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8-K - FORM 8-K - CVB FINANCIAL CORPd457243d8k.htm

Exhibit 99.1

 

LOGO

CVB Financial Corp.

701 North Haven Ave., Suite 350

Ontario, CA 91764

(909) 980-4030

Press Release

For Immediate Release

 

Contact:

    

Christopher D. Myers

President and CEO

(909) 980-4030

 

 

 

CVB Financial Corp. Reports Record Earnings for the Third Quarter 2017

 

    Record quarterly earnings of $29.7 million for the third quarter of 2017, or $0.27 per share.
    Record earnings for the first nine months of $86.6 million, or $0.79 per share.
    Year-to-date return on average assets of 1.40%.

Ontario, CA, October 18, 2017-CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (“the Company”), announced earnings for the quarter ended September 30, 2017.

CVB Financial Corp. reported net income of $29.7 million for the quarter ended September 30, 2017, compared with $28.4 million for the second quarter of 2017 and $25.4 million for the third quarter of 2016. This represents an increase of $1.3 million over the prior quarter and an increase of $4.2 million from the third quarter of 2016. Diluted earnings per share were $0.27 for the third quarter, compared to $0.26 for the prior quarter and $0.23 for the same period last year.

Chris Myers, President and CEO of Citizens Business Bank, commented, “The third quarter was a solid and fundamental quarter for CVBF. We consolidated three center locations and continued to focus on the quality of our deposit funding and earning assets. Our profit ratios improved as did asset quality. “

Net income of $29.7 million for the third quarter of 2017 produced an annualized return on beginning equity of 11.10%, an annualized return on average equity of 10.93%, and an annualized return on average assets of 1.41%. Net income for the third quarter of 2016 produced an annualized return on average equity of 10.05% and an annualized return on average assets of 1.23%. The efficiency ratio for the third quarter of 2017 was 42.44%, compared to 45.62% for the third quarter of 2016.

Net income totaled $86.6 million for the nine months ended September 30, 2017. This represented a $12.2 million, or 16.42%, increase from the prior year. Earnings for the first nine months of 2017 included $7.0 million in loan loss provision recapture, compared with $2.0 million in loan loss provision recapture for the first nine months of 2016. Diluted earnings per share were $0.79 for the nine months ended September 30, 2017, compared to $0.69 for the same period of 2016. Net income for the nine months ended September 30, 2017 produced an annualized return on beginning equity of 11.68%, an annualized return on average equity of

 

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11.01% and an annualized return on average assets of 1.40%. The efficiency ratio for the nine months ended September 30, 2017 was 44.56%, compared to 46.54% for the first nine months of 2016.

Net interest income before recapture of loan loss provision was $71.7 million for the third quarter, which was a $1.3 million, or 1.78%, increase over the second quarter of 2017, and an $8.6 million, or 13.58%, increase over the third quarter of 2016. Total interest income and fees on loans for the third quarter of 2017 of $56.0 million increased $2.4 million, or 4.45%, from the second quarter of 2017 and $8.2 million, or 17.26%, from the third quarter of 2016. Total investment income decreased $906,000, or 4.94%, from the second quarter of 2017 and grew by $1.2 million, or 7.48%, from the third quarter of 2016. Interest expense was consistent with the second quarter of 2017 and grew by $121,000 in comparison with the third quarter of 2016.

During the third quarter of 2017, $1.5 million of loan loss provision was recaptured, compared to $1.0 million recaptured for the prior quarter and $2.0 million recaptured for the same period last year.

Noninterest income was $10.0 million for the third quarter of 2017, compared with $10.8 million for the second quarter of 2017 and $9.2 million for the third quarter of 2016. During the third quarter of 2017 we sold our former operations/technology center, which was classified as an asset held-for-sale at December 31, 2016. We recognized a gain on sale of $542,000. The second quarter of 2017 included over $1.6 million in income related to a BOLI death benefit, loan recoveries related to loans charged off prior to acquisition by a bank we acquired in 2014, and a gain on sale of an investment security. The third quarter of 2016 also included a $548,000 gain on sale of securities. Excluding these items, noninterest income for the third quarter of 2017 grew by $340,000, or 3.71%, quarter-over-quarter and increased $861,000, or 9.97%, compared to the third quarter of 2016.

For the first nine months of 2017, noninterest income was $29.5 million, compared to $27.1 million for the same period of 2016. Excluding the previously noted items and a $1.1 million gain on sale of loans in the first quarter of 2016, noninterest income grew by $1.9 million, or 7.39%.

Noninterest expense for the third quarter of 2017 was $34.7 million, compared to $36.9 million for the second quarter of 2017 and $33.0 million for the third quarter of 2016. The $2.2 million quarter over quarter decrease was primarily the result of a $1.0 million decline in acquisition related expenses and a $752,000 decrease in professional service expense which included a $405,000 recovery of legal expense. The $1.7 million increase over the third quarter of 2016 was primarily due to a $1.4 million increase in salaries and employee benefits and a $298,000 increase in occupancy and equipment costs, partially offset by a $313,000 decrease in professional service expense. The year-over-year decrease of $313,000 in professional services was impacted by a $405,000 recovery of legal expense on a nonperforming loan in the third quarter of 2017. As a percentage of average assets, noninterest expense was 1.65%, compared to 1.76% for the second quarter of 2017 and 1.59% for the third quarter of 2016.

