Form 8-K AMERICAN RIVER BANKSHARE For: Jan 22

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January 22, 2015 12:27 PM EST

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 8-K

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CURRENT REPORT PURSUANT

TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934�

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Date of Report (Date of earliest reported)��

��January 22, 2015

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American River Bankshares

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(Exact name of Registrant as Specified in Its Charter)

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California

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(State or Other Jurisdiction of Incorporation)

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0-31525	�	68-0352144
(Commission File Number)	�	(IRS Employer Identification No.)
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3100 Zinfandel Drive, Suite 450, Rancho Cordova, CA	�	95670
(Address of Principal Executive Offices)	�	(Zip Code)

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(916) 851-0123

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(Registrant’s Telephone Number, Including Area Code)

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Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

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o Solicitation material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

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o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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The Index to Exhibits is on Page 3

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Item 2.02. Results of Operations and Financial Condition.

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Registrant issued a press release January 22, 2015 announcing financial results for the fourth quarter of 2014. The foregoing description is qualified by reference to the press release attached here to as Exhibit 99.1. The information included in the press release is considered to be “filed” under the Securities Exchange Act of 1934.

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Item 9.01 Financial Statements and Exhibits.

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(99.1)�� Financial Results press release dated January 22, 2015�

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SIGNATURES

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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�	AMERICAN RIVER BANKSHARES
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�	/s/ Mitchell A. Derenzo
January 22, 2015	Mitchell A. Derenzo
�	Chief Financial Officer (Principal Accounting and Financial Officer)

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INDEX TO EXHIBITS		�
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Exhibit No.	Description	Page
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99.1	Financial results press release of American River Bankshares dated January 22, 2015	4

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EXHIBIT 99.1

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American River Bankshares Reports Fourth Quarter 2014 Results

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Sacramento, CA, January 22, 2015 – American River Bankshares (NASDAQ-GS: AMRB) today reported net income of $1.2 million, or $0.15 per diluted share for the fourth quarter of 2014 compared to $890,000, or $0.10 per diluted share for the fourth quarter of 2013. For the twelve months ended December 31, 2014, net income was $4.4 million or $0.54 per diluted share, compared to $3.1 million or $0.34 per diluted share for the twelve months ended December 31, 2013.

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“Our team worked hard throughout the year and finished strong, which resulted in growth of both loans and deposits,” said David Taber, President and CEO of American River Bankshares. “While we are pleased with a 59% increase in earnings per share year over year and our fourth quarter loan growth at an annualized rate of 16%, we are prepared to work even harder in 2015 to more effectively leverage our deposits, our people and our capital.”

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Financial Highlights

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Net loans increased $10 million (4%) during the fourth quarter of 2014 and core deposits increased $32 million (8%) during 2014.

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The fourth quarter 2014 net interest margin was 3.41%, compared to 3.49% for the third quarter of 2014 and 3.44% for the fourth quarter of 2013. Net interest income was $18.8 million in 2014, an increase of 8% over 2013.

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The allowance for loan and lease losses was $5.3 million (2.01% of total loans and leases) at December 31, 2014, compared to $5.3 million (2.08% of total loans and leases) at December 31, 2013. The allowance for loan and lease losses to nonperforming loans and leases was 320.7% at December 31, 2014, compared to 270.1% at December 31, 2013.

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Shareholders equity was $89.6 million at December 31, 2014 compared to $87.0 million at December 31, 2013. Tangible book value per share was $9.06 at December 31, 2014 compared to $8.33 per share at December 31, 2013. Book value per share was $11.08 per share at December 31, 2014 compared to $10.25 per share at December 31, 2013.

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2014 Stock Repurchase Program resulted in the Company repurchasing 424,462 shares of its common stock at an average price of $9.77 per share.

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The Companys subsidiary, American River Bank, remains above the well-capitalized regulatory guidelines. At December 31, 2014, American River Banks Leverage ratio was 11.7% compared to 11.9% at December 31, 2013; the Tier 1 Risk-Based Capital ratio was 21.7% compared to 22.0% at December 31, 2013; and the Total Risk-Based Capital ratio was 22.9% compared to 23.3% at December 31, 2013.

