SACRAMENTO, California, July 23, 2021 (GLOBE NEWSWIRE) -- Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.917 billion asset bank holding company and parent company of Merchants Bank of Commerce (the “Bank”), today announced financial results for the quarter and six months ended June 30, 2021. Net income for the quarter ended June 30, 2021 was $4.1 million or $0.25 per share – diluted, compared with net income of $3.8 million or $0.23 per share – diluted, for the same period of 2020. Net income for the six months ended June 30, 2021 was $9.1 million or $0.54 per share – diluted, compared with net income of $4.8 million or $0.28 per share – diluted, for the same period of 2020.
Significant Items for the Second Quarter of 2021:
- On June 23, 2021, we entered into a Merger Agreement with Columbia Banking Systems, Inc. with Columbia as the surviving entity; which was previously announced. The closing of the merger transaction is expected to occur during the fourth quarter of 2021.
- The Bank continued to experience significant growth in deposits, which increased $83 million during the current quarter and increased $71 million during the previous quarter.
- During the second quarter of 2021, we received $67.3 million in repayments on PPP loans.
- The Company’s net interest margin declined to 3.16% for the current quarter compared to 3.46% for the prior quarter.
Randall S. Eslick, President and CEO commented: “The second quarter was a very exciting time for the company. In June, we announced that we entered into a merger agreement with Columbia Banking Systems, Inc. which we believe will, upon consummation, enhance financial returns to our shareholders and provide our customers with a more comprehensive range of loan and deposit products. We also continued to report very strong growth in deposits and competitive profits during a time when our industry is challenged by declining margins. I remain proud of all of our employees as they respond and adapt to the various changes facing them, our Company and our industry.”
Financial Highlights for the Second Quarter of 2021:
- Net income of $4.1 million was an increase of $292 thousand (8%) from $3.8 million earned during the same period in the prior year. Earnings of $0.25 per share – diluted was an increase of $0.02 (9%) from $0.23 per share – diluted earned during the same period in the prior year and reflects the impact of the following:
- $817 thousand in costs for the second quarter of 2021 associated with the merger with Columbia Banking Systems, Inc., most of which are not tax deductible.
- $1.3 million provision for loan and leases losses for the second quarter of 2020.
- Return on average assets decreased to 0.89% compared to 0.95% for the same period in the prior year.
- Return on average equity was unchanged at 9.26% compared to the same period in the prior year.
- Net interest income increased $181 thousand (1%) to $14.0 million compared to $13.8 million for the same period in the prior year.
- Net interest margin declined to 3.16% compared to 3.64% for the same period in the prior year.
- Average loans totaled $1.136 billion, a decrease of $45 million (4%) compared to average loans for the same period in the prior year.
- Average earning assets totaled $1.775 billion, an increase of $252 million (17%) compared to average earning assets for the same period in the prior year.
- Average deposits totaled $1.653 billion, an increase of $247 million (18%) compared to average deposits for the same period in the prior year.
- Average non-maturing deposits totaled $1.514 billion, an increase of $251 million (20%) compared to the same period in the prior year.
- Average certificates of deposit totaled $139.4 million, a decrease of $3.6 million (2%) compared to the same period in the prior year.
- The Company’s efficiency ratio was 61.5% compared to 56.1% during the same period in the prior year.
- The Company’s efficiency ratio of 61.5% for the second quarter of 2021 included $817 thousand of merger related costs, which increased the efficiency ratio by 5.4%.
- The Company’s efficiency ratio of 61.5% for the second quarter of 2021 included $817 thousand of merger related costs, which increased the efficiency ratio by 5.4%.
- Nonperforming assets at June 30, 2021 totaled $3.8 million or 0.20% of total assets, a decrease of $2.9 million (43%) since June 30, 2020. The decrease in nonperforming assets resulted from repayment of a $3.0 million nonaccrual borrowing relationship during the first quarter of 2021.
- Book value per common share was $10.78 at June 30, 2021 compared to $10.13 at June 30, 2020.
- Tangible book value per common share was $9.87 at June 30, 2021 compared to $9.17 at June 30, 2020.
Financial Highlights for the Six Months Ended June 30, 2021:
- Net income of $9.1 million was an increase of $4.3 million (90%) from $4.8 million earned during the same period in the prior year. Earnings of $0.54 per share – diluted was an increase of $0.26 (93%) per share from $0.28 per share – diluted earned during the same period in the prior year and reflects the impact of the following:
- $817 thousand in costs during the first six months of 2021 associated with the merger with Columbia Banking Systems, Inc., most of which was not tax deductible.
- $4.2 million provision for loan and lease losses during the six months ended June 30, 2020.
- $1.1 million in non-recurring costs during the first quarter of 2020 associated with the termination of a technology management services contract and a severance agreement; both previously announced.
- 1.0 million shares of common stock repurchased during the six months ended June 30, 2020.
- Return on average assets increased to 1.00% compared to 0.62% for the same period in the prior year.
- Return on average equity increased to 10.22% compared to 5.65% for the same period in the prior year.
- Net interest income increased $1.6 million (6%) to $28.4 million compared to $26.8 million for the same period in the prior year.
- Net interest margin declined to 3.30% compared to 3.74% for the same period in the prior year.
- Average loans totaled $1.138 billion, an increase of $31 million (3%) compared to average loans for the same period in the prior year.
- Average earning assets totaled $1.734 billion, an increase of $296 million (21%) compared to average earning assets for the same period in the prior year.
- Average deposits totaled $1.613 billion, an increase of $287 million (22%) compared to average deposits for the same period in the prior year.
- Average non-maturing deposits totaled $1.476 billion, an increase of $295 million (25%) compared to the same period in the prior year.
- Average certificates of deposit totaled $137.0 million, a decrease of $8.1 million (6%) compared to the same period in the prior year.
- The Company’s efficiency ratio was 59.3% compared to 63.1% for the same period in the prior year.
- The Company’s efficiency ratio of 59.3% for the first six months of 2021 included $817 thousand of merger related costs, which increased the efficiency ratio by 2.7%.
- The Company’s efficiency ratio of 63.1% for the first six months of 2020 included $1.1 million of non-recurring costs, which increased the efficiency ratio by 3.9%.
- Nonperforming assets at June 30, 2021 totaled $3.8 million or 0.20% of total assets, a decrease of $3.2 million (92% annualized) since December 31, 2020. The decrease in nonperforming assets resulted from repayment of a $3.0 million nonaccrual borrowing relationship during the first quarter of 2021.
- Book value per common share was $10.78 at June 30, 2021 compared to $10.58 at December 31, 2020.
- Tangible book value per common share was $9.87 at June 30, 2021 compared to $9.64 at December 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 June 30, 2021, we have 47 loans totaling $12.3 million remaining to be forgiven compared to 228 loans totaling $79.0 million at March 31, 2021.
- During 2021, we funded an additional 247 loans totaling $47.3 million under the second PPP. The application period for the second PPP loan program ended on May 31, 2021. We began to process loan forgiveness applications during June, and at June 30, 2021, we have 234 loans totaling $46.7 million remaining to be forgiven.
- 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 $29.0 million at June 30, 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 June 30, 2021, approximately 30% of our workforce is working remotely.
- As of April 12, 2021, all of our offices have returned to pre-pandemic operating hours.
Forward-Looking Statements
Bank of Commerce Holdings wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. This news release includes statements by the Company, which describe management’s expectations and developments, which may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21B of the Securities Act of 1934, as amended. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company's public filings, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the Company's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new banks and/or branches are lower than expected; (4) our concentration in lending tied to real estate exposes us to the adverse effects of material increases in interest rates, declines in the general economy, tightening credit markets or declines in real estate values; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged; and (7) technological changes could expose us to new risks.
| TABLE 1 | ||||||||||||||||||||
| SELECTED FINANCIAL INFORMATION - UNAUDITED | ||||||||||||||||||||
| (dollars in thousands except per share data) | ||||||||||||||||||||
| For The Three Months Ended | For The Six Months Ended | |||||||||||||||||||
| Net income, average assets and | June 30, | March 31, | June 30, | |||||||||||||||||
| average shareholders' equity | 2021 | 2020 | 2021 | 2021 | 2020 | |||||||||||||||
| Net income | $ | 4,139 | $ | 3,847 | $ | 4,920 | $ | 9,059 | $ | 4,763 | ||||||||||
| Average total assets | $ | 1,869,294 | $ | 1,626,827 | $ | 1,790,447 | $ | 1,830,089 | $ | 1,540,423 | ||||||||||
| Average total earning assets | $ | 1,775,020 | $ | 1,523,157 | $ | 1,692,281 | $ | 1,733,879 | $ | 1,438,127 | ||||||||||
| Average shareholders' equity | $ | 179,329 | $ | 167,036 | $ | 178,162 | $ | 178,748 | $ | 169,578 | ||||||||||
| Selected performance ratios | ||||||||||||||||||||
| Return on average assets | 0.89 | % | 0.95 | % | 1.11 | % | 1.00 | % | 0.62 | % | ||||||||||
| Return on average equity | 9.26 | % | 9.26 | % | 11.20 | % | 10.22 | % | 5.65 | % | ||||||||||
| Efficiency ratio | 61.5 | % | 56.1 | % | 57.1 | % | 59.3 | % | 63.1 | % | ||||||||||
| Share and per share amounts | ||||||||||||||||||||
| Weighted average shares - basic (1) | 16,736 | 16,660 | 16,706 | 16,721 | 17,178 | |||||||||||||||
| Weighted average shares - diluted (1) | 16,823 | 16,689 | 16,778 | 16,803 | 17,217 | |||||||||||||||
| Earnings per share - basic | $ | 0.25 | $ | 0.23 | $ | 0.29 | $ | 0.54 | $ | 0.28 | ||||||||||
| Earnings per share - diluted | $ | 0.25 | $ | 0.23 | $ | 0.29 | $ | 0.54 | $ | 0.28 | ||||||||||
| At June 30, | At March 31, | |||||||||||||||||||
| Share and per share amounts | 2021 | 2020 | 2021 | |||||||||||||||||
| Common shares outstanding (2) | 16,896 | 16,739 | 16,876 | |||||||||||||||||
| Book value per common share (2) | $ | 10.78 | $ | 10.13 | $ | 10.50 | ||||||||||||||
| Tangible book value per common share (2)(3) | $ | 9.87 | $ | 9.17 | $ | 9.58 | ||||||||||||||
| Capital ratios (4) | ||||||||||||||||||||
| Bank of Commerce Holdings | ||||||||||||||||||||
| Common equity tier 1 capital ratio | 13.04 | % | 12.34 | % | 12.99 | % | ||||||||||||||
| Tier 1 capital ratio | 13.84 | % | 13.18 | % | 13.81 | % | ||||||||||||||
| Total capital ratio | 15.89 | % | 15.27 | % | 15.87 | % | ||||||||||||||
| Tier 1 leverage ratio | 9.37 | % | 9.82 | % | 9.61 | % | ||||||||||||||
| Tangible common equity ratio (5) | 8.77 | % | 9.05 | % | 8.91 | % | ||||||||||||||
| Merchants Bank of Commerce | ||||||||||||||||||||
| Common equity tier 1 capital ratio | 14.48 | % | 13.72 | % | 14.41 | % | ||||||||||||||
| Tier 1 capital ratio | 14.48 | % | 13.72 | % | 14.41 | % | ||||||||||||||
| Total capital ratio | 15.74 | % | 14.97 | % | 15.66 | % | ||||||||||||||
| Tier 1 leverage ratio | 9.80 | % | 10.21 | % | 10.03 | % | ||||||||||||||
| (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 June 30, 2021, the Company had total consolidated assets of $1.917 billion, gross loans of $1.091 billion, allowance for loan and lease losses (“ALLL”) of $17 million, total deposits of $1.697 billion, and shareholders’ equity of $182 million. Certain amounts for prior periods have been reclassified to conform to the current presentation. The results of reclassifications are not considered material and have no effect on previously reported equity or net income.
