Market Overview

CVB Financial Corp. Reports Highest Quarterly Earnings in History

Share:
  • Record net earnings of $34.9 million for the first quarter of 2018,
    or $0.32 per share.
  • Noninterest-bearing deposits totaled $4.06 billion, or 60.55%, of
    total deposits.
  • CVB Financial Corp. and Community Bank entered into a merger
    agreement in the first quarter of 2018.

CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business
Bank ("the Company"), announced record earnings for the quarter ended
March 31, 2018.

CVB Financial Corp. reported net income of $34.9 million for the quarter
ended March 31, 2018, compared with $17.9 million for the fourth quarter
of 2017 and $28.5 million for the first quarter of 2017. Diluted
earnings per share were $0.32 for the first quarter, compared to $0.16
for the prior quarter and $0.26 for the same period last year. Income
tax expense for the fourth quarter of 2017 included a one-time charge of
$13.2 million due to the re-measurement of the Company's net deferred
tax asset ("DTA") resulting from the Tax Cuts and Jobs Act of 2017 ("Tax
Reform Act"). Excluding the impact of the $13.2 million DTA revaluation,
net income totaled $31.1 million for the fourth quarter of 2017, or
$0.28 per share. Net earnings grew by $3.9 million over the prior
quarter, or 12.41%, when the impact of the DTA revaluation is excluded,
and $6.4 million from the first quarter of 2017, or 22.48%.

On February 26, 2018, we announced that we entered into an agreement and
plan of reorganization and merger (the "Agreement"), pursuant to which
Community Bank will merge with and into Citizens Business Bank in a
stock and cash transaction valued at approximately $885.2 million, based
on CVBF's closing stock price of $23.60 on February 26, 2018. The merger
will increase Citizens' total assets to approximately $12.4 billion on a
pro forma basis as of December 31, 2017.

Chris Myers, President and CEO of Citizens Business Bank, commented, "I
am pleased with our bank's continued focus on growing both earnings and
assets. Our executives are doing an outstanding job balancing the
ongoing demands of running Citizens Business Bank and preparing for the
merger with Community Bank."

Net income of $34.9 million for the first quarter of 2018 produced an
annualized return on beginning equity of 13.24%, an annualized return on
average equity ("ROAE") of 13.02%, and an annualized return on average
assets ("ROAA") of 1.71%. Excluding the impact of the $13.2 million DTA
revaluation resulting from the Tax Reform Act, ROAE and ROAA for the
fourth quarter of 2017 were 11.28% and 1.48%, respectively. Net income
for the first quarter of 2017 produced an annualized return on average
equity of 11.39% and an annualized return on average assets of 1.42%.
The efficiency ratio for the first quarter of 2018 was 43.08%, compared
to 41.81% for the fourth quarter of 2017 and 46.01% for the first
quarter of 2017.

Net interest income before recapture of loan loss provision was $70.5
million for the quarter, which was a $754,000, or 1.06%, decrease from
the fourth quarter of 2017, and a $5.1 million, or 7.78%, increase over
the first quarter of 2017. Total interest income and fees on loans for
the first quarter of 2018 of $55.2 million decreased $677,000, or 1.21%,
from the fourth quarter of 2017, but increased $6.6 million, or 13.48%,
from the first quarter of 2017. Total investment income of $16.6 million
decreased $259,000, or 1.53%, from the fourth quarter of 2017 and $1.5
million, or 8.34%, from the first quarter of 2017. Interest expense
increased $132,000, or 6.46%, from the fourth quarter of 2017 and
$161,000, or 7.99%, in comparison with the first quarter of 2017.

During the first quarter of 2018, $1.0 million of loan loss provision
was recaptured, compared to $1.5 million recaptured for the prior
quarter, and $4.5 million recaptured for the same period last year.

Noninterest income was $12.9 million for the first quarter of 2018,
compared with $12.6 million for the fourth quarter of 2017, and $8.7
million for the first quarter of 2017. The $334,000 quarter-over-quarter
increase was primarily the result of a $3.5 million net gain on the sale
of our last remaining OREO. The first quarter of 2018 also included a
$475,000 recovery of a Valley Business Bank ("VBB") loan that was fully
charged off prior to acquisition and $436,000 in a death benefit
included in our BOLI policies. The fourth quarter of 2017 included a
$2.9 million net gain due to an eminent domain condemnation of one of
our banking center buildings and a $906,000 net gain on sale of a branch
acquired from VBB.

