ONTARIO, Calif.--(BUSINESS WIRE)-- CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank ("the Company"), announced the results for the first quarter of 2009.
Net Income
CVB Financial Corp. reported net income of $13.2 million for the first quarter ending March 31, 2009. This represents a decrease of $3.0 million, or 18.64%, when compared with net earnings of $16.2 million for the first quarter of 2008. Diluted earnings per common share were $0.13 for the first quarter of 2009. This was down $0.06, or 31.58%, from diluted earnings per common share of $0.19 for the same period last year. Of the $0.06 decrease, $0.03 is due to the dividends and amortization of the discount on our preferred stock.
Net income for the first quarter of 2009 produced a return on beginning common equity of 10.82%, a return on average common equity of 10.64% and a return on average assets of 0.81%. Return on beginning equity was 8.68% and return on average equity was 8.56%. The efficiency ratio for the first quarter was 63.24%; excluding the provision for credit losses and the gain on sale of securities, the efficiency ratio was 50.06%. Operating expenses as a percentage of average assets were 1.93%.
Net income for the first quarter of 2009 of $13.2 million, increased by $891,000 or 7.26%, compared to net income of $12.3 million for the fourth quarter of 2008. Diluted earnings per common share of $0.13 for the first quarter of 2009, decreased by $0.01 or 8.86%, from diluted earnings per common share of $0.14 for the fourth quarter of 2008, due to the full impact of the preferred stock dividend in the first quarter of 2009.
The Company made provisions for credit losses totaling $22.0 million during the first quarter ending March 31, 2009. This compares with provisions of $1.7 million for the first quarter of 2008. The Company's non-performing assets increased from $24.2 million as of December 31, 2008 to $56.7 million as of March 31, 2009. This represents 0.36% of total assets as of December 31, 2008 and 0.88% of total assets as of March 31, 2009.
Net Interest Income and Net Interest Margin
The Company had the highest quarterly net interest income in the history of the Company during the first quarter of 2009. Net interest income, before provision for credit losses, totaled $55.3 million for the first quarter of 2009. This represents an increase of $11.2 million, or 25.29%, over net interest income of $44.1 million for the same period in 2008. The increase resulted from a $15.4 million decrease in interest expense which overshadowed a $4.2 million decrease in interest income. The decrease in interest income was primarily due to the decrease in interest rates, partially offset by the growth in average earning assets. The decrease in interest expense was due to the decrease in the interest rates paid on deposits and borrowed funds, coupled with a decrease in average borrowed funds, which was partially offset by the increase in average interest-bearing deposits.
Net interest margin (tax equivalent) increased from 3.25% for the first quarter of 2008 to 3.75% for the first quarter of 2009. Total average earning asset yields decreased from 5.90% for the first quarter of 2008 to 5.26% for the first quarter of 2009. The cost of funds decreased from 3.45% for the first quarter of 2008 to 2.07% for the first quarter of 2009. The increase in net interest margin is due to the cost of interest-bearing liabilities decreasing faster than the decrease in yields on earning assets.
Balance Sheet
The Company reported total assets of $6.42 billion at March 31, 2009. This represented an increase of $41.3 million, or 0.65%, over total assets of $6.37 billion at March 31, 2008. Earning assets totaling $6.01 billion were up $14.5 million, or 0.24%, when compared with earning assets of $6.00 billion at March 31, 2008. Total deposits and customer repos were $4.19 billion at March 31, 2009. This represents an increase of $562.1 million, or 15.50%, when compared with total deposits and customer repos of $3.63 billion at March 31, 2008. Loans and leases totaled $3.66 billion at March 31, 2009. This represents an increase of $266.7 million, or 7.86%, when compared with loans and leases of $3.39 billion at March 31, 2008.
