FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
For Quarter Ended March 31, 1995 Commission File Number: 1-10394
CVB FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
California 95-3629339
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
701 North Haven Ave, Suite 350, Ontario, California 91764
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (909) 980-4030
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Number of shares of common stock of the registrant: 8,068,908 outstanding as of
May 8, 1995.
This Form 10-Q contains 22 pages. Exhibit index on page 20.
PAGE 1
<PAGE>
PART I - FINANCIAL INFORMATION
CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
dollar amounts in thousands
March 31, December 31,
1995 1994
----------- ------------
(unaudited)
ASSETS
Investment securities held-to-maturity
(market values of $18,636 and $18,073) $ 18,794 $ 19,018
Investment securities available-for-sale 200,954 173,248
Federal funds sold and interest-bearing
deposits with other financial institutions 100 15,199
Loans and lease finance receivables,net 474,136 484,618
--------- --------
Total earning assets 693,984 692,083
Cash and due from banks 69,671 94,630
Premises and equipment, net 12,590 12,801
Other real estate owned, net 11,609 9,860
Goodwill 8,979 9,139
Other assets 15,212 17,582
--------- --------
$ 812,045 $ 836,095
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 266,630 $ 327,807
Interest-bearing 433,960 434,817
--------- --------
700,590 762,624
Demand note issued to U.S. Treasury 2,926 6,430
Long-term capitalized lease 489 494
Federal Funds Purchased 11,000 0
Repurchase Agreement 22,675 0
Other liabilities 7,324 4,607
--------- --------
745,004 774,155
Stockholders' Equity:
Preferred stock (authorized 20,000,000
shares without par; none issued
or outstanding) 0 0
Common stock (authorized, 50,000,000 shares
without par; issued and outstanding
8,066,915 and 8,056,774) 32,501 32,438
Retained earnings 38,053 36,128
Net unrealized gains(losses) on investment
securities available-for-sale (3,513) (6,626)
--------- --------
67,041 61,940
--------- --------
$ 812,045 $ 836,095
========= ========
See accompanying notes to the consolidated financial statements.
PAGE 2
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CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
dollar amounts in thousands, except per share
For the Three Months
Ended March 31,
1995 1994
-------- --------
Interest income:
Loans, including fees $ 12,360 $ 9,591
Investment securities:
Taxable 3,251 2,092
Tax-advantaged 101 72
-------- --------
3,352 2,164
Federal funds sold and interest bearing
deposits with other financial institutions 25 85
15,737 11,840
-------- --------
Interest expense:
Deposits 3,153 2,345
Other borrowings 480 71
-------- --------
3,633 2,416
-------- --------
Net interest income 12,104 9,424
Provision for credit losses 1,225 50
-------- --------
Net interest income after
provision for credit losses 10,879 9,374
Other operating income:
Service charges on deposit accounts 1,650 1,248
(Losses) Gains on sale of investment securities 0 (128)
Gains on sale of other real estate owned 6 5
Other 442 328
------- --------
2,098 1,453
Other operating expenses:
Salaries and employee benefits 4,251 3,576
Deposit insurance premiums 397 312
Occupancy 790 596
Equipment 518 458
Provision for losses on other real estate owned 0 200
Other 2,664 1,958
------- --------
8,620 7,100
------- --------
Earnings before income taxes 4,357 3,727
Provision for income taxes 1,816 1,506
------- --------
Net earnings $ 2,541 $ 2,221
======= ========
Earnings per common share $ 0.30 $ 0.26
======= ========
Cash dividends per common share $ 0.08 $ 0.07
======= ========
See accompanying notes to the consolidated financial statements.
