CVBF 10-K & 10-Q changes, risk factors and insider trading
Cvb Financial Corp. · Nasdaq · State Commercial Banks · CIK 354647 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risk Factors Summary”
New heading “Liquidity and Interest Rate Risks”
New heading “Operational Risks”
New heading “Strategic and External Risks”
New heading “Legal, Regulatory, Compliance and Reputational Risks”
New heading “Risks Associated with our Common Stock”
New heading “Our allowance for credit losses may not be sufficient to cover actual losses.”
New heading “We may be required to make additional provisions for credit losses and charge-off additional loans in the future, which could adversely affect our results of operations.”
New heading “Our dairy & livestock and agribusiness lending presents unique credit risks.”
New heading “Our loan portfolio is predominantly secured by real estate in California and thus we have a higher degree of credit risk from a downturn in our real estate markets.”
New heading “The development and use of AI presents risks and challenges that may adversely impact our business.”
New heading “Risks Relating to our Pending Merger with Heritage”
New heading “Failure to complete the proposed merger with Heritage”
New heading “Combining with Heritage may be more difficult, costly or time-consuming than expected, and the Company may fail to realize the anticipated benefits of the merger.”
New heading “The combined company may be unable to retain the Company/s and/or Heritage’s personnel successfully after the merger is completed.”
New heading “The Company will be subject to business uncertainties and contractual restrictions while the merger with Heritage is pending.”
New heading “The Company has incurred and is expected to incur substantial costs related to the merger and integration.”
New heading “The merger agreement between the Company and Heritage may be terminated in accordance with its terms and the merger may not be completed.”
New heading “Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the Company following the merger.”
New heading “Our assumptions regarding the fair value of assets acquired could be inaccurate, which could materially and adversely affect our business, financial condition, results of operations, and future prospects.”
New heading “The future results of the Company following the completion of the mergers may suffer if the Company does not effectively manage its expanded business and operations.”
New heading “Issuance of shares of the Company’s common stock in connection with the merger may adversely affect the market price of such common stock.”
Largest changes
“We, or our third party vendors, clients or counterparties may develop or incorporate Artificial Intelligence (AI) technology in certain business processes, services, or products including deploying AI in the areas of fraud detection and prevention, cybersecurity, credit risk and underwriting, regulatory compliance, process automation, data analysis, and customer marketing and product customization. …”see in full comparison
“On December 15, 2025 the Bank converted from a California state-chartered bank to a national banking association. While we are already accustomed to federal regulatory requirements, this conversion to a national banking association could pose some regulatory transition risk. The Company remains subject to supervision by the Federal Reserve Bank (“FRB”). Regulatory agencies, including the OCC, FRB, and the CFPB, periodically monitor and conduct examinations of our business, including compliance with laws and regulations. …”see in full comparison
“As of December 31, 2025, approximately 5.0% of our total gross loan portfolio was comprised of dairy & livestock and agribusiness loans. As of December 31, 2025, we had $431.6 million in dairy & livestock and agribusiness loans, including $386.1 million in dairy & livestock loans and $45.5 million in agribusiness loans. Repayment of dairy & livestock and agribusiness loans depends primarily on the successful raising and feeding of livestock or planting and harvesting of crops and marketing the harvested commodity (including milk production). Collateral securing these loans may be illiquid. …”see in full comparison
“As of December 31, 2024, approximately 5.0% of our total gross loan portfolio was comprised of dairy & livestock and agribusiness loans. As of December 31, 2024, we had $419.9 million in dairy & livestock and agribusiness loans, including $385.3 million in dairy & livestock loans and $34.6 million in agribusiness loans. Repayment of dairy & livestock and agribusiness loans depends primarily on the successful raising and feeding of livestock or planting and harvest of crops and marketing the harvested commodity (including milk production). Collateral securing these loans may be illiquid. …”see in full comparison
“For the year ended December 31, 2024, we recorded a $3.0 million recapture of provision for credit losses. During 2024, we experienced charge-offs of $4.4 million and recoveries of $0.7 million, resulting in net charge-offs of $3.7 million. We have a significant amount of real estate loans, therefore, decreases in real estate values could adversely affect the value of property used as collateral for our loans. As of December 31, 2024, we had $6.51 billion in commercial real estate loans, $269.2 million in single-family residential mortgages, and $16.1 million in construction loans. …”see in full comparison
Full comparison: every changed paragraph (126)
Risk Factors Summary
A significant source of risk arises from the possibility that we could sustain losses because borrowers, guarantors, and related parties may fail to perform in accordance with the terms of their loans and leases. The underwriting and credit monitoring policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows. We maintain an allowance for credit losses to provide for loan and lease defaults and non-performance, which also includes increases for new loan growth. While we believe that our allowance for credit losses is appropriate to cover currently expected losses, we cannot assure you that we will not increase the allowance for credit losses in the future or that our regulators or outside auditors will not require us to increase this allowance.
For the year ended December 31, 2024, we recorded a $3.0 million recapture of provision for credit losses. During 2024, we experienced charge-offs of $4.4 million and recoveries of $0.7 million, resulting in net charge-offs of $3.7 million. We have a significant amount of real estate loans, therefore, decreases in real estate values could adversely affect the value of property used as collateral for our loans. As of December 31, 2024, we had $6.51 billion in commercial real estate loans, $269.2 million in single-family residential mortgages, and $16.1 million in construction loans. Low interest rates through the pandemic caused real estate values in general to increase materially due to low cost of funding with inflationary upward pressures on cash flow. There is no assurance that recent rental rate increases across any segment of the real estate property classes are sustainable with reasonable possibility of moderate decline to stabilization. Capitalization Rates used to determine value have increased due to overall cost of capital causing some downward pressure on real estate values. Additionally, changes in longer term commercial real estate usage and occupancy patterns, particularly in the office and retail segments, have negatively impacted the valuations of affected properties, depending on geographic location and other factors. These issues could affect the ability of our loan customers to refinance or service their debts, including those customers whose loans are secured by commercial or residential real estate. This, in turn, could result in loan charge-offs and provisions for credit losses in the future, which could have a material adverse effect on our financial condition, net income and capital.
As of December 31, 2024, approximately 5.0% of our total gross loan portfolio was comprised of dairy & livestock and agribusiness loans. As of December 31, 2024, we had $419.9 million in dairy & livestock and agribusiness loans, including $385.3 million in dairy & livestock loans and $34.6 million in agribusiness loans. Repayment of dairy & livestock and agribusiness loans depends primarily on the successful raising and feeding of livestock or planting and harvest of crops and marketing the harvested commodity (including milk production). Collateral securing these loans may be illiquid. In addition, the limited purpose of some agricultural-related collateral affects credit risk because such collateral may have limited or no other uses to support values when loan repayment problems emerge. Our dairy & livestock and agribusiness lending staff have specific technical expertise that we depend on to mitigate our lending risks for these loans and we may have difficulty retaining or replacing such individuals. Many external factors can impact our agricultural borrowers’ ability to repay their loans, including the effects of inflation, adverse weather conditions, water issues, commodity price volatility (i.e. milk prices), diseases (including bird flu), land values, production costs, changing government regulations and subsidy programs, changing tax treatment, technological changes, labor market shortages/increased wages, and changes in consumers’ preferences, over which our borrowers may have no control. These factors, as well as recent volatility in certain commodity prices, including milk prices, could adversely impact the ability of those to whom we have made dairy & livestock and agribusiness loans to perform under the terms of their borrowing arrangements with us, which in turn could result in credit losses and adversely affect our business, financial condition and results of operations.
Our commercial real estate loan portfolio exposes us to risks that may be greater than the risks related to our other loans.
We are exposed to risk of environmental liabilities with respect to properties to which we take title.
Liquidity and Interest Rate Risks
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
Negative developments affecting the banking industry could adversely impact our liquidity.
The actions and commercial soundness of other financial institutions could affect our ability to engage in routine funding transactions.
We may not be able to maintain a strong core deposit base or other low-cost funding sources.
Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.
Elevated interest rates have decreased the market value of the Company’s available for sale and held-to-maturity securities and loan portfolios, and the Company would realize losses if it were required to sell such securities or loans to meet liquidity needs.
Hedging against interest rate exposure may adversely affect our earnings.
Operational Risks
We face risks related to our operational, technological and organizational infrastructure.
The development and use of AI presents risks and challenges that may adversely impact our business.
Failure to manage our growth may adversely affect our performance.
Risks Relating to our Pending Merger with Heritage
Failure to complete the proposed merger with Heritage
Combining with Heritage may be more difficult, costly or time-consuming than expected, and the Company may fail to realize the anticipated benefits of the merger.
The combined company may be unable to retain the Company’s and/or Heritage’s personnel successfully after the merger is completed.
The Company will be subject to business uncertainties and contractual restrictions while the merger with Heritage is pending.
The Company has incurred and is expected to incur substantial costs related to the merger and integration.
The merger agreement between the Company and Heritage may be terminated in accordance with its terms and the merger may not be completed.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the Company following the merger.
Our assumptions regarding the fair value of assets acquired could be inaccurate, which could materially and adversely affect our business, financial condition, results of operations, and future prospects.
The future results of the Company following the completion of the mergers may suffer if the Company does not effectively manage its expanded business and operations.
Issuance of shares of the Company’s common stock in connection with the merger may adversely affect the market price of such common stock.
The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents to either our information systems or information systems provided by third party vendors could have a material adverse effect on our business, financial condition and results of operations.
Our business is exposed to the risk of changes in technology.
Our controls and procedures could fail or be circumvented.
Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial condition and results of operations accurately and on a timely basis.
We rely on communications, information, operating and financial control systems technology from third-party service providers, and we may suffer an interruption in those systems.
We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects.
If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses and our results of operations could be materially adversely affected.
Changes in stock market prices could reduce fee income from our brokerage, asset management and investment advisory businesses.
Our accounting estimates and risk management processes rely on analytical and forecasting models.
Our decisions regarding the fair value of assets acquired could be different than initially estimated, which could materially and adversely affect our business, financial condition, results of operations, and future prospects.
If the goodwill that we recorded in connection with business acquisitions becomes impaired, it could require charges to earnings, which would have a negative impact on our financial condition and results of operations.
Strategic and External Risks
Changes in economic, market and political conditions can adversely affect our liquidity, results of operations and financial condition.
Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.
Future legislation, regulatory reform or policy changes could have a material effect on our business and results of operations.
We face strong competition from financial services companies and other companies that offer banking services.
Consumers may decide not to use banks to complete their financial transactions.
Potential downgrades of U.S. government securities or the securities of U.S. government-sponsored entities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings, and financial condition.
Climate change and climate change regulation could have a material adverse effect on us and our customers.
Public Health Risks
Legal, Regulatory, Compliance and Reputational Risks
We are subject to extensive government regulation that could limit or restrict our activities, which, in turn, may hamper our ability to increase our assets and earnings.
Any enhanced regulatory examination scrutiny or new regulatory requirements arising from recent events in the banking industry could increase the Company’s expenses and affect the Company’s operations and acquisition opportunities.
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The impact of current capital rules may materially affect our operations.
Increasing scrutiny and evolving expectations from regulators, customers, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
Managing reputational risk is important to attracting and maintaining customers, investors and employees.
We depend on the accuracy and completeness of information provided by customers and counterparties.
We are subject to legal and litigation risk which could adversely affect us.
Risks Associated with our Common Stock
The price of our common stock may be volatile or may decline.