Total assets of $6.42 billion at March 31, 2009 decreased $233.6 million, or 3.51% from total assets of $6.65 billion at December 31, 2008. This was primarily due to the decrease in investment securities of $174.7 million. Total earning assets of $6.01 billion decreased $264.5 million, or 4.21%, from total earning assets of $6.28 billion at December 31, 2008. Loans and leases totaling $3.66 billion at March 31, 2009 decreased $78.0 million, or 2.09% from loans and leases of $3.74 billion at December 31, 2008. This was primarily due to seasonal trends in loan balances. Total deposits and customer repos of $4.19 billion at March 31, 2009 increased by $323.3 million, or 8.36%, when compared to total deposits and customer repos of $3.87 billion at December 31, 2008.
Investment Securities
Investment securities totaled $2.33 billion at March 31, 2009. This represents a decrease of $228.3 million, or 8.94%, when compared with $2.55 billion in investment securities at March 31, 2008. It also represents a decrease of $174.7 million, or 6.99%, when compared with $2.50 billion in investment securities at December 31, 2008. During the first quarter of 2009, we sold certain securities with relatively short maturities and recognized a gain on sale of securities of $8.9 million. Our investment portfolio continues to perform well. We have no preferred stock, nor do we have any trust preferred securities. Virtually all of our mortgage-backed securities are issued by Freddie Mac or Fannie Mae, which have the guarantee of the U.S. Government. Those that are private label mortgage-backed issues, approximately $47 million, are performing well. Ninety-six percent of our municipal portfolio contains securities which have an underlying rating of investment grade.
Borrowings
Our borrowings decreased by $579.2 million, or 33.33%, from December 31, 2008. As a result of our increase in deposits and customer repurchases of $323.3 million and the sale of approximately $177.1 million in securities, it was possible for us to reduce our reliance on borrowed funds. The replacement of high cost borrowings with low cost deposits helped to improve our margin during the first quarter of 2009.
CitizensTrust
CitizensTrust has approximately $1.5 billion in assets under administration, including $741.6 million in assets under management at March 31, 2009. This compares with $2.0 billion in assets under administration, including $804.7 million in assets under management at March 31, 2008. CitizensTrust provides trust, investment and brokerage related services, as well as financial, estate and business succession planning. Income from CitizensTrust was $1.7 million in the current quarter, down $252,000 from $1.9 million for the first quarter of 2008. The decrease was primarily due to the decline in market value of the assets under administration.
Loan and Lease Quality
The overall credit quality of the loan portfolio remains strong, but we are experiencing higher levels of problem credits. The allowance for credit losses increased from $34.7 million as of March 31, 2008 and $54.0 million as of December 31, 2008 to $65.8 million as of March 31, 2009. The increase was primarily due to provisions for credit losses of $17.9 million during the fourth quarter of 2008 and a provision for credit losses of $22.0 million during the first quarter of 2009. During the first quarter of 2009, we had loan charge-offs totaling $10.3 million and recoveries on previously charged-off loans of $99,000. This resulted in net charge-offs of $10.2 million. By comparison, during the first quarter of 2008, the Company had net charge-offs of $38,000 and a $1.7 million contribution to the provision for credit losses. The allowance for credit losses was 1.80% and 1.02% of total loans and leases outstanding as of March 31, 2009 and 2008, respectively. "We continue to make greater provisions for credit losses in order to build our reserves. It is important for us to be proactive and fiscally prepared for any further deterioration in economic conditions," said Chris Myers, President & Chief Executive Officer.
We had $48.0 million in non-performing loans at March 31, 2009, or 1.31% of total loans. This compares to $17.7 million in non-performing loans at December 31, 2008 and $2.7 million at March 31, 2008. Non-performing loans consist of $20.9 million in residential construction and land loans, $22.1 million in commercial construction loans, $2.2 million in single-family mortgage loans, $1.7 million in commercial real estate loans, $0.8 million in other commercial loans and $0.3 million in consumer loans. Of our total loan portfolio, approximately 22% is based in the Inland Empire, one of the hardest hit areas of the United States during this recession. While our non-performing loans continue to remain in a fair position at 1.31% of total loans, we are mindful of potential losses. "We do not anticipate that potential losses will prevent us from meeting our earnings projections for 2009. We continue to monitor all of our loans closely and work proactively with our borrowers," said Myers. In addition, Citizens Business Bank recently completed its annual regulatory examination.
