Exhibit 99.1

 

Press Release

For Immediate Release

 

CVB Financial Corp. Reports Strong Earnings for the Third Quarter of 2013

 

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Net earnings were $24.2 million for the third quarter of 2013, or $0.23 per diluted share.

 

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Total loans and leases grew by $101.0 million for the quarter, or 3.02%.

 

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Improved credit quality resulted in a $3.8 million reduction of the allowance for loan losses. The allowance for loan losses was $80.7 million at quarter-end, or 2.46% of total non-covered loans.

 

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Noninterest bearing deposits totaled $2.54 billion, or 51.85% of total deposits.

Ontario, CA, October 23, 2013-CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (“the Company”), announced earnings for the third quarter of 2013.

CVB Financial Corp. reported net income of $24.2 million for the third quarter of 2013, compared with net income of $9.3 million for the third quarter of 2012. Diluted earnings per share were $0.23 for the third quarter of 2013, compared to $0.09 for the third quarter of 2012. Net income for the third quarter of 2013 included a $3.8 million loan loss provision recapture and $3.7 million in insurance reimbursements for previous years’ legal costs. By comparison, the third quarter of 2012 was negatively impacted by a pre-tax debt termination expense of $20.4 million. This was related to the redemption of $250.0 million of fixed rate borrowings from the Federal Home Loan Bank (“FHLB”).

As a result of improved credit quality and better economic conditions, the allowance for loan losses was reduced by $3.8 million for the third quarter of 2013. This compares with a $6.2 million reduction for the second quarter of 2013 and zero provision for loan losses for the previous eight fiscal quarters.

 

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Chris Myers, President and CEO commented, “We achieved strong earnings for the third quarter and were particularly pleased with loan growth of roughly $100 million or 3%, quarter-over-quarter. Our new loan initiatives gained traction and our loan runoff moderated. Credit quality continued to show improvement allowing us to release an additional $3.8 million in loan loss reserves. In looking forward, we remain focused on organic expansion through the hiring and integration of banking teams. We will also seek to accelerate our growth through the acquisition of community banks in and adjacent to our existing geographic markets.”

Net income for the third quarter of 2013 produced a return on beginning equity of 12.79%, a return on average equity of 12.58%, and a return on average assets of 1.49%. The efficiency ratio for the third quarter of 2013 was 43.63%, compared to 46.85% for the second quarter of 2013.

Net income was $70.3 million for the nine months ended September 30, 2013. This represented an increase of $15.2 million, or 27.52%, when compared with net income of $55.1 million for the same period in 2012. The nine months ended September 30, 2012 included $20.4 million in pre-tax debt termination expense associated with the redemption of $250.0 million of fixed rate borrowings from the FHLB. Diluted earnings per share were $0.67 for the nine months ended September 30, 2013, compared to $0.53 for the same period in 2012. Net income for the nine months ended September 30, 2013 produced a return on beginning equity of 12.32%, a return on average equity of 12.16% and a return on average assets of 1.48%.

Total interest income and fees on loans for the third quarter of 2013 were $58.1 million, which included $2.9 million of discount accretion from accelerated principal reductions, payoffs and improved credit loss experienced on covered loans acquired from San Joaquin Bank (“SJB”). This represented a $1.5 million increase when compared to total interest income and fees on loans of $56.6 million for the second quarter of 2013, which included $3.5 million of discount accretion from accelerated principal reductions, payoffs and improved credit loss experienced on acquired loans. Total interest income and fees on loans of $58.1 million decreased $7.8 million, or 11.80%, from the year ago third quarter, which included $7.0 million of discount accretion from accelerated principal reductions, payoffs and improved credit loss experienced on acquired loans.

Noninterest income was $5.0 million for the third quarter of 2013, compared with $7.7 million for the second quarter of 2013 and $2.6 million for the third quarter of 2012. The quarter-over-quarter decrease was primarily due to a $2.5 million net pre-tax gain on the sale of one OREO property in the second quarter of 2013.

Noninterest expense for the third quarter of 2013 was $25.7 million, a decrease of $2.5 million over the second quarter of 2013, and a decrease of $24.3 over the third quarter of 2012. The quarter-over-quarter decrease was primarily due to $3.7 million in insurance reimbursements for previous years’ legal costs. This was somewhat offset by a $1.3 million increase in salaries and employee benefits and a $500,000 provision for unfunded loan commitments.

