CVB Financial (CVBF) 23 Jan 202019 Q4 Earnings call transcript

Good morning, ladies and gentlemen and welcome to the Fourth Quarter and Year Ended 2019 CVB Financial Corporation and its Subsidiary Citizens Business Bank Earnings Conference Call. My name is Andria and I am your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer period. Please note this call is being recorded.

to call, presentation Christina like host to now today’s for Carrabino. would turn over the your I

You may proceed.

financial fourth Thank you, us our joining Thank you for Andria and good today morning, to ended and year quarter everyone. for results XXXX. the review

morning this President Myers, Allen Chris Officer; Chief Financial and President Executive Vice are and Executive Officer. and me Joining Chief Nicholson,

www.cbbank.com To Our and our the earnings in that was comments included visit Investors the today will on please released click refer obtain yesterday. tab. to website copy, the at financial information a announcement

Before uncertainties, call financial we may among that events get statements statements. today's started, expectations let me trends and to, remind will These affect call XXXX. you Act claim the contained that protection other relate Harbor forward-looking plans, industry statements activities conference things, from company's in current include Securities future risks future some the materially and differ results Safe Reform forward-looking Such and the operating this expectations. of may involve The on Private provisions these and and of the speakers results position. Litigation

year on XXXX may in XX-K complete information item see more that therein. and the uncertainties Factors statements. differ actual Annual forth our results the and to company's in Report risks particular a discussion materially the Please XX, of for from For ended set cause December forward-looking Form the XA, Risk

Chris over Myers. I'll turn the to call Now,

Christina. you, Thank

that and a there's for the guys the all our our and years they've get job. I a information done LaPoint of good this goes do XX today, special just you very last this rolling found and and hopefully the we thanks Christina to together have into making Before script putting to Carrabino want to and everything fantastic ton for controller communications Francene and a

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quarter. million we quarter and for you earnings XXXX compared joining million Yesterday, reported fourth $XX.X the Good with million us of quarter for and of again quarter. XXXX morning, everyone year for for net $XX.X the ago $XX.X third this thank of the

for $X.XX XXXst of the Earnings quarter ago a our quarter third XXXX profitability, were of with and quarter fourth $X.XX cash quarter for dividend fourth quarter. quarter of The consecutive per consecutive $X.XX represented compared year to shareholders. share ourXXXst the paying the for and

I way also Forbes want five to the came with XXX largest performance yesterday in years the speak. for terms to go me ranking is of This rated so out mention one time United was in CVBF that States is good in number of out their we've a second number the and one. banks rated financial been to

Net XXXX earnings were XXXX. million compared year for $XXX.X and $XXX $XXX.X the for with XXXX ended million for million

two have past doubled our years. We earnings essentially fiscal the over

earnings for and XXXX, $X.XX Diluted compared XXXX XXXX. for $X.XX $X.XX per with share for

quarter, interest net for with year the margin equivalent X.XX% the for tax ago Our and for X.XX% quarter third fourth compared the X.XX% was of quarter. XXXX

prepay for defer the quarter. majority increased following in as the was dairy million and quarter, to many the $X.XX their occurred of the increase million dairy the livestock into and increase expenses. near choose end &livestock owners the loans quarter loans. agricultural the of quarter increase loans & of feed to quarter, first loans the seasonal X% The and due of in about to our milk essentially or dairy year, Total their primarily from or was checks $XX.X The fourth a by Average were flat billion. prior $XX.X for

for compared XXXX quarter. the with Loan quarter yields XXXX, X.XX% were of fourth quarter X.XX% and third of ago X.XX% for the the in year

non-accrual third lower to primarily income yields loan were interest interest excluding X of After decreases. yields increased decline impact rate basis points accretion non-accrual actually three of the and quarter was X the and Reserve's basis paid, XXXX. to due interest than the over to our related income This interest fourth Excluding purchase quarter discount of Federal loan points the accretion XXXX. related discount paid, by purchase

