Community West Bancshares: Form 10-Q for the period ended Mar 31, 2026

General

We are a central California-based bank holding company for a bank subsidiary, Community West Bank (the “Bank”). We offer 26 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 April 22, 2026, the Board of Directors declared a $0.12 per share cash dividend payable on May 22, 2026 to shareholders of record as of May 8, 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 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 March 31, 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 (the “Bank”), a wholly owned subsidiary of the Company, with the Bank continuing as the surviving bank. The financial condition and results of operation of the combined companies will begin to be reported in the 2026 second quarter results.
• The Company reported net income during the first quarter of $11.5 million, or earnings per diluted common share of $0.60, compared to net income of $11.2 million and $0.58, respectively, in the fourth quarter of 2025.
• The Company recorded a provision for credit losses of $90,000 during the quarter ended March 31, 2026, as compared to a provision for credit losses of $515,000 during the trailing quarter. The current quarter provision is attributed to a provision for loan losses totaling $122,000 and a provision for unfunded commitments of $1,000, partially offset by a credit to the reserve for held-to-maturity securities of $33,000.
• Gross loans of $2.55 billion at March 31, 2026 increased by $10.2 million or 0.40% compared to $2.54 billion at December 31, 2025.
• Total assets increased by $12.7 million or 0.34% at March 31, 2026 compared to December 31, 2025.
• Total deposits of $3.1 billion at March 31, 2026 increased by 1.50% or $46.3 million compared to December 31, 2025.
• Total cost of deposits increased to 1.40% for the quarter ended March 31, 2026 compared to 1.39% for the quarter ended December 31, 2025.
• Average non-interest bearing demand deposit accounts as a percentage of total average deposits was 33.32% and 34.97% for the quarters ended March 31, 2026 and December 31, 2025, respectively.
• Net interest margin increased to 4.30% for the quarter ended March 31, 2026, from 4.24% for the quarter ended December 31, 2025.
• There were $23.0 million of non-performing assets as of March 31, 2026. Net loan recoveries were $37,000 for the quarter ended March 31, 2026 and loans delinquent 30 days or more were $27.5 million as of March 31, 2026.
• Capital positions remain strong at March 31, 2026 with a 9.94% Tier 1 Leverage Ratio; a 11.84% Common Equity Tier 1 Ratio; a 12.01% Tier 1 Risk-Based Capital Ratio; and a 14.24% Total Risk-Based Capital Ratio.
• The Company declared a $0.12 per common share cash dividend, payable on May 22, 2026 to shareholders of record as of May 8, 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

(In thousands, except share and per-share amounts)

During the three months ended March 31, 2026, the Company reported net income of $11,489,000. Basic and diluted earnings per share for the three months ended March 31, 2026 were $0.60 compared to $0.44 for the three months ended March 31, 2025. During the three months ended March 31, 2026, the Company recorded a $90,000 provision for credit losses compared to a $41,000 credit for credit losses during the three months ended March 31, 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

(Dollars in thousands)

(Dollars in thousands)

40

(In thousands, except share and per-share amounts)

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.

SCHEDULE OF AVERAGE BALANCES AND AVERAGE YIELDS AND RATES

(Dollars in thousands)

(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $336 and $348 at March 31, 2026 and March 31, 2025, respectively.

(2) Loan interest income includes loan fees (costs) of $589 and $99 at March 31, 2026 and March 31, 2025, respectively. Loan interest income includes an accretion on loan marks of $2,253 and $3,339 at March 31, 2026 and March 31, 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.

(In thousands)

(1) Computed on a tax equivalent basis for securities exempt from federal income taxes.

Comparison of the quarter ended March 31, 2026 and March 31, 2025

The Company’s net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, increased 26 basis points to 4.30% for the first quarter of 2026, from 4.04% for the first quarter of 2025. Average interest earning assets were $3,423,934,000 for the three months ended March 31, 2026 compared to $3,263,483,000 for the three months ended March 31, 2025. The $160,451,000 increase in average earning assets was attributed to the $202,980,000 or 8.72% increase in average loans, partially offset by a $2,497,000 decrease in interest-earning deposits and $40,032,000 decrease in investment securities. For the three months ended March 31, 2026, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks decreased 19 basis points. The effective yield on loans increased 3 basis points. Average interest bearing liabilities increased 3.53% to $2,190,436,000 for the three months ended March 31, 2026, compared to $2,115,718,000 for the same period in 2025.

