Press Release

CVB Financial Corp. Reports Earnings for the Second Quarter of 2020

Company Release - 7/22/2020 4:45 PM ET
  • 173rd Consecutive Quarter of Profitability
  • Net Earnings of $41.6 million for the second quarter of 2020, or $0.31 per share
  • Return on Average Tangible Common Equity of 13.80% for the second quarter of 2020
  • TCE Ratio of 9.6%, CET1 Ratio of 14.5% and Total Risk-based Capital Ratio of 16.0%
  • Growth in Noninterest-bearing Deposits of $1.65 billion or 31% year-over-year
  • $1.1 billion in loans under SBA’s Paycheck Protection Program (“PPP”)

ONTARIO, Calif.--(BUSINESS WIRE)-- CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (the “Company”), announced earnings for the quarter ended June 30, 2020.

CVB Financial Corp. reported net income of $41.6 million for the quarter ended June 30, 2020, compared with $38.0 million for the first quarter of 2020 and $54.5 million for the second quarter of 2019. Diluted earnings per share were $0.31 for the second quarter, compared to $0.27 for the prior quarter and $0.39 for the same period last year. The Company recorded $11.5 million in provision for credit losses during the quarter as a result of the further deterioration in the forecasted economic impact from the coronavirus pandemic. During the second quarter of 2020, the Company originated, under the SBA Paycheck Protection Program, approximately 4,100 loans, of which $1.1 billion was outstanding at June 30, 2020.

David Brager, Chief Executive Officer of Citizens Business Bank, commented: “Citizens Business Bank remains well positioned to succeed with strong capital, consistent earnings, solid credit, and excellent liquidity. We will continue to focus on these key attributes that continue to make our Bank a high performer. I am exceptionally proud of the commitment and effort of our associates who have provided outstanding service to our customers during these unprecedented times and supported our customers by originating more than 4,000 PPP loans.”

Net income of $41.6 million for the second quarter of 2020 produced an annualized return on average equity (“ROAE”) of 8.51% and an annualized return on average tangible common equity (“ROATCE”) of 13.80%. ROAE and ROATCE for the first quarter of 2020 were 7.61% and 12.27 %, respectively, and 11.38% and 18.81%, respectively, for the second quarter of 2019. Annualized return on average assets (“ROAA”) was 1.33% for the second quarter, compared to 1.34% for the first quarter of 2020 and 1.95% for the second quarter of 2019. The efficiency ratio for the second quarter of 2020 was 39.75%, compared to 42.69% for the first quarter of 2020 and 39.09% for the second quarter of 2019.

Net income totaled $79.6 million for the six months ended June 30, 2020. This represented a $26.5 million, or 24.98%, decrease from the prior year, as the provision for credit losses increased by $20 million. Diluted earnings per share were $0.58 for the six months ended June 30, 2020, compared to $0.76 for the same period of 2019. Net income for the six months ended June 30, 2020 produced an annualized ROAE of 8.06%, an ROATCE of 13.03% and an ROAA of 1.33%. This compares to ROAE of 11.26%, ROATCE of 18.78% and ROAA of 1.89% for the first six months of 2019. The efficiency ratio for the six months ended June 30, 2020 was 41.20%, compared to 40.04% for the first six months of 2019.

Net interest income before provision for credit losses was $104.6 million for the second quarter of 2020. This represented a $2.3 million, or 2.21%, increase from the first quarter of 2020, and a $6.5 million, or 5.84%, decrease from the second quarter of 2019. Total interest income was $108.0 million for the second quarter of 2020, which was $849,000, or 0.79%, higher than the first quarter of 2020 and $8.8 million, or 7.56%, lower than the same period last year. Total interest income and fees on loans for the second quarter of 2020 of $95.4 million increased $3.2 million, or 3.51%, from the first quarter of 2020, and decreased $6.5 million, or 6.37%, from the second quarter of 2019. Total investment income of $12.1 million decreased $1.9 million, or 13.80%, from the first quarter of 2020 and decreased $2.4 million, or 16.74%, from the second quarter of 2019. Interest expense decreased $1.4 million, or 29.44%, from the prior quarter and decreased $2.3 million, or 40.83%, compared to the second quarter of 2019.

The Company adopted ASU 2016-13, commonly referred to as CECL which replaces the “incurred loss” approach with an “expected loss” model over the life of the loan, effective on January 1, 2020. An $11.5 million provision for credit losses was recorded for the second quarter of 2020, due to the continued economic disruption resulting from COVID-19. The additional provision for credit losses reflect a more severe economic downturn compared to the forecast at the end of the prior quarter. A $12.0 million provision for credit losses was recorded in the first quarter of 2020, due to the forecast of an economic recession that developed at the end of that quarter. In comparison to the prior year, a $2.0 million loan loss provision was incurred for the second quarter of 2019. During the second quarter of 2020, we experienced minimal credit charge-offs of $167,000 and total recoveries of $9,000, resulting in net charge-offs of $158,000.

Noninterest income was $12.2 million for the second quarter of 2020, compared with $11.6 million for the first quarter of 2020 and $18.2 million for the second quarter of 2019. The second quarter of 2020 included higher swap fee income of $1.8 million compared to both the prior quarter and the second quarter of 2019. The year-over-year decrease of $6.0 million reflects a $5.7 million net gain in the second quarter of 2019 from the legal settlement of an eminent domain condemnation of one of our banking center buildings located in Bakersfield.

