CVB Financial Corp. (CVBF) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals a mixed outlook: strong loan originations and optimistic merger progress are positive, but rising expenses and lower margins are concerns. The Q&A highlights normal seasonal changes and competitive challenges, with management maintaining cautious optimism. Given the market cap, the stock price is unlikely to see significant movement, resulting in a neutral sentiment.
Key Financial Performance
Net Earnings $55 million or $0.40 per share for Q4 2025, compared to $52.6 million or $0.38 per share in Q3 2025 and $50.9 million or $0.36 per share in Q4 2024. The increase was primarily due to growth in net interest income.
Pretax Income Increased by $5.4 million quarter-over-quarter and $6.3 million year-over-year, driven by growth in net interest income.
Net Interest Income $122.7 million in Q4 2025, up $7 million (6%) from Q3 2025 and $12.2 million (11%) from Q4 2024. Growth was due to higher interest income and a $3.2 million interest collection on a nonperforming loan.
Noninterest Income $11.2 million in Q4 2025, down $1.8 million from Q3 2025 and $1.9 million from Q4 2024. Decline due to lower bank-owned life insurance income and other income.
Total Loans $8.7 billion as of December 31, 2025, up $228 million (2.7%) from Q3 2025 and $163 million (2%) from December 31, 2024. Growth was driven by increases in nearly all loan categories, including dairy and livestock loans, C&I loans, CRE loans, and SBA 504 loans.
Loan Originations Approximately 70% higher in 2025 compared to 2024, with Q4 2025 production 15% higher than Q3 2025.
Nonperforming and Delinquent Loans Decreased by $20 million to $8 million as of December 31, 2025, due to the payoff of a $20 million nonperforming loan.
Deposits and Customer Repurchase Agreements $12.6 billion as of December 31, 2025, with noninterest-bearing deposits declining by $440 million and interest-bearing deposits increasing by $430 million from Q3 2025. Seasonal deposit declines were noted.
Cost of Deposits and Repos 86 basis points in Q4 2025, down from 90 basis points in Q3 2025 and 97 basis points in Q4 2024.
Allowance for Credit Losses (ACL) $77 million as of December 31, 2025, down from $79 million in Q3 2025. The decrease was due to a $2.5 million recapture of credit loss and net recoveries of $325,000.
Noninterest Expense $62 million in Q4 2025, up from $58.6 million in Q3 2025 and $58.5 million in Q4 2024. Increase was due to $1.6 million in merger-related expenses and a $1 million provision for off-balance sheet reserves.
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Operating Highlights
Loan Growth: Total loans increased by $228 million (2.7%) from Q3 2025 and $163 million (2%) from 2024. Growth was seen across nearly all loan categories, including dairy and livestock loans, C&I loans, CRE loans, SBA 504 loans, and construction loans.
Deposit Trends: Average total deposits and customer repurchase agreements were $12.6 billion in Q4 2025, with noninterest-bearing deposits declining by $122 million compared to Q3 2025, while interest-bearing deposits and customer repos grew by $234 million.
Net Interest Income: Net interest income grew by $7 million (6%) from Q3 2025 and $12.2 million (11%) from Q4 2024, driven by higher loan yields and increased earning assets.
Operational Efficiency: Excluding acquisition expenses and off-balance sheet reserves, operating expenses grew by 2.3% from Q3 2025 and 1.6% from Q4 2024, achieving positive operating leverage of 2% and 6%, respectively.
Merger Activity: Incurred $1.6 million in acquisition expenses related to the pending merger with Heritage Bank of Commerce.
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Risk or Challenges
Noninterest Income Decline: Noninterest income decreased by $1.8 million compared to the third quarter and $1.9 million compared to the fourth quarter of 2024, driven by declines in bank-owned life insurance income and other income.
Loss on Sale of Investment Securities: The company incurred a $2.8 million loss on the sale of investment securities during the fourth quarter.
Merger-Related Expenses: The company incurred $1.6 million in acquisition expenses related to the pending merger with Heritage Bank of Commerce.