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Northern California Economic Update, December 31, 2014

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Each quarter, management at American River Bank prepares an industry and economic report for internal use that analyzes the past six to eight 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: Voit Real Estate Services market reports, Keegan & Coppin Company, Inc., Trulia Real Estate Search, ycharts/housing, State of California Economic Development Department, US Census, CBRE, Integra Realty Resources, Pacific Union, Sacramento Association of Realtors and Trading Economics. In general, previous reports noted that economic indicators in these markets ended 2012 on a positive note, results for 2013 were positive and, in 2014, most trends continued to be generally positive. Residential home sales, trending positive throughout 2012, slowed in late 2013 and first quarter of 2014, improved in the second and third quarters of 2014, and trended downwards in the fourth quarter of 2014. Positive trends in commercial real estate in late 2012 and 2013 continue in 2014. After year-over-year improvement, unemployment in the fourth quarter of 2014 is higher in California and, in our markets, increased in Sacramento but dropped in Sonoma and Amador Counties. Job growth in 2014 was positive in California and in all three of our markets.

Page 1 of page 11

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Commercial Real Estate. In the Greater Sacramento Area, office vacancies at the end of 2014 were 14.4%, down from 15.5% at year-end 2013; retail vacancies dropped to 8.7% at the end 2014 compared to 9.6% at the end of 2013; and industrial vacancies are 9.4%, down from 11.4% at year-end 2013. Vacancy trends for all three property types are positive. In the fourth quarter of 2014, Sonoma County commercial real estate vacancies improved in all market segments. Office property vacancies have dropped from 20.2% as of December 31, 2013 to 17.6% as of December 31, 2014, industrial vacancies dropped from 10.0% to 7.7% and retail vacancies dropped from 4.7% to 4.0%, during that same time period. Absorption of commercial real estate continues to be positive in both the Greater Sacramento Area and Sonoma County. As of the end of 2014, absorption in all market segments has been positive. Sacramento County reports positive absorption in seven of the past eight quarters and County has reported positive absorption for over two years. Sonoma County does not measure retail absorption but, with a 4.0% vacancy rate, the retail market remains strong in the County. In the Greater Sacramento Area, commercial lease rates have shown little change over the past two years; office rates have been in the $1.74/SF to $1.78/SF range, retail has ranged from $1.31/SF to $1.35/SF, and industrial has ranged from $0.35/SF to $0.37/SF. Lease rates in Sonoma County are generally positive through the end of June 2014; office leases have ranged from a low of $1.31/SF to the current rate of $1.73/SF (adjusted for a triple net basis); retail leases are $1.54/SF; and industrial rates, after dropping in the first quarter of 2013, increased to $0.77/SF at the end of September 2013 and are $0.73/SF at the end of June 2014. Another value indicator is the capitalization (“CAP”) rate for closed sales; generally a lower CAP rate results in a higher sales value. Comparing property appraisal reports received by ARB for new loans underwritten during the second half of 2014 to data from CBRE for the first half of the year shows that the CAP rate trend improved during the third and fourth quarters of 2014. At the end of the second quarter of 2014, office CAP rates per CBRE report averaged 7.79% compared to 7.70% for property appraisals received by ARB in the second half of the year; retail CAP rates averaged 7.71% compared to 7.63% for property appraisals received by ARB; and industrial CAP rates averaged 8.29% compared to 7.75% for property appraisals received by ARB.

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Residential Real Estate. Residential real estate data is focused on California and the markets we serve, and is measured by tracking home sales (median prices, asking prices and type of sale) and home sale turnover (days on market, current inventory). Foreclosure activity has stabilized and has a lesser effect on the current residential market.

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Results in sales activity were positive through most of 2013, but have been mixed for the past four quarters. After a drop in asking prices and median sales prices for several years through 2011, these prices increased in all our markets in 2012 and 2013. Comparing year end 2014 to year end 2013, asking prices are 10% higher in Sacramento County, nearly 1% higher in Sonoma County and 50% higher in Amador County (note that the number of listings in Amador is very low and the average can be skewed by one or two more high-priced homes). The trend for median closed sales prices is mixed. Compared to year-end 2013, closed sales prices at year end 2014 are up 5% in Sacramento, down 5% in Sonoma County and down 26% in Amador County.

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Through most of 2013, Sacramento reported a sales inventory of less than one month, increased to 52 days in the fourth quarter of 2013, and is up to 78 days in the fourth quarter of 2014. The number of closed sales remained stable for most of 2014, dropping slightly in the fourth quarter of 2014. The increase in inventory is primarily due to more homes for sale. The average number of homes for sale at the end of 2014 is over 50% higher than at the end of 2013. Average days on market for closed sales was a low of 21 days in June 2013 and increased to 30 days at year-end 2013. At the end of 2014, average time on market increased to 38 days.

Page 2 of page 11

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In Sonoma County, there were 51 days of inventory at the end of June 2013, increasing to 69 days at year end 2013. After increasing to 94 days in March 2014, the current inventory, as of November 2014, is 87 days.

