UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from     N/A     to     N/A

CVB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

California		95-3629339
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)
701 N. Haven Avenue, Suite 350
Ontario, California (Address of Principal Executive Offices)		91764 (Zip Code)

Registrant’s telephone number, including area code (909) 980-4030

Securities registered pursuant to Section 12(b) of the Act:

Title of class Common Stock, no par value Preferred Stock Purchase Rights		Name of Each Exchange on Which Registered NASDAQ Stock Market, LLC NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act:
None

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer,” large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated Filer o		Non-accelerated filer o		Smaller Reporting Company o
			(Do Not Check if Smaller Reporting Company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     As of June 30, 2008, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $785,609,620.

     Number of shares of common stock of the registrant outstanding as of February 15, 2009: 83,270,263.

DOCUMENTS INCORPORATED BY REFERENCE		PART OF
Definitive Proxy Statement for the Annual Meeting of Stockholders which will be filed within 120 days of the fiscal year ended December 31, 2008		Part III of Form 10-K

 

 

PART I			4
ITEM 1. BUSINESS			4
ITEM 1A. RISK FACTORS			18
ITEM 1B. UNRESOLVED STAFF COMMENTS			25
ITEM 2. PROPERTIES			25
ITEM 3. LEGAL PROCEEDINGS			25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			26
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY			26
PART II			27
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			27
ITEM 6. SELECTED FINANCIAL DATA			29
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS			31
GENERAL			31
OVERVIEW			31
CRITICAL ACCOUNTING POLICIES AND ESTIMATES			32
ANALYSIS OF THE RESULTS OF OPERATIONS			33
RESULTS BY SEGMENT OPERATIONS			40
ANALYSIS OF FINANCIAL CONDITION			43
RISK MANAGEMENT			54
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			64
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			64
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			65
ITEM 9A. CONTROLS AND PROCEDURES			65
ITEM 9B. OTHER INFORMATION			67
PART III			68
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNACE			68
ITEM 11. EXECUTIVE COMPENSATION			68
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			68
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDCE			69
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES			69
PART IV			70
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES			70
EX-3.1
EX-3.2(a)
EX-3.2(b)
EX-3.4
EX-10.15(A)
EX-10.16(A)
EX-12
EX-21
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

	•		Local, regional, national and international economic conditions and events (including the U.S. recession and natural disasters such as fires and earthquakes) and the impact they may have on us and our customers and our assessment of that impact;
	•		Changes in the economy affecting real estate values;
	•		Ability to attract deposits and other sources of liquidity;
	•		Oversupply of inventory and continued deterioration in values of California real estate,both residential and commercial;
	•		A slowdown in construction activity;
	•		Changes in the financial performance and/or condition of our borrowers;
	•		Changes in the level of non-performing assets and charge-offs;
	•		The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board;
	•		Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;
	•		Inflation, interest rate, securities market and monetary fluctuations;
	•		Political instability;
	•		Acts of war or terrorism or natural disasters;
	•		The timely development and acceptance of new products and services and perceived overall value of these products and services by users;
	•		Changes in consumer spending, borrowing and savings habits;
	•		Technological changes;
	•		The ability to increase market share and control expenses;
	•		Changes in the competitive environment among financial and bank holding companies and other financial service providers;
	•		Continued volatility in the credit and equity markets and its effect on the general economy;

	•		The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, executive compensation and insurance) with which we and our subsidiaries must comply;
	•		The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters;
	•		Changes in our organization, compensation and benefit plans;
	•		The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; and
	•		Our success at managing the risks involved in the foregoing items.

For additional information concerning risks we face, see “Item 1A. Risk Factors” and any additional information we set forth in our periodic reports filed pursuant to the Exchange Act. We do not undertake any obligation to update our forward-looking statements to reflect occurrences or unanticipated events or circumstances arising after the date of such statements except as required by law.

PART I

ITEM 1. BUSINESS

CVB Financial Corp.

     CVB Financial Corp. (referred to herein on an unconsolidated basis as “CVB” and on a consolidated basis as “we” or the “Company”) is a bank holding company incorporated in California on April 27, 1981 and registered under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”). The Company commenced business on December 30, 1981 when, pursuant to a reorganization, it acquired all of the voting stock of Chino Valley Bank. On March 29, 1996, Chino Valley Bank changed its name to Citizens Business Bank (the “Bank”). The Bank is our principal asset. The Company has three other inactive subsidiaries: CVB Ventures, Inc.; Chino Valley Bancorp; and ONB Bancorp. The Company is also the common stockholder of CVB Statutory Trust I, CVB Statutory Trust II, CVB Statutory Trust III, and FCB Trust II. CVB Statutory Trusts I and II were created in December 2003 and CVB Statutory Trust III was created in January 2006 to issue trust preferred securities in order to raise capital for the Company. The Company acquired FCB Trust II (which was also created to raise capital) through the acquisition of First Coastal Bancshares (“FCB”) in June 2007.

     CVB’s principal business is to serve as a holding company for the Bank and for other banking or banking related subsidiaries, which the Company may establish or acquire. We have not engaged in any other activities to date. As a legal entity separate and distinct from its subsidiaries, CVB’s principal source of funds is, and will continue to be, dividends paid by and other funds advanced from the Bank and capital raised directly by CVB. Legal limitations are imposed on the amount of dividends that may be paid and loans that may be made by the Bank to CVB. See “Item 1. Business - Supervision and Regulation — Dividends and Other Transfers of Funds.” At December 31, 2008, the Company had $6.65 billion in total consolidated assets, $3.74 billion in net loans and $3.51 billion in deposits.

     The principal executive offices of CVB and the Bank are located at 701 North Haven Avenue, Suite 350, Ontario, California. Our phone number is (909) 980-4030.

Citizens Business Bank

     The Bank commenced operations as a California state chartered bank on August 9, 1974. The Bank’s deposit accounts are insured under the Federal Deposit Insurance Act up to applicable limits. The Bank is

not a member of the Federal Reserve System. At December 31, 2008, the Bank had $6.64 billion in assets, $3.74 billion in net loans and $3.53 billion in deposits.

     As of December 31, 2008, we had 43 Business Financial Centers located in the San Bernardino County, Riverside County, Orange County, Los Angeles County, Madera County, Fresno County, Tulare County, and Kern County areas of California. Of the 43 offices, we opened thirteen as de novo branches and acquired the other thirty in acquisition transactions.

     We also had four Commercial Banking Centers, all of which were opened in 2008. Although able to take deposits, these centers operate primarily as sales offices and focus on business clients and their principals, professionals, and high net-worth individuals. One of these centers is located in the San Fernando Valley. The other three centers are located within a Business Financial Center in each of San Bernardino, Los Angeles, and Orange Counties.

     Through our network of banking offices, we emphasize personalized service combined with a full range of banking and trust services for businesses, professionals and individuals located in the service areas of our offices. Although we focus the marketing of our services to small-and medium-sized businesses, a full range of retail banking services are made available to the local consumer market.

     We offer a wide range of deposit instruments. These include checking, savings, money market and time certificates of deposit for both business and personal accounts. We also serve as a federal tax depository for our business customers.

     We provide a full complement of lending products, including commercial, agribusiness, consumer, real estate loans and equipment and vehicle leasing. Commercial products include lines of credit and other working capital financing, accounts receivable lending and letters of credit. Agribusiness products are loans to finance the operating needs of wholesale dairy farm operations, cattle feeders, livestock raisers, and farmers. We provide lease financing for municipal governments. Financing products for consumers include automobile leasing and financing, lines of credit, and home improvement and home equity lines of credit. Real estate loans include mortgage and construction loans.

     We also offer a wide range of specialized services designed for the needs of our commercial accounts. These services include cash management systems for monitoring cash flow, a credit card program for merchants, courier pick-up and delivery, payroll services, electronic funds transfers by way of domestic and international wires and automated clearinghouse, and on-line account access. We make available investment products to customers, including mutual funds, a full array of fixed income vehicles and a program to diversify our customers’ funds in federally insured time certificates of deposit of other institutions.

     We offer a wide range of financial services and trust services through CitizensTrust. These services include fiduciary services, mutual funds, annuities, 401K plans and individual investment accounts.

Business Segments

     We are a community bank with two reportable operating segments: (i) Business Financial and Commercial Banking Centers and (ii) Treasury Department. Our Business Financial and Commercial Banking Centers (“Centers”) are the focal points for customer sales and services. As such, these Centers comprise the biggest segment of the Company. Our other reportable segment, Treasury Department manages all of the investments for the Company. All administrative and other smaller operating departments are combined into the “Other” category for reporting purposes. See the sections captioned “Results by Segment Operations” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 19 — Business Segments in the notes to consolidated financial statements.

Competition

     The banking and financial services business is highly competitive. The increasingly competitive environment faced by banks is a result primarily of changes in laws and regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial services providers. We compete for loans, deposits, and customers with other commercial banks, savings and loan associations, savings banks, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions, and other nonbank financial service providers. Many competitors are much larger in total assets and capitalization, have greater access to capital markets, including foreign-ownership, and/or offer a broader range of financial services.

Economic Conditions, Government Policies, Legislation, and Regulation

     Our profitability, like most financial institutions, is primarily dependent on interest rate differentials. In general, the difference between the interest rates paid by the Bank on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received by the Bank on interest-earning assets, such as loans extended to customers and securities held in the investment portfolio, will comprise the major portion of our earnings. These rates are highly sensitive to many factors that are beyond our control, such as inflation, recession and unemployment, and the impact which future changes in domestic and foreign economic conditions might have on us cannot be predicted.

     Our business is also influenced by the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the Board of Governors of the Federal Reserve System (the “FRB”). The FRB implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. Government securities by adjusting the required level of reserves for depository institutions subject to its reserve requirements, and by varying the target federal funds and discount rates applicable to borrowings by depository institutions. The actions of the FRB in these areas influence the growth of bank loans, investments, and deposits and also affect interest earned on interest-earning assets and paid on interest-bearing liabilities. The nature and impact of any future changes in monetary and fiscal policies on us cannot be predicted.

     From time to time, federal and state legislation is enacted which may have the effect of materially increasing the cost of doing business, limiting or expanding permissible activities, or affecting the competitive balance between banks and other financial services providers. Several proposals for legislation that could substantially intensify the regulation of the financial services industry (including a possible comprehensive overhaul of the financial institutions regulatory system) are expected to be introduced and possibly enacted in the new Congress in response to the current economic downturn and financial industry instability. We cannot predict whether or when potential legislation will be enacted, and if enacted, the effect that it, or any implemented regulations and supervisory policies, would have on our financial condition or results of operations. In addition, the outcome of examinations, any litigation or any investigations initiated by state or federal authorities may result in necessary changes in our operations and increased compliance costs.

     Negative developments beginning in the latter half of 2007 in the sub-prime mortgage market and the securitization markets for such loans, together with volatility in oil prices and other factors, have resulted in uncertainty in the financial markets in general and a related general economic downturn, which continued through 2008 and are anticipated to continue at least well through 2009. Dramatic declines in the housing market, with decreasing home prices and increasing delinquencies and foreclosures, have negatively impacted the credit performance of mortgage and construction loans and resulted in significant write-downs of assets by many financial institutions. In addition, the values of real estate collateral supporting many commercial and residential loans have declined and may continue to decline. General downward economic trends, reduced availability of commercial credit and increasing unemployment have negatively impacted the credit performance of commercial and consumer credit, resulting in additional write-downs. Concerns over the stability of the financial markets and the economy have resulted in decreased lending by financial institutions to their customers and to each other. This market turmoil and

tightening of credit has led to increased commercial and consumer delinquencies, lack of customer confidence, increased market volatility and widespread reduction in general business activity. Competition among depository institutions for deposits has increased significantly. Bank and bank holding company stock prices have been significantly negatively affected as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets compared to recent years. The bank regulatory agencies have been very aggressive in responding to concerns and trends identified in examinations, and this has resulted in the increased issuance of enforcement orders requiring action to address credit quality, liquidity and risk management and capital adequacy, as well as other safety and soundness concerns.

     On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted to restore confidence and stabilize the volatility in the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other. Initially introduced as the Troubled Asset Relief Program or “TARP”, the EESA authorized the United States Department of the Treasury (“Treasury”) to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program. Initially, $350 billion or half of the $700 billion was made immediately available to Treasury. On January 15, 2009, the remaining $350 billion was released to Treasury.

     On October 14, 2008, the Treasury announced its intention to inject capital into nine large U.S. financial institutions under the TARP Capital Purchase Program (the “TARP CPP”), and since has injected capital into many other financial institutions, including us. The Treasury initially allocated $250 billion towards the TARP CPP. On December 5, 2008, the Company entered into a Securities Purchase Agreement-Standard Terms with the U.S. Treasury (“Stock Purchase Agreement”), pursuant to which, among other things, we sold to the U.S. Treasury for an aggregate purchase price of $130.0 million, preferred stock and warrants. Under the terms of the TARP CPP, we are prohibited from increasing dividends on our common stock, and from making certain repurchases of equity securities, including our common stock, without the U.S. Treasury’s consent. Furthermore, as long as the preferred stock issued to the U.S. Treasury is outstanding, dividend payments and repurchases or redemptions relating to certain equity securities, including our common stock, are prohibited until all accrued and unpaid dividends are paid on such preferred stock, subject to certain limited exceptions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Cash Flow and —Capital Resources” in Part II, Item 7 herein.

