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What changed in CVB FINANCIAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CVB FINANCIAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+478 added−483 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in CVB FINANCIAL CORP's 2024 10-K

478 paragraphs added · 483 removed · 371 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

73 edited+15 added−18 removed142 unchanged
Biggest changeIn addition, the Company makes an annual 401(k) retirement contribution to all eligible associates, which includes a profit sharing component. For 2023, the combined Company 401(k) contribution was 5% of associate’s eligible salary. 93% of our associates made individual participant contributions to the 401(k) plan during 2023.
Biggest changeAs of December 2024, 68% of our associates were enrolled in our medical insurance plans and 78% of our associates participated in at least one wellness activity during 2024. In addition, the Company makes an annual 401(k) retirement contribution to all eligible associates, which includes a profit sharing component.
In October 2022, in order to increase the likelihood that the reserve ratio would be restored to at least 1.35% by the statutory deadline of September 30, 2029, the FDIC increased in the initial base deposit insurance assessment rate schedules uniformly by two (2) basis points.
In October 2022, in order to increase the likelihood that the reserve ratio would be restored to at least 1.35% by the statutory deadline of September 30, 2029, the FDIC increased the initial base deposit insurance assessment rate schedules uniformly by two (2) basis points.
Conversely, this 16 legislation also enacted limitations on certain deductions, including the deduction of FDIC deposit insurance premiums, which partially offset the expected increase in net earnings from the lower tax rate. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted into law.
Conversely, this legislation also enacted limitations on certain deductions, including the deduction of FDIC deposit insurance premiums, which partially offset the expected increase in net earnings from the lower tax rate. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted into law.
Substantially all of CVB’s funds to pay dividends or to pay principal and interest on our debt obligations are derived from dividends paid by the Bank to CVB; • 9 • Require a bank holding company to terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments if the Federal Reserve believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any bank subsidiary; • Require the prior approval of senior executive officer or director changes and prohibit golden parachute payments, including change in control agreements, or new employment agreements with such payment terms, which are contingent upon termination if an institution is in “troubled condition”; • Regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt and require prior approval to purchase or redeem securities in certain situations; • Require prior approval for the acquisition of 5% or more of the voting stock of a bank or bank holding company by bank holding companies or other acquisitions and mergers with banks and consider certain competitive, management, financial, anti-money-laundering compliance, potential impact on U.S. financial stability or other factors in granting these approvals, in addition to similar California or other state banking agency approvals which may also be required; and • Require prior notice and/or prior approval of the acquisition of control of a bank or a bank holding company by a shareholder or individuals acting in concert with ownership or control of certain percentage thresholds of the voting stock being a presumption of control.
Substantially all of CVB’s funds to pay dividends or to pay principal and interest on our debt obligations are derived from dividends paid by the Bank to CVB; • • Require a bank holding company to terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments if the Federal Reserve believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any bank subsidiary; • Require the prior approval of senior executive officer or director changes and prohibit golden parachute payments, including change in control agreements, or new employment agreements with such payment terms, which are contingent upon termination if an institution is in “troubled condition”; • Regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt and require prior approval to purchase or redeem securities in certain situations; • Require prior approval for the acquisition of 5% or more of the voting stock of a bank or bank holding company by bank holding companies or other acquisitions and mergers with banks and consider certain competitive, management, financial, anti-money-laundering compliance, potential impact on U.S. financial stability or other factors in granting these approvals, in addition to similar California or other state banking agency approvals which may also be required; and • Require prior notice and/or prior approval of the acquisition of control of a bank or a bank holding company by a shareholder or individuals acting in concert with ownership or control of certain percentage thresholds of the voting stock being a presumption of control.
Among other things, the rules adopted by the CFPB require covered persons including banks making residential mortgage loans to: (i) develop and implement procedures to ensure compliance with an “ability-to-repay” test and identify whether a loan meets a new definition for a “qualified mortgage”, in which case a rebuttable presumption exists that the creditor extending the loan has satisfied the ability-to-repay test; (ii) implement new or revised disclosures, policies and procedures for originating and servicing mortgages including, but not limited to, pre-loan counseling, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower’s principal residence; (iii) comply with additional restrictions on mortgage loan originator hiring and compensation; (iv) comply with new disclosure requirements and standards for appraisals and certain financial products; and (v) maintain escrow accounts for higher-priced mortgage loans for a longer period of time.
Among other things, the rules adopted by the CFPB require covered persons including banks making residential mortgage loans to: (i) develop and implement procedures to ensure compliance with an “ability-to-repay” test and identify whether a loan meets a new definition for a “qualified 14 mortgage”, in which case a rebuttable presumption exists that the creditor extending the loan has satisfied the ability-to-repay test; (ii) implement new or revised disclosures, policies and procedures for originating and servicing mortgages including, but not limited to, pre-loan counseling, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower’s principal residence; (iii) comply with additional restrictions on mortgage loan originator hiring and compensation; (iv) comply with new disclosure requirements and standards for appraisals and certain financial products; and (v) maintain escrow accounts for higher-priced mortgage loans for a longer period of time.
If, as a result of an examination, the DFPI or the FDIC should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Bank’s operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation, the DFPI and the FDIC, and separately the FDIC as insurer of the Bank’s deposits, have residual authority to: • Require prompt affirmative action to correct any conditions resulting from any violation or practice; • Direct an increase in capital and the maintenance of higher specific minimum capital ratios, which could preclude the Bank from being deemed well capitalized and restrict its ability to accept certain brokered deposits; • Restrict the Bank’s growth geographically, by products and services, or by mergers and acquisitions, including bidding in FDIC receiverships for failed banks; 11 • Enter into or issue informal or formal enforcement actions, including required Board resolutions, Matters Requiring Board Attention (MRBA), written agreements and consent or cease and desist orders or prompt corrective action orders to take corrective action and cease unsafe and unsound practices; • Require prior approval of senior executive officer or director changes; remove officers and directors and assess civil monetary penalties; and • Terminate FDIC insurance, revoke the Bank’s charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver.
If, as a result of an examination, the DFPI or the FDIC should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Bank’s operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation, the DFPI and the FDIC, and separately the FDIC as insurer of the Bank’s deposits, have residual authority to: • Require prompt affirmative action to correct any conditions resulting from any violation or practice; • Direct an increase in capital and the maintenance of higher specific minimum capital ratios, which could preclude the Bank from being deemed well-capitalized and restrict its ability to accept certain brokered deposits; • Restrict the Bank’s growth geographically, by products and services, or by mergers and acquisitions, including bidding in FDIC receiverships for failed banks; • Enter into or issue informal or formal enforcement actions, including required Board resolutions, matters requiring board attention, written agreements and consent or cease and desist orders or prompt corrective action orders to take corrective action and cease unsafe and unsound practices; • Require prior approval of senior executive officer or director changes; remove officers and directors and assess civil monetary penalties; and • Terminate FDIC insurance, revoke the Bank’s charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver.
Operations and Consumer Compliance Laws The Bank must comply with numerous federal and state anti-money laundering and consumer protection statutes and implementing regulations, including the USA PATRIOT Act of 2001, the Bank Secrecy Act, the Foreign Account Tax Compliance Act, the CRA, the California Consumer Privacy Act, the California Privacy Rights Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, the California Homeowner Bill of Rights and various federal and state privacy protection laws, including the Telephone Consumer Protection Act and the CAN-SPAM Act.
Operations and Consumer Compliance Laws The Bank must comply with numerous federal and state anti-money laundering and consumer protection statutes and implementing regulations, including the USA PATRIOT Act of 2001, the Bank Secrecy Act, the Foreign Account Tax Compliance Act, the CRA, the California Consumer Privacy Act, the California Privacy Rights Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, the California Homeowner Bill of Rights and various federal and state privacy protection laws, including the Telephone 13 Consumer Protection Act and the CAN-SPAM Act.
For banks with total assets in excess of $2 billion, which includes the Bank, the Bank’s CRA evaluation will be based on four tests: (i) retail lending; (ii) retail services and products (including digital delivery systems for banks with more than $10 billion in assets or banks which request consideration of such systems); (iii) community development (CD) financing; and (iv) CD services.
For banks with total assets in excess of $2 billion, which includes the Bank, the Bank’s CRA evaluation will be based on four tests: (i) retail lending; (ii) retail services and products (including digital delivery systems for banks with more than $10 billion in assets or banks which request consideration of such systems); (iii) community development (“CD”) financing; and (iv) CD services.
Agribusiness products are loans to finance the 3 operating needs of wholesale dairy farm operations, cattle feeders, livestock raisers, and farmers. We provide bank qualified lease financing for municipal governments. Commercial real estate and construction loans are secured by a range of property types and include both owner-occupied and investor owned properties.
Agribusiness products are loans to finance the operating needs of wholesale dairy farm operations, cattle feeders, livestock raisers, and farmers. We provide bank qualified lease financing for municipal governments. Commercial real estate and construction loans are secured by a range of property types and include both owner-occupied and investor owned properties.
We make available investment products offered by other providers to our customers, including mutual funds, a full array of fixed income vehicles and a program to diversify our customers’ funds in federally insured time certificates of deposit of other institutions. In addition, we offer a wide range of financial services and trust services through our CitizensTrust division.
We make available investment products offered by other providers to our 3 customers, including mutual funds, a full array of fixed income vehicles and a program to diversify our customers’ funds in federally insured time certificates of deposit of other institutions. In addition, we offer a wide range of financial services and trust services through our CitizensTrust division.
While these new rules may require us to conduct certain internal analysis and reporting to ensure continued compliance, they did not require any material changes in our operations or business. Brokered Deposits The FDIC limits the ability to accept brokered deposits to those insured depository institutions that are well capitalized.
While these rules may require us to conduct certain internal analysis and reporting to ensure continued compliance, they did not require any material changes in our operations or business. Brokered Deposits The FDIC limits the ability to accept brokered deposits to those insured depository institutions that are well capitalized.
Many competitors are much larger in total assets and capitalization, have greater access to capital 5 markets and/or offer a broader range of financial products and services. Additionally, some smaller competitors, including non-bank entities, may be more nimble and responsive to customer preferences or requirements.
Many competitors are much larger in total assets and capitalization, have greater access to capital markets and/or offer a broader range of financial products and services. Additionally, some smaller competitors, including non-bank entities, may be more nimble and responsive to customer preferences or requirements.
The Dodd-Frank Act provided for the creation of the Bureau of Consumer Finance Protection (“CFPB”) as an independent entity within the Federal Reserve with broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards.
The Dodd-Frank Act provided for the creation of the Consumer Financial Protection Bureau (“CFPB”) as an independent entity within the Federal Reserve with broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards.
The applicable regulations also provide for certain other “rebuttable” presumptions of control. In April 2020, the Federal Reserve adopted a final rule to revise its regulations related to determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the BHCA.
The applicable regulations also provide for certain other “rebuttable” presumptions of control. 9 In April 2020, the Federal Reserve adopted a final rule to revise its regulations related to determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the BHCA.
Bank holding companies are also required to act as a source of financial strength to their subsidiary banks. Under this policy, the Company must commit resources to support the Bank even when the Company may not be in a financial position to provide it.
Bank holding 6 companies are also required to act as a source of financial strength to their subsidiary banks. Under this policy, the Company must commit resources to support the Bank even when the Company may not be in a financial position to provide it.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on our operations or 7 financial condition.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on our operations or financial condition.
The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices that pose a risk to the DIF or that may prejudice the interest of the bank’s depositors.
The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices that pose a risk to the DIF or that may prejudice the interest of the 11 bank’s depositors.
The table below summarizes the capital requirements that the Company and the Bank must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the Capital Conservation Buffer): Minimum Basel III Regulatory Capital Ratio Plus Capital Conservation Buffer Effective January 1, 2019 CET1 risk-based capital ratio 7.0 % Tier 1 risk-based capital ratio 8.5 % Total risk-based capital ratio 10.5 % As of December 31, 2023 the Company and the Bank are well-capitalized for regulatory purposes.
The table below summarizes the capital requirements that the Company and the Bank must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the Capital Conservation Buffer): 7 Minimum Basel III Regulatory Capital Ratio Plus Capital Conservation Buffer Effective January 1, 2019 CET1 risk-based capital ratio 7.0 % Tier 1 risk-based capital ratio 8.5 % Total risk-based capital ratio 10.5 % As of December 31, 2024 the Company and the Bank are well-capitalized for regulatory purposes.
Therefore, the Bank may form subsidiaries to engage in the many so-called “closely related to banking” or “nonbanking” activities commonly conducted by national banks in operating subsidiaries or in subsidiaries of bank holding companies.
Therefore, the Bank may 10 form subsidiaries to engage in the many so-called “closely related to banking” or “nonbanking” activities commonly conducted by national banks in operating subsidiaries or in subsidiaries of bank holding companies.
Monitoring methods and processes used by a banking organization should be commensurate with the size and complexity of the organization and its use of incentive compensation.
Monitoring methods and processes used by a banking organization should be commensurate with the size and complexity of the 12 organization and its use of incentive compensation.
None of the information contained in or hyperlinked from our website is incorporated into this Form 10-K. Executive Officers of the Company The following sets forth certain information regarding our executive officers, their positions and their ages. Executive Officers: Name Position Age David A. Brager President and Chief Executive Officer of the Company and the Bank 56 E.
None of the information contained in or hyperlinked from our website is incorporated into this Form 10-K. Executive Officers of the Company The following sets forth certain information regarding our executive officers, their positions and their ages. Executive Officers: Name Position Age David A. Brager President and Chief Executive Officer of the Company and the Bank 57 E.
The address of the site is http://www.sec.gov. The Company also maintains an Internet website at http://www.cbbank.com.
The address of the site is http://www.sec.gov. The Company also maintains an Internet 16 website at http://www.cbbank.com.
The DEI Council is led by our Director of Human Resources and the Associate Engagement Manager, as well as an additional member of our Senior Leadership team. Members of the Council represent a cross section of our associates across numerous departments.
The Council is led by our Director of Human Resources and the Associate 4 Engagement Manager, as well as an additional member of our Senior Leadership team. Members of the Council represent a cross section of our associates across numerous departments.
The foregoing description of the impact of changes in federal and applicable state tax laws on us should be read in conjunction with Note 10 — Income Taxes of the notes to consolidated financial statements for more information.
The foregoing description of the impact of changes in federal and applicable state tax laws on us should be read in conjunction with Note 9 — Income Taxes of the notes to consolidated financial statements for more information.
(referred to herein on an unconsolidated basis as “CVB” and on a consolidated basis as “we”, “our” or the “Company”) is a bank holding company incorporated in California on April 27, 1981 and registered with the Board of Governors of the Federal Reserve System (“Federal Reserve”) under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”).
(referred to herein on an unconsolidated basis as “CVB” and on a consolidated basis as “we”, “our” or the “Company”) is a bank holding company incorporated in California on April 27, 1981 and registered with the Board of Governors of the Federal Reserve System (“Federal Reserve”) under the Bank Holding Company Act of 1956, as amended (the “BHCA”).
The federal banking agencies also may require banks and bank holding companies subject to enforcement actions to maintain capital ratios in excess of the minimum ratios otherwise required to be deemed well capitalized, in which case institutions may no longer be deemed to be well capitalized and may therefore be subject to certain restrictions such as taking brokered deposits.
The federal banking agencies also may require banks and bank holding companies subject to enforcement actions to maintain capital ratios in excess of the minimum ratios otherwise required to be deemed well capitalized, in which case institutions may no longer be deemed to be well capitalized and may therefore be subject to certain restrictions such as obtaining new brokered deposits.
