CVBF - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen, and welcome to the Second Quarter 2019 CVB Financial Corporation and its subsidiary Citizens Business Bank Earnings Conference Call. My name is Ben, and I am your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer period. Please note this call is being recorded.

to call, presentation Christina like host to now today's for Carrabino. would turn over the your I

You may proceed.

Christina Carrabino

financial second Thank you, us our joining Thank you for Ben, and good today morning, to of XXXX. quarter everyone. for results the review

President Financial morning O'Brien, Officer; Officer. the and Myers, of Vice Executive Chief Allen Executive Joining me Nicholson, Chris President and this Board; are Ray Chairman and Chief

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

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

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

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

Christopher Myers

Board, our thank joined the Ray the this Allen are quarter. everyone, of you, on Thank again Christina. by today and morning, you O'Brien. for us and joining Good call I Chairman

to briefly ask results, week's I we planned of a the words last Before address from Ray few retirement perspective. announcement and Board's our would like my quarterly to then say discuss

after will as orderly my March President as through as agreement, transition to a that March CEO. December I XXst, have next to I decided XXXX. help years and July remain facilitate XXth, retirement and the part and retire XX announced of smooth effective XXXX President to CEO, we After XXth, On XX, and consultant a

I addition, our role needed. In base associates strategic as serve will this support and to both to advice and consultant provide customer in

has years, in I objective XX front it my of Through past major outstanding industry many leadership have all, consistently team the leading accomplished respects. them. every Over put financial results, in produced we

to success current I our our leadership. believe time strength right of generation and stability, the Given company it and a overall to transition is new the

for over has pleasure company, to of to Borba all Ray XX past thank years support. would of the my I the their been family, It proud I'm incredibly directors lead like all achievements. my and this and of our honor and

to I'd like to Ray? call Ray. turn Now, the over

Raymond O'Brien

your you, absolute you in are go, I Thank we wish best see Chris. the as you say we retirement.

pleased Board Let begin is by me and that current company's with the directions, strategy stating performance.

considering time, to changes strategic at or We usual. our business are not any business model as financial this

and for very In addition, leadership into are transition. during year his be to continues next continued happy we and the Chris's the performance Bank's grateful this with Board

our exceptional quarters strengthened as through shareholders. to of He quarters director. a and appreciative long our maintaining track led performance of dividend cash the his and our paying consecutive President of service has the tremendous we growth profitability a of record tremendous bank and enviable as fellow of and record our a of has XXX and period consecutive Chris of franchise, and an team, a leader CEO, while XXX management as are

provided benefit with runway and bench stability team deep the management there Chris long from the this be disruption Bank senior leadership experienced will our no has ensure and will or to will our believe We operation company transition. the

Chris's qualified to committee evaluating internal Board identify outside identifying committee the the This process the search and departure, process, special will thanks right the Board thorough engage oversee the executive conduct time a prior and to formed in to to to to external special transition and assist will candidates. ample successor. an have time been has of long A lead firm

turn our will quarterly discuss call President the CEO, XXXX. for financial we reiterate transition back extraordinarily March a lead the an Chris to me to to us and Chris be results, XXth, this I been company. Before has smooth to that let through and expect he successful continue

second the return now will to financial discuss results call the to our I quarter. Chris and Chris?

Christopher Myers

$XX.X quarter All quarter. of $XX.X million first for business. to Yesterday, right, second and net XXXX million reported for back $XX.X the million with we Ray. you, of earnings the XXXX Thank for ago of compared the quarter year

quarter second million. $XXX.X were earnings highest of our year-to-date earnings company were quarterly earnings as in the Our history,

Earnings were the ago quarter level and of a first $X.XX for compared year second $X.XX $X.XX with per share the record quarter. at the quarter for for

impacted of negatively by one centers The acquisition-related gain banking eminent of million million our lawsuit impacted settlement $X.X second quarter and a $X.X pre-tax positively earnings an over were by in expenses. from of condemnation domain the

By comparison, to negatively bank-owned by acquisition and of impacted costs integration of the earnings Community impacted were our positively building $X.X the $X.X gain by million quarter's sale a related on Bank. first in a million

