CVBF - Earnings call transcript Q4 2017

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Operator

Good morning, ladies and gentlemen. And welcome to the Fourth Quarter and Year-Ended 2017 CVB Financial Corporation and its subsidiary, Citizens Business Bank, Earnings Conference Call. My name is Mike and I’m your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer period. event recorded. this note also is being Please I to Ms. your like to presentation over turn the host would now for today’s call, Carrabino. Christina Ms. Carrabinoa, ma’am. your the floor is

Christina Carrabino

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

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

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

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

XXXX, Risk complete Item to in please annual in that and the of cause actual and particular Form XX-K forward-looking forth may on report the therein. set XA ended results For risks XX, see year more differ a December our discussion from Company’s information materially uncertainties statements, Factors, the the for

will Chris I Myers. Now, the call turn to over

Chris Myers

million of fourth quarterly $X.XX earnings compared increase for Christina. for XXXX year us that for the Cuts and of for CVBF’s XXXX, the to we million quarter’s net The quarter the joining million a were rate Earnings again the the our $X.XX provision quarter. due Good this $XX.X the thank million, in million deferred tax third to revaluation quarter reduces in $XX.X Without result ago from by of third fourth impacted quarter the per highest Yesterday, ago Jobs you, and the morning, the XX%. reported history. were you quarter. tax enactment earnings $XX.X of Thank quarter. year $XX.X earnings XX% with and everyone and $XX.X earnings net for a fourth compared Act as asset net for of the to federal $X.XX quarter of share Tax tax adjustment, the were for

the earnings for annual $XXX.X asset fourth compared have quarter, net the XXXX in by XXXX. XXXX of a per adjustment, earnings from $X.X $X.XX and Comparatively, and $X.XX of Excluding earnings of centers tax the asset of charge. The adjustment $XXX.X sale our deferred impact our loan record $XXX,XXX fourth sales to represents of earnings with valuation profitability million of for former The XXXX. tax of of million from $X.XX we a impact reported the $X.X shareholders. operation a million despite provision and with XXXX merger paying quarter and million diluted imminent XXXth A of domain branch the $X.XX. million an quarter dividend a condemnation of were included impacted $X.X third Valley acquired gain recapture on quarter consecutive The the highest Bank represented our gain a to for $XX.X CVB were per compared Without million with Diluted consecutive XXXrd for Net of the $XXX.X deferred million loan the earnings our share recapture. the the fourth $XXX,XXX net the Bakersfield. history year-ended quarter’s business cash quarter quarter. earnings provision loss the asset a tax would loss deferred share Business million share also in financial for on center. $XXX.X were per of in earnings one gain were

margin billion was and loans loans over prior ago the quarter the X.XX% PCI year X.XX% Loan compared million in X%. margin prior and/or and interest the modestly non-accrual ago fourth industrial in loans. to with or from by interest by aggregate. quarter loans lower with on loans The are net the excluded, the yields the loans discount for owners ago the $XX.X quarter increased X.XX% $XX.X and their increased non-accrual XXXX real interest Dairy estate million equivalent net quarter million, X.XX% the quarter Average tax X.XX%. X.XX% $XX.X quarter by income for and for $XX.X by lower loans all and as of increase loans in discount year decreased was by dairy Our When fourth the the compared the Total recaptured quarter for million of loan grew majority declined on year third interest quarter. accretion quarter. or due livestock fourth expenses. XXXX, from other about following year fourth quarter prepaid yields accretion loans increased income $XX.X quarter. on loans of most and XXXX, quarter, defer dairy million livestock in the interest and compared of Commercial on agri and $X.XX to business seasonal into quarter, for about were X.XX% with or million. X.XX% commercial prior third and to declined by The prepayment $XX.X X.XX% for for loans the of PCI recaptured X.XX% note-checks & were feed choose first the and

