CVB Financial Corp. Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
Is CVB Financial Corp. a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $4.00b | Revenue (TTM) = $573.98m
Market Cap = $4.00b | Estimated Revenue = $645.75m
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $4.60b | Revenue (TTM) = $573.98m
Enterprise Value = $4.60b | Forward Revenue = $645.75m
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🧮 Calculation
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
CVB Financial Corp. Stock Analysis
Analyst Opinions
12 Analysts have issued a CVB Financial Corp. forecast:
Analyst Opinions
12 Analysts have issued a CVB Financial Corp. forecast:
CVB Financial Corp. Events
Past Events
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JUL
23
Q2 2026 Earnings Call
about 2 months ago
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MAY
20
Shareholder/Analyst Call - CVB Financial Corp.
4 months ago
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APR
23
Q1 2026 Earnings Call
5 months ago
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JAN
22
Q4 2025 Earnings Call
8 months ago
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DEC
17
Heritage Commerce Corp, CVB Financial Corp. - M&A Call
9 months ago
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OCT
23
Q3 2025 Earnings Call
11 months ago
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CVB Financial Corp. — Q2 2026 Earnings Call
1. Management Discussion
Good morning, ladies and gentlemen, and welcome to the Second Quarter of 2026 Earnings Conference Call for CVB Financial Corporation and its subsidiary, Citizens Business Bank. My name is Sheri, and I'm your operator for today. [Operator Instructions] Please note, this call is being recorded.
I would now like to turn the presentation over to your host for today's call, Allen Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.
Thank you, Sheri, and good morning, everyone. Thank you for joining us today to review our financial results for the second quarter of 2026. Joining me this morning is our Chief Executive Officer, Dave Brager; and our President, Clay Jones. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab.
The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2025, and in particular, the information set forth in Item 1A, Risk Factors therein. For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call.
I'll now turn the call over to Dave Brager. Dave?
Thank you, Allen. Good morning, everyone. For the second quarter of 2026, we reported net earnings of $48.3 million or $0.29 per share, representing our 197th consecutive quarter of profitability, which is every quarter for over 49 years. We previously declared a $0.20 per share dividend for the second quarter of 2026, representing our 147th consecutive quarter of paying a cash dividend to our shareholders.
Our net earnings of $48.3 million or $0.29 per share compares with $51 million for the first quarter of 2026 or $0.38 per share and $50.6 million or $0.37 per share for the prior year quarter. Pretax income in the second quarter of 2026 was $65 million compared to $68.6 million in the first quarter of 2026. Results for the second quarter of 2026 reflect the impact of the acquisition of Heritage Bank of Commerce, which closed on April 17.
The core banking systems of the 2 banks were integrated at the end of the second quarter. During the second quarter, we incurred $31.4 million in acquisition expenses, which was $30.3 million greater than the first quarter. In addition, we incurred a provision for unfunded commitments of $4.25 million for the acquired Heritage unfunded loan commitments. Excluding these unusual items, pretax income would have been $100.7 million in the second quarter.
I'll now turn the call over to Allen to further discuss additional aspects of the merger and our balance sheet.
Thanks, Dave. Including the acquisition of Heritage Bank of Commerce, our total assets grew from $15.5 billion at March 31, 2026, to $21.2 billion at June 30. Total consideration for the acquisition of Heritage was approximately $845 million and resulted in total intangible assets of approximately $450 million, including $334 million of goodwill. The acquisition of Heritage included $1 billion of investment securities, of which we sold $490 million at the close of the merger and subsequently purchased $500 million of new securities with an average yield of approximately 4.7%.
The fair value of the acquired Heritage loans was $3.48 billion, and the initial allowance for credit losses on the acquired loans was $46.6 million. To further optimize the balance sheet, we also sold the SFR mortgage pools acquired from Heritage at their fair value of $327 million. The sale of these loans settled on June 10. With the benefit of the merger, average earning assets for the second quarter of 2026 were $17.6 billion, an increase over the first quarter of $3.7 billion.
The growth in earning assets, combined with a 28 basis point expansion in our net interest margin drove a $44.6 million increase in net interest income in the second quarter when compared to the first quarter of 2026. During the second quarter, we also adjusted our wholesale funding. In connection with our cash flow hedges, we replaced $300 million of maturing brokered CDs that were hedged with the pay fixed swaps with 90-day Federal Home Loan Bank advances. In the month of May, we also chose not to replace $300 million of maturing putable FHLB advances that had a borrowing rate of 4.73%.
As a result of these changes, we no longer have brokered CDs and our FHLB advances totaled $500 million, comprised of the $300 million of 90-day cash flow hedge advances and a $200 million putable advance maturing in May of 2027 at a rate of 4.27%. As a result of the merger, we acquired Heritage's $40 million of 5% fixed rate sub debt, which had a market value of $38.7 million at close and a market rate of interest of 6.7%. This debt is expected to be redeemed at the earliest possible date, which is May 2027.
Although our cost of deposits increased modestly from the first quarter to the second quarter of 2026, these changes in borrowings resulted in a decrease in our overall cost of funds from 0.97% for the first quarter of this year to 0.96% in the second quarter of 2026. Our allowance for credit loss increased from $80.2 million at March 31, 2026, to $126.7 million at June 30, with the additional ACL from the acquisition of Heritage. The ACL as a percentage of loans increased from 0.93% at March 31, 2026, to 1.05% at June 30, 2026.
Our ACL is based on our economic forecast that is a blend of multiple forecasts produced by Moody's. We continue to have the largest individual scenario weighting on Moody's baseline forecast with both upside and downside risks weighted among multiple forecasts. The resulting economic forecast at June 30, 2026, was generally consistent with our first quarter forecast. Real GDP growth is forecasted to stay below 2% through the end of 2027. The unemployment rate is forecasted to reach 5% by the beginning of 2027 and remain above 5% through 2028. Commercial real estate prices are forecasted to continue their decline through the end of 2027 before experiencing some growth in 2028.
Now turning to our capital position. At June 30, 2026, our shareholders' equity was $3.2 billion compared to $2.3 billion at March 31, 2026. The acquisition of Heritage resulted in the issuance of 40.6 million shares of common stock. In June, our Board authorized a new $50 million share repurchase plan. From June 18 through July 21, we repurchased 409,000 shares for $8.9 million at an average share price of $21.72.
Our tangible book value per share at June 30, 2026, was $11.07 compared to $11.42 at March 31, 2026. The company's tangible common equity ratio was 9.8% at June 30, 2026, compared to 10.5% at March 31, 2026, while our common equity Tier 1 capital ratio was 14.7% at June 30, 2026, compared to 16.3% at March 31.
I'll now turn the call back to Dave for further discussion of our loans and deposits.
Thank you, Allen. Loan originations continued at a strong pace in the second quarter as originations for the second quarter of 2026 were approximately 85% higher than the second quarter of 2025 and 40% higher than the first quarter of 2026. Our loan pipelines remain relatively strong, although rate competition for high-quality loans continues to be intense. Loan originations in the second quarter had average yields of approximately 6%, which was in line with the first quarter.
Total loans were $12.1 billion at June 30, 2026, compared to $8.64 billion at March 31, 2026. The $3.37 billion increase includes $3.15 billion of loans acquired from the merger with Heritage, net of the SFR loan pools that were sold prior to quarter end. Our average loan yield was 5.53% for the second quarter of 2026 compared to 5.32% for the first quarter of 2026 and 5.22% for the second quarter of 2025. Excluding loan fees and discount accretion on acquired loans, our base loan yield increased from 5.14% at March 31 to 5.37% at June 30, 2026.
The overall line utilization rate at June 30, 2026, was 41% compared to 44% at March 31, 2026. However, the C&I line utilization increased quarter-over-quarter from 30% at March 31 to 32% at the end of the second quarter. Dairy & livestock loan utilization decreased from 69% at March 31, 2026, to 63% at June 30, which is in line with the typical patterns for these types of loans. We experienced $137,000 of net charge-offs during the second quarter of 2026, and there was no provision for credit losses during the quarter.
Total nonperforming assets increased by $10.5 million to $16.8 million at June 30, 2026, which represents 8 basis points of total assets. Classified loans were $109.7 million at June 30, 2026, or 0.91% of total loans. The $26.6 million increase from March 31, 2026, was due to the addition of $29 million in classified loans -- in classified Heritage loans.
Now on to deposits. Our total deposits and customer repurchase agreements as of June 30, 2026, were $16.9 billion, which compares to $12.4 billion on March 31, 2026. The $4.4 billion increase was a result of $4.75 billion of deposits acquired from Heritage upon the close of the merger in April and the reduction in deposits from $300 million of brokered CDs that matured and were not rolled over during the second quarter.
Our noninterest-bearing deposits were 53% of total deposits on June 30 compared to the premerger percentage of 59% on March 31, 2026. Our cost of deposits and repos was 86 basis points for the second quarter of 2026 compared to 82 basis points for the first quarter of 2026 and 87 basis points for the year ago quarter. Clay will now highlight the growth in noninterest income and give an update on the merger integration.
Thank you, Dave. Noninterest income was $17 million in the second quarter of 2026 compared to $14.3 million in the first quarter of this year. The $2.7 million quarter-over-quarter increase in noninterest income was the result of increased fee income across almost all categories. Deposit and other banking service fees grew by $850,000 and trust and investment services income grew by $460,000 or 12% from the first quarter of 2026. International banking income grew by $200,000 and income from bank-owned life insurance increased by $350,000 with the additional policies for the merger.
I also want to provide a brief update on our merger integration and the revenue opportunities we see from the Heritage combination. We completed the conversion of Heritage into Citizens operating the June 19 through June 21 weekend. This was an important milestone and a significant undertaking, supporting -- supported by strong execution across our teams and dedicated internal and external resources focused on customer readiness and support. Overall, the conversion was successful. As we expected, we worked through individual customer transition items, and we're already seeing customers benefit from our enhanced online banking platform.
We're also beginning to see the strategic benefits of bringing the 2 banks together. The combined company gives us greater lending capacity and has created additional opportunities across our broader banking platform, including trust and wealth management, home mortgage and international services. Today, we are operating as one bank with a stronger presence across California's major economic markets and a broader platform to serve our customers.
I will now turn the call back over to Dave for further discussion of our noninterest expense.
Thank you, Clay. Noninterest expense for the second quarter of 2026 was $114.4 million, including $31.4 million of acquisition expense related to the Heritage merger. Core noninterest expense, which excludes acquisition expense, amortization of intangible assets and provision for unfunded commitments was $75.2 million in the second quarter of 2026 compared to $58.1 million in the first quarter and $56.4 million in the second quarter of 2025.
After excluding acquisition expense and provision for unfunded commitments, our adjusted efficiency ratio was 43.9% in the second quarter of 2026 compared to 44.6% in the first quarter of 2026 and 45.5% in the second quarter of 2025. In conclusion, we continue to focus on the successful integration of the merged companies and the opportunities for accelerated growth in the Bay Area, while achieving the projected returns we outlined for this acquisition.
Our current outlook continues to align with our stated objectives of achieving EPS accretion of 13% or greater in 2027, while generating a return on average assets of 1.50% and a return on tangible common equity of 17%. This concludes today's presentation. We are now happy to take any questions that you might have.
[Operator Instructions] And our first question will come from the line of Matthew Clark with Piper Sandler.
2. Question Answer
First one for me, just on the accretion. I wanted to confirm the number that was in the net interest income. I've got the loan piece based on the core loan yield comment, but I wanted to see if there was some additional securities marks in there.
From a security standpoint, it would have been -- I mean, I guess I don't really distinguish that, Matt, because that -- it's all AFS. Everything we acquired is AFS. So it will change as the market value changes every quarter.
Got it. Yes. Okay. So roughly $4.6 million of accretion this quarter?
Are you talking about exclusive or in total?
In total for the quarter, for the 74 days in net interest income?
Let me check that. Any follow-up questions, I'll take a look at that -- $2.7 million, by the way, Matt, specifically for the merger.
$2.7 million. Okay. All right. And then just on the cost saves, how far along are you, just so we can get a sense for what might be left coming out of the run rate?
Of course, Q3 will still have some noise. There'll still be a high level of acquisition expense, but not the same level as Q2. That will trickle down into Q4. I think Q4 will be fairly clean, but the full impact of the expense synergies won't be seen to the beginning of 2027.
Okay. Okay. Got it. And then if I can just sneak one in here on the pipeline and just the overall integration getting into the Bay Area, given the rebound that's happening there. Any updated thoughts on loan growth going forward, whether or not you might be able to step it up relative to your legacy CBB?
Yes. Thanks, Matthew. Clay here. I think the pipelines look very good. As noted in the presentation here, no question about it. We still see continued pricing pressure and lots of competition, but loan demand is strong, and we continue to execute on that. With the combination of the 2 organizations and full integration of the production teams, we're full steam ahead as one bank here and are looking for all those opportunities going forward.
Yes. I think the only thing I would add, Matt, obviously, we feel good about looking out 90-ish days or so. I mean there's a lot of pressure on interest rates right now with the 5-year, 10-year treasuries rising pretty substantially. So we'll see if that impacts customer prospect behaviors just with rates. So that would be potentially the only [ tailwind ]. But the things that we mentioned and Clay mentioned with respect to the integration and the combined capacity of the 2 organizations, which will really have an impact on the opportunities that we're seeing in the former HBC offices -- and our pipelines for the legacy CBB offices continue to remain strong.
So look, we want to deal in the top 25% of relationships out there. And so we're going to always decide on credit quality. We'll compete on price for the full relationship. But at the end of the day, I think at least what we're seeing today, it's pretty positive going forward.
And that will come from the line of Kelly Motta with KBW.
Congrats on getting the deals done quickly and the conversion done quickly. I'm sure that's a great feeling.
I'm feeling most of the time...
I hope you guys all get a vacation after this. I guess building off what really stood out to me in your slides was just like a remarkable amount of organic growth to kick it off. Can you provide additional color as to like the drivers of that? And if there was anything -- I imagine some of it is chunky, but if you could provide additional color given that it was quite notable, the organic growth you highlighted.
Yes. So I'll answer that, and Clay can jump in if he has anything to add. I think just generally, when you look at the last 5 or 6 quarters, 4 or 5 quarters, we've had very strong pipelines. And with the combination of the 2 organizations, that opportunity has just continued. So with the increased capacity and round numbers, Heritage had their sort of house limit and our house limit is 2.5x bigger than their house limit was.
So relationships that maybe -- and I don't use the term outgrow is probably overstating it, but they may have had to participate on a deal that was growing, whereas now we don't have to, and we can consider that. So I think the loan growth is primarily the increases in loan growth, as I've said, the last couple of quarters, has primarily come from investor commercial real estate. All the other asset classes, we had solid production. But with C&I and a 31% utilization rate, you just don't get the totals. So I think with investor commercial real estate coming back, I think it's really helped us sort of fill that gap of what was missing sort of through '23 and '24. So I don't know, Clay, if you have anything to add?
Yes. Just 2 things to add there. I think both organizations pre-close had strong momentum going into the close. And so the momentum of both organizations combined really was very powerful. And then secondly, what I would say is the collaboration of the teams in terms of the credit sales partnership, moving loans from origination through boarding worked very well in terms of the passing of those loans. So we really didn't see any delays or hiccups through that passing. So the momentum, including the hard work and making sure that the throughput came through really worked.
Great. That's super helpful. A balance sheet question perhaps for Allen. Cash is elevated at the end of the quarter. You obviously sold the HFS book that from Heritage that you had planned that announcement. I know you had mentioned in your prepared remarks some repayment of some borrowings down the pike. You have an active buyback. Just like how should we be thinking about the reinvestment of the liquidity of that book? And yes, I'll leave it at that.
Sure, Kelly. So as I said in the prepared remarks, we did sell at close about half of the $1 billion portfolio we inherited. And we reinvested that pretty much throughout the quarter. So we didn't get the full benefit from an average perspective. We did settle the sale of the SFR mortgages sort of late in the quarter on June 10 and did not deploy that cash during the quarter, but we have subsequently deployed that. And so we don't anticipate carrying as much balances at the Fed going forward. But certainly, it will be higher than premerger. We'll keep something north of what we typically did prior to the merger just because of the overall increase in the balance sheet size.
Yes, Kelly, the only thing I would add to that, and Allen can opine as well. Obviously, with the combined investment securities portfolio, the runoff of the loans, if loan demand stays where it's at, we're averaging -- and we put a new slide in our deck that talked about the investment portfolio and the cash flow that's generated from that. And round numbers, it ranges from $150 million to $200 million a quarter.
And so that's additional -- assuming the loan demand stays where it's at, that's additional pickup for us if we can reinvest that in loans at least 200 basis points over the like treasury, that should be a good pickup for us as well. Combined with the runoff on the loan portfolio, there's another slide in the deck that shows what those average yields are, too. So there is opportunity for pickup if the loan demand stays where it's at.
And our next question will come from the line of Gary Tenner with D.A. Davidson.