The because our a quarter it. and say happy to to shareholders. we're like dividend second twice We very quarter that about XXXth profitability XXXX paying consecutive represented cash XXXth quarter would consecutive of of our of

months months we $X.XX ended were period million six XXXX the XXXX. $XX.X million the for same $XXX.X Diluted for $X.XX period of compared per earned XXXX. with first of the share June XX, compared first six-month Through in the earnings with for XXXX, six

compared and from for Our ago the quarter. year the quarter tax the X.XX% X.XX% quarter first with for XXXX of equivalent margin net interest X.XX% was second

by a $XX $XX The dairy included quarter-over-quarter. million industrial in X% million in livestock about loans $X.XX billion decrease declined loans or and and a $XX loans in to decrease Total commercial decline million loans. and

about by for production the XXXX negative is growth new of declined quarter-over-quarter. XX%. quarter, loans Despite Average million ahead the $XXX loan loan tracking by

the payoffs, Bank from particularly increased seen former portfolio. loan have Community We

decided the new with compete these early, due not lender paid of to to For primarily concerns. many loans that off underwriting we were

Loan X.XX% ago second for and quarter of quarter for year of yields were X.XX% XXXX X.XX% compared with the for first the XXXX the quarter.

interest income accretion quarter, X first discount was loan interest XXXX. points were yields second than paid, quarter X.XX% basis related of which purchase the Excluding and for higher to the non-accrual

to XXXX. interest XX purchase accretion income loan over interest excluding by the After and non-accrual points related basis of increased discount paid, second our quarter yields

$XX.X million X.XX% total XXXX. X.XX% At was June and XX, loans or compared or of loan at million losses March XXXX, the total lease allowance for of with loans $XX.X XXst,

$X second growth was acquired our the quarter million the losses from million During non-acquired of of million. we primarily loans. $XXX approximately Conversely, first of provision loan decreased recorded by in a to provision loan loans portfolio The for of XXXX, $XXX quarter. due

X.XX% loans non-acquired X.XX% The losses as allowance compared at for XXXX. XXst, to at percentage XXXX XX, a June loan March of was

compared quarter and were At total assets $XX.X June estate-owned, $XX.X XXXX. X.XX% end, assets other assets total assets, real XX, or X.XX% non-performing defined non-accrual of $XX.X or loans million prior total X.XX% of as million of million or at with plus quarter the for

of Bank. Total assets we non-performing delinquent loans included loans June XX Community non-performing to in XX had originated $XXX,XXX. days only At $X.X XXXX, XX, million by

the quarter prior Classified of Community decrease from a $XX.X million were Bank. loans the million, loans million second from $XX loans quarter. acquired included for Total classified $X.X

quarter have XX-Q. Form our will on classified detailed We loans information more available second in

like Now, to discuss I'd deposits.

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

At agreements ago. a year-ago Non-interest deposits and quarter. of $X.XX with billion the XX.X% bearing period compared of XXXX, total year at total compared the and XXst, quarter end $X.XX XX.X% the second prior were deposits for XX.X% repurchase of with deposits our were June billion March customer the for at $X.XX quarter the and billion XXXX same for XX

of repurchase XX agreements prior the quarter second and same deposits cost as customer Our the quarter. for points, the basis were

is basis also of funds prior to total equal quarter. XX Our was the cost which points,

objective maintaining to funding continue low loans for stable our a our securities. cost source of We and of achieve

increase XXXX short-term by Notwithstanding points. cost on deposits in of rising over cost remaining borrowings deposits rates interest bearing resulted increase basis unchanged overnight our average. in points the basis at of in have funds first an pressure a wide, costs As industry to decline funding of quarter and XX bearing interest increased X non-interest created our

of for assets $XXX,XXX XX ago. in was The year from the compared quarter and of the with second million XXXX interest paid second quarter in of average the of an The $X.X and yield period accretion. $XXX.X in interest, in and second the quarter the same interest day million increased income income earning million increase for loan totaled result $X.X for Interest one a first loan of the growth on assets was earning increase of $XXX.X the XXXX XXXX in quarter income. $XX.X discount quarter increase Interest an additional income of in million basis in the points. for first result billion interest non-accrual

