Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2019

SACRAMENTO, Calif., Jan. 17, 2020 (GLOBE NEWSWIRE) -- Bank of Commerce Holdings (BOCH) (the “Company”), a $1.480 billion asset bank holding company and parent company of Merchants Bank of Commerce (the “Bank”), today announced financial results for the quarter and the year ended December 31, 2019. Net income for the quarter ended December 31, 2019 was $4.4 million or $0.24 per share – diluted, compared with net income of $4.8 million or $0.30 per share – diluted for the same period of 2018. Net income for the year ended December 31, 2019 was $15.0 million or $0.83 per share – diluted, compared with net income of $15.7 million or $0.96 per share – diluted for the same period of 2018.

The current year includes the benefits of our January 31, 2019 acquisition of Merchants National Bank of Sacramento (“Merchants”). In May, we successfully converted all of Merchant’s computer records onto our core system. As previously announced, the Company’s subsidiary bank, which had been operating under multiple names, simultaneously changed the name for all locations to Merchants Bank of Commerce. During 2019 acquisition related costs totaled $2.2 million and costs related to the name change totaled $503 thousand. All significant costs for these two projects have now been absorbed.

Randall S. Eslick, President and CEO commented: “We are pleased to report that 2019 was another solid year for the company. We are proud of our high quality assets, the successful acquisition and integration of Merchants National Bank and the widespread acceptance of our new name, Merchants Bank of Commerce. Thanks to the hard work of our dedicated employees our company remains well positioned for continued success.”

Financial highlights for the year ended December 31, 2019:

  • Net income of $15.0 million was a decrease of $769 thousand (5%) from $15.7 million earned during the same period in the prior year. Earnings of $0.83 per share – diluted was an decrease of $0.13 (14%) from $0.96 per share – diluted earned during the same period in the prior year and reflects the impact of the following:

    • 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants and

    • 90,501 shares of common stock repurchased during the fourth quarter of 2019 as part of our previously announced share repurchase program.

  • Net interest income increased $6.0 million (13%) to $53.5 million compared to $47.5 million for the same period in the prior year.

  • Net interest margin improved to 3.94% compared to 3.90% for the same period in the prior year.

  • Return on average assets decreased to 1.03% compared to 1.22% for the same period in the prior year.

  • Return on average equity decreased to 9.09% compared to 12.08% for the same period in the prior year.

  • Average loans totaled $1.021 billion, an increase of $105 million (12%) compared to average loans for the same period in the prior year.

  • Average earning assets totaled $1.360 billion, an increase of $140 million (11%) compared to average earning assets for the same period in the prior year.

  • Average deposits totaled $1.245 billion, an increase of $146 million (13%) compared to average deposits for the same period in the prior year.

    • Average non-maturing deposits totaled $1.084 billion, an increase of $154 million (17%) compared to the same period in the prior year.

    • Average certificates of deposit totaled $160.6 million, a decrease of $7.6 million (5%) compared to same period in the prior year.

  • The Company’s efficiency ratio was 64.5% compared to 62.5% during the same period in the prior year.

    • The Company’s efficiency ratio of 64.5% for 2019 includes $2.2 million in acquisition costs and $503 thousand in name change costs. The efficiency ratio excluding these non-recurring costs is 59.9%.

    • The Company’s efficiency ratio of 62.5% for 2018 includes $844 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs is 60.8%.

  • Nonperforming assets at December 31, 2019 totaled $5.7 million or 0.38% of total assets, an increase of $1.5 million since December 31, 2018. The increase was primarily caused by loans to one commercial real estate borrower that were moved to nonaccrual and had zero calculated impairment at December 31, 2019.

  • Book value per common share was $9.62 at December 31, 2019 compared to $8.47 at December 31, 2018.

  • Tangible book value per common share was $8.71 at December 31, 2019 compared to $8.36 at December 31, 2018.

Financial highlights for the fourth quarter of 2019:

  • Net income of $4.4 million ($0.24 per share – diluted) was a decrease of $470 thousand (10%) from $4.8 million ($0.30 per share – diluted) earned during the same period in the prior year and reflects the impact of the following:

    • 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants and

    • 90,501 shares of common stock repurchased during the fourth quarter of 2019 as part of our previously announced share repurchase program.

  • Net interest income increased $820 thousand (7%) to $13.3 million compared to $12.5 million for the same period in the prior year.

  • Net interest margin decreased to 3.80% compared to 3.93% for the same period in the prior year.

  • Return on average assets decreased to 1.16% compared to 1.44% for the same period in the prior year.

  • Return on average equity decreased to 10.06% compared to 14.32% for the same period in the prior year.

  • Average loans totaled $1.032 billion, an increase of $108 million (12%) compared to average loans for the same period in the prior year.

  • Average earning assets totaled $1.390 billion, an increase of $131 million (10%) compared the same period in the prior year.

  • Average deposits totaled $1.282 billion, an increase of $124 million (11%) compared the same period in the prior year.

    • Average non-maturing deposits totaled $1.129 billion, an increase of $128 million (13%) compared to the same period in the prior year.

    • Average certificates of deposit totaled $153.2 million, a decrease of $3.8 million (2%) compared to the same period in the prior year.

  • The Company’s efficiency ratio was 58.7% compared to 65.1% for the same period in the prior year.

    • The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 includes $802 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs is 59.2%.

  • Nonperforming assets at December 31, 2019 totaled $5.7 million or 0.38% of total assets, a decrease of $7.2 million since September 30, 2019. The decrease was due to a sale of a $9.9 million nonaccrual commercial real estate loan.

  • Book value per common share was $9.62 at December 31, 2019 compared to $9.42 at September 30, 2019.

  • Tangible book value per common share was $8.71 at December 31, 2019 compared to $8.51 at September 30, 2019.