Noninterest expense for the first quarter of 2018 was $35.9 million,
compared to $35.1 million for the fourth quarter of 2017, and $34.1
million for the first quarter of 2017. The $889,000 quarter-over-quarter
increase was primarily the result of a $728,000 increase in acquisition
expense in connection with the proposed merger of Community Bank. The
$1.8 million increase over the first quarter of 2017 was primarily due
to a $739,000 increase in salaries and employee benefits, a $508,000
increase in occupancy and equipment costs, and an increase of $271,000
in legal expense. As a percentage of average assets, noninterest expense
was 1.77%, compared to 1.67% for the fourth quarter of 2017 and 1.70%
for the first quarter of 2017.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $70.5 million
for the first quarter of 2018, compared to $71.3 million for the fourth
quarter of 2017 and $65.4 million for the first quarter of 2017. Our net
interest margin (tax equivalent) was 3.68% for the first quarter of
2018, compared to 3.68% for the fourth quarter of 2017 and 3.51% for the
first quarter of 2017. On a nominal basis, excluding the impact from
tax-exempt interest, the net interest margin for the first quarter of
2018 grew by three basis points compared to the fourth quarter of 2017
and by 20 basis points over the first quarter of 2017. Total average
earning asset yields (tax equivalent) were 3.80% for the first quarter
of 2018, compared to 3.79% for the fourth quarter of 2017 and 3.62% for
the first quarter of 2017. Total cost of funds continued to be stable as
reflected by a 0.12% cost of funds for the first quarter of 2018,
compared to 0.11% for the fourth quarter of 2017 and 0.12% for the first
quarter of 2017. The increase in the net interest margin over the first
quarter of 2017 was primarily due to a 17 basis point increase in loan
yields as well as the change in the mix of earning assets. Average loans
increased by $410.8 million and represented 61.5% of earning assets for
the first quarter of 2018, compared to 57.2% for the first quarter of
2017. The tax equivalent yield on investments decreased five basis
points over the first quarter of 2017, due to a reduction of the federal
tax rate on tax-exempt investments resulting from the Tax Reform Act,
from 35% for the first quarter of 2017 to 21% for the first quarter of
2018.

Income Taxes

Our effective tax rate for the quarter ended March 31, 2018 was 28%,
compared with 36% for the quarter ended March 31, 2017. On December 22,
2017, the Tax Reform Act was enacted into law. Beginning in 2018, the
Tax Reform Act reduces the federal tax rate for corporations from 35% to
21% and changes or limits certain tax deductions. During the fourth
quarter of 2017, the Company recorded a $13.2 million one-time charge to
income tax expense due to the tax rate reduction and re-measurement of
its net deferred tax assets. Our estimated annual effective tax rate
varies depending upon the level of tax-advantaged income as well as
available tax credits.

Assets

The Company reported total assets of $8.36 billion at March 31, 2018.
This represented an increase of $85.6 million, or 1.03%, from total
assets of $8.27 billion at December 31, 2017. Interest-earning assets of
$7.92 billion at March 31, 2018 increased $115.5 million, or 1.48%, when
compared with $7.80 billion at December 31, 2017. The increase in
interest-earning assets was primarily due to a $330.0 million increase
in interest-earning balances due from the Federal Reserve. This increase
was partially offset by a $171.0 million decrease in investment
securities and a $35.6 million decrease in total loans. The decrease in
total loans was due to the approximate $71.7 million decline in seasonal
borrowings of dairy & livestock and agribusiness loans.

Total assets of $8.36 billion at March 31, 2018 decreased $203.0
million, or 2.37%, from total assets of $8.56 billion at March 31, 2017.
Interest-earning assets totaled $7.92 billion at March 31, 2018, a
decrease of $168.7 million, or 2.09%, when compared with earning assets
of $8.09 billion at March 31, 2017. The decrease in interest-earning
assets was due to a $416.9 million decrease in investment securities,
which was partially offset by a $179.5 million increase in total loans
and a $90.9 million increase in interest-earning balances due from the
Federal Reserve.

Investment Securities

Total investment securities were $2.74 billion at March 31, 2018, a
decrease of $171.0 million, or 5.87%, from $2.91 billion at December 31,
2017 and a decrease of $416.9 million, or 13.21%, from $3.16 billion at
March 31, 2017.

At March 31, 2018, investment securities held-to-maturity ("HTM")
totaled $798.3 million, a $31.6 million decrease, or 3.81%, from
December 31, 2017 and a $86.8 million decrease, or 9.80%, from March 31,
2017.

At March 31, 2018, investment securities available-for-sale ("AFS")
totaled $1.94 billion, inclusive of a pre-tax net unrealized loss of
$28.5 million due to a decline in fair value resulting from higher
interest rates. AFS securities declined by $139.4 million, or 6.70%,
from December 31, 2017, and declined by $330.1 million, or 14.53%, from
March 31, 2017.

The decrease in investment securities from the fourth quarter of 2017
was due to principal payments from the portfolio and minimal
reinvestment activity during the first quarter of 2018.

