CVB Financial Corp. (NASDAQ:CVBF) Q4 2025 Earnings Call Transcript

CVB Financial Corp. (NASDAQ:CVBF) Q4 2025 Earnings Call Transcript January 22, 2026

Operator: Good morning, ladies and gentlemen, and welcome to the Fourth Quarter of 2025 CVB Financial Corporation and its subsidiary, Citizens Business Bank Earnings Conference Call. My name is Sherry, and I’m your operator for today. [Operator Instructions] Please note, this call is being recorded. I would now like to turn the presentation over to your host for today’s call, Allen Nicholson, Executive Vice President and Chief Financial Officer. You may proceed.

E. Nicholson: Thank you, Sherry, and good morning, everyone. Thank you for joining us today to review our financial results for the fourth quarter of 2025. Joining me this morning is Dave Brager, President and Chief Executive Officer. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab. The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company’s annual report on Form 10-K for the year ended December 31, 2024, and in particular, the information set forth in Item 1A, Risk Factors therein.

For a more complete version of the company’s safe harbor disclosure, please see the company’s earnings release issued in connection with this call. I’ll now turn the call over to Dave Brager. Dave?

David Brager: Thank you, Allen. Good morning, everyone. For the fourth quarter of 2025, we reported net earnings of $55 million or $0.40 per share, representing our 195th consecutive quarter of profitability, which equates to more than 48 years. We previously declared a $0.20 per share dividend for the fourth quarter of 2025, representing our 145th consecutive quarter of paying a cash dividend to our shareholders. We produced a return on average tangible common equity of 14.4% and a return on average assets of 1.40% for the fourth quarter of 2025. Our net earnings of $55 million or $0.40 per share compares with $52.6 million for the third quarter of 2025 or $0.38 per share and $50.9 million or $0.36 per share for the prior year quarter.

Pretax income grew by $5.4 million quarter-over-quarter and $6.3 million over the prior year quarter. Both the quarter-over-quarter increase in pretax income as well as the increase from the fourth quarter of 2024 were primarily the result of growth in net interest income. Net interest income grew by $7 million or 6% over the third quarter of 2025 and by $12.2 million or 11% over the fourth quarter of 2024. During the fourth quarter, we collected $3.2 million of interest on a nonperforming loan that was paid off during the quarter and incurred a $2.8 million loss on sale of investment securities. We also incurred $1.6 million of acquisition expense related to the pending merger with Heritage Bank of Commerce. Changes during the first quarter to our allowance for credit losses and reserve for unfunded loan commitments had the net impact of increasing pretax income by $3 million compared to the prior quarter and pretax income decreasing by $1.5 million compared to the fourth quarter of 2024.

Noninterest income was $11.2 million in the fourth quarter, which was $1.8 million lower than the third quarter and $1.9 million lower than the fourth quarter of 2024. Trust and investment services income grew by $156,000 or 4% from the third quarter of 2025 and grew by $519,000 or 15% over the fourth quarter of 2024. Bank-owned life insurance income decreased by $1.1 million from the third to fourth quarters due to the annual amortization of revenue enhancements. In addition, other income declined by $800,000 from the prior quarter. This decrease in other income was the result of a smaller loss on sale of investments during the fourth quarter as we incurred a $2.8 million loss during the fourth quarter compared to the $8 million loss on sale incurred in the third quarter and the $6 million of income earned in the third quarter from a legal settlement.

Now let’s discuss loans. Total loans at December 31, 2025, were $8.7 billion, a $228 million or 2.7% increase from the end of the third quarter of 2025 and a $163 million or 2% increase from the end of 2024. The quarter-over-quarter increase in total loans was due to growth in nearly all loan categories. As typically happens at year-end, we experienced seasonal increases in dairy and livestock borrowings. Dairy and livestock loans grew by $139 million compared to the end of the third quarter, driven by higher line utilization. from 64% at the end of the third quarter to 78% at the end of the fourth quarter. Loan growth was also positively impacted by increases in line utilization for C&I lines of credit, increasing from 28% at the end of the third quarter to 32% at the end of the year.

