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Edited Transcript of AMRB.OQ earnings conference call or presentation 28-Jan-21 9:30pm GMT

·32 min read

Q4 2020 American River Bankshares Earnings Call Roncho Cordova Jan 29, 2021 (Thomson StreetEvents) -- Edited Transcript of American River Bankshares earnings conference call or presentation Thursday, January 28, 2021 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * David E. Ritchie American River Bankshares - President, CEO & Director * Mitchell A. Derenzo American River Bankshares - Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Nicholas Anthony Cucharale Piper Sandler & Co., Research Division - Director & Senior Research Analyst * Timothy Norton Coffey Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the fourth quarter 2020 earnings conference call. My name is Darryl, and I'll be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded. I will now turn the call over to David Ritchie. David, you may begin. -------------------------------------------------------------------------------- David E. Ritchie, American River Bankshares - President, CEO & Director [2] -------------------------------------------------------------------------------- Thank you. Good afternoon, everyone. Nice to be with you. This is Dave Ritchie, President and CEO of American River Bankshares, the parent company of American River Bank, headquartered in Rancho Cordova, California. This is our fourth quarter 2020 update. You should be aware that our earnings release, which details our quarterly and year-end results went out at market opening today. Last week, we also announced our quarterly cash dividend payment for next month. We did include some economic data in the press release. In general, positive trends continue in our markets with the state reopening and the vaccinations being distributed. So now, I'd like to talk a little bit about the company. I just want to tell you how proud I am of this company and the people that work here. It was a tough year. American River Bank generated really strong results for the full year despite the low interest rate environment, the pandemic and the shelter-in-place orders. We will continue to make progress, and we do continue to make progress, living in a state of disruption with a bit -- for a bit longer, so flexibility remains paramount. We did a terrific job with the loan deferrals. We were an early adopter of the program. And we truly helped our borrowers in their time of need. The PPP campaign was very successful. Over 470 loans were made for around $80 million. Again, our focus was on our clients and the communities we serve. We are participating in Round 2 of the program. We are taking applications. The volume has been much less than it was last year. Again, focusing on taking care of our clients. We continue to provide support as clients apply for forgiveness, providing them with the information necessary to help them maximize their opportunity for forgiveness. Our credit quality has held up really well. I'm optimistic about the credit quality going into the new year. Our deferrals, which we did a lot in the beginning, the deferrals for the most part, have expired and the compliance are back paying as agreed. Core loan growth, pretty good given the distractions last year at 6.6%. The third and fourth quarter's loan productions were positive, returning back to similar levels in prior years. I would like to make a comment on that. This organization has 100-or-so employees. Last year, we booked 851 loans. And if you think about that, that's a hell of a lot of loans. We did 27 moves, C&I loans, 50 real estate loans, 474 PPP loans, and we did 200 of our auto portfolio loans, plus we did 98 extensions. So amazing accomplishment, I think, for this organization. On the deposit side, again, growing deposits. Not that we are pretty familiar with that. And I thought it was interesting. We opened over 1,000 new accounts last year. And since opening those accounts, the deposits and those particular accounts have grown by $37 million. So another great effort speaks to our client service. I think we're well reserved. Capital liquidity is very strong. And we believe we did a terrific job in 2020 and are very proud of the efforts of the team. We took care of clients and we deliver to our shareholders. We believe we're well positioned heading into 2021. Now with that, I will turn the call over to Mitch Derenzo to give you an in-depth review of our financial results. -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [3] -------------------------------------------------------------------------------- Thank you, Dave. Of course, thanks to all of you for taking the time to listen in this call this afternoon. Before we get started, I will remind everyone of our safe harbor disclosures. Certain matters discussed in this presentation may constitute forward-looking statements for the purposes of the federal securities laws and may involve risks and uncertainties. Actual results may differ materially from the results in these forward-looking statements. Factors that might cause such a difference are discussed in the company's annual report on Form 10-K for the year ended December 31, 2019, and our subsequent files on Form 10-Q and Form 8-K. The company does not undertake