AMRB American River Bankshares

American River Bankshares (NASDAQ-GS: AMRB) today reported net income of $1.2 million, or $0.20 per diluted share for the third quarter of 2018 compared to $1.1 million, or $0.17 per diluted share for the third quarter of 2017.  For the nine months ended September 30, 2018, net income was $3.8 million or $0.64 per diluted share, compared to $3.6 million or $0.55 per diluted share for the nine months ended September 30, 2017.

“We are pleased to see positive results of our plan coming to fruition,” said David E. Ritchie, Jr., President and CEO of American River Bankshares.  “This is our second consecutive quarter where we have experienced strong loan commitment totals.  Following the $30 million in new loan commitments reported during the second quarter of 2018, we recorded an additional $40 million in loan commitments during the most recent quarter.”  Ritchie continued, “These commitments resulted in an increase in loans outstanding by nearly $20 million during the quarter.  It is also worth noting that we experienced an increase in the net interest margin from 3.36% to 3.44% when compared to last quarter.”

Financial Highlights

• During the third quarter of 2018, net loans increased $19.8 million (6.8%) and core deposits decreased $5.3 million (1.1%).  Net loans decreased $11.9 million (3.7%) from September 30, 2017 to September 30, 2018.  Core deposits increased $28.1 million (6.0%) from September 30, 2017 to September 30, 2018. 

• The net interest margin for the third quarter of 2018 was 3.44%, compared to 3.32% for the third quarter of 2017.  The net interest margin for the nine months ended September 30, 2018 was 3.36%, compared to 3.39% for the nine months ended September 30, 2017. 

• Net interest income was $5.3 million in the third quarter of 2018, compared to $4.8 million in the third quarter of 2017.  For the nine months ended September 30, 2018, net interest income was $15.1 million, compared to $14.5 million for the nine months ended September 30, 2017.

• The allowance for loan and lease losses was $4.3 million (1.38% of total loans and leases) at September 30, 2018, compared to $4.6 million (1.39% of total loans and leases) at September 30, 2017.  Nonperforming loans decreased from $2.3 million at September 30, 2017 to $376,000 at September 30, 2018.  The allowance for loan and lease losses was 11.52 times the nonperforming loans and leases at September 30, 2018, compared to 1.96 times at September 30, 2017. 

• Shareholders’ equity was $71.7 million at September 30, 2018 compared to $82.3 million at September 30, 2017.  Tangible book value per share was $9.45 at September 30, 2018 compared to $10.31 at September 30, 2017.  Book value per share was $12.23 at September 30, 2018 compared to $12.87 at September 30, 2017.

• There were no repurchases of common stock during the most recent quarter.  For the first nine months of 2018, the Company repurchased a total of 298,778 shares at an average price of $15.53 per share.  The Company has nearly completed the 2018 Stock Repurchase Program, which allowed for the purchase of up to 306,618 shares of common stock during 2018.  The Company continued the quarterly cash dividend by paying a $0.05 per share cash dividend on August 15, 2018.

• The Company continues to maintain strong capital ratios.  At September 30, 2018 the Leverage ratio was 9.0% compared to 10.3% at September 30, 2017; the Tier 1 Risk-Based Capital ratio was 16.6% compared to 18.8% at September 30, 2017; and the Total Risk-Based Capital ratio was 17.9% compared to 20.0% at September 30, 2017. 

Northern California Economic Update, September 30, 2018.

Each quarter, management at American River Bank prepares an economic report for internal use that analyzes the recent historical rolling quarters within the three primary markets in which the Company does business – Greater Sacramento Area and Sonoma and Amador Counties.  Sources of economic and industry information include: Colliers International, Keegan & Coppin Company, Inc., ycharts/housing, State of California Employment Development Department, US Census, CBRE, Integra Realty Resources, and Sacramento Association of Realtors and Trading Economics. 

Commercial real estate and employment data continued to be positive in the markets we serve.                            Commercial Real Estate.  In the Greater Sacramento Area, when comparing fourth quarter 2017 to fourth quarter 2016, commercial real estate vacancies improved in all segments.  Office vacancy decreased from 11.6% to 10.8%, retail vacancy decreased from 10.3% to 9.1%, and industrial vacancy decreased from 8.1% to 5.9%.  As of second quarter 2018, Sacramento area vacancy rates for all three segments decreased further to 10.4% for office, 9.0% for retail, and 4.8% for industrial.    

