Earnings call transcript Q1 2023

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Operator

Good morning, ladies and gentlemen, and welcome to the First Quarter of the 2023 CVB Financial Corporation and its subsidiary Citizens Business Bank Earnings Conference Call. My name is Latonya 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. Please note, this call is 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 first Thank you, us our joining Thank you for Latonya, and good today morning, to of XXXX. quarter everyone. for results the review

President morning Allen Officer; Vice and Brager, Executive Officer. Chief Chief Executive Joining me Financial Dave and this President are and Nicholson,

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

The Harbor speakers XXXX. on Reform Private the this call claim of the provisions Securities protection of Act the Safe contained in Litigation

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

please a more company's version company's release of annual the For Harbor complete in with this see earnings call. the issued connection disclosure, Safe

Now turn the Brager. will to over Dave? Dave call I

David Brager

morning, Thank Good everyone. Christina. you,

first per the XXXth to XXXX, representing of shareholders. For per $X.XX quarter earnings dividend our reported for declared our first share representing consecutive consecutive previously profitability. a share, of We our paying XXXth cash or a million dividend XXXX, of $XX.X of of net the quarter $X.XX we quarter quarter

X.XX%. per in XX% that of highlights a include exceeded Financial increase below on efficiency XX% on earnings an ratio return and average share, quarter average for the common XX%, first return year-over-year a tangible assets equity a

for of $XX.X or per or share $X.XX income per net $X.XX compares quarter. the share million with the per or million quarter and for First year million XXXX $XX.X share $XX.X quarter fourth ago $X.XX of

a are strong Although recession the the and continue we generate rate near-term impacting earnings. bank, to expectations of interest environment current

average quarter. consecutive return assets for X% pre-provision pretax on Our exceeded the fourth

$XX.X in with million the slowdown the dairy lower and million ago prior Pretax pre-provision quarter first $XX.X loan as our was approximately a million pre-provision income earned quarter. as demand. seasonal was by first growth income loans, Loan to compared the the C&I quarter. pretax quarter of compared XXXX, year impacted grew from line For well decline $XX the when in the by utilization in livestock during XX%

loans declined Although credit end for end economic million recorded losses for further provision our in the at the a of $X.X quarter of quarter XXXX, of forecast. from first to a reflect deterioration XXXX we

year by risen by a Although excess rates their our deposits, of our deposits over sought margin XX cost liquidity our the quarter, has it the basis a have points XXXX short-term in by our in interest and to customers months, fourth in X% due higher million on almost management both $XXX last which Trust Group's to customer cost Citizens deposits XX of rates interest-bearing to of transitioning the have interest net approximately increase basis products. resulted decreased increase basis expanded point point XX points compared the ago Considering of XX compared to XX funds. basis quarter

wide relationship the to continue the businesses, array and has lower these middle focus As high-touch on of Business strong, Citizens primary products. model market become deposits banking with banking and that Bank of would customers have emphasize I to will a both focus financially like industry, providing a

had core of repos. and deposits broker are end We at zero customer deposits XXX% the first relationship-based quarter. Our the deposits

are and primarily deposits you presentation, XX% of see in consumer, employees of deposits are business business the As customers. XX% and investor can owners our our our

a that management which products. represent annualized suite are operating customer percentage of utilize generally largest business treasury The XX%, full accounts, accounts our of deposits, checking

diverse deposit Our represent set of industries. relationships a customer

manufacturing, is concentration our deposits. The industry largest the with represents which of X%

presentation investor of our March in classification, graph a deposits XXXX. represent our included or each that XXst, our as the that deposits shows X% industries highlighting more XX industry by we of of quarter, This

Our depositors with for have banked typically Citizens Business many Bank years.

Our with us XXst, our or have has banked of more. that years comprised with XXXX, three relationships XX% our been banked a have of our the March deposit of for or years, us years of deposit more deposits and presentation that more. as relationships relationships deposit tenure shows with consistently XX has than investor three for have slide XX% of for been And us

lowest We the deposits target on customers of model. in the our have the historically maintained we cost one industry and of based business

quarter quarter basis of first for of points for XXXX, three XXXX on Our points average to XX for of cost XXXX. the compares basis quarter basis and first deposits which the eight of was fourth the points

As on a customer percentage we XX% continue XX% This ago operating XXst, of At of and year quarter. high compares to deposits. noninterest-bearing we focus of end deposits companies, repos the the noninterest-bearing. to banking March XXXX, have were at our

repos is customer to and $XX.X $XXX on impacting approximately or X% a the levels. for a deposit XXXX, the rates or compared million first interest of short-term decrease Total in X.X% balance prior million deposits in quarter. quarter. increase Noninterest-bearing average billion, unprecedented our $X.X the were quarter fourth the decrease $XXX the billion from average Also, deposits averaged

quarter short-term ago an average the deposits with was average average The XX.X% and a quarter of year first compared in approximately offset for X.XX%. million of quarter. borrowings for $XXX Noninterest-bearing prior in at XXXX decrease XX.X% deposits cost increase our of deposits the primarily for XX.X% were the by

year same billion XXst, deposits were compared and period XX, for At $XX.X XXXX, December a total the compared with billion March quarter $XX.X March and decline billion XXXX. At at deposits from X.X% represents $X.X our year prior customer billion $X.X XXst, the billion ago. repos the the XXXX, a for noninterest-bearing ago quarter. $X.X end This were billion of and from with $XX.X our XXXX,

invested as where higher-yielding $XXX As noted the Citizens notes. the are in year million decline assets into than deposits million they from such the end $XXX of moved in earlier, more liquid of were Trust, treasury

