CVB Financial Corp. Reports Earnings for the Third Quarter of 2020
CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank (the “Company”), announced earnings for the quarter ended September 30, 2020.
CVB Financial Corp. reported net income of $47.5 million for the quarter ended September 30, 2020, compared with $41.6 million for the second quarter of 2020 and $50.4 million for the third quarter of 2019. Diluted earnings per share were $0.35 for the third quarter, compared to $0.31 for the prior quarter and $0.36 for the same period last year. The third quarter of 2020 did not include a provision for credit losses, as the economic outlook is generally consistent with the forecast from the prior quarter end. In comparison, the Company recorded a provision for credit losses of $23.5 million in the first half of 2020, including $11.5 million in the second quarter.
David Brager, Chief Executive Officer of Citizens Business Bank, commented “Although the current uncertain economic situation, coronavirus outlook and low interest rate environment present near term challenges to earnings growth, we will continue to maintain our long-term focus on credit quality, strong capital levels, and consistent earnings. We believe that Citizens Business Bank will be well positioned as we return to a more normal economic environment and continue to generate stable, long-term shareholder returns.”
Net income of $47.5 million for the third quarter of 2020 produced an annualized return on average equity (“ROAE”) of 9.51% and an annualized return on average tangible common equity (“ROATCE”) of 15.20%. ROAE and ROATCE for the second quarter of 2020 were 8.51% and 13.80%, respectively, and 10.18% and 16.53%, respectively, for the third quarter of 2019. Annualized return on average assets (“ROAA”) was 1.38% for the third quarter, compared to 1.33% for the second quarter of 2020 and 1.78% for the third quarter of 2019. The efficiency ratio for the third quarter of 2020 was 42.57%, compared to 39.75% for the second quarter of 2020 and 39.60% for the third quarter of 2019.
Net income totaled $127.1 million for the nine months ended September 30, 2020. This represented a $29.4 million, or 18.81%, decrease from the prior year, as the provision for credit losses increased by $18.5 million. Diluted earnings per share were $0.93 for the nine months ended September 30, 2020, compared to $1.12 for the same period of 2019. Net income for the nine months ended September 30, 2020 produced an annualized ROAE of 8.55%, an ROATCE of 13.76% and an ROAA of 1.35%. This compares to ROAE of 10.89%, ROATCE of 17.99% and ROAA of 1.86% for the first nine months of 2019. The efficiency ratio for the nine months ended September 30, 2020 was 41.66%, compared to 39.89% for the first nine months of 2019.
Net interest income before provision for credit losses was $103.3 million for the third quarter of 2020. This represented a $1.2 million, or 1.19%, decrease from the second quarter of 2020, and a $4.8 million, or 4.47%, decrease from the third quarter of 2019. Total interest income was $106.6 million for the third quarter of 2020, which was $1.3 million, or 1.23%, lower than the second quarter of 2020 and $6.9 million, or 6.11%, lower than the same period last year. Total interest income and fees on loans for the third quarter of 2020 of $94.2 million decreased $1.2 million, or 1.21%, from the second quarter of 2020, and decreased $4.6 million, or 4.65%, from the third quarter of 2019. Total investment income of $11.8 million decreased $287,000, or 2.37%, from the second quarter of 2020 and decreased $1.7 million, or 12.56%, from the third quarter of 2019. Interest expense decreased $88,000, or 2.60%, from the prior quarter and decreased $2.1 million, or 38.92%, compared to the third quarter of 2019.
The Company adopted ASU 2016-13, commonly referred to as CECL which replaces the “incurred loss” approach with an “expected loss” model over the life of the loan, effective on January 1, 2020. No provision for credit losses was recorded for the third quarter of 2020. The Company’s economic forecast of macro-economic variables was generally consistent to the forecast at the end of the second quarter. A $23.5 million provision for credit losses was recorded in the first half of 2020, due to the economic disruption and forecasted impact resulting from COVID-19. In comparison to the prior year, a $1.5 million loan loss provision was incurred for the third quarter of 2019. During the third quarter of 2020, we experienced minimal credit charge-offs of $231,000 and total recoveries of $117,000, resulting in net charge-offs of $114,000.
Noninterest income was $13.2 million for the third quarter of 2020, compared with $12.2 million for the second quarter of 2020 and $11.9 million for the third quarter of 2019. The third quarter of 2020 included a $1.7 million net gain on the sale of one of our bank owned buildings, related to a banking center that was closed in September. In addition to this gain on sale, the year-over-year increase of $1.3 million included higher swap fee income of $1.2 million, partially offset by a decrease of $863,000 in service charges on deposit accounts.
Noninterest expense for the third quarter of 2020 was $49.6 million, compared to $46.4 million for the second quarter of 2020 and $47.5 million for the third quarter of 2019. There were no merger related expenses related to the Community Bank acquisition for the third quarter of 2020 and the second quarter of 2020, compared to $244,000 for the third quarter of 2019. The $3.2 million quarter-over-quarter increase was primarily due to a $2.3 million increase in salaries and employee benefits, including $1.1 million in additional bonus expense for “Thank You Awards” paid to all Bank employees during the third quarter and $900,000 in lower net deferred loan costs (contra account) primarily due to PPP loan origination costs in the second quarter of 2020. The third quarter of 2020 also reflected an $833,000 increase in regulatory assessments resulting from final application of assessment credits provided by the FDIC at the end of the second quarter of 2020 and a $700,000 write-down of one OREO property. Marketing and promotion expense decreased by $527,000. The year-over-year increase also included a $912,000 increase in salaries and employee benefits, primarily due to the “Thank You Awards”. Compared to the third quarter of 2019, regulatory assessments increased $852,000 and OREO expense increased by $829,000, while marketing and promotion expense decreased by $789,000. As a percentage of average assets, noninterest expense was 1.44% for the third quarter of 2020, compared to 1.48% for the second quarter of 2020 and 1.68% for the third quarter of 2019.