     In order to participate in the TARP CPP, financial institutions were required to adopt certain standards for executive compensation and corporate governance. These standards generally apply to the Chief Executive Officer, Chief Financial Officer and the three next most highly compensated senior executive officers. The standards include (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; (3) prohibition on making golden parachute payments to senior executives; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. The Company has complied with these requirements.

     The bank regulatory agencies, Treasury and the Office of Special Inspector General, also created by the EESA, have issued guidance and requests to the financial institutions that participated in the CPP to document their plans and use of TARP CPP funds and their plans for addressing the executive compensation requirements associated with the TARP CPP.

     On February 10, 2009, The Treasury and the federal bank regulatory agencies announced, in a Joint Statement, a new Financial Stability Plan which would include additional capital support for banks under a Capital Assistance Program, a public-private investment fund to address existing bank loan portfolios

and expanded funding for the FRB’s pending Term Asset-Backed Securities Loan Facility to restart lending and the securitization markets.

     Legislation entitled the American Recovery and Reinvestment Act of 2009 (the “ARRA”) was enacted by the House and the Senate and was signed by President Obama on February 17, 2009. Among other provisions, the ARRA imposes new conditions upon recipients of additional TARP CPP funds, as well as, certain new requirements of financial institutions which have already received TARP CPP funds. These include additional restrictions on executive compensation.

     Further legislation may yet be proposed and enacted to restrict the use of or conditions imposed upon recipients of TARP funds, including possibly additional requirements imposed on financial institutions which have already received TARP funds.

     On February 23, 2008, the Treasury and the federal bank regulatory agencies issued a Joint Statement providing further guidance with respect to the Capital Assistance Program announced February 10, 2009, including: (i) that should the “stress test” assessments of the major banks being initiated February 25, 2009 indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government; (ii) such additional government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory; and (iii) previous capital injections under the TARP CPP will also be eligible to be exchanged for the mandatory convertible preferred shares. The conversion of preferred shares to common equity shares would enable institutions to maintain or enhance the quality of their capital by increasing their tangible common equity capital ratios; however, such conversions would necessarily dilute the interests of existing shareholders.

     The EESA also increased Federal Deposit Insurance Corporation (“FDIC”) deposit insurance on most accounts from $100,000 to $250,000. This increase is in place until the end of 2009 and is not covered by deposit insurance premiums paid by the banking industry. In addition, the FDIC has implemented two temporary programs to provide deposit insurance for the full amount of most non-interest bearing transaction accounts through the end of 2009 and to guarantee certain unsecured debt of financial institutions and their holding companies through June 2012. Financial institutions had until December 5, 2008 to opt out of these two programs. The Company and the Bank have elected to opt out of the debt guarantee program. The FDIC charges “systemic risk special assessments” to depository institutions that participate in the Temporary Loan Guarantee Program. The FDIC has recently proposed that Congress give the FDIC expanded authority to charge fees to those holding companies which benefit directly and indirectly from the FDIC guarantees.

Supervision and Regulation

     General

     We and our subsidiaries are extensively regulated under both federal and state laws. Regulation and supervision by the federal and state banking agencies is intended primarily for the protection of depositors and the Deposit Insurance Fund (“DIF”) administered by the FDIC and not for the benefit of stockholders. Set forth below is a brief description of key laws and regulations which relate to our operations. These descriptions are qualified in their entirety by reference to the applicable laws and regulations. The federal and state agencies regulating the financial services industry also frequently adopt changes to their regulations.

     The Company

     As a bank holding company, we are subject to regulation and examination by the FRB under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Accordingly, we are subject to the FRB’s regulations and its authority to:

	.		require periodic reports and such additional information as the FRB may require.
	.		require us to maintain certain levels of capital. See “Capital Requirements”.
	.		require that bank holding companies serve as a source of financial and managerial strength to subsidiary banks and commit resources as necessary to support each subsidiary bank. A bank holding company’s failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the FRB to be an unsafe and unsound banking practice or a violation of FRB regulations or both.
	.		terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments if the FRB believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any bank subsidiary.
	.		regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt and require prior approval to purchase or redeem our securities in certain situations.
	.		approve acquisitions and mergers with banks and consider certain competitive, management, financial and other factors in granting these approvals. Similar California and other state banking agency approvals may also be required.

     Nonbanking and Financial Activities - Subject to certain prior notice or FRB approval requirements, bank holding companies may engage in any, or acquire shares of companies engaged in, those nonbanking activities determined by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Companies which elect to be treated as “financial holding companies” may also engage in broader securities, insurance, merchant banking and other activities that are determined to be “financial in nature” or are incidental or complementary to activities that are financial in nature without prior FRB approval. Pursuant to the Gramm-Leach-Bliley Act of 1999 (“GLBA”), in order to elect and retain financial holding company status, all depository institution subsidiaries of a bank holding company must be well capitalized, well managed, and, except in limited circumstances, be in satisfactory compliance with the Community Reinvestment Act (“CRA”). Failure to sustain compliance with these requirements or correct any non-compliance within a fixed time period could lead to divestiture of subsidiary banks or require all activities to conform to those permissible for a bank holding company. We have not currently elected to be treated as a financial holding company.

     The Company is also a bank holding company within the meaning of the California Financial Code. As such, the Company and its subsidiaries are subject to examination by, and may be required to file reports with, the California Department of Financial Institutions (“DFI”).

     Securities Registration - Our securities are registered with the Securities Exchange Commission (“SEC”) under the Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are subject to the information, proxy solicitation, insider trading, corporate governance, and other requirements and restrictions of the Exchange Act.

     The Sarbanes-Oxley Act - The Company is subject to the accounting oversight and corporate governance requirements of the Sarbanes-Oxley Act of 2002, including:

	.		required executive certification of financial presentations;
	.		increased requirements for board audit committees and their members;
	.		enhanced disclosure of controls and procedures and internal control over financial reporting;

	.		enhanced controls over, and reporting of, insider trading; and
	.		increased penalties for financial crimes and forfeiture of executive bonuses in certain circumstances.

     The Bank

     As a California chartered bank, the Bank is subject to primary supervision, periodic examination, and regulation by the DFI and by the FDIC as the Bank’s primary federal regulator. In general, under the California Financial Code, California banks have all the powers of a California corporation , subject to the general limitation of state bank powers under the Federal Deposit Insurance Act (“FDIA”) to those permissible for national banks. Specific federal and state laws and regulations which are applicable to banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for certain loans. The regulatory structure also gives the bank regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. If, as a result of an examination, the DFI or the FDIC should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Bank’s operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation, the DFI and the FDIC have residual authority to:

	.		require affirmative action to correct any conditions resulting from any violation or practice;
	.		direct an increase in capital and the maintenance of specific minimum capital ratios;
	.		restrict the Bank’s growth geographically, by products and services or by mergers and acquisitions;
	.		enter into informal or formal enforcement orders, including memoranda of understanding, written agreements and consent or cease and desist orders to take corrective action and enjoin unsafe and unsound practices;
	.		remove officers and directors and assess civil monetary penalties; and
	.		take possession and close and liquidate the Bank.

     Permissible Activities and Subsidiaries - California law permits state chartered commercial banks to engage in any activity permissible for national banks. Therefore, the Bank may form subsidiaries to engage in the many so-called “closely related to banking” or “nonbanking” activities commonly conducted by national banks in operating subsidiaries or conduct such activities themselves.

     Interstate Banking and Branching — Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, bank holding companies and banks generally have the ability to acquire or merge with banks in other states; and, subject to certain state restrictions, banks may also acquire or establish new branches outside their home state. Interstate branches are subject to certain laws of the states in which they are located. The Bank presently does not have any interstate branches.

     Federal Home Loan Bank System - The Bank is a member of the Federal Home Loan Bank (“FHLB”) of San Francisco. Among other benefits, each FHLB serves as a reserve or central bank for its members within its assigned region and makes available loans or advances to its members. Each FHLB is financed primarily from the sale of consolidated obligations of the FHLB system. As an FHLB member, the Bank is required to own a certain amount of capital stock in the FHLB. At December 31, 2008, the Bank was in compliance with the FHLB’s stock ownership requirement and our investment in FHLB capital stock totaled $93.2 million. The FHLB recently announced that they would not pay any dividends

on its capital stock in the first quarter of 2009, and there can be no assurance that the FHLB will pay dividends at the same rate it has paid in the past, or that it will pay any dividends in the future.

     Federal Reserve System - The Federal Reserve Board requires all depository institutions to maintain noninterest bearing reserves at specified levels against their transaction accounts. At December 31, 2008, the Bank was in compliance with these requirements.

     Dividends and Other Transfers of Funds

     Dividends from the Bank constitute the principal source of income to the Company. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends. Under such restrictions, the amount available for payment of dividends to the Company by the Bank totaled $111.3 million at December 31, 2008. In addition, the banking agencies have the authority to prohibit or limit the Bank from paying dividends, depending upon the Bank’s financial condition, if such payment is deemed to constitute an unsafe or unsound practice. Furthermore, under the federal Prompt Corrective Action regulations, the FRB or the FDIC may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.” See “Capital Requirements.”

     Additionally, it is FRB policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also Fed policy that bank holding companies should not maintain dividend levels that undermine the company’s ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the FRB has indicated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.

     Under the terms of the TARP CPP, for so long as any preferred stock issued under the TARP CPP remains outstanding, the Company is prohibited from increasing dividends on its common stock, and from making certain repurchases of equity securities, including its common stock, without the Treasury’s consent until the third anniversary of the Treasury’s investment or until the Treasury has transferred all of the preferred stock it purchased under the TARP CPP to third parties. As long as the preferred stock issued to the Treasury is outstanding, as well as the Company’s Series B Preferred Stock, dividend payments and repurchases or redemptions relating to certain equity securities, including the Company’s common stock, are also prohibited until all accrued and unpaid dividends are paid on such preferred stock, subject to certain limited exceptions (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Cash Flow and —Capital Resources”).

     Capital Standards

     Bank holding companies and banks are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors. At December 31, 2008, the Company’s and the Bank’s capital ratios exceed the minimum capital adequacy guideline percentage requirements of the federal banking agencies and the prompt corrective action regulations for “well capitalized” institutions. See Note 16 to the consolidated financial statements for further information regarding the regulatory capital guidelines as well as the Company’s and the Bank’s actual capitalization as of December 31, 2008.

     The federal banking agencies have adopted risk-based minimum capital adequacy guidelines for bank holding companies and banks which are intended to provide a measure of capital that reflects the degree

of risk associated with a banking organization’s operations for both transactions reported on the balance sheet as assets and transactions which are recorded as off-balance sheet items. The risk-based capital ratio is determined by classifying assets and certain off-balance sheet financial instruments into weighted categories, with higher levels of capital being required for those categories perceived as representing greater risk. Bank holding companies and banks engaged in significant trading activity may also be subject to the market risk capital guidelines and be required to incorporate additional market and interest rate risk components into their risk-based capital standards. Under the capital adequacy guidelines, a banking organization’s total capital is divided into tiers. “Tier I capital” includes common equity and trust-preferred securities, subject to certain criteria and quantitative limits. The TARP CPP capital received by the Company from the U.S. Treasury also qualifies as Tier I capital. “Tier II capital” includes hybrid capital instruments, other qualifying debt instruments, a limited amount of the allowance for loan and lease losses, and a limited amount of unrealized holding gains on equity securities. “Tier III capital” consists of qualifying unsecured debt. The sum of Tier II and Tier III capital may not exceed the amount of Tier I capital. The risk-based capital guidelines require a minimum ratio of qualifying total capital to risk-weighted assets of 8% and a minimum ratio of Tier I capital to risk-weighted assets of 4%.

     Bank holding companies and banks are also required to comply with minimum leverage ratio requirements. The leverage ratio is the ratio of a banking organization’s Tier 1 capital to its total adjusted quarterly average assets (as defined for regulatory purposes). The requirements necessitate a minimum leverage ratio of 4.0%, unless a different minimum is specified by an appropriate regulatory authority. For a depository institution to be considered “well capitalized” under the regulatory framework for prompt corrective action, its leverage ratio must be at least 5.0%.

     The following table presents the amounts of regulatory capital and the capital ratios for the Company, compared to its minimum regulatory capital requirements as of December 31, 2008:

		As of December 31, 2008
		Actual								Required									Excess
		Amount				Ratio				Amount				Ratio				Amount				Ratio
		(amounts in thousands )
Leverage ratio		$	631,643				9.8	%		$	256,765				4.0	%		$	374,878				5.8	%
Tier 1 risk-based ratio		$	631,643				14.2	%		$	178,179				4.0	%		$	453,464				10.2	%
Total risk-based ratio		$	692,352				15.5	%		$	356,423				8.0	%		$	335,929				7.5	%

     The following table presents the amounts of regulatory capital and the capital ratios for the Bank, compared to its minimum regulatory capital requirements as of December 31, 2008:

		As of December 31, 2008
		Actual								Required								Excess
		Amount				Ratio				Amount				Ratio				Amount				Ratio
										(amounts in thousands )
Leverage ratio		$	620,323				9.7	%		$	257,129				4.0	%		$	363,194				5.7	%
Tier 1 risk-based ratio		$	620,323				13.9	%		$	178,126				4.0	%		$	442,197				9.9	%
Total risk-based ratio		$	676,000				15.2	%		$	356,024				8.0	%		$	319,976				7.2	%

     Basel and Basel II Capital Requirements

     The current risk-based capital guidelines which apply to the Company and the Bank are based upon the 1988 capital accord of the International Basel Committee on Banking Supervision, a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines for use by each country’s supervisors in determining the supervisory policies they apply. A new international accord, referred to as Basel II, which emphasizes internal assessment of

credit, market and operational risk; supervisory assessment and market discipline in determining minimum capital requirements, became mandatory for large or “core” international banks outside the U.S. in 2008 (total assets of $250 billion or more or consolidated foreign exposures of $10 billion or more); is optional for others, and if adopted, must first be complied with in a “parallel run” for two years along with the existing Basel I standards. In January 2009, the Basel Committee proposed to reconsider regulatory-capital standards, supervisory and risk-management requirements and additional disclosures in the final new accord in response to recent worldwide developments.

