Bank of Commerce Holdings Announces Results for the First Quarter of 2021

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  • BOCH

SACRAMENTO, Calif., April 16, 2021 (GLOBE NEWSWIRE) -- Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.829 billion asset bank holding company and parent company of Merchants Bank of Commerce (the “Bank”), today announced financial results for the quarter ended March 31, 2021. Net income for the quarter ended March 31, 2021 was $4.9 million or $0.29 per share – diluted, compared with net income of $916 thousand or $0.05 per share – diluted for the same period of 2020.

Significant Items for the First Quarter of 2021:

  • The Bank continued to experience significant growth in deposits, which increased $71 million during the quarter.

  • Loans, exclusive of PPP loans increased $19 million during the quarter; a reversal of the decline that occurred throughout 2020.

  • The Company’s net interest margin was 3.46% for the quarter; unchanged from the preceding quarter.

  • COVID-19 related credit concerns have continued to moderate and no provision for loan and lease losses was required.

  • During the first quarter of 2021, our largest nonaccrual borrowing relationship totaling $3.0 million (43% of nonaccrual loans at December 31, 2020) was repaid. The repayment included all principal (including $110 thousand recovery for an amount previously charged-off) $251 thousand of previously unrecorded interest and $80 thousand of reimbursed legal, appraisal and title fees.

Randall S. Eslick, President and CEO commented: “Our first quarter financial performance is a very positive start to the year and our growth in loans and deposits reflects the increased economic activity throughout our markets. The medical response to the pandemic has been quite effective, our concerns of last year regarding asset quality have moderated and our outlook on profitability for 2021 remains upbeat.”

Financial Highlights for the First Quarter of 2021 Compared to Prior Quarter:

  • Net income of $4.9 million ($0.29 per share – diluted) was a decrease of $152 thousand ($0.01 per share – diluted) (3%) from $5.1 million ($0.30 per share – diluted) earned during the prior quarter.

  • Return on average assets decreased to 1.11% compared to 1.14% for the prior quarter.

  • Return on average equity decreased to 11.20% compared to 11.56% for the prior quarter.

  • Net interest income decreased $138 thousand (1%) to $14.4 million compared to $14.6 million for the prior quarter.

  • Net interest margin of 3.46% was unchanged compared to the prior quarter.

  • Average loans totaled $1.140 billion, a decrease of $32 million (11% annualized) compared to average loans for the prior quarter.

  • Average earning assets totaled $1.692 billion, an increase of $18 million (4% annualized) compared to average earning assets for the prior quarter.

  • Average deposits totaled $1.571 billion, an increase of $16 million (4% annualized) compared to average deposits for the prior quarter.

    • Average non-maturing deposits totaled $1.437 billion, an increase of $20 million (6% annualized) compared to the prior quarter.

    • Average certificates of deposit totaled $134.5 million, a decrease of $3.9 million (11% annualized) compared to the prior quarter.

  • The Company’s efficiency ratio was 57.1% compared to 54.8% for the prior quarter.

  • Nonperforming assets at March 31, 2021 totaled $3.9 million or 0.21% of total assets, a decrease of $3.1 million (44%) since December 31, 2020. The decrease in nonperforming assets was due to a $3.0 million nonaccrual borrowing relationship that was repaid during the first quarter of 2021.

  • Book value per common share was $10.50 at March 31, 2021 compared to $10.58 at December 31, 2020.

  • Tangible book value per common share was $9.58 at March 31, 2021 compared to $9.64 at December 31, 2020.

Financial Highlights for the First Quarter of 2021 Compared to the Same Quarter a Year Previous:

  • Net income of $4.9 million was an increase of $4.0 million (437%) from $916 thousand earned during the same period in the prior year. Earnings of $0.29 per share – diluted was an increase of $0.24 (480%) per share from $0.05 per share – diluted earned during the same period in the prior. The prior year was impacted by:

    • $2.9 million provision for loan and lease losses.

    • $1.1 million in non-recurring costs associated with the termination of a technology management services contract and a severance agreement; both previously announced.

  • Return on average assets increased to 1.11% compared to 0.25% for the same period in the prior year.

  • Return on average equity increased to 11.20% compared to 2.14% for the same period in the prior year.

  • Net interest income increased $1.4 million (11%) to $14.4 million compared to $13.0 million for the same period in the prior year.

  • Net interest margin declined to 3.46% compared to 3.86% for the same period in the prior year.

  • Average loans totaled $1.140 billion, an increase of $107 million (10%) compared to average loans for the same period in the prior year.

  • Average earning assets totaled $1.692 billion, an increase of $339 million (25%) compared to average earning assets for the same period in the prior year.

  • Average deposits totaled $1.571 billion, an increase of $327 million (26%) compared to average deposits for the same period in the prior year.

    • Average non-maturing deposits totaled $1.437 billion, an increase of $339 million (31%) compared to the same period in the prior year.

    • Average certificates of deposit totaled $134.5 million, a decrease of $12.7 million (9%) compared to the same period in the prior year.

  • The Company’s efficiency ratio was 57.1% compared to 70.5% for the same period in the prior year.

    • The Company’s efficiency ratio of 70.5% for the first quarter of 2020 included $1.1 million of non-recurring costs, which increased the efficiency ratio by 8.0%.

  • Nonperforming assets at March 31, 2021 totaled $3.9 million or 0.21% of total assets, a decrease of $1.3 million (25%) since March 31, 2020.

  • Book value per common share was $10.50 at March 31, 2021 compared to $9.86 at March 31, 2020.

  • Tangible book value per common share was $9.58 at March 31, 2021 compared to $8.89 at March 31, 2020.

Impact of COVID-19:

  • During 2020, we funded 606 loans totaling $163.5 million under the first Small Business Administration Paycheck Protection Program (“PPP”). We continue to process loan forgiveness applications, and at March 31, 2021, we have 228 loans totaling $79.0 million remaining compared to 487 loans totaling $130.8 million at December 31, 2020.

  • During the first quarter of 2021, we funded an additional 196 loans totaling $38.9 million under the SBA’s second PPP loan program. The application period for the second PPP loan program ends on May 31, 2021.

  • We have experienced significant increases in deposit balances during the past year. All PPP loan funds were deposited into customer accounts at our bank and customer behavior has emphasized savings during the economic slowdown.

  • During the first quarter of 2021, the SBA extended their debt relief program and resumed making principal and interest payments on all of our SBA 7(a) loans which totaled $29.8 million at March 31, 2021. Payment assistance varies by borrower, will continue for no more than eight months and is limited to a maximum $9 thousand per borrower per month.

  • At March 31, 2021, approximately 35% of our workforce is working remotely.

  • As of April 12, 2021, all of our offices have returned to a pre-pandemic operating hours.

