CVB Financial Corporation

Good day, and welcome to the CVB Financial First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Alan Nicholson, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Cherie, and good morning, everyone. Thank you for joining us today to review our financial results for the first quarter of 2025. Joining me this morning is Dave Rager, President and Chief Executive 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 31st, 2024. 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. I'll now turn the call over to Dave Rager. Dave? Thank you, Alan.

Good morning, everyone. For the first quarter of 2025, we reported net earnings of $51.1 million, or 36 cents per share, representing our 192nd consecutive quarter of profitability, which equates to 48 years. We previously declared a 20 cents per share dividend for the first quarter of 2025, representing our 142nd consecutive quarter of paying a cash dividend to our shareholders. We produced a return on average tangible common equity of 14.51% and a return on average assets of 1.37% for the first quarter of 2025. We announced in November of 2024 that our board of directors authorized a new 10 million share repurchase program and approved a 10B51 plan. Year to date, as of yesterday, we have repurchased 2.05 million shares at an average share price of $18.13. Our net earnings of $51.1 million, or 36 cents per share, compares with $50.9 million for the fourth quarter of 2024, or 36 cents per share, and $48.6 million, or 35 cents per share, for the prior year quarter. Pre-tax income in the first quarter of 2025 was $69.5 million, which was $1.5 million higher than the fourth quarter of 2024 and $2.7 million higher than the first quarter of 2024. Our net interest margin expanded by 13 basis points in the first quarter of 2025, primarily due to the actions we took towards the end of 2024 in which we deleveraged our balance sheet by reducing borrowings and other wholesale funds. Our net interest margin for the first quarter of 2025 was 3.31% compared to 3.18% for the fourth quarter of 2024 and 3.10% for the first quarter of 2024. In the first quarter, we sold $19.3 million of OREO that was reflected on our December 31, 2024 balance sheet, generating a $2.2 million net gain on sale. Primarily due to reduction in outstanding dairy and livestock loans, we had a recapture of allowance for credit losses of $2 million in the first quarter of 2025 and a $500,000 provision for off-balance sheet reserves. This compares to a $3 million recapture of allowance for credit losses in the fourth quarter of 2024. At March 31st, 2025, Our total deposits and customer repurchase agreements totaled $12.3 billion, a $56 million increase from December 31, 2024, and $95 million higher than March 31, 2024. Our non-interest-bearing deposits grew by $147 million, or 2%, compared to the end of 2024, and were $71 million higher than the end of the first quarter of 2024. We generally experience a decrease in deposits at the end of the fourth quarter and beginning of the first quarter each year, and then a buildup of deposits starts after the April tax season. This seasonal pattern contributed to the $380 million decline in average deposits and repos from the fourth quarter of 2024 to the first quarter of 2025. Total deposits and customer repos grew on average by $244 million over the first quarter of 2024, including $139 million in average growth in brokered CDs. On average, non-interest-bearing deposits were 59% of total deposits for the first quarter of 2025, which compares to 58.7 for the fourth quarter of 2024, but lower than the 61.7% average in the first quarter of 2024. Our cost of deposits and repos was 87 basis points for the first quarter of 2025, which compares to 97 basis points for the fourth quarter of 2024 and 73 basis points for the year-ago quarter. Our cost of non-maturity deposits, which represents more than 95% of our deposits, has grown from 70 basis points in April of 2024 to 76 basis points in March of 2025. Our current deposit pipelines are strong and focused on operating companies. In addition, The deposit pipeline in our specialty banking group, which is focused on title escrow, property management, and fiduciaries continues to be strong. Now let's discuss loans. Total loans at March 31st, 2025 were $8.36 billion, a $173 million decrease from the end of the fourth quarter of 2024 and a $407 million or 4.6% decline from March 31st, 2024. the quarter-over-quarter decrease was largely due to a $168 million decline in dairy and livestock loans. In addition, commercial real estate loans declined by $17 million compared to the end of 2024, but C&I loans grew by $17 million. We typically experience a seasonal decline in dairy and livestock loans during the first quarter every year as our customers increase line utilization at year-end for tax planning purposes. The reduction in dairy and livestock loans during the first quarter of 2025 included a decrease in line borrowings of approximately $40 million due to the final distributions received by some of our dairies from the Fairlife sale to Coca-Cola. These reductions contributed to the low utilization rate of 64% at March 31, 2025, compared to 81% at December 31, 2024, and 75% at March 31, 2024. The decrease in loans from the end of the first quarter of 2024 included commercial real estate loans declining by $230 million and construction loans declining by $43 million. Dairy and livestock loans were down year-over-year by $91 million, while C&I loans also declined by $21 million. We have experienced an uptick in demand for commercial real estate loans, but rate competition for the quality of loans we focus on has been intense. Loan originations in the first quarter of 2025 were approximately 13% higher than 2024. The increase in originations was across both C&I and commercial real estate loans, with a notable increase in investor commercial real estate. We average yields of 6.5% on new originations during the first quarter. CNI line utilization continues to be low, declining from 30% at December 31, 2024 to 29% at the end of the first quarter of 2025. Our current loan pipelines remain strong as we are seeing more activity in commercial real estate. Total non-performing and delinquent loans decreased to $26.8 million at March 31, 2025 from $47.6 million at December 31, 2024. We ended 2024 with $19.3 million in OREO assets. All of these assets were sold during the first quarter of 2025 at a net gain of $2.2 million. Net recoveries in the first quarter were $130,000, which compares to $180,000 in net recoveries for the fourth quarter of 2024. Classified loans were $94.2 million at March 31st, 2025, compared to $89.5 million at December 31st, 2024. Classified loans' percentage of total loans was 1.13% at March 31st, 2025. The increase from the end of 2024 was primarily due to a downgrade of $6.5 million of loans to a single dairy. Overall, the credit matrix for our dairy and livestock loan portfolio improved with a $51 million decline in criticized loans from the end of 2024. I will now turn the call over to Alan to further discuss additional aspects of our balance sheet and our net interest income. Alan?