Market Overview

CVB Financial Corp. Reports Highest Quarterly Earnings in History

Share:
  • Record net earnings of $35.4 million for the second quarter of
    2018, or $0.32 per share.
  • Record net earnings for the first six months of $70.3 million, or
    $0.64 per share.
  • Year-to-date return on average assets of 1.72%.
  • Year-to-date return on average equity of 13.05%.

CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business
Bank ("the Company"), announced record earnings for the quarter ended
June 30, 2018.

CVB Financial Corp. reported net income of $35.4 million for the quarter
ended June 30, 2018, compared with $34.9 million for the first quarter
of 2018 and $28.4 million for the second quarter of 2017. Diluted
earnings per share were $0.32 for the second quarter, compared to $0.32
for the prior quarter and $0.26 for the same period last year.

Chris Myers, President and CEO of Citizens Business Bank, commented,
"Our strong deposit base remained a key differentiator and is the
primary reason for our higher profitability and net interest margin for
the second quarter. Our strategic focus is on quality loan and deposit
growth and the ongoing preparation for the integration of Community
Bank."

Net income of $35.4 million for the second quarter of 2018 produced an
annualized return on beginning equity of 13.30%, an annualized return on
average equity ("ROAE") of 13.08%, and an annualized return on average
assets ("ROAA") of 1.73%. ROAE and ROAA for the first quarter of 2018
were 13.02% and 1.71%, respectively. Net income for the second quarter
of 2017 produced a ROAE of 10.73% and a ROAA of 1.35%. The efficiency
ratio for the second quarter of 2018 was 41.58%, compared to 43.08% for
the first quarter of 2018 and 45.38% for the second quarter of 2017.

Net income totaled $70.3 million for the six months ended June 30, 2018.
This represented a $13.4 million, or 23.58%, increase from the prior
year. Earnings for the first six months of 2018 included $2.0 million in
loan loss provision recapture, compared with $5.5 million in loan loss
provision recapture for the first six months of 2017. Diluted earnings
per share were $0.64 for the six months ended June 30, 2018, compared to
$0.52 for the same period of 2017. Net income for the six months ended
June 30, 2018 produced an annualized return on beginning equity of
13.26%, a ROAE of 13.05% and a ROAA of 1.72%. The efficiency ratio for
the six months ended June 30, 2018 was 42.34%, compared to 45.68% for
the first six months of 2017.

Net interest income before recapture of loan loss provision was $72.7
million for the quarter, which was a $2.2 million, or 3.07%, increase
from the first quarter of 2018, and a $2.2 million, or 3.13%, increase
over the second quarter of 2017. Total interest income and fees on loans
for the second quarter of 2018 of $57.4 million increased $2.2 million,
or 3.94%, from the first quarter of 2018 and $3.8 million, or 7.00%,
from the second quarter of 2017. Total investment income of $16.5
million decreased $129,000, or 0.78%, from the first quarter of 2018 and
$1.8 million, or 9.96%, from the second quarter of 2017. Interest
expense was relatively unchanged from the prior quarter and the second
quarter of 2017. Total cost of funds for all three comparative periods
equaled 0.12%.

During the second quarter of 2018, $1.0 million of loan loss provision
was recaptured, compared to $1.0 million recaptured for both the prior
quarter and the second quarter of 2017.

Noninterest income was $9.7 million for the second quarter of 2018,
compared with $12.9 million for the first quarter of 2018, and $10.8
million for the second quarter of 2017. The $3.2 million
quarter-over-quarter decrease was primarily due to a $3.5 million net
gain on the sale of an OREO property and a $475,000 recovery of a Valley
Business Bank ("VBB") loan that was fully charged off prior to
acquisition in the first quarter of 2018. The second quarter of 2017
included $443,000 of recoveries on American Security Bank ("ASB") loans
that were charged off prior to the acquisition and a $402,000 gain on
sale of an investment security. Excluding these items, noninterest
income for the second quarter of 2018 grew by $794,000 or 8.92%,
quarter-over-quarter and decreased by $236,000, or 2.38%, compared to
the second quarter of 2017.