of The X.XX% quarter second increase XXXX second the the over of interest was a paid quarter and tax the million non-accrual second quarter assets for equivalent year-ago for loan compared The in on discount and XXXX. quarter. quarter $X.X reflected the earning yield X.XX% with accretion X.XX% prior for

on are earning XX paid points to equivalent quarter to of the point tax second discount by the basis increased non-accrual yield quarter by prior X and basis loan accretion assets the quarter excluded, for compared and With the interest compared XXXX. second

expense point of of over to the increase interest liabilities. quarter million of the quarter $X.X Average can by bearing basis million, of quarter XXXX bearing the and cost million expense average X over decreased billion a of increase a liabilities $XX,XXX and $X.XX Interest second the The points. in for Interest interest liabilities interest be increase first quarter by quarter, liabilities interest in compared bearing expense. to the first XX higher a cost the decrease increased while for attributed $X.X basis totaled bearing XXXX of XXXX. interest second the $XXX second

margin. interest Net

Our tax excluded, X.XX%. equivalent impact margin paid from to quarter to loans second the X.XX% net X.XX% and basis interest interest the grew tax from margin X.XX% increased first the adjusted of in equivalent in accretion is non-accrual point the interest discount acquired on X When quarter. by net

adjusted margin basis XX Our interest the net points second by over XXXX. grew of equivalent quarter tax

income prior for for Non-interest million quarter. the million the million for quarter $X.X income. compared of was with and year-ago $XX.X the quarter Non-interest second $XX.X XXXX

an our the eminent a one Non-interest condemnation over of from income domain of included current of settlement a gain branches. lawsuit for million $X.X the quarter

the gain Citizens where quarter a located. Business was While a of million center of previously on Bank $X.X sale the first XXXX building a included

non-interest $XXX,XXX the is income excluded. unusual domain excluded, second million when material income million approximately the approximately to bank Bank Non-interest eminent and of grew gain the of was $X.X and quarter the $X.X million increase approximately swaps. in primarily from higher interest services compared are or income service This attributed X% over international Community of $X primarily rate When to XXXX to grew charges items by quarter. fee a by due higher prior additional income

with was Now expenses, non-interest compared the the XXXX of expense million for quarter quarter $XX.X for the for first quarter. $XX.X million and year-ago second $XX.X million

of and $XXX,XXX The million included expenses XXXX compared with for quarter of the million for quarter second XXXX. in $X.X prior quarter $X.X the acquisition second

to majority year-over-year of the XXXX, declined benefit first of and to the merger. Bank to salary expenses. attributed Compared timing quarter expense $XXX,XXX expense increase primarily the vast payroll-related of tax is the by Community due The

Non-interest X.XX% the for first quarter assets second quarter quarter for X.XX% expense totaled average the compared XXXX. the for of X.XX% of second and with

acquisition second quarter with X.XX% of the for X.XX% expense was non-interest quarter. the average for Excluding compared assets first expense,

when quarter second eliminated. the the expense for of XXXX XX.XX% was eminent XX.XX% domain acquisition or are gain ratio efficiency and Our

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

Allen Nicholson

morning, everyone. Good Chris. Thanks,

quarter from XXXX of rate taxable compared and tax-advantaged to the effective greater the was second for in the first XX% of the Our increase the prior was the increase compared quarter in due XX% Slight relative increase quarter income. year second for tax XXXX. with to income both

securities $XXX available-for-sale the securities Looking XXth, held-to-maturity combined from quarter quarter to at million June $X.X At a totaled June million our billion. decrease billion, and portfolio, totaled investment and available-for-sale end first $XX from decrease XXXX. $X.X XXth, our XXXX, investment investment a

Due portfolio unrealized $XX.X a $X.X of loss million pre-tax lower interest a from to unrealized gain to rates million. pre-tax went of the

the tax quarter equivalent second In to The quarter for compared X.XX% the the the for own for security first and portfolio addition, with quarter on securities million. XXXX. we maturity X.XX% held investment second was of yield total $XXX totaling X.XX%

of yield second we of quarter, the purchased X.XX%. average securities million $XX.X mortgage-backed During an with

