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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 21, 2003
Commission file number: 0-10140
CVB Financial Corp.
Incorporated pursuant to the Laws of California
Internal Revenue Service - Employer Identification No. 95-3629339
701 North Haven Avenue, Ontario, California 91764
(909) 980-4030
Item 12. Results of Operations and Financial Condition
On October 16, 2003, CVB Financial Corp. issued a press release setting forth its third quarter 2003 earnings. A
copy of this press release is attached hereto as Exhibit 99.1, incorporated herein by reference. This press release includes certain
non-GAAP financial measures. A reconciliation of these measures to the most comparable GAAP measures is included as part of Exhibit
99.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, hereunto duly authorized.
CVB Financial Corp.
Date: October 21, 2003 /s/ Edward J. Biebrich, Jr.
Edward J. Biebrich, Jr.
Executive Vice President and Chief Financial
and Accounting Officer
Exhibit Index
99.1 Press Release, dated October 16, 2003
Press Release
For Immediate Release
Contact: D. Linn Wiley
President and CEO
(909) 980-4030
CVB Financial Corp. Reports Third Quarter Operating Results
Ontario, CA, October 16, 2003-CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank, announced record results
for the third quarter of 2003. This included record deposits, record loans, record assets and record earnings. It was the 46th
consecutive quarter of record results for the Company.
CVB Financial Corp. reported net income of $13.5 million for the third quarter ending September 30, 2003. This represents an
increase of $306,000, or 2.32%, when compared with the $13.2 million in net income reported for the third quarter of 2002. Diluted
earnings per share were $0.30 for the third quarter of 2003. This is up $0.01, or 3.45%, when compared with earnings per share of
$0.29 for the third quarter of 2002.
Earnings results for the third quarter of 2003 produced a return on beginning equity of 19.71%, a return on average equity of 18.99%
and a return on average assets of 1.55%. The efficiency ratio for the third quarter was 51.20%.
During the third quarter of 2003, the Company prepaid $25.0 million in borrowing from the Federal Home Loan Bank. This resulted in a
prepayment penalty of $2.2 million. The prepayment penalty was recorded as an operating expense. This prepayment will reduce
interest costs, and provide for a corresponding increase in the net interest margin. The efficiency ratio would have been 45.89%
without this prepayment expense.
In addition, the Company realized a net gain after taxes from the sale of securities of $2.2 million in the third quarter of 2003.
This compares with a net gain after taxes from the sale of securities of $1.2 million for the third quarter of 2002.
Net income, excluding the gains on the sale of securities and the prepayment penalty, was $12.7 million for the third quarter of
2003. This compares with net operating income, excluding the gains on the sale of securities, of $12.0 million for the third quarter
of 2002. Net income on this basis was up $747,000, or 6.23%, from the third quarter of 2002 to the third quarter of 2003.
Net income for the nine months ending September 30, 2003 was $38.7 million. This represents an increase of $1.6 million, or 4.23%,
when compared with net earnings of $37.2 million for the same period of 2002. Diluted earnings per share was $0.87. This was up
$0.04, or 4.82%, from diluted earnings per share of $0.83 for the same period last year. Net income for the nine months ending
September 30, 2003 produced a return on beginning equity of 19.93%, a return on average equity of 18.99% and a return on average
assets of 1.55%. The efficiency ratio for the nine-month period was 48.73%.
During the nine months ending September 30, 2003, the Company prepaid $75.0 million in advances from the Federal Home Loan Bank.
This resulted in aggregate prepayment penalties of $5.3 million. The Company also reversed an excess accrual of legal fees of $3.3
million as a result of the settlement of a lawsuit.
In addition, the Company had a net gain after taxes from the sale of securities of $2.7 million for the first nine months of 2003.
This compares with a net gain after taxes from the sale of securities of $3.2 million during the first nine months of 2002.
Net income, excluding the gains on the sale of securities, prepayment penalties and the reversal of litigation accruals, was $37.3
million for the nine months ending September 30, 2003. Net income, excluding the gains on the sale of securities, was $34.0 million
for the first nine months of 2002. This represents an increase of $3.3 million, or 9.76%, for the first nine months of 2003 when
compared with the first nine months of 2002.
