American Riviera Bancorp Announces Record Earnings for the Third Quarter of 2022

SANTA BARBARA, Calif.–(BUSINESS WIRE)–#BankonBetter–American Riviera Bancorp (“Company”) (OTCQX: ARBV), holding company of American Riviera Bank (“Bank”), announced today unaudited net income of $9.5 million ($1.84 per share) for the nine months ended September 30, 2022 compared to the $9.1 million ($1.77 per share) earned in the same reporting period in the previous year. Unaudited net income was $3.8 million ($0.73 per share) for the three months ended September 30, 2022 compared to the $3.0 million ($0.58 per share) earned in the same reporting period in the previous year. The increase in year to date unaudited net income in 2022 compared to 2021 is primarily attributable to loan growth, increased interest income on liquid assets, and continued stability of the deposit portfolio.

Jeff DeVine, President and CEO of the Company and the Bank, stated, “We are pleased to report record earnings this quarter and year to date. Our balance sheet and relationship based deposits have remained stable despite the volatility created by Federal Reserve policy this year. Stable funding allows the Bank to deploy cash into higher-yielding assets including our loans to clients on the Central Coast of California which continue to grow and exhibit strong credit quality.”

Third Quarter Highlights

• Return on average assets for the third quarter ended September 30, 2022 was 1.08%, a significant increase from 0.75% in the previous quarter and 0.98% in the same quarter last year.
• Total loans, excluding Paycheck Protection Program (“PPP”) loans, reached $886 million at September 30, 2022, an increase of $31 million or 3.7% from the prior quarter end and $158 million or 21.7% from September 30, 2021.
• Non-interest bearing demand deposits reached $520 million at September 30, 2022, an increase of $33 million or 6.7% from the prior quarter end and $84 million or 19.4% from September 30, 2021. Non-interest bearing demand deposits now represent 41.1% of total deposits.
• Net interest margin increased to 3.69% for the third quarter of 2022, compared to 3.26% for the prior quarter and 3.54% for the same quarter in the prior year.
• Total cost of funding sources increased to 0.16% for the third quarter of 2022, compared to 0.12% in the prior quarter and 0.08% for the same quarter in the prior year. Total cost of deposits, including non-interest bearing demand deposits, has remained consistent at 0.08% for the third quarter of 2022, compared to 0.07% in the prior quarter and 0.08% for the same quarter in the prior year.
• Provision for loan losses for the third quarter of 2022 was $0.1 million, a decrease of $0.8 million compared to the $0.9 million expensed in the previous quarter. Year to date provision in 2022 of $1.0 million exceeds the $0.3 million expensed in the same nine month period in the prior year. Increased provision in 2022 is attributed to strong organic loan growth and not credit quality concerns.
• Allowance for loan losses was 1.18% of total loans at September 30, 2022, compared with 1.20% at June 30, 2022 and September 30, 2021.
• The Bank maintained strong credit quality with no other real estate owned, no loans 90 days or more past due, and only $6.3 million or 0.72% of total loans on non-accrual status, which are well supported by collateral and reserves. The increase in non-accrual loans during the quarter relates to one loan totaling $2.9 million which is adequately supported by collateral and strong guarantor support.
• Tangible book value per share was $14.90 at September 30, 2022, down slightly from the $15.17 at June 30, 2022 due to rising interest rates and rate volatility in the third quarter of 2022 as a result of Federal Reserve actions which, in turn, increased tax adjusted unrealized losses on the securities portfolio.
• All Bank capital ratios were above regulatory requirements for a well-capitalized institution with a total risk-based capital ratio of 12.73%, as compared to 12.94% in the previous quarter and 12.28% in the same quarter of 2021.

Third Quarter Earnings

For the third quarter of 2022, unaudited net income was $3.8 million, compared to $2.6 million in the second quarter of 2022 and $3.0 million in the third quarter of 2021. For the third quarter of 2022, unaudited net income pre-tax, pre-provision, pre-PPP fees (a non-GAAP measure) was $5.4 million, compared to $4.1 million in the second quarter of 2022 and $3.1 million in the third quarter of 2021.

With $178.9 million in cash at September 30, 2022, net interest income continues to benefit from the Federal Reserve’s actions to increase short-term rates as evidenced by the $0.5 million or 94% increase in Interest on Due From Banks from the previous quarter, and $0.9 million or 771% increase from the same quarter last year.

