CVB Financial Q4 2025 Earnings Report

CVB Financial EPS Results

• Actual EPS: $0.40
• Consensus EPS: $0.40
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.36

CVB Financial Revenue Results

• Actual Revenue: $133.85 million
• Expected Revenue: $135.45 million
• Beat/Miss: Missed by -$1.60 million
• YoY Revenue Growth: N/A

CVB Financial Announcement Details

• Quarter: Q4 2025
• Date: 1/22/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, January 22, 2026
• Conference Call Time: 10:30AM ET

CVB Financial (NASDAQ:CVBF) Corp is the bank holding company for Citizens Business Bank, a California-based commercial bank whose operations trace back to 1974. Headquartered in Ontario, California, the company provides a broad range of banking and financial services through its community-focused branch network. As a publicly traded company on the NASDAQ under the symbol CVBF, CVB Financial oversees strategic planning, corporate governance and long-term growth initiatives for its subsidiary.

The company’s core business activities include commercial lending, real estate financing, equipment leasing and Small Business Administration (SBA) loan programs. In addition to commercial and industrial lending, Citizens Business Bank offers deposit products such as checking, savings and money market accounts, as well as consumer mortgages. CVB Financial also provides treasury and cash management services designed to help businesses optimize liquidity, manage receivables and streamline payments.

Beyond traditional banking, CVB Financial delivers trust, wealth management and retirement planning services through a dedicated trust division. Its wealth platform offers investment advisory, fiduciary and estate settlement services tailored to both individual and institutional clients. Under the leadership of President and Chief Executive Officer Erik Ellingsen, CVB Financial has expanded its geographic footprint with branches across Southern California, the Central Valley, the San Francisco Bay Area and select markets in Arizona.

CVB Financial Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Reported Q4 net earnings of $55 million ( $0.40 per share), with a 14.4% return on average tangible common equity and the bank's 195th consecutive quarter of profitability and continued dividend payments.
• Positive Sentiment: Total loans of $8.7 billion rose $228 million quarter-over-quarter (2.7%) and originations were ~70% higher in 2025 vs 2024, with management saying pipelines remain strong despite intense rate competition.
• Positive Sentiment: Credit metrics improved: non-performing/delinquent loans fell following a $20 million NPL payoff, classified loans declined to $52.7 million (0.6% of loans), and the allowance for credit losses was $77 million (0.89% of gross loans), covering 133% of NPAs plus classified loans.
• Neutral Sentiment: Management repositioned the securities book, selling $30 million of AFS securities at a $2.8 million loss and buying $239 million at ~4.75%, which reduced unrealized AFS losses and produced a $20 million after-tax increase to other comprehensive income.
• Neutral Sentiment: Pending merger with Heritage Bank of Commerce is expected to close in Q2 (incurred $1.6M of deal costs), management plans to sell about $400 million of Heritage single-family loans post-close, and share repurchases were paused ahead of the S‑4 while capital ratios remain healthy (TCE 10.3%, CET1 15.9%).

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the fourth quarter of 2025 CVB Financial Corporation and its subsidiary, Citizens Business Bank, earnings conference call. My name is Cherie, and I'm your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer period. Please note this call is being recorded. I would now like to turn the presentation over to your host for today's call, Allen Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.

[E. Allen Nicholson, EVP and CFO at CVB Financial Corp.]

Thank you, Cherie, and good morning, everyone. Thank you for joining us today to review our financial results for the fourth quarter of 2025. Joining me this morning is Dave Brager, President and Chief Executive Officer. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab. The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31st, 2024, and in particular, the information set forth in Item 1A, risk factors therein.

[E. Allen Nicholson, EVP and CFO at CVB Financial Corp.]

For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call. I'll now turn the call over to Dave Brager. Dave?

[David A. Brager, President and CEO at CVB Financial Corp.]

Thank you, Allen. Good morning, everyone. For the fourth quarter of 2025, we reported net earnings of $55 million or $0.40 per share, representing our 195th consecutive quarter of profitability, which equates to more than 48 years. We previously declared a $0.20 per share dividend for the fourth quarter of 2025, representing our 145th consecutive quarter of paying a cash dividend to our shareholders. We produced a return on average tangible common equity of 14.4% and a return on average assets of 1.40% for the fourth quarter of 2025. Our net earnings of $55 million or $0.40 per share compares with $52.6 million for the third quarter of 2025, or $0.38 per share, and $50.9 million or $0.36 per share for the prior year quarter. Pre-tax income grew by $5.4 million quarter over quarter and $6.3 million over the prior year quarter.

[David A. Brager, President and CEO at CVB Financial Corp.]

