American Riviera Bank (OTC BB: ARBV.OB) announced Tuesday that the bank had its most successful quarter ever, with an unaudited net income of $328,000 and an annualized return on assets of 0.93 percent for the quarter ending Dec. 31, 2009.

“As anticipated in last quarter’s press release, the steps we took in 2009 have positioned the bank for this solid quarterly profit and continued positive performance in 2010,” president and CEO Jeff DeVine said. “Our earnings this quarter were not based upon extraordinary items, but instead were made possible by expanding our client base, increasing our net interest margin and disciplined cost control.”

The bank reported deposit growth of 25 percent in 2009, ending the year at $105.6 million in total deposits, with a 43 percent increase in core deposits compared with 2008.

Loans grew 22 percent to $105.9 million, compared with the same period in 2008. Loan and deposit growth was balanced, which helped the bank hold a strong cushion of $24.7 million in liquid assets at Dec. 31, 2009. The bank’s net interest margin was 4.35 percent for the quarter ended Dec. 31, 2009, up from 4.15 percent for the quarter ended Sept. 30, 2009. For the year ended Dec. 31, 2009, the bank reported a net interest margin of 3.97 percent, well above the State Chartered Bank average of 3.2 percent as of Sept. 30, 2009.

The bank reported $5 million in net interest income for the year, a 37 percent increase compared with the same period in 2008.

As previously reported, the bank made meaningful additions to its allowance for loan losses during 2009, resulting in a 2.43 percent reserve to total loans. Seventy-eight percent of the $2.6 million reserve is general and is unrelated to specific loans, but rather is attributable to the bank’s awareness of economic factors.

In the second half of 2009, the bank had an increase in problem loans, ending the year with $8.6 million in nonaccrual and $2.2 million in other real estate owned. All carrying values for nonaccrual loans and other real estate owned are supported by recent appraisals and impairment — if any — has already been charged-off in conformity with the bank’s accounting policies. Subsequent to year end, the bank received a $4.1 million payoff on a nonaccrual loan, reducing nonaccrual loans to $4.6 million and resulting in a $152,000 recovery, which will be recognized in the first quarter of 2010.

The bank’s unaudited net income for the quarter ended Dec. 31, 2009, of $328,000 includes $136,000 in provision for loan losses and a $70,000 reduction in the fair value of other real estate owned. The bank also reported an unaudited net loss of $1.9 million, which includes $2.7 million in provision for loan loss and $382,000 in reductions to the fair value of other real estate owned.

The bank continues to maintain a strong capital position with Tier 1 capital to total assets of 13 percent as of Dec. 31, 2009, well above the regulatory guideline of 5 percent for well-capitalized institutions.

— Michelle Martinich is senior vice president and chief financial officer for American Riviera Bank.