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Bank of Commerce Holdings Announces Third Quarter Results

REDDING, Calif., Oct. 31, 2014 (GLOBE NEWSWIRE) -- Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (Nasdaq:BOCH), a $977.8 million bank holding company and parent company of Redding Bank of Commerce and Sacramento Bank of Commerce (a division of Redding Bank of Commerce) (the "Bank"), today reported net income available to common shareholders of $1.2 million and diluted earnings per share ("EPS") of $0.09 for the third quarter 2014.

Financial highlights for the quarter:

  • Net income available to common shareholders was $1.2 million for the three months ended September 30, 2014 compared with $1.8 million for the same period a year ago. The year-over-year decrease was driven by loan loss provisions.
  • Portfolio loans increased $30.3 million compared to the prior quarter and $55.0 million compared to the third quarter of 2013. The sequential quarter over quarter increase was a combination of wholesale purchase activity and organic loan originations.
  • Nonperforming assets decreased $3.4 million or 12% compared to the prior quarter and decreased $11.9 million or 32% compared to the third quarter of 2013.
  • Non-maturing core deposits increased $17.2 million or 4% compared to the prior quarter.

Randall S. Eslick, President and CEO commented: "While our third quarter performance was short of our expectations, we are pleased with the strong loan and core deposit growth, and improvement in asset quality. These factors are consistent with our longer term objectives of stronger core earnings and solid credit metrics."

Forward-Looking Statements

This quarterly press release includes forward-looking information, which is subject to the "safe harbor" created by the Securities Act of 1933, and Securities Act of 1934. These forward-looking statements (which involve the Company's plans, beliefs and goals, refer to estimates or use similar terms) involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors:

  • Competitive pressure in the banking industry and changes in the regulatory environment
  • Changes in the interest rate environment and volatility of rate sensitive assets and liabilities
  • A decline in the health of the economy nationally or regionally which could further reduce the demand for loans or reduce the value of real estate collateral securing most of the Company's loans
  • Credit quality deterioration which could cause an increase in the provision for loan losses
  • Asset/Liability matching risks and liquidity risks
  • Changes in the securities markets

For additional information concerning risks and uncertainties related to the Company and its operations please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2013 and under the heading: "Risk Factors" and subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Table 1 below shows summary financial information for the quarters ended September 30, 2014 and 2013, and June 30, 2014.

Table 1 QUARTER END SUMMARY FINANCIAL INFORMATION
(Shares and dollars in thousands) Q3 Q3 Q2
2014 2013 Change 2014 Change
Selective quarterly performance ratios
Return on average assets, annualized 0.51% 0.76% -0.25% 0.91% -0.40%
Return on average equity, annualized 4.99% 6.89% -1.90% 8.73% -3.74%
Efficiency ratio for quarter to date 69.98% 62.69% 7.29% 59.18% 10.80%
Share and Per Share figures - Actual
Common shares outstanding at period end 13,294 14,462 (1,168) 13,294 --
Weighted average diluted shares 13,339 14,853 (1,514) 13,426 (87)
Diluted EPS $ 0.09 $ 0.12 $ (0.03) $ 0.16 $ (0.07)
Book value per common share $ 6.17 $ 5.73 $ 0.44 $ 6.07 $ 0.10
Tangible book value per common share $ 6.17 $ 5.73 $ 0.44 $ 6.07 $ 0.10
Capital Ratios
Bank of Commerce Holdings
Leverage ratio 11.87% 12.80% -0.93% 12.10% -0.23%
Tier 1 risk based capital ratio 14.74% 15.66% -0.92% 15.14% -0.40%
Total risk based capital ratio 15.99% 16.92% -0.93% 16.39% -0.40%
Redding Bank of Commerce
Leverage ratio 11.84% 12.42% -0.58% 12.11% -0.27%
Tier 1 risk based capital ratio 14.68% 15.19% -0.51% 15.15% -0.47%
Total risk based capital ratio 15.93% 16.45% -0.52% 16.40% -0.47%

Bank of Commerce Holdings (the "Company") and the Bank continued to meet all capital adequacy requirements to which they are subject. At September 30, 2014, the Company's Tier 1 and Total risk based capital ratios measured 14.74% and 15.99% respectively, while the leverage ratio was 11.87%. The decrease in capital ratios during the current quarter compared to the prior quarter and the same period a year ago is primarily due to the repurchase of common stock and increased average assets.