Both the quarter over quarter increase in pre-tax income, as well as the increase from the fourth quarter of 2024, were primarily the result of growth in net interest income. Net interest income grew by $7 million, or 6%, over the third quarter of 2025, and by $12.2 million, or 11%, over the fourth quarter of 2024. During the fourth quarter, we collected $3.2 million of interest on a non-performing loan that was paid off during the quarter and incurred a $2.8 million loss on sale of investment securities. We also incurred $1.6 million of acquisition expense related to the pending merger with Heritage Bank of Commerce.

[David A. Brager, President and CEO at CVB Financial Corp.]

Changes during the fourth quarter to our allowance for credit losses and reserve for unfunded loan commitments had the net impact of increasing pre-tax income by $3 million compared to the prior quarter and pre-tax income decreasing by $1.5 million compared to the fourth quarter of 2024. Non-interest income was $11.2 million in the fourth quarter, which was $1.8 million lower than the third quarter and $1.9 million lower than the fourth quarter of 2024. Trust and investment services income grew by $156,000, or 4%, from the third quarter of 2025 and grew by $519,000, or 15%, over the fourth quarter of 2024. Bank-owned life insurance income decreased by $1.1 million from the third to fourth quarters due to the annual amortization of revenue enhancements. In addition, other income declined by $800,000 from the prior quarter.

[David A. Brager, President and CEO at CVB Financial Corp.]

This decrease in other income was the result of a smaller loss on sale of investments during the fourth quarter, as we incurred a $2.8 million loss during the fourth quarter compared to the $8 million loss on sale incurred in the third quarter and the $6 million of income earned in the third quarter from a legal settlement. Now, let's discuss loans. Total loans at December 31st, 2025, were $8.7 billion, a $228 million, or 2.7%, increase from the end of the third quarter of 2025, and a $163 million, or 2%, increase from the end of 2024. The quarter-over-quarter increase in total loans was due to growth in nearly all loan categories. As typically happens at year-end, we experienced seasonal increases in dairy and livestock borrowings.

[David A. Brager, President and CEO at CVB Financial Corp.]

Dairy and livestock loans grew by $139 million compared to the end of the third quarter, driven by higher line utilization from 64% at the end of the third quarter to 78% at the end of the fourth quarter. Loan growth was also positively impacted by increases in line utilization for C&I lines of credit, increasing from 28% at the end of the third quarter to 32% at the end of the year. Compared to the end of the third quarter, C&I loans grew by $34 million, CRE loans grew by more than $39 million, and SBA 504 loans grew by $17 million. The $163 million year-over-year increase in loans includes growth of CRE loans of $67 million, $49 million of growth in C&I loans, $25 million of growth in SBA 504 loans, and $22 million of growth in construction loans.

[David A. Brager, President and CEO at CVB Financial Corp.]

Loan originations were approximately 70% higher in 2025 than 2024, and the fourth quarter production was approximately 15% higher than the third quarter of 2025. Our loan pipelines remain strong going into 2026, although rate competition for the quality of loans we compete for continues to be intense. Loan originations in the fourth quarter had average yields of approximately 6.25%, which was consistent with the prior quarter. We experienced $325,000 of net recoveries during the fourth quarter compared to $333,000 of net recoveries for the third quarter of 2025. Net recoveries for the full year of 2025 were $539,000. Total non-performing and delinquent loans decreased by $20 million to $8 million at December 31st, 2025. A $20 million non-performing loan was paid in full at the beginning of the fourth quarter.

[David A. Brager, President and CEO at CVB Financial Corp.]

The sale of the building collateralizing this loan resulted in the bank receiving all principal and $3.2 million of interest income. Classified loans were $52.7 million at December 31st, 2025, compared to $78.2 million at September 30th, 2025, and $89.5 million at December 31st, 2024. Classified loans as a percentage of total loans were 0.6% at December 31st, 2025. Now, on the deposits. Our average total deposits and customer repurchase agreements were $12.6 billion during the fourth quarter, which compares to $12.5 billion for the third quarter. Our non-interest-bearing deposits declined on average by $122 million compared to the third quarter of 2025, while interest-bearing non-maturity deposits in customer repos grew by $234 million. On average, non-interest-bearing deposits were 58% of total deposits for the fourth quarter of 2025, compared to 59% for both the third quarter of 2025 and the fourth quarter of 2024.

[David A. Brager, President and CEO at CVB Financial Corp.]

