CVB Financial Corp. Reports Results for 2007

CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank ("the Company”), announced the results for the year ended December 31, 2007. Net Income CVB Financial Corp. reported net income of $60.6 million for the year ended December 31, 2007. This represents a decrease of $10.0 million, or 14.16%, when compared with net earnings of $70.6 million for the year ended December 31, 2006. Diluted earnings per share were $0.72 for the year ended December 31, 2007. This was down $0.11, or 13.34%, from diluted earnings per share of $0.83 for the same period last year. Net income for the year ended December 31, 2007 produced a return on beginning equity of 15.64%, a return on average equity of 15.00% and a return on average assets of 1.00%. The efficiency ratio for the year was 55.93%, and operating expenses as a percentage of average assets were 1.73%. The Company reported net income of $13.4 million for the fourth quarter ending December 31, 2007. This represented a decrease of $2.5 million, or 15.93%, when compared with the $15.9 million in net income reported for the fourth quarter of 2006. Diluted earnings per share were $0.16 for the fourth quarter of 2007. This was down $0.03, or 14.47%, from diluted earnings per share of $0.19 for the fourth quarter of 2006. These results include a $4 million provision for credit losses taken in the fourth quarter of 2007. Net income for the fourth quarter of 2007 produced a return on beginning equity of 12.97%, a return on average equity of 12.68% and a return on average assets of 0.86%. The efficiency ratio for the fourth quarter was 60.50%, and operating costs as a percentage of average assets were 1.77%. Net Interest Income and Net Interest Margin Net interest income, after provision for credit losses, totaled $157.1 million for the year ended December 31, 2007. This represents a decrease of $8.5 million, or 5.12%, over the net interest income of $165.6 million for the same period of 2006. This decrease resulted from a $25.2 million increase in interest income, offset by a $32.7 million increase in interest expense and a $1.0 million increase in provision for credit losses. The increases in interest income were primarily due to the growth in average earning assets and the increase in interest rates. The increases in interest expense were due to the increases in interest bearing deposits and borrowed funds and the increase in interest rates. Net interest income, after provision for credit losses, totaled $37.4 million for the fourth quarter of 2007. This represented a decrease of $2.0 million, or 5.07%, over the net interest income of $39.4 million for the fourth quarter of 2006. These decreases resulted from a $1.1 million increase in interest income, and a $0.3 million decrease in interest expense offset by a $3.4 million increase in the provision for credit losses. Net interest margin (tax equivalent) declined from 3.30% for the year ended December 31, 2006 to 3.03% for the year ended December 31, 2007. Total average earning asset yields increased from 6.04% for 2006 to 6.17% for 2007. The cost of funds increased from 2.76% for 2006 to 3.17% for 2007. The decline in net interest margin is due to the cost of interest-bearing liabilities rising faster than the increase in yields on earning assets. This decline in net interest margin has been mitigated by the strong growth in the balance sheet. In addition, the Company has approximately $1.30 billion, or 38.52%, of its deposits in interest free demand deposits. Net interest margin (tax equivalent) for the fourth quarter of 2007 was 3.06%. This represents an increase of 5 basis points when compared to the 3.01% for the fourth quarter of 2006. Average earning asset yields for the fourth quarter of 2007 were 6.06%, compared with asset yields of 6.10% for the fourth quarter of 2006. The cost of funds for the fourth quarter of 2007 was 3.04% compared with 3.13% for the same period last year. The credit quality of the loan portfolio continues to be strong. The allowance for credit losses increased from $27.7 million as of December 31, 2006 to $33.0 million as of December 31, 2007. During 2007, the Company experienced net charge-offs of $1.4 million and made a provision for credit losses of $4.0 million. During 2006, the Company had net recoveries of $1.5 million and a $3 million provision for credit losses. The allowance for credit losses was .95% and .90% of the total loans and leases outstanding as of December 31, 2007 and 2006, respectively. Balance Sheet The Company reported total assets of $6.29 billion at December 31, 2007. This represented an increase of $202 million, or 3.31%, over total assets of $6.09 