Located just an hour and a half north of Los Angeles and about 4 1/2 hours south of San Francisco, American Riviera Bank proudly considers itself part of California's vibrant Central Coast. The Bank serves the Santa Barbara and San Luis Obispo counties with six branches spanning Santa Barbara, Montecito, Goleta, Santa Maria, San Luis Obispo, and Paso Robles. The Central Coast is known for its prestigious universities, such as UC Santa Barbara and Cal Poly San Luis Obispo, which attract talented individuals and provide ample opportunities for businesses to flourish.  

The region's economy is further bolstered by tourism, with visitors flocking to enjoy the scenic coastline and indulge in wine-tasting experiences. Despite the challenges faced by the country, Santa Barbara and San Luis Obispo counties have managed to sustain a vibrant economy, with bustling restaurants, thriving hotels, and robust small businesses. This resilience is reflected in American Riviera Bank's loan portfolio, as the utilization of lines of credit has significantly dwindled in recent years, indicating the strength of the local businesses.  

A Merger of Equals and Expansion into New Territories  ¶

In 2016, American Riviera Bank experienced a significant advancement in its growth trajectory through a merger with the Bank of Santa Barbara, resulting in a combined entity with assets exceeding $400 million. This move set the stage for the Bank's ambition to become a billion-dollar institution. Expanding its footprint into San Luis Obispo County, the Bank capitalized on the absence of community banks in the area, establishing a presence in Paso Robles and San Luis Obispo. Beginning with Loan Production Offices (LPOs), these locations evolved into full-fledged branches, contributing approximately $400 million in deposits, and bolstering the overall loan portfolio. In 2022, the Bank further solidified its position by forming a holding company, enabling it to issue subordinated debt on favorable terms to support future growth.  

Diversified Loan Portfolio and Relationship-Based Banking¶

The Bank's commitment to relationship-based banking is exemplified by its emphasis on non-interest-bearing checking accounts, which constitute a significant portion of its total deposits. With approximately 42% of deposits in non-interest-bearing checking and an additional 12% in interest-bearing checking, American Riviera Bank prioritizes building lasting connections with its clients. The Bank reported this approach helps keep costs low and fosters a sense of trust and loyalty among its client base.  

Navigating the Changing Interest Rate Environment  ¶

As with any financial institution, American Riviera Bank faces challenges in navigating the changing interest rate environment. The Bank acknowledges the current higher rate environment has impacted loan demand, with clients opting to minimize borrowing unless necessary. However, this phenomenon also reflects the strength and resilience of the Bank's commercial and industrial (C&I) clients, who have chosen to inject personal funds into their businesses rather than relying solely on borrowing from the Bank.  

The Bank's loan-to-deposit ratio, typically ranging from 85% to 95%, remains within a comfortable range. While loan growth has slowed due to the prevailing interest rates, American Riviera Bank believes the stability and attractive rates offered to its clients provide a solid foundation for weathering any potential economic downturns. The Bank's prudent approach to lending, and its clients' ability to meet their financial obligations, bodes well for their ability to navigate future challenges effectively.  

A Strong Management Team and Commitment to Innovation ¶

American Riviera Bank attributes much of its success to its strong management team, led by President and CEO Jeff DeVine. Recognizing the need to prepare for the Bank's growth past the billion-dollar mark, the management team strategically added vital positions, such as Chief Risk Officer Laurel Sykes and Chief Technology Officer Paul Abramson. With their extensive experience in larger financial institutions, Sykes and Abramson have played instrumental roles in ensuring the Bank's compliance with regulatory expectations and fostering a culture of innovation.  

The Bank prides itself on its youthful and energetic team, which comprises professionals from various backgrounds, including CPAs, attorneys, and individuals from the construction industry. This diverse mix of talent enables American Riviera Bank to provide comprehensive services tailored to its clients' unique needs. In an industry often associated with traditional banking, the Bank's forward-thinking approach and embrace of technology set it apart, ensuring it remains at the forefront of innovation.  

Investing in the Future: The American Riviera Bank Stock  ¶

American Riviera Bank's stock offers an enticing opportunity for investors seeking a stake in a well-managed, community-oriented financial institution. The Bank's emphasis on relationship-based banking and its robust deposit base, with a significant percentage in non-interest-bearing checking accounts, contribute to its stability and future growth potential. With a loan-to-deposit ratio of 85%, American Riviera Bank strikes a balance between profitability and risk management.  