The net interest margin continues to be under pressure as a result of the low interest rate environment. It declined from 4.81% for
the third quarter of 2002 to 3.95% for the third quarter of 2003. It declined from 4.63% for the first nine months of 2002 to 4.18%
for the first nine months of 2003. Asset yields have declined from 6.26% for the first nine months of 2002 to 5.38% for the first
nine months of 2003. This has been mitigated by the strong growth in the balance sheet, and the decline in the cost of funds from
2.52% to 1.80% for the same periods.
Asset yields for the third quarter of 2003 were 5.06%, compared with asset yields of 6.42% for the third quarter last year. The
cost of funds was 1.58% and 2.60% for the same periods. The margin compression appears to be moderating with the recent stability of
interest rates. The Company has approximately $1.1 billion, or 42.85% of its deposits, in interest free demand deposits. This
should position it well for a rising rate environment.
Total assets were $3.67 billion as of September 30, 2003. This represents an increase of $818.8 million, or 28.75%, over the $2.85
billion in total assets reported on September 30, 2002. Total deposits rose to $2.61 billion. This is up $416.8 million, or 18.97%,
from $2.20 billion last year. Gross loans and leases grew to $1.63 billion as of September 30, 2003. This is an increase of $296.9
million, or 22.28%, from $1.33 billion in gross loans and leases on September 30, 2002. The Wealth Management Group has
approximately $1.1 billion in assets under administration.
CVB Financial Corp reported non-performing assets of $1.6 million as of September 30, 2003. This represents a ratio of
non-performing assets to total assets of 0.04%, and it represents 0.10% of gross loans and leases. The allowance for loan and lease
losses was $23.8 million as of September 30, 2003. This represents 1.46% of gross loans and leases, and it compares with 1.70% on
September 30, 2002. Non-performing loans and leases represented 6.87% of the allowance for loan and lease losses.
On September 19, 2003, the Company completed its acquisition of Kaweah National Bank. Kaweah National Bank had four branches located
in Visalia, Tulare, Porterville and McFarland. This acquisition added $81.7 million in deposits, $72.7 million in loans and $86.7
million in assets to the Company's balance sheet. This acquisition is an excellent complement to the existing business financial
centers in Bakersfield and Fresno. It provides a total of six business financial centers in the southern portion of the San Joaquin
Valley with $140.3 million in deposits and $103.0 million in loans.
Citizens Business Bank is the largest financial institution headquartered in the Inland Empire Region of Southern California. It
serves 30 cities with 37 business financial centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley
areas of California. Its subsidiary, Golden West 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
This document may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to
differ materially from the projected. For a discussion of 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, 2002, and particularly the discussion on risk factors within that document.
CVB FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET
(unaudited)
dollars in thousands
September 30
2003 2002
-------------- -------------
Assets:
Federal funds sold and reverse repos 0 99,202 $ $
Investment Securities available-for-sale 1,818,199 1,239,653
Loans and lease finance receivables 1,629,775 1,332,835
Less allowance for credit losses (23,787) (22,644)
-------------- -------------
Net loans and lease finance receivables 1,605,988 1,310,191
-------------- -------------
Total earning assets 3,424,187 2,649,046
Cash and due from banks 126,018 124,469
Premises and equipment, net 31,683 28,786
Goodwill and intangibles 26,699 12,536
Other assets 58,566 33,479
-------------- -------------
TOTAL $ 3,667,153 2,848,316 $
============== =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand Deposits(noninterest-bearing) 1,120,037 882,785 $ $
Investment Checking 200,572 171,029
Savings/MMDA 715,557 634,655
Time Deposits 577,692 508,621
-------------- -------------
Total Deposits 2,613,858 2,197,090
Demand Note to U.S. Treasury 10,251 9,878
Borrowings 729,000 344,700
Other liabilities 36,222 41,088
-------------- -------------
Total Liabilities 3,389,331 2,592,756
Stockholders' equity:
Stockholders' equity 263,990 226,621
Accumulated other comprehensive income
(loss), net of tax 13,832 28,939
-------------- -------------
277,822 255,560
-------------- -------------
TOTAL 3,667,153 2,848,316 $ $
============== =============
CVB FINANCIAL CORP.
