % | ||||||||||||||||||||||||||||||||||||||||
| Data processing expense | 1,218 | 855 | 363 | 42.5 | % | 1,978 | 1,655 | 323 | 19.5 | % | ||||||||||||||||||||||||||||||||||||||||
| Professional services | 840 | 639 | 201 | 31.5 | % | 1,462 | 1,503 | (41) | (2.7) | % | ||||||||||||||||||||||||||||||||||||||||
| Regulatory assessments | 706 | 498 | 208 | 41.8 | % | 1,232 | 989 | 243 | 24.6 | % | ||||||||||||||||||||||||||||||||||||||||
| ATM/Debit card expenses | 677 | 397 | 280 | 70.5 | % | 1,023 | 790 | 233 | 29.5 | % | ||||||||||||||||||||||||||||||||||||||||
| Directors’ expenses | 261 | 236 | 25 | 10.6 | % | 496 | 452 | 44 | 9.7 | % | ||||||||||||||||||||||||||||||||||||||||
| Loan related expenses | 208 | 164 | 44 | 26.8 | % | 394 | 376 | 18 | 4.8 | % | ||||||||||||||||||||||||||||||||||||||||
| Advertising | 185 | 241 | (56) | (23.2) | % | 386 | 502 | (116) | (23.1) | % | ||||||||||||||||||||||||||||||||||||||||
| Personnel other | 25 | 97 | (72) | (74.2) | % | 63 | 198 | (135) | (68.2) | % | ||||||||||||||||||||||||||||||||||||||||
| Other expense | 2,625 | 2,074 | 551 | 26.6 | % | 4,826 | 3,989 | 837 | 21.0 | % | ||||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | $ | 39,143 | $ | 22,296 | $ | 16,847 | 75.6 | % | $ | 62,130 | $ | 45,766 | $ | 16,364 | 35.8 | % | ||||||||||||||||||||||||||||||||||
Salaries and employee benefits, occupancy and equipment, information technology, data processing, professional services,
acquisition and integration expenses, and regulatory assessments are the major categories of non-interest expenses.
Non-interest expenses increased $16,847,000 or 75.56% to $39,143,000 for the three months ended June 30, 2026, compared to $22,296,000 for the three months ended June 30, 2025. The net increase for the three months ended June 30, 2026 was primarily the result of increases in salaries and employee benefits of $4,058,000, information technology of $867,000, professional services of $201,000, data processing expenses of $363,000, and ATM/Debit card expenses of $280,000, partially offset by a decrease in personnel other of $72,000 and advertising expenses of $56,000. The increase in expenses for the quarter-to-date period was primarily driven by the Merger.
Non-interest expenses increased $16,364,000 or 35.76% to $62,130,000 for the six months ended June 30, 2026, compared to $45,766,000 for the six months ended June 30, 2025. The net increase for the six month period was primarily the result of increases in merger expenses of $7,758,000, salaries and employee benefits of $3,862,000, occupancy and equipment of $1,037,000, other expenses of $837,000, information technology of $678,000, and regulatory assessments of $243,000. The increase in expenses for the year-to-date period was primarily driven by the Merger.
Salaries and employee benefits increased $3,862,000 or 15.31% to $29,081,000 for the first six months of 2026 compared to $22,090,000 for the three months ended June 30, 2025. The Company added 100 full-time equivalent employees as a result of the Merger, including temporary employees to assist with systems integrations. The year-to-date average full time equivalent employees were 418 for the three months ended June 30, 2026, compared to 342 for the three months ended June 30, 2025.
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Provision for Income Taxes
Our effective income tax rate was 35.28% and 27.21% for the three month periods ended June 30, 2026 and 2025. The increase in the effective tax rate was primarily driven by non-deductible expenses incurred in connection with the Merger. Our effective income tax rate was 28.64% and 27.11% for the six month periods ended June 30, 2026 and 2025.
The Company reported an income tax provision of $1,469,000 and $2,927,000 for the three month periods ended June 30, 2026 and 2025, respectively. The Company reported an income tax provision of $5,694,000 and $5,998,000 for the six month periods ended June 30, 2026 and 2025, respectively.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense in the consolidated statements of income. If deemed necessary, the Company maintains a reserve for uncertain income taxes where the merits of the position taken or the amount of the position that would be ultimately sustained upon examination do not meet a more-likely-than-not criteria. As of June 30, 2026 and December 31, 2025, there was no reserve for uncertain tax positions.
On June 27, 2025, California Senate Bill 132 (“SB 132”) was passed and signed into law by Governor Newsom. Effective for taxable years beginning on or after January 1, 2025, SB 132 amends California Rev. & Tax. Code to require financial institutions to apportion income using the single sales factor formula for California. Prior to this change, financial institutions were required to use the three-factor apportionment formula contemplating a payroll factor, property factor, and sales factor. This change in tax law did not have a material impact on the company's tax expense as of June 30, 2026 and for the year ended 2025.
