Market Overview

CVB Financial Corp. Reports Record Earnings for the Third Quarter 2017

Share:
  • Record quarterly earnings of $29.7 million for the third quarter of
    2017, or $0.27 per share.
  • Record earnings for the first nine months of $86.6 million, or
    $0.79 per share.
  • Year-to-date return on average assets of 1.40%.

CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business
Bank ("the Company"), announced earnings for the quarter ended September
30, 2017.

CVB Financial Corp. reported net income of $29.7 million for the quarter
ended September 30, 2017, compared with $28.4 million for the second
quarter of 2017 and $25.4 million for the third quarter of 2016. This
represents an increase of $1.3 million over the prior quarter and an
increase of $4.2 million from the third quarter of 2016. Diluted
earnings per share were $0.27 for the third quarter, compared to $0.26
for the prior quarter and $0.23 for the same period last year.

Chris Myers, President and CEO of Citizens Business Bank, commented,
"The third quarter was a solid and fundamental quarter for CVBF. We
consolidated three center locations and continued to focus on the
quality of our deposit funding and earning assets. Our profit ratios
improved as did asset quality. "

Net income of $29.7 million for the third quarter of 2017 produced an
annualized return on beginning equity of 11.10%, an annualized return on
average equity of 10.93%, and an annualized return on average assets of
1.41%. Net income for the third quarter of 2016 produced an annualized
return on average equity of 10.05% and an annualized return on average
assets of 1.23%. The efficiency ratio for the third quarter of 2017 was
42.44%, compared to 45.62% for the third quarter of 2016.

Net income totaled $86.6 million for the nine months ended September 30,
2017. This represented a $12.2 million, or 16.42%, increase from the
prior year. Earnings for the first nine months of 2017 included $7.0
million in loan loss provision recapture, compared with $2.0 million in
loan loss provision recapture for the first nine months of 2016. Diluted
earnings per share were $0.79 for the nine months ended September 30,
2017, compared to $0.69 for the same period of 2016. Net income for the
nine months ended September 30, 2017 produced an annualized return on
beginning equity of 11.68%, an annualized return on average equity of
11.01% and an annualized return on average assets of 1.40%. The
efficiency ratio for the nine months ended September 30, 2017 was
44.56%, compared to 46.54% for the first nine months of 2016.

Net interest income before recapture of loan loss provision was $71.7
million for the third quarter, which was a $1.3 million, or 1.78%,
increase over the second quarter of 2017, and an $8.6 million, or
13.58%, increase over the third quarter of 2016. Total interest income
and fees on loans for the third quarter of 2017 of $56.0 million
increased $2.4 million, or 4.45%, from the second quarter of 2017 and
$8.2 million, or 17.26%, from the third quarter of 2016. Total
investment income decreased $906,000, or 4.94%, from the second quarter
of 2017 and grew by $1.2 million, or 7.48%, from the third quarter of
2016. Interest expense was consistent with the second quarter of 2017
and grew by $121,000 in comparison with the third quarter of 2016.

During the third quarter of 2017, $1.5 million of loan loss provision
was recaptured, compared to $1.0 million recaptured for the prior
quarter and $2.0 million recaptured for the same period last year.

Noninterest income was $10.0 million for the third quarter of 2017,
compared with $10.8 million for the second quarter of 2017 and $9.2
million for the third quarter of 2016. During the third quarter of 2017
we sold our former operations/technology center, which was classified as
an asset held-for-sale at December 31, 2016. We recognized a gain on
sale of $542,000. The second quarter of 2017 included over $1.6 million
in income related to a BOLI death benefit, loan recoveries related to
loans charged off prior to acquisition by a bank we acquired in 2014,
and a gain on sale of an investment security. The third quarter of 2016
also included a $548,000 gain on sale of securities. Excluding these
items, noninterest income for the third quarter of 2017 grew by
$340,000, or 3.71%, quarter-over-quarter and increased $861,000, or
9.97%, compared to the third quarter of 2016.

For the first nine months of 2017, noninterest income was $29.5 million,
compared to $27.1 million for the same period of 2016. Excluding the
previously noted items and a $1.1 million gain on sale of loans in the
first quarter of 2016, noninterest income grew by $1.9 million, or 7.39%.

Noninterest expense for the third quarter of 2017 was $34.7 million,
compared to $36.9 million for the second quarter of 2017 and $33.0
million for the third quarter of 2016. The $2.2 million quarter over
quarter decrease was primarily the result of a $1.0 million decline in
acquisition related expenses and a $752,000 decrease in professional
service expense which included a $405,000 recovery of legal expense. The
$1.7 million increase over the third quarter of 2016 was primarily due
to a $1.4 million increase in salaries and employee benefits and a
$298,000 increase in occupancy and equipment costs, partially offset by
a $313,000 decrease in professional service expense. The year-over-year
decrease of $313,000 in professional services was impacted by a $405,000
recovery of legal expense on a nonperforming loan in the third quarter
of 2017. As a percentage of average assets, noninterest expense was
1.65%, compared to 1.76% for the second quarter of 2017 and 1.59% for
the third quarter of 2016.

