ONTARIO, Calif.--(BUSINESS WIRE)--
CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank ("the Company"), announced the results for the third quarter of 2006.
Net Income
CVB Financial Corp. reported net income of $18.5 million for the third quarter ending September 30, 2006. This represents an increase of $188,000, or 1.03%, when compared with the $18.3 million in net earnings reported for the third quarter of 2005. Diluted earnings per share were $0.24 for the third quarter of 2006 and 2005.
Net income for the third quarter of 2006 produced a return on beginning equity of 21.65%, a return on average equity of 20.71% and a return on average assets of 1.23%. The efficiency ratio for the third quarter was 45.63%, and operating expenses as a percentage of average assets were 1.51%.
Net income for the nine months ending September 30, 2006 was $55.6 million. This represents an increase of $2.2 million, or 4.05%, when compared with net earnings of $53.4 million for the same period of 2005. Diluted earnings per share were $0.72. This was up $0.03, or 4.35%, from diluted earnings per share of $0.69 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 nine months ending September 30, 2005 would have been $51.7 million. Net earnings of $55.6 million for the first nine months of 2006 would represent an increase of $3.9 million, or 7.50%, when compared to the $51.7 million for the same period in 2005.
Net income for the nine months ending September 30, 2006 produced a return on beginning equity of 21.69%, a return on average equity of 21.03% and a return on average assets of 1.31%. The efficiency ratio for the nine-month period was 46.52%, and operating expenses as a percentage of average assets was 1.66%.
Net Interest Income and Net Interest Margin
Net interest income after provision for credit losses totaled $40.7 million for the third quarter of 2006. This represented a decrease of $1.9 million, or 4.37%, from net interest income after provision for credit losses of $42.6 million for the third quarter of 2005. This decrease resulted from a $19.9 million increase in interest income, offset by a $20.5 million increase in interest expense and a $1.3 million increase in the provision for credit losses. Net interest income before the provision for credit losses decreased $612,000, or 1.44%, in the third 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 3.82% for the third quarter of 2005 to 3.22% for the third quarter of 2006. Total average earning asset yields have increased from 5.57% for the third quarter of 2005 to 6.15% for the third quarter of 2006. The cost of funds has increased from 2.55% for the third quarter of 2005 to 3.90%, for the third 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 $1.29 billion, or 36.57%, of its deposits in interest free demand deposits.
Net interest income after provision for credit losses totaled $126.6 million for the nine months ending September 30, 2006. This represents an increase of $1.5 million, or 1.17%, over the net interest income after provision for credit losses of $125.1 million for the same period in 2005. This increase resulted from a $53.6 million increase in interest income, which was partially offset by a $49.7 million increase in interest expense and a $2.4 million increase in the provision for credit losses. Net interest income before the provision for credit losses increased $3.9 million, or 3.09%, for the first nine 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 3.90% for the first nine months of 2005 to 3.42% for the first nine months of 2006. Total average earning asset yields have increased from 5.48% for the first nine months of 2005 to 6.00% for the first nine months of 2006. The cost of funds has increased from 2.34% for the first nine months of 2005 to 3.51% for the first nine months of 2006.
The credit quality of the loan portfolio continues to be strong. The allowance for credit losses increased from $24.2 million as of September 30, 2005 to $26.9 million as of September 30, 2006. During the first nine months of 2006, the Company experienced net recoveries of $1.3 million and made a provision for credit losses of $2.4 million. During the first nine months of 2005, the Company had net recoveries of $987,000. In addition, $756,000 was added to the allowance from the acquisition of Granite State Bank. The allowance for credit losses is 0.92% and 1.02% of the total loans and leases outstanding as of September 30, 2006 and 2005, respectively.
Balance Sheet
The Company reported total assets of $5.97 billion at September 30, 2006. This represented an increase of $954.5 million, or 19.01%, over total assets of $5.02 billion on September 30, 2005. Earning assets totaling $5.61 billion were up $923.6 million, or 19.71%, when compared with earning assets of $4.69 billion as of September 30, 2005. Deposits of $3.52 billion grew $310.1 million, or 9.65%, from $3.21 billion for the same period of the prior year. Gross loans and leases of $2.92 billion on September 30, 2006 rose $541.8 million, or 22.81%, from $2.38 billion on September 30, 2005.
