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What changed in CVB FINANCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CVB FINANCIAL CORP's 2022 and 2023 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 2023 report.

+565 added−546 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in CVB FINANCIAL CORP's 2023 10-K

565 paragraphs added · 546 removed · 361 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

79 edited+19 added−20 removed135 unchanged
Biggest changeThe increase in assessment rates is effective as of January 1, 2023 and is applicable beginning with the first quarterly assessment period of 2023. 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.
Biggest changeThe 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.
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 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 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; 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.
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 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, 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 Consumer Protection Act and the CAN-SPAM Act.
The CFPB also has the authority to obtain cease and desist orders providing for affirmative relief or monetary penalties. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards. State regulation of financial products and potential enforcement actions could also adversely affect the Bank’s business, financial condition or results of operations.
The CFPB also has the authority to obtain cease and desist orders providing for affirmative relief or monetary penalties. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards. CFPB and state regulation of financial products and potential enforcement actions could adversely affect the Bank’s business, financial condition or results of operations.
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.
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.
A wide range of requirements and restrictions are contained in both federal and state banking laws, which together with implementing regulatory authority: • Require periodic reports and such additional reports of information as the Federal Reserve may require; • Require bank holding companies to meet or exceed increased levels of capital (See “Capital Adequacy Requirements”); • Require that bank holding companies serve as a source of financial and managerial strength to subsidiary banks and commit resources as necessary to support each subsidiary bank; • Limit of dividends payable to shareholders and restrict the ability of bank holding companies to obtain dividends or other distributions from their subsidiary banks.
A wide range of requirements and restrictions are contained in both federal and state banking laws, which together with implementing regulatory authority: • Require periodic reports and such additional reports of information as the Federal Reserve may specify; • Require bank holding companies to meet or exceed increased levels of capital (See “Capital Adequacy Requirements”); • Require that bank holding companies serve as a source of financial and managerial strength to subsidiary banks and commit resources as necessary to support each subsidiary bank; • Limit dividends payable to shareholders and restrict the ability of bank holding companies to obtain dividends or other distributions from their subsidiary banks.
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 operations that would result in material loss.
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.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of proposed legislation (or modification or repeal of existing legislation) could impact the regulatory structure under which the Company and Bank operate and may significantly increase its costs, impede the efficiency of its internal business processes, require the Bank to increase its regulatory capital and modify its business strategy, and limit its ability to pursue business opportunities in an efficient manner.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of proposed legislation (or modification or repeal of existing legislation) could impact the regulatory structure under which the Company and Bank operate and may significantly increase our costs, impede the efficiency of our internal business processes, require the Bank to increase its regulatory capital and modify its business strategy, and limit its ability to pursue business opportunities in an efficient manner.
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.
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.
The risk-based capital guidelines for bank holding companies, and additionally for banks, require capital ratios that vary based on the perceived degree of risk associated with a banking organization’s operations, both for transactions reported on the balance sheet as assets, such as loans, and for those recorded as off-balance sheet items, such as commitments, letters of credit and recourse arrangements.
The risk-based capital guidelines for bank holding companies, and additionally for banks, require capital ratios that vary based on the perceived degree of risk associated with a banking organization’s operations, both for transactions reported on the balance sheet as assets, such as loans, and for those recorded as off-balance sheet items, such as loan commitments, letters of credit and recourse arrangements.
While to date we have not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future.
While to date we have not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat, and it is possible that we or they could experience a significant event in the future.
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.
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.
In addition, to the extent we experience any data breaches, we may become subject to governmental fines or enforcement actions as well as potential liability arising out of governmental or private litigation. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and data breaches.
In addition, to the extent we experience any data breaches, we may become subject to governmental fines or enforcement actions and reputation risk as well as potential liability arising out of governmental or private litigation. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and data breaches.
These rates are highly sensitive to many factors that are beyond our control, such as inflation, recession and unemployment, government 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.
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.
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 also result in restrictions on 7 the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications.
Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications.
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, 2022 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): 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 Federal Reserve’s final rule applies to questions of control under the BHCA, but does not extend to CIBCA or applicable provisions of California law.
The Federal Reserve’s final rule applies to questions of control under the BHCA, but it does not extend to CIBCA or applicable provisions of California law.
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 55 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 56 E.
In December of 2022, 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.
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 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, 2022: In addition, 38% of our Board of Directors are female or ethnically diverse.
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 foregoing description of the impact of changes in federal and applicable state tax laws on us should be read in conjunction with Note 11 — 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 10 — Income Taxes of the notes to consolidated financial statements for more information.
Many of the CARES Act’s programs were dependent upon the direct involvement of U.S. financial institutions, such as the Company and the Bank, and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S.
Many of the CARES Act’s programs were dependent upon the direct involvement of U.S. financial institutions, such as the Company and the Bank, and were implemented through rules and guidance adopted by federal departments and agencies, including the U.S.
We compete for loans, deposits, and customers with other commercial 5 banks, savings and loan associations, savings banks, securities and brokerage companies, mortgage companies, insurance companies, finance companies, blockchain and cryptocurrency companies, money market funds, credit unions, and other nonbank financial service providers, including online banks and “peer-to-peer” or “marketplace” payment processors, FinTech companies, lenders and other small business and consumer lenders.
We compete for loans, deposits, and customers with other commercial banks, savings and loan associations, savings banks, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions, and other nonbank financial service providers, including online banks and “peer-to-peer” or “marketplace” payment processors, FinTech companies, lenders and other small business and consumer lenders.
A “person” includes an individual, bank, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of entity. A person acquires “control” of a banking organization whenever the person acquires ownership, control, or the power to vote 25 percent or more of any class of voting securities of the institution.
A “person” for this purpose includes an individual, bank, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of entity. A person acquires “control” of a banking organization whenever the person acquires ownership, control, or the power to vote 25 percent or more of any class of voting securities of the institution.
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 four trust offices located in Ontario, Newport Beach, Pasadena, and Bakersfield. These offices serve as sales offices for the Bank’s wealth management, trust and investment products.
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.
CVB has not elected financial holding company status and neither CVB nor the Bank has engaged in any activities determined by the Federal Reserve to be financial in nature or incidental or complementary to activities that are financial in nature. CVB is also a bank holding company within the meaning of Section 3700 of the California Financial Code.
CVB has not elected financial holding company status and neither CVB nor the Bank has engaged in any activities determined by the Federal Reserve to be “financial in nature” or incidental or complementary to activities that are “financial in nature.” CVB is also a bank holding company within the meaning of Section 3700 of the California Financial Code.
These quantitative calculations are minimums, and the Federal Reserve, FDIC or DFPI may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
These quantitative calculations are minimums, and the Federal Reserve, FDIC or DFPI may determine that a banking organization (like the Company or the Bank), based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
Through our network of Centers, we emphasize personalized service combined with a wide range of banking and trust services for businesses, professionals and individuals located in the service areas of our Centers.
Through our network of Centers, we emphasize personalized service combined with a wide array of banking and trust services for businesses, professionals and individuals located in the service areas of our Centers.
There can be no assurance of the amount of 12 dividends that the Company will pay to its shareholders in the future or that the Company will continue to pay dividends to its shareholders at all.
There can be no assurance regarding the amount of dividends that the Company will pay to its shareholders in the future or that the Company will continue to pay dividends to its shareholders at all.
For a tabular presentation of the Company’s and Bank’s capital ratios as of December 31, 2022, see Note 18 — 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, 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”).
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
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
Wohl Executive Vice President and General Counsel 64 Yamynn DeAngelis Executive Vice President and Chief Risk Officer 66 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 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.
All of our associates are eligible for incentive compensation awards. For 2022, 94% of our associates earned an incentive bonus, which compares to 92% in 2021. Competition The banking and financial services business is highly competitive.
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.
Recently, several states, notably including California where we conduct substantially all our banking business, 13 have adopted laws and/or regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements.
Recently, a number of states, notably including California where we conduct substantially all our banking business, have adopted laws and/or regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements.
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. From 2008 to 2009 he served as Executive Vice President and Commercial and Treasury Services Manager at Bank of the West. Mr.
Under the Basel framework, these standards will generally be effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company and the Bank.
Under the Basel framework, as amended, these standards were effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company and the Bank.
As of December 31, 2022, the Bank’s total CRE loan concentration based on total outstanding loans is 283% of risk-based capital. Office of Foreign Assets Control Regulation The U.S.
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.
Many such states have also implemented or modified their data breach notification and data privacy requirements including California and New York. We expect this trend of state-level activity in those areas to continue, and we continue to monitor relevant legislative and regulatory developments in California where nearly all our customers are located.
Many such states have also implemented or modified their data breach notification and data privacy requirements, including California and New York. We expect this trend of state-level activity in those areas to continue, and we continue to monitor relevant legislative and regulatory developments in California and other states in which our customers are located or in which we conduct business.
Allen Nicholson Chief Financial Officer of the Company and Executive Vice President and Chief Financial Officer of the Bank 55 David F. Farnsworth Executive Vice President and Chief Credit Officer of the Bank 66 David C. Harvey Executive Vice President and Chief Operating Officer of the Bank 55 Richard H.
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.
The Company’s Citizens Experience Service Awards and Recognition Program resulted in 439 nominations of associates who were recognized for exemplifying our Five Core Values in 2022, representing an 11% increase over 2021. Of those nominations, 280 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 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 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. In 2021, the Company launched a Diversity, Engagement, and Inclusion ("DEI") Council to continue our commitment to fostering, cultivating, and preserving a culture of diversity and inclusion.
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.
