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Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2014

REDDING, Calif., Jan. 30, 2015 (GLOBE NEWSWIRE) -- Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (Nasdaq:BOCH) (the "Company"), a $997.2 million asset bank holding company and parent company of Redding Bank of Commerce (the "Bank"), today announced financial results for the fourth quarter and year ended December 31, 2014. Net income available to common shareholders for the quarter ended December 31, 2014 was $1.6 million or $0.12 per share – diluted, compared with $2.0 million or $0.14 per share – diluted for the same period of 2013. Net income available to common shareholders for the year ended December 31, 2014 was $5.5 million or $0.14 per share – diluted compared with $7.7 million or $0.52 for the same period of 2013.

Financial highlights for the full year 2014:

  • Net income available to common shareholders was $5.5 million for the year ended December 31, 2014 compared with $7.7 million for the same period a year ago.
  • Loans increased $62.8 million or 10% compared to the prior year.
  • Nonperforming assets decreased $8.5 million or 28% compared to the prior year.
  • Total deposits increased $42.7 million or 6% compared to the prior year.
  • Book value per share increased to $6.29 compared to $5.86 for the prior year.

Financial highlights for the fourth quarter of 2014:

  • Net income available to common shareholders was $1.6 million for the three months ended December 31, 2014 compared with $2.0 million for the same period a year ago and $1.2 million for the prior quarter.
  • Nonperforming assets decreased $2.7 million or 11% compared to the prior quarter.
  • Total deposits increased $21.5 million or 3% compared to the prior quarter.
  • Loans increased $11.2 million or 2% compared to the prior quarter.
  • Gain of $406 thousand from the discounted repayment of $5.0 million of junior subordinated debentures.
  • The quarter includes severance costs of $1.0 million associated with the retirement of a former executive.

Randall S. Eslick, President and CEO commented: "I am very pleased with our achievements during a challenging 2014. The executive management team is energized and our loan and deposit sales force is focused. On a year over year basis, we were able to increase total deposits 6%, increase loans 10% and make sizeable decreases in our nonperforming assets. We are poised to build on these successes in 2015."

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 and lease 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. The Company undertakes no obligation and specifically disclaims any obligation, to revise or publicly release the results of any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date the statements were made.

TABLE 1
SELECTED FINANCIAL INFORMATION - UNAUDITED
(amounts in thousands except per share data)
At or For the Three Months Ended At or For the Twelve Months Ended
December 31, September 30, December 31,
2014 2013 2014 2014 2013
Net income, average assets and average equity
Income available to common shareholders $ 1,633 $ 2,037 $ 1,223 $ 5,527 $ 7,735
Average total assets $ 985,771 $ 939,732 $ 994,373 $ 993,925 $ 954,302
Average shareholders' equity $ 103,579 $ 102,084 $ 102,109 $ 102,364 $ 106,193
Selected performance ratios
Return on average assets 0.68% 0.89% 0.51% 0.58% 0.83%
Return on average equity 6.50% 8.18% 4.99% 5.59% 7.47%
Efficiency ratio 78.55% 61.79% 69.98% 74.05% 59.59%
Share and per share amounts
Common shares outstanding at period end 13,295 13,977 13,294 13,295 13,977
Weighted average shares - basic 13,295 14,143 13,294 13,475 14,940
Weighted average shares - diluted 13,335 14,176 13,339 13,520 14,964
Earnings per share - basic $ 0.12 $ 0.14 $ 0.09 $ 0.41 $ 0.52
Earnings per share - diluted $ 0.12 $ 0.14 $ 0.09 $ 0.41 $ 0.52
Book value per common share $ 6.29 $ 5.86 $ 6.17 $ 6.29 $ 5.86
Capital ratios
Bank of Commerce Holdings
Leverage ratio 11.59% 12.80% 11.87% 11.59% 12.80%
Tier 1 risk based capital ratio 13.91% 15.94% 14.74% 13.91% 15.94%
Total risk based capital ratio 15.16% 17.20% 15.99% 15.16% 17.20%
Redding Bank of Commerce
Leverage ratio 11.57% 12.49% 11.84% 11.57% 12.49%
Tier 1 risk based capital ratio 13.89% 15.56% 14.68% 13.89% 15.56%
Total risk based capital ratio 15.14% 16.82% 15.93% 15.14% 16.82%

The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. At December 31, 2014, the Company's Tier 1 and Total risk based capital ratios were 13.91% and 15.16% respectively, while the leverage ratio was 11.59%. The decrease in capital ratios during the current quarter compared to the same period a year ago and the prior quarter is primarily due to repayment of junior subordinated debentures, repurchase of common stock, and increased average assets.

