CVB Financial Corp. Reports Earnings for the First Quarter 2023

Rhea-AI Summary

CVB Financial Corp. (NASDAQ: CVBF) reported a net income of $59.3 million for Q1 2023, translating to $0.42 per share, compared to $66.2 million in Q4 2022 and $45.6 million in Q1 2022. The return on average tangible common equity stood at 20.59%, with a return on average assets of 1.47%. The net interest margin decreased to 3.45%, down from 3.69% in Q4 2022, primarily due to increased interest expenses from higher short-term borrowings. Deposits fell to $12.27 billion, a 4.77% decline compared to December 2022. The bank's total assets decreased by 1.23% to $16.27 billion.

Despite the challenges, noninterest income increased to $13.2 million, and the efficiency ratio improved to 39.50%. Management cited a focus on customer service amidst a challenging economic backdrop, projecting modest GDP growth for 2023.

Positive

• Reported net income increased by 30% year-over-year.
• Noninterest income rose to $13.2 million, higher than the previous quarter and year.
• Efficiency ratio improved to 39.50%.

Negative

• Net income decreased by $6.9 million compared to Q4 2022.
• Net interest margin declined from 3.69% to 3.45% quarter-over-quarter.
• Total deposits fell by $639.6 million, or 4.77%, compared to December 2022.

First Quarter 2023 Highlights

• Net Earnings of $59.3 million, or $0.42 per share
• Return on Average Tangible Common Equity of 20.59%
• Return on Average Assets of 1.47%
• Noninterest-bearing deposits 63.92% of total deposits
• Cost of deposits of 0.17%
  

ONTARIO, Calif., April 26, 2023 (GLOBE NEWSWIRE) -- CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (the “Company”), announced earnings for the quarter ended March 31, 2023.

CVB Financial Corp. reported net income of $59.3 million for the quarter ended March 31, 2023, compared with $66.2 million for the fourth quarter of 2022 and $45.6 million for the first quarter of 2022. Diluted earnings per share were $0.42 for the first quarter of 2023, compared to $0.47 for the prior quarter and $0.31 for the same period last year. The first quarter of 2023 included $1.5 million in provision for credit losses, compared to $2.5 million in the fourth quarter of 2022 and $2.5 million in the first quarter of 2022. Net income of $59.3 million for the first quarter of 2023 produced an annualized return on average equity (“ROAE”) of 12.15%, an annualized return on average tangible common equity (“ROATCE”) of 20.59%, and an annualized return on average assets (“ROAA”) of 1.47%. Our net interest margin, tax equivalent (“NIM”), was 3.45% for the first quarter of 2023, while our efficiency ratio was 39.50%.

David Brager, President and Chief Executive Officer of Citizens Business Bank, commented, “We produced $59.3 million in net income in the first quarter of 2023. These results reflect our continued focus on serving the comprehensive financial needs of our customers. I would like to thank our customers for their loyalty and our associates for their commitment to assisting our customers achieve their goals.”

INCOME STATEMENT HIGHLIGHTS

	Three Months Ended
	March 31, 2023				December 31, 2022				March 31, 2022
	(Dollars in thousands, except per share amounts)
Net interest income	$	125,728			$	137,395			$	112,840
(Provision for) recapture of credit losses	(1,500		)		(2,500		)		(2,500		)
Noninterest income	13,202				12,465				11,264
Noninterest expense	(54,881		)		(54,419		)		(58,238		)
Income taxes	(23,279		)		(26,773		)		(17,806		)
Net earnings	$	59,270			$	66,168			$	45,560
Earnings per common share:
Basic	$	0.42			$	0.47			$	0.31
Diluted	$	0.42			$	0.47			$	0.31
NIM	3.45		%		3.69		%		2.90		%
ROAA	1.47		%		1.60		%		1.06		%
ROAE	12.15		%		13.68		%		8.24		%
ROATCE	20.59		%		23.65		%		13.08		%
Efficiency ratio	39.50		%		36.31		%		46.93		%
Noninterest expense to average assets, annualized	1.36		%		1.32		%		1.36		%

Net Interest Income
Net interest income was $125.7 million for the first quarter of 2023. This represented a $11.7 million, or 8.49%, decrease from the fourth quarter of 2022, and a $12.9 million, or 11.42%, increase from the first quarter of 2022. The quarter-over-quarter decline in net interest income was primarily due to a $9.7 million increase in interest expense from higher levels of short-term borrowings. A nine basis point increase in the cost of deposits and customer repos, combined with the higher cost borrowings resulted in a 36 basis point increase in our cost of funds. The interest-earning asset yield expanded by nine basis point over the prior quarter, primarily due to an increase in loan yields from 4.78% in the fourth quarter of 2022 to 4.90% for the first quarter of 2023. The year-over-year increase in net interest income was primarily due to a 55 basis point expansion of the net interest margin. In comparison to the first quarter of 2022, interest income grew by $28.7 million, or 25.14%, primarily due to a 98 basis point expansion of the yield on earning assets. The year-over-year increase in interest expense of $15.8 million resulted primarily from the $972 million in average short term borrowings in the first quarter of 2023 and a 14 basis point increase in cost of deposits and customer repurchases.

