SACRAMENTO, CA — River City Bank (the Bank) reported net income of $7.3 million, or $4.96 per diluted share, for the quarter ending March 31, 2020, which compares favorably to the $5.9 million, or $4.07 per diluted share, for the same period in 2019. The improved net income versus the prior year quarter was driven by:
- Higher loan balances – Average loan outstandings were $333 million higher than the prior year quarter, thereby increasing net interest income.
- Non-core income of $657,000 during the current quarter related to prepayment penalty and deferred loan fee income on loans that paid off prior to their maturity compared to only $3,000 in the prior year quarter.
- Increased loan income of $428,000 associated with hedge accounting entries related to our interest rate swap contracts compared to only $26,000 in the prior year quarter.
- Partially offsetting the benefits to net income was a $500,000 increase in the provision for loan losses versus the prior year.
“We experienced exceptional deposit growth of $133 million, or 6.2 percent, during the first quarter of 2020,” said Steve Fleming, President and CEO of River City Bank. “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. These are unprecedented times and we are thankful that we can play a vital role through providing Paycheck Protection Program Loans (PPP Loans) to our existing customers as well as some new customers. As of April 20, 2020, we have funded $251 million of these PPP Loans. Our staff has performed at an exceptionally high level to ensure our customers received the resources they needed for their businesses in a timely fashion. Additionally, given the health risks associated with Covid-19, we are protecting our staff through minimizing the number of customers that can enter a branch at one time and through the use of acrylic barriers on our teller-line. Lastly, for those working in our corporate and back offices, we have been able to allow 80-90 percent of those staff to work from home.”
“These will be trying times for our economy and we are very pleased to be entering this period with solid asset quality metrics,” Fleming said. “Through our disciplined underwriting and consistency of monitoring the portfolio, we reported no non-performing loans for the two consecutive quarters ending March 31, 2020, and December 31, 2019.”
After excluding the prepayment penalty, accelerated deferred loan fee income and hedge accounting entries noted above, the Bank’s net interest margin decreased slightly from 2.66 percent to 2.64 percent for the quarters ending March 31, 2019 and 2020, respectively.
“Operational efficiency remains a core competency for the Bank, as evidenced by our 39 percent efficiency ratio for the quarter ending March 31, 2020,” said Anker Christensen, Chief Financial Officer of River City Bank. “Though our total non-interest expense has increased over the prior year quarter, our focus on managing expenses continues to be evident by our continued low efficiency ratio.”
Shareholders’ equity for River City Bank on March 31, 2020, increased $10.4 million to $247 million, when compared to the $237 million as of December 31, 2019. The increase was driven by increased retained earnings and a $3.2 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 definitions for being Well Capitalized, with a Tier 1 Leverage ratio of 9.5 percent as of March 31, 2020.
