CVB FINANCIAL CORP
For the period ended Sep 30, 2025. Filed Nov 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 7, 2025
Extracted filing text, with the paragraph anchors used by the comparison.
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ANALYSIS OF THE RESULTS OF OPERATIONS
Financial Performance
| Three Months Ended · Variance | ||||
|---|---|---|---|---|
| September 30, · June 30, | ||||
| 2025 | 2025 | $ | % | |
| (Dollars in thousands, except per share amounts) | ||||
| Net interest income | $115,577 | $111,608 | $3,969 | 3.56% |
| (Provision for) recapture of credit losses | (1,000) | — | (1,000) | — |
| Noninterest income | 13,006 | 14,744 | (1,738) | -11.79% |
| Noninterest expense | (58,576) | (57,557) | (1,019) | -1.77% |
| Income taxes | (16,421) | (18,231) | 1,810 | 9.93% |
| Net earnings | $52,586 | $50,564 | $2,022 | 4.00% |
| Earnings per common share: | ||||
| Basic | $0.38 | $0.37 | $0.01 | |
| Diluted | $0.38 | $0.37 | $0.01 | |
| Return on average assets | 1.35% | 1.34% | 0.01% | |
| Return on average shareholders' equity | 9.19% | 9.06% | 0.13% | |
| Efficiency ratio | 45.56% | 45.55% | 0.01% | |
| Noninterest expense to average assets | 1.50% | 1.52% | -0.02% | |
| Three Months Ended | ||||
|---|---|---|---|---|
| September 30, · Variance | ||||
| 2025 | 2024 | $ | % | |
| (Dollars in thousands, except per share amounts) | ||||
| Net interest income | $115,577 | $113,619 | $1,958 | 1.72% |
| (Provision for) recapture of credit losses | (1,000) | — | (1,000) | 0.00% |
| Noninterest income | 13,006 | 12,834 | 172 | 1.34% |
| Noninterest expense | (58,576) | (58,835) | 259 | 0.44% |
| Income taxes | (16,421) | (16,394) | (27) | -0.16% |
| Net earnings | $52,586 | $51,224 | $1,362 | 2.66% |
| Earnings per common share: | ||||
| Basic | $0.38 | $0.37 | $0.01 | |
| Diluted | $0.38 | $0.37 | $0.01 | |
| Return on average assets | 1.35% | 1.23% | 0.12% | |
| Return on average shareholders' equity | 9.19% | 9.40% | -0.21% | |
| Efficiency ratio | 45.56% | 46.53% | -0.97% | |
| Noninterest expense to average assets | 1.50% | 1.42% | 0.08% | |
| Nine Months Ended | ||||
|---|---|---|---|---|
| September 30, · Variance | ||||
| 2025 | 2024 | $ | % | |
| (Dollars in thousands, except per share amounts) | ||||
| Net interest income | $337,629 | $336,929 | $700 | 0.21% |
| Recapture of (provision for) credit losses | 1,000 | — | 1,000 | 100.00% |
| Noninterest income | 43,978 | 41,371 | 2,607 | 6.30% |
| Noninterest expense | (175,276) | (175,103) | (173) | -0.10% |
| Income taxes | (53,077) | (53,339) | 262 | 0.49% |
| Net earnings | $154,254 | $149,858 | $4,396 | 2.93% |
| Earnings per common share: | ||||
| Basic | $1.12 | $1.07 | $0.05 | |
| Diluted | $1.11 | $1.07 | $0.04 | |
| Return on average assets | 1.35% | 1.23% | 0.12% | |
| Return on average shareholders' equity | 9.18% | 9.43% | -0.25% | |
| Efficiency ratio | 45.93% | 46.29% | -0.36% | |
| Noninterest expense to average assets | 1.53% | 1.43% | 0.10% | |
Return on Average Tangible Common Equity Reconciliation (Non-GAAP)
The return on average tangible common equity is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance. The following is a reconciliation of net income, adjusted for tax-effected amortization of intangibles, to net income computed in accordance with GAAP, a reconciliation of average tangible common equity to the Company's average stockholders' equity computed in accordance with GAAP, as well as a calculation of return on average tangible common equity.