| TABLE 2 | ||||||||||||||||||||||||||||
| LOAN BALANCES BY TYPE - UNAUDITED | ||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||
| At June 30, | At March 31, | |||||||||||||||||||||||||||
| % of | % of | Change | % of | |||||||||||||||||||||||||
| 2021 | Total | 2020 | Total | Amount | % | 2021 | Total | |||||||||||||||||||||
| Commercial | $ | 93,650 | 9 | % | $ | 126,024 | 10 | % | $ | (32,374 | ) | (26 | ) | % | $ | 117,597 | 10 | % | ||||||||||
| Paycheck Protection Program ("PPP") | 59,058 | 5 | 162,189 | 13 | (103,131 | ) | (64 | ) | % | 117,991 | 10 | |||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||||||
| Construction and land development | 30,494 | 3 | 41,371 | 3 | (10,877 | ) | (26 | ) | % | 32,145 | 3 | |||||||||||||||||
| Non-owner occupied | 626,819 | 57 | 557,466 | 47 | 69,353 | 12 | % | 592,157 | 52 | |||||||||||||||||||
| Owner occupied | 168,296 | 15 | 179,337 | 15 | (11,041 | ) | (6 | ) | % | 165,367 | 14 | |||||||||||||||||
| Residential real estate: | ||||||||||||||||||||||||||||
| Individual Tax Identification Number ("ITIN") | 26,912 | 2 | 31,083 | 3 | (4,171 | ) | (13 | ) | % | 27,839 | 2 | |||||||||||||||||
| 1-4 family mortgage | 50,259 | 5 | 60,756 | 5 | (10,497 | ) | (17 | ) | % | 54,562 | 5 | |||||||||||||||||
| Equity lines | 17,827 | 2 | 20,938 | 2 | (3,111 | ) | (15 | ) | % | 18,600 | 2 | |||||||||||||||||
| Consumer and other | 17,430 | 2 | 27,176 | 2 | (9,746 | ) | (36 | ) | % | 19,685 | 2 | |||||||||||||||||
| Gross loans | 1,090,745 | 100 | % | 1,206,340 | 100 | % | (115,595 | ) | (10 | ) | % | 1,145,943 | 100 | % | ||||||||||||||
| Deferred (fees) and costs | 551 | (1,603 | ) | 2,154 | 143 | |||||||||||||||||||||||
| Loans, net of deferred fees and costs | 1,091,296 | 1,204,737 | (113,441 | ) | 1,146,086 | |||||||||||||||||||||||
| Allowance for loan and lease losses | (17,194 | ) | (16,089 | ) | (1,105 | ) | (17,027 | ) | ||||||||||||||||||||
| Net loans | $ | 1,074,102 | $ | 1,188,648 | $ | (114,546 | ) | $ | 1,129,059 | |||||||||||||||||||
| Average loans during the quarter | $ | 1,135,521 | $ | 1,180,915 | $ | (45,394 | ) | (4 | ) | % | $ | 1,140,315 | ||||||||||||||||
| Average loans during the quarter (excluding PPP) | $ | 1,031,484 | $ | 1,048,139 | $ | (16,655 | ) | (2 | ) | % | $ | 1,017,123 | ||||||||||||||||
| Average yield on loans during the quarter | 4.39 | % | 4.50 | % | (0.11 | ) | (2 | ) | % | 4.70 | % | |||||||||||||||||
| Average yield on loans during the quarter (excluding PPP) | 4.42 | % | 4.76 | % | (0.34 | ) | (7 | ) | % | 4.60 | % | |||||||||||||||||
| Average yield on loans year to date | 4.54 | % | 4.64 | % | (0.10 | ) | (2 | ) | % | 4.70 | % | |||||||||||||||||
| Average yield on loans year to date (excluding PPP) | 4.51 | % | 4.78 | % | (0.27 | ) | (6 | ) | % | 4.60 | % | |||||||||||||||||
The Company recorded gross loan balances of $1.091 billion at June 30, 2021, compared with $1.206 billion and $1.146 billion at June 30, 2020 and March 31, 2021, respectively, a decrease of $116 million and $55 million, respectively. The improving economic environment is reflected in the growth of our gross loans (excluding PPP loans) which increased $22.8 million (5% annualized) since December 31, 2020.
Gross loan balances in the table above include a net fair value discount for loans acquired from Merchants of $694 thousand, $1.3 million and $810 thousand at June 30, 2021, June 30, 2020 and March 31, 2021, respectively. We recorded $115 thousand, $216 thousand and $110 thousand in accretion of the discount for these loans during the quarters ended June 30, 2021, June 30, 2020 and March 31, 2021, respectively.
Paycheck Protection Program (PPP)
We have funded 853 loans totaling $210.8 million under the two PPP loan programs through June 30, 2021.
First PPP Loan Program - 2020
During 2020, we originated 606 loans totaling $163.5 million in the first PPP loan program. Most of the loans have subsequently been forgiven and repaid. At June 30, 2021, we have 47 loans totaling $12.3 million in the program. The majority of the first program loans 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, 181 loans totaling $66.7 million were repaid and we recognized $560 thousand in accelerated net fee income compared to 259 loans repaid totaling $51.8 million and $1.0 million in accelerated net fee income in the prior quarter. At June 30, 2021, net loan fees totaling $142 thousand remain to be earned and we anticipate that most of it will be recognized during the third quarter of 2021.
Second PPP Loan Program - 2021
During the first quarter of 2021, the SBA announced a second PPP loan program. The SBA’s second PPP loan program provided 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 allowed second draw PPP loans to qualifying businesses that received a first draw under SBA’s first PPP loan program. The loans were available until May 31, 2021, were limited to $2 million, had a five-year term and SBA increased the lender fees for loans under $50 thousand to incentivize lenders to work with smaller borrowers.
During 2021, we originated 247 loans totaling $47.3 million in the second PPP loan program. During the second quarter, we began to process loan forgiveness applications. At June 30, 2021, we have 234 loans totaling $46.7 million in the program. We anticipate that the loans in the second PPP loan program will have a lower yield as net loan 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. 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, 13 loans totaling $629 thousand were repaid and we recognized $28 thousand in accelerated net fee income. At June 30, 2021, net loan fees totaling $1.5 million remain to be earned.
The following tables provide additional information on the PPP loans by industry and by loan balance at June 30, 2021 for loans in both PPP loan programs.
| TABLE 3 | |||||
| PPP LOANS BY INDUSTRY - UNAUDITED | |||||
| (dollars in thousands) | |||||
| At June 30, 2021 | |||||
| Number | Balance | ||||
| Construction | 39 | $ | 15,634 | ||
| Healthcare and Social Assistance | 42 | 4,326 | |||
| Professional, Scientific and Tech Services | 37 | 5,711 | |||
| Accommodation and Food Services | 39 | 9,185 | |||
| Admin, Support, Waste Management and Remediation Services | 9 | 2,064 | |||
| Primary Metal Manufacturing | 7 | 558 | |||
| Retail Trade | 19 | 3,340 | |||
| Other | 89 | 18,240 | |||
| Total | 281 | $ | 59,058 | ||
| TABLE 4 | |||||||
| PPP LOANS BY LOAN SIZE - UNAUDITED | |||||||
| (dollars in thousands) | |||||||
| At June 30, 2021 | |||||||
| Balance | Number | Average Loan Size | |||||
| $50,000 or less | $ | 2,232 | 101 | $ | 22 | ||
| $50,001 to $150,000 | 7,047 | 83 | $ | 85 | |||
| $150,001 to $350,000 | 10,723 | 51 | $ | 210 | |||
| $350,001 to $1,999,999 | 31,884 | 43 | $ | 741 | |||
| $2,000,000 or greater | 7,172 | 3 | $ | 2,391 | |||
| Total | $ | 59,058 | 281 | $ | 210 | ||
The following table presents the status of our loans in the forgiveness process.
