S-4/A
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As filed with the Securities and Exchange Commission on September 24, 2021

Registration No. 333-259517

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CVB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

 

 

 

California   6022   95-4849715

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(IRS Employer

Identification Number)

701 N. Haven Avenue, Suite 350

Ontario, California 91764

(909) 980-4030

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

David A. Brager

Chief Executive Officer

CVB Financial Corp.

701 N. Haven Avenue, Suite 350

Ontario, California 91764

(909) 980-4030

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Craig D. Miller

Veronica Lah

Manatt, Phelps & Phillips, LLP

One Embarcadero Center

30th Floor

San Francisco, California 94111

(415) 291-7400

 

Richard H. Wohl

Executive Vice President and General Counsel

CVB Financial Corp.

701 N. Haven Avenue, Suite 350

Ontario, California 91764

(909) 980-4030

 

Joshua A. Dean

Sheppard, Mullin, Richter &

Hampton LLP

650 Town Center Drive, 10th Floor

Costa Mesa, California 92626

(714) 513-5100

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and upon completion of the merger.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender Offer)  ☐

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS—SUBJECT TO COMPLETION—Dated September 24, 2021

 

LOGO

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

To Suncrest Bank Shareholders:

The board of directors of Suncrest Bank has approved an agreement (the “merger agreement”) for the merger of Suncrest Bank with and into Citizens Business Bank, a wholly-owned subsidiary of CVB Financial Corp. Before we can complete the merger, we must obtain the approval of the shareholders of Suncrest Bank. We are sending you this document to ask for your approval of the principal terms of the merger agreement at the special shareholder meeting of Suncrest Bank, which will be held on October 27, 2021 at 6:00 p.m., local time. The merger agreement, which is attached as Annex A to the accompanying proxy statement/prospectus, sets forth the terms of the merger.

In the proposed merger, Suncrest Bank will merge with and into Citizens Business Bank in a stock and cash transaction valued at approximately $203 million in the aggregate (inclusive of payments for outstanding Suncrest Bank stock options), based on the closing price of CVB Financial Corp. common stock on July 27, 2021, the last trading day prior to our public announcement of the merger, and approximately $205 million in the aggregate (inclusive of payments for outstanding Suncrest Bank stock options), based on the closing price of CVB Financial Corp. common stock on September 23, 2021. Suncrest Bank shareholders will receive fixed consideration consisting of 0.6970 shares of CVB Financial Corp. common stock and $2.69 per share in cash for each share of Suncrest Bank common stock outstanding at the effective time of the merger, subject to the merger consideration adjustments and other terms and conditions set forth in the merger agreement, as further described in the accompanying proxy statement/prospectus.

The merger consideration will be reduced, on a per share basis, by the sum of the following, if any: (i) a common equity tier 1 capital adjustment (i.e., the amount, if any, by which the adjusted common equity tier 1 capital of Suncrest Bank is below $122.9 million (the “tier 1 benchmark”) and multiplying such difference, if any, by 1.5; plus (ii) a transaction costs adjustment (i.e., the amount, if any, by which certain specified transaction costs of Suncrest Bank exceed $5.8 million).

Based on the closing price of CVB Financial Corp. common stock on July 27, 2021, the last trading day prior to the public announcement of the merger, and assuming no merger consideration adjustments, the merger consideration represented a value of $16.09 per share of Suncrest Bank common stock. Using the closing price of CVB Financial Corp. common stock on September 23, 2021 and assuming no merger consideration adjustments, the merger consideration represented a value of $16.27 per share of Suncrest Bank common stock. Accordingly, the dollar value of the stock consideration that Suncrest Bank shareholders may receive will change depending on fluctuations in the market price of CVB Financial Corp. common stock and will not be known at the time you vote on the merger. You should obtain current stock quotations for CVB Financial Corp. common stock, which is listed on the NASDAQ Global Select Market under the symbol “CVBF.”

Giving effect to the merger, we expect Suncrest Bank shareholders would hold, in the aggregate, approximately 6% of CVB Financial Corp.’s outstanding common stock following the merger.

The merger is subject to the receipt of the required approval by the shareholders of Suncrest Bank and all regulatory approvals, and the satisfaction or waiver of all other conditions to closing as described in the accompanying proxy statement/prospectus.


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The accompanying proxy statement/prospectus contains a more complete description of the special meeting and the terms of the merger agreement and the merger. We urge you to review that entire document carefully. In particular, you should read the “Risk Factors” section beginning on page 16 of the proxy statement/prospectus for a discussion of the risks you should consider in evaluating the proposed merger and how they will affect you. You may also obtain information about CVB Financial Corp. from documents that CVB Financial Corp. has filed with the Securities and Exchange Commission.

Suncrest Bank will hold a special shareholders’ meeting to vote on the merger agreement on October 27, 2021 at 501 West Main Street, Visalia, California 93291, at 6:00 p.m. local time. Detailed instructions for participation can be found in the notice of special shareholder meeting that accompanies this proxy statement/prospectus.

Your vote is very important. Whether or not you plan to attend the special meeting, please take the time to submit your proxy in accordance with the voting instructions contained in this document. If you do not vote, abstain from voting or do not instruct your broker how to vote any shares held by you in “street name,” the effect will be a vote AGAINST the merger.

After careful consideration, the Suncrest Bank board of directors unanimously recommends that the shareholders of Suncrest Bank vote “FOR” approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and “FOR” the grant of discretionary authority to adjourn the special meeting as necessary or appropriate.

We enthusiastically support the merger and believe it to be in the best interests of the Suncrest Bank shareholders.

 

 

Ciaran McMullan

 

President and Chief Executive Officer

 

Suncrest Bank

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the issuance of the CVB Financial Corp. common stock in connection with the merger or the other transactions described in this proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This proxy statement/prospectus is dated September 28, 2021 and is first being mailed to shareholders of Suncrest Bank on or about September 28, 2021.


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WHERE YOU CAN FIND ADDITIONAL INFORMATION

CVB Financial Corp. files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission, or the “SEC.” You can read CVB’s filings over the Internet. CVB Financial Corp.’s SEC filings are available to the public at the SEC’s website at http://www.sec.gov. You may also obtain these documents, free of charge, from CVB Financial Corp. at www.cbbank.com under the “Investors” tab and then under the heading “SEC Filings.”

CVB Financial Corp. has filed a registration statement on Form S-4 of which this document forms a part. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits, at the address set forth below. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. This document incorporates by reference documents that CVB Financial Corp. has previously filed with the SEC. They contain important information about CVB Financial Corp. and its financial condition. For more information, please see the section entitled “Incorporation of Certain Documents by Reference.” These documents are available without charge to you upon written or oral request to CVB Financial Corp.’s principal executive office, which is listed below:

CVB Financial Corp.

701 N. Haven Avenue, Suite 350

Ontario, California 91764

Attention: Corporate Secretary

Telephone: (909) 980-4030

If you would like to request any CVB Financial Corp. documents, your request should be sent in time to be received by CVB Financial Corp. no later than October 20, 2021 in order for you to receive the documents before the special meeting.

Suncrest Bank does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act and accordingly does not file documents or reports with the SEC.

If you are a Suncrest Bank shareholder and have questions about the merger or submitting your proxy, or if you need additional copies of this proxy statement/prospectus or proxy card, you should contact Suncrest Bank’s proxy solicitor:

 

LOGO

1290 Avenue of the Americas, 9th Floor

New York, NY 10104

Toll-Free Telephone: (866) 647-8869 (Toll Free)

CVB Financial Corp. common stock is traded on the NASDAQ Global Select Market under the symbol “CVBF,” and Suncrest Bank common stock is quoted on the OTC Markets’ OTCQX market under the symbol “SBKK.”

 


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LOGO

501 West Main Street, Visalia, California 93291

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF

SUNCREST BANK

To Be Held October 27, 2021

 

 

To the Shareholders of Suncrest Bank:

Notice is hereby given that, pursuant to the terms of its bylaws and the call of its board of directors, a special meeting of shareholders of Suncrest Bank will be held at 501 West Main Street, Visalia, California 93291, on Wednesday, October 27, 2021. The special meeting will convene at 6:00 p.m. local time for the following purposes:

 

  1.

Approval of Merger Agreement. To approve the principal terms of the Agreement and Plan of Reorganization and Merger, dated as of July 27, 2021, by and among CVB Financial Corp., Citizens Business Bank and Suncrest Bank (the “merger agreement”) and the transactions contemplated by the merger agreement, including the merger of Suncrest Bank with and into Citizens Business Bank (the “merger”), with Citizens Business Bank surviving the merger, and the cancellation of each outstanding share of Suncrest Bank common stock, other than any dissenting shares and excluded shares, in exchange for the right to receive 0.6970 shares of CVB Financial Corp. common stock and $2.69 per share in cash, subject to any adjustments set forth in the merger agreement.

 

  2.

Grant of Discretionary Authority to Adjourn Meeting. To consider and vote upon a proposal to grant discretionary authority to adjourn the special meeting if necessary or appropriate in the judgment of our board of directors to solicit additional proxies or votes in favor of the approval of the principal terms of the merger agreement and the transactions contemplated thereby, including the merger.

No other business may be conducted at the special meeting.

The merger agreement, which is attached as Annex A to the accompanying proxy statement/prospectus, sets forth the terms of the merger. The transaction is also more fully described in the enclosed proxy statement/prospectus. You are urged to read these documents carefully and in their entirety. In particular, see “Risk Factors” beginning on page 16 of the accompanying proxy statement/prospectus.

Only shareholders of record at the close of business on September 21, 2021 will be entitled to notice of and to vote at the special meeting or at any postponement or adjournment thereof. The proposals to approve the principal terms of the merger agreement and the transactions contemplated thereby, including the merger, requires the affirmative vote of at least a majority of the shares of Suncrest Bank common stock outstanding as of the record date for the special meeting. The proposal to grant discretionary authority to adjourn the special meeting, if necessary, to solicit additional proxies or votes requires the affirmative vote of at least a majority of the shares of Suncrest Bank common stock present in person or represented by proxy and voting at the special meeting (which affirmative vote constitutes at least a majority of the required quorum).

Suncrest Bank shareholders will be given the opportunity to exercise dissenters’ rights in accordance with certain procedures specified in California Corporations Code Sections 1300, et seq., which sections are attached as Annex C to the attached proxy statement/prospectus and incorporated herein by reference. Suncrest Bank shareholders who do not vote in favor of the merger may demand that Suncrest Bank acquire their shares of Suncrest Bank common stock for cash at their fair market value as of July 27, 2021, the day of, and immediately prior to, the first public announcement of the terms of the merger, excluding any appreciation or depreciation in


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consequence of the merger. Suncrest Bank shareholders dissenting must file written demands that Suncrest Bank acquire their shares of Suncrest Bank common stock for cash and comply with the other procedural requirements set forth in California Corporations Code Sections 1300, et seq. For additional details about dissenters’ rights, please refer to “Dissenters’ Rights for Holders of Suncrest Shares” beginning on page 53 and Annex C to the accompanying proxy statement/prospectus.

The Suncrest Bank board of directors unanimously recommends that you vote in favor of approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and the grant of discretionary authority to adjourn the special meeting, as described in the proxy statement/prospectus.

Whether or not you plan to attend the special meeting, please sign, date and return the enclosed proxy card in the postage prepaid envelope provided, or cast your vote by telephone or Internet by following the instructions on your proxy card, as soon as you can. The vote of every shareholder is important, and we appreciate your cooperation in returning your executed proxy promptly. If you do not vote, abstain from voting or do not instruct your broker how to vote any shares held by you in “street name,” the effect will be a vote “AGAINST” the merger.

Your proxy, or your telephone or Internet vote, is revocable and will not affect your right to vote in person if you attend the special meeting. If your shares are registered in your name and you attend the special meeting, you may simply revoke your previously submitted proxy by voting your shares at that time. If you receive more than one set of proxy materials because your shares are registered in different names or addresses, you will need to follow the instructions in each set of proxy materials that you receive to ensure that all your shares will be voted at the special meeting. If your shares are held by a broker or other nominee holder, and are not registered in your name, you will need additional documentation from your broker or other record holder to vote your shares in person at the special meeting. Please indicate on the proxy card whether or not you expect to attend the special meeting in person.

We expect to hold the special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only shareholders will be admitted to the special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the special meeting in person. To do so, please make your request by mail to Suncrest Bank at 501 West Main Street, Visalia, California 93291, Attention: Jean Carandang, or by email at jcarandang@suncrestbank.com. Suncrest Bank must receive your request for pre-authorization on or before October 20, 2021.

We appreciate your continuing support and look forward to seeing you at the special meeting.

 

    By Order of the Board of Directors
    Marc Schuil
Dated: September 28, 2021     Corporate Secretary
Visalia, California    

 


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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

     ii  

SUMMARY

     1  

RISK FACTORS

     16  

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

     21  

SPECIAL MEETING

     24  

THE MERGER

     28  

General

     28  

Merger Consideration

     28  

Background of the Merger

     29  

Suncrest’s Reasons for the Merger; Recommendation of the Merger by the Suncrest Board of Directors

     32  

Opinion of Suncrest’s Financial Advisor

     35  

CVB’s Reasons for the Merger

     41  

Governing Documents

     42  

Board of Directors and Officers of CVB and Citizens After the Merger

     42  

Interests of Suncrest Directors and Executive Officers in the Merger

     43  

Material U.S. Federal Income Tax Consequences of the Merger

     47  

Regulatory Approvals Required for the Merger

     51  

Accounting Treatment

     53  

Public Trading Markets

     53  

Exchange of Shares in the Merger

     53  

Dissenters’ Rights for Holders of Suncrest Shares

     53  

THE MERGER AGREEMENT

     57  

Explanatory Note Regarding the Merger Agreement

     57  

Effects of the Merger

     57  

Effective Time of the Merger

     57  

Covenants and Agreements

     58  

Representations and Warranties

     67  

Conditions to Completion of the Merger

     69  

Termination

     71  

Termination Fee

     72  

Effect of Termination

     72  

Waiver; Amendment

     73  

Fees and Expenses

     73  

Voting and Support Agreements

     73  

Non-Competition, Non-Solicitation and Non-Disclosure Agreement

     74  

INFORMATION ABOUT THE COMPANIES

     76  

CVB Financial Corp. and Citizens Business Bank

     76  

Suncrest Bank

     77  

COMPARISON OF RIGHTS OF SHAREHOLDERS OF CVB AND SUNCREST

     78  

BENEFICIAL OWNERSHIP OF SUNCREST COMMON STOCK

     84  

LEGAL MATTERS

     86  

EXPERTS

     86  

SHAREHOLDER PROPOSALS FOR NEXT YEAR

     86  

Suncrest Bank

     86  

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     87  

ANNEX A - AGREEMENT AND PLAN OF REORGANIZATION AND MERGER

     A-1  

ANNEX B - FAIRNESS OPINION OF MJC PARTNERS, LLC

     B-1  

ANNEX C - DISSENTER’S RIGHTS

     C-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following are brief answers to certain questions that you may have about the Suncrest Bank special meeting and the merger. We urge you to read carefully the remainder of this proxy statement/prospectus, including the risk factors beginning on page 16, because the information in this section does not provide all of the information that might be important to you with respect to the merger and the special meeting. Additional important information is contained in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.”

Unless the context otherwise requires, throughout this proxy statement/prospectus, “CVB” refers to CVB Financial Corp., “Citizens” refers to Citizens Business Bank, “Suncrest” refers to “Suncrest Bank” and “we,” “us” and “our” refers to Suncrest. Additionally, we refer to the proposed merger of Suncrest with and into Citizens as the “merger,” and the Agreement and Plan of Reorganization and Merger, dated as of July 27, 2021, by and among CVB, Citizens and Suncrest as the “merger agreement.”

 

Q:

Why am I receiving this proxy statement/prospectus?

 

A:

We are delivering this document to you to help you decide how to vote your shares of Suncrest common stock with respect to the proposals being voted on at the special meeting.

This document is both a proxy statement of Suncrest and a prospectus of CVB. It is a proxy statement because the Suncrest board of directors is soliciting proxies from Suncrest’s shareholders for use at the special meeting. It is a prospectus because CVB will issue shares of its common stock in exchange for shares of Suncrest common stock as the consideration to be paid in the merger.

 

Q:

What is the merger?

 

A:

CVB, Citizens and Suncrest have entered into the merger agreement, pursuant to which Suncrest will merge with and into Citizens, the separate existence of Suncrest will cease and Citizens will continue as the surviving corporation immediately upon the closing of the merger. The terms of the merger are set forth in the merger agreement, a copy of which is attached to this proxy statement/prospectus as Annex A.

 

Q:

Why has the Suncrest board of directors approved the merger of Suncrest with Citizens?

 

A:

The Suncrest board of directors has determined that the merger is fair to and in the best interests of Suncrest and its shareholders. In reaching its decision to approve the merger agreement and the transactions contemplated thereby, the Suncrest board of directors considered the long-term as well as the short-term interests and prospects of Suncrest and its shareholders and determined that the merger was the best option reasonably available for its shareholders. In this regard, the Suncrest board of directors considered the performance trends of Suncrest over the past several years and the anticipated financial performance for Suncrest in future years. The Suncrest board of directors also considered the ability of Suncrest to grow as an independent institution, challenges presented in today’s regulatory environment and its ability to further enhance shareholder value without engaging in a strategic transaction. Please read the section entitled “The Merger—Suncrest’s Reasons for the Merger; Recommendation of the Merger by the Suncrest Board of Directors” for additional discussion on the reasons why the Suncrest board of directors unanimously approved, and unanimously recommended that Suncrest shareholders approve, the merger agreement and the transactions contemplated by the merger agreement, including the merger.

 

Q:

What are holders of Suncrest common stock being asked to vote on?

 

A:

Suncrest is soliciting proxies from holders of its common stock with respect to the following matters:

 

   

approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the cancellation of each outstanding share of Suncrest

 

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common stock, other than any dissenting shares and excluded shares, in exchange for the right to receive 0.6970 shares of CVB common stock and $2.69 per share in cash, subject to any adjustments and other terms set forth in the merger agreement (the “merger proposal”); and

 

   

adjournment of the special meeting if necessary or appropriate in the judgment of the Suncrest board of directors to solicit additional proxies or votes in favor of the approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement (the “adjournment proposal”).

Under the merger agreement, (i) dissenting shares mean any shares of Suncrest common stock that meet the requirements of dissenting shares under the California Corporations Code; and (ii) excluded shares mean any shares of Suncrest common stock held by CVB or any direct or indirect wholly-owned subsidiary of CVB or by Suncrest or any direct or indirect wholly-owned subsidiary of Suncrest, other than those held in a fiduciary capacity or as a result of debts previously contracted. See “The Merger – Dissenters’ Rights for Holders of Suncrest Shares.”

Suncrest will not transact any other business at the special meeting.

 

Q:

What will holders of Suncrest common stock receive in the merger?

 

A:

If you are a holder of Suncrest common stock, each share of common stock that you hold before the merger will be converted into the right to receive fixed consideration (which we refer to as the “merger consideration”) consisting of 0.6970 shares of CVB common stock and $2.69 per share in cash, subject to any adjustments and other terms set forth in the merger agreement.

The cash merger consideration will be reduced, on a per share basis, by the sum of the following, if any:

 

   

a common tier 1 capital adjustment (i.e., the amount, if any, by which the adjusted common equity tier 1 capital of Suncrest is below $122.9 million (the “tier 1 benchmark”) and multiplying such difference, if any, by 1.5) plus

 

   

a transaction costs adjustment (i.e., the amount, if any by which certain specified transaction costs of Suncrest exceed $5.8 million).

Please see “The Merger—Merger Consideration” for further discussion of the merger consideration.

 

Q:

How will the merger affect outstanding Suncrest restricted stock awards and deferred share awards?

 

A:

At the effective time of the merger, each Suncrest restricted stock award or deferred share award (each, a “Suncrest Stock Award”) will automatically accelerate in full and be converted into the right to receive the merger consideration.

 

Q:

How will the merger affect outstanding Suncrest stock options?

 

A:

At the effective time of the merger, each option to purchase shares of Suncrest common stock under the Suncrest stock option plan outstanding immediately prior to the effective time, whether vested or unvested, will be cashed out and the holder will be entitled to receive a cash payment equal to the difference between the “stock option cashout price” and the exercise price per share of the Suncrest options. The “stock option cashout price” is equal to the sum of (i) the cash consideration per share being paid to each Suncrest common stock holder, or $2.69 per share assuming no pricing adjustments and (ii) the product of (X) CVB’s volume weighted average closing price per share over a twenty day period ending on the fifth business day prior to consummation of the merger and (Y) 0.6970 (the exchange ratio).

 

Q:

When and where will the special meeting take place?

 

A:

The special meeting of the Suncrest shareholders will be held at 501 West Main Street, Visalia, California 93291, on October 27, 2021, starting at 6:00 p.m. local time.

 

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Q:

What is the record date for the special meeting?

 

A:

The Suncrest board of directors has fixed the close of business on September 21, 2021, as the record date for the purpose of determining Suncrest shareholders entitled to notice of and to vote at the special meeting.

 

Q:

How many votes do I have?

 

A:

You will have one vote for each share of Suncrest common stock that you owned at the close of business on the record date, provided those shares are either held directly in your name as the shareholder of record or were held for you as the beneficial owner through a broker, bank, or other nominee.

 

Q:

How does the Suncrest board of directors recommend that I vote at the special meeting if I am a holder of Suncrest common stock?

 

A:

After careful consideration, the Suncrest board of directors unanimously recommends that the shareholders of Suncrest vote “FOR” approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and “FOR” the grant of discretionary authority to adjourn the special meeting as necessary or appropriate.

Each of the Suncrest directors and executive officers and certain other shareholders of Suncrest have entered into voting and support agreements with CVB and Suncrest, pursuant to which they have agreed to vote “FOR” the approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger. As of the record date, these directors, executive officers and shareholders of Suncrest beneficially owned and were entitled to vote 2,865,210 shares of Suncrest common stock, representing approximately 23% of the shares of Suncrest common stock outstanding on that date.

 

Q:

What do I need to do now?

 

A:

After you have carefully read this proxy statement/prospectus and have decided how you wish to vote your shares, please vote your shares promptly so that your shares are represented and voted. If you hold stock in your name as a shareholder of record, you must complete, sign, date and mail your proxy card in the enclosed postage-prepaid return envelope as soon as possible, or call the toll-free telephone number or use the Internet as described in the instructions included with your proxy card. If you hold your stock in “street name” through a bank or broker or other nominee, you must direct your bank or broker or other nominee to vote in accordance with the instructions you have received from your bank or broker or other nominee.

 

Q:

What constitutes a quorum for the special meeting?

 

A:

The presence at the special meeting, in person or by proxy, of holders of a majority of the outstanding shares of Suncrest common stock entitled to vote at the special meeting will constitute a quorum for the transaction of business at the special meeting. Abstentions will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum. Since none of the proposals to be voted on at the special meeting are routine matters for which brokers may have discretionary authority to vote, if you hold your shares in “street name,” failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being counted as represented for purposes of establishing a quorum at the special meeting.

 

Q:

If my shares are held in “street name” through a bank, broker or other nominee, will my bank, broker or other nominee vote my shares for me?

 

A:

No. Your bank, broker or other nominee cannot vote your shares without instructions from you, except for certain routine matters. None of the matters to be voted upon at the special meeting constitutes a routine matter. You should instruct your bank, broker or other nominee as to how to vote your shares, following the

 

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  directions your bank, broker or other nominee provides to you. Please check the voting form used by your bank, broker or other nominee. Without instructions, your shares will not be voted, which will have the effect described below.

 

Q:

What is the vote required to approve each proposal at the special meeting?

 

A

The affirmative vote of a majority of the shares of Suncrest common stock outstanding on the record date will be required to approve the merger proposal. Approval of the adjournment proposal requires the affirmative vote of a majority of the shares of Suncrest common stock represented in person or by proxy at the special meeting and voting on the proposal (which affirmative vote constitutes at least a majority of the required quorum).

 

Q:

Why is my vote important?

 

A:

If you do not vote at the special meeting, it will be more difficult to obtain the necessary quorum to hold the special meeting. In addition, your failure to submit a proxy or vote in person at the special meeting, or failure to instruct your bank or broker or other nominee how to vote, or abstaining from voting will have the same effect as a vote “AGAINST” the merger proposal.

 

Q:

Can I attend the special meeting and vote my shares personally?

 

A:

Yes. We expect to hold the special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only shareholders will be admitted to the special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the special meeting in person. To do so, please make your request by mail to Suncrest Bank at 501 West Main Street, Visalia, California 93291, Attention: Jean Carandang, or by email at jcarandang@suncrestbank.com. Suncrest must receive your request for pre-authorization on or before October 20, 2021.

 

Q:

Can I change or revoke my vote?

 

A:

Yes. If you are a holder of record of Suncrest common stock, you may change your vote or revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) delivering a written revocation letter to Suncrest’s corporate secretary, (3) attending the special meeting in person, and voting by ballot at the special meeting, or (4) voting by telephone or the Internet at a later time. Attendance at the special meeting by itself will not automatically revoke your proxy. A revocation or later-dated proxy received by Suncrest after the vote will not affect the vote. Suncrest’s corporate secretary’s mailing address is: 501 West Main Street, Visalia, California 93291, Attention: Corporate Secretary.

If you hold your shares of Suncrest common stock in “street name” through a bank or broker or other nominee, you should contact your bank or broker or other nominee to change your vote or revoke your proxy.

 

Q:

Will Suncrest be required to submit the proposal to approve the principal terms of the merger agreement to its shareholders even if the Suncrest board of directors has withdrawn, modified or qualified its recommendation?

 

A:

Unless the merger agreement is terminated before the special meeting, Suncrest is required to submit the merger proposal to its shareholders even if the Suncrest board of directors has withdrawn, modified or qualified its recommendation to approve the principal terms of the merger agreement.

 

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Q:

What are the material U.S. federal income tax consequences of the merger to U.S. holders of Suncrest common stock?

 

A:

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”), and the merger is conditioned on the receipt by each of CVB and Suncrest of a legal opinion from its respective counsel to the effect that the merger will so qualify. Assuming the merger qualifies as a reorganization, U.S. holders of Suncrest common stock generally will recognize gain (but not loss) upon receipt of the merger consideration in exchange for Suncrest common stock in an amount equal to the lesser of (1) the amount of gain realized (i.e., the excess of the sum of the amount of cash (excluding any cash received in lieu of a fractional share) and the fair market value of the CVB common stock received pursuant to the merger over the adjusted tax basis in the Suncrest common stock surrendered), and (2) the amount of cash received by such U.S. holder of Suncrest common stock (excluding any cash received in lieu of a fractional share).

For a more detailed discussion of the material U.S. federal income tax consequences of the merger, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 47.

The tax consequences of the merger to any particular holder of Suncrest common stock will depend on that shareholder’s particular facts and circumstances. Accordingly, you are urged to consult your own tax advisor for a full understanding of the tax consequences of the merger to you.

 

Q:

Do Suncrest shareholders have dissenters’ rights with respect to approval of the principal terms of the merger agreement?

 

A:

Yes. Suncrest shareholders who do not vote in favor of the merger may demand that Suncrest acquire their shares of Suncrest common stock for cash at their fair market value as of July 27, 2021, the day of, and immediately prior to, the first public announcement of the terms of the merger, excluding any appreciation or depreciation in consequence of the merger. Suncrest shareholders dissenting must file written demands that Suncrest acquire their shares of Suncrest common stock for cash and comply with the other procedural requirements set forth in California Corporations Code Sections 1300, et seq. A copy of the applicable sections of Chapter 13 of the California Corporations Code is included with this proxy statement/prospectus as Annex C. For additional details about dissenters’ rights, please refer to “Dissenters’ Rights for Holders of Suncrest Shares” beginning on page 53 and Annex C to the accompanying proxy statement/prospectus.

CVB is not obligated to complete the merger if dissenters’ rights are perfected and exercised with respect to 10% or more of the outstanding shares of Suncrest common stock. Please see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 69.

 

Q:

Should Suncrest shareholders send stock certificates at this time?

 

A:

No, please do not send in your certificates, if you hold your shares in certificated form, until you receive instructions to do so. You are not required to take any special additional actions if your shares of Suncrest stock are held in book-entry form. After the completion of the merger, an exchange agent will send you instructions for exchanging your shares for the merger consideration.

If you hold your Suncrest shares in certificated form, and do not know where your stock certificates are located, you may want to find them now so you do not experience delays receiving your merger consideration. If you are unable to locate your original Suncrest stock certificate(s), you should contact Continental Stock Transfer & Trust Company, Suncrest’s transfer agent, via email at lost@continentalstock.com.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

Suncrest shareholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold

 

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  shares of Suncrest common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a holder of record of Suncrest common stock and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this proxy statement/prospectus to ensure that you vote every share of Suncrest common stock that you own.

 

Q:

What risks should a Suncrest shareholder consider before voting on the matters to be presented at the special meeting?

 

A:

We encourage you to read the detailed information about the merger in this proxy statement/prospectus, including the “Risk Factors” section beginning on page 16.

 

Q:

When do you expect to complete the merger?

 

A:

CVB and Suncrest expect to complete the merger in the fourth quarter of 2021 or the beginning of the first quarter of 2022. If the merger could otherwise be consummated in December, 2021, the parties have agreed to wait until January, 2022 to complete the merger. However, neither CVB nor Suncrest can assure you of when or if the merger will be completed. Suncrest must first obtain the approval of Suncrest shareholders for the merger, as well as obtain necessary regulatory approvals and satisfy certain other conditions to closing.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger is not completed, holders of Suncrest common stock will not receive any consideration for their shares in connection with the merger. Instead, each of CVB and Suncrest will remain an independent company and their respective common stock will continue to be listed and traded on the NASDAQ Global Select Market and OTCQX, respectively. In addition, if the merger agreement is terminated in certain circumstances, a termination fee may be required to be paid by Suncrest to CVB. Please see “The Merger Agreement—Termination” on page 71 for a complete discussion of the circumstances under which termination fees will be required to be paid.

 

Q:

Where do I get more information?

 

A:

If you have questions about the merger or submitting your proxy, or if you need additional copies of this document, the proxy card or any documents incorporated by reference, you should contact Suncrest’s proxy solicitor:

 

LOGO

1290 Avenue of the Americas, 9th Floor

New York, NY 10104

Toll-Free Telephone: (866) 647-8869

 

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SUMMARY

This summary highlights selected information contained in this proxy statement/prospectus. It may not contain all of the information that is important to you in deciding how to vote on the matters that will be voted on at the special meeting. You should carefully read this entire document and the other documents referred to in this proxy statement/prospectus for a more complete understanding of the merger and the other matters that will be considered and voted on at the special meeting. In addition, we incorporate important business and financial information about CVB by reference into this proxy statement/prospectus. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find Additional Information.”