Net Interest Margin
Our tax equivalent net interest margin was 3.45% for the first quarter of 2023, compared to 3.69% for the fourth quarter of 2022 and 2.90% for the first quarter of 2022. The 24 basis point decrease in our net interest margin compared to the fourth quarter of 2022, was primarily due to a 36 basis point increase in our cost of funds. Cost of funds increased in part due to an $810 million increase in short-term borrowings, which had an average cost of 4.81% during the first quarter of 2023. The cost of interest-bearing deposits increased by 25 basis points from the fourth quarter, but the total cost of deposits and customer repurchases only increased by nine basis points, as noninterest-bearing deposits were more than 63% of average deposits during the first quarter. The nine basis point increase in the interest-earning asset yield was due to a 12 basis point increase in loan yields and a quarter-over-quarter change in the composition of average earning assets, with loans growing from 59.67% to 60.55% of earnings assets.   The 55 basis point increase in net interest margin, compared to the first quarter of 2022 was primarily the result of a 98 basis point increase in earning asset yield. Loan yields grew from 4.27% for the first quarter of 2022 to 4.90% for the first quarter of 2023. Likewise, the yield on investment securities increased by 67 basis points from the prior year quarter. Loan balances grew to 60.55% of earning assets on average for the first quarter of 2023, compared to 53.25% for the first quarter of 2022. In addition to loan growth, excess liquidity held at the Federal Reserve was invested into higher yielding investments, which increased to 38.93% of earning assets on average for the first quarter of 2023 from 36.19% for the first quarter of 2022. As a result of growth in loans and investment securities, our average balance at the Fed declined from 10.4% of earning assets in the first quarter of 2022 to 0.3% in the first quarter of 2023.   Total cost of funds of 0.49% for the first quarter of 2023 increased from 0.03% for the year ago quarter. This 46 basis point increase in cost of funds was the result of a 39 basis point increase in the cost of interest-bearing deposits and an average cost of 4.81% on $972 million of short-term borrowings for the first quarter of 2023. On average, noninterest-bearing deposits were 63.65% of total deposits during the most recent quarter, compared to 63.58% for the fourth quarter of 2022 and 61.48% for the first quarter of 2022.

Earning Assets and Deposits
On average, earning assets declined by $60.3 million and by $1.16 billion, compared to the fourth and first quarters of 2022, respectively. The $60.3 million quarter-over-quarter decline in earning assets resulted from an $88.4 million decrease in interest-earning funds held at the Federal Reserve and average investment securities declining by $79.6 million, which was partially offset by average loans increasing by $94.7 million. Compared to the first quarter of 2022, average loans increased by $462.9 million, while the average amount of funds held at the Federal Reserve declined by $1.62 billion from the first quarter of 2022. Noninterest-bearing deposits declined on average by $610.2 million, or 7.01%, from the fourth quarter of 2022, while interest-bearing deposits and customer repurchase agreements declined on average by $332.6 million. Compared to the first quarter of 2022, total deposits and customer repurchase agreements declined on average by $1.6 billion, or 10.77%, including a decline of $628.0 million in noninterest-bearing deposits.

	Three Months Ended
SELECTED FINANCIAL HIGHLIGHTS	March 31, 2023						December 31, 2022						March 31, 2022
	(Dollars in thousands)
Yield on average investment securities (TE)		2.37%						2.36%						1.70%
Yield on average loans		4.90%						4.78%						4.27%
Core Loan Yield [1]		4.85%						4.67%						4.11%
Yield on average earning assets (TE)		3.91%						3.82%						2.93%
Cost of deposits		0.17%						0.08%						0.03%
Cost of funds		0.49%						0.13%						0.03%
Net interest margin (TE)		3.45%						3.69%						2.90%
Average Earning Asset Mix	Avg			% of Total			Avg			% of Total			Avg			% of Total
Total investment securities	$	5,762,728		38.93	%		$	5,842,283		39.31	%		$	5,776,440		36.19	%
Interest-earning deposits with other institutions		47,934		0.32	%			133,931		0.90	%			1,666,473		10.44	%
Loans		8,963,323		60.55	%			8,868,673		59.67	%			8,500,436		53.25	%
Total interest-earning assets		14,802,853						14,863,178						15,962,282
[1] Represents yield on average loans excluding the impact of discount accretion and PPP loans.

Provision for Credit Losses
The first quarter of 2023 included $1.5 million in provision for credit losses, compared to a $2.5 million in provision for credit losses in the fourth quarter of 2022 and $2.5 million in the first quarter of 2022. The $1.5 million provision for credit losses in the most recent quarter was the result of an overall increase in projected loss rates from 0.94% at the end of 2022 to 0.97% at March 31, 2023. Projected loss rates continue to be impacted by a deteriorating economic forecast that assumes a modest recession starting in late 2023 and modest GDP growth through 2024, as well as lower commercial real estate values and an increase in the rate of unemployment. Our forecast reflects GDP growth of 1.4% for all of 2023 and 0.9% in 2024. Unemployment is forecasted to be 4.2% in 2023 and 5.1% in 2024.

Noninterest Income
Noninterest income was $13.2 million for the first quarter of 2023, compared with $12.5 million for the fourth quarter of 2022 and $11.3 million for the first quarter of 2022. Service charges on deposits decreased by $413,000, or 7.17% over the fourth quarter of 2022 and increased by $285,000, or 5.63% in comparison to the first quarter of 2022. Trust and investment services income was relatively flat compared to the fourth quarter of 2022 but grew by $92,000 year-over-year. The first quarter of 2023 included approximately $500,000 in interest rate swap related fees and a recapture of a previous impairment charge of $500,000 as a result of the payoff of a CRA investment that was previously identified as impaired. The fourth quarter of 2022 included $1.0 million in death benefits that exceeded the asset value of certain BOLI policies.

