SACRAMENTO, CA - River City Bank (the Bank) reported its 8th consecutive year of record net income with $60.3 million or $40.49 per diluted share for the year ended December 31, 2023; this was $12.5 million more than the $47.8 million or $32.22 per diluted share for the year ended December 31, 2022. The Bank also reported net income of $16.8 million, or $11.28 per diluted share, for the quarter ended December 31, 2023, which compares favorably to the $11.5 million, or $7.72 per diluted share, for the same period in 2022. The Bank’s earnings for the year ended December 31, 2023 represented a healthy 15.7% return on equity capital and 1.34% return on assets. The improved net income versus the prior year was driven by the following factors:
- Higher loan balances – Average loan outstandings in 2023 were $477 million higher than the prior year, thereby increasing net interest income.
- Increased net interest margin (NIM) – For 2023, NIM increased to 2.74% from 2.68% in the prior year. The Bank has seen a benefit in NIM as market rates have increased over these two years. Despite experiencing significantly higher deposit costs during 2023, the Bank had $19.1 million more net interest income than in 2022.
- The provision for credit losses in 2023 was $12.6 million, which was $5.8 million less than the $18.4 million in 2022. The provision for credit losses in 2023 reflects the growth in the Bank’s loans this year and concern for continued deterioration in the office segment of the Bank’s commercial real estate portfolio. During 2023, the Bank did not experience any actual credit losses and the Bank’s Allowance for Credit Losses for Loans was a robust 2.61% as of December 31, 2023.
- The Bank recognized a $3.9 million loss in 2022 on the sale of $34 million of available for sale corporate bonds which were yielding only 0.95%. At the time of the sale, the Bank was able to re-invest in U.S. Treasuries and Agency securities at a significantly higher yield.
“With the Bank’s founding in 1973, we celebrated 50 years of consistent and reliable service to our customers in 2023 and we are thankful for the goodwill that we have built with our loyal and expanding customer base,” said Steve Fleming, president and chief executive officer. “Notwithstanding the turmoil in the banking industry that was caused by the failure of several banks in the first half of this year, our total deposits grew significantly from $3.4 billion as of December 31, 2022 to $4.3 billion as of December 31, 2023; as such, the Bank’s liquidity remains healthy. At the same time, our asset quality remains strong with a very short effective duration (average of 1.15 years) bond portfolio and virtually no delinquencies or non-performing loans. We believe we can continue to grow our commercial real estate loan portfolio as we focus on loans secured by multi-family, retail, and industrial properties, as well as expanding our geographic footprint to other western states outside of California. On the other hand, we continue to see deterioration in the office segment of our commercial real estate loan portfolio from the reduction in demand as employers continue to provide work from home opportunities for their employees.”
“The Bank’s high quality investment securities portfolio continues to perform well with relatively small unrealized losses of 1.7 percent and there are no investment securities categorized as held-to maturity,” said Brian Killeen, chief financial officer of River City Bank. “Operational efficiency remains a core competency for the Bank, as evidenced by our 26.6 percent efficiency ratio for the year ended December 31, 2023. Though our total non-interest expense increased in 2023 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, 2023 increased $65 million to $418 million, when compared to the $353 million as of December 31, 2022. The increase was primarily driven by current year retained earnings, as well as a $9.3 million improvement in the Bank’s accumulated other comprehensive income position. The Bank’s capital ratios remain well above the regulatory definition for being Well Capitalized, with a Tier 1 Leverage Ratio of 8.2% as of December 31, 2023.
Additionally, Mr. Fleming announced that the Bank’s board of directors has approved a cash dividend of $0.37 per common share to shareholders of record as of February 6, 2024, and payable on February 20, 2024.