Return on average assets ("ROA") and return on average equity ("ROE") for the current quarter was 0.51% and 4.99%, respectively, compared with 0.76% and 6.89%, respectively, for the same period a year ago. The 25 basis points ("bp") decrease in ROA over this period was attributed to both an increase in average assets and a decreased level of net income. The decrease in net income was the primary driver in the reduced ROE. However, the impact of decreased net income on ROE was partially offset by the decrease of weighted average shares resulting from the Company's stock buyback activities.

Balance Sheet Overview

As of September 30, 2014, the Company had total consolidated assets of $977.8 million, net portfolio loans of $639.5 million, allowance for loan and lease losses of $10.4 million, total deposits of $767.5 million, and stockholders' equity of $102.0 million.

Table 2 PERIOD END LOANS
(Dollars in thousands) Q3 % of Q3 % of Change Q2 % of
2014 Total 2013 Total Amount % 2014 Total
Commercial $ 160,024 25% $ 169,193 28% $ (9,169) -5% $ 168,353 27%
Real estate - construction loans 25,579 4% 15,625 3% 9,954 64% 20,462 3%
Real estate - commercial (investor) 216,204 34% 208,530 35% 7,674 4% 205,592 33%
Real estate - commercial (owner occupied) 105,889 16% 80,101 13% 25,788 32% 88,402 14%
Real estate - ITIN loans 53,805 8% 57,232 10% (3,427) -6% 54,611 9%
Real estate - mortgage 13,779 2% 15,872 3% (2,093) -13% 14,211 2%
Real estate - equity lines 45,050 7% 43,989 7% 1,061 2% 47,542 8%
Consumer 28,998 4% 3,753 1% 25,245 673% 20,195 3%
Other 367 0% 267 0% 100 37% 50 1%
Gross portfolio loans 649,695 100% 594,562 100% 55,133 9% 619,418 100%
Less:
Deferred loan fees, net (184) (282) 98 (204)
Allowance for loan losses 10,400 13,542 (3,142) 9,882
Net portfolio loans $ 639,479 $ 581,302 $ 58,177 $ 609,740
Yield on loans 4.59% 4.91% -0.32% 4.69%

The Company recorded net portfolio loans of $639.5 million at September 30, 2014, compared with $581.3 million at September 30, 2013, an increase of $58.2 million. The increase in net portfolio loans during the nine months ended months ended September 30, 2014 was primarily centered in the purchase of $49.3 million in consumer and SBA loan pools. The $3.1 million decrease in the Allowance for Loan and Lease Losses ("ALLL") compared to the same period a year ago is primarily due to charge offs related to three significant borrowing relationships. The loans charged off for these three relationships were collateral dependent loans that were adequately reserved for at September 30, 2013, and subsequently charged off during the second quarter of 2014.

Table 3 PERIOD END CASH EQUIVALENTS AND INVESTMENT SECURITIES
(Dollars in thousands) Q3 % of Q3 % of Change Q2 % of
2014 Total 2013 Total Amount % 2014 Total
Cash and cash equivalents:
Cash and due from banks $ 31,151 11% $ 28,616 10% $ 2,535 9% $ 50,677 18%
Interest bearing due from banks 15,272 6% 20,379 7% (5,107) -25% 16,068 5%
46,423 17% 48,995 17% (2,572) -5% 66,745 23%
Investment securities - AFS
U.S. government and agencies 7,825 3% 3,718 1% 4,107 110% 7,787 3%
Obligations of state and political subdivisions 57,161 21% 61,492 20% (4,331) -7% 55,369 20%
Residential mortgage backed securities and collateralized mortgage obligations 46,498 17% 57,934 20% (11,436) -20% 45,798 16%
Corporate securities 39,717 15% 52,552 18% (12,835) -24% 42,166 14%
Commercial mortgage backed securities 11,100 4% 8,924 3% 2,176 24% 9,833 3%
Other asset backed securities 27,078 10% 25,022 9% 2,056 8% 27,733 9%
Total investment securities - AFS 189,379 70% 209,642 71% (20,263) -10% 188,686 65%
Securities - HTM, at amortized cost
Obligations of state and political subdivisions 36,888 13% 34,814 12% 2,074 6% 37,031 12%
Total cash equivalents and investment securities $ 272,690 100% $ 293,451 100% $ (20,761) -7% $ 292,462 100%
Yield on cash equivalents and investment securities 2.43% 2.52% -0.09% 2.54%

The Company continued to maintain a strong liquidity position during the reporting period. As of September 30, 2014, the Company maintained cash positions at the Federal Reserve Bank and correspondent banks in the amount of $31.2 million. The Company also held certificates of deposits with other financial institutions in the amount of $15.3 million.