Forward-Looking Statements

Bank of Commerce Holdings wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. This news release includes statements by the Company, which describe management’s expectations and developments, which may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21B of the Securities Act of 1934, as amended. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company's public filings, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the Company's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new banks and/or branches are lower than expected; (4) our concentration in lending tied to real estate exposes us to the adverse effects of material increases in interest rates, declines in the general economy, tightening credit markets or declines in real estate values; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged; and (7) technological changes could expose us to new risks.

TABLE 1

SELECTED FINANCIAL INFORMATION - UNAUDITED

(dollars in thousands except per share data)

For The Three Months Ended

Net income, average assets and

March 31,

December 31,

average shareholders' equity

2021

2020

2020

Net income

$

4,920

$

916

$

5,072

Average total assets

$

1,790,447

$

1,454,019

$

1,774,937

Average total earning assets

$

1,692,281

$

1,353,098

$

1,674,544

Average shareholders' equity

$

178,162

$

172,120

$

174,520

Selected performance ratios

Return on average assets

1.11

%

0.25

%

1.14

%

Return on average equity

11.20

%

2.14

%

11.56

%

Efficiency ratio

57.1

%

70.5

%

54.8

%

Share and per share amounts

Weighted average shares - basic (1)

16,706

17,695

16,663

Weighted average shares - diluted (1)

16,778

17,747

16,731

Earnings per share - basic

$

0.29

$

0.05

$

0.30

Earnings per share - diluted

$

0.29

$

0.05

$

0.30

At March 31,

At December 31,

Share and per share amounts

2021

2020

2020

Common shares outstanding (2)

16,876

16,796

16,801

Book value per common share (2)

$

10.50

$

9.86

$

10.58

Tangible book value per common share (2)(3)

$

9.58

$

8.89

$

9.64

Capital ratios (4)

Bank of Commerce Holdings

Common equity tier 1 capital ratio

12.99

%

12.02

%

13.12

%

Tier 1 capital ratio

13.81

%

12.85

%

13.97

%

Total capital ratio

15.87

%

14.93

%

16.06

%

Tier 1 leverage ratio

9.61

%

10.78

%

9.46

%

Tangible common equity ratio (5)

8.91

%

10.38

%

9.27

%

Merchants Bank of Commerce

Common equity tier 1 capital ratio

14.41

%

13.66

%

14.58

%

Tier 1 capital ratio

14.41

%

13.66

%

14.58

%

Total capital ratio

15.66

%

14.91

%

15.83

%

Tier 1 leverage ratio

10.03

%

11.45

%

9.86

%

(1) Excludes unvested restricted shares issued in accordance with the Company's equity incentive plan, as they are non-participative in dividends or voting rights.

(2) Includes unvested restricted shares issued in accordance with the Company's equity incentive plan.

(3) Book value per share is computed by dividing total shareholders’ equity by shares outstanding. Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.

(4) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject.

(5) Management believes the tangible common equity ratio is a useful measure of capital adequacy because it provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the capital of the Company and the ability of the Company to absorb potential losses. The tangible common equity ratio is calculated as total shareholders' equity less goodwill and core deposit intangible, net divided by total assets less goodwill and core deposit intangible, net.

BALANCE SHEET OVERVIEW

As of March 31, 2021, the Company had total consolidated assets of $1.829 billion, gross loans of $1.146 billion, allowance for loan and lease losses (“ALLL”) of $17 million, total deposits of $1.614 billion, and shareholders’ equity of $177 million. Certain amounts for prior periods have been reclassified to conform to the current presentation. The results of reclassifications are not considered material and have no effect on previously reported equity or net income.

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(dollars in thousands)

At March 31,

At December 31,

% of

% of

Change

% of

2021

Total

2020

Total

Amount

%

2020

Total

Commercial

$

117,597

10

%

$

138,870

13

%

$

(21,273

)

(15

)

%

$

115,559

10

%

Paycheck Protection Program ("PPP")

117,991

10

117,991

100

%

130,814

11

Commercial real estate:

Construction and land development

32,145

3

34,394

3

(2,249

)

(7

)

%

44,549

4

Non-owner occupied

592,157

52

550,606

53

41,551

8

%

550,020

48

Owner occupied

165,367

14

180,765

17

(15,398

)

(9

)

%

172,967

15

Residential real estate:

Individual Tax Identification Number ("ITIN")

27,839

2

31,998

3

(4,159

)

(13

)

%

29,035

3

1-4 family mortgage

54,562

5

62,533

6

(7,971

)

(13

)

%

55,925

5

Equity lines

18,600

2

23,158

2

(4,558

)

(20

)

%

18,894

2

Consumer and other

19,685

2

29,921

3

(10,236

)

(34

)

%

21,969

2

Gross loans

1,145,943

100

%

1,052,245

100

%

93,698

9

%

1,139,732

100

%

Deferred (fees) and costs

143

2,129

(1,986

)

229

Loans, net of deferred fees and costs

1,146,086

1,054,374

91,712

1,139,961

Allowance for loan and lease losses

(17,027

)

(15,067

)

(1,960

)

(16,910

)

Net loans

$

1,129,059

$

1,039,307

$

89,752

$

1,123,051

Average loans during the quarter

$

1,140,315

$

1,033,689

$

106,626

10

%

$

1,172,705

Average loans during the quarter (excluding PPP)

$

1,017,123

$

1,033,689

$

(16,566

)

(2

)

%

$

1,024,324

Average yield on loans during the quarter

4.70

%

4.80

%

(0.10

)

(2

)

%

4.59

%

Average yield on loans during the quarter (excluding PPP)

4.60

%

4.80

%

(0.20

)

(4

)

%

4.67

%

Average yield on loans year to date

4.70

%

4.80

%

(0.10

)

(2

)

%

4.57

%

Average yield on loans year to date (excluding PPP)

4.60

%

4.80

%

(0.20

)

(4

)

%

4.75

%

The Company recorded gross loan balances of $1.146 billion at March 31, 2021, compared with $1.052 billion and $1.140 billion at March 31, 2020 and December 31, 2020, respectively, an increase of $94 million and $6 million, respectively. The improving economic environment is reflected in the growth of our gross loans (excluding PPP loans) which increased $19.0 million (8% annualized) during the quarter.

Gross loan balances in the table above include a net fair value discount for loans acquired from Merchants of $810 thousand, $1.5 million and $920 thousand at March 31, 2021, March 31, 2020 and December 31, 2020, respectively. We recorded $110 thousand, $163 thousand and $141 thousand in accretion of the discount for these loans during the quarters ended March 31, 2021, March 31, 2020 and December 31, 2020, respectively.

We have funded 802 loans totaling $202.4 million under the two PPP loan programs through March 31, 2021.