Noninterest expense of $105.7 million for the first nine months of 2017 was $3.9 million higher than the prior year period. The year-over-year increase included expenses related to the acquisition of Valley Business Bank (“VBB”) and the build-out and relocation to our new operations and technology building. Acquisition related expenses were $2.2 million, up $619,000 from the prior year. The $2.1 million, or 3.35%, increase in compensation and benefit expense includes additional staff from the acquisition of VBB. Occupancy expense and software licenses and maintenance increased $772,000 and $621,000, respectively. Increases in professional services included $326,000 in higher legal expenses. As a percentage of average assets, noninterest expense was 1.70% for both the nine months ended September 30, 2017 and September 30, 2016.

 

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Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $71.7 million for the third quarter of 2017, compared to $70.5 million for the second quarter of 2017 and $63.2 million for the third quarter of 2016. Our net interest margin (tax equivalent) was 3.70% for the third quarter of 2017, compared to 3.63% for the second quarter of 2017 and 3.30% for the third quarter of 2016. Total average earning asset yields (tax equivalent) were 3.81% for the third quarter of 2017, compared to 3.74% for the second quarter of 2017 and 3.40% for the third quarter of 2016. Total cost of funds of 0.12% for the third quarter of 2017 remained unchanged from the second quarter of 2017, and compares to 0.11% for the third quarter of 2016. The increase in the net interest margin over the second quarter of 2017 was the result of an increase in earning asset yield that resulted from a combination of a nine basis point increase in loan yields, and the change in mix of earning assets represented by an increase in loans as a percentage of earning assets growing from 58.7% in the second quarter to 60.3% in the latest quarter. The tax equivalent yield on investments decreased six basis points quarter-over-quarter. Likewise, the increase in the net interest margin over the third quarter of 2016 included an increase in loans as a percentage of earning assets growing from 54.4% to 60.3%. The yield on loans increased by 26 basis points and the tax equivalent yield on investments grew by four basis points over the same period in 2016. Loan yields were positively impacted in the third quarter of 2017, as a troubled debt restructured (“TDR”) loan that was previously on nonaccrual paid in full, resulting in the recognition of $1.0 million of interest. Quarter-over-quarter, average loans grew by $67.4 million and year-over-year they grew by $462.7 million. Total investment securities were lower on average by $89.5 million compared to the second quarter of 2017, but grew by $58.0 million on average over the prior year.

Income Taxes

Our effective tax rate for the three and nine months ended September 30, 2017 was 38.89% and 37.50%, respectively, compared with 37.50% for the nine months ended September 30, 2016. The effective tax rate for 2017 was impacted by the tax effects related to the adoption of Accounting Standards Update (“ASU”) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which resulted in the recognition of excess tax benefits of approximately $1.5 million in our provision for income taxes, rather than as an adjustment of paid-in capital. Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged income as well as available tax credits.

Assets

The Company reported total assets of $8.30 billion at September 30, 2017. This represented an increase of $230.3 million, or 2.85%, from total assets of $8.07 billion at December 31, 2016. Interest-earning assets of $7.82 billion at September 30, 2017 increased $170.3 million, or 2.23%, when compared with $7.64 billion at December 31, 2016. The increase in interest-earning assets was primarily due to a $351.4 million increase in total loans. This was partially offset by a $158.1 million decrease in investment securities and a $27.3 million decrease in interest-earning balances due from depository institutions.

Total assets of $8.30 billion at September 30, 2017 increased $259.0 million, or 3.22%, from total assets of $8.04 billion at September 30, 2016. Interest-earning assets totaled $7.82 billion at September 30, 2017, an increase of $173.0 million, or 2.26%, when compared with earning assets of $7.64 billion at September 30, 2016.

 

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Investment Securities

Total investment securities were $3.02 billion at September 30, 2017, a decrease of $158.1 million, or 4.97%, from $3.18 billion at December 31, 2016 and a decrease of $82.5 million, or 2.65%, from $3.11 billion at September 30, 2016.

At September 30, 2017, investment securities held-to-maturity (“HTM”) totaled $848.4 million, a $63.3 million, or 6.94%, decrease from December 31, 2016 and a $30.6 million, or 3.48%, decrease from September 30, 2016.

At September 30, 2017, investment securities available-for-sale (“AFS”) totaled $2.18 billion, inclusive of a pre-tax net unrealized gain of $20.3 million. AFS securities declined by $94.8 million, or 4.18%, from December 31, 2016, and declined by $51.9 million, or 2.33%, from September 30, 2016.

Combined, the AFS and HTM investments in mortgage backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) totaled $2.52 billion at September 30, 2017, compared to $2.62 billion at December 31, 2016 and $2.52 billion at September 30, 2016. Virtually all of our MBS and CMOs are issued or guaranteed by government or government sponsored enterprises, which have the implied guarantee of the U.S. Government.

