Community West Bancshares

11/06/2026 | Press release | Distributed by Public on 11/06/2026 05:04

Quarterly Report for Quarter Ending SEPTEMBER 30, 2026 (Form 10-Q)

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 34 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 Combination for further discussion of this transaction.
Dividend Declared
On October 21, 2026, the Board of Directors declared a $0.12 per share cash dividend payable on November 20, 2026 to shareholders of record as of November 6, 2026.
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.
Financial Highlights
The significant highlights for the Company as of or for the period ended September 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 third quarter increased to $8.07 million, or $0.30 per diluted common share, compared to net income of $2.70 million and $0.10 per diluted common share, respectively, in the second quarter of 2026.
•The Company recorded a provision for credit losses of $578,000 during the quarter ended September 30, 2026, as compared to $5,635,000 during the trailing quarter. The current quarter provision is attributed to a provision for credit losses on loans totaling $588,000, a provision for unfunded commitments of $89,000, partially offset by a credit to the reserve for held-to-maturity securities of $99,000.
•Gross loans increased by $19.1 million or 0.54% for the quarter ended September 30, 2026 compared to the quarter ended June 30, 2026 and increased $1.0 billion or 40.22% year-to-date. The fair value of loans acquired from USB was $877.8 million as of April 1, 2026.
•Total deposits increased by $101.0 million or 2.45% for the quarter ended September 30, 2026 compared to the quarter ended June 30, 2026 and $1.1 billion or 36.35% year-to-date. Total deposits acquired as a result of the Merger were $1.1 billion as of April 1, 2026. Brokered deposits decreased by $107.5 million or 24.53% for the quarter ended September 30, 2026 compared to the quarter ended June 30, 2026 and decreased $112.8 million or 25.45% year-to-date. The decrease in brokered deposits was a result of the Company's strengthened liquidity position from strong core deposit growth, which reduced the need for brokered deposit funding during the period. Excluding the quarter-to-date decrease of $107.5 million in brokered deposits, total deposits increased by $208.5 million or 5.66% relative to the quarter ended June 30, 2026.
•Total cost of deposits decreased to 1.27% for the quarter ended September 30, 2026 compared to 1.31% for the quarter ended June 30, 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 34.82% and 34.14% for the quarters ended September 30, 2026 and June 30, 2026, respectively.
•Net interest margin (calculated on a fully tax equivalent basis) increased to 4.65% for the quarter ended September 30, 2026, from 4.56% for the quarter ended June 30, 2026.
•There were $46.5 million of non-performing assets as of September 30, 2026. Net loan charge offs were $1,377,000 for the quarter ended September 30, 2026 and loans delinquent 30 days or more were $60.4 million as of September 30, 2026.
•Capital positions remain strong at September 30, 2026 with a 9.69% Tier 1 Leverage Ratio; a 11.14% Common Equity Tier 1 Ratio; a 11.26% Tier 1 Risk-Based Capital Ratio; and a 13.28% Total Risk-Based Capital Ratio.
•The Company declared a $0.12 per common share cash dividend, payable on November 20, 2026 to shareholders of record as of November 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.
RESULTS OF OPERATIONS
Three months ended Nine months ended
September 30,
June 30,
September 30,
September 30,
(In thousands, except share and per-share amounts)
2026
2026
2025
2026
2025
Net interest income before provision for credit losses $ 53,344 $ 50,912 $ 34,944 $ 140,260 $ 100,431
Provision for credit losses 578 5,635 667 6,303 3,239
Net interest income after provision for credit losses 52,766 45,277 34,277 133,957 97,192
Total non-interest income 4,680 (1,970) 2,966 5,497 7,941
Total non-interest expenses 46,168 39,143 22,167 108,298 67,934
Income before provision for income taxes 11,278 4,164 15,076 31,156 37,199
Provision for income taxes 3,212 1,469 4,203 8,906 10,201
Net income $ 8,066 $ 2,695 $ 10,873 $ 22,250 $ 26,998
During the three months ended September 30, 2026, the Company reported net income of $8,066,000. Basic and diluted earnings per share for the three months ended September 30, 2026 were $0.30 compared to $0.57 for the three months ended September 30, 2025. During the three months ended September 30, 2026, the Company recorded a $578,000 provision for credit losses compared to a $667,000 provision for credit losses during the three months ended September 30, 2025.
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.
Reconciliation of GAAP and Non-GAAP Financial Measures
For the Three Months Ended For the Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
(In thousands, except share and per-share amounts)
2026
2026 2025 2026 2025
NET INCOME ADJUSTED FOR NON-CORE ITEMS
Net income (GAAP) $ 8,066 $ 2,695 $ 10,873 $ 22,250 $ 26,998
Merger and conversion related costs:
Personnel and severance 1,825 4,824 - 6,650 -
Professional services 142 2,361 - 2,871 278
Data processing and technology 3,185 502 - 3,687 -
Other 2,014 60 - 1,994 -
Total merger and conversion related costs 7,166 7,747 - 15,202 278
Loss on sales/calls of investment securities 19 5,899 26 5,918 41
Legal settlement 6,615 - - 6,615 -
Income tax impact of non-core items (1) (4,079) (4,034) (8) (8,198) (94)
Comparable net income (non-GAAP) $ 17,787 $ 12,307 $ 10,891 $ 41,787 $ 27,223
DILUTED EARNINGS PER SHARE
Weighted average diluted shares 27,144,648 27,108,920 19,093,544 24,493,822 19,051,291
Diluted earnings per share (GAAP) $ 0.30 $ 0.10 $ 0.57 $ 0.91 $ 1.42
Comparable diluted earnings per share (non-GAAP) $ 0.66 $ 0.45 $ 0.57 $ 1.71 $ 1.43
RETURN ON AVERAGE ASSETS (Annualized)
Average assets $ 5,051,226 $ 4,927,433 $ 3,595,359 $ 4,563,179 $ 3,559,252
Return on average assets (GAAP) 0.65 % 0.22 % 1.21 % 0.65 % 1.01 %
Impact of non-core items 0.76 % 0.78 % - % 0.57 % 0.01 %
Comparable return on average assets (non-GAAP) 1.41 % 1.00 % 1.21 % 1.22 % 1.02 %
RETURN ON AVERAGE EQUITY (Annualized)
Average stockholders' equity $ 612,710 $ 607,758 $ 386,500 $ 546,927 $ 378,037
Return on average equity (GAAP) 5.27 % 1.77 % 11.25 % 5.42 % 9.52 %
Impact of non-core items 6.34 % 6.33 % 0.02 % 4.76 % 0.08 %
Comparable return on average equity (non-GAAP) 11.61 % 8.10 % 11.27 % 10.18 % 9.60 %
EFFICIENCY RATIO
Non-interest expense (GAAP) $ 46,168 $ 39,143 $ 22,167 $ 108,298 $ 67,934
Non-core expenses (13,781) (7,747) - (21,817) (278)
Comparable non-interest expense (non-GAAP) 32,387 31,396 22,167 86,481 67,656
Net interest income (GAAP) 53,344 50,912 34,944 140,260 100,431
Non-interest income (GAAP) 4,680 (1,970) 2,966 5,497 7,941
Loss on sales/calls of investment securities 19 5,899 26 5,918 41
Comparable non-interest income (non-GAAP) $ 4,699 $ 3,929 $ 2,992 $ 11,415 $ 7,982
Efficiency ratio (GAAP) 79.57 % 79.98 % 58.47 % 74.30 % 62.69 %
Comparable efficiency ratio (non-GAAP) 55.80 % 57.25 % 58.43 % 57.02 % 62.41 %
(1) Calculated at statutory tax rate of 29.56%.
