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Little Bank Shows Big Growth

American Riviera Weathers Economic Crisis with Excess Liquidity


As of March 31, 2009, American Riviera Bank reported a 65 percent increase in assets compared to last year at this time, reaching a total of $131 million. The bank also reported $91 million in total loans. That is an increase of $24 million, or 35 percent, over the first quarter of 2008; and a 5 percent increase from their 2008 end-of-year report. The bank saw a $20 million increase in total deposits from December 31, 2008-which is an 80 percent increase from last year’s first quarter.

So how have they accomplished this in such a harsh economic environment? Jeff DeVine, American Riviera’s president and CEO, says that an important difference between American Riviera and larger, national banks is that the latter tend to get into more exotic investments-like the pools of mortgages, sub-prime lending, and self-investing that have caused major problems in the last year. Community banks like American Riviera only deal with simple, local deposits and local loans that stay away from these complicated business models. American Riviera had no delinquent or non-accrual loans, and no loan write-offs in the first quarter, said DeVine. It maintains a strong capital position that is well above regulatory guidelines. As a result, the bank did not apply for nor accept the Troubled Assets Relief Program (TARP) or any other government-subsidized stimuli. “We stay away from risky things like credit cards and student loans that expose banks to bigger problems,” DeVine explained, “and thus have an increased ability to lend.”

It wouldn’t be fair to say that American Riviera Bank is the only one growing. In fact, most Santa Barbara area banks are growing, but the fact that American Riviera is still relatively small means that its growth is reflected in large percentages. The bank only reported a net income of $7,000 for the first quarter, an amount smaller than many people’s wages.

In April, New York Times journalist Andrew Ross Sorkin reported that many national banks attempted to impress investors by reporting better than expected profits by pulling numbers “out of thin air.” Goldman Sachs, for example, changed its calendar year by removing December, effectively eliminating $1.5 billion in losses from their report. Sorkin’s column accused JP Morgan, Chase, Citigroup, and Bank of America for doing similar shady, although legal, maneuvers.

DeVine maintains that his bank’s numbers have not been changed and that nothing is different in its way of doing business or reporting figures. He objected to the importance the larger banks place on their quarterly earnings. “No one should ever focus on one quarter’s worth of results for any bank or public company. [Ninety days] is such a short period of time,” DeVine said. He said it is more important to take a longer view, and question if the banks can sustain their earnings over time.

DeVine expressed confidence that American Riviera will be able to do so. Its unprecedented growth has resulted in an excess level of liquid assets, which will provide long-term sources for continued loan growth. The bank conservatively invested these funds in short-term investments, he said, with low interest rates, resulting in a lower margin of net interest for the bank. Thanks to steady loan yields, the bank expects this to improve in the next quarter as liquidity is utilized for loans.

DeVine sees this as a key point to his bank’s success, and says that while larger banks have standardized methods for decision making, American Riviera is small enough to approach each client with a customized solution. “We examine each loan and look at their merits individually,” he said, “and can make investments that are outside the box to help the economy.” The bank’s focus on deposit growth, vigilant management during the economic downturn, and community support will allow it to continue providing loans and a safe alternative for local depositors, DeVine said.

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