Our combined AFS and HTM municipal securities totaled $338.5 million as of September 30, 2017. These securities are located in 29 states. Our largest concentrations of holdings are located in Minnesota at 21.07%, Texas at 9.65%, Massachusetts at 9.55%, and New York at 5.81%.

In the third quarter of 2017, we purchased $31.6 million of MBS/CMO securities with an average yield of approximately 2.26%. We also purchased $5.3 million of municipal securities with an average tax-equivalent yield of approximately 3.60%.

Loans

Total loans and leases, net of deferred fees and discounts, of $4.75 billion at September 30, 2017 increased by $58.7 million, or 1.25%, from June 30, 2017. The increase in total loans was principally due to growth of $54.2 million in commercial real estate loans and $25.2 million in dairy & livestock and agribusiness loans. The overall increase in loans and leases were partially offset by decreases of $9.6 million in commercial and industrial loans, $5.3 million in SFR mortgage loans, and $5.2 million in Small Business Administration (“SBA”) loans.

Total loans and leases, net of deferred fees and discounts, of $4.75 billion at September 30, 2017 increased by $351.4 million, or 7.99%, from December 31, 2016. The increase in total loans included $309.7 million of loans acquired from VBB in the first quarter of 2017. Excluding the acquired VBB loans, dairy & livestock and agribusiness loans decreased by $83.1 million, primarily due to seasonal pay-downs. Excluding the acquired VBB loans and the decrease in dairy & livestock and agribusiness loans, loans increased by $124.8 million, or 2.84% overall, for the first nine months of 2017.

Total loans and leases, net of deferred fees and discounts, of $4.75 billion at September 30, 2017 increased by $451.3 million, or 10.51%, from September 30, 2016.

 

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Deposits & Customer Repurchase Agreements

Deposits of $6.61 billion and customer repurchase agreements of $455.1 million totaled $7.06 billion at September 30, 2017. This represents a decrease of $180.1 million, or 2.49%, when compared with total deposits and customer repurchase agreements of $7.24 billion at June 30, 2017. Deposits and customer repurchase agreements increased by $150.5 million, or 2.18%, when compared with total deposits and customer repurchase agreements of $6.91 billion at December 31, 2016 and increased by $164.2 million, or 2.38%, when compared with $6.90 billion in total deposits and customer repurchase agreements at September 30, 2016.

Noninterest-bearing deposits were $3.91 billion at September 30, 2017, an increase of $235.3 million, or 6.40%, when compared to December 31, 2016 and an increase of $251.2 million, or 6.87%, compared to $3.66 billion at September 30, 2016. At September 30, 2017, noninterest-bearing deposits were 59.15% of total deposits, compared to 58.22% at December 31, 2016 and 57.86% at September 30, 2016.

The increase in total deposits from the end of 2016 included $172.5 million of noninterest-bearing deposits and $361.8 million of total deposits acquired from VBB during the first quarter of 2017.

Our average cost of total deposits was 0.09% for the quarter ended September 30, 2017, unchanged from both the second quarter of 2017 and the third quarter of 2016. Our cost of total deposits including customer repurchase agreements was 0.10% for the quarters ending September 30, 2017 and 2016, compared to 0.11% for the second quarter of 2017.

FHLB Advance, Other Borrowings and Debentures

At September 30, 2017, we had $63.0 million in short-term borrowings, compared to $53.0 million at December 31, 2016 and zero at September 30, 2016.

At September 30, 2017, we had $25.8 million of junior subordinated debentures, unchanged from December 31, 2016 and September 30, 2016. These debentures bear interest at three-month LIBOR plus 1.38% and mature in 2036.

Asset Quality

The allowance for loan losses totaled $60.6 million at September 30, 2017, compared to $60.2 million at June 30, 2017, $61.5 million at December 31, 2016 and $61.0 million at September 30, 2016. The allowance for loan losses was increased by net recoveries on loans of $1.9 million for the third quarter of 2017 and was reduced by a $1.5 million loan loss provision recapture for the third quarter of 2017. The allowance for loan losses was 1.28%, 1.28%, 1.28%, 1.40%, and 1.42% of total loans and leases outstanding, at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively. The ratio as of the most recent three quarters was impacted by the $309.7 million loans acquired from VBB that are recorded at fair market value, without a corresponding loan loss allowance.

Nonperforming loans, defined as nonaccrual loans plus nonperforming TDR loans, were $11.6 million at September 30, 2017, or 0.24% of total loans, and included $4.5 million of loans acquired from VBB in the first quarter of 2017. This compares to nonperforming loans of $12.2 million, or 0.26% of total loans, at June 30, 2017, $7.2 million, or 0.16% of total loans, at December 31, 2016, and $8.7 million, or 0.20% of total loans, at September 30, 2016. The $11.6 million in nonperforming loans at September 30, 2017 are summarized as

 

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follows: $6.7 million in commercial real estate loans, $1.6 million in SBA loans, $1.3 million in SFR mortgage loans, $829,000 in dairy & livestock and agribusiness loans, $743,000 in consumer and other loans, and $313,000 in commercial and industrial loans. The $649,000 decrease in nonperforming loans quarter-over-quarter was primarily due to a $745,000 decrease in nonperforming commercial and industrial loans and a $222,000 decrease in commercial real estate loans. This was partially offset by a $386,000 increase in nonperforming SFR mortgage loans.

