CVB Financial Corp. Reports Earnings for the Fourth Quarter and the Year Ended 2024
Ontario, CA, Jan. 22, 2025 (GLOBE NEWSWIRE) — CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (the “Company”), announced earnings for the quarter and the year ended December 31, 2024.
CVB Financial Corp. reported net income of $50.9 million for the quarter ended December 31, 2024, compared with $51.2 million for the third quarter of 2024 and $48.5 million for the fourth quarter of 2023. Diluted earnings per share were $0.36 for the fourth quarter, compared with $0.37 for the prior quarter and $0.35 for the same period last year.
For the fourth quarter of 2024, annualized return on average equity (“ROAE”) was 9.14%, annualized return on average tangible common equity (“ROATCE”) was 14.31%, and annualized return on average assets (“ROAA”) was 1.30%.
For the year ended December 31, 2024, the Company reported net income of $200.7 million, compared with $221.4 million for the year ended December 31, 2023. Diluted earnings per share were $1.44 for the year ended December 31, 2024, compared to $1.59 for the same period last year. For the year ended December 31, 2024, ROAA was 1.24% and ROATCE was 14.95%, which compares to a 1.35% ROAA and 18.48% ROATCE for 2023.
David Brager, President and Chief Executive Officer of Citizens Business Bank, commented, “We are pleased with our fourth quarter results which represents our 191st consecutive quarter of profitability. I would like to thank our customers for their loyalty and our associates for their commitment.”
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income was $110.4 million for the fourth quarter of 2024. This represented a $3.2 million, or 2.82%, decrease from the third quarter of 2024, and a $8.9 million, or 7.49%, decrease from the fourth quarter of 2023. The quarter-over-quarter decrease in net interest income was due to a $18.2 million decrease in interest income resulting from a $974 million average decrease in earning assets and a 19 basis point decline in our earning asset yield. The decline in earning assets was primarily a result of a $747 million decrease in interest-earning balances due from the Federal Reserve. The decrease in balances held at the Federal Reserve were the result of the $1.3 billion redemption of a Bank Term Fund Program (BTFP) advance at the end of the third quarter of 2024, which resulted in average total borrowings declining by $1.22 billion in the fourth quarter of 2024. The decline in interest income was partially offset by $15 million decrease in interest expense, including the $14.9 million lower interest on borrowings from the redemption of the BTFP advance.
The decline in net interest income compared to the fourth quarter of 2023 was primarily due to a $10.5 million decrease in interest income resulting from a $684 million decrease in average earning assets and a 6 basis point decline in our earning asset yield. Interest expense decreased by $1.5 million compared to the fourth quarter of 2023, primarily due to $1.1 billion in lower average borrowings in the fourth quarter of 2024.
Net interest income of $447.3 million for the year ended December 31, 2024, decreased $40.6 million, or 8.33%, compared to the same period of 2023. Interest income increased by $23.8 million, while interest expense grew by $64.4 million from 2023. Growth in interest income was primarily due to a 25 basis point increase in the earning asset yield. Interest expense on deposits and customer repurchase agreements increased by $57.8 million, primarily due to a 49 basis point increase in the cost of deposits and repurchase agreements. Average borrowings grew by $163.6 million year over year, resulting in a $6.1 million increase in interest expense. Overall, cost of funds grew from 0.83% for 2023 to 1.32% in 2024.
Net Interest Margin
Our tax equivalent net interest margin was 3.18% for the fourth quarter and 3.05% for the third quarter of 2024, compared to 3.26% for the fourth quarter of 2023. Fourth quarter cost of funds decreased 34 basis points compared to the third quarter of 2024, partially offset by a 19 basis point decrease in our interest-earning asset yield. Our cost of funds decreased from 1.47% in the third quarter of 2024 to 1.13% in the fourth quarter, as average borrowings declined quarter over quarter by $1.2 billion. The cost of borrowings decreased from 4.77% in the third quarter of 2024 to 4.62% in the fourth quarter due to the redemption of a $1.3 billion BTFP advance in September 2024. In addition, cost of deposits and customer repurchase agreements decreased by four basis points to 0.97% for the fourth quarter of 2024. The 19 basis point quarter over quarter decrease in our interest-earning asset yield was primarily due to a 16 basis point decrease in loan yields and an 80 basis point decrease in the positive carry on fair value hedging instruments that pay a fixed interest rate and receive daily SOFR. These swaps originally had a total notional value of $1 billion, of which $700 million remained outstanding at December 31, 2024. A $300 million swap that matured in 2027 was terminated in December of 2024. The fourth quarter yield on funds on deposit at the Federal Reserve decreased by 50 basis points compared to the third quarter of 2024, although these funds decreased as a percentage of earnings assets to 3.5%, from 8.2% in the prior quarter.