| Three Months Ended · Nine Months Ended | |||||
|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | September 30, | |
| 2025 | 2025 | 2024 | 2025 | 2024 | |
| (Dollars in thousands) | |||||
| Net Income | $52,586 | $50,564 | $51,224 | $154,254 | $149,858 |
| Add: Amortization of intangible assets | 1,003 | 1,155 | 1,286 | 3,312 | 4,161 |
| Less: Tax effect of amortization of intangible assets (1) | (297) | (341) | (380) | (979) | (1,230) |
| Tangible net income | $53,292 | $51,378 | $52,130 | $156,587 | $152,789 |
| Average stockholders' equity | $2,271,151 | $2,237,948 | $2,166,793 | $2,245,511 | $2,122,870 |
| Less: Average goodwill | (765,822) | (765,822) | (765,822) | (765,822) | (765,822) |
| Less: Average intangible assets | (7,111) | (8,232) | (11,819) | (8,278) | (13,216) |
| Average tangible common equity | $1,498,218 | $1,463,894 | $1,389,152 | $1,471,411 | $1,343,832 |
| Return on average equity, annualized (2) | 9.19% | 9.06% | 9.40% | 9.18% | 9.43% |
| Return on average tangible common equity, annualized (2) | 14.11% | 14.08% | 14.93% | 14.23% | 15.19% |
(1)
Tax effected at respective statutory rates.
(2)
Annualized where applicable.
Net Interest Income
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 corporate tax rates of 21% in effect for the three and nine months ended September 30, 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. We manage interest rate risk within policy limits approved by the Board of Directors, which guides and limits the interest rate risk over short-term and long-term horizons. Sources of interest rate risk include differences in maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, and embedded options in assets or liabilities. The mix of interest-earning assets as well as the mix of noninterest bearing deposits and interest-bearing liabilities impacts our ability to manage net interest income during changing interest rate conditions. We also utilize certain derivative instruments to partially hedge interest rate risk. 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.
The tables below present the interest rate spread, net interest margin and the composition of average interest-earning assets and average interest-bearing liabilities by category for the periods indicated, including the changes in average balance, composition, and average yield/rate between these respective periods.
| Three Months Ended September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 | ||||||||||
| Average · Yield/ · Average · Yield/ | ||||||||||
| Balance · Interest · Rate · Balance · Interest · Rate | ||||||||||
| (Dollars in thousands) | ||||||||||
| INTEREST-EARNING ASSETS | ||||||||||
| Investment securities (1) | ||||||||||
| Available-for-sale securities: | ||||||||||
| Taxable | $2,501,923 | $18,722 | 2.99% | $2,637,216 | $20,010 | 3.03% | ||||
| Tax-advantaged | 20,797 | 145 | 3.33% | 24,774 | 168 | 3.25% | ||||
| Held-to-maturity securities: | ||||||||||
| Taxable | 1,953,725 | 10,494 | 2.15% | 2,046,987 | 10,896 | 2.13% | ||||
| Tax-advantaged | 359,483 | 2,318 | 3.12% | 371,056 | 2,388 | 3.11% | ||||
| Investment in FHLB stock | 18,012 | 377 | 8.30% | 18,012 | 375 | 8.28% | ||||
| Interest-earning deposits with other institutions | 646,979 | 7,231 | 4.43% | 1,232,551 | 16,986 | 5.48% | ||||
| Loans (2) | 8,372,383 | 110,825 | 5.25% | 8,605,270 | 114,929 | 5.31% | ||||
| Total interest-earning assets | 13,873,302 | 150,112 | 4.32% | 14,935,866 | 165,752 | 4.43% | ||||
| Total noninterest-earning assets | 1,625,088 | 1,577,295 | ||||||||
| Total assets | $15,498,390 | $16,513,161 | ||||||||
| INTEREST-BEARING LIABILITIES | ||||||||||
| Savings deposits (3) | $4,311,097 | $22,060 | 2.03% | $4,189,345 | $23,427 | 2.22% | ||||
| Time deposits | 582,117 | 4,036 | 2.75% | 741,875 | 6,394 | 3.43% | ||||