Interest and fee income from loans increased $3,480,000 or 9.06% for the three months ended March 31, 2026 compared to the same period in 2025. The yield on average loans, excluding nonaccrual loans, was 6.72% for the three months ended March 31, 2026 compared to 6.69% for the same period in 2025. The accretion from fair value marks on loans contributed 38 basis points to the loan yield for the three months ended March 31, 2026 compared to 58 basis points for the same period in 2025.

Interest income from interest-earning deposits in other banks decreased $206,000 in the three months ended March 31, 2026 to $850,000 compared to $1,056,000 for the same period in 2025. The yield on average interest-earning deposits decreased 78 basis points to 3.75% for the three month period ended March 31, 2026 compared to 4.53% for the same period in 2025. Average interest-earning deposits for the three month period ended March 31, 2026 decreased $2,497,000 or 2.68% to $90,720,000 compared to $93,217,000 for the same period in 2025.

Interest income from total investment securities decreased $532,000 in the three months ended March 31, 2026 to $5,473,000 compared to $6,005,000 for the same period in 2025. The yield on average total investment securities decreased twelve basis points to 2.73% for the three month period ended March 31, 2026 compared to 2.85% for the same period in 2025. Average total investment securities for the three month period ended March 31, 2026 decreased $40,032,000 or 4.75% to $802,402,000 compared to $842,434,000 for the same period in 2025.

Total interest income for the three months ended March 31, 2026 increased $2,754,000 or 6.10% to $47,892,000 compared to $45,138,000 for the three months ended March 31, 2025. The yield on interest earning assets increased 6 basis points to 5.71% on a fully tax equivalent basis for the three months ended March 31, 2026 from 5.65% for the period ended March 31, 2025. The increase was the result of yield changes, increases in interest rates, and asset mix changes.

Interest expense on deposits for the three months ended March 31, 2026 and 2025 was $10,835,000 and $10,388,000, respectively. The average interest rate on interest bearing deposits decreased to 2.09% for the three months ended March 31, 2026 compared to 2.21% for the period ended March 31, 2025. Average interest-bearing deposits increased 9.93% or $189,563,000 to $2,099,119,000 for the three months ended March 31, 2026 compared to $1,909,556,000 for the period ended March 31, 2025.

Average other borrowed funds were $91,317,000 with an effective rate of 4.62% for the three months ended March 31, 2026 compared to $206,162,000 with an effective rate of 4.98% for the three months ended March 31, 2025. Total interest expense on other borrowed funds was $1,054,000 for the three months ended March 31, 2026 and $2,568,000 for the three months ended March 31, 2025.

The cost of interest-bearing liabilities decreased 28 basis points to 2.20% for the three month period ended March 31, 2026 compared to 2.48% for the same period in 2025. The cost of total deposits decreased to 1.40% compared to 1.45% for the three month periods ended March 31, 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 5.23% to $1,049,045,000 for the three month period ended March 31, 2026 compared to $996,921,000 for the same period in 2025. The ratio of average non-interest bearing demand deposits to average total deposits decreased to 33.32% in the three month period ended March 31, 2026 compared to 34.30% for the same period in 2025.

Net interest income before the provision for credit losses for the three months ended March 31, 2026 increased by $3,821,000 or 11.87% to $36,003,000 compared to $32,182,000 for the same period in 2025. The increase was a result of increased interest income on average earnings assets and a decrease 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:

(Dollars in thousands)