These services include fiduciary services, mutual funds, annuities, 401(k) plans and individual investment accounts. Business Segments We are a community bank with one reportable operating segment. See Note 3 — Summary of Significant Accounting Policies — Business Segments of the notes to consolidated financial statements. Human Capital We employed 1,107 associates as of December 31, 2023.
These services include fiduciary services, mutual funds, annuities, 401(k) plans and individual investment accounts. Business Segments We are a community bank with one reportable operating segment. See Note 3 — Summary of Significant Accounting Policies — Business Segments of the notes to the consolidated financial statements. Human Capital We employed 1,089 associates as of December 31, 2024.
For a tabular presentation of the Company’s and Bank’s capital ratios as of December 31, 2023, see Note 17 — Regulatory Matters of the notes to the consolidated financial statements. In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”).
For a tabular presentation of the Company’s and Bank’s capital ratios as of December 31, 2024, see Note 16 — Regulatory Matters of the notes to the consolidated financial statements. In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”).
The Company held small investment positions in three financial technology private equity funds at December 31, 2023, with aggregate potential commitments in such funds of approximately $5 million, which were subject to the final rule.
The Company 8 held small investment positions in three financial technology private equity funds at December 31, 2024, with aggregate potential commitments in such funds of approximately $5 million, which were subject to the final rule.
From 2006 to 2008, she served as Executive Vice President and Service Division Manager for the Bank. From 1995 to 2005, she served as Senior Vice President and Division Service Manager for the Bank. 18
From 2006 to 2008, she served as Executive Vice President and Service Division Manager for the Bank. From 1995 to 2005, she served as Senior Vice President and Division Service Manager for the Bank. 17
The Diversity and Inclusion Committee is co-chaired by our Chief Operating Officer and Human Resources Director and includes our Chief Financial Officer, Chief Risk Officer, and General Counsel. The Company's Diversity, Engagement, and Inclusion ("DEI") Council was established to continue our commitment to fostering, cultivating, and preserving a culture of diversity and inclusion.
The Engagement Committee is co-chaired by our Chief Operating Officer and Human Resources Director and includes our Chief Financial Officer, Chief Risk Officer, and General Counsel. The Company's Engagement Council was established to continue our commitment to associate engagement, as well as fostering, cultivating, and preserving a culture of diversity and inclusion.
Consumers also have the option to direct banks 15 and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services. In California, consumer privacy rights have been further bolstered by the enactment of the California Consumer Privacy Act (CCPA) and the California Privacy Rights Act (CPRA).
Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services. In California, consumer privacy rights have been further bolstered by the enactment of the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”).
Institutions that are less than well capitalized cannot accept, renew or roll over any brokered deposit unless they have applied for and been granted a waiver by the FDIC. As of December 31, 2023, the Bank had no deposit liabilities categorized as brokered deposits.
Institutions that are less than well capitalized cannot accept, renew or roll over any brokered deposit unless they have applied for and been granted a waiver by the FDIC. As of December 31, 2024, the Bank had $300 million of deposit liabilities categorized as brokered deposits.
Wohl Executive Vice President and General Counsel 65 Yamynn DeAngelis Executive Vice President and Chief Risk Officer 67 Mr. Brager was appointed Chief Executive Officer of the Company and the Bank on March 16, 2020. Effective November 19, 2021, Mr. Brager was also named President of the Company and the Bank. Mr.
Wohl Executive Vice President and General Counsel 66 Yamynn DeAngelis Executive Vice President and Chief Risk Officer 68 Mr. Brager was appointed Chief Executive Officer of the Company and the Bank on March 16, 2020. Effective November 19, 2021, Mr. Brager was also named President of the Company and the Bank. Mr.
All of our associates are eligible for incentive compensation awards. For 2023, 93% of our associates earned an incentive bonus, which compares to 94% in 2022. Competition The banking and financial services business is highly competitive.
All of our associates are eligible for incentive compensation awards. In 2024, 92% of our associates earned an incentive bonus, which compares to 93% in 2023. Competition The banking and financial services business is highly competitive.
As of December 31, 2023, the Bank’s total CRE loan concentration based on total outstanding loans is 262% of risk-based capital. Office of Foreign Assets Control Regulation The U.S.
As of December 31, 2024, the Bank’s CRE loan concentration based on total outstanding loans is 237% of risk-based capital. Office of Foreign Assets Control Regulation The U.S.
Allen Nicholson Chief Financial Officer of the Company and Executive Vice President and Chief Financial Officer of the Bank 56 David F. Farnsworth Executive Vice President and Chief Credit Officer of the Bank 67 David C. Harvey Executive Vice President and Chief Operating Officer of the Bank 56 Richard H.
Allen Nicholson Chief Financial Officer of the Company and Executive Vice President and Chief Financial Officer of the Bank 57 David F. Farnsworth Executive Vice President and Chief Credit Officer of the Bank 68 David C. Harvey Executive Vice President and Chief Operating Officer of the Bank 57 Richard H.
We are continuing to evaluate the impact of these changes to the regulations implementing the CRA and their impact to our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.
We are continuing to evaluate the impact of these changes to bank and holding company regulations and their impact to our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.
The Company’s Citizens Experience Service Awards and Recognition Program resulted in 708 nominations of associates who were recognized for exemplifying our Five Core Values in 2023, representing an 61% increase over 2022. Of those nominations, 266 received service awards. In addition, the Company has a long held tradition of an annual awards program that recognizes outstanding job performance.
The Company’s Citizens Experience Service Awards and Recognition Program resulted in 983 nominations of associates who were recognized for exemplifying our Five Core Values in 2024, representing a 39% increase over 2023. Of those nominations, 143 received service awards. In addition, the Company has a long held tradition of an annual awards program that recognizes outstanding job performance.
This was a 3.3% increase from 1,072 associates at December 31, 2022. Our Code of Personal and Business Conduct and Ethics (“Code”) addresses both business and social relationships that may present legal and ethical concerns and also sets forth a code of conduct to guide the members of the Board of Directors and associates.
This was a 1.6% decrease from 1,107 associates at December 31, 2023. Our Code of Personal and Business Conduct and Ethics (“Code”) addresses both business and social relationships that may present legal and ethical concerns and also sets forth a code of conduct to guide the members of the Board of Directors and associates.
Tier 2 capital also includes, among other things, certain trust preferred securities. The total minimum regulatory capital ratios and well-capitalized minimum ratios are reflected in the charts below.
Tier 2 capital also includes, among other things, certain trust preferred securities. The total minimum regulatory capital ratios and well-capitalized minimum ratios are reflected elsewhere in this document.
Nicholson served as Executive Vice President and Chief Financial Officer of Pacific Premier Bank and its holding company, Pacific Premier Bancorp Inc. from June of 2015 to May 17 of 2016, and from 2008 to 2014, Mr. Nicholson was Chief Financial Officer of 1st Enterprise Bank.
Nicholson served as Executive Vice President and Chief Financial Officer of Pacific Premier Bank and its holding company, Pacific Premier Bancorp Inc. from June of 2015 to May of 2016, and from 2008 to 2014, Mr. Nicholson was Chief Financial Officer of 1st Enterprise Bank. From 2005 to 2008, he was the Chief Financial Officer of Mellon First Business Bank.
The Bank received an overall “Satisfactory” rating in its most recent FDIC CRA performance evaluation, which measures how financial institutions support their communities in the areas of lending, investment and service tests.
The Bank received an overall “Satisfactory” rating in its most recent FDIC CRA performance evaluation, which measures how financial institutions support their communities in the areas of lending, investment and service tests. The Bank received a “High Satisfactory” rating for both the lending and the investment tests and an “Outstanding” rating for the service test.
Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment. 8 The prompt corrective action standards were changed to conform with the new capital rules.
Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.
The average tenure at the 4 Company among our leadership group at the end of 2023 was greater than 10 years. In 2023, turnover among our leadership group was 4.3% and during the year we promoted 1 associate and hired 7 new associates into our leadership group.
The average tenure at the Company among our leadership group at the end of 2024 was greater than 10 years. In 2024, turnover among our leadership group was 5.8% and during the year we promoted 3 associates and hired 4 new associates into our leadership group.
The FDIC is an independent federal agency that insures deposits through the DIF up to prescribed statutory limits of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries.
The FDIC is an independent federal agency that insures deposits through the DIF up to prescribed statutory limits of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries. The FDIC has set the target DRR at 2.00%.
Business — Regulation and Supervision — Dividends .” As of December 31, 2023, the Company had $16.02 billion in total consolidated assets, $8.82 billion in net loans, $11.43 billion in deposits, and $2.08 billion in shareholders’ equity. The principal executive offices of CVB and the Bank are located at 701 North Haven Avenue, Suite 350, Ontario, California.
Business — Regulation and Supervision — Dividends .” As of December 31, 2024, the Company had $15.15 billion in total consolidated assets, $8.46 billion in net loans, $11.95 billion in deposits, and $2.19 billion in shareholders’ equity. The principal executive offices of CVB and the Bank are located at 701 North Haven Avenue, Suite 350, Ontario, California.
From 2000 to 2008, he served as Senior Vice President and Operations Manager at Bank of the West. From 2008 to 2009 he served as Executive Vice President and Commercial and Treasury Services Manager at Bank of the West. Mr.
From 2000 to 2008, he served as Senior Vice President and Operations Manager at Bank of the West. Mr.
The DEI Council discusses ways to encourage diversity and inclusion among associates and serve as ambassadors when it comes to implementing our Core Values regarding diversity and inclusion. We monitor progress in enhancing diversity throughout our organization, including the percentage of our total associates who are female and racially or ethnically diverse.
The Council discusses ways to promote engagement among associates and serve as ambassadors when it comes to implementing our Core Values. We monitor diversity throughout our organization, including the percentage of our total associates who are female and racially or ethnically diverse.
DFPI approvals may also be required for certain mergers and acquisitions. 10 Securities Exchange Act of 1934 CVB’s common stock is publicly held and listed on the NASDAQ Stock Market (“NASDAQ”), and CVB is subject to the periodic reporting, information, proxy solicitation, insider trading, corporate governance and other requirements and restrictions of the Securities Exchange Act of 1934 and the regulations of the Securities and Exchange Commission (“SEC”) promulgated thereunder as well as listing requirements of NASDAQ.
Securities Exchange Act of 1934 CVB’s common stock is publicly held and listed on the NASDAQ Stock Market (“NASDAQ”), and CVB is subject to the periodic reporting, information, proxy solicitation, insider trading, corporate governance and other requirements and restrictions of the Securities Exchange Act of 1934 and the regulations of the Securities and Exchange Commission (“SEC”) promulgated thereunder as well as listing requirements of NASDAQ.
In November 2021, the federal banking agencies adopted a final rule, with compliance required by May 1, 2022, that requires banking organizations to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and 13 operations that would result in material loss.
Effective May 1, 2022, banking organizations are required to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss.
Therefore, CVB and any of its subsidiaries are subject to examination by, and may be required to file reports with, the California DFPI.
Therefore, CVB and any of its subsidiaries are subject to examination by, and may be required to file reports with, the California DFPI. DFPI approvals may also be required for certain mergers and acquisitions.
The final CRA rule takes effect on April 1, 2024 but builds in staggered compliance dates, including compliance with the new tests, data collection requirements, and the requirement to define retail lending assessment areas, all of which become applicable on January 1, 2026.
The final CRA rule was intended to take effect on April 1, 2024 with staggered compliance dates, including compliance with the new tests, data collection requirements, with the requirement to define retail lending assessment areas, all of which become applicable on January 1, 2026 and revised data reporting requirements taking effect January 1, 2027.
During 2016, as required by the Dodd-Frank Act, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets (including the Company and Citizens Business Bank).
During 2016, as required by the Dodd-Frank Act, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets (including the Company and Bank). In October 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act.
Recruiting, training and development, and retention of key associates is vital to the Company’s strategy and success. The Company promotes leadership and associate development through various programs, including succession planning, top talent program, and leadership essentials training. At December 31, 2023, we had 139 positions within the Company designated as “leadership” positions. This represents approximately 13% of our total associates.
The Company promotes leadership and associate development through various programs, including succession planning, top talent program, and leadership essentials training. At December 31, 2024, we had 138 positions within the Company designated as “leadership” positions. This represents approximately 13% of our total associates.
The Bank received a “High Satisfactory” rating for both the lending and the investment tests and an “Outstanding” rating for the service test. 14 The CRA specifically directs the federal bank regulatory agencies, in examining insured depository institutions, to assess their record of helping to meet the credit needs of the entire communities in which the financial institution operates, including low and moderate income (LMI) communities, consistent with safe and sound banking practices.
The CRA specifically directs the federal bank regulatory agencies, in examining insured depository institutions, to assess their record of helping to meet the credit needs of the entire communities in which the financial institution operates, including low and moderate income communities, consistent with safe and sound banking practices.
From 2005 to 2008, he was the Chief Financial Officer of Mellon First Business Bank. Mr. Farnsworth was appointed Executive Vice President and Chief Credit Officer of the Bank on July 18, 2016. Prior to his appointment, Mr. Farnsworth was Executive Vice President, Global Risk Management, and National CRE Risk Executive at BBVA Compass. Previously, Mr.
Mr. Farnsworth was appointed Executive Vice President and Chief Credit Officer of the Bank on July 18, 2016. Prior to his appointment, Mr. Farnsworth was Executive Vice President, Global Risk Management, and National CRE Risk Executive at BBVA Compass. Previously, Mr. Farnsworth held senior credit management positions with US Bank and AmSouth. Mr.
Any future increases in FDIC insurance premiums may have a material and adverse effect on our earnings and could have a material adverse effect on the value of, or market for, our common stock. 12 Dividends It is the Federal Reserve’s policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.
Dividends It is the Federal Reserve’s policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.
The Board of Directors oversees executive compensation, as well as the Company’s compensation and benefit plans, through the Board’s Compensation Committee. The Management Compensation Compliance Committee, under the direction of the Compensation Committee, identifies, assesses, and manages exposure to and compliance with applicable compensation laws, regulations, and other related issues.
The Management Compensation Compliance Committee, under the direction of the Compensation Committee, identifies, assesses, and manages exposure to and compliance with applicable compensation laws, regulations, and other related issues.
The Company has adopted a Nasdaq compliant clawback policy which is included as an exhibit with this Annual Report on Form 10-K.
In response to the final rules, the Nasdaq Stock Market implemented new clawback listing standards which are applicable to the Company. The Company has adopted a Nasdaq compliant clawback policy which is included as an exhibit with this Annual Report on Form 10-K.
The Federal Reserve also adopted a rule to allow a debit card issuer to recover one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements required by the Federal Reserve.
The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is currently uncertain. The Federal Reserve also adopted a rule to allow a debit card issuer to recover one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements required by the Federal Reserve.
The Company’s Diversity and Inclusion Program is designed to invest in the professional development of our associates and values an inclusive and diverse workplace. We strive to reward talent, with a commitment to equal opportunity. Oversight is provided by the Company’s Diversity and Inclusion Committee, which is guided by our Diversity and Inclusion Policy.
The Company’s Development and Engagement Program is designed to invest in the professional development of our associates and increase workplace engagement. We strive to reward talent, with a commitment to equal opportunity.
These rates are highly sensitive to many factors that are beyond our control, such as inflation, recession and unemployment, government fiscal and monetary and other policies, and the impact which future changes in domestic and foreign economic conditions might have on us cannot be predicted.
These rates are highly sensitive to many factors that are beyond our control, such as inflation, recession and unemployment, government fiscal and monetary and other policies, and the impact which future changes in domestic and foreign economic conditions might have on us cannot be predicted. 5 Opportunity for banks to earn fees and other noninterest income have also been limited by restrictions imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and other government regulations.
