Fitch Downgrades CVB Financial Corp.'s Ratings; Outlook Stable
Thursday, December 02, 2021 5:03 PM

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Dec. 2, 2010 (Business Wire) -- Fitch Ratings has downgraded the long-term Issuer Default Ratings (IDRs) and Individual ratings of CVB Financial Corp's (CVBF) and related subsidiaries to 'BBB' and 'C' from 'BBB+' and 'B/C' respectively. The company's rating Outlook is Stable. A complete list of ratings is included at the end of this release.

The downgrade reflects Fitch's concerns regarding both CVBF's level of commercial real estate (CRE), which represents approximately 38% of total assets and 65% of total loans accordingly to regulatory data, and Fitch's views toward CRE as articulated in the agency's Special Report 'U.S. Bank CRE Exposure Review' (dated Nov. 16, 2009), as well as its broader views on the industry. The downgrade is also illustrative of Fitch's previously articulated concerns regarding the potential credit volatility present in CVBF's larger borrower concentrations. While management has been aggressively addressing the challenges associated with the company's largest lending relationship as additional credit costs associated with it were realized during third quarter 2010 (3Q'10), total non-performing loans excluding this credit have continued to trend upward over the past five consecutive quarters. Fitch's downgrade also is reflective of CVBF's and the industry's revenue challenges, which coupled with asset quality challenges (albeit manageable), aligns CVBF's overall performance with Fitch's 'BBB' rated peers.

Reflected in the Stable Outlook are various actions CVBF has made to enhance the company's sound balance sheet fundamentals. Providing additional ratings support are the company's robust capital levels and strong liquidity, which Fitch believes are managed to prudent levels for this rating category. Predominantly funded through core deposits, CVBF has also greatly reduced its reliance on borrowed funds over the past nine months, which has helped to delever the balance sheet.

While credit quality is anticipated to remain pressured, CVBF's financial performance is expected to remain steady with sustained profitability, consistent with the respective ratings. A loan portfolio less skewed by CRE exposure and enhanced earnings growth beyond recent trends could also have positive rating implications. Conversely, should credit losses escalate beyond Fitch's current expectations of stress, creating pressure on earnings and/or capital levels, negative rating actions could ensue. Fitch also acknowledges the uncertainties and potential ramifications of the SEC investigation focusing on loan underwriting guidelines, allowance for credit losses, and loan grading methodology, and will respond accordingly should there be any material negative developments.

Headquartered in Ontario, CA, CVB Financial (CVBF) is a $6.5 billion bank holding company and the sole shareholder of its principal banking subsidiary, Citizens Business Bank, which operates via 44 branches and six commercial lending centers located across the Inland Empire, Los Angeles County, Orange County, and the Central Valley areas of California. CVBF also offers wealth management services through its Citizens Trust division, which held approximately $2 billion in total assets under administration at Sept. 30, 2010.

The following ratings are downgraded with a Stable Outlook.

CVB Financial Corp.

--Long-Term IDR to 'BBB' from 'BBB+';

--Individual Rating to 'C' from 'B/C';

--Subordinated Debt to 'BBB-' from 'BBB'.

Citizens Business Bank

--Long-term IDR to 'BBB' from 'BBB+';

--Long-term Deposits to 'BBB+' from 'A-';

--Individual Rating to 'C' from 'B/C'.

CVB Statutory Trust I, II, and III

FCB Capital Trust I and II

--Preferred stock to 'BB+' from 'BBB-'

The following ratings are affirmed with a Stable Outlook.

CVB Financial Corp.

--Short-Term IDR at 'F2';

--Support at '5';

--Support Floor at 'NF'.

Citizens Business Bank

--Short-Term IDR at 'F2';

--Short-Term Deposits at 'F2';

--Support at '5';

--Support Floor at 'NF'.

Applicable Criteria

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2010);

--'Bank Holding Companies' (Dec. 30, 2009);

--'Equity Credit for Hybrids & Other Capital Securities-Amended' (Dec. 29, 2009);

--'Rating Hybrid Securities' (Dec 29, 2021);

--'Short-Term Ratings for Corporate Finance' (Nov. 2, 2010).

Related Resarch

--Revisiting U.S. Banks' Home Equity Portfolios; , June 9, 2010;

--Fitch U.S. Banking Quarterly, 1Q10, June 2, 2022

--U.S. Bank CRE Exposure Review, Nov 16, 2021

Applicable Criteria and Related Research:

Rating Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493086

Short-Term Ratings for Corporate Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726

U.S. Bank CRE Exposure Review (Midsized Regional Banks Most at Risk)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=485006

Revisiting U.S. Banks¬タル Home Equity Portfolios: Have Losses Abated or Is More Pain in Store?

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=531687

U.S. Banking Quarterly 1Q10 -- Finding Stability

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=530107

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685

Bank Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493324

Equity Credit for Hybrids & Other Capital Securities - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493112

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch Ratings
Primary Analyst
Amy Shanle, +1-212-908-0821
Director
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Ken Ritz, +1-212-908-0368
Senior Director
or
Committee Chairperson
Thomas Abruzzo, +1-212-908-0793
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
Email: brian.bertsch@fitchratings.com


(Source: Business Wire )
(Source: Quotemedia)
 

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