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Bank of Commerce Holdings (BOCH)

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  • Bank of Commerce (BOCH) Misses Q1 Earnings and Revenue Estimates
    Zacks

    Bank of Commerce (BOCH) Misses Q1 Earnings and Revenue Estimates

    Bank of Commerce (BOCH) delivered earnings and revenue surprises of -9.38% and -9.94%, respectively, for the quarter ended March 2021. Do the numbers hold clues to what lies ahead for the stock?

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

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

    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 1SELECTED FINANCIAL INFORMATION - UNAUDITED(dollars in thousands except per share data) For The Three Months EndedNet income, average assets andMarch 31, December 31,average shareholders' equity2021 2020 2020Net 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 amounts2021 2020 2020Common 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 2LOAN BALANCES BY TYPE - UNAUDITED(dollars in thousands) At March 31, At December 31, % of % of Change % of 2021 Total 2020 Total Amount % 2020 TotalCommercial$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 3PPP LOANS BY INDUSTRY - UNAUDITED(dollars in thousands) At March 31, 2021 Number BalanceConstruction70 $55,204Healthcare and Social Assistance65 12,166Professional, Scientific and Tech Services59 8,161Accommodation and Food Services47 8,705Admin, Support, Waste Management and Remediation Services14 4,855Primary Metal Manufacturing7 3,438Retail Trade31 2,232Other131 23,230Total424 $117,991 TABLE 4PPP 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 $3,462Total$117,991 424 $278 The following table presents the status of our loans in the forgiveness process. TABLE 5PPP 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 SizeBorrower has not started application$5,425 49 $111 $33,459 185 $181Borrower is working on application 9,345 65 $144 31,277 136 $230Borrower has completed application and the bank is reviewing it 6,381 35 $182 43,872 105 $418Bank has approved application and submitted it to the SBA 57,901 78 $742 22,087 44 $502Remaining balance for loans partially repaid (1) 4 1 $4 119 17 $7PPP loans not fully repaid 79,056 228 $347 130,814 487 $269 Repayments 84,437 378 $223 32,679 119 $275Total 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 6CASH, 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 TotalCash 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 7DEPOSITS BY TYPE - UNAUDITED(dollars in thousands) At March 31, At December 31, % of % of Change % of 2021 Total 2020 Total Amount % 2020 TotalDemand - 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 8AVERAGE COST OF FUNDS - UNAUDITEDFor 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 2019Interest-bearing deposits0.26% 0.29% 0.36% 0.43% 0.53% 0.56% 0.56% 0.54%Interest-bearing deposits and noninterest-bearing demand0.16% 0.19% 0.23% 0.28% 0.35% 0.38% 0.38% 0.37%All interest-bearing liabilities0.32% 0.37% 0.44% 0.52% 0.65% 0.68% 0.68% 0.74%All interest-bearing liabilities and noninterest-bearing demand0.21% 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 9SUMMARY 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 10aNET 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 11ALLOWANCE 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 2020ALLL 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 2020Nonaccrual 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 12TROUBLED 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 2020Nonaccrual$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 13NONPERFORMING ASSETS - UNAUDITED(dollars in thousands) At March 31, At December 31, At September 30, At June 30, At March 31, 2021 2020 2020 2020 2020Total 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 14LOANS 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 TotalFixed$78,882 $106,343 $57,826 $45,797 $41,390 $187,744 $38,332 $556,314Variable: Prime 70,560 5,540 5,402 6,957 6,722 954 — 96,1355 Year Treasury 47,993 66,128 60,511 94,813 102,025 55,762 — 427,2327 Year Treasury 2,914 4,502 5,347 — — — — 12,7631 Year LIBOR 17,418 — — — — — — 17,418Other Indexes 3,373 1,961 1,801 9,831 2,504 11,386 1,444 32,300Total 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 3,924Total$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 15LOAN FLOORS - UNAUDITED(dollars in thousands) Variable Rate