Three months ended Nine months ended
September 30,
June 30,
September 30,
September 30,
September 30,
(Dollars in thousands)
2026
2026
2025 2026 2025
PRE-TAX PRE-PROVISION RETURN ON AVERAGE ASSETS OR EQUITY
Net income (GAAP) $ 8,066 $ 2,695 $ 10,873 $ 22,250 $ 26,998
Exclude provision for income taxes 3,212 1,469 4,203 8,906 10,201
Exclude provision for credit losses 578 5,635 667 6,303 3,239
Net income before income tax and provision expense (Non-GAAP) $ 11,856 $ 9,799 $ 15,743 $ 37,459 $ 40,438
Net income excluding non-core items (Non-GAAP) 17,787 12,307 10,891 41,787 27,223
Exclude provision for income taxes (Non-GAAP) (1) 7,291 5,503 4,211 17,104 10,295
Exclude provision for credit losses 578 5,635 667 6,303 3,239
Net income excluding non-core items before income tax and provision expense (Non-GAAP) $ 25,656 $ 23,445 $ 15,769 $ 65,194 $ 40,757
RETURN ON AVERAGE ASSETS (Annualized)
Average assets $ 5,051,226 $ 4,927,433 $ 3,595,359 $ 4,563,179 $ 3,559,252
Return on average assets (GAAP) 0.65 % 0.22 % 1.21 % 0.65 % 1.01 %
Pre-tax pre-provision return on average assets (Non-GAAP) 0.94 % 0.80 % 1.75 % 1.09 % 1.51 %
Pre-tax pre-provision excluding non-core items return on average assets (Non-GAAP) 2.03 % 1.90 % 1.75 % 1.90 % 1.53 %
RETURN ON AVERAGE EQUITY (Annualized)
Average stockholders' equity $ 612,710 $ 607,758 $ 386,500 $ 546,927 $ 378,037
Return on average equity (GAAP) 5.27 % 1.77 % 11.25 % 5.42 % 9.52 %
Pre-tax pre-provision return on average equity (Non-GAAP) 7.74 % 6.45 % 16.29 % 9.13 % 14.26 %
Pre-tax pre-provision excluding non-core items return on average equity (Non-GAAP) 16.75 % 15.43 % 16.32 % 15.89 % 14.37 %
(1) Calculated as GAAP provision for income taxes plus income tax impact of non-core items at statutory tax rate of 29.56%.
September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2026 2026 2026 2025 2025
TANGIBLE COMMON EQUITY
Shareholders' equity (GAAP) $ 602,186 $ 607,820 $ 419,203 $ 409,588 $ 397,576
Exclude goodwill 155,088 154,600 96,828 96,828 96,828
Exclude other intangibles assets 30,849 32,723 8,015 8,266 8,516
Tangible common shareholders' equity (Non-GAAP) $ 416,249 $ 420,497 $ 314,360 $ 304,494 $ 292,232
TANGIBLE COMMON EQUITY PER SHARE
Tangible common shareholders' equity (Non-GAAP) $ 416,249 $ 420,497 $ 314,360 $ 304,494 $ 292,232
Common shares outstanding at end of period 27,134,636 27,131,078 19,185,275 19,163,452 19,138,677
Common shareholders' equity (book value) per share (GAAP) $ 22.19 $ 22.40 $ 21.85 $ 21.37 $ 20.77
Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) $ 15.34 $ 15.50 $ 16.39 $ 15.89 $ 15.27
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.