At losses the in X.XX% million $XX.X XX, December with loans, X.XX% XX, $XX.X of allowance total with X.XX% losses for at was million and of loan non-acquired at XXXX. a or percentage loan XX, XXXX, in end XX, as was The compared for or and XXXX, total the September September lease loans XXXX, loans allowance of December of compared XXXX. X.XX% X.XX%

estate December OREO non-accrual the originated non-performing as XX, loans Bank. for were loans $XX.X quarter non-performing Community by $XX.X assets compared million million end, quarter, Total At included real $X.X non-performing in XXXX. at million, $XX.X loans plus assets, million defined other prior with and and loans

to due December quarter. to or commercial real days XX primarily loans to million, the fourth $X.X days $XX loans quarter loans loans included for Total $XX.X linked $XX.X in have is $X million, dairy X.XX%. At XX, at increase loans from million a a prior $X.X million in XXXX, acquired Classified increase million were loans. estate XX Community The in and a increase with the of we & million Bank. classified increase livestock

will have year-end available detailed on more XX-K. We loans information Form on classified

deposits for the Now, prior Average quarter quarter billion for non-interest $X.XX compared ago the year prior ago quarter. quarter, XX, XXXX, discuss deposits for bearing deposits. billion December with to were fourth year bearing billion billion quarter. non-interest XXXX, billion, compared like for $X.XX total billion $X.XX the and our and $X.XX with I'd $X.XX At for $X.XX the

quarter. the of deposits for XX.X% those for were fourth XX% prior deposits the compared bearing of in quarter, year quarter, and XX.X% with end the Non-interest the ago

agreements billion repurchase agreements $XXX quarter. At total or total third a quarter year for same by the repurchase average from period billion, for $X.XX our December $X.XX at and the XX, deposits ago. $X.XX the and were XXXX, Our with XXXX customer customer of September X.X% million fourth grew billion XX, $X.XX compared and deposits billion

total the with for slightly million XXXX income period of $XXX.X the of compared $XXX.X funds ago. were cost of points, cost year million same Interest $XXX.X the quarter, XX fourth total repurchase the basis income. prior quarter quarter XX our and third for a both for million, deposits and Our basis fourth customer for the Interest in quarter. points, agreements were and down

The from paid. quarter lower decrease to interest income loans interest third acquired primarily was and due the non-accrual accretion in discount $XXX,XXX of in XXXX on

of year-over-year quarter basis in $XXX was additional interest We points also $X.X experience decline third fourth load yield rate to points. the earning and X decline the Reserve decreases Federal on of The million quarter. and million, a XX result assets in was an in average due basis yields lower and primarily yields. earnings asset loan decrease income during the The decrease three in

million fourth equivalent loan quarter and $X.X discounted decreased accretion for assets earning The decreased and X.XX% XXXX. the are prior paying was to reflected compared quarter to compared points decrease on basis tax yield discounted with the in accretion of quarter equivalent the ago interest for quarter the X.XX% by for a the the year fourth X quarter basis and quarter the over tax loan excluded interest compared the nonaccrual non-accrual prior assets when X.XX% quarter, earnings by XX points quarter XXXX. fourth on XXXX The for yield paid fourth fourth and

and $X.X interest-bearing The million. cost Interest deposit. increase quarter for to the basis the can quarter over of quarter the quarter, from interest cost the liabilities XXXX in basis $XXX,XXX be a interest-bearing decreased XXXX increase in expense third by attributed the XX points. X fourth while million points of $XX XXXX. quarter compared fourth a Average increased interest-bearing by $XXX,XXX with A $XXX,XXX the expense third expense. of Interest fourth increase totaled liabilities over decrease the

Net interest margin.

for Our tax net equivalent the X.XX% equivalent interest margin acquired quarter net quarter. the the third accretion and with When of quarter, interest for X.XX% X.XX% was the interest for fourth was impact margin loans the and non-accrual compared prior adjusted the fourth X.XX% XXXX, down discount from quarter. from is excluded, tax of paid on

the million for income the by from rate include million the the income. from million was compared increase XXXX. quarter for increase to the ago quarter swap. of $XXX,XXX of year fees XXXX Non-interest with $X.X Non-interest third quarter. for $XX.X Non-interest The interest $XXX,XXX $XX.X grew compared the income fourth quarter quarter $XX.X fourth in and prior the million