     In July 2008, the U.S. federal banking agencies issued a proposed rule that would give banking organizations, which do not use the Basel II advanced approaches, the option to implement a new risk-based capital framework. This framework would adopt the standardized approach of Basel II for credit risk, the basic indicator approach of Basel II for operational risk, and related disclosure requirements. While this proposed rule generally parallels the relevant approaches under Basel II, it diverges where United States markets have unique characteristics and risk profiles, most notably with respect to risk weighting residential mortgage exposures. A definitive final rule has not been issued. The U.S. banking agencies have indicated, however, that they will retain the minimum leverage requirement for all U.S. banks.

     Prompt Corrective Action

     The FDIA provides a framework for regulation of depository institutions and their affiliates, including parent holding companies, by their federal banking regulators. Among other things, it requires the relevant federal banking regulator to take “prompt corrective action” with respect to a depository institution if that institution does not meet certain capital adequacy standards, including requiring the prompt submission of an acceptable capital restoration plan. Supervisory actions by the appropriate federal banking regulator under the prompt corrective action rules generally depend upon an institution’s classification within five capital categories as defined in the regulations. The relevant capital measures are the total capital ratio, the Tier 1 capital ratio and the leverage ratio. However, the federal banking agencies have also adopted non-capital safety and soundness standards to assist examiners in identifying and addressing potential safety and soundness concerns before capital becomes impaired. These include operational and managerial standards relating to: (i) internal controls, information systems and internal audit systems, (ii) loan documentation, (iii) credit underwriting, (iv) asset quality and growth, (v) earnings, (vi) risk management, and (vii) compensation and benefits.

     A depository institution’s capital tier under the prompt corrective action regulations will depend upon how its capital levels compare with various relevant capital measures and the other factors established by the regulation. A bank will be: (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized”; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 4.0%; (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 3.0% or a leverage ratio of less than 3.0%; and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets. An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.

     The FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be “undercapitalized.” “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital restoration plan. The agencies may not accept

such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The bank holding company must also provide appropriate assurances of performance. The aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5.0% of the depository institution’s total assets at the time it became undercapitalized and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

     The appropriate federal banking agency may, under certain circumstances, reclassify a well capitalized insured depository institution as adequately capitalized. The FDIA provides that an institution may be reclassified if the appropriate federal banking agency determines (after notice and opportunity for hearing) that the institution is in an unsafe or unsound condition or deems the institution to be engaging in an unsafe or unsound practice. The appropriate agency is also permitted to require an adequately capitalized or undercapitalized institution to comply with the supervisory provisions as if the institution were in the next lower category (but not treat a significantly undercapitalized institution as critically undercapitalized) based on supervisory information other than the capital levels of the institution.

     FDIC Insurance

     The FDIC is an independent federal agency that insures deposits, up to prescribed statutory limits, of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. The FDIC insures our customer deposits through the Deposit Insurance Fund (the “DIF”) up to prescribed limits for each depositor. Pursuant to the EESA, the maximum deposit insurance amount has been increased from $100,000 to $250,000 effective through December 2009. The amount of FDIC assessments paid by each DIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors. Pursuant to the Federal Deposit Insurance Reform Act of 2005, the FDIC is authorized to set the reserve ratio for the DIF annually at between 1.15% and 1.50% of estimated insured deposits. The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. In an effort to restore capitalization levels and to ensure the DIF will adequately cover projected losses from future bank failures, the FDIC, in October 2008, proposed a rule to alter the way in which it differentiates for risk in the risk-based assessment system and to revise deposit insurance assessment rates, including base assessment rates. First quarter 2009 assessment rates were increased to between 12 and 50 cents for every $100 of domestic deposits, with most banks paying between 12 and 14 cents. The Federal Deposit Insurance Corp. approved an interim rule on February 27, 2009 that will institute a one-time special assessment of 20 cents per $100 in domestic deposits to restore the DIF reserves depleted by recent bank failures. The interim rule additionally reserves the right of the FDIC to charge an additional up-to-10 basis point special premium at a later point if the DIF reserves continue to fall. The FDIC also approved an increase in regular premium rates beginning with the second quarter of 2009.

     Additionally, by participating in the FDIC’s Temporary Liquidity Guarantee Program, banks temporarily become subject to an additional assessment on deposits in excess of $250,000 in certain transaction accounts and additionally for assessments from 50 basis points to 100 basis points per annum depending on the initial maturity of the debt. Further, all FDIC-insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation (“FICO”), an agency of the Federal government established to recapitalize the predecessor to the DIF. The FICO assessment rates, which are determined quarterly, averaged 0.0113% of insured deposits in fiscal 2008. These assessments will continue until the FICO bonds mature in 2017.

     The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices that pose a risk to the DIF or that may prejudice the interest of the bank’s depositors.

The termination of deposit insurance for a bank would also result in the revocation of the bank’s charter by the DFI.

     Loans-to-One Borrower Limitations

     With certain limited exceptions, the maximum amount of obligations, secured or unsecured, that any borrower (including certain related entities) may owe to a California state bank at any one time may not exceed 25% of the sum of the shareholders’ equity, allowance for loan losses, capital notes and debentures of the bank. Unsecured obligations may not exceed 15% of the sum of the shareholders’ equity, allowance for loan losses, capital notes and debentures of the bank. The Bank has established internal loan limits which are lower than the legal lending limits for a California bank.

     Extensions of Credit to Insiders and Transactions with Affiliates

     The Federal Reserve Act and FRB Regulation O place limitations and conditions on loans or extensions of credit to:

	.		a bank or bank holding company’s executive officers, directors and principal shareholders (i.e., in most cases, those persons who own, control or have power to vote more than 10% of any class of voting securities);
	.		any company controlled by any such executive officer, director or shareholder; or
	.		any political or campaign committee controlled by such executive officer, director or principal shareholder.

     Such loans and leases:

	.		must comply with loan-to-one-borrower limits;
	.		require prior full board approval when aggregate extensions of credit to the person exceed specified amounts;
	.		must be made on substantially the same terms (including interest rates and collateral) and follow credit-underwriting procedures no less stringent than those prevailing at the time for comparable transactions with non-insiders;
	.		must not involve more than the normal risk of repayment or present other unfavorable features; and
	.		in the aggregate limit not exceed the bank’s unimpaired capital and unimpaired surplus.

     California has laws and the DFI has regulations which adopt and also apply Regulation O to the Bank.

     The Bank also is subject to certain restrictions imposed by Federal Reserve Act Sections 23A and 23B and FRB Regulation W on any extensions of credit to, or the issuance of a guarantee or letter of credit on behalf of, any affiliates, the purchase of, or investments in, stock or other securities thereof, the taking of such securities as collateral for loans, and the purchase of assets of any affiliates. Affiliates include parent holding companies, sister banks, sponsored and advised companies, financial subsidiaries and investment companies whereby the Bank’s affiliate serves as investment advisor. Sections 23A and 23B and Regulation W generally:

	.		prevent any affiliates from borrowing from the Bank unless the loans are secured by marketable obligations of designated amounts;
	.		limit such loans and investments to or in any affiliate individually to 10.0% of the Bank’s capital and surplus;
	.		limit such loans and investments to or in any affiliate in the aggregate to 20.0% of the Bank’s capital and surplus; and

.

requires such loans and investments to or in any affiliate to be on terms and under conditions substantially the same or at least as favorable to the Bank as those prevailing for comparable transactions with nonaffiliated parties.

     Additional restrictions on transactions with affiliates may be imposed on the Bank under the FDIA prompt corrective action provisions and the supervisory authority of the federal and state banking agencies.

     USA PATRIOT Act and Anti-Money Laundering Compliance

     The USA PATRIOT Act of 2001 and its implementing regulations significantly expanded the anti-money laundering and financial transparency laws, including the Bank Secrecy Act. The Bank has adopted comprehensive policies and procedures to address the requirements of the USA PATRIOT Act. Material deficiencies in anti-money laundering compliance can result in public enforcement actions by the banking agencies, including the imposition of civil money penalties and supervisory restrictions on growth and expansion. Such enforcement actions could also have serious reputation consequences for the Company and the Bank.

     Consumer Laws

     The Bank and the Company are subject to many federal and state consumer protection statutes and regulations and laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition, including:

	.		The Home Ownership and Equity Protection Act of 1994, or HOEPA, requires extra disclosures and consumer protections to borrowers from certain lending practices, such as practices deemed to be “predatory lending.”
	.		Privacy policies are required by federal and state banking laws regulations which limit the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties.
	.		The Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, or the FACT Act, requires financial firms to help deter identity theft, including developing appropriate fraud response programs, and gives consumers more control of their credit data.
	.		The Equal Credit Opportunity Act, or ECOA, generally prohibits discrimination in any credit transaction, whether for consumer or business purposes, on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), receipt of income from public assistance programs, or good faith exercise of any rights under the Consumer Credit Protection Act.
	.		The Truth in Lending Act, or TILA, requires that credit terms be disclosed in a meaningful and consistent way so that consumers may compare credit terms more readily and knowledgeably.
	.		The Fair Housing Act regulates many lending practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status.
	.		The Community Reinvestment Act, or CRA, requires insured depository institutions, while operating safely and soundly, to help meet the credit needs of their communities; directs the federal regulatory agencies, in examining insured depository institutions, to assess a bank’s record of helping meet the credit needs of its entire community, including low- and moderate- income neighborhoods, consistent with safe and sound banking practices and further requires the agencies to take a financial institution’s record of meeting its community credit needs into account when evaluating applications for, among other things, domestic branches, mergers or acquisitions, or holding company formations. In its last examination for CRA compliance, as of September 2008, the Bank was rated “satisfactory.”

	.		The Home Mortgage Disclosure Act, or HMDA, includes a “fair lending” aspect that requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes.
	.		The Real Estate Settlement Procedures Act, or RESPA, requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits certain abusive practices, such as kickbacks.
	.		The National Flood Insurance Act, or NFIA, requires homes in flood-prone areas with mortgages from a federally regulated lender to have flood insurance.

     Regulation of Nonbank Subsidiaries

     Nonbank subsidiaries are subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies.

     Employees

     At February 15, 2009, we employed 776 persons, 543 on a full-time and 233 on a part-time basis. We believe that our employee relations are satisfactory.

     Available Information

     Reports filed with the Securities and Exchange Commission (the “Commission”) include our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. These reports and other information on file can be inspected and copied at the public reference facilities of the Commission on file at 100 F Street, N.E., Washington D.C., 20549. The public may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The Commission maintains a Web Site that contains the reports, proxy and information statements and other information we file with them. The address of the site is http://www.sec.gov. The Company also maintains an Internet website at http://www.cbbank.com. We make available, free of charge through our website, our Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and current Report on Form 8-K, and any amendment there to, as soon as reasonably practicable after we file such reports with the SEC. None of the information contained in or hyperlinked from our website is incorporated into this Form 10-K.

     Risk Factors That May Affect Future Results - Together with the other information on the risks we face and our management of risk contained in this Annual Report or in our other SEC filings, the following presents significant risks which may affect us. Events or circumstances arising from one or more of these risks could adversely affect our business, financial condition, operating results and prospects and the value and price of our common stock could decline. The risks identified below are not intended to be a comprehensive list of all risks we face and additional risks that we may currently view as not material may also impair our business operations and results.

     Difficult economic and market conditions have adversely affected our industry

     Dramatic declines in the housing market, with decreasing home prices and increasing delinquencies and foreclosures, have negatively impacted the credit performance of mortgage and construction loans and resulted in significant write-downs of assets by many financial institutions. General downward economic trends, reduced availability of commercial credit and increasing unemployment have negatively impacted the credit performance of commercial and consumer credit, resulting in additional write-downs. Concerns over the stability of the financial markets and the economy have resulted in decreased lending by financial institutions to their customers and to each other. This market turmoil and tightening of credit has led to increased commercial and consumer deficiencies, lack of customer confidence, increased market volatility and widespread reduction in general business activity. Financial institutions have experienced decreased access to deposits and borrowings. The resulting economic pressure on consumers and businesses and the lack of confidence in the financial markets may adversely affect our business, financial condition, results of operations and stock price. We do not expect that the difficult conditions in the financial markets are likely to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institutions industry. In particular, we may face the following risks in connection with these events:

	•		We potentially face increased regulation of our industry. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.
	•		The process we use to estimate losses inherent in our credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans. The level of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates which may, in turn, impact the reliability of the process.
	•		We may be required to pay significantly higher FDIC premiums because market developments have significantly depleted the insurance fund of the FDIC and reduced the ratio of reserves to insured deposits.

     If current levels of market disruption and volatility continue or worsen, there can be no assurance that we will not experience an adverse effect, which may be material, on our business, financial condition and results of operations.

