Press Release

For Immediate Release

                                                          Contact:  D. Linn Wiley

                                                                          President and CEO

                                                                          (909) 980-4030

 

 

 

CVB Financial Corp. Reports Third Quarter Operating Results

 

Ontario, CA, October 16, 2003-CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank, announced record results for the third quarter of 2003.  This included record deposits, record loans, record assets and record earnings.  It was the 46th consecutive quarter of record results for the Company.

 

CVB Financial Corp. reported net income of $13.5 million for the third quarter ending September 30, 2003.  This represents an increase of $306,000, or 2.32%, when compared with the $13.2 million in net income reported for the third quarter of 2002.  Diluted earnings per share were $0.30 for the third quarter of 2003.  This is up $0.01, or 3.45%, when compared with earnings per share of $0.29 for the third quarter of 2002. 

 

Earnings results for the third quarter of 2003 produced a return on beginning equity of 19.71%, a return on average equity of 18.99% and a return on average assets of 1.55%.  The efficiency ratio for the third quarter was 51.20%. 

 

During the third quarter of 2003, the Company prepaid $25.0 million in borrowing from the Federal Home Loan Bank.  This resulted in a prepayment penalty of $2.2 million.  The prepayment penalty was recorded as an operating expense.  This prepayment will reduce interest costs, and provide for a corresponding increase in the net interest margin.  The efficiency ratio would have been 45.89% without this prepayment expense.

 

In addition, the Company realized a net gain after taxes from the sale of securities of $2.2 million in the third quarter of 2003.  This compares with a net gain after taxes from the sale of securities of $1.2 million for the third quarter of 2002.

 

Net income, excluding the gains on the sale of securities and the prepayment penalty, was $12.7 million for the third quarter of 2003.  This compares with net operating income, excluding the gains on the sale of securities, of $12.0 million for the third quarter of 2002.  Net income on this basis was up $747,000, or 6.23%, from the third quarter of 2002 to the third quarter of 2003.

 

Net income for the nine months ending September 30, 2003 was $38.7 million.  This represents an increase of $1.6 million, or 4.23%, when compared with net earnings of $37.2 million for the same period of 2002.  Diluted earnings per share was $0.87.  This was up $0.04, or 4.82%, from diluted earnings per share of $0.83 for the same period last year.  Net income for the nine months ending September 30, 2003 produced a return on beginning equity of 19.93%, a return on average equity of 18.99% and a return on average assets of 1.55%.  The efficiency ratio for the nine-month period was 48.73%.

 

During the nine months ending September 30, 2003, the Company prepaid $75.0 million in advances from the Federal Home Loan Bank.  This resulted in aggregate prepayment penalties of $5.3 million.  The Company also reversed an excess accrual of legal fees of $3.3 million as a result of the settlement of a lawsuit.

 

In addition, the Company had a net gain after taxes from the sale of securities of $2.7 million for the first nine months of 2003.  This compares with a net gain after taxes from the sale of securities of $3.2 million during the first nine months of 2002.

 

Net income, excluding the gains on the sale of securities, prepayment penalties and the reversal of litigation accruals, was $37.3 million for the nine months ending September 30, 2003.  Net income, excluding the gains on the sale of securities, was $34.0 million for the first nine months of 2002.  This represents an increase of $3.3 million, or 9.76%, for the first nine months of 2003 when compared with the first nine months of 2002.

 

The net interest margin continues to be under pressure as a result of the low interest rate environment.  It declined from 4.81% for the third quarter of 2002 to 3.95% for the third quarter of 2003.  It declined from 4.63% for the first nine months of 2002 to 4.18% for the first nine months of 2003.  Asset yields have declined from 6.26% for the first nine months of 2002 to 5.38% for the first nine months of 2003.  This has been mitigated by the strong growth in the balance sheet, and the decline in the cost of funds from 2.52% to 1.80% for the same periods.

 

Asset yields for the third quarter of 2003 were 5.06%, compared with asset yields of 6.42% for the third quarter last year.   The cost of funds was 1.58% and 2.60% for the same periods.  The margin compression appears to be moderating with the recent stability of interest rates.  The Company has approximately $1.1 billion, or 42.85% of its deposits, in interest free demand deposits.  This should position it well for a rising rate environment.

 

Total assets were $3.67 billion as of September 30, 2003.  This represents an increase of $818.8 million, or 28.75%, over the $2.85 billion in total assets reported on September 30, 2002.  Total deposits rose to $2.61 billion.  This is up $416.8 million, or 18.97%, from $2.20 billion last year.  Gross loans and leases grew to $1.63 billion as of September 30, 2003.  This is an increase of $296.9 million, or 22.28%, from $1.33 billion in gross loans and leases on September 30, 2002.  The Wealth Management Group has approximately $1.1 billion in assets under administration.

 

CVB Financial Corp reported non-performing assets of $1.6 million as of September 30, 2003.  This represents a ratio of non-performing assets to total assets of 0.04%, and it represents 0.10% of gross loans and leases.  The allowance for loan and lease losses was $23.8 million as of September 30, 2003.  This represents 1.46% of gross loans and leases, and it compares with 1.70% on September 30, 2002.  Non-performing loans and leases represented 6.87% of the allowance for loan and lease losses.

 

On September 19, 2003, the Company completed its acquisition of Kaweah National Bank.  Kaweah National Bank had four branches located in Visalia, Tulare, Porterville and McFarland.  This acquisition added $81.7 million in deposits, $72.7 million in loans and $86.7 million in assets to the Company’s balance sheet.  This acquisition is an excellent complement to the existing business financial centers in Bakersfield and Fresno.  It provides a total of six business financial centers in the southern portion of the San Joaquin Valley with $140.3 million in deposits and $103.0 million in loans.

 

Citizens Business 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.  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, 2002, and particularly the discussion on risk factors within that document.

 

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