American Riviera Bank on Tuesday announced unaudited net income of $1,171,000 ($0.23 per share) for the quarter ended March 31, 2020. This represents a decrease in net income from the $1,768,000 ($0.35 per share) for the same reporting period in the prior year.

The bank reported an annualized return on average assets of 0.67 percent and return on average equity of 6.27 percent.

The variance from the prior year is attributed to conservative risk management practices with the bank providing $783,000 in allowance for loan losses primarily due to anticipated economic impacts from the COVID-19 pandemic, an increase of $608,000 from the same reporting period in the prior year.

American Riviera Bank entered the COVID-19 crisis in a position of strength and remains well-capitalized and highly liquid. The bank offers electronic banking services, including mobile deposit for consumers and remote deposit capture for businesses. We have been able to successfully modify branch operations to safely meet all the needs of our customers despite the need for appropriate social distancing and continue to see tremendous growth of new and existing relationships.

“Our thoughts go out to our Central Coast community, individuals and businesses most deeply affected by the COVID-19 pandemic,” said Jeff DeVine, president/CEO. “American Riviera Bank is playing an important role in the economic stability of Santa Barbara and San Luis Obispo counties.

“We are taking extraordinary steps to provide much needed financing and relief to our clients and community during this difficult time.” 

As a SBA Preferred Lender, the bank was able to move quickly and deploy an automated Paycheck Protection Program (PPP) loan application portal. To date, the bank has funded 416 applications, with an average loan amount of about $230,000, for existing business clients in the first round of the CARES Act funding.

The bnak has already obtained 134 more SBA PPP approvals thus far with the second round of funding recently announced. The bank’s PPP loans currently represent some $113 million of much needed small business relief and could save almost 12,000 jobs in the community.

The number of SBA PPP loans represents almost two years of normal new loan production for the bank, which will be processed, approved, documented and funded in the span of about a month. The dollar volume of SBA PPP loans represents more than 18 percent of the total loans outstanding at March 31, 2020.

At the same time, American Riviera Bank has been working with existing loan clients negatively affected by the pandemic, and has provided temporary payment deferrals through the date of this release covering $109 million of loans.

About 92 percent of such deferrals are to borrowers wishing to conserve cash for the economic uncertainty and have asked for the principal portion of their payments to be deferred while continuing to pay interest. The remaining 8 percent is predominantly associated with the bank’s residential mortgage portfolio loans, where the temporary deferral of both principal and interest is currently industry practice. 

The sizeable increase in loan loss provision this quarter was primarily driven by qualitative factors in the bank’s modeling and a general expectation of expanded credit risk due to the economic effects of COVID-19.

For the reasons above, the bank anticipates continued above-average provisioning and reserve build in subsequent periods, but anticipate that the origination fees paid by the SBA on PPP loans may substantially offset such incremental credit expenses.

The bank reported strong loan growth, with gross loans increasing $83 million, or 16 percent from March 31, 2019, reaching $604 million at March 31, 2020. This increase in loans is primarily due to new loan origination with the bank originating $39 million in new loans outstanding, excluding draws on existing lines of credit, in the first quarter of 2020.

The bank reports significant growth, reporting $743 million in total assets as of March 31, 2020, representing a $105 million, or 16 percent increase from March 31, 2019. Total deposits increased 18 percent from March 31, 2019 reaching $645 million at March 31, 2020.

Non-interest bearing demand deposit accounts increased $32 million, or 17 percent from the same reporting period in the prior year, reaching $219 million at March 31, 2020. Interest bearing demand deposit accounts increased $41 million, or 54 percent from the same reporting period in the prior year, reaching $117 million at March 31, 2020.

Net interest margin increased to 4.27 percent for the quarter due to the bank’s ability to deploy excess liquidity into loans and a reduction in the cost of deposits due to Federal Reserve actions during the quarter.

As of March 31, 2020, American Riviera Bank reports a strong capital position with a Tier 1 Capital Ratio of 11 percent, well above the regulatory guideline of 8 percent for well-capitalized institutions. The tangible book value per share of American Riviera Bank common stock is $14.30 at March 31, 2020.