In Sonoma County, when comparing fourth quarter 2017 to fourth quarter 2016, commercial real estate vacancies continued to improve.  Office vacancy decreased from 14.7% to 12.5%, retail vacancy remained flat at 3.8%, and industrial vacancy decreased from 5.8% to 4.6%.   As of second quarter 2018, Sonoma County’s retail and industrial vacancies decreased further to 3.7% and 4.0% respectively, while office vacancies increased slightly to 12.7%.                In all segments (office, retail, and industrial), the Greater Sacramento area reported positive absorption from June 30, 2016 through June 30, 2018.  Sonoma County and the City of Santa Rosa also reported (when data is available) positive absorption over this same time period for the office and industrial segments (retail data is not available).

In Greater Sacramento, commercial lease rates have experienced little change from June 30, 2016 through June 30, 2018 with lease rates ranging from the following: office: $1.71/SF to $1.88/SF; retail: $1.33/SF to $1.38/SF; and industrial: $0.46/SF to $0.53/SF.  Second quarter 2018 lease rates represented the top of the range in all three segments at $1.88 per square foot for office, $1.38 for retail, and $0.53 for industrial.  

As a proxy for Sonoma County, the City of Santa Rosa’s gross office lease rates as of year-end 2016 ranged from $1.75/SF to $2.25/SF depending on the quality of the property.  Industrial rents ranged from $0.85/SF to $0.95/SF with light industrial in certain cases ranging from $1.15/SF to $1.40/SF.   At December 31, 2017, office rental rates ranged from $1.75/SF to $2.35/SF and industrial rates ranged from $.90/SF to $1.10/SF.   There was no retail rental rate data available for Santa Rosa for these time periods or in 2018 year-to-date.  

The Amador region has the lowest level of commercial real estate concentration in the Bank.  There is limited supply for commercial real estate in this region and as a result, minimal information is available.

Multi-family.  The multi-family market in the Sacramento area has reflected high occupancy from June 30, 2016 through June 30, 2018.  The highest occupancy rate within this time range was in second quarter 2016 at 97.9%, and the lowest was first quarter 2018 at 96.3%.  As of second quarter 2018, occupancy was 96.4%.  Monthly lease rates during this period ranged from $1,192 in second quarter 2016 to $1,374 in second quarter 2018.

The trailing 12-month cap rates from June 30, 2016 through June 30, 2018 ranged with minor fluctuations from a low of 5.90% in second quarter 2016 to a high of 6.10% in third quarter 2017.   Since that time, a slight decrease has occurred quarter over quarter, and as of second quarter 2018, the rate was 5.44%.   The median sales price increased from $106,571 per unit in fourth quarter 2017 to $110,119 per unit in the first quarter 2018.  The average sale price in second quarter 2018 was $137,691 per unit.  Similar data for the Sonoma and Amador markets are currently unavailable. 

Employment.  National unemployment, which reached a high of 10.0% at October 31, 2009, has dropped steadily since and has stabilized.  Looking at the past two years; compared to December 2015, national unemployment decreased from 5.0% to 4.7% in December 2016, and to 4.1% in December 2017.  As of August 2018, national unemployment dropped further to 3.9%. 

California unemployment was 5.9% at December 31, 2015, and 5.3% at December 31, 2016.  As of December 2017, the rate decreased further to 4.5%, and as of August 2018, the rate was 4.2%.  The number of employed Californians continues to increase.  There were 17.9 million employed at the end of 2015, 18.2 million at the end of 2016, and 18.5 million at the end of 2017.  The State added another 28,000 jobs during the first eight months in 2018.    

At December 31, 2015, all three of our markets reported lower unemployment rates than at year end 2014.   Unemployment rates at the time were 5.5% and 4.2% for the Sacramento MSA and Santa Rosa-Petaluma MSA, respectively.  When comparing December 31, 2016 to December 31 2017, unemployment rates decreased from 5.0% to 3.8% in the Sacramento MSA and 3.7% to 2.8% in the Santa Rosa-Petaluma MSA.  As of month-end August 2018, the unemployment rate for Sacramento and Santa Rosa-Petaluma MSAs decreased to 3.8% and 2.7% respectively.

Over the same period, Amador County has been higher than the State level in nearly every quarter.  Amador County has however shown improvement reaching 6.2% at December 31, 2015, 5.9% at December 31, 2016, and 4.2% at December 31, 2017.  As of August 2018, the unemployment rate decreased further to 3.8% and is now below the State average.

