A robust loan environment is helping banks big and small in the Sacramento region make money this year and pour funds back into the local economy.
Throughout the area, banks have been reporting quarterly profits throughout 2015. In many cases, net income is being driven by gains in net loans, a development economists link to an improving economy, lower unemployment and an improving housing market.
It’s a far cry from the recession, when many regional banks were reporting profit-crushing provisions for loan losses, and financial activity had dried up in both the commercial and residential sectors. For business and consumer customers, the accelerated lending practices of the banks also represent a sharp departure from the economic downturn, when getting approved for even a comparatively humble business or car loan could be a dicey proposition.
I’m particularly optimistic about Sacramento. I think there’s more growth to come in Sacramento.
Steve Fleming, River City’s president and CEO
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And banks are not the only beneficiaries of the local loan boom. Increased demand also is allowing some lending institutions to hang the “Help Wanted” sign.
In September, Golden 1 Credit Union hosted a career fair at its Sacramento headquarters, looking to fill positions in its expanding home-loans department. At that time, Golden 1 said it had seen a 123 percent increase in first mortgage applications from July 2014 to July 2015.
“By all accounts, 2015 has been a tremendous success,” said Richard Musci, executive vice president and chief products officer of Golden 1, who added that the credit union has provided “almost $2.6 billion in loans so far this year. That money goes directly back into California’s economy.”
Sacramento-based River City Bank is a prime example of the current market. Driven by strong commercial real estate and industrial activity, RCB reported 24 percent year-over-year growth in loans in the third quarter, which ended Sept. 30. Through nine months this year, River City profits totaled $8.6 million, or $5.99 a share, up from net income of $8.2 million, or $5.77 a share, in the year-ago period.
On Oct. 6, RCB announced the opening of a commercial banking office in Walnut Creek, its first Bay Area location, a move it characterized as a shift from a Sacramento retail bank to a statewide business-oriented bank.
Steve Fleming, River City’s president and CEO said he does not “have a crystal ball ... but I’m particularly optimistic about Sacramento. I think there’s more growth to come in Sacramento.”
Fleming’s tenure at RCB represents a snapshot of the region’s banking fortunes in general.
He assumed the bank’s president and CEO posts in September 2008, right in the heart of the downturn. In 2009, amid a local economy Fleming characterized as “weak,” RCB lost $5.9 million.
In 2010, after what Fleming called “two years of intensive credit portfolio management,” the bank rolled up a yearlong profit of $5.2 million. For 2011, the bank had net income of $10.6 million, at the time the second most-profitable year in the history of the bank, founded in 1973.
Amid improving business conditions locally, Fleming said RCB has been boosted in part by a wave of refinancing.
Folsom-based Sierra Vista Bank, which opened a new branch in Fair Oaks in 2014, said loans in the recently ended third quarter totaled $112.6 million, an increase of 12.2 percent from this year’s second quarter and a nearly 31 percent year-over-year gain. Total deposits also increased, helping drive year-to-date net income to $418,000, up almost 8 percent from earnings of $388,000 in the first nine months of 2014.
“It is great to experience both loan and deposit growth that is getting stronger and stronger,” said Gary Gall, Sierra Vista’s president and CEO.
The story is the same for Rancho Cordova-based American River Bankshares, parent of American River Bank, which amassed net income of $1.5 million, or 20 cents a share, in this year’s third quarter, up 36.3 percent from $1.1 million, or 14 cents per share, in the third quarter of 2014. ARB’s net loans totaled $289.8 million as of Sept. 30, up nearly 17 percent from $247.7 million on Sept. 30, 2014.
“The third quarter provided the strongest evidence to date of our progress as net loans increased by $14 million (from the second quarter), overhead decreased by 3 percent and (earnings per share) increased by 43 percent,” said David Taber, president and CEO of ARB.
Yuba City-based River Valley Community Bank reported third-quarter net income of $491,192, or 27 cents a share, in this year’s third quarter, both records. Gross loans of $106.1 million increased 38.6 percent from a year ago, and the bank said it had no past-due or non-accrual loans on its books as of Sept. 30.
“Our year-over-year increases are primarily a function of our loan growth, and both our Yuba/Sutter and Grass Valley operations continue to contribute to the bank’s loan growth and profitability,” said John M. Jelavich, bank president and CEO.