Noninterest expense for the second quarter of 2020 was $46.4 million, compared to $48.6 million for the first quarter of 2020 and $50.5 million for the second quarter of 2019. There were no merger related expenses related to the Community Bank acquisition for the second quarter of 2020 and the first quarter of 2020, compared to $2.6 million for the second quarter of 2019. The $2.2 million quarter-over-quarter decrease was primarily due to a $2.2 million decrease in salaries and employee benefits, including a decrease in payroll taxes of approximately $1.1 million and $1.2 million in higher net deferred loan costs (contra account) primarily due to PPP loan origination costs. The year-over-year decrease also included a $568,000 decrease in regulatory assessments, a $396,000 decrease in occupancy and equipment expense primarily due to the consolidation of banking centers, and a $388,000 decrease in Core Deposit Intangible amortization. As a percentage of average assets, noninterest expense was 1.48% for the second quarter of 2020, compared to 1.72% for the first quarter of 2020 and 1.81% for the second quarter of 2019.

Net Interest Income and Net Interest Margin

Net interest income, before provision for credit losses, was $104.6 million for the second quarter of 2020, compared to $102.3 million for the first quarter of 2020 and $111.1 million for the second quarter of 2019. Our net interest margin (tax equivalent) was 3.70% for the second quarter of 2020, compared to 4.08% for the first quarter of 2020 and 4.49% for the second quarter of 2019. Total average earning asset yields (tax equivalent) were 3.82% for the second quarter of 2020, compared to 4.27% for the first quarter of 2020 and 4.72% for the second quarter of 2019. The decrease in earning asset yield from the prior quarter was due to a combination of an 18 basis point decrease in average loan yields, a 23 basis point decrease in investment yields and a change in asset mix with average balances at the Federal Reserve growing to 9.2% of earning assets for the second quarter of 2020, compared to 2.4% for the first quarter of 2020. The decrease in earning asset yield compared to the second quarter of 2019 was primarily due to a 63 basis point decrease in loan yields from 5.40% in the year ago quarter to 4.77% for the second quarter of 2020, a 31 basis point decline in investment yields, as well as a change in asset mix resulting from a $1.0 billion increase in average balances at the Federal Reserve. Discount accretion on acquired loans decreased by $672,000 quarter-over-quarter and decreased by $3.9 million compared to the second quarter of 2019. The significant decline in interest rates over the past four quarters had a negative impact on loan yields, which after excluding discount accretion, nonaccrual interest income, and the impact from PPP loans, declined by 23 basis points compared to the prior quarter and 42 basis points from the second quarter of 2019. The significant decline in interest rates also impacted the tax equivalent yield on investments, which decreased by 23 basis points from the first quarter of 2020 and decreased 31 basis points from the second quarter of 2019. Average earning assets increased from the first quarter of 2020 by $1.27 billion to $11.39 billion for the second quarter of 2020. Average loans grew by $564.2 million quarter-over-quarter and investment securities declined on average by $112.9 million from the first quarter. Average earning assets increased by $1.43 billion from the second quarter of 2019, as loans grew by $488.6 million and investments decreased by $118.5 million, while balances at the Federal Reserve grew on average by $1.04 billion compared to the second quarter of 2019. PPP loan balances were about $670 million, on average, during the second quarter of 2020.

Total cost of funds declined to 0.13% for the second quarter of 2020 from 0.21% for the first quarter of 2020 and 0.25% in the year ago quarter. On average, noninterest-bearing deposits were 62% of total deposits during the current quarter. Noninterest-bearing deposits grew on average by $957.3 million, or 18.24%, from the first quarter of 2020. Interest-bearing deposits and customer repurchase agreements grew on average by $306.1 million during the second quarter of 2020, compared to the first quarter of 2020. The cost of interest-bearing deposits and customer repurchase agreements declined from 0.46% for the prior quarter to 0.31% for the second quarter of 2020. In comparison to the second quarter of 2019, our overall cost of funds decreased by 12 basis points, as noninterest-bearing deposits grew by $1.11 billion and short-term borrowings decreased by $129.6 million. Interest-bearing deposits increased by $324.9 million compared to the second quarter of 2019, while the cost of interest-bearing deposits decreased by 16 basis points.

Income Taxes

Our effective tax rate for the six months ended June 30, 2020 was 29.00%, compared with 29.00% for the six months ended June 30, 2019. Our estimated annual effective tax rate can vary depending upon the level of tax-advantaged income as well as available tax credits.

Assets

The Company reported total assets of $13.75 billion at June 30, 2020. This represented an increase of $2.14 billion, or 18.48%, from total assets of $11.61 billion at March 31, 2020. Interest-earning assets of $12.52 billion at June 30, 2020 increased $2.12 billion, or 20.39%, when compared with $10.40 billion at March 31, 2020. The increase in interest-earning assets was primarily due to a $1.20 billion increase in interest-earning balances due from the Federal Reserve and a $936.4 million increase in total loans, partially offset by a $32.8 million decrease in investment securities. The increase in total loans was due to the origination of approximately 4,100 PPP loans, totaling $1.10 billion at June 30, 2020. Excluding PPP loans, total loans declined by $160.8 million from March 31, 2020.