Net interest margin for the fourth quarter of 2024 decreased by 8 basis points compared to the fourth quarter of 2023, as a result of lower interest earning asset yields that declined by 6 basis points and a 4 basis point increase in funding costs. Earning asset yields declined from 4.30% in the fourth quarter of 2023 to 4.24% in the fourth quarter of 2024. The lower earning asset yields included lower loan yields, which declined from 5.18% for the fourth quarter of 2023 to 5.15% for the fourth quarter of 2024, as well as a 66 basis point quarter over quarter decrease in the positive carry on fair value hedging instruments. Funds on deposit at the Federal Reserve yielded 100 basis points less than the prior year quarter. Compared to the fourth quarter of 2023, the cost of deposits and customer repurchase agreements increased by 36 basis points in the fourth quarter of 2024, but cost of funds only increased by 4 basis points due to a $1.1 billion decrease in average borrowings.
Earning Assets and Deposits
On average, total earning assets declined by $974 million, or 6.52%, compared to the third quarter of 2024 and declined by $684 million, or 4.67% when compared to the fourth quarter of 2023. The quarter-over-quarter decrease includes a $747 million decrease in average funds on deposit at the Federal Reserve, $143.5 million decline in average investment securities, and a $82.7 million decrease in average loans outstanding. Compared to the fourth quarter of 2023, the decrease in earnings assets was primarily due to a $328.1 million decline in average loans outstanding and a $391.7 million decrease in total investment securities. Total deposits and customer repurchase agreements increased on average by $150.5 million compared to the third quarter of 2024 and increased on average by $115.3 million from the fourth quarter of 2023. Noninterest-bearing deposits declined on average by $8.9 million, or 0.12%, from the third quarter of 2024 and by $334.8 million, or 4.5%, from the fourth quarter of 2023. On average, noninterest-bearing deposits were 58.7% of total deposits for the fourth quarter of 2024, compared to 59.10% for the third quarter of 2024 and 61.30% in the fourth quarter of 2023.
Provision for Credit Losses
There was a $3.0 million recapture of provision for credit losses in the fourth quarter and no provision in the third quarter of 2024, compared to $2.0 million recapture of provision in the fourth quarter of 2023. Net recoveries for the fourth quarter of 2024 were $180,000 compared to net recoveries of $156,000 in the prior quarter. Allowance for credit losses represented 0.94% of gross loans at December 31, 2024, compared to 0.97% at September 30, 2024.
For the year ended December 31, 2024, we recorded a $3.0 million recapture of provision for credit losses, compared to a $2 million provision for credit loss for 2023.
Noninterest Income
Noninterest income was $13.1 million for the fourth quarter of 2024, compared with $12.8 million for the third quarter of 2024 and $19.2 million for the fourth quarter of 2023. During the fourth quarter of 2024, the Bank executed sale-leaseback transactions with the sale of two buildings, that were simultaneously leased back, resulting in a pre-tax net gain of $16.8 million. The gains on selling the buildings were offset by realizing a pre-tax net loss of $16.7 million on the sale of $155 million of AFS securities. Fourth quarter income from Bank Owned Life Insurance (“BOLI”) decreased by $1.1 million from the third quarter of 2024 and decreased by $5.5 million compared to the fourth quarter of 2023, which was primarily due to $6.5 million of income from the surrender and redeployment of the BOLI policies at the end 2023.
For the year ended December 31, 2024, noninterest income was $54.5 million, compared to $59.3 million for 2023. Noninterest income in 2024 included a total pre-tax gain of $25.9 million from the sale-leaseback of four locations partially offset by pre-tax loss of $28.3 million from the sale of $467 million of AFS securities while 2023 included a $2.6 million gain from an equity fund distribution. Trust and investment income for 2024 grew by $1.2 million, or 9.34%, from the prior year.
