CVB Financial Corporation

Good morning, ladies and gentlemen, and welcome to the fourth quarter and year-ended 2021 CVB Financial Corporation and its subsidiary, Citizens Business Bank Earnings Conference Call. My name is Michelle, and I am your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer period. Please note, this call is being recorded. I would now like to turn the presentation over to your host for today's call, Christina Carabino. You may proceed.

Thank you, Michelle, and good morning, everyone. Thank you for joining us today to review our financial results for the fourth quarter and year-ended 2021. Joining me this morning are Dave Brager, Chief Executive Officer, and Alan Nicholson, Executive Vice President and Chief Financial Officer. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab. The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31st, 2020, and in particular, the information set forth in Item 1A, risk factors therein. For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call. Now I will turn the call over to Dave Breger. Dave?

Thank you, Christina, and good morning, everyone. The bank delivered another solid quarter and full year of strong earnings. The 2021 earnings represented the highest earnings in the company's history, and over the last two years since the onset of the COVID-19 pandemic, Citizens Business Bank has maintained its high level of performance and confirmed our position as a safe, sound, and secure financial institution. We were pleased to complete the acquisition of Suncrest Bank on January 7, 2022, and to welcome Suncrest Bank's associates, customers, and shareholders to Citizens Business Bank. We are excited about the acquisition and the opportunities it provides for expansion into the greater Sacramento market, as well as solidifying our significant position in the Central Valley. We reported net earnings of $47.7 million for the fourth quarter of 2021, or 35 cents per share, representing our 179th consecutive quarter of profitability. We previously declared an 18 cents per share dividend for the fourth quarter of 2021, which represented our 129th consecutive quarter of paying a cash dividend to our shareholders. Fourth quarter net earnings of $47.7 million, or 35 cents per share, compared with $49.8 million for the third quarter of 2021, or 37 cents per share, and $50.1 million for the year-ago quarter, or 37 cents per share. For the fourth quarter of 2021, our pre-tax, pre-provision income was $66.8 million compared with $65.7 million for the prior quarter and $70.5 million for the year-ago quarter. Net earnings were $212.5 million for the year ended 2021, a $35.4 million increase compared to 2020. Diluted earnings per share were $1.56 for 2021 compared with $1.30 for 2020. 2021 pretax pre-provision income was $272 million compared with $273 million for 2020. In 2021, we had a $25.5 million recapture provision for credit losses, while in 2020, we had a $23.5 million provision for credit losses. Now, let's discuss loans. Our 2021 loan production continued to be strong in the fourth quarter. From year end 2020 to December 31, 2021, core loans, excluding PPP loans, grew by $235.3 million, or approximately 3%. Total loans at quarter end were $7.89 billion, a $38.2 million increase from the end of the third quarter. After excluding PPP loan forgiveness and the seasonal increase in dairy and livestock loans, fourth quarter loan growth was $76 million, or approximately 4% annualized. Loan growth in the fourth quarter was led by continued growth in commercial real estate loans, which grew by $55 million compared with the end of the third quarter and by $288.2 million or approximately 5% for all of 2021. C&I loans increased $43 million compared with the third quarter, but were essentially flat when compared to the end of 2020. Although line of credit utilization for CNI loans continues to be lower than our pre-pandemic experience, it increased modestly from the third quarter. The line utilization rate for CNI loans was 29% at the end of the fourth quarter compared with 27% for the third quarter and 29% at the end of 2020. Daring Livestock Loans grew by approximately $110 million from the end of the third quarter. The majority of the increase in dairy and livestock loans was seasonal and much of the growth occurred near the end of the fourth quarter as many of our dairy owners chose to defer their milk checks into the first quarter of the following year and or prepay their feed expenses. Dairy and livestock loans grew by approximately $32 million from the end of 2020. PPP loans declined by $144 million compared with the third quarter and by $696 million from the end of 2020 due to the continued forgiveness of these loans. Non-PPP SBA loans declined by approximately $19 million compared with the third quarter and $15 million from the fourth quarter of 2020. We are optimistic that we can continue to grow high-quality loans in 2022 at a pace similar to our 2021 core loan growth. We also anticipate that the Suncrest Bank merger with an expanded geography and CBB's greater lending capabilities can further enhance our growth. At quarter end, non-performing assets defined as non-accrual loans plus other real estate owned were $6.9 million compared with $8.4 million for the prior quarter and $17.7 million for the year-ago quarter. At fourth quarter end, we had no OREO properties and the $6.9 million in non-performing loans represented nine basis points of total loans. During the fourth quarter, we acquired an OREO property which was sold during the fourth quarter at a gain of approximately $700,000. During the fourth quarter, we had net loan charge-offs of $345,000 compared with net loan recoveries of $22,000 for the third quarter of 2021. We had net loan charge-offs of $3.2 million for the full year 2021, compared with $308,000 for the full year 2020. At December 31, 2021, we had loans delinquent 30 to 89 days of $2.5 million, compared with $1.1 million at September 30, 2021. Classified loans for the fourth quarter were $56.1 million compared with $49.8 million for the prior quarter and were lower than year-end 2020 by approximately $23 million. Our $65 million allowance for credit losses is approximately 103% of our total classified and non-performing loans. Now I would like to discuss our deposits. At December 31, 2021, our total deposits and customer repurchase agreements were $13.62 billion, compared with $13.6 billion at September 30, 2021, and $12.2 billion for the same period a year ago. At December 31, 2021, our non-interest-bearing deposits were $8.1 billion, compared with $8.3 billion for the prior quarter and $7.5 for $6 billion for the year-ago quarter. During the fourth quarter, non-interest bearing deposits averaged $8.3 billion, a $335 million increase from the average balance in the third quarter. A key differentiator for our bank is the level of our non-interest bearing deposits. Non-interest bearing deposits were greater than 63% of our average deposits for the fourth and the $8.3 billion balance at year end exceeded the bank's $7.8 billion loan portfolio. We continued to see strong deposit growth for the fourth quarter as average total deposits and customer repurchase agreements increased by $378 million, or an annualized rate of approximately 11%, from the third quarter of 2021. and $1.9 billion or approximately 16% higher on average than the year-ago quarter. The bank's funding is entirely core customer deposits and customer repos, which combined had a total cost of just three basis points in the fourth quarter. This three basis point cost of funds compares with four basis points in the prior quarter and nine basis points for the year-ago quarter. I will now turn the call over to Alan Nicholson to discuss our investments, allowance for credit losses, and capital levels. Alan?