Noninterest Expense
Noninterest expense for the first quarter of 2023 was $54.9 million, compared to $54.4 million for the fourth quarter of 2022 and $58.2 million for the first quarter of 2022. The first quarter of 2023 included $500,000 in provision for unfunded loan commitments. Acquisition expense related to the merger of Suncrest Bank was $5.6 million for the first quarter of 2022. As a percentage of average assets, noninterest expense was 1.36% for the first quarter of 2023, compared to 1.32% for the fourth quarter of 2022 and 1.36% for the first quarter of 2022. The efficiency ratio for the first quarter of 2023 was 39.50%, compared to 36.31% for the fourth quarter of 2022 and 46.93% for the first quarter of 2022.

Income Taxes
Our effective tax rate for the quarter ended March 31, 2023, was 28.20%, compared with 28.10% for the same period of 2022. Our estimated annual effective tax rate can vary depending upon the level of tax-advantaged income as well as available tax credits.

BALANCE SHEET HIGHLIGHTS

Assets
The Company reported total assets of $16.27 billion at March 31, 2023. This represented a decrease of $202.5 million, or 1.23%, from total assets of $16.48 billion at December 31, 2022. Interest-earning assets of $14.80 billion at March 31, 2023, decreased by $172.8 million, or 1.15%, when compared with $14.97 billion at December 31, 2022. The decrease in interest-earning assets was primarily due to a $136.9 million decrease in total loans and a $69.0 million decrease in investment securities.

Total assets at March 31, 2023, decreased by $1.27 billion, or 7.21%, from total assets of $17.54 billion at March 31, 2022. Interest-earning assets decreased by $1.31 billion, or 8.13%, when compared with $16.11 billion at March 31, 2022. The decrease in interest-earning assets included a $1.42 billion decrease in interest-earning balances due from the Federal Reserve and a $269.6 million decrease in investment securities, partially offset by a $350.8 million increase in total loans. The increase in total loans included a $115.4 million decrease in PPP loans with a remaining outstanding balance totaling $5.8 million as of March 31, 2023. Excluding PPP loans, total loans increased by $466.2 million from March 31, 2022.

Investment Securities
Total investment securities were $5.74 billion at March 31, 2023, a decrease of $69.0 million, or 1.19%, from $5.81 billion at December 31, 2022 and a decrease of $269.6 million, or 4.49%, from $6.01 billion at March 31, 2022.  

At March 31, 2023, investment securities held-to-maturity (“HTM”) totaled $2.54 billion, a decrease of $18.3 million, or 0.72%, from December 31, 2022 and a $173.2 million increase, or 7.33%, from March 31, 2022.

At March 31, 2023, investment securities available-for-sale (“AFS”) totaled $3.20 billion, inclusive of a pre-tax net unrealized loss of $459.7 million. AFS securities decreased by $50.7 million, or 1.56%, from $3.26 billion at December 31, 2022 and decreased by $442.8 million, or 12.14%, from March 31, 2022.

Combined, the AFS and HTM investments in mortgage backed securities (“MBS”) and collateralized mortgage obligations (“CMO”) totaled $4.70 billion or approximately 82% of the total investment securities at March 31, 2023. 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 addition, we had $543.3 million of Government Agency securities (HTM) at March 31, 2023, that represent approximately 9.5% of the total investment securities.

Our combined AFS and HTM municipal securities totaled $498.5 million as of March 31, 2023, or approximately 8.7% of our total investment portfolio. These securities are located in 35 states. Our largest concentrations of holdings by state, as a percentage of total municipal bonds, are located in Texas at 15.80%, Minnesota at 11.20%, California at 9.51%, Ohio at 6.30%, Massachusetts at 6.26%, and Washington at 5.78%.

Loans
Total loans and leases, at amortized cost, of $8.94 billion at March 31, 2023, decreased by $136.9 million, or 1.51%, from December 31, 2022. After adjusting for seasonality of dairy and livestock and PPP loans, our core loans declined by $6.5 million, or 0.07%, from the end of the fourth quarter. The $136.9 million decrease in total loans quarter-over-quarter included decreases of $127.2 million in dairy & livestock loans, $50.5 million in commercial and industrial loans, $7.4 million in SBA loans, $4.3 million in construction loans, $3.7 million in SFR mortgage loans, $3.3 million in PPP loans, and $5.7 million in consumer and other loans, partially offset by an increase of $65.4 million in commercial real estate loans. The decline in dairy and livestock loans primarily relates to the seasonal peak in line utilization at the end of every calendar year, demonstrated by a decline in utilization from 78% at the end of 2022 to 68%. Likewise, the decline in commercial and industrial loans was impacted by a decrease in line utilization from 33% at the end of 2022 to 28% at March 31, 2023.

Total loans and leases, at amortized cost, increased by $350.8 million, or 4.08%, from March 31, 2022. After adjusting for PPP loans, our core loans grew by $466.2 million, or 5.50%, from the end of the first quarter of 2022. Commercial real estate loans grew by $479.5 million, dairy & livestock and agribusiness loans grew by $15.0 million, municipal lease financings increased by $14.0 million, construction loans increased by $10.5 million, and SFR mortgage loans grew by $7.2 million. This core loan growth was partially offset by decreases of $27.8 million in SBA loans, $26.6 million in commercial and industrial loans, and $5.6 million in consumer and other loans.

Asset Quality
During the first quarter of 2023, we experienced credit charge-offs of $110,000 and total recoveries of $33,000, resulting in net charge-offs of $77,000. The allowance for credit losses (“ACL”) totaled $86.5 million at March 31, 2023, compared to $85.1 million at December 31, 2022 and $76.1 million at March 31, 2022. The ACL increased by $1.4 million for the first quarter of 2023, including $1.5 million in provision for credit losses. At March 31, 2023, ACL as a percentage of total loans and leases outstanding was 0.97%. This compares to 0.94% and 0.89% at December 31, 2022 and March 31, 2022, respectively.