BALANCE SHEET OVERVIEW

As of December 31, 2014, the Company had total consolidated assets of $997.2 million, net loans of $650.2 million, allowance for loan and lease losses ("ALLL") of $10.8 million, total deposits of $789.0 million, and shareholders' equity of $103.6 million.

TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
At December 31, At September 30,
% of % of Change % of
2014 Total 2013 Total Amount % 2014 Total
Commercial $ 153,957 23% $ 170,429 29% $ (16,472) -10% $ 160,024 25%
Real estate - construction loans 30,099 5% 18,545 3% 11,554 62% 25,579 4%
Real estate - commercial (investor) 215,114 33% 205,384 34% 9,730 5% 216,204 33%
Real estate - commercial (owner occupied) 115,389 17% 83,976 14% 31,413 37% 105,889 16%
Real estate - ITIN loans 52,830 8% 56,101 9% (3,271) -6% 53,805 8%
Real estate - mortgage 13,156 2% 14,590 2% (1,434) -10% 13,779 2%
Real estate - equity lines 44,981 7% 45,462 8% (481) -1% 45,050 7%
Consumer 35,210 5% 3,472 1% 31,738 914% 28,998 4%
Other 162 0% 36 0% 126 350% 367 1%
Gross loans 660,898 100% 597,995 100% 62,903 11% 649,695 100%
Deferred fees and costs 157 303 (146) 184
Loans, net of deferred fees and costs 661,055 598,298 62,757 649,879
Allowance for loan and lease losses (10,820) (14,172) 3,352 (10,400)
Net loans $ 650,235 $ 584,126 $ 66,109 $ 639,479
Average yield on loans 4.77% 5.00% -0.23% 4.59%

The Company recorded gross loan balances of $660.9 at December 31, 2014, compared with $598.0 at December 31, 2013, an increase of $62.9 million. The increase in gross loans during the year ended December 31, 2014 was driven by strong organic loan originations and the purchase of wholesale loan pools. During 2014, the Company purchased $42.2 million and $18.5 million in consumer and SBA loan pools, respectively.

The decrease in the ALLL primarily resulted from $5.8 million in charge offs related to three significant borrowing relationships partially offset by $3.2 million in provision to the allowance for loan and lease losses. The loans associated with these three borrowers were collateral dependent, were adequately reserved for at December 31, 2013, and were subsequently charged-off during the second quarter of 2014. See table 7 for additional detail of the ALLL.

TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
At December 31, At September 30,
% of % of Change % of
2014 Total 2013 Total Amount % 2014 Total
Cash and due from banks $ 43,949 16% $ 38,369 12% $ 5,580 15% $ 31,151 11%
Interest bearing due from banks 14,473 5% 20,146 6% (5,673) -28% 15,272 6%
Total cash and cash equivalents 58,422 21% 58,515 18% (93) 0% 46,423 17%
U.S. government and agencies 6,393 2% 6,264 2% 129 2% 7,825 3%
Obligations of state and political subdivisions 54,363 20% 59,209 21% (4,846) -8% 57,161 21%
Residential mortgage backed securities and collateralized mortgage obligations 47,015 17% 62,991 20% (15,976) -25% 46,498 17%
Corporate securities 37,734 13% 48,230 15% (10,496) -22% 39,717 15%
Commercial mortgage backed securities 10,389 4% 10,472 3% (83) -1% 11,100 4%
Other asset backed securities 31,092 11% 29,474 9% 1,618 5% 27,078 10%
Total investment securities - AFS 186,986 67% 216,640 70% (29,654) -14% 189,379 70%
Obligations of state and political subdivisions - HTM 36,806 12% 36,696 12% 110 0% 36,888 13%
Total investment securities 223,792 79% 253,336 82% (29,544) -14% 226,267 83%
Total cash equivalents and investment securities $ 282,214 100% $ 311,851 100% $ (29,637) 10% $ 272,690 100%
Yield on cash, cash equivalents and investment securities 2.58% 2.49% 0.09% 2.43%

The Company continued to maintain a strong liquidity position during the reporting period. As of December 31, 2014, the Company maintained cash positions at the Federal Reserve Bank and correspondent banks in the amount of $43.9 million. The Company also held certificates of deposits with other financial institutions in the amount of $14.5 million.