Management's Discussion & Analysis (MD&A)
New heading “Provision for (Recapture of) Credit Losses”
New heading “Bank owned life insurance”
Removed heading “Recently Issued Accounting Pronouncements Not Adopted as of December 31, 2024”
Largest changes
“The Bank’s investment in BOLI includes life insurance policies generally acquired through acquisitions or the purchase of life insurance by the Bank on a select group of employees to fund deferred compensation plans. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at its cash surrender value. Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in noninterest income and are not subject to income tax, as long as they are held for the life of the covered parties. …”see in full comparison
“During the year ended December 31, 2025, a commercial real estate loan of $43,000 experienced a subsequent default within twelve months of the modification date. During the years ended December 31, 2024 and 2023, the Company did not have any modified loans that subsequently defaulted within twelve months of the modification date. Payment default is defined as movement to nonaccrual (nonperforming) status, foreclosure or charge-off, whichever occurs first.”see in full comparison
“As of December 31, 2024 and December 31, 2023, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, that subsequently defaulted. Payment default is defined as movement to nonaccrual (nonperforming) status, foreclosure or charge-off, whichever occurs first.”see in full comparison
For the year ended December 31,see in full comparison2024,2025, we reported net earnings of$200.7$209.3 million, compared with$221.4$200.7 million for2023,2024, a$20.7$8.6 million, or9.36%,4.28%,decreaseincrease from the prior year. Diluted earnings per share of$1.44$1.52 for2024,2025,decreasedincreased by$0.15,$0.08, or9.43%,5.61%, when compared to$1.59$1.44 for2023.2024.During 2023 marketMarket interest ratesrapidly increased andstayed elevatedthroughthroughout the first eight months of 2024 until the Federal Reserve initiated a series of rate cuts in September 2024. This shift in the interest rate environment materially affected the Company's net interest income and overall earnings during 2025. Net earningswerebenefitednegativelyfromimpactedhigher net interest income, driven primarily byathedecreaseexpansion in net interestincome,margin.asThetheimprovement reflected a reduction in overall cost ofourfunds,interest-bearing liabilities increased faster than the rising yieldparticularly onour interest-earning assets, primarilyborrowings, as a result of thehigherCompany'sshortbalancetermsheetmarketdeleveraginginterest rates controlled by the Federal Reserve. The declineefforts innetlateinterest income was also negatively impacted by increased levels of higher-cost borrowings that were used to manage our liquidity during the uncertain times following the banking crisis in the spring of 2023 and resulting declines in our level of deposits.2024. Net earnings of$200.7$209.3 million produced a return on average equity (“ROAE”) of9.35%,9.26%, a return on average tangible common equity (“ROATCE”) of14.95%14.28% and a return on average assets (“ROAA”) of1.24%.1.36%. Our net interest margin, tax equivalent (“NIM”), was3.09%3.36% for2024,2025, while our efficiency ratio was46.6%.46.0%.
Noninterest expense ofsee in full comparison$229.9$233.6 million for the year ended December 31,20232024 was$13.3$3.7millionmillion, or 1.6% higher than2022.2023. Year-over-year increases included$12.2normalmillioninflationary increases inregulatorymostassessments,expense categories includingthe $9.2 million FDIC special assessment, and $7.6$5.3 million in salaries and employee benefits, primarily due to inflationary pressures on salaries andbenefits and a $2.9 million decline in the contra expense for deferred origination costs due to fewer loan originations. Marketing and promotion expense increased over 2022 by approximately $460,000, as these expenses returned to pre-pandemic levels.benefits. As we continue to invest in new technology, software expense increased by$548,000,$1.3 million, or4.06%.8.90%.TheProfessionalincreaseexpenseinincreasedtechnologybycosts$1.4demonstratesmillion,ourorcommitment15.42%,toasimprovinglegalefficienciesexpenseandincreasedprovidingbyan$1.3excellentmillioncustomerorexperience.80.7%. Theseincreasesincrease were partially offset by a$6.0$7.6 million decrease inacquisitionregulatoryexpense.assessmentTheexpense,year-over-yearasdecrease also2023 includeda$9.2$500,000 recapture of provisionmillion forunfundedtheloanFDICcommitmentsSpecialrecorded in 2023.Assessment.
“Recently Issued Accounting Pronouncements Not Adopted as of December 31, 2024”see in full comparison
Full comparison: every changed paragraph (119)
Allowance for Credit Losses (“ACL”) — Our allowance for credit losses is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables. Risk attributes for commercial real estate loans include original loan to value ratios, origination year, loan seasoning, and macroeconomic variables that include GDP growth, commercial real estate price index and unemployment rate. Risk attributes for commercial and industrial loans include internal risk ratings, borrower industry sector, loan credit spreads and macroeconomic variables that include unemployment rate and BBB spread. The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans. The Commercial and Industrial methodology is applied over a substantial portion of the Company’s commercial and industrial loans, all dairy & livestock and agribusiness loans, municipal lease receivables, as well as the remaining portion of SBA loans (excluding Paycheck Protection Program (“PPP”) loans).loans. The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans. In addition to determining the quantitative life of loan loss rate to be applied against the amortized cost basis of the portfolio segments, management reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes. Our methodology for assessing the appropriateness of the allowance is reviewed on a regular basis and considers overall risks in the Bank’s loan portfolio.
Recently Issued Accounting Pronouncements Not Adopted as of December 31, 2024
For the year ended December 31, 2024,2025, we reported net earnings of $200.7$209.3 million, compared with $221.4$200.7 million for 2023,2024, a $20.7$8.6 million, or 9.36%,4.28%, decreaseincrease from the prior year. Diluted earnings per share of $1.44$1.52 for 2024,2025, decreasedincreased by $0.15,$0.08, or 9.43%,5.61%, when compared to $1.59$1.44 for 2023.2024. During 2023 marketMarket interest rates rapidly increased and stayed elevated throughthroughout the first eight months of 2024 until the Federal Reserve initiated a series of rate cuts in September 2024. This shift in the interest rate environment materially affected the Company's net interest income and overall earnings during 2025. Net earnings werebenefited negativelyfrom impactedhigher net interest income, driven primarily by athe decreaseexpansion in net interest income,margin. asThe theimprovement reflected a reduction in overall cost of ourfunds, interest-bearing liabilities increased faster than the rising yieldparticularly on our interest-earning assets, primarilyborrowings, as a result of the higherCompany's shortbalance termsheet marketdeleveraging interest rates controlled by the Federal Reserve. The declineefforts in netlate interest income was also negatively impacted by increased levels of higher-cost borrowings that were used to manage our liquidity during the uncertain times following the banking crisis in the spring of 2023 and resulting declines in our level of deposits.2024. Net earnings of $200.7$209.3 million produced a return on average equity (“ROAE”) of 9.35%,9.26%, a return on average tangible common equity (“ROATCE”) of 14.95%14.28% and a return on average assets (“ROAA”) of 1.24%.1.36%. Our net interest margin, tax equivalent (“NIM”), was 3.09%3.36% for 2024,2025, while our efficiency ratio was 46.6%.46.0%.
Net interest income of $447.3$460.3 million for the year ended December 31, 2024,2025, decreasedincreased $40.6$12.9 million, or 8.33%,2.89%, compared to the same period of 2023.2024. Interest income grewdecreased by $23.8$36.8 million, or 3.92%,5.84%, in 2024,2025, offset by a $64.4 million increase inwhile interest expense decreased $49.8 million year-over-year. Cost of funds for 20242025 increaseddecreased by 4929 basis points over 2023,2024, while the earning asset yield grewdecreased by 25two basis points. Average earning assets declined by $275.6$798.3 million year-over-year.
Noninterest income of $54.5$55.2 million for the year ended December 31, 2024,2025, decreasedincreased $4.8by $0.7 million, or 8.18%,1.28%, compared to the same period of 2023.2024. Trust and investment income for 2025 grew by $1.3 million, or 9.50%, from the prior year. Noninterest income in 2025 included a $11.0 million in losses on the sale of AFS investment securities, a $6.0 million legal settlement, and a $2.3 million gain in OREO, while 2024 included a total pre-tax loss of $28.3 million from the sale of $467 million of AFS securities partially offset by a pre-tax gain of $25.9 million from the sale-leaseback of four buildings, while 2023 included a $2.6 million gain from an equity fund distribution. Trust and investment income for 2024 grew by $1.2 million, or 9.34%, from the prior year.buildings.
Noninterest expense increased from $229.9 million in 2023 to $233.6 million in 2024.2024 to $237.3 million in 2025. The $3.7 million increase in noninterest expense generallywas representsprimarily normaldriven inflationaryby increaseshigher software related costs associated with the continued investments in mosttechnology and infrastructure. In addition, noninterest expense categories,included partially$1.6 offsetmillion byof aacquisition decreaserelated incosts regulatory assessment expense as 2023 includedto the $9.2announced millionmerger Specialwith FDIC assessment.Heritage.
At December 31, 2024,2025, total assets of $15.63 billion increased by $477.4 million, or 3.15%, from total assets of $15.15 billion decreasedat byDecember $867.331, million,2024. or 5.41%, from totalInterest-earning assets of $16.02$13.99 billion at December 31, 2023.2025 Interest-earningincreased assetsby of$463.0 million, or 3.42%, when compared with $13.53 billion at December 31, 2024 decreased by $934.2 million, or 6.46%, when compared with $14.46 billion at December 31, 2023.2024. The decreaseincrease in interest-earning assets was primarily due to a $499.0$218.1 million decrease in investment securities, a $368.5 million decrease in total loans, and a decrease of $59.1 millionincrease in interest-earning balances due from the Federal Reserve.Reserve, a $162.8 million increase in total loans, and a $31.7 million increase in investment securities.
Total investment securities were $4.95 billion at December 31, 2025, an increase of $31.7 million, or 0.64%, from $4.92 billion at December 31, 2024, a decrease of $499.0 million, or 9.20%, from $5.42 billion at December 31, 2023. The decrease was primarily due to principal repayments and maturities, as well as sales of securities exceeding purchases during the year.2024. At December 31, 2024,2025, investment securities held-to-maturity (“HTM”) totaled $2.38$2.27 billion. HTM securities decreased by $85.0$109.3 million, or 3.45%4.59% from $2.46$2.38 billion at December 31, 2023.2024. At December 31, 2024,2025, investment securities AFS totaled $2.54$2.68 billion, inclusive of a pre-tax net unrealized loss of $447.7$299.2 million. AFS securities decreasedincreased by $414.0$141.0 million, or 14.01%,5.54%, from $2.96$2.54 billion at December 31, 2023,2024, includingdriven theprimarily impactby of the sale of $467$482.5 million in purchases of AFS securities and an improvement of $128.9 million in AFS investment securities mark-to-market unrealized loss, partially offset by principal payments and maturities, as well as sales of securities of $92.9 million during the thirdyear, and fourth quarters. The sale of these securitieswhich resulted in a net pre-tax loss of $28.3$11.0 million. The securities sold had an average yield of less than three percent. The net cash proceeds from the sale of these securities was partially utilized to purchase $385 million of AFS securities in the fourth quarter of 2024, with yields that exceeded five percent. Our tax equivalent yield on our investment portfolio grewremained fromthe 2.52%same for 2023 toat 2.65% for 2024. The 13 basis point increase in the yield on investment securities from the prior year was impacted by the positive spread generated from fair-value hedging of certain AFS securities, in which the Company receives daily SOFR2024 and paid a weighted average fixed cost of approximately 3.8% during 2024.2025.
