CVCB loan losses start to pile up

Community bank lender braces for a possibly $214 million loss in loans in industries hardest hit by the shutdown

By Reggie Ellis

FRESNO – It seems no private industry is safe from the side effects of the coronavirus as community banks are the latest to see huge loses.

On April 15, the parent company for Central Valley Community Bank (CVCB), which has branches in Visalia and Exeter, announced its third quarter earnings and reported that its net loans had decreased by $15 million for the quarter that ended March 31 compared to the previous quarter which ended on Dec. 31, 2019. Non-performing assets were $1.1 million, net loan recoveries were $41,000, and loans delinquent more than 30 days were $1.3 million for the quarter ended March 31, 2020.

“What began as a quarter with good momentum, coming off a strong year-end 2019, has been disrupted by a global health crisis that has set off an economic crisis which is now our highest priority. Central Valley Community Bank immediately put its pandemic plan into action in late February to adjust to the impact of the COVID-19 pandemic on our communities and our clients,” president and CEO James M. Ford said.

The pandemic plan began with the bank enacting a provision for credit losses of $1.3 million for the quarter. Net interest income before the provision was $16 million compared to $15.8 million, an increase of $194,000 or 1.23%. The impact to interest income was a decrease of $434,000 compared to 2019.

Still at risk for the company is $214 million in loans to industries that have been the most effected by the pandemic including hospitality, restaurants, retail, assisted living facilities, childcare and education, entertainment and oil and gas. CVCB said management is closely monitoring credit metrics and performing stress testing on the bank’s loan portfolio. Additional resources have been shifted to credit administration to closely analyze those higher risk segments within the loan portfolio, monitor and track loan payment deferrals and customer liquidity, and provide timely reporting to management and the board of directors. The management team continues to analyze economic conditions in our geographic markets and perform stress testing of our investment portfolio as well as our loan portfolio.

The bank has already implemented loan programs to allow customers who were required to close or reduce their business operations to defer loan principal and interest payments for up to 90 days. As of March 31, 2020, the company granted $115 million in payment deferrals for loan customers. As a preferred Small Business Administration (SBA) lender, the bank did participate in the SBA Paycheck Protection Program (PPP) until the $349 billion in forgivable loans was exhausted on April 16. CVCB has received $150 million in loans from its clients and continues to work to process the applications.

“We are here for our clients assisting them with loan payment deferrals and maintaining service inside Banking Centers and through drive-up locations, digital and electronic channels, all the while adhering to the ever-evolving State and Federal guidelines. Central Valley Community Bank is participating in the Paycheck Protection Program launched by the Treasury and the Small Business Administration. We are also serving clients and our communities through refocusing our charitable giving and assistance in these unprecedented times.”

The COVID-19 pandemic has already impacted the local economy in the San Joaquin Valley and greater Sacramento area. Federal, State and local shelter-in-place recommendations were enacted in our markets in March 2020 causing many businesses to close and workers to be furloughed or lose jobs. Essential purpose entities such as medical professionals, food and agricultural businesses, and transportation and logistical businesses were exempted from the closures; however, unemployment rates are increasing in our local market area.

As of February 29, 2020, the unemployment rates in Fresno and Sacramento Counties were 8.5% and 3.8%, respectively but Tulare County was 11.5%. According to a study performed by the Center for Business and Policy Research at the University of the Pacific, unemployment rates in markets with CVCB branches are projected to climb to 18% to 21% in next month.

But for now, it’s mostly good news for the banking industry. If all of those loans are approved by SBA, CVCB stands to make $4.7 million in fees. Despite the potential loan losses, CVCB finished this quarter better than the same quarter last year. The company’s net income was still up by $1.4 million, shares were up 14 cents, total deposits were up 1.3% to $135 million, non-interest bearing deposit accounts were up 2%, and net income for the quarter increased 26.97% compared to 2019.

Based on the Company’s capital levels, conservative underwriting policies, low loan-to-deposit ratio, loan concentration diversification, and suburban geographical marketplace, CVCB management expects to be able to manage the economic risks and uncertainties associated with the COVID-19 pandemic and remain adequately capitalized.

Central Valley Community Bancorp, parent company for Central Valley Community Bank, trades on the NASDAQ stock exchange under the symbol CVCY. Central Valley Community Bank, headquartered in Fresno, operates 20 full-service offices throughout California’s San Joaquin Valley and Greater Sacramento Region. For more information, visit

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