Noninterest expense for the second quarter of 2018 was $34.3 million,
compared to $35.9 million for the first quarter of 2018, and $36.9
million for the second quarter of 2017. The $1.7 million
quarter-over-quarter decrease was primarily due to a $1.3 million
decrease in salaries and employee benefits, including a decrease in
payroll taxes of approximately $800,000. Acquisition expense, incurred
in connection with the pending merger of Community Bank, declined by
$309,000. The $2.6 million decrease over the second quarter of 2017 was
primarily due to a decrease of $756,000 in acquisition expense, a
$655,000 decrease in salaries and employee benefits, and a $236,000
decrease in occupancy and equipment costs. As a percentage of average
assets, noninterest expense was 1.68%, compared to 1.77% for the first
quarter of 2018 and 1.76% for the second quarter of 2017.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $72.7 million
for the second quarter of 2018, compared to $70.5 million for the first
quarter of 2018 and $70.5 million for the second quarter of 2017. Our
net interest margin (tax equivalent) was 3.82% for the second quarter of
2018, compared to 3.68% for the first quarter of 2018 and 3.63% for the
second 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 13 basis points compared to the first quarter of 2018 and
by 21 basis points over the second quarter of 2017. Total average
earning asset yields (tax equivalent) were 3.93% for the second quarter
of 2018, compared to 3.80% for the first quarter of 2018 and 3.74% for
the second quarter of 2017. Total cost of funds continued to be stable
as reflected by a 0.12% cost of funds for the second quarter of 2018,
unchanged from both the first quarter of 2018 and the second quarter of
2017. The increase in the net interest margin from the prior quarter was
the result of a 14 basis point increase in loan yields. Compared to the
second quarter of 2017, the net interest margin expanded primarily due
to an 18 basis point increase in loan yields as well as the change in
the mix of earning assets. Average loans increased by $136.8 million and
represented 62.1% of earning assets for the second quarter of 2018,
compared to 58.7% for the second quarter of 2017. The tax equivalent
yield on investments increased seven basis points from the first quarter
of 2018. The nominal yield on investments increased by five basis points
compared to the second quarter of 2017, while the tax equivalent yield
remained unchanged due to the reduction of the federal tax rate on
tax-exempt investments resulting from the Tax Reform Act.

Income Taxes

Our effective tax rate for the three and six months ended June 30, 2018
was 28%, compared with 37% for the six months ended June 30, 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.

Assets

The Company reported total assets of $8.09 billion at June 30, 2018.
This represented a decrease of $176.7 million, or 2.14%, from total
assets of $8.27 billion at December 31, 2017. Interest-earning assets of
$7.61 billion at June 30, 2018 decreased $195.4 million, or 2.50%, when
compared with $7.80 billion at December 31, 2017. The decrease in
interest-earning assets was primarily due to a $208.4 million decrease
in investment securities and a $13.7 million decrease in total loans.
This decrease was partially offset by a $37.5 million increase in
interest-earning balances due from the Federal Reserve. The decrease in
total loans was due to the approximate $79.6 million decline in seasonal
borrowings of dairy & livestock and agribusiness loans.

Total assets of $8.09 billion at June 30, 2018 decreased $324.3 million,
or 3.85%, from total assets of $8.42 billion at June 30, 2017.
Interest-earning assets totaled $7.61 billion at June 30, 2018, a
decrease of $313.5 million, or 3.96%, when compared with earning assets
of $7.92 billion at June 30, 2017. The decrease in interest-earning
assets was due to a $436.8 million decrease in investment securities,
which was partially offset by a $129.3 million increase in total loans.

Investment Securities

Total investment securities were $2.70 billion at June 30, 2018, a
decrease of $208.4 million, or 7.16%, from $2.91 billion at December 31,
2017 and a decrease of $436.8 million, or 13.91%, from $3.14 billion at
June 30, 2017. The decrease in investment securities was primarily due
to limited reinvestment of cash flows generated from principal payments
on the security portfolio.

At June 30, 2018, investment securities held-to-maturity ("HTM") totaled
$772.5 million, a $57.4 million decrease, or 6.92%, from December 31,
2017 and a $97.3 million decrease, or 11.19%, from June 30, 2017.