Net Interest Income and Net Interest Margin
Net interest income, before provision for credit losses, was $103.3 million for the third quarter of 2020, compared to $104.6 million for the second quarter of 2020 and $108.2 million for the third quarter of 2019. Our net interest margin (tax equivalent) was 3.34% for the third quarter of 2020, compared to 3.70% for the second quarter of 2020 and 4.34% for the third quarter of 2019. Total average earning asset yields (tax equivalent) were 3.45% for the third quarter of 2020, compared to 3.82% for the second quarter of 2020 and 4.55% for the third quarter of 2019. The decrease in earning asset yield from the prior quarter was due to a combination of a 30 basis point decrease in average loan yields, a 23 basis point decrease in investment yields and a change in asset mix with loan balances declining to 67.1% of earning assets on average for the third quarter of 2020, compared to 70.7% for the second quarter of 2020. The decrease in earning asset yield compared to the third quarter of 2019 was primarily due to a 76 basis point decrease in loan yields from 5.23% in the year ago quarter to 4.47% for the third quarter of 2020, a 48 basis point decline in investment yields, as well as a change in asset mix resulting from a $1.28 billion increase in average balances at the Federal Reserve. Discount accretion on acquired loans increased by $122,000 quarter-over-quarter and decreased by $2.9 million compared to the third quarter of 2019. Interest and fee income from PPP loans increased from approximately $8.5 million in the second quarter of 2020, to $9.5 million in the third quarter. The significant decline in interest rates since the start of the pandemic has had a negative impact on loan yields, which after excluding discount accretion, nonaccrual interest income, and the impact from PPP loans, declined by 7 basis points compared to the prior quarter and 44 basis points from the third quarter of 2019. The significant decline in interest rates also impacted the tax equivalent yield on investments, which decreased by 23 basis points from the second quarter of 2020 and decreased 48 basis points from the third quarter of 2019. Average earning assets increased from the second quarter of 2020 by $1.11 billion to $12.50 billion for the third quarter of 2020. Of that increase in earning assets, $402.7 million represented increased balances at the Federal Reserve, while investment securities grew on average by $358.1 million. Average loans grew by $335.2 million quarter-over-quarter, primarily due to PPP loans. Average earning assets increased by $2.55 billion from the third quarter of 2019. Loans on average grew by $887.0 million, including PPP loan balances that were about $1.10 billion, on average, during the third quarter of 2020. Investments increased by $344.1 million, while balances at the Federal Reserve grew on average by $1.28 billion compared to the third quarter of 2019.
Total cost of funds declined to 0.11% for the third quarter of 2020 from 0.13% for the second quarter of 2020 and 0.23% in the year ago quarter. On average, noninterest-bearing deposits were 61.67% of total deposits during the current quarter. Noninterest-bearing deposits grew on average by $527.4 million, or 8.50%, from the second quarter of 2020. Interest-bearing deposits and customer repurchase agreements grew on average by $402.1 million during the third quarter of 2020, compared to the second quarter of 2020. The cost of interest-bearing deposits and customer repurchase agreements declined from 0.31% for the prior quarter to 0.27% for the third quarter of 2020. In comparison to the third quarter of 2019, our overall cost of funds decreased by 12 basis points, as average noninterest-bearing deposits grew by $1.50 billion. Average Interest-bearing deposits increased by $720.0 million compared to the third quarter of 2019, while the cost of interest-bearing deposits decreased by 25 basis points.
Income Taxes
Our effective tax rate for the nine months ended September 30, 2020 was 29.00%, compared with 29.00% for the nine months ended September 30, 2019. Our estimated annual effective tax rate can vary depending upon the level of tax-advantaged income as well as available tax credits.
Assets
The Company reported total assets of $13.82 billion at September 30, 2020. This represented an increase of $67.4 million, or 0.49%, from total assets of $13.75 billion at June 30, 2020. Interest-earning assets of $12.59 billion at September 30, 2020 increased $75.8 million, or 0.61%, when compared with $12.52 billion at June 30, 2020. The increase in interest-earning assets was primarily due to a $494.1 million increase in investment securities and a $5.3 million increase in total loans, partially offset by a $429.4 million decrease in interest-earning balances due from the Federal Reserve.
Total assets at September 30, 2020 increased by $2.54 billion, or 22.48%, from total assets of $11.28 billion at December 31, 2019. Interest-earning assets increased $2.57 billion, or 25.59%, when compared with $10.03 billion at December 31, 2019. The increase in interest-earning assets includes a $1.31 billion increase in interest-earning balances due from the Federal Reserve, an $843.3 million increase in total loans, and a $368.6 million increase in investment securities. The increase in total loans was due to the origination of approximately 4,100 PPP loans in the second quarter of 2020, totaling $1.10 billion as of September 30, 2020. Excluding PPP loans, total loans declined by $257.8 million from December 31, 2019.
Total assets increased $2.49 billion, or 21.94%, from total assets of $11.33 billion at September 30, 2019. Interest-earning assets totaled $12.59 billion at September 30, 2020, an increase of $2.59 billion, or 25.83%, when compared with earning assets of $10.01 billion at September 30, 2019. The increase in interest-earning assets was due to a $1.12 billion increase in interest-earning balances due from the Federal Reserve, a $913.4 million increase in total loans, and a $509.0 million increase in investment securities. Excluding PPP loans, total loans declined by $187.7 million from September 30, 2019.
Investment Securities
Total investment securities were $2.78 billion at September 30, 2020, an increase of $494.1 million, or 21.58%, from $2.29 billion at June 30, 2020, an increase of $368.6 million, or 15.27%, from $2.41 billion at December 31, 2019, and an increase of $509.0 million, or 22.38%, from $2.27 billion at September 30, 2019.
At September 30, 2020, investment securities held-to-maturity (“HTM”) totaled $577.7 million, a $35.5 million, or 5.79%, decrease from June 30, 2020, a $96.8 million decrease, or 14.35%, from December 31, 2019 and a $126.3 million decrease, or 17.94%, from September 30, 2019.
At September 30, 2020, investment securities available-for-sale (“AFS”) totaled $2.21 billion, inclusive of a pre-tax net unrealized gain of $55.3 million. AFS securities increased by $529.6 million, or 31.60%, from $1.68 billion at June 30, 2020, increased by $465.4 million, or 26.74%, from December 31, 2019, and increased by $635.2 million, or 40.45%, from September 30, 2019.