So it sounds like things are going really well on the loan front. And I'm just wondering maybe from Clay's perspective, anything that your lenders have needed to kind of change or adjust the approach as it relates to kind of fitting with the Citizens style and philosophy in underwriting and sourcing business?
Thanks, Gary. Yes, no question about it. Both organizations had a very like-minded credit culture, client selection. So the combination of the 2, we didn't see any imbalances in terms of how we view and look at customer onboarding and client selection. But no question about it, there's a change, and we fully integrated into the Citizens operating model as well as the loan pathing and loan processes.
So yes, the former Heritage team members have learned the new process and are navigating that through with their credit administrators and loan underwriters. So we fully integrated that and are continuing that. I would expect to see us kind of at the very conclusion of all of the integration on the loan processing side be somewhere around September time period. But contribution-wise, the Heritage -- former Heritage team members are contributing at their proportion.
Great. Appreciate that. And then, Allen, I wonder if you could just put a little finer dime on kind of expectations for expenses in the third quarter, just given kind of the full quarter now post-Heritage, some degree cost saves post conversion, just to give us a little bit of a guide, if you will, in terms of the third quarter expense run rate.
Well, I think from Q2, obviously, we mentioned more than $30 million in acquisition expense. So that will come down at least by half, probably more than half of that. We also don't anticipate having a $4 million provision for balance sheet that was a day 2 entry. So that will go back to what I would say is typical. We'll see some cost saves. I can't quantify them for you at this point necessarily, but Q3 will look a little better. As I said, Q4 will be a true run rate in line with what we talked about at announcement. We'll probably achieve by the fourth quarter, 90% to 95% of what we said we would achieve in terms of cost saves, and then we'll have it fully loaded by the beginning of 2027.
And our next question will come from the line of Andrew Terrell with Stephens.
Just wanted to ask on -- Dave, I think right at the end of your prepared remarks, you just reminded the kind of earnings accretion, the 1.50% ROAA and 17% ROATCE expectations. I mean you're kind of pretty darn close, if not there on ROAA on an operating basis this quarter. Do you feel like there's a chance to outperform the ROAA expectation with this deal? And then on the ROATCE specifically, it could be tough given how profitable you are and where capital is at unless you leverage capital a bit more or more active on the buyback. So I guess I'm just kind of curious like should we lean on the ROAA target more or the ROATCE target more? And it's kind of a question around how much capital you're willing to leverage?
Yes. Look, I mean, the question is, do I think we can outperform it, but that's always the goal. I'm talking about the ROAA. I absolutely think we can outperform it. And we'll be evaluating -- continue to evaluate all capital deployment management aspects of what we're doing. With the share repurchase program, we'll be evaluating dividends once we get a more clear run rate. I mean there's a number of things that we're going to be doing from the capital perspective. And we do have a -- it's a good problem to have. I mean, we generate an enormous amount of capital. And so we'll be evaluating that to ensure that the ROATCE projections we can get there as well.
So I mean, all in all, as I mentioned in the prepared remarks, I believe that we can outperform it. We're already on a strong pathway towards outperforming it. And as Allen mentioned, we projected a certain cost save recognition of that within a year -- within this year and then 100% going forward. And I think that's still accurate. So we'll see how it all plays out. I mean the market for financial stocks has been pretty strong. I mean there's been one-off days, and we are buying back shares, as we mentioned. We gave you the number through yesterday or excuse me, through Tuesday. So we'll continue to be in the market from a share repurchase program perspective, and we'll evaluate the other ways that we return shareholder capital as well. I don't know, Allen, do you have anything to add to that?
No. I mean I think we are currently fairly confident about reaching all those goals. The ROATCE number, maybe that takes a little bit more time because there's more moving parts, but we are definitely focused on striving to get all of those, Andrew.
Okay. Fair enough. I appreciate the color. And then I wanted to go back and see if you're maybe willing to put a little more of a fine point on the margin, but the 3.72% this quarter, definitely better than where I was at and where consensus was at. And there's obviously a lot of moving pieces, but it sounds like maybe some -- a little bit of headwind from just competitive dynamics in the market, but you've got, I would say, more unique tailwinds versus some peers as well with the acquisition. Can you just maybe frame for us general kind of expectations on the margin into 3Q?
So if you have our investor deck, we tried to provide some additional information towards the end of the quarter to at least provide a little more context to everyone. So if you start on Page 24, we actually provided what the -- what I'll call the base yield or coupon of our loan portfolio as of June 30, which was 5.37%. So that excludes any accretion from purchased loans, any fees, any prepayment penalties, anything like that. So it's not the reported number, and you can tell it's -- there's a lot that goes into that.
But you can see the difference between March 31 and Slide 14 to see the sort of the lift of both the loans we acquired and what we've seen over the quarter in terms of improvements. On Page 25, we gave a lot more color around our organic growth in there. And as we mentioned, we've been generating loans at yields approximately 6%. If you go to Page 29 in the investment portfolio, we're demonstrating what the book yields were at the end of the quarter as well as the principal runoff and the coupons on that runoff on that chart for you as well.
On the deposit side on Page 30, you'll see the point-in-time cost of deposits and repos at the end of the month. So hopefully, that will help you as well. And you also see that on Page 32. And so we also provided a little more color around interest rate risk on Page 34. And I think you can get a sense from there of some of the back book. And there's the same chart we had from last quarter in our appendix, which shows the scheduled payments of our loans over the next number of periods and what the runoff coupons are. Of course, we see a lot more prepayment than that. So it will probably be larger than that. So hopefully, you can utilize that information to help you with your forecast.
[Operator Instructions] And our next question will come from the line of David Feaster with Raymond James.
I wanted to start out with the integration completed now, I wanted to -- I was hoping you guys could elaborate a bit about what's on the docket for the Heritage team. You touched on some opportunities maybe in the trust and wealth side, some increasing capacity with existing clients as you deepen the relationships there and some lending opportunities. But I'm just kind of curious, with the integration completed now, like what are you focused on? And where do you see the most opportunity near term?
Yes, I'll start and then Clay can add on. So just a couple of things. Obviously, the systems conversion was an important step to bring them on to the CBB platform. There's still work to be done, and we're still working on those things. There are some, as Clay mentioned, just process stuff that we'll continue to work on through September, October time frame. But all in all, it's business as usual. They're dealing with one-off customer situations and those types of things, and there's still work to be done there.
But all in all, I think it's gone pretty well. And Heritage, previously, like us, as Clay mentioned, they went after the best customers, the best relationships in their markets, very similar to us. I mentioned previously in calls that in our original credit due diligence and moving forward now that everything is on our platform, we can see that the book was very similar. The type of relationship was very similar. There are differences in how we do things, and they're still learning that. It doesn't happen magically on June 22.
But at the end of the day, we'll continue just to integrate not only from a process standpoint, but from a culture standpoint and how we view all of this. So I do think that for the former Heritage associates, there's going to be a lot of opportunities for them to do things that they maybe couldn't have done before. So we have to get through this initial stage, but we'll continue to work on the integration, both process, culture, everything else. So...
Yes. No, David, the only thing I would add is there's a number of things that we had on the former Heritage road map that were accelerated through the merger and integration. And those things included everything from CRM tools to sourcing, production tools, not least of which there are revenue synergies around wealth management, international, mortgage, those that I touched on before that we did not have in our toolbox prior to the integration.
And so now we've got those full set of tools ready for the team. And we've already seen revenue benefits from those that obviously weren't in the model, but are revenue synergies going forward. So as David said, there is good momentum in there, but there's a lot of things in front of us that we're still working through today, but also are in front of us in terms of opportunities '27 and beyond.
And then obviously, look, there's a lot of moving parts on the deposit side. You talked about some of the intentional moves, broker deposits. Kind of curious, how do you think about deposit growth opportunities across the footprint in the deposit pipeline today? And how do you balance defending deposit costs in your low-cost core deposit base versus growing deposits -- growing core deposits, especially as competition is kind of intensifying?
Yes. I think there's a couple of pieces there. And as you said, there are a lot of moving parts on the deposit side. Most of the questions are always around loans and that process. But historically, we've grown core deposits, noninterest-bearing deposits in that kind of 3% range. So I don't think there's really that much difference in what's going to be happening going forward. I think it's just making sure that we continue to focus on the strength of our organization, which is our deposit book.
And we'll continue to streamline that. Look, we customize every solution. Heritage customized every solution. The way we did it was slightly different. But ultimately, that will align with how Citizens Business Bank looks at it, but we want to protect relationships at the same time. So it's not like we just flip the switch and do it. There will be a process that we go over both with the deposit side, the loan side, all of everything that we're doing from a revenue side.
So I think the simple answer to your question is I don't foresee it changing from what's been historical for us. We're not going to compete on high-priced CDs or just be the highest provider out there. Clay is disappointed in that, just kidding. But we're not going to compete on that stuff. And the bankers are incented to bring operating companies and operating deposits. And so once they figure out all of the moving parts, we'll be back to full strength on that side as well. Our deposit pipeline still remains strong as well. So there is good momentum for us with our type of deposit relationship, and we'll just continue to work towards that. So I don't know if you have anything to add.
Yes. No, the only thing I would add is we have a very disciplined approach to relationship pricing and deposits. And yes, need to defend those that are valued clients in the book. But I think our disciplined approach continues pre and post conversion here. Last thing I would just say is through the integration and conversion, we did move to an enhanced online banking system here at Citizens. And so the legacy Heritage customers are receiving the benefit of a very more -- a very deeper, more robust online banking platform. And so we have deep integration into our customers from a full-service banking platform.
And maybe just last one. Look, you guys have been active managing the securities book. You've done that in the past. You've been investing. We talked about some of the investment of the excess liquidity. I know there's really no optimization included in the initial pro forma guidance, but I'm curious, how do you think about additional balance sheet optimization opportunities as you think about capital deployment and supporting the NIM just in addition to maybe some more of the mechanical tailwinds that Allen, you talked about?
Yes, David, on the wholesale funding side, we did some things in the quarter. I alluded to the fact that we have some of those also maturing through early 2027. And we'll evaluate it, but I think we'll continue to -- unless there's an opportunity to better position us from an interest rate risk perspective, we're likely not to replace those wholesale funding. So that would improve our cost of funds slightly.
I think on the investment side, it's just really a function of how we're doing on loan and deposit growth. We have a lot of cash flow coming out of that portfolio that can be redeployed at much higher yields than what the portfolio is currently. But we've also been focused and one of the reasons we put a chart in our IP deck is reducing the duration of that portfolio. And so we've been adding more variable securities, more hybrid ARMs, things like that to overall reduce the duration of the bond portfolio.
I'm showing no further questions at this time. I would now like to turn the call back over to Mr. Brager for any closing remarks.
Thank you, Sheri. With the systems integration behind us, we will continue to focus on our vision of serving the comprehensive financial needs of small- to medium-sized businesses and their owners. We now operate in every major economic market of California, and we'll continue to deliver our relationship-focused banking model throughout the state. The Citizens Business Bank team remains focused on building long-term relationships within the communities we serve.
Our consistent financial performance is highlighted by the 197 consecutive quarters of profitability and the 147 consecutive quarters of paying cash dividends.
I would like to thank our associates for their outstanding efforts and commitment during the systems conversion. I would also like to thank our customers for their continuing loyalty. Thank you for joining us this quarter. Appreciate your interest and look forward to speaking with you in October for our third quarter 2026 earnings call. Have a great day.
This concludes today's program. Thank you all for participating. You may now disconnect.
CVB Financial Corp. — Q2 2026 Earnings Call
CVB Financial Corp. — Shareholder/Analyst Call - CVB Financial Corp.
1. Management Discussion
Good morning, and welcome to the CVB Financial Corp, 2026 Annual Meeting of Shareholders. [Operator Instructions]
Please note this event is being recorded. As a reminder, kindly silence your phone or device. I would now like to turn the conference over to David Brager, Chief Executive Officer of CVBF and Citizens Business Bank. Please go ahead.
Thank you, and good morning, and welcome to our 51st Annual Meeting of Shareholders for CVBF. I'm David Brager, the Chief Executive Officer of CVBF and Citizens Business Bank. I would like to announce that how Oswalt, Chairman of the Board, will preside over the meeting and that Dana Rees will serve as Assistant Secretary of the meeting. Any shareholder attending this meeting in person who wishes to vote their shares in person, or has not yet submitted their proxy, should please see Dana Rees, who is to my left. I would like to introduce Hal Oswalt to say a few words.
Thank you, Dave. I would like to extend a warm welcome to our shareholders and in particular, our new shareholders who have come to us as a result of our merger with Heritage Commerce Corp and Heritage Bank of Commerce, which closed on April 17, 2026. While our merger with Heritage was completed after the day for shareholder voting, at this annual meeting of CVB Financial, I want to reiterate how excited we are to combine our 2 organizations and to celebrate the addition of Heritage's stellar associates and customers to create a more powerful and extended banking franchise.
I would also like to note two things. One, our meeting format includes both in-person attendance and conference call facility and that the agenda will generally be limited to mandatory corporate and housekeeping matters with the opportunity for shareholder questions, but only at the end of the meeting. As our custom I would like to leave those that are present today in the pledge of allegiance to our plan.
I pledge allegiance to the flag of the United States of America and to the Republic which it stands, One Nation Under God, Indivisible, with liberty and justice for all. Thank you.
I'd like to announce the selection by the Board of Directors of Mark Cano of Computershare as inspector of elections and ask Mark to identify himself to those present at the meeting.
Thank you, Mark.
May I have a motion to ratify the appointment of Mark Cano as Inspector of Elections. Do I have a second? All those in favor, please say aye.
2. Question Answer
Aye.
Nye opposed. Thank you. I would now like to introduce our Board of Directors in addition to Dave Brager and myself. First, George Borgt, Jr; our Vice Chairman; Ray O'Brien, our past Chairman, Steve DelGercio, Jane Majors, Anna Khan, Tim Stevens, and a special recognition of Clay Jones and Julie Vigini come to us from Heritage. And also I want to congratulate Clay as becoming our new President. Welcome. Clay.
Lastly, I want to thank Kim Sheehy, served on our board and chair the Audit Committee. It completes our service with our company immediately prior to this meeting. Kim has been an outstanding colleague and contributor to our organization, and we wish her the best in the future. So I'd like to now hand the gabble back and microphone back to Dave Brager, our CEO.
Thank you, Hal. Due to the hybrid in-person and virtual nature of the meeting, I will not be making a formal presentation, but I would point you to our April 2026 investor presentation, our 2025 Form 10-K and our 2026 1st quarter Form 10-Q for any information you would like to have concerning CVB Financial Corporation and Citizens Business Bank. I would also like to reiterate how enthusiastic welcome to our new associates, customers and shareholders from Heritage. This was our company's largest merger in terms of asset size in our history at $5.6 billion, and it represents the combination of 2 premier business banking organizations. We're particularly excited to extend our Citizens Business Bank franchise into the Bay Area, which achieves our long-standing goal to be a significant presence in every major metropolitan market in the state of California.
Citizens Business Bank has a long and proud track record, and this is our 51st Annual Shareholders' Meeting since our founding in 1974. We're proud of the remarkable growth we've achieved over this period and the returns that we've earned for our investors while at the same time maintain a fundamentally safe and sound financial institution. We're equally proud of the thousands of customers we serve and their loyalty to our bank, the opportunities we provide to our valued associates and the positive role we play and plan to continue to play in our numerous communities throughout the state of California, including the new ones we've entered into as a result of our recent merger with Heritage.
I would ask that any questions from our shareholders should be reserved until the end of the meeting. I would also request that anyone with questions, please limit yourself to 1 question and 1 follow-up question, if needed. So that all participants are treated equally.
I would now like to introduce Richard Wohl, our General Counsel, to take us through the procedural items for the meeting. Richard?
Thank you, Dave. Good morning, everyone. I will now move to the official business and legal portion of our 2026 Annual Shareholders Meeting. Before we proceed to completing the business items for today's meeting, there are 2 procedural matters that we need to address. The first one is the reading of the legal notice of this annual meeting. A Computershare, the company's transfer agent has provided me with an affidavit regarding the mailing of the legal notice of meeting.
States that notice of this annual meeting with instructions on how to obtain copies of the proxy materials was mailed on or about April 7, 2026 to all CVB Financial Corp shareholders of record on March 26, 2026. This affidavit is available here at our corporate headquarters, if any shareholder wishes to examine it, and it will be filed with the minutes of this annual meeting.
To keep things moving along quickly, at this time, I would like to entertain a motion to waive the reading of the legal notice. Do I hear such a motion?
[ Motion ]
Thank you, Do I have a second. Thank you. All in favor, please signify by saying, Aye.
Aye.
Oppose nay. The motion carries. The second procedural item we need to address is the quorum report. I converted with Mark Connell, our Inspector of Elections, who's advised me that the number of shares of CVB Financial Corp outstanding on the record date of March 26, 2026, for this annual meeting is 135,784,880.
