Exhibit 99.1
For Immediate Release:
Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2019
SACRAMENTO, California, January 17, 2020 / GLOBE NEWSWIRE—Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.480 billion asset bank holding company and parent company of Merchants Bank of Commerce (the “Bank”), today announced financial results for the quarter and the year ended December 31, 2019. Net income for the quarter ended December 31, 2019 was $4.4 million or $0.24 per share – diluted, compared with net income of $4.8 million or $0.30 per share – diluted for the same period of 2018. Net income for the year ended December 31, 2019 was $15.0 million or $0.83 per share – diluted, compared with net income of $15.7 million or $0.96 per share – diluted for the same period of 2018.
The current year includes the benefits of our January 31, 2019 acquisition of Merchants National Bank of Sacramento (“Merchants”). In May, we successfully converted all of Merchant’s computer records onto our core system. As previously announced, the Company’s subsidiary bank, which had been operating under multiple names, simultaneously changed the name for all locations to Merchants Bank of Commerce. During 2019 acquisition related costs totaled $2.2 million and costs related to the name change totaled $503 thousand. All significant costs for these two projects have now been absorbed.
Randall S. Eslick, President and CEO commented: “We are pleased to report that 2019 was another solid year for the company. We are proud of our high quality assets, the successful acquisition and integration of Merchants National Bank and the widespread acceptance of our new name, Merchants Bank of Commerce. Thanks to the hard work of our dedicated employees our company remains well positioned for continued success.”
Financial highlights for the year ended December 31, 2019:
● | Net income of $15.0 million was a decrease of $769 thousand (5%) from $15.7 million earned during the same period in the prior year. Earnings of $0.83 per share – diluted was an decrease of $0.13 (14%) from $0.96 per share – diluted earned during the same period in the prior year and reflects the impact of the following: |
| | o | 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants and |
| | o | 90,501 shares of common stock repurchased during the fourth quarter of 2019 as part of our previously announced share repurchase program. |
● | Net interest income increased $6.0 million (13%) to $53.5 million compared to $47.5 million for the same period in the prior year. |
● | Net interest margin improved to 3.94% compared to 3.90% for the same period in the prior year. |
● | Return on average assets decreased to 1.03% compared to 1.22% for the same period in the prior year. |
● | Return on average equity decreased to 9.09% compared to 12.08% for the same period in the prior year. |
● | Average loans totaled $1.021 billion, an increase of $105 million (12%) compared to average loans for the same period in the prior year. |
● | Average earning assets totaled $1.360 billion, an increase of $140 million (11%) compared to average earning assets for the same period in the prior year. |
● | Average deposits totaled $1.245 billion, an increase of $146 million (13%) compared to average deposits for the same period in the prior year. |
| | o | Average non-maturing deposits totaled $1.084 billion, an increase of $154 million (17%) compared to the same period in the prior year. |
| | o | Average certificates of deposit totaled $160.6 million, a decrease of $7.6 million (5%) compared to same period in the prior year. |
● | The Company’s efficiency ratio was 64.5% compared to 62.5% during the same period in the prior year. |
| | o | The Company’s efficiency ratio of 64.5% for 2019 includes $2.2 million in acquisition costs and $503 thousand in name change costs. The efficiency ratio excluding these non-recurring costs is 59.9%. |
| | o | The Company’s efficiency ratio of 62.5% for 2018 includes $844 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs is 60.8%. |
● | Nonperforming assets at December 31, 2019 totaled $5.7 million or 0.38% of total assets, an increase of $1.5 million since December 31, 2018. The increase was primarily caused by loans to one commercial real estate borrower that were moved to nonaccrual and had zero calculated impairment at December 31, 2019. |
● | Book value per common share was $9.62 at December 31, 2019 compared to $8.47 at December 31, 2018. |
● | Tangible book value per common share was $8.71 at December 31, 2019 compared to $8.36 at December 31, 2018. |
Financial highlights for the fourth quarter of 2019:
● | Net income of $4.4 million ($0.24 per share – diluted) was a decrease of $470 thousand (10%) from $4.8 million ($0.30 per share – diluted) earned during the same period in the prior year and reflects the impact of the following: |
| | o | 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants and |
| | o | 90,501 shares of common stock repurchased during the fourth quarter of 2019 as part of our previously announced share repurchase program. |
● | Net interest income increased $820 thousand (7%) to $13.3 million compared to $12.5 million for the same period in the prior year. |
● | Net interest margin decreased to 3.80% compared to 3.93% for the same period in the prior year. |
● | Return on average assets decreased to 1.16% compared to 1.44% for the same period in the prior year. |
● | Return on average equity decreased to 10.06% compared to 14.32% for the same period in the prior year. |
● | Average loans totaled $1.032 billion, an increase of $108 million (12%) compared to average loans for the same period in the prior year. |
● | Average earning assets totaled $1.390 billion, an increase of $131 million (10%) compared the same period in the prior year. |
● | Average deposits totaled $1.282 billion, an increase of $124 million (11%) compared the same period in the prior year. |
| | o | Average non-maturing deposits totaled $1.129 billion, an increase of $128 million (13%) compared to the same period in the prior year. |
| | o | Average certificates of deposit totaled $153.2 million, a decrease of $3.8 million (2%) compared to the same period in the prior year. |
● | The Company’s efficiency ratio was 58.7% compared to 65.1% for the same period in the prior year. |
| | o | The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 includes $802 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs is 59.2%. |
● | Nonperforming assets at December 31, 2019 totaled $5.7 million or 0.38% of total assets, a decrease of $7.2 million since September 30, 2019. The decrease was due to a sale of a $9.9 million nonaccrual commercial real estate loan. |
● | Book value per common share was $9.62 at December 31, 2019 compared to $9.42 at September 30, 2019. |
● | Tangible book value per common share was $8.71 at December 31, 2019 compared to $8.51 at September 30, 2019. |
Selected Tax Items:
Financial performance for 2018 includes “selected tax items” which complicate reporting period comparisons. The 2018 results include a $1.5 million decrease in our income tax provision composed of a $988 thousand reversal of our uncertain tax position and a $484 thousand benefit as a result of our cost segregation study and tangible property review. These items were previously disclosed in our form 10-K filed March 12, 2019. Management believes that our financial results are more comparative excluding the impact of these selected tax items.
Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. We believe that these non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this document are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.
SELECTED NON-GAAP FINANCIAL INFORMATION - UNAUDITED |
(amounts in thousands except per share data) |
| | | | | | | | | | | | | | | | | | | | | |
| | | For The Three Months Ended | | | For The Twelve Months Ended | |
Reconciliation of Net Income (GAAP) to Net Income | | December 31, | | | September 30, | | | December 31, | |
Excluding Selected Tax Items (non-GAAP): | | 2019 | | | 2018 | | | 2019 | | | 2019 | | | 2018 | |
Net income (GAAP) | | $ | 4,369 | | | $ | 4,839 | | | $ | 4,642 | | | $ | 14,961 | | | $ | 15,730 | |
Selected tax items: | | | | | | | | | | | | | | | | | | | | |
Reversal of uncertain tax position (GAAP) | | | — | | | | (988 | ) | | | — | | | | — | | | | (988 | ) |
Benefit from cost segregation study and tangible property review (GAAP) | | | — | | | | (484 | ) | | | — | | | | — | | | | (484 | ) |
Total selected tax items | | | — | | | | (1,472 | ) | | | — | | | | — | | | | (1,472 | ) |
Net income excluding selected tax items (non-GAAP) | | $ | 4,369 | | | $ | 3,367 | | | $ | 4,642 | | | $ | 14,961 | | | $ | 14,258 | |
| | | | | | | | | | | | | | | | | | | | | |
Earnings per share - diluted (GAAP) | | $ | 0.24 | | | $ | 0.30 | | | $ | 0.26 | | | $ | 0.83 | | | $ | 0.96 | |
Effect of selected tax items | | | — | | | | (0.09 | ) | | | — | | | | — | | | | (0.09 | ) |
Earnings per share - diluted excluding selected tax items (non-GAAP) | | $ | 0.24 | | | $ | 0.21 | | | $ | 0.26 | | | $ | 0.83 | | | $ | 0.87 | |
| | | | | | | | | | | | | | | | | | | | | |
GAAP Information: | | | | | | | | | | | | | | | | | | | | |
Return on average assets | | | 1.16 | % | | | 1.44 | % | | | 1.26 | % | | | 1.03 | % | | | 1.22 | % |
Return on average equity | | | 10.06 | % | | | 14.32 | % | | | 10.86 | % | | | 9.09 | % | | | 12.08 | % |
Effective tax rate | | | 26.1 | % | | | (1.7 | %) | | | 27.8 | % | | | 26.9 | % | | | 18.7 | % |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP Ratios: | | | | | | | | | | | | | | | | | | | | |
Return on average assets excluding selected tax items | | | 1.16 | % | | | 1.01 | % | | | 1.26 | % | | | 1.03 | % | | | 1.11 | % |
Return on average equity excluding selected tax items | | | 10.06 | % | | | 9.97 | % | | | 10.86 | % | | | 9.09 | % | | | 10.95 | % |
Effective tax rate excluding selected tax items | | | 26.1 | % | | | 29.2 | % | | | 27.8 | % | | | 26.9 | % | | | 26.3 | % |
Forward-Looking Statements
Bank of Commerce Holdings wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. This news release includes statements by the Company, which describe management’s expectations and developments, which may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21B of the Securities Act of 1934, as amended. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company's public filings, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the Company's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new banks and/or branches are lower than expected; (4) our concentration in lending tied to real estate exposes us to the adverse effects of material increases in interest rates, declines in the general economy, tightening credit markets or declines in real estate values; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged; and (7) technological changes could expose us to new risks.
