River City Bank

Good afternoon and welcome to the River City Bank third quarter 2026 earnings call. Please note that this event is being recorded and this is a closed conference call and we encourage you to listen via the webcast. Before we begin, we would like to remind listeners that today's presentation may include forward-looking statements within the meaning of applicable securities laws. These statements are based on management's current expectations and are subject to risk and uncertainties that could cause actual results to differ materially. Please review River City Bank's earnings release and other applicable disclosures for additional information regarding these risks and uncertainties. I also call your attention to slide two of the investor presentation, which includes disclaimers regarding forward-looking statements, industry data, unaudited financial data, and non-GAAP financial information included in this presentation. Reconciliation of non-GAAP financial measures to their most directly comparable GAAP figures are included in the appendix to the presentation. The presentation may be referenced during this call, Thank you for joining us today to review River City Bank's third quarter 2026 financial results. Our first is a public company. Our financial results were released last Friday.

After the NASDAQ market closed and are available through the investor relations section on the bank's website. Also joining me today is Brian Killeen, the bank's executive vice president and chief financial officer. Before I begin with the quarterly results, I'd like to thank my colleagues on the River City Bank team for their continued dedication to delivering superior service and value to our clients, communities, and shareholders. As most of you know, The third quarter included an important milestone in River City Bank's 53-year history since its founding by John Kelly in 1973 as we completed our transition in August to being a publicly traded company through the IPO on the NASDAQ Stock Exchange. During the IPO process, we had the opportunity to share with investors River City Bank's unique business model, emphasis on long-term relationships and decision-making, and differentiated approach to commercial banking. We outlined our strategy for disciplined growth, strong credit performance, operating efficiency and focus on superior long-term shareholder value creation. We are delighted with the quality and composition of our new shareholders and look forward to building long-term relationships with them. At the same time, We greatly appreciate the long-term relationship we've had and expect to continue having with the Kelly family, including Chairman of the Board, Sean Kelly-Dublin, who remains the bank's largest shareholder. River City Bank reported net income of $30.6 million, or $2.16 per share for the quarter. Our quarterly results produced a return on average assets of 1.92%, and a return on average equity of 21%. The quarter reflected solid core operating performance with a quarter over quarter increase in net interest income from balance sheet growth and continued operating efficiency. As highlighted in the earnings release, the reported results included a $17 million pre-tax gain from changes in the fair value of undesignated interest rate swaps. The recognition of the mark-to-market gain is related to a portion of our interest rate swaps that do not qualify for hedge accounting treatment. These swaps have all been entered into to mitigate interest rate risk associated with the fixed rate exposure in our commercial real estate loan portfolio. The mark-to-market gain was a result of a significant increase in US Treasury yields during the third quarter of 2026. To be clear, We do not view these mark-to-market movements as indicative of core operating performance because the derivatives we're entering into for economic and risk management purposes and these mark-to-market fluctuations can both increase and decrease without being a true reflection of economic gains and losses. The mark-to-market was positive and large during Q3 and could be negative and large next quarter. Therefore, we believe that the financial results exclusive of the mark-to-market gains or losses highlight the true operating performance of the bank. Excluding the after-tax impact of that gain, adjusted net income was $18.3 million and adjusted earnings per share were $1.29 for the third quarter of 2026. Adjusted ROAA was 1.15%, and adjusted ROAE was 12.63% for the third quarter. Core pre-tax pre-provision income, which also removes these mark-to-market gains and losses, was $29 million for the quarter, compared with $25 million in the prior quarter and $28 million in the prior year quarter. The 15% increase of the trailing quarter demonstrates the strength of our underlying operations. Book value per share increased to $42 at September 30, 2026, compared with $37 a year earlier, an increase of 14%. Compounding book value per share is a key financial metric by which we judge our performance. Total assets increased to $6.4 billion at September 30, up $339 million or 5.6% during the quarter and $907 million or 16% from the prior year quarter end. Despite a very competitive market for loan originations, the bank increased loans outstanding by $172 million during the third quarter or 3.7% with gross originations of approximately $238 million. This was a solid improvement from the first half of 2026 where loans only grew by about 1%. Given the seasonal pickup in our loan pipeline, we anticipate loan growth at the upper end of the mid single digit range for 2026. Total loans increased by $412 million or 9.3% from September 30th, 2025. The loan growth has primarily come from commercial real estate loans. Total deposits increased by $239 million or 4.4% during the quarter and by $753 million or 15% from the prior year quarter. The deposit growth in the current year has been evenly split between commercial depositors and the bank's clean energy sector clients. Additionally, the bank continued to operate with no wholesale funding at quarter end. Credit quality remained exceptional during the quarter, reflecting the strength of our conservative underwriting standards, disciplined risk management, and longstanding relationship banking approach. As of September 30th, 2026, the bank had zero non-performing loans, virtually no delinquent loans, no charge-offs during the quarter, and no other real estate owned. We are particularly proud of our credit performance a testament to our credit culture which manifests with rigorous underwriting standards and a proactive portfolio management. Our allowance for credit losses on loans at quarter end was $111 million or 2.3% of total loans unchanged from the prior quarter end and slightly above 2.27% from the prior year period end. We recorded a $3.7 million provision for credit losses including loans and unfunded commitments during the quarter compared with 1.5 million in the trailing quarter. The growth in provision for credit losses was primarily due to the increase in the current period loan originations. The bank's north star is to grow and enhance shareholder value. As I noted earlier, the bank's book value per share rose by 14% over the last year to just over $42 a share as of September 30th, 2026. This compounding of book value is primarily a result of the bank's growth and retained earnings and partially offset by $15.5 million of shares repurchased during the period. During the current quarter, the bank repurchased $1.6 million of common stock at an average price of $51 per share. We believe disciplined capital allocation together with continued earnings retention, share repurchases, and book value growth supports long-term shareholder value. Another significant way that we have enhanced shareholder value was through the IPO process. By raising the visibility of the bank's profile for the investor public over the past two years and increasing the quality in the shares of our stock, the market cap of RCBC has increased for the benefit of both existing and new shareholders alike. As an example, the board decided to move forward with IPO planning in the fourth quarter of 2024 when the market cap of RCBC was around $450 million. Since going public, our market cap as of today is now almost $800 million. Capital ratios remained healthy. As of September 30th, our Tier 1 leverage ratio was 9.4%, our common equity Tier 1 ratio was 13.3%, and our total risk-based capital ratio was 14.6%. With that overview, I will turn the call over to Brian to discuss the quarter's financial results in greater detail.

