American Riviera Bancorp Announces Earnings for the Fourth Quarter of 2022

SANTA BARBARA, Calif., January 27, 2023--(BUSINESS WIRE)--American Riviera Bancorp ("Company") (OTCQX: ARBV), holding company of American Riviera Bank ("Bank"), announced today unaudited net income of $13.5 million ($2.37 per share) for the twelve months ended December 31, 2022 compared to the $11.8 million ($2.09 per share) earned in the same reporting period in the previous year. Unaudited net income was $4.0 million ($0.70 per share) for the three months ended December 31, 2022, compared to the $2.7 million ($0.49 per share) earned in the same reporting period in the previous year. The increase in year-to-date unaudited net income in 2022 compared to 2021 is primarily attributable to loan growth, increased interest income on liquid assets, and a strong deposit base.

Jeff DeVine, President and CEO of the Company and the Bank stated, "We are pleased to report improved profitability, continued loan growth, expanding capital ratios, strong credit quality, and a balance sheet supported by local deposits from relationship clients. The Federal Reserve’s actions to date to increase rates and remove excess liquidity from the financial system have only modestly decelerated loan growth and increased funding costs."

Fourth Quarter Highlights

• Return on average assets for the fourth quarter ended December 31, 2022, was 1.14%, an increase from 1.08% in the previous quarter and 0.84% in the same quarter last year.

• Total loans, excluding Paycheck Protection Program ("PPP") loans, reached $907.6 million at December 31, 2022, an increase of $21.5 million or 2.4% from the prior quarter end and $154.1 million or 20.4% from December 31, 2021.

• Non-interest-bearing demand deposits totaled $478.5 million at December 31, 2022, a decrease of $41.3 million or 7.9% from the prior quarter end and an increase of $7.8 million or 1.6% from December 31, 2021. Non-interest-bearing demand deposits now represent 41.1% of total deposits. This reduction in deposit balances occurred late in the fourth quarter of 2022 as some Bank clients decided to reinvest their excess cash in non-FDIC insured, external investment products.

• Net interest margin increased to 3.94% for the fourth quarter of 2022, compared to 3.69% for the prior quarter and 3.12% for the same quarter in the prior year.

• Total cost of funding sources increased to 0.26% for the fourth quarter of 2022, compared to 0.16% in the prior quarter and 0.07% for the same quarter in the prior year. Total cost of deposits, including non-interest-bearing demand deposits, has increased to 0.21% for the fourth quarter of 2022, compared to 0.08% in the prior quarter and 0.07% for the same quarter in the prior year.

• Provision for loan losses for the fourth quarter of 2022 was $0.1 million, the same as in the previous quarter. Year-to-date provision in 2022 of $1.1 million exceeds the $0.3 million expensed in the prior year due to strong organic loan growth, and not credit quality concerns.

• Allowance for loan losses was 1.17% of total loans at December 31, 2022, compared with 1.18% at September 30, 2022 and December 31, 2021.

• The Bank maintained strong credit quality with no other real estate owned, no loans 90 days or more past due, and only $3.1 million or 0.34% of total loans on non-accrual status, which are well supported by collateral and reserves.

• Tangible book value per share was $14.43 at December 31, 2022, up from the $13.55 at September 30, 2022 due to strong earnings in the fourth quarter of 2022 and stable market value of the available-for-sale investment portfolio.

• All Bank capital ratios were above regulatory requirements for a well-capitalized institution with a total risk-based capital ratio of 12.89% for the fourth quarter of 2022, as compared to 12.73% in the previous quarter and 12.16% in the same quarter of 2021.

Fourth Quarter Earnings

For the fourth quarter of 2022, unaudited net income was $4.0 million, compared to $3.8 million in the third quarter of 2022, and $2.8 million in the fourth quarter of 2021. For the fourth quarter of 2022, unaudited net income pre-tax, pre-provision, pre-PPP fees (a non-GAAP measure) was $5.6 million, compared to $5.4 million in the third quarter of 2022, and $3.3 million in the fourth quarter of 2021.

Net interest income continues to benefit from the Federal Reserve’s actions to increase short-term rates as evidenced by the $0.3 million or 26% increase in Interest on Due From Banks from the previous quarter, and $1.2 million or 852% increase from the same quarter last year. However, deposit rates have adjusted upward from historically low levels as interest expense on deposits increased $0.4 million or 152% during the fourth quarter of 2022 compared to prior quarter and increased $0.5 million or 223% compared to the fourth quarter of 2021.

