American Riviera Bank Reports on Earnings and Paycheck Protection Program

News item July 27, 2020 by Michelle Martinich

Santa Barbara, California (July 27, 2020) – American Riviera Bank (OTC Markets: ARBV) announced today unaudited net income of $2,736,000 ($0.54 per share) for the six months ended June 30, 2020. This represents a decrease in net income from the $3,274,000 ($0.65 per share) for the same reporting period in the prior year.

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.

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