INFORMATION ABOUT THE COMPANIES

CVB Financial Corp. and Citizens Business Bank (see page 76)

701 N. Haven Avenue, Suite 350

Ontario, California 91764

Telephone: (909) 980-4030

CVB Financial Corp. is a California corporation that is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, or the “BHC Act.” As of June 30, 2021, CVB had consolidated total assets of approximately $15.5 billion, total net loans of approximately $8.0 billion, total deposits of approximately $12.7 billion, and total shareholders’ equity of approximately $2.1 billion. CVB had 996 full-time equivalent employees as of June 30, 2021.

CVB provides a wide range of banking services through Citizens, its wholly-owned subsidiary. Citizens is a California state-chartered bank headquartered in Ontario, California, and has been conducting business since 1974, originally under the name Chino Valley Bank. Citizens is an independent community bank that offers a full range of banking services in 58 banking centers located in the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County and the Central Valley area of California. Citizens also operates three trust offices located in Ontario, Newport Beach and Pasadena. These offices serve as sales offices for its wealth management, trust and investment products.

Through its network of banking offices, Citizens emphasizes personalized service combined with a full range of banking and trust services for businesses, professionals and individuals. Although Citizens focuses the marketing of its services to small- and medium-sized businesses, a full range of banking, investment and trust services are made available to the local consumer market.

For further information, see “Information about the Companies – CVB Financial Corp. and Citizens Business Bank” beginning on page 76. CVB’s principal executive offices are located at 701 N. Haven Avenue, Suite 350, Ontario, California 91764, and its telephone number is (909) 980-4030.

Suncrest Bank (see page 77)

501 West Main Street

Visalia, California 93291

Telephone: (559) 802-1000

Suncrest Bank, headquartered in Visalia, California, is an independent community bank which was founded in 2008. In addition to the Visalia headquarters office, there are seven full-service branches in the Central Valley area of California. Suncrest’s principal business is to provide full-service commercial and retail banking services primarily in the Central Valley of California. Suncrest offers commercial and retail banking services designed for small- and medium-sized businesses, professionals and retail customers located in five counties.


 

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At June 30, 2021, Suncrest had consolidated total assets of approximately $1.37 billion, total net loans of approximately $860.3 million, total deposits of approximately $1.19 billion and total shareholder’s equity of approximately $172.5 million. Suncrest had 120 full-time equivalent employees as of June 30, 2021.

For further information, see “Information about the Companies – Suncrest Bank” beginning on page 77. Suncrest’s principal executive offices are located at 501 West Main Street, Visalia, California 93291, and its telephone number is (559) 802-1000.

THE MERGER AND THE MERGER AGREEMENT

Suncrest Will Merge with and into Citizens (see page 28)

The terms and conditions of the merger are contained in the merger agreement, which is attached to this proxy statement/prospectus as Annex A. The parties encourage you to read the merger agreement carefully, as it is the legal document that governs the merger.

Subject to the terms and conditions of the merger agreement described in this proxy statement/prospectus, and in accordance with California law, Suncrest will merge with and into Citizens, the separate existence of Suncrest will cease and Citizens will continue as the surviving corporation immediately upon the closing of the merger. Citizens’ articles of incorporation and bylaws, as in effect immediately prior to the closing of the merger, will be the articles of incorporation and bylaws of the combined company. We refer in this proxy statement/prospectus to Suncrest and Citizens, on a consolidated basis in their capacity as the legal surviving corporation, as the “combined company.”

Suncrest Common Shareholders Will Receive 0.6970 Shares of CVB Common Stock and $2.69 per Share in Cash for Each Share of Suncrest Common Stock, Subject to Potential Adjustments; CVB Shareholders Will Retain Their Shares (see page 28)

The merger agreement provides that Suncrest common shareholders will receive 0.6970 shares of CVB common stock and $2.69 per share in cash for each share of Suncrest common stock they own, subject to merger consideration adjustments and other terms of the merger agreement. The cash consideration is subject to reduction, on a per share basis, by the sum of the following, if any:

 

   

a common equity tier 1 capital adjustment (i.e., the amount, if any, by which the adjusted common equity tier 1 capital of Suncrest is below the tier 1 benchmark and multiplying such difference, if any, by 1.5); plus

 

   

a transaction costs adjustment in the amount, if any, by which certain specified transaction costs of Suncrest exceed $5.8 million.

Upon completion of the merger, current CVB shareholders and current Suncrest shareholders will own approximately 94% and 6%, respectively, of the combined company. It is a condition to completion of the merger that the shares of CVB common stock issued in the merger shall be listed for trading on the NASDAQ Global Select Market, which is the stock exchange on which CVB common stock is currently listed for trading.

Assuming the number of shares of Suncrest common stock outstanding at the time of the merger equaled the number of shares outstanding on September 23, 2021 and that the value of CVB common stock at the time of the merger equaled $19.48 per share, the closing price as of September 23, 2021, and including $2.69 per share in cash consideration, the aggregate merger consideration for the Suncrest shares and outstanding Suncrest Stock Awards would be approximately $199 million. As noted below, however, the total value of CVB common stock and cash consideration issued to Suncrest shareholders upon completion of the merger will fluctuate based on the share price of CVB common stock and the number of shares of Suncrest common stock and Suncrest Stock Awards outstanding on the date of the merger and any merger consideration adjustments pursuant to the merger agreement.


 

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Merger Consideration Is Fixed (see page 28)

The exchange ratio in the merger will not be adjusted to reflect CVB common stock price changes between now and the closing.

Based on the closing price of CVB common stock on July 27, 2021, the last trading day prior to the public announcement of the merger, and $2.69 per share in cash consideration and assuming no merger consideration adjustments, the merger consideration represented a value of $16.09 per share of Suncrest Bank common stock. Using the closing price of CVB common stock on September 23, 2021 and including $2.69 per share in cash consideration, the merger consideration represented a value of $16.27 per share of Suncrest Bank common stock. You should obtain current stock quotations for CVB common stock, which is listed on the NASDAQ Global Select Market under the symbol “CVBF.”

Voting and Support Agreements (see page 73)

Each of the directors and executive officers of Suncrest and certain Suncrest shareholders have entered into voting and support agreements pursuant to which they have agreed, as applicable, to vote “FOR” the proposals set forth in this proxy statement/prospectus. As of the record date, these directors, executive officers and shareholders of Suncrest beneficially owned and were entitled to vote 2,865,210 shares of Suncrest common stock, representing approximately 23% of the shares of Suncrest common stock outstanding on that date. For more information regarding the voting and support agreements, please see the section entitled “The Merger Agreement—Voting and Support Agreements” beginning on page 73.

The Suncrest Board of Directors Unanimously Recommend that Suncrest Shareholders Approve the Merger Agreement and the Merger (see page 32)

After careful consideration, the Suncrest board of directors has unanimously determined that the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Suncrest and its shareholders and unanimously recommends that Suncrest shareholders vote “FOR” the approval of the principal terms of the merger agreement.

In determining whether to approve the merger, the Suncrest board of directors evaluated the merger and the merger agreement, in consultation with Suncrest’s senior management and legal and financial advisors, and considered the respective strategic, financial and other considerations referred to under “The Merger—Suncrest’s Reasons for the Merger; Recommendation of the Merger by the Suncrest Board of Directors” beginning on page 32.

Opinion of Suncrest Financial Advisor (see page 35)

In connection with the Suncrest board of directors’ consideration of the merger, Suncrest’s financial advisor, MJC Partners, LLC, or MJC, provided its opinion to the Suncrest board of directors, dated July 27, 2021, to the effect that, as of such date and based upon the qualifications and assumptions set forth in the written opinion, the merger consideration was fair, from a financial point of view, to the holders of Suncrest common stock. The full text of MJC’s opinion is attached as Annex B to this proxy statement/prospectus. Holders of Suncrest common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Suncrest Shareholders Will Have Dissenters’ Rights (see page 53)

Under the California Corporations Code, Suncrest common shareholders will be entitled to dissenters’ rights in connection with the merger. Suncrest shareholders who do not vote in favor of the merger, timely file written


 

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demands that Suncrest acquire their shares of Suncrest common stock for cash and comply with the other procedural requirements set forth in California Corporations Code Sections 1300, et seq. may demand that Suncrest acquire their shares of Suncrest common stock for cash at their fair market value as of July 27, 2021, the day of, and immediately prior to, the first public announcement of the terms of the merger, excluding any appreciation or depreciation in consequence of the merger.

The provisions of California law governing dissenters’ rights are complex, and you should study them carefully if you hold any such shares and wish to exercise your dissenters’ rights. A copy of Sections 1300-1313 of the California Corporations Code is attached to this proxy statement/prospectus as Annex C. For a more detailed discussion of dissenters’ rights under California law, please see the section entitled “The Merger— Dissenters’ Rights for Holders of Suncrest Shares” beginning on page 53 of this proxy statement/prospectus.

Interests of Directors and Executive Officers of Suncrest in the Merger (see page 43)

Directors and executive officers of Suncrest have interests in the merger that are different from, or are in addition to, the interests of the shareholders of Suncrest. These interests include:

 

   

certain Suncrest directors and executive officers have Suncrest Stock Awards that, under the merger agreement, will accelerate in full upon completion of the merger and be converted into, and be exchanged for, the right to receive the merger consideration;

 

   

Suncrest directors and executive officers have stock options that, under the merger agreement, will accelerate in full upon completion of the merger and be converted into the right to receive cash in the amount of the option consideration;

 

   

Suncrest executive officers are participants in plans and party to agreements that provide for severance payments and other benefits upon a change in control of Suncrest and/or a qualifying termination of employment following such a change in control; and

 

   

Suncrest directors and executive officers will receive continued indemnification and director’s and officer’s liability insurance coverage for six years following the merger, subject to the terms of the merger agreement.

The board of directors of Suncrest was aware of the foregoing interests and considered them, among other matters, in approving the merger agreement and the merger. For a more complete description of the interests of Suncrest’s directors and executive officers in the merger, see “The Merger—Interests of Suncrest Directors and Executive Officers in the Merger” beginning on page 43.

Board of Directors and Officers of CVB and Citizens After the Merger (page 42)

The directors and officers of CVB and Citizens immediately prior to the effective time of the merger will be the directors and officers of the surviving corporation until the earlier of their resignation or removal or until their respective successors are duly appointed and qualified.

Regulatory Approvals Required for the Merger (see page 51)

CVB, Citizens and Suncrest have each agreed to use reasonable best efforts to obtain all regulatory approvals required to complete the merger. Regulatory approvals are required from the Federal Deposit Insurance Corporation (referred to as the “FDIC”) and the California Department of Financial Protection and Innovation (referred to as the “CDFPI”). CVB has confirmed with a representative at the Board of Governors of the Federal Reserve System (referred to as the “Federal Reserve”) that no approval is required from the Federal Reserve as the merger currently meets the requirements of the approval exemption set forth in Section 225.12(d)(1) of Regulation Y under the BHC Act. As of the date of this proxy statement/prospectus, CVB, Citizens and Suncrest


 

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have submitted applications and notifications to obtain the required regulatory approvals. There can be no assurances that such approvals will be received on a timely basis, or as to the ability of CVB, Citizens and Suncrest to obtain the approvals on satisfactory terms or the absence of litigation challenging such approvals. The regulatory approvals to which completion of the merger is conditioned are described in more detail under the section entitled “The Merger— Regulatory Approvals Required for the Merger” beginning on page 51.

Expected Timing of the Merger

We expect to complete the merger in the fourth quarter of 2021 or early in the first quarter of 2022 if we receive Suncrest shareholder and regulatory approvals for the merger and the other conditions to closing are satisfied. The merger agreement provides that it may be terminated by either CVB or Suncrest if the merger has not been consummated by April 30, 2022. The merger agreement may also be extended, but not past June 30, 2022, if the only unsatisfied condition to consummating the merger is receipt of any requisite regulatory approval.

Conditions to Completion of the Merger (see page 69)

The respective obligations of CVB and Citizens, on the one hand, and Suncrest, on the other, to complete the merger are each subject to the satisfaction or waiver of the following conditions:

 

   

receipt by Suncrest of Suncrest shareholders’ approval;

 

   

the receipt of all regulatory approvals required from the FDIC and the CDFPI;

 

   

the effectiveness of CVB’s SEC registration statement on Form S-4, of which this proxy statement/prospectus is a part, and the absence of any stop order or proceeding initiated or threatened by the SEC for that purpose;

 

   

no injunction or decree or law prohibiting the consummation of the merger shall be in effect;

 

   

the shares of CVB common stock to be issued in the merger shall have been approved for listing on the NASDAQ Global Select Market;

 

   

the aggregate value of CVB common stock to be issued in the merger must represent at least 42% of the aggregate cash plus such value of aggregate CVB common stock value;

 

   

the accuracy of the representations and warranties of each party set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date of the merger as though made at and as of the closing date (except that representations and warranties that by their terms speak as of the date of the merger agreement or some other date need only be true and correct as of such date);

 

   

performance in all material respects by each party of the obligations required to be performed by it at or prior to the closing date of the merger;

 

   

the absence of a material adverse effect on CVB or Suncrest since the date of the merger agreement; and

 

   

the receipt by each of CVB and Suncrest of the opinions of its respective tax counsel, dated the closing date of the merger, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

The obligation of CVB and Citizens to consummate the merger is also conditioned upon, among other things,

 

   

the adjusted common tier 1 capital of Suncrest being not less than $122.9 million (the tier 1 benchmark), as of the last day of the month immediately preceding the month in which the closing of the merger occurs, which we refer to as the “measurement date” (except that if the closing occurs


 

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within the first 10 days of any month, the “measurement date” will be the last day of the second month immediately preceding the month in which the closing of the merger occurs, provided that if the closing does not occur on or before the fifth business day after the satisfaction or waiver of the closing conditions set forth in the merger agreement, then the parties will treat such fifth business day as the closing date solely for the purpose of determining the measurement date);

 

   

the total non-interest bearing deposits of Suncrest being equal to or greater than $470 million as of the measurement date;

 

   

the adjusted total loans of Suncrest shall be equal to or greater than $745 million as of the measurement date;

 

   

the allowance for loan losses of Suncrest shall not be less than $8,504,000; and

 

   

holders of not more than 10% of the outstanding shares of Suncrest common stock shall have exercised their dissenters’ rights.

No Solicitation of Competing Offers (see page 63)

Under the terms of the merger agreement, Suncrest has agreed not to, directly or indirectly, initiate, solicit, encourage or knowingly facilitate any inquiries or the making of proposals with respect to, or engage in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have any discussions with, any person relating to, any alternative acquisition proposal (as defined below in the section entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions”).

Notwithstanding these restrictions, the merger agreement provides that under specified circumstances, if Suncrest receives an unsolicited bona fide alternative acquisition proposal and the board of directors of Suncrest concludes in good faith that such alternative acquisition proposal constitutes, or is reasonably likely to result in, a superior proposal (as defined below in the section entitled “The Merger Agreement—Covenants and Agreements”), then Suncrest and its board of directors may furnish or cause to be furnished nonpublic information and participate in such negotiations or discussions to the extent that the board of directors of Suncrest concludes in good faith that taking such actions would be necessary in order the Suncrest board of directors to comply with its fiduciary duties to its shareholders under applicable law; provided that prior to providing any such nonpublic information or engaging in any such negotiations, Suncrest entered into a confidentiality agreement with such third party.

Under the terms of the merger agreement, none of the members of the board of directors of Suncrest may, except as expressly permitted by the merger agreement, make a change of recommendation (as defined below in the section entitled “The Merger Agreement—Covenants and Agreements”), or cause or commit Suncrest to enter into any agreement or understanding other than the confidentiality agreement referred to above relating to any alternative acquisition proposal made to Suncrest. Nevertheless, in the event that Suncrest receives an alternative acquisition proposal that the Suncrest board of directors concludes in good faith constitutes a superior proposal, the board of directors of Suncrest may make a change of recommendation or terminate the merger agreement to enter into a definitive agreement for a superior proposal, subject, in each case, to Suncrest’s complying with the procedures and other provisions set forth in the merger agreement with respect to an alternative acquisition proposal, all as further described in the sections entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions,” “The Merger Agreement—Termination” and “The Merger Agreement—Termination Fee.” Suncrest has agreed to call and hold a special meeting at which shareholders will consider and vote upon the merger proposal, even if Suncrest receives an alternative acquisition proposal or makes an adverse change of recommendation, unless the merger agreement is terminated in accordance with its terms.


 

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Termination of the Merger Agreement (see page 71)

The merger agreement may be terminated under the following circumstances:

 

   

by mutual consent of CVB, Citizens and Suncrest, as authorized by their respective board of directors, at any time prior to the effective time of the merger, whether before or after the receipt of the requisite Suncrest shareholder approval;

 

   

by action of the CVB board of directors or the Suncrest board of directors, if the merger is not completed on or before April 30, 2022 (which date may be extended to June 30, 2022 if the only unsatisfied condition to the completing the merger is receiving regulatory approval), which date is referred to as the “outside date,” except to the extent that the failure of the merger to be consummated results from the knowing action or inaction of the party seeking to terminate, which action or inaction is in violation of its obligations under the merger agreement;

 

   

by action of the CVB board of directors or the Suncrest board of directors, if the approval of any governmental authority required for consummation of the merger and the other transactions contemplated by the merger agreement has been denied by final and nonappealable action of such governmental authority, or an application therefor has been permanently withdrawn by mutual agreement of the parties at the request or suggestion of a governmental authority;

 

   

by action of the CVB board of directors or the Suncrest board of directors, if Suncrest shareholder approval is not obtained;

 

   

by action of the CVB board of directors or the Suncrest board of directors, if there has been a breach of any representation, warranty, covenant or agreement made by the other party, such that if continuing on the closing date of the merger, the condition as to the accuracy of the representations and warranties or the compliance with covenants by the other party would not be satisfied and such breach or condition is not curable or, if curable, is not cured within 30 calendar days after written notice thereof is given by the terminating party (or such shorter period as remaining prior to the outside date); provided, that the terminating party is not then in material breach of any representation, warranty, covenant or agreement;

 

   

by action of the CVB board of directors at any time prior to the receipt of Suncrest shareholder approval if: (i) Suncrest materially breaches its non-solicitation obligations relating to alternative acquisition proposals; (ii) the Suncrest board of directors shall have effected a change in recommendation to its shareholders; (iii) the Suncrest board of directors fails to affirm its recommendation within the required time period after an acquisition proposal is made; or (iv) the Suncrest board recommends a tender offer or fails to recommend against such tender offer within 10 business days after commencement thereof; and

 

   

by action of the Suncrest board of directors at any time prior to the receipt of Suncrest shareholder approval in order to enter into a definitive agreement providing for a superior proposal obtained by Suncrest without breaching the merger agreement.

Termination Fee (see page 72)

Suncrest has agreed to pay CVB a termination fee of $8,325,000 in the following circumstances:

 

   

the merger agreement is terminated by Suncrest in order for Suncrest to enter into a definitive agreement providing for a superior acquisition proposal;

 

   

CVB terminates the merger agreement due to (i) Suncrest materially breaching its non-solicitation obligations relating to alternative acquisition proposals; (ii) the Suncrest board of directors effecting a change in recommendation to its shareholders; (iii) the Suncrest board of directors failing to affirm its


 

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recommendation within the required time period after an acquisition proposal is made; or (iii) the Suncrest board of directors recommending a tender offer or failing to recommend against such tender offer within 10 business days after commencement thereof; or

 

   

(i) if an acquisition proposal is made to Suncrest or to its shareholders publicly; (ii) if CVB or Suncrest terminates the merger agreement for failure to consummate the merger by the outside date or to obtain the approval of Suncrest shareholders, or if CVB terminates the merger agreement for breach; and (iii) Suncrest enters into a definitive agreement with respect to or consummates certain acquisition proposals within 18 months of any such termination of the merger agreement.

The termination fee could discourage other companies from seeking to acquire or merge with Suncrest prior to completion of the merger. For more information, please see “The Merger Agreement – Termination Fee.”

Material U.S. Federal Income Tax Consequences of the Merger (see page 47)

The merger has been structured to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code, and it is a condition to our respective obligations to complete the merger that CVB and Suncrest each receive a legal opinion from its legal counsel to the effect that the merger will so qualify. If the merger qualifies as a “reorganization” for U.S. federal income tax purposes and you are a U.S. holder of Suncrest common stock, you generally will recognize gain (but not loss) upon receipt of the merger consideration in exchange for Suncrest common stock in an amount equal to the lesser of (1) the amount of gain realized (i.e., the excess of the sum of the amount of cash (excluding any cash received in lieu of a fractional share) and the fair market value of the CVB common stock received pursuant to the merger over your adjusted tax basis in the Suncrest common stock surrendered), and (2) the amount of cash received by such U.S. holder of Suncrest common stock (excluding any cash received in lieu of a fractional share).

The U.S. federal income tax consequences of the merger to you will depend upon your own particular facts and circumstances. In addition, you may be subject to state, local or foreign tax laws, none of which is discussed in this proxy statement/prospectus. You should, therefore, consult with your own tax advisor for a complete understanding of the tax consequences of the merger to you. For more information, please see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 47.

Non-Competition, Non-Solicitation and Non-Disclosure Agreement (see page 74)

Concurrently with the execution and delivery of the merger agreement:

 

   

each non-employee director of Suncrest has entered into a non-competition, non-solicitation and non-disclosure agreement pursuant to which such directors have agreed not to compete against Citizens or solicit the employees or customers of Citizens (or the former Suncrest Bank), in each case, for a period of 12 months after the effective time of the merger;

 

   

the President and Chief Executive Officer of Suncrest has entered into a non-competition, non-solicitation and non-disclosure agreement pursuant to which he has agreed not to compete against Citizens for a period of 12 months after the effective time of the merger, become connected in any capacity (including as an employee, officer, shareholder or director) with any business or enterprise engaged in providing financial services in the State of California, or solicit the employees or customers of Citizens (or the former Suncrest Bank) for a period of 36 months after the effective time of the merger; and

 

   

certain other executive officers of Suncrest have entered into a non-solicitation and non-disclosure agreement pursuant to which such officers have agreed not to solicit the employees or customers of Suncrest and Citizens (or the former Suncrest Bank), in each case, for periods of up to 24 months after the effective time of the merger.


 

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Additionally, these directors and executive officers of Suncrest have agreed, among other things, not to make use of any trade secrets of Suncrest or disclose any trade secrets of Suncrest to any other person on the terms set forth in their respective non-solicitation and non-disclosure agreements.

The Rights of Suncrest Shareholders Will Change as Result of the Merger (see page 78)

The rights of Suncrest shareholders who continue as CVB shareholders after the merger will be governed by the articles of incorporation and bylaws of CVB rather than the articles of incorporation and bylaws of Suncrest. For more information, please see the section entitled “Comparison of Rights of Shareholders of CVB and Suncrest beginning on page 78.

Risk Factors (see page 16)

Before voting at the special meeting, you should carefully consider all of the information contained in or incorporated by reference into this proxy statement/prospectus, including the risk factors set forth in the section entitled “Risk Factors” beginning on page 16 and the risk factors described in CVB’s Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC, which are incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Where You Can Find Additional Information.


 

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THE SPECIAL MEETING

Special Meeting (see page 24)

The special meeting will be held at 501 West Main Street, Visalia, California 93291, on Wednesday, October 27, 2021, starting at 6:00 p.m. local time. At the special meeting, Suncrest shareholders will be asked to vote on the following matters:

 

   

approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the cancellation of each outstanding share of Suncrest common stock, other than any dissenting shares and excluded shares, in exchange for the right to receive 0.6970 shares of CVB common stock and $2.69 per share in cash, subject to the merger consideration adjustments and other terms in the merger agreement; and

 

   

adjournment of the special meeting if necessary or appropriate in the judgment of the Suncrest board of directors to solicit additional proxies or votes in favor of the approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement.

You may vote at the special meeting if you owned shares of Suncrest common stock at the close of business on September 21, 2021. On that date, 12,251,000 shares of Suncrest common stock were outstanding, approximately 13.40% of which were owned and entitled to be voted by Suncrest directors and executive officers. Each of the directors, executive officers and certain of the shareholders of Suncrest has entered into a voting and support agreement with CVB, pursuant to which such Suncrest director, executive officer or shareholder has agreed to vote “FOR” the merger proposal. As of the record date, these Suncrest directors, executive officers and shareholders beneficially owned and were entitled to vote 2,865,210 shares of Suncrest common stock, representing approximately 23% of the shares of Suncrest common stock outstanding on that date.

The affirmative vote of a majority of the shares of Suncrest common stock outstanding on the record date will be required to approve the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger. Approval of the adjournment proposal requires the affirmative vote of a majority of the shares of Suncrest common stock represented (in person or by proxy) at the special meeting and voting on the proposal (which affirmative vote constitutes at least a majority of the required quorum). See “Special Meeting” beginning on page 24 for information regarding voting at the special meeting.

 

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SELECTED HISTORICAL FINANCIAL INFORMATION

The following tables present selected historical financial information of CVB and selected historical financial information of Suncrest. This information is intended to aid you in understanding the financial aspects of the merger. The historical financial information shows the actual financial condition and results of operations of CVB and Suncrest for the years indicated.

Selected Historical Financial Information of CVB

The following table summarizes consolidated financial results of CVB for the periods and at the dates indicated and should be read in conjunction with CVB’s consolidated financial statements and the notes to the consolidated financial statements contained in reports that CVB has previously filed with the SEC. Historical financial information for CVB can be found in its Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the period ended June 30, 2021. Please see the section entitled “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference” for instructions on how to obtain the information that has been incorporated by reference. You should not assume the results of operations for past periods indicate results for any future period.

 

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    Unaudited
Six Months Ended
June 30,
    Year Ended December 31,  
    2021     2020     2020     2019     2018     2017     2016  
    (Dollars in thousands, except per share amounts)  

Interest income

  $ 212,552     $ 215,067     $ 430,337     $ 457,850     $ 361,860     $ 287,226     $ 265,050  

Interest expense

    3,696       8,192       14,284       22,078       12,815       8,296       7,976  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income before (recapture of) provision for credit losses

    208,856       206,875       416,053       435,772       349,045       278,930       257,074  

(Recapture of) provision for credit losses

    (21,500     23,500       23,500       5,000       1,500       (8,500     (6,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after (recapture of) provision for credit losses

    230,356       183,375       392,553       430,772       347,545       287,430       263,474  

Noninterest income

    24,517       23,792       49,870       59,042       43,481       42,118       35,552  

Noninterest expense

    93,708       95,039       192,903       198,740       179,911       140,753       136,740  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

    161,165       112,128       249,520       291,074       211,115       188,795       162,286  

Income taxes

    46,093       32,517       72,361       83,247       59,112       84,384       60,857  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Earnings

  $ 115,072     $ 79,611     $ 177,159     $ 207,827     $ 152,003     $ 104,411     $ 101,429  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

  $ 0.85     $ 0.58     $ 1.30     $ 1.48     $ 1.25     $ 0.95     $ 0.94  

Diluted earnings per common share

  $ 0.85     $ 0.58     $ 1.30     $ 1.48     $ 1.24     $ 0.95     $ 0.94  

Cash dividends declared per common share

  $ 0.36     $ 0.36     $ 0.72     $ 0.72     $ 0.56     $ 0.54     $ 0.48  

Dividend pay-out ratio (1)

    42.58     61.34     55.13     48.57     46.19     56.97     51.12

Weighted average common shares:

             

Basic

    135,235,138       137,052,180       136,030,613       139,757,355       121,670,113       109,409,301       107,282,332  

Diluted

    135,470,332       137,227,984       136,206,210       139,934,211       121,957,364       109,806,710       107,686,955  

Common Stock Data:

             

Common shares outstanding at year end

    135,927,287       135,516,316       135,600,501       140,102,480       140,000,017       110,184,922       108,251,981  

Book value per share

  $ 15.12     $ 14.46     $ 14.81     $ 14.23     $ 13.22     $ 9.70     $ 9.15  

Financial Position:

             

Assets

  $ 15,539,288     $ 13,751,297     $ 14,419,314     $ 11,282,450     $ 11,529,153     $ 8,270,586     $ 8,073,707  

Investment securities

    3,968,945       2,289,236       2,977,549       2,414,709       2,478,525       2,910,875       3,182,142  

Net loans (2)

    8,001,968       8,308,551       8,255,116       7,495,917       7,700,998       4,771,046       4,333,524  

Deposits

    12,669,057       10,983,580       11,736,501       8,704,928       8,827,490       6,546,853       6,309,680  

Borrowings

    578,207       478,156       444,406       428,659       722,255       553,773       656,028  

Junior subordinated debentures

    —         25,774       25,774       25,774       25,774       25,774       25,774  

Stockholders’ equity

    2,055,074       1,959,098       2,007,990       1,994,098       1,851,190       1,069,266       990,862  

Equity-to-assets ratio (3)

    13.23     14.25     13.93     17.67     16.06     12.93     12.27

Financial Performance:

             

Return on average equity (ROAE)

    11.37     8.06     8.90     10.71     11.00     9.84     10.26

Return on average assets (ROAA)

    1.56     1.33     1.37     1.84     1.60     1.26     1.26

Net interest margin, tax-equivalent (TE) (4)

    3.12     3.88     3.59     4.36     4.03     3.63     3.46

Efficiency ratio (5)

    40.15     41.20     41.40     40.16     45.83     43.84     46.73

Noninterest expense to average assets

    1.27     1.59     1.49     1.76     1.89     1.70     1.70

Credit Quality:

             

Allowance for credit losses

  $ 69,342     $ 93,983     $ 93,692     $ 68,660     $ 63,613     $ 59,585     $ 61,540  

Allowance/total loans

    0.86     1.12     1.12     0.91     0.82     1.23     1.40

Total nonaccrual loans

  $ 8,471     $ 6,817     $ 14,347     $ 5,277     $ 19,951     $ 10,716     $ 7,152  

Nonaccrual loans/total loans, at amortized cost

    0.10     0.08     0.17     0.07     0.26     0.22     0.16

Allowance/nonaccrual loans

    818.58     1378.66     653.04     1301.12     318.85     556.04     860.46

Net (charge-offs) recoveries/average loans

    -0.035     0.000     -0.004     0.001     0.04     0.14     0.21

Regulatory Capital Ratios:

 

           

Company:

             

Tier 1 leverage ratio

    9.38     10.59     9.90     12.33     10.98     11.88     11.49

Common equity Tier 1 risk-based capital ratio

    15.08     14.47     14.77     14.83     13.04     16.43     16.48

Tier 1 risk-based capital ratio

    15.08     14.76     15.06     15.11     13.32     16.87     16.94

Total risk-based capital ratio

    15.94     15.97     16.24     16.01     14.13     18.01     18.19

Bank:

             

Tier 1 leverage ratio

    9.12     10.45     9.58     12.19     10.90     11.77     11.36

Common equity Tier 1 risk-based capital ratio

    14.66     14.58     14.57     14.94     13.22     16.71     16.76

Tier 1 risk-based capital ratio

    14.66     14.58     14.57     14.94     13.22     16.71     16.76

Total risk-based capital ratio

    15.52     15.79     15.75     15.83     14.03     17.86     18.01

 

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(1)

Dividends declared on common stock divided by net earnings.

