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 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, or 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 mergers, acquisitions or dispositions we may make, including the
pending merger of Community Bank with and into Citizens Business Bank,
whether we are able to obtain any required governmental approvals in
connection with any such mergers, acquisitions or dispositions, and/or
our ability to realize the contemplated financial or business benefits
associated with any such mergers, acquisitions or dispositions; our
ability to realize cost savings or synergies in connection with any
acquisitions we may make; the effect of changes in laws, regulations and
applicable judicial decisions (including laws, regulations and judicial
decisions concerning financial reforms, taxes, bank 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 security technology)
with which we and our subsidiaries must comply or believe we should
comply or which may otherwise impact us; the effects of , including
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; political developments, uncertainties or instability;
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; terrorist and political uncertainty or instability
activities, disease pandemics, catastrophic events, ; acts of war or
terrorism, or natural disasters, such as earthquakes, drought, or the
effects of pandemic diseases extreme weather events, electrical,
environmental, computer servers, and communications or other services we
use, or that affect our employees or third parties with whom we conduct
business; our 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 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, funds transfer applications and electronic marketplaces
for loans and other banking products or services); 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 the 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 such as securities, bank operations, consumer or
employee class action litigation), the possibility that any settlement
of any of the 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 our Annual Report on Form 10-K for the year ended
December 31, 2017, 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)
 
March 31, December 31, March 31,
2018 2017 2017
Assets
Cash and due from banks $ 101,714 $ 119,841 $ 118,772

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

  354,524     24,536     263,669  
Total cash and cash equivalents   456,238     144,377     382,441  
Interest-earning balances due from depository institutions 10,100 17,952 30,321
Investment securities available-for-sale 1,941,592 2,080,985 2,271,703
Investment securities held-to-maturity   798,284     829,890     885,057  
Total investment securities   2,739,876     2,910,875     3,156,760  
Investment in stock of Federal Home Loan Bank (FHLB) 17,688 17,688 19,640
Loans and lease finance receivables 4,794,983 4,830,631 4,615,497
Allowance for loan losses   (59,935 )   (59,585 )   (59,212 )
Net loans and lease finance receivables   4,735,048     4,771,046     4,556,285  
Premises and equipment, net 45,542 46,166 47,262
Bank owned life insurance (BOLI) 146,702 146,486 145,056
Intangibles 6,507 6,838 7,892
Goodwill 116,564 116,564 119,193
Other assets   81,895     92,594     94,271  
Total assets $ 8,356,160   $ 8,270,586   $ 8,559,121  
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 4,062,691 $ 3,846,436 $ 3,999,107
Investment checking 433,725 433,971 424,077
Savings and money market 1,840,929 1,881,099 1,993,196
Time deposits   372,090     385,347     426,433  
Total deposits 6,709,435 6,546,853 6,842,813

Customer repurchase agreements

487,277 553,773 564,387
Junior subordinated debentures 25,774 25,774 25,774
Other liabilities   66,816     74,920     79,814  

Total liabilities

7,289,302 7,201,320 7,512,788

Stockholders' Equity:

Stockholders' equity 1,087,709 1,067,814 1,035,916
Accumulated other comprehensive income, net of tax   (20,851 )   1,452     10,417  
Total stockholders' equity   1,066,858     1,069,266     1,046,333  
Total liabilities and stockholders' equity $ 8,356,160   $ 8,270,586   $ 8,559,121  
 
 
                     
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
Three Months Ended
March 31,
2018 2017
Assets
Cash and due from banks $ 125,638 $ 125,524