Non-Interest Income and Expense

Non-interest income was $0.7 million for the fourth quarter of 2022, compared to $0.8 million for the third quarter of 2022 and $0.8 million for the same quarter last year. Variances between the quarters relate primarily to SBA loan sale premium, mortgage broker fees and loan prepayment fees. Aggregate non-interest income has remained consistent over the periods analyzed.

Non-interest expense was $8.4 million for the fourth quarter of 2022, compared to $7.8 million in the third quarter of 2022 and $6.7 million for the same period last year. The increase in non-interest expense in the fourth quarter of 2022 is primarily attributable to additional incentive plan accrual based on the strong performance of the Bank and timing of certain expenses, such as advertising and annual sponsorships. With the relaxing of COVID restrictions, expenses related to business development and marketing have moved back to historical levels. The Company remains committed to making investments in systems and staffing to support continued growth while maximizing efficiencies. Occupancy expenses are temporarily elevated as the Company is in the process of consolidating office space which is expected to result in efficiencies in the second half of 2023.

Loans and Asset Quality

Total loans, excluding PPP loans, reached $907.6 million at December 31, 2022, an increase of $21.5 million or 2.4% from the prior quarter end and $154.1 million or 20.4% from December 31, 2021.

The Allowance for Loan Losses increased $0.1 million to $10.6 million at December 31, 2022 with a resulting coverage ratio of 1.17% of total loans, as compared to $10.5 million or 1.18% at September 30, 2022 and $9.4 million or 1.18% at December 31, 2021. The Allowance percentage has remained consistent over the periods analyzed with increased dollars primarily attributable to continued organic loan growth and not credit quality concerns.

Loan charge-offs totaled zero and loan recoveries totaled $0.1 million for the entire year of 2022. As of December 31, 2022, non-accrual loans totaled $3.1 million, down $3.3 million compared to the previous quarter. The decrease in non-accrual loans during the quarter relates to two loans fully paid off. $2.3 million of the non-accrual total at December 31, 2022 is comprised of one loan which is real estate secured at a 29% loan-to-value based upon a recent appraisal and is paying full principal and interest payments monthly. Credit quality remains strong.

Deposits

Total deposits were $1.2 billion at December 31, 2022 representing a decrease of $100.3 million, or 7.9%, from September 30, 2022, and a decrease of $38.6 million, or 3.2% since December 31, 2021. This reduction in deposit balances occurred late in the fourth quarter of 2022 as some Bank clients decided to reinvest their excess cash in non-FDIC insured, external investment products. Total non-interest-bearing deposits represented 41.1% of total deposits at December 31, 2022. The Bank had no brokered deposits or Federal Home Loan Bank advances in its funding base as of December 31, 2022.

Shareholders’ Equity

Total shareholders’ equity was $87.1 million at December 31, 2022, a $5.0 million or 6.0% increase since September 30, 2022, and a decrease of $9.2 million or 9.5% over prior year. The tax adjusted unrealized loss on securities, which is a component of equity (accumulated other comprehensive income or "AOCI"), reduced slightly from $24.7 million at the end of the third quarter of 2022 to $23.9 million at the end of the fourth quarter of 2022, resulting in an additional $0.8 million expansion of shareholders equity for the fourth quarter. Industry-wide there has been a material decline in market value of fixed income securities in 2022, consistent with the significant increase in market yields. These securities have a maturity and minimal inherent credit risk; therefore, the Bank expects to receive principal in full 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, 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 twelve 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 2020 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.

American Riviera Bancorp and Subsidiaries
Balance Sheets (unaudited)
(dollars in thousands)
			Dec 31,				Dec 31,				One Year				One Year
			2022				2021				$ Change				% Change
Assets
	Cash & Due From Banks		$	61,801			$	292,111			$	(230,310	)		-79	%
	Available for sale securities			223,281				191,543				31,738			17	%
	Held to maturity securities			41,293				-				41,293			100	%
	Loans (excluding PPP)			907,580				753,494				154,086			20	%
	PPP Loans			105				39,996				(39,891	)		-100	%
	Allowance For Loan Losses			(10,626	)			(9,383	)			(1,243	)		13	%
	Net Loans			897,059				784,107				112,952			14	%
	Premise & Equipment			12,347				10,429				1,918			18	%
	Goodwill and Other Intangibles			4,947				5,075				(128	)		-3	%
	Other Assets			40,931				23,275				17,656			76	%
Total Assets			$	1,281,659			$	1,306,540			$	(24,881	)		-2	%
Liabilities & Shareholders' Equity
	Demand Deposits		$	478,519			$	470,763			$	7,756			2	%
	NOW Accounts			184,138				181,546				2,592			1	%
	Other Interest Bearing Deposits			500,870				549,781				(48,911	)		-9	%
	Total Deposits			1,163,527				1,202,090				(38,563	)		-3	%
	Borrowed Funds			18,000				-				18,000			100	%
	Other Liabilities			13,036				8,177				4,859			59	%
	Total Liabilities			1,194,563				1,210,267				(15,704	)		-1	%
	Common Stock			57,458				56,564				894			2	%
	Retained Earnings			53,560				40,432				13,128			32	%
	Other Capital			(23,922	)			(723	)			(23,199	)		3,209	%
	Total Shareholders' Equity			87,096				96,273				(9,177	)		-10	%
Total Liabilities & Shareholders' Equity			$	1,281,659			$	1,306,540			$	(24,881	)		-2	%