| Total interest-bearing deposits | 4,893,214 | 26,096 | 2.12% | 4,931,220 | 29,821 | 2.41% | ||||
| FHLB advances, other borrowings, and customer repurchase agreements | 956,235 | 8,109 | 3.36% | 2,093,364 | 22,312 | 4.24% | ||||
| Interest expense - Other interest-bearing liabilities | 30,029 | 330 | 4.30% | — | — | 0.00% | ||||
| Interest-bearing liabilities | 5,879,478 | 34,535 | 2.33% | 7,024,584 | 52,133 | 2.95% | ||||
| Noninterest-bearing deposits | 7,123,511 | 7,124,952 | ||||||||
| Other liabilities | 224,250 | 196,832 | ||||||||
| Stockholders' equity | 2,271,151 | 2,166,793 | ||||||||
| Total liabilities and stockholders' equity | $15,498,390 | $16,513,161 | ||||||||
| Net interest income | $115,577 | $113,619 | ||||||||
| Net interest spread - tax equivalent | 1.99% | 1.48% | ||||||||
| Net interest margin | 3.31% | 3.03% | ||||||||
| Net interest margin - tax equivalent | 3.33% | 3.05% | ||||||||
(1)
Includes tax equivalent (TE) adjustments utilizing federal statutory corporate rates of 21% in effect for the three months ended September 30, 2025 and September 30, 2024. The non TE rates for total investment securities were 2.62% and 2.63% for the three months ended September 30, 2025 and September 30, 2024, respectively.
(2)
Includes loan fees of $781,000 and $748,000 for the three months ended September 30, 2025 and September 30, 2024, respectively. Prepayment penalty fees of $643,000 and $830,000 are included in interest income for the three months ended September 30, 2025 and September 30, 2024, respectively.
(3)
Includes interest-bearing demand and money market accounts.
| Nine Months Ended September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 | ||||||||||
| Average · Yield/ · Average · Yield/ | ||||||||||
| Balance · Interest · Rate · Balance · Interest · Rate | ||||||||||
| (Dollars in thousands) | ||||||||||
| INTEREST-EARNING ASSETS | ||||||||||
| Investment securities (1) | ||||||||||
| Available-for-sale securities: | ||||||||||
| Taxable | $2,501,899 | $55,466 | 2.96% | $2,750,063 | $62,347 | 3.02% | ||||
| Tax-advantaged | 20,552 | 434 | 3.36% | 24,918 | 502 | 3.22% | ||||
| Held-to-maturity securities: | ||||||||||
| Taxable | 1,978,043 | 31,690 | 2.14% | 2,065,950 | 32,930 | 2.13% | ||||
| Tax-advantaged | 363,260 | 7,029 | 3.12% | 373,477 | 7,201 | 3.11% | ||||
| Investment in FHLB stock | 18,012 | 1,167 | 8.66% | 18,012 | 1,171 | 8.68% | ||||
| Interest-earning deposits with other institutions | 384,208 | 12,796 | 4.45% | 799,443 | 32,884 | 5.49% | ||||
| Loans (2) | 8,397,900 | 328,741 | 5.23% | 8,720,058 | 345,478 | 5.29% | ||||
| Total interest-earning assets | 13,663,874 | 437,323 | 4.29% | 14,751,921 | 482,513 | 4.38% | ||||
| Total noninterest-earning assets | 1,620,955 | 15,814,501 | ||||||||
| Total assets | $15,284,829 | $16,333,372 | ||||||||
| INTEREST-BEARING LIABILITIES | ||||||||||
| Savings deposits (3) | $4,265,958 | $64,344 | 2.02% | $4,064,625 | $61,844 | 2.03% | ||||
| Time deposits | 572,593 | 11,903 | 2.78% | 640,941 | 15,322 | 3.19% | ||||
| Total interest-bearing deposits | 4,838,551 | 76,247 | 2.11% | 4,705,566 | 77,166 | 2.19% | ||||
| FHLB advances, other borrowings, and customer repurchase agreements | 890,936 | 22,310 | 3.35% | 2,177,051 | 68,418 | 4.20% | ||||
| Interest expense - Other interest-bearing liabilities | 34,697 | 1,137 | 4.32% | — | — | 0.00% | ||||
| Interest-bearing liabilities | 5,764,184 | 99,694 | 2.31% | 6,882,617 | 145,584 | 2.83% | ||||
| Noninterest-bearing deposits | 7,060,953 | 7,153,557 | ||||||||
| Other liabilities | 214,181 | 174,328 | ||||||||
| Stockholders' equity | 2,245,511 | 2,122,870 | ||||||||
| Total liabilities and stockholders' equity | $15,284,829 | $16,333,372 | ||||||||
| Net interest income | $337,629 | $336,929 | ||||||||
