News & Media

CVB Financial Corp. Reports First Quarter Earnings for 2015

  • Net earnings were $15.8 million for the first quarter of 2015, or $0.15 per diluted share. Earnings were impacted by the Bank’s decision to prepay a $200.0 million Federal Home Loan Bank advance, recognizing a one-time pre-tax debt termination expense of $13.9 million.
  • Noninterest-bearing deposits increased by $260.6 million for the quarter, or 9.09%, and totaled $3.13 billion, or 53.02% of total deposits.
  • Total loans and leases, net of deferred fees and discount, decreased by $101.0 million for the quarter, or 2.65%. Dairy borrowings declined by $106.6 million for the quarter, mostly due to seasonal repayments.
  • The allowance for loan losses was $60.7 million at quarter-end, or 1.63% of total loans.

 

Download press release >

Ontario, CA, April 22, 2015 – CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (“the Company”), announced earnings for the quarter ended March 31, 2015.

CVB Financial Corp. reported net income of $15.8 million for the quarter ended March 31, 2015, compared with net income of $28.7 million for the first quarter of 2014. Diluted earnings per share were $0.15 for the quarter ended March 31, 2015, compared to $0.27 for the same period last year. The first quarter of 2015 included pre-tax debt termination expense of $13.9 million, related to the redemption of $200.0 million of fixed rate debt from the Federal Home Loan Bank (“FHLB”). The FHLB advance carried an interest rate of 4.52% and was scheduled to mature in late November 2016.

The allowance for loan losses totaled $60.7 million at March 31, 2015, compared to $59.8 million at December 31, 2014. There was no provision for loan losses for the first quarter of 2015, compared to a loan loss provision recapture of $7.5 million for the first quarter of 2014.

Chris Myers, President and CEO commented, “We are pleased with our financial results for the first quarter and the continued improvement of our credit quality. The decision to prepay the remaining $200.0 million of Federal Home Loan Bank debt was made to further reduce our overall funding costs. Our deleveraging program is now complete as we have repaid all FHLB debt. Organic loan growth remains challenging due to the low interest rate environment and related loan prepayment pressure but should be strengthened by our acquisition of banking teams in San Diego, Los Angeles and Oxnard.”

Net income for the first quarter of 2015 produced a return on beginning equity of 7.31%, a return on average equity of 7.22%, and a return on average assets of 0.86%. The efficiency ratio for the first quarter of 2015 was 64.43%, compared to 45.52% for 2014. Excluding the impact of the debt termination expense, the efficiency ratio was 44.34% and noninterest expense as a percentage of average assets was 1.67%.

Total interest income and fees on loans for the first quarter of 2015 of $45.5 million increased $886,000, or 1.98%, from 2014. The year-over-year increase was primarily due to a $797,000 increase in prepayment penalty fees.

Noninterest income was $8.0 million for the first quarter of 2015, compared with $9.9 million for the fourth quarter of 2014 and $11.5 million for the first quarter of 2014. The quarter-over-quarter decrease was primarily due to a $1.3 million decrease in gain on sale of OREO assets and loans. The $11.5 million in noninterest income for the first quarter of 2014 included $5.3 million in gains on sale of loans.

Noninterest expense for the first quarter of 2015 was $44.5 million, compared with $31.3 million for the fourth quarter of 2014 and $31.2 million for the first quarter of 2014. The increase was due to $13.9 million in debt termination expense resulting from the repayment of a $200.0 million FHLB fixed rate advance. As a percentage of average assets, noninterest expense, excluding the impact of the debt termination expense, was 1.67% compared to 1.67% for the fourth quarter of 2014 and 1.87% for the first quarter of 2014.

