Page 21 – River City Bank

July 11, 2017

Silicon Valley Clean Energy: Redefining Energy

After decades of dominance by electricity monopolies, California is experiencing the emergence of Community Choice Aggregators (CCAs), a new type of electricity provider that provides cities and counties the opportunity to choose what kinds of energy to purchase for their needs. CCA is a state policy that enables local governments to aggregate electricity demand within their jurisdictions in order to procure alternative energy supplies while maintaining the existing electricity provider for transmission and distribution services. On April 3, 2017, Silicon Valley Clean Energy (SVCE) commemorated its first official day of operation, supplying 100% carbon-free electricity to its customers in Silicon Valley. River City Bank was in attendance that day to celebrate SVCE’s launch and our banking partnership. We circled back with CEO, Tom Habashi, to find out more about SVCE and the important role they play in reducing the region’s carbon emissions.

How many customers does SVCE serve?

SVCE currently serves 240,000 residents in the area. SVCE, is a Joint Powers Authority (“JPA”) comprised of 11 municipalities located within the County of Santa Clara, as well as the unincorporated areas of the County itself. They have elected to allow SVCE to provide electric generation service within their respective jurisdictions.

SVCE just launched in April and is now supplying parts of the Silicon Valley with 100% carbon-free electricity. Were there any challenges you faced as you were trying to bring the program to fruition?

We knew we had to make sure our policies were in place, contracts were sound, and that we had set up a good foundation rather than building on quicksand. We learned from our predecessors and knew we needed to be better than the incumbent utility already in place.

The one problem we didn’t anticipate was how difficult it was to find office space in the Silicon Valley. For a time, we had trouble finding enough space that made sense for the organization. Luckily we found a great space in Sunnyvale.

What types of renewable sources does SVCE utilize and does it all come from California?

SVCE offers residents and businesses two main electricity choices. The default choice is GreenStart, which is 100 percent carbon-free. Under the GreenStart option, 50 percent of electricity comes from renewables such as wind and solar, while the other 50 percent comes from large-scale hydropower that we receive from the Upper Northwest. Customers currently pay 1% less for this option compared to the incumbent utility’s base plan with lower renewable content.

The other choice is GreenPrime, which is sourced from 100% renewables and is also 100% carbon free. GreenPrime is generated from 100% renewable, carbon-free sources, primarily from solar and wind farms in California and on the western grid. Buying GreenPrime further expands generation from these new and competitive renewable energy sources. Customers can choose to upgrade to GreenPrime for about $3 to $5 more per month. Customers enroll in Silicon Valley Clean Energy through an “opt-out” system. This means customers within SVCE’s service area receive alerts in the mail about switching to the agency, and they’re automatically switched over unless they choose to opt out.

SVCE is working on a program where 100% of the carbon free energy comes exclusively from California.

Why do you think more residents are leaning towards renewable energy and are willing to spend more to have greener options?

For many CCA customers, it actually saves them money. For example, SVCE GreenStart customers will pay 1% less than the incumbent utility’s current rates. With the opt-out option, customers are automatically enrolled and do not need to do a thing if they want cleaner, greener electricity, at a better price. For consumers, the benefits of the CCA are a no-brainer. They can choose to increase the amount of clean energy they use, thereby helping to reduce greenhouse gases and to reach, and even exceed, state and national clean-energy goals. CCA customers have also benefited from rebates on energy efficiency upgrades.

On another level, more and more communities are coming together to be a part of a solution to ease carbon emissions. They realize that it affects all of us, our children, and grandchildren.

California is experiencing the emergence of CCAs. Do you see more and more communities moving towards clean energy?

More and more communities are demanding more renewable energy options. California’s push for cleaner energy has been driven by a desire to limit greenhouse gas emissions from fossil fuels, which are the primary driver of climate change. Locally-governed public agencies like SVCE allow participating communities to reinvest revenues to keep rates low, provide energy efficiency programs, and promote a cleaner energy infrastructure.

