SACRAMENTO, CA — River City Bank (the Bank) reported record net income of $6.5 million, or $4.44 per diluted share, for the quarter ending June 30, 2019. This compares favorably to the $5.7 million, or $3.94 per diluted share, for the same period in 2018. Net income was $12.4 million, or $8.51 per diluted share, for the six-months ending June 30, 2019, which compares to the $11.3 million, or $7.76 per diluted share, for the six-month period ending June 30, 2018. The improved net income versus the prior year quarter was driven by:

• Higher loan balances – Average loan outstandings were $192 million higher than the prior year quarter, thereby increasing net interest income.
• Non-recurring income of $1.3 million – The Bank recorded an elevated level of prepayment penalty and deferred loan fee income on loans that paid off prior to their maturity and received interest recoveries from loans that were previously charged off.
• Partially offsetting the above benefits to net income was a $750,000 increase in the provision for loan losses versus the prior year quarter. The increased level of provisions for loan losses was attributed to the Bank’s exceptional loan growth.

“We experienced solid growth of $147 million, or nine percent, in the first half of 2019 due to our excellent reputation in the commercial real estate loan market and the decline in long term interest rates,” said Steve Fleming, President and CEO of River City Bank. “Though our solid loan growth during the current quarter resulted in higher provision for loan losses, our asset quality remains exceptional. The ratio of nonperforming loans and Other Real Estate Owned to total gross loans of only 0.02 percent as of June 30, 2019, and we have reported net recoveries for more than four years. While the credit risk environment is benign today, we know from prior experience that it will change for the worse at some point, and we think it is prudent to maintain adequate loan loss reserves in anticipation of the eventual downturn.”

The loan growth has also been sufficient to mitigate the negative impact of the rise in short term interest rates and the flattening of the interest rate yield curve over the last year. After excluding the prepayment penalty and deferred loan fee income noted above, the Bank’s net interest margin declined from 2.73 percent to 2.67 percent for the six months ending June 30, 2018 and 2019, respectively.

“Operational efficiency remains a core competency for the Bank, as evidenced by our 40 percent and 42 percent efficiency ratios for the six months ending June 30, 2019 and 2018, respectively,” said Anker Christensen, Chief Financial Officer of River City Bank. “Over the prior year period, our focus on managing expenses continues to be made evident by our low efficiency ratio. This demonstrates our ability to grow profitably despite some net interest margin compression.”

Shareholders’ equity for River City Bank on June 30, 2019, increased $15.1 million to $224 million, when compared to the $209 million as of December 31, 2018. The growth was driven by increased retained earnings and accumulated other comprehensive income due to the decline in interest rates since December 31, 2018. The Bank’s capital ratios remain well above the regulatory definitions for being Well Capitalized. Common Equity Tier 1, Tier 1 Leverage and Total Risk-based capital ratios were 11.4 percent, 9.8 percent and 12.7 percent, respectively, as of June 30, 2019.