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Bank of Commerce Holdings Announces Results for the First Quarter of 2015

REDDING, Calif., April 30, 2015 (GLOBE NEWSWIRE) -- Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (Nasdaq:BOCH) (the "Company"), a $985.4 million asset bank holding company and parent company of Redding Bank of Commerce (the "Bank"), today announced financial results for the quarter ended March 31, 2015. Net income available to common shareholders for the quarter ended March 31, 2015 was $1.8 million or $0.13 per share – diluted, compared with $515 thousand or $0.04 per share – diluted for the same period of 2014.

Financial highlights for the first quarter of 2015:

  • Net income available to common shareholders of $1.8 million for the three months ended March 31, 2015 was a $1.2 million (240%) improvement over $515 thousand net income available to common shareholders earned during the first quarter of 2014; and a $118 thousand (7%) improvement over $1.6 million available to common shareholders earned during the previous quarter.
  • Gross loans at March 31, 2015 totaled $699.2 million, an increase of $92.2 million (15%) since March 31, 2014; and an increase of $38.3 million (23% annualized) since December 31, 2014.
  • Nonperforming assets at March 31, 2015 totaled $20.0 million, a decrease of $5.3 million compared to March 31, 2014; and a decrease of $2.2 million compared to December 31, 2014.
  • The Company's net interest margin improved to 3.72% for the quarter ended March 31, 2015 from 3.63% for the first quarter of 2014 and 3.67% for the fourth quarter of 2014.
  • Net loan loss recoveries of $476 thousand during the quarter ended March 31, 2015 negated the need for a provision for loan and lease losses.
  • Noninterest bearing demand deposits for the quarter ended March 31, 2015 averaged $148.9 million, an increase of $17.4 million (13%) since the first quarter of 2014; and a decrease of $4.1 million (11% annualized) since the fourth quarter of 2014.
  • The Company's tangible book value increased to $6.41 per common share at March 31, 2015 from $5.97 per common share at March 31, 2014 (7%); and from $6.29 per common share at December 31, 2014 (8% annualized).

Randall S. Eslick, President and CEO commented: "I am very pleased that we continue to successfully accomplish our primary objectives of growing the loan portfolio, reducing the level of non-performing assets, and improving the net interest margin in this protracted low interest rate environment. The efforts of our talented employees have resulted in these positive trends, and provide the foundation for improving profitability over the remainder of the year."

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 fiscal year ended December 31, 2014 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)
For the Three Months Ended
March 31, December 31,
Net income, average assets and average shareholders' equity 2015 2014 2014
Income available to common shareholders $ 1,751 $ 515 $ 1,633
Average total assets $ 978,916 $ 960,163 $ 985,100
Average shareholders' equity $ 104,618 $ 103,206 $ 103,147
Selected performance ratios
Return on average assets 0.72% 0.21% 0.66%
Return on average equity 6.69% 2.00% 6.33%
Efficiency ratio 71.48% 89.49% 76.02%
Share and per share amounts
Weighted average shares - basic 13,303 13,942 13,295
Weighted average shares - diluted 13,340 13,987 13,335
Earnings per share - basic $ 0.13 $ 0.04 $ 0.12
Earnings per share - diluted $ 0.13 $ 0.04 $ 0.12
At March 31, At December 31,
Share and per share amounts 2015 2014 2014
Common shares outstanding 13,337 13,552 13,295
Book value per common share $ 6.41 $ 5.97 $ 6.29
Capital ratios
Bank of Commerce Holdings
Common equity tier 1 capital ratio (1) 9.73% n/a n/a
Tier 1 capital ratio 13.10% 15.94% 13.91%
Total capital ratio 14.35% 17.20% 15.16%
Tier 1 leverage ratio 11.74% 12.80% 11.60%
Redding Bank of Commerce
Common equity tier 1 capital ratio (1) 13.05% n/a n/a
Tier 1 capital ratio 13.05% 15.56% 13.89%
Total capital ratio 14.30% 16.82% 15.14%
Tier 1 leverage ratio 11.70% 12.49% 11.57%
(1) As of March 31, 2015, common equity tier 1 capital ratio is a new ratio requirement under the Basel III Capital Rules and represents the sum of the common equity tier 1 elements, minus regulatory adjustments and deductions divided by net risk weighted assets.

