The Bank reported an annualized return on average assets of 0.72% and return on average equity of 7.23%. The variance from prior year is primarily due to an increase in the allowance for loan losses related to COVID-19 pandemic economic uncertainty, with the Bank reporting $1,493,000 in loan loss provision in the first six months of 2020, an increase of $1,098,000 from the same reporting period in the prior year. The Bank reported unaudited net income of $1,565,000 ($0.31 per share) for the second quarter ended June 30, 2020 compared to $1,506,000 ($0.30 per share) for the same quarter last year.
“We are fully committed to the safety of our employees and clients, while helping the Central Coast adapt to the impact of the COVID-19 pandemic. The Bank’s liquidity and capital position provide considerable capacity to lend, and we will continue to build new relationships, provide flexibility to our existing clients and build value for our shareholders despite the pandemic."
Jeff DeVine, President and Chief Executive Officer
American Riviera Bank has been able to continue to provide a high level of service through the COVID-19 pandemic with modified branch hours, robust electronic banking services and quick responses to customers’ lending and deposit needs. We originated over 600 Small Business Administration Paycheck Protection Program (PPP) loans, with an average loan amount of approximately $194 thousand, representing $117 million of much needed small business relief to our community and supporting approximately 12,300 local jobs. The Bank has received $4.2 million in PPP origination fees and recognized $397 thousand as income in the quarter ended June 30, 2020, with the remainder to be amortized over the life of the loans.
The Bank has been working closely with existing loan clients negatively affected by the COVID-19 pandemic, and has provided temporary, 90-day payment deferrals as of June 30, 2020 covering $108 million of loans, unchanged from March 31, 2020. Approximately 83% of such deferrals are to borrowers wishing to conserve cash for the economic uncertainty and who have asked for the principal portion of their payments to be deferred while continuing to pay interest. The remaining 17% are full deferrals of both principal and interest, with almost half of these 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 year-to-date was primarily driven by qualitative factors in our loan loss methodology related to COVID-19 pandemic economic uncertainty, and not by actual delinquencies or defaults. At June 30, 2020, the Bank had no other real estate owned and no loans 90 days or more past due.
We continued to see tremendous growth of new and existing relationships, reporting $903 million in total assets as of June 30, 2020, representing a $241 million, or 36% increase from June 30, 2019. Total loans, excluding PPP, increased $73 million, or 14% from June 30, 2019, reaching $615 million at June 30, 2020. Total deposits increased 40% from June 30, 2019 reaching $793 million at June 30, 2020. Non-interest bearing demand deposit accounts increased $142 million, or 76% from the same reporting period in the prior year. Interest bearing demand deposit accounts increased $48 million, or 65% from the same reporting period in the prior year. Although deposit growth was accelerated by the funding of PPP loans into existing client accounts, there were significant new account relationships moved from other financial institutions. New deposit account openings net of account closures are 550 in the second quarter 2020 versus 306 in the second quarter of 2019.