First PPP Loan Program

We originated 606 loans totaling $163.5 million in the first PPP loan program. At March 31, 2021, we have 228 loans totaling $79.0 million in the program. The majority of the loans under the first program have a two-year term over which the loan fee income (net of loan origination costs) is earned. When a PPP loan is repaid prior to maturity, all unamortized fees and cost associated with the loan are accelerated into income. During the current quarter, 259 loans totaling $51.8 million were repaid and we recognized $1.0 million in accelerated net fee income compared to 119 loans repaid totaling $32.7 million and $664 thousand in accelerated net fee income in the prior quarter. At March 31, 2021, net loan fees totaling $842 thousand remain to be earned and we anticipate that most of it will be recognized during the second quarter of 2021.

Second PPP Loan Program

During the first quarter of 2021, the SBA announced a second PPP loan program. The SBA’s second PPP loan program provides first draw PPP loans to borrowers who were ineligible under the first PPP loan program (sole proprietors, ITIN business owners, small business owners with non-fraud felony convictions and small business owners who have struggled with student loan debt) and allows second draw PPP loans to qualifying businesses that received a first draw under SBA’s first PPP loan program. The loans are available until May 31, 2021, are limited to $2 million, have a five-year term and SBA has increased the lender fees for loans under $50 thousand to incentivize lenders to work with smaller borrowers. We have originated 196 loans totaling $38.9 million in the new program and we have an additional 52 applications totaling $9.3 million in process at March 31, 2021. Of the 196 loans we originated in the second program, 158 were made to borrowers receiving their second draw PPP loan.

We anticipate that the loans in the second PPP loan program will have a lower yield as loan net fee income will be recognized over a five-year term instead of the two-year term of the first program. Borrowers may submit a loan forgiveness application after using the loan proceeds and submitting an application for forgiveness of their first PPP loan. As of March 31, 2021, we have not accepted any forgiveness applications for loans funded in the second program. At March 31, 2021, loan fee income (net of loan origination costs) totaling $1.3 million remains to be earned from the loans in the second PPP loan program.

The following tables provide additional information on the PPP loans by industry and by loan balance at March 31, 2021 for loans in both PPP loan programs.

TABLE 3

PPP LOANS BY INDUSTRY - UNAUDITED

(dollars in thousands)

At March 31, 2021

Number

Balance

Construction

70

$

55,204

Healthcare and Social Assistance

65

12,166

Professional, Scientific and Tech Services

59

8,161

Accommodation and Food Services

47

8,705

Admin, Support, Waste Management and Remediation Services

14

4,855

Primary Metal Manufacturing

7

3,438

Retail Trade

31

2,232

Other

131

23,230

Total

424

$

117,991


TABLE 4

PPP LOANS BY LOAN SIZE - UNAUDITED

(dollars in thousands)

At March 31, 2021

Balance

Number

Average Loan Size

$50,000 or less

$

3,427

154

$

22

$50,001 to $150,000

11,205

136

$

82

$150,001 to $350,000

13,895

63

$

221

$350,001 to $1,999,999

44,464

58

$

767

$2,000,000 or greater

45,000

13

$

3,462

Total

$

117,991

424

$

278

The following table presents the status of our loans in the forgiveness process.

TABLE 5

PPP LOANS FORGIVENESS APPLICATION STATUS - UNAUDITED

(dollars in thousands)

At March 31, 2021

At December 31, 2020

Balance

Number

Average Loan Size

Balance

Number

Average Loan Size

Borrower has not started application

$

5,425

49

$

111

$

33,459

185

$

181

Borrower is working on application

9,345

65

$

144

31,277

136

$

230

Borrower has completed application and the bank is reviewing it

6,381

35

$

182

43,872

105

$

418

Bank has approved application and submitted it to the SBA

57,901

78

$

742

22,087

44

$

502

Remaining balance for loans partially repaid (1)

4

1

$

4

119

17

$

7

PPP loans not fully repaid

79,056

228

$

347

130,814

487

$

269

Repayments

84,437

378

$

223

32,679

119

$

275

Total PPP loans under first PPP loan program

163,493

606

$

270

163,493

606

$

270

New originations under second PPP loan program

38,935

196

$

199

$

Total PPP loans originated by bank

$

202,428

802

$

252

$

163,493

606

$

270

(1) Borrowers who participated in the Economic Injury Disaster Loan (“EIDL”) program had their forgiveness payment reduced by their EIDL advance. With the second PPP loan program, this reduction was repealed and the SBA remitted a reconciliation payment for the previously-deducted EIDL advance amounts, plus interest.


TABLE 6

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(dollars in thousands)

At March 31,

At December 31,

% of

% of

Change

% of

2021

Total

2020

Total

Amount

%

2020

Total

Cash and due from banks

$

20,053

3

%

$

21,127

6

%

$

(1,074

)

(5

)

%

$

19,875

4

%

Interest-bearing deposits in other banks

74,804

12

22,813

7

51,991

228

%

87,111

16

Total cash and cash equivalents

94,857

15

43,940

13

50,917

116

%

106,986

20

Investment securities:

U.S. government and agencies

31,060

5

36,043

11

(4,983

)

(14

)

%

32,994

6

Obligations of state and political subdivisions

128,841

21

63,263

19

65,578

104

%

108,366

20

Residential mortgage backed securities and collateralized mortgage obligations

277,547

46

160,439

50

117,108

73

%

240,478

42

Corporate securities

2,983

1

(2,983

)

(100

)

%

Commercial mortgage backed securities

38,582

6

17,428

5

21,154

121

%

28,074

5

Other asset backed securities

41,345

7

4,921

1

36,424

740

%

36,968

7

Total investment securities - AFS

517,375

85

285,077

87

232,298

81

%

446,880

80

Total cash, cash equivalents and investment securities

$

612,232

100

%

$

329,017

100

%

$

283,215

86

%

$

553,866

100

%

Average yield on interest-bearing due from banks during the quarter

0.11

%

1.31

%

(1.20

)

0.12

%

Average yield on investment securities during the quarter - nominal

1.84

%

2.74

%

(0.90

)

2.06

%

Average yield on investment securities during the quarter - tax equivalent

1.96

%

2.84

%

(0.88

)

2.19

%

As of March 31, 2021, we maintained noninterest-bearing cash positions of $20.1 million and interest-bearing deposits of $74.8 million at the Federal Reserve Bank and correspondent banks. During the current quarter, we successfully invested a large portion of our increased liquidity into our investment portfolio.

Unprecedented deposit growth during the last year as a result of PPP programs and customer behavior, which has placed a greater emphasis on savings since the start of the pandemic combined with the need to deploy excess cash, has led to a significant increase in the size of our investment securities portfolio. Investment securities totaled $517.4 million at March 31, 2021, compared with $285.1 million and $446.9 million at March 31, 2020 and December 31, 2020, respectively. During the first quarter of 2021, we purchased securities with a par value of $111.1 million and weighted average yield of 1.56% (1.62% tax equivalent) and sold securities with a par value of $11.6 million and weighted average yield and tax equivalent yield of (0.19)%. The sales resulted in net realized gain of $7 thousand for the quarter ended March 31, 2021. Investment purchases were comprised primarily of longer duration municipal bonds and lower coupon, moderate-term mortgage backed securities.

