CVB FINANCIAL CORP

Previous wording

For the third quarter of 2024, we reported net earnings of $51.2 million, compared with $50.0 million for the second quarter of 2024 and $57.9 million for the third quarter of 2023. Diluted earnings per share were $0.37 for the third quarter, compared to $0.36 for the prior quarter and $0.42 for the same period last year. Net income of $51.2 million for the third quarter of 2024 produced an annualized return on average equity (“ROAE”) of 9.40%, an annualized return on average tangible common equity (“ROATCE”) of 14.93%, and an annualized return on average assets (“ROAA”) of 1.23%. Our net interest margin, tax equivalent (“NIM”), was 3.05% for the third quarter of 2024, while our efficiency ratio was 46.53%.

Current wording

For the first quarter of 2025, we reported net earnings of $51.1 million, compared with $50.9 million for the fourth quarter of 2024 and $48.6 million for the first quarter of 2024. Diluted earnings per share were $0.36 for the first quarter, and prior quarter and $0.35 for the same period last year. Net income of $51.1 million for the first quarter of 2025 produced an annualized return on average equity (“ROAE”) of 9.31%, an annualized return on average tangible common equity (“ROATCE”) of 14.51%, and an annualized return on average assets (“ROAA”) of 1.37%. Our net interest margin, tax equivalent (“NIM”), was 3.31% for the first quarter of 2025, while our efficiency ratio was 46.69%.

Previous wording

Total loans and leases, at amortized cost, of $8.57 billion at September 30, 2024, decreased by $332.3 million, or 3.73%, from December 31, 2023. The decrease in total loans included decreases of $165.9 million in commercial real estate loans, $70.5 million in dairy & livestock and agribusiness loans, $52.0 million in construction loans, and $33.4 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 71% at September 30, 2024. Our yield on loans was 5.31% for the quarter ended September 30, 2024, compared to 5.26% for the quarter ended June 30, 2024 and 5.07% for the third quarter of 2023.

Current wording

Total loans and leases, at amortized cost, of $8.36 billion at March 31, 2025, decreased by $172.8 million, or 2.02%, from December 31, 2024. The quarter-over-quarter decline in loans included decreases of $16.8 million in commercial real estate loans, $167.8 million in dairy & livestock loans, offset by an increase of $17.1 million in commercial and industrial loans. The decline in dairy and 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 81% at the end of 2024 to 64% at March 31, 2025. Our yield on loans was 5.22% for the quarter ended March 31, 2025, compared to 5.15% for the fourth quarter of 2024 and 5.30% for the first quarter of 2024.

Previous wording

The allowance for credit losses totaled $82.9 million at September 30, 2024, compared to $86.8 million at December 31, 2023. There was no provision for credit losses in the first three 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.

Current wording

The allowance for credit losses totaled $78.3 million at March 31, 2025, compared to $80.1 million at December 31, 2024. There was $2.0 million recapture of credit losses in the first quarter of 2025. The decline in the allowance was due primarily to improved credit ratings for dairy and livestock loans. The allowance for credit losses as a percentage of total loans was .94% at both March 31, 2025 and December 31, 2024.

Previous wording

Noninterest-bearing deposits were $7.14 billion at September 30, 2024, a decrease of $69.4 million, or 0.96%, when compared to $7.21 billion at December 31, 2023. At September 30, 2024, noninterest-bearing deposits were 59.12% of total deposits, compared to 63.03% at December 31, 2023.

Current wording

Noninterest-bearing deposits were $7.18 billion at March 31, 2025, an increase of $147.1 million, or 2.09%, when compared to $7.04 billion at December 31, 2024 . At March 31, 2025, noninterest-bearing deposits were 59.92% of total deposits, compared to 58.90% at December 31, 2024.

Previous wording

Interest-bearing deposits were $4.94 billion at September 30, 2024, an increase of $708.2 million, or 16.75%, 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 quarter 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 $394.5 million at September 30, 2024, compared to $271.6 million at December 31, 2023. Our average cost of total deposits including customer repurchase agreements was 1.01% for the quarter ended September 30, 2024, compared to 0.87% for the quarter ended June 30, 2024 and 0.51% for the third quarter of 2023.