The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. The change 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 a change in the calculation of the risk-weighted average assets in accordance with Basel III.

BALANCE SHEET OVERVIEW

As of March 31, 2015, the Company had total consolidated assets of $985.4 million, gross loans of $699.2 million, allowance for loan and lease losses ("ALLL") of $11.3 million, total deposits of $762.0 million, and shareholders' equity of $105.4 million.

TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
At March 31, At December 31,
% of % of Change % of
2015 Total 2014 Total Amount % 2014 Total
Commercial $ 153,044 22% $ 165,747 27% $ (12,703) (8)% $ 153,957 23%
Real estate - construction loans 29,127 4 17,500 3 11,627 66% 30,099 5
Real estate - commercial (investor) 235,404 34 205,111 35 30,293 15% 215,114 33
Real estate - commercial (owner occupied) 127,259 18 86,929 14 40,330 46% 115,389 17
Real estate - ITIN loans 52,043 7 55,411 9 (3,368) (6)% 52,830 8
Real estate - mortgage 12,304 2 14,973 2 (2,669) (18)% 13,156 2
Real estate - equity lines 45,750 7 45,519 7 231 1% 44,981 7
Consumer 44,283 6 15,749 3 28,534 181% 35,210 5
Other 15 0 110 0 (95) (86)% 162 0
Gross loans 699,229 100% 607,049 100% 92,180 15% 660,898 100%
Deferred fees and costs 315 320 (5) 157
Loans, net of deferred fees and costs 699,544 607,369 92,175 661,055
Allowance for loan and lease losses (11,296) (9,748) (1,548) (10,820)
Net loans $ 688,248 $ 597,621 $ 90,627 $ 650,235
Average yield on loans during the quarter 4.77% 4.80% (0.03) 4.77%

The Company recorded gross loan balances of $699.2 million at March 31, 2015, compared with $607.0 million and $660.9 million at March 31, 2014 and December 31, 2014; an increase of $92.2 million and $38.3 million, respectively. The increase in gross loans compared to the same period a year ago and the prior quarter was driven by strong organic loan originations and the purchase of wholesale loan pools. During the three months ended March 31, 2015, the Company purchased $14.1 million and $6.4 million in consumer and commercial real estate investor loan pools, respectively. During the 12 month period ended March 31, 2015, the Company purchased $43.6 million, $6.4 million and $18.5 million in consumer, commercial real estate investor and SBA loan pools, respectively.

The increase in the ALLL in the current quarter compared to the prior quarter resulted from $655 thousand in loan recoveries partially offset by $179 thousand in loan charge offs. These net recoveries negated the need for a provision for loan and lease losses during the first quarter of 2015. See table 8 for additional detail of the ALLL.

TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
At March 31, At December 31,
% of % of Change % of
2015 Total 2014 Total Amount % 2014 Total
Cash and due from banks $ 19,309 8% $ 54,422 17% $ (35,113) (65)% $ 43,949 16%
Interest bearing due from banks 10,802 5 20,146 6 (9,344) (46)% 14,473 5
Total cash and cash equivalents 30,111 13 74,568 23 (44,457) (60)% 58,422 21
U.S. government and agencies 6,422 3 6,300 2 122 2% 6,393 2
Obligations of state and political subdivisions 53,491 23 56,454 18 (2,963) (5)% 54,363 20
Residential mortgage backed securities and collateralized mortgage obligations 41,851 18 53,105 17 (11,254) (21)% 47,015 17
Corporate securities 31,660 14 49,553 16 (17,893) (36)% 37,734 13
Commercial mortgage backed securities 6,799 3 10,406 3 (3,607) (35)% 10,389 4
Other asset backed securities 26,667 11 28,192 9 (1,525) (5)% 31,092 11
Total investment securities - AFS 166,890 72 204,010 65 (37,120) (18)% 186,986 67
Obligations of state and political subdivisions - HTM 36,609 15 36,985 12 (376) (1)% 36,806 12
Total investment securities - AFS and HTM 203,499 87 240,995 77 (37,496) (19)% 223,792 79
Total cash, cash equivalents and investment securities $ 233,610 100% $ 315,563 100% $ (81,953) (26)% $ 282,214 100%
Average yield on interest bearing due from banks and investment securities during the quarter 2.73% 2.47% 0.26 2.60%

