The Bank reported an annualized return on average assets of 0.67% and return on average equity of 6.27%. The variance from prior year is attributed to conservative risk management practices with the Bank providing $783,000 in allowance for loan losses primarily due to anticipated economic impacts from the COVID-19 pandemic, an increase of $608,000 from the same reporting period in the prior year.
American Riviera Bank entered the COVID-19 crisis in a position of strength and remains well capitalized and highly liquid. The Bank offers robust electronic banking services, including mobile deposit for consumers and remote deposit capture for businesses. We have been able to successfully modify branch operations to safely meet all the needs of our customers despite the need for appropriate social distancing and continue to see tremendous growth of new and existing relationships.
“Our thoughts go out to our Central Coast community, individuals, and businesses most deeply affected by the COVID-19 pandemic. American Riviera Bank is playing an important role in the economic stability of Santa Barbara and San Luis Obispo Counties. We are taking extraordinary steps to provide much needed financing and relief to our clients and community during this difficult time.”
Jeff DeVine, President and Chief Executive Officer
As a SBA Preferred Lender, we were able to move quickly and deploy an automated Paycheck Protection Program (PPP) loan application portal. To date, the Bank has funded 416 applications, with an average loan amount of approximately $230,000, for existing business clients in the first round of the CARES Act funding. We have already obtained 134 more SBA PPP approvals thus far with the second round of funding recently announced. Our PPP loans currently represent over $113 million of much needed small business relief and could save almost 12,000 jobs in our community. The number of SBA PPP loans represents almost 2 years of normal new loan production for the Bank, which will be processed, approved, documented and funded in the span of approximately one month. The dollar volume of SBA PPP loans represents over 18% of the total loans outstanding at March 31, 2020.
At the same time, American Riviera Bank has been working closely with existing loan clients negatively affected by the COVID-19 pandemic, and has provided temporary payment deferrals through the date of this release covering $109 million of loans. Approximately 92% of such deferrals are to borrowers wishing to conserve cash for the economic uncertainty and have asked for the principal portion of their payments to be deferred while continuing to pay interest. The remaining 8% is predominantly associated with our residential mortgage portfolio loans where the temporary deferral of both principal and interest is currently industry practice. The sizeable increase in loan loss provision this quarter was primarily driven by qualitative factors in our modeling and a general expectation of expanded credit risk due to the economic effects of COVID-19. For the reasons above, we anticipate continued above-average provisioning and reserve build in subsequent periods, but anticipate that the origination fees paid by the SBA on PPP loans may substantially offset such incremental credit expenses.
The Bank reported strong loan growth, with gross loans increasing $83 million, or 16% from March 31, 2019, reaching $604 million at March 31, 2020. This increase in loans is primarily due to new loan origination with the Bank originating $39 million in new loans outstanding, excluding draws on existing lines of credit, in the first quarter of 2020.
The Bank has experienced significant growth, reporting $743 million in total assets as of March 31, 2020, representing a $105 million, or 16% increase from March 31, 2019. Total deposits increased 18% from March 31, 2019 reaching $645 million at March 31, 2020. Non-interest bearing demand deposit accounts increased $32 million, or 17% from the same reporting period in the prior year, reaching $219 million at March 31, 2020. Interest bearing demand deposit accounts increased $41 million, or 54% from the same reporting period in the prior year, reaching $117 million at March 31, 2020. Net interest margin increased to 4.27% for the quarter due to the Bank’s ability to deploy excess liquidity into loans and a reduction in the cost of deposits due to Federal Reserve actions during the quarter.
As of March 31, 2020, American Riviera Bank has a strong capital position with a Tier 1 Capital Ratio of 11%; well above the regulatory guideline of 8% for well capitalized institutions. The tangible book value per share of American Riviera Bank common stock is $14.30 at March 31, 2020.
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.
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