ONTARIO, Calif.--(BUSINESS WIRE)--July 20, 2006--
CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank ("the Company"), announced record results for the second quarter of 2006. This included record deposits, record loans, record assets and record earnings. It was the strongest second quarter in the history of the Company.
Net Income
CVB Financial Corp. reported net income of $18.9 million for the second quarter ending June 30, 2006. This represents an increase of $1.4 million, or 8.23%, when compared with the $17.5 million in net earnings reported for the second quarter of 2005. Diluted earnings per share were $0.25 for the second quarter of 2006. This was up $0.02, or 8.70%, when compared with earnings per share of $0.23 for the second quarter of 2005.
Net income for the second quarter of 2006 produced a return on beginning equity of 22.13%, a return on average equity of 21.58% and a return on average assets of 1.35%. The efficiency ratio for the second quarter was 48.18%, and operating expenses as a percentage of average assets were 1.73%.
Net income for the six months ending June 30, 2006 was $37.2 million. This represents an increase of $2.0 million, or 5.62%, when compared with net earnings of $35.2 million for the same period of 2005. Diluted earnings per share were $0.48. This was up $0.03, or 6.67%, from diluted earnings per share of $0.45 for the same period last year.
As previously reported, the Company recorded the reversal of a reserve of $2.6 million in the first quarter of 2005. This reserve had been established for a possible robbery loss that did not materialize. This reversal added $1.7 million to net income after taxes for the period. Without this extraordinary item, the net income for the first six months ending June 30, 2005 would have been $33.5 million. Net earnings of $37.2 million for the first half of 2006 would represent an increase of $3.6 million, or 10.86%, when compared to the $33.5 million for the same period in 2005.
Net income for the six months ending June 30, 2006 produced a return on beginning equity of 21.85%, a return on average equity of 21.20% and a return on average assets of 1.35%. The efficiency ratio for the six-month period was 46.95%, and operating expenses as a percentage of average assets was 1.74%.
Net Interest Income and Net Interest Margin
Net interest income totaled $42.3 million for the second quarter of 2006. This represented an increase of $377,000, or 0.90%, over net interest income of $41.9 million for the second quarter of 2005. This increase resulted from a $17.2 million increase in interest income, partially offset by a $15.9 million increase in interest expense and a $900,000 increase in the provision for credit losses. Net interest income before the provision for credit losses increased $1.3 million, or 3.05%, in the second quarter of 2006. The increases in interest income were primarily due to the growth in average earning assets and an increase in interest rates. The increases in interest expense were due to the increases in deposits and borrowed funds and the increase in interest rates on these funding instruments.
The net interest margin (tax equivalent) declined from 3.92% for the second quarter of 2005 to 3.47% for the second quarter of 2006. Total average earning asset yields have increased from 5.52% for the second quarter of 2005 to 6.03% for the second quarter of 2006. The cost of funds has increased from 2.33% for the second quarter of 2005 to 3.47%, for the second quarter of 2006. The higher increase in cost of funds is due to the short-term liability sensitivity of the Company. This decline in net interest margin has been mitigated by the strong growth in the balance sheet. The Company has approximately $1.37 billion, or 38.05%, of its deposits in interest free demand deposits.
Net interest income totaled $85.8 million for the six months ending June 30, 2006. This represents an increase of $3.3 million, or 4.03%, over the net interest income of $82.5 million for the same period in 2005. This increase resulted from a $33.6 million increase in interest income, which was partially offset by a $29.2 million increase in interest expense and a $1.2 million increase in the provision for credit losses. Net interest income before the provision for credit losses increased $4.5 million, or 5.43% for the first six months of 2006. The increases in interest income were primarily due to the growth in average earning assets and an increase in interest rates. The increases in interest expense were due to the increases in interest rates on deposits and borrowed funds.
The net interest margin (tax equivalent) decreased from 3.94% for the first six months of 2005 to 3.55% for the first six months of 2006. Total average earning asset yields have increased from 5.45% for the first six months of 2005 to 5.94% for the first six months of 2006. The cost of funds has increased from 2.23% for the first six months of 2005 to 3.29% for the first six months of 2006.