Because of the success of CCAs, more and more communities are aching to take the leap and have environmental and energy stewardship over their regions.

What advances have you seen in renewable energy?

Energy storage has been a hot topic in the last couple of years. It is needed to store solar energy at night or wind power on days when there is no breeze. Energy storage plays an important role in this balancing act and helps to create a more flexible and reliable grid system. There are a number of technology choices available, but the cost of energy storage is still a concern. Solar energy has recently dropped in price by ~40%, but the question remains if it would be more profitable to simply add more generating capacity rather than more storage capacity. California, where there is already strong public policy support for renewable energy, is the undisputed king of US energy storage. However, in other places around the country, there is the need to stimulate technological improvement in storage to encourage further growth.

There are many other banks out there. What made SVCE choose RCB?

River City Bank was there for us from day one. We’ve seen them help other CCAs get their financing, even when it was unchartered territory. River City Bank had the experience and understanding for what CCAs encounter at various stages of financing and banking needs. They put together an offer that made sense for us and we were compelled to work with a community based bank with similar values. Steve (Fleming) and Rosa (Cucicea) were able to come up with solutions for our issues, helping us get through all the roadblocks we encountered and enable us to get the funding and banking services needed to launch SVCE. River City Bank’s experience and knowledge in the renewable energy industry is second to none.

To find out more about SVCE, visit their website at ww.svcleanenergy.org.

April 19, 2017

River City Bank Reports 2017 First Quarter Net Income of $4.2 Million

SACRAMENTO, CA – Apr. 19, 2017—River City Bank (the Bank) reported net income of $4.2 million, or $2.93 per diluted share, for the quarter ending March 31, 2017, which compares to the $2.8 million, or $1.92 per diluted share, for the same period in 2016. The prior year quarter benefited from an interest recovery of $596,000 from a nonaccrual loan that was fully repaid; however, that benefit was more than fully offset by the $1.7 million mark-to-market (MTM) loss on the Bank’s interest rate swap contracts (swaps). The current quarter reflects a MTM swap gain of $270,000.

“Our exceptionally strong loan growth over the past two years continued into the first quarter of 2017 with a net increase of $88 million, or 6.9 percent in total gross loans, since the end of 2016,” said Steve Fleming, president and chief executive officer of River City Bank. “The loan growth reflects our continued expansion in all three of our geographic markets: Central Valley, Bay Area and Southern California. Still, we believe that this commercial real estate refinancing cycle is approaching its conclusion and, as such, we expect a significant slowdown in our loan growth going forward.”

The superior loan growth has been essential to the expansion of the Bank’s net interest income, which increased 17 percent, or nearly $2 million, compared to the prior year quarter after excluding the non-recurring interest recovery noted above. Additionally, the Bank’s net interest margin declined only slightly from 2.95 percent in the prior year quarter to 2.89 percent in the current quarter after adjusting for the non-recurring interest recovery in 2016. The Bank’s commitment to asset quality coupled with the benign credit environment are reflected in the steady decline from an already low 0.87 percent non-performing loans to total gross loans as of March 31, 2015 to 0.19 percent and 0.07 percent as of March 31, 2016 and 2017, respectively.

In addition to the loan growth, the other noteworthy movement on the Bank’s balance sheet was the $94 million growth in deposits in the first quarter of 2017.

Medium term interest rates changed minimally since the prior year end, resulting in a modest MTM swap gain in the current quarter. This compared favorably to the MTM swap loss of $1.7 million in the prior year quarter due to the pronounced decline in medium-term interest rates between December 31, 2015, and March 31, 2016. The Bank entered these swap agreements to hedge the interest rate risk associated with its ongoing origination of long-term fixed rate loans. Because these swaps were not designed to receive hedge accounting treatment, these swaps have to be carried on the balance sheet at their fair market value with any changes in value recorded in the income statement.