At June 30, 2018, investment securities available-for-sale ("AFS")
totaled $1.93 billion, inclusive of a pre-tax net unrealized loss of
$34.3 million due to a decline in fair value resulting from higher
interest rates. AFS securities declined by $151.0 million, or 7.26%,
from December 31, 2017, and declined by $339.5 million, or 14.96%, from
June 30, 2017.

Combined, the AFS and HTM investments in mortgage backed securities
("MBS") and collateralized mortgage obligations ("CMOs") totaled $2.26
billion at June 30, 2018, compared to $2.43 billion at December 31, 2017
and $2.62 billion at June 30, 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 $291.6 million as
of June 30, 2018. These securities are located in 29 states. Our largest
concentrations of holdings are located in Minnesota at 22.31%,
Massachusetts at 11.01%, Texas at 10.02%, and Connecticut at 6.01%.

In the second quarter of 2018, we purchased $98.7 million of MBS/CMO
securities with an average yield of approximately 3.00%.

Loans

Total loans and leases, net of deferred fees and discounts, of $4.82
billion at June 30, 2018 increased by $22.0 million, or 0.46%, from
March 31, 2018. The quarter-over-quarter increase in loans was due to
$35.8 million of growth in commercial real estate loans and $4.5 million
of growth in construction loans. The increase in loans and leases were
partially offset by decreases of $7.9 million in dairy & livestock and
agribusiness loans, $5.4 million in commercial and industrial loans, and
$3.3 million in consumer and other loans.

Total loans and leases, net of deferred fees and discounts, of $4.82
billion at June 30, 2018 decreased by $13.7 million, or 0.28%, from
December 31, 2017. The decrease in total loans was principally due to a
decline of $79.6 million in dairy & livestock and agribusiness loans
primarily due to seasonal paydowns. The overall decrease was partially
offset by growth of $67.1 million in commercial real estate loans.
Excluding the decrease in dairy & livestock and agribusiness loans,
total loans grew by $65.9 million or 1.36%.

Total loans and leases, net of deferred fees and discounts, of $4.82
billion at June 30, 2018 increased by $129.3 million, or 2.76%, from
June 30, 2017.

Deposits & Customer Repurchase Agreements

Deposits of $6.54 billion and customer repurchase agreements of $384.1
million totaled $6.92 billion at June 30, 2018. This represents a
decrease of $181.3 million, or 2.55%, when compared with total deposits
and customer repurchase agreements of $7.10 billion at December 31,
2017. Deposits and customer repurchase agreements decreased by $323.9
million, or 4.47%, when compared with total deposits and customer
repurchase agreements of $7.24 billion at June 30, 2017.

Noninterest-bearing deposits were $3.98 billion at June 30, 2018, an
increase of $134.2 million, or 3.49%, when compared to December 31,
2017, and an increase of $51.3 million, or 1.30%, when compared to $3.93
billion at June 30, 2017. At June 30, 2018, noninterest-bearing deposits
were 60.91% of total deposits, compared to 58.75% at December 31, 2017
and 58.67% at June 30, 2017.

Our average cost of total deposits was 0.09% for the quarter ended June
30, 2018, unchanged from both the first quarter of 2018 and the second
quarter of 2017. Our cost of total deposits including customer
repurchase agreements was 0.11% for the quarters ended June 30, 2018,
March 31, 2018 and June 30, 2017.

FHLB Advance, Other Borrowings and Debentures

We had no short-term borrowings at June 30, 2018, December 31, 2017, and
June 30, 2017.

At June 30, 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 $59.6 million at June 30, 2018,
compared to $59.6 million at December 31, 2017 and $60.2 million at June
30, 2017. The allowance for loan losses for the second quarter of 2018
was increased by net recoveries on loans of $648,000 and was reduced by
a $1.0 million loan loss provision recapture. The allowance for loan
losses was 1.24%, 1.25%, 1.23%, and 1.28% of total loans and leases
outstanding, at June 30, 2018, March 31, 2018, December 31, 2017, and
June 30, 2017, respectively.

