SACRAMENTO, CA — River City Bank (the Bank) reported net income of $8.3 million, or $5.70 per diluted share, for the quarter ending September 30, 2020, which compares to the $7.0 million, or $4.82 per diluted share, for the same period in 2019. Net income was $21.8 million or $14.86 per diluted share for the nine months ending September 30, 2020, which compares to the $19.5 million or $13.33 per diluted share for the nine months ending September 30, 2019. The improved net income versus the prior year quarter was driven by:
- Higher loan balances – Average loan outstandings were $405 million higher, excluding $290 million of Paycheck Protection Program (PPP) loans, than the prior year quarter, thereby increasing net interest income.
- Deferred loan fees recognized on PPP loans and included in interest income during the current quarter totaled $1.7 million.
- Non-core income of $764,000 and $316,000 for the quarters ending September 30, 2020 and 2019, respectively – The Bank recorded an elevated level of prepayment penalty income on loans that were paid-off prior to their maturity.
- Mark to market adjustments recorded on interest rate swaps, resulting in a gain of $365,000 for the three months ending September 30, 2020 compared to zero for the prior year quarter. The Bank entered into these swap agreements to hedge the interest rate risk associated with its ongoing origination of medium-term fixed rate loans.
- Partially offsetting the above benefits to net income was a $2.35 million increase in the provision for loan losses versus the prior year quarter.
Though the economy improved somewhat during the third quarter, until an effective vaccine is developed and widely distributed amongst the population, we believe that the California economy will remain weak”, said Steve Fleming, president and chief executive officer of River City Bank. “We continue to be pleased with our solid asset quality metrics. Through our disciplined and financially conservative loan underwriting and diligent management of the portfolio, we have reported no non-performing loans over the past four consecutive quarters. Perhaps even more importantly, we have had to make a minimal number of loan modifications as a result of the COVID-19 pandemic.” Loan modifications to those borrowers experiencing financial challenges as a result of COVID-19 (not classified as troubled debt restructurings) totaled $12.8 million and were 0.5% of total loans. Below is a summary of the loan modifications as of September 30, 2020:
- Consumer: One residential mortgage loan with an outstanding balance of only $6,278 had its P&I payments deferred to October 2020.
- C&I: One loan with an outstanding balance of $1.3 million has been making interest only payments through September with P&I payments commencing October 2020.
- CRE: Three borrowers with an aggregate outstanding balance of $11.5 million have been making interest only payments through September with P&I payments commencing October 2020.
“In addition to the exceptional loan growth noted above, we also experienced outstanding deposit growth of $692 million or 32% during the first nine months of 2020”, said Steve Fleming. “We are very pleased with the trust placed in us by our deposit customers, which has allowed us to continue our robust lending into the communities we serve. That said, we have noticed a significant slowdown in loan demand since the onset of the pandemic and, thus, expect much slower loan growth in the near term. Though almost all of our branches remain open to provide services to our customers, given the health risks associated with COVID-19, we are continuing to protect our staff through minimizing the number of customers that can enter a branch at one time and are following California’s guidelines for wearing masks and social distancing.”
“Operational efficiency remains a core competency for the Bank, as evidenced by our 34 percent efficiency ratio for the nine months ending September 30, 2020” said Anker Christensen, chief financial officer of River City Bank. “Though our total non-interest expense has increased over the prior year period, our focus on managing expenses continues to be evident by our continued low efficiency ratio.”
Shareholders’ equity for River City Bank on September 30, 2020, increased $23.6 million to $260 million, compared to the $237 million as of December 31, 2019. The increase was driven by current year retained earnings and a $2.3 million increase in accumulated other comprehensive income as the decline in short and medium term interest rates resulted in increased unrealized gains in our Investment securities portfolio. The Bank’s capital ratio remains well above the regulatory definition for being Well Capitalized with a Tier 1 Leverage Ratio of 8.4% as of September 30, 2020.
About River City Bank
Named one of Sacramento Business Journal’s “50 Fastest Growing Companies” for each of the past three years, River City Bank is the Sacramento region’s premier business bank with assets of over $3.1 billion. River City Bank offers a comprehensive suite of banking services, including loans, deposits and cash management tools to the business, consumer and commercial real estate sectors. With tailored, executive-level service and a “Superior” financial rating from the nation’s leading independent bank-rating firm, Bauer Financial, River City Bank redefines the banking experience and every touch point that surrounds it. River City Bank is the largest, independent, locally-owned bank in the Sacramento region with offices in the San Francisco Bay Area and a presence in Southern California. For additional information, please visit www.rivercitybank.com or call (916) 567-2600. Member FDIC. Equal Housing Lender.