“Operational efficiency is a core competency for the Bank, as evidenced by our 43 percent efficiency ratio for the quarter ending March 31, 2017,” said Anker Christensen, chief financial officer of River City Bank. “Though managing expenses continues to be a priority for the management team, the continued improvement in our efficiency ratio for the current quarter has been primarily driven by revenue growth. Our current efficiency ratio represents a significant improvement from the 56 percent reported in the prior year quarter (49 percent after excluding the impact of the $1.7 million MTM swap loss).”

Shareholders’ equity for River City Bank on March 31, 2017, increased $3.8 million to $174.4 million, when compared to the $170.6 million as of December 31, 2016. The increase was driven through increased retained earnings. The Bank’s capital ratios remain well above the regulatory definitions for being Well Capitalized. Common Equity Tier 1, Tier 1 Leverage and Total Risk-based capital ratios were 10.9 percent, 9.4 percent and 12.8 percent, respectively, as of March 31, 2017.

March 9, 2017

Staying Safe from Tax Season Scams

By Thomas F. Duffy,Chair, MS-ISAC | Center for Internet Security.

Extreme close up of a calculator and pencil on top of a paper filled with numbers

Now that W-2’s have arrived, it’s time to consider how to stay safe from tax season scams. Every year, unfortunate taxpayers go to file their returns and are shocked to find that someone else has filed a fraudulent one in their name! Some innocent people also receive fraudulent phone calls from criminals impersonating tax officials. Sadly, tax fraud has only become more widespread and digital communication has opened new ways for it to happen.

While the Internal Revenue Service (IRS) reports on multiple tax-payer related scams and even publishes a “Dirty Dozen” list, three scams variants are worth highlighting: Phishing and Malware Schemes; Identity Theft and Falsely Filed Tax Returns; and Impersonation Scams. Once criminals have your information, they can also continue to commit identity theft well beyond tax season. Here are some details on each of these scams, along with how to identify them and seek help in case of identity theft.

Phishing and Malware Schemes

The first type of scam often leads to identity theft and falsely filed tax returns, but may also result in you downloading malware. This happens when criminals send convincing phishing emails or direct you to convincing websites that appear to be IRS, state government, tax software, or financial institution websites. Their goal is to trick you into entering your login credentials, verifying sensitive personal information, or downloading malware.

Never click on email links; type the organization’s website into your web browser.
If you feel something is suspicious, contact the organization through a known method, like their publicly-posted customer service line.

Do not reply to emails or texts asking for personal or tax information.

Identity Theft and Falsely Filed Tax Returns

Once criminals have your personal information, they can use it to commit identity theft or file a false tax return in your name. In this case, if the criminal files the return before you do, they are getting your refund money and forcing you to go through the arduous process of proving that it was not you who filed the return. Criminals send phishing emails or make phone calls to trick you into providing your information so that they can commit this type of fraud.

Be wary of any contact by phone or email claiming to be from the IRS, as they do not contact taxpayers directly for this type of information.

File your tax return as soon as you get your W-2’s and other tax information. Criminals cannot successfully file a fraudulent return if you have already filed with the IRS!

Impersonation Scams

Our final flavor of scam involves a criminal impersonating the IRS or a tax official, such as a tax advocacy panel or tax preparer. They may say you owe money to the IRS or your state tax department or may represent themselves as a trusted tax authority and request information. This contact can occur through websites, emails, or threatening calls or text messages, that seem official. Sometimes, these scammers request that their victims pay by strange methods like gift cards or prepaid credit cards.

If you do in fact owe tax money to the IRS, you will receive an official bill in the mail first before being contacted by phone or email. For a quick reference, the IRS states that these are four things they will never do:

ask for credit or debit card numbers over the phone;
call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer;
threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying;
demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

Seeking help and reporting scams

The IRS encourages taxpayers to send suspicious emails related to tax fraud to its [email protected] email account. Other forms of tax fraud can be reported by following the instructions here.