Non-Interest Income and Expense

Non-interest income was $0.8 million for the third quarter of 2022, compared to $0.7 million for the second quarter of 2022 and $0.9 million for the same quarter last year. Variances between the quarters relate primarily to SBA loan sale premium, mortgage broker fees and loan prepayment fees. Aggregate non-interest income has remained fairly consistent over the periods analyzed.

Non-interest expense was $7.8 million for the third quarter of 2022, compared $7.2 million in the second quarter of 2022 and $7.0 million for the same period last year. The increase in non-interest expense in the third quarter of 2022 is primarily attributable to additional incentive plan accrual based on year to date performance and timing of certain expenses such as advertising. With the relaxing of COVID restrictions, expenses related to business development and sponsorships have moved back to historical levels. Additionally, the Company remains committed to making investments in systems and staffing to support continued growth while maximizing efficiencies.

Loans and Asset Quality

Total loans, excluding PPP loans, reached $886 million at September 30, 2022, an increase of $31 million or 3.7% from the prior quarter end and $158 million or 21.7% from September 30, 2021.

The Allowance for Loan Losses increased $0.1 million to $10.5 million at September 30, 2022 with a resulting coverage ratio of 1.18% of total loans, as compared to $10.4 million or 1.20% at June 30, 2022 and $9.4 million or 1.20% at September 30, 2021. The Allowance percentage has remained fairly consistent over the periods analyzed with increased dollars primarily attributable to continued organic loan growth and not credit quality concerns.

Year to date 2022 charge-offs total $0 versus $93 thousand of recoveries. As of September 30, 2022, non-accrual loans totaled $6.3 million, up $2.8 million compared to the previous quarter. The increase in non-accrual loans in the quarter relates to one loan totaling $2.9 million which is adequately supported by collateral and strong guarantor support. Another $2.4 million of the non-accrual total at September 30, 2022 is comprised of one loan which is real estate secured at a 32.9% loan to value based upon a recent appraisal and is paying full principal and interest payments monthly. Credit quality remains strong.

Deposits

Total deposits were $1.3 billion at September 30, 2022, representing an increase of $8.6 million, or 0.7%, from June 30, 2022 and an increase of $148 million, or 13.3% since September 30, 2021. Total non-interest bearing deposits represented 41.1% of total deposits at September 30, 2022. The Bank had no brokered deposits or Federal Home Loan Bank advances in its funding base as of September 30, 2022.

Shareholders’ Equity

Total shareholders’ equity was $82.1 million at September 30, 2022, a $1.4 million or 1.7% decrease since June 30, 2022 and a decrease of $11.7 million over prior year. Although earnings remain strong, the tax adjusted unrealized loss on the securities portfolio over this same period has exceed net income.

The tax adjusted unrealized loss on securities, which is a component of equity (accumulated other comprehensive income or “AOCI”), grew from $19.3 million at the end of the second quarter of 2022 to $24.7 million at the end of the third quarter of 2022. Industry-wide there has been a material decline in market value of fixed income securities, consistent with the significant increase in market yields. These securities have a maturity and minimal inherent credit risk, therefore, the Bank expects to receive principal in full when the investments mature. During the third quarter of 2022, $43 million of the Bank’s most interest rate sensitive securities were moved from available-for-sale (“AFS”) to held-to-maturity (“HTM”) classification to protect the Bank from further decline in mark-to-market value if rates continue to rise. The remaining AFS investment portfolio has a duration of 4.9 years and is comprised of a diverse portfolio including amortizing mortgage backed securities, municipal bonds, SBA pools, corporate debt and U.S. Government sponsored agencies.

Company Profile

American Riviera Bancorp (OTCQX: ARBV) is a registered bank holding company headquartered in Santa Barbara, California. American Riviera Bank, the 100% owned subsidiary of American Riviera Bancorp, is a full-service community bank focused on serving the lending and deposit needs of businesses and consumers on the Central Coast of California. The state-chartered bank opened for business on July 18, 2006, with the support of local shareholders. Full-service branches are located in Santa Barbara, Montecito, Goleta, San Luis Obispo and Paso Robles. The Bank provides commercial business, commercial real estate, residential mortgage, construction and Small Business Administration lending services as well as convenient online and mobile technology. For twelve consecutive years, the Bank has been recognized for strong financial performance by the Findley Reports, and has received the highest “Super Premier” rating from Findley every year since 2016. The Bank was rated “Outstanding” by the Federal Deposit Insurance Corporation in 2020 for its performance under the Community Reinvestment Act.