TABLE 1 |
SELECTED FINANCIAL INFORMATION - UNAUDITED |
(amounts in thousands except per share data) |
| | | | | | | | | | | | | | | | | | | | | |
| | | For The Three Months Ended | | | For The Twelve Months Ended | |
Net income, average assets and | | December 31, | | | September 30, | | | December 31, | |
average shareholders' equity | | 2019 | | | 2018 | | | 2019 | | | 2019 | | | 2018 | |
Net income | | $ | 4,369 | | | $ | 4,839 | | | $ | 4,642 | | | $ | 14,961 | | | $ | 15,730 | |
Average total assets | | $ | 1,492,643 | | | $ | 1,328,817 | | | $ | 1,462,444 | | | $ | 1,458,112 | | | $ | 1,288,841 | |
Average total earning assets | | $ | 1,390,446 | | | $ | 1,259,709 | | | $ | 1,360,006 | | | $ | 1,360,325 | | | $ | 1,220,135 | |
Average shareholders' equity | | $ | 172,385 | | | $ | 134,033 | | | $ | 169,608 | | | $ | 164,642 | | | $ | 130,218 | |
| | | | | | | | | | | | | | | | | | | | | |
Selected performance ratios | | | | | | | | | | | | | | | | | | | | |
Return on average assets | | | 1.16 | % | | | 1.44 | % | | | 1.26 | % | | | 1.03 | % | | | 1.22 | % |
Return on average equity | | | 10.06 | % | | | 14.32 | % | | | 10.86 | % | | | 9.09 | % | | | 12.08 | % |
Efficiency ratio | | | 58.7 | % | | | 65.1 | % | | | 56.4 | % | | | 64.5 | % | | | 62.5 | % |
| | | | | | | | | | | | | | | | | | | | | |
Share and per share amounts | | | | | | | | | | | | | | | | | | | | |
Weighted average shares - basic (1) | | | 18,068 | | | | 16,265 | | | | 18,130 | | | | 17,956 | | | | 16,248 | |
Weighted average shares - diluted (1) | | | 18,150 | | | | 16,345 | | | | 18,196 | | | | 18,024 | | | | 16,332 | |
Earnings per share - basic | | $ | 0.24 | | | $ | 0.30 | | | $ | 0.26 | | | $ | 0.83 | | | $ | 0.97 | |
Earnings per share - diluted | | $ | 0.24 | | | $ | 0.30 | | | $ | 0.26 | | | $ | 0.83 | | | $ | 0.96 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | At December 31, | | | At September 30, | | | | | | | | | |
Share and per share amounts | | 2019 | | | 2018 | | | 2019 | | | | | | | | | |
Common shares outstanding (2) | | | 18,137 | | | | 16,334 | | | | 18,212 | | | | | | | | | |
Book value per common share (2) | | $ | 9.62 | | | $ | 8.47 | | | $ | 9.42 | | | | | | | | | |
Tangible book value per common share (2)(3) | | $ | 8.71 | | | $ | 8.36 | | | $ | 8.51 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Capital ratios (4) | | | | | | | | | | | | | | | | | | | | |
Bank of Commerce Holdings | | | | | | | | | | | | | | | | | | | | |
Common equity tier 1 capital ratio | | | 13.19 | % | | | 12.79 | % | | | 12.85 | % | | | | | | | | |
Tier 1 capital ratio | | | 14.04 | % | | | 13.71 | % | | | 13.69 | % | | | | | | | | |
Total capital ratio | | | 15.97 | % | | | 15.82 | % | | | 15.62 | % | | | | | | | | |
Tier 1 leverage ratio | | | 11.30 | % | | | 11.21 | % | | | 11.28 | % | | | | | | | | |
Tangible common equity ratio (5) | | | 10.80 | % | | | 10.46 | % | | | 10.64 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Merchants Bank of Commerce | | | | | | | | | | | | | | | | | | | | |
Common equity tier 1 capital ratio | | | 14.39 | % | | | 13.23 | % | | | 14.25 | % | | | | | | | | |
Tier 1 capital ratio | | | 14.39 | % | | | 13.23 | % | | | 14.25 | % | | | | | | | | |
Total capital ratio | | | 15.48 | % | | | 14.42 | % | | | 15.34 | % | | | | | | | | |
Tier 1 leverage ratio | | | 11.58 | % | | | 10.81 | % | | | 11.74 | % | | | | | | | | |
(1) Excludes unvested restricted shares issued in accordance with the Company's equity incentive plan, as they are non-participative in dividends or voting rights. |
(2) Includes unvested restricted shares issued in accordance with the Company's equity incentive plan. |
(3) Book value per share is computed by dividing total shareholders’ equity by shares outstanding. Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy. |
(4) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. |
(5) Management believes the tangible common equity ratio is a useful measure of capital adequacy because it provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the capital of the Company and the ability of the Company to absorb potential losses. The tangible common equity ratio is calculated as total shareholders' equity less goodwill and core deposit intangible, net divided by total assets less goodwill and core deposit intangible, net. |
BALANCE SHEET OVERVIEW
As of December 31, 2019, the Company had total consolidated assets of $1.480 billion, gross loans of $1.033 billion, allowance for loan and lease losses (“ALLL”) of $12 million, total deposits of $1.267 billion, and shareholders’ equity of $174 million.
TABLE 2 |
LOAN BALANCES BY TYPE - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | At December 31, | | | | | | | | | | | At September 30, | |
| | | | | | | % of | | | | | | | % of | | | Change | | | | | | | % of | |
| | | 2019 | | | Total | | | 2018 | | | Total | | | Amount | | | % | | | 2019 | | | Total | |
Commercial | | $ | 141,197 | | | | 14 | % | | $ | 135,543 | | | | 14 | % | | $ | 5,654 | | | | 4 | % | | $ | 152,195 | | | | 15 | % |
Real estate - construction and land development | | | 26,830 | | | | 3 | | | | 22,563 | | | | 2 | | | | 4,267 | | | | 19 | % | | | 35,606 | | | | 3 | |
Real estate - commercial non-owner occupied | | | 493,920 | | | | 48 | | | | 433,708 | | | | 46 | | | | 60,212 | | | | 14 | % | | | 475,678 | | | | 47 | |
Real estate - commercial owner occupied | | | 218,833 | | | | 21 | | | | 204,622 | | | | 22 | | | | 14,211 | | | | 7 | % | | | 210,767 | | | | 20 | |
Real estate - residential - ITIN | | | 33,039 | | | | 3 | | | | 37,446 | | | | 4 | | | | (4,407 | ) | | | (12 | )% | | | 34,036 | | | | 3 | |
Real estate - residential - 1-4 family mortgage | | | 63,661 | | | | 6 | | | | 34,366 | | | | 4 | | | | 29,295 | | | | 85 | % | | | 64,747 | | | | 6 | |
Real estate - residential - equity lines | | | 22,099 | | | | 2 | | | | 26,958 | | | | 3 | | | | (4,859 | ) | | | (18 | )% | | | 22,729 | | | | 2 | |
Consumer and other | | | 33,324 | | | | 3 | | | | 51,045 | | | | 5 | | | | (17,721 | ) | | | (35 | )% | | | 37,324 | | | | 4 | |
Gross loans | | | 1,032,903 | | | | 100 | % | | | 946,251 | | | | 100 | % | | | 86,652 | | | | 9 | % | | | 1,033,082 | | | | 100 | % |
Deferred fees and costs | | | 2,162 | | | | | | | | 1,927 | | | | | | | | 235 | | | | | | | | 1,980 | | | | | |
Loans, net of deferred fees and costs | | | 1,035,065 | | | | | | | | 948,178 | | | | | | | | 86,887 | | | | | | | | 1,035,062 | | | | | |
Allowance for loan and lease losses | | | (12,231 | ) | | | | | | | (12,292 | ) | | | | | | | 61 | | | | | | | | (12,285 | ) | | | | |
Net loans | | $ | 1,022,834 | | | | | | | $ | 935,886 | | | | | | | $ | 86,948 | | | | | | | $ | 1,022,777 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average loans during the quarter | | $ | 1,031,702 | | | | | | | $ | 923,409 | | | | | | | $ | 108,293 | | | | 12 | % | | $ | 1,029,534 | | | | | |
Average yield on loans during the quarter | | | 4.86 | % | | | | | | | 4.94 | % | | | | | | | (0.08 | ) | | | | | | | 5.01 | % | | | | |
Average yield on loans during the year | | | 4.95 | % | | | | | | | 4.91 | % | | | | | | | 0.04 | | | | | | | | 4.98 | % | | | | |
The Company recorded gross loan balances of $1.033 billion at December 31, 2019, compared with $946 million and $1.033 billion at December 31, 2018 and September 30, 2019, respectively, an increase of $87 million and a decrease of $179 thousand, respectively. During the first quarter of 2019, the Merchants acquisition provided an additional $85.3 million of loans.
The average yield on loans during the quarter was 4.86% compared to 4.94% and 5.01% for the quarters ended December 31, 2018 and September 30, 2019, respectively.
Gross loan balances in the table above include a net fair value discount for loans acquired from Merchants during the first quarter of 2019 of $1.7 million and $1.9 million at December 31, 2019 and September 30, 2019, respectively. We recorded $193 thousand and $188 thousand in accretion of the discount for these loans during the third and fourth quarters of 2019, respectively.
