Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CVB Financial Corp (CVBF, Financial) reported net earnings of $51 million or $0.37 per share for the third quarter of 2024, marking its 190th consecutive quarter of profitability.
- The company declared a $0.20 per share dividend for the third quarter, continuing its streak of 140 consecutive quarters of cash dividends.
- Return on average tangible common equity was strong at 14.93%, and return on average assets was 1.23% for the quarter.
- Total revenue, excluding gains and losses, grew by 2.9% compared to the second quarter of 2024, driven by a $2.8 million increase in net interest income.
- Nonperforming loans declined by $3 million, and the allowance for credit losses remained stable at approximately $83 million, indicating strong asset quality.
Negative Points
- Total assets declined by approximately $750 million from the end of the second quarter of 2024 due to the early redemption of the bank term funding program borrowing.
- Core non-interest expense increased by 3.8% or $2 million compared to the prior quarter, impacting overall profitability.
- Loan demand, particularly in commercial real estate and construction, remains weak, with total loans decreasing by $109 million or 1% from the end of the second quarter.
- Interest expense increased by $3.9 million over the prior quarter, reflecting a 9 basis points increase in the cost of funds.
- The company sold more than $300 million of available-for-sale investment securities at a cumulative loss of $11.6 million, impacting financial results.
Q & A Highlights
Q: Can you provide details on the repayment of the BTFP and its impact on net interest margin (NIM)?
A: The book yield on the securities sold was less than 3%. The repayment involved cash and securities, with additional cash generated from deposit growth. Deposit costs have stabilized, and future rate cuts will likely see a closer to 100% beta on the downside.
Q: What is the outlook for mergers and acquisitions (M&A) and share buybacks?
A: M&A is a priority, with efforts ongoing to structure deals appropriately. Share buybacks are also being considered as a form of capital management, with potential announcements expected soon.
Q: How do you view growth opportunities given the current competitive environment?
A: Loan demand is slow, and competition is intense, with some deals lost to rates below 6%. The focus remains on growing relationships, particularly with C&I operating companies, while maintaining a selective approach to loan pricing.
Q: Can you discuss the trends in credit quality and any pressures faced by clients?
A: Credit quality remains stable, with recent issues being isolated and unrelated to interest rates. Agricultural loans have improved, and there have been no significant borrower issues related to rate increases.
Q: What drove the increase in non-interest-bearing deposit balances this quarter?
A: The increase was driven by new relationships across various industries, including government services and title escrow. Existing clients' deposit levels are lower due to market conditions, but new client acquisition remains strong.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