Selected Tax Items:

Financial performance for 2018 includes “selected tax items” which complicate reporting period comparisons. The 2018 results include a $1.5 million decrease in our income tax provision composed of a $988 thousand reversal of our uncertain tax position and a $484 thousand benefit as a result of our cost segregation study and tangible property review. These items were previously disclosed in our form 10-K filed March 12, 2019. Management believes that our financial results are more comparative excluding the impact of these selected tax items.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. We believe that these non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this document are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

SELECTED NON-GAAP FINANCIAL INFORMATION - UNAUDITED

(amounts in thousands except per share data)

For The Three Months Ended

For The Twelve Months Ended

Reconciliation of Net Income (GAAP) to Net Income

December 31,

September 30,

December 31,

Excluding Selected Tax Items (non-GAAP):

2019

2018

2019

2019

2018

Net income (GAAP)

$

4,369

$

4,839

$

4,642

$

14,961

$

15,730

Selected tax items:

Reversal of uncertain tax position (GAAP)

(988

)

(988

)

Benefit from cost segregation study and
tangible property review (GAAP)

(484

)

(484

)

Total selected tax items

(1,472

)

(1,472

)

Net income excluding selected tax items (non-GAAP)

$

4,369

$

3,367

$

4,642

$

14,961

$

14,258

Earnings per share - diluted (GAAP)

$

0.24

$

0.30

$

0.26

$

0.83

$

0.96

Effect of selected tax items

(0.09

)

(0.09

)

Earnings per share - diluted excluding
selected tax items (non-GAAP)

$

0.24

$

0.21

$

0.26

$

0.83

$

0.87

GAAP Information:

Return on average assets

1.16

%

1.44

%

1.26

%

1.03

%

1.22

%

Return on average equity

10.06

%

14.32

%

10.86

%

9.09

%

12.08

%

Effective tax rate

26.1

%

(1.7

)

%

27.8

%

26.9

%

18.7

%

Non-GAAP Ratios:

Return on average assets excluding selected tax items

1.16

%

1.01

%

1.26

%

1.03

%

1.11

%

Return on average equity excluding selected tax items

10.06

%

9.97

%

10.86

%

9.09

%

10.95

%

Effective tax rate excluding selected tax items

26.1

%

29.2

%

27.8

%

26.9

%

26.3

%

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

(amounts in thousands except per share data)

For The Three Months Ended

For The Twelve Months Ended

Net income, average assets and

December 31,

September 30,

December 31,

average shareholders' equity

2019

2018

2019

2019

2018

Net income

$

4,369

$

4,839

$

4,642

$

14,961

$

15,730

Average total assets

$

1,492,643

$

1,328,817

$

1,462,444

$

1,458,112

$

1,288,841

Average total earning assets

$

1,390,446

$

1,259,709

$

1,360,006

$

1,360,325

$

1,220,135

Average shareholders' equity

$

172,385

$

134,033

$

169,608

$

164,642

$

130,218

Selected performance ratios

Return on average assets

1.16

%

1.44

%

1.26

%

1.03

%

1.22

%

Return on average equity

10.06

%

14.32

%

10.86

%

9.09

%

12.08

%

Efficiency ratio

58.7

%

65.1

%

56.4

%

64.5

%

62.5

%

Share and per share amounts

Weighted average shares - basic (1)

18,068

16,265

18,130

17,956

16,248

Weighted average shares - diluted (1)

18,150

16,345

18,196

18,024

16,332

Earnings per share - basic

$

0.24

$

0.30

$

0.26

$

0.83

$

0.97

Earnings per share - diluted

$

0.24

$

0.30

$

0.26

$

0.83

$

0.96

At December 31,

At September 30,

Share and per share amounts

2019

2018

2019

Common shares outstanding (2)

18,137

16,334

18,212

Book value per common share (2)

$

9.62

$

8.47

$

9.42

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

$

8.71

$

8.36

$

8.51

Capital ratios (4)

Bank of Commerce Holdings

Common equity tier 1 capital ratio

13.19

%

12.79

%

12.85

%

Tier 1 capital ratio

14.04

%

13.71

%

13.69

%

Total capital ratio

15.97

%

15.82

%

15.62

%

Tier 1 leverage ratio

11.30

%

11.21

%

11.28

%

Tangible common equity ratio (5)

10.80

%

10.46

%

10.64

%

Merchants Bank of Commerce

Common equity tier 1 capital ratio

14.39

%

13.23

%

14.25

%

Tier 1 capital ratio

14.39

%

13.23

%

14.25

%

Total capital ratio

15.48

%

14.42

%

15.34

%

Tier 1 leverage ratio

11.58

%

10.81

%

11.74

%

(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 December 31, 2019, the Company had total consolidated assets of $1.480 billion, gross loans of $1.033 billion, allowance for loan and lease losses (“ALLL”) of $12 million, total deposits of $1.267 billion, and shareholders’ equity of $174 million.