In December of 2023, we held our annual awards ceremony that recognized 38 associates, who stood out for their commitment to our high standards of performance. The Company is committed to supporting the physical and financial wellness of our associates and their families.
Our 2024 annual awards ceremony recognized 40 associates, who stood out for their commitment to our high standards of performance. The Company is committed to supporting the physical and financial wellness of our associates and their families. We offer a comprehensive set of health insurance and retirement benefits, as well as wellness programs and resources.
At December 31, 2023, the Bank had $16.03 billion in assets, $8.82 billion in net loans, $11.48 billion in deposits, and $2.06 billion in total equity. As of December 31, 2023, the Bank had 62 Banking Centers (“Centers”) located throughout California.
At December 31, 2024, the Bank had $15.16 billion in assets, $8.46 billion in net loans, $12.00 billion in deposits, and $2.16 billion in total equity. As of December 31, 2024, the Bank had 62 Banking Centers (“Centers”) located throughout California. We also have three trust offices located in Ontario, Newport Beach, and Pasadena.
The CFPB has finalized a number of significant rules which impact nearly every aspect of the lifecycle of a residential mortgage loan. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act.
These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act.
The FDIC will, at least semi-annually, update its income and loss projections for the Deposit Insurance Fund and, if necessary, propose rules to further increase assessment rates. In addition, in November, 2023, the FDIC finalized a special assessment to recover the loss to the DIF as a result of the closure of several large regional banks during 2023.
The FDIC will, at least semi-annually, update its income and loss projections for the DIF and, if necessary, propose rules to further increase assessment rates.
Farnsworth held senior credit management positions with US Bank and AmSouth. Mr. Harvey was appointed Executive Vice President and Chief Operating Officer of the Bank on February 23, 2022. He previously assumed the position of Executive Vice President and Chief Operations Officer of the Bank on December 31, 2009.
Harvey was appointed Executive Vice President and Chief Operating Officer of the Bank on February 23, 2022. He previously assumed the position of Executive Vice President and Chief Operations Officer of the Bank on December 31, 2009. From 2008 to 2009 he served as Executive Vice President and Commercial and Treasury Services Manager at Bank of the West.
We also cannot predict whether or when regulatory requirements may be reduced or eliminated and the overall affect such reduction or elimination may have on the Company and the Bank. 6 Legislation and Regulatory Developments The federal banking agencies continue to promulgate regulations and guidelines intended to ensure the financial strength and safety and soundness of banks and the stability of the U.S. banking system.
Legislation and Regulatory Developments The federal banking agencies continue to promulgate regulations and guidelines intended to ensure the financial strength and safety and soundness of banks and the stability of the U.S. banking system.
Commercial Real Estate Concentration Limits In December 2006, the federal banking regulators issued guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” to address increased concentrations in commercial real estate, or CRE, loans.
The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product. 15 Commercial Real Estate Concentration Limits In December 2006, the federal banking regulators issued guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” to address increased concentrations in commercial real estate, or “CRE”, loans.
We continue to believe there will be increased focus on perceived regulatory gaps, regulatory compliance, supervision and examination during the remainder of the current presidential term. Capital Adequacy Requirements Bank holding companies and banks are subject to similar regulatory capital requirements administered by state and federal banking agencies.
The scope of such changes, however, cannot yet be fully determined. Capital Adequacy Requirements Bank holding companies and banks are subject to similar regulatory capital requirements administered by state and federal banking agencies.
Our Human Resources Director provides updates on our progress to the Board of Directors on a regular basis. The following represents the Company’s diversity at December 31, 2023: In addition, 38% of our Board of Directors are female or ethnically diverse.
The following represents the Company’s diversity at December 31, 2024: In addition, 38% of our Board of Directors are female or ethnically diverse. The Board of Directors oversees executive compensation, as well as the Company’s compensation and benefit plans, through the Board’s Compensation Committee.
The Policy provides a framework which we use to create and strengthen our diversity policies and practices, including our organizational commitment to diversity, positive workforce and employment practices, sound procurement and business practices, and practices to promote transparency of organizational diversity and inclusion.
Oversight is provided by the Company’s Engagement Committee, which is guided by our Five Core Values and various policies that support a framework which we use to create and strengthen our associate engagement and the Company's overall diversity, including our organizational commitment to associate engagement and well-being, as well as sound procurement and business practices.
Removed
On January 7, 2022 we completed the acquisition of Suncrest Bank ("Suncrest"), in Visalia, California with approximately $1.4 billion in total assets, acquired at fair value. Total assets at the time of the acquisition, included $765.9 million of acquired net loans at fair value, $131.1 million of investment securities, and $9 million in Bank-Owned Life Insurance ("BOLI").
Added
These offices serve as sales offices for the Bank’s wealth management, trust and investment products. The Bank's goal is to be the premier financial services company operating throughout the state of California, servicing the comprehensive financial needs of successful small-and medium-sized businesses and their owners.
Removed
The acquisition resulted in $102.1 million of goodwill and $3.9 million in core deposit premium. Net cash proceeds were used to fund the $39.6 million in cash paid to the former shareholders of Suncrest as part of the merger consideration. The total fair value of liabilities assumed included $1.2 billion in total deposits.
Added
In 2024, the combined Company 401(k) contribution was 5% of associate’s eligible salary. 92% of our associates made individual participant contributions to the 401(k) plan during 2024. Recruiting, training and development, and retention of key associates is vital to the Company’s strategy and success.
Removed
In connection with the acquisition, the Bank acquired seven Centers and two loan production offices in California’s Central Valley and the Sacramento area. Of the seven acquired centers, two centers, that were each within two miles of the Bank's existing centers, were consolidated into existing Citizens Business Bank centers during the second quarter of 2022.
Added
We also cannot predict whether or when regulatory requirements may be reduced or eliminated and the overall affect such reduction or elimination may have on the Company and the Bank.
Removed
Refer to Note 4 – Business Combinations of the notes to the unaudited condensed consolidated financial statements of this report for additional information. We also have three trust offices located in Ontario, Newport Beach, and Pasadena. These offices serve as sales offices for the Bank’s wealth management, trust and investment products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTreasury yield curve is inverted could cause net interest margins to compress, as the majority of our funding sources are impacted by short-term rates, while much of our earning assets are impacted by longer term interest rates • The value of the portfolio of investment securities that we hold may be adversely affected by increasing interest rates and defaults by debtors; • Further disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations, may result in changes in applicable rates of interest, difficulty in accessing capital or an inability to borrow on favorable terms or at all from other financial institutions; and Although the Company and the Bank currently exceed the minimum capital ratio requirements to be deemed “well-capitalized” for regulatory purposes and have not suffered any significant liquidity issues as a result of these types of events, the cost and availability of funds may be adversely affected by illiquid credit markets and the demand for our products and services may decline if we experience slower than expected economic growth or higher rates of unemployment.
Biggest changeTreasury yield curve is inverted could cause net interest margins to compress, as the majority of our funding sources are impacted by short-term rates, while much of our earning assets are impacted by longer term interest rates; • The value of the portfolio of investment securities that we hold may be adversely affected by increasing interest rates and defaults by debtors; and 25 • Further disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations, may result in changes in applicable rates of interest, difficulty in accessing capital or an inability to borrow on favorable terms or at all from other financial institutions.
We are exposed to risk of environmental liabilities with respect to properties to which we take title. In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties.
We are exposed to risk of environmental liabilities with respect to properties to which we take title. In the course of our business, we may foreclose and take title to real estate, and we could be subject to environmental liabilities with respect to these properties.
Current and future federal and state legal and regulatory requirements, restrictions and regulations, including those imposed under Dodd-Frank, those relating to climate-related disclosure, corporate governance, and those adopted to facilitate data privacy or consumer protection, may adversely impact our profitability and may have a material and adverse effect on our business, financial condition, and results of operations, may require us to invest significant management attention and resources to evaluate and make any changes required by the legislation and accompanying rules, and may make it more difficult for us to attract and retain qualified executive officers and employees.
Current and future federal and state legal and regulatory requirements, restrictions and regulations, including those imposed under Dodd-Frank, those relating to climate-related disclosure, corporate governance, and those adopted to facilitate 27 data privacy or consumer protection, may adversely impact our profitability and may have a material and adverse effect on our business, financial condition, and results of operations, may require us to invest significant management attention and resources to evaluate and make any changes required by the legislation and accompanying rules, and may make it more difficult for us to attract and retain qualified executive officers and employees.
The level of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates which may, in turn, impact the reliability of the process; • The Company’s commercial, residential and consumer borrowers may be unable to make timely repayments of their loans, or the decrease in value of real estate collateral securing the payment of such loans could result in significant credit losses, increasing delinquencies, foreclosures and customer bankruptcies, any of which could have a material adverse effect on the Company’s operating results; • A sustained environment in which the U.S.
The level of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates which may, in turn, impact the reliability of the estimation process; • The Company’s commercial, residential and consumer borrowers may be unable to make timely repayments of their loans, or the decrease in value of real estate collateral securing the payment of such loans could result in significant credit losses, increasing delinquencies, foreclosures and customer bankruptcies, any of which could have a material adverse effect on the Company’s operating results; • A sustained environment in which the U.S.
Additionally, federal and state banking regulators and supervisory authorities, investors, and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change, both directly and with respect to their clients, which may result in financial institutions coming under increased scrutiny regarding the 27 disclosure and management of their climate risks and related lending and investment activities, including in the context of stress testing for various climate stress scenarios.
Additionally, federal and state banking regulators and supervisory authorities, investors, and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change, both directly and with respect to their clients, which may result in financial institutions coming under increased scrutiny regarding the disclosure and management of their climate risks and related lending and investment activities, including in the context of stress testing for various climate stress scenarios.
The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may increase the level of charge-offs or the allowance for credit losses in the loan portfolio that we acquire and correspondingly reduce our net income.
The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may increase the level of charge-offs or the allowance for credit losses in the loan portfolio that we acquire and correspondingly reduce our net 24 income.
In addition, we may face the following risks in connection with any downward turn in the economy or sustained period of higher or lower interest rates or higher inflation rates: • Higher interest rates will not only impact the interest we receive on loans and investment securities and the amount of interest we pay our depositors, but also could also impact our ability to grow loans and deposits; • Rising interest rates, higher commodity prices, and an overall slowdown in economic growth could also impact the fair value of our assets and adversely impact our asset quality; • The process we use to estimate losses inherent in our credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans.
In addition, we may face the following risks in connection with any downward turn in the economy or sustained period of higher or lower interest rates or higher inflation rates: • Higher interest rates will not only impact the interest we receive on loans and investment securities and the amount of interest we pay our depositors, but also could also impact our ability to compete for and grow loans and deposits; • Rising interest rates, higher commodity prices, and an overall slowdown in economic growth could also impact the fair value of our assets and adversely impact our asset quality; • The process we use to estimate losses inherent in our credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans.
As an example, monetary 26 tightening and increases in the federal funds rate by the Federal Reserve could adversely affect our borrowers’ earnings and ability to repay their loans, which could have a material adverse effect on our financial condition and results of operations.
As an example, monetary tightening and increases in the federal funds rate by the Federal Reserve could adversely affect our borrowers’ earnings and ability to repay their loans, which could have a material adverse effect on our financial condition and results of operations.
If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of 25 operations in the periods in which they become known.
If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of operations in the periods in which they become known.
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. 19 Our loan portfolio is predominantly secured by real estate in California and thus we have a higher degree of risk from a downturn in our real estate markets.
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. 18 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.
Among the factors that could affect our stock price are: • actual or anticipated fluctuations in our operating results and financial condition; • changes in liquidity, revenue or earnings estimates or publication of research reports and recommendations by financial analysts; • credit events or losses; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; • strategic actions by us or our competitors, such as acquisitions or restructurings; • actions or trades by institutional shareholders or other large shareholders; • our capital position; • fluctuations in the stock price and operating results of our competitors; • actions by hedge funds, short term investors, activist shareholders or shareholder representative organizations; • general market conditions and, in particular, developments relating to the financial services industry and interest rates; • proposed or adopted regulatory changes or developments; • anticipated or pending investigations, proceedings or litigation that involve or affect the Company and/or the Bank; • fraud losses or data or privacy breaches; or 30 • domestic and international economic factors, whether related or unrelated to the Company’s performance.
Among the factors that could affect our stock price are: • actual or unanticipated fluctuations in our operating results and financial condition; • changes in liquidity, revenue or earnings estimates or publication of research reports and recommendations by financial analysts; • credit events or losses; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; • strategic actions by us or our competitors, such as acquisitions or restructurings; • actions or trades by institutional shareholders or other large shareholders; • our capital position; • fluctuations in the stock price and operating results of our competitors; • actions by hedge funds, short term investors, activist shareholders or shareholder representative organizations; • general market conditions and, in particular, developments relating to the financial services industry and interest rates; • proposed or adopted regulatory changes or developments; • unanticipated or pending investigations, proceedings or litigation that involve or affect the Company and/or the Bank; • fraud losses or data or privacy breaches; or • domestic and international economic factors, whether related or unrelated to the Company’s performance.
If we become subject to significant environmental liabilities, our business, financial condition, results of operations and prospects could be adversely affected. Liquidity and Interest Rate Risks Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business.
If we become subject to significant environmental liabilities, our business, financial condition, results of operations and prospects could be adversely affected. Liquidity and Interest Rate Risks Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our banking business.
We are presently subject to macroeconomic and interest rate risk due to domestic and global economic instability that has resulted in higher inflation than the United States has experienced in more than 40 years and resulted in increases to prevailing interest rates.
We are presently subject to macroeconomic and interest rate risk due to domestic and global economic instability that has resulted in higher inflation than the United States has experienced in more than 40 years and resulted in overall increases to prevailing interest rates.
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, 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.
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.
We also may rely on representations of customers and counterparties as to the accuracy and 29 completeness of that information. In deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements are accurate.
We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information. In deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements are accurate.
We have established processes and procedures intended to identify, measure, monitor, report and analyze the types of risk to which we are subject, including credit, liquidity, operational, regulatory, compliance and reputational risks.
We have established processes and procedures intended to identify, measure, monitor, report and analyze the types of risk to which we are subject, including credit, liquidity, operational, regulatory, compliance, legal and reputational risks.
Additionally, holders of common stock are subject to the prior liquidation rights of the holders of any outstanding debt we have now or may issue in the future and may be subject to the prior dividend and liquidation rights of any series of preferred stock we may issue in the future.
Additionally, holders of common stock are subject to the prior 30 liquidation rights of the holders of any outstanding debt we have now or may issue in the future and may be subject to the prior dividend and liquidation rights of any series of preferred stock we may issue in the future.
We have exposure to different industries and counterparties, and execute transactions with various counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual funds, and other institutional clients.
We have exposure to different industries and counterparties, and we typically execute transactions with various counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual funds, and other institutional clients.
Any failure or interruption of these services or systems or breaches in the security of these systems could result in failures or interruptions to serve our customers, including deposit, servicing and/or loan origination systems.
Any failure or 23 interruption of these services or systems or breaches in the security of these systems could result in failures or interruptions to serve our customers, including deposit, servicing and/or loan origination systems.
Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, risk management, marketing and technical personnel and upon the continued contributions of our management and personnel.
Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, risk management, marketing, professional and technical personnel and upon the continued contributions of our management and personnel.
In particular, our success has been and continues to be highly 24 dependent upon the abilities of key executives, including our President and Chief Executive Officer, and certain other key employees.
In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our President and Chief Executive Officer, and certain other key employees.