Total assets of $5.97 billion as of September 30, 2006 reflect an increase of $551.7 million, or 10.17%, over total assets of $5.42 billion on December 31, 2005. Earning assets of $5.61 billion were up $525.4 million, or 10.34%, over the total earning assets of $5.08 billion on December 31, 2005. Deposits of $3.52 billion on September 30, 2006 grew $99.4 million, or 2.90%, from $3.42 billion as of December 31, 2005. Gross loans and leases of $2.92 billion increased $253.2 million, or 9.50%, from $2.66 billion on December 31, 2005. Total equity of $382.9 million on September 30, 2006 was up by $40.0 million, or 11.67%, from $342.9 million as of December 31, 2005.
Investment Securities
Investment securities totaled $2.64 billion as of September 30, 2006. This represents an increase of $387.9 million, or 17.20%, when compared with the $2.26 billion in securities as of September 30, 2005. It represents an increase of $273.2 million, or 11.53%, 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 $3.0 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 no non-performing assets as of September 30, 2006 and December 31, 2005. The allowance for credit losses was $26.9 million as of September 30, 2006. This represents 0.92% 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 $2.4 million and recoveries of $1.5 million, offset by loan charge-offs of $145,000 during the first nine 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, with offices in Orange and Tulare counties.
On August 1, 2006, Christopher D. Myers joined the Company as President and Chief Executive Officer of CVB Financial Corp. and its wholly owned subsidiary, Citizens Business Bank. Myers also joined 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. received 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
September 30, December 31,
---------------------- ------------
2006 2005 2005
---------------------- ------------
Assets:
Investment Securities available-
for-sale $2,643,100 $2,255,176 $ 2,369,892
Interest-bearing balances due from
depository institutions - 8,905 1,883
Investment in stock of Federal Home
Loan Bank (FHLB) 75,399 69,994 70,770
Loans and lease finance receivables 2,917,027 2,375,226 2,663,863
Less allowance for credit losses (26,912) (24,237) (23,204)
---------------------- ------------
Net loans and lease finance
receivables 2,890,115 2,350,989 2,640,659
---------------------- ------------
Total earning assets 5,608,614 4,685,064 5,083,204
Cash and due from banks 127,217 132,741 130,141
Premises and equipment, net 44,219 39,823 40,020
Intangibles 10,709 13,062 12,474
Goodwill 31,531 28,735 32,357
Cash value of life insurance 98,906 71,232 71,811
Other assets 53,452 49,507 52,964
---------------------- ------------
TOTAL $5,974,648 $5,020,164 $ 5,422,971
===================================
Liabilities and Stockholders'
Equity
Liabilities:
Deposits:
Demand Deposits
(noninterest-bearing) $1,288,569 $1,424,623 1,490,613
Investment Checking 297,659 260,484 298,067
Savings/MMDA 919,021 991,102 852,189
Time Deposits 1,018,228 537,129 783,177
---------------------- ------------
Total Deposits 3,523,477 3,213,338 3,424,046
Demand Note to U.S. Treasury 1,510 1,529 6,433
Borrowings 1,904,501 1,312,000 1,496,000
Junior Subordinated Debentures 108,250 82,476 82,476
Other liabilities 54,020 73,646 71,139
---------------------- ------------
Total Liabilities 5,591,758 4,682,989 5,080,094
Stockholders' equity:
Stockholders' equity 392,600 345,460 356,263
Accumulated other comprehensive
income (loss), net of tax (9,710) (8,285) (13,386)
---------------------- ------------
382,890 337,175 342,877
---------------------- ------------
TOTAL $5,974,648 $5,020,164 $ 5,422,971
===================================
CVB FINANCIAL CORP.
