News of SEC inquiry spooks investors
Rebecca U. Cho, Staff Writer
Created: 08/10/2010 05:33:11 PM PDT
The stock price for Ontario-based CVB Financial Corp. sank 22 percent Tuesday, a day after the company disclosed it was being investigated by the Securities and Exchange Commission investigation.
The SEC subpoenaed the institution July 26for information regarding its lending practices, CVB Financial said Monday in its regulatory filings.
Shares for the company fell Tuesday following the news, opening at $10.30 and closing at $8.00.
Christopher Myers, chief executive officer for CVB and Citizens Business Bank, defended his institution Tuesday.
“Shareholders are nervous with the SEC inquiry going on, but I can tell you our business and management practices will prevail, and we don’t believe we’ve done anything wrong,” Myers said, adding that he was surprised by the inquiry.
Myers added that the subpoena was “disconcerting” and the fall in stocks is “unjustified” after the management team’s hard work.
With nearly $7billion in assets, CVB is the Inland Empire’s largest financial institution, analysts said, with branches throughout San Bernardino, Riverside, Los Angeles and Orange counties and the Central Valley.
CVB announced on July 26 the retirement of its chief financial officer, Edward J. Biebrich Jr.
Under Biebrich Jr., who joined the bank 12 years ago, the company grew from $1.8billion to $6.9billion in assets.
The SEC is looking into whether the company’s loan-loss allowance is correct and whether CVB has been reporting everything it should be reporting to its shareholders, Myers said. He declined to go into further detail.
Both the subpoena and the SEC’s investigation are not being made public, CVB said in its regulatory filing.
Despite the Inland Empire’s still struggling economy, the company reported second-quarter income of $19million. The figure was the highest second quarter of earnings in the bank’s history.
SEC spokesman John Heinedeclined to comment on the subpoena.
“Staff at the commission are not authorized to either confirm or deny the existence or nonexistence of any kind of investigative activity,” Heine said.
The SEC’s investigation drew questions from banking analysts, who wondered why the securities regulator was getting involved in the bank’s activities.
Timothy Coffey, a San Francisco-based research analyst for investment firm FIG Partners, said he rarely sees an SEC subpoena of a bank. The information the SEC has requested, including loan-underwriting guidelines and allowance for credit losses, are usually under the scope of bank regulators, he said.
In addition, bank regulators completed an annual examination of CVB Financial in May, during which they most likely looked at the information for which the SEC is now searching.
“At the end of the day you have to ask what does the SEC know about what the bank is doing that the bank’s regulators don’t know,” Coffey said.
Several analysts suggested that the SEC subpoena was orchestrated by short-sellers in the stock market, who had a financial gain in play with drops in CVB’s stock price.
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