At December 31st, 2025, our total deposits and customer repurchase agreements totaled $12.6 billion. Non-interest-bearing deposits declined from the end of the third quarter to the end of the year by approximately $440 million, as we typically experience seasonal deposit declines at year-end. However, interest-bearing deposits and customer repurchase agreements increased by $430 million between the third and fourth quarter. Our cost of deposits and repos was 86 basis points for the fourth quarter, compared to 90 basis points in the third quarter of 2025 and 97 basis points for the year-ago quarter. I will now turn the call over to Allen to further discuss additional aspects of our balance sheet and our net interest income. Allen.

[David A. Brager, President and CEO at CVB Financial Corp.]

Thanks, Dave. Net interest income was $122.7 million in the fourth quarter of 2025. This compares to $115.6 million in the third quarter of 2025 and $110.4 million in the fourth quarter of 2024. Interest income was $156 million in the fourth quarter of 2025, compared to $150.1 million in the third quarter and $147.6 million in the fourth quarter of last year. Average earning assets increased by $153 million in the fourth quarter when compared to the third quarter, and the earning asset yield increased by 11 basis points from 4.32% to 4.43%. The fourth quarter loan yield was 5.47%, compared to 5.25% in the prior quarter. Excluding the $3.2 million of interest income on the non-performing loan we previously discussed, the yield on loans would have increased quarter over quarter by 7 basis points.

[David A. Brager, President and CEO at CVB Financial Corp.]

Interest expense was $33.3 million in the fourth quarter and $34.5 million in the third quarter of 2025. Our cost of funds decreased from 1.05% for the third quarter of 2025 to 1.01% in the fourth quarter of 2025. The average balances of interest-bearing deposits and repos increased by $232 million over the prior quarter. However, interest expense decreased as interest-bearing deposit costs declined by 17 basis points, and the cost of customer repurchase agreements decreased by 24 basis points. Our allowance for credit losses was $77 million at December 31st, 2025, or 0.89% of gross loans. In comparison, our allowance for credit losses as of September 30th, 2025, was $79 million, or 0.94% of gross loans. The decrease in the ACL resulted from a $2.5 million recapture of credit losses and net recoveries of $325,000. Our $77 million ACL is 133% of our combined non-performing assets and classified loans.

[David A. Brager, President and CEO at CVB Financial Corp.]

Our economic forecast continues to be a blend of multiple forecasts produced by Moody's. We continue to have the largest individual scenario weighting on Moody's baseline forecast, with both upside and downside risks weighted among multiple forecasts. The resulting economic forecast at December 31st, 2025, was modestly different from our forecast at the end of the third quarter, with loss rate assumptions for C&I loans experiencing a negative impact from the economic forecast. Real GDP is forecasted to stay below 1.5% through 2027 and not reach 2% until 2029. The unemployment rate is forecasted to reach 5% by the beginning of 2026 and remain above 5% through 2028. Commercial real estate prices are forecasted to continue their decline through the third quarter of 2026 before experiencing growth through 2029. So now, switching to our investment portfolio available for sale, or AFS investment securities, were $2.68 billion at December 31st, 2025.

[David A. Brager, President and CEO at CVB Financial Corp.]

During the fourth quarter, we sold $30 million of securities with an average book yield of 1.5%, realizing a $2.8 million loss, and then purchased $239 million of new securities at an average book value yield of approximately 4.75%. The unrealized loss on AFS securities decreased by $26 million from $334 million at September 30th, 2025, to $308 million on December 31st, 2025. The net after-tax impact of changes in both the fair value of our AFS securities and our derivatives resulted in a $20 million increase in other comprehensive income for the fourth quarter. Our held-to-maturity investments totaled $2.27 billion at December 31st, 2025, which is $109 million lower than the balance at December 31st, 2024.

[David A. Brager, President and CEO at CVB Financial Corp.]

Now, turning to the capital position, at December 31st, 2025, our shareholders' equity was $2.3 billion, a $109 million increase from the end of 2024, including the $84 million increase in other comprehensive income. There were 1.96 million shares of common stock repurchased during the fourth quarter of 2025 at an average purchase price of $18.80. For all of 2025, we repurchased 4.3 million shares at an average share price of $18.60. The company's tangible common equity ratio was 10.3% at December 31st, 2025, while our common equity Tier-1 capital ratio was 15.9%, and our total risk-based capital ratio was 16.7%. I'll now turn the call back to Dave for further discussion of our expenses.

[David A. Brager, President and CEO at CVB Financial Corp.]

