CVB FINANCIAL CORP

CVB Financial Corp. operates as a bank holding company incorporated in California on April 27, 1981 and registered with the Federal Reserve under the Bank Holding Company Act of 1956. The Company's principal asset is Citizens Business Bank, National Association (CBB), which as of December 31, 2025 had $15.63 billion in assets, $8.62 billion in net loans, $12.13 billion in deposits, and $2.27 billion in total equity. The Bank operates 62 Banking Centers and one loan production office located throughout California, along with three trust offices in Ontario, Newport Beach, and Pasadena. The Bank's goal is to be the premier financial services company operating throughout California, servicing the comprehensive financial needs of successful small-and medium-sized businesses and their owners. The Company is a community bank with one reportable operating segment.

The banking and financial services business is highly competitive, and CVB competes 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 FinTech companies. Many competitors are much larger in total assets and capitalization, have greater access to capital markets, or offer a broader range of financial products and services. The Company emphasizes personalized service combined with a wide array of banking and trust services for businesses, professionals, and individuals located in the service areas of its Centers.

CVB generates revenue primarily through net interest income, which is the difference between interest earned on loans, investments, and interest-earning cash and interest paid on deposits and borrowed funds. For the year ended December 31, 2025, net interest income was $460.3 million ¹. Noninterest income, which includes trust and investment income, service charges, and other fees, totaled $55.2 million ² for the same period. The Company offers a wide range of bank deposit instruments including checking, savings, money market, and certificates of time deposit for both business and personal accounts, municipalities and districts, and specialized deposit products for title and escrow. The Company also serves as a federal tax depository for its business customers.

The Company provides 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. Agribusiness products are loans to finance the operating needs of wholesale dairy farm operations, cattle feeders, livestock raisers, and farmers. The Company provides 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. As of December 31, 2025, total loans and leases, at amortized cost, were $8.70 billion ³, which included $6.57 billion ⁴ in commercial real estate loans, $281.8 million ⁵ in single-family residential mortgages, and $37.8 million ⁶ in construction loans. The Company also offers borrowers the ability to enter into interest rate swaps. Financing products for consumers include automobile leasing and financing, lines of credit, credit cards, home mortgages, and home equity loans and lines of credit.

The Company offers a wide range of specialized services designed for the needs of its commercial customers, including treasury management systems, 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. The Company makes available investment products offered by other providers, including mutual funds, a full array of fixed income vehicles, and a program to diversify customers' funds in federally insured time certificates of deposit of other institutions. Through its CitizensTrust division, the Company offers a wide range of financial services and trust services, including fiduciary services, mutual funds, annuities, 401(k) plans, and individual investment accounts. Trust and investment income for 2025 grew by $1.3 million ⁷, or 9.50% ⁸, from the prior year.

On December 17, 2025, the Company entered into an Agreement and Plan of Merger with Heritage Commerce Corp. Under the terms of the Merger Agreement, Heritage shareholders will receive 0.65 shares ⁹ of the Company's common stock for each share of Heritage common stock they own. Upon closing, CVB shareholders will own approximately 77% ¹⁰ and Heritage shareholders will own approximately 23% ¹¹ of the combined company, which will have approximately $22 billion ¹² in assets, more than 80 centers and offices, and a deeply rooted presence in California's key economic centers. The acquisition is presently expected to close in the second quarter of 2026. For the year ended December 31, 2025, the Company incurred non-recurring merger related expenses associated with the Heritage acquisition of $1.6 million ¹³. During the year ended December 31, 2025, the Company repurchased 4,321,777 ¹⁴ shares at an average price of $18.60 ¹⁵, totaling $80.4 million ¹⁶. As of December 31, 2025, an aggregate of 5,678,223 ¹⁷ shares remained available for repurchase under the 2024 Repurchase Program. The Company also paid $110.3 million ¹⁸ in cash dividends during 2025.