X% have credit lines the rates that with deposits interest of to deposits well to both the their down as at deposits and impacted higher using have X%. inflationary Trust to by call, real down seen market. overall both leaving and Citizens the the rise impacted the rates estate deposit customers levels pay the burn commented residential as be our continue environment slowdown I due As beginning Furthermore, to past in

escrow. For This deposits banking $XXX title the as are year primarily group's lower in example, decline ago March our specialty than XXst, XXXX and of quarter. million occurred

first My deposits. accounts than final reflected that by closed $XXX deposit million comment we had million. totaled that deposit focus to during core of contrast, the that as we representing continue during balances is accounts opened on deposits on quarter more the new In quarter, of $XXX growth, new

from deposits Additionally, as the XXth, by of our end April repos of quarter. approximately first the $XXX have million increased and

From loans the X.X% let's million XXXX. Now dairy end seasonal more at loan of loans detail. decrease $X.X and discuss loans and XXst, XXXX $X.X the PPP declined Total at loans of livestock the forgiveness or March in in excluding million by increase from XXst, XXXX, a $XXX billion, December the year. were after end

increase quarter or of fourth were first quarter of in fourth XXXX. $XXX million XXXX, we quarter decreased while higher demand as X.X% fourth interest Average average result by estate paydowns $XX approximately or the loans to compared year million due and than down the slowing X% Loan the of uncertainty in to higher annualized real both rates is loans outstanding markets. quarter by year. each as experienced livestock and the million the from quarter each a we grew of calendar loan temporary first of $XXX the the in balances experienced Dairy

new Our first during loan production slowed the quarter.

and XXXX growth million XXXX. loan loan X.X%. rate $XXX quarter of a $XXX the After New in quarter million was $XXX loan were approximately commitments the of first approximately PPP forgiveness, approximately year-over-year fourth million excluding for in of growth

$XX.X line loans C&I Commercial million for loans rate million XX% approximately XXst, the from real growth of from continued at to to at estate of decreased year the loans as the overall XXXX. XX% C&I year-end end annualized. March with utilization or decreased X% grow, $XX by

declined from the March of the of XXXX modestly categories remaining All XXst, to XXXX. loan end

interest year, winning in targeting single-digit opportunistic economic and the of we XXXX about as achieved still remain higher growth. but impact We grow to and could high-quality level our low we growth uncertain ability this loans are rates cautiously conditions

million the strong, At as Asset basis nonperforming owned assets, properties. ago points $XX.X total of other remain We trends year loans real nonaccrual and OREO quality in The quarter quarter. or to stable. for for defined loans estate quarter prior continues assets. end, $X.X no compared million nonperforming plus and the had the were four be $X.X to million $X.X million

$XX million million XXXX. total the the charge-offs charge-offs recoveries year fourth credit with quarter quarter, net prior million first of the $XX.X of Classified $XX,XXX resulting and with recoveries for ago we $XX.X During compared of the for of $XXX,XXX were net experienced quarter in quarter loans first $XX,XXX for of and the for compared $XX,XXX, quarter.

loans acquired million Bank. $XX of As of XXXX, classified March included loans from XXst, Suncrest

now to capital. will call for turn liquidity discuss I the the and allowance Allen? to losses, Allen credit over

Allen Nicholson

Dave. X.XX% which was our to XXXX. losses XXst, $XX.X total million March allowance of credit morning, Thanks, compares or Good at or At loans XXst, for million December everyone. ending XXXX, loans, X.XX% of $XX.X total

growth March the credit our first for XXXX. the which million ended we the December economic credit our in the in quarter provision first a resulted $X.X both GDP when XXXX at losses of in and and XXXX. losses recorded million ended higher by end of unemployment for quarter for the XXst, XXXX, for $X.X provision driven For to compared compared was XXst, the to quarter forecast quarter lower The of forecast, change

The forecasts forecast. include a be Moody's. forecast to continues of as produced forecast economic well economic multiple a U.S. by forecasts Our baseline blend downside as

baseline scenario multiple We forecasts. individual among continue weighting risks largest have the with forecast weighted the downside on to

assumes second of be XXst, followed for then by decline grow in XXXX. GDP and X.X% XXXX in by is rate to in modest XXXX. X.X% X.X% in in in of increase unemployment weighted X.X% March GDP The a half X.X% growth As the of including forecast then the X.X% and by forecasted XXXX, resulting this XXXX, XXXX in will year,