Thank you, Allen. Noninterest expense for the fourth quarter of 2025 was $62 million, compared to $58.6 million in the third quarter of 2025 and $58.5 million in the fourth quarter of 2024. During the fourth quarter, we incurred $1.6 million of one-time merger-related expenses associated with the pending merger with Heritage Bank of Commerce. The fourth quarter of 2025 also included a $1 million provision for off-balance sheet reserves compared to a $500,000 provision in the third quarter. Excluding acquisition expense and the provision for off-balance sheet reserves, operating expenses grew by 2.3%, or $1.4 million over the third quarter of 2025, and by 1.6%, or $1 million over the fourth quarter of 2024. Excluding the impact of acquisition expense and the provision for off-balance sheet reserves, we achieved positive operating leverage from both the prior quarter and the year-ago quarter of 2% and 6%, respectively.

[David A. Brager, President and CEO at CVB Financial Corp.]

Non-interest expense, excluding acquisition expense, totaled 1.53% as a percentage of average assets in the fourth quarter of 2025, compared to 1.50% for the third quarter of 2025 and 1.49% for the fourth quarter of 2024. This concludes today's presentation. Now, Allen and I will be happy to take any questions that you may have.

[Operator]

Thank you. If you would like to ask a question, please press Star one one on your telephone and wait for your name to be announced. To withdraw your question, press Star one one again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question will come from the line of Matthew Clark with Piper Sandler. Your line is open.

[Matthew Clark, Analyst at Piper Sandler]

Hey, good morning, guys.

[David A. Brager, President and CEO at CVB Financial Corp.]

Good morning, Matthew.

[Matthew Clark, Analyst at Piper Sandler]

I just want to start on the noninterest-bearing deposits. You mentioned some seasonality. It looked also like some mixed change toward savings money market. Can you just speak to what you saw there and maybe whether or not there was some behavioral change among customers seeking rate?

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah, no, I don't think there was any behavioral change. It's pretty standard for us. People pay bonuses, accrue for taxes, do different things. So I don't really think there was any major change. There wasn't any movement of any large relationships or deposits from non-interest-bearing to interest-bearing. I think for the most part, it just was normal seasonality. The part that was different was that we actually grew the non-interest-bearing deposits, and that is something that is a little different, but it wasn't necessarily coming from the non-interest-bearing and moving to the interest-bearing. I mean, Matthew, I would just consistently say, look at quarterly averages. Our deposit customers move fairly large amounts of money at any point in time. So point-in-time balances don't necessarily reflect exactly what's going on. So average balances, I think, are just more informative.

[Matthew Clark, Analyst at Piper Sandler]

Yep. Yep. Okay. And then just on the non-dairy and livestock loan growth, if you excluded, it's up over 4% annualized this quarter. I know some of it was higher line utilization, but maybe speak to the higher line utilization, whether or not you think that might be more sustainable, and your thoughts overall on kind of non-dairy and livestock loan growth this year.

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. It's kind of interesting. I think we ended the year year-over-year up about 2% in total loans, and it's kind of in line with what I thought at the beginning of the year. It just took us a little while to get there point to point, but loan pipelines remain strong. I think the utilization is normalizing. I think people are a little more positive, I mean, as evidenced by just some of the GDP growth that we're seeing, so I think that that's probably going to remain a little more stable than it has been over the last year and a half or so, and candidly, that's anecdotal, but everybody we talk to is basically saying that they're ready to go and they think things are going to be okay, so that's a good sign.

[David A. Brager, President and CEO at CVB Financial Corp.]

That's also evidenced, obviously, by the classified loans and the non-performing loans that we reported at the end of the quarter. So I think all in all, the pipelines are strong, at least for the foreseeable future, and I believe that we'll be able to do more with our existing customers, and we're still attracting some pretty good relationships going forward. So all in all, I'm cautiously optimistic, maybe even positive and optimistic about 2026 so far.

[Matthew Clark, Analyst at Piper Sandler]

Great. And then last one from me, just on the Heritage deal, any update and how it's progressing?

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. So everything's going well. We've toured their offices and their headquarters, almost all of their offices. We're getting ready from an application perspective and the proxy perspective, but everything's going according to plan right now. We still anticipate a second quarter close and a second quarter systems conversion, and I think that's where we are. Obviously, there's still game to be played there, but everything's looking good so far.

[Matthew Clark, Analyst at Piper Sandler]

Okay. Great. Thank you.

[David A. Brager, President and CEO at CVB Financial Corp.]

You're welcome.

[Operator]

One moment for our next question. That will come from the line of David Feaster with Raymond James. Your line is open.

[David Feaster, Analyst at Raymond James]

Hi. Good morning, everybody.

[David A. Brager, President and CEO at CVB Financial Corp.]

Good morning.

