American River Bankshares (AMRB) CEO David Ritchie on Q2 2018 Results - Earnings Call Transcript

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About: American River Bankshares (AMRB)
by: SA Transcripts

American River Bankshares (NASDAQ:AMRB) Q2 2018 Results Earnings Conference Call July 20, 2018 1:30 PM ET

Executives

David Ritchie - President and Chief Executive Officer

Mitch Derenzo - EVP and Chief Financial Officer

Analysts

Tim O'Brien - Sandler O'Neill

Operator

Welcome to the second quarter 2018 earnings conference call. My name is Jackie and I will your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. Please note this conference is being recorded.

I will now like to turn the call to Mr. David Ritchie. Mr. Ritchie, you may begin.

David Ritchie

Good morning. This is Dave Ritchie, CEO of American River Bankshares, parent company of American River Bank, coming to you from Rancho Cordova, California. This is our second quarter update.

Our plan is to give you some updates. This is my third call since joining the bank. We continue to have excellent liquidity, capital to be deployed. We continue to have high client satisfaction. Our plan has three key areas for growth. Progress towards the plan is well underway. And I plan on giving you some updates on that after the financial report. Today, we have two press releases that went out to the market when the market opened today. An earnings release detailing the quarterly results, cash dividends which is payable next month.

So now I am going to turn it over to Mitch to give you an in-depth financial report.

Mitch Derenzo

Thanks Dave. Of course, thanks to all of you for listening in on the call today. I appreciate your flexibility. It's not our typical time but things came up.

Before we get started, I need to remind everyone of our safe harbor disclosures. Certain matters discussed in this presentation may constitute forward-looking statements for the purposes of the federal securities laws and may involve risks and uncertainties. Actual results may differ materially from the results in these forward-looking statements. Factors that might cause such a difference are discussed in the company's Annual Report on Form 10-K for the year ending December 31, 2017 and in subsequent reports filed on Form 10-Q and form 8-K.

We do not undertake any obligation to publicly update or revise any of these forward looking statements, which would include information or future events, except as required by law. Links to our Annual Report and 10-K are located on our website, americanriverbank.com.

As with past calls, I am going to try to highlight some of the key areas from our press release that we released yesterday. And then I will also try to provide some additional details and analysis and will turn it back over to Dave for some additional comments and then open up the lines for questions.

Yesterday, we reported our net income for the second quarter of 2018 of 1.3 million. That was the same as the $1.3 million during the second quarter of 2017. Earnings per share were $0.22 for the second quarter of 2018, up from the $0.20 per share from the second quarter of 2017.

ROA and ROE for the quarter. ROA was 75 basis points. ROE was 7.1%. That compares to 80 basis points and 6.35%, respectively one year ago. On a year-to-date basis, our net income came in at $2.6 million. That's up slightly from the $2.5 million in 2017. Earnings per share were up to $0.44 in 2018, compared to $0.38 in 2017. ROA for the six-month period, 77 basis points, same as the -- same $0.77 in the same period last year. ROE was up a tad up to 7.2% in 2018 and compared to 6% one year ago.

Comments on the balance sheet. Net loans did decrease $18.2 million in 2018. The payoffs exceeded the new loan fundings. While I am not happy about reporting another decrease, I do believe we are seeing some results from our plan that Dave outlined earlier this year and that is to upgrade our lending staff and to put more of our liquidity to work. I reported last quarter that we added some new lenders in early April. We did add a couple more in May. And we are already seeing some great progress from these folks. These folks are seasoned lenders with an average of 16 years in the lending area.

Though the quarter does show a net decrease of $18 million, it doesn't fully capture the new loans boarded during the quarter. We booked $30 million of new commitments, but of that amount only $13 million were actually advanced as of June 30. We anticipate the remaining commitments here to begin funding during 2018.

We also got hit real hard with some payoffs during the quarter. We had $19 million in payoffs. Some of those were scheduled, some of them were not and a large part of those actually paid off in the last week of the quarter. We had $12.3 million payoff in the last week of June.

I do want to point out that we did see a nice increase in commercial loans outstanding during the quarter. We are up $4.3 million in commercial. And we are seeing some pretty good rates on these. Average loans, the average rate on the loans of the $30 million that we booked during the quarter was 5.53%.