Federal at the declining quarter first Bank quarter X%. balances, average was we borrowings on of As billion. end at $X.X borrowings million the quarter. approximately these cost borrowed deposit a The Home end $XXX Loan peaked result short-term at The of from during

cash increase we portfolio by quarter, our investments. the our during by borrowing In the short-term first addition in the generated shrunk to not reinvesting flows investment

increase million inclusive a rates. cash a from or quarter a by totaled fourth to securities of at AFS investment declined securities $X.X $XX net the available unrealized $XX value in flows, the for offset $XX in million decline securities securities. which portfolio from quarter, market interest the decline of Our to due $XXX in the million first $X.X decline billion of AFS million. billion The of that loss a in investment primarily AFS end reflects pretax principal end sale, resulted

capacity We to the intend Loan do as $XXX liquidity be Bank, million or of ample of funding the liquidity. billion sheet value more Fed's Home secured of the of off-balance discount bank Federal the unpledged AFS $X.X borrowing than securities at sources bank window AFS secured Fed sell has pledged capacity discount new sources $X.X not window Those billion at and securities any of that could the fair program. with and term include unused

of of In XX% total not wholesale almost all broker considered. addition deposits. sources, such to probability these bank utilized has the is and any a when secured selling funding deposit are borrowing Therefore, AFS deposits repos, securities sources sources as total that these remote our

grew $XX The same HTM HTM XXXX to portfolio during of billion of quarter. points the first The Investment in essentially cash to or XX the reinvested were the from the securities $X.XX the investment by quarter quarter million approximately entire securities comparison prior totaled end approximately as the of flows portfolio basis first as XXXX. not for X.XX% tax yield the equivalent maturity March at declined but 'XX, by on quarter, held XXXX. XXst, was

offset Shareholders' equity increased dividend million XX% billion equity quarter million of a Now by from Equity payout The end result increased $XX.X company's which ratio $X to million, $XX as the quarter. at the first tangible position. $XX representing XXst, XXXX a turning was of to X.X%. by of dividends, was income our in a at common capital ratio. the March

The XXXX, expired stock plan back Xnd, XXbX-X on XXXX. we March repurchase initiated in

of repurchases. shares $XX.XX, During an the approximately price average in $XX.X stock million of first of quarter stock at XXX,XXX XXXX, we repurchased totaling common

income of security March to resulted from of AFS our As effected interest XXst, comprehensive unrealized XXXX declined end loss in the million. to tax on decreased. a increase This the $XX.X other rates

Our overall continues position strong. very capital to be

and Tier are common ratios well was ratio our equity above capitalized At capital regulatory total be X was the requirements considered our XXXX, regulatory above Our of majority March risk-based XXst, our XX.X%. ratio and to XX.X%, capital peers. well capital

our Dave the of quarter turn now to I'll call earnings. discussion first back further

David Brager

first was million quarter. income the with interest million for $XXX.X Allen. for for provision $XXX.X year quarter Thank the you, for compared Net the million and $XXX.X credit fourth before losses ago quarter

a First The increase $XX.X from average result fourth quarter yield point earning growing $XX assets points. composition our nine in by earning a on earning lower-yielding declined the earning increase a loans basis average. on by XX of asset and million increased was million yield of securities basis shift yields asset quarter, average $XX in decreased million by but with the in investment loan by assets our while

was point result net basis in million quarter of X.X% was quarter first X.XX% a increase The short-term tax in margin Our with increase an margin a the for funds, interest of quarter XXXX. in of the by net first primarily fourth the cost XX equivalent X.XX% of driven compared borrowings. for decrease interest XXXX, our and for $XXX

in increase by the point average year-over-year million of XXXX, net XX margin the points. yields interest increased basis of $XX.X points was assets result from net our that earning cost the billion quarter. basis quarter XX grew the of year from XXXX first while interest Interest-earning to in $X.X increase a of ago The of first our income decline quarter asset in by offsets net the basis funds XX

the quarter for the noninterest $XX.X Noninterest million to Moving with was income. XXXX year the for ago quarter $XX.X compared and income $XX.X million quarter. first for prior million of

$XXX,XXX Merchant by $XXX,XXX decreased approximately Bankcard piece, quarter banking first approximately compared and fourth the of deposit services and including quarter compared by to services, to international when customer-related XXXX. the increased Our

LIBOR our fee of during The originated approximately SOFR to of conversion to all previously first XXXX. indexed $XXX,XXX of generated income rate quarter interest the swaps of

quarter, were $XX,XXX when prior management trust Our but the year-over-year. compared flat increased wealth by essentially to and fees

million by compared increases Income deferred of separate the plans. by value than quarter due the life fair in improved more to the from associated was bank-owned policies decreased BOLI, market insurance, prior for compensation our as $X account decline benefits $XXX,XXX debt or with in the to offset conditions

a from of written XXXX. Income quarter are from $XXX,XXX, previously some community full by investments, investment adjustments, of mark-to-market This including $XXX,XXX prior by impaired approximately down was impacted the quarter which development of recapture during repaid increased in investment. first a the

million million quarter was fourth Noninterest compared expense with ago the $XX.X for quarter. for quarter year the expenses. Now million the fourth $XX.X for and $XX.X

included The zero provision both a first of XXXX unfunded for $XXX,XXX, commitments loan of quarter which for was comparable quarters.