any obligation to publicly update or revise any of these forward-looking statements, which would include information or future events, except as required by law. The links to this annual report and our Form 10-K are located on our website, americanriverbank.com. As of the past conference calls, I'm going to highlight some of the key areas from a press release that Dave mentioned that went up this morning. Also, I'm going to try to provide some additional details and analysis, then we'll open up the lines for questions. This morning, American River Bank reported net income of $2.1 million for the fourth quarter of 2020, that's up from $1.5 million for the fourth quarter 2019. That's a 40% increase. Earnings per share were $0.36 in the fourth quarter of 2020 compared to 26% in the fourth quarter of 2019, that's a 39% increase. The ROA and ROE for the quarter, 96 basis points and 9 12 -- 9.12%, respectively. That's up from 82 basis points and 7.22%, respectively, 1 year ago. On a year-to-date basis, the net income for 2020 was $7.1 million. That's $1.20 a share. That compares to $5.5 million or $0.94 a share in 2019. On a pretax pre-provision basis, net income in 2020 was $11.1 million. That's an increase of $3 million or about 38% over the $8.1 million reported for 2019. Despite the significant rate drops as a result of FRMC actions this year, our margin held up fairly well. For the full year 2020, the yield on loans was 4.8%. That compares to 4.95% in 2019. Overall, our cost of deposits decreased from 35 basis points in 2019 to just 18 basis points in 2020. The resulting net interest margin was 3.52% in 2020. That is slightly down from 3.6% in 2019. Of course, the loan yields were somewhat impacted by the Paycheck Protection Program loans. Those loans had a yield of 3.86% for 2020. I'll go a little deeper into the PPP loans in this next section that I call Pandemic Response section. The 3 areas that I'll cover in this Pandemic Response section are PPP loans, our loan deferrals and our exposure to industry segments most impacted by the pandemic. On the PPP loans. Last quarter, we reported that as of September 30, we had 473 PPP loans totaling $75.8 million, and the unaccreted fees and costs were $1.6 million. We did open up the forgiveness portal in the fourth quarter. And we've had some pretty -- quite a bit of success, as Dave mentioned. As of December 31, we were down to 352 loans remaining, totaling $55.5 million, and unaccreted fees and costs were $1.1 million. Included in this remaining balance was 21 loans totaling about $145,000 that were economic injury disaster loans. Those loans -- the loans were forgiven, but the SBA held back those IDL grants. And as we know now, those will be forgiven because of the new -- the recent stimulus program. Of the remaining 352 loans, 273 of those or about 78% have balances less than $150,000, and those will have access to the streamlined forgiveness process. So we're anticipating those will go out the door pretty quickly. For the quarter and year-to-date, we recognized fees of $521,000 and $1.3 million, respectively, on the PPP loans, PPP fees. The interest on those PPP loans is $170,000 during the quarter and $502,000 for the year 2020. Dave mentioned the new program, the new PPP program. Last week, we did open up the portal, began processing loan applications. And we've already been approved, and some of those loans are in documentation. Again, as Dave mentioned, the initial rush wasn't quite as significant as the program implemented in the second quarter of last year. On the deferrals. We initially reported in June 30 that we had 100 deferrals -- over 100 deferrals totaling about $96.5 million. That was about 1/4 of our loans outstanding in dollars. At the end of September, we had that reduced to $35 million or $38.3 million. And I also indicated that a lot of those loans would come up for payments that, that deferral would expire in the fourth quarter. And I am very pleased to announce that these borrowers did begin making their payments in the fourth quarter, with the exception of 2: one was a $25,000 commercial loan. We charged that off. Another one was a $3.6 million CRE loan where the borrower requested another deferral. That deferral was -- we deferred it to mid-January. And I'm happy to announce that, that borrower did make their payment this week. So as of December 31, we had just 2 deferrals: one of them was a $3.6 million loan I just talked about, and the other 1 was a $1.3 million CRE loan. That's a 6-month interest-only plan, and I'm happy to announce that those -- they are current to those temporary terms. They are making their interest payments. So I think we're doing very well on those -- on the deferrals, and I'm excited about that. Now last week, our exposure to the industry is most impacted by the pandemic. I'm going to report these outstanding balances with the percentages of our loans to non-PPP loans. So charges at the end of December were $22.1 million or 5.3% of our outstanding loans. There actually was an increase of $4 million during the quarter. Those were construction loans and substantially funded, just some draws on those. Restaurants, $5.8 million or 1.4%. The elder care, that's $6.5 million or 1.5%. Schools/childcare, $5.2 million or 1.2%. Our recreation