| Net interest spread - tax equivalent | 1.98% | 1.56% | ||||||||
| Net interest margin | 3.30% | 3.05% | ||||||||
| Net interest margin - tax equivalent | 3.32% | 3.06% | ||||||||
(1)
Includes tax equivalent (TE) adjustments utilizing federal statutory corporate rates of 21% in effect for the nine months ended September 30, 2025 and September 30, 2024. The non TE rates for total investment securities were 2.59% and 2.63% for the nine months ended September 30, 2025 and September 30, 2024, respectively.
(2)
Includes loan fees of $2.1 million and $2.2 million for the nine months ended September 30, 2025 and September 30, 2024, respectively. Prepayment penalty fees of $2.3 million and $1.9 million are included in interest income for the nine months ended September 30, 2025 and September 30, 2024, respectively.
(3)
Includes interest-bearing demand and money market accounts.
The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated. Changes in interest income or expense attributable to volume changes are calculated by multiplying the change in volume by the initial average interest rate. The change in interest income or expense attributable to changes in interest rates is calculated by multiplying the change in interest rate by the initial volume. The changes attributable to interest rate and volume changes are calculated by multiplying the change in rate times the change in volume and reflect an adjustment for the number of days as appropriate.
Rate and Volume Analysis for Changes in Interest Income, Interest Expense and Net Interest Income
| Comparison of Three Months Ended September 30, | ||||
|---|---|---|---|---|
| Increase (Decrease) Due to | ||||
| Rate/ | ||||
| Volume | Rate | Volume | Total | |
| (Dollars in thousands) | ||||
| Interest income: | ||||
| Available-for-sale securities: | ||||
| Taxable investment securities | $(1,034) | $(267) | $13 | $(1,288) |
| Tax-advantaged investment securities | (27) | 5 | (1) | (23) |
| Held-to-maturity securities: | ||||
| Taxable investment securities | (501) | 100 | (1) | (402) |
| Tax-advantaged investment securities | (75) | 5 | — | (70) |
| Investment in FHLB stock | — | 1 | 1 | 2 |
| Interest-earning deposits with other institutions | (8,092) | (3,257) | 1,594 | (9,755) |
| Loans | (3,119) | (1,325) | 340 | (4,104) |
| Total interest income | (12,848) | (4,738) | 1,946 | (15,640) |
| Interest expense: | ||||
| Savings deposits | 683 | (2,054) | 4 | (1,367) |
| Time deposits | (1,381) | (1,268) | 291 | (2,358) |
| FHLB advances, other borrowings, and customer repurchase agreements | (12,153) | (4,621) | 2,571 | (14,203) |
| Interest expense - Other interest-bearing liabilities | — | — | 330 | 330 |
| Total interest expense | (12,851) | (7,943) | 3,196 | (17,598) |
| Net interest income | $3 | $3,205 | $(1,250) | $1,958 |
| Comparison of Nine Months Ended September 30, | ||||
|---|---|---|---|---|
| Increase (Decrease) Due to | ||||
| Rate/ | ||||
| Volume | Rate | Volume | Total | |
| (Dollars in thousands) | ||||
| Interest income: | ||||
| Available-for-sale securities: | ||||
| Taxable investment securities | $(7,509) | $(1,859) | $2,487 | $(6,881) |
| Tax-advantaged investment securities | (117) | 32 | 17 | (68) |
| Held-to-maturity securities: | ||||
| Taxable investment securities | (1,868) | 224 | 404 | (1,240) |
| Tax-advantaged investment securities | (263) | 34 | 57 | (172) |
| Investment in FHLB stock | — | (4) | — | (4) |
| Interest-earning deposits with other institutions | (22,815) | (8,327) | 11,054 | (20,088) |
| Loans | (17,048) | (5,106) | 5,417 | (16,737) |
| Total interest income | (49,620) | (15,006) | 19,436 | (45,190) |
| Interest expense: | ||||
| Savings deposits | 4,092 | (642) | (950) | 2,500 |
| Time deposits | (2,182) | (2,653) | 1,416 | (3,419) |