compares of Noninterest This for of of quarter the XXXX. average expense totaled assets the X.XX% first quarter fourth X.XX% for X.XX% first to and quarter the XXXX. for

quarter ratio XX.XX% for the XXXX first efficiency of for XX.X% the quarter the with of first compared was XXXX. Our prior and quarter XX.XX% for

expenses. growth grew in million Excluding loan The noninterest in of provision by staff-related $X.X of year-over-year. an the was $XXX,XXX unfunded in X% acquisition incurred quarter commitments expense noninterest expense for the XXXX, expense and increase approximately first driven X.X% by

grew by to annual taxes benefit salary as first of profit-sharing result payment quarter payroll in million $XXX,XXX thresholds reset Base the stock but $X tax the first the and approximately grew from payroll expenses of during a the quarter million and by bonuses $X.X compensation of and of fourth $X.X the due expense quarter. million. quarter, higher by declined Staff-related prior from annual the bonus expense

to best and some focused and about our in recent banks, safe, the to medium-sized banking bank the a emphasize we on their time. has of I'm of that owners. financial founding reports build light stand have to our small businesses secure bank to of In the institution Since managed continued sound XXXX, the pleased test

Reserve superior our by the industry the our potential on Federal for of economic and strength, impact banking seek create focus, to the While continue our cost-effective we our core to having values, fun. challenges and rapid bank, rate the Board increases and operation uncertainty maintain people-customer focus financial

to have our a of to and have variety fact years, is of solutions course and of relationships the to remained we wide cycles, and and customers for Over a have and our a with business tenures business by This will loyal of customer achieved continue diverse goals our customers we who of designed base objectives. banking of time, products our array durable bank decades. of a us provide through banking many with satisfy been plurality deposit evidenced customers' bank have our XX the that built over

Our strategy we to and American success of small making remain an their medium-sized consistent. bank our relationship We committed steady are owners efficient business on executing the to operating best privately and and great businesses held our model in and focused and stories, way. banking will

strive approach in credit ongoing associates to earnings, consistent will business and their like solid produce hard their I'd levels, our to loyalty. disciplined remain our quality our for capital excellent customers to maintain dedication and liquidity. work and credit strong for We and and and thank

today's presentation. concludes This

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

Operator

Instructions] David [Operator will come our And Feaster of first Raymond James. from question

David Feaster

Hey, good morning, everybody.

David Brager

morning, Good David.

David Feaster

deposit could get -- on I'd your some thoughts quarter. of we trends the the love to in Maybe just

side. your started break as you no you migration coming it color of back? You or feels trust, utilizing flows maybe rate lot at into like uninsured and appreciate you on some gave the impacts cost woke is relationship any see and a versus down? just in if some curious, maybe accounts. seems real how concern like of seasonality, of debt categories the And lost, real to those of it But that. to interest dig the as I'm separate of just title stabilize I all the cash and start a customers to remarks. went you giant have balances the and pay this And would of this, some higher-cost deposits, to attribute even to floating sleeping kind prepared the over I I'm to curious, attribution, rate lot you had higher look we've it and dissect mean, a It down just escrow

David Brager

Yes. exactly And I where all I the topic But to obviously, of know soon it the to that's we -- mentioned, wanted We day. I the day. think, get deposits at every single I office. We'll mean, go. look look,

first our first quarters. generally weaker quarter fourth deposit -- are the The and

The generally, grow. quarter, deposits second third and the

that that's the I the were As million I $XXX of first end mentioned trend our continues. a remarks, and up deposits as the hope prepared XXth from the in of -- quarter. it

we're the same offense playing at and time. But defense

money it. The first is loans And moved now. quarter, pay trust the that of lot talking part that of been a And other the always there's multiple it. in things There's down and part we've to for taxes burn, of so a been about C&I bonuses row quarters in is occur. the of which cash and

I each attributed of don't how have definitely on that was those, exact an but it. So of much to was part number

every looking outside their everything we've bank XXth, deposits never brokerage customers have I I flows, gone we with any But not never good mean deposits went some that time years some been the to that we a spent built feel trust. it. for There's to houses. I've been excess the at deposit excess me have really what that day gone relationship. to lost -- And and March that There's so we down. than just more more have the have after evident have significant over literally and that was relationships we

oh question. is not. And And been, It It's get we've we're that, I not X.X% and safety been managing think wait, can with has and I on a not something? soundness has so relationships. dealing that been

think. put presentation, don't average what Allen? points, basis know investor we I think I our in cost, XX in investor the our was I --

Ellen Nicholson

bearing interest Yes, deposits.

