CVB Financial Corp. Reports First Quarter Earnings

    Business Editors

    ONTARIO, Calif.--(BUSINESS WIRE)--April 21, 2005--CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank ("the Company"), announced record results for the first quarter of 2005. This included record deposits, record loans, record assets and record earnings. It was the strongest first quarter in the history of the Company.

    Net Income

    CVB Financial Corp. reported net income of $17.7 million for the first quarter ending March 31, 2005. This represents an increase of $7.6 million, or 75.74%, when compared with the $10.1 million in net earnings reported for the first quarter 2004. Diluted earnings per share were $0.29 for the first quarter of 2005. This was up $0.13, or 81.25%, when compared with earnings per share of $0.16 for the first quarter of 2004.
    Net income for the first quarter of 2005 produced a return on beginning equity of 22.61%, a return on average equity of 21.86% and a return on average assets of 1.58%. The efficiency ratio for the first quarter was 43.10%, and operating expenses as a percentage of average assets were 1.84%.
    In early 2004, the Company experienced a burglary at one of its business financial centers. The burglary resulted in a loss to our customers of items located in their safe deposit boxes. The Company had been compensating its customers for their losses with the acknowledgement of the insurance company that they were not confirming or denying coverage to us under our insurance policies. The Company paid $400,000 on these claims. In early fall, the insurance company ceased approving these claims.
    At the end of 2004, it became apparent that the insurance company may deny coverage of our claims. Therefore, the Company reserved an additional $2.2 million as an estimate of claims yet to be paid as of December 2004. During the first quarter of 2005, the insurance company expressed its interest to settle these claims. The Company settled with the insurance company in April 2005. This allowed the Company to reverse the $2.6 million estimated robbery loss in first quarter of 2005.
    During the first quarter of 2004, the Company wrote down the carrying value of two issues of Federal Home Loan Mortgage Association preferred stock. These securities pay dividends based on a variable rate related to LIBOR (London Interbank Offered Rate). Consequently, the value of these securities declined as the result of historically low interest rates. Since this loss of value was deemed other-than-temporary, the Company charged $6.3 million against earnings in the first quarter of 2004 to adjust for the impairment of these preferred securities.
    Net income before the reversal of the $2.6 million estimated robbery loss would have been $16.0 million for the first quarter of 2005. This represents an increase of $1.7 million, or 11.63%, when compared to net earnings, before the other-than-temporary impairment write-down, of $14.3 million for the same period in 2004. These results would have produced a return on beginning equity of 20.46%, a return on average equity of 19.78%, and a return on average assets of 1.43%. The related efficiency ratio for the first quarter of 2005 would be 48.52%, and operating costs as a percentage of average assets would be 2.08%.

    Net Interest Income and Net Interest Margin

    Net interest income totaled $40.9 million for the first quarter of 2005. This represented an increase of $5.4 million, or 15.11%, over the net interest income of $35.5 million for the first quarter of 2004. This increase resulted from a $10.0 million increase in interest income, partially offset by a $4.7 million increase in interest expense. The increases in interest income were primarily due to the growth in average earning assets and increase in interest rates. The increases in interest expense were due to the increases in deposit rates and borrowed funds.
    Net interest margin (tax equivalent) declined slightly from 4.02% for the first quarter of 2004 to 3.99% for the first quarter of 2005. Total average earning asset yields have increased from 5.15% for the first quarter of 2004 to 5.40% for first quarter of 2005. The cost of funds has increased from 1.66% for the first quarter of 2004 to 2.11% for the first quarter of 2005. This decline in net interest margin has been mitigated by the strong growth in the balance sheet. The Company has approximately $1.39 billion, or 46.03%, of its deposits in interest free demand deposits. The Company believes its deposit base should position it well for a rising interest rate environment.
    Net interest income totaled $40.9 million for the first quarter of 2005. This represented an increase of $1.2 million, or 3.01%, over the net interest income of $39.7 million for the fourth quarter of 2004. This increase resulted from a $2.7 million increase in interest income, partially offset by a $1.5 million increase in interest expense. The increases in interest income were primarily due to the growth in average earning assets and an increase in interest rates. The increases in interest expense were due to the increases in deposit rates and borrowed funds.
    Net interest margin (tax equivalent) increased from 3.95% for the fourth quarter of 2004 to 3.99% for the first quarter of 2005. Total average earning asset yields have increased from 5.24% for the fourth quarter of 2004 to 5.40% for first quarter of 2005. The cost of funds has increased from 1.93% for the fourth quarter of 2004 to 2.11% for the first quarter of 2005. The increase in net interest margin is the result of a recent increase in interest rates.