For the year ended December 31, 2025, the Company reported net earnings of $209.3 million ¹⁹, compared with $200.7 million ²⁰ for 2024, an increase of $8.6 million ²¹, or 4.28% ²². Diluted earnings per share of $1.52 ²³ for 2025 increased by $0.08 ²⁴, or 5.61% ²⁵, when compared to $1.44 ²⁶ for 2024. Net earnings of $209.3 million ²⁷ produced a return on average equity (ROAE) of 9.26% ²⁸, a return on average tangible common equity (ROATCE) of 14.28% ²⁹, and a return on average assets (ROAA) of 1.36% ³⁰. The net interest margin, tax equivalent (NIM), was 3.36% ³¹ for 2025, while the efficiency ratio was 46.03% ³². Net interest income of $460.3 million ³³ for 2025 increased $12.9 million ³⁴, or 2.89% ³⁵, compared to 2024. Noninterest income of $55.2 million ³⁶ for 2025 increased by $0.7 million ³⁷, or 1.28% ³⁸, compared to 2024. Noninterest expense increased from $233.6 million ³⁹ in 2024 to $237.3 million ⁴⁰ in 2025. Total assets of $15.63 billion ⁴¹ at December 31, 2025 increased by $477.4 million ⁴², or 3.15% ⁴³, from $15.15 billion ⁴⁴ at December 31, 2024.

The pending acquisition of Heritage Commerce Corp. represents a major growth vector for the Company. Under the terms of the Merger Agreement, Heritage shareholders will receive 0.65 shares ⁴⁵ of the Company's common stock for each share of Heritage common stock they own. Upon closing, CVB shareholders will own approximately 77% ⁴⁶ and Heritage shareholders will own approximately 23% ⁴⁷ of the combined company, which will have approximately $22 billion ⁴⁸ in assets, more than 80 centers and offices, and a deeply rooted presence in the State of California's key economic centers. The acquisition is presently expected to close in the second quarter of 2026, subject to satisfaction of regulatory approvals, Heritage and CVB shareholder approvals, and other customary closing conditions. The Company expects to issue approximately 40.6 million ⁴⁹ shares of the Company's common stock to Heritage shareholders in connection with the merger consideration.

The Company's organic growth strategy focuses on being the premier financial services company operating throughout California, servicing the comprehensive financial needs of successful small-and medium-sized businesses and their owners. The Company emphasizes personalized service combined with a wide array of banking and trust services. The Company continues to invest in technology and infrastructure, as evidenced by higher software related costs in 2025. The Company also continues to develop and deliver new products that meet the needs of its existing customers and attract new ones, though the filing does not specify particular new products or markets with quantified opportunity sizes.

The Company's efficiency ratio was 46.03% ⁵⁰ for 2025, compared to 46.55% ⁵¹ for 2024. Noninterest expense to average assets was 1.54% ⁵² for 2025, compared to 1.45% ⁵³ for 2024. The increase in noninterest expense was primarily driven by higher software related costs associated with continued investments in technology and infrastructure, as well as $1.6 million ⁵⁴ of acquisition related costs for the announced merger with Heritage. The Company's cost of funds for 2025 decreased by 29 basis points ⁵⁵ over 2024, while the earning asset yield decreased by two basis points ⁵⁶. The Company's net interest margin, tax equivalent, was 3.36% ⁵⁷ for 2025, compared to 3.09% ⁵⁸ for 2024.

The Company employed 1,079 ⁵⁹ associates as of December 31, 2025, a 1.0% ⁶⁰ decrease from 1,089 ⁶¹ associates at December 31, 2024. The Company promotes leadership and associate development through various programs, including succession planning, top talent program, and leadership essentials training. At December 31, 2025, the Company had 129 ⁶² positions designated as leadership positions, representing approximately 12% ⁶³ of total associates. The average tenure at the Company among the leadership group at the end of 2025 was greater than 10 years ⁶⁴. In 2025, turnover among the leadership group was 10% ⁶⁵ and during the year the Company promoted 3 ⁶⁶ associates and hired 3 ⁶⁷ new associates into the leadership group. The Company is committed to supporting the physical and financial wellness of its associates, offering a comprehensive set of health insurance and retirement benefits. As of December 2025, 72% ⁶⁸ of associates were enrolled in medical insurance plans and 81% ⁶⁹ of associates participated in at least one wellness activity during 2025. In 2025, the combined Company 401(k) contribution was 5% ⁷⁰ of associate's eligible salary and 92% ⁷¹ of associates made individual participant contributions to the 401(k) plan during 2025. In 2025, 95% ⁷² of associates earned an incentive bonus, compared to 92% ⁷³ in 2024.

For the year ended December 31, 2025, the Company repurchased 4,321,777 ⁷⁴ shares at an average price of $18.60 ⁷⁵, totaling $80.4 million ⁷⁶ under its stock repurchase plan. As of December 31, 2025, an aggregate of 5,678,223 ⁷⁷ shares remained available for repurchase under the 2024 Repurchase Program, which authorizes the repurchase of up to 10,000,000 ⁷⁸ shares. The Company paid $110.3 million ⁷⁹ in cash dividends during 2025. The Company did not provide specific R&D spending or capital expenditure figures in the filing.