The Company reported total assets of $13.75 billion at June 30, 2020. This represented an increase of $2.47 billion, or 21.88%, from total assets of $11.28 billion at December 31, 2019. Interest-earning assets of $12.52 billion at June 30, 2020 increased $2.49 billion, or 24.83%, when compared with $10.03 billion at December 31, 2019. The increase in interest-earning assets was primarily due to a $1.74 billion increase in interest-earning balances due from the Federal Reserve and an $838.0 million increase in total loans, partially offset by a $125.5 million decrease in investment securities. Excluding PPP loans, total loans declined by $259.2 million from December 31, 2019.

Total assets of $13.75 billion at June 30, 2020 increased $2.58 billion, or 23.09%, from total assets of $11.17 billion at June 30, 2019. Interest-earning assets totaled $12.52 billion at June 30, 2020, an increase of $2.62 billion, or 26.52%, when compared with earning assets of $9.89 billion at June 30, 2019. The increase in interest-earning assets was primarily due to a $1.76 billion increase in interest-earning balances due from the Federal Reserve and an $866.8 million increase in total loans. This was partially offset by a $38.9 million decrease in investment securities. Excluding PPP loans, total loans declined by $230.3 million from June 30, 2019.

Investment Securities

Total investment securities were $2.29 billion at June 30, 2020, a decrease of $32.8 million, or 1.41%, from $2.32 billion at March 31, 2020, a decrease of $125.5 million, or 5.20%, from $2.41 billion at December 31, 2019, and a decrease of $38.9 million, or 1.67%, from $2.33 billion at June 30, 2019.

At June 30, 2020, investment securities held-to-maturity (“HTM”) totaled $613.2 million, a $61.3 million decrease, or 9.09%, from December 31, 2019 and a $114.9 million decrease, or 15.79%, from June 30, 2019.

At June 30, 2020, investment securities available-for-sale (“AFS”) totaled $1.68 billion, inclusive of a pre-tax net unrealized gain of $57.3 million. AFS securities decreased by $64.2 million, or 3.69%, from December 31, 2019, and increased by $76.0 million, or 4.75%, from June 30, 2019.

Combined, the AFS and HTM investments in mortgage backed securities (“MBS”) and collateralized mortgage obligations (“CMO”) totaled $1.97 billion at June 30, 2020, compared to $2.06 billion at December 31, 2019 and $1.94 billion at June 30, 2019. Virtually all of our MBS and CMO are issued or guaranteed by government or government sponsored enterprises, which have the implied guarantee of the U.S. Government.

In the second quarter of 2020, we purchased $162 million of MBS securities with an average yield of approximately 1.25%.

Our combined AFS and HTM municipal securities totaled $206.6 million as of June 30, 2020. These securities are located in 27 states. Our largest concentrations of holdings are located in Minnesota at 28.78%, Massachusetts at 14.05%, Connecticut at 7.25%, Texas at 7.03%, and Wisconsin at 6.54%.

Loans

Total loans and leases, net of deferred fees and discounts, of $8.40 billion at June 30, 2020 increased by $936.4 million, or 12.54%, from March 31, 2020. The increase in total loans included $1.10 billion in PPP loans. Excluding PPP loans, total loans declined by $160.8 million, or 2.15%. The $160.8 million decrease in loans included decreases of $120.0 million in commercial and industrial loans, $20.3 million in dairy & livestock and agribusiness loans, $12.9 million in other SBA loans, and $28.9 million in consumer and other loans, partially offset by a $17.2 million increase in commercial real estate loans.

Total loans and leases, net of deferred fees and discounts, of $8.40 billion at June 30, 2020 increased by $838.0 million, or 11.08%, from December 31, 2019. The increase in total loans included $1.10 billion in PPP loans and a $131.9 million decline in dairy & livestock and agribusiness loans primarily due to seasonal pay downs, which historically occur in the first quarter of each calendar year. Excluding PPP loans and dairy & livestock and agribusiness loans, total loans declined by $127.3 million, or 1.77%. The $127.3 million decrease in loans included decreases of $94.4 million in commercial and industrial loans, $31.0 million in consumer and other loans, and $9.5 million in commercial real estate loans, and collectively $4.4 million in other loan segments. Partially offsetting these declines were increases in construction loans and SFR mortgage loans of $8.9 million and $3.1 million, respectively.

Total loans and leases, net of deferred fees and discounts, of $8.40 billion at June 30, 2020 increased by $866.8 million, or 11.50%, from June 30, 2019. Excluding $1.10 billion in PPP loans, loans declined by $230.3 million including decreases of $77.2 million in commercial and industrial loans, $52.2 million in commercial real estate loans, $49.9 million in dairy & livestock and agribusiness loans, $35.4 million in consumer and other loans, $27.5 million in other SBA loans, and $10.1 million in municipal lease finance, partially offset by a $9.4 million increase in construction loans and a $8.2 million increase in SFR mortgage loans.

Asset Quality

The allowance for credit losses (“ACL”) totaled $94.0 million at June 30, 2020, compared to $82.6 million at March 31, 2020, $68.7 million at December 31, 2019 and $67.1 million at June 30, 2019. The allowance for credit losses for the second quarter of 2020 was increased by $11.5 million in provision for credit losses due to the severe economic disruption forecasted as a result of the coronavirus pandemic. At June 30, 2020, ACL as a percentage of total loans and leases outstanding was 1.12%, or 1.29% when PPP loans are excluded. This compares to 1.11%, 0.91%, and 0.89% at March, 31, 2020, December 31, 2019, and June 30, 2019, respectively.

