Santa Barbara, California (October 26, 2022) - 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.
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.
Jeff DeVine, President and CEO
Third Quarter Highlights
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.
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.
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.
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.
American Riviera Bank
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.Previous: BankOn Next: ARB Announces Stock Dividend