Now, turning position. to our capital

market in comprehensive million first of XXXX, six the ended tax-effected increase billion. other equity the shareholders' from in income to $XX.X impact months dividends. equity of was $XX.X due available these million in in net securities. increase cash were value $XX.X increased to by For sale million offsetting to increase Partially June The the and primarily million $XXX.X for XXth, earnings increases $X.XX

remarks. the back Chris now I'll call turn some closing to for

Christopher Myers

you, Thank Allen.

about conditions. talk Let's economic

California the of XXXX. economic in expansion The X.X% rate to reports. the in May is April Turning in various May economy, XXXX X.X% second-longest XXX-month was compared unemployment XXXXs. state's behind a X.X% according expansion XXXX on employment record XXX-month long California's with to the and

Seven There The biggest gained is housing in reflecting jobs May. hospitality job California. by demand increase in was followed of were California's XX and in industries homebuilding. construction, major leisure in This government continued in a jobs. gains an gains and

continues. remain the is The supply and of demand lean, slightly has expected to increased existing for homes while housing high

at continues home increase to for of construction a first the pace XXXX. modest New half

XXXX to and the higher demand non-fat for are of prices milk due industry, increased the for exports. an dairy to the of terms dry economy remainder expected strong In be milk

are Notwithstanding, or of are cost remain slightly feed projected to modestly. flat production, to still be prices milk the under while decrease prices expected

we're our exceeded closing, results our for the expectations. has with In It six of pleased XXXX. truly financial extremely months first

remains concludes in Bank presentation. way. conservative the the remain balanced unchanged today's That continuing as strategy focused Our to grow on we and

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

Operator

much. very from you Davidson. D.A. Please question ahead. Our Gary Thank with [Operator first Instructions] go comes Tanner

Gary Tenner

on morning. and of And on on couple Chris, your kind one congratulations I then on the ask loan Good want to outlook of Thanks. one questions, announcement. a front rates.

highlighted run-off down the quarter production it you over portfolio of and relates acquired half the thinking about but year-to-date loans in core this portfolio, the the production? in on the to are you relative second the run-off how year So X%, as kind your the own to

Christopher Myers

is to tougher me comprehensive thing loan we're objective. a for to organic clearly when our is The to determine which thing growth, go going Yes. back

yet. there gotten haven't We

like tough be growth say but do third the whether I will not, So down it's or positive I think to or feel have quarter, bit, coming. we little flat will a it's

not we're probably keeping from year Bank the think date we're we're a less close through the what XX% as of renewals than that Community those keeping through deal. we're to what filtering I determine Remember, loans transpire. still and

fourth and hoping loan It's have I the the that's I'm turn growth in it there. to loan I So positive headwind quarter, have got would but third in positive think will will growth -- we'd the quarter. bet

Gary Tenner

for close several identified Bank that of that that Community the to weigh you when are launch. Any of curiosity underwriting. you at deal deteriorate from within loans out Just because credits mentioned you the in want where there -- competing or did you that from anything the was that those have would vein

Christopher Myers

of a there There a is competition. It's there is definitely enhanced just merger, that a deterioration. was lot -- whenever there is

and is lot so after that a So of there coming forth. banks our clients are

tighten we structures of and it to tried change And deals the may of those down. of to renegotiate some those can structures some have

requiring not. that a not. So be could you're you that guarantee of business personal to don't or know keep whether going Examples or

guarantee, may we're the going do credits banks the going may if well, for not make price say this borrower of not loan, not you're if they'll we're other have to can then say, to the same -- some And if we guarantee, move. to guarantee that I move are going sometimes this to release and the and going we're not state not to where guarantee, There deal.

our for what stick credit record a and compromise to to not trying track years. we're have built for great this has XX company And standards us and helped

we a there, we're associates great making looking relationships, day at Business other -- Citizens those clients lot better sure thought. culture. are that it's than -- we're are is that of making been Community and every not has But of this a we're Bank culture in we that there -- Bank lot great So, look, and running and any

of So, lending people aggressive market are very out an it's there. lot a There's still who aggressively.

of of of six Western assessment states. the in the At peer $XX little and quarter call out our is, a the think things what very XXXX, first we an -- there. I of still is billion aggressive is $X between end One billion we did is bank crazy pricing the

of $XX Western $X XX points the cost our those billion of states. average was And six lower than banks, to billion on deposits basis

having interest price willing So because much more risks banks on as than we guess I'm take or as are just to puzzled rate how lower times. at margins we competition I we're are, fixed are

get with sometimes relationship for that But price to all will won't them the try compete bit a long. banking, price we're on little win going for it, deposits much to and we those It's associated better deals deals day or we higher have don't transactional where