Nonperforming loans, defined as nonaccrual loans and loans 90 days past due accruing interest plus nonperforming TDR loans, were $6.8 million at June 30, 2020, or 0.08% of total loans. Total nonperforming loans at June 30, 2020 included $4.3 million of nonperforming loans acquired with the acquisition of Community Bank in the third quarter of 2018. This compares to nonperforming loans of $6.4 million, or 0.09% of total loans, at March 31, 2020, $5.3 million, or 0.07% of total loans, at December 31, 2019 and $11.3 million, or 0.15% of total loans, at June 30, 2019. The $6.8 million in nonperforming loans at June 30, 2020 are summarized as follows: $2.6 million in commercial real estate loans, $1.6 million in SBA loans, $1.2 million in commercial and industrial loans, $1.1 million in SFR mortgage loans, and $289,000 in consumer and other loans.

As of June 30, 2020, we had $4.9 million in OREO compared to $4.9 million at December 31, 2019 and $2.3 million at June 30, 2019.

At June 30, 2020, we had loans delinquent 30 to 89 days of $2.6 million. This compares to $4.4 million at March 31, 2020, $1.7 million at December 31, 2019 and $332,000 at June 30, 2019. As a percentage of total loans, delinquencies, excluding nonaccruals, were 0.03% at June 30, 2020, 0.06% at March 31, 2020, 0.02% at December 31, 2019, and 0.004% at June 30, 2019.

At June 30, 2020, we had $2.8 million in performing TDR loans, compared to $3.1 million in performing TDR loans at December 31, 2019 and $3.2 million in performing TDR loans at June 30, 2019. Through July 10, 2020, we have temporary payment deferments (primarily 90 day deferments of principal and interest) in response to the CARES Act for loans totaling $1.27 billion, or 15% of total loans. As of July 10, 2020, 6% of the initial deferments have requested and been granted a second deferment.

Nonperforming assets, defined as nonaccrual loans and loans 90 days past due accruing interest plus OREO, totaled $11.7 million at June 30, 2020, $10.2 million at December 31, 2019, and $13.6 million at June 30, 2019. As a percentage of total assets, nonperforming assets were 0.09% at June 30, 2020, 0.09% at December 31, 2019, and 0.12% at June 30, 2019.

Classified loans are loans that are graded “substandard” or worse. At June 30, 2020, classified loans totaled $86.3 million, compared to $83.6 million at March 31, 2020, $73.4 million at December 31, 2019 and $49.4 million at June 30, 2019. Total classified loans at June 30, 2020 included $40.6 million of classified loans acquired from Community Bank in the third quarter of 2018. Classified loans increased $2.8 million quarter-over-quarter and included a $5.8 million increase in classified commercial and industrial loans, partially offset by a $1.3 million decrease in classified SBA loans, a $793,000 decrease in classified commercial real estate loans, and a $739,000 decrease in classified dairy & livestock and agribusiness loans.

Deposits & Customer Repurchase Agreements

Deposits of $10.98 billion and customer repurchase agreements of $468.2 million totaled $11.45 billion at June 30, 2020. This represented an increase of $1.97 billion, or 20.77%, when compared with $9.48 billion at March 31, 2020. Total deposits and customer repurchase agreements increased $2.32 billion, or 25.38% when compared with $9.13 billion at December 31, 2019 and increased $2.37 billion, or 26.06%, when compared with $9.08 billion at June 30, 2019.

Noninterest-bearing deposits were $6.90 billion at June 30, 2020, an increase of $1.33 billion, or 23.84%, when compared to $5.57 billion at March 31, 2020, an increase of $1.66 billion, or 31.57%, when compared to $5.25 billion at December 31, 2019, and an increase of $1.65 billion, or 31.45%, when compared to June 30, 2019. At June 30, 2020, noninterest-bearing deposits were 62.83% of total deposits, compared to 61.15% at March 31, 2020, 60.26% at December 31, 2019 and 60.61% at June 30, 2019.

FHLB Advance, Other Borrowings and Debentures

At June 30, 2020, we had $10.0 million in FHLB borrowings, with a cost of 0.0%.

At June 30, 2020, we had $25.8 million of junior subordinated debentures, unchanged from December 31, 2019. These debentures bear interest at three-month LIBOR plus 1.38% and mature in 2036.

Capital

For the first six months of 2020, shareholders’ equity decreased by $35.0 million to $1.96 billion. The decrease was primarily due to $91.7 million in stock repurchases and $48.8 million in cash dividends, offset by net earnings of $79.6 million and a $24.9 million increase in other comprehensive income from the tax effected impact of the increase in market value of available-for-sale securities. Our tangible common equity ratio was 9.6% at June 30, 2020.

Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory standards. At June 30, 2020, the Company’s Tier 1 leverage capital ratio totaled 10.6%, common equity Tier 1 ratio totaled 14.5%, Tier 1 risk-based capital ratio totaled 14.8%, and total risk-based capital ratio totaled 16%.

CitizensTrust

As of June 30, 2020 CitizensTrust had approximately $2.83 billion in assets under management and administration, including $2.02 billion in assets under management. Revenues were $2.5 million for the second quarter of 2020 and $4.9 million for the first six months of 2020, compared to $2.4 million and $4.6 million, respectively, for the same periods of 2019. 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 one of the 10 largest bank holding companies headquartered in California with over $13 billion in total assets. 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 58 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 23, 2020 to discuss the Company’s second quarter 2020 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 6, 2020 at 6:00 a.m. PDT/9:00 a.m. EDT. To access the replay, please dial (877) 344-7529, passcode 10145516.