In this regard, it bears pointing out that as of today, due to closing of our merger and acquisition transaction with Heritage on April 17, 2026, CVB Financial Corp has approximately 176 million shares outstanding. However, because, as noted, our record date for this annual meeting was March 26, 2026, which date was prior to the closing of our Heritage merger and acquisition. The number of shares of CVB Financial Corp outstanding on that date, the record date was 135,784,880.
So with reference to that smaller number of record date outstanding shares, shareholder votes that are present by proxy and in person for this meeting are 114,696,695 which constitute 84.5% of our then outstanding shares. This means that the shares which are present and voting in person or by proxy, constitute at least a majority of CVB Financial Corp.'s outstanding shares as of the record date of March 26, 2026. I'm pleased to report that we have a quorum of shares represented and voting at this annual meeting.
Now let's move to address the actual business items that are the subject of today's Annual Meeting. As forth in our notice of annual meeting, there are 3 items of business to be conducted as well as an election of 10 nominees for our Board of Directors. Number two, to approve on a nonbinding advisory basis, the compensation of the company's named executive officers for 2025. That's our say-on-pay resolution; and number three, ratification of the appointment of KPMG LLP as our independent ledger public accountants for CVB Financial Corp for the year ending December 31, 2026.
The first item of business is the election of 10 persons to serve a 1-year term on the company's Board of Directors and until their successors are duly elected or chosen. Asset forth in the notice of the annual meeting. The Board has nominated the following 10 persons to serve as directors of the company. Juliann BiginiComas, George Borgt, Jr.; David Brager, Stephen Del Curcio, Anna Khan, Clay Jones, Jane [ OlBbera ] Majors, Raymond O'Brien, Hal Oswalt and Timothy Stevens. May I have a motion to place the nomination of the board's 10 nominees.
Okay, may have a second. Thank you. The procedures for shareholders to nominate individuals to serve on the Board of Directors are set forth in our corporate bylaws, which we'll reference in the notice of this meeting. I've been advised that no shareholder nominations were otherwise received by CVB Financial Corp and therefore, the only nominees for Director or the Board's 10 nominees.
May I have a motion to close the nominations.
Motion.
May have a second.
Second.
Thank you. So the motion on the floor is be it resolved that the 10 nominees whom I announced be and they hereby are elected to serve as members of the Board of Directors of CVB Financial Corp until our 2027 Annual Medium shareholders and until their successors have been duly elected and are so qualified.
I confer with Mr. Cano, the Inspector of Elections, advises me that each of the Board's nominees has received at least 94,760,760 votes or 96% in favorable election and that no other person has received any votes. Since each nominee has received a plurality of the votes cast, they're all elected for another 1-year term. Congratulations to our directors.
Our second item of business is a proposal to ratify the compensation of the company's 5 named executive officers for our 2025 fiscal year. This say-on-pay proposal is explained in further detail in our proxy statement and by a separate vote of our shareholders taken at our annual meeting in 2023, it has been established that this item shall be placed on the annual media agenda for a vote by our shareholders on an annual basis, so every single year.
Hopping so this resolution covers the compensation for our named executive officers for the most recent fiscal year of the company ended on December 31, 2025. The component elements of our individual named executive officers' compensation, the metrics for determining their performance, the amounts paid for each component element and the total amounts paid are all set forth in detail in our proxy statement.
Please note that this shareholder vote is advisory only and thus is nonbinding on the company, although our Board will, of course, consider the views of our shareholders and setting our compensation plans for our named executive officers.
At this time, I would entertain a motion to ratify the compensation of our 5 named executive officers for the company's most recent fiscal year. Do I hear such a motion?
Motion.
Thank you. Do I have a second?
Aye.
Thank you.
The motion on the floor is be it resolved that the compensation paid to the company's named executive officers for 2025, as disclosed in our proxy statement, pursuant to the compensation rules of the Securities and Exchange Commission, as set forth and Item 402 of Regulation S-K, including the compensation discussion and analysis, the summary compensation tables and the related narrative discussion be hereby approved.
I confer with Mr. Cano, who advises me that on this proposal, voting in favor were 92,117,170 shares or 93.2%, voting against were 6,455,002 shares 6.5% and abstaining were 284,693 shares or 0.3%. Since the number of shares voting in favor of the proposal exceeds a majority of the shares represented in voting at the meeting with the affirmative votes constituting a majority of the required quorum, this nonbinding advisory proposal passes.
Our third and final item of business is a proposal to ratify the appointment of KPMG LLP as the company's independent public accountants for the company's 2026 fiscal year. This proposal is also explained in further detail in our proxy statement for this annual meeting. At this time, I would entertain a motion to ratify the appointment of KPMG LLP as the company's independent public accountants for the company's 2026 fiscal year.
Do I hear such a motion?
Motion.
Do I have the second?
Second.
Thank you. The motion on the floor is be it resolved with the appointment of KPMG LLP as the company's independent public accountants for the fiscal year ending December 31, 2026, be and hereby is ratified and approved. Again, I confirm to Mr. Cano, who advises me that on this proposal, voting in favor 114,187,374 shares or 99.6% against 403,538 shares or 0.3% and abstaining 105,783 shares or 0.1%.
Since the number of shares voting in favor of proposal exceeds a majority of the shares represented in voting at the meeting with the affirmative votes constituting a majority of the required quorum, the proposal passes.
That concludes the business portion of today's annual meeting. Thank you, and I'll now turn the meeting back over to Dave Brager.
Thank you, Richard. Any shareholder questions from this room or via our conference call facility should be addressed to me and should relate to matters on the annual meeting agenda. We will address any questions from individuals who are present here in the room first and then move to any questions by telephone. If there are any questions posed by persons here in the room, we will repeat them for the benefit of those of you participating by telephone.
Questions should be asked only by shareholders and each person asking a question should identify themselves either in person or over the telephone by stating their name and affirming that they are a shareholder. So that we can be fair to all shareholders who may have a question, each person is requested to limit himself or herself to 1 question plus a follow-up only if needed on the same topic and to limit his or her questions to a maximum of 1 minute.
Please allow for a complete response before seeking to ask any follow-up question. Operator, we're now ready to take questions. Are there any questions in the room first? No questions in the room. Operator, we're now ready to take questions from the phone.
There are no questions over the phone.
Is there any other business to come before this meeting? If not, I will turn it over to Hal Oswalt for closing.
Thank you, Dave. Once again, I would like to reiterate how excited we are regarding our transformational merger with Heritage. In concluding this meeting, we'd like to thank the bank's associates, our directors and our shareholders for their continued loyalty and support. We hope everyone stays safe and healthy.
At this time, I would entertain a motion to adjourn the meeting.
Motion.
May I have second?
Second.
All in favour?
Aye.
We are adjourned.
The Annual Meeting of Shareholders has now concluded. Thank you for participating.
CVB Financial Corp. — Q1 2026 Earnings Call
1. Management Discussion
Good morning, ladies and gentlemen, and welcome to the First Quarter of 2026 Earnings Conference Call for CVB Financial Corporation and its subsidiary, Citizens Business Bank. My name is Sherry, and I'm your operator for today. [Operator Instructions] Please note that this call is being recorded.
I would now like to turn the presentation over to your host for today's call, Allen Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.
Thank you, Sherry, and good morning, everyone. Thank you for joining us today to review our financial results for the first quarter of 2026. Joining me this morning is our Chief Executive Officer, Dave Brager; and our President, Clay Jones.
Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com, and click on the Investors tab. The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2025, and in particular, the information set forth in Item 1A Risk Factors therein. For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call.
I'll now turn the call over to Dave Brager. Dave?
Thank you, Allen. Good morning, everyone. For the first quarter of 2026, we reported net earnings of $51 million or $0.38 per share, representing our 196th consecutive quarter of profitability, which is every quarter for 49 years. We previously declared a $0.20 per share dividend for the first quarter of 2026, representing our 146th consecutive quarter of paying a cash dividend to our shareholders. We produced a return on average tangible common equity of 13.4% and a return on average assets of 1.33% for the first quarter of 2026. Our net earnings of $51 million or $0.38 per share compared with $55 million for the fourth quarter of 2025 or $0.40 per share and $51.1 million or $0.36 per share for the prior year quarter.
Results of the first quarter of 2026 reflects solid growth year-over-year across several financial metrics, including pretax pre-provision income growth, net interest margin expansion, loan growth and growth in deposits and customer repurchase agreements.
Pretax pre-provision income grew by $4 million or 6% over the first quarter of 2025. Our net interest margin expanded by 13 basis points over the prior year quarter to 3.44% as our earning asset yields increased by 7 basis points, while our cost of funds decreased by 7 basis points. Average loans grew by $157 million or approximately 2% from the first quarter of 2025. We also increased our average total deposits and customer repurchase agreements by $288 million or 2.4% from the first quarter of 2025. Now let's discuss loans further.
Total loans at March 31, 2026, were $8.64 billion, a $280 million or 3.3% increase from the end of the first quarter of 2025. This increase was driven primarily by growth in commercial real estate loans of $141 million, a $62 million increase in dairy and livestock and agribusiness loans and a $43 million increase in construction loans. We also had $34 million of growth in SBA 504 loans and C&I loan outstandings increased by $10 million over the prior year. Total loans declined by $56 million from the end of 2025 as dairy and livestock and agribusiness loans declined by $117 million due to the seasonal peak and line usage that occurs every calendar year-end. The seasonal decline is evident by the decrease in line utilization rate from 78% at the end of 2025 to 69% at March 31, 2026.
C&I loans decreased quarter-over-quarter by $21 million as line utilization decreased from 32% at the end of 2025 to 30% at the end of the first quarter of 2026. Partially offsetting the decline in line usage from the end of 2025 was commercial real estate loan growth of $57 million, SBA 504 loan growth of $13 million and construction loans increasing by $22 million. Loan originations have started off the year at a strong pace as originations for the first quarter of 2026 were approximately 90% higher than the first quarter of 2025 and 15% higher than the fourth quarter of 2025. Our loan pipelines remain relatively strong, although rate competition for high-quality loans continues to be intense.
C&I loan originations have stayed relatively consistent over the past 5 quarters, but commercial real estate loan originations have been strengthening. Loan originations in the first quarter had average yields of approximately 6%, which was roughly 25 basis points lower than the prior quarter.
Our average loan yield was 5.32% for the first quarter of 2026, compared to 5.47% for the fourth quarter of 2025 and 5.22% for the first quarter of 2025. During the fourth quarter of 2025, we collected $3.2 million of interest on a nonperforming loan. Excluding this additional interest income, our loan yield would have been 5.32% for the fourth quarter of 2025. We experienced $9,000 of net recoveries during the first quarter of 2026, compared to $325,000 of net recoveries for the fourth quarter of 2025.
Total nonperforming loans increased by $1.5 million to $6.1 million at March 31, 2026, which represents 0.07% of total loans. The increase is primarily due to the downgrade of a $2.9 million C&I loan for which we established a specific reserve in our allowance for credit losses.
Classified loans were $83.1 million at March 31, 2026, compared to $52.7 million at December 31, 2025, and $94.2 million at March 31, 2025. Classified loans as a percentage of total loans were less than 1% at March 31, 2026.
Now on to deposits. Our average total deposits and customer repurchase agreements for the first quarter of 2026 were $12.5 billion, which compares to $12.2 billion for the first quarter of 2025, and $12.6 billion during the fourth quarter of 2025. Our noninterest-bearing deposits declined on average by $112 million compared to the first quarter of 2025 and by $107 million compared to the fourth quarter of 2025. On average, noninterest-bearing deposits were 58% of total deposits for both the first quarter of 2026 and the fourth quarter of 2025, compared to 59% for the first quarter of 2025.
Interest-bearing non-maturity deposits and customer repurchase agreements grew on average by $400 million from the first quarter of 2025. Our cost of deposits and repos was 82 basis points for the first quarter of 2026, compared to 86 basis points for the fourth quarter of 2025 and 87 basis points for the year ago quarter.
I will now turn the call over to Allen to further discuss additional aspects of our balance sheet and income.
Thanks, Dave. Pretax pre-provision income was $71.6 million in the first quarter of 2026, compared to $71.9 million in the fourth quarter of 2025 and $67.5 million in the first quarter of last year. After adjusting for acquisition expense and gains on OREO, our operating income grew from the first quarter of 2025 by $8 million, reflecting positive operating leverage of 6%. The growth in operating income was driven by growth in net interest income of $7.4 million by 7% rate of growth.
Net interest income was $117.8 million in the first quarter of 2026, compared to $122.7 million in the fourth quarter of '25 and $110.4 million in the first quarter of 2025. Interest income decreased from the fourth quarter of 2025 by $6.9 million due primarily to 2 fewer calendar days in the first quarter, a $134 million decrease in earning assets and the $3.2 million of non-accrued interest paid during the fourth quarter. Interest income increased from the first quarter of 2025 by $6.1 million as our earning asset yield increased by 7 basis points from 4.28% to 4.35%, and our average earning assets increased by $336 million.
Interest expense declined from both the prior quarter and the prior year quarter. Interest expense was $31.3 million in the first quarter of 2026, compared to $33.3 million in the fourth quarter of 2025 and $32.6 million in the first quarter of 2025. Our cost of funds decreased from 1.01% in the fourth quarter of 2025 to 97 basis points in the first quarter of 2026. Our cost of funds was 7 basis points lower than the first quarter of 2025, even though the average balance of interest-bearing deposits and repos increased by $400 million.
Noninterest expense -- noninterest income was $14.3 million in the first quarter of 2026, compared to $11.2 million in the fourth quarter of 2025 and $16.2 million in the first quarter of 2025. The fourth quarter of 2025 included a $2.8 million loss on the sale of securities, while the first quarter of 2025 included a gain on sale of OREO of $2.2 million. The quarter-over-quarter increase in noninterest income also included a $1.1 million increase in the cash surrender value of bank-owned life insurance.
Trust and investment services income grew by $313,000 or 9% from the first quarter of 2025, but decreased by $307,000 over the fourth quarter of 2025 due to lower brokerage fee income. Our allowance for credit loss was $80.2 million at March 31, 2026. In comparison, our allowance for credit losses was $77 million at December 31, 2025. The $3 million increase in the allowance was primarily due to the establishment of a specific reserve totaling $3.2 million.
Our economic forecast continues to be a blend of multiple forecasts produced by Moody's. We continue to have the largest individual scenario weighting on Moody's baseline forecast with both upside and downside risks weighted among multiple forecasts. The resulting economic forecast at March 31, 2025, was modestly different from our forecast at the end of 2025 -- I'm sorry, the resulting economic forecast at March 31, 2026 was modestly different than the forecast at the end of 2025.
Real GDP is forecasted to be below 1% in the second half of 2026 and stay below 2% through 2027. The unemployment rate is forecasted to reach 5% by the middle of 2026 and remain above 5% through 2028. Commercial real estate prices are forecasted to continue to decline through the end of 2026 before experiencing growth in the back half of 2027.
So switching to our investment portfolio. Investment securities totaled $4.8 billion at March 31, 2026, a $116 million decrease from the end of 2025. Available for sale or AFS investment securities were $2.59 billion and our held-to-maturity investments totaled $2.25 billion. The unrealized loss on AFS securities increased by $2 million from $308 million on December 31, 2025, to $310 million. Our $700 million in fair value hedges generated negative carry in the first quarter of 2026, resulting in a $1.1 million and $750,000 decrease in interest income compared to the first and fourth quarters of 2025, respectively.
Now turning to our capital position. At March 31, 2026, our shareholders' equity was $2.3 billion, a $93 million increase from the first quarter of 2025, including the $52 million increase in other comprehensive income. The company's tangible common equity ratio was 10.5% at March 31, 2026, while our common equity Tier 1 capital ratio was 16.3%. Our tangible book value per share increased over the last 12 months by 9% from $10.45 at March 31, 2025, to $11.42. I'll now turn the call back to Dave for further discussion of our expenses.
Thank you, Allen. Noninterest expense for the first quarter of 2026 was $60.6 million, which includes $1.1 million in onetime merger acquisition of Heritage Bank of Commerce and $500,000 in provision for off-balance sheet reserves. Regulatory assessment expense decreased by $1.6 million as a result of the unwinding, the remaining accrual for the special FDIC assessment. Excluding acquisition expense and the provision for off-balance sheet reserves, the level of core operating expense was essentially flat to both the prior quarter and the first quarter of 2025. Our efficiency ratio was 45.8% in the first quarter of 2026, compared to 46.3% in the fourth quarter of 2025 and 46.7% in the first quarter of 2025.
Noninterest expense, excluding acquisition expense as a percentage of average assets totaled 1.55% for the first quarter of 2026, compared to 1.53% in the fourth quarter of 2025 and 1.58% for the first quarter of 2025.
This concludes today's presentation. Now Allen and I and Clay will be happy to take any questions that you might have.
[Operator Instructions] And our first question will come from the line of David Feaster with Raymond James.
2. Question Answer
I wanted to start on the deal and welcome to the call, Clay. So I know we're only a week into this, but I just wanted to get a sense of how to [indiscernible]. How has it gone thus far? Like what are your top priorities just in these first few weeks after the deal is closed from an operational perspective? And Dave, I know like the goal is always to CVB, the bank. Like where are you focused initially and you see the most opportunity to add value?