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In Sacramento the ratio trend of conventional sales compared to short sales and bank-owned properties (“OREO”) sales has been very positive. In January 2012 this ratio was almost even; conventional sales were 37% of total sales, short sales were 31% and OREO sales were 32%. The trend to conventional sales has been consistent for the past two and a half years. During the fourth quarter of 2014, of 3,685 total sales in the Sacramento market, 88% were conventional sales, 6% were short sales and 6% were sales of OREO.

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Employment. California unemployment reached a high of 11.4% in second quarter of 2012, and dropped steadily to 9.6% at year-end 2012 and 7.9% at year-end 2013. After a slight increase to 8.4% in the first quarter of 2014, the rate as of November 2014 is 7.1%. The number of employed Californians continues to increase; compared to 17.0 million at the end of 2013, statewide employment was 17.5 million at the end of November 2014, an increase of 463,000 jobs, or 2.72%.

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Through November 2014, all three of our markets reported lower unemployment rates than at year end 2013. Two of our markets (Sacramento MSA and Santa Rosa-Petaluma MSA) continue to be below State unemployment figures, and Santa Rosa-Petaluma MSA has been lower than the national average since the end of 2012. Over the same period, Amador County has been higher than the State but the 7.5% unemployment rate at the end of 2104 is the County’s lowest rate in over three years. Job growth has been positive in all of our markets in 2014. Through November 2014, Sacramento MSA job growth has been 2.64%, Santa Rosa-Petaluma MSA is 4.27% and Amador County is 3.52%.

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Asset Quality and Balance Sheet Review

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American River Bankshares’ assets totaled $617.8 million at December 31, 2014, compared to $615.6 million at September 30, 2014, and $592.8 million at December 31, 2013.

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Net loans totaled $258.1 million at December 31, 2014, up from $247.7 million at September 30, 2014 and $251.7 million at December 31, 2013. Nonperforming loans decreased $0.3 million (15.0%) from $2.0 million at December 31, 2013 to $1.7 million at December 31, 2014. Nonperforming loans decreased $0.1 million (5.6%) from $1.8 million at September 30, 2014.

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The loan portfolio at December 31, 2014 included: real estate loans of $229.4 million (86% of the portfolio), commercial loans of $25.2 million (10% of the portfolio) and other loans, which consist mainly of leases and consumer loans of $9.0 million (4% of the portfolio). The real estate loan portfolio at December 31, 2014 includes: owner-occupied commercial real estate loans of $75.5 million (33% of the real estate portfolio), investor commercial real estate loans of $118.4 million (52% of the real estate portfolio), construction and land development loans of $8.0 million (3% of the real estate portfolio) and other loans, which consists of residential and multi-family real estate loans of $27.5 million (12% of the real estate loan portfolio).

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Nonperforming assets (“NPAs”) include nonperforming loans, leases, and other assets and other real estate owned. Nonperforming loans includes 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 declined to $7.2 million at December 31, 2014 from $9.5 million at year end 2013 and from $7.9 million at September 30, 2014. The NPAs to total assets ratio stood at 1.16% at the end of December 2014, down from 1.60% one year ago and 1.28% three months earlier.

Page 3 of page 11

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At December 31, 2014, the Company had seven OREO properties totaling $4.6 million. This compares to eight OREO properties totaling $5.2 million at September 30, 2014 and nine OREO properties totaling $6.6 million at December 31, 2013. During the fourth quarter of 2014, the Company sold one property for a gain of $27,000. The Company adjusted the balance on two properties, to fair value, that were obtained in a prior quarter by $106,000 for which updated information was received in the current quarter. These adjustments went to OREO expense. Other adjustments included a net increase of $26,000 in the OREO reserve for a potential sale that is in escrow. At December 31, 2014, the OREO valuation allowance was $156,000. This compares to a valuation allowance of $105,000 at December 31, 2013 and $130,000 at September 30, 2014.

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Loans measured for impairment were $25.1 million at the end of December 2014, compared to $27.2 million at September 30, 2014, and $27.0 million a year ago. Specific reserves of $1,603,000 were held on the impaired loans as of December 31, 2014, compared to $1,694,000 at September 30, 2014 and $1,598,000 at December 31, 2013. There was no provision for loan and lease losses for the fourth quarter of 2013 and a reversal of $341,000 in the fourth quarter of 2014. The Company had net recoveries of $182,000 in the fourth quarter of 2014 compared to net charge-offs of $221,000 in the fourth quarter of 2013. 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.

