American Riviera Bancorp Announces Earnings for the Fourth Quarter of 2022

SANTA BARBARA, Calif., January 27, 2023--(BUSINESS WIRE)--American Riviera Bancorp ("Company") (OTCQX: ARBV), holding company of American Riviera Bank ("Bank"), announced today unaudited net income of $13.5 million ($2.37 per share) for the twelve months ended December 31, 2022 compared to the $11.8 million ($2.09 per share) earned in the same reporting period in the previous year. Unaudited net income was $4.0 million ($0.70 per share) for the three months ended December 31, 2022, compared to the $2.7 million ($0.49 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 a strong deposit base.

Jeff DeVine, President and CEO of the Company and the Bank stated, "We are pleased to report improved profitability, continued loan growth, expanding capital ratios, strong credit quality, and a balance sheet supported by local deposits from relationship clients. The Federal Reserve’s actions to date to increase rates and remove excess liquidity from the financial system have only modestly decelerated loan growth and increased funding costs."

Fourth Quarter Highlights

  • Return on average assets for the fourth quarter ended December 31, 2022, was 1.14%, an increase from 1.08% in the previous quarter and 0.84% in the same quarter last year.

  • Total loans, excluding Paycheck Protection Program ("PPP") loans, reached $907.6 million at December 31, 2022, an increase of $21.5 million or 2.4% from the prior quarter end and $154.1 million or 20.4% from December 31, 2021.

  • Non-interest-bearing demand deposits totaled $478.5 million at December 31, 2022, a decrease of $41.3 million or 7.9% from the prior quarter end and an increase of $7.8 million or 1.6% from December 31, 2021. Non-interest-bearing demand deposits now represent 41.1% of total deposits. This reduction in deposit balances occurred late in the fourth quarter of 2022 as some Bank clients decided to reinvest their excess cash in non-FDIC insured, external investment products.

  • Net interest margin increased to 3.94% for the fourth quarter of 2022, compared to 3.69% for the prior quarter and 3.12% for the same quarter in the prior year.

  • Total cost of funding sources increased to 0.26% for the fourth quarter of 2022, compared to 0.16% in the prior quarter and 0.07% for the same quarter in the prior year. Total cost of deposits, including non-interest-bearing demand deposits, has increased to 0.21% for the fourth quarter of 2022, compared to 0.08% in the prior quarter and 0.07% for the same quarter in the prior year.

  • Provision for loan losses for the fourth quarter of 2022 was $0.1 million, the same as in the previous quarter. Year-to-date provision in 2022 of $1.1 million exceeds the $0.3 million expensed in the prior year due to strong organic loan growth, and not credit quality concerns.

  • Allowance for loan losses was 1.17% of total loans at December 31, 2022, compared with 1.18% at September 30, 2022 and December 31, 2021.

  • The Bank maintained strong credit quality with no other real estate owned, no loans 90 days or more past due, and only $3.1 million or 0.34% of total loans on non-accrual status, which are well supported by collateral and reserves.

  • Tangible book value per share was $14.43 at December 31, 2022, up from the $13.55 at September 30, 2022 due to strong earnings in the fourth quarter of 2022 and stable market value of the available-for-sale investment portfolio.

  • All Bank capital ratios were above regulatory requirements for a well-capitalized institution with a total risk-based capital ratio of 12.89% for the fourth quarter of 2022, as compared to 12.73% in the previous quarter and 12.16% in the same quarter of 2021.

Fourth Quarter Earnings

For the fourth quarter of 2022, unaudited net income was $4.0 million, compared to $3.8 million in the third quarter of 2022, and $2.8 million in the fourth quarter of 2021. For the fourth quarter of 2022, unaudited net income pre-tax, pre-provision, pre-PPP fees (a non-GAAP measure) was $5.6 million, compared to $5.4 million in the third quarter of 2022, and $3.3 million in the fourth quarter of 2021.

Net interest income continues to benefit from the Federal Reserve’s actions to increase short-term rates as evidenced by the $0.3 million or 26% increase in Interest on Due From Banks from the previous quarter, and $1.2 million or 852% increase from the same quarter last year. However, deposit rates have adjusted upward from historically low levels as interest expense on deposits increased $0.4 million or 152% during the fourth quarter of 2022 compared to prior quarter and increased $0.5 million or 223% compared to the fourth quarter of 2021.