Yes. So I think initially, David, obviously, we're just trying to acclimate all the new associates that have joined us through the merger. So Clay has been -- Clay and his team, the former Heritage folks have been drinking through a firehose. There's a lot of training, a lot of information that's going on. We're looking at how we set up accounts, how we structure relationships. All of those things are part of that initial time frame. Clay and Julie, who joined our Board, were in our first Board meeting yesterday. So they're getting acclimated. Clay is going to be spending a lot of time down here. We'll be spending a lot of time together. We've sort of restructured the organization to involve the new senior leaders that are joining us, Clay and his former senior leadership team that are remaining.
So there's just a lot of education about the culture of our bank, the way we do things. And that's not an event, it's a process. So it's going to take some time to do that. But all in all, things went very well on closed weekend and it will continue to get easier and better as we go forward. But I'd love to Clay can give his perspective as well.
Yes, David, I think, Dave, the integration is going just fine. As Dave said, the team is just getting acclimated to new reporting lines and new systems and reporting lines. So it's all going just fine. I think the primary focus we have is one, staying close to our customers and clients and making sure that they hear from us often and also just keeping a close eye on our associates to make sure that they're keeping pace with the integration and the training.
Okay. That's great. And I know we didn't include much in the way of optimization. Look, the deal gives you a ton of financial flexibility, right? Didn't really include any optimization in guidance outside of maybe some of the purchase mortgages that we talked about. With the deal closed, and all this financial flexibility, has your thoughts changed at all about opportunities to optimize things or deploy excess liquidity just given the fully marked balance sheet?
David, you're right. We do have some ability to restructure the balance sheet a little bit. We have announced and do have a sale in place for the single-family mortgage pools of Heritage. Beyond that, we're still evaluating it. I think we'll come out of the quarter with a balance sheet and a plan that you'll be able to see on the next quarterly earnings. But a lot of moving parts right now because it does give us a fair amount of optionality.
Okay. And then just last one for me. The commentary on the origination activity is extremely encouraging. I wanted to dig into that a bit. How much of the improvement that you're seeing is you gaining share at this point and your bankers being more productive versus improving demand? And just kind of curious, how do you think about the growth outlook, just in light of the competitive landscape that you alluded to, which it sounds like it's primarily on the pricing side. And then just again, the expansion in the Bay Area?
Yes. Well, obviously, we're not going to compete on the credit quality side. We're going to maintain that pristine credit quality. And when you're fighting for those types of deals, you have to price them in a way that you can win them, assuming that you're monetizing the rest of the relationship as well. But I think, initially, I would say, to answer your question more specifically, I would say, initially, it was just there was more opportunity out there.
I think what's happened over the last couple of quarters, for example, and with the increase in the opportunities that we're seeing, I think that we're in a very good position from a liquidity perspective, from a market perspective. Obviously, from the Heritage -- the former Heritage perspective, there's some significant opportunity there just with the capacity of the combined organization relative to hold limits, house lending limits, those types of things.
So we view it as very positively. We need to get them integrated and understand how we look at it. But from a credit perspective, very similar. From a pricing perspective on the lending side, very similar. On the deposit pricing side, that's probably a little more work that we're going to have to do ultimately. But at the end of the day, we're going after the same types of relationships. We were going after the same types of relationships. So I think it's our people recognizing that, hey, we're ready, but a lot of it is just -- there's a lot going on out there, but there's a lot of competition. So that's primarily why even though in some ways, the treasury rates have gone up a little bit, and our loan origination yields have gone down slightly just because we're having to compete if we want to win.
Is our pipeline still holding up pretty solid? And do you think you can kind of hold new origination yields in the 6% realm?
Yes. I mean, I would say that it's going to be around that 6% range going forward. Obviously, it depends on the mix of real estate versus C&I and then the utilization of that because we're actually getting better rates on the C&I stuff than on the real estate stuff. And that was part of the reason the net interest margin -- well, there's a lot of -- the Fed lowered rates in December, there was a number of things that happened, and our yields stay the same, essentially the same if you exclude the NAIP. And so I think that was a big victory for us.
And if this loan demand remains and we're continuing to book what we've been booking, I think that's a big tailwind for us as we keep going through the year. But yes, pipelines are holding up and there's plenty of opportunities for us out there for the right relationships.
And that will come from the line of Kelly Motta with KBW.
Maybe building upon David's question, I do appreciate the color on pipelines, and it's all quite encouraging. I'm wondering in your markets, if you're seeing any increased competitive dynamics. Notably, I think, growth at Wells was a lot stronger with the asset cap coming off. I'm just wondering if there's been any notable shifts or change in dynamics in your markets?
Yes. I don't know if I would say there's been any noticeable shift. I mean it's always extremely competitive, especially for the types of relationships that we're looking for. There are some banks, you mentioned Wells Fargo. I would -- there's other banks. Pac Premier was not as active for the last few years. Columbia is going to be much more active. I mean there's a number of organizations. The Fifth Third, the regional banks, BMO. There's a number of banks that are coming into our market. And plus, you always have the big guys. And so I think there is maybe some increase at the higher end of sort of our typical type relationship we go after, but it's not significantly different than before. I don't know, Clay, do you want to.
No. I echo Dave's comments here. The market continues to be very competitive. I don't think there's been any recent shifts in competitive nature of the clients that we go after. In the Bay Area, it continues to be just as competitive as it is here.
Yes. And Kelly, I would just say this, we're -- our bankers are most successful in their new customer origination, new relationship origination business, it's with the biggest banks. We provide a super high level of service that allows us to compete. We have the product array. And I think that's another sort of tailwind from the Heritage merger as far as both combined organizations being able to provide that wide array of products and services to our relationships and prospects. So there are some very positive things that are occurring. And as we get everybody integrated and acclimated, it should improve.
Got it. That's really helpful color. Turning to capital, your levels should still be quite robust pro forma for the merger just closed. You had been a bit active in the buyback prior to announcing the deal, which put that on hold. Wondering any updated thoughts on capital management, buybacks, future deals, the works?
Yes. So I'll sort of start with the tail end of your question first. Look, we want to make sure we integrate Heritage appropriately. That is our #1 focus. So unless there's something that's really unique or an opportunity that's really unique and something we've been looking at, I would say we're more focused on the integration of Heritage than additional M&A. We do recognize that we have an enormous amount of capital. And prior to us getting in conversations with Clay and Heritage, that was something that we were very active in, and we repurchased 4.2 million shares last year, and we'll continue to evaluate that.
Obviously, the combined company's earnings, we'll be looking at the dividend, ultimately. This quarter is really where we're going to get all that, Allen can opine on this as well, but we're going to get the balance sheet set up the way that we want to set up and then we'll be working on those capital management things. And definitely, buybacks are going to be part of that strategy going forward. So I don't know, Allen, do you have anything you want to add?
Kelly, as Dave said, it will be noisy in Q2, a little bit more noise in Q3. But as we get into Q3, I think we'll have a lot more visibility into our capital. And of course, as you pointed out, our pro forma is already very strong. And historically, we've been able to generate a lot of organic capital. And we'll definitely have to evaluate all those things that Dave mentioned.
Got it. If I could just slip it in as a follow-up. You mentioned the resi mortgage, it's held for sale right now. Do you anticipate that off the balance sheet by quarter end? Or is there a possibility that could stick around a bit longer than perhaps we expected at announcement?
No, we do expect it to be off the balance sheet by the end of the quarter.
And that will come from the line of Matthew Clark with Piper Sandler.
I want to start on the C&I credit that you assigned some specific reserves to, and then the other classified credits that migrated. I know classified overall still sub 1%, but just wanted to get some color on what happened there and your plans for resolution and timing, if possible?
Yes. So I'll start with the nonperformer. So that C&I loan was impacted by one of their customers who declared bankruptcy. So we have shored up our collateral position. We did put a specific reserve because at the time we had not shored up the collateral position in the way that we wanted to. So I don't really anticipate -- there could be some challenges there, but we're very proactive when we grade things and when we look at things and how we classify them. So just being very transparent, it's -- for lack of a better term, they're a marketing company for a larger organization and they sell agricultural products. So it's something that we've been involved with since one of these customers, but we just wanted to make sure that we elevated it to that level.
As far as the classified loans, it's really centered in two relationships. They both happen to be C&I. We're in very good collateral positions in both of those deals. That makes up the majority of the increase in the classified loans. One of the companies is in the midst of a sale and that could happen. I mean we're obviously prepared if it doesn't. But they're both within their collateral guidelines, and we think one of them, it's just a situation with the operations, and they're working hard on that. So again, just being very proactive, and it's something that happens now and again. And -- but nothing systematic or endemic of the rest of the portfolio. These are just 2 separate situations.
Okay. Great. And then just a few housekeeping items. Do you plan to do the CECL double count here in 2Q, resulting in an outsized provision? Or are you not [indiscernible]?
Matthew, we elected the new accounting, so there won't be a double count.
Okay. Great. And then accretion expectations. I know the marks can still move around a little bit, but I assume you have preliminary marks at this stage. Any guesstimate, I mean we have our own, but I just wanted to check in to see what you thought may be quarterly or normal accretion -- normal accretion might be per quarter?
Too early, Matt. Too early, sorry. We'll have -- we'll be able to give you better answers next quarter.
Okay. And then just -- I think there was a special FHLB dividend. Can you just quantify that this quarter?
I think it was about $400,000.
And that will come from the line of Andrew Terrell with Stephens.
So maybe just wanted to start off. I know you guys don't generally guide, but with the merger closed in the second quarter, the kind of range of forecast for the margin for 2Q are pretty widespread. I was hoping you could maybe just help us out. I don't know if you have kind of day 1 pro forma margin, what the general kind of impact is to your reported margin when you layer in Heritage. Just any kind of guardrails you could put kind of around margin expectations for us?
Andrew, once again, sorry, it's a little bit too early. As Dave said we closed 4 days ago. We did include on Page 31 of the investor presentation, the pro forma loans and deposits for the combined organization, excluding the mortgages we're selling. So at least, I mean, you can look at that from a starting point, but we are still evaluating the balance sheet in terms of what we're going to do with repositioning the bond portfolio, repositioning some of our wholesale funds. So unfortunately, it's just too preliminary for me to give you much more information.
Okay. Does the yield on Page 31 of the deck for HTBK loans, the 5.60%, does that include the single-family yield? And I'm assuming the 5.60% is pre for any kind of mark?
Yes. There's no mark. And if you look at the pro forma yield of 5.47%, that's excluding the single-family. And that's on a combined basis, of course.
Got it. Okay. We talked some in the past just about maybe some of the opportunity to upsize some of the legacy Heritage relationships and maybe that some of that was already occurring pre-deal close. Just can you remind us general kind of opportunity set there? How that influences kind of how you're thinking about loan growth throughout the year?
Yes, Andrew, no question about it. At deal announcement, we gave a mantra to the team to make sure that we captured all of those clients that we're growing and that were reaching our upper limits at Heritage. We now have greatly expanded that capacity and those clients obviously have extended their runway with Heritage significantly. So there's great opportunities in terms of our largest clients that on the going forward basis.
I would add to that, too, as Dave said, there's some additional synergies amongst the 2 firms as combined in terms of ag, dairy, lending, mortgage origination, trust, wealth services, international services. So there's just a wide variety of opportunities that our relationship management teams and calling officers are engaged in. So going forward looks good.
Yes. And I would just say, I wanted to Clay to answer that first just from the perspective of the former Heritage offices. But from the overall perspective, Andrew, just to your question, a lot of this is 4 days in, they're drinking through the firehose, trying to figure out everything. And so we're working on it. But just overall, pipelines have remained strong. The relationships, we haven't had a lot of turnover in relationships. We're seeing opportunities for us to do maybe a little bit better than we did last year as far as loan growth. But I do think that as we get through the second quarter, we'll have a much better idea.
And you're right. I mean I've always said sort of low single-digit growth. I mean that could be mid-single-digit growth, but we just need to make sure that we understand the relationships as we look out on the opportunities that are out there. But for now, we're sort of sticking with what we've been doing and what's been done in the past. So I don't know if that gives you a better answer, but we're still kind of in -- we want quality stuff, and we're having to price it aggressively. And so I think that is going to be somewhat of a limiting factor as well. But on the positive side are definitely the things Clay said, not just on the loan side, but on the overall relationship side.
[Operator Instructions] And that will come from the line of Gary Tenner with D.A. Davidson.
I had one follow-up on the initial loan growth commentary. In terms of the strengthening of the commercial real estate segment from a demand and production perspective, how much -- could you kind of parse that a little bit in terms of more -- is it more customer activity? Is it borrowers getting more comfortable with the rate environment we're in and moving forward on projects? Is it CBB getting more competitive on pricing? Just kind of parse out kind of the moving parts that's attributed to that strength?
Yes. Well, I definitely think it starts with the potential borrowers out there. It's, I mean, our existing customers, it's -- our bankers' ability to go and attract new relationships to the bank. So I think that's driving some of it. I think also, Gary, I'd say our average size of new loan origination has creeped up a little bit as well. There are a number of things that are sort of assisting us in reaching that low single-digit growth that we had last year. So I think that's part of it. I don't know that we're getting more aggressive on pricing than we have been in the past. We were always aggressive for the right relationships.
Obviously, the loan pricing is just one component of the overall relationship. We have to look at the deposit side, we look at the fee income side. We look at how we monetize the entire relationship. And so that -- I don't know that we're getting more aggressive, but I definitely think customers are more used to the rate environment and money can't sit on the sidelines for that long. So there are people that are doing things, and we're seeing some of that activity and capturing a good part of it.
But yes, I think it's all of those things that are sort of contributing to those opportunities. And we just -- 90% of new loan originations in the first quarter over the first quarter of last year, it's basically double what we did last year. And that's -- I think that speaks to just the opportunities that we're seeing and the opportunities that we're winning.
Appreciate that. And actually, as a follow-up there, any particular asset class within CRE that you're seeing more activity in or maybe is driving more of the activity?
Yes. I don't know that there's a specific asset class. It's pretty well balanced between all asset classes. I will say even it's probably easier to parse it out by owner or non-owner. We were doing a lot of owner-occupied in the past. The thing that was really missing was investor commercial real estate really across all classes, multifamily, industrial, retail. I mean, we are seeing much more investor commercial real estate than we have in the past. I mean, going back the last year, it's been pretty steady in that area. But before that, we weren't really seeing any investor commercial real estate. Nobody was doing anything. So I think it's just more investor real estate across all asset classes and those opportunities, we've been doing pretty well with.
I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Brager for any closing remarks.
Great. Thank you, Sherry. First, I would like to welcome Heritage Bank of Commerce customers, associates and shareholders to Citizens Business Bank. The merger with Heritage Bank of Commerce marks the most strategic and largest acquisition by asset size in our history, bringing together 2 premier relationship-focused business banks and advancing our long-standing objective of expanding Citizens throughout California by entering the Bay Area.
Our team is eager to build on the strong customer and community relationships that Heritage has established, and our performance in the first quarter demonstrates our continued financial strength and focus on our vision of serving the comprehensive financial needs of small to medium-sized businesses and their owners. Our consistent financial performance is highlighted by our 196 consecutive quarters of profitability and our 146 consecutive quarters of paying cash dividends. I would like to thank our customers and associates for their continuing commitment and loyalty.
Thank you for joining us this quarter. We appreciate your interest and look forward to speaking with you in July for our second quarter 2026 earnings call. Please let Allen or I know if you have any questions. Have a great day.
This concludes today's program. Thank you all for participating. You may now disconnect.
CVB Financial Corp. — Q1 2026 Earnings Call
CVB Financial Corp. — Q4 2025 Earnings Call
1. Management Discussion
Good morning, ladies and gentlemen, and welcome to the Fourth Quarter of 2025 CVB Financial Corporation and its subsidiary, Citizens Business Bank Earnings Conference Call. My name is Sherry, and I'm your operator for today. [Operator Instructions] Please note, this call is being recorded. I would now like to turn the presentation over to your host for today's call, Allen Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.
Thank you, Sherry, and good morning, everyone. Thank you for joining us today to review our financial results for the fourth quarter of 2025. Joining me this morning is Dave Brager, President and Chief Executive Officer. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab.
The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2024, and in particular, the information set forth in Item 1A, Risk Factors therein. For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call. I'll now turn the call over to Dave Brager. Dave?
Thank you, Allen. Good morning, everyone. For the fourth quarter of 2025, we reported net earnings of $55 million or $0.40 per share, representing our 195th consecutive quarter of profitability, which equates to more than 48 years. We previously declared a $0.20 per share dividend for the fourth quarter of 2025, representing our 145th consecutive quarter of paying a cash dividend to our shareholders. We produced a return on average tangible common equity of 14.4% and a return on average assets of 1.40% for the fourth quarter of 2025.