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

  124,678     74,307  
Total cash and cash equivalents   250,316     199,831  
Interest-earning balances due from depository institutions 14,098 43,497
Investment securities available-for-sale 2,034,191 2,245,799
Investment securities held-to-maturity   811,954     893,104  
Total investment securities   2,846,145     3,138,903  
Investment in stock of FHLB 17,688 18,143
Loans and lease finance receivables 4,789,943 4,379,111
Allowance for loan losses   (59,820 )   (61,697 )
Net loans and lease finance receivables   4,730,123     4,317,414  
Premises and equipment, net 46,034 43,416
Bank owned life insurance (BOLI) 146,574 137,289
Intangibles 6,722 5,624
Goodwill 116,564 96,454
Other assets   82,116     121,566  
Total assets $ 8,256,380   $ 8,122,137  
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 3,856,254 $ 3,700,572
Interest-bearing   2,668,560     2,685,033  
Total deposits 6,524,814 6,385,605
Customer repurchase agreements 543,997 603,186
Other borrowings 13,489 19,594
Junior subordinated debentures 25,774 25,774
Payable for securities purchased - 13,844
Other liabilities   61,033     59,388  
Total liabilities 7,169,107 7,107,391

Stockholders' Equity:

Stockholders' equity 1,086,285 1,004,815
Accumulated other comprehensive income, net of tax   988     9,931  
Stockholders' equity   1,087,273     1,014,746  
Total liabilities and stockholders' equity $ 8,256,380   $ 8,122,137  
 
 
                         
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Three Months Ended
March 31,
2018 2017
Interest income:
Loans and leases, including fees $ 55,196 $ 48,641
Investment securities:
Investment securities available-for-sale 11,868 12,640
Investment securities held-to-maturity   4,765     5,507  
Total investment income 16,633 18,147
Dividends from FHLB stock 332 393

Interest-earning deposits with other institutions and federal
funds sold

  536     267  
Total interest income   72,697     67,448  
Interest expense:
Deposits 1,525 1,433
Borrowings and junior subordinated debentures   651     582  
Total interest expense   2,176     2,015  

Net interest income before recapture of provision for loan losses

70,521 65,433
Recapture of provision for loan losses   (1,000 )   (4,500 )

Net interest income after recapture of provision for loan losses

  71,521     69,933  
Noninterest income:
Service charges on deposit accounts 4,045 3,727
Trust and investment services 2,157 2,296
Gain on OREO, net 3,540 -
Other   3,174     2,699  

Total noninterest income

  12,916     8,722  
Noninterest expense:
Salaries and employee benefits 22,314 21,575
Occupancy and equipment 4,192 3,684
Professional services 1,530 1,257
Software licenses and maintenance 1,760 1,561
Marketing and promotion 1,356 1,239
Acquisition related expenses 803 676
Other   3,991     4,125  
Total noninterest expense   35,946     34,117  
Earnings before income taxes 48,491 44,538
Income taxes   13,578     16,034  
Net earnings $ 34,913   $ 28,504  
 
Basic earnings per common share $ 0.32   $ 0.26  
Diluted earnings per common share $ 0.32   $ 0.26  
Cash dividends declared per common share $ 0.14   $ 0.12  
 
 
                         
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Three Months Ended
March 31,
2018 2017

Interest income - tax equivalent (TE)

$ 73,228 $ 68,522
Interest expense   2,176     2,015  
Net interest income - (TE) $ 71,052   $ 66,507  
 
Return on average assets, annualized 1.71 % 1.42 %
Return on average equity, annualized 13.02 % 11.39 %
Efficiency ratio [1] 43.08 % 46.01 %
Noninterest expense to average assets, annualized 1.77 % 1.70 %
Yield on average earning assets (TE) 3.80 % 3.62 %
Cost of deposits 0.09 % 0.09 %
Cost of deposits and customer repurchase agreements 0.11 % 0.11 %
Cost of funds 0.12 % 0.12 %
Net interest margin (TE) 3.68 % 3.51 %
[1] Noninterest expense divided by net interest income before
provision for loan losses plus noninterest income.
 
Weighted average shares outstanding
Basic 109,858,684 108,339,129
Diluted 110,223,288 108,805,810
Dividends declared $ 15,434 $ 13,018
Dividend payout ratio [2] 44.21 % 45.67 %
[2] Dividends declared on common stock divided by net earnings.
 