Noninterest expense of $105.7 million for the first nine months of 2017
was $3.9 million higher than the prior year period. The year-over-year
increase included expenses related to the acquisition of Valley Business
Bank ("VBB") and the build-out and relocation to our new operations and
technology building. Acquisition related expenses were $2.2 million, up
$619,000 from the prior year. The $2.1 million, or 3.35%, increase in
compensation and benefit expense includes additional staff from the
acquisition of VBB. Occupancy expense and software licenses and
maintenance increased $772,000 and $621,000, respectively. Increases in
professional services included $326,000 in higher legal expenses. As a
percentage of average assets, noninterest expense was 1.70% for both the
nine months ended September 30, 2017 and September 30, 2016.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $71.7 million
for the third quarter of 2017, compared to $70.5 million for the second
quarter of 2017 and $63.2 million for the third quarter of 2016. Our net
interest margin (tax equivalent) was 3.70% for the third quarter of
2017, compared to 3.63% for the second quarter of 2017 and 3.30% for the
third quarter of 2016. Total average earning asset yields (tax
equivalent) were 3.81% for the third quarter of 2017, compared to 3.74%
for the second quarter of 2017 and 3.40% for the third quarter of 2016.
Total cost of funds of 0.12% for the third quarter of 2017 remained
unchanged from the second quarter of 2017, and compares to 0.11% for the
third quarter of 2016. The increase in the net interest margin over the
second quarter of 2017 was the result of an increase in earning asset
yield that resulted from a combination of a nine basis point increase in
loan yields, and the change in mix of earning assets represented by an
increase in loans as a percentage of earning assets growing from 58.7%
in the second quarter to 60.3% in the latest quarter. The tax equivalent
yield on investments decreased six basis points quarter-over-quarter.
Likewise, the increase in the net interest margin over the third quarter
of 2016 included an increase in loans as a percentage of earning assets
growing from 54.4% to 60.3%. The yield on loans increased by 26 basis
points and the tax equivalent yield on investments grew by four basis
points over the same period in 2016. Loan yields were positively
impacted in the third quarter of 2017, as a troubled debt restructured
("TDR") loan that was previously on nonaccrual paid in full, resulting
in the recognition of $1.0 million of interest. Quarter-over-quarter,
average loans grew by $67.4 million and year-over-year they grew by
$462.7 million. Total investment securities were lower on average by
$89.5 million compared to the second quarter of 2017, but grew by $58.0
million on average over the prior year.

Income Taxes

Our effective tax rate for the three and nine months ended September 30,
2017 was 38.89% and 37.50%, respectively, compared with 37.50% for the
nine months ended September 30, 2016. The effective tax rate for 2017
was impacted by the tax effects related to the adoption of Accounting
Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting,
which resulted in the recognition of excess tax benefits of
approximately $1.5 million in our provision for income taxes, rather
than as an adjustment of paid-in capital. Our estimated annual effective
tax rate also varies depending upon the level of tax-advantaged income
as well as available tax credits.

Assets

The Company reported total assets of $8.30 billion at September 30,
2017. This represented an increase of $230.3 million, or 2.85%, from
total assets of $8.07 billion at December 31, 2016. Interest-earning
assets of $7.82 billion at September 30, 2017 increased $170.3 million,
or 2.23%, when compared with $7.64 billion at December 31, 2016. The
increase in interest-earning assets was primarily due to a $351.4
million increase in total loans. This was partially offset by a $158.1
million decrease in investment securities and a $27.3 million decrease
in interest-earning balances due from depository institutions.

Total assets of $8.30 billion at September 30, 2017 increased $259.0
million, or 3.22%, from total assets of $8.04 billion at September 30,
2016. Interest-earning assets totaled $7.82 billion at September 30,
2017, an increase of $173.0 million, or 2.26%, when compared with
earning assets of $7.64 billion at September 30, 2016.

Investment Securities

Total investment securities were $3.02 billion at September 30, 2017, a
decrease of $158.1 million, or 4.97%, from $3.18 billion at December 31,
2016 and a decrease of $82.5 million, or 2.65%, from $3.11 billion at
September 30, 2016.

At September 30, 2017, investment securities held-to-maturity ("HTM")
totaled $848.4 million, a $63.3 million, or 6.94%, decrease from
December 31, 2016 and a $30.6 million, or 3.48%, decrease from September
30, 2016.

At September 30, 2017, investment securities available-for-sale ("AFS")
totaled $2.18 billion, inclusive of a pre-tax net unrealized gain of
$20.3 million. AFS securities declined by $94.8 million, or 4.18%, from
December 31, 2016, and declined by $51.9 million, or 2.33%, from
September 30, 2016.

Combined, the AFS and HTM investments in mortgage backed securities
("MBS") and collateralized mortgage obligations ("CMOs") totaled $2.52
billion at September 30, 2017, compared to $2.62 billion at December 31,
2016 and $2.52 billion at September 30, 2016. Virtually all of our MBS
and CMOs are issued or guaranteed by government or government sponsored
enterprises, which have the implied guarantee of the U.S. Government.

Our combined AFS and HTM municipal securities totaled $338.5 million as
of September 30, 2017. These securities are located in 29 states. Our
largest concentrations of holdings are located in Minnesota at 21.07%,
Texas at 9.65%, Massachusetts at 9.55%, and New York at 5.81%.

In the third quarter of 2017, we purchased $31.6 million of MBS/CMO
securities with an average yield of approximately 2.26%. We also
purchased $5.3 million of municipal securities with an average
tax-equivalent yield of approximately 3.60%.

