CVB Financial Corp Q4 2024 Earnings Call Transcript

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

Question: David Feaster - Raymond James Financial, Inc. - Analyst : I just wanted to start out maybe touching on the pulse of your clients. There's a lot of optimism out there with investors and analysts alike talking about improving demand, accelerating loan growth. I'm curious, have you started to see that in your pipeline yet? Just kind of the early read with your conversations and how clients, just their sense of optimism in their plans for 2025?

Question: David Feaster - Raymond James Financial, Inc. - Analyst : Okay. That's great. And then just wanted to touch on your capital priorities. You guys have been active, very active. You've got an extremely strong balance sheet. How do you think about deploying capital today? And where are you most interested? Are buybacks or additional restructurings on the table? And just any broader thoughts maybe on the M&A market as well?

Question: David Feaster - Raymond James Financial, Inc. - Analyst : Yes. That's great. And then just -- you guys have done a great job you've been really active managing interest-bearing deposit costs. I'm curious, the feedback that you've received from clients, have you gotten any pushback? Have you seen any attrition? And then just how do you think about your ability to further reduce deposit costs and your outlook for core deposit growth going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 3:30PM, CVBF.OQ - Q4 2024 CVB Financial Corp Earnings Call

Question: Andrew Terrell - Stephens Inc. - Analyst : I just wanted to maybe start on the margin. If I look in the presentation, it looks like the cost of total deposits was 90 basis points in December, so a few basis points off of the quarterly average. I'm just curious, any color you can provide on just the timing of rate reductions that you took kind of throughout the quarter? And then as we look into 2025, should we think of -- obviously, that 90 basis points is kind of the starting point coming into the year. But do you feel like there's more reductions cost-wise, you can make in the deposit base absent any additional rate decreases? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank So Andrew, if you look at that slide, I think you're mentioning, if you look at the top left, where you separate the cost of nonmaturity versus time deposits. From a time deposit perspective, the bulk of what we have in time deposits is those cash flow hedge CDs. So those are unlikely near term to change. That said, the nonmaturity deposits will probably continue to slowly go down in the near term. The Fed does nothing, then obviously, it hit a floor. But I think over the next month or 2, we probably will still see a little bit of a lag because the last Fed cut was in December. So there's still probably a little bit of a decline for that to continue. And then we suspect that, that won't be doing anything this year and that will probably level out.

Question: Andrew Terrell - Stephens Inc. - Analyst : Got it. I appreciate it. And then for the $500 million of borrowings that are remaining, can you remind us the weighted average cost of those? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank I think it's in the low 4s, if I remember correctly, Andrew, I'll estimate like 4 25, if I recall correctly.

Question: Ahmad Hasan - D.A. Davidson & Co. - Analyst : Ahmad Hasan on for Gary Tenner. Any additional color on the timing of the $35 million in securities purchases? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank Timing of the purchases we did in the fourth quarter?

Question: Ahmad Hasan - D.A. Davidson & Co. - Analyst : Right. That makes sense. And as a follow-up, any additional sale leaseback or securities transaction contemplated at this point?

Question: Adam Butler - Piper Sandler - Analyst : This is Adam on for Matthew Clark. So just on the expense line, particularly occupancy and equipment expense, what was the timing of the sale-leaseback transaction? And how much of that 4Q run rate of $5.9 million includes the expected $1.8 million annualized increase in the expense line? E. Allen Nicholson - CVB Financial Corp - Chief Financial Officer; Executive Vice President and Chief Financial Officer of the Bank Those sales occurred in October. So the bulk of it was reflected. There's other things that go into our occupancy expense. So you can look at our slide deck, and you'll be able to see the full year annual impact to occupancy from the sale leaseback but we have other ways to reduce expense as well. I mean, as we -- as leases come up, we are reducing what we're paying on those leases and downsizing the size of our offices. So there's other components that we're managing to keep occupancy expense down.

Question: Kelly Motta - Keefe, Bruyette & Woods - Analyst : I guess from a high level, we sometimes get pushed back from investors on the dynamics in California with population outflows migration and it's a terrible situation, but the wildfire certainly doesn't help the narrative. What would you say to those who question the outlook here in California? What are you seeing and what gives you optimism about your outlook ahead here?

Question: Kelly Motta - Keefe, Bruyette & Woods - Analyst : Got it. That's really helpful. And then I also wanted to touch on just the opportunity on the loan side. I think I caught in your prepared remarks or earlier in the Q&A that commercial real estate has been -- it's challenging right now to get things that missed fit your very tight credit box. Can you remind us where are new loans coming on at? And do you -- if we were to get a rate cut or 2, do you think you can help offset that with reinvestment of some of these cash flows into the loan production you're getting?

Question: Timothy Coffey - Janney Montgomery Scott LLC - Analyst : Dave, I mean I hate to ask these questions because, I mean, there's still an active situation, but I mean there's going to be -- the fire situation in your footprint, there's going to be some things that are going to happen with your balance sheet over the next couple of quarters. And so I'm wondering, is the expectation that the money you bring -- that comes into the bank in form of deposits from rebuilding from insurance? Your expectation to put those into kind of overnight funds?

Question: Timothy Coffey - Janney Montgomery Scott LLC - Analyst : Right. And then that's my next question, it's on the loan side, right? Because I think there is going to be some opportunity for new development, I won't say, in the fire and maybe perhaps not for the existing property owner. And that would put contractors to work quite a bit. Do you feel -- I mean that you're -- obviously, you're capable and willing to rebuild the community. I mean are you comfortable with construction balances rising above the current level for a period of time?

Question: Timothy Coffey - Janney Montgomery Scott LLC - Analyst : Well, yes, of course, I mean, I'm in Northern California. So I've seen how devastating the wildfires can be to my community. So absolutely, I'll be of help.