PAGE 3
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CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
dollar amounts in thousands
For the Three Months
Ended March 31,
1995 1994
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 14,969 $ 10,813
Service charges and other fees received 2,098 1,586
Interest paid (3,440) (2,246)
Cash paid to suppliers and employees (7,627) (8,070)
Income taxes paid (205) (1,301)
--------- ---------
5,795 782
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities
available for sale 0 53,170
Proceeds from maturities of securities
available for sale 5,906 8,714
Proceeds from maturities of securities
held to maturity 373 412
Purchases of securities available for sale (28,322) (91,950)
Purchases of securities held to maturity (112) (1,184)
Net (increase) decrease in loans 7,777 10,176
Loan origination fees received 448 684
Proceeds from sale of premises and equipment 20 18
Purchase of premises and equipment (216) (915)
Other investing activities 729 (5,612)
-------- --------
(13,397) (26,487)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase(decrease)in transaction deposits (72,828) 17,571
Net increase(decrease) in time deposits 10,794 15,512
Net increase(decrease) in short-term borrowings 30,167 (7,765)
Dividends paid (652) (588)
Exercise of stock options 63 64
-------- --------
(32,456) 24,794
-------- --------
NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS (40,058) (911)
CASH AND CASH EQUIVALENTS, beginning of year 109,829 60,853
--------- --------
CASH AND CASH EQUIVALENTS, March 31, $ 69,771 $ 59,942
========= ========
See accompanying notes to the consolidated financial statements.
PAGE 4
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CVB FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
dollar amounts in thousands
For the Three Months
Ended March 31,
1995 1994
-------- --------
RECONCILIATION OF NET EARNINGS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net earnings $ 2,541 $ 2,221
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Loss (Gain) on sale of investment securities 0 128
Amortization of premiums on investment securities (25) 175
Provision for loan and OREO losses 1,225 250
Accretion of deferred loan fees and costs (449) (612)
Loan origination costs capitalized (379) (633)
Depreciation and amortization 466 337
Change in accrued interest receivable (294) (590)
Change in accrued interest payable 193 170
Change in other assets and liabilities 2,517 (664)
--------- --------
3,254 (1,439)
--------- --------
$ 5,795 $ 782
========= ========
PAGE 5
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CVB FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 1995 and 1994
1. Summary of Significant Accounting Policies. See note 1 of the
Notes to Consolidated Financial Statements in CVB Financial Corp.'s 1994 Annual
Report. Goodwill resulting from purchase accounting treatment of acquired banks
is amortized straight line over 15 years.
The Company adopted SFAS 114 as of January 1, 1995. The adoption of the
standard did not result in an impact on the financial position or results of
operations at that date. As of March 31, 1995, loans for which impairment has
been recognized amounted to $9,291,000. The allowance for credit losses related
to those loans amounted to $1,834,000. In addition, loans for which impairment
was recognized were secured by collateral with a fair market value of
$7,957,000 as of March 31, 1995. The Company recognizes the change in present
value as bad-debt expense in the same manner in which impairment was recognized
or as a reduction in the amount of bad-debt expense that otherwise would be
reported.
2. Certain reclassifications have been made in the 1994 financial information
to conform to the presentation used in 1995.
3. In the ordinary course of business, the Company enters into commitments
to extend credit to its customers. These commitments are not reflected in the
accompanying consolidated financial statements. As of March 31, 1995, the
Company had entered into commitments with certain customers amounting to $80.8
million compared to $76.7 million at December 31, 1994. Letters of credit at
March 31, 1995 and December 31, 1994 were $5.8 million and $5.7 million,
respectively.
4. The interim consolidated financial statements are unaudited and reflect
all adjustments and reclassifications which, in the opinion of management, are
necessary for a fair statement of the results of operations and financial
condition for the interim period. All adjustments and reclassifications are of
a normal and recurring nature. Results for the period ending March 31, 1995 are
not necessarily indicative of results which may be expected for any other
interim period or for the year as a whole.
5. The actual number of shares outstanding at March 31, 1995 was
8,066,915. Earnings per share are calculated on the basis of the weighted
average number of shares outstanding during the quarter plus shares issuable
upon the assumed exercise of outstanding common stock options. The number of
shares used in the calculation of earnings per share was 8,403,625 at March 31,
1995 and 8,296,362 at March 31, 1994. All 1994 per share information in the
financial statements and in management's discussion and analysis has been
restated to give retroactive effect to the 10% stock dividend declared on
December 21, 1994.
6. Supplemental cash flow information. During the three-month period
ended March 31, 1995, loans amounting to $1.9 million were transferred to Other
Real Estate Owned ("OREO") as a result of foreclosure on the real properties
held as collateral. OREO sold during the three-month period ended March 31,
1995, amounted to $108,000.
PAGE 6
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CVB FINANCIAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis is written to provide greater insight
into the results of operations and the financial condition of CVB Financial
Corp. and its subsidiaries. Reference should be made to the financial
statements included in this report and in the Company's 1994 annual report for a
more complete understanding of CVB Financial Corp. and its operations.