Loans

Total loans and leases, net of deferred fees and discounts, of $4.75
billion at September 30, 2017 increased by $58.7 million, or 1.25%, from
June 30, 2017. The increase in total loans was principally due to growth
of $54.2 million in commercial real estate loans and $25.2 million in
dairy & livestock and agribusiness loans. The overall increase in loans
and leases were partially offset by decreases of $9.6 million in
commercial and industrial loans, $5.3 million in SFR mortgage loans, and
$5.2 million in Small Business Administration ("SBA") loans.

Total loans and leases, net of deferred fees and discounts, of $4.75
billion at September 30, 2017 increased by $351.4 million, or 7.99%,
from December 31, 2016. The increase in total loans included $309.7
million of loans acquired from VBB in the first quarter of 2017.
Excluding the acquired VBB loans, dairy & livestock and agribusiness
loans decreased by $83.1 million, primarily due to seasonal pay-downs.
Excluding the acquired VBB loans and the decrease in dairy & livestock
and agribusiness loans, loans increased by $124.8 million, or 2.84%
overall, for the first nine months of 2017.

Total loans and leases, net of deferred fees and discounts, of $4.75
billion at September 30, 2017 increased by $451.3 million, or 10.51%,
from September 30, 2016.

Deposits & Customer Repurchase Agreements

Deposits of $6.61 billion and customer repurchase agreements of $455.1
million totaled $7.06 billion at September 30, 2017. This represents a
decrease of $180.1 million, or 2.49%, when compared with total deposits
and customer repurchase agreements of $7.24 billion at June 30, 2017.
Deposits and customer repurchase agreements increased by $150.5 million,
or 2.18%, when compared with total deposits and customer repurchase
agreements of $6.91 billion at December 31, 2016 and increased by $164.2
million, or 2.38%, when compared with $6.90 billion in total deposits
and customer repurchase agreements at September 30, 2016.

Noninterest-bearing deposits were $3.91 billion at September 30, 2017,
an increase of $235.3 million, or 6.40%, when compared to December 31,
2016 and an increase of $251.2 million, or 6.87%, compared to $3.66
billion at September 30, 2016. At September 30, 2017,
noninterest-bearing deposits were 59.15% of total deposits, compared to
58.22% at December 31, 2016 and 57.86% at September 30, 2016.

The increase in total deposits from the end of 2016 included $172.5
million of noninterest-bearing deposits and $361.8 million of total
deposits acquired from VBB during the first quarter of 2017.

Our average cost of total deposits was 0.09% for the quarter ended
September 30, 2017, unchanged from both the second quarter of 2017 and
the third quarter of 2016. Our cost of total deposits including customer
repurchase agreements was 0.10% for the quarters ending September 30,
2017 and 2016, compared to 0.11% for the second quarter of 2017.

FHLB Advance, Other Borrowings and Debentures

At September 30, 2017, we had $63.0 million in short-term borrowings,
compared to $53.0 million at December 31, 2016 and zero at September 30,
2016.

At September 30, 2017, we had $25.8 million of junior subordinated
debentures, unchanged from December 31, 2016 and September 30, 2016.
These debentures bear interest at three-month LIBOR plus 1.38% and
mature in 2036.

Asset Quality

The allowance for loan losses totaled $60.6 million at September 30,
2017, compared to $60.2 million at June 30, 2017, $61.5 million at
December 31, 2016 and $61.0 million at September 30, 2016. The allowance
for loan losses was increased by net recoveries on loans of $1.9 million
for the third quarter of 2017 and was reduced by a $1.5 million loan
loss provision recapture for the third quarter of 2017. The allowance
for loan losses was 1.28%, 1.28%, 1.28%, 1.40%, and 1.42% of total loans
and leases outstanding, at September 30, 2017, June 30, 2017, March 31,
2017, December 31, 2016, and September 30, 2016, respectively. The ratio
as of the most recent three quarters was impacted by the $309.7 million
loans acquired from VBB that are recorded at fair market value, without
a corresponding loan loss allowance.

Nonperforming loans, defined as nonaccrual loans plus nonperforming TDR
loans, were $11.6 million at September 30, 2017, or 0.24% of total
loans, and included $4.5 million of loans acquired from VBB in the first
quarter of 2017. This compares to nonperforming loans of $12.2 million,
or 0.26% of total loans, at June 30, 2017, $7.2 million, or 0.16% of
total loans, at December 31, 2016, and $8.7 million, or 0.20% of total
loans, at September 30, 2016. The $11.6 million in nonperforming loans
at September 30, 2017 are summarized as follows: $6.7 million in
commercial real estate loans, $1.6 million in SBA loans, $1.3 million in
SFR mortgage loans, $829,000 in dairy & livestock and agribusiness
loans, $743,000 in consumer and other loans, and $313,000 in commercial
and industrial loans. The $649,000 decrease in nonperforming loans
quarter-over-quarter was primarily due to a $745,000 decrease in
nonperforming commercial and industrial loans and a $222,000 decrease in
commercial real estate loans. This was partially offset by a $386,000
increase in nonperforming SFR mortgage loans.

We had $4.5 million in Other Real Estate Owned ("OREO") at both
September 30, 2017 and December 31, 2016, compared to $4.8 million at
September 30, 2016. As of September 30, 2017, we had one OREO property,
compared with two OREO properties at September 30, 2016. There were no
additions or sales of OREO for the nine months ended September 30, 2017.

