Christina Carrabino - IR, CLC Communications, Inc. Christopher Myers - President and CEO Allen Nicholson - EVP and CFO.

Aaron Deer - Sandler O'Neill & Partners Matthew Clark - Piper Jaffray Jacquelynne Chimera - Keefe Bruyette & Woods Inc. Gary Tenner - D.A. Davidson & Co. David Chiaverini - Wedbush Securities.

Good morning, ladies and gentlemen, and welcome to the Third Quarter 2017 CVB Financial Corporation and its subsidiary, Citizens Business Bank, Earnings Conference Call. My name is [Austin] [ph] and I'm your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer period.

Please note this call is being recorded. I would now like to turn the presentation over to your host for today's call, Christina Carrabino. You may proceed..

Thank you, [Austin] [ph], and good morning everyone. Thank you for joining us today to review our financial results for the third quarter of 2017. Joining me this morning are Chris Myers, President and Chief Executive Officer, and Allen Nicholson, Executive Vice President and Chief Financial 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 Web-site at www.cbbank.com and click on the Investors tab. Before we get started, let me remind you that today's conference call will include some forward-looking statements.

These forward-looking statements relate to, among other things, current plans, expectations, events and industry trends that may affect the Company's future operating results and financial position. Such statements involve risks and uncertainties and future activities and results may differ materially from these expectations.

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, 2016, and in particular the information set forth in Item 1A. Risk Factors, therein.

Now, I will turn the call over to Chris Myers..

Thank you, Christina. Good morning everyone and thank you for joining us again this quarter. Yesterday, we reported net earnings of $29.7 million for the third quarter compared with $28.4 million for the second quarter of 2017 and $25.4 million for the year ago quarter. Our third quarter earnings were the highest quarterly earnings in CVBF's history.

Earnings per share were $0.27 for the third quarter compared to $0.26 for the second quarter and $0.23 for the year ago quarter. The third quarter's earnings were impacted by a $1.5 million loan loss provision recapture. The third quarter included $1.9 million in net loan loss recoveries.

Comparatively, the second quarter of 2017 included loan loss provision recapture of $1 million, and $2 million in net recoveries. During the quarter, approximately $1 million of interest income was recognized as a result of a payoff of a troubled debt restructured loan, or TDR, that we transferred from nonaccrual to accrual status last year.

We also sold our operations in technology center building during the third quarter, recording a gain on sale of $542,000. The third quarter represented our 162nd consecutive quarter of profitability and 112th consecutive quarter of paying a cash dividend to our shareholders.

Through the first nine months of 2017, we earned $86.6 million compared with $74.4 million for the first nine months of 2016, an increase of 16.42%. Diluted earnings per share were $0.79 for the nine-month period ended September 30, 2017 compared with $0.69 for the same period in 2016.

Our year-to-date earnings were the highest in CVBF history for the first nine months of any calendar year. Our tax equivalent net interest margin was 3.70% for the third quarter compared with 3.63% for the second quarter and 3.30% for the year ago quarter.

The increase in net interest margin over the prior quarter was positively impacted by a 5 basis point increase from the recaptured interest previously noted and an additional 3 basis point increase in loan yields. Total loans increased by $58.7 million to $4.75 billion for the third quarter of 2017, or about 1.25%.

Commercial real estate loans increased by $54.2 million, dairy & livestock loans increased by $26.5 million, and all other loans decreased by $22 million in aggregate. Average loans grew by $67.4 million over the prior quarter or about 1.45%. In comparison to the third quarter 2016, average loans increased by $462.7 million or about 10.9%.

Loan yields were 4.72% for the third quarter of 2017 compared with 4.63% for the second quarter of 2017 and 4.46% for the year ago quarter. When interest recaptured on nonaccrual loans is excluded, the third quarter loan yields were 4.63%, compared with 4.60% in the prior quarter and 4.46% in the year ago quarter.

At September 30, 2017, the allowance for loan and lease losses was $60.6 million or 1.28% of total loans, compared with $60.2 million or 1.28% of total loans at June 30, 2017. Net recoveries on loans for the second quarter were $1.9 million.

When the loan loss allowances combine with the remaining fair market value loan discounts from our acquisitions, the allowance for loan and lease loss ratio was 1.48% as of September 30, 2017, unchanged from the prior quarter.