TABLE 3 |
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | At December 31, | | | | | | | | | | | At September 30, | |
| | | | | | | % of | | | | | | | % of | | | Change | | | | | | | % of | |
| | | 2019 | | | Total | | | 2018 | | | Total | | | Amount | | | % | | | 2019 | | | Total | |
Cash and due from banks | | $ | 21,338 | | | | 6 | % | | $ | 23,692 | | | | 8 | % | | $ | (2,354 | ) | | | (10 | )% | | $ | 32,505 | | | | 9 | % |
Interest-bearing deposits in other banks | | | 59,266 | | | | 16 | | | | 23,673 | | | | 8 | | | | 35,593 | | | | 150 | % | | | 56,099 | | | | 16 | |
Total cash and cash equivalents | | | 80,604 | | | | 22 | | | | 47,365 | | | | 16 | | | | 33,239 | | | | 70 | % | | | 88,604 | | | | 25 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. government and agencies | | | 38,733 | | | | 11 | | | | 40,087 | | | | 13 | | | | (1,354 | ) | | | (3 | )% | | | 40,467 | | | | 11 | |
Obligations of state and political subdivisions | | | 42,098 | | | | 11 | | | | 50,530 | | | | 17 | | | | (8,432 | ) | | | (17 | )% | | | 39,004 | | | | 11 | |
Residential mortgage backed securities and collateralized mortgage obligations | | | 180,835 | | | | 49 | | | | 138,503 | | | | 45 | | | | 42,332 | | | | 31 | % | | | 165,994 | | | | 46 | |
Corporate securities | | | 2,966 | | | | 1 | | | | 2,922 | | | | 1 | | | | 44 | | | | 2 | % | | | 2,992 | | | | 1 | |
Commercial mortgage backed securities | | | 19,307 | | | | 5 | | | | 24,762 | | | | 8 | | | | (5,455 | ) | | | (22 | )% | | | 22,822 | | | | 6 | |
Other asset backed securities | | | 3,011 | | | | 1 | | | | 124 | | | | — | | | | 2,887 | | | | 2,328 | % | | | 1,062 | | | | — | |
Total investment securities - AFS | | | 286,950 | | | | 78 | | | | 256,928 | | | | 84 | | | | 30,022 | | | | 12 | % | | | 272,341 | | | | 75 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total cash, cash equivalents and investment securities | | $ | 367,554 | | | | 100 | % | | $ | 304,293 | | | | 100 | % | | $ | 63,261 | | | | 21 | % | | $ | 360,945 | | | | 100 | % |
Average yield on interest-bearing due from banks and investment securities during the quarter - nominal | | | 2.39 | % | | | | | | | 2.66 | % | | | | | | | (0.27 | ) | | | | | | | 2.63 | % | | | | |
Average yield on interest-bearing due from banks and investment securities during the quarter - tax equivalent | | | 2.47 | % | | | | | | | 2.77 | % | | | | | | | (0.30 | ) | | | | | | | 2.71 | % | | | | |
As of December 31, 2019, we maintained noninterest-bearing cash positions of $21.3 million and interest-bearing deposits of $59.3 million at the Federal Reserve Bank and correspondent banks.
Investment securities totaled $287.0 million at December 31, 2019, compared with $256.9 million and $272.3 million at December 31, 2018 and September 30, 2019, respectively. During the first quarter of 2019, the Merchants acquisition included securities with a par value of $107.4 million. Management elected to sell securities with a par value of $18.0 million and $118.0 million during the quarter and the year ended December 31, 2019, respectively. The sales resulted in net realized gains of $49 thousand and $186 thousand for the quarter and the year ended December 31, 2019, respectively.
Average securities balances and weighted average tax equivalent yields for the quarters ended December 31, 2019 and 2018 were $277.6 million and 2.71% compared to $261.0 million and 2.91%, respectively.
At December 31, 2019, our net unrealized gains on available-for-sale investment securities were $3.7 million compared with net unrealized losses of $4.3 million and unrealized gains of $3.3 million at December 31, 2018 and September 30, 2019, respectively. The changes in net unrealized losses on the investment securities portfolio were due to changes in market interest rates.
TABLE 4 |
DEPOSITS BY TYPE - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | At December 31, | | | | | | | | | | | At September 30, | |
| | | | | | | % of | | | | | | | % of | | | Change | | | | | | | % of | |
| | | 2019 | | | Total | | | 2018 | | | Total | | | Amount | | | % | | | 2019 | | | Total | |
Demand - noninterest-bearing | | $ | 432,680 | | | | 34 | % | | $ | 347,199 | | | | 31 | % | | $ | 85,481 | | | | 25 | % | | $ | 412,410 | | | | 33 | % |
Demand - interest-bearing | | | 239,258 | | | | 19 | | | | 252,202 | | | | 22 | | | | (12,944 | ) | | | (5 | )% | | | 239,547 | | | | 19 | |
Money market | | | 307,559 | | | | 24 | | | | 265,093 | | | | 23 | | | | 42,466 | | | | 16 | % | | | 317,120 | | | | 25 | |
Total demand | | | 979,497 | | | | 77 | | | | 864,494 | | | | 76 | | | | 115,003 | | | | 13 | % | | | 969,077 | | | | 77 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Savings | | | 135,888 | | | | 11 | | | | 114,840 | | | | 10 | | | | 21,048 | | | | 18 | % | | | 137,441 | | | | 11 | |
Total non-maturing deposits | | | 1,115,385 | | | | 88 | | | | 979,334 | | | | 86 | | | | 136,051 | | | | 14 | % | | | 1,106,518 | | | | 88 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Certificates of deposit | | | 151,786 | | | | 12 | | | | 152,382 | | | | 14 | | | | (596 | ) | | | 0 | % | | | 155,621 | | | | 12 | |
Total deposits | | $ | 1,267,171 | | | | 100 | % | | $ | 1,131,716 | | | | 100 | % | | $ | 135,455 | | | | 12 | % | | $ | 1,262,139 | | | | 100 | % |
Total deposits at December 31, 2019, increased $135 million or 12% to $1.267 billion compared to December 31, 2018 and increased $5 million or 2% annualized compared to September 30, 2019. Total non-maturing deposits increased $136.1 million or 14% compared to the same date a year ago and increased $8.9 million or 3% annualized compared to September 30, 2019. Certificates of deposit decreased $596 thousand or less than 1% compared to the same date a year ago and decreased $3.8 million or 10% annualized compared to September 30, 2019.
TABLE 5 |
WHOLESALE AND RECIPROCAL DEPOSITS - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | |
| | | At December 31, | | | At September 30, | |
| | | 2019 | | | 2018 | | | 2019 | |
CDARS / ICS reciprocal deposits | | $ | 64,030 | | | $ | 83,666 | | | $ | 57,897 | |
Online listing service wholesale time deposits | | | 248 | | | | 22,015 | | | | 248 | |
Total wholesale and reciprocal deposits | | $ | 64,278 | | | $ | 105,681 | | | $ | 58,145 | |
For calendar quarters prior to April 1, 2018, CDARS/ ICS reciprocal deposits were considered to be brokered deposits by regulatory authorities and were reported as such on quarterly Call Reports. With passage of The Economic Growth, Regulatory Relief and Consumer Protection Act in May 2018, this is no longer so.
AVERAGE COST OF FUNDS
The following table presents the average cost of interest-bearing deposits, all deposits and all interest-bearing liabilities for the periods indicated.
TABLE 6 |
AVERAGE COST OF FUNDS - UNAUDITED |
For The Three Months Ended |
| | | December 31, | | | September 30, | | | June 30, | | | March 31, | | | December 31, | | | September 30, | | | June 30, | | | March 31, | |
| | | 2019 | | | 2019 | | | 2019 | | | 2019 | | | 2018 | | | 2018 | | | 2018 | | | 2018 | |
Interest-bearing deposits | | | 0.56 | % | | | 0.56 | % | | | 0.54 | % | | | 0.49 | % | | | 0.45 | % | | | 0.42 | % | | | 0.41 | % | | | 0.41 | % |
Interest-bearing deposits and noninterest-bearing demand | | | 0.38 | % | | | 0.38 | % | | | 0.37 | % | | | 0.34 | % | | | 0.31 | % | | | 0.29 | % | | | 0.29 | % | | | 0.29 | % |
All interest-bearing liabilities | | | 0.68 | % | | | 0.68 | % | | | 0.74 | % | | | 0.67 | % | | | 0.61 | % | | | 0.64 | % | | | 0.68 | % | | | 0.60 | % |
All interest-bearing liabilities and noninterest-bearing demand | | | 0.46 | % | | | 0.46 | % | | | 0.52 | % | | | 0.46 | % | | | 0.42 | % | | | 0.45 | % | | | 0.50 | % | | | 0.43 | % |
INCOME STATEMENT OVERVIEW
TABLE 7 |
SUMMARY INCOME STATEMENT - UNAUDITED |
(amounts in thousands, except per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For The Three Months Ended | |
| | | December 31, | | | Change | | | September 30, | | | Change | |
| | | 2019 | | | 2018 | | | Amount | | | % | | | 2019 | | | Amount | | | % | |
Interest income | | $ | 14,808 | | | $ | 13,750 | | | $ | 1,058 | | | | 8 | % | | $ | 15,201 | | | $ | (393 | ) | | | (3 | )% |
Interest expense | | | 1,494 | | | | 1,256 | | | | 238 | | | | 19 | % | | | 1,479 | | | | 15 | | | | 1 | % |
Net interest income | | | 13,314 | | | | 12,494 | | | | 820 | | | | 7 | % | | | 13,722 | | | | (408 | ) | | | (3 | )% |
Provision for loan and lease losses | | | — | | | | — | | | | — | | | | — | % | | | — | | | | — | | | | — | % |
Noninterest income | | | 1,021 | | | | 1,132 | | | | (111 | ) | | | (10 | )% | | | 1,006 | | | | 15 | | | | 1 | % |
Noninterest expense | | | 8,421 | | | | 8,868 | | | | (447 | ) | | | (5 | )% | | | 8,300 | | | | 121 | | | | 1 | % |
Income before provision for income taxes | | | 5,914 | | | | 4,758 | | | | 1,156 | | | | 24 | % | | | 6,428 | | | | (514 | ) | | | (8 | )% |
Provision for income taxes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reversal of uncertain tax position | | | — | | | | (988 | ) | | | 988 | | | | (100 | )% | | | — | | | | — | | | | — | % |
Benefit from cost segregation study and tangible property review | | | — | | | | (484 | ) | | | 484 | | | | (100 | )% | | | — | | | | — | | | | — | % |
Provision for income taxes | | | 1,545 | | | | 1,391 | | | | 154 | | | | 11 | % | | | 1,786 | | | | (241 | ) | | | (13 | )% |
Total provision for income taxes | | | 1,545 | | | | (81 | ) | | | 1,626 | | | | (2,007 | )% | | | 1,786 | | | | (241 | ) | | | (13 | )% |
Net income | | $ | 4,369 | | | $ | 4,839 | | | $ | (470 | ) | | | (10 | )% | | $ | 4,642 | | | $ | (273 | ) | | | (6 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.24 | | | $ | 0.30 | | | $ | (0.06 | ) | | | (20 | )% | | $ | 0.26 | | | $ | (0.02 | ) | | | (8 | )% |
Average basic shares | | | 18,068 | | | | 16,265 | | | | 1,803 | | | | 11 | % | | | 18,130 | | | | (62 | ) | | | — | % |
Diluted earnings per share | | $ | 0.24 | | | $ | 0.30 | | | $ | (0.06 | ) | | | (20 | )% | | $ | 0.26 | | | $ | (0.02 | ) | | | (8 | )% |
Average diluted shares | | | 18,150 | | | | 16,345 | | | | 1,805 | | | | 11 | % | | | 18,196 | | | | (46 | ) | | | — | % |
Dividends declared per common share | | $ | 0.05 | | | $ | 0.04 | | | $ | 0.01 | | | | 25 | % | | $ | 0.05 | | | $ | — | | | | — | % |
Fourth Quarter of 2019 Compared With Fourth Quarter of 2018
Income before provision for income taxes for the fourth quarter of 2019 increased $1.2 million compared to the fourth quarter of 2018. In the current quarter, net interest income was $820 thousand higher and noninterest expenses were $447 thousand lower. These positive changes were partially offset by noninterest income that was $111 thousand lower.