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 first quarter of 2026, the Company recorded net loan recoveries of $37,000 compared to $125,000 for the same period in 2025. The net recovery ratio reflects annualized net recoveries to average loans of 0.01% for the quarter ended March 31, 2026, compared to annualized net recoveries of 0.02% for the quarter ended March 31, 2025. During the quarter ended March 31, 2026, non-accrual loans increased $16,042,000 to $22,997,000 compared to $6,955,000 at December 31, 2025. The increase in non-accrual loans during the quarter was due to two substandard loans that reached 90 days past due subsequent to quarter-end. Both loans are considered collateral dependent and individually evaluated for impairment. The loans are well secured and management believes that the current specific reserves are adequate as of March 31, 2026. During the quarter ended March 31, 2026, the Company recorded a $122,000 provision for loan losses, compared to $168,000 for the same period in 2025. In addition to the provision for credit losses on loans for the quarter ended March 31, 2026, the Company recorded a credit to the provision for credit losses on held-to-maturity securities of $33,000 as compared to $182,000 in the prior year quarter. The Company recorded a provision for unfunded loan commitments totaling $1,000 for the quarter ended March 31, 2026 compared to a credit to the provision of $27,000 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.

The following table shows classified loans for the periods indicated:

Non-Interest Income

The following table shows significant components of non-interest income for the periods indicated:

(Dollars in thousands)

45

Non-interest income is comprised of customer service charges, loan placement fees, net gains/losses on sales and calls of investment securities, appreciation in cash surrender value of bank-owned life insurance, FHLB dividends, and other income. Non-interest income was $2,788,000 for the three months ended March 31, 2026 compared to $2,611,000 for the same period in 2025. The 6.78% or $177,000 increase in non-interest income during the three months ended March 31, 2026 was primarily driven by higher FHLB dividends, partially offset by a decrease in interchange fees, loan placement fees, and other income.

The Bank currently holds $10,978,000 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 $557,000 for the three months ended March 31, 2026, which included a special dividend, compared to $241,000 for the three months ended March 31, 2025.

Non-Interest Expenses

The following table shows significant components of non-interest expense for the periods indicated:

(Dollars in thousands)

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 decreased $483,000 or 2.06% to $22,987,000 for the three months ended March 31, 2026, compared to $23,470,000 for the three months ended March 31, 2025. The net decrease for the three months ended March 31, 2026 was primarily the result of decreases in professional services of $242,000, salaries and employee benefits of $195,000, information technology of $189,000, advertising of $60,000 ATM/Debit card expenses of $46,000, and data processing expenses of $40,000. The year over year decrease in professional services was primarily driven by a decrease in audit and consulting fees.

Salaries and employee benefits decreased $195,000 or 1.50% to $12,764,000 for the first three months of 2026 compared to $22,090,000 for the three months ended March 31, 2025. The decrease in salaries and benefits was a reflection of a decrease in full-time equivalent employees, partially offset by annual merit increases The year-to-date average full time equivalent employees were 327 for the three months ended March 31, 2026, compared to 344 for the three months ended March 31, 2025.

Provision for Income Taxes

Our effective income tax rate was 26.89% and 27.02% for the three month periods ended March 31, 2026 and 2025.

The Company reported an income tax provision of $4,225,000 and $3,071,000 for the three month periods ended March 31, 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 March 31, 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 March 31, 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 March 31, 2026.

FINANCIAL CONDITION

Summary of Changes in Consolidated Balance Sheets

Total assets were $3,702,983,000 as of March 31, 2026, compared to $3,690,317,000 at December 31, 2025, an increase of 0.34% or $12,666,000. Total gross loans were $2,551,058,000 at March 31, 2026, compared to $2,540,857,000 at December 31, 2025, an increase of $10,201,000 or 0.40%. Total cash and cash equivalents increased 9.53% or $11,342,000 to $130,326,000 at March 31, 2026 compared to $118,984,000 at December 31, 2025. The investment portfolio decreased 1.00% or $7,620,000 to $755,704,000 at March 31, 2026 compared to $763,324,000 at December 31, 2025. Total deposits increased 1.50% or $46,319,000 to $3,141,593,000 at March 31, 2026, compared to $3,095,274,000 at December 31, 2025. Shareholders’ equity increased 2.35% or $9,615,000 to $419,203,000 at March 31, 2026, compared to $409,588,000 at December 31, 2025. Accrued interest payable and other liabilities was $39,011,000 at March 31, 2026, compared to $42,929,000 at December 31, 2025, a decrease of 9.13% or $3,918,000. The increase in shareholders’ equity was driven by the retention of earnings, and issuance of common stock, partially offset by dividends paid.