Failure to comply with applicable bank regulation or adverse results from any examinations of the Bank could affect the cost of doing business, and may limit or impede otherwise permissible activities and expansion activities by the Bank.
Failure to comply with applicable bank regulations or adverse results from any examinations of the Bank could affect our costs of doing business, and may also limit or impede otherwise permissible activities and expansion activities by the 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.
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.
In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. We employ a layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.
In the ordinary course of business, we rely on electronic communications and information systems, as well as certain third-party service providers’ electronic communication and information systems, to conduct our operations and to store sensitive data. We employ a layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.
We will continue to evaluate the impact of any 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 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.
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.
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.
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.
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.
These services include treasury management systems for monitoring and managing cash flow, a merchant card processing program, armored pick-up and delivery, payroll services, remote deposit capture, electronic funds transfers, domestic and international wires and automated clearinghouse, and on-line account access.
These services include treasury management systems for monitoring and managing cash flow, a merchant card processing program, armored pick-up and delivery, payroll services, remote deposit capture, electronic funds transfers, domestic and international wires and automated clearinghouse, on-line account access, and international business activities including foreign exchange and letters of credit for international trade.
We offer a comprehensive set of health insurance and retirement benefits, as well as wellness programs and resources. As of December 2022, 68% of our associates were enrolled in our medical insurance plans and 65% of our associates participated in at least one wellness activity during 2022.
We offer a comprehensive set of health insurance and retirement benefits, as well as wellness programs and resources. As of December 2023, 56% of our associates were enrolled in our medical insurance plans and 77% of our associates participated in at least one wellness activity during 2023, an increase of 22% from 2022.
Business — Regulation and Supervision — Dividends .” As of December 31, 2022, the Company had $16.48 billion in total consolidated assets, $8.99 billion in net loans, $12.84 billion in deposits, and $1.95 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, 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.
We also serve as a federal tax depository for our business customers. 3 We provide a full complement of lending products, including commercial, agribusiness, consumer, SBA loans, real estate loans, construction loans and equipment and vehicle leasing. Commercial products include lines of credit and other working capital financing, accounts receivable lending and letters of credit.
We provide a full complement of lending products, including commercial, agribusiness, consumer, SBA, real estate, and construction loans, as well as equipment and vehicle leasing. Commercial products include lines of credit and other working capital financing, accounts receivable lending and letters of credit.
The Company’s business, financial condition, results of operations or prospects may be adversely affected, perhaps materially. Available Information Reports filed with the SEC include our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
The Company’s business, financial condition, results of operations or prospects may be adversely affected, perhaps materially. Available Information We file reports with the SEC including our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The SEC maintains a website that contains these reports, proxy and information statements and other information.
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 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.
The actions of the Federal Reserve in these areas influence the growth and performance of bank loans, investments, and deposits and also affect interest earned on interest-earning assets and paid on interest-bearing liabilities.
The actions of the Federal Reserve in these areas influence the growth and performance of bank loans, investments, and deposits and also affect interest earned on interest-earning assets and paid on interest-bearing liabilities. Recent actions by the Federal Reserve have impacted deposits due to expansion and contraction of the money supply.
Paycheck Protection Program. The CARES Act amended the SBA’s loan program, in which the Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19.
The CARES Act also amended the SBA’s loan program, in which the Bank participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program ("PPP"), to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. The Company had less than $3 million in outstanding PPP loans as of December 31, 2023.
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.
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.
These include checking, savings, money market and time certificates of deposit for both business and personal accounts, municipalities and districts, and specialized deposit products for title and escrow.
These include checking, savings, money market and time certificates of deposit for both business and personal accounts, municipalities and districts, and specialized deposit products for title and escrow. We also serve as a federal tax depository for our business customers.
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.
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.
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.
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).
Brokered Deposits The FDIC limits the ability to accept brokered deposits to those insured depository institutions that are well capitalized. 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.
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.
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 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 makes an annual 401(k) retirement contribution to all eligible associates, which includes a profit sharing component. For 2022, the combined Company 401(k) contribution was 6% of associate’s eligible salary.
In 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.
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. 8 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020 to provide national emergency economic relief measures.
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.
In 2021 and 2022, various bank regulatory agencies have sought public comments and requested additional information regarding laws, regulations and policies regarding merger transactions involving financial institutions.
Although no comprehensive plan appears to have yet been adopted, various bank regulatory agencies have sought public comments and requested additional information regarding laws, regulations and policies regarding merger transactions involving financial institutions.
These regulations and restrictions are intended primarily for the protection of depositors and the Federal Deposit Insurance Corporation (“FDIC”) Deposit Insurance Fund (“DIF”) and for the protection of borrowers, and secondarily for the stability of the U.S. banking system.
Regulation and Supervision General The Company and the Bank are subject to significant regulation and restrictions under applicable federal and state laws and by various regulatory agencies. These regulations and restrictions are intended primarily for the protection of depositors and the Federal Deposit Insurance Corporation (“FDIC”) Deposit Insurance Fund (“DIF”) and secondarily for the stability of the U.S. banking system.
The impact of Basel IV on us will depend on the manner in which it is implemented by the federal bank regulators.
The impact of any changes to capital requirements and calculations and the implementation of Basel IV on us will depend on the manner in which it is implemented by the federal bank regulators with respect to smaller-sized institutions.
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 2000 to 2008, he served as Senior Vice President and Operations Manager at Bank of the West.
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.
In addition, because we are not an advanced approach banking organization, we were permitted to make a one-time permanent election to exclude accumulated other comprehensive income items from regulatory capital.
CET1 capital primarily includes common stockholders’ equity subject to certain regulatory adjustments and deductions, including with respect to goodwill, intangible assets and certain deferred tax assets. Because we are not an advanced approach banking organization, we were permitted to make a one-time permanent election to exclude accumulated other comprehensive income items from regulatory capital.
The SEC maintains a website that contains the reports, proxy and information statements and other information we file with them. The address of the site is http://www.sec.gov. The Company also maintains an 16 Internet website at http://www.cbbank.com.
The address of the site is http://www.sec.gov. The Company also maintains an Internet website at http://www.cbbank.com.
We employ a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.
We employ a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.
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.
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.
In addition, 93% of our associates made individual participant contributions to the 401(k) plan during 2022. 4 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.
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 and the Bank held no investment positions at December 31, 2022 which were subject to the final rule. Therefore, 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.
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.
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 the sections captioned “Business Segments” in Item 7.
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.
Legislation and Regulatory Developments The federal banking agencies continue to promulgate regulations and guidelines intended to assure the financial strength and safety and soundness of banks and the stability of the U.S. banking system. We continue to believe there will be 6 increased focus on perceived regulatory gaps, regulatory compliance, supervision and examination during the remainder of President Biden’s term.
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.
In October 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act. The final rule requires the stock exchanges to, among other things, establish listing standards for listed companies which must develop and implement policies for the recovery of erroneously awarded incentive-based compensation received by former or current executive officers.
In October 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act. In response to the final rules, the Nasdaq Stock Market implemented new clawback listing standards which are applicable to the Company.
At December 31, 2022, the Bank had $16.47 billion in assets, $8.99 billion in net loans, $12.88 billion in deposits, and $1.93 billion in total equity.
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.
In 2022, turnover among our leadership group was 9% and during the year we promoted 4 associates and hired 10 new associates into our leadership group. 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.
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.
Removed
As of December 31, 2022, the Bank had 62 Banking Centers (“Centers”) located in the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County, and the Central Valley area of California.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, we may face the following risks in connection with any downward turn in the economy: • 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.
Biggest changeIn 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.
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: 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 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.
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 severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.
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.
If the models we use for interest rate risk and asset-liability management are inadequate, we may incur 24 increased or unexpected losses upon changes in market interest rates or other market measures. If the models we use for determining our expected credit losses are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs.
If the models we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models we use for determining our expected credit losses are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs.
In 25 addition, adverse economic conditions may exacerbate our exposure to credit risk and adversely affect the ability of borrowers to perform, and thereby, adversely affect our liquidity, financial condition, results or operations and profitability. Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.
In addition, adverse economic conditions may exacerbate our exposure to credit risk and adversely affect the ability of borrowers to perform, and thereby, adversely affect our liquidity, financial condition, results or operations and profitability. Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.
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.
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.
Future acquisitions and our continued organic growth may present operating, integration, regulatory, management and other issues that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Acquisitions are and have been a key element of our growth strategy.
Past and future acquisitions and our continued organic growth may present operating, integration, regulatory, management and other issues that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Acquisitions are and have been a key element of our growth strategy.
Among the factors that could affect our stock price are: • actual or anticipated fluctuations in our operating results and financial condition; • changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts; 28 • 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 • 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 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.
If we become subject to significant environmental liabilities, our business, financial condition, results of operations and prospects could be adversely affected. 20 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 business.
Together with the other information on the risks we face and our management of risk contained in this Annual Report, the following presents the most significant risks of which we are currently aware which may affect us.
Together with the other information on the risks we face and our management of risk contained in this Annual Report, the following presents the most significant risks of which we are currently aware that may affect us.
Accordingly, fluctuations in interest rates could adversely affect our interest rate spread and, in turn, our profitability. Loan origination volumes may be affected by changes in market interest rates. In addition, in rising interest rate environments, loan repayment rates may 21 decline and in falling interest rate environments, loan repayment rates may increase.
Accordingly, fluctuations in interest rates could adversely affect our interest rate spread and, in turn, our profitability. Loan origination volumes may be affected by changes in market interest rates. In addition, in rising interest rate environments, loan repayment rates may decline and in falling interest rate environments, loan repayment rates may increase.