Our net earnings of $55 million or $0.40 per share compares with $52.6 million for the third quarter of 2025 or $0.38 per share and $50.9 million or $0.36 per share for the prior year quarter. Pretax income grew by $5.4 million quarter-over-quarter and $6.3 million over the prior year quarter. Both the quarter-over-quarter increase in pretax income as well as the increase from the fourth quarter of 2024 were primarily the result of growth in net interest income.
Net interest income grew by $7 million or 6% over the third quarter of 2025 and by $12.2 million or 11% over the fourth quarter of 2024. During the fourth quarter, we collected $3.2 million of interest on a nonperforming loan that was paid off during the quarter and incurred a $2.8 million loss on sale of investment securities. We also incurred $1.6 million of acquisition expense related to the pending merger with Heritage Bank of Commerce.
Changes during the first quarter to our allowance for credit losses and reserve for unfunded loan commitments had the net impact of increasing pretax income by $3 million compared to the prior quarter and pretax income decreasing by $1.5 million compared to the fourth quarter of 2024. Noninterest income was $11.2 million in the fourth quarter, which was $1.8 million lower than the third quarter and $1.9 million lower than the fourth quarter of 2024.
Trust and investment services income grew by $156,000 or 4% from the third quarter of 2025 and grew by $519,000 or 15% over the fourth quarter of 2024. Bank-owned life insurance income decreased by $1.1 million from the third to fourth quarters due to the annual amortization of revenue enhancements. In addition, other income declined by $800,000 from the prior quarter.
This decrease in other income was the result of a smaller loss on sale of investments during the fourth quarter as we incurred a $2.8 million loss during the fourth quarter compared to the $8 million loss on sale incurred in the third quarter and the $6 million of income earned in the third quarter from a legal settlement. Now let's discuss loans. Total loans at December 31, 2025, were $8.7 billion, a $228 million or 2.7% increase from the end of the third quarter of 2025 and a $163 million or 2% increase from the end of 2024.
The quarter-over-quarter increase in total loans was due to growth in nearly all loan categories. As typically happens at year-end, we experienced seasonal increases in dairy and livestock borrowings. Dairy and livestock loans grew by $139 million compared to the end of the third quarter, driven by higher line utilization. from 64% at the end of the third quarter to 78% at the end of the fourth quarter.
Loan growth was also positively impacted by increases in line utilization for C&I lines of credit, increasing from 28% at the end of the third quarter to 32% at the end of the year. Compared to the end of the third quarter, C&I loans grew by $34 million, CRE loans grew by more than $39 million and SBA 504 loans grew by $17 million.
The $163 million year-over-year increase in loans includes growth of CRE loans of $67 million, $49 million of growth in C&I loans, $25 million of growth in SBA 504 loans and $22 million of growth in construction loans. Loan originations were approximately 70% higher in 2025 than 2024, and the fourth quarter production was approximately 15% higher than the third quarter of 2025. Our loan pipelines remain strong going into 2026, although rate competition for the quality of loans we compete for continues to be intense.
Loan originations in the fourth quarter had average yields of approximately 6.25%, which was consistent with the prior quarter. We experienced $325,000 of net recoveries during the fourth quarter compared to $333,000 of net recoveries for the third quarter of 2025. Net recoveries for the full year of 2025 were $539,000. Total nonperforming and delinquent loans decreased by $20 million to $8 million at December 31, 2025.
A $20 million nonperforming loan was paid in full at the beginning of the fourth quarter. The sale of the building collateralizing this loan resulted in the bank receiving all principal and $3.2 million of interest income. Classified loans were $52.7 million at December 31, 2025, compared to $78.2 million at September 30, 2025, and $89.5 million at December 31, 2024. Classified loans as a percentage of total loans were 0.6% at December 31, 2025.
Now on to deposits. Our average total deposits and customer repurchase agreements were $12.6 billion during the fourth quarter, which compares to $12.5 billion for the third quarter. Our noninterest-bearing deposits declined on average by $122 million compared to the third quarter of 2025, while interest-bearing nonmaturity deposits and customer repos grew by $234 million.
On average, noninterest-bearing deposits were 58% of total deposits for the fourth quarter of 2025 compared to 59% for both the third quarter of 2025 and the fourth quarter of 2024. At December 31, 2025, our total deposits and customer repurchase agreements totaled $12.6 billion. Noninterest-bearing deposits declined from the end of the third quarter to the end of the year by approximately $440 million as we typically experience seasonal deposit declines at year-end.
However, interest-bearing deposits and customer repurchase agreements increased by $430 million between the third and fourth quarter. Our cost of deposits and repos was 86 basis points for the fourth quarter compared to 90 basis points in the third quarter of 2025 and 97 basis points for the year ago quarter. I will now turn the call over to Allen to further discuss additional aspects of our balance sheet and our net interest income. Allen?
Thanks, Dave. Net interest income was $122.7 million in the fourth quarter of 2025. This compares to $115.6 million in the third quarter of 2025 and $110.4 million in the fourth quarter of 2024. Interest income was $156 million in the fourth quarter of 2025 compared to $150.1 million in the third quarter and $147.6 million in the fourth quarter of last year. Average earning assets increased by $153 million in the fourth quarter when compared to the third quarter, and the earning asset yield increased by 11 basis points from 4.32% to 4.43%.
The fourth quarter loan yield was 5.47% compared to 5.25% in the prior quarter. Excluding the $3.2 million of interest income on the nonperforming loan we previously discussed, the yield on loans would have increased quarter-over-quarter by 7 basis points. Interest expense was $33.3 million in the fourth quarter and $34.5 million in the third quarter of 2025. Our cost of funds decreased from 1.05% for the third quarter of 2025 to 1.01% in the fourth quarter of 2025.
The average balances of interest-bearing deposits and repos increased by $232 million over the prior quarter. However, interest expense decreased as interest-bearing deposit costs declined by 17 basis points and the cost of customer repurchase agreements decreased by 24 basis points.
Our allowance for credit loss was $77 million at December 31, 2025, or 0.89% of gross loans. In comparison, our allowance for credit losses as of September 30, 2025, was $79 million or 0.94% of gross loans. The decrease in the ACL resulted from a $2.5 million recapture of credit loss and net recoveries of $325,000. Our $77 million ACL is 133% of our combined nonperforming assets and classified loans. Our economic forecast continues to be a blend of multiple forecasts produced by Moody's.
We continue to have the largest individual scenario weighting on Moody's baseline forecast with both upside and downside risks weighted among multiple forecasts. The resulting economic forecast at December 31, 2025, was modestly different from our forecast at the end of the third quarter, with loss rate assumptions for C&I loans experiencing a negative impact from the economic forecast.
Real GDP is forecasted to stay below 1.5% through 2027 and not reach 2% until 2029. The unemployment rate is forecasted to reach 5% by the beginning of 2026 and remain above 5% through 2028. Commercial real estate prices are forecasted to continue their decline through the third quarter of 2026 before experiencing growth through 2029. So now switching to our investment portfolio. Available for sale or AFS investment securities were $2.68 billion at December 31, 2025.
During the fourth quarter, we sold $30 million of securities with an average book yield of 1.5%, realizing a $2.8 million loss and then purchased $239 million of new securities at an average book value yield of approximately 4.75%. The unrealized loss on AFS securities decreased by $26 million from $334 million at September 30, 2025, to $308 million on December 31, 2025.
The net after-tax impact of changes in both the fair value of our AFS securities and our derivatives resulted in a $20 million increase in other comprehensive income for the fourth quarter. Our held-to-maturity investments totaled $2.27 billion at December 31, 2025, which is $109 million lower than the balance at December 31, 2024. Now turning to the capital position. At December 31, 2025, our shareholders' equity was $2.3 billion, a $109 million increase from the end of 2024, including the $84 million increase in other comprehensive income.
There were 1.96 million shares of common stock repurchased during the fourth quarter of 2025 at an average purchase price of $18.80. For all of 2025, we repurchased 4.3 million shares at an average share price of $18.60. The company's tangible common equity ratio was 10.3% at December 31, 2025, while our common equity Tier 1 capital ratio was 15.9%, and our total risk-based capital ratio was 16.7%. I'll now turn the call back to Dave for further discussion of our expenses.
Thank you, Allen. Noninterest expense for the fourth quarter of 2025 was $62 million compared to $58.6 million in the third quarter of 2025 and $58.5 million in the fourth quarter of 2024. During the fourth quarter, we incurred $1.6 million of onetime merger-related expenses associated with the pending merger with Heritage Bank of Commerce. The fourth quarter of 2025 also included a $1 million provision for off-balance sheet reserves compared to a $500,000 provision in the third quarter.
Excluding acquisition expense and the provision for off-balance sheet reserves, operating expenses grew by 2.3% or $1.4 million over the third quarter of 2025 and by 1.6% or $1 million over the fourth quarter of 2024. Excluding the impact of acquisition expense and the provision for off-balance sheet reserves, we achieved positive operating leverage from both the prior quarter and the year ago quarter of 2% and 6%, respectively. Noninterest expense, excluding acquisition expense, totaled 1.53% as a percentage of average assets in the fourth quarter of 2025 compared to 1.50% for the third quarter of 2025 and 1.49% for the fourth quarter of 2024. This concludes today's presentation. Now Allen and I will be happy to take any questions that you may have.
[Operator Instructions]
And our first question will come from the line of Matthew Clark with Piper Sandler.
2. Question Answer
Good morning, Matthew. I just want to start on the interest-bearing deposits. You mentioned some seasonality. It looked also like some mix change towards savings money market. Can you just speak to what you saw there and maybe whether or not there was some behavioral change among customers seeking rate.
Yes. No, I don't think there was any behavioral change. It's pretty standard for us. People pay bonuses, accrue for taxes, do different things. So I don't really think there was any major change. There wasn't any movement of any large relationships or deposits from noninterest-bearing to interest bearing. I think for the most part, it just was normal seasonality. The part that was different was that we actually grew the noninterest-bearing deposits, and that is something that is a little different, but it wasn't necessarily coming from the noninterest-bearing and moving to the interest-bearing .
I mean, Matthew, I would just consistently say look at quarterly averages. Our deposit customers move fairly large amounts of money at any point in time. So point in time balances don't necessarily reflect exactly what's going on. So average balances, I think, are just more important.
Yes. Yes. Okay. And then just on the nondairy and livestock loan growth. If you exclude it, it's up over 4% annualized this quarter. I know some of it was higher line utilization. But maybe speak to the higher line utilization, whether or not you think that might be more sustainable? And your thoughts overall on kind of nondairy and livestock loan growth this year.
Yes. It's kind of interesting. I think we ended the year year-over-year up about 2% in total loans. And it's kind of in line with what I thought at the beginning of the year. It just took us a little while to get their point-to-point. But loan pipelines remain strong. I think the utilization is normalizing I think people are a little more positive, I mean, as evidenced by just some of the GDP growth that we're seeing. So I think that that's probably going to remain a little more stable than it has been over the last 1.5 years or so.
And candidly, that's anecdotal, but everybody we talk to is basically saying that they're ready to go and they think things are going to be okay. So that's a good sign. That's also evidenced, obviously, by the classified loans and the nonperforming loans that we reported at the end of the quarter.
So I think all in all, the pipelines are strong. at least for the foreseeable future. And I believe that we'll be able to do more with our existing customers, and we're still attracting some pretty good relationships going forward. So all in all, I'm cautiously optimistic, maybe even positive and optimistic about 2026 so far.
Great. And then last one for me. Just on the Heritage deal. Any update on how it's progressing?
Yes. So everything is going well. We've toured their offices and their headquarters, almost all of their offices. We are in -- we're getting ready from an application perspective and the proxy perspective. But everything is going according to plan right now. We still anticipate second quarter close and a second quarter systems conversion. And I think that's where we are. Obviously, there's still game to be played there, but everything is looking good so far.
One moment for our next question, and that will come from the line of David Feaster with Raymond James.
I wanted to circle back to the core deposit side. Obviously, we talked about the seasonal dynamics within NIB. But Wanted to get your thoughts on the competitive landscape for deposits from your standpoint. Where are you winning deposit business? And your thoughts on the -- obviously, you saw good interest-bearing deposit growth. And then just your thoughts on the ability to push through the Fed cuts and expectations for betas near term.
SPYes. So I think just from your first part of your question, I think the type of clients that we go after generally is an operating company. And so the majority of the new deposit relationships that we're bringing to the bank are 75% plus noninterest bearing. If you look back over the last 10 years of the bank, we always seem to have this sort of dip. And as Allen said, on any one given day, that money can move out and move back and there's a number of things that happen. And that's why I think the average number is better as well.
But we are winning relationships. As you know, we are not a bank that goes out and offers the highest rate on our deposit accounts. And we're not really trying to attract that type of customer. So I think for the most part, it's pretty standard on the type of relationship.
As far as the Fed rates are concerned, we basically -- during the last cut, we basically lowered everything by 25% that was earning over 1%. And so we're trying to capture as much of that as possible. I think the combination of -- on the interest-bearing deposit side with be trying to offset to the extent we can on the asset side of those rate cuts. I mean I think it was a good sign for us that our asset -- our loan yield still went up despite a Fed rate cut. And we added a slide in our investor deck in the appendix that really gives a very good overview of sort of the repricing reset time frames both on the truly variable stuff as well as the fixed rate stuff that's maturing or resetting over the next -- I think it's we go all the way up to 10 years and over.
It's a very small number in that category. But there's a lot more granularity there than we had in the previous deck as well. But on the deposit side, David, it's pretty much the same type of thing. And -- and I think from a competition standpoint, we are seeing more competition utilizing earnings credit and that ability to pay.
I mean we just had a relationship that came to us and said, that there was a bank, and I won't mention the name, but there was a bank that was offering them a 3% guaranteed ETR rate for 5 years with paying their accounting system, which is $120,000 a year as part of that 5-year deal. I don't know the outcome of that 1 yet, but we -- that's not something we would do.
So -- that's what I'm seeing out there. And I don't know if that's just for the other banks to drive their noninterest-bearing or just deposits in general. But there is loan growth. So there's going to be funding pressure. So I think that's something that we need to stay on top of. But for the most part, it's pretty much status quo and business as usual for us.
Okay. That's helpful. And to that point on the growth side, I was hoping you could touch on the competitive landscape state there. It sounds like you're seeing primarily just on the pricing side. But wanted to see if you're getting any more aggressiveness from competitors on the underwriting side? And then just -- how do you think about payoffs and paydowns. Obviously, there's pretty significant back book repricing in your story. But I'm just curious, with competition and potential Fed cuts still on the horizon.
How do you think about payoffs and paydowns next year? Is that something that you would expect could be headwind?
Yes. Well, it's always a little bit of a headwind. The payoff and prepayment penalty activity in the fourth quarter was lower than the third quarter. But it's always something we have to deal with, and we anticipate that happening when we model and forecast internally, we look at those numbers and just sort of from a historical perspective.
The one thing to your comment about the back book repricing -- the one thing that is becoming or not in a major way, but is an issue is that when there is a reset, we still have prepayment penalties in our loan. But when there is a reset there are people that are getting quotes theoretically from competitors that are lower than ours. I don't always see the actual quotes.
So I always question whether that's true or not. But they're theoretically getting quotes from competitors out there saying they'll do the loan that lower rate than what our repricing rate would be or reset rate would be. And so we have a little protection with the prepayment penalty.
But on the maturing book, we don't have any protection there. So we have to be a little more aggressive I was candidly very happy that our fourth quarter average yield was 6.25% because I would say some of the stuff we're doing now is closer to the 6% range just to be competitive on that. And look, treasuries are going up, at least in the last week or so, they're going up pretty good. So hopefully, people will remain disciplined.
But it's really more pricing than credit. We're not we're not going to do something that we wouldn't do from a credit underwriting perspective, but we especially to protect relationships, we'll be a little more aggressive on the pricing aspect of it.
Are you seeing more...
We're seeing more short-term loans as well. So people are doing 5, 3-year instead of going out 7 or 10 years. So I think that's also part of the yield we're seeing.
Okay. Have you started to see...
I'm sorry, David, I was just going to add one thing, and that's a very good point that Allen brought up. I don't know that, that's a good bet. Like trying to keep things 2 or 3 years. We'll see -- but if you just look at forward rates are especially on the longer end, could be higher just based on a lot of different factors.
Yes. And so it doesn't sound like other than the duration that you've really seen much pressure on the underwriting structures or standards. .
No, not really. I mean, we wouldn't really consider it anyway. So it might not come all the way up to me...
And that will come from the line of Andrew Terrell with Stephens.
If I could just start maybe asking on expenses, I think, post the adjustments you guys call out, it's around $59 million or so. But compensation up this quarter. Was any of that incentive accrual adjustments kind of at year-end? And then maybe just looking for a little bit of help around thoughts on organic expense growth into 2026 or kind of run rate expectations you guys have?
Yes, Andrew, you're correct. There were some adjustments to our private bonus share accruals that elevated the expense quarter-over-quarter. We also -- every fourth quarter with the holiday season, there is extra benefit expense. So Q4 to Q4 might be a better indication of where dense growth is, and I think that was less than 2%.