Combined, the AFS and HTM investments in mortgage backed securities (“MBS”) and collateralized mortgage obligations (“CMO”) totaled $2.48 billion at September 30, 2020, compared to $2.06 billion at December 31, 2019 and $1.91 billion at September 30, 2019. Virtually all of our MBS and CMO are issued or guaranteed by government or government sponsored enterprises, which have the implied guarantee of the U.S. Government.
In the third quarter of 2020, we purchased $720.8 million of securities, primarily MBS, with an average expected yield of approximately 1.20%.
Our combined AFS and HTM municipal securities totaled $198.9 million as of September 30, 2020, or approximately 7% of our entire investment portfolio. These securities are located in 27 states. Our largest concentrations of holdings by state, as a percentage of total municipal bonds, are located in Minnesota at 29.89%, Massachusetts at 13.45%, Connecticut at 7.53%, Wisconsin at 6.79%, and Ohio at 5.89%.
Loans
Total loans and leases, net of deferred fees and discounts, of $8.41 billion at September 30, 2020 increased by $5.3 million, or 0.06%, from June 30, 2020. The $5.3 million increase in loans included increases of $4.0 million in PPP loans, $63.1 million in commercial real estate loans, $4.8 million in other SBA loans, $1.0 million in dairy & livestock and agribusiness loans, and $3.7 million in consumer and other loans, partially offset by decreases of $23.9 million in construction loans, $23.7 million in commercial and industrial loans, $11.8 million in municipal lease financings, and $11.8 million in SFR mortgage loans.
Total loans and leases, net of deferred fees increased by $843.3 million, or 11.15%, from December 31, 2019. The increase in total loans included $1.10 billion in PPP loans and a $130.9 million decline in dairy & livestock and agribusiness loans primarily due to seasonal pay downs, which historically occur in the first quarter of each calendar year. Excluding PPP loans and dairy & livestock and agribusiness loans, total loans declined by $126.9 million, or 1.77%. The $126.9 million decrease in loans included decreases of $118.1 million in commercial and industrial loans, $27.3 million in consumer and other loans, $15.1 million in municipal lease financings, $15.0 million in construction loans, and $8.7 million in SFR mortgage loans. Partially offsetting these declines was an increase in commercial real estate loans of $53.6 million.
Total loans and leases, net of deferred fees increased by $913.4 million, or 12.19%, from September 30, 2019. Excluding $1.10 billion in PPP loans, loans declined by $187.7 million including decreases of $104.6 million in commercial and industrial loans, $58.4 million in dairy & livestock and agribusiness loans, $28.1 million in consumer and other loans, $18.0 million in construction loans, $16.4 million in municipal lease financings, $14.6 million in other SBA loans, and $3.9 million in SFR mortgage loans, partially offset by an increase of $52.6 million in commercial real estate loans.
Asset Quality
The allowance for credit losses (“ACL”) totaled $93.9 million at September 30, 2020, compared to $94.0 million at June 30, 2020, $68.7 million at December 31, 2019, and $68.7 million at September 30, 2019. The allowance for credit losses for the first nine months of 2020 was increased by $23.5 million in provision for credit losses due to the severe economic disruption forecasted as a result of the coronavirus pandemic. At September 30, 2020, ACL as a percentage of total loans and leases outstanding was 1.12%, or 1.28% when PPP loans are excluded. This compares to 1.12%, 0.91%, and 0.92% at June 30, 2020, December 31, 2019, and September 30, 2019, respectively.
Nonperforming loans, defined as nonaccrual loans and loans 90 days past due accruing interest plus nonperforming TDR loans, were $11.8 million at September 30, 2020, or 0.14% of total loans. This compares to nonperforming loans of $6.8 million, or 0.08% of total loans, at June 30, 2020, $5.3 million, or 0.07% of total loans, at December 31, 2019 and $6.6 million, or 0.09% of total loans, at September 30, 2019. The $11.8 million in nonperforming loans at September 30, 2020 are summarized as follows: $6.5 million in commercial real estate loans, $1.8 million in commercial and industrial loans, $1.7 million in SBA loans, $849,000 in dairy & livestock and agribusiness loans, $675,000 in SFR mortgage loans, and $224,000 in consumer and other loans.
As of September 30, 2020, we had $4.2 million in OREO compared to $4.9 million at June 30, 2020 and December 31, 2019, and $9.5 million at September 30, 2019.
At September 30, 2020, we had loans delinquent 30 to 89 days of $3.8 million. This compares to $2.6 million at June 30, 2020, $1.7 million at December 31, 2019 and $1.4 million at September 30, 2019. As a percentage of total loans, delinquencies, excluding nonaccruals, were 0.04% at September, 30, 2020, 0.03% at June 30, 2020, 0.02% at December 31, 2019, and 0.02% at September 30, 2019.
At September 30, 2020, we had $2.2 million in performing TDR loans, compared to $3.1 million in performing TDR loans at December 31, 2019 and $3.2 million in performing TDR loans at September 30, 2019. Through October 9, 2020, we have temporary payment deferments (primarily 90 day deferments of principal and interest) in response to the CARES Act for 33 loans totaling $69 million, or less than 1% of total loans at September 30, 2020.
Nonperforming assets, defined as nonaccrual loans and loans 90 days past due accruing interest plus OREO, totaled $16.0 million at September 30, 2020, $11.7 million at June 30, 2020, $10.2 million at December 31, 2019, and $16.1 million at September 30, 2019. As a percentage of total assets, nonperforming assets were 0.12% at September 30, 2020, 0.09% at June 30, 2020, 0.09% at December 31, 2019, and 0.14% at September 30, 2019.
Classified loans are loans that are graded “substandard” or worse. At September 30, 2020, classified loans totaled $72.7 million, compared to $86.3 million at June 30, 2020, $73.4 million at December 31, 2019 and $60.0 million at September 30, 2019. Classified loans decreased $13.6 million quarter-over-quarter and included a $6.1 million decrease in classified commercial real estate loans, a $4.6 million decrease in classified commercial and industrial loans, $3.8 million decrease in classified dairy & livestock and agribusiness loans, and a $1.3 million decrease in classified SBA loans, partially offset by a $2.2 million increase in classified SFR mortgage loans.