Net Interest Income and Net Interest Margin

Net interest income, before the provision for loan losses, totaled $61.0 million for the first quarter of 2015, a decrease of $166,000 from $61.2 million for the fourth quarter of 2014 and an increase of $4.1 million from $56.9 million for the first quarter of 2014. Our net interest margin, tax equivalent (TE), was 3.59% for the first quarter 2015, compared to 3.58% for the fourth quarter of 2014 and 3.72% for the first quarter of 2014. Total average earning asset yields (TE) were 3.77% for the first quarter of 2015, compared to 3.81% for the fourth quarter of 2014 and 3.98% for the first quarter of 2014. Total cost of funds was 0.20% for the first quarter of 2015, compared to 0.25% for the fourth quarter of 2014 and 0.28% for the first quarter of 2014.

Income Taxes

Our effective tax rate for the quarter ended March 31, 2015 was 35.50%, compared with 36.00% for 2014. Our estimated annual effective tax rate varies depending upon tax-advantaged income as well as available tax credits.

Assets

The Company reported total assets of $7.44 billion at March 31, 2015. This represents an increase of $65.0 million, or 0.88%, from total assets of $7.38 billion at December 31, 2014. Earning assets of $7.09 billion at March 31, 2015 increased $67.1 million, or 0.96%, when compared with $7.02 billion at December 31, 2014. The increase in earning assets was primarily due to a $278.3 million increase in interest-earning balances due from the Federal Reserve. This was partially offset by a $108.9 million decrease in investment securities and a $101.0 million decrease in total loans. Approximately $106.6 million of the decrease in loans was due to the decline in dairy & livestock loans, most of which was seasonal.

Total assets of $7.44 billion at March 31, 2015 increased $540.4 million, or 7.83%, from total assets of $6.90 billion at March 31, 2014. Earning assets totaled $7.09 billion at March 31, 2015, an increase of $538.5 million, or 8.22%, when compared with earning assets of $6.55 billion at March 31, 2014. The increase in earning assets was primarily due to a $278.0 million increase in investment securities and a $313.2 million increase in total loans. This was partially offset by a $44.1 million decrease in interest-earning deposits with other institutions and an $8.2 million decrease in balances due from the Federal Reserve.

Investment Securities

Investment securities were $3.03 billion at March 31, 2015, a decrease of $108.9 million from $3.14 billion at December 31, 2014 and an increase of $278.0 million from $2.75 billion at March 31, 2014. As of March 31, 2015, we had a pre-tax unrealized gain of $73.8 million on our overall securities portfolio.

Investment in mortgage backed securities (“MBS”) totaled $2.14 billion at March 31, 2015, compared to $2.22 billion at December 31, 2014 and $1.87 billion at March 31, 2014. Virtually all of our MBS are issued by Freddie Mac or Fannie Mae, which have the implied guarantee of the U.S. Government. We have one private-label mortgage-backed security that has impairment. This Alt-A bond, with a carrying value of $1.5 million as of March 31, 2015, has had $1.9 million in net other-than-temporary (“OTTI”) impairment loss to date since it was purchased in early 2008. No additional OTTI impairment was recorded for the quarter ended March 31, 2015.

Our municipal securities, totaling $549.8 million, are located in 28 states, and approximately $24.6 million, or 4.48%, are located within the state of California. Our largest concentrations of holdings are in Michigan at approximately 13.5%, Minnesota at 10.3%, New Jersey at 9.4%, and Texas at 8.6%. All municipal bond securities are performing.

In the first quarter of 2015, we purchased $4.3 million of municipal securities with an average tax-equivalent yield of approximately 3.89%.

Loans

Total loans and leases, net of deferred fees and discount, of $3.72 billion at March 31, 2015 decreased by $101.0 million, or 2.65%, from $3.82 billion at December 31, 2014. The quarter-over-quarter decrease in loans was due to a decline of approximately $106.6 million in dairy & livestock loans, a $3.7 million decline in agribusiness loans and a $7.9 million decrease in SBA loans. This was partially offset by growth of $13.0 million in commercial and industrial loans and $4.5 million in commercial real estate loans.

Total loans and leases, net of deferred fees and discount, of $3.72 billion at March 31, 2015, increased by $313.2 million, or 9.20%, from $3.40 billion at March 31, 2014.

