CVB FINANCIAL CORP

For the second quarter of 2024, we reported net earnings of $50.0 million, compared with $48.6 million for the first quarter of 2024 and $55.8 million for the second quarter of 2023. Diluted earnings per share were $0.36 for the second quarter, compared to $0.35 for the prior quarter and $0.40 for the same period last year. Net income of $50.0 million for the second quarter of 2024 produced an annualized return on average equity (“ROAE”) of 9.57%, an annualized return on average tangible common equity (“ROATCE”) of 15.51%, and an annualized return on average assets (“ROAA”) of 1.24%. Our net interest margin, tax equivalent (“NIM”), was 3.05% for the second quarter of 2024, while our efficiency ratio was 45.10%.

Net interest income was $110.8 million for the second quarter of 2024. This represented a $1.6 million, or 1.43%, decline from the first quarter of 2024, and an $8.7 million, or 7.27%, decrease from the second quarter of 2023. The quarter-over-quarter decrease in net interest income was due to a five basis point decline in net interest margin, as total earning assets were essentially unchanged from the prior quarter end. The decline in net interest income compared to the second quarter of 2023 was due to a 17 basis point decrease in net interest margin and a $294.2 million decline in average earning assets.

Noninterest income was $14.4 million for the second quarter of 2024, compared with $14.1 million for the first quarter of 2024 and $12.7 million for the second quarter of 2023. Second quarter income from Bank Owned Life Insurance (“BOLI”) decreased by $651,000 from the first quarter of 2024 and increased by $845,000 compared to the second quarter of 2023. Death benefits that exceeded the asset value on certain policies totaled $531,000 in the first quarter of 2024 and approximately $800,000 in the second quarter of 2023. There were no death benefits received in the second quarter of 2024. The year-over-year increase in BOLI income was primarily due to restructuring and enhancements in BOLI policies in the fourth quarter of 2023.

Noninterest expense for the second quarter of 2024 was $56.5 million, compared to $59.8 million for the first quarter of 2024 and $54.0 million for the second quarter of 2023. The $3.3 million quarter-over-quarter decrease was primarily due to a $3.0 million decrease in regulatory assessment expense resulting from changes in the amount accrued as an estimate of the FDIC special assessment. The $2.5 million increase in expense compared to the second quarter of 2023, was due primarily to salary and benefit expense growing by $1.9 million, or 5.60%.

At June 30, 2024, total assets of $16.15 billion increased by $130.5 million, or 0.81%, from total assets of $16.02 billion at December 31, 2023. Interest-earning assets of $14.55 billion at June 30, 2024 increased by $90.9 million, or 0.63%, when compared with $14.46 billion at December 31, 2023. The increase in interest-earning assets was primarily due to a $559.9 million increase in interest-earning balances due from the Federal Reserve, offset by a $245.1 million decrease in investment securities, and a $223.1 million decrease in total loans.

Total investment securities were $5.18 billion at June 30, 2024, a decrease of $245.1 million, or 4.52%, from $5.42 billion at December 31, 2023. At June 30, 2024, investment securities held-to-maturity (“HTM”) totaled $2.43 billion, a $34.7 million, or 1.41%, decline from December 31, 2023. At June 30, 2024, investment securities available-for-sale (“AFS”) totaled $2.75 billion, inclusive of a pre-tax net unrealized loss of $487.9 million. AFS securities decreased by $210.3 million, or 7.12%, from $2.96 billion at December 31, 2023. The pre-tax unrealized loss grew by $38.1 million from December 31, 2023. Fair value hedges in which $1 billion notional pay-fixed interest rate swaps with maturities ranging from 2027 to 2028, wherein the Company pays a weighted average fixed rate of approximately 3.8% and receives daily SOFR, had a fair value totaling $13.7 million and were reflected as an asset June 30, 2024. The fair value of these pay fixed interest rate swaps increased by $20.7 million from December 31, 2023. Our tax equivalent yield on investments was 2.71% for the quarter ended June 30, 2024, compared to 2.64% for the first quarter of 2024 and 2.37% for the second quarter of 2023.

Total loans and leases, at amortized cost, of $8.68 billion at June 30, 2024, decreased by $223.1 million, or 2.50%, from December 31, 2023. The decrease in total loans included decreases of $119.6 million in commercial real estate loans, $62.3 million in dairy & livestock and agribusiness loans, $14.5 million in construction loans, and $13.7 million in commercial and industrial loans. The decline in dairy & livestock loans primarily relates to the seasonal peak in line utilization at the end of every calendar year, demonstrated by a decline in utilization from 80% at December 31, 2023 to 74% at June 30, 2024. Our yield on loans was 5.26% for the quarter ended June 30, 2024, compared to 5.30% for the quarter ended March 31, 2024 and 5.01% for the second quarter of 2023.

The allowance for credit losses totaled $82.8 million at June 30, 2024, compared to $86.8 million at December 31, 2023. There was no provision for credit losses in the first or second quarters of 2024. The decline in the allowance was due to $4 million of net charge-offs in the first quarter of 2024, primarily due to two borrowers in which specific loan loss reserves were previously established in 2023.

Noninterest-bearing deposits were $7.09 billion at June 30, 2024, a decrease of $116.1 million, or 1.61%, when compared to $7.21 billion at December 31, 2023. At June 30, 2024, noninterest-bearing deposits were 60.13% of total deposits, compared to 63.03% at December 31, 2023.

Interest-bearing deposits were $4.70 billion at June 30, 2024, an increase of $472.8 million, or 11.18%, when compared to $4.23 billion at December 31, 2023. The increase in interest-bearing deposits included $400 million in new brokered time deposits issued during the first six months of 2024. These brokered time deposits mature every 90 days. $300 million of these time deposits were combined with $300 million in cash flow hedges during the first quarter of 2024, resulting in a fixed rate of approximately 4.2%. Customer repurchase agreements totaled $268.8 million at June 30, 2024, compared to $271.6 million at December 31, 2023. Our average cost of total deposits including customer repurchase agreements was 0.87% for the quarter ended June 30, 2024, compared to 0.73% for the quarter ended March 31, 2024 and 0.35% for the second quarter of 2023.

At June 30, 2024, total borrowings of $1.8 billion, consisted of $1.3 billion from the Federal Reserve’s Bank Term Funding Program ("BTFP"), at a cost of 4.76%, maturing in January of 2025 and $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.

The Company’s total equity was $2.11 billion at June 30, 2024. This represented an overall increase of $34.5 million from total equity of $2.08 billion at December 31, 2023. Increases to equity included $98.6 million in net earnings, that were partially offset by $55.9 million in cash dividends and a $10.8 million decrease in other comprehensive income from the tax effected impact of the net decline in market value of available-for-sale securities and increase in value of pay fixed swaps. We engaged in no stock repurchases during the first half of 2024. Our tangible book value per share at June 30, 2024 was $9.55.

Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory requirements. As of June 30, 2024, the Company’s Tier 1 leverage capital ratio was 10.55%, common equity Tier 1 ratio was 15.29%, Tier 1 risk-based capital ratio was 15.29%, and total risk-based capital ratio was 16.10%. Refer to our Analysis of Financial Condition – Capital Resources.