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.

Adjusted Efficiency Ratio (Non-GAAP)

Adjusted efficiency ratio is a non-GAAP financial measure derived from GAAP-based amounts. This figure represents the ratio of noninterest expense, less acquisition-related expense and the provision for unfunded loan commitments, where applicable, to the sum of net interest income before provision for credit losses and total noninterest income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.

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 six months ended June 30, 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 June 30, 2026 and June 30, 2025. The non-TE rates for total investment securities were 2.70% and 2.57% for the three months ended June 30, 2026 and June 30, 2025, respectively.

(2)

Includes loan fees of $1.2 million and $615,000 for the three months ended June 30, 2026 and 2025, respectively. Prepayment penalty fees of $527,000 and $680,000 are included in interest income for the three months ended June 30, 2026 and 2025, respectively. Average balances include nonperforming loans.

(3)

Includes interest-bearing demand and money market accounts.

(1)

Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the six months ended June 30, 2026 and June 30, 2025. The non-TE rates for total investment securities were 2.65% and 2.59% for the three months ended June 30, 2026 and June 30, 2025, respectively.

(2)

Includes loan fees of $2.4million and $1.3 million for the six months ended June 30, 2026 and 2025, respectively. Prepayment penalty fees of $1.0 million and $1.6 million were included in interest income for the six months ended June 30, 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 resulting from the combined impact of volume and interest rates changes has been allocated proportionately between changes attributable to volume and changes attributable to 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 $162.4 million for the second quarter of 2026 increased by $50.8 million, or 45.5%, from the second quarter of 2025. The increase was driven by a $57.9 million increase in interest income, partially offset by a $7.1 million increase in interest expense. The year-over-year increase in net interest income largely reflected the impact of operating as a combined company for approximately two and a half months following the Heritage acquisition.

Our tax-equivalent net interest margin increased 41 basis points to 3.72% for the second quarter of 2026, compared with the second quarter of 2025. The expansion in net interest margin was primarily due to a 34 basis point increase in the yield on average interest-earning assets, as well as a seven basis point decrease in the cost of funds.

Total interest income of $202.1 million increased by $57.9 million, or 40.2%, compared with the second quarter of 2025. This increase was primarily due to a $4.00 billion increase in average interest-earning assets and a 34 basis point increase in the yield on interest-earning assets. Average loan balances increased by $3.19 billion, average interest-earning deposits with other institutions increased by $331.2 million, and the average balance of investment securities increased by $423.5 million from the second quarter of 2025.

Total interest income and fees on loans for the second quarter of 2026 were $159.2 million, an increase of $50.4 million, or 46.3%, from the second quarter of 2025. This increase in income was due to the $3.19 billion increase in average loan balances and a 31 basis point increase in average loan yields from 5.22% for the second quarter of 2025 to 5.53% for the second quarter of 2026. In addition to the impact of originating new loans at higher yields than the existing loan portfolio, the increase in average loan yields reflected the Heritage acquisition and the addition of higher-yielding acquired assets, including factored receivables that averaged approximately $86.1 million during the second quarter of 2026. Through the Heritage acquisition, the Company acquired CSNK Working Capital Finance Corp., doing business as Bay View Funding, a wholly owned subsidiary of the Bank that provides working capital factoring financing to businesses throughout the United States. During the second quarter of 2026, the average yield on factored receivables was 18.04%.

Interest income from investment securities was $35.6 million for the second quarter of 2026, an increase of $4.4 million, or 14.0%, from the second quarter of 2025. A nine basis point increase in yields on investment securities was partially 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 0.50% in the second quarter of 2025 to negative 0.09% in the second quarter of 2026, resulting in a $1.4 million decrease in interest income. Excluding the impact of the pay-fixed swaps, the average yield on investment securities increased by 25 basis points, due to the higher yield on investment securities purchased and acquired during the first six months of 2026.

Interest expense was $39.7 million for the second quarter of 2026, an increase of $7.1 million, compared with the second quarter of 2025. Total interest bearing deposits increased on average by $2.64 billion, while customer repurchase agreements and borrowings increased on average by $96.3 million. Cost of funds was 0.96% for the second quarter of 2026, which decreased from 1.03% for the second quarter of 2025. Although average noninterest-bearing deposits declined as a percentage of average total deposits to 52.3% from 59.7%, resulting in a less favorable deposit mix, the cost of total interest-bearing deposits decreased by 35 basis points, more than offsetting the impact of the lower proportion of noninterest-bearing deposits. The cost of customer repurchase agreements increased from 1.66% in the second quarter of 2025 to 1.79% in the second quarter of 2026, while the average cost of borrowings declined by 29 basis points.