Deposits & Customer Repurchase Agreements

Deposits of $5.90 billion and customer repurchase agreements of $560.4 million totaled $6.46 billion at March 31, 2015. This represents an increase of $289.8 million, or 4.70%, when compared with total deposits and customer repurchase agreements of $6.17 billion at December 31, 2014. Deposits and customer repurchase agreements increased by $720.5 million, or 12.56%, when compared with $5.74 million in total deposits and customer repurchase agreements reported at March 31, 2014.

Noninterest-bearing deposits were $3.13 billion at March 31, 2015, an increase of $260.6 million, or 9.09%, compared to $2.87 billion at December 31, 2014 and an increase of $438.3 million, or 16.30%, when compared to the quarter ended March 31, 2014. At March 31, 2015, noninterest-bearing deposits were 53.02% of total deposits, compared to 51.14% at December 31, 2014 and 52.61% at March 31, 2014.

Our average cost of total deposits was 0.09% for the quarter ended March 31, 2015, compared to 0.10% for the same period last year. Our cost of total deposits including customer repurchase agreements was 0.11% for the quarter ended March 31, 2015, compared to 0.12% for the same period last year.

FHLB Advance, Other Borrowings and Debentures

On February 23, 2015 we repaid our last remaining FHLB advance with a fixed rate of 4.52%. At December 31 2014, FHLB advances were $199.5 million, compared to $199.3 million at March 31, 2014.

At March 31, 2015, we had no short-term borrowings, compared to $46.0 million at December 31, 2014 and zero at March 31, 2014.

At March 31, 2015, we had $25.8 million of junior subordinated debentures, unchanged from December 31, 2014 and March 31, 2014.

Asset Quality

Purchase Credit Impaired (“PCI”) loans are those loans that we acquired in the San Joaquin Bank (“SJB”) acquisition for which we were “covered” for reimbursement for a substantial portion of any future losses under the terms of the FDIC loss sharing agreement. The FDIC indemnification loss coverage period for commercial loans associated with the SJB acquisition expired October 16, 2014. PCI loans are included in total loans.

The allowance for loan losses totaled $60.7 million at March 31, 2015, compared to $59.8 million at December 31, 2014 and $68.7 million at March 31, 2014. The quarter-over-quarter increase in the allowance for loan losses was due to $884,000 in net loan recoveries. The allowance for loan losses was 1.63%, 1.57%, 1.67%, 1.75%, and 2.11% of total loans and leases outstanding, at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014, and March 31, 2014, respectively.

Nonperforming loans, defined as nonaccrual loans and nonperforming troubled debt restructured loans (“TDR”), were $23.0 million at March 31, 2015, or 0.62% of total loans. This compares to nonperforming loans of $32.2 million, or 0.84% of total loans, at December 31, 2014 and $40.2 million, or 1.23% of total loans, at March 31, 2014. The $23.0 million in nonperforming loans at March 31, 2015 are summarized as follows: $16.8 million in commercial real estate loans, $2.5 million in SBA loans, $2.2 million in SFR mortgage loans, $952,000 in commercial and industrial loans, $103,000 in dairy & livestock and agribusiness loans, and $463,000 in other loans. The $9.2 million decrease in nonperforming loans quarter-over-quarter was principally due to a $6.5 million decrease in nonperforming commercial real estate loans, a $1.4 million decrease in nonperforming commercial and industrial loans, and a $1.0 million decrease in nonperforming SFR mortgage loans.

We had $7.1 million in OREO at March 31, 2015, compared to $5.6 million at December 31, 2014 and $6.5 million at March 31, 2014. As of March 31, 2015, we had six OREO properties, compared with four OREO properties at December 31, 2014 and two OREO properties at March 31, 2014. During the first quarter of 2015, we added three OREO properties with a carrying value of $2.8 million and sold one OREO property with a carrying value of $1.3 million, realizing a net gain on sale of $112,000.