CONSOLIDATED AVERAGE BALANCE SHEET
(unaudited)
dollars in thousands
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
---------------------- ---------------------
Assets:
Investment securities
available-for-sale $2,620,781 $2,226,695 $2,477,114 $2,174,900
Interest-bearing balances
due from depository
institution 32 9,924 2,464 9,949
Investment in stock of
Federal Home Loan Bank
(FHLB) 75,118 67,277 73,333 62,078
Loans and lease finance
receivables 2,857,573 2,320,733 2,759,778 2,208,258
Less allowance for
credit losses (25,994) (24,183) (24,582) (23,791)
--------------------------------------------
Net loans and lease
finance receivables 2,831,579 2,296,550 2,735,196 2,184,467
--------------------------------------------
Total earning
assets 5,527,510 4,600,446 5,288,107 4,431,394
Cash and due from banks 126,716 127,374 127,440 123,182
Premises and equipment,
net 44,395 39,881 42,704 37,491
Intangibles 10,941 13,294 11,524 11,256
Goodwill 31,531 28,735 31,625 25,757
Cash value of life
insurance 78,646 70,824 74,542 70,131
Other assets 113,077 77,121 98,326 66,613
--------------------------------------------
TOTAL $5,932,816 $4,957,675 $5,674,268 $4,765,824
============================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $1,344,239$1,406,223$1,358,135$1,373,174
Interest-bearing 2,233,844 1,677,630 2,150,609 1,625,927
--------------------------------------------
Total Deposits 3,578,083 3,083,853 3,508,744 2,999,101
Other borrowings 1,805,765 1,401,252 1,643,804 1,315,095
Junior Subordinated
Debentures 108,250 82,476 105,418 82,476
Other liabilities 87,217 40,889 62,800 33,511
--------------------------------------------
Total Liabilities 5,579,315 4,608,470 5,320,766 4,430,183
Stockholders' equity:
Stockholders' equity 395,102 346,028 381,569 335,042
Accumulated other
comprehensive income
(loss), net of tax (41,601) 3,177 (28,067) 599
--------------------------------------------
353,501 349,205 353,502 335,641
----------- --------------------- ----------
TOTAL $5,932,816 $4,957,675 $5,674,268 $4,765,824
============================================
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
dollar amounts in thousands, except per share
For the Three For the Nine
Months Months
Ended September Ended September
30, 30,
2006 2005 2006 2005
----------------------------------
Interest Income:
Loans, including fees $50,564 $38,341 $142,769 $105,989
Investment securities:
Taxable 24,725 18,994 66,625 56,594
Tax-advantaged 6,510 4,989 19,563 13,873
------- ---------------- --------
Total investment income 31,235 23,983 86,188 70,467
Dividends from FHLB Stock 1,200 675 2,990 1,813
Federal funds sold - - 32 2
Interest-bearing CDs with other
institutions 6 74 60 207
------- ---------------- --------
Total interest income 83,005 63,073 232,039 178,478
Interest Expense:
Deposits 18,903 7,539 48,398 18,848
Borrowings and junior subordinated
debentures 22,130 12,950 54,682 34,537
------- ---------------- --------
Total interest expense 41,033 20,489 103,080 53,385
------- ---------------- --------
Net interest income before
provision for credit losses 41,972 42,584 128,959 125,093
Provision for credit losses 1,250 - 2,400 -
------- ---------------- --------
Net interest income after
provision for credit losses 40,722 42,584 126,559 125,093
Other Operating Income:
Service charges on deposit
accounts 3,253 3,477 9,833 9,770
Financial Advisory Services 1,807 1,741 5,467 4,929
Gain/(Loss) on sale of investment
securities 1,029 - 1,062 (46)
Other 2,782 2,643 8,329 7,579
------- ---------------- --------
Total other operating
income 8,871 7,861 24,691 22,232
Other operating expenses:
Salaries and employee benefits 11,541 12,700 37,031 38,323
Occupancy 2,209 2,091 6,313 6,048
Equipment 1,777 1,727 5,278 5,583
Professional services 1,237 1,047 3,995 3,267
Amortization of intangible assets 588 588 1,765 1,473
Other 5,278 4,526 15,977 11,432
------- ---------------- --------
Total other operating
expenses 22,630 22,679 70,359 66,126
------- ---------------- --------
Earnings before income taxes 26,963 27,766 80,891 81,199
Income taxes 8,508 9,499 25,279 27,753
----------------------------------
Net earnings $18,455 $18,267 $ 55,612 $ 53,446
==================================
Basic earnings per common share $ 0.24 $ 0.24 $ 0.73 $ 0.70
==================================
Diluted earnings per common share $ 0.24 $ 0.24 $ 0.72 $ 0.69
==================================
Cash dividends per common share $ 0.09 $ 0.11 $ 0.27 $ 0.33
==================================
All per share information has been retroactively adjusted to reflect
the 5 for 4 stock split declared on December 21, 2005.