Deposits & Customer Repurchase Agreements
Deposits of $11.17 billion and customer repurchase agreements of $483.4 million totaled $11.65 billion at September 30, 2020. This represented an increase of $200.5 million, or 1.75%, when compared with $11.45 billion at June 30, 2020. Total deposits and customer repurchase agreements increased $2.52 billion, or 27.58% when compared with $9.13 billion at December 31, 2019 and increased $2.45 billion, or 26.62%, when compared with $9.20 billion at September 30, 2019.
Noninterest-bearing deposits were $6.92 billion at September 30, 2020, an increase of $18.1 million, or 0.26%, when compared to $6.90 billion at June 30, 2020, an increase of $1.67 billion, or 31.91%, when compared to $5.25 billion at December 31, 2019, and an increase of $1.53 billion, or 28.49%, when compared to September 30, 2019. At September 30, 2020, noninterest-bearing deposits were 61.95% of total deposits, compared to 62.83% at June 30, 2020, 60.26% at December 31, 2019 and 61.23% at September 30, 2019.
Capital
For the first nine months of 2020, shareholders’ equity decreased by $12.1 million to $1.98 billion. The decrease was primarily due to $91.7 million in stock repurchases and $73.3 million in cash dividends, offset by net earnings of $127.1 million and a $23.5 million increase in other comprehensive income from the tax effected impact of the increase in market value of available-for-sale securities. Our tangible common equity ratio was 9.8% at September 30, 2020.
Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory standards. At September 30, 2020, the Company’s Tier 1 leverage capital ratio totaled 9.9%, common equity Tier 1 ratio totaled 14.6%, Tier 1 risk-based capital ratio totaled 14.9%, and total risk-based capital ratio totaled 16.1%.
CitizensTrust
As of September 30, 2020 CitizensTrust had approximately $2.91 billion in assets under management and administration, including $2.08 billion in assets under management. Revenues were $2.4 million for the third quarter of 2020 and $7.3 million for the first nine months of 2020, compared to $2.3 million and $7.0 million, respectively, for the same periods of 2019. CitizensTrust provides trust, investment and brokerage related services, as well as financial, estate and business succession planning.
Corporate Overview
CVB Financial Corp. (“CVBF”) is the holding company for Citizens Business Bank. CVBF is one of the 10 largest bank holding companies headquartered in California with over $13 billion in total assets. Citizens Business Bank is consistently recognized as one of the top performing banks in the nation and offers a wide array of banking, lending and investing services through 57 banking centers and 3 trust office locations serving the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County, and the Central Valley area of California.
Shares of CVB Financial Corp. common stock are listed on the NASDAQ under the ticker symbol “CVBF”. For investor information on CVB Financial Corp., visit our Citizens Business Bank website at www.cbbank.com and click on the “Investors” tab.
Conference Call
Management will hold a conference call at 7:30 a.m. PDT/10:30 a.m. EDT on Thursday, October 22, 2020 to discuss the Company’s third quarter 2020 financial results.
To listen to the conference call, please dial (877) 506-3368. A taped replay will be made available approximately one hour after the conclusion of the call and will remain available through November 5, 2020 at 6:00 a.m. PST/9:00 a.m. EST. To access the replay, please dial (877) 344-7529, passcode 10148385.
The conference call will also be simultaneously webcast over the Internet; please visit our Citizens Business Bank website at www.cbbank.com and click on the “Investors” tab to access the call from the site. Please access the website 15 minutes prior to the call to download any necessary audio software. This webcast will be recorded and available for replay on the Company’s website approximately two hours after the conclusion of the conference call, and will be available on the website for approximately 12 months.
Safe Harbor
Certain matters set forth herein (including the exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company's current business plans and expectations and our future financial position and operating results. Words such as “will likely result”, “aims”, “anticipates”, “believes”, “could”, “estimates”, “expects”, “hopes”, “intends”, “may”, “plans”, “projects”, “seeks”, “should”, “will,” “strategy”, “possibility”, and variations of these words and similar expressions help to identify these forward-looking statements, which involve risks and uncertainties. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic and market conditions and political events and the impact they may have on us, our customers and our assets and liabilities; our ability to attract deposits and other sources of funding or liquidity; supply and demand for commercial or residential real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend; a sharp or prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors, key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance for credit losses and charge-offs; the costs or effects of mergers, acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or our ability to realize the contemplated financial or business benefits associated with any such mergers, acquisitions or dispositions; the effects of new laws, regulations and/or government programs, including those laws, regulations and programs enacted by federal, state or local governments in the geographic jurisdictions in which we do business in response to the recent national emergency declared in connection with the COVID-19 pandemic; the impact of the federal CARES Act and the significant additional lending activities undertaken by the Company in connection with the Small Business Administration’s Paycheck Protection Program enacted thereunder, including risks to the Company with respect to the uncertain application by the Small