If you suspect that you have been a victim of fraud or identity theft, please head to www.identitytheft.gov. This is a site run by the Federal Trade Commission that provides a step-by-step recovery plan and assistance in taking action. It allows you to report if someone filed a return fraudulently in your name if your information was exposed in a major data breach, and in the case of many other types of fraud. If you believe someone has used your social security number to fraudulently submit a tax return, you can also call the IRS at (800) 908-4490.

Keep these common types of fraud in mind, and don’t hesitate to seek assistance if you become a victim.

January 27, 2017

River City Bank Reports Record Net Income and Loan Growth for 2016

SACRAMENTO, CA, January 27, 2017—River City Bank reported net income of $4.7 million, or $3.27 per diluted share, for the three-month period ending December 31, 2016, which compares to the $4.0 million, or $2.77 per diluted share, for the same period in 2015. The Bank posted record net income of $14.9 million, or $10.34 per diluted share, for the year ending December 31, 2016, which was $2.4 million more than the $12.5 million, or $8.76 per diluted share, for the year ending December 31, 2015.

“In addition to record earnings for 2016, we also reported record loan growth of over $304 million,” stated Steve Fleming, president and chief executive officer of River City Bank. “Over the last two years, our team of highly talented bankers has expanded the Bank’s relationships with existing clients and added high-quality new clients to the Bank resulting in a 66 percent increase in gross loans since December 31, 2014. This expansion of market share stems from maintaining our strong market position and brand in the Sacramento area and our continued penetration into the Bay Area and Southern California commercial real estate markets.”

Asset quality continued to be a high priority for the Bank, with nonperforming loans to total gross loans declining from an already low 0.35 percent as of December 31, 2015, to 0.08 percent as of December 31, 2016. Other real estate owned (i.e. real estate obtained by the Bank via foreclosure) as of December 31, 2016, amounted to only $3 million. Notwithstanding the excellent asset quality, the Bank made loan loss provisions of almost $4 million in 2016 due to the above-noted loan growth.

Loan growth propelled net interest income $8.6 million higher for the year ending December 31, 2016, versus the same period in 2015. It should be noted that net interest income for 2016 benefited from $916,000 in interest recoveries from two nonaccrual loans which paid off during 2016. These interest recoveries, combined with the Bank’s superior loan growth, are the reason the Bank’s net interest margin increased from 2.97 percent to 3.01 percent for the years ending December 31, 2015, and December 31, 2016, respectively, despite the negative impact of the continued low level of interest rates.

In addition to the accelerated loan growth, another factor affecting the performance for the three- and twelve-month periods ending December 31, 2016 pertains to the mark-to-market (MTM) of the Bank’s interest rate swap contracts (swaps). Due to recent increases in medium-term interest rates during the three- and twelve-month periods ending December 31, 2016, the Bank incurred a MTM gain of $2.5 million and $649,000, respectively. This compares favorably to the $740,000 MTM gain and $338,000 MTM loss for the same periods in 2015. The Bank entered these swaps to hedge the interest rate risk associated with its ongoing origination of medium-term fixed rate commercial real estate loans. Because these swaps were not designed to receive hedge accounting treatment, these swaps must be carried on the balance sheet at fair market value with any changes in value recorded in the income statement. It should also be noted that the increase in interest rates in 2016 caused a mark-to-market decrease in the Bank’s securities fair value, resulting in a $707,000 decrease (net of taxes) from December 31, 2015, to December 31, 2016, in the Accumulated Other Comprehensive Income in the equity section of the Bank’s balance sheet.

“Our significant loan growth over the last two years has expanded our net interest income as noted above and, together with our continued vigilance in managing expenses, has led to a 46 percent efficiency ratio for 2016 compared to 52 percent for 2015,” stated Anker Christensen, chief financial officer of River City Bank. “Managing expenses continues to be a necessity in this historically low interest rate environment, which pressures our revenues.”

Shareholders’ equity for River City Bank on December 31, 2016, increased almost $13 million to $171 million, when compared to the $158 million as of December 31, 2015. The increase was driven by retained earnings and partially offset by the previously noted decrease in Accumulated Other Comprehensive Income. The Bank’s capital ratios remain well above the regulatory definitions for being Well Capitalized. Tier 1 Leverage, Common Equity Tier 1, and Total Risk-Based Capital Ratios were 9.8 percent, 11.3 percent, and 13.3 percent, respectively, as of December 31, 2016.