In June 2023, fairFair value hedging transactions were executed in which $1 billion notional pay-fixed interest rate swaps were consummated with maturities ranging from four to five years, wherein the Company pays a weighted average fixed rate of approximately 3.8% and receives daily SOFR. In December 2024, we terminated one of these swaps which had a notional value of $300 million, a maturity date of June 2027 and a fixed rate of 3.95%. The remaining $700 million notional pay-fixed interest rate swapsswaps, had a fair value which totaled $7.2$8.7 million and was reflected as ana assetliability at December 31, 2024.2025. The fair value of these instruments totaled $6.9$7.2 million and were reflected as a liabilityasset at December 31, 2023.2024. These instruments generated interest income of $4.3 million for 2025, a decrease of $10.1 million from interest income of $14.4 million for the year ended December 31, 2024. Refer to Note 18 – Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.
Total loans and leases, at amortized cost, were $8.70 billion at December 31, 2025, an increase of $162.8 million, or 1.91%, from $8.54 billion at December 31, 2024. The $162.8 million increase included $66.9 million in commercial real estate loans, $48.5 million in commercial and industrial loans, and $21.7 million in construction loans. Our loan yields were 5.29% for the year ended December 31, 2025, compared to 5.26% for 2024.
Total loans and leases, at amortized cost, were $8.54 billion at December 31, 2024, a decrease of $368.5 million, or 4.14%, from $8.90 billion at December 31, 2023. The decrease in outstanding loans in 2024 was impacted by a slowdown in loan demand due to higher interest rates and borrower uncertainty about the timing and amount of future rate actions of the Federal Reserve and the outcome of the November 2024 election. The $368.5 million decrease included $277.1 million in commercial real estate loans, $50.7 million in construction loans and $44.7 million in commercial and industrial loans. Our loan yields were 5.26% for the year ended December 31, 2024, compared to 5.04% for 2023. This 22 basis point increase in our loan yields year-over-year was the result of increases in market interest rates.
The allowance for credit losses totaled $77.2 million at December 31, 2025, compared to $80.1 million at December 31, 2024, compared to $86.8 million at December 31, 2023.2024. At December 31, 2024,2025, ACL as a percentage of total loans and leases outstanding was 0.94%.0.89%. This compares to 0.98%0.94% at December 31, 2023.2024. The changesdecrease in ourthe allowance overwas primarily the lastresult fewof quartersthe havesuccessful beenresolution primarilyof duecertain tononperforming lowerloans, loanwith balancesnonaccrual outstandingloans declining by $23.1 million and positive credit migration resulting in a $36.8 million decrease in classified loans. The allowance was not materially impacted by changes in our economic forecast.forecast as of December 31, 2025. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. The resulting economic forecast reflects slower GDP growth of less than 2% for 20252026 though 2027.2028. Commercial Real Estate values are forecasted to continue their decline in 2025,2026, with meaningful growth in values notreturning occurring untilin 2027. Unemployment is forecasted to exceed 5% throughoutfrom early 2026 until the nearsecond termhalf forecast periods, with a decrease below 5% inof 2028.
At December 31, 2025, total borrowings of $500.0 million consisted of Federal Home Loan Bank (“FHLB”) advances, at an average cost of approximately 4.6%. Borrowings remained the same from $500.0 million at December 31, 2024. On average, borrowings decreased by more than $1.01 billion between 2024 and 2025, as the Company completed a deleveraging strategy during the later part of 2024. As a result of this deleveraging, cost of funds decreased by 29 basis points from 1.32% for 2024 to 1.03% for 2025 due to the decrease in the higher-cost short-term borrowings.
In 2024, we experienced a decline in noninterest-bearing deposit levels due to the impact of higher interest rates that led to deposits moving to higher yielding alternatives, such as our money market and time deposit products. We also experienced noninterest-bearing deposits being transferred from the Bank’s balance sheet by customers to be invested by CitizensTrust in higher yielding instruments such as United States treasury notes or bonds.
At December 31, 2024, total borrowings of $0.50 billion consisted of Federal Home Loan Bank (“FHLB”) advances, at an average cost of approximately 4.6%. Borrowings decreased $1.57 billion from $2.07 billion at December 31, 2023, primarily due to the payoff of $1.91 billion of advances from the Federal Reserve's Bank Term Funding Program (“BTFP”) in 2024. The higher-cost short-term borrowings outstanding during most of 2024 and an increase in the cost of deposits and customer repurchase agreements of 49 basis points, increased our cost of funds by 49 basis points to 1.32% for the year ended December 31 2024.
The Company’s total equity was $2.30 billion at December 31, 2025. This represented an overall increase of $108.9 million from total equity of $2.19 billion at December 31, 2024. This represented an overall increase of $108.3 million from total equity of $2.08 billion at December 31, 2023. Increases to equity included $200.7$209.3 million in net earnings and ana $11.5$84.4 million increase in other comprehensive income, that were partially offset by $111.9$110.3 million in cash dividends. For the year ended December 31, 2025, we repurchased, under our stock repurchase plan, 4,321,777 shares at an average price of $18.60, totaling $80.4 million. We did not repurchase any stock during 2024. In 2023, we repurchased 791,800 shares of common stock, at an average repurchase price of $23.43, totaling $18.5 million. Our tangible book value per share at December 31, 20242025 was $10.10,$11.24, compared to $9.31$10.10 at December 31, 2023.2024, an 11.29% increase.
On December 17, 2025, the Company announced that it entered into a Merger Agreement with Heritage, headquartered in San Jose, California. pursuant to which the Company will acquire Heritage in an all-stock transaction.
For the year ended December 31, 2025, the Company incurred non-recurring merger related expenses associated with the Heritage acquisition of $1.6 million.
On January 7, 2022, the Company completed a merger transaction whereby Suncrest Bank (“Suncrest”), headquartered in Visalia, California, merged with and into the Company’s wholly-owned subsidiary Citizens Business Bank, in accordance with the terms and conditions of that certain Agreement and Plan of Reorganization and Merger (“Merger Agreement”), dated as of July 27, 2021, by and among the Company, the Bank and Suncrest, in a stock and cash transaction valued at approximately $237 million in aggregate, or $18.63 per Suncrest share based on CVB Financial Corp.’s closing stock price of $22.87 on January 7, 2022. Under the terms of the Merger Agreement, the Company issued approximately 8.6 million shares of Company common stock and approximately $39.6 million in aggregate cash consideration, including cash paid out in settlement of outstanding incentive stock option awards at Suncrest.
At close, the total fair value of assets acquired approximated $1.38 billion in total assets, including $329.0 million of cash and cash equivalents, net of cash paid, $131.1 million of investment securities, and $765.9 million in net loans. The acquired loans were recorded at fair value, which reflected a net discount of 1.5% for the entire loan portfolio. Approximately 30% of the acquired loans are considered PCD loans. An allowance for credit loss of $8.6 million was established for these PCD loans at acquisition. In addition, the acquired PCD loans were further discounted by almost 2% to adjust them to fair value. Non-PCD loans were valued at a total premium of 0.3%, net of a credit discount of 1.5%. We recorded a loan loss provision to establish a day one allowance for credit losses of $4.9 million on the non-PCD loans.
Suncrest had seven branch locations and two loan production offices in California’s Central Valley and the Sacramento area, which opened as Citizens Business Bank locations on January 10, 2022. The integration of Suncrest, including the conversion of core systems in the first quarter of 2022, was completed with the consolidation of two banking centers during the second quarter of 2022. For the year ended December 31, 2022, the Company incurred non-recurring merger related expenses associated with the Suncrest acquisition of $6.0 million.
Net interest income before provision for credit losses of $460.3 million for 2025 increased $12.9 million, or 2.89%, compared to $447.3 million for 2024. Interest income decreased by $36.8 million, or 5.84% in 2025, while interest expense decreased by $49.8, or 27.22% year-over-year. Cost of funds for 2025 decreased by 29 basis points over 2024, while the earning asset yield decreased by two basis points. Interest-earning assets decreased on average by $798.3 million, or 5.49%, from $14.55 billion for 2024 to $13.76 billion for 2025. Our net interest margin (TE) was 3.36% for 2025, compared to 3.09% for 2024.
Total interest income for 2025 of $593.3 million decreased by $36.8 million, or 5.84%, when compared to 2024. Compared to 2024, average interest-earning assets decreased $798.3 million and the yield on interest-earning assets decreased by two basis point from 4.35% for 2024 to 4.33% for 2025. The $798.3 million year-over-year decrease in average earning assets resulted from a $298.1 million decrease in average earning balances due from the Federal Reserve, a $259.9 million decrease in investment securities and a decrease of $242.5 million in average loans. The decrease in the overall earning asset yield was primarily impacted by the 107 basis point decrease in the yield on balances held at the Federal Reserve and the decrease in average earning balances due from the Federal Reserve as a percentage of earning assets from approximately 5% in 2024 to 3% in 2025. Balances due from the Federal Reserve earned 5.38% on average in 2024 compared to 4.31% in 2025. The decrease in the earning asset yield was also impacted by a $10.1 million decrease in the interest income derived from the positive carry on fair value hedges. A three basis point increase in loan yields, from 5.26% for 2024 to 5.29% for 2025 and 19 basis point increase in the yield on investment securities, from 2.37% for 2024 to 2.56% for 2025, partially offset the decline in earnings from the fair value hedges and funds held at the Federal Reserve.
Total interest income and fees on loans for 2025 of $446.2 million decreased $9.6 million, or 2.11%, when compared to 2024. This decrease in income was due to a decrease in average loans of $242.5 million partially offset by a higher loan yield. Loan yields were 5.29% for 2025, compared to 5.26% for 2024. Loan yields grew year-over-year, due to higher rates from adjustable rate loans and newly originated loans, as well as an increase in interest paid on nonaccrual loans.
In general, we stop accruing interest on a loan after its principal or interest becomes 90 days or more past due. When a loan is placed on nonaccrual, all interest previously accrued but not collected is charged against earnings. There was no interest income that was accrued and not reversed on nonaccrual loans at December 31, 2025 and 2024. As of December 31, 2025 and 2024, we had $4.7 million and $27.8 million of nonaccrual loans, respectively.
Interest income from investment securities was $127.3 million for 2025, a $6.7 million, or 5.01%, decrease from $134.0 million for 2024, including a $4.9 million decrease for AFS securities. This decrease was driven by a decline in the average balance of investment securities of $259.9 million, or 5.05%. The $4.9 million decrease in interest income on AFS securities was the net result of the decrease in interest income from the positive carry on fair value hedges and the 19 basis point increase in the yield on AFS securities. The positive carry on these fair value hedges resulted in approximately $4.3 million of interest income in 2025 compared to $14.4 million of interest income in 2024. The yield on investment securities was impacted positively by the sale of $467 million and $104 million of lower-yielding investment securities combined with the purchase of $418.5 million and $482 million of higher-yielding securities in 2024 and 2025 respectively.
Interest expense of $133.0 million for 2025 decreased $49.8 million, compared to $182.8 million for 2024. Total cost of funds for 2025 was 1.03%, compared with 1.32% for 2024. This 29 basis point decrease in cost of funds was primarily the result of the decrease in the average balance of higher cost borrowing of $1.01 billion, offset by a higher average balance and cost of customer repurchase agreements in 2025. The average rate paid on total deposits decreased by three basis points, to 0.85% for 2025 from 0.88% for 2024. Noninterest bearing deposits continued to be a significant portion of total deposits in 2025. Average noninterest-bearing deposits were 58.98% of our total deposits for 2025, compared to 59.92% for 2024.