Gary Tenner

kind since costs you. was of cut obviously Okay. deposits, I to ability July? as through keep the to to That's as do think up color. tightening And you benefited your on have, about your those you've you low as brought ability potential Thank how react all great pricing deposit in

Christopher Myers

Well, rates of I is to the think our know lot basis. interest type saw to you doesn't basis be guys. as cuts different had that market that in money sound because going for second to pressure accounts. the in on customers us or that standpoint, we increase for like the were money And competition points from deposit some you quarter, going a a of up to lot alleviate it's I something And good a selectively. market we've four

XX% your average basis But we're points, up there. means deposits have noninterest-bearing, four in if But we in point we probably of because increased basis we there's it it's a interest goes an by effect X of of basis XX% not burden money. amount four If huge terms of financial in a points, up not tremendous it's of just of bearing. that noninterest-bearing, XX%

when going to I orchestrated we and borrowings Community $X we thing and see our on I bought deposits, things have rid that of and a in $X were things think other that one interest some rate cut to ever we of knows, things we're think this $X loans. we billion Allen quite back like no almost of Citizens to billion non-relationship or billion, to about are we those got deposits Business that's that that. bids, used want do, it's pressure those the is but moderate felt in that of one Bank trying each deposits Bank's fund the and $X billion we and in All you'd But if bearing was one in I like because

Right close a neither overnight or we lender on in the equilibrium now, borrower to are And in funds. we terms second money quarter, the beginning quarter. of borrowed a pretty of running during second the

By so, of we or are now, second surplus, than quarter, the meaning a going the are any into the Fed weren't do right we've money. at loans that the into going in have end we borrowing more running been that week deposits last And slight we funds.

something exactly last where back way the standpoint. how about all an from we that's that us to So is August And in year. be talked want we this of we efficiency orchestrated of

So where exactly to get Allen like, it. that's got did and it. we we why We I hey, aren't wanted

so, economic efficiently extremely running to right We're is, pound the focus now. look the in we asset want cycle. this is pound be our And in And we company Bank, think late for I the best. have every at

we're sure and for CVB. make to carefully we And make every sure every asset that it's to right looking asset investment a at so want counts that

Gary Tenner

you. Thank Chris. stuff Great

Operator

go & question Sandler Our O'Neill Deer Aaron ahead. Partners. with next from Please comes

Aaron Deer

a I you Good could competition would think given everyone. I'm with competitors. actually no? that guess surprised see funding that just suggesting that that that huge guess, are theme, advantage little good, to over rates just the Chris, I Hey. have I worse, same make that lower morning, sticking

Christopher Myers

go to think which start banks is if that the you deposit the these going It's with little us. down. to It's is agree quarter brakes competition the putting of to offering July. is of are rates to there I continue in on annoying just bit. going come crazy to some deals, first moderate percent a No, I out going some

will rate And will down as have margin know that's -- rates -- go think as standpoint rate put think go -- that little our I right. fast think our a down our variable X I costs moderate will deposit we those X So, our variable will you're absolutely don't just or But pressure if a yield loans, on as go those from go cost as rate fast the I bit. down. I as on that decreases, loans. competition If deposit will

will -- it it. question us. standpoint to put about competition is first margin No retention from So think the pressure But a percent and going us. business quarter standpoint, help on it's I to help going

Aaron Deer

Sure.

do book of us I a during the the year, if couple of back the either to then rate minimize what a going some asset touching on on give is And or tied side, was guess, of of short-term get to place might rate in the the of we of percentage monthly sense re kind hikes Okay. and a the help maybe half rates and be your see to quarterly floors what pricing credits on basis downside? now

Christopher Myers

Yes.