(2)

2016-2018 includes purchased credit-impaired (“PCI”) loans.

(3)

Stockholders’ equity divided by total assets.

(4)

Net interest income (TE) divided by average interest-earning assets.

(5)

Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.

Selected Historical Financial Information of Suncrest

The following table summarizes financial results of Suncrest for the periods and the dates indicated. You should not assume the results of operations for past periods indicate results for any future period.

 

     Unaudited
For the
Six Months Ended
June 30,
     Year Ended December 31,  
     2021     2020      2020      2019      2018      2017      2016  
     (Dollars in thousands, except per share amounts)  

Interest income

   $ 24,061     $ 21,468      $ 44,794      $ 43,186      $ 34,489      $ 22,158      $ 14,104  

Interest expense

     1,007       1,896        3,248        4,558        2,335        1,026        656  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income before provision for loan losses

     23,054       19,572        41,546        38,628        32,154        21,132        13,448  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Provision for loan losses

     —         2,300        3,550        2,100        1,270        950        235  

Net Interest income after provision for loan losses

     23,054       17,272        37,996        36,528        30,884        20,182        13,213  

Noninterest income

     930       770        1,939        1,477        1,584        1,220        1,104  

Noninterest expense

     12,341       10,910        22,496        21,467        18,860        13,284        11,156  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings before income taxes

     11,643       7,132        17,439        16,538        13,608        8,118        3,161  

Income taxes

     3,151       1,559        4,307        4,629        3,751        4,733        1,428  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NET EARNINGS

   $ 8,492     $ 5,573      $ 13,132      $ 11,909      $ 9,857      $ 3,385      $ 1,733  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per common share

   $ 0.69     $ 0.45      $ 1.06      $ 0.96      $ 0.95      $ 0.48      $ 0.34  

Diluted earnings per common share

   $ 0.68     $ 0.45      $ 1.06      $ 0.95      $ 0.94      $ 0.48      $ 0.34  

Cash dividends declared per common share

   $ 0.25     $ —        $ —        $ —        $ —        $ —        $ —    

Dividend pay-out ratio (1)

     36.05     NA        NA        NA        NA        NA        NA  

Weighted average common shares:

                   

Basic

     12,244,931       12,442,805        12,364,962        12,429,851        10,379,515        6,998,644        5,105,669  

Diluted

     12,469,583       12,519,071        12,439,328        12,471,220        10,477,997        7,057,173        5,117,787  

 

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     Unaudited
For the
Six Months Ended
June 30,
    Year Ended December 31,  
     2021     2020     2020     2019     2018     2017     2016  
     (Dollars in thousands, except per share amounts)  

Common Stock Data:

        

Common shares outstanding, at period end

     12,249,500       12,443,800       12,240,500       12,442,800       12,420,300       7,007,594       6,979,497  

Book value per share

   $ 14.08     $ 12.98     $ 13.80     $ 11.91     $ 10.71     $ 8.68     $ 8.21  

Financial Position:

              

Assets

   $ 1,371,984     $ 1,286,517     $ 1,246,369     $ 984,898     $ 928,677     $ 528,917     $ 447,653  

Investment securities

     379,724       256,315       340,756       195,800       137,719       90,368       53,567  

Net loans

     860,316       797,407       811,970       661,990       645,774       349,956       305,022  

Deposits

     1,191,848       1,048,911       1,035,551       828,559       791,018       466,901       388,986  

Borrowings

     —         68.559       33,437       —         —         —         —    

Shareholders’ equity

     172,515       161,544       168,910       148,178       133,037       60,817       57,291  

Equity-to-assets ratio (2)

     12.57     12.56     13.55     15.05     14.33     11.50     12.80

Financial Performance:

              

Return on average equity (ROAE)

     10.08     7.20     8.22     8.41     9.51     5.67     4.19

Return on average assets (ROAA)

     1.29     1.01     1.10     1.25     1.30     0.69     0.54

Net interest margin (3)

     3.75     3.83     3.69     4.44     4.59     4.66     4.44

Efficiency ratio (4)

     51.45     53.63     51.73     53.53     55.90     59.32     71.24

Noninterest expense to average assets

     1.73     1.97     1.88     2.26     2.49     2.71     2.86

Credit Quality:

              

Allowance for loan losses

   $ 8,502     $ 7,262     $ 8,503     $ 5,489     $ 4,373     $ 3,413     $ 2,496  

Allowance/total loans

     0.98     0.90     1.04     0.82     0.67     0.97     0.81

Total nonaccrual loans

   $ 4,668     $ 4,297     $ 3,890     $ 5,186     $ 784     $ 657     $ 1,090  

Nonaccrual loans/total loans, net of deferred loan fees

     0.54     0.53     0.47     0.78     0.12     0.19     0.35

Allowance/nonaccrual loans

     182.09     169.00     218.59     105.84     557.78     519.48     228.99

Net (charge offs) recoveries/average loans

     0.00     (0.07 )%      (0.07 )%      (0.15 )%      (0.06 )%      (0.01 )%      0.01

Regulatory Capital Ratios:

              

Tier 1 leverage ratio

     9.45     9.93     9.42     10.91     10.57     10.58     11.70

Common equity Tier 1 risk-based capital ratio

     13.86     13.61     13.90     14.02     12.53     13.63     13.86

Tier 1 risk-based capital ratio

     13.86     13.61     13.90     14.02     12.53     13.63     13.86

Total risk-based capital ratio

     14.84     14.52     14.93     14.77     13.14     14.47     14.52

 

(1)

Dividends declared on common stock divided by net earnings.

(2)

Shareholders’ equity divided by total assets.

(3)

Net interest income divided by average interest-earning assets.

(4)

Noninterest expense divided by net interest income before provision for loan losses plus noninterest income.

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share, and the cash dividends paid per share, of CVB common stock, which trades on the NASDAQ Global Select Market under the symbol “CVBF,” and the high and low bid price per share, and the cash dividends paid per share, for Suncrest common stock, which trades very infrequently on the OTC Markets Group’s OTCQX market under the symbol “SBKK.” Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The OTCQX is an electronic, screen-based market which imposes considerably less stringent listing standards than the NASDAQ Global Select Market. Historical trading in Suncrest common stock has not been extensive and such trades cannot be characterized as constituting an active trading market.

 

     CVB Financial Corp.      Suncrest Bank  
     Stock Price      Dividends
Declared
Per Share
     Stock Price      Dividends
Per Share
 
     High      Low             High      Low         

2021 Quarter End

                 

Third Quarter (through September 23, 2021)

   $ 20.86      $ 18.72      $ 0.00      $ 16.50      $ 14.20      $ 0.00  

June 30

   $ 22.98      $ 20.50      $ 0.18      $ 14.90      $ 12.66      $ 0.00  

March 31

   $ 25.00      $ 19.15      $ 0.18      $ 12.75      $ 10.00      $ 0.25  

2020

                 

December 31

   $ 21.34      $ 16.26      $ 0.18      $ 10.35      $ 8.11      $ 0.00  

September 30

   $ 19.87      $ 15.57      $ 0.18      $ 8.74      $ 7.76      $ 0.00  

June 30

   $ 22.22      $ 15.97      $ 0.18      $ 8.66      $ 7.40      $ 0.00  

March 31

   $ 22.01      $ 14.92      $ 0.18      $ 12.10      $ 5.92      $ 0.00  

2019

                 

December 31

   $ 22.18      $ 19.83      $ 0.18      $ 11.90      $ 11.00      $ 0.00  

September 30

   $ 22.23      $ 20.00      $ 0.18      $ 11.08      $ 10.56      $ 0.00  

June 30

   $ 22.22      $ 20.40      $ 0.18      $ 11.94      $ 10.80      $ 0.00  

March 31

   $ 23.18      $ 19.94      $ 0.18      $ 12.40      $ 10.40      $ 0.00  

The following table sets forth the closing sale prices per share of CVB common stock and Suncrest common stock on July 27, 2021, the last trading day before the first public announcement of the terms of the merger, and on September 23, 2021, the latest practicable date before the date of this proxy statement/prospectus. The following table also includes the equivalent market value of the merger consideration per share of Suncrest common stock on July 27, 2021 and September 23, 2021.

 

     CVB
Financial
Corp.
     Suncrest
Bank
     Equivalent
Market Value
Per Share of
Suncrest
 

July 27, 2021(1)

   $ 19.23      $ 14.95      $ 16.09

September 23, 2021(2)

   $ 19.48      $ 16.05      $ 16.27  

 

*

Determined by adding the cash consideration of $2.69 per share plus the value of the stock consideration as of July 27, 2021 or September 23, 2021, as applicable, which is equal to the product of the exchange ratio of 0.6970 and the CVB common stock price of $19.23 as of July 27, 2021 or September 23, 2021, as applicable. Assumes the value of CVB common stock is $19.23 per share or $19.48 per share as applicable, which was the actual closing price of CVB common stock on July 27, 2021 and September 23, 2021, respectively, and that there will be no merger consideration adjustments under the merger agreement.

(1)

The last reported trade of Suncrest common stock on the OTCQX market before the public announcement of the merger was on July 27, 2021 at a closing sales price of $14.95 per share.

(2)

The last reported trade of Suncrest common stock on the OTCQX market before the date of this proxy statement/prospectus was on September 23, 2021 at a closing sales price of $16.05 per share.

 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the section “Caution Regarding Forward-Looking Statements,” you should carefully consider the following risks relating to the merger before deciding how to vote at the special meeting. You should also consider the risks relating to the business of CVB because these risks will also affect the combined company. The risks relating to the business of CVB can be found in CVB’s Annual Report on Form 10-K for the year ended December 31, 2020, as amended or updated by any subsequent documents filed with the Securities and Exchange Commission, which are incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.”

Because the market price of CVB and Suncrest common stock will fluctuate and the exchange ratio will not adjust for such changes, Suncrest shareholders cannot be sure of the market value of the CVB common stock that they will receive in the merger.

Upon completion of the merger, each outstanding share of Suncrest common stock will be converted into 0.6970 shares of CVB common stock, with cash being paid in lieu of the issuance of fractional shares, and $2.69 per share in cash, subject to adjustment. The stock exchange ratio will not be adjusted for changes in the market price of CVB common stock or Suncrest common stock, whether such changes in market price result from an improvement or decline in the financial condition or operating results of either company, general market and economic conditions, regulatory considerations, the timing of the merger or other factors. Changes in the price of CVB common stock prior to the merger will therefore affect the value that CVB will pay, through the issuance of CVB common stock, and that Suncrest common shareholders will receive in the merger. For example, based on the range of closing prices of CVB common stock during the period from July 27, 2021 the last trading day before public announcement of the merger, through September 23, 2021, the most recent trading day preceding the completion of this proxy statement/prospectus for which that information is available, the merger consideration represented a value ranging from a high of $16.94 to a low of $15.86 for each share of Suncrest common stock (assuming no other merger consideration adjustments under the merger agreement). Neither CVB nor Suncrest is permitted to terminate the merger agreement or resolicit the vote of Suncrest shareholders solely because of changes in the market price of the common stock of CVB or Suncrest.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated, cannot be met or may have a material adverse effect on the combined company following the merger.

Before the merger may be completed, various approvals or consents from bank regulatory authorities must be obtained, including the FDIC and the CDFPI. These approvals or consents require consideration by the bank regulatory authorities of various factors, including assessments of the managerial and financial resources and future prospects of the resulting institutions and the competitive effect of the contemplated transactions. The Community Reinvestment Act of 1977, as amended (the “CRA”), also requires that the bank regulatory authorities, in deciding whether to approve the merger, assess the records of performance of Citizens and Suncrest in meeting the credit needs of the communities they serve, including low and moderate income neighborhoods.

There can be no assurance as to whether the regulatory approvals or consents will be received, the timing of those approvals and consents, or whether any conditions will be imposed. The merger agreement contains a condition to the obligation of each of CVB and Suncrest to close the merger that the required regulatory approvals and consents generally do not require any action, condition or restriction that (i) would reasonably expected be likely to have a material adverse effect on CVB or (ii) require CVB, Citizens or the combined company to raise additional capital or accept any restriction on its ability to operate its businesses that would materially reduce the economic benefits of the merger to CVB and Citizens to such a degree that they would not

 

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have entered into the merger agreement had such conditions, restrictions or requirements been known as of the date of the merger agreement. Please see “The Merger— Regulatory Approvals Required for the Merger” beginning on page 51 for more information. Accordingly, if the required regulatory approvals and consents are not obtained, or if such approvals and consents contain any such materially burdensome regulatory conditions, the merger agreement may be terminated and the merger may not be completed.

Suncrest will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have a material adverse effect on Suncrest and consequently, if the merger occurs, on CVB. These uncertainties may impair Suncrest’s ability to attract or motivate key personnel until the merger is completed and could cause customers, vendors and others that deal with Suncrest to seek to change existing business relationships. Retention of certain employees may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with CVB. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, CVB’s business following the merger could be negatively affected. These departures could also negatively affect Suncrest’s business if the merger is not completed. In addition, the merger agreement restricts Suncrest from making taking certain actions until the merger occurs, without the consent of CVB. These restrictions may prevent Suncrest from pursuing attractive business opportunities that may arise prior to the completion of the merger.

The merger may distract management of CVB, Citizens and Suncrest from their other responsibilities.

The merger could cause the management of CVB, Citizens and Suncrest to focus their time and energies on matters related to the merger that otherwise would be directed to their respective businesses and operations. Any such distraction on the part of management, if significant, could affect the ability of CVB, Citizens and Suncrest to service existing business and develop new business and may adversely affect their businesses and earnings.

Combining the two companies may be more difficult, costly or time-consuming than expected.

Citizens and Suncrest have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger will depend, in part, on the ability to successfully combine the businesses of Citizens and Suncrest upon the completion of the merger. It is possible that the integration process could result in:

 

   

the loss of key employees,

 

   

the disruption of each company’s ongoing businesses, or

 

   

inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger.

The loss of key employees could adversely affect the ability of Citizens, Suncrest and/or the combined company to successfully conduct businesses in the markets in which Citizens and Suncrest now operate, which could have a material adverse effect on their financial results and the value of CVB common stock to be received in the merger. In addition, if the combined company experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Citizens, Suncrest and/or the combined company to lose customers or cause customers to remove their accounts from Citizens, Suncrest and/or the combined company and move their business to competing financial institutions. These integration matters could have a material adverse effect on each of Citizens and Suncrest during this transition period and for an undetermined period after consummation of the merger.

 

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The combined company may fail to realize cost savings for the merger.

Although CVB, Citizens and Suncrest expect to realize cost savings from the merger when fully phased in, it is possible that these potential cost savings may not be realized fully or realized at all, or may take longer to realize than expected. For example, future business developments may require the combined company to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced. Cost savings also depend on the combined company’s ability to combine the businesses of Citizens and Suncrest in a manner that permits those costs savings to be realized. If the combined company is not able to combine the two companies successfully, these anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected. This in turn could reduce or otherwise adversely affect the profitability of the combined company and adversely affect its stock price.

The merger agreement may be terminated in accordance with its terms and the merger may not be completed.

The merger agreement is subject to a number of conditions which must be fulfilled in order to close. Those conditions include, but are not limited to, the receipt of Suncrest shareholder approval, the receipt of all required regulatory approvals, the continued accuracy of representations and warranties by both parties and the performance by both parties of covenants and agreements, and the absence of a material adverse effect on CVB or Suncrest since the date of the merger agreement. In addition, CVB’s obligation to close is subject to satisfaction of the following minimum financial measures by Suncrest as of the measurement date: (i) adjusted common tier 1 capital of Suncrest shall be not less than $122.9 million, (ii) total non-interest bearing deposits of Suncrest shall be equal to or greater than $470 million, (iii) the adjusted total loans of Suncrest shall be equal to or greater than $745 million and (iv) the allowance for loan losses shall be not less than $8,504,000. See “The Merger Agreement—Conditions to Completion of the Merger” for a more complete discussion of the conditions to consummation of the merger. In addition, CVB may choose to terminate the merger agreement if Suncrest makes a change in recommendation or materially breaches its non-solicitation covenants under the merger agreement, and Suncrest may elect to terminate the merger agreement to enter into a definitive agreement for a superior acquisition proposal. See “The Merger Agreement—Termination” for a more complete discussion of the circumstances under which the merger agreement could be terminated. There can be no assurance that the conditions to closing the merger will be fulfilled or that the merger will be completed.

Failure to complete the merger could negatively affect the market price of Suncrest common stock and result in other adverse consequences.

If the merger is not completed for any reason, Suncrest will be subject to a number of material risks, including the following:

 

   

the market price of Suncrest common stock may decline to the extent that the current market prices of its shares reflect a market assumption that the merger will be completed;

 

   

costs relating to the merger, such as legal, accounting and financial advisory fees, and, in specified circumstances, termination fees, must be paid even if the merger is not completed and its anticipated benefits not realized;

 

   

the diversion of Suncrest’s management’s attention from the day-to-day business operations or pursuit of other strategic opportunities and the potential disruption to its employees and business relationships during the period before the completion of the merger may make it difficult to regain financial and market positions if the merger does not occur;

 

   

if the Suncrest board of directors seeks another merger or business combination, holders of the Suncrest common stock cannot be certain that Suncrest will be able to find a party willing to pay an equivalent or greater consideration than that which it is expected to receive in the merger; and

 

   

if a termination of the merger agreement triggers payment by Suncrest of a termination fee, this could have a material adverse effect on Suncrest’s financial position.

 

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For further information on the closing conditions and the termination provisions of the merger agreement, see “The Merger Agreement—Termination” on page 71 and “The Merger Agreement—Conditions to Completion of the Merger” on page 69.

The termination fee and the restrictions on solicitation contained in the merger agreement may discourage other companies from trying to acquire Suncrest.

Until the completion of the merger, with certain exceptions, Suncrest is prohibited from initiating, soliciting, encouraging or knowingly facilitating any inquiries with respect to an acquisition proposal, such as a merger, business combination or similar transaction, with any person or entity other than CVB. In addition, Suncrest has agreed to pay a termination fee of $8,325,000 to CVB if it terminates the merger agreement to, among other things, enter into a definitive agreement relating to an acquisition proposal or if the other party terminates the merger agreement because, among other things, its board of directors fails to recommend the merger or makes a change in its recommendation of the merger, or fails to comply with the provisions of the merger agreement prohibiting solicitation of other acquisition proposals. These provisions could discourage other companies from trying to acquire Suncrest even though such other companies might be willing to offer greater value to Suncrest shareholders than offered in the merger agreement. The payment of the termination fee also could have a material adverse effect on the financial condition of Suncrest.

Impairment of goodwill resulting from the merger may adversely affect our results of operations.

Goodwill and other intangible assets are expected to increase as a result of the merger. Based on CVB’s preliminary purchase price allocation, goodwill of approximately $61.8 million and core deposits intangibles of approximately $2.0 million are currently expected to be recorded by CVB as a result of the merger. The actual amount of goodwill and core deposits intangibles recorded may be materially different and will depend on a number of factors, including changes in the net assets acquired and changes in the fair values of the net assets acquired. Potential impairment of goodwill and amortization of other intangible assets could adversely affect CVB’s financial condition and results of operations. CVB assesses its goodwill and other intangible assets and long-lived assets for impairment annually and more frequently when required by generally accepted accounting principles. CVB is required to record an impairment charge if circumstances indicate that the asset carrying values exceed their fair values. CVB’s assessment of goodwill, other intangible assets, or long-lived assets could indicate that an impairment of the carrying value of such assets may have occurred or may occur in a future accounting period, in each case, that could result in a material, non-cash write-down of such assets, which could have a material adverse effect on CVB’s results of operations and future earnings.

The market price of CVB common stock after the merger may be affected by factors different from those affecting the shares of Suncrest or CVB currently.

Upon completion of the merger, holders of Suncrest common stock will become holders of CVB common stock. CVB’s business differs in important respects from that of Suncrest, and, accordingly, the results of operations of the combined company and the market price of CVB common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of CVB and Suncrest. For a discussion of the businesses of CVB and Suncrest and of some important factors to consider in connection with those businesses, see the information provided under “Information about the Companies – CVB Financial Corp. and Citizens Business Bank” on page 76, “Information about the Companies – Suncrest Bank” on page 77 and documents incorporated by reference in this proxy statement/prospectus and referred to under “Incorporation of Certain Documents by Reference” on page 87.

The shares of CVB common stock to be received by holders of Suncrest common stock will have different rights from the shares of Suncrest common stock.

Upon completion of the merger, Suncrest shareholders will become CVB shareholders and their rights as shareholders will be governed by the articles of incorporation of CVB and CVB’s bylaws. The rights associated

 

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with Suncrest common stock are different from the rights associated with CVB common stock. Please see “Comparison of Rights of Shareholders of CVB and Suncrest” for more information.

Holders of Suncrest common stock will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

Holders of Suncrest common stock currently have the right to vote in the election of the board of directors and on other matters affecting Suncrest. Upon the completion of the merger, each Suncrest shareholder who receives shares of CVB common stock will become a shareholder of CVB with a percentage ownership of CVB that is substantially smaller than the shareholder’s percentage ownership of Suncrest. In the aggregate, CVB current shareholders and Suncrest current shareholders are expected to own approximately 94% and 6%, respectively, of the outstanding shares of CVB common stock when the merger is completed. Because of this, Suncrest common shareholders will have significantly less influence on the management and policies of the combined company than they now have on the management and policies of Suncrest.

Suncrest directors and executive officers have interests in the merger that are different from, or are in addition to, the interests of the shareholders Suncrest.

Suncrest’s executive officers and directors have interests in the merger that are different from, or in addition to, the interests of Suncrest shareholders generally. Such interests include the following: (1) many of Suncrest’s executive officers and directors have unvested stock options and/or Suncrest Stock Awards that will be accelerated and vest in full on the completion of the merger; (2) Suncrest’s executive officers are participants in plans and party to agreements that provide for severance payments and other benefits upon a change in control of Suncrest and/or a qualifying termination of employment following such a change in control; and (3) Suncrest’s directors and executive officers are entitled to continued indemnification and insurance coverage following the closing of the merger. These interests are described in more detail under the section entitled “The Merger—Interests of Suncrest Directors and Executive Officers in the Merger.”

Litigation may be filed against CVB or Suncrest (or their respective boards of directors) that could prevent or delay the completion of the merger or result in the payment of damages following completion of the merger.

In connection with the merger, it is possible that shareholders may file putative class action lawsuits against CVB or Suncrest (or their respective boards of directors). Among other remedies, these shareholders could seek to enjoin the merger. The outcome of any such litigation is uncertain. If a dismissal is not granted or a settlement is not reached, such potential lawsuits could prevent or delay completion of the merger and result in substantial costs to CVB and Suncrest, including any costs associated with indemnification obligations of CVB or Suncrest. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is consummated may adversely affect the combined company’s business, financial condition, results of operations, cash flows and market price.

The fairness opinion received by the Suncrest board of directors from MJC has not been, and is not expected to be, updated to reflect any changes in circumstances that may have occurred since the date of the opinions.

The fairness opinion of MJC was delivered to the Suncrest board of directors on July 27, 2021. Changes in the operations and prospects of CVB or Suncrest, general market and economic conditions and other factors which may be beyond the control of CVB and Suncrest may have altered the value of CVB or Suncrest or the sale prices of shares of CVB common stock and Suncrest common stock as of the date of this proxy statement/prospectus, or may alter such values and sale prices by the time the merger is completed. The opinion from MJC does not speak as of any date other than July 27, 2021. For a description of the opinion that Suncrest received from its financial advisor, see “The Merger—Opinions of Suncrest’s Financial Advisor” beginning on page 35. For a description of the other factors considered by the Suncrest board of directors in determining to approve the merger, see “The Merger—Suncrest’s Reasons for the Merger; Recommendation of the Merger by the Suncrest Board of Directors” beginning on page 32.

 

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to CVB, Citizens, Suncrest and the combined company. These statements may be made directly in this proxy statement/prospectus or they may be made a part of this proxy statement/prospectus by appearing in other documents filed with the Securities and Exchange Commission by CVB and incorporated herein by reference. These statements include statements regarding the period following completion of the merger.

Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “plans,” “may,” “intend,” “projects,” “possibility,” “aims,” “target,” “objective,” “goal,” “seek” and words and terms of similar substance used in connection with any discussion of future operating or financial performance of CVB, Citizens, Suncrest, the combined company or the merger help identify forward-looking statements. All of these forward-looking statements are CVB’s or Suncrest’s management’s present expectations or forecasts of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In addition to the factors relating to the merger discussed under the caption “Risk Factors” beginning on page 16, the following risks related to the businesses of CVB, Citizens and Suncrest, among others, could cause CVB’s, Citizens’ or Suncrest’s actual results or those of the combined company to differ materially from those described in the forward-looking statements:

 

   

the ongoing COVID-19 pandemic’s effect on the banking industry, the health and safety of Suncrest and Citizens’ employees, and their business prospects, as well as the effects on their customers, suppliers and financial condition;

 

   

difficulties and delays in integrating Citizens and Suncrest and achieving anticipated synergies, cost savings and other benefits from the merger;

 

   

higher than anticipated transaction costs; deposit attrition, operating costs, customer loss and business disruption following the merger, including difficulties in maintaining relationships with employees, may be greater than expected; local, regional, national and international economic and market conditions, political events and public health developments and the impact they may have on Citizens, its customers and its assets and liabilities;

 

   

Citizens’ ability to attract deposits and other sources of funding or liquidity;

 

   

supply and demand for commercial or residential real estate and periodic deterioration in real estate prices and/or values in California or other states where Citizens lends; a sharp or prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of Citizens’ borrowers, depositors, key vendors or counterparties; changes in Citizens’ levels of delinquent loans, nonperforming assets, allowance for credit losses and charge-offs;

 

   

the costs or effects of mergers, acquisitions or dispositions CVB may make, whether CVB is able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or Citizens’ ability to realize the contemplated financial or business benefits associated with any such mergers, acquisitions or dispositions;

 

   

the effects of new laws, regulations and/or government programs, including those laws, regulations and programs enacted by federal, state or local governments in the geographic jurisdictions in which Citizens does business in response to the current national emergency declared in connection with the COVID-19 pandemic;

 

   

the impact of the federal CARES Act and the significant additional lending activities undertaken by CVB in connection with the Small Business Administration’s Paycheck Protection Program enacted thereunder, including risks to CVB with respect to the uncertain application by the Small Business Administration of new borrower and loan eligibility, forgiveness and audit criteria; the effects of the

 

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CVB’s participation in one or more of the new lending programs temporarily established by the Federal Reserve, including the Main Street New Loan Facility, the Main Street Priority Loan Facility and the Nonprofit Organization New Loan Facility, and the impact of any related actions or decisions by the Federal Reserve Bank of Boston and its special purpose vehicle established pursuant to such lending programs;

 

   

the effect of changes in other pertinent laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, bank capital levels, allowance for credit losses, consumer, commercial or secured lending, securities and securities trading and hedging, bank operations, compliance, fair lending, the CRA, employment, executive compensation, insurance, cybersecurity, vendor management and information security technology) with which CVB and its subsidiaries must comply or believe CVB should comply or which may otherwise impact CVB;

 

   

changes in estimates of future reserve requirements and minimum capital requirements, based upon the periodic review thereof under relevant regulatory and accounting standards, including changes in the Basel Committee framework establishing capital standards for bank credit, operations and market risks;

 

   

the accuracy of the assumptions and estimates and the absence of technical error in implementation or calibration of models used to estimate the fair value of financial instruments or currently expected credit losses or delinquencies; inflation, changes in market interest rates, securities market and monetary fluctuations; changes in government-established interest rates, reference rates or monetary policies, including the possible imposition of negative interest rates on bank reserves; the impact of the anticipated phase-out of the London Interbank Offered Rate (LIBOR) on interest rate indexes specified in certain of our customer loan agreements and in Citizens’ interest rate swap arrangements, including any economic and compliance effects related to the expected change from LIBOR to an alternative reference rate;

 

   

changes in the amount, cost and availability of deposit insurance; disruptions in the infrastructure that supports CVB’s business and the communities where CVB is located, which are concentrated in California, involving or related to public health, physical site access and/or communication facilities; cyber incidents, attacks, infiltrations, exfiltrations, or theft or loss of CVB, customer or employee data or money;

 

   

political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, drought, the effects of pandemic diseases, climate change or extreme weather events, that may affect electrical, environmental and communications or other services, computer services or facilities CVB may use, or that may affect CVB’s assets, customers, employees or third parties with whom CVB conducts business;

 

   

CVB’s timely development and implementation of new banking products and services and the perceived overall value of these products and services by customers and potential customers;

 

   

CVB’s relationships with and reliance upon outside vendors with respect to certain of CVB’s key internal and external systems, applications and controls;

 

   

changes in commercial or consumer spending, borrowing and savings patterns, preferences or behaviors; technological changes and the expanding use of technology in banking and financial services (including the adoption of mobile banking, funds transfer applications, electronic marketplaces for loans, block-chain technology and other financial products, systems or services);

 

   

CVB’s ability to retain and increase market share, to retain and grow customers and to control expenses; changes in the competitive environment among banks and other financial services and technology providers; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions or on CVB’s capital, deposits, assets or customers;

 

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fluctuations in the price of CVB’s common stock or other securities, and the resulting impact on CVB’s ability to raise capital or to make acquisitions; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by the principal regulatory agencies with jurisdiction over CVB, as well as by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard-setters;

 

   

changes in CVB’s organization, management, compensation and benefit plans, and CVB’s ability to recruit and retain or expand or contract its workforce, management team, key executive positions and/or CVB’s board of directors; CVB’s ability to identify suitable and qualified replacements for any executive officers who may leave their employment, including CVB’s Chief Executive Officer;

 

   

the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (including any securities, lender liability, bank operations, check or wire fraud, financial product or service, data privacy, health and safety, consumer or employee class action litigation); regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; ongoing relations with various federal and state regulators, including, but not limited to, the SEC, Federal Reserve Board, FDIC and CDFPI;

 

   

success at managing the risks involved in the foregoing items and all other factors set forth in CVB’s public reports, including its Annual Report on Form 10-K for the year ended December 31, 2020, and particularly the discussion of risk factors within that document.