Our dairy & livestock and agribusiness lending staff have specific technical expertise that we depend on to mitigate our lending risks for these loans and we may 19 have difficulty retaining or replacing such individuals.
Our dairy & livestock and agribusiness lending staff have specific technical expertise that we depend on to mitigate our lending risks for these loans and we may have difficulty retaining or replacing such individuals.
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.
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.
At December 31, 2022 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, 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.
In addition, 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 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 21 deposits with us to institutions that pay higher interest rates on deposits accounts.
Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial condition and results of operations accurately and on a timely basis A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial results accurately and on a timely basis, which could result in a loss of investor confidence in our financial reporting or adversely affect our access to sources of liquidity.
A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to report our financial results accurately and on a timely basis, which could result in a loss of investor confidence in our financial reporting or adversely affect our access to sources of liquidity.
Current and future federal and state legal and regulatory requirements, restrictions and regulations, including those imposed under Dodd-Frank 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, 26 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 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.
An investment in our common stock is not an insured deposit Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity.
Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity.
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.
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.
Our accounting estimates and risk management processes rely on analytical and forecasting models The processes we use to estimate our expected credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical and forecasting models.
The processes we use to estimate our expected credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical and forecasting models.
We are subject to legal and litigation risk which could adversely affect us Because our Company is extensively regulated by a variety of federal and state agencies, and because we are subject to a wide range of business, consumer and employment laws and regulations at the federal, state and local levels, we are at risk of governmental investigations and lawsuits as well as claims and litigation from private parties.
Because our Company is extensively regulated by a variety of federal and state agencies, and because we are subject to a wide range of business, consumer and employment laws and regulations at the federal, state and local levels, we are at risk of governmental investigations and lawsuits as well as claims and litigation from private parties.
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 making distributions to our stockholders. 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%.
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%.
Substantially all 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.
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.
Additionally, holders of common stock are subject to the prior liquidation rights of the holders of any debt we 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 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.
Managing reputational risk is important to attracting and maintaining customers, investors and employees Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee mistakes, misconduct or fraud, failure to deliver minimum standards of service or quality, failure of any product or service offered by us to meet our customers’ expectations, compliance deficiencies, privacy or information security breaches, government investigations, litigation, and questionable or fraudulent activities of our employees or customers.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee mistakes, misconduct or fraud, failure to deliver minimum standards of service, failure of any product or service offered by us to meet our customers’ expectations, compliance deficiencies, privacy or information security breaches, government investigations, litigation, and questionable or fraudulent activities of our employees or customers.
In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by, or on behalf of, customers and counterparties, including financial statements and other financial information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information.
We depend on the accuracy and completeness of information provided by customers and counterparties. In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by, or on behalf of, customers and counterparties, including financial statements and other financial information.
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 of low interest rates would continue to cause lending margins to stay compressed, which in turn may limit our revenues and profitability; • 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 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.
A significant decline in our stock price could result in substantial losses for individual shareholders and could lead to costly and disruptive securities litigation. Extensive sales by large shareholders could also exert sustained downward pressure on our stock price.
A significant decline in our stock price could result in substantial losses for individual shareholders and could lead to costly and disruptive securities litigation. Extensive sales by large shareholders could also exert sustained downward pressure on our stock price. An investment in our common stock is not an insured deposit.
This in turn could negatively affect our ability to attract deposits generally and the amount of interest we pay on our interest-bearing liabilities, which could have an adverse impact on our interest rate spread and profitability.
This in turn could negatively affect our ability to attract deposits generally and the amount of interest we pay on our interest-bearing liabilities, which could have an adverse impact on our interest rate spread and profitability. Negative developments affecting the banking industry could adversely impact our liquidity.
The risks identified below are not intended to be a comprehensive list of all risks we face, and additional risks that we may currently view as not material may also impair our business operations, financial condition and results.
The risks identified below are not intended to be a comprehensive list of all risks we face, and additional risks that we may currently view as not material may also impair our business operations, financial condition and operating results. Credit Risks Our allowance for credit losses may not be sufficient to cover actual losses.
Our commercial real estate loan portfolio exposes us to risks that may be greater than the risks related to our other loans Federal and state banking regulators are examining commercial real estate lending activity with heightened scrutiny and may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.
Federal and state banking regulators are examining commercial real estate lending activity with heightened scrutiny and may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations The Bank Secrecy Act, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.
The Bank Secrecy Act, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.
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, 2022, we recorded $10.6 million in provision for credit losses. During 2022, we experienced charge-offs of $197,000 and recoveries of $1.1 million, resulting in net recoveries of $893,000.
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, 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.
Credit Risks Our allowance for credit losses may not be sufficient to cover actual losses A significant source of risk arises from the possibility that we could sustain losses because borrowers, guarantors, and related parties may fail to perform in accordance with the terms of their loans and leases.
A significant source of risk arises from the possibility that we could sustain losses because borrowers, guarantors, and related parties may fail to perform in accordance with the terms of their loans and leases.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could materially and adversely affect our business, financial condition and results of operations.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could materially and adversely affect our business, financial condition and results of operations. The impact of current capital rules may materially affect our operations. We are subject to stringent capital requirements.
Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral for our loans. As of December 31, 2022, we had $6.88 billion in commercial real estate loans, $88.3 million in construction loans, and $266.0 million in single-family residential mortgages.
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.
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.
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.
Our controls and procedures could fail or be circumvented Management regularly reviews and updates our internal controls, disclosure controls and procedures and corporate governance policies and procedures.
Management regularly reviews and updates our internal controls, disclosure controls and procedures and corporate governance policies and procedures.
The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are uncertain and cannot be predicted, including the scope and duration of the various impacts from the pandemic, including the effectiveness, distribution and uptake rates of vaccines, boosters and medical treatments, and actions taken by governmental authorities and other third parties in response to the pandemic.
The extent to which the aftereffects of the COVID-19 pandemic impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are uncertain and cannot be predicted, including whether post-pandemic inflation rates continue to decline, the effectiveness, distribution and uptake rates of vaccines, boosters and medical treatments designed to ameliorate more infectious variants of the original COVID-19 virus, and actions taken by governmental authorities and other third parties in response to continuing aftereffects of the pandemic.
The current capital rules, which have now been fully implemented, 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.
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.
Similarly, the lending, credit and deposit products we offer are subject to broad oversight and regulation. Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change.
Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change.
Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance A substantial portion of our income is derived from the differential or “spread” between the interest earned on loans, securities and other interest-earning assets, and the interest paid on deposits, borrowings and other interest-bearing liabilities.
A substantial portion of our income is derived from the differential or “spread” between the interest earned on loans, securities and other interest-earning assets, and the interest paid on deposits, borrowings and other interest-bearing liabilities.
Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.
Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. Risks Associated with our Common Stock The price of our common stock may be volatile or may decline.
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.
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.
Treasury 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 • Increased competition among financial services companies due to expected further consolidation in the industry may adversely affect the Company’s ability to market its products and services.
Treasury 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.
As of December 31, 2022, approximately 4.8% of our total gross loan portfolio was comprised of dairy & livestock and agribusiness loans. As of December 31, 2022, we had $433.6 million in dairy & livestock and agribusiness loans, including $388.5 million in dairy & livestock loans and $45.1 million in agribusiness 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.
These provisions may prevent a merger or acquisition that would be attractive to shareholders and could limit the price investors would be willing to pay in the future for our common stock. We may face other risks From time to time, we detail other risks with respect to our business and/or financial results in our filings with the SEC.
These provisions may prevent a merger or acquisition that would be attractive to shareholders and could limit the price investors would be willing to pay in the future for our common stock. We could reduce or discontinue the payment of dividends on our common stock.
Our financial condition, results of operations, financial reporting and reputation could be materially adversely affected if we rely on materially misleading, false, inaccurate or fraudulent information.
We also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our commercial clients. Our financial condition, results of operations, financial reporting and reputation could be materially adversely affected if we rely on materially misleading, false, inaccurate or fraudulent information.
For further discussion on additional areas of risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .” 29 ITEM 1B. UNRESO LVED STAFF COMMENTS None
From time to time, we detail other risks with respect to our business and/or financial results in our filings with the SEC. For further discussion on additional areas of risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .” 31 ITEM 1B. UNRESO LVED STAFF COMMENTS None
In addition, the stock market is subject to fluctuations in its share prices and trading volumes that affect the market prices of the shares of many companies. These specific and broad market fluctuations could adversely affect the market price of our common stock.
The trading price of our common stock may fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in its share prices and trading volumes that affect the market prices of the shares of many companies.
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 A renewed downturn in our real estate markets could hurt our business because most of our loans are secured by real estate.
A renewed downturn in our real estate markets could hurt our business because most of our loans are secured by real estate.
The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition and results of operations As a financial institution, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may be committed against us or our clients, including by our own employees, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation, or damage to our reputation.
As a financial institution, we are susceptible to fraudulent activity, information security breaches and other cybersecurity-related incidents and attacks that may be committed against us, our customers or key vendors and business partners, which in turn may result in financial losses or increased costs to us, our customers, or our key vendors and business partners, disclosure or misuse of our information or our customer information, theft or misappropriation of assets (including bank or customer funds), privacy breaches against us or our customers, litigation, regulatory enforcement actions, and damage to our reputation.
Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations. Our decisions regarding the fair value of assets acquired could be different than initially estimated, which could materially and adversely affect our business, financial condition, results of operations, and future prospects.