Available-for-sale investment securities totaled $189.4 million at September 30, 2014, compared with $209.6 million at September 30, 2013. The Company's available-for-sale investment portfolio is currently being utilized as a secondary source of liquidity to fund other higher yielding asset opportunities, such as commercial and commercial real estate loan originations and wholesale loan purchases. During the third quarter of 2014, the Company purchased thirteen securities with a par value of $17.2 million and weighted average yield of 2.26% and sold seventeen securities with a par value of $12.6 million and weighted average yield of 2.56%. The net sales activity resulted in $32 thousand in realized gains. Average quarterly securities balances and weighted average tax equivalent yields at September 30, 2014 and 2013 were $223.6 million and 3.49% compared to $245.8 million and 3.35%, respectively.

The Company's purchases continue to focus on moderate term maturity securities, taking advantage of the steepness of the yield curve which moderates the Company's exposure to rising interest rates, while still providing an acceptable yield. Sales were focused on longer term municipal and corporate bonds, as well as mortgage-backed and asset-backed securities with extended cash flows or with a high probability of cash flows extending as interest rates increase.

Overall, management's investment strategy reflects the continuing expectation of rising rates across the yield curve. As such, management will continue to actively seek out opportunities to reduce the overall duration of the portfolio and improve cash flows. Given the current shape of the yield curve, this strategy could entail absorbing small losses within the portfolio to meet this longer term objective.

At September 30, 2014, the Company's net unrealized gains on available-for-sale securities were $1.8 million compared with $1.3 million net unrealized gains at June 30, 2014. The favorable change in net unrealized gains was primarily due to increases in the fair values of the Company's municipal bond, and US government securities portfolios. The increases in the fair values of the Company's investment securities portfolio were primarily driven by the narrowing of market spreads and changes in market interest rates.

Table 4
(Dollars in thousands) Q3 % of Q3 % of Change Q2 % of
2014 Total 2013 Total Amount % 2014 Total
Demand deposits $ 142,796 19% $ 125,133 18% $ 17,663 14% $ 132,842 17%
Interest bearing demand 269,633 35% 246,236 35% 23,397 10% 272,073 36%
Total checking deposits 412,429 54% 371,369 53% 41,060 11% 404,915 53%
Savings 91,556 12% 94,062 13% (2,506) -3% 91,488 12%
Total non-time deposits 503,985 66% 465,431 66% 38,554 8% 496,403 65%
Time deposits 260,592 34% 241,947 34% 18,645 8% 262,809 35%
Total deposits $ 764,577 100% $ 707,378 100% $ 57,199 8% $ 759,212 100%
Average rate on total interest bearing deposits 0.54% 0.56% -0.02% 0.54%

During the third quarter, average total deposits increased 8% or $57.2 million to $764.6 million compared to the same period a year ago. Average non-maturing core deposits increased $17.2 million or 36% during the current quarter compared to the same period a year ago.

Brokered certificates of deposits totaled $13.5 million at September 30, 2014, and were structured with both fixed rate terms and adjustable rate terms, and had remaining maturities ranging from four to six years. Furthermore, brokered certificates of deposits with adjustable rate terms were structured with call features allowing the Company to redeem the certificates should interest rates dictate such action. These call features are generally exercisable within six to twelve months of issuance date and quarterly thereafter.

Operating results for the third quarter of 2014

Net income available to common shareholders was $1.2 million for the three months ended September 30, 2014 compared with $1.8 million for the same period a year ago and $2.2 million for the prior quarter. The decrease in net income available to common shareholders in the current quarter compared to the same period a year ago was primarily driven by a decrease in net interest income, increased provision for loan losses, and a decrease in the gains recognized on sale of securities partially offset by a decrease in provision for income taxes.