Job growth was positive in all of our markets during the past two calendar years.  Compared to December 2015, job growth was 1.81%, 1.38% and 4.87% for the Sacramento MSA, Santa Rosa-Petaluma MSA and Amador County, respectively as of December 2016.  Comparing December 2016 to December 2017, job growth was 2.66% for the Sacramento MSA, 2.41% in the Santa Rosa-Petaluma MSA and 2.80% in Amador County.  As of August 2018, job growth in 2018 was very slight at 0.19% for Sacramento MSA; Santa Rosa MSA and Amador County continued to see respectable job growth at 1.57% and 1.79% respectively.

Balance Sheet Review

American River Bankshares’ assets totaled $670.0 million at September 30, 2018, compared to $655.6 million at December 31, 2017, and $655.6 million at September 30, 2017.

Net loans totaled $310.3 million at September 30, 2018, compared to $308.7 million at December 31, 2017, and $322.2 million at September 30, 2017. 

The loan portfolio at September 30, 2018 included: real estate loans of $280.2 million (89% of the portfolio), commercial loans of $24.5 million (8% of the portfolio) and other loans, which consist mainly of agriculture and consumer loans of $10.1 million (3% of the portfolio).  The real estate loan portfolio at September 30, 2018 includes: owner-occupied commercial real estate loans of $69.2 million (25% of the real estate portfolio), investor commercial real estate loans of $121.5 million (43% of the real estate portfolio), multi-family real estate loans of $65.3 million (23% of the real estate portfolio), construction and land development loans of $7.5 million (3% of the real estate portfolio) and residential real estate loans of $16.7 million (6% of the real estate loan portfolio).

Nonperforming assets (“NPAs”) include nonperforming loans, leases, and other assets and other real estate owned (“OREO”).  Nonperforming loans include all such loans and leases that are either placed on nonaccrual status or are 90 days past due as to principal or interest, but still accrue interest because such loans are well-secured and in the process of collection.  NPAs were $1.3 million at September 30, 2018 compared to $2.9 million at December 31, 2017 and $3.3 million at September 30, 2017.  The NPAs to total assets ratio decreased to 0.20% at the end of September 2018 from 0.44% at December 31, 2017 and from 0.50% one year ago.  The Company’s largest nonaccrual loan at June 30, 2018 was a participation in a shared national credit to a large retailer that filed for bankruptcy in 2017.  The net loan balance at June 30, 2018 was just under $1.4 million and carried a $200,000 specific reserve.  In the third quarter of 2018, the Company sold the loan, charged off the $200,000 specific reserve and an additional $13,000, both of which were charged to the allowance for loan and lease losses, reducing the Company’s loan balance to zero.  No additional losses were recognized on this loan or any other loan during the third quarter of 2018.

At September 30, 2018, December 31, 2017 and September 30, 2017, the Company had one OREO property totaling $961,000.  During the third quarter of 2018, the Company did not add, sell, or modify the value of any OREO properties.  At September 30, 2018, December 31, 2017, and September 30, 2017 there was not a valuation allowance for OREO properties. 

Loans measured for impairment were $9.3 million at the end of September 2018, a decrease from $13.8 million at December 31, 2017, and a decrease from $17.6 million a year ago.  Specific reserves of $181,000 were held on the impaired loans at September 30, 2018, compared to $355,000 at December 31, 2017 and $404,000 at September 30, 2017.  There was a provision for loan and lease losses of $50,000 in the third quarter and first nine months of 2018 compared to a provision for loan and lease losses of $300,000 in the third quarter and first nine months of 2017.  The Company had net charge-offs of $210,000 in the third quarter of 2018 compared to net charge-offs of $630,000 in the third quarter of 2017.  For the first nine months of 2018, the Company had net charge-offs of $196,000 compared to net charge-offs of $571,000 in the first nine months of 2017.  The Company maintains the allowance for loan and lease losses at a level believed to be adequate for known and inherent risks in the portfolio. The methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan and lease losses that management believes is appropriate at each reporting date. 

Investment securities, which excludes $3.9 million in stock of the Federal Home Loan Bank of San Francisco (“FHLB Stock”), totaled $277.6 million at September 30, 2018, up $14.9 million (5.7%) from $262.7 million at December 31, 2017 and up $27.3 million (10.9%) from $250.3 million at September 30, 2017.  At September 30, 2018, the investment portfolio was comprised of 90% U.S. Government agencies or U.S. Government-sponsored agencies (primarily mortgage-backed securities), 6% obligations of states and political subdivisions, 2% corporate bonds, and 2% U.S. Treasuries.