CVB FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
----------- ----------------------- -----------
Interest income - (Tax
Effective)(te) $85,182 $64,674 $238,446 $182,932
Interest Expense 41,033 20,489 103,080 53,385
----------- ----------- ----------- -----------
Net Interest income -
(te) $44,149 $44,185 $135,366 $129,547
=========== =========== =========== ===========
Return on average
assets 1.23% 1.46% 1.31% 1.50%
Return on average
equity 20.71% 20.75% 21.03% 21.29%
Efficiency ratio 45.63% 44.96% 46.52% 44.88%
Net interest margin
(te) 3.22% 3.82% 3.42% 3.90%
Weighted average
shares outstanding
Basic 76,508,982 76,368,473 76,487,473 76,500,318
Diluted 76,983,851 77,057,114 77,169,959 77,224,423
Dividends declared $6,891 $6,722 $20,659 $20,213
Dividend payout ratio 37.34% 36.80% 37.15% 37.82%
Number of shares
outstanding-EOP 76,569,847 76,384,199
Book value per share $5.00 $4.41
September 30,
2006 2005
----------- -----------
Non-performing Assets
(dollar amount in
thousands):
Non-accrual loans $0 $2
Loans past due 90 days
or more and still
accruing interest - -
Restructured loans - -
Other real estate
owned (OREO), net - -
----------- -----------
Total non-performing
assets $0 $2
=========== ===========
Percentage of non-
performing assets to
total loans
outstanding and OREO 0.00% 0.00%
Percentage of non-
performing assets to
total assets 0.00% 0.00%
Non-performing assets
to allowance for loan
losses 0.00% 0.01%
Net Charge-off
(Recovered) to
Average loans -0.05% -0.08%
Allowance for Credit
Losses:
Beginning Balance $23,204 $22,494
Total Loans
Charged-Off (145) (191)
Total Loans
Recovered 1,453 1,178
Acquisition of
Granite State
Bank 0 756
----------- -----------
Net Loans Recovery
(Charged-Off) 1,308 1,743
Provision Charged to
Operating Expense 2,400 -
----------- -----------
Allowance for Credit
Losses at End of
period $26,912 $24,237
=========== ===========
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
September 30, $15.66 $14.11 $17.52 $14.43 $14.96 $12.93
December 31, $16.72 $13.90 $17.87 $14.24
Quarterly Consolidated Statements of Earnings
3Q 2Q 1Q 4Q 3Q
2006 2006 2006 2005 2005
-------- -------- -------- -------- --------
Interest income
Loans, including fees $50,564 $47,913 $44,292 $42,432 $38,341
Investment securities
and federal funds sold 32,441 28,988 27,840 26,039 24,732
-------- -------- -------- -------- --------
83,005 76,901 72,132 68,471 63,073
Interest expense
Deposits 18,903 16,294 13,201 10,060 7,539
Other borrowings 22,130 17,446 15,106 13,991 12,950
-------- -------- -------- -------- --------
41,033 33,740 28,307 24,051 20,489
Net interest income
before provision for
credit losses 41,972 43,161 43,825 44,420 42,584
Provision for credit
losses 1,250 900 250 - -
-------- -------- -------- -------- --------
Net interest income
after provision for
credit losses 40,722 42,261 43,575 44,420 42,584
Non-interest income 8,871 8,091 7,729 5,273 7,861
Non-interest expenses 22,630 24,259 23,470 23,926 22,679
-------- -------- -------- -------- --------
Earnings before income
taxes 26,963 26,093 27,834 25,767 27,766
Income taxes 8,508 7,176 9,594 8,593 9,499
-------- -------- -------- -------- --------
Net earnings $18,455 $18,917 $18,240 $17,174 $18,267
======== ======== ======== ======== ========
Basic earning per common
share $0.24 $0.25 $0.24 $0.22 $0.24
Diluted earnings per
common share $0.24 $0.25 $0.24 $0.22 $0.24
Cash dividends per common
share $0.09 $0.09 $0.09 $0.09 $0.11
Dividends Declared $6,891 $6,885 $6,883 $6,877 $6,722
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 and gain/(loss) on sale of
securities in conformity with GAAP.
Net Earnings Reconciliation (non- Three months ended Nine months ended
GAAP disclosure):
September 30, September 30,
2006 2005 2006 2005
--------- -------- -------- --------
Net earnings without the
settlement of robbery loss and
gain/(loss) on sale of
securities $17,751 $18,267 $54,881 $51,764
Settlement of robbery loss, net
of tax - - - 1,712
Gain/(Loss) on Sale of
Securities, net of tax $704 - $731 (30)
--------- -------- -------- --------
Reported net earnings $18,455 $18,267 $55,612 $53,446
========= ======== ======== ========
Settlement of robbery loss - - - $2,600
Gain/(Loss) on Sale of
Securities $1,029 - $1,062 (46)
Tax effect (325) - (331) (872)
--------- -------- -------- --------
Net of taxes $704 $0 $731 $1,682
========= ======== ======== ========
We have presented net earnings without the settlement of robbery loss
and gain/(loss) on sale of securities 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.
Contact: CVB Financial Corp. Christopher D. Myers, President and CEO, 909-980-4030