The credit quality of the loan portfolio continues to be strong. The allowance for credit losses increased from $24.1 million as of June 30, 2005 to $25.6 million as of June 30, 2006. During the first six months of 2006, the Company experienced net recoveries of $1.3 million and made a provision for credit losses of $1.2 million. During the first six months of 2005, the Company had net recoveries of $878,000 and $756,000 was added to the allowance from the acquisition of Granite State Bank. The allowance for credit losses is 0.90% of the total loans and leases outstanding. Although the allowance for credit losses is justified by the strong credit quality of the loan portfolio, it is relatively low when compared with peer banks. We believe that making appropriate levels of provisions to compensate for the growth of the loan portfolio is justified.
Balance Sheet
The Company reported total assets of $5.95 billion at June 30, 2006. This represented an increase of $1.14 billion, or 23.70%, over total assets of $4.81 billion on June 30, 2005. Earning assets totaling $5.56 billion were up $1.07 billion, or 23.84%, when compared with earning assets of $4.49 billion as of June 30, 2005. Deposits of $3.59 billion grew $600.3 million, or 20.06%, from $2.99 billion for the same period of the prior year. Gross loans and leases of $2.84 billion on June 30, 2006 rose $543.0 million, or 23.65%, from $2.30 billion on June 30, 2005.
Total assets of $5.95 billion as of June 30, 2006 reflect an increase of $529.4 million, or 9.76%, over total assets of $5.42 billion on December 31, 2005. Earning assets of $5.56 billion were up $480.0 million, or 9.44%, over the total earning assets of $5.08 billion on December 31, 2005. Deposits of $3.59 billion on June 30, 2006 grew $168.8 million, or 4.93%, from $3.42 billion as of December 31, 2005. Gross loans and leases of $2.84 billion increased $175.3 million, or 6.58%, from $2.66 billion on December 31, 2005. Total equity of $338.3 million on June 30, 2006 was down by $4.6 million, or 1.35%, from $342.9 million as of December 31, 2005. This decline was the result of a $28.9 million increase in the unrealized loss in the investment portfolio.
Investment Securities
Investment securities totaled $2.68 billion as of June 30, 2006. This represents an increase of $520.5 million, or 24.15%, when compared with the $2.15 billion in securities as of June 30, 2005. It represents an increase of $305.3 million, or 12.88%, when compared with $2.37 billion in investment securities as of December 31, 2005.
In June 2006, the Company purchased $250.0 million in mortgage-backed securities funded by a repurchase agreement with a double cap. This was done to protect against increased interest rates while providing a potential benefit in the event rates decline. The life of the repurchase agreement is two years.
Financial Advisory Services
The Financial Advisory Services Group has over $2.9 billion in assets under administration. They provide trust, investment and brokerage related services, as well as financial, estate and business succession planning.
Loan and Lease Quality
CVB Financial Corp. reported $885,000 in non-performing assets as of June 30, 2006. There were no non-performing assets as of December 31, 2005. The allowance for credit losses was $25.6 million as of June 30, 2006. This represents 0.90% of gross loans and leases. It compares with an allowance for credit losses of $23.2 million, or 0.87% of gross loans and leases on December 31, 2005. The increase was primarily due to a provision for credit losses of $1.2 million and recoveries of $1.3 million, offset by loan charge-offs of $64,000 during the first six months of 2006.
Other Items in 2006
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 33 cities with 39 business financial centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley areas of California. Its leasing division, Golden West Financial Services, provides vehicle leasing, equipment leasing and real estate loan services.
On June 2, 2006, the Company announced the appointment of Christopher D. Myers as President and Chief Executive Officer of CVB Financial Corp. and its wholly owned subsidiary, Citizens Business Bank. The appointment will become effective August 1, 2006. Myers will also join the Board of Directors of both CVB Financial Corp. and Citizens Business Bank at that time.
During the second quarter of 2006, the two Arcadia business financial centers were consolidated and moved into a new location within the city of Arcadia, California. The new address is 101 West Huntington Drive, Arcadia, California 91007.
For the fourth consecutive year, CVB Financial Corp. will receive the KBW Honor Roll award at the Annual Community Bank Investor Conference hosted by Keefe, Bruyette & Woods, Inc. in New York on August 1-2, 2006. The Company was also recognized as a SmAll-Star by Sandler O'Neill, and named on the FPK Honor Roll by Fox-Pitt, Kelton.
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
This document contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the projected. In addition, these forward-looking statements relate to the Company's current expectations regarding future operating results. Such issues and uncertainties include impact of changes in interest rates, a decline in economic conditions and increased competition among financial services providers. For a discussion of other factors that could cause actual results to differ, please see the publicly available Securities and Exchange Commission filings of CVB Financial Corp., including its Annual Report on Form 10-K for the year ended December 31, 2005, and particularly the discussion on risk factors within that document. The Company does not undertake any, 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.