Net interest income, before provision for credit losses, was $280.3 million for the six months ended June 30, 2026, an increase of $58.2 million, or 26.21%, compared with $222.1 million for the same period last year. The increase was attributable to higher balance and yields on average interest-earning assets as well as lower cost of funds, partially offset by an increase in the balance of interest-bearing liabilities. The increases in average interest-earning assets and interest-bearing liabilities reflected the impact of interest-earning assets and interest-bearing liabilities acquired in connection with the Heritage acquisition, as well as organic growth.

Our net interest margin (TE) was 3.60% for the six months ended June 30, 2026, compared with 3.31% for the same period last year. The expansion in net interest margin was primarily due to a 22 basis point increase in the yield on average interest-earning assets, as well as a two basis point decrease in the cost of funds.

Total interest income was $351.2 million for the six months ended June 30, 2026, an increase of $64.0 million, or 22.29%, compared with the same period last year. This increase was primarily due to a $2.18 billion increase in average interest-earning assets and a 22 basis point increase in the yield on interest-earning assets. Average loan balances increased by $1.68 billion, average interest-earning deposits with other institutions increased by $230.3 million, and average investment securities increased by $219.1 million from the same period last year.

Total interest income and fees on loans for the six months ended June 30, 2026 were $272.5 million, an increase of $54.6 million, or 25.04%, from the same period last year. This increase in income was due to the $1.68 billion increase in average loan balances and a 22 basis point increase in average loan yields from 5.22% for the six months ended June 30, 2025, to 5.44% for the six months ended June 30, 2026.

Interest income from investment securities was $67.4 million for the six months ended June 30, 2026, an increase of $4.5 million, or 7.0%, from the same period last year. A 12 basis point increase in yields on investment securities was partially 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 0.47% for the six months ended June 30, 2025 to a negative 0.07% for the six months ended June 30, 2026, resulting in a $2.6 million decrease in interest income.

Interest expense was $71.0 million for the six months ended June 30, 2026, an increase of $5.8 million, or 8.94%, from the same period last year. Total cost of funds for the six months ended June 30, 2026, was 0.97%, compared with 1.03% for the same period last year. Although average noninterest-bearing deposits declined as a percentage of average total deposits to 54.68% from 59.37%, resulting in a less favorable deposit mix, the cost of total interest-bearing deposits decreased by 31 basis points, more than offsetting the impact of the lower proportion of noninterest-bearing deposits. However, the cost of customer repurchase agreements increased from 1.47% in the six months ended June 30, 2025 to 1.75% in the six months ended June 30, 2026.

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.

The provision for credit losses on loans was zero for both the second quarter of 2026 and 2025. Net charge-offs for the second quarter of 2026 were $137,000, compared with net charge-offs of $249,000 for the second quarter of 2025.

For the six months ended June 30, 2026, the provision for credit losses was $3.0 million, compared with $2.0 million recapture of credit losses for the same period last year. Net charge-offs were $128,000 for the six months ended June 30, 2026, compared with net charge-offs of $119,000 for the same period last year. The provision for credit losses for the six months ended June 30, 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 affecting 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 for, or recapture of, credit losses. The process to estimate the allowance for credit losses requires considerable judgment and economic forecasts may continue to vary due to the uncertainty of the future impact from geopolitical events, trade barriers, including tariff policies, inflationary pressures, future interest rates, unemployment levels, and overall economic conditions, all of which may impact our customers. Refer to Item 2 –MD&A - Analysis of Financial Condition - Allowance for Credit Losses for a discussion of changes in the credit quality of our loan portfolio as well as refinements to the Company's ACL 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 for the second quarter of 2026 increased by $2.3 million, or 15.37%, compared with the second quarter of 2025, primarily reflecting the impact of the Heritage acquisition. The increase was driven by higher fee income across almost all categories and higher BOLI income associated with policies acquired in the merger. The increase was primarily attributable to $468,000 in trust and investment services fees, $377,000 in service charges on deposit accounts, $264,000 in BOLI income, and $1.2 million in other income. International and other banking service fees, which increased by approximately $350,000, are the most significant components of other noninterest income.