I think once again, particularly if you look at the full year numbers, the only expense line that's really growing more than very low single digits is the technology side, the software expense. And we'll continue to invest in that. And the percentages may not be quite as high as 24% to 25%, but an area we'll continue to invest in.
Yes. Okay. And then just on the margin overall, I appreciate the slide you guys gave on the loan repricing in the presentation. But if we look at margins for the industry right now, a lot of the banks out there approaching kind of that peak level or fairly close from back in 2019, you guys are still 50 or 75 basis points light versus the 4.25 level from 2019.
So I guess the kind of question is, has anything structurally changed preventing you from getting back there? And then just keeping that loan repricing in mind, I know some of it looks decently far out there up to 10 years. How long does it take you guys to get margin back to what you would view as a normalized level?
Well, of course, the yield environment plays a lot into that, Andrew. But yes, I mean, obviously, if you go back pre-pandemic, our securities book still has a much lower yield than it would have had back then. And so that's obviously going to play into it. And the loan book still as well. So it will take a little time for both cash flows and the security book to reprice as well as the loan book reprice. And that's why we added that slide. So I mean it's hard to tell. I don't know if I would comment on it knowing that there's so many variables, but I wouldn't be surprised if we get there over the next couple of years, but there's a lot of things that could change that.
Yes. And the only thing I would add to that, Andrew, is to the point that we have not done any large restructuring loss trade type transactions. And so in the fourth quarter, with the gain that we had or with the recapture of the interest income that we had, use that to take advantage of.
So sort of all these onetime things that happen, we will still look at that and make determinations. And that's really part of the reason that we looked at the loss trade to utilize that $3.2 million where we recaptured an interest. So we'll just continue to do that. It's more singles. We're not planning on doing anything like we've said all along, anything larger than that.
Yes. Okay. Yes, my follow-up to that was going to be on the securities, so I appreciate it.
And that will come from the line of Gary Tenner with D.A. Davidson.
I had just a follow-up on the loan yields in the quarter. Even excluding the interest recovery, as you pointed out, Allen, the loan yield was up 7 basis points. Was that pretty exclusively driven by the increased C&I outstandings between general C&I and the ag portfolio? I just wanted to make sure there weren't any other dynamics during the quarter that impacted.
I mean I wouldn't point to anything -- one thing. I mean, dairy goes up, but really, I think the dairy borrowing to a higher percentage of our overall loans probably drove about a basis point improvement in loan yields. So a little bit on the mix. But once again, I think the bulk of our loans are commercial real estate, and it really goes back to the back book conversation.
They're slowly repricing -- and as we have the payoffs, we're replacing them with higher yields. So that concept is probably still the biggest driver...
And new production.
New production versus what's rolling off out there.
Okay. Great. And then just looking forward to the HCP transaction, any expectations at this point of kind of any day 1 restructuring of their balance sheet or otherwise?
The only thing we've announced, Gary, is that we do plan on selling approximately $400 million of single-family loans that Heritage has -- these are not really customers they were purchased. And the duration is very long on them.
So even though we'll get to mark them to market, and there's a lot of accretion there that if we kept them at significant accretion, but still they're very low coupon, 30-year mortgages. We don't really care for the duration, and they're not associated with customers. So we'll sell those and reinvest into investments with shorter durations.
Okay. And I was in the merger announcement, but beyond that, no other -- nothing at this point.
And that will come from the line of Kelly Motta with KBW.
Good morning. Thanks for the question. apologize. I joined a little bit late. I may have missed this. But just circling back to the noninterest-bearing flows. With those balances down a bit, can you just elaborate? I know you guys sold an NPL if there was any attrition of customers related to exits or anything that? Or if it was just normal seasonal movements post COVID getting back to more normal trends.
Yes. I think maybe you're just back checking me, Kelly, but no, there was no loss of relationships that, that represented and the comment that we made was really just around the point in time on December 31.
There's a lot of movement around the deposits going back and forth or going out and this is actually pretty standard. The part that was a little surprising. I mean, I watch it every day, but not surprising, but a part that was different is we did grow noninterest-bearing deposits. The new relationships that we're attracting to the bank are probably in the 75% noninterest-bearing range. interest-bearing.
So this is really just kind of normal stuff. If you go back 10 years, we always have this seasonality in the fourth and first quarter. I think, Allen, a while back, we had done an analysis of that. I think in the fourth quarter, we normally lose about 4% of our deposits going back like 10 years.
This, on averages, that didn't occur this year. We sort of had the normal noninterest-bearing stuff that went out for taxes or bonuses or whatever the case may be. But no, there was nothing abnormal about it and no loss of relationship that -- and I'd say no loss, any material or significant relationship, nothing changed.
And Kelly, I just mentioned that I think it's better to look at average balances. They are more indicative. Our customers move a lot of money. There's patterns day of the week and things like that, that depending on how a quarter end happens to land you're not really getting the -- probably the 2 picture.
Got it. That's helpful. Maybe switching to the buyback. You were really this quarter. And then obviously, you had announced Heritage Commerce site in the quarter. Wondering, is it fair to say that you're out of the market at least until the deal closes, just wondering...
Yes. I mean, obviously we're -- we'll be issuing an S-4 prospectus. So we've been out of the market since the beginning of December. And the Board reevaluate that once we close the merger.
And our next question will come from the line of Tim Coffey with Janney Montgomery Scott.
Question on the loan modifications. Is there anything special causing the balances in that bucket to [indiscernible].
Go ahead, Allen. I would have small on to say [indiscernible].
I wouldn't say there's anything abnormal about it.
Okay. What causes somebody to fall into that bucket?
I'm sorry...
You're talking about the loan modifications.
Yes.
Yes. Well, it depends. I mean when we -- there's a lot of different reasons they can fall into that if they come to us and ask for help and they need to do something to make the payment. That's one way that they would get in there. Another way would be just through our normal evaluation when we're doing our annual term loan reviews, if we see something that's not accurate or not -- that isn't meeting our minimum debt service coverage or some other covenant that could cause us to go in there.
That number in and of itself is still a material number relative to the total loan portfolio. But there's a lot -- there's a few different reasons that it could fall into that category.
Okay. And then post the closed deal with Heritage Commerce Bank, we look out back half of this year and the next year. Dave, do you anticipate the addition of Heritage Commerce to materially change your outlook for loan growth?
Yes. Well, look, I think it just depends on a couple of different factors. We are, as you know, sort of slow and steady wins the race. Heritage has been growing a little faster than we have. I'm sure there'll be some combination of that. We're going into new markets. We're going to be able to help their clients grow even -- they'll be able to do more for their clients than they can do for them today.
So I think there's some definite tailwinds with respect to that. But we got to make sure we get to close, we get it integrated. We we go through the culture things to make sure they understand how we do things. So I think for the most part, there could be some benefit to that for our overall loan growth, but we're going to maintain the same credit quality that we've maintained and the same credit quality that they've maintained.
So we'll have to evaluate that as we combine everything and see where we are. But I do think there's a lot of opportunity in those markets for what we have to offer, not just from the loan perspective, but also from just the overall product array that we have relative to the product array they have.
Sure. Yes. And a bigger balance sheet will help them a lot.
Exactly.
And then [Audio Gap] No check -- final no check for me, Allen. What was the core loan yield in the quarter?
I would point you to the slide we added on Page 43. And that is what I would call a basic coupon, no loan fees, nothing else. And you can see where it ended the year. And then you can obviously see the relative repricing for the different buckets.
And Tim, that number was 5.12%.
Thank you. I'm showing no further questions in the queue this time. I owuld now like to turn the call back over to Mr. Brager for any closing remarks.
Great. Thank you. Citizens Business Bank continues to perform consistently in all operating environments. Our solid financial performance is highlighted by our 195 consecutive quarters or more than 48 years of profitability and 145 consecutive quarters of paying cash dividends. We remain focused on our mission of banking the best small- to medium-sized businesses and their owners through all economic cycles.
I'd like to thank our customers and associates for their commitment and loyalty, and we look forward to a successful 2026 and the pending merger with Heritage Bank Commerce. Thank you for joining us this quarter. We appreciate your interest and look forward to speaking to you in April for our first quarter 2026 earnings call. You can always let Allen and I know if you have any questions. Have a great day. Thank you.
This concludes today's program. Thank you all for participating. You may now disconnect.
CVB Financial Corp. — Q4 2025 Earnings Call
CVB Financial Corp. — Heritage Commerce Corp, CVB Financial Corp. - M&A Call
1. Management Discussion
Good afternoon, ladies and gentlemen. Welcome to today's Conference Call to discuss the All-Stock Merger transaction between CVB Financial Corporation and Heritage Commerce Corporation. My name is Ashia, and I'll be your operator for today.
[Operator Instructions]
Please note, this call is being recorded. I would now like to turn the presentation over to your host for today's call, Allen Nicholson, Executive Vice President and Chief Financial Officer of CVB Financial Corporation. You may proceed.
Thank you, Ashia, and good afternoon, everyone. Thank you for joining us today to discuss the announcement of a definitive merger agreement between CVB Financial Corporation and Heritage Commerce Corporation. A press release and an investor slide presentation are available on the Investor Relations section of each company's website at cbbank.com and heritagecommercecorp.com. .
Joining me this afternoon is Dave Brager, President and Chief Executive Officer of CVB Financial Corporation; and Clay Jones, Chief Executive Officer and President of Heritage Commerce Corp.
Our comments today will refer to the investor slide presentation for today's announced merger. The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see Slide 2 and 3 of the company's investor presentation.
I will now turn the call over to Dave Brager.
Thank you, Allen. Good afternoon, everyone. Today's announcement of the merger between CVB Financial Corporation and Heritage Commerce Corp marks the most strategic acquisition in our company's history and the largest by asset size. It brings together 2 premier relationship-focused banks and provide Citizens with a tremendous opportunity to expand into the Bay Area, which has long been an important strategic objective for us. The combined company will have comprehensive geographic coverage of all the major business banking markets in California. We are excited to welcome Clay and key members of his banking team to Citizens Business Bank.
On Page 4 of our investor presentation, you'll see that the combined organization is positioned to have the scale and earnings potential to generate industry-leading performance metrics, including a projected 2027 return on average assets of 1.5% and a projected 2027 return on average tangible common equity of approximately 17%. We believe this is a compelling financial transaction for both companies' shareholders. We expect the transaction to initially generate 13.2% earnings per share accretion in 2027 and an internal rate of return above 20%.
Excluding rate marks, the transaction is expected to be accretive to tangible book value, when including rate marks, we anticipate a 7.7% dilution with a projected earn-back of 2.5 years. I'd like -- I would now like to turn the call over to Clay Jones.
Thanks, Dave. Heritage and Citizens share similar cultures and focus on small and medium businesses customers, with a history of pristine credit quality and low-cost deposits. I'm incredibly proud of the Heritage team and what we've achieved together. This merger is a testament to the hard work of our employees and our reputation with our customers. Citizens Business Bank is one of the top-performing business banks in the country, and this combination rewards our shareholders, creates opportunities for our employees, and expands the products and services available to our customers.
I'd now like to return it to Allen.
Thanks, Clay. Turning to Page 7 of our investor presentation. This merger is projected to exceed a number of the key financial thresholds that we have previously communicated. Our projected internal rate of return of 20%, which would exceed our 15% minimum threshold, projected earnings per share accretion of 13.2%, which would meet our double-digit EPS accretion threshold and a projected tangible book dilution earn back of 2.5 years, which would be below our threshold 3-year earn back.
This is a 100% stock deal with a fixed exchange ratio of 0.65 CVBF shares for each Heritage share. The transaction represents a total deal value of approximately $811 million based on yesterday's closing stock prices for CVBF and HTBK and would represent pro forma ownership in the combined organization of approximately 77% CVBF and 23% Heritage. The pricing multiples at these levels would represent 12.6x, 2027 earnings per share and 1.51x Heritage tangible book value. Key transaction assumptions are set forth on Page 8 of the investor presentation.
Our earnings forecast is based on the consensus analyst estimates for both companies. Based on our track record and prior acquisitions, we expect to achieve approximately 35% cost saves. And while we have not modeled any revenue synergies into the financial metrics that I've mentioned, we see opportunities to deepen relationships with Heritage's customers through our broader suite of services and larger balance sheet. On Page 9 of the investor presentation, we highlight why we believe this is a compelling opportunity to deploy CVBF's capital. Importantly, the pro forma company would be estimated to have 14.6% CET1 at close and ongoing strong capital generation, which should enable us to provide meaningful capacity to continue returning capital to shareholders through both dividends and share repurchases.
I'd now like to turn the call back to Dave for some closing remarks. Dave?
Thank you, Allen. Over the last 18 months, we've evaluated several acquisition opportunities and remain focused and disciplined in our approach. Heritage is a like-minded banking partner with a similar business model, and this combination uniquely aligns with both of our strategic and financial goals. Our extensive past experience with due diligence and merger integration have enabled us to outperform our core financial projections and past mergers. We believe this is a highly strategic and financially compelling transaction for both groups of our shareholders.
On behalf of all of us at Citizens Business Bank, I want to welcome Heritage's talented employees and loyal customers. We look forward to working together to obtain a timely closing and smooth integration. This concludes today's presentation. We are happy to take your questions.
[Operator Instructions]
The first question comes from Matthew Clark with Piper Sandler.
2. Question Answer
Just first one for me, just on -- just wanted to get some color on how this came together. I'm sure Heritage was on your priority list for a number of years and whether or not this was negotiated or whether or not there were some other bidders involved?
I'll start and then Clay can jump in. And look, Clay and I have known each other for a little while. We've had conversations. We've talked about the similarities of our banks, and just our business models, the types of clients we go after, the markets that we serve. And I think for us, it was just an idea that, hey, look, let's create something bigger than each of us individually. Let's create an opportunity to be able to compete with the larger banks. It was not a process. It was a negotiated deal between us, and Clay and his team did a great job in helping us get to the conclusions.
And obviously, we're really looking forward to the future together with his team and our team as one. I don't know, Clay, if you want to add anything, you can go for it.
Yes. No, Matthew, the only thing I would add is, we've made great strides to build our kind of leading commercial community bank here in our area, but combining the 2 expands the breadth and depth to which we can serve our clients. It's obviously, as Dave mentioned, strategically important combination and financially very compelling transaction for our shareholders. So we see a lot of synergies and a lot of value create here.
Okay. And then the other one on your pro forma CET1 of 14.6%, still very healthy and likely to quickly grow beyond that after the merger. I guess what's your -- how does this change your M&A appetite once you integrate this one from a size and geographic perspective?
Yes. So I think first and foremost, we want to make sure we do the integration correct. We're going to make sure that we're doing everything we can to make this as seamless as possible. There's always going to be issues that arise. But Clay and the existing Heritage folks and our folks are going to work closely together to make sure that we do a good job of combining the 2 organizations. Once we get through that, I think then we'll probably have a little bit better idea.
But you're correct. It does -- it will generate a lot of capital. We like running with a little more capital, but at the end of the day, we'll just have to evaluate the opportunities as they present themselves. And Clay and I and Allen and the rest of our team will make those determinations. But what we're really focused on is just putting the 2 banks together and making an even better bank together. I don't know, Allen or Clay, if you want to add anything.
Yes. I mean, Matthew, we'll obviously reevaluate sort of our criteria based on what we've said in the past, and it's possible that the lower end of our range may certainly move up as a $22 billion institution. .
The next question comes from David Feaster with Raymond James.
All right. Congrats on the deal, everybody.
Thank you, David.
Thanks, David.
So look, I know you guys bode pretty well. I mean this is obviously a really good fit in a lot of ways. There's -- I can see the cultural similarities. But look, I'm just kind of curious for Clay and Dave, as you both have got to know each other, the cultures and kind of scene behind the curtain, if you will. Could you maybe just compare and contrast the businesses to some degree, the similarities that you see from a cultural standpoint, and maybe Clay, where you see opportunities to CVB across your platform? And Dave, maybe things that you saw that Heritage does well that you'd like to implement across your platform?
Go ahead, Clay. You can start.
Yes. No question about it, David. We've got tremendous amount of similarities in terms of cultures, our client-first stance, growing with our clients, excellence in people. There's just a lot of similarities in how we run our business banks. I think there's just -- there's not too many differences there. The opportunities that we at Heritage see in this combination is one, just size and scale to be able to bring more to our clients, those in trust and wealth and mortgage. I mean there's just a number of things that Citizens brings to the table to expand our product offering for our clients here. And so while those aren't built into the models, there is inherent synergies that we've been looking in our long-term strategic plan to build out here at Heritage and this just accelerates that strategic planning footprint and timeline.
Yes. I would just add, we look at it the same way. I mean, for the things that we offer are a little bit wider product array, there's opportunities for us to help place clients achieve whatever goals and objectives they have in their businesses. And I think for us, it's sort of been what we've done in every single acquisition we've done in our history is just have the opportunity to sell deeper into that relationship. Obviously, the capacity to grow with our clients is important, having access to Northern California, the Bay Area is very important for us.