CONSOLIDATED AVERAGE BALANCE SHEET
(unaudited)
dollars in thousands
Three months ended September 30 Nine months ended September 30
2003 2002 2003 2002
-------------- ------------- --------------- ---------------
Assets:
Federal funds sold and reverse repos 210 32,628 $ 3,257 $ 44,158 $ $
Investment securities available-for-sale 1,797,096 1,332,299 1,654,602 1,258,104
Loans and lease finance receivables 1,522,765 1,230,454 1,479,676 1,234,762
Less allowance for credit losses (21,179) (22,083) (21,406) (21,971)
-------------- -------------- --------------- ---------------
Net loans and lease finance receivables 1,501,586 1,208,371 1,458,270 1,212,791
-------------- ------------- --------------- ---------------
Total earning assets 3,298,892 2,573,298 3,116,129 2,515,053
Cash and due from banks 111,655 100,558 110,726 106,154
Premises and equipment, net 31,713 28,883 30,882 30,340
Other real estate owned, net 0 0 0 0
Goodwill and intangibles 19,503 6,235 15,544 6,358
Other assets 88,469 41,787 72,033 64,241
-------------- ------------- --------------- ---------------
TOTAL $ 3,550,232 2,750,761 $ 3,345,314 $ 2,722,146 $
============== ============= =============== ===============
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing 1,008,109 809,625 $ 939,725 $ 802,589 $ $
Interest-bearing 1,475,017 1,260,634 1,432,392 1,247,559
-------------- ------------- --------------- ---------------
Total Deposits 2,483,126 2,070,259 2,372,117 2,050,148
Other borrowings 741,774 401,206 641,263 393,739
Other liabilities 47,149 32,031 59,354 35,196
------------- ------------ ------------- -------------
Total Liabilities 3,272,049 2,503,496 3,072,734 2,479,083
Stockholders' equity:
Stockholders' equity 255,682 226,156 248,722 227,886
Accumulated other comprehensive income
(loss), net of tax 22,501 21,109 23,858 15,177
-------------- ------------- --------------- ---------------
278,183 247,265 272,580 243,063
-------------- ------------- --------------- ---------------
TOTAL 3,550,232 2,750,761 $ 3,345,314 $ 2,722,146 $ $
============== ============= =============== ===============
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
dollar amounts in thousands, except per share
For the Three Months For the Nine Months
Ended September 30 Ended September 30
2003 2002 2003 2002
------------- ------------- ------------ -------------
Interest Income:
Loans, including fees $ 24,629 $ 24,030 $ 72,262 $ 66,337
Investment securities:
Taxable 11,780 12,073 36,966 35,609
Tax-advantaged 3,938 4,071 12,088 12,127
---------- ---------- ------------ -------------
Total investment income 15,718 16,144 49,054 47,736
Federal funds sold 1 157 41 478
---------- ---------- ------------ -------------
Total interest income 40,348 40,331 121,357 114,551
Interest Expense:
Deposits 3,723 5,938 12,505 16,545
Borrowings 5,191 5,022 15,632 14,552
---------- ---------- ------------ -------------
Total interest expense 8,914 10,960 28,137 31,097
---------- ---------- ------------ -------------
Net interest income before provision for credit losses 31,434 29,371 93,220 83,454
Provision for credit losses 0 0 0 0
---------- ---------- ------------ -------------
Net interest income after
provision for credit losses 31,434 29,371 93,220 83,454
Other Operating Income:
Service charges on deposit accounts 3,835 3,580 11,280 10,335
Wealth Management services 932 924 2,903 2,894
Gain(Loss) on sale of securities 3,387 1,844 4,210 4,940
Other 1,986 1,492 5,116 4,456
---------- ---------- ------------ -------------
Total other operating income 10,140 7,840 23,509 22,625
Other operating expenses:
Salaries and employee benefits 10,498 9,617 30,393 26,766
Occupancy 1,771 1,602 4,944 4,731
Equipment 1,833 1,538 4,904 4,431
Professional services 1,037 947 3,020 3,011
Goodwill Amortization 203 268 518 325
Other 5,945 3,222 13,105 9,448
---------- ---------- ------------ -------------
Total other operating expenses 21,287 17,194 56,884 48,712
---------- ---------- ------------ -------------
Earnings before income taxes 20,287 20,017 59,845 57,367
Income taxes 6,785 6,821 21,119 20,214
------------- ------------- ------------ -------------
Net earnings $ 13,502 $ 13,196 $ 38,726 $ 37,153
============= ============= ============ =============
Basic earnings per common share $ 0.31 $ 0.30 $ 0.89 $ 0.85
============= ============= ============ =============
Diluted earnings per common share $ 0.30 $ 0.29 $ 0.87 $ 0.83
============= ============= ============ =============
Cash dividends per common share $ 0.12 $ 0.14 $ 0.36 $ 0.42
============= ============= ============ =============
All per share information has been retroactively adjusted to
reflect the 5-for-4 stock split declared on December 19, 2002.
