Company: CVBF
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000950170-25-029985
Chunk: 261

Company: CVB FINANCIAL CORP
Filing Date: 2025-02-28
Form: 10-K
Item: Item 1B
Chunk 261
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 forecast of various macroeconomic variables over the remaining average life of the loan. The forecast incorporates an assumption that each 

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macroeconomic variable will revert to a long-term expectation, starting in years 2-3, of the reasonable and supportable forecast period, with the reversion largely completed within the first five years of the forecast. The commercial ACL methodology incorporates unique macroeconomic variables based on risk drivers to the underlying portfolio. The Company reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes.

We identified the assessment of the December 31, 2024 commercial ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the commercial ACL methodology, including the method used to estimate lifetime loss rates and the key assumptions: portfolio segmentation, the economic forecast scenarios and their weightings and macroeconomic variables, and the length of the reasonable and supportable forecast period. The assessment also included the evaluation of the adjustments performed to align the life of loan loss rates with the current state of the portfolio. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the commercial ACL estimate, including controls over the:

•development of the commercial ACL methodology

•development of the lifetime loss rate methodology

•ongoing monitoring of the lifetime loss rate methodology

•identification and determination of the key assumptions used in the lifetime loss rate methodology

•development of the adjustments performed to align the life of loan loss rates with the current state of the portfolio

•analysis of the commercial ACL results, trends, and ratios.

We evaluated the Company’s process to develop the commercial ACL estimate by testing certain sources of data, factors, and assumptions used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

•evaluating the commercial ACL methodology for compliance with U.S. generally accepted accounting principles

•evaluating judgments made relative to the development and performance monitoring of the lifetime loss rate methodology, including prepayments, by comparing them to Company-specific metrics and trends and the applicable industry and regulatory