Statements concerning future performance, developments or events concerning expectations for growth and market forecasts, and any other guidance on future periods, constitute forward looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, effects of interest rate changes, ability to control costs and expenses, impact of consolidation in the banking industry, financial policies of the US government, and general economic conditions.

American Riviera Bancorp and Subsidiaries
Balance Sheets (unaudited)
(dollars in thousands)
			Sep 30,				Sep 30,				One Year				One Year
			2022				2021				$ Change				% Change
Assets
	Cash & Due From Banks		$	178,882			$	262,965			$	(84,083	)		-32	%
	Available for sale securities			222,910				146,937				75,973			52	%
	Held to maturity securities			41,241				–				41,241			100	%
	Loans (excluding PPP)			886,087				728,316				157,771			22	%
	PPP Loans			121				50,966				(50,845	)		-100	%
	Allowance For Loan Losses			(10,500	)			(9,376	)			(1,124	)		12	%
	Net Loans			875,708				769,906				105,802			14	%
	Premise & Equipment			9,649				10,848				(1,199	)		-11	%
	Goodwill and Other Intangibles			4,984				5,135				(151	)		-3	%
	Other Assets			38,033				22,371				15,662			70	%
Total Assets			$	1,371,407			$	1,218,162			$	153,245			13	%
Liabilities & Shareholders’ Equity
	Demand Deposits		$	519,796			$	435,489			$	84,307			19	%
	NOW Accounts			184,138				177,952				6,186			3	%
	Other Interest Bearing Deposits			559,914				502,237				57,677			11	%
	Total Deposits			1,263,848				1,115,678				148,170			13	%
	Borrowed Funds			18,000				–				18,000			100	%
	Other Liabilities			7,425				8,665				(1,240	)		-14	%
	Total Liabilities			1,289,273				1,124,343				164,930			15	%
	Common Stock			57,123				56,302				821			1	%
	Retained Earnings			49,722				37,685				12,037			32	%
	Other Capital			(24,711	)			(168	)			(24,543	)		14,609	%
	Total Shareholders’ Equity			82,134				93,819				(11,685	)		-12	%
Total Liabilities & Shareholders’ Equity			$	1,371,407			$	1,218,162			$	153,245			13	%

American Riviera Bancorp and Subsidiaries
Balance Sheets (unaudited)
(dollars in thousands)
			September 30,				June 30,				March 31,				December 31,				September 30,
			2022				2022				2022				2021				2021
Assets
	Cash & Due From Banks		$	178,882			$	212,675			$	320,683			$	292,111			$	262,965
	Available for sale securities			222,910				250,132				220,364				191,543				146,937
	Held to maturity securities			41,241				–				–				–				–
	Loans (excluding PPP)			886,087				854,593				776,395				753,494				728,316
	PPP Loans			121				6,169				11,633				39,996				50,966
	Allowance For Loan Losses			(10,500	)			(10,367	)			(9,394	)			(9,383	)			(9,376	)
	Net Loans			875,708				850,395				778,634				784,107				769,906
	Premise & Equipment			9,649				9,491				9,948				10,429				10,848
	Goodwill and Other Intangibles			4,984				5,025				5,080				5,075				5,135
	Other Assets			38,033				35,470				27,327				23,275				22,371
Total Assets			$	1,371,407			$	1,363,188			$	1,362,036			$	1,306,540			$	1,218,162
Liabilities & Shareholders’ Equity
	Demand Deposits		$	519,796			$	487,187			$	481,619			$	470,763			$	435,489
	NOW Accounts			184,138				196,485				193,178				181,546				177,952
	Other Interest Bearing Deposits			559,914				571,544				571,595				549,781				502,237
	Total Deposits			1,263,848				1,255,216				1,246,392				1,202,090				1,115,678
	Borrowed Funds			18,000				18,000				18,000				–				–
	Other Liabilities			7,425				6,460				7,971				8,177				8,665
	Total Liabilities			1,289,273				1,279,676				1,272,363				1,210,267				1,124,343
	Common Stock			57,123				56,897				56,554				56,564				56,302
	Retained Earnings			49,722				45,922				43,370				40,432				37,685
	Other Capital			(24,711	)			(19,307	)			(10,251	)			(723	)			(168	)
	Total Shareholders’ Equity			82,134				83,512				89,673				96,273				93,819
Total Liabilities & Shareholders’ Equity			$	1,371,407			$	1,363,188			$	1,362,036			$	1,306,540			$	1,218,162

