SACRAMENTO, CA — River City Bank (the Bank) reported net income of $15.6 million, or $10.62 per diluted share, for the quarter ending March 31, 2021, which compares favorably to the $7.3 million, or $4.96 per diluted share, for the same period in 2020. The improved net income versus the prior year quarter was driven by:
- $6.8 million in mark-to-market gains on interest rate swaps for the quarter ending March 31, 2021 compared to a loss of $164,000 for the prior year quarter. 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.
- $3.4 million gain on sale of an investment.
- $2.0 million deferred loan fees earned on Paycheck Protection Program (PPP) loans for which the outstanding loan balances were forgiven by the Small Business Administration.
- Higher loan balances – Average loans outstandings were $533 million higher than the prior year, thereby increasing net interest income; $246 million of the increase was attributable to PPP loans.
- $3.0 million provision for loan losses during the current quarter compared to the $1.0 million provision for loan losses recorded in the prior year quarter which partially offsets the benefits noted above.
“With many businesses in California continuing to struggle from the ongoing effects of the pandemic shutting down many segments of our economy, we are pleased to report that we were able to assist 292 customers obtain PPP round two loans totaling $79 million in outstandings as of March 31, 2021,” said Steve Fleming, president and chief executive officer of River City Bank. “With vaccine distribution ramping up and California stating that it will allow indoor concerts, theater performances and other private gatherings starting on June 15th, we are expecting to see continued improvement in our local economy. Nevertheless, we continue to be concerned about the long-term impacts to the retail and office segments of commercial real estate due to rising levels of online shopping and work-from-home opportunities.”
“Operational efficiency remains a core competency for the Bank, as evidenced by our 34 percent efficiency ratio after excluding the swap MTM and investment gains noted above for the quarter ending March 31, 2021,” 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 March 31, 2021, increased $12 million to $282 million, when compared to the $270 million as of December 31, 2020. The increase was driven by current year retained earnings, slightly offset by a $2.9 million decrease in accumulated other comprehensive income as the increase in short and medium-term interest rates resulted in unrealized losses 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 8.3% as of March 31, 2021.