At quarter end, nonperforming assets, defined as nonaccrual loans plus Other Real Estate Owned, were $16.1 million or 0.19% of total assets, compared with $16.7 million or 0.20% of total assets for the prior quarter and $13.5 million or 0.17% of total assets at September 30, 2016.

At September 30, 2017, we have loans delinquent 30 to 89 days of only $271,000 or 0.01% of total loans. Classified loans for the third quarter were $75.1 million, an $18.4 million decrease from the prior quarter. The decline was partially attributed to the full payoff of our largest TDR loan totaling $9.1 million.

This loan was originally made in 2008 and was our last remaining Shared National Credit. We will have more detailed information on classified loans available in our third quarter Form 10-Q. Now I'd like to discuss deposits.

For the third quarter of 2017, our noninterest-bearing deposits totaled $3.91 billion, compared with $3.93 billion for the prior quarter and $3.66 billion for the year ago quarter. Average noninterest-bearing deposits were $3.89 billion for the third quarter of 2017, unchanged from the second quarter.

Average noninterest-bearing deposits represented about 59% of our total deposits for the third quarter. Our cost of interest-bearing deposits and customer repurchase agreements for the third quarter was 10 basis points, compared to 11 basis points for the prior quarter. Our total cost of funds was 12 basis points for both the third and second quarter.

At September 30, 2017, our total deposits and customer repurchase agreements were $7.06 billion, compared with $7.24 billion at June 30 of 2017 and $6.90 billion for the same period a year ago. We continue to focus on deposits that have limited interest rate sensitivity.

Our ongoing objective is to maintain a low-cost stable source of funding for our loans and securities. Interest income, interest income for the third quarter of 2017 totaled $73.9 million, compared with $72.6 million for the second quarter and $65.2 million for the same period a year ago.

The [tax] [ph] equivalent yield on earning assets grew by 7 basis points over the prior quarter and 41 basis points over the year ago quarter. The yield on loans increased by 9 basis points over the second quarter, or 3 basis points when interest capture is excluded.

Noninterest income was $10 million for the third quarter of 2017, compared with $10.8 million for the prior quarter and $9.2 million for the third quarter of 2016. A gain of $542,000 was recognized in the third quarter on the sale of the Bank's former operations and technology center building that has been held for sale since the end of 2016.

Now expenses; noninterest expenses for the third quarter were $34.7 million compared with $36.9 million for the second quarter of 2017 and $33 million for the year ago quarter. The decline was primarily due to a decrease in both acquisition and professional service expenses.

Acquisition related expenses associated with the merger of Valley Business Bank declined by $1 million compared to the prior quarter. For the third quarter, the decline in professional service expense of $752,000 included $405,000 in legal expense recovery.

Noninterest expense totaled 1.65% of average assets for the third quarter, compared with 1.76% for the second quarter and 1.59% for the third quarter of 2016. Now, I'd like to turn the call over to Allen Nicholson, our CFO, to discuss our effective tax rate, investment portfolio, and overall capital position.

Allen?.

Thanks Chris. Good morning, everyone. Our effective tax rate was 37.5% year-to-date and 38.9% for the third quarter. This compares with 37.5% for the first nine months of last year. Our effective tax rate can vary depending upon the amount of tax advantage income, tax credits and discrete items such as stock compensation.

Looking to our investment portfolio, during the third quarter of 2017, our average interest earning balances at other financial institutions and the Federal Reserve totaled $45 million.

During the third quarter, these balances represented only 0.6% of our average earning assets, which compares to 1.4% for the prior quarter and 7% for the third quarter of 2016. At September 30, 2017, our combined available-for-sale and held-to-maturity investment securities totaled $3.02 billion, a $115.2 million decrease from the second quarter.

Investment securities represented 39% of our average earning assets during the third quarter compared to 40% in the prior quarter. At quarter end, investment securities available for sale totaled $2.18 billion, which included a pre-tax unrealized gain of $20.3 million. In addition, we had held-to-maturity investment securities totaling $848 million.

The tax equivalent yield on the total securities portfolio was 2.42% for the third quarter, which was 6 basis points lower than the prior quarter. During the quarter, we purchased $36.9 million of securities with a tax equivalent yield of 2.45%.

Our purchases of available-for-sale securities were comprised primarily of commercial mortgage-backed securities totaling $31.6 million with an average expected yield of 2.26% based on an expected average life of approximately four years.

