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American Riviera Bancorp Announces Results for the Third Quarter of 2024

SANTA BARBARA, Calif.--(BUSINESS WIRE)-- American Riviera Bancorp (鈥淐ompany鈥�) (OTCQX: ARBV), holding company of American Riviera Bank (鈥淏ank鈥�), announced today unaudited net income of $6.7 million ($1.15 per share) for the nine months ended September 30, 2024, compared to $8.3 million ($1.44 per share) earned in the same reporting period in the previous year. Unaudited net income was $2.1 million ($0.36 per share) for the three months ended September 30, 2024, compared to $2.5 million ($0.42 per share) in the previous quarter, and $2.6 million ($0.46 per share) earned in the same reporting period in the previous year.

Jeff DeVine, President and CEO of the Company and the Bank stated, 鈥淥ur strong relationship deposit growth from every branch this quarter has allowed the Bank to reduce non-core, wholesale funding. Our new branch in Atascadero has been well received by the community and has already reached $9.6 million in deposits since opening in June. Loan demand noticeably increased in the latter portion of this quarter which will allow us to further serve client needs, support the growth of our communities and enhance shareholder return.鈥�

Third Quarter Highlights

• The Bank has the highest 鈥淪uper Premier鈥� rating for financial performance from the Findley Reports and maintained a 鈥�5 Star - Superior鈥� rating from Bauer Financial as of June 30, 2024.
• The Bank was rated 鈥淥utstanding鈥� by the Federal Deposit Insurance Corporation in 2023 for its performance under the Community Reinvestment Act.
• Total shareholders鈥� equity of $112.1 million at September 30, 2024, has increased $6.7 million or 6.4% from the prior quarter-end, and $19.8 million or 21.4% from the same reporting period in the previous year.
• Tangible book value per share of $18.37 at September 30, 2024, has increased $1.11 or 6.4% from the prior quarter-end, and $3.22 or 21.3% from the same reporting period in the previous year.
• All Bank and Company capital ratios increased in the third quarter of 2024. The Bank鈥檚 regulatory capital ratios were all above 鈥渨ell-capitalized鈥� standards. The Company鈥檚 tangible common equity ratio at September 30, 2024 was 8.31%, an increase from 6.92% at September 30, 2023.
• Return on average assets for the third quarter ended September 30, 2024, was 0.65%, and return on average equity was 7.73%.
• Total loans were $976.3 million at September 30, 2024, an increase of $12.6 million or 1.3% from the prior quarter-end, and an increase of $35.1 million or 3.7% from September 30, 2023. The Bank鈥檚 loan-to-deposit ratio at September 30, 2024, was 86.2%.
• Total deposits were $1.13 billion at September 30, 2024, an increase of $64.8 million or 6.1% from the $1.07 billion at June 30, 2024, and an increase of $31.3 million or 2.8% from September 30, 2023.
• Non-interest-bearing demand deposits were $466.5 million at September 30, 2024, an increase of $41.5 million or 9.8% from the prior quarter-end. Non-interest-bearing demand deposits represent 41.2% of total deposits, and total demand deposits represent 51.5% of total deposits, respectively, at September 30, 2024.
• As a result of increased core deposits, borrowed funds were $36.5 million at September 30, 2024, a reduction of $50.0 million or 57.8% from the amount carried at the prior quarter-end.
• As a result of decreased use of non-core, wholesale funds, total cost of funds decreased to 1.66% for the third quarter of 2024, compared to 1.70% in the prior quarter, yet remain higher than the 1.06% for the same quarter in the prior year. Overall funding costs for the Company have increased from prior year due to Federal Reserve policy but remain modest compared to industry averages based on our relationship banking focus and high percentage of demand deposits.
• On-balance sheet liquidity continues to be substantial with $228.7 million of cash, due from banks, and available-for-sale (鈥淎FS鈥�) securities market value at September 30, 2024.
• Access to available sources of liquidity including fed funds lines of credit with correspondent banks, unused secured borrowing capacity with the Federal Home Loan Bank (鈥淔HLB鈥�), and unused secured borrowing capacity with the Federal Reserve totaled $450.6 million at September 30, 2024.
• Allowance for Credit Losses (鈥淎CL鈥�) was 1.20% of total loans at September 30, 2024, slightly decreased from 1.21% at June 30, 2024, and 1.24% at September 30, 2023.
• The Bank鈥檚 commercial real estate (鈥淐RE鈥�) portfolio is diverse, with only $83.4 million in the non-owner-occupied office category. Credit underwriting is strong with weighted average loan-to-values of 31% to 53% and weighted average debt coverage ratios between 1.86 and 3.16 depending on the individual CRE category.
• The Bank maintained strong credit quality with no other real estate owned, no loans 90 days or more past due, and only $0.5 million or 0.05% of total loans on non-accrual status, which are well supported by collateral or reserves.