with Golf, Sports Club, $1.8 million or just 0.4%. And the oil and gas was $8.6 million or 2%. We consider it oil and gas, but again, these loans are to gas stations and related businesses such as oil chain facilities. Maybe it's a gas station with a car wash or a convenience store. This section also increased during the quarter by $2.4 million. We did make 2 loans to 1 borrower. One of those loans is secured by a gas station and the other is to a car wash. Also, this quarter, I'm adding a new sector hospitality. Previously reported, we had 0 balances in those -- in that sector. We did add, during this quarter, an SBA 504 to a value level chain hotel. The balance was $1.8 million or 0.4% of our outstanding loans. Once the SBA events were sold, our balance will be reduced by 50%, and we'll still remain in first position there. The uncertainty of the overall impact to COVID of our borrowers, the deferrals, length of shelter-in-place, the vaccination distribution, et cetera, et cetera, that still warrant an increase in our loan loss allowance. For the year, we did add $1.5 million. That's up from $660,000 in 2019. For the fourth quarter, the provisions were just $35,000 despite the increase in the non-PPP loans during the quarter. We did benefit from a decrease in the construction sector from about $30.5 million at the end of September, down to $18.4 million. So that $12 million decrease. Because those construction loans historically carry a higher grade of risk of loss, we were able to reduce our reserves in that sector. That reduction then allowed us to add for new growth in the portfolio, still only having to add the total net of the $35,000. The allowance to the -- ALLL loans, excluding the PPPs, was 1.56% at December 30, 2020, that's up from 1.29% at December 30 -- December 31, 2019. On a side note, you may be aware that California did relax their shelter-in-place order earlier this week. Our government released the remaining regions of the state from the order that had been in place since early December. The region I'm in right now, the Sacramento region, had been released as of January 12, but now the entire state has been released. This will put us back on the color-coded program that had been in place prior to this most recent order in December. And really, all reports say that the virus continues to spread just at a slower pace in our state. Basically, what this -- the reopening allows us to do is some businesses can reopen, for example, restaurants can be open; outdoor dining, but no indoor dining just yet. And the nail and hair salon can be open indoors. So definitely some positive happenings in our marketplace. These -- as I reported just a few minutes ago, we're not -- don't have a lot of business in these sectors, but it's great for our overall economy. On to the balance sheet. Start with loans. Net loans outstanding, excluding the PPP loans, increased $20 million during the fourth quarter. That's just under a 5% increase for the quarter. Year-to-date, net loans, excluding the PPP loans, increased $25.1 million. That's over 6% increase. Fourth quarter, our new loans, we did put on $40.7 million of new loans. That compares to $33.2 million in the third quarter of 2020 and just over $40 million in the fourth quarter in 2019. So what Dave said, since our last couple of quarters, we've got it back on track to where we were in, say, 2019. After a couple of down quarters, this first part of 2020, it was due to the slowdown from the pandemic. Year-to-date loan fundings in 2020 were $104 million. So you can see, again, most of that was in the last 2 quarters. That compares to 2019 total fundings of just under $150 million. Our total unused commitments at the end of the year with just under $33 million, about $20 million of that was commercial line, so they have the ability to revolve. But the rest of that $33 million is real estate-related and should fund over the next year or so. Payoffs, those did drop to a normal run rate in the fourth quarter. There were $8.5 million compared with, say, $15.5 million in the third quarter of 2020. Those payoffs do add prepayment penalties. We collected $120,000 in prepayment fees in the fourth quarter. That compares to $74,000 in the fourth quarter of last year. On a year-to-date basis, we collected $466,000 prepayment penalties compared to $231,000 in all of 2019. Dave mentioned credit as well. I think it's looking pretty well. We didn't have any nonaccrual loans or any loans past due 30 days at December 31, 2020. Earlier, I did mention the additions to the allowance of $1.5 million. We did have $23,000 in net charge-offs in the fourth quarter of this year. Again, that was the loan I mentioned earlier that was deferred. Last year, we had $4,000 in recoveries. Sort of comparison there. So for the entire year, we had just $30,000 of net charge-offs compared to $86,000 in recoveries in 2019. So looking back over 2020, I'm pleased that it was just a low number such as $30,000. Our classified equity is still strong at 2.6%. And really, we have 1 OREO property, about $800,000, and then 2 loans, 2 commercial loans, both of those totaling $1.2 million. So again, relatively low classified assets. On the other OREO, we did update -- get an updated appraisal during the quarter, wrote that thing down by $46,000. So it went from $846,000 down to $800,000. Nonperforming assets that's really just the OREO. So nonperforming assets, total assets is just 9 basis points at December 31, 2020. Loan growth that I mentioned here, primarily in real estate, about almost $25 million or -- $25 million was in real estate area, that's a 7.6% growth. Commercial loans were down $5.4 million. Again, that excludes PPP. If you add in the PPP, they were down quite a bit more than that. Consumer was up $644,000. That's our specialty auto portfolio. We did 42 new loans in that sector. The average was about $61,000. Just for comparison, we did 51 of those in the third quarter of 2020, and the average of those was $117,000. The growth in the real estate was primarily in CRE, which increased $26.2 million. Some of that was the construction loans rolling into perm loans that I mentioned earlier. Let's see, the average rate on the new loans, this new $41 million, are still holding up pretty well, where average was 4.48%. We also renewed a little over $10 million in the quarter. Those averaged 4.98%. That's been fully really the same. It did grow quite a bit during the quarter as we put some cash to work. But really, it's well-structured cash flow and mortgage products mixed in there with a few high credit quality bonds. Portfolio remains -- still remains relatively short. The average life of the entire portfolio is just under 4%. And the effective duration of the entire portfolio is still low at 2.3 years. And then our exposure to rate's up 300 with just 9.3%. The liabilities, deposits, [year-to-date] deposits, as we all know. But we did continue to grow in the fourth quarter. We added -- we had a $15.3 million increase. And then year-over-year, we're up $139.4 million. That's a 23% year-over-year increase. Our noninterest-bearing deposits at 12/31/2020 was 44.4% of the entire deposit portfolio. And our cost is dropping as well. The average cost of funds decreased from 29 basis points in the third quarter of 2020 to 23 basis points in the fourth quarter. And comparing that to the fourth quarter of 2019, they're down from 60 basis points. And if you factor in the overall cost of deposits, those also decreased during that same time frame. For the third quarter of 2020, they were 14 basis points. That dropped to 11 basis points in the fourth quarter of 2020. Comparing that to the fourth quarter of 2019, where they were 33 basis points. So quite a bit of a drop there. If you pull out the CDs, the average cost of our deposits in the fourth quarter was just 16 basis points, that's down from 15 basis points in the fourth quarter of 2019. Capital levels remain strong. The capital balance itself actually increased from just under $83 million a year ago to just over $93 million at December 31, 2020. That $10.2 million increase, of course, came from the net income of $71 million. We had a $4.4 million increase in our other comprehensive income. Net that out, we paid $1.7 million in dividends. And then we had $400,000 increase primarily to equity compensation. Our tangible book value per share was $12.93 at the end of the year, and the book value was $15.68. If you try to calculate these amounts on your own, may have come up with something slightly different as the total shares in the table had an incorrect amount. The actual shares outstanding at December 31 was 5,937,529. Let me repeat that again. 5,937,529. It wasn't the -- now, the reported in the press release. That was actually the 12/31 balance -- 12/31/19 balance. It just didn't get a little forward. So I apologize for that number, but you have the right number now. The capital ratios, leverage ratio, 8.3%. Total risk base, 16.2%. Those actually dropped a little bit. Actually, the leverage ratio dropped a little bit from last year. We're at 9.2%, and that's really the increase in the balance sheet decrease that leverage ratio. Some brief comments on the income statement. Noninterest income, really not much here. We were down about $160,000 year-over-year. Lower fees from service charges, and gains on sale were down as well. With the the lower service charges I think reported in the past, return checks were down with the higher average balance in our client checking accounts. There's been just a lot lower level of checks caused by the overgrown balances. That's a good thing. Noninterest expense increased $13,000 for the fourth quarter 2019 to the fourth quarter of 2020. Really the big area there is the FDIC that increased from 0 in the fourth quarter last year was $69,000 in the fourth quarter this year. And that really relates to the FDIC small bank assessment credits that we received in 2019. Year over -- year-to-date numbers, $46,000 -- I'm sorry, the other item that changed quarter-to-quarter was the OREO expense. That actually decreased. And that's really the write-down. So this year, we had a write-down of $46,000 on OREO property. In the fourth quarter of 2019, we had $110,000 right down there. So a big delta, just different appraisal. On a year-to-date basis, noninterest expense actually decreased $133,000, with the primary driver being in the salary and benefit line item. And that's the deferral of direct loan costs we've been talking about this year, over the last -- at least the last few quarters. Salaries and