CVB Financial Corp. Reports Record Earnings

    Business Editors/Banking Writers/Financial Analysts

    ONTARIO, Calif.--(BUSINESS WIRE)--Jan. 20, 2005--CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank ("the Company"), announced record results for the year ending December 31, 2004. This included record deposits, record loans, record assets and record earnings. It was the strongest year in the history of the Company.

    Net Income

    Net income for the twelve months ending December 31, 2004 was $61.5 million. This represents an increase of $8.7 million, or 16.38%, when compared with net earnings of $52.8 million for the year ending December 31, 2003. Diluted earnings per share were $1.00 for the twelve months ending December 31, 2004. This was up $0.14, or 16.28%, from diluted earnings per share of $0.86 for the same period last year. These per share amounts have been adjusted to reflect the five for four stock split declared in December of 2004.
    Net income for the twelve months ending December 31, 2004 produced a return on beginning equity of 21.44%, a return on average equity of 20.33% and a return on average assets of 1.47%. The efficiency ratio for the twelve-month period was 50.10%, and operating expenses as a percentage of average assets were 2.14%.
    Net income before the other-than-temporary impairment write-down, net gains on sales of investment securities, net gain on sale of real estate and estimated robbery loss was $63.5 million for the twelve months ending December 31, 2004. This represents an increase of $12.1 million, or 23.62%, when compared to net earnings before net gains on sales of investment securities, the prepayment penalty, and the reversed excess legal fee accrual of $51.4 million for the same twelve-month period in 2003. These results produced a return on beginning equity of 22.15%, a return on average equity of 21.00%, and a return on average assets of 1.51%. The related efficiency ratio for the twelve-month period was 49.29%, and operating costs as a percentage of average assets were 2.14%.
    The Company reported net income of $16.9 million for the fourth quarter ending December 31, 2004. This represented an increase of $2.8 million, or 19.72%, when compared with the $14.1 million in net income reported for the fourth quarter of 2003. Diluted earnings per share were $0.28 for the fourth quarter of 2004. This is up $0.05, or 21.74%, when compared with earnings per share of $0.23 for the fourth quarter of 2003.
    Net income for the fourth quarter of 2004 produced a return on beginning equity of 21.67%, a return on average equity of 20.98% and a return on average assets of 1.52%. The efficiency ratio for the fourth quarter was 53.79%, and operating costs as a percentage of average assets were 2.29%.
    Net income before the estimated robbery loss was $18.5 million for the fourth quarter of 2004. This represents an increase of $4.3 million, or 30.80%, when compared to net earnings of $14.1 million for the fourth quarter of 2003. These results produced a return on beginning equity of 23.67%, a return on average equity of 22.92%, and a return on average assets of 1.66%. The related efficiency ratio for the fourth quarter of 2004 was 51.33%, and operating costs as a percentage of average assets were 2.29%.
    The Company sold one of its buildings in Pasadena during the third quarter of 2004. This building houses the Pasadena Business Financial Center and the Wealth Management Group. The Company has agreed to lease back the Pasadena Business Financial Center space for five years and the Wealth Management Group space for two years.
    The sale of the building resulted in a gross gain of $2.1 million. However, $1.7 million of the gain is required to be deferred and amortized as an adjustment to rental expense over the life of the leases. The Company recognized the remaining $419,000 of the gain during the fourth quarter.