    Balance Sheet

    The Company reported total assets of $4.83 billion at March 31, 2005. This represented an increase of $822.1 million, or 20.50%, over total assets of $4.01 billion on March 31, 2004. Earning assets totaling $4.50 billion were up $769.4 million, or 20.60%, when compared with earning assets of $3.74 billion as of March 31, 2004. Deposits of $3.02 billion grew $317.9 million, or 11.78%, from $2.70 billion for the same period of the prior year. Demand deposits of $1.39 billion jumped $234.9 million, or 20.36%, from $1.15 billion. Gross loans and leases of $2.18 billion on March 31, 2005 rose $371.5 million, or 20.50%, from $1.81 billion on March 31, 2004.
    Total assets of $4.83 billion as of March 31, 2005 reflect an increase of $321.0 million, or 7.12%, over total assets of $4.51 billion on December 31, 2004. Earning assets of $4.50 billion were up $248.2 million, or 5.83%, over the total earning assets of $4.26 billion on December 31, 2004. Deposits of $3.02 billion on March 31, 2005 grew $142.2 million, or 4.94%, from $2.88 billion as of December 31, 2004. Demand deposits of $1.39 billion were up $66.7 million, or 5.04%, from $1.32 billion. Gross loans and leases of $2.18 billion increased $43.9 million, or 2.05%, from $2.14 billion on December 31, 2004. Total equity of $324.2 million on March 31, 2005 was up $6.75 million, or 2.13%, from $317.5 million as of December 31, 2004.

    Investment Securities

    Investment securities totaled $2.29 billion as of March 31, 2005. This represents an increase of $201.2 million, or 9.65%, when compared with $2.09 billion in investment securities as of December 31, 2004. It represents an increase of $383.7 million, or 20.17%, when compared with the $1.90 billion for the first quarter of 2004.

    Wealth Management Group

    The Wealth Management Group has over $2.1 billion in assets under administration. They provide trust, investment and brokerage related services.

    Loan and Lease Quality

    CVB Financial Corp reported non-performing assets of $9,000 as of March 31, 2005. The ratio of non-performing assets to total assets and non-performing assets to gross loans and leases is negligible. The allowance for loan and lease losses was $23.9 million as of March 31, 2005. This represents 1.10% of gross loans and leases. It compares with an allowance for loan and lease losses of $22.5 million, or 1.05% of gross loans and leases on December 31, 2004. The increase was primarily due to the allowance for loan and lease losses acquired from Granite State Bank of $756,000 and the net recoveries of $682,000 during the first quarter of 2005. Non-performing loans and leases represented 0.04% of the allowance for loan and lease losses as of March 31, 2005. Non-performing assets increased to $9,000 from the $2,000 reported as of December 31, 2004.
    The Company has not made a provision for loan and lease losses since 2001 due to the high quality of its loan portfolio. This has been the case even though loans increased from $2.14 billion as of December 31, 2004 to $2.18 billion as of March 31, 2005. Recoveries of $771,000 more than offset charge offs of $89,000 million during first quarter of 2005.

    Other Items in 2005

    On February 25, 2005, the Company acquired 100% of the stock of Granite State Bank. The merger agreement provides for Granite State Bank to merge with and into Citizens Business Bank. Citizens Business Bank represents the continuing operation. The purchase price was $19.00 per share, or approximately $26.7 million. The transaction was handled under purchase accounting. The Company issued 696,049 common shares or $13.4 million of its common stock to shareholders of Granite State Bank, and paid the remaining $13.3 million of the acquisition price in cash.
    Granite State Bank was headquartered in Monrovia, California, with one office in South Pasadena. The bank had total assets of $111.4 million, total loans of $62.8 million and total deposits of $103.1 million as of the acquisition date, February 25, 2005.