The Bank's stock performance has been commendable, outperforming the KBW Regional Bank Index over the past year and demonstrating resilience even in a challenging economic climate. With trailing earnings per share and annualized earnings per share indicating solid financial performance, American Riviera Bank's stock is trading at an attractive valuation. The Bank's strong capital position and focus on maintaining a diverse and high-quality loan portfolio continue to give confidence to investors looking for long-term growth potential.  

Striving for Balance: Loan and Deposit Mix¶

American Riviera Bank's loan and deposit mix reflects its commitment to balancing risk and profitability. The Bank's loan portfolio encompasses several types of commercial real estate and residential loans, catering to a wide range of clients. While most loans are fixed-rate, providing stability for both borrowers and the Bank, American Riviera Bank has also adapted to the market's demand by offering competitive rates on variable-rate loans.  

The Bank's deposit mix is characterized by a considerable proportion of non-interest-bearing and interest-bearing checking accounts, with a minimal presence of certificates of deposit (CDs). This composition aligns with the preferences of clients in the Central Coast region, where money market accounts are more prevalent than traditional CDs. American Riviera Bank's focus on relationship banking and its ability to attract a stable deposit base contribute to its overall profitability and financial strength.

Ensuring Robust Liquidity and Managing Risk  ¶

American Riviera Bank places significant importance on maintaining robust liquidity to support its operations and manage risk effectively. The Bank's liquidity position is bolstered by a combination of on-balance-sheet and off-balance-sheet sources, with a deliberate focus on avoiding reliance on brokered or wholesale funds. American Riviera Bank aims to minimize its need for external funding by prioritizing deposit growth.  

The Bank's liquidity management strategy involves maintaining a healthy balance between the Federal Reserve, FHLB borrowings, and its deposit base. American Riviera Bank's diverse deposit mix and strong relationship with its clients contribute to its ability to access liquidity when needed. The Bank's prudent approach to liquidity management enhances its resilience and ensures it can adapt to changing market conditions while safeguarding the interests of its clients and stakeholders.  

Credit Quality: A Pillar of Strength¶

American Riviera Bank's commitment to maintaining strong credit quality has been a key factor in its success. With zero or negative charge-offs for three consecutive years and net recoveries in several quarters, the Bank has effectively mitigated credit risk. The Bank's credit portfolio exhibits a minimal number of non-accrual loans, indicating the overall health of its loan book.  

The Bank conducts regular stress tests and analyzes updated financial information from its borrowers to ensure the accuracy of loan-to-value ratios and debt coverage ratios. Regulators have commended American Riviera Bank for the prudent management of its commercial real estate portfolio, which remains diverse and well-structured. The Bank's clients, many of whom have personal guarantees and favorable loan terms, further enhance the Bank's confidence in its credit quality.

Capital Strength and Performance  ¶

American Riviera Bank's capital strength is a testament to its sound financial management and prudent risk management practices. The Bank's regulatory capital ratios have consistently increased over the past year, reflecting its commitment to maintaining a strong capital position. The Total Capital to Risk-Weighted Assets ratio, a key measure of financial strength, has shown significant improvement, reassuring investors and stakeholders.  

The Bank's profitability trends were impacted by several factors, including changes in interest rates, expenses related to office space consolidation, and technology projects. However, American Riviera Bank remains optimistic about its future profitability, with expected cost reductions and increased efficiencies resulting from the technology projects. The Bank's focus on innovation and ability to adapt to evolving market conditions positions it well for continued growth and success.  

Conclusion: A Bright Future Ahead  ¶

American Riviera Bank's presentation at the Virtual Bank Conference highlighted the Bank's journey of growth, resilience, and commitment to its clients and stakeholders. With a strong management team, a diverse loan portfolio, and a relationship-based approach to banking, the Bank has established itself as a trusted partner for businesses and individuals on the Central Coast of California.  

While challenges and uncertainties may arise in the banking industry, American Riviera Bank's proactive measures, capital strength, and prudent risk management practices provide a solid foundation for future growth. The Bank's focus on innovation and technology ensures it remains at the forefront of the industry, offering the best possible services to its clients.  

American Riviera Bank stressed its commitment to maintaining strong credit quality, robust liquidity, and a diverse deposit base, which sets it apart while navigating the ever-changing financial landscape. With a bright future ahead, American Riviera Bank is poised to further strengthen its position as a leading financial institution on the Central Coast of California and beyond.  

This dynamic event is the ultimate nexus where banks and investors can share and ask questions with industry leaders. With thought-provoking discussions and unparalleled insights into emerging trends, this conference is a “must attend” for those seeking to stay ahead in the ever-evolving financial ecosystem. Please visit the Virtual Bank Conference website to access all previously recorded presentations.  

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