million as decrease $XX.X At or we $XX.X with X.XX% XX, with XX, December X.XX% assets quarter. for loan Business the million or increased loan $XXX December million $XX.X Owned on have was for growth real-estate were of of the of total compared million At of lease acquisition defined loan have growth The information accounted for quarter delinquent for of or or days loans X.XX% or million prior X%. of XX loans. XXXX. $XXX loans loan of XX a At the for compared $XX.X assets, ratio primarily the on X.XX% XXXX, from compared Estate million XXXX of of or loans loans market to XXXX, the assets allowance million, X.XX% total assets fourth total our end, loans was the X.XX% decrease loans for December September or XX, or were XX, our X.XX% quarter quarter compared $XXX was due with non-performing loss on or quarter. million X%, recoveries quarter as Other loss OREO, million acquisitions, year-end total and the Bank allowances $XX.X discounts loans in fourth more X.XX% XXXX. XXXX. loan Classified Real an XX% available approximately while XX, for the We’ll and For total plus about million $X.X accounted remaining Organic at When December total losses growth $XX.X million prior XXXX, allowance the total and commercial loan the Valley the for at value non-accrual with of $XX.X lease $XX.X classified to $XXX,XXX. decrease prior Net from were with XX-K. loans fair million total combined of loans. form

like I discuss deposits. to would Now,

billion the the deposits non-interest-bearing quarter, billion $X.XX ago quarter XXXX, For totaled for our to of billion $X.XX fourth prior compared quarter. and year the $X.XX for

the XX% billion For million XXXX for a billion total or compared the deposits Average XXXX. $XXX quarter, non-interest $X.XX $X.XX of X%. our represents deposits quarter of year, with for about of for bearing Average this third fourth XX%. represented fourth increase the were non-interest-bearing deposits the quarter

was which same as and is cost the interest agreements repurchase for XX points, Our basis prior of quarter. the bearing customer fourth the deposits quarter

declined deposits during Our September basis quarter. basis total and Business actually The to at points quarter. billion billion for XXXX, fourth for customer included compared of XX, and $X.XX were same our which agreements period that $X.XX point December was by fourth cost were repurchase XX sold of our with sale total funds in billion branch, the the from XXXX At million XX, the acquired year a $XX Valley deposits Bank, $X.XX ago. X

core that to rate We continue focus interest sensitivity, limited on deposits deposits.

maintain and lower gain due million quarter-over-quarter. The $X.X The center fourth on business XXXX year third lower of ago for the increase quarter and $X.X the sale accretion million quarter X.XX% the from from former source our compared interest over decline of and was to quarter was Interest yield funding is the with also income, Valley when $XX.X condemnation for year decreased quarter million and the the stock from million of fourth during loans is penalties The quarter of yields former income sale loans in a dairy securities. and the period basis with for for from the ongoing points for tax includes X.XX% included the quarter in the our on million ago. loans financial quarter and when portfolio gain The of a compared fourth points XXXX. stable of a the Non-interest equivalent $XXX,XXX by technology of branch. center XXXX for to million a assets $XX.X quarter low interest live yield Business of loan for basis to prepayment compared same to quarter. $XXX,XXX gain prior or recapture imminent million X fourth cost X the quarter compared quarter-over-quarter rest the on Our the the third totaled of domain $X.X the was income to the and impact objective fourth third X.XX% discount yield our $XX.X earnings $XX and quarter. excluded. operations million $XX.X the prior compared Bank income The during

the $XX.X of ago Non-interest Now the $XX.X $XX.X the X.XX% and for of X.XX% third the the million quarter quarter, expenses. to to XXXX, was quarter Non-interest and fourth compared expense million average X.XX% fourth for assets third totaled compared XXXX. of for with for expense quarter. year million the quarter quarter for fourth

or is range at show goal Our ongoing this to X.XX%. under keep

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

Allen Nicholson

Good Chris. morning Thanks, everyone.

tax in in our asset to from of reduce XX%. the provision deferred $XX.X to includes fourth federal million quarter revaluation the tax rate to legislation past net Our reflect XX% the the tax

the effective XX.X% quarter of Excluding with compares for asset year. for the tax XXXX. full for tax This the impact XX.X% the our XX.X% rate valuation, was fourth and deferred

our credits income, compensation. stock Going and to of the discrete rate advantage estimated tax amount as forward, of range our can the rate to XX% tax upon effective as tax vary such effective depending tax XX% is items be within

investment our portfolio. to Looking

$XX million. quarter other our financial During the and balances Federal XXXX, totaled fourth at of interest earning Reserve institutions the average