Net Interest Income
Net interest income increased $820 thousand compared to the same period a year ago.
Interest income for the fourth quarter of 2019 increased $1.1 million or 8% to $14.8 million.
● | Interest and fees on loans increased $1.1 million due to a $108.3 million increase in average loan balances partially offset by an 8 basis point decrease in the average yield on the loan portfolio. |
● | Interest on investment securities increased $4 thousand due to a $16.6 million increase in average securities balances partially offset by a 16 basis point decrease in average yield on the securities portfolio. |
● | Interest on interest-bearing deposits due from banks decreased $95 thousand due to a 63 basis point decrease in average yield that was partially offset by a $5.8 million increase in average interest-bearing deposit balances. |
Interest expense for the fourth quarter of 2019 increased $238 thousand or 19% to $1.5 million.
● | Interest expense on interest-bearing deposits increased $312 thousand. Average interest-bearing demand and savings deposit balances increased $67.2 million, while average certificate of deposit balances decreased $3.8 million. The average rate paid on interest-bearing deposits increased 11 basis points. |
● | Interest expense on other term debt and junior subordinated debentures decreased $74 thousand. During the second quarter of 2019, we completed the early repayment of our variable rate senior debt. |
Provision for loan and lease losses
Net loan loss charge-offs were only $54 thousand for the current quarter and no provision for loan and lease losses was necessary. There was no provision for loan and lease losses in the fourth quarter of 2018.
Noninterest Income
Noninterest income for the three months ended December 31, 2019 decreased $111 thousand compared to the fourth quarter for 2018. Noninterest income for the fourth quarter of 2018 included a $96 thousand special dividend on Federal Home Loan Bank of San Francisco stock.
Noninterest Expense
Noninterest expense for the three months ended December 31, 2019 decreased $447 thousand compared to the same period a year previous. The decrease was primarily due to $802 of acquisition and merger costs recorded during the same period a year ago that did not recur and $93 thousand in Small Bank Assessment Credits from the FDIC in the current quarter. These decreases were partially offset by $136 thousand in amortization of the core deposit intangible for the deposits acquired from Merchants and $112 thousand in increased salaries and related benefit costs.
The Company’s efficiency ratio was 58.7% for the fourth quarter of 2019; the ratio during the same period in 2018 was 65.1%. The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 includes $802 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs was 59.2%.
Income Tax Provision
For the three months ended December 31, 2019, our income tax provision of $1.5 million on pre-tax income of $5.9 million was an effective tax rate of 26.1%.
For the three months ended December 31, 2018, our negative income tax provision of $81 thousand on pre-tax income of $4.8 million included:
● | $(988) thousand benefit due to the reversal of our uncertain tax position. |
● | $(484) thousand benefit as a result of our cost segregation study and tangible property review. |
● | $1.4 million tax provision on pre-tax net operating income of $4.8 million (29.2%). |
| | o | $765 thousand in acquisition costs were not tax deductible for the three months ended December 31, 2018. |
Fourth Quarter of 2019 Compared With Third Quarter of 2019
Net income for the fourth quarter of 2019 decreased $273 thousand compared to the third quarter of 2019. In the current quarter, net interest income was $408 thousand lower and noninterest expense was $121 thousand higher. These changes were partially offset by noninterest income that was $15 thousand higher and a provision for income taxes that was $241 thousand lower.
Net Interest Income
Net interest income decreased $408 thousand over the prior quarter.
Interest income for the three months ended December 31, 2019 decreased $393 thousand or 3% to $14.8 million.
● | Interest and fees on loans decreased $370 thousand due to a 15 basis point decrease in the average yield on the loan portfolio partially offset by a $2.2 million increase in average loan balances. |
● | Interest on investment securities decreased $54 thousand due to a 14 basis point decrease in average yield on the investment portfolio partially offset by a $6.1 million increase in average securities balances partially. |
● | Interest on interest-bearing deposits due from banks increased $31 thousand due to a $22.2 million increase in average balances partially offset by a 42 basis point decrease in the average yield on interest-bearing deposits due from banks. |
Interest expense for the three months ended December 31, 2019 increased $15 thousand or 1% to $1.5 million.
● | Interest expense on interest-bearing deposits increased $24 thousand. Average interest-bearing demand and savings deposit balances increased $9.5 million, while average certificates of deposit decreased $4.4 million. The average rate paid on interest-bearing deposits increased by less than one basis point. |
● | Interest expense on other term debt and junior subordinated debentures decreased $9 thousand. |
Provision for loan and lease losses
As illustrated in Table 9, the sale during the fourth quarter of a $9.9 million nonaccrual commercial real estate loan has resulted in an improvement in our asset quality metrics. As a result of these improved metrics and loan loss charge-offs totaling only $54 thousand for the current quarter, no provision for loan and lease losses was necessary during current quarter. There was no provision for loan and lease losses in the prior quarter.
Noninterest Income
Noninterest income for the three months ended December 31, 2019 increased $15 thousand, which was not concentrated in any one item.
Noninterest Expense
Noninterest expense for the three months ended December 31, 2019 increased $121 thousand, which was not concentrated in any one item.
The Company’s efficiency ratio was 58.7% for the fourth quarter of 2019 compared with 56.4% for the prior quarter.
Income Tax Provision
For the three months ended December 31, 2019, our income tax provision of $1.5 million on pre-tax income of $5.9 million was an effective tax rate of 26.1%. The income tax provision for the prior quarter of $1.8 million on pre-tax income of $6.4 million was an effective tax rate of 27.8%. The effective tax rate for the prior quarter was increased by the write-off of a $41 thousand deferred tax asset.
Earnings Per Share
Diluted earnings per share were $0.24 for the three months ended December 31, 2019 compared with diluted earnings per share of $0.30 for the same period a year ago and diluted earnings per share of $0.26 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in Table 7 presented earlier in this press release.