    Net Interest Income and Net Interest Margin

    Net interest income (before provision for credit losses) totaled $151.2 million for the twelve months ending December 31, 2004. This represented an increase of $21.9 million, or 16.93%, over the net interest income of $129.3 million for the same period of 2003. This increase resulted from a $31.4 million increase in interest income, partially offset by a $9.5 million increase in interest expense. The increases in interest income were primarily due to the growth in average earning assets. The increases in interest expense were due to the increases in borrowed funds.
    Net interest income (before provision for credit losses) totaled $39.7 million for the fourth quarter of 2004. This represented an increase of $3.7 million, or 10.17%, over the net interest income of $36.0 million for the fourth quarter of 2003. These increases resulted from an $8.3 million increase in interest income, offset by a $4.6 million increase in interest expense.
    Net interest margin (tax equivalent) declined from 4.18% for the twelve months ending December 31, 2003 to 3.98% for the twelve months ending December 31, 2004. Total average earning asset yields have declined from 5.34% for 2003 to 5.17% for 2004. The cost of funds has increased from 1.73% for 2003 to 1.77% for 2004. This decline in net interest margin has been mitigated by the strong growth in the balance sheet. The margin compression appears to be moderating with the recent stability of interest rates. The Company has approximately $1.32 billion, or 45.99%, of its deposits in interest-free demand deposits. The Company believes its deposit base should position it well for a rising interest rate environment.
    Net interest margin (tax equivalent) for the fourth quarter of 2004 was 3.95%. This represents a slight decrease when compared to the 4.25% for the fourth quarter of 2003. Average earning asset yields for the fourth quarter of 2004 were 5.24%, compared with asset yields of 5.25% for the fourth quarter of 2003. The cost of funds was 1.93% and 1.51% for the same periods, respectively.

    Balance Sheet

    The Company reported total assets of $4.51 billion at December 31, 2004. This represented an increase of $653.1 million, or 16.95%, over total assets of $3.85 billion on December 31, 2003. Earning assets totaling $4.26 billion were up $613.8 million, or 16.85%, when compared with earning assets of $3.64 billion as of December 31, 2003. Deposits of $2.88 billion grew $214.5 million, or 8.06%, from $2.66 billion for the prior year. Demand deposits of $1.32 billion jumped $179.9 million, or 15.75%, from $1.14 billion on December 31, 2003. Gross loans and leases of $2.14 billion on December 31, 2004 rose $380.1 million, or 21.60%, from $1.76 billion on December 31, 2003.

    Investment Securities

    Investment securities totaled $2.14 billion as of December 31, 2004. This represents an increase of $234.8 million, or 12.34%, when compared with $1.90 billion in investment securities as of December 31, 2003.

    Assets Under Administration

    The Wealth Management Group has over $2.0 billion in assets under administration. They provide trust, investment and brokerage related services.

    Loan and Lease Quality

    CVB Financial Corp. reported non-performing assets of $2,000 as of December 31, 2004. The ratio of non-performing assets to total assets and non-performing assets to gross loans and leases is negligible. The allowance for loan and lease losses was $22.5 million as of December 31, 2004. This represents 1.05% of gross loans and leases. It compares with an allowance for loan and lease losses of $21.3 million, or 1.21% of gross loans and leases on December 31, 2003. Non-performing loans and leases represented 0.01% of the allowance for loan and lease losses as of December 31, 2004. Non-performing assets decreased by $546,000 from the $548,000 reported as of December 31, 2003.
    The Company has not made a provision for loan and lease losses since 2001 due to the high quality of its loan portfolio. This has been the case even though loans increased from $1.76 billion as of December 31, 2003 to $2.14 billion as of December 31, 2004. Recoveries of $3.5 million more than offset charge offs of $2.3 million during 2004.