Neither CVB nor Suncrest undertakes any obligation to update these forward-looking statements, except as required by law. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see the information provided under “Information about the Companies – Suncrest Bank” on page 77, “Information about the Companies – CVB Financial Corp. and Citizens Business Bank” on page 76 and documents incorporated by reference in this proxy statement/prospectus and referred to under “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference”.

 

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SPECIAL MEETING

Date, Time and Place of the Special Meeting

This proxy statement/prospectus is being furnished to you in connection with the solicitation of proxies by the Suncrest board of directors in connection with the special meeting of Suncrest shareholders. The special meeting is scheduled to be held as follows:

October 27, 2021

Suncrest Bank

501 West Main Street,

Visalia, California 93291

6:00 p.m., local time

We expect to hold the special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only shareholders will be admitted to the special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the special meeting in person. To do so, please make your request by mail to Suncrest Bank at 501 West Main Street, Visalia, California 93291, Attention: Jean Carandang or by email at jcarandang@suncrestbank.com. Suncrest must receive your request for pre-authorization on or before October 20, 2021.

Purpose of the Special Meeting

Suncrest shareholders of record as of September 21, 2021 will be asked to consider and vote upon the following proposals at the special meeting, including any postponement or adjournment thereof:

Proposal No. 1—Merger Proposal

Suncrest is asking its shareholders to approve the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the cancellation of each outstanding share of Suncrest common stock, other than any dissenting shares and excluded shares, in exchange for the right to receive 0.6970 shares of CVB common stock and $2.69 per share in cash, subject to the merger consideration adjustments and other terms in the merger agreement. Holders of Suncrest common stock should read this proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A.

After careful consideration, the Suncrest board of directors unanimously approved the merger and the merger agreement and determined that the merger is fair to, and in the best interests of, Suncrest shareholders. See “The Merger—Suncrest’s Reasons for the Merger; Recommendation of the Merger by the Suncrest Board of Directors” included elsewhere in this proxy statement/prospectus for a more detailed discussion of the recommendation of the Suncrest board of directors.

The Suncrest board of directors unanimously recommends that Suncrest shareholders vote “FOR” the merger proposal.

Proposal No. 2—Adjournment Proposal

The special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further solicitation of proxies if necessary to obtain additional votes in favor of the merger proposal.

 

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If, at the special meeting, the number of shares of Suncrest common stock present or represented and voting in favor of the merger proposal is insufficient to approve such proposal, Suncrest intends to move to adjourn the special meeting in order to solicit additional proxies for the approval of the merger proposal.

In the adjournment proposal, Suncrest is asking its shareholders to authorize the holder of any proxy solicited by the Suncrest board of directors on a discretionary basis to vote in favor of adjourning the special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Suncrest shareholders who have previously voted.

The Suncrest board of directors unanimously recommends that Suncrest shareholders vote “FOR” the adjournment proposal.

Record Date for the Special Meeting

The Suncrest board of directors has fixed the close of business on September 21, 2021 as the record date for determination of Suncrest shareholders entitled to notice of and to vote at the special meeting. On the record date, 12,251,000 shares of Suncrest common stock were outstanding and there were 696 holders of record.

Quorum; Votes Required

A majority of the outstanding shares of Suncrest common stock entitled to vote on the record date must be present, either in person or by proxy, to constitute a quorum at the special meeting. If a quorum is present, in order to be approved, the proposals require the following votes:

 

   

The affirmative vote of a majority of the shares of Suncrest common stock outstanding on the record date will be required to approve the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger.

 

   

Approval of the adjournment proposal requires the affirmative vote of a majority of the shares of Suncrest common stock represented (in person or by proxy) at the special meeting and voting on the proposal (which affirmative vote constitutes at least a majority of the required quorum).

At the special meeting, each share of Suncrest common stock will be entitled to one vote on all matters properly submitted to Suncrest shareholders.

Each of the directors and executive officers and certain shareholders of Suncrest has entered into a voting and support agreement with CVB, pursuant to which such Suncrest shareholder has agreed to vote “FOR” the merger proposal. As of the record date, these shareholders beneficially owned and were entitled to vote 2,865,210 shares of Suncrest common stock, representing approximately 23% of the shares of Suncrest common stock outstanding on that date.

Attending the Special Meeting

We expect to hold the special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only shareholders will be admitted to the special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the special meeting in person. To do so, please make your request by mail to Suncrest Bank at 501 West Main Street, Visalia, California 93291, Attention: Jean Carandang or by email at jcarandang@suncrestbank.com. Suncrest must receive your request for pre-authorization on or before October 20, 2021.

Proxies

All shares of Suncrest common stock represented by properly executed proxies (including those given through voting by telephone or Internet) received before or at the special meeting will, unless properly revoked, be voted

 

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in accordance with the instructions indicated on those proxies. If no instructions are indicated on a properly executed proxy, the shares represented thereby will be voted:

 

   

FOR” approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger; and

 

   

FOR” the adjournment of the special meeting if necessary or appropriate in the judgment of the Suncrest board of directors.

If you return a properly executed proxy card or voting instruction card and have indicated that you have abstained from voting, your Suncrest common stock represented by the proxy will be considered present at the special meeting or any adjournment or postponement thereof solely for purposes of determining a quorum.

If your shares are held in an account at a broker or bank or other nominee, you must instruct the broker or bank or other nominee on how to vote your shares by following the instructions provided to you by your broker or bank or other nominee. If you do not provide voting instructions to your broker or bank or other nominee, your shares will not be voted on any proposal on which your broker or bank or other nominee does not have discretionary authority to vote. Under applicable rules, your broker or bank or other nominee does not have discretionary authority to vote on the merger proposal or the adjournment proposal. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being counted as present for purposes of establishing a quorum at the meeting and not being voted on the proposals.

Because approval of the principal terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, requires the affirmative vote of a majority of the shares of Suncrest common stock outstanding as of the record date, abstentions, failures to vote and failure to provide instructions to your bank, broker or other nominee on how to vote will have the same effect as votes against the merger proposal, including the merger. Accordingly, we urge you to mark each applicable box on the proxy card or voting instruction card to indicate how to vote your shares.

Because this is a special meeting, no matter or proposal other than the proposals described in this proxy statement/prospectus may be brought before the special meeting or any postponement or adjournment thereof.

If you are a Suncrest shareholder of record, you may revoke your proxy at any time before it is voted by:

 

   

filing a written notice of revocation with the Corporate Secretary of Suncrest;

 

   

granting a subsequently dated proxy; or

 

   

if you are a holder of record, appearing in person and voting at the Suncrest special meeting.

If you hold your shares of Suncrest common stock through an account at a broker or bank, you should contact your broker or bank to change your vote.

Attendance at the special meeting will not in and of itself constitute revocation of a proxy. If the special meeting is postponed or adjourned, it will not affect the ability of shareholders of record as of the record date to exercise their voting rights or to revoke any previously granted proxy using the same methods described above, except in certain circumstances that are not currently anticipated. Suncrest would notify shareholders if such circumstances were to occur.

Voting by Telephone or Internet

Suncrest shareholders of record will have the option to submit their proxy cards by telephone or Internet. Please note that there are separate arrangements for voting your shares depending on whether your shares are registered in Suncrest’s stock records in your name or in the name of a broker, bank or other holder of record. If you hold

 

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your shares through a broker, bank or other holder of record, you should check your proxy card or voting instruction card forwarded to you by your broker, bank or other holder of record to see which options are available.

Suncrest shareholders of record may submit their proxies:

 

   

through the Internet by visiting a website established for that purpose at www.cstproxyvote.com and following the instructions provided on that website,

 

   

by telephone by calling the toll-free number (866) 894-0536 in the United States, Puerto Rico or Canada on a touch-tone phone and following the recorded instructions, or

 

   

by completing, signing, dating and mailing their proxy card in the pre-addressed envelope that accompanies the delivery of paper proxy cards.

Dissenters’ Rights

In connection with the merger, Suncrest shareholders will have the opportunity to exercise dissenters’ rights in accordance with certain procedures specified in California Corporations Code Sections 1300, et seq., which sections are attached as Annex C to this proxy statement/prospectus. Suncrest shareholders who do not vote in favor of the merger may demand that Suncrest acquire their shares of Suncrest common stock for cash at their fair market value as of July 27, 2021, the day of, and immediately prior to, the first public announcement of the terms of the merger, excluding any appreciation or depreciation in consequence of the merger. Suncrest shareholders dissenting must file written demands that Suncrest acquire their shares of Suncrest common stock for cash and comply with the other procedural requirements set forth in California Corporations Code Sections 1300, et seq. For additional details and information on how to exercise your dissenters’ rights, please refer to “The Merger—Dissenters’ Rights for Holders of Suncrest Shares” on page 53 and Annex C to this proxy statement/prospectus.

Solicitation of Proxies

The Suncrest board of directors is soliciting proxies for the special meeting. Suncrest will pay for the cost of solicitation of proxies. In addition to solicitation by mail, Suncrest’s directors, officers and employees may also solicit proxies from shareholders by telephone, facsimile, or in person. Suncrest will not pay any additional compensation to these directors, officers or employees for these activities but may reimburse them for reasonable out-of-pocket expenses. Suncrest has also retained Georgeson LLC to assist with the solicitation of proxies at an estimated cost of $10,000. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries to send the proxy materials to beneficial owners. Suncrest will, upon request, reimburse those brokerage houses and custodians for their reasonable expenses in so doing.

 

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THE MERGER

This section of this proxy statement/prospectus describes material aspects of the proposed merger, including the merger agreement. This summary may not contain all of the information that is important to you. You should carefully read this entire document and the other documents we refer you to for a more complete understanding of the merger. In addition, we incorporate important business and financial information about CVB into this proxy statement/prospectus by reference. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find Additional Information.”

General

CVB, Citizens and Suncrest have entered into the merger agreement, pursuant to which Suncrest will merge with and into Citizens, the separate existence of Suncrest will cease and Citizens will continue as the surviving corporation immediately upon the closing of the merger. The terms of the merger are set forth in the merger agreement, a copy of which is attached to this proxy statement/prospectus as Annex A.

Merger Consideration

In the merger, each outstanding share of Suncrest common stock will be converted into the right to receive 0.6970 shares of CVB common stock, with cash paid in lieu of fractional shares, and $2.69 per share in cash, subject to certain merger consideration adjustments set forth in the merger agreement. At the effective time of the merger, each Suncrest Stock Award will automatically accelerate in full and be converted into the right to receive the merger consideration.

The exchange ratio in the merger will not be adjusted to reflect CVB common stock price changes between now and the closing.

The cash consideration is subject to reduction, on a per share basis, by the sum of the following, if any:

 

   

a common equity tier 1 capital adjustment (i.e., the amount, if any, by which the adjusted common equity tier 1 capital of Suncrest is below the tier 1 benchmark, multiplying such difference, if any, by 1.5); plus

 

   

a transaction costs adjustment in the amount, if any, by which certain specified transaction costs of Suncrest exceed $5.8 million.

Based on the closing price of CVB common stock on July 27, 2021, the last trading day prior to the public announcement of the merger, and $2.69 per share in cash consideration and assuming no merger consideration adjustments, the merger consideration represented a value of $16.09 per share of Suncrest common stock. Using the closing price of CVB common stock on September 23, 2021 and including $2.69 per share in cash consideration, the merger consideration represented a value of $16.27 per share of Suncrest common stock. Accordingly, the dollar value of the stock consideration that Suncrest shareholders may receive will change depending on fluctuations in the market price of CVB common stock and will not be known at the time you vote on the merger. You may obtain current stock quotations for CVB common stock, which is listed on the NASDAQ Global Select Market under the symbol “CVBF.”

Based on the 0.6970 exchange ratio and the number of shares of Suncrest common stock outstanding as of the date of the merger agreement, and assuming no merger consideration adjustments, CVB expects that approximately 8.5 million shares of its common stock will become issuable and approximately $33 million in cash will be paid to Suncrest shareholders as a result of the merger. In addition, based on the merger consideration set forth above and assuming the number of shares of Suncrest stock options outstanding as of the

 

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date of closing is the same as of the date of the merger agreement, CVB anticipates that an additional $6 million will be paid to holders of Suncrest stock options at the closing. Giving effect to the merger, Suncrest shareholders would hold, in aggregate, approximately 6% of CVB’s outstanding common stock following the merger.

At the effective time of the merger, (i) any Suncrest common stock held by CVB or any direct or indirect wholly-owned subsidiary of CVB or by Suncrest or any direct or indirect wholly owned subsidiary of Suncrest, other than those held in a fiduciary capacity or as a result of debts previously contracted, which are referred to as excluded shares, and (ii) any dissenting shares (subject to the procedures for dissenting shares described herein) will automatically be cancelled and retired and will cease to exist and no consideration will be issued in exchange therefor.

Background of the Merger

Each of the CVB and Suncrest board of directors and management regularly review their respective business strategies, opportunities and challenges as part of their consideration and evaluation of their respective long-term prospects, with the goal of enhancing value for their respective shareholders.

For the Suncrest board of directors, those evaluations have included, among other considerations, the business and regulatory environment facing financial institutions generally, as well as conditions and ongoing consolidation in the financial services industry. Strategic discussion topics have typically involved a review of current and projected market conditions, Suncrest’s results of operations, certain peer group information comparisons, reported merger and acquisition activity and selected industry information and analysis provided to the Suncrest board by its management and financial advisors.

Suncrest has regularly evaluated strategic combinations through the acquisition of financial institutions in the Central Valley area of California, as well as strategic combinations with other financial institutions as a means of growing asset size, remaining more competitive and delivering greater value for Suncrest shareholders. In the normal course of its business, Suncrest has, from time to time, received unsolicited verbal inquiries from various sources regarding possible interest in a potential business combination transaction.

In late 2020, Suncrest began discussions regarding a potential strategic transaction with a larger financial institution, which we refer to as Institution A, concerning Institution A’s potential acquisition of Suncrest.

Following a number of discussions with Institution A, Suncrest engaged MJC to act as Suncrest’s exclusive financial advisor on March 7, 2021. MJC is an investment banking firm with substantial experience in similar transactions. Over the years, MJC has conducted strategic planning exercises for Suncrest and its board and, as a result, was familiar with Suncrest’s operations, as well as the merger and acquisition environment. On behalf of the Suncrest board’s Mergers and Acquisitions Committee (the “M&A Committee”), MJC undertook an analysis of Institution A and other potential parties that appeared to have the financial ability to acquire Suncrest at a premium to its market value. This analysis also included the prospects of community banks in general; the current merger and acquisition environment within the banking industry; the opportunity for Suncrest to better leverage its strengths and minimize its risks by engaging in a strategic business combination to enhance shareholder value; the prospects of Suncrest finding a potential partner; the potential risks associated with pursuing a potential business combination, including the disclosure of confidential information to Suncrest’s competitors; the consequences of an abandoned transaction to Suncrest’s shareholders, employees and customers; and the standalone financial forecast of Suncrest and the merits of continuing operations on a standalone basis.

At the direction of the Suncrest M&A Committee, MJC initiated conversations in March 2021 with two larger financial institutions, which we refer to as Institution B and Institution C, and CVB in order to provide Suncrest with potential alternatives to Institution A. In addition, beginning during the month of March 2021, as a result of overtures from MJC, CVB’s CEO and Suncrest’s CEO engaged in detailed discussions about a possible merger transaction between Suncrest and Citizens. Suncrest subsequently executed mutual non-disclosure agreements with Institution B on March 25, 2021, Institution C on April 2, 2021, and CVB on March 23, 2021.

 

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On March 26, 2021, Mr. McMullan met with CVB’s CEO, David A. Brager, in Ontario, California.

On April 1, 2021, Mr. McMullan and Jean M. Carandang, Suncrest’s Chief Financial Officer, together with MJC, held a video conference call with Institution B to further familiarize Institution B’s leadership team with Suncrest and the opportunity of a potential transaction.

On or around April 3, 2021, Mr. McMullan had a telephone call with Institution C to further familiarize Institution C’s leadership team with Suncrest and the opportunity of a potential transaction.

On April 21, 2021, CVB’s financial advisor, Piper Sandler & Co., which we refer to as Piper Sandler, provided an initial due diligence request list to Suncrest. The following day, Suncrest provided Piper Sandler and CVB access to a virtual data room with due diligence materials.

On April 24, 2021, Institution C’s financial advisor provided an initial due diligence request list to Suncrest, and was provided with access to a virtual data room with due diligence materials.

On April 30, 2021, at the request of Institution C, Suncrest and MJC held a video conference which included Suncrest’s executive management team and the executive management team from Institution C, to discuss several topics of interest to Institution C.

During the week of May 3, 2021, Institution A, Institution C, and CVB verbally proposed an offer structured on fixed exchange ratios. Institution B elected not to participate in this process.

On May 16, 2021, MJC provided Institution A, Institution C and CVB’s financial advisor, Piper Sandler, with a bid instruction letter outlining subjects and matters that should be included in a letter of intent.

At an executive session of the CVB and Citizens boards on May 17, 2021, representatives of Piper Sandler reviewed a detailed presentation, key strategic considerations, including a pro forma financial analysis of a potential combination of the two banks, a range of possible acquisition scenarios and economic terms, and various permutations of CVB stock and cash that could be offered as consideration for any purchase.

On May 20, 2021, Institution C submitted a nonbinding letter of intent proposing an acquisition of Suncrest in an all-stock transaction in which Suncrest shareholders would receive shares of Institution C’s common stock based on a fixed exchange ratio. The value of the consideration proposed by Institution C was $214.9 million or an implied value of $17.53 per share, based on the 20-day volume-weighted average closing price of Institution C’s common stock as reported on the NASDAQ Global Select Market. Including an additional estimated $7.3 million payable to holders of Suncrest stock options, the total value of Institution C’s offer was approximately $222.2 million.

Subsequently, following further discussions among the parties and their respective advisors, on May 21, 2021, the board of CVB reviewed and approved, in form and substance, a letter of intent (LOI) to be delivered to Suncrest containing the terms and conditions of a proposed acquisition offer.

On May 23, 2021, the executive management teams of Suncrest and CVB held a video conference call to discuss several topics of interest to CVB.

On May 24, 2021, CVB submitted a nonbinding letter of intent with a consideration mix of $3.40 in cash and 0.5960 of a share of CVB common stock for each share of Suncrest common stock, with an implied value of $17.00 per share of Suncrest common stock, based on the 20-day volume-weighted average closing price of CVB common stock as reported on the NASDAQ Global Select Market. Including an additional estimated $6.8 million payable to holders of Suncrest stock options, the total value of CVB’s offer was approximately $215.2 million.

 

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On May 25, 2021, the Suncrest M&A Committee convened a meeting to consider the respective letters of intent received from CVB and Institution C. Institution A elected not to submit a letter of intent providing for a business combination with Suncrest. Representatives of MJC and Suncrest’s outside legal counsel, Sheppard, Mullin, Richter & Hampton, LLP, which we refer to as Sheppard Mullin, attended this meeting. After reviewing the two letters of intent and consultation with its outside advisors, the Suncrest M&A Committee directed MJC to inform both parties that they would need to improve their bids.

On May 26, 2021, after additional discussions among the parties and their respective advisors, CVB’s board of directors approved the issuance of a revised nonbinding letter of intent. The revised LOI offered aggregate merger consideration of 8,542,432 shares of common stock and $32,908,463 cash, equating to a per share consideration mix of 0.6970 of a share of CVB common stock and $2.69 in cash for each share of Suncrest common stock. The total value of CVB’s revised offer as of this date was $228.1 million.

On May 27, 2021, the Suncrest M&A Committee met to consider CVB’s revised offer and the existing offer from Institution C. Representatives of MJC and Sheppard Mullin attended this meeting. At the direction of the Suncrest M&A Committee, Mr. McMullan requested that CVB make changes to its letter of intent concerning, among other things, certain closing conditions, the requirement that Suncrest executives enter into non-competition, non-solicitation and non-disclosure agreements with CVB, adherence to the Suncrest severance policy for Suncrest employees and the length of CVB’s period of exclusivity and anticipated timing of the completion of the transaction.

On June 2, 2021, CVB submitted a revised nonbinding letter of intent. The consideration amount was unchanged from CVB’s May 26, 2021 letter of intent, but the revised letter of intent included a number of updated terms in response to Suncrest’s requests.

On June 3, 2021, Suncrest accepted and executed CVB’s letter of intent and MJC advised Institution C that Suncrest had chosen to pursue a transaction with a different party. Later that day, Piper Sandler, on behalf of CVB, provided MJC with an updated due diligence request list. Suncrest again provided Piper Sandler and CVB access to a virtual data room and began uploading additional documents in response to CVB’s requests. Immediately thereafter, Mr. Brager and designated executives of CVB and Citizens commenced their due diligence review of Suncrest, and Mr. Brager and such designated executives reported on the ongoing results of such due diligence review to CVB’s and Citizens’ respective boards during executive session meetings held on June 16 and July 21, 2021.

On July 5, 2021, the Suncrest M&A Committee held a meeting at which a representative of Sheppard Mullin was present. At that meeting, a representative of Sheppard Mullin reviewed the material terms of CVB’s draft of the merger agreement and discussed the process for executing on the merger with CVB. On July 14, 2021, Sheppard Mullin delivered a revised draft of the merger agreement to CVB’s outside legal counsel, Manatt, Phelps & Phillips, LLP, which we refer to as Manatt, reflecting comments from the Suncrest M&A Committee and Sheppard Mullin.

Over the following days, representatives of CVB and Suncrest discussed and negotiated various terms of the proposed merger agreement and ancillary agreements, including certain financial tests and closing conditions to the merger and which members of the Suncrest board and management would sign non-competition, non-solicitation and non-disclosure agreements.

On July 26, 2021, Manatt provided a final version of the merger agreement and ancillary agreements to Sheppard Mullin, which was in turn distributed to the Suncrest board of directors later that day.

Only July 27, 2021, the Suncrest board of directors, together with representatives from MJC and Sheppard Mullin, met by teleconference to consider the merger agreement and ancillary agreements. At this meeting, MJC reviewed the financial aspects of the proposed merger and rendered to the Suncrest board an opinion to the effect that, as of that date and subject to the procedures followed, assumptions made, matters considered, and

 

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qualifications and limitations on the review undertaken by MJC as set forth in such opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to the holders of Suncrest common stock. Among other matters considered, the Suncrest board of directors reviewed the specific terms of the merger agreement, the form and value of the consideration to be received by Suncrest shareholders, the price and historical performance of CVB’s common stock, current market conditions including comparable bank merger and acquisition transactions, and the implications of the merger for Suncrest employees and customers. Following these discussions, review and analysis of materials provided to the board of directors and discussion among the members of the board of directors, the Suncrest board of directors determined that the merger agreement, the merger and the other transactions contemplated thereby are advisable and in the best interests of Suncrest and its shareholders, and the Suncrest board of directors unanimously voted to approve and adopt the merger agreement, the merger and the other transactions contemplated thereby.

On July 27, 2021 a special joint meeting of the CVB and Citizens board of directors was held to review the proposed merger agreement and the related ancillary documents, copies of which were provided to the boards in advance of the meeting. Representatives of Manatt and Piper Sandler also attended this meeting. Among other things, Mr. Brager and other executive officers of CVB discussed with the boards the terms of the proposed merger, the negotiations to date and the diligence undertaken by CVB and its advisors in respect of Suncrest. A representative of Piper Sandler and a representative of Manatt reviewed with the boards of directors the material terms of the proposed draft definitive agreements. A representative of Piper Sandler also reviewed the financial aspects of the proposed merger and financial analysis related to the merger. Following these discussions, review and analysis of materials provided to the boards of directors and discussion among the members of the boards of directors, the CVB and Citizens board of directors determined that the merger agreement, the merger and the other transactions contemplated thereby are advisable and in the best interests of CVB and its shareholders, and the CVB and Citizens’ boards of directors unanimously voted to approve and adopt the merger agreement, the merger and the other transactions contemplated thereby.

On July 27, 2021, the merger agreement and ancillary agreements were executed and delivered by CVB, Citizens and Suncrest. The transaction was publicly announced in the afternoon of July 27, 2021. Based on a $19.23 per share closing price of CVB common stock on July 27, 2021, the aggregate merger consideration to be paid to Suncrest shareholders was approximately $197 million, or $16.09 per share of Suncrest common stock.

Suncrest’s Reasons for the Merger; Recommendation of the Merger by the Suncrest Board of Directors

The Suncrest board of directors has determined that the merger is fair to and in the best interests of Suncrest and its shareholders and, by the unanimous vote of all of the directors of Suncrest, approved and adopted the merger agreement and the merger. ACCORDINGLY, THE SUNCREST BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ALL SUNCREST SHAREHOLDERS VOTE “FOR” THE MERGER PROPOSAL.

In reaching its decision to approve the merger agreement and the transactions contemplated thereby, the Suncrest board of directors evaluated the merger agreement in consultation with Suncrest executive management, as well as Suncrest’s legal counsel and financial advisor, and considered numerous factors, including the following:

 

   

an extensive review of strategic options available to Suncrest;

 

   

CVB’s business, financial condition, results of operations, asset quality, earnings and prospects, and the performance of CVB’s common stock on both a historical and prospective basis;

 

   

the risks and prospects of Suncrest remaining independent, including (i) the challenges of the current and prospective economic, regulatory and competitive environment facing the financial services industry generally, and Suncrest in particular, including the importance of scale in the financial services industry, the anticipated prolonged low interest rate environment and its potential effect on net interest margin, the current historically low income tax rate, and the current

 

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low level of credit losses; (ii) the increasing costs associated with banking regulation, compliance and technology, including the substantial cost that Suncrest would have to incur in either 2022 or 2023 to replace its core banking system; and (iii) the anticipated costs of continuing to develop and enhance Suncrest’s business capabilities;

 

   

the results that Suncrest could expect to achieve by remaining independent in light of the aforementioned risks and prospects, and the likely value to Suncrest shareholders of that course of action, as compared to the value of the merger consideration to be received in connection with a merger with CVB;

 

   

the financial terms of the merger;

 

   

the structure of the merger consideration, payable in both shares of CVB common stock, which will allow Suncrest shareholders to participate in the future performance of the combined company’s business and synergies resulting from the merger and from improved conditions for financial institutions or in the general economy, and cash;

 

   

that the merger consideration represented an implied stock price premium of 7.6%, based on the closing prices of Suncrest common stock and CVB common stock on July 27, 2021, the last trading day prior to the public announcement of the merger, an implied stock price premium of 11.9%, based on the closing price of Suncrest common stock on July 27, 2021 and the volume weighted average closing price of CVB common stock over a twenty day period ending on July 26, 2021, and an implied stock price premium of 21.9%, based on the closing price of Suncrest common stock on July 27, 2021 and the issuance price of CVB common stock as reflected in the letter of intent signed by Suncrest on June 2, 2021;

 

   

the expected pro forma financial impact of the merger, taking into account anticipated cost savings and other factors, and the fact that the merger is expected to be accretive to the combined company in terms of earnings per share in 2022, with modest tangible book value dilution;

 

   

the advantages of being part of a larger financial institution, such as CVB, including the potential for operating efficiencies, the ability to leverage overhead costs, and the generally higher trading multiples of larger financial institutions;

 

   

the need for greater liquidity for Suncrest shareholders, and the fact that CVB’s common stock is registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and publicly traded on the NASDAQ Global Select Market;

 

   

the fact that CVB has historically paid dividends on its common stock;

 

   

the ability of CVB’s management team to successfully integrate and operate the business of the combined company after the merger, as evidenced by the success of CVB and Citizens in completing and integrating previous mergers of community banks;

 

   

the terms of the merger agreement, including the representations, covenants, deal protection and termination provisions and the size of the termination fee payable by Suncrest in certain circumstances in relation to the overall transaction size;

 

   

the fact that the merger agreement does not include any unrealistic closing conditions based on the financial performance of Suncrest between signing and closing of the merger;

 

   

the likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals in a timely manner;

 

   

the fact that the merger agreement does not preclude a third party from making an unsolicited acquisition proposal to Suncrest and that, under certain circumstances more fully described under “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions” on page 63, Suncrest may furnish non-public information to, and enter into discussions with, such a third party regarding a qualifying acquisition proposal;

 

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the ability of the Suncrest board of directors to change its recommendation that Suncrest shareholders vote to approve the merger agreement, subject to the terms and conditions set forth in the merger agreement (including the right of CVB to match any competing bid and the payment by Suncrest of a termination fee);

 

   

Suncrest’s management’s view that the merger will allow for greater opportunities for Suncrest’s clients, customers and other constituencies, and that the potential synergies, low loan and deposit concentration levels allowing greater growth in all classes of commercial lending, deposit gathering, and diversification resulting from the merger will enhance product offerings and customer service beyond the level believed to be reasonably achievable by Suncrest on an independent basis;

 

   

the expectation that the merger will qualify as a “reorganization” for U.S. federal income tax purposes;

 

   

the prices paid and the terms of other recent comparable combinations of banks and bank holding companies;

 

   

the financial presentation, dated July 27, 2021, of MJC to the Suncrest board and the written opinion, dated July 27, 2021, of MJC to the Suncrest board, as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Suncrest common stock of the merger consideration, as more fully described below under “Opinion of Suncrest’s Financial Advisor;” and

 

   

the Suncrest board’s review and discussions with Suncrest’s management and advisors concerning Suncrest’s due diligence examination of the operations, financial condition and regulatory compliance programs and prospects of CVB.

The Suncrest board also considered the potential adverse consequences of the proposed merger, including:

 

   

the stock consideration being based on a fixed exchange ratio and the resulting risk that the consideration to be paid to Suncrest shareholders could be adversely affected by a decrease in the trading price of CVB common stock prior to the closing of the merger;

 

   

the potential that the cash merger consideration could be reduced if Suncrest’s common equity tier 1 capital on a prescribed measurement date is below $122.9 million or if certain of Suncrest’s transaction expenses exceed $5.8 million;

 

   

the potential for diversion of management and employee attention, and for employee attrition, during the period following the announcement of the merger and prior to the completion of the merger, and the potential effect on Suncrest’s business and relations with customers, service providers and other stakeholders, whether or not the merger is completed;

 

   

the risk that Suncrest might not satisfy some or all of the financial measures that are conditions to CVB’s obligation to complete the merger;

 

   

the potential that certain provisions of the merger agreement prohibiting Suncrest from soliciting, and limiting its ability to respond to, proposals for alternative transactions, and requiring the payment of a termination fee could have the effect of discouraging an alternative proposal;

 

   

the interests of Suncrest’s officers and directors with respect to the merger apart from their interests as holders of Suncrest common stock, and the risk that these interests might influence their decision with respect to the merger;

 

   

the requirement that Suncrest conduct its business in the ordinary course and the other restrictions on the conduct of Suncrest’s business prior to completion of the merger, which may delay or prevent Suncrest from undertaking business opportunities that may arise pending completion of the merger;

 

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the regulatory and other approvals required in connection with the merger and the possibility that such regulatory approvals may not be received in a timely manner and may include the imposition of burdensome conditions;

 

   

the transaction costs and expenses that will be incurred in connection with the merger, including the costs of integrating the businesses of Suncrest and CVB;

 

   

the possible effects on Suncrest should the parties fail to complete the merger, including the increased difficulty of resuming operations with a standalone strategy, the possible effects on the price of Suncrest common stock, and the business and opportunity costs;

 

   

the risk of litigation arising from shareholders in respect of the merger agreement or transactions contemplated thereby; and

 

   

the other risks described under “Risk Factors” beginning on page 16, and the risks of investing in CVB common stock identified in the “Risk Factors” sections of CVB’s periodic reports filed with the SEC and incorporated by reference herein.