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
September 30, 2026 		For the Three Months Ended
September 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 $ 142,723 $ 1,363 3.82 % $ 104,344 $ 1,149 4.40 %
Securities
Taxable securities 650,903 5,395 3.32 % 580,463 4,082 2.81 %
Non-taxable securities (1) 235,587 1,593 2.70 % 238,353 1,611 2.70 %
Total investment securities 886,490 6,988 3.15 % 818,816 5,693 2.78 %
Total securities and interest-earning deposits 1,029,213 8,351 3.25 % 923,160 6,842 2.96 %
Loans (2) (3) 3,547,861 60,163 6.73 % 2,410,272 40,384 6.65 %
Total interest-earning assets 4,577,074 $ 68,514 5.94 % 3,333,432 $ 47,226 5.62 %
Allowance for credit losses (49,172) (28,758)
Non-accrual loans 27,809 6,883
Cash and due from banks 65,675 35,484
Bank premises and equipment 40,222 23,963
Other assets 389,618 224,355
Total average assets $ 5,051,226 $ 3,595,359
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and NOW accounts $ 1,048,973 $ 1,687 0.64 % $ 618,022 $ 1,220 0.78 %
Money market accounts 1,212,551 7,482 2.45 % 861,403 4,953 2.28 %
Time certificates of deposit 518,603 4,394 3.36 % 491,985 4,612 3.72 %
Total interest-bearing deposits 2,780,127 13,563 1.94 % 1,971,410 10,785 2.17 %
Other borrowed funds 109,991 1,273 4.63 % 92,325 1,159 4.91 %
Total interest-bearing liabilities 2,890,118 $ 14,836 2.04 % 2,063,735 $ 11,944 2.30 %
Non-interest bearing demand deposits 1,485,004 1,098,889
Other liabilities 63,394 46,235
Shareholders' equity 612,710 386,500
Total average liabilities and shareholders' equity $ 5,051,226 $ 3,595,359
Interest income and rate earned on average earning assets $ 68,514 5.94 % $ 47,226 5.62 %
Interest expense and interest cost related to average interest-bearing liabilities 14,836 2.04 % 11,944 2.30 %
Net interest income and net interest margin (4) $ 53,678 4.65 % $ 35,282 4.20 %
(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $334 and $338 at September 30, 2026 and September 30, 2025, respectively.
(2) Loan interest income includes loan (costs) fees of $344 and $(44) at September 30, 2026 and September 30, 2025, respectively. Loan interest income includes an accretion on loan marks of $4,498 and $2,567 at September 30, 2026 and September 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.
For the Nine Months Ended September 30, 2026 For the Nine Months Ended September 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 $ 118,460 $ 3,312 3.73 % $ 97,939 $ 3,259 4.44 %
Securities
Taxable securities 628,997 14,393 3.05 % 591,147 12,560 2.83 %
Non-taxable securities (1) 236,094 4,796 2.71 % 239,179 4,921 2.74 %
Total investment securities 865,091 19,189 2.96 % 830,326 17,481 2.81 %
Total securities and interest-earning deposits 983,551 22,501 3.05 % 928,265 20,740 2.98 %
Loans (2) (3) 3,190,138 160,698 6.73 % 2,367,824 118,346 6.68 %
Total interest-earning assets 4,173,689 $ 183,199 5.87 % 3,296,089 $ 139,086 5.64 %
Allowance for credit losses (42,142) (26,933)
Non-accrual loans 20,787 6,306
Cash and due from banks 48,651 35,669
Bank premises and equipment 31,606 24,075
Other assets 330,588 224,046
Total average assets $ 4,563,179 $ 3,559,252
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and NOW accounts $ 934,790 $ 4,496 0.64 % $ 602,208 $ 3,113 0.69 %
Money market accounts 1,071,669 19,809 2.47 % 870,260 15,123 2.32 %
Time certificates of deposit 541,115 13,825 3.42 % 468,520 13,475 3.85 %
Total interest-bearing deposits 2,547,574 38,130 2.00 % 1,940,988 31,711 2.18 %
Other borrowed funds 110,486 3,802 4.59 % 154,957 5,910 5.09 %
Total interest-bearing liabilities 2,658,060 $ 41,932 2.11 % 2,095,945 37,621 2.40 %
Non-interest bearing demand deposits 1,325,598 1,039,444
Other liabilities 32,594 45,826
Shareholders' equity 546,927 378,037
Total average liabilities and shareholders' equity $ 4,563,179 $ 3,559,252
Interest income and rate earned on average earning assets $ 183,199 5.87 % $ 139,086 5.64 %
Interest expense and interest cost related to average interest-bearing liabilities 41,932 2.11 % 37,621 2.40 %
Net interest income and net interest margin (4) $ 141,267 4.53 % $ 101,465 4.12 %
(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $1,007 and $1,034 at September 30, 2026 and September 30, 2025, respectively.
(2) Loan interest income includes loan fees (costs) of $654 and $272 at September 30, 2026 and September 30, 2025, respectively. Loan interest income includes an accretion on loan marks of $11,914 and $8,866 at September 30, 2026 and September 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.
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 September 30, 2026 and 2025
For the Nine Months Ended September 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 $ 422 $ (208) $ 214 $ 682 $ (629) $ 53
Investment securities:
Taxable 496 817 1,313 805 1,028 1,833
Non-taxable (1) (18) - (18) (64) (61) (125)
Total investment securities 478 817 1,295 741 967 1,708
Loans 19,060 719 19,779 41,101 1,251 42,352
Total earning assets (1) 19,960 1,328 21,288 42,524 1,589 44,113
Interest expense:
Deposits:
Savings and NOW 849 (382) 467 1,719 (336) 1,383
MMA 2,020 509 2,529 3,500 1,186 4,686
Time certificate of deposits 249 (467) (218) 2,087 (1,737) 350
Total interest-bearing deposits 3,118 (340) 2,778 7,306 (887) 6,419
Other borrowed funds 222 (108) 114 (1,698) (410) (2,108)
Total interest-bearing liabilities 3,340 (448) 2,892 5,608 (1,297) 4,311
Net interest income (1) $ 16,620 $ 1,776 $ 18,396 $ 36,916 $ 2,886 $ 39,802
(1) Computed on a tax equivalent basis for securities exempt from federal income taxes.
Comparison of the quarter ended September 30, 2026 and September 30, 2025
The Company's net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, increased 45 basis points to 4.65% for the third quarter of 2026, from 4.20% for the third quarter of 2025. Average interest earning assets were $4,577,074,000 for the three months ended September 30, 2026 compared to $3,333,432,000 for the three months ended September 30, 2025. The $1,243,642,000 increase in average earning assets was attributed to the $1,137,589,000 or 47.20% increase in average loans, a $38,379,000 increase in interest-earning deposits and $67,674,000 increase in investment securities. For the three months ended September 30, 2026, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks increased 29 basis points. The effective yield on loans increased 8 basis points. Average interest bearing liabilities increased 40.04% to $2,890,118,000 for the three months ended September 30, 2026, compared to $2,063,735,000 for the same period in 2025.
