Central Valley(CVCY) - 2024 Q3 - Quarterly Results

Community West Bancshares Q3 2024 Earnings Report Financial Highlights The company reported Q3 net income of $3.4 million, reflecting merger impacts and balance sheet repositioning Q3 2024 Earnings Summary | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $3.4 million | ($6.3 million) | $6.4 million | | Diluted EPS | $0.18 | ($0.33) | $0.54 | Balance Sheet Growth (as of Sep 30, 2024 vs Dec 31, 2023) | Metric | Growth Amount | Growth Rate | | :--- | :--- | :--- | | Total Assets | +$1.1 billion | +45.12% | | Total Gross Loans | +$1.0 billion | +77.96% | | Total Deposits | +$880.1 million | +43.11% | - The company is strategically repositioning its balance sheet by selling available-for-sale investment securities to fund loan growth, with proceeds from sales totaling $64.2 million year-to-date[3] Key Performance Ratios (Q3 2024) | Ratio | Value | | :--- | :--- | | Net Interest Margin | 3.69% | | Total Cost of Deposits | 1.69% | | Tier 1 Leverage Ratio | 9.38% | | Total Risk-Based Capital Ratio | 13.55% | Management Commentary Management highlighted the transformative merger and system integration as key milestones for future growth and efficiency - CEO James J. Kim highlighted the completion of the merger and system integration as foundational milestones for future growth, establishing the new Community West Bank as a premier community bank in Central California[7] - CFO Shannon Livingston stated that with most merger-related expenses behind them, future operating results are expected to reflect the implemented efficiencies and synergies[8] Results of Operations Q3 net income fell to $3.4 million year-over-year, driven by a 106% surge in non-interest expenses from the merger Consolidated Income Statement Summary (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $30,214 | $20,527 | $78,343 | $62,313 | | Provision for Credit Losses | ($518) | $186 | $9,889 | $476 | | Non-Interest Income | $1,105 | $1,583 | $4,142 | $4,752 | | Non-Interest Expense | $27,677 | $13,436 | $71,513 | $40,446 | | Net Income (Loss) | $3,385 | $6,390 | $771 | $19,642 | - The decrease in earnings for Q3 and the nine-month period was primarily due to merger and acquisition expenses and the additional operating costs associated with the expanded company[13][14] Key Performance Ratios (Annualized) | Ratio | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Return on Average Equity (ROAE) | 3.84% | 13.60% | | Return on Average Assets (ROAA) | 0.38% | 1.02% | Net Interest Income and Margin Net interest margin expanded to 3.69% in Q3 2024, driven by higher asset yields that outpaced rising deposit costs Net Interest Margin and Component Yields | Metric | Q3 2024 | Q3 2023 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin (FTE) | 3.69% | 3.47% | 3.65% | | Yield on Interest Earning Assets | 5.52% | 4.46% | 5.50% | | Cost of Total Deposits | 1.69% | 0.90% | 1.71% | - Average loans increased by over $1.0 billion for Q3 2024 compared to Q3 2023, primarily due to the merger, with the effective yield on average loans increasing to 6.53%[16] Non-Interest Income Total non-interest income declined 30.2% in Q3 2024 due to strategic losses on securities sales to fund loan growth Non-Interest Income Components (Q3 2024 vs Q3 2023, in thousands) | Component | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Service charges | $478 | $376 | 27.1% | | Loan placement fees | $251 | $119 | 110.9% | | Net realized losses on sales of securities | ($1,853) | ($39) | 4651.3% | | Other income | $1,040 | $283 | 267.5% | | Total non-interest income | $1,105 | $1,583 | (30.2)% | - The decrease in total non-interest income was due to strategic sales of investment securities, with proceeds used to fund loan growth[22] Non-Interest Expense Non-interest expenses more than doubled to $27.7 million in Q3 2024, primarily due to merger-related costs and expansion Non-Interest Expense Components (Q3 2024 vs Q3 2023, in