CVB Financial Corporation

Ladies and gentlemen, welcome to the first quarter of 2022 CBB Financial Corporation and its subsidiary, Citizens Business Bank Earnings Conference Call. My name is Olivia and I am your conference operator for today. At this time, all participants are on the 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, Livia, and good morning, everyone. Thank you for joining us today to review our financial results for the first quarter of 2022. Joining me this morning are Dave Breger, 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 a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2021, 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. Good morning, everyone. For the first quarter of 2022, we reported net earnings of $45.6 million, or 31 cents per share, representing our 180th consecutive quarter of profitability. We previously declared an 18 cents per share dividend for the first quarter of 2022, which represented our 130th consecutive quarter of paying a cash dividend to our shareholders. First quarter net earnings of $45.6 million, or 31 cents per share, compares with $47.7 million for the fourth quarter of 2021, or 35 cents a share, and $63.9 million for the year-ago quarter, or 47 cents per share. On January 7th, we announced the completion of our acquisition of Suncrest Bank. Our financials for the first quarter of 2022 included 83 days of Suncrest's operating results, as well as acquisition-related expenses of $5.6 million. At close, Citizens Business Bank acquired $766 million of net loans, assumed $513 million of non-interest-bearing deposits, and $670 million of interest-bearing deposits from Suncrest. For the first quarter of 2022, our pre-tax, pre-provision income was $65.9 million compared with $66.8 million for the prior quarter and $70 million for the year-ago quarter. If acquisition expenses excluded, pre-tax, pre-provision income would have been $71.5 million, a $4.7 million increase from the fourth quarter of 2021. A particular note this quarter, we had strong core loan growth represented by 5% growth from the end of the first quarter of 2021 and 8% annualized growth from the end of 2021. We also expanded our net interest margin by 11 basis points when compared to the fourth quarter of 2021. We recorded a loan loss provision of $2.5 million for the first quarter, In comparison, we did not have a provision in the fourth quarter of 2021 and recorded a recapture provision for credit losses of $19.5 million in the first quarter of 2021. As previously announced, we executed on a $70 million accelerated share repurchase program at the beginning of February that had the effect of reducing our share count by approximately 2.5 million shares. In addition, we repurchased 536,000 shares under a 10B51 share repurchase program that became effective at the beginning of March. Now, let's discuss loans in more detail. Our new loan production was very strong in the first quarter. New loan commitments were approximately $439 million, which is higher than the same period of last year by approximately 14%. Total loans at quarter end were $8.6 billion, a $704 million increase from the end of the fourth quarter. Total loans included $766 million of net loans acquired from Suncrest Bank or $775 million when excluding the $8.6 million allowance for credit losses from Suncrest's PCD loans. Excluding the loans acquired from Suncrest, loans declined by $70.5 million However, after excluding PPP loan forgiveness, the loans acquired from Suncrest, and the seasonal decrease in dairy and livestock loans, first quarter loan growth was $144 million, or approximately 8% annualized. The core loan growth in the first quarter was led by continued growth in commercial real estate loans, which grew by $100 million, and CNI loans, which increased by $27 million when compared with the end of the fourth quarter. The line utilization rate for CNI loans was 31% at the end of the first quarter, compared with 29% for the fourth quarter and 26% for the year-ago quarter. Single-family mortgage loans also grew by $14 million from the end of 2021. Daring livestock loans decreased by approximately $110 million from the prior quarter as we experienced paydowns in the first quarter of each calendar year as a result of the temporary increase we experienced in the fourth quarter of each year. PPP loans declined by $105 million compared with the fourth quarter due to the continued forgiveness of these loans. At quarter end, non-performing assets defined as non-accrual loans plus other real estate were $13.3 million compared with $6.9 million for the prior quarter and $15.3 million for the year-ago quarter. At quarter end, we had no OREO properties and the $13.3 million in non-performing loans represented 15 basis points of total loans. During the first quarter, we had net loan charge-offs of $5,000 compared with net loan charge-offs of $345,000 for the fourth quarter of 2021. At March 31st, 2022, we had loans delinquent 30 to 89 days of $2.6 million compared with $2.5 million at December 31st, 2021. Classified loans for the first quarter were $64.1 million compared with $56.1 million for the prior quarter and $69.7 million for the year-ago quarter. Classified loans declined by $9.5 million when excluding the $17.5 million in classified loans acquired from Suncrest. Now, I'd like to discuss our deposits. At March 31, 2022, our total deposits and customer repurchase agreements were $15.1 billion, compared with $13.6 billion at December 31, 2021, and $12.6 billion for the same period a year ago. Excluding the approximately $1.2 billion in deposits acquired from Suncrest, total deposits and customer repos increased by $285 million from the end of 2021. and by $1.3 billion from March 31, 2021. At March 31, 2022, our non-interest-bearing deposits were $9.1 billion, compared with $8.1 billion for the prior quarter and $7.6 billion for the year-ago quarter. The ending balance at March 31, 2022 included $513 million in non-interest-bearing deposits acquired from Suncrest. Excluding the acquired deposits, our non-interest bearing deposits grew by $490 million. During the first quarter, non-interest bearing deposits averaged $8.72 billion, a $395 million increase from the average balance in the fourth quarter. A key differentiator for our bank is the level of non-interest bearing deposits. Non-inspiring deposits were greater than 61% of our average deposits for the first quarter and 62.9% as of March 31, 2022. The bank's funding is entirely core customer deposits and customer repos, which combined had a cost of just three basis points in the first quarter. This three basis point cost of funds compares with three basis points in the prior quarter and seven basis points for the year-ago quarter. I will now turn the call over to Alan to discuss our investments, acquisition accounting, allowance for credit losses, and capital. Alan.