Thank you, Steve, and hello, everyone. Net interest income was 38.7%. Thank you for joining us today. and 2.71% in the third quarter of 2025. The five basis point linked quarter increase reflected slightly higher yields on average interest earning assets resulting from an increase in interest rates and a three basis point decline in cost of funds. The year over year decrease in net interest margin was largely a function of our balance sheet mix as interest bearing deposits grew faster than our loan portfolio and the bank has held excess cash or short-term securities. The cost of deposits was 2.73% for the quarter compared with 2.77% in the second quarter and 2.81% in the prior year quarter. Our cost of deposits decreased at a slower rate than many of our peers as our deposit growth was concentrated in interest bearing deposits and due to the lagged and the stock repricing nature of our public deposits. Total non-interest income was $19.8 million in the third quarter. As Steve discussed in some detail earlier, this amount included the $17.1 million gain from the change in the fair value of undesignated derivatives compared with a $3.2 million gain in the second quarter and a $1.6 million loss in the third quarter of 2025. Additionally, during the current quarter, the bank recognized a $553,000 gain related to the sale of Visa shares received through Visa's B-Share tender offer. The bank does not view this as recurring income. Excluding the fair value change on undesignated derivatives, core non-interest income was $2.7 million for the quarter compared with $1.8 million in the second quarter and $2.5 million in the third quarter of 2025. Non-interest expense totaled $11.2 million, down $734,000 or 6.1% from the prior quarter and up only $39,000 from the prior year quarter. The decrease from the trailing quarter was driven by lower professional fees, This is due mainly to higher IPO-related costs recognized during the second quarter of this year, as well as lower personnel expenses, mainly a reduction in stock compensation expense. Operating efficiency remains a core strength of River City Bank and a competitive advantage for the bank. Our adjusted efficiency ratio, excluding the mark-to-market gain on the undesignated interest rate swaps, was 28%. compared with 32% in the trailing quarter and 28% during the prior year quarter. As we noted through our recent IPO Roadshow process, being a low-cost producer allows for the bank to operate quite profitably despite having lower net interest margin than many peers. This allows for us to originate the highest credit quality loans, which tend to have lower yields. Having a low efficiency ratio also allows for us to be very competitive on both loan and deposit pricing. We also believe that being operationally efficient will enable the bank to grow in a scalable fashion. The bank's liquidity profile remains strong. At quarter end, the bank maintained approximately $1.5 billion of cash and investment securities. together with approximately $2.3 billion of available borrowing capacity. As of September 30, 2026, the bank has $2.6 billion worth of total notional in interest rate swaps outstanding. Approximately 84% of these are designated as fair value hedges under hedge accounting and the remaining 16% are undesignated. That is that their volatility flows through the income statement. Importantly, the bank has been systematically utilizing interest rate swaps to mitigate interest rate risk since 2012. In addition, and by design, we generally keep our investment portfolio duration very short and therefore it has performed well in the current interest rate environment. with an unrealized loss position of only 1.5% as of September 30, 2026. Lastly, the bank's provision for income taxes increased by $4.6 million compared to the prior quarter, primarily due to an increase in taxable income. The effective income tax rate was approximately 28% for the first nine months of 2026. Overall, the third quarter reflected net interest income and net interest margin expansion, disciplined expense management, loan and deposit growth, and continued exceptional credit quality. I will now turn the call back to Steve for some closing remarks.