American Riviera Bancorp (“Company”) (OTCQX: ARBV), holding company of American Riviera Bank (“Bank”), announced today unaudited net income of $4.6 million ($0.80 per share) for the six months ended June 30, 2024, compared to $5.7 million ($0.98 per share) earned in the same reporting period in the previous year. Unaudited net income was $2.5 million ($0.42 per share) for the three months ended June 30, 2024, compared to $2.2 million ($0.37 per share) in the previous quarter, and $2.7 million ($0.47 per share) earned in the same reporting period in the previous year.

Jeff DeVine, President and CEO of the Company and the Bank stated, “We continue to expand and grow our client base, opening over 1,100 new demand deposit and savings accounts in the first half of the year. We opened our Atascadero branch just a few weeks ago and have already gathered over $5 million in new deposits. Loan demand is increasing, allowing us to serve customer needs, support the growth of our communities and enhance shareholder return.”

Second 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 March 31, 2024.
• 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 $105.4 million at June 30, 2024, has increased $3.7 million or 3.6% from the prior quarter-end, and $12.6 million or 13.6% from the same reporting period in the previous year.
• Tangible book value per share of $17.26 at June 30, 2024, has increased $0.64 or 3.9% from the prior quarter-end, and $2.04 or 13.4% from the same reporting period in the previous year.
• All Bank capital ratios increased in the second quarter of 2024 as well as the Company’s tangible common equity ratio. The Bank’s regulatory capital ratios were all above “well-capitalized” standards. The Company’s tangible common equity ratio at June 30, 2024 was 7.92%, an increase from 6.86% at June 30, 2023.
• Return on average assets for the second quarter ended June 30, 2024, was 0.77%, and return on average equity was 9.57%.
• Total loans were $963.7 million at June 30, 2024, an increase of $12.9 million or 1.4% from the prior quarter-end, and an increase of $18.3 million or 1.9% from June 30, 2023. The Bank’s loan-to-deposit ratio at June 30, 2024, was 90.2%.
• Total deposits were $1.07 billion at June 30, 2024, representing $18.6 million or 1.8% increase from the $1.05 billion at March 31, 2024, and a slight decrease of $14.5 million or 1.3% from June 30, 2023.
• Non-interest-bearing demand deposits represent 39.8% of total deposits, and total demand deposits represent 50.1% of total deposits, respectively, at June 30, 2024.
• Total cost of deposits increased to 1.35% for the second quarter of 2024, compared to 1.09% in the prior quarter, and 0.73% for the same quarter in the prior year. Total cost of funding sources increased to 1.70% for the second quarter of 2024, compared to 1.51% in the prior quarter, and 1.02% 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 second quarter of 2024, the same as the prior quarter, and only slightly more than the $8.0 million for the same quarter of the prior year.
• On-balance sheet liquidity continues to be substantial with $218.1 million of cash, due from banks, and available-for-sale (“AFS”) securities market value at June 30, 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 $404.2 million at June 30, 2024.
• Allowance for Credit Losses (“ACL”) was 1.21% of total loans at June 30, 2024, slightly decreased from 1.23% at March 31, 2024 and June 30, 2023.
• The Bank’s commercial real estate (“CRE”) portfolio is diverse, with only $83.8 million in the non-owner occupied office category. Credit underwriting is strong with weighted average loan-to-values of 31% to 54% and weighted average debt coverage ratios between 1.96 and 2.76 depending on the individual CRE category.
• 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 0.06% of total loans on non-accrual status, which are well supported by collateral or reserves.

Second Quarter Earnings

For the second quarter of 2024, unaudited net income was $2.5 million, compared to $2.2 million in the first quarter of 2024, and $2.7 million in the second quarter of 2023. The decrease in earnings compared to the second quarter of the previous year is primarily attributable to increased interest expense on deposits and borrowings.

The Bank continues to grow interest and fees on loans sequentially over the last four quarters from $11.8 million in the second quarter of 2023 to $13.0 million in the second quarter of 2024, representing a $1.2 million or 10.6% increase. However, the cost of funding has also increased sequentially due to the Federal Reserve’s higher-rate policy. Total interest expense has increased from $3.0 million in the second quarter of 2023 to $4.9 million in the second quarter of 2024, a $1.9 million or 65.0% increase.

