American Riviera Bancorp (“Company”) (OTCQX: ARBV), holding company of American Riviera Bank (“Bank”), announced today unaudited net income was $2.2 million ($0.37 per share) for the quarter ended March 31, 2024, compared to $2.2 million ($0.38 per share) in the previous quarter, and $3.0 million ($0.52 per share) earned in the same reporting period in the previous year. Earnings for the last two quarters have remained stable despite the continued high-rate environment.

Jeff DeVine, President and CEO of the Company and the Bank, stated, “With our newly enhanced online banking technology we have been able to launch new products and services to meet the needs of our existing and prospective clients. We are serving additional communities and industries within our geographic footprint that are benefiting from what American Riviera Bank has to offer. Competitor consolidation has provided attractive opportunities to hire relationship bankers, and we look forward to announcing continued expansion on the Central Coast of California.”

First Quarter Highlights

• The Bank has the highest “Super Premier” rating for financial performance from the Findley Reports and maintained a “5 Star - Superior” rating from Bauer Financial as of December 31, 2023.
• The Bank was rated “Outstanding” by the Federal Deposit Insurance Corporation in 2023 for its performance under the Community Reinvestment Act.
• Total shareholders’ equity of $101.7 million at March 31, 2024, has increased $1.1 million or 1.0% from the prior quarter-end, and $10.1 million or 11.1% from the same reporting period in the previous year.
• Tangible book value per share of $16.62 at March 31, 2024, has increased $0.03 or 0.2% from the prior quarter-end, and $1.59 or 10.6% from the same reporting period in the previous year.
• All Bank and Company capital ratios increased in the first quarter of 2024. The Bank’s regulatory capital ratios were all above “well-capitalized” standards.
• Return on average assets for the first quarter ended March 31, 2024, was 0.69%, and return on average equity was 8.65%.
• Total loans were $950.8 million at March 31, 2024, an increase of $4.4 million or 0.5% from the prior quarter-end, and an increase of $26.1 million or 2.8% from March 31, 2023. The Bank’s loan-to-deposit ratio at March 31, 2024, was 90.6%.
• Total deposits were $1.05 billion at March 31, 2024, representing no change from the $1.05 billion at December 31, 2023, and a modest decrease of $50.2 million or 4.6% from March 31, 2023.
• Non-interest-bearing demand deposits represent 39.6% of total deposits, and total demand deposits represent 52.4% of total deposits, respectively, at March 31, 2024.
• Total cost of deposits increased to 1.09% for the first quarter of 2024, compared to 1.00% in the prior quarter, and 0.45% for the same quarter in the prior year. Total cost of funding sources increased to 1.51% for the first quarter of 2024, compared to 1.23% in the prior quarter, and 0.59% for the same quarter in the prior year. Overall funding costs for the Company have increased due to Federal Reserve policy but remain modest compared to industry averages based on our relationship banking focus.
• Non-interest expenses have remained tightly controlled at $8.1 million for the first quarter of 2024, compared to $8.2 million in the prior quarter, and $8.0 million for the same quarter of the prior year.
• On-balance sheet liquidity continues to be substantial with $233.9 million of cash, due from banks, and available-for-sale (“AFS”) securities market value at March 31, 2024.
• Access to available sources of liquidity including fed funds lines of credit with correspondent banks, unused secured borrowing capacity with the Federal Home Loan Bank (“FHLB”), and unused secured borrowing capacity with the Federal Reserve totaled $386.2 million at March 31, 2024.
• Allowance for Credit Losses (“ACL”) was 1.23% of total loans at March 31, 2024, unchanged from December 31, 2023, and 1.24% at March 31, 2023. Provision for credit losses related to securities for the first quarter of 2024 was a $2,000 reversal of previous expense, compared to zero in the prior quarter and the same quarter in the prior year.
• The Bank maintained strong credit quality with no other real estate owned, no loans 90 days or more past due, and only $0.6 million or 0.07% of total loans on non-accrual status, which are well supported by collateral or reserves.

First Quarter Earnings

For the first quarter of 2024, unaudited net income was $2.2 million, compared to $2.2 million in the fourth quarter of 2023, and $3.0 million in the first quarter of 2023. The decrease in earnings compared to the first quarter of the previous year is primarily attributable to increased interest expense and decreased interest income on cash and due from banks.

The Bank continues to grow interest and fees on loans sequentially over the last four quarters from $11.2 million in the first quarter of 2023 to $12.7 million in the first quarter of 2024, representing a $1.5 million or 13.1% increase. However, the cost of funding has also increased sequentially from the historically low levels that existed prior to the Federal Reserve’s aggressive rate increase policy. Total interest expense has increased from $1.7 million in the first quarter of 2023 to $4.3 million in the first quarter of 2024, a $2.6 million or 156.3% increase.

Non-Interest Income and Expense

Total non-interest income was $0.9 million for the first quarter of 2024, compared to $0.3 million for the prior quarter, and $0.5 million for the same quarter last year. The fourth quarter of 2023 included a non-recurring $0.5 million pre-tax loss on the sale of $15.6 million in AFS securities. Variances between the quarters relate primarily to SBA loan sale premiums, mortgage broker fees, loan swap fees and loan prepayment fees.

Non-interest expense was $8.1 million for the first quarter of 2024, compared to $8.2 million in the prior quarter, and $8.0 million for the same quarter of the prior year. Expenses in the second, third, and fourth quarters of 2023 were elevated due to non-recurring expenses related to technology upgrades that were completed in the fourth quarter of 2023.

