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American River Bankshares Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 6, 2012 05:06PM

American River Bankshares (AMRB) filed Quarterly Report for the period ended 2012-09-30. American River Bankshares has a market cap of $70.8 million; its shares were traded at around $7.6 with a P/E ratio of 22.3 and P/S ratio of 2.7.



Highlight of Business Operations:

The Company recorded net income of $780,000 for the quarter ended September 30, 2012, which was a decrease of $269,000 compared to $1,049,000 reported for the same period of 2011. Diluted earnings per share for the third quarter of 2012 were $0.08 compared to $0.11 recorded in the third quarter of 2011. The return on average equity (“ROAE”) and the return on average assets (“ROAA”) for the third quarter of 2012 were 3.34% and 0.52%, respectively, as compared to 4.53% and 0.72%, respectively, for the same period in 2011.

The fully taxable equivalent interest income component for the third quarter of 2012 decreased $723,000 (11.8%) to $5,414,000 compared to $6,137,000 for the three months ended September 30, 2011. The decrease in the fully taxable equivalent interest income for the third quarter of 2012 compared to the same period in 2011 is broken down by rate (down $530,000) and volume (down $193,000). The rate decrease can be attributed to the overall lower interest rate environment and lower average loan balances replaced with higher average investment securities. While forgone interest on nonaccrual loans has decreased, it continues to negatively impact the yield on earning assets. During the third quarter of 2012, foregone interest income on nonaccrual loans was approximately $129,000, compared to foregone interest of $398,000 during the third quarter of 2011. The foregone interest of $129,000 had a 9 basis point negative impact on the yield on earning assets. The average balance of earning assets increased $10,215,000 (2.1%) from $496,500,000 in the third quarter of 2011 to $506,715,000 in the third quarter of 2012; however, there was a significant change in the average earning asset mix during these periods, due to an increase in investment securities, offset by a decrease in loan balances. Principal reductions from loan balances were invested into investment securities. When compared to the third quarter of 2011, average loan balances were down $42,116,000 (13.2%) to $277,793,000 for the third quarter of 2012 and average investment securities were up $53,531,000 (34.6%) to $227,222,000 for the third quarter of 2012. The overall low interest rate environment and the change in the asset mix (lower loan totals and higher investment security totals) resulted in a 65 basis point decrease in the yield on average earning assets from 4.90% for the third quarter of 2011 to 4.25% for the third quarter of 2012. The volume decrease of $193,000 occurred mainly as a result of the decrease in average loans. The market in which the Company operates continues to see a slowdown in new loan volume as existing and potential new borrowers continue to pay down debt and delay expansion plans.

Total fully taxable equivalent interest income for the nine months ended September 30, 2012 decreased $2,166,000 (11.7%) to $16,397,000 compared to $18,563,000 for the nine months ended September 30, 2011. The breakdown of the fully taxable equivalent interest income for the nine months ended September 30, 2012 over the same period in 2011 resulted from decreases in rate (down $1,560,000) and a decrease in volume (down $606,000). Average earning assets increased $5,512,000 (1.1%) during the first nine months of 2012 as compared to the same period in 2011. Average loan balances decreased $40,633,000 (12.4%) during that same period and average investment securities balances increased $47,200,000 (30.7%).

Noninterest income decreased $38,000 (5.1%) to 712,000 for the three months ended September 30, 2012 as compared to $750,000 for the three months ended September 30, 2011. The decrease from the third quarter of 2011 to the third quarter of 2012 was primarily related to a decrease in gains from sale of investment securities offset by an increase in income from OREO properties. Gains from investment sales in the third quarter of 2012 were $1,000, down from $326,000 in the third quarter of 2011. Income from OREO properties was $261,000 compared to none in the third quarter of 2011. The income from OREO properties results primarily from rents received on leased office properties the Company foreclosed upon in the last twelve months. For the nine months ended September 30, 2012, noninterest income increased $462,000 (28.2%) to $2,099,000. The increase from the first nine months of 2011 compared to the same period in 2012 was also related to higher rents received on properties obtained through foreclosure.

Federal and state income taxes for the quarter ended September 30, 2012 decreased $428,000 from $595,000 in the third quarter of 2011 to $167,000 in the third quarter of 2012. The effective tax rate for the quarter ended September 30, 2012 was 17.6% compared to 36.2% for the third quarter of 2011. For the nine months ended September 30, 2012, the provision for income taxes was $729,000 with an effective tax rate of 23.8%, compared to a provision of $650,000 and an effective tax rate of 30.6% for the nine months ended September 30, 2011. The lower effective tax rate in 2012 resulted from the normal tax benefits such as the benefits of tax-free income related to municipal bonds and bank owned life insurance, but also in the most recent quarter, we realized the benefits of Enterprise Zone credits on our State tax return. For the first time, the Company took advantage of hiring credit and the sales and use tax credit offered under the California Enterprise Zone program. In the third quarter of 2012, the Company realized the credit for the full year of 2011.

Read the The complete Report



Stocks Discussed: AMRB,
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