This description of the information and factors considered by the Suncrest board of directors is not intended to be exhaustive, but is believed to include all material factors the Suncrest board of directors considered. In determining whether to approve and recommend the merger agreement, the Suncrest board of directors did not assign any relative or specific weights to any of the foregoing factors, and individual directors may have weighed factors differently. After deliberating with respect to the merger and the merger agreement, considering, among other things, the reasons discussed above, the Suncrest board of directors approved the merger agreement and the merger as being in the best interests of Suncrest and its shareholders, based on the total mix of information available to the Suncrest board of directors.

This explanation of Suncrest’s reasons for the merger and other information presented in this section is forward-looking in nature and should be read in light of the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Suncrest’s board of directors has unanimously approved the merger agreement and recommends that Suncrest shareholders vote “FOR” approval of the merger proposal.

Opinion of Suncrest’s Financial Advisor

Suncrest’s board of directors engaged MJC Partners, LLC to act as its financial advisor and to provide an opinion of the fairness, from a financial point of view, to the shareholders of Suncrest of the merger consideration.

Suncrest’s board of directors selected MJC based upon its reputation, its knowledge of financial institution and its experience as a financial advisor in mergers and acquisitions of financial institutions similar to the merger. Suncrest imposed no limitations on MJC’s investigations or the procedures it followed to render its opinion.

MJC acted as an independent financial advisor to the Suncrest board of directors in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the July 27, 2021 meeting, at which the Suncrest board of directors approved the merger agreement, MJC issued its written opinion that, as of that date, the merger consideration was fair, from a financial point of view, to the shareholders of Suncrest. This proxy statement/prospectus summary of the MJC opinion is qualified in its entirety by reference to the full text of the opinion. The full text of the opinion of MJC, dated July 27, 2021, which describes the procedures followed, assumptions made, matters considered and limitations on the review undertaken, is attached hereto as Annex B. Suncrest shareholders should read this opinion in its entirety.

MJC’s opinion is directed only to the fairness, from a financial point of view, of the merger consideration, and, as such, does not constitute a recommendation to any Suncrest shareholder as to how the shareholder

 

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should vote at the special meeting. The summary of the opinion of MJC set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.

The following summary of the analyses performed by MJC is not a complete description of the analyses performed by MJC to render its fairness opinion and is not a complete description of the presentation made by MJC to the Suncrest board of directors. MJC did not attribute any particular weight to any analysis and factor considered by it, but rather made qualitative judgments about the significance and relevance of each analysis and factor. MJC did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of Suncrest, or any class of such persons, if any, relative to the compensation to be received by any other shareholder. MJC believes that its analyses and the following summary must be considered as a whole, and that selecting portions of the analyses without considering all factors could create an incomplete account of its analyses and its fairness opinion.

To carry out its analyses and to render its opinion concerning the fairness of the per share merger consideration, MJC:

 

  (1)

reviewed the merger agreement and terms of the proposed merger;

 

  (2)

reviewed certain historical publicly available business and financial information concerning CVB and Suncrest, including among other things, quarterly and annual reports filed with the FDIC;

 

  (3)

analyzed certain financial projections prepared by the managements of CVB and Suncrest;

 

  (4)

reviewed certain potential scenarios, and business plans, provided by CVB and Suncrest, concerning Citizens following the merger;

 

  (5)

reviewed the terms of recent merger and acquisition transactions, to the extent publicly available, involving banks and bank holding companies that MJC considered relevant; and

 

  (6)

performed such other analyses and considered such other factors as MJC considered appropriate.

MJC also took into account its assessment of general economic, market and financial conditions and its experience in other transactions as well as its knowledge of the banking industry and its general experience in securities valuations.

Without independent verification, MJC assumed the accuracy and completeness of the financial and other information and representations contained in the materials provided by Suncrest and in discussions with Suncrest. MJC assumed that financial forecasts, including, without limitation, the projections regarding under-performing and nonperforming assets and net charge-offs were reasonably prepared on a basis reflecting best currently available information and judgments of Suncrest, and that the forecasts will be realized in the amounts and at the times contemplated thereby. MJC did not evaluate the loan and lease portfolio to assess the adequacy of the allowances for losses, and assumed that the allowance is adequate to cover loan and lease losses. MJC did not conduct a physical inspection of any properties or facilities, did not review individual credit files, and did not make an independent evaluation or appraisal of any properties, assets, or liabilities of CVB or Suncrest, or any of their respective subsidiaries and MJC was not furnished with any such evaluations or appraisals. MJC assumed that the merger will be consummated substantially in accordance with the terms set forth in the merger agreement. MJC further assumed that the merger will be accounted for as a purchase under generally accepted accounting principles. MJC assumed that the merger is, and will be, in compliance with all laws and regulations that are applicable to CVB and Suncrest.

MJC reviewed the financial terms of the proposed merger. Pursuant to the terms of the Merger Agreement, at the effective time of the merger each share of Suncrest common stock issued and outstanding immediately prior to the effective time of the transaction, except for certain shares as set forth in the Merger Agreement, shall be converted into the right to receive, subject to proration and the provisions of the Merger Agreement, without interest: (i) a fractional share of CVB common stock determined by a fixed exchange ratio of 0.6970, plus (ii) cash in the amount

 

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of $2.69 per share. MJC assumed for purposes of its analysis that the consideration mix for the issued and outstanding shares of Suncrest common stock, including consideration for options, would be 80.9% stock and 19.1% cash. MJC calculated an aggregate implied transaction value of approximately $204.3 million and an implied purchase price per share of $16.18 consisting of the implied value of 0.6970 shares of CVB common stock based on the closing price of CVB’s common stock on July 26, 2021 plus cash in the amount of $2.69. Based upon financial information for Suncrest as of or for the last twelve months (“LTM”) ended June 30, 2021 and the closing price of Suncrest’s common stock on July 26, 2021, MJC calculated the following implied transaction metrics:

 

Transaction Price Per Share / Tangible Book Value Per Share

     151%  

Transaction Price Per Share / LTM Earnings Per Share

     12.7x  

Tangible Book Premium / Core Deposits(1)

     6.8%  

Market Premium as of July 26, 2021

     9.7%  

 

(1)

Calculated as (aggregate deal value minus Suncrest’s tangible common equity) divided by (Suncrest’s non-time deposits).

MJC also calculated alternative aggregate and per share implied transaction values based on the volume weighted average closing price of CVB’s common stock over a twenty day period ending on July 26, 2021 and the issuance price stated on the Letter of Intent (“LOI”) signed on June 2, 2021. The aggregate implied transaction value was approximately $208.6 million with an implied price per share of $16.50 based on the volume weighted average closing price of CVB’s common stock over a twenty day period ending on July 26, 2021, and approximately $228.1 million with an implied price per share of $17.98 based on the issuance price stated on the LOI signed on June 2, 2021.

Based upon financial information for Suncrest as of or for the LTM ended June 30, 2021 and the closing price of Suncrest’s common stock on July 26, 2021, MJC calculated the following implied transaction metrics based on the volume weighted average closing price of CVB’s common stock over a twenty day period ending on July 26, 2021 and the issuance price stated on the LOI signed on June 2, 2021:

 

    July 26, 2021
(20-day
VWAP)
  June 2, 2021
(LOI Issuance
Price)

Transaction Price Per Share / Tangible Book Value Per Share

  154%   168%

Transaction Price Per Share / LTM Earnings Per Share

  12.9x   14.1x

Tangible Book Premium / Core Deposits(1)

  7.2%   9.0%

Market Premium as of July 26, 2021

  11.9%   21.9%

 

(1)

Calculated as (aggregate deal value minus Suncrest’s tangible common equity) divided by (Suncrest’s non-time deposits)

In addition, based on Wall Street analyst estimates, MJC calculated the amount of the dividend Suncrest shareholders could expect to receive following a combination with CVB through the year ending December 31, 2022 which demonstrated Suncrest shareholders would receive a cash dividend equivalent to 37% to 42.5% of total net income that Suncrest would generate on a stand-alone basis.

Present Value. Using Suncrest’s projected earnings and tangible book value for years ending December 31, 2021 through December 31, 2026 and assuming 7% to 8% annual asset growth through 2026, based on Suncrest guidance, MJC estimated the terminal value of Suncrest common stock as a multiple of tangible book value and as a multiple of earnings per share. MJC discounted the terminal values back to present value using a range of discount rates. For terminal values at the end of the fifth year, MJC performed two analyses, one assuming a trading multiple range from 1.43x to 1.63x times projected tangible book value per share, and the other assuming a trading multiple range from 16.1x to 18.1x times projected earnings per share. MJC calculated the present value

 

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of these terminal amounts based on discount rates ranging from 9.8% to 11.8%. These rates and values were chosen to reflect different assumptions regarding the required rates of return of holders or prospective buyers of Suncrest’s common stock. The number of shares of Suncrest common stock outstanding remained constant in the projections at the then current number outstanding of 12,256,000. Based on projecting earnings per share of $1.66 in 2026 and tangible book value per share value of $18.70 at the end of 2026 and applying a range of multiples of earnings per share and tangible book value per share, MJC arrived at a range of present values from a low of $16.25 to a high of $20.08 on a tangible book value per share basis, and a low of $16.19 to a high of $19.75 on an earnings per share basis.

 

Terminal value as a multiple of tangible book value per share, discounted to present value

 
            Discount Rate  
        9.8     10.3     10.8     11.3     11.8

Terminal Price / TBV

     1.43x      $ 17.62     $ 17.27     $ 16.92     $ 16.58     $ 16.25  
     1.48x      $ 18.24     $ 17.87     $ 17.51     $ 17.16     $ 16.82  
     1.53x      $ 18.85     $ 18.47     $ 18.10     $ 17.74     $ 17.38  
     1.58x      $ 19.47     $ 19.07     $ 18.69     $ 18.31     $ 17.95  
     1.63x      $ 20.08     $ 19.68     $ 19.28     $ 18.89     $ 18.52  

 

Terminal value as a multiple of earnings per share, discounted to present value

 
            Discount Rate  
        9.8     10.3     10.8     11.3     11.8

Terminal Price / EPS

     16.1x      $ 17.56     $ 17.21     $ 16.86     $ 16.52     $ 16.19  
     16.6x      $ 18.11     $ 17.74     $ 17.38     $ 17.04     $ 16.70  
     17.1x      $ 18.65     $ 18.28     $ 17.91     $ 17.55     $ 17.20  
     17.6x      $ 19.20     $ 18.81     $ 18.43     $ 18.06     $ 17.70  
     18.1x      $ 19.75     $ 19.35     $ 18.96     $ 18.58     $ 18.21  

Comparable Transactions. MJC reviewed a group of comparable merger and acquisition transactions selected by MJC consisting of whole commercial bank acquisition transactions throughout the United States announced on or after January 1, 2021 with publicly available pricing data and in which the target’s total assets were between $750 million and $2 billion, resulting in 22 transactions satisfying the criteria. The group of comparable merger and acquisition transactions is summarized in the table immediately following.

 

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22 U.S. Transactions

 

Acquirer Information

 

Target Information

    Transaction Overview  

Company

 

State

 

Company

 

City, State

  Total
Assets

($millions)
    Announce
Date
    Deal
Value
($millions)
    Multiples / Ratio  
  Price to
last 12
months
earnings
per
share
(x)
    Price to
tangible
book
value

(x)
    Tangible
book
value
premium
/ core
deposits
(%)
 

Blue Ridge Bankshares

  VA   FVC Bankcorp Inc.   Fairfax, VA   $ 1,884.5       07/14/21     $ 306.9       16.9x       1.51x       8.5

Lakeland Bancorp

  NJ   1st Constitution Bancorp   Cranbury, NJ   $ 1,806.2       07/12/21     $ 243.7       12.3x       1.56x       6.5

Mid Penn Bancorp

  PA   Riverview Financial Corp.   Harrisburg, PA   $ 1,374.8       06/30/21     $ 124.7       NM       1.28x       2.8

Valley National Bancorp

  NY   Westchester Bank Holding Corp.   White Plains, NY   $ 1,313.1       06/29/21     $ 219.7       18.0x       1.69x       8.6

Columbia Banking System Inc.

  WA   Bank of Commerce Holdings   Sacramento, CA   $ 1,829.1       06/23/21     $ 268.8       14.7x       1.66x       7.1

Farmers National Banc Corp.

  OH   Cortland Bancorp   Cortland, OH   $ 791.7       06/23/21     $ 124.0       12.6x       1.51x       6.8

Nicolet Bankshares, Inc.

  WI   County Bancorp Inc.   Manitowoc, WI   $ 1,491.3       06/22/21     $ 220.6    

 

15.6x

 

    1.35x       6.9

Simmons First National Corp.

  AR  

Landmark Community Bank

  Collierville, TN   $ 1,006.7       06/07/21     $ 146.3       14.0x       1.43x       8.0

Simmons First National Corp.

  AR   Triumph Bancshares Inc.   Memphis, TN   $ 893.7       06/07/21     $ 131.6       17.2x       1.53x       8.8

United Bankshares, Inc.

  WV   Community Bankers Trust Corp   Richmond, VA   $ 1,698.8       06/03/21     $ 304.7       14.2x       1.68x       11.7

First Bancorp

  NC   Select Bancorp Inc.   Dunn, NC   $ 1,832.3       06/01/21     $ 314.3       23.8x       1.85x       11.0

United Community Banks Inc.

  GA   Aquesta Financial Holdings   Cornelius, NC   $ 752.3       05/27/21     $ 129.2       18.1x       2.14x       11.8

Equity Bancshares Inc.

  KS   American State Bancshares Inc.   Wichita, KS   $ 777.1       05/17/21     $ 76.8       21.6x       1.13x       1.5

Bank of Marin Bancorp

  CA   American River Bankshares   Rancho Cordova, CA   $ 869.0       04/19/21     $ 134.7       18.7x       1.74x       8.4

HPS Investment Partners LLC

  NY  

Marlin Business

Services Corp.

  Mount Laurel, NJ   $ 1,022.0       04/19/21     $ 299.5       NM       1.48x       NA  

Nicolet Bankshares Inc.

  WI   Mackinac Financial Corp   Manistique, MI   $ 1,501.7       04/12/21     $ 248.3       18.3x       1.69x       NA  

VyStar CU

  FL   Heritage Southeast Bancorp.   Jonesboro, GA   $ 1,571.2       03/31/21     $ 194.4       NM       1.84x       7.4

Peoples Bancorp Inc.

  OH   Premier Financial Bancorp Inc.   Huntington, WV   $ 1,945.8       03/29/21     $ 292.4       12.9x       1.39x       NA  

Banc of California Inc.

  CA   Pacific Mercantile Bancorp   Costa Mesa, CA   $ 1,587.6       03/22/21     $ 247.8       29.2x       1.53x       6.7

Stock Yards Bancorp Inc.

 

KY

 

Kentucky Bancshares Inc.

 

Paris, KY

  $ 1,200.5       01/27/21     $ 191.3       16.3x       1.71x       NA  

First Busey Corp.

 

IL

 

Cummins-American Corp.

 

Glenview, IL

  $ 1,395.4       01/19/21     $ 130.8       17.1x       1.12x       1.3

BancorpSouth Bank

 

MS

 

FNS Bancshares Inc.

 

Scottsboro, AL

  $ 786.5       01/13/21     $ 108.4       19.4x       1.54x       6.5
    25th Percentile   $ 922.0       $ 131.0       14.5x       1.44x       6.6
  Average   $ 1,333.3       $ 202.7       17.4x       1.56x       7.2
  Median   $ 1,385.1       $ 207.1       17.1x       1.53x       7.3
  75th Percentile   $ 1,671.0       $ 263.7       18.5x       1.69x       8.6

 

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MJC calculated the average, median, 25th percentile rank, and 75th percentile rank in terms of deal price as a percent tangible book value; deal price as a percent of last-twelve-months earnings per share, and deal price minus tangible book value as a percent of core deposits. MJC applied these results to produce a range of implied values for Suncrest common stock based on last-twelve-months earnings per share, tangible book value, and core deposits as of June 30, 2021; taking the average of deal price as a percent of last-twelve-months earnings per share, deal price as a percent of tangible book value, and deal price minus tangible book value as a percent of core deposits to establish a range from 25th percentile to 75th percentile and median. MJC utilized the 25th percentile, median, and 75th percentile multiples to determine an implied value of Suncrest’s common stock. Based on this analysis of the selected transactions, the implied value of Suncrest common stock using the average of the three multiples ranged from $16.92 to $20.15 when all transactions from both groups of transactions were considered as summarized in the tables immediately following.

 

22 U.S. transactions  
     Deal price multiple     Suncrest Bank implied value per share  
     25h
percentile
    Median     75th
percentile
    25th
percentile
     Median      75th
percentile
 

Deal price as a percent of last 12 months earnings per share

     14.5x       17.1x       18.5x     $ 18.43      $ 21.76      $ 23.59  

Deal price as a percent of tangible book value

     1.44x       1.53x       1.69x     $ 15.48      $ 16.44      $ 18.13  

Deal price minus tangible book value, as a percent of core deposits

     6.6     7.3     8.6   $ 16.84      $ 17.50      $ 18.72  
        

 

 

    

 

 

    

 

 

 
     Three factor average     $ 16.92      $ 18.57      $ 20.15  
        

 

 

    

 

 

    

 

 

 

Operating Metrics. MJC considered Suncrest’s financial performance as of or for the twelve months ended June 30, 2021 relative to the selected group of target institutions, considering target financial performance as of or for the most recent twelve months ended at the transaction announcement dates. Specifically, MJC considered four financial metrics: (1) tangible common equity as a percent of total assets, (2) last 12 months’ return on average assets, (3) last 12 months’ return on average equity, and (4) nonperforming assets as a percent of total assets. For this purpose, nonperforming assets include all nonaccrual loans, loans 90 days or more past due but still accruing, restructured loans, and other real estate owned.

 

     Tangible
common equity
as a percent of
total assets
    Last 12
months’
return on

average
assets
    Last 12
months’
return on
average
equity
    Nonperforming
assets as a
percent of total
assets
 

22 U.S. Transactions

   25th percentile      9.0     0.78     6.4     0.54
   Average      10.0     0.78     7.2     1.00
   Median      9.8     0.97     8.7     0.76
   75th percentile      10.2     1.07     10.4     1.03
     

 

 

   

 

 

   

 

 

   

 

 

 
   Suncrest Bank      9.9     1.22     9.6     0.35
     

 

 

   

 

 

   

 

 

   

 

 

 

Based on Suncrest’s financial performance as measured by these four financial metrics and the Present Value – tangible book value basis, present value – earnings per share basis and the comparable transaction analyses described above, MJC derived an estimated range of minimum and maximum values for Suncrest common stock as follows:

 

     Estimate of value per share  
     Minimum      Maximum  

Present Value – TBV basis

   $ 16.25      $ 20.08  

Present Value – EPS basis

   $ 16.19      $ 19.75  

U.S. M&A Transactions (22 transactions)

   $ 16.92      $ 20.15  

Estimated Range of Value

     $16.00 - $18.00      

 

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Proforma Merger Analysis. MJC analyzed certain potential pro forma effects of the merger, based on the assumptions that (i) the merger is completed in the fourth calendar quarter of 2021 and (ii) each share of outstanding Suncrest common stock will be converted into the right to receive 0.6970 shares of CVB common stock and $2.69 in cash. MJC also incorporated the following assumptions: (i) financial projections for CVB for the years ending December 31, 2021 through December 31, 2023 based on Wall Street analyst estimates and per MJC thereafter through the year ending December 31, 2026 based on MJC estimates; (ii) internal financial projections for Suncrest for the years ending December 31, 2021 through December 31, 2026 based upon MJC estimates and discussions with Suncrest’s senior management; (iii) purchase accounting adjustments consisting of (a) a credit mark on loans and (b) core deposit intangibles; (iv) estimated annual cost savings based on estimates provided by CVB and its representatives; and (v) estimated, pre-tax, one-time transaction costs based on estimates provided by Suncrest. The analysis indicated that the merger could be accretive to CVB’s estimated earnings per share in 2022 and immediately dilutive to estimated tangible book value. In connection with these analyses, MJC considered and discussed with Suncrest’s board of directors and senior management of CVB how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the merger, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Based on these analyses and other investigations and assumptions set forth in its opinion, MJC determined that as of July 27, 2021, the date on which the Suncrest’s board of directors approved the merger agreement, the merger consideration was fair from a financial point of view to Suncrest shareholders.

MJC’s Relationship. MJC is acting as Suncrest’s financial advisor in connection with the merger. MJC received a fee of $100,000 for rendering its written opinion to the Suncrest board of directors concerning the fairness to Suncrest shareholders of the merger consideration. This fee is creditable against a transaction success fee equal to $2,300,000 which MJC will be entitled to receive if the merger is completed. In addition, Suncrest has agreed to indemnify MJC against certain claims or liabilities arising out of MJC’s engagement. In the two years prior the issuance of this opinion, MJC had a material relationship with Suncrest for which MJC received compensation, in the form of a retainer, to act as Suncrest’s financial advisor and to render certain financial advisory and investment banking services in connection with Suncrest’s consideration of strategic alternatives.

CVB’s Reasons for the Merger

In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the CVB board of directors consulted with CVB senior management, as well as its financial and legal advisors, and considered a number of factors, including the following material factors:

 

   

each of CVB’s, Suncrest’s and the combined company’s business, operations, financial condition, asset quality, earnings and prospects;

 

   

the opportunity to grow CVB’s presence in the Sacramento region of California and complement CVB’s existing franchise and the opportunity to strengthen and consolidate its position in the Central Valley area of California;

 

   

the cost savings available in the proposed merger, as well as the potential for revenue enhancement, which create the opportunity for CVB to have greater future earnings and prospects compared to CVB’s earnings and prospects on a stand-alone basis;

 

   

the potential risks associated with successfully integrating CVB’s business, operations and workforce with those of Suncrest, and CVB’s past record of integrating acquisitions and realizing projected benefits of acquisitions;

 

   

its review and discussions with CVB’s management and advisors concerning the due diligence examination of Suncrest;

 

   

the opportunity to add customers at branches and leverage Citizens’ existing operations and platform;

 

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management’s expectation that CVB will continue to have a strong capital position upon completion of the merger;

 

   

Suncrest’s financial position and deposit base;

 

   

the analysis, presentations and materials presented by its financial advisor, Piper Sandler;

 

   

its review with its legal advisors, including Manatt, Phelps & Phillips, LLP, of the merger agreement and other agreements, including the provisions of the merger agreement designed to enhance the probability that the merger will be completed on terms acceptable to CVB;

 

   

the potential risk of diverting management attention and resources from the operation of CVB’s business and towards the completion of the merger and the integration of Suncrest;

 

   

the regulatory and other approvals required in connection with the merger and CVB’s belief that such regulatory approvals will be received in a reasonably timely manner and without the imposition of unacceptable conditions; and

 

   

the possibility of litigation challenging the merger, and CVB’s belief that any such litigation would be without merit.

The foregoing discussion of the information and factors considered by the CVB board of directors is not intended to be exhaustive, but includes the material factors considered by the CVB board of directors. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the CVB board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The CVB board of directors considered all these factors as a whole, including discussions with, and questioning of, CVB’s senior management and CVB’s advisors, and overall considered the factors to be favorable to, and to support its determination to approve entering into the merger agreement.

This explanation of CVB’s reasons for the merger and other information presented in this section is forward-looking in nature and should be read in light of the section entitled “Cautionary Statement Regarding Forward-Looking Statements.

CVB’s board of directors realized that there can be no assurance about future results, including results expected or considered in the factors listed above, such as assumptions regarding enhanced business prospects, anticipated cost savings and earnings accretion/dilution. The CVB board of directors concluded, however, that the potential positive factors outweighed the potential risks of completing the merger.

Governing Documents

The articles of incorporation and bylaws of CVB and Citizens will continue to be the articles of incorporation and bylaws of CVB and Citizens following the merger, in each case until thereafter changed or amended as provided therein or by applicable law. Citizens’ articles of incorporation and bylaws, as in effect immediately prior to the closing of the merger, will be the articles of incorporation and bylaws of the combined company.

The rights of Suncrest shareholders who continue as CVB shareholders after the merger will be governed by the articles of incorporation and bylaws of CVB rather than the articles of incorporation and bylaws of Suncrest. For more information, please see the section entitled “Comparison of Rights of Shareholders of CVB and Suncrest” beginning on page 78.

Board of Directors and Officers of CVB and Citizens After the Merger

The directors and officers of CVB and Citizens immediately prior to the effective time of the merger will be the directors and officers of the surviving corporation until the earlier of their resignation or removal or until their respective successors are duly appointed and qualified.

 

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Information about the current CVB directors and executive officers can be found in the proxy statement for the 2021 CVB annual meeting of shareholders listed under the section entitled “Incorporation of Certain Documents by Reference” on page 87 and “Where You Can Find Additional Information.”

Interests of Suncrest Directors and Executive Officers in the Merger

In considering the recommendations of the Suncrest board of directors, Suncrest shareholders should be aware that certain directors and executive officers of Suncrest have interests in the merger that may differ from, or may be in addition to, the interests of Suncrest shareholders generally. These interests are described in more detail and quantified below. The Suncrest board of directors was aware of these interests and considered them, among other matters, when it approved the merger agreement and in making its recommendations that the Suncrest shareholders approve the merger proposal. For purposes of all Suncrest agreements and plans described below, the completion of the transactions contemplated by the merger agreement will constitute a change of control or term of similar meaning.

Stock Ownership

As of September 21, 2021, the directors and executive officers of Suncrest owned, in the aggregate 1,643,565 shares of Suncrest common stock, representing approximately 13.40% of the shares of Suncrest common stock outstanding on that date. Each Suncrest director and executive officer has entered into a voting and support agreement with CVB and Suncrest, pursuant to which he or she has agreed, among other things, to vote all of his or her shares of Suncrest common stock in favor of the merger proposal and other matters required to be approved or adopted to effect the merger and any other transactions contemplated by the merger agreement. The voting agreements are substantially in the form of Exhibit A to the merger agreement, which is attached as Annex A to this proxy statement/prospectus. Each of the directors and executive officers of Suncrest will receive the same stock consideration for their shares of Suncrest common stock as the other Suncrest shareholders.

Treatment of Suncrest Equity Awards

Suncrest Options. At the effective time of the merger, each Suncrest option that is outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be cancelled and will only entitle the holder of such Suncrest option to receive, as soon as administratively practicable after the effective time, an amount in cash equal to the product of (i) the total number of shares subject to such Suncrest option and (ii) the excess, if any, of (A) the Stock Option Cashout Price over (B) the exercise price per share under such Suncrest option, less any applicable taxes required to be withheld with respect to such payment. Any Suncrest options which have an exercise price per share that is greater than or equal to the Stock Option Cashout Price will be cancelled at the effective time of the merger for no consideration or payment.

Suncrest Stock Awards. At the effective time of the merger, each Suncrest Stock Award will, automatically and without any required action on the part of the holder thereof, accelerate in full and such Suncrest Stock Awards will be converted into, and become exchanged for, the merger consideration, less applicable taxes required to be withheld with respect to such vesting.

 

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The table below sets forth information regarding the Suncrest options and Suncrest Stock Awards held by each of Suncrest’s executive officers and directors as of November 15, 2021. The total payout value of each Suncrest option and Suncrest Stock Award is determined by reference to the latest available closing price of the common stock of CVB, which was $19.16.

 

Name   Number of
Vested
Options Held
    Weighted
Average
Exercise Price
of Vested
Options ($)
    Number of
Unvested
Stock
Options Held
    Weighted
Average Exercise
Price of
Unvested
Options ($)
    Value of
Accelerated
Options ($)
    Total Number of
Unvested
Suncrest Stock
Awards
    Value of
Accelerated
Suncrest
Stock Awards
    Total Value
($)
 

Executive Officers

               

Ciaran McMullan

    512,550       9.66       12,500       9.75       78,682       —         —         3,351,088  

Jean Carandang

    28,800       11.00       19,200       11.00       96,855       —         —         242,138  

Steven Jones

    19,800       11.00       13,200       11.00       66,588       5,000       80,223       246,693  

Peter Nutz

    67,000       9.47       28,000       11.00       141,247       —         —         581,743  

Non-Employee Directors

            —             —    

William A. Benneyan

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

David C. Crinklaw

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

John A. DiMichele

    —           —           —         —         —          

Daniel C. Jacuzzi

    6,000       11.00       4,000       11.00       20,178       —         —         50,445  

Dale B. Margosian

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

Chadwick B. Meyer

    —           —           —         —         —         —    

Florencio (Frank) Paredez

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

Matthew B. Pomeroy

    6,000       11.00       4,000       11.00       20,178       —         —         50,445  

Marc R. Schuil

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

Eric M. Shannon

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

Michael E. Thurlow

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

Darrell E. Tunnell

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

Eric J. Wilkins

    16,000       8.56       4,000       11.00       20,178       —         —         139,131  

Payments Under Employment Agreement and Change in Control Agreements

Employment Agreement. Suncrest is party to an employment agreement with Ciaran McMullan. Pursuant to his employment agreement, Mr. McMullan currently receives an annual base salary of $300,000. Mr. McMullan’s employment agreement also provides that he is eligible to earn an annual incentive compensation payment in an amount equal to up to 2.0% of Suncrest’s annual pre-tax income, prorated for any partial year of service, or such other amount as the Suncrest board of directors shall approve.

Mr. McMullan’s employment agreement provides that he will receive certain benefits in the event of a “Change in Control” (as defined therein). Upon the occurrence of a Change in Control, Mr. McMullan will be entitled to receive benefits consisting of (i) a lump sum cash payment in an amount equal to two (2) times the sum of his

 

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(A) annual base salary and (B) the average bonus or incentive compensation amount paid to him in the three (3) year period immediately preceding his termination, less applicable withholding deductions; (ii) acceleration of vesting of any equity awards granted to him; and (iii) in the event of his termination of employment, continuation of COBRA coverage for Mr. McMullan and his dependents for a period of twenty-four (24) months from the date of such termination. Suncrest’s obligation to pay the premium costs related to such COBRA continuation will terminate upon the earlier of the expiration of twenty-four (24) months from the date of termination or the date of commencement of comparable insurance coverages for Mr. McMullan by another employer.