| FHLB advances, other borrowings, and customer repurchase agreements | (53,990) | (18,503) | 26,385 | (46,108) |
| Interest expense - Other interest-bearing liabilities | — | — | 1,137 | 1,137 |
| Total interest expense | (52,080) | (21,798) | 27,988 | (45,890) |
| Net interest income | $2,460 | $6,792 | $(8,552) | $700 |
Net interest income, before provision for credit losses, of $115.6 million for the third quarter of 2025 increased by $2.0 million, or 1.72%, from the third quarter of 2024. The increase in net interest income in the third quarter of 2025 compared to the third quarter of 2024 was the net result of a $17.6 million decrease in interest expense that exceeded a $15.6 million decline in interest income. The decrease in interest expense was primarily due to a $14.9 million decrease in interest expense from a $1.2 billion decrease in average borrowings.
Total interest income of $150.1 million declined by $15.6 million, or 9.44%, when compared to the third quarter of 2024. This decrease was primarily due to a $1.06 billion decline in average interest-earning assets and an 11 basis point decrease of the yield on earning assets. Average loan balances declined by $232.9 million from the third quarter of 2024. Compared to the third quarter of 2024, the average balance of investment securities decreased by $244.1 million, while the average amount of funds held at the Federal Reserve decreased by $581.3 million.
Total interest income and fees on loans for the third quarter of 2025 was $110.8 million, a decrease of $4.1 million, or 3.57%, from the third quarter of 2024. This decrease in income was due to both the decline in average loan balances and a decline in loan yields from 5.31% for the third quarter of 2024, to 5.25% for the third quarter of 2025. Loan yields decreased as declining short term interest rates, such as the Prime rate, lowered the yield on variable indexed loans.
Interest income from investment securities was $31.7 million, a decrease of $1.8 million, or 5.33%, from the third quarter of 2024. The decrease was driven primarily by a $3.0 million decrease in the positive carry on pay-fixed swaps that are available-for-sale investment fair value hedges. The spread between daily SOFR and fixed rate paid on these swaps decreased from 1.71% in the third quarter of 2024 to .74% in the third quarter of 2025. Excluding the impact of the fair value hedges, investment security yields increased by 22 basis points, partially offsetting the impact on interest income from the $244.1 million decrease in average investment balances.
Interest expense was $34.5 million for the third quarter of 2025, a decrease of $17.6 million, compared to the third quarter of 2024. Total cost of funds of 1.05% for the third quarter of 2025 decreased from 1.47% for the year ago quarter. This 42 basis point decrease in cost of funds was primarily the result of a $1.2 billion decrease in average borrowings, as well as the 16 basis point decrease in average borrowing costs, when compared to the third quarter of 2024. The redemption of $1.3 billion of Federal Reserve Bank Term Funding Program borrowings in the third quarter of 2024 resulted in the year over year decline in the level of borrowings. A 29 basis point decrease in the cost of total interest-bearing deposits was primarily due to a 19 basis point decrease in the cost of non-maturing interest bearing deposits. Additionally, time deposits declined by $159.8 million and the cost of time deposits decreased by 68 basis points. The cost of customer repurchase agreements increased from 1.73% in the third quarter of 2024 to 2.00% in the third quarter of 2025. Average noninterest-bearing deposits were 59.3% of total average deposits for the third quarter of 2025, compared to 59.1% for the third quarter of 2024.
