Press Release

For Immediate Release

                                                          Contact:  D. Linn Wiley

                                                                          President and CEO

                                                                          (909) 980-4030

 

 

 

CVB Financial Corp. Reports Record Second Quarter Results

 

Ontario, CA, July 20, 2005-CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (“the Company”), announced record financial results for the second quarter of 2005.  This included record deposits, record loans and record earnings from operations.  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, 2005.  This represents an increase of $27,000, or 0.15%, when compared with the $17.5 million in net earnings reported for the second quarter 2004. Diluted earnings per share were $0.28 for the second quarter of 2005.  This was down $0.01, or 3.57%, when compared with earnings per share of $0.29 for the second quarter of 2004.

 

Net income for the second quarter of 2005 produced a return on beginning equity of 21.62%, a return on average equity of 21.30% and a return on average assets of 1.47%.  The efficiency ratio for the second quarter of 2005 was 47.27%, and operating expenses as a percentage of average assets were 1.96%.

 

Net income from operations, before gains and losses on the sale of securities, was $17.5 million for the second quarter of 2005.  This represents an increase of $3.4 million, or 24.43%, over the $14.1 million in net income from operations, before gains and losses on the sale of securities, in the second quarter of 2004.   Net income from operations for the second quarter of 2005 produced a return on beginning equity of 21.66%, a return on average equity of 21.34% and a return on average assets of 1.47%.  The efficiency ratio on this basis was 47.23%, and operating expenses as a percentage of assets was 1.96%.

 

Net income for the six months ending June 30, 2005 was $35.2 million.  This represents an increase of $7.7 million, or 27.82%, when compared with net earnings of $27.5 million for the same period of 2004.  Diluted earnings per share were $0.57.  This was up $0.12, or 26.67%, from diluted earnings per share of $0.45 for the same period last year. 

 

Net income for the six months ending June 30, 2005 produced a return on beginning equity of 22.34%, a return on average equity of 21.58 and a return on average assets of 1.52%.  The efficiency ratio for the six-month period was 45.22%, and operating expenses as a percentage of average assets were 1.91%.

 

Net income from operations, before gains and losses on the sale of securities and the recovery of the settlement of a possible robbery loss in the first quarter of 2005, was $33.5 million.  This represents an increase in net income from operations for the first six months of 2005 of $5.3 million, or 18.62%.  This is an increase over the $28.2 million in net income before gains and losses on the sales of securities and the other-than-temporary impairment write-down in the first six months of 2004. As a result, the net income for the first six months of 2005, without the gains/losses on sales of securities and the settlement of robbery loss, would have produced a return on beginning equity of 21.28%, a return on average equity of 20.55% and a return on average assets of 1.45%.  The efficiency ratio for the first six months of 2005 would have been 47.87%, and operating expenses as a percentage of average assets would have been 2.02%.

 

Net Interest Income and Net Interest Margin

Net interest income totaled $42.2 million for the second quarter of 2005. This represented an increase of $6.3 million, or 17.63%, over the net interest income of $35.9 million for the second quarter of 2004. This increase resulted from a $13.6 million increase in interest income which was partially offset by a $7.3 million increase in interest expense. The increase in interest income was primarily due to the growth in average earning assets and the increase in interest rates.  The increase in interest expense was due to the increases in deposit rates and borrowed funds.

 

Net interest margin (tax equivalent) increased slightly from 3.91% for the second quarter of 2004 to 3.95% for the second quarter of 2005.  Total average earning asset yields have increased from 5.01% for the second quarter of 2004 to 5.54% for second quarter of 2005.  The cost of funds has increased from 1.64% for the second quarter of 2004 to 2.34% for the second quarter of 2005. This increase in the net interest margin is a result of strong growth in the balance sheet and the recent increases in interest rates.  The Company has approximately $1.39 billion, or 46.61%, of its deposits in interest free demand deposits.   The Company believes its deposit base should position it well for a rising interest rate environment.

 

Net interest income totaled $83.2 million for the six months ending June 30, 2005. This represents an increase of $11.7 million, or 16.38%, over the net interest income of $71.5 million for the same period in 2004. This increase resulted from a $23.7 million increase in interest income which was partially offset by a $12.0 million increase in interest expense. The increase in interest income was primarily due to the growth in average earning assets and an increase in interest rates.  The increase in interest expense was due to the increases in deposit rates and borrowed funds.