 

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Net Interest Income and Net Interest Margin

Net interest income, before the provision for loan losses, totaled $54.0 million for the third quarter of 2013, compared to $52.6 million for the second quarter of 2013. Excluding the impact of the yield adjustment on covered loans, our net interest margin (tax equivalent) was 3.48% for the third quarter of 2013, compared to 3.46% for the second quarter of 2013, and 3.60% for the third quarter of 2012. Total average earning asset yields (excluding discount) were 3.75% for the third quarter of 2013, compared to 3.73% for the second quarter of 2013 and 3.99% for the third quarter of 2012. Total cost of funds of 0.29% for the third quarter of 2013 was unchanged from the second quarter of 2013, and decreased by14 basis points from 0.43% for the third quarter of 2012.

Income Taxes

Our effective tax rate for the three and nine months ended September 30, 2013 was 34.43% and 33.50%, respectively. Our estimated annual effective tax rate varies depending upon tax-advantaged income as well as available tax credits. We benefited from $1.4 million of enterprise zone tax credits reflected during the first quarter of 2013.

Assets

The Company reported total assets of $6.56 billion at September 30, 2013. This represented an increase of $193.9 million, or 3.05%, from total assets of $6.36 billion at December 31, 2012. Earning assets of $6.18 billion at September 30, 2013 increased $140.2 million, or 2.32%, when compared with $6.04 billion at December 31, 2012. The increase in earning assets during the first nine months of 2013 was primarily due to a $167.7 million increase in investment securities, offset principally by a $17.2 million decrease in FHLB stock and a $7.4 million decrease in interest-earning balances due from the Federal Reserve.

Investment Securities

Investment securities of $2.62 billion at September 30, 2013 increased $167.7 million from $2.45 billion at December 31, 2012. As of September 30, 2013, we had a net pre-tax unrealized gain of $7.3 million on our overall securities portfolio.

MBS totaled $1.68 billion at September 30, 2013, compared to $1.46 billion at 2012 year-end. Virtually all of our mortgage-backed securities 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 $1.8 million as of September 30, 2013, has had $1.8 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 first nine months of 2013.

Our municipal securities, totaling $600.7 million, are located within 26 states, and approximately $25.3 million, or 4.2%, are located within the state of California. Our largest concentrations of holdings are in New Jersey at 13.9%, Michigan at 12.5% and Illinois at 10.5%. All municipal bond securities are performing.

In the third quarter of 2013, we pre-purchased MBS to take advantage of an increase in yields and utilized short-term borrowings to facilitate a portion of these purchases. During

 

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the third quarter of 2013, we purchased $307.5 million of MBS with an average yield of 2.44%. Our new purchases of MBS have an average duration of approximately four years. We also purchased $7.2 million in municipal securities with an average tax-equivalent yield of 4.01%.

Loans

Total loans and leases, net of deferred fees and discount, of $3.44 billion at September 30, 2013 increased by $101.0 million, or 3.02%, from $3.34 billion at June 30, 2013. Quarter-over-quarter, non-covered loans increased by $111.5 million, and covered loans decreased by $10.5 million. The $111.5 million increase in non-covered loans was principally due to increases of $117.7 million in commercial real estate loans, $12.0 million in single family residential mortgages, and $4.4 million in dairy & livestock loans. This growth was partially offset by decreases of $14.6 million in commercial and industrial loans, $6.1 million in municipal lease finance receivables, and $1.9 million in agribusiness loans.

Deposits & Customer Repurchase Agreements

Deposits of $4.90 billion and customer repurchase agreements of $565.9 million totaled $5.46 billion at September 30, 2013. This represents an increase of $214.1 million, or 4.08%, when compared with total deposits and customer repurchase agreements of $5.25 billion at December 31, 2012.

Noninterest-bearing deposits were $2.54 billion at September 30, 2013, an increase of $117.5 million, or 4.85%, compared to $2.42 billion at December 31, 2012. At September 30, 2013, noninterest-bearing deposits were 51.85% of total deposits, compared to 50.71% at December 31, 2012.

Our average cost of total deposits was 0.10% for the three months ended September 30, 2013, compared to 0.12% for the same period last year. Our cost of total deposits including customer repurchase agreements was 0.12% for the three months ended September 30, 2013, compared to 0.13% for the same period last year.

FHLB Advances, Other Borrowings and Debentures

We had $199.1 million in FHLB advances at September 30, 2013, compared to $198.9 million at December 31, 2012.

At September 30, 2013, we had $42.5 million in short-term borrowings. These borrowings were used to facilitate a portion of our investment purchases made in the third quarter of 2013. We had $26.0 million in short-term borrowings at December 31, 2012.

At September 30, 2013, we had $25.8 million of junior subordinated debentures, compared to $67.0 million at December 31, 2012. On January 7, 2013, we redeemed $20.6 million, or 50%, of the outstanding capital and common securities issued by the Company’s trust subsidiary, CVB Statutory Trust II. On April 7, 2013, we redeemed the remaining $20.6 million of the outstanding capital and common securities issued by CVB Statutory Trust II. We took these actions to reduce funding costs.