Nonperforming loans, defined as nonaccrual loans plus nonperforming TDR
loans, were $10.2 million at June 30, 2018, or 0.21% of total loans.
This compares to nonperforming loans of $10.2 million, or 0.21% of total
loans, at March 31, 2018, $10.7 million, or 0.22%, of total loans, at
December 31, 2017, and $12.2 million, or 0.26%, of total loans, at June
30, 2017. The $10.2 million in nonperforming loans at June 30, 2018 are
summarized as follows: $6.5 million in commercial real estate loans,
$1.6 million in single-family residential ("SFR") mortgage loans,
$800,000 in dairy & livestock and agribusiness loans, $574,000 in Small
Business Administration ("SBA") loans, $509,000 in consumer and other
loans, and $204,000 in commercial and industrial loans.

As of June 30, 2018, we had no OREO, compared to one property with a
carrying value of $4.5 million at December 31, 2017 and June 30, 2017.
During the first quarter of 2018, we sold this OREO property, realizing
a net gain on sale of $3.5 million. There were no additions of OREO for
the six months ended June 30, 2018.

At June 30, 2018, we had loans delinquent 30 to 89 days of $47,000. This
compares to $743,000 at March 31, 2018, $1.2 million at December 31,
2017 and $619,000 at June 30, 2017. As a percentage of total loans,
delinquencies, excluding nonaccruals, were 0.00% at June 30, 2018, 0.02%
at March 31, 2018, 0.02% at December 31, 2017, and 0.01% at June 30,
2017.

At June 30, 2018, we had $4.5 million in performing TDR loans, compared
to $4.3 million in performing TDR loans at March 31, 2018, $4.8 million
in performing TDR loans at December 31, 2017, and $16.6 million in
performing TDR loans at June 30, 2017. In terms of the number of loans,
we had 15 performing TDR loans at June 30, 2018, compared to 15
performing TDR loans at March 31, 2018, 16 performing TDR loans at
December 31, 2017, and 24 performing TDR loans at June 30, 2017.

Nonperforming assets, defined as nonaccrual loans plus OREO, totaled
$10.2 million at June 30, 2018, $10.2 million at March 31, 2018, $15.2
million at December 31, 2017, and $16.7 million at June 30, 2017. As a
percentage of total assets, nonperforming assets were 0.13% at June 30,
2018, 0.12% at March 31, 2018, 0.18% at December 31, 2017, and 0.20% at
June 30, 2017.

Classified loans are loans that are graded "substandard" or worse. At
June 30, 2018, classified loans totaled $40.0 million, compared to $43.2
million at March 31, 2018, $57.3 million at December 31, 2017, and $93.4
million at June 30, 2017. Total classified loans at June 30, 2018
included $5.4 million of classified loans acquired from VBB in the first
quarter of 2017. The quarter-over-quarter decrease was primarily due to
an $8.3 million decrease in classified commercial and industrial loans
and a $5.7 million decrease in classified dairy & livestock and
agribusiness loans, partially offset by an $11.3 million increase in
commercial real estate loans.

CitizensTrust

As of June 30, 2018, CitizensTrust had approximately $2.52 billion in
assets under management and administration, including $1.76 billion in
assets under management. Revenues were $2.4 million for the second
quarter of 2018 and $4.6 million for the first six months of 2018,
compared to $2.6 million and $4.9 million, respectively, for the same
period of 2017. CitizensTrust provides trust, investment and brokerage
related services, as well as financial, estate and business succession
planning.

Merger Update

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
would increase Citizens' total assets to approximately $12.1 billion on
a pro forma basis as of March 31, 2018. The shareholders of both
Companies approved the merger on June 21, 2018, and we are hopeful that
regulatory approvals will be received shortly.

Corporate Overview

CVB Financial Corp. ("CVBF") is the holding company for Citizens
Business Bank. CVBF is one of the 10 largest bank holding companies
headquartered in California with assets of approximately $8.1 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, July 19, 2018 to discuss the Company's second 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 August 2, 2018
at 6:00 a.m. PDT/9:00 a.m. EDT. To access the replay, please dial (877)
344-7529, passcode 10121691.