Throughout this discussion, "Company" refers to CVB Financial Corp. and its
subsidiaries as a consolidated entity. "CVB" refers to CVB Financial Corp. as
the unconsolidated parent company, and "Bank" refers to Chino Valley Bank.
RESULTS OF OPERATIONS
The Company reported net earnings of $2,541,000, or $0.30 per share, for
the quarter ended March 31, 1995, compared to $2,221,000, or $0.26 per share for
the same period in 1994, an increase of $320,000, or 14.39%. The annualized
return on average assets during the quarter ended March 31, 1995 was 1.26%, and
the annualized return on average equity was 16.02%. For the quarter ended March
31, 1994, the annualized return on average assets was 1.30% and the annualized
return on average equity was 14.80%.
Pre-tax operating earnings, which exclude the impact of gains or losses on
sale of securities and OREO and provisions for losses on loans and OREO, were
$5,576,000 during the quarter ended March 31, 1995, an increase of $1,477,000 or
36.03% from $4,099,000 for the first quarter of 1994.
Net Interest Income/Net Interest Margin
The principal component of the Company's earnings is net interest income which
is the difference between interest and fees earned on loans and investments and
interest paid on deposits and other borrowings. When net interest income is
expressed as a percentage of average earning assets, the result is the net
interest margin. The net interest spread ("NIS") is the yield on average
earning assets minus the average cost of interest-bearing deposits and borrowed
funds.
Net interest income increased from $9.4 million for the three months ended
March 31, 1994, to $12.1 million for the three months ended March 31, 1995 an
increase of $2.7 million, or 28.45%, between the two periods. The increase in
net interest income was the result of increased volume of average earning
assets combined with an increase in the net interest spread and the net interest
margin for the three months ended March 31, 1995. The net interest margin was
6.96%, up from 6.25% for the same three month period for 1994. The net interest
spread increased from 5.49% for the three months ended March 31, 1994, to 6.00%
for the three months ended March 31, 1995.
PAGE 7
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Interest income from earning assets increased due to an increase in the yield
on earning assets and a greater volume of average earning assets. Interest and
fee income from loans increased from $9.6 million for the three months ended
March 31, 1994, to $12.4 million for the three months ended March 31, 1995, an
increase of $2.8 million, or 28.88%. Interest income from investment securities
increased from $2.2 million for the three months ended March 31, 1994, to $3.4
million for the three months ended March 31, 1995, an increase of $1.2 million,
or 54.89%. Interest on average earning assets increased from $11.8 million for
the three months ended March 31, 1994 to $15.7 million for the three months
ended March 31, 1995, an increase of $3.9 million, or 32.91%
Interest expense increased from $2.4 million for the three months ended March
31, 1994, to $3.6 million for the three months ended March 31, 1995. The
increase in interest expense resulted from an increase in average deposits of
$100.8 million, or 16.66%, and an increase in the cost of deposits. Average
interest bearing deposits increased by $44.0 million, or 43.7% of the total
increase in average deposits. The cost of average interest bearing deposits
increased from 2.35% for the three months ended March 31, 1994, to 2.85% for the
three months ended March 31, 1995. As a percentage of total deposits, demand
deposits averaged $263.0 million, or 37.3% of total deposits during the three
months ended March 31, 1995, versus an average of $206.2 million, or 34.1% of
total deposits during the same period last year. Consequently, increases in
interest earning assets were funded by a greater percentage of demand deposits,
resulting in a lesser increase in the cost of funds in relation to the increases
in the yield on earning assets.
The yield on earning assets increased from 7.85% to 9.05% for the three months
ended March 31, 1994 and 1995, respectively, an increase of 120 basis points.
For the same periods, the cost of interest bearing liabilities was 2.37% and
3.05%, an increase of 68 basis points. As the increase in the yield on earning
assets was greater than the increase in the cost of interest bearing
liabilities, the net interest spread increased from 5.49% for the three months
ended March 31, 1994 to 6.00% for the three months ended March 31, 1995.