The Company faces structural headwinds from the elevated interest rate environment. At December 31, 2025, the aggregate pre-tax net unrealized loss in the Company's available-for-sale (AFS) securities was $307.8 million ⁸⁰. Based on estimated fair values, the aggregate pre-tax net unrealized loss in the held-to-maturity (HTM) securities was approximately $344.9 million ⁸¹ at December 31, 2025. The Company would realize losses if it were required to sell such securities or loans to meet liquidity needs. The Company's business is concentrated in California, and a renewed downturn in real estate markets could hurt the business because most of the Company's loans are secured by real estate. The Company's commercial real estate loan portfolio exposes it to risks that may be greater than the risks related to other loans, and federal banking regulators may require the Company to maintain higher levels of capital or impose limits on its ability to make additional commercial real estate loans.

The Company faces execution risks related to the pending merger with Heritage, including the failure to complete the merger, difficulties and delays in integrating Heritage's business, and the failure to achieve anticipated synergies and cost savings. If the merger agreement is terminated under certain circumstances, the Company may be required to pay a termination fee of $32.45 million ⁸² to Heritage. The Company also faces risks from changes in economic, market, and political conditions, including inflation, interest rate levels, and monetary policy actions. The Company's dairy and livestock and agribusiness lending presents unique credit risks, with $431.6 million ⁸³ in dairy and livestock and agribusiness loans as of December 31, 2025, including $386.1 million ⁸⁴ in dairy and livestock loans and $45.5 million ⁸⁵ in agribusiness loans.

The Company's allowance for credit losses may not be sufficient to cover actual losses, and the Company may be required to make additional provisions for credit losses and charge-off additional loans in the future, which could adversely affect results of operations. As of December 31, 2025, the Company had $6.57 billion ⁸⁶ in commercial real estate loans, and the commercial real estate loan portfolio exposes the Company to risks that may be greater than the risks related to other loans. The Company's loan portfolio is predominantly secured by real estate in California, and a downturn in real estate markets could hurt the business. The Company's dairy and livestock and agribusiness lending presents unique credit risks, with $431.6 million ⁸⁷ in such loans as of December 31, 2025. Elevated interest rates have decreased the market value of the Company's securities portfolio; at December 31, 2025, the aggregate pre-tax net unrealized loss in AFS securities was $307.8 million ⁸⁸ and the aggregate pre-tax net unrealized loss in HTM securities was approximately $344.9 million ⁸⁹. The Company would realize losses if it were required to sell such securities or loans to meet liquidity needs. The Company faces risks related to the pending merger with Heritage, including the potential failure to complete the merger, difficulties in integration, and the failure to realize anticipated benefits. If the merger agreement is terminated under certain circumstances, the Company may be required to pay a termination fee of $32.45 million ⁹⁰ to Heritage.

Management's message emphasizes the Company's improved financial performance in 2025, driven by higher net interest income and expansion in net interest margin, reflecting a reduction in overall cost of funds particularly on borrowings as a result of balance sheet deleveraging efforts in late 2024. Net earnings of $209.3 million ⁹¹ produced a return on average equity of 9.26% ⁹², a return on average tangible common equity of 14.28% ⁹³, and a return on average assets of 1.36% ⁹⁴. The net interest margin, tax equivalent, was 3.36% ⁹⁵ for 2025, while the efficiency ratio was 46.03% ⁹⁶. Management highlights the pending acquisition of Heritage Commerce Corp. as a key strategic priority, which is expected to create a combined company with approximately $22 billion ⁹⁷ in assets and more than 80 centers and offices. The acquisition is expected to close in the second quarter of 2026. Management also emphasizes the Company's strong capital position, with the Company's Tier 1 leverage capital ratio totaling 11.62% ⁹⁸, common equity Tier 1 ratio totaling 15.89% ⁹⁹, Tier 1 risk-based capital ratio totaling 15.89% ¹⁰⁰, and total risk-based capital ratio totaling 16.66% ¹⁰¹ as of December 31, 2025. Tangible book value per share at December 31, 2025 was $11.24 ¹⁰², compared to $10.10 ¹⁰³ at December 31, 2024, an 11.29% ¹⁰⁴ increase.