[David Feaster, Analyst at Raymond James]

I wanted to circle back to the core deposit side. Obviously, we talked about the seasonal dynamics within NIB, but wanted to get your thoughts on the competitive landscape for deposits from your standpoint. Where are you winning deposit business? And your thoughts on the obviously, you saw good interest-bearing deposit growth. And then just your thoughts on the ability to push through the Fed cuts and expectations for betas near term.

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. So I think just from the first part of your question, I think the type of client that we go after generally is an operating company. And so the majority of the new deposit relationships that we're bringing to the bank are 75%+ non-interest-bearing. If you look back over the last 10 years of the bank, we always seem to have this sort of dip. And as Allen said, on any one given day, that money can move out and move back, and there's a number of things that happen. And that's why I think the average number is better as well. But we are winning relationships. As you know, we are not a bank that goes out and offers the highest rate on our deposit accounts, and we're not really trying to attract that type of customer.

[David A. Brager, President and CEO at CVB Financial Corp.]

So I think for the most part, it's pretty standard on the type of relationship. As far as the Fed rate cuts are concerned, we basically, during the last cut, we basically lowered everything by 0.25% that was earning over 1%. And so we're trying to capture as much of that as possible. I think the combination of on the interest-bearing deposit side with the trying to offset to the extent we can on the asset side of those rate cuts, I mean, I think it was a good sign for us that our asset, our loan yield still went up despite a Fed rate cut.

[David A. Brager, President and CEO at CVB Financial Corp.]

And we added a slide in our investor deck in the appendix that really gives a very good overview of sort of the repricing/reset timeframes, both on the truly variable stuff as well as the fixed-rate stuff that's maturing or resetting over the next. I think we go all the way up to 10 years and over. It's a very small number in that category, but there's a lot more granularity there than we had in the previous deck as well. But on the deposit side, David, it's pretty much the same type of thing. And I think from a competition standpoint, we are seeing more competition utilizing earnings credit and that ability to pay.

[David A. Brager, President and CEO at CVB Financial Corp.]

I mean, we just had a relationship that came to us and said that there was a bank, and I won't mention the name, but there was a bank that was offering them a 3% guaranteed ECR rate for five years with paying their accounting system, which is $120,000 a year as part of that five-year deal. I don't know the outcome of that one yet, but that's not something we would do, so that's what I'm seeing out there. And I don't know if that's just for the other banks to drive their non-interest-bearing or just deposits in general, but there is loan growth, so there's going to be funding pressure. So I think that's something that we need to stay on top of. But for the most part, it's pretty much status quo and business as usual for us.

[David Feaster, Analyst at Raymond James]

Okay. That's helpful. And to that point on the growth side, I was hoping you could touch on the competitive landscape there. It sounds like you're seeing primarily just on the pricing side. I wanted to see if you're getting any more aggressiveness from competitors on the underwriting side. And then just how do you think about payoffs and paydowns? Obviously, there's pretty significant backbook repricing in your story, but I'm just curious, with competition and potential Fed cuts still on the horizon, how do you think about payoffs and paydowns next year? Is that something that you would expect could be a headwind?

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. Well, it's always a little bit of a headwind. The payoffs and prepayment penalty activity in the fourth quarter was lower than the third quarter. But it's always something we have to deal with, and we anticipate that happening when we model and forecast internally. We look at those numbers just sort of from a historical perspective. The one thing to your comment about the backbook repricing, the one thing that is becoming, or not in a major way, but is an issue is that when there is a reset, we still have prepayment penalties in our loan. But when there is a reset, there are people that are getting quotes theoretically from competitors that are lower than ours.

[David A. Brager, President and CEO at CVB Financial Corp.]

I don't always see the actual quotes, so I always question whether that's true or not, but they're theoretically getting quotes from competitors out there saying they'll do the loan at a lower rate than what our repricing rate would be or reset rate would be, and so we have a little protection with the prepayment penalty, but on the maturing book, we don't have any protection there, so we have to be a little more aggressive. I was candidly very happy that our fourth quarter average yield was 6.25 because I would say some of the stuff we're doing now is closer to the 6 range just to be competitive on that, and look, treasuries are going up, at least in the last week or so. They're going up pretty good, so hopefully, people will remain disciplined, but it's really more pricing than credit.

[David A. Brager, President and CEO at CVB Financial Corp.]

We're not going to do something that we wouldn't do from a credit underwriting perspective, but we, especially to protect relationships, will be a little more aggressive on the pricing aspect of it.

[David Feaster, Analyst at Raymond James]

Are you seeing more?

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. We're seeing more short-term loans as well. So people are doing five, three-year instead of going out seven or 10 years. So I think that's also part of the yields we're seeing.