Table 1 shows the average balances of assets, liabilities, and stockholders'
equity and the related interest income, expense, and rates for the three month
periods ended March 31, 1995 and 1994. Rates for tax-preferenced investments
are shown on a taxable equivalent basis using a 34.0% tax rate. Table 2
summarizes the changes in interest income and interest expense based on changes
in average asset and liability balances (volume) and changes in average rates
(rate). For each category of earning assets and interest-bearing liabilities,
information is provided with respect to changes attributable to (1) changes in
volume (change in volume multiplied by initial rate), (2) changes in rate
(change in rate multiplied by initial volume) and (3) changes in rate/volume
(change in rate multiplied by change in volume).
PAGE 8
<PAGE>
The net interest spread and the net interest margin are largely affected by
the Company's ability to reprice assets and liabilities as interest rates
change. At March 31, 1995, the Bank's 90 days or less maturity/repricing gap
was a negative $84.7 million as compared to a negative $34.4 million at December
31, 1994. Generally, a negative gap produces a higher net interest margin and
net interest spread when rates fall and a lower net interest margin and net
interest spread when rates rise. However, as interest rates for different asset
and liability products offered by the Bank respond differently to changes in
interest rate environment, gap analysis is only a general indicator of interest
rate sensitivity.
TABLE 1 - Distribution of Average Assets, Liabilities, and Stockholders' Equity;
Interest Rates and Interest Differentials
(dollars in thousands)
Three-month periods ended March 31,
1995 1994
------------------------ ------------------------
Average Average
ASSETS Balance Interest Rate Balance Interest Rate
------------------------ ------------------------
Investment Securities
Taxable $ 207,015 3,251 6.28% $ 152,934 2,092 5.47%
Tax preferenced (1) 8,161 101 6.93% 6,299 72 6.39%
Federal Funds Sold
& Interest-bearing
deposits with other
financial institutions 1,761 25 5.68% 10,857 85 3.13%
Net Loans (2) (3) 480,569 12,360 10.29% 434,392 9,591 8.83%
------------------------- -------------------------
Total Earnings Assets 697,506 15,737 9.05% 604,482 11,840 7.85%
Total Non-earning
Assets 110,654 79,442
-------- --------
Total Assets $ 808,160 $ 683,924
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits $ 262,968 $ 206,214
Savings Deposits (4) 313,913 1,688 2.15% 302,514 1,551 2.05%
Time Deposits 128,684 1,465 4.55% 96,077 794 3.31%
------------------------- -------------------------
Total Deposits 705,565 3,153 1.79% 604,805 2,345 1.55%
------------------------- -------------------------
Other Borrowings 34,349 480 5.59% 10,025 71 2.83%
------------------------- -------------------------
Total Interest
-Bearing Liabilities 476,946 3,633 3.05% 408,616 2,416 2.37%
-------- --------
Other Liabilities 4,787 9,052
Stockholders' Equity 63,459 60,042
-------- --------
Total Liabilities and
Stockholders' Equity $ 808,160 $ 683,924
======== ========
Net interest spread 6.00% 5.49%
Net interest margin 6.96% 6.25%
(1) Yields are calculated on a taxable equivalent basis.
(2) Loan fees are included in total interest income as follows: 1995, $517;
1994, $663.
(3) Nonperforming loans are included in net loans as follows: 1995, $11,290;
1994, $14,269.
(4) Includes interest-bearing demand and money market accounts.
