SACRAMENTO, CA — River City Bank (the Bank) reported earnings for the fourth quarter of 2022 of $11.5 million, or $7.72 per share, compared to $9.8 million, or $6.63 per share in the fourth quarter of 2021. The Bank also reported its 7th consecutive year of record net income with $47.8 million or $32.22 per diluted share, for the year ending December 31, 2022; this was $3.3 million more than the $44.5 million, or $30.14 per diluted share, for the year ending December 31, 2021. The improved net income versus the prior year was driven by the following factors:

• Average loans outstanding, excluding Paycheck Protection Program (“PPP”) loans, were $560 million higher in 2022 than the prior year, thereby increasing net interest income.
• Mark-to-market gains (“MTM”) on interest rate swaps in 2022 were $2.3 million higher than the prior year. 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.
• $6.9 million gain on sale in 2022 derived from earn-out provisions on the sale of an investment in the prior year. The initial gain recognized on the sale of this investment in the prior year was $3.4 million.
• $728,000 gain on sale of an office building that was no longer in use in 2022.

Partially mitigating the above were the following factors:

• $1.0 million deferred loan fees earned on PPP loans for which the outstanding loan balances were forgiven by the Small Business Administration in the current year compared to $5.7 million recognized in the prior year.
• $18.4 million provision for loan losses in 2022 compared to the $10.5 million provision for loan losses recorded in the prior year. The increase in the loan loss provisions was a function of the robust loan growth and some deterioration in the segment of the loan portfolio secured by office properties.
• The Bank recognized a $3.9 million loss in the current year on the sale of $34 million of available for sale corporate bonds yielding only 0.95%.

“In addition to seven consecutive years of record net income, we are very pleased to report record net loan growth of $536 million for the year ending December 31, 2022, after excluding the $32 million reduction in PPP loans,” said Steve Fleming, president and chief executive officer of River City Bank. “Our asset quality remains strong with virtually no delinquencies or non-performing loans; however, we remain cautious about the impact to the office segment of commercial real estate (approximately 20% of the Bank’s commercial real estate loan portfolio) due to the reduction in demand as employers provide work-from-home opportunities.”

“Operational efficiency remains a core competency for the Bank, as evidenced by our 28 percent efficiency ratio after excluding the swap MTM gain and the loss on sale of securities for the year ending December 31, 2022” said Anker Christensen, chief financial officer of River City Bank. “Though our total non-interest expense increased in 2022 over the prior year, our focus on high productivity and managing expenses continues to be evident by our continued low efficiency ratio.”

Shareholders’ equity for River City Bank on December 31, 2022 increased $45 million to $353 million, when compared to the $308 million as of December 31, 2021. The increase was driven by current year retained earnings, slightly offset by a $5.4 million net decrease in accumulated other comprehensive income as the increase in short and medium-term interest rates resulted in unrealized losses in the Bank’s investment securities portfolio which was partially offset by unrealized gains on certain interest rate swap contracts designated as cash flow hedges. The Bank’s capital ratio remains well above the regulatory definition for being Well Capitalized with a Tier 1 Leverage Ratio of 8.7% as of December 31, 2022.