We had $4.5 million in Other Real Estate Owned (“OREO”) at both September 30, 2017 and December 31, 2016, compared to $4.8 million at September 30, 2016. As of September 30, 2017, we had one OREO property, compared with two OREO properties at September 30, 2016. There were no additions or sales of OREO for the nine months ended September 30, 2017.

At September 30, 2017, we had loans delinquent 30 to 89 days of $271,000. This compares to $619,000 at June 30, 2017, $436,000 at December 31, 2016, and $522,000 at September 30, 2016. As a percentage of total loans, delinquencies, excluding nonaccruals, were 0.01% at September 30, 2017, 0.01% at June 30, 2017, 0.01% at December 31, 2016, and 0.01% at September 30, 2016.

At September 30, 2017, we had $5.7 million in performing TDR loans, compared to $16.6 million in performing TDR loans at June 30, 2017, $19.2 million in performing TDR loans at December 31, 2016, and $27.0 million in performing TDR loans at September 30, 2016. In terms of the number of loans, we had 21 performing TDR loans at September 30, 2017, compared to 24 performing TDR loans at June 30, 2017, 26 performing TDR loans at December 31, 2016, and 29 performing TDR loans at September 30, 2016.

Nonperforming assets, defined as nonaccrual loans plus other real estate owned, totaled $16.1 million at September 30, 2017, $16.7 million at June 30, 2017, $11.7 million at December 31, 2016, and $13.5 million at September 30, 2016. As a percentage of total assets, nonperforming assets were 0.19% at September 30, 2017, 0.20% at June 30, 2017, 0.14% at December 31, 2016, and 0.17% at September 30, 2016.

Classified loans are loans that are graded “substandard” or worse. At September 30, 2017, classified loans totaled $75.1 million, compared to $93.4 million at June 30, 2017, $108.3 million at December 31, 2016, and $105.0 million at September 30, 2016. Total classified loans at September 30, 2017 included $6.5 million of classified loans acquired from VBB in the first quarter of 2017. The quarter-over-quarter decrease was primarily due to a $14.4 million decrease in classified commercial real estate loans, a $2.3 million decrease in classified dairy & livestock and agribusiness loans and a $1.8 million decrease in classified commercial and industrial loans. This was partially offset by a $372,000 increase in classified SFR mortgage loans.

CitizensTrust

As of September 30, 2017, CitizensTrust had approximately $2.84 billion in assets under management and administration, including $2.13 billion in assets under management. Revenues were $2.5 million for the third quarter of 2017 and $7.4 million for the first nine months of 2017, compared to $2.3 million and $7.0 million, respectively, for the same period of 2016. CitizensTrust provides trust, investment and brokerage related services, as well as financial, estate and business succession planning.

 

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Corporate Overview

CVB Financial Corp. (“CVBF”) is the holding company for Citizens Business Bank. CVBF is the ninth largest bank holding company headquartered in California with assets of approximately $8.3 billion. 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 through 51 banking centers and 3 trust office locations serving the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County, and the Central Valley area of California.

Shares of CVB Financial Corp. common stock are listed on the NASDAQ under the ticker symbol “CVBF.” For investor information on CVB Financial Corp., 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, October 19, 2017 to discuss the Company’s third quarter 2017 financial results.

To listen to the conference call, please dial (877) 506-3368. A taped replay will be made available approximately one hour after the conclusion of the call and will remain available through November 2, 2017 at 6:00 a.m. PDT/9:00 a.m. EDT. To access the replay, please dial (877) 344-7529, passcode 10112364.

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.

 