Seasonal Deposit Declines: Noninterest-bearing deposits declined by $440 million at year-end, which is a typical seasonal trend but could impact liquidity.
Rate Competition for Loans: Intense rate competition for high-quality loans could pressure margins and impact loan growth.
Economic Forecast Risks: The economic forecast predicts GDP below 1.5% through 2027, unemployment above 5% through 2028, and declining commercial real estate prices through 2026, which could negatively impact loan performance and asset quality.
Allowance for Credit Losses: The allowance for credit losses decreased from $79 million to $77 million, which could pose risks if economic conditions worsen.
Unrealized Losses on Securities: The unrealized loss on available-for-sale securities was $308 million as of December 31, 2025, which could impact the company's financial position if market conditions deteriorate.
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Guidance & Outlook
Loan Pipelines: Loan pipelines remain strong going into 2026, although rate competition for quality loans continues to be intense.
Loan Originations: Loan originations in the fourth quarter had average yields of approximately 6.25%, consistent with the prior quarter.
Economic Forecast: Real GDP is forecasted to stay below 1.5% through 2027 and not reach 2% until 2029. The unemployment rate is forecasted to reach 5% by the beginning of 2026 and remain above 5% through 2028. Commercial real estate prices are forecasted to continue their decline through the third quarter of 2026 before experiencing growth through 2029.
Investment Portfolio: During the fourth quarter, $30 million of securities were sold with an average book yield of 1.5%, realizing a $2.8 million loss, and $239 million of new securities were purchased at an average book value yield of approximately 4.75%.
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Shareholder Return Plan
Dividend per share for Q4 2025: $0.20
Consecutive quarters of cash dividend payments: 145 quarters
Shares repurchased in Q4 2025: 1.96 million shares
Average purchase price per share in Q4 2025: $18.80
Total shares repurchased in 2025: 4.3 million shares
Average purchase price per share in 2025: $18.60
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Key Q&A
Q:Can you elaborate on the seasonality and mix changes in interest-bearing deposits?
A:David Brager explained that there was no significant behavioral change among customers, attributing the changes to normal seasonality such as bonuses and tax accruals. He noted that noninterest-bearing deposits grew, which was unusual but not due to a shift from noninterest-bearing to interest-bearing deposits. E. Nicholson emphasized the importance of looking at quarterly averages as point-in-time balances can be misleading.
Q:What are your thoughts on nondairy and livestock loan growth and its sustainability?
A:David Brager stated that total loans grew by about 2% year-over-year, aligning with expectations. Loan pipelines remain strong, and utilization is normalizing. He expressed cautious optimism for 2026, supported by positive GDP growth and stable classified and nonperforming loans.
Q:Can you provide an update on the Heritage deal?
A:David Brager reported that the deal is progressing well, with office tours and preparations for applications and proxy processes underway. The anticipated close and systems conversion are expected in the second quarter.
Q:What is your perspective on the competitive landscape for deposits and the ability to manage Fed rate cuts?
A:David Brager noted that the bank focuses on operating companies, with new deposit relationships being 75% noninterest-bearing. The bank does not offer the highest rates to attract customers. Regarding Fed rate cuts, the bank lowered rates by 25% for accounts earning over 1% and aims to offset rate cuts on the asset side. He mentioned increased competition from banks offering high rates and additional incentives.
Q:How do you view the competitive landscape for loan growth and the impact of payoffs and paydowns?
A:David Brager acknowledged pricing competition but emphasized maintaining credit underwriting standards. He noted that payoffs and prepayment penalties are a consistent headwind but manageable. The bank is seeing more short-term loans, which may impact yields.
Q:What are your expectations for organic expense growth in 2026?
A:E. Nicholson highlighted that compensation expenses increased due to year-end incentive accrual adjustments and holiday-related benefits. Organic expense growth is expected to remain low, with technology and software investments being the primary areas of growth.
Q:Why is the margin still below 2019 levels, and how long will it take to normalize?