Feeincome approximately the assets. card income of $XXX,XXX, services Banks increased the quarter Durbin from rate fourth fees fourth swap grew investment to international service charges $XXX,XXX declined by trust quarter by Conversely XXXX interchange interest fee $XXX,XXX. income debit the XXXX and services mark by $XXX,XXX. in reaching and grew from us $XXX,XXX by due increased and $XX by approximately billion amendment

a with in ago compared quarter. which third compared Now to for there Salary for the $X.X bonus the for expense. the and $XXX,XXX by third grew $XX.X year and profit-sharing quarter was fourth $XX.X million and benefit was quarter Non-interest expense million million of increased expenses. million $XX.X quarter expense XXXX,

Bank to expense the decrease quarter fourth the acquisition for expense $X.X $X and merger in decrease million a related from of include decrease million offices. Community in and occupancy expense million $XX.X banking The XXXX, XX a the consolidation in

expense average for third quarter, with X.XX% compared and X.XX% Non-interest for quarter, the totaled XXXX. the the of quarter X.XX% fourth fourth of for assets

for was prior the and XXXX, the XX.X% of quarter XX.X% quarter fourth XX% quarter, Our with efficiency of the fourth ratio compared for for XXXX.

to investment to effective Allen, position. our tax portfolio the discuss Allen? Now, I'd to our turn overall call rate, CFO, over and like capital

everyone. morning, Good Chris. Thanks,

year The XXXX was tax and year for compared Our and for tax-advantaged slight the rate compare increase This of quarter, income. full fourth in XX.X% was XX% to due to effective from full of the the relative for level taxable quarter increase the the to year. XXXX. income prior the XX.X% fourth greater the

December held-to-maturity increase our million to decreased totaled available XXXX, XX, sale XX, for securities, Looking the third investment $XX investment portfolio. from a December our quarter combined $X.X billion, $XXX XXXX. from and and million At

of securities December end, $X.XX unrealized XXXX. million sale The quarter pre-tax gain at a billion. portfolio investment $XX totaled At available had XX, for

own totaling $XXX million. we addition, In investment held-to-maturity securities

equivalent fourth quarter, X.XX% with XXXX. third for X.XX% the of The securities total fourth and for on yield the X.XX% the portfolio quarter, quarter was for the tax compared

yield purchased the securities, or with million average tax mortgage quarter, expected $XXX During of we fourth X.XX%. approximately an

at of in sales dividends. The to of increase was from available primarily in earnings other Partially $XXX Now, the tax-affected securities. turning increases impact a increase to position. in were equity million value the to increase Shareholders' cash XXXX. the in million $X.XX million our offsetting increased equity end for million and of net billion by comprehensive $XX $XXX.X due $XXX.X capital market income these

remarks. closing to And some back for I'll Chris now the turn call

Allen. Thanks,

Now, economic let's about conditions. talk

Turning X.X% year and various California a economy, according was ago in October to for economic reports. unemployment XXXX. in California's X.X% November November to XXXX, the X.X% XXXX rate

in to healthcare and XXXX. and hospitality. GDP two X.X% is social year was California GDP Approximately California of U.S. in growth sectors, concentrated past job XXXX. growth XX% by the is leisure expected growth and The over California's grew GDP the assistance, for outpace

outlook for for the economy bright California's Overall, remains XXXX.

than faster of As continued on is and basis, and Logistics, job sustained the the technology. nation. a California job grow rest sectors gains by which and are propelled giant to those two Southern have ports likely the

XXXX, be the terms industry, are exports. in strong predicted increase milk In and of somewhat to due demand for economy the non-fat to dry dairy prices milk higher

our future sales, opening efficiency XXXX we In closing, all of novo de in record centers of we and accomplishments bank and growth. acquisitions. growing balanced committed proud earnings three for our are to and growth way the are believe positioned a remain utilizing Same-store for well and We initiatives.