Held-to-maturity security purchases for the quarter included $5.3 million of high-quality bank-qualified municipal bonds with an average tax equivalent yield of 3.60%.

Now, turning to our capital position, for the nine months ended September 30, 2017, shareholders' equity increased by $85.6 million from December 31, 2016 to $1.1 billion at September 30, 2017.

The increase was due to $86.6 million in net earnings, $37.6 million from the issuance of common stock for the acquisition of Valley Commerce Bancorp, and $3.8 million of various stock-based compensation and other items. This was offset by $44 million of cash dividends. I'll now turn the call back to Chris for some closing remarks..

Thanks, Allen. Now let's talk about economic conditions. Turning to the California economy, according to data recently released by California's Employment Development Department, California has now gained a total of 2.6 million jobs since the economic expansion began at February 2010.

For most of the post-recession era, the California economy has been among the fastest-growing of the 50 states, both in terms of job growth and growth in economic activity. California's unemployment rate rose slightly to 5.1% in August 2017, compared with 4.8% in July and 5.4% back in August 2016.

The year-over-year change shows an increase of approximately 265,000 jobs. State and its regions is expected to experience continued growth in economic activity and jobs throughout 2017 and into 2018. Most of the job gains will occur in the healthcare, leisure and hospitality, and construction industries.

The demand for housing continues for California. The supply of existing homes has increased but remains lean and new home construction continues to increase at a modest pace. In terms of the dairy industry, low price futures fluctuated somewhat over the past few months while feed costs were stable.

The net result was profitable operations for the dairy industry. The outlook for milk prices for the remainder of 2017 is positive and feed prices should remain low. In closing, we are pleased with our third quarter results. We remain committed to our relationship banking model and operating our business in an efficient and focused way.

We will strive to build on our organic growth initiatives and continue to look for acquisition opportunities. Our strategic objective is to increase our market share and expand our geographic footprint. And that concludes today's presentation. Allen and I will be happy to take any questions that you might have..

[Operator Instructions] Our first question comes from Aaron Deer with Sandler O'Neill & Partners. Please go ahead..

Chris, you had some decent loan growth in the quarter. It looks like a good bit of that came from the dairy & livestock category.

I wondered, how much of that was just a general business growth and demand versus the seasonal line usage that you typically see toward the end of the year? Was any of that just the seasonal stuff that came early or can we still expect a good seasonal pickup here toward the end of the year?.

We will see a strong seasonal pickup for the remainder of the year. I think a portion of that – I'll just split it down the middle, probably half of it was organic growth and the other half was early seasonal pickup, as deferrals can begin as early as September.

But most deferrals come in later in the quarter, they come later in the quarter and they kind of skew our end of the year numbers but not so much the average for the quarter, if you will..

Right, okay. And then I guess excluding the acquisition cost, the legal recovery, your OpEx looks to be just under about $35 million.

Is that a good run rate from here or might we see some cost saves coming up from the real estate consolidation and the branch sale?.

I really look at this, what we try to do is keep our noninterest expenses under 1.70% of our total assets. That's kind of a benchmark that we look at on a normalized basis, as something a good way to run our Company. But I think your point is taken.

I think that the fourth quarter, barring something unforeseen, should be a good expense quarter for us as we consolidated three branch locations in the third quarter and are slated to sell one of our offices in the fourth quarter as well and we should get a gain on that. .

Okay, that's great. Right.

And then, Allen, maybe to get your thoughts on the margin expansion, I guess the core expansion we saw a little bit here this quarter, and if we continue to see a further mix shift into loans, how much additional expansion might we see without the benefit of any further rate hikes?.

Without any rate hikes, I think what you saw over the last quarter will be slow and steady as we move up loan to the higher percentage of earning assets. So, I would never expect it to be dramatic quarter over quarter.

But if you look over the last year, I think it's been a very positive influence on our margins and we hope to see that continue to grow..

I mean, Aaron, one of the things I'd just add to that is, is really you're seeing the yield on our – what we are trying to do is maximize the yield on our earning assets and make sure that the vast majority of our assets are earning assets.

So, we're running our cash levels very, very low, we're trying to keep that as close to zero as we can so that we are fully invested, if you will. And you noticed in the quarter, I think we had about $130,000 in interest on our overnight Fed fund sold and we had about $70,000 in expenses on our overnight borrowings from the Fed.