American Riviera Bancorp and Subsidiaries
Balance Sheets (unaudited)
(dollars in thousands)
			December 31,				September 30,				June 30,				March 31,				December 31,
			2022				2022				2022				2022				2021
Assets
	Cash & Due From Banks		$	61,801			$	178,882			$	212,675			$	320,683			$	292,111
	Available for sale securities			223,281				222,910				250,132				220,364				191,543
	Held to maturity securities			41,293				41,241				-				-				-
	Loans (excluding PPP)			907,580				886,087				854,593				776,395				753,494
	PPP Loans			105				121				6,169				11,633				39,996
	Allowance For Loan Losses			(10,626	)			(10,500	)			(10,367	)			(9,394	)			(9,383	)
	Net Loans			897,059				875,708				850,395				778,634				784,107
	Premise & Equipment			12,347				9,649				9,491				9,948				10,429
	Goodwill and Other Intangibles			4,947				4,984				5,025				5,080				5,075
	Other Assets			40,931				38,033				35,470				27,327				23,275
Total Assets			$	1,281,659			$	1,371,407			$	1,363,188			$	1,362,036			$	1,306,540
Liabilities & Shareholders' Equity
	Demand Deposits		$	478,519			$	519,796			$	487,187			$	481,619			$	470,763
	NOW Accounts			184,138				184,138				196,485				193,178				181,546
	Other Interest Bearing Deposits			500,870				559,914				571,544				571,595				549,781
	Total Deposits			1,163,527				1,263,848				1,255,216				1,246,392				1,202,090
	Borrowed Funds			18,000				18,000				18,000				18,000				-
	Other Liabilities			13,036				7,425				6,460				7,971				8,177
	Total Liabilities			1,194,563				1,289,273				1,279,676				1,272,363				1,210,267
	Common Stock			57,458				57,123				56,897				56,554				56,564
	Retained Earnings			53,560				49,722				45,922				43,370				40,432
	Other Capital			(23,922	)			(24,711	)			(19,307	)			(10,251	)			(723	)
	Total Shareholders' Equity			87,096				82,134				83,512				89,673				96,273
Total Liabilities & Shareholders' Equity			$	1,281,659			$	1,371,407			$	1,363,188			$	1,362,036			$	1,306,540

American Riviera Bancorp and Subsidiaries
Statement of Income (unaudited)
(dollars in thousands, except per share data)
			Quarter Ended											Twelve Months Ended
			Dec 31,				Dec 31,							Dec 31,				Dec 31,
			2022				2021				Change			2022				2021				Change
Interest Income
	Interest and Fees on Loans		$	11,081			$	8,557			29	%		$	39,189			$	33,613			17	%
	Fees on PPP Loans			-				517			-100	%			1,321				3,853			-66	%
	Net Fair Value Amortization Income			-				25			-100	%			7				506			-99	%
	Interest on Securities			1,716				645			166	%			5,212				1,674			211	%
	Interest on Due From Banks			1,323				139			852	%			3,049				391			680	%
	Total Interest Income			14,120				9,883			43	%			48,778				40,037			22	%
Interest Expense
	Interest Expense on Deposits			669				207			223	%			1,362				948			44	%
	Interest Expense on Borrowings			169				-			100	%			571				-			100	%
	Total Interest Expense			838				207			305	%			1,932				742			160	%
Net Interest Income				13,282				9,676			37	%			46,846				39,089			20	%
	Provision for Loan Losses			109				-			100	%			1,147				338			239	%
Net Interest Income After Provision				13,173				9,676			36	%			45,699				38,751			18	%
Non-Interest Income
	Service Charges, Commissions and Fees			522				705			-26	%			2,467				2,623			-6	%
	Other Non-Interest Income			157				138			14	%			881				962			-8	%
	Total Non-Interest Income			679				843			-19	%			3,347				3,585			-7	%
Non-Interest Expense
	Salaries and Employee Benefits			4,948				4,003		...