Table 5 SUMMARY INCOME STATEMENT
(Dollars in thousands) Q3 Q3 Change Q2 Change
2014 2013 Amount % 2014 Amount %
Net interest income $ 7,948 $ 8,496 $ (548) -6% $ 8,190 $ (242) -3%
Provision for loan and lease losses 1,050 300 750 250% 1,450 (400) -28%
Noninterest income 671 974 (303) -31% 2,136 (1,465) -69%
Noninterest expense 6,032 5,937 95 2% 6,111 (79) -1%
Income before income taxes 1,537 3,233 (1,696) -52% 2,765 (1,228) -44%
Provision for income tax 264 1,431 (1,167) -82% 559 (295) -53%
Net income 1,273 1,802 (529) -29% 2,206 (933) -42%
Less: Preferred dividend and accretion on preferred stock 50 50 -- 0% 50 -- 0%
Income available to common shareholders $ 1,223 $ 1,752 $ (529) -30% $ 2,156 $ (933) -43%
Basic earnings per share $ 0.09 $ 0.12 $ (0.03) -25% $ 0.16 $ (0.07) -44%
Average basic shares 13,294 14,824 (1,530) -10% 13,378 (84) -1%
Diluted earnings per share $ 0.09 $ 0.12 $ (0.03) -25% $ 0.16 $ (0.07) -44%
Average diluted shares 13,339 14,853 (1,514) -10% 13,426 (87) -1%
Dividends declared per common share $ 0.03 $ 0.05 $ (0.02) -40% $ 0.03 $ -- 0%

Net interest income for the three months ended September 30, 2014 was $7.9 million compared to $8.5 million during the same period a year ago.

Interest income for the three months ended September 30, 2014 was $9.1 million, a decrease of $219 thousand or 2% compared to the same period a year ago. The decrease in interest income during the three months of 2014 compared to the same period a year ago was driven by decreased yields in the loan portfolio and decreased volume in the investment securities portfolio, partially offset by increased volume in the loan portfolio and increased yield of investment securities.

Interest expense for the nine months ended September 30, 2014 was $1.2 million, an increase of $329 thousand or 40% compared to the same period a year ago. During the second quarter of 2014 the Company concluded the remaining hedged forecasted FHLB advances associated with the final two legs of the interest rate swaps were no longer probable. Accordingly, the remaining gains recorded in OCI relating to the final two legs of the interest rate swaps were immediately recognized in other noninterest income and are no longer being reclassified from OCI to earnings as a credit to interest expense.

Noninterest income for the three months ended September 30, 2014 was $671 thousand, a decrease of $303 thousand when compared to the same period a year ago. The decrease in noninterest income in the current quarter compared to the same period a year ago is primarily due to a $304 thousand decrease in gains recognized on sale of available for sale investment securities. The decrease in noninterest income of $1.5 million in the current quarter when compared to the prior quarter is due to $1.6 million in gains recorded in other income during the prior quarter, as a result of the Company's determination that the remaining hedged forecasted FHLB advances associated with the final two legs of certain interest rate swaps were no longer probable.

Provision for income tax was $264 thousand for the three months ended September 30, 2014 compared with $1.4 million for the same period a year ago. In the prior year the provision for income tax included the correction of an under-accrual of taxes that resulted from incorrectly accounting for the book tax timing differences relating to the sale of the Company's former mortgage subsidiary. As a result, the Company recognized additional income tax, interest and penalties expense totaling $429 thousand, relating to 2012 tax year during the three months ended September 30, 2013.

Diluted EPS was $0.09 for the three months ended September 30, 2014 compared with $0.12 for the same period a year ago, and $0.16 for the prior period. EPS decreased during the three months ended September 30, 2014 compared to the same period a year ago primarily due to a decrease in net income partially offset by a decrease in weighted average shares. The decrease in weighted average shares resulted from the repurchase of 2.0 million common shares through two separate repurchase plans announced and completed in 2013 and 700,000 common shares from another repurchase plan announced and completed during the six months ended June 30, 2014. All repurchased shares were retired subsequent to purchase. As such, the weighted average number of dilutive common shares outstanding decreased by 1.4 million shares during the nine months ended September 30, 2014.