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 March 31, 2026, investment securities with a fair value of $416,048,000, or 55% 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 decreased $7,620,000 to $755,704,000 at March 31, 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 $40,734,000 at March 31, 2026, compared to net unrealized losses of $39,673,000 at December 31, 2025 and $56,466,000 at March 31, 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 $10,201,000 or 0.40% to $2,551,058,000 as of March 31, 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:

As of March 31, 2026, in management’s judgment, a concentration of loans existed in loans commercial real estate representing approximately 56.8% 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 months ended March 31, 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:

(Dollars in thousands)

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:

49

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 March 31, 2026 there were $22,997,000 nonperforming assets, compared to $6,955,000 at December 31, 2025. The increase in non-accrual loans during the quarter was due to two substandard loans that reached 90 days past due subsequent to quarter-end. Both loans are considered collateral dependent and individually evaluated for impairment.

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 $30,230,000 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):

As of March 31, 2026, the balance in the allowance for credit losses (ACL) on loans was $30,230,000, or 1.18% 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 March 31, 2026, the provision for credit losses was primarily driven by limited loan growth during the quarter. There were no changes to the economic scenarios or weightings as compared to the prior quarter.

The balance of unfunded commitments to extend credit on construction and other loans and letters of credit was $503,127,000 as of March 31, 2026, compared to $491,413,000 as of December 31, 2025. At March 31, 2026 and December 31, 2025, the balance of the reserve for unfunded commitments was $1,326,000 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.

(Dollars in thousands)

The balance of past due loans 30 days or more increased by $4,268,000 from $23,208,000 at December 31, 2025 to $27,476,000 as of March 31, 2026. The increase in non-accrual loans during the quarter was due to two substandard loans that reached 90 days past due subsequent to quarter-end. Both loans are considered collateral dependent and individually evaluated for impairment.

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 $46,319,000 or 1.50% to $3,141,593,000 as of March 31, 2026, compared to $3,095,274,000 as of December 31, 2025. Interest-bearing deposits increased $57,443,000 or 2.82% to $2,093,952,000 as of March 31, 2026, compared to $2,036,509,000 as of December 31, 2025. Non-interest bearing deposits decreased $11,124,000 or 1.05% to $1,047,641,000 as of March 31, 2026, compared to $1,058,765,000 as of December 31, 2025.

The composition of the deposits and average interest rates at March 31, 2026 and December 31, 2025 is summarized in the table below.

(Dollars in thousands)

As of March 31, 2026 there was $1,213,266,000 in uninsured deposits or 38.62% of total deposits, compared to $1,185,118,000 and 38.29% as of December 31, 2025.

Other Borrowings

As of March 31, 2026, the Company had $34,000,000 Federal Home Loan Bank (“FHLB”) of San Francisco overnight advances outstanding. 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 $419,203,000 at March 31, 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 $11,489,000, stock issued under the employee purchase plan of $113,000, the effect of share-based compensation expense of $278,000, stock options exercised of $302,000 and an increase in accumulated other comprehensive loss of $211,000, partially offset by common stock cash dividends of $2,299,000

During the first three months of 2026, the Company declared and paid $2,299,000 in cash dividends ($0.12 per common share) to holders of common stock.

The following table presents the Company’s regulatory capital ratios as of March 31, 2026 and December 31, 2025.

(Dollars in thousands)

The following table presents the Bank’s regulatory capital ratios as of March 31, 2026 and December 31, 2025.

(Dollars in thousands)

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 March 31, 2026, the Company had unpledged securities totaling $230,838,000 available as a secondary source of liquidity and total cash and cash equivalents of $130,326,000. Cash and cash equivalents at March 31, 2026 increased 9.53% 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 March 31, 2026, our available borrowing capacity includes approximately $110,000,000 in unsecured credit lines with our correspondent banks, $811,119,000 in unused FHLB borrowing capacity, and a $3,286,000 secured credit line at the Federal Reserve Bank. We believe our liquidity sources to be stable and adequate. At March 31, 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 March 31, 2026 and December 31, 2025:

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.

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 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 March 31, 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.

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.

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 March 31, 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 desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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.