The $48.0 million in non-performing loans consist of five construction loans to one developer totaling $34.8 million with a specific reserve of $5.1 million. The remaining $13.2 million consist primarily of one commercial construction loan with a balance of $7.1 million, five residential mortgage loans totaling $2.2 million, one residential construction loan of $1.1 million, and one commercial real estate loan of $1.2 million. In terms of loan concentrations to any single borrower, the Bank has only one borrowing relationship with over $50 million in total loan commitments. The aggregate borrowing relationship is below our $87 million house lending limit, which is 50% of our legal lending limit. We have multiple forms of real estate collateral supporting the subject credit facility, including both income and non-income producing properties. All loans related to this relationship are performing and paid current.
Other Real Estate Owned was $8.7 million at March 31, 2009. This was an increase of $2.1 million from December 31, 2008. This was primarily due to the transfer of $6.3 million from non-performing loans offset by $3.4 million in sales of existing OREO properties and $0.8 million in OREO write-downs during the first quarter of 2009. We now have nine properties in OREO.
At March 31, 2009, we had loans delinquent 30 to 89 days of $13.9 million. This compares to delinquent loans of $5.2 million at December, 31, 2008, and $18.2 million at March 31, 2008. As a percentage of total loans, delinquencies, excluding non-accruals, were 0.38% at March 31, 2009, 0.14% at December 31, 2008 and 0.53% at March 31, 2008.
Our construction loan portfolio totaled $333.2 million as of March 31, 2009 down from $351.5 million as of December 31, 2008. This represents 9.09% of our total loans outstanding at March 31, 2009. Of the $333.2 million, $98.6 million is for residential construction and residential land loans. This represents 29.6% of the construction loans outstanding or 2.69% of our total loan portfolio. Of note, 36.04% of our construction loan portfolio is based in the Inland Empire.
Corporate Overview
CVB Financial Corp. is the holding company for Citizens Business Bank. The Bank is the largest financial institution headquartered in the Inland Empire region of Southern California. It serves 40 cities with 43 business financial centers and 5 commercial banking centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley areas of California. Its leasing division, Citizens Financial Services, provides vehicle leasing, equipment leasing and real estate loan services.
Shares of CVB Financial Corp. common stock are listed on the NASDAQ under the ticker symbol of CVBF. For investor information on CVB Financial Corp., visit our Citizens Business Bank website at www.cbbank.com and click on the CVB Investor tab.
Safe Harbor
Certain matters set forth herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company's current business plan and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, the impact of changes in interest rates, a decline in economic conditions, adverse changes resulting from natural and manmade disasters, effects of government regulation and increased competition among financial services providers and other factors set forth in the Company's public reports including its Annual Report on Form 10-K for the year ended December 31, 2008, and particularly the discussion of risk factors within that document. The Company does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law.