Furthermore, because of the inherent limitations of any system of internal control over financial reporting, including the possibility of human error, the circumvention or overriding of controls and fraud, even effective internal controls may not prevent or detect all misstatements. 23 We rely on communications, information, operating and financial control systems technology from third-party service providers, and we may suffer an interruption in those systems We rely heavily on third-party service providers for much of our communications, information, operating and financial control systems technology, including our internet banking services and data processing systems.
We rely on communications, information, operating and financial control systems technology from third-party service providers, and we may suffer an interruption in those systems. We rely heavily on third-party service providers for much of our communications, information, operating and financial control systems technology, including our internet banking services and data processing systems.
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 Our operations are subject to extensive regulation by federal, state and local governmental authorities, including the FDIC, FRB, DFPI and CFPB, and we are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations.
Our operations are subject to extensive regulation by federal, state and local governmental authorities, including the FDIC, FRB, DFPI and CFPB, and we are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Similarly, the lending, credit and deposit products we offer are subject to broad oversight and regulation.
In deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements are accurate. We also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our commercial clients.
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.
Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental scrutiny and regulation. 27 We depend on the accuracy and completeness of information provided by customers and counterparties.
We have policies and procedures in place to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental scrutiny and regulation.
We could reduce or discontinue the payment of dividend on our common stock The ability of the Bank to pay dividends to the Company and of the Company to pay dividends to its shareholders is limited by applicable federal and California law and regulations.
The ability of the Bank to pay dividends to the Company and of the Company to pay dividends to our shareholders is limited by applicable federal and California law and regulations. If the Bank is unable to meet regulatory requirements to pay dividends or make other distributions to CVB, CVB will be unable to pay dividends to its shareholders.
These fluctuations are not predictable, cannot be controlled and may have a material adverse impact on our operations and financial condition, even if other favorable events occur. Strategic and External Risks Changes in economic, market and political conditions can adversely affect our liquidity, results of operations and financial condition.
There can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations. Strategic and External Risks Changes in economic, market and political conditions can adversely affect our liquidity, results of operations and financial condition.
Estimates of fair value are determined based on a complex model using cash flows, the fair value of our Company as determined by our stock price, and peer company comparisons. If management’s estimates of future cash flows are inaccurate, fair value determined could be inaccurate and impairment may not be recognized in a timely manner.
We determine impairment by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. Estimates of fair value are determined based on a complex model using, among other things, discounted cash flows, the fair value of our Company as determined by our stock price, and peer company comparisons.
Our decisions regarding the fair value of assets acquired could be different than initially estimated, which could materially and adversely affect our business, financial condition, results of operations, and future prospects 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.
Operational Risks 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.
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 the Bank is unable to meet regulatory requirements to pay dividends or make other distributions to CVB, CVB will be unable to pay dividends to its shareholders. 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.
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.
Additionally, any such loss of funds could result in lower loan originations, which could adversely impact our growth strategy. Changes in interest rates could reduce the value of our investment securities holdings. The Bank maintains an investment portfolio consisting of various high quality liquid fixed-income securities.
Additionally, any such loss of funds could result in lower loan originations, which could adversely impact our growth strategy. Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.
Removed
Risks relating to the COVID-19 Pandemic The COVID-19 pandemic has significantly impacted the banking industry and our business, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.
Added
Our commercial real estate loan portfolio exposes us to risks that may be greater than the risks related to our other loans.
Removed
The COVID-19 pandemic has negatively impacted the global, U.S., California and local economies, disrupted supply chains, affected equity market valuations, and created significant volatility and disruption in financial markets, although economic growth and employment levels had largely rebounded by the end of 2021.
Added
High-profile bank failures in 2023 generated significant market volatility among publicly traded bank holding companies and, in particular, regional community banks like the Bank. These market developments negatively impacted customer confidence in the safety and soundness of smaller regional and community banks.
Removed
Similarly, the initial imposition of temporary business closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities have been relaxed or rescinded as the COVID-19 pandemic has become more endemic.
Added
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.
Removed
Our operations, like those of other financial institutions that operate in our markets, are significantly influenced by economic conditions in California, including the strength of the real estate market and business conditions in the industries to which we lend or from which we gather deposits.
Added
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.
Removed
The COVID-19 pandemic has resulted in heightened volatility with respect to the revenues of many business sectors as well as in commercial and residential property sales and construction activities. As a result, the demand for our products and services has been significantly impacted by the actions of federal, state and local governments in response to the pandemic.
Added
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.
Removed
As there continues to be a degree of remaining uncertainty around the epidemiological assumptions and impact of government responses to the pandemic, no assurance can be given that resulting impacts to economic conditions could adversely affect the Company’s service areas or other circumstances that could be reflected in an increased allowance for credit losses in future periods.
Added
Elevated interest rates have decreased the market value of the Company’s available for sale and held-to-maturity securities and loan portfolios, and the Company would realize losses if it were required to sell such securities or loans to meet liquidity needs.
Removed
For the year ended December 31, 2022, our allowance for credit losses increased $10.6 million, compared to a decrease of $25.5 million in provision for credit losses for 2021. Depending on the scope and duration of various impacts of the COVID-19 pandemic, there is a possibility that additional provisions for credit losses may be necessary in the future.
Added
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.
Removed
Similarly, because of possible changing economic and market conditions affecting bond issuers, we may be required to recognize credit losses in future periods on the securities we hold as well as reductions in other comprehensive income.
Added
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.

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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 2023 through 2028. All properties are located in Southern and Central California. For additional information concerning properties, see Note 9 — Premises and Equipment of the Notes to the consolidated financial statements included in this report.
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.
As of December 31, 2022, 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, 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGA L PROCEEDINGS The Company and its subsidiaries are parties to various lawsuits and threatened lawsuits in the ordinary and non-ordinary course of business.
Biggest changeITEM 3. LEGA L PROCEEDINGS The Company and its subsidiaries are parties to various lawsuits and threatened lawsuits in the course of business.
The outcome of litigation and other legal and regulatory matters is inherently uncertain, however, and it is possible that one or more of the legal matters currently pending or threatened against the Company could have a material adverse effect on our results of operations, financial condition or cash flows. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 PART II
The outcome of litigation and other legal and regulatory matters is inherently uncertain, however, and it is possible that one or more of the legal matters currently pending or threatened against the Company could have a material adverse effect on our results of operations, financial condition or cash flows. 34 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−4 removed1 unchanged
Biggest changeAs of December 31, 2022, we had 5,091,859 shares of CVB common stock available for repurchase under the 2022 Repurchase Program. 31 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.
Biggest changePeriod 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Cash Flow .” Issuer Purchases of Equity Securities On August 11, 2016, 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.
Management’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").
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 139,506,834 shares of common stock outstanding with 1,926 registered shareholders of record as of February 10, 2023.
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.
The following graph compares the yearly percentage change in CVB’s cumulative total shareholder return (stock price appreciation plus reinvested dividends) on common stock (i) the cumulative total return of the Nasdaq Composite Index; a (ii) a published index comprised by Morningstar (formerly Hemscott, Inc.) of banks and bank holding companies in the Pacific region (the peer group line depicted below), and the Keefe, Bruyette and Woods (“KBW”) Nasdaq Regional Banking Index (“KRX”) (comprised of 50 banks and bank holding companies headquartered throughout the country).
The following graph compares the yearly percentage change in CVB’s cumulative total shareholder return (stock price appreciation plus reinvested dividends) on common stock to (i) the cumulative total return of the Nasdaq Composite Index; and (ii) the Keefe, Bruyette and Woods (“KBW”) Nasdaq Regional Banking Index (“KRX”) (comprised of 50 banks and bank holding companies headquartered throughout the country) which the Company uses as the Company's peers for performance and compensatory purposes.
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, 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.
ASSUMES $100 INVESTED ON DECEMBER 31, 2017 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING DECEMBER 31, 2022 Company/Market/Peer Group 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 CVB Financial Corp. 100.00 88.02 97.00 91.94 104.42 129.50 NASDAQ Composite 100.00 97.16 132.81 192.47 235.15 158.65 Peer Group Index 100.00 80.59 100.77 103.30 155.68 105.30 KBW Nasdaq Regional Banking 100.00 83.53 103.95 94.73 124.66 115.25 32 Source: Research Data Group, Inc., www.researchdatagroup.com 33 ITEM 6.
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.
Removed
On February 1, 2022, we announced that our Board of Directors authorized a share repurchase plan to repurchase up to 10,000,000 shares of the Company’s common stock ("2022 Repurchase Program"), including by means of (i) an initial $70 million dollar Accelerated Share Repurchase, or ASR Plan, and (ii) one or more Rule 10b5-1 plans or other appropriate buyback arrangements, including open market purchases and private transactions.
Added
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.
Removed
This new program replaces in its entirety our 2016 stock repurchase program. There is no expiration date for this repurchase program. We completed the execution of the $70 million accelerated stock repurchase program in the second quarter of 2022, and retired a total of 2,993,551 shares of common stock at an average price of $23.38.
Added
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.
Removed
During 2022 we also repurchased, under our 10b5-1 stock repurchase plan, 1,914,590 shares of common stock, at an average repurchase price of $23.43, totaling $44.9 million.