Today earnings conference company. call with my is last the

XX, will the announced transition help As through smooth Executive effective retiring XX, orderly a to facilitate XXXX. I December consultant to I we next as Officer. this am a remain Chief After March past previously July, and March XX, XXXX

of in back would Linn Vaccaro Borba look former CEO Cruz, organization. Members Barber, George Jacoby giving Seley, this Board opportunity. As this my for Wiley, Bob Senior, to XX.X our like Johnny great and years as San me thank Ron I I Jim

Dave to Farnsworth, my Executive like named to and relentless Nicholson Dave success. thank also Harvey, the would Brager, commitment I four Allen Dave for

consistently that also with I Dave XX-year side-by-side a thank whole. over XX years, have and Mark past Angelis, vision. me Dave Harvey, Leadership those and especially have Mike thank executing to Larry and Richardson. of in I on for Elsa employees. take the all Zavala, my Team Tim Noone, Zivelonghi, Senior Bob would history would Brager, my Zeltner our to as Mulcahy, De closed And Ted like strived my And in pride thank ownership been and accomplishment. like excellence They Dondanville, Yamynn

that that As the proud we've $XX proud all in you million accomplished $XXX I'm has proud I'm million XXXX fact risk, from taking over income moderate to tell, XXXX. And net XX for years. no while past we've of only can it of grown plus our shortcuts. the done further

We business focus continue efforts to scalable our repeatable, that quality and on is transparent.

for thank think you, of their their leadership continued our for and loyalty. I I your And In closing, business guidance. I -- our our thank continued support and shareholders customers their trust. Directors Board for ongoing for and

that and will questions take be today's that might I Well, to presentation. And happy now Allen have. any concludes you

begin now will ahead. Bohlen come Please our question KBW. question-and-answer session. will And We first go [Operator Jackie Instructions]. the from of

I first I'm about base the in the wanted and wondering that did the was quarter. to was you sold decline the that third know in on that had I during the we that OREO drop? added residence the touch talked quarter in larger if the quarter single-family and in past,

We Yes. the it each are residence of single-family OREO, property pieces actually, was was Bank two that Community and adjacent a secured largest that by other. actually to loan

trust and holder. the we is is land gave piece So what then to at initial deed property, residence first the doing we of ended the keeping $X.X up back which million, mark the

OREO. was And so the in the that reduction

hold feel we the our land time, feel hopefully confident point will this still and at in at mark And it's money $X.X get a -- little million. more. that we So we back we

Okay.

there associated the So noticeable anything transfer or no that gain was was took OREO with place? that

Not piece. on No. that

Okay. it's expenses de been associated And Charge-off there zero minimis then with and charge-off, expense haven't fourth general. is the in looking a provision you at the that been fluctuated throughout a and the in positive expense much have year, recovery quarter. just

off are starting forward, how course just you understanding wondering in thinking world going a that now about So basically. that

net or in last you recoveries years for six we row. As know the had a five

were down, more exceeded bit part, up news million. good are gross charge-off, time charge-off in that from most trended the have gross over But both of charge-off $X.X still Now little the XXXX recoveries actually that year-over-year 'XX. is period further our gross a

to that. somewhere I down $XXX,XXX think and $XXX,XXX net $XXX,XXX recoveries charge-off about were in gross are

is going I I will will XXXX, we for or do what actually we’re as is that have going number, negative if go as real but forward know not net So charge-off mean, now. well a to running very a itself. think that’s charge-off We have reversing a right you credit into net we us start

days think look at look or $X.X loans. to XX you billion it passed like If through, I mean our low that. something let million out in days XX was for $X.X I

little but credit is feel seeing perfect it So we about good not and choppiness. we're

to then a Bank real If you classified lot at content of due they dairy that some we're time. and some to which a least our form of dairy, estate, look that quarter-over-quarter up loans, at of potential that are one But due classified and at particular seeing Community loss loan. commercial was not of in loan pool, this