As of June 30, 2020, American Riviera Bank was highly liquid with $142 million in cash and available-for-sale securities, and well capitalized 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 was $14.62 at June 30, 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.
| Balance Sheets (unaudited) | |||||||
| (dollars in thousands) | |||||||
| Jun 30, | Jun 30, | One Year | |||||
| 2020 | 2019 | Change | |||||
| Assets | |||||||
| Cash & Due From Banks | $ 84,722 | $ 47,640 | 78% | ||||
| Fed Funds Sold | - | - | n/a | ||||
| Securities | 57,099 | 42,961 | 33% | ||||
| Loans (excluding PPP) | 615,367 | 541,869 | 14% | ||||
| PPP Loans | 116,531 | - | n/a | ||||
| Allowance For Loan Losses | (7,890) | (5,883) | 34% | ||||
| Net Loans | 724,008 | 535,986 | 35% | ||||
| Premise & Equipment | 6,731 | 6,528 | 3% | ||||
| Goodwill and Other Intangibles | 5,248 | 5,427 | -3% | ||||
| Other Assets | 24,846 | 23,054 | 8% | ||||
| Total Assets | $ 902,654 | $ 661,596 | 36% | ||||
| Liabilities & Shareholders' Equity | |||||||
| Demand Deposits | $ 328,748 | $ 186,845 | 76% | ||||
| NOW Accounts | 121,741 | 73,782 | 65% | ||||
| Other Interest Bearing Deposits | 342,668 | 304,223 | 13% | ||||
| Total Deposits | 793,157 | 564,850 | 40% | ||||
| Borrowed Funds | 20,000 | 15,000 | 33% | ||||
| Other Liabilities | 9,772 | 8,806 | 11% | ||||
| Total Liabilities | 822,929 | 588,656 | 40% | ||||
| Common Stock | 55,418 | 54,739 | 1% | ||||
| Retained Earnings | 23,960 | 18,105 | 32% | ||||
| Other Capital | 347 | 96 | 261% | ||||
| Total Shareholders' Equity | 79,725 | 72,940 | 9% | ||||
| Total Liabilities & Shareholders' Equity | $ 902,654 | $ 661,596 | 36% | ||||
| Balance Sheets (unaudited) | |||||||||||
| (dollars in thousands) | |||||||||||
| June, 30 | March 31, | December 31, | September 30, | June 30, | |||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | |||||||
| Assets | |||||||||||
| Cash & Due From Banks | $ 84,722 | $ 59,793 | $ 66,472 | $ 79,101 | $ 47,640 | ||||||
| Fed Funds Sold | - | - | - | - | - | ||||||
| Securities | 57,099 | 50,518 | 43,403 | 41,797 | 42,961 | ||||||
| Loans (excluding PPP) | 615,367 | 603,631 | 578,458 | 547,956 | 541,869 | ||||||
| PPP Loans | 116,531 | - | - | - | - | ||||||
| Allowance For Loan Losses | (7,890) | (7,171) | (6,366) | (6,145) | (5,883) | ||||||
| Net Loans | 724,008 | 596,460 | 572,092 | 541,811 | 535,986 | ||||||
| Premise & Equipment | 6,731 | 6,832 | 6,878 | 6,812 | 6,528 | ||||||
| Goodwill and Other Intangibles | 5,248 | 5,293 | 5,337 | 5,382 | 5,427 | ||||||
| Other Assets | 24,846 | 24,514 | 24,753 | 22,364 | 23,054 | ||||||
| Total Assets | $ 902,654 | $ 743,410 | $ 718,935 | $ 697,267 | $ 661,596 | ||||||
| Liabilities & Shareholders' Equity | |||||||||||
| Demand Deposits | $ 328,748 | $ 219,331 | $ 216,671 | $ 207,643 | $ 186,845 | ||||||
| NOW Accounts | 121,741 | 117,453 | 87,906 | 79,509 | 73,782 | ||||||
| Other Interest Bearing Deposits | 342,668 | 308,666 | 316,586 | 316,124 | 304,223 | ||||||
| Total Deposits | 793,157 | 645,450 | 621,163 | 603,276 | 564,850 | ||||||
| Borrowed Funds | 20,000 | 10,000 | 10,000 | 10,000 | 15,000 | ||||||
| Other Liabilities | 9,772 | 10,723 | 11,629 | 9,452 | 8,806 | ||||||
| Total Liabilities | 822,929 | 666,173 | 642,792 | 622,728 | 588,656 | ||||||
| Common Stock | 55,418 | 55,084 | 55,034 | 54,889 | 54,739 | ||||||
| Retained Earnings | 23,960 | 22,395 | 21,224 | 19,653 | 18,105 | ||||||
| Other Capital | 347 | (242) | (115) | (3) | 96 | ||||||
| Total Shareholders' Equity | 79,725 | 77,237 | 76,143 | 74,539 | 72,940 | ||||||
| Total Liabilities & Shareholders' Equity | $ 902,654 | $ 743,410 | $ 718,935 | $ 697,267 | $ 661,596 | ||||||
| Statements of Income (unaudited) | |||||||||||||
| (dollars in thousands, except per share data) | |||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||