 

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Asset Quality

We have separated the discussion of asset quality into two sections: non-covered loans and covered loans. The non-covered loans represent the legacy Citizens Business Bank loans and exclude all loans acquired in the SJB acquisition. The SJB loans are “covered” loans as defined in the loss sharing agreement with the FDIC. These loans were marked to fair value at the acquisition date.

Citizens Business Bank Asset Quality (Non-covered loans)

The allowance for loan losses decreased to $80.7 million at September 30, 2013, compared to $85.5 million at June 30, 2013 and $92.4 million at December 31, 2012. The decrease for the third quarter was due to a $3.8 million reduction in the allowance for loan losses and $994,000 in net charge-offs. The allowance for loan losses was 2.46%, 2.70%, 2.89%, 2.84%, and 2.85% of total non-covered loans and leases outstanding at September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012, respectively.

Nonperforming loans, defined as nonaccrual loans and nonperforming troubled debt restructured loans (“TDR”), were $49.5 million at September 30, 2013, or 1.51% of total loans. This compares to nonperforming loans of $53.4 million, or 1.68% of total loans, at June 30, 2013 and $58.0 million, or 1.78% of total loans, at December 31, 2012. The $49.5 million in nonperforming loans at September 30, 2013 are summarized as follows: $17.8 million in commercial real estate, $10.4 million in residential mortgages, $10.4 million in commercial construction, $7.0 million in dairy & livestock, $3.7 million in commercial and industrial, and $159,000 in other loans. The $3.9 million decrease in nonperforming loans quarter-over-quarter was principally due to a $1.3 million decrease in nonperforming commercial and industrial loans, a $1.0 million decrease in nonperforming residential mortgages, a $781,000 decrease in nonperforming commercial real estate loans, and a $682,000 decrease in nonperforming dairy & livestock loans.

At September 30, 2013, we had $6.5 million in OREO, a decrease of $8.3 million from $14.8 million at December 31, 2012. As of September 30, 2013, we had two OREO properties, compared to seven OREO properties at December 31, 2012. During the first nine months of 2013, we sold five properties with a carrying value of $7.8 million, realizing a net gain on sale of $2.7 million. There were no additions to OREO during the first nine months of 2013.

At September 30, 2013, we had loans delinquent 30 to 89 days of $1.7 million. This compares to $1.6 million at June 30, 2013 and $887,000 at December 31, 2012. As a percentage of total loans, delinquencies, excluding nonaccruals, were 0.05% at September 30, 2013, 0.05% at June 30, 2013 and 0.03% at December 31, 2012. All loans delinquent 90 days or more were categorized as nonperforming.

At September 30, 2013, we had $59.2 million in performing TDR loans, compared to $61.6 million in performing TDR loans at June 30, 2013 and $50.4 million in performing TDR loans at December 31, 2012. In terms of number of loans, we had 41 performing TDR loans at September 30, 2013, compared to 40 performing TDR loans at June 30, 2013 and 34 performing TDR loans at December 31, 2012.

 

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Nonperforming assets, defined as non-covered nonaccrual loans and other real estate owned, totaled $56.0 million at September 30, 2013, $59.9 million at June 30, 2013, and $72.8 million at December 31, 2012.

Classified loans are loans that are graded “substandard” or worse. At September 30, 2013, classified loans totaled $264.1 million, compared to $304.4 million at June 30, 2013 and $314.0 million at December 31, 2012. The $40.3 million quarter-over-quarter reduction in classified loans was primarily due to decreases of $24.8 million in our classified commercial real estate portfolio, $10.0 million in our classified commercial and industrial portfolio, and $5.2 million in our classified dairy & livestock portfolio.

The overall improvement in credit quality and stronger economic factors resulted in a $3.8 million recapture of loan loss provision reflected in the operating results for the third quarter of 2013. We recaptured $6.2 million for the second quarter of 2013 and had zero provision for loan losses for the previous eight consecutive quarters.

As a result of a $45.9 million quarter-over-quarter increase in unfunded loan commitments, we increased our reserve for unfunded loan commitments by $500,000 for the third quarter of 2013.