    Other Items in 2004

    During 2004, there were several items that had an impact on earnings. In the first quarter of 2004, the Company had a $6.3 million Other-Than-Temporary Impairment write-down of two issues of Federal Home Loan Mortgage Corporation preferred stock. This stock fluctuates in value due to the variable interest rate on the preferred stock dividend. This is similar in structure to a bond. However, because it has no maturity and the unrealized loss lasted for more than twelve months, the Company was required to write the two issues down to market value. Throughout the twelve months ended December 31, 2004, the Company realized gains on securities totaling $5.2 million. This resulted in the net loss on securities being $1.1 million for the twelve months ended December 31, 2004.
    The Company sustained a loss during the year on a robbery at one of its banking facilities. By the end of the year, it became probable that the Company's insurance company would deny this claim. Therefore, the Company has made a reserve for $2.2 million at the end of the year in the event the Company is required to pay amounts associated with this robbery. The Company intends to pursue any available causes of action against its insurance company to the extent the Company determines that the insurance company should be covering this claim.
    As a result of filing the 2003 federal and state income tax returns in October 2004, the Company will receive a refund. During the fourth quarter of 2004 the Company recognized the refund. This resulted in the reduction of the tax provision by $2.3 million.
    On October 21, 2004, Citizens Business Bank signed a definitive agreement to acquire Granite State Bank. This agreement provides for Granite State Bank to merge with and into Citizens Business Bank. Citizens Business Bank will represent the continuing operation.
    The definitive agreement provides that Citizens Business Bank will acquire Granite State Bank for an aggregate purchase price of $19.00 per share, or approximately $27 million, including costs associated with the cancellation of stock options. The total purchase price will be paid half in CVB Common Stock and half in cash in a cash/stock election merger. The transaction will be handled under purchase accounting. The transaction is subject to shareholder and regulatory approval and other customary conditions. It is expected to be completed during the first quarter of 2005.
    Granite State Bank was established in 1984. The Bank is headquartered in Monrovia, California and they have an office in South Pasadena. The Bank had total assets of $108.1 million, total deposits of $97.3 million, and total loans of $64.8 million as of December 31, 2004.

    Corporate Overview

    CVB Financial Corp. is the holding company for Citizens Business Bank. The Bank is the largest financial institution headquartered in the Inland Empire region of Southern California. It serves 30 cities with 37 business financial centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley areas of California. Its subsidiary, Golden West Financial Services, provides vehicle leasing, equipment leasing and real estate loan services.
    CVB Financial Corp. was recently recognized at the Annual Strategic Issues Summit with the "Market Cap" Award. This Award was presented to recognize the Company for producing a return to its original shareholders of 41,034% -- over 400 times the original investment. This is the highest return in the history of the banking industry in California. The Strategic Issues Summit is co-sponsored by Carpenter & Company and the California Bankers Association.
    For the second year, the Company received the KBW Honor Roll award at the Annual Community Bank Investor Conference hosted by Keefe, Bruyette & Woods, Inc. in New York on July 27, 28 and 29, 2004. This award was presented to the 31 banks in the United States that have reported increased earnings per share every year for the past ten years.
    Shares of CVB Financial Corp. common stock are listed on the Nasdaq under the ticker symbol of CVBF. For investor information on CVB Financial Corp., visit our Citizens Business Bank website at www.cbbank.com and click on the CVB Investor tab.

    Safe Harbor

    This document contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the projected. In addition, these forward-looking statements relate to the Company's current expectations regarding future operating results, potential pursuit of remedies against its insurance company in relation to the robbery at one of its banking facilities, and the consummation of the pending merger with Granite State Bank. Such issues and uncertainties include (i) impact of changes in interest rates, a decline in economic conditions and increased competition among financial services providers; (ii) unavailability of any remedy against the Company's insurance carrier for the robbery and (iii) failure to obtain requisite shareholder or regulatory approval for the merger with Granite, or failure of any other condition to the merger agreement with Granite. For a discussion of other factors that could cause actual results to differ, please see the publicly available Securities and Exchange Commission filings of CVB Financial Corp., including its Annual Report on Form 10-K for the year ended December 31, 2003, and particularly the discussion on risk factors within that document. The Company does not undertake any, and specifically, disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

CVB FINANCIAL CORP. CONSOLIDATED BALANCE SHEET (unaudited) dollars in thousands December 31, 2004 2003 Assets: Federal funds sold and reverse repos $ - $ - Investment Securities trading - - Investment Securities available-for-sale 2,085,014 1,865,782 Investment in stock of Federal Home Loan Bank (FHLB) 53,565 37,966 Loans and lease finance receivables 2,140,074 1,759,941 Less allowance for credit losses (22,494) (21,282) Net loans and lease finance receivables 2,117,580 1,738,659 Total earning assets 4,256,159 3,642,407 Cash and due from banks 84,400 112,008 Premises and equipment, net 33,508 31,069 Goodwill and intangibles 25,716 26,901 Cash value of life insurance 68,233 15,800 Other assets 39,458 26,164 TOTAL $4,507,474 $3,854,349