benefits were down $114,000. The salary piece, actually, just core salaries, that's up $18,000 year-over-year, less than 1%. So minimal there. The true changes, the loan origination costs, those were up $314,000, and those relate to the PPP loans, and those are actually a reduction of our expense. So that reduction of $314 million is actually offset somewhat by the $18,000 increase in salaries that I just mentioned. Higher costs to our vacation accrual, $71,000 there. People just aren't because they can't go anywhere. And then some higher equity comp of about $73,000 and higher incentive accrual was up $93,000. FDIC expense, again, up year-over-year. We received credits in the last 2 quarters of 2019 and a very minimal credit in the first quarter of 2020. That's the reason for the increase there. The decrease in noninterest expense year-over-year is also due to an increase -- a decrease in other expenses of $149,000 from 2019 to 2020. Again, that area includes a lot of things. The other including a lot. That's our advertising, insurance, director fees, telephone, et cetera. But the big category that we've been talking about that's changing year-over-year is the advertising and business development. That decreased -- it was $600,000 last year -- I'm sorry, 2019, dropped to $244,000. It dropped by $244,000 down to $336,000 in 2020. Again, that's the shelter-in-place, reducing the number of business development opportunities and our sponsorships, et cetera. Partially offsetting that decrease is our -- we did implement that new Internet banking system. I talked about earlier this year, so there were some additional cost there. And that went up 57 -- I'm sorry, that went up $90,000. And then again, pointing out that our director fees did go up this year. We're up $57,000. That's related to that nonrecurring amount. One of the directors that passed away, we did the full accrual expense on the future payment stream. That was about $70,000. Lastly, taxes. Of course, those did go up. You have a higher level of taxable income, you're going to have a higher level of taxes. We also -- the benefit from the equity comp was not a benefit this year. It was a benefit last year. 39 -- $34,000 of benefit in 2019. 2020, we had $39,000 of expense -- taxable expense related to the equity comp. So net-net, our effective tax rate did increase from 25.6% in 2019 to 26.6% in 2020. Thank you. And now Darryl, I'd ask you to open up the lines for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question comes from Nick Cucharale. -------------------------------------------------------------------------------- Nicholas Anthony Cucharale, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [2] -------------------------------------------------------------------------------- So I wanted to start on the strong loan growth this quarter. First, were the new credits coming from new or existing customers? And then secondly, can you give us some color on the competitive dynamics in your market? -------------------------------------------------------------------------------- David E. Ritchie, American River Bankshares - President, CEO & Director [3] -------------------------------------------------------------------------------- To your first question, both. I mean we had some -- some new stuff, and then we had some additional loans to existing clients. So that answers that. But yes. I think it's competitive. I mean, I think it's very competitive, especially as you look at -- well, I think the way I look at it, Nick, is that we're looking at it real hard, the stuff that's especially coming up and maturing, or if you have your prepays are running down to 1% or so, we're attacking those because we want to stay in front of the clients. And hopefully, if they would like to stay with us, and we'd like them to stay with us, we're going to renew them. But I think it's just -- and I don't see it being uncompetitive. I think it's partly just because competitors has always been. I mean the Sacramento market, despite all the negative out there, I think it's still a pretty good market for certain types of loans. -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [4] -------------------------------------------------------------------------------- Yes. And really, to add on to that, we've definitely benefited from the pandemic. -------------------------------------------------------------------------------- David E. Ritchie, American River Bankshares - President, CEO & Director [5] -------------------------------------------------------------------------------- Yes, exactly. We're a big bank. -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [6] -------------------------------------------------------------------------------- We have just more people coming to Sacramento. If you can work from home, why live in the Bay and pay 2 to 3x as much for a place to live. So the real estate marketing here is -- real estate market, the residential real estate market is pretty strong. -------------------------------------------------------------------------------- Nicholas Anthony Cucharale, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [7] -------------------------------------------------------------------------------- That's great. And then given the strong close to 2020, I