Loans at March 31, 2021 With Floors Without At Floor Rate Above Floor Rate Total Floors TotalPrime$41,635 $6,145 $47,780 $48,355 $96,1355 year Treasury 355,530 44,466 399,996 27,236 427,2327 Year Treasury 12,763 — 12,763 — 12,7631 Year LIBOR — 709 709 16,709 17,418Other Indexes 15,041 824 15,865 16,435 32,300Total accruing variable rate loans$424,969 $52,144 $477,113 $108,735 585,848 Nonaccrual 3,924Total variable rate loans $589,772 TABLE 16UNAUDITED 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 (10,000) (100)% 5,000 Other borrowings 10,000 10,000 — — % 10,000 Unamortized debt issuance costs — (31) 31 100 % — Net term debt 10,000 19,969 (9,969) (50)% 15,000 Junior subordinated debentures 10,310 10,310 — — % 10,310 Other liabilities 17,259 17,556 (297) (2)% 18,163 Total liabilities 1,651,962 1,290,222 361,740 28 % 1,586,252 Shareholders' equity: Common stock 59,215 59,067 148 — % 58,988 Retained earnings 115,142 100,644 14,498 14 % 111,226 Accumulated other comprehensive income, net of tax 2,783 5,947 (3,164) (53)% 7,488 Total shareholders' equity 177,140 165,658 11,482 7 % 177,702 Total liabilities and shareholders' equity$1,829,102 $1,455,880 $373,222 26 % $1,763,954 Total interest-earning assets$1,734,314 $1,353,822 $380,492 28 % $1,663,321 Shares outstanding 16,876 16,796 80 — % 16,801 Book value per share (1)$10.50 $9.86 $0.64 6 % $10.58 Tangible book value per share (1)$9.58 $8.89 $0.69 8 % $9.64 (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 17UNAUDITEDINCOME STATEMENT(dollars in thousands, except per share data) For The Three Months Ended March 31, Change December 31, 2021 2020 $ % 2020Interest income: Interest and fees on loans$13,215 $12,338 $877 7 % $13,532Interest on taxable securities 1,485 1,582 (97) (6)% 1,484Interest on tax-exempt securities 511 271 240 89 % 467Interest on interest-bearing deposits in other banks 29 154 (125) (81)% 36Total interest income 15,240 14,345 895 6 % 15,519Interest expense: Interest on demand deposits 58 100 (42) (42)% 57Interest on money market 195 403 (208) (52)% 237Interest on savings 48 118 (70) (59)% 53Interest on certificates of deposit 338 464 (126) (27)% 390Interest on other borrowings 137 184 (47) (26)% 179Interest on junior subordinated debentures 46 90 (44) (49)% 47Total interest expense 822 1,359 (537) (40)% 963Net interest income 14,418 12,986 1,432 11 % 14,556Provision for loan and lease losses — 2,850 (2,850) (100)% —Net interest income after provision for loan and lease losses 14,418 10,136 4,282 42 % 14,556Noninterest income: Service charges on deposit accounts 148 169 (21) (12)% 173ATM and point of sale fees 318 268 50 19 % 306Payroll and benefit processing fees 169 170 (1) (1)% 182Life insurance 121 123 (2) (2)% 125Gain on investment securities, net 7 84 (77) (92)% —FHLB dividends 93 130 (37) (28)% 94Legal settlement 221 — 221 100 % —Other income (loss) 86 (52) 138 265 % 136Total noninterest income 1,163 892 271 30 % 1,016 TABLE 17 - CONTINUEDUNAUDITEDINCOME STATEMENT(dollars in thousands, except per share data) For The Three Months Ended March 31, Change December 31, 2021 2020 $ % 2020Noninterest expense: Salaries and related benefits 5,639 5,887 (248) (4)% 5,284Premises and equipment 959 854 105 12 % 966FDIC insurance premium 110 36 74 206 % 105Data processing 548 531 17 3 % 584Professional services 301 334 (33) (10)% 292Telecommunications 170 171 (1) (1)% 174Other expenses 1,170 1,970 (800) (41)% 1,129Total noninterest expense 8,897 9,783 (886) (9)% 8,534Income before provision for income taxes 6,684 1,245 5,439 437 % 7,038Provision for income taxes 1,764 329 1,435 436 % 1,966Total provision for income taxes 1,764 329 1,435 436 % 1,966Net income$4,920 $916 $4,004 437 % $5,072 Earnings per share - basic$0.29 $0.05 $0.24 480 % $0.30Weighted average shares - basic 16,706 17,695 (989) (6)% 16,663Earnings per share - diluted$0.29 $0.05 $0.24 480 % $0.30Weighted average shares - diluted 16,778 17,747 (969) (5)% 16,731 TABLE 18UNAUDITED CONDENSED CONSOLIDATEDQUARTERLY AVERAGE BALANCE SHEETS(dollars in thousands) For The Three Months Ended March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020Earning assets: Loans$1,140,315 $1,172,705 $1,209,277 $1,180,915 $1,033,689Taxable securities 358,291 304,242 228,045 211,195 237,405Tax-exempt securities 82,355 73,207 68,766 58,540 34,869Interest-bearing deposits in other banks 111,320 124,390 95,348 72,507 47,135Total earning assets 1,692,281 1,674,544 1,601,436 