Mr. McMullan’s receipt of the benefits described above is subject to his execution of a general release of claims in favor of Suncrest.

Change in Control Agreements. Suncrest is a party to a Change in Control Agreement with four executives, Jean Carandang, Steven Jones, Peter Nutz and Dennis Johnson (each, a “Change in Control Agreement”). Each Change in Control Agreement provides that the executive will be entitled to receive certain benefits in the event of a “Change in Control” (as defined therein) during the executive’s employment by Suncrest.

Such benefits will consist of (i) a lump sum cash payment in an amount equal to one (1) times the executive’s (A) annual base salary during the year in which a Change in Control occurs and (B) the average annual bonus or incentive compensation amount paid to the executive in the three (3) calendar year period ending immediately preceding the year in which the Change in Control occurs, less applicable withholding deductions; (ii) acceleration of vesting of any equity awards granted to the executive; and (iii) continuation of COBRA coverage for the executive and his or her dependents, in the event the executive’s service to Suncrest is terminated, for a period of twelve (12) months from the date of termination. Suncrest’s obligation to pay the premium costs related to such COBRA continuation shall terminate upon the earlier of the expiration of twelve (12) months from the date of termination or the date of commencement of comparable insurance coverages for the executive by another employer.

Each Change in Control Agreement provides that the executive’s receipt of the change in control benefits provided for thereunder shall be subject to the executive’s execution of an effective general release in favor of Suncrest. The change in control benefits payable under each such Change in Agreement are also subject to reduction to the extent such benefits would result in the payment of a parachute payment within the meaning of Section 280G of the Code.

Indemnification and Insurance of Directors and Officers

Pursuant to the terms of the merger agreement, each of CVB and Citizens (as the surviving corporation) have agreed, from and after the effective time of the merger, to indemnify and hold harmless each present and former director and officer of against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of actions or omissions of such persons in the course of performing their duties for Suncrest occurring at or before the effective time of the merger, and to advance expenses as incurred to the fullest extent permitted under applicable law; provided, however, the person to whom such expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

Pursuant to the merger agreement, CVB or Citizens (as the surviving corporation) have agreed to provide that portion of director’s and officer’s liability insurance for a period of six (6) years following the effective time of the merger to reimburse each present and former director and officer of Suncrest with respect to claims against such persons arising from facts or events which occurred at or before the effective time of the merger, which insurance will contain terms and conditions providing substantially equivalent benefits as the current policies of

 

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the director’s and officer’s liability insurance maintained by Suncrest, covering without limitation, the merger and other transactions contemplated by the merger agreement at an aggregate cost up to but not exceeding 250% of the current annual premium for such insurance.

Merger-Related Compensation for Suncrest’s Named Executive Officers

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation of each of Suncrest’s named executive officers that is based on or otherwise relates to the merger. The consummation of the merger will constitute a change of control of Suncrest under the terms of the employment agreements and other employment arrangements between Suncrest and its named executive officers. The table below describes the estimated potential payments to each of Suncrest’s named executive officers under the terms of their employment arrangements, their Suncrest equity awards and the merger agreement. The severance benefits shown reflect only the additional payments or benefits that the individual would have received upon the occurrence of an involuntary termination. The amounts shown do not include the value of payments or benefits that would have been earned absent such an involuntary termination.

Please note the amounts shown in the table are estimates only and are based on assumptions regarding events that may or may not actually occur, including assumptions described in this proxy statement/prospectus and in the notes to the table below, which may or may not actually occur or may occur at times different than the time assumed. The figures in the table are estimates based on compensation levels as of the date of this proxy statement/prospectus and an assumed effective date of November 15, 2021, for both the merger and, where applicable, termination of the named executive officer’s employment. As a result of the foregoing assumptions, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.

Potential Change in Control Payments to Named Executive Officers

 

Name

   Cash
($) (1)
     Equity
($) (2)
     Perquisites/
Benefits
($) (3)
     Total
($) (4)
 

Ciaran McMullan

     796,043        78,682        32,359        907,084  

Jean Carandang

     310,739        96,855        25,316        432,910  

Steven Jones

     301,499        146,810        25,316        473,625  

Peter Nutz

     342,592        141,247        25,280        509,119  

 

(1)

Pursuant to the employment agreement between Mr. McMullan and Suncrest dated as of April 1, 2017 (the “McMullan Employment Agreement”), in the event that a change in control of Suncrest occurs during Mr. McMullan’s employment with Suncrest, Mr. McMullan would be entitled to receive a lump sum payment equal to two (2) times (i) his annual base salary during the year of termination; plus (ii) the average bonus or incentive compensation amount paid to him in the three (3) year period immediately preceding the termination. These cash payments to Mr. McMullan constitute a single-trigger (closing of the merger) benefit that will be received solely because of the merger and regardless of whether Mr. McMullan is terminated.

Each of Ms. Carandang and Messrs. Jones and Nutz is party to a Change in Control Agreement with Suncrest, which entitles the executive to certain benefits upon a change in control of Suncrest. In the event of such a change in control, the executive will be entitled to receive a cash payment in an amount equal to the sum of the executive’s (i) annual base salary during the year in which a Change in Control occurs; and (ii) the average annual bonus or incentive compensation amount paid to the executive in the three (3) calendar year period ending immediately preceding the year in which the Change in Control occurs. These cash payments to Ms. Carandang and Messrs. Jones and Nutz are single-trigger (closing of the merger) benefits that will be received solely because of the merger and regardless of whether a named executive officer is terminated.

 

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The cash payments described in this column include the following components:

 

Name

   Base Salary
($)
     Bonus
($)
     Total
($)
 

Ciaran McMullan

     600,000        196,043        796,043  

Jean Carandang

     250,000        60,739        310,739  

Steven Jones

     245,000        56,499        301,499  

Peter Nutz

     270,000        72,592        342,592  

 

(2)

Outstanding Suncrest stock options, whether vested or unvested, will be cancelled and cashed out as set forth in the merger agreement, and outstanding Suncrest Stock Awards, whether vested or unvested, will be accelerated in full and such Suncrest Stock Awards will be converted into, and become exchanged for, the merger consideration, in each case as described under “Treatment of Suncrest Equity Awards” above. The amount listed in this column represents the estimated value of the unvested stock options and Suncrest Stock Awards held by the named executive officers as to which vesting will occur at the effective time of the merger. The payments calculated below with respect to each award were based on a price per share of CVB’s common stock of $19.16, which represents the average closing trading price of CVB common stock over the first five business days following the first public announcement of the merger. The acceleration, cancellation and cash out of such unvested stock options, and the acceleration and exchange of such Suncrest Stock Awards, are single-trigger (closing of the merger) benefits that will be received solely because of the merger and regardless of whether a named executive officer is terminated.

 

Name

   Number of Unvested
Stock Options
Subject to
Acceleration
     Value of
Accelerated
Stock Option
Vesting
     Number of
Unvested
Suncrest Stock
Awards Subject
to Acceleration
     Value of
Accelerated
Suncrest Stock
Awards
     Total Value of
Unvested
Equity
Acceleration
 

Ciaran McMullan

     12,500      $ 78,682        —        $         —        $ 78,682  

Jean Carandang

     19,200        96,855        —        $ —        $ 96,855  

Steven Jones

     13,200        66,588        5,000      $ 80,223      $ 146,810  

Peter Nutz

     28,000        141,247        —          —          141,247  

 

(3)

Pursuant to the McMullan Employment Agreement, in the event that Mr. McMullan’s employment with Suncrest is terminated in connection with a Change in Control, Mr. McMullan will be entitled to continuation of COBRA coverage for Mr. McMullan and his dependents for a period of twenty-four (24) months from the date of termination. Suncrest has estimated the value of such benefits to be $1,348.29 per month. These payments are considered to be single-trigger benefits, as they will become payable upon any termination of employment.

Pursuant to their respective Change in Control Agreements, in the event that Ms. Carandang and Messrs. Jones and Nutz are terminated, the executive would be entitled to continuation of COBRA coverage for the executive and his or her dependents for a period of twelve (12) months from the date of termination. Suncrest has estimated the value of such benefits to be (i) $2,106.64 per month for Mr. Nutz; and (ii) $2,109.64 for Ms. Carandang and Mr. Jones. These payments to Ms. Carandang and Messrs. Jones and Nutz are considered to be single-trigger benefits, as they will become payable upon any termination of employment.

 

(4)

The amounts in this column represent the aggregate dollar value of the amounts in the preceding three columns. All of these payments are considered to be single-trigger benefits.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of Suncrest common stock who exchange shares of Suncrest common stock for shares of CVB

 

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common stock and cash pursuant to the merger. This discussion does not address the tax consequences of transactions effectuated prior or subsequent to, or concurrently with, the merger (whether or not such transactions are undertaken in connection with the merger).

The following discussion is based on the Code, Treasury regulations promulgated thereunder, judicial decisions and published administrative rulings, all as currently in effect as of the date hereof, and all of which are subject to change, possibly with retroactive effect. Any such change could affect the continuing validity of this discussion.

For purposes of this discussion, a “U.S. holder” means a holder of Suncrest common stock who is, for U.S. federal income tax purposes:

 

   

a citizen or resident of the United States;

 

   

a corporation, or an entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state or political subdivision thereof (including the District of Columbia);

 

   

a trust that (1) is subject to (A) the primary supervision of a court within the United States and (B) the authority of one or more “U.S. persons” to control all substantial decisions of the trust or (2) has a valid election in effect under applicable Treasury regulations to be treated as a “U.S. person”; or

 

   

an estate that is subject to U.S. federal income tax on its income regardless of its source.

If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds Suncrest common stock, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding Suncrest common stock, you should consult your tax advisor regarding the tax consequences of the merger.

This discussion addresses only those Suncrest shareholders that are U.S. holders and that hold their Suncrest common stock as a capital asset within the meaning of Section 1221 of the Code for U.S. federal income tax purposes, and does not address (i) tax consequences applicable to Suncrest shareholders that are not U.S. holders, (ii) all U.S. federal income tax consequences that may be relevant to particular Suncrest shareholders in light of their individual circumstances, or (iii) Suncrest shareholders that are subject to special rules, such as:

 

   

financial institutions;

 

   

pass-through entities or investors in pass-through entities;

 

   

regulated investment companies;

 

   

real estate investment trusts;

 

   

insurance companies;

 

   

tax-exempt organizations;

 

   

dealers in securities or currencies;

 

   

certain expatriates or other persons whose functional currency is not the U.S. dollar;

 

   

traders in securities that elect to use a mark to market method of accounting;

 

   

persons who exercise dissenters’ rights;

 

   

persons that hold Suncrest common stock as part of a straddle, hedge, constructive sale, conversion transaction, or other integrated transaction for U.S. federal income tax purposes; or

 

   

shareholders who acquired their shares of Suncrest common stock through the exercise of an employee stock option or otherwise as compensation or through a tax-qualified retirement plan.

 

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In addition, the discussion does not address those subject to the alternative minimum tax provisions of the Code or any state, local or foreign tax consequences of the merger, nor does it address any federal laws other than those pertaining to income tax.

CVB and Suncrest have structured the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, (i) CVB has received an opinion of Manatt, Phelps & Phillips, LLP that, as of the date of such opinion, if certain factual circumstances exist, the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and (ii) Suncrest has received an opinion of Sheppard, Mullin, Richter & Hampton, LLP that, as of the date of such opinion, if certain factual circumstances exist, the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Additionally, CVB will not be required to consummate the merger unless CVB receives an additional opinion of Manatt, Phelps & Phillips, LLP, dated as of the closing date of the merger, confirming that the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Similarly, Suncrest will not be required to consummate the merger unless Suncrest receives an additional opinion of Sheppard, Mullin, Richter & Hampton, LLP, dated as of the closing date of the merger, confirming that the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. The opinions of Manatt, Phelps & Phillips, LLP and Sheppard, Mullin, Richter & Hampton, LLP regarding the merger will be based on factual assumptions, representations, warranties and covenants, including those contained in the merger agreement and in tax representation letters provided by CVB, Citizens and Suncrest. The accuracy of such assumptions, representations and warranties, and compliance with such covenants, could affect the conclusions set forth in such opinions. Neither of these opinions will be binding on the Internal Revenue Service (“IRS”) or on any court. CVB and Suncrest have not requested and do not intend to request any ruling from the IRS as to the U.S. federal income tax consequences of the merger. Accordingly, each Suncrest shareholder should consult his, her or its tax advisor with respect to the particular tax consequences of the merger to such holder. The remainder of this discussion assumes that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

Tax Consequences of the Merger Generally. On the basis of the opinions delivered in connection herewith:

 

   

no gain or loss will be recognized by CVB or Suncrest as a result of the merger;

 

   

gain (but not loss), if any, will be recognized by those U.S. holders who receive shares of CVB common stock and cash in exchange for shares of Suncrest common stock pursuant to the merger in an amount equal to the lesser of (1) the amount of gain realized (i.e., the excess of the sum of the amount of cash (excluding any cash received in lieu of a fractional share) and the fair market value of the CVB common stock received pursuant to the merger over the adjusted tax basis in the Suncrest common stock surrendered), and (2) the amount of cash received by such holder of Suncrest common stock (excluding any cash received in lieu of a fractional share);

 

   

the aggregate tax basis in the shares of CVB common stock received by a U.S. holder of Suncrest common stock in the merger (including any fractional share interests deemed received and sold as described below) will equal the aggregate tax basis of the Suncrest common stock surrendered, decreased by the amount of cash received in the merger (excluding any cash received in lieu of a fractional share), and increased by the amount of gain, if any, recognized (excluding any gain recognized with respect to cash received in lieu of a fractional share) on the exchange (regardless of whether such gain is classified as capital gain, or as ordinary dividend income, as discussed below); and

 

   

the holding period of CVB common stock received in exchange for shares of Suncrest common stock (including fractional shares of CVB common stock deemed received and sold as described below) will include the holding period of the Suncrest common stock that is surrendered in the merger.

 

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If a U.S. holder of Suncrest common stock acquired different blocks of Suncrest common stock at different times or at different prices, any gain or loss will be determined separately with respect to each block of Suncrest common stock and such holder’s basis and holding period in his or her shares of CVB common stock may be determined with reference to each block of Suncrest common stock. Any such holders should consult their tax advisors regarding the manner in which cash and CVB common stock received in the exchange should be allocated among different blocks of Suncrest common stock and with respect to identifying the bases or holding periods of the particular shares of CVB common stock received in the merger.

Taxation of Gains. Gain that U.S. holders of Suncrest common stock recognize in connection with the merger generally will constitute capital gain and will constitute long-term capital gain if such holders have held (or are treated as having held) their Suncrest common stock for more than one year as of the date of the merger. Long-term capital gain of non-corporate U.S. holders of Suncrest common stock is generally taxed at preferential rates. In some cases, if a U.S. holder of Suncrest common stock actually or constructively owns CVB stock other than CVB stock received pursuant to the merger, the recognized gain could be treated as having the effect of a distribution of a dividend under the tests set forth in Section 302 of the Code, in which case such gain would be treated as dividend income. Because the possibility of dividend treatment depends primarily upon each U.S. holder’s particular circumstances, including the application of various constructive ownership rules, U.S. holders of Suncrest common stock should consult their tax advisors regarding the application of the foregoing rules to their particular circumstances.

Cash Received Instead of a Fractional Share of CVB Common Stock. If a U.S. holder of Suncrest common stock receives cash instead of a fractional share of CVB common stock, he or she will be treated as having received the fractional share of CVB common stock pursuant to the merger and then as having exchanged the fractional share of CVB common stock for cash in a redemption by CVB. As a result, the U.S. holder of Suncrest common stock will generally recognize gain or loss equal to the difference between the amount of cash received and the basis allocable to the fractional share interest as set forth above. Subject to the discussion above regarding possible dividend treatment, this gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the holding period for such shares is greater than one year. The deductibility of capital losses is subject to limitations.

Additional Medicare Tax. Certain non-corporate U.S. holders of Suncrest common stock whose income exceeds certain thresholds may also be subject to an additional 3.8% tax on their “net investment income” up to the amount of such excess. Gain or loss recognized in the merger will be includable in such holder’s net investment income for purposes of this tax. Non-corporate U.S. holders of Suncrest common stock should consult their own tax advisors regarding the possible effect of this tax.

Backup Withholding and Information Reporting. Payments of cash to a U.S. holder of Suncrest common stock may, under certain circumstances, be subject to information reporting and backup withholding, unless such holder provides proof of an applicable exemption satisfactory to CVB and the exchange agent or, in the case of backup withholding, furnishes its correct taxpayer identification number and generally otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a U.S. holder of Suncrest common stock under the backup withholding rules do not represent additional tax and will be allowed as a refund or credit against such holder’s U.S. federal income tax liability, provided the required information is furnished in a timely manner to the IRS.

Reporting Requirements. If a U.S. holder of Suncrest common stock who receives CVB common stock in the merger is considered a “significant holder,” such holder will be required (1) to file a statement with such holder’s U.S. federal income tax return providing certain facts pertinent to the merger, including the tax basis (determined immediately before the exchange) in the Suncrest common stock surrendered and the fair market value (determined immediately before the exchange) of the CVB common stock received in the merger, and (2) to retain permanent records of these facts relating to the merger. A “significant holder” for this purpose is any U.S. holder of Suncrest common stock who, immediately before the merger, (i) owns at least 1% (by vote or value) of Suncrest common stock or (ii) owns Suncrest securities with a tax basis of $1 million or more.

 

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The discussion set forth above does not address all U.S. federal income tax consequences that may be relevant to U.S. holders of Suncrest common stock and may not be applicable to such holders that are subject to special rules. It is not a complete analysis or discussion of all potential tax effects that may be important to you. Thus, you are strongly encouraged to consult your tax advisor as to the specific tax consequences resulting from the merger, including tax return reporting requirements, the applicability and effect of federal, state, local, and other tax laws and the effect of any proposed changes in the tax laws.

Regulatory Approvals Required for the Merger

Completion of the merger is subject to the receipt of all approvals required to complete the transactions contemplated by the merger agreement, including the merger, from the FDIC and the CDFPI and the expiration of any applicable statutory waiting periods, in each case subject to the condition that none of the approvals shall contain any “materially burdensome regulatory condition.”

The merger agreement defines a “materially burdensome regulatory condition” as any action, condition or restriction that

 

   

would reasonably be likely to have a material adverse effect on CVB; or

 

   

require CVB, Citizens or the combined company to increase its capital levels or accept any restriction on its ability to operate its businesses, in each case, that would materially reduce the economic benefits of the merger to CVB and Citizens to such a degree that CVB and Citizens, in good faith after consultation with Suncrest, would not have entered into the merger agreement had such conditions, restrictions or requirements been known as of the date of the merger agreement.

CVB and Suncrest have agreed to reasonably cooperate with each other and use their respective commercially reasonable efforts to obtain as promptly as practicable all consents and approvals of all governmental authorities to consummate the merger. CVB and Suncrest have filed applications and notifications to obtain these regulatory approvals.

Although the parties currently believe they should be able to obtain all required regulatory approvals or waivers in a timely manner, they cannot be certain when or if they will obtain them or, if obtained, whether they will contain any materially burdensome regulatory condition to the merger.

FDIC Application under the Bank Merger Act

Prior approval of the bank merger is required pursuant to Section 18(c) of the Federal Deposit Insurance Act, which we refer to as the “Bank Merger Act.” Because Citizens is a state-chartered bank that is not a member of the Federal Reserve System, Citizens is required to file its Bank Merger Act application with the FDIC. In evaluating an application filed under the Bank Merger Act, the FDIC takes into consideration, among other things: (i) the competitive impact of the proposed transactions, (ii) financial and managerial resources and future prospects of the banks that are party to the merger, (iii) the convenience and needs of the communities served by the banks and their compliance with the CRA, (iv) the banks’ effectiveness in combating money-laundering activities, and (v) the extent to which the proposed transactions would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. In connection with its review under the Bank Merger Act, the FDIC provides an opportunity for public comment on the application for the merger and is authorized to hold a public meeting or other proceeding if it determines that would be appropriate.

The CRA requires that the bank regulatory authorities, in deciding whether to approve the merger, assess the records of performance of Citizens and Suncrest in meeting the credit needs of the communities they serve, including low and moderate income neighborhoods. A less than satisfactory CRA rating could delay or block the consummation of the merger.

 

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Citizens received a composite rating of “satisfactory” at its most recent CRA performance evaluation, and Suncrest received a composite rating of “satisfactory” at its most recent CRA performance evaluation. Citizens and Suncrest believe that the merger will facilitate the enhancement of the combined company’s performance under CRA guidelines as Citizens offers a broader range of services and products that will enhance the lending, investment and service offerings of Suncrest’s customers particularly for low to moderate income businesses and individuals. Additionally, the combined company will gain efficiencies that will allow, among other factors, for more investment in alternative delivery channels such as mobile banking, ATMs, and call centers. Citizens and Suncrest believe that the merger meets all the material requirements of the CRA, although there is no assurance that bank regulatory authorities will approve the merger or will approve the merger without imposing conditions on the completion of the merger or requiring changes to the terms of the merger. In the event that any such conditions or changes are imposed, they could have the effect of delaying completion of the merger or imposing additional costs on or limiting the growth, revenues or other aspects of the business of the combined company following the merger. In addition, while both Citizens and Suncrest have garnered positive CRA ratings, as part of the review process under the CRA, it is not unusual for the bank regulatory authorities to receive protests and other adverse comments from community groups and others. If any such protests or adverse comments are submitted in connection with the present merger, any resulting evaluation by the bank regulatory authorities could prolong the period during which the merger is subject to review or could influence any decision by such authorities to approve or impose conditions on the approval of the merger.

Transactions approved by the FDIC under the Bank Merger Act generally may not be completed until 30 days after the approval of the FDIC is received, during which time the Department of Justice may challenge the transaction on antitrust grounds. With the approval of the FDIC and the concurrence of the Department of Justice, the waiting period may be reduced to no less than 15 days. The commencement of an antitrust action would stay the effectiveness of such an approval unless a court specifically orders otherwise. In reviewing the merger, the Department of Justice could analyze the merger’s effect on competition differently than does the FDIC, and, therefore, it is possible that the Department of Justice could reach a different conclusion than the FDIC regarding the merger’s effects on competition. A determination by the Department of Justice not to object to the merger may not prevent the filing of antitrust actions by private persons or state attorneys general.

California Department of Financial Protection and Innovation (CDFPI) Application

Because Citizens and Suncrest are California state-chartered banks, the prior approval of the CDFPI is required under the California Financial Code to merge Suncrest with and into Citizens.

In reviewing the merger of Suncrest with and into Citizens, the CDFPI will take into consideration, among other things: (i) the competitive impact of the merger, (ii) the adequacy of the surviving depository corporation’s shareholders’ equity and financial condition, (iii) whether the directors and executive officers of the surviving depository institution will be satisfactory, (iv) whether the surviving depository corporation will afford reasonable promise of successful operation and whether it is reasonable to believe that the surviving depository corporation will be operated in a safe and sound manner and in compliance with all applicable laws, and (v) whether the merger is fair, just and equitable to the disappearing depository corporation and the surviving depository corporation.

Federal Reserve Approval under the Bank Holding Company Act

CVB is a bank holding company under Section 3 of the BHC Act. Section 3(a) of the BHC Act generally requires the prior approval of the Federal Reserve for any bank holding company to merge with any other bank holding company or to acquire direct or indirect ownership or control over more than five percent of the voting shares of a bank. The Federal Reserve Bank of San Francisco has confirmed, however, that no application is required because the merger between Citizens and Suncrest is part of a transaction that involves the merger of their subsidiary banks, which is the subject of a separate application under the Bank Merger Act and CVB will not operate Suncrest but instead Suncrest will merge into Citizens immediately after the merger. Accordingly, the merger meets the requirements of the approval exemption set forth in Section 225.12(d)(1) of Regulation Y under the BHC Act.

 

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Additional Regulatory Approvals, Notices and Filings

Additional notifications, filings and/or applications may be submitted to various other federal and state regulatory authorities and self-regulatory organizations in connection with the merger.

Although CVB, Citizens and Suncrest expect to timely obtain the required regulatory approvals, there can be no assurances as to whether, or when, these regulatory approvals will be obtained, the terms and conditions on which the approvals will be granted or whether there will be litigation challenging such approvals. There can likewise be no assurances that U.S. or state regulatory authorities or other parties will not attempt to challenge the merger on antitrust grounds, on the basis of the CRA or for other reasons or, if any such challenge is made, as to the result of the challenge.

Accounting Treatment

In accordance with current accounting guidance, the merger will be accounted for using the acquisition method. The result of this is that (i) the recorded assets and liabilities of CVB will be carried forward at their recorded amounts, (ii) CVB’s historical operating results will be unchanged for the prior periods being reported and (iii) the assets and liabilities of Suncrest will be adjusted to fair value at the date of the merger. In addition, all identified intangibles will be recorded at fair value and included as part of the net assets acquired. The amount by which the purchase price, consisting of the value of shares of CVB common stock to be issued to former Suncrest shareholders, the cash consideration, and the cash to be paid in lieu of fractional shares and to former option holders, exceeds the fair value of the net assets acquired, including identifiable intangibles of Suncrest and liabilities assumed at the merger date, will be reported as goodwill of CVB. In accordance with current accounting guidance, goodwill is not amortized and will be evaluated for impairment annually. Identified intangibles will be amortized over their estimated lives. Further, the acquisition method of accounting results in the operating results of Suncrest being included in the operating results of CVB beginning from the date of completion of the merger.

Public Trading Markets

CVB common stock is listed on the NASDAQ Global Select Market under the symbol “CVBF.” Suncrest common stock is quoted on the OTCQX market under the symbol “SBKK.” Upon completion of the merger, Suncrest common stock will cease trading on the OTCQX. CVB common stock issuable in the merger will be listed on the NASDAQ Global Select Market.

Exchange of Shares in the Merger

CVB will appoint Computershare Corporate Services as the exchange agent to handle the exchange of shares of Suncrest common stock for shares of CVB common stock and cash. As soon as reasonably practicable after the effective time of the merger, the exchange agent will send to each holder of record of Suncrest common stock at the effective time of the merger who holds shares of Suncrest common stock, a letter of transmittal and instructions for effecting the exchange of Suncrest common stock certificates for the per share merger consideration the holder is entitled to receive under the merger agreement. Upon surrender of stock certificates or book entry shares for cancellation, along with the executed letter of transmittal and other documents described in the instructions, a Suncrest shareholder will receive the cash and any whole shares of CVB common stock such holder is entitled to receive under the merger agreement and cash in lieu of any fractional shares of CVB common stock such holder is entitled to receive. After the effective time, neither Suncrest nor Citizens will register any transfers of shares of Suncrest common stock.

Dissenters’ Rights for Holders of Suncrest Shares

The shares of Suncrest common stock held by Suncrest shareholders who do not vote their Suncrest common stock in favor of the merger proposal and who properly demand the purchase of such shares in accordance with

 

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Chapter 13 of the California Corporations Code will not be converted into the right to receive the merger consideration otherwise payable for Suncrest common stock upon consummation of the merger, but will instead be converted into the right to receive such consideration as may be determined to be due pursuant to Chapter 13 of California Corporations Code.

The following discussion is not a complete statement of the law pertaining to dissenters’ rights under the California Corporations Code. The full text of Sections 1300 through 1313 of the California Corporations Code is attached to this proxy statement/prospectus as Annex C and is incorporated herein by reference. Annex C should be reviewed carefully by any Suncrest shareholder who wishes to exercise dissenters’ rights or who wishes to preserve the right to do so, since failure to comply with the procedures of the relevant statute in any respect will result in the loss of dissenters’ rights.

All references in Sections 1300 through 1313 of the California Corporations Code and in this summary to a “shareholder” are to the holder of record of Suncrest common stock as to which dissenters’ rights are asserted. A person having a beneficial interest in Suncrest common stock held of record in the name of another person, such as a broker, bank or nominee, cannot enforce dissenters’ rights directly and must act promptly to cause the holder of record to follow the steps summarized below properly and in a timely manner to perfect such person’s dissenters’ rights.

ANY HOLDER OF SUNCREST COMMON STOCK WISHING TO EXERCISE DISSENTERS’ RIGHTS IS URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS. FAILURE TO COMPLY STRICTLY WITH ALL OF THE PROCEDURES SET FORTH IN CHAPTER 13 OF THE CALIFORNIA CORPORATIONS CODE, WHICH CONSISTS OF SECTIONS 1300-1313, WILL RESULT IN THE LOSS OF A SHAREHOLDER’S STATUTORY DISSENTERS’ RIGHTS.

Under the California Corporations Code, Suncrest common stock must satisfy each of the following requirements to qualify as dissenting shares, which are referred to as dissenting shares:

 

   

such dissenting shares must have been outstanding on the record date;

 

   

such dissenting shares must not have been voted in favor of the merger proposal;

 

   

the holder of such dissenting shares must timely make a written demand that Suncrest repurchase such dissenting shares at fair market value (as defined below); and

 

   

the holder of such dissenting shares must submit certificates representing such dissenting shares for endorsement (as described below).

A vote “AGAINST” the merger proposal, or abstaining from voting, does not in and of itself constitute a demand for appraisal under California law.

Pursuant to Sections 1300 through 1313 of the California Corporations Code, holders of dissenting shares may require Suncrest to repurchase their dissenting shares at a price equal to the fair market value of such shares determined as of the day before the first announcement of the terms of the merger, excluding any appreciation or depreciation as a consequence of the proposed merger, but adjusted for any stock split, reverse stock split or stock dividend that becomes effective thereafter, referred to as the “fair market value.”

Within 10 days following approval of the merger proposal by Suncrest shareholders, Suncrest is required to mail a dissenter’s notice to each person who did not vote in favor of the merger proposal. The dissenter’s notice must contain the following:

 

   

a notice of the approval of the merger proposal;

 

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a statement of the price determined by Suncrest to represent the fair market value of dissenting shares (which will constitute an offer by Suncrest to purchase such dissenting shares at such stated price unless such shares lose their status as “dissenting shares” under Section 1309 of the California Corporations Code);

 

   

a brief description of the procedure for such holders to exercise their rights as dissenting shareholders; and

 

   

a copy of Sections 1300 through 1304 of Chapter 13 of the California Corporations Code.

