CVB FINANCIAL CORP

Financial Performance

GAAP to Non-GAAP Reconciliation

The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's operational performance and to enhance investors’ overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.

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.

(1)

Tax effected at respective statutory rates.

(2)

Annualized where applicable.

Tangible Book Value (Non-GAAP)

The tangible book value per share is a non-GAAP financial measure derived from GAAP-based amounts. The following is a reconciliation of tangible book value to the Company stockholders' equity computed in accordance with GAAP, as well as a calculation of tangible book value per share.

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 months ended March 31, 2026 and 2025. 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 –MD&A – 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.

(1)

Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the three months ended March 31, 2026 and March 31, 2025. The non-TE rates for total investment securities were 2.59% and 2.59% for the three months ended March 31, 2026 and March 31, 2025, respectively.

(2)

Includes loan fees of $1.2 million and $700,000 for the three months ended March 31, 2026 and 2025, respectively. Prepayment penalty fees of $521,000 and $931,000 are included in interest income for the three months ended March 31, 2026 and 2025, respectively. Average balances include nonperforming loans.

(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 net change or the combined impact of volume and rate changes allocated proportionately to changes in volume and changes in interest rates.

Rate and Volume Analysis for Changes in Interest Income, Interest Expense and Net Interest Income

Net interest income, before provision for credit losses, of $117.8 million for the first quarter of 2026 increased by $7.4 million, or 6.7%, from the first quarter of 2025. The increase in net interest income in the first quarter of 2026 compared to the first quarter of 2025 was the net result of a $6.1 million increase in interest income and a $1.3 million decrease in interest expense.

Our tax equivalent net interest margin for the first quarter of 2026 increased by 13 basis points compared to the first quarter of 2025. The expansion of net interest margin was due to an increase in the yield on average interest-earning assets of seven basis points, as well as a seven basis points decrease in cost of funds.

Total interest income of $149.1 million increased by $6.1 million, or 4.27%, when compared to the first quarter of 2025. This increase was primarily due to a $335.7 increase in average interest-earning assets and a seven basis point increase in the yield on earning assets. Average loan balances increased by $157.1 million, average interest-earning deposits with other institutions increased $128.1 million, and the average balance of investment securities increased by $12.5 million from the first quarter of 2025.

Total interest income and fees on loans for the first quarter of 2026 was $113.3 million, an increase of $4.2 million, or 3.85%, from the first quarter of 2025. This increase in income was due to the $157 million increase in average loan balances and the increase in average loan yields from 5.22% for the first quarter of 2025, to 5.32% for the first quarter of 2026.

Interest income from investment securities was $31.9 million for the first quarter of 2026, an increase of $111,000, or 0.35%, from the first quarter of 2025. A ten basis point increase in yields on investment securities was offset by a decrease in the interest income derived from the pay-fixed swaps designated as fair value hedges on AFS securities. The spread between daily SOFR and the fixed rate paid on these swaps decreased from 0.61% in the first quarter of 2025 to a negative 0.06% in the first quarter of 2026, resulting in a $1.1 million decrease in interest income.

Interest expense was $31.3 million for the first quarter of 2026, a decrease of $1.3 million, compared to the first quarter of 2025. Total cost of funds was 0.97% for the first quarter of 2026, which decreased from 1.03% for the year ago quarter. This six basis point decrease in cost of funds was primarily driven by an eight basis point reduction in cost of deposits. Cost of total interest-bearing deposits decreased by 26 basis points. However, the cost of customer repurchase agreements increased from 1.24% in the first quarter of 2025 to 1.71% in the first quarter of 2026. Average noninterest-bearing deposits were 57.8% of total average deposits for the first quarter of 2026, compared to 59.0% for the first quarter of 2025.

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 $3.0 million provision for credit losses in the first quarter of 2026, compared to a $2.0 million recapture of credit losses in the first quarter of 2025. Net recoveries for the first quarter of 2026 were $9,000, compared to net recoveries of $130,000 in the first quarter of 2025. Projected loss rates were 0.93% at March 31, 2026, compared to 0.94% at March 31, 2025. The provision for credit losses for the first quarter of 2026 was largely attributable to a $3.2 million increase in specific reserves, primarily related to one commercial and industrial credit relationship.

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. Refer to Item 2 –MD&A - Analysis of Financial Condition - Allowance for Credit Losses 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.

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.

Noninterest income in the first quarter of 2026 decreased by $2.0 million, or 12%, compared to the same period in 2025. The decrease was driven primarily by the $2.2 million gain on sale of OREO that occurred during the first quarter of 2025. A decrease of $334,000 in other income, partially offset a $313,000 increase in trust and investment services and a $308,000 increase in BOLI income.

Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made up of wealth management and investment services. CitizensTrust provides 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, 2026, CitizensTrust had approximately $5.06 billion in assets under management and administration, including $3.70 billion in assets under management. CitizensTrust generated fees of $3.7 million for the first quarter of 2026, compared to $3.4 million for the same period last year.

Noninterest Expense

The following table summarizes the various components of noninterest expense for the periods presented.

(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 1.58% for the first quarter of 2026, compared to 1.58% for the first quarter of 2025.

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 45.84% for the first quarter of 2026, compared to 46.69% for the first quarter of 2025.

Noninterest expense was $60.6 million for the first quarter of 2026, an increase of $1.4 million, or 2.4%, compared to the first quarter of 2025. Excluding acquisition expense, noninterest expense decreased by $295,000. Acquisition related expenses for the Heritage merger, announced at the end of the fourth quarter of 2025, totaled $1.1 million in the first quarter of 2026. Salaries and employee benefits increased by $984,000 and professional services increased by $437,000. These increases in noninterest expense were offset by a $1.6 million reduction in regulatory assessment expense resulting from a reduction in the FDIC special assessment accrual.

Income Taxes

The Company’s effective tax rate for the three months ended March 31, 2026 was 25.60% compared to 26.50% for the three months ended March 31, 2025, 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.