David Brager

deposits. interest-bearing March In

the bit. So It's March. that's gone little up of towards of accelerated sort end a

confidence all built it's I And anticipated our attribute and we've -- customers better feel after even I that than better deposit relationships than this I So started to in a from us. definitely feared, the and it's I happening, that customers perspective. really placing the with

answered question. that I So your hope

David Feaster

helpful. extremely that's No, -- Yes. I And appreciate

David Brager

trying in $XXX -- I account I'm I million, mentioned mean, prepared I we from make mean $XXX other new it $XXX million on opened million too. of thing to quarter. sorry, And -- were the relationships, grow we balances offense, just the I'm average yes, the remarks, first

playing we're and offense defense. So

David Feaster

a maybe that and on you on a the conservative presentation, up approach let's California have as underwritten, Southern hit supports that's that. you Yeah all of about. And topic it you and put huge mean, helpful to off the hyperfocus second appreciate story. just Obviously, there's the -- that focus I well CRE I offices, think great. in you're I talked obviously, in color lending a that brought it's and extremely

borrowers? kind that you you thoughts details just specific your us stressed of color give from what on could -- just what as And on CRE And you But your hearing those seeing you're footprint? on it, any across after book? in office? -- maybe what And are

David Brager

Yes.

we stress testing. So do

that mild have you on normal a three a term call the good this reviews. stress levels stress severe stress. and of we talked past just base know, because, scenario, annual in and case We idea we've testing, this a have loan do we then as And about

of we -- look We're information the we're of just the taking the updated the at looking on but financial over a getting loan guarantor, at information. value getting million. do not property. the loan We We're updated $X portfolio, entire office any portfolio are

loan We have very portfolio. granular a

think bit can loan overall you there on value even the the you origination, have XX% from even maybe values. because loans time of And and originated were potentially, And depreciation lower would at at theoretically, of values in or it higher, just value appreciation some say, loan-to-value would those amortization those a was use those loans. loan And at earlier, and to some loans origination. frames we whether XX% lower the little XXXX some or okay, today's if based be look or you infer loan average -- which on should same those to value,

close forward. size, any our attention And of bank in buildings. -- with we just classified with portfolio loans our said, origination very like zero We won't a going center, And average portfolio. money have an pay there's have that to classified That office loans. loans ,XX-story we of granularity office XX% office we in But doesn't it. mean loan-to-value loan average million don't XX lot XX, and $X.X our a at I in big

any not And we it far, have so of there. And cracks owner-occupied office. seen is in XX%

portfolio XX% So and our owner-occupied. overall of we underwrite the is underlying company,

together, you CRA -- put in those all when mitigated we'll as given it the might by things problems, I cautiously be originally. be but There a that as feel So optimistic be spot default loan portfolio. the will should far be good loss how we underwrote

then we you said Page loans loans we piece And Well, this, no were And last industrial say the in investor to on which of quarter, I'll last column added presentation frame. had a presentation used back, of on I during by information collateral type. give -- investor we added classified. our we had the down breaks I in it that COVID XX our sort classified had, the in time that

there's page, $X in industrial can that loans. on you million see And

on to you it's of loan give XX-year fully payments. Just that value to flavor a a it's on and loan, a current loan, XX% amortizing

So underlying we do that a some we rough had, has pretty when and see to these grade year. issues, aggressively with company had things the

And it. so downgraded we

that also talked includes Suncrest, loan category loan we one farmland that quarter loan low is about living the primarily value. other last senior that the And facility. acquired has very to we the The from

feel to we loans really all that if there's paying problem those of that should or if be stop portfolio, commercial without out loans get there the estate pretty of again, in a about any are good, losses. So in they classified -- good I our incurring shape real

David Feaster

side. terrific appreciate color. And touching the maybe That's But I that. other on

I'm Obviously, But curious, growth down open bit. little seeing loans mostly risk-adjusted to where sounds this point I'm new seasonality. business, you're still And hear loans. in making at it you is -- like for good you're this trending? demand -- open quarter, Let's the returns how still are touch cycle? still were on a glad Where just

David Brager

the our the Because in the good with no, of top we But risk-adjusted obviously. C&I loans. loans of we're in move quarter, I the their down returns XX% rate first Fed -- funds look, bank clients. mean, those All prime, paid

to pricing. And have we so competitive on be

I've did do, done in as March, customer and information. April do doing some -- did April, and two month. a two I anecdotal Just two luncheons, I in excuse in I any been I do customer March. one I in mentioned, luncheons me, I've didn't I've

the is me fourth the I in depositors XX% he our customer half real the telling title title company. a largest from quarter, business two one and that title of he was hunkered first April, luncheons, was him the business to his said down. loans doing And But loans. had down stopped that him, doing quarter to refer estate to not were referred commercial banks the is

sure loan. that every just single this. and guidelines to got "Hey, need landing as to and our be Credit commercial stick people We nervous knitting I real Chief made said, we far our So need about that Officer underwrite going we're and these called as estate not to I all the our how soft spot for

So the quarter, demand what first in slowed. we booked by has slowed. It's evidenced demand has

growth, think We're attain. that then, something comments getting single-digit single-digit I can low And my for stating middle low yields on comments the we my sort modified not commercial that's book. we of now. did to loans sort growth modify of, looking real I we're higher that estate I

our six to raised have in the interest few a We times weeks. rates eight last

best want up offensively that struggling and this credit, can pick able the looking maybe and we're more, use banks there's relationships. to we are relationships, we the good best where at And to be just

that hope So helped. I

David Feaster

Thanks, I everybody. helpful. appreciate That's really it.