Table 6 NET INTEREST SPREAD AND MARGIN
(Dollars in thousands) Q3 Q3 Change Q2 Change
2014 2013 Amount 2014 Amount
Tax equivalent yield on average interest earning assets 4.06% 4.29% -0.23% 4.14% -0.08%
Rate on average interest bearing liabilities 0.64% 0.47% 0.17% 0.49% 0.15%
Net interest spread 3.42% 3.82% -0.40% 3.65% -0.23%
Net interest margin on a tax equivalent basis 3.56% 3.93% -0.37% 3.75% -0.19%
Average earning assets $ 929,447 $ 900,786 $ 28,661 $ 908,197 $ 21,250
Average interest bearing liabilities $ 722,300 $ 709,096 $ 13,204 $ 716,835 $ 5,465

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 3.56% for the three months ended September 30, 2014, a decrease of 37 bp as compared to the same period a year ago. The decrease in net interest margin resulted from a 23 bp decline in yield on average earning assets and a 14 bp increase in interest expense to average earning assets. With decreasing elasticity in managing our funding costs and historically low interest rates, maintaining our net interest margin in the foreseeable future will continue to be challenging. Accordingly, management will continue to pursue organic loan growth, wholesale loan purchases, and actively manage the investment securities portfolio within our accepted risk tolerance to maximize yield on earning assets.

Table 7 ALLOWANCE ROLL FORWARD
(Dollars in thousands) Q3 Q2 Q1 Q4 Q3
2014 2014 2014 2013 2013
Beginning balance $ 9,882 $ 9,748 $ 14,172 $ 13,542 $ 13,133
Provision for loan loss charged to expense 1,050 1,450 -- -- 300
Loans charged off (585) (1,456) (4,903) (815) (635)
Loan loss recoveries 53 140 479 1,445 744
Ending balance $ 10,400 $ 9,882 $ 9,748 $ 14,172 $ 13,542
Gross portfolio loans outstanding at period end $ 649,695 $ 619,418 $ 607,049 $ 597,995 $ 594,562
Ratio of allowance for loan and lease losses to gross portfolio loans 1.60% 1.60% 1.61% 2.37% 2.28%
Nonaccrual loans at period end:
Commercial $ 7,065 $ 4,375 $ 4,303 $ 6,527 $ 7,501
Commercial real estate 9,896 15,598 12,560 14,539 16,895
Residential real estate 7,438 6,939 7,360 8,217 10,953
Home equity 89 479 484 513 517
Consumer -- 87 -- -- --
Total nonaccrual loans $ 24,488 $ 27,478 $ 24,707 $ 29,796 $ 35,866
Accruing troubled debt restructured loans
Commercial 1,585 13 62 63 65
Construction -- -- --
Commercial real estate 1,707 1,716 3,853 3,864 1,742
Residential real estate 5,222 5,074 4,894 4,303 2,996
Home equity 584 589 593 598 604
Total accruing restructured loans $ 9,098 $ 7,392 $ 9,402 $ 8,828 $ 5,407
All other accruing impaired loans 757 585 2,564 3,517 4,190
Total impaired loans $ 34,343 $ 35,455 $ 36,673 $ 42,141 $ 45,463
Allowance for loan and lease losses to nonaccrual loans at period end 42.47% 35.96% 39.45% 47.56% 37.76%
Nonaccrual loans to gross portfolio loans 3.77% 4.44% 4.07% 4.98% 6.03%
Allowance for loan and lease losses to impaired loans 30.28% 27.87% 26.58% 33.63% 29.79%

The Company realized net charge offs of $532 thousand in the current quarter compared with net charge offs of $1.3 million in the prior quarter and net recoveries of $109 thousand in the same period a year ago. Charge offs in the current quarter are primarily related to one commercial loan relationship.

The Company continues to monitor credit quality, and adjust the ALLL accordingly to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolios. As such, the Company made $1.1 million additional provisions for loan losses during the third quarter of 2014, compared with $300 thousand during the same period a year ago. The Company's ALLL as a percentage of gross portfolio loans was 1.60% at September 30, 2014 compared to 2.28% as of period ended September 30, 2013.

Management is cautiously optimistic that given continuing improvement in local and national economic conditions, the Company's nonperforming assets including impaired loans will continue to trend down. However, the commercial real estate and commercial loan portfolios continue to be influenced by weak real estate values and the effects of relatively high unemployment levels in our local markets. At September 30, 2014, management believes the Company's ALLL is adequately funded given the current level of credit risk.

At September 30, 2014, the recorded investment in loans classified as impaired totaled $34.3 million, with a corresponding valuation allowance of $1.2 million compared to impaired loans of $35.5 million, with a corresponding valuation allowance of $1.0 million at June 30, 2014. The valuation allowance on impaired loans represents the impairment reserves on performing restructured loans, other accruing loans, and nonaccrual loans. The decrease in impaired loans during the three months ended September 30, 2014 is primarily due to charge offs for one commercial loan relationship.

