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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

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

For the transition period from _____ to _____

Commission File Number: 000-10140

CVB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


California		95-3629339
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

701 North Haven Ave., Suite 350
Ontario, California		91764
(Address of principal executive offices)		(Zip Code)

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	CVBF	The Nasdaq Stock Market, LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer or smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of 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 13(a) of the Exchange Act 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No 

Number of shares of common stock of the registrant: 139,289,515 outstanding as of April 28, 2023.

TABLE OF CONTENTS


PART I –	FINANCIAL INFORMATION (UNAUDITED)	3
ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	4
	NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
	CRITICAL ACCOUNTING POLICIES	36
	OVERVIEW	38
	ANALYSIS OF THE RESULTS OF OPERATIONS	40
	ANALYSIS OF FINANCIAL CONDITION	47
	ASSET/LIABILITY AND MARKET RISK MANAGEMENT	62
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	65
ITEM 4.	CONTROLS AND PROCEDURES	65
PART II –	OTHER INFORMATION	66
ITEM 1.	LEGAL PROCEEDINGS	66
ITEM 1A.	RISK FACTORS	67
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	69
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	69
ITEM 4.	MINE SAFETY DISCLOSURES	69
ITEM 5.	OTHER INFORMATION	69
ITEM 6.	EXHIBITS	70
SIGNATURES		71

PART I – FINANCIAL INFORMATION (UNAUDITED)

GENERAL

Cautionary Note Regarding Forward-Looking Statements

Certain statements set forth herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “will likely result”, “aims”, “anticipates”, “believes”, “could”, “estimates”, “expects”, “hopes”, “intends”, “may”, “plans”, “projects”, “seeks”, “should”, “will,” “strategy”, “possibility”, and variations of these words and similar expressions help to identify these forward-looking statements, which involve risks and uncertainties that could cause actual results or performance to differ materially from those projected. These forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company, including, without limitation, plans, strategies and goals, and statements about the Company’s outlook regarding revenue and asset growth, financial performance and profitability, capital and liquidity levels, loan and deposit growth and retention, yields and returns, loan diversification and credit management, stockholder value creation, tax rates, and the impact of acquisitions we have made or may make. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company, and there can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors in addition to those set forth below could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements.

General risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct business; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; the effect of acquisitions we have made or may make, including, without limitation, the failure to obtain the necessary regulatory approvals, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; the effectiveness of our risk management framework and quantitative models; changes in the level of our nonperforming assets and charge-offs; the transition away from USD LIBOR and uncertainties regarding potential alternative reference rates, including SOFR; the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible credit related impairments or declines in the fair value of loans and securities held by us; possible impairment charges to goodwill, including any impairment that may result from increased volatility in our stock price; changes in consumer spending, borrowing, and savings habits; the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; periodic fluctuations in commercial or residential real estate prices or values; our ability to attract and retain deposits and other sources of liquidity; the possibility that we may reduce or discontinue the payments of dividends on our common stock; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; technological changes in banking and financial services; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism, and/or military conflicts, which could impact business and economic conditions in the United States and abroad; catastrophic events or natural disasters, including earthquakes, drought, climate change or extreme weather events that may affect our assets, communications or computer services, customers, employees or third party vendors; public health crises and pandemics, such as the COVID-19 pandemic, and their effects on the economic and business environments in which we operate, including on our credit quality, business operations and employees, as well as the impact on general economic and financial market conditions; cybersecurity and fraud threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; our ability to recruit and retain key executives, board members and other employees, and changes in employment laws and regulations; unanticipated regulatory or legal proceedings; and our ability to manage the risks involved in the foregoing.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2022 Annual Report on Form 10-K filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements, except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company’s earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

(Unaudited)


	March 31,			December 31,
	2023			2022
Assets
Cash and due from banks	$	162,668		$	158,236
Interest-earning balances due from Federal Reserve		64,866			45,225
Total cash and cash equivalents		227,534			203,461
Interest-earning balances due from depository institutions		11,944			9,553
Investment securities available-for-sale, at fair value (with amortized cost of $3,664,184 at March 31, 2023, and $3,755,297 at December 31, 2022)		3,204,524			3,255,211
Investment securities held-to-maturity (with fair value of $2,168,569 at March 31, 2023, and $2,155,587 at December 31, 2022)		2,535,979			2,554,301
Total investment securities		5,740,503			5,809,512
Investment in stock of Federal Home Loan Bank (FHLB)		38,697			27,627
Loans and lease finance receivables		8,942,489			9,079,392
Allowance for credit losses		(86,540	)		(85,117	)
Net loans and lease finance receivables		8,855,949			8,994,275
Premises and equipment, net		45,310			46,698
Bank owned life insurance (BOLI)		256,717			255,528
Accrued interest receivable		44,186			46,692
Intangibles		20,023			21,742
Goodwill		765,822			765,822
Income taxes		151,954			186,684
Other assets		115,402			108,946
Total assets	$	16,274,041		$	16,476,540

Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing	$	7,844,329		$	8,164,364
Interest-bearing		4,427,541			4,671,881
Total deposits		12,271,870			12,836,245
Customer repurchase agreements		490,235			565,431
Other borrowings		1,405,000			995,000
Deferred compensation		22,873			22,092
Other liabilities		94,294			109,255
Total liabilities		14,284,272			14,528,023

Commitments and Contingencies
Stockholders' Equity
Common stock, authorized, 225,000,000 shares without par; issued and outstanding 139,302,451 at March 31, 2023, and 139,818,703 at December 31, 2022		1,281,786			1,300,466
Retained earnings		1,034,110			1,002,847
Accumulated other comprehensive (loss) income, net of tax		(326,127	)		(354,796	)
Total stockholders' equity		1,989,769			1,948,517
Total liabilities and stockholders' equity	$	16,274,041		$	16,476,540

See accompanying notes to the unaudited condensed consolidated financial statements.

CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)


	Three Months Ended
	March 31,
	2023			2022
Interest income:
Loans and leases, including fees	$	108,394		$	89,461
Investment securities:
Investment securities available-for-sale		19,596			12,832
Investment securities held-to-maturity		13,956			10,663
Total investment income		33,552			23,495
Dividends from FHLB stock		349			371
Interest-earning deposits with other institutions		491			773
Total interest income		142,786			114,100
Interest expense:
Deposits		5,365			1,127
Borrowings and customer repurchase agreements		11,693			133
Total interest expense		17,058			1,260
Net interest income before provision for credit losses		125,728			112,840
Provision for credit losses		1,500			2,500
Net interest income after provision for credit losses		124,228			110,340
Noninterest income:
Service charges on deposit accounts		5,344			5,059
Trust and investment services		2,914			2,822
Bankcard services		377			416
BOLI income		1,189			1,349
Other		3,378			1,618
Total noninterest income		13,202			11,264
Noninterest expense:
Salaries and employee benefits		35,247			32,656
Occupancy and equipment		5,450			5,571
Professional services		1,696			2,045
Computer software expense		3,408			3,795
Marketing and promotion		1,715			1,458
Provision for unfunded loan commitments		500			—
Amortization of intangible assets		1,720			1,998
Acquisition related expenses		—			5,638
Other		5,145			5,077
Total noninterest expense		54,881			58,238
Earnings before income taxes		82,549			63,366
Income taxes		23,279			17,806
Net earnings	$	59,270		$	45,560

Other comprehensive income (loss):
Unrealized gain (loss) on securities arising during the period, before tax	$	40,702		$	(202,018	)
Less: Income tax (expense) benefit related to items of other comprehensive income		(12,033	)		59,724
Other comprehensive income (loss), net of tax		28,669			(142,294	)
Comprehensive income (loss)	$	87,939		$	(96,734	)

Basic earnings per common share	$	0.42		$	0.31
Diluted earnings per common share	$	0.42		$	0.31

See accompanying notes to the unaudited condensed consolidated financial statements.

CVB FINANCIAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars and shares in thousands)

(Unaudited)

Three Months Ended March 31, 2023 and 2022


	Common Shares Outstanding			Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, January 1, 2023		139,819		$	1,300,466		$	1,002,847		$	(354,796	)	$	1,948,517
Repurchase of common stock		(918	)		(21,036	)		—			—			(21,036	)
Exercise of stock options		4			72			—			—			72
Shares issued pursuant to stock-based compensation plan		397			2,284			—			—			2,284
Cash dividends declared on common stock ($0.20 per share)		—			—			(28,007	)		—			(28,007	)
Net earnings		—			—			59,270			—			59,270
Other comprehensive income		—			—			—			28,669			28,669
Balance, March 31, 2023		139,302		$	1,281,786		$	1,034,110		$	(326,127	)	$	1,989,769

Balance, January 1, 2022		135,526		$	1,209,903		$	875,568		$	(3,968	)	$	2,081,503
Issuance of common stock for acquisition of Suncrest Bank		8,617			197,069			—			—			197,069
Repurchase of common stock		(584	)		(13,643	)		—			—			(13,643	)
Repurchase of common stock, ASR Plan		(2,544	)		(56,000	)		—			—			(56,000	)
ASR Contract		—			(14,000	)		—			—			(14,000	)
Exercise of stock options		50			720			—			—			720
Shares issued pursuant to stock-based compensation plan		561			1,595			—			—			1,595
Cash dividends declared on common stock ($0.18 per share)		—			—