Business Administration of new borrower and loan eligibility, forgiveness and audit criteria; the effects of the Company’s participation in one or more of the new lending programs recently established by the Federal Reserve, including the Main Street New Loan Facility, the Main Street Priority Loan Facility and the Nonprofit Organization New Loan Facility, and the impact of any related actions or decisions by the Federal Reserve Bank of Boston and its special purpose vehicle established pursuant to such lending programs; the effect of changes in other pertinent laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, bank capital levels, allowance for credit losses, consumer, commercial or secured lending, securities and securities trading and hedging, bank operations, compliance, fair lending, the Community Reinvestment Act, employment, executive compensation, insurance, cybersecurity, vendor management and information security technology) with which we and our subsidiaries must comply or believe we should comply or which may otherwise impact us; changes in estimates of future reserve requirements and minimum capital requirements, based upon the periodic review thereof under relevant regulatory and accounting standards, including changes in the Basel Committee framework establishing capital standards for bank credit, operations and market risks; the accuracy of the assumptions and estimates and the absence of technical error in implementation or calibration of models used to estimate the fair value of financial instruments or currently expected credit losses or delinquencies; inflation, changes in market interest rates, securities market and monetary fluctuations; changes in government-established interest rates, reference rates or monetary policies, including the possible imposition of negative interest rates on bank reserves; the impact of the anticipated phase-out of the London Interbank Offered Rate (LIBOR) on interest rate indexes specified in certain of our customer loan agreements and in our interest rate swap arrangements, including any economic and compliance effects related to the expected change from LIBOR to an alternative reference rate; changes in the amount, cost and availability of deposit insurance; disruptions in the infrastructure that supports our business and the communities where we are located, which are concentrated in California, involving or related to physical site access and/or communication facilities; cyber incidents, attacks, infiltrations, exfiltrations, or theft or loss of Company, customer or employee data or money; political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, drought, the effects of pandemic diseases, climate change or extreme weather events, that may affect electrical, environmental and communications or other services, computer services or facilities we use, or that affect our assets, customers, employees or third parties with whom we conduct business; our timely development and implementation of new banking products and services and the perceived overall value of these products and services by our customers and potential customers; the Company’s relationships with and reliance upon outside vendors with respect to certain of the Company’s key internal and external systems, applications and controls; changes in commercial or consumer spending, borrowing and savings preferences or behaviors; technological changes and the expanding use of technology in banking and financial services (including the adoption of mobile banking, funds transfer applications, electronic marketplaces for loans, block-chain technology and other banking products, systems or services); our ability to retain and increase market share, to retain and grow customers and to control expenses; changes in the competitive environment among banks and other financial services and technology providers; competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies; volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions or on the Company’s capital, assets or customers; fluctuations in the price of the Company’s common stock or other securities, and the resulting impact on the Company’s ability to raise capital or to make acquisitions; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by the principal regulatory agencies with jurisdiction over the Company, as well as by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard-setters; changes in our organization, management, compensation and benefit plans, and our ability to recruit and retain or expand or contract our workforce, management team, key executive positions and/or our board of directors; our ability to identify suitable and qualified replacements for any of our executive officers who may leave their employment with us, including our Chief Executive Officer; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (including any securities, lender liability, bank operations, financial product or service, data privacy, consumer or employee class action litigation); regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; our ongoing relations with our various federal and state regulators, including the SEC, Federal Reserve Board, FDIC and California DFPI; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company's public reports, including our Annual Report on Form 10-K for the year ended December 31, 2019, and particularly the discussion of risk factors within that document. Among other risks, the ongoing COVID-19 pandemic may significantly affect the banking industry and the Company’s business prospects. The ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the impact on the economy, our customers and our business partners, and actions taken by governmental authorities in response to the pandemic. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements, except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company’s earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.
CVB FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)September 30,
December 31,