So, that just shows that we're trying to run our cash balances to zero and keep all of our assets to the extent we can, or the vast majority of our assets, into either loans, which is our preference, or securities, mortgage-backed or municipals. And that's just a way of us running as efficiently as possible.

The other piece of that I think that's very important is deposit rates are going up, earnings credit rates are going up, and it's affecting depositors different way. True relationship deposits are not being that affected. It's your hot deposits, if you will, or non-sticky deposits that are really pressing the flush on interest rate.

And we have let some of those go, and that's why you're seeing a flatness in our deposit growth or even a little bit of a step-back in our deposit growth. We don't want deposits that are just going to trade, every time the Fed fund goes up, it goes up 25 basis points.

We know that we can always get those interest rate driven deposits back if we need them. Right now we don't need them, because I certainly don't want to take a deposit on them at 1% or 1.25% and buy a mortgage-backed security with a 4.5 year duration at 2.25%. It's just not enough yield for us, too much interest rate risk for us.

So I think what you've seen us do is basically on purpose is shrink our balance sheet a little bit from the second quarter to the third quarter, but change the mix in our assets on our balance sheet trying to get it to be more loan focused that's investment focused and certainly not overnight investment focused.

That makes sense?.

Sure. Yes, absolutely, it seems like a good strategy and I appreciate the additional color. So, thank you, Chris, and thanks, Allen..

Yes, it's all about we're really trying to run as efficiently as possible and really make sure we have core deposits and make sure we have good earning assets that we – everything is long-term oriented here, we're trying to see what do we want to keep and what is transient..

Our next question comes from Matthew Clark with Piper Jaffray. Please go ahead..

What was the contribution from the purchase accounting accretion in the quarter? Obviously you had the acquisition in there. Just curious what that was..

We don't publish that, Matthew, but it's very nominal..

Just trying to get a sense for your core margin, so we can forecast that going forward, but okay.

On the tax rate as well, a little higher this quarter, curious what you think the run rate might be going into the fourth and into next year?.

Matthew, we always look to forecast our full-year taxable income, and excluding discrete items, so the first quarter was significantly impacted by some discrete items related to stock compensation. So really where we are right now year-to-date at 37.5 is our best estimate of what we will be for the full year.

Now that can obviously change as we can't predict exactly what our income will be, but that's why you saw the increase in the second quarter to bring it up to where we anticipate full year to be..

Increase in the third quarter you mean..

I'm sorry, third quarter, yes..

Third quarter, we were at 38.89% for the third quarter, something like that?.

Correct..

And so that averaged us to the 37.5%, but we are anticipating 37.5%-ish for the fourth quarter at this point..

Okay..

Unless they get the tax law passed really fast. That is what we are hoping for..

Okay, great.

And then with the cost saves still to come out of Valley Business Bank, I mean your sense is it will be largely done in the fourth quarter and any guesstimate as how much is still left?.

Tough to say in dollars but it really is, the bottom line is that we have four locations of people when we bought the bank and all of those four locations will be merged into our Bank by early November.

So we should feel the full extent of our cost saves, except for just a little bit, I guess maybe a month and a half of one-off is being opened and a few extra people. So the fourth quarter you should see some additional cost saves through Valley Business Bank, yes..

Okay, great.

And then just the earning assets down this quarter, obviously some deliberate runoff, but is it fair to assume that we'll see growth resume from here given obviously the stronger loan growth, but still with that mix shift going on with securities coming out into loans?.

When we look at our earning assets, we kind of look at them as – we really only look at our loan earning assets and our mortgage-backed security earning assets and our municipal earning assets, and then I guess our licensure, bullion, stuff like that, but not the cash, not the overnight cash stuff. So, we don't really look at it as being down.

It's kind of flat quarter-over-quarter if you look at those items, and that's our objective, is to grow those two things with strong core deposits.

So we feel like we are on track and I was really pleased with the quarter the way the numbers are coming in and the way our execution is on getting us into our new building, which is great, we are functioning very well right there, we sold our former building and get that out from under us, which was nice, and took a gain on that.

Actually we charged it down before and now took a gain of $0.5 million, $543,000, something like that. So it's good to get all these projects behind us, including consolidating three offices and so forth.

So now we feel like, okay, we really can dedicate our full attention onto what our strategic objectives are, or growing organically and potentially looking at acquisitions.

We anticipate in the fourth quarter this year we're going to open a second office in San Diego, we've recruited a new team down there, they are already working in temporary offices and we're very close to signing a lease to get us in that downtown San Diego location before the end of the year.