We Our prime short-term do floors. rate on best LIBOR. is some our or is best estimate have tied XX% that to

they're in rate past putting floors. is, floors the back you and floor floors want paying anything. low, go happens of year, X% when because your it up low have we've What rid when a too rate your don't X.X% rate your get rate you mean been floors Over doesn't to are rates rate

we're got put rid and some back them we starting now we floors of to in where can. So rate

particularly extent of dairy agribusiness some C&I the to on And our side, some side. then that's side, and

Aaron Deer

I and forgive of can if give what me the interest dollar this, Allen, in amounts missed recoveries then, were And the just but you accretion exact quarter? Okay. the

Allen Nicholson

million in approximately paid, non-accrual about million Sure. and We discount $X in interest had accretion $X.X

Aaron Deer

for great. taking questions. Okay, Thank you my

Operator

go ahead. Please comes Clark Piper question Matthew next with Our from Jaffray.

Matthew Clark

morning. Hey. Good

Christopher Myers

morning. Good

Allen Nicholson

morning, Matthew. Good

Matthew Clark

Could and Bank your just the the deal, rest of Community outlook. to outlook? from cap get is expense probably just Can to need might of you you on investments want cost the here the thoughts done the types from but overall make sales expense you speak the to

Christopher Myers

mumbled. repeat that you Matthew, question? It was can

Matthew Clark

saves fully wanted get, from cost I thoughts this investments to to the just need might get I you of outlook deal your on to through here. think, quarter. expenses, came So, the the wanted the and on types on just make

Christopher Myers

Okay.

I still the was acquisition I think second $X.X reducing we expenses know -- it was? we That's we were don't what expense side, the million quarter, still in On had. it expenses.

Allen Nicholson

That's correct.

Christopher Myers

million non-recurring -- $X.X acquisition-related our acquisition would type quarter, expenses all for or expense that We've thousand that office I the of would in two that. probably guess would prior third acquisition and several consolidations be significantly hundred the down all from quarters. done expenses. dollars

So of last us. not quarter third margins the in should the another And our gain to we've acquisition-related what two going be be have something we a $X in very quarters, for operate, are large and expenses. pure that quarter to going had anticipating we're terms how we're won't on million

I our where a -- asking on be clear I -- relatively months for think left, then, the third us. predict be is a quarter this, wasn't the will about still no, to a the And you part. quarter couple uneventful going of second strategy, acquisition -- on one-time can't So event I relatively

Matthew Clark

No, just here from the a technology make reinvestments you standpoint. from -- need to

Christopher Myers

those I think think I regulation, the all technology things.

$XX more having too. and staff over up spend on to We're starting area they're in we're billion. that, to that Now, money

dollars will a been So, on the think going us expense investing but for we've of lot an side, do be already that I in, that headwind in. technology

our efficiency a expect the eue be our now, going which would still expense from XX%-ish. And so efficiency I say at So cost number. probably maybe or running at I say running. that kind think great up I the and and that of is ratio of some would of XX%, to ratio staffing billion year something I we've over look forth, Right a been at that's now, $XX would headwind so our we XX% to for an

number assets? assets. the total total focus that other our by Is our divided is assets on we And expense earning or noninterest total

Allen Nicholson

Total assets. average

Christopher Myers

assets. bit there we've get Total that us about above is and And right at X.XX%, a X.XX%. too at number been goal that. average our to little And I about expect running

average long-term it's you goals, non-interest into if ratio that's and at kind our and run So of expense total a efficiency -- divided XX% X.XX% assets.

Matthew Clark

I then, not update Got know Durbin quarter? the it. And in impact Quantify is on but that. you us upcoming large, can number the the

Christopher Myers

swaps. great international some like on income interest question. in what have Community in little us, of thought good pleasant interest should we rate year for been It's of year international income. year non-interest our things synergies a better finish Bank on fee With our us been than kind one best if we been income. together, that's And surprise there there we Yes. and having was best fee finish that's income, swap a has is We're and -- ever our should the we the side rate ever the out, the

a And on fee income charges quite service is our then, gone up bit.

will pre-tax Is about be Allen? number, right that $X.X that than out of by Durbin. About a now, a So is running $XXX,XXX quarter we're -- in about right the pre-acquisition, we've the quarter million been running taken million a higher we were which year. $XX is

Allen Nicholson

Yes.

Christopher Myers

think when income do $X.X past third or where I would get we addition quarter, from once were we... income So, that a about quarter if we estimate in the -- be modeling, that you're it's noninterest before, million

Allen Nicholson

Effective effective. already so it's July. Yes,

Christopher Myers

effective? It's already

Allen Nicholson

Yes.