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The Company evaluates nonperforming loans for impairment and assigns specific reserves when necessary. At December 31, 2014, this evaluation resulted in specific reserves of $353,000 on nonperforming loans that were considered impaired compared to $278,000 at September 30, 2014 and $398,000 at December 31, 2013. In addition, there were five loans totaling $1.1 million, which are included in the $1.7 million of nonperforming loans and leases, which have been modified and are considered troubled debt restructures at December 31, 2014. At December 31, 2013 there were six loans totaling $1.0 million, which had been modified and were considered troubled debt restructures, which were also included in the nonperforming loan totals. Specific reserves on impaired performing loans were $1,250,000 as of December 31, 2014, compared to $1,416,000 at September 30, 2014 and $1,200,000 at December 31, 2013.

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Investment securities, which include stock of the Federal Home Loan Bank of San Francisco (“FHLB Stock”), totaled $293.6 million at December 31, 2014, up 5.7% from $277.8 million at September 30, 2014 and up 5.9% from $277.2 million at December 31, 2013. At December 31, 2014, the investment portfolio was comprised of 89% U.S. Government agencies or U.S. Government-sponsored agencies (primarily mortgage-backed securities), 9% obligations of states and political subdivisions, 1% corporate bonds and 1% in FHLB Stock.

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At December 31, 2014, total deposits were $510.7 million, compared to $510.4 million at September 30, 2014 and $483.7 million one year ago. Core deposits increased to $423.0 million at December 31, 2014 from $422.7 million at September 30, 2014 and have increased 8.0% from $391.5 million at December 31, 2013. The Company considers all deposits except time deposits as core deposits.

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At December 31, 2014, noninterest-bearing demand deposits accounted for 30% of total deposits, interest-bearing demand accounts were 12%, savings deposits were 12%, money market balances accounted for 29% and time certificates were 17% of total deposits. At December 31, 2013, noninterest-bearing demand deposits accounted for 30% of total deposits, interest-bearing demand accounts were 12%, savings deposits were 11%, money market balances accounted for 28% and time certificates were 19% of total deposits.

Page 4 of page 11

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Shareholders’ equity increased to $89.6 million at December 31, 2014, compared to $88.2 million at September 30, 2014 and $87.0 million at December 31, 2013. The increase in equity from December 31, 2013 was due primarily to an increase in accumulated other comprehensive income of $2.2 million as a result of the increase in the unrealized gain on securities due to a decrease in interest rates. Furthermore, there was an increase in Retained Earnings of $4.4 million due to earnings that was predominately offset by a reduction in common stock ($4.0 million), primarily related to the repurchases made under the 2014 Stock Repurchase Program. In 2014 the Company repurchased 424,462 shares of its common stock at an average price of $9.77 per share.

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Net Interest Income

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Fourth quarter 2014 net interest income was up 2% to $4.7 million from $4.6 million in the fourth quarter of 2013 and for the twelve months ended December 31, 2014, net interest income increased 8% to $18.8 million from $17.4 million for the twelve months ended December 31, 2013. The net interest margin as a percentage of average earning assets was 3.41% in the fourth quarter of 2014, compared to 3.49% in the third quarter of 2014 and 3.44% in the fourth quarter of 2013. For the twelve months ended December 31, 2014, the net interest margin was 3.54% compared to 3.45% % for the twelve months ended December 31, 2013. Interest income for the fourth quarter of 2014 stayed constant with 2013 at $4.9 million and for the twelve months ended December 31, 2014, interest income increased 6% to $20.0 million from $18.9 million for the twelve months ended December 31, 2013. Interest expense for the fourth quarter of 2014 decreased 18% to $286,000 from $347,000 for the fourth quarter of 2013 and for the twelve months ended December 31, 2014 decreased 22% to $1.2 million from $1.5 million for the twelve months ended December 31, 2013.

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The average tax equivalent yield on earning assets declined from 3.70% in the fourth quarter of 2013 to 3.61% for the fourth quarter of 2014 and was 3.75% for the twelve months ended December 31, 2014 and 2013. For the comparison of the fourth quarters, the decrease in the yield on earning assets was attributable to a decrease in the yield on loans that was partially offset by an increase in the balance and yield on investment securities. For the year over year comparison, higher balances and yields on investment securities mitigated the decrease in the yields on loans. Although the foregone interest on nonaccrual loans decreased in the fourth quarter of 2014 compared to the fourth quarter of 2013, it continues to have an impact on the net interest margin. During the fourth quarter of 2014, foregone interest income on nonaccrual loans was approximately $31,000, compared to foregone interest of $58,000 during the fourth quarter of 2013. The foregone interest had a two basis point negative impact on the yield on earning assets during the fourth quarter of 2014 compared to a four basis point negative impact during the fourth quarter of 2013.

