CVB Financial Corporation

Good morning, ladies and gentlemen, and welcome to the third quarter of 2025 CVB Financial Corporation and its subsidiary Citizens Business Bank Earnings Conference Call. My name is Cherie, 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 being recorded. I would now like to turn the presentation over to your host for today's call, Alan Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.

Thank you, Cherie, and good morning, everyone. Thank you for joining us today to review our financial results for the third quarter of 2025. Joining me this morning is Dave Breger, 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 will now turn the call over to Dave Rager. Thank you, Alan.

Good morning, everyone. For the third quarter of 2025, we reported net earnings of $52.6 million, or 38 cents per share, representing our 194th consecutive quarter of profitability, which equates to more than 48 years of consecutive quarters of profitability. We previously declared a 20 cents per share dividend for the third quarter of 2025, representing our 144th consecutive quarter of paying a cash dividend to our shareholders. We produced a return on average tangible common equity of 14.11% and a return on average assets of 1.35% for the third quarter of 2025. Our net earnings of $52.6 million, or 38 cents per share, compares with $50.6 million for the second quarter of 2025, or 37 cents per share, and $51.2 million, or 37 cents per share, for the prior year quarter. The $2 million quarter-over-quarter increase in net income was primarily the result of growth in net interest income of $4 million that was partially offset by a $1.5 million increase in provision for credit losses and unfunded loan commitments. Pre-tax pre-provision income in the third quarter of 2025 was $70 million, an increase of $1.2 million, or 2%, compared to the second quarter of 2025, and $2.4 million, or 3.5% higher, compared to the third quarter of 2024. During the third quarter of 2025, we received a $6 million legal settlement, which was more than offset by an $8.2 million loss on the sale of $65 million of low yielding AFS securities that were reinvested at yields of approximately 5%. The growth in PPNR over the third quarter of last year was the net result of a $2 million increase in net interest income and a $1.5 million decrease in operating expenses that were partially offset by a $1.25 million increase in provision for unfunded commitments. Net interest income for the third quarter of 2025 was $4 million higher than the prior quarter and $2 million higher than the third quarter of 2024. Our average earning assets grew by $315 million between the second and third quarters of 2025, and our net interest margin increased from 3.31% to 3.33%. As a result of our deleveraging strategy that was executed during the second half of 2024, Our earning assets declined by $1.1 billion from the prior year quarter, while our net interest margin increased by 28 basis points from 3.05 in the third quarter of 2024. Non-interest income was $13 million in the third quarter, which was $1.7 million lower than the second quarter. Excluding the legal settlement and loss on sale of AFS, Third quarter non-interest income increased by $260,000 from the prior quarter, driven primarily by higher trust and investment service fee income. Non-interest expense was $58.6 million in the third quarter, which was $1 million higher than the second quarter of 2025. Our efficiency ratio remained at 45.6% in the third quarter. At September 30, 2025, our total deposits and customer repurchase agreements totaled $12.6 billion, a $170 million increase from June 30, 2025, and a $108 million higher than September 30, 2024. The quarter-over-quarter growth was driven by growth in money market and customer repurchase balances. The year-over-year growth was net at a $100 million decrease in time deposits. Our non-interest bearing deposits grew by $108 million compared to the third quarter of 2024, while interest bearing non-maturity deposits and customer repos grew by an additional $100 million. On average, non-interest-bearing deposits were 59.8% of total deposits for the third quarter of 2025 compared to 59.1% for the third quarter of 2024. Our cost of deposits and repos was 90 basis points for the third quarter compared to 87 basis points in the second quarter of 2025 and 101 basis points for the year-ago quarter. Now, let's discuss loans. Total loans of September 30, 2025 were $8.47 billion, a $112 million or 5% annualized increase from the end of the second quarter of 2025. The quarter-over-quarter increase in total loans was due to growth in nearly all loan categories. Loan growth was positively impacted by increases in line utilization for CNI and dairy and livestock lines of credit. A quarter-over-quarter increase of $27 million in CNI loans reflects an increase in line utilization from 26% at June 30, 2025 to 28% at September 30. In addition, dairy and livestock loans also grew by $47 million compared to the second quarter, driven by higher line utilization from 62% at the end of the second quarter to 64% at the end of the third quarter. Agribusiness loans grew by $12 million, while commercial real estate and construction loans grew by $18 million and $12 million, respectively, from the end of the second quarter. Total loans decreased by $66 million from the end of 2024, driven by dairy and livestock loans declining by $139 million, as these lines experienced their seasonal high utilization at calendar year-end. Excluding small declines in SBA and municipal loans, as well as decreases in dairy and livestock loans, our loans grew by $85 million from the end of 2024. We've experienced an increase in loan originations and our loan pipelines remain strong, although rate competition for the quality of loans we focus on has continued to be intense. Loan originations in the third quarter of 2025 were approximately 55% higher than the third quarter of 2024, and year-to-date loan originations have been 57% higher than the same period in 2024. We have average yields of approximately 6.5% on new loan originations during 2025, but the third quarter average was lower at about 6.25%. We experienced $333,000 of net recoveries for the third quarter of 2025 compared to $249,000 in net charge-offs in the second quarter. Total non-performing and delinquent loans decreased by $1.5 million to $28.5 million at September 30, 2025. Nonperforming and delinquent loans were $24.8 million lower than the $53.3 million at the end of the third quarter of 2024. Subsequent to the close of the third quarter, a $20 million nonperforming loan was paid off in full. The sale of the building collateralizing this loan resulted in the bank receiving all principal at approximately $3 million of interest, which will be included in interest income in the fourth quarter of 2025. Classified loans were $78.2 million at September 30, 2025, compared to $73.4 million at June 30, 2025, and $89.5 million at December 31, 2024. Classified loans as percentage of total loans was 0.9% at September 30, 2025. I will now turn the call over to Alan to further discuss additional aspects of our balance sheet and our net interest income. Thanks, Dave.