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 commercial or residential real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend; a sharp or prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors, key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance forcredit losses and charge-offs; the costs or effects of mergers, acquisitions or dispositions we may make, 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; the effects of new laws, regulations and/or government programs, including those laws, regulations and programs enacted by federal, state or local governments in the geographic jurisdictions in which we do business in response to the recent national emergency declared in connection with the COVID-19 pandemic; the impact of the federal CARES Act and the significant additional lending activities undertaken by the Company in connection with the Small Business Administration’s Paycheck Protection Program enacted thereunder, including risks to the Company with respect to the uncertain application by the Small Business Administration of new borrower and loan eligibility, forgiveness and audit criteria; the effects of the Company’s participation in one or more of the new lending programs recently established by the Federal Reserve, including the Main Street New Loan Facility, the Main Street Priority Loan Facility and the Nonprofit Organization New Loan Facility, and the impact of any related actions or decisions by the Federal Reserve Bank of Boston and its special purpose vehicle established pursuant to such lending programs; the effect of changes in other pertinent laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, bank capital levels, allowance for credit losses, consumer, commercial or secured lending, securities and securities trading and hedging, bank operations, compliance, fair lending, the Community Reinvestment Act, 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; changes in estimates of future reserve requirements and minimum capital requirements, based upon the periodic review thereof under relevant regulatory and accounting standards, including changes in the Basel Committee framework establishing capital standards for bank credit, operations and market risks; 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 currently expected credit losses or delinquencies; inflation, changes in market interest rates, securities market and monetary fluctuations; changes in government-established interest rates, reference rates or monetary policies, including the possible imposition of negative interest rates on bank reserves; the impact of the anticipated phase-out of the London Interbank Offered Rate (LIBOR) on interest rate indexes specified in certain of our customer loan agreements and in our interest rate swap arrangements, including any economic and compliance effects related to the expected change from LIBOR to an alternative reference rate; changes in the amount, cost and availability of deposit insurance; disruptions in the infrastructure that supports our business and the communities where we are located, which are concentrated in California, involving or related to physical site access and/or communication facilities; cyber incidents, attacks, infiltrations, exfiltrations, or theft or loss of Company, customer or employee data or money; political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, drought, the effects of pandemic diseases, climate change or extreme weather events, that affect electrical, environmental and communications or other services, computer services or facilities we use, or that affect our assets, customers, employees or third parties with whom we conduct business; our timely development and implementation 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 outside vendors with respect to certain of the Company’s key internal and external systems, applications and controls; 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, electronic marketplaces for loans, block-chain technology and other banking products, systems or services); our ability to retain and increase market share, to retain and grow customers and to control expenses; changes in the competitive environment among banks and other financial services 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 capital, assets or 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 to make acquisitions; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by the principal regulatory agencies with jurisdiction over the Company, 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 recruit and retain or expand or contract our workforce, management team, key executive positions and/or our board of directors; our ability to identify suitable and qualified replacements for any of our executive officers who may leave their employment with us, including our Chief Executive Officer; 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, financial product or service, data privacy, 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, 2019, and particularly the discussion of risk factors within that document. Among other risks, the ongoing COVID-19 pandemic may significantly affect the banking industry and the Company’s business prospects. The ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the impact on the economy, our customers and our business partners, and actions taken by governmental authorities in response to the pandemic. 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,

2020

 

2019

 

2019

Assets
Cash and due from banks

$

158,397

 

$

158,310

 

$

170,387

 

Interest-earning balances due from Federal Reserve

 

1,768,886

 

 

27,208

 

 

5,453

 

Total cash and cash equivalents

 

1,927,283

 

 

185,518

 

 

175,840

 

Interest-earning balances due from depository institutions

 

38,611

 

 

2,931

 

 

6,425

 

Investment securities available-for-sale

 

1,676,067

 

 

1,740,257

 

 

1,600,020

 

Investment securities held-to-maturity

 

613,169

 

 

674,452

 

 

728,113

 

Total investment securities

 

2,289,236

 

 

2,414,709

 

 

2,328,133

 

Investment in stock of Federal Home Loan Bank (FHLB)

 

17,688

 

 

17,688

 

 

17,688

 

Loans and lease finance receivables

 

8,402,534

 

 

7,564,577

 

 

7,535,690

 

Allowance for credit losses

 

(93,983

)

 

(68,660

)

 

(67,132

)

Net loans and lease finance receivables

 

8,308,551

 

 

7,495,917

 

 

7,468,558

 

Premises and equipment, net

 

51,766

 

 

53,978

 

 

54,163

 

Bank owned life insurance (BOLI)

 

226,330

 

 

226,281

 

 

224,172

 

Intangibles

 

38,096

 

 

42,986

 

 

48,094

 

Goodwill

 

663,707

 

 

663,707

 

 

663,707

 

Other assets

 

190,029

 

 

178,735

 

 

184,803

 

Total assets

$

13,751,297

 

$

11,282,450

 

$

11,171,583

 

Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing

$

6,901,368

 

$

5,245,517

 

$

5,250,235

 

Investment checking

 

472,509

 

 

454,565

 

 

436,090

 