Current wording

Interest-bearing deposits were $4.81 billion at March 31, 2025, a decrease of $105.6 million, or 2.15%, when compared to $4.91 billion at December 31, 2024. Customer repurchase agreements totaled $276.2 million at March 31, 2025, compared to $261.9 million at December 31, 2024. Our average cost of total deposits including customer repurchase agreements was 0.87% for the first quarter of 2025, compared to 0.97% for the fourth quarter of 2024 and 0.73% for the first quarter of 2024.

Previous wording

The Company’s total equity was $2.20 billion at September 30, 2024. This represented an overall increase of $119.9 million from total equity of $2.08 billion at December 31, 2023. Increases to equity included $149.9 million in net earnings and a $48.7 million increase in other comprehensive income from the tax effected impact of the net increase in market value of available-for-sale securities, that were partially offset by $83.9 million in cash dividends. We engaged in no stock repurchases during the first nine months of 2024. Our tangible book value per share at September 30, 2024 was $10.17.

Current wording

The Company’s total equity was $2.23 billion at March 31, 2025. This represented an overall increase of $42.1 million from total equity of $2.19 billion at December 31, 2024. Increases to equity included $51.1 million in net earnings and a $34.8 million increase in other comprehensive income, that were partially offset by $27.9 million in cash dividends. During the first quarter of 2025, we repurchased 782,063 shares at an average price of $19.55, totaling $15.3 million. We engaged in no stock repurchases during the first quarter of 2024 other than the shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards. Our tangible book value per share at March 31, 2025 was $10.45.

Previous wording

Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory requirements. As of September 30, 2024, the Company’s Tier 1 leverage capital ratio was 10.60%, common equity Tier 1 ratio was 15.77%, Tier 1 risk-based capital ratio was 15.77%, and total risk-based capital ratio was 16.59%. Refer to our Analysis of Financial Condition – Capital Resources.

Current wording

Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory requirements. As of March 31, 2025, the Company’s Tier 1 leverage capital ratio was 11.81%, common equity Tier 1 ratio was 16.52%, Tier 1 risk-based capital ratio was 16.52%, and total risk-based capital ratio was 17.33%. Refer to our Analysis of Financial Condition – Capital Resources.

Previous wording

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent (TE) basis by adjusting interest income utilizing the federal statutory tax rates of 21% in effect for the three and nine months ended September 30, 2024 and 2023. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. See Item 2 –Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/Liability and Market Risk Management – Interest Rate Sensitivity Management included herein.

Current wording

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent (TE) basis by adjusting interest income utilizing the federal statutory tax rates of 21% in effect for the three months ended March 31, 2025 and 2024. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. See Item 2 –Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset/Liability and Market Risk Management – Interest Rate Sensitivity Management included herein.

Previous wording

Includes tax equivalent (TE) adjustments utilizing federal statutory rates of 21% in effect for the three months ended September 30, 2024 and 2023. The non TE rates were 2.63% and 2.60% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Includes tax equivalent (TE) adjustments utilizing federal statutory rates of 21% in effect for the three months ended March 31, 2025 and March 31, 2024. The non TE rates for total investment securities were 2.59% and 2.60% for the three months ended March 31, 2025 and March 31, 2024, respectively.

Previous wording

Includes loan fees of $748,000 and $763,000 for the three months ended September 30, 2024 and 2023, respectively. Prepayment penalty fees of $830,000 and $373,000 are included in interest income for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Includes loan fees of $700,000 and $706,000 for the three months ended March 31, 2025 and March 31, 2024, respectively. Prepayment penalty fees of $931,000 and $630,000 are included in interest income for the three months ended March 31, 2025 and March 31, 2024, respectively.