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, 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 additional legal
and regulatory requirements to which we may become subject in the event
our total assets exceed $10 billion, which is expected to occur in the
event that our pending merger transaction with Community Bank is
consummated; 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 bank
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, cost 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,
catastrophic events, acts of war or terrorism, or natural disasters,
such as earthquakes, drought, or the effects of pandemic diseases,
extreme weather events, that affect 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
any securities, bank operations, consumer or employee class action
litigation); 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)
 
June 30, December 31, June 30,
2018 2017 2017
Assets
Cash and due from banks $ 119,495 $ 119,841 $ 134,686
Interest-earning balances due from Federal Reserve   61,994     24,536     50,061  
Total cash and cash equivalents   181,489     144,377     184,747  
Interest-earning balances due from depository institutions 7,150 17,952 25,050
Investment securities available-for-sale 1,929,994 2,080,985 2,269,510
Investment securities held-to-maturity   772,469     829,890     869,769  
Total investment securities   2,702,463     2,910,875     3,139,279  
Investment in stock of Federal Home Loan Bank (FHLB) 17,688 17,688 17,688

Loans and lease finance receivables

4,816,956 4,830,631 4,687,698
Allowance for loan losses   (59,583 )   (59,585 )   (60,201 )

Net loans and lease finance receivables

  4,757,373     4,771,046     4,627,497  
Premises and equipment, net 44,691 46,166 47,362
Bank owned life insurance (BOLI) 147,419 146,486 145,441
Intangibles 6,179 6,838 7,519
Goodwill 116,564 116,564 119,193
Other assets   112,847     92,594     104,427  
Total assets $ 8,093,863   $ 8,270,586   $ 8,418,203  
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 3,980,666 $ 3,846,436 $ 3,929,394
Investment checking 432,455 433,971 415,768
Savings and money market 1,759,684 1,881,099 1,948,634
Time deposits   362,501     385,347     403,385  
Total deposits 6,535,306 6,546,853 6,697,181
Customer repurchase agreements 384,054 553,773 546,085
Junior subordinated debentures 25,774 25,774 25,774
Payable for securities purchased - - 16,346
Other liabilities   65,312     74,920     72,048  
Total liabilities 7,010,446 7,201,320 7,357,434
Stockholders' Equity
Stockholders' equity 1,108,915 1,067,814 1,049,633
Accumulated other comprehensive income, net of tax   (25,498 )   1,452     11,136  
Total stockholders' equity   1,083,417     1,069,266     1,060,769  
Total liabilities and stockholders' equity $ 8,093,863   $ 8,270,586   $ 8,418,203  
 
 
                       
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Assets
Cash and due from banks $ 124,333 $ 129,922 $ 124,982 $ 128,463

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

  135,748     82,694     130,244     77,796  
Total cash and cash equivalents   260,081     212,616     255,226     206,259  
Interest-earning balances due from depository institutions 8,333 27,371 11,199 35,389
Investment securities available-for-sale 1,975,037 2,263,932 2,004,452 2,254,915
Investment securities held-to-maturity   784,602     870,840     798,201     881,910  
Total investment securities   2,759,639     3,134,772     2,802,653     3,136,825  
Investment in stock of FHLB 17,688 18,675 17,688 18,411
Loans and lease finance receivables 4,780,347 4,643,505 4,785,118 4,512,039
Allowance for loan losses   (60,032 )   (59,476 )   (59,926 )   (60,581 )
Net loans and lease finance receivables   4,720,315     4,584,029     4,725,192     4,451,458  
Premises and equipment, net 45,280 47,810 45,655 45,625
Bank owned life insurance (BOLI) 147,738 145,383 147,159 141,359
Intangibles 6,393 7,725 6,557 6,680
Goodwill 116,564 119,193 116,564 107,886
Other assets   96,578     122,548     89,387     121,855  
Total assets $ 8,178,609   $ 8,420,122   $ 8,217,280   $ 8,271,747  
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 3,958,980 $ 3,890,656 $ 3,907,901 $ 3,796,139
Interest-bearing   2,601,523     2,808,869     2,634,856     2,747,293  
Total deposits 6,560,503 6,699,525 6,542,757 6,543,432
Customer repurchase agreements 433,542 554,016 488,465 578,465
Other borrowings 3,302 7,781 8,367 13,655
Junior subordinated debentures 25,774 25,774 25,774 25,774
Payable for securities purchased 13,529 9,695 6,802 11,758
Other liabilities   56,906     62,589     58,958     60,792  
Total liabilities 7,093,556 7,359,380 7,131,123 7,233,876
Stockholders' Equity
Stockholders' equity 1,106,448 1,050,743 1,096,422 1,027,905
Accumulated other comprehensive income, net of tax   (21,395 )   9,999     (10,265 )   9,966  
Stockholders' equity   1,085,053     1,060,742     1,086,157     1,037,871  
Total liabilities and stockholders' equity $ 8,178,609   $ 8,420,122   $ 8,217,280   $ 8,271,747  
 