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(amounts in thousands)

At December 31,

At September 30,

% of

% of

Change

% of

2019

Total

2018

Total

Amount

%

2019

Total

Commercial

$

141,197

14

%

$

135,543

14

%

$

5,654

4

%

$

152,195

15

%

Real estate - construction and land development

26,830

3

22,563

2

4,267

19

%

35,606

3

Real estate - commercial non-owner occupied

493,920

48

433,708

46

60,212

14

%

475,678

47

Real estate - commercial owner occupied

218,833

21

204,622

22

14,211

7

%

210,767

20

Real estate - residential - ITIN

33,039

3

37,446

4

(4,407

)

(12

)

%

34,036

3

Real estate - residential - 1-4 family mortgage

63,661

6

34,366

4

29,295

85

%

64,747

6

Real estate - residential - equity lines

22,099

2

26,958

3

(4,859

)

(18

)

%

22,729

2

Consumer and other

33,324

3

51,045

5

(17,721

)

(35

)

%

37,324

4

Gross loans

1,032,903

100

%

946,251

100

%

86,652

9

%

1,033,082

100

%

Deferred fees and costs

2,162

1,927

235

1,980

Loans, net of deferred fees and costs

1,035,065

948,178

86,887

1,035,062

Allowance for loan and lease losses

(12,231

)

(12,292

)

61

(12,285

)

Net loans

$

1,022,834

$

935,886

$

86,948

$

1,022,777

Average loans during the quarter

$

1,031,702

$

923,409

$

108,293

12

%

$

1,029,534

Average yield on loans during the quarter

4.86

%

4.94

%

(0.08

)

5.01

%

Average yield on loans during the year

4.95

%

4.91

%

0.04

4.98

%

The Company recorded gross loan balances of $1.033 billion at December 31, 2019, compared with $946 million and $1.033 billion at December 31, 2018 and September 30, 2019, respectively, an increase of $87 million and a decrease of $179 thousand, respectively. During the first quarter of 2019, the Merchants acquisition provided an additional $85.3 million of loans.

The average yield on loans during the quarter was 4.86% compared to 4.94% and 5.01% for the quarters ended December 31, 2018 and September 30, 2019, respectively.

Gross loan balances in the table above include a net fair value discount for loans acquired from Merchants during the first quarter of 2019 of $1.7 million and $1.9 million at December 31, 2019 and September 30, 2019, respectively. We recorded $193 thousand and $188 thousand in accretion of the discount for these loans during the third and fourth quarters of 2019, respectively.

TABLE 3

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(amounts in thousands)

At December 31,

At September 30,

% of

% of

Change

% of

2019

Total

2018

Total

Amount

%

2019

Total

Cash and due from banks

$

21,338

6

%

$

23,692

8

%

$

(2,354

)

(10

)

%

$

32,505

9

%

Interest-bearing deposits in other banks

59,266

16

23,673

8

35,593

150

%

56,099

16

Total cash and cash equivalents

80,604

22

47,365

16

33,239

70

%

88,604

25

Investment securities:

U.S. government and agencies

38,733

11

40,087

13

(1,354

)

(3

)

%

40,467

11

Obligations of state and political subdivisions

42,098

11

50,530

17

(8,432

)

(17

)

%

39,004

11

Residential mortgage backed securities and
collateralized mortgage obligations

180,835

49

138,503

45

42,332

31

%

165,994

46

Corporate securities

2,966

1

2,922

1

44

2

%

2,992

1

Commercial mortgage backed securities

19,307

5

24,762

8

(5,455

)

(22

)

%

22,822

6

Other asset backed securities

3,011

1

124

2,887

2,328

%

1,062

Total investment securities - AFS

286,950

78

256,928

84

30,022

12

%

272,341

75

Total cash, cash equivalents and
investment securities

$

367,554

100

%

$

304,293

100

%

$

63,261

21

%

$

360,945

100

%

Average yield on interest-bearing due
from banks and investment securities
during the quarter - nominal

2.39

%

2.66

%

(0.27

)

2.63

%

Average yield on interest-bearing due
from banks and investment securities
during the quarter - tax equivalent

2.47

%

2.77

%

(0.30

)

2.71

%

As of December 31, 2019, we maintained noninterest-bearing cash positions of $21.3 million and interest-bearing deposits of $59.3 million at the Federal Reserve Bank and correspondent banks.

Investment securities totaled $287.0 million at December 31, 2019, compared with $256.9 million and $272.3 million at December 31, 2018 and September 30, 2019, respectively. During the first quarter of 2019, the Merchants acquisition included securities with a par value of $107.4 million. Management elected to sell securities with a par value of $18.0 million and $118.0 million during the quarter and the year ended December 31, 2019, respectively. The sales resulted in net realized gains of $49 thousand and $186 thousand for the quarter and the year ended December 31, 2019, respectively.

Average securities balances and weighted average tax equivalent yields for the quarters ended December 31, 2019 and 2018 were $277.6 million and 2.71% compared to $261.0 million and 2.91%, respectively.

At December 31, 2019, our net unrealized gains on available-for-sale investment securities were $3.7 million compared with net unrealized losses of $4.3 million and unrealized gains of $3.3 million at December 31, 2018 and September 30, 2019, respectively. The changes in net unrealized losses on the investment securities portfolio were due to changes in market interest rates.

TABLE 4

DEPOSITS BY TYPE - UNAUDITED

(amounts in thousands)

At December 31,

At September 30,

% of

% of

Change

% of

2019

Total

2018

Total

Amount

%

2019

Total

Demand - noninterest-bearing

$

432,680

34

%

$

347,199

31

%

$

85,481

25

%

$

412,410

33

%

Demand - interest-bearing

239,258

19

252,202

22

(12,944

)

(5

)

%

239,547

19

Money market

307,559

24

265,093

23

42,466

16

%

317,120

25

Total demand

979,497

77

864,494

76

115,003

13

%

969,077

77

Savings

135,888

11

114,840

10

21,048

18

%

137,441

11

Total non-maturing deposits

1,115,385

88

979,334

86

136,051

14

%

1,106,518

88

Certificates of deposit

151,786

12

152,382

14

(596

)

0

%

155,621

12

Total deposits

$

1,267,171

100

%

$

1,131,716

100

%

$

135,455

12

%

$

1,262,139

100

%

Total deposits at December 31, 2019, increased $135 million or 12% to $1.267 billion compared to December 31, 2018 and increased $5 million or 2% annualized compared to September 30, 2019. Total non-maturing deposits increased $136.1 million or 14% compared to the same date a year ago and increased $8.9 million or 3% annualized compared to September 30, 2019. Certificates of deposit decreased $596 thousand or less than 1% compared to the same date a year ago and decreased $3.8 million or 10% annualized compared to September 30, 2019.

