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CVB Financial Corp. Reports Operating Results (10-Q)

May 10, 2010 | About:
10qk

10qk

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CVB Financial Corp. (CVBF) filed Quarterly Report for the period ended 2010-03-31.

Cvb Financial Corp. has a market cap of $1.04 billion; its shares were traded at around $9.8 with a P/E ratio of 21.3 and P/S ratio of 2.66. The dividend yield of Cvb Financial Corp. stocks is 3.47%. Cvb Financial Corp. had an annual average earning growth of 9.5% over the past 10 years. GuruFocus rated Cvb Financial Corp. the business predictability rank of 3-star.CVBF is in the portfolios of Richard Aster Jr of Meridian Fund, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

We reported net earnings of $16.1 million for the three months ended March 31, 2010. This represented an increase of $2.9 million or 22.42%, from net earnings of $13.2 million for the three months ended March 31, 2009. Basic and diluted earnings per common share for the three-month period increased to $0.15 per common share for 2010, compared to $0.13 per common share for 2009. The annualized return on average assets was 0.96% for the three months of 2010 compared to an annualized return on average assets of 0.81% for the three months of 2009. The annualized return on average equity was 10.07% for the three months ended March 31, 2010, compared to an annualized return of 8.56% for the three months ended March 31, 2009.

Interest income totaled $90.6 million for the first three months of 2010. This represented an increase of $11.6 million, or 14.68%, compared to total interest income of $79.0 million for the same period last year. The increase in interest income is primarily due to a $13.4 million discount accretion on covered loans acquired from SJB. This amount represents the discount recognized from the sale of two loans and principal payments on other loans and is recorded as a yield adjustment to interest income on loans. As a result, average yield on earning assets increased to 6.06% for the three months of 2010 from 5.26% for the same period of 2009, or 80 basis points. Average earning assets decreased by $63.4 million, or 1.01%, from $6.28 billion to $6.21 billion.

Interest expense totaled $17.2 million for the first three months of 2010. This represented a decrease of $6.4 million, or 27.28%, from total interest expense of $23.7 million for the same period last year. The decrease in interest expense was primarily the result of a decrease in the average rate paid on interest-bearing liabilities to 1.52% for the first three months of 2010 from 2.07% for the same period in 2009, or 55 basis points. The decrease in rates paid on deposits and borrowings was offset by an increase in average interest-bearing deposits of $644.5 million, or 28.5%, from $2.26 billion to $2.91 billion.

As stated above, the net interest margin measures net interest income as a percentage of average earning assets. Our tax effected (TE) net interest margin was 4.95% for the three months of 2010, compared to 3.74% for the first three months of 2009. The increase in the net interest margin over the same period last year is primarily the result of the $13.4 million discount accretion on covered SJB loans which impacted interest income on loans. This was partially offset by changes in the mix of assets and liabilities as discussed in the following paragraphs. Generally, our net interest margin improves in a decreasing interest rate environment as our deposits and borrowings reprice much faster than our loans and securities.

The yield (TE) on earning assets increased to 6.06% for the three months of 2010, from 5.26% for the same period last year. Average loans as a percent of earning assets increased to 64.57% in the three months of 2010 over 58.63% for the same period in 2009. Average investments as a percent of earning assets decreased to 33.61% in the three months of 2010 from 39.88% for the same period in 2009. The yield on loans for the first three months of 2010 increased to 6.85% as compared to 5.46% for the same period in 2009 as a result of $13.4 million discount accretion on SJB covered loans. The yield on loans decline at a slower rate than general interest rates as approximately 57% of the Companys loans are fixed-rate loans or hybrid adjustable loans with interest rates that are typically fixed for the first five years of the loans and reset at fixed rates for the remaining 5-year terms. The yield (TE) on investments for the first three months of 2010 decreased to 4.85% compared to 5.17% for the same period in 2009.

The cost of average interest-bearing liabilities decreased to 1.52% for the first three months of 2010 as compared to 2.07% for the same period in 2009, reflecting a decrease in interest rates and change in the mix of interest-bearing liabilities. Average borrowings as a percent of average interest-bearing liabilities decreased to 36.30% during the first three months of 2010 as compared to 50.70% for the same period in 2009. Average borrowings were $1.66 billion as of March 31, 2010. This represents a decrease of $669.2 million or 28.79%, from average borrowings of $2.32 billion as of March 31, 2009. The cost of borrowings for the first three months of 2010 decreased to 2.88% as compared to 2.94% for the same period in 2009. Borrowings typically have a higher cost than interest-bearing deposits. The cost of interest-bearing deposits for the first three months of 2010 decreased to 0.74% as compared to 1.18% for the same period in 2009, while average deposits increased $644.5 million or 28.50% over the same periods. The FDIC has approved the payment of interest on certain demand deposit accounts. This could have a negative impact on our net interest margin, net interest spread, and net earnings, should this be implemented fully. Currently, we pay interest on NOW and Money Market Accounts. The overall decrease in interest rates and decrease in average borrowings, offset by an increase in average deposits, resulted in a decrease in our interest expense.

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