1,523,157 1,353,098 Cash and due from banks 21,744 22,413 23,381 21,564 21,987Premises and equipment, net 15,001 15,162 15,365 15,428 15,753Life insurance 24,265 24,147 24,028 23,899 23,762Deferred tax asset, net 4,287 2,738 2,501 3,016 4,259Goodwill 11,671 11,671 11,671 11,671 11,671Other intangible assets, net 3,934 4,126 4,318 4,508 4,701Other assets 17,264 20,136 21,416 23,584 18,788Total assets$1,790,447 $1,774,937 $1,704,116 $1,626,827 $1,454,019 Liabilities and shareholders' equity: Demand - noninterest-bearing$562,155 $552,601 $531,459 $497,636 $420,847Demand - interest-bearing 295,388 283,213 279,744 261,907 233,375Money market 425,113 430,014 387,995 365,368 307,587Savings 154,199 151,223 146,074 138,500 135,504Certificates of deposit 134,520 138,380 139,757 142,955 147,241Total deposits 1,571,375 1,555,431 1,485,029 1,406,366 1,244,554 Federal Home Loan Bank of San Francisco ("FHLB") borrowings 3,889 7,120 10,000 16,044 220Other borrowings 10,000 9,999 9,988 9,976 9,963Junior subordinated debentures 10,310 10,310 10,310 10,310 10,310Other liabilities 16,711 17,557 17,356 17,095 16,852Total liabilities 1,612,285 1,600,417 1,532,683 1,459,791 1,281,899 Shareholders' equity 178,162 174,520 171,433 167,036 172,120Liabilities & shareholders' equity$1,790,447 $1,774,937 $1,704,116 $1,626,827 $1,454,019 TABLE 19UNAUDITED CONDENSED CONSOLIDATEDYEAR TO DATE AVERAGE BALANCE SHEETS(dollars in thousands) For the Three Months Ended For the Twelve Months Ended March 31, March 31, December 31, December 31, December 31, 2021 2020 2020 2019 2018Earning assets: Loans$1,140,315 $1,033,689 $1,149,375 $1,020,801 $915,360Taxable securities 358,291 237,405 245,336 246,723 207,407Tax-exempt securities 82,355 34,869 58,912 38,706 50,330Interest-bearing deposits in other banks 111,320 47,135 84,982 54,095 47,038Total earning assets 1,692,281 1,353,098 1,538,605 1,360,325 1,220,135 Cash and due from banks 21,744 21,987 22,339 22,806 20,468Premises and equipment, net 15,001 15,753 15,426 15,598 13,952Life insurance 24,265 23,762 23,960 23,371 22,148Deferred tax asset, net 4,287 4,259 3,126 5,430 7,567Goodwill 11,671 11,671 11,671 10,758 665Other intangible assets, net 3,934 4,701 4,412 4,807 1,252Other assets 17,264 18,788 20,980 15,017 2,654Total assets$1,790,447 $1,454,019 $1,640,519 $1,458,112 $1,288,841 Liabilities and shareholders' equity: Demand - noninterest-bearing$562,155 $420,847 $500,862 $400,588 $332,197Demand - interest-bearing 295,388 233,375 264,652 242,516 238,328Money market 425,113 307,587 372,939 304,340 250,685Savings 154,199 135,504 142,857 136,733 109,025Certificates of deposit 134,520 147,241 142,067 160,550 168,183Total deposits 1,571,375 1,244,554 1,423,377 1,244,727 1,098,418 Federal Home Loan Bank of San Francisco ("FHLB") borrowings 3,889 220 8,347 9,644 22,466Other borrowings 10,000 9,963 9,981 10,895 15,143Junior subordinated debentures 10,310 10,310 10,310 10,310 10,310Other liabilities 16,711 16,852 17,217 17,894 12,286Total liabilities 1,612,285 1,281,899 1,469,232 1,293,470 1,158,623 Shareholders' equity 178,162 172,120 171,287 164,642 130,218Liabilities & shareholders' equity$1,790,447 $1,454,019 $1,640,519 $1,458,112 $1,288,841 About Bank of Commerce Holdings Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, California and is the parent company for Merchants Bank of Commerce. The Bank is an FDIC-insured California banking corporation providing community banking and financial services in northern California along the Interstate 5 corridor from Sacramento to Yreka and in the wine region north of San Francisco. The Bank was incorporated as a California banking corporation on November 25, 1981 and opened for business on October 22, 1982. The Company’s common stock is listed on the NASDAQ Global Market and trades under the symbol “BOCH”. Contact Information: Randall S. Eslick, President and Chief Executive OfficerTelephone Direct (916) 677-5800 James A. Sundquist, Executive Vice President and Chief Financial OfficerTelephone Direct (916) 677-5825 Andrea M. Newburn, Vice President and Senior Administrative Officer / Corporate SecretaryTelephone Direct (530) 722-3959

  • Bank of Commerce (BOCH) to Report Q1 Results: Wall Street Expects Earnings Growth
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    Bank of Commerce (BOCH) to Report Q1 Results: Wall Street Expects Earnings Growth

    Bank of Commerce (BOCH) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.