A:E. Nicholson attributed the lower margin to the securities book's lower yield and the gradual repricing of the loan book. He estimated it could take a couple of years to normalize, depending on yield environment changes. David Brager added that the bank has not undertaken large restructuring transactions, focusing instead on smaller adjustments.
Q:What drove the increase in loan yields this quarter?
A:E. Nicholson attributed the increase to a mix of factors, including higher dairy borrowing and the repricing of the back book. New loan production also contributed to the higher yields.
Q:Will there be any restructuring of Heritage Commerce's balance sheet post-merger?
A:E. Nicholson stated that approximately $400 million of single-family loans with long durations will be sold and reinvested into shorter-duration investments. No other significant restructuring plans were announced.
Q:What caused the decline in noninterest-bearing deposits?
A:David Brager explained that the decline was due to normal seasonal movements, such as tax payments and bonuses, with no loss of significant relationships. E. Nicholson emphasized the importance of looking at average balances for a more accurate picture.
Q:What are your expectations for loan growth post-Heritage Commerce merger?
A:David Brager expressed optimism about loan growth opportunities in new markets and the ability to offer more to Heritage's clients. However, he emphasized the importance of maintaining credit quality and integrating the merger successfully.
Q:What factors contribute to loan modifications?
A:David Brager explained that loan modifications can result from borrowers requesting assistance or from the bank identifying issues during annual reviews, such as not meeting debt service coverage or covenant requirements.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about how long it would take to normalize margins, citing too many variables and uncertainties. Additionally, they did not provide specific details on the competitive landscape for underwriting standards, only stating that they maintain their credit quality.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACL asset
ACL recapture
Bank Commerce
Bank life
Brager President
Brager share
CI loan
CRE loan
Changes allowance
Commerce Changes
Heritage Bank
Loan origination
Noninterest deposit
Officer speaker
Risk today
SBA loan
Trust investment
acquisition expense
addition income
beginning
end increase
harbor
income increase
income loan
increase income
increase loan
loan CRE
loan Loan
loan SBA
loan increase
loan yield
loss loan
loss sale
point basis
sale investment
security book
th
yield loss
CVBF Transcript
CVB Financial Corp. (CVBF) Q4 2025 Earnings Call Transcript
Unknown1-22
The earnings call reveals a mixed outlook: strong loan originations and optimistic merger progress are positive, but rising expenses and lower margins are concerns. The Q&A highlights normal seasonal changes and competitive challenges, with management maintaining cautious optimism. Given the market cap, the stock price is unlikely to see significant movement, resulting in a neutral sentiment.
CVB Financial Corp. (CVBF) Q3 2025 Earnings Call Transcript
Unknown10-23
The earnings call summary presents a mixed picture. Financial performance and market strategy are positive, with strong loan growth and deposit pipelines. However, concerns about pricing competition, potential negative impact of interest rate swaps, and vague responses on M&A and interest rate impacts contribute to uncertainty. The Q&A reveals management's optimism but also highlights competitive pressures and potential risks. Considering these factors, the sentiment is neutral, as positive elements are balanced by uncertainties and competitive challenges.
CVB Financial (CVBF) Q2 2025 Earnings Call Transcript
Unknown7-25
The earnings call presents a mixed outlook. While there are positive aspects such as increased loan originations and a strong capital position, there are also concerns like declining total loans and competitive pressures on loan origination yields. The Q&A reveals uncertainties in M&A activity and lack of specifics on prepay income. The market cap is moderate, suggesting a less volatile reaction. Overall, the combination of positive and negative factors suggests a neutral stock price movement in the short term.
CVB Financial Corp. (CVBF) Q1 2025 Earnings Call Transcript
Positive4-24
The earnings call summary shows strong financial performance, with increased net earnings, stable capital ratios, and improved operational efficiency. The share repurchase program and consistent dividends indicate shareholder value focus. While there are concerns about loan declines and unclear guidance on tariffs and deposit costs, the positive outlook on loan growth, new business opportunities, and improved interest margins provide a positive sentiment. Given the market cap, these factors suggest a moderate positive stock price movement over the next two weeks.
CVBF Slides
CVBF Report
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