Previous wording

There was no provision for credit losses for the nine months ended September 30, 2024, compared to $4.0 million in provision for credit losses for the same period of 2023. We experienced credit charge-offs of $4.3 million and total recoveries of $444,000, resulting in net charge-offs of $3.9 million for 2024 year-to-date. For the nine months ended September 30, 2023, we experienced credit charge-offs of $224,000 and total recoveries of $102,000, resulting in net charge-offs of $122,000. Refer to the discussion of “Allowance for Credit Losses” in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations contained herein for discussion concerning observed changes in the credit quality of various components of our loan portfolio as well as changes and refinements to our methodology.

Current wording

There was $2.0 million recapture of credit losses in the first quarter of 2025, compared to no provision in the first quarter of 2024. Projected loss rates were 0.94% at March 31, 2025, compared to 0.94% at March 31, 2024. Refer to the discussion of “Allowance for Credit Losses” in Item 2 –Management’s Discussion and Analysis of Financial Condition and Results of Operations contained herein for discussion concerning observed changes in the credit quality of various components of our loan portfolio as well as changes and refinements to our methodology.

Previous wording

No assurance can be given that economic conditions which affect the Company’s service areas or other circumstances will or will not be reflected in future changes in the level of our allowance for credit losses and the resulting provision or recapture of provision for credit losses. The process to estimate the allowance for credit losses requires considerable judgment and our economic forecasts may continue to vary due to the uncertainty of the future impact from the recent rise in interest rates, geopolitical events, and the continued inflationary pressures will have on future interest rates, unemployment, the overall economy and resulting impact on our customers. See “Allowance for Credit Losses” under Analysis of Financial Condition herein.

Current wording

No assurance can be given that economic conditions which affect the Company’s service areas or other circumstances will or will not be reflected in future changes in the level of our allowance for credit losses and the resulting provision or recapture of provision for credit losses. The process to estimate the allowance for credit losses requires considerable judgment and our economic forecasts may continue to vary due to the uncertainty of the future impact from the recent rise in interest rates, geopolitical events in Europe, and global inflation will have on future interest rates, unemployment, the overall economy and resulting impact on our customers. See “Allowance for Credit Losses” under Analysis of Financial Condition herein.

Previous wording

Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made up of wealth management and investment services. They provide a variety of services, which include asset management, financial planning, estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides self-directed brokerage, 401(k) plans, mutual funds, insurance and other non-insured investment products. At September 30, 2024, CitizensTrust had approximately $4.7 billion in assets under management and administration, including $3.3 billion in assets under management. CitizensTrust generated fees of $3.6 million for the third quarter of 2024, compared to $3.2 million for the same period of 2023.

Current wording

Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made up of wealth management and investment services. They provide a variety of services, which include asset management, financial planning, estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides self-directed brokerage, 401(k) plans, mutual funds, insurance and other non-insured investment products. At March 31, 2025, CitizensTrust had approximately $4.7 billion in assets under management and administration, including $3.38 billion in assets under management. CitizensTrust generated fees of $3.4 million for the first quarter of 2025, compared to $3.2 million for the first quarter of 2024.

Previous wording

Our ability to control noninterest expenses in relation to asset growth can be measured in terms of total noninterest expenses as a percentage of average assets. Noninterest expense as a percentage of average assets was 1.42% for the third quarter of 2024, compared to 1.33% for the third quarter of 2023.

Current wording

Our ability to control noninterest expenses in relation to asset growth can be measured in terms of total noninterest expenses as a percentage of average assets. Noninterest expense as a percentage of average assets was 1.58% for the first quarter of 2025, compared to 1.48% for the first quarter of 2024. This ratio was impacted by the deleveraging strategy that culminated at the end of 2024 and resulted in a $1.04 billion decrease in average assets between the first quarter of 2024 and the first quarter of 2025.

Previous wording

Our ability to control noninterest expenses in relation to the level of total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses. The efficiency ratio was 46.53% for the third quarter of 2024, compared to 39.99% for the third quarter of 2023.

Current wording

Our ability to control noninterest expenses in relation to the level of total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses. The efficiency ratio for the first quarter of 2025 was 46.69%, compared to 47.22% for the first quarter of 2024.