Provision for (Recapture of) Credit Losses
Net interest income, before provision for credit losses of $488.0 million for 2023 decreased $17.5 million, or 3.47%, compared to $505.5 million for 2022. Interest income grew by $91.7 million, or 17.81% in 2023, offset by a $109.2 million increase in interest expense year-over-year. Cost of funds for 2023 increased by 77 basis points over 2022, while the earning asset yield grew by 74 basis points. Interest-earning assets decreased on average by $610.4 million, or 3.95%, from $15.44 billion for 2022 to $14.83 billion for 2023. Our net interest margin (TE) was 3.31% for 2023, compared to 3.30% for 2022.
Total interest income for 2023 of $606.3 million grew by $91.7 million, or 17.81%, when compared to 2022. Compared to 2022, average interest-earning assets decreased $610.4 million and the yield on interest-earning assets increased by 74 basis point from 3.36% for 2022 to 4.10% for 2023. The $610.4 million year-over-year decrease in earning assets resulted from a $471.9 million decrease in average earning balances due from the Federal Reserve and a decline of $360.1 million in average investment securities, offset by $216.5 million of growth in average loans. The 74 basis point increase in the earning asset yield over 2022 resulted from a 55 basis point increase in loan yields, increasing from 4.49% for 2022 to 5.04% for 2023, as well as a change in the mix of earning assets. Average loans as a percentage of earning assets grew from 56.20% for 2022 to 59.97% for 2023. Average investments as a percentage of earning assets decreased to 37.63% for 2023 from 38.47% for 2022. The tax-equivalent yield on investment securities was 2.52% for 2023, compared to 2.03% for 2022.
Total interest income and fees on loans for 2023 of $448.3 million increased $59.1 million, or 15.19%, when compared to 2022. This increase in income was partly due to growth in average loans of $216.5 million, as well as higher loan yields. Loan yields were 5.04% for 2023, compared to 4.49% for 2022. Discount accretion on acquired loans decreased by $4.0 million and interest and fee income from PPP loans declined by $5.4 million compared to 2022. After excluding discount accretion and the impact from PPP loans, our loan yields grew by 63 basis points compared to 2022. Loan yields grew year-over-year, as rising interest rates contributed to an increase in yields on loans indexed to the Prime rate or other short-term indexes, as well as higher rates from newly originated loans.
In general, we stop accruing interest on a loan after its principal or interest becomes 90 days or more past due. When a loan is placed on nonaccrual, all interest previously accrued but not collected is charged against earnings. There was no interest income that was accrued and not reversed on nonaccrual loans at December 31, 2023 and 2022. As of December 31, 2023 and 2022, we had $21.3 million and $4.9 million of nonaccrual loans, respectively.
Interest income from investment securities was $138.3 million for 2023, a $20.8 million, or 17.66%, increase from $117.6 million for 2022. This increase was driven by a 49 basis point increase in the yield on securities, compared to 2022. This 49 basis point increase in the yield on investment securities from the prior year period was impacted by the positive spread generated from the pay-fixed swaps we entered into at the end of the second quarter of 2023. The positive carry on these fair value hedges resulted in approximately $8.2 million of interest income associated with these interest rate swaps. Excluding the impact of these swaps, 2023 investment yields increased by 33 basis points from 2022. Average investment securities declined by $360.1 million from 2022.
Interest expense of $118.3 million for 2023 increased $109.2 million, compared to $9.2 million for 2022. Total cost of funds for 2023 was 0.83%, compared with 0.06% for 2022. This 77 basis point increase in cost of funds was the result of the increase in the cost of interest-bearing deposits and the addition of $1.35 billion of borrowings, on average, for 2023, at an average cost of 4.88%. Average interest-bearing deposits declined by $580.5 million when compared 2022. The average rate paid on interest-bearing liabilities increased by 168 basis points, to 1.84% for 2023 from 0.16% for 2022. Likewise, the rate on interest-bearing deposits for 2023 increased by 98 basis points from 2022. Noninterest bearing deposits continued to be greater than 60% of total deposits in 2023. Average noninterest-bearing deposits were 62.66% of our total deposits for 2023, compared to 62.85% for 2022.
We recorded a recapture of provision for credit losses of $3.0$3.5 million in 2024,2025, and experienced credit charge-offs of $4.4 million$642,000 and recoveries of $0.7$1.2 million, resulting in net charge-offsrecoveries of $3.7 million.$539,000. The year-to-date recapture of provision for credit losses of $3.0$3.5 million was the result of acontinued decreaseimprovement in loancredit balancesquality outstandingand lower nonperforming loans at December 31, 20242025 as compared to the prior year-end and an overall decrease in projected loss rates from 0.98%0.94% at the end of 20232024 to 0.94%0.89% at December 31, 2024.2025. For 2023,2024, we recorded $2.0$3.0 million inrecapture provision forof credit losses, and experienced credit charge-offs of $405,000$4.4 million and total recoveries of $130,000,$688,000, resulting in net charge-offs of $275,000.$3.7 Themillion. Specific credit reserves for nonperforming loans declined by $5.9 million during 2024 and modest changes in projected loss rates continueon toperforming beloans were driven primarily by economic forecast changes to various macroeconomic variables such as GDP growth, commercial real estate values and the rate of unemployment. Refer to the discussion of “Allowance for Credit Losses” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations contained herein for discussion concerning observed changes in the credit quality of various components of our loan portfolio as well as changes and refinements to our methodology.
Noninterest income includes income derived from financial services offered to our customers, such as CitizensTrust, merchant processing and card services, international banking, and other business services. Also included in noninterest income are service charges and fees, primarily from deposit accounts, bank owned life insurance (“BOLI”) income, gains/losses from the disposition of investment securities, loans, other real estate owned, and fixed assets, and other revenues not included as interest on earning assets.
The $0.7 million increase in noninterest income in 2025 was impacted by $11.0 million in losses on the sale of AFS securities, a $6.0 million legal settlement, and a $2.3 million gain on OREO, while 2024 included $28.3 million in losses from the sale of AFS securities that were partially offset by gains of $25.9 million from the sale and leaseback of four properties in 2024. Trust and investment management fees increased by $1.3 million, or 9.50% compared to 2024. Service charges on deposit accounts decreased by $910,000, or 4.47% from the year ended December 31, 2024. BOLI income decreased by $953,000, or 7.67% from the prior year, as additional income from death benefits decreased by $855,000.
Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made up of wealth management and investment services. They provide a variety of services, which include asset management, financial planning, estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides self-directed brokerage, 401(k) plans, mutual funds, insurance and other non-insured investment products. At December 31, 2025, CitizensTrust had approximately $5.11 billion in assets under management and administration, including $3.75 billion in assets under management. CitizensTrust generated fees of $15.0 million for 2025, compared to $13.7 million for 2024. The increase in fees in 2025 included both the impact on market values of changes in equity and fixed income markets but also increased flows of funds from customers, including liquidity management of funds formerly on deposit with the Bank.
The Bank’s investment in BOLI includes life insurance policies generally acquired through acquisitions or the purchase of life insurance by the Bank on a select group of employees to fund deferred compensation plans. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at its cash surrender value. Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in noninterest income and are not subject to income tax, as long as they are held for the life of the covered parties. Income from our BOLI policies declined by $953,000 for 2025 as compared to 2024, as 2024 included death benefits that exceeded cash surrender values of $1.4 million.
Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made upmadeup of wealth management and investment services. They provide a variety of services, which include asset management, financial planning, estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides self-directed brokerage, 401(k) plans, mutual funds, insurance and other non-insured investment products. At December 31, 2024, CitizensTrust had approximately $4.6 billion in assets under management and administration, including $3.3 billion in assets under management. CitizensTrust generated fees of $13.7 million for 2024, compared to $12.6 million for 2023. The increase in fees in 2024 included both the impact on market values of changes in equity and fixed income markets but also increased flows of funds from customers, including liquidity management of funds formerly on deposit with the Bank.
The $9.3 million increase in noninterest income included $2.6 million in gain from an equity fund distribution related to a CRA investment, while 2022 included a $2.4 million net gain on the sale of one of our properties. Service charges on deposit accounts decreased by $1.2 million, or 5.44% from the year ended December 31, 2022. Trust management fees increased by $1.0 million, or 9.01% compared to 2022. Income from BOLI increased by $7.4 million from the prior year, primarily due to approximately $6.5 million net increase in cash surrender value resulting from the surrender and redeployment of various BOLI policies at the end 2023, which offset the tax expense impact of the taxable gains generated from the surrendered policies.
Service fees on deposits include analysis fees, NSF fees, as well as other deposit fees. For 2023, service fees on deposits declined by approximately $1.2 million, when compared to 2022. More than half of this decline was due to lower NSF fee income in 2023.
Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made up of wealth management and investment services. They provide a variety of services, which include asset management, financial planning, estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides self-directed brokerage, 401(k) plans, mutual funds, insurance and other non-insured investment products. At December 31, 2023, CitizensTrust had approximately $4.0 billion in assets under management and administration, including $2.81 billion in assets under management. CitizensTrust generated fees of $12.6 million for 2023, compared to $11.5 million for 2022. The increase in fees in 2023 included both the impact on market values of changes in equity and fixed income markets but also increased flows of funds from customers, including liquidity management of funds formerly on deposit with the Bank.
The Bank’s investment in BOLI includes life insurance policies generally acquired through acquisitions or the purchase of life insurance by the Bank on a select group of employees to fund deferred compensation plans. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at its cash surrender value. Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in noninterest income and are not subject to income tax, as long as they are held for the life of the covered parties. At the end of the fourth quarter of 2023, the Company partially restructured its BOLI assets by surrendering various policies valued at approximately $68 million, resulting in a write-down of asset values of more than $4 million and additional income tax expense and penalties of more than $6 million. This combined restructuring charge was offset by increases of approximately $10 million to the cash surrender value resulting from the purchase of $109 million of new policies during the quarter, reflecting a net increase to noninterest income of $6.5 million and additional tax expense of approximately $6.5 million. The new policies will have an initial crediting rate that is approximately 300 basis points higher than the policies that we surrendered. Separate account BOLI policies that fund deferred compensation increased in value in 2023, compared to declines in value in 2022, due to the overall performance of the selected investments within these policies. Income from our BOLI policies for 2023 also included $935,000 of death benefits that exceeded cash surrender values, compared to $3.6 million of death benefits for 2022.
The Bank has entered into interest rate swap agreements with our customers to manage our interest rate risk and enters into identical offsetting swaps with a counterparty. The changes in the fair value of these non-hedged swaps primarily offset each other resulting in swap fee income. Generally speaking, our volume of back-to-back interest rate swaps is impacted by the level and shape of the yield curve and the Bank's management of interest rate risk. Swap fee income was higher than 2022, primarily due to LIBOR indexed swaps that were converted to term SOFR in 2023 generating fee income of approximately $620,000. We executed on swap agreements related to new loan originations with a notional amount totaling $1.0 million for 2023. There were no executed swap agreements related to new loan originations for 2022. Refer to Note 18 — Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.