Average securities balances for the quarters ended March 31, 2021, March 31, 2020 and December 31, 2020 were $440.6 million, $272.3 million and $377.4 million, respectively. Weighted average yields on securities balances for those same periods were 1.84%, 2.74% and 2.06%, respectively.

At March 31, 2021, our net unrealized gains on available-for-sale investment securities were $4.0 million compared with net unrealized gains of $8.4 million and $10.6 million at March 31, 2020 and December 31, 2020, respectively. The decline in net unrealized gains were due to recent increases in market interest rates.

TABLE 7

DEPOSITS BY TYPE - UNAUDITED

(dollars in thousands)

At March 31,

At December 31,

% of

% of

Change

% of

2021

Total

2020

Total

Amount

%

2020

Total

Demand - noninterest-bearing

$

603,991

37

%

$

419,315

34

%

$

184,676

44

%

$

541,033

35

%

Demand - interest-bearing

290,687

18

231,276

19

59,411

26

%

290,251

19

Money market

425,251

26

314,687

25

110,564

35

%

425,121

28

Total demand

1,319,929

81

965,278

78

354,651

37

%

1,256,405

82

Savings

160,834

10

133,552

11

27,282

20

%

150,695

10

Total non-maturing deposits

1,480,763

91

1,098,830

89

381,933

35

%

1,407,100

92

Certificates of deposit

133,630

9

143,557

11

(9,927

)

(7

)

%

135,679

8

Total deposits

$

1,614,393

100

%

$

1,242,387

100

%

$

372,006

30

%

$

1,542,779

100

%

Total deposits at March 31, 2021, increased $372 million or 30% to $1.614 billion compared to March 31, 2020 and increased $71.6 million or 19% annualized compared to December 31, 2020. Total non-maturing deposits increased $381.9 million or 35% compared to the same date a year ago and increased $73.7 million or 21% annualized compared to December 31, 2020. The increase in non-maturing deposits compared to the same period one year ago was due to PPP loan program disbursements and changes in customer behavior, which is placing greater emphasis on savings during the economic slowdown. Management anticipates that depositor behavior will change later in the year as economic conditions improve and depositors begin to use the cash balances that have accumulated over the past year. Certificates of deposit decreased $9.9 million or 7% compared to the same date a year ago and decreased $2.0 million or 6% annualized compared to December 31, 2020. These decreases reflect our decision to reduce reliance on public deposits and depositor reaction to the low interest rate environment.

The following table presents the average cost of interest-bearing deposits, all deposits and all interest-bearing liabilities for the periods indicated.

TABLE 8

AVERAGE COST OF FUNDS - UNAUDITED

For The Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2020

2020

2020

2020

2019

2019

2019

Interest-bearing deposits

0.26

%

0.29

%

0.36

%

0.43

%

0.53

%

0.56

%

0.56

%

0.54

%

Interest-bearing deposits and noninterest-bearing demand

0.16

%

0.19

%

0.23

%

0.28

%

0.35

%

0.38

%

0.38

%

0.37

%

All interest-bearing liabilities

0.32

%

0.37

%

0.44

%

0.52

%

0.65

%

0.68

%

0.68

%

0.74

%

All interest-bearing liabilities and noninterest-bearing demand

0.21

%

0.24

%

0.29

%

0.34

%

0.43

%

0.46

%

0.46

%

0.52

%

Equity

As detailed in Table 1, management believes the capital ratios remain adequate for the Company’s risk profile.

In late 2019, we announced a program to repurchase 1.0 million common shares which was later increased to 1.5 million common shares. Between October of 2019 and April of 2020, all 1.5 million shares were repurchased at a total cost of $13.6 million including commissions, or an average of $9.11 per share. 1.4 million of the common share repurchases under this plan were made during the first quarter of 2020.

In late 2020, we announced a new share repurchase program to repurchase up to 1.0 million shares of common stock over a period ending December 31, 2021. As of March 31, 2021, no shares have been repurchased under this plan.

INCOME STATEMENT OVERVIEW

TABLE 9

SUMMARY INCOME STATEMENT - UNAUDITED

(dollars in thousands, except per share data)

For The Three Months Ended

March 31,

Change

December 31,

Change

2021

2020

Amount

%

2020

Amount

%

Interest income

$

15,240

$

14,345

$

895

6

%

$

15,519

$

(279

)

(2

)

%

Interest expense

822

1,359

(537

)

(40

)

%

963

(141

)

(15

)

%

Net interest income

14,418

12,986

1,432

11

%

14,556

(138

)

(1

)

%

Provision for loan and lease losses

2,850

(2,850

)

(100

)

%

%

Noninterest income

1,163

892

271

30

%

1,016

147

14

%

Noninterest expense

8,897

9,783

(886

)

(9

)

%

8,534

363

4

%

Income before provision for income taxes

6,684

1,245

5,439

437

%

7,038

(354

)

(5

)

%

Provision for income taxes

1,764

329

1,435

436

%

1,966

(202

)

(10

)

%

Net income

$

4,920

$

916

$

4,004

437

%

$

5,072

$

(152

)

(3

)

%

Earnings per share - basic

$

0.29

$

0.05

$

0.24

480

%

$

0.30

$

(0.01

)

(3

)

%

Weighted average shares - basic

16,706

17,695

(989

)

(6

)

%

16,663

43

%

Earnings per share - diluted

$

0.29

$

0.05

$

0.24

480

%

$

0.30

$

(0.01

)

(3

)

%

Weighted average shares - diluted

16,778

17,747

(969

)

(5

)

%

16,731

47

%

Dividends declared per common share

$

0.06

$

0.05

$

0.01

20

%

$

0.06

$

%

First Quarter of 2021 Compared with the First Quarter of 2020

Net income for the first quarter of 2021 increased $4.0 million compared to the first quarter of 2020. In the current quarter, net interest income was $1.4 million higher, provision for loan and lease losses was $2.9 million lower, noninterest income was $271 thousand higher and noninterest expense was $886 thousand lower. These positive changes were partially offset by a provision for income taxes that was $1.4 million higher.

Net Interest Income

Net interest income increased $1.4 million compared to the same period a year ago.

Interest income for the first quarter of 2021 increased $895 thousand or 6% to $15.2 million.

  • During the first quarter of 2021, we recognized $1.0 million in accelerated net fee income on PPP loans forgiven or repaid during the quarter. These accelerated loan fees increased the average yield on loans for the first quarter of 2021 by 36 basis points.