if we're news performing we're reserving So for. good the market, mean loans classified that I well but marketing are those not

starting so feeling slowly going just nothing where that go, But, think where size worse. see that it to we're now. Jackie, about I it is of And little we do can’t stand very to I good major. better to get So credit to but it's right starting small get going we're think right, inch,

of when you guidance any have impact? you CECL's might an on provide on do And update Okay. any sort

that I'm to question. let Allen going answer

day XX-K. point, equity obviously one, this immaterial. a in is And be our adjustment CECL more expected we provide lot to at for will but information to Jackie, -- So our

great congratulations you. will step everything And now. Okay, on thank back I Chris.

loss I the reserve But they go when Jackie, got won't me but do to I’m saying it come should Chris go And is that on set and process, sure when Myers that low CECL before to from he Chris through just retiring. this that let that. we is think there. joined we like Allen don’t me

retiring. Feds before Chris when I'll join the he's let

and And Instructions] of from ahead. Aaron Partners. our go next come O’Neill Please will Deer [Operator question Sandler

handy. have maybe of the in the quarter get to accretion you discount that exact if come to amount Just

Yes. $X.X Aaron, million. it was

Okay. year-end? discount the -- unaccredited remaining that And is what at

I up The think, total about remaining discount, $XX is million.

the accelerated same And after Okay. And expense, restricted at quarter? running end about the that level? stock is this that should

third bit quarter relates this situation very that decline And it it was as quarter. into Chris's similar a last Yes, the to particularly will to and quarter.

obviously, for stock digital CEO, probably issued However, so a that new person. have some we'll have we'll

point? like of at What you then on small And do looked share front this there was Okay. it amount thoughts that a repurchases.

in Well, XXbX-X place. a we have plan

And is as during the level like automatic so kind a in that thing at of it kicked and an certain quarter.

price and I shares wasn't stock, the in October October. think was that it bought stock high so about a XX,XXX in think, like or average lot we it the I XXs, $XX.XX but something In of or was, that. $XX,

Okay.

So it's just, on it threshold depends really to trigger that's that? going that where is

threshold. that disclose don't we and Yes,

in there then credit quarter? FDIC assessment Okay. utilized And any the was -- the

Yes, was. It XXX,XXX remaining $X.X there we was and have million.

That, ride is you sunset. and your hopefully my see you on retirement chance it questions a get into again Alright. again to we'll Okay. Chris, the congratulations and all off before

and So, care thanks so much. take

Our next Tenner from D.A. come Gary of question will Davidson.

Stern Gary This for is on Tenner. Jake

about is come? re-pricing recent is the thinking loan or in NIM, rate majority So of there capture to loan more for quarter quarter the from the the cuts core most still re-pricing yield Or LIBOR? another

Can hear repeat the We you you very well? question? didn't

of Yes, course.

majority Just loan NIM, the there more quarter core quarter for yield is or from Or capture rate come? of LIBOR? the re-pricing recent the in moves about and most another still the re-pricing cuts loan does to thinking

No, terms most think prime and by the quarter in in the LIBOR, of I Fed that of has terms reflected. the actions of

just challenge a seems for time. it's growth, And been referring to some Okay. it's loan

XXXX? slowing of do backdrop you project growth sector the With where growth, loan to

I'd this -- of our of recycling some It's, say -- acquisition XX% and our through done. is really,

down in something $X really you take quarter, we're down, So about or the We're flat. were if think if loans the out looked you million dairy, fourth I that. like

flat were loans So quarter-over-quarter.

the budgeted positive loan We bank. for XXXX in for growth have

we be great,but achieve is think than realistic trying I we if economy in what we're is that's terms the given that little mid-single-digits. loan kind and better the pricing right now, it'd competition. growth, given do can to certainly the where what we of And are and of think that, goal a

I've loans. some a we're much bit margin these some very surprised relationship they're the on little that the And willing of and take been at banks of to bank-oriented.