Our ability to control noninterest expenses in relation to asset growth can be measured in terms of total noninterest expenses as a percentage of average assets. Noninterest expense as a percentage of average assets was 1.45%1.54% for 2024,2025, compared to 1.45% for 2024 and 1.41% for 2023 and 1.28% for 2022,2023, respectively. The increase in this ratio in 20242025 as compared to 20232024 was due primarilyto toboth a reduction in average assets of $207 million resulting from the deleveraging strategy executed in the later half of 2024, as well as normal inflationary increases in most expense categories, partially offset by a decrease in regulatory assessment expense as 2023 included the $9.2 million FDIC Special Assessment, and also due to a $207 million decrease in average assets in 2024 as compared to 2023.Assessment. The increase in this ratio for 20232024 compared with 20222023 reflects the impact of inflationary pressures on staff related expenses and expense growth associated with Suncrest.investments Thisin ratiotechnology, waspartially alsooffset negativelyby impactedthe impact in 2023 byfor a $9.2 million expense accrual for the FDIC Special Assessment. The ratio was negatively impacted in 2022 as a result of $6 million of acquisition expense associated with Suncrest.
Our ability to control noninterest expenses in relation to the level of total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses. The efficiency ratio was 46.55%46.03% for 2024,2025, compared to 46.55% for 2024 and 42.00% for 2023 and 38.98% for 2022.2023. The increasedecrease in the efficiency ratio in 20242025 was primarily due to the decreaseincrease in our net interest margin in 2024,2025, asthat wellresulted asin a revenue growth rate that exceeded the 1.6% increase in noninterest expense. The increase in the efficiency ratio in 20232024 compared to 20222023 reflects the impact of inflationarya pressures on staff related expenses and expense growth associated with Suncrest. This ratio was also negatively impacteddecline in 2023 by a $9.2 million expense accrual for the FDICnet Specialinterest Assessment. The ratio was negatively impactedmargin in 2022 as a result of $6 million of acquisition expense associated with Suncrest.2024.
Noninterest expense of $233.6$237.3 million for the year ended December 31, 20242025 was $3.7 million, or 1.6% higher than 2023.2024. Year-over-yearThe increasesyear-over-year increase included normal inflationary increases in mostsoftware expense categoriesincreasing includingby $5.3$1.8 millionmillion, inor salaries and employee benefits, primarily12.07%, due to inflationarycontinued pressures on salaries and benefits. As we continue to investinvestment in new technology, software expense increased by $1.3 million, or 8.90%.technology. The increase in technology costs demonstrates our commitment to improving efficiencies and providing an excellent customer experience. ProfessionalThe expenseprovision or recapture of unfunded loan commitments also increased by $1.4 million, or 15.42%, as legal expense increased by $1.3$3.3 million orin 80.7%.2025. TheseFurthermore, increasesthe wereincrease partiallyincluded offsetacquisition byrelated aexpenses $7.6of $1.6 million decreaseassociated with the pending merger with Heritage announced in regulatory assessment expense, as 2023 included $9.2 million for the FDIC Special Assessment.2025.
Noninterest expense of $229.9$233.6 million for the year ended December 31, 20232024 was $13.3$3.7 millionmillion, or 1.6% higher than 2022.2023. Year-over-year increases included $12.2normal millioninflationary increases in regulatorymost assessments,expense categories including the $9.2 million FDIC special assessment, and $7.6$5.3 million in salaries and employee benefits, primarily due to inflationary pressures on salaries and benefits and a $2.9 million decline in the contra expense for deferred origination costs due to fewer loan originations. Marketing and promotion expense increased over 2022 by approximately $460,000, as these expenses returned to pre-pandemic levels.benefits. As we continue to invest in new technology, software expense increased by $548,000,$1.3 million, or 4.06%.8.90%. TheProfessional increaseexpense inincreased technologyby costs$1.4 demonstratesmillion, ouror commitment15.42%, toas improvinglegal efficienciesexpense andincreased providingby an$1.3 excellentmillion customeror experience.80.7%. These increasesincrease were partially offset by a $6.0$7.6 million decrease in acquisitionregulatory expense.assessment Theexpense, year-over-yearas decrease also2023 included a$9.2 $500,000 recapture of provisionmillion for unfundedthe loanFDIC commitmentsSpecial recorded in 2023.Assessment.
The Company’s effective tax rate for the year ended December 31, 20242025 was 26.00%,25.70%, compared with 29.80%26.00% and 28.30%29.80% for the years ended December 31, 20232024 and 2022,2023, respectively. The decrease in the effective tax rate in 2025 and 2024 was a result of increased investments in tax credits during 2024 and the impact on taxes in 2023 from the surrender of certain BOLI policies. During the fourth quarter and full year of 2023, our effective tax rate was impacted by more than $6 million in combined income tax expense and penalties resulting from the surrender of various BOLI policies. Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged income from municipal securities and BOLI as well as available tax credits. Refer to Note 9 — Income Taxes of the notes to consolidated financial statements for more information.
Total assets of $15.63 billion at December 31, 2025 increased $477.4 million, or 3.15%, from $15.15 billion at December 31, 20242024. decreased by $867.3 million, or 5.41%, from totalInterest-earning assets of $16.02$13.99 billion at December 31, 2023.2025, Interest-earningincreased assetsby of$463.0 million, or 3.42%, when compared with $13.53 billion at December 31, 2024, decreased by $934.2 million, or 6.46%, when compared with $14.46 billion at December 31, 2023.2024. The decreaseincrease in interest-earning assets was primarily due to a $499.0$218.1 million decrease in investment securities, a $368.5 million decrease in total loans, and a decrease of $59.1 millionincrease in interest-earning balances due from the Federal Reserve.Reserve, a $162.8 million increase in total loans, a $37.9 million increase in FRB stock, and $31.7 million in investment securities.
Total liabilities were $13.34 billion at December 31, 2025, an increase of $368.5 million, or 2.84%, from total liabilities of $12.97 billion at December 31, 2024. The increase was due to a $228.7 million increase in customer repurchase agreements and a $123.6 million increase in total deposits. As of December 31, 2025 and 2024, total borrowings consisted of $500 million of FHLB advances, at an average cost of approximately 4.55%.
Total liabilities were $12.97 billion at December 31, 2024, a decrease of $975.7 million, or 7.00%, from total liabilities of $13.94 billion at December 31, 2023. The decrease was due to a $1.57 billion decrease in borrowings partially offset by a $514.7 million increase in deposits. Total deposits increased by $514.7 million, or 4.50%, from December 31, 2023. The increase in deposits includes $300 million of brokered deposits issued in association with cash flow hedging transactions entered into in 2024. Borrowings decreased by $1.57 billion from December 31, 2023, primarily due to the payoff of $1.91 billion of BTFP advances in 2024. As of December 31, 2024, total borrowings consisted of $500 million of Federal Home Loan Bank advances, at an average cost of approximately 4.6%.
Total equity increasedwas $108.3$2.3 million at December 31, 2025 increased $108.9 million, or 4.98%, to $2.30 billion from $2.19 billion at December 31, 2024, compared to total equity of $2.08 billion at December 31, 2023.2024. Increases to equity included $200.7$209.3 million in net earnings and an $11.5$84.4 million increase in other comprehensive income, that were partially offset by $111.9$110.3 million in cash dividends.dividends Weand did$81.1 notmillion in common stock repurchase. For the year ended 2025, we repurchased, under our stock repurchase anyplan, stock in 2024. In 2023, we repurchased 791,8004,321,777 shares of common stock, at an average repurchase price of $23.43,$18.60, totaling $18.5$80.4 million. TheWe Company'sengaged 2024in 10b5-1no stock repurchaserepurchases planduring was authorized in November 2024 and allows for the repurchase of up to 10,000,000 shares of CVB common stock.2024.
We engaged in no sale-leaseback transactions during 2025. During the third and fourth quarters of 2024, the Bank executed sale-leaseback transactions and sold four buildings for a cumulative sale price of $47.1 million, resulting in a net pre-tax gain of $25.9 million and cash proceeds of $44.76 million. The Bank simultaneously entered into lease agreements with the respective purchasers for initial terms of 15 and 18 years. Total ROU assets and corresponding operating lease liabilities recorded were $26.8 million.
Investment Securities and BOLI
The Company maintains a portfolio of investment securities to provide interest income and to serve as a source of liquidity for its ongoing operations. We continued to shrink our investment portfolio in 2024. At December 31, 2024,2025, total investment securities were $4.92$4.95 billion.billion, Thisan represented a decreaseincrease of $499.0$31.7 million, or 9.20%,0.64%, from total investment securities of $5.42$4.92 billion at December 31, 2023.2024. The decreaseincrease in investment securities was primarily due to$483.6 million in purchases of AFS securities and an improvement of $128.9 million in AFS investment securities mark-to-market unrealized loss, partially offset by principal payments and maturities, as well as sales of securities exceedingof purchases$92.9 million in fair value during the year.year, Concurrentwhich with the sale-leaseback transactions in the third and fourth quarters of 2024, the Bank sold AFS securities with a book value of $467 million, resultingresulted in a net pre-tax loss of $28.3$11.0 million. At December 31, 2024,2025, our AFS investment securities totaled $2.54$2.68 billion, inclusive of a pre-tax net unrealized loss of $447.7$299.2 million. The after-tax unrealized loss reported in AOCI on AFS investment securities was $315.4$218.3 million. This represented a decrease of $1.4$97.0 million from $316.8$315.4 million after-tax unrealized loss at December 31, 2023.2024. The change in the net unrealized holding loss resulted primarily from fluctuations in market interest rates and from realized losses on sold securities. At December 31, 2024,2025, total HTM investment securities of $2.38$2.27 billion declined by $84.9$109.3 million from December 31, 2023.2024. For the years ended December 31, 20242025 and 2023,2024, sales/repayments/maturities of investment securities totaled $901.5$572.1 million and $450.3$901.5 million, respectively. The Company purchased additional investment securities totaling $430.6$489.8 million and $48.4$430.6 million for the years ended December 31, 20242025 and 2023,2024, respectively.
At December 31, 2024, the Company had $316.2 million of BOLI. The $7.5 million increase in the value of BOLI, when compared to December 31, 2023, was primarily due to increases in the cash surrender value of the policies owned.
The allowance for credit losses on investment securities is determined for both the AFS and HTM classifications of the investment portfolio in accordance with ASC 326 . We review investment securities to determine whether unrealized losses are deemed credit related or due to other factors such as changes in interest rates and general market conditions, issuer rating changes and trends. Non-credit related unrealized losses on AFS investment securities, which may be attributed to changes in interest rates and other market-related factors, are not recorded through an ACL. Such declines are recorded as an adjustment to accumulated other comprehensive loss, net. In the event the Company is required to sell or has the intent to sell an AFS security that has experienced a decline in fair value below its amortized cost, the Company writes the amortized cost of the security down to fair value in the current period.. Management determined that credit losses did not exist for securities in an unrealized loss position as of December 31, 2025 and 2024.
The following tables present the Company’s available-for-sale investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of December 31, 2024 and December 31, 2023.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors as previously disclosed in Item 1A. to Part I of our Annual Report on Form 10-K for the year ended December 31, 2025. The materiality of any risks and uncertainties identified in our Forward Looking Statements contained in this report together with those previously disclosed in the Form 10-K or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and/or cash flows. See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Adjusted Efficiency Ratio (Non-GAAP)”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
Largest changes
During the three and six months endedsee in full comparisonMarchJune31,30, 2026 and 2025, the Company did not have any modified loans that subsequently defaulted within twelve months of the modification date.Payment default is defined as movement to nonaccrual (nonperforming) status, foreclosure or charge-off, whichever occurs first.
