SACRAMENTO, CA — River City Bank (the Bank) reported record net income of $31.6 million, or $21.58 per diluted share, for the year ending December 31, 2020; this was $6.3 million more than the $25.3 million, or $17.33 per diluted share, for the year ending December 31, 2019. The improved net income versus the prior year was driven by:

• Higher loan balances – Average loans outstandings were $554 million higher than the prior year, thereby increasing net interest income.
• Paycheck Protection Program (PPP) loans – As of December 31, 2020 the Bank had $236 million PPP loans outstanding and recorded $2.0 million of interest income and $3.8 million of loan fee income in 2020 related to PPP loans.
• Prepayment penalty income of $3.9 million and $2.2 million for the years ending December 31, 2020 and 2019, respectively. In both years, the Bank recorded an elevated level of prepayment penalty fee income on commercial real estate loans that paid off prior to their maturity dates.
• Mark-to-market adjustments on interest rate swaps resulting in a gain of $659,000 for the year ending December 31, 2020 compared to zero for the prior year period. The Bank entered into these swap agreements to hedge the interest rate risk associated with its ongoing origination of medium-term fixed rate commercial real estate loans.
• Partially offsetting the benefits noted above to net income was a $6.4 million increase in the provision for loan losses versus the prior year. The increased level of provisions for loan losses was attributed to the Bank’s loan growth and some deterioration in loan quality caused by COVID-19. Nonetheless, management is very pleased with the Bank’s asset quality as evidenced by the following as of December 31, 2020:
  • No remaining loan modifications related to COVID-19
  • 0.02% Total delinquent loans
  • A total of one non-performing loan in the amount of $25,000
  • No charge-offs for the year ending December 31, 2020

“At the risk of stating the obvious, 2020 was an unprecedented year due to the COVID-19 pandemic,” said Steve Fleming, president and chief executive officer of River City Bank. “We experienced a shutting down of many segments of the economy in the first half of the year, with many businesses suffering massive interruptions in their operations. Though the economy improved during the second half of the year, until the vaccine is widely distributed amongst the population and determined to be effective, we believe that the California economy will remain weak.”

“I am very proud of the performance of the Bank in 2020, particularly given the very challenging circumstances,” said Fleming. “In early March our office staff had to adjust to working from home on a full-time basis. Within a month, many of them were also working long hours to process a large volume of Paycheck Protection Program loans for our existing customers and even some new customers. At the same time, our branch staff were on the front line, as they provided an essential service to our customers.  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.”

“Notwithstanding the challenges noted above, we experienced outstanding deposit growth of $866 million or 40% for the year ending December 31, 2020,” said Steve Fleming. “We are very pleased with the trust placed in us by our deposit customers, which has provided us with the liquidity necessary to continue our robust lending (25% growth in 2020) into the communities we serve. That said, we noticed a significant slowdown in loan demand since the onset of the pandemic and, thus, expect slow loan growth for most of 2021.”

“Operational efficiency remains a core competency for the Bank, as evidenced by our 33 percent efficiency ratio for the year ending December 31, 2020” said Anker Christensen, chief financial officer of River City Bank. “Though our total non-interest expense 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 December 31, 2020 increased $33 million to $269 million, when compared to the $237 million as of December 31, 2019. The increase was driven by current year retained earnings and a $1.6 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 8.1% as of December 31, 2020.