So so of any deposit forth. we is that still way the right give business, to not And, the do run don't that's have think funding relation to us. because a critical. those lot we might give going progress them pricing good a We're to your with clients I aspect

growth And net you on of Bank follow-up Community Are for have just recent the in on quarters? our runoff that. headwind loan kind guys loans that to been through the

there again, re-pressure -- have still yield of We still flat curve. of pricing the lot because are a

acquisition retain both having Bank still and but So But Bank loans, well, a lot we of was stages we're to yes, not are of employee Citizens one an is kind citizens we're somebody the even I'm competition. one. those think or all I think even mean, Business thinking all through I team were the, we're or whether I are our just Community normal thinking team now. through not ex-community

So I that's true. think and pretty

the as for true financial plus XX% well. the on before, -- said I As side

[Operator from with Instructions]. will come Tim And next our Coffey Janney. question

had I competition Chris, just your the deposit a customers. for question about

and but fees waive portfolio, that surrounded by or are You've done the deposit of the to lot strong this competitors a on willing a those attract customers you job them. maintaining great to building are retain deposits

steady the on have So seen has deposit kind of a side pressure intensifiers competition I'm state? you been wondering, the from

me funds rate to asked pricing make has maybe really the having ago, Yes, if X three question it's interesting, moderated X ago, drops. -- you months decision-by-decision. tremendously yes, deposit-pricing pressure That or and it's I'd we're intense say, pretty Fed months because that with

bearing bearing. now is and now, kind showing the goal same and deposits, of kind ratio is of the that right XXXX. we deposits as So same in well And we non-interest a feel can for ratios grow better that maybe we're bit deposits our bearing non-interest right confident interest of little XX% to that's that that mid-single-digit, in growth with

of moderated. So have mousetrap deposit our job. our great from actually, technology fabulous we the we We build does support good here and We're feeling of service we side. on individual clients here. personal a it's a And a lot really team, who a have lot provide to

last Business of One account balance now, account. checking of is account was remind over right things Bank I per checking the month you in all $XXX,XXX want Citizens average to least at the

about the to bank. with to the service, executives scale, clients deposit services real with think provide So each think that's benefit principles kind and dealing company if can We're provide the not And of for I that's our a then we we banks a there client you extra we're not that provides that that consumer and business for. financing masses. retail We're a bank key will. of

sized medium businesses, do. principals. and the So what small owners business we and That's

ahead. Our next is a of KBW. go from Bohlen Jackie question Please follow-up

Just question activity normalized Do that. there vesting rate. some in norm? understand to of on historic the were Allen, moving points surrounding -- the a XXXX quarter expect compensation outside tax go that all the quick and rate you I stock and back a in

Were rate? you about sorry. I’m asking tax our

the Yes, in the I'm by benefit positive testing a the in and was impacted rate that's in that that assuming tax stuff quarter. stock caused quarter.

So I’m of wondering it to activity. level the will in that go more absent XXXX, regular back

Yes.

full run -- think our I rate. reflective of tax really is year rate XX.X% of

year, the a to out were rate, Jackie, fourth XX.X%. at what we now running lot run quarter and then to in the XX% the is is think that which we of able And balance we're

we think So peak the XXXX could best kind it where right? XX%, go I is to XX.X% of judgment but that’s up for our

to Yes. XX% from I it range will XX.X%. mean,

hear your Chris, announcement and months search And your if about you how you an then say for have less on we just that? the as when than as from we update you know is might had X any going retirement. replacement

this I looking a regard, States. And guys you closer, and announce think we're think at to have nothing And lead through company in there narrowing been United right to I that there I process of for this person across to I but very is an the time. right the go is getting out doing down, extensive that job person. for Board look or think thoughtful and its the exactly for

more questions. there [Operator no Instructions] this At time, are

call I to would like So, Myers. to back Mr. the turn

us again your Thanks appreciate this for day. bless want and listening, CVBF. Have I much. a very interest. quarter. to joining thank for god everybody great We Thanks

you now is concluded. today’s presentation. attending The conference Thank for

You may now disconnect.