We also continued to see prepayment penalties. Yes, we are losing some of these loans, but they are leaving some money on the table which helps soften the blow a bit. During the second quarter 2018, those prepayment penalties were $232,000 compared to $20,000 in the second quarter of last year. And then for the year, we are up to $356,000 for 2018. That's up from the $103,000 in 2017.

Credit quality, not a whole lot to report. Credit still remains pretty strong. We had $4,000 in recoveries and zero charge-offs. Also there is not a lot to report on the shared national credit that we have been talking about the past few quarters. We continue to monitor it very closely. We are gathering information. They seem to be progressing. Really nothing to report. We didn't have any adjustments to our -- had no additional write-downs this quarter. Just as a reminder, our net balance, our balance outstanding is $1.5 million. We do have a $200,000 specific reserve. So our net exposure is $1,362,000.

That one loan makes up 80% of our nonaccrual loans. The rest of our nonaccrual loans are made up of one commercial real estate property, $283,000. They actually made $6,000 of payments during the quarter, principal payments during the quarter. We have a commercial loan relationship. There's two loans in that that totals $31,000. That's a new nonaccrual for the quarter. We actually did reduce that balance by $4,000 subsequent to us putting it on nonaccrual. So they are making payments. And then we had one $69,000 equity loan that was also a new add for the quarter.

The commercial property that I mentioned earlier here, it's back in escrow. The buyer and seller are working hard to get this closed. If we can get it closed, we expect a full payoff or expect full recovery from that payoff, assuming the sales price sticks to where it is now. In the meantime, the borrower is making payments. They are trying to catch up on the past due payments and worked out their property taxes past year as well.

On our allowance, that's 1.52% of loans outstanding. That's exactly what it was one year ago. We had one loan on 30 days past due, excluding the nonaccrual of course. The value of that was $98,000. At the end of the quarter, that loan was in the process of being renewed. It has since been renewed and is considered current as of the date today.

We still have the one OREO property, $961,000. No change there. Classified equity is relatively low. At June 30, 2018, it was just 4.6%. Of course, breaking that down, it's $1.9 million is the nonaccrual and then $961,000 for OREO for a combined total of just $2.9 million.

No real change in the investment portfolio. It continues to be well structured cash flowing mortgage products and few high credit quality municipal loans. At June 30, 2018, the portfolio totaled $282 million. That's up from $263 million a year ago. In addition, we did end the quarter with $8 million in Fed funds. The increased balances in the portfolio obviously results from the increase in deposits as well as the reduction of loan balances. About 91% of our investment portfolio remains in U.S. government agencies or U.S. government sponsored agencies, primarily mortgage related. And the portfolio is still short. Average life of the entire portfolio is 4.1 years and the duration is 3.1. And the price changing up 300 is 10.3%. So relatively low.

We continued to experience a market interest rate increase. So that's impacting the unrealized gain on our bonds. At June 30, 2018, unrealized loss on the portfolio was $4.4 million. That compares to an unrealized gain of $1.6 million one year ago. This obviously impacts the tangible book value per share. At June 30 last year, the unrealized gain I mentioned added 15 basis points to our tangible book value, whereas June 30 of this year, the unrealized loss reduced tangible book by $0.51 per share. That's a swing of $0.66 per share. So a big impact on the tangible book value.

On the other side of the balance sheet. Deposits increased from $556.1 million at the end of December 2017 to $581.3 million at June 30. That's a $25.2 million increase or 4.5%. Much of that increase incurred in our non-interest bearing deposits which increased from $216 million at December 31, 2017 to $221 million at June 30, 2018. We also saw an increase in money market. Those increased from $130 million at the end of 2017 to $146 million at the end of June 2018. Despite the growth during the year, we did see a decrease in balances in the second quarter of $18.9 million.

If you recall, during my comments last quarter, I mentioned about half of the increase in the first quarter were about $22 million, that was related to one relationship that sold their business. I think I also told you that we didn't know how long the funds would stay in the bank. So we are keeping the funds short. We had the large Fed fund balance at March 31. Well, as I expected, much of that balance, all but about $100,000 did leave the bank in the second quarter. So in reality, excluding that relationship, deposit balances actually grew by nearly $3 million in the second quarter. Now that decrease in that relationship is really one of the primary reason the Fed funds did decrease from $38 million at March 31, 2018 to just $8 million at June 30, 2018.