Operator

moment And one come question next will our Gary question. from for our Tenner And next of Davidson. D.A.

Your line is open.

Gary Tenner

me. or morning good Good Thanks. afternoon excuse

David Brager

Gary. Hi,

Gary Tenner

are quarterly I what Allen, the of current portfolio currently? long a been if wonder already could It's update you on day. the kind from cash securities us projected flows

Allen Nicholson

the they're actually, that million. both -- interest to little on $XXX $XXX of think, think believe million much range are I are right projections books, I well, $XXX not likely. I $XXX The bit are the say on models, probably projecting. securities Yes. million based -- closer seeing about at is field from term But and and flow the to over-projecting recently, near we're now, would least, as mortgage-backed seen we've I to as a more million But think a reality cash $XXX is lot what I quarter. the million commercial principal et is cetera, those A the is,

Gary Tenner

it. Okay, I appreciate

So from of from got perspective, sheet a remainder cash the you portfolio. as the kind mix you the think coming securities year of about the flows balance

You seen that about being on deposits, third little April. better here far and so second, in talked quarter a we've bit

think pipelines deposit the To the of year that borrowings other how loan have sources or fund are down to you or to of pull sort what the, do having to at degree ability funding? modest mix additional projectable may resort this the of, this without you growth point,

David Brager

that No, just is from to the move securities side having investment without Yes. exactly more. mix the to asset loans we're what attempting to on borrow do is

So looking the not candidly, way couple XX-year ago, really light treasury, would treasury. a we or -- treasury, we're X-year of price at quarters that, a we're the off is a a

had pricing that. would borrow spread Now incrementally, we we at the we're really base to plus how a fund looking if

plus So say, rate of we're for looking at on the it basing X% the we're and discussion that just, purposes, perspective, worst-case spread. funding borrowing average

X-year significantly than same So our loan spread. a treasury that plus are rates using or higher XX-year

work move deposit borrowing So want it to the cost. to hard that. Gary. we flow cash and towards will that goal, loans higher and offset But the that is utilize doing into We help costs

economy. will that depend of the Some on

interest environment. the the rate But that's will Some of depend goal. that on

Gary Tenner

quarter loan Classified chart or But huge Thanks. down, a and every for just me. not in essentially And number it's on a the what scheme sequential loans then have is major things. a that of caught segment segment decline. your loan did eye my Okay. last

curious quarter-over-quarter about that of of if that just impacted Suncrest-related and kind any shift. just kind there's So wondering resolutions

David Brager

resolutions? You Suncrest mean the the down,

Gary Tenner

Yes.

David Brager

Yes.

gave Allen, the we So think, was million. number, $XX I it

Allen Nicholson

$XX Suncrest. million of

David Brager

$XX million is there, is in of Suncrest the that number it quarter. was same last about that and

quarter, is low living -- previous than were agreed, the was with one the relatively loan related. And as senior the and resolutions the is million-ish? guarantor So really mentioned good not which That we is that facility $XX loan-to-value XX% that support. paying Suncrest loan Suncrest more is the

Allen Nicholson

Yes.

David Brager

that, is other And on Gary, showing that. $XX our category. million XX up to $XX page million in of the

is category of that as as one loans majority Suncrest that the far other So loan. classified

Allen Nicholson

look IP, before, And sort as of you sometimes. quarter-to-quarter, in the bit same within alluded we these moved conservative little And a we're if cure a lot on chart but the classifications. quarter highly around Dave the within been the has Gary, times, it's put to Yes, a at range. it themselves generally of can

Gary Tenner

color. the Appreciate Thank Great. you.

Operator

One next moment for our question.

question of next Clark will Matthew Piper come Our Sandler. from

Your open. line is

Matthew Clark

morning good guys. Hey,

Gary Tenner

morning. Good

Matthew Clark

margin in month questions March, on of a March? just the deposits Maybe the additional of at the spot of couple the average around margin end and rate

Allen Nicholson

in I two of in our guess you remarks we information prepared IP. gave the and pieces

points. you was if So cost average, cost end, almost points. of XX was that X%. end interest-bearing it the at was look quarter quarter. X.XX% at borrowings IP, of it at the we noted basis exactly the was the our average On XX And the of deposits Also, quarter during basis

So hopefully, that helps you, Matthew.

Matthew Clark

you feel you in clearly borrowings, that would like, Is But here second great. assume half. And XQ. the likely from and given about margin how the again you're in plan that recover it? Okay, I here thinking that then would down do the down be working will remix

Allen Nicholson

possible. I quarter. further next think interest goes the in the net down it's Obviously, margin

that last we under alluded pressure. year the think the that first would quarter of to be probably some half I

sheet, Q, We're volatility a XX months, or And and net even in lot there's Certainly, it's you'll at we minus looking this two over of X.X% down. a not X%. with either our or down in margin, plus just way, and model static interest our two balance ramp. up up see

the So that the the the latter into pressure year. half will will of get be if as there. we're able I that question But the think, some of side, offset, funding to we remix