PAGE 9
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TABLE 2 - Rate and Volume Analysis for Changes in Interest Income, Interest
Expense and Net Interest Income
(amounts in thousands)
Comparison of three-month period
ended March 31, 1995 and 1994
Increase (decrease) in interest income or expense
due to changes in
-------------------------------------------------
Rate/
Volume Rate Volume Total
-------------------------------------------------
Interest Income:
Taxable investment securities $ 740 $ 310 $ 109 $ 1,159
Tax preferenced securities 21 6 2 29
Fed funds sold & interest
bearing deposits with
other institutions (71) 69 (58) (60)
Loans 1,019 1,582 168 2,769
----------------------------------------
Total earnings assets 1,709 1,967 221 3,897
----------------------------------------
Interest Expense:
Savings deposits 58 76 3 137
Time deposits 269 300 102 671
Other borrowings 174 69 166 409
-----------------------------------------
Total interest-bearing
liabiliites 501 445 271 1,217
-----------------------------------------
Net Interest Income $ 1,208 $ 1,522 $ (50) $ 2,680
=========================================
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Credit Loss Experience
The Company maintains an allowance for potential credit losses that is
increased by a provision for credit losses charged against operating results and
recoveries on loans previously charged off, and reduced by actual loan losses
charged to the allowance. The provision for loan losses was $1,225,000 for the
three months ended March 31, 1995, compared to a provision of $50,000 for the
three months ended March 31, 1994. Loans charged to the allowance, net of
recoveries totaled $1,503,000 for the three months ended March 31, 1995,
compared to $140,000 for the same period last year. At March 31, 1995, the
allowance for credit losses totaled $9.2 million, or 1.90% of total loans,
compared to an allowance of $8.8 million, or 2.00% of total loans, at March 31,
1994. Nonaccrual loans have declined from $12.6 million at December 31, 1994
to $11.3 million at March 31, 1995, a decrease of $1.3 million or 10.5%. Table
6 presents nonperforming assets (nonaccrual loans, loans 90 days or more past
due, restructured loans, and other real estate owned) as of December 31, 1994
and March 31, 1995. The Company has adopted the methods prescribed by Financial
Accounting Standard 114 for calculating the net present value of specific loans
determined for which the eventual collection of all principal and interest is
impaired.
While management believes that the allowance was adequate at March 31, 1995 to
absorb losses from any known or inherent risks in the portfolio, no assurance
can be given that economic conditions which adversely affect the Company's
service areas or other circumstances will not be reflected in increased
provisions or credit losses in the future. Table 3 shows comparative
information on net credit losses, provisions for credit losses, and the
allowance for credit losses for the periods indicated.
PAGE 11
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TABLE 3 - Summary of Credit Loss Experience Three-months
(amounts in thousands) ended March 31,
----------------------
1995 1994
Amount of Total Loans at End of Period $ 483,329 $ 438,655
========= =========
Average Total Loans Outstanding $ 489,660 $ 442,739
========= =========
Allowance for Credit Losses at
Beginning of Period $ 9,471 $ 8,849
Loans Charged-Off:
Real Estate Loans 1,447 0
Commercial and Industrial 116 144
Consumer Loans 8 8
--------- ---------
Total Loans Charged-Off 1,571 152
--------- ---------
Recoveries:
Real Estate Loans 18 0
Commercial and Industrial 44 9
Consumer Loans 6 3
--------- ---------
Total Loans Recovered 68 12
--------- ---------
Net Loans Charged-Off 1,503 140
--------- ---------
Provision Charged to Operating Expense 1,225 50
--------- ---------
Adjustment Incident to Mergers 0 24
--------- ---------
Allowance for Credit Losses at End of period $ 9,193 $ 8,783
========= =========
Net Loans Charged-Off to Average Total Loans<F1> 1.23% 0.13%
Net Loans Charged-Off to Total Loans at
End of Period<F1> 1.24% 0.13%
Allowance for Credit Losses to Average Total Loans 1.88% 1.98%
Allowance for Credit Lossess to Total Loans at
End of Period 1.90% 2.00%
Net Loans Charged-Off to allowance for
Credit Losses<F1> 65.40% 6.38%
Net Loans Charged-Off to Provision for
Credit Losses 122.69% 280.00%
[FN]
<F1>Net Loan Charge-Off amounts are annualized.
PAGE 12
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Other Operating Income
Other operating income includes service charges on deposit accounts, gain on
sale of securities, gross revenue from Community Trust Deed Services, the
Company's non-bank subsidiary, and other revenues not derived from interest on
earning assets. Other operating income, excluding gains on sales of securities
and OREO, for the three months ended March 31, 1995 was $2.1 million, compared
to $1.6 million for the same period last year. Fees from merchant bankcard
services and sublease income contributed to the increase in Other income. Other
operating income for the three months ended March 31, 1994 included a loss on
the sale of securities of $128,000.
Other Operating Expenses
Other operating expenses increased from $7.1 million for the three months
ended March 31, 1994 to $8.6 million for the three months ended March 31, 1995.