Number of shares outstanding - (end of period) 110,259,046 110,108,757
Book value per share $ 9.68 $ 9.50
Tangible book value per share $ 8.56 $ 8.35
 
 
March 31,
2018 2017
Nonperforming assets:
Nonaccrual loans $ 6,263 $ 8,940

Loans past due 90 days or more and still accruing interest

- -
Troubled debt restructured loans (nonperforming) 3,909 1,407
Other real estate owned (OREO), net   -     4,527  
Total nonperforming assets $ 10,172   $ 14,874  
Troubled debt restructured performing loans $ 4,285   $ 19,702  
 

Percentage of nonperforming assets to total loans outstanding and
OREO

0.21 % 0.32 %

Percentage of nonperforming assets to total assets

0.12 % 0.17 %

Allowance for loan losses to nonperforming assets

589.22 % 398.09 %
 
 
Three Months Ended
March 31,
2018 2017
Allowance for loan losses:
Beginning balance $ 59,585 $ 61,540
Total charge-offs (7 ) (2 )
Total recoveries on loans previously charged-off   1,357     2,174  
Net recoveries 1,350 2,172
Recapture of provision for loan losses   (1,000 )   (4,500 )
Allowance for loan losses at end of period $ 59,935   $ 59,212  
 
Net recoveries to average loans 0.028 % 0.050 %
 
 
           
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Quarterly Common Stock Price
 
2018 2017 2016
Quarter End High Low High Low High Low
March 31, $ 25.14 $ 21.64 $ 24.63 $ 20.58 $ 17.70 $ 14.02
June 30, - - $ 22.85 $ 19.90 $ 17.92 $ 15.25
September 30, - - $ 24.29 $ 19.58 $ 17.88 $ 15.39
December 31, - - $ 25.49 $ 22.25 $ 23.23 $ 16.32
 
Quarterly Consolidated Statements of Earnings
 
Q1 Q4 Q3 Q2 Q1
2018 2017 2017 2017 2017
Interest income
Loans and leases, including fees $ 55,196 $ 55,873 $ 55,998 $ 53,614 $ 48,641
Investment securities and other   17,501     17,446     17,872     18,975     18,807  
Total interest income   72,697     73,319     73,870     72,589     67,448  
Interest expense
Deposits 1,525 1,497 1,555 1,559 1,433
Other borrowings   651     547     576     547     582  
Total interest expense   2,176     2,044     2,131     2,106     2,015  

Net interest income before recapture of provision for loan losses

70,521 71,275 71,739 70,483 65,433
Recapture of provision for loan losses   (1,000 )   (1,500 )   (1,500 )   (1,000 )   (4,500 )

Net interest income after recapture of provision for loan losses

  71,521       72,775       73,239       71,483       69,933  
 
Noninterest income 12,916 12,582 10,038 10,776 8,722
Noninterest expense   35,946     35,057     34,706     36,873     34,117  
Earnings before income taxes 48,491 50,300 48,571 45,386 44,538
Income taxes   13,578     32,449     18,888     17,013     16,034  
Net earnings $ 34,913   $ 17,851   $ 29,683   $ 28,373   $ 28,504  
 
Effective tax rate 28.00 % 64.51 % 38.89 % 37.49 % 36.00 %
 
Basic earnings per common share $ 0.32 $ 0.16 $ 0.27 $ 0.26 $ 0.26
Diluted earnings per common share $ 0.32 $ 0.16 $ 0.27 $ 0.26 $ 0.26
 
Cash dividends declared per common share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.12
 
Cash dividends declared $ 15,434 $ 15,425 $ 15,423 $ 15,617 $ 13,018
 
 
                             