San Joaquin Bank Asset Quality (Covered loans)

At September 30, 2013, we had $177.9 million of gross loans from SJB with a carrying value of $163.3 million, compared to $191.4 million of gross loans at June 30, 2013 with a carrying value of $173.8 million at June 30, 2013. We had $220.5 million of gross loans from SJB with a carrying value of $195.2 million at December 31, 2012. Of the gross loans, we had $20.8 million in nonperforming loans as of September 30, 2013, or 11.69%, compared to $27.9 million in nonperforming loans as of December 31, 2012, or 12.67%. We had two OREO properties totaling $906,000, compared to three properties totaling $961,000 at June 30, 2013 and three properties totaling $1.1 million at December 31, 2012. During the first nine months of 2013, there were three additions to OREO totaling $1.5 million. For the nine months ended September 30, 2013, we sold four OREO properties with a carrying value of $1.6 million, resulting in a net gain of $372,000; 80% of these net gains are shared with the FDIC.

CitizensTrust

CitizensTrust has approximately $2.23 billion in assets under management and administration, including $1.67 billion in assets under management, as of September 30, 2013. Revenues were $2.0 million for the third quarter of 2013 and $6.1 million for the nine months ended September 30, 2013, compared to $2.0 million and $6.3 million for the same periods in 2012. 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 $6.6 billion. Citizens Business Bank serves 41 cities with 39 Business Financial Centers, six Commercial Banking Centers and three trust office locations serving the Inland Empire, Los Angeles County, Orange County, San Diego County, and the Central Valley areas of California.

 

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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 Our 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, October 24, 2013 to discuss the Company’s third quarter 2013 financial results.

To listen to the conference call, please dial (888) 317-6016. A taped replay will be made available approximately one hour after the conclusion of the call and will remain available through November 4, 2013 at 6:00 a.m. Pacific time/9:00 a.m. Eastern time. To access the replay, please dial (877) 344-7529, passcode 10034206.

The conference call will also be simultaneously webcast over the Internet; please visit the Company’s website at www.cbbank.com and click on the Our 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 twelve 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 covered 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.

 

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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 regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic conditions and events and the impact they may have on us and our customers; ability to attract deposits and other sources of liquidity; supply and demand for real property inventory and periodic deterioration in values of California real estate, both residential and commercial; a prolonged slowdown or decline in construction activity; changes in the financial performance and/or condition of our borrowers; changes in the level of non-performing assets and charge-offs; the cost or effect of acquisitions we may make; the effect of changes in laws and regulations (including laws, regulations and judicial decisions concerning financial reform, taxes, banking capital levels, securities, employment, executive compensation, insurance 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 rate 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; 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 perceived overall value of these products and services by users; changes in consumer spending, borrowing and savings 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 and other financial service providers; continued volatility in the credit and equity markets and its effect on the general economy or local business conditions; fluctuations in the price of the Company’s stock; 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 and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries or investigations and the results of regulatory examinations or reviews; 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, 2012, 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.

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CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

 

		September 30, 2013				December 31, 2012				September 30, 2012
Assets
Cash and due from banks		$	127,728			$	87,274			$	99,881
Interest-earning balances due from Federal Reserve			3,714				11,157				148,304
Total cash and cash equivalents			131,442				98,431				248,185
Interest-earning balances due from depository institutions			70,000				70,000				70,000
Investment securities available-for-sale			2,617,307				2,449,387				2,257,507
Investment securities held-to-maturity			1,850				2,050				2,122
Investment in stock of Federal Home Loan Bank (FHLB)			39,420				56,651				62,428
Non-covered loans held-for-sale			—				—				996
Loans and lease finance receivables, excluding covered loans			3,281,352				3,252,313				3,227,405
Allowance for loan losses			(80,713	)			(92,441	)			(92,067	)
Net loans and lease finance receivables			3,200,639				3,159,872				3,135,338
Covered loans and lease finance receivables, net			163,334				195,215				207,307
Premises and equipment, net			33,604				35,080				35,577
Intangibles			2,386				3,389				3,830
Goodwill			55,097				55,097				55,097
Bank owned life insurance			122,538				119,744				118,384
FDIC loss sharing asset			7,034				18,489				22,271
Other assets			112,632				99,959				102,299
TOTAL ASSETS		$	6,557,283			$	6,363,364			$	6,321,341
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits		$	2,538,461			$	2,420,993			$	2,324,401
Investment checking			345,317				323,159				302,071
Savings and money market demand			1,323,391				1,315,668				1,416,035
Time deposits			688,317				714,167				738,609
Total deposits			4,895,486				4,773,987				4,781,116
Customer repurchase agreements			565,883				473,244				448,788
FHLB advances			199,138				198,934				198,866
Other borrowings			42,482				26,000				—
Junior subordinated debentures			25,774				67,012				67,012
Payable for securities purchased			—				—				—
Other liabilities			60,298				61,217				71,352
Total liabilities			5,789,061				5,600,394				5,567,134
Stockholders’ Equity:
Stockholders’ equity			763,960				719,719				705,742
Accumulated other comprehensive income, net of tax			4,262				43,251				48,465
Total stockholders’ equity			768,222				762,970				754,207
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	6,557,283			$	6,363,364			$	6,321,341