Combined, the AFS and HTM investments in mortgage backed securities
("MBS") and collateralized mortgage obligations ("CMOs") totaled $2.28
billion at March 31, 2018, compared to $2.43 billion at December 31,
2017 and $2.61 billion at March 31, 2017. 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 $306.3 million as
of March 31, 2018. These securities are located in 29 states. Our
largest concentrations of holdings are located in Minnesota at 21.24%,
Massachusetts at 10.50%, Texas at 9.56%, and Connecticut at 5.73%.

Loans

Total loans and leases, net of deferred fees and discounts, of $4.79
billion at March 31, 2018 decreased by $35.6 million, or 0.74%, from
December 31, 2017. The quarter-over-quarter decrease in loans was due to
a decline of $71.7 million in dairy & livestock and agribusiness loans
primarily due to seasonal paydowns. The overall decrease was partially
offset by growth of $31.3 million in commercial real estate loans.

Total loans and leases, net of deferred fees and discounts, of $4.79
billion at March 31, 2018 increased by $179.5 million, or 3.89%, from
March 31, 2017. The increase in total loans was principally due to
growth of $163.9 million in commercial real estate loans, $31.7 million
in dairy & livestock and agribusiness loans, and $10.5 million in Small
Business Administration ("SBA") loans. This growth was partially offset
by decreases of $17.1 million in consumer and other loans and $15.7
million in commercial and industrial loans.

Deposits & Customer Repurchase Agreements

Deposits of $6.71 billion and customer repurchase agreements of $487.3
million totaled $7.20 billion at March 31, 2018. This represents an
increase of $96.1 million, or 1.35%, when compared with total deposits
and customer repurchase agreements of $7.10 billion at December 31,
2017. Deposits and customer repurchase agreements decreased by $210.5
million, or 2.84%, when compared with total deposits and customer
repurchase agreements of $7.41 billion at March 31, 2017.

Noninterest-bearing deposits were $4.06 billion at March 31, 2018, an
increase of $216.3 million, or 5.62%, when compared to December 31,
2017, and an increase of $63.6 million, or 1.59%, when compared to $4.00
billion at March 31, 2017. At March 31, 2018, noninterest-bearing
deposits were 60.55% of total deposits, compared to 58.75% at December
31, 2017 and 58.44% at March 31, 2017.

Our average cost of total deposits was 0.09% for the quarter ended March
31, 2018, unchanged from both the fourth quarter of 2017 and the first
quarter of 2017. Our cost of total deposits including customer
repurchase agreements was 0.11% for the quarter ended March 31, 2018,
compared to 0.10% for the quarter ended December 31, 2017 and 0.11% for
the quarter ended March 31, 2017.

FHLB Advance, Other Borrowings and Debentures

We had no short-term borrowings at March 31, 2018, December 31, 2017,
and March 31, 2017.

At March 31, 2018, we had $25.8 million of junior subordinated
debentures, unchanged from December 31, 2017. These debentures bear
interest at three-month LIBOR plus 1.38% and mature in 2036.

Asset Quality

The allowance for loan losses totaled $59.9 million at March 31, 2018,
compared to $59.6 million at December 31, 2017 and $59.2 million at
March 31, 2017. The allowance for loan losses for the first quarter of
2018 was increased by net recoveries on loans of $1.3 million and was
reduced by a $1.0 million loan loss provision recapture. The allowance
for loan losses was 1.25%, 1.23%, and 1.28% of total loans and leases
outstanding, at March 31, 2018, December 31, 2017, and March 31, 2017,
respectively.

Nonperforming loans, defined as nonaccrual loans plus nonperforming TDR
loans, were $10.2 million at March 31 2018, or 0.21% of total loans.
This compares to nonperforming loans of $10.7 million, or 0.22%, of
total loans, at December 31, 2017, and $10.3 million, or 0.22%, of total
loans, at March 31, 2017. The $10.2 million in nonperforming loans at
March 31, 2018 are summarized as follows: $6.7 million in commercial
real estate loans, $1.3 million in single-family residential ("SFR")
mortgage loans, $818,000 in dairy & livestock and agribusiness loans,
$589,000 in SBA loans, $438,000 in consumer and other loans, and
$272,000 in commercial and industrial loans. The $544,000 decrease in
nonperforming loans quarter-over-quarter was primarily due to a $317,000
decrease in nonperforming SBA loans, a $114,000 decrease in
nonperforming consumer and other loans, and a $96,000 decrease in
nonperforming commercial real estate loans.

As of March 31, 2018, we had no OREO, compared to one property with a
carrying value of $4.5 million at December 31, 2017 and March 31, 2017.
During the first quarter of 2018, we sold our last remaining property,
realizing a net gain on sale of $3.5 million. There were no additions of
OREO for the three months ended March 31, 2018.