These events include, but are not limited to: our success in integrating the operations, retaining key employees and customers, achieving anticipated synergies, meeting expectations and otherwise realizing the anticipated benefits of the acquisition; litigation resulting from circumstances occurring at the acquired entity prior to the date of acquisition; loan downgrades and credit loss provisions resulting from underwriting of certain acquired loans determined not to meet our credit standards; personnel changes that cause instability within a department; delays in implementing new policies or procedures or the failure to apply new policies or procedures; and other events relating to the performance of our business.
These events include, but are not limited to: our success in integrating the operations, retaining key employees and customers, achieving anticipated synergies, meeting expectations and otherwise realizing the anticipated benefits of the acquisition; litigation resulting from circumstances occurring at the acquired entity prior to the date of acquisition or in connection with the acquisition itself; loan downgrades and credit loss provisions resulting from underwriting of certain acquired loans determined not to meet our credit standards; personnel changes that cause instability within a department; delays in implementing new policies or procedures or the failure to apply new policies or procedures; and other events relating to the performance of our business.
An inability to raise funds through deposits, borrowings, the sale of investment securities, loans and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.
An inability to raise funds through deposits, borrowings, the sale of investment securities, loans and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the banking or broader financial services industry in general.
The U.S. government has warned financial institutions of the potential increase in the frequency and severity of malicious cyber-attacks and other activities involving critical infrastructure, specifically including the financial sector, and has encouraged the banking sector to enhance cyber-defenses, and these risks have increased in connection with the current conflicts involving Ukraine and Russia in Europe and Israel and Hamas in the Middle East.
The U.S. government has warned financial institutions of the potential increase in the frequency and severity of malicious cyber-attacks and other activities involving critical infrastructure, specifically including the 22 financial sector, and has encouraged the banking sector to enhance cyber-defenses, and these risks have increased in connection with the current conflicts involving Ukraine and Russia in Europe and Israel, Hamas and Iran in the Middle East.
Although we 23 continue to invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, our inability to anticipate, or failure to adequately mitigate, breaches of security could result in: losses to us or our clients; our loss of business and/or clients; damage to our reputation; the incurrence of additional expenses; disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability — any of which could have a material adverse effect on our business, financial condition and results of operations.
Although we continue to invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, our inability to anticipate, or failure to adequately mitigate, breaches of security could result in, among other things, losses to us or our clients; our loss of business and/or clients; damage to our reputation; the incurrence of additional expenses; disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability — any of which could have a material adverse effect on our business, financial condition and results of operations.
Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies, and acts of nature, such as earthquakes, prolonged drought and disasters particular to California.
Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies, and acts of nature, such as earthquakes, prolonged drought, pandemics, wildfires and other disasters particular to California.
Additional risks associated with our real estate construction loan portfolio include failure of developers and/or contractors to complete construction on a timely basis or at all, market deterioration during construction, cost overruns and failure to sell or lease the security underlying the construction loans so as to generate the cash flow anticipated by our borrower.
Additional risks associated with our real estate construction loan portfolio include failure of developers and/or contractors to complete construction on a timely basis or at all, market deterioration during construction, cost overruns and failure to sell or lease the properties underlying the construction loans so as to generate the cash flow anticipated by our borrower.
Rising interest rates may also cause a decline in principal payments, while a decline in interest rates may accelerate principal payments for a significant portion of our investment securities.
Rising interest rates may also cause a decline in principal payments, while a decline in interest rates may accelerate principal payments for a significant portion of 20 our investment securities.
In addition, we are heavily dependent on the strength and capability of our technology systems, which we use both to 22 interface with our customers and to manage our internal financial records and other systems. Any shortcomings in our technology systems subjects us to risk of misconduct by our employees that may go undetected.
In addition, we are heavily dependent on the strength and capability of our technology systems, which we use both to 21 interface with our customers and to manage our internal financial records and other systems. Any shortcomings in our technology systems subjects us to risk of misconduct by our employees that may go undetected.
At December 31, 2023, our balance sheet was positioned with an asset sensitive bias over both a one and two-year horizon assuming no balance sheet growth, and as a result, our net interest margin tends to expand in a rising interest rate environment and decrease in a declining interest rate environment.
At December 31, 2024, our balance sheet was positioned with an asset sensitive bias over both a one and two-year horizon, assuming no balance sheet growth, and as a result, our net interest margin tends to expand in a rising interest rate environment and decrease in a declining interest rate environment.
If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan.
If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plans.
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. Many companies are facing increasing scrutiny from regulators, customers, investors, and other stakeholders related to their environmental, social and governance ("ESG") practices and disclosures.
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. Many companies are facing increasing scrutiny from regulators, customers, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosures.
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 will not require us to increase this allowance.
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.
Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as the effects of inflation, rising interest rates, a 20 severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.
Our ability 19 to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as the effects of inflation, rising interest rates, a severe disruption of the financial markets or negative views and expectations about the prospects for the banking or financial services industry as a whole.
Climate change presents multi-faceted risks, including operational risk from the physical effects of climate events on our bank and our customers’ facilities and other assets, credit risk from borrowers with significant exposure to climate risk, particularly our customers in the dairy and agricultural sectors, transition risks associated with the transition to a less carbon-dependent economy, and possible reputational risk from stakeholder concerns about our practices and business relationships with clients who operate in carbon-intensive industries.
Climate change presents multi-faceted risks, including operational risk from the physical effects of climate events on our bank and our customers’ facilities and other assets, including the enhanced risks of drought or wildfires, credit risk from borrowers with significant exposure to climate risk, particularly our customers in the dairy and agricultural sectors, transition risks associated with the transition to a less carbon-dependent economy, and possible reputational risk from stakeholder concerns about our practices and business relationships with clients who operate in carbon-intensive industries.
Future growth in our banking business will largely depend on our ability to maintain and grow a strong deposit base. There is no assurance that we will be able to grow and maintain our deposit base.
Future growth in our banking business will largely depend on our ability to maintain and grow a strong and low-cost deposit base. There is no assurance that we will be able to grow and maintain our deposit base.
While the Bank currently has access to substantial borrowing capacity from the Federal Reserve Bank, the Federal Home Loan Bank and credit facilities established with larger banks, there can be no assurance that customer confidence in regional banks and the banking system more broadly will be fully restored or that potential liquidity concerns will recede or that such access will continue unimpaired.
While the Bank currently has access to substantial borrowing capacity from the Federal Reserve Bank, the Federal Home Loan Bank and credit facilities established with larger banks, there can be no assurance that customer confidence in regional banks and the banking system more broadly has been fully restored or that potential liquidity concerns will recede or that such access to alternative sources of liquidity will continue unimpaired.
In addition, our Board of Directors could decide in the future to reduce or discontinue the payment of cash dividends on our common stock in its sole discretion. See “Business — Regulation and Supervision” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Cash Flow.” Other Risks We may face other risks.
In addition, our Board of Directors could decide in the future to reduce or discontinue the payment of cash dividends on our common stock in its sole discretion. See “Business — Regulation and Supervision” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Cash Flow.” Other Risks We may face other risks.
Our success depends, to a certain extent, upon local, national and global economic and political conditions, as well as governmental monetary policies.
Our success depends, to a certain extent, upon local, national and global economic and political conditions, as well as governmental monetary and interest rate policies.
Because a significant portion of our loan portfolio is comprised of commercial real estate loans, the banking regulators may require us to maintain higher levels of capital than we would otherwise be expected to maintain, which could limit our ability to leverage our capital and have a material adverse effect on our business, financial condition, results of operations and prospects.
Because a significant portion of our loan portfolio is comprised of commercial real estate loans, the banking regulators may require us to maintain higher levels of capital than we would otherwise be expected to maintain or may impose limits on our ability to make additional commercial real estate loans, which could limit our ability to leverage our capital and have a material adverse effect on our business, financial condition, results of operations and prospects.
In a rising interest rate environment, we may need to accelerate the pace of rate increases on our deposit accounts as compared to the pace of future increases in short-term market rates and our customers could move their 21 deposits with us to institutions that pay higher interest rates on deposits accounts.
In a rising interest rate environment, we may need to accelerate the pace of rate increases on our deposit accounts as compared to the pace of future increases in short-term market rates and our customers could move their deposits with us to money market funds or institutions that pay higher interest rates on deposits accounts.
Recent adverse events in the banking industry, including the significant bank failures that occurred in 2023, could result in increased regulatory scrutiny in the course of routine examinations and otherwise, and new regulations directed towards regional banks, designed to address the recent negative developments in the banking industry.
Recent adverse events in the banking industry, including the significant bank failures that occurred in 2023, have resulted in increased regulatory scrutiny in the course of routine examinations and otherwise, and could result in additional new regulations being directed towards regional banks, designed to address the recent negative developments in the banking industry.
As a result, customers may choose to maintain deposits with larger more systemically important financial institutions or invest in higher yielding and higher-rated short-term fixed income securities, all of which could materially adversely impact the Bank’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
As a result, customers may choose to maintain deposits with larger more systemically important financial institutions, restrict the amount of deposits they place with a given financial institution, or invest in higher yielding and higher-rated short-term fixed income securities, all of which could materially adversely impact the Bank’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
Such developments include the rapid movement by customers and some competitor financial institutions to web-based services, mobile banking and cloud computing. Our failure or inability to anticipate, plan for or implement technology change could adversely affect our competitive position, financial condition and profitability. Our controls and procedures could fail or be circumvented.
Such developments include the rapid movement by customers and some competitor financial institutions to web-based services, mobile banking and cloud computing. Our failure or inability to anticipate, plan for or implement technology change could adversely affect our competitive position, financial condition and profitability.
A substantial amount of our real estate collateral is located in the state of California. If real estate values, including values of land held for development, should again start to decline, the value of real estate collateral securing our loans could be significantly reduced.
The vast majority of our real estate collateral is located in the state of California. If real estate values, including values of land held for development, should again start to decline, the value of real estate collateral securing our loans could be significantly reduced.
Deposit balances can decrease when customers perceive alternative investments, such as the stock market, bond market or real estate, as providing a better risk/return tradeoff.
Deposit balances can decrease when customers perceive alternative investments, such as higher yielding money market funds, the stock market, bond market or real estate, as providing a better risk/return tradeoff.
These current capital rules may adversely affect our ability to pay dividends, or require us to reduce business levels or raise capital, including in ways that may adversely affect our business, liquidity, financial condition and results of operations. Any future regulatory capital requirements may similarly adversely affect us.
These current capital rules may adversely affect our ability to pay dividends, or require us to reduce business levels or raise capital, including in ways that may adversely affect our business, liquidity, financial condition and results of operations.
In addition, responding to requests for information in connection with discovery demanded by a government agency or private plaintiffs in any of these lawsuits may be costly and divert internal resources away from managing our business. See Item 3 — Legal Proceedings below.
In addition, responding to requests for information in connection with discovery demanded by a government agency or private plaintiffs in any of these lawsuits may be costly and divert internal resources away from managing our business.
We may be subject to customer claims and government or legal actions pertaining to our ability to safeguard our customers’ information and the performance of our fiduciary responsibilities.
See Item 3 — Legal Proceedings below. 29 We may be subject to customer claims and government or legal actions pertaining to our ability to safeguard our customers’ information and the performance of our fiduciary responsibilities.
Under the current capital standards, if our Common Equity Tier 1 Capital does not include the required “capital conservation buffer,” we will be prohibited from paying dividends to our shareholders. The capital conservation buffer requirement, which is measured in addition to the minimum Common Equity Tier 1 capital of 4.5%, is now 2.5%.
The capital conservation buffer requirement, which is measured in addition to the minimum Common Equity Tier 1 capital of 4.5%, is now 2.5%. Additionally, under the capital standards, if our Common Equity Tier 1 Capital does not include the “capital conservation buffer,” we will also be prohibited from paying discretionary bonuses to our executive employees.
Based on estimated fair values, the aggregate pre-tax net unrealized loss in our HTM securities was approximately $381.7 million at December 31, 2023.
The aggregate pre-tax net unrealized loss in our AFS securities was $447.7 million at December 31, 2024. Based on estimated fair values, the aggregate pre-tax net unrealized loss in our HTM securities was approximately $425.3 million at December 31, 2024.
Adverse events in the banking sector have caused market volatility and declines in the stock market prices for many community and regional banks, including the Company’s, resulting in a recent decline in the Company’s market capitalization.
Adverse events in the banking sector have caused market volatility and declines in the stock market prices for many community and regional banks from time to time, including the Company’s, resulting in periodic declines in the Company’s market capitalization.
There are no perfect hedging strategies, and interest rate hedging may fail to protect us from loss. Moreover, hedging activities could result in losses if the event against which we hedge does not occur.
Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions. There are no perfect hedging strategies, and interest rate hedging may fail to protect us from loss. Moreover, hedging activities could result in losses if the event against which we hedge does not occur.
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.
If any of these were to occur, our future results and performance could be adversely impacted. 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.
Climate change and climate change regulation could have a material adverse effect on us and our customers. Our business, as well as the operations and activities of certain of our banking customers, could be negatively impacted by climate change.
Our business, as well as the operations and activities of certain of our banking customers, could be negatively impacted by climate change.
The Federal Reserve’s Open Market Committee (“FOMC”) raised the target range for the federal funds rate to 5.25% to 5.50% in 2023, resulting in a cumulative increase of 5.25% from March of 2022.
The Federal Reserve’s Open Market Committee raised the target range for the federal funds rate to 5.25% to 5.50% in 2023, and then subsequently lowered it to a range of 4.25% to 4.50% in the last few months of 2024, resulting in a cumulative increase of 4.25% from March of 2022.
As a primarily commercial bank, the Bank has a relatively higher percentage of uninsured deposits compared to larger national banks or smaller community banks with a stronger focus on retail deposits.
As a primarily commercial bank, the Bank has a relatively higher percentage of uninsured deposits compared to larger national banks or smaller community banks with a stronger focus on retail deposits. As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.
While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions and the Company's borrowing facilities will be successful or sufficient in the event of sudden liquidity needs. Hedging against interest rate exposure may adversely affect our earnings.
A possible future downgrade of the sovereign credit ratings of the U.S. government and a decline in the perceived creditworthiness of U.S. government-related obligations could impact our ability to obtain funding that is collateralized by affected instruments, as well as affect the pricing of that funding when it is available.
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. 26 Any possible future downgrade of the sovereign credit ratings of the U.S. government and a decline in the perceived creditworthiness of U.S. government-related obligations could impact our ability to obtain funding that is collateralized by affected instruments, as well as affect the pricing of that funding when it is available.
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. For the year ended December 31, 2023, we recorded $2 million in provision for credit losses. During 2023, we experienced charge-offs of $405,000 and recoveries of $130,000, resulting in net charge-offs of $275,000.
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. For the year ended December 31, 2024, we recorded a $3.0 million recapture of provision for credit losses.
In business combinations, we acquire significant portfolios of loans that are marked to their estimated fair value.
In business combinations, we acquire significant portfolios of loans that are marked to their estimated fair value based on information known to us at the time of the business combination.
The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations. Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings, and financial condition.
The loss of these revenue streams and a lower level of low-cost deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.
In addition, the fair value of many of our loans, which have interest rates that are fixed until maturity or reset on a future date, has been negatively impacted by the increase in interest rates from the time these loans were originated While the Company does not currently intend to sell these securities or loans, if the Company were required to sell such securities or loans to meet liquidity needs, it could incur losses, which could impair the Company’s capital, financial condition, and results of operations, thereby negatively impacting our profitability.
While the Company does not currently intend to sell these securities or loans, if the Company were required to sell such securities or loans to meet liquidity needs, it could incur significant losses, which could impair the Company’s capital, financial condition, and results of operations, thereby negatively impacting our profitability.
Hedging against interest rate exposure may adversely affect our earnings. On occasion we have employed various financial risk methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios, investment securities and short-term liabilities.
