Community West Profit Slides as USB Merger Costs Bite
Community West Bancshares closed its merger with United Security Bancshares and pushed assets past $5 billion, but net income fell to $2.70 million from $11.49 million a quarter earlier.
Community West Bancshares (CWBC), the Goleta, California-based bank holding company, reported second-quarter net income of $2.70 million, or $0.10 a diluted share, down from $11.49 million, or $0.60 a share, in the first quarter and from $7.83 million a year earlier.
The decline came in the same quarter the company completed its merger with United Security Bancshares, effective April 1, 2026, a deal that pushed total assets past $5 billion and lifted the balance sheet 36.42% from year-end 2025. The transaction generated $58,456,000 in goodwill on total consideration of $184,672,000.
Merger and acquisition expense jumped to $7,746,000 from $289,000 in the first quarter and zero a year earlier, and the company also booked a $5,899,000 net realized loss on the sale and call of investment securities tied to a balance sheet repositioning, versus no such loss in the prior quarter. Total non-interest expense rose 70.3% from the first quarter to $39,143,000, driven by the merger charges, additional salaries and benefits from 100 new employees added in the deal, and core deposit intangible amortization. Non-interest income swung to a loss of $1,970,000 from income of $2,788,000 in the first quarter, a 170.7% decline driven by the securities loss.
Provision for credit losses rose to $5,635,000 from $90,000 in the first quarter, reflecting an updated peer-group reserve methodology adopted after the merger along with organic loan growth. Net loan charge-offs climbed to $5,498,000, a 0.63% annualized rate, from $13,000 a year earlier, with $2.6 million tied to an acquired student loan portfolio. Non-accrual loans fell $3,240,000 from the first quarter to $19,757,000 but were up $12,802,000 from year-end 2025.
Gross loans grew $992.7 million, or 38.91%, from the first quarter to $1.0 billion year-to-date, with $878.5 million of that from USB loans acquired at fair value. Total deposits rose $977.9 million, or 31.13%, including $1.1 billion in deposits assumed in the merger, while brokered deposits fell $73.1 million. The acquired deposit base helped push the total cost of deposits down to 1.31% from 1.40% in the first quarter.
Net interest margin on a fully taxable-equivalent basis expanded to 4.56% from 4.30% in the first quarter and 4.10% a year earlier, and net interest income before provision rose 52.87% year-over-year to $50,912,000. A portion of that expansion came from accretion of fair value marks on the acquired loan book, which added an estimated 44 basis points, or $4,960,000, to the margin, up from 25 basis points in the first quarter.
Return on average assets fell to 0.22% from 1.24% in the first quarter, and return on average equity dropped to 1.77% from 10.99%. Even stripping out merger-related and non-core items, return on average assets slipped to 1.00% from 1.27% and return on average equity to 8.10% from 11.18%, indicating some margin compression beyond the one-time charges. Tangible book value per share fell to $15.47 from $16.39 as goodwill and intangibles from the deal diluted the metric, even as book value per share rose to $22.40 from $21.85. Weighted average diluted shares outstanding rose to 27,108,920 from 19,137,134, reflecting shares issued to USB shareholders in the merger.