Third Quarter Earnings

For the third quarter of 2024, unaudited net income was $2.1 million, stable from the $2.1 million in the second quarter of 2024 (adjusted for the $0.5 million non-recurring gain on early redemption of a subordinated note), and less than the $2.7 million in the third quarter of 2023. The decrease in earnings compared to the third quarter of the previous year is primarily attributable to increased interest expense on deposits and borrowings.

The Bank continues to grow interest and fees on loans sequentially over the last four quarters from $12.1 million in the third quarter of 2023 to $13.4 million in the third quarter of 2024, representing a $1.3 million or 10.4% increase. However, the cost of funding has also increased sequentially due to the Federal Reserve鈥檚 higher-rate policy. Total interest expense has increased from $3.1 million in the third quarter of 2023 to $4.8 million in the third quarter of 2024, a $1.7 million or 54.9% increase.

Non-Interest Income and Expense

Total non-interest income was $0.9 million for the third quarter of 2024, compared to $1.5 million for the prior quarter including the $0.5 million non-recurring gain on subordinated note redemption, and $0.7 million for the same quarter last year. Total non-interest income for the quarter has grown 27% over the same quarter of the prior year and has increased 49% year-to-date compared to September 30, 2023. Variances between the quarters relate primarily to SBA loan sale premiums, mortgage broker fees, loan interest rate swap fees, and loan prepayment fees.

Non-interest expense was $8.4 million for the third quarter of 2024, a slight increase from the $8.1 million reported for the prior quarter, and more than the $7.9 million reported for the same quarter of the prior year. Non-recurring expenses related to counterfeit check fraud losses were $0.2 million higher in the third quarter of 2024 compared to the prior quarter. Cost savings generated from our core and online banking vendor contract have allowed for targeted personnel increases in deposit generating roles including staffing and occupancy for our recently opened branch in Atascadero.

Loans and Asset Quality

Total loans were $976.3 million at September 30, 2024, an increase of $12.6 million or 1.3% from the prior quarter-end, and an increase of $35.1 million or 3.7% from September 30, 2023.

The Bank鈥檚 ACL was $11.7 million at September 30, 2024, with a resulting coverage ratio of 1.20%, as compared to $11.6 million or 1.24% at September 30, 2023. As of September 30, 2024, non-accrual loans totaled $0.5 million, a slight decrease from the previous quarter-end, and a reduction of $2.2 million from September 30, 2023. Credit quality remains strong.

Deposits & Borrowings

Total deposits were $1.13 billion at September 30, 2024, representing a $64.8 million or 6.1% increase from June 30, 2024, and an increase of $31.3 million or 2.8% since September 30, 2023.

Non-interest-bearing demand deposits totaled $466.5 million at September 30, 2024, an increase of $41.5 million or 9.8% from the prior quarter-end, and an increase of $8.8 million or 1.9% from September 30, 2023. Non-interest-bearing demand deposits represent 41.2% of total deposits at September 30, 2024, compared to 39.8% at the prior quarter-end, and 41.6% at September 30, 2023.

Interest-bearing demand deposits totaled $116.6 million at September 30, 2024, an increase of $6.3 million or 5.7% from the prior quarter-end, and a decrease of $12.9 million or 9.9% from September 30, 2023. Demand deposits represent 51.5% of total deposits at September 30, 2024, an increase from 50.1% at the prior quarter-end, and decrease from 53.3% at September 30, 2023.

Other interest-bearing deposits totaled $549.6 million at September 30, 2024, an increase of $16.9 million or 3.2% from the prior quarter-end, and an increase of $35.3 million or 6.9% from September 30, 2023.

The weighted average cost of deposits for the third quarter of 2024 was 1.52%, compared to 1.35% for the previous quarter, and 0.90% for the same quarter last year. The increase in the cost of deposits this quarter is related to higher rates on time deposits for local depositors.