At September 30, 2017, we had loans delinquent 30 to 89 days of
$271,000. This compares to $619,000 at June 30, 2017, $436,000 at
December 31, 2016, and $522,000 at September 30, 2016. As a percentage
of total loans, delinquencies, excluding nonaccruals, were 0.01% at
September 30, 2017, 0.01% at June 30, 2017, 0.01% at December 31, 2016,
and 0.01% at September 30, 2016.

At September 30, 2017, we had $5.7 million in performing TDR loans,
compared to $16.6 million in performing TDR loans at June 30, 2017,
$19.2 million in performing TDR loans at December 31, 2016, and $27.0
million in performing TDR loans at September 30, 2016. In terms of the
number of loans, we had 21 performing TDR loans at September 30, 2017,
compared to 24 performing TDR loans at June 30, 2017, 26 performing TDR
loans at December 31, 2016, and 29 performing TDR loans at September 30,
2016.

Nonperforming assets, defined as nonaccrual loans plus other real estate
owned, totaled $16.1 million at September 30, 2017, $16.7 million at
June 30, 2017, $11.7 million at December 31, 2016, and $13.5 million at
September 30, 2016. As a percentage of total assets, nonperforming
assets were 0.19% at September 30, 2017, 0.20% at June 30, 2017, 0.14%
at December 31, 2016, and 0.17% at September 30, 2016.

Classified loans are loans that are graded "substandard" or worse. At
September 30, 2017, classified loans totaled $75.1 million, compared to
$93.4 million at June 30, 2017, $108.3 million at December 31, 2016, and
$105.0 million at September 30, 2016. Total classified loans at
September 30, 2017 included $6.5 million of classified loans acquired
from VBB in the first quarter of 2017. The quarter-over-quarter decrease
was primarily due to a $14.4 million decrease in classified commercial
real estate loans, a $2.3 million decrease in classified dairy &
livestock and agribusiness loans and a $1.8 million decrease in
classified commercial and industrial loans. This was partially offset by
a $372,000 increase in classified SFR mortgage loans.

CitizensTrust

As of September 30, 2017, CitizensTrust had approximately $2.84 billion
in assets under management and administration, including $2.13 billion
in assets under management. Revenues were $2.5 million for the third
quarter of 2017 and $7.4 million for the first nine months of 2017,
compared to $2.3 million and $7.0 million, respectively, for the same
period of 2016. CitizensTrust provides trust, investment and brokerage
related services, as well as financial, estate and business succession
planning.

Corporate Overview

CVB Financial Corp. ("CVBF") is the holding company for Citizens
Business Bank. CVBF is the ninth largest bank holding company
headquartered in California with assets of approximately $8.3 billion.
Citizens Business Bank is consistently recognized as one of the top
performing banks in the nation and offers a wide array of banking,
lending and investing services through 51 banking centers and 3 trust
office locations serving the Inland Empire, Los Angeles County, Orange
County, San Diego County, Ventura County, Santa Barbara County, and the
Central Valley area of California.

Shares of CVB Financial Corp. common stock are listed on the NASDAQ
under the ticker symbol "CVBF." For investor information on CVB
Financial Corp., visit our Citizens Business Bank website at www.cbbank.com
and click on the "Investors"
tab.

Conference Call

Management will hold a conference call at 7:30 a.m. PDT/10:30 a.m. EDT
on Thursday, October 19, 2017 to discuss the Company's third quarter
2017 financial results.

To listen to the conference call, please dial (877) 506-3368. A taped
replay will be made available approximately one hour after the
conclusion of the call and will remain available through November 2,
2017 at 6:00 a.m. PDT/9:00 a.m. EDT. To access the replay, please dial
(877) 344-7529, passcode 10112364.

The conference call will also be simultaneously webcast over the
Internet; please visit our Citizens Business Bank website at www.cbbank.com
and click on the "Investors"
tab to access the call from the site. Please access the website 15
minutes prior to the call to download any necessary audio software. This
webcast will be recorded and available for replay on the Company's
website approximately two hours after the conclusion of the conference
call, and will be available on the website for approximately 12 months.