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The average balance of earning assets increased 3% from $535.7 million in the fourth quarter of 2013 to $549.2 million in the fourth quarter of 2014 and for the twelve months ended December 31, 2014, increased 5% to $539.3 million from $511.9 million for the twelve months ended December 31, 2013. While there was an increase in the average earning assets, principal reductions from loan paydowns have somewhat offset the new loan growth, as a result, the increase in deposits during both periods has resulted in an increase in lower yielding investment security balances.

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When compared to the fourth quarter of 2013, average loan balances were down 1% to $252.9 million for the fourth quarter of 2014 and for the twelve months ended December 31, 2014 increased slightly to $253.9 million. The Company has continued to generate new loans and over the past twelve months the production of new loans has been able to outpace loan payoffs resulting in an increase in average loans. Average investment securities were up 6% to $295.3 million for the fourth quarter of 2014 compared to the fourth quarter of 2013 and are up 10.2% in 2014 when compared to 2013.

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Average deposits increased from $493.1 million during the fourth quarter of 2013 to $516.2 million during the fourth quarter of 2014 and from $477.2 million during the twelve months of 2013 to $500.1 million during the twelve months of 2014. Average borrowings decreased from $16.0 million during the fourth quarter of 2013 to $11.1 million during the fourth quarter of 2014 and for the twelve months ended December 31, 2014, decreased to $11.3 million from $16.8 million for the twelve months ended September 30, 2013.

Page 5 of page 11

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Noninterest Income and Expense

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Noninterest income for the fourth quarter of 2014 was $647,000, up 35% from $480,000 in the fourth quarter of 2013 and for the twelve months ended December 31, 2014, was $2.2 million, up 8% from $2.0 million for the twelve months ended December 31, 2013. On a quarter over quarter basis, the increase in noninterest income was primarily related to an increase in income from security sales which increased from $17,000 in the fourth quarter of 2013 to $108,000 in the fourth quarter of 2014 as well as proceeds of a life insurance policy on a former employee, resulting in tax-free income of $99,000. On a year over year basis, the increase in noninterest income was predominately related to income from security sales increasing from $36,000 in the twelve months of 2013 to $208,000 in the twelve months of 2014.

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Noninterest expense increased 3% to $3.8 million for the fourth quarter of 2014 from $3.7 million in the fourth quarter of 2013 and for the twelve months ended December 31, 2014, remained constant at $14.9 million from the twelve months ended December 31, 2013. While there were many fluctuations in expense related items between the fourth quarter of 2013 and 2014, two areas of note would be an increase in salary and employee benefits from $2.1 million in 2013 to $2.3 million in 2014 and a decrease in OREO related expense from $299,000 in 2013 to $208,000 in 2014.

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On a year over year basis, salary and employee benefits expense increased from $8.5 million to $8.8 million, other expense increased from $3.2 million to $3.4 million and OREO related expense decreased from $936,000 in 2013 to $364,000 in 2014. The increase in salaries and benefits resulted from increases in incentive plan accruals and other benefits, partially offset by a decrease in core salaries. Incentive plan accruals increased by $54,000 from $618,000 in 2013 to $672,000 in 2014. Other benefit expense, which includes health care related benefits, 401(k) matching, and employee placement fees, increased by $162,000 from $1.4 million in 2013 to $1.5 million in 2014. Core salary expense decreased by $66,000, from $6.1 million in 2013 to $6.0 million in 2014. The increase in other expense was related to increases in legal and professional fee expense which increased from $933,000 in 2013 to $1,182,000 in 2014 and is the result of the resolution of issues associated with a former OREO property. The primary reason for the decrease in OREO related expenses is due to the sale of properties and less write downs.

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The fully taxable equivalent efficiency ratio for the fourth quarter of 2014 was 71.8% compared to 73.0% for the fourth quarter of 2013 and for the twelve months ended December 31, 2014 was 70.0% compared to 75.6% for 2013.

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Provision for Income Taxes

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Federal and state income taxes increased from $424,000 in the fourth quarter of 2013 to $594,000 in the fourth quarter of 2014. The provision for income taxes increased from $1.3 million for the twelve months ended December 31, 2013 to $2.3 million for the twelve months ended December 31, 2014. The higher provision for taxes in 2014 compared to 2013 resulted from the higher level of pretax income in 2014 and the Company realizing significantly less benefits of Enterprise Zone credits on our State tax return as the program has been significantly reduced. Pretax income increased from $4.3 million in 2013 to $6.7 million in 2014.

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Earnings Conference Call

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The fourth quarter earnings conference call will be held Thursday, January 22, 2014 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). David T. Taber, 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) 517-2470 and entering the Conference ID 8692619#. A recording of the call will be available approximately twenty-four hours after the call’s completion on AmericanRiverBank.com.

Page 6 of page 11

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About American River Bankshares

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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.

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Forward-Looking Statements

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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, 2013, 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.