Other operating expenses for 1994 included $200,000 as a provision for possible
losses on other real estate owned (OREO). No provision was made for possible
losses on other real estate owned during the first quarter of 1995. Such
allowances reduce the possibility that the Company will experience additional
losses on the ultimate disposition of the properties. However, a further
decline in prices in southern California real estate may cause the Company to
increase its valuation allowance in the future. Note 1 of the financial
statements included in the Company's 1994 annual report describes the Company's
accounting for OREO. Excluding provisions for possible losses on OREO, total
other operating expenses for the three months ended March 31, 1995 and 1994
were $8,620,000 and $6,900,000, respectively, an increase of $1,720,000, or
24.93%.
As a result of the acquisitions of Western Industrial National Bank on June
24, 1994 and Pioneer Bank on July 8, 1994, the Bank has increased the number of
branches by three to nineteen resulting in an increase in operating expenses.
Salaries and employee benefits totaled $4,251,000, for the three months ended
March 31,1995, an increase of $675,000, compared to the same period last year
as a result of a general increase in wages and the acquisitions. The Bank also
expanded its merchant bankcard services and created a new international banking
department during the first quarter of 1995. As a percent of average assets,
other operating expenses have increased from 4.15% for the three months ended
March 31, 1994 to 4.27% for the three months ended March 31, 1995. As a percent
of total revenue, other operating expenses have declined from 53.4% to 48.3% for
the same periods, respectively.
BALANCE SHEET ANALYSIS
At March 31, 1995 total assets were $812.0 million, representing a decrease of
$24.1 million or 2.88% from total assets of $836.1 million at December 31, 1994.
Total deposits of $700.6 million at March 31, 1995, decreased $62.0 million, or
8.13%, from $762.6 million at December 31, 1994. Net loans decreased $10.5
million, or 2.16%, from $484.6 million at December 31, 1994 to $474.1 million at
March 31, 1995.
Investment Securities and Debt Securities Available-for-Sale
In May 1992, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments and
Debt and Equity Securities" (SFAS 115"). The Company adopted SFAS 115 in the
first quarter of 1994. Under the new rules, securities "available for sale" are
carried at their market values and changes in the securities' market values, net
of taxes, are recorded to equity capital. At March 31, 1995, the Company's
unrealized losses on securities-available-for sale totaled $6.0 million. The
Company recorded a decrease in equity capital of $3.5 million, net of $2.5
million of applicable income taxes during the three months ended March 31, 1995.
At December 31, 1994, net unrealized losses on securities available for sale
totaled $6.6 million, a decrease in unrealized losses of $3.1 million, or 46.98%
between the two periods. Note 1 to the financial statements in the Company's
1994 Annual Report discusses its current accounting policy.
PAGE 13
<PAGE>
Table 4 sets forth investment securities held-to-maturity and available-for-
sale, at March 31, 1995 and December 31, 1994.
<TABLE>
Table 4 - Composition of Securities Portfolio
(amounts in thousands)
<CAPTION>
March 31, 1995 December 31, 1994
Amortized Market Net Unreal Yield Amortized Market Net Unreal Yield
Cost Value ized Gain/ Cost Value ized Gain/
(Loss) (Loss)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities
Available for Sale $ 58,238 $ 58,059 $ (179) 6.43% $ 59,294 $ 58,125 $ (1,169) 6.19%
FHLMC, FNMA CMO's, REMIC's
and mortgage-backed
pass-through securities
Available for Sale 114,440 109,433 (5,007) 5.75% 113,404 104,520 (8,884) 5.75%
Held to Maturity 8,183 8,139 (44) 5.72% 8,385 7,997 (388) 5.72%
Other Government Agency
Securities Available
for Sale 32,575 32,404 (171) 6.52% 10,633 10,078 (555) 4.67%
GNMA mortgage-backed
pass-through securities
Held to Maturity 1,737 1,829 92 9.33% 1,787 1,838 51 9.09%
Tax-exempt Municipal
Securities Held
to Maturity 8,131 7,926 (205) 4.95% 8,214 7,606 (608) 4.95%
Other securities
Available for Sale 1,058 1,058 0 N/A 525 525 0 N/A
Held to Maturity 743 743 0 7.19% 632 632 0 7.52%
--------------------------------------- ----------------------------------------
$225,105 $219,591 $(5,514) 6.01% $202,874 $191,321 $(11,553) 5.27%
======================================= ========================================
</TABLE>
PAGE 14
<PAGE>
Loan Composition and Nonperforming Assets
Table 5 sets forth the distribution of the loan portfolio by type as of the
dates indicated (dollar amounts in thousands):
Table 5 - Distribution of Loan Portfolio by Type
March 31, December 31,
1995 1994
Commercial and Industrial (1) $256,501 $262,494
Real Estate:
Construction 24,450 26,302
Mortgage 120,348 116,077
Consumer 16,318 15,553
Lease finance receivables 22,319 23,246
Agribusiness 45,826 52,920
-------- --------
Gross Loans $485,762 $496,592
Less:
Allowance for credit losses 9,193 9,471
Deferred net loan fees 2,433 2,503
-------- --------
Net loans $474,136 $484,618
======== ========
(1) Includes $170.6 and $173.7 million of loans for which the Company holds
real property as collateral at March 31, 1995 and December 31, 1994,
respectively.