     Recent legislative and regulatory initiatives to address difficult market and economic conditions may not stabilize the U.S. banking system. On October 3, 2008, President Bush signed into law EESA in response to the current crisis in the financial sector. The U.S. Department of the Treasury (“UST”) and banking regulators are implementing a number of programs under this legislation to address capital and liquidity issues in the banking system and on February 17, 2009, President Obama signed into law ARRA. There can be no assurance, however, as to the actual impact that the EESA or ARRA will have on the financial markets, including the extreme levels of volatility and limited credit availability currently being experienced. The failure of the EESA to help stabilize the financial markets and a continuation or

worsening of current financial market conditions could have a material, adverse effect on our business, financial condition, results of operations, access to credit or the value of our securities.

     U.S. and international financial markets and economic conditions could adversely affect our liquidity, results of operations and financial condition

     As described in “Business — Economic Conditions, Government Policies, Legislation and Regulation”, recent turmoil and downward economic trends have been particularly acute in the financial sector. Although the Company and the Bank remain well capitalized and have not suffered any significant liquidity issues as a result of these recent events, the cost and availability of funds may be adversely affected by illiquid credit markets and the demand for our products and services may decline as our borrowers and customers realize the impact of an economic slowdown and recession. In view of the concentration of our operations and the collateral securing our loan portfolio in Central and Southern California, we may be particularly susceptible to the adverse economic conditions in the state of California, where our business is concentrated. In addition, the severity and duration of these adverse conditions is unknown and may exacerbate our exposure to credit risk and adversely affect the ability of borrowers to perform under the terms of their lending arrangements with us.

     We may be required to make additional provisions for loan losses and charge off additional loans in the future, which could adversely affect our results of operations

     During the year ended December 31, 2008, we recorded a $26.6 million provision for credit losses and charged off $5.7 million, net of $348,000 in recoveries. There has been a significant slowdown in the housing market in portions of Los Angeles, Riverside, San Bernardino and Orange counties and the Central Valley area of California where a majority of our loan customers are based. This slowdown reflects declining prices and excess inventories of homes to be sold, which has contributed to financial strain on home builders and suppliers. As of December 31, 2008, we had $2.3 billion in real estate loans and $0.35 billion in construction loans. Continuing deterioration in the real estate market generally and in the residential building segment in particular could result in additional loan charge-offs and provisions for credit losses in the future, which could have a material adverse effect on our financial condition, net income and capital.

     Declines in commodity prices may adversely affect our results of operations.

     As of December 31, 2008, approximately twelve percent (12%) of our loan portfolio was comprised of dairy and livestock loans. Recent declines in commodity prices, including milk prices, could adversely impact the ability of those to whom we have made dairy and livestock loans to perform under the terms of their borrowing arrangements with us. In particular, declines in commodity prices could result in additional loan charge-offs and provisions for credit losses in the future, which could have a material adverse effect on our financial condition, net income and capital.

     Our allowance for credit losses may not be adequate to cover actual losses

     A significant source of risk arises from the possibility that we could sustain losses because borrowers, guarantors, and related parties may fail to perform in accordance with the terms of their loans and leases. The underwriting and credit monitoring policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows. We maintain an allowance for credit losses to provide for loan and lease defaults and non-performance. The allowance is also appropriately increased for new loan growth. While we believe that our allowance for credit losses is adequate to cover inherent losses, we cannot assure you that we will not increase the allowance for credit losses further or that regulators will not require us to increase this allowance.

     Liquidity risk could impair our ability to fund operations and jeopardize our financial condition

     Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us. Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole as the recent turmoil faced by banking organizations in the domestic and worldwide credit markets deteriorates.

     Our loan portfolio is predominantly secured by real estate and thus we have a higher degree of risk from a downturn in our real estate markets

     A further downturn in our real estate markets could hurt our business because many of our loans are secured by real estate. Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes and national disasters particular to California. Substantially all of our real estate collateral is located in California. If real estate values continue to further decline, the value of real estate collateral securing our loans could be significantly reduced. Our ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and we would be more likely to suffer losses on defaulted loans.

     We are exposed to risk of environmental liabilities with respect to properties to which we take title

     In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we become subject to significant environmental liabilities, our business, financial condition, results of operations and prospects could be adversely affected.

     We may experience goodwill impairment

     If our estimates of segment fair value change due to changes in our businesses or other factors, we may determine that impairment charges on goodwill recorded as a result of acquisitions are necessary. Estimates of fair value are determined based on our earnings, the fair value of our Company as determined by our stock price, and company comparisons. If the fair value of the Company declines, we may need to recognize goodwill impairment in the future which would have a material adverse affect on our results of operations and capital levels.

     Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance

     A substantial portion of our income is derived from the differential or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Because of the differences in the maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. At December 31, 2008 our balance sheet was liability sensitive and, as a result, our net interest margin tends to decline in a rising interest rate environment and expand in a declining interest rate environment. Accordingly, fluctuations in interest rates could adversely affect our interest rate spread

and, in turn, our profitability. In addition, loan origination volumes are affected by market interest rates. Rising interest rates, generally, are associated with a lower volume of loan originations while lower interest rates are usually associated with higher loan originations. Conversely, in rising interest rate environments, loan repayment rates may decline and in falling interest rate environments, loan repayment rates may increase. In addition, in a rising interest rate environment, we may need to accelerate the pace of rate increases on our deposit accounts as compared to the pace of future increases in short-term market rates. Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality and loan origination volume.

     We are subject to extensive government regulation that could limit or restrict our activities, which, in turn, may hamper our ability to increase our assets and earnings

     Our operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change. Perennially various laws, rules and regulations are proposed, which, if adopted, could impact our operations by making compliance much more difficult or expensive, restricting our ability to originate or sell loans or further restricting the amount of interest or other charges or fees earned on loans or other products.

     The short term and long term impact of the new Basel II capital standards and the forthcoming new capital rules to be proposed for non-Basel II U.S. banks is uncertain

     As a result of the recent deterioration in the global credit markets and the potential impact of increased liquidity risk and interest rate risk, it is unclear what the short term impact of the implementation of Basel II may be or what impact a pending alternative standardized approach to Basel II option for non-Basel II U.S. banks may have on the cost and availability of different types of credit and the potential compliance costs of implementing the new capital standards.

     Failure to manage our growth may adversely affect our performance

     Our financial performance and profitability depend on our ability to manage past and possible future growth. Future acquisitions and our continued growth may present operating, integration and other issues that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

     We face strong competition from financial services companies and other companies that offer banking services

     We conduct most of our operations in California. The banking and financial services businesses in California are highly competitive and increased competition in our primary market area may adversely impact the level of our loans and deposits. Ultimately, we may not be able to compete successfully against current and future competitors. These competitors include national banks, regional banks and other community banks. We also face competition from many other types of financial institutions, including savings and loan associations, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In particular, our competitors include major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous locations and mount extensive promotional and advertising campaigns. Areas of competition include interest rates for loans and deposits, efforts to obtain loan and deposit customers and a range in quality of products and services provided, including new technology driven products and services. If we are unable to attract and retain banking customers, we may be unable to continue our loan growth and level of deposits.

     We rely on communications, information, operating and financial control systems technology from third-party service providers, and we may suffer an interruption in those systems

     We rely heavily on third-party service providers for much of our communications, information, operating and financial control systems technology, including our internet banking services and data processing systems. Any failure or interruption of these services or systems or breaches in security of these systems could result in failures or interruptions in our customer relationship management, general ledger, deposit, servicing and/or loan origination systems. The occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all.

     We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects

     Competition for qualified employees and personnel in the banking industry is intense and there are a limited number of qualified persons with knowledge of, and experience in, the California community banking industry. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. In addition, ARRA has imposed significant limitations on executive compensation for recipients of TARP funds, such as us, which may make it more difficult for us to retain and recruit key personnel. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of our management and personnel. In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our President, and certain other employees.

     Managing reputational risk is important to attracting and maintaining customers, investors and employees

     Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers. We have policies and procedures in place to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation.

     State laws may restrict our ability to pay dividends

     The ability for the Bank to pay dividends to us and for us to pay dividends to our shareholders is limited by California law. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Cash Flows.”

     The terms of our outstanding preferred stock limit our ability to pay dividends on and repurchase our common stock and there can be no assurance of any future dividends on our common stock

     The Purchase Agreement between us and the UST pursuant to which we sold $130.0 million of our Series B Preferred Stock (the “TARP Preferred Stock”) and issued a warrant to purchase up to 1,669,521 shares of our common stock (the “TARP Warrant”) provides that prior to the earlier of (i) December 5, 2011 and (ii) the date on which all of the shares of the TARP Preferred Stock have been redeemed by us or transferred by the UST to third parties, we may not, without the consent of the UST, (a) increase the cash dividend on our common stock above $0.085 per share, the amount of the last quarterly cash dividend per share declared prior to October 14, 2008 or (b) subject to limited exceptions, redeem, repurchase or otherwise acquire shares of our common stock or preferred stock other than the TARP Preferred Stock. In addition, we are unable to pay any dividends on our common stock unless we are

current in our dividend payments on the TARP Preferred Stock. These restrictions, together with the potentially dilutive impact of the TARP Warrant could have a negative effect on the value of our common stock. Moreover, holders of our common stock are entitled to receive dividends only when, as and if declared by our Board of Directors. Although we have historically paid cash dividends on our common stock, we are not required to do so and our Board of Directors could reduce or eliminate our common stock dividend in the future.

     Our outstanding preferred stock impacts net income available to our common stockholders and earnings per common share, and the TARP Warrant as well as other potential issuances of equity securities may be dilutive to holders of our common stock

     The dividends declared and the accretion on discount on our outstanding preferred stock will reduce the net income available to common stockholders and our earnings per common share. Our outstanding preferred stock will also receive preferential treatment in the event of liquidation, dissolution or winding up of the Company. Additionally, the ownership interest of the existing holders of our common stock will be diluted to the extent the TARP Warrant is exercised. The shares of common stock underlying the TARP Warrant represent approximately 2.0% of the shares of our common stock outstanding as of February 15, 2009 (including the shares issuable upon exercise of the TARP Warrant in total shares outstanding). Although the UST has agreed not to vote any of the shares of common stock it receives upon exercise of the TARP Warrant, a transferee of any portion of the TARP Warrant or of any shares of common stock acquired upon exercise of the TARP Warrant is not bound by this restriction. In addition, to the extent options to purchase common stock under our employee and director stock option plans are exercised, holders of our common stock will incur additional dilution. Further, if we sell additional equity or convertible debt securities, such sales could result in increased dilution to our shareholders.

     Because of our participation in the Troubled Asset Relief Program, we are subject to several restrictions including restrictions on compensation paid to our executives

     Pursuant to the terms of the Purchase Agreement, we adopted certain standards for executive compensation and corporate governance for the period during which the UST holds the equity issued pursuant to the Purchase Agreement, including the common stock which may be issued pursuant to the TARP Warrant. These standards generally apply to our Chief Executive Officer, Chief Financial Officer and the three next most highly compensated senior executive officers. The standards include (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; (3) prohibition on making golden parachute payments to senior executives; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. In particular, the change to the deductibility limit on executive compensation will likely increase the overall cost of our compensation programs in future periods. Since the TARP Warrant has a ten year term, we could potentially be subject to the executive compensation and corporate governance restrictions for a ten-year time period. Pursuant to ARRA, further compensation restrictions, including significant limitations on incentive compensation, have been imposed on our senior executive officers and most highly compensated employees. Such restrictions and any future restrictions on executive compensation, which may be adopted, could adversely affect our ability to hire and retain senior executive officers.

     The price of our common stock may be volatile or may decline

     The trading price of our common stock may fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations could adversely affect the market price of our common stock. Among the factors that could affect our stock price are:

	•		actual or anticipated quarterly fluctuations in our operating results and financial condition;
	•		changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts;
	•		failure to meet analysts’ revenue or earnings estimates;
	•		speculation in the press or investment community;
	•		strategic actions by us or our competitors, such as acquisitions or restructurings;
	•		actions by institutional shareholders;
	•		fluctuations in the stock price and operating results of our competitors;
	•		general market conditions and, in particular, developments related to market conditions for the financial services industry;
	•		proposed or adopted regulatory changes or developments;
	•		anticipated or pending investigations, proceedings or litigation that involve or affect us; or
	•		domestic and international economic factors unrelated to our performance.

     The stock market and, in particular, the market for financial institution stocks, has experienced significant volatility recently. As a result, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate more than usual and cause significant price variations to occur. The trading price of the shares of our common stock and the value of our other securities will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales of our equity or equity related securities, and other factors identified above in “Cautionary Note Regarding Forward-Looking Statements”. Current levels of market volatility are unprecedented. The capital and credit markets have been experiencing volatility and disruption for more than a year. In recent months, the volatility and disruption has reached unprecedented levels. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. A significant decline in our stock price could result in substantial losses for individual shareholders and could lead to costly and disruptive securities litigation.

     Anti-takeover provisions and federal law may limit the ability of another party to acquire us, which could cause our stock price to decline

     Various provisions of our articles of incorporation and by-laws and certain other actions we have taken could delay or prevent a third-party from acquiring us, even if doing so might be beneficial to our shareholders. These include, among other things, a shareholder rights plan and the authorization to issue

“blank check” preferred stock by action of the board of directors acting alone, thus without obtaining shareholder approval. The Bank Holding Company Act of 1956, as amended, and the Change in Bank Control Act of 1978, as amended, together with federal regulations, require that, depending on the particular circumstances, either Federal Reserve approval must be obtained or notice must be furnished to the Federal Reserve and not disapproved prior to any person or entity acquiring “control” of a state member bank, such as the Bank. These provisions may prevent a merger or acquisition that would be attractive to shareholders and could limit the price investors would be willing to pay in the future for our common stock.