    Corporate Overview

    CVB Financial Corp. is the holding company for Citizens Business Bank. The Bank is the largest financial institution headquartered in the Inland Empire region of Southern California. It serves 32 cities with 39 business financial centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley areas of California. Its subsidiary, Golden West Financial Services, provides vehicle leasing, equipment leasing and real estate loan services.
    For the second year, CVB Financial Corp. received the KBW Honor Roll award at the Annual Community Bank Investor Conference hosted by Keefe, Bruyette & Woods, Inc. in New York on July 27, 28 and 29, 2004. This award was presented to the 31 banks in the United States that have reported increased earnings per share every year for the past ten years.
    Shares of CVB Financial Corp. common stock are listed on the Nasdaq under the ticker symbol of CVBF. For investor information on CVB Financial Corp., visit our Citizens Business Bank website at www.cbbank.com and click on the CVB Investor tab.

    Safe Harbor

    This document contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the projected. In addition, these forward-looking statements relate to the Company's current expectations regarding future operating results. Such issues and uncertainties include impact of changes in interest rates, a decline in economic conditions and increased competition among financial services providers. For a discussion of other factors that could cause actual results to differ, please see the publicly available Securities and Exchange Commission filings of CVB Financial Corp., including its Annual Report on Form 10-K for the year ended December 31, 2004, and particularly the discussion on risk factors within that document. The Company does not undertake any, and specifically, disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

CVB FINANCIAL CORP. CONSOLIDATED BALANCE SHEET (unaudited) dollars in thousands

March 31, December 31, ---------------------- ---------- 2005 2004 2004 ----------- ---------- ---------- Assets: Investment Securities available-for-sale $2,286,187 $1,902,503 $2,085,014 Investment in stock of Federal Home Loan Bank (FHLB) 58,092 42,022 53,565 Loans and lease finance receivables 2,184,021 1,812,487 2,140,074 Less allowance for credit losses (23,932) (22,005) (22,494) ----------- ----------- ---------- Net loans and lease finance receivables 2,160,089 1,790,482 2,117,580 ----------- ----------- ---------- Total earning assets 4,504,368 3,735,007 4,256,159 Cash and due from banks 127,113 118,156 84,400 Premises and equipment, net 35,755 30,035 33,508 Goodwill and intangibles 43,572 26,605 25,716 Cash value of life insurance 70,512 66,012 68,233 Other assets 50,673 34,101 42,995 ----------- ----------- ---------- TOTAL $4,831,993 $4,009,916 $4,511,011 =========== =========== ===========

Liabilities and Stockholders' Equity Liabilities: Deposits: Demand Deposits (noninterest-bearing) $1,388,942 $1,153,994 1,322,255 Investment Checking 274,312 223,561 258,636 Savings/MMDA 843,553 798,875 813,983 Time Deposits 510,387 522,826 480,165 ----------- ----------- ---------- Total Deposits 3,017,194 2,699,256 2,875,039

Demand Note to U.S. Treasury 2,136 1,829 6,453 Borrowings 1,361,000 885,900 1,186,000 Junior Subordinated Debentures 82,476 82,476 82,476 Other liabilities 44,956 44,026 43,560 ----------- ----------- ---------- Total Liabilities 4,507,762 3,713,487 4,193,528 Stockholders' equity: Stockholders' equity 334,378 272,769 308,591 Accumulated other comprehensive income (loss), net of tax (10,147) 23,660 8,892 ----------- ----------- ---------- 324,231 296,429 317,483 ----------- ----------- ---------- TOTAL $4,831,993 $4,009,916 $4,511,011 =========== =========== ===========

CVB FINANCIAL CORP. CONSOLIDATED AVERAGE BALANCE SHEET (unaudited) dollars in thousands

Three months ended March 31, 2005 2004 ----------- ----------- Assets: Federal funds sold and reverse repos $ - $ 879 Investment securities available-for-sale 2,132,465 1,887,734 Investment in stock of Federal Home Loan Bank (FHLB) 55,245 39,590 Loans and lease finance receivables 2,099,312 1,766,715 Less allowance for credit losses (23,154) (21,734) ----------- ----------- Net loans and lease finance receivables 2,076,158 1,744,981 ----------- ----------- Total earning assets 4,263,868 3,673,184 Cash and due from banks 118,011 108,279 Premises and equipment, net 34,392 30,718 Goodwill and intangibles 25,541 26,734 Cash value of life insurance 69,014 34,393 Other assets 38,878 52,564 ----------- ----------- TOTAL $4,549,704 $3,925,872 =========== ===========

Liabilities and Stockholders' Equity Liabilities: Deposits: Noninterest-bearing $1,336,937 $1,102,699 Interest-bearing 1,591,087 1,537,215 ----------- ----------- Total Deposits 2,928,024 2,639,914