Interest and fee income from loans increased $19,779,000 or 48.98% for the three months ended September 30, 2026 compared to the same period in 2025. The yield on average loans, excluding nonaccrual loans, was 6.73% for the three months ended September 30, 2026 compared to 6.65% for the same period in 2025. The accretion from fair value marks on loans contributed 51 basis points to the loan yield for the three months ended September 30, 2026 compared to 28 basis points for the same period in 2025.
Interest income from interest-earning deposits in other banks increased $214,000 in the three months ended September 30, 2026 to $1,363,000 compared to $1,149,000 for the same period in 2025. The yield on average interest-earning deposits decreased 58 basis points to 3.82% for the three month period ended September 30, 2026 compared to 4.40% for the same period in 2025. Average interest-earning deposits for the three month period ended September 30, 2026 increased $38,379,000 or 36.78% to $142,723,000 compared to $104,344,000 for the same period in 2025.
Interest income from total investment securities increased $1,295,000 in the three months ended September 30, 2026 to $6,988,000 compared to $5,693,000 for the same period in 2025. The yield on average total investment securities increased 37 basis points to 3.15% for the three month period ended September 30, 2026 compared to 2.78% for the same period in 2025. Average total investment securities for the three month period ended September 30, 2026 increased $67,674,000 or 8.26% to $886,490,000 compared to $818,816,000 for the same period in 2025.
Total interest income for the three months ended September 30, 2026 increased $21,292,000 or 45.41% to $68,180,000 compared to $46,888,000 for the three months ended September 30, 2025. The yield on interest earning assets increased 32 basis points to 5.94% on a fully tax equivalent basis for the three months ended September 30, 2026 from 5.62% for the period ended September 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 September 30, 2026 and 2025 was $13,563,000 and $10,785,000, respectively. The average interest rate on interest bearing deposits decreased to 1.94% for the three months ended September 30, 2026 compared to 2.17% for the period ended September 30, 2025. Average interest-bearing deposits increased 41.02% or $808,717,000 to $2,780,127,000 for the three months ended September 30, 2026 compared to $1,971,410,000 for the period ended September 30, 2025.
Average other borrowed funds were $109,991,000 with an effective rate of 4.63% for the three months ended September 30, 2026 compared to $92,325,000 with an effective rate of 4.91% for the three months ended September 30, 2025. Total interest expense on other borrowed funds was $1,273,000 for the three months ended September 30, 2026 and $1,159,000 for the three months ended September 30, 2025.
The cost of interest-bearing liabilities decreased 26 basis points to 2.04% for the three month period ended September 30, 2026 compared to 2.30% for the same period in 2025. The cost of total deposits decreased to 1.27% compared to 1.39% for the three month periods ended September 30, 2026 and 2025, respectively. The decrease in the cost of deposits is primarily attributed to the addition of the USB deposit portfolio which carried an overall lower interest cost. This decrease was further driven by strong organic deposit growth that allowed the maturation and payoff of brokered deposits during the quarter. Average non-interest bearing demand deposits increased 35.14% to $1,485,004,000 for the three month period ended September 30, 2026 compared to $1,098,889,000 for the same period in 2025. The ratio of average non-interest bearing demand deposits to average total deposits decreased to 34.82% in the three month period ended September 30, 2026 compared to 35.79% for the same period in 2025.
Net interest income before the provision for credit losses for the three months ended September 30, 2026 increased by $18,400,000 or 52.66% to $53,344,000 compared to $34,944,000 for the same period in 2025. The increase was a result of increased interest income on average earning assets and a decrease in interest expense on average interest bearing liabilities.
Comparison of the nine months ended September 30, 2026 and September 30, 2025
The Company's net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, increased 41 basis points to 4.53% for the nine months ended September 30, 2026, from 4.12% for the same period of 2025. Average interest earning assets were $4,173,689,000 for the nine months ended September 30, 2026 compared to $3,296,089,000 for the nine months ended September 30, 2025. The $877,600,000 increase in average earning assets was attributed to the $822,314,000 or 34.73% increase in average loans, partially offset by the $3,085,000 decrease in average non-taxable investment securities. For the nine months ended September 30, 2026, the effective yield on loans increased 5 basis points. Average interest bearing liabilities increased 26.82% to $2,658,060,000 for the nine months ended September 30, 2026, compared to $2,095,945,000 for the same period in 2025.
Interest and fee income from loans increased $42,352,000 or 35.79% for the nine months ended September 30, 2026 compared to the same period in 2025. Net interest income during the first nine months of 2026 was impacted by an increase in average total loans of $822,314,000 or 34.73% to $3,190,138,000 compared to $2,367,824,000 for the same period in 2025. The yield on average loans, excluding nonaccrual loans, was 6.73% for the nine months ended September 30, 2026 compared to 6.68% for the same period in 2025. The accretion from fair value marks on loans contributed 49 basis points to the loan yield for the nine months ended September 30, 2026 compared to 54 basis points for the same period in 2025.
Total interest income for the nine months ended September 30, 2026 increased $44,140,000 or 31.97% to $182,192,000 compared to $138,052,000 for the nine months ended September 30, 2025. The yield on interest earning assets increased 23 basis points to 5.87% on a fully tax equivalent basis for the nine months ended September 30, 2026 from 5.64% for the nine
months ended September 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 nine months ended September 30, 2026 and 2025 was $38,130,000 and $31,711,000, respectively. The average interest rate on interest bearing deposits decreased 18 basis points to 2.00% for the nine months ended September 30, 2026 compared to 2.18% for the same period ended September 30, 2025. Average interest-bearing deposits increased 31.25% or $606,586,000 to $2,547,574,000 for the nine months ended September 30, 2026 compared to $1,940,988,000 for the same period ended September 30, 2025.