The Company's primary liquidity position tightened during the current reporting period. As of March 31, 2015, the Company maintained cash positions at the Federal Reserve Bank and correspondent banks in the amount of $19.3 million. The Company also held interest bearing deposits with other financial institutions in the amount of $10.8 million.

Available-for-sale investment securities totaled $166.9 million at March 31, 2015, compared with $204.0 and $187.0 million at March 31, 2014 and December 31, 2014, respectively. 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 first quarter of 2015, the Company purchased eight securities with a par value of $12.0 million and weighted average yield of 2.74% and sold twenty-two securities with a par value of $25.4 million and weighted average yield of 2.53%. The sales activity resulted in $215 thousand in net realized gains for the three months ended March 31, 2015. During the three months ended March 31, 2015, the Company also received $7.4 million in proceeds from principal payments, calls and maturities within the available-for-sale investment securities portfolio. Average quarterly securities balances and weighted average tax equivalent yields at March 31, 2015 and 2014 were $213.9 million and 3.46% compared to $246.9 million and 3.48%, respectively. During the first quarter of 2015, reductions in the available-for-sale investment portfolio were used to fund higher yielding loan assets.

During the current quarter, 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 bonds, short term corporate floating rate 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. Sales were also focused on those bonds likely to be less liquid in the event of a market shock. 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, while also improving credit quality and liquidity. This strategy could entail absorbing small losses within the portfolio to meet longer term objectives.

At March 31, 2015, the Company's net unrealized gain on available-for-sale securities was $3.1 million compared with $643 thousand net unrealized loss and $2.6 million net unrealized gain at March 31, 2014 and December 31, 2014, respectively. The favorable change in net unrealized gains resulted primarily from increases in the fair values of the Company's municipal bond and corporate securities portfolios, due to declines in interest rates.

TABLE 4
DEPOSITS BY TYPE - UNAUDITED
(amounts in thousands)
At March 31, At December 31,
% of % of Change % of
2015 Total 2014 Total Amount % 2014 Total
Demand - noninterest bearing $ 150,056 20% $ 131,290 17% $ 18,766 14% $ 157,557 20%
Demand - interest bearing 266,552 35 269,634 35 (3,082) (1)% 298,160 38
Total demand 416,608 55 400,924 52 15,684 4% 455,717 58
Savings 92,088 12 93,279 12 (1,191) (1)% 88,569 11
Total non-maturing deposits 508,696 67 494,203 64 14,493 3% 544,286 69
Certificates of deposit 253,280 33 267,508 36 (14,228) (5)% 244,749 31
Total deposits $ 761,976 100% $ 761,711 100% $ 265 0% $ 789,035 100%
Average rate on interest bearing deposits during the quarter 0.50% 0.55% (0.05) 0.49%

Total deposits at March 31, 2015, increased $265 thousand to $762.0 million compared to March 31, 2014, and decreased $27.0 million or 3% compared to December 31, 2014. Non-maturing core deposits increased $14.5 million or 3% compared to the same date a year ago and decreased $35.6 million or 7% compared to December 31, 2014.

TABLE 5
WHOLESALE DEPOSITS - UNAUDITED
(amounts in thousands)
At March 31, At December 31,
2015 2014 2014
CDARS / ICS $ 52,767 $ 59,622 $ 90,324
Online deposit listing service 67,453 68,446 67,449
Third party deposit broker 17,498 13,876 7,550
Total wholesale deposits $ 137,718 $ 141,944 $ 165,323

In accordance with regulatory Call Report instructions, the Bank has filed quarterly Call Reports which listed brokered deposits of $70.3 million, $73.5 million and $97.9 million at March 31, 2015, March 31, 2014 and December 31, 2014, respectively. These amounts include deposits obtained through the CDARS and ICS programs, which management does not consider to be brokered.