Nonperforming loans, defined as nonaccrual loans, including modified loans on nonaccrual, plus loans 90 days past due and accruing interest, and nonperforming assets, defined as nonperforming loans plus OREO, are highlighted below.

Nonperforming Assets and Delinquency Trends	March 31, 2023				December 31, 2022				March 31, 2022
Nonperforming loans	(Dollars in thousands)
Commercial real estate	$	2,634			$	2,657			$	7,055
SBA		702				443				1,575
SBA - PPP		-				-				2
Commercial and industrial		2,049				1,320				1,771
Dairy & livestock and agribusiness		406				477				2,655
SFR mortgage		-				-				167
Consumer and other loans		384				33				40
Total	$	6,175			$	4,930			$	13,265
% of Total loans		0.07	%			0.05	%			0.15	%
OREO
Commercial real estate	$	-			$	-			$	-
SFR mortgage		-				-				-
Total	$	-			$	-			$	-
Total nonperforming assets	$	6,175			$	4,930			$	13,265
% of Nonperforming assets to total assets		0.04	%			0.03	%			0.08	%
Past due 30-89 days
Commercial real estate	$	425			$	-			$	565
SBA		575				556				549
Commercial and industrial		-				-				6
Dairy & livestock and agribusiness		183				-				1,099
SFR mortgage		-				388				403
Consumer and other loans		-				175				-
Total	$	1,183			$	1,119			$	2,622
% of Total loans		0.01	%			0.01	%			0.03	%
Classified Loans	$	66,977			$	78,658			$	64,108

The $1.2 million increase in nonperforming loans from December 31, 2022 was primarily due to an increase of $729,000 in commercial and industrial loans. Classified loans are loans that are graded “substandard” or worse. Classified loans decreased $11.7 million quarter-over-quarter, primarily due to a $7.9 million decrease in classified commercial real estate loans. Total classified loans at March 31, 2023, included $22.3 million of classified loans acquired from Suncrest. Excluding the $22.3 million of acquired classified Suncrest loans, classified loans decreased from December 31, 2022 by approximately $11.1 million.

Deposits & Customer Repurchase Agreements
Deposits of $12.27 billion and customer repurchase agreements of $490.2 million totaled $12.76 billion at March 31, 2023. This represented a decrease of $639.6 million, or 4.77%, when compared with $13.40 billion at December 31, 2022. Total deposits and customer repurchase agreements decreased $2.32 billion, or 15.41% when compared with $15.09 billion at March 31, 2022. Higher interest rates that have resulted from the Federal Reserve’s significant increase in the federal funds rate over the last year have continued to impact deposit levels, including approximately $370 million of funds on deposit at the end of 2022 that were transferred from the Bank’s balance sheet to Citizens Trust for investment in higher yielding securities such as treasury notes.

Noninterest-bearing deposits were $8.09 billion on average for the first quarter of 2023, a decrease of $610.2 million, or 7.01%, when compared to $8.70 billion on average for the fourth quarter of 2022. Noninterest-bearing deposits decreased on average by $628.0 million, or 7.20% when compared to $8.72 billion on average for the first quarter of 2022. For the first quarter of 2023, average noninterest-bearing deposits were 63.65% of total deposits, compared to 63.58% for the prior quarter, and 61.48% for the year ago quarter.

Capital
The Company’s total equity was $1.99 billion at March 31, 2023. This represented an overall increase of $41.3 million from total equity of $1.95 billion at December 31, 2022. Increases to equity included $59.3 million in net earnings and a $28.7 million increase in other comprehensive income from the tax effected impact of the increase in market value of available-for-sale securities. Decreases included $28.0 million in cash dividends. During the first quarter of 2023, we repurchased, under our 10b5-1 stock repurchase plan, 791,800 shares of common stock, at an average repurchase price of $23.43, totaling $18.5 million. The 10b5-1 plan expired on March 2, 2023. Our tangible book value per share at March 31, 2023 was $8.64.

Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory standards.

				CVB Financial Corp. Consolidated
Capital Ratios		Minimum Required Plus Capital Conservation Buffer		March 31, 2023	December 31, 2022	March 31, 2022
Tier 1 leverage capital ratio		4.0%		9.7%	9.5%	8.7%
Common equity Tier 1 capital ratio		7.0%		13.8%	13.6%	13.6%
Tier 1 risk-based capital ratio		8.5%		13.8%	13.6%	13.6%
Total risk-based capital ratio		10.5%		14.6%	14.4%	14.4%
Tangible common equity ratio				7.8%	7.4%	7.7%

CitizensTrust
As of March 31, 2023, CitizensTrust had approximately $3.38 billion in assets under management and administration, including $2.25 billion in assets under management. Revenues were $2.9 million for the first quarter of 2023, compared to $2.8 million for the same period of 2022. 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 $16 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 with more than 60 banking centers and 3 trust office locations serving 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, April 27, 2023 to discuss the Company’s first quarter 2023 financial results. The conference call can be accessed live by registering at: https://register.vevent.com/register/BI9ddd4df47ee3452fb259d35cbf1a8db7.

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 statements set forth herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 that could cause actual results or performance to differ materially from those projected. These forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s outlook regarding revenue and asset growth, financial performance and profitability, capital and liquidity levels, loan and deposit growth and retention, yields and returns, loan diversification and credit management, stockholder value creation, tax rates, and the impact of acquisitions we have made or may make. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company, and there can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors, in addition to those set forth below could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements.

General risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct business; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; the effect of acquisitions we have made or may make, including, without limitation, the failure to obtain the necessary regulatory approvals, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; the effectiveness of our risk management framework and quantitative models; changes in the level of our nonperforming assets and charge-offs; the transition away from USD LIBOR and uncertainties regarding potential alternative reference rates, including SOFR; the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the CECL model, which has changed how we estimate credit losses and may further increase the required level of our allowance for credit losses in future periods; possible credit related impairments or declines in the fair value of loans and securities held by us; possible impairment charges to goodwill; changes in consumer spending, borrowing, and savings habits; the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; periodic fluctuations in commercial or residential real estate prices or values; our ability to attract or retain deposits and other sources of liquidity; the possibility that we may reduce or discontinue the payments of dividends on our common stock; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; technological changes in banking and financial services; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism, and/or military conflicts, which could impact business and economic conditions in the United States and abroad; catastrophic events or natural disasters, including earthquakes, drought, climate change or extreme weather events that may affect our assets, communications or computer services, customers, employees or third party vendors; public health crises and pandemics, such as the COVID-19 pandemic, and their effects on the economic and business environments in which we operate, including on our credit quality, business operations, and employees, as well as the impact on general economic and financial market conditions; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; our ability to recruit and retain key executives, board members and other employees, and changes in employment laws and regulations; unanticipated regulatory or legal proceedings; and our ability to manage the risks involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2022 Annual Report on Form 10-K filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

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.

Non-GAAP Financial Measures — Certain financial information provided in this presentation has not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and is presented on a non-GAAP basis. Investors and analysts should refer to the reconciliations included in this presentation and should consider the Company’s non-GAAP measures in addition to, not as a substitute for or as superior to, measures prepared in accordance with GAAP. These measures may or may not be comparable to similarly titled measures used by other companies.

Contact:	David A. Brager
	President and Chief Executive Officer
	(909) 980-4030

CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
		March 31, 2023				December 31, 2022				March 31, 2022
Assets
Cash and due from banks		$	162,668			$	158,236			$	171,000
Interest-earning balances due from Federal Reserve			64,866				45,225				1,482,039
Total cash and cash equivalents			227,534				203,461				1,653,039
Interest-earning balances due from depository institutions			11,944				9,553				6,859
Investment securities available-for-sale			3,204,524				3,255,211				3,647,330
Investment securities held-to-maturity			2,535,979				2,554,301				2,362,741
Total investment securities			5,740,503				5,809,512				6,010,071
Investment in stock of Federal Home Loan Bank (FHLB)			38,697				27,627				18,012
Loans and lease finance receivables			8,942,489				9,079,392				8,591,684
Allowance for credit losses			(86,540	)			(85,117	)			(76,119	)
Net loans and lease finance receivables			8,855,949				8,994,275				8,515,565
Premises and equipment, net			45,310				46,698				53,435
Bank owned life insurance (BOLI)			256,717				255,528				259,254
Intangibles			20,023				21,742				27,310
Goodwill			765,822				765,822				765,822
Other assets			311,542				342,322				229,770
Total assets		$	16,274,041			$	16,476,540			$	17,539,137
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing		$	7,844,329			$	8,164,364			$	9,107,304
Investment checking			668,947				723,870				714,567
Savings and money market			3,474,651				3,653,385				4,289,550
Time deposits			283,943				294,626				376,357
Total deposits			12,271,870				12,836,245				14,487,778
Customer repurchase agreements			490,235				565,431				598,909
Other borrowings			1,405,000				995,000				-
Payable for securities purchased			-				-				257,979
Other liabilities			117,167				131,347				119,428
Total liabilities			14,284,272				14,528,023				15,464,094
Stockholders' Equity
Stockholders' equity			2,315,896				2,303,313				2,221,305
Accumulated other comprehensive loss, net of tax			(326,127	)			(354,796	)			(146,262	)
Total stockholders' equity			1,989,769				1,948,517				2,075,043
Total liabilities and stockholders' equity		$	16,274,041			$	16,476,540			$	17,539,137

CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
		Three Months Ended
		March 31, 2023				December 31, 2022				March 31, 2022
Assets
Cash and due from banks		$	175,129			$	180,661			$	187,061
Interest-earning balances due from Federal Reserve			36,950				125,350				1,653,349
Total cash and cash equivalents			212,079				306,011				1,840,410
Interest-earning balances due from depository institutions			10,984				8,581				13,124
Investment securities available-for-sale			3,216,143				3,273,149				3,546,957
Investment securities held-to-maturity			2,546,585				2,569,134				2,229,483
Total investment securities			5,762,728				5,842,283				5,776,440
Investment in stock of FHLB			28,868				18,291				18,933
Loans and lease finance receivables			8,963,323				8,868,673				8,500,436
Allowance for credit losses			(85,151	)			(82,612	)			(73,082	)
Net loans and lease finance receivables			8,878,172				8,786,061				8,427,354
Premises and equipment, net			46,258				47,327				54,015
Bank owned life insurance (BOLI)			256,137				256,216				259,799
Intangibles			20,983				22,610				28,190
Goodwill			765,822				765,822				759,014
Other assets			331,105				341,958				206,671
Total assets		$	16,313,136			$	16,395,160			$	17,383,950
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing		$	8,092,704			$	8,702,899			$	8,720,728
Interest-bearing			4,621,247				4,985,591				5,464,552
Total deposits			12,713,951				13,688,490				14,185,280
Customer repurchase agreements			550,754				518,996				679,931
Other borrowings			971,701				161,197				51
Payable for securities purchased			79				6,022				165,665
Other liabilities			98,407				101,472				109,688
Total liabilities			14,334,892				14,476,177				15,140,615
Stockholders' Equity
Stockholders' equity			2,332,625				2,301,770				2,248,871
Accumulated other comprehensive (loss) income, net of tax			(354,381	)			(382,787	)			(5,536	)
Total stockholders' equity			1,978,244				1,918,983				2,243,335
Total liabilities and stockholders' equity		$	16,313,136			$	16,395,160			$	17,383,950