 

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CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Assets:
Cash and due from banks		$	105,404			$	100,530			$	103,280			$	113,139
Interest-earning balances due from Federal Reserve			90,150				247,870				83,338				242,960
Total cash and cash equivalents			195,554				348,400				186,618				356,099
Interest-earning balances due from depository institutions			70,000				68,370				70,000				62,810
Investment securities available-for-sale			2,488,265				2,241,473				2,408,690				2,278,257
Investment securities held-to-maturity			1,860				2,113				1,918				2,201
Investment in stock of Federal Home Loan Bank (FHLB)			42,507				64,084				49,004				67,911
Non-covered loans held-for-sale			—				1,145				25				1,626
Covered loans held-for-sale			—				—				—				3,057
Loans and lease finance receivables, excluding covered loans			3,217,079				3,220,469				3,189,906				3,194,408
Allowance for loan losses			(85,541	)			(91,736	)			(89,846	)			(92,658	)
Net loans and lease finance receivables			3,131,538				3,128,733				3,100,060				3,101,750
Covered loans and lease finance receivables, net			166,315				208,727				173,261				229,067
Premises and equipment, net			34,062				36,215				34,650				35,991
Intangibles			2,469				4,038				2,775				4,506
Goodwill			55,097				55,097				55,097				55,097
Bank owned life insurance			122,262				117,935				121,011				117,194
FDIC loss sharing asset			9,797				35,350				13,477				47,867
Other assets			131,747				142,820				140,341				145,586
TOTAL ASSETS		$	6,451,473			$	6,454,500			$	6,356,927			$	6,509,019
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits		$	2,483,421			$	2,257,941			$	2,398,378			$	2,167,497
Interest-bearing			2,352,291				2,455,365				2,337,788				2,508,264
Total deposits			4,835,712				4,713,306				4,736,166				4,675,761
Customer repurchase agreements			534,395				468,259				526,370				497,607
FHLB advances			199,112				356,449				199,045				417,751
Other borrowings			13,751				—				14,278				11
Junior subordinated debentures			25,774				83,821				33,071				98,968
Payable for securities purchased			28,199				11,626				16,083				14,778
Other liabilities			50,225				63,470				58,975				59,627
Total liabilities			5,687,168				5,696,931				5,583,988				5,764,503
Stockholders’ equity:
Stockholders’ equity			760,285				713,932				745,947				702,326
Accumulated other comprehensive income, net of tax			4,020				43,637				26,992				42,190
Total stockholders’ equity			764,305				757,569				772,939				744,516
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	6,451,473			$	6,454,500			$	6,356,927			$	6,509,019

 

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CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Interest income:
Loans and leases, including fees		$	41,706			$	45,559			$	124,879			$	139,289
Accretion on acquired loans			2,947				7,045				10,796				19,258
Total loans and leases, including fees			44,653				52,604				135,675				158,547
Investment securities:
Taxable			7,102				7,246				19,280				25,202
Tax-advantaged			5,517				5,640				16,569				17,221
Total investment income			12,619				12,886				35,849				42,423
Dividends from FHLB stock			622				79				1,432				263
Federal funds sold and interest-earning CDs			180				276				524				856
Total interest income			58,074				65,845				173,480				202,089
Interest expense:
Deposits			1,228				1,398				3,627				4,605
Borrowings and junior subordinated debentures			2,873				4,703				8,696				16,178
Total interest expense			4,101				6,101				12,323				20,783
Net interest income before provision for loan losses			53,973				59,744				161,157				181,306
Provision for loan losses			(3,750	)			—				(9,950	)			—
Net interest income after provision for loan losses			57,723				59,744				171,107				181,306
Noninterest income:
Service charges on deposit accounts			4,011				4,040				11,982				12,232
Trust and investment services			2,021				2,037				6,098				6,264
Gain on sale of investment securities, net			—				—				2,094				—
Decrease in FDIC loss sharing asset, net			(3,248	)			(7,059	)			(10,715	)			(19,339	)
(Loss)/gain on OREO			(3	)			524				3,129				1,458
Other			2,176				3,084				6,809				9,559
Total noninterest income			4,957				2,626				19,397				10,174
Noninterest expense:
Salaries and employee benefits			18,389				17,489				52,777				50,856
Occupancy and equipment			3,641				4,010				10,888				11,582
Professional services			1,316				1,570				4,299				5,666
Amortization of intangible assets			127				449				1,002				1,717
Provision for unfunded commitments			500				—				500				—
Debt termination			—				20,379				—				20,379
OREO expense			21				405				384				1,458
Insurance reimbursements			(4,139	)			(48	)			(4,139	)			(451	)
Other			5,859				5,766				19,049				17,974
Total noninterest expense			25,714				50,020				84,760				109,181
Earnings before income taxes			36,966				12,350				105,744				82,299
Income taxes			12,727				3,093				35,424				27,155
Net earnings		$	24,239			$	9,257			$	70,320			$	55,144
Basic earnings per common share		$	0.23			$	0.09			$	0.67			$	0.53
Diluted earnings per common share		$	0.23			$	0.09			$	0.67			$	0.53
Dividends declared per common share		$	0.10			$	0.085			$	0.285			$	0.255