| Jun 30, | Jun 30, | Jun 30, | Jun 30, | ||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||
| Interest Income | |||||||||||||
| Interest and Fees on Loans | $ 7,546 | $ 6,992 | 8% | $ 15,083 | $ 13,672 | 10% | |||||||
| Interest and Fees on PPP Loans | 611 | - | n/a | 611 | - | n/a | |||||||
| Net Fair Value Amortization Income | 46 | 86 | -47% | 162 | 308 | -47% | |||||||
| Interest on Securities | 246 | 230 | 7% | 569 | 514 | 11% | |||||||
| Interest on Fed Funds | - | - | n/a | - | 1 | -100% | |||||||
| Interest on Due From Banks | 72 | 205 | -65% | 259 | 403 | -36% | |||||||
| Total Interest Income | 8,521 | 7,513 | 13% | 16,683 | 14,898 | 12% | |||||||
| Interest Expense | |||||||||||||
| Interest Expense on Deposits | 501 | 998 | -50% | 1,363 | 1,822 | -25% | |||||||
| Interest Expense on Borrowings | 48 | 60 | -20% | 101 | 202 | -50% | |||||||
| Total Interest Expense | 549 | 1,058 | -48% | 1,464 | 2,024 | -28% | |||||||
| Net Interest Income | 7,972 | 6,455 | 24% | 15,219 | 12,874 | 18% | |||||||
| Provision for Loan Losses | 710 | 220 | 223% | 1,493 | 395 | 278% | |||||||
| Net Interest Income After Provision | 7,262 | 6,235 | 16% | 13,726 | 12,479 | 10% | |||||||
| Non-Interest Income | |||||||||||||
| Service Charges, Commissions and Fees | 463 | 580 | -20% | 965 | 1,007 | -4% | |||||||
| Other Non-Interest Income | 159 | 113 | 41% | 352 | 279 | 26% | |||||||
| Total Non-Interest Income | 622 | 693 | -10% | 1,317 | 1,286 | 2% | |||||||
| Non-Interest Expense | |||||||||||||
| Salaries and Employee Benefits | 3,495 | 2,881 | 21% | 6,947 | 5,573 | 25% | |||||||
| Occupancy and Equipment | 666 | 546 | 22% | 1,351 | 1,040 | 30% | |||||||
| Other Non-Interest Expense | 1,534 | 1,366 | 12% | 2,917 | 2,679 | 9% | |||||||
| Total Non-Interest Expense | 5,695 | 4,793 | 19% | 11,215 | 9,292 | 21% | |||||||
| Net Income Before Provision for Taxes | 2,189 | 2,135 | 3% | 3,828 | 4,473 | -14% | |||||||
| Provision for Taxes | 624 | 629 | -1% | 1,092 | 1,199 | -9% | |||||||
| Net Income | $ 1,565 | $ 1,506 | 4% | $ 2,736 | $ 3,274 | -16% | |||||||
| Shares (end of period) | 5,069,523 | 5,028,906 | 1% | 5,069,523 | 5,028,906 | 1% | |||||||
| Earnings Per Share - Basic | $ 0.31 | $ 0.30 | 3% | $ 0.54 | $ 0.65 | -17% | |||||||
| Return on Average Assets | 0.76% | 0.95% | -20% | 0.72% | 1.07% | -33% | |||||||
| Return on Average Equity | 8.18% | 8.46% | -3% | 7.23% | 10.06% | -28% | |||||||
| Net Interest Margin | 3.98% | 4.27% | -7% | 4.11% | 4.34% | -5% | |||||||
| Five Quarter Statements of Income (unaudited) | |||||||||||
| (dollars in thousands) | |||||||||||
| Three Months Ended | |||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | |||||||
| Interest Income | |||||||||||
| Interest and Fees on Loans | $ 7,546 | $ 7,537 | $ 7,387 | $ 7,224 | $ 6,992 | ||||||
| Interest and Fees on PPP Loans | 611 | - | - | - | - | ||||||
| Net Fair Value Amortization Income | 46 | 115 | 62 | 71 | 86 | ||||||
| Interest on Securities | 246 | 323 | 247 | 264 | 230 | ||||||
| Interest on Fed Funds | - | - | - | - | - | ||||||
| Interest on Due From Banks | 72 | 187 | 290 | 291 | 205 | ||||||
| Total Interest Income | 8,521 | 8,162 | 7,986 | 7,850 | 7,513 | ||||||
| Interest Expense | |||||||||||
| Interest Expense on Deposits | 501 | 862 | 1,085 | 1,065 | 998 | ||||||
| Interest Expense on Borrowings | 48 | 53 | 43 | 32 | 60 | ||||||
| Total Interest Expense | 549 | 915 | 1,128 | 1,097 | 1,058 | ||||||
| Net Interest Income | 7,972 | 7,247 | 6,858 | 6,753 | 6,455 | ||||||
| Provision for Loan Losses (a) | 710 | 783 | 205 | 205 | 220 | ||||||
| Net Interest Income After Provision | 7,262 | 6,464 | 6,653 | 6,548 | 6,235 | ||||||