Available-for-sale investment securities totaled $187.0 million at December 31, 2014, compared with $216.6 million at December 31, 2013 and $189.4 million at September 30, 2014. The Company's available-for-sale investment portfolio provides the Company a secondary source of liquidity to fund other higher yielding asset opportunities, such as loan originations and wholesale loan purchases. During the fourth quarter of 2014, the Company purchased twelve securities with a par value of $14.9 million and weighted average yield of 3.29% and sold nine securities with a par value of $11.4 million and weighted average yield of 2.44%. The sales activity resulted in $93 thousand in net realized gains for the three months ended December 31, 2014. Average quarterly securities balances and weighted average tax equivalent yields at December 31, 2014 and 2013 were $226.1 million and 3.40% compared to $252.7 million and 3.30%, respectively.

During the year ended December 31, 2014, the Company's securities purchases were focused on moderate term maturities, 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. Management continues to actively seek out opportunities to reduce the overall duration of the portfolio and accelerate cash flows. This strategy could entail recognizing small losses within the portfolio to meet these longer term objectives.

At December 31, 2014, the Company's net unrealized gains on available-for-sale securities were $2.6 million compared with $3.7 million net unrealized loss at December 31, 2013 and $1.8 million net unrealized gains at September 30, 2014. The favorable change in net unrealized gains resulted primarily from increases in the fair values of the Company's municipal bond, and US government securities portfolios, caused by declines in long-term interest rates.

TABLE 4
DEPOSITS BY TYPE UNAUDITED
(amounts in thousands)
At December 31, At September 30,
% of % of Change % of
2014 Total 2013 Total Amount % 2014 Total
Demand - noninterest bearing $ 157,557 20% $ 133,984 18% $ 23,573 18% $ 151,684 20%
Demand - interest bearing 298,160 38% 273,390 37% 24,770 9% 265,308 35%
Total demand 455,717 58% 407,374 55% 48,343 12% 416,992 55%
Savings 88,569 11% 90,442 12% (1,873) -2% 91,589 12%
Total non-maturing deposits 544,286 69% 497,816 67% 46,470 9% 508,581 67%
Certificates of deposit 244,749 31% 248,477 33% (3,728) -2% 258,939 33%
Total deposits $ 789,035 100% $ 746,293 100% $ 42,742 6% $ 767,520 100%
Average rate on interest bearing deposits 0.50% 0.53% -0.03% 0.54%

Total deposits for the year ended December 31, 2014, increased 6% or $42.7 million to $789.0 million compared to the same period a year ago and 3% or $21.5 million compared to the prior quarter. Non-maturing core deposits increased $7.8 million or 2% compared to the same period a year ago and 3% or $11.6 million compared to the prior quarter.

Brokered deposits totaled $97.9 million at December 31, 2014 compared with $70.3 million at December 31, 2013, and $80.0 million at September 30, 2014. Brokered deposits included reciprocal deposits of $90.3 million, $55.1 million, and $66.4 million for the same periods respectively.

Deposits obtained through the use of a deposit listing service that are not considered brokered deposits totaled $67.5 million at December 31, 2014 compared with $68.0 million at September 30, 2014 and $42.7 million at December 31, 2013.