We've also opened a loan production office up in Stockton. They are doing a little better than we thought. We have a good leader up there and she is, I think she is going to be on track probably to open an office in the first quarter of 2018. So, we're moving forward on some of these de novo issues or de novo opportunities.

So I think we've got some good oars in the water right now. Loan demand is not great. We're tracking about where we were last year in terms of our loan production. Last year was the best year we've ever had. So we're kind of tracking even with that. We hope to be tracking better than that.

But we are sticking to what we know how to do and trying not to get outside of our area of expertise and make sure we are balancing our loan growth too. So quality is very important to us too.

We've seen some other banks get ahead of themselves in terms of loan growth, get concentrated in areas where they are not the experts in, and selectively seen some charge-offs and some retrenching in those areas. That's not what we do.

We will continue – everything we do, we want to take a long-term perspective and continue to march forward and get better at it every day..

Great. Thank you..

Our next question is from Jackie Bohlen with KBW. Please go ahead..

Chris, kind of touching back on the deposit comments that you made, on understanding the reasoning for a little bit of balance sheet shrinkage, what kind of levers do you look at to when you might want to bring deposit accounts like that back on?.

I think it becomes more compelling to us when we have a sharper yield curve, is really what it's about.

When we had – it was okay to keep excess deposits on the balance sheet a year and a half ago when Fed fund's rate was 25 basis points and I only had to pay them 25 basis points at the maximum for those deposits and I could buy a mortgage-backed security at 210, 220, I was getting a 2% yield on that.

Today that same overnight borrowing, I'm only getting a 1% yield for that and you're taking 4.5 years worth of interest rate risk, you're also listening to the government say that they want to increase rates, Federal Reserve saying they want to increase rates, one in December and three next year.

Well, if that really happens, Fed fund's rates will be 2.25% a year from now and I'll be holding a bunch of 2.25% mortgage-backed securities on an incremental funding basis making no money. So I don't want to do that, and especially on the precipice of getting close to $10 billion.

I want to make sure we have as [indiscernible] assets as we can as we go over $10 billion. We want to do it intelligently and not do it with any kind of low yielding assets or low yielding spreads vis-a-vis our cost of funds..

So do you look to a loan to deposit ratio or some other metric in terms of your comfort level for where your deposits could potentially go down to?.

Our objective is to continue to grow our deposits, just make sure we're growing the lower cost relationship based deposits and that aren't interest rate sensitive. So I'm not hoping that deposits will go down any further. I think we've done a lot of work here over the last year to improve our granularity of our deposit relationship.

I mean I went through a study with the Board yesterday and we looked through the top 150 depositors in the Bank and the top 150 borrowers in the Bank, and we've lined those things up next to each other and the size similarities were amazing.

I mean our 150th largest depositor keeps about $9 million in the bank with us and our 150th largest borrower had $8.9 million in loans.

It was just really lined up really beautifully, and that's exactly what we're trying to do, because we don't want to have as lumpy funding or lumpy loans that could cause swings to us or make us do things that we are not organic and long-term thinking for our business. So, I really think we're right where we want to be.

There's some consolidation going on in the industry. We're hoping to take advantage of some of that. We've kind of gotten through this work of consolidating the offices and moving into our operations and technology building and getting our teams lined up, and I think we're in a great position to do really well going forward.

I just want to see a little bit more robust loan demand out there than it is right now and I think some of that is because of the flattening of the curve..

Okay, makes sense.

And then also just one last one, I realize that the worst of the fires are not in your footprint, but if you have any sort of an update on any impacts you might be seeing with your borrowers and just from a stakeholder perspective as well?.

I'm not aware of anything, any situation for any of our borrowers.

So we're very fortunate that way, and I mean certainly most of it is centered up in Northern California and that area and we really don't have a lot of holdings up in that area, but a good question and I'll circle back with our credit people, but they have not, certainly not proactively, mentioned anything to me, and so I'm not aware of any problems..

Okay. Thanks Chris..

Our next question is from Gary Tenner with D.A. Davidson. Please go ahead..

Most of my questions have been asked, but just in terms of the provision outlook, obviously you guys have had a remarkably long run of recoveries post recession and it's translated to negative or nil provisions for quite a while now.

Any sort of visibility into recoveries fourth quarter and beyond and what that could mean for your provision?.

