Business Context and Reporting Period
This Form 8-K, dated April 27, 2017, reports a material definitive agreement entered into by Central Valley Community Bancorp (NASDAQ: CVCY) and its subsidiary, Central Valley Community Bank. The registrant is a bank holding company headquartered in Fresno, California.
Key Financial Metrics and Transaction Terms
- Transaction Type: Stock merger in which Folsom Lake Bank (OTCBB: FOLB) will merge into Central Valley Community Bank.
- Exchange Ratio: 0.80 shares of Central Valley Community Bancorp stock for each share of Folsom Lake Bank.
- Transaction Value: Approximately $33.6 million in fully diluted consideration based on the April 27, 2017 closing price, equating to $18.74 per Folsom Lake Bank share. The value is subject to fluctuation based on CVCY's stock price until closing.
- Termination Fee: Folsom Lake Bank must pay $1,115,828 if the agreement is terminated under certain specified circumstances.
- Financial Impact Projections:
- Initial dilution to tangible book value per share: 1.8%.
- Tangible book value earnback period: Less than 2.5 years.
- Accretion to earnings per share (2018): 3%.
- Internal Rate of Return (IRR): Greater than 15%.
Note: This filing does not provide standalone revenue, profit, cash flow, or debt metrics for the reporting period; it focuses exclusively on the merger agreement terms.
Material Changes and Outlook
The primary material change is the proposed acquisition of Folsom Lake Bank, which operates three branches in Folsom, Rancho Cordova, and Roseville, California. The transaction is expected to close in the fourth quarter of 2017, subject to regulatory approvals and shareholder approval by Folsom Lake Bank.
Management expects the merger to be accretive to earnings in 2018 and to generate an IRR exceeding 15%. The boards of directors for both entities have unanimously approved the transaction.
Risks and Contingencies
- Regulatory and Shareholder Approval: Closing is contingent upon governmental approvals and a vote by Folsom Lake Bank shareholders.
- Forward-Looking Uncertainties: Risks include failure to realize expected cost savings or synergies, changes in interest rates, competitive pressure, and fluctuations in the real estate market.
- Deal Termination: The transaction may not close if conditions are not satisfied or if shareholders fail to approve the acquisition.
Investor Verification Checklist
- Verify the final transaction value, as it fluctuates with Central Valley Community Bancorp's stock price prior to closing.
- Confirm the receipt and review of the upcoming Form S-4 registration statement and joint proxy statement/prospectus.
- Monitor the status of regulatory approvals required for the merger.
- Assess the timeline for tangible book value earnback (projected at less than 2.5 years) against actual post-merger performance.
- Review the specific terms of the termination fee obligation ($1,115,828) and the conditions triggering it.