Net interest income, before provision for credit losses, was $337.6 million for the nine months ended September 30, 2025, an increase of $0.7 million, or 0.21%, compared to $336.9 million for the same period in 2024. The increase in net interest income for the nine months ended September 30, 2025 compared to the same period in 2024 was due to the net impact of a 26 basis point increase in the net interest margin that offset a $1.1 billion decrease in average earning assets. The average balance on interest-bearing liabilities decreased by $1.1 billion, or 16.25%, to $5.76 billion for the nine months ended September 30, 2025, from $6.88 billion for the same period in the prior year. Our net interest margin (TE) was 3.32% for the first nine months of 2025, compared to 3.06% for the same period of 2024.
Total interest income was $437.3 million for the nine months ended September 30, 2025, which was $45.2 million, or 9.37%, lower than the same period of 2024. The decline was due to the decrease in the average balance in interest-earning assets which decreased by $1.1 billion, or 7.38%, to $13.66 billion for the nine months ended September 30, 2025 from $14.75 billion for the same period in 2024, and a nine basis point decrease in the yield on earning assets, to 4.29% for the first nine months of 2025, compared to 4.38% for the same period in 2024. The year-over-year decrease in average earning assets resulted from a decline of $350.7 million in average investment securities, a $322.2 million decrease in our average loan balances, and a $408.3 million decrease in the average amount of funds held at the Federal Reserve. The decrease in the average earning asset yield compared to the first nine months of 2024 resulted from a six basis point decrease in loan yields, from 5.29% for the first nine months of 2024 to 5.23% for the same period of 2025, and a four basis point decrease in the tax-equivalent yield on investment securities. Including the impact of fair value hedges, the yield on investment securities decreased from 2.68% for the first nine months of 2024 to 2.64% for the nine months ended September 30, 2025. The decrease in yield includes the positive carry on the fair value hedges, which resulted in $3.6 million of interest income for the nine months ended September 30, 2025, compared to $12.1 million in the first nine months of 2024.
Interest expense of $99.7 million for the nine months ended September 30, 2025, was $45.9 million lower than the same period of 2024. Total cost of funds for the first nine months of 2025 was 1.04%, compared with 1.39% for the same period of 2024. Average noninterest-bearing deposits for the nine months ending September 30, 2025 decreased by $92.6 million, compared to the first nine months of 2024. Average noninterest-bearing deposits represented 59.34% of our total average deposits for the nine months ended September 30, 2025, compared to 60.32% for the same period of 2024. The average rate paid on interest-bearing liabilities decreased by 52 basis points, to 2.31% for the first nine months of 2025, from 2.83% for the same period of 2024. The average rate paid on interest-bearing deposits for the first nine months of 2025 decreased by eight basis points from the same period in 2024. The average balance of time deposits decreased by $68.3 million to $572.6 million in the first nine months of 2025 compared to $640.9 million in the same period in 2024, while the cost of time deposits decreased to 2.78%, from 3.19% in the same period in 2024. The average balance on non-maturity interest-bearing deposits increased from the prior year period by $201.3 million, with the cost of these deposits decreasing by one basis point. Average borrowings for the first nine months of 2025 were $507.0 million at a cost of 4.61%, compared with $1.86 billion at cost of 4.76% of average borrowings for the same period of 2024. The decrease in rates on deposits and borrowings was due to declining market rates and the redemption of Bank Term Funding Program borrowings.
Provision for (Recapture of) Credit Losses
The provision for (recapture of) credit losses is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected lifetime losses in the loan portfolio as of the balance sheet date.
There was a $1.0 million provision for credit losses in the third quarter of 2025, compared to no provision in the third quarter of 2024. Net recoveries for the third quarter of 2025 were $333,000, compared to net recoveries of $156,000 in the third quarter of 2024. Projected loss rates were 0.94% at September 30, 2025, compared to 0.97% at September 30, 2024.
