Provision for Credit Losses. The Company recognized a release of credit losses in the amount of $404,000 and $80,000 for the three-month periods ending March 31, 2021 and 2020, respectively. The increase in release of credit losses in the 2021 period was due to a decrease in the reservable balance in the loan portfolio and two loan recoveries in the first quarter of 2021. A provision was not recognized for the Commercial SBA PPP loans as these loans are 100% guaranteed by the SBA. As of March 31, 2021, the allowance for credit losses represented 1.18% of total loans compared to 0.69% at March 31, 2020. The increase in the percentage in the allowance for credit losses resulted from the implementation of ASC 326.
Noninterest Income. Noninterest income decreased to $247,000 for the three-month period ended March 31, 2021, from $255,000 for the corresponding period in 2020, a decrease of $8,000, or 3.14%. The decrease was primarily due to a decrease in service charges on deposit accounts and other fees and commissions.
Noninterest Expenses. Noninterest expenses for the three-month period ended March 31, 2021 and 2020 were $2.8 million and $3.0 million, respectively, a decrease of $212,000 or 6.98%. The decrease was driven by decreases in salary and employee benefits cost, occupancy and equipment, legal, accounting and other professional fees, loan collection costs and other expenses, offset by increases in data and item processing services, and telephone costs.
Income Taxes. During the three-month period ended March 31, 2021, the Company recorded income tax expense of $106,000 compared to $75,000 expense for the same period in 2020, a $31,000, or 41.33%, increase. The Company’s annualized effective tax rate at March 31, 2021 was 15.20% compared to 21.91% for the prior year. The increase in income tax expense was due to higher income before taxes. The decrease in the annualized effective tax rate for the three-month period was due to an increase in tax-exempt municipal securities in 2021.
Comprehensive Income (Loss). In accordance with regulatory requirements, the Company reports comprehensive income (loss) in its financial statements. Comprehensive income (loss) consists of the Company’s net income, adjusted for unrealized gains and losses on the Bank’s portfolio of investment securities and interest rate swap contracts. For the first quarter of 2021, comprehensive loss, net of tax, totaled $1,895,000 compared to comprehensive income, net of tax, of $428,000 for the same period in 2020. The decrease was due to higher net unrealized losses on available for sale securities, offset by higher net income, and higher net unrealized gains on interest rate swaps.
FINANCIAL CONDITION
General. The Company’s assets increased to $436.7 million at March 31, 2021 from $419.5 million at December 31, 2020, an increase of $17.2 million or 4.11%, primarily due to increases in cash and cash equivalents and investment securities available for sale, offset by decreases in loans, net. Loans totaled $243.9 million at March 31, 2021, a decrease of $8.4 million, or 3.32%, from $252.3 million at December 31, 2020. The decrease was primarily attributable to decreases in commercial real estate, commercial and industrial loans, consumer, and automobile loans, offset by increases in construction and land, and commercial SBA PPP loans. Investment securities available for sale as of March 31, 2021, totaled $134.9 million, an increase of $20.8 million, or 18.28% from $114.0 million at December 31, 2020. The increase resulted primarily from the purchase of investments securities due to an increase in excess liquidity from deposit growth and decreases in loan portfolio balances. Cash and cash equivalents as of March 31, 2021, totaled $40.5 million, an increase of $3.4 million, or 9.11% from $37.1 million at December 31, 2020 resulting from an increase in short-term borrowings to fund PPP loans and deposits, offset by the purchase of investment securities in 2020.
Loans are placed on nonaccrual status when they are past due 90 days as to either principal or interest or when, in the opinion of management, the collection of all interest and/or principal is in doubt. Placing a loan on nonaccrual status means that we no longer accrue interest or amortize deferred fees or costs on such loans and reverse any interest previously accrued but not collected. Management may grant a waiver from nonaccrual status for a 90 day past due loan that is both well secured and in the process of collection. A loan remains on nonaccrual status until the loan is current as to payment of both principal and interest and the borrower has demonstrated the ability to make payments in accordance with the terms of the loan and remain current.
A loan is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are