CVB Financial (NASDAQ:CVBF) reported lower second-quarter earnings as costs tied to its acquisition of Heritage Bank of Commerce weighed on results, while management said the deal expanded the company’s balance sheet, lending capacity and footprint across California.
Chief Executive Officer Dave Brager said the company earned $48.3 million, or $0.29 per share, in the second quarter of 2026. That compared with $51 million, or $0.38 per share, in the first quarter of 2026, and $50.6 million, or $0.37 per share, in the prior-year quarter. Brager said the quarter marked CVB Financial’s 197th consecutive quarter of profitability, spanning more than 49 years.
Heritage Acquisition Drives Balance Sheet Growth
Results for the quarter reflected the April 17 closing of CVB Financial’s acquisition of Heritage Bank of Commerce. The companies completed their core banking systems integration at the end of the second quarter.
Brager said CVB Financial incurred $31.4 million in acquisition expenses during the quarter, $30.3 million higher than in the first quarter. The company also recorded a $4.25 million provision for unfunded commitments related to acquired Heritage unfunded loan commitments. Excluding those items, Brager said pre-tax income would have been $100.7 million, compared with reported pre-tax income of $65 million.
Chief Financial Officer Allen Nicholson said total assets rose to $21.2 billion at June 30 from $15.5 billion at March 31, including the effect of the Heritage acquisition. He said total consideration for the acquisition was approximately $845 million, resulting in total intangible assets of about $450 million, including $334 million of goodwill.
The acquisition included $1 billion of investment securities. Nicholson said CVB Financial sold $490 million of those securities at the close of the merger and subsequently purchased $500 million of new securities with an average yield of approximately 4.7%. The company also sold single-family residential mortgage pools acquired from Heritage at their fair value of $327 million, with the sale settling on June 10.
Net Interest Income Rises on Larger Earning Asset Base
Average earning assets were $17.6 billion in the second quarter, up $3.7 billion from the first quarter, Nicholson said. Combined with a 28-basis-point expansion in net interest margin, the higher earning asset base drove a $44.6 million increase in net interest income from the first quarter.
Nicholson said the company also adjusted wholesale funding during the quarter. CVB Financial replaced $300 million of maturing brokered certificates of deposit that were hedged with pay-fixed swaps with 90-day Federal Home Loan Bank advances. It also chose not to replace $300 million of maturing putable FHLB advances that carried a 4.73% borrowing rate.
As a result, Nicholson said the company no longer has brokered CDs, and FHLB advances totaled $500 million at quarter-end. Despite a modest increase in deposit costs, the company’s overall cost of funds declined to 0.96% in the second quarter from 0.97% in the first quarter.
During the question-and-answer session, Nicholson pointed analysts to additional disclosures in the company’s investor deck to help frame margin expectations, including base loan yields, investment portfolio book yields, principal runoff and deposit costs. He said CVB Financial continues to see cash flow from the investment portfolio that can be redeployed at higher yields than the portfolio’s current yield.
Loan Production Strengthens, Credit Metrics Remain Low
Brager said loan originations remained strong in the quarter, rising approximately 85% from the second quarter of 2025 and 40% from the first quarter of 2026. Loan originations carried average yields of about 6%, in line with the first quarter.
Total loans were $12.1 billion at June 30, compared with $8.64 billion at March 31. The $3.37 billion increase included $3.15 billion of loans acquired from Heritage, net of the single-family residential loan pools sold before quarter-end.
The company’s average loan yield was 5.53% in the second quarter, up from 5.32% in the first quarter and 5.22% in the prior-year quarter. Excluding loan fees and discount accretion on acquired loans, Brager said the base loan yield rose to 5.37% at June 30 from 5.14% at March 31.
Overall line utilization was 41% at June 30, down from 44% at March 31. However, commercial and industrial line utilization increased to 32% from 30%, while dairy and livestock loan utilization fell to 63% from 69%, which Brager said was in line with typical patterns for those loans.
CVB Financial reported $137,000 of net charge-offs during the second quarter and no provision for credit losses. Non-performing assets increased by $10.5 million to $16.8 million, representing 8 basis points of total assets. Classified loans were $109.7 million, or 0.91% of total loans, with the increase from March 31 attributed to $29 million of classified Heritage loans.
Deposits Expand With Merger, Noninterest Income Improves
Total deposits and customer repurchase agreements were $16.9 billion at June 30, compared with $12.4 billion at March 31. Brager said the increase reflected $4.75 billion of deposits acquired from Heritage, partially offset by the maturity of $300 million of brokered CDs that were not renewed.
Noninterest-bearing deposits represented 53% of total deposits at June 30, compared with 59% before the merger at March 31. The cost of deposits and repos was 86 basis points in the second quarter, compared with 82 basis points in the first quarter and 87 basis points in the year-earlier period.
President Clay Jones said noninterest income rose to $17 million from $14.3 million in the first quarter, reflecting higher fee income across nearly all categories. Deposit and other banking service fees increased by $850,000, trust and investment services income rose by $460,000, international banking income increased by $200,000 and bank-owned life insurance income rose by $350,000.
Management Says Integration Is Progressing
Jones said the Heritage conversion into Citizens Business Bank was completed over the June 19-21 weekend. He described the conversion as successful and said customers are beginning to benefit from an enhanced online banking platform.
Management said the combined company has greater lending capacity and broader opportunities in trust and wealth management, home mortgage and international services. During the Q&A session, Brager said the combined platform gives former Heritage offices additional capacity, noting that CVB Financial’s lending limit is substantially larger than Heritage’s prior limit.
Brager said the company continues to expect the acquisition to support earnings-per-share accretion of at least 13% in 2027, along with a return on average assets of 1.50% and a return on tangible common equity of 17%. Nicholson said the full impact of expense synergies is expected to be seen by the beginning of 2027, with the fourth quarter providing a cleaner run rate.
“Today, we are operating as one bank with a stronger presence across California’s major economic markets and a broader platform to serve our customers,” Jones said.
About CVB Financial (NASDAQ:CVBF)
CVB Financial Corp is the bank holding company for Citizens Business Bank, a California-based commercial bank whose operations trace back to 1974. Headquartered in Ontario, California, the company provides a broad range of banking and financial services through its community-focused branch network. As a publicly traded company on the NASDAQ under the symbol CVBF, CVB Financial oversees strategic planning, corporate governance and long-term growth initiatives for its subsidiary.
The company’s core business activities include commercial lending, real estate financing, equipment leasing and Small Business Administration (SBA) loan programs.