I mean, we've done that in very small steps over the last acquisition we did. So again, just like Clay, I think it just accelerates our opportunity to be more meaningful in all of the markets we serve. So I'm really excited about it. I'm excited that Clay is joining the team. as the President, we have a good personal relationship. We have a good business relationship. We've shared things over the years and talk things through. So it's just going to be great to be on the same team.
And following up kind of on Matt's question, just talking about capital. In the presentation, you talked about optimization of the balance sheet. There's some opportunities to sell Heritage's purchase mortgages. Obviously, there's other opportunities. I'm curious, how do you think about other balance sheet optimization strategies, whether it be on the security side, other assets? Just kind of curious what you guys are contemplating there?
We'll let Allen take that one.
Well, David, I would say at this point, the only thing we've really communicated and we'll continue to evaluate everything. But we do anticipate it's likely we will sell the single-family mortgage loans at Heritage. They're not associated with any of their customers. So it will be an opportunity to reinvest those probably in securities. But there's a lot of things we'll evaluate as we go through the integration, but nothing else is contemplated and firm in stone at this point.
And then maybe just last one for me. You guys touched on this. This is the largest deal that you've done. Obviously, both of you all are a proven acquirer. It's great. Clay sticking around that. I mean is a huge help. But how do you think about the integration and the conversion here? Are there any guardrails or safety nets or different policies and procedures that you're putting in place to protect the bank in this deal and minimize execution risk and any type of attrition or anything?
Yes. So David, as you know, I mean, we've done 18, 19 transactions in our history. We've done quite a number of them. I mean we have a very thorough and disciplined playbook for these types of things. We'll be working closely with Clay and his team to ensure that we're able to execute on all of that. But we've proven that we've been able to do it. It is the largest in asset size deal that we've done. So obviously, there are some nuance in that. But that doesn't concern me just based on the conversations we've already had through the due diligence and the process because everybody wants the same thing.
And so as long as we're working together to make it happen, we believe that we'll be able to keep the vast, vast majority of both parts of the bank that we want to keep. And I just think from my perspective, we work hard to ensure that happens. And I don't know, Clay, if you have anything to add, but I think from his perspective, he's kind of looking at it the same way.
Yes. No, the only thing I would add, and Dave, you said it. I mean, we both have veteran teams on both sides here in the companies that have pretty extensive experience on integration and combination. And obviously, our client-centric and service delivery model is the guiding post to make sure that goes well. So we have -- I think both companies have the people and execution teams to get this done correctly.
That's great. Congrats everybody on the deal, excited to see what's in store for you all.
The next question comes from Andrew Terrell with Stephens.
I wanted to start just, Dave, we recently had a conversation just about kind of the lift-out strategy or LPO strategy in the -- I think in the absence of M&A. Just curious, now that you've got a deal announced, how should we expect you to approach new LPO activity moving forward? Does that slow down from here?
Yes. Well, I think the LPO strategy, I mean, obviously, if we have the opportunity to get good people, we're going to evaluate that just as we did with our Temecula-Murrieta team. So we want to make sure we do both things right. And if the right opportunity presents itself with the team that's interested in coming to the Premier Business Bank in California, we're obviously going to take a look at that and make a determination if it's something that makes sense for us.
But again, I'll just kind of go back to my earlier answer, we want to make sure the combination of Citizens and Heritage goes well first. We're very focused on that. Both sides becoming one and doing it the right way. But I do think that if the right team came along, we would look at it. Clay is going to be running as President. He's going to be running everything that touches customer. So he and I and other members of the sales leadership team, some from his current team, some from my current team will make those determinations if it makes sense.
Great. I appreciate it. And I just wanted to make sure I heard right. I think you mentioned in the prepared remarks, it sounds like buybacks continue, post the close of the acquisition. Was that correct?
Yes. We have the capacity to continue doing that. Obviously, we'll look at it once we get through this, but we do have the capacity based on our capital position.
Yes. Okay. And I think it's probably pretty minimal, but I didn't see anything called out around Durbin impact in the presentation. Is that anything notable we should be aware of?
It's really notable. They're not a retail bank. They're a business bank like we are. So it's nothing significant. .
The next question comes from Kelly Motta with KBW.
Congrats on the deal announcement, very exciting. Dave, you have been a very conservative lender, sticked to your knitting. And kind of one thing you've talked about is, finding a partner is someone who has kind of the same approach to lending. Can you -- you guys clearly did fairly significant overview of the Heritage Commerce's loan book. Can you discuss kind of your thoughts on kind of the growth profile of the bank? And any -- you noted in the deck the potential mortgage sale or anything else that we should be thinking about in terms of potential paring down of the balance sheet here?
Yes. So we did. We did a very thorough due diligence on the credit side. And what I would say is what we found is our credit folks that were doing the due diligence felt very strongly that Clay and his team had built a very solid bank. Obviously, we've had pristine credit quality pretty much for the history of the bank. Clay's bank is very similar in their approach to that. There are some minor differences, and we'll be able to work through those things. And between the 2 teams, I mean, we're going to be keeping a lot, I mean, pretty much all of their sales folks, and we're going to be keeping a lot of the credit folks, if not all, or most of the credit folks as well.
So I just I think we're going to meld that credit culture very well. There wasn't anything we found that really stood out to us as something they did that we wouldn't do. They do have a factoring business, and we're going to always look at that. And -- but Clay and his team have done an outstanding job in that business. So we'll evaluate it. But other than that, I would say it's pretty much very similar. Clay, I don't know if you have any comments on any of that, but you're welcome to add on.
Yes. I think the Citizens and Heritage teams start with excellence in client selection, and it starts from the very beginning and then you overlay that with strict credit disciplines and attention to detail. But as Dave said, the credit cultures of both banks are very strong, and I would echo the sentiments. Citizens has been an enviable player in California market and the credit is outstanding. We pride ourselves on our own credit, and we greatly appreciate like-minded credit folks.
Got it. That's a really helpful overview. One minor housekeeping item for me. I'm looking at Slide 15, which is helpful. I just wanted to confirm it looks like this is the case, but that 7.7% tangible book value dilution includes all kind of onetime costs baked in since we've seen some deals announced that exclude some items. I just want to make sure that's a fully baked number. Is that the correct read?
It's fully backed.
Congrats again. Looks very exciting.
The next question comes from Tim Coffey with Janney.
So Dave, look, you know commercial real estate pretty well. Clay knows it pretty well. I'm wondering, Dave, what your take is on the San Francisco Bay Area commercial real estate market and how comfortable you are with that sector right now?
Clay, do you want to start and then I'll just add on.
Yes. No, Tim, as we've said, the credit discipline that Heritage has put on the overlay of our CRE in the Bay Area market here has been strong and the performance has weathered some real storms. The client stability is extremely strong here at the bank. I think what Dave and I have spent some time on is just the resurgence in the marketplace and where that marketplace has rebounded from post-pandemic in terms of just vacancy absorption, reputational improvement here in the Bay Area, resurgence of funding flows in the venture community.
And so I just think all those things have provided a lot of comfort. Starts with a foundation of strong credit and good client selection, as I mentioned. But I think the Bay Area economy here has improved greatly since the -- coming out of the pandemic. Dave?
Yes. I would -- the only thing I would add to what he said, Tim, is that, look, and just like Heritage, we evaluate individual deals. And we're going to look at the strength of the cash flow, the strength of the guarantor, the stability and quality of those cash flows. And so I don't think any of that's going to change. I just recall back the story during the pandemic when we did the largest office loan in the history of our bank. And I called it out on our calls, just saying, look, I make that loan again today. And so I think it's -- we're not a cookie cutter lender, we're evaluating the strength of the deal and we make determination.
And through our due diligence, that's what we saw with Heritage. I know through Heritage's reverse due diligence, that's what they saw in us. And so I think it's going to be a good opportunity for us to take a look at it where it makes sense.
Okay. Sticking with you, Dave, if I could. You know how to operate in big markets, right? L.A. is a perfect example. The Bay Area is a bit smaller than L.A., but still a big market. Do you feel that you have enough scale in the market, and will have enough scale in the San Francisco, Bay Area market to be competitive?
Yes. I mean I think we're competitive in every market from the most rural market to the largest metropolitan area. And as you know, Tim, we're not trying to be everything to everybody. We have a very disciplined approach to the type of client we're looking for. This will allow us to potentially make larger loans to evaluate opportunities that we might not have had a chance to evaluate. So I'm very bullish on the fact that I think we can take advantage of that.
And I actually spent a little bit of my life up in the Bay Area. So I don't know it nearly as well as Clay, but I believe it's going to create a great opportunity for us in those markets where it makes sense with the right customers to really make an impact. And we compete, as you know, we compete with the big boys all the time. That's where we do our best work because we -- as Clay said, we now have a customer service approach. We want to take care of that client. We're really focused on that. That customer focus is one of our core values.
And so I just think it's something for us that with the bigger capacity for Clay, his people will have a better opportunity to compete against some of those larger banks in the combined organization.
Yes. And that actually kind of feeds into my next question for Clay. So Clay also you know there's been a lot of movement from clients -- bank clients in the Bay Area because of what happened with -- in the spring of 2023. Heritage Commerce definitely benefited from some of that client movement. Do you feel that having a bigger balance sheet now could accelerate some of that tailwind for you?
Yes. I think to your point, I think we've capitalized well in terms of kind of the disruption that we've seen here in the Bay Area and we've been a beneficiary of that. And it's principally because how we handle clients and the service delivery there. I think as Dave said, no question about it. Size and scale matters and having a bigger balance sheet as well as the additional product sets and service delivery that we're bringing together with Citizens, those are all very good upside for our existing footprint in our go-to-market strategy here.
The next question comes from Gary Tenner with D.A. Davidson.
So my first question probably treads a little bit on what Tim just asked. From a -- if you look back over several years, Dave, CVBF has always been a pretty modest grower in terms of net loans, kind of low single digit and maybe a bit better than that in a good year. Heritage has been a little better than that over time. So as you think of the combined organization, would you envision kind of the Heritage franchise mirroring more of the way CVBF grows? Or do you look at it as a net benefit to growth at CVBF.
Yes. Well, I think both of the bank's commitment to quality credit is going to influence that a lot. And so as we evaluate these opportunities, in Clay's markets in my market, there's a lot of competition, and we're only really looking for the best. In our parlance, we say the top 25% of clients in their respective industries and building long-term relationships. And I envision as we meld the 2 organizations, we're going to try to do the best of both. We're going to work hard at that. It's really hard for me to say just off the top of my head that it's going to be more closer to Clay's growth rate or more closer to my growth rate.
We just want to make good deals to the right people. And when those deals present themselves, whether it's in Southern California or Northern California, we're going to evaluate it, and if it makes sense. I think to your other part of that question, obviously, the increased balance sheet size and capacity should be a net benefit for both of us because we will have a larger balance sheet down here, they will have a larger balance sheet up there.
So I think there are definitely tailwinds with respect to that for both of us. We're a very disciplined grower, and we're going to be that in the long run as a combined organization as well. But we want to make sure that we're doing the right thing from a credit perspective, from a customer perspective and we'll see how it all melds together. But I think that as we look at this, it's going to be a disciplined process and disciplined growth going forward. And Clay and I and the rest of our management team we'll evaluate that as we go along.
We need to obviously get to the close date, and then we can start getting a little better handle on what we think the exact opportunities are. But just generally, I'm, again, very optimistic about the opportunities for both of us.
Okay. Great. And then just one question as it relates to the potential sale of the purchase mortgages. As you -- look -- I don't know if this is a question you can answer on this call. But as it relates to the rate mark specific to those credits, could you give a sense at all proportionally of where that is because obviously, if you were to sell some, that would accelerate some of that long-term accretion?
So Gary, we've assumed in our projections that the single-family are sold at close. They're fairly low coupon assets in the mid-3s to low 3s. And we looked at them from a fair value on a couple of different ways. And we think conservatively, and that's how we built it into the model, but basically $0.83 on the dollar is how we value them at current value.
This concludes the question-and-answer session. I would like to turn the conference back over to Dave Brager for any closing remarks. Please go ahead.
Great. Thank you. Thank you for joining us this afternoon. We appreciate your interest. Look forward to speaking with you again in January for CVBF's Fourth Quarter 2025 Earnings Call. Please let Allen, Clay or myself know if you have any questions. Have a great day, and thanks for showing up on quick notice. We really appreciate it. Have a great day.
The conference has now concluded. Thank you for attending to this presentation. You may now disconnect.
CVB Financial Corp. — Heritage Commerce Corp, CVB Financial Corp. - M&A Call
CVB Financial Corp. — Q3 2025 Earnings Call
1. Management Discussion
Good morning, ladies and gentlemen, and welcome to the Third Quarter of 2025 CVB Financial Corporation and its Subsidiary Citizens Business Bank Earnings Conference Call. My name is Sherry, and I am your operator for today. [Operator Instructions] Please note this call is being recorded.
I would now like to turn the presentation over to your host for today's call, Allen Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.
Thank you, Sherry, and good morning, everyone. Thank you for joining us today to review our financial results for the third quarter of 2025. Joining me this morning is Dave Brager, President and Chief Executive Officer. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab.
The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2024, and in particular the information set forth in Item 1A, Risk Factors, therein. For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call.
I will now turn the call over to Dave Brager.
Thank you, Allen. Good morning, everyone. For the third quarter of 2025, we reported net earnings of $52.6 million, or $0.38 per share, representing our 194th consecutive quarter of profitability, which equates to more than 48 years of consecutive quarters of profitability. We previously declared a $0.20 per share dividend for the third quarter of 2025, representing our 144th consecutive quarter of paying a cash dividend to our shareholders.
We produced a return on average tangible common equity of 14.11% and a return on average assets of 1.35% for the third quarter of 2025. Our net earnings of $52.6 million, or $0.38 per share, compares with $50.6 million for the second quarter of 2025, or $0.37 per share, and $51.2 million, or $0.37 per share for the prior year quarter. The $2 million quarter-over-quarter increase in net income was primarily the result of growth in net interest income of $4 million that was partially offset by a $1.5 million increase in provision for credit losses and unfunded loan commitments.
Pretax, preprovision income in the third quarter of 2025 was $70 million, an increase of $1.2 million, or 2% compared to the second quarter of 2025 and $2.4 million, or 3.5% higher compared to the third quarter of 2024. During the third quarter of 2025 we received a $6 million legal settlement which was more than offset by an $8.2 million loss on the sale of $65 million of low-yielding AFS securities that were reinvested at yields of approximately 5%.
The growth in PPNR over the third quarter of last year was the net result of a $2 million increase in net interest income and a $1.5 million decrease in operating expenses that were partially offset by a $1.25 million increase in provision for unfunded commitments.
Net interest income for the third quarter of 2025 was $4 million higher than the prior quarter and $2 million higher than the third quarter of 2024. Our average earning assets grew by $315 million between the second and third quarters of 2025, and our net interest margin increased from 3.31% to 3.33%. As a result of our deleveraging strategy that was executed during the second half of 2024, our earning assets declined by $1.1 billion from the prior-year quarter while our net interest margin increased by 28 basis points from 3.05% in the third quarter of 2024.
Noninterest income was $13 million in the third quarter, which was $1.7 million lower than the second quarter. Excluding the legal settlement and loss of sale -- loss on sale of AFS, third quarter noninterest income increased by $260,000 from the prior quarter, driven primarily by higher trust and investment service fee income. Noninterest expense was $58.6 million in the third quarter, which was $1 million higher than the second quarter of 2025. Our efficiency ratio remained at 45.6% in the third quarter.
At September 30, 2025, our total deposits and customer repurchase agreements totaled $12.6 billion, a $170 million increase from June 30, 2025, and $108 million higher than September 30, 2024. The quarter-over-quarters growth was driven by growth in money market and customer repurchase balances. The year-over-year growth was net $100 million decrease in time deposits. Our noninterest-bearing deposits grew by $108 million compared to the third quarter of 2024, while interest-bearing nonmaturity deposits and customer repos grew by an additional $100 million. On average, noninterest-bearing deposits were 59.8% of total deposits for the third quarter of 2025 compared to 59.1% for the third quarter of 2024. Our cost of deposits and repos was 90 basis points for the third quarter compared to 87 basis points in the second quarter of 2025 and 101 basis points for the year ago quarter.
Now let's discuss loans. Total loans at September 30, 2025, were $8.47 billion, a $112 million, or 5% annualized increase from the end of the second quarter of 2025. The quarter-over-quarter increase in total loans was due to growth in nearly all loan categories. Loan growth was positively impacted by increases in line utilization for C&I and dairy and livestock lines of credit. A quarter-over-quarter increase of $27 million in C&I loans reflects an increase in line utilization from 26% at June 30, 2025, to 28% at September 30. In addition, dairy and livestock loans also grew by $47 million compared to the second quarter driven by higher line utilization from 62% at the end of the second quarter to 64% at the end of the third quarter. Agribusiness loans grew by $12 million, while commercial real estate and construction loans grew by $18 million and $12 million, respectively, from the end of the second quarter.