On July 4, 2025, the President of the United States signed and enacted the One Big Beautiful Bill Act (“OBBBA”) into law. Except for certain provisions, the OBBBA is effective for tax years beginning on or after January 1, 2025. The tax and spending legislation permanently extends key business tax breaks originally enacted under the 2017 Tax Cuts and Jobs Act. The law did not materially impact the Company’s tax provision as of June 30, 2026.
FINANCIAL CONDITION
Summary of Changes in Consolidated Balance Sheets
Total assets were $5,034,240,000 as of June 30, 2026, compared to $3,690,317,000 at December 31, 2025, an increase of 36.42% or $1,343,923,000. Total gross loans were $3,543,783,000 at June 30, 2026, compared to $2,540,857,000 at December 31, 2025, an increase of $1,002,926,000 or 39.47%. Total cash and cash equivalents increased 73.84% or $87,853,000 to $206,837,000 at June 30, 2026 compared to $118,984,000 at December 31, 2025. The investment portfolio increased 12.18% or $92,944,000 to $856,268,000 at June 30, 2026 compared to $763,324,000 at December 31, 2025. Total deposits increased 33.09% or $1,024,188,000 to $4,119,462,000 at June 30, 2026, compared to $3,095,274,000 at December 31, 2025. Shareholders’ equity increased 48.40% or $198,232,000 to $607,820,000 at June 30, 2026, compared to $409,588,000 at December 31, 2025. Accrued interest payable and other liabilities was $56,667,000 at June 30, 2026, compared to $42,929,000 at December 31, 2025, an increase of 32.00% or $13,738,000. The increase in shareholders’ equity was driven by the retention of earnings, issuance of common stock, and the completion of the Merger with USB, partially offset by dividends paid. The increases in the various asset categories were all driven by the Merger.
Investments
Our investment portfolio consists primarily of private label mortgage, U.S. Government sponsored entities and agencies collateralized by residential mortgage backed obligations, asset backed securities (PLMABS), corporate debt securities, and obligations of states and political subdivision securities and are classified as available for sale or held to maturity. As of June 30, 2026, investment securities with a fair value of $477,894,000, or 56% of our investment securities portfolio, were held as collateral for public funds, short and long-term borrowings, treasury, tax, and for other purposes.
The total investment portfolio increased $92,944,000 to $856,268,000 at June 30, 2026 compared to $763,324,000 at December 31, 2025. The fair value of the available-for-sale investment portfolio reflected a net unrealized loss of $35,185,000 at June 30, 2026, compared to net unrealized losses of $39,673,000 at December 31, 2025 and $54,325,000 at June 30, 2025.
See Note 3 of the Notes to Consolidated Financial Statements (unaudited) included in this report for carrying values and estimated fair values of our investment securities portfolio.
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Loans
Total gross loans increased $1,002,926,000 or 39.47% to $3,543,783,000 as of June 30, 2026, compared to $2,540,857,000 as of December 31, 2025.
The following table sets forth information concerning the composition of our loan portfolio at the dates indicated:
| Loan Type (Dollars in thousands) | June 30, 2026 | % of Total Loans | December 31, 2025 | % of Total Loans | ||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||
| Commercial and industrial | $ | 261,339 | 7.4 | % | $ | 156,744 | 6.2 | % | ||||||||||||||||||
| Agricultural production | 74,117 | 2.1 | % | 34,152 | 1.3 | % | ||||||||||||||||||||
| Total commercial | 335,456 | 9.5 | % | 190,896 | 7.5 | % | ||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||
| Construction & other land loans | 224,359 | 6.3 | % | 80,452 | 3.2 | % | ||||||||||||||||||||
| Commercial real estate - owner occupied | 524,989 | 14.8 | % | 368,604 | 14.5 | % | ||||||||||||||||||||
| Commercial real estate - non-owner occupied | 1,266,026 | 35.8 | % | 992,486 | 39.1 | % | ||||||||||||||||||||
| Farmland | 162,830 | 4.6 | % | 142,100 | 5.6 | % | ||||||||||||||||||||
| Multi-family residential | 230,387 | 6.5 | % | 199,123 | 7.8 | % | ||||||||||||||||||||
| 1-4 family - close-ended | 307,176 | 8.7 | % | 111,741 | 4.4 | % | ||||||||||||||||||||
| 1-4 family - revolving | 43,768 | 1.2 | % | 39,818 | 1.6 | % | ||||||||||||||||||||
| Total real estate | 2,759,535 | 77.9 | % | 1,934,324 | 76.2 | % | ||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||
| Manufactured housing | 323,384 | 9.1 | % | 322,761 | 12.7 | % | ||||||||||||||||||||
| Other installment loans | 124,898 | 3.5 | % | 92,589 | 3.6 | % | ||||||||||||||||||||
| Total consumer | 448,282 | 12.6 | % | 415,350 | 16.3 | % | ||||||||||||||||||||
| Net deferred origination costs | 510 | 0.1 | % | 287 | — | % | ||||||||||||||||||||
| Loan, net of deferred origination fees | 3,543,783 | 100.1 | % | 2,540,857 | 100.0 | % | ||||||||||||||||||||
| Allowance for credit losses | (49,422) | (30,071) | ||||||||||||||||||||||||