 

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CVB FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Interest income—(tax-effected) (te)		$	60,093			$	67,973			$	179,555			$	208,550
Interest expense			4,101				6,101				12,323				20,783
Net interest income—(te)		$	55,992			$	61,872			$	167,232			$	187,767
Return on average assets, annualized			1.49	%			0.57	%			1.48	%			1.13	%
Return on average equity, annualized			12.58	%			4.86	%			12.16	%			9.89	%
Efficiency ratio [1]			43.63	%			80.20	%			46.94	%			57.02	%
Efficiency ratio excluding debt termination [1] [2]			43.63	%			47.52	%			46.94	%			46.38	%
Noninterest expense to average assets, annualized			1.58	%			3.08	%			1.78	%			2.24	%
Noninterest expense to average assets, excluding debt termination [2]			1.58	%			1.83	%			1.78	%			1.82	%
Yield on average earning assets (te)			3.95	%			4.48	%			4.03	%			4.59	%
Yield on average earning assets (te) excluding discount			3.75	%			3.99	%			3.77	%			4.13	%
Cost of deposits			0.10	%			0.12	%			0.10	%			0.13	%
Cost of deposits and customer repurchase agreements			0.12	%			0.13	%			0.12	%			0.15	%
Cost of funds			0.29	%			0.43	%			0.30	%			0.48	%
Net interest margin (te)			3.68	%			4.08	%			3.75	%			4.14	%
Net interest margin (te) excluding discount			3.48	%			3.60	%			3.49	%			3.69	%
[1]    Noninterest expense divided by net interest income before provision for loan losses plus noninterest income.
[2]    See Non-GAAP table for efficiency ratio and noninterest expense reconciliation.
Weighted average shares outstanding
Basic			104,765,645				104,456,267				104,657,144				104,379,558
Diluted			105,217,269				104,775,607				104,987,120				104,638,706
Dividends declared		$	10,511			$	8,909			$	29,925			$	26,725
Dividend payout ratio [3]			43.36	%			96.24	%			42.56	%			48.46	%
[3]    Dividends declared on common stock divided by net earnings.
Number of shares outstanding-EOP			105,209,875				104,813,389
Book value per share		$	7.30			$	7.20
Tangible book value per share		$	6.76			$	6.63
		September 30,
(Non-covered loans)		2013				2012
Nonperforming assets:
Nonaccrual loans		$	21,439			$	32,889
Loans past due 90 days or more and still accruing interest			—				—
Troubled debt restructured loans (nonperforming)			28,045				33,099
Other real estate owned (OREO), net			6,524				10,473
Total nonperforming assets		$	56,008			$	76,461
Troubled debt restructured performing loans		$	59,195			$	51,613
Percentage of nonperforming assets to total loans outstanding and OREO			1.70	%			2.36	%
Percentage of nonperforming assets to total assets			0.85	%			1.21	%
Allowance for loan losses to nonperforming assets			144.11	%			120.41	%
Net charge-offs to average loans			0.06	%			0.06	%
Allowance for loan losses:
Beginning balance		$	92,441			$	93,964
Total loans charged-off			(2,699	)			(4,844	)
Total recoveries on loans previously charged-off			921				2,947
Net loans charged-off			(1,778	)			(1,897	)
(Recapture of) provision for loan losses			(9,950	)			—
Allowance for loan losses at end of period		$	80,713			$	92,067

 

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CVB FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Quarterly Common Stock Price

 

		2013								2012								2011
Quarter End		High				Low				High				Low				High				Low
March 31,		$	12.30			$	10.42			$	11.97			$	9.99			$	9.32			$	7.83
June 30,		$	11.99			$	10.29			$	11.92			$	10.16			$	9.94			$	8.18
September 30,		$	13.77			$	11.65			$	12.95			$	11.35			$	10.00			$	7.41
December 31,										$	12.17			$	9.43			$	10.27			$	7.28

Quarterly Consolidated Statements of Earnings

 