On occasion we have employed various financial risk methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios, investment securities, and short-term liabilities. We also engage in hedging strategies with respect to arrangements where our customers swap floating interest rate obligations for fixed interest rate obligations, or vice versa.
Even if we are able to replace them, it may be at a higher cost to us, which could materially adversely affect our business, financial condition and results of operations. Failure to manage our growth may adversely affect our performance. Our financial performance and profitability depend on our ability to manage past and possible future growth.
If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we are able to replace them, it may be at a higher cost to us, which could materially adversely affect our business, financial condition and results of operations.
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs, particularly in our home state of California. There are residual and ongoing risks stemming from the COVID-19 pandemic.
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs, particularly in our home state of California. Public Health Risks We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events.
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 is sustainable with reasonable possibility of moderate decline to stabilization.
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.
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, 2023, we had $6.78 billion in commercial real estate loans, $66.7 million in construction loans, and $269.9 million in single-family residential mortgages.
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, 2023, approximately 4.7% of our total gross loan portfolio was comprised of dairy & livestock and agribusiness loans. As of December 31, 2023, we had $412.9 million in dairy & livestock and agribusiness loans, including $374.9 million in dairy & livestock loans and $38.0 million in agribusiness loans.
Our dairy & livestock and agribusiness lending presents unique credit risks. As of December 31, 2024, approximately 5.0% of our total gross loan portfolio was comprised of dairy & livestock and agribusiness loans.
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. Our dairy & livestock and agribusiness lending presents unique credit risks.
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 a result of inflationary pressures that resulted in rapid increases in interest rates initiated by the Federal Reserve over the last year, the mark-to-market values of previously purchased fixed income securities have declined significantly.
As a result of inflationary pressures that resulted in rapid increases in interest rates initiated by the Federal Reserve during 2022-2023, the fair values of previously purchased fixed income securities have declined significantly. At December 31, 2024, the total carrying value of our securities portfolio was $4.92 billion, of which $2.54 billion was available-for-sale and $2.38 billion was held-to-maturity.
Additionally, under the capital standards, if our Common Equity Tier 1 Capital does not include the “capital conservation buffer,” we will also be prohibited from paying discretionary bonuses to our executive employees. This may affect our ability to attract or retain employees, or alter the nature of the compensation arrangements that we may enter into with them.
This may affect our ability to attract or retain employees, or could alter the nature of the compensation arrangements that we may enter into with them.
If we experience difficulties, fail to comply with banking regulations or keep up with increasingly sophisticated technologies, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially.
We may build and maintain these capabilities ourselves, or we may outsource some of these functions to third parties. If we experience difficulties, fail to comply with banking or information security regulations or to keep up with increasingly sophisticated technologies, our operations could be interrupted.
As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community. 28 We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
It is possible that the Bank could be subject to similar assessments in the future which would adversely affect our costs and profitability. We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
We monitor our operational and technological capabilities and make modifications and improvements when we believe it will be cost effective to do so. We may build and maintain these capabilities ourselves, or we may outsource some of these functions to third parties.
If we fail or are unable to comply with such laws and regulations, we could incur significant legal liability, governmental investigations and penalties, and reputational damage. We monitor our operational and technological capabilities and make modifications and improvements when we believe it will be cost effective to do so.
Removed
Capitalization Rates used to determine value have increased due to overall cost of capital causing some downward pressure on real estate values. 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.
Added
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.
Removed
At December 31, 2023, the total carrying value of our securities portfolio was $5.42 billion, of which $2.96 billion was available-for-sale and $2.46 billion was held-to-maturity. The aggregate pre-tax net unrealized loss in our AFS securities was $449.8 million at December 31, 2023.
Added
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.
Removed
Furthermore, while the Federal Reserve Board established the Bank Term Funding Program (available until March 11, 2024) to eligible depository institutions secured by U.S. treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that this program or the Company's other borrowing facilities will be effective in addressing the Company's liquidity needs as they arise.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur COO is a seasoned bank operations executive with experience in loan servicing and documentation, cash management services, payment operations, information technology, vendor management, and treasury services.
Biggest changeOur COO is a seasoned bank operations executive with over 35 years of banking experience in Operations, Vendor Management, IT, Security, Treasury Management and Payment Operations.
These assessments include a variety of activities including information security maturity assessments, audits and independent reviews of our information security control environment and operating effectiveness. The results of significant assessments are reported to senior management and our Board through its Audit Committee. Cybersecurity processes are adjusted based on the information provided from these assessments.
These assessments include a variety of activities including information security maturity assessments, audits and independent reviews of our information security control environment and operating effectiveness. These assessments are reported to senior management and our Board through its Audit Committee. Cybersecurity processes are adjusted based on the information provided from these assessments.
The Security Committee also considers and makes recommendations on cybersecurity policies and procedures, service requirements, and risk mitigation strategies. 33 Our CISO has more than 20 years of Information Technology and Information Security experience in financial services including two other regional banks. He holds an undergraduate and master’s degree in Cybersecurity and Information Assurance.
The Security Committee also considers and makes recommendations on cybersecurity policies and procedures, service requirements, and risk mitigation strategies. 33 Our CISO has more than 27 years of Information Technology and 21 years of Information Security experience in financial services including two other regional banks. He holds an undergraduate and master’s degree in Cybersecurity and Information Assurance.
Risk Management and Strategy Our policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats are integrated into our overall risk management program and are based on applicable banking regulations, including the Interagency Guidelines Establishing Information Security Standards (“Interagency Guidelines”), and the Cybersecurity Assessment Tool (CAT2).
Risk Management and Strategy Our policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats are integrated into our overall risk management program and are based on applicable banking regulations, including the Interagency Guidelines Establishing Information Security Standards (“Interagency Guidelines”), and a Cybersecurity Assessment Framework.
We maintain controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and our Board in a timely manner.
We maintain controls and procedures that are designed to follow state and federal regulations to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and our Board in a timely manner.
Our CIO has 24 years of Information Technology (IT) experience and 17 years of experience in the financial services industry. Our CRO has more than 32 years of experience in Banking and over 14 years of experience in risk management, compliance, and BSA.
Our CIO has 25 years of information technology experience and 18 years of experience in the financial services industry. Our CRO has more than 33 years of experience in Banking and over 15 years of experience in risk management, compliance, and BSA.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe own 14 of these locations and the remaining properties are leased under various agreements with expiration dates ranging from 2024 through 2030. All properties are located in Southern and Central California. For additional information concerning properties, see Note 8 — Premises and Equipment of the Notes to the consolidated financial statements included in this report.
Biggest changeWe own 10 of these locations and the remaining properties are leased under various agreements with expiration dates ranging from 2025 through 2042. All properties are located in Southern and Central California.
As of December 31, 2023, the Bank occupied a total of 65 premises consisting of (i) 62 Banking Centers (“Centers”) of which one Center is located at our Corporate Headquarters in Ontario California, and (ii) three operation and technology centers.
As of December 31, 2024, the Bank occupied a total of 65 premises consisting of (i) 62 Banking Centers (“Centers”) of which one Center is located at our Corporate Headquarters in Ontario California, and (ii) three operation and technology centers.
Removed
See “Item 8 — Financial Statements and Supplemental Data .”
Added
For additional information concerning properties, see Note 7 — Premises and Equipment and Note 21 — Leases of the Notes to the consolidated financial statements included in this report. See “Item 8 — Financial Statements and Supplemental Data .”

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFrom time to time, such lawsuits and threatened lawsuits may include, but are not limited to, actions involving securities litigation, employment matters, wage-hour and labor law claims, consumer claims, regulatory compliance claims, data privacy claims, lender liability claims, bankruptcy-related claims and negligence claims, some of which may be styled as “class action” or representative cases.
Biggest changeFrom time to time, such lawsuits and threatened lawsuits may include, but are not limited to, actions involving securities litigation, employment matters, wage-hour and labor law claims, consumer claims, regulatory compliance claims, data privacy claims, lender liability claims, bankruptcy-related claims, and fraud and negligence claims, some of which may be styled as “class action” or representative cases.
Some of these lawsuits may be similar in nature to other lawsuits pending against the Company’s competitors. For additional information concerning legal proceedings, see Note 13 Commitments and Contingencies of the Notes to the consolidated financial statements included in this report.
Some of these lawsuits may be similar in nature to other lawsuits pending against the Company’s competitors. For additional information concerning legal proceedings, see Note 12 — Commitments and Contingencies of the Notes to the consolidated financial statements included in this report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Cash Flow .” Issuer Purchases of Equity Securities On February 1, 2022, our Board of Directors approved a program to repurchase up to 10,000,000 shares of CVB common stock in the open market or in privately negotiated transactions, at times and at prices considered appropriate by us, depending upon prevailing market conditions and other corporate and legal considerations ("2022 Repurchase Program").
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Cash Flow .” Issuer Purchases of Equity Securities On November 20, 2024, our Board of Directors approved a program to repurchase up to 10,000,000 shares (the “Maximum Amount”) of CVB common stock including by means of one or more Rule 10b5-1 plans or other appropriate buy-back arrangements, including open market purchases and private transactions, at times and at prices considered appropriate by us, depending upon prevailing market conditions and other corporate and legal considerations (“2024 Repurchase Program”).
The graph assumes an initial investment of $100 on December 31, 2017, and reinvestment of dividends through December 31, 2023. Points on the graph represent the performance as of the last business day of each of the years indicated. The graph is not necessarily indicative of future price performance.
The graph assumes an initial investment of $100 on December 31, 2019, and reinvestment of dividends through December 31, 2024. Points on the graph represent the performance as of the last business day of each of the years indicated. The graph is not necessarily indicative of future price performance.
Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares Available for Repurchase Under the Plans or Programs October 1 - 31, 2023 1,129 $ 15.82 — 4,300,059 November 1 - 30, 2023 243 $ 18.51 — 4,300,059 December 1- 31, 2023 346 $ 20.89 — 4,300,059 Total 1,718 $ 17.22 — 4,300,059 (1) Shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards. 35 The following Performance Graph and related information shall not be deemed “soliciting material” or be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.
Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares Available for Repurchase Under the Plans or Programs October 1 - 31, 2024 915 $ 19.46 — 4,300,059 November 1 - 30, 2024 459 $ 21.04 — 10,000,000 December 1 - 31, 2024 — $ - — 10,000,000 Total 1,374 $ 19.99 — 10,000,000 (1) Shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards. 35 The following Performance Graph and related information shall not be deemed “soliciting material” or be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.
ITEM 5. MARKET FOR THE REGISTRANT’S CO MMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES CVB’s common stock is traded on the NASDAQ Global Select National Market under the symbol “CVBF.” CVB had approximately 139,374,072 shares of common stock outstanding with 1,916 registered shareholders of record as of February 9, 2024.
ITEM 5. MARKET FOR THE REGISTRANT’S CO MMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES CVB’s common stock is traded on the NASDAQ Global Select National Market under the symbol “CVBF.” CVB had approximately 139,617,917 shares of common stock outstanding with 1,831 registered stockholders of record as of February 24, 2025.
The only shares repurchased during the fourth quarter of 2023 were shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards.
As of December 31, 2024, an aggregate of 10,000,000 shares remained available for repurchase under our 2024 Repurchase Program. The only shares repurchased during the fourth quarter of 2024 were shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards.
ASSUMES $100 INVESTED ON DECEMBER 31, 2018 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING DECEMBER 31, 2023 Company/Market/Peer Group 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 CVB Financial Corp. 100.00 110.21 104.45 118.63 147.13 120.05 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 KBW Nasdaq Regional Banking Index 100.00 124.51 114.06 149.12 139.27 141.23 Source: Research Data Group, Inc., www.researchdatagroup.com 36 ITEM 6.
ASSUMES $100 INVESTED ON DECEMBER 31, 2019 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING DECEMBER 31, 2024 Company/Market/Peer Group 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 CVB Financial Corp. 100.00 94.77 107.64 133.50 108.92 121.86 NASDAQ Composite 100.00 144.92 177.06 119.45 172.77 223.87 KBW Nasdaq Regional Banking Index 100.00 91.29 124.74 116.10 115.63 130.90 Source: Research Data Group, Inc., www.researchdatagroup.com 36 ITEM 6.
Removed
We did not repurchase any shares of our common stock during the quarter ended December 31, 2023. As of December 31, 2023, an aggregate of 4,300,059 shares remained available for repurchase under our 2022 Repurchase Program.
Added
This 2024 Repurchase Program replaces in its entirety the Company's previous 2022 share repurchase program under which 4,300,059 shares remained available for repurchase and which has now been terminated. The 2024 Repurchase Program terminates on the earlier of the repurchase of the Maximum Amount or five years from the date of authorization.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

207 edited+72 added−86 removed156 unchanged
Biggest changeVariance Year Ended December 31, 2023 2022 2023 2022 2021 $ % $ % (Dollars in thousands) Noninterest expense: Salaries and employee benefits $ 139,191 $ 131,596 $ 117,871 $ 7,595 5.77 % $ 13,725 11.64 % Occupancy 18,492 18,825 16,765 (333 ) (1.77 )% 2,060 12.29 % Equipment 3,617 3,912 2,991 (295 ) (7.54 )% 921 30.79 % Professional services 9,082 9,362 7,967 (280 ) (2.99 )% 1,395 17.51 % Computer software expense 14,051 13,503 11,584 548 4.06 % 1,919 16.57 % Marketing and promotion 6,756 6,296 4,623 460 7.31 % 1,673 36.19 % Amortization of intangible assets 6,452 7,566 8,240 (1,114 ) (14.72 )% (674 ) (8.18 )% Telecommunications expense 2,010 2,193 2,105 (183 ) (8.34 )% 88 4.18 % Regulatory assessments 17,710 5,477 4,695 12,233 223.35 % 782 16.66 % Insurance 2,025 1,968 1,840 57 2.90 % 128 6.96 % Loan expense 1,078 1,041 1,113 37 3.55 % (72 ) (6.47 )% OREO expense 1 (3 ) 49 4 133.33 % (52 ) (106.12 )% (Recapture of) provision for unfunded loan commitments (500 ) — (1,000 ) (500 ) — 1,000 100.00 % Directors’ expenses 1,202 1,426 1,539 (224 ) (15.71 )% (113 ) (7.34 )% Stationery and supplies 768 988 962 (220 ) (22.27 )% 26 2.70 % Acquisition related expenses — 6,013 962 (6,013 ) (100.00 )% 5,051 525.05 % Other 7,951 6,392 7,481 1,559 24.39 % (1,089 ) (14.56 )% Total noninterest expense $ 229,886 $ 216,555 $ 189,787 $ 13,331 6.16 % $ 26,768 14.10 % Noninterest expense to average assets 1.41 % 1.28 % 1.24 % Efficiency ratio (1) 42.00 % 38.98 % 41.09 % (1) Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.