| Total loans | $ | 3,494,361 | $ | 2,510,786 | ||||||||||||||||||||||
As of June 30, 2026, in management’s judgment, a concentration of loans existed in loans commercial real estate representing approximately 56.9% of total loans. We believe that our commercial real estate loan underwriting policies and practices result in prudent extensions of credit, but recognize that our lending activities result in relatively high reported commercial real estate lending levels. Although we believe the loans within this real estate concentration have no more than the normal risk of collectability, a substantial decline in the performance of the economy in general or a decline in real estate values in our primary market areas, in particular, could have an adverse impact on collectability, increase the level of real estate-related nonperforming loans, or have other adverse effects which alone or in the aggregate could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In order to mitigate these risks, the Board reviews and approves concentration limits proposed by management. Exceptions to limitations of concentrations are reported to the Board of Directors at least quarterly. Additionally, the Company maintains policy guidelines for maximum loan to value ratios to mitigate the risk of general declines in real estate values. The Company performs regular risk assessments, portfolio monitoring of loans, and stress tests as part of its risk management policies to identify any negative trends within the portfolio. Within the commercial real estate portfolio, there is diversification of collateral type and geography throughout our footprint. The Company did not engage in any sub-prime mortgage lending activities during the three and six months ended June 30, 2026 and 2025.
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The following table presents the commercial real estate owner and non-owner occupied loan balances, associated percentage of commercial real estate concentrations of those sub-categories by collateral type as of the dates indicated:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| (Dollars in thousands) | Loan Balance | % of Category | Loan Balance | % of Category | ||||||||||||||||||||||
| Commercial real estate - owner occupied | ||||||||||||||||||||||||||
| Office | $ | 75,387 | 14.36 | % | $ | 56,565 | 15.35 | % | ||||||||||||||||||
| Industrial & warehouse | 129,493 | 24.66 | % | 104,427 | 28.33 | % | ||||||||||||||||||||
| Retail | 67,870 | 12.93 | % | 46,300 | 12.56 | % | ||||||||||||||||||||
| Gas Stations | 128,659 | 24.51 | % | 65,985 | 17.90 | % | ||||||||||||||||||||
| Restaurants | 28,796 | 5.49 | % | 22,054 | 5.98 | % | ||||||||||||||||||||
| Other | 94,784 | 18.05 | % | 73,273 | 19.88 | % | ||||||||||||||||||||
| Total | $ | 524,989 | 100.00 | % | 368,604 | 100.00 | % | |||||||||||||||||||
| Commercial real estate - non-owner occupied | ||||||||||||||||||||||||||
| Office | $ | 378,962 | 29.93 | % | $ | 317,917 | 32.03 | % | ||||||||||||||||||
| Industrial & warehouse | 170,036 | 13.43 | % | 161,466 | 16.27 | % | ||||||||||||||||||||
| Retail | 266,823 | 21.08 | % | 229,954 | 23.17 | % | ||||||||||||||||||||
| Hospitality | 289,930 | 22.90 | % | 186,599 | 18.80 | % | ||||||||||||||||||||
| Other | 160,275 | 12.66 | % | 96,550 | 9.73 | % | ||||||||||||||||||||
| Total | $ | 1,266,026 | 100.00 | % | $ | 992,486 | 100.00 | % | ||||||||||||||||||
The following table presents repricing data for our gross loans portfolio, broken out by loan type and repricing interval. This table provides insight into the timing of interest rate resets across different loan categories, offering a more detailed view of the portfolio’s sensitivity to changes in market rates:
| Loan Type (Dollars in thousands) | 3 months or less | 3 - 12 months | 1 - 3 Years | 3 - 5 Years | 5 - 15 Years | Over 15 years | Total | |||||||||||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 158,173 | $ | 17,755 | $ | 24,985 | $ | 41,394 | $ | 17,516 | $ | 1,516 | $ | 261,339 | ||||||||||||||||||||||||||||||
| Agricultural production | 69,887 | 2 | 773 | 1,244 | 2,211 | — | 74,117 | |||||||||||||||||||||||||||||||||||||
| Total commercial | 228,060 | 17,757 | 25,758 | 42,638 | — | 19,727 | — | 1,516 | 335,456 | |||||||||||||||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||||||||||||||||||||
| Construction & other land loans | $ | 184,891 | $ | 9,267 | $ | 9,362 | $ | 839 | $ | 20,000 | $ | — | 224,359 | |||||||||||||||||||||||||||||||
| Commercial real estate - owner occupied | 68,592 | 33,165 | 124,999 | 230,449 | 67,784 | — | 524,989 | |||||||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | 130,980 | 147,430 | 325,422 | 472,937 | 189,257 | — | 1,266,026 | |||||||||||||||||||||||||||||||||||||
| Farmland | 29,711 | 10,026 | 38,672 | 61,087 | 22,699 | 635 | 162,830 | |||||||||||||||||||||||||||||||||||||
| Multi-family residential | 26,804 | 12,749 | 75,718 | 60,744 | 54,372 | — | 230,387 | |||||||||||||||||||||||||||||||||||||
