SACRAMENTO, CA — February 1, 2016—River City Bank (the Bank) reported net income of $3.97 million, or $2.77 per diluted share, for the three months ending December 31, 2015, which compares to the $3.63 million, or $2.54 per diluted share, for the three months ending December 31, 2014. The current quarter benefited from a $1.1 million gain on sale of an Other Real Estate Owned property. Net income was $12.5 million, or $8.76 per diluted share for the year ending December 31, 2015, which compares favorably to the $11.8 million, or $8.31 per diluted share for the year ending December 31, 2014. Total assets grew almost 19 percent during 2015, and total assets as of December 31, 2015 exceeded $1.5 billion.
Due to changes in interest rates, the Bank recorded a $740,000 mark to market gain and a $338,000 mark to market loss on interest rate swap contracts for the quarter and year ending December 31, 2015, respectively. This compares to $495,000 and $1.0 million mark to market losses on interest rate swap contracts for the quarter and year ending December 31, 2014, respectively. The Bank entered these swap agreements to hedge the interest rate risk associated with its ongoing origination of long term fixed rate loans. Because these swaps were not designed to receive hedge accounting treatment, these swaps are carried on the balance sheet at their fair market value with any changes in value recorded in the income statement.
“2015 was another year of excellent profitability and growth,” stated Steve Fleming, president and chief executive officer of River City Bank. “Each of the five years of 2011 through 2015 are in the top six most profitable years for the bank over its 43-year history. Loan growth has been vibrant over the last five years, averaging 13 percent per annum; however, 2015 was truly exceptional with nearly 27 percent loan growth in one year.”
Total gross loans increased $206 million, or 26.8 percent, in 2015 and $78 million, or 8.7 percent, from September 30, 2015. “Loan growth continues to be a key element of our profitability as it has mitigated the downward pressure on the Bank’s net interest margin and revenue caused by the extended low interest rate environment,” stated Fleming. “Most importantly, this growth in loans has been achieved without lowering our high credit underwriting standards, as evidenced by the significant decline in our already low non-performing loans to total loans ratio from 0.85 percent as of December 31, 2014 to 0.35 percent as of December 31, 2015. The continued strengthening of the quality of the Bank’s loan portfolio led to a $2.7 million negative loan loss provision in the fourth quarter of 2014; however, due to the substantial loan growth in 2015, the Bank recorded a $900,000 provision for loan losses in the fourth quarter of 2015.”
The net interest margin declined from 3.05 percent for the quarter ending December 31, 2014, to 2.97 percent for the same period in 2015. “Fixed income investment yields remain near historic lows, putting pressure on our margins as the reinvestment rate for our maturing investment securities is still well below their current yield,” stated Anker Christensen, chief financial officer of River City Bank. “With the continued pressure on our margins, we have remained vigilant about maximizing our operating efficiency. Our efficiency ratio for the years ending December 31, 2015 and 2014 was 51.76 percent and 57.97 percent, respectively.”
Shareholders’ equity for River City Bank on December 31, 2015 increased $9.8 million to $157.9 million, compared to $148.1 million as of December 31, 2014. The Bank’s capital ratios remain well above the regulatory definitions for being Well Capitalized. Common Equity Tier 1, Tier 1 Leverage, and Total Risked-Based Capital Ratios were 13.1 percent, 10.9 percent and 15.2 percent, respectively, as of December 31, 2015.
