CVB Financial (CVBF) Q3 Earnings call transcript Oct 24, 2024
2min read Citizens Business Bank (CVB Financial Corporation) held its third quarter 2024 earnings call, providing insights into the bank's financial performance and strategic initiatives. The call, led by Executive Vice President and Chief Financial Officer Allen Nicholson and President and CEO David Brager, highlighted several key themes and trends, offering a comprehensive view of the bank's current standing and future outlook.
Financial Performance and Growth Strategies
The bank reported a net earnings of $51 million or $0.37 per share, marking its 190th consecutive quarter of profitability and its 140th consecutive quarter of paying a cash dividend to shareholders. The return on average tangible common equity and return on average assets were 14.93% and 1.23%, respectively. Despite a slight decline in net earnings compared to the prior year quarter, the bank's continued profitability and cash dividend payments underscore its financial stability and commitment to shareholders.
The bank's strategy to deleverage its balance sheet and pay off its bank term funding program borrowings is noteworthy. The sale-leaseback transactions, which involved selling and leasing back two banking center buildings, generated a gain on sale of $9.1 million. The bank also sold available-for-sale investment securities at a cumulative loss of $11.6 million as part of its efforts to manage its investment portfolio.
Loan and Deposit Growth
Loan growth has been a challenge for Citizens Business Bank, with total loans declining by 1% from the end of the second quarter to $8.6 billion. Commercial real estate loan demand has been tepid, with a 46 million decline in commercial real estate loans from the prior year quarter. The bank's focus on selectively competing on loans and providing full array of products to small- to medium-sized businesses has resulted in a higher percentage of new loans in 2024 that are either owner-occupied or commercial and industrial loans.
Deposit growth has been a positive note, with an increase of $408 million from the end of the second quarter to September 30, 2024. The bank has experienced an increase in total deposits and customer repurchase agreements, which now total $12.5 billion. This growth in deposits has driven the quarter-over-quarter increase in net interest income, despite the decline in average loans.
Outlook and Challenges
Looking ahead, Citizens Business Bank faces challenges in its loan portfolio, particularly in commercial real estate loans, where demand has been weak. The bank's credit quality remains strong, with nonperforming loans declining by $3 million and classified loans remaining relatively flat. However, the bank faces competition on loan pricing, with yields on new loans in 2024 greater than 7.25% but expected to decrease in the near term.
The bank's efficiency ratio of 46.53% for the third quarter of 2024 indicates room for improvement in managing expenses. Noninterest expense increased by $2.3 million from the prior quarter, primarily due to an increase in staff-related expenses and regulatory assessment expense.
Conclusion
Citizens Business Bank's third quarter 2024 earnings call provided a mixed picture of its financial health and growth prospects. While the bank's continued profitability and cash dividend payments demonstrate its financial stability, the challenges in loan growth and increasing competition in the banking sector pose significant hurdles. The bank's focus on deleveraging its balance sheet and managing its investment portfolio, along with its commitment to banking the best small- to medium-sized businesses, position it well for the future. The bank's strategic initiatives, coupled with its strong financial foundation, provide a solid base for navigating the challenges ahead.