billion on December 31, 2006. Earning assets totaling $5.91 billion were up $204 million, or 3.57%, when compared with earning assets of $5.70 billion at December 31, 2006. Total deposits and customer repos were $3.70 billion at December 31, 2007. This represents an increase of $200 million, or 5.70%, when compared with total deposits and customer repos of $3.50 billion at December 31, 2006. Gross loans and leases totaled $3.50 billion at December 31, 2007. This represents an increase of $425 million, or 13.84%, when compared with gross loans and leases of $3.07 billion at December 31, 2006. Investment Securities Investment securities totaled $2.37 billion at December 31, 2007. This represents a decrease of $217 million, or 8.42%, when compared with $2.58 billion in investment securities at December 31, 2006. CitizensTrust CitizensTrust has approximately $2.6 billion in assets under administration. They provide trust, investment and brokerage related services, as well as financial, estate and business succession planning. Loan and Lease Quality CVB Financial Corp reported non-performing assets as of December 31, 2007 of $1.4 million compared with zero non-performing assets as of December 31, 2006. The $1.4 million in non-performing assets, while higher than December 31, 2006, was down $2.1 million from the $3.5 million in non-performing assets at the end of the September 30, 2007. Delinquencies at December 31, 2007 were .10% of the portfolio compared with the industry average of approximately 1.08% at September 30, 2007. As of December 31, 2007, the Company had $308.4 million in construction loans. This represents 8.8% of the total loans outstanding of $3.5 billion. Of this $308.4 million in construction loans, approximately 52%, or $159.2 million, were for single-family residences and land loans. The remaining construction loans, totaling $149.2 million, were related to commercial construction. Approximately 29% of the total loan portfolio of $3.5 billion is located in the Inland Empire region of California. The rest of the portfolio is from outside this region. The Company does not make "subprime” mortgage loans. The allowance for loan and lease losses was $33.0 million as of December 31, 2007. This represents 0.95% of gross loans and leases. It compares with an allowance for loan and lease losses of $27.7 million, or 0.90% of gross loans and leases as of December 31, 2006. During 2007, we made a provision for credit losses of $4 million and we added an additional $2.7 million from the acquisition of First Coastal Bank in June 2007. These increases to the Allowance for Credit Losses were offset by the net charge offs of $1.4 million in 2007. 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 37 cities with 44 business financial centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley areas of California. Its leasing division, Citizens Financial Services, provides vehicle leasing, equipment leasing and real estate loan services. U.S. Banker Magazine named Citizens Business Bank the "Top Business Bank” in the nation in their January 2007 issue. The Bank was also recognized for having the fifteenth highest return on equity in the nation at 20.88%. 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 Certain matters set forth herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company's current business plan and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, the impact of changes in interest rates, a decline in economic conditions, adverse changes resulting from natural and manmade disasters, effects of government regulation and increased competition among financial services providers and other factors set forth in the Company's public reports including its Annual Report on Form 10-K for the year ended December 31, 2006, and particularly the discussion of risk factors within that document. The Company does not undertake, 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 except as required by law. CVB FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (unaudited) dollars in thousands   December 31,       2007       2006   Assets: Cash and due from banks $ 89,486 $ 146,411   Investment Securities available-for-sale 2,365,513 2,582,902 Interest-bearing balances due from depository institutions 475 - Investment in stock of Federal Home Loan Bank (FHLB) 79,983 78,866 Loans and lease finance receivables 3,495,144 3,070,196 Less allowance for credit losses   (33,049 )   (27,737 ) Net loans and lease finance receivables   3,462,095     3,042,459   Total earning assets 5,908,066 5,704,227 Premises and equipment, net 46,855 44,963 Intangibles 14,611 10,121 Goodwill 55,167 31,531 Cash value of life insurance 103,400 99,861 