David Brager

grow seasonality we have the Yes. normal some And in deposits can we help which and down can would the deposits, borrowings as well. if obviously pay

Matthew Clark

$X.XX tangible of it or out, Yes, XX.X%. do your a you okay. mean AFS guess why it? book at What's It's plenty earn already back if securities I pretty the to like you out it mean this have your in of to just X.X% securities CETX a budged It's X%. to blow accretive four-year like earnings. TCE. not easily, you share. It's pickup earn less back, can I just XX% blow shifting book? of just I your And and barely that capital, yields then appetite book. quarter,

Allen Nicholson

is Well, see from year that, still don't back long And rather I reason at think we in we this to or understand cycle. the a four a certainly. three But earn our really time point perspective, in that. do

David Brager

Yes. the But is in times quarter. fourth of sort over borrowing broader Matthew, the we've evaluated started just to maybe multiple to time, answer since question your we it

what's what rates, on do. can lot a happening with we this depends where are, of we obviously, So

point, and that But that. it. continue to it And it. we're the evaluate looking to not we'll determination But that this so at we've do mean made doesn't not at evaluating

So to I clear, that just make too. want

Matthew Clark

shorter the And the back portfolio. of than earn is Yes. duration the

So up okay. place, I think but, end better a in still you

David Brager

That's assuming same. exactly that's mean, obviously that assuming -- the rates I stay

back And a that up, rates that. there's that assumptions or in And down too. so of rates lot went impacts if earned went

Matthew Clark

Yes, I understand. totally

and say on What critical unrealized then just the And equity loans would through book? sheet, mark your other and mark balance that those running shifting Okay. the to of book. are to exercise you loss your the the on loan of that

Allen Nicholson

Matthew, plans sell be we classified loans, not going available mean, I to to for so no as sale. have they're any

point point at say would it's a -- this view, time. I in So our in it's new

from it's end I'd see you look So related I'm down. sure when come to. rates likely the our -- you'll not have have your what the value Q, loans, improved, most say, as which question fair our year of what at really of But the

Matthew Clark

Yes. agree. No, I

you just think that criticism. to I it's allowing confront I'm ridiculous.

David Brager

we Yes. your portfolio the done I earlier funding there. and that our mean, No. AFS -- I to that's the all money we've And loans, the think and about look, question securities, with -- securities of we've what as have the can we funds excess is we said, core

to the and loans. a down to in make came bit, consideration. we under quite remind money. sell could how rates say mean, positive to these little But I we're plan the much no yields coming So when going things. marked all to up, remember We average I'll the -- are everybody have loan never sell them for,

in point, with quality I loans portfolio spot But no, us you a the we appreciate really but to speak and the we're good -- and the I that, to opportunity loan the some giving yes, -- with right get can whittle we believe And them the we now that as we're a borrowings. have. through But bit down funding with we securities the we little really and year. understand

Matthew Clark

the one, on appetite Great. Okay. buyback? last And the re-up then buyback. just Any to

David Brager

take an we some the that. think this time where about of And of think we now, out trading I in of that's is we fortress the future. us with more where it's is right for the But some a balance sheet there, I right advantage just point, still at waiting stock down, kind Obviously, that uncertainty are. potentially seeing. into now, and important good and could we just feel thing have having uncertainty going the we're

Allen Nicholson

we excess about foresee is when deploy want cycle, something think last more M&A that I talked quarter consider. and we obviously, And Matthew, capital that this we is for get this out we of opportunities too, in to having to

Matthew Clark

Great. you. Thank

David Brager

you. Thank

Operator

of And come question. question will next from Kelly Motta our KBW. our next for moment One

Kelly Motta

Hi. Good morning. Thanks for question. the

David Brager

morning, Good Kelly.

Kelly Motta

your like there? of how on update Any have off people slow. willing said. But asked at some any given perhaps that. been I I M&A, balance maybe fortress sheet, it with challenging more are questions Most positioned since getting might it's answered kick you just Any with headwinds sell? changes well mentioned update, you of been especially my imagine the pretty like you But point. to this and

David Brager

bit, hunkered of some evaluate. to little have would mean, Yes. been are that been there there a do think very haven't lot headwinds candidly, conversations. things more to think will March, I Look, But different drive that I that down mean a has and this I I conversations. everybody we

and to conversations. need having going at on. established listen. there's There about to that lot there's for of But to sure mean, the potentially we going standards anything, we is make not I how that we're these some stretch to deals. we want it we we've this, a opportunities not a obviously, bankers do -- there and investment to for those lot and conversations us. talk look And we're again, But open according of it's

we be have of event over we happened. wait skip recognizing XXXX, just But black at because then think March not sort and point, I CEO occurs. I've of seems just my what's this going are to think kind was the for that decided that, some is every because March there to right XXXX. to We're decided of swan see this March, that day XXXX, XX, I've of first my -- everybody's But joke as March hunkered I down, morning.

Kelly Motta

Mark calendar. god. my it Oh on the

David Brager

to mentioned, you. that faster. I reason no look may we'll us Allen Thank that's Yes. I get and just think But a as opportunities, for tired something People at -- see.