Total loans decreased by $66 million from the end of 2024, driven by dairy and livestock loans declining by $139 million as these lines experienced their seasonal high utilization at calendar year end. Excluding small declines in SBA and municipal loans as well as decreases in dairy and livestock loans, our loans grew by $85 million from the end of 2024. We have experienced an increase in loan originations, and our loan pipelines remain strong, although rate competition for the quality of loans we focus on has continued to be intense.
Loan originations in the third quarter of 2025 were approximately 55% higher than the third quarter of 2024, and year-to-date loan originations have been 57% higher than the same period in 2024. We had average yields of approximately 6.5% on new loan originations during 2025, but the third quarter average was lower at about 6.25%. We experienced $333,000 of net recoveries for the third quarter of 2025 compared to $249,000 in net charge-offs in the second quarter. Total nonperforming and delinquent loans decreased by $1.5 million to $28.5 million at September 30, 2025.
Nonperforming and delinquent loans were $24.8 million lower than the $53.3 million at the end of the third quarter of 2024. Subsequent to the close of the third quarter, a $20 million nonperforming loan was paid off in full. The sale of the building collateralizing this loan resulted in the bank receiving all principal and approximately $3 million of interest which will be included in interest income in the fourth quarter of 2025. Classified loans were $78.2 million at September 30, 2025, compared to $73.4 million at June 30, 2025, and $89.5 million at December 31, 2024. Classified loans as a percentage of total loans was 0.9% at September 30, 2025.
I will now turn the call over to Allen to further discuss additional aspects of our balance sheet and our net interest income -- sorry, net interest income.
Thanks, Dave. Net interest income was $115.6 million in the third quarter of 2025. This compares to $111.6 million in the second quarter of 2025 and $113.6 million in the third quarter Of 2024. Interest income was $150.1 million in the third quarter of 2025 compared to $144.2 million in the second quarter and $165.8 million in the third quarter of last year.
Average earning assets increased by $315 million in the third quarter when compared to the second quarter and the earning asset yield increased from 4.28% to 4.32%. Compared to the third quarter of 2024, earning assets decreased by $1.1 billion and the earning asset yield declined by 11 basis points. Interest expense was $34.5 million in the third quarter and $32.6 million in the second quarter of 2025. Our cost of funds increased from 1.03% for the second quarter of 2025 to 1.05% in third quarter of '25. The average balances of interest-bearing deposits and repos increased by $217 million over the prior quarter.
Interest expense decreased from the third quarter of 2024 by $17.6 million, primarily due to $1.23 billion decline in average borrowings that resulted in approximately a $15 million decline in interest expense. Interest-bearing deposits and customer repos increased by $53 million over the third quarter of 2024, while the total cost of deposits and repos decreased by 11 basis points. With this reduction in borrowings and lower cost of deposits, our cost of funds decreased by 41 basis points from the third quarter of last year.
Our allowance for credit loss was $79 million at September 30, 2025, or 0.94% of gross loans. In comparison, our allowance for credit losses at June 30, 2025, was $78 million, or 0.93% of gross loans. The increase in the ACL resulted from $1 million provision for credit loss and net recoveries of $333,000.
Our economic forecast continues to be a blend of multiple forecasts produced by Moody's. We continue to have the largest individual scenario weighting on Moody's baseline forecast with both upside and downside risks weighted among multiple forecasts. The resulting economic forecast at September 30, 2025, was modestly different from our forecast at the end of the second quarter of 2025. The comparative change from the previous economic forecast reflects lower GDP growth, a slightly lower unemployment rate, and lower commercial real estate prices. Real GDP is forecasted to stay below 1.5% until the end of 2027 and not reach 2% until 2028. The unemployment rate is forecasted to reach 5% by the beginning of 2026 and remain above 5% through 2028. Commercial real estate prices are forecasted to continue to decline through the second quarter of 2026 before experiencing growth through 2028.
Switching to our investment portfolio. Available for sale, or AFS, investment securities were $2.58 billion at September 30, 2025. During the third quarter we sold $65 million of securities with an average book yield of 1.3%, realizing an $8.2 million loss, and purchased $214 million of new securities at an average book yield of 5%. The unrealized loss on AFS securities decreased by $31.6 million from $364 million at June 30, 2025, to $334 million on September 30, 2025. The net after tax impact of changes in both the fair value of our AFS securities and our derivatives resulted in a $20 million increase in other comprehensive income for the third quarter. Our held-to-maturity investments totaled $2.3 billion at September 30, 2025, which is $82 million lower than the balance at December 31, 2024.
Now turning to the capital position. At September 30, 2025, our shareholders equity was $2.28 billion, a $42 million increase from the end of June 2025, including the $20 million increase in other comprehensive income. There were 290,000 shares repurchased during the third quarter of 2025 at an average price of $20.30. Year to date we have repurchased 2.4 million shares at an average share price of $18.43. The company's tangible common equity ratio was 10.1% at September 30, 2025, while our common equity Tier 1 capital ratio was 16.3% and our total risk-based capital ratio was 17.1%.
I'll now turn the call back to Dave for further discussion of our expenses.
Thank you, Allen. Noninterest expense for the third quarter of 2025 was $58.6 million compared to $57.6 million in the second quarter of 2025 and $58.8 million in the third quarter of 2024. The third quarter of 2025 included a $500,000 provision for off balance sheet reserves. Excluding this $500,000 provision, operating expenses grew by $500,000 over the second quarter of 2025. This growth in operating expense was due to an $877,000 increase in salary and benefits from our annual midyear salary increases. Noninterest expense, including the provision for unfunded loan commitments, decreased from the third quarter of 2024 by approximately $1.5 million. Almost all expense categories declined, led by a $770,000 decrease in salary and benefit expense. We also experienced a $430,000 decrease in legal expense, and a $380,000 decline in occupancy and equipment expense.
One area of expense growth is our continued investment in technology, infrastructure, and automation, which resulted in $440,000, or 11% growth, in software expense from the third quarter of 2024. Noninterest expense totaled 1.5% as a percentage of average assets in the third quarter of 2025 compared to 1.52% for the second quarter of 2025 and 1.40% for the third quarter of 2024.
This concludes today's presentation. Now Allen and I will be happy to take any questions that you might have.
[Operator Instructions] And our first question will come from the line of Matthew Clark with Piper Sandler.
2. Question Answer
On your interest-bearing deposit costs up a few basis points this quarter caused your beta cycle to date to slow a little bit to, I think, 28%. How should we think about the beta through the cycle from here and maybe remind us what portion of your deposit base do you feel like you can be more aggressive with?
Yes. So obviously that last rate cut was towards the end of the third quarter. So we didn't get the benefit of -- the big benefit of what we did and had a little bit to do with some of the mix of individual accounts. And in our repurchase agreement sweep, one of our largest depositors had built his deposits pretty good. But we did reduce every rate -- every money market rate and repo rate over 1.25% -- we reduced by a full 25 basis points the day after the Fed moved. So we're just trying to match that off. Obviously it depends a little bit on the mix between some of the higher paying ones and the lower paying ones that still got reduced. But at the end of the day, our plan is to continue to match whatever the Fed funds decreases with decreases in money market rates over 1%. Do you have anything to add to that, Allen?
No, I think, there's a small portion obviously of our deposit base that has higher yields and there was a little bit of an increase relative to the rest of the deposits in the quarter. But as Dave said, we'll be reducing all of them as the market -- as the Fed goes down.
Since we're limited to 2, I'm just going to jump to M&A. Any increase in dialog there on the M&A front? I guess where do we stand?
Yes. A lot of dialogs. Not a lot has happened yet. I feel a little bit like Allen Iverson on the practice thing. We just keep practicing, but we're continuing conversations. I still believe that the dam is going to break here, but at this point, there's not anything imminent, and we're still having conversations. I will say one thing we did in the third quarter, and it was in our investor presentation -- excuse me, subsequent to the third quarter, we did hire a team of 4 bankers from City National Bank and are opening a de novo office in the Temecula, Murrieta area. They actually started yesterday. So we're excited about that. We feel like we got 4 really great bankers, and they all came from sort of different parts of City National, but they all live in that area. And so we're going to open a presence there. So we're excited about that. And we'll see how they do as we go forward. But at the end of the day, we're going to keep looking to bring the right bankers and/or the right opportunities from an M&A perspective.
One moment for our next question, and that will come from the line of Andrew Terrell with Stephens.
I wanted to start just on loan growth. You guys had a really good quarter. Dave, it sounded like in your prepared remarks, obviously, originations are up a lot this year. It sounds like the pipeline is still pretty strong. I just wanted to get -- I know you've got a seasonal benefit in the fourth quarter, but just expectations on loan growth over the near term. Do you think you can continue at this mid-single-digit pace?
Yes. At the beginning of the year and pretty much for as long as I've been CEO, I've said kind of that low single-digit growth. And I think we can still hit that for the year. The pipelines are still strong. I feel pretty confident over the next quarter that, that should continue. We'll see how it plays out. I mean, excluding the dairy, obviously, because the dairy is the seasonal aspect of it. But we're still not back to our normal utilization rate.
We still have a lot in the pipeline. We're seeing many opportunities and some larger opportunities as well. So I do feel confident. The mid-single digits might be a little aggressive for the annualized. But I do think that we're in a good spot from that perspective. And we'll see how it plays out, but I'm sticking to my low single-digit growth rate for the year.
Very good. I appreciate it. And I did want to ask about -- you referenced just pricing competition in the market. And it sounds like your new origination yields came down a little bit this quarter relative to the first half of the year and rates have obviously come down, so that will influence it. But I'm curious, are you willing to be a little more competitive on the pricing front now, just given where the market is at today? Or has your approach to new loan pricing not really changed much?
Yes. I mean, look, we're always willing to compete on price for the right relationship. So that's something we've had to do. And I think that's part of the reason why we've continued to see opportunities on the loan front. But yes, it is aggressive. I mean, I just saw a deal -- this was a pretty large equipment deal, but it had a 4 handle that we were competing with a large bank on. So people are out there pretty aggressively and we're trying to hold the line as best we can, but we are definitely willing to compete on price as long as the credit quality is where we want it to be.
One moment for our next question, and that will come from the line of Gary Tenner with D.A. Davidson.
I wanted to ask on the loan side, it looks like you had a little earlier than typical increase in dairy and livestock line utilization. So just as we're thinking about the fourth quarter and what's usually a pretty large spike there, is that spike muted a bit because you had some drawdown here in the third quarter?
No. We actually brought on 2 new dairy relationships in the third quarter, so that impacted it as well. It's interesting at the beginning of the year, they were doing really well. Milk prices have come down a little bit. So they're still doing okay, but not as well as they were doing in the first couple of quarters. So I think we'll still see some of that, but I wouldn't necessarily say it's going to be muted. That growth -- that small increase in utilization probably had a little bit more to do with the new relationships than just people doing things early. So we still should see kind of a normal increase in that line item in the fourth quarter.
Great. And then just a question about the $700 million of interest rate swaps that you kind of updated back in May. I think the kind of outlook for short-term rates is probably points to more lowering over the next 12 months or so than maybe what was contemplated back in May. So any thoughts about that swap arrangement and making any changes there?
So Gary, you're correct. If the market and the Fed's forecast is true, it will probably become a negative drag on our net interest income next year. But we put those on and continue to look to them as a true fair value hedge and hedging really our equity, our tangible common equity ratio and our large AFS portfolio. So I don't think we have any plans on changing that. We extended them last quarter out for that same reason to be better aligned with the duration of the AFS portfolio.
One moment for our next question, and that will come from the line of Liam Coohill with Raymond James.
It's Liam on for David. You guys have highlighted the intense rate competition on the lending side. You called out that one regional competitor offering the 4 handle on the equipment loan. Is that who you're seeing the most competition from on both the loan and deposit side today? And how difficult is deposit gathering given this intense loan growth?
Yes. So the deposit gathering has still been relatively strong. It's not as strong as it was towards the end of -- I'd say, all of '24 and the beginning of the year. It slowed a little bit. But we're going after operating companies and it is a little more competitive, I think. But I don't think it's changed much from the perspective. We're not looking for high-rate CDs or high-rate money market accounts. It has to be a full relationship. So that hasn't changed.
But I will say the loan pricing is generally coming from the larger banks and the larger regional banks. It's not as much from the banks that are our size or smaller per se. So I do think that, that will continue. And look, there's a lot of market disruption with some of the acquisitions that have been done. There's a lot of market disruption from the perspective of Wells Fargo's asset cap is removed. I mean, all these things are sort of influencing that.
So there are some probably more aggressive competitors in the market. But we're really focused on the operating company and most of our new deposits -- I'd say most of the new deposit gathering, relationship gathering that includes deposits is coming on at a little bit higher percentage of noninterest-bearing than our overall portfolio. So we feel pretty good about it.
This last quarter on the deposit side, like Allen and I said, it was more related to just one large customer in the bank that had a little greater mix at a higher rate. But we should start to see the benefit of that deposit cost going down as the Fed continues to lower. So there's competition on both sides, but we we're willing to compete, but we want to do it for the right relationships.
I appreciate the color there. And I'm excited to hear about the team lift out. What lending verticals do you expect them to focus on? And what are some of the opportunities that you see in that particular market?
So they've been focused on more operating companies and high net worth individuals. They did not have the opportunity to do investor commercial real estate. So that's an area that they can -- instead of having to refer out or give to somebody else that they'll be able to do here within their group. They all live in that area, and they covered different parts of Southern California from Orange County to Riverside County. So they'll be able to cast a wide net in those markets. And for us, it fills in a little bit of the geography from our San Diego region to our Riverside region. So that's a good thing.
And Temecula, Murrieta is really a growing market. So we're excited about the opportunities there, and they're all experienced bankers, and they've been doing it for a long time. So we're excited to see what they can do.
[Operator Instructions] And one moment for our next question, that will come from the line of Charlie Driscoll with KBW.
This is Charlie on for Kelly. You guys continue to build cash balances again this quarter. Just wondering if there's any updated message there regarding any potential areas to deploy that? Are you kind of viewing it as dry powder for a seasonally strong Q4? Just any color on how you're thinking of utilizing it?
A couple of quick things. One, you're right. In the fourth quarter, we'll see a fairly large increase in the dairy. We also see end of the quarter more year-end versus quarterly average impact, but we do see deposit outflows for tax reasons and bonuses, et cetera. So we prepare for that. But we will -- especially if the Fed continues to cut, we do evaluate where bond yields are. They're down from where we were buying early in the quarter. But we may put some of that to work depending on how we look at the bond market in the quarter.
Okay. And then if you guys could just touch on expenses, they've been really well controlled. Just looking forward here, if we do get a little bit of growth and with the team lift out, how are you thinking about expense management heading into 2026?
Not really any change there. I mean, we continue to manage it very closely, low single-digit type of growth is our expectation. Third quarter is always when we do our annual increases. So of course, quarter-over-quarter, that it impact. But year-over-year, actually, salary expense by itself was essentially flat. The one area we'll continue to invest in, as we noted in the prepared remarks, is technology. That includes automation as well as just sort of the standard stuff to keep us safe from cyber and all the other stuff.
I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Brager for any closing remarks.
Thank you, Sherry. Citizens Business Bank continues to perform consistently in all operating environments. Our solid financial performance is highlighted by our 194 consecutive quarters or more than 48 years of profitability and 144 consecutive quarters of paying cash dividends. We remain focused on our mission of banking the best small- to medium-sized businesses and their owners through all economic cycles.
I'd like to thank our customers and our associates for their commitment and loyalty and would like to thank all of you for joining us this quarter. We appreciate your interest and look forward to speaking with you in January for our fourth quarter 2025 earnings call. Please let Allen or I know if you have any questions. Have a great day.
This concludes today's program. Thank you all for participating. You may now disconnect.
CVB Financial Corp. — Q3 2025 Earnings Call
Financial data from CVB Financial Corp.
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 574 574 |
14%
14%
100%
|
|
| - Interest Income | 518 518 |
16%
16%
90%
|
|
| - Non-Interest Income | 55 55 |
2%
2%
10%
|
|
| Interest Expense | 139 139 |
10%
10%
24%
|
|
| Non-Interest Expense | -296 -296 |
26%
26%
-51%
|
|
| Loan Loss Provisions | 1.50 1.50 |
130%
130%
0%
|
|
| Net Profit | 206 206 |
2%
2%
36%
|
|
In millions USD.
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CVB Financial Corp. Stock News
Company Profile
CVB Financial Corp. is a bank holding company, which engages in the provision of relationship-based banking products, services, and solutions for small to mid-sized companies, real estate investors, non-profit organizations, professionals, and other individuals through its subsidiary, Citizens Business Bank. Its products include loans for commercial businesses, commercial real estate, multi-family, construction, land, dairy and livestock and agribusiness, consumer and government-guaranteed small business loans. The company was founded by George A. Borba on April 27, 1981 and is headquartered in Ontario, CA.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Brager |
| Employees | 1,079 |
| Founded | 1981 |
| Website | www.cbbank.com |