INCOME STATEMENT OVERVIEW

TABLE 5
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
For The Three Months Ended
December 31, Change September 30, Change
2014 2013 Amount % 2014 Amount %
Net interest income $ 8,290 $ 8,494 $ (204) -2% $ 7,948 $ 342 4%
Provision for loan and lease losses 675 675 100% 1,050 (375) -36%
Noninterest income 1,144 719 425 59% 671 473 70%
Noninterest expense 7,410 5,693 1,717 30% 6,032 1,378 23%
Income before income taxes 1,349 3,520 (2,171) -62% 1,537 (188) -12%
Provision (benefit) for income taxes (334) 1,433 (1,767) -123% 264 (598) -227%
Net income 1,683 2,087 (404) -19% 1,273 410 32%
Less: Dividend on preferred stock 50 50 0% 50 0%
Income available to common shareholders $ 1,633 $ 2,037 $ (404) -20% $ 1,223 $ 410 34%
Basic earnings per share $ 0.12 $ 0.14 $ (0.02) -14% $ 0.09 $ 0.03 33%
Average basic shares 13,295 14,143 (848) -6% 13,294 1 0%
Diluted earnings per share $ 0.12 $ 0.14 $ (0.02) -14% $ 0.09 $ 0.03 33%
Average diluted shares 13,335 14,176 (841) -6% 13,339 (4) 0%
Dividends declared per common share $ 0.03 $ 0.03 $ — 0% $ 0.03 $ — 0%

Net income available to common shareholders was $1.6 million for the three months ended December 31, 2014 compared with $2.0 million for the same period a year ago. 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 increased loan loss provisions and increased noninterest expense partially offset by increased noninterest income and a decreased provision for income taxes.

Net income available to common shareholders increased $410 thousand to $1.6 million during the three months ended December 31, 2014 compared to $1.2 million in the prior quarter. Increased operating income, decreased provision for loan and lease losses and decreased provision for tax expense were partially offset by increased noninterest expense.

Return on average assets and return on average equity for the current quarter was 0.68% and 6.50%, respectively, compared with 0.89% and 8.18%, respectively, for the same period a year ago. The 21 basis point decrease in return on average assets between these periods is mostly attributed to decreased earnings. The decrease in return on average equity was primarily driven by decreased net income, partially offset by the decrease in weighted average shares resulting from the Company's publically announced common stock repurchase plans.

Net interest Income

Interest income for the three months ended December 31, 2014 was $9.5 million, an increase of $228 thousand or 2% compared to the same period a year ago and an increase of $427 thousand or 5% compared to the prior quarter. The increase in interest income compared to the same period a year ago was driven by increased volume in the loan portfolio and increased yield in the investment securities portfolio, partially offset by decreased volume in the investment securities portfolio and decreased yield in the loan portfolio. The increase in interest income compared to the prior quarter was primarily due to increased volume and yield in the loan portfolio.

Interest expense for the three months ended December 31, 2014 was $1.2 million, an increase of $432 thousand or 54% compared to the same period a year ago and an increase of $85 thousand or 7% compared to the prior quarter. During the second quarter of 2014 the Company concluded that the remaining hedged forecasted interest costs from FHLB advances associated with the final two legs of a terminated forward starting interest rate swap were no longer probable. Accordingly, the remaining hedge gains recorded in other comprehensive income relating to the interest rate swap were immediately recognized in other noninterest income. Prior to this determination the Company had been reclassifying the hedge gains out of other comprehensive income into earnings as an adjustment to interest expense.

TABLE 6
NET INTEREST SPREAD AND MARGIN - UNAUDITED
(amounts in thousands)
For the Three Months Ended
December 31, Change September 30, Change
2014 2013 Amount 2014 Amount
Tax equivalent yield on average interest earning assets 4.28% 4.31% -0.03% 4.06% 0.22%
Rate on average interest bearing liabilities 0.70% 0.47% 0.23% 0.64% 0.06%
Net interest spread 3.58% 3.84% -0.26% 3.42% 0.16%
Net interest margin 3.60% 3.80% -0.20% 3.42% 0.18%
Net interest margin on a tax equivalent basis 3.74% 3.95% -0.21% 3.56% 0.18%
Average earning assets $ 919,864 $ 895,101 $ 24,763 $ 929,447 $ (9,583)
Average interest bearing liabilities $ 713,091 $ 692,739 $ 20,352 $ 722,300 $ (9,209)

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 3.74% for the three months ended December 31, 2014, a decrease of 21 basis points as compared to the same period a year ago. The decrease in net interest margin resulted from a 3 basis point decline in yield on average earning assets and an 18 basis point 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. 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 yields on earning assets.