Compared to the end of the third quarter, C&I loans grew by $34 million, CRE loans grew by more than $39 million and SBA 504 loans grew by $17 million. The $163 million year-over-year increase in loans includes growth of CRE loans of $67 million, $49 million of growth in C&I loans, $25 million of growth in SBA 504 loans and $22 million of growth in construction loans. Loan originations were approximately 70% higher in 2025 than 2024, and the fourth quarter production was approximately 15% higher than the third quarter of 2025. Our loan pipelines remain strong going into 2026, although rate competition for the quality of loans we compete for continues to be intense. Loan originations in the fourth quarter had average yields of approximately 6.25%, which was consistent with the prior quarter.

We experienced $325,000 of net recoveries during the fourth quarter compared to $333,000 of net recoveries for the third quarter of 2025. Net recoveries for the full year of 2025 were $539,000. Total nonperforming and delinquent loans decreased by $20 million to $8 million at December 31, 2025. A $20 million nonperforming loan was paid in full at the beginning of the fourth quarter. The sale of the building collateralizing this loan resulted in the bank receiving all principal and $3.2 million of interest income. Classified loans were $52.7 million at December 31, 2025, compared to $78.2 million at September 30, 2025, and $89.5 million at December 31, 2024. Classified loans as a percentage of total loans were 0.6% at December 31, 2025. Now on to deposits.

Our average total deposits and customer repurchase agreements were $12.6 billion during the fourth quarter, which compares to $12.5 billion for the third quarter. Our noninterest-bearing deposits declined on average by $122 million compared to the third quarter of 2025, while interest-bearing nonmaturity deposits and customer repos grew by $234 million. On average, noninterest-bearing deposits were 58% of total deposits for the fourth quarter of 2025 compared to 59% for both the third quarter of 2025 and the fourth quarter of 2024. At December 31, 2025, our total deposits and customer repurchase agreements totaled $12.6 billion. Noninterest-bearing deposits declined from the end of the third quarter to the end of the year by approximately $440 million as we typically experience seasonal deposit declines at year-end.

However, interest-bearing deposits and customer repurchase agreements increased by $430 million between the third and fourth quarter. Our cost of deposits and repos was 86 basis points for the fourth quarter compared to 90 basis points in the third quarter of 2025 and 97 basis points for the year ago quarter. I will now turn the call over to Allen to further discuss additional aspects of our balance sheet and our net interest income. Allen?

E. Nicholson: Thanks, Dave. Net interest income was $122.7 million in the fourth quarter of 2025. This compares to $115.6 million in the third quarter of 2025 and $110.4 million in the fourth quarter of 2024. Interest income was $156 million in the fourth quarter of 2025 compared to $150.1 million in the third quarter and $147.6 million in the fourth quarter of last year. Average earning assets increased by $153 million in the fourth quarter when compared to the third quarter, and the earning asset yield increased by 11 basis points from 4.32% to 4.43%. The fourth quarter loan yield was 5.47% compared to 5.25% in the prior quarter. Excluding the $3.2 million of interest income on the nonperforming loan we previously discussed, the yield on loans would have increased quarter-over-quarter by 7 basis points.

Interest expense was $33.3 million in the fourth quarter and $34.5 million in the third quarter of 2025. Our cost of funds decreased from 1.05% for the third quarter of 2025 to 1.01% in the fourth quarter of 2025. The average balances of interest-bearing deposits and repos increased by $232 million over the prior quarter. However, interest expense decreased as interest-bearing deposit costs declined by 17 basis points and the cost of customer repurchase agreements decreased by 24 basis points. Our allowance for credit loss was $77 million at December 31, 2025, or 0.89% of gross loans. In comparison, our allowance for credit losses as of September 30, 2025, was $79 million or 0.94% of gross loans. The decrease in the ACL resulted from a $2.5 million recapture of credit loss and net recoveries of $325,000.

Our $77 million ACL is 133% of our combined nonperforming assets and classified loans. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. We continue to have the largest individual scenario weighting on Moody’s baseline forecast with both upside and downside risks weighted among multiple forecasts. The resulting economic forecast at December 31, 2025, was modestly different from our forecast at the end of the third quarter, with loss rate assumptions for C&I loans experiencing a negative impact from the economic forecast. Real GDP is forecasted to stay below 1.5% through 2027 and not reach 2% until 2029. The unemployment rate is forecasted to reach 5% by the beginning of 2026 and remain above 5% through 2028.