Safe Harbor

Certain matters set forth herein (including the exhibits hereto)
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including forward-looking
statements relating to the Company's current business plans and
expectations and our future financial position and operating results.
Words such as "will likely result", "aims", "anticipates", "believes",
"could", "estimates", "expects", "hopes", "intends", "may", "plans",
"projects", "seeks", "should", "will," "strategy", "possibility", and
variations of these words and similar expressions help to identify these
forward looking statements, which involve risks and uncertainties. These
forward-looking statements are subject to risks and uncertainties that
could cause actual results, performance and/or achievements to differ
materially from those projected. These risks and uncertainties include,
but are not limited to, local, regional, national and international
economic and market conditions and political events and the impact they
may have on us, our customers and our assets and liabilities; our
ability to attract deposits and other sources of funding or liquidity;
supply and demand for real estate and periodic deterioration in real
estate prices and/or values in California or other states where we lend,
including both residential and commercial real estate; a sharp or
prolonged slowdown or decline in real estate construction, sales or
leasing activities; changes in the financial performance and/or
condition of our borrowers, depositors, key vendors or counterparties;
changes in our levels of delinquent loans, nonperforming assets,
allowance for loan losses and charge-offs; the costs or effects of
acquisitions or dispositions we may make, whether we are able to obtain
any required governmental approvals in connection with any such
acquisitions or dispositions, and/or our ability to realize the
contemplated financial or business benefits associated with any such
acquisitions or dispositions; our ability to realize cost savings and
business synergies in connection with our recent acquisition of Valley
Commerce Bancorp within expected time frames or at all; the effect of
changes in laws, regulations and applicable judicial decisions
(including laws, regulations and judicial decisions concerning financial
reforms, taxes, banking capital levels, allowance for loan losses,
consumer, commercial or secured lending, securities and securities
trading and hedging, bank operations, compliance, fair lending,
employment, executive compensation, insurance, cybersecurity, vendor
management and information technology) with which we and our
subsidiaries must comply or believe we should comply or which may
otherwise impact us; the effects of additional legal and regulatory
requirements to which we may become subject in the event our total
assets exceed $10 billion; changes in estimates of future reserve
requirements and minimum capital requirements based upon the periodic
review thereof under relevant regulatory and accounting requirements,
including changes in the Basel Committee framework establishing capital
standards for credit, operations and market risk; the accuracy of the
assumptions and estimates and the absence of technical error in
implementation or calibration of models used to estimate the fair value
of financial instruments or expected credit losses or delinquencies;
inflation, changes in market interest rates, securities market and
monetary fluctuations; changes in government-established interest rates
or monetary policies; changes in the amount and availability of deposit
insurance; disruptions in the infrastructure that supports our business
and the communities where we are located, which are concentrated in
California, involving or related to physical site access and/or
communication facilities; cyber incidents; or theft or loss of Company
or customer data or money; political uncertainty or instability; acts of
war or terrorism, or natural disasters, such as earthquakes, drought, or
the effects of pandemic diseases; the timely development and acceptance
of new banking products and services and the perceived overall value of
these products and services by our customers and potential customers;
the Company's relationships with and reliance upon vendors with respect
to the operation of certain of the Company's key internal and external
systems and applications; changes in commercial or consumer spending,
borrowing and savings preferences or behaviors; technological changes
and the expanding use of technology in banking and financial services
(including the adoption of mobile banking and funds transfer
applications); our ability to retain and increase market share, retain
and grow customers and control expenses; changes in the competitive
environment among financial and bank holding companies, banks and other
financial service and technology providers; competition and innovation
with respect to financial products and services by banks, financial
institutions and non-traditional providers including retail businesses
and technology companies, volatility in the credit and equity markets
and its effect on the general economy or local or regional business
conditions or on the Company's customers; fluctuations in the price of
the Company's common stock or other securities; and the resulting impact
on the Company's ability to raise capital or make acquisitions, the
effect of changes in accounting policies and practices, as may be
adopted from time-to-time by our regulatory agencies, as well as by the
Public Company Accounting Oversight Board, the Financial Accounting
Standards Board and other accounting standard-setters; changes in our
organization, management, compensation and benefit plans, and our
ability to retain or expand our workforce, management team and/or our
board of directors; the costs and effects of legal, compliance and
regulatory actions, changes and developments, including the initiation
and resolution of legal proceedings (including securities, bank
operations, consumer or employee class action litigation), the
possibility that any settlement of any putative class action lawsuits
may not be approved by the relevant court or that significant numbers of
putative class members may opt out of any settlement; regulatory or
other governmental inquiries or investigations, and/or the results of
regulatory examinations or reviews; our ongoing relations with our
various federal and state regulators, including the SEC, Federal Reserve
Board, FDIC and California DBO; our success at managing the risks
involved in the foregoing items and all other factors set forth in the
Company's public reports, including its Annual Report on Form 10-K for
the year ended December 31, 2016, and particularly the discussion of
risk factors within that document. The Company does not undertake, and
specifically disclaims any obligation, to update any forward-looking
statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements except as required by
law. Any statements about future operating results, such as those
concerning accretion and dilution to the Company's earnings or
shareholders, are for illustrative purposes only, are not forecasts, and
actual results may differ.

                 
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
September 30, December 31, September 30,
2017 2016 2016
Assets
Cash and due from banks $ 137,196 $ 119,445 $ 119,420
Interest-earning balances due from Federal Reserve   6,594     2,188     139,739  
Total cash and cash equivalents   143,790     121,633     259,159  
Interest-earning balances due from depository institutions 20,521 47,848 83,178
Investment securities available-for-sale 2,175,648 2,270,466 2,227,551
Investment securities held-to-maturity   848,382     911,676     878,953  
Total investment securities   3,024,030     3,182,142     3,106,504  
Investment in stock of Federal Home Loan Bank (FHLB) 17,688 17,688 17,688
Loans and lease finance receivables 4,746,424 4,395,064 4,295,167
Allowance for loan losses   (60,631 )   (61,540 )   (61,001 )
Net loans and lease finance receivables   4,685,793     4,333,524     4,234,166  
Premises and equipment, net 46,654 42,086 38,671
Bank owned life insurance 145,970 134,785 134,073
Intangibles 7,177 5,010 5,293
Goodwill 116,564 89,533 88,174
Other assets   95,825     99,458     78,087  
Total assets $ 8,304,012   $ 8,073,707   $ 8,044,993  
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 3,908,809 $ 3,673,541 $ 3,657,610
Investment checking 415,503 407,058 413,789
Savings and money market 1,886,687 1,846,257 1,823,163
Time deposits   397,097     382,824     426,433  
Total deposits 6,608,096 6,309,680 6,320,995
Customer repurchase agreements 455,069 603,028 577,990
Other borrowings 63,000 53,000 -
Junior subordinated debentures 25,774 25,774 25,774
Payable for securities purchased 1,625 23,777 43,111
Other liabilities   73,984     67,586     73,820  
Total liabilities   7,227,548     7,082,845     7,041,690  
Stockholders' Equity
Stockholders' equity 1,064,620 980,691 964,700
Accumulated other comprehensive income, net of tax   11,844     10,171     38,603  
Total stockholders' equity   1,076,464     990,862     1,003,303  
Total liabilities and stockholders' equity $ 8,304,012   $ 8,073,707   $ 8,044,993  
 
