NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) publishes a comment on CVB Financial Corp. and Community Bank Merger.
The report makes the following key points:
- Community Bank (OTC:CYHT) (“Community”) announced a definitive agreement to merge with Ontario, California based CVB Financial Corp. (NASDAQ:CVBF) (“Citizens”), the holding company for Citizens Business Bank.
- The transaction, valued at approximately $878 million in aggregate, is expected to close in the third quarter of 2018 and would result in the eighth largest California-based bank in the state on a pro forma basis.
- The acquisition of Community Bank would allow Citizens to both deepen its presence in the greater Los Angeles area as well as meaningfully surpass the $10 billion threshold, often an important consideration in achieving optimal operating leverage in the face of increased compliance burden and cost.
- CVB Financial Corp. and its subsidiary appear to have very sound financial metrics. Based upon third quarter 2017 financials, KBRA’s Subscription Rating Service rated Citizens Business Bank “A-” on the financial strength rating scale.
- In KBRA’s view, if the deal is successfully executed and integrated, the combination of Citizens and Community Bank could be potentially a credit positive to the ratings of Community Bank. This is primarily driven by the potential for increased revenue, product, and geographic diversification, as well as the potentially enhanced operating leverage and scale, and favorable capital and credit quality metrics of the combined organization. As Community Bank does not have a rated debt issuance outstanding, this potentially positive credit impact would primarily carry through to CYHT’s deposit and counterparty relationships.
- In December of 2017, KBRA affirmed the senior unsecured debt and deposit ratings of BBB+, subordinated debt rating of BBB, and short-term debt and deposit ratings of K2 for Community Bank. The Outlook on all long-term ratings is Stable.
- Ratings of CYHT will likely be withdrawn when the merger closes, given that Community Bank will merge with and into Citizens Business Bank as a subsidiary of CVB Financial Corp.
The ratings are based on KBRA’s Global Bank and Bank Holding Company Rating Methodology, published on February 19, 2016. The ratings and supporting rationale are available at www.kbra.com.
To access the report, click here.
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
