ONTARIO, Calif. (
) -- Shares of
were down 21%, to $8.09, in afternoon trading after a Securities and Exchange Commission filing revealed that the bank was hit it with a subpoena for information related to its lending practices.
By mid-afternoon, over 9.4 million shares had changed hands, well beyond the stock's three-month daily average trading volume of 852,000, according to
CVB Financial said in its second-quarter 10-Q filing that the focus of the SEC investigation into its loan underwriting guidelines, provisions for loan losses and loan risk grading was non-public and that the company did "not know the events that caused the SEC to request information on these subjects."
The SEC's actions run counter to bank regulators' opinion on CVB, considering that the
Federal Deposit Insurance Corp.
sold the failed
of Bakersfield, Calif. to Citizens Business Bank -- CVB's main subsidiary -- in October.
FIG Partners analyst Timothy Coffey -- who has an "outperform" or buy rating on the shares, with a 12-month target of $12 - told
that the decline probably "has more to do with the heavy short interest, rather than any pending legal issues." He went on to say that the short interest has been substantial for a while because of the bank's location in California's Inland Empire, where several banks with heavy real estate concentrations have already failed.
Coffee added that the SEC's action "doesn't mesh with what we've been seeing from regulators," and that FIG Partners wouldn't review its rating of the shares without further information.
CVB Financial is no longer a participant in the Troubled Assets Relief Program, having repaid the government $130 million last September. For the second quarter, the company reported net income of $19 million, or 15 cents a share, and was strongly capitalized, with a Tier 1 leverage ratio of 10% and a total risk-based capital ratio of 17.40%. These ratios need to be at least 5% and 10% for most banks to be considered
With a quarterly dividend payout of 8.5 cents, the shares were yielding 3.30% at Friday's close.
Written by Philip van Doorn in Jupiter, Fla.
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.