Non-interest bearing balances were 38% of our total deposits and non-CD balances, which we refer to as core deposits, was 87% of our total deposits. So still continuing that strong deposit portfolio. Average cost of funds did increase slightly by about 9 basis points from 28 basis points in the first half of last year to 37 basis points in the first half of this year. The primary reason for that was, we are obviously in a higher rate environment but much of that increase is really centered on our FHLB borrowings and some higher CD cost as those things are renewing or rolling over at the higher market rates.

Overall cost of deposits for the first half of 2018 was 21 basis points, up six basis points from 15 basis points in the first half of last year. Again, much of that deposit cost increase is going to be related to the higher CD expense.

Capital levels remained strong. Equity did decrease about $205,000 during the quarter and that really results from the decrease in the other accumulated comprehensive income exceeding the increase from our net income for the quarter. The AOCI was a positive $988,000 one year ago and because of the rising market rates, it's now a negative $3 million.

Our leverage ratio, 8.8% at the end of June of this year. And our total risk base was 18.8%. Those are down slightly from 10.2% and 19.7% respectively one year ago.

For the second quarter of 2018, we did repurchase 34,600 shares. Average price on those was $16 a share. For the year, we repurchased 298,778 shares at an average price of $15.53. That's about 97% of our target that we laid out for the 2018 repurchase program.

David did mentioned, we did issue the press release yesterday for the cash dividend as well. We continue to believe those to be good capital management strategies.

Not much on the non-interest income side. We did see a decrease there. That's primarily related to investment sales. We had less investment gains in 2017 compared to 2018.

Non-interest expense, we did see an increase there. We talked a bit about that at the last quarter. We increase from $3.4 million in the second quarter of last year to $3.8 million in the second quarter of this year. And the primary reason for that is increase in salary and benefits which increased by about $450,000 year-over-year.

As we reported, last quarter I mentioned that we had four new relationships that joined the bank in early April. We did another one in late April. We added one in mid-May. And that brings our total to nine which, I believe, we are up to full, that's our target for relationship managers at this point.

Taxes. We continue to benefit from the lower Federal tax rate. The pretax income was $3.7 million last year compared to $3.4 million this year. The lower tax rate did benefit us. The effective tax rate decreased from 33.7% in 2017, down to 23.6% in 2018. Of course, that lower tax rate does impact some of the ratios we quote as a fully taxable equivalent effective rate, it does drop. That dropped about a couple of basis points off our margin and then about 40 basis points on the efficiency ratio.

Thank you. And I return it back over to Dave for some additional comments.

David Ritchie

Thanks Mitch. Yes. So I wanted to give you the second quarter update kind of on the plan and I would call that the big goals. We need to have a focused and integrated strategic plan which we put together in January and I think, is well on its way. We need to align the companywide efforts toward a single goal, that's to be more profitable. And the ultimate goal, the big goal would probably be, we want to return back to being a top performer. And so, those are pretty simple.

From a tactical perspective, I guess I will call it the tactical goals. We are out chasing profitable relationships. We want to increase the number of our relationships. We are less focused on brokers and things that have been done in the past. We need to assess the bank and make needed changes which I think are well on their way. Staffing up for growth was obviously something that we talked about in the past and getting the right team members in place to help us with the growth. And I think the last thing we talked about is, we just needed to be much more visible in the markets we serve. And I think we have done a fairly significant job there and we will talk about that in a minute.

I think the first thing I will talk about is assessing the needs of the bank and make needed changes. And I think, just for everyone's benefit, we have made some fairly significant internal restructuring, in particular of our lending groups and our credit functions. We have a significant project we are doing right now to review our policies and make the appropriate changes and I would say, maybe make the appropriate cleanup so that we are more a reflection of what the market is providing for borrowers in particular.

And the other piece is, we have got a focus and one of our competitive advantages is got to be speed to market. And with the internal restructuring and the policy reviews, I think that has really helped us. And I will talk about that in a minute.

The other thing was, you have heard it along and we are short staffed in terms of from the beginning of the year to now. And so it was really important for us to go out and be particularly, I mean I think we really wanted to look at the right people for this organization that had the same passion for growth. We wanted to have some seasonality, as Mitch talked about, with the RMs that we have hired. And quite frankly, I think we have done that, on that front.

Since the last time we spoke, I think I mentioned to you last call that we were very close to hiring a new Chief Credit Officer. We have done that. Dan McGregor started with the company in the middle of May. So that's been a huge lift.

