Central Valley(CVCY) - 2024 Q4 - Annual Results

Financial Highlights Community West Bancshares reported a transformative year in 2024, marked by a significant merger, with Q4 2024 net income rising to $6.9 million driven by an improved net interest margin of 3.95% and lower deposit costs - President and CEO James J. Kim described 2024 as a "transformative chapter" due to a merger that enhanced the company's team, expertise, territory, and technology offerings[3] Q4 2024 Key Performance Indicators | Metric | Value | Change vs. Q3 2024 | | :--- | :--- | :--- | | Net Income | $6.9 million | Increased from $3.4 million | | Diluted EPS | $0.36 | Increased from $0.18 | | Gross Loans | +$37.1 million | 6.46% annualized growth | | Cost of Deposits | 1.49% | Decreased from 1.69% | | Net Interest Margin | 3.95% | Increased from 3.69% | Capital Ratios as of December 31, 2024 | Ratio | Value | | :--- | :--- | | Tier 1 Leverage Ratio | 9.17% | | Common Equity Tier 1 Ratio | 11.15% | | Tier 1 Risk-Based Capital Ratio | 11.33% | | Total Risk-Based Capital Ratio | 13.58% | - A cash dividend of $0.12 per common share was declared, payable on February 21, 2025, to shareholders of record as of February 7, 2025[4] Results of Operations The company's financial performance in Q4 2024 showed significant improvement over the prior quarter, driven by higher net interest income and reduced merger-related expenses, though full-year 2024 net income was substantially lower than 2023 due to a large provision for credit losses and merger-related non-interest expenses Net Income and Earnings Per Share (EPS) For Q4 2024, consolidated net income was $6.9 million ($0.36 diluted EPS), compared to $3.4 million ($0.18 diluted EPS) in Q3 2024, with full-year 2024 net income of $7.7 million ($0.45 diluted EPS) representing a steep decline from $25.5 million ($2.17 diluted EPS) in 2023 due to a large provision for credit losses and increased non-interest expenses from the merger Net Income and Diluted EPS Comparison | Period | Net Income (in thousands) | Diluted EPS | | :--- | :--- | :--- | | Q4 2024 | $6,895 | $0.36 | | Q3 2024 | $3,385 | $0.18 | | Q4 2023 | $5,893 | $0.50 | Full Year Net Income and Diluted EPS | Period | Net Income (in thousands) | Diluted EPS | | :--- | :--- | :--- | | FY 2024 | $7,666 | $0.45 | | FY 2023 | $25,536 | $2.17 | - The decrease in full-year 2024 earnings was primarily driven by a provision for credit losses of $11.1 million and a $39.4 million increase in non-interest expenses, largely from merger and acquisition activities[10] Net Interest Income and Margin Net interest margin (NIM) on a fully tax equivalent basis improved to 3.95% in Q4 2024, driven by a higher yield on interest-earning assets (5.59%) and a decrease in the cost of deposits to 1.49%, resulting in Q4 2024 net interest income of $32.0 million Net Interest Margin (NIM) Trend | Period | Net Interest Margin (FTE) | | :--- | :--- | | Q4 2024 | 3.95% | | Q3 2024 | 3.69% | | Q4 2023 | 3.52% | - The yield on interest-earning assets increased to 5.59% in Q4 2024 from 4.51% in Q4 2023, while the cost of total deposits increased to 1.49% from 0.87% over the same period[15] - Net interest income in Q4 2024 was positively impacted by approximately 24 basis points ($1.9 million) from the net accretion of fair value marks on acquired loans[15] Non-Interest Income Total non-interest income for Q4 2024 was $2.3 million, a significant increase from $1.1 million in Q3 2024 due to the absence of losses on sales of securities, though full-year non-interest income decreased to $6.4 million from $7.0 million in 2023 primarily due to higher net realized losses on investment securities sales Non-Interest Income Comparison (in thousands) | Period | Total Non-Interest Income | Net Realized Losses on Securities | | :--- | :--- | :--- | | Q4 2024 | $2,303 | $0 | | Q3 2024 | $1,105 | $(1,853) | | Q4 2023 | $2,267 | $(424) | - The increase in non-interest income in Q4 2024 compared to the trailing quarter was due to the absence of losses on security sales[18] - For the full year 2024, net realized losses on sales of investment securities increased by 363.0% to $4.2 million, which was the primary driver for the 8.2% decline in total annual non-interest income[18] Non-Interest Expense Total non-interest expense decreased to $23.2 million in Q4 2024 from $27.7 million in Q3 2024, reflecting the materialization of cost savings after systems integration, while full-year 2024 non-interest expenses surged 71.2% to $94.7 million, driven by $9.6 million in direct merger expenses and higher operating costs Non-Interest Expense Comparison (in thousands) | Period | Total Non-Interest Expense | Merger & Acquisition Expense | | :--- | :--- | :--- | | Q4 2024 | $23,188 | $467 | | Q3 2024 | $27,677 | $3,208 | | Q4 2023 | $14,854 | $581 | - Cost savings began to materialize in Q4 2024 in salaries, IT, data processing, and professional services following the completion of systems integration and re-branding[21] - For the full year 2024, merger and acquisition expenses were $9.6 million, a 707.2% increase from $1.2 million in 2023[21] GAAP to Non-GAAP Reconciliation The company provided non-GAAP metrics to exclude merger-related costs and security sale losses, offering a view of core performance, with Q4 2024 comparable non-GAAP net income at $7.2 million ($0.38 per share) and an efficiency ratio of 66.19% Q4 2024 GAAP vs. Non-GAAP (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Net Income | $6,895 | $330 | $7,225 | | Diluted EPS | $0.36 | $0.02 | $0.38 | Full Year 2024 GAAP vs. Non-GAAP (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Net Income | $7,666 | $17,392 | $25,058 | | Diluted EPS | $0.45 | $1.01 | $1.46 | Financial Position As of December 31, 2024, total assets stood at $3.52 billion, a 45% increase from year-end 2023 primarily due to the merger, with gross loans growing to $2.33 billion and total deposits increasing to $2.91 billion, while maintaining significant liquidity of $1.28 billion Balance Sheet Summary Total assets increased by $1.09 billion (45%) to $3.52 billion at December 31, 2024, compared to the prior year-end, largely as a result of the merger on April 1, 2024, which added approximately $43 million in goodwill and $10.0 million in core deposit intangibles Total Assets Comparison (in thousands) | Date | Total Assets | | :--- | :--- | | Dec 31, 2024 | $3,521,771 | | Sep 30, 2024 | $3,531,298 | | Dec 31, 2023 | $2,433,426 | - The merger on April 1, 2024, resulted in the recording of approximately $43 million in goodwill and $10.0 million in core deposit intangibles[22] Loan Portfolio Total gross loans reached $2.33 billion at December 31, 2024, an 81% increase from $1.29 billion a year prior, with the growth fueled by the merger and a significant shift in the loan mix towards consumer loans, which now represent 17.8% of the portfolio Loan Portfolio Composition (in thousands) | Loan Type | Dec 31, 2024 | % of Total | Dec 31, 2023 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Commercial | $180,745 | 7.7% | $139,022 | 10.8% | | Real Estate | $1,736,498 | 74.3% | $1,094,327 | 84.8% | | Consumer | $415,102 | 17.8% | $55,606 | 4.3% | | Total Gross Loans | $2,334,221 | 99.9% | $1,290,797 | 100.0% | Deposit Composition Total deposits grew to $2.91 billion at December 31, 2024, from $2.04 billion at the end of 2023, with the composition shifting as non-interest-bearing deposits decreased to 33.7% of total deposits from 46.6% a year ago, while interest-bearing deposits increased proportionally Deposit Composition (in thousands) | Deposit Type | Dec 31, 2024 | % of Total | Dec 31, 2023 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Non-interest bearing | $980,824 | 33.7% | $951,541 | 46.6% | | Interest-bearing | $1,929,953 | 66.3% | $1,090,071 | 53.4% | | Total Deposits | $2,910,777 | 100.0% | $2,041,612 | 100.0% | - The ratio of average non-interest bearing deposits to total average deposits was 36.02% for Q4 2024, down from 46.61% in Q4 2023[25] Liquidity and Capital The company maintained a strong liquidity position with total available sources of $1.28 billion as of December 31, 2024, an increase from $1.17 billion at year-end 2023, with capital ratios remaining well above regulatory requirements Primary and Secondary Liquidity Sources (in thousands) | Source | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $120,398 | $53,728 | | Unpledged investment securities | $403,669 | $574,633 | | FHLB borrowing availability | $576,556 | $307,483 | | Unsecured lines of credit | $110,000 | $110,000 | | Total | $1,284,317 | $1,168,206 | Credit Quality Credit quality remains stable, with net loan charge-offs of only $59,000 in Q4 2024, while the allowance for credit losses (ACL) increased to $25.8 million from $14.7 million a year ago, primarily due to the provision for loans acquired in the merger Allowance for Credit Losses (ACL) | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | ACL for Loans (in thousands) | $25,803 | $14,653 | | ACL as % of Total Loans | 1.11% | 1.14% | - The year-to-date provision for loan losses of $10.8 million was primarily due to the acquisition of loans from the merger as of April 1, 2024[30] - Substandard loans increased to $44.3 million (1.9% of total) at year-end 2024, up from $20.3 million (1.7% of total) at year-end 2023[30] Shareholder Information The Board of Directors declared a quarterly cash dividend, demonstrating confidence in the company's capital position and ongoing financial stability Dividend Declaration On January 22, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.12 per share on the company's common stock, payable on February 21, 2025, to shareholders of record as of February 7, 2025, affirming the company remains well capitalized - A regular quarterly cash dividend of $0.12 per share was declared[32] Dividend Schedule | Event | Date | | :--- | :--- | | Declaration Date | January 22, 2025 | | Record Date | February 7, 2025 | | Payment Date | February 21, 2025 | Company Overview Effective April 1, 2024, Central Valley Community Bancorp merged with Community West Bancshares, with the combined entity adopting the Community West Bancshares and Community West Bank names, operating full-service centers throughout Central California and offering a range of commercial, agricultural, and retail banking services - On April 1, 2024, Central Valley Community Bancorp completed its merger with Community West Bancshares, with the surviving entities being renamed Community West Bancshares and Community West Bank[33] - The company is headquartered in Fresno, California and operates full-service Banking Centers throughout Central California, specializing in Commercial Lending, Agribusiness, SBA, and various mortgage services[34] Financial Statements and Schedules This section contains the detailed, unaudited consolidated financial statements and supporting schedules for Community West Bancshares, including the Balance Sheets, Statements of Income, Selected Ratios, and Average Balances and Yields for the periods ended December 31, 2024 Forward-looking Statements This section outlines potential risks and uncertainties that could cause actual results to differ from forward-looking statements, including economic conditions, interest rate changes, credit quality, competition, merger integration challenges, and regulatory changes - The report contains forward-looking statements subject to risks including economic conditions, interest rate fluctuations, credit quality, competition, and risks related to the successful integration of the recent merger[37] Consolidated Balance Sheets The consolidated balance sheet as of December 31, 2024, shows total assets of $3.52 billion, total liabilities of $3.16 billion, and total shareholders' equity of $362.7 million, compared to total assets of $2.43 billion and shareholders' equity of $207.1 million at year-end 2023 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $3,521,771 | $2,433,426 | | Total Loans, net | $2,308,418 | $1,276,144 | | Total Deposits | $2,910,777 | $2,041,612 | | Total Liabilities | $3,159,086 | $2,226,362 | | Total Shareholders' Equity | $362,685 | $207,064 | Consolidated Statements of Income The consolidated income statement for Q4 2024 details revenues and expenses leading to a net income of $6.9 million, while for the full twelve months ended December 31, 2024, net interest income was $110.4 million and net income was $7.7 million Full Year Income Statement Highlights (in thousands) | Account | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Interest Income | $110,367 | $82,429 | | Provision for Credit Losses | $11,113 | $309 | | Non-Interest Income | $6,445 | $7,020 | | Non-Interest Expenses | $94,701 | $55,300 | | Net Income | $7,666 | $25,536 | Selected Ratios This schedule presents key performance and capital ratios on a quarterly basis, with Q4 2024 showing a return on average assets (ROAA) of 0.78%, return on average equity (ROAE) of 7.55%, an efficiency ratio of 67.55%, and a Bancorp Tier 1 leverage ratio of 9.17% Key Ratios for Q4 2024 | Ratio | Value | | :--- | :--- | | Return on Average Assets (ROAA) | 0.78% | | Return on Average Equity (ROAE) | 7.55% | | Efficiency Ratio | 67.55% | | Book Value Per Share | $19.11 | | Tier 1 Leverage - Bancorp | 9.17% | Schedule of Average Balances and Yields This schedule provides a detailed breakdown of average asset and liability balances and their corresponding yields and costs, with Q4 2024 showing an average yield on total interest-earning assets of 5.59% and an average cost of total interest-bearing liabilities of 2.59%, resulting in a net interest margin of 3.95% Q4 2024 Average Yields and Costs | Item | Average Rate | | :--- | :--- | | Yield on Interest-Earning Assets | 5.59% | | Yield on Loans | 6.61% | | Cost of Interest-Bearing Deposits | 2.33% | | Cost of Total Interest-Bearing Liabilities | 2.59% | | Net Interest Margin | 3.95% |