We're kind of running out of real estate so to speak on this one, both figuratively and literally. So, I think we've got a couple of more quarters' worth of some good recovery potential, but this is going to swing in 2018 where the magnitude of our recoveries dry up.

I mean the good news is that our gross charge-offs, and this is ridiculous, but I believe our gross charge-offs for the year is under $150,000. That's our gross charge-offs. So even if we didn't have any recoveries, I mean that's not going to be something that is really we need to provision for, if you will, if our recoveries go away at this juncture.

But loan growth will be. Obviously if we can grow, we're trying to grow 6% to 8% organically a year on our loan portfolio, let's call that $250 million to $300 million a year organically, that will need some provisioning for eventually. But I don't see it happening until at least a couple of quarters out, and then we'll see how we do from there..

Great. Thanks Chris..

We're racing to collect all this stuff as fast as we can and we have some maturities of loans in the fourth quarter that help us do that. And we also have an OREO property. We have one remaining in the bank and we feel like we're hoping to have that resolved in the first quarter of 2018..

Our next question is from David Chiaverini with Wedbush Securities. Please go ahead..

I jumped on late, so this is probably already addressed, but I just wanted to make sure I didn't miss it, efficiency target, I know that it was for getting below 45% by the fourth quarter.

Is there an update on that and also for the outlook for 2018 on the efficiency ratio?.

I think with the way we're running the Company right now, I don't see any reason that we shouldn't be able to maintain our efficiency ratio under that 45% level.

That could get skewed by a lot of factors, economic and so forth, but more importantly, if we get into another acquisition, we tend to start spending money when we acquire something, but right now we feel like the third quarter efficiency ratio of under 45%, we are 42.44% for the third quarter, that's kind of where we're running right now and we should be able to continue that barring ebbs and flows in interest rates and economic circumstances.

But if things remain stable, we feel comfortable in that 45% or below area..

And not to pin you to a number but would it be fair to say that you're now going to run in the 40% to 42.5% efficiency going forward?.

I don't want to get pinned to that number. There's still a lot of stuff we're investing in. We've averaged 44.56% for the year so far, and in there there's been some one-time expenses and so forth that [we didn't knew] [ph].

So, yes, I think we're running lower than that, but we do have – there's a lot of – what we're doing right now is we're trying to make our brick-and-mortar more efficient, our locations as efficient as possible. We have some potential there which will help us on the income side. We have some extra space that we can lease out.

We just bought this new building and we're trying to lease out 10,000 square feet space of that. We have another office where we have a potential to either take a gain on or lease some space out there. So I think there are some opportunities there.

On the other side of that though is, we're going to need to be spending more and more money for cybersecurity, information technology, compliance, all of those kinds of things, so that tends to eat up a lot of those savings. So, I look at it as mostly a trade-off and that's why I'm hedging my bets at 45%, 44% instead of trying to get at 40%..

Got it.

And then shifting gears to the securities portfolio, what sort of yields are you acquiring securities now versus what you were buying them at during the quarter as well as the average yield on the book?.

David, we didn't purchase a lot during the quarter compared to the prior quarter. As we noted earlier, the yields on our – most of the purchases in this third quarter were commercial mortgage-backed securities at a yield of about 2.25 roughly. Right now we could probably buy those at a little bit higher rate than that.

But if you look at the prior quarter, the second quarter, it was about 15 basis points higher and we bought quite a bit more. So, it's been in a fairly tight range. We also noted our overall portfolio yields on a tax equivalent basis were down quarter over quarter by about 6 basis points..

Thanks very much..

And we seem to be running somewhere around, all-in around 2.45..

If you start to include some of our municipals and some longer duration, yes..

And then if we include the municipal purchases and the mortgage-backed purchases, we're buying things all-in about 2.45 right now..

Yes..

So we don't expect that to be neither a positive nor a negative I think in terms of anything material affecting our income, and on the security side, none of those securities will go as loans go and as our core funding goes. So, again, securities are the second option to us in purchasing using our excess cash to loan growth..

Got it. Thank you..

[Operator Instructions] At this time, I am showing no questions. So I would like to turn the call back to Mr. Myers for any closing remarks..

All right, we appreciate your interest in CVBF. Thank you very much for being on the call. We look forward to talking to you again on our year-end 2017 earnings conference call in January. In the meantime, have a great holiday season. You can call Allen or me if you have any further questions and thank you for listening. Take care..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..