“The Company maintains a portfolio of investment securities to provide interest income and to serve as a source of liquidity for its ongoing operations. At March 31, 2026, total investment securities were $4.84 billion, a decrease of $116.3 million, or 2.35%, from $4.95 billion at December 31, 2025. The overall decrease in investment securities was primarily due to repayment and maturities At March 31, 2026, our AFS investment securities totaled $2.59 billion, inclusive of a pre-tax net unrealized loss of $310.4 million. …”see in full comparison
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“On April 17, 2026, the Company completed its previously announced acquisition of Heritage Commerce Corp and its wholly-owned banking subsidiary, Heritage Bank of Commerce (collectively, “Heritage”). The systems conversion was also completed during the second quarter of 2026. The acquisition was an all-stock transaction accounted for under the acquisition method of accounting as a business combination pursuant to the Agreement and Plan of Reorganization and Merger, dated December 17, 2025 (the “Merger Agreement”), by and between CVB and Heritage. …”see in full comparison
Full comparison: every changed paragraph (143)
On April 17, 2026, the Company completed its previously announced acquisition of Heritage Commerce Corp and its wholly-owned banking subsidiary, Heritage Bank of Commerce (collectively, “Heritage”). The systems conversion was also completed during the second quarter of 2026. The acquisition was an all-stock transaction accounted for under the acquisition method of accounting as a business combination pursuant to the Agreement and Plan of Reorganization and Merger, dated December 17, 2025 (the “Merger Agreement”), by and between CVB and Heritage. Under the terms of the Merger Agreement, Heritage shareholders received 0.65 shares of the Company’s common stock for each share of Heritage common stock owned. Total merger consideration was $845.5 million. Upon closing, the Company acquired loans with a fair value of $3.4 billion and investment securities with a fair value of $1.0 billion, and assumed $1.2 billion of noninterest-bearing deposits, $3.5 billion of interest-bearing deposits, and $38.7 million of subordinated debt. The preliminary purchase price allocation resulted in $450.7 million of intangible assets, consisting of a core deposit intangible asset of $116.6 million and goodwill of $334.1 million.
For additional information on the acquisition of Heritage, see Note 4 - Business Combination.
The Company's financial results for the three and six months ended June 30, 2026 reflect the impact of the acquisition of Heritage completed on April 17, 2026.
For the firstsecond quarter of 2026, we reported net earnings of $51.0$48.3 million, or diluted earnings per share of $0.38,$0.29, compared with $51.1$50.6 million, or diluted earnings per share of $0.36$0.37 for the firstsecond quarter of 2025. Net earnings for the firstsecond quarter of 2026 producedgenerated an annualized return on average equity (“ROAE”) of 8.86%,6.41%, an annualized return on average tangible common equity (“ROATCE”) of 13.38%,10.85%, and an annualized return on average assets (“ROAA”) of 1.33%.0.97%, compared with 9.06%, 14.08%, and 1.34%, respectively, for the second quarter of 2025. Our net interest margin (“NIM”), on a tax equivalent basis, was 3.44%3.72% for the firstsecond quarter of 2026, while our efficiency ratio was 45.84%.63.75%. Excluding acquisition expense and provision for unfunded commitments, our adjusted efficiency ratio was 43.88% for the second quarter of 2026, compared with 45.55% for the second quarter of 2025. ROATCE isand athe adjusted efficiency ratio are non-GAAP financial measure.measures. For additional details, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — GAAP to Non-GAAP ReconciliationReconciliations in this Form 10-Q.
For the six months ended June 30, 2026, net earnings was $99.3 million, or diluted earnings per share of $0.65, compared with $101.7 million, or diluted earnings per share of $0.73 for the six months ended June 30, 2025. Net earnings for the six months ended June 30, 2026 produced an annualized ROAE of 7.47%, ROATCE of 11.99%, and ROAA of 1.13% compared with 9.18%, 14.29%, and 1.35%, respectively, for the same period last year. Our NIM, on a tax equivalent basis, was 3.60% for six months ended June 30, 2026, while our efficiency ratio was 56.15%, compared with a NIM of 3.31% and an efficiency ratio of 46.12% for the same period last year. Excluding acquisition expense and the provision for unfunded commitments, our adjusted efficiency ratio was 44.19% for the six months ended June 30, 2026, compared with 45.92% for the same period last year.
NetFor the second quarter of 2026, net interest income was $117.8$162.4 million for the first quarter of 2026,million, an increase of $7.4$50.8 million, or 6.70%,45.5%, from the firstsecond quarter of 2025. The increase was primarily drivenattributable byto a $6.1$57.9 million increase in interest income thatdriven resultedby froma $335.7$4.01 millionbillion increase in higher average interest-earning assets and a seven34 basis point increase in the yield on earning assets. In addition to theThe increase in interest income,income interestwas expense declined from the first quarter of 2025offset by $1.3 million, as a five basis point decrease in the cost of deposits and customer repurchase agreements offset the $288.2$7.1 million increase in interest expense attributable to a $2.83 billion increase in average totalinterest-bearing deposits and customer repurchase agreements. For the six months ended June 30, 2026, net interest income was $280.3 million, an increase of $58.2 million, or 26.2%, compared with the same period last year.
Noninterest income for the second quarter of 2026 was $17.0 million, an increase of $2.3 million, or 15.4%, from $14.7 million for the second quarter of 2025, reflecting the impact of the Heritage acquisition. The increase included $468,000 in trust and investment services, $377,000 in service charges on deposit accounts, $264,000 in Bank-owned life insurance (“BOLI”) income, and $1.2 million in other income. For the six months ended June 30, 2026, noninterest income was $31.3 million, an increase of $316,000, or 1.0%, from $31.0 million from the same period last year.
Noninterest expense for the second quarter of 2026 was $114.4 million, an increase of $56.8 million, or 98.7%, from $57.6 million for the second quarter of 2025. The increase was primarily attributable to the Heritage acquisition and the related addition of operations, personnel, and banking centers. During the second quarter of 2026, the Company incurred $31.4 million of acquisition expenses and recorded an initial provision of $4.3 million for unfunded loan commitments acquired in the transaction. Excluding acquisition expense and the provision for unfunded loan commitments, the increase in noninterest expense compared with the second quarter of 2025 was $21.2 million. For the six months ended June 30, 2026, noninterest expense was $174.9 million, an increase of $58.2 million, or 49.9% from the same period last year.
Noninterest income was $14.3 million for the first quarter of 2026, a decrease of $2.0 million, or 12.0%, compared to $16.2 million for the first quarter of 2025. The decrease was primarily due to a $2.2 million gain on sale of other real estate owned (“OREO”) during the first quarter of 2025. Bank-owned life insurance (“BOLI”) income for the first quarter of 2026 increased by $308,000 compared to the first quarter of 2025. Trust and investment services income increased by $300,000, or 9.2%, from the first quarter of 2025.
Noninterest expense for the first quarter of 2026 was $60.6 million, an increase of $1.4 million, or 2.41%, compared to $59.1 million for the first quarter of 2025. Acquisition related expenses for the acquisition of Heritage Commerce Corp, announced at the end of the fourth quarter of 2025, totaled $1.1 million in the first quarter of 2026. Excluding acquisition expense, the increase in noninterest expense compared to the first quarter of 2025 was $295,000.
At MarchJune 31,30, 2026, total assets were $15.51$21.18 billion, aan decreaseincrease of $123.5$5.55 million,billion, or 0.79%,35.52%, from total assets of $15.63 billion at December 31, 2025. Interest-earning assets were $13.86$18.69 billion at MarchJune 31,30, 2026, aan decreaseincrease of $135.4$4.69 million,billion, or 0.97%, when33.56%, compared with $13.99 billion at December 31, 2025. The decreaseincrease in interest-earning assets was primarily due to a $116.3$3.32 billion increase in total loans, a $728.0 million decreaseincrease in cash and cash equivalents, and a $722.8 million increase in investment securities,securities. aThe $55.9 million decreaseincrease in total loansassets andprimarily areflected $8.1the millionimpact decreaseof inthe interest-earningHeritage balancesacquisition duecompleted fromon depositoryApril institutions,17, 2026, which added approximately $5.41 billion of assets, partially offset by abalance $44.9sheet millionoptimization increaseactivities in interest-earning balances due fromduring the Federal Reserve.quarter.
Total investment securities were $4.84$5.68 billion at MarchJune 31,30, 2026, aan decreaseincrease of $116.3$722.8 million, or 2.35%,14.6%, from $4.95 billion at December 31, 2025. The increase was primarily attributable to $1.02 billion of investment securities acquired in the Heritage acquisition, of which $519.0 million was retained and $488.2 million were sold upon completion of the merger as part of the Company's balance sheet optimization strategy, as well as approximately $511.5 million of purchases of AFS securities during the second quarter of 2026. At MarchJune 31,30, 2026, investment securities held-to-maturity (“HTM”) totaled $2.25$2.22 billion, a $22.4decrease of $51.9 million, or 0.98%, decline2.3%, from $2.27 billion at December 31, 2025. At MarchJune 31,30, 2026, available-for-sale (“AFS”) investment securities totaled $2.59$3.46 billion, inclusive of a pre-tax net unrealized loss of $310.4$323.5 million. AFS securities decreasedincreased by $94.00$774.7 million, or 3.50%,28.87%, from $2.68 billion at December 31, 2025. The pre-tax unrealized loss increased by $2.6$15.7 million from December 31, 2025. Our average tax equivalent yield on investments was 2.63%2.74% for the second quarter ended March 31,of 2026, compared to 2.63%2.62% for the firstsecond quarter of 2025.
Fair value hedging transactions with $700 million notional pay-fixed interest rate swaps, had a fair value which totaled $3.9$3.8 million and was reflected as aan liabilityasset at MarchJune 31,30, 2026. The fair value of these instruments totaled $8.6 million and were reflected as a liability at December 31, 2025. These instruments generated negative interest income of $96,000$100,000 for the firstsecond quarter of 2026, compared to interest income of $1.1$1.2 million for the firstsecond quarter of 2025, respectively.2025. Refer to Note 911 – Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.
Total loans and leases, at amortized cost, of $8.64$12.02 billion at MarchJune 31,30, 2026, decreasedincreased by $55.9$3.32 million,billion, or 0.64%,38.1%, from December 31, 2025. The decrease from the prior year endincrease was primarily dueattributable to decreasesthe Heritage acquisition, which added $3.10 billion of $114.0loans held for investment recorded at fair value as of the acquisition date, as well as organic loan growth. To further optimize the balance sheet, the Company sold SFR mortgage pools acquired from Heritage at their fair value of $327.5 million during the second quarter of 2026. The increase in dairytotal loans and livestockleases loans associated with the seasonal increase that occurs every calendar year end, offset in part byincluded increases of $56.8$2.41 millionbillion in commercial real estate loans, $505.3 million in commercial and industrial loans, $172.2 million in construction loans, $166.2 million in consumer loans, $159.2 million in SBA loans, and $59.6 million in SFR mortgage loans. Our average loan yields were 5.32%5.53% for the quarter ended MarchJune 31,30, 2026, compared towith 5.22% for the firstsecond quarter of 2025.
The allowance for credit losses totaled $80.2$126.7 million at MarchJune 31,30, 2026, compared towith $77.2 million at December 31, 2025. There was no provision for credit losses for either the second quarter of 2026 or 2025. The $49.5 million increase was primarily duethe toresult of the $46.9 million allowance for credit losses established for the loans acquired from Heritage and a $3.0$3 million provision for credit losses incurred in the first quarter of 2026.