Loans and Asset Quality

Total loans were $950.8 million at March 31, 2024, an increase of $4.4 million or 0.5% from the prior quarter-end, and an increase of $26.1 million or 2.8% from March 31, 2023.

The Bank’s ACL was $11.6 million at March 31, 2024, with a resulting coverage ratio of 1.23%, as compared to $11.5 million or 1.24% at March 31, 2023. As of March 31, 2024, non-accrual loans totaled $0.6 million, resulting in no change from previous quarter-end, and a reduction of $2.3 million from March 31, 2023. Credit quality remains strong.

Deposits & Borrowings

Total deposits were $1.05 billion at March 31, 2024, representing no change from December 31, 2023, and a decrease of $50.2 million or 4.6% since March 31, 2023.

Non-interest-bearing demand deposits totaled $415.6 million at March 31, 2024, a decrease of $27.4 million or 6.2% from the prior quarter-end, and a decrease of $45.0 million or 9.8% from March 31, 2023. Non-interest-bearing demand deposits represent 39.6% of total deposits at March 31, 2024, a decrease from 42.2% at the prior quarter-end, and 41.9% at March 31, 2023.

Interest-bearing demand deposits totaled $134.5 million at March 31, 2024, an increase of $10.8 million or 8.8% from the prior quarter-end, and a decrease of $3.9 million or 2.8% from March 31, 2023. Demand deposits represent 52.4% of total deposits at March 31, 2024, a decrease from 54.0% at the prior quarter-end, and 54.5% at March 31, 2023.

Other interest-bearing deposits totaled $499.2 million at March 31, 2024, an increase of $16.3 million or 3.4% from the prior quarter-end, and a decrease of $1.4 million or 0.3% from March 31, 2023.

Although the Bank continues to maintain core deposit relationships, consistent with industry trends in this higher-rate environment, certain depositors are reinvesting their excess cash in non-FDIC insured, external investment products resulting in a deposit mix shift from non-interest-bearing to interest-bearing.

The weighted average cost of deposits for the first quarter of 2024 was 1.09%, compared to 1.00% for the previous quarter, and 0.45% for the same quarter last year. The increase in the cost of deposits this quarter is partially due to the Bank acquiring $29.0 million in short-term brokered CD’s at rates higher than our average cost of deposits, but at a favorable spread to FHLB borrowings.

The Bank increased its FHLB advances to $85.0 million at March 31, 2024 from $75.0 million at December 31, 2023. At March 31, 2024, the Bank had $75.0 million of short-term, 30 days or less, FHLB advances and another $10.0 million of long-term FHLB advances outstanding. At March 31, 2024, the Company also had $10.0 million drawn on a correspondent bank line of credit at a favorable rate of 3.85% and $18.0 million of subordinated notes outstanding at a favorable rate of 3.75%. The weighted average cost on all borrowings for the quarter was 5.06%, resulting in $1.5 million in interest expense. The $113.0 million of total borrowings at March 31, 2024, was a $10.0 million increase from the level carried at the end of the fourth quarter of 2023.

The Bank’s liquidity position remained strong with a primary liquidity ratio (cash and cash equivalents, deposits held in other banks and unpledged AFS securities as a percentage of total assets) of 16.7% at March 31, 2024, compared to 16.4% at December 31, 2023.

As of March 31, 2024, the Bank had available and unused, secured borrowing capacity with the FHLB of San Francisco of $199.2 million, and had available and unused, secured borrowing capacity with the Federal Reserve of $42.0 million. In addition, the Bank also had $145.0 million of unused fed funds lines of credit with correspondent banks at March 31, 2024. Available contingent funding sources of $386.2 million remain robust.

Overall uninsured deposits, excluding public agency deposits that are collateralized, are conservatively estimated to be $373.1 million, or 35.5% of total deposit balances as of March 31, 2024. The actual level of uninsured deposits is lower than the percentage stated above, as our knowledgeable bankers have helped clients obtain more than $250,000 of FDIC insurance with vesting structures such as joint accounts, payable upon death accounts, and revocable trust accounts with multiple beneficiaries. In addition, the Bank can offer up to $50 million of FDIC pass-through insurance to clients via the IntraFi network Insured Cash Sweep (“ICS”) or Certificate of Deposit Account Registry System (“CDARS”) products.

Shareholders’ Equity

Total shareholders’ equity was $101.7 million at March 31, 2024, a $1.1 million or 1.0% increase since December 31, 2023, and an increase of $10.1 million or 11.1% over the same period of the prior year. The tax adjusted unrealized loss on securities, which is a component of equity (accumulated other comprehensive income or “AOCI”), increased $0.9 million or 4.5% from $20.9 million at the end of 2023 to $21.9 million at the end of the first quarter of 2024. The Bank fully expects to receive all principal when the investments mature.

Company Profile

American Riviera Bancorp (OTCQX: ARBV) is a registered bank holding company headquartered in Santa Barbara, California. American Riviera Bank, the 100% owned subsidiary of American Riviera Bancorp, is a full-service community bank focused on serving the lending and deposit needs of businesses and consumers on the Central Coast of California. The state-chartered bank opened for business on July 18, 2006, with the support of local shareholders. Full-service branches are located in Santa Barbara, Montecito, Goleta, Santa Maria, San Luis Obispo, and Paso Robles. The Bank provides commercial business, commercial real estate, residential mortgage, construction, and Small Business Administration lending services as well as convenient online and mobile technology. For thirteen consecutive years, the Bank has been recognized for strong financial performance by the Findley Reports and has received the highest “Super Premier” rating from Findley every year since 2016. The Bank was rated “Outstanding” by the Federal Deposit Insurance Corporation in 2023 for its performance under the Community Reinvestment Act.

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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