Liabilities and Stockholders' Equity Liabilities: Deposits: Demand Deposits (noninterest-bearing) $1,322,255 $1,142,330 Investment Checking 258,636 227,031 Savings/MMDA 813,983 732,992 Time Deposits 480,165 558,157 Total Deposits 2,875,039 2,660,510

Demand Note to U.S. Treasury 6,453 3,834 Borrowings 1,186,000 786,500 Junior Subordinated Debentures 82,476 82,476 Other liabilities 40,023 34,308 Total Liabilities 4,189,991 3,567,628 Stockholders' equity: Stockholders' equity 308,591 269,441 Accumulated other comprehensive income (loss), net of tax 8,892 17,280 317,483 286,721 TOTAL $4,507,474 $3,854,349

CVB FINANCIAL CORP. CONSOLIDATED AVERAGE BALANCE SHEET (unaudited) dollars in thousands Three months ended December 31, 2004 2003 Assets: Federal funds sold and reverse repos $ - $ - Investment Securities trading - - Investment securities available-for-sale 2,059,264 1,789,051 Investment in stock of Federal Home Loan Bank (FHLB) 53,371 38,425 Loans and lease finance receivables 2,042,148 1,679,099 Less allowance for credit losses (23,148) (23,639) Net loans and lease finance receivables 2,019,000 1,655,460 Total earning assets 4,131,635 3,482,936 Cash and due from banks 112,722 104,780 Premises and equipment, net 27,544 31,545 Goodwill and intangibles 25,833 17,376 Cash value of life insurance 67,214 - Other assets 55,854 84,493 TOTAL $4,420,802 $3,721,130

Liabilities and Stockholders' Equity Liabilities: Deposits: Noninterest-bearing $1,300,817 $1,080,209 Interest-bearing 1,552,973 1,543,094 Total Deposits 2,853,790 2,623,303

Other borrowings 1,117,952 766,488 Junior Subordinated Debentures 82,476 14,344 Other liabilities 46,297 32,682 Total Liabilities 4,100,515 3,436,817 Stockholders' equity: Stockholders' equity 304,895 270,443 Accumulated other comprehensive income (loss), net of tax 15,392 13,870 320,287 284,313 TOTAL $4,420,802 $3,721,130

Twelve months ended December 31, 2004 2003 Assets: Federal funds sold and reverse repos $ 311 $ 2,436 Investment Securities trading 8,761 - Investment securities available-for-sale 1,962,123 1,664,007 Investment in stock of Federal Home Loan Bank (FHLB) 46,443 34,169 Loans and lease finance receivables 1,905,144 1,529,944 Less allowance for credit losses (22,445) (21,970) Net loans and lease finance receivables 1,882,699 1,507,974 Total earning assets 3,900,337 3,208,586 Cash and due from banks 121,200 109,227 Premises and equipment, net 29,399 31,049 Goodwill and intangibles 26,281 15,974 Cash value of life insurance 58,540 - Other assets 56,785 75,205 TOTAL $4,192,542 $3,440,041

Liabilities and Stockholders' Equity Liabilities: Deposits: Noninterest-bearing $1,213,884 $ 975,134 Interest-bearing 1,547,549 1,460,296 Total Deposits 2,761,433 2,435,430

Other borrowings 1,005,058 672,827 Junior Subordinated Debentures 82,476 3,615 Other liabilities 41,201 52,606 Total Liabilities 3,890,168 3,164,478 Stockholders' equity: Stockholders' equity 289,053 254,223 Accumulated other comprehensive income (loss), net of tax 13,321 21,340 302,374 275,563 TOTAL $4,192,542 $3,440,041

CVB FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Dollar amounts in thousands, except per share