Commercial real estate prices are forecasted to continue their decline through the third quarter of 2026 before experiencing growth through 2029. So now switching to our investment portfolio. Available for sale or AFS investment securities were $2.68 billion at December 31, 2025. During the fourth quarter, we sold $30 million of securities with an average book yield of 1.5%, realizing a $2.8 million loss and then purchased $239 million of new securities at an average book value yield of approximately 4.75%. The unrealized loss on AFS securities decreased by $26 million from $334 million at September 30, 2025, to $308 million on December 31, 2025. The net after-tax impact of changes in both the fair value of our AFS securities and our derivatives resulted in a $20 million increase in other comprehensive income for the fourth quarter.

Our held-to-maturity investments totaled $2.27 billion at December 31, 2025, which is $109 million lower than the balance at December 31, 2024. Now turning to the capital position. At December 31, 2025, our shareholders’ equity was $2.3 billion, a $109 million increase from the end of 2024, including the $84 million increase in other comprehensive income. There were 1.96 million shares of common stock repurchased during the fourth quarter of 2025 at an average purchase price of $18.80. For all of 2025, we repurchased 4.3 million shares at an average share price of $18.60. The company’s tangible common equity ratio was 10.3% at December 31, 2025, while our common equity Tier 1 capital ratio was 15.9%, and our total risk-based capital ratio was 16.7%.

I’ll now turn the call back to Dave for further discussion of our expenses.

David Brager: Thank you, Allen. Noninterest expense for the fourth quarter of 2025 was $62 million compared to $58.6 million in the third quarter of 2025 and $58.5 million in the fourth quarter of 2024. During the fourth quarter, we incurred $1.6 million of onetime merger-related expenses associated with the pending merger with Heritage Bank of Commerce. The fourth quarter of 2025 also included a $1 million provision for off-balance sheet reserves compared to a $500,000 provision in the third quarter. Excluding acquisition expense and the provision for off-balance sheet reserves, operating expenses grew by 2.3% or $1.4 million over the third quarter of 2025 and by 1.6% or $1 million over the fourth quarter of 2024. Excluding the impact of acquisition expense and the provision for off-balance sheet reserves, we achieved positive operating leverage from both the prior quarter and the year ago quarter of 2% and 6%, respectively.

Noninterest expense, excluding acquisition expense, totaled 1.53% as a percentage of average assets in the fourth quarter of 2025 compared to 1.50% for the third quarter of 2025 and 1.49% for the fourth quarter of 2024. This concludes today’s presentation. Now Allen and I will be happy to take any questions that you may have.

Q&A Session

Operator: [Operator Instructions] And our first question will come from the line of Matthew Clark with Piper Sandler.

Matthew Clark: Good morning, Matthew. I just want to start on the interest-bearing deposits. You mentioned some seasonality. It looked also like some mix change towards savings money market. Can you just speak to what you saw there and maybe whether or not there was some behavioral change among customers seeking rate.

David Brager: Yes. No, I don’t think there was any behavioral change. It’s pretty standard for us. People pay bonuses, accrue for taxes, do different things. So I don’t really think there was any major change. There wasn’t any movement of any large relationships or deposits from noninterest-bearing to interest bearing. I think for the most part, it just was normal seasonality. The part that was different was that we actually grew the noninterest-bearing deposits, and that is something that is a little different, but it wasn’t necessarily coming from the noninterest-bearing and moving to the interest-bearing .

E. Nicholson: I mean, Matthew, I would just consistently say look at quarterly averages. Our deposit customers move fairly large amounts of money at any point in time. So point in time balances don’t necessarily reflect exactly what’s going on. So average balances, I think, are just more important.

Matthew Clark: Yes. Yes. Okay. And then just on the nondairy and livestock loan growth. If you exclude it, it’s up over 4% annualized this quarter. I know some of it was higher line utilization. But maybe speak to the higher line utilization, whether or not you think that might be more sustainable? And your thoughts overall on kind of nondairy and livestock loan growth this year.