Savings and money market

 

3,150,013

 

 

2,558,538

 

 

2,496,904

 

Time deposits

459,690

446,308

479,594

Total deposits

 

10,983,580

 

 

8,704,928

 

 

8,662,823

 

Customer repurchase agreements

 

468,156

 

 

428,659

 

 

421,271

 

Other borrowings

 

10,000

 

 

-

 

 

-

 

Junior subordinated debentures

 

25,774

 

 

25,774

 

 

25,774

 

Payable for securities purchased

 

162,090

 

 

-

 

 

-

 

Other liabilities

 

142,599

 

 

128,991

 

 

125,038

 

Total liabilities

 

11,792,199

 

 

9,288,352

 

 

9,234,906

 

Stockholders' Equity
Stockholders' equity

 

1,921,594

 

 

1,981,484

 

 

1,928,397

 

Accumulated other comprehensive income, net of tax

 

37,504

 

 

12,614

 

 

8,280

 

Total stockholders' equity

 

1,959,098

 

 

1,994,098

 

 

1,936,677

 

Total liabilities and stockholders' equity

$

13,751,297

 

$

11,282,450

 

$

11,171,583

 

 
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 

Three Months Ended

 

Six Months Ended

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

2020

 

2020

 

2019

 

2020

 

2019

Assets
Cash and due from banks

$

140,665

 

$

166,816

 

$

170,283

 

$

153,740

 

$

172,807

 

Interest-earning balances due from Federal Reserve

 

1,049,430

 

 

243,069

 

 

11,871

 

 

646,249

 

 

11,494

 

Total cash and cash equivalents

 

1,190,095

 

 

409,885

 

 

182,154

 

 

799,989

 

 

184,301

 

Interest-earning balances due from depository institutions

 

31,003

 

 

17,972

 

 

6,151

 

 

24,488

 

 

6,862

 

Investment securities available-for-sale

 

1,616,907

 

 

1,697,480

 

 

1,634,678

 

 

1,657,185

 

 

1,666,513

 

Investment securities held-to-maturity

 

626,557

 

 

658,916

 

 

727,304

 

 

642,745

 

 

732,383

 

Total investment securities

 

2,243,464

 

 

2,356,396

 

 

2,361,982

 

 

2,299,930

 

 

2,398,896

 

Investment in stock of FHLB

 

17,688

 

 

17,688

 

 

17,688

 

 

17,688

 

 

17,688

 

Loans and lease finance receivables

 

8,047,054

 

 

7,482,805

 

 

7,558,483

 

 

7,764,930

 

 

7,610,241

 

Allowance for credit losses

 

(82,752

)

 

(70,736

)

 

(65,239

)

 

(76,744

)

 

(64,429

)

Net loans and lease finance receivables

 

7,964,302

 

 

7,412,069

 

 

7,493,244

 

 

7,688,186

 

 

7,545,812

 

Premises and equipment, net

 

52,719

 

 

53,689

 

 

55,204

 

 

53,204

 

 

56,182

 

Bank owned life insurance (BOLI)

 

225,818

 

 

225,463

 

 

223,281

 

 

225,640

 

 

222,232

 

Intangibles

 

39,287

 

 

41,732

 

 

49,615

 

 

40,510

 

 

51,188

 

Goodwill

 

663,707

 

 

663,707

 

 

666,196

 

 

663,707

 

 

666,366

 

Other assets

 

182,972

 

 

177,199

 

 

165,252

 

 

180,086

 

 

164,466

 

Total assets

$

12,611,055

 

$

11,375,800

 

$

11,220,767

 

$

11,993,428

 

$

11,313,993

 

Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing

$

6,204,329

 

$

5,247,025

 

$

5,093,781

 

$

5,725,677

 

$

5,089,795

 

Interest-bearing

 

3,844,025

 

 

3,502,174

 

 

3,519,171

 

 

3,673,100

 

 

3,585,547

 

Total deposits

 

10,048,354

 

 

8,749,199

 

 

8,612,952

 

 

9,398,777

 

 

8,675,342

 

Customer repurchase agreements

 

442,580

 

 

478,373

 

 

426,228

 

 

460,476

 

 

466,264

 

Other borrowings

 

3,981

 

 

438

 

 

133,548

 

 

2,210

 

 

146,425

 

Junior subordinated debentures

 

25,774

 

 

25,774

 

 

25,774

 

 

25,774

 

 

25,774

 

Payable for securities purchased

 

2,697

 

 

-

 

 

-

 

 

1,348

 

 

1,483

 

Other liabilities

 

121,069

 

 

115,552

 

 

102,377

 

 

118,311

 

 

98,807

 

Total liabilities

 

10,644,455

 

 

9,369,336

 

 

9,300,879

 

 

10,006,896

 

 

9,414,095

 

Stockholders' Equity
Stockholders' equity

 

1,928,210

 

 

1,993,560

 

 

1,925,212

 

 

1,960,885

 

 

1,911,767

 

Accumulated other comprehensive income (loss), net of tax

 

38,390

 

 

12,904

 

 

(5,324

)

 

25,647

 

 

(11,869

)

Total stockholders' equity

 

1,966,600

 

 

2,006,464

 

 

1,919,888

 

 

1,986,532

 

 

1,899,898

 

Total liabilities and stockholders' equity

$

12,611,055

 

$

11,375,800

 

$

11,220,767

 

$

11,993,428

 