During the current quarter, the Company restructured two loans to grant a rate concession and two loans to grant a rate and maturity concession. The loans were classified as TDR and placed on nonaccrual status. As of September 30, 2014, the Company had $25.7 million in TDRs compared to $27.9 million as of June 30, 2014. As of September 30, 2014, the Company had one hundred and eighteen restructured loans that qualified as TDRs, of which one hundred were performing according to their restructured terms. TDRs represented 3.95% of gross portfolio loans as of September 30, 2014 compared with 4.50% at June 30, 2014.

Table 8 PERIOD END TROUBLED DEBT RESTRUCTURINGS
(Dollars in thousands) Q3 Q2 Q1 Q4 Q3
2014 2014 2014 2013 2013
Nonaccrual $ 16,556 $ 20,504 $ 19,779 $ 24,596 $ 21,511
Accruing 9,098 7,392 9,402 8,828 5,407
Total troubled debt restructurings $ 25,654 $ 27,896 $ 29,181 $ 33,424 $ 26,918
Percentage of total gross portfolio loans 3.95% 4.50% 4.81% 5.59% 4.53%

Loans are reported as troubled debt restructurings ("TDR") when the Bank grants a concession(s) to a borrower experiencing financial difficulties that it would not otherwise consider. Examples of such concessions include a reduction in the note rate, forgiveness of principal or accrued interest, extending the maturity date(s) significantly, or providing a lower interest rate than would be normally available for a transaction of similar risk. As a result of these concessions, restructured loans are impaired as the Bank will not collect all amounts due, both principal and interest, in accordance with the terms of the original loan agreement. Impairment reserves on non collateral dependent restructured loans are measured by comparing the present value of expected future cash flows of the restructured loans, discounted at the effective interest rate of the original loan agreement. These impairment reserves are recognized as a specific component to be provided for in the ALLL.

Nonperforming loans, which include nonaccrual loans and accruing loans past due over 90 days, totaled $24.5 million or 3.77% of portfolio loans as of September 30, 2014, compared to $27.5 million, or 4.23% of portfolio loans at June 30, 2014. The decrease in nonperforming loans in the current quarter primarily resulted from $3.1 million in payments received on two commercial loan relationships. Nonperforming assets, which include nonperforming loans and other real estate owned ("OREO"), totaled $24.9 million, or 2.54% of total assets as of September 30, 2014, compared with $28.3 million, or 2.89% of total assets as of June 30, 2014. As of September 30, 2014, nonperforming assets of $24.9 million have been written down by 24%, or $5.9 million, from their original balance of $37.9 million.

Table 9 PERIOD END NONPERFORMING ASSETS
(Dollars in thousands) Q3 Q2 Q1 Q4 Q3
2014 2014 2014 2013 2013
Commercial $ 7,065 $ 4,375 $ 4,303 $ 6,527 $ 7,501
Real estate mortgage
1-4 family, closed end 1st lien 2,157 1,249 1,286 1,322 1,740
1-4 family revolving 89 479 484 513 517
ITIN 1-4 family loan pool 5,281 5,690 6,074 6,895 9,213
Consumer 87 -- -- --
Total real estate mortgage 7,527 7,505 7,844 8,730 11,470
Commercial real estate 9,896 15,598 12,560 14,539 16,895
Total nonaccrual loans 24,488 27,478 24,707 29,796 35,866
90 days past due not on nonaccrual -- -- -- -- --
Total nonperforming loans 24,488 27,478 24,707 29,796 35,866
Other real estate owned 393 826 623 913 959
Total nonperforming assets $ 24,881 $ 28,304 $ 25,330 $ 30,709 $ 36,825
Nonperforming loans to portfolio loans 3.77% 4.23% 3.99% 4.98% 6.03%
Nonperforming assets to total assets 2.54% 2.89% 2.63% 3.23% 3.95%

At September 30, 2014, and June 30, 2014, the recorded investment in OREO was $393 thousand and $826 thousand, respectively. The September 30, 2014 OREO balance consists of four properties, of which three are secured by 1-4 family residential real estate in the amount of $231 thousand and one commercial nonfarm residential property in the amount of $162 thousand. During the current quarter the Company transferred two ITIN properties with a carrying value of $169 thousand into OREO and sold two ITIN properties and one improved commercial land property with a total carrying value of $602 thousand.