		3Q 2013				2Q 2013				1Q 2013				4Q 2012				3Q 2012
Interest income
Loans, including fees		$	44,653			$	44,975			$	46,047			$	47,206			$	52,604
Investment securities and other			13,421				11,618				12,766				12,927				13,241
Total interest income			58,074				56,593				58,813				60,133				65,845
Interest expense
Deposits			1,228				1,158				1,241				1,306				1,398
Other borrowings			2,873				2,840				2,983				3,183				4,703
Total interest expense			4,101				3,998				4,224				4,489				6,101
Net interest income before provision for loan losses			53,973				52,595				54,589				55,644				59,744
Provision for loan losses			(3,750	)			(6,200	)			—				—				—
Net interest income after provision for loan losses			57,723				58,795				54,589				55,644				59,744
Noninterest income			4,957				7,695				6,745				5,729				2,626
Noninterest expense			25,714				28,248				30,798				28,979				29,641
Debt termination			—				—				—				—				20,379
Earnings before income taxes			36,966				38,242				30,536				32,394				12,350
Income taxes			12,727				13,776				8,921				10,258				3,093
Net earnings		$	24,239			$	24,466			$	21,615			$	22,136			$	9,257
Basic earning per common share		$	0.23			$	0.23			$	0.21			$	0.21			$	0.09
Diluted earnings per common share		$	0.23			$	0.23			$	0.21			$	0.21			$	0.09
Dividends declared per common share		$	0.100			$	0.100			$	0.085			$	0.085			$	0.085
Dividends declared		$	10,511			$	10,502			$	8,912			$	8,917			$	8,909

 

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CVB FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands)

Loan Portfolio by Type

 

		9/30/2013				6/30/2013				3/31/2013				12/31/2012				9/30/2012
Commercial and industrial		$	531,391			$	549,776			$	558,255			$	573,571			$	554,000
Real estate:
Commercial real estate			2,273,704				2,163,034				2,156,267				2,169,535				2,206,339
Construction			48,309				47,372				56,764				61,300				72,485
SFR mortgage			192,457				180,438				163,343				160,703				159,730
Dairy & livestock and agribusiness			265,297				264,663				289,742				342,311				300,630
Municipal lease finance receivables			99,188				105,246				109,727				105,767				109,005
Consumer and other loans			57,988				58,811				62,505				66,610				67,450
Gross loans			3,468,334				3,369,340				3,396,603				3,479,797				3,469,639
Less:
Purchase accounting discount			(14,529	)			(17,526	)			(20,908	)			(25,344	)			(28,590	)
Deferred loan fees, net			(9,119	)			(8,156	)			(7,487	)			(6,925	)			(6,337	)
Allowance for loan losses			(80,713	)			(85,457	)			(92,218	)			(92,441	)			(92,067	)
Net loans		$	3,363,973			$	3,258,201			$	3,275,990			$	3,355,087			$	3,342,645
Non-covered loans, net		$	3,200,639			$	3,084,358			$	3,097,296			$	3,159,872			$	3,135,338
Covered loans, net			163,334				173,843				178,694				195,215				207,307
Net loans		$	3,363,973			$	3,258,201			$	3,275,990			$	3,355,087			$	3,342,645

 

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CVB FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands)

Nonperforming Assets and Delinquency Trends

(Non-Covered Loans)

 

		September 30,				June 30,				March 31,				December 31,				September 30,
		2013				2013				2013				2012				2012
Nonperforming loans:
Commercial and industrial		$	3,734			$	5,012			$	3,387			$	3,136			$	3,896
Real estate:
Commercial real estate			17,829				18,610				19,964				21,039				21,354
Construction			10,368				10,494				10,620				10,663				17,708
SFR mortgage			10,421				11,423				11,561				13,102				12,321
Dairy & livestock and agribusiness			6,973				7,655				9,371				9,842				10,345
Consumer and other loans			159				157				226				215				364
Total		$	49,484			$	53,351			$	55,129			$	57,997			$	65,988
% of Total gross loans			1.51	%			1.68	%			1.73	%			1.78	%			2.04	%
Past due 30-89 days:
Commercial and industrial		$	417			$	373			$	2,026			$	690			$	286
Real estate:
Commercial real estate			1,015				1,251				1,820				—				298
Construction			—				—				—				—				—
SFR mortgage			—				—				824				107				650
Dairy & livestock and agribusiness			—				—				—				—				170
Consumer and other loans			255				8				63				90				285
Total		$	1,687			$	1,632			$	4,733			$	887			$	1,689
% of Total gross loans			0.05	%			0.05	%			0.15	%			0.03	%			0.05	%
OREO
Commercial and industrial		$	—			$	—			$	—			$	—			$	203
Real estate:
Commercial real estate			—				—				828				2,319				3,153
Construction			6,524				6,524				12,513				12,513				7,117
SFR mortgage			—				—				—				—				—
Consumer and other loans			—				—				—				—				—
Total		$	6,524			$	6,524			$	13,341			$	14,832			$	10,473
Total nonperforming, past due, and OREO		$	57,695			$	61,507			$	73,203			$	73,716			$	78,150
% of Total gross loans			1.76	%			1.94	%			2.30	%			2.27	%			2.42	%