The commercial banking team, I will never say it's full, but for right now I think we feel pretty good with our nine. And I think that's reflected in the results to somewhat. I think it should be noted that we did put on, as Mitch said, $30 million of new commitments in the quarter and I am happy to say that it wasn't all real estate. $8 million was C&I. To give you an idea, we had a development loan and we are lending some money to an agriculture company. We did a contractor. We also did some business with a franchisee.

So we are definitely -- part of our hiring is a reflection of the deals we are bringing in. We brought in some people that know real estate, but we also brought in some people that understand commercial banking and C&I. I think what's pretty interesting about that is, on the speed the market front, if you think about it, we hired one person in January and four in April and two in May to fill everything up.

So if you think about it, I figured these people would probably take 90 to 120 days to get it integrated into our bank. And so, you think about it, we probably had the whole team in place for an average of about 45 days. And I think what's nice about that, as we were able in a very short period of time to get some new business on the books. I think the new business of the nine relationship managers came from five. So we are about halfway there on the productivity. But I was pleased with that. I think the new relationship count was somewhere probably 11 or 12 brand-new relationships. And so I think that's a good thing.

And other than that, I think that's good progress for us. We certainly weren't crazy about some of the payoffs but some of that was broker deals. We didn't really have relationships with some of them. And so I think we are on our way. The RM teams, they are set up into four teams and they are covering, are working with each of our branches. That integration with the branch managers has been terrific. The joint calling, the whole relationship idea, we are not just making loans. We have been able to bring branch managers in to help with the integration into our banking systems and depository systems and things like that. So that's great progress for us.

So I am pretty happy about the staffing and I am pretty happy about the pipeline that I am seeing. I am pretty happy about the idea that we have a very succinct loan committing process now. And so things are moving a lot quicker. And it should be noted on this, speed to market. That $23 million of the $30 million that we did in the quarter booked in June. So in 30 days, we put some stuff on the book. So that was a good thing.

The last thing was, the other thing we had talked about was visibility. We needed that in our markets. I think we have done a yeoman's job on that. I think we have gotten a lot of exposure. And we have been sponsoring events and gauging all of our employees in these events. I think we attended some close to 30 or so events in the last couple months alone and in the markets we serve. So we are getting some nice media coverage and I think the general buzz in the market is that people are talking about American River Bank again. And we are really proud of that.

And so, as always, we have included some economic data in our press release. Positive trends continue in our markets in the California and the nation. So last thing I would ay is, we have already begun thinking about 2019 and discussing our strategic plan and how to continue our momentum.

So Jackie, if you could open up the lines for questions, that would be great.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from Tim O'Brien with Sandler O'Neill. Please go ahead.

Tim O'Brien

Good morning guys.

David Ritchie

Good morning Tim.

Mitch Derenzo

Good morning Tim.

Tim O'Brien

So just with regard to the payoffs and Dave you gave some color about participation payoffs and such. What was behind those payoffs? Was it refis? Or was it property sold? The payoffs were weighted in multi and real estate.

Mitch Derenzo

Tim, we bought some multi-family about a year-and-half ago. A couple of pools I think reported. That was part of our loan growth in 2016. Some of those paid off in the quarter, probably three of those. They are pretty large deals. We are not allowed to get in front of those people. As Dave pointed out, those are not relationship deals. So again --

Tim O'Brien

You don't know why they occurred necessarily? What the under --?

Mitch Derenzo

Yes. Most of it, I think, had gone through the prepayment periods and the rate was probably going to reset and they just refi-ed. So again, they are not relationships. Does it bother me that we lost some volume? Yes, but they are not the type of business we really want right now.

Another one. Guy did sell. He had his own bank. Another deal, but pretty big deal, the terms were not good. No recourse and low long-term, I think it was a low 4% long-term fixed. Now these are just not the credit and interest rate risk we want to take. So sometimes you just have got to sit out. And it was a broker deal too.

Dave, do you have anything to add there?

David Ritchie

I think part of the process for us, Tim, is we have aligned the new relationship management teams with the branches and something that we have lacked in the past is having multiple people in this organization getting to know the relationships. And so since we have got the team in place, I feel that now we have assigned portfolios to the relationship managers. We are making sure we do have relationships, but honestly I think of the $18 million, most of this was non-relationship-based payoffs other than one sale. So I think going forward, you are always going to have payoffs. You guys know that. That's the game.