| TABLE 5 | |||||||||||||||
| PPP LOANS FORGIVENESS APPLICATION STATUS - UNAUDITED | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| At June 30, 2021 | At March 31, 2021 | ||||||||||||||
| Balance | Number | Average Loan Size | Balance | Number | Average Loan Size | ||||||||||
| First PPP loan program - 2020 | |||||||||||||||
| Borrower has not started application | $ | 314 | 7 | $ | 45 | $ | 5,425 | 49 | $ | 111 | |||||
| Borrower is working on application | 3,348 | 15 | $ | 223 | 9,345 | 65 | $ | 144 | |||||||
| Borrower has completed application and the bank is reviewing it | 2,744 | 16 | $ | 172 | 6,381 | 35 | $ | 182 | |||||||
| Bank has approved application and submitted it to SBA | 5,804 | 6 | $ | 967 | 57,901 | 78 | $ | 742 | |||||||
| Loans partially repaid (1) | 137 | 3 | $ | 46 | 4 | 1 | $ | 4 | |||||||
| PPP loans not fully repaid | 12,347 | 47 | $ | 263 | 79,056 | 228 | $ | 347 | |||||||
| Repayments | 151,146 | 559 | $ | 270 | 84,437 | 378 | $ | 223 | |||||||
| Total first PPP loan program - 2020 | 163,493 | 606 | $ | 270 | 163,493 | 606 | $ | 270 | |||||||
| Second PPP loan program - 2021 | |||||||||||||||
| Borrower has not started application | 42,506 | 221 | $ | 192 | 38,935 | 196 | $ | 199 | |||||||
| Borrower is working on application | 2,224 | 6 | $ | 371 | — | — | $ | — | |||||||
| Borrower has completed application and the bank is reviewing it | 1,911 | 6 | $ | 319 | — | — | $ | — | |||||||
| Bank has approved application and submitted it to SBA | 70 | 1 | $ | 70 | — | — | $ | — | |||||||
| PPP loans not fully repaid | 46,711 | 234 | $ | 200 | 38,935 | 196 | $ | 199 | |||||||
| Repayments | 629 | 13 | $ | 48 | — | — | $ | — | |||||||
| Total second PPP loan program - 2021 | 47,340 | 247 | $ | 192 | 38,935 | 196 | $ | 199 | |||||||
| Total PPP loans originated by bank | $ | 210,833 | 853 | $ | 247 | $ | 202,428 | 802 | $ | 252 | |||||
| (1) Borrowers who participated in the Economic Injury Disaster Loan ("EIDL") program had their forgiveness payment reduced by their EIDL advance. This reduction has subsequently been repealed and the SBA has remitted a reconciliation payment for previously-deducted EIDL advance amounts, plus interest. | |||||||||||||||
| TABLE 6 | ||||||||||||||||||||||||||
| CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED | ||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||
| At June 30, | At March 31, | |||||||||||||||||||||||||
| % of | % of | Change | % of | |||||||||||||||||||||||
| 2021 | Total | 2020 | Total | Amount | % | 2021 | Total | |||||||||||||||||||
| Cash and due from banks | $ | 21,011 | 3 | % | $ | 29,630 | 7 | % | $ | (8,619 | ) | (29 | ) | % | $ | 20,053 | 3 | % | ||||||||
| Interest-bearing deposits in other banks | 156,107 | 21 | 126,132 | 29 | 29,975 | 24 | % | 74,804 | 12 | |||||||||||||||||
| Total cash and cash equivalents | 177,118 | 24 | 155,762 | 36 | 21,356 | 14 | % | 94,857 | 15 | |||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||
| U.S. government and agencies | 29,691 | 4 | 33,195 | 8 | (3,504 | ) | (11 | ) | % | 31,060 | 5 | |||||||||||||||
| Obligations of state and political subdivisions | 136,467 | 18 | 76,888 | 18 | 59,579 | 77 | % | 128,841 | 21 | |||||||||||||||||
| Residential mortgage backed securities and collateralized mortgage obligations | 317,842 | 41 | 137,120 | 30 | 180,722 | 132 | % | 277,547 | 46 | |||||||||||||||||
| Corporate securities | — | — | 1,000 | — | (1,000 | ) | (100 | ) | % | — | — | |||||||||||||||
| Commercial mortgage backed securities | 52,718 | 7 | 16,329 | 4 | 36,389 | 223 | % | 38,582 | 6 | |||||||||||||||||
| Other asset backed securities | 42,946 | 6 | 15,668 | 4 | 27,278 | 174 | % | 41,345 | 7 | |||||||||||||||||
| Total investment securities - AFS | 579,664 | 76 | 280,200 | 64 | 299,464 | 107 | % | 517,375 | 85 | |||||||||||||||||
| Total cash, cash equivalents and investment securities | $ | 756,782 | 100 | % | $ | 435,962 | 100 | % | $ | 320,820 | 74 | % | $ | 612,232 | 100 | % | ||||||||||
| Average yield on interest-bearing due from banks during the quarter | 0.10 | % | 0.12 | % | (0.02 | ) | 0.11 | % | ||||||||||||||||||
| Average yield on investment securities during the quarter - nominal | 1.70 | % | 2.61 | % | (0.91 | ) | 1.84 | % | ||||||||||||||||||
| Average yield on investment securities during the quarter - tax equivalent | 1.82 | % | 2.78 | % | (0.96 | ) | 1.96 | % | ||||||||||||||||||
As of June 30, 2021, we maintained noninterest-bearing cash positions of $21.0 million and interest-bearing deposits of $156.1 million at the Federal Reserve Bank and correspondent banks. During the current quarter, we continued to invest our increased liquidity into our investment securities portfolio.
Unprecedented deposit growth during the last year as a result of PPP programs and changes in customer behavior has led to a significant increase in the size of our investment securities portfolio. Investment securities totaled $579.7 million at June 30, 2021, compared with $280.2 million and $517.4 million at June 30, 2020 and March 31, 2021, respectively.
During the second quarter of 2021, we purchased securities with a par value of $110.0 million and weighted average yield of 1.52% (1.57% tax equivalent). Investment purchases were comprised primarily of municipal bonds and mortgage backed securities. We sold securities with a par value of $26.1 million resulting in net realized gain of $64 thousand for the quarter ended June 30, 2021.
At June 30, 2021, our net unrealized gains on available-for-sale investment securities were $6.3 million compared with net unrealized gains of $10.1 million and $4.0 million at June 30, 2020 and March 31, 2021, respectively. The fluctuation in net unrealized gains was due to changes in market interest rates.
| TABLE 7 | |||||||||||||||||||||||||
| DEPOSITS BY TYPE - UNAUDITED | |||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||
| At June 30, | At March 31, | ||||||||||||||||||||||||
| % of | % of | Change | % of | ||||||||||||||||||||||
| 2021 | Total | 2020 | Total | Amount | % | 2021 | Total | ||||||||||||||||||
| Demand - noninterest-bearing | $ | 627,911 | 37 | % | $ | 521,751 | 35 | % | $ | 106,160 | 20 | % | $ | 603,991 | 37 | % | |||||||||
| Demand - interest-bearing | 306,565 | 18 | 287,198 | 19 | 19,367 | 7 | % | 290,687 | 18 | ||||||||||||||||
| Money market | 463,639 | 27 | 405,322 | 27 | 58,317 | 14 | % | 425,251 | 26 | ||||||||||||||||
| Total demand | 1,398,115 | 82 | 1,214,271 | 81 | 183,844 | 15 | % | 1,319,929 | 81 | ||||||||||||||||
| Savings | 162,325 | 10 | 142,389 | 10 | 19,936 | 14 | % | 160,834 | 10 | ||||||||||||||||
| Total non-maturing deposits | 1,560,440 | 92 | 1,356,660 | 91 | 203,780 | 15 | % | 1,480,763 | 91 | ||||||||||||||||
| Certificates of deposit | 136,898 | 8 | 137,647 | 9 | (749 | ) | (1 | ) | % | 133,630 | 9 | ||||||||||||||
| Total deposits | $ | 1,697,338 | 100 | % | $ | 1,494,307 | 100 | % | $ | 203,031 | 14 | % | $ | 1,614,393 | 100 | % | |||||||||
Total deposits at June 30, 2021, increased $203 million or 14% to $1.697 billion compared to June 30, 2020 and increased $83 million or 21% annualized compared to March 31, 2021. Total non-maturing deposits increased $203.8 million or 15% compared to the same date a year ago and increased $79.7 million or 22% annualized compared to March 31, 2021. 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 assumes that depositor behavior will change at a later date, but is unable to predict the timing of that change. Certificates of deposit decreased $749 thousand or 1% compared to the same date a year ago and increased $3.3 million or 10% annualized compared to March 31, 2021.
The following table presents the average cost of interest-bearing deposits, all deposits and all interest-bearing liabilities for the periods indicated.
| TABLE 8 | |||||||||||||||||||||||||||||||
| AVERAGE COST OF FUNDS - UNAUDITED | |||||||||||||||||||||||||||||||
| For The Three Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | 2020 | 2019 | 2019 | ||||||||||||||||||||||||
| Interest-bearing deposits | 0.22 | % | 0.26 | % | 0.29 | % | 0.36 | % | 0.43 | % | 0.53 | % | 0.56 | % | 0.56 | % | |||||||||||||||
| Interest-bearing deposits and noninterest-bearing demand | 0.14 | % | 0.16 | % | 0.19 | % | 0.23 | % | 0.28 | % | 0.35 | % | 0.38 | % | 0.38 | % | |||||||||||||||
| All interest-bearing liabilities | 0.29 | % | 0.32 | % | 0.37 | % | 0.44 | % | 0.52 | % | 0.65 | % | 0.68 | % | 0.68 | % | |||||||||||||||
| All interest-bearing liabilities and noninterest-bearing demand | 0.18 | % | 0.21 | % | 0.24 | % | 0.29 | % | 0.34 | % | 0.43 | % | 0.46 | % | 0.46 | % | |||||||||||||||
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.
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 June 30, 2021, no shares have been repurchased under this plan.