Removed
For 2022, the Company is using the KBW Regional Banking Index as it more closely represents the Company's peers for performance and compensatory purposes. The graph assumes an initial investment of $100 on December 31, 2017, and reinvestment of dividends through December 31, 2022.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. RESERVED 34 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 34 CRITICAL ACCOUNTING POLICIES 35 OVERVIEW 38 ANALYSIS OF THE RESULTS OF OPERATIONS 41 ANALYSIS OF FINANCIAL CONDITION 49 RISK MANAGEMENT 66 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 73 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 74
Biggest changeITEM 6. RESERVED 37 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 37 CRITICAL ACCOUNTING POLICIES 37 OVERVIEW 39 ANALYSIS OF THE RESULTS OF OPERATIONS 41 ANALYSIS OF FINANCIAL CONDITION 51 RISK MANAGEMENT 70 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 79 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 80

Item 7. Management's Discussion & Analysis

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

205 edited+122 added−117 removed122 unchanged
Biggest changeDecember 31, 2022 Less Than 12 Months 12 Months or Longer Total Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses (Dollars in thousands) Investment securities available-for-sale: Mortgage-backed securities $ 1,658,331 $ (187,842 ) $ 1,129,257 $ (215,207 ) $ 2,787,588 $ (403,049 ) CMO/REMIC 54,005 (4,796 ) 385,295 (91,170 ) 439,300 (95,966 ) Municipal bonds 24,507 (1,177 ) — — 24,507 (1,177 ) Total available-for-sale securities $ 1,736,843 $ (193,815 ) $ 1,514,552 $ (306,377 ) $ 3,251,395 $ (500,192 ) Investment securities held-to-maturity: Government agency/GSE $ 179,348 $ (39,866 ) $ 255,080 $ (74,477 ) $ 434,428 $ (114,343 ) Mortgage-backed securities 188,480 (9,042 ) 412,449 (96,825 ) 600,929 (105,867 ) CMO/REMIC 376,540 (60,598 ) 319,076 (71,132 ) 695,616 (131,730 ) Municipal bonds 312,702 (35,656 ) 53,350 (12,031 ) 366,052 (47,687 ) Total held-to-maturity securities $ 1,057,070 $ (145,162 ) $ 1,039,955 $ (254,465 ) $ 2,097,025 $ (399,627 ) 52 December 31, 2021 Less Than 12 Months 12 Months or Longer Total Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses (Dollars in thousands) Investment securities available-for-sale: Mortgage-backed securities $ 1,465,647 $ (15,099 ) $ 44,244 $ (806 ) $ 1,509,891 $ (15,905 ) CMO/REMIC 450,393 (11,515 ) 53,745 (2,468 ) 504,138 (13,983 ) Municipal bonds — — — — — — Total available-for-sale securities $ 1,916,040 $ (26,614 ) $ 97,989 $ (3,274 ) $ 2,014,029 $ (29,888 ) 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.
Biggest changeDecember 31, 2023 Less Than 12 Months 12 Months or Longer Total Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses (Dollars in thousands) Investment securities available-for-sale: Government agency/GSE $ — $ — $ — $ — $ — $ — Mortgage-backed securities 48 — 2,506,162 (336,107 ) 2,506,210 (336,107 ) CMO/REMIC — — 389,359 (112,872 ) 389,359 (112,872 ) Municipal bonds 3,286 (17 ) 18,105 (871 ) 21,391 (888 ) Total available-for-sale securities $ 3,334 $ (17 ) $ 2,913,626 $ (449,850 ) $ 2,916,960 $ (449,867 ) Investment securities held-to-maturity: Government agency/GSE $ — $ — $ 432,684 $ (97,972 ) $ 432,684 $ (97,972 ) Mortgage-backed securities $ — — 565,655 (97,436 ) 565,655 (97,436 ) CMO/REMIC $ — — 646,737 (156,155 ) 646,737 (156,155 ) Municipal bonds 20,609 (200 ) 293,467 (33,404 ) 314,076 (33,604 ) Total held-to-maturity securities $ 20,609 $ (200 ) $ 1,938,543 $ (384,967 ) $ 1,959,152 $ (385,167 ) December 31, 2022 Less Than 12 Months 12 Months or Longer Total Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses Fair Value Gross Unrealized Holding Losses (Dollars in thousands) Investment securities available-for-sale: Mortgage-backed securities $ 1,658,331 $ (187,842 ) $ 1,129,257 $ (215,207 ) $ 2,787,588 $ (403,049 ) CMO/REMIC 54,005 (4,796 ) 385,295 (91,170 ) 439,300 (95,966 ) Municipal bonds 24,507 (1,177 ) — — 24,507 (1,177 ) Total available-for-sale securities $ 1,736,843 $ (193,815 ) $ 1,514,552 $ (306,377 ) $ 3,251,395 $ (500,192 ) Investment securities held-to-maturity: Government agency/GSE $ 179,348 $ (39,866 ) $ 255,080 $ (74,477 ) $ 434,428 $ (114,343 ) Mortgage-backed securities 188,480 (9,042 ) 412,449 (96,825 ) 600,929 (105,867 ) CMO/REMIC 376,540 (60,598 ) 319,076 (71,132 ) 695,616 (131,730 ) Municipal bonds 312,702 (35,656 ) 53,350 (12,031 ) 366,052 (47,687 ) Total held-to-maturity securities $ 1,057,070 $ (145,162 ) $ 1,039,955 $ (254,465 ) $ 2,097,025 $ (399,627 ) Once it is determined that a credit loss has occurred, an allowance for credit losses is established on our available-for-sale and held-to-maturity securities.
Based on our current simulation models, we believe that the interest rate risk profile of the balance sheet is asset sensitive over both a one-year and a two-year horizon. The estimated sensitivity does not necessarily represent a forecast and the results may not be indicative of actual changes to our net interest income.
Based on our current simulation models, we believe that the interest rate risk profile of the balance sheet is modestly asset sensitive over both a one-year and a two-year horizon. The estimated sensitivity does not necessarily represent a forecast and the results may not be indicative of actual changes to our net interest income.
Underwriting of residential real estate and consumer loans are generally driven by personal income and debt service capacity, credit history and scores, and collateral values. 66 SBA loans require credit structures that conform to the various requirements of the SBA programs specific to the type of loan request and the Bank’s loan policy as it relates to these loans.
Underwriting of residential real estate and consumer loans are generally driven by personal income and debt service capacity, credit history and scores, and collateral values. SBA loans require credit structures that conform to the various requirements of the SBA programs specific to the type of loan request and the Bank’s loan policy as it relates to these loans.
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.
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.
Any such failures, interruptions or fraud or security breaches, depending on the scope, duration, affected system(s) or customers(s), could expose the Company and/or the Bank to financial loss, reputation damage, litigation, or regulatory action. We continue to invest in technologies and training to protect our associates, our clients and our assets.
Any such failures, interruptions or fraud or security breaches, depending on the scope, duration, affected system(s) or customers(s), could expose the Company and/or the Bank to financial loss, reputation damage, litigation, or regulatory action. We continue to invest in technologies and training to protect our associates, our customers and our assets.
Refer to our Analysis of Financial Condition — Capital Resources. 39 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 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.
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. 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 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.
This product, known as Citizens Sweep Manager, sells our investment securities overnight to our customers under an agreement to repurchase them the next day at a price 62 which reflects the market value of the use of funds by the Bank for the period concerned.
This product, known as Citizens Sweep Manager, sells our investment securities overnight to our customers under an agreement to repurchase them the next day at a price which reflects the market value of the use of funds by the Bank for the period concerned.
However, we cannot predict the extent to which the deterioration in general economic conditions, real estate values, changes in general rates of interest and changes in the financial conditions or business of a borrower may adversely affect a specific borrower’s ability to pay or the value of our collateral.
However, we cannot predict the extent to which the deterioration in general economic conditions, real estate values, changes in general rates of interest and changes 61 in the financial conditions or business of a borrower may adversely affect a specific borrower’s ability to pay or the value of our collateral.
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 and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period.
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.
In addition, management prepares, on a monthly basis, a capital volatility report that compares changes in the market value of the investment portfolio. We have as our target to always be well-capitalized by regulatory standards.
In addition, management prepares, on a monthly basis, a capital volatility report that compares changes in the market value of the investment portfolio. We have as our target to always be well-capitalized by regulatory standards. 78
Dairy & livestock and agribusiness loans are largely predicated on the revenue cycles and demand for milk and crops, commodity prices, collateral values of herd, feed, and income-producing dairies or croplands, and the financial support of the guarantors.
Dairy & livestock and agribusiness loans are largely predicated on the revenue cycles and demand for milk and crops, commodity prices, collateral values of herd, feed, and income-producing dairies or croplands, and the financial support of the 70 guarantors.
Since we lend primarily in Southern and Central California, our real estate loan collateral is concentrated in this region. 55 Nonperforming Assets The following table provides information on nonperforming assets as of the dates presented.
Since we lend primarily in Southern and Central California, our real estate loan collateral is concentrated in this region. Nonperforming Assets The following table provides information on nonperforming assets as of the dates presented.
In general, our liquidity is managed daily by controlling the level of liquid assets as well as the use of funds provided by the cash flow from the investment portfolio, loan demand and deposit fluctuations.
In general, our liquidity is managed daily by controlling the level of liquid assets as well as the use of funds provided by the cash flow from the investment portfolio, loan demand, deposit fluctuations, and borrowings.
After excluding discount accretion, nonaccrual interest income and the impact from PPP loans, our ("core") loan yields grew by 17 basis points compared to 2021.
After excluding discount accretion, nonaccrual interest income and the impact from PPP loans, our ("core") loan yields grew by 17 45 basis points compared to 2021.
The 34 basis point increase in the earning asset yield was due to a 47 basis point increase in security yields, a seven basis point increase in loan yields, and a change in the composition of average earning assets, with the investment portfolio growing from 28.79% to 38.47% of average earnings assets, while funds held at the Federal Reserve on average declined from 13.64% to 5.15% for 2022, compared to 2021.