Christopher Myers

That's due effective down to I good. to Amendment. right. Durbin guess, quarter, this All not Well, be we're $XXX,XXX going

Matthew Clark

quarter. the Okay. with And like are then, Bank provision assume to Community just a loan you of non-performers quite your a the bit. given added I this but renewals see just reserves loans, provision up on shrinking where that's the to just surprised guys little balances quarter, still this

Christopher Myers

to gone a Citizens me we I'm is, Bank on loans as help And with that through Allen, we've -- you quite have the something Yes. the Business Community from transition bit is the this stat. going Bank books,

away. So discount accretion goes

have the typically if have those that move been on for we low and allowance. as is accretion, portfolios then they we there all renewed, the have loans, accounted etcetera, a segregate So to that. credit Matthew discounts, don't we're and provisioning of transition of we month the But acquired, they're starting and because put

acquired that decline So, a portfolio. $XXX Community million non-acquired most drove loan of our Bank increase in that and significant in provisioning over portfolio we had the

Matthew Clark

. Thank it Got you.

Operator

ahead. Our with Luke next KBW. go from question Please Wooten is

Luke Wooten

Hi. Good questions. morning, my taking Thank you for guys.

of and into investment that just push kind services continuing the in had same AUM in the kind at guys income. I wanted you fee know going clip? of growth we that quarter-over-quarter, is to back Just line how see, should of growth and trust in wanted wanted the item, just this kind to see you to of kind see if forward model great

Christopher Myers

Yes.

in Some growth AUM more management. of that was liquidity

move the deposits -- to CVB-Citizens you interest rates where growth. rate much And those trust not it's interest our a normally a true higher over we And on Citizens defensive to as Business AUM some would without compete driving offer those so, see to can as part having shifted as move of basis was Bank, income they that rate. on defensive fee put of

We family. have on keep to going the they think as into deposits As them they those that I them within. keep expensive to Citizens two migrate and a will you're down if migrate to want want rust when come Bank they rates to when become use or them kind higher within want them number funding right back. less the see of back we're But we for now

was that strategy the there. So

Luke Wooten

that still I then, kind little third probably it Okay quarter in thanks deposit follow that the for with deposit? up of you bit slow model fourth growth do kind pick -- guys interrelated growth loan a the talked of of And lines see the that. somewhat that and seeing the will quarter. or in little And of the relationship about know of just and loan you basis they're growth a same should kind the in we

Christopher Myers

Yes.

very are them now. competitive of both think I right

us opportunity there about I gauging think organically good the there to at X% deposit kind that grow is is deposit I of the we're there side, growth there annual is, of our for think is side.

keep that to best it's want huge one we We And the number. the noninterest-bearing XX% close like the that over a advantage number. of to It's country competition. in and

see same deposit think I of the on So, the side. you'll more

will on I think side. we get we deposit I back growth think -- see the will net to

The down bearing And out. million went million. but grow it almost non-interest bearing went we quarter-over-quarter, swapped and noninterest-bearing up $XXX saw the interest $XXX was

quarter. the over kind we're So a of breakeven

see start That's and interest-bearing again in customers to you'll relationship forth. aggregate all and just bringing numbers the non-interest so the proportionally and hopefully. and new bearing think about grow I with

is we're more runway through XX% bank community still, little got sifting portfolio. bit the -- The again side there. a again loan a the little bit through We

a I loans same-store organization that year-over-year, deposit and think the grow to grow side. sales That's income we key and what this our organically office-over-office ways we goal. etcetera, But be need little call, and our deposits etcetera. more fee the we to the grow will in bit So that that's is three

That's the goal.

de novo new in and Second years our we is, last out. Barbara opened We open through then those the locations. is Diego and acquisition. And way Stockton two way are up the Santa third San over things up building and

through as sideline is And -- the the this here. no bit sheet, on once little power, acquisition here continue earnings the the that its acquisitions transition reason get trail on on retirement the Bank well, its we balance with here, a my put is us leadership may company there can with talent

