SACRAMENTO, CA — River City Bank (the Bank) reported record net income of $24.0 million, or $16.50 per diluted share, for the year ending December 31, 2018. This was $7.3 million more than the $16.7 million, or $11.52 per diluted share, for the year ending December 31, 2017. The Bank’s earnings for 2018 were higher due to organic growth, as well as lower taxes from the Tax Cut and Jobs Act that was passed at the end of 2017. Earnings in 2017 were impacted by a one-time, non-cash charge of $4.6 million, or $3.18 per diluted share, in the fourth quarter of 2017. The charge was related to the re-measurement of the Bank’s deferred tax assets arising from a lower corporate tax rate. In addition, the 2017 results benefited from a pre-tax $3.5 million gain on sale of an Other Real Estate Owned property and a $765,000 mark to market gain on interest rate swap contracts.
“We are very proud to have finished 2018 with record earnings, significant growth in our customer base, and the successful opening of our loan production office in downtown San Francisco,” said Steve Fleming, President and CEO of River City Bank. “The new office and the recent launch of our Clean Energy Division will provide us with new and additional opportunities to serve the thriving Bay Area marketplace.”
The Bank experienced solid growth in its balance sheet in 2018, as evidenced by 9.6 percent loan growth and 12.4 percent deposit growth.
The Bank’s net interest margin declined from 2.83 percent to 2.73 percent for the years ending December 31, 2017 and 2018, respectively. The reduced net interest margin is a function of the Federal Reserve having increased short-term interest rates and the flattening of the yield curve. Consequently, the Bank’s net interest margin compresses as the cost of deposits and other borrowings rise faster than the yield on its earning assets.
“Operational efficiency remains a core competency for the Bank, as evidenced by our 40 percent efficiency ratio for the years ending December 31, 2018 and 2017, respectively,” 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, 2018 increased $24 million to $209 million, when compared to the $185 million as of December 31, 2017. The growth was driven 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 11.8 percent, 9.6 percent and 13.1 percent, respectively, as of December 31, 2018.