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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 and our future financial position and operating results. 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. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic and market conditions and political events and the impact they may have on us, our customers and our assets and liabilities; our ability to attract deposits and other sources of funding or liquidity; supply and demand for real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend, including both residential and commercial real estate; a sharp or prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors, key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance for loan losses and charge-offs; the costs or effects of acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such acquisitions or dispositions, and/or our ability to realize the contemplated financial or business benefits associated with any such acquisitions or dispositions; our ability to realize cost savings and business synergies in connection with our recent acquisition of Valley Commerce Bancorp within expected time frames or at all; the effect of changes in laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, banking capital levels, allowance for loan losses, consumer, commercial or secured lending, securities and securities trading and hedging, bank operations, compliance, fair lending, employment, executive compensation, insurance, cybersecurity, vendor management and information technology) with which we and our subsidiaries must comply or believe we should comply or which may otherwise impact us; the effects of additional legal and regulatory requirements to which we may become subject in the event our total assets exceed $10 billion; 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; the accuracy of the assumptions and estimates and the absence of technical error in implementation or calibration of models used to estimate the fair value of financial instruments or expected credit losses or delinquencies; inflation, changes in market interest rates, securities market and monetary fluctuations; changes in government-established interest rates or monetary policies; changes in the amount and availability of deposit insurance; disruptions in the infrastructure that supports our business and the communities where we are located, which are concentrated in California, involving or related to physical site access and/or communication facilities; cyber incidents; or theft or loss of Company or customer data or money; political uncertainty or instability; acts of war or terrorism, or natural disasters, such as earthquakes, drought, or the effects of pandemic diseases; the timely development and acceptance of new banking products and services and the perceived overall value of these products and services by our customers and potential customers; the Company’s relationships with and reliance upon vendors with respect to the operation of certain of the Company’s key internal and external systems and applications; changes in commercial or consumer spending, borrowing and savings preferences or behaviors; technological changes and the expanding use of technology in banking and financial services (including the adoption of mobile banking and funds transfer applications); our ability to retain and increase market share, retain and grow customers and control expenses; changes in the competitive environment among financial and bank holding companies, banks and other financial service and technology providers; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies, volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions or on the Company’s customers; fluctuations in the price of the Company’s common stock or other securities; and the resulting impact on the Company’s ability to raise capital or make acquisitions, the effect of changes in accounting policies and practices, as may be adopted from time-to-time by our 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 workforce, management team and/or our board of directors; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (including securities, bank operations, consumer or employee class action litigation), the possibility that any settlement of any putative class action lawsuits may not be

 

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approved by the relevant court or that significant numbers of putative class members may opt out of any settlement; regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; our ongoing relations with our various federal and state regulators, including the SEC, Federal Reserve Board, FDIC and California DBO; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including its Annual Report on Form 10-K for the year ended December 31, 2016, 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. 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.

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CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

 

     September 30,     December 31,     September 30,  
     2017     2016     2016  
  

 

 

   

 

 

   

 

 

 

Assets

      

Cash and due from banks

   $ 137,196     $ 119,445     $ 119,420  

Interest-earning balances due from Federal Reserve

     6,594       2,188       139,739  
  

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

     143,790       121,633       259,159  
  

 

 

   

 

 

   

 

 

 

Interest-earning balances due from depository institutions

     20,521       47,848       83,178  

Investment securities available-for-sale

     2,175,648       2,270,466       2,227,551  

Investment securities held-to-maturity

     848,382       911,676       878,953  
  

 

 

   

 

 

   

 

 

 

Total investment securities

     3,024,030       3,182,142       3,106,504  
  

 

 

   

 

 

   

 

 

 

Investment in stock of Federal Home Loan Bank (FHLB)

     17,688       17,688       17,688  

Loans and lease finance receivables

     4,746,424       4,395,064       4,295,167  

Allowance for loan losses

     (60,631     (61,540     (61,001
  

 

 

   

 

 

   

 

 

 

Net loans and lease finance receivables

     4,685,793       4,333,524       4,234,166  
  

 

 

   

 

 

   

 

 

 

Premises and equipment, net

     46,654       42,086       38,671  

Bank owned life insurance

     145,970       134,785       134,073  

Intangibles

     7,177       5,010       5,293  

Goodwill

     116,564       89,533       88,174  

Other assets

     95,825       99,458       78,087  
  

 

 

   

 

 

   

 

 

 

Total assets

   $     8,304,012     $     8,073,707     $     8,044,993  
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders' Equity

      

Liabilities:

      

Deposits:

      

Noninterest-bearing

   $ 3,908,809     $ 3,673,541     $ 3,657,610  

Investment checking

     415,503       407,058       413,789  

Savings and money market

     1,886,687       1,846,257       1,823,163  

Time deposits

     397,097       382,824       426,433  
  

 

 

   

 

 

   

 

 

 

Total deposits

     6,608,096       6,309,680       6,320,995  

Customer repurchase agreements

     455,069       603,028       577,990  

Other borrowings

     63,000       53,000       —    

Junior subordinated debentures

     25,774       25,774       25,774  

Payable for securities purchased

     1,625       23,777       43,111  

Other liabilities

     73,984       67,586       73,820  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     7,227,548       7,082,845       7,041,690  
  

 

 

   

 

 

   

 

 

 

Stockholders' Equity

      

Stockholders' equity

     1,064,620       980,691       964,700  

Accumulated other comprehensive income, net of tax

     11,844       10,171       38,603  
  

 

 

   

 

 

   

 

 

 

Total stockholders' equity

     1,076,464       990,862       1,003,303  
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders' equity

   $ 8,304,012     $ 8,073,707     $ 8,044,993  
  

 

 

   

 

 

   

 

 

 

 

- 10 -


CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2017     2016     2017     2016  

Assets

        

Cash and due from banks

   $ 133,197     $ 120,360     $ 130,058     $ 119,863  

Interest-earning balances due from Federal Reserve and federal funds sold

     21,399       475,882       58,790       289,100  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

     154,596       596,242       188,848       408,963  
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest-earning balances due from depository institutions

     23,359       86,872       31,335       75,086  

Investment securities available-for-sale

     2,188,932       2,239,440       2,232,679       2,254,550  

Investment securities held-to-maturity

     856,370       747,813       873,304       769,979  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment securities