Noninterest Income

Noninterest income for the three months ended December 31, 2014 was $1.1 million, an increase of $425 thousand and $473 thousand when compared to the same period a year ago and the previous quarter respectively. The increase in noninterest income in the current quarter compared to the same period a year ago and prior quarter is primarily due to a $406 thousand gain on discounted repayment of junior subordinated debentures recognized during the quarter ended December 31, 2014. The debentures were issued to Bank of Commerce Holdings Trust. All of the debentures issued to the Trust, less the common stock of the Trust, qualified as Tier 1 capital, under guidance issued by the Federal Reserve Board.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2014 increased $1.7 million compared to the same period a year ago, and increased $1.4 million compared to the prior quarter. The increase in noninterest expense in the current quarter is primarily due to severance costs associated with the retirement of a former executive, and an overall increase in the number of employees.

During the three months ended December 31, 2014, the Company recorded a provision for income tax benefit of $334 thousand compared with a provision for income tax expense of $1.4 million for the same period a year ago and a provision for income tax expense of $264 thousand for the prior quarter. The tax benefit recorded in the current quarter was driven by a change in the Company's estimated annual effective tax rate. In addition, tax return to accrual adjustments were recognized as a result of an adjustment to 2013 permanent book tax differences. During the current quarter, the recorded tax benefit of $334 thousand was comprised of $164 thousand in tax expense derived from applying the adjusted estimated effective tax rate, a tax benefit of $390 thousand, resulting from a change in the estimated effective tax rate, and a tax benefit of $108 thousand resulting from tax return to accrual adjustments.

Diluted earnings per share was $0.12 for the three months ended December 31, 2014 compared with $0.14 for the same period a year ago, and $0.09 for the prior period. Earnings per share decreased during the three months ended December 31, 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 the repurchase of 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. The weighted average number of dilutive common shares outstanding decreased by 502 thousand shares during the year ended December 31, 2014.

TABLE 7
ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD - UNAUDITED
(amounts in thousands)
For The Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
Beginning balance $ 10,400 $ 9,882 $ 9,748 $ 14,172 $ 13,542
Provision for loan loss charged to expense 675 1,050 1,450
Loans charged off (374) (585) (1,456) (4,903) (815)
Loan loss recoveries 119 53 140 479 1,445
Ending balance $ 10,820 $ 10,400 $ 9,882 $ 9,748 $ 14,172
At December 31, At September 30, At June 30, At March 31, At December 31,
2014 2014 2014 2014 2013
Nonaccrual loans:
Commercial $ 5,112 $ 7,065 $ 4,375 $ 4,303 $ 6,527
Commercial real estate 9,696 9,896 15,598 12,560 14,539
Residential real estate 1-4 family 6,782 7,438 6,939 7,360 8,217
Home equity 24 89 479 484 513
Consumer 35 87
Total nonaccrual loans 21,649 24,488 27,478 24,707 29,796
Accruing troubled debt restructured loans:
Commercial 1,485 1,585 13 62 63
Commercial real estate 1,698 1,707 1,716 3,853 3,864
Residential real estate 1-4 family 5,462 5,222 5,074 4,894 4,303
Home equity 579 584 589 593 598
Total accruing troubled debt restructured loans 9,224 9,098 7,392 9,402 8,828
All other accruing impaired loans 536 757 585 2,564 3,517
Total impaired loans $ 31,409 $ 34,343 $ 35,455 $ 36,673 $ 42,141
Gross loans outstanding at period end $ 660,898 $ 649,695 $ 619,418 $ 607,049 $ 597,995
Allowance for loan and lease losses as a percent of:
Gross loans 1.64% 1.60% 1.60% 1.61% 2.37%
Nonaccrual loans 49.98% 42.47% 35.96% 39.45% 47.56%
Impaired loans 34.45% 30.28% 27.87% 26.58% 33.63%
Nonaccrual loans to gross loans 3.28% 3.77% 4.44% 4.07% 4.98%

The Company realized net charge offs of $255 thousand in the current quarter compared with net charge offs of $532 thousand in the prior quarter and net recoveries of $630 thousand for 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 portfolio. As such, the Company recognized $675 thousand in provisions for loan and lease losses during the fourth quarter of 2014, compared to $1.1 million for the prior quarter. The Company's ALLL as a percentage of gross loans was 1.64% at December 31, 2014 compared to 1.60% as of September 30, 2014. At December 31, 2014, management believes the Company's ALLL is adequately funded given the current level of credit risk.