CVB FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET
(unaudited)
dollars in thousands
June 30, Dec. 31,
----------------------- -----------
2006 2005 2005
----------- ----------- -----------
Assets:
Investment Securities available-
for-sale $2,675,165 $2,143,528 $2,369,892
Interest-bearing balances due from
depository institutions 99 11,281 1,883
Investment in stock of Federal
Home Loan Bank (FHLB) 74,441 65,439 70,770
Loans and lease finance
receivables 2,839,145 2,296,135 2,663,863
Less allowance for credit
losses (25,620) (24,127) (23,204)
----------- ----------- -----------
Net loans and lease finance
receivables 2,813,525 2,272,008 2,640,659
----------- ----------- -----------
Total earning assets 5,563,230 4,492,256 5,083,204
Cash and due from banks 143,212 128,577 130,141
Premises and equipment, net 43,862 39,596 40,020
Intangibles 11,297 13,651 12,474
Goodwill 31,531 28,735 32,357
Cash value of life insurance 73,282 70,598 71,811
Other assets 86,005 38,441 52,964
----------- ----------- -----------
TOTAL $5,952,419 $4,811,854 $5,422,971
=========== =========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand Deposits
(noninterest-bearing) $1,367,015 $1,394,898 1,490,613
Investment Checking 299,393 248,726 298,067
Savings/MMDA 910,083 838,657 852,189
Time Deposits 1,016,362 510,255 783,177
----------- ----------- -----------
Total Deposits 3,592,853 2,992,536 3,424,046
Demand Note to U.S. Treasury 4,462 5,079 6,433
Borrowings 1,746,000 1,352,000 1,496,000
Junior Subordinated Debentures 108,250 82,476 82,476
Other liabilities 162,600 42,908 71,139
----------- ----------- -----------
Total Liabilities 5,614,165 4,474,999 5,080,094
Stockholders' equity:
Stockholders' equity 380,564 333,552 356,263
Accumulated other comprehensive
income (loss), net of tax (42,310) 3,303 (13,386)
----------- ----------- -----------
338,254 336,855 342,877
----------- ----------- -----------
TOTAL $5,952,419 $4,811,854 $5,422,971
=========== =========== ===========
CVB FINANCIAL CORP.
CONSOLIDATED AVERAGE BALANCE SHEET
(unaudited)
dollars in thousands
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Assets:
Investment securities
available-for-sale $2,417,985 $2,170,056 $2,404,090 $2,148,572
Interest-bearing
balances due from
depository
institution 2,745 14,262 3,701 9,962
Investment in stock of
Federal Home Loan
Bank (FHLB) 73,541 63,581 72,426 59,436
Loans and lease
finance receivables 2,767,014 2,202,295 2,710,070 2,151,089
Less allowance for
credit losses (24,424) (24,024) (23,865) (23,592)
----------- ----------- ----------- -----------
Net loans and lease
finance
receivables 2,742,590 2,178,271 2,686,205 2,127,497
----------- ----------- ----------- -----------
Total earning
assets 5,236,861 4,426,170 5,166,422 4,345,467
Cash and due from
banks 125,323 124,058 127,045 121,051
Premises and
equipment, net 43,019 38,140 41,844 36,276
Intangibles 11,527 14,335 11,820 10,220
Goodwill 31,531 28,755 31,673 24,244
Cash value of life
insurance 72,871 70,536 72,456 69,779
Other assets 95,101 81,338 90,825 61,339
----------- ----------- ----------- -----------
TOTAL $5,616,233 $4,783,332 $5,542,085 $4,668,376
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-
bearing $1,343,664 $1,375,603 $1,365,198 $1,356,372
Interest-
bearing 2,155,113 1,608,114 2,108,302 1,599,649