Biggest changeVariance Year Ended December 31, 2024 2023 2024 2023 2022 $ % $ % (Dollars in thousands) Noninterest expense: Salaries and employee benefits $ 144,472 $ 139,191 $ 131,596 $ 5,281 3.79 % $ 7,595 5.77 % Occupancy 18,976 18,492 18,825 484 2.62 % (333 ) (1.77 )% Equipment 4,431 3,617 3,912 814 22.50 % (295 ) (7.54 )% Professional services 10,482 9,082 9,362 1,400 15.42 % (280 ) (2.99 )% Computer software expense 15,301 14,051 13,503 1,250 8.90 % 548 4.06 % Marketing and promotion 7,307 6,756 6,296 551 8.16 % 460 7.31 % Amortization of intangible assets 5,324 6,452 7,566 (1,128 ) (17.48 )% (1,114 ) (14.72 )% Telecommunications expense 1,972 2,010 2,193 (38 ) (1.89 )% (183 ) (8.34 )% Regulatory assessments 10,091 17,710 5,477 (7,619 ) (43.02 )% 12,233 223.35 % Insurance 2,022 2,025 1,968 (3 ) (0.15 )% 57 2.90 % (Recapture of) provision for unfunded loan commitments (1,250 ) (500 ) — (750 ) (150.00 )% (500 ) — Directors’ expenses 1,266 1,202 1,426 64 5.32 % (224 ) (15.71 )% Acquisition related expenses — — 6,013 — — (6,013 ) (100.00 )% Other 13,189 9,798 8,418 3,391 34.61 % 1,380 16.39 % Total noninterest expense $ 233,583 $ 229,886 $ 216,555 $ 3,697 1.61 % $ 13,331 6.16 % Noninterest expense to average assets 1.45 % 1.41 % 1.28 % Efficiency ratio (1) 46.55 % 42.00 % 38.98 % (1) Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.
We recorded provision for credit losses of $2.0 million in 2023, and experienced credit charge-offs of $405,000 and total recoveries of $130,000, resulting in net charge-offs of $275,000.
For 2023, we recorded $2.0 million in provision for credit losses, and experienced credit charge-offs of $405,000 and total recoveries of $130,000, resulting in net charge-offs of $275,000.
Once the 504 second is paid off, the remaining first trust deed loan is then managed under the same requirements applied to the Bank’s owner-occupied commercial real estate loan. It should be noted that both the SBA 7(a) and 504 programs provide loans for commercial real estate acquisition.
Once the 504 second is paid off, the remaining first trust deed loan is then managed under the same requirements applied to the Bank’s owner-occupied commercial real estate loans. It should be noted that both the SBA 7(a) and 504 programs provide loans for commercial real estate acquisition.
Refer to our Analysis of Financial Condition — Capital Resources. 40 Acquisition Related On January 7, 2022, the Company completed the merger transaction whereby Suncrest Bank (“Suncrest”), headquartered in Visalia, California, merged with and into the Company’s wholly-owned subsidiary Citizens Business Bank (“Citizens”), 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.
Refer to our Analysis of Financial Condition — Capital Resources. 40 Acquisition Related 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.
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. 44 Total interest income and fees on loans for 2023 of $448.3 million increased $59.1 million, or 15.19%, when compared to 2022.
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.
Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements. Based on the results of our annual goodwill impairment test, we determined that no goodwill impairment charges were required as our single reportable segment’s fair value exceeded its carrying amount.
Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements. Based on the results of our annual goodwill impairment test, we determined that no goodwill impairment charges were required as our single reportable segment’s estimated fair value exceeded its carrying amount.
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.
After excluding discount accretion and the impact from PPP loans, our loan yields grew by 63 basis points compared to 2022. Loan yields 45 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.
Includes TE adjustments utilizing a federal statutory rate of 21%. (2) Gross loans, at amortized cost. 75 Interest Rate Sensitivity Management During periods of changing interest rates, the ability to re-price interest-earning assets and interest-bearing liabilities can influence net interest income, the net interest margin, and consequently, our earnings.
Includes TE adjustments utilizing a federal statutory rate of 21%. (2) Gross loans, at amortized cost. Interest Rate Sensitivity Management During periods of changing interest rates, the ability to re-price interest-earning assets and interest-bearing liabilities can influence net interest income, the net interest margin, and consequently, our earnings.
The 74 basis point increase in the earning asset yield over 2022 resulted from a 55 basis point increase in loan yields, 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.
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.
The changes in the fair value of these non-hedged swaps primarily 47 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.
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.
Risk attributes for commercial real estate loans include Original Loan to Value ratios ("OLTV"), 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.
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.
While we believe that the allowance at December 31, 2023 was appropriate to absorb losses from known or inherent risks in the portfolio, no assurance can be given that future economic conditions, interest rate fluctuations, conditions of our borrowers (including fraudulent activity), or natural disasters, which adversely affect our service areas or other circumstances or conditions, including those defined above, will not be reflected in increased provisions for credit losses in the future. 63 Changes in economic and business conditions could have an impact on our market area and on our loan portfolio.
While we believe that the allowance at December 31, 2024 was appropriate to absorb losses from known or inherent risks in the portfolio, no assurance can be given that future economic conditions, interest rate fluctuations, conditions of our borrowers (including fraudulent activity), or natural disasters, which adversely affect our service areas or other circumstances or conditions, including those defined above, will not be reflected in increased provisions for credit losses in the future. 63 Changes in economic and business conditions could have an impact on our market area and on our loan portfolio.
CVB’s ability to pay cash dividends to its shareholders is subject to 68 restrictions under federal and California law, including restrictions imposed by the Federal Reserve, and covenants set forth in various agreements we are a party to.
CVB’s ability to pay cash dividends to its shareholders is subject to restrictions under federal and California law, including restrictions imposed by the Federal Reserve, and covenants set forth in various agreements we are a party to.
Our Board of Directors (Board) and executive management team have overall and ultimate responsibility for management of these risks, which they carry out through committees with specific and well-defined risk management functions.
Our Board of Directors (“Board”) and executive management team have overall and ultimate responsibility for management of these risks, which they carry out through committees with specific and well-defined risk management functions.
Any material exceptions identified are brought forward to the appropriate department head, and appropriate management and board committees. This reporting provides an independent view of compliance risk across the company, support transparent communication and management awareness of compliance risk. We recognize that customer complaints can often identify weaknesses in our compliance program which could expose us to risk.
Any material exceptions identified are brought forward to the appropriate department head, and appropriate management and board committees. This reporting provides an independent view of compliance risk across the company, and supports transparent communication and management awareness of compliance risk. We recognize that customer complaints can often identify weaknesses in our compliance program which could expose us to risk.
Also included in noninterest income are service charges and fees, primarily from deposit accounts, gains (net of 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. 46 The following table sets forth the various components of noninterest income for the periods presented.
Also included in noninterest income are service charges and fees, primarily from deposit accounts, 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. 46 The following table sets forth the various components of noninterest income for the periods presented.
For a full discussion of our methodology of assessing the adequacy of the allowance for credit losses, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation — Risk Management ” and Note 3 — Summary of Significant Accounting Policies and Note 6 — Loans and Lease Finance Receivables and Allowance for Credit Losses of our consolidated financial statements presented elsewhere in this report.
For a full discussion of our methodology of assessing the adequacy of the allowance for credit losses, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation — Risk Management ” and Note 3 — Summary of Significant Accounting Policies and Note 5 — Loans and Lease Finance Receivables and Allowance for Credit Losses of our consolidated financial statements presented elsewhere in this report.
The table below provides the actual balances as of December 31, 2023 of interest-earning assets and interest-bearing liabilities, including the average rate earned or incurred for 2023, the projected contractual maturities over the next five years, and the estimated fair value of each category determined using available market information and appropriate valuation methodologies.
The table below provides the actual balances as of December 31, 2024 of interest-earning assets and interest-bearing liabilities, including the average rate earned or incurred for 2024, the projected contractual maturities over the next five years, and the estimated fair value of each category determined using available market information and appropriate valuation methodologies.
Risk ratings may be adjusted as necessary. Loans are risk rated into the following categories: Pass, Special Mention, Substandard, Doubtful, and Loss. Each of these groups is assessed and appropriate amounts used in determining the adequacy of our ACL. The Impaired and Doubtful loans are analyzed on an individual basis for allowance amounts.
Risk ratings may be adjusted as necessary. Loans are risk rated into the following categories: Pass, Special Mention, Substandard, Doubtful, and Loss. Each of these groups is assessed and appropriate amounts used in determining the adequacy of our ACL. Nonperforming and Doubtful loans are analyzed on an individual basis for allowance amounts.
Because the derivative counterparties are required to post collateral to satisfy the mandatory margin requirements, the counterparties are not subject to counterparty credit risk. • As of December 31, 2023, we had $305.0 million in Fed Funds lines of credit with other major U.S. banks.
Because the derivative counterparties are required to post collateral to satisfy the mandatory margin requirements, the counterparties are not subject to counterparty credit risk; • As of December 31, 2024, we had $305.0 million in Fed Funds lines of credit with other major U.S. banks.
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 10 — Income Taxes of the notes to consolidated financial statements for more information.
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.
In addition, our regulators could limit the ability of the Bank or CVB to pay dividends or make other distributions. 74 Below is a summary of our average cash position and statement of cash flows for the years ended December 31, 2023 and 2022.
In addition, our regulators could limit the ability of the Bank or CVB to pay dividends or make other distributions. 74 Below is a summary of our average cash position and statement of cash flows for the years ended December 31, 2024 and 2023.
There were no nonperforming construction loans at December 31, 2023. 56 Our loan portfolio is geographically disbursed throughout our marketplace. The following is the breakdown of our total held-for-investment commercial real estate loans, by region as of December 31, 2023.
There were no nonperforming construction loans at December 31, 2024. 56 Our loan portfolio is geographically disbursed throughout our marketplace. The following is the breakdown of our total held-for-investment commercial real estate loans, by region as of December 31, 2024.
To meet unexpected demands, lines of credit are maintained with correspondent banks, the Federal Home Loan Bank and the Federal Reserve, although availability under these lines of credit are subject to certain conditions. In addition to having more than $250 million of cash on the balance sheet at December 31, 2023, we had substantial sources of off-balance sheet liquidity.
To meet unexpected demands, lines of credit are maintained with correspondent banks, the Federal Home Loan Bank and the Federal Reserve, although availability under these lines of credit are subject to certain conditions. In addition to having more than $200 million of cash on the balance sheet at December 31, 2024, we had substantial sources of off-balance sheet liquidity.
We have assessed our Counterparty Risk with the following results: • We do not have any investments in the preferred stock of any other company; • Most of our investment securities are either municipal securities or securities either issued or guaranteed by government, agencies, including Fannie Mae, Freddie Mac, SBA or FHLB; • All of our commercial line insurance policies are with companies with the highest AM Best ratings of A or above; • We have no significant exposure to our Cash Surrender Value of Life Insurance since the Cash Surrender Value balance is predominately supported by insurance companies that carry an AM Best rating of A or greater; • We have no significant Counterparty exposure related to our derivatives not designated as hedging instruments such as interest rate swaps.
We have assessed our Counterparty Risk with the following results: • We do not have any investments in the preferred stock of any other company; • Most of our investment securities are either municipal securities or securities either issued or guaranteed by government, agencies, including FNMA, FHLMC, GNMA, SBA or FHLB; • All of our commercial line insurance policies are with companies with the highest AM Best ratings of A or above; • We have no significant exposure to our Cash Surrender Value of Life Insurance since the Cash Surrender Value balance is predominately supported by insurance companies that carry an AM Best rating of A or greater; • We have no significant Counterparty exposure related to our derivatives not designated as hedging instruments such as interest rate swaps.
Income from Bank-Owned Life Insurance ("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.
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.
The following table presents the recorded investment in, and the aging of, past due loans at amortized cost (including nonaccrual loans), by type of loans, made to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, the date we adopted ASU 2022-02.
The following table presents as of December 31, 2024, the recorded investment in, and the aging of, past due loans at amortized cost (including nonaccrual loans), by type of loans, made to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, the date we adopted ASU 2022-02.
We measure these risks and their impact by identifying and quantifying exposures through the use of sophisticated simulation and valuation models, which, as described in additional detail below, are employed by management to understand net interest income (NII) at risk and economic value of equity (EVE) at risk.
We measure these risks and their impact by identifying and quantifying exposures through the use of sophisticated simulation and valuation models, which, as described in additional detail below, are employed by management to understand net interest income (“NII”) at risk and economic value of equity (“EVE”) at risk.
Net interest margin and net interest spread are included on a tax equivalent (TE) basis by adjusting interest income utilizing the federal statutory tax rates of 21% in effect for the years ended December 31, 2023, 2022 and 2021. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions.
Net interest margin and net interest spread are included on a tax equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory tax rates of 21% in effect for the years ended December 31, 2024, 2023 and 2022. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions.
Management determined that credit losses did not exist for securities in an unrealized loss position as of December 31, 2023 and 2022. Refer to Note 5 – Investment Securities of the notes to the consolidated financial statements of this report for additional information on our investment securities portfolio.
Management determined that credit losses did not exist for securities in an unrealized loss position as of December 31, 2024 and 2023. Refer to Note 4 – Investment Securities of the notes to the consolidated financial statements of this report for additional information on our investment securities portfolio.
This is caused by the change in the amount of amortization of premiums or accretion of discounts of each security as repayments increase or decrease. The Company obtains the estimated average life of each security from independent third parties. The weighted-average yield on the total investment portfolio at December 31, 2023 was 2.16% with a weighted-average life of 6.7 years.
This is caused by the change in the amount of amortization of premiums or accretion of discounts of each security as repayments increase or decrease. The Company obtains the estimated average life of each security from independent third parties. The weighted-average yield on the total investment portfolio at December 31, 2024 was 2.36% with a weighted-average life of 7.2 years.
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 1.41% for 2023, compared to 1.28% for 2022 and 1.24% for 2021, respectively.
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% for 2024, compared to 1.41% for 2023 and 1.28% for 2022, respectively.
Net interest income at risk sensitivity captures asset and liability repricing mismatches and is considered a shorter term measure, while EVE sensitivity captures mismatches within the period end balance sheets through the financial instruments’ respective maturities or estimated durations and is considered a longer term measure.
NII at risk sensitivity captures asset and liability repricing mismatches and is considered a shorter term measure, while EVE sensitivity captures mismatches within the period end balance sheets through the financial instruments’ respective maturities or estimated durations and is considered a longer term measure.
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 loans). The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction 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 PPP loans). The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans.
See “ Risk Management – Credit Risk Management ” included herein. Allowance for Credit Losses The allowance for credit losses totaled $86.8 million as of December 31, 2023, compared to $85.1 million as of December 31, 2022. Our allowance for credit losses at December 31, 2023 was 0.98% of total loans, compared to 0.94% at December 31, 2022.
See “ Risk Management – Credit Risk Management ” included herein. Allowance for Credit Losses The allowance for credit losses totaled $80.1 million as of December 31, 2024, compared to $86.8 million as of December 31, 2023. Our allowance for credit losses at December 31, 2024 was 0.94% of total loans, compared to 0.98% at December 31, 2023.
In this regard, it is important to note that the Bank’s practice with regard to these loans, including modified loans or modified loans to borrowers experiencing financial difficulty that are classified as impaired, is to generally charge off any loss amount against the ACL upon evaluating the loan at the time a probable loss becomes recognized.
In this regard, it is important to note that the Bank’s practice with regard to these loans, including modified loans to borrowers experiencing financial difficulty, is to generally charge off any loss amount against the ACL upon evaluating the loan at the time a probable loss becomes recognized.
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 Small Business Administration (SBA) loans (excluding Paycheck Protection Program 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).
Consequently, we maintain Allowance for Credit Losses ("ACL") by charging a provision for credit losses to earnings. Loans determined to be losses are charged against the allowance for credit losses.
Consequently, we maintain an Allowance for Credit Losses (“ACL”) by charging a provision for credit losses to earnings. Loans determined to be losses are charged against the allowance for credit losses.
These specific risk factors are not mutually exclusive. It is recognized that any product or service offered by us may expose the Bank to one or more of these risks. Our Risk Management Committee and Risk Management Division monitor these risks to minimize exposure to the Company. The Board and its committees work closely with management in overseeing risk.
It is recognized that any product or service offered by us may expose the Bank to one or more of these risks. Our Risk Management Committee and Risk Management Division monitor these risks to minimize exposure to the Company. The Board and its committees work closely with management in overseeing risk.