  • PPP loans had an average balance of $123.2 million and yield of 5.49% (2.20% excluding accelerated fee income).

  • Excluding PPP loans, interest and fees on loans decreased $791 thousand due to a $16.6 million decrease in average loan balances and a 20 basis point decrease in average yield.

  • During the first quarter of 2021, we recognized $251 thousand in nonaccrual interest income as part of the repayment of loans for our largest nonaccrual borrowing relationship. The interest income recognized as part of that repayment increased the average yield on loans for the first quarter of 2021 by 9 basis points.

  • Interest on investment securities increased $143 thousand due to a $168.4 million increase in average securities balances partially offset by a 90 basis point decrease in average yield.

  • Interest on interest-bearing deposits due from banks decreased $125 thousand due to a 120 basis point decrease in average yield that was partially offset by a $64.2 million increase in average interest-bearing deposit balances. During 2020, in response to the economic effects of the COVID-19 pandemic, the Federal Reserve cut short-term interest rates by 150 to 175 basis points and has provided guidance that it expects interest rates to remain low for an extended period of time.

Interest expense for the first quarter of 2021 decreased $537 thousand or 40% to $822 thousand.

  • Interest expense on interest-bearing deposits decreased $446 thousand. Average interest-bearing demand and savings deposit balances increased $198.2 million, while average certificate of deposit balances decreased $12.7 million. The average rate paid on interest-bearing deposits decreased 27 basis points.

  • Average FHLB borrowings were $3.9 million in the current quarter compared to $220 thousand during the same period a year ago. The borrowings bore no interest under a program offered by the FHLB and were fully repaid at March 31, 2021.

  • Interest expense on other term debt decreased $47 thousand. The average debt balance was essentially unchanged, while the average rate paid decreased 187 basis points.

  • Interest expense on junior subordinated debentures decreased $44 thousand. The average debt balance was unchanged, while the average rate paid decreased 170 basis points.

Provision for Loan and Lease Losses

Many of our asset quality concerns from 2020 have moderated. No provision for loan and lease losses was necessary for the current quarter compared to a provision for loan and lease losses of $2.9 million in the same quarter a year ago. Nonaccrual loans decreased 25% since March 31, 2020 primarily due to the repayment of $3.0 million in principal from one commercial real estate loan relationship. Net loan recoveries were $117 thousand for the current quarter compared to net loan charge-offs of $14 thousand during the same period a year ago. Most COVID-19 related loan payment deferrals have ended with limited negative impact on delinquencies. We have however recognized downgrades of certain loans during the current quarter based on year-end financial data received from some borrowers. A more in depth discussion of our provision is provided below under the heading Provision for Loan and Lease Losses.

Noninterest Income

Noninterest income for the three months ended March 31, 2021 increased $271 thousand compared to the same period a year previous. The increase was primarily due to a $221 thousand legal settlement, which was a partial recovery of an investment security impairment loss recorded during the second quarter of 2016.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2021 decreased $886 thousand compared to the same period a year previous. The first quarter of 2020 included $1.1 million in non-recurring costs. Excluding the non-recurring costs, noninterest expense increased $214 thousand primarily due to accruals for incentives made in the current quarter that were not made in the same quarter one year ago.

The Company’s efficiency ratio was 57.1% for the first quarter of 2021. The ratio during the same period in 2020 was 70.5%. The Company’s efficiency ratio of 70.5% for the first quarter of 2020 included $1.1 million of non-recurring costs, which increased the efficiency ratio by 8.0%.

Income Tax Provision

For the three months ended March 31, 2021, our income tax provision of $1.8 million on pre-tax income of $6.7 million was an effective tax rate of 26.4%. The tax provision for the first quarter of the prior year was $329 thousand on pre-tax income of $1.2 million for an effective rate of 26.4%.

First Quarter of 2021 Compared with the Fourth Quarter of 2020

Net income for the first quarter of 2021 decreased $152 thousand compared to the fourth quarter of 2020. In the current quarter, net interest income was $138 thousand lower and noninterest expense was $363 thousand higher. These negative variances were partially offset by noninterest income that was $147 thousand higher and a provision for income taxes that was $202 thousand lower.

Net Interest Income

Net interest income decreased $138 thousand over the prior quarter.

Interest income for the three months ended March 31, 2021 decreased $279 thousand or 2% to $15.2 million.

  • During the first quarter of 2021, we recognized $1.0 million in accelerated net fee income on PPP loans forgiven or repaid during the quarter compared to $664 thousand in the prior quarter. These accelerated loan fees increased the average yield on loans for the first quarter of 2021 and the fourth quarter of 2020 by 36 basis points and 23 basis points, respectively.

  • PPP loans had an average balance of $123.2 million and yield of 5.49% (2.20% excluding accelerated fee income) for the first quarter of 2021 compared to an average balance of $148.4 million and yield of 4.07% (2.29% excluding accelerated fee income) for the prior quarter.

  • Excluding PPP loans, interest and fees on loans decreased $467 thousand due to a $7.2 million decrease in average loan balances, a 7 basis point decrease in average yield and a quarter that was two days shorter.

  • During the first quarter of 2021, we recognized $251 thousand in nonaccrual interest income as part of the repayment of loans for our largest nonaccrual borrowing relationship. The interest income recognized as part of that repayment increased the average yield on loans for the first quarter of 2021 by 9 basis points.

  • Interest on investment securities increased $45 thousand due to a $63.2 million increase in average security balances partially offset by a 3 basis point decrease in average yield.

  • Interest on interest-bearing deposits due from banks decreased $7 thousand due to a $13.1 million decrease in average balances and a 1 basis point decrease in average yield.

Interest expense for the three months ended March 31, 2021 decreased $141 thousand or 15% to $822 thousand.

  • Interest expense on interest-bearing deposits decreased $98 thousand. Average interest-bearing demand and savings deposit balances increased $10.3 million, while average certificates of deposit decreased $3.9 million. The average rate paid on interest-bearing deposits decreased 3 basis points. The first quarter of 2021 was two days shorter than the fourth quarter of 2020.

  • Average FHLB borrowings were $3.9 million in the current quarter compared to $7.1 million in the prior quarter. The borrowings bore no interest under a program offered by the FHLB and were fully repaid at March 31, 2021.

  • Interest expense on other term debt decreased $42 thousand. The average debt balance was essentially unchanged, while the average rate paid decreased 156 basis points.

  • Interest expense on junior subordinated debentures decreased $1 thousand. The average debt balance and average rate paid remained unchanged.

Provision for Loan and Lease Losses

During the first quarter of 2021, our largest nonaccrual borrowing relationship was fully repaid resulting in the collection of $3.0 million in principal, and a $110 thousand recovery for amount charged-off in a prior year. We have however recognized downgrades of certain loans during the current quarter based on year-end financial data from some borrowers. No provision for loan and lease losses was necessary for the current or prior quarter. A more in depth discussion of our provision is provided below under the heading Provision for Loan and Lease Losses.