September 30,
2020
2019
2019
Assets Cash and due from banks$
145,455
$
158,310
$
222,248
Interest-earning balances due from Federal Reserve
1,339,498
27,208
215,300
Total cash and cash equivalents
1,484,953
185,518
437,548
Interest-earning balances due from depository institutions
44,367
2,931
5,673
Investment securities available-for-sale
2,205,646
1,740,257
1,570,406
Investment securities held-to-maturity
577,694
674,452
703,953
Total investment securities
2,783,340
2,414,709
2,274,359
Investment in stock of Federal Home Loan Bank (FHLB)
17,688
17,688
17,688
Loans and lease finance receivables
8,407,872
7,564,577
7,494,451
Allowance for credit losses
(93,869
)
(68,660
)
(68,672
)
Net loans and lease finance receivables
8,314,003
7,495,917
7,425,779
Premises and equipment, net
51,477
53,978
53,256
Bank owned life insurance (BOLI)
228,132
226,281
224,841
Intangibles
35,804
42,986
45,446
Goodwill
663,707
663,707
663,707
Other assets
195,240
178,735
184,465
Total assets
$
13,818,711
$
11,282,450
$
11,332,762
Liabilities and Stockholders' Equity Liabilities: Deposits: Noninterest-bearing
$
6,919,423
$
5,245,517
$
5,385,104
Investment checking
447,910
454,565
433,615
Savings and money market
3,356,353
2,558,538
2,513,888
Time deposits
445,148
446,308
461,723
Total deposits
11,168,834
8,704,928
8,794,330
Customer repurchase agreements
483,420
428,659
407,850
Other borrowings
10,000
-
4,914
Junior subordinated debentures
25,774
25,774
25,774
Other liabilities
148,726
128,991
133,001
Total liabilities
11,836,754
9,288,352
9,365,869
Stockholders' Equity Stockholders' equity
1,945,864
1,981,484
1,954,797
Accumulated other comprehensive income, net of tax
36,093
12,614
12,096
Total stockholders' equity
1,981,957
1,994,098
1,966,893
Total liabilities and stockholders' equity
$
13,818,711
$
11,282,450
$
11,332,762
CVB FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED AVERAGE BALANCE SHEETS (Unaudited) (Dollars in thousands)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2020
2020
2019
2020
2019
Assets Cash and due from banks$
156,132
$
140,665
$
173,291
$
154,543
$
172,970
Interest-earning balances due from Federal Reserve
1,452,167
1,049,430
168,113
916,849
64,274
Total cash and cash equivalents
1,608,299
1,190,095
341,404
1,071,392
237,244
Interest-earning balances due from depository institutions
41,982
31,003
6,006
30,362
6,574
Investment securities available-for-sale
2,006,829
1,616,907
1,545,276
1,774,620
1,625,648
Investment securities held-to-maturity
594,751
626,557
712,199
626,594
725,590
Total investment securities
2,601,580
2,243,464
2,257,475
2,401,214
2,351,238
Investment in stock of FHLB
17,688
17,688
17,688
17,688
17,688
Loans and lease finance receivables
8,382,257
8,047,054
7,495,289
7,972,208
7,571,502
Allowance for credit losses
(93,972
)
(82,752
)
(67,186
)
(82,529
)
(65,358
)
Net loans and lease finance receivables
8,288,285
7,964,302
7,428,103
7,889,679
7,506,144
Premises and equipment, net
52,052
52,719
53,970
52,817
55,436
Bank owned life insurance (BOLI)
227,333
225,818
224,526
226,209
223,005
Intangibles
37,133
39,287
46,720
39,376
49,682
Goodwill
663,707
663,707
663,707
663,707
665,470
Other assets
189,117
182,972
174,817
183,118
167,955
Total assets
$
13,727,176
$
12,611,055
$
11,214,416
$
12,575,562
$
11,280,436
Liabilities and Stockholders' Equity Liabilities: Deposits: Noninterest-bearing
$
6,731,711
$
6,204,329
$
5,227,595
$
6,063,469
$
5,136,233
Interest-bearing
4,184,688
3,844,025
3,464,677
3,844,874
3,544,814
Total deposits
10,916,399
10,048,354
8,692,272
9,908,343
8,681,047
Customer repurchase agreements
504,039
442,580
408,273
475,103
446,721
Other borrowings
10,020
3,981
12,040
4,833
101,138
Junior subordinated debentures
25,774
25,774
25,774
25,774
25,774
Payable for securities purchased
157,057
2,697
-
53,630
983
Other liabilities
128,045
121,069
110,630
121,579
102,792
Total liabilities
11,741,334
10,644,455
9,248,989
10,589,262
9,358,455
Stockholders' Equity Stockholders' equity
1,948,351
1,928,210
1,957,195
1,956,676
1,927,076
Accumulated other comprehensive income (loss), net of tax
37,491
38,390
8,232
29,624
(5,095
)
Total stockholders' equity
1,985,842
1,966,600
1,965,427
1,986,300
1,921,981
Total liabilities and stockholders' equity
$
13,727,176
$
12,611,055
$
11,214,416
$
12,575,562
$
11,280,436
CVB FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollars in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2020
2020
2019
2020
2019
Interest income: Loans and leases, including fees$
94,200
$
95,352
$
98,796
$
281,669
$
300,326
Investment securities: Investment securities available-for-sale
8,447
8,449
9,222
26,945
29,985
Investment securities held-to-maturity
3,375
3,660
4,298
11,033
13,249
Total investment income
11,822
12,109
13,520
37,978
43,234
Dividends from FHLB stock
215
214
301
761
931
Interest-earning deposits with other institutions
389
283
946
1,285
1,140
Total interest income
106,626
107,958
113,563
321,693
345,631
Interest expense: Deposits
2,958
2,995
4,589
10,077
12,553
Borrowings and junior subordinated debentures
343
394
815
1,416
4,326
Total interest expense
3,301
3,389
5,404
11,493
16,879
Net interest income before provision for credit losses
103,325
104,569
108,159
310,200
328,752
Provision for credit losses
-
11,500
1,500
23,500
5,000
Net interest income after provision for credit losses
103,325
93,069
106,659
286,700
323,752
Noninterest income: Service charges on deposit accounts
3,970
3,809
4,833
12,555
15,039
Trust and investment services
2,405
2,477
2,330
7,302
6,964
Gain on OREO, net
13
-
-
23
129
Gain on sale of building, net
1,680
-
-
1,680
4,545
Gain on eminent domain condemnation, net
-
-
-
-
5,685
Other
5,085
5,866
4,731
15,385
14,040
Total noninterest income
13,153
12,152
11,894
36,945
46,402
Noninterest expense: Salaries and employee benefits
31,034
28,706
30,122
90,617
88,286
Occupancy and equipment
5,275
5,031
4,879
15,143
15,730
Professional services
2,019
2,368
1,688
6,643
5,653
Computer software expense
2,837
2,754
2,663
8,407
8,032
Marketing and promotion