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(unaudited)
dollars in thousands
March 31, December 31,
2009 2008 2008
Assets:
Cash and due from banks $ 101,214 $ 110,102 $ 95,297
Investment Securities 2,319,051 2,546,367 2,493,476
available-for-sale
Investment Securities 6,607 7,638 6,867
held-to-maturity
Federal funds sold and
Interest-bearing balances due from 285 475 285
depository institutions
Investment in stock of 93,240 85,852 93,240
Federal Home Loan Bank (FHLB)
Loans and lease finance 3,658,859 3,392,192 3,736,838
receivables
Less allowance for credit (65,755 ) (34,711 ) (53,960 )
losses
Net loans and lease finance 3,593,104 3,357,481 3,682,878
receivables
Total earning assets 6,012,287 5,997,813 6,276,746
Premises and equipment, net 44,015 46,585 44,420
Intangibles 10,231 13,713 11,020
Goodwill 55,097 55,097 55,097
Cash value of life insurance 107,134 104,499 106,366
Other assets 86,111 46,993 60,705
TOTAL $ 6,416,089 $ 6,374,802 $ 6,649,651
Liabilities and Stockholders'
Equity
Liabilities:
Deposits:
Demand Deposits $ 1,396,087 $ 1,218,660 $ 1,334,248
(noninterest-bearing)
Investment Checking 324,187 351,692 324,907
Savings/MMDA 910,571 952,601 818,872
Time Deposits 1,154,420 737,715 1,030,129
Total Deposits 3,785,265 3,260,668 3,508,156
Demand Note to U.S. Treasury 5,737 3,622 5,373
Customer Repurchase 404,016 366,502 357,813
Agreements
Repurchase Agreements 250,000 250,000 250,000
Borrowings 1,158,500 1,745,851 1,737,660
Junior Subordinated 115,055 115,055 115,055
Debentures
Other liabilities 71,155 181,315 60,702
Total Liabilities 5,789,728 5,923,013 6,034,759
Stockholders' equity:
Stockholders' equity 591,355 429,017 586,161
Accumulated other
comprehensive income
(loss), net of tax 35,006 22,772 28,731
626,361 451,789 614,892
TOTAL $ 6,416,089 $ 6,374,802 $ 6,649,651
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEET
(unaudited)
dollars in thousands
Three months ended March 31,
2009 2008
Assets:
Cash and due from banks $ 95,339 $ 107,878
Investment securities 2,496,590 2,386,918
available-for-sale
Investment securities 6,692 6,117
held-to-maturity
Federal funds sold and Interest-bearing balances 285 1,296
due from depository institutions
Investment in stock of Federal 93,240 84,719
Home Loan Bank (FHLB)
Loans and lease finance 3,680,258 3,383,772
receivables
Less allowance for credit losses (60,323 ) (33,906 )
Net loans and lease finance 3,619,935 3,349,866
receivables
Total earning assets 6,216,742 5,828,916
Premises and equipment, net 44,542 46,773
Intangibles 10,519 14,061
Goodwill 55,097 55,131
Cash value of life insurance 106,708 103,787
Other assets 81,741 69,967
TOTAL $ 6,610,688 $ 6,226,513
Liabilities and Stockholders'
Equity
Liabilities:
Deposits:
Noninterest-bearing $ 1,342,229 $ 1,225,327
Interest-bearing 2,260,850 2,050,628
Total Deposits 3,603,079 3,275,955
Other borrowings 2,209,679 2,339,160
Junior Subordinated Debentures 115,055 115,055
Other liabilities 59,156 59,743
Total Liabilities 5,986,969 5,789,913
Stockholders' equity:
Stockholders' equity 594,919 432,265
Accumulated other comprehensive
income
(loss), net of tax 28,800 4,335
623,719 436,600
TOTAL $ 6,610,688 $ 6,226,513
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
dollar amounts in thousands, except per share
For the Three Months
Ended March 31,
2009 2008
Interest Income:
Loans and leases, including fees $ 49,526 $ 54,046
Investment securities:
Taxable 22,436 20,877
Tax-advantaged 6,996 7,188
Total investment income 29,432 28,065
Dividends from FHLB Stock - 1,093
Federal funds sold & Interest-bearing CDs with other
4 15
institutions
Total interest income 78,962 83,219
Interest Expense:
Deposits 6,590 12,278
Borrowings and junior subordinated debentures 17,080 26,811
Total interest expense 23,670 39,089
Net interest income before provision for credit losses 55,292 44,130
Provision for credit losses 22,000 1,700
Net interest income after
provision for credit losses 33,292 42,430
Other Operating Income:
Service charges on deposit accounts 3,717 3,745
Trust and investment services 1,661 1,913
Gain on sale of investment securities 8,929 -
Other 2,050 2,482
Total other operating income 16,357 8,140
Other operating expenses:
Salaries and employee benefits 15,819 15,543
Occupancy 2,851 2,871
Equipment 1,597 1,649
Professional services 1,695 1,541
Amortization of intangible assets 789 898
Provision for unfunded commitments 900 250
OREO Expense 1,031 -
Other 6,715 5,647
Total other operating expenses 31,397 28,399
Earnings before income taxes 18,252 22,171
Income taxes 5,084 5,987
Net earnings $ 13,168 $ 16,184
Basic earnings per common share $ 0.13 $ 0.19
Diluted earnings per common share $ 0.13 $ 0.19
Cash dividends per common share $ 0.085 $ 0.085
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(unaudited)
Three months ended March 31,
2009 2008
Interest income - (Tax-Effected) (te) $ 81,808 $ 86,133
Interest Expense 23,670 39,089
Net Interest income - (te) $ 58,138 $ 47,044
Return on average assets 0.81 % 1.05 %
Return on average equity 8.56 % 14.91 %
Efficiency ratio 63.24 % 56.16 %
Net interest margin (te) 3.75 % 3.25 %
Weighted average shares outstanding
Basic 83,174,373 83,151,328
Diluted 83,303,201 83,521,594
Dividends declared $ 7,083 $ 7,093
Dividend payout ratio 53.79 % 43.83 %
Number of shares outstanding-EOP 83,326,511 83,095,678
Book value per share $ 6.05 $ 5.44
March 31,
2009 2008
Non-performing Assets (dollar amount in
thousands):
Non-accrual loans $ 48,037 $ 2,707
Loans past due 90 days or more
and still accruing interest - -
Other real estate owned (OREO), net 8,666 1,137
Total non-performing assets $ 56,703 $ 3,844
Percentage of non-performing assets
to total loans outstanding and OREO 1.55 % 0.11 %
Percentage of non-performing
assets to total assets 0.88 % 0.06 %
Allowance for loan losses to
non-performing assets 115.96 % 902.99 %
Net Charge-off to Average loans 0.28 % 0.00 %
Allowance for Credit Losses:
Beginning Balance $ 53,960 $ 33,049
Total Loans Charged-Off (10,304 ) (246 )
Total Loans Recovered 99 208
Net Loans Charged-off (10,205 ) (38 )
Provision Charged to Operating Expense 22,000 1,700
Allowance for Credit Losses at End of period $ 65,755 $ 34,711
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(in thousands, except per share data)
(unaudited)
Quarterly Common Stock
Price
2009 2008 2007
Quarter End High Low High Low High Low
March 31, $11.62 $5.62 $11.20 $8.45 $13.38 $11.42
June 30, $12.10 $9.44 $12.40 $10.63
September $15.01 $7.65 $12.71 $9.51
30,
December $13.89 $9.29 $11.97 $9.98
31,
Quarterly Consolidated Statements of Earnings
1Q 4Q 3Q 2Q 1Q
2009 2008 2008 2008 2008
Interest
income
Loans, including fees $49,526 $53,416 $52,954 $52,211 $54,046