At September 30, 2018, total deposits were $575.8 million, compared to $556.1 million at December 31, 2017 and $550.9 million one year ago.  Core deposits increased $28.1 million (6.0%) to $498.8 million at September 30, 2017 from $470.7 million at September 30, 2017 and increased $22.4 million (4.7%) from $476.4 million at December 31, 2017.  The Company considers all deposits except time deposits as core deposits.

At September 30, 2018, noninterest-bearing demand deposits accounted for 36% of total deposits, interest-bearing demand accounts were 11%, savings deposits were 13%, money market balances accounted for 26% and time certificates were 14% of total deposits.  At September 30, 2017, noninterest-bearing demand deposits accounted for 37% of total deposits, interest-bearing demand accounts were 12%, savings deposits were 12%, money market balances accounted for 24% and time certificates were 15% of total deposits. 

Shareholders’ equity decreased $5.2 million (6.7%) to $71.7 million at September 30, 2018 compared to $76.9 million at December 31, 2017 and $10.5 million (12.8%) from $82.3 million at September 30, 2017.   The decrease in equity from December 31, 2017 was due to a decrease in common stock of $4.3 million primarily related to repurchases made under the 2018 Stock Repurchase Program and a $3.8 million decrease in accumulated other comprehensive income related to a decrease in the unrealized gain on securities, resulting from the rise in market interest rates, partially offset by an increase in Retained Earnings of $2.9 million due to the net income for the year less cash dividends declared.    

Net Interest Income

The net interest income during the third quarter of 2018 increased $454,000 (9.5%) from $4.8 million to $5.3 million during the third quarter of 2017.  For the nine months ended September 30, 2018, net interest income increased $631,000 (4.4%) from $14.5 million to $15.1 million from the nine months ended September 30, 2017.  The net interest margin as a percentage of average earning assets was 3.44% in the third quarter of 2018, compared to 3.36% in the second quarter of 2018 and 3.32% in the third quarter of 2017.  For the nine months ended September 30, 2018, the net interest margin was 3.36% compared to 3.39% for the nine months ended September 30, 2017.  Interest income for the third quarter of 2018 increased $584,000 (11.5%) to $5.7 million from $5.1 million for the third quarter of 2017 and for the nine months ended September 30, 2018, interest income increased $974,000 (6.4%) to $16.2 million from $15.3 million for the nine months ended September 30, 2017. 

The average tax equivalent yield on earning assets increased from 3.51% in the third quarter of 2017 to 3.70% for the third quarter of 2018 and increased from 3.57% for the nine months ended September 30, 2017 to 3.61% in the nine months ended September 30, 2018.  Much of the increase in yields from the three months ending September 30, 2017 to September 30, 2018 results from higher rates on loans and investments.  The yield on loans increased from 4.48% during the third quarter of 2017 to 4.71% during the third quarter of 2018 and the yield on investments increased from 2.33% during the third quarter of 2017 to 2.81% during the third quarter of 2018, both of these increases can be attributed to an overall higher interest rate market.

The average balance of earning assets increased $26.7 million (4.6%) from $585.0 million in the third quarter of 2017 to $611.7 million in the third quarter of 2018 and for the nine months ended September 30, 2018, increased $24.6 million (4.2%) to $607.3 million from $582.7 million for the nine months ended September 30, 2017.  The primary reason for the increase in average earning assets results from increased balances in investments and Federal funds sold.  Average investments increased $24.8 million (9.5%) from $260.9 million in the third quarter of 2017 to $285.7 million in the third quarter of 2018.  The average balance of Federal funds sold increased from zero in the third quarter of 2017 to $24.4 million in the third quarter of 2018.  Average investments increased $19.8 million (7.6%) from $261.7 million in the first nine months of 2017 to $281.5 million in the first nine months of 2018.  The average balance of Federal funds sold increased from zero in the first nine months of 2017 to $20.1 million in the first nine months of 2018. 

Interest expense for the third quarter of 2018 increased $130,000 (46.6%) to $409,000 from $279,000 for the third quarter of 2017 and for the nine months ended September 30, 2018 increased $343,000 (44.3%) to $1.1 million from $773,000 for the nine months ended September 30, 2017.  The increase in interest expense is related to an overall higher interest rate environment.  The average cost of funds increased from 0.31% in the third quarter of 2017 to 0.43% in the third quarter of 2018 and from 0.29% in the first nine months of 2017 to 0.39% in the first nine months of 2018.  Average deposits increased $35.2 million (6.5%) from $544.4 million during the third quarter of 2017 to $579.6 million during the third quarter of 2018.  Average borrowings remained consistent at $15.6 million during the third quarter of 2017 compared to the third quarter of 2018 while the yield increased 0.20%, during that same time period, due to rising borrowing rates.