November 21, 2016

Kelly Foundation awards $100,000 grant to Special Olympics Northern California

2016 Major gift will support new Sacramento school partnership program, athlete health, and coach training

SACRAMENTO, CA — Nov. 21, 2016 — The Kelly Foundation awarded $100,000 to Special Olympics Northern California (SONC) to support the launch of the first Sacramento Schools Partnership Program for K-12 student-athletes in the Sacramento region and other key initiatives. The Kelly Foundation Board selected SONC as the recipient of the 2016 Major Gift in order to support children and adults with intellectual disabilities through new programs, initiatives and expansion efforts.

“While we had many reputable charities to choose from and would enjoy awarding all of the applicants, we selected Special Olympics Northern California because they will make great use of the grant to launch Sacramento’s first Schools Partnership Program,” said Chairman of the Board of River City Bank and President of the Kelly Foundation Shawn Kelly Devlin. “We are excited to sponsor student athletes and the communities that surround them, while supporting a larger organization whose efforts reach far beyond the Sacramento region’s borders.”

The new Sacramento Schools Partnership Program will unify students with and without disabilities through sports and whole-school involvement activities to provide them with the knowledge, experience and skills necessary to create and sustain school communities that promote inclusion, acceptance and respect for all students. At present, SONC provides support to over 9,385 student athletes in these programs outside the greater Sacramento area and is expected to increase the student athlete total with the expansion of the new Sacramento Schools Partnership Program.

“We are excited to be awarded this grant from the Kelly Foundation which will help us expand our services to Special Olympics athletes and volunteer coaches in the greater Sacramento region,” said President and CEO of Special Olympics Northern California and Nevada David Solo. “As our organization moves beyond just sports, this grant will allow us to provide coaches with training and certification, bring health screenings to our athletes at competitions and start a Special Olympics program in the K-12 public schools. We thank the Kelly Foundation for being a champion of inclusion for the intellectually disabled.”

In conjunction with the grant, The Kelly Foundation will co-sponsor the Healthy Athletes initiative at the local level. The Healthy Athletes initiative provides health services and information to athletes and maintains the world’s largest database of health data for people with intellectual disabilities. Throughout its history, the initiative has trained more than 136,000 health care professionals who have provided indispensable care to millions worldwide.

Other measures the grant will support include the expansion of coach training and additional competition opportunities for athletes within the Greater Sacramento Area. These efforts will help provide adequate training for the athletes, allowing for an increase in Sacramento athletes at statewide events.

The Kelly Foundation supports health and human services, education, culture, environment and civic improvement through their funding. Each year, the Foundation provides approximately $400,000 in grants to organizations that support the Sacramento region. Since merging with the RCB Foundation in 2009, the Kelly Foundation, of which River City Bank remains a major contributor, focuses on giving back to the greater Sacramento region through charitable donations.

For more information about the Kelly Foundation, please visit www.KellyFoundationSacramento.org. For more details on Special Olympics Northern California, and its initiatives, programs and plans, please visit www.SONC.org.

October 30, 2015

Client Profile: Marin Clean Energy

Marin Clean Energy (MCE) was founded in 2008 and began serving customers in 2010 within the area of Marin County. MCE’s mission is to address climate change by reducing energy related greenhouse gas emissions and securing energy supply, price stability, energy efficiency and local economic and workforce benefits. With the leadership and vision of CEO, Dawn Weisz, MCE now serves over 170,000 customers in Marin County, unincorporated Napa County, the cities of Benicia, El Cerrito, Richmond, and San Pablo. As a not-for-profit utility, MCE gives its customers, the opportunity to have between half and all their electricity needs supplied by solar, wind, hydroelectric, biogas and renewable resources at competitive rates.