Noninterest-bearing deposits were $7.10$8.61 billion at MarchJune 31,30, 2026, an increase of $299.8$1.81 million,billion, or 4.41%, when26.6%, compared towith $6.80 billion at December 31, 2025. The increase was primarily the result of $1.2 billion of noninterest-bearing deposits assumed in the Heritage merger. At MarchJune 31,30, 2026, noninterest-bearing deposits were 59.44%52.8% of total deposits, compared towith 56.33% at December 31, 2025. The decline in the proportion of noninterest-bearing deposits reflected the mix of deposits assumed in the Heritage acquisition.
Interest-bearing deposits were $7.68 billion at June 30, 2026, an increase of $2.41 billion, or 45.7%, when compared with $5.27 billion at December 31, 2025. The increase in interest-bearing deposits primarily reflected $3.5 billion of interest-bearing deposits assumed in connection with the Heritage acquisition, partially offset by the maturity of $300.0 million of brokered CDs that were not renewed during the second quarter of 2026. Customer repurchase agreements totaled $563.4 million at June 30, 2026, compared with $490.6 million at December 31, 2025.
Interest-bearingTotal deposits wereand $4.84 billion at March 31, 2026, a decrease of $426.6 million, or 8.09%, when compared to $5.27 billion at December 31, 2025. Customercustomer repurchase agreements totaled $494.3$16.85 millionbillion at MarchJune 31,30, 2026, comparedan toincrease $490.6 million atfrom December 31, 2025.2025 of $4.29 billion, including $4.75 billion of total deposits assumed in the Heritage acquisition. Our average cost of total deposits including customer repurchase agreements was 0.82%0.86% for the quarter ended MarchJune 31,30, 2026, compared to 0.87% for the quarter ended MarchJune 31,30, 2025.
At June 30, 2026, total borrowings were $539.0 million, consisting of $500.0 million of FHLB advances and $39.0 million of subordinated debt assumed in the Heritage acquisition, compared with $500.0 million of FHLB advances at December 31, 2025. At June 30, 2026, FHLB advances consisted of $300.0 million of three-month advances that replaced maturing brokered CDs and were designated in related pay-fixed, receive-floating interest rate swaps accounted for as cash flow hedges, under which the Company pays a fixed rate of 4.10% and receives SOFR and a $200.0 million advance bearing interest at 4.27% maturing in May 2027.
At March 31, 2026 and December 31, 2025, total borrowings consisted of $500.0 million of FHLB advances at a weighted average cost of approximately 4.6%. The Federal Home Loan Bank of San Francisco (“FHLB”) advances include maturities of $300.0 million in May 2026 and $200.0 million in May 2027.
The Company’s totalTotal stockholders' equity was $2.32$3.17 billion at MarchJune 31,30, 2026, an increase of $26.1$874.5 million compared with $2.30 billion at December 31, 2025. The increase was primarily attributable to $51.0$840.2 million of common shares issued and exchanged as a result of the Heritage acquisition and $99.3 million in net earnings and a $2.7 million increase in other comprehensive income,earnings, partially offset by $27.2$62.5 million in cash dividends declared.declared Weand engaged$5.1 inmillion noof common stock repurchasesrepurchases. duringDuring the firstsecond quarter of 2026.2026, the Company repurchased 241,034 shares under the 2026 Repurchase Program at an average price of $21.06 per share for an aggregate purchase price of $5.1 million. Our tangible book value per share at MarchJune 31,30, 2026 was $11.42,$11.07, which compares to $11.24 at December 31, 2025. Tangible book value per share is a non-GAAP financial measure. For additional details, refer to Item 2. – MD&A — GAAP to Non-GAAP Reconciliation.
Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory requirements. As of MarchJune 31,30, 2026, the Company’s Tier 1 leverage capital ratio was 11.9%,11.7%, Common Equity Tier 1 (“CET1”) ratio was 16.3%,14.7%, Tier 1 risk-based capital ratio was 16.3%,14.7%, and total risk-based capital ratio was 17.1%.15.6%. Refer to Item 2. – MD&A —Analysis of Financial Condition – Capital Resources.
On April 17, 2026, the Company completed its previously announced acquisition of Heritage Commerce Corp (“Heritage”), including its banking subsidiary, Heritage Bank of Commerce, in an all-stock transaction in accordance with the terms and conditions of that certain Agreement and Plan of Reorganization and Merger, dated as of December 17, 2025, by and between CVB and Heritage (the “Merger Agreement”). On the Closing Date, Heritage merged with and into CVB, with CVB being the surviving entity (the “Heritage Merger”). Immediately thereafter, Heritage’s wholly-owned banking subsidiary, Heritage Bank of Commerce, merged with and into Citizens Business Bank, N.A. Under the terms of the Merger Agreement, Heritage shareholders received 0.65 shares of the Company’s common stock for each share of Heritage common stock they own. As a result of the merger, the Company issued approximately 41 million shares of common stock to former Heritage shareholders, representing approximately $845 million of consideration. At close, Heritage had loans with a book value of approximately $3.6 billion and approximately $4.8 billion of deposits.
The Heritage Merger will be accounted for under ASC 805 as a business combination. Effective the closing date of April 17, 2026, Heritage’s financial results are included in the Company’s consolidated operations and will be reported in the Company’s second quarter 2026 results.
Adjusted Efficiency Ratio (Non-GAAP)
Adjusted efficiency ratio is a non-GAAP financial measure derived from GAAP-based amounts. This figure represents the ratio of noninterest expense, less acquisition-related expense and the provision for unfunded loan commitments, where applicable, to the sum of net interest income before provision for credit losses and total noninterest income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory corporate tax rates of 21% in effect for the three and six months ended MarchJune 31,30, 2026 and 2025. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. We manage interest rate risk within policy limits approved by the Board of Directors, which guides and limits the interest rate risk over short-term and long-term horizons. Sources of interest rate risk include differences in maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, and embedded options in assets or liabilities. The mix of interest-earning assets as well as the mix of noninterest bearingnoninterest-bearing deposits and interest-bearing liabilities impacts our ability to manage net interest income during changing interest rate conditions. We also utilize certain derivative instruments to partially hedge interest rate risk. See Item 2 – MD&A – Asset/Liability and Market Risk Management – Interest Rate Sensitivity Management included herein.
Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025. The non-TE rates for total investment securities were 2.59%2.70% and 2.59%2.57% for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.
Includes loan fees of $1.2 million and $700,000$615,000 for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Prepayment penalty fees of $521,000$527,000 and $931,000$680,000 are included in interest income for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Average balances include nonperforming loans.
(3)
Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the six months ended June 30, 2026 and June 30, 2025. The non-TE rates for total investment securities were 2.65% and 2.59% for the three months ended June 30, 2026 and June 30, 2025, respectively.
Includes loan fees of $2.4million and $1.3 million for the six months ended June 30, 2026 and 2025, respectively. Prepayment penalty fees of $1.0 million and $1.6 million were included in interest income for the six months ended June 30, 2026 and 2025, respectively. Average balances include nonperforming loans.
Includes interest-bearing demand and money market accounts.
The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated. Changes in interest income or expense attributable to volume changes are calculated by multiplying the change in volume by the initial average interest rate. The change in interest income or expense attributable to changes in interest rates is calculated by multiplying the change in interest rate by the initial volume. The net change orresulting from the combined impact of volume and rateinterest rates changes has been allocated proportionately tobetween changes inattributable to volume and changes inattributable interestto rates.
FirstSecond Quarter of 2026 Compared to the FirstSecond Quarter of 2025
Net interest income, before provision for credit losses, of $117.8$162.4 million for the firstsecond quarter of 2026 increased by $7.4$50.8 million, or 6.7%,45.5%, from the firstsecond quarter of 2025. The increase in net interest income in the first quarter of 2026 compared to the first quarter of 2025 was thedriven net result ofby a $6.1$57.9 million increase in interest incomeincome, andpartially offset by a $1.3$7.1 million decreaseincrease in interest expense. The year-over-year increase in net interest income largely reflected the impact of operating as a combined company for approximately two and a half months following the Heritage acquisition.
Our tax equivalenttax-equivalent net interest margin increased 41 basis points to 3.72% for the firstsecond quarter of 2026 increased by 13 basis points2026, compared towith the firstsecond quarter of 2025. The expansion ofin net interest margin was primarily due to ana 34 basis point increase in the yield on average interest-earning assets of seven basis points,assets, as well as a seven basis pointspoint decrease in the cost of funds.
Total interest income of $149.1$202.1 million increased by $6.1$57.9 million, or 4.27%, when40.2%, compared towith the firstsecond quarter of 2025. This increase was primarily due to a $335.7$4.00 billion increase in average interest-earning assets and a seven34 basis point increase in the yield on earninginterest-earning assets. Average loan balances increased by $157.1$3.19 million,billion, average interest-earning deposits with other institutions increased $128.1by $331.2 million, and the average balance of investment securities increased by $12.5$423.5 million from the firstsecond quarter of 2025.
Total interest income and fees on loans for the second quarter of 2026 were $159.2 million, an increase of $50.4 million, or 46.3%, from the second quarter of 2025. This increase in income was due to the $3.19 billion increase in average loan balances and a 31 basis point increase in average loan yields from 5.22% for the second quarter of 2025 to 5.53% for the second quarter of 2026. In addition to the impact of originating new loans at higher yields than the existing loan portfolio, the increase in average loan yields reflected the Heritage acquisition and the addition of higher-yielding acquired assets, including factored receivables that averaged approximately $86.1 million during the second quarter of 2026. Through the Heritage acquisition, the Company acquired CSNK Working Capital Finance Corp., doing business as Bay View Funding, a wholly owned subsidiary of the Bank that provides working capital factoring financing to businesses throughout the United States. During the second quarter of 2026, the average yield on factored receivables was 18.04%.
Total interest income and fees on loans for the first quarter of 2026 was $113.3 million, an increase of $4.2 million, or 3.85%, from the first quarter of 2025. This increase in income was due to the $157 million increase in average loan balances and the increase in average loan yields from 5.22% for the first quarter of 2025, to 5.32% for the first quarter of 2026.
Interest income from investment securities was $31.9$35.6 million for the firstsecond quarter of 2026, an increase of $111,000,$4.4 million, or 0.35%,14.0%, from the firstsecond quarter of 2025. A tennine basis point increase in yields on investment securities was partially offset by a decrease in the interest income derived from the pay-fixed swaps designated as fair value hedges on AFS securities. The spread between daily SOFR and the fixed rate paid on these swaps decreased from 0.61%0.50% in the firstsecond quarter of 2025 to a negative 0.06%0.09% in the firstsecond quarter of 2026, resulting in a $1.1$1.4 million decrease in interest income. Excluding the impact of the pay-fixed swaps, the average yield on investment securities increased by 25 basis points, due to the higher yield on investment securities purchased and acquired during the first six months of 2026.