[David Feaster, Analyst at Raymond James]

Okay. Have you started to see?

[David A. Brager, President and CEO at CVB Financial Corp.]

I'm sorry, David. I was just going to add one thing, and that's a very good point that Allen brought up. I don't know that that's a good bet. Trying to keep things two or three years, we'll see. But if you just look at the forward, rates are, especially on the longer end, could be higher just based on a lot of different factors.

[David Feaster, Analyst at Raymond James]

Yeah. And so it doesn't sound like, other than the duration, that you've really seen much pressure on the underwriting structures or standards.

[David A. Brager, President and CEO at CVB Financial Corp.]

No, not really. I mean, we wouldn't really consider it anyway, so it might not come all the way up to me, so.

[David Feaster, Analyst at Raymond James]

That's a good point. All right. Thanks, everybody.

[David A. Brager, President and CEO at CVB Financial Corp.]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Andrew Terrell with Stephens. Your line is open.

[Andrew Terrell, Analyst at Stephens]

Hey, good morning.

[David A. Brager, President and CEO at CVB Financial Corp.]

Good morning, Andrew.

[Andrew Terrell, Analyst at Stephens]

If I could just start maybe asking on expenses, I think post the adjustments you guys call out, it's around $59 million or so. But compensation up this quarter, was any of that incentive accrual adjustments kind of at year-end? And then maybe just looking for a little bit of help around thoughts on organic expense growth into 2026 or kind of run rate expectations you guys have.

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah, Andrew, you're correct. There were some adjustments to our profit bonus share accruals that elevated the expense quarter over quarter. Every fourth quarter with the holiday season, there's extra benefit expense. So Q4 to Q4 might be a better indication of where expense growth is, and I think that was less than 2%. I think, once again, particularly if you look at the full-year numbers, the only expense line that's really growing more than very low single digits is the technology side, the software expense. And we'll continue to invest in that. The percentages may not be quite as high as 24%-25%, but that's an area we'll continue to invest in.

[Andrew Terrell, Analyst at Stephens]

Yeah. Okay. And then just on the margin overall, I appreciate the slide you guys gave on the loan repricing in the presentation. But if we look at margins for the industry right now, a lot of the banks out there are approaching kind of that peak level or fairly close from back in 2019. You guys are still 50, 75 basis points light versus that four and a quarter level from 2019. So I guess the kind of question is, has anything structurally changed preventing you from getting back there? And then just keeping that loan repricing in mind, I know some of it looks decently far out there, up to 10 years. How long does it take you guys to get margin back to what you would view as a normalized level?

[David A. Brager, President and CEO at CVB Financial Corp.]

Of course, the yield environment plays a lot into that, Andrew. But yeah, I mean, obviously, if you go back pre-pandemic, our securities book still has a much lower yield than it would have had back then. And so that's obviously going to play into it. And the loan book still as well. So it'll take a little time for both cash flows and the security book to reprice as well as the loan book to reprice. And that's why we added that slide. So I mean, it's hard to tell, and I don't know if I have a comment on it knowing that there's so many variables. But I wouldn't be surprised if we get there over the next couple of years, but there's a lot of things that could change that. Yeah.

[David A. Brager, President and CEO at CVB Financial Corp.]

And the only thing I would add to that, Andrew, is to the point that we have not done any large restructuring, loss trade type transactions. And so in the fourth quarter, with the gain that we had or with the recapture of the interest income that we had, we used that to take advantage of. So sort of all these one-time things that happen, we will still look at that and make determinations. And that's really part of the reason that we looked at the loss trade to utilize that $3.2 million where we recaptured in interest. So we'll just continue to do that. It's more singles. We're not planning on doing anything, like we've said all along, anything larger than that.

[Andrew Terrell, Analyst at Stephens]

Yep. Okay. Yeah. My follow-up to that was going to be on the security, so I appreciate it. Thanks for taking the questions.

[David A. Brager, President and CEO at CVB Financial Corp.]

Of course.

[Operator]

One moment for our next question, and that will come from the line of Gary Tenner with D.A. Davidson. Your line is open.

[Gary Tenner, Analyst at D.A. Davidson]

Thanks. Good morning.

[David A. Brager, President and CEO at CVB Financial Corp.]

Good morning.

[Gary Tenner, Analyst at D.A. Davidson]

Hey, I had just a follow-up on the loan yields in the quarter, even excluding that interest recovery, as you pointed out, Allen, that the loan yield was up seven basis points. Was that pretty exclusively driven by the increased C&I outstandings between general C&I and the ag portfolio? I just wanted to make sure there weren't any other dynamics during the quarter that impacted things.