At March 31, 2015, we had loans delinquent 30 to 89 days of $1.9 million. This compares to $1.7 million at December 31, 2014 and $960,000 at March 31, 2014. As a percentage of total loans, delinquencies, excluding nonaccruals, were 0.05% at March 31, 2015, 0.04% at December 31, 2014 and 0.03% at March 31, 2014.

At March 31, 2015, we had $45.4 million in performing TDR loans, compared to $53.6 million in performing TDR loans at December 31, 2014 and $66.4 million in performing TDR loans at March 31, 2014. In terms of the number of loans, we had 34 performing TDR loans at March 31, 2015, compared to 38 performing TDR loans at December 31, 2014 and 44 performing TDR loans at March 31, 2014.

Nonperforming assets, defined as nonaccrual loans plus other real estate owned, totaled $30.1 million at March 31, 2015, $37.8 million at December 31, 2014, and $46.7 million at March 31, 2014.

Classified loans are loans that are graded “substandard” or worse. At March 31, 2015, classified loans totaled $129.2 million, including approximately $18.8 million of PCI loans. Classified loans were $160.7 million, including approximately $21.2 million of PCI loans, at December 31, 2014 and were $219.0 million at March 31, 2014. During the first quarter of 2015, approximately $12 million of our commercial real estate loans and $9.7 million of our classified dairy & livestock loans were upgraded.

CitizensTrust

CitizensTrust had approximately $2.48 billion in assets under management and administration, including $1.91 billion in assets under management, as of March 31, 2015. Revenues were $2.2 million for the first quarter of 2015, compared to $1.9 million for the same period in 2014. CitizensTrust provides trust, investment and brokerage related services, as well as financial, estate and business succession planning.

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 with assets of approximately $7.4 billion. Citizens Business Bank serves 43 cities with 40 Business Financial Centers, seven Commercial Banking Centers, and three trust office locations serving the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, and the Central Valley areas 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., please 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. Pacific time/10:30 a.m. Eastern time on Thursday, April 23, 2015 to discuss the Company’s first quarter 2015 financial results.
To listen to the conference call, please dial (877) 506-3368(877) 506-3368. A taped replay will be made available approximately one hour after the conclusion of the call and will remain available through May 4, 2015 at 6:00 a.m. Pacific time/9:00 a.m. Eastern time. To access the replay, please dial (877) 344-7529(877) 344-7529, passcode 10062819.

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.

Disclosure

This press release contains certain non-GAAP financial disclosures for tangible common equity, earnings before income taxes, which we refer to as “pre-tax earnings”, and net interest income and net interest margin adjusted for discount accretion on PCI loans. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. Please refer to the tables at the end of this release for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measures to the GAAP financial measures.

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. 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 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 prolonged slowdown or decline in real estate construction or sales activity; changes in the financial performance and/or condition of our borrowers or key vendors or counterparties; changes in the levels of nonperforming assets and charge-offs; the costs or effects of acquisitions or dispositions we may make; the effect of changes in laws and regulations (including laws, regulations and judicial decisions concerning financial reforms, taxes, banking capital levels, securities and securities trading and hedging, employment, executive compensation, insurance, vendor management and information security) with which we and our subsidiaries must comply; 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 credit, operations and market risk; inflation, interest rate, securities market and monetary fluctuations; changes in government interest rates or monetary policies; changes in the amount and availability of deposit insurance; cyber-security threats, including loss of system functionality or theft or loss of Company or customer data or money; political instability; acts of war or terrorism, or natural disasters, such as earthquakes, or the effects of pandemic diseases; the timely development and acceptance of new banking products and services and the perceived overall value of these products and services by customers and potential customers; the Company’s relationships with and reliance upon vendors with respect to the operation of certain of the Company key internal and external systems and applications; changes in consumer spending, borrowing and savings preferences or habits; technological changes and the expanding use of technology in banking (including the adoption of mobile banking applications); the 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 providers; continued volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions; fluctuations in the price of the Company’s common stock or other securities; 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 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 (such as 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, 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 its Annual Report on Form 10-K for the year ended December 31, 2014, 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.

###

Visit us.