Average other borrowed funds were $110,486,000 with an effective rate of 4.59% for the nine months ended September 30, 2026 compared to $154,957,000 with an effective rate of 5.09% for the nine months ended September 30, 2025. Total interest expense on other borrowed funds was $3,802,000 for the nine months ended September 30, 2026 and $5,910,000 for the nine months ended September 30, 2025.
Net interest income before the provision for credit losses for the nine months ended September 30, 2026 increased by $39,829,000 or 39.66% to $140,260,000 compared to $100,431,000 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
September 30, 		For the Nine Months Ended
September 30,
(Dollars in thousands) 2026 2025 2026 2025
Balance, beginning of period $ 49,422 $ 28,722 $ 30,071 $ 25,803
Merger Day 1 ACL - - 19,431 -
Provision for credit losses 588 793 5,969 3,601
Losses charged to allowance (1,575) (45) (7,399) (209)
Recoveries 198 120 561 395
Balance, end of period $ 48,633 $ 29,590 $ 48,633 $ 29,590
Allowance for credit losses to total loans at end of period 1.36 % 1.21 % 1.36 % 1.21 %
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 third quarter of 2026, the Company recorded net loan charge-offs of $1,377,000 compared to net recoveries of $75,000 for the same period in 2025. The primary reason for loan charge-offs during the quarter was for charge-offs within an acquired student loan portfolio from the Merger, in which the Company recorded a Day 1 allowance of $8.4 million in anticipation of future charge-offs in this portfolio segment. The net charge-off ratio reflects annualized net charge-offs to average loans of 0.15% for the quarter ended September 30, 2026, compared to annualized net recoveries of 0.01% for the quarter ended September 30, 2025. During the quarter ended September 30, 2026, non-accrual loans increased $18,516,000 to $38,273,000 compared to $19,757,000 at June 30, 2026 and increased $31,318,000 year-to-date to $38,273,000 compared to $6,955,000 at December 31, 2025. The increase in non-accrual loans was due to two loan relationships that reached 90 days past due during the quarter. These loans are evaluated as collateral dependent loans as of September 30, 2026 and the Company believes the loans are adequately reserved for on an individual basis.
During the quarter ended September 30, 2026, the Company recorded a $588,000 provision for credit losses on loans, compared to $793,000 for the same period in 2025. In addition to the provision for credit losses on loans for the quarter ended September 30, 2026, the Company recorded a credit to the provision for credit losses on held-to-maturity securities of $99,000 as compared to $62,000 in the prior year quarter. The Company recorded a provision for unfunded loan commitments totaling $89,000 for the quarter ended September 30, 2026 compared to a credit to the provision of unfunded loan commitments of $64,000 in the prior year quarter. The provision for credit losses for the quarter ended September 30, 2026 was primarily in the
Consumer segment, reflecting a provision for credit losses of $1,445,000, driven primarily by higher than anticipated charge-offs of $1,259,000 related to the acquired student loan portfolio from the Merger; the increase in the provision was partially offset by a credit to the provision for credit losses in both the Commercial and Commercial Real Estate segments due to improved credit quality metrics within those portfolios.
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.
The following table shows classified loans for the periods indicated:
Loan Type (Dollars in thousands) September 30, 2026 % of
Classified loans 		December 31, 2025 % of
Classified loans
Commercial:
Commercial and industrial $ 17,446 15.5 % $ 8,878 11.3 %
Agricultural production - - % - - %
Total commercial 17,446 15.5 % 8,878 11.3 %
Real estate:
Construction & other land loans 15,664 13.9 % 82 0.1 %
Commercial real estate - owner occupied 6,247 5.5 % 4,736 6.0 %
Commercial real estate - non-owner occupied 40,840 36.3 % 29,163 37.1 %
Farmland 18,656 16.5 % 22,124 28.1 %
Multi-family residential 7,255 6.4 % 7,283 9.2 %
1-4 family - close-ended 2,387 2.1 % 2,530 3.2 %
1-4 family - revolving 135 0.1 % 37 - %
Total real estate 91,184 80.8 % 65,955 83.7 %
Consumer:
Manufactured Housing 3,744 3.3 % 3,394 4.3 %
Other installment loans 438 0.4 % 569 0.7 %
Total consumer 4,182 3.7 % 3,963 5.0 %
Total classified loans $ 112,812 $ 78,796
Non-Interest Income
The following table shows significant components of non-interest income for the periods indicated:
For the Three Months Ended
September 30, 		For the Nine Months Ended
September 30,
(Dollars in thousands) 2026 2025 $ Change % Change 2026 2025 $ Change % Change
Gain on sale of loans $ 1,677 $ 107 $ 1,570 1,467.3 % $ 1,891 $ 343 $ 1,548 451.3 %
Interchange fees 785 493 292 59.2 % 2,085 1,501 584 38.9 %
Service charges 673 519 154 29.7 % 2,229 1,526 703 46.1 %
Appreciation in cash surrender value of bank owned life insurance 530 379 151 39.8 % 1,430 1,117 313 28.0 %
Federal Home Loan Bank dividends 478 240 238 99.2 % 1,251 718 533 74.2 %
Loan placement fees 191 215 (24) (11.2) % 636 632 4 0.6 %
Gain on proceeds from death benefits - 198 (198) (100.0) % - 198 (198) (100.0) %
Net realized losses on sales and calls of investment securities (19) (26) 7 (26.9) % (5,918) (41) (5,877) 14,334.1 %
Other income 365 841 (476) (56.6) % 1,893 1,947 (54) (2.8) %
Total non-interest income $ 4,680 $ 2,966 $ 1,714 57.8 % $ 5,497 $ 7,941 $ (2,444) (30.8) %
The increase in non-interest income quarter-to-date was primarily due to an increase in gain on sale of loans and minimal realized losses in the investment portfolio. The decrease in non-interest income year-to-date as compared to the prior year-to-date period was due to the realized loss on sales within the investment portfolio. 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, gain on sale of loans, bank-owned life insurance, and loan placement fees, 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 $478,000 and $1,251,000 for the three and nine months ended September 30, 2026 compared to $240,000 and $718,000 for the three and nine months ended September 30, 2025.