Previous wording

The Company’s effective tax rate for the three and nine months ended September 30, 2024 was 24.25% and 26.25%, respectively, compared to 28.20% for both the three and nine months ended September 30, 2023. Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged income from municipal securities and BOLI, as well as available tax credits. Investments in tax credits and higher BOLI income were the primary drivers of the lower effective tax rate in 2024.

Current wording

The Company’s effective tax rate for the three months ended March 31, 2025 was 26.50%, compared to 27.25% for the three months ended March 31, 2024, respectively. The decrease in the effective tax rate was a result of increased investments in tax credits during 2024 and 2025. Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged income from municipal securities and BOLI, as well as available tax credits.

Previous wording

At September 30, 2024, total assets of $15.40 billion decreased by $617.8 million, or 3.86%, from total assets of $16.02 billion at December 31, 2023. Interest-earning assets of $13.74 billion at September 30, 2024 decreased by $723.2 million, or 5.0%, when compared with $14.46 billion at December 31, 2023. The decrease in interest-earning assets was primarily due to a $549.9 million decrease in investment securities, and a $328.4 million decrease in net loans, partially offset by a $142.9 million increase in interest-earning balances due from the Federal Reserve.

Current wording

Total assets of $15.26 billion at March 31, 2025 increased by $102.9 million, or 0.68%, from total assets of $15.15 billion at December 31, 2024. Interest-earning assets of $13.6 billion at March 31, 2025, increased by $92.9 million, or 0.69%, when compared with $13.53 billion at December 31, 2024. The increase in interest-earning assets was primarily due to a $290.3 million increase in interest-earning balances due from the Federal Reserve, offset by a $27.6 million decrease in investment securities, and a $170.9 million decrease in net loans.

Previous wording

Total equity increased $119.9 million to $2.20 billion at September 30, 2024, compared to total equity of $2.08 billion at December 31, 2023. Increases to equity included $149.9 million in net earnings and a $48.7 million increase in other comprehensive income, that were partially offset by $83.9 million in cash dividends. We engaged in no stock repurchases during the first nine months of 2024. Our tangible book value per share at September 30, 2024 was $10.17.

Current wording

Total equity increased $42.1 million to $2.23 billion at March 31, 2025, compared to total equity of $2.19 billion at December 31, 2024. Increases to equity included $51.1 million in net earnings and a $34.8 million increase in other comprehensive income that were partially offset by $27.9 million in cash dividends. In the first quarter of 2025, we repurchased, under our stock repurchase plan, 782,063 shares of common stock, at an average repurchase price of $19.55, totaling $15.3 million. We engaged in no stock repurchases during the first quarter of 2024.

Previous wording

At September 30, 2024, our AFS investment securities totaled $2.47 billion, inclusive of a pre-tax net unrealized loss of $367.7 million. The $82.1 million increase in fair value of our AFS securities was partially offset by an $8.0 million decrease in the fair value of our derivatives that hedge the change in value of our AFS portfolio. The after-tax unrealized loss reported in AOCI on our AFS investment securities at September 30, 2024 was $271.1 million. The changes in the net unrealized holding loss resulted from the sale of AFS securities and fluctuations in market interest rates. At September 30, 2024, investment securities HTM totaled $2.41 billion. For the nine months ended September 30, 2024 and 2023, repayments/maturities of investment securities totaled $366.4 million and $358.6 million, respectively. The Company purchased $33 million of short-term treasury notes in the second quarter of 2024 for pledging purposes. We also originated $11.5 million of Commercial Property Assessed Clean Energy ("C-PACE") bonds in the first nine months of 2024, which are included in our HTM securities portfolio. There were no purchases of investment securities during the nine months ended September 30, 2023 as cashflows generated from the portfolio were not reinvested during the year. There were no investment securities sold during the nine months ended September 30, 2023.

