CVB Financial Corp Q3 2024 Earnings Call Transcript

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

Question: Matthew Clark - Piper Sandler - Analyst : Hey, good morning. First one for me, just around the repayment of the BTFP. I wanted to get the yield on the securities sold. And then it looks like you also used some cash to pay that off. Can you just give us the moving parts in terms of the yield give up and -- so we can calculate the lift that you'll get in your NIM from the smaller -- from the deleveraging?

Question: Matthew Clark - Piper Sandler - Analyst : Okay. Any other pieces to the puzzle there? Or is it just cash and those securities? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 2:30PM, CVBF.OQ - Q3 2024 CVB Financial Corp Earnings Call

Question: Matthew Clark - Piper Sandler - Analyst : Okay. And then it looks like deposit costs have stabilized in September based on slides 41 and 47. What are your thoughts on deposit costs in general from here, assuming we get the forward curve?

Question: Matthew Clark - Piper Sandler - Analyst : Okay. Great. And then last one for me, just on M&A and buybacks. Any update on whether or not you think you might be able to announce a deal before year-end? And if not, whether or not a buyback is likely?

Question: David Feaster - Raymond James - Analyst : I wanted to touch on the growth outlook. You talked about tepid demand and you talked about competition being real headwinds. It's not exactly a great environment to be trying to grow in. I'm curious, how do you think about growth? Where are you seeing opportunities? And how do you win in that type of environment, right, where competition seems to be mispricing credit to an extent?

Question: David Feaster - Raymond James - Analyst : It was such a good question that you guys got kicked off the phone.

Question: David Feaster - Raymond James - Analyst : Okay. And I just wanted to touch on credit. You touched on this in your prepared remarks, just talking about the credit migration that were -- maybe additional credit migration in October, the commentary on the CRE -- or the ORE trends. But look, your ability to sell at or above loan value and some of the other commentary talks about -- speaks to your credit underwriting discipline. I guess, I was hoping you could just touch on the trends you're seeing in the book. We touched on ag pressures in the past. But I'm curious, what are you hearing from your clients? Where are they seeing pressures? Is there anything specific? And to what extent does declining rates kind of help alleviate a lot of the pressures that these folks are seeing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 2:30PM, CVBF.OQ - Q3 2024 CVB Financial Corp Earnings Call

Question: David Feaster - Raymond James - Analyst : Okay. That's good color. And then last one for me. You touched on the healthy deposit pipeline. It was great to see the increase in NIB balances this quarter. I'm curious kind of when you look at your pipeline and what drove that increase this quarter, I mean, how much is existing clients versus where you're winning more of the wallet share versus new clients coming over? And where you're having success driving core deposit growth today?

Question: Andrew Terrell - Stephens - Analyst : Maybe just a follow-up on, I think, one of Matt's questions around the securities that were sold during the quarter. Do you have the specific timing during the third quarter the securities were sold? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank Well, in many ways, they were sold throughout the quarter, but it was probably a little heavier on the back end, particularly in the last month. But

Question: Andrew Terrell - Stephens - Analyst : Yeah. Okay. And we should just kind of make the assumption that the securities that were sold have a yield that's pretty much in line with the current AFS portfolio or maybe a little bit below? I think it was 3.02% in the third quarter. E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank Probably -- if you're saying the average of the portfolios -- now, this is a market yield, but of 2.70%, the book yield on these was closer to 3%.

Question: Andrew Terrell - Stephens - Analyst : Yeah. Okay. And then just one more actually on the securities portfolio. I think there was a hedge in place against the bond book. I'm curious if anything changed from a hedging standpoint during the quarter, given you did sell some bonds? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 2:30PM, CVBF.OQ - Q3 2024 CVB Financial Corp Earnings Call

Question: Gary Tenner - D.A. Davidson - Analyst : I wanted to ask regarding plans to do possibly another sale-leaseback transaction with AFS sales, would the expectation there or goal there be to reinvest or maybe go towards reducing other wholesale funding or broker deposits?

Question: Gary Tenner - D.A. Davidson - Analyst : Okay. I appreciate that. And just with regard to the loan yields here in the third quarter, the 5 basis points expansion, just wondering if there was any noise within that at all? And as we're thinking about the fourth quarter, kind of ballpark the impact of the 50 basis point rate cut on loan yields, all else equal?

Question: Kelly Motta - KBW - Analyst : I guess turning back to margin. Now that you paid down the BTSP, I mean, your borrowings there, I know you have the $500 million of FHLB that you've obviously disclosed previously. Wondering, of the repos in there, if there's any color as to where those rates currently are so we can kind of back into how to think about that -- those customer accounts as we look ahead.

Question: Kelly Motta - KBW - Analyst : Yeah. That's correct.

Question: Kelly Motta - KBW - Analyst : Got it. Putting together the moving pieces of NII, and I appreciate you guys don't necessarily give guidance, but you paid down some of that BTFP with a negative carry. Net-net, with rates lowering additional pressure on NII from here, at least initially off this 114 level. Is that fair? Or do you think the actions you took should more than offset kind of the initial hit from lower rates?

Question: Kelly Motta - KBW - Analyst : Okay. Got it. And I apologize, I was a little late to the call. Have you quantified your expectation for future security sales as we start to think through the size of the balance sheet? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 2:30PM, CVBF.OQ - Q3 2024 CVB Financial Corp Earnings Call