Three months ended September 30 Nine months ended September 30
2003 2002 2003 2002
------------------- ------------------- ------------------- ------------------
Interest income - (Tax Effective)(te) 41,726 41,756 125,588 118,795
Interest Expense 8,914 10,960 28,137 31,097
----------------- ----------------- ----------------- ----------------
Net Interest income - (te) 32,812 30,796 97,451 87,698
================= ================= ================= ================
Net Earnings Reconciliation (non-GAAP disclosure):
Net operating income without net gain on sale of 12,730 11,983 37,267 33,954
securities, the prepayment penalty, and reversal of
excess accrual on legal expense
Net gain on sale of securities, net of tax 2,222 1,213 2,724 3,199
Prepayment penalty, net of tax (1,450) 0 (3,401) 0
Reversal of excess legal accrual, net of tax 0 0 2,136 0
----------------- ----------------- ----------------- ----------------
Reported net earnings 13,502 13,196 38,726 37,153
================= ================= ================= ================
Gain(Loss) on sale of securities 3,387 1,844 4,210 4,940
Gain on sale of OREO 0 0 0 0
Return on average assets 1.55% 1.82% 1.55% 1.82%
Return on average equity 18.99% 20.44% 18.99% 20.44%
Efficiency ratio 51.20% 46.21% 48.73% 45.92%
Net interest margin (te) 3.95% 4.81% 4.18% 4.63%
Weighted average shares outstanding
Diluted 44,548,671 44,564,810 44,609,640 44,546,380
Basic 43,746,984 43,632,036 43,751,716 43,612,010
Dividend payout ratio 38.56% 37.04% 40.69% 41.96%
Number of shares outstanding-EOP 44,077,664 43,513,420
Book value per share 6.30 5.87
September 30
2003 2002
----------------- -----------------
Non-performing Assets (dollar amount in thousands):
Non-accrual loans $1,633 $192
Loans past due 90 days or more
and still accruing interest 0 49
Restructured loans 0 577
Other real estate owned (OREO), net 0 0
----------------- -----------------
Total non-performing assets $1,633 $818
================= =================
Percentage of non-performing assets
to total loans outstanding and OREO 0.10% 0.06%
Percentage of non-performing
assets to total assets 0.04% 0.03%
Non-performing assets to
allowance for loan losses 6.87% 3.61%
Net loan losses to Average loans 0.06% 0.02%
Allowance for Credit Losses at Beginning of Period:
Citizens Business Bank $21,666 $20,469
Acquisition of Western Security Bank 2,325
Acquisition of Kaweah National Bank 2,770
Total Loans Charged-Off 1,673 1,287
Total Loans Recovered (1,024) (1,137)
----------------- -----------------
Net Loans Charged-Off 649 150
Provision Charged to Operating Expense 0 0
----------------- -----------------
Allowance for Credit Losses at End of period $23,787 $22,644
================= =================