 
                       
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
Three Months Ended

Nine Months Ended

September 30, September 30,
2017 2016 2017 2016
Assets
Cash and due from banks $ 133,197 $ 120,360 $ 130,058 $ 119,863

Interest-earning balances due from Federal Reserve and federal
funds sold

  21,399     475,882     58,790     289,100  
Total cash and cash equivalents   154,596     596,242     188,848     408,963  
Interest-earning balances due from depository institutions 23,359 86,872 31,335 75,086
Investment securities available-for-sale 2,188,932 2,239,440 2,232,679 2,254,550
Investment securities held-to-maturity   856,370     747,813     873,304     769,979  
Total investment securities   3,045,302     2,987,253     3,105,983     3,024,529  
Investment in stock of Federal Home Loan Bank (FHLB) 17,688 17,688 18,167 17,935
Loans and lease finance receivables 4,710,900 4,248,225 4,579,054 4,155,717
Allowance for loan losses   (60,223 )   (61,092 )   (60,460 )   (60,092 )
Net loans and lease finance receivables   4,650,677     4,187,133     4,518,594     4,095,625  
Premises and equipment, net 47,240 39,362 46,170 37,660
Bank owned life insurance 145,641 133,576 142,802 132,405
Intangibles 7,401 5,447 6,923 4,861
Goodwill 119,164 88,174 111,687 85,124
Other assets   128,308     114,807     124,029     117,606  
Total assets $ 8,339,376   $ 8,256,554   $ 8,294,538   $ 7,999,794  
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 3,891,381 $ 3,715,018 $ 3,828,235 $ 3,480,739
Interest-bearing   2,751,781     2,804,867     2,748,806     2,809,431  

Total deposits

6,643,162 6,519,885 6,577,041 6,290,170
Customer repurchase agreements 501,085 582,539 552,388 615,023
FHLB advances - - - 949
Other borrowings 24,334 - 17,253 2,537
Junior subordinated debentures 25,774 25,774 25,774 25,774
Payable for securities purchased 3,768 55,532 9,065 22,992
Other liabilities   63,950     65,806     61,858     62,747  
Total liabilities   7,262,073     7,249,536     7,243,379     7,020,192  
Stockholders' Equity
Stockholders' equity 1,066,369 965,876 1,040,867 946,631
Accumulated other comprehensive income, net of tax   10,934     41,142     10,292     32,971  
Total stockholders' equity   1,077,303     1,007,018     1,051,159     979,602  
Total liabilities and stockholders' equity $ 8,339,376   $ 8,256,554   $ 8,294,538   $ 7,999,794  
 
 
                       
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Interest income:
Loans and leases, including fees $ 55,998 $ 47,754 $ 158,253 $ 143,781
Investment securities:
Investment securities available-for-sale 12,240 11,425 37,887 36,242
Investment securities held-to-maturity   5,184     4,787     16,014     14,878  
Total investment income 17,424 16,212 53,901 51,120
Dividends from FHLB stock 318 403 1,070 1,210

Interest-earning deposits with other institutions and federal
funds sold

  130     802     683     1,575  
Total interest income   73,870     65,171     213,907     197,686  
Interest expense:
Deposits 1,555 1,525 4,547 4,544
Borrowings and junior subordinated debentures   576     485     1,705     1,509  
Total interest expense   2,131     2,010     6,252     6,053  

Net interest income before recapture of provision for loan losses

71,739 63,161 207,655 191,633
Recapture of provision for loan losses   (1,500 )   (2,000 )   (7,000 )   (2,000 )

Net interest income after recapture of provision for loan losses

  73,239     65,161     214,655     193,633  
Noninterest income:
Service charges on deposit accounts 4,085 3,817 11,794 11,386
Trust and investment services 2,523 2,328 7,432 7,039
Gain on sale of loans - - - 1,101
Other   3,430     3,038     10,310     7,614  
Total noninterest income   10,038     9,183     29,536     27,140  
Noninterest expense:
Salaries and employee benefits 21,835 20,403 65,116 63,004
Occupancy and equipment 4,400 4,102 12,638 11,940
Professional services 1,091 1,404 4,191 3,727
Software licenses and maintenance 1,510 1,358 4,698 4,077
Marketing and promotion 1,055 1,199 3,484 3,818
Acquisition related expenses 250 353 2,176 1,557
Other   4,565     4,187     13,393     13,685  
Total noninterest expense   34,706     33,006     105,696     101,808  
Earnings before income taxes 48,571 41,338 138,495 118,965
Income taxes   18,888     15,890     51,935     44,612  
Net earnings $ 29,683   $ 25,448   $ 86,560   $ 74,353  
 