Noninterest Income and Expense

Noninterest income for the third quarters of 2017 and 2018 was $377,000 and for the nine months ended September 30, 2018 was $1.1 million, a decrease of $106,000 (8.6%) compared to $1.2 million for the nine months ended September 30, 2018.  For the nine months ended September 30, the decrease in noninterest income was predominately related to a decrease in gain on sale of securities from a gain of $161,000 in 2017 to a gain of $19,000 in 2018.   

Noninterest expense increased $691,000 (20.9%) from $3.3 million in the third quarter of 2017 to $4.0 million in the third quarter of 2018, and increased $1.1 million (10.6%) from $10.1 million for the nine months ended September 30, 2017 to $11.2 million in 2018.  The predominant variance between the third quarters of 2017 and 2018 and the nine months ended September 30 for each year was the increase in salaries and benefits of $449,000 (21.4%), quarter over quarter, and $938,000 (14.8%), year over year.  There has been one newly created Chief Lending Officer position and multiple vacant Relationship Manager positions filled in late 2017 and early 2018.      

The fully taxable equivalent efficiency ratio for the third quarter of 2018 increased to 70.5% from 62.8% in the third quarter of 2017 and for the nine months ended September 30, 2018, increased to 68.2% from 63.1% for the nine months ended September 30, 2017. 

Provision for Income Taxes

Federal and state income taxes for the quarter ended September 30, 2018 decreased by $31,000 (6.8%) from $459,000 in the third quarter of 2017 to $428,000 in the third quarter of 2018 and decreased $481,000 (28.0%) from $1.7 million in the first nine months of 2017 to $1.2 million in the first nine months of 2018.  The lower provision for taxes in 2018 compared to 2017 primarily resulted from the lower federal tax rate effective January 1, 2018 of 21% compared to 34% in prior year. 

Earnings Conference Call

The third quarter earnings conference call will be held Thursday, October 18, 2018 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time).  David E. Ritchie, Jr., President and Chief Executive Officer, and Mitchell A. Derenzo, Executive Vice President and Chief Financial Officer, both of American River Bankshares, will lead a live presentation and answer analysts’ questions.   Shareholders, analysts and other interested parties are invited to join the call by dialing (888) 517-2513 and entering the Conference ID 7985160#.  A recording of the call will be available approximately twenty-four hours after the call’s completion on AmericanRiverBank.com.

About American River Bankshares

American River Bankshares [NASDAQ-GS: AMRB] is the parent company of American River Bank, a regional bank serving Northern California since 1983. We give business owners more REACH by offering financial expertise and exceptional service to complement a full suite of banking products and services. Our honest approach, commitment to community and focus on profitability is intended to lead our clients to greater success. For more information, call (800) 544-0545 or visit AmericanRiverBank.com.

Use of Non-GAAP Financial Measures

This news release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures in addition to results presented in accordance with GAAP.  These measures include tangible book value and taxable equivalent basis.  Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in the Company’s financial position reflected in the current quarter and year-to-date results and facilitate comparison of our performance with the performance of our peers.

Net Interest Margin and Efficiency Ratio (non-GAAP financial measures)

In accordance with industry standards, certain designated net interest income amounts are presented on a taxable equivalent basis, including the calculation of net interest margin and the efficiency ratio.  The Company believes the presentation of net interest margin on a taxable equivalent basis using a 21% effective tax rate for 2018 and a 34% effective tax rate for 2017 allows for comparability of net interest margin with industry peers by eliminating the effect of the differences in portfolios attributable to the proportion represented by both taxable and tax-exempt loans and investments.  The efficiency ratio is a measure of a banking company’s overhead as a percentage of its revenue.  The Company derives this ratio by dividing total noninterest expense by the sum of the taxable equivalent net interest income and the total noninterest income.      

Tangible Equity (non-GAAP financial measures)

Tangible common stockholders' equity (tangible book value) excludes goodwill and other intangible assets.  The Company believes the exclusion of goodwill and other intangible assets to create “tangible equity” facilitates the comparison of results for ongoing business operations.  The Company’s management internally assesses its performance based, in part, on these non-GAAP financial measures.