For the Three For the Twelve Months Months Ended December 31, Ended December 31, 2004 2003 2004 2003 Interest Income: Loans, including fees $31,095 $26,780 $114,543 $ 99,042 Investment securities: Taxable 18,359 14,239 68,069 51,205 Tax-advantaged 3,825 3,977 15,087 16,065 Total investment income 22,184 18,216 83,156 67,270 Federal funds sold - (7) 3 34 Total interest income 53,279 44,989 197,702 166,346 Interest Expense: Deposits 4,356 3,818 15,508 16,323 Borrowings and junior subordinated debentures 9,183 5,098 31,009 20,730 Total interest expense 13,539 8,916 46,517 37,053 Net interest income before provision for credit losses 39,740 36,073 151,185 129,293 Provision for credit losses - - - - Net interest income after provision for credit losses 39,740 36,073 151,185 129,293 Other Operating Income: Service charges on deposit accounts 3,119 3,758 13,663 15,039 Wealth Management services 1,198 1,000 4,464 3,904 Gains on sale of investment securities - - 5,219 4,210 Other-than-temporary impairment write-down - - (6,300) - Other 3,279 1,721 10,861 6,836 Total other operating income 7,596 6,479 27,907 29,989 Other operating expenses: Salaries and employee benefits 11,970 11,099 47,292 41,493 Occupancy 1,930 1,794 7,891 6,738 Equipment 2,397 1,974 8,003 6,878 Professional services 1,746 985 4,776 4,005 Amortization of intangible assets 296 297 1,185 815 Other 7,123 4,760 20,575 17,865 Total other operating expenses 25,462 20,909 89,722 77,794 Earnings before income taxes 21,874 21,643 89,370 81,488 Income taxes 4,986 7,537 27,884 28,656 Net earnings $16,888 $14,106 $ 61,486 $ 52,832

Basic earnings per common share $ 0.28 $ 0.23 $ 1.02 $ 0.88 Diluted earnings per common share $ 0.28 $ 0.23 $ 1.00 $ 0.86

Cash dividends per common share $ 0.11 $ 0.12 $ 0.48 $ 0.48

All per share information has been retroactively adjusted to reflect the 5 for 4 stock split declared on December 29, 2004.

CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (unaudited)

Three months ended Twelve months ended December 31, December 31, 2004 2003 2004 2003

Interest income - (Tax Effective)(te) $54,507 $46,274 $202,549 $171,531 Interest Expense 13,539 8,916 46,517 37,053 Net Interest income - (te) $40,968 $37,358 $156,032 $134,478

Other-than-temporary impairment write- down $0 $0 ($6,300) $0 Gains on sales of securities $0 $0 $5,219 $4,210 Gain on sale of real estate $0 $0 $419 $0 Gain on sale of OREO $0 $0 $0 $0

Return on average assets 1.52% 1.50% 1.47% 1.54% Return on average equity 20.98% 19.68% 20.33% 19.17% Efficiency ratio 53.79% 49.14% 50.10% 48.84% Net interest margin (te) 3.95% 4.25% 3.98% 4.18%

Weighted average shares outstanding Basic 60,574,986 60,503,386 60,524,724 60,228,030 Diluted 61,386,806 61,604,220 61,279,224 61,387,908 Dividends declared $5,872 $5,794 $23,821 $21,638 Dividend payout ratio 34.77% 41.07% 38.74% 40.96%

Number of shares outstanding-EOP 60,668,549 60,361,684 Book value per share $5.23 $4.75

September 30, 2004 2003 Non-performing Assets (dollar amount in thousands): Non-accrual loans $2 $548 Loans past due 90 days or more and still accruing interest - - Restructured loans - - Other real estate owned (OREO), net - - Total non-performing assets $2 $548

Percentage of non- performing assets to total loans outstanding and OREO 0.00% 0.03%

Percentage of non- performing assets to total assets 0.00% 0.01%

Non-performing assets to allowance for loan losses 0.01% 2.57%

Net Charge-off (Recovered) to Average loans (0.06)% 0.08%

Allowance for Credit Losses: Beginning Balance $21,282 $21,666 Acquisition of Kaweah National Bank 2,767 Reclass Uncommitted LOC Reserve to Other Liabilities (1,733) Total Loans Charged-Off (2,320) (3,017) Total Loans Recovered 3,532 1,599 Net Loans Recovery (Charged-Off) 1,212 (1,418) Provision Charged to Operating Expense - - Allowance for Credit Losses at End of period $22,494 $21,282

CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (in thousands, except per share data) (unaudited)

Quarterly Common Stock Price

2004 2003 2002 Quarter End High Low High Low High Low March 31, $17.04 $15.13 $18.50 $14.10 $11.73 $10.20 June 30, $17.56 $15.72 $16.06 $14.07 $14.01 $11.62 September 30, $18.70 $16.16 $15.69 $13.35 $13.63 $10.01 December 31, $22.34 $17.80 $15.87 $13.94 $15.55 $11.91

Quarterly Consolidated Statements of Income

4Q 3Q 2Q 1Q 4Q 2004 2004 2004 2004 2003 Interest income Loans, including fees $31,095 $30,061 $27,136 $26,250 $26,780 Investment securities and federal funds sold 22,184 21,960 19,315 19,701 18,209 53,279 52,021 46,451 45,951 44,989 Interest expense Deposits 4,356 3,863 3,605 3,683 3,818 Other borrowings 9,183 8,182 6,939 6,704 5,098 13,539 12,045 10,544 10,387 8,916 Net interest income before provision for credit losses 39,740 39,976 35,907 35,564 36,073 Provision for credit losses - - - - - Net interest income after provision for credit losses 39,740 39,976 35,907 35,564 36,073

Non-interest income 7,596 7,519 12,011 781 6,479 Non-interest expenses 25,462 21,752 21,004 21,505 20,909 Earnings before income taxes 21,874 25,743 26,914 14,840 21,643 Income taxes 4,986 8,668 9,462 4,768 7,537 Net earnings $16,888 $17,075 $17,452 $10,072 $14,106

Basic earnings per common share $0.28 $0.28 $0.29 $0.17 $0.23 Diluted earnings per common share $0.28 $0.28 $0.28 $0.16 $0.23

Cash dividends per common share $0.11 $0.13 $0.12 $0.12 $0.12

Financial Measures That Supplement GAAP

Our discussions sometimes contain financial information not required to be presented by generally accepted accounting principles (GAAP). We do this to better inform readers of our financial statements. The SEC requires us to present a reconciliation of GAAP presentation with non-GAAP presentation.

The following table reconciles the differences in net earnings with and without the other-than-temporary impairment write-down, net gains on sale of investment securities, gain on sale of real estate, and other unusual items in conformity with GAAP:

Net Earnings Reconciliation (non- Three months Twelve months GAAP disclosure): ended ended December 31, December 31, 2004 2003 2004 2003 Net earnings without the other- than-temporary impairment write- down and net gain on sale of securities $18,450 $14,106 $63,503 $51,373 Other-than-temporary impairment write-down, net of tax - - (4,334) Net gains on sale of securities, net of tax - - 3,591 2,724 Net gains on sale of real estate, net of tax - - 288 - Estimated robbery loss (1,562) - (1,562) Prepayment penalty for FHLB advance - - (3,401) Reversed excess legal fees accrual - - 2,136 Reported net earnings $16,888 $14,106 $61,486 $52,832

Other-than-temporary impairment write-down $0 $0 ($6,300) - Gains on sale of securities - - 5,219 $4,210 Gain on sale of real estate - - 419 - Estimated robbery loss (2,269) - (2,269) Prepayment penalty for FHLB advance - - (5,256) Reversed excess legal fees accrual - - 3,300 Tax effect 707 - 914 (795) Net of taxes (1,562) $0 ($2,017) 1,459

We have presented net earnings without the other-than-temporary impairment write-down on investment securities, net gains on sales of investment securities and net gain on sale of real estate, and other unusual items to show shareholders the earnings from operations unaffected by the impact of these items. We believe this presentation allows the reader to more easily assess the results of the Company's operations and business.

--30--SP/np*

CONTACT: CVB Financial Corp., Ontario D. Linn Wiley, 909-980-4030

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: BANKING EARNINGS SOURCE: CVB Financial Corp.

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