The 49 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 SOFR and pays a weighted average fixed cost of approximately 3.8%.
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 SOFR and paid a weighted average fixed cost of approximately 3.8% during 2024.
As of December 31, 2023, the Company had $198.3 million of total SBA 504 loans. SBA 504 loans include term loans to finance capital expenditures and for the purchase of commercial real estate. Initially the Bank provides two separate loans to the borrower representing a first and second lien on the collateral.
As of December 31, 2024, the Company had $204.5 million of total SBA 504 loans. SBA 504 loans include term loans to finance capital expenditures and for the purchase of commercial real estate. Initially the Bank provides two separate loans to the borrower representing a first and second lien on the collateral.
As an active participant in the SBA’s Paycheck Protection Program, we originated during 2020 approximately 4,100 PPP loans totaling $1.10 billion in round one and originated approximately 1,900 PPP loans totaling $420 million in round two. As of December 31, 2023, the remaining outstanding balance of PPP loans totaled $2.7 million.
As an active participant in the SBA’s Paycheck Protection Program, we originated during 2020 approximately 4,100 PPP loans totaling $1.10 billion in round one and originated approximately 1,900 PPP loans totaling $420 million in round two. As of December 31, 2024, the remaining outstanding balance of PPP loans totaled $0.8 million.
Approximately 91% of the securities in the total investment portfolio, at December 31, 2023, are issued by the U.S. government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. The remaining securities are predominately AA or better general-obligation municipal bonds. As of December 31, 2023, approximately $31.4 million in U.S. government agency bonds are callable.
Approximately 90% of the securities in the total investment portfolio, at December 31, 2024, are issued by the U.S. government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. The remaining securities are predominately AA or better general-obligation municipal bonds. As of December 31, 2024, approximately $27.1 million in U.S. government agency bonds are callable.
The fair value of these instruments totaled $6.9 million and were reflected as a liability at December 31, 2023. These instruments generated interest income of $8.2 million for the year ended December 31, 2023. Refer to Note 19 – Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.
The fair value of these instruments totaled $6.9 million and were reflected as a liability at December 31, 2023. These instruments generated 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.
At origination, these loans on retail properties were underwritten with loan-to-values averaging approximately 48%. Approximately 33% of these loans were originated prior to 2018. 57 The table below provides the maturity distribution for held-for-investment total gross loans as of December 31, 2023. The loan amounts are based on contractual maturities although the borrowers have the ability to prepay the loans.
At origination, these loans on retail properties were underwritten with loan-to-values averaging approximately 47%. Approximately 37% of these loans were originated prior to 2020. 57 The table below provides the maturity distribution for held-for-investment total gross loans as of December 31, 2024. The loan amounts are based on contractual maturities although the borrowers have the ability to prepay the loans.
The tax equivalent yield at December 31, 2023 was 3.35%. The maturity of each security category is defined as the contractual maturity except for the categories of mortgage-backed securities and CMO/REMIC whose maturities are defined as the estimated average life.
The tax equivalent yield at December 31, 2024 was 2.77%. The maturity of each security category is defined as the contractual maturity except for the categories of mortgage-backed securities and CMO/REMIC whose maturities are defined as the estimated average life.
As of December 31, 2023, the Company had $72.3 million of total SBA 7(a) loans that include a guarantee of payment from the SBA (typically 75% of the loan amount, but up to 90% in certain cases) in the event of default.
As of December 31, 2024, the Company had $68.5 million of total SBA 7(a) loans that include a guarantee of payment from the SBA (typically 75% of the loan amount, but up to 90% in certain cases) in the event of default.
The effective tax rates are below the nominal combined Federal and State tax rate as a result of tax-advantaged income from certain municipal security investments, municipal loans and leases and BOLI, as well as available tax credits for each period. 50 ANALYSIS OF FI NANCIAL CONDITION Total assets of $16.02 billion at December 31, 2023 decreased by $455.5 million, or 2.76%, from total assets of $16.48 billion at December 31, 2022.
The effective tax rates are below the nominal combined Federal and State tax rate as a result of tax-advantaged income from certain municipal security investments, municipal loans and leases and BOLI, as well as available tax credits for each period. 50 ANALYSIS OF FI NANCIAL CONDITION Total assets of $15.15 billion at December 31, 2024 decreased by $867.3 million, or 5.41%, from total assets of $16.02 billion at December 31, 2023.
Note 3 — Summary of Significant Accounting Policies of our consolidated financial statements presented elsewhere in this report For complete discussion and disclosure of other accounting policies see Note 3 — Summary of Significant Accounting Policies of the Company’s consolidated financial statements presented elsewhere in this report.
See Note 6 — Goodwill and Other Intangible Assets of our consolidated financial statements presented elsewhere in this report. For a complete discussion and disclosure of other accounting policies see Note 3 — Summary of Significant Accounting Policies of the Company’s consolidated financial statements presented elsewhere in this report.
Income Taxes The Company’s effective tax rate for the year ended December 31, 2023 was 29.80%, compared with 28.30% and 28.60% for the years ended December 31, 2022 and 2021, respectively.
Income Taxes The Company’s effective tax rate for the year ended December 31, 2024 was 26.00%, compared with 29.80% and 28.30% for the years ended December 31, 2023 and 2022, respectively.
Valuation and Recoverability of Goodwill — Goodwill represented $765.8 million of our $16.02 billion in total assets as of December 31, 2023. The Company has one reportable segment.
Valuation and Recoverability of Goodwill — Goodwill represented $765.8 million of our $15.15 billion in total assets as of December 31, 2024. The Company has one reportable segment.
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 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.
This compares to a weighted-average yield of 2.13% at December 31, 2022 with a weighted-average life of 6.9 years. The weighted average life is the average number of years that each dollar of unpaid principal due remains outstanding.
This compares to a weighted-average yield of 2.16% at December 31, 2023 with a weighted-average life of 6.7 years. The weighted average life is the average number of years that each dollar of unpaid principal due remains outstanding.
At December 31, 2023, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios required to be considered “well-capitalized” for regulatory purposes. For further information about capital requirements and our capital ratios, see “Item 1. Business—Regulation and Supervision—Capital Adequacy Requirements ”.
At December 31, 2024, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios required to be considered “well-capitalized” for regulatory purposes. For further information about capital requirements and our capital ratios, see “Item 1.
Our sensitivity of EVE to changes in interest rates is modest, with the exception of more meaningful reductions in value if rates were to immediately decline by 300 or 400 basis points.
Overall, our sensitivity of EVE to changes in interest rates is generally modest, with the exception of more meaningful decreases in the EVE Ratio if rates were to immediately decline by 300 or 400 basis points.
As of December 31, 2023, we had commitments to extend credit of approximately $1.71 billion, and obligations under letters of credit of $54.3 million. Commitments to extend credit are agreements to lend to customers, provided there is no violation of any material condition established in the contract.
As of December 31, 2024, we had commitments to extend credit of approximately $1.72 billion, and obligations under letters of credit of $60.0 million. Commitments to extend credit are agreements to lend to customers, provided there is no violation of any material condition established in the contract.
Allowance for Credit Losses by Loan Type December 31, 2023 2022 2021 2020 2019 Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans (Dollars in thousands) Commercial real estate $ 69,466 76.2 % $ 64,806 75.8 % $ 50,950 73.4 % $ 75,439 65.9 % $ 48,629 71.0 % Construction 1,277 0.8 % 1,702 1.0 % 765 0.8 % 1,934 1.0 % 858 1.5 % SBA 2,679 3.0 % 2,809 3.2 % 2,668 3.6 % 2,992 3.6 % 1,453 4.0 % SBA - PPP — — — 0.1 % — 2.4 % — 10.6 % — — Commercial and industrial 9,116 10.9 % 10,206 10.5 % 6,669 10.3 % 7,142 9.7 % 8,880 12.4 % Dairy & livestock and agribusiness 3,098 4.7 % 4,400 4.8 % 3,066 4.9 % 3,949 4.4 % 5,255 5.1 % Municipal lease finance receivables 210 0.8 % 296 0.9 % 100 0.6 % 74 0.5 % 623 0.7 % SFR mortgage 535 3.0 % 366 2.9 % 188 3.1 % 367 3.2 % 2,339 3.8 % Consumer and other loans 461 0.6 % 532 0.8 % 613 0.9 % 1,795 1.1 % 623 1.5 % Total $ 86,842 100.0 % $ 85,117 100.0 % $ 65,019 100.0 % $ 93,692 100.0 % $ 68,660 100.0 % The ACL/Total Loan Coverage Ratio as of December 31, 2023 increased to 0.98%, compared to 0.94% as of December 31, 2022.
Allowance for Credit Losses by Loan Type December 31, 2024 2023 2022 2021 2020 Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans Allowance Amount Loans as % of Total Loans (Dollars in thousands) Commercial real estate $ 66,237 76.2 % $ 69,466 76.2 % $ 64,806 75.8 % $ 50,950 73.4 % $ 75,439 65.9 % Construction 312 0.2 % 1,277 0.8 % 1,702 1.0 % 765 0.8 % 1,934 1.0 % SBA 2,629 3.2 % 2,679 3.0 % 2,809 3.2 % 2,668 3.6 % 2,992 3.6 % SBA - PPP — — — — — 0.1 % — 2.4 % — 10.6 % Commercial and industrial 6,093 10.8 % 9,116 10.9 % 10,206 10.5 % 6,669 10.3 % 7,142 9.7 % Dairy & livestock and agribusiness 3,610 4.9 % 3,098 4.7 % 4,400 4.8 % 3,066 4.9 % 3,949 4.4 % Municipal lease finance receivables 205 0.8 % 210 0.8 % 296 0.9 % 100 0.6 % 74 0.5 % SFR mortgage 424 3.2 % 535 3.0 % 366 2.9 % 188 3.1 % 367 3.2 % Consumer and other loans 612 0.7 % 461 0.6 % 532 0.8 % 613 0.9 % 1,795 1.1 % Total $ 80,122 100.0 % $ 86,842 100.0 % $ 85,117 100.0 % $ 65,019 100.0 % $ 93,692 100.0 % The ACL/Total Loan Coverage Ratio as of December 31, 2024 decreased to 0.94%, compared to 0.98% as of December 31, 2023.
December 31, 2023 2022 2021 2020 2019 (Dollars in thousands) Nonaccrual loans $ 21,302 $ 4,930 $ 6,893 $ 14,347 $ 5,033 Loans past due 90 days or more and still accruing interest — — — — — Nonperforming modified loans / troubled debt restructured loans (TDRs) — — — — 244 Total nonperforming loans 21,302 4,930 6,893 14,347 5,277 OREO, net — — — 3,392 4,889 Total nonperforming assets $ 21,302 $ 4,930 $ 6,893 $ 17,739 $ 10,166 Modified loans / Performing TDRs $ 9,460 $ 7,817 $ 5,293 $ 2,159 $ 3,112 Total nonperforming loans and performing modified loans/TDRs $ 30,762 $ 12,747 $ 12,186 $ 16,506 $ 8,389 Percentage of nonperforming loans and performing modified loans/TDRs to total loans, at amortized cost 0.35 % 0.14 % 0.15 % 0.20 % 0.11 % Percentage of nonperforming assets to total loans, at amortized cost, and OREO 0.24 % 0.05 % 0.09 % 0.21 % 0.13 % Percentage of nonperforming assets to total assets 0.13 % 0.03 % 0.04 % 0.12 % 0.09 % 58 Modifications of Loans to Borrowers Experiencing Financial Difficulty The Company adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023.
December 31, 2024 2023 2022 2021 2020 (Dollars in thousands) Nonaccrual loans $ 27,795 $ 21,302 $ 4,930 $ 6,893 $ 14,347 Loans past due 90 days or more and still accruing interest — — — — — Nonperforming modified loans / troubled debt restructured loans (TDRs) — — — — — Total nonperforming loans 27,795 21,302 4,930 6,893 14,347 OREO, net 19,303 — — — 3,392 Total nonperforming assets $ 47,098 $ 21,302 $ 4,930 $ 6,893 $ 17,739 Modified loans / Performing TDRs $ 6,467 $ 9,460 $ 7,817 $ 5,293 $ 2,159 Total nonperforming loans and performing modified loans/TDRs $ 34,262 $ 30,762 $ 12,747 $ 12,186 $ 16,506 Percentage of nonperforming loans and performing modified loans/TDRs to total loans, at amortized cost 0.40 % 0.35 % 0.14 % 0.15 % 0.20 % Percentage of nonperforming assets to total loans, at amortized cost, and OREO 0.55 % 0.24 % 0.05 % 0.09 % 0.21 % Percentage of nonperforming assets to total assets 0.31 % 0.13 % 0.03 % 0.04 % 0.12 % 58 Modifications of Loans to Borrowers Experiencing Financial Difficulty The Company adopted Accounting Standards Update 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023.
The non-TE rates for total investment securities was 2.48%, 2.00% and 1.53% for the years ended December 31, 2023, 2022 and 2021, respectively. (2) Includes loan fees of $3.1 million, $8.1 million and $27.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The non-TE rates for total investment securities was 2.61%, 2.48% and 2.00% for the years ended December 31, 2024, 2023 and 2022, respectively. (2) Includes loan fees of $2.9 million, $3.1 million and $8.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The changes attributable to interest rate and volume changes are calculated by multiplying the change in rate times the change in volume and reflect an adjustment for the number of days as appropriate.
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 changes attributable to interest rate and volume changes are calculated by multiplying the change in rate times the change in volume and reflect an adjustment for the number of days as appropriate.
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 the recent rise in interest rates, geopolitical events in Europe, and global inflation will have on future interest rates, unemployment, the overall economy and resulting impact on our customers.
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 changes in rates by the Federal Reserve, geopolitical events in Europe and the Middle East, and impacts of changes in global trade and inflation will have on future interest rates, unemployment, the overall economy and resulting impact on our customers.
Economic Value of Equity Sensitivity December 31, Instantaneous Rate Change 2023 2022 400 bp decrease in interest rates -13.9 % N/A 300 bp decrease in interest rates -9.3 % N/A 200 bp decrease in interest rates -4.7 % -12.8 % 100 bp decrease in interest rates -1.6 % -4.4 % 100 bp increase in interest rates -0.4 % 1.2 % 200 bp increase in interest rates -0.3 % 2.2 % 300 bp increase in interest rates -1.0 % 3.8 % 400 bp increase in interest rates -2.2 % 5.3 % As EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year).
Economic Value of Equity Sensitivity December 31, 2024 2023 400 bp decrease in interest rates 15.7 % 14.7 % 300 bp decrease in interest rates 17.1 % 15.5 % 200 bp decrease in interest rates 17.9 % 16.3 % 100 bp decrease in interest rates 18.4 % 16.8 % Base 19.0 % 17.1 % 100 bp increase in interest rates 19.2 % 17.0 % 200 bp increase in interest rates 19.6 % 17.1 % 300 bp increase in interest rates 19.8 % 16.9 % 400 bp increase in interest rates 20.0 % 16.7 % As EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year).