 

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Net Interest Income and Net Interest Margin Reconciliations (Non-GAAP)

We use certain non-GAAP financial measures to provide supplemental information regarding our performance. Net interest income for the three months ended September 30, 2013, and 2012 include a yield adjustment of $2.9 million, and $7.0 million, respectively. Net interest income for the nine months ended September 30, 2013, and 2012 include a yield adjustment of $10.8 million, and $19.3 million, respectively. These yield adjustments relate to discount accretion on covered loans, and are reflected in the Company’s net interest margin. We believe that presenting net interest income and the net interest margin excluding these yield adjustments provides additional clarity to the users of financial statements regarding core net interest income and net interest margin.

 

		Three Months Ended September 30,
(Dollars in thousands)		2013												2012
		Average Balance				Interest				Yield				Average Balance				Interest				Yield
Total interest-earning assets (te)		$	6,076,176			$	60,093				3.95	%		$	6,054,251			$	67,973				4.48	%
Discount on acquired loans			16,798				(2,947	)							35,248				(7,045	)
Total interest-earning assets, excluding SJB loan discount and yield adjustment		$	6,092,974			$	57,146				3.75	%		$	6,089,499			$	60,928				3.99	%
Net interest income and net interest margin (te)						$	55,992				3.68	%						$	61,872				4.08	%
Yield adjustment to interest income from discount accretion							(2,947	)											(7,045	)
Net interest income and net interest margin (te), excluding yield adjustment						$	53,045				3.48	%						$	54,827				3.60	%
		Nine Months Ended September 30,
(Dollars in thousands)		2013												2012
		Average Balance				Interest				Yield				Average Balance				Interest				Yield
Total interest-earning assets (te)		$	5,976,142			$	179,555				4.03	%		$	6,082,297			$	208,550				4.59	%
Discount on acquired loans			20,269				(10,796	)							42,425				(19,258	)
Total interest-earning assets, excluding SJB loan discount and yield adjustment		$	5,996,411			$	168,759				3.77	%		$	6,124,722			$	189,292				4.13	%
Net interest income and net interest margin (te)						$	167,232				3.75	%						$	187,767				4.14	%
Yield adjustment to interest income from discount accretion							(10,796	)											(19,258	)
Net interest income and net interest margin (te), excluding yield adjustment						$	156,436				3.49	%						$	168,509				3.69	%

 

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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 September 30, 2013.

 

		September 30, 2013
		(Dollars in thousands)
Stockholders’ equity		$	768,222
Less: Goodwill			(55,097	)
Less: Intangible assets			(2,386	)
Tangible book value		$	710,739
Common shares issued and outstanding			105,209,875
Tangible book value per share		$	6.76

 

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Noninterest Expense and Efficiency Ratio Reconciliation (Non-GAAP)

We use certain non-GAAP financial measures to provide supplemental information regarding our performance. Noninterest expense for the three and nine months ended September 30, 2012, includes debt termination expense of $20.4 million. We believe that presenting the efficiency ratio, and the ratio of noninterest expense to average assets, excluding the impact of debt termination expense, provides additional clarity to the users of financial statements regarding core financial performance. The Company did not incur debt termination expense during the three and nine month periods ended September 30, 2013.

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
		(Dollars in thousands)
Net interest income		$	53,973			$	59,744			$	161,157			$	181,306
Noninterest income			4,957				2,626				19,397				10,174
Noninterest expense			25,714				50,020				84,760				109,181
Less: debt termination expense			—				(20,379	)			—				(20,379	)
Adjusted noninterest expense		$	25,714			$	29,641			$	84,760			$	88,802
Efficiency ratio			43.63	%			80.20	%			46.94	%			57.02	%
Adjusted efficiency ratio			43.63	%			47.52	%			46.94	%			46.38	%
Adjusted noninterest expense		$	25,714			$	29,641			$	84,760			$	88,802
Average assets			6,451,473				6,454,500				6,356,927				6,509,019
Adjusted noninterest expense to average assets [1]			1.58	%			1.83	%			1.78	%			1.82	%

 

[1]	Annualized

 

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