| Non-Interest Income | |||||||||||
| Service Charges, Commissions and Fees | 463 | 502 | 566 | 523 | 580 | ||||||
| Other Non-Interest Income | 159 | 193 | 199 | 216 | 113 | ||||||
| Total Non-Interest Income | 622 | 695 | 765 | 739 | 693 | ||||||
| Non-Interest Expense | |||||||||||
| Salaries and Employee Benefits | 3,495 | 3,452 | 3,212 | 3,137 | 2,881 | ||||||
| Occupancy and Equipment | 666 | 685 | 665 | 653 | 546 | ||||||
| Other Non-Interest Expense | 1,534 | 1,383 | 1,309 | 1,303 | 1,366 | ||||||
| Total Non-Interest Expense | 5,695 | 5,520 | 5,186 | 5,093 | 4,793 | ||||||
| Net Income Before Provision for Taxes | 2,189 | 1,639 | 2,232 | 2,194 | 2,135 | ||||||
| Provision for Taxes | 624 | 468 | 660 | 647 | 629 | ||||||
| Net Income | $ 1,565 | $ 1,171 | $ 1,572 | $ 1,547 | $ 1,506 | ||||||
| Shares (end of period) | 5,069,523 | 5,047,696 | 5,033,348 | 5,031,788 | 5,028,906 | ||||||
| Earnings Per Share - Basic | $ 0.31 | $ 0.23 | $ 0.31 | $ 0.31 | $ 0.30 | ||||||
| Notes: | |||||||||||
| (a) In the first and second quarter of 2020, the Bank recorded additional allowance for loan loss provision due to potential economic impacts from the COVID 19 pandemic. | |||||||||||
| Selected Financial Highlights (unaudited) | |||||||||||
| (dollars in thousands, except per share data) | |||||||||||
| At or for the Three Months Ended | |||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||
| 2020 | 2020 | 2019 | 2019 | 2019 | |||||||
| Income and performance ratios: | |||||||||||
| Net Income | $ 1,565 | $ 1,171 | $ 1,572 | $ 1,547 | $ 1,506 | ||||||
| Eamings per share - basic | 0.31 | 0.23 | 0.31 | 0.31 | 0.30 | ||||||
| Retum on average assets | 0.76% | 0.67% | 0.85% | 0.89% | 0.95% | ||||||
| Return on average equity | 8.18% | 6.27% | 8.04% | 8.09% | 8.46% | ||||||
| Net interest margin | 3.98% | 4.27% | 4.06% | 4.23% | 4.27% | ||||||
| Net interest margin (excluding PPP loans) | 4.12% | n/a | n/a | n/a | n/a | ||||||
| Efficiency ratio | 65.96% | 69.18% | 68.49% | 68.46% | 66.90% | ||||||
| Asset quality: | |||||||||||
| Allowance for loan and lease losses | $ 7,890 | $ 7,171 | $ 6,366 | $ 6,145 | $ 5,883 | ||||||
| Nonperforming assets | 40 | 341 | 284 | 276 | 281 | ||||||
| Allowance for loan and lease losses / total loans and leases | 1.08% | 1.19% | 1.10% | 1.12% | 1.09% | ||||||
| Allowance for loan and lease losses / total loans and leases (excluding PPP loans) (b) | 1.28% | n/a | n/a | n/a | n/a | ||||||
| Net charge-offs / average loans and leases (annualized) | -0.01% | ‐0.01% | -0.01% | -0.04% | 0.00% | ||||||
| Texas ratio | 0.05% | 0.43% | 0.37% | 0.37% | 0.38% | ||||||
| Other ratios: | |||||||||||
| Tier 1 risk-based capital (a) | 11.31% | 11.17% | 11.35% | 11.56% | 11.56% | ||||||
| Total risk-based capital (a) | 12.54% | 12.30% | 12.40% | 12.62% | 12.61% | ||||||
| Common equity tier 1 risk-based capital (a) | 11.31% | 11.17% | 11.35% | 11.56% | 11.56% | ||||||
| Tier 1 leverage ratio (a) | 8.87% | 10.04% | 10.04% | 10.32% | 10.48% | ||||||
| Equity and share related: | |||||||||||
| Common equity | $ 79,725 | 77,237 | $ 76,143 | $ 74,539 | $ 72,940 | ||||||
| Book value per share | 15.66 | 15.35 | 15.15 | 14.81 | 14.49 | ||||||
| Tangible book value per share | 14.62 | 14.30 | 14.09 | 13.74 | 13.41 | ||||||
| Stock closing price per share | 12.25 | 12.00 | 19.80 | 17.85 | 18.35 | ||||||
| Number of shares issued and outstanding | 5,070 | 5,048 | 5,033 | 5,032 | 5,029 | ||||||
| Notes: | |||||||||||
| (a) Presented as projected for most recent quarter and actual for the remaining periods. | |||||||||||
| (b) PPP loans are 100% guaranteed by the Small Business Administration and not subject to provision for loan and lease losses. | |||||||||||
