CVB Financial Corp. Q2 FY2025 earnings call

• Financial Performance: 193rd consecutive quarter of profitability, 143rd consecutive quarter of cash dividend. Return on average tangible common equity was 14.08% and return on average assets was 1.34% for the quarter. Net earnings of $50.6M compared to $51.1M in Q1 2025 and $50M in prior year quarter.
• Net Interest Income: $111.6M in Q2 2025, $1.2M higher than prior quarter. Net interest margin remained at 3.31%.
• Noninterest Income: $14.7M in Q2 2025, lower than Q1 but higher than prior year quarter excluding OREO gain. Trust and wealth management fees increased.
• Noninterest Expense: $57.6M in Q2 2025, lower than Q1. Efficiency ratio was 45.6%.
• Deposits: Total deposits and customer repos at $12.4B, core deposits growing. Cost of deposits and repos remained at 87 basis points.
• Loans: Total loans $8.36B, commercial real estate and single-family loans grew, but line utilization issues impacted loan yields. Loan originations up 58% Q2 vs Q1 and 79% vs prior year.
• Capital Position: Shareholders' equity $2.24B, $11M increase from March 2025. 1.28 million shares repurchased in Q2, capital ratios stable.

For the second quarter of 2025, CVB Financial Corporation reported net earnings of $50.6 million or $0.36 per share. Net interest income was $111.6 million in the second quarter, $1.2 million higher than the prior quarter. Noninterest income was $14.7 million, lower than the first quarter but higher than the prior year quarter excluding a $2.2 million OREO sale gain. Noninterest expense was $57.6 million, lower than the first quarter. Total loans at June 30, 2025, were $8.36 billion. Total deposits and customer repurchase agreements totaled $12.4 billion, a $123 million increase from March 31, 2025.

• Economic uncertainties: Lower GDP growth, higher unemployment, and lower commercial real estate prices forecasted. - Credit risks: Impact of loan payoffs, line utilization on loan yields and credit quality. - Competitive risks: Intense competition in deposit and loan markets affecting pricing and market share.

Q: Sounds like prepays and line utilization weighed on loan yields this quarter. Can you quantify prepay income vs last, and pickup in activity in July?

A: Dave and Allen discuss line utilization being stable, with higher-yielding loans (ABL, dairy) having lower utilization impacting yields. No immediate increase in line utilization seen, but expected in Q4 for dairy loans.

Q: On deposit repurchase agreements, cost and outlook?

A: Dave views repos as deposits, average cost around 170 basis points, outlook normal with customer behavior.

Q: Thoughts on cash deployment, competitive environment?

A: E. Allen Nicholson says likely to build investment book. Dave discusses fierce competition in loan origination, spreads 130-170 over treasuries, origination yields expected to change in Q3/Q4.

Q: Competition source, Specialty Banking impact?

A: Dave says fiercest competition from regional banks. Specialty Banking has solid deposit trends but faces competition on earnings credit rates.

Q: M&A, California economic headwinds?

A: Dave says considering out-of-state expansion cautiously, but still focused on California-centric banks. California economic headwinds exist but opportunities remain.

Q: Expense control, run rate?

A: E. Allen Nicholson and Dave discuss low single-digit expense growth, lease management, and ongoing efforts to maintain expense control and operating leverage.