Adjustments made to reflect certain expenses

During the fourth quarter of 2017, the Company recorded expenses related to a change in leadership as well as higher than historical income tax expense resulting from the Tax Cuts and Jobs Act that was signed into law on December 22, 2017.  Management believes that presenting the net income and earnings per share adjusted for these items provides investors with useful information in understanding the financial performance on a comparative basis.  

Forward-Looking Statements

Certain statements contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.  Actual results may differ materially from the results in these forward-looking statements.  Factors that might cause such a difference include, among other matters, changes in interest rates, economic conditions, governmental regulation and legislation, credit quality, and competition affecting the Company’s businesses generally; the risk of natural disasters and future catastrophic events including terrorist related incidents; and other factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and in subsequent reports filed on Form 10-Q and Form 8-K.  The Company does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or otherwise, except as required by law.

Investor Contact:Mitchell A. DerenzoExecutive Vice President andChief Financial OfficerAmerican River Bankshares916-231-6723

Media Contact:Erica DiasVice President, MarketingAmerican River Bankshares916-231-6717

American River Bankshares
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
		September 30,			December 31,			September 30,
ASSETS		2018			2017			2017
Cash and due from banks	$	24,634		$	38,467		$	37,233
Federal funds sold		10,000			-			-
Interest-bearing deposits in banks		1,746			1,746			1,248
Investment securities		277,580			262,700			250,283
Loans & leases:
Real estate		280,172			285,153			297,143
Commercial		24,526			25,377			26,753
Other		10,104			2,863			3,120
Deferred loan and lease origination fees, net		(148	)		(202	)		(227	)
Allowance for loan and lease losses		(4,332	)		(4,478	)		(4,551	)
Loans and leases, net		310,322			308,713			322,238
Bank premises and equipment, net		1,072			1,158			1,226
Goodwill and intangible assets		16,321			16,321			16,321
Investment in Federal Home Loan Bank Stock		3,932			3,932			3,932
Other real estate owned, net		961			961			961
Accrued interest receivable and other assets		23,426			21,624			22,202
	$	669,994		$	655,622		$	655,644
LIABILITIES & SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	209,322		$	215,528		$	205,938
Interest checking		64,682			64,709			66,707
Money market		150,050			130,032			131,545
Savings		74,765			66,130			66,482
Time deposits		77,001			79,681			80,270
Total deposits		575,820			556,080			550,942
Short-term borrowings		6,500			3,500			2,000
Long-term borrowings		9,000			12,000			13,500
Accrued interest and other liabilities		6,939			7,121			6,947
Total liabilities		598,259			578,701			573,389
SHAREHOLDERS' EQUITY
Common stock	$	30,165		$	34,463		$	38,139
Retained earnings		45,660			42,779			43,437
Accumulated other comprehensive (loss) income		(4,090	)		(321	)		679
Total shareholders' equity		71,735			76,921			82,255
	$	669,994		$	655,622		$	655,644
Ratios:
Nonperforming loans and leases to total loans and leases		0.12	%		0.60	%		0.71	%
Net recoveries to average loans and leases (annualized)		0.28	%		0.25	%		0.77	%
Allowance for loan and lease losses to total loans and leases		1.38	%		1.43	%		1.39	%
American River Bank Capital Ratios:
Leverage Capital Ratio		9.05	%		9.32	%		10.42	%
Common Equity Tier 1 Risk-Based Capital		16.60	%		17.71	%		18.55	%
Tier 1 Risk-Based Capital Ratio		16.60	%		17.71	%		18.55	%
Total Risk-Based Capital Ratio		17.85	%		18.96	%		19.80	%
American River Bankshares Capital Ratios:
Leverage Capital Ratio		9.00	%		9.45	%		10.33	%
Tier 1 Risk-Based Capital Ratio		16.63	%		18.08	%		18.75	%
Total Risk-Based Capital Ratio		17.88	%		19.34	%		20.00	%
Nonperforming loans		376			1,892			2,317
Nonperforming assets		1,337			2,853			3,278

 