David Brager: Yes. It’s kind of interesting. I think we ended the year year-over-year up about 2% in total loans. And it’s kind of in line with what I thought at the beginning of the year. It just took us a little while to get their point-to-point. But loan pipelines remain strong. I think the utilization is normalizing I think people are a little more positive, I mean, as evidenced by just some of the GDP growth that we’re seeing. So I think that that’s probably going to remain a little more stable than it has been over the last 1.5 years or so. And candidly, that’s anecdotal, but everybody we talk to is basically saying that they’re ready to go and they think things are going to be okay. So that’s a good sign. That’s also evidenced, obviously, by the classified loans and the nonperforming loans that we reported at the end of the quarter.

So I think all in all, the pipelines are strong. at least for the foreseeable future. And I believe that we’ll be able to do more with our existing customers, and we’re still attracting some pretty good relationships going forward. So all in all, I’m cautiously optimistic, maybe even positive and optimistic about 2026 so far.

Matthew Clark: Great. And then last one for me. Just on the Heritage deal. Any update on how it’s progressing?

David Brager: Yes. So everything is going well. We’ve toured their offices and their headquarters, almost all of their offices. We are in — we’re getting ready from an application perspective and the proxy perspective. But everything is going according to plan right now. We still anticipate second quarter close and a second quarter systems conversion. And I think that’s where we are. Obviously, there’s still game to be played there, but everything is looking good so far.

Operator: One moment for our next question, and that will come from the line of David Feaster with Raymond James.

David Feaster: I wanted to circle back to the core deposit side. Obviously, we talked about the seasonal dynamics within NIB. But Wanted to get your thoughts on the competitive landscape for deposits from your standpoint. Where are you winning deposit business? And your thoughts on the — obviously, you saw good interest-bearing deposit growth. And then just your thoughts on the ability to push through the Fed cuts and expectations for betas near term.

David Brager: SPYes. So I think just from your first part of your question, I think the type of clients that we go after generally is an operating company. And so the majority of the new deposit relationships that we’re bringing to the bank are 75% plus noninterest bearing. If you look back over the last 10 years of the bank, we always seem to have this sort of dip. And as Allen said, on any one given day, that money can move out and move back and there’s a number of things that happen. And that’s why I think the average number is better as well. But we are winning relationships. As you know, we are not a bank that goes out and offers the highest rate on our deposit accounts. And we’re not really trying to attract that type of customer.

So I think for the most part, it’s pretty standard on the type of relationship. As far as the Fed rates are concerned, we basically — during the last cut, we basically lowered everything by 25% that was earning over 1%. And so we’re trying to capture as much of that as possible. I think the combination of — on the interest-bearing deposit side with be trying to offset to the extent we can on the asset side of those rate cuts. I mean I think it was a good sign for us that our asset — our loan yield still went up despite a Fed rate cut. And we added a slide in our investor deck in the appendix that really gives a very good overview of sort of the repricing reset time frames both on the truly variable stuff as well as the fixed rate stuff that’s maturing or resetting over the next — I think it’s we go all the way up to 10 years and over.

It’s a very small number in that category. But there’s a lot more granularity there than we had in the previous deck as well. But on the deposit side, David, it’s pretty much the same type of thing. And — and I think from a competition standpoint, we are seeing more competition utilizing earnings credit and that ability to pay. I mean we just had a relationship that came to us and said, that there was a bank, and I won’t mention the name, but there was a bank that was offering them a 3% guaranteed ETR rate for 5 years with paying their accounting system, which is $120,000 a year as part of that 5-year deal. I don’t know the outcome of that 1 yet, but we — that’s not something we would do. So — that’s what I’m seeing out there. And I don’t know if that’s just for the other banks to drive their noninterest-bearing or just deposits in general.

But there is loan growth. So there’s going to be funding pressure. So I think that’s something that we need to stay on top of. But for the most part, it’s pretty much status quo and business as usual for us.