     Changes in stock market prices could reduce fee income from our brokerage, asset management and investment advisory businesses

     We earn substantial wealth management fee income for managing assets for our clients and also providing brokerage and investment advisory services. Because investment management and advisory fees are often based on the value of assets under management, a fall in the market prices of those assets could reduce our fee income. Changes in stock market prices could affect the trading activity of investors, reducing commissions and other fees we earn from our brokerage business.

     We may face other risks

     From time to time, we detail other risks with respect to our business and/or financial results in our filings with the Commission.

     For further discussion on additional areas of risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and the Results of Operations — Risk Management.”

ITEM 1B. UNRESOLVED STAFF COMMENTS

     None

ITEM 2. PROPERTIES

     The principal executive offices of the Company and the Bank are located in Ontario, California, and are owned by the Company.

     At December 31, 2008, the Bank occupied the premises for thirty-seven of its Business Financial and Commercial Banking Centers under leases expiring at various dates from 2009 through 2020, at which time we can exercise options that could extend certain leases through 2026. We own the premises for nine of our offices which include seven Business Financial Centers, and our Corporate Headquarters and Operations Center, both located in Ontario, California.

     At December 31, 2008, our consolidated investment in premises and equipment, net of accumulated depreciation and amortization totaled $44.4 million. Our total occupancy expense, exclusive of furniture and equipment expense, for the year ended December 31, 2008, was $11.8 million. We believe that our existing facilities are adequate for our present purposes. The Company believes that if necessary, it could secure suitable alternative facilities on similar terms without adversely affecting operations. For additional information concerning properties, see Notes 6 and 11 of the Notes to the Consolidated Financial Statements included in this report. See “Item 8. Financial Statements and Supplemental Data.”

ITEM 3. LEGAL PROCEEDINGS

     From time to time the Company and the Bank are parties to claims and legal proceedings arising in the ordinary course of business. After taking into consideration information furnished by counsel, we believe that the ultimate aggregate liability represented thereby, if any, will not have a material adverse effect on our consolidated financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to shareholders during the fourth quarter of 2008.

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY

     The following tables set forth certain information regarding our executive officers as of February 28, 2009:

Executive Officers:

Name		Position		Age
Christopher D. Myers		President and Chief Executive Officer of the Company and the Bank			46
Edward J. Biebrich Jr.		Chief Financial Officer of the Company and Executive Vice President and Chief Financial Officer of the Bank			65
James F. Dowd		Executive Vice President/Credit Management Division of the Bank			56
Todd E. Hollander		Executive Vice President/Sales Division of the Bank			42
Christopher A. Walters		Executive Vice President/CitizensTrust Division of the Bank			45

     Mr. Myers assumed the position of President and Chief Executive Officer of the Company and the Bank on August 1, 2006. Prior to that, Mr. Myers served as Chairman of the Board and Chief Executive Officer of Mellon First Business Bank from 2004 to 2006. From 1996 to 2003, Mr. Myers held several management positions with Mellon First Business Bank, including Executive Vice President, Regional Vice President, and Vice President/Group Manager.

     Mr. Biebrich assumed the position of Chief Financial Officer of the Company and Executive Vice President/Chief Financial Officer of the Bank on February 2, 1998.

     Mr. Dowd assumed the position of Executive Vice President and Chief Credit Officer of the Bank on June 30, 2008. From 2006 to 2008, he served as Executive Vice President and Chief Credit Officer for Mellon First Business Bank. From 1991 to 2006, Mr. Dowd held several management positions with City National Bank, including Senior Vice President and Manager of Special Assets, Deputy Chief Credit Officer, and Interim Chief Credit Officer.

     Mr. Hollander assumed the position of Executive Vice President of the Bank on May 15, 2008. From 2005 to 2008, he served as Executive Vice President for the Community Banking Group of California National Bank. From 2003 to 2005, he served as Executive Vice President for the Commercial Banking Group of U.S. Bank. From 1990 to 2003, Mr. Hollander held various management positions with Wells Fargo & Company, Inc. including Executive Vice President, Senior Vice President, and Vice President of the Business Banking Group.

     Mr. Walters assumed the position of Executive Vice President of the Bank on June 27, 2007. From 2005 to 2006, he served as Senior Vice President for Atlantic Trust. From 2002 to 2004, he was Director of Private Banking for Citigroup. From 1994 to 2002, he served as a member of the Executive Committee and held a variety of management positions for Mellon Private Wealth Management.

     Our common stock is traded on the Nasdaq Global Select National Market under the symbol “CVBF.” The following table presents the high and low closing sales prices and dividend information for our common stock during each quarter for the past two years. The Company had approximately 1,920 shareholders of record as of February 15, 2009.

Two Year Summary of Common Stock Prices
Quarter
Ended		High				Low				Dividends
3/31/2007		$	13.38				11.42			$0.085 Cash Dividend
6/30/2007		$	12.40			$	10.63			$0.085 Cash Dividend
9/30/2007		$	12.71			$	9.51			$0.085 Cash Dividend
12/31/2007		$	11.97			$	9.98			$0.085 Cash Dividend
3/31/2008		$	11.20			$	8.45			$0.085 Cash Dividend
6/30/2008		$	12.10			$	9.44			$0.085 Cash Dividend
9/30/2008		$	15.01			$	7.65			$0.085 Cash Dividend
12/31/2008		$	13.89			$	9.29			$0.085 Cash Dividend

     For information on the ability of the Company to pay dividends to its shareholders and on the Bank to pay dividends to the Company, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Cash Flow”.

     Issuer Purchases of Equity Securities

     On July 16, 2008, our Board of Directors approved a program to repurchase up to 5,390,482 shares of our common stock. This program was combined with the 4,609,518 shares remaining from our previous stock repurchase program, approved in August 2007. As of December 31, 2008, we have the authority to repurchase up to 10,000,000 shares of our common stock (such number will not be adjusted for stock splits, stock dividends, and the like) in the open market or in privately negotiated transactions, at times and at prices considered appropriate by us, depending upon prevailing market conditions and other corporate and legal considerations. We made no repurchases of our common stock during the fourth quarter ended December 31, 2008. There is no expiration date for our current stock repurchase program.

     As a result of our participation in the Capital Purchase Program promulgated pursuant to TARP, prior to the earlier of (i) December 5, 2011 and (ii) the date on which all of our outstanding Series B Preferred Stock has been redeemed or transferred to third parties unaffiliated with the UST, we may not, without the consent of the UST, repurchase or otherwise acquire any of our shares of common stock or any trust preferred securities, subject to certain limited exceptions. In addition, so long as any of our Series B Preferred Stock is outstanding, we may not repurchase or otherwise acquire any of our outstanding common stock unless we are current in our dividend payments on our outstanding Series B Preferred Stock.

     Performance Graph

     The following Performance Graph and related information shall not be deemed “soliciting material” or be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

     The following graph compares the yearly percentage change in CVB Financial Corp.’s cumulative total shareholder return (stock price appreciation plus reinvested dividends) on common stock (i) the cumulative total return of the Nasdaq National Market; and (ii) a published index comprised by Hemscott, Inc. of banks and bank holding companies in the Pacific region (the industry group line depicted below). The graph assumes an initial investment of $100 on December 31, 2003, and reinvestment of dividends through December 31, 2008. Points on the graph represent the performance as of the last business day of each of the years indicated. The graph is not necessarily indicative of future price performance.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CVB FINANCIAL CORP.,
NASDAQ MARKET INDEX AND HEMSCOTT GROUP INDEX



ASSUMES $100 INVESTED ON DEC. 31, 2003
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2008

		2003				2004				2005				2006				2007				2008
CVB FINANCIAL CORP.			100.00				140.65				136.82				124.58				100.82				120.66
HEMSCOTT GROUP INDEX			100.00				122.08				127.85				133.39				95.71				65.58
NASDAQ MARKET INDEX			100.00				108.41				110.79				122.16				134.29				79.25

ITEM 6. SELECTED FINANCIAL DATA.

     The following table reflects selected financial information at and for the five years ended December 31. Throughout the past five years, the Company has acquired other banks. This may affect the comparability of the data.

Item 6. Selected Financial Data

		At December 31,
		2008				2007				2006				2005				2004
		( Amounts and numbers in thousands except per share amounts)
Interest Income		$	332,518			$	341,277			$	316,091			$	246,884			$	197,257
Interest Expense			138,839				180,135				147,464				77,436				46,517
Net Interest Income			193,679				161,142				168,627				169,448				150,740
Provision for Credit Losses			26,600				4,000				3,000				—				—
Other Operating Income			34,457				31,325				33,258				27,505				27,907
Other Operating Expenses			115,788				105,404				95,824				90,053				89,722
Earnings Before Income Taxes			85,748				83,063				103,061				106,900				88,925
Income Taxes			22,675				22,479				32,481				36,710				27,698
NET EARNINGS		$	63,073			$	60,584			$	70,580			$	70,190			$	61,227
Basic Earnings Per Common Share (1)		$	0.75			$	0.72			$	0.84			$	0.83			$	0.74
Diluted Earnings Per Common Share (1)		$	0.75			$	0.72			$	0.83			$	0.83			$	0.73
Cash Dividends Declared Per Common Share		$	0.340			$	0.340			$	0.355			$	0.420			$	0.480
Cash Dividends paid on Common Shares			28,317				28,479				27,876				27,963				23,821
Dividend Pay-Out Ratio (3)			44.90	%			47.01	%			39.50	%			39.60	%			38.74	%
Weighted Average Common Shares (1):
Basic			83,120,817				83,600,316				84,154,216				84,139,254				83,221,496
Diluted			83,335,503				84,005,941				84,813,875				84,911,893				84,258,933
Common Stock Data:
Common shares outstanding at year end (1)			83,270,263				83,164,906				84,281,722				84,073,227				83,416,193
Book Value Per Share (1)		$	5.92			$	5.11			$	4.60			$	4.07			$	3.81
Financial Position:
Assets		$	6,649,651			$	6,293,963			$	6,092,248			$	5,422,283			$	4,510,752
Investment Securities available-for-sale			2,493,476				2,390,566				2,582,902				2,369,892				2,085,014
Net Loans			3,682,878				3,462,095				3,042,459				2,640,660				2,117,580
Deposits			3,508,156				3,364,349				3,406,808				3,424,045				2,875,039
Borrowings			2,345,473				2,339,809				2,139,250				1,496,000				1,186,000
Junior Subordinated debentures			115,055				115,055				108,250				82,476				82,746
Stockholders’ Equity			614,892				424,948				387,325				342,189				317,224
Equity-to-Assets Ratio (2)			9.25	%			6.75	%			6.36	%			6.31	%			7.03	%
Financial Performance:
Net Income to Beginning Equity			14.84	%			15.64	%			20.63	%			22.13	%			21.44	%
Net Income to Average Equity (ROE)			13.75	%			15.00	%			19.45	%			20.77	%			20.33	%
Net Income to Average Assets (ROA)			0.99	%			1.00	%			1.22	%			1.44	%			1.47	%
Net Interest Margin (TE) (4)			3.41	%			3.03	%			3.30	%			3.86	%			3.99	%
Efficiency Ratio (5)			57.45	%			55.93	%			48.18	%			45.72	%			50.10	%
Credit Quality:
Allowance for Credit Losses		$	53,960			$	33,049			$	27,737			$	23,204			$	22,494
Allowance/Total Loans			1.44	%			0.95	%			0.90	%			0.87	%			1.05	%
Total Non-Accrual Loans		$	17,684			$	1,435			$	—			$	—			$	2
Non-Accrual Loans/Total Loans			0.47	%			0.04	%			0.00	%			0.00	%			0.00	%
Allowance/Non-Accrual Loans			305.13	%			2,303	%			—				—				—
Net (Recoveries)/Charge-offs		$	5,689			$	1,358			$	(1,533	)		$	46			$	(1,212	)
Net (Recoveries)/Charge-Offs/Average Loans			0.16	%			0.04	%			-0.05	%			0.00	%			-0.06	%
Regulatory Capital Ratios
For the Company:
Leverage Ratio			9.8	%			7.6	%			7.8	%			7.7	%			8.3	%
Tier 1 Capital			14.2	%			11.0	%			12.2	%			11.3	%			12.6	%
Total Capital			15.5	%			12.0	%			13.0	%			12.0	%			13.4	%
For the Bank:
Leverage Ratio			9.7	%			7.1	%			7.0	%			7.3	%			7.8	%
Tier 1 Capital			13.9	%			10.5	%			11.0	%			10.8	%			11.9	%
Total Capital			15.2	%			11.3	%			11.8	%			11.5	%			12.7	%

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS.

GENERAL

     Management’s discussion and analysis is written to provide greater detail of the results of operations and the financial condition of CVB Financial Corp. and its subsidiaries. This analysis should be read in conjunction with the audited financial statements contained within this report including the notes thereto.