Table 10 INCOME STATEMENT
(Shares and dollars in thousands) Q3 Q3 Change Q2 Full Year
2014 2013 $ % 2014 2013
Interest income:
Interest and fees on loans $ 7,350 $ 7,487 $ (137) -2% $ 7,188 $ 29,918
Interest on securities 998 1,031 (33) -3% 1,111 4,198
Interest on tax-exempt securities 629 673 (44) -7% 635 2,610
Interest on interest bearing deposits 125 130 (5) -4% 128 535
Total interest income 9,102 9,321 (219) -2% 9,062 37,261
Interest expense:
Interest on demand deposits 123 113 10 9% 118 485
Interest on savings deposits 59 61 (2) -3% 57 254
Interest on certificates of deposit 650 639 11 2% 673 2,625
Interest on securities sold under repurchase agreements -- -- -- 0% -- 6
Interest on FHLB borrowings 126 (84) 210 -250% 33 (267)
Interest on other borrowings 196 96 100 104% (9) 375
Total interest expense 1,154 825 329 40% 872 3,478
Net interest income 7,948 8,496 (548) -6% 8,190 33,783
Provision for loan and lease losses 1,050 300 750 250% 1,450 2,750
Net interest income after provision for loan and lease losses 6,898 8,196 (1,298) -16% 6,740 31,033
Noninterest income:
Service charges on deposit accounts 50 46 4 9% 41 191
Payroll and benefit processing fees 127 113 14 12% 109 484
Earnings on cash surrender value - BOLI 171 133 38 29% 162 534
Gain (loss) on investment securities, net 32 336 (304) -90% (39) 995
Merchant credit card service income, net 25 33 (8) -24% 29 129
Other income 266 313 (47) -15% 1,834 1,209
Total noninterest income 671 974 (303) -31% 2,136 3,542
Noninterest expense:
Salaries and related benefits 3,474 2,865 609 21% 3,417 12,035
Occupancy and equipment expense 749 549 200 36% 678 2,205
FDIC insurance premium 204 202 2 1% 189 725
Data processing fees 217 127 90 71% 218 547
Professional service fees 309 364 (55) -15% 338 1,241
Deferred compensation expense 115 58 57 98% 115 179
Other expenses 964 1,772 (808) -46% 1,156 5,309
Total noninterest expense 6,032 5,937 95 2% 6,111 22,241
Income before provision (benefit) for income taxes 1,537 3,233 (1,696) -52% 2,765 12,334
Provision (benefit) for income taxes 264 1,431 (1,167) -82% 559 4,399
Net income $ 1,273 $ 1,802 $ (529) -29% $ 2,206 $ 7,935
Less: Preferred dividend and accretion on preferred stock 50 50 -- 0% 50 200
Income available to common shareholders $ 1,223 $ 1,752 $ (529) -30% $ 2,156 $ 7,735
Basic earnings per share $ 0.09 $ 0.12 $ (0.03) -25% $ 0.16 $ 0.52
Average basic shares 13,294 16,240 (2,946) -18% 13,378 14,940
Diluted earnings per share $ 0.09 $ 0.12 $ (0.03) -25% $ 0.16 $ 0.52
Average diluted shares 13,339 14,853 (1,514) -10% 13,426 14,964
Table 11 BALANCE SHEET
(Dollars in thousands) September 30, September 30, Change June 30,
2014 2013 $ % 2014
Assets
Cash and due from banks $ 31,151 $ 28,616 $ 2,535 9% $ 50,677
Interest bearing due from banks 15,272 20,379 (5,107) -25% 16,068
Total cash and cash equivalents 46,423 48,995 (2,572) -5% 66,745
Securities available-for-sale, at fair value 189,379 209,642 (20,263) -10% 188,686
Securities held-to-maturity, at amortized cost 36,888 34,814 2,074 6% 37,031
Portfolio loans 649,879 594,844 55,035 9% 619,622
Allowance for loan losses (10,400) (13,542) 3,142 -23% (9,882)
Net loans 639,479 581,302 58,177 10% 609,740
Total interest earning assets 922,569 888,295 34,274 4% 912,084
Bank premises and equipment, net 12,510 10,533 1,977 19% 12,415
Other intangibles -- 31 (31) -100% --
Other real estate owned 393 959 (566) -59% 826
Other assets 52,685 45,541 7,144 16% 48,273
Total Assets $ 977,757 $ 931,817 $ 45,940 5% $ 963,716
Liabilities And Stockholders' Equity
Demand - noninterest bearing $ 151,684 $ 128,299 $ 23,385 18% $ 135,416
Demand - interest bearing 265,308 257,390 7,918 3% 269,055
Savings accounts 91,589 92,043 (454) 0% 90,416
Certificates of deposit 258,939 247,791 11,148 4% 260,129
Total deposits 767,520 725,523 41,997 6% 755,016
Federal Home Loan Bank borrowings 75,000 75,000 -- 0% 75,000
Junior subordinated debentures 15,465 15,465 -- 0% 15,465
Other liabilities 17,812 13,061 4,751 36% 17,545
Total Liabilities 875,797 829,049 46,748 6% 863,026
Total Stockholders' Equity 101,960 102,768 (808) -1% 100,690
Total Liabilities And Stockholders' Equity $ 977,757 $ 931,817 $ 45,940 5% $ 963,716
Table 12 YEAR TO DATE AVERAGE BALANCE SHEET
(Dollars in thousands) September 30, September 30, December 31, December 31, December 31,
2014 2013 2013 2012 2011
Earning assets:
Loans $ 629,879 $ 619,188 $ 612,819 $ 642,200 $ 626,275
Tax exempt securities 84,560 93,388 92,854 81,714 52,467
Taxable Securities 150,216 156,143 157,486 135,615 130,898
Interest bearing due from banks 63,036 41,991 43,397 48,712 64,399
Average earning assets 927,691 910,710 906,556 908,241 874,039
Cash and DFB 10,907 10,330 10,570 10,125 2,251
Bank premises 11,984 10,175 10,338 9,567 9,489
Other assets 36,333 28,431 26,838 24,249 21,421
Average total assets $ 986,915 $ 959,646 $ 954,302 $ 952,182 $ 907,200
Interest bearing liabilities:
Demand - interest bearing $ 269,832 $ 239,308 $ 244,125 $ 203,342 $ 157,696
Savings deposits 91,484 92,351 92,502 89,789 91,876
Certificates of deposit 260,986 248,825 249,500 285,574 296,381
Repurchase Agreements -- 7,728 5,780 14,246 14,805
Other Borrowings 93,853 137,886 125,144 125,839 130,933
Average interest bearing liabilities 716,155 726,098 717,051 718,790 691,691
Demand - noninterest bearing 136,082 117,830 126,017 115,091 100,722
Other liabilities 32,723 8,140 5,041 7,033 6,679
Shareholders' equity 101,955 107,578 106,193 111,268 108,108
Average liabilities & equity $ 986,915 $ 959,646 $ 954,302 $ 952,182 $ 907,200