728
1,255
1,517
3,538
4,149
Amortization of intangible assets
2,292
2,445
2,648
7,182
8,338
Acquisition related expenses
-
-
244
-
6,005
Other
5,403
3,839
3,774
13,097
13,474
Total noninterest expense
49,588
46,398
47,535
144,627
149,667
Earnings before income taxes
66,890
58,823
71,018
179,018
220,487
Income taxes
19,398
17,192
20,595
51,915
63,941
Net earnings$
47,492
$
41,631
$
50,423
$
127,103
$
156,546
Basic earnings per common share$
0.35
$
0.31
$
0.36
$
0.93
$
1.12
Diluted earnings per common share$
0.35
$
0.31
$
0.36
$
0.93
$
1.12
Cash dividends declared per common share$
0.18
$
0.18
$
0.18
$
0.54
$
0.54
CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2020
2020
2019
2020
2019
Interest income - tax equivalent (TE)$
106,950
$
108,305
$
113,964
$
322,732
$
346,912
Interest expense
3,301
3,389
5,404
11,493
16,879
Net interest income - (TE)
$
103,649
$
104,916
$
108,560
$
311,239
$
330,033
Return on average assets, annualized
1.38
%
1.33
%
1.78
%
1.35
%
1.86
%
Return on average equity, annualized
9.51
%
8.51
%
10.18
%
8.55
%
10.89
%
Efficiency ratio [1]
42.57
%
39.75
%
39.60
%
41.66
%
39.89
%
Noninterest expense to average assets, annualized
1.44
%
1.48
%
1.68
%
1.54
%
1.77
%
Yield on average loans
4.47
%
4.77
%
5.23
%
4.72
%
5.30
%
Yield on average earning assets (TE)
3.45
%
3.82
%
4.55
%
3.82
%
4.63
%
Cost of deposits
0.11
%
0.12
%
0.21
%
0.14
%
0.19
%
Cost of deposits and customer repurchase agreements
0.11
%
0.12
%
0.22
%
0.14
%
0.21
%
Cost of funds
0.11
%
0.13
%
0.23
%
0.15
%
0.24
%
Net interest margin (TE)
3.34
%
3.70
%
4.34
%
3.68
%
4.41
%
[1] Noninterest expense divided by net interest income before provision for credit losses plus noninterest income. Weighted average shares outstanding Basic
135,016,723
134,998,440
139,823,833
136,368,742
139,729,752
Diluted
135,183,918
135,154,479
139,975,372
136,536,372
139,946,685
Dividends declared$
24,419
$
24,417
$
25,276
$
73,252
$
75,692
Dividend payout ratio [2]
51.42
%
58.65
%
50.13
%
57.63
%
48.35
%
[2] Dividends declared on common stock divided by net earnings. Number of shares outstanding - (end of period)
135,509,143
135,516,316
140,157,063
Book value per share
$
14.63
$
14.46
$
14.03
Tangible book value per share
$
9.46
$
9.28
$
8.97
September 30,
December 31,
September 30,
2020
2019
2019
Nonperforming assets: Nonaccrual loans$
11,775
$
5,033
$
6,363
Loans past due 90 days or more and still accruing interest
-
-
-
Troubled debt restructured loans (nonperforming)
-
244
249
Other real estate owned (OREO), net
4,189
4,889
9,450
Total nonperforming assets
$
15,964
$
10,166
$
16,062
Troubled debt restructured performing loans
$
2,217
$
3,112
$
3,168
Percentage of nonperforming assets to total loans outstanding and OREO
0.19
%
0.13
%
0.21
%
Percentage of nonperforming assets to total assets
0.12
%
0.09
%
0.14
%
Allowance for credit losses to nonperforming assets
588.00
%
675.39
%
427.54
%
Nine Months Ended
September 30,
September 30,
2020
2019
Allowance for credit losses: Beginning balance$
68,660
$
63,613
Impact of adopting ASU 2016-13
1,840
-
Total charge-offs
(484
)
(428
)
Total recoveries on loans previously charged-off
353
487
Net (charge-offs) recoveries
(131
)
59
Provision for credit losses
23,500
5,000
Allowance for credit losses at end of period
$
93,869
$
68,672
Net (charge-offs) recoveries to average loans
-0.002
%
0.001
%
CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in millions) Allowance for Credit Losses by Loan Type September 30, 2020 June 30, 2020 December 31, 2019 AllowanceFor Credit
Losses Allowance
as a % of
Total Loans
by Respective
Loan Type Allowance
For Credit
Losses Allowance
as a % of
Total Loans
by Respective
Loan Type Allowance
For Loan
Losses Allowance
as a % of
Total Loans
by Respective
Loan Type Commercial and industrial
$
8.6
1.1
%
$
8.0
1.0
%
$
8.9
0.9
%
SBA
3.5
1.1
%
3.7
1.2
%
1.5
0.5
%
SBA - PPP
-
-
-
-
-
-
Real estate: Commercial real estate
74.5
1.4
%
74.9
1.4
%
48.6
0.9
%
Construction
1.9
1.9
%
2.3
1.8
%
0.9
0.7
%
SFR mortgage
0.2
0.1
%
0.2
0.1
%
2.3
0.8
%
Dairy & livestock and agribusiness
3.7
1.5
%
3.4
1.3
%
5.3
1.4
%
Municipal lease finance receivables
0.2
0.4
%
0.3
0.6
%
0.6
1.2
%
Consumer and other loans
1.3
1.4
%
1.2
1.4
%
0.6
0.5
%
Total$
93.9
1.1
%
$
94.0
1.1
%
$
68.7
0.9
%
CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts) Quarterly Common Stock Price2020
2019
2018
Quarter EndHigh
Low
High
Low
High
Low
March 31,$
22.01
$
14.92
$
23.18
$
19.94
$
25.14
$
21.64
June 30,
$
22.22
$
15.97
$
22.22
$
20.40
$
24.11
$
21.92
September 30,
$
19.87
$
15.57
$
22.23
$
20.00
$
24.97
$
22.19
December 31,
$
22.18
$
19.83
$
23.51
$
19.21
Quarterly Consolidated Statements of Earnings
Q3
Q2
Q1
Q4
Q3
2020
2020
2020
2019
2019
Interest income Loans and leases, including fees$
94,200
$
95,352
$
92,117
$
97,302
$
98,796
Investment securities and other
12,426
12,606
14,992
14,917
14,767
Total interest income
106,626
107,958
107,109
112,219
113,563
Interest expense Deposits
2,958
2,995
4,124
4,567
4,589
Other borrowings
343
394
679
632
815
Total interest expense
3,301
3,389
4,803
5,199
5,404
Net interest income before provision for credit losses
103,325
104,569
102,306
107,020
108,159
Provision for credit losses
-
11,500
12,000
-
1,500
Net interest income after provision for credit losses
103,325
93,069
90,306
107,020
106,659
Noninterest income
13,153
12,152
11,640
12,640
11,894
Noninterest expense
49,588
46,398
48,641
49,073
47,535
Earnings before income taxes
66,890
58,823
53,305
70,587
71,018
Income taxes
19,398
17,192
15,325
19,306
20,595
Net earnings
$
47,492
$
41,631
$
37,980
$
51,281
$
50,423
Effective tax rate
29.00
%
29.23
%
28.75
%
27.35
%
29.00
%
Basic earnings per common share$
0.35
$
0.31
$
0.27
$
0.37
$
0.36
Diluted earnings per common share
$
0.35
$
0.31
$
0.27
$
0.37
$
0.36
Cash dividends declared per common share
$
0.18
$
0.18
$
0.18
$
0.18
$
0.18
Cash dividends declared
$
24,419
$
24,417
$
24,416
$
25,248
$
25,276
CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands) Loan Portfolio by Type
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