OVERVIEW

     We are a bank holding company with one bank subsidiary, Citizens Business Bank. We have three other inactive subsidiaries: CVB Ventures, Inc.; Chino Valley Bancorp and ONB Bancorp. We are also the common stockholder of CVB Statutory Trust I, CVB Statutory Trust II and CVB Statutory Trust III which were formed to issue trust preferred securities in order to increase the capital of the Company. Through our acquisition of First Coastal Bancshares (“FCB”) in June 2007, we acquired FCB Capital II. We are based in Ontario, California in what is known as the “Inland Empire”. Our geographical market area encompasses the City of Stockton (the middle of the Central Valley) in the center of California to the City of Laguna Beach (in Orange County) in the southern portion of California. Our mission is to offer the finest financial products and services to professionals and businesses in our market area.

     Our primary source of income is from the interest earned on our loans and investments and our primary area of expense is the interest paid on deposits and borrowings, and salaries and benefits expense. As such our net income is subject to fluctuations in interest rates which impact our income statement. We are also subject to competition from other financial institutions, which may affect our pricing of products and services, and the fees and interest rates we can charge on them.

     Economic conditions in our California service area impact our business. We have seen a significant decline in the housing market resulting in slower growth in construction loans and a decrease in deposit balances from escrow companies. Unemployment is increasing and the Inland Empire and other areas of our marketplace have been significantly impacted as economic conditions, both nationally and in California, continue to deteriorate. Approximately 22% of our total loan portfolio of $3.7 billion is located in the Inland Empire region of California. The balance of the portfolio is from outside of this region. Weaknesses in the local and state economy could adversely affect us through diminished loan demand, credit quality deterioration, and increases in loan delinquencies and defaults.

     Over the past few years, we have been active in acquisitions and we will continue to pursue acquisition targets which will enable us to meet our business objectives and enhance shareholder value. Since 2000, we have acquired four banks and a leasing company, and we have opened five de novo branches in the following California cities: Glendale, Bakersfield, Fresno, Madera, and Stockton. We have also pursued growth organically. In 2008, we opened four Commercial Banking Centers. Although able to take deposits, these centers operate primarily as sales offices and focus on business clients and their principals, professionals, and high net-worth individuals. One of these centers is located in the San Fernando Valley. The other three centers are located within a Business Financial Center in each of San Bernardino, Los Angeles, and Orange Counties.

     The decrease in interest rates during 2008 as compared with 2007 has allowed our net interest income to grow. The Bank has always had an excellent base of interest free deposits primarily due to our specialization in businesses and professionals as customers. This has allowed us to have an overall low cost of deposits which contributed to a substantial reduction in interest expense in 2008 as compared to 2007.

     Our net income increased to $63.1 million in 2008 compared with $60.6 million in 2007, an increase of $2.5 million or 4.11%. Diluted earnings per common share increased $0.03, from $0.72 in 2007 to $0.75 in 2008. The increase of $2.5 million in net income is primarily the result of a substantial decrease

in interest expense, offset by a decline in interest income, increase in other operating expense and $22.6 million increase in our provision for credit losses.

CRITICAL ACCOUNTING ESTIMATES

     Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting estimates upon which our financial condition depends, and which involve the most complex or subjective decisions or assessment, are as follows:

     Allowance for Credit Losses: Arriving at an appropriate level of allowance for credit losses involves a high degree of judgment. Our allowance for credit losses provides for probable losses based upon evaluations of known and inherent risks in the loan and lease portfolio. The determination of the balance in the allowance for credit losses is based on an analysis of the loan and lease finance receivables portfolio using a systematic methodology and reflects an amount that, in our judgment, is adequate to provide for probable credit losses inherent in the portfolio, after giving consideration to the character of the loan portfolio, current economic conditions, past credit loss experience, and such other factors as deserve current recognition in estimating inherent credit losses. The provision for credit losses is charged to expense. For a full discussion of our methodology of assessing the adequacy of the allowance for credit losses, see “Risk Management” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation.

     Investment Portfolio: The investment portfolio is an integral part of our financial performance. We invest primarily in fixed income securities. Accounting estimates are used in the presentation of the investment portfolio and these estimates do impact the presentation of our financial condition and results of operations. We classify securities as held-to-maturity those debt securities that we have the positive intent and ability to hold to maturity. Securities classified as trading are those securities that are bought and held principally for the purpose of selling them in the near term. All other debt and equity securities are classified as available-for-sale. Securities held-to-maturity are accounted for at cost and adjusted for amortization of premiums and accretion of discounts. Trading securities are accounted for at fair value with the unrealized holding gains and losses being included in current earnings. Securities available-for-sale are accounted for at fair value, with the net unrealized gains and losses, net of income tax effects, presented as a separate component of stockholders’ equity. At each reporting date, securities are assessed to determine whether there is an other-than-temporary impairment. Such impairment, if any, is required to be recognized in current earnings rather than as a separate component of stockholders’ equity. Realized gains and losses on sales of securities are recognized in earnings at the time of sale and are determined on a specific-identification basis. Purchase premiums and discounts are recognized in interest income using the effective-yield method over the terms of the securities. Our investment in Federal Home Loan Bank (“FHLB”) stock is carried at cost.

     Income Taxes: We account for income taxes using the asset and liability method by deferring income taxes based on estimated future tax effects of differences between the tax and book basis of assets and liabilities considering the provisions of enacted tax laws. These differences result in deferred tax assets and liabilities, which are included in our balance sheets. We must also assess the likelihood that any deferred tax assets will be recovered from future taxable income and establish a valuation allowance for those assets determined to not likely be recoverable. Our judgment is required in determining the amount and timing of recognition of the resulting deferred tax assets and liabilities, including projections of future taxable income. Although we have determined a valuation allowance is not required for any of our deferred tax assets, there is no guarantee that these assets are recoverable.

     Goodwill and Intangible Assets: We have acquired entire banks and branches of banks. Those acquisitions accounted for under the purchase method of accounting have given rise to goodwill and intangible assets. We record the assets acquired and liabilities assumed at their fair value. These fair values are arrived at by use of internal and external valuation techniques. The excess purchase price is

allocated to assets and liabilities respectively, resulting in identified intangibles. The identified intangibles are amortized over the estimated lives of the assets or liabilities. Any excess purchase price after this allocation results in goodwill. Goodwill is tested on an annual basis for impairment.

ANALYSIS OF THE RESULTS OF OPERATIONS

     The following table summarizes net earnings, earnings per common share, and key financial ratios for the periods indicated.

		For the years ended December 31,
		2008				2007				2006
		(Dollars in thousands,
		except per share amounts)
Net earnings		$	63,073			$	60,584			$	70,580
Earnings per common share:
Basic (1)		$	0.75			$	0.72			$	0.84
Diluted (1)		$	0.75			$	0.72			$	0.83
Return on average assets			0.99	%			1.00	%			1.22	%
Return on average shareholders’ equity			13.75	%			15.00	%			19.45	%

     We reported net earnings of $63.1 million for the year ended December 31, 2008. This represented an increase of $2.5 million, or 4.11%, over net earnings of $60.6 million for the year ended December 31, 2007. Net earnings for 2007 decreased $10.0 million to $60.6 million, or 14.16%, from net earnings of $70.6 million for the year ended December 31, 2006. Diluted earnings per common share were $0.75 in 2008, as compared to $0.72 in 2007, and $0.83 in 2006. Basic earnings per common share were $0.75 in 2008, as compared to $0.72 in 2007, and $0.84 in 2006. Diluted and basic earnings per common share have been adjusted for the effects of a ten percent stock dividend declared December 20, 2006 and paid on January 19, 2007.

     The increase in net earnings for 2008 compared to 2007 was primarily the result of an increase in net interest income and other operating income, offset by an increase in loan loss provision and other operating expenses. The decrease in net earnings for 2007 compared to 2006 was primarily the result of a decrease in net interest income and increase in other operating expenses. The net earnings in 2008 and 2007 reflect the fluctuations in interest rates during those years and the impact on our net interest margin.

     For 2008, our return on average assets was 0.99%, compared to 1.00% for 2007, and 1.22% for 2006. Our return on average stockholders’ equity was 13.75% for 2008, compared to a return of 15.00% for 2007, and 19.45% for 2006.

Net Interest Income

     The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments (earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is the taxable-equivalent of net interest income as a percentage of average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average earning assets minus the cost of average interest-bearing liabilities. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the economy, in general, and the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate

environments will have a significant impact on our overall performance. Our balance sheet is currently liability-sensitive; meaning interest-bearing liabilities will generally reprice more quickly than earning assets. Therefore, our net interest margin is likely to decrease in sustained periods of rising interest rates and increase in sustained periods of declining interest rates. We manage net interest income through affecting changes in the mix of earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to earning assets, and in the growth of earning assets.

     Our net interest income, after provision for credit losses totaled $167.1 million for 2008. This represented an increase of $9.9 million, or 6.32%, over net interest income of $157.1 million for 2007. Net interest income for 2007 decreased $8.5 million, or 5.12%, from net interest income of $165.6 million for 2006. The increase in net interest income of $9.9 million for 2008 resulted from a decrease of $41.3 million in interest expense offset by a decrease of $8.8 million in interest income and a $22.6 million increase in provision for credit losses. The decrease in interest expense of $41.3 million resulted from the decrease in average rate paid on interest-bearing liabilities to 3.01% in 2008 from 4.11% in 2007, offset by an increase of average interest-bearing liabilities of $259.1 million. The decrease of $8.8 million in interest income resulted from the decrease in the average yield on interest-earning assets to 5.71% in 2008 from 6.17% in 2007, offset by an increase of $341.6 million in average interest-earning assets.

     The decrease in net interest income of $8.5 million for 2007 as compared to 2006 resulted from an increase of $25.2 million in interest income offset by a $32.7 million increase in interest expense and a $1.0 million increase in provision for credit losses. This increase in interest income of $25.2 million resulted from the $297.7 million increase in average interest-earning assets and the increase in yield on earning assets to 6.17% in 2007 from 6.04% in 2006. The increase of $32.7 million in interest expense was the result of an increase in the average rate paid on interest-bearing liabilities to 4.11% in 2007 from 3.70% in 2006, and an increase of $359.9 million in average interest-bearing liabilities.

     Interest income totaled $332.5 million for 2008. This represented a decrease of $8.8 million, or 2.57%, compared to total interest income of $341.3 million for 2007. For 2007, total interest income increased $25.2 million, or 7.97%, over total interest income of $316.1 million for 2006. The decrease in total interest income during 2008 was primarily due to the decrease in interest rates, partially offset by the growth in average earning assets. The increase in 2007 was due to the increase in volume of interest-earning assets and increase in interest rates on total earning assets.

     Interest income includes dividends earned on our investment in FHLB capital stock. For the year ended December 31, 2008, 2007 and 2006, our interest income from dividends earned on FHLB stock totaled $4.6 million, $4.2 million and $3.7 million, respectively. The FHLB recently announced that they would not pay any dividends on its capital stock in the first quarter of 2009, and there can be no assurance that the FHLB will pay dividends at the same rate it has paid in the past, or that it will pay any dividends in the future, which, in both cases, would adversely affect our interest income as compared to prior periods.

     Interest expense totaled $138.8 million for 2008. This represented a decrease of $41.3 million, or 22.93%, from total interest expense of $180.1 million for 2007. For 2007, total interest expense increased $32.7 million, or 22.15%, over total interest expense of $147.5 million for 2006. The decrease in interest expense during 2008 was due to the decrease in interest rates on deposits and borrowed funds, partially offset by the increase in average borrowed funds. The increase in interest expense for 2007 was primarily due to an increase in average interest-bearing liabilities and increase in the cost of total interest-bearing liabilities.

     Table 1 represents the composition of average interest-earning assets and average interest-bearing liabilities by category for the periods indicated, including the changes in average balance, composition, and yield/rate between these respective periods:

TABLE 1 — Distribution of Average Assets, Liabilities, and Stockholders’ Equity; Interest Rates and Interest Differentials

		Twelve-month period ended December 31,
		2008												2007												2006
		Average								Average				Average								Average				Average								Average
ASSETS		Balance				Interest				Yield/Rate				Balance				Interest				Yield/Rate				Balance				Interest				Yield/Rate
(amounts in thousands)
Investment Securities
Taxable		$	1,766,754			$	86,930				4.97	%		$	1,722,605			$	85,899				4.99	%		$	1,907,713			$	91,029				4.80	%
Tax preferenced (1)			675,309				28,371				5.91	%			666,278				29,231				5.88	%			604,222				26,545				5.90	%
Investment in FHLB stock			89,601				4,552				5.08	%			80,789				4,229				5.23	%			74,368				3,721				5.00	%
Federal Funds Sold & Interest Bearing Deposits with other institutions			1,086				39				3.59	%			1,876				109				5.81	%			1,843				92				4.99	%
Loans (2) (3)			3,506,510				212,626				6.06	%			3,226,086				221,809				6.88	%			2,811,782				194,704				6.92	%
Total Earning Assets			6,039,260				332,518				5.71	%			5,697,634				341,277				6.17	%			5,399,928				316,091				6.04	%
Total Non Earning Assets			355,653												382,869												363,892
Total Assets		$	6,394,913											$	6,080,503											$	5,763,820
LIABILITIES AND STOCKHOLDERS’ EQUITY
Savings Deposits (4)		$	1,238,810			$	16,413				1.32	%		$	1,288,745			$	31,764				2.46	%		$	1,220,441			$	26,637				2.18	%
Time Deposits			769,827				19,388				2.52	%			844,667				37,533				4.44	%			940,634				40,543				4.31	%
Total Deposits			2,008,637				35,801				1.78	%			2,133,412				69,297				3.25	%			2,161,075				67,180				3.11	%
Other Borrowings			2,597,943				103,038				3.97	%			2,214,108				110,838				4.94	%			1,826,532				80,284				4.40	%
Interest Bearing Liabilities			4,606,580				138,839				3.01	%			4,347,520				180,135				4.11	%			3,987,607				147,464				3.70	%
Non-interest bearing deposits			1,268,548												1,285,857												1,354,014
Other Liabilities			61,119												43,285												59,296
Stockholders’ Equity			458,666												403,841												362,903
Total Liabilities and Stockholders’ Equity		$	6,394,913											$	6,080,503											$	5,763,820
Net interest income						$	193,679											$	161,142											$	168,627
Net interest spread — tax equivalent											2.70	%											2.06	%											2.34	%
Net interest margin											3.22	%											2.86	%											3.13	%
Net interest margin — tax equivalent											3.41	%											3.03	%											3.30	%
Net interest margin excluding loan fees											3.13	%											2.76	%											3.02	%
Net interest margin excluding loan fees — tax equivalent											3.32	%											2.93	%											3.19	%

     As stated above, the net interest margin measures net interest income as a percentage of average earning assets. Our tax effected (TE) net interest margin was 3.41% for 2008, compared to 3.03% for 2007, and 3.30% for 2006. The increase in the net interest margin in 2008 and the decrease in net interest margin in 2007 is primarily the result of the changing interest rate environment, which impacted interest earned and interest paid as a percent of earning assets. This was partially offset by changes in the mix of assets and liabilities as discussed in the following paragraphs. Generally, our net interest margin improves in a decreasing interest rate environment as our deposits and borrowings reprice much faster than our loans and securities.

