The results are not surprising, yet slightly worse then I anticipated. Apparently loan loss was a bit heavier, but I am not certain. I was hoping for a slight improvement of the interest income. At least it didn't appear to be shrinking.
All and all, it was not disastrous. And if my other banks can hold up this well...
Valuation is not so clear cut. It's ROAA was not impressive in the past. The Service First acquisition seems to be the bulk of the problem loans. Given the price and headache thus far, CVCY may have gained a little though this deal, but didn't get a bargain. Based on its historical returns, it may be worth 1.5 x book, or $10. Given the rather cyclical customer base, the uncertain timing of recovery, I'd rather buy it near $4.
The past two quarters saw unusual higher interest income as a percentage of asset (which is about 40% higher after the Service First acquisition). This suggests that the new market carries much higher interest loans, and also new loans made carried higher rate as well. All the while, the overall cost of money remain much lower than peers. This should have improved margin. But non-interest expenses took a jump of more than 50 basis point, negating all the benefit. I surmise that this higher expenses are largely related to integration of new branches and will return to norm in the following quarters. Worthy of note is that its "normal" non-interest expense was traditionally high. The CEO trimmed it down back in early 2000's but it remained elevated. By and by, I expect that CVCY will enjoy better return-on-asset(ROA), probably closer to 1.5%, in the future. That is on a much larger asset base due to the acquisition. The 30-89 days past due figure suggests that it might have less problem loans in the coming quarters. We shall see. Beware that large intangibles clouds the valuation. The tangible book value is only a bit over $6. So CVCY may be cheap, but at this time not cheap comparing to other small banks.