$

11,313,993

 

 
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,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

2020

 

2020

 

2019

 

2020

 

2019

Interest income:
Loans and leases, including fees

$

95,352

$

92,117

$

101,843

$

187,469

$

201,530

Investment securities:
Investment securities available-for-sale

 

8,449

 

10,049

 

10,118

 

18,498

 

20,763

Investment securities held-to-maturity

 

3,660

 

3,998

 

4,426

 

7,658

 

8,951

Total investment income

 

12,109

 

14,047

 

14,544

 

26,156

 

29,714

Dividends from FHLB stock

 

214

 

332

 

298

 

546

 

630

Interest-earning deposits with other institutions

 

283

 

613

 

100

 

896

 

194

Total interest income

 

107,958

 

107,109

 

116,785

 

215,067

 

232,068

Interest expense:
Deposits

 

2,995

 

4,124

 

4,093

 

7,119

 

7,964

Borrowings and junior subordinated debentures

 

394

 

679

 

1,635

 

1,073

 

3,511

Total interest expense

 

3,389

 

4,803

 

5,728

 

8,192

 

11,475

Net interest income before provision for credit losses

 

104,569

 

102,306

 

111,057

 

206,875

 

220,593

Provision for credit losses

 

11,500

 

12,000

 

2,000

 

23,500

 

3,500

Net interest income after provision for credit losses

 

93,069

 

90,306

 

109,057

 

183,375

 

217,093

Noninterest income:
Service charges on deposit accounts

 

3,809

 

4,776

 

5,065

 

8,585

 

10,206

Trust and investment services

 

2,477

 

2,420

 

2,452

 

4,897

 

4,634

Gain on OREO, net

 

-

 

10

 

24

 

10

 

129

Gain on sale of building, net

 

-

 

-

 

-

 

-

 

4,545

Gain on eminent domain condemnation, net

 

-

 

-

 

5,685

 

-

 

5,685

Other

 

5,866

 

4,434

 

4,979

 

10,300

 

9,309

Total noninterest income

 

12,152

 

11,640

 

18,205

 

23,792

 

34,508

Noninterest expense:
Salaries and employee benefits

 

28,706

 

30,877

 

28,862

 

59,583

 

58,164

Occupancy and equipment

 

5,031

 

4,837

 

5,427

 

9,868

 

10,851

Professional services

 

2,368

 

2,256

 

2,040

 

4,624

 

3,965

Computer software expense

 

2,754

 

2,816

 

2,756

 

5,570

 

5,369

Marketing and promotion

 

1,255

 

1,555

 

1,238

 

2,810

 

2,632

Amortization of intangible assets

 

2,445

 

2,445

 

2,833

 

4,890

 

5,690

Acquisition related expenses

 

-

 

-

 

2,612

 

-

 

5,761

Other

 

3,839

 

3,855

 

4,760

 

7,694

 

9,700

Total noninterest expense

 

46,398

 

48,641

 

50,528

 

95,039

 

102,132

Earnings before income taxes

 

58,823

 

53,305

 

76,734

 

112,128

 

149,469

Income taxes

 

17,192

 

15,325

 

22,253

 

32,517

 

43,346

Net earnings

$

41,631

$

37,980

$

54,481

$

79,611

$

106,123

 
Basic earnings per common share

$

0.31

$

0.27

$

0.39

$

0.58

$

0.76

Diluted earnings per common share

$

0.31

$

0.27

$

0.39

$

0.58

$

0.76

Cash dividends declared per common share

$

0.18

$

0.18

$

0.18

$

0.36

$

0.36

 
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 

Three Months Ended

 

Six Months Ended

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

2020

 

2020

 

2019

 

2020

 

2019

Interest income - tax equivalent (TE)

$

108,305

 

$

107,477

 

$

117,210

 

$

215,782

 

$

232,948

 

Interest expense

 

3,389

 

 

4,803

 

 

5,728

 

 

8,192

 

 

11,475

 

Net interest income - (TE)

$

104,916

 

$

102,674

 

$

111,482

 

$

207,590

 

$

221,473

 

 
Return on average assets, annualized

 

1.33

%

 

1.34

%

 

1.95

%

 

1.33

%

 

1.89

%

Return on average equity, annualized

 

8.51

%

 

7.61

%

 

11.38

%

 

8.06

%

 

11.26

%

Efficiency ratio [1]

 

39.75

%

 

42.69

%

 

39.09

%

 

41.20

%

 

40.04

%

Noninterest expense to average assets, annualized

 

1.48

%

 

1.72

%

 

1.81

%

 

1.59

%

 

1.82

%

Yield on average loans

 

4.77

%

 

4.95

%

 

5.40

%

 

4.85

%

 

5.34

%

Yield on average earning assets (TE)

 

3.82

%

 

4.27

%

 

4.72

%

 

4.03

%

 

4.67

%

Cost of deposits

 

0.12

%

 

0.19

%

 

0.19

%

 

0.15

%

 

0.19

%

Cost of deposits and customer repurchase agreements

 

0.12

%

 

0.20

%

 

0.20

%

 

0.16

%

 

0.20

%

Cost of funds

 

0.13

%

 

0.21

%

 

0.25

%

 

0.17

%

 

0.25

%

Net interest margin (TE)

 

3.70

%

 

4.08

%

 

4.49

%

 

3.88

%

 

4.44

%

[1] Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.
 