INCOME STATEMENT OVERVIEW
| TABLE 9 | ||||||||||||||||||||||||
| SUMMARY INCOME STATEMENT - UNAUDITED | ||||||||||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||||||||||
| For The Three Months Ended | ||||||||||||||||||||||||
| June 30, | Change | March 31, | Change | |||||||||||||||||||||
| 2021 | 2020 | Amount | % | 2021 | Amount | % | ||||||||||||||||||
| Interest income | $ | 14,728 | $ | 14,997 | $ | (269 | ) | (2 | ) | % | $ | 15,240 | $ | (512 | ) | (3 | ) | % | ||||||
| Interest expense | 764 | 1,214 | (450 | ) | (37 | ) | % | 822 | (58 | ) | (7 | ) | % | |||||||||||
| Net interest income | 13,964 | 13,783 | 181 | 1 | % | 14,418 | (454 | ) | (3 | ) | % | |||||||||||||
| Provision for loan and lease losses | — | 1,300 | (1,300 | ) | (100 | ) | % | — | — | — | % | |||||||||||||
| Noninterest income | 1,131 | 955 | 176 | 18 | % | 1,163 | (32 | ) | (3 | ) | % | |||||||||||||
| Noninterest expense | 9,279 | 8,270 | 1,009 | 12 | % | 8,897 | 382 | 4 | % | |||||||||||||||
| Income before provision for income taxes | 5,816 | 5,168 | 648 | 13 | % | 6,684 | (868 | ) | (13 | ) | % | |||||||||||||
| Provision for income taxes | 1,677 | 1,321 | 356 | 27 | % | 1,764 | (87 | ) | (5 | ) | % | |||||||||||||
| Net income | $ | 4,139 | $ | 3,847 | $ | 292 | 8 | % | $ | 4,920 | $ | (781 | ) | (16 | ) | % | ||||||||
| Earnings per share - basic | $ | 0.25 | $ | 0.23 | $ | 0.02 | 9 | % | $ | 0.29 | $ | (0.04 | ) | (14 | ) | % | ||||||||
| Weighted average shares - basic | 16,736 | 16,660 | 76 | — | % | 16,706 | 30 | — | % | |||||||||||||||
| Earnings per share - diluted | $ | 0.25 | $ | 0.23 | $ | 0.02 | 9 | % | $ | 0.29 | $ | (0.04 | ) | (14 | ) | % | ||||||||
| Weighted average shares - diluted | 16,823 | 16,689 | 134 | 1 | % | 16,778 | 45 | — | % | |||||||||||||||
| Dividends declared per common share | $ | 0.06 | $ | 0.05 | $ | 0.01 | 20 | % | $ | 0.06 | $ | — | — | % | ||||||||||
Second Quarter of 2021 Compared with the Second Quarter of 2020
Net income for the second quarter of 2021 increased $292 thousand compared to the second quarter of 2020. In the current quarter, net interest income was $181 thousand higher, provision for loan and lease losses was $1.3 million lower and noninterest income was $176 thousand higher. These positive changes were partially offset by noninterest expense that was $1.0 million higher and a provision for income taxes that was $356 thousand higher.
Net Interest Income
Net interest income increased $181 thousand compared to the same period a year ago.
Interest income for the second quarter of 2021 decreased $269 thousand or 2% to $14.7 million.
- During the second quarter of 2021, we recognized $588 thousand 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 second quarter of 2021 by 21 basis points and increased the net interest margin for the second quarter of 2021 by 13 basis points.
- PPP loans had an average balance of $104.0 million and yield of 4.10% (1.83% excluding accelerated fee income) for the second quarter of 2021 compared to an average balance of $132.8 million and yield of 2.46% for the same period a year ago.
- Excluding PPP loans, interest and fees on loans decreased $1.0 million due to a $16.7 million decrease in average loan balances and a 34 basis point decrease in average yield.
- Interest on investment securities increased $520 thousand due to a $265.6 million increase in average investment securities balances partially offset by a 91 basis point decrease in average yield.
- Interest on interest-bearing deposits due from banks increased $6 thousand due to a $31.6 million increase in average interest-bearing deposit balances partially offset by a 1 basis point decrease in average yield. 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 second quarter of 2021 decreased $450 thousand or 37% to $764 thousand.
- Interest expense on interest-bearing deposits decreased $385 thousand. Average interest-bearing demand and savings deposit balances increased $141.6 million, while average certificate of deposit balances decreased $3.6 million. The average rate paid on interest-bearing deposits decreased 21 basis points from 0.43% to 0.22%.
- Interest expense on FHLB borrowings decreased $5 thousand. There were no FHLB borrowings during the current quarter. Average FHLB borrowings were $16.0 million during the same period a year ago. During the second quarter of 2020, we took advantage of a program offered by the FHLB that bore no interest. The average rate paid on FHLB borrowings was 0.13% during the second quarter of 2020.
- Interest expense on other term debt decreased $46 thousand. The average debt balance was essentially unchanged, while the average rate paid decreased 188 basis points.
- Interest expense on junior subordinated debentures decreased $14 thousand. The average debt balance was unchanged, while the average rate paid decreased 55 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 $1.3 million in the same quarter a year ago. Nonaccrual loans decreased 43% since June 30, 2020 primarily due to repayment of two commercial real estate loans totaling $4.1 million. Net loan recoveries were $167 thousand during the current quarter compared to net loan charge-offs of $278 thousand during the same period a year ago. Most COVID-19 related loan payment deferrals have ended with limited negative impact on delinquencies. 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 June 30, 2021 increased $176 thousand compared to the same period a year previous. The increase was primarily due to $138 thousand increase in ATM and point of sales fees and a $90 thousand increase in FHLB dividends partially offset by a $76 thousand decrease in gain on sale of investment securities.
Noninterest Expense
Noninterest expense for the three months ended June 30, 2021 increased $1.0 million compared to the same period a year previous, mostly resulting from $817 thousand of merger related costs.
The Company’s efficiency ratio was 61.5% for the second quarter of 2021. The ratio during the same period in 2020 was 56.1%. The Company’s efficiency ratio of 61.5% for the second quarter of 2021 included $817 thousand of merger related costs, which increased the efficiency ratio by 5.4%.
Income Tax Provision
For the three months ended June 30, 2021, our income tax provision of $1.7 million on pre-tax income of $5.8 million was an effective tax rate of 28.8%. The tax provision for the second quarter of the prior year was $1.3 million on pre-tax income of $5.2 million for an effective rate of 25.6%.
The current quarter income tax calculation included the impact of $772 thousand of non-deductible merger related costs, which increased the effective tax rate by 2.4%.
Second Quarter of 2021 Compared with the First Quarter of 2021
Net income for the second quarter of 2021 decreased $781 thousand compared to the first quarter of 2021. In the current quarter, net interest income was $454 thousand lower, noninterest income was $32 thousand lower and noninterest expense was $382 thousand higher. These negative variances were partially offset by a provision for income taxes that was $87 thousand lower.
Net Interest Income
Net interest income decreased $454 thousand over the prior quarter.
Interest income for the three months ended June 30, 2021 decreased $512 thousand or 3% to $14.7 million.
- During the second quarter of 2021, we recognized $588 thousand in accelerated net fee income on PPP loans forgiven or repaid during the quarter compared to $1.0 million in the prior quarter. These accelerated loan fees increased the average yield on loans for the second and first quarter of 2021 by 21 basis points and 36 basis points, respectively. The accelerated loan fees increased the net interest margin for the second and first quarter of 2021 by 13 basis points and 24 basis points, respectively.
- PPP loans had an average balance of $104.0 million and yield of 4.10% (1.83% excluding accelerated fee income) for the second quarter of 2021 compared to an average balance of $123.2 million and yield of 5.49% (2.20% excluding accelerated fee income) for the prior quarter.
- Excluding PPP loans, interest and fees on loans decreased $181 thousand due to a 15 basis point decrease in average yield partially offset by a $14.4 million increase in average loan balances.
- During the first quarter of 2021, we recognized $251 thousand in interest income from the repayment of a nonaccrual loan. The interest income recognized from that repayment increased the average yield on loans for the first quarter of 2021 by 9 basis points.
- Interest on investment securities increased $276 thousand due to a $94.7 million increase in average investment security balances partially offset by a 13 basis point decrease in average yield.
- Interest on interest-bearing deposits due from banks decreased $2 thousand due to a $7.2 million decrease in average balances and a 1 basis point decrease in average yield.
Interest expense for the three months ended June 30, 2021 decreased $58 thousand or 7% to $764 thousand.
- Interest expense on interest-bearing deposits decreased $60 thousand. Average interest-bearing demand and savings deposit balances increased $32.6 million and average certificates of deposit increased $4.9 million. The average rate paid on interest-bearing deposits decreased 4 basis points from 0.26% to 0.22%.
- There were no FHLB borrowings during the current quarter. Average FHLB borrowings were $3.9 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 $1 thousand. The average debt balance remained unchanged, while the average rate paid decreased 2 basis points.
- Interest expense on junior subordinated debentures decreased $1 thousand. The average debt balance remained unchanged, while the average rate paid decreased 2 basis points.
Provision for Loan and Lease Losses
Many of our asset quality concerns from 2020 have moderated. Net loan recoveries were $167 thousand for the current quarter compared to net loan recoveries of $117 thousand for the prior quarter. 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 June 30, 2021 decreased $32 thousand compared to the prior quarter. The first quarter of 2021 included a $221 thousand legal settlement, which was partial recovery of an investment security impairment loss recorded during the second quarter of 2016. The decrease was partially offset by an $83 thousand increase in ATM and point of sale fees, $57 thousand gain on sale of investment securities and $33 thousand increase in FHLB dividends.
Noninterest Expense
Noninterest expense for the three months ended June 30, 2021 increased $382 thousand compared to the prior quarter. The increase included $817 thousand of merger related costs in the current quarter. This increase was partially offset by a decrease in accrued vacation, salaries and related benefit costs of $434.
The Company’s efficiency ratio was 61.5% for the second quarter of 2021 compared with 57.1% for the prior quarter. The Company’s efficiency ratio of 61.5% for the second quarter of 2021 included $817 thousand of merger related costs, which increased the efficiency ratio by 5.4%.
Income Tax Provision
For the three months ended June 30, 2021, our income tax provision of $1.7 million on pre-tax income of $5.8 million was an effective tax rate of 28.8%. The income tax provision for the prior quarter of $1.8 million on pre-tax income of $6.7 million was an effective tax rate of 26.4%.
The current quarter income tax calculation included the impact of $772 thousand of non-deductible merger related costs, which increased the effective tax rate by 2.4%.