Within 30 days after the date on which the notice of the approval of the merger proposal by the outstanding shares is mailed to dissenting shareholders, Suncrest or its transfer agent must have received from any dissenting shareholder a written demand that Suncrest repurchase such shareholder’s dissenting shares. The written demand must include the number and class of dissenting shares held of record by such dissenting shareholder that the dissenting shareholder demands that Suncrest purchase. Furthermore, the written demand must include a statement of what such dissenting shareholder claims to be the fair market value of the dissenting shares (which will constitute an offer by the dissenting shareholder to sell the dissenting shares at such price). In addition, within such same 30-day period, a dissenting shareholder must submit to Suncrest or its transfer agent certificates representing any dissenting shares that the dissenting shareholder demands Suncrest purchase, so that such dissenting shares may either be stamped or endorsed with the statement that the shares are dissenting shares or exchanged for certificates of appropriate denomination so stamped or endorsed. If the dissenting shares are uncertificated, then such shareholder must provide written notice of the number of shares which the shareholder demands that Suncrest purchase within 30 days after the date of the mailing of the notice of the approval of the merger proposal. The demand, statement and Suncrest certificates should be delivered by overnight courier to:

Suncrest Bank

501 West Main Street

Visalia, California 93291

Attention: Corporate Secretary

or

Continental Stock Transfer & Trust Company

17 Battery Place, 8th Floor

New York, New York 10004

Attention: Suncrest Bank (SBKK)

If upon the dissenting shareholder’s surrender of the certificates representing the dissenting shares, Suncrest and a dissenting shareholder agree upon the price to be paid for the dissenting shares and agree that such shares are dissenting shares, then the agreed price is required by law to be paid (with interest thereon at the legal rate on judgments from the date of the agreement) to the dissenting shareholder within the later of (i) 30 days after the date of such agreement or (ii) 30 days after any statutory or contractual conditions to the completion of the merger are satisfied.

If Suncrest and a dissenting shareholder disagree as to the price for such dissenting shares or disagree as to whether such shares are entitled to be classified as dissenting shares, such holder has the right to bring an action in the California Superior Court of the proper county, within six months after the date on which the notice of the shareholders’ approval of the merger proposal is mailed, to resolve such dispute. In such action, the court will determine whether the Suncrest common stock held by such shareholder are dissenting shares and/or the fair market value of such dissenting shares.

In determining the fair market value for the dissenting shares, the court may appoint one or more impartial appraisers to make the determination. Within a time fixed by the court, the appraisers, or a majority of them, will make and file a report with the court. If the appraisers cannot determine the fair market value within 10 days of

 

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their appointment, or within a longer time determined by the court, or the court does not confirm their report, then the court will determine the fair market value. Upon a motion made by any party, the report will be submitted to the court and considered evidence as the court considers relevant. The costs of the dissenters’ rights action, including reasonable compensation to the appraisers appointed by the court, will be allocated between Suncrest and the dissenting shareholder(s) as the court deems equitable. However, if the appraisal of the fair market value of Suncrest shares exceeds the price offered by Suncrest in the notice of approval, then Suncrest will pay the costs. If the fair market value of the shares awarded by the court exceeds 125% of the price offered by Suncrest, then the court may in its discretion impose additional costs on Suncrest, including attorneys’ fees, fees of expert witnesses and interest.

Suncrest shareholders considering whether to exercise dissenters’ rights should consider that the fair market value of their Suncrest common stock determined under Chapter 13 of the California Corporations Code could be more than, the same as or less than the value of consideration to be paid in connection with the merger, as set forth in the merger agreement. Also, Suncrest reserves the right to assert in any appraisal proceeding that, for purposes thereof, the fair market value of dissenting shares is less than the value of the merger consideration to be issued and paid in connection with the merger, as set forth in the merger agreement. Suncrest shareholders considering whether to exercise dissenters’ rights should consult with their tax advisors for the specific tax consequences of the exercise of dissenters’ rights.

Strict compliance with certain technical prerequisites is required to exercise dissenters’ rights. Suncrest shareholders wishing to exercise dissenters’ rights should consult with their own legal counsel in connection with compliance with Chapter 13 of the California Corporations Code. Any Suncrest shareholder who fails to strictly comply with the requirements of Chapter 13 of the California Corporations Code, attached as Annex C to this proxy statement/prospectus, will forfeit the right to exercise dissenters’ rights and will, instead, receive the consideration to be issued and paid in connection with the merger, as set forth in the merger agreement.

Except as expressly limited by Chapter 13 of the California Corporations Code, dissenting shares continue to have all the rights and privileges incident to their shares until the fair market value of their shares is agreed upon or determined.

Dissenting shares lose their status as “dissenting shares,” and holders of dissenting shares cease to be entitled to require Suncrest to purchase such shares, upon the happening of any of the following:

 

   

the merger is abandoned;

 

   

the dissenting shares are transferred before their submission to Suncrest for the required endorsement;

 

   

the dissenting shareholder and Suncrest do not agree on the status of the shares as dissenting shares or do not agree on the purchase price, but neither Suncrest nor the shareholder files a complaint or intervenes in a pending action within six months after Suncrest mails a notice that its shareholders have approved the merger; or

 

   

with Suncrest’s consent, the dissenting shareholder withdraws the shareholder’s demand for purchase of the dissenting shares.

 

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THE MERGER AGREEMENT

The following section of this proxy statement/prospectus describes the material terms of the merger agreement. This summary is qualified in its entirety by reference to the complete text of the merger agreement, which is incorporated by reference and attached as Annex A to this proxy statement/prospectus. We urge you to read the full text of the merger agreement since it, and not the following description, constitutes the agreement of CVB, Citizens and Suncrest.

Explanatory Note Regarding the Merger Agreement

The merger agreement is described in this proxy statement/prospectus, and a copy of it is included as Annex A to this proxy statement/prospectus, to provide you with important information regarding the proposed merger. The representations, warranties and covenants made in the merger agreement by CVB, Citizens and Suncrest are qualified by and subject to important limitations agreed to by the parties in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to complete the merger if the representations and warranties of the other party prove to be untrue, whether due to a change in circumstances or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to shareholders or reports and documents filed with the SEC and in some cases are qualified by disclosures that were made by each party to the other, which disclosures were reflected in schedules to the merger agreement that have not been described or included in this proxy statement/prospectus, including Annex A. Factual disclosures about CVB and Citizens contained in the public reports filed by CVB with the SEC may also supplement, update or modify the factual disclosures and representations about CVB and Citizens contained in the merger agreement. Further, information concerning the subject matter of the representations and warranties in the merger agreement, which do not purport to be accurate as of the date of this proxy statement/prospectus, may have changed since the date of the merger agreement, and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement/prospectus.

Effects of the Merger

The merger agreement provides for the merger of Suncrest with and into Citizens, the separate existence of Suncrest will cease and Citizens will continue as the surviving corporation immediately upon the closing of the merger. The merger agreement provides that the articles of incorporation and the bylaws of Citizens as in effect immediately prior to the merger will be the articles of incorporation and bylaws of the surviving corporation.

As a result of the merger, there will no longer be any shares of Suncrest common stock authorized, issued or outstanding. Suncrest shareholders will only participate in CVB’s future earnings and potential growth through their ownership of CVB common stock. All of the other incidents of direct ownership of Suncrest common stock, such as the right to vote on certain corporate decisions, to elect directors and to receive dividends and distributions from Suncrest, will be extinguished at the effective time of the merger. All of the property, rights, privileges and powers of Citizens and Suncrest will vest in the surviving corporation, and all claims, obligations, liabilities, debts and duties of Citizens and Suncrest will become the claims, obligations, liabilities, debts and duties of the surviving corporation.

Effective Time of the Merger

The merger agreement provides that the merger will be consummated no later than the fifth business day following the satisfaction or waiver of the closing conditions in the merger agreement (other than those conditions that by their nature are to be satisfied at the consummation of the merger), which are described below,

 

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unless the parties to the merger agreement agree to another date. The merger will be consummated legally at the time the agreement of merger between Citizens and Suncrest, the form of which is included as Exhibit C to the merger agreement, has been certified by the Secretary of State of the State of California and filed with the CDFPI. As of the date of this proxy statement/prospectus, the parties expect that the merger will be completed in the fourth quarter of 2021 or early in the first quarter of 2022. The merger agreement provides that if the conditions to the merger have been satisfied such that the merger would otherwise close in December, 2021, the parties have agreed that the merger will close instead in January, 2022. However, there can be no assurance as to when or whether the merger will occur.

If the merger is not completed by the close of business on the outside date, the merger agreement may be terminated by either Suncrest or CVB, unless the failure of the closing to occur by such date is due to the failure of the party seeking to terminate the merger agreement to perform or observe the covenants and agreements of such party set forth in the merger agreement.

For a description of the merger consideration, please see the section entitled “The Merger—Merger Consideration” beginning on page  28.

Covenants and Agreements

Conduct of Business Pending the Merger

Suncrest Conduct of Business Pending the Merger

Under the merger agreement, Suncrest has agreed that, during the period before completion of the merger, except as permitted by the merger agreement or consented to by CVB, Suncrest will:

 

   

conduct its business in the ordinary course consistent with past practice in all material respects,

 

   

use its commercially reasonable best efforts to maintain and preserve intact its business organization and advantageous business relationships and goodwill and keep available the services of its employees and agents,

 

   

maintain its insurance, and

 

   

take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability to obtain any necessary regulatory approvals, to perform its covenants and agreements or to consummate the merger.

In addition to the above agreements regarding the conduct of business generally, Suncrest has agreed to specific restrictions relating to the conduct of its businesses, including prohibitions of the following (in each case subject to exceptions specified in the merger agreement and except as consented to by CVB):

 

   

other than pursuant to Suncrest options and Suncrest Stock Awards outstanding on the date of the merger agreement, issue or sell additional shares of its capital stock, or securities convertible or exchangeable into, or exercisable for, any shares of its capital stock;

 

   

make, declare, pay or set aside for payment any dividend or other distribution on its capital stock;

 

   

adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its stock or other securities;

 

   

amend or modify the material terms of, waive, release or assign any rights under, terminate, renew or allow to renew automatically, make any payment not then required under, fail to comply with or violate the terms of or enter into (i) any material contract, lease or regulatory agreement, (ii) any restriction on its ability to conduct its business as it is conducted at the time the merger agreement was entered into or (iii) any contract governing the terms of Suncrest common stock, related rights or any outstanding debt instrument, in each case, which is not terminable on 60 days’ notice or less without the payment of any amount other than for products delivered or services performed;

 

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sell, transfer, mortgage, lease, encumber or otherwise dispose of any of its assets, deposits, business or properties other than in the ordinary course of business and in a transaction that, together with other such transactions, does not exceed $50,000;

 

   

acquire (other than by way of foreclosures, in satisfaction of a debt or in a fiduciary capacity) all or any portion of the assets, business, deposits or properties of any other entity, except in the ordinary course of business and in a transaction that, together with other such transactions, is not material to it, taken as a whole, and would not reasonably be expected to present a material risk that the completion of the merger will be materially delayed or the required regulatory approvals will not be obtained;

 

   

amend the articles of incorporation or bylaws of Suncrest or those of its subsidiaries;

 

   

except as and when required under applicable law or an employee benefit plan, (i) increase the salary, wages or benefits of any director, officer or employee, except for ordinary-course, merit-based increases in the base salary of employees (not exceeding 110% in the aggregate) consistent with past practice; (ii) accrue, grant, pay or agree to pay any bonus or other incentive compensation, except for bonuses and other incentive compensation payable on an annual basis in the ordinary course of business consistent in all material respects with past practice for the year ending December 31, 2021, not exceeding (solely for each individual whose employment terminates upon consummation of the merger), the lessor of (1) 110% of the amount of such employee’s annual bonus for the year ended December 31, 2020 (pro-rated for the portion of the calendar year prior to the closing date) and (2) the amount accrued as of the closing date on the Suncrest financial statements with respect to such employee; (iii) adopt or amend any employee benefit plan; (iv) grant any new equity award; and (v) grant or pay any severance, retention, retirement or termination pay other than pursuant to (A) the Suncrest employee benefit plans in effect as of the date of the merger agreement or (B) a pool for retention payments to certain Suncrest employees to be mutually agreed upon by CVB and Suncrest;

 

   

accelerate the payment or vesting of, or lapsing of restrictions with respect to, any stock-based compensation;

 

   

fund any rabbi trust or similar arrangement or take any action to fund or in any other way secure the payment of compensation or benefits under any employee benefit plan;

 

   

terminate the employment or services of any executive officer other than for cause;

 

   

forgive or issue any loans to any director, officer or employee;

 

   

hire any officer, employee or other service provider, except in the ordinary course of business consistent with past practices;

 

   

enter into any collective bargaining or other agreement with a labor organization;

 

   

knowingly take, or omit to take, any action that would prevent or impede, or could reasonably be expected to prevent or impede, the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;

 

   

make any contributions to Suncrest’s 401(k) Plan outside of the ordinary course of business and consistent with past practice;

 

   

incur or guarantee any indebtedness for borrowed money, other than in the ordinary course of business consistent with past practice and provided further that the maturity period for any such indebtedness shall not exceed 90 days from the date of incurrence of such indebtedness;

 

   

assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other person (other than the endorsement of checks, commercial paper, bankers acceptances and bank drafts in the ordinary course of business consistent with past practice);

 

   

enter into any new line of business or make any material change in any basic policies and practices with respect to the operation of its business;

 

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make any investment either by contributions to capital, property transfers or purchase of any property or assets of any person other than (i) in accordance with Suncrest’s investment policies in effect as of the date of the merger agreement and (ii) purchases of direct obligations of the United States of America or its government agencies with a remaining maturity of one year or less;

 

   

materially change Suncrest’s investment securities portfolio;

 

   

settle any action, suit, claim, proceeding, order or investigation for consideration not in excess of $50,000 individually or $100,000 in the aggregate;

 

   

alter materially its interest rate or pricing fee or fee pricing policies with respect to depository accounts, except as determined in good faith to be necessary or advisable based on changes in market conditions, or waive any material fees with respect thereto;

 

   

change its interest rate policy or other risk management policies, procedures or practices or fail to follow such policies;

 

   

grant or commit to grant any new extension of credit to any obligor (whether a new or existing relationship) (i) if such extension of credit would equal or exceed $1,000,000 if Suncrest’s aggregate relationship exposure to such obligor, including as a result of such extension, is at least $4,000,000; (ii) if such extension of credit is secured by commercial real estate and is for at least $2,000,000; (iii) if such extension is an SBA loan where Suncrest was identified through a non-bank referral or lender and is for at least $500,000; or (iv) if such extension of credit is not secured by commercial real estate and is for at least $1,000,000;

 

   

grant or commit to grant any renewal or modification of an existing extension of credit to any obligor if such extension of credit would equal or exceed $3,000,000;

 

   

sell any real estate, charge off any assets, compromise on any debt or release any collateral on loans if such sale, charge-off, compromise or release would exceed $100,000 in the aggregate;

 

   

renew any extension of credit that would equal or exceed (i) $250,000 if rated Substandard; or (ii) $500,000 if rated Special Mention;

 

   

purchase any loan or loan participation, or participate in any extension of credit;

 

   

securitize any loan or create any special purpose funding or variable interest entity other than on behalf of clients;

 

   

invest in any mortgage-backed or mortgage-related securities that would be considered “high-risk” securities or enter into a derivatives transaction;

 

   

solicit, accept, renew or roll over:

 

   

any brokered or listing service deposits with a maturity in excess of 90 days;

 

   

any ordinary commercial or consumer interest bearing deposit without a maturity or with a maturity of 12 months or less, in each case, by offering a yield that exceeds the yield set forth in a schedule to the merger agreement; and

 

   

any ordinary commercial or consumer interest bearing time deposit with a maturity in excess of 12 months by offering a yield that exceeds the yield for a deposit with the same maturity set forth in the Suncrest deposit rate sheet in effect as of April 16, 2021;

 

   

apply for the opening, relocation or closing of any branch office;

 

   

make any changes to the Suncrest deposit rate sheet in effect as of April 16, 2021;

 

   

make any capital expenditures other than capital expenditures in the ordinary and usual course of business consistent with past practice in amounts not exceeding $25,000 individually or $100,000 in the aggregate;

 

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pay, loan or advance any amount to, or sell, transfer or lease any properties, rights or assets to, or enter into any arrangement or agreement with, any of its officers or directors or any of their family members, or any affiliates or associates (as defined under the Exchange Act) of any of its officers or directors, other than loans originated in the ordinary course of business;

 

   

make or commit to make any loan or amend the terms of any outstanding loan to any directors, officers or principal shareholders of Suncrest or waive any rights with respect to any such loan (other than a renewal of a loan in the ordinary course of business, without a material change in terms, and in compliance with Regulation O and all other applicable laws);

 

   

change its tax or accounting policies and procedures unless required by generally accepted accounting principles or any governmental entity;

 

   

change its fiscal year for tax or accounting purposes;

 

   

other than as required by generally accepted accounting principles or any governmental entity, reduce any material accrual or reserve, including its allowance for loan and lease losses (which allowance at all times shall not be less than $8,504,000, or change the methodology with respect to any such reserves or allowances;

 

   

make any material change in any basic policies and practices with respect to loans, deposits and services, liquidity management and cash flow planning, marketing, deposit origination, lending, reserves for loan or lease losses, budgeting, profit and tax planning, personnel practices or any other material aspect of its business or operations;

 

   

grant any power of attorney or similar authority;

 

   

acquire direct or indirect control over any entity, or make any other investment either by purchase of securities, contributions to capital, property transfers or purchase of any property or assets of any other person, except, in either instance, in connection with a foreclosure of collateral or conveyance of such collateral in lieu of foreclosure taken in connection with collection of a loan in the ordinary course of business consistent with past practice and with respect to loans made to third parties who are not affiliates of Suncrest;

 

   

except as required by a governmental entity, make or change any tax elections; change or consent to any change in Suncrest’s method of accounting for tax purposes, except as required by applicable tax law; take any position on any tax return filed on or after the date of the merger agreement, settle or compromise any tax liability, claim or assessment; enter into any closing agreement, waive or extend any statute of limitations with respect to taxes; surrender any right to claim a refund for taxes; or file any amended tax return;

 

   

make any charitable contributions exceeding, individually or in the aggregate, 110% of total charitable contributions made by Suncrest during 2020, as determined and pro-rated on a quarterly basis;

 

   

issue any written communication to any Suncrest employee related to employee benefits or compensation for post-closing employment;

 

   

foreclose upon or otherwise take title to real property without first obtaining a Phase 1 environmental report, except as otherwise permitted in the merger agreement;

 

   

take any action, or omit to take any action, that is intended to or would reasonably be likely to result in any of its representations and warranties in the merger agreement becoming untrue in any respect, any of the conditions to the merger not being satisfied or delayed, or a violation or breach of any provision of the merger agreement; or

 

   

agree to take, or make any commitment to take, any of the foregoing prohibited actions.

 

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CVB Forbearance

Under the merger agreement, CVB has agreed that, during the period before completion of the merger, except as permitted by the merger agreement or consented to by Suncrest, CVB will not:

 

   

conduct its business other than in the ordinary course consistent with past practice in all material respects;

 

   

take any action that would reasonably be expected to prevent or materially impede or materially delay the consummation of the merger;

 

   

knowingly take or omit to take any action that would reasonably be expected to prevent or materially impede the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;

 

   

amend its articles of incorporation or bylaws in a manner that would adversely affect the holders of Suncrest common stock relative to and disproportionate to all other holders of CVB common stock;

 

   

accept any offer from any third party involving a business combination, unless such offer is conditioned upon the performance by CVB and Citizens of all of their obligations under the merger agreement; and

 

   

take or omit to take any action that is intended to or would reasonably be likely to result in (i) a material adverse effect on CVB (ii) any of the conditions to the merger not being satisfied or materially delayed, or (iii) a material violation or breach of any provision of the merger agreement.

Regulatory Matters

CVB and Suncrest have agreed to promptly prepare and file this proxy statement/prospectus, and CVB has agreed to promptly prepare and file with the SEC the registration statement on Form S-4, of which this proxy statement/prospectus is a part, in connection with the issuance of shares of CVB common stock in the merger. Each party has agreed to use its reasonable best efforts to have the S-4 registration statement declared effective under the Securities Act as promptly as practicable after such filing.

CVB and Suncrest have agreed to cooperate with each other and use their respective commercially reasonable efforts to prepare and file all necessary documentation to obtain all permits, consents, approvals and authorizations of all third parties and governmental authorities that are necessary or advisable to consummate the merger. Nothing contained in the merger agreement will be deemed to require CVB or Citizens to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals and authorizations of governmental authorities that would reasonably be likely to be a materially burdensome regulatory condition. Under the merger agreement, a materially burdensome regulatory condition includes any action, condition or restriction that (i) would reasonably expected be likely to have a material adverse effect on CVB or (ii) require CVB, Citizens or the combined company to raise additional capital or accept any restriction on its ability to operate its businesses that would materially reduce the economic benefits of the merger to CVB and Citizens to such a degree that CVB and Citizens would not have entered into the merger agreement had such conditions, restrictions or requirements been known as of the date of the merger agreement.

Shareholder Meeting

Suncrest has agreed to take all action necessary to convene a meeting of its shareholders, as promptly as reasonably practicable after the Form S-4 registration statement is declared effective, and in no event later than 45 days after the Form S-4 registration statement is declared effective, for the purpose of obtaining its shareholders approval of the merger.

Except as permitted under the terms of the merger agreement, the Suncrest board of directors shall at all times prior to and during such special meeting unanimously recommend such approval and shall use its commercially

 

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reasonable efforts to solicit and obtain such approval. Unless the merger agreement is terminated in accordance with its terms, Suncrest will convene such meeting regardless of whether or not (i) the Suncrest board of directors has made an adverse change in recommendation or (ii) an acquisition proposal (as defined below) from a third party has been made.

No Solicitation of Alternative Transactions

The merger agreement contains detailed provisions prohibiting Suncrest from seeking an alternative transaction to the merger. Under these “no solicitation” provisions, none of Suncrest nor any of its officers, directors and employees shall, and Suncrest will cause its officers, directors, agents, representatives, advisors and affiliates not to:

 

   

initiate, solicit, encourage or knowingly facilitate any inquiries with respect to, or make any proposal or offer that constitutes, or could reasonably be expected to lead to, an acquisition proposal (as defined below);

 

   

engage or enter into, continue or otherwise participate in any discussions with or provide any confidential information to any person relating to, or engage in any negotiations concerning, or otherwise cooperate with or assist or participate in, or encourage or knowingly facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make an acquisition proposal or other proposal that could reasonably be expected to lead to an acquisition proposal; or

 

   

approve, endorse or recommend, or propose to approve, endorse or recommend, or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange agreement, option agreement or other similar agreement related to any acquisition proposal or propose or agree to do any of the foregoing.

Suncrest has further agreed that it will:

 

   

immediately terminate any activities, discussions or negotiations conducted prior to the date of the merger agreement with any third parties with respect to any acquisition proposal; and

 

   

enforce any confidentiality or similar agreement relating to an acquisition proposal and request and confirm the return or destruction of any confidential information provided to any person pursuant to any such confidentiality or similar agreement.

The “no solicitation” restrictions notwithstanding, if Suncrest receives an unsolicited bona fide written acquisition proposal after the date of the merger agreement, it may engage in discussions and negotiations with or provide nonpublic information to the entity or person in response to such acquisition proposal, but only if:

 

   

the Suncrest board of directors receives the acquisition proposal prior to the approval by Suncrest shareholders of the merger proposal;

 

   

Suncrest first enters into a confidentiality agreement with the person making such acquisition proposal on terms no less restrictive to the counterparty than those contained in confidentiality agreement between CVB and Suncrest and that expressly permits Suncrest to comply with its obligations under the merger agreement;

 

   

the Suncrest board of directors concludes in good faith such acquisition proposal constitutes or is reasonably likely to result in a superior proposal (as defined below); and

 

   

the Suncrest board of directors determines that engaging in such discussions and negotiations with, or providing such nonpublic information or data to, such person is necessary in order for the Suncrest board of directors to comply with its fiduciary duties to its shareholders under applicable law.

Suncrest will notify CVB promptly (in no event later than 24 hours) after receipt of any acquisition proposal, or any request for nonpublic information relating to an acquisition proposal, or any inquiry from any person seeking

 

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to have discussions or negotiations with Suncrest relating to an acquisition proposal or any other indication that any person is considering making an acquisition proposal. Suncrest will also notify CVB promptly (in no event later than 24 hours) if it enters into discussions or negotiations concerning any acquisition proposal or provides nonpublic information or data relating to an acquisition proposal. Suncrest will keep CVB promptly and fully informed of the status and terms of any acquisition proposals, offers, discussions or negotiations on a current basis, including providing copies of any draft definitive agreement reflecting an acquisition proposal. Suncrest will provide CVB with at least five business days’ notice prior to each meeting of the Suncrest board of directors (or any committee thereof) at which the Suncrest board of directors (or any committee thereof) considers and determines whether any offer constitutes a superior proposal.

For purposes of the merger agreement, the term “acquisition proposal” means, any proposal or offer that constitutes, or could reasonably be expected to lead to, a transaction to effect:

 

   

a merger, reorganization, share exchange, consolidation, business combination, recapitalization or similar transaction involving Suncrest or any of its subsidiaries that, if consummated, would result in any person (or the shareholders of such person) beneficially owning 15% or more of any class of equity securities of Suncrest (or of the surviving parent entity in such transaction) or of any of its subsidiaries;

 

   

any purchase or sale or other acquisition of 15% or more of Suncrest’s consolidated assets;

 

   

any purchase or sale of, or tender or exchange offer for, or other acquisition of, Suncrest’s voting securities that, if consummated, would result in any person (or the shareholders of such person) beneficially owning 15% or more of any class of equity securities or any amount of Suncrest (or of the surviving parent entity in such transaction) or of any of its subsidiaries; or

 

   

a liquidation, dissolution or winding up of Suncrest.

For purposes of the merger agreement, the term “superior proposal” means an unsolicited bona fide written acquisition proposal that the Suncrest board of directors, after consultation with its financial advisors and legal advisors, and taking into account all legal, financial, regulatory, shareholder approval risk and other aspects of the proposal and the person making the proposal (including any break-up fees, expense reimbursement provisions and conditions to consummation), concludes in good faith:

 

   

is more favorable to the shareholders of Suncrest, from a financial point of view, than the merger (after taking into account break-up fees, expense reimbursement provisions and conditions to consummation, as well as all adjustments and modifications to the merger terms that CVB may propose);

 

   

is not subject to any financing contingencies or, if financing is required, then such financing is reasonably committed to the third party making the acquisition proposal and is reasonably likely to be provided; and

 

   

is reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably capable of being completed on a timely basis on the terms proposed.

For the purpose of defining “superior proposal” in the merger agreement, each reference to “15%” in the definition of “acquisition proposal” shall be deemed to be a reference to “50%”.

Suncrest Board Recommendation

Subject to the terms of the merger agreement, the Suncrest board of directors (including committees) shall not:

 

   

withdraw, modify or qualify its recommendation in favor of the merger in a manner adverse to CVB, or adopt a resolution to withdraw, modify or qualify such recommendation in a manner adverse to CVB or take any other action that is or becomes disclosed publicly and which can reasonably be interpreted as indicating that the Suncrest board of directors does not support the merger and the merger agreement or does not believe that the merger and the merger agreement are in the best interests of its shareholders;

 

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fail to reaffirm, without qualification, its recommendation or fail to state publicly, without qualification, that the merger and the merger agreement are in the best interests of its shareholders within five business days after CVB requests in writing that such action be taken;

 

   

fail to announce publicly within 10 business days after a tender offer or exchange offer relating to Suncrest common stock shall have been commenced, that it recommends rejection of such tender or exchange offer;

 

   

fail to issue within 10 business days after an acquisition proposal is publicly announced with respect to Suncrest a press release announcing its opposition to such acquisition proposal; or

 

   

approve, endorse or recommend any acquisition proposal.

Each of the foregoing actions is referred to in the merger agreement as a “change in recommendation.” Notwithstanding the foregoing, and subject to the conditions described below, the board of directors of Suncrest may, at any time prior to the approval of the principal terms of the merger by Suncrest shareholders, make a change in recommendation in response to a superior proposal if:

 

   

after the date of the merger agreement, an unsolicited, bona fide written offer to effect a transaction constituting a superior proposal is made to Suncrest and is not withdrawn;

 

   

such offer was not obtained or made as a direct or indirect result of a breach of, or any action inconsistent with, the merger agreement;

 

   

Suncrest has complied with its obligations to provide notices to CVB of any acquisition proposal and other matters requiring notice under the merger agreement;

 

   

at least two business days prior to each meeting of the Suncrest board of directors at which it will consider and determine whether any such offer constitutes a superior proposal, Suncrest provides CVB with a written notice specifying the meeting date and time, the reasons for holding such meeting, the terms and conditions of such offer (including a copy of any draft definitive agreement reflecting such offer) and the identity of the party making such offer;

 

   

the Suncrest board of directors determines in good faith, after taking into account the advice of a financial advisor of nationally recognized reputation and its outside legal counsel, that such offer constitutes a superior proposal;

 

   

the Suncrest board of directors does not effect, or cause Suncrest to effect, a change in recommendation at any time within three business days after CVB receives written notice confirming that the Suncrest board of directors has determined that the offer is a superior proposal and intends to effect a change in recommendation;

 

   

during the three business day period, if requested by CVB, Suncrest engages in good faith negotiations with CVB to amend the merger agreement in such a manner that the offer that was determined to constitute a superior proposal no longer constitutes a superior proposal;

 

   

at the end of such three business day period, such offer has not been withdrawn and continues to constitute a superior proposal (taking into account any changes to the terms of the merger agreement as a result of negotiations); and

 

   

the Suncrest board of directors reasonably determines in good faith, after taking into account the advice of its outside legal counsel that, in light of the superior proposal, a change in recommendation is required for the Suncrest board of directors to comply with its fiduciary duties to its shareholders under applicable law.

Indemnification and Insurance

The merger agreement provides that, from and after the effective time of the merger, CVB and Citizens will indemnify and hold harmless each present and former director and officer of Suncrest against any costs or

 

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expenses, including reasonable attorneys’ fees, judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of actions or omissions occurring at or prior to the effective time of the merger, including the transactions contemplated by the merger agreement, to the extent such indemnified parties are indemnified as of the date of the merger agreement to the fullest extent permitted under applicable law. CVB will also advance expenses as incurred to the fullest extent permitted under applicable law. Further, CVB and Citizens shall assume, perform and observe the obligations of Suncrest under Suncrest’s articles of incorporation and bylaws and Suncrest’s agreements in effect as of the date of the merger agreement to indemnify such directors and officers for their acts and omissions occurring at or prior to the effective time of the merger in their capacity as directors or officers.