 
                       
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Interest income:
Loans and leases, including fees $ 57,368 $ 53,614 $ 112,564 $ 102,255
Investment securities:
Investment securities available-for-sale 11,697 13,007 23,565 25,647
Investment securities held-to-maturity   4,807     5,323     9,572     10,830  
Total investment income 16,504 18,330 33,137 36,477
Dividends from FHLB stock 298 359 630 752

Interest-earning deposits with other institutions and federal
funds sold

  635     286     1,171     553  
Total interest income   74,805     72,589     147,502     140,037  
Interest expense:
Deposits 1,549 1,559 3,074 2,992
Borrowings and junior subordinated debentures   568     547     1,219     1,129  
Total interest expense   2,117     2,106     4,293     4,121  

Net interest income before recapture of provision for loan losses

72,688 70,483 143,209 135,916
Recapture of provision for loan losses   (1,000 )   (1,000 )   (2,000 )   (5,500 )

Net interest income after recapture of provision for loan losses

  73,688     71,483     145,209     141,416  
Noninterest income:
Service charges on deposit accounts 4,091 3,982 8,136 7,709
Trust and investment services 2,399 2,613 4,556 4,909
Gain on OREO, net - 2 3,540 2
Other   3,205     4,179     6,379     6,878  
Total noninterest income   9,695     10,776     22,611     19,498  
Noninterest expense:
Salaries and employee benefits 21,051 21,706 43,365 43,281
Occupancy and equipment 4,318 4,554 8,510 8,238
Professional services 1,690 1,843 3,220 3,100
Software licenses and maintenance 1,759 1,627 3,519 3,188
Marketing and promotion 1,148 1,190 2,504 2,429
Acquisition related expenses 494 1,250 1,297 1,926
Other   3,794     4,703     7,785     8,828  
Total noninterest expense   34,254     36,873     70,200     70,990  
Earnings before income taxes 49,129 45,386 97,620 89,924
Income taxes   13,756     17,013     27,334     33,047  
Net earnings $ 35,373   $ 28,373   $ 70,286   $ 56,877  
 
Basic earnings per common share $ 0.32   $ 0.26   $ 0.64   $ 0.52  
Diluted earnings per common share $ 0.32   $ 0.26   $ 0.64   $ 0.52  
Cash dividends declared per common share $ 0.14   $ 0.14   $ 0.28   $ 0.26  
 
 
                       
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Interest income - tax equivalent (TE) $ 75,308 $ 73,615 $ 148,536 $ 142,137
Interest expense   2,117     2,106     4,293     4,121  
Net interest income - (TE) $ 73,191   $ 71,509   $ 144,243   $ 138,016  
 
Return on average assets, annualized 1.73 % 1.35 % 1.72 % 1.39 %
Return on average equity, annualized 13.08 % 10.73 % 13.05 % 11.05 %
Efficiency ratio [1] 41.58 % 45.38 % 42.34 % 45.68 %
Noninterest expense to average assets, annualized 1.68 % 1.76 % 1.72 % 1.73 %
Yield on average earning assets (TE) 3.93 % 3.74 % 3.86 % 3.68 %
Cost of deposits 0.09 % 0.09 % 0.09 % 0.09 %
Cost of deposits and customer repurchase agreements 0.11 % 0.11 % 0.11 % 0.11 %
Cost of funds 0.12 % 0.12 % 0.12 % 0.12 %
Net interest margin (TE) 3.82 % 3.63 % 3.75 % 3.57 %
[1] Noninterest expense divided by net interest income before
provision for loan losses plus noninterest income.
 