Basic earnings per common share $ 0.27   $ 0.23   $ 0.79   $ 0.69  
Diluted earnings per common share $ 0.27   $ 0.23   $ 0.79   $ 0.69  
Cash dividends declared per common share $ 0.14   $ 0.12   $ 0.40   $ 0.36  
 
 
                       
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Interest income - tax-equivalent (TE) $ 74,832 $ 66,420 $ 216,969 $ 201,849
Interest expense   2,131     2,010     6,252     6,053  
Net interest income - (TE) $ 72,701   $ 64,410   $ 210,717   $ 195,796  
 
Return on average assets, annualized 1.41 % 1.23 % 1.40 % 1.24 %
Return on average equity, annualized 10.93 % 10.05 % 11.01 % 10.14 %
Efficiency ratio [1] 42.44 % 45.62 % 44.56 % 46.54 %
Noninterest expense to average assets, annualized 1.65 % 1.59 % 1.70 % 1.70 %
Yield on average earning assets (TE) 3.81 % 3.40 % 3.72 % 3.57 %
Cost of deposits 0.09 % 0.09 % 0.09 % 0.10 %
Cost of deposits and customer repurchase agreements 0.10 % 0.10 % 0.11 % 0.11 %
Cost of funds 0.12 % 0.11 % 0.12 % 0.12 %
Net interest margin (TE) 3.70 % 3.30 % 3.62 % 3.46 %
[1] Noninterest expense divided by net interest income before
provision for loan losses plus noninterest income.
 
Weighted average shares outstanding
Basic 109,754,210 108,984,081 109,279,722 107,143,700
Diluted 110,118,851 109,370,404 109,671,571 107,547,042
Dividends declared $ 15,423 $ 12,968 $ 44,058 $ 38,853
Dividend payout ratio [2] 51.96 % 50.96 % 50.90 % 52.25 %
[2] Dividends declared on common stock divided by net earnings.
 
Number of shares outstanding - (end of period) 110,157,384 108,097,493
Book value per share $ 9.77 $ 9.28
Tangible book value per share $ 8.65 $ 8.42
 
 
September 30,
2017 2016
Nonperforming assets:
Nonaccrual loans $ 7,263 $ 5,633

Loans past due 90 days or more and still accruing interest

- -
Troubled debt restructured loans (nonperforming) 4,310 3,033
Other real estate owned (OREO), net   4,527     4,840  
Total nonperforming assets $ 16,100   $ 13,506  
Troubled debt restructured performing loans $ 5,735   $ 27,018  
 

Percentage of nonperforming assets to total loans outstanding and
OREO

0.34 % 0.31 %

Percentage of nonperforming assets to total assets

0.19 % 0.17 %

Allowance for loan losses to nonperforming assets

376.59 % 451.66 %
 
 
Nine Months Ended
September 30,
2017 2016
Allowance for loan losses:
Beginning balance $ 61,540 $ 59,156
Total charge-offs (149 ) (195 )

 

Total recoveries on loans previously charged-off   6,240     4,040  
Net recoveries 6,091 3,845
Recapture of provision for loan losses   (7,000 )   (2,000 )
Allowance for loan losses at end of period $ 60,631   $ 61,001  
 
Net recoveries to average loans 0.133 % 0.093 %
 
 
 
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
           
Quarterly Common Stock Price
 
2017   2016   2015  
Quarter End High Low High Low High Low
March 31, $ 24.63 $ 20.58 $ 17.70 $ 14.02 $ 16.21 $ 14.53
June 30, $ 22.85 $ 19.90 $ 17.92 $ 15.25 $ 18.11 $ 15.45
September 30, $ 24.29 $ 19.58 $ 17.88 $ 15.39 $ 18.37 $ 15.30
December 31, - - $ 23.23 $ 16.32 $ 18.77 $ 15.82
 
Quarterly Consolidated Statements of Earnings
 
Q3 Q2 Q1 Q4 Q3
  2017     2017     2017     2016     2016  
Interest income
Loans and leases, including fees $ 55,998 $ 53,614 $ 48,641 $ 49,211 $ 47,754

Investment securities and other

  17,872     18,975     18,807     18,153     17,417  
Total interest income   73,870     72,589     67,448     67,364     65,171  
Interest expense
Deposits 1,555 1,559 1,433 1,413 1,525
Other borrowings   576     547     582     510     485  

Total interest expense

  2,131     2,106     2,015     1,923     2,010  

Net interest income before recapture of provision for loan losses

71,739 70,483 65,433 65,441 63,161

Recapture of provision for loan losses

  (1,500 )   (1,000 )   (4,500 )   (4,400 )   (2,000 )

Net interest income after recapture of provision for loan losses

  73,239       71,483       69,933       69,841     65,161  
 
Noninterest income 10,038 10,776 8,722 8,412 9,183
Noninterest expense   34,706     36,873     34,117     34,932     33,006  
Earnings before income taxes 48,571 45,386 44,538 43,321 41,338
Income taxes   18,888     17,013     16,034     16,245     15,890  
Net earnings $ 29,683   $ 28,373   $ 28,504   $ 27,076   $ 25,448  
 