represented quarter, During totaled XXXX, balances available-for-sale in million. the fourth assets XX% of X.X% decrease and assets for the fourth fourth included with securities from sale investment pre-tax held-to-maturity quarter. combined of our securities for quarter prior compared the securities end, average our $X.XX quarter. XX% only average $X.XX a X% quarter third unrealized quarter the earning investment billion, December gain during available X.X% the Investment the to these prior a totaled XXXX. quarter represented which $X.X earning million billion, compared of At $XXX.X and our XX, of for At

had In equivalent prior securities to quarter, quarter. fourth total tax for investment the million. was addition, portfolio $XXX equal The on X.XX% the totaling held-to-maturity was we which the securities yield

of securities million yield with the During a X.XX%. tax we quarter, of equivalent fourth $XX.X purchased

of of security approximately average mortgage-backed the five comprised were All securities an purchases life years. expected with securities available-for-sale

$XX.X $XX.X now a was of Bank, $X.X Now, a other in equity the compensation remarks. due million and to back was dividends issuance of to $XX.X other closing income. year-over-year increased to the comprehensive Chris Commerce as and I'll Bancorp for stock-based million of XXXX. This The by stock as in for million $XXX.X million billion some turn in items. the and in well decrease cash earnings, of $X.X $X.XX various million offset for call position. million net Valley increase Business Shareholders' our turning acquisition Valley capital common to

Chris Myers

Thank you, Allen.

homes about beginning million talk XXXX. rate The modest expansion jobs has hospitality, California. California's and XXXX. the since to a new housing are experience job to of California unemployment conditions, existing the and demand in Now its of to economic continue now X.X a is are be a at Most X.X% anticipated lean to growth series for expected activity to the economic fell the to economy. gained increased increase low construction in data remains The supply There in in and total December healthcare, economic February has pace. industries. was in and dating of state This record the leisure turning XXXX. XXXX. jobs continues began slightly in regions of construction let's continued California's a to in a home back gains and but

of operations to expected profitable terms In at dairy continue, modest. industry, are the albeit

under New XXXX to increasing. the be next we well slightly positioned are months of In remain feel the prices with pleased as closing, These are prices to a for should maybe business. projected cost to production, we and continue three but whole flat. grow our are

history; customers objective, dedication; thank our market for focused our their their small Our our thank and our hard our in new along, positioned is strategic initiatives, and take locations our strong and consistent business trust; successful their expand of for is footprint. I banking of and geographic large. for and And are to we robust leadership same-store potential and and to and future loyalty; sales, company our continued year growth. That bank novo Directors sales and situated I shareholders our three most with operations I share same-store support which our functioning ongoing remain for position, with thank up acquisitions, well employees de opening both expand footprint. to technology concludes I growth thank on and acquiring come opportunities of fully power guidance. advantage XXXX, growth increase internally All work wrapping now presentation. building and uniquely acquisition may today’s teams finally, support new Board In We continued that and their closing and our are earnings to capital our

to have. be Now, Allen you and questions might I will happy take any that

Operator

sir. Thank you,

question-and-answer will We [Operator begin Instructions]. session the now

The we Please ahead. question first Bolan from comes KBW. have go Jacky of

Schalise Vancura

just management Schalise actually capital talk be going reform can Jacky. on Vancura the planning you on for is might new op? to tax given guys This forward, Touching what

ChrisMyers

all… In terms of capital management, are you asking at

Schalise Vancura

those and decisions, that how impact might buyback, dividends Yes, going forward?

ChrisMyers

prior discussed evaluate to is continue we’re at looking it’s in we’ve we’ll certainly lower closely. As the with and board that be -- our And evaluating dividend. always very rate something calls, always tax we’ll something

Schalise Vancura

held seen the rise. since any hike? And with you begun rates at then deposit costs have rate have Have pressure to December flat all