Weighted average shares outstanding
Basic 109,983,074 109,730,278 109,921,223 109,038,546
Diluted 110,354,766 110,078,433 110,339,463 109,445,295
Dividends declared $ 15,444 $ 15,617 $ 30,878 $ 28,635
Dividend payout ratio [2] 43.66 % 55.04 % 43.93 % 50.35 %
[2] Dividends declared on common stock divided by net earnings.
 
Number of shares outstanding - (end of period) 110,302,468 110,149,314
Book value per share $ 9.82 $ 9.63
Tangible book value per share $ 8.71 $ 8.48
 
June 30,
2018 2017
Nonperforming assets:
Nonaccrual loans $ 6,290 $ 7,831

Loans past due 90 days or more and still accruing interest

- -
Troubled debt restructured loans (nonperforming) 3,892 4,391
Other real estate owned (OREO), net   -     4,527  
Total nonperforming assets $ 10,182   $ 16,749  
Troubled debt restructured performing loans $ 4,530   $ 16,574  
 

Percentage of nonperforming assets to total loans outstanding and
OREO

0.21 % 0.36 %

Percentage of nonperforming assets to total assets

0.13 % 0.20 %

Allowance for loan losses to nonperforming assets

585.18 % 359.43 %
 
Six Months Ended
June 30,
2018 2017
Allowance for loan losses:
Beginning balance $ 59,585 $ 61,540
Total charge-offs (9 ) (2 )

 

Total recoveries on loans previously charged-off   2,007     4,163  
Net recoveries 1,998 4,161
Recapture of provision for loan losses   (2,000 )   (5,500 )
Allowance for loan losses at end of period $ 59,583   $ 60,201  
 
Net recoveries to average loans 0.042 % 0.092 %
 
 
                             
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, $ 24.11 $ 21.92 $ 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
 
Q2 Q1 Q4 Q3 Q2
2018 2018 2017 2017 2017
Interest income
Loans and leases, including fees $ 57,368 $ 55,196 $ 55,873 $ 55,998 $ 53,614
Investment securities and other   17,437     17,501     17,446     17,872     18,975  
Total interest income   74,805     72,697     73,319     73,870     72,589  
Interest expense
Deposits 1,549 1,525 1,497 1,555 1,559
Other borrowings   568     651     547     576     547  
Total interest expense   2,117     2,176     2,044     2,131     2,106  

Net interest income before recapture of provision for loan losses

72,688 70,521 71,275 71,739 70,483
Recapture of provision for loan losses   (1,000 )   (1,000 )   (1,500 )   (1,500 )   (1,000 )

Net interest income after recapture of provision for loan losses

  73,688       71,521       72,775       73,239       71,483  
 
Noninterest income 9,695 12,916 12,582 10,038 10,776
Noninterest expense   34,254     35,946     35,057     34,706     36,873  
Earnings before income taxes 49,129 48,491 50,300 48,571 45,386
Income taxes   13,756     13,578     32,449     18,888     17,013  
Net earnings $ 35,373   $ 34,913   $ 17,851   $ 29,683   $ 28,373  
 
Effective tax rate 28.00 % 28.00 % 64.51 % 38.89 % 37.49 %
 
Basic earnings per common share $ 0.32 $ 0.32 $ 0.16 $ 0.27 $ 0.26
Diluted earnings per common share $ 0.32 $ 0.32 $ 0.16 $ 0.27 $ 0.26
 
Cash dividends declared per common share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.14
 
Cash dividends declared $ 15,444 $ 15,434 $ 15,425 $ 15,423 $ 15,617
 
 
                             