[David A. Brager, President and CEO at CVB Financial Corp.]

I mean, I wouldn't point to any one thing. I mean, dairy goes up, but really, I think the dairy borrowing, the higher percentage of our overall loans probably drove about a basis point improvement in loan yields. So a little bit on the mix. But once again, I think the bulk of our loans are commercial real estate. And it really goes back to the backbook conversation. They're slowly repricing. And as we have the payoffs, we're replacing them with higher yield. So that concept is probably still the biggest driver.

[David A. Brager, President and CEO at CVB Financial Corp.]

New production.

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. New production versus what's rolling off the out there.

[Gary Tenner, Analyst at D.A. Davidson]

Great. Thanks. And then just looking forward to the HTBK transaction, any expectations at this point of kind of any day-one restructuring of their balance sheet or otherwise?

[David A. Brager, President and CEO at CVB Financial Corp.]

The only thing we've announced, Gary, is that we do plan on selling approximately $400 million of single-family loans that Heritage has. These are not related to customers. They were purchased. And the duration is very long on them. So even though we'll get to mark them to market, and there's a lot of accretion there that if we kept them, that's significant accretion, but still, they're very low coupon, 30-year mortgages. We don't really care for the duration, and they're not associated with customers. So we'll sell those, and we'll reinvest into investments with shorter durations.

[Gary Tenner, Analyst at D.A. Davidson]

Okay. And that was in the merger announcement, but beyond that, nothing else contemplated at this point?

[David A. Brager, President and CEO at CVB Financial Corp.]

Nothing at this point.

[Gary Tenner, Analyst at D.A. Davidson]

Okay. Thank you.

[David A. Brager, President and CEO at CVB Financial Corp.]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Kelly Motta with KBW. Your line is open.

[Kelly Motta, Analyst at KBW]

Hey, good morning. Thanks for the question.

[David A. Brager, President and CEO at CVB Financial Corp.]

Good morning.

[Kelly Motta, Analyst at KBW]

I apologize. I joined a little bit late. I may have missed this. But just circling back to the non-interest-bearing flows, with those balances down a bit, can you just elaborate? I know you guys sold an NPL. If there was any attrition of customers related to exits or anything like that, or if it was just normal seasonal movements post-COVID getting back to more normal trends. Thank you.

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. I think maybe you're just fact-checking me, Kelly. But no, there was no loss of relationships that that represented. And the comment that we made was really just around the point in time on December 31st. There was a lot of movement around the deposits going back and forth or going out. And this is actually pretty standard. The part that was a little surprising, I mean, I watch it every day, but not surprising, but the part that was different is we did grow non-interest-bearing deposits. The new relationships that we're attracting to the bank are probably in the 75% non-interest-bearing range, 25% interest-bearing. So this is really just kind of normal stuff. If you go back 10 years, we always have this seasonality in the fourth and first quarter. I think, Allen, a while back, we had done an analysis of that.

[David A. Brager, President and CEO at CVB Financial Corp.]

I think in the fourth quarter, we normally lose about 4% of our deposits going back like 10 years. This, on average, that didn't occur this year. We sort of had the normal non-interest-bearing stuff that went out for taxes or bonuses or whatever the case may be. But no, there was nothing abnormal about it and no loss of relationship that, and I say no loss, meaning any material or significant relationship, nothing changed, so. And Kelly, I just mentioned that I think it's better to look at average balances. They're more indicative. Our customers move a lot of money. There's patterns, day of the week, and things like that that, depending on how a quarter end happens to land, you're not really getting probably the true picture.

[Kelly Motta, Analyst at KBW]

Got it. That's helpful. Maybe switching to the buyback. You were really active this quarter. And then, obviously, you had announced Heritage Bank of Commerce late in the quarter. Is it fair to say that you're out of the market, at least until the deal closes? Just wondering how that's worked out.

[David A. Brager, President and CEO at CVB Financial Corp.]

Yes. I mean, obviously, we'll be issuing a S-4 prospectus. So we've been out of the market since the beginning of December. And the board will reevaluate that once we close the merger.

[Kelly Motta, Analyst at KBW]

Great. Thank you so much. I'll step back.

[Operator]

Thank you. As a reminder, if you would like to ask a question, please press star 11. Our next question will come from the line of Tim Coffey with Janney Montgomery Scott. Your line is open.

[Tim Coffey, Analyst at Janney Montgomery Scott]

Thank you. Good morning, gentlemen.

[David A. Brager, President and CEO at CVB Financial Corp.]

Good morning.

[Tim Coffey, Analyst at Janney Montgomery Scott]

Good. Question on the loan modifications. Is there anything special causing the balances in that bucket to rebound?