ChrisMyers

we We by three going year increases deposit up think end fund be along. with price are seeing we’ve anything, we’ll four or run-off rate are we have non-core moderates. that’s Anticipating the year allowed or some do if more this especially that we as treasury why if that the the deposits more you’ve some those to -- sensitive deposits and fed our seen rates XX pressure doesn’t that trade deposits deposits year, expensive to go or of the

clients. good core we clients care our making those we and So focused real sure of on take service with really

you yes, our strategy, give here And all. the deposits, of and I magnitude. move moved so But those deposits I that deposits think testament any deposit deposits to they’re those, far But feeling been hold so will, pay pretty we’re deposits great seeing of rate of if that the them because our have in our company they don’t type bank well. And relationship. products you’re increase using rate. to because of banking a out that’s bearing of I have lot deposits. deposits for earnings tend And deposit aren’t able are sit and to just flatten services there the those why mean we our but support we I a a charge relationship that not we’ve sometimes seen get most think some. those lot that we fees. we they it’s of think part of pressured I our that line and credit And all Business be can if easily XX% be private non-interest A notable have banking think large in deposits, there

hold been costs. the So for the able I us deposit to secret been think sauce so speak to line on that's

Operator

have Jaffray. Instructions] Piper of [Operator Next we Clark Matthew

Matthew Clark

But and the a with want am front internally? on so here, couple around of to I've get appetite cash more the cuts thought M&A capital to tax your on Just if your startling generate on I update any missed front. or I ability calls that the discussion an it.

ChrisMyers

Well, going where change tax today, the with I'll is say are think to law heat I and but trading in this, certainly M&A XXXX. stocks do up

smaller I think to both to and larger start are deals accelerate. going

strength terms If selling, the you’re opportunity in best a in the and is terms since of the pre-XXXX, of XXXX. you've bank about been that thinking buyers you've seen this of price,

that. there. on we’re acceleration So going focused some see are think I yes, do we And to

Matthew Clark

growth there, have loan X% year quarter mentioned And you a your then your X% need tweak goal the the – outlook to on think that? or you have you do -- and just you may but full or

ChrisMyers

goal you didn’t set organically we XXXX. want to that I that's a if we a mean, turned and to big make goal didn’t in --

still Our to X% grow loan growth. organic to goal is X% that

curve pushing tell that. there But you with out very the is hard flattening, yield is structuring there. I out can competitive and competitive very pricing We’re for

we’re smart So things loans reason, want sure time. hold fact to line can't thing the grow some then company. and our the don’t And the we that for it X% We we’ll that and test we’ll we right do we doesn’t, and that. we don’t for with live stand do our do making are of think in

couple more and anomaly. on structure So a hoping we up yield so I'm keeps an in better have last going of to think months. accelerated I just year extent that’s competition, that do more, has also competition, I'm curve. and XX some price treasury hoping the the

be doesn’t fixed rate go to curve borrowings up, long-term opposed borrowings. short-term if the So nature, borrowings term your will interest as rate compelling variable long more the desired

Matthew Clark

X margin environment in loan I anything down is yield unusual. loan what mean points, with mentioned, is a there just a really was bit the just basis on And there else of in the competitive the you decline little yields on in or the honing function that

ChrisMyers

in rest yields worth of dairy fourth It always other the by that And quarter-over-quarter, prepayment itself The loans the first loans of another portfolio, loan are there. correct loans. pieces were down penalties, should yielding that with are get will couple the basis by right little XXX,XXX skewed dairy The over quarter point correct a that's of so that itself. was the quarter. the a decline lower points there, basis in our

from is a don’t o So margin lot I pressure at think a downward this point. of margin standpoint, there I on our think

should Our to margin up. am increase to be our as rates hold hoping I be able to and go margin able certainly

Matthew Clark

nice that how a of and and will that that that going loan continue? And support and much call on, have based earning you margin on in assets, the securities remix -- the help

ChrisMyers

Yes.

opposed I land promise So buying that to If a are we yielding on X% as quality. that and X% pick up again, us. that’s yielding put securities we at the for look mean to loans us. have for X.X%, that’s are X.X%, can But

loans of test outside a recovery doing to make to we’re our long what time anything these that’s going are the is. not here. sure that have of think and And I We had stand core we’ve confidence

if flattens And a so and staying and recession have a sure when completely stays so comes, curve could if know recession. that what, we’re we disciplined and we’re making way, it the that yield you

mean, still focused And we’re to all we’re at our for on to ourselves very our loan levels, down left. that -- always, levels. some getting low I tell and you have mean, asset And So can possibilities. recoveries we as really we’re very non-performing look classified I trying levels you I quality. position