Non-Interest Income and Expense

Non-interest income was $0.7 million for the fourth quarter of 2022, compared to $0.8 million for the third quarter of 2022 and $0.8 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 consistent over the periods analyzed.

Non-interest expense was $8.4 million for the fourth quarter of 2022, compared to $7.8 million in the third quarter of 2022 and $6.7 million for the same period last year. The increase in non-interest expense in the fourth quarter of 2022 is primarily attributable to additional incentive plan accrual based on the strong performance of the Bank and timing of certain expenses, such as advertising and annual sponsorships. With the relaxing of COVID restrictions, expenses related to business development and marketing have moved back to historical levels. The Company remains committed to making investments in systems and staffing to support continued growth while maximizing efficiencies. Occupancy expenses are temporarily elevated as the Company is in the process of consolidating office space which is expected to result in efficiencies in the second half of 2023.

Loans and Asset Quality

Total loans, excluding PPP loans, reached $907.6 million at December 31, 2022, an increase of $21.5 million or 2.4% from the prior quarter end and $154.1 million or 20.4% from December 31, 2021.

The Allowance for Loan Losses increased $0.1 million to $10.6 million at December 31, 2022 with a resulting coverage ratio of 1.17% of total loans, as compared to $10.5 million or 1.18% at September 30, 2022 and $9.4 million or 1.18% at December 31, 2021. The Allowance percentage has remained consistent over the periods analyzed with increased dollars primarily attributable to continued organic loan growth and not credit quality concerns.

Loan charge-offs totaled zero and loan recoveries totaled $0.1 million for the entire year of 2022. As of December 31, 2022, non-accrual loans totaled $3.1 million, down $3.3 million compared to the previous quarter. The decrease in non-accrual loans during the quarter relates to two loans fully paid off. $2.3 million of the non-accrual total at December 31, 2022 is comprised of one loan which is real estate secured at a 29% 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 $1.2 billion at December 31, 2022 representing a decrease of $100.3 million, or 7.9%, from September 30, 2022, and a decrease of $38.6 million, or 3.2% since December 31, 2021. This reduction in deposit balances occurred late in the fourth quarter of 2022 as some Bank clients decided to reinvest their excess cash in non-FDIC insured, external investment products. Total non-interest-bearing deposits represented 41.1% of total deposits at December 31, 2022. The Bank had no brokered deposits or Federal Home Loan Bank advances in its funding base as of December 31, 2022.

Shareholders’ Equity

Total shareholders’ equity was $87.1 million at December 31, 2022, a $5.0 million or 6.0% increase since September 30, 2022, and a decrease of $9.2 million or 9.5% over prior year. The tax adjusted unrealized loss on securities, which is a component of equity (accumulated other comprehensive income or "AOCI"), reduced slightly from $24.7 million at the end of the third quarter of 2022 to $23.9 million at the end of the fourth quarter of 2022, resulting in an additional $0.8 million expansion of shareholders equity for the fourth quarter. Industry-wide there has been a material decline in market value of fixed income securities in 2022, 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.

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)

Dec 31,

Dec 31,

One Year

One Year

2022

2021

$ Change

% Change

Assets

Cash & Due From Banks

$

61,801

$

292,111

$

(230,310

)

-79

%

Available for sale securities

223,281

191,543

31,738

17

%

Held to maturity securities

41,293

-

41,293

100

%

Loans (excluding PPP)

907,580

753,494

154,086

20

%

PPP Loans

105

39,996

(39,891

)

-100

%

Allowance For Loan Losses

(10,626

)

(9,383

)

(1,243

)

13

%

Net Loans

897,059

784,107

112,952

14

%

Premise & Equipment

12,347

10,429

1,918

18

%

Goodwill and Other Intangibles

4,947

5,075

(128

)

-3

%

Other Assets

40,931

23,275

17,656

76

%

Total Assets

$

1,281,659

$

1,306,540

$

(24,881

)

-2

%

Liabilities & Shareholders' Equity

Demand Deposits

$

478,519

$

470,763

$

7,756

2

%

NOW Accounts

184,138

181,546

2,592

1

%

Other Interest Bearing Deposits

500,870

549,781

(48,911

)

-9

%

Total Deposits

1,163,527

1,202,090

(38,563

)