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
 
Loan Portfolio by Type
 
June 30, March 31, December 31, September 30, June 30,
2018 2018 2017 2017 2017
 
Commercial and industrial $ 509,750 $ 515,137 $ 514,259 $ 529,661 $ 539,260
SBA 122,359 124,788 123,438 125,501 130,716
Real estate:
Commercial real estate 3,471,244 3,435,491 3,404,144 3,366,316 3,312,068
Construction 84,400 79,898 77,982 74,148 77,294
SFR mortgage 237,308 237,776 236,364 244,828 250,104
Dairy & livestock and agribusiness 268,489 276,389 348,059 270,817 245,600
Municipal lease finance receivables 67,721 67,892 70,243 71,352 66,048
Consumer and other loans   61,060     64,387     64,457     71,009     74,714  
Gross loans 4,822,331 4,801,758 4,838,946 4,753,632 4,695,804
Less:
Purchase accounting discount on PCI loans - (1,074 ) (2,026 ) (758 ) (1,008 )
Deferred loan fees, net   (5,375 )   (5,701 )   (6,289 )   (6,450 )   (7,098 )
Gross loans, net of deferred loan fees and discounts 4,816,956 4,794,983 4,830,631 4,746,424 4,687,698
Allowance for loan losses   (59,583 )   (59,935 )   (59,585 )   (60,631 )   (60,201 )
Net loans $ 4,757,373   $ 4,735,048   $ 4,771,046   $ 4,685,793   $ 4,627,497  
 
 
 
Deposit Composition by Type and Customer Repurchase Agreements
 
June 30, March 31, December 31, September 30, June 30,
2018 2018 2017 2017 2017
 
Noninterest-bearing $ 3,980,666 $ 4,062,691 $ 3,846,436 $ 3,908,809 $ 3,929,394
Investment checking 432,455 433,725 433,971 415,503 415,768
Savings and money market 1,759,684 1,840,929 1,881,099 1,886,687 1,948,634
Time deposits   362,501     372,090     385,347     397,097     403,385  
Total deposits 6,535,306 6,709,435 6,546,853 6,608,096 6,697,181
 
Customer repurchase agreements   384,054     487,277     553,773     455,069     546,085  
Total deposits and customer repurchase agreements $ 6,919,360   $ 7,196,712   $ 7,100,626   $ 7,063,165   $ 7,243,266  
 
 
                             
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
 
Nonperforming Assets and Delinquency Trends
June 30, March 31, December 31, September 30, June 30,
2018 2018 2017 2017 2017

Nonperforming loans:

Commercial and industrial $ 204 $ 272 $ 250 $ 313 $ 1,058
SBA 574 589 906 1,611 1,651
Real estate:
Commercial real estate 6,517 6,746 6,842 6,728 6,950
Construction - - - - -
SFR mortgage 1,578 1,309 1,337 1,349 963
Dairy & livestock and agribusiness 800 818 829 829 829
Consumer and other loans   509     438     552     743     771  
Total $ 10,182   $ 10,172   $ 10,716   $ 11,573   $ 12,222  
% of Total gross loans 0.21 % 0.21 % 0.22 % 0.24 % 0.26 %
 

Past due 30-89 days:

Commercial and industrial $ - $ - $ 768 $ 45 $ -
SBA - - 403 - -
Real estate:
Commercial real estate - - - 220 218
Construction - - - - -
SFR mortgage - 680 - - 400
Dairy & livestock and agribusiness - - - - -
Consumer and other loans   47     63     1     6     1  
Total $ 47   $ 743   $ 1,172   $ 271   $ 619  
% of Total gross loans 0.001 % 0.02 % 0.02 % 0.01 % 0.01 %
 

OREO:

Real estate:
Commercial real estate $ - $ - $ - $ - $ -
Construction   -     -     4,527     4,527     4,527  
Total $ -   $ -   $ 4,527   $ 4,527   $ 4,527  
Total nonperforming, past due, and OREO $ 10,229   $ 10,915   $ 16,415   $ 16,371   $ 17,368  
% of Total gross loans 0.21 % 0.23 % 0.34 % 0.34 % 0.37 %
 
 

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 June 30, 2018 and 2017.

          June 30,
  2018       2017  

(Dollars in thousands, except per share amounts)

 
Stockholders' equity $ 1,083,417 $ 1,060,769
Less: Goodwill (116,564 ) (119,193 )
Less: Intangible assets   (6,179 )   (7,519 )

Tangible book value

$ 960,674 $ 934,057
Common shares issued and outstanding   110,302,468     110,149,314  

Tangible book value per share

$ 8.71   $ 8.48  

View Comments and Join the Discussion!