Luke Wooten

And going my helpful. very on that's was last question kind to management. capital be of just Okay

the and is so, novo of pairing the then dividend picture. M&A, Bank -- sounds the off toward repurchases just management increases then the in capital geared with and de more is novo that And de just of kind full like near-term, kind also it

You little clarifying wouldn't mind a just bit. that

Christopher Myers

Yes.

a we're means capital. organically if if right growth, running in I a our of That quarter if million man's we're problem plus year where have after we're lot dividends new at a and about not million are dividends, in and we're of at that's we any without $XX flat. think a is we did $XXX half that profitability our now, rich and capital and growth a great creating

how have deploy that. out figure to So we to

think Bank named back at does on say do that need the to the I the never, trail. do acquisition is came get to here a transitionary there through never is CEO along. until but the right new So opportunity right just period probably

these over a and in deals well. my how does other they've involved got on I've Allen lot that to of know talented executives I years. key And management I've been have price that the too. curve think four too I of and last very And as learning and team and part them a Allen worked

what guys doing. the be think they're and should these transition smooth I pretty that So, know

Luke Wooten

Okay. That's Thank my very you taking helpful. questions. for

Operator

Tim ahead. comes with go question [Operator Coffey Our from Please next Instructions] Janney.

Tim Coffey

Great. Thank you. Good morning, gentlemen.

Christopher Myers

Good morning, Tim

Tim Coffey

a on very this to getting the relative dairy year was last you might in want relative it sense seasonality last Chris, the to half saw the to down year? I a get portfolio that of thoughts bit strong of the XXXX. back year, wondering, little potential And half in your because second what are we slow was

Christopher Myers

will, been last I in profitable year. have time Every not the think Yes. because dairies overly it

down through. are these it that think But areas little a you'd powering some So bit. slow should of

up So to quarter the million. run will probably I in quarter $XX going mostly seasonal estimate, to I to be in the do late and fourth the million $XX third it's think would

Tim Coffey

Okay.

I in then, footings? other been heard opening de terms your And at novo of comments looking total parts your branches. trimming on footprint Have the you in Okay. of

Christopher Myers

that, the when -- Well, done acquisition. six I we we six. had locations, we of we're we had with mean, kind cut XX that only keeping

most granted, those but those of our transitioned a to couple way. office, Now are the transitioned been those -- other some have of of

know I our this point. of any tree that do don't pruning So at we'll

I think as there in we we is need offices. some things here do as brick-and-mortar there and much don't can little

like we That's -- may realigning look street, We at an sold close buildings, we we So our domain. of down sold we office. that half-mile are one didn't we them. eminent the moved but bank

growth. -- six ourselves talking I'm for or we've this future now. it's to a not got Right another ton consolidate right five and -- it's we're going So efficient about running offices. is not we're There positioning pretty organization about, streamlined, pretty now,

Tim Coffey

improved And would to footprint parts candidate? novo right that adjacent footprint de now like there your the of any or be you'd are

Christopher Myers

and any find mean, we close that's good relative where all team can geographically are. I we Yes, to been a proximity where

Modesto in backfill California -- or to the up we'd and well, the more, in Northern to Those like to and like as get love if came then we're we're in where through up I Diego that we'd so Sacramento. then Stockton for are drive opportunity right set markets we as and either through I'd into eventually Valley into So Diego, and the and then like even de people more looking in. San in Central in all through acquisition we're into Central to densify novo Coast, would get San

of those all get done. the exciting just how in future. when So, question kind we have things they of are a It's that get and they done

Tim Coffey

Sure.

thank Those my Well, you questions. Okay. much. very are

Operator

back This would closing any Instructions] conference to our [Operator the Okay. for remarks. Mr. session. question-and-answer turn like concludes to Myers over I

Christopher Myers

committed thank next together. a very half my call for reiterate today. to you I for great months the as half that have and here And strong to of a team accomplished, President after And all seven I people. come have years tenure associates Bank great under want Thank things on us seven in the myself have worked my and joining and many of I Business my closely for high also months next finishing I Yes. we've and really for We to and leadership the expectations Citizens the a that. the of I CEO.

quarter you XXXX to great guys That our talk said, earnings in I for will and a day October call have third

CVB Financial (CVBF) 28 Jul 192019 Q2 Earnings call transcript