Current wording

The Company maintains a portfolio of investment securities to provide interest income and to serve as a source of liquidity for its ongoing operations. We continued to shrink our investment portfolio. At March 31, 2025, total investment securities were $4.89 billion. This represented a decrease of $27.6 million, or 0.56%, from $4.92 billion at December 31, 2024. The overall decrease in investment securities was primarily due to a $20.5 million decline in our HTM securities. At March 31, 2025, investment securities HTM totaled $2.36 billion. At March 31, 2025, our AFS investment securities totaled $2.54 billion, inclusive of a pre-tax net unrealized loss of $388.4 million, compared to $447.7 million at December 31, 2024. The $59.3 million increase in fair value of our AFS securities was partially offset by an $8.3 million decrease in the fair value of our derivatives that hedge the change in value of our AFS portfolio. The after-tax unrealized loss reported in AOCI on our AFS investment securities and fair-value hedges at March 31, 2025 was $272.8 million. The changes in the net unrealized holding loss resulted primarily from fluctuations in market interest rates. For the three months ended March 31, 2025 and 2024, repayments/maturities of investment securities totaled $84.7 million and $115.5 million, respectively. The Company purchased $1.7 million and $11.5 million of HTM securities during the first quarter of 2025 and 2024 respectively. There were no investment securities sold during the first quarter of 2025 and 2024.

Previous wording

Represents the amount of portfolio layer method basis adjustments related to AFS MBS securities hedged in a closed portfolio. Under U.S. GAAP, portfolio layer method basis adjustments are not allocated to individual securities, however the amounts impact the unrealized gains or losses for the individual securities being hedged. Refer to Note 3 and Note 10 for additional information.

Current wording

Represents the amount of portfolio layer method basis adjustments related to AFS MBS securities hedged in a closed portfolio. Under the U.S. GAAP, portfolio layer method basis adjustments are not allocated to individual securities, however the amounts impact the unrealized gains or losses for the individual securities being hedged. Refer to Note 3 and Note 9 for additional information.

Previous wording

As of September 30, 2024, approximately $27.6 million in U.S. government agency bonds are callable. The Agency CMO/REMIC securities are backed by agency-pooled collateral. Municipal bonds, which represented approximately 10% of the total investment portfolio, are predominately AA or higher rated securities.

Current wording

As of March 31, 2025, approximately $25.5 million in U.S. government agency bonds are callable. The Agency CMO/REMIC securities are backed by agency-pooled collateral. Municipal bonds, which represented approximately 10% of the total investment portfolio, are predominately AA or higher rated securities.

Previous wording

The following table presents the Company’s AFS investment securities and HTM investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of September 30, 2024 and December 31, 2023.

Current wording

The following table presents the Company’s available-for-sale and held-to-maturity investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of March 31, 2025 and December 31, 2024.

Previous wording

Total loans and leases, at amortized cost, of $8.57 billion at September 30, 2024 decreased by $332.3 million, or 3.73%, from December 31, 2023. The decrease in total loans included decreases of $165.9 million in commercial real estate loans, $70.5 million in dairy & livestock and agribusiness loans, $52.0 million in construction loans, and $33.4 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 the end of 2023 to 71% at September 30, 2024.

Current wording

Total loans and leases, at amortized cost, of $8.36 billion at March 31, 2025 decreased by $172.8 million, or 2.02%, from December 31, 2024. The decrease in total loans quarter-over-quarter included decreases of $16.8 million in commercial real estate loans and $167.4 million in dairy & livestock and agribusiness loans, offset by an increase of $17.1 million in commercial and industrial loans. The decline in dairy and livestock loans primarily relates to the seasonal peak in line utilization at the end of every calendar year, demonstrated by a decline in the utilization rate from 81% at the end of 2024 to 64% at March 31, 2025.

Previous wording

As of September 30, 2024, $460.7 million, or 6.96% of the total commercial real estate loans included loans secured by farmland, compared to $497.7 million, or 7.34%, at December 31, 2023. The loans secured by farmland included $121.9 million for loans secured by dairy & livestock land and $338.8 million for loans secured by agricultural land at September 30, 2024, compared to $122.4 million for loans secured by dairy & livestock land and $375.3 million for loans secured by agricultural land at December 31, 2023. As of September 30, 2024, dairy & livestock and agribusiness loans of $342.4 million were comprised of $298.3 million for dairy & livestock loans and $44.1 million for agribusiness loans, compared to $412.9 million comprised of $374.9 million of dairy & livestock loans and $38.0 million of agribusiness loans December 31, 2023.