Investment securities and federal 29,436 29,407 30,553 30,758 29,173
funds sold
78,962 82,823 83,507 82,969 83,219
Interest
expense
Deposits 6,590 7,569 7,417 8,537 12,278
Other borrowings 17,080 23,200 27,078 25,949 26,811
23,670 30,769 34,495 34,486 39,089
Net interest income
before
provision for credit 55,292 52,054 49,012 48,483 44,130
losses
Provision for credit 22,000 17,900 4,000 3,000 1,700
losses
Net interest income
after
provision for credit 33,292 34,154 45,012 45,483 42,430
losses
Non-interest income 16,357 9,242 8,373 8,702 8,140
Non-interest expenses 31,397 27,954 29,057 30,378 28,399
Earnings before income 18,252 15,442 24,328 23,807 22,171
taxes
Income 5,084 3,165 6,868 6,655 5,987
taxes
Net $13,168 $12,277 $17,460 $17,152 $16,184
earnings
Basic earning per common $0.13 $0.14 $0.21 $0.21 $0.19
share
Diluted earnings per $0.13 $0.14 $0.21 $0.21 $0.19
common share
Cash dividends per $0.085 $0.085 $0.085 $0.085 $0.085
common share
Dividends Declared $7,083 $7,078 $7,088 $7,058 $7,093
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(in thousands)
(unaudited)
Distribution
of Loan
Portfolio
3/31/2009 12/31/2008 9/30/2008 6/30/2008 3/31/2008
Commercial
and $ 355,591 $ 370,829 $ 356,973 $ 424,515 $ 386,274
Industrial
Real Estate:
Construction 333,234 351,543 359,859 333,303 318,549
Commercial 1,965,531 1,945,706 1,932,778 1,851,123 1,822,610
Real Estate
SFR Mortgage 328,145 333,931 341,389 351,120 356,415
Consumer 69,708 66,255 61,710 57,380 57,554
Municipal
lease 169,230 172,973 173,600 163,459 153,270
finance
receivables
Auto and
equipment 41,708 45,465 47,753 53,121 54,795
leases
Dairy and 404,090 459,329 331,333 293,133 254,156
Livestock
Gross Loans 3,667,237 3,746,031 3,605,395 3,527,154 3,403,623
Less:
Deferred net (8,378 ) (9,193 ) (10,058 ) (10,911 ) (11,431 )
loan fees
Allowance
for credit (65,755 ) (53,960 ) (40,058 ) (37,310 ) (34,711 )
losses
Net Loans $ 3,593,104 $ 3,682,878 $ 3,555,279 $ 3,478,933 $ 3,357,481
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(in thousands)
(unaudited)
Non-Performing Assets & Delinquency
Trends
March 31, December 31, September 30, June 30,
2009 2008 2008 2008
Non-Performing Loans
Residential
Construction and $ 20,943 $ 7,524 $ 8,020 $ 9,802
Land
Commercial 22,102 - - -
Construction
Residential Mortgage 2,203 3,116 2,062 1,672
Commercial Real 1,661 4,658 4,995 337
Estate
Commercial and 792 2,074 1,248 214
Industrial
Consumer 336 312 312 312
Total $ 48,037 $ 17,684 $ 16,637 $ 12,337
% of Total Loans 1.31 % 0.47 % 0.46 % 0.35 %
Past Due 30+ Days
Residential
Construction and $ - $ - $ - $ -
Land
Commercial - - 2,500 -
Construction
Residential Mortgage 3,814 1,931 481 483
Commercial Real 8,341 2,402 19 255
Estate
Commercial and 1,720 592 1,852 228
Industrial
Consumer 62 231 55 -
Total $ 13,937 $ 5,156 $ 4,907 $ 966
% of Total Loans 0.38 % 0.14 % 0.14 % 0.03 %
OREO
Residential
Construction and $ 2,416 $ 6,158 $ 1,612 $ 1,137
Land
Commercial Real 4,612 87 - -
Estate
Commercial and 893 - - -
Industrial
Residential Mortgage 745 320 315 -
Total $ 8,666 $ 6,565 $ 1,927 $ 1,137
Total
Non-Performing, Past $ 70,640 $ 29,405 $ 23,471 $ 14,440
Due & OREO
% of Total Loans 1.93 % 0.78 % 0.65 % 0.41 %
Total Loans 3,667,237 3,746,031 3,605,395 3,527,154
Source: CVB Financial Corp.Contact: CVB Financial Corp. Christopher D. Myers President and CEO (909) 980-4030