American Riviera Bancorp and Subsidiaries
Statement of Income (unaudited)
(dollars in thousands, except per share data)
			Quarter Ended											Nine Months Ended
			Sep 30,				Sep 30,							Sep 30,				Sep 30,
			2022				2021				Change			2022				2021				Change
Interest Income
	Interest and Fees on Loans		$	10,158			$	8,342			22	%		$	28,109			$	25,056			12	%
	Fees on PPP Loans			199				978			-80	%			1,320				3,336			-60	%
	Net Fair Value Amortization Income			3				419			-99	%			7				481			-99	%
	Interest on Securities			1,539				447			244	%			3,496				1,029			240	%
	Interest on Due From Banks			1,046				120			771	%			1,726				252			585	%
	Total Interest Income			12,944				10,306			26	%			34,658				30,154			15	%
Interest Expense
	Interest Expense on Deposits			266				220			21	%			693				742			-7	%
	Interest Expense on Borrowings			169				–			100	%			402				–			100	%
	Total Interest Expense			435				220			98	%			1,094				742			47	%
Net Interest Income				12,509				10,086			24	%			33,564				29,412			14	%
	Provision for Loan Losses			122				–			100	%			1,038				338			207	%
Net Interest Income After Provision				12,387				10,086			23	%			32,526				29,074			12	%
Non-Interest Income
	Service Charges, Commissions and Fees			602				601			0	%			1,945				1,918			1	%
	Other Non-Interest Income			210				342			-39	%			724				825			-12	%
	Total Non-Interest Income			812				943			-14	%			2,668				2,743			-3	%
Non-Interest Expense
	Salaries and Employee Benefits			4,717				4,469			6	%			13,353				12,004			11	%
	Occupancy and Equipment			777				756			3	%			2,299				2,124			8	%
	Other Non-Interest Expense			2,260				1,769			28	%			6,273				5,092			23	%
	Total Non-Interest Expense			7,754				6,994			11	%			21,925				19,220			14	%
Net Income Before Provision for Taxes				5,446				4,035			35	%			13,269				12,597			5	%
Provision for Taxes				1,645				1,085			52	%			3,739				3,515			6	%
Net Income			$	3,800			$	2,950			29	%		$	9,531			$	9,082			5	%
	Shares (end of period)			5,176,200				5,130,937			1	%			5,176,200				5,130,937			1	%
	Earnings Per Share – Basic		$	0.73			$	0.58			28	%		$	1.84			$	1.77			4	%
	Return on Average Assets			1.08	%			0.98	%		10	%			0.95	%			1.12	%		-15	%
	Return on Average Equity			17.26	%			12.45	%		39	%			14.72	%			13.64	%		8	%
	Net Interest Margin			3.69	%			3.54	%		4	%			3.39	%			3.75	%		-10	%

American Riviera Bancorp and Subsidiaries
Five Quarter Statements of Income (unaudited)
(dollars in thousands, except per share data)
			Three Months Ended
			September 30,				June 30,				March 31,				December 31,				September 30,
			2022				2022				2022				2021				2021
Interest Income
	Interest and Fees on Loans		$	10,158			$	9,356			$	8,600			$	8,557			$	8,342
	Fees on PPP Loans			199				209				913				517				978
	Net Fair Value Amortization Income			3				(9	)			7				25				419
	Interest on Securities			1,539				1,116				842				645				447
	Interest on Due From Banks			1,046				539				142				139				120
	Total Interest Income			12,944				11,211				10,504				9,883				10,306
Interest Expense
	Interest Expense on Deposits			266				216				210				207				220
	Interest Expense on Borrowings			169				166				67				–				–
	Total Interest Expense			435				382				277				207				220
Net Interest Income				12,509				10,829				10,227				9,676				10,086
	Provision for Loan Losses			122				916				–				–				–
Net Interest Income After Provision				12,387				9,913				10,227				9,676				10,086
Non-Interest Income
	Service Charges, Commissions and Fees			602				672				670				705				601
	Other Non-Interest Income			210				20				494				138				342
	Total Non-Interest Income			812				692				1,164				843				943
Non-Interest Expense
	Salaries and Employee Benefits			4,717				4,326				4,310				4,003				4,469
	Occupancy and Equipment			777				766				755				747				756
	Other Non-Interest Expense			2,260				2,119				1,895				1,991				1,769
	Total Non-Interest Expense			7,754				7,211				6,960				6,741				6,994
Net Income Before Provision for Taxes				5,446				3,394				4,431				3,778				4,035
Provision for Taxes				1,645				818				1,276				1,031				1,085
Net Income			$	3,800			$	2,576			$	3,155			$	2,747			$	2,950
	Shares (end of period)			5,176,200				5,173,373				5,178,965				5,134,993				5,130,937
	Earnings Per Share – Basic		$	0.73			$	0.49			$	0.61			$	0.53			$	0.58
	Net Income pre-tax, pre-provision, pre-PPP fees (Non-GAAP)		$	5,369			$	4,101			$	3,518			$	3,261			$	3,057