Current wording

As of March 31, 2025, $437.3 million, or 6.70% of the total commercial real estate loans included loans secured by farmland, compared to $449.8 million, or 6.91%, at December 31, 2024. The loans secured by farmland included $103.6 million for loans secured by dairy & livestock land and $333.7 million secured by agricultural land at March 31, 2025, compared to $109.1 million for loans secured by dairy & livestock land and $340.7 million for loans secured by agricultural land at December 31, 2024. As of March 31, 2025, dairy & livestock and agribusiness loans of $252.5 million were comprised of $217.4 million for dairy & livestock loans and $35.1 million for agribusiness loans, compared to $419.9 million were comprised of $385.3 million for dairy & livestock loans and $34.6 million for agribusiness loans at December 31, 2024.

Previous wording

As of September 30, 2024, the Company had $202.6 million of total SBA 504 loans. SBA 504 loans include term loans to finance capital expenditures and for the purchase of commercial real estate. Initially the Bank provides two separate loans to the borrower representing a first and second lien on the collateral. The loan with the first lien is typically at a 50% advance to the acquisition costs and the second lien loan provides the financing for 40% of the acquisition costs with the borrower’s down payment of 10% of the acquisition costs. The Bank retains the first lien loan for its term and sells the second lien loan to the SBA subordinated debenture program. A majority of the Bank’s 504 loans are granted for the purpose of commercial real estate acquisition. As of September 30, 2024, the Company had $69.4 million of total SBA 7(a) loans that include a guarantee of payment from the SBA (typically 75% of the loan amount, but up to 90% in certain cases) in the event of default. The SBA 7(a) loans include revolving lines of credit (SBA Express) and term loans of up to ten (10) years to finance long-term working capital requirements, capital expenditures, and/or for the purchase or refinance of commercial real estate.

Current wording

As of March 31, 2025, the Company had $207.2 million of total SBA 504 loans. SBA 504 loans include term loans to finance capital expenditures and for the purchase of commercial real estate. Initially the Bank provides two separate loans to the borrower representing a first and second lien on the collateral. The loan with the first lien is typically at a 50% advance to the acquisition costs and the second lien loan provides the financing for 40% of the acquisition costs with the borrower’s down payment of 10% of the acquisition costs. The Bank retains the first lien loan for its term and sells the second lien loan to the SBA subordinated debenture program. A majority of the Bank’s 504 loans are granted for the purpose of commercial real estate acquisition. As of March 31, 2025, the Company had $64.6 million of total SBA 7(a) loans that include a guarantee of payment from the SBA (typically 75% of the loan amount, but up to 90% in certain cases) in the event of default. The SBA 7(a) loans include revolving lines of credit (SBA Express) and term loans of up to ten (10) years to finance long-term working capital requirements, capital expenditures, and/or for the purchase or refinance of commercial real estate.

Previous wording

As of September 30, 2024, the Company had $14.8 million in construction loans. This represents 0.17% of total loans held-for-investment. Although our construction loans are located throughout our market footprint, the majority of construction loans consist of commercial land development and construction projects throughout California. There were no nonperforming construction loans at September 30, 2024.

Current wording

As of March 31, 2025, the Company had $15.7 million in construction loans. This represents 0.19% of total gross loans held-for-investment. Although our construction loans are located throughout our market footprint, the majority of construction loans consist of commercial land development and construction projects throughout California. There were no nonperforming construction loans at March 31, 2025.

Previous wording

Our loan portfolio is geographically disbursed throughout our marketplace. The following is the breakdown of our total held-for-investment commercial real estate loans, by region as of September 30, 2024.