[David A. Brager, President and CEO at CVB Financial Corp.]

Go ahead, Allen.

[E. Allen Nicholson, EVP and CFO at CVB Financial Corp.]

I would have a smile on a sink head.

[David A. Brager, President and CEO at CVB Financial Corp.]

We need credit people. I wouldn't say there's anything abnormal about it, Tim.

[Tim Coffey, Analyst at Janney Montgomery Scott]

Okay. What causes somebody to fall into that bucket?

[David A. Brager, President and CEO at CVB Financial Corp.]

I'm sorry. You're talking about the loan modifications?

[Tim Coffey, Analyst at Janney Montgomery Scott]

Yeah.

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. Well, it depends. I mean, there's a lot of different reasons they can fall into that. If they come to us and ask for help and they need to do something to make the payment, that's one way that they would get in there. Another way would be just through our normal evaluation when we're doing our annual term loan reviews. If we see something that's not accurate or that isn't meeting our minimum debt service coverage or some other covenant, that could cause it to go in there. That number in and of itself is still not a material number relative to the total loan portfolio. But there's a few different reasons that it could fall into that category.

[Tim Coffey, Analyst at Janney Montgomery Scott]

Okay. And then post the closing of the deal with Heritage Bank of Commerce, we look out back half of this year and the next year. Dave, do you anticipate the addition of Heritage Bank of Commerce to materially change your outlook for loan growth?

[David A. Brager, President and CEO at CVB Financial Corp.]

Yeah. Well, look, I think it just depends on a couple of different factors. We are, as you know, sort of slow and steady wins the race. Heritage has been growing a little faster than we have. I'm sure there'll be some combination of that. We're going into new markets. We're going to be able to help their clients grow even. They'll be able to do more for their clients than they can do for them today. So I think there's some definite tailwinds with respect to that. But we got to make sure we get to close, we get it integrated. We go through the culture things to make sure they understand how we do things. So I think for the most part, there could be some benefit to that for our overall loan growth.

[David A. Brager, President and CEO at CVB Financial Corp.]

But we're going to maintain the same credit quality that we've maintained and the same credit quality that they've maintained. So we'll have to evaluate that as we combine everything and see where we are. But I do think there's a lot of opportunity in those markets for what we have to offer, not just from the loan perspective, but also from just the overall product array that we have relative to the product array they have.

[Tim Coffey, Analyst at Janney Montgomery Scott]

Sure. Yeah, and a bigger balance sheet will help them out a lot.

[David A. Brager, President and CEO at CVB Financial Corp.]

Exactly.

[Tim Coffey, Analyst at Janney Montgomery Scott]

Yeah. And then just final note check from me, Allen. What was the core loan yield in the quarter?

[David A. Brager, President and CEO at CVB Financial Corp.]

I would point you to the slide we added on page 43. And that is what I would call a basic coupon, no loan fees, nothing else. And you can see where it ended the year. And then you can obviously see the relative repricing for the different buckets.

[David A. Brager, President and CEO at CVB Financial Corp.]

Tim, that number was 5.12.

[Tim Coffey, Analyst at Janney Montgomery Scott]

Okay. Yep. All right. That was my question. Thank you, gentlemen.

[David A. Brager, President and CEO at CVB Financial Corp.]

You're welcome.

[Operator]

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Brager for any closing remarks.

[David A. Brager, President and CEO at CVB Financial Corp.]

Great. Thank you. Citizens Business Bank continues to perform consistently in all operating environments. Our solid financial performance is highlighted by our 195 consecutive quarters or more than 48 years of profitability and 145 consecutive quarters of paying cash dividends. We remain focused on our mission of banking the best small to medium-sized businesses and their owners through all economic cycles. I'd like to thank our customers and associates for their commitment and loyalty. We look forward to a successful 2026 and the pending merger with Heritage Bank of Commerce. Thank you for joining us this quarter. We appreciate your interest and look forward to speaking to you in April for our first quarter 2026 earnings call. You can always let Allen and I know if you have any questions. Have a great day. Thank you.

[Operator]

This concludes today's program. Thank you all for participating. You may now disconnect.

Participants

Executives

• E. Allen Nicholson, EVP and CFO
• David A. Brager, President and CEO

Analysts

• David Feaster, Analyst at Raymond James
• Gary Tenner, Analyst at D.A. Davidson
• Matthew Clark, Analyst at Piper Sandler
• Kelly Motta, Analyst at KBW
• Andrew Terrell, Analyst at Stephens
• Tim Coffey, Analyst at Janney Montgomery Scott