Other borrowings 1,197,290 866,174 Junior Subordinated Debentures 82,476 82,476 Other liabilities 13,495 43,600 ----------- ----------- Total Liabilities 4,221,285 992,250 Stockholders' equity: Stockholders' equity 319,739 276,398 Accumulated other comprehensive income (loss), net of tax 8,680 17,310 ----------- ----------- 328,419 293,708 ----------- ---------- TOTAL $4,549,704 $3,925,872 =========== ===========

CVB FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Dollar amounts in thousands, except per share

For the Three Months Ended March 31, 2005 2004 -------- -------- Interest Income: Loans, including fees $32,693 $26,250 Investment securities: Taxable 19,179 15,728 Tax-advantaged 4,087 3,971 ------- ------- Total investment income 23,266 19,699 Federal funds sold 37 2 ------- ------- Total interest income 55,996 45,951 Interest Expense: Deposits 5,061 3,683 Borrowings and junior subordinated debentures 9,998 6,704 ------- ------- Total interest expense 15,059 10,387 ------- ------- Net interest income before provision for credit losses 40,937 35,564 Provision for credit losses - - ------- ------- Net interest income after provision for credit losses 40,937 35,564 Other Operating Income: Service charges on deposit accounts 3,042 3,793 Wealth Management services 1,232 1,162 Other-than-temporary impairment write down - (6,300) Other 2,805 2,126 ------- ------- Total other operating income 7,079 781 Other operating expenses: Salaries and employee benefits 13,146 11,742 Occupancy 1,998 1,774 Equipment 1,744 1,856 Professional services 1,025 1,121 Amortization of intangible assets 296 296 Other 2,488 4,716 ------- ------- Total other operating expenses 20,697 21,505 ------- ------- Earnings before income taxes 27,319 14,840 Income taxes 9,618 4,768 -------- -------- Net earnings $17,701 $10,072 ======== ========

Basic earnings per common share $ 0.29 $ 0.17 ======== ======== Diluted earnings per common share $ 0.29 $ 0.16 ======== ========

Cash dividends per common share $ 0.11 $ 0.12 ======== ========

All per share information has been retroactively adjusted to reflect the 5 for 4 stock split declared on December 29, 2004.

CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (unaudited)

Three months ended March 31, 2005 2004 ----------- -----------

Interest income - (Tax Effective)(te) $57,313 $47,236 Interest Expense 15,059 10,387 ----------- ----------- Net Interest income - (te) $42,254 $36,849 =========== ===========

Other-than-temporary impairment write-down $0 ($6,300)

Return on average assets 1.58% 1.03% Return on average equity 21.86% 13.79% Efficiency ratio 43.10% 59.17% Net interest margin (te) 3.99% 4.02%

Weighted average shares outstanding Basic 61,114,705 60,459,791 Diluted 61,730,417 61,500,490 Dividends paid $6,775 $5,806 Dividend payout ratio 38.27% 57.65%

Number of shares outstanding-EOP 61,666,993 60,483,023 Book value per share $5.26 $4.90

March 31, 2005 2004 ----------- ----------- Non-performing Assets (dollar amount in thousands): Non-accrual loans $9 $719 Loans past due 90 days or more and still accruing interest - - Restructured loans - - Other real estate owned (OREO), net - - ----------- ----------- Total non-performing assets $9 $719 =========== ===========

Percentage of non-performing assets to total loans outstanding and OREO 0.00% 0.04%

Percentage of non-performing assets to total assets 0.00% 0.02%

Non-performing assets to allowance for loan losses 0.04% 3.27%

Net Charge-off (Recovered) to Average loans -0.07% -0.04%

Allowance for Credit Losses: Beginning Balance $22,494 $21,282 Total Loans Charged-Off (89) (308) Total Loans Recovered 771 1,031 Acquisition of Granite State Bank 756 ----------- ----------- Net Loans Recovery (Charged-Off) 1,438 723 Provision Charged to Operating Expense - - ----------- ----------- Allowance for Credit Losses at End of period $23,932 $22,005 =========== ===========

CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (in thousands, except per share data) (unaudited)

Quarterly Common Stock Price

2005 2004 2003 --------------- --------------- --------------- Quarter End High Low High Low High Low ------- ------- ------- ------- ------- ------- March 31, $21.30 $17.60 $17.04 $15.13 $18.50 $14.10 June 30, $17.56 $15.72 $16.06 $14.07 September 30, $18.70 $16.16 $15.69 $13.35 December 31, $22.34 $17.80 $15.87 $13.94