| 1-4 family - close-ended | 17,737 | 15,995 | 18,979 | 24,501 | 6,127 | 223,837 | 307,176 | |||||||||||||||||||||||||||||||||||||
| 1-4 family - revolving | 41,317 | — | — | 121 | 2,330 | — | 43,768 | |||||||||||||||||||||||||||||||||||||
| Total real estate | 500,032 | 228,632 | 593,152 | 850,678 | — | 362,569 | — | 224,472 | 2,759,535 | |||||||||||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||||||||||||||
| Manufactured Housing | $ | 7,003 | $ | 53,794 | $ | 25,588 | $ | 23,743 | $ | 67,583 | $ | 145,673 | 323,384 | |||||||||||||||||||||||||||||||
| Other installment loans | 26,047 | 416 | 3,269 | 4,090 | 90,838 | 238 | 124,898 | |||||||||||||||||||||||||||||||||||||
| Total consumer | 33,050 | 54,210 | 28,857 | 27,833 | — | 158,421 | — | 145,911 | 448,282 | |||||||||||||||||||||||||||||||||||
| Gross loans | $ | 761,142 | $ | 300,599 | $ | 647,767 | $ | 921,149 | $ | 540,717 | $ | 371,899 | $ | 3,543,273 | ||||||||||||||||||||||||||||||
| % of total | 21.48 | % | 8.48 | % | 18.28 | % | 26.00 | % | 15.26 | % | 10.50 | % | 100.00 | % | ||||||||||||||||||||||||||||||
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Nonperforming Assets
Nonperforming assets consist of nonperforming loans, other real estate owned (OREO), and repossessed assets. Nonperforming loans are those loans which have (i) been placed on nonaccrual status; (ii) been classified as doubtful under our asset classification system; or (iii) become contractually past due 90 days or more with respect to principal or interest and have not been restructured or otherwise placed on nonaccrual status. A loan is classified as nonaccrual when (i) it is maintained on a cash basis because of deterioration in the financial condition of the borrower; (ii) payment in full of principal or interest under the original contractual terms is not expected; or (iii) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection.
At June 30, 2026 there were $27,942,000 nonperforming assets, compared to $6,955,000 at December 31, 2025. The increase in nonperforming assets during the year was primarily due to two substandard loans that reached 90 days past due during the year-to-date period and the addition of other real estate owned through the Merger. The total nonperforming assets balance consists of $19,757,000 in total non-accrual loans and $8.2 million in other real estate obtained through the USB Merger.
Allowance for Credit Losses on Loans
For additional information regarding provisions to credit losses on loans, see “Provision for credit losses on loans” above. Based on the current conditions of the loan portfolio, management believes that the $49,422,000 is adequate to absorb current expected credit losses in the Company’s loan portfolio. The following table summarizes the allocation for the allowance for credit losses by loan type as of the dates indicated (in thousands):
| Loan Type | June 30, 2026 | December 31, 2025 | ||||||||||||
| Commercial: | ||||||||||||||
| Commercial and industrial | $ | 4,448 | $ | 2,212 | ||||||||||
| Agricultural production | 1,697 | 535 | ||||||||||||
| Total commercial | 6,145 | 2,747 | ||||||||||||
| Real estate: | ||||||||||||||
| Construction & other land loans | 3,169 | 1,751 | ||||||||||||
| Commercial real estate - owner occupied | 5,732 | 3,492 | ||||||||||||
| Commercial real estate - non-owner occupied | 14,472 | 11,102 | ||||||||||||
| Farmland | 1,737 | 1,423 | ||||||||||||
| Multi-family residential | 3,109 | 2,175 | ||||||||||||
| 1-4 family - close-ended | 2,589 | 1,481 | ||||||||||||
| 1-4 family - revolving | 903 | 892 | ||||||||||||
| Total real estate | 31,711 | 22,316 | ||||||||||||
| Consumer: | ||||||||||||||
| Manufactured housing | 3,237 | 3,692 | ||||||||||||
| Other installment | 8,329 | 1,316 | ||||||||||||
| Total consumer | 11,566 | 5,008 | ||||||||||||
| Total allowance for credit losses | $ | 49,422 | $ | 30,071 | ||||||||||
As of June 30, 2026, the balance in the allowance for credit losses (ACL) on loans was $49,422,000, or 1.39% of total gross loans, compared to $30,071,000, or 1.18% of total gross loans, as of December 31, 2025. During the three month period ended June 30, 2026, the increase in allowance for credit losses was primarily driven by the acquisition of USB, which contributed $19.4 million in Day 1 allowance balances across all portfolio segments. As a result of the Company's early adoption of ASU 2025-08, a Day 1 allowance for credit losses was established for acquired loans at the Merger date. Excluding the impact of the Day 1 allowance, the allowance grew modestly, reflecting a provision for credit losses of $5.3 million, partially offset by net charge-offs of $5.5 million during the quarter. The provision for loan losses during the quarter ended June 30, 2026 was primarily due to an update of the Company’s peer group based on its larger asset size following the completion of the Merger and also from organic loan growth during the quarter.