Page 7 of page 11

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American River Bankshares	�	�
Condensed Consolidated Balance Sheets (Unaudited)	�	�
�	�	�

(Dollars in thousands)

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December 31,

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September 30,

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December 31,

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ASSETS

�

2014

�

2014

�

2013

�

Cash and due from banks

�

22,449

�

41,997

�

17,948

�

Interest-bearing deposits in banks

�

1,000

�

1,000

�

1,000

�

Investment securities

�

289,926

�

277,847

�

273,976

�

Loans & leases:

�

��Real estate

�

229,375

�

219,649

�

222,625

�

��Commercial

�

25,186

�

24,529

�

24,545

�

��Lease financing

�

1,286

�

1,279

�

1,344

�

��Other

�

7,798

�

7,949

�

8,892

�

��Deferred loan and lease origination fees, net

�

(287

)

�

(260

)

�

(313

)

��Allowance for loan and lease losses

�

(5,301

)

�

(5,460

)

�

(5,346

)

Loans and leases, net

�

258,057

�

247,686

�

251,747

�

Bank premises and equipment, net

�

1,518

�

1,531

�

1,500

�

Goodwill and intangible assets

�

16,321

�

16,321

�

16,321

�

Investment in Federal Home Loan Bank Stock

�

3,686

�

3,686

�

3,248

�

Other real estate owned, net

�

4,647

�

5,201

�

6,621

�

Accrued interest receivable and other assets

�

20,150

�

20,337

�

20,392

�

617,754

�

615,606

�

592,753

�

LIABILITIES & SHAREHOLDERS’ EQUITY

�

Noninterest-bearing deposits

�

155,698

�

159,863

�

145,516

�

Interest checking

�

60,862

�

61,627

�

59,042

�

Money market

�

147,625

�

148,863

�

135,169

�

Savings

�

58,820

�

52,339

�

51,733

�

Time deposits

�

87,688

�

87,703

�

92,230

�

��Total deposits

�

510,693

�

510,395

�

483,690

�

Short-term borrowings

�

3,500

�

3,500

�

8,000

�

Long-term borrowings

�

7,500

�

7,500

�

8,000

�

Accrued interest and other liabilities

�

6,414

�

6,032

�

6,043

�

��Total liabilities

�

528,107

�

527,427

�

505,733

�

SHAREHOLDERS’ EQUITY

�

Common stock

�

57,126

�

57,079

�

61,108

�

Retained earnings

�

29,150

�

27,954

�

24,789

�

Accumulated other comprehensive income

�

3,371

�

3,146

�

1,123

�

��Total shareholders’ equity

�

89,647

�

88,179

�

87,020

�

617,754

�

615,606

�

592,753

�

Ratios:

�

Nonperforming loans and leases to total loans and leases

�

0.63

�

0.72

�

0.77

Net (recoveries) chargeoffs to average loans and leases (annualized)

�

-0.20

�

-0.17

�

0.25

Allowance for loan and lease losses to total loans and leases

�

2.01

�

2.16

�

2.08

�

American River Bank Capital Ratios:

�

Leverage Capital Ratio

�

11.65

�

11.77

�

11.90

Tier 1 Risk-Based Capital Ratio

�

21.69

�

21.69

�

22.01

Total Risk-Based Capital Ratio

�

22.95

�

22.94

�

23.26

�

American River Bankshares Capital Ratios:

�

Leverage Capital Ratio

�

11.60

�

11.72

�

11.88

Tier 1 Risk-Based Capital Ratio

�

21.60

�

21.60

�

21.95

Total Risk-Based Capital Ratio

�

22.85

�

22.86

�

23.20

Page 8 of page 11

�

American River Bankshares

Condensed Consolidated Statements of Income (Unaudited)

�

(Dollars in thousands, except per share data)

�

Fourth

�

Fourth

�

For the Twelve Months

�

Quarter

�

Quarter

�

Ended December 31,

�

2014

�

2013

�

Change

�

2014

�

2013

�

Change

�

Interest income

�

4,936

�

$�

4,922

�

0.3

�

19,965

�

$�

18,881

�

5.7

Interest expense

�

286

�

347

�

(17.6

�

1,168

�

1,490

�

(21.6

Net interest income

�

4,650

�

4,575

�

1.6

�

18,797

�

17,391

�

8.1

Provision for loan and lease losses

�

(341

)

�

—

�

(541

)

�

200

�

(370.5

Noninterest income:

�

��Service charges on deposit accounts

�

128

�

152

�

(15.8

�

562

�

590

�

(4.7

Gain on sale of securities

�

108

�

535.3

�

208

�

477.8

Rental income from other real estate owned

�

1.4

�

365

�

316

�

15.5

Other noninterest income

�

336

�

237

�

41.8

�

1,042

�

1,073

�

(2.9

Total noninterest income

�

647

�

480

�

34.8

�

2,177

�

2,015

�

8.0

Noninterest expense:

�

Salaries and employee benefits

�

2,297

�

2,103

�

9.2

�

8,776

�

8,516

�

3.1

Occupancy

�

290

�

315

�

(7.9

�

1,188

�

1,212

�

(2.0

Furniture and equipment

�

168

�

179

�

(6.1

�

724

�

758

�

(4.5

Federal Deposit Insurance Corporation assessments

�

(18.5

�

363

�

312

�

16.3

Expenses related to other real estate owned

�

208

�

299

�

(30.4

�

364

�

936

�

(61.1

Other expense

�

810

�

753

�

7.6

�

3,447

�

3,157

�

9.2

Total noninterest expense

�

3,848

�

3,741

�

2.9

�

14,862

�

14,891

�

(0.2

Income before provision for income taxes

�

1,790

�

1,314

�

36.2

�

6,653

�

4,315

�

54.2

Provision for income taxes

�

594

�

424

�

40.1

�

2,292

�

1,258

�

82.2

Net income

�

1,196

�

$�

890

�

34.4

�

4,361

�

$�

3,057

�

42.7

�

Basic earnings per share

�

0.15

�

$�

0.10

�

50.0

�

0.54

�

$�

0.34

�

58.8

Diluted earnings per share

�

0.15

�

0.10

�

50.0

�

0.54

�

0.34

�

58.8

�

Net interest margin as a percentage of

�

average earning assets

�

3.41

�

3.44

�

3.54

�

3.45

�

Average diluted shares outstanding

�

8,075,031

�

8,650,879

�

8,143,567

�

8,894,267

�

Operating Ratios:

�

Return on average assets

�

0.76

�

0.58

�

0.72

�

0.52

�

Return on average equity

�

5.33

�

3.97

�

4.98

�

3.38

�

Return on average tangible equity

�

6.52

�

4.86

�

6.12

�

4.13

�

Efficiency ratio (fully taxable equivalent)

�

71.75

�

73.02

�

69.96

�

75.61

�

Page 9 of page 11

�

American River Bankshares
Condensed Consolidated Statements of Income (Unaudited)
�

(Dollars in thousands, except per share data)

�

Fourth

�

Third

�

Second

�

First

�

Fourth

�

Quarter

�

Quarter

�

Quarter

�

Quarter

�

Quarter

�

2014

�

2014

�

2014

�

2014

�

2013

�

Interest income

�

4,936

�

4,966

�

5,067

�

4,996

�

4,922

�

Interest expense

�

286

�

287

�

291

�

304

�

347

�

Net interest income

�

4,650

�

4,679

�

4,776

�

4,692

�

4,575

�

Provision for loan and lease losses

�

(341

)

�

(200

)

�

—

�

—

�

—

�

Noninterest income:

�

Service charges on deposit accounts

�

128

�

129

�

149

�

156

�

152

�

Gain on sale of securities

�

108

�

—

�

Rental income from other real estate owned

�

105

�

107

�

Other noninterest income

�

336

�

230

�

237

�

239

�

237

�

Total noninterest income

�

647

�

520

�

508

�

502

�

480

�

Noninterest expense:

�

Salaries and employee benefits

�

2,297

�

2,242

�

2,117

�

2,120

�

2,103

�

Occupancy

�

290

�

295

�

296

�

307

�

306

�

Furniture and equipment

�

168

�

190

�

188

�

178

�

178

�

Federal Deposit Insurance Corporation assessments

�

103

�

Expenses related to other real estate owned

�

208

�

123

�

)

�

299

�

Other expense

�

810

�

807

�

884

�

946

�

762

�

Total noninterest expense

�

3,848

�

3,662

�

3,699

�

3,653

�

3,741

�

Income before provision for income taxes

�

1,790

�

1,737

�

1,585

�

1,541

�

1,314

�

Provision for income taxes

�

594

�

613

�

550

�

535

�

424

�

Net income

�

1,196

�

1,124

�

1,035

�

1,006

�

890

�

Basic earnings per share

�

0.15

�

0.14

�

0.13

�

0.12

�

0.10

�

Diluted earnings per share

�

0.15

�

0.14

�

0.13

�

0.12

�

0.10

�

Net interest margin as a percentage of average earning assets

�

3.41

�

3.49

�

3.66

�

3.60

�

3.44

�

Average diluted shares outstanding

�

8,075,031

�

8,076,523

�

8,091,914

�

8,341,843

�

8,650,879

�

Shares outstanding-end of period

�

8,089,615

�

8,089,615

�

8,089,615

�

8,158,409

�

8,489,247

�

Operating Ratios (annualized):