You have got to do more loans and get paid off. That's how we work. But I think the good news is that these really weren't relationships and like Mitch said, there is some brokerage stuff. The portfolio that we bought, we really didn't have access to the clients or the customers at all. So as Mitch said, there is about $18 million of that left. And so we monitor that. We watch it, do the best we can. And so I think that's what happened. I am happy to say that it's non--relationship stuff versus relationship stuff.

Mitch Derenzo

I guess on a positive note, we are putting those loans back out in the market at a much higher rate.

David Ritchie

Yes, exactly.

Mitch Derenzo

Over 5.5% for the quarter and some of those loans are paid off, we are probably in the low threes.

Tim O'Brien

And to that last point you made Mitch, that's the thing that is surprising me about, I would think that we would see fewer refis in this market today than say we did a year ago or two years ago. Isn't that just because it's kind of the nature of the market and where pricing is and banks loaned up on the commercial real estate side much more today than they were two years ago, even perhaps? And for all these different reasons, my thinking was just that something that's been a headwind for American River for a long time, perhaps always, is turnover in the loan book. And I guess my question is, do you expect refi business to slow down marketwide, regardless of whether or not if it's a relationship client or non-relationship client, just because of what's happening with rates?

Mitch Derenzo

I would agree with your comment that we should see less. However, if we have some that are resetting and they are popping up 200 basis points, maybe that 200 basis points increase is putting on that, what would be considered higher than market right now so they can refi and lock-in. And if it's a continually resetting loan now where maybe it was fixed for five years and now it's going to reset every six months or a year, I am going to say you are going to get those refinanced. So those will be the ones that I would be keeping an eye on.

Tim O'Brien

So as far as that book of business that you have is concerned, when a loan like that comes up for a reset, if it's a relationship client what's the chance that the client will reach out to you and say, can you do something with me on this because I don't like the reset? You are not where the market is anymore and I can do better over here? What's the bank's response?

David Ritchie

Yes. Tim, I think that if it's a relationship, we are going to do everything to keep the loan. And I really think part of it is, we are playing a little catch-up. We didn't have the relationship managers that covered the portfolio necessarily and we didn't have enough of them. And now those portfolios, the relationships have been assigned. First thing out of the blocks for these relationship managers is to get a hold of these people and make sure that they know we are here and that we are here to serve and we are here to take care of them. And that's what we are doing, trying to combat that a bit.

Mitch Derenzo

I will give you one example I know of. A loan is resetting in January, I believe. So we are still six months, five, six months out and we are already making contact with them. It is a pretty large loan. We will make the contact with them and we will work it out. That's a relationship loan that we don't want to lose.

Tim O'Brien

And you have waited a long time for that reset to make some money on this thing too, I would imagine. But what about as far as, my suspicion would be that you are more likely to see payoffs in real estate related loans due to property sales today then from refis. Is that a fair way to look at this? Or is that false?

David Ritchie

I would totally agree.

Tim O'Brien

And did you guys experience any of your clients selling properties and then they say, hey here you go, I don't need this anymore?

Mitch Derenzo

We did. Not the majority of it. But I am looking at here $1.5 million one that did that. A couple of smaller ones as well, but the majority of it was the ones that we didn't have control over.

Tim O'Brien

Are you seeing transactions amongst or do you have a feel for if your clients are buying or selling properties on a net basis at this point? More likely to sell?

David Ritchie

Well probably, I guess it's a little all over the board. But some of the clients are selling and creating liquidity to do another project. We have had a couple of those. But I don't know if there's a one consistent answer for that.

Mitch Derenzo

Most of it is, they are selling, they are going to turn around and buy, so they can avoid paying the capital gains.

Tim O'Brien

So I guess big picture, as far as the line of questioning that I approached you guys with is, just trying to get a better sense of what turnover might look like going forward and how that might influence net loan growth, which is obviously really important to your story starting now? And that's it. So that's my comment. But I will step back.

Mitch Derenzo

I look forward to you, when you figure that out, letting us know.

Tim O'Brien

Okay.

Mitch Derenzo

In the meantime, we are going to keep an eye on our relationships and try to retain those and trying to get head of them, so we can keep them.

