CVBF

CVB Financial Corporation (CVBF)

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CVB Financial (CVBF)

Q1 2013 Earnings Call

April 18, 2013 10:30 am ET

Executives

Christina Carrabino

Christopher D. Myers - Chief Executive Officer, President, Director, Chief Executive Officer of Citizens Business Bank, President of Citizens Business Bank and Director of Citizens Business Bank

Francene LaPoint

Analysts

Hugh M. Miller - Sidoti & Company, LLC

Julianna Balicka - Keefe, Bruyette, & Woods, Inc., Research Division

Douglas Johnson - Evercore Partners Inc., Research Division

Robert Greene - Sterne Agee & Leach Inc., Research Division

Gary P. Tenner - D.A. Davidson & Co., Research Division

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Timothy N. Coffey - FIG Partners, LLC, Research Division

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the First Quarter 2013 CVB Financial Corp. and its subsidiary, Citizens Bank -- Business Bank Earnings Conference Call. My name is Jessica and I am your operator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Christina Carrabino. You may proceed. Ms. Carrabino, you may proceed.

[Technical Difficulty]

Operator

Good morning, ladies and gentlemen, and welcome to the First Quarter 2013 CVB Financial Corp. and its subsidiary, Citizens Business Bank Earnings Conference Call. My name is Jessica and I am your operator for today. [Operator Instructions] I would now like to turn your presentation over to your host for today's call, Christina Carrabino. You may proceed.

Christina Carrabino

Thank you, Jessica, and good morning, everyone. Thank you for joining us today to review our financial results for the first quarter of 2013. Joining me this morning is Chris Myers, President and Chief Executive Officer; and Francene LaPoint, Senior Vice President and Controller. Rich Thomas, our Chief Financial Officer, is not on the call today due to a death in his family.

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

Before we get started, let me remind you that today's conference call will include some forward-looking statements. These forward-looking statements relate to, among other things, current plans, expectations, events and industry trends that may affect the company's future operating results and financial position. Such statements involve risks and uncertainties and future activities, and results may differ materially from these expectations.

Speakers on this call claim the protection of the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2012, and in particular, the information set forth in Item 1A, risk factors therein.

Now I will turn the call over to Chris Myers.

Christopher D. Myers

Thank you, Christina. Good morning, everyone, and thank you for joining us again this quarter. Yesterday, we reported earnings of $21.6 million for the first quarter of 2013 compared with $22.1 million for the fourth quarter of 2012 and $22.3 million for the first quarter of 2012.

Earnings per share were $0.21 for the first quarter compared with $0.21 for the fourth quarter and $0.21 for the year-ago quarter. The first quarter represented our 144th consecutive quarter of profitability and 94th consecutive quarter of paying a cash dividend to our shareholders.

Excluding the impact of the yield adjustment on covered loans, our tax-exempt, net-interest margin was 3.54% for the first quarter compared with 3.60% for the fourth quarter and down from 3.69% for the year-ago quarter. The yield on investment securities continued to decline, partially driven by the Federal Reserve Bank's stimulus program of purchasing longer-term debt in the open market.

Lower rates on mortgages have resulted in larger volumes of refinancings, which have impacted the prepayment speeds within our current portfolio.

We also continued to see competitive pressure on rates in all classes of loans, particularly commercial real estate secured loans.

At March 31, 2013, we had $3.37 billion in total loans, net of deferred fees and discounts compared with $3.45 billion at December 31, 2012. Overall, noncovered loans decreased $62.8 million from the first quarter to $3.19 billion. The majority of the decline was due to the seasonality of our dairy and livestock portfolio. Covered loans decreased $16.5 million for the fourth -- for the first quarter to $178.7 million.

Our dairy and livestock loan portfolio decreased by $49.1 million from the fourth quarter of 2012 to the first quarter of 2013, primarily due to the seasonal borrowing patterns of these customers, as they draw down on their line of credit during the fourth quarter and then repay them during the first quarter.

January and February 2013 were slow months in terms of overall loan demand. However, we are now starting to see signs of improvement and our current loan pipeline appears to be gaining momentum.

In addition, we are also seeing positive progress in our new single-family residential mortgage product, which we introduced in the fourth quarter of 2012. In terms of loan quality, nonperforming assets, defined as noncovered, nonaccrual loans, plus OREO, decreased in the first quarter to $68.5 million compared with $72.8 million for the prior quarter. We once again reported 0 provision for funded loan and lease losses for the first quarter. This represents the eighth consecutive quarter we have reported a 0 provision.

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