American River Bankshares
Condensed Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
		Third			Third							For the Nine Months
		Quarter			Quarter		%					Ended September 30,					%
		2018			2017		Change					2,018			2017		Change
Interest income	$	5,666		$	5,082		11.5		%		$	16,230		$	15,256		6.4		%
Interest expense		409			279		46.6		%			1,116			773		44.4		%
Net interest income		5,257			4,803		9.5		%			15,114			14,483		4.4		%
Provision for loan and lease losses		50			300		83.3		%			50			300		83.3		%
Noninterest income:
Service charges on deposit accounts		119			117		1.7		%			352			348		1.1		%
Gain on sale of securities		8			19		(57.9	)	%			19			161		(88.2	)	%
Other noninterest income		250			241		3.7		%			758			726		4.4		%
Total noninterest income		377			377		-		%			1,129			1,235		(8.6	)	%
Noninterest expense:
Salaries and employee benefits		2,551			2,102		21.4		%			7,274			6,336		14.8		%
Occupancy		267			262		1.9		%			791			793		(0.3	)	%
Furniture and equipment		141			141		-		%			415			439		(5.5	)	%
Federal Deposit Insurance Corporation assessments		52			51		2.0		%			158			156		1.3		%
Expenses related to other real estate owned		10			4		150.0		%			12			36		(66.7	)	%
Other expense		982			752		30.6		%			2,531			2,350		7.7		%
Total noninterest expense		4,003			3,312		20.9		%			11,181			10,110		10.6		%
Income before provision for income taxes		1,581			1,568		0.8		%			5,012			5,308		(5.6	)	%
Provision for income taxes		428			459		(6.8	)	%			1,237			1,718		(28.0	)	%
Net income	$	1,153		$	1,109		4.0		%		$	3,775		$	3,590		5.2		%
Basic earnings per share	$	0.20		$	0.18		11.1		%		$	0.64		$	0.56		14.3		%
Diluted earnings per share	$	0.20		$	0.17		17.6		%		$	0.64		$	0.55		16.4		%
Net interest margin as a percentage of
average earning assets		3.44	%		3.32	%						3.36	%		3.39	%
Average diluted shares outstanding		5,864,827			6,366,032							5,925,677			6,481,569
Operating Ratios (annualized):
Return on average assets		0.68	%		0.68	%						0.74	%		0.74	%
Return on average equity		6.37	%		5.37	%						6.95	%		5.82	%
Return on average tangible equity		8.24	%		6.71	%						8.97	%		7.26	%
Efficiency ratio (fully taxable equivalent)		70.49	%		62.75	%						68.17	%		63.13	%

 

American River Bankshares
Condensed Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
		Third			Second			First			Fourth			Third
		Quarter			Quarter			Quarter			Quarter			Quarter
		2018			2018			2018			2017			2017
Interest income	$	5,666		$	5,498		$	5,066		$	5,158		$	5,082
Interest expense		409			378			329			288			279
Net interest income		5,257			5,120			4,737			4,870			4,803
Provision for loan and lease losses		50			-			-			150			300
Noninterest income:
Service charges on deposit accounts		119			116			117			117			117
Gain on sale of securities		8			10			1			-			19
Other noninterest income		250			254			254			244			241
Total noninterest income		377			380			372			361			377
Noninterest expense:
Salaries and employee benefits		2,551			2,517			2,206			2,584			2,102
Occupancy		267			262			262			260			262
Furniture and equipment		141			136			138			147			141
Federal Deposit Insurance Corporation assessments		52			53			53			50			51
Expenses related to other real estate owned		10			(3	)		5			8			4
Other expense		982			863			686			890			752
Total noninterest expense		4,003			3,828			3,350			3,939			3,312
Income before provision for income taxes		1,581			1,672			1,759			1,142			1,568
Provision for income taxes		428			403			406			1,534			459
Net income (loss)	$	1,153		$	1,269		$	1,353		$	(392	)	$	1,109
Basic earnings (loss) per share	$	0.20		$	0.22		$	0.23		$	-0.06		$	0.18
Diluted earnings (loss) per share	$	0.20		$	0.22		$	0.22		$	-0.06		$	0.17
Net interest margin as a percentage of
average earning assets		3.44	%		3.36	%		3.29	%		3.39	%		3.32	%
Average diluted shares outstanding		5,864,827			5,882,914			6,032,787			6,253,475			6,366,032
Shares outstanding-end of period		5,864,802			5,864,802			5,882,214			6,132,362			6,392,570
Operating Ratios (annualized):
Return on average assets		0.68	%		0.75	%		0.80	%		-0.24	%		0.68	%
Return on average equity		6.37	%		7.09	%		7.39	%		-1.95	%		5.37	%
Return on average tangible equity		8.24	%		9.18	%		9.47	%		-2.45	%		6.71	%
Efficiency ratio (fully taxable equivalent)		70.49	%		68.91	%		64.81	%		73.99	%		62.75	%
Reconciliation of Non-GAAP Financial Measures (Unaudited)
The following table sets forth a reconciliation of adjusted net income and diluted earnings per share excluding the impact of the Tax Act and expenses related to the leadership change for each of the dates indicated:
		Third			Second			First			Fourth			Third
		Quarter			Quarter			Quarter			Quarter			Quarter
		2018			2018			2018			2017			2017
Reported net income (loss)	$	1,153		$	1,269		$	1,353		$	(392	)	$	1,109
Impact of Tax Act		-			-			-			1,220			-
Expense related to leadership change		-			-			-			676			-
Tax effect on leadership expenses		-			-			-			304
Adjusted net income	$	1,153		$	1,269		$	1,353		$	1,200		$	1,109
Reported diluted earnings (loss) per share	$	0.20		$	0.22		$	0.22		$	-0.06		$	0.17
Adjusted diluted earnings per share	$	0.20		$	0.22		$	0.22		$	0.19		$	0.17