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
 
Loan Portfolio by Type
 
March 31, December 31, September 30, June 30, March 31,
2018 2017 2017 2017 2017
 
Commercial and industrial $ 515,137 $ 514,259 $ 529,661 $ 539,260 $ 530,856
SBA 124,788 123,438 125,501 130,716 114,265
Real estate:
Commercial real estate 3,435,491 3,404,144 3,366,316 3,312,068 3,271,592
Construction 79,898 77,982 74,148 77,294 72,782
SFR mortgage 237,776 236,364 244,828 250,104 245,537
Dairy & livestock and agribusiness 276,389 348,059 270,817 245,600 244,724
Municipal lease finance receivables 67,892 70,243 71,352 66,048 62,416
Consumer and other loans   64,387     64,457     71,009     74,714     81,534  
Gross loans 4,801,758 4,838,946 4,753,632 4,695,804 4,623,706
Less:
Purchase accounting discount on PCI loans (1,074 ) (2,026 ) (758 ) (1,008 ) (1,258 )
Deferred loan fees, net   (5,701 )   (6,289 )   (6,450 )   (7,098 )   (6,951 )
Gross loans, net of deferred loan fees and discounts 4,794,983 4,830,631 4,746,424 4,687,698 4,615,497
Allowance for loan losses   (59,935 )   (59,585 )   (60,631 )   (60,201 )   (59,212 )
Net loans $ 4,735,048   $ 4,771,046   $ 4,685,793   $ 4,627,497   $ 4,556,285  
 
 
Deposit Composition by Type and Customer Repurchase Agreements
 
March 31, December 31, September 30, June 30, March 31,
2018 2017 2017 2017 2017
 
Noninterest-bearing $ 4,062,691 $ 3,846,436 $ 3,908,809 $ 3,929,394 $ 3,999,107
Investment checking 433,725 433,971 415,503 415,768 424,077
Savings and money market 1,840,929 1,881,099 1,886,687 1,948,634 1,993,196
Time deposits   372,090     385,347     397,097     403,385     426,433  
Total deposits 6,709,435 6,546,853 6,608,096 6,697,181 6,842,813
 
Customer repurchase agreements   487,277     553,773     455,069     546,085     564,387  
Total deposits and customer repurchase agreements $ 7,196,712   $ 7,100,626   $ 7,063,165   $ 7,243,266   $ 7,407,200  
 
 
         
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
 
Nonperforming Assets and Delinquency Trends
March 31, December 31, September 30, June 30, March 31,
2018 2017 2017 2017 2017

Nonperforming loans:

Commercial and industrial $ 272 $ 250 $ 313 $ 1,058 $ 506
SBA 589 906 1,611 1,651 1,089
Real estate:
Commercial real estate 6,746 6,842 6,728 6,950 5,623
Construction - - - - 384
SFR mortgage 1,309 1,337 1,349 963 983
Dairy & livestock and agribusiness 818 829 829 829 1,324
Consumer and other loans   438     552     743     771     438  
Total $ 10,172   $ 10,716   $ 11,573   $ 12,222   $ 10,347  
% of Total gross loans 0.21 % 0.22 % 0.24 % 0.26 % 0.22 %
 

Past due 30-89 days:

Commercial and industrial $ - $ 768 $ 45 $ - $ 219
SBA - 403 - - 329
Real estate:
Commercial real estate - - 220 218 -
Construction - - - - -
SFR mortgage 680 - - 400 403
Dairy & livestock and agribusiness - - - - -
Consumer and other loans   63     1     6     1     429  
Total $ 743   $ 1,172   $ 271   $ 619   $ 1,380  
% of Total gross loans 0.02 % 0.02 % 0.01 % 0.01 % 0.03 %
 

OREO:

Real estate:
Commercial real estate $ - $ - $ - $ - $ -
Construction   -     4,527     4,527     4,527     4,527  
Total $ -   $ 4,527   $ 4,527   $ 4,527   $ 4,527  
Total nonperforming, past due, and OREO $ 10,915   $ 16,415   $ 16,371   $ 17,368   $ 16,254  
% of Total gross loans 0.23 % 0.34 % 0.34 % 0.37 % 0.35 %
 
 

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 March 31, 2018 and 2017.

                       
March 31,
2018 2017
(Dollars in thousands, except per share amounts)
 
Stockholders' equity $ 1,066,858 $ 1,046,333
Less: Goodwill (116,564 ) (119,193 )
Less: Intangible assets   (6,507 )   (7,892 )
Tangible book value $ 943,787 $ 919,248
Common shares issued and outstanding   110,259,046     110,108,757  
Tangible book value per share $ 8.56   $ 8.35  
 

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