     The net interest spread is the difference between the yield on average earning assets less the cost of average interest-bearing liabilities. The net interest spread is an indication of our ability to manage interest rates received on loans and investments and paid on deposits and borrowings in a competitive and changing interest rate environment. Our net interest spread (TE) was 2.70% for 2008, 2.06% for 2007, and 2.34% for 2006. The increase in the net interest spread for 2008 as compared to 2007 resulted from a 110 basis point decrease in the cost of interest-bearing liabilities offset by a 46 basis point decrease in the yield on earning assets, thus generating a 64 basis point increase in the net interest spread. The decrease in rates during 2008 had a smaller impact on our assets since a majority of our assets are fixed rate; while deposits and borrowings benefited from the rate decrease. The decrease in the net interest spread for 2007 as compared to 2006 resulted from a 13 basis point increase in the yield on earning assets offset by a 41 basis point increase in the cost of interest-bearing liabilities, thus generating a 28 basis point decrease in the net interest spread.

     The yield (TE) on earning assets decreased to 5.71% for 2008, from 6.17% for 2007, and reflects a decreasing interest rate environment and a change in the mix of earning assets. Investments as a percent of earning assets decreased to 40.44% in 2008 from 41.93% in 2007. The yield on loans for 2008 decreased to 6.06% as compared to 6.88% for 2007. The yield on investments for 2008 decreased slightly to 5.23% as compared to 5.24% in 2007. The yield on loans for 2007 increased to 6.88% as compared to 6.92% for 2006. The yield on investments increased to 5.24% in 2007 as compared to 5.06% in 2006.

     The cost of average interest-bearing liabilities decreased to 3.01% for 2008 as compared to 4.11% for 2007 and 3.70% for 2006. These variations reflected the changing interest rate environment in 2008 and 2007, as well as the change in the mix of interest-bearing liabilities. Borrowings as a percent of interest-bearing liabilities increased to 56.40% for 2008 as compared to 50.93% for 2007 and 45.81% for 2006. Borrowings typically have a higher cost than interest-bearing deposits. The cost of interest-bearing deposits for 2008 was 1.78% as compared to 3.25% for 2007 and 3.11% for 2006, reflecting a decreasing interest rate environment in 2008 and increasing interest rate environment in 2007. The cost of borrowings for 2008 was 3.97% as compared to 4.94% for 2007, and 4.40% for 2006, also reflecting the same fluctuating interest rate environment. The FDIC has approved the payment of interest on certain demand deposit accounts. This could have a negative impact on our net interest margin, net interest spread, and net earnings, should this be implemented fully. Currently, the only deposits for which we pay interest on are NOW, Money Market and TCD Accounts.

     Table 2 presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average earning assets and average interest-bearing liabilities for the years indicated. Changes in interest income or expense attributable to volume changes are calculated by multiplying the change in volume by the initial average interest rate. The change in interest income or expense attributable to changes in interest rates is calculated by multiplying the change in interest rate by the initial volume. The changes attributable to interest rate and volume changes are calculated by multiplying the change in rate times the change in volume.

TABLE 2 — Rate and Volume Analysis for Changes in Interest Income, Interest Expense and Net Interest Income

		Comparison of years ended December 31,
		2008 Compared to 2007																2007 Compared to 2006
		Increase (Decrease) Due to																Increase (Decrease) Due to
										Rate/																Rate/
		Volume				Rate				Volume				Total				Volume				Rate				Volume				Total
		( amounts in thousands )
Interest Income:
Taxable investment securities		$	1,457			$	(344	)		$	(82	)		$	1,031			$	(8,822	)		$	3,622			$	70			$	(5,130	)
Tax-advantaged securities			581				200				(1,641	)			(860	)			3,606				(121	)			(799	)			2,686
Fed funds sold & interest-bearing deposits with other institutions			(46	)			(42	)			18				(70	)			2				15				—				17
Investment in FHLB stock			461				(121	)			(17	)			323				321				171				17				509
Loans			19,293				(26,454	)			(2,022	)			(9,183	)			28,670				(1,125	)			(440	)			27,105
Total interest on earning assets			21,746				(26,761	)			(3,744	)			(8,759	)			23,777				2,562				(1,152	)			25,187
Interest Expense:
Savings deposits			(1,228	)			(14,692	)			528				(15,392	)			1,489				3,417				249				5,155
Time deposits			(3,323	)			(16,218	)			1,437				(18,104	)			(4,136	)			1,223				(125	)			(3,038	)
Other borrowings			19,277				(21,835	)			(5,242	)			(7,800	)			17,290				10,000				3,265				30,555
Total interest on interest-bearing liabilities			14,726				(52,745	)			(3,277	)			(41,296	)			14,643				14,640				3,389				32,672
Net Interest Income		$	7,020			$	25,984			$	(467	)		$	32,537			$	9,134			$	(12,078	)		$	(4,541	)		$	(7,485	)

Interest and Fees on Loans

     Our major source of revenue is interest and fees on loans, which totaled $212.6 million for 2008. This represented a decrease of $9.2 million, or 4.14%, from interest and fees on loans of $221.8 million for 2007. For 2007, interest and fees on loans increased $27.1 million, or 13.92%, over interest and fees on loans of $194.7 million for 2006. The decrease in interest and fees on loans for 2008 reflects the decrease in loan yield, offset by the increase in average loan balances. The increase in interest and fees on loans for 2007 reflects the increase in average loan balances offset by a slight decrease in loan yield. The yield on loans decreased to 6.06% for 2008, compared to 6.88% for 2007 and 6.92% 2006.

     In general, we stop accruing interest on a loan after its principal or interest becomes 90 days or more past due. When a loan is placed on non-accrual, all interest previously accrued but not collected is charged against earnings. There was no interest income that was accrued and not reversed on non-accrual loans at December 31, 2008, 2007, and 2006. For 2008 and 2007, we had $17.7 million and $1.4 million of non-accrual loans, respectively. Had non-accrual loans for which interest was no longer accruing complied with the original terms and conditions, interest income would have been $370,000 and $90,000 greater for 2008 and 2007, respectively. For 2006 we had no non-performing loans.

     Fees collected on loans are an integral part of the loan pricing decision. Loan fees and the direct costs associated with the origination of loans are deferred and deducted from total loans on our balance sheet. Deferred net loan fees are recognized in interest income over the term of the loan using the effective-yield method. We recognized loan fee income of $5.4 million for 2008, $5.6 million for 2007 and $5.8 million for 2006.

Interest on Investments

     Another component of interest income is interest on investments, which totaled $119.9 million for 2008. This represented an increase of $423,000, or 0.35%, over interest on investments of $119.5 million for 2007. For 2007, interest on investments decreased $1.9 million, or 1.58%, from interest on investments of $121.4 million for 2006. The decrease in interest on investments for 2007 as compared to 2006 reflected the decreases in average balances. The interest rate environment and the investment strategies we employ directly affect the yield on the investment portfolio. We continually adjust our investment strategies in response to the changing interest rate environments in order to maximize the rate of total return consistent within prudent risk parameters, and to minimize the overall interest rate risk of the Company. The weighted-average yield on investments was 5.23% for 2008, compared to 5.24% for 2007 and 5.06% for 2006.

Interest on Deposits

     Interest on deposits totaled $35.8 million for 2008. This represented a decrease of $33.5 million, or 48.34%, from interest on deposits of $69.3 million for 2007. The decrease is due to the decrease in interest rates on deposits and decrease in average interest-bearing deposit balances. The cost of interest-bearing deposits decreased to 1.78% in 2008 from 3.25% in 2007 and average interest-bearing deposits decreased $124.8 million, or 5.85% from 2007. Interest on deposits increased in 2007 by $2.1 million, over interest on deposits of $67.2 million during 2006. Our cost of total deposits was 1.09%, 2.03%, 1.91% for the years ended December 31, 2008, 2007, and 2006, respectively.

Interest on Borrowings

     Interest on borrowings totaled $96.0 million for 2008. This represents a decrease of $7.3 million, or 7.05%, from interest on borrowings of $103.3 million for 2007. The decrease is primarily due to the decrease in interest rates on borrowings, offset by an increase in average borrowings. Interest rates on borrowings decreased 98 basis points during 2008 to 3.87% from 4.85% during 2007. Interest on borrowings increased $29.9 million for 2007, over $73.4 million for 2006. The increase is attributed to an increase in average borrowings by $381.6 million, or 22.2% and an increase in interest rates from 4.27% in 2006 to 4.85% in 2007.

Provision for Credit Losses

     We maintain an allowance for inherent credit losses that is increased by a provision for credit losses charged against operating results. Provision for credit losses is determined by management as the amount to be added to the allowance for credit losses after net charge-offs have been deducted to bring the allowance to an adequate level which, in management’s best estimate, is necessary to absorb probable credit losses within the existing loan portfolio. The nature of this process requires considerable judgment. As such, we made a provision for credit losses of $26.6 million in 2008, $4.0 million in 2007 and $3.0 million in 2006. The increase in allowance during 2008 was due to the increase in classified loans and the increase in qualitative factors which is consistent with the current economic environment. We believe the allowance is currently appropriate. The ratio of the allowance for credit losses to total loans as of December 31, 2008, 2007, and 2006 was 1.44%, 0.95% and 0.90%, respectively. No assurance can be given that economic conditions which adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for credit losses in the future. The net charge-

offs totaled $5.7 million in 2008, $1.4 million in 2007, and net recoveries totaled $1.5 million in 2006. See “Risk Management — Credit Risk” herein.

Other Operating Income

     The components of other operating income were as follows:

		For the years ended December 31,
		2008				2007				2006
		(Dollars in thousands,
		except per share amounts)
Service charges on deposit accounts		$	15,228			$	13,381			$	13,080
CitizensTrust			7,926				7,226				7,385
Bankcard services			2,329				2,530				2,486
BOLI Income			5,000				3,839				3,051
Other			3,974				4,349				6,199
Gain/(Loss) on sale of securities, net			—				—				1,057
Total other operating income		$	34,457			$	31,325			$	33,258

     Other operating income, totaled $34.5 million for 2008. This represents an increase of $3.1 million, or 10.00%, over other operating income of $31.3 million in 2007. During 2007, other operating income decreased $1.9 million, or 5.81%, from other operating income, including realized gains on the sales of investment securities, of $33.3 million for 2006.

     Other operating income as a percent of net revenues (net interest income before loan loss provision plus other operating income) was 15.10% for 2008, as compared to 16.28% for 2007 and 16.47% for 2006.

     Service charges on deposit accounts totaled $15.2 million in 2008. This represented an increase of $1.8 million or 13.81% over service charges on deposit accounts of $13.4 million in 2007. Service charges for demand deposits (checking) accounts for business customers are generally charged based on an analysis of their activity and include an earnings allowance based on their average balances. Contributing to the increase in service charges on deposit accounts was the lower interest rate environment that resulted in a lower account earnings allowance, which offsets services charges. Service charges on deposit accounts in 2007 increased $301,000 or 2.30% over service charges on deposit accounts of $13.1 million in 2006. Service charges on deposit accounts represented 44.19% of other operating income in 2008, as compared to 42.72% in 2007 and 39.33% in 2006.

     CitizensTrust consists of Trust Services and Investment Services income. Trust Services provides a variety of services, which include asset management services (both full management services and custodial services), estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides mutual funds, certificates of deposit, and other non-insured investment products. CitizensTrust generated fees of $7.9 million in 2008. This represents an increase of $700,000, or 9.69% over fees generated of $7.2 million in 2007. Fees generated by CitizensTrust represented 23.00% of other operating income in 2008, as compared to 23.07% in 2007 and 22.20% in 2006.

     Bankcard Services, which provides merchant bankcard services, generated fees totaling $2.3 million in 2008, compared to $2.5 million in 2007 and 2006. Fees generated by Bankcard represented 6.76% of other operating income in 2008, as compared to 8.08% in 2007 and 7.48% in 2006.