There was a $1.0 million recapture of credit losses for the nine months ended September 30, 2025, compared to no provision or recapture for credit losses for the same period of 2024. For the nine months ended September 30, 2025, we experienced credit charge-offs of $536,000 and total recoveries of $750,000, resulting in net recoveries of $214,000. For the nine months ended September 30, 2024, we experienced credit charge-offs of $4.3 million and total recoveries of $444,000, resulting in net charge-offs of $3.9 million. 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.
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 geopolitical events, trade barriers, including tariff policies, 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.
Noninterest Income
Noninterest income includes income derived from financial services offered to our customers, such as CitizensTrust, merchant processing and card services, international banking, and other business services. Also included in noninterest income are service charges and fees, primarily from deposit accounts, gains (net of losses) from the disposition of investment securities, loans, other real estate owned, and fixed assets, and other revenues not included as interest on earning assets.
The following table sets forth the various components of noninterest income for the periods presented.
| Three Months Ended · Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| September 30, · Variance · September 30, · Variance | ||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |
| (Dollars in thousands) | ||||||||
| Noninterest income: | ||||||||
| Service charges on deposit accounts | $4,859 | $5,120 | $(261) | -5.10% | $14,726 | $15,273 | $(547) | -3.58% |
| Trust and investment services | 3,875 | 3,565 | 310 | 8.70% | 11,002 | 10,217 | 785 | 7.68% |
| Bankcard services | 684 | 355 | 329 | 92.68% | 1,961 | 1,110 | 851 | 76.67% |
| BOLI income | 3,267 | 3,499 | (232) | -6.63% | 9,326 | 10,034 | (708) | -7.06% |
| Loss on sale of AFS investment securities | (8,185) | (11,582) | 3,397 | 29.33% | (8,185) | (11,582) | 3,397 | 29.33% |
| Gain on OREO, net | — | — | — | — | 2,183 | — | 2,183 | — |
| Gain on sale leaseback transactions | — | 9,106 | (9,106) | -100.00% | — | 9,106 | (9,106) | -100.00% |
| Other | 8,506 | 2,771 | 5,735 | 206.96% | 12,965 | 7,213 | 5,752 | 79.74% |
| Total noninterest income | $13,006 | $12,834 | $172 | 1.34% | $43,978 | $41,371 | $2,607 | 6.30% |
The $172,000 increase in noninterest income in the third quarter of 2025 compared to the same period in 2024 was due to a $5.7 million increase in other income and a $3.4 million decrease in the loss on sale of AFS securities, partially offset by a $9.1 million gain on a sale leaseback transaction in the third quarter of 2024. The increase in other income included a $6.0 million legal settlement received in the third quarter of 2025.
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, 2025, CitizensTrust had approximately $5.2 billion in assets under management and administration, including $3.7 billion in assets under management. CitizensTrust generated fees of $3.9 million for the third quarter of 2025, compared to $3.6 million for the same period of 2024.
The $2.6 million year-over-year increase in noninterest income included a $2.2 million gain on sale of OREO, a $3.4 million decrease in the loss on sale of AFS securities, a $5.7 million increase in other income, and a $785,000 increase in trust and investment services, partially offset by a $9.1 million gain on a sale leaseback transaction in the third quarter of 2024. The increase in other income included a $6.0 million legal settlement received in the third quarter of 2025.
Noninterest Expense
The following table summarizes the various components of noninterest expense for the periods presented.