TABLE 5

WHOLESALE AND RECIPROCAL DEPOSITS - UNAUDITED

(amounts in thousands)

At December 31,

At September 30,

2019

2018

2019

CDARS / ICS reciprocal deposits

$

64,030

$

83,666

$

57,897

Online listing service wholesale time deposits

248

22,015

248

Total wholesale and reciprocal deposits

$

64,278

$

105,681

$

58,145

For calendar quarters prior to April 1, 2018, CDARS/ ICS reciprocal deposits were considered to be brokered deposits by regulatory authorities and were reported as such on quarterly Call Reports. With passage of The Economic Growth, Regulatory Relief and Consumer Protection Act in May 2018, this is no longer so.

AVERAGE COST OF FUNDS

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

TABLE 6

AVERAGE COST OF FUNDS - UNAUDITED

For The Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

September 30,

June 30,

March 31,

2019

2019

2019

2019

2018

2018

2018

2018

Interest-bearing deposits

0.56

%

0.56

%

0.54

%

0.49

%

0.45

%

0.42

%

0.41

%

0.41

%

Interest-bearing deposits and noninterest-bearing demand

0.38

%

0.38

%

0.37

%

0.34

%

0.31

%

0.29

%

0.29

%

0.29

%

All interest-bearing liabilities

0.68

%

0.68

%

0.74

%

0.67

%

0.61

%

0.64

%

0.68

%

0.60

%

All interest-bearing liabilities and noninterest-bearing demand

0.46

%

0.46

%

0.52

%

0.46

%

0.42

%

0.45

%

0.50

%

0.43

%


INCOME STATEMENT OVERVIEW

TABLE 7

SUMMARY INCOME STATEMENT - UNAUDITED

(amounts in thousands, except per share data)

For The Three Months Ended

December 31,

Change

September 30,

Change

2019

2018

Amount

%

2019

Amount

%

Interest income

$

14,808

$

13,750

$

1,058

8

%

$

15,201

$

(393

)

(3

)

%

Interest expense

1,494

1,256

238

19

%

1,479

15

1

%

Net interest income

13,314

12,494

820

7

%

13,722

(408

)

(3

)

%

Provision for loan
and lease losses

%

%

Noninterest income

1,021

1,132

(111

)

(10

)

%

1,006

15

1

%

Noninterest expense

8,421

8,868

(447

)

(5

)

%

8,300

121

1

%

Income before provision
for income taxes

5,914

4,758

1,156

24

%

6,428

(514

)

(8

)

%

Provision for income taxes:

Reversal of uncertain tax position

(988

)

988

(100

)

%

%

Benefit from cost segregation study and
tangible property review

(484

)

484

(100

)

%

%

Provision for income taxes

1,545

1,391

154

11

%

1,786

(241

)

(13

)

%

Total provision for income taxes

1,545

(81

)

1,626

(2,007

)

%

1,786

(241

)

(13

)

%

Net income

$

4,369

$

4,839

$

(470

)

(10

)

%

$

4,642

$

(273

)

(6

)

%

Basic earnings per share

$

0.24

$

0.30

$

(0.06

)

(20

)

%

$

0.26

$

(0.02

)

(8

)

%

Average basic shares

18,068

16,265

1,803

11

%

18,130

(62

)

%

Diluted earnings per share

$

0.24

$

0.30

$

(0.06

)

(20

)

%

$

0.26

$

(0.02

)

(8

)

%

Average diluted shares

18,150

16,345

1,805

11

%

18,196

(46

)

%

Dividends declared per
common share

$

0.05

$

0.04

$

0.01

25

%

$

0.05

$

%

Fourth Quarter of 2019 Compared With Fourth Quarter of 2018

Income before provision for income taxes for the fourth quarter of 2019 increased $1.2 million compared to the fourth quarter of 2018. In the current quarter, net interest income was $820 thousand higher and noninterest expenses were $447 thousand lower. These positive changes were partially offset by noninterest income that was $111 thousand lower.

Net Interest Income

Net interest income increased $820 thousand compared to the same period a year ago.

Interest income for the fourth quarter of 2019 increased $1.1 million or 8% to $14.8 million.

  • Interest and fees on loans increased $1.1 million due to a $108.3 million increase in average loan balances partially offset by an 8 basis point decrease in the average yield on the loan portfolio.

  • Interest on investment securities increased $4 thousand due to a $16.6 million increase in average securities balances partially offset by a 16 basis point decrease in average yield on the securities portfolio.

  • Interest on interest-bearing deposits due from banks decreased $95 thousand due to a 63 basis point decrease in average yield that was partially offset by a $5.8 million increase in average interest-bearing deposit balances.

Interest expense for the fourth quarter of 2019 increased $238 thousand or 19% to $1.5 million.

  • Interest expense on interest-bearing deposits increased $312 thousand. Average interest-bearing demand and savings deposit balances increased $67.2 million, while average certificate of deposit balances decreased $3.8 million. The average rate paid on interest-bearing deposits increased 11 basis points.

  • Interest expense on other term debt and junior subordinated debentures decreased $74 thousand. During the second quarter of 2019, we completed the early repayment of our variable rate senior debt.

Provision for loan and lease losses

Net loan loss charge-offs were only $54 thousand for the current quarter and no provision for loan and lease losses was necessary. There was no provision for loan and lease losses in the fourth quarter of 2018.