     The Bank invests in Bank-Owned Life Insurance (BOLI). BOLI involves the purchasing of life insurance by the Bank on a chosen group of employees. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at cash surrender value. Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in other operating income and are not

subject to income tax. Bank Owned Life Insurance income totaled $5.0 million in 2008. This represents an increase of $1.2 million, or 30.25%, over BOLI income generated of $3.8 million for 2007. BOLI income in 2007 increased $788,000, or 25.84% over BOLI income generated of $3.1 million for 2006. The increase in BOLI income in 2008 was due to a death settlement of $967,000. The increase in BOLI income in 2007 was due to the purchase of $25.0 million in BOLI in September 2006.

     Other fees and income, which includes wire fees, other business services, international banking fees, check sale, ATM fees, miscellaneous income, etc, generated fees totaling $4.0 million in 2008. This represented a decrease of $376,000, or 8.63% from other fees and income generated of $4.3 million in 2007. The other income in 2006 includes the gain on sale of the Arcadia and former Operations Center buildings of $726,000 and a legal settlement of $750,000.

     The sale of securities generated a realized gain of $1.1 million in 2006. The gains/losses on sales of securities in prior years were primarily due to repositioning of the investment portfolio to take advantage of the current interest rate cycle.

Other Operating Expenses

     The components of other operating expenses were as follows:

		For the years ended December 31,
		2008				2007				2006
		(Dollars in thousands,
		except per share amounts)
Salaries and employee benefits		$	61,271			$	55,303			$	50,509
Occupancy			11,813				10,540				8,572
Equipment			7,162				7,026				7,025
Stationery and supplies			6,913				6,712				6,492
Professional services			6,519				6,274				5,896
Promotion			6,882				5,953				6,251
Amortization of Intangibles			3,591				2,969				2,353
Other			11,637				10,627				8,726
Total other operating expenses		$	115,788			$	105,404			$	95,824

     Other operating expenses totaled $115.8 million for 2008. This represents an increase of $10.4 million, or 9.85%, over other operating expenses of $105.4 million for 2007. During 2007, other operating expenses increased $9.6 million, or 10.0%, over other operating expenses of $95.8 million for 2006.

     For the most part, other operating expenses reflect the direct expenses and related administrative expenses associated with staffing, maintaining, promoting, and operating branch facilities. Our ability to control other operating expenses in relation to asset growth can be measured in terms of other operating expenses as a percentage of average assets. Operating expenses measured as a percentage of average assets was 1.81% for 2008, compared to 1.73% for 2007, and 1.66% for 2006.

     Our ability to control other operating expenses in relation to the level of total revenue (net interest income plus other operating income) is measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses. For 2008, the efficiency ratio was 57.45%, compared to 55.93% for 2007 and 48.18% for 2006. The increase in 2008 and 2007 is due to increases in salaries and related expenses and other expenses as discussed below.

     Salaries and related expenses comprise the greatest portion of other operating expenses. Salaries and related expenses totaled $61.3 million for 2008. This represented an increase of $6.0 million, or 10.79%, over salaries and related expenses of $55.3 million for 2007. In 2007, salary and related expenses increased $4.8 million, or 9.49%, over salaries and related expenses of $50.5 million for 2006. At December 31, 2008, we employed 778 persons, 540 on a full-time and 238 on a part-time basis. This

compares to 766 persons, 541 on a full-time and 225 on a part-time basis at December 31, 2007 and 752 persons, 522 on a full-time and 230 on a part-time basis at December 31, 2006. The increases primarily resulted from increased senior management positions as a result of the overall growth of the Company and the addition of new business financial centers through the FCB acquisition, as well as, the addition of our new commercial banking centers. Salaries and related expenses as a percent of average assets increased to 0.96% for 2008, compared to 0.91% for 2007, and 0.88% for 2006.

     Occupancy and equipment expense totaled $19.0 million for 2008, compared to $17.6 million in 2007, and $15.6 million in 2006. The increase is primarily due to the new commercial banking centers opened in 2008 and the addition of new business financial centers through the FCB acquisition in 2007.

     Stationery and supplies expense totaled $6.9 million for 2008, compared to $6.7 million in 2007 and $6.5 million in 2006.

     Professional services totaled $6.5 million for 2008, $6.3 million for 2007, and $5.9 million for 2006. The increases were primarily due to professional expenses incurred for recruitment of new associates and legal fees due to outstanding litigation.

     Promotion expense totaled $6.9 million for 2008. This represented an increase of $929,000, or 15.60%, over expense of $6.0 million for 2007. Promotion expense decreased in 2007 by $298,000, or 4.77%, from expense of $6.3 million for 2006. The increase in promotional expenses during 2008 was partially due to the naming rights of the Citizens Business Bank Arena in Ontario, California and increases in advertising and promotion related to our new commercial banking centers.

     Other operating expenses totaled $11.6 million for 2008. This represented an increase of $1.0 million, or 9.50%, over expense of $10.6 million for 2007. The increase in 2008 was primarily due to increases in FDIC deposit insurance. As discussed in “Item 1. Business — FDIC Insurance,” further increases in deposit insurance premiums will increase other operating expenses in 2009. For 2007, other operating expenses increased $1.9 million, or 21.79%, over expense of $8.7 million in 2006. The increase in 2007 was primarily due to $1.2 million increase in the provision for unfunded commitments during 2007 and $675,000 related to the Bank’s share of allocable losses from certain tax-preferenced investments.

RESULTS BY SEGMENT OPERATIONS

     We have two reportable business segments, which are (i) Business Financial and Commercial Banking Centers and (ii) Treasury. The results of these two segments are included in the reconciliation between business segment totals and our consolidated total. Our business segments do not include the results of administration units that do not meet the definition of an operating segment.

Business Financial and Commercial Banking Centers

     Key measures we use to evaluate the Business Financial and Commercial Banking Center’s performance are included in the following table for years ended December 31, 2008, 2007 and 2006. The table also provides additional significant segment measures useful to understanding the performance of this segment.

		For the Years Ended December 31,
		2008				2007				2006
Key Measures:		(Dollars in thousands)
Statement of Operations
Interest income		$	189,128			$	234,142			$	219,663
Interest expense			52,140				77,848				58,469
Non-interest income			21,593				18,148				15,136
Non-interest expense			48,108				44,558				41,258
Segment pretax profit		$	110,473			$	129,884			$	135,072
Balance Sheet
Average loans		$	3,506,510			$	3,226,086			$	2,811,782
Average interest-bearing deposits		$	2,008,637			$	2,133,412			$	2,161,075
Yield on loans			6.06	%			6.88	%			6.92	%
Rate paid on deposits			1.78	%			3.25	%			3.11	%

     For 2008, interest income decreased $45.0 million, or 19.23%, when compared with interest income during 2007, primarily due to decreases in interest rates during 2008, offset by increases in average loan balances. For 2007, interest income increased $14.5 million, or 6.59%, when compared with interest income during 2006. This is due to the increase in balances outstanding on loans and increases in interest rates. Average loan balances increased year over year by $280.4 million, or 8.69% in 2008 and $414.3 million, or 14.73% in 2007.

     For 2008, interest expense decreased $25.7 million, or 33.02%, when compared with interest expense during 2007. The decrease in interest expense in 2008 was primarily due to the decrease in interest rates on deposits by 147 basis points. For 2007, interest expense increased $19.4 million, or 33.14%, when compared with interest expense during 2006. The increase in interest expense in 2007 is due to the increase in interest rates offered on deposit products.

     Non-interest income and non-interest expense also had increases when compared to the prior periods. The increases have been consistent year over year, primarily due to the growth of the Company. Non-interest income increased $3.4 million, or 18.98%, during 2008 over 2007 and increased $3.0 million, or 19.90%, during 2007 over 2006. Non-interest expense also increased $3.6 million, or 7.97%, for 2008 and $3.3 million, or 8.00%, for 2007.

Treasury

     Key measures we use to evaluate the Treasury’s performance are included in the following table for the years ended December 31, 2008, 2007 and 2006. The table also provides additional significant segment measures useful to understanding the performance of this segment.

		For the Years Ended December 31,
		2008				2007				2006
Key Measures:		(Dollars in thousands)
Statement of Operations
Interest income		$	119,975			$	119,544			$	121,438
Interest expense			99,714				129,698				115,839
Non-interest income			6				1				1,058
Non-interest expense			1,285				1,148				1,123
Segment pretax profit (loss)		$	18,982			$	(11,301	)		$	5,534
Balance Sheet
Average investments		$	2,532,750			$	2,471,548			$	2,588,146
Average borrowings		$	2,482,888			$	2,102,030			$	1,720,400
Yield on investments-TE			5.23	%			5.24	%			5.06	%
Non-tax equivalent yield			4.20	%			4.39	%			4.44	%
Rate paid on borrowings			3.87	%			4.85	%			4.27	%

     For 2008, interest income increased $431,000, or 0.36%, over 2007, due to the increase in average balances. For 2007, interest income decreased $1.9 million, or 1.56% from 2006 due to a decrease in average investment balances by $116.6 million. We used a portion of the cash flow from our investment portfolio to pay-down borrowings and fund loans in 2007.

     For 2008, interest expense decreased $30.0 million or 23.12%, when compared with 2007. This is due to the 98 basis point decrease in interest rates paid on borrowings during 2008, offset by the increase in average borrowings. For 2007, interest expense increased $13.9 million or 11.96%, when compared with 2006, as a result of increases in rates and average borrowings. The cost of funding decreased to 3.87% in 2008 and increased in 2007 to 4.85% from 4.27% in 2006.

     The result of decrease in cost of funds during 2008 resulted in segment pre-tax income of $19.0 million, an increase of $30.3 million compared to 2007. Whereas the increase in cost of funds during 2007 resulted in an $11.3 million pre-tax loss compared to 2006.

     There are no provisions for credit losses or taxes in the segments as these are accounted for at the Company level.

		For the Years Ended December 31,
		2008				2007				2006
Key Measures:		(Dollars in thousands)
Statement of Operations
Interest income		$	50,279			$	61,360			$	52,879
Interest expense			13,849				46,358				51,045
Net interest income		$	36,430			$	15,002			$	1,834
Provision for Credit Losses			26,600				4,000				3,000
Non-interest income			12,858				13,176				17,064
Non-interest expense			66,395				59,698				53,443
Pre-tax loss		$	(43,707	)		$	(35,520	)		$	(37,545	)

     The Company’s administration and other operating departments reported pre-tax loss of $43.7 million for the year ended December 31, 2008. This represented an increase of $8.2 million, or 23.05%, over pre-tax loss of $35.5 million for the year ended December 31, 2007. The increase is attributed to an increase in provision for credit losses, offset by a decrease in interest expense. Pre-tax loss for 2007 decreased $2.0 million to $35.5 million, or 5.39%, from pre-tax loss of $37.5 million for 2006.

     Our effective tax rate for 2008 was 26.44%, compared to 27.06% for 2007, and 31.52% for 2006. The effective tax rates are below the nominal combined Federal and State tax rates as a result of the increase in tax-preferenced income from certain investments and municipal loans/leases as a percentage of total income for each period. In 2008 and 2007, the percentage of tax-preferenced income to total income increased, resulting in lower tax rate compared to prior year. The majority of tax preferenced income is derived from municipal securities.

ANALYSIS OF FINANCIAL CONDITION

     The Company reported total assets of $6.6 billion at December 31, 2008. This represented an increase of $355.7 million, or 5.65%, over total assets of $6.3 billion at December 31, 2007.

Investment Securities

     The Company maintains a portfolio of investment securities to provide interest income and to serve as a source of liquidity for its ongoing operations. The tables below set forth information concerning the composition of the investment securities portfolio at December 31, 2008, 2007, and 2006, and the maturity distribution of the investment securities portfolio at December 31, 2008. At December 31, 2008, we reported total investment securities of $2.50 billion. This represents an increase of $109.8 million, or 4.59%, from total investment securities of $2.39 billion at December 31, 2007.

     Under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, securities held as “available-for-sale” are reported at current fair value for financial reporting purposes. The related unrealized gain or loss, net of income taxes, is recorded in stockholders’ equity. At December 31, 2008, securities held as available-for-sale had a fair value of $2.49 billion, representing 99.7% of total investment securities with an amortized cost of $2.44 billion. At December 31, 2008, the net unrealized holding gain on securities available-for-sale was $49.5 million that resulted in accumulated other comprehensive gain of $28.7 million (net of $20.8 million in deferred taxes).

Composition of the Fair Value of Securities Available-for-Sale:

		At December 31,
		2008								2007								2006
		Amount				Percent				Amount				Percent				Amount				Percent
		(amounts in thousands)
U.S. Treasury Obligations		$	—				0.00	%		$	998				0.04	%		$	970				0.04	%
Government agency and government- sponsored enterprises			27,778				1.11	%			50,835				2.13	%			68,300				2.64	%
Mortgage-backed securities			1,184,485				47.51	%			1,023,061				42.80	%			1,077,851				41.73	%
CMO/REMICs			596,791				23.93	%			622,806				26.05	%			787,270				30.48	%
Municipal bonds			684,422				27.45	%			692,866				28.98	%			645,785				25.00	%
Other securities			—				0.00	%			—				0.00	%			2,726				0.11	%
TOTAL		$	2,493,476				100.00	%		$	2,390,566				100.00	%		$	2,582,902				100.00	%