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The balance of unfunded commitments to extend credit on construction and other loans and letters of credit was $798,806,000 as of June 30, 2026, compared to $491,413,000 as of December 31, 2025. At June 30, 2026 and December 31, 2025, the balance of the reserve for unfunded commitments was $1,757,000 and $1,325,000, respectively. The reserve for unfunded commitments is calculated by management using appropriate, systematic, and consistently applied processes. While related to credit losses, this allocation is not a part of the ACL on loans and is considered separately as a liability for accounting and regulatory reporting purposes.
The following table illustrates and sets forth additional analysis which portrays the trends that are occurring in the loan portfolio.
| June 30, 2026 | December 31, 2025 | June 30, 2025 | ||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Balance | % to Total Loans | Balance | % to Total Loans | Balance | % to Total Loans | ||||||||||||||||||||||||||||||||
| Past due loans 30 days or more | $ | 34,320 | 0.97 | % | $ | 23,208 | 1.80 | % | $ | 7,014 | 0.22 | % | ||||||||||||||||||||||||||
| Nonaccrual loans | 19,757 | 0.56 | % | 6,955 | 0.54 | % | 6,769 | 0.28 | % | |||||||||||||||||||||||||||||
The balance of past due loans 30 days or more increased by $11,112,000 from $23,208,000 at December 31, 2025 to $34,320,000 as of June 30, 2026.
Deposits
The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to applicable legal limits. All of a depositor’s accounts at an insured depository institution, including all non-interest bearing transactions accounts, are insured by the FDIC up to standard maximum deposit insurance amount of $250,000 for each deposit insurance ownership category.
Total deposits increased $1,024,188,000 or 33.09% to $4,119,462,000 as of June 30, 2026, compared to $3,095,274,000 as of December 31, 2025. Interest-bearing deposits increased $631,945,000 or 31.03% to $2,668,454,000 as of June 30, 2026, compared to $2,036,509,000 as of December 31, 2025. Non-interest bearing deposits increased $392,243,000 or 37.05% to $1,451,008,000 as of June 30, 2026, compared to $1,058,765,000 as of December 31, 2025.
The composition of the deposits and average interest rates at June 30, 2026 and December 31, 2025 is summarized in the table below.
| (Dollars in thousands) | June 30, 2026 | % of Total Deposits | Average Interest Rate | December 31, 2025 | % of Total Deposits | Average Interest Rate | ||||||||||||||||||||||||||||||||
| Savings and NOW accounts | $ | 976,176 | 23.7 | % | 0.68 | % | $ | 674,704 | 21.8 | % | 0.73 | % | ||||||||||||||||||||||||||
| MMA accounts | 1,151,159 | 27.9 | % | 2.37 | % | 858,354 | 27.7 | % | 2.31 | % | ||||||||||||||||||||||||||||
| Time deposits | 541,119 | 13.1 | % | 3.47 | % | 503,451 | 16.3 | % | 3.79 | % | ||||||||||||||||||||||||||||
| Total interest-bearing | 2,668,454 | 64.8 | % | 2.09 | % | 2,036,509 | 65.8 | % | 2.17 | % | ||||||||||||||||||||||||||||
| Non-interest bearing | 1,451,008 | 35.2 | % | 1,058,765 | 34.2 | % | ||||||||||||||||||||||||||||||||
| Total deposits | $ | 4,119,462 | 100.0 | % | $ | 3,095,274 | 100.0 | % | ||||||||||||||||||||||||||||||
As of June 30, 2026 there was $1,526,017,000 in uninsured deposits or 37.04% of total deposits, compared to $1,185,118,000 and 38.29% as of December 31, 2025.
Other Borrowings
As of June 30, 2026, the Company had $135,000,000 Federal Home Loan Bank (“FHLB”) of San Francisco overnight advances outstanding. As of June 30, 2026, the Company had four short-term advances outstanding totaling $40,000,000 with a weighted average interest rate of 3.93%. We maintain a line of credit with the FHLB collateralized by government securities and loans. Refer to the Liquidity section below for further discussion of FHLB advances.
Capital
Capital serves as a source of funds and helps protect depositors and shareholders against potential losses. Historically, the primary source of capital for the Company has been through retained earnings.