Interest expense was $31.3$39.7 million for the firstsecond quarter of 2026, aan decreaseincrease of $1.3$7.1 million, compared towith the firstsecond quarter of 2025. Total costinterest bearing deposits increased on average by $2.64 billion, while customer repurchase agreements and borrowings increased on average by $96.3 million. Cost of funds was 0.97%0.96% for the firstsecond quarter of 2026, which decreased from 1.03% for the yearsecond agoquarter quarter.of This2025. sixAlthough basisaverage pointnoninterest-bearing decreasedeposits declined as a percentage of average total deposits to 52.3% from 59.7%, resulting in costa ofless fundsfavorable wasdeposit primarilymix, driven by an eight basis point reduction inthe cost of deposits. Cost of total interest-bearing deposits decreased by 2635 basis points.points, However,more than offsetting the impact of the lower proportion of noninterest-bearing deposits. The cost of customer repurchase agreements increased from 1.24%1.66% in the firstsecond quarter of 2025 to 1.71%1.79% in the first quarter of 2026. Average noninterest-bearing deposits were 57.8% of total average deposits for the firstsecond quarter of 2026, compared to 59.0% forwhile the firstaverage quartercost of 2025.borrowings declined by 29 basis points.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Net interest income, before provision for credit losses, was $280.3 million for the six months ended June 30, 2026, an increase of $58.2 million, or 26.21%, compared with $222.1 million for the same period last year. The increase was attributable to higher balance and yields on average interest-earning assets as well as lower cost of funds, partially offset by an increase in the balance of interest-bearing liabilities. The increases in average interest-earning assets and interest-bearing liabilities reflected the impact of interest-earning assets and interest-bearing liabilities acquired in connection with the Heritage acquisition, as well as organic growth.
Our net interest margin (TE) was 3.60% for the six months ended June 30, 2026, compared with 3.31% for the same period last year. The expansion in net interest margin was primarily due to a 22 basis point increase in the yield on average interest-earning assets, as well as a two basis point decrease in the cost of funds.
Total interest income was $351.2 million for the six months ended June 30, 2026, an increase of $64.0 million, or 22.29%, compared with the same period last year. This increase was primarily due to a $2.18 billion increase in average interest-earning assets and a 22 basis point increase in the yield on interest-earning assets. Average loan balances increased by $1.68 billion, average interest-earning deposits with other institutions increased by $230.3 million, and average investment securities increased by $219.1 million from the same period last year.
Total interest income and fees on loans for the six months ended June 30, 2026 were $272.5 million, an increase of $54.6 million, or 25.04%, from the same period last year. This increase in income was due to the $1.68 billion increase in average loan balances and a 22 basis point increase in average loan yields from 5.22% for the six months ended June 30, 2025, to 5.44% for the six months ended June 30, 2026.
Interest income from investment securities was $67.4 million for the six months ended June 30, 2026, an increase of $4.5 million, or 7.0%, from the same period last year. A 12 basis point increase in yields on investment securities was partially offset by a decrease in the interest income derived from the pay-fixed swaps designated as fair value hedges on AFS securities. The spread between daily SOFR and the fixed rate paid on these swaps decreased from 0.47% for the six months ended June 30, 2025 to a negative 0.07% for the six months ended June 30, 2026, resulting in a $2.6 million decrease in interest income.
Interest expense was $71.0 million for the six months ended June 30, 2026, an increase of $5.8 million, or 8.94%, from the same period last year. Total cost of funds for the six months ended June 30, 2026, was 0.97%, compared with 1.03% for the same period last year. Although average noninterest-bearing deposits declined as a percentage of average total deposits to 54.68% from 59.37%, resulting in a less favorable deposit mix, the cost of total interest-bearing deposits decreased by 31 basis points, more than offsetting the impact of the lower proportion of noninterest-bearing deposits. However, the cost of customer repurchase agreements increased from 1.47% in the six months ended June 30, 2025 to 1.75% in the six months ended June 30, 2026.
The provision for credit losses on loans was zero for both the second quarter of 2026 and 2025. Net charge-offs for the second quarter of 2026 were $137,000, compared with net charge-offs of $249,000 for the second quarter of 2025.
ThereFor wasthe asix $3.0months millionended June 30, 2026, the provision for credit losses inwas the$3.0 first quarter of 2026,million, compared to awith $2.0 million recapture of credit losses infor the firstsame quarterperiod oflast 2025.year. Net recoveriescharge-offs were $128,000 for the firstsix quartermonths ofended 2026June were $9,000, compared to net recoveries of $130,000 in the first quarter of 2025. Projected loss rates were 0.93% at March 31,30, 2026, compared towith 0.94%net atcharge-offs Marchof 31,$119,000 2025.for the same period last year. The provision for credit losses for the firstsix quartermonths ofended June 30, 2026 was largely attributable to a $3.2 million increase in specific reserves, primarily related to one commercial and industrial credit relationship.
No assurance can be given that economic conditions which affectaffecting the Company’s service areas or other circumstances will or will not be reflected in future changes in the level of our allowance for credit losses and the resulting provision for, or recapture of provision forof, credit losses. The process to estimate the allowance for credit losses requires considerable judgment and our economic forecasts may continue to vary due to the uncertainty of the future impact from geopolitical events, trade barriers, including tariff policies, andinflationary global inflation will have onpressures, future interest rates, unemployment,unemployment thelevels, and overall economyeconomic andconditions, resultingall of which may impact on our customers. Refer to Item 2 – MD&A - Analysis of Financial Condition - Allowance for Credit Losses for a discussion concerning observedof changes in the credit quality of various components of our loan portfolio as well as changes and refinements to ourthe Company's ACL methodology.
FirstSecond Quarter of 2026 Compared to the FirstSecond Quarter of 2025
Noninterest income for the second quarter of 2026 increased by $2.3 million, or 15.37%, compared with the second quarter of 2025, primarily reflecting the impact of the Heritage acquisition. The increase was driven by higher fee income across almost all categories and higher BOLI income associated with policies acquired in the merger. The increase was primarily attributable to $468,000 in trust and investment services fees, $377,000 in service charges on deposit accounts, $264,000 in BOLI income, and $1.2 million in other income. International and other banking service fees, which increased by approximately $350,000, are the most significant components of other noninterest income.
Noninterest income in the first quarter of 2026 decreased by $2.0 million, or 12%, compared to the same period in 2025. The decrease was driven primarily by the $2.2 million gain on sale of OREO that occurred during the first quarter of 2025. A decrease of $334,000 in other income, partially offset a $313,000 increase in trust and investment services and a $308,000 increase in BOLI income.
Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made up of wealth management and investment services.services revenue is generated through the Company's CitizensTrust provides a variety of services,division, which includeprovides assetwealth management, investment management, financial planning, estate planning, retirement planning, private and corporate trustee services,trustee, and probate services. Investment Services providesoffers self-directed brokerage, 401(k) plans, mutual funds, insurance products, and other non-insured investment products. At MarchJune 31,30, 2026, CitizensTrust had approximately $5.06$5.18 billion in assets under management and administration, including $3.70$3.81 billion in assets under management. CitizensTrust generated feesfee income of $3.7$4.2 million for the firstsecond quarter of 2026, compared to $3.4$3.7 million for the same period last year.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Noninterest income for the six months ended June 30, 2026 increased by $316,000, or 1.02%, compared with the same period last year. The increase was primarily driven by increases in service charges, trust revenue, and BOLI income, reflecting the combined operations following the acquisition of Heritage, partially offset by a $2.2 million gain on sale of OREO during the six months ended June 30, 2025. Trust and investment fees grew by $781,000 or 10.96% due primarily to increased assets under management. BOLI income increased by $572,000, or 9.44%, including changes in net asset value of policies related to deferred compensation arrangements.
Our ability to control noninterest expenses in relation to asset growth can be measured in terms of total noninterest expenses as a percentage of average assets. Noninterest expense as a percentage of average assets was 1.58%2.31% for the firstsecond quarter of 2026, compared towith 1.58%1.52% for the firstsecond quarter of 2025. Noninterest expense as a percentage of average assets was 1.99% for the six months ended June 30, 2026, compared with 1.55% for the same period last year. The ratio of noninterest expense to average assets was negatively impacted by acquisition-related expense and the provision for unfunded loan commitments.
Our ability to control noninterest expenses in relation to the level of total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses. The efficiency ratio was 45.84%63.75% for the firstsecond quarter of 2026, compared towith 46.69%45.55% for the firstsecond quarter of 2025. For the six months ended June 30, 2026, the efficiency ratio was 56.15%, compared with 46.12% for the same period last year. Our efficiency ratio adjusted for acquisition expense and the provision for unfunded loan commitments declined from 45.55% in the second quarter of 2025 to 43.88% in the second quarter of 2026. Adjusted efficiency ratio is a non-GAAP measure. For additional details, refer to Item 2.–MD&A—GAAP to Non-GAAP Reconciliation.
CVBF insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 6 Form 4 filings (3 insiders, 6 trade dates, 179,420 shares, about $3.7M) and open-market sales in 1 filing (1 insider, 1 trade date, 40,000 shares, about $917.6K). Net open-market shares: 139,420 (purchases minus sales); net value about $2.8M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-31 | Maddox Mike |
Open-market purchase | 10,000 | $22.03 | $220.3K |
| 2026-08-23 | Maddox Mike |
Grant/award | 3,138 | $22.57 | $70.8K |
| 2026-08-05 | Harvey David C |
Open-market sale | 40,000 | $22.94 | $917.6K |
| 2026-07-28 | O Brien Raymond V Iii |
Open-market purchase | 20,000 | $22.77 | $455.4K |
| 2026-06-05 | Wohl Richard H |
Shares withheld for tax | 8,944 | $20.50 | $183.4K |
| 2026-06-01 | Deangelis Yamynn |
Shares withheld for tax | 11,109 | $20.10 | $223.3K |
| 2026-05-22 | Borba George A Jr |
Open-market purchase | 48,894 | $20.45 | $999.9K |
| 2026-05-20 | Stephens Timothy Michael |
Grant/award | 4,187 | — | — |
| 2026-05-20 | Oswalt Hal W |
Grant/award | 4,187 | — | — |
| 2026-05-20 | Olvera Jane |
Grant/award | 4,187 | — | — |
| 2026-05-20 | O Brien Raymond V Iii |
Grant/award | 4,187 | — | — |
| 2026-05-20 | Kan Anna |
Grant/award | 4,187 | — | — |
| 2026-05-20 | Del Guercio Stephen A |
Grant/award | 4,187 | — | — |
| 2026-05-20 | Borba George A Jr |
Grant/award | 4,187 | — | — |
| 2026-05-20 | Biagini Komas Julianne M |
Grant/award | 4,187 | — | — |
| 2026-05-20 | Ehrnman Roger Lynn |
Grant/award | 10,000 | — | — |
| 2026-05-19 | Borba George A Jr |
Open-market purchase | 25,187 | $19.85 | $500.0K |
| 2026-05-14 | Borba George A Jr |
Open-market purchase | 25,097 | $19.92 | $499.9K |
| 2026-05-12 | Borba George A Jr |
Open-market purchase | 50,242 | $19.90 | $999.8K |
| 2026-04-17 | Jones Robertson Clay Jr |
Grant/award | 10,000 | — | — |
| 2026-04-17 | Jones Robertson Clay Jr |
Grant/award | 244,767 | — | — |
| 2026-04-17 | Biagini Komas Julianne M |
Grant/award | 44,326 | — | — |
Well-known investors holding CVBF (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 1,045,588 | $23.6M | 0.01% | Added 8% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 961,835 | $21.7M | 0.01% | Added 29% |
| Renaissance Technologies | 2026-06-30 | 903,591 | $20.4M | 0.03% | Added 111% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 604,834 | $13.6M | 0.0% | Added 135% |
| Two Sigma Investments | 2026-06-30 | 176,700 | $4.0M | 0.0% | Reduced 80% |
| Millennium Management (Israel Englander) | 2026-06-30 | 25,484 | $494.1K | — | Sold out |
| Bridgewater Associates | 2026-06-30 | 13,679 | $308.5K | 0.0% | Reduced 88% |