     3,045,302       2,987,253       3,105,983       3,024,529  
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment in stock of Federal Home Loan Bank (FHLB)

     17,688       17,688       18,167       17,935  

Loans and lease finance receivables

     4,710,900       4,248,225       4,579,054       4,155,717  

Allowance for loan losses

     (60,223     (61,092     (60,460     (60,092
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loans and lease finance receivables

     4,650,677       4,187,133       4,518,594       4,095,625  
  

 

 

   

 

 

   

 

 

   

 

 

 

Premises and equipment, net

     47,240       39,362       46,170       37,660  

Bank owned life insurance

     145,641       133,576       142,802       132,405  

Intangibles

     7,401       5,447       6,923       4,861  

Goodwill

     119,164       88,174       111,687       85,124  

Other assets

     128,308       114,807       124,029       117,606  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $     8,339,376     $     8,256,554     $     8,294,538     $     7,999,794  
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders' Equity

        

Liabilities:

        

Deposits:

        

Noninterest-bearing

   $ 3,891,381     $ 3,715,018     $ 3,828,235     $ 3,480,739  

Interest-bearing

     2,751,781       2,804,867       2,748,806       2,809,431  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     6,643,162       6,519,885       6,577,041       6,290,170  

Customer repurchase agreements

     501,085       582,539       552,388       615,023  

FHLB advances

     —         —         —         949  

Other borrowings

     24,334       —         17,253       2,537  

Junior subordinated debentures

     25,774       25,774       25,774       25,774  

Payable for securities purchased

     3,768       55,532       9,065       22,992  

Other liabilities

     63,950       65,806       61,858       62,747  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     7,262,073       7,249,536       7,243,379       7,020,192  
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders' Equity

        

Stockholders' equity

     1,066,369       965,876       1,040,867       946,631  

Accumulated other comprehensive income, net of tax

     10,934       41,142       10,292       32,971  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders' equity

     1,077,303       1,007,018       1,051,159       979,602  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders' equity

   $ 8,339,376     $ 8,256,554     $ 8,294,538     $ 7,999,794  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

- 11 -


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,
 
     2017     2016     2017     2016  

Interest income:

        

Loans and leases, including fees

   $ 55,998     $ 47,754     $ 158,253     $ 143,781  

Investment securities:

        

Investment securities available-for-sale

     12,240       11,425       37,887       36,242  

Investment securities held-to-maturity

     5,184       4,787       16,014       14,878  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     17,424       16,212       53,901       51,120  

Dividends from FHLB stock

     318       403       1,070       1,210  

Interest-earning deposits with other institutions and federal funds sold

     130       802       683       1,575  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     73,870       65,171       213,907       197,686  
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     1,555       1,525       4,547       4,544  

Borrowings and junior subordinated debentures

     576       485       1,705       1,509  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     2,131       2,010       6,252       6,053  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income before recapture of provision for loan losses

     71,739       63,161       207,655       191,633  

Recapture of provision for loan losses

     (1,500     (2,000     (7,000     (2,000
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after recapture of provision for loan losses

     73,239       65,161       214,655       193,633  
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income:

        

Service charges on deposit accounts

     4,085       3,817       11,794       11,386  

Trust and investment services

     2,523       2,328       7,432       7,039  

Gain on sale of loans

     —         —         —         1,101  

Other

     3,430       3,038       10,310       7,614  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     10,038       9,183       29,536       27,140  
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense:

        

Salaries and employee benefits

     21,835       20,403       65,116       63,004  

Occupancy and equipment

     4,400       4,102       12,638       11,940  

Professional services

     1,091       1,404       4,191       3,727  

Software licenses and maintenance

     1,510       1,358       4,698       4,077  

Marketing and promotion

     1,055       1,199       3,484       3,818  

Acquisition related expenses

     250       353       2,176       1,557  

Other

     4,565       4,187       13,393       13,685  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     34,706       33,006       105,696       101,808  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

     48,571       41,338           138,495           118,965  

Income taxes

     18,888       15,890       51,935       44,612  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $     29,683     $     25,448     $ 86,560     $ 74,353  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

   $ 0.27     $ 0.23     $ 0.79     $ 0.69  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 0.27     $ 0.23     $ 0.79     $ 0.69  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividends declared per common share

   $ 0.14     $ 0.12     $ 0.40     $ 0.36  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

- 12 -


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,
 
     2017     2016     2017      2016  

Interest income - tax-equivalent (TE)

   $ 74,832     $ 66,420     $ 216,969      $ 201,849  

Interest expense

     2,131       2,010       6,252        6,053  
  

 

 

   

 

 

   

 

 

    

 

 

 

Net interest income - (TE)

   $ 72,701     $ 64,410     $ 210,717      $ 195,796  
  

 

 

   

 

 

   

 

 

    

 

 

 

Return on average assets, annualized

     1.41%       1.23%       1.40%        1.24%  

Return on average equity, annualized

     10.93%       10.05%       11.01%        10.14%  

Efficiency ratio [1]

     42.44%       45.62%       44.56%        46.54%  

Noninterest expense to average assets, annualized

     1.65%       1.59%       1.70%        1.70%  

Yield on average earning assets (TE)

     3.81%       3.40%       3.72%        3.57%  

Cost of deposits

     0.09%       0.09%       0.09%        0.10%  

Cost of deposits and customer repurchase agreements

     0.10%       0.10%       0.11%        0.11%  

Cost of funds

     0.12%       0.11%       0.12%        0.12%  

Net interest margin (TE)

     3.70%       3.30%       3.62%        3.46%  

[1] Noninterest expense divided by net interest income before provision for loan losses plus noninterest income.