At December 31, 2014, the recorded investment in loans classified as impaired totaled $31.4 million, with a corresponding valuation allowance of $1.6 million compared to impaired loans of $34.3 million, with a corresponding valuation allowance of $1.2 million at September 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 December 31, 2014 compared to the prior quarter is primarily due to principal payments on two commercial loan relationships.

Loans are reported as a troubled debt restructuring 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 measuring 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.

During the three months ended December 31, 2014, the Company restructured one loan to grant a rate and maturity concession. The loan was classified as a troubled debt restructuring and placed on nonaccrual status. As of December 31, 2014, the Company had $23.5 million in troubled debt restructurings compared to $25.7 million as of September 30, 2014. As of December 31, 2014, the Company had one hundred eighteen restructured loans that qualified as troubled debt restructurings, of which ninety-seven were performing according to their restructured terms. Troubled debt restructurings represented 3.55% of gross loans as of December 31, 2014 compared with 3.95% at September 30, 2014.

TABLE 8
PERIOD END TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
At December 31, At September 30, At June 30, At March 31, At December 31,
2014 2014 2014 2014 2013
Nonaccrual $ 14,230 $ 16,556 $ 20,504 $ 19,779 $ 24,596
Accruing 9,224 9,098 7,392 9,402 8,828
Total troubled debt restructurings $ 23,454 $ 25,654 $ 27,896 $ 29,181 $ 33,424
Percentage of total gross loans 3.55% 3.95% 4.50% 4.81% 5.59%

Nonperforming loans, which include nonaccrual loans and accruing loans past due more than 90 days, totaled $21.7 million or 3.28% of gross loans as of December 31, 2014, compared to $24.9 million, or 3.77% of gross loans at September 30, 2014. The decrease in nonperforming loans in the current quarter compared to the prior quarter primarily resulted from $1.7 million in payments received from a commercial loan relationship. Nonperforming assets, which include nonperforming loans and other real estate owned ("OREO"), totaled $22.2 million, or 2.22% of total assets as of December 31, 2014, compared with $24.9 million, or 2.54% of total assets as of September 30, 2014.

TABLE 9
PERIOD END NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
At December 31, At September 30, At June 30, At March 31, At December 31,
2014 2014 2014 2014 2013
Total nonaccrual loans $ 21,649 $ 24,488 $ 27,478 $ 24,707 $ 29,796
90 days past due not on nonaccrual 23
Total nonperforming loans 21,672 24,488 27,478 24,707 29,796
Other real estate owned 502 393 826 623 913
Total nonperforming assets $ 22,174 $ 24,881 $ 28,304 $ 25,330 $ 30,709
Nonperforming loans to gross loans 3.28% 3.77% 4.44% 4.07% 4.98%
Nonperforming assets to total assets 2.22% 2.54% 2.89% 2.63% 3.23%

At December 31, 2014, and September 30, 2014, the recorded investment in OREO was $502 thousand and $393 thousand, respectively. The December 31, 2014 OREO balance consists of six properties, of which five are secured by 1-4 family residential real estate in the amount of $341 thousand and one commercial nonfarm residential property in the amount of $161 thousand.