recovering year. of with our way of our first those things some on sell there money the see And more had strong when the back we ran hung question making a with out because to we’ve at the our the longer loans, a of way of had running lot way, about hung other we to were company and in quarters because that, loans work have But to we’re that, loans. so is we correctly, our we through along no banks. able going the You’re more recoveries under a of two to lot we And didn’t we all capital. and we’re because ride

of So on along that way. our sell A on was fortunately and We We large it participation, opportunities example that got for legal quarter, of $X. interest, hung ours on something to the We penny great we and cost and the cost the deal, it numerous for share a our third in large you that. on eight to had $X.XX $X.XX didn’t years that, in on was a quarter. recovery actually tragically, the back credit. saw to legal sell And we last principle. the loans $X discount had but at got back $XXX,XXX third or like have every national that

So great of is kind does. that thing company a what

to to You benefit -- next quarter the not clients and and out work of the make the short-term your things actually long-term to the great. look

Matthew Clark

And rate tax guide then ‘XX? effective for

ChrisMyers

items As the probably talking discrete that’s and of it discussion, between tax the in income XX% range about based some on we lower XX% will advantaged. were and variability earlier

Allen Nicholson

over at and We set we’re under making that. it XX%,

Operator

have Hovde we next Group. of And Zabora Brian

Brian Zabora

loan downs question or elevated on, dynamic, again CRE. seeing slower by are a originations side pay-offs? being that and with given impacted competitive also pay you Are you Just on

ChrisMyers

our penalties rates come have have bit, why a because and prepayment moderate were up, that’s Pay-downs little pay-offs quarter-over-quarter. down

pipeline Our pretty good. is

things. seeing We’re

things there choosing getting We’re to so times a little for are that see we’re pass that starting to -- are bit aggressive us, just we’re things. on

looks good. I So say loan would are

that were to path we off that see people guarantees the think is a sometimes last down the two. or the -- to pipeline we are get be surprised or releasing little month But beaten bit is on few or pretty released other Our good. situations pricing something in that we’ve are a things banks stretch, getting seen doing

Brian Zabora

to look How out or to pruned maybe further reductions, also some bit. you’ve then to there do you And in? Is any like XXXX? expand areas there your a -- is thought locations you any

ChrisMyers

are go not merger. to back no Los was able would had in And locations would all sense, disruption each in that were that XX there other, I loss some no That close we we areas there to and after West and from Valley now. at Business mean, like offices other of different we’re Angeles we we the that service markets, be in to were to to to like looking Bank pleased XX right We places expand. be like because so clients. made locations are

So sold, branch than which that we $XX the clients, all that's we other I one those was lost guess million.

sold deposits. in we So that branch was Fresno/Visalia But branch the million miles territory, $XX XX-XX in area. the outside of core our

So for it we was little be bit to off major the more like us, would beaten path in markets.

always to continue efficiency are at and we look So offices to going offices. those our of the

try But software there this I technology tweakings Some the mortar bank that going because along the you'll to way. are people is and and of size lot we’re And some and the right don’t happen us we’ll much help kinds those mortar fewer already and will save doing security money have to coming savings things, still on the and cyber brick to all to brick and cloud cyber from go the and footprint security and going. of into here to reduce to there. don’t of back because so been it those and a see business. do and are evolution most continue do are mortar save too their brick to dramatic we’ve side. -- that to Fewer offices But in of banking that think footprint I into going and money some see anything XXXX our some

Operator

any were to and Sir? Instructions] hand [Operator time, no I conclude session. would like showing this for further back At to Mr. go the questions. At today's conference ahead We’ll we remarks. this over question-and-answer Myers closing time,

Chris Myers

for everybody thank going we another And to Citizens wish be very and this Financial. to joining us again much. This Business you a and we’re very Bank presentation, is very CVB that today's great Thank confident XXXX successful concludes want for I quarter. XXXX. you

Operator

we Thank a today. time for and your to your everyone. presentation. you the may great with today's we Again, disconnect thank time, you for And management rest care, At sir us again, all have the day. thank this team you Take and you lines. attending of

CVB Financial (CVBF) 25 Jan 182017 Q4 Earnings call transcript