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The Company has historically maintained substantial levels of capital. The assessment of capital adequacy is dependent on several factors including asset quality, earnings trends, liquidity and economic conditions. Maintenance of adequate capital levels is integral to providing stability to the Company. The Company needs to maintain substantial levels of regulatory capital to give it maximum flexibility in the changing regulatory environment and to respond to changes in the market and economic conditions.
Our shareholders’ equity was $607,820,000 at June 30, 2026, compared to $409,588,000 at December 31, 2025. The increase from December 31, 2025 in shareholders’ equity is the result of an increase in retained earnings from net income of $14,184,000, common stock issued due to the Merger of $184,586,000, stock issued under the employee purchase plan of $177,000, the effect of share-based compensation expense of $583,000, stock options exercised of $358,000 and a decrease in accumulated other comprehensive loss of $4,126,000, partially offset by common stock cash dividends of $5,555,000.
During the first six months of 2026, the Company declared and paid $5,555,000 in cash dividends ($0.24 per common share) to holders of common stock. The Company declared and paid $4,567,000 in cash dividends ($0.24 per common share) to holders of common stock during the six months ended June 30, 2025.
The following table presents the Company’s regulatory capital ratios as of June 30, 2026 and December 31, 2025.
| (Dollars in thousands) | Actual Ratio | Minimum regulatory requirement | ||||||||||||||||||||||||
| June 30, 2026 | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||
| Tier 1 Leverage Ratio | $ | 467,432 | 9.79 | % | $ | 191,011 | 4.00 | % | ||||||||||||||||||
| Common Equity Tier 1 Ratio (CET 1) | $ | 462,432 | 11.41 | % | $ | 182,481 | 4.50 | % | ||||||||||||||||||
| Tier 1 Risk-Based Capital Ratio | $ | 467,432 | 11.53 | % | $ | 243,308 | 6.00 | % | ||||||||||||||||||
| Total Risk-Based Capital Ratio | $ | 552,688 | 13.63 | % | $ | 324,411 | 8.00 | % | ||||||||||||||||||
| December 31, 2025 | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||
| Tier 1 Leverage Ratio | $ | 349,430 | 9.80 | % | $ | 142,632 | 4.00 | % | ||||||||||||||||||
| Common Equity Tier 1 Ratio (CET 1) | $ | 344,430 | 11.56 | % | $ | 134,072 | 4.50 | % | ||||||||||||||||||
| Tier 1 Risk-Based Capital Ratio | $ | 349,430 | 11.73 | % | $ | 178,762 | 6.00 | % | ||||||||||||||||||
| Total Risk-Based Capital Ratio | $ | 416,145 | 13.97 | % | $ | 238,350 | 8.00 | % | ||||||||||||||||||
The following table presents the Bank’s regulatory capital ratios as of June 30, 2026 and December 31, 2025.
| (Dollars in thousands) | Actual Ratio | Minimum regulatory requirement (1) | Minimum requirement for “Well-Capitalized” Institution | |||||||||||||||||||||||||||||||||||
| June 30, 2026 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
| Tier 1 Leverage Ratio | $ | 522,960 | 10.97 | % | $ | 190,724 | 4.00 | % | $ | 238,404 | 5.00 | % | ||||||||||||||||||||||||||
| Common Equity Tier 1 Ratio (CET 1) | $ | 522,960 | 12.93 | % | $ | 182,039 | 7.00 | % | $ | 262,946 | 6.50 | % | ||||||||||||||||||||||||||
| Tier 1 Risk-Based Capital Ratio | $ | 522,960 | 12.93 | % | $ | 242,719 | 8.50 | % | $ | 323,625 | 8.00 | % | ||||||||||||||||||||||||||
| Total Risk-Based Capital Ratio | $ | 573,526 | 14.18 | % | $ | 323,625 | 10.50 | % | $ | 404,532 | 10.00 | % | ||||||||||||||||||||||||||
| December 31, 2025 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
| Tier 1 Leverage Ratio | $ | 407,337 | 11.44 | % | $ | 142,447 | 4.00 | % | $ | 178,059 | 5.00 | % | ||||||||||||||||||||||||||
| Common Equity Tier 1 Ratio (CET 1) | $ | 407,337 | 13.70 | % | $ | 133,839 | 7.00 | % | $ | 193,324 | 6.50 | % | ||||||||||||||||||||||||||
| Tier 1 Risk-Based Capital Ratio | $ | 407,337 | 13.70 | % | $ | 178,453 | 8.50 | % | $ | 237,937 | 8.00 | % | ||||||||||||||||||||||||||
| Total Risk-Based Capital Ratio | $ | 439,173 | 14.77 | % | $ | 237,937 | 10.50 | % | $ | 297,421 | 10.00 | % | ||||||||||||||||||||||||||
| (1) The minimum regulatory requirement threshold includes the capital conservation buffer of 2.50%. | ||||||||||||||||||||||||||||||||||||||
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Liquidity
Liquidity management involves our ability to meet cash flow requirements arising from fluctuations in deposit levels and demands of daily operations, which include funding of securities purchases, providing for customers’ credit needs and ongoing repayment of borrowings. Our liquidity is actively managed on a daily basis and reviewed periodically by our management and the Bank’s Board of Director’s Asset/Liability Committees. This process is intended to ensure the maintenance of sufficient funds to meet our needs, including adequate cash flow for off-balance sheet commitments.
