Central Valley(US:CVCY)2024-08-09 23:28PART 1: FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited statements show the financial impact of the April 2024 merger with Community West Bancshares Consolidated Balance Sheets Total assets grew 43.2% to $3.48 billion, driven by merger-related increases in loans and deposits Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $3,484,671 | $2,433,426 | +43.2% | | Total cash and cash equivalents | $109,669 | $53,728 | +104.1% | | Loans, net | $2,231,631 | $1,276,144 | +74.9% | | Goodwill | $96,379 | $53,777 | +79.2% | | Total Liabilities | $3,134,429 | $2,226,362 | +40.8% | | Total deposits | $2,869,300 | $2,041,612 | +40.5% | | Total Shareholders' Equity | $350,242 | $207,064 | +69.2% | Consolidated Statements of Operations A Q2 2024 net loss of $6.3 million resulted from merger-related credit provisions and expenses Quarterly and Six-Month Performance (in thousands, except per-share amounts) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $29,057 | $20,205 | $48,129 | $41,786 | | Provision for Credit Losses | $9,831 | $(343) | $10,407 | $290 | | Non-Interest Income | $1,400 | $1,594 | $3,037 | $3,169 | | Non-Interest Expenses | $28,503 | $13,805 | $43,836 | $27,010 | | Net (Loss) Income | $(6,290) | $6,282 | $(2,614) | $13,252 | | Diluted EPS | $(0.33) | $0.54 | $(0.17) | $1.13 | Notes to Consolidated Financial Statements Notes detail the merger accounting, credit loss allowance, goodwill, and a declared cash dividend - Effective April 1, 2024, Central Valley Community Bancorp merged with Community West Bancshares, with Central Valley being the surviving entity and subsequently changing its name to Community West Bancshares29 - The allowance for credit losses on loans increased to $24.94 million at June 30, 2024, from $14.65 million at year-end 2023, primarily driven by a $10.03 million provision6063 - On July 17, 2024, the Board of Directors declared a $0.12 per share cash dividend, payable on August 16, 2024131 Merger Consideration and Net Assets Acquired (in thousands) | Item | Amount | | :--- | :--- | | Total merger consideration | $143,714 | | Total assets acquired | $1,041,385 | | Total liabilities assumed | $(940,276) | | Total net assets acquired | $101,109 | | Goodwill created from transaction | $42,605 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The merger drove balance sheet growth but resulted in a net loss due to related expenses and provisions Financial Highlights Merger effects led to a $6.3 million net loss despite significant growth in loans, deposits, and assets - The company incurred a net loss of $6.3 million, or $0.33 per diluted share, in Q2 2024, primarily due to merger-related expenses and a provision for loan losses on the acquired portfolio143 Key Metrics as of June 30, 2024 | Metric | Value | Change vs. Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $3.48 billion | +43.20% | | Total Gross Loans | $2.26 billion | +74.82% | | Total Deposits | $2.87 billion | +40.54% | | Net Interest Margin (Q2) | 3.65% | +23 bps (vs Q1 2024) | | Tier 1 Leverage Ratio | 9.14% | -4 bps | Results of Operations A Q2 net loss of $6.3 million was driven by a $9.8M credit provision and a $14.7M rise in expenses - Comparable net income (non-GAAP), which excludes merger costs and other non-core items, was $7.8 million ($0.41 per diluted share) for Q2 2024149 - Net interest margin (FTE) for Q2 2024 increased 19 basis points to 3.65% from 3.46% in Q2 2023, as the higher yield on the expanded loan portfolio outweighed the increased cost of funds159 - Non-interest expenses for Q2 2024 rose 106.5% year-over-year to $28.5 million, with merger and acquisition expenses accounting for $5.6 million of the total177179 Financial Condition The merger expanded total assets to $3.48 billion, with loans up 74.8% and deposits up 40.5% - Total gross loans increased by $965.8 million (74.8%) to $2.26 billion, with commercial real estate loans comprising 56.0% of the total portfolio185187 - Nonperforming assets were $2.8 million as of June 30, 2024, compared to zero at the end of 2023, with the increase resulting from the acquired loan portfolio190 - The allowance for credit losses (ACL) on loans stood at $24.9 million, or 1.11% of total gross loans, up from $14.7 million at year-end 2023191 - Total deposits grew by $827.7 million (40.5%) to $2.87 billion, with uninsured deposits representing 37.85% of total deposits194196 Capital and Liquidity Capital ratios remained well-capitalized and liquidity was robust with significant available borrowing capacity - Primary liquidity sources include customer deposits, FHLB advances, and correspondent bank lines, with $110 million in unsecured credit lines and $256 million in unused FHLB secured advances204205 Consolidated Regulatory Capital Ratios | Ratio | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Tier 1 Leverage Ratio | 9.14% | 9.18% | | Common Equity Tier 1 Ratio | 11.36% | 12.78% | | Tier 1 Risk-Based Capital Ratio | 11.55% | 13.07% | | Total Risk-Based Capital Ratio | 13.87% | 16.08% | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity, which remains within policy limits - The company actively manages interest rate risk to minimize exposure of its net interest margin and equity to rate changes, with risk remaining within policy guidelines as of June 30, 2024207209 Interest Rate Sensitivity Analysis (Immediate Parallel Shift) | Rate Shift (bps) | Estimated Change in NII (Year 1) | Estimated Change in NII (Year 2) | | :--- | :--- | :--- | | +400 | (1.33)% | (2.02)% | | +200 | (0.85)% | (1.46)% | | +100 | 0.02% | (0.08)% | | -100 | (2.77)% | (3.59)% | | -200 | (4.20)% | (5.98)% | Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2024211 - No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls212 PART II: OTHER INFORMATION Other Information Items (Items 1-6) The company reports no new legal proceedings, material risk factor changes, or unregistered security sales - The company reports no legal proceedings to disclose for the period213 - There have been no material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K213 - No unregistered sales of equity securities or defaults upon senior securities were reported for the period214