Current wording

Our loan portfolio is geographically disbursed throughout our marketplace. The following is the breakdown of our total held-for-investment and commercial real estate loans, by region as of March 31, 2025.

Previous wording

The loans secured by farmland included $121.9 million for loans secured by dairy & livestock land and $338.8 million for loans secured by agricultural land at September 30, 2024.

Current wording

The loans secured by farmland included $103.6 million for loans secured by dairy & livestock land and $333.7 million for loans secured by agricultural land at March 31, 2025.

Previous wording

Other loans consist of a variety of loan types, none of which exceeds 2.0% of total commercial real estate loans at September 30, 2024.

Current wording

Other loans consist of a variety of loan types, none of which exceeded 2.0% of total commercial real estate loans at March 31, 2025.

Previous wording

There were 10 loans to borrowers experiencing financial difficulty that were modified during the nine months ended September 30, 2024 with an amortized cost totaling $8.0 million as of September 30, 2024, including two dairy & livestock and agribusiness loans of $5.2 million, and eight commercial and industrial loans totaling $2.8 million.

Current wording

There were three loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2025 with an amortized cost totaling $6.2 million as of March 31, 2025, including two commercial real estate loans totaling $6.0 million and one dairy & livestock and agribusiness loan of $225,000.

Previous wording

The table below reflects the amortized cost of loans by type made to borrowers experiencing financial difficulty that were modified as of September 30, 2024 and September 30, 2023.

Current wording

The table below reflects the amortized cost of loans by type made to borrowers experiencing financial difficulty that were modified as of three months ended March 31, 2025 and March 31, 2024, and the financial effect of those modifications.

Previous wording

As of September 30, 2024 and September 30, 2023, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the third quarter of 2024 and 2023 that subsequently defaulted. Payment default is defined as movement to nonaccrual (nonperforming) status, foreclosure or charge-off, whichever occurs first.

Current wording

As of March 31, 2025 and March 31, 2024, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the first quarter of 2025 and 2024 that subsequently defaulted. Payment default is defined as movement to nonaccrual (nonperforming) status, foreclosure or charge-off, whichever occurs first.

Previous wording

At September 30, 2024 and December 31, 2023, there was no ACL allocated to modified loans to borrowers experiencing financial difficulty. Impairment amounts identified are typically charged off against the allowance at the time the loan is considered uncollectible. There were no charge-offs on loans to borrowers experiencing financial difficulty for the nine months ended September 30, 2024 and 2023.

Current wording

At March 31, 2025 and December 31, 2024, there was no ACL allocated to modified loans to borrowers experiencing financial difficulty. Impairment amounts identified are typically charged off against the allowance at the time the loan is considered uncollectible. There were no charge-offs on loans to borrowers experiencing financial difficulty for the three months ended March 31, 2025 and 2024.

Previous wording

Nonperforming loans, defined as nonaccrual loans, nonperforming modified/TDR loans and loans past due 90 days or more and still accruing interest, were $21.9 million at September 30, 2024, or 0.26% of total loans. This compares to nonperforming loans of $21.3 million, or 0.24% of total loans, at December 31, 2023 and $10.0 million, or 0.11% of total loans, at September 30, 2023. The $3.0 million decrease in nonperforming loans from June 30, 2024 was primarily due to the payoff of one nonperforming commercial real estate loans totaling $2.3 million and $1.4 million in paydowns of nonperforming commercial real estate loans associated with two relationships.

Current wording

Nonperforming loans, defined as nonaccrual loans, including modified loans on nonaccrual, and loans past due 90 days or more and still accruing interest, were $25.6 million at March 31, 2025, or 0.31% of total loans. This compares to nonperforming loans of $27.8 million, or 0.33% of total loans, at December 31, 2024 and $13.8 million, or 0.16% of total loans, at March 31, 2024. The $2.2 million decrease in nonperforming loans from December 31, 2024 was primarily due to the payoff of two nonperforming commercial real estate loans totaling $764 thousand, and various paydowns.

Previous wording

At September 30, 2024, we had one OREO property totaling $647,000. At December 31, 2023 and September 30, 2023, we had no OREO properties.