David Feaster: Okay. That’s helpful. And to that point on the growth side, I was hoping you could touch on the competitive landscape state there. It sounds like you’re seeing primarily just on the pricing side. But wanted to see if you’re getting any more aggressiveness from competitors on the underwriting side? And then just — how do you think about payoffs and paydowns. Obviously, there’s pretty significant back book repricing in your story. But I’m just curious, with competition and potential Fed cuts still on the horizon. How do you think about payoffs and paydowns next year? Is that something that you would expect could be headwind?

David Brager: Yes. Well, it’s always a little bit of a headwind. The payoff and prepayment penalty activity in the fourth quarter was lower than the third quarter. But it’s always something we have to deal with, and we anticipate that happening when we model and forecast internally, we look at those numbers and just sort of from a historical perspective. The one thing to your comment about the back book repricing — the one thing that is becoming or not in a major way, but is an issue is that when there is a reset, we still have prepayment penalties in our loan. But when there is a reset there are people that are getting quotes theoretically from competitors that are lower than ours. I don’t always see the actual quotes. So I always question whether that’s true or not.

But they’re theoretically getting quotes from competitors out there saying they’ll do the loan that lower rate than what our repricing rate would be or reset rate would be. And so we have a little protection with the prepayment penalty. But on the maturing book, we don’t have any protection there. So we have to be a little more aggressive I was candidly very happy that our fourth quarter average yield was 6.25% because I would say some of the stuff we’re doing now is closer to the 6% range just to be competitive on that. And look, treasuries are going up, at least in the last week or so, they’re going up pretty good. So hopefully, people will remain disciplined. But it’s really more pricing than credit. We’re not we’re not going to do something that we wouldn’t do from a credit underwriting perspective, but we especially to protect relationships, we’ll be a little more aggressive on the pricing aspect of it.

David Feaster: Are you seeing more…

E. Nicholson: We’re seeing more short-term loans as well. So people are doing 5, 3-year instead of going out 7 or 10 years. So I think that’s also part of the yield we’re seeing.

David Feaster: Okay. Have you started to see…

David Brager: I’m sorry, David, I was just going to add one thing, and that’s a very good point that Allen brought up. I don’t know that, that’s a good bet. Like trying to keep things 2 or 3 years. We’ll see — but if you just look at forward rates are especially on the longer end, could be higher just based on a lot of different factors.

David Feaster: Yes. And so it doesn’t sound like other than the duration that you’ve really seen much pressure on the underwriting structures or standards. .

David Brager: No, not really. I mean, we wouldn’t really consider it anyway. So it might not come all the way up to me…

Operator: And that will come from the line of Andrew Terrell with Stephens.

Andrew Terrell: If I could just start maybe asking on expenses, I think, post the adjustments you guys call out, it’s around $59 million or so. But compensation up this quarter. Was any of that incentive accrual adjustments kind of at year-end? And then maybe just looking for a little bit of help around thoughts on organic expense growth into 2026 or kind of run rate expectations you guys have?

E. Nicholson: Yes, Andrew, you’re correct. There were some adjustments to our private bonus share accruals that elevated the expense quarter-over-quarter. We also — every fourth quarter with the holiday season, there is extra benefit expense. So Q4 to Q4 might be a better indication of where dense growth is, and I think that was less than 2%. I think once again, particularly if you look at the full year numbers, the only expense line that’s really growing more than very low single digits is the technology side, the software expense. And we’ll continue to invest in that. And the percentages may not be quite as high as 24% to 25%, but an area we’ll continue to invest in.

Andrew Terrell: Yes. Okay. And then just on the margin overall, I appreciate the slide you guys gave on the loan repricing in the presentation. But if we look at margins for the industry right now, a lot of the banks out there approaching kind of that peak level or fairly close from back in 2019, you guys are still 50 or 75 basis points light versus the 4.25 level from 2019. So I guess the kind of question is, has anything structurally changed preventing you from getting back there? And then just keeping that loan repricing in mind, I know some of it looks decently far out there up to 10 years. How long does it take you guys to get margin back to what you would view as a normalized level?