About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Redding, California and is the parent company for Redding Bank of Commerce which operates under two separate names (Redding Bank of Commerce and Sacramento Bank of Commerce, a division of Redding Bank of Commerce). The Bank is an FDIC insured California banking corporation providing commercial banking and financial services through four offices located in Northern California. The Bank opened on October 22, 1982. The Company's common stock is listed on the NASDAQ Global Market and trades under the symbol "BOCH".

Investment firms making a market in BOCH stock are:

Raymond James Financial McAdams Wright Ragen, Inc.
John T. Cavender Joey Warmenhoven
555 Market Street 1211 SW Fifth Avenue, Suite 1400
San Francisco, CA 94105 Portland, OR 97204
(800) 346-5544 (866) 662-0351
Sandler O'Neill + Partners, L.P. Stifel Nicolaus
Brian Sullivan Perry Wright
1251 Avenue of the Americas, 6th Floor 1255 East Street, Suite 100
New York, NY 10022 Redding, CA 96001
(212) 466-8022 (530) 244-7199
Contact Information:
Randall S. Eslick, President and Chief Executive Officer
Telephone Direct (530) 722-3900
Samuel D. Jimenez, Executive Vice President and Chief Operating Officer / Chief Financial Officer
Telephone Direct (530) 722-3952
Andrea Schneck, Vice President and Senior Administrative Officer
Telephone Direct (530) 722-3959

Source:Bank of Commerce Holdings