Earnings Per Share
Diluted earnings per share were $0.25 for the three months ended June 30, 2021 compared with diluted earnings per share of $0.23 for the same period a year ago and diluted earnings per share of $0.29 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in Table 9 presented earlier in this press release.
| TABLE 10a | |||||||||||||||||||||||||||
| NET INTEREST MARGIN - UNAUDITED | |||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||
| For The Three Months Ended | |||||||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | March 31, 2021 | |||||||||||||||||||||||||
| Average | Yield / | Average | Yield / | Average | Yield / | ||||||||||||||||||||||
| Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | |||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||
| Loans net of PPP (2) | $ | 1,031,484 | $ | 11,366 | 4.42 | % | $ | 1,048,139 | $ | 12,411 | 4.76 | % | $ | 1,017,123 | $ | 11,547 | 4.60 | % | |||||||||
| PPP loans | 104,037 | 1,063 | 4.10 | % | 132,776 | 813 | 2.46 | % | 123,192 | 1,668 | 5.49 | % | |||||||||||||||
| Taxable securities | 437,710 | 1,697 | 1.56 | % | 211,195 | 1,329 | 2.53 | % | 358,291 | 1,485 | 1.68 | % | |||||||||||||||
| Tax-exempt securities (3) | 97,637 | 575 | 2.36 | % | 58,540 | 423 | 2.91 | % | 82,355 | 511 | 2.52 | % | |||||||||||||||
| Interest-bearing deposits in other banks | 104,152 | 27 | 0.10 | % | 72,507 | 21 | 0.12 | % | 111,320 | 29 | 0.11 | % | |||||||||||||||
| Average interest- earning assets | 1,775,020 | 14,728 | 3.33 | % | 1,523,157 | 14,997 | 3.96 | % | 1,692,281 | 15,240 | 3.65 | % | |||||||||||||||
| Cash and due from banks | 21,819 | 21,564 | 21,744 | ||||||||||||||||||||||||
| Premises and equipment, net | 14,715 | 15,428 | 15,001 | ||||||||||||||||||||||||
| Goodwill | 11,671 | 11,671 | 11,671 | ||||||||||||||||||||||||
| Other intangible assets, net | 3,743 | 4,508 | 3,934 | ||||||||||||||||||||||||
| Other assets | 42,326 | 50,499 | 45,816 | ||||||||||||||||||||||||
| Average total assets | $ | 1,869,294 | $ | 1,626,827 | $ | 1,790,447 | |||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||
| Interest-bearing demand | $ | 301,052 | 55 | 0.07 | % | $ | 261,907 | 85 | 0.13 | % | $ | 295,388 | 58 | 0.08 | % | ||||||||||||
| Money market | 443,067 | 180 | 0.16 | % | 365,368 | 317 | 0.35 | % | 425,113 | 195 | 0.19 | % | |||||||||||||||
| Savings | 163,227 | 41 | 0.10 | % | 138,500 | 95 | 0.28 | % | 154,199 | 48 | 0.13 | % | |||||||||||||||
| Certificates of deposit | 139,391 | 303 | 0.87 | % | 142,955 | 467 | 1.31 | % | 134,520 | 338 | 1.02 | % | |||||||||||||||
| Federal Home Loan Bank of San Francisco ("FHLB") borrowings | — | — | — | % | 16,044 | 5 | 0.13 | % | 3,889 | — | — | % | |||||||||||||||
| Other borrowings | 10,000 | 138 | 5.54 | % | 9,976 | 184 | 7.42 | % | 10,000 | 137 | 5.56 | % | |||||||||||||||
| Junior subordinated debentures | 10,310 | 47 | 1.83 | % | 10,310 | 61 | 2.38 | % | 10,310 | 46 | 1.81 | % | |||||||||||||||
| Average interest- bearing liabilities | 1,067,047 | 764 | 0.29 | % | 945,060 | 1,214 | 0.52 | % | 1,033,419 | 822 | 0.32 | % | |||||||||||||||
| Noninterest-bearing demand | 606,625 | 497,636 | 562,155 | ||||||||||||||||||||||||
| Other liabilities | 16,293 | 17,095 | 16,711 | ||||||||||||||||||||||||
| Shareholders’ equity | 179,329 | 167,036 | 178,162 | ||||||||||||||||||||||||
| Average liabilities and shareholders’ equity | $ | 1,869,294 | $ | 1,626,827 | $ | 1,790,447 | |||||||||||||||||||||
| Net interest income and net interest margin (4) | $ | 13,964 | 3.16 | % | $ | 13,783 | 3.64 | % | $ | 14,418 | 3.46 | % | |||||||||||||||
| (1) Interest income on loans, net of PPP includes net fees and costs of approximately $249 thousand, $138 thousand, and $204 thousand for the three months ended June 30, 2021 and 2020 and March 31, 2021, respectively. Interest income on PPP loans includes $806 thousand, $476 thousand and $1.4 million of net fees and costs for the three months ended June 30, 2021 and 2020 and March 31, 2021, respectively. | |||||||||||||||||||||||||||
| (2) Loans, net of PPP includes average nonaccrual loans of $3.9 million, $5.6 million and $6.2 million for the three months ended June 30, 2021 and 2020 and March 31, 2021, respectively. | |||||||||||||||||||||||||||
| (3) Interest income and yields on tax-exempt securities are presented on a nominal basis, not on a tax equivalent basis. | |||||||||||||||||||||||||||
| (4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the three months ended June 30, 2021 and 2020 and March 31, 2021 included $115 thousand, $216 thousand and $110 thousand, respectively, in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 4, 7 and 4 basis points, respectively. | |||||||||||||||||||||||||||
| (5) Yields and rates are calculated by dividing income or expense by the average balance of assets or liabilities, respectively. | |||||||||||||||||||||||||||
| TABLE 10b | ||||||||||||||||||
| NET INTEREST MARGIN - UNAUDITED | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||
| For The Six Months Ended | ||||||||||||||||||
| June 30, 2021 | June 30, 2020 | |||||||||||||||||
| Average | Yield / | Average | Yield / | |||||||||||||||
| Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | |||||||||||||
| Interest-earning assets: | ||||||||||||||||||
| Loans net of PPP (2) | $ | 1,024,343 | $ | 22,913 | 4.51 | % | $ | 1,040,914 | $ | 24,749 | 4.78 | % | ||||||
| PPP loans | 113,562 | 2,731 | 4.85 | % | 66,388 | 813 | 2.46 | % | ||||||||||
| Taxable securities | 398,220 | 3,182 | 1.61 | % | 224,300 | 2,911 | 2.61 | % | ||||||||||
| Tax-exempt securities (3) | 90,038 | 1,086 | 2.43 | % | 46,705 | 694 | 2.99 | % | ||||||||||
| Interest-bearing deposits in other banks | 107,716 | 56 | 0.10 | % | 59,820 | 175 | 0.59 | % | ||||||||||
| Average interest- earning assets | 1,733,879 | 29,968 | 3.49 | % | 1,438,127 | 29,342 | 4.10 | % | ||||||||||
| Cash and due from banks | 21,781 | 21,775 | ||||||||||||||||
| Premises and equipment, net | 14,858 | 15,591 | ||||||||||||||||
| Goodwill | 11,671 | 11,671 | ||||||||||||||||
| Other intangible assets, net | 3,838 | 4,604 | ||||||||||||||||
| Other assets | 44,062 | 48,655 | ||||||||||||||||
| Average total assets | $ | 1,830,089 | $ | 1,540,423 | ||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||
| Interest-bearing demand | $ | 298,236 | 113 | 0.08 | % | $ | 247,641 | 185 | 0.15 | % | ||||||||
| Money market | 434,140 | 375 | 0.17 | % | 336,477 | 720 | 0.43 | % | ||||||||||
| Savings | 158,738 | 89 | 0.11 | % | 137,002 | 213 | 0.31 | % | ||||||||||
| Certificates of deposit | 136,969 | 641 | 0.94 | % | 145,098 | 931 | 1.29 | % | ||||||||||
| Federal Home Loan Bank of San Francisco ("FHLB") borrowings | 1,934 | — | — | % | 8,132 | 5 | 0.12 | % | ||||||||||
| Other borrowings | 10,000 | 275 | 5.55 | % | 9,970 | 368 | 7.42 | % | ||||||||||
| Junior subordinated debentures | 10,310 | 93 | 1.82 | % | 10,310 | 151 | 2.95 | % | ||||||||||
| Average interest- bearing liabilities | 1,050,327 | 1,586 | 0.30 | % | 894,630 | 2,573 | 0.58 | % | ||||||||||
| Noninterest-bearing demand | 584,513 | 459,241 | ||||||||||||||||
| Other liabilities | 16,501 | 16,974 | ||||||||||||||||
| Shareholders’ equity | 178,748 | 169,578 | ||||||||||||||||
| Average liabilities and shareholders’ equity | $ | 1,830,089 | $ | 1,540,423 | ||||||||||||||
| Net interest income and net interest margin (4) | $ | 28,382 | 3.30 | % | $ | 26,769 | 3.74 | % | ||||||||||
| (1) Interest income on loans, net of PPP includes net fees and costs of approximately $453 thousand and $395 thousand for the six months ended June 30, 2021 and 2020, respectively. Interest income on PPP loans includes $2.2 million and $476 thousand of net fees and costs for the six months ended June 30, 2021 and 2020, respectively. | ||||||||||||||||||
| (2) Loans, net of PPP includes average nonaccrual loans of $5.0 million and $5.5 million for the six months ended June 30, 2021 and 2020, respectively. | ||||||||||||||||||
| (3) Interest income and yields on tax-exempt securities are presented on a nominal basis, not on a tax equivalent basis. | ||||||||||||||||||
| (4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the six months ended June 30, 2021 and 2020 included $225 thousand and $379 thousand, respectively, in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 4 and 7 basis points, respectively. | ||||||||||||||||||
| (5) Yields and rates are calculated by dividing income or expense by the average balance of the assets or liabilities, respectively. | ||||||||||||||||||
| TABLE 11 | ||||||||||||||||||||||||
| ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED | ||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| For The Three Months Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | ||||||||||||||||||||
| ALLL beginning balance | $ | 17,027 | $ | 16,910 | $ | 16,873 | $ | 16,089 | $ | 15,067 | ||||||||||||||
| Provision for loan and lease losses charged to expense | — | — | — | 1,100 | 1,300 | |||||||||||||||||||
