Press Release

For Immediate Release

                                                          Contact:  D. Linn Wiley

                                                                          President and CEO

                                                                          (909) 980-4030

 

 

 

CVB Financial Corp. Reports Second Quarter Earnings

 

Ontario, CA, July 21, 20043-CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank, announced record results for the second quarter of 2004.  This included record deposits, record loans, record assets and record earnings.  It was the strongest second quarter in the history of the Company.

 

Net Income

CVB Financial Corp. reported net income of $17.5 million for the second quarter ending June 30, 2004.  This represents an increase of $4.9 million, or 39.39%, when compared with the $12.5 million in net income reported for the second quarter of 2003.  Diluted earnings per share were $0.36 for the second quarter of 2004.  This is up $0.11, or 44.00%, when compared with earnings per share of $0.25 for the second quarter of 2003. 

 

Net income for the second quarter of 2004 produced a return on beginning equity of 25.77%, a return on average equity of 23.05% and a return on average assets of 1.71%.  The efficiency ratio for the second quarter was 43.83%, and operating costs as a percentage of average assets were 2.06%. 

 

Net income for the six months ending June 30, 2004 was $27.5 million.  This represents an increase of $2.3 million, or 9.11%, when compared with net earnings of $25.2 million for the same period of 2003.  Diluted earnings per share were $0.56.  This was up $0.05, or 9.80%, from diluted earnings per share of $0.51 for the same period last year. 

 

Net income for the six months ending June 30, 2004 produced a return on beginning equity of 19.30%, a return on average equity of 18.51% and a return on average assets of 1.38%.  The efficiency ratio for the six-month period was 50.45%, and operating expenses as a percentage of average assets were 2.13%.

 

Net Interest Income and Net Interest Margin

Net interest income (before provision for credit losses) for the second quarter of 2004 totaled $35.9 million. This represented an increase of $5.4 million, or 17.54%, over the net interest income of $30.5 million for the second quarter of 2003. These increases resulted from a $5.8 million increase in interest income, offset by a $0.4 million increase in interest expense.

 

Net interest income increased $343,000 or 0.96%, from $35.6 million for the first quarter of 2004 to $35.9 million for the second quarter of 2004. This nominal growth in net interest income was the result of the sale of $63.0 million in securities with relatively short maturities. This sale resulted in securities gains of $4.3 million. It is believed that this opportunity to take advantage of these gains would have dissipated rapidly with the anticipated rise in interest rates. 

 

The yield on the $63.0 million in securities that were sold was 5.58%. Proceeds from the sale were used to purchase securities with a yield of 5.01%. Although the yields are reasonably comparable, interest income on investments was adversely impacted by the delay between the time the $63.0 million in securities were sold and the new securities were purchased and settled. This reduced interest income from investments by $295,000 for the quarter. The $4.3 million gain on the sale of the securities appears to far outweigh this reduction in investment interest income. Interest income on investments is expected to increase in the third quarter.

 

Net interest income (before provision for credit losses) totaled $71.5 million for the six months ending June 30, 2004. This represented an increase of $9.7 million, or 15.67%, over the net interest income of $61.8 million for the same period of 2003. This increase resulted from an $11.4 million increase in interest income, partially offset by a $1.7 million increase in interest expense. The increases in interest income period over period were primarily due to the increase in average earnings assets, partially offset by a decline in interest rates.

 

We experienced a decline in the net interest margin when compared with the same period last year due to the lower interest rate environment. Net interest margin (tax equivalent) declined from 4.044.52% for the second quarter of 2003 to 3.91% for the second quarter of 2004.  It declined from 4.294.45% for the first six months of 2003 to 3.963.97% for the first six months of 2004.  Asset yields have declined from 5.57% for the first six months of 2003 to 5.08% for the first six months of 2004.  This has been mitigated by the strong growth in the balance sheet, and the decline in the cost of funds from 1.92% to 1.65% for the same periods.