Quarterly Consolidated Statements of Income

1Q 4Q 3Q 2Q 1Q 2005 2004 2004 2004 2004 -------- -------- -------- -------- -------- Interest income Loans, including fees $32,693 $31,095 $30,061 $27,136 $26,250 Investment securities and federal funds sold 23,303 22,184 21,960 19,315 19,701 -------- -------- -------- -------- -------- 55,996 53,279 52,021 46,451 45,951 Interest expense Deposits 5,061 4,356 3,863 3,605 3,683 Other borrowings 9,998 9,183 8,182 6,939 6,704 -------- -------- -------- -------- -------- 15,059 13,539 12,045 10,544 10,387 Net interest income before provision for credit losses 40,937 39,740 39,976 35,907 35,564 Provision for credit losses - - - - - -------- -------- -------- -------- -------- Net interest income after provision for credit losses 40,937 39,740 39,976 35,907 35,564

Non-interest income 7,079 7,596 7,519 12,011 781 Non-interest expenses 20,697 25,462 21,752 21,004 21,505 -------- -------- -------- -------- -------- Earnings before income taxes 27,319 21,874 25,743 26,914 14,840 Income taxes 9,618 4,986 8,668 9,462 4,768 -------- -------- -------- -------- -------- Net earnings $17,701 $16,888 $17,075 17,452 $10,072 ======== ======== ======== ======== ========

Basic earning per common share $0.29 $0.28 $0.28 $0.29 $0.17 Diluted earnings per common share $0.29 $0.28 $0.28 $0.28 $0.16

Cash dividends per common share $0.11 $0.11 $0.13 $0.12 $0.12

Dividends Paid $6,775 $6,733 $6,293 $5,836 $5,806

Financial Measures That Supplement GAAP

Our discussions sometimes contain financial information not required to be presented by generally accepted accounting principles (GAAP). We do this to better inform readers of our financial statements. The SEC requires us to present a reconciliation of GAAP presentation with non-GAAP presentation.

The following table reconciles the differences in net earnings with and without the settlement of robbery loss and the other-than- temporary impairment write down in conformity with GAAP.

Net Earnings Reconciliation (non-GAAP disclosure): Three months ended March 31, 2005 2004 -------- -------- Net earnings without the settlement of robbery loss and other-than-temporary impairment write-down $16,016 $14,348 Settlement of robbery loss, net of tax 1,685 Other-than-temporary impairment write-down, net of tax - (4,276) -------- -------- Reported net earnings $17,701 $10,072 ======== ========

Settlement of robbery loss $2,600 Other-than-temporary impairment write-down - ($6,300) Tax effect (915) 2,024 -------- -------- Net of taxes $1,685 ($4,276) ======== ========

We have presented net earnings without the settlement of robbery loss and other-than-temporary impairment write-down on investment securities to show shareholders the earnings from operations unaffected by the impact of these items. We believe this presentation allows the reader to more easily assess the results of the Company's operations and business.

Ratios Reconciliation (non-GAAP disclosure):

The following table reconciles the differences in ratios with and without the settlement of robbery loss and the other-than-temporary impairment write down in conformity with GAAP.

Ratios Reconciliation For the Three Months Ended March 31, 2005 -------------------------------- Without Settlement Reported settlement of earnings of robbery robbery loss loss ----------- ---------- --------- ( amounts in thousands )

Other Operating Expense $23,297 $(2,600) $20,697 ----------- ---------- ---------

Net Revenues $48,016 $- $48,016 ----------- ---------- ---------

Net Earnings $16,016 $1,685 $17,701 ----------- ---------- ---------

Return on Beginning Equity 20.46% 22.61% Return on Average Equity 19.78% 21.86% Return on Average Assets 1.43% 1.58% Efficiency Ratio 48.52% 43.10% Operating Costs as % of Average assets 2.08% 1.84%

We have presented ratios without the settlement of robbery loss and other-than-temporary impairment write-down on investment securities to show shareholders the earnings from operations unaffected by the impact of these items. We believe this presentation allows the reader to more easily assess the results of the Company's operations and business.

--30--WAM/la*

CONTACT: CVB Financial Corp. D. Linn Wiley, 909-980-4030

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: BANKING EARNINGS SOURCE: CVB Financial Corp.

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