SACRAMENTO, CA — River City Bank (the Bank) reported record net income of $25.3 million, or $17.33 per diluted share, for the year ending December 31, 2019. This was $1.3 million more than the $24.0 million, or $16.50 per diluted share, for the year ending December 31, 2018. The improved net income versus the prior year was driven by:
- Higher loan balances – Average loan outstandings were $208 million higher than the prior year, thereby increasing net interest income.
- Non-core income of $2.0 million and $496,000 for the years ending December 31, 2019 and 2018, respectively — In 2019, the Bank recorded an elevated level of prepayment penalty and deferred loan fee income on loans that paid off prior to their maturity; it also received interest recoveries from loans that were previously charged off.
- Partially offsetting the benefits to net income was a $3.25 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 exceptional loan growth.
Additionally, the exceptional loan growth required a higher provision for loan losses in the fourth quarter causing the Bank to report lower net income of $5.8 million or $4.00 per diluted share, for the three months ending December 31, 2019, compared to the $6.8 million or $4.67 per diluted share, for the three months ending December 31, 2018.
Steve Fleming, president and chief executive officer of River City Bank, commented “We are pleased to report our fourth consecutive year of record earnings in 2019, along with exceptional loan (21%) and deposit (24%) growth. We achieved this loan growth due to our excellent reputation in the commercial markets that we operate in throughout California and the decline in long term interest rates. Perhaps more importantly, we accomplished this loan growth without compromising our asset quality. Through our disciplined underwriting and consistency of monitoring the portfolio, we are reporting no non-performing loans as of December 31, 2019.”
The loan growth has also been sufficient to mitigate the negative impact of the rise in the Bank’s cost of funds as it grew deposits at an accelerated pace. After excluding the prepayment penalty and deferred loan fee income noted above, the Bank’s net interest margin declined from 2.70 percent to 2.64 percent for the years ending December 31, 2018 and 2019, respectively.
“Our management team is committed to growing the Bank in an operationally efficient manner as evidenced by maintaining an efficiency ratio under 40 percent for the years ending December 31, 2019 and 2018” said Anker Christensen, chief financial officer of River City Bank. “We have a highly productive group of employees at the Bank and managing expenses continues to be a priority for the management team.”
Shareholders’ equity for River City Bank on December 31, 2019, increased $28 million to $237 million, when compared to the $209 million as of December 31, 2018. The increase was driven largely by 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 11.1 percent, 9.5 percent and 12.3 percent, respectively, as of December 31, 2019.