-3

%

Borrowed Funds

18,000

-

18,000

100

%

Other Liabilities

13,036

8,177

4,859

59

%

Total Liabilities

1,194,563

1,210,267

(15,704

)

-1

%

Common Stock

57,458

56,564

894

2

%

Retained Earnings

53,560

40,432

13,128

32

%

Other Capital

(23,922

)

(723

)

(23,199

)

3,209

%

Total Shareholders' Equity

87,096

96,273

(9,177

)

-10

%

Total Liabilities & Shareholders' Equity

$

1,281,659

$

1,306,540

$

(24,881

)

-2

%

American Riviera Bancorp and Subsidiaries

Balance Sheets (unaudited)

(dollars in thousands)

December 31,

September 30,

June 30,

March 31,

December 31,

2022

2022

2022

2022

2021

Assets

Cash & Due From Banks

$

61,801

$

178,882

$

212,675

$

320,683

$

292,111

Available for sale securities

223,281

222,910

250,132

220,364

191,543

Held to maturity securities

41,293

41,241

-

-

-

Loans (excluding PPP)

907,580

886,087

854,593

776,395

753,494

PPP Loans

105

121

6,169

11,633

39,996

Allowance For Loan Losses

(10,626

)

(10,500

)

(10,367

)

(9,394

)

(9,383

)

Net Loans

897,059

875,708

850,395

778,634

784,107

Premise & Equipment

12,347

9,649

9,491

9,948

10,429

Goodwill and Other Intangibles

4,947

4,984

5,025

5,080

5,075

Other Assets

40,931

38,033

35,470

27,327

23,275

Total Assets

$

1,281,659

$

1,371,407

$

1,363,188

$

1,362,036

$

1,306,540

Liabilities & Shareholders' Equity

Demand Deposits

$

478,519

$

519,796

$

487,187

$

481,619

$

470,763

NOW Accounts

184,138

184,138

196,485

193,178

181,546

Other Interest Bearing Deposits

500,870

559,914

571,544

571,595

549,781

Total Deposits

1,163,527

1,263,848

1,255,216

1,246,392

1,202,090

Borrowed Funds

18,000

18,000

18,000

18,000

-

Other Liabilities

13,036

7,425

6,460

7,971

8,177

Total Liabilities

1,194,563

1,289,273

1,279,676

1,272,363

1,210,267

Common Stock

57,458

57,123

56,897

56,554

56,564

Retained Earnings

53,560

49,722

45,922

43,370

40,432

Other Capital

(23,922

)

(24,711

)

(19,307

)

(10,251

)

(723

)

Total Shareholders' Equity

87,096

82,134

83,512

89,673

96,273

Total Liabilities & Shareholders' Equity

$

1,281,659

$

1,371,407

$

1,363,188

$

1,362,036

$

1,306,540

American Riviera Bancorp and Subsidiaries

Statement of Income (unaudited)

(dollars in thousands, except per share data)

Quarter Ended

Twelve Months Ended

Dec 31,

Dec 31,

Dec 31,

Dec 31,

2022

2021

Change

2022

2021

Change

Interest Income

Interest and Fees on Loans

$

11,081

$

8,557

29

%

$

39,189

$

33,613

17

%

Fees on PPP Loans

-

517

-100

%

1,321

3,853

-66

%

Net Fair Value Amortization Income

-

25

-100

%

7

506

-99

%

Interest on Securities

1,716

645

166

%

5,212

1,674

211

%

Interest on Due From Banks

1,323

139

852

%

3,049

391

680

%

Total Interest Income

14,120

9,883

43

%

48,778

40,037

22

%

Interest Expense

Interest Expense on Deposits

669

207

223

%

1,362

948

44

%

Interest Expense on Borrowings

169

-

100

%

571

-

100

%

Total Interest Expense

838

207

305

%

1,932

742

160

%

Net Interest Income

13,282

9,676

37

%

46,846

39,089

20

%

Provision for Loan Losses

109

-

100

%

1,147

338

239

%

Net Interest Income After Provision

13,173

9,676

36

%

45,699

38,751

18

%

Non-Interest Income

Service Charges, Commissions and Fees

522

705

-26

%

2,467

2,623

-6

%

Other Non-Interest Income

157

138

14

%

881

962

-8

%

Total Non-Interest Income

679

843

-19

%

3,347

3,585

-7

%

Non-Interest Expense

Salaries and Employee Benefits

4,948

4,003

...