MCE is California’s first Community Choice Aggregation (CCA) program. Back in 2002, the California State Legislature passed Assembly Bill 117, enabling CCAs. This legislation made it possible for communities to form companies to purchase power on behalf of their residents and businesses, completely supported by customer revenues, rather than taxpayer subsidies. Increased local control allowed elected officials to participate in the decision making and weigh in on supply contracts, customer pricing, etc.. AB 117 enabled California to join the small but growing number of states allowing CCAs. More importantly, the bill mandated that customers be automatically enrolled in their local CCA, with an option to opt out should they want to stay with the incumbent utility.

As a pioneer for CCAs in California, MCE has an impressive track record over its initial 5+ years of operations and continues to lead the charge in lobbying for renewable energy at our State Capitol. However, as Weisz admits, the journey was not without a few hiccups along the way. At first, educating the community seemed a daunting task. Prior to MCE’s launch, everything was speculative as there was no model for a CCA in California. For many, switching from a provider of reliable electricity seemed risky from both a service and financial perspective. Throughout, MCE stayed the course and continued to educate the community on its choices. The message was simple: The power provided still flows through the incumbent utility’s grid and consumers continue to be billed through the incumbent utility. The only difference is the source of power which has a greater content of renewable sources. There was no extra effort needed from the consumer, and so the transition to cleaner power and more energy savings was seamless from its customers’ perspective. With the environmental benefits and natural appeal of freedom of choice, support for MCE quickly followed.

Initially, MCE’s goal was to have 25% of its area’s power come from renewable energy. Along with her team, Weisz helped MCE negotiate and enter into power purchase agreements to double the amount of renewable energy for its customers. The end result: more clean energy, while keeping pricing low. Now at 50% renewable energy servicing the area, customers are reaping the rewards.

Head shot of Dawn Weisz, CEO of Marin Clean Energy

Dawn Weisz, CEO of Marin Clean Energy (MCE)

People who live in MCE’s service area are automatically enrolled in the “Light Green” energy program. The “Light Green” program is comprised of 50% renewable energy from sources such as solar, wind, bioenergy, geothermal, and small hydro. By default, customers can take advantage of cleaner, greener energy, at a cost savings over standard incumbent utility rates. With a base rate that is cheaper and cleaner than traditional utility companies, MCE saved its customers $5.4 million in 2014 and is slated to increase customer savings to over $10 million in 2015.

Residents or business customers who have the resources and desire to do more for the environment can upgrade to MCE’s Deep Green program. With Deep Green, all of the power purchased by customers comes from 100% non-polluting, Green-e certified wind power. Green-e is the nation’s leading independent certification and verification program for voluntary renewable energy purchases. Deep Green costs only a penny more per kilowatt-hour than Light Green rates, so for most residential customers, the additional cost averages less than $5 per month. In addition to slashing their carbon footprint, customers who opt for 100% renewable energy also support the development of new, local renewable-energy projects; half of the revenue from the Deep Green premium is directed to a local renewable-development fund for projects such as the MCE Solar 1 Project in Richmond, a 10.5 megawatt solar installation. Other local renewable projects will support MCE’s Local Sol program, another 100% clean energy choice, which draws its power from local solar installations. In addition to reducing greenhouse gases, solar projects such as MCE Solar 1, which is scheduled for completion in 2016, have helped with local job production.

With the support of River City Bank, MCE has become a success for its customers, the environment and the local economy. In May, Marin Clean Energy celebrated its fifth year in business. Throughout its entire existence, River City Bank is proud to have been MCE’s bank of choice.

“We have had an extremely positive relationship with River City Bank,” said Dawn Weisz, CEO of Marin Clean Energy. “The size and nimbleness of the bank made it a perfect fit. There is a strong level of service and trust with the management. We also enjoy having direct access to decision makers.”

“At River City Bank, we help clients like MCE realize their vision,” says CEO and President, Steve Fleming. “Delivering exceptional service and a commitment to our clients and communities is what fuels our organization.”