TABLE 10
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEET
(amounts in thousands)
At December 31, At December 31, Change At September 30,
2014 2013 $ % 2014
Assets:
Cash and due from banks $ 43,949 $ 38,369 $ 5,580 15% $ 31,151
Interest bearing due from banks 14,473 20,146 (5,673) -28% 15,272
Total cash and cash equivalents 58,422 58,515 (93) 0% 46,423
Securities available-for-sale, at fair value 186,986 216,640 (29,654) -14% 189,379
Securities held-to-maturity, at amortized cost 36,806 36,696 110 0% 36,888
Loans, net of deferred fees and costs 661,055 598,298 62,757 10% 649,879
Allowance for loan and lease losses (10,820) (14,172) 3,352 -24% 10,400
Net loans 650,235 584,126 66,109 11% 660,279
Total interest earning assets 943,269 910,149 33,120 4% 922,569
Premises and equipment, net 12,295 10,893 1,402 13% 12,510
Other real estate owned 502 913 (411) -45% 393
Life insurance 21,844 16,216 5,628 35% 21,675
Deferred taxes 10,231 11,653 (1,422) -12% 10,314
Other assets 19,871 20,690 (819) -4% 20,696
Total Assets $ 997,192 $ 956,342 $ 40,850 4% $ 998,557
Liabilities and shareholders' equity:
Demand - noninterest bearing $ 157,557 $ 133,984 $ 23,573 18% $ 151,684
Demand - interest bearing 298,160 273,390 24,770 9% 265,308
Savings 88,569 90,442 (1,873) -2% 91,589
Certificates of deposit 244,749 248,477 (3,728) -2% 258,939
Total deposits 789,035 746,293 42,742 6% 767,520
Federal Home Loan Bank borrowings 75,000 75,000 0% 75,000
Junior subordinated debentures 10,310 15,465 (5,155) -33% 15,465
Other liabilities 19,245 17,797 1,448 8% 17,812
Total Liabilities 893,590 854,555 39,035 5% 875,797
Shareholders' equity:
Preferred stock 19,931 19,931 0% 19,931
Common Stock 23,891 28,304 (4,413) -16% 23,874
Retained earnings 59,867 55,944 3,923 7% 58,633
Accumulated other comprehensive (loss) income, net of tax (87) (2,392) 2,305 -96% (478)
Total shareholders' equity 103,602 101,787 1,815 2% 101,960
Total liabilities and shareholders' equity $ 997,192 $ 956,342 $ 40,850 4% $ 977,757
Shares outstanding 13,295 13,977 13,294
Book value per share $ 6.29 $ 5.86 $ 6.17
TABLE 11
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
For The Three Months Ended
December 31, Change September 30, Twelve Months Ended December 31,
2014 2013 $ % 2014 2014 2013
Interest income:
Interest and fees on loans $ 7,832 $ 7,432 $ 400 5% $ 7,350 $ 29,464 $ 29,918
Interest on securities 980 658 322 49% 998 4,203 4,198
Interest on tax-exempt securities 620 492 128 26% 629 2,536 2,610
Interest on deposits 97 719 (622) -87% 125 490 535
Total interest income 9,529 9,301 228 2% 9,102 36,693 37,261
Interest expense:
Interest on demand deposits 109 121 (12) -10% 123 471 485
Interest on savings deposits 55 60 (5) -8% 59 228 254
Interest on certificates of deposit 623 635 (12) -2% 650 2,608 2,625
Interest on securities sold under repurchase agreements 0% 6
Interest on FHLB borrowings 370 (104) 474 -456% 126 422 (267)
Interest on other borrowings 82 95 (13) -14% 196 363 375
Total interest expense 1,239 807 432 54% 1,154 4,092 3,478
Net interest income 8,290 8,494 (204) -2% 7,948 32,601 33,783
Provision for loan and lease losses 675 675 100% 1,050 3,175 2,750
Net interest income after provision for loan and lease losses 7,615 8,494 (879) -10% 6,898 29,426 31,033
Noninterest income:
Service charges on deposit accounts 51 45 6 13% 50 186 191
Payroll and benefit processing fees 137 129 8 6% 127 508 484
Increase in cash surrender value of life insurance 169 133 36 27% 171 628 534
Gain (loss) on investment securities, net 93 64 29 45% 32 (159) 995
Merchant credit card service income, net 24 31 (7) -23% 25 104 129
Other income 670 317 353 111% 266 3,048 1,209
Total noninterest income 1,144 719 425 59% 671 4,315 3,542
Noninterest expense:
Salaries and related benefits 4,257 3,172 1,085 34% 3,474 14,770 12,035
Occupancy and equipment expense 715 554 161 29% 749 2,784 2,205
Write down of other real estate owned 0% 290
FDIC insurance premium 214 190 24 13% 204 798 725