TABLE 8a |
NET INTEREST MARGIN - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For The Three Months Ended | |
| | | December 31, 2019 | | | December 31, 2018 | | | September 30, 2019 | |
| | | Average | | | | | | | Yield / | | | Average | | | | | | | Yield / | | | Average | | | | | | | Yield / | |
| | | Balance | | | Interest(1) | | | Rate (5) | | | Balance | | | Interest(1) | | | Rate (5) | | | Balance | | | Interest(1) | | | Rate (5) | |
Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loans (2) | | $ | 1,031,702 | | | $ | 12,643 | | | | 4.86 | % | | $ | 923,409 | | | $ | 11,494 | | | | 4.94 | % | | $ | 1,029,534 | | | $ | 13,013 | | | | 5.01 | % |
Taxable securities | | | 245,487 | | | | 1,567 | | | | 2.53 | % | | | 218,137 | | | | 1,469 | | | | 2.67 | % | | | 238,601 | | | | 1,609 | | | | 2.68 | % |
Tax-exempt securities (3) | | | 32,158 | | | | 258 | | | | 3.18 | % | | | 42,868 | | | | 353 | | | | 3.27 | % | | | 32,974 | | | | 271 | | | | 3.26 | % |
Interest-bearing deposits in other banks | | | 81,099 | | | | 340 | | | | 1.66 | % | | | 75,295 | | | | 434 | | | | 2.29 | % | | | 58,897 | | | | 308 | | | | 2.07 | % |
Average interest-earning assets | | | 1,390,446 | | | | 14,808 | | | | 4.23 | % | | | 1,259,709 | | | | 13,750 | | | | 4.33 | % | | | 1,360,006 | | | | 15,201 | | | | 4.43 | % |
Cash and due from banks | | | 24,083 | | | | | | | | | | | | 22,447 | | | | | | | | | | | | 23,822 | | | | | | | | | |
Premises and equipment, net | | | 16,049 | | | | | | | | | | | | 13,331 | | | | | | | | | | | | 15,922 | | | | | | | | | |
Goodwill and core deposit intangible, net | | | 16,561 | | | | | | | | | | | | 1,842 | | | | | | | | | | | | 16,769 | | | | | | | | | |
Other assets | | | 45,504 | | | | | | | | | | | | 31,488 | | | | | | | | | | | | 45,925 | | | | | | | | | |
Average total assets | | $ | 1,492,643 | | | | | | | | | | | $ | 1,328,817 | | | | | | | | | | | $ | 1,462,444 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing demand | | $ | 244,276 | | | | 108 | | | | 0.18 | % | | $ | 257,227 | | | | 141 | | | | 0.22 | % | | $ | 243,553 | | | | 117 | | | | 0.19 | % |
Money market | | | 318,127 | | | | 479 | | | | 0.60 | % | | | 265,190 | | | | 207 | | | | 0.31 | % | | | 309,188 | | | | 451 | | | | 0.58 | % |
Savings | | | 138,155 | | | | 128 | | | | 0.37 | % | | | 110,934 | | | | 92 | | | | 0.33 | % | | | 138,296 | | | | 131 | | | | 0.38 | % |
Certificates of deposit | | | 153,223 | | | | 499 | | | | 1.29 | % | | | 157,035 | | | | 462 | | | | 1.17 | % | | | 157,620 | | | | 491 | | | | 1.24 | % |
Other borrowings net of unamortized debt issuance costs | | | 9,952 | | | | 183 | | | | 7.30 | % | | | 13,785 | | | | 252 | | | | 7.25 | % | | | 9,942 | | | | 183 | | | | 7.30 | % |
Junior subordinated debentures | | | 10,310 | | | | 97 | | | | 3.73 | % | | | 10,310 | | | | 102 | | | | 3.93 | % | | | 10,310 | | | | 106 | | | | 4.08 | % |
Average interest-bearing liabilities | | | 874,043 | | | | 1,494 | | | | 0.68 | % | | | 814,481 | | | | 1,256 | | | | 0.61 | % | | | 868,909 | | | | 1,479 | | | | 0.68 | % |
Noninterest-bearing demand | | | 428,420 | | | | | | | | | | | | 367,457 | | | | | | | | | | | | 405,853 | | | | | | | | | |
Other liabilities | | | 17,795 | | | | | | | | | | | | 12,846 | | | | | | | | | | | | 18,074 | | | | | | | | | |
Shareholders’ equity | | | 172,385 | | | | | | | | | | | | 134,033 | | | | | | | | | | | | 169,608 | | | | | | | | | |
Average liabilities and shareholders’ equity | | $ | 1,492,643 | | | | | | | | | | | $ | 1,328,817 | | | | | | | | | | | $ | 1,462,444 | | | | | | | | | |
Net interest income and net interest margin (4) | | | | | | $ | 13,314 | | | | 3.80 | % | | | | | | $ | 12,494 | | | | 3.93 | % | | | | | | $ | 13,722 | | | | 4.00 | % |
(1) Interest income on loans includes deferred fees and costs of approximately $224 thousand, $109 thousand, and $161 thousand for the three months ended December 31, 2019 and 2018 and September 30, 2019, respectively. |
(2) Net loans includes average nonaccrual loans of $11.4 million, $4.1 million and $13.2 million for the three months ended December 31, 2019 and 2018 and September 30, 2019, respectively. |
(3) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis. |
(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the three months ended December 31, 2019 included $188 thousand in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 7 basis points. |
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result. |
TABLE 8b | |
NET INTEREST MARGIN - UNAUDITED | |
(amounts in thousands) | |
| | | For The Twelve Months Ended | |
| | | December 31, 2019 | | | December 31, 2018 | |
| | | Average | | | | | | | Yield / | | | Average | | | | | | | Yield / | |
| | | Balance | | | Interest(1) | | | Rate (5) | | | Balance | | | Interest(1) | | | Rate (5) | |
Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Net loans (2) | | $ | 1,020,801 | | | $ | 50,534 | | | | 4.95 | % | | $ | 915,360 | | | $ | 44,955 | | | | 4.91 | % |
Taxable securities | | | 246,723 | | | | 6,673 | | | | 2.70 | % | | | 207,407 | | | | 5,165 | | | | 2.49 | % |
Tax-exempt securities (3) | | | 38,706 | | | | 1,244 | | | | 3.21 | % | | | 50,330 | | | | 1,629 | | | | 3.24 | % |
Interest-bearing deposits in other banks | | | 54,095 | | | | 1,112 | | | | 2.06 | % | | | 47,038 | | | | 952 | | | | 2.02 | % |
Average interest-earning assets | | | 1,360,325 | | | | 59,563 | | | | 4.38 | % | | | 1,220,135 | | | | 52,701 | | | | 4.32 | % |
Cash and due from banks | | | 22,806 | | | | | | | | | | | | 20,468 | | | | | | | | | |
Premises and equipment, net | | | 15,598 | | | | | | | | | | | | 13,952 | | | | | | | | | |
Goodwill and core deposit intangible, net | | | 15,565 | | | | | | | | | | | | 1,917 | | | | | | | | | |
Other assets | | | 43,818 | | | | | | | | | | | | 32,369 | | | | | | | | | |
Average total assets | | $ | 1,458,112 | | | | | | | | | | | $ | 1,288,841 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing demand | | $ | 242,516 | | | | 480 | | | | 0.20 | % | | $ | 238,328 | | | | 414 | | | | 0.17 | % |
Money market | | | 304,340 | | | | 1,599 | | | | 0.53 | % | | | 250,685 | | | | 646 | | | | 0.26 | % |
Savings | | | 136,733 | | | | 493 | | | | 0.36 | % | | | 109,025 | | | | 288 | | | | 0.26 | % |
Certificates of deposit | | | 160,550 | | | | 1,977 | | | | 1.23 | % | | | 168,183 | | | | 1,910 | | | | 1.14 | % |
Federal Home Loan Bank of San Francisco borrowings | | | 9,644 | | | | 247 | | | | 2.56 | % | | | 22,466 | | | | 435 | | | | 1.94 | % |
Other borrowings net of unamortized debt issuance costs | | | 10,895 | | | | 806 | | | | 7.40 | % | | | 15,143 | | | | 1,077 | | | | 7.11 | % |
Junior subordinated debentures | | | 10,310 | | | | 426 | | | | 4.13 | % | | | 10,310 | | | | 385 | | | | 3.73 | % |
Average interest-bearing liabilities | | | 874,988 | | | | 6,028 | | | | 0.69 | % | | | 814,140 | | | | 5,155 | | | | 0.63 | % |
Noninterest-bearing demand | | | 400,588 | | | | | | | | | | | | 332,197 | | | | | | | | | |
Other liabilities | | | 17,894 | | | | | | | | | | | | 12,286 | | | | | | | | | |
Shareholders’ equity | | | 164,642 | | | | | | | | | | | | 130,218 | | | | | | | | | |
Average liabilities and shareholders’ equity | | $ | 1,458,112 | | | | | | | | | | | $ | 1,288,841 | | | | | | | | | |
Net interest income and net interest margin (4) | | | | | | $ | 53,535 | | | | 3.94 | % | | | | | | $ | 47,546 | | | | 3.90 | % |
(1) Interest income on loans includes deferred fees and costs of approximately $657 thousand and $465 thousand for the years ended December 31, 2019 and 2018, respectively. | |
(2) Net loans includes average nonaccrual loans of $11.7 million and $4.2 million for the years ended December 31, 2019 and 2018, respectively. | |
(3) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis. | |
(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the year ended December 31, 2019 included $620 thousand in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 6 basis points. | |
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result. | |
TABLE 9 |
ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | |
| | | For The Three Months Ended | |
| | | December 31, | | | September 30, | | | June 30, | | | March 31, | | | December 31, | |
| | | 2019 | | | 2019 | | | 2019 | | | 2019 | | | 2018 | |
Beginning balance ALLL | | $ | 12,285 | | | $ | 12,445 | | | $ | 12,242 | | | $ | 12,292 | | | $ | 12,392 | |
Provision for loan and lease losses | | | — | | | | — | | | | — | | | | — | | | | — | |
Loans charged-off | | | (174 | ) | | | (319 | ) | | | (659 | ) | | | (348 | ) | | | (279 | ) |
Loan loss recoveries | | | 120 | | | | 159 | | | | 862 | | | | 298 | | | | 179 | |
Ending balance ALLL | | $ | 12,231 | | | $ | 12,285 | | | $ | 12,445 | | | $ | 12,242 | | | $ | 12,292 | |
| | | At December 31, | | | At September 30, | | | At June 30, | | | At March 31, | | | At December 31, | |
| | | 2019 | | | 2019 | | | 2019 | | | 2019 | | | 2018 | |
Nonaccrual loans: | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 61 | | | $ | 139 | | | $ | 194 | | | $ | 1,018 | | | $ | 959 | |
Real estate - commercial non-owner occupied | | | — | | | | 10,099 | | | | 10,690 | | | | 10,878 | | | | — | |
Real estate - commercial owner occupied | | | 3,103 | | | | — | | | | — | | | | — | | | | 548 | |
Real estate - residential - ITIN | | | 2,221 | | | | 2,339 | | | | 2,389 | | | | 2,392 | | | | 2,388 | |
Real estate - residential - 1-4 family mortgage | | | 191 | | | | 198 | | | | 217 | | | | 182 | | | | 185 | |
Real estate - residential - equity lines | | | — | | | | — | | | | — | | | | 42 | | | | 43 | |
Consumer and other | | | 40 | | | | 21 | | | | 22 | | | | 23 | | | | 23 | |
Total nonaccrual loans | | | 5,616 | | | | 12,796 | | | | 13,512 | | | | 14,535 | | | | 4,146 | |
Accruing troubled debt restructured loans: | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 595 | | | | 629 | | | | 1,092 | | | | 1,187 | | | | 1,224 | |
Real estate - commercial non-owner occupied | | | — | | | | — | | | | 791 | | | | 793 | | | | 795 | |
Real estate - residential - ITIN | | | 3,957 | | | | 4,072 | | | | 4,300 | | | | 4,342 | | | | 4,484 | |
Real estate - residential - equity lines | | | 231 | | | | 236 | | | | 242 | | | | 358 | | | | 363 | |
Total accruing troubled debt restructured loans | | | 4,783 | | | | 4,937 | | | | 6,425 | | | | 6,680 | | | | 6,866 | |
| | | | | | | | | | | | | | | | | | | | | |
All other accruing impaired loans | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 10,399 | | | $ | 17,733 | | | $ | 19,937 | | | $ | 21,215 | | | $ | 11,012 | |
| | | | | | | | | | | | | | | | | | | | | |
Gross loans outstanding at period end | | $ | 1,032,903 | | | $ | 1,033,082 | | | $ | 1,036,724 | | | $ | 1,034,606 | | | $ | 946,251 | |
| | | | | | | | | | | | | | | | | | | | | |
Impaired loans to gross loans | | | 1.01 | % | | | 1.72 | % | | | 1.92 | % | | | 2.05 | % | | | 1.16 | % |
Nonaccrual loans to gross loans | | | 0.54 | % | | | 1.24 | % | | | 1.30 | % | | | 1.40 | % | | | 0.44 | % |
| | | | | | | | | | | | | | | | | | | | | |
Allowance for loan and lease losses as a percent of: | | | | | | | | | | | | | |
Gross loans | | | 1.18 | % | | | 1.19 | % | | | 1.20 | % | | | 1.18 | % | | | 1.30 | % |
Nonaccrual loans | | | 217.79 | % | | | 96.01 | % | | | 92.10 | % | | | 84.22 | % | | | 296.48 | % |
Impaired loans | | | 117.62 | % | | | 69.28 | % | | | 62.42 | % | | | 57.70 | % | | | 111.62 | % |
We continue to monitor credit quality and adjust the ALLL to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. The decrease in nonaccrual loans during the current quarter resulted from the sale of a $9.9 million nonaccrual commercial real estate loan. Net loan loss charge-offs totaled only $54 thousand for the quarter ended December 31, 2019 and no provision for loan and lease losses was necessary for the quarter. There was no provision for loan and lease loss during the prior quarter or during the same quarter a year ago.