As a result of increased core deposits, the Bank was able to reduce more expensive wholesale-funded certificates of deposit by $11.8 million from the prior quarter. Additionally, the Bank decreased its FHLB advances to $10.0 million at September 30, 2024, from $60.0 million at June 30, 2024. At September 30, 2024, the Bank had a single $10.0 million long-term FHLB advance outstanding with a rate of 4.00%, $10.0 million drawn on a correspondent bank line of credit at a rate of 3.85%, and $16.5 million of subordinated notes outstanding at a rate of 3.75%. The weighted average cost on all borrowings for the quarter was 4.50%, resulting in $0.6 million in interest expense. The $36.5 million of borrowed funds at September 30, 2024, represents a $50.0 million or 57.8% decrease from the level carried at the prior quarter-end.

As a result of the increased core deposits and decreased use of non-core wholesale funding, the Company was able to reduce the overall cost of funds to 1.66% for the third quarter of 2024, compared to 1.70% for the previous quarter. Additionally, the Company鈥檚 net interest margin increased to 3.33% for the third quarter of 2024, compared to 3.24% for the prior quarter.

The Bank鈥檚 liquidity position remained strong with a primary liquidity ratio (cash and cash equivalents, deposits held in other banks and unpledged AFS securities as a percentage of total assets) of 15.8% at September 30, 2024, compared to 15.3% at June 30, 2024.

As of September 30, 2024, the Bank had available and unused, secured borrowing capacity with the FHLB of San Francisco of $266.5 million, and had available and unused, secured borrowing capacity with the Federal Reserve of $41.2 million. In addition, the Bank had $142.9 million of unused fed funds lines of credit with correspondent banks at September 30, 2024. Available contingent funding sources of $450.6 million remain robust.

Overall uninsured deposits, excluding public agency deposits that are collateralized, are conservatively estimated to be $423.4 million, or 37.4% of total deposit balances as of September 30, 2024. The actual level of uninsured deposits is lower than the percentage stated above, as our knowledgeable bankers have helped clients obtain more than $250,000 of FDIC insurance with vesting structures such as joint accounts, payable upon death accounts, and revocable trust accounts with multiple beneficiaries. In addition, the Bank can offer up to $50 million of FDIC pass-through insurance to clients via the IntraFi network Insured Cash Sweep (鈥淚CS鈥�) or Certificate of Deposit Account Registry System (鈥淐DARS鈥�) products.

Shareholders鈥� Equity

Total shareholders鈥� equity was $112.1 million at September 30, 2024, a $6.7 million or 6.4% increase since June 30, 2024, and an increase of $19.8 million or 21.4% over the same period of the prior year. The tax adjusted unrealized loss on securities, which is a component of equity (accumulated other comprehensive income or 鈥淎OCI鈥�), improved $4.3 million or 20.6% from $20.9 million at June 30, 2024, to $16.6 million at the end of the third quarter of 2024. The Bank fully expects to receive all principal when the investments mature. As of September 30, 2024, the Company has not repurchased any shares under the previously announced share repurchase program.

Company Profile

American Riviera Bancorp (OTCQX: ARBV) is a registered bank holding company headquartered in Santa Barbara, California. American Riviera Bank, the 100% owned subsidiary of American Riviera Bancorp, is a full-service community bank focused on serving the lending and deposit needs of businesses and consumers on the Central Coast of California. The state-chartered bank opened for business on July 18, 2006, with the support of local shareholders. Full-service branches are located in Santa Barbara, Montecito, Goleta, Santa Maria, San Luis Obispo, Atascadero, and Paso Robles. The Bank provides commercial business, commercial real estate, residential mortgage, construction, and Small Business Administration lending services as well as convenient online and mobile technology. For thirteen consecutive years, the Bank has been recognized for strong financial performance by the Findley Reports and has received the highest 鈥淪uper Premier鈥� rating from Findley every year since 2016. The Bank was rated 鈥淥utstanding鈥� by the Federal Deposit Insurance Corporation in 2023 for its performance under the Community Reinvestment Act.

Statements concerning future performance, developments or events concerning expectations for growth and market forecasts, and any other guidance on future periods, constitute forward looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, effects of interest rate changes, ability to control costs and expenses, impact of consolidation in the banking industry, financial policies of the US government, and general economic conditions.

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American Riviera Bank



805-965-5942

Michelle Martinich

Source: American Riviera Bancorp