| Loans charged-off | (72 | ) | (90 | ) | (86 | ) | (502 | ) | (356 | ) | ||||||||||||||
| Loan and lease loss recoveries | 239 | 207 | 123 | 186 | 78 | |||||||||||||||||||
| ALLL ending balance | $ | 17,194 | $ | 17,027 | $ | 16,910 | $ | 16,873 | $ | 16,089 | ||||||||||||||
| At June 30, | At March 31, | At December 31, | At September 30, | At June 30, | ||||||||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | ||||||||||||||||||||
| Nonaccrual loans: | ||||||||||||||||||||||||
| Commercial | $ | 1,506 | $ | 1,520 | $ | 1,535 | $ | 1,549 | $ | 7 | ||||||||||||||
| Commercial real estate: | ||||||||||||||||||||||||
| Non-owner occupied | 606 | 626 | 640 | 1,712 | 1,717 | |||||||||||||||||||
| Owner occupied | 89 | 95 | 3,094 | 3,100 | 2,992 | |||||||||||||||||||
| Residential real estate: | ||||||||||||||||||||||||
| ITIN | 1,463 | 1,529 | 1,585 | 1,574 | 1,738 | |||||||||||||||||||
| 1-4 family mortgage | 133 | 137 | 141 | 145 | 180 | |||||||||||||||||||
| Consumer and other | 16 | 17 | 18 | 18 | 37 | |||||||||||||||||||
| Total nonaccrual loans | 3,813 | 3,924 | 7,013 | 8,098 | 6,671 | |||||||||||||||||||
| Accruing troubled debt restructured loans: | ||||||||||||||||||||||||
| Commercial | 430 | 494 | 498 | 531 | 592 | |||||||||||||||||||
| Residential real estate: | ||||||||||||||||||||||||
| ITIN | 3,374 | 3,420 | 3,466 | 3,597 | 3,642 | |||||||||||||||||||
| Equity lines | 112 | 121 | 126 | 131 | 221 | |||||||||||||||||||
| Total accruing restructured loans | 3,916 | 4,035 | 4,090 | 4,259 | 4,455 | |||||||||||||||||||
| Total impaired loans | $ | 7,729 | $ | 7,959 | $ | 11,103 | $ | 12,357 | $ | 11,126 | ||||||||||||||
| Gross loans at period end | $ | 1,090,745 | $ | 1,145,943 | $ | 1,139,732 | $ | 1,206,065 | $ | 1,206,340 | ||||||||||||||
| Impaired loans to gross loans | 0.71 | % | 0.69 | % | 0.97 | % | 1.02 | % | 0.92 | % | ||||||||||||||
| Impaired loans to gross loans (excluding PPP) (1) | 0.75 | % | 0.77 | % | 1.10 | % | 1.19 | % | 1.07 | % | ||||||||||||||
| Nonaccrual loans to gross loans | 0.35 | % | 0.34 | % | 0.62 | % | 0.67 | % | 0.55 | % | ||||||||||||||
| Nonaccrual loans to gross loans (excluding PPP) (2) | 0.37 | % | 0.38 | % | 0.70 | % | 0.78 | % | 0.64 | % | ||||||||||||||
| Allowance for loan and lease losses as a percent of: | ||||||||||||||||||||||||
| Gross loans | 1.58 | % | 1.49 | % | 1.48 | % | 1.40 | % | 1.33 | % | ||||||||||||||
| Gross loans (excluding PPP) (3) | 1.67 | % | 1.66 | % | 1.68 | % | 1.62 | % | 1.54 | % | ||||||||||||||
| Nonaccrual loans | 450.93 | % | 433.92 | % | 241.12 | % | 208.36 | % | 241.18 | % | ||||||||||||||
| Impaired loans | 222.46 | % | 213.93 | % | 152.30 | % | 136.55 | % | 144.61 | % | ||||||||||||||
| (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 future losses. 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 or second quarter of 2021. Net loan loss recoveries were $167 thousand during the second quarter of 2021, $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. This compares with the second quarter of 2020 when concerns over COVID-19 necessitated a provision for loan and lease losses of $1.3 million.
Our ALLL methodology supported an ALLL of $17.2 million at June 30, 2021, an increase of 2% compared to our ALLL of $16.9 million at December 31, 2020 and an increase of 7% compared to our ALLL of $16.1 million at June 30, 2020. Management believes the Company’s ALLL is adequate at June 30, 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 June 30, 2021, the recorded investment in loans classified as impaired totaled $7.7 million, with a corresponding specific reserve of $159 thousand compared to impaired loans of $8.0 million, with a corresponding specific reserve of $188 thousand at March 31, 2021 and impaired loans of $11.1 million with a corresponding specific reserve of $270 thousand at June 30, 2020.
| TABLE 12 | ||||||||||||||||||||
| TROUBLED DEBT RESTRUCTURINGS - UNAUDITED | ||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| At June 30, | At March 31, | At December 31, | At September 30, | At June 30, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | ||||||||||||||||
| Nonaccrual | $ | 1,869 | $ | 1,947 | $ | 2,007 | $ | 2,063 | $ | 2,194 | ||||||||||
| Accruing | 3,916 | 4,035 | 4,090 | 4,259 | 4,455 | |||||||||||||||
| Total troubled debt restructurings | $ | 5,785 | $ | 5,982 | $ | 6,097 | $ | 6,322 | $ | 6,649 | ||||||||||
| Troubled debt restructurings as a percent of: | ||||||||||||||||||||
| Gross loans | 0.53 | % | 0.52 | % | 0.53 | % | 0.52 | % | 0.55 | % | ||||||||||
| Gross loans (excluding PPP) (1) | 0.56 | % | 0.58 | % | 0.60 | % | 0.61 | % | 0.64 | % | ||||||||||
| (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 June 30, 2021. As of June 30, 2021, 89 loans were classified as troubled debt restructurings, of which 88 were performing according to their restructured terms. Of the 89 troubled debt restructurings, 81 were ITIN loans totaling $4.6 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 who were 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 loan payment deferrals have ended and borrowers have resumed making payments. At June 30, 2021, payment deferrals were extant for 16 loans totaling $4.1 million compared to 26 loans totaling $4.1 million at March 31, 2021. Loans with a payment deferral at June 30, 2021 consisted of two SBA 504 commercial real estate loans totaling $3.2 million and 14 first trust deed residential mortgage loans totaling $827 thousand.
Past Due Loans
Past due loans as of June 30, 2021 decreased $3.3 million to $1.9 million, compared to $5.2 million as of June 30, 2020 and decreased $1.9 million compared to $3.8 million as of March 31, 2021. 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 first quarter of 2021, a $1.1 million commercial real estate loan that was repaid in the current quarter and a $626 thousand nonaccrual commercial real estate loan that was brought current in the current quarter.
The following table presents nonperforming assets at the dates indicated.
| TABLE 13 | ||||||||||||||||||||
| NONPERFORMING ASSETS - UNAUDITED | ||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| At June 30, | At March 31, | At December 31, | At September 30, | At June 30, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | ||||||||||||||||
| Total nonaccrual loans | $ | 3,813 | $ | 3,924 | $ | 7,013 | $ | 8,098 | $ | 6,671 | ||||||||||
| 90 days past due and still accruing | — | — | — | — | — | |||||||||||||||
| Total nonperforming loans | 3,813 | 3,924 | 7,013 | 8,098 | 6,671 | |||||||||||||||
| Other real estate owned ("OREO") | — | — | 8 | 8 | 8 | |||||||||||||||
| Total nonperforming assets | $ | 3,813 | $ | 3,924 | $ | 7,021 | $ | 8,106 | $ | 6,679 | ||||||||||
| Gross loans | $ | 1,090,745 | $ | 1,145,943 | $ | 1,139,732 | $ | 1,206,065 | $ | 1,206,340 | ||||||||||
| PPP loans (1) | 59,058 | 117,991 | 130,814 | 163,493 | 162,189 | |||||||||||||||
| Total gross loans, net of PPP loans | $ | 1,031,687 | $ | 1,027,952 | $ | 1,008,918 | $ | 1,042,572 | $ | 1,044,151 | ||||||||||
| Nonperforming loans to gross loans | 0.35 | % | 0.34 | % | 0.62 | % | 0.67 | % | 0.55 | % | ||||||||||
| Nonperforming loans to gross loans (excluding PPP) (2) | 0.37 | % | 0.38 | % | 0.70 | % | 0.78 | % | 0.64 | % | ||||||||||
| Nonperforming assets to total assets | 0.20 | % | 0.21 | % | 0.40 | % | 0.47 | % | 0.39 | % | ||||||||||
| (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 June 30, 2021.
| TABLE 14 | ||||||||||||||||||||||||
| LOANS BY RATE INDEX AND PROJECTED REPRICING PERIOD - UNAUDITED | ||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| At June 30, 2021 | ||||||||||||||||||||||||
| Years 6 | ||||||||||||||||||||||||
| Through | Beyond | |||||||||||||||||||||||
| Rate Index: | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 10 | Year 10 | Total | ||||||||||||||||
| Fixed | $ | 59,225 | $ | 67,622 | $ | 46,869 | $ | 44,062 | $ | 39,279 | $ | 217,043 | $ | 39,971 | $ | 514,071 | ||||||||
| Variable: | ||||||||||||||||||||||||
| Prime | 61,925 | 4,939 | 6,593 | 5,116 | 8,584 | 329 | — | 87,486 | ||||||||||||||||
| 5 Year Treasury | 51,583 | 70,562 | 54,639 | 95,601 | 100,033 | 50,097 | — | 422,515 | ||||||||||||||||
| 7 Year Treasury | 2,901 | 4,465 | 5,315 | — | — | — | — | 12,681 | ||||||||||||||||
| 1 Year LIBOR | 16,772 | — | — | — | — | — | — | 16,772 | ||||||||||||||||
| Other Indexes | 3,432 | 2,206 | 2,063 | 10,427 | 2,183 | 12,284 | 1,363 | 33,958 | ||||||||||||||||
| Total accruing variable rate loans | 136,613 | 82,172 | 68,610 | 111,144 | 110,800 | 62,710 | 1,363 | 573,412 | ||||||||||||||||
| Nonaccrual | 796 | 770 | 721 | 434 | 234 | 747 | 111 | 3,813 | ||||||||||||||||
| Total | $ | 196,634 | $ | 150,564 | $ | 116,200 | $ | 155,640 | $ | 150,313 | $ | 280,500 | $ | 41,445 | $ | 1,091,296 | ||||||||
For variable rate loans, the following table summarizes those that are at or above their floor rate, and those that do not possess a contractual floor rate.