----------- ----------- ----------- -----------
Total
Deposits 3,498,777 2,983,717 3,473,500 2,956,021
Other borrowings 1,611,443 1,344,502 1,561,480 1,271,302
Junior Subordinated
Debentures 108,250 82,476 103,978 82,476
Other liabilities 46,109 43,565 49,625 29,828
----------- ----------- ----------- -----------
Total
Liabilities 5,264,579 4,454,260 5,188,583 4,339,627
Stockholders' equity:
Stockholders'
equity 380,391 339,071 374,690 329,460
Accumulated other
comprehensive
income (loss), net
of tax (28,737) (9,999) (21,188) (711)
----------- ----------- ----------- -----------
351,654 329,072 353,502 328,749
----------- ----------- ----------- -----------
TOTAL $5,616,233 $4,783,332 $5,542,085 $4,668,376
=========== =========== =========== ===========
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
dollar amounts in thousands, except per share
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2006 2005 2006 2005
--------- ---------- --------- ----------
Interest Income:
Loans, including fees $47,913 $35,267 $92,205 $67,647
Investment securities:
Taxable 21,163 18,897 41,900 37,600
Tax-advantaged 6,807 4,798 13,052 8,885
--------- ---------- --------- ----------
Total investment
income 27,970 23,695 54,952 46,485
Dividends from FHLB Stock 990 663 1,790 1,138
Federal funds sold - (2) 32 2
Interest-bearing CDs with
other institutions 28 99 54 133
--------- ---------- --------- ----------
Total interest
income 76,901 59,722 149,033 115,405
Interest Expense:
Deposits 16,294 6,248 29,495 11,309
Borrowings and junior
subordinated debentures 17,446 11,590 32,552 21,588
--------- ---------- --------- ----------
Total interest
expense 33,740 17,838 62,047 32,897
--------- ---------- --------- ----------
Net interest income
before provision for
credit losses 43,161 41,884 86,986 82,508
Provision for credit losses 900 - 1,150 -
--------- ---------- --------- ----------
Net interest income
after provision for
credit losses 42,261 41,884 85,836 82,508
Other Operating Income:
Service charges on
deposit accounts 3,288 3,251 6,579 6,293
Financial Advisory
Services 1,815 1,509 3,660 3,187
Gain/(Loss) on sale of
investment securities 33 (46) 33 (46)
Other 2,955 2,578 5,548 4,937
--------- ---------- --------- ----------
Total other
operating
income 8,091 7,292 15,820 14,371
Other operating expenses:
Salaries and employee
benefits 12,771 12,789 25,491 25,622
Occupancy 2,075 1,959 4,104 3,957
Equipment 1,756 2,112 3,501 3,856
Professional services 1,485 1,195 2,758 2,220
Amortization of
intangible assets 589 589 1,177 885
Other 5,583 4,418 10,698 6,906
--------- ---------- --------- ----------
Total other
operating
expenses 24,259 23,062 47,729 43,446
--------- ---------- --------- ----------
Earnings before income taxes 26,093 26,114 53,927 53,433
Income taxes 7,176 8,636 16,770 18,254
--------- ---------- --------- ----------
Net earnings $18,917 $17,478 $37,157 $35,179
========= ========== ========= ==========
Basic earnings per common
share $0.25 $0.23 $0.49 $0.46
========= ========== ========= ==========
Diluted earnings per common
share $0.25 $0.23 $0.48 $0.45
========= ========== ========= ==========
Cash dividends per common
share $0.09 $0.11 $0.18 $0.22
========= ========== ========= ==========
All per share information has been retroactively adjusted to reflect
the 5 for 4 stock split declared on Dec. 21, 2005.