Data processing fees 260 150 110 73% 217 889 547
Professional service fees 616 315 301 96% 309 1,527 1,241
Deferred compensation expense 113 121 (8) -7% 115 458 179
Other expenses 1,235 1,191 44 4% 964 5,821 5,309
Total noninterest expense 7,410 5,693 1,717 30% 6,032 27,337 22,241
Income before provision (benefit) for income taxes 1,349 3,520 (2,171) -62% 1,537 6,404 12,334
Provision (benefit) for income taxes (334) 1,433 (1,767) -123% 264 677 4,399
Net income $ 1,683 $ 2,087 $ (404) -19% $ 1,273 $ 5,727 $ 7,935
Less: preferred dividend and accretion on preferred stock 50 50 0% 50 200 200
Income available to common shareholders $ 1,633 $ 2,037 $ (404) -20% $ 1,223 $ 5,527 $ 7,735
Basic earnings per share $ 0.12 $ 0.14 $ (0.02) -14% $ 0.09 $ 0.41 $ 0.52
Average basic shares 13,295 14,143 (848) -6% 13,294 13,475 14,940
Diluted earnings per share $ 0.12 $ 0.14 $ (0.02) -14% $ 0.09 $ 0.41 $ 0.52
Average diluted shares 13,335 14,176 (841) -6% 13,339 13,520 14,964
TABLE 12
UNAUDITED CONDENSED CONSOLIDATED
ANNUAL AVERAGE BALANCE SHEET
(amounts in thousands)
For the Twelve Months Ended
December 31, December 31, December 31, December 31,
2014 2013 2012 2011
Earning assets:
Loans $ 644,029 $ 612,819 $ 642,200 $ 626,275
Tax exempt securities 83,973 92,854 81,714 52,467
Taxable securities 148,606 157,486 135,615 130,898
Interest bearing due from banks 56,466 43,397 48,712 64,399
Average earning assets 933,074 906,556 908,241 874,039
Cash and due from banks 11,249 10,570 10,125 2,251
Premises and equipment, net 12,105 10,338 9,567 9,489
Other assets 37,497 26,838 24,249 21,421
Average total assets $ 993,925 $ 954,302 $ 952,182 $ 907,200
Interest bearing liabilities:
Demand - interest bearing $ 272,383 $ 244,125 $ 203,342 $ 157,696
Savings 91,108 92,502 89,789 91,876
Certificates of deposit 259,462 249,500 285,574 296,381
Repurchase agreements 5,780 14,246 14,805
Other borrowings 15,533 15,584 15,465 8,398
FHLB borrowings 77,466 109,560 110,374 122,535
Average interest bearing liabilities 715,952 717,051 718,790 691,691
Demand - noninterest bearing 140,520 126,017 115,091 100,722
Other liabilities 35,089 5,041 7,033 6,679
Shareholders' equity 102,364 106,193 111,268 108,108
Average liabilities & equity $ 993,925 $ 954,302 $ 952,182 $ 907,200
TABLE 13
UNAUDITED CONDENSED CONSOLIDATED
QUARTERLY AVERAGE BALANCE SHEET
(amounts in thousands)
For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
Earning assets:
Loans $ 656,834 $ 640,990 $ 612,847 $ 605,682 $ 594,324
Tax exempt securities 82,231 83,503 83,530 86,681 91,269
Taxable securities 143,829 140,128 152,780 157,936 161,473
Interest bearing due from banks 36,970 64,826 59,040 65,179 48,035
Average earning assets 919,864 929,447 908,197 915,478 895,101
Cash and due from banks 12,264 12,322 10,163 10,212 11,506
Premises and equipment, net 12,464 12,551 12,190 11,197 10,823
Other assets 41,179 40,053 36,297 30,426 22,302
Average total assets $ 985,771 $ 994,373 $ 966,847 $ 967,313 $ 939,732
Interest bearing liabilities:
Demand - interest bearing $ 277,692 $ 269,633 $ 272,073 $ 267,428 $ 261,949
Savings 89,992 91,556 91,488 91,406 92,949
Certificates of deposit 254,942 260,592 262,809 259,523 247,376
Other borrowings 15,465 15,737 15,465 15,465 15,465
FHLB borrowings 75,000 84,782 75,000 75,000 75,000
Average interest bearing liabilities 713,091 722,300 716,835 708,822 692,739
Demand - noninterest bearing 154,471 142,796 132,842 132,495 134,439
Other liabilities 14,630 27,168 16,040 23,013 10,470
Shareholders' equity 103,579 102,109 101,130 102,983 102,084
Average liabilities & equity $ 985,771 $ 994,373 $ 966,847 $ 967,313 $ 939,732

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
Telephone Direct (530) 722-3952
James A. Sundquist, Executive Vice President and Chief Financial Officer
Telephone Direct (530) 722-3908
Andrea Schneck, Vice President and Senior Administrative Officer
Telephone Direct (530) 722-3959

Source:Bank of Commerce Holdings