 

Weighted average shares outstanding

         

Basic

     109,754,210       108,984,081       109,279,722        107,143,700  

Diluted

     110,118,851       109,370,404       109,671,571        107,547,042  

Dividends declared

   $ 15,423     $ 12,968     $ 44,058      $ 38,853  

Dividend payout ratio [2]

     51.96%       50.96%       50.90%        52.25%  

[2] Dividends declared on common stock divided by net earnings.

 

Number of shares outstanding - (end of period)

     110,157,384       108,097,493       

Book value per share

   $ 9.77     $ 9.28       

Tangible book value per share

   $ 8.65     $ 8.42       
     September 30,               
     2017     2016               

Nonperforming assets:

         

Nonaccrual loans

   $ 7,263     $ 5,633       

Loans past due 90 days or more and still accruing interest

     —         —         

Troubled debt restructured loans (nonperforming)

     4,310       3,033       

Other real estate owned (OREO), net

     4,527       4,840       
  

 

 

   

 

 

      

Total nonperforming assets

   $ 16,100     $ 13,506       
  

 

 

   

 

 

      

Troubled debt restructured performing loans

   $ 5,735     $ 27,018       
  

 

 

   

 

 

      

Percentage of nonperforming assets to total loans outstanding and OREO

     0.34%       0.31%       

Percentage of nonperforming assets to total assets

     0.19%       0.17%       

Allowance for loan losses to nonperforming assets

     376.59%       451.66%       
     Nine Months Ended
September 30,
              
     2017     2016               

Allowance for loan losses:

         

Beginning balance

   $ 61,540     $ 59,156       

Total charge-offs

     (149     (195     

Total recoveries on loans previously charged-off

     6,240       4,040       
  

 

 

   

 

 

      

Net recoveries

     6,091       3,845       

Recapture of provision for loan losses

     (7,000     (2,000     
  

 

 

   

 

 

      

Allowance for loan losses at end of period

   $ 60,631     $ 61,001       
  

 

 

   

 

 

      

Net recoveries to average loans

     0.133%       0.093%       

 

- 13 -


CVB FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Quarterly Common Stock Price

 

     2017      2016      2015  
Quarter End    High      Low      High      Low      High      Low  

March 31,

   $     24.63      $     20.58      $     17.70      $     14.02      $     16.21      $     14.53  

June 30,

   $ 22.85      $ 19.90      $ 17.92      $ 15.25      $ 18.11      $ 15.45  

September 30,

   $ 24.29      $ 19.58      $ 17.88      $ 15.39      $ 18.37      $ 15.30  

December 31,

     -          -        $ 23.23      $ 16.32      $ 18.77      $ 15.82  

Quarterly Consolidated Statements of Earnings

 

     Q3     Q2     Q1     Q4     Q3  
     2017       2017       2017       2016       2016  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest income

          

Loans and leases, including fees

   $ 55,998     $ 53,614     $ 48,641     $ 49,211     $ 47,754  

Investment securities and other

     17,872       18,975       18,807       18,153       17,417  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     73,870       72,589       67,448       67,364       65,171  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

          

Deposits

     1,555       1,559       1,433       1,413       1,525  

Other borrowings

     576       547       582       510       485  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     2,131       2,106       2,015       1,923       2,010  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income before recapture of provision for loan losses

     71,739       70,483       65,433       65,441       63,161  

Recapture of provision for loan losses

     (1,500     (1,000     (4,500     (4,400     (2,000
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after recapture of provision for loan losses

     73,239       71,483       69,933       69,841       65,161  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income

     10,038       10,776       8,722       8,412       9,183  

Noninterest expense

     34,706       36,873       34,117       34,932       33,006  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

     48,571       45,386       44,538       43,321       41,338  

Income taxes

     18,888       17,013       16,034       16,245       15,890  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $     29,683     $     28,373     $     28,504     $     27,076     $     25,448  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     38.89%       37.49%       36.00%       37.50%       38.44%  

Basic earnings per common share

   $ 0.27     $ 0.26     $ 0.26     $ 0.25     $ 0.23  

Diluted earnings per common share

   $ 0.27     $ 0.26     $ 0.26     $ 0.25     $ 0.23  

Cash dividends declared per common share

   $ 0.14     $ 0.14     $ 0.12     $ 0.12     $ 0.12  

Cash dividends declared

   $ 15,423     $ 15,617     $ 13,018     $ 12,996     $ 12,968  

 