Non-Interest Expenses
The following table shows significant components of non-interest expense for the periods indicated:
For the Three Months Ended
September 30, 		For the Nine Months Ended
September 30,
(Dollars in thousands) 2026 2025 $ Change % Change 2026 2025 $ Change % Change
Salaries and employee benefits $ 16,667 $ 12,525 $ 4,142 33.1 % $ 45,748 $ 37,744 $ 8,004 21.2 %
Merger and acquisition expense 7,167 - 7,167 - % 15,202 278 14,924 5,368.3 %
Legal settlement 6,615 - 6,615 - % 6,615 - 6,615 - %
Occupancy and equipment 3,958 2,933 1,025 34.9 % 10,616 8,554 2,062 24.1 %
Information technology 2,675 1,711 964 56.3 % 7,046 5,404 1,642 30.4 %
Amortization of core deposit intangibles 1,874 250 1,624 649.6 % 3,998 752 3,246 431.6 %
Data processing expense 1,128 748 380 50.8 % 3,106 2,403 703 29.3 %
Professional services 714 447 267 59.7 % 2,176 1,950 226 11.6 %
Regulatory assessments 708 490 218 44.5 % 1,940 1,479 461 31.2 %
ATM/Debit card expenses 635 359 276 76.9 % 1,658 1,149 509 44.3 %
Directors' expenses 231 234 (3) (1.3) % 727 686 41 6.0 %
Loan related expenses 310 252 58 23.0 % 704 628 76 12.1 %
Advertising 218 185 33 17.8 % 604 687 (83) (12.1) %
Personnel other 64 19 45 236.8 % 127 217 (90) (41.5) %
Other expense 3,204 2,014 1,190 59.1 % 8,031 6,003 2,028 33.8 %
Total non-interest expense $ 46,168 $ 22,167 $ 24,001 108.3 % $ 108,298 $ 67,934 $ 40,364 59.4 %
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 $24,001,000 or 108.27% to $46,168,000 for the three months ended September 30, 2026, compared to $22,167,000 for the three months ended September 30, 2025. The net increase for the three months ended September 30, 2026 was primarily the result of merger expenses of $7,167,000, an expense incurred as a result of a one-time legal settlement of $6,615,000, increases in salaries and employee benefits of $4,142,000, amortization of core deposit intangibles of $1,624,000, occupancy and equipment of $1,025,000, and information technology of $964,000. The legal settlement resolved ongoing litigation related to a former depositor. The increase in expenses for the quarter-to-date period was primarily driven by the Merger.
Non-interest expenses increased $40,364,000 or 59.42% to $108,298,000 for the nine months ended September 30, 2026, compared to $67,934,000 for the nine months ended September 30, 2025. The net increase for the nine month period was primarily the result of increases in merger expenses of $14,924,000, salaries and employee benefits of $8,004,000, expense incurred as a result of a one-time settlement of $6,615,000, occupancy and equipment of $2,062,000, other expenses of $2,028,000, information technology of $1,642,000, and regulatory assessments of $461,000. The increase in expenses for the year-to-date period was primarily driven by the Merger.
Salaries and employee benefits increased $8,004,000 or 21.21% to $45,748,000 for the first nine months of 2026 compared to $37,744,000 for the nine months ended September 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 average full time equivalent employees were 391 for the three months ended September 30, 2026, compared to 338 for the three months ended September 30, 2025.
Provision for Income Taxes
Our effective income tax rate was 28.48% and 27.88% for the three month periods ended September 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 28.59% and 27.42% for the nine month periods ended September 30, 2026 and 2025.
The Company reported an income tax provision of $3,212,000 and $4,203,000 for the three month periods ended September 30, 2026 and 2025, respectively. The Company reported an income tax provision of $8,906,000 and $10,201,000 for the nine month periods ended September 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 September 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 September 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 September 30, 2026.
FINANCIAL CONDITION
Summary of Changes in Consolidated Balance Sheets
Total assets were $5,013,088,000 as of September 30, 2026, compared to $3,690,317,000 at December 31, 2025, an increase of 35.84% or $1,322,771,000. Total gross loans were $3,562,892,000 at September 30, 2026, compared to $2,540,857,000 at December 31, 2025, an increase of $1,022,035,000 or 40.22%. Total cash and cash equivalents increased 49.82% or $59,277,000 to $178,261,000 at September 30, 2026 compared to $118,984,000 at December 31, 2025. The investment portfolio increased 9.29% or $70,917,000 to $834,241,000 at September 30, 2026 compared to $763,324,000 at December 31, 2025. Total deposits increased 36.35% or $1,125,208,000 to $4,220,482,000 at September 30, 2026, compared to $3,095,274,000 at December 31, 2025. Shareholders' equity increased 47.02% or $192,598,000 to $602,186,000 at September 30, 2026, compared to $409,588,000 at December 31, 2025. Accrued interest payable and other liabilities was $74,508,000 at September 30, 2026, compared to $42,929,000 at December 31, 2025, an increase of 73.56% or $31,579,000. 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 September 30, 2026, investment securities with a fair value of $454,408,000, or 54% 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 $70,917,000 to $834,241,000 at September 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 $51,438,000 at September 30, 2026, compared to net unrealized losses of $39,673,000 at December 31, 2025 and $42,738,000 at September 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.