The merger agreement also provides that CVB will maintain, for a period of six years from the effective time of the merger, director’s and officer’s liability insurance that serves to reimburse the officers and directors of Suncrest with respect to claims against such directors and officers arising from facts or events which occurred at or before the effective time of the merger. Such insurance shall contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to such officers and directors as the coverage provided by Suncrest; although CVB will not be required to expend in the aggregate for such six-year period more than 250% of the amount expended on an annual basis by Suncrest to maintain or procure such insurance. If CVB is unable to maintain or obtain such insurance, CVB will obtain as much comparable insurance as is available at a cost in the aggregate for such six-year period up to 250% of the current annual premium. In lieu of the foregoing requirements, CVB (or Suncrest) may obtain, at or prior to the effective time of the merger, a six-year prepaid “tail” policy on terms and conditions providing substantially equivalent benefits as the current policies of the directors’ and officers’ liability insurance maintained by Suncrest with respect to matters arising at or prior to the effective time of the merger subject to the same expense limitation.

Employment Matters

Except as otherwise provided in the merger agreement, all employee benefit plans of Suncrest will be discontinued and employees of Suncrest who become employees of Citizens, referred to as “continuing employees,” will be eligible to participate in the employee benefit plans of Citizens beginning on the first day of the month immediately after the closing date of the merger on the same terms as such plans and benefits are generally offered to employees of Citizens in comparable positions. Continuing employees (other than any employees of Suncrest who have employment contracts or change-in-control agreements with Suncrest) who are terminated within one year of the closing date (other than for cause), however, shall receive severance benefits in accordance with Suncrest’s severance policy. For purposes of determining continuing employees’ eligibility and vesting (but not for benefit accruals under any defined benefit plan) under the employee benefit plans of Citizens and entitlement to severance and vacation benefits (to the extent permitted by applicable law), Citizens will recognize such employees’ years of service with Suncrest. Suncrest shall terminate its 401(k) plan no later than the day immediately preceding the closing date of the merger.

Subject to the requirements of applicable law, Citizens has agreed to take commercially reasonable actions as are necessary to cause the group health plan maintained by Citizens and applicable insurance carriers and any other third parties, to the extent such group health plan is made available to continuing employees, to waive any evidence of insurability requirements, waiting periods and any limitations as to preexisting medical conditions under the group health plan applicable to continuing employees and their spouses and eligible dependents (but only to the extent that such preexisting condition limitations did not apply or were satisfied under the group health plan maintained by Suncrest prior to the closing) and to provide continuing employees with credit, for the calendar year in which the closing occurs, for the amount of any out-of-pocket expenses and copayments or deductible expenses that are incurred by them during the calendar year in which the merger occurs under a group health plan maintained by Citizens or any of its affiliates.

Subject to the requirements of applicable law, continuing employees whose employment continues with Citizens through the end of 2021, will be entitled to receive their accrued annual bonus (subject to reduction for any

 

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amount that may have been previously paid by Suncrest with respect to such annual period) on the earlier of (i) the same time as Citizens pays out its bonuses in 2022 for similarly situated employees, and (ii) the date that any such continuing employee’s employment is terminated if such termination occurs after December 31, 2021 and prior to the date that Citizens pays out its bonuses in 2022 for similarly situated employees. Suncrest employees whose employment with Citizens is terminated after the effective time of the merger and prior to the end of 2021 will receive their pro-rated accrued annual bonuses (subject to reduction for any amount that may have been previously paid by Suncrest with respect to such annual period) on the date of termination. The foregoing annual bonuses, however, shall not exceed 110% of the amount of such employee’s annual bonus for the year ended December 21, 2020 (pro-rated for the portion of the year in which the closing occurs).

The merger agreement specifies that none of its provisions confer upon any employee of Suncrest who is employed by Citizens after the merger any right with respect to continuance of employment or other service. No current or former employee, independent contractor or any other individual associated with Suncrest shall be regarded for any purpose as a third-party beneficiary under the merger agreement. The terms of the merger agreement do not constitute an amendment of, or interfere in any way with the right of CVB and its subsidiaries to amend, terminate or otherwise discontinue, any or all CVB employee plans and any other plans, practices or policies of CVB in effect from time to time.

Stock Market Listing

CVB has agreed to apply to have the shares of CVB common stock to be issued in the merger approved for listing on the NASDAQ Global Select Market, which is the principal trading market for existing shares of CVB common stock. It is a condition to CVB’s and Suncrest’s obligations to complete the merger that such approval is obtained, subject to official notice of issuance. Following completion of the merger, Suncrest common stock will cease trading and will no longer be quoted on the OTCQX market.

Representations and Warranties

Suncrest Representations and Warranties

The merger agreement contains representations and warranties made by Suncrest to CVB and Citizens relating to a number of matters, including the following:

 

   

corporate organization, governing documents and subsidiaries;

 

   

capitalization;

 

   

corporate authority;

 

   

consents and approvals;

 

   

regulatory and governmental reports;

 

   

financial statements;

 

   

no undisclosed liabilities;

 

   

broker’s fees;

 

   

absence of changes;

 

   

compliance with applicable law;

 

   

inapplicability of takeover laws;

 

   

employment and employee benefits matters;

 

   

accuracy of Suncrest information provided in this proxy statement/prospectus;

 

   

fairness opinion from financial advisor;

 

   

legal proceedings;

 

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material contracts;

 

   

environmental matters;

 

   

taxes and tax returns;

 

   

intellectual property, IT systems and privacy;

 

   

real estate properties and assets;

 

   

insurance;

 

   

accounting and internal controls;

 

   

derivatives;

 

   

deposits;

 

   

loans, notes and other borrowing arrangements;

 

   

investment securities;

 

   

related party transactions;

 

   

operating losses;

 

   

employee and labor matters;

 

   

trust activities; and

 

   

credit card operations.

CVB Representations and Warranties

The merger agreement also contains representations and warranties made by CVB and Citizens to Suncrest relating to a number of matters, including the following:

 

   

corporate organization, governing documents and subsidiaries;

 

   

capitalization;

 

   

corporate authority;

 

   

consents and approvals;

 

   

regulatory and governmental reports;

 

   

financial statements;

 

   

broker’s fees;

 

   

absence of any material adverse effect on CVB;

 

   

compliance with applicable law;

 

   

absence of certain changes;

 

   

IT systems;

 

   

inapplicability of takeover laws;

 

   

regulatory approvals;

 

   

accuracy of CVB information provided in this proxy statement/prospectus;

 

   

legal proceedings;

 

   

accounting and internal controls;

 

   

related party transactions;

 

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taxes;

 

   

employee benefit plans; and

 

   

insurance.

Certain of these representations and warranties by Suncrest and CVB are qualified as to “knowledge,” “materiality” or “material adverse effect.”

“Material adverse effect” means, with respect to any party, any fact, event, change, effect, condition, occurrence, development, circumstance, effect or state of facts that (a) individually or in the aggregate, has been, or would reasonably be expected to be, materially adverse to the business, assets, deposit liabilities, results of operations, or condition (financial or otherwise) of such party and its subsidiaries taken as a whole, or (b) prevents, materially delays or materially impairs the ability of such party to perform its obligations under the merger agreement to consummate the merger; except that a “material adverse effect” shall not be deemed to include effects to the extent resulting from (i) changes after the date of the merger agreement in applicable laws and regulations, including any change in applicable generally accepted accounting principles or regulatory accounting requirements; (ii) changes in the U.S. economy or U.S. financial markets; (iii) changes in economic, business or financial conditions generally effecting the banking industry; (iv) any action taken by such party with the other party’s written consent or that was expressly required by the merger agreement; (v) any failure in and of itself by such party to meet internal or other estimates (but not the underlying facts or circumstances that contributed to such failure); and (vi) the commencement of any litigation that was primarily the result of the announcement or public disclosure of the merger agreement; provided further that that effects attributable to or resulting from any of the changes described in clauses (i), (ii), or (iii) shall not be excluded to the extent of any disproportionate impact they have on such party and its subsidiaries as compared to other comparable companies in the banking industry.

The representations and warranties in the merger agreement do not survive the effective time of the merger, and as described below under the section entitled “The Merger Agreement—Termination Fee” beginning on page 72, if the merger agreement is validly terminated, there will be no liability or damages arising under the representations and warranties of CVB or Suncrest, or otherwise under the merger agreement, unless CVB or Suncrest willfully and intentionally breached the merger agreement.

Conditions to Completion of the Merger

Conditions to Each Party’s Obligations.

The respective obligations of each of CVB and Suncrest to complete the merger are subject to the satisfaction of the following conditions:

 

   

receipt by Suncrest of Suncrest shareholders’ approval;

 

   

the receipt of all required regulatory approvals including from the Federal Reserve Board, the FDIC and the CDFPI ;

 

   

the effectiveness of CVB’s SEC registration statement on Form S-4, of which this proxy statement/prospectus is a part, and the absence of a stop order or proceeding initiated or threatened by the SEC for that purpose;

 

   

no injunction or decree or law prohibiting the consummation of the merger shall be in effect;

 

   

the shares of CVB common stock to be issued in the merger shall have been approved for listing on the NASDAQ Global Select Market; and

 

   

the aggregate value of CVB common stock to be issued in the merger must represent at least 42% of the aggregate cash plus such value of aggregate CVB common stock value.

 

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Conditions to Obligation of Suncrest

The obligation of Suncrest to complete the merger is also subject to the satisfaction or waiver by Suncrest of the following conditions:

 

   

the accuracy of the representations and warranties of CVB and Citizens set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date of the merger as though made at and as of the closing date (except that representations and warranties that by their terms speak as of the date of the merger agreement or some other date need only be true and correct as of such date);

 

   

performance in all material respects by CVB and Citizens of the obligations required to be performed by them at or prior to the closing date of the merger;

 

   

the receipt by Suncrest of an officer’s certificate from CVB certifying satisfaction by CVB of the conditions related to accuracy of the representations and warranties and performance of covenants and obligations;

 

   

the absence of a material adverse effect on CVB since the date of the merger agreement; and

 

   

the receipt by Suncrest of the opinion of its tax counsel, dated the closing date of the merger, to the effect, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

Conditions to Obligation of CVB and Citizens

The obligation of CVB and Citizens to complete the merger is also subject to the satisfaction or waiver by CVB of the following additional conditions:

 

   

the accuracy of the representations and warranties of Suncrest set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date of the merger as though made at and as of the closing date (except that representations and warranties that by their terms speak as of the date of the merger agreement or some other date need only be true and correct as of such date);

 

   

performance in all material respects by Suncrest of the obligations required to be performed by it at or prior to the closing date of the merger;

 

   

CVB’s receipt of an officer’s certificate from Suncrest certifying satisfaction by Suncrest of the conditions related to accuracy of the representations and warranties and performance of covenants and obligations;

 

   

CVB’s receipt of satisfactory evidence that as of the measurement date, which we define below:

 

   

the adjusted common equity tier 1 capital of Suncrest shall be equal to or greater than the tier 1 benchmark;

 

   

the total non-interest bearing deposits of Suncrest shall be equal to or greater than $470 million;

 

   

the adjusted total loans of Suncrest shall be equal to our greater than $745 million; and

 

   

The allowance for loan losses shall not be less than $8,504,000;

 

   

all attorneys, accountants, investment bankers and other advisors and agents for Suncrest shall have submitted to Suncrest estimates of their fees and expenses, and Suncrest shall have prepared and submitted CVB a final calculation of all transaction costs, certified by Suncrest’s chief financial officer;

 

   

the absence of a material adverse effect on Suncrest since the date of the merger agreement;

 

   

the receipt by CVB of the opinion of its tax counsel, dated the closing date of the merger, to the effect, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code;

 

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holders of not more than 10% of the outstanding shares of Suncrest common stock shall have duly exercised their dissenters’ rights under Chapter 13 of the California Corporations Code;

 

   

CVB shall have received the written resignation of each director of Suncrest and each of its subsidiaries effective as of the effective time of the merger;

 

   

CVB shall have received voting agreements, non-competition, non-solicitation and non-disclosure agreements and non-solicitation and non-disclosure agreements from certain Suncrest directors, executive officers and shareholders; and

 

   

Suncrest shall have delivered to CVB a properly executed statement from special meeting the requirements of Treasury Regulations Sections 1.1445-2(c)(3) and 1.897-2(h)(1).

The merger agreement defines:

 

   

“adjusted common equity tier 1 capital” as (a) common equity tier 1 capital of Suncrest determined on the measurement date and calculated in the same manner as shown on Suncrest’s call report filed with its primary regulator, plus (b) specified approved transaction costs not to exceed the limits set forth in the merger agreement;

 

   

“measurement date” as the last day of the month immediately preceding the month in which the closing date occurs, except that if the closing occurs within the first 10 days of any month, the “measurement date” will be the last day of the second month immediately preceding the month in which the closing of the merger occurs, provided that if the closing does not occur on or before the fifth business day after the satisfaction or waiver of the closing conditions set forth in the merger agreement, then the parties will treat such fifth business day as the closing date solely for the purpose of determining the measurement date;

 

   

“total non-interest bearing deposits” as the average daily balance of Suncrest’s non-interest bearing deposits for the calendar month ending on the measurement date (exclusive of brokered deposits as defined by federal regulation); and

 

   

“adjusted total loans” as the balance of Suncrest’s total loans held for investment on the measurement date, excluding loans generated under the federal Paycheck Protection Program.

Termination

The merger agreement may be terminated under the following circumstances:

 

   

by mutual consent of CVB, Citizens and Suncrest authorized by their respective board of directors, at any time prior to the effective time of the merger, whether before or after the receipt of the requisite Suncrest shareholder approval;

 

   

by action of the CVB board of directors or the Suncrest board of directors, if the merger is not completed on or before April 30, 2022 (which date may be extended to June 30, 2022 if the only unsatisfied condition to completing the merger is receiving regulatory approval), which we refer to as the outside date, except to the extent that the failure of the merger to be consummated results from the knowing action or inaction of the party seeking to terminate, which action or inaction is in violation of its obligations under the merger agreement;

 

   

by action of the CVB board of directors or the Suncrest board of directors, if the approval of any governmental authority required for consummation of the merger and the other transactions contemplated by the merger agreement has been denied by final and nonappealable action of such governmental authority, or an application therefor has been permanently withdrawn by mutual agreement of the parties at the request or suggestion of a governmental authority, except to the extent that such denial is due to the failure of the party seeking to terminate the merger agreement to perform or observe the covenants of such party under the merger agreement;

 

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by action of the CVB board of directors or the Suncrest board of directors, if Suncrest shareholder approval is not obtained;

 

   

by action of the CVB board of directors or the Suncrest board of directors, if there has been a breach of any representation, warranty, covenant or agreement made by the other party, such that if continuing on the closing date of the merger, the condition as to the accuracy of the representations and warranties or the compliance with covenants by the other party would not be satisfied and such breach or condition is not curable or, if curable, is not cured within 30 calendar days after written notice thereof is given by the terminating party (or such shorter period as remaining prior to the outside date); provided, that the terminating party is not then in material breach of any representation, warranty, covenant or agreement;

 

   

by action of the CVB board of directors at any time prior to the receipt of Suncrest shareholder approval if: (i) Suncrest materially breaches its non-solicitation obligations relating to alternative acquisition proposals; (ii) the Suncrest board of directors shall have effected a change in recommendation to its shareholders; (iii) the Suncrest board of directors fails to affirm its recommendation within the required time period after an acquisition proposal is made; or (iv) the Suncrest board recommends a tender offer or fails to recommend against such offer within 10 business days after commencement thereof; and

 

   

by action of the Suncrest board of directors at any time prior to the receipt of Suncrest shareholder approval in order to enter into a definitive agreement providing for a superior proposal obtained by Suncrest without breaching the merger agreement.

Termination Fee

Suncrest must pay CVB a termination fee of $8,325,000 in any of the following circumstances:

 

   

the merger agreement is terminated by Suncrest in order to enter into a definitive agreement providing for a superior acquisition proposal;

 

   

CVB terminates the merger agreement due to (i) Suncrest materially breaching its non-solicitation obligations relating to alternative acquisition proposals; (ii) the Suncrest board of directors effecting a change in recommendation to its shareholders; (iii) the Suncrest board of directors failing to affirm its recommendation within the required time period after an acquisition proposal is made; or (iii) the Suncrest board recommending a tender offer or failing to recommend against such offer within 10 business days after commencement thereof; or

 

   

CVB or Suncrest terminates the merger agreement for failure to consummate the merger by the outside date or CVB terminates the merger agreement for the failure of Suncrest to obtain the approval of its shareholders or if CVB terminates the merger agreement for an uncured breach of any representation, warranty, covenant or agreement made by Suncrest, provided that the terminating party is not then in material breach of any representation, warranty, covenant or agreement; an acquisition proposal is made to Suncrest or to its shareholders publicly before the date of the special meeting; and Suncrest enters into a definitive agreement with respect to or consummates such acquisition proposal within 18 months of any such termination of the merger agreement.

The termination fee could discourage other companies from seeking to acquire or merge with Suncrest prior to completion of the merger.

Effect of Termination

If the merger agreement is validly terminated, the merger agreement will become void and of no effect, and none of Suncrest, CVB, any of their respective subsidiaries or any of their officers or directors will have any liability of any nature whatsoever under the merger agreement, or in connection with the transactions contemplated by the merger agreement, except that (i) the provisions of the merger agreement relating to confidentiality obligations of

 

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the parties, the termination fees, publicity and certain other technical provisions will continue in effect notwithstanding termination of the merger agreement and (ii) neither Suncrest nor CVB shall be relieved or released from any liabilities or damages arising out of its willful and intentional breach of any provision of the merger agreement.

Waiver; Amendment

Before the effective time of the merger, any provisions of the merger agreement may be:

 

   

waived, in whole or in part, by the party benefitted by the provision or by both CVB and Suncrest; or

 

   

amended by an agreement in writing signed by CVB, Citizens and Suncrest.

After approval of the merger by Suncrest shareholders, however, no amendment may be made which would reduce the aggregate value of the consideration to be received by Suncrest shareholders in the merger without any subsequent approval by Suncrest shareholders.

Fees and Expenses

Whether or not the merger is completed, all costs and expenses incurred in connection with the merger and merger agreement (including costs and expenses of printing and mailing this document) will be paid by the party incurring the expense.

Voting and Support Agreements

In connection with entering into the merger agreement and as an inducement to the willingness of CVB and Citizens to enter into the merger agreement, each of Suncrest’s directors and executive officers and certain of its shareholders executed and delivered to CVB a voting and support agreement, which we refer to collectively as the “voting and support agreements.” Each Suncrest director and executive officer entered into the voting and support agreement in such person’s capacity as the record or beneficial owner of shares of Suncrest and not in such person’s capacity as a director or executive officer of Suncrest or as a trustee of any benefit plan. The following summary of the voting and support agreements is subject to, and qualified in its entirety by reference to, the full text of the form of the voting and support agreement included as Exhibit A to the merger agreement, which is attached as Annex A to this proxy statement/prospectus.

Pursuant to the voting and support agreements, each Suncrest shareholder party thereto agreed to vote such person’s shares of Suncrest common stock:

 

   

in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement;

 

   

against any action or agreement that to such Suncrest shareholder’s knowledge would result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of Suncrest under the merger agreement; and

 

   

except with the prior written consent of CVB or as otherwise contemplated or permitted by the merger agreement, against, the following actions (other than the merger and the transactions contemplated by the merger agreement): (1) any extraordinary corporate transactions, such as a merger, consolidation or other business combination involving Suncrest; (2) any sale, lease or transfer of a material amount of Suncrest assets; and (3) any other matter to the extent such matter requires a Suncrest shareholder vote, that to the knowledge of such shareholder could reasonably be expected to materially impede, interfere with, delay, postpone, discourage or adversely affect the consummation of the merger and the other transactions contemplated by the merger agreement.

Such Suncrest shareholders also irrevocably and unconditionally waived, and agreed not to exercise or perfect, any rights of appraisal, dissenters’ rights and any similar rights relating to the merger. Such Suncrest shareholders also agreed not to, directly or indirectly:

 

   

sell, give, transfer, exchange, pledge, assign, hypothecate, encumber, tender or otherwise dispose of such person’s Suncrest shares;

 

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enforce or permit execution of the provisions of any redemption, share purchase or sale, recapitalization or other agreement with Suncrest or any other person or enter into any contract, option or other agreement, arrangement or understanding with respect to the transfer of any of such person’s Suncrest shares or any securities convertible into or exercisable for such shares;

 

   

deposit any of such person’s Suncrest shares into a voting trust or enter into a voting agreement with respect to such shares or grant any proxy or power of attorney with respect thereto;

 

   

enter into any swap or other arrangement with respect to the direct or indirect sale, assignment, transfer, exchange or other disposition of or transfer of any interest in or the voting of such person’s Suncrest shares; and

 

   

take any action that would make any of such person’s representations or warranties contained in the voting and support agreement untrue or incorrect in any material respect or have the effect of preventing or disabling such person from performing such person’s obligations under the voting and support agreement.

Such Suncrest shareholders, however, may transfer Suncrest shares to their immediate family or a trust for their benefit if the transferees agree to be bound by the voting and support agreements.

The obligations of such Suncrest shareholders will terminate upon the earlier of the consummation of the merger or, if the merger is not consummated, upon the termination of the merger agreement.

As of the record date, the directors, executive officers and shareholders of Suncrest who have signed voting and support agreements beneficially owned and were entitled to vote 2,865,210 shares of Suncrest common stock, representing approximately 23% of the shares of Suncrest common stock outstanding on that date.

Non-Competition, Non-Solicitation and Non-Disclosure Agreement

In order for CVB and Citizens to have the full benefit of ownership of Suncrest and the business it conducts, including its goodwill, concurrently with the execution and delivery of the merger agreement, the President and Chief Executive Officer of Suncrest entered into a non-competition, non-solicitation, and non-disclosure agreement and release, and all of the Suncrest directors other than the President and Chief Executive Officer (who is also a director), have entered into non-competition, non-solicitation and non-disclosure agreements, which we collectively refer to as the “non-competition, non-solicitation and non-disclosure agreements.” The following summaries of such agreements are subject to, and qualified in their entirety by reference to, the full text of the applicable non-competition, non-solicitation and non-disclosure agreement included in the forms attached as Exhibits B-1 and B-2 to the merger agreement, which is attached as Annex A to this proxy statement/prospectus.

Pursuant to the non-competition, non-solicitation and non-disclosure agreements, each of the President and Chief Executive Officer of Suncrest and the Suncrest directors has agreed not to, directly or indirectly, without the prior written consent of CVB or Citizens:

 

   

own, manage, operate, control or have any interest in the ownership, management, operation or control of, or be connected as a shareholder, member, partner, principal, director, officer, manager, investor, organizer, founder, trustee, employee, advisor, consultant, agent or representative of or with, any business or enterprise enganged in providing financial services in California;

 

   

solicit or aid in the solicitation of any customers or prospective customers of Suncrest;

 

   

solicit or aid in the solicitation of any officers or employees of Suncrest, or from and after the effective time of the merger, Citizens as successor to Suncrest; and

 

   

induce or attempt to induce any person who is a customer or prospective customer, or induce or attempt to induce any supplier, distributor, officer or employee of Suncrest, in each case, to terminate such person’s relationships with the Citizens as successor to Suncrest.

 

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The non-employee directors have agreed to comply with the non-competition and non-solicitation covenants for a period ending 12 months after the effective time of the merger. The President and Chief Executive Officer of Suncrest has agreed to comply with the non-competition covenants for a period ending 12 months after closing of the merger and the non-solicitation covenants for a period ending 36 months after the effective time of the merger.

These directors and executive officers of Suncrest also have agreed, among other things, not to make use of any trade secrets of Suncrest or disclose any trade secrets to any other person on the terms set forth in the non-competition, non-solicitation and non-disclosure agreements.

Certain other executive officers of Suncrest have entered into non-solicitation and non-disclosure agreements, which we refer to collectively as the “non-solicitation and non-disclosure agreements.” The following summary of the non-solicitation and non-disclosure agreements is subject to, and qualified in its entirety by reference to, the full text of such agreements in the form of Exhibit B-3 to the merger agreement, which is attached as Annex A to this proxy statement/prospectus.

Pursuant to respective non-solicitation and non-disclosure agreements, certain executive officers of Suncrest have agreed, for periods of up to 24 months after the effective time of the merger, not to, directly or indirectly, without the prior written consent of CVB or Citizens:

 

   

solicit or aid in the solicitation of any customers or prospective customers of Suncrest;

 

   

solicit or aid in the solicitation of any officers or employees of Suncrest, or from and after the effective time of the merger, Citizens as successor to Suncrest; and

 

   

induce or attempt to induce any person who is a customer or prospective customer, or induce or attempt to induce any supplier, distributor, officer or employee of Suncrest, in each case, to terminate such person’s relationships with the Citizens as successor to Suncrest.

These executive officers of Suncrest also have agreed, among other things, not to make use of any trade secrets of Suncrest or disclose any trade secrets to any other person on the terms set forth in the non-solicitation and non-disclosure agreement.

 

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INFORMATION ABOUT THE COMPANIES

CVB Financial Corp. and Citizens Business Bank

CVB is a California corporation that is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, or the “BHC Act.” As of June 30, 2021, CVB had consolidated total assets of approximately $15.5 billion, total net loans of approximately $8.0 billion, total deposits of approximately $12.7 billion, and total shareholders’ equity of approximately $2.1 billion. CVB had 996 full-time equivalent employees as of June 30, 2021.

CVB provides a wide range of banking services through Citizens, its wholly-owned subsidiary. Citizens is a California state-chartered bank headquartered in Ontario, California, and has been conducting business since 1974, originally under the name Chino Valley Bank. Citizens is an independent community bank that offers a full range of banking services in 58 banking centers located in the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County and the Central Valley area of California. Citizens also operates three trust offices located in Ontario, Newport Beach and Pasadena. These offices serve as sales offices for its wealth management, trust and investment products.

Through its network of banking offices, Citizens emphasizes personalized service combined with a full range of banking and trust services for businesses, professionals and individuals. Although Citizens focuses the marketing of its services to small- and medium-sized businesses, a full range of banking, investment and trust services are made available to the local consumer market.

Citizens offers a standard range of bank deposit products. These include checking, savings, money market and time certificates of deposit for both business and personal accounts. Citizens’ deposit accounts are insured by the FDIC up to applicable limits.

Citizens provides 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. Citizens also provides bank-qualified lease financing for municipal governments. Financing products include automobile leasing and financing, lines of credit, credit cards and home equity loans and lines of credit. Real estate loans include mortgage and construction loans.

Citizens also offers a wide range of specialized services designed for its commercial customers, including cash management systems for monitoring cash flow, a credit card program for merchants, courier pick-up and delivery, payroll services, remote deposit capture, electronic funds transfers by way of domestic and international wires and automated clearinghouse, and online account access.

Citizens offers financial services and trust services through its CitizensTrust division. These services include fiduciary services, mutual funds, annuities, 401(k) plans and individual investment accounts.

As a bank holding company, CVB is subject to the supervision of the Federal Reserve. It is required to file with the Federal Reserve reports and other information regarding its business operations and the business operations of its subsidiaries. As a California state-chartered bank, Citizens is subject to supervision, periodic examination and regulation by the CDFPI and by the FDIC as its primary federal regulator.

CVB’s principal executive office is located at 701 North Haven Avenue, Suite 350, Ontario, California 91764, telephone number: (909) 980-4030.

CVB common stock is traded on the NASDAQ Global Select Market under the symbol “CVBF.”

 

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The foregoing information concerning CVB does not purport to be complete. Certain additional information relating to CVB’s business, management, executive officer and director compensation, voting securities and certain relationships is incorporated by reference in this proxy statement/prospectus from other documents filed by CVB with the Securities and Exchange Commission and listed under “Where You Can Find Additional Information.” If you desire copies of any of these documents, you may contact CVB at its address or telephone number indicated under “Where You Can Find Additional Information.”

Suncrest Bank

Suncrest Bank, headquartered in Visalia, California, is an independent community bank which was founded in 2008. In addition to the Visalia headquarters office, there are seven full-service branches in the Central Valley area of California and Sacramento. Suncrest’s principal business is to provide full-service commercial and retail banking services primarily in the Central Valley of California and Sacramento. Suncrest offers commercial and retail banking services designed for small and medium-sized businesses, professionals and retail customers located in five counties.

At June 30, 2021, Suncrest had consolidated total assets of approximately $1.37 billion, total net loans of approximately $860.3 million, total deposits of approximately $1.19 billion and total shareholder’s equity of approximately $172.5 million. Suncrest had 120 full-time equivalent employees as of June 30, 2021.

Suncrest’s principal executive offices are located at 501 West Main Street, Visalia, California 93291, and its telephone number is (559) 802-1000.

Suncrest Bank common stock is quoted on the OTC Markets’ OTCQX market under the symbol “SBKK.”

 

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COMPARISON OF RIGHTS OF SHAREHOLDERS OF CVB AND SUNCREST

The rights of Suncrest shareholders are governed by the laws of the State of California and the articles of incorporation, as amended, and bylaws of Suncrest. If the merger is completed, shareholders of Suncrest will become shareholders of CVB. The rights of CVB shareholders are governed by the laws of the State of California and the articles of incorporation, as amended, and amended and restated bylaws of CVB. Thus, following the merger, the rights of Suncrest shareholders who become CVB shareholders in the merger will continue to be governed by the laws of the State of California, but will no longer be governed by Suncrest’s articles of incorporation and bylaws and instead be governed by CVB’s articles of incorporation and bylaws.

The table below summarizes certain of the material differences between the rights of Suncrest shareholders and CVB shareholders and their respective constitutive documents as they are currently in effect. While CVB and Suncrest believe that the summary table includes the material differences between the rights of their respective shareholders prior to the merger, this summary does not include a complete description of all the differences between the rights of CVB shareholders and those of Suncrest shareholders, nor does it include a complete description of the specific rights of the respective shareholders discussed. The inclusion of differences in the rights of these shareholders in the table is not intended to indicate that all of such differences should necessarily be considered material by you or that other differences that you may consider equally important do not exist.

You are urged to read carefully the relevant provisions of the California Corporations Code, as well as CVB’s governing documents. To find out where copies of these documents can be obtained, see “Where You Can Find Additional Information.”

Authorized Capital Stock

 

Suncrest Bank

  

CVB Financial Corp.

Suncrest’s articles of incorporation state that the authorized capital stock of Suncrest consists of 25,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of September 21, 2021, Suncrest had 12,251,000 shares of common stock and no shares of preferred stock issued and outstanding. Subject to compliance with the California Financial Code, the California Corporations Code and Suncrest’s articles of incorporation and bylaws, the Suncrest board of directors may authorize the issuance of additional shares of common stock and preferred stock.    CVB’s articles of incorporation states that the authorized capital stock of CVB consists of 225,000,000 shares of common stock, without par value, and 20,000,000 shares of preferred stock, without par value. As of September 20, 2021, CVB had 135,679,427 shares of common stock and no shares of preferred stock issued and outstanding. Subject to compliance with the California Corporations Code and CVB’s articles of incorporation and bylaws, the CVB board of directors may authorize the issuance of additional shares of common stock and preferred stock.

Dividends

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