- 14 -


CVB FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands)

Loan Portfolio by Type

 

     September 30,
2017
    June 30,
2017
    March 31,
2017
    December 31,
2016
    September 30,
2016
 

Commercial and industrial

   $ 529,661     $ 539,260     $ 530,856     $ 487,387     $ 496,814  

SBA

     125,501       130,716       114,265       97,511       104,379  

Real estate:

          

Commercial real estate

     3,366,316       3,312,068       3,271,592       2,997,735       2,981,859  

Construction

     74,148       77,294       72,782       85,879       90,710  

SFR mortgage

     244,828       250,104       245,537       250,783       241,672  

Dairy & livestock and agribusiness

     270,817       245,600       244,724       339,847       239,749  

Municipal lease finance receivables

     71,352       66,048       62,416       64,639       68,309  

Consumer and other loans

     71,009       74,714       81,534       79,743       81,143  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross loans

     4,753,632       4,695,804       4,623,706       4,403,524       4,304,635  

Less:

          

Purchase accounting discount on PCI loans

     (758     (1,008     (1,258     (1,508     (1,894

Deferred loan fees, net

     (6,450     (7,098     (6,951     (6,952     (7,574
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross loans, net of deferred loan fees and discounts

     4,746,424       4,687,698       4,615,497       4,395,064       4,295,167  

Allowance for loan losses

     (60,631     (60,201     (59,212     (61,540     (61,001
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans

   $     4,685,793     $     4,627,497     $     4,556,285     $     4,333,524     $     4,234,166  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposit Composition by Type and Customer Repurchase Agreements

 

     September 30,
2017
     June 30,
2017
     March 31,
2017
     December 31,
2016
     September 30,
2016
 

Noninterest-bearing

   $ 3,908,809      $ 3,929,394      $ 3,999,107      $ 3,673,541      $ 3,657,610  

Investment checking

     415,503        415,768        424,077        407,058        413,789  

Savings and money market

     1,886,687        1,948,634        1,993,196        1,846,257        1,823,163  

Time deposits

     397,097        403,385        426,433        382,824        426,433  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total deposits

     6,608,096        6,697,181        6,842,813        6,309,680        6,320,995  

Customer repurchase agreements

     455,069        546,085        564,387        603,028        577,990  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total deposits and customer repurchase agreements

   $     7,063,165      $     7,243,266      $     7,407,200      $     6,912,708      $     6,898,985  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

- 15 -


CVB FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands)

Nonperforming Assets and Delinquency Trends

 

     September 30,
2017
     June 30,
2017
     March 31,
2017
     December 31,
2016
     September 30,
2016
 

Nonperforming loans:

              

Commercial and industrial

   $ 313      $ 1,058      $ 506      $ 156      $ 543  

SBA

     1,611        1,651        1,089        2,737        3,013  

Real estate:

              

Commercial real estate

     6,728        6,950        5,623        1,683        2,396  

Construction

     -          -          384        -          -    

SFR mortgage

     1,349        963        983        2,207        2,244  

Dairy & livestock and agribusiness

     829        829        1,324        -          -    

Consumer and other loans

     743        771        438        369        470  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 11,573      $ 12,222      $ 10,347      $ 7,152      $ 8,666  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

% of Total gross loans

     0.24%        0.26%        0.22%        0.16%        0.20%  

Past due 30-89 days:

              

Commercial and industrial

   $ 45      $ -        $ 219      $ -        $ -    

SBA

     -          -          329        352        -    

Real estate:

              

Commercial real estate

     220        218        -          -          228  

Construction

     -          -          -          -          -    

SFR mortgage

     -          400        403        -          -    

Dairy & livestock and agribusiness

     -          -          -          -          -    

Consumer and other loans

     6        1        429        84        294  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 271      $ 619      $ 1,380      $ 436      $ 522  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

% of Total gross loans

     0.01%        0.01%        0.03%        0.01%        0.01%  

OREO:

              

Commercial and industrial

   $ -        $ -        $ -        $ -        $ -    

Real estate:

              

Commercial real estate

     -          -          -          -          -    

Construction

     4,527        4,527        4,527        4,527        4,840  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,527      $ 4,527      $ 4,527      $ 4,527      $ 4,840  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total nonperforming, past due, and OREO

   $     16,371      $     17,368      $     16,254      $     12,115      $     14,028  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

% of Total gross loans

     0.34%        0.37%        0.35%        0.28%        0.33%  

 

- 16 -


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, 2017 and 2016.

 

    September 30,  
    2017     2016  
    (Dollars in thousands, except per share amounts)  

Stockholders' equity

  $ 1,076,464     $ 1,003,303  

Less: Goodwill

    (116,564     (88,174

Less: Intangible assets

    (7,177     (5,293
 

 

 

   

 

 

 

Tangible book value

  $ 952,723     $ 909,836  

Common shares issued and outstanding

    110,157,384       108,097,493  
 

 

 

   

 

 

 

Tangible book value per share

  $ 8.65     $ 8.42  
 

 

 

   

 

 

 

 

- 17 -