Commercial and industrial$
817,056
$
840,738
$
960,761
$
935,127
$
921,678
SBA
304,987
300,156
313,071
305,008
319,571
SBA - PPP
1,101,142
1,097,150
-
-
-
Real estate: Commercial real estate
5,428,223
5,365,120
5,347,925
5,374,617
5,375,668
Construction
101,903
125,815
128,045
116,925
119,931
SFR mortgage
274,731
286,526
278,743
283,468
278,644
Dairy & livestock and agribusiness
252,802
251,821
272,114
383,709
311,229
Municipal lease finance receivables
38,040
49,876
51,287
53,146
54,468
Consumer and other loans
88,988
85,332
114,206
116,319
117,128
Gross loans
8,407,872
8,402,534
7,466,152
7,568,319
7,498,317
Less: Deferred loan fees, net [1]
-
-
-
(3,742
)
(3,866
)
Gross loans, net of deferred loan fees and discounts
8,407,872
8,402,534
7,466,152
7,564,577
7,494,451
Allowance for credit losses
(93,869
)
(93,983
)
(82,641
)
(68,660
)
(68,672
)
Net loans$
8,314,003
$
8,308,551
$
7,383,511
$
7,495,917
$
7,425,779
[1] Beginning with March 31, 2020, gross loans are presented net of deferred loan fees by respective class of financing receivables. Deposit Composition by Type and Customer Repurchase Agreements
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
Noninterest-bearing$
6,919,423
$
6,901,368
$
5,572,649
$
5,245,517
$
5,385,104
Investment checking
447,910
472,509
454,153
454,565
433,615
Savings and money market
3,356,353
3,150,013
2,635,364
2,558,538
2,513,888
Time deposits
445,148
459,690
451,438
446,308
461,723
Total deposits
11,168,834
10,983,580
9,113,604
8,704,928
8,794,330
Customer repurchase agreements
483,420
468,156
368,915
428,659
407,850
Total deposits and customer repurchase agreements
$
11,652,254
$
11,451,736
$
9,482,519
$
9,133,587
$
9,202,180
CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands) Nonperforming Assets and Delinquency Trends
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
Nonperforming loans [1]: Commercial and industrial$
1,822
$
1,222
$
1,703
$
1,266
$
1,550
SBA
1,724
1,598
2,748
2,032
2,706
Real estate: Commercial real estate
6,481
2,628
947
724
1,083
Construction
-
-
-
-
-
SFR mortgage
675
1,080
864
878
888
Dairy & livestock and agribusiness
849
-
-
-
-
Consumer and other loans
224
289
166
377
385
Total
$
11,775
$
6,817
$
6,428
$
5,277
$
6,612
% of Total loans
0.14
%
0.08
%
0.09
%
0.07
%
0.09
%
Past due 30-89 days: Commercial and industrial$
3,627
$
630
$
665
$
2
$
756
SBA
66
214
3,086
1,402
303
Real estate: Commercial real estate
-
4
210
-
368
Construction
-
-
-
-
-
SFR mortgage
-
446
233
249
-
Dairy & livestock and agribusiness
-
882
166
-
-
Consumer and other loans
67
413
-
-
-
Total
$
3,760
$
2,589
$
4,360
$
1,653
$
1,427
% of Total loans
0.04
%
0.03
%
0.06
%
0.02
%
0.02
%
OREO: SBA$
797
$
797
$
797
$
797
$
444
Real estate: Commercial real estate
1,575
2,275
2,275
2,275
2,275
SFR mortgage
1,817
1,817
1,817
1,817
6,731
Total
$
4,189
$
4,889
$
4,889
$
4,889
$
9,450
Total nonperforming, past due, and OREO
$
19,724
$
14,295
$
15,677
$
11,819
$
17,489
% of Total loans
0.23
%
0.17
%
0.21
%
0.16
%
0.23
%
[1] As of June 30, 2020, nonperforming loans included $25,000 of commercial and industrial loans past due 90 days or more and still accruing. CVB FINANCIAL CORP. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) Regulatory Capital Ratios CVB Financial Corp. ConsolidatedMinimum Required Plus
September 30,
June 30,
December 31,
Capital RatiosCapital Conservation Buffer
2020
2020
2019
Tier 1 leverage capital ratio4.0
%
9.9
%
10.6
%
12.3
%
Common equity Tier 1 capital ratio7.0
%
14.6
%
14.5
%
14.8
%
Tier 1 risk-based capital ratio8.5
%
14.9
%
14.8
%
15.1
%
Total risk-based capital ratio10.5
%
16.1
%
16.0
%
16.0
%
Tangible common equity ratio9.8
%
9.6
%
12.2
%
Tangible Book Value Reconciliations (Non-GAAP)
The tangible book value per share is a Non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance. The following is a reconciliation of tangible book value to the Company stockholders' equity computed in accordance with GAAP, as well as a calculation of tangible book value per share as of September 30, 2020, December 31, 2019 and September 30, 2019.
September 30,
December 31,
September 30,
2020
2019
2019
(Dollars in thousands, except per share amounts)
Stockholders' equity$
1,981,957
$
1,994,098
$
1,966,893
Less: Goodwill
(663,707
)
(663,707
)
(663,707
)
Less: Intangible assets
(35,804
)
(42,986
)
(45,446
)
Tangible book value$
1,282,446
$
1,287,405
$
1,257,740
Common shares issued and outstanding
135,509,143
140,102,480
140,157,063
Tangible book value per share
$
9.46
$
9.19
$
8.97
Return on Average Tangible Common Equity Reconciliations (Non-GAAP)
The return on average tangible common equity is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance. The following is a reconciliation of net income, adjusted for tax-effected amortization of intangibles, to net income computed in accordance with GAAP; a reconciliation of average tangible common equity to the Company's average stockholders' equity computed in accordance with GAAP; as well as a calculation of return on average tangible common equity.
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2020
2020
2019
2020
2019
(Dollars in thousands) Net Income$
47,492
$
41,631
$
50,423
$
127,103
$
156,546
Add: Amortization of intangible assets
2,292
2,445
2,648
7,182
8,338
Less: Tax effect of amortization of intangible assets [1]
(678
)
(723
)
(783
)
(2,123
)
(2,465
)
Tangible net income$
49,106
$
43,353
$
52,288
$
132,162
$
162,419
Average stockholders' equity
$
1,985,842
$
1,966,600
$
1,965,427
$
1,986,300
$
1,921,981
Less: Average goodwill
(663,707
)
(663,707
)
(663,707
)
(663,707
)
(665,470
)
Less: Average intangible assets
(37,133
)
(39,287
)
(46,720
)
(39,376
)
(49,682
)
Average tangible common equity$
1,285,002
$
1,263,606
$
1,255,000
$
1,283,217
$
1,206,829
Return on average equity, annualized
9.51
%
8.51
%
10.18
%
8.55
%
10.89
%
Return on average tangible common equity, annualized
15.20
%
13.80
%
16.53
%
13.76
%
17.99
%
[1] Tax effected at respective statutory rates.
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