Effective tax rate 38.89 % 37.49 % 36.00 % 37.50 % 38.44 %
 
Basic earnings per common share $ 0.27 $ 0.26 $ 0.26 $ 0.25 $ 0.23
Diluted earnings per common share $ 0.27 $ 0.26 $ 0.26 $ 0.25 $ 0.23
 
Cash dividends declared per common share $ 0.14 $ 0.14 $ 0.12 $ 0.12 $ 0.12
 
Cash dividends declared $ 15,423 $ 15,617 $ 13,018 $ 12,996 $ 12,968
 
 
                             
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
 
Loan Portfolio by Type
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
 
Commercial and industrial $ 529,661 $ 539,260 $ 530,856 $ 487,387 $ 496,814
SBA 125,501 130,716 114,265 97,511 104,379
Real estate:
Commercial real estate 3,366,316 3,312,068 3,271,592 2,997,735 2,981,859
Construction 74,148 77,294 72,782 85,879 90,710
SFR mortgage 244,828 250,104 245,537 250,783 241,672
Dairy & livestock and agribusiness 270,817 245,600 244,724 339,847 239,749
Municipal lease finance receivables 71,352 66,048 62,416 64,639 68,309
Consumer and other loans   71,009     74,714     81,534     79,743     81,143  
Gross loans 4,753,632 4,695,804 4,623,706 4,403,524 4,304,635
Less:
Purchase accounting discount on PCI loans (758 ) (1,008 ) (1,258 ) (1,508 ) (1,894 )
Deferred loan fees, net   (6,450 )   (7,098 )   (6,951 )   (6,952 )   (7,574 )
Gross loans, net of deferred loan fees and discounts 4,746,424 4,687,698 4,615,497 4,395,064 4,295,167
Allowance for loan losses   (60,631 )   (60,201 )   (59,212 )   (61,540 )   (61,001 )
Net loans $ 4,685,793   $ 4,627,497   $ 4,556,285   $ 4,333,524   $ 4,234,166  
 
 
Deposit Composition by Type and Customer Repurchase Agreements
 
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
 
Noninterest-bearing $ 3,908,809 $ 3,929,394 $ 3,999,107 $ 3,673,541 $ 3,657,610
Investment checking 415,503 415,768 424,077 407,058 413,789
Savings and money market 1,886,687 1,948,634 1,993,196 1,846,257 1,823,163
Time deposits   397,097     403,385     426,433     382,824     426,433  
Total deposits 6,608,096 6,697,181 6,842,813 6,309,680 6,320,995
 
Customer repurchase agreements   455,069     546,085     564,387     603,028     577,990  
Total deposits and customer repurchase agreements $ 7,063,165   $ 7,243,266   $ 7,407,200   $ 6,912,708   $ 6,898,985  
 
 
                         
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
   
Nonperforming Assets and Delinquency Trends
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016

Nonperforming loans:

Commercial and industrial $ 313 $ 1,058 $ 506 $ 156 $ 543
SBA 1,611 1,651 1,089 2,737 3,013
Real estate:
Commercial real estate 6,728 6,950 5,623 1,683 2,396
Construction - - 384 - -
SFR mortgage 1,349 963 983 2,207 2,244
Dairy & livestock and agribusiness 829 829 1,324 - -
Consumer and other loans   743     771     438     369     470  
Total $ 11,573   $ 12,222   $ 10,347   $ 7,152   $ 8,666  
% of Total gross loans 0.24 % 0.26 % 0.22 % 0.16 % 0.20 %
 

Past due 30-89 days:

Commercial and industrial $ 45 $ - $ 219 $ - $ -
SBA - - 329 352 -
Real estate:
Commercial real estate 220 218 - - 228
Construction - - - - -
SFR mortgage - 400 403 - -
Dairy & livestock and agribusiness - - - - -
Consumer and other loans   6     1     429     84     294  
Total $ 271   $ 619   $ 1,380   $ 436   $ 522  
% of Total gross loans 0.01 % 0.01 % 0.03 % 0.01 % 0.01 %
 

OREO:

Commercial and industrial $ - $ - $ - $ - $ -
Real estate:
Commercial real estate - - - - -
Construction   4,527     4,527     4,527     4,527     4,840  
Total $ 4,527   $ 4,527   $ 4,527   $ 4,527   $ 4,840  
Total nonperforming, past due, and OREO $ 16,371   $ 17,368   $ 16,254   $ 12,115   $ 14,028  
% of Total gross loans 0.34 % 0.37 % 0.35 % 0.28 % 0.33 %
 
 

Tangible Book Value Reconciliations (Non-GAAP)

The tangible book value per share is a Non-GAAP disclosure. The Company
uses certain non-GAAP financial measures to provide supplemental
information regarding the Company's performance. The following is a
reconciliation of tangible book value to the Company stockholders'
equity computed in accordance with GAAP, as well as a calculation of
tangible book value per share as of September 30, 2017 and 2016.

                September 30,
2017           2016
(Dollars in thousands, except per share amounts)
 
Stockholders' equity $ 1,076,464 $ 1,003,303
Less: Goodwill (116,564 ) (88,174 )
Less: Intangible assets   (7,177 )   (5,293 )
Tangible book value $ 952,723 $ 909,836
Common shares issued and outstanding   110,157,384     108,097,493  
Tangible book value per share $ 8.65   $ 8.42  
 

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