Noninterest Income

Noninterest income for the three months ended March 31, 2021 increased $147 thousand compared to the prior quarter. The increase was primarily due to a $221 thousand legal settlement, which was a partial recovery of an investment security impairment loss recorded during the second quarter of 2016.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2021 increased $363 thousand compared to the prior quarter. The increase was primarily due to increased payroll tax expense and increased accruals for unused vacation offset by decreased incentive accruals.

The Company’s efficiency ratio was 57.1% for the first quarter of 2021 compared with 54.8% for the prior quarter.

Income Tax Provision

For the three months ended March 31, 2021, our income tax provision of $1.8 million on pre-tax income of $6.7 million was an effective tax rate of 26.4%. The income tax provision for the prior quarter of $2.0 million on pre-tax income of $7.0 million was an effective tax rate of 27.9%.

The tax provision of $2.0 million for the prior quarter included $132 thousand applicable to earlier quarters, as deductible operating losses and tax credits from our low-income housing partnerships were lower than anticipated. The effective tax rate excluding this $132 thousand was 26.1%.

Earnings Per Share

Diluted earnings per share were $0.29 for the three months ended March 31, 2021 compared with diluted earnings per share of $0.05 for the same period a year ago and diluted earnings per share of $0.30 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in Table 9 presented earlier in this press release.

TABLE 10a

NET INTEREST MARGIN - UNAUDITED

(dollars in thousands)

For The Three Months Ended

March 31, 2021

March 31, 2020

December 31, 2020

Average

Yield /

Average

Yield /

Average

Yield /

Balance

Interest(1)

Rate (6)

Balance

Interest(1)

Rate (6)

Balance

Interest(1)

Rate (6)

Interest-earning assets:

Loans net of PPP (2)

$

1,017,123

$

11,547

4.60

%

$

1,033,689

$

12,338

4.80

%

$

1,024,324

$

12,014

4.67

%

PPP loans (3)

123,192

1,668

5.49

%

%

148,381

1,518

4.07

%

Taxable securities

358,291

1,485

1.68

%

237,405

1,582

2.68

%

304,242

1,484

1.94

%

Tax-exempt securities (4)

82,355

511

2.52

%

34,869

271

3.13

%

73,207

467

2.54

%

Interest-bearing deposits in other banks

111,320

29

0.11

%

47,135

154

1.31

%

124,390

36

0.12

%

Average interest-earning assets

1,692,281

15,240

3.65

%

1,353,098

14,345

4.26

%

1,674,544

15,519

3.69

%

Cash and due from banks

21,744

21,987

22,413

Premises and equipment, net

15,001

15,753

15,162

Goodwill

11,671

11,671

11,671

Other intangible assets, net

3,934

4,701

4,126

Other assets

45,816

46,809

47,021

Average total assets

$

1,790,447

$

1,454,019

$

1,774,937

Interest-bearing liabilities:

Interest-bearing demand

$

295,388

58

0.08

%

$

233,375

100

0.17

%

$

283,213

57

0.08

%

Money market

425,113

195

0.19

%

307,587

403

0.53

%

430,014

237

0.22

%

Savings

154,199

48

0.13

%

135,504

118

0.35

%

151,223

53

0.14

%

Certificates of deposit

134,520

338

1.02

%

147,241

464

1.27

%

138,380

390

1.12

%

Federal Home Loan Bank of San Francisco ("FHLB") borrowings

3,889

%

220

0.21

%

7,120

%

Other borrowings

10,000

137

5.56

%

9,963

184

7.43

%

9,999

179

7.12

%

Junior subordinated debentures

10,310

46

1.81

%

10,310

90

3.51

%

10,310

47

1.81

%

Average interest-bearing liabilities

1,033,419

822

0.32

%

844,200

1,359

0.65

%

1,030,259

963

0.37

%

Noninterest-bearing demand

562,155

420,847

552,601

Other liabilities

16,711

16,852

17,557

Shareholders’ equity

178,162

172,120

174,520

Average liabilities and shareholders’ equity

$

1,790,447

$

1,454,019

$

1,774,937

Net interest income and net interest margin (5)

$

14,418

3.46

%

$

12,986

3.86

%

$

14,556

3.46

%

(1) Interest income on loans, net of PPP includes net fees and costs of approximately $204 thousand, $257 thousand, and $85 thousand for the three months ended March 31, 2021 and 2020 and December 31, 2020, respectively. Interest income on PPP loans includes net fees and costs of $1.4 million and $1.1 million for the three months ended March 31, 2021 and December 31, 2020, respectively.

(2) Loans, net of PPP includes average nonaccrual loans of $6.2 million, $5.5 million and $7.2 million for the three months ended March 31, 2021 and 2020 and December 31, 2020, respectively.

(3) PPP loans represent average gross loans and excludes deferred fees and costs.

(4) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis.

(5) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the three months ended March 31, 2021 and 2020 and December 31, 2020 included $110 thousand, $163 thousand and $141 thousand in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by four, six and five basis points, respectively.

(6) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively.


TABLE 11

ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED

(dollars in thousands)

For The Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

ALLL beginning balance

$

16,910

$

16,873

$

16,089

$

15,067

$

12,231

Provision for loan and lease losses charged to expense

1,100

1,300

2,850

Loans charged-off

(90

)

(86

)

(502

)

(356

)

(169

)

Loan and lease loss recoveries

207

123

186

78

155

ALLL ending balance

$

17,027

$

16,910

$

16,873

$

16,089

$

15,067

At March 31,

At December 31,

At September 30,

At June 30,

At March 31,

2021

2020

2020

2020

2020

Nonaccrual loans:

Commercial

$

1,520

$

1,535

$

1,549

$

7

$

39

Commercial real estate:

Non-owner occupied

626

640

1,712

1,717

Owner occupied

95

3,094

3,100

2,992

3,103

Residential real estate:

ITIN

1,529

1,585

1,574

1,738

1,878

1-4 family mortgage

137

141

145

180

184

Consumer and other

17

18

18

37

39

Total nonaccrual loans

3,924

7,013

8,098

6,671

5,243

Accruing troubled debt restructured loans:

...

...