 

Asset yields for the second quarter of 2004 were 5.01%, compared with asset yields of 5.31% for the second quarter last year.   The cost of funds was 1.64% and 1.89% for the same periods, respectively.  The margin compression appears to be moderating with the recent stability of interest rates.  The Company has approximately $1.29 billion, or 45.57%, of its deposits in interest free demand deposits.  This should position it well for a rising interest rate environment.

 

Investment Securities

Investment securities totaled $2.12 billion as of June 30, 2004. This represents an increase of $212.3 million, or 11.15%, when compared with $1.90 billion in investment securities as of December 31, 2003. It represents an increase of $291.5 million, or 15.98%, when compared with $1.82 billion for the second quarter of 2003.

 

Balance Sheet

The Company reported total assets of $4.36 billion at June 30, 2004. This represented an increase of $851.0 million, or 24.22%, over total assets of $3.51 billion on June 30, 2003. Earning assets totaling $4.03 billion were up $725.0 million, or 21.92%, when compared with earning assets of $3.31 billion as of June 30, 2003. Deposits of $2.83 billion grew $424.4 million, or 17.63%, from $2.41 billion for the prior year. Demand deposits of $1.29 billion jumped $282.7 million, or 28.03%, from $1.01 billion. Gross loans and leases of $1.94 billion on June 30, 2004 rose $434.8 million, or 28.91%, from $1.50 billion on June 30, 2003.

 

Total assets of $4.36 billion as of June 30, 2004 reflect an increase of $509.7 million, or 13.22%, over total assets of $3.85 billion on December 31, 2003.  Earning assets of $4.03 billion were up $390.4 million, or 10.72%, during the same period. Deposits of $2.83 billion on June 30, 2004 grew $171.1 million, or 6.43%, from $2.66 billion as of December 31, 2003.  Demand deposits of $1.29 billion were up $148.9 million, or 13.04%, from $1.14 billion. Gross loans and leases of $1.94 billion increased $179.0 million, or 10.17%, from $1.76 billion on December 31, 2003. Total equity of $280.9 million on June 30, 2004 was down $5.9 million, or 2.05%, from $286.7 million as of December 31, 2003. This decline was the result of a $20.1 million reduction in the unrealized gain in the investment portfolio.

 

Assets Under Administration

The Wealth Management Group has over $1.1 billion in assets under administration. They provide trust, investment and related services. 

 

Loan and Lease Quality

CVB Financial Corp reported non-performing assets of $1.5 million as of June 30, 2004.  This represents a ratio of non-performing assets to total assets of 0.03%, and it represents 0.07% of gross loans and leases.  The allowance for loan and lease losses was $22.1 million as of June 30, 2004.  This represents 1.14% of gross loans and leases, and it compares with 1.38% on June 30, 2003.  Non-performing loans and leases represented 6.57% of the allowance for loan and lease losses. Non-performing assets increased by $736,000 from the $719,000 reported as of March 31, 2004.

 

The Company has not made a provision for loan and lease losses due to the high quality of its loan portfolio. This has been the case even though loans increased from $1.50 billion as of June 30, 2003 to $1.94 billion as of June 30, 2004. Recoveries of $2.5 million and the addition of $2.8 million from acquisitions more than offset charge offs of $2.2 million during this twelve-month period.

 

Corporate Overview

CVB Financial Corp. is the holding company for Citizens Business Bank. The Bank is the largest financial institution headquartered in the Inland Empire Region of Southern California.  It serves 30 cities with 37 business financial centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley areas of California. Its subsidiary, Golden West Financial Services, provides vehicle leasing, equipment leasing and real estate loan services. 

 

Citizens Business Bank was recently recognized at the Annual Strategic Issues Summit with the “Market Cap” Award.  This Award was presented to recognize the Company for producing a return to its original shareholders of 41,034%--over 400 times the original investment.  This is the highest return in the history of the banking industry in California.  The Strategic Issues Summit is co-sponsored by Carpenter & Company and the California Bankers Association.

 

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

 

Safe Harbor

This document may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the projected.  For a discussion of factors that could cause actual results to differ, please see the publicly available Securities and Exchange Commission filings of CVB Financial Corp., including its Annual Report on Form 10-K for the year ended December 31, 2003, and particularly the discussion on risk factors within that document.

 

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