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American Riviera Bank Reports on Earnings and Paycheck Protection Program

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.        
Next: ICBA Honors American Riviera Bank for Exceptional Service During COVID-19