Current wording

At March 31, 2025, we had one OREO property totaling $495,000. At December 31, 2024 we had four OREO properties totaling $19.3 million. In the first quarter of 2025, we sold four properties with a total book value of $19.3 million. These sales resulted in gains on sale of approximately $2.0 million.

Previous wording

Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. The baseline forecast continues to represent the largest weighting in our multi-weighted forecast scenario, with downside risks weighted among multiple forecasts. As of September 30, 2024, the resulting weighted forecast resulted in Real GDP declining slightly in the fourth quarter of 2024 and continuing to be negative in the first quarter of 2025. GDP growth is forecasted to be less than 1% for all of 2025, before increasing to 1.4% in 2026, and then growth of 1.9% in 2027. Unemployment is forecasted to increase, with unemployment averaging 5.5% for all of 2025. The unemployment rate is forecasted to stay higher than 5.5% until late 2027.

Current wording

Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. The baseline forecast continues to represent the largest weighting in our multi-weighted forecast scenario, with downside risks weighted among multiple forecasts. As of March 31, 2025, the resulting weighted forecast resulted in Real GDP growth increase at a slower rate. Real GDP forecasted to be below 2% for the remainder of 2025 until reaching a growth in the second half of 2026. Commercial real estate values are forecasted to continue their decline through the first half of 2026. Unemployment is forecasted to rise in 2025 and reach 5% by the beginning of 2026 and stay elevated through 2028.

Previous wording

The Bank’s ACL methodology also produced an allowance of $6.3 million for our off-balance sheet credit exposures as of September 30, 2024, compared to $7.5 million and $8.0 million as of December 31, 2023 and September 30, 2023, respectively.

Current wording

The Bank’s ACL methodology also produced an allowance of $6.8 million for our off-balance sheet credit exposures as of March 31, 2025, compared with $6.3 million and $7.5 million as of December 31, 2024 and March 31, 2024, respectively. The increase from December 31, 2024 was due to a $500,000 provision for unfunded loan commitments for the first quarter of 2025.

Previous wording

Total deposits were $12.07 billion at September 30, 2024. This represented an increase of $638.8 million, or 5.59%, when compared with total deposits of $11.43 billion at December 31, 2023. The composition of deposits is summarized as of the dates presented in the table below.

Current wording

The composition of deposits is summarized as of the dates presented in the table below.

Previous wording

The amount of noninterest-bearing deposits in relation to total deposits is an integral element in our strategy of seeking to achieve a low cost of funds. Noninterest-bearing deposits declined from the end of 2023 by $69.4 million and represented 59.1% of total deposits at the end of the third quarter of 2024, compared to 63% at the end of 2023. Average noninterest-bearing deposits totaled $7.12 billion for the third quarter of 2024, a decrease of $28.4 million, or 0.41%, from average noninterest-bearing deposits of $7.15 billion for the second quarter of 2024. Average noninterest-bearing deposits were 59.10% of total average deposits for the third quarter of 2024, compared to 60.20% for the second quarter of 2024.

Current wording

The amount of noninterest-bearing deposits in relation to total deposits is an integral element in our strategy of seeking to achieve a low cost of funds. Noninterest-bearing deposits totaled $7.18 billion at March 31, 2025, an increase of $147.2 million, or 2.09%, from noninterest-bearing deposits of $7.04 billion at December 31, 2024. Noninterest-bearing deposits were 59.92% of total deposits at the end of the first quarter of 2025, compared to 58.90% at December 31, 2024.

Previous wording

Interest-bearing non-maturity deposits, which include savings, interest-bearing demand, and money market accounts, totaled $4.25 billion at September 30, 2024, representing an increase of $418.7 million, or 10.93%, from savings deposits of $3.83 billion at December 31, 2023.

Current wording

Interest-bearing non-maturity deposits, which include savings, interest-bearing demand, and money market accounts, totaled $4.24 billion at March 31, 2025, representing a decrease of $93.9 million, or 2.16%, from $4.34 billion at December 31, 2024.