Business context and reporting period
This summary covers the unaudited first quarter ended March 31, 2022. The filing identifies the registrant as Central Valley Community Bancorp (Nasdaq: CVCY), the holding company for Central Valley Community Bank—not Community West Bancshares as specified in the request metadata. The company serves businesses and individuals in California’s Central Valley and Greater Sacramento region.
Financial performance and condition
Dollar amounts are in millions unless otherwise noted.
| Metric | Q1 2022 / March 31, 2022 | Comparable period / prior date |
|---|---|---|
| Net income; diluted EPS | $6.086; $0.51 | Q1 2021: $7.479; $0.60 |
| Net interest income before credit-loss provision | $17.597 | Q1 2021: $17.555 |
| Net interest margin, fully tax-equivalent | 3.19% | Q1 2021: 3.76% |
| Non-interest income; non-interest expense | $1.834; $11.445 | Q1 2021: $1.999; $11.388 |
| Annualized ROA; ROE | 0.99%; 10.51% | Q1 2021: 1.42%; 12.17% |
| Total assets | $2,423.030 | December 31, 2021: $2,450.139 |
| Gross loans; allowance for credit losses | $1,012.042; $9.864 | December 31, 2021: $1,039.111; $9.600 |
| Deposits | $2,162.360 | December 31, 2021: $2,122.797 |
| Shareholders’ equity | $191.660 | December 31, 2021: $247.845 |
- Net income declined 18.6% year over year. The largest cited factors were the absence of the prior-year $1.8 million credit-loss provision reversal and lower loan placement fees; higher investment-security gains, service charges and net interest income partly offset these effects.
- Q1 operating cash flow was negative $0.635 million; investing cash flow was negative $107.836 million and financing cash flow was positive $33.841 million. Cash and cash equivalents fell $74.630 million to $88.837 million.
- The available-for-sale securities portfolio had a $69.974 million pretax net unrealized loss at quarter-end, versus a $10.835 million unrealized gain at year-end 2021. The after-tax accumulated other comprehensive loss was $49.287 million. Management attributed the declines primarily to interest-rate changes and reported no other-than-temporary impairment losses.
- Subordinated debt totaled $39.490 million, including $35 million of notes due 2031. The company reported no FHLB advances or federal funds purchased. It reported $110 million of unsecured correspondent-bank lines, $284.114 million of unused FHLB capacity and an $8.845 million Federal Reserve line; all were undrawn. Liquid assets were $1,257.664 million, or 51.90% of assets.
- The Bank’s total risk-based capital ratio was 14.08%, above the stated 10.00% well-capitalized threshold. The company repurchased 195,873 shares for $4.486 million during the quarter and paid a $0.12-per-share dividend.
Material changes versus comparable periods
- Net interest income before provision was nearly flat year over year, but NIM contracted 57 basis points. Average earning assets increased, largely from investment securities, while average loans declined; loan and investment yields weakened and borrowing costs rose.
- Non-interest income decreased 8.25%, mainly from loan placement fees, down $358,000, and other income, down $276,000. Non-interest expense increased 0.50%; higher IT and regulatory-assessment costs were partly offset by lower expenses in several other categories. The efficiency ratio worsened to 57.66% from 56.34%.
- Compared with December 31, 2021, deposits grew 1.86%, while gross loans fell 2.61%, including a decline in PPP loans. The loan-to-deposit ratio fell to 46.80% from 48.95%.
- Equity decreased 22.67%, principally due to the securities-related decline in accumulated other comprehensive income and share repurchases, partly offset by retained earnings.
- Credit indicators were favorable at quarter-end: nonperforming loans were $292,000 versus $946,000 at year-end; past-due loans were $17,000 and no loans were over 90 days past due and accruing. Classified loans rose to $10.7 million from $8.5 million.
Outlook, risks and unusual items
- The filing provides no specific earnings or financial guidance. Management said it considered liquidity adequate and the allowance for credit losses sufficient for probable incurred losses, while cautioning that future charge-offs could exceed the allowance.
- Management identified sensitivity to interest rates, securities-market values and mortgage-security prepayments; local economic and real-estate conditions; and Central Valley agriculture, including drought, water availability, commodity prices and farm income. COVID-19, inflation, labor shortages and supply-chain disruption were also cited as uncertainties.
- Commercial and real-estate lending represented approximately 96.6% of loans. The company disclosed $346.752 million of commitments to extend credit, $611,000 of standby letters of credit and a $2.145 million guarantee related to its previously sold credit-card portfolio; management did not anticipate a material loss from the commitments and guarantees.
- The company was preparing for CECL adoption, then scheduled for January 1, 2023, but said it could not yet reasonably estimate the impact. COVID-related loan deferral relief ended January 1, 2022; no such deferred loans remained at quarter-end, and no loans were modified as TDRs during Q1 2022.
- The filing reported no legal proceedings requiring disclosure and no material change in interest-rate-risk exposure from the 2021 Form 10-K. Management stated disclosure controls were effective.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is Central Valley Community Bancorp (CVCY), not Community West Bancshares.
- Review the securities portfolio’s rate sensitivity, unrealized losses, and the company’s ability and intent to hold securities if liquidity needs change.
- Track NIM and loan yields, deposit mix and costs, loan growth, and the effect of rising rates on earnings.
- Monitor classified loans, allowance adequacy, real-estate and agricultural concentrations, drought and water risks, and the adoption impact of CECL.
- Assess capital and liquidity after securities valuation changes, share repurchases, dividends and the substantial unfunded lending commitments.