Commercial

494

498

531

592

592

Residential real estate:

ITIN

3,420

3,466

3,597

3,642

3,891

Equity lines

121

126

131

221

226

Total accruing restructured loans

4,035

4,090

4,259

4,455

4,709

Total impaired loans

$

7,959

$

11,103

$

12,357

$

11,126

$

9,952

Gross loans at period end

$

1,145,943

$

1,139,732

$

1,206,065

$

1,206,340

$

1,052,245

Impaired loans to gross loans

0.69

%

0.97

%

1.02

%

0.92

%

0.95

%

Impaired loans to gross loans (excluding PPP) (1)

0.77

%

1.10

%

1.19

%

1.07

%

0.95

%

Nonaccrual loans to gross loans

0.34

%

0.62

%

0.67

%

0.55

%

0.50

%

Nonaccrual loans to gross loans (excluding PPP) (2)

0.38

%

0.70

%

0.78

%

0.64

%

0.50

%

Allowance for loan and lease losses as a percent of:

Gross loans

1.49

%

1.48

%

1.40

%

1.33

%

1.43

%

Gross loans (excluding PPP) (3)

1.66

%

1.68

%

1.62

%

1.54

%

1.43

%

Nonaccrual loans

433.92

%

241.12

%

208.36

%

241.18

%

287.37

%

Impaired loans

213.93

%

152.30

%

136.55

%

144.61

%

151.40

%

(1) Impaired loans to gross loans (excluding PPP) is computed by dividing the impaired loans by total gross loans excluding gross PPP loans. Management believes that the ratio excluding PPP loans is meaningful when comparing to periods that do not include PPP loans, which are guaranteed by the SBA, and are expected to be forgiven and repaid by the SBA.

(2) Nonaccrual loans to gross loans (excluding PPP) is computed by dividing the nonaccrual loans by total gross loans excluding gross PPP loans. Management believes that the ratio excluding PPP loans is meaningful when comparing to periods that do not include PPP loans, which are guaranteed by the SBA, and are expected to be forgiven and repaid by the SBA.

(3) ALLL to gross loans (excluding PPP) is computed by dividing the ALLL by total gross loans excluding gross PPP loans. Management believes that the ratio excluding PPP loans is meaningful when comparing to periods that do not include PPP loans, which are guaranteed by the SBA, and are expected to be forgiven and repaid by the SBA.

Provision for Loan and Lease Losses

We monitor credit quality and the general economic environment to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. Our review of ALLL adequacy utilizes both quantitative and qualitative factors. The quantitative analysis relies on historical loss rates which, unfortunately, may not be indicative of potential losses related to a pandemic such as we are currently experiencing with COVID-19. In response to quantitative data deficiencies, we have placed greater reliance on qualitative factors (Q-Factors).

Many of our COVID-19 related credit concerns have moderated and no provision for loan and lease losses was required during the first quarter of 2021. Nonaccrual loans decreased 43% since December 31, 2020 due to the repayment of $3.0 million in principal from one commercial real estate loan relationship. Net loan loss recoveries were $117 thousand during the first quarter of 2021 and most of our borrowers who received a COVID-19 related loan payment deferral have resumed making their payments. We have however recognized downgrades of certain loans during the current quarter based on year-end financial data received by some borrowers. Approximately half of the loan balance for the loans downgraded are from SBA 504 loans. No provision for loan and lease losses was necessary for the current quarter or the prior quarter compared to a provision for loan and lease losses of $2.9 million in the same quarter a year ago.

During the current quarter, we adjusted our Q-Factor for economic conditions to reflect our more positive outlook on the economy. Our ALLL methodology, adjusted for the revised Q-Factor and the changes in loan quality metrics discussed above supported an ALLL of $17.0 million at March 31, 2021, an increase of 1% compared to our ALLL of $16.9 million at December 31, 2020 and an increase of 13% compared to our ALLL of $15.1 million at March 31, 2020. Management believes the Company’s ALLL is adequate at March 31, 2021. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in future charges to the provision for loan and lease losses.

At March 31, 2021, the recorded investment in loans classified as impaired totaled $8.0 million, with a corresponding specific reserve of $188 thousand compared to impaired loans of $11.1 million, with a corresponding specific reserve of $192 thousand at December 31, 2020 and impaired loans of $10.0 million with a corresponding specific reserve of $318 thousand at March 31, 2020. The decrease in impaired loans during the current quarter resulted from the repayment of a $3.0 million nonaccrual borrowing relationship.

TABLE 12

TROUBLED DEBT RESTRUCTURINGS - UNAUDITED

(dollars in thousands)

At March 31,

At December 31,

At September 30,

At June 30,

At March 31,

2021

2020

2020

2020

2020

Nonaccrual

$

1,947

$

2,007

$

2,063

$

2,194

$

1,611

Accruing

4,035

4,090

4,259

4,455

4,709

Total troubled debt restructurings

$

5,982

$

6,097

$

6,322

$

6,649

$

6,320

Troubled debt restructurings as a percent of:

Gross loans

0.52

%

0.53

%

0.52

%

0.55

%

0.60

%

Gross loans (excluding PPP) (1)

0.58

%

0.60

%

0.61

%

0.64

%

0.60

%

(1) Troubled debt restructuring to gross loans (excluding PPP) is computed by dividing troubled debt restructurings by total gross loans excluding gross PPP loans. Management believes that the ratio excluding PPP loans is meaningful when comparing to periods that do not include PPP loans, which are guaranteed by the SBA, and are expected to be forgiven and repaid by the SBA.

There were no new troubled debt restructurings during the three months ended March 31, 2021. As of March 31, 2021, we had 90 loans that were classified as troubled debt restructurings, of which 88 were performing according to their restructured terms. Of the 90 troubled debt restructurings, 82 were ITIN loans totaling $4.7 million which are serviced by a third party.

Troubled Debt Restructuring Guidance

Financial institution regulators and the CARES Act have changed the treatment of short-term loan modifications for borrowers impacted by COVID-19. The change provides that modifications made in response to COVID-19, to borrowers under certain circumstances, should not be considered a troubled debt restructuring.

We have responded to the needs of our borrowers in accordance with the CARES Act and regulatory guidance to grant short-term COVID-19 related loan modifications. These modified loans are not troubled debt restructurings and are not considered to be past due or non-performing. We have granted payment deferrals ranging from one to six months determined on a case-by-case basis considering the nature of the business and the impact of COVID-19. For some borrowers that where initially granted a payment deferral of less than six months, we have granted an additional payment deferral period on a case-by-case basis.

We maintain close contact with our borrowers to update our understanding of the impact of the pandemic on them, their businesses and the underlying collateral for our loans. For borrowers who continue to have been granted a loan payment deferral, we have evaluated their credit quality position and the potential for loss of principal.

Most of the loan payment deferrals have ended and borrowers have resumed making payments. At March 31, 2021, there were 26 loans totaling $4.1 million with a payment deferral compared to 82 loans totaling $9.5 million at December 31, 2020.

Loans with a payment deferral at March 31, 2021 consisted of two SBA 504 commercial real estate loans totaling $2.9 million, a $2 thousand consumer loan, and 23 loans totaling $1.2 million that are serviced by others. The loans serviced by others are small residential mortgages and consumer home improvement loans that are geographically disbursed throughout the United States and serviced by third parties.