Loans
Total gross loans increased $1,022,035,000 or 40.22% to $3,562,892,000 as of September 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) September 30, 2026 % of Total
Loans 		December 31, 2025 % of Total
Loans
Commercial:
Commercial and industrial $ 276,340 7.8 % $ 156,744 6.2 %
Agricultural production 67,001 1.9 % 34,152 1.3 %
Total commercial 343,341 9.7 % 190,896 7.5 %
Real estate:
Construction & other land loans 225,647 6.3 % 80,452 3.2 %
Commercial real estate - owner occupied 556,074 15.6 % 368,604 14.5 %
Commercial real estate - non-owner occupied 1,255,338 35.2 % 992,486 39.1 %
Farmland 158,213 4.4 % 142,100 5.6 %
Multi-family residential 230,171 6.5 % 199,123 7.8 %
1-4 family - close-ended 305,879 8.6 % 111,741 4.4 %
1-4 family - revolving 47,854 1.3 % 39,818 1.6 %
Total real estate 2,779,176 77.9 % 1,934,324 76.2 %
Consumer:
Manufactured housing 318,711 8.9 % 322,761 12.7 %
Other installment loans 121,426 3.4 % 92,589 3.6 %
Total consumer 440,137 12.3 % 415,350 16.3 %
Net deferred origination costs 238 0.1 % 287 - %
Loan, net of deferred origination fees 3,562,892 100.0 % 2,540,857 100.0 %
Allowance for credit losses (48,633) (30,071)
Total loans $ 3,514,259 $ 2,510,786
As of September 30, 2026, in management's judgment, a concentration of loans existed in commercial real estate loans representing approximately 57.2% 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 nine months ended September 30, 2026 and 2025.
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:
September 30, 2026 December 31, 2025
(Dollars in thousands) Loan Balance % of Category Loan Balance % of Category
Commercial real estate - owner occupied
Office $ 84,754 15.24 % $ 56,565 15.35 %
Industrial & warehouse 123,810 22.27 % 104,427 28.33 %
Retail 67,142 12.07 % 46,300 12.56 %
Gas Stations 138,387 24.89 % 65,985 17.90 %
Restaurants 28,358 5.10 % 22,054 5.98 %
Other 113,623 20.43 % 73,273 19.88 %
Total $ 556,074 100.00 % 368,604 100.00 %
Commercial real estate - non-owner occupied
Office $ 389,726 31.05 % $ 317,917 32.03 %
Industrial & warehouse 163,103 12.99 % 161,466 16.27 %
Retail 260,786 20.77 % 229,954 23.17 %
Hospitality 253,318 20.18 % 186,599 18.80 %
Other 188,405 15.01 % 96,550 9.73 %
Total $ 1,255,338 100.00 % $ 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 $ 158,996 $ 19,652 $ 25,076 $ 46,891 $ 24,723 $ 1,002 $ 276,340
Agricultural production 61,360 450 424 829 3,938 - 67,001
Total commercial 220,356 20,102 25,500 47,720 28,661 1,002 343,341
Real estate:
Construction & other land loans $ 188,770 $ 9,199 $ 4,107 $ 3,507 $ 20,064 $ - 225,647
Commercial real estate - owner occupied 54,911 41,471 137,159 273,490 49,043 - 556,074
Commercial real estate - non-owner occupied 118,336 178,565 345,230 452,632 160,575 - 1,255,338
Farmland 22,082 19,190 34,891 59,178 22,239 633 158,213
Multi-family residential 31,771 13,247 72,405 60,566 52,182 - 230,171
1-4 family - close-ended 20,037 15,563 18,690 24,015 5,684 221,890 305,879
1-4 family - revolving 45,303 - 5 171 2,375 - 47,854
Total real estate 481,210 277,235 612,487 873,559 312,162 222,523 2,779,176
Consumer:
Manufactured Housing $ 7,621 $ 54,026 $ 21,632 $ 22,655 $ 69,372 $ 143,405 318,711
Other installment loans 25,045 351 3,010 4,090 88,696 234 121,426
Total consumer 32,666 54,377 24,642 26,745 158,068 143,639 440,137
Gross loans $ 734,232 $ 351,714 $ 662,629 $ 948,024 $ 498,891 $ 367,164 $ 3,562,654
% of total 20.61 % 9.87 % 18.60 % 26.61 % 14.00 % 10.31 % 100.00 %
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 September 30, 2026 there were $46,458,000 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 $38,273,000 in total non-accrual loans and $8.2 million in other real estate obtained through the USB Merger. The following table presents information about the Company's non-performing loans and non-performing assets at the dates indicated (dollars in thousands):
September 30, 2026 December 31, 2025
Non-accrual loans:
Commercial:
Commercial and industrial $ 7,937 $ 1,533
Agricultural production - -
Total commercial 7,937 1,533
Real estate:
Construction & other land loans - -
Commercial real estate - owner occupied 1,724 101
Commercial real estate - non-owner occupied 16,881 530
Farmland 8,175 1,525
Multi-family residential - -
1-4 family - close-ended 1,882 1,697
1-4 family - revolving 50 -
Total real estate 28,712 3,853
Consumer:
Manufactured housing 1,318 1,485
Other installment 306 84
Total consumer 1,624 1,569
Total non-accrual loans 38,273 6,955
Other real estate owned 8,185 -
Total non-performing assets $ 46,458 $ 6,955
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 $48,633,000 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 September 30, 2026 December 31, 2025
Commercial:
Commercial and industrial $ 4,254 $ 2,212
Agricultural production 1,678 535
Total commercial 5,932 2,747
Real estate:
Construction & other land loans 3,405 1,751
Commercial real estate - owner occupied 5,303 3,492
Commercial real estate - non-owner occupied 12,638 11,102
Farmland 3,519 1,423
Multi-family residential 2,549 2,175
1-4 family - close-ended 2,684 1,481
1-4 family - revolving 973 892
Total real estate 31,071 22,316
Consumer:
Manufactured housing 3,416 3,692
Other installment 8,214 1,316
Total consumer 11,630 5,008
Total allowance for credit losses $ 48,633 $ 30,071
As of September 30, 2026, the balance in the allowance for credit losses (ACL) on loans was $48,633,000, or 1.36% of total gross loans, compared to $30,071,000, or 1.18% of total gross loans, as of December 31, 2025. The primary driver of this increase was 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. The increase in the allowance as a percentage of loan is directly attributable to the higher reserve amounts for a student loan portfolio acquired as part of the Merger. The Company believes the allowance for credit losses is adequate to provide for expected credit losses within the loan portfolio at September 30, 2026.