Noninterest Expense
Noninterest expense for the fourth quarter of 2024 was $58.5 million, compared to $58.8 million for the third quarter of 2024 and $65.9 million for the fourth quarter of 2023. The quarter-over-quarter decrease included a $650,000 decrease in staff related expense, offset by an increase in expense of $750,000 due to the recapture of provision for unfunded loan commitments in the third quarter of 2024.
Noninterest expense decreased by $7.4 million compared to the fourth quarter of 2023 primarily due to $9.2 million FDIC special assessment in the fourth quarter of 2023. Partially offsetting the impact of lower regulatory assessment expense were increases of $346,000 in staff related expenses, $342,000 increase in occupancy expenses and an increase in expense due to a $500,000 recapture of provision for unfunded loan commitments in the fourth quarter of 2023. The efficiency ratio was 47.34% for the fourth quarter of 2024, compared to 47.60% for the same period of 2023.
Income Taxes
Our effective tax rate for the fourth quarter of 2024 was 25.25% and was 26% for the year ended December 31, 2024, compared with 34.97% for the fourth quarter of 2023 and 29.80% for year-to-date 2023. The fourth quarter of 2023 effective tax rate was impacted by the surrender of certain BOLI policies. Our estimated annual effective tax rate can vary depending upon the level of tax-advantaged income from municipal securities and BOLI, as well as available tax credits.
BALANCE SHEET HIGHLIGHTS
Assets
The Company reported total assets of $15.1 billion at December 31, 2024. This represented a decrease of $249.6 million, or 1.62%, from total assets of $15.4 billion at September 30, 2024. The decrease in assets included a $201.99 million decrease in interest-earning balances due from the Federal Reserve, a $70.6 million decrease in cash and due from banks and depository institutions, and a $33.3 million decrease in net loans, partially offset by a $50.95 million increase in investment securities.
Total assets at December 31, 2024 decreased by $867.3 million, or 5.41%, from total assets of $16.02 billion at December 31, 2023. The decrease in assets included a $499.0 million decrease in investment securities, a $361.8 million decrease in net loans, and a $59.1 million decrease in interest-earning balances due from the Federal Reserve.
Sale-Leaseback Transaction
During the fourth quarter of 2024, the Bank executed sale-leaseback transactions and sold two buildings for an aggregate sale price of $30.1 million. The Bank simultaneously entered into lease agreements with the respective purchasers for initial terms of 15 years. These sale-leaseback transactions resulted in a pre-tax net gain of $16.8 million for the fourth quarter of 2024. The Bank also recorded Right of Use (“ROU”) assets and corresponding operating lease liabilities each totaling $15.6 million.
Total sale-leaseback transactions for full year 2024 entailed the sale of four buildings sold for a cumulative sale price of $47.1 million, resulting in a pre-tax net gain of $25.9 million and cash proceeds of $44.76 million. Total ROU assets and corresponding operating lease liabilities recorded was $26.8 million.
Investment Securities and BOLI
Total investment securities were $4.92 billion at December 31, 2024, an increase of $50.9 million, or 1.05%, from September 30, 2024, and a decrease of $499.0 million, or 9.20%, from $5.42 billion at December 31, 2023.
At December 31, 2024, investment securities available-for-sale (“AFS”) totaled $2.54 billion, inclusive of a pre-tax net unrealized loss of $447.7 million. AFS securities increased by $76.53 million or 3.10% from September 30, 2024 and decreased by $414.0 million, or 14.01%, from $2.96 billion at December 31, 2023. Pre-tax unrealized loss increased by $80.02 million from September 30, 2024 and decreased by $2.04 million from December 31, 2023.
Concurrent with the sale-leaseback transactions during the fourth quarter of 2024, the Bank sold AFS securities with a book value of $154.7 million, resulting in a net pre-tax loss of $16.7 million, which was offset by purchased AFS securities with a book value of $385.0 million. Including the sale of AFS securities during the third quarter of 2024, total book value of AFS securities sold during the second half of 2024 was $467.0 million, resulting in a cumulative net pre-tax loss of $28.3 million.
