American Riviera Bank (OTC BB: ARBV.OB) on Thursday announced strong improvement in the net interest margin and continued growth of the bank.

As a result of efforts to deploy excess liquidity into loan growth, the bank was able to improve the net interest margin to 3.95 percent for the quarter ended June 30, from 3.38 percent for the first quarter, which ended March 31. The bank reported total loans of $103.7 million as of the second quarter, an increase of 33 percent, or $25.5 million, from the same period a year ago. The bank’s sustained focus on deposit growth resulted in total deposits of $103.8 million as of the second quarter in 2009, an increase of 58 percent, or $38.1 million, from the same period in 2008.

Despite the struggling economy and real estate market, the bank continues to have no past-due loans greater than 30 days, no nonaccrual loans, and no loan charge-offs in the second quarter. In response to the weakness in the economy, the bank increased its monitoring and testing of the loan portfolio by engaging an external consultant to review a significant sample of loans, with particular emphasis on large dollar and real estate-secured loans. Several loan relationships were identified for increased monitoring, and current appraisals were ordered for all real estate-secured loans in these relationships.

The bank recorded loan-loss provision of $326,000 in the second quarter, compared to $47,000 in the first quarter, thereby increasing the loan-loss allowance to total loan ratio to 1.38 percent this quarter from 1.20 percent in the previous quarter. Bank officials believe the current allowance for loan losses is adequate to provide for probable losses inherent in the loan portfolio based on the historical performance of the loan portfolio to date and the extensive monitoring and testing recently performed.

The bank’s unaudited adjusted net income for the second quarter, excluding the provision for loan loss, was $222,000. After loan-loss provision and an additional $55,000 of expense related to the FDIC special assessment, the bank recorded an unaudited net loss of $104,000 for the second quarter.

The bank did not apply for or accept TARP or any other government-subsidized capital infusions, and continues to maintain a strong capital position with a Tier 1 Leverage ratio of 14.98 percent in the second quarter, well above the regulatory guideline of 5 percent for well-capitalized institutions and 8 percent for de novo institutions.

“We are very pleased with the growth in deposits and loans,” said Jeff DeVine, American Riviera Bank’s president and CEO. “In addition, our efforts to deploy excess liquidity into high-quality, local loans has resulted in a dramatic increase in our net interest margin that will benefit the bank on a go-forward basis. The provisioning for potential loan losses is necessary during these difficult economic times and may need to continue into the third quarter of 2009.”

Founded in 2006 by more than 400 local shareholders, American Riviera Bank is located at 1033 Anacapa St.

— Michelle Martinich is chief financial officer at American Riviera Bank.