At March 31, 2018, we had loans delinquent 30 to 89 days of $743,000.
This compares to $1.2 million at December 31, 2017 and $1.4 million at
March 31, 2017. As a percentage of total loans, delinquencies, excluding
nonaccruals, were 0.02% at March 31, 2018, 0.02% at December 31, 2017,
and 0.03% at March 31, 2017.

At March 31, 2018 we had $4.3 million in performing TDR loans, compared
to $4.8 million in performing TDR loans at December 31, 2017, and $19.7
million in performing TDR loans at March 31, 2017. In terms of the
number of loans, we had 15 performing TDR loans at March 31, 2018,
compared to 16 performing TDR loans at December 31, 2017, and 25
performing TDR loans at March 31, 2017.

Nonperforming assets, defined as nonaccrual loans plus OREO, totaled
$10.2 million at March 31, 2018, $15.2 million at December 31, 2017, and
$14.9 million at March 31, 2017. As a percentage of total assets,
nonperforming assets were 0.12% at March 31, 2018, 0.18% at December 31,
2017, and 0.17% at March 31, 2017.

Classified loans are loans that are graded "substandard" or worse. At
March 31, 2018, classified loans totaled $43.2 million, compared to
$57.3 million at December 31, 2017, and $104.2 million at March 31,
2017. Total classified loans at March 31, 2018 included $5.5 million of
classified loans acquired from VBB in the first quarter of 2017. The
quarter-over-quarter decrease was primarily due to a $7.4 million
decrease in classified commercial real estate loans and a $6.7 million
decrease in classified dairy & livestock and agribusiness loans.

CitizensTrust

As of March 31, 2018, CitizensTrust had approximately $2.48 billion in
assets under management and administration, including $1.74 billion in
assets under management. Revenues were $2.2 million for the first
quarter of 2018, compared to $2.3 million for the same period of 2017.
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 $8.4 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, April 19, 2018 to discuss the Company's first quarter 2018
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 May 3, 2018 at
6:00 a.m. PDT/9:00 a.m. EDT. To access the replay, please dial (877)
344-7529, passcode 10118523.

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.

Additional Information about the Proposed
Merger with Community Bank and Where to Find It

In connection with the proposed merger of Citizens Business Bank
(CBB) and Community Bank (CYHT), CVB Financial Corp. (CVBF) has filed
with the United States Securities and Exchange Commission (SEC) a
registration statement on Form S-4 to register the shares of CBVF common
stock to be issued to the shareholders of CYHT, which contains CVBF's
preliminary prospectus and CVBF's and CYHT's preliminary joint proxy
statement. Before making any voting or investment decision, investors
and security holders of CVBF and CYHT, respectively, are urged to
carefully read the entire registration statement and preliminary joint
proxy statement/prospectus, the definitive joint proxy
statement/prospectus when it becomes available, as well as any
amendments or supplements to these documents, because they contain
important information about the proposed transaction. In addition, CVBF
and CYHT may file other relevant documents concerning the proposed
merger between CBB and CYHT with the SEC.

This communication does not constitute an
offer to sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval.

Investors and shareholders may obtain free copies of these documents,
including the preliminary joint proxy statement/prospectus and, when it
becomes available, the definitive joint proxy statement/prospectus,
through the website maintained by the SEC at
www.sec.gov.
Free copies of these documents also may be obtained when available by
directing a request by telephone or mail to CVB Financial Corp., 701 N.
Haven Avenue, Ontario, CA 91764, Attn: Corporate Secretary, telephone
(909) 980-4030, or by accessing CVBF's website at
www.cbbank.com
under the "Investors" tab. The information
on CVBF's website is not, and shall not be deemed to be, a part of the
joint proxy statement /prospectus filing or incorporated into any other
filings which CVBF makes with the SEC.

Participants in the Solicitation

CVB Financial Corp. and its directors and executive officers may be
deemed to be participants in the solicitation of proxies from its
shareholders as well as from the shareholders of CYHT in connection with
the transaction. Information about the directors and executive officers
of CVBF is set forth in CVBF's separate definitive proxy statement on
Schedule 14A filed with the SEC on April 4, 2018 in connection with
CVBF's annual meeting of shareholders scheduled for May 23, 2018.

CYHT and its directors and executive officers may also be deemed to
be participants in the solicitation of proxies from the shareholders of
CYHT in connection with the proposed merger between CYHT and CBB.

Additional information regarding the interests of these participants
and other persons who may be deemed participants in the proposed merger
may be obtained by reading the preliminary joint proxy
statement/prospectus and, when it becomes available, the definitive
joint proxy statement/prospectus.

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 val

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