E. Nicholson: Well, of course, the yield environment plays a lot into that, Andrew. But yes, I mean, obviously, if you go back pre-pandemic, our securities book still has a much lower yield than it would have had back then. And so that’s obviously going to play into it. And the loan book still as well. So it will take a little time for both cash flows and the security book to reprice as well as the loan book reprice. And that’s why we added that slide. So I mean it’s hard to tell. I don’t know if I would comment on it knowing that there’s so many variables, but I wouldn’t be surprised if we get there over the next couple of years, but there’s a lot of things that could change that.

David Brager: Yes. And the only thing I would add to that, Andrew, is to the point that we have not done any large restructuring loss trade type transactions. And so in the fourth quarter, with the gain that we had or with the recapture of the interest income that we had, use that to take advantage of. So sort of all these onetime things that happen, we will still look at that and make determinations. And that’s really part of the reason that we looked at the loss trade to utilize that $3.2 million where we recaptured an interest. So we’ll just continue to do that. It’s more singles. We’re not planning on doing anything like we’ve said all along, anything larger than that.

Matthew Clark: Yes. Okay. Yes, my follow-up to that was going to be on the securities, so I appreciate it.

Operator: And that will come from the line of Gary Tenner with D.A. Davidson.

Gary Tenner: I had just a follow-up on the loan yields in the quarter. Even excluding the interest recovery, as you pointed out, Allen, the loan yield was up 7 basis points. Was that pretty exclusively driven by the increased C&I outstandings between general C&I and the ag portfolio? I just wanted to make sure there weren’t any other dynamics during the quarter that impacted.

E. Nicholson: I mean I wouldn’t point to anything — one thing. I mean, dairy goes up, but really, I think the dairy borrowing to a higher percentage of our overall loans probably drove about a basis point improvement in loan yields. So a little bit on the mix. But once again, I think the bulk of our loans are commercial real estate, and it really goes back to the back book conversation. They’re slowly repricing — and as we have the payoffs, we’re replacing them with higher yields. So that concept is probably still the biggest driver…

David Brager: And new production.

E. Nicholson: New production versus what’s rolling off out there.

Gary Tenner: Okay. Great. And then just looking forward to the HCP transaction, any expectations at this point of kind of any day 1 restructuring of their balance sheet or otherwise?

E. Nicholson: The only thing we’ve announced, Gary, is that we do plan on selling approximately $400 million of single-family loans that Heritage has — these are not really customers they were purchased. And the duration is very long on them. So even though we’ll get to mark them to market, and there’s a lot of accretion there that if we kept them at significant accretion, but still they’re very low coupon, 30-year mortgages. We don’t really care for the duration, and they’re not associated with customers. So we’ll sell those and reinvest into investments with shorter durations.

Gary Tenner: Okay. And I was in the merger announcement, but beyond that, no other — nothing at this point.

Operator: And that will come from the line of Kelly Motta with KBW.

Kelly Motta: Good morning. Thanks for the question. apologize. I joined a little bit late. I may have missed this. But just circling back to the noninterest-bearing flows. With those balances down a bit, can you just elaborate? I know you guys sold an NPL if there was any attrition of customers related to exits or anything that? Or if it was just normal seasonal movements post COVID getting back to more normal trends.

David Brager: Yes. I think maybe you’re just back checking me, Kelly, but no, there was no loss of relationships that, that represented and the comment that we made was really just around the point in time on December 31. There’s a lot of movement around the deposits going back and forth or going out and this is actually pretty standard. The part that was a little surprising. I mean, I watch it every day, but not surprising, but a part that was different is we did grow noninterest-bearing deposits. The new relationships that we’re attracting to the bank are probably in the 75% noninterest-bearing range. interest-bearing. So this is really just kind of normal stuff. If you go back 10 years, we always have this seasonality in the fourth and first quarter.

I think, Allen, a while back, we had done an analysis of that. I think in the fourth quarter, we normally lose about 4% of our deposits going back like 10 years. This, on averages, that didn’t occur this year. We sort of had the normal noninterest-bearing stuff that went out for taxes or bonuses or whatever the case may be. But no, there was nothing abnormal about it and no loss of relationship that — and I’d say no loss, any material or significant relationship, nothing changed.