Kelly Motta

of of were remarkable rate? deposits will deposit proportion overall discussed one but length, and down hear Is sort in And We've towards total that below go running composition? to that search the asked kind thought still deposits. continues XX%, dip think of XX% question excess the noninterest-bearing of I you're XX% of noninterest mean, to think that. that mix of anything higher Understood. about way Pre-COVID, base? that Is makes pre-COVID didn't funding the than bearing, at was as drifting the you bit so right you that I at it's a

David Brager

some a they little about In do I've companies. now companies bank the the able services, we mean, maybe want it operating I maybe before questioning bit ways, those this prevention management and and lot they talked And a to and want treasury fraud and it. past. things. believed more are operating people the products Yes. want in be But to

is just a balance any any of structured the have And with we accounts, customers size, insured. company the you fact $XXX,XXX -- and those notwithstanding that can't that if they way have those operate

to insured cash utilized, have We sweep. and access very small a degree, have the

name they I the cash but services, to think product. inter-buy just changed same

need it's business. higher they safety. to service in candidly, And quite not maintain offset that's is their operate really just about something But that somebody that, about charges to to concerned and is been noninterest-bearing the balances there, their

years. I So around the for we we that could think at don't last that on think But or we've could number I number guidance be few based give our just where it what model, can on the that been stay think be.

that in of exactly. out that significant in project it lot to kept hard a family. we've Obviously, the had it's gone have rate. So We've a amount of search deposits of

we million think about quarter, $XXX said the gone. fourth in I had

Allen Nicholson

year. Last

David Brager

Last year.

that hasn't left to left to recession and likely and hit -- -- short-term So will it lower in strategies. that lost there, liquidity out, the come that not money starts money was back hasn't to us me that for it hard If is is that most we hasn't get rates a family. because me, excuse yield

type happens. that's I for that's me how the to but -- project, -- and client of that's So it's what bank, hard generally we

-- So

Kelly Motta

it. I that, on appreciate color all really the Got Dave.

David Brager

thing know I And and don't been hasn't mention, directly this Kelly, other if one asked. wanted really I to just Yes.

page uninsured. the just there's on deposit little also added a reality. We more around And granularity characteristics reporting XX, and in and differences the call

to what how just numbers. -- want at see I we everybody look So those

Kelly Motta

from I books last thing expected that you appreciate detail. Allen, the helpful. have the it, HTM would me. duration all just and One AFS if be of

Allen Nicholson

Yes.

X% between is Our and X.X%. AFS portfolio still

David Brager

Years. Years. Duration.

said You percent.

Allen Nicholson

X to Yes. X.X years.

Kelly Motta

well? have you Do Okay. I book got it. HTM as the

Allen Nicholson

usually We I don't have that. disclose that. don't

Kelly Motta

All Thanks. so back. much. right. Thank I'll you step

Operator

And our of Instructions] Janney Scott Tim from Montgomery. next [Operator come will Coffey question

open. is line Your

Timothy Coffey

morning, Thanks. Great. gentlemen. Good

David Brager

Hi, Tim.

Allen Nicholson

morning. Good

Timothy Coffey

to the Trust in a approach Obviously, I'm the what kind wondering is. Citizens business quarter. your deposits it's to trade. of Dave, popular the that Hey, transfer of

David Brager

Actually, a Yes. question. really it's good

second at higher them rate. rate. tenure highest in little deposits deposits at bit So choice here third than look money a the then hierarchy, the generally little rate. And higher the market which keeping treasury. a the in Then we bit look keeping at And here the keeping those the choice here depending higher one is at we treasuries, is rate is on of the

but go family. the to outside goal, want want deposits. first keep of That's the also deposits we to the So the don't we

XX, Obviously, March of deposit since excess side. whole even side it. looking it's this and sort at that's on the the on many more happened how of we're been awakening in thing ways, an So rate

out the do. can Citizens don't what our to having mean whether with or people just We bank. want keep trust, about deposits. we let to conversations we door the it So we're I Trust walk the outside

Timothy Coffey

long the balance do That's Great. envision were on that ones, sheet? how quarter, that Okay. during And the you short-term the helpful. brought borrowings then on very the staying

David Brager

our end and just short economy anticipate year It hard I on now mean was to it. I goes on, lot it's mean, diminish that say, like it obviously, the with borrowing we the of term. in the of going view that's things A Well, will year. could current but very advances as change what's that. and between the themselves, things are of the

obviously, have flows then So reason deposit no there's increase, if we would them.

Timothy Coffey

Right.

Okay. much my for That Thank of you makes very the Those time. questions. sense.

David Brager

Thank you.

Operator

to like now turn I Brager remarks. the would back closing conference to Dave for

David Brager

you July day, or we'll joining We to interest Thank speaking quarter. you for our Allen call. appreciate month in you very your quarter let Please next and if for and us quarter. a thank to great XXXX see I want I Have questions. any everybody next and earnings this with second much. look you know forward have

Operator

today's Thank concludes participating. for this you conference And call.

disconnect. now may You

CVB Financial (CVBF) 27 Apr 232023 Q1 Earnings call transcript