The 34 basis point increase in the earning asset yield was due to a 47 basis point increase in security yields, a seven basis point increase in loan yields, and impacted by the change in the composition of average earning assets, with the investment portfolio growing from 28.79% to 38.47% of average earnings assets, while funds held at the Federal Reserve on average declined from 13.64% to 5.15% for 2022, compared to 2021.
Further, EVE does not take into account factors such as future balance sheet growth, changes in asset and liability mix, changes in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates. 72 Counterparty Risk Recent developments in the financial markets have placed an increased awareness of Counterparty Risks.
Further, EVE does not take into account factors such as future balance sheet growth, changes in asset and liability mix, changes in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates. 77 Counterparty Risk Recent developments in the financial markets have placed an increased awareness of Counterparty Risks.
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. 45 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, 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.
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, 2022, 2021 and 2020. 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, 2023, 2022 and 2021. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions.
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 B+ or greater; • We have no significant Counterparty exposure related to derivatives 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 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.
Refer to additional discussion concerning loans, nonperforming assets, allowance for credit losses and related tables under the Analysis of Financial Condition contained herein. 67 Transaction Risk Transaction risk is the risk to earnings or capital arising from problems in service, activity or product delivery.
Refer to additional discussion concerning loans, nonperforming assets, allowance for credit losses and related tables under the Analysis of Financial Condition contained herein. 71 Transaction Risk Transaction risk is the risk to earnings or capital arising from problems in service, activity or product delivery.
At December 31, 2022, 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, 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 ”.
On February 1, 2022, we announced that our Board of Directors authorized a share repurchase plan to repurchase up to 10,000,000 shares of the Company’s common stock ("2022 Repurchase Program"), including by means of (i) an initial $70 million dollar Accelerated Share Repurchase, or ASR Plan, and (ii) one or more Rule 10b5-1 plans or other appropriate buyback arrangements, including open market purchases and private transactions.
On February 1, 2022, we announced that our Board of Directors authorized a share repurchase plan to repurchase up to 10,000,000 shares of the Company’s common stock ("2022 Repurchase Program"), including by means of (i) an initial $70 million dollar Accelerated Share Repurchase, or ASR Plan, and (ii) one or more Rule 10b5-1 plans or other appropriate buy-back arrangements, including open market purchases and private transactions.
(3) Includes interest-bearing demand and money market accounts. 42 The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated.
(3) Includes interest-bearing demand and money market accounts. 43 The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated.
At December 31, 2022, 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.
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.
This sensitivity analysis is compared to policy limits, which specify a maximum tolerance level for net interest income exposure over a one-year horizon assuming no balance sheet growth, given a 200 basis point upward and a 200 or 100 basis point downward shift in interest rates, depending on the level of current market rates.
This sensitivity analysis is compared to policy limits, which specify a maximum tolerance level for net interest income exposure over a one and two year horizon assuming no balance sheet growth, given a 200 basis point upward and a 200 basis point downward shift in interest rates depending on the level of current market rates.
As of December 31, 2022, we determined there were no events or circumstances which would more likely than not reduce the fair value of our reportable segment below its carrying amount.
As of December 31, 2023, we determined there were no events or circumstances which would more likely than not reduce the fair value of our reportable segment below its carrying amount.
The Risk Management Plan that we have adopted seeks to implement the proper control and management of key risk factors inherent in the operation of the Company and the Bank. Some of the key risks that we must manage are credit risks, interest rate risk, liquidity risk, market risks, transaction risk, compliance risk, strategic risk, and cybersecurity risk.
The Risk Management Program that we have adopted seeks to implement the proper control and management of key risk factors inherent in the operation of the Company and the Bank. Some of the key risks that we must manage are credit risks, interest rate risk, liquidity risk, market risks, transaction risk, compliance risk, strategic risk, legal risk, and cybersecurity risk.
While we believe that the allowance at December 31, 2022 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. 60 Changes in economic and business conditions have had an impact on our market area and on our loan portfolio.
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.
These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance.
These conditions include short-term and long-term interest rates, inflation, monetary policy, and the strength of the global, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance.
We use the same credit underwriting policies in granting or accepting such commitments or contingent obligations as we do for on-balance sheet instruments, which consist of evaluating customers’ creditworthiness individually. As of December 31, 2022 and December 31, 2021, the balance in this reserve was $8.0 million and $8.0 million, respectively, and was included in other liabilities.
We use the same credit underwriting policies in granting or accepting such commitments or contingent obligations as we do for on-balance sheet instruments, which consist of evaluating customers’ creditworthiness individually. As of December 31, 2023 and December 31, 2022, the balance in this reserve was $7.5 million and $8.0 million, respectively, and was included in other liabilities.
There were no nonperforming construction loans at December 31, 2022. 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, 2022.
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.
December 31, 2022 December 31, 2021 Capital Ratios Adequately Capitalized Ratios Minimum Required Plus Capital Conservation Buffer Well Capitalized Ratios CVB Financial Corp. Consolidated Citizens Business Bank CVB Financial Corp.
December 31, 2023 December 31, 2022 Capital Ratios Adequately Capitalized Ratios Minimum Required Plus Capital Conservation Buffer Well Capitalized Ratios CVB Financial Corp. Consolidated Citizens Business Bank CVB Financial Corp.
The tax equivalent yield at December 31, 2022 was 3.33%. 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, 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.
Risk attributes for commercial real estate loans include 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 ("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.
Economic Value of Equity Sensitivity December 31, Instantaneous Rate Change 2022 2021 200 bp decrease in interest rates -12.8 % N/A 100 bp decrease in interest rates -4.4 % -14.1 % 100 bp increase in interest rates 1.2 % 5.3 % 200 bp increase in interest rates 2.2 % 11.8 % 300 bp increase in interest rates 3.8 % 13.6 % 400 bp increase in interest rates 5.3 % 16.8 % 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, 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).
See “Allowance for Credit Losses” under Analysis of Financial Condition herein. Noninterest Income Noninterest income includes income derived from financial services offered to our customers, such as CitizensTrust, BankCard services, international banking, and other business services.
See “Allowance for Credit Losses” under Analysis of Financial Condition herein. Noninterest Income Noninterest income includes income derived from financial services offered to our customers, such as CitizensTrust, merchant processing and card services, international banking, and other business services.
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 including covenants set forth in our junior subordinated debentures.
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.
As of December 31, 2022, the Company had $211.5 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 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.
We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in 41 proportion to interest-earning assets, and in the growth and maturity of earning assets.
We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, the growth and maturity of earning assets, and derivative financial instruments.
The allowance for credit losses as of December 31, 2022 is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics.
Allowance for Credit Losses (“ACL”) — Our allowance for credit losses is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics.
As of December 31, 2022, we had commitments to extend credit of approximately $1.73 billion, and obligations under letters of credit of $50.3 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, 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.
The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans (excluding Paycheck Protection Program loans).
The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans.
In this regard, it is important to note that the Bank’s practice with regard to these loans, including modified loans or troubled debt restructurings 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 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.
Consolidated Citizens Business Bank Tier 1 leverage capital ratio 4.00% 4.00% 5.00% 9.53% 9.42% 9.18% 8.90% Common equity Tier 1 capital ratio 4.50% 7.00% 6.50% 13.55% 13.39% 14.86% 14.41% Tier 1 risk-based capital ratio 6.00% 8.50% 8.00% 13.55% 13.39% 14.86% 14.41% Total risk-based capital ratio 8.00% 10.50% 10.00% 14.37% 14.22% 15.63% 15.18% 65 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% 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.
As of December 31, 2022, the Company had $79.4 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, 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 an active participant in the SBA’s Paycheck Protection Program, we originated 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, 2022, the remaining outstanding balance of PPP loans totaled $9.1 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, 2023, the remaining outstanding balance of PPP loans totaled $2.7 million.
In each area, we have identified the variables most important in the estimation process. We have used the best information available to make the necessary estimates to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables could change future valuations and impact the results of operations.
We have used the best information available to make the necessary estimates to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables could change future valuations and impact the results of operations.
(2) Beginning with March 31, 2020, gross loans are presented net of deferred loan fees (at amortized cost) by respective class of financing receivables. 53 As of December 31, 2022, $517.8 million, or 7.52% of the total commercial real estate loans included loans secured by farmland, compared to $364.4 million, or 6.29%, at December 31, 2021.
(2) Beginning with March 31, 2020, gross loans are presented net of deferred loan fees (at amortized cost) by respective class of financing receivables. As of December 31, 2023, $497.7 million, or 7.34% of the total commercial real estate loans included loans secured by farmland, compared to $517.8 million, or 7.52%, at December 31, 2022.
We utilize internal auditors and independent audit firms to test key controls of operational processes and to audit information systems, compliance management programs, loan credit reviews and trust services. The key to monitoring transaction risk is in the design, documentation and implementation of well-defined procedures.
The audit plan ensures that high risk areas are reviewed annually. We utilize internal auditors and independent audit firms to test key controls of operational processes and to audit information systems, compliance management programs, loan credit reviews and trust services. The key to monitoring transaction risk is in the design, documentation and implementation of well-defined procedures.
Refer to Note 23 — Leases of the notes to the consolidated financial statements for a more detailed discussion about leases. 63 Off-Balance Sheet Arrangements The following table summarizes the off-balance sheet items at December 31, 2022.
Refer to Note 22 — Leases of the notes to the consolidated financial statements for a more detailed discussion about leases. 67 Off-Balance Sheet Arrangements The following table summarizes the off-balance sheet items at December 31, 2023.
Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain would be recognized.
Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts 37 allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain would be recognized. Acquisition related costs are expensed as incurred.
Municipal bonds, which represented approximately 9% of the total investment portfolio, are predominately AA or higher rated securities. The Company held investment securities in excess of 10% of shareholders’ equity from the following issuers as of the dates presented.
The Agency CMO/REMIC are backed by agency-pooled collateral. Municipal bonds, which represented approximately 9% of the total investment portfolio, are predominately AA or higher rated securities. The Company held investment securities in excess of 10% of shareholders’ equity from the following issuers as of the dates presented.
Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged income as well as available tax credits. Refer to Note 11 — 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 10 — Income Taxes of the notes to consolidated financial statements for more information.
Market conditions have continued to negatively impact assets under management and trust fee income. Additionally, a large trust relationship with more than $800 million in assets was transitioned to a financial institution outside of California. The transition was completed by the end of 2022, with the impact on fee income expected to be reflected in 2023.
Additionally, a large trust relationship with more than $800 million in assets was transitioned to a financial institution outside of California. The transition was completed by the end of 2022, with the impact on fee income expected to be reflected in 2023.
(2) The loans secured by farmland included $140.5 million for loans secured by dairy & livestock land and $377.3 million for loans secured by agricultural land at December 31, 2022. (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 $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.
Allowance for Credit Losses by Loan Type December 31, 2022 2021 2020 2019 2018 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 $ 64,806 75.8 % $ 50,950 73.4 % $ 75,439 65.9 % $ 48,629 71.0 % $ 44,934 69.4 % Construction 1,702 1.0 % 765 0.8 % 1,934 1.0 % 858 1.5 % 981 1.6 % SBA 2,809 3.2 % 2,668 3.6 % 2,992 3.6 % 1,453 4.0 % 1,062 4.5 % SBA - PPP — 0.1 % — 2.4 % — 10.6 % — — — — Commercial and industrial 10,206 10.5 % 6,669 10.3 % 7,142 9.7 % 8,880 12.4 % 7,520 12.9 % Dairy & livestock and agribusiness 4,400 4.8 % 3,066 4.9 % 3,949 4.4 % 5,255 5.1 % 5,215 5.1 % Municipal lease finance receivables 296 0.9 % 100 0.6 % 74 0.5 % 623 0.7 % 775 0.8 % SFR mortgage 366 2.9 % 188 3.1 % 367 3.2 % 2,339 3.8 % 2,196 3.8 % Consumer and other loans 532 0.8 % 613 0.9 % 1,795 1.1 % 623 1.5 % 726 1.7 % PCI loans — — — — — — — — 204 0.2 % Total $ 85,117 100.0 % $ 65,019 100.0 % $ 93,692 100.0 % $ 68,660 100.0 % $ 63,613 100.0 % The ACL/Total Loan Coverage Ratio as of December 31, 2022 increased to 0.94%, compared to 0.82% as of December 31, 2021.
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.
For the years ended December 31, 2022 and 2021, repayments/maturities of investment securities totaled $661.5 million and $928.4 million, respectively. The Company purchased additional investment securities totaling $1.76 billion and $3.16 billion for the years ended December 31, 2022 and 2021, respectively. There were no investment securities sold during the years ended December 31, 2022 and 2021.
For the years ended December 31, 2023 and 2022, repayments/maturities of investment securities totaled $450.3 million and $661.5 million, respectively. The Company purchased additional investment securities totaling $48.4 million and $1.8 billion for the years ended December 31, 2023 and 2022, respectively. There were no investment securities sold during the years ended December 31, 2023 and 2022.
The Bank’s ACL methodology also produced an allowance of $8.0 million for our off-balance sheet credit exposures as of December 31, 2022, compared to $8.0 million as of December 31, 2021. The second quarter of 2021 included $1.0 million in recapture of provision for unfunded loan commitments.
The Bank’s ACL methodology also produced an allowance of $7.5 million for our off-balance sheet credit exposures as of December 31, 2023, compared to $8.0 million as of December 31, 2022. The fourth quarter of 2023 included $500,000 in recapture of provision for unfunded loan commitments.
Year Ended December 31, 2022 2021 2020 2019 2018 (Dollars in thousands) Allowance for credit losses at beginning of period $ 65,019 $ 93,692 $ 68,660 $ 63,613 $ 59,585 Impact of adopting ASU 2016-13 — — 1,840 — — Charge-offs: Commercial real estate — — — — — Construction — — — — — SBA (127 ) (223 ) (362 ) (321 ) (257 ) Commercial and industrial (66 ) (3,019 ) (195 ) (48 ) (10 ) Dairy & livestock and agribusiness — (118 ) — (78 ) — SFR mortgage — — — — (13 ) Consumer and other loans (4 ) (11 ) (109 ) (7 ) (11 ) Total charge-offs (197 ) (3,371 ) (666 ) (454 ) (291 ) Recoveries: Commercial real estate — — — — — Construction 12 58 11 12 2,506 SBA 107 23 72 9 20 Commercial and industrial 503 12 10 255 82 Dairy & livestock and agribusiness 468 — — 19 19 SFR mortgage — 79 206 196 51 Consumer and other loans — 26 59 10 141 Total recoveries 1,090 198 358 501 2,819 Net recoveries (charged-offs) 893 (3,173 ) (308 ) 47 2,528 Initial ACL for PCD loans at acquisition 8,605 — — — — Provision recorded at acquisition 4,932 — — — — Provision for (recapture of) credit losses 5,668 (25,500 ) 23,500 5,000 1,500 Allowance for credit losses at end of period $ 85,117 $ 65,019 $ 93,692 $ 68,660 $ 63,613 Summary of reserve for unfunded loan commitments: Reserve for unfunded loan commitments at beginning of period $ 8,000 $ 9,000 $ 8,959 $ 8,959 $ 6,306 Impact of adopting ASU 2016-13 — — 41 — — Estimated fair value of reserve for unfunded loan commitment assumed from Community Bank — — — — 2,903 (Recapture of) provision for unfunded loan commitments — (1,000 ) — — (250 ) Reserve for unfunded loan commitments at end of period $ 8,000 $ 8,000 $ 9,000 $ 8,959 $ 8,959 Reserve for unfunded loan commitments to total unfunded loan commitments 0.46 % 0.49 % 0.54 % 0.56 % 0.51 % Amount of total loans at end of period (1) $ 9,079,392 $ 7,887,713 $ 8,348,808 $ 7,564,577 $ 7,764,611 Average total loans outstanding (1) $ 8,676,820 $ 8,065,877 $ 8,066,483 $ 7,552,505 $ 5,905,674 Net (charge-offs) recoveries to average total loans 0.01 % (0.04 )% (0.00 )% — 0.04 % Net (charge-offs) recoveries to total loans at end of period 0.01 % (0.04 )% (0.00 )% — 0.03 % Allowance for credit losses to average total loans 0.98 % 0.81 % 1.16 % 0.91 % 1.08 % Allowance for credit losses to total loans at end of period 0.94 % 0.82 % 1.12 % 0.91 % 0.82 % Net (charge-offs) recoveries to allowance for credit losses 1.05 % (4.88 )% (0.33 )% 0.07 % 3.97 % Net (charge-offs) recoveries to (recapture of) provision for credit losses 8.42 % 12.44 % (1.31 )% 0.94 % 168.53 % (1) Net of deferred loan origination fees, costs and discounts (amortized cost).
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).
As of December 31, 2022, total funds borrowed under these agreements were $565.4 million with a weighted average interest rate of 0.11%, compared to $642.4 million with a weighted average rate of 0.08% as of December 31, 2021.
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.
There was no provision or recapture of provision for unfunded commitments for the year ended December 31, 2022. The second quarter of 2021 included a $1.0 million recapture of provision for unfunded loan commitments. Standby letters of credit are conditional commitments issued by the Bank to guarantee the financial performance of a customer to a third party.
The fourth quarter of 2023 included $500,000 in recapture of provision for unfunded loan commitments. There was no provision or recapture of provision for unfunded commitments for the year ended December 31, 2022. Standby letters of credit are conditional commitments issued by the Bank to guarantee the financial performance of a customer to a third party.
This committee analyzes the cash flows from loans, investments, deposits and borrowings. In addition, the Company has a Balance Sheet Management Committee of the Board of Directors that meets quarterly to review the Company’s balance sheet and liquidity position.
This committee analyzes the cash flows from loans, investments, deposits and borrowings, as well as the input assumptions and results from various models. In addition, the Company has a Balance Sheet Management Committee of the Board of Directors that meets at least quarterly to review the Company’s balance sheet and liquidity position.
As part of this ongoing assessment, the Board of Directors reviews the various components of our capital plan and capital stress testing. Total equity decreased $133.0 million, or 6.39%, to $1.95 billion at December 31, 2022, compared to total equity of $2.08 billion at December 31, 2021.
As part of this ongoing assessment, the Board of Directors reviews the various components of our capital plan and capital stress testing. Total equity increased $129.5 million, or 6.64%, to $2.08 billion at December 31, 2023, compared to total equity of $1.95 billion at December 31, 2022.
Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. These U.S. economic forecasts include a baseline forecast, as well as multiple downside forecasts. The baseline forecast continues to represent the largest weighting in our multi-weighted forecast scenario, with downside risks, including a stagflation scenario, weighted among these multiple forecasts.
Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. The baseline forecast continues to represent the largest weighting in our multi-weighted forecast scenario, with downside risks weighted among multiple forecasts.
This committee provides oversight to the balance sheet and liquidity management process and recommends policy guidelines for the approval of our Board of Directors, and courses of action to address our actual and projected liquidity needs. Our primary sources and uses of funds for the Company are deposits and loans.