Weighted average shares outstanding
Basic

 

134,998,440

 

 

139,106,596

 

 

139,747,934

 

 

137,052,180

 

 

139,681,931

 

Diluted

 

135,154,479

 

 

139,315,514

 

 

139,896,655

 

 

137,227,984

 

 

139,861,253

 

Dividends declared

$

24,417

 

$

24,416

 

$

25,248

 

$

48,833

 

$

50,416

 

Dividend payout ratio [2]

 

58.65

%

 

64.29

%

 

46.34

%

 

61.34

%

 

47.51

%

[2] Dividends declared on common stock divided by net earnings.
 
Number of shares outstanding - (end of period)

 

135,516,316

 

 

135,510,960

 

 

140,141,680

 

Book value per share

$

14.46

 

$

14.33

 

$

13.82

 

Tangible book value per share

$

9.28

 

$

9.13

 

$

8.74

 

 

June 30,

 

December 31,

 

June 30,

2020

 

2019

 

2019

Nonperforming assets:
Nonaccrual loans

$

6,792

 

$

5,033

 

$

11,024

 

Loans past due 90 days or more and still accruing interest

 

25

 

 

-

 

 

-

 

Troubled debt restructured loans (nonperforming)

 

-

 

 

244

 

 

263

 

Other real estate owned (OREO), net

 

4,889

 

 

4,889

 

 

2,275

 

Total nonperforming assets

$

11,706

 

$

10,166

 

$

13,562

 

Troubled debt restructured performing loans

$

2,771

 

$

3,112

 

$

3,219

 

 
Percentage of nonperforming assets to total loans outstanding and OREO

 

0.14

%

 

0.13

%

 

0.18

%

Percentage of nonperforming assets to total assets

 

0.09

%

 

0.09

%

 

0.12

%

Allowance for credit losses to nonperforming assets

 

802.86

%

 

675.39

%

 

495.00

%

 

Six Months Ended

June 30,

 

June 30,

2020

 

2019

Allowance for credit losses:
Beginning balance

$

68,660

 

$

63,613

 

Impact of adopting ASU 2016-13

 

1,840

 

 

-

 

Total charge-offs

 

(253

)

 

(360

)

Total recoveries on loans previously charged-off

 

236

 

 

379

 

Net (charge-offs) recoveries

 

(17

)

 

19

 

Provision for credit losses

 

23,500

 

 

3,500

 

Allowance for credit losses at end of period

$

93,983

 

$

67,132

 

 
Net (charge-offs) recoveries to average loans

 

-0.0002

%

 

0.0002

%

CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in millions)
 
Allowance for Credit Losses by Loan Type

June 30, 2020

 

March 31, 2020

 

December 31, 2019

Allowance

For Credit

Losses

 

Allowance

as a % of

Total Loans

by

Respective

Loan Type

 

Allowance

For Credit

Losses

 

Allowance

as a % of

Total Loans

by

Respective

Loan Type

 

Allowance

For Loan

Losses

 

Allowance

as a % of

Total Loans

by

Respective

Loan Type

 
Commercial and industrial

$

8.0

1.0

%

$

9.4

1.0

%

$

8.9

0.9

%

SBA

 

3.7

1.2

%

 

3.9

1.3

%

 

1.5

0.5

%

SBA - PPP

 

-

0.0

%

 

-

-

 

 

-

-

 

Real estate:
Commercial real estate

 

74.9

1.4

%

 

58.4

1.1

%

 

48.6

0.9

%

Construction

 

2.3

1.8

%

 

4.6

3.6

%

 

0.9

0.7

%

SFR mortgage

 

0.2

0.1

%

 

0.3

0.1

%

 

2.3

0.8

%

Dairy & livestock and agribusiness

 

3.4

1.3

%

 

4.3

1.6

%

 

5.3

1.4

%

Municipal lease finance receivables

 

0.3

0.6

%

 

0.3

0.5

%

 

0.6

1.2

%

Consumer and other loans

 

1.2

1.4

%

 

1.4

1.2

%

 

0.6

0.5

%

 
Total

$

94.0

1.1

%

$

82.6

1.1

%

$

68.7

0.9

%

 
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
 
Quarterly Common Stock Price
 

2020

 

2019

 

2018

Quarter EndHighLowHighLowHighLow
March 31,

$

22.01

$

14.92

 

$

23.18

 

$

19.94

 

$

25.14

 

$

21.64

 

June 30,

$

22.22

$

15.97

 

$

22.22

 

$

20.40

 

$

24.11

 

$

21.92

 

September 30,

$

22.23

 

$

20.00

 

$

24.97

 

$

22.19

 

December 31,

$

22.18

 

$

19.83

 

$

23.51

 

$

19.21

 

 
Quarterly Consolidated Statements of Earnings
 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

2020

 

2020

 

2019

 

2019

 

2019

Interest income
Loans and leases, including fees

$

95,352

 

$

92,117

 

$

97,302

 

$

98,796

 

$

101,843

 

Investment securities and other

 

12,606

 

 

14,992

 

 

14,917

 

 

14,767

 

 

14,942

 

Total interest income

 

107,958

 

 

107,109

 

 

112,219

 

 

113,563

 

 

116,785

 

Interest expense
Deposits

 

2,995

 

 

4,124

 

 

4,567

 

 

4,589

 

 

4,093

 

Other borrowings

 

394

 

 

679

 

 

632

 

 

815