CVB FINANCIAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
		Three Months Ended
		March 31, 2023			December 31, 2022			March 31, 2022
Interest income:
Loans and leases, including fees		$	108,394		$	106,884		$	89,461
Investment securities:
Investment securities available-for-sale			19,596			20,091			12,832
Investment securities held-to-maturity			13,956			13,837			10,663
Total investment income			33,552			33,928			23,495
Dividends from FHLB stock			349			305			371
Interest-earning deposits with other institutions			491			1,001			773
Total interest income			142,786			142,118			114,100
Interest expense:
Deposits			5,365			2,774			1,127
Borrowings and junior subordinated debentures			11,693			1,949			133
Total interest expense			17,058			4,723			1,260
Net interest income before provision for credit losses			125,728			137,395			112,840
Provision for credit losses			1,500			2,500			2,500
Net interest income after provision for credit losses			124,228			134,895			110,340
Noninterest income:
Service charges on deposit accounts			5,344			5,757			5,059
Trust and investment services			2,914			2,867			2,822
Other			4,944			3,841			3,383
Total noninterest income			13,202			12,465			11,264
Noninterest expense:
Salaries and employee benefits			35,247			34,154			32,656
Occupancy and equipment			5,450			5,820			5,571
Professional services			1,696			2,574			2,045
Computer software expense			3,408			3,362			3,795
Marketing and promotion			1,715			1,712			1,458
Amortization of intangible assets			1,720			1,724			1,998
Provision for unfunded loan commitments			500			-			-
Acquisition related expenses			-			-			5,638
Other			5,145			5,073			5,077
Total noninterest expense			54,881			54,419			58,238
Earnings before income taxes			82,549			92,941			63,366
Income taxes			23,279			26,773			17,806
Net earnings		$	59,270		$	66,168		$	45,560
Basic earnings per common share		$	0.42		$	0.47		$	0.31
Diluted earnings per common share		$	0.42		$	0.47		$	0.31
Cash dividends declared per common share		$	0.20		$	0.20		$	0.18

CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
		Three Months Ended
		March 31, 2023				December 31, 2022				March 31, 2022
Interest income - tax equivalent (TE)		$	143,332			$	142,646			$	114,463
Interest expense			17,058				4,723				1,260
Net interest income - (TE)		$	126,274			$	137,923			$	113,203
Return on average assets, annualized			1.47	%			1.60	%			1.06	%
Return on average equity, annualized			12.15	%			13.68	%			8.24	%
Efficiency ratio [1]			39.50	%			36.31	%			46.93	%
Noninterest expense to average assets, annualized			1.36	%			1.32	%			1.36	%
Yield on average loans			4.90	%			4.78	%			4.27	%
Yield on average earning assets (TE)			3.91	%			3.82	%			2.93	%
Cost of deposits			0.17	%			0.08	%			0.03	%
Cost of deposits and customer repurchase agreements			0.17	%			0.08	%			0.03	%
Cost of funds			0.49	%			0.13	%			0.03	%
Net interest margin (TE)			3.45	%			3.69	%			2.90	%
[1] Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.
Tangible Common Equity Ratio (TCE) [2]
CVB Financial Corp. Consolidated			7.77	%			7.40	%			7.66	%
Citizens Business Bank			7.69	%			7.29	%			7.42	%
[2] (Capital - [GW+Intangibles])/(Total Assets - [GW+Intangibles])
Weighted average shares outstanding
Basic			138,592,371				138,890,705				144,725,296
Diluted			138,953,172				139,438,103				145,018,517
Dividends declared		$	28,007			$	27,995			$	25,467
Dividend payout ratio [3]			47.25	%			42.31	%			55.90	%
[3] Dividends declared on common stock divided by net earnings.
Number of shares outstanding - (end of period)			139,302,451				139,818,703				141,626,059
Book value per share		$	14.28			$	13.94			$	14.65
Tangible book value per share		$	8.64			$	8.30			$	9.05
		March 31, 2023				December 31, 2022				March 31, 2022
Nonperforming assets:
Nonaccrual loans		$	6,175			$	4,930			$	13,265
Total nonperforming assets		$	6,175			$	4,930			$	13,265
Modified loans/performing troubled debt restructured loans (TDR) [4]		$	5,836			$	7,817			$	5,259
[4] Effective January 1, 2023, performing and nonperforming TDRs are reflected as Loan Modifications to borrowers experiencing financial difficulty.
Percentage of nonperforming assets to total loans outstanding and OREO			0.07	%			0.05	%			0.15	%
Percentage of nonperforming assets to total assets			0.04	%			0.03	%			0.08	%
Allowance for credit losses to nonperforming assets			1401.46	%			1726.51	%			573.83	%
		Three Months Ended
		March 31, 2023				December 31, 2022				March 31, 2022
Allowance for credit losses:
Beginning balance		$	85,117			$	82,601			$	65,019
Suncrest FV PCD loans			-				-				8,605
Total charge-offs			(110	)			(127	)			(16	)
Total recoveries on loans previously charged-off			33				143				11
Net recoveries (charge-offs)			(77	)			16				(5	)
Provision for (recapture of) credit losses			1,500				2,500				2,500
Allowance for credit losses at end of period		$	86,540			$	85,117			$	76,119
Net recoveries (charge-offs) to average loans			-0.001	%			0.000	%			-0.000	%

CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in millions)
Allowance for Credit Losses by Loan Type
		March 31, 2023								December 31, 2022								March 31, 2022
		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 Credit Losses			Allowance as a % of Total Loans by Respective Loan Type
Commercial real estate		$	67.1			0.97	%			$	64.8			0.94	%			$	57.8			0.90	%
Construction			1.7			1.99	%				1.7			1.93	%				1.0			1.30	%
SBA			2.7			0.96	%				2.8			0.97	%				2.8			0.90	%
Commercial and industrial			8.9			1.00	%				10.2			1.08	%				6.8			0.70	%
Dairy & livestock and agribusiness			4.8			1.55	%				4.4			1.01	%				6.7			2.30	%
Municipal lease finance receivables			0.3			0.36	%				0.3			0.36	%				0.2			0.20	%
SFR mortgage			0.4			0.16	%				0.4			0.14	%				0.2			0.10	%
Consumer and other loans			0.6			0.84	%				0.5			0.69	%				0.6			0.70	%
Total		$	86.5			0.97	%			$	85.1			0.94	%			$	76.1			0.90	%

CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
Quarterly Common Stock Price
			2023							2022								2021
Quarter End		High			Low				High				Low				High				Low
March 31,		$	25.98		$	16.34			$	24.37			$	21.36			$	25.00			$	19.15
June 30,		$	-		$	-			$	25.59			$	22.37			$	22.98			$	20.50
September 30,		$	-		$	-			$	28.14			$	22.63			$	20.86			$	18.72
December 31,		$	-		$	-			$	29.25			$	25.26			$	21.85			$	19.00
Quarterly Consolidated Statements of Earnings
					Q1				Q4				Q3				Q2				Q1
						2023				2022				2022				2022				2022
Interest income
Loans and leases, including fees					$	108,394			$	106,884			$	100,077			$	92,770			$	89,461
Investment securities and other						34,392				35,234				35,111				30,492				24,639
Total interest income						142,786				142,118				135,188				123,262				114,100
Interest expense
Deposits						5,365				2,774				1,728				1,201				1,127
Other borrowings						11,693				1,949				122				121				133
Total interest expense						17,058				4,723				1,850				1,322				1,260
Net interest income before provision for
credit losses						125,728				137,395				133,338				121,940				112,840
Provision for credit losses						1,500				2,500				2,000				3,600				2,500
Net interest income after provision for
credit losses						124,228				134,895				131,338				118,340				110,340
Noninterest income						13,202				12,465				11,590				14,670				11,264
Noninterest expense						54,881				54,419				53,027				50,871				58,238
Earnings before income taxes						82,549				92,941				89,901				82,139				63,366
Income taxes						23,279				26,773				25,262				23,081				17,806
Net earnings					$	59,270			$	66,168			$	64,639			$	59,058			$	45,560
Effective tax rate						28.20	%			28.81	%			28.10	%			28.10	%			28.10	%
Basic earnings per common share					$	0.42			$	0.47			$	0.46			$	0.42			$	0.31
Diluted earnings per common share					$	0.42			$	0.47			$	0.46			$	0.42			$	0.31
Cash dividends declared per common share					$	0.20			$	0.20			$	0.20			$	0.19			$	0.18
Cash dividends declared					$	28,007			$	27,995			$	27,965			$	26,719			$	25,467

CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
Loan Portfolio by Type
		March 31,				December 31,				September 30,				June 30,				March 31,
			2023				2022				2022				2022				2022
Commercial real estate		$	6,950,302			$	6,884,948			$	6,685,245			$	6,643,628			$	6,470,841
Construction			83,992				88,271				76,495				60,584				73,478
SBA			283,464				290,908				296,664				297,109				311,238
SBA - PPP			5,824				9,087				17,348				66,955				121,189
Commercial and industrial			898,167				948,683				952,231				941,595				924,780
Dairy & livestock and agribusiness			307,820				433,564				323,105				273,594				292,784
Municipal lease finance receivables			79,552				81,126				76,656				64,437				65,543
SFR mortgage			262,324				266,024				263,646				260,218				255,136
Consumer and other loans			71,044				76,781				82,746				84,109				76,695
Gross loans, net of deferred loan fees and discounts			8,942,489				9,079,392				8,774,136				8,692,229				8,591,684
Allowance for credit losses			(86,540	)			(85,117	)			(82,601	)			(80,222	)			(76,119	)
Net loans		$	8,855,949			$	8,994,275			$	8,691,535			$	8,612,007			$	8,515,565
Deposit Composition by Type and Customer Repurchase Agreements
		March 31,				December 31,				September 30,				June 30,				March 31,
			2023				2022				2022				2022				2022
Noninterest-bearing		$	7,844,329			$	8,164,364			$	8,764,556			$	8,881,223			$	9,107,304
Investment checking			668,947				723,870				751,618				695,054				714,567
Savings and money market			3,474,651				3,653,385				3,991,531				4,145,634				4,289,550
Time deposits			283,943				294,626				364,694				350,308				376,357
Total deposits			12,271,870				12,836,245				13,872,399				14,072,219				14,487,778
Customer repurchase agreements			490,235				565,431				467,844				502,829				598,909
Total deposits and customer repurchase agreements		$	12,762,105			$	13,401,676			$	14,340,243			$	14,575,048			$	15,086,687

CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands)
Nonperforming Assets and Delinquency Trends
		March 31,				December 31,				September 30,				June 30,				March 31,
			2023				2022				2022				2022				2022
Nonperforming loans:
Commercial real estate		$	2,634			$	2,657			$	6,705			$	6,843			$	7,055
Construction			-				-				-				-				-
SBA			702				443				1,065				1,075				1,575
SBA - PPP			-				-				-				-				2
Commercial and industrial			2,049				1,320				1,308				1,655				1,771
Dairy & livestock and agribusiness			406				477				1,007				3,354				2,655
SFR mortgage			-				-				-				-				167
Consumer and other loans			384				33				32				37				40
Total		$	6,175			$	4,930			$	10,117			$	12,964			$	13,265
% of Total loans			0.07	%			0.05	%			0.12	%			0.15	%			0.15	%
Past due 30-89 days:
Commercial real estate		$	425			$	-			$	-			$	559			$	565
Construction			-				-				-				-				-
SBA			575				556				-				-				549
Commercial and industrial			-				-				-				-				6
Dairy & livestock and agribusiness			183				-				-				-				1,099
SFR mortgage			-				388				-				-				403
Consumer and other loans			-				175				-				-				-
Total		$	1,183			$	1,119			$	-			$	559			$	2,622
% of Total loans			0.01	%			0.01	%			0.00	%			0.01	%			0.03	%
OREO:
Commercial real estate		$	-			$	-			$	-			$	-			$	-
SBA			-				-				-				-				-
SFR mortgage			-				-				-				-				-
Total		$	-			$	-			$	-			$	-			$	-
Total nonperforming, past due, and OREO		$	7,358			$	6,049			$	10,117			$	13,523			$	15,887
% of Total loans			0.08	%			0.07	%			0.12	%			0.16	%			0.18	%

CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
Regulatory Capital Ratios
				CVB Financial Corp. Consolidated
Capital Ratios		Minimum Required Plus Capital Conservation Buffer		March 31, 2023		December 31, 2022		March 31, 2022
Tier 1 leverage capital ratio		4.0%		9.7%		9.5%		8.7%
Common equity Tier 1 capital ratio		7.0%		13.8%		13.6%		13.6%
Tier 1 risk-based capital ratio		8.5%		13.8%		13.6%		13.6%
Total risk-based capital ratio		10.5%		14.6%		14.4%		14.4%
Tangible common equity ratio				7.8%		7.4%		7.7%

Tangible Book Value Reconciliations (Non-GAAP)
The tangible book value per share is a Non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance. The following is a reconciliation of tangible book value to the Company stockholders' equity computed in accordance with GAAP, as well as a calculation of tangible book value per share as of March 31, 2023, December 31, 2022 and March 31, 2022.
			March 31, 2023				December 31, 2022				March 31, 2022
			(Dollars in thousands, except per share amounts)
	Stockholders' equity		$	1,989,769			$	1,948,517			$	2,075,043
	Less: Goodwill			(765,822	)			(765,822	)			(765,822	)
	Less: Intangible assets			(20,023	)			(21,742	)			(27,310	)
	Tangible book value		$	1,203,924			$	1,160,953			$	1,281,911
	Common shares issued and outstanding			139,302,451				139,818,703				141,626,059
	Tangible book value per share		$	8.64			$	8.30			$	9.05

Return on Average Tangible Common Equity Reconciliations (Non-GAAP)
The return on average tangible common equity is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance. The following is a reconciliation of net income, adjusted for tax-effected amortization of intangibles, to net income computed in accordance with GAAP; a reconciliation of average tangible common equity to the Company's average stockholders' equity computed in accordance with GAAP; as well as a calculation of return on average tangible common equity.
			Three Months Ended
			March 31,				December 31,				March 31,
				2023				2022				2022
			(Dollars in thousands)
	Net Income		$	59,270			$	66,168			$	45,560
	Add: Amortization of intangible assets			1,720				1,724				1,998
	Less: Tax effect of amortization of intangible assets [1]			(508	)			(510	)			(591	)
	Tangible net income		$	60,482			$	67,382			$	46,967
	Average stockholders' equity		$	1,978,244			$	1,918,983			$	2,243,335
	Less: Average goodwill			(765,822	)			(765,822	)			(759,014	)
	Less: Average intangible assets			(20,983	)			(22,610	)			(28,190	)
	Average tangible common equity		$	1,191,439			$	1,130,551			$	1,456,131
	Return on average equity, annualized			12.15	%			13.68	%			8.24	%
	Return on average tangible common equity, annualized			20.59	%			23.65	%			13.08	%
	[1] Tax effected at respective statutory rates.

FAQ

What were CVBF's earnings for Q1 2023?

CVBF reported a net income of $59.3 million, or $0.42 per share.

How did CVBF's net interest margin change in Q1 2023?

The net interest margin decreased to 3.45% in Q1 2023 from 3.69% in Q4 2022.

What was the total asset value of CVB Financial Corp. as of March 31, 2023?

CVB Financial Corp. reported total assets of $16.27 billion as of March 31, 2023.

How did CVBF's deposits change in Q1 2023?

Total deposits decreased by $639.6 million, or 4.77%, compared to December 2022.

What is the return on average tangible common equity for CVBF?

The return on average tangible common equity was 20.59% for Q1 2023.