As set forth in Table 6, nonperforming assets (nonaccrual loans, loans 90 days
or more past due, restructured loans, and other real estate owned) totaled $32.9
million, or 4.05% of total assets, at March 31, 1995. This compares to $31.4
million, or 3.76% of total assets, at December 31, 1994, an increase of $1.5
million or 4.69 % between the two periods. Although management believes that
nonperforming loans are generally well secured and that potential losses are
reflected in the allowance for credit losses, there can be no assurance that the
continued deterioration in economic conditions or collateral values will not
result in future credit losses.
PAGE 15
<PAGE>
Table 6 - Nonperforming Assets
March 31, 1995 December 31, 1994
Nonaccrual loans $11,290 $12,613
Loans past due 90 days or more
and still accruing interest 5 -0-
Restructured loans 9,997 8,954
Other real estate owned (OREO), net 11,609 9,860
------- -------
Total nonperforming assets $32,901 $31,427
Percentage of nonperforming assets
to total loans outstanding & OREO 6.65% 6.24%
Percentage of nonperforming
assets to total assets 4.05% 3.76%
At March 31, 1995, nonaccrual loans were $11.3 million, down from $12.6
million at December 31, 1994. The majority of nonaccrual loans were
collateralized by real property at March 31, 1995. The estimated ratio of the
outstanding loan balances to the fair values of related collateral (loan-to-
value ratio) for nonaccrual loans at that date ranged from approximately 25% to
90%. The Bank has allocated specific reserves to provide for any potential loss
on these loans. Management cannot, however, predict the extent to which the
current economic environment may persist or worsen or the full impact such
environment may have on the Company's loan portfolio.
Deposits and Other Borrowings
Total deposits decreased to $700.6 million at March 31, 1995, from $762.6
million at December 31, 1994, a decrease of $62.0 million, or 8.13%. Total
deposits at December 31, 1994, included approximately $40.0 million in short
term demand deposits which were subsequently withdrawn. For the three months
ended March 31, 1995, noninterest-bearing deposits averaged 37.27% of total
deposits, compared to 34.10% for the same three month period last year.
Noninterest-bearing deposits were $266.6 million and $327.8 million at March 31,
1995 and December 31, 1994, respectively. Savings deposits averaged 44.49% of
total deposits during the first three months of 1995 compared to 50.02% for the
first three months of 1994. Savings deposits (money market, savings and
interest-bearing checking) decreased $11.6 million during the first three months
of 1995. Savings deposits were $305.8 million at March 31, 1995 compared to
$317.4 million at December 31, 1994. Time deposits increased by $10.8 million
during the first three months of 1995. For the three months ended March 31,
1995, time deposits averaged 18.24% of total deposits, up from 15.89% during the
same period in 1994.
PAGE 16
<PAGE>
Liquidity
The 1994 annual report describes the Company's principal sources of liquidity,
liquidity management objectives and liquidity measurements.
There are several accepted methods of measuring liquidity. Since the balance
between loans and deposits is integral to liquidity, the Company monitors its
loan-to-deposit ratio (gross loans divided by total deposits) as an important
part of its liquidity management. In general, the closer this ratio is to 100%,
the more reliant an institution becomes on its illiquid loan portfolio to absorb
fluctuations in deposits. At March 31, 1995, the Company's loan-to-deposit
ratio was 68.99% compared to 64.79% at December 31, 1994.