 

Net interest margin (tax equivalent) decreased slightly from 3.97% for the first six months of 2004 to 3.96% for the first six months of 2005.  Total average earning asset yields have increased from 5.07% for the first six months of 2004 to 5.47% for the first six months of 2005.  The cost of funds has increased from 1.65% for the first six months of 2004 to 2.23% for the first six months of 2005. This slight decrease in net interest margin has been mitigated by the strong growth in the balance sheet. 

 

Balance Sheet

The Company reported total assets of $4.81 billion at June 30, 2005. This represented an increase of $447.8 million, or 10.26%, over total assets of $4.36 billion on June 30, 2004. Earning assets totaling $4.49 billion were up $459.4 million, or 11.39%, when compared with earning assets of $4.03 billion as of June 30, 2004. Deposits of $2.99 billion grew $160.9 million, or 5.68%, from $2.83 billion for the same period of the prior year. Demand deposits of $1.39 billion jumped $103.6 million, or 8.02%, from $1.29 billion. Gross loans and leases of $2.30 billion on June 30, 2005 rose $357.2 million, or 18.42%, from $1.94 billion on June 30, 2004.

 

Total assets of $4.81 billion as of June 30, 2005 reflect an increase of $300.8 million, or 6.67%, over total assets of $4.51 billion on December 31, 2004.  Earning assets of $4.49 billion were up $236.1 million, or 5.55%, over the total earning assets of $4.26 billion on December 31, 2004. Deposits of $2.99 billion on June 30, 2005 grew $117.5 million, or 4.09%, from $2.88 billion as of December 31, 2004.  Demand deposits of $1.39 billion were up $72.6 million, or 5.49%, from $1.32 billion. Gross loans and leases of $2.30 billion increased $156.1 million, or 7.29%, from $2.14 billion on December 31, 2004. Total equity of $336.8 million on June 30, 2005 was up $19.4 million, or 6.10%, from $317.5 million as of December 31, 2004.

 

Investment Securities

Investment securities totaled $2.15 billion as of June 30, 2005. It represents an increase of $84.7 million, or 4.09%, when compared with the $2.07 billion in investment securities as of June 30, 2004. This represents an increase of $69.8 million, or 3.35%, when compared with $2.09 billion in investment securities as of December 31, 2004.

 

Wealth Management Group

The Wealth Management Group has over $2.1 billion in assets under administration. They provide trust, investment and brokerage related services. 

 

Loan and Lease Quality

CVB Financial Corp reported zero non-performing assets as of June 30, 2005.  The allowance for loan and lease losses was $24.1 million as of June 30, 2005.  This represents 1.05% of gross loans and leases. It compares with an allowance for loan and lease losses of $22.5 million, or 1.05% of gross loans and leases on December 31, 2004.  The increase was primarily due to the allowance for loan and lease losses acquired from Granite State Bank of $756,000 and the net recoveries of $877,000 during the first six months of 2005. Non-performing assets were $2,000 as of December 31, 2004.

 

The Company has not made a provision for loan and lease losses since 2001 due to the high quality of its loan portfolio. This has been the case even though loans increased from $2.14 billion as of December 31, 2004 to $2.30 billion as of June 30, 2005. Recoveries of $1.0 million more than offset charge offs of $133,000 during the first six months of 2005.

 

Other Items in 2005

On February 25, 2005, the Company acquired 100% of the stock of Granite State Bank. The merger agreement provides for Granite State Bank to merge with and into Citizens Business Bank.  Citizens Business Bank represents the continuing operation.

 

On May 2, 2005, Citizens Business Bank opened its 40th business financial center in the Central Valley city of Madera.

 

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 33 cities with 40 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. 

 

For the third consecutive year, CVB Financial Corp. will receive the KBW Honor Roll award at the Annual Community Bank Investor Conference hosted by Keefe, Bruyette & Woods, Inc. in New York on July 25, 26, and 27, 2005. The Company was also recognized as a SmAll-Star by Sandler O’Neill and named on the FPK Honor Roll by Fox-Pitt, Kelton.

 

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 contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the projected.  In addition, these forward-looking statements relate to the Company’s current expectations regarding future operating results.  Such issues and uncertainties include impact of changes in interest rates, a decline in economic conditions and increased competition among financial services providers.  For a discussion of other 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, 2004, and particularly the discussion on risk factors within that document.  The Company does not undertake any, 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.

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