| TABLE 15 | |||||||||||||||
| LOAN FLOORS - UNAUDITED | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| Variable Rate Loans at June 30, 2021 | |||||||||||||||
| With Floors | Without | ||||||||||||||
| At Floor Rate | Above Floor Rate | Total | Floors | Total | |||||||||||
| Prime | $ | 43,035 | $ | 6,055 | $ | 49,090 | $ | 38,396 | $ | 87,486 | |||||
| 5 year Treasury | 356,362 | 43,826 | 400,188 | 22,327 | 422,515 | ||||||||||
| 7 Year Treasury | 12,681 | — | 12,681 | — | 12,681 | ||||||||||
| 1 Year LIBOR | — | 701 | 701 | 16,071 | 16,772 | ||||||||||
| Other Indexes | 16,639 | 815 | 17,454 | 16,504 | 33,958 | ||||||||||
| Total accruing variable rate loans | $ | 428,717 | $ | 51,397 | $ | 480,114 | $ | 93,298 | 573,412 | ||||||
| Nonaccrual | 3,813 | ||||||||||||||
| Total variable rate loans | $ | 577,225 | |||||||||||||
| TABLE 16 | ||||||||||||||||||||
| UNAUDITED | ||||||||||||||||||||
| CONSOLIDATED BALANCE SHEET | ||||||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||||||
| At June 30, | Change | At March 31, | ||||||||||||||||||
| 2021 | 2020 | $ | % | 2021 | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and due from banks | $ | 21,011 | $ | 29,630 | $ | (8,619 | ) | (29 | ) | % | $ | 20,053 | ||||||||
| Interest-bearing deposits in other banks | 156,107 | 126,132 | 29,975 | 24 | % | 74,804 | ||||||||||||||
| Total cash and cash equivalents | 177,118 | 155,762 | 21,356 | 14 | % | 94,857 | ||||||||||||||
| Securities available-for-sale, at fair value | 579,664 | 280,200 | 299,464 | 107 | % | 517,375 | ||||||||||||||
| Loans, net of deferred fees and costs | 1,091,296 | 1,204,737 | (113,441 | ) | (9 | ) | % | 1,146,086 | ||||||||||||
| Allowance for loan and lease losses | (17,194 | ) | (16,089 | ) | (1,105 | ) | (7 | ) | % | (17,027 | ) | |||||||||
| Net loans | 1,074,102 | 1,188,648 | (114,546 | ) | (10 | ) | % | 1,129,059 | ||||||||||||
| Premises and equipment, net | 14,514 | 15,466 | (952 | ) | (6 | ) | % | 14,792 | ||||||||||||
| Life insurance | 24,462 | 23,968 | 494 | 2 | % | 24,320 | ||||||||||||||
| Deferred tax asset, net | 5,234 | 2,645 | 2,589 | 98 | % | 5,929 | ||||||||||||||
| Goodwill | 11,671 | 11,671 | — | — | % | 11,671 | ||||||||||||||
| Other intangible assets, net | 3,661 | 4,426 | (765 | ) | (17 | ) | % | 3,852 | ||||||||||||
| Other assets | 26,727 | 29,110 | (2,383 | ) | (8 | ) | % | 27,247 | ||||||||||||
| Total assets | $ | 1,917,153 | $ | 1,711,896 | $ | 205,257 | 12 | % | $ | 1,829,102 | ||||||||||
| Liabilities and shareholders' equity: | ||||||||||||||||||||
| Demand - noninterest-bearing | $ | 627,911 | $ | 521,751 | $ | 106,160 | 20 | % | $ | 603,991 | ||||||||||
| Demand - interest-bearing | 306,565 | 287,198 | 19,367 | 7 | % | 290,687 | ||||||||||||||
| Money market | 463,639 | 405,322 | 58,317 | 14 | % | 425,251 | ||||||||||||||
| Savings | 162,325 | 142,389 | 19,936 | 14 | % | 160,834 | ||||||||||||||
| Certificates of deposit | 136,898 | 137,647 | (749 | ) | (1 | ) | % | 133,630 | ||||||||||||
| Total deposits | 1,697,338 | 1,494,307 | 203,031 | 14 | % | 1,614,393 | ||||||||||||||
| Term debt: | ||||||||||||||||||||
| Federal Home Loan Bank of San Francisco ("FHLB") borrowings | — | 10,000 | (10,000 | ) | (100 | ) | % | — | ||||||||||||
| Other borrowings | 10,000 | 10,000 | — | — | % | 10,000 | ||||||||||||||
| Unamortized debt issuance costs | — | (19 | ) | 19 | 100 | % | — | |||||||||||||
| Net term debt | 10,000 | 19,981 | (9,981 | ) | (50 | ) | % | 10,000 | ||||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | — | — | % | 10,310 | ||||||||||||||
| Other liabilities | 17,368 | 17,743 | (375 | ) | (2 | ) | % | 17,259 | ||||||||||||
| Total liabilities | 1,735,016 | 1,542,341 | 192,675 | 12 | % | 1,651,962 | ||||||||||||||
| Shareholders' equity: | ||||||||||||||||||||
| Common stock | 59,422 | 58,749 | 673 | 1 | % | 59,215 | ||||||||||||||
| Retained earnings | 118,276 | 103,658 | 14,618 | 14 | % | 115,142 | ||||||||||||||
| Accumulated other comprehensive income, net of tax | 4,439 | 7,148 | (2,709 | ) | (38 | ) | % | 2,783 | ||||||||||||
| Total shareholders' equity | 182,137 | 169,555 | 12,582 | 7 | % | 177,140 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,917,153 | $ | 1,711,896 | $ | 205,257 | 12 | % | $ | 1,829,102 | ||||||||||
| Total interest-earning assets | $ | 1,820,765 | $ | 1,600,922 | $ | 219,843 | 14 | % | $ | 1,734,314 | ||||||||||
| Shares outstanding | 16,896 | 16,739 | 157 | 1 | % | 16,876 | ||||||||||||||
| Book value per share (1) | $ | 10.78 | $ | 10.13 | $ | 0.65 | 6 | % | $ | 10.50 | ||||||||||
| Tangible book value per share (1) | $ | 9.87 | $ | 9.17 | $ | 0.70 | 8 | % | $ | 9.58 | ||||||||||
| (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 17 | |||||||||||||||||||||||
| UNAUDITED | |||||||||||||||||||||||
| INCOME STATEMENT | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | |||||||||||||||||||||||
| For The Three Months Ended | For The Six Months Ended | ||||||||||||||||||||||
| June 30, | Change | March 31, | June 30, | ||||||||||||||||||||
| 2021 | 2020 | $ | % | 2021 | 2021 | 2020 | |||||||||||||||||
| Interest income: | |||||||||||||||||||||||
| Interest and fees on loans | $ | 12,429 | $ | 13,224 | $ | (795 | ) | (6 | ) | % | $ | 13,215 | $ | 25,644 | $ | 25,562 | |||||||
| Interest on taxable securities | 1,697 | 1,329 | 368 | 28 | % | 1,485 | 3,182 | 2,911 | |||||||||||||||
| Interest on tax-exempt securities | 575 | 423 | 152 | 36 | % | 511 | 1,086 | 694 | |||||||||||||||
| Interest on interest-bearing deposits in other banks | 27 | 21 | 6 | 29 | % | 29 | 56 | 175 | |||||||||||||||
| Total interest income | 14,728 | 14,997 | (269 | ) | (2 | ) | % | 15,240 | 29,968 | 29,342 | |||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Interest on demand deposits | 55 | 85 | (30 | ) | (35 | ) | % | 58 | 113 | 185 | |||||||||||||
| Interest on money market | 180 | 317 | (137 | ) | (43 | ) | % | 195 | 375 | 720 | |||||||||||||
| Interest on savings | 41 | 95 | (54 | ) | (57 | ) | % | 48 | 89 | 213 | |||||||||||||
| Interest on certificates of deposit | 303 | 467 | (164 | ) | (35 | ) | % | 338 | 641 | 931 | |||||||||||||
| Interest on FHLB borrowings | — | 5 | (5 | ) | (100 | ) | % | — | — | 5 | |||||||||||||
| Interest on other borrowings | 138 | 184 | (46 | ) | (25 | ) | % | 137 | 275 | 368 | |||||||||||||
| Interest on junior subordinated debentures | 47 | 61 | (14 | ) | (23 | ) | % | 46 | 93 | 151 | |||||||||||||
| Total interest expense | 764 | 1,214 | (450 | ) | (37 | ) | % | 822 | 1,586 | 2,573 | |||||||||||||
| Net interest income | 13,964 | 13,783 | 181 | 1 | % | 14,418 | 28,382 | 26,769 | |||||||||||||||
| Provision for loan and lease losses | — | 1,300 | (1,300 | ) | (100 | ) | % | — | — | 4,150 | |||||||||||||
| Net interest income after provision for loan and lease losses | 13,964 | 12,483 | 1,481 | 12 | % | 14,418 | 28,382 | 22,619 | |||||||||||||||
| Noninterest income: | |||||||||||||||||||||||
| Service charges on deposit accounts | 160 | 152 | 8 | 5 | % | 148 | 308 | 321 | |||||||||||||||
| ATM and point of sale fees | 401 | 263 | 138 | 52 | % | 318 | 719 | 531 | |||||||||||||||
| Payroll and benefit processing fees | 160 | 143 | 17 | 12 | % | 169 | 329 | 313 | |||||||||||||||
| Life insurance | 123 | 148 | (25 | ) | (17 | ) | % | 121 | 244 | 271 | |||||||||||||
| Gain on investment securities, net | 64 | 140 | (76 | ) | (54 | ) | % | 7 | 71 | 224 | |||||||||||||
| FHLB dividends | 126 | 36 | 90 | 250 | % | 93 | 219 | 166 | |||||||||||||||
| Legal settlement | — | — | — | — | % | 221 | 221 | — | |||||||||||||||
| Other income | 97 | 73 | 24 | 33 | % | 86 | 183 | 21 | |||||||||||||||
| Total noninterest income | 1,131 | 955 | 176 | 18 | % | 1,163 | 2,294 | 1,847 | |||||||||||||||