Another method used to measure liquidity is the liquidity ratio. This ratio
is calculated by dividing the difference between short-term liquid assets
(federal funds sold and investments maturing within one year) and large
liabilities (time deposits over $100,000 maturing within one year, federal funds
purchased, and other borrowed funds) by the sum of loans and long-term
investments. As of March 31, 1995 the ratio was a negative 10.88% as compared
to a negative 4.48% at December 31, 1994. Conceptually, this shows that the
Company was funding a modest 10.88% and 4.48% of its long-term, illiquid assets
with large liabilities at these dates, respectively.
Cash flows from operating activities, primarily representing net interest
income, totaled $5.8 million at March 31, 1995 compared to $782,000 at March 31,
1994. Net cash used in investing activities primarily purchases of investment
securities totaled $13.4 million at March 31, 1995, and $26.5 million at March
31, 1994. Cash flows from financing activities primarily representing changes
in deposits and short term borrowings totaled $32.5 million at March 31, 1995
compared to $24.8 million at March 31, 1994.
Capital Resources
The Company's equity capital was $67.0 million at March 31, 1995. The primary
source of capital for the Company continues to be the retention of operating
earnings. The Company's 1994 annual report (management's discussion and
analysis and note 12 of the accompanying financial statements) describes the
regulatory capital requirements of the Company and the Bank.
As of December 31, 1994, the Bank and the Company were required to meet the
risk-based capital standards set by the respective regulatory authorities. The
risk-based capital standards require the achievement of a minimum ratio of total
capital to risk-weighted assets of 8.0% (of which at least 4.0% must be Tier 1
capital). In addition, the regulatory institutions require the highest rated
institutions to maintain a minimum leverage ratio of 3.0% as of December 31,
1994. At March 31, 1995, the Bank and the Company met the minimum risk-based
capital ratio and leverage ratio requirements.
PAGE 17
<PAGE>
Table 7 below presents the Company's and the Bank's risk-based and leverage
capital ratios as of March 31, 1995 and December 31, 1994:
Table 7 - Regulatory Capital Ratios
Required
Minimum March 31, 1995 December 31, 1994
Capital Ratios Ratios Company Bank Company Bank
- - -------------- ------- ------- ---- ------- ----
Risk-based
Capital Ratios:
Tier I 4.00% 11.4% 11.1% 10.8% 10.4%
Total 8.00% 12.7% 12.3% 12.0% 11.7%
Leverage Ratio 3.00% 7.7% 7.4% 7.5% 7.3%
PAGE 18
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Not Applicable
Item 2 - Changes in Securities
Not Applicable
Item 3 - Defaults upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5 - Other Information
Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
Not Applicable
PAGE 19
<PAGE>
Exhibit Index
Exhibit No. Description Page
27 Financial Data Schedule 22
PAGE 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CVB FINANCIAL CORP.
(Registrant)
Date: May 12, 1995 /s/ Robert J. Schurheck
Robert J. Schurheck
Chief Financial Officer
PAGE 21
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31,
1995, CONSOLIDATED BALANCE SHEET, AND THE MARCH 31, 1995, CONSOLIDATED STATEMENT
OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 69,671
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 200,954
<INVESTMENTS-CARRYING> 18,794
<INVESTMENTS-MARKET> 18,636
<LOANS> 483,329
<ALLOWANCE> 9,193
<TOTAL-ASSETS> 812,045
<DEPOSITS> 700,590
<SHORT-TERM> 36,601
<LIABILITIES-OTHER> 7,324
<LONG-TERM> 489
<COMMON> 32,501
0
0
<OTHER-SE> 34,540
<TOTAL-LIABILITIES-AND-EQUITY> 812,045
<INTEREST-LOAN> 12,360
<INTEREST-INVEST> 3,352
<INTEREST-OTHER> 25
<INTEREST-TOTAL> 15,737
<INTEREST-DEPOSIT> 3,153
<INTEREST-EXPENSE> 3,633
<INTEREST-INCOME-NET> 12,104
<LOAN-LOSSES> 1,225
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<EXPENSE-OTHER> 8,620
<INCOME-PRETAX> 4,357
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,541
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 6.96
<LOANS-NON> 11,290
<LOANS-PAST> 5
<LOANS-TROUBLED> 9,997
<LOANS-PROBLEM> 1,657
<ALLOWANCE-OPEN> 9,471
<CHARGE-OFFS> 1,571
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</TABLE>