Trust and investment services revenue is generated through the Company's CitizensTrust division, which provides wealth management, investment management, financial planning, estate planning, retirement planning, trustee, and probate services. Investment Services offers self-directed brokerage, 401(k) plans, mutual funds, insurance products, and other non-insured investment products. At June 30, 2026, CitizensTrust had approximately $5.18 billion in assets under management and administration, including $3.81 billion in assets under management. CitizensTrust generated fee income of $4.2 million for the second quarter of 2026, compared to $3.7 million for the same period last year.

Noninterest income for the six months ended June 30, 2026 increased by $316,000, or 1.02%, compared with the same period last year. The increase was primarily driven by increases in service charges, trust revenue, and BOLI income, reflecting the combined operations following the acquisition of Heritage, partially offset by a $2.2 million gain on sale of OREO during the six months ended June 30, 2025. Trust and investment fees grew by $781,000 or 10.96% due primarily to increased assets under management. BOLI income increased by $572,000, or 9.44%, including changes in net asset value of policies related to deferred compensation arrangements.

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 2.31% for the second quarter of 2026, compared with 1.52% for the second quarter of 2025. Noninterest expense as a percentage of average assets was 1.99% for the six months ended June 30, 2026, compared with 1.55% for the same period last year. The ratio of noninterest expense to average assets was negatively impacted by acquisition-related expense and the provision for unfunded loan commitments.

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 63.75% for the second quarter of 2026, compared with 45.55% for the second quarter of 2025. For the six months ended June 30, 2026, the efficiency ratio was 56.15%, compared with 46.12% for the same period last year. Our efficiency ratio adjusted for acquisition expense and the provision for unfunded loan commitments declined from 45.55% in the second quarter of 2025 to 43.88% in the second quarter of 2026. Adjusted efficiency ratio is a non-GAAP measure. For additional details, refer to Item 2.–MD&A—GAAP to Non-GAAP Reconciliation.

Noninterest expense for the second quarter of 2026 was $114.4 million, an increase of $56.8 million, or 98.7%, from $57.6 million for the second quarter of 2025. The increase was primarily attributable to the Heritage acquisition and the related addition of operations, personnel, and banking centers. During the second quarter of 2026, the Company incurred $31.4 million of acquisition expenses. Excluding acquisition expense, noninterest expense increased $25.4 million compared with the second quarter of 2025. This increase was primarily driven by an $11.6 million increase in salaries and employee benefits, a $4.3 million increase in provision for unfunded loan commitments attributable to the Heritage acquisition, a $2.4 million increase in amortization of intangible assets related to the core deposit intangibles, a $2.2 million increase in occupancy and equipment and a $1.8 million increase in computer software expense. Excluding acquisition expense and the provision for unfunded loan commitments, the increase in noninterest expense compared to the second quarter of 2025 was $21.2 million. The remaining increases primarily reflect the addition of personnel, facilities, technology platforms, and other operating costs resulting from the Heritage acquisition.

For the six months ended June 30, 2026, noninterest expense was $174.9 million, an increase of $58.2 million, or 49.9% from the same period last year. The increase was primarily attributable to the Heritage acquisition and the related addition of operations, personnel, and banking centers. During the six months ended June 30, 2026, the Company incurred $32.5 million of acquisition expenses. Excluding acquisition expense, noninterest expense increased $25.7 million compared to the six months ended June 30, 2025. This increase was primarily driven by a $12.6 million increase in salaries and employee benefits, a $4.3 million increase in provision for unfunded loan commitment attributable to the Heritage acquisition, a $2.3 million increase in occupancy and equipment, and a $2.1 million increase in amortization of intangible assets, a $1.8 million increase in computer software expense, and a $1.5 million increase in professional services expense. Excluding acquisition expense and the provision for unfunded loan commitments, the increase in noninterest expense compared to the six months ended June 30, 2025 was $21.5 million. The remaining increases primarily reflect the addition of personnel, facilities, technology platforms, and other operating costs resulting from the Heritage acquisition.

Income Taxes

The Company’s effective tax rate for the three and six months ended June 30, 2026 was 25.81% and $25.7%, respectively, compared with 26.50% for both the three and six months ended June 30, 2025, respectively. 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. 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.