The loans acquired from Merchants were recorded at fair value which included a discount for credit risk which is not a part of the ALLL. As a result, our ALLL as a percentage of gross loans declined to 1.18% as of December 31, 2019 compared to 1.30% as of December 31, 2018 and compared to 1.19% as of September 30, 2019.
Based on the Bank’s ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate at December 31, 2019. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in future charges to the provision for loan and lease losses.
At December 31, 2019, the recorded investment in loans classified as impaired totaled $10.4 million, with a corresponding specific reserve of $324 thousand compared to impaired loans of $11.0 million with a corresponding specific reserve of $1.2 million at December 31, 2018 and impaired loans of $17.7 million, with a corresponding specific reserve of $335 thousand at September 30, 2019. The decrease in loans classified as impaired compared to the prior quarter results from the sale of one $9.9 million commercial real estate loan.
TABLE 10 |
TROUBLED DEBT RESTRUCTURINGS - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | |
| | | At December 31, | | | At September 30, | | | At June 30, | | | At March 31, | | | At December 31, | |
| | | 2019 | | | 2019 | | | 2019 | | | 2019 | | | 2018 | |
Nonaccrual | | $ | 1,680 | | | $ | 1,746 | | | $ | 1,828 | | | $ | 2,725 | | | $ | 2,693 | |
Accruing | | | 4,783 | | | | 4,937 | | | | 6,425 | | | | 6,680 | | | | 6,866 | |
Total troubled debt restructurings | | $ | 6,463 | | | $ | 6,683 | | | $ | 8,253 | | | $ | 9,405 | | | $ | 9,559 | |
| | | | | | | | | | | | | | | | | | | | | |
Troubled debt restructurings as a percentage of total gross loans | | | 0.63 | % | | | 0.65 | % | | | 0.80 | % | | | 0.91 | % | | | 1.01 | % |
There was one new troubled debt restructuring to grant a rate and maturity modification during the three months ended December 31, 2019. As of December 31, 2019, we had 98 restructured loans that qualified as troubled debt restructurings, of which 94 were performing according to their restructured terms.
TABLE 11 |
NONPERFORMING ASSETS - UNAUDITED |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | |
| | | At December 31, | | | At September 30, | | | At June 30, | | | At March 31, | | | At December 31, | |
| | | 2019 | | | 2019 | | | 2019 | | | 2019 | | | 2018 | |
Total nonaccrual loans | | $ | 5,616 | | | $ | 12,796 | | | $ | 13,512 | | | $ | 14,535 | | | $ | 4,146 | |
90 days past due and still accruing | | | — | | | | — | | | | — | | | | — | | | | — | |
Total nonperforming loans | | | 5,616 | | | | 12,796 | | | | 13,512 | | | | 14,535 | | | | 4,146 | |
| | | | | | | | | | | | | | | | | | | | | |
Other real estate owned ("OREO") | | | 35 | | | | 58 | | | | 34 | | | | 31 | | | | 31 | |
Total nonperforming assets | | $ | 5,651 | | | $ | 12,854 | | | $ | 13,546 | | | $ | 14,566 | | | $ | 4,177 | |
| | | | | | | | | | | | | | | | | | | | | |
Nonperforming loans to gross loans | | | 0.54 | % | | | 1.24 | % | | | 1.30 | % | | | 1.40 | % | | | 0.44 | % |
Nonperforming assets to total assets | | | 0.38 | % | | | 0.87 | % | | | 0.94 | % | | | 0.99 | % | | | 0.32 | % |
The following table summarizes when loans are projected to reprice by year and rate index as of December 31, 2019.
TABLE 12 |
LOANS BY RATE INDEX AND PROJECTED REPAYMENT - UNAUDITED |
(amounts in thousands) |
At December 31, 2019 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Years 6 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Through | | | Beyond | | | | | |
| | | Year 1 | | | Year 2 | | | Year 3 | | | Year 4 | | | Year 5 | | | Year 10 | | | Year 10 | | | Total | |
Rate Index: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed | | $ | 49,959 | | | $ | 52,191 | | | $ | 33,501 | | | $ | 72,871 | | | $ | 32,308 | | | $ | 166,641 | | | $ | 32,514 | | | $ | 439,985 | |
Variable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prime | | | 92,508 | | | | 5,534 | | | | 9,682 | | | | 4,616 | | | | 6,759 | | | | 4,752 | | | | — | | | | 123,851 | |
5 Year Treasury | | | 24,733 | | | | 66,548 | | | | 83,684 | | | | 66,329 | | | | 77,812 | | | | 54,490 | | | | — | | | | 373,596 | |
7 Year Treasury | | | 858 | | | | 7,024 | | | | 9,292 | | | | 480 | | | | 5,597 | | | | 13,828 | | | | — | | | | 37,079 | |
1 Year LIBOR | | | 20,988 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,988 | |
Other Indexes | | | 4,146 | | | | 2,946 | | | | 2,062 | | | | 1,733 | | | | 5,716 | | | | 16,730 | | | | 617 | | | | 33,950 | |
Nonaccrual | | | 625 | | | | 551 | | | | 529 | | | | 513 | | | | 492 | | | | 1,988 | | | | 918 | | | | 5,616 | |
Total | | $ | 193,817 | | | $ | 134,794 | | | $ | 138,750 | | | $ | 146,542 | | | $ | 128,684 | | | $ | 258,429 | | | $ | 34,049 | | | $ | 1,035,065 | |
TABLE 13 |
UNAUDITED CONSOLIDATED |
BALANCE SHEET |
(amounts in thousands, except per share data) |
| | | | | | | | | | | | | | | | | | | | | |
| | | At December 31, | | | Change | | | At September 30, | |
| | | 2019 | | | 2018 | | | $ | | | % | | | 2019 | |
Assets: | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 21,338 | | | $ | 23,692 | | | $ | (2,354 | ) | | | (10 | )% | | $ | 32,505 | |
Interest-bearing deposits in other banks | | | 59,266 | | | | 23,673 | | | | 35,593 | | | | 150 | % | | | 56,099 | |
Total cash and cash equivalents | | | 80,604 | | | | 47,365 | | | | 33,239 | | | | 70 | % | | | 88,604 | |
Securities available-for-sale, at fair value | | | 286,950 | | | | 256,928 | | | | 30,022 | | | | 12 | % | | | 272,341 | |
Loans, net of deferred fees and costs | | | 1,035,065 | | | | 948,178 | | | | 86,887 | | | | 9 | % | | | 1,035,062 | |
Allowance for loan and lease losses | | | (12,231 | ) | | | (12,292 | ) | | | 61 | | | | — | % | | | (12,285 | ) |
Net loans | | | 1,022,834 | | | | 935,886 | | | | 86,948 | | | | 9 | % | | | 1,022,777 | |
Premises and equipment, net | | | 15,906 | | | | 13,119 | | | | 2,787 | | | | 21 | % | | | 16,084 | |
Other real estate owned | | | 35 | | | | 31 | | | | 4 | | | | 13 | % | | | 58 | |
Life insurance | | | 23,701 | | | | 22,410 | | | | 1,291 | | | | 6 | % | | | 23,576 | |
Deferred tax asset, net | | | 4,553 | | | | 7,039 | | | | (2,486 | ) | | | (35 | )% | | | 4,818 | |
Goodwill and core deposit intangible, net | | | 16,480 | | | | 1,841 | | | | 14,639 | | | | 795 | % | | | 16,672 | |
Other assets | | | 28,553 | | | | 22,485 | | | | 6,068 | | | | 27 | % | | | 27,497 | |
Total assets | | $ | 1,479,616 | | | $ | 1,307,104 | | | $ | 172,512 | | | | 13 | % | | $ | 1,472,427 | |
Liabilities and shareholders' equity: | | | | | | | | | | | | | | | | | | | | |
Demand - noninterest-bearing | | $ | 432,680 | | | $ | 347,199 | | | $ | 85,481 | | | | 25 | % | | $ | 412,410 | |
Demand - interest-bearing | | | 239,258 | | | | 252,202 | | | | (12,944 | ) | | | (5 | )% | | | 239,547 | |
Money market | | | 307,559 | | | | 265,093 | | | | 42,466 | | | | 16 | % | | | 317,120 | |
Savings | | | 135,888 | | | | 114,840 | | | | 21,048 | | | | 18 | % | | | 137,441 | |
Certificates of deposit | | | 151,786 | | | | 152,382 | | | | (596 | ) | | | — | % | | | 155,621 | |
Total deposits | | | 1,267,171 | | | | 1,131,716 | | | | 135,455 | | | | 12 | % | | | 1,262,139 | |
Term debt: | | | | | | | | | | | | | | | | | | | | |