| TABLE 17 - CONTINUED | |||||||||||||||||||||||
| UNAUDITED | |||||||||||||||||||||||
| INCOME STATEMENT | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | |||||||||||||||||||||||
| For The Three Months Ended | For The Six Months Ended | ||||||||||||||||||||||
| June 30, | Change | March 31, | June 30, | ||||||||||||||||||||
| 2021 | 2020 | $ | % | 2021 | 2021 | 2020 | |||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| Salaries and related benefits | 5,205 | 4,965 | 240 | 5 | % | 5,639 | 10,844 | 10,852 | |||||||||||||||
| Premises and equipment | 973 | 826 | 147 | 18 | % | 959 | 1,932 | 1,680 | |||||||||||||||
| FDIC insurance premium | 124 | 90 | 34 | 38 | % | 110 | 234 | 126 | |||||||||||||||
| Data processing | 546 | 585 | (39 | ) | (7 | ) | % | 548 | 1,094 | 1,116 | |||||||||||||
| Professional services | 278 | 469 | (191 | ) | (41 | ) | % | 301 | 579 | 803 | |||||||||||||
| Telecommunications | 145 | 156 | (11 | ) | (7 | ) | % | 170 | 315 | 327 | |||||||||||||
| Merger costs | 817 | — | 817 | 100 | % | — | 817 | — | |||||||||||||||
| Other expenses | 1,191 | 1,179 | 12 | 1 | % | 1,170 | 2,361 | 3,149 | |||||||||||||||
| Total noninterest expense | 9,279 | 8,270 | 1,009 | 12 | % | 8,897 | 18,176 | 18,053 | |||||||||||||||
| Income before provision for income taxes | 5,816 | 5,168 | 648 | 13 | % | 6,684 | 12,500 | 6,413 | |||||||||||||||
| Provision for income taxes | 1,677 | 1,321 | 356 | 27 | % | 1,764 | 3,441 | 1,650 | |||||||||||||||
| Net income | $ | 4,139 | $ | 3,847 | $ | 292 | 8 | % | $ | 4,920 | $ | 9,059 | $ | 4,763 | |||||||||
| Earnings per share - basic | $ | 0.25 | $ | 0.23 | $ | 0.02 | 9 | % | $ | 0.29 | $ | 0.54 | $ | 0.28 | |||||||||
| Weighted average shares - basic | 16,736 | 16,660 | 76 | — | % | 16,706 | 16,721 | 17,178 | |||||||||||||||
| Earnings per share - diluted | $ | 0.25 | $ | 0.23 | $ | 0.02 | 9 | % | $ | 0.29 | $ | 0.54 | $ | 0.28 | |||||||||
| Weighted average shares - diluted | 16,823 | 16,689 | 134 | 1 | % | 16,778 | 16,803 | 17,217 | |||||||||||||||
| TABLE 18 | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED | |||||||||||||||
| QUARTERLY AVERAGE BALANCE SHEETS | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| For The Three Months Ended | |||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | |||||||||||
| Earning assets: | |||||||||||||||
| Loans | $ | 1,135,521 | $ | 1,140,315 | $ | 1,172,705 | $ | 1,209,277 | $ | 1,180,915 | |||||
| Taxable securities | 437,710 | 358,291 | 304,242 | 228,045 | 211,195 | ||||||||||
| Tax-exempt securities | 97,637 | 82,355 | 73,207 | 68,766 | 58,540 | ||||||||||
| Interest-bearing deposits in other banks | 104,152 | 111,320 | 124,390 | 95,348 | 72,507 | ||||||||||
| Total earning assets | 1,775,020 | 1,692,281 | 1,674,544 | 1,601,436 | 1,523,157 | ||||||||||
| Cash and due from banks | 21,819 | 21,744 | 22,413 | 23,381 | 21,564 | ||||||||||
| Premises and equipment, net | 14,715 | 15,001 | 15,162 | 15,365 | 15,428 | ||||||||||
| Life insurance | 24,395 | 24,265 | 24,147 | 24,028 | 23,899 | ||||||||||
| Deferred tax asset, net | 5,599 | 4,287 | 2,738 | 2,501 | 3,016 | ||||||||||
| Goodwill | 11,671 | 11,671 | 11,671 | 11,671 | 11,671 | ||||||||||
| Other intangible assets, net | 3,743 | 3,934 | 4,126 | 4,318 | 4,508 | ||||||||||
| Other assets | 12,332 | 17,264 | 20,136 | 21,416 | 23,584 | ||||||||||
| Total assets | $ | 1,869,294 | $ | 1,790,447 | $ | 1,774,937 | $ | 1,704,116 | $ | 1,626,827 | |||||
| Liabilities and shareholders' equity: | |||||||||||||||
| Demand - noninterest-bearing | $ | 606,625 | $ | 562,155 | $ | 552,601 | $ | 531,459 | $ | 497,636 | |||||
| Demand - interest-bearing | 301,052 | 295,388 | 283,213 | 279,744 | 261,907 | ||||||||||
| Money market | 443,067 | 425,113 | 430,014 | 387,995 | 365,368 | ||||||||||
| Savings | 163,227 | 154,199 | 151,223 | 146,074 | 138,500 | ||||||||||
| Certificates of deposit | 139,391 | 134,520 | 138,380 | 139,757 | 142,955 | ||||||||||
| Total deposits | 1,653,362 | 1,571,375 | 1,555,431 | 1,485,029 | 1,406,366 | ||||||||||
| Federal Home Loan Bank of San Francisco ("FHLB") borrowings | — | 3,889 | 7,120 | 10,000 | 16,044 | ||||||||||
| Other borrowings | 10,000 | 10,000 | 9,999 | 9,988 | 9,976 | ||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | 10,310 | 10,310 | 10,310 | ||||||||||
| Other liabilities | 16,293 | 16,711 | 17,557 | 17,356 | 17,095 | ||||||||||
| Total liabilities | 1,689,965 | 1,612,285 | 1,600,417 | 1,532,683 | 1,459,791 | ||||||||||
| Shareholders' equity | 179,329 | 178,162 | 174,520 | 171,433 | 167,036 | ||||||||||
| Liabilities & shareholders' equity | $ | 1,869,294 | $ | 1,790,447 | $ | 1,774,937 | $ | 1,704,116 | $ | 1,626,827 | |||||
| TABLE 19 | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED | |||||||||||||||
| YEAR TO DATE AVERAGE BALANCE SHEETS | |||||||||||||||
| (dollars in thousands) | |||||||||||||||
| For The Six Months Ended | For The Twelve Months Ended | ||||||||||||||
| June 30, | June 30, | December 31, | December 31, | December 31, | |||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | |||||||||||
| Earning assets: | |||||||||||||||
| Loans | $ | 1,137,905 | $ | 1,107,302 | $ | 1,149,375 | $ | 1,020,801 | $ | 915,360 | |||||
| Taxable securities | 398,220 | 224,300 | 245,336 | 246,723 | 207,407 | ||||||||||
| Tax-exempt securities | 90,038 | 46,705 | 58,912 | 38,706 | 50,330 | ||||||||||
| Interest-bearing deposits in other banks | 107,716 | 59,820 | 84,982 | 54,095 | 47,038 | ||||||||||
| Total earning assets | 1,733,879 | 1,438,127 | 1,538,605 | 1,360,325 | 1,220,135 | ||||||||||
| Cash and due from banks | 21,781 | 21,775 | 22,339 | 22,806 | 20,468 | ||||||||||
| Premises and equipment, net | 14,858 | 15,591 | 15,426 | 15,598 | 13,952 | ||||||||||
| Life insurance | 24,330 | 23,968 | 23,960 | 23,371 | 22,148 | ||||||||||
| Deferred tax asset, net | 4,947 | 2,645 | 3,126 | 5,430 | 7,567 | ||||||||||
| Goodwill | 11,671 | 11,671 | 11,671 | 10,758 | 665 | ||||||||||
| Other intangible assets, net | 3,838 | 4,604 | 4,412 | 4,807 | 1,252 | ||||||||||
| Other assets | 14,785 | 22,042 | 20,980 | 15,017 | 2,654 | ||||||||||
| Total assets | $ | 1,830,089 | $ | 1,540,423 | $ | 1,640,519 | $ | 1,458,112 | $ | 1,288,841 | |||||
| Liabilities and shareholders' equity: | |||||||||||||||
| Demand - noninterest-bearing | $ | 584,513 | $ | 459,241 | $ | 500,862 | $ | 400,588 | $ | 332,197 | |||||
| Demand - interest-bearing | 298,236 | 247,641 | 264,652 | 242,516 | 238,328 | ||||||||||
| Money market | 434,140 | 336,477 | 372,939 | 304,340 | 250,685 | ||||||||||
| Savings | 158,738 | 137,002 | 142,857 | 136,733 | 109,025 | ||||||||||
| Certificates of deposit | 136,969 | 145,098 | 142,067 | 160,550 | 168,183 | ||||||||||
| Total deposits | 1,612,596 | 1,325,459 | 1,423,377 | 1,244,727 | 1,098,418 | ||||||||||
| Federal Home Loan Bank of San Francisco ("FHLB") borrowings | 1,934 | 8,132 | 8,347 | 9,644 | 22,466 | ||||||||||
| Other borrowings | 10,000 | 9,970 | 9,981 | 10,895 | 15,143 | ||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | 10,310 | 10,310 | 10,310 | ||||||||||
| Other liabilities | 16,501 | 16,974 | 17,217 | 17,894 | 12,286 | ||||||||||
| Total liabilities | 1,651,341 | 1,370,845 | 1,469,232 | 1,293,470 | 1,158,623 | ||||||||||
| Shareholders' equity | 178,748 | 169,578 | 171,287 | 164,642 | 130,218 | ||||||||||
| Liabilities & shareholders' equity | $ | 1,830,089 | $ | 1,540,423 | $ | 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 Officer
Telephone Direct (916) 677-5800
James A. Sundquist, Executive Vice President and Chief Financial Officer
Telephone Direct (916) 677-5825
Andrea M. Newburn, Vice President and Senior Administrative Officer / Corporate Secretary
Telephone Direct (530) 722-3959