E. Nicholson: And Kelly, I just mentioned that I think it’s better to look at average balances. They are more indicative. Our customers move a lot of money. There’s patterns day of the week and things like that, that depending on how a quarter end happens to land you’re not really getting the — probably the 2 picture.

Kelly Motta: Got it. That’s helpful. Maybe switching to the buyback. You were really this quarter. And then obviously, you had announced Heritage Commerce site in the quarter. Wondering, is it fair to say that you’re out of the market at least until the deal closes, just wondering…

E. Nicholson: Yes. I mean, obviously we’re — we’ll be issuing an S-4 prospectus. So we’ve been out of the market since the beginning of December. And the Board reevaluate that once we close the merger.

Operator: And our next question will come from the line of Tim Coffey with Janney Montgomery Scott.

Timothy Coffey: Question on the loan modifications. Is there anything special causing the balances in that bucket to [indiscernible].

David Brager: Go ahead, Allen. I would have small on to say [indiscernible].

E. Nicholson: I wouldn’t say there’s anything abnormal about it.

Timothy Coffey: Okay. What causes somebody to fall into that bucket?

E. Nicholson: I’m sorry…

David Brager: You’re talking about the loan modifications.

Timothy Coffey: Yes.

David Brager: Yes. Well, it depends. I mean when we — there’s a lot of different reasons they can fall into that if they come to us and ask for help and they need to do something to make the payment. That’s one way that they would get in there. Another way would be just through our normal evaluation when we’re doing our annual term loan reviews, if we see something that’s not accurate or not — that isn’t meeting our minimum debt service coverage or some other covenant that could cause us to go in there. That number in and of itself is still a material number relative to the total loan portfolio. But there’s a lot — there’s a few different reasons that it could fall into that category.

Timothy Coffey: Okay. And then post the closed deal with Heritage Commerce Bank, we look out back half of this year and the next year. Dave, do you anticipate the addition of Heritage Commerce to materially change your outlook for loan growth?

David Brager: Yes. Well, look, I think it just depends on a couple of different factors. We are, as you know, sort of slow and steady wins the race. Heritage has been growing a little faster than we have. I’m sure there’ll be some combination of that. We’re going into new markets. We’re going to be able to help their clients grow even — they’ll be able to do more for their clients than they can do for them today. So I think there’s some definite tailwinds with respect to that. But we got to make sure we get to close, we get it integrated. We we go through the culture things to make sure they understand how we do things. So I think for the most part, there could be some benefit to that for our overall loan growth, but we’re going to maintain the same credit quality that we’ve maintained and the same credit quality that they’ve maintained.

So we’ll have to evaluate that as we combine everything and see where we are. But I do think there’s a lot of opportunity in those markets for what we have to offer, not just from the loan perspective, but also from just the overall product array that we have relative to the product array they have.

Timothy Coffey: Sure. Yes. And a bigger balance sheet will help them a lot.

David Brager: Exactly.

Timothy Coffey: And then [Audio Gap] No check — final no check for me, Allen. What was the core loan yield in the quarter?

E. Nicholson: I would point you to the slide we added on Page 43. And that is what I would call a basic coupon, no loan fees, nothing else. And you can see where it ended the year. And then you can obviously see the relative repricing for the different buckets.

David Brager: And Tim, that number was 5.12%.

Operator: Thank you. I’m showing no further questions in the queue this time. I owuld now like to turn the call back over to Mr. Brager for any closing remarks.

David Brager: Great. Thank you. Citizens Business Bank continues to perform consistently in all operating environments. Our solid financial performance is highlighted by our 195 consecutive quarters or more than 48 years of profitability and 145 consecutive quarters of paying cash dividends. We remain focused on our mission of banking the best small- to medium-sized businesses and their owners through all economic cycles. I’d like to thank our customers and associates for their commitment and loyalty, and we look forward to a successful 2026 and the pending merger with Heritage Bank Commerce. Thank you for joining us this quarter. We appreciate your interest and look forward to speaking to you in April for our first quarter 2026 earnings call. You can always let Allen and I know if you have any questions. Have a great day. Thank you.

Operator: This concludes today’s program. Thank you all for participating. You may now disconnect.