The balance of unfunded commitments to extend credit on construction and other loans and letters of credit was $810,533,000 as of September 30, 2026, compared to $491,413,000 as of December 31, 2025. At September 30, 2026 and December 31, 2025, the balance of the reserve for unfunded commitments was $1,845,000 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.
September 30, 2026 December 31, 2025 September 30, 2025
(Dollars in thousands) Balance % to Total Loans Balance % to Total Loans Balance % to Total Loans
Past due loans 30 days or more $ 60,369 1.69 % $ 23,208 0.91 % $ 24,143 0.98 %
Nonaccrual loans 38,273 1.07 % 6,955 0.27 % 7,072 0.29 %
The balance of past due loans 30 days or more increased by $37,161,000 from $23,208,000 at December 31, 2025 to $60,369,000 as of September 30, 2026. The increase in nonaccrual loans during the year-to-date period did not cause an increase to the overall allowance for loan losses, as the loans that migrated from pooled to specific reserves were adequately reserved under the pooled method.
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 $1,125,208,000 or 36.35% to $4,220,482,000 as of September 30, 2026, compared to $3,095,274,000 as of December 31, 2025. Interest-bearing deposits increased $684,771,000 or 33.62% to $2,721,280,000 as of September 30, 2026, compared to $2,036,509,000 as of December 31, 2025. Non-interest bearing deposits increased $440,437,000 or 41.60% to $1,499,202,000 as of September 30, 2026, compared to $1,058,765,000 as of December 31, 2025.
The composition of the deposits and average interest rates at September 30, 2026 and December 31, 2025 is summarized in the table below.
(Dollars in thousands) September 30, 2026 % of
Total
Deposits 		Average Interest
Rate 		December 31, 2025 % of
Total
Deposits 		Average Interest
Rate
Savings and NOW accounts $ 938,600 22.3 % 0.64 % $ 674,704 21.8 % 0.73 %
MMA accounts 1,305,018 30.9 % 2.47 % 858,354 27.7 % 2.31 %
Time deposits 477,662 11.3 % 3.42 % 503,451 16.3 % 3.79 %
Total interest-bearing 2,721,280 64.5 % 2.00 % 2,036,509 65.8 % 2.17 %
Non-interest bearing 1,499,202 35.5 % 1,058,765 34.2 %
Total deposits $ 4,220,482 100.0 % $ 3,095,274 100.0 %
As of September 30, 2026 there was $1,757,493,000 in uninsured deposits or 41.64% of total deposits, compared to $1,185,118,000 and 38.29% as of December 31, 2025.
Other Borrowings
As of September 30, 2026, the Company had $21,000,000 Federal Home Loan Bank ("FHLB") of San Francisco overnight advances outstanding. As of September 30, 2026, the Company had two short-term advances outstanding totaling $20,000,000 with a weighted average interest rate of 3.91%. 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.
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 $602,186,000 at September 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 $22,250,000, common stock issued due to the Merger of $184,586,000, stock issued under the employee purchase plan of $254,000, the effect of share-based compensation expense of $918,000, stock options exercised of $358,000 and an increase in accumulated other comprehensive loss of $6,731,000, partially offset by common stock cash dividends of $8,810,000.
During the first nine months of 2026, the Company declared and paid $8,810,000 in cash dividends ($0.36 per common share) to holders of common stock. The Company declared and paid $6,863,000 in cash dividends ($0.36 per common share) to holders of common stock during the nine months ended September 30, 2025.
The following table presents the Company's regulatory capital ratios as of September 30, 2026 and December 31, 2025.
(Dollars in thousands) Actual Ratio Minimum regulatory requirement
September 30, 2026 Amount Ratio Amount Ratio
Tier 1 Leverage Ratio $ 474,906 9.69 % $ 195,994 4.00 %
Common Equity Tier 1 Ratio (CET 1) $ 469,906 11.14 % $ 189,786 4.50 %
Tier 1 Risk-Based Capital Ratio $ 474,906 11.26 % $ 253,047 6.00 %
Total Risk-Based Capital Ratio $ 560,279 13.28 % $ 337,397 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 September 30, 2026 and December 31, 2025.
(Dollars in thousands) Actual Ratio Minimum regulatory requirement (1)
Minimum requirement for "Well-Capitalized"
Institution
September 30, 2026 Amount Ratio Amount Ratio Amount Ratio
Tier 1 Leverage Ratio $ 529,096 10.82 % $ 195,611 4.00 % $ 244,514 5.00 %
Common Equity Tier 1 Ratio (CET 1) $ 529,096 12.58 % $ 189,324 7.00 % $ 273,467 6.50 %
Tier 1 Risk-Based Capital Ratio $ 529,096 12.58 % $ 252,432 8.50 % $ 336,575 8.00 %
Total Risk-Based Capital Ratio $ 562,985 13.38 % $ 336,575 10.50 % $ 420,719 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%.
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 September 30, 2026, the Company had unpledged securities totaling $352,274,000 available as a secondary source of liquidity and total cash and cash equivalents of $178,261,000. Cash and cash equivalents at September 30, 2026 increased 49.82% 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 September 30, 2026, our available borrowing capacity includes approximately $150,000,000 in unsecured credit lines with our correspondent banks, $998,199,000 in unused FHLB borrowing capacity, and a $2,814,000 secured credit line at the Federal Reserve Bank. We believe our liquidity sources to be stable and adequate. At September 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 September 30, 2026 and December 31, 2025:
Credit Lines (In thousands) September 30, 2026 December 31, 2025
Unsecured Credit Lines
Total credit limit $ 150,000 $ 110,000
Balance outstanding - -
Federal Home Loan Bank
Total credit limit 1,114,199 809,391
Balance outstanding 41,000 73,000
Letters of credit 75,000 27,000
Collateral pledged 2,618,714 1,446,828
Fair value of collateral 1,658,137 1,230,691
Federal Reserve Bank
Credit limit 2,814 3,411
Balance outstanding - -
Collateral pledged 3,483 3,910
Fair value of collateral 3,005 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.
Community West Bancshares published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 11:04 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]