Other borrowings | | | 10,000 | | | | 13,496 | | | | (3,496 | ) | | | (26 | )% | | | 10,000 | |
Unamortized debt issuance costs | | | (43 | ) | | | (91 | ) | | | 48 | | | | (53 | )% | | | (55 | ) |
Net term debt | | | 9,957 | | | | 13,405 | | | | (3,448 | ) | | | (26 | )% | | | 9,945 | |
| | | | | | | | | | | | | | | | | | | | | |
Junior subordinated debentures | | | 10,310 | | | | 10,310 | | | | — | | | | — | % | | | 10,310 | |
Other liabilities | | | 17,700 | | | | 13,352 | | | | 4,348 | | | | 33 | % | | | 18,396 | |
Total liabilities | | | 1,305,138 | | | | 1,168,783 | | | | 136,355 | | | | 12 | % | | | 1,300,790 | |
Shareholders' equity: | | | | | | | | | | | | | | | | | | | | |
Common stock | | | 71,311 | | | | 52,284 | | | | 19,027 | | | | 36 | % | | | 72,200 | |
Retained earnings | | | 100,566 | | | | 89,045 | | | | 11,521 | | | | 13 | % | | | 97,100 | |
Accumulated other comprehensive income (loss), net of tax | | | 2,601 | | | | (3,008 | ) | | | 5,609 | | | | (186 | )% | | | 2,337 | |
Total shareholders' equity | | | 174,478 | | | | 138,321 | | | | 36,157 | | | | 26 | % | | | 171,637 | |
Total liabilities and shareholders' equity | | $ | 1,479,616 | | | $ | 1,307,104 | | | $ | 172,512 | | | | 13 | % | | $ | 1,472,427 | |
Total interest-earning assets | | $ | 1,377,588 | | | $ | 1,233,049 | | | $ | 144,539 | | | | 12 | % | | $ | 1,360,184 | |
Shares outstanding | | | 18,137 | | | | 16,334 | | | | 1,803 | | | | 11 | % | | | 18,212 | |
Book value per share (1) | | $ | 9.62 | | | $ | 8.47 | | | $ | 1.15 | | | | 14 | % | | $ | 9.42 | |
Tangible book value per share (1) | | $ | 8.71 | | | $ | 8.36 | | | $ | 0.35 | | | | 4 | % | | $ | 8.51 | |
(1) Book value per share is computed by dividing total shareholders’ equity by shares outstanding. Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy. |
TABLE 14 |
UNAUDITED |
INCOME STATEMENT |
(amounts in thousands, except per share data) |
| |
| | | For The Three Months Ended | | | For The Twelve Months Ended | |
| | | December 31, | | | Change | | | September 30, | | | December 31, | |
| | | 2019 | | | 2018 | | | $ | | | % | | | 2019 | | | 2019 | | | 2018 | |
Interest income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest and fees on loans | | $ | 12,643 | | | $ | 11,494 | | | $ | 1,149 | | | | 10 | % | | $ | 13,013 | | | $ | 50,534 | | | $ | 44,955 | |
Interest on taxable securities | | | 1,567 | | | | 1,469 | | | | 98 | | | | 7 | % | | | 1,609 | | | | 6,673 | | | | 5,165 | |
Interest on tax-exempt securities | | | 258 | | | | 353 | | | | (95 | ) | | | (27 | )% | | | 271 | | | | 1,244 | | | | 1,629 | |
Interest on interest-bearing deposits in other banks | | | 340 | | | | 434 | | | | (94 | ) | | | (22 | )% | | | 308 | | | | 1,112 | | | | 952 | |
Total interest income | | | 14,808 | | | | 13,750 | | | | 1,058 | | | | 8 | % | | | 15,201 | | | | 59,563 | | | | 52,701 | |
Interest expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest on demand deposits | | | 108 | | | | 141 | | | | (33 | ) | | | (23 | )% | | | 117 | | | | 480 | | | | 414 | |
Interest on money market | | | 479 | | | | 207 | | | | 272 | | | | 131 | % | | | 451 | | | | 1,599 | | | | 646 | |
Interest on savings | | | 128 | | | | 92 | | | | 36 | | | | 39 | % | | | 131 | | | | 493 | | | | 288 | |
Interest on certificates of deposit | | | 499 | | | | 462 | | | | 37 | | | | 8 | % | | | 491 | | | | 1,977 | | | | 1,910 | |
Interest on Federal Home Loan Bank of San Francisco borrowings | | | — | | | | — | | | | — | | | | — | % | | | — | | | | 247 | | | | 435 | |
Interest on other borrowings | | | 183 | | | | 252 | | | | (69 | ) | | | (27 | )% | | | 183 | | | | 806 | | | | 1,077 | |
Interest on junior subordinated debentures | | | 97 | | | | 102 | | | | (5 | ) | | | (5 | )% | | | 106 | | | | 426 | | | | 385 | |
Total interest expense | | | 1,494 | | | | 1,256 | | | | 238 | | | | 19 | % | | | 1,479 | | | | 6,028 | | | | 5,155 | |
Net interest income | | | 13,314 | | | | 12,494 | | | | 820 | | | | 7 | % | | | 13,722 | | | | 53,535 | | | | 47,546 | |
Provision for loan and lease losses | | | — | | | | — | | | | — | | | | — | % | | | — | | | | — | | | | — | |
Net interest income after provision for loan and lease losses | | | 13,314 | | | | 12,494 | | | | 820 | | | | 7 | % | | | 13,722 | | | | 53,535 | | | | 47,546 | |
Noninterest income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Service charges on deposit accounts | | | 198 | | | | 161 | | | | 37 | | | | 23 | % | | | 177 | | | | 730 | | | | 682 | |
ATM and point of sale fees | | | 282 | | | | 283 | | | | (1 | ) | | | — | % | | | 293 | | | | 1,158 | | | | 1,131 | |
Payroll and benefit processing fees | | | 183 | | | | 178 | | | | 5 | | | | 3 | % | | | 158 | | | | 669 | | | | 652 | |
Life insurance | | | 126 | | | | 128 | | | | (2 | ) | | | (2 | )% | | | 126 | | | | 536 | | | | 512 | |
Gain on investment securities, net | | | 49 | | | | 3 | | | | 46 | | | | 1,533 | % | | | 12 | | | | 186 | | | | 44 | |
Federal Home Loan Bank of San Francisco dividends | | | 131 | | | | 201 | | | | (70 | ) | | | (35 | )% | | | 131 | | | | 507 | | | | 480 | |
Gain(Loss) on sale of OREO | | | 21 | | | | 64 | | | | (43 | ) | | | (67 | )% | | | — | | | | 62 | | | | 73 | |
Other income | | | 31 | | | | 114 | | | | (83 | ) | | | (73 | )% | | | 109 | | | | 336 | | | | 445 | |
Total noninterest income | | | 1,021 | | | | 1,132 | | | | (111 | ) | | | (10 | )% | | | 1,006 | | | | 4,184 | | | | 4,019 | |
TABLE 14 - CONTINUED |
UNAUDITED |
INCOME STATEMENT |
(amounts in thousands, except per share data) |
| | | For The Three Months Ended | | | For The Twelve Months Ended | |
| | | December 31, | | | Change | | | September 30, | | | December 31, | |
| | | 2019 | | | 2018 | | | $ | | | % | | | 2019 | | | 2019 | | | 2018 | |
Noninterest expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries and related benefits | | | 4,924 | | | | 4,812 | | | | 112 | | | | 2 | % | | | 5,005 | | | | 20,804 | | | | 18,709 | |
Premises and equipment | | | 916 | | | | 927 | | | | (11 | ) | | | (1 | )% | | | 933 | | | | 3,752 | | | | 3,983 | |
Federal Deposit Insurance Corporation insurance premium | | | — | | | | 93 | | | | (93 | ) | | | (100 | )% | | | (104 | ) | | | 91 | | | | 376 | |
Data processing | | | 739 | | | | 528 | | | | 211 | | | | 40 | % | | | 582 | | | | 2,535 | | | | 1,997 | |
Professional services | | | 309 | | | | 436 | | | | (127 | ) | | | (29 | )% | | | 392 | | | | 1,539 | | | | 1,431 | |
Telecommunications | | | 190 | | | | 145 | | | | 45 | | | | 31 | % | | | 194 | | | | 737 | | | | 594 | |
Acquisition and merger | | | — | | | | 802 | | | | (802 | ) | | | (100 | )% | | | (113 | ) | | | 2,193 | | | | 844 | |
Other expenses | | | 1,343 | | | | 1,125 | | | | 218 | | | | 19 | % | | | 1,411 | | | | 5,604 | | | | 4,272 | |
Total noninterest expense | | | 8,421 | | | | 8,868 | | | | (447 | ) | | | (5 | )% | | | 8,300 | | | | 37,255 | | | | 32,206 | |
Income before provision for income taxes | | | 5,914 | | | | 4,758 | | | | 1,156 | | | | 24 | % | | | 6,428 | | | | 20,464 | | | | 19,359 | |
Provision for income taxes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reversal of uncertain tax position | | | — | | | | (988 | ) | | | 988 | | | | (100 | )% | | | — | | | | — | | | | (988 | ) |