Past Due Loans

Past due loans as of March 31, 2021 decreased $2.7 million to $3.8 million, compared to $6.5 million as of March 31, 2020 and decreased $1.6 million compared to $5.4 million as of December 31, 2020. The decreases in past due loans was primarily due to collection of our largest nonaccrual borrowing relationship totaling $3.0 million that was repaid in the current quarter and a $1.1 million commercial real estate loan that was repaid in the prior quarter.

Past due loans included seven loans totaling $3.3 million at March 31, 2021, that were previously granted payment deferrals:

  • Three loans that are guaranteed under the California Capital Access Program for Small Business;

    • $1.4 million for two commercial loans on nonaccrual status made to one borrower and

    • $101 thousand for one commercial loan secured by residential real estate.

  • $626 thousand for one commercial real estate loan on nonaccrual status that is a troubled debt restructured loan.

  • $1.1 million for one commercial real estate loan that was fully repaid on April 1, 2021.

  • $72 thousand for two ITIN loans.

The following table presents nonperforming assets at the dates indicated.

TABLE 13

NONPERFORMING ASSETS - UNAUDITED

(dollars in thousands)

At March 31,

At December 31,

At September 30,

At June 30,

At March 31,

2021

2020

2020

2020

2020

Total nonaccrual loans

$

3,924

$

7,013

$

8,098

$

6,671

$

5,243

90 days past due and still accruing

2

Total nonperforming loans

3,924

7,013

8,098

6,671

5,245

Other real estate owned ("OREO")

8

8

8

8

Total nonperforming assets

$

3,924

$

7,021

$

8,106

$

6,679

$

5,253

Gross loans

$

1,145,943

$

1,139,732

$

1,206,065

$

1,206,340

$

1,052,245

PPP loans (1)

117,991

130,814

163,493

162,189

Total gross loans, net of PPP loans

$

1,027,952

$

1,008,918

$

1,042,572

$

1,044,151

$

1,052,245

Nonperforming loans to gross loans

0.34

%

0.62

%

0.67

%

0.55

%

0.50

%

Nonperforming loans to gross loans (excluding PPP) (2)

0.38

%

0.70

%

0.78

%

0.64

%

0.50

%

Nonperforming assets to total assets

0.21

%

0.40

%

0.47

%

0.39

%

0.36

%

(1) PPP loans are fully guaranteed by SBA and no allowance is provided for them.

(2) Nonperforming loans to gross loans (excluding PPP) is computed by dividing nonperforming loans by total gross loans excluding gross PPP loans. Management believes that the ratio excluding PPP loans is meaningful when comparing to periods that do not include PPP loans, which are guaranteed by the SBA, and are expected to be forgiven and repaid by the SBA.

The following table summarizes when loans are projected to reprice by year and rate index as of March 31, 2021.

TABLE 14

LOANS BY RATE INDEX AND PROJECTED REPRICING PERIOD - UNAUDITED

(dollars in thousands)

At March 31, 2021

Years 6

Through

Beyond

Rate Index:

Year 1

Year 2

Year 3

Year 4

Year 5

Year 10

Year 10

Total

Fixed

$

78,882

$

106,343

$

57,826

$

45,797

$

41,390

$

187,744

$

38,332

$

556,314

Variable:

Prime

70,560

5,540

5,402

6,957

6,722

954

96,135

5 Year Treasury

47,993

66,128

60,511

94,813

102,025

55,762

427,232

7 Year Treasury

2,914

4,502

5,347

12,763

1 Year LIBOR

17,418

17,418

Other Indexes

3,373

1,961

1,801

9,831

2,504

11,386

1,444

32,300

Total accruing variable rate loans

142,258

78,131

73,061

111,601

111,251

68,102

1,444

585,848

Nonaccrual

800

784

728

444

244

780

144

3,924

Total

$

221,940

$

185,258

$

131,615

$

157,842

$

152,885

$

256,626

$

39,920

$

1,146,086

For variable rate loans, the following table summarizes those that are at or above their floor rate, and those that do not possess a contractual floor rate.

TABLE 15

LOAN FLOORS - UNAUDITED

(dollars in thousands)

Variable Rate Loans at March 31, 2021

With Floors

Without

At Floor Rate

Above Floor Rate

Total

Floors

Total

Prime

$

41,635

$

6,145

$

47,780

$

48,355

$

96,135

5 year Treasury

355,530

44,466

399,996

27,236

427,232

7 Year Treasury

12,763

12,763

12,763

1 Year LIBOR

709

709

16,709

17,418

Other Indexes

15,041

824

15,865

16,435

32,300

Total accruing variable rate loans

$

424,969

$

52,144

$

477,113

$

108,735

585,848

Nonaccrual

3,924

Total variable rate loans

$

589,772


TABLE 16

UNAUDITED

CONSOLIDATED BALANCE SHEET

(dollars in thousands, except per share data)

At March 31,

Change

At December 31,

2021

2020

$

%

2020

Assets:

Cash and due from banks

$

20,053

$

21,127

$

(1,074

)

(5

)

%

$

19,875

Interest-bearing deposits in other banks

74,804

22,813

51,991

228

%

87,111

Total cash and cash equivalents

94,857

43,940

50,917

116

%

106,986

Securities available-for-sale, at fair value

517,375

285,077

232,298

81

%

446,880

Loans, net of deferred fees and costs

1,146,086

1,054,374

91,712

9

%

1,139,961

Allowance for loan and lease losses

(17,027

)

(15,067

)

(1,960

)

(13

)

%

(16,910

)

Net loans

1,129,059

1,039,307

89,752

9

%

1,123,051

Premises and equipment, net

14,792

15,452

(660

)

(4

)

%

14,999

Life insurance

24,320

23,824

496

2

%

24,206

Deferred tax asset, net

5,929

3,149

2,780

88

%

3,954

Goodwill

11,671

11,671

%

11,671

Other intangible assets, net

3,852

4,618

(766

)

(17

)

%

4,044

Other assets

27,247

28,842

(1,595

)

(6

)

%

28,163

Total assets

$

1,829,102

$

1,455,880

$

373,222

26

%

$

1,763,954

Liabilities and shareholders' equity:

Demand - noninterest-bearing

$

603,991

$

419,315

$

184,676

44

%

$

541,033

Demand - interest-bearing

290,687

231,276

59,411

26

%

290,251

Money market

425,251

314,687

110,564

35

%

425,121

Savings

160,834

133,552

27,282

20

%

150,695

Certificates of deposit

133,630

143,557

(9,927

)

(7

)

%

135,679

Total deposits

1,614,393

1,242,387

372,006

30

%

1,542,779

Term debt:

Federal Home Loan Bank of San Francisco ("FHLB") borrowings

10,000