At December 31, 2024, investment securities held-to-maturity (“HTM”) totaled $2.38 billion, a decrease of $25.6 million, or 1.06%, from September 30, 2024, and a decrease of $84.9 million, or 3.45%, from December 31, 2023.
At December 31, 2024, the Company had $316.2 million of Bank Owned Life insurance (“BOLI”), compared to $316.6 million at September 30, 2024 and $308.7 million at December 31, 2023. The Bank completed a restructuring of the Company’s life insurance policies at the end of 2023, which resulted to $4.5 million write-down in value on surrender policies that was offset by a $10.9 million enhancement to cash surrender values, as well as additional policy purchases totaling $41 million.
Loans
Total loans and leases, at amortized cost, of $8.54 billion at December 31, 2024 decreased by $36.1 million, or 0.42%, from September 30, 2024. The quarter-over quarter decrease in loans is primarily due to decreases of $111.1 million in commercial real estate loans, $11.3 million in Commercial and Industrial loans, and $9.5 million in agribusiness loans, offset by a seasonal increase of $87 million in dairy & livestock loans.
Total loans and leases, at amortized cost, decreased by $368.5 million, or 4.14%, from December 31, 2023. The year-over-year decrease in total loans is primarily due to decreases of $277.1 million in commercial real estate loans, $50.65 million in construction loans, and $44.7 million in commercial and industrial loans.
Asset Quality
During the fourth quarter of 2024, we experienced credit charge-offs of $64,000 and total recoveries of $244,000, resulting in net recoveries of $180,000. The allowance for credit losses (“ACL”) totaled $80.1 million at December 31, 2024, compared to $82.9 million at September 30, 2024 and $86.8 million at December 31, 2023. At December 31, 2024, ACL as a percentage of total loans and leases outstanding was 0.94%. This compares to 0.97% at September 30, 2024 and 0.98% at December 31, 2023.
Nonperforming loans, defined as nonaccrual loans, including modified loans on nonaccrual, plus loans 90 days past due and accruing interest, and nonperforming assets, defined as nonperforming plus OREO, are highlighted below.
Total nonperforming assets and delinquent loans decreased from $53.3 million at September 30, 2024 to $47.6 million at December 31, 2024. Of the $30.7 million in past due and accruing loans as of September 30, 2024, $24.8 million became classified as nonperforming loans and approximately $1 million became OREO by the end of 2024. The remaining $4.9 million of past due and accruing loans at the end of the third quarter were paid off by the borrower or from the sale of loan collateral. An additional $17.7 million of loans that were classified as nonperforming at the end of the third quarter of 2024 were foreclosed during the fourth quarter and recorded as OREO at December 31, 2024.
Classified loans are loans that are graded “substandard” or worse. Classified loans totaled $89.55 million or 1.05% of total loans at December 31, 2024 compared with $124.61 million or 1.44 % of loans at September 30, 2024 and $102.20 million or 1.15 % of total loans at December 31, 2023. The quarter-over-quarter decrease of $35.06 million is primarily due to a $26.72 million net decrease in classified nonowner occupied commercial real estate loans and a $10.82 million net decrease in dairy & livestock and agribusiness loans.
Deposits & Customer Repurchase Agreements
Deposits of $11.9 billion and customer repurchase agreements of $261.9 million totaled $12.21 billion at December 31, 2024. This represented a net decrease of $256.7 million compared to September 30, 2024. Total deposits and customer repurchase agreements increased $505.0 million, or 4.31%, when compared to $11.71 billion at December 31, 2023, partially due to the growth in brokered deposits, which totaled $300 million at December 31, 2024. Overall, non-maturity deposits grew by $314.7 million, or 2.80%, from the end of 2023.
Noninterest-bearing deposits were $7.04 billion at December 31, 2024, a decrease of $100.0 million, or 1.40%, when compared to $7.14 billion at September 30, 2024. Noninterest-bearing deposits decreased by $169.1 million, or 2.35%, when compared to $7.21 billion at December 31, 2023. At December 31, 2024, noninterest-bearing deposits were 58.90% of total deposits, compared to 59.12% at September 30, 2024 and 63.03% at December 31, 2023.