David Ritchie

Tim, maybe I can soften it a little bit by saying and I don't know if we have shared this with everyone, but the way we set up the relationship teams is we have three teams of four and we have one team of five, right. And so we have like four, what we would call team leaders and underneath there is a relationship manager and underneath that there's a portfolio manager and underneath that there's kind of a person that handles a day-to-day. And so the idea here is, as the relationship managers and their team leads spend time on these portfolios that we are going to have a lot more touch points on these clients which is the right way to do it.

I think in the past, there has been a lot of transition with RMs and nobody knew who they are dealing with. And I think we are just trying to get some consistency and some true coverage on these relationships. So you are going to have people sell. You know that. We are going to payoffs. But at the end of the day, we don't want to take a good client and have them refinanced with somebody else. So we are trying to do a little bit more. We make a lot more effort on just relationship management. We have to do that.

Tim O'Brien

Will you guys ever start, I don't know, giving color on or quantifying pipeline? Prospect pipeline numbers? Is that something that you anticipate you will provided in the market at some point?

Mitch Derenzo

I don't think so.

Tim O'Brien

Even on one of these calls?

Mitch Derenzo

Well, if you saw a pipeline in there, what does that mean? What's the percentage of that that can actually book? I think sometimes pipeline can be misleading?

Tim O'Brien

Absolutely. It's all in the definition.

Mitch Derenzo

Yes.

David Ritchie

Yes.

Tim O'Brien

I mean, but there is a way to judge that, which is how much, what's the fallout ratio. But yes, just curious about that. But I guess, you would probably qualitatively say that your prospects here at the end of this quarter are better, bigger, broader, stronger, deeper than they were at the beginning of the quarter. But that's kind of getting at that.

David Ritchie

Here's how I would answer it, just because the number is the number. I mean, kind of the process here is you have got to get some paper on the streets. So I think with the seniority here, what we are trying to do is get, before we really call it even pipeline here, we get term sheets out in front of people that are new prospects and if they come back signed, which is before underwriting, but we usually get a little information if we like what we see, then it becomes pipeline, because we don't have enough people to just throw everything up against the wall and call it pipeline. And so there's really a systematic approach here to what we are calling pipeline and the number, it changes every day. A little bit of the pipeline today is because of all these new hires. I mean we have seven new hires technically and they have a lot of clients that are following them. So we feel pretty good about it. But I think the idea here is that I don't want to give you a big old number that really doesn't mean anything and I would rather I am just kind of whittling it down to what is really the pipeline here with what we are hearing from the market.

Tim O'Brien

Thanks for the color guys. Just trying to get a sense of kind of how this process is going to proceed so we can quantify. Thanks. I will step back.

David Ritchie

No. It's great. Thanks Tim.

Mitch Derenzo

Thanks Tim.

Operator

Thank you. Our next question comes from Tim Coffey with FIG Partners. Please go ahead.

Tim Coffey

Great. Thanks. Good morning gentlemen.

David Ritchie

Hi Tim. How are you?

Mitch Derenzo

Hi Tim.

Tim Coffey

Good. Thanks. Just trying to get my head around the cash and equivalent balances. They have been elevated for a number of reasons. And I am wondering what would be kind of a normalized level, do you think, going forward?

Mitch Derenzo

Yes. We did have quite a bit of deposit growth right near the end of the quarter. So we are probably at a higher level than I would like to see. It takes a few days to get that money invested out and I have been keeping it a little shorter as well, primarily because of the new loan fundings. I mean last quarter we had a big ton, because we have the $38 million. But most of that went out to loan fundings and then that one relationship, the deposit relationship that I was kind of keeping money held back for. I am thinking that if you look historically, we are probably in the $30 million range. So a little higher than that. But again, I am probably going to keep a little more based on the pipeline. So if you look at where we were a year ago in our pipeline, there was no reason to keep more than $30 million in there. I am not giving you the exact number, but it's all going to really depend on my thoughts on the pipeline.

Tim Coffey

Right. And that's actually what I am going to trying to get my arms around, because if you do have a lot of initiatives going, you are going to have need for liquidity, obviously. But you also had these moving parts past few quarters. And so I am trying to figure out, how I should be thinking about that level of liquidity going forward? That's all.

Mitch Derenzo

As I mentioned, we had $12.3 million in loans that paid off in the last week with most of those paying off on the last day of the quarter. So there is $12 million right there. You pull that out and that's pretty close to where I would like to be.