| Three Months Ended · Nine Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, · Variance · September 30, · Variance | ||||||||||
| 2025 · 2024 · $ · % · 2025 · 2024 · $ · % | ||||||||||
| (Dollars in thousands) | ||||||||||
| Noninterest expense: | ||||||||||
| Salaries and employee benefits | $35,876 | $36,647 | $(771) | -2.10% | $107,352 | $108,474 | $(1,122) | -1.03% | ||
| Occupancy | 4,703 | 4,997 | (294) | -5.88% | 14,331 | 14,232 | 99 | 0.70% | ||
| Equipment | 1,120 | 1,207 | (87) | -7.21% | 3,596 | 3,309 | 287 | 8.67% | ||
| Professional services | 2,350 | 2,855 | (505) | -17.69% | 6,622 | 7,836 | (1,214) | -15.49% | ||
| Computer software expense | 4,350 | 3,906 | 444 | 11.37% | 12,981 | 11,380 | 1,601 | 14.07% | ||
| Marketing and promotion | 1,738 | 1,964 | (226) | -11.51% | 5,543 | 5,550 | (7) | -0.13% | ||
| Amortization of intangible assets | 1,003 | 1,286 | (283) | -22.01% | 3,312 | 4,161 | (849) | -20.40% | ||
| Telecommunications expense | 520 | 479 | 41 | 8.56% | 1,574 | 1,461 | 113 | 7.73% | ||
| Regulatory assessments | 2,030 | 2,104 | (74) | -3.52% | 6,065 | 7,963 | (1,898) | -23.84% | ||
| Insurance | 494 | 507 | (13) | -2.56% | 1,468 | 1,523 | (55) | -3.61% | ||
| Provision for (recapture of) unfunded loan commitments | 500 | (750) | 1,250 | 166.67% | 1,000 | (1,250) | 2,250 | 180.00% | ||
| Directors' expenses | 316 | 306 | 10 | 3.27% | 913 | 961 | (48) | -4.99% | ||
| Other | 3,576 | 3,327 | 249 | 7.48% | 10,519 | 9,503 | 1,016 | 10.69% | ||
| Total noninterest expense | $58,576 | $58,835 | $(259) | -0.44% | $175,276 | $175,103 | $173 | 0.10% | ||
| Noninterest expense to average assets | 1.50% | 1.42% | 1.53% | 1.43% | ||||||
| Efficiency ratio (1) | 45.56% | 46.53% | 45.93% | 46.29% | ||||||
(1)
Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.
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 1.50% for the third quarter of 2025, compared to 1.42% for the third quarter of 2024.
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 45.56% for the third quarter of 2025, compared to 46.53% for the third quarter of 2024.
Noninterest expense of $58.6 million for the third quarter of 2025 was $260,000, or 0.44%, lower than the third quarter of 2024. The decrease in noninterest expense from the third quarter of 2024 was the net result of decreases in most expense categories, that were partially offset by a $444,000 increase in software expense related to technology investments and a $1.25 million increase in the provision for unfunded loan commitments. The $771,000 decrease in salaries and employee benefits was primarily due to lower benefit expense.
Noninterest expense of $175.3 million for the first nine months of 2025 was $173,000 higher than the prior year period. Year-over-year expense increases included $1.6 million, or a 14.1% increase in computer software expense related to data processing costs from continued investments in technology and automation, which coincides with a $1.1 million decrease in salary and benefit expense. Regulatory assessment expense declined by $1.9 million as there was additional accruals in the first half of 2024 for the FDIC special assessment fee from initial estimates of losses from bank failures in 2023. This was offset by the impact of the change in unfunded commitment reserve. The first nine months of 2025 included $1.0 million in provision for unfunded loan commitments, compared to $1.3 million in recapture of provision for in the same period of 2024, resulting in a $2.3 million increase in expense. Legal expenses decreased by $1.3 million in the first nine months of 2025, primarily due to legal expenses incurred in the first nine months of 2024 related to the lawsuit the Company pursued related to allegations of trade secrets misappropriation that was settled in the third quarter of 2025. As a percentage of average assets, noninterest expense was 1.53% for the nine months ended September 30, 2025, compared to 1.43% for the same period of 2024. For the nine months ended September 30, 2025, the efficiency ratio was 45.93%, compared to 46.29% for the same period of 2024.
Income Taxes
The Company’s effective tax rate for the three and nine months ended September 30, 2025 was 23.80% and 25.60% compared to 24.25% and 26.25%, for the three and nine months ended September 30, 2024, respectively. Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged income from municipal securities and bank owned life insurance ("BOLI"), as well as available tax credits. The decrease in the effective tax rate was primarily driven by increased investments in solar tax credits.
The Company’s effective tax rates are below the nominal combined Federal and State tax rate primarily as a result of tax-advantaged income from certain municipal security investments, municipal loans and leases and BOLI, as well as available tax credits for each period.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.