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(unaudited)
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Interest income - (Tax
Effective)(te) $79,111 $61,258 $153,263 $118,258
Interest Expense 33,740 17,838 62,047 32,897
----------- ----------- ----------- -----------
Net Interest income -
(te) $45,371 $43,420 $91,216 $85,361
=========== =========== =========== ===========
Return on average
assets 1.35% 1.47% 1.35% 1.52%
Return on average
equity 21.58% 21.30% 21.20% 21.58%
Efficiency ratio 48.18% 46.90% 46.95% 44.85%
Net interest margin
(te) 3.47% 3.92% 3.55% 3.94%
Weighted average
shares outstanding
Basic 76,493,394 76,686,751 76,476,932 76,554,033
Diluted 77,184,827 77,487,431 77,175,954 77,454,080
Dividends declared $6,885 $6,716 $13,768 $14,356
Dividend payout ratio 36.39% 38.42% 37.05% 40.81%
Number of shares
outstanding-EOP 76,479,277 77,083,741
Book value per share $4.42 $4.37
June 30,
2006 2005
----------- -----------
Non-performing Assets (dollar amount in
thousands):
Non-accrual loans $885 $0
Loans past due 90 days or more and still
accruing interest - -
Restructured loans - -
Other real estate owned (OREO), net - -
----------- -----------
Total non-performing assets $885 $0
=========== ===========
Percentage of non-performing assets to total
loans outstanding and OREO 0.03% 0.00%
Percentage of non-performing assets to total
assets 0.01% 0.00%
Non-performing assets to allowance for loan
losses 3.45% 0.00%
Net Charge-off (Recovered) to Average loans -0.05% -0.07%
Allowance for Credit Losses:
Beginning Balance $23,204 $22,494
Total Loans Charged-Off (64) (133)
Total Loans Recovered 1,330 1,010
Acquisition of Granite State Bank 0 756
----------- -----------
Net Loans Recovery (Charged-Off) 1,266 1,633
Provision Charged to Operating Expense 1,150 -
----------- -----------
Allowance for Credit Losses at End of period $25,620 $24,127
=========== ===========
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(in thousands, except per share data)
(unaudited)
Quarterly Common Stock Price
2006 2005 2004
--------------- --------------- ---------------
Quarter End High Low High Low High Low
------- ------- ------- ------- ------- -------
March 31, $17.16 $16.18 $17.04 $14.08 $13.63 $12.10
June 30, $17.15 $14.58 $16.10 $13.60 $14.05 $12.58
Sept. 30, $17.52 $14.43 $14.96 $12.93
Dec. 31, $16.72 $13.90 $17.87 $14.24
Quarterly Consolidated Statements of Earnings
2Q 1Q 4Q 3Q 2Q
2006 2006 2005 2005 2005
-------- -------- -------- -------- --------
Interest income
Loans, including fees $47,913$44,292$42,432$38,341$35,267
Investment securities
and federal funds
sold 28,988 27,840 26,039 24,732 24,455
-------- -------- -------- -------- --------
76,901 72,132 68,471 63,073 59,722
Interest expense
Deposits 16,294 13,201 10,060 7,539 6,248
Other borrowings 17,446 15,106 13,991 12,950 11,590
-------- -------- -------- -------- --------
33,740 28,307 24,051 20,489 17,838
Net interest income
before provision for
credit losses 43,161 43,825 44,420 42,584 41,884
Provision for credit
losses 900 250 - - -
-------- -------- -------- -------- --------
Net interest income
after provision for
credit losses 42,261 43,575 44,420 42,584 41,884
Non-interest income 8,091 7,729 5,273 7,861 7,292
Non-interest expenses 24,259 23,470 23,926 22,679 23,062
-------- -------- -------- -------- --------
Earnings before income
taxes 26,093 27,834 25,767 27,766 26,114
Income taxes 7,176 9,594 8,593 9,499 8,636
-------- -------- -------- -------- --------
Net earnings $18,917 $18,240 $17,174 $18,267 $17,478
======== ======== ======== ======== ========
Basic earning per common
share $0.25 $0.24 $0.22 $0.24 $0.23
Diluted earnings per
common share $0.25 $0.24 $0.22 $0.23 $0.23
Cash dividends per common
share $0.09 $0.09 $0.09 $0.11 $0.11
Dividends Declared $6,885 $6,883 $6,877 $6,722 $6,716
Financial Measures That Supplement GAAP
Our discussions sometimes contain financial information not required
to be presented by generally accepted accounting principles (GAAP). We
do this to better inform readers of our financial statements. The SEC
requires us to present a reconciliation of GAAP presentation with
non-GAAP presentation.
The following table reconciles the differences in net earnings with
and without the settlement of robbery loss in conformity with GAAP.
Net Earnings Reconciliation Three months ended Six months ended
(non-GAAP disclosure):
June 30, June 30,
2006 2005 2006 2005
--------- -------- -------- ---------
Net earnings without the
settlement of robbery loss $18,917 $17,478 $37,157 $33,467
Settlement of robbery loss, net
of tax - - 1,712
--------- -------- -------- ---------
Reported net earnings $18,917 $17,478 $37,157 $35,179
========= ======== ======== =========
Settlement of robbery loss $0 $0 $0 $2,600
Tax effect - - (888)
--------- -------- -------- ---------
Net of taxes $0 $0 $0 $1,712
========= ======== ======== =========
We have presented net earnings without the settlement of robbery loss
to show shareholders the earnings from operations unaffected by the
impact of these items. We believe this presentation allows the reader
to more easily assess the results of the Company's operations and
business.
Source: CVB Financial Corp.