Other assets   76,378     55,134   TOTAL $ 6,293,963   $ 6,092,248     Liabilities and Stockholders' Equity Liabilities: Deposits: Demand Deposits (noninterest-bearing) $ 1,295,959 $ 1,363,411 Investment Checking 409,912 318,431 Savings/MMDA 868,123 896,988 Time Deposits   790,355     827,978   Total Deposits 3,364,349 3,406,808   Demand Note to U.S. Treasury 540 7,245 Customer Repurchase Agreements 336,309 94,350 Repurchase Agreements 250,000 250,000 Borrowings 1,753,500 1,794,900 Junior Subordinated Debentures 115,055 108,250 Other liabilities   49,834     43,370   Total Liabilities 5,869,587 5,704,923 Stockholders' equity: Stockholders' equity 420,246 400,546 Accumulated other comprehensive income (loss), net of tax   4,130     (13,221 )   424,376     387,325   TOTAL $ 6,293,963   $ 6,092,248       CVB FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCE SHEET (unaudited) dollars in thousands Three months ended December 31, Twelve months ended December 31,   2007     2006   2007     2006   Assets: Cash and due from banks $ 110,094 $ 126,432 $ 118,784 $ 127,186 Investment securities available-for-sale 2,326,600 2,615,263 2,388,883 2,511,935 Interest-bearing balances due from depository institution 1,477 - 1,876 1,843 Investment in stock of Federal Home Loan Bank (FHLB) 80,043 77,439 80,789 74,368 Loans and lease finance receivables 3,368,058 2,966,099 3,226,086 2,811,782 Less allowance for credit losses   (30,186 )   (27,041 )   (29,017 )   (25,202 ) Net loans and lease finance receivables   3,337,872     2,939,058     3,197,069     2,786,580   Total earning assets 5,745,992 5,631,760 5,668,617 5,374,726 Premises and equipment, net 47,257 44,657 46,490 43,196 Intangibles 10,049 10,351 9,388 11,228 Goodwill 57,375 31,531 45,404 31,601 Cash value of life insurance 102,814 99,213 101,406 80,760 Other assets   93,841     88,439     90,414     95,123   TOTAL $ 6,167,422   $ 6,032,383   $ 6,080,503   $ 5,763,820     Liabilities and Stockholders' Equity Liabilities: Deposits: Noninterest-bearing $ 1,275,259 $ 1,340,312 $ 1,285,857 $ 1,354,014 Interest-bearing   2,098,140     2,192,130     2,133,412     2,161,075   Total Deposits 3,373,399 3,532,442 3,419,269 3,515,089   Other borrowings 2,216,721 1,947,692 2,102,030 1,720,400 Junior Subordinated Debentures 115,579 108,250 112,078 106,132 Other liabilities   43,507     50,391     43,285     59,292   Total Liabilities 5,749,206 5,638,775 5,676,662 5,400,913 Stockholders' equity: Stockholders' equity 427,740 403,432 417,719 386,376 Accumulated other comprehensive income (loss), net of tax   (9,524 )   (9,824 )   (13,878 )   (23,469 )   418,216   393,608     403,841     362,907   TOTAL $ 6,167,422   $ 6,032,383   $ 6,080,503   $ 5,763,820   CVB FINANCIAL CORP. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Dollar amounts in thousands, except per share       For the Three Months Ended December 31, For the Twelve Months Ended December 31, 2007 2006 2007 2006 Interest Income: Loans, including fees   $56,692 $51,935 $221,809 $194,704 Investment securities: Taxable 20,498 24,405 85,899 91,029 Tax-advantaged 7,202 6,982   29,231 26,545 Total investment income 27,700 31,387 115,130 117,574 Dividends from FHLB Stock 1,077 1,049 4,229 3,721 Federal funds sold & Interest-bearing CDs with other institutions 17 -   109 92 Total interest income 85,486 84,371 341,277 316,091 Interest Expense: Deposits 15,766 18,783 69,297 67,180 Borrowings and junior subordinated debentures 28,332 25,602   110,838 80,284 Total interest expense 44,098 44,385   180,135 147,464 Net interest income before provision for credit losses 41,388 39,986 161,142 168,627 Provision for credit losses 4,000 600   4,000 3,000 Net interest income after provision for credit losses 37,388 39,386 157,142 165,627 Other Operating Income: Service charges on deposit accounts 3,554 3,247 13,381 13,080 Financial Advisory Services 1,871 1,918 7,226 7,385 Gain on sale of investment securities - (5 ) - 1,057 Other 2,544 3,407   10,718 11,736 Total other operating income 7,969 8,567 31,325 33,258 Other operating expenses: Salaries and employee benefits 13,854 13,477 55,303 50,509 Occupancy 2,928 2,259 10,540 8,572 Equipment 1,733 1,748 7,026 7,025 Professional services 1,739 1,902 6,274 5,896 Amortization of intangible assets 706 588 2,969 2,353 Other 6,482 5,491   23,292 21,469 Total other operating expenses 27,442 25,465   105,404 95,824 Earnings before income taxes 17,915 22,488 83,063 103,061 Income taxes 4,548 6,589   22,479 32,481 Net earnings   $13,367 $15,899   $60,584 $70,580   Basic earnings per common share   $0.16 $0.19   $0.72 $0.84 Diluted earnings per common share   $0.16 $0.19   $0.72 $0.83   Cash dividends per common share   $0.085 $0.085   $0.340 $0.355   All per share information has been retroactively adjusted to reflect the 10% stock dividend declared on December 20, 2006.   CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (unaudited)             Three months ended December 31, Twelve months ended December 31,   2007     2006     2007     2006     Interest income - (Tax-Effected) (te) $ 88,004 $ 86,713 $ 351,200 $ 324,841 Interest Expense   44,098     44,385     180,135     147,464   Net Interest income - (te) $ 43,906   $ 42,328   $ 171,065   $ 177,377     Return on average assets 0.86 % 1.05 % 1.00 % 1.22 % Return on average equity 12.68 % 16.03 % 15.00 % 19.45 % Efficiency ratio 60.50 % 53.10 % 55.93 % 48.18 % Net interest margin (te) 3.06 % 3.01 % 3.03 % 3.30 %   Weighted average shares outstanding Basic 83,257,179 84,262,599 83,600,316 84,154,216 Diluted 83,607,505 85,054,850 84,005,941 84,813,875 Dividends declared $ 7,069 $ 7,164 $ 28,479 $ 27,876 Dividend payout ratio 52.88 % 45.06 % 47.01 % 39.50 %   Number of shares outstanding-EOP 83,164,906 84,281,722 Book value per share $ 5.10 $ 4.60     December 31,   2007     2006   Non-performing Assets (dollar amount in thousands): Non-accrual loans $ 1,435 $ 0 Loans past due 90 days or more and still accruing interest - - Restructured loans - - Other real estate owned (OREO), net   -     -   Total non-performing assets $ 1,435   $ 0     Percentage of non-performing assets to total loans outstanding and OREO 0.04 % 0.00 %   Percentage of non-performing assets to total assets 0.02 % 0.00 %   Non-performing assets to allowance for loan losses 4.34 % 0.00 %   Net Charge-off (Recovered) to Average loans 0.04 % -0.05 %   Allowance for Credit Losses: Beginning Balance $ 27,737 $ 23,204 Total Loans Charged-Off (2,098 ) (201 ) Total Loans Recovered   739     1,734   Net Loans Recovered (1,359 ) 1,533 Acquisition of First Coastal Bank 2,671 - Provision Charged to Operating Expense   4,000     3,000   Allowance for Credit Losses at End of period $ 33,049   $ 27,737   CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (in thousands, except per share data) (unaudited)           Quarterly Common Stock Price   2007 2006 2005 Quarter End High Low High Low High Low March 31, $ 13.38 $ 11.42 $ 15.60 $ 14.71 $ 15.49 $ 12.80 June 30, $ 12.40 $ 10.63 $ 15.59 $ 13.25 $ 14.63 $ 12.36 September 30, $ 12.71 $ 9.51 $ 14.24 $ 12.83 $ 15.93 $ 13.12 December 31, $ 11.97 $ 9.98 $ 14.13 $ 12.83 $ 15.20 $ 12.63     Quarterly Consolidated Statements of Earnings   4Q 3Q 2Q 1Q 4Q 2007 2007 2007 2007 2006 Interest income Loans, including fees $ 56,692 $ 58,677 $ 53,726 $ 52,714 $ 51,935 Investment securities and federal funds sold   28,794   29,203   30,003   31,468   32,436 85,486 87,880 83,729 84,182 84,371 Interest expense Deposits 15,766 18,445 17,928 17,158 18,783 Other borrowings   28,332   27,727   27,518   27,260   25,602 44,098 46,172 45,446 44,418 44,385 Net interest income before provision for credit losses 41,388 41,708 38,283 39,764 39,986 Provision for credit losses   4,000   -   -   -   600 Net interest income after provision for credit losses 37,388 41,708 38,283 39,764 39,386   Non-interest income 7,969 7,863 7,596 7,898 8,567 Non-interest expenses   27,442   27,218   24,845   25,900   25,465 Earnings before income taxes 17,915 22,353 21,034 21,762 22,488 Income taxes   4,548   6,232   5,080   6,620   6,589 Net earnings $ 13,367 $ 16,121 $ 15,954 $ 15,142 $ 15,899 Basic earning per common share $ 0.16 $ 0.19 $ 0.19 $ 0.18 $ 0.19 Diluted earnings per common share $ 0.16 $ 0.19 $ 0.19 $ 0.18 $ 0.19   Cash dividends per common share $ 0.085 $ 0.085 $ 0.085 $ 0.085 $ 0.085   Dividends Declared $ 7,069 $ 7,067 $ 7,234 $ 7,109 $ 7,164 CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (in thousands) (unaudited)   Distribution of Loan Portfolio     12/31/2007     9/30/2007   6/30/2007   3/31/2007   12/31/2006     Commercial and Industrial $ 365,214 $ 345,697 $ 334,968 $ 294,265 $ 264,416 Real Estate: Construction 308,354 307,506 310,390 289,013 299,112 Commercial Real Estate 1,805,946 1,775,812 1,768,539 1,675,964 1,642,370 SFR Mortgage 365,849 363,765 358,347 316,661 284,725 Consumer 58,999 62,979 64,083 54,379 54,125 Municipal lease finance receivables 156,646 143,399 143,316 131,073 126,393 Auto and equipment leases 58,505 58,958 55,151 52,321 51,420 Dairy and Livestock   387,488     265,806   280,114   293,781   358,259   Gross Loans 3,507,001 3,323,922 3,314,908 3,107,457 3,080,820 Less: Deferred net loan fees (11,857 ) (12,173 ) (11,635 ) (10,848 ) (10,624 ) Allowance for credit losses   (33,049 )   (30,428 )   (30,244 )   (27,632 )   (27,737 ) Net Loans $ 3,462,095   $ 3,281,321 $ 3,273,029 $ 3,068,977 $ 3,042,459