Year Ended December 31, 2023 2022 2021 2020 2019 (Dollars in thousands) Allowance for credit losses at beginning of period $ 85,117 $ 65,019 $ 93,692 $ 68,660 $ 63,613 Impact of adopting ASU 2016-13 — — — 1,840 — Charge-offs: Commercial real estate — — — — — Construction — — — — — SBA (288 ) (127 ) (223 ) (362 ) (321 ) Commercial and industrial (109 ) (66 ) (3,019 ) (195 ) (48 ) Dairy & livestock and agribusiness — — (118 ) — (78 ) SFR mortgage — — — — — Consumer and other loans (8 ) (4 ) (11 ) (109 ) (7 ) Total charge-offs (405 ) (197 ) (3,371 ) (666 ) (454 ) Recoveries: Commercial real estate — — — — — Construction 12 12 58 11 12 SBA 73 107 23 72 9 Commercial and industrial 14 503 12 10 255 Dairy & livestock and agribusiness 31 468 — — 19 SFR mortgage — — 79 206 196 Consumer and other loans — — 26 59 10 Total recoveries 130 1,090 198 358 501 Net (charge-offs) recoveries (275 ) 893 (3,173 ) (308 ) 47 Initial ACL for PCD loans at acquisition — 8,605 — — — Provision recorded at acquisition — 4,932 — — — Provision for (recapture of) credit losses 2,000 5,668 (25,500 ) 23,500 5,000 Allowance for credit losses at end of period $ 86,842 $ 85,117 $ 65,019 $ 93,692 $ 68,660 Summary of reserve for unfunded loan commitments: Reserve for unfunded loan commitments at beginning of period $ 8,000 $ 8,000 $ 9,000 $ 8,959 $ 8,959 Impact of adopting ASU 2016-13 — — — 41 — (Recapture of) provision for unfunded loan commitments (500 ) — (1,000 ) — — Reserve for unfunded loan commitments at end of period $ 7,500 $ 8,000 $ 8,000 $ 9,000 $ 8,959 Reserve for unfunded loan commitments to total unfunded loan commitments 0.43 % 0.46 % 0.49 % 0.54 % 0.56 % Amount of total loans at end of period (1) $ 8,904,910 $ 9,079,392 $ 7,887,713 $ 8,348,808 $ 7,564,577 Average total loans outstanding (1) $ 8,893,335 $ 8,676,820 $ 8,065,877 $ 8,066,483 $ 7,552,505 Net (charge-offs) recoveries to average total loans (0.00 )% 0.01 % (0.04 )% (0.00 )% — Net (charge-offs) recoveries to total loans at end of period (0.00 )% 0.01 % (0.04 )% (0.00 )% — Allowance for credit losses to average total loans 0.98 % 0.98 % 0.81 % 1.16 % 0.91 % Allowance for credit losses to total loans at end of period 0.98 % 0.94 % 0.82 % 1.12 % 0.91 % Net (charge-offs) recoveries to allowance for credit losses (0.32 )% 1.05 % (4.88 )% (0.33 )% 0.07 % Net (charge-offs) recoveries to (recapture of) provision for credit losses (13.75 )% 8.42 % 12.44 % (1.31 )% 0.94 % (1) Net of deferred loan origination fees, costs and discounts (amortized cost).
Year Ended December 31, 2024 2023 2022 2021 2020 (Dollars in thousands) Allowance for credit losses at beginning of period $ 86,842 $ 85,117 $ 65,019 $ 93,692 $ 68,660 Impact of adopting ASU 2016-13 — — — — 1,840 Charge-offs: Commercial real estate (2,258 ) — — — — Construction — — — — — SBA (165 ) (288 ) (127 ) (223 ) (362 ) Commercial and industrial (1,981 ) (109 ) (66 ) (3,019 ) (195 ) Dairy & livestock and agribusiness — — — (118 ) — SFR mortgage — — — — — Consumer and other loans (4 ) (8 ) (4 ) (11 ) (109 ) Total charge-offs (4,408 ) (405 ) (197 ) (3,371 ) (666 ) Recoveries: Commercial real estate 68 — — — — Construction 67 12 12 58 11 SBA 128 73 107 23 72 Commercial and industrial 424 14 503 12 10 Dairy & livestock and agribusiness — 31 468 — — SFR mortgage — — — 79 206 Consumer and other loans 1 — — 26 59 Total recoveries 688 130 1,090 198 358 Net (charged-offs) recoveries (3,720 ) (275 ) 893 (3,173 ) (308 ) Initial ACL for PCD loans at acquisition — — 8,605 — — Provision recorded at acquisition — — 4,932 — — (Recapture of) provision for credit losses (3,000 ) 2,000 5,668 (25,500 ) 23,500 Allowance for credit losses at end of period $ 80,122 $ 86,842 $ 85,117 $ 65,019 $ 93,692 Summary of reserve for unfunded loan commitments: Reserve for unfunded loan commitments at beginning of period $ 7,500 $ 8,000 $ 8,000 $ 9,000 $ 8,959 Impact of adopting ASU 2016-13 — — — — 41 (Recapture of) provision for unfunded loan commitments (1,250 ) (500 ) — (1,000 ) — Reserve for unfunded loan commitments at end of period $ 6,250 $ 7,500 $ 8,000 $ 8,000 $ 9,000 Reserve for unfunded loan commitments to total unfunded loan commitments 0.35 % 0.43 % 0.46 % 0.49 % 0.54 % Amount of total loans at end of period (1) $ 8,536,432 $ 8,904,910 $ 9,079,392 $ 7,887,713 $ 8,348,808 Average total loans outstanding (1) $ 8,670,420 $ 8,893,335 $ 8,676,820 $ 8,065,877 $ 8,066,483 Net (charge-offs) recoveries to average total loans (0.04 )% (0.00 )% 0.01 % (0.04 )% (0.00 )% Net (charge-offs) recoveries to total loans at end of period (0.04 )% (0.00 )% 0.01 % (0.04 )% (0.00 )% Allowance for credit losses to average total loans 0.92 % 0.98 % 0.98 % 0.81 % 1.16 % Allowance for credit losses to total loans at end of period 0.94 % 0.98 % 0.94 % 0.82 % 1.12 % Net (charge-offs) recoveries to allowance for credit losses (4.64 )% (0.32 )% 1.05 % (4.88 )% (0.33 )% Net (charge-offs) recoveries to (recapture of) provision for credit losses 124.00 % (13.75 )% 8.42 % 12.44 % (1.31 )% (1) Net of deferred loan origination fees, costs and discounts (amortized cost).
As of December 31, 2023, the Company had $66.7 million in construction loans. This represented 0.75% of total held-for-investment loans at amortized cost. Although our construction loans are located throughout our market footprint, the majority of construction loans consist of commercial land development and construction projects throughout California.
As of December 31, 2024, the Company had $16.1 million in construction loans. This represented 0.19% of total held-for-investment loans at amortized cost. Our construction loans are located throughout our California market footprint and the majority consist of commercial land development and construction projects.
(2) The loans secured by farmland included $122.4 million for loans secured by dairy & livestock land and $375.3 million for loans secured by agricultural land at December 31, 2023. (3) Other loans consist of a variety of loan types, none of which exceeds 2.0% of total commercial real estate loans.
(2) The loans secured by farmland included $109.1 million for loans secured by dairy & livestock land and $340.6 million for loans secured by agricultural land at December 31, 2024. (3) Other loans consist of a variety of loan types, none of which exceeds 2.0% of total commercial real estate loans.
The average loan size for office loans was approximately $1.7 million and 88% of these loans have a balance of $10 million or less. At December 31, 2023, commercial real estate loans on retail properties totaled $939.9 million or approximately 13.9% of total commercial real estate loans.
The average loan size for office loans was approximately $1.7 million and 87% of these loans have a balance of $10 million or less. At December 31, 2024, commercial real estate loans on retail properties totaled $887.5 million, or approximately 13.6% of total commercial real estate loans.
At December 31, 2023, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios, under the revised capital framework referred to as Basel III, required to be considered “well-capitalized” for regulatory purposes.
Business—Regulation and Supervision—Capital Adequacy Requirements ”. 68 At December 31, 2024, the Bank and the Company exceeded the minimum risk-based capital ratios and leverage ratios, under the revised capital framework referred to as Basel III, required to be considered “well-capitalized” for regulatory purposes.
Term Extension Amortized Cost Basis % of Total Class of at December 31, 2023 Financing Receivables (Dollars in thousands) Commercial real estate loans $ 2,550 0.03 % Commercial and industrial 1,305 0.01 % Dairy & livestock and agribusiness 4,639 0.05 % Total $ 8,494 Combination-Term Extension and Interest Rate Reduction Amortized Cost Basis % of Total Class of at December 31, 2023 Financing Receivables Commercial real estate loans $ 688 0.01 % Commercial and industrial 278 0.00 % Total $ 966 The following table describes the financial effect of the loan modifications made to borrowers experiencing financial difficulty as of December 31, 2023.
Loan Type Term Extension Combination-Term Extension and Interest Rate Reduction Amortized Cost Basis % of Total Class of Financing Receivables Amortized Cost Basis % of Total Class of Financing Receivables December 31, 2024 Commercial real estate loans $ 2,180 0.03 % $ 683 0.01 % Commercial and industrial 2,804 0.03 % — 0.00 % Dairy & livestock and agribusiness 800 0.01 % — 0.00 % Total $ 5,784 $ 683 December 31, 2023 Commercial real estate loans $ 2,550 0.03 % $ 688 0.01 % Commercial and industrial 1,305 0.01 % 278 0.00 % Dairy & livestock and agribusiness 4,639 0.05 % — 0.00 % Total $ 8,494 $ 966 59 The following table describes the financial effect of the loan modifications made to borrowers experiencing financial difficulty for the years ended December 31, 2024 and December 31, 2023.
As of December 31, 2023, total funds borrowed under these agreements were $271.6 million with a weighted average interest rate of 0.29%, compared to $565.4 million with a weighted average interest rate of 0.11% as of December 31, 2022.
As of December 31, 2024, total funds borrowed under these agreements were $261.9 million with a weighted average interest rate of 0.72%, compared to $271.6 million with a weighted average interest rate of 0.29% as of December 31, 2023.
Estimated Net Interest Income Sensitivity (1) December 31, 2023 December 31, 2022 Interest Rate Scenario 12-month Period 24-month Period (Cumulative) Interest Rate Scenario 12-month Period 24-month Period (Cumulative) + 200 basis points 3.96 % 4.56 % + 200 basis points 2.32 % 4.96 % - 200 basis points -3.97 % -5.21 % - 200 basis points -2.28 % -6.83 % (1) Percentage change from base scenario.
Estimated Net Interest Income Sensitivity (1) December 31, 2024 December 31, 2023 Interest Rate Scenario 12-month Period 24-month Period (Cumulative) Interest Rate Scenario 12-month Period 24-month Period (Cumulative) + 200 basis points 4.66 % 6.26 % + 200 basis points 3.96 % 4.56 % - 200 basis points -3.63 % -6.36 % - 200 basis points -3.97 % -5.21 % (1) Percentage change from base scenario.
Consolidated Citizens Business Bank Tier 1 leverage capital ratio 4.00% 4.00% 5.00% 10.27% 10.17% 9.53% 9.42% Common equity Tier 1 capital ratio 4.50% 7.00% 6.50% 14.65% 14.49% 13.55% 13.39% Tier 1 risk-based capital ratio 6.00% 8.50% 8.00% 14.65% 14.49% 13.55% 13.39% Total risk-based capital ratio 8.00% 10.50% 10.00% 15.50% 15.34% 14.37% 14.22% 69 RISK MANA GEMENT All financial institutions must manage and control a variety of business risks that can significantly affect their financial performance.
Consolidated Citizens Business Bank Tier 1 leverage capital ratio 4.00% 4.00% 5.00% 11.46% 11.30% 10.27% 10.17% Common equity Tier 1 capital ratio 4.50% 7.00% 6.50% 16.24% 16.01% 14.65% 14.49% Tier 1 risk-based capital ratio 6.00% 8.50% 8.00% 16.24% 16.01% 14.65% 14.49% Total risk-based capital ratio 8.00% 10.50% 10.00% 17.06% 16.82% 15.50% 15.34% 69 RISK MANA GEMENT All financial institutions must manage and control a variety of business risks that can significantly affect their financial performance.
At December 31, 2023, ACL as a percentage of total loans and leases outstanding was 0.98%. This compares to 0.94% at December 31, 2022. The changes in our allowance over the last few quarters have been primarily due to changes in our economic forecast. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s.
This compares to 0.98% at December 31, 2023. The changes in our allowance over the last few quarters have been primarily due to lower loan balances outstanding and changes in our economic forecast. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s.
At December 31, 2023, commercial real estate loans on office properties totaled $1.11 billion or approximately 16.4% of total commercial real estate loans. At origination, these loans on office properties were underwritten with loan-to-values averaging approximately 55%. Approximately 33% of these loans were originated prior to 2018.
At December 31, 2024, commercial real estate loans on office properties totaled $1.04 billion, or approximately 16.0% of total commercial real estate loans. At origination, these loans on office properties were underwritten with loan-to-values averaging approximately 55%. Approximately 37% of these loans were originated prior to 2020.
These sources of available liquidity include $4.6 billion of secured and unused capacity with the Federal Home Loan Bank, $759.4 million of secured unused borrowing capacity at the Fed’s discount window or Bank Term Funding Program, more than $134 million of unpledged AFS securities that could be pledged at the discount window or the Fed’s Bank Term Funding Program and $300 million of unsecured lines of credit.
These sources of available liquidity include $4.2 billion of secured and unused capacity with the Federal Home Loan Bank, $1.1 billion of secured unused borrowing capacity at the Fed’s discount window, more than $183 million of unpledged AFS securities that could be pledged at the discount window and $305 million of unsecured lines of credit.
The sensitivity of EVE to changes in the level of interest rates is a measure 76 of the longer-term re-pricing risk and options risk embedded in the balance sheet. EVE uses instantaneous changes in rates, as shown in the table below. Assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis.
The sensitivity of EVE to changes in the level of interest rates is a measure of the longer-term re-pricing risk and options risk embedded in the balance sheet. EVE uses instantaneous changes in rates, as shown in the table below.
Loans Total loans and leases, at amortized cost, of $8.90 billion at December 31, 2023, decreased by $174.5 million, or 1.92%, from $9.08 billion at December 31, 2022. Loan growth continues to be impacted by a slowdown in loan demand.
Loans Total loans and leases, at amortized cost, of $8.54 billion at December 31, 2024, decreased by $368.5 million, or 4.14%, from $8.90 billion at December 31, 2023. Loan growth continues to be impacted by a slowdown in loan demand.
Interest rate risk is managed by attempting to control the spread between rates earned on interest-earning assets and the rates paid on interest-bearing liabilities within the constraints imposed by market competition in our service area. The primary goal of interest rate risk management is to control exposure to interest rate risk, within policy limits approved by the Board of Directors.
Interest rate risk is managed by 75 attempting to control the spread between rates earned on interest-earning assets and the rates paid on interest-bearing liabilities within the constraints imposed by market competition in our service area.
The loans secured by farmland included $122.4 million for loans secured by dairy & livestock land and $375.3 million for loans secured by agricultural land at December 31, 2023, compared to $140.5 million for loans secured by dairy & livestock land and $377.3 million for loans secured by agricultural land at December 31, 2022.
The loans secured by farmland included $109.1 million for loans secured by dairy & livestock land and $340.7 million for loans secured by agricultural land at December 31, 2024, compared to $122.4 million for loans secured by dairy & livestock land and $375.3 million for loans secured by agricultural land at December 31, 2023.
Net Interest Income The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, investments and interest earning cash (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.
(2) Annualized where applicable. Net Interest Income The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, investments and interest earning cash (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities).
Loan Type Financial Effect Term Extension Commercial real estate loans Added a weighted-average 1.0 years to the life of loans, which reduced monthly payment amounts for the borrowers. Commercial and industrial Added a weighted-average 0.3 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Loan Type Financial Effect Term Extension Combination-Term Extension and Interest Rate Reduction December 31, 2024 Commercial real estate loans Added a weighted-average 1.7 years to the life of loans, which reduced monthly payment amounts for the borrowers.

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Other CVBF 10-K year-over-year comparisons