Non-Interest Income and Expense

Total non-interest income was $1.5 million for the second quarter of 2024, compared to $0.9 million for the prior quarter, and $1.0 million for the same quarter last year. The second quarter of 2024 included a non-recurring $0.5 million pre-tax gain on the redemption of $1.5 million in subordinated debentures. Variances between the quarters relate primarily to SBA loan sale premiums, mortgage broker fees, loan interest rate swap fees, and loan prepayment fees.

Non-interest expense was $8.1 million for the second quarter of 2024, same as the prior quarter, and slightly more than the $8.0 million reported for the same quarter of the prior year. Cost savings generated from our core and online banking vendor contract have allowed for targeted personnel increases in deposit generating roles including staffing for our recently opened branch in Atascadero.

Loans and Asset Quality

Total loans were $963.7 million at June 30, 2024, an increase of $12.9 million or 1.4% from the prior quarter-end, and an increase of $18.3 million or 1.9% from June 30, 2023.

The Bank’s ACL was $11.7 million at June 30, 2024, with a resulting coverage ratio of 1.21%, as compared to $11.6 million or 1.23% at June 30, 2023. As of June 30, 2024, non-accrual loans totaled $0.6 million, no change from the previous quarter-end, and a reduction of $2.2 million from June 30, 2023. Credit quality remains strong.

Deposits & Borrowings

Total deposits were $1.07 billion at June 30, 2024, representing an $18.6 million or 1.8% increase from March 31, 2024, and a slight decrease of $14.5 million or 1.3% since June 30, 2023.

Non-interest-bearing demand deposits totaled $425.0 million at June 30, 2024, an increase of $9.3 million or 2.2% from the prior quarter-end, and a decrease of $17.1 million or 3.9% from June 30, 2023. Non-interest-bearing demand deposits represent 39.8% of total deposits at June 30, 2024, compared to 39.6% at the prior quarter-end, and 40.8% at June 30, 2023.

Interest-bearing demand deposits totaled $110.3 million at June 30, 2024, a decrease of $24.2 million or 18.0% from the prior quarter-end, and a decrease of $30.6 million or 21.7% from June 30, 2023. Demand deposits represent 50.1% of total deposits at June 30, 2024, a decrease from 52.4% at the prior quarter-end, and 53.9% at June 30, 2023.

Other interest-bearing deposits totaled $532.7 million at June 30, 2024, an increase of $33.4 million or 6.7% from the prior quarter-end, and an increase of $33.2 million or 6.7% from June 30, 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 second quarter of 2024 was 1.35%, compared to 1.09% for the previous quarter, and 0.73% for the same quarter last year. The increase in the cost of deposits this quarter is partially due to the Bank acquiring an additional $10.0 million, for a total of $39.3 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 decreased its FHLB advances to $60.0 million at June 30, 2024 from $85.0 million at March 31, 2024. At June 30, 2024, the Bank had $50.0 million of short-term, 30 days or less, FHLB advances and another $10.0 million of long-term FHLB advances outstanding. At June 30, 2024, the Company also had $10.0 million drawn on a correspondent bank line of credit at a favorable rate of 3.85% and $16.5 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 $1.4 million in interest expense. The $86.5 million of total borrowings at June 30, 2024, was a $26.5 million decrease from the level carried at the end of the first quarter of 2024.

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 15.3% at June 30, 2024, compared to 16.7% at March 31, 2024.

As of June 30, 2024, the Bank had available and unused, secured borrowing capacity with the FHLB of San Francisco of $219.5 million, and had available and unused, secured borrowing capacity with the Federal Reserve of $41.3 million. In addition, the Bank also had $143.4 million of unused fed funds lines of credit with correspondent banks at June 30, 2024. Available contingent funding sources of $404.2 million remain robust.

Overall uninsured deposits, excluding public agency deposits that are collateralized, are conservatively estimated to be $375.9 million, or 35.2% of total deposit balances as of June 30, 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 $105.4 million at June 30, 2024, a $3.7 million or 3.6% increase since March 31, 2024, and an increase of $12.6 million or 13.6% 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”), decreased $0.9 million or 4.3% from $21.9 million at March 31, 2024, to $20.9 million at the end of the second quarter of 2024. The Bank fully expects to receive all principal when the investments mature. As of June 30, 2024, the Company has not repurchased any shares under the previously announced share repurchase program.

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, Atascadero, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240724993042/en/