�

Return on average assets

�

0.76

�

0.74

�

0.70

�

0.68

�

0.58

Return on average equity

�

5.33

�

5.09

�

4.80

�

4.69

�

3.97

Return on average tangible equity

�

6.52

�

6.25

�

5.91

�

5.78

�

4.86

Efficiency ratio (fully taxable equivalent)

�

71.75

�

69.53

�

69.09

�

69.45

�

73.02

Page 10 of page 11

�

American River Bankshares

Analysis of Net Interest Margin on Earning Assets

(Taxable Equivalent Basis)

�

(Dollars in thousands)

�

Three months ended December 31,

�

2014

�

2013

�

ASSETS

�

Avg
Balance

�

Interest

�

Avg
Yield

�

Avg
Balance

�

Interest

�

Avg
Yield

�

Loans and leases

�

252,875

�

3,301

�

5.18

�

254,822

�

3,492

�

5.44

Taxable investment securities

�

268,538

�

1,444

�

2.13

�

252,644

�

1,225

�

1.92

Tax-exempt investment securities

�

26,745

�

256

�

3.80

�

27,143

�

272

�

3.98

Corporate stock

�

—

�

0.00

�

—

�

0.00

Interest-bearing deposits in banks

�

1,000

�

0.40

�

1,000

�

0.40

��Total earning assets

�

549,203

�

5,002

�

3.61

�

535,668

�

4,990

�

3.70

Cash & due from banks

�

35,747

�

31,460

�

Other assets

�

43,428

�

42,574

�

Allowance for loan & lease losses

�

(5,572

)

�

(5,508

)

�

622,806

�

604,194

�

LIABILITIES & SHAREHOLDERS’ EQUITY

�

Interest checking and money market

�

207,762

�

104

�

0.20

�

196,499

�

114

�

0.23

Savings

�

56,557

�

0.06

�

52,346

�

0.09

Time deposits

�

87,818

�

139

�

0.63

�

92,536

�

153

�

0.66

Other borrowings

�

11,000

�

1.23

�

16,000

�

1.69

���Total interest bearing liabilities

�

363,137

�

286

�

0.31

�

357,381

�

347

�

0.39

Noninterest bearing demand deposits

�

164,108

�

151,710

�

Other liabilities

�

6,480

�

6,179

�

���Total liabilities

�

533,725

�

515,270

�

���Shareholders’ equity

�

89,081

�

88,924

�

622,806

�

604,194

�

Net interest income & margin

�

4,716

�

3.41

�

4,643

�

3.44

�

Twelve months ended December 31,

�

2014

�

2013

�

ASSETS

�

Avg
Balance

�

Interest

�

Avg
Yield

�

Avg
Balance

�

Interest

�

Avg
Yield

�

Loans and leases

�

253,898

�

13,631

�

5.37

�

252,807

�

14,191

�

5.61

Taxable investment securities

�

257,308

�

5,528

�

2.15

�

229,518

�

3,822

�

1.67

Tax-exempt investment securities

�

27,051

�

1,057

�

3.91

�

28,607

�

1,142

�

3.99

Corporate stock

�

19.48

�

31.58

Interest-bearing deposits in banks

�

1,000

�

0.40

�

898

�

0.33

��Total earning assets

�

539,334

�

20,235

�

3.75

�

511,868

�

19,170

�

3.75

Cash & due from banks

�

28,533

�

37,609

�

Other assets

�

42,924

�

46,703

�

Allowance for loan & lease losses

�

(5,544

)

�

(5,769

)

�

605,247

�

590,411

�

LIABILITIES & SHAREHOLDERS’ EQUITY

�

Interest checking and money market

�

201,412

�

420

�

0.21

�

185,671

�

475

�

0.26

Savings

�

53,806

�

0.07

�

51,432

�

0.13

Time deposits

�

89,392

�

561

�

0.63

�

95,415

�

655

�

0.69

Other borrowings

�

11,262

�

147

�

1.31

�

16,811

�

293

�

1.74

���Total interest bearing liabilities

�

355,872

�

1,168

�

0.33

�

349,329

�

1,490

�

0.43

Noninterest bearing demand deposits

�

155,537

�

144,710

�

Other liabilities

�

6,275

�

5,978

�

���Total liabilities

�

517,684

�

500,017

�

���Shareholders’ equity

�

87,563

�

90,394

�

605,247

�

590,411

�

Net interest income & margin

�

19,067

�

3.54

�

17,680

�

3.45

Page 11 of page 11

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