CVB Financial’s eagerness to calm investors speaks so loudly that you can hardly hear what the bank is saying.
The Ontario, Calif., owner of Citizens Business Bank saw its shares plunge 20% Tuesday after the company disclosed it had received a Securities and Exchange Commission subpoena. CVB explained in its quarterly filing with regulators:
The subpoena requests information regarding our loan underwriting guidelines, our allowance for credit losses and our allowance for loan loss calculation methodology, our methodology for grading loans and the process for making provisions for loan losses, and our provision for credit losses. In addition, the subpoena requests information regarding presentations we have given or conferences we have attended with analysts, brokers, investors or prospective investors.
The disclosure unnerved investors who have been wondering about the bank’s accounting practices. The selloff prompted CVB to issue a statement later Tuesday reaffirming management’s confidence in itself and pledging to buy back stock at the new, exciting, lower price.
One clear measure of the bank’s health lies in the results of an annual examination its regulators at the Federal Deposit Insurance Corp. recently completed, CVB contends. The only problem is that by law, neither the bank nor the regulators can divulge the results of that examination.
That’s a shame, because CVB chief Christopher Myers is just dying to let the rest of us in on the secret. “We’re not allowed to talk about that [FDIC report], but I hope the SEC gets that report,” he tells the Wall Street Journal.
Tuesday’s press release takes this trip into the regulatory twilight zone a step further. CVB notes that an FDIC exam calls for “a comprehensive review of the company’s loan portfolio, underwriting practices, and the adequacy of its loan loss reserves and methodology,” then concludes:
While the results of this examination are confidential, the fact that there was no negative disclosure on the FDIC website should speak for itself.
It does indeed. The FDIC’s silence is mandatory and says absolutely nothing – in stark contrast to Myers’ apparent willingness to say anything to get his stock back up.