 

American River Bankshares
Analysis of Net Interest Margin on Earning Assets (Unaudited)
(Taxable Equivalent Basis)
(Dollars in thousands)
Three months ended September 30,		2018								2017
ASSETS	Avg Balance			Interest		Avg Yield			Avg Balance			Interest		Avg Yield
Taxable loans and leases	$	286,261		$	3,405	4.72	%		$	308,679		$	3,496	4.49	%
Tax-exempt loans and leases		13,673			152	4.41	%			14,225			147	4.10	%
Taxable investment securities		270,014			1,902	2.79	%			237,907			1,292	2.15	%
Tax-exempt investment securities		15,690			122	3.08	%			22,855			241	4.18	%
Corporate stock		-			-	-				97			-	0.00	%
Federal funds sold		24,359			120	1.95	%			-			-	-
Interest-bearing deposits in banks		1,746			10	2.27	%			1,248			4	1.27	%
Total earning assets		611,743			5,711	3.70	%			585,011			5,180	3.51	%
Cash & due from banks		26,272								30,229
Other assets		40,343								39,063
Allowance for loan & lease losses		(4,399	)							(4,876	)
	$	673,959							$	649,427
LIABILITIES & SHAREHOLDERS’ EQUITY
Interest checking and money market	$	212,872		$	63	0.12	%		$	195,270		$	34	0.07	%
Savings		72,580			6	0.03	%			65,458			6	0.04	%
Time deposits		77,411			277	1.42	%			80,232			184	0.91	%
Other borrowings		15,630			63	1.60	%			15,587			55	1.40	%
Total interest bearing liabilities		378,493			409	0.43	%			356,547			279	0.31	%
Noninterest bearing demand deposits		216,732								203,473
Other liabilities		6,887								7,482
Total liabilities		602,112								567,502
Shareholders' equity		71,847								81,925
	$	673,959							$	649,427
Net interest income & margin				$	5,302	3.44	%					$	4,901	3.32	%
Nine months ended September 30,		2018								2017
ASSETS	Avg Balance			Interest		Avg Yield			Avg Balance			Interest		Avg Yield
Taxable loans and leases	$	290,142		$	10,216	4.71	%		$	305,467		$	10,384	4.54	%
Tax-exempt loans and leases		13,809			458	4.43	%			14,357			503	4.68	%
Taxable investment securities		261,482			4,930	2.52	%			238,775			3,978	2.23	%
Tax-exempt investment securities		19,983			494	3.31	%			22,797			663	3.89	%
Corporate stock		-			-	-				95			16	22.52	%
Federal funds sold		20,139			268	1.78	%			-			-	-
Interest-bearing deposits in banks		1,744			23	1.76	%			1,209			9	1.00	%
Total earning assets		607,299			16,389	3.61	%			582,700			15,553	3.57	%
Cash & due from banks		37,537								32,902
Other assets		39,678								39,099
Allowance for loan & lease losses		(4,458	)							(4,856	)
	$	680,056							$	649,845
LIABILITIES & SHAREHOLDERS’ EQUITY
Interest checking and money market	$	219,797		$	196	0.12	%		$	197,606		$	104	0.07	%
Savings		70,785			19	0.04	%			64,072			16	0.03	%
Time deposits		78,761			730	1.24	%			81,385			501	0.82	%
Other borrowings		15,544			171	1.47	%			15,529			152	1.31	%
Total interest bearing liabilities		384,887			1,116	0.39	%			358,592			773	0.29	%
Noninterest bearing demand deposits		215,537								201,227
Other liabilities		7,013								7,559
Total liabilities		607,437								567,378
Shareholders' equity		72,619								82,467
	$	680,056							$	649,845
Net interest income & margin				$	15,273	3.36	%					$	14,780	3.39	%