mean, you've got some good momentum headed into this year. Certainly, a fluid environment. But what type of loan growth are you targeting in 2021? -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [8] -------------------------------------------------------------------------------- Yes. We've -- the last year or so, we've been talking about double digits. It's got to be less than that this year. We're -- we've got a decent pipeline. But there's a lot of pressure. Dave, you want to? -------------------------------------------------------------------------------- David E. Ritchie, American River Bankshares - President, CEO & Director [9] -------------------------------------------------------------------------------- Yes, I think there's a decent pipeline, but I think the real challenge is as you have, as I was saying, maturities and things like that, we had $45 million in loan payoffs last year. I mean, if you were unable to keep them probably at lower rates as we all would agree, if you aren't going to keep them, it's going to make it very difficult to show real positive growth. So I think it's a little tough to tell you exactly, but I agree with, Mitch. We've been on a pretty heavy growth plan here for the last 3 years and pushing double digits. I'd probably be happy to be a little -- south of 10% and somewhere in that 6% to 8% range, we thought we would make them feel good. -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [10] -------------------------------------------------------------------------------- Yes. Nick, as you would expect -- I know what you're trying to do. You're trying to figure out what the loan interest income is going to be. It's tough. I think there's going to be more pressure on the rate we're getting as opposed to the growth. Even if we are successful in growing 8%, we're going to be at lower rates. There's a lot of -- we talk about competition, there's a lot of cash still in the system here. We're getting less than 1 point on our investment portfolio. So I'm thinking that banks would rather drop that rate to go down to 3.5%. So I did report for the quarter, we still have some pretty good yields. Our budgeting processes for 2021 is that those yields. We're not going to getting 4.5% on our loans. I hope that helps. -------------------------------------------------------------------------------- Nicholas Anthony Cucharale, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [11] -------------------------------------------------------------------------------- I appreciate the additional disclosure on PPP, Mitch. If I heard you correctly, you gave the fee impact in the quarter and the year-to-date for 2020. Do you have the NIM impact of PPP in the third and fourth quarters? I'm just trying to ascertain how much of the sequential rise was related to PPP? -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [12] -------------------------------------------------------------------------------- Nick, I didn't calculate that. What I did is I calculated the average earnings yield on those were 3% and 6% for the year. I didn't calculate the -- I didn't pull those out this year... -------------------------------------------------------------------------------- Nicholas Anthony Cucharale, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [13] -------------------------------------------------------------------------------- No problem. No problem. Just to be headed off here. And then lastly, some typical seasonality in the expense base in the first quarter. Can you just help us think about a run rate and how you're viewing the expense base longer term? -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [14] -------------------------------------------------------------------------------- You said the fourth -- the first quarter or during the fourth quarter? -------------------------------------------------------------------------------- Timothy Norton Coffey, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [15] -------------------------------------------------------------------------------- Yes. Typically, you have some seasonality in the first quarter with some seasonal increases and so forth. I'm just trying to kind of -- a run rate... -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [16] -------------------------------------------------------------------------------- Yes. We have salary increases in the first quarter. It is a shorter month and days for the interest income. As far as the -- I don't anticipate many new hires in the first quarter, so the salary line should be fairly consistent. Comparing it to the fourth quarter, the fourth quarter, we tend of true-up the incentives as we have a better idea of what the income is going to be for the year because our -- the staff incentive is based on income. So I don't see too many changes in the first quarter compared to the fourth quarter. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- (Operator Instructions) And our next question comes from Tim Coffey. -------------------------------------------------------------------------------- Timothy Norton Coffey, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [18] -------------------------------------------------------------------------------- So you guys did a great job growing noninterest-bearing deposits this year. I mean, for a variety of reasons, those were up significantly, and the ratio of those looks a lot better. Now what's your expectation that you'll be able to hold on to those? -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [19] -------------------------------------------------------------------------------- We're pretty optimistic. I spend a lot of time with our Head of Retail Banking, challenging her, saying, "(inaudible), where do these come from? How long are they going to be here?" Because I, like you, I think that some of those is going to run out. But I also thought that the PPP loans would come in -- or the deposits that went in from the PPP loans would go out as well. There was taxes involved. While people pay their taxes and the deposits still grew. We grew $15 million in the fourth quarter. So I'm optimistic that these things will stay. There's some pent-up demand that businesses haven't been investing in their future, so there will be some decrease there. But we're still -- Dave, we picked up on 1,000 new accounts. -------------------------------------------------------------------------------- David E. Ritchie, American River Bankshares - President, CEO & Director [20] -------------------------------------------------------------------------------- 1,000 new accounts this year. Those aren't necessarily -- [could pay]. I mean, some might have been related to PPP, but it's the -- something we've talked about first since I've been here is this, I call it this concierge service. I mean, we take great care of the clients. We get referrals. I would -- like Mitch said, even in December, I mean, our deposits grew [$18 million] in 1 month. And I made a comment earlier in my comments about that for the year, I mean, 1,000 accounts and the initial deposits were somewhere in the $20 million range, and they're up $37 million. I don't think that's -- I mean I think that's pretty good for us. And I think -- we've been challenging this depositive thing for 3 or 4 months. And we don't -- we haven't come up with any reason to feel like they're all going to run out the door. -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [21] -------------------------------------------------------------------------------- We're not going with another 23% growth. We're not running around to go to (inaudible) here, but we feel pretty good that what we brought are pretty good relationships. -------------------------------------------------------------------------------- David E. Ritchie, American River Bankshares - President, CEO & Director [22] -------------------------------------------------------------------------------- (inaudible) -------------------------------------------------------------------------------- Timothy Norton Coffey, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [23] -------------------------------------------------------------------------------- No. No. Certainly, after the financial crisis, there was an expectation that we'd see a drop down in liquidity that built throughout that period, and there really wasn't. So I think it's possible it's going to stick around as well. And so what does that mean for your margin then? I mean, it seems like you might be having a bit more liquidity on balance sheet? -------------------------------------------------------------------------------- Mitchell A. Derenzo, American River Bankshares - Executive VP & CFO [24] -------------------------------------------------------------------------------- Well, if you look at our year-end balance sheet, we have a ton of -- in my opinion, way too much in our investment portfolio they can very well yield. So really, our challenge is going to be to continue to put that out in loans. We have $55 million of PPP loans in the -- at the end of the year. Those are going to be forgiven. We kind of think that those will come back over the next 6 months. But we also have another PPP loan program going here, which both Dave and I mentioned, we don't think it will be as strong as that. But those loans, despite the 1% yield on them, with the feeds and the quickness of forgiveness, those can create some positive bumps to our NIM. And again, it's how quickly can we get that cash moved into really out of security. So we did -- I think we did a pretty good job of moving it into securities by the -- in the quarter -- in the fourth quarter. I think the portfolio grew by over $40 million in the quarter. But again, the yields we're getting on those are not too exciting. And we're not going to take risk with going out 15, 20 years to go out on the curve there. We still believe that our bread and butter is the loan portfolio, so we want to keep that available to fund the loans. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- And we have no more questions at this time. I'd like to turn the call over to David Ritchie to close the call. -------------------------------------------------------------------------------- David E. Ritchie, American River Bankshares - President, CEO & Director [26] -------------------------------------------------------------------------------- Thank you very much, everyone, for listening. We appreciate your support, and we'll be talking to you next quarter. Thanks again. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.