American Riviera Bancorp and Subsidiaries
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
			At or for the Three Months Ended
			September 30,				June 30,				March 31,				December 31,				September 30,
			2022				2022				2022				2021				2021
Income and performance ratios:
	Net Income		$	3,800			$	2,576			$	3,155			$	2,747			$	2,950
	Earnings per share – basic			0.73				0.50				0.61				0.53				0.58
	Return on average assets			1.08	%			0.75	%			1.00	%			0.84	%			0.98	%
	Return on average equity			17.26	%			11.40	%			15.58	%			11.20	%			12.45	%
	Cost of Funds			0.16	%			0.12	%			0.09	%			0.07	%			0.08	%
	Cost of Deposits			0.08	%			0.07	%			0.07	%			0.07	%			0.08	%
	Net interest margin			3.69	%			3.26	%			3.22	%			3.12	%			3.54	%
	Efficiency ratio (b)			58.58	%			62.89	%			60.48	%			64.51	%			63.80	%
Asset quality:
	Allowance for loan and lease losses		$	10,500			$	10,367			$	9,394			$	9,383			$	9,376
	Nonperforming assets			6,337				3,505				2,776				2,870				3,349
	Allowance for loan and lease losses / total loans and leases			1.18	%			1.20	%			1.19	%			1.18	%			1.20	%
	Net charge-offs / average loans and leases (annualized)			-0.04	%			-0.03	%			-0.01	%			0.00	%			0.00	%
	Texas ratio (a)			6.07	%			3.94	%			2.95	%			2.85	%			3.41	%
Capital ratios for American Riviera Bank (c):
	Tier 1 risk-based capital			11.68	%			11.85	%			12.53	%			11.02	%			11.09	%
	Total risk-based capital			12.73	%			12.94	%			13.59	%			12.16	%			12.28	%
	Tier 1 leverage ratio			8.48	%			8.29	%			8.75	%			7.23	%			7.59	%
Capital ratios for American Riviera Bancorp (c):
	Tier 1 risk-based capital			10.05	%			10.15	%			10.82	%			N/A				N/A
	Total risk-based capital			11.10	%			11.24	%			11.91	%			N/A				N/A
	Tier 1 leverage ratio			7.29	%			7.11	%			7.27	%			N/A				N/A
Equity and share related:
	Common equity		$	82,134			$	83,512			$	89,673			$	96,273			$	93,819
	Book value per share			–				16.14				17.31				18.75				18.28
	Tangible book value per share			14.90				15.17				16.33				17.76				17.28
	Tangible book value per share, excluding AOCI (d)			19.68				18.90				18.31				17.90				17.34
	Stock closing price per share			–				17.90				20.58				20.29				19.20
	Number of shares issued and outstanding			5,176.20				5,173.37				5,178.97				5,134.99				5,130.94

Notes:
	(a) The sum of Nonperforming assets and Other Real Estate Owned, divided by the sum of Total Shareholder Equity and Total Allowance for Loan and Lease Losses (less Preferred Stock and Intangible Assets).
	(b) Annualized Operating Expense excluding Loan Loss Provisions minus Annualized Extraordinary Expense, divided by Annualized Interest Income including Loan Fees minus Annualized Interest Expense plus Annualized Non-Interest Income minus Annualized Extraordinary Income, expressed as a percentage.
	(c) Current period capital ratios are preliminary.
	(d) Accumulated Other Comprehensive Income (AOCI), is comprised of the tax adjusted unrealized loss on securities and is presented as Other Capital on the Balance Sheet.

 

Contacts

American Riviera Bank

www.americanriviera.bank
805-965-5942

Michelle Martinich