Benefit from cost segregation study and tangible property review | | | — | | | | (484 | ) | | | 484 | | | | (100 | )% | | | — | | | | — | | | | (484 | ) |
Provision for income taxes | | | 1,545 | | | | 1,391 | | | | 154 | | | | 11 | % | | | 1,786 | | | | 5,503 | | | | 5,101 | |
Total provision for income taxes | | | 1,545 | | | | (81 | ) | | | 1,626 | | | | (2,007 | )% | | | 1,786 | | | | 5,503 | | | | 3,629 | |
Net income | | $ | 4,369 | | | $ | 4,839 | | | $ | (470 | ) | | | (10 | )% | | $ | 4,642 | | | $ | 14,961 | | | $ | 15,730 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.24 | | | $ | 0.30 | | | $ | (0.06 | ) | | | (20 | )% | | $ | 0.26 | | | $ | 0.83 | | | $ | 0.97 | |
Average basic shares | | | 18,068 | | | | 16,265 | | | | 1,803 | | | | 11 | % | | | 18,130 | | | | 17,956 | | | | 16,248 | |
Diluted earnings per share | | $ | 0.24 | | | $ | 0.30 | | | $ | (0.06 | ) | | | (20 | )% | | $ | 0.26 | | | $ | 0.83 | | | $ | 0.96 | |
Average diluted shares | | | 18,150 | | | | 16,345 | | | | 1,805 | | | | 11 | % | | | 18,196 | | | | 18,024 | | | | 16,332 | |
TABLE 15 |
UNAUDITED CONDENSED CONSOLIDATED |
QUARTERLY AVERAGE BALANCE SHEETS |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | |
| | | For The Three Months Ended | |
| | | December 31, | | | September 30, | | | June 30, | | | March 31, | | | December 31, | |
| | | 2019 | | | 2019 | | | 2019 | | | 2019 | | | 2018 | |
Earning assets: | | | | | | | | | | | | | | | | | | | | |
Loans | | $ | 1,031,702 | | | $ | 1,029,534 | | | $ | 1,028,187 | | | $ | 993,261 | | | $ | 923,409 | |
Taxable securities | | | 245,487 | | | | 238,601 | | | | 249,907 | | | | 253,068 | | | | 218,137 | |
Tax-exempt securities | | | 32,158 | | | | 32,974 | | | | 39,501 | | | | 50,454 | | | | 42,868 | |
Interest-bearing deposits in other banks | | | 81,099 | | | | 58,897 | | | | 35,605 | | | | 40,223 | | | | 75,295 | |
Total earning assets | | | 1,390,446 | | | | 1,360,006 | | | | 1,353,200 | | | | 1,337,006 | | | | 1,259,709 | |
| | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | | 24,083 | | | | 23,822 | | | | 21,942 | | | | 21,392 | | | | 22,447 | |
Premises and equipment, net | | | 16,049 | | | | 15,922 | | | | 15,819 | | | | 14,581 | | | | 13,331 | |
Goodwill and core deposit intangible, net | | | 16,561 | | | | 16,769 | | | | 16,995 | | | | 11,872 | | | | 1,842 | |
Other assets | | | 45,504 | | | | 45,925 | | | | 42,769 | | | | 41,009 | | | | 31,488 | |
Total assets | | $ | 1,492,643 | | | $ | 1,462,444 | | | $ | 1,450,725 | | | $ | 1,425,860 | | | $ | 1,328,817 | |
| | | | | | | | | | | | | | | | | | | | | |
Liabilities and shareholders' equity: | | | | | | | | | | | | | | | | | | | | |
Demand - noninterest-bearing | | $ | 428,420 | | | $ | 405,853 | | | $ | 379,173 | | | $ | 388,410 | | | $ | 367,457 | |
Demand - interest-bearing | | | 244,276 | | | | 243,553 | | | | 238,840 | | | | 243,376 | | | | 257,227 | |
Money market | | | 318,127 | | | | 309,188 | | | | 296,326 | | | | 293,396 | | | | 265,190 | |
Savings | | | 138,155 | | | | 138,296 | | | | 139,307 | | | | 131,081 | | | | 110,934 | |
Certificates of deposit | | | 153,223 | | | | 157,620 | | | | 164,084 | | | | 167,463 | | | | 157,035 | |
Total deposits | | | 1,282,201 | | | | 1,254,510 | | | | 1,217,730 | | | | 1,223,726 | | | | 1,157,843 | |
| | | | | | | | | | | | | | | | | | | | | |
Federal Home Loan Bank of San Francisco borrowings | | | — | | | | — | | | | 30,000 | | | | 8,778 | | | | — | |
Other borrowings net of unamortized debt issuance costs | | | 9,952 | | | | 9,942 | | | | 10,841 | | | | 12,889 | | | | 13,785 | |
Junior subordinated debentures | | | 10,310 | | | | 10,310 | | | | 10,310 | | | | 10,310 | | | | 10,310 | |
Other liabilities | | | 17,795 | | | | 18,074 | | | | 18,246 | | | | 17,452 | | | | 12,846 | |
Total liabilities | | | 1,320,258 | | | | 1,292,836 | | | | 1,287,127 | | | | 1,273,155 | | | | 1,194,784 | |
| | | | | | | | | | | | | | | | | | | | | |
Shareholders' equity | | | 172,385 | | | | 169,608 | | | | 163,598 | | | | 152,705 | | | | 134,033 | |
Liabilities & shareholders' equity | | $ | 1,492,643 | | | $ | 1,462,444 | | | $ | 1,450,725 | | | $ | 1,425,860 | | | $ | 1,328,817 | |
TABLE 16 |
UNAUDITED CONDENSED CONSOLIDATED |
ANNUAL AVERAGE BALANCE SHEETS |
(amounts in thousands) |
| | | | | | | | | | | | | | | | | |
| | | For The Year Ended | |
| | | December 31, | | | December 31, | | | December 31, | | | December 31, | |
| | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Earning assets: | | | | | | | | | | | | | | | | |
Loans | | $ | 1,020,801 | | | $ | 915,360 | | | $ | 818,119 | | | $ | 752,938 | |
Taxable securities | | | 246,723 | | | | 207,407 | | | | 165,333 | | | | 120,884 | |
Tax-exempt securities | | | 38,706 | | | | 50,330 | | | | 74,231 | | | | 75,303 | |
Interest-bearing deposits in other banks | | | 54,095 | | | | 47,038 | | | | 66,872 | | | | 58,668 | |
Total earning assets | | | 1,360,325 | | | | 1,220,135 | | | | 1,124,555 | | | | 1,007,793 | |
| | | | | | | | | | | | | | | | | |
Cash and due from banks | | | 22,806 | | | | 20,468 | | | | 18,301 | | | | 15,831 | |
Premises and equipment, net | | | 15,598 | | | | 13,952 | | | | 15,567 | | | | 15,078 | |
Goodwill and core deposit intangible, net | | | 15,565 | | | | 1,917 | | | | 2,136 | | | | 1,888 | |
Other assets | | | 43,818 | | | | 32,369 | | | | 37,692 | | | | 39,160 | |
Total assets | | $ | 1,458,112 | | | $ | 1,288,841 | | | $ | 1,198,251 | | | $ | 1,079,750 | |
| | | | | | | | | | | | | | | | | |
Liabilities and shareholders' equity: | | | | | | | | | | | | | | | | |
Demand - noninterest-bearing | | $ | 400,588 | | | $ | 332,197 | | | $ | 289,735 | | | $ | 226,368 | |
Demand - interest-bearing | | | 242,516 | | | | 238,328 | | | | 209,792 | | | | 172,011 | |
Money market | | | 304,340 | | | | 250,685 | | | | 224,913 | | | | 202,159 | |
Savings | | | 136,733 | | | | 109,025 | | | | 111,376 | | | | 104,771 | |
Certificates of deposit | | | 160,550 | | | | 168,183 | | | | 205,648 | | | | 221,074 | |
Total deposits | | | 1,244,727 | | | | 1,098,418 | | | | 1,041,464 | | | | 926,383 | |
| | | | | | | | | | | | | | | | | |
Federal Home Loan Bank of San Francisco borrowings | | | 9,644 | | | | 22,466 | | | | 302 | | | | 17,856 | |
Other borrowings net of unamortized debt issuance costs | | | 10,895 | | | | 15,143 | | | | 17,981 | | | | 19,430 | |
Junior subordinated debentures | | | 10,310 | | | | 10,310 | | | | 10,310 | | | | 10,310 | |
Other liabilities | | | 17,894 | | | | 12,286 | | | | 12,293 | | | | 13,217 | |
Total liabilities | | | 1,293,470 | | | | 1,158,623 | | | | 1,082,350 | | | | 987,196 | |
| | | | | | | | | | | | | | | | | |
Shareholders' equity | | | 164,642 | | | | 130,218 | | | | 115,901 | | | | 92,554 | |
Liabilities & shareholders' equity | | $ | 1,458,112 | | | $ | 1,288,841 | | | $ | 1,198,251 | | | $ | 1,079,750 | |
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 from Sacramento to Yreka along the Interstate 5 corridor. 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
Samuel D. Jimenez, Executive Vice President and Chief Operating Officer
Telephone Direct (530) 722-3952
Andrea M. Newburn, Vice President and Senior Administrative Officer / Corporate Secretary
Telephone Direct (530) 722-3959
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