CVB Financial Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gary Tenner - D.A. Davidson & Company - Analyst : So I had two quick questions. One, in terms of the tariff policies, I know the ag portfolio is not a huge portfolio for you guys at this point. But any thoughts on the potential impacts there on that customer base?

Question: Gary Tenner - D.A. Davidson & Company - Analyst : Okay. Appreciate that. And then can you talk a little bit about the pace of commercial real estate payoff activity in the context of your improved first quarter production and the improved pipelines you commented on in your prepared remarks? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 2:30PM, CVBF.OQ - Q1 2025 CVB Financial Corp Earnings Call

Question: Gary Tenner - D.A. Davidson & Company - Analyst : Yes. I appreciate that. Just as a follow-up, Dave, to your response. Do you think you're at the point where those -- that improvement in production starts to more consistently outpace the payoffs?

Question: Andrew Terrell - Stephens Inc. - Analyst : Maybe just to start, and I apologize if I missed it. The loan pre-payment penalties this quarter. Do you have what the impact of that was to interest -- loan interest income or maybe in loan yields or margin terms? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank I can just give you dollar wise. I mean, quarter over quarter, I think it was up about $300,000-ish. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 2:30PM, CVBF.OQ - Q1 2025 CVB Financial Corp Earnings Call

Question: David Feaster - Raymond James - Analyst : Maybe just one high level one. Obviously, there's a lot of uncertainty in the market. A lot of volatility just around Doge, around the trade wars and tariffs and all that, you are very disciplined on the credit side, both at initial underwriting and being proactive managing credit and addressing issues head on. I'm just curious -- with this backdrop, I mean, I guess, first off, where are you focused? Like what are you watching more closely today? And has your approach to either underwriting or managing credit and addressing some of these potential issues changed at all just given the broader economic uncertainty?

Question: David Feaster - Raymond James - Analyst : No, that's great. And maybe touching on the deposit side. I mean, look, you've got one of the best core deposit franchises in the country, right? And growth this quarter was really strong, NIB driven. It sounds like a lot of the growth came from the specialty business lines. I was hoping you could maybe touch on the competitive landscape for deposits today. How much of this growth is from existing clients or new clients to the bank? And just how do you think about your ability to continue to drive core deposit growth at this point?

Question: David Feaster - Raymond James - Analyst : Okay. And then just maybe last one for me. Touching on the capital side. I mean, you've got a really strong balance sheet. Obviously, we've been active with the buyback, continued repurchasing here in the second quarter. I'm just curious, how do you think about capital priorities today? I mean -- and balancing the buyback versus potential M&A? And just how do you get comfortable with M&A? I guess how are conversations going? And how do you get comfortable underwriting somebody else's credit today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 2:30PM, CVBF.OQ - Q1 2025 CVB Financial Corp Earnings Call

Question: Adam Butler - Piper Sandler Companies - Analyst : This is Adam on for Matthew Clark. Just to start off, I was curious in the fee income side. I saw other came up a little bit this quarter. I was just curious what drove that increase, and if it's sustainable and just trying to get your overall outlook for the run rate going forward? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank Yes, Adam, I think in our prepared remarks, we noted that some of our equity investments we have for CRA purposes, saw an increase year over year and quarter over quarter, and that's probably what you're seeing in the other income. And those -- although there are dividend incomes that are very consistent from some of those, a number of those we have to account for on a net asset value. So there is some volatility there, that can be impacted by both the equity markets and the bond markets. And so Q1 was a pretty good quarter for those. We've had better, but we've had worse. So there is a little bit of volatility there.

Question: Tim Coffey - Janney Montgomery Scott LLC - Analyst : Going back to the CRE discussion, are there property types where you're seeing the most demand? I mean, is it office in the central business districts, industrial warehouses and with Empire. Can you provide some color?

Question: Tim Coffey - Janney Montgomery Scott LLC - Analyst : Okay. I appreciate that. Outside of commercial real estate, what is the sentiment of your customers right now?

Question: Tim Coffey - Janney Montgomery Scott LLC - Analyst : Yes. Yes. I mean the discussions or in actual applications that you're seeing?

Question: Tim Coffey - Janney Montgomery Scott LLC - Analyst : Okay. And then just maybe a inside base loss question here. As you look at underwriting new construction loans, how are you thinking about the possibility of that input cost, whether labor or material a year from now, could be substantially higher?

Question: Tim Coffey - Janney Montgomery Scott LLC - Analyst : Okay. And I'm sorry, just one more. Just which you're talking about potential opportunities here. What is your appetite for increasing the multifamily portfolio, given the amount of dislocation that's happening among lenders in the Southern California market?

Question: Kelly Motta - Keefe, Bruyette & Woods Europe - Analyst : Maybe a lot of might have been asked and answered. Maybe on just the competitive landscape in California, there's been a lot of disruption in these past couple of years. Can you share -- are you still seeing good opportunities to gain share from some of these changes that have gone on? And if so, in which areas?

Question: Kelly Motta - Keefe, Bruyette & Woods Europe - Analyst : Okay. Got it. That's really helpful. And maybe a question for Allen. Just from a modeling perspective, it looks like average interest-bearing cash came down over the last quarter. Is this a good level? Or is there any like puts and takes to think about here? Your deposit growth was quite strong. So wondering, is this a good level to manage to on a go-forward basis? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank Kelly, on an average basis, that was really tied to our average deposit decline quarter over quarter. As we noted, we tend to have really strong deposits in the beginning of the fourth quarter, but they declined fairly rapidly towards the end, and that really continues to some degree all the way through tax season. So that will rebound here or has started to rebound a bit here in April. So I think that's mostly tied to that. So I would say we'll see some growth in that in -- but modest growth in that as we get into the second quarter.