Tim Coffey

Okay. The $12 million that paid off, was any of those related to the multi-family loans that you discussed earlier?

Mitch Derenzo

There were a handful of those in there, yes.

Tim Coffey

Okay. All right. Thanks. And Dave, I think you have got to be feeling pretty good about your marketing efforts so far. We look at the growth in non-interest bearing deposits versus the growth in total deposits and you have done pretty well last several quarters. Is that indicative of the kind of strategies that you are trying to put in place?

David Ritchie

Totally. I mean, to be honest with you, I think the whole strategy is to build relationships. And I am shying away from, we need to have full relationships here as the loans grow and these relationships grow. The perfect world, as you know is the loans and the deposits and the services. So it's working. We are really fortunate. I mean, I got to tell you that just from the retail banking side, the branches do a great job. I mean our branch leadership team is phenomenal. And just the interaction, Tim, for a branch manager to call one of the relationship managers and just to go out on the call, the feedback from these teams has been, gosh, it's just refreshing to have somebody that really knows how to talk about a loan and then somebody knows how to talk a little bit about services and deposits. And there is just a lot of momentum and that is the game.

I think that other piece that net promoter score, how we look at our clients. I mean I have said this since I have been here, it's quite remarkable to talk to, just depository relationships in the bank, branch customers. I mean we do a great job at servicing these people. I mean we realize, with the interest rates moving up, there could be some pressure on deposits, but we really haven't really felt that kind of pressure. When I get around and talk to other leaders and other banks, there's a lot of people who will feel pressure and I think we have like this, it's kind of like having a Platinum American Express Card, some concierge service kind of thing, because it's really impressive. So I am hoping that, I mean, I am feeling really good about the loan stuff and the last 30 days was pretty good and everybody brought deposits in too and that's really good.

So I think if it all works, we have got some pretty good momentum and I think coupled with just the recognition in the marketplace. I think it's been, I really thought we wouldn't see much on the loan side till the third quarter. Granted we had some payoffs, I get it. But we are a little ahead of the plan, I really thought. I mean I think we are 60 days better then I thought we would be.

Tim Coffey

No. I agree. I thought you were as well. And then just my last question was, in reading some of the economic data in the press release, one of the things that popped out was the slowing job growth in the Sacramento area. Is that a concern to you at all?

Mitch Derenzo

No. Because we still have a lot of people employed in the area. Eventually, yes, I am not concerned with it.

Tim Coffey

Okay. I mean especially given your relative size, you are likely to outgrow your local markets anyway, if everything goes according to plan?

Mitch Derenzo

Exactly.

Tim Coffey

Okay. Well, those were my questions. Thank you very much for your time.

David Ritchie

Thanks Tim.

Operator

Okay. Thank you. Our next question comes from Don Worthington with Raymond James. Please go ahead.

Don Worthington

Thank you. Good morning.

Mitch Derenzo

Hi Don.

David Ritchie

Hi Don. How are you?

Don Worthington

Good. Thanks. Mitch, you may have mentioned it and I missed it, but how much did the prepayment fees impact the margin in the quarter?

Mitch Derenzo

I don't have that as a percentage. I did give the dollar amounts. I can give you those again.

Don Worthington

Okay.

Mitch Derenzo

You can just simply divide those by the average earning assets, you can quickly calculate that yourself.

Don Worthington

Okay. Yes. What was it again this quarter? The dollars?

Mitch Derenzo

Let me find that page. I am kind of throwing things around here. So for the quarter $232,000, compared to $20,000 a year ago. And then for the six months, $356,000 versus the $103,000 in the first six months of last year.

Don Worthington

Okay. So in terms of the margin going forward, I know you don't gives specific guidance, but it's expected probably to drop down some from the second quarter unless you have a similar amount of prepaid fees?

Mitch Derenzo

That's a fair statement. We are hoping that as these lower rate loans that are paying off, we are benefiting with some more C&I. And C&I typically tend to be tied to the shorter end of the curve, which has been increasing. So we are hoping to increase some margin that way. But you are spot on with that.

Don Worthington

Okay. All right. Thanks.

Mitch Derenzo

Thanks Don.

David Ritchie

Thank you Don.

Operator

Thank you. We have no further questions at this time. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect.

Mitch Derenzo

All right.

David Ritchie

Thanks Jackie.

Operator

Thank you.