This committee provides oversight to the balance sheet and liquidity management process and recommends policy guidelines for the approval of our Board of Directors, and courses of action to address our actual and projected liquidity needs.
Our definition of liquid assets includes cash and cash equivalents in excess of minimum levels needed to fulfill normal business operations, short-term investment securities, and other anticipated near term cash flows from investments. Our balance sheet has significant liquidity and our loans are primarily funded with core deposits. Furthermore, we have significant off-balance sheet sources of liquidity.
Our definition of liquid assets includes cash and cash equivalents in excess of minimum levels needed to fulfill normal business operations, short-term investment securities, and other anticipated near term cash flows from investments. In addition to on balance sheet liquidity, we have significant off-balance sheet sources of liquidity.
The weighted-average yield on the total investment portfolio at December 31, 2022 was 2.13% with a weighted-average life of 6.9 years. This compares to a weighted-average yield of 1.71% at December 31, 2021 with a weighted-average life of 5.5 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 2.13% 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.
The Company obtains a semi-annual independent credit review by engaging an outside party to review a sample of our loans and leases. The primary purpose of this review is to evaluate our existing loan ratings.
The other categories have formulae used to determine the needed allowance amount. The Company obtains a semi-annual independent credit review by engaging an outside party to review a sample of our loans and leases. The primary purpose of this review is to evaluate our existing loan ratings.
(2) Includes loan fees of $8.1 million, $27.5 million and $23.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. Prepayment penalty fees of $6.9 million, $9.0 million and $8.2 million are included in interest income for the years ended December 31, 2022, 2021 and 2020, respectively.
Prepayment penalty fees of $2.5 million, $6.9 million and $9.0 million are included in interest income for the years ended December 31, 2023, 2022 and 2021, respectively.
We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables. The allowance for credit loss is sensitive to both changes in these portfolio characteristics and the forecast of macroeconomic variables.
We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables.
The Bank’s investment in BOLI includes life insurance policies acquired through acquisitions and the purchase of life insurance by the Bank on a select group of employees. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at its cash surrender value. The policies consist of general account, separate account, and hybrid policies.
The Bank’s investment in BOLI includes life insurance policies generally acquired through acquisitions or the purchase of life insurance by the Bank on a select group of employees to fund deferred compensation plans. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at its cash surrender value.
Total cost of funds was 0.05% for 2021, compared with 0.13% for 2020. Provision for (Recapture of) Credit Losses The provision for (recapture of) credit losses is a charge (credit) to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected lifetime losses in the loan portfolio as of the balance sheet date.
Provision for (Recapture of) Credit Losses The provision for (recapture of) credit losses is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected lifetime losses in the loan portfolio as of the balance sheet date.
The loans secured by farmland included $140.5 million for loans secured by dairy & livestock land and $377.3 million for loans secured by agricultural land at December 31, 2022, compared to $134.9 million for loans secured by dairy & livestock land and $229.5 million for loans secured by agricultural land at December 31, 2021.
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.
Deposits The primary source of funds to support earning assets (loans and investments) is the generation of deposits. Total deposits were $12.84 billion at December 31, 2022. This represented a decrease of $140.1 million, or 1.08%, from total deposits of $12.98 billion at December 31, 2021.
Deposits The primary source of funds to support earning assets (loans and investments) is the generation of deposits. Total deposits were $11.43 billion at December 31, 2023. This represented a decrease of $1.4 billion, or 10.93%, from total deposits of $12.84 billion at December 31, 2022.
Distribution of Loan Portfolio by Type December 31, 2022 2021 2020 2019 (1) 2018 (Dollars in thousands) Commercial real estate $ 6,884,948 $ 5,789,730 $ 5,501,509 $ 5,374,617 $ 5,394,229 Construction 88,271 62,264 85,145 116,925 122,782 SBA 290,908 288,600 303,896 305,008 350,043 SBA - PPP 9,087 186,585 882,986 — — Commercial and industrial 948,683 813,063 812,062 935,127 1,002,209 Dairy & livestock and agribusiness 433,564 386,219 361,146 383,709 393,843 Municipal lease finance receivables 81,126 45,933 45,547 53,146 64,186 SFR mortgage 266,024 240,654 270,511 283,468 296,504 Consumer and other loans 76,781 74,665 86,006 116,319 128,429 Gross loans (Non-PCI) 9,079,392 7,887,713 8,348,808 7,568,319 7,752,225 Less: Deferred loan fees, net (2) — — — (3,742 ) (4,828 ) Total loans, at amortized cost (Non-PCI) 9,079,392 7,887,713 8,348,808 7,564,577 7,747,397 Less: Allowance for credit losses (85,117 ) (65,019 ) (93,692 ) (68,660 ) (63,409 ) Net loans (Non-PCI) $ 8,994,275 $ 7,822,694 $ 8,255,116 7,495,917 7,683,988 PCI Loans 17,214 Discount on PCI loans — Less: Allowance for credit losses (204 ) PCI loans, net 17,010 Total loans and lease finance receivables, net $ 7,700,998 (1) Beginning with June 30, 2019, PCI loans were accounted for and combined with Non-PCI loans and were reflected in total loans and lease finance receivables.
Distribution of Loan Portfolio by Type December 31, 2023 2022 2021 2020 2019 (Dollars in thousands) Commercial real estate $ 6,784,505 $ 6,884,948 $ 5,789,730 $ 5,501,509 $ 5,374,617 Construction 66,734 88,271 62,264 85,145 116,925 SBA 270,619 290,908 288,600 303,896 305,008 SBA - PPP 2,736 9,087 186,585 882,986 — Commercial and industrial 969,895 948,683 813,063 812,062 935,127 Dairy & livestock and agribusiness 412,891 433,564 386,219 361,146 383,709 Municipal lease finance receivables 73,590 81,126 45,933 45,547 53,146 SFR mortgage 269,868 266,024 240,654 270,511 283,468 Consumer and other loans 54,072 76,781 74,665 86,006 116,319 Gross loans (Non-PCI) 8,904,910 9,079,392 7,887,713 8,348,808 7,568,319 Less: Deferred loan fees, net (1) — — — — (3,742 ) Total loans, at amortized cost (Non-PCI) 8,904,910 9,079,392 7,887,713 8,348,808 7,564,577 Less: Allowance for credit losses (86,842 ) (85,117 ) (65,019 ) (93,692 ) (68,660 ) Net loans (Non-PCI) $ 8,818,068 $ 8,994,275 $ 7,822,694 $ 8,255,116 $ 7,495,917 (1) Beginning with June 30, 2019, PCI loans were accounted for and combined with Non-PCI loans and were reflected in total loans and lease finance receivables.
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. 48 ANALYSIS OF FI NANCIAL CONDITION Total assets of $16.48 billion at December 31, 2022 increased $592.8 million, or 3.73%, from total assets of $15.88 billion at December 31, 2021.
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.
This ASU is effective for interim and annual reporting periods beginning after December 15, 2023; early adoption is permitted. 1st Quarter 2024 The adoption of this ASU is not expected to have a material impact on our consolidated financial statements. 37 OVERVIEW For the year ended December 31, 2022, we reported net earnings of $235.4 million, compared with $212.5 million for 2021.
This ASU is effective for annual reporting periods beginning after December 15, 2024 and are to be applied on a prospective basis; early adoption is permitted. 1st Quarter 2025 The adoption of this ASU is not expected to have a material impact on our consolidated financial statements. 38 OVERVIEW For the year ended December 31, 2023, we reported net earnings of $221.4 million, compared with $235.4 million for 2022, a $14.0 million, or 5.94%, decrease from the prior year.
Financial products that expose us to market risk include securities, loans, deposits, debt, and derivative financial instruments. 70 The table below provides the actual balances as of December 31, 2022 of interest-earning assets and interest-bearing liabilities, including the average rate earned or incurred for 2022, 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, 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.
Our average cost of total deposits including customer repurchase agreements was 0.05% for both 2022 and 2021. Our average cost of funds for 2022 was 0.06%, compared to 0.05% for 2021.
Our average cost of total deposits including customer repurchase agreements for 2023 was 0.41%, compared to 0.05% for 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−2 removed1 unchanged
Biggest changeITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss from adverse changes in the market prices and interest rates. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking activities. We currently do not enter into futures, forwards, or option contracts.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss from adverse changes in the market prices and interest rates. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking activities. We do not currently have futures, forwards, or option contracts.
Our analysis of market risk and market-sensitive financial information contain forward looking statements and is subject to the disclosure at the beginning of Part I regarding such forward-looking information. 73
Our analysis of market risk and market-sensitive financial information contain forward looking statements and is subject to the disclosure at the beginning of Part I regarding such forward-looking information. 79
Removed
LIBOR is expected to be completely phased out by 2023, as such the Company continues to assess the impacts of this transition and exploring alternatives to use in place of LIBOR for various financial instruments, primarily related to our variable-rate loans and interest rate swap derivatives that are indexed to LIBOR.
Added
As a result of the phase out of LIBOR, our interest rate swap derivatives and the associated loans that were indexed to LIBOR, have been replaced with one month CME Term SOFR. All remaining financial instruments indexed to LIBOR have been transitioned to a replacement index, as of June 30, 2023.
Removed
The Bank will use multiple alternative indices as replacements for LIBOR for new instruments originated after 2021.All remaining financial instruments indexed to LIBOR will be transitioned to a replacement index, primarily CME Term SOFR, prior to June 2023.

Other CVBF 10-K year-over-year comparisons