Our primary sources of liquidity are derived from financing activities which include the acceptance of customer and, to a lesser extent, broker deposits, Federal funds facilities with correspondent banks, and advances from the Federal Home Loan Bank of San Francisco. These funding sources are augmented by payments of principal and interest on loans, the routine maturities and pay downs of securities from the securities portfolio, the stability of our core deposits and the ability to sell investment securities. As of June 30, 2026, the Company had unpledged securities totaling $369,697,000 available as a secondary source of liquidity and total cash and cash equivalents of $206,837,000. Cash and cash equivalents at June 30, 2026 increased 73.84% compared to $118,984,000 at December 31, 2025. Primary uses of funds include withdrawal of and interest payments on deposits, originations and purchases of loans, purchases of investment securities, and payment of operating expenses.
As a means of augmenting our liquidity, we have established federal funds lines with our correspondent banks. At June 30, 2026, our available borrowing capacity includes approximately $150,000,000 in unsecured credit lines with our correspondent banks, $703,907,000 in unused FHLB borrowing capacity, and a $3,101,000 secured credit line at the Federal Reserve Bank. We believe our liquidity sources to be stable and adequate. At June 30, 2026, we were not aware of any information that was reasonably likely to have a material effect on our liquidity position.
The following table reflects the Company’s credit lines, balances outstanding, and pledged collateral at June 30, 2026 and December 31, 2025:
| Credit Lines (In thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Unsecured Credit Lines | ||||||||||||||
| Total credit limit | $ | 150,000 | $ | 110,000 | ||||||||||
| Balance outstanding | $ | — | $ | — | ||||||||||
| Federal Home Loan Bank | ||||||||||||||
| Total credit limit | $ | 878,907 | $ | 809,391 | ||||||||||
| Balance outstanding | $ | 175,000 | $ | 73,000 | ||||||||||
| Collateral pledged | $ | 1,929,752 | $ | 1,446,828 | ||||||||||
| Fair value of collateral | $ | 1,325,541 | $ | 1,230,691 | ||||||||||
| Federal Reserve Bank | ||||||||||||||
| Credit limit | $ | 3,101 | $ | 3,411 | ||||||||||
| Balance outstanding | $ | — | $ | — | ||||||||||
| Collateral pledged | $ | 3,600 | $ | 3,910 | ||||||||||
| Fair value of collateral | $ | 3,204 | $ | 3,536 | ||||||||||
The liquidity of the parent company, Community West Bancshares, is primarily dependent on the payment of cash dividends by its subsidiary, Community West Bank, subject to limitations imposed by California statutes and the regulations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is defined as the risk of loss arising from an adverse change in the market value (or prices) of financial instruments. A significant component of market risk is interest rate risk, which is inherent in our lending, investment, borrowing and deposit gathering activities. The Bank manages interest rate sensitivity to minimize the exposure of our net interest margin, earnings, and capital to changes in interest rates. Interest rate changes can create fluctuations in the net interest margin due to an imbalance in the timing of repricing or maturity of assets or liabilities. Interest rate changes can also affect the market value of our financial instruments, such as available-for-sale securities and the related unrealized gains or losses, which affects our equity value.
To mitigate interest rate risk, the structure of our assets and liabilities is managed with the objective of correlating the effects of interest rate changes on loans and investments with those of deposits and borrowings. The asset and liability management
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policy sets limits on the acceptable amount of change to net interest income and economic value of equity in different interest rate environments.
ALCO and the Bank’s Board of Directors review our exposure to interest rate risk at least quarterly. We use simulation models to measure interest rate risk and to evaluate strategies to improve profitability in the context of policy guidelines. A simplified statement of condition is prepared on a quarterly basis as a starting point, using instrument level data of our actual loans, investments, borrowings and deposits as inputs. If potential changes to net equity value and net interest income resulting from hypothetical interest rate changes are not within the limits established by the Bank’s Board of Directors, management may adjust the asset and liability mix to bring the risk position within approved limits or take other actions. Governing policies are subject to review by regulators and are updated to incorporate their observations and to adapt to changes in idiosyncratic and systemic risks. At June 30, 2026, interest rate risk was within policy guidelines established by ALCO and the Bank’s Board of Directors. One set of interest rates modeled and evaluated against flat interest rates and a static balance sheet is a series of immediate parallel shifts in the yield curve. Our most recent analysis of our interest rate sensitivity is provided in the following table as an example rather than an expectation of likely interest rate movements.