Borrowings
As of December 31, 2024, total borrowings consisted of $500 million of FHLB advances. The FHLB advances include maturities of $300 million, at an average cost of approximately 4.73%, maturing in May of 2026, and $200 million, at a cost of 4.27% maturing in May of 2027. Total borrowings decreased by $1.57 billion from the end of 2023. During the third quarter of 2024, we repaid the $1.3 billion of borrowings from the Federal Reserve’s Bank Term Funding Program, with a cost of 4.76%, that were scheduled to mature in January of 2025.
Capital
The Company’s total equity was $2.19 billion at December 31, 2024. This represented an overall increase of $108.34 million from total equity of $2.08 billion at December 31, 2023. Retained earnings grew by $96.84 million and other comprehensive income increased by $11.51 million. A new 10 million share 10b5-1 stock repurchase program was authorized by the Board of Directors during the fourth quarter of 2024. No stock repurchases occurred during the fourth quarter of 2024. Our tangible book value per share at December 31, 2024 was $10.10.
Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory standards.
CitizensTrust
As of December 31, 2024, CitizensTrust had approximately $4.6 billion in assets under management and administration, including $3.3 billion in assets under management. Revenues were $3.51 million for the fourth quarter of 2024 and $13.73 million for the year ended December 31, 2024, compared to $3.1 million and $12.6 million, respectively, for the same periods of 2023. CitizensTrust provides trust, investment and brokerage related services, as well as financial, estate and business succession planning.
Corporate Overview
CVB Financial Corp. (“CVBF”) is the holding company for Citizens Business Bank. CVBF is one of the 10 largest bank holding companies headquartered in California with more than $15 billion in total assets. Citizens Business Bank is consistently recognized as one of the top performing banks in the nation and offers a wide array of banking, lending and investing services with more than 60 banking centers and three trust office locations serving California.
Shares of CVB Financial Corp. common stock are listed on the NASDAQ under the ticker symbol “CVBF”. For investor information on CVB Financial Corp., visit our Citizens Business Bank website at www.cbbank.com and click on the “Investors” tab.
Conference Call
Management will hold a conference call at 7:30 a.m. PDT/10:30 a.m. EDT on Thursday, January 23, 2025 to discuss the Company’s fourth quarter and year ended 2024 financial results. The conference call can be accessed live by registering at: https://register.vevent.com/register/BIf69e02e605ed46219d375263adc834bc
The conference call will also be simultaneously webcast over the Internet; please visit our Citizens Business Bank website at www.cbbank.com and click on the “Investors” tab to access the call from the site. Please access the website 15 minutes prior to the call to download any necessary audio software. This webcast will be recorded and available for replay on the Company’s website approximately two hours after the conclusion of the conference call and will be available on the website for approximately 12 months.
Safe Harbor
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, goals and statements about the Company’s outlook regarding revenue and asset growth, financial performance and profitability, capital and liquidity levels, loan and deposit levels, growth and retention, yields and returns, loan diversification and credit management, stockholder value creation, tax rates, the impact of economic developments, 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, key personnel and customers into our operations; the timely development of competitive 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 banking, taxes, securities, and insurance, and the application thereof by regulatory agencies; the effectiveness of our risk management framework and quantitative models; changes in the level of our nonperforming assets and charge-offs; 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 on our balance sheet; changes in customer 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 or retain deposits (including low cost deposits) or to access government or private lending facilities and other sources of liquidity; the possibility that we may reduce or discontinue the payment 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; systemic or non-systemic bank failures or crises; 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, and their effects on our asset credit quality, business operations, and employees, as well as the impact on general economic and financial market conditions; cybersecurity threats and fraud and the costs of defending against them, including the costs of compliance with legislation or regulations to combat money laundering, fraud and cybersecurity threats; our ability to recruit and retain key executives, board members and other employees, and our ability to comply with federal and state employment laws and regulations; ongoing or unanticipated regulatory or legal proceedings or outcomes; 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 2023 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.
Non-GAAP Financial Measures — Certain financial information provided in this earnings release has not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and is presented on a non-GAAP basis. Investors and analysts should refer to the reconciliations included in this earnings release and should consider the Company’s non-GAAP measures in addition to, not as a substitute for or as superior to, measures prepared in accordance with GAAP. These measures may or may not be comparable to similarly titled measures used by other companies.