thousands) | Component | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $13,710 | $7,474 | 83.4% | | Merger and acquisition expense | $3,208 | $365 | 778.9% | | Information technology | $1,878 | $915 | 105.2% | | Total non-interest expenses | $27,677 | $13,436 | 106.0% | - The increase in non-interest expense was due to the merger, which added 131 full-time equivalent employees and seven banking centers[26] Non-GAAP Financial Measures Non-GAAP measures show core net income of $5.7 million, excluding merger costs and other non-recurring items - Management uses non-GAAP measures to facilitate analysis of the Company's core operating results and for internal budgeting and business management[10] GAAP vs. Non-GAAP Reconciliation (Q3 2024, in thousands except per share) | Metric | GAAP | Adjustments | Non-GAAP (Comparable) | | :--- | :--- | :--- | :--- | | Net Income | $3,385 | $2,308 | $5,693 | | Diluted EPS | $0.18 | $0.12 | $0.30 | | ROAA (annualized) | 0.38% | | 0.64% | | ROAE (annualized) | 3.84% | | 6.45% | | Efficiency Ratio | 88.37% | | 73.76% | Balance Sheet Analysis Total assets grew 45.1% to $3.53 billion since year-end 2023, driven by the recent merger's impact on loans and deposits - Total assets increased by $1.1 billion, or 45.12%, from December 31, 2023, to September 30, 2024, largely due to the merger[28] - As a result of the merger, the company recorded approximately $42.6 million in goodwill and $10.0 million in core deposit intangibles[28] Asset and Loan Portfolio Gross loans increased by 78% to $2.3 billion since year-end, with the merger shifting the portfolio mix toward consumer loans Loan Portfolio Composition (in thousands) | Loan Type | Sep 30, 2024 | % of Total | Dec 31, 2023 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Commercial | $160,816 | 7.0% | $139,022 | 10.8% | | Real Estate | $1,726,444 | 75.1% | $1,094,327 | 84.8% | | Consumer | $407,919 | 17.8% | $55,606 | 4.3% | | Total Gross Loans | $2,297,143 | 100.0% | $1,290,797 | 100.0% | Deposits and Liquidity Total deposits rose 43% to $2.92 billion, supported by strong liquidity sources of $1.28 billion Deposit Composition (in thousands) | Deposit Type | Sep 30, 2024 | % of Total | Dec 31, 2023 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Non-interest bearing | $1,076,423 | 36.8% | $951,541 | 46.6% | | Interest-bearing | $1,845,272 | 63.2% | $1,090,071 | 53.4% | | Total Deposits | $2,921,695 | 100.0% | $2,041,612 | 100.0% | Total Liquidity Sources (in thousands) | Source | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Liquidity | $1,275,858 | $1,168,206 | Credit Quality Credit quality remained strong with net loan recoveries in Q3 and an allowance for credit losses of 1.08% of total loans - The company recorded net loan recoveries of $162,000 in Q3 2024, compared to net charge-offs of $194,000 in Q3 2023[36] - The allowance for credit losses for loans was $24.9 million, or 1.08% of total loans, as of September 30, 2024, with the increase driven by provisioning for acquired loans[37] Loan Risk Ratings (% of Total Portfolio) | Risk Rating | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Pass | 97.0% | 97.1% | 96.7% | | Special mention | 1.3% | 1.1% | 1.3% | | Substandard | 1.7% | 1.8% | 2.0% | Dividend Declaration The Board of Directors declared a regular quarterly cash dividend of $0.12 per common share - A regular quarterly cash dividend of $0.12 per share was declared, payable on November 22, 2024, to shareholders of record as of November 8, 2024[38] Company Overview The company completed its merger with Central Valley Community Bancorp, establishing a larger presence in Central California - The merger between Central Valley Community Bancorp and Community West Bancshares was completed on April 1, 2024, with the resulting entities named Community West Bancshares and Community West Bank[40] - The company is headquartered in Fresno, California and provides a full suite of banking services throughout Central California[41]