| Immediate and Parallel Shift in Interest Rates (in basis points) | Estimated Change in Net Interest Income in Year 1, as percent of Net Interest Income | Estimated Change in Net Interest Income in Year 2, as percent of Net Interest Income | ||||||
| up 400 | 6.38% | 8.47% | ||||||
| up 300 | 5.56% | 7.31% | ||||||
| up 200 | 4.70% | 6.05% | ||||||
| up 100 | 3.53% | 4.44% | ||||||
| down 100 | (1.70)% | (2.65)% | ||||||
| down 200 | (2.59)% | (4.66)% | ||||||
| down 300 | (2.60)% | (5.81)% | ||||||
Interest rate sensitivity is a function of the repricing characteristics of our assets and liabilities. The Bank runs a combination of scenarios and sensitivities in its attempt to capture the range of interest rate risk including the simulations mentioned above. As with any simulation model or other method of measuring interest rate risk, limitations are inherent in the process and dependent on assumptions. For example, lower deposit growth than modeled may cause the Bank to increase its borrowing position, thereby increasing its liability sensitivity. Additionally, assets and liabilities may react differently to changes in market interest rates in terms of both timing and responsiveness to market rate movements. Important deposit modeling assumptions include the speed of deposit run-off and the amount by which interest-bearing deposit rates increase or decrease when market interest rates change, otherwise known as the deposit beta. The above tables reflect a range of deposit betas to rates paid on non-maturity interest-bearing deposits that differ in rising and falling rate scenarios, depending on product type and magnitude of the rate shock. The actual rates and timing of prepayments on loans and investment securities could vary significantly from the assumptions applied in the various scenarios. Lastly, uneven changes in different tenors of U.S. Treasury rates that result in changes to the shape of the yield curve could produce different results from those presented in the table. Accordingly, the results presented should not be relied upon as indicative of actual results in the event of changing market interest rates.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures with respect to the information generated for use in this Quarterly Report. The evaluation was based in part upon reports provided by a number of executives. Based upon, and as of the date of the evaluation of the disclosure controls and procedures, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed by the Company in the reports that it files or submits is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
There was no change in the Company’s internal controls over financial reporting during the quarter ended June 30, 2026 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
In designing and evaluating disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurances of achieving the
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desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 1A. RISK FACTORS
There have been no material changes from risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. MINE SAFETY DISCLOSURES
None to report.
ITEM 5. OTHER INFORMATION
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ITEM 6 EXHIBITS
| 3.1 | Amended and Restated Articles of Incorporation of Central Valley Community Bancorp attached as Exhibit 3.1 to the Annual Report on From 10-K for the year ended December 31, 2023, filed on March 15, 2024, and incorporated herein by reference. | |||||||
| 3.2 | Amended and Restated bylaws of the Company as amended attached as Exhibit 3.2 to the Annual Report on From 10-K for the year ended December 31, 2023, filed on March 15, 2024, and incorporated herein by reference. | |||||||
| 4.1 | Indenture, dated as of August 17, 2006 between Service 1st Bancorp, as Issuer, and Wells Fargo Bank, National Association, as trustee, attached as Exhibit 4.2 to the Quarterly Report on Form 10-Q for the quarter ended August June 30, 2007 and incorporated herein by reference. | |||||||
| 4.2 | Declaration of Trust for Service 1st Capital Trust I, dated as of August 17, 2006, between Wells Fargo Bank, National Association as trustee, and Central Valley Community Bancorp as successor through merger to Service 1st Bancorp, attached as Exhibit 4.3 to the Quarterly Report on Form 10-Q for the quarter ended August June 30, 2007 and incorporated herein by reference. | |||||||
| 4.3 | Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934, attached as Exhibit 4.3 to the Form 10-K for the year ended December 31, 2019, filed on March 6, 2020 and incorporated herein by reference. | |||||||
| 31.1 | Certification of Principal Executive Officer Pursuant to Rule 13a-14(d) / 15d-14(a) of the Securities Exchange Act of 1934. | |||||||
| 31.2 | Certification of Principal Financial Officer Pursuant to Rule 13a-14(d) / 15d-14(a) of the Securities Exchange Act of 1934. | |||||||
| 32.1 | Certification of Principal Executive Officer Pursuant to Rule 13a-14(b) / 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350. | |||||||
| 32.2 | Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) / 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350. | |||||||
| 101.INS | XBRL Instance Document | |||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | XBRL Taxonomy Extension Calculation document | |||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | |||||||
| 101.LAB | XBRL Taxonomy Extension labels Linkbase Document | |||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Link Document | |||||||
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Community West Bancshares | |||||
| Date: August 10, 2026 | /s/ James J. Kim | ||||
| James J. Kim | |||||
| Chief Executive Officer | |||||
| Date: August 10, 2026 | /s/ Shannon R. Livingston | ||||
| Shannon R. Livingston | |||||
| Executive Vice President and Chief Financial Officer | |||||
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