Noninterest Income

Noninterest income for the three months ended December 31, 2019 decreased $111 thousand compared to the fourth quarter for 2018. Noninterest income for the fourth quarter of 2018 included a $96 thousand special dividend on Federal Home Loan Bank of San Francisco stock.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2019 decreased $447 thousand compared to the same period a year previous. The decrease was primarily due to $802 of acquisition and merger costs recorded during the same period a year ago that did not recur and $93 thousand in Small Bank Assessment Credits from the FDIC in the current quarter. These decreases were partially offset by $136 thousand in amortization of the core deposit intangible for the deposits acquired from Merchants and $112 thousand in increased salaries and related benefit costs.

The Company’s efficiency ratio was 58.7% for the fourth quarter of 2019; the ratio during the same period in 2018 was 65.1%. The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 includes $802 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs was 59.2%.

Income Tax Provision

For the three months ended December 31, 2019, our income tax provision of $1.5 million on pre-tax income of $5.9 million was an effective tax rate of 26.1%.

For the three months ended December 31, 2018, our negative income tax provision of $81 thousand on pre-tax income of $4.8 million included:

  • $(988) thousand benefit due to the reversal of our uncertain tax position.

  • $(484) thousand benefit as a result of our cost segregation study and tangible property review.

  • $1.4 million tax provision on pre-tax net operating income of $4.8 million (29.2%).

    • $765 thousand in acquisition costs were not tax deductible for the three months ended December 31, 2018.

Fourth Quarter of 2019 Compared With Third Quarter of 2019

Net income for the fourth quarter of 2019 decreased $273 thousand compared to the third quarter of 2019. In the current quarter, net interest income was $408 thousand lower and noninterest expense was $121 thousand higher. These changes were partially offset by noninterest income that was $15 thousand higher and a provision for income taxes that was $241 thousand lower.

Net Interest Income

Net interest income decreased $408 thousand over the prior quarter.

Interest income for the three months ended December 31, 2019 decreased $393 thousand or 3% to $14.8 million.

  • Interest and fees on loans decreased $370 thousand due to a 15 basis point decrease in the average yield on the loan portfolio partially offset by a $2.2 million increase in average loan balances.

  • Interest on investment securities decreased $54 thousand due to a 14 basis point decrease in average yield on the investment portfolio partially offset by a $6.1 million increase in average securities balances partially.

  • Interest on interest-bearing deposits due from banks increased $31 thousand due to a $22.2 million increase in average balances partially offset by a 42 basis point decrease in the average yield on interest-bearing deposits due from banks.

Interest expense for the three months ended December 31, 2019 increased $15 thousand or 1% to $1.5 million.

  • Interest expense on interest-bearing deposits increased $24 thousand. Average interest-bearing demand and savings deposit balances increased $9.5 million, while average certificates of deposit decreased $4.4 million. The average rate paid on interest-bearing deposits increased by less than one basis point.

  • Interest expense on other term debt and junior subordinated debentures decreased $9 thousand.

Provision for loan and lease losses

As illustrated in Table 9, the sale during the fourth quarter of a $9.9 million nonaccrual commercial real estate loan has resulted in an improvement in our asset quality metrics. As a result of these improved metrics and loan loss charge-offs totaling only $54 thousand for the current quarter, no provision for loan and lease losses was necessary during current quarter. There was no provision for loan and lease losses in the prior quarter.

Noninterest Income

Noninterest income for the three months ended December 31, 2019 increased $15 thousand, which was not concentrated in any one item.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2019 increased $121 thousand, which was not concentrated in any one item.

The Company’s efficiency ratio was 58.7% for the fourth quarter of 2019 compared with 56.4% for the prior quarter.

Income Tax Provision

For the three months ended December 31, 2019, our income tax provision of $1.5 million on pre-tax income of $5.9 million was an effective tax rate of 26.1%. The income tax provision for the prior quarter of $1.8 million on pre-tax income of $6.4 million was an effective tax rate of 27.8%. The effective tax rate for the prior quarter was increased by the write-off of a $41 thousand deferred tax asset.

Earnings Per Share

Diluted earnings per share were $0.24 for the three months ended December 31, 2019 compared with diluted earnings per share of $0.30 for the same period a year ago and diluted earnings per share of $0.26 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in Table 7 presented earlier in this press release.

TABLE 8a

NET INTEREST MARGIN - UNAUDITED

(amounts in thousands)

For The Three Months Ended

December 31, 2019

December 31, 2018

September 30, 2019

Average

Yield /

Average

Yield /

Average

Yield /

Balance

Interest(1)

Rate (5)

Balance

Interest(1)

Rate (5)

Balance

Interest(1)

Rate (5)

Interest-earning assets:

Net loans (2)

$

1,031,702

$

12,643

4.86

%

$

923,409

$

11,494

4.94

%

$

1,029,534

$

13,013

5.01

%

Taxable securities

245,487

1,567

2.53

%

218,137

1,469

2.67

%

238,601

1,609

2.68

%

Tax-exempt securities (3)

32,158

258

3.18

%

42,868

353

3.27

%

32,974

271

3.26

%

Interest-bearing deposits
in other banks

81,099

340

1.66

%

75,295

434

2.29

%

58,897

308

2.07

%

Average interest-
earning assets

1,390,446

14,808

4.23

%

1,259,709

13,750

4.33

%

1,360,006

15,201

4.43

%

Cash and due from banks

24,083

22,447

23,822

Premises and equipment, net

16,049

13,331

15,922

Goodwill and core deposit intangible, net

16,561

1,842

16,769

Other assets

45,504

31,488

45,925

Average total assets

$

1,492,643

$

1,328,817

$

1,462,444

Interest-bearing liabilities:

Interest-bearing demand

$

244,276

108

0.18

%

$

257,227

141

0.22

%

$

243,553

117

0.19

%

Money market

318,127

479

0.60

%

265,190

207

0.31

%

309,188

451

0.58

%

Savings

138,155

128

0.37

%

110,934

92

0.33

%

138,296

131

0.38

%

Certificates of deposit

153,223

499

1.29

%

157,035

462

1.17

%

157,620

491

1.24

%

Other borrowings net of unamortized debt issuance costs

9,952

183

7.30

%

13,785

252

7.25

%

9,942

183

7.30

%

Junior subordinated
debentures

10,310

97

3.73

%

10,310

102

3.93

%

10,310

106

4.08

%

Average interest-
bearing liabilities

874,043

1,494

0.68

%

814,481

1,256

0.61

%

868,909

1,479

0.68

%

Noninterest-bearing demand

428,420

367,457

405,853

Other liabilities

17,795

12,846

18,074

Shareholders’ equity

172,385

134,033

169,608

Average liabilities and
shareholders’ equity

$

1,492,643

$

1,328,817

$

1,462,444

Net interest income and
net interest margin (4)

$

13,314

3.80

%

$

12,494

3.93

%

$

13,722

4.00

%

(1) Interest income on loans includes deferred fees and costs of approximately $224 thousand, $109 thousand, and $161 thousand for the three months ended December 31, 2019 and 2018 and September 30, 2019, respectively.

(2) Net loans includes average nonaccrual loans of $11.4 million, $4.1 million and $13.2 million for the three months ended December 31, 2019 and 2018 and September 30, 2019, respectively.

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

(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the three months ended December 31, 2019 included $188 thousand in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 7 basis points.

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


TABLE 8b

NET INTEREST MARGIN - UNAUDITED

(amounts in thousands)

For The Twelve Months Ended

December 31, 2019

December 31, 2018

Average

Yield /

Average

Yield /

Balance

Interest(1)

Rate (5)

Balance

Interest(1)

Rate (5)

Interest-earning assets:

Net loans (2)

$

1,020,801

$

50,534

4.95

%

$

915,360

$

44,955

4.91

%

Taxable securities

246,723

6,673

2.70

%

207,407

5,165

2.49

%

Tax-exempt securities (3)

38,706

1,244

3.21

%

50,330

1,629

3.24

%

Interest-bearing deposits
in other banks

54,095

1,112

2.06

%

47,038

952

2.02

%

Average interest-
earning assets

1,360,325

59,563

4.38

%

1,220,135

52,701

4.32

%

Cash and due from banks

22,806

20,468

Premises and equipment, net

15,598

13,952

Goodwill and core deposit intangible, net

15,565

1,917

Other assets

43,818

32,369

Average total assets

$

1,458,112

$

1,288,841

Interest-bearing liabilities:

Interest-bearing demand

$

242,516

480

0.20

%

$

238,328

414

0.17

%

Money market

304,340

1,599

0.53

%

250,685

646

0.26

%

Savings

136,733

493

0.36

%

109,025

288

0.26

%

Certificates of deposit

160,550

1,977

1.23

%

168,183

1,910

1.14

%

Federal Home Loan Bank of San Francisco borrowings

9,644

247

2.56

%

22,466

435

1.94

%

Other borrowings net of unamortized debt issuance costs

10,895

806

7.40

%

15,143

1,077

7.11

%

Junior subordinated
debentures

10,310

426

4.13

%

10,310

385

3.73

%

Average interest-
bearing liabilities

874,988

6,028

0.69

%

814,140

5,155

0.63

%

Noninterest-bearing demand

400,588

332,197

Other liabilities

17,894

12,286

Shareholders’ equity

164,642

130,218

Average liabilities and shareholders’ equity

$

1,458,112

$

1,288,841

Net interest income and
net interest margin (4)

$

53,535

3.94

%

$

47,546

3.90

%

(1) Interest income on loans includes deferred fees and costs of approximately $657 thousand and $465 thousand for the years ended December 31, 2019 and 2018, respectively.

(2) Net loans includes average nonaccrual loans of $11.7 million and $4.2 million for the years ended December 31, 2019 and 2018, respectively.

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

(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the year ended December 31, 2019 included $620 thousand in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 6 basis points.

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


TABLE 9

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

(amounts in thousands)

For The Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2019

2019

2019

2019

2018

Beginning balance ALLL

$

12,285

$

12,445

$

12,242

$

12,292

$

12,392

Provision for loan and lease losses

Loans charged-off

(174

)

(319

)

(659

)

(348

)

(279

)

Loan loss recoveries

120

159

862

298

179

Ending balance ALLL

$

12,231

$

12,285

$

12,445

$

12,242

$

12,292

At December 31,

At September 30,

At June 30,

At March 31,

At December 31,

2019

2019

2019

2019

2018

Nonaccrual loans:

Commercial

$

61

$

139

$

194

$

1,018

$

959

Real estate - commercial non-owner occupied

10,099

10,690

10,878

Real estate - commercial owner occupied

3,103

548

Real estate - residential - ITIN

2,221

2,339

2,389

2,392

2,388

Real estate - residential - 1-4 family mortgage

191

198

217

182

185

Real estate - residential - equity lines

42

43

Consumer and other

40

21

22

23

23

Total nonaccrual loans

5,616

12,796

13,512

14,535

4,146

Accruing troubled debt restructured loans:

Commercial

595

629

1,092

1,187

1,224

Real estate - commercial non-owner occupied

791

793

795

Real estate - residential - ITIN

3,957

4,072

4,300

4,342

4,484

Real estate - residential - equity lines

231

236

242

358

363

Total accruing troubled debt restructured loans

4,783

4,937

6,425

6,680

6,866

All other accruing impaired loans

Total impaired loans

$

10,399

$

17,733

$

19,937

$

21,215

$

11,012

Gross loans outstanding at period end

$

1,032,903

$

1,033,082

$

1,036,724

$

1,034,606

$

946,251

Impaired loans to gross loans

1.01

%

1.72

%

1.92

%

2.05

%

1.16

%

Nonaccrual loans to gross loans

0.54

%

1.24

%

1.30

%

1.40

%

0.44

%

Allowance for loan and lease losses as a percent of:

Gross loans

1.18

%

1.19

%

1.20

%

1.18

%

1.30

%

Nonaccrual loans

217.79

%

96.01

%

92.10

%

84.22

%

296.48

%

Impaired loans

117.62

%

69.28

%

62.42

%

57.70

%

111.62

%

We continue to monitor credit quality and adjust the ALLL to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. The decrease in nonaccrual loans during the current quarter resulted from the sale of a $9.9 million nonaccrual commercial real estate loan. Net loan loss charge-offs totaled only $54 thousand for the quarter ended December 31, 2019 and no provision for loan and lease losses was necessary for the quarter. There was no provision for loan and lease loss during the prior quarter or during the same quarter a year ago.

The loans acquired from Merchants were recorded at fair value which included a discount for credit risk which is not a part of the ALLL. As a result, our ALLL as a percentage of gross loans declined to 1.18% as of December 31, 2019 compared to 1.30% as of December 31, 2018 and compared to 1.19% as of September 30, 2019.

Based on the Bank’s ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate at December 31, 2019. 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 December 31, 2019, the recorded investment in loans classified as impaired totaled $10.4 million, with a corresponding specific reserve of $324 thousand compared to impaired loans of $11.0 million with a corresponding specific reserve of $1.2 million at December 31, 2018 and impaired loans of $17.7 million, with a corresponding specific reserve of $335 thousand at September 30, 2019. The decrease in loans classified as impaired compared to the prior quarter results from the sale of one $9.9 million commercial real estate loan.

TABLE 10

TROUBLED DEBT RESTRUCTURINGS - UNAUDITED

(amounts in thousands)

At December 31,

At September 30,

At June 30,

At March 31,

At December 31,

2019

2019

2019

2019

2018

Nonaccrual

$

1,680

$

1,746

$

1,828

$

2,725

$

2,693

Accruing

4,783

4,937

6,425

6,680

6,866

Total troubled debt restructurings

$

6,463

$

6,683

$

8,253

$

9,405

$

9,559

Troubled debt restructurings as a percentage of total gross loans

0.63

%

0.65

%

0.80

%

0.91

%

1.01

%

There was one new troubled debt restructuring to grant a rate and maturity modification during the three months ended December 31, 2019. As of December 31, 2019, we had 98 restructured loans that qualified as troubled debt restructurings, of which 94 were performing according to their restructured terms.

TABLE 11

NONPERFORMING ASSETS - UNAUDITED

(amounts in thousands)

At December 31,

At September 30,

At June 30,

At March 31,

At December 31,

2019

2019

2019

2019

2018

Total nonaccrual loans

$

5,616

$

12,796

$

13,512

$

14,535

$

4,146

90 days past due and still accruing

Total nonperforming loans

5,616

12,796

13,512

14,535

4,146

Other real estate owned ("OREO")

35

58

34

31

31

Total nonperforming assets

$

5,651

$

12,854

$

13,546

$

14,566

$

4,177

Nonperforming loans to gross loans

0.54

%

1.24

%

1.30

%

1.40

%

0.44

%

Nonperforming assets to total assets

0.38

%

0.87

%

0.94

%

0.99

%

0.32

%


The following table summarizes when loans are projected to reprice by year and rate index as of December 31, 2019.

TABLE 12

LOANS BY RATE INDEX AND PROJECTED REPAYMENT - UNAUDITED

(amounts in thousands)

At December 31, 2019

Years 6

Through

Beyond

Year 1

Year 2

Year 3

Year 4

Year 5

Year 10

Year 10

Total

Rate Index:

Fixed

$

49,959

$

52,191

$

33,501

$

72,871

$

32,308

$

166,641

$

32,514

$

439,985

Variable:

Prime

92,508

5,534

9,682

4,616

6,759

4,752

123,851

5 Year Treasury

24,733

66,548

83,684

66,329

77,812

54,490

373,596

7 Year Treasury

858

7,024

9,292

480

5,597

13,828

37,079

1 Year LIBOR

20,988

20,988

Other Indexes

4,146

2,946

2,062

1,733

5,716

16,730

617

33,950

Nonaccrual

625

551

529

513

492

1,988

918

5,616

Total

$

193,817

$

134,794

$

138,750

$

146,542

$

128,684

$

258,429

$

34,049

$

1,035,065


TABLE 13

UNAUDITED CONSOLIDATED

BALANCE SHEET

(amounts in thousands, except per share data)

At December 31,

Change

At September 30,

2019

2018

$

%

2019

Assets:

Cash and due from banks

$

21,338

$

23,692

$

(2,354

)

(10

)

%

$

32,505

Interest-bearing deposits in other banks

59,266

23,673

35,593

150

%

56,099

Total cash and cash equivalents

80,604

47,365

33,239

70

%

88,604

Securities available-for-sale, at fair value

286,950

256,928

30,022

12

%

272,341

Loans, net of deferred fees and costs

1,035,065

948,178

86,887

9

%

1,035,062

Allowance for loan and lease losses

(12,231

)

(12,292

)

61

%

(12,285

)

Net loans

1,022,834

935,886

86,948

9

%

1,022,777

Premises and equipment, net

15,906

13,119

2,787

21

%

16,084

Other real estate owned

35

31

4

13

%

58

Life insurance

23,701

22,410

1,291

6

%

23,576

Deferred tax asset, net

4,553

7,039

(2,486

)

(35

)

%

4,818

Goodwill and core deposit intangible, net

16,480

1,841

14,639

795

%

16,672

Other assets

28,553

22,485

6,068

27

%

27,497

Total assets

$

1,479,616

$

1,307,104

$

172,512

13

%

$

1,472,427

Liabilities and shareholders' equity:

Demand - noninterest-bearing

$

432,680

$

347,199

$

85,481

25

%

$

412,410

Demand - interest-bearing

239,258

252,202

(12,944

)

(5

)

%

239,547

Money market

307,559

265,093

42,466

16

%

317,120

Savings

135,888

114,840

21,048

18

%

137,441

Certificates of deposit

151,786

152,382

(596

)

%

155,621

Total deposits

1,267,171

1,131,716

135,455

12

%

1,262,139

Term debt:

Other borrowings

10,000

13,496

(3,496

)

(26

)

%

10,000

Unamortized debt issuance costs

(43

)

(91

)

48

(53

)

%

(55

)

Net term debt

9,957

13,405

(3,448

)

(26

)

%

9,945

Junior subordinated debentures

10,310

10,310

%

10,310

Other liabilities

17,700

13,352

4,348

33

%

18,396

Total liabilities

1,305,138

1,168,783

136,355

12

%

1,300,790

Shareholders' equity:

Common stock

71,311

52,284

19,027

36

%

72,200

Retained earnings

100,566

89,045

11,521

13

%

97,100

Accumulated other comprehensive income (loss), net of tax

2,601

(3,008

)

5,609

(186

)

%

2,337

Total shareholders' equity

174,478

138,321

36,157

26

%

171,637

Total liabilities and shareholders' equity

$

1,479,616

$

1,307,104

$

172,512

13

%

$

1,472,427

Total interest-earning assets

$

1,377,588

$

1,233,049

$

144,539

12

%

$

1,360,184

Shares outstanding

18,137

16,334

1,803

11

%

18,212

Book value per share (1)

$

9.62

$

8.47

$

1.15

14

%

$

9.42

Tangible book value per share (1)

$

8.71

$

8.36

$

0.35

4

%

$

8.51

(1) 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.


TABLE 14

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

For The Three Months Ended

For The Twelve Months Ended

December 31,

Change

September 30,

December 31,

2019

2018

$

%

2019

2019

2018

Interest income:

Interest and fees on loans

$

12,643

$

11,494

$

1,149

10

%

$

13,013

$

50,534

$

44,955

Interest on taxable securities

1,567

1,469

98

7

%

1,609

6,673

5,165

Interest on tax-exempt securities

258

353

(95

)

(27

)

%

271

1,244

1,629

Interest on interest-bearing deposits in other banks

340

434

(94

)

(22

)

%

308

1,112

952

Total interest income

14,808

13,750

1,058

8

%

15,201

59,563

52,701

Interest expense:

Interest on demand deposits

108

141

(33

)

(23

)

%

117

480

414

Interest on money market

479

207

272

131

%

451

1,599

646

Interest on savings

128

92

36

39

%

131

493

288

Interest on certificates of deposit

499

462

37

8

%

491

1,977

1,910

Interest on Federal Home Loan Bank of
San Francisco borrowings

%

247

435

Interest on other borrowings

183

252

(69

)

(27

)

%

183

806

1,077

Interest on junior subordinated debentures

97

102

(5

)

(5

)

%

106

426

385

Total interest expense

1,494

1,256

238

19

%

1,479

6,028

5,155

Net interest income

13,314

12,494

820

7

%

13,722

53,535

47,546

Provision for loan and lease losses

%

Net interest income after provision
for loan and lease losses

13,314

12,494

820

7

%

13,722

53,535

47,546

Noninterest income:

Service charges on deposit accounts

198

161

37

23

%

177

730

682

ATM and point of sale fees

282

283

(1

)

%

293

1,158

1,131

Payroll and benefit processing fees

183

178

5

3

%

158

669

652

Life insurance

126

128

(2

)

(2

)

%

126

536

512

Gain on investment securities, net

49

3

46

1,533

%

12

186

44

Federal Home Loan Bank of
San Francisco dividends

131

201

(70

)

(35

)

%

131

507

480

Gain(Loss) on sale of OREO

21

64

(43

)

(67

)

%

62

73

Other income

31

114

(83

)

(73

)

%

109

336

445

Total noninterest income

1,021

1,132

(111

)

(10

)

%

1,006

4,184

4,019


TABLE 14 - CONTINUED

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

For The Three Months Ended

For The Twelve Months Ended

December 31,

Change

September 30,

December 31,

2019

2018

$

%

2019

2019

2018

Noninterest expense:

Salaries and related benefits

4,924

4,812

112

2

%

5,005

20,804

18,709

Premises and equipment

916

927

(11

)

(1

)

%

933

3,752

3,983

Federal Deposit Insurance Corporation
insurance premium

93

(93

)

(100

)

%

(104

)

91

376

Data processing

739

528

211

40

%

582

2,535

1,997

Professional services

309

436

(127

)

(29

)

%

392

1,539

1,431

Telecommunications

190

145

45

31

%

194

737

594

Acquisition and merger

802

(802

)

(100

)

%

(113

)

2,193

844

Other expenses

1,343

1,125

218

19

%

1,411

5,604

4,272

Total noninterest expense

8,421

8,868

(447

)

(5

)

%

8,300

37,255

32,206

Income before provision for income taxes

5,914

4,758

1,156

24

%

6,428

20,464

19,359

Provision for income taxes:

Reversal of uncertain tax position

(988

)

988

(100

)

%

(988

)

Benefit from cost segregation study and
tangible property review

(484

)

484

(100

)

%

(484

)

Provision for income taxes

1,545

1,391

154

11

%

1,786

5,503

5,101

Total provision for income taxes

1,545

(81

)

1,626

(2,007

)

%

1,786

5,503

3,629

Net income

$

4,369

$

4,839

$