INCOME STATEMENT OVERVIEW

TABLE 6
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
For The Three Months Ended
March 31, Change December 31, Change
2015 2014 Amount % 2014 Amount %
Net interest income $ 8,369 $ 8,173 $ 196 2% $ 8,290 $ 79 1%
Provision for loan and lease losses 0% 675 (675) (100)%
Noninterest income 854 364 490 135% 1,144 (290) (25)%
Noninterest expense 6,593 7,640 (1,047) (14)% 7,172 (579) (8)%
Income before income taxes 2,630 897 1,733 193% 1,587 1,043 66%
Provision (benefit) for income taxes 829 332 497 150% (96) 925 (964)%
Net income 1,801 565 1,236 219% 1,683 118 7%
Less: Dividend on preferred stock 50 50 0% 50 0%
Income available to common shareholders $ 1,751 $ 515 $ 1,236 240% $ 1,633 $ 118 7%
Basic earnings per share $ 0.13 $ 0.04 $ 0.09 225% $ 0.12 $ 1 8%
Average basic shares 13,303 13,942 (639) (5)% 13,295 8 0%
Diluted earnings per share $ 0.13 $ 0.04 $ 0.09 225% $ 0.12 $ 1 8%
Average diluted shares 13,340 13,987 (647) (5)% 13,335 5 0%
Dividends declared per common share $ 0.03 $ 0.03 $ — 0% $ 0.03 $ — 0%

First Quarter of 2015 Compared With First Quarter of 2014

Net income available to common shareholders for the first quarter of 2015 increased $1.2 million over the first quarter of 2014. In the current year, net interest income was $196 thousand higher, noninterest income was $490 thousand higher and noninterest expenses were $1.0 million lower. These positive changes were partially offset by an income tax provision that was higher by $497 thousand.

Net Interest Income

Net interest income increased $196 thousand over a year previous. Interest income for the three months ended March 31, 2015 increased $526 thousand or 6% to $9.5 million which reflects the increase in average earnings assets and the reallocation of lower yielding assets into higher yielding loans. Interest expense for the three months ended March 31, 2015 increased $330 thousand or 40% to $1.2 million. Interest expense on deposits declined $79 thousand, interest expense on other borrowings decreased $47 thousand, but interest on the Bank's Federal Home Loan Bank of San Francisco ("FHLB") borrowings increased $456 thousand.

During the first quarter of 2014, the net cost of the Bank's FHLB borrowings was reduced when hedge gains were reclassified out of other comprehensive income into earnings as a reduction of interest expense. As a result, interest expense on FHLB borrowings for the first quarter of 2014 was a negative $107 thousand. This accounting treatment ceased during the second quarter of 2014. Interest expense on FHLB borrowings for the first quarter of 2015 was $349 thousand. Interest expense on other borrowings was $47 thousand and $94 for the first quarter of 2015and 2014, respectively. During December of 2014, the Company repaid $5.0 million of junior subordinated debentures resulting in a decrease in interest on other borrowings.

Noninterest Income

Noninterest income for the three months ended March 31, 2015 increased $490 thousand compared to the same period a year ago. The Company recognized net gains on sale of available-for-sale investment securities during the current quarter of $215 thousand compared to a net loss of $245 thousand, for the same period a year ago.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2015 decreased $1.0 million compared to the same period a year ago. During the quarter ended March 31, 2014 the Company negotiated the settlement of a note receivable from its former mortgage subsidiary which resulted in a loss of $1.4 million and also wrote down $290 thousand of other real estate owned ("OREO"). In the current period, salaries and benefits are $288 thousand higher than a year earlier.

Income Tax Provision

During the three months ended March 31, 2015, the Company recorded a provision for income tax expense of $829 thousand compared with $332 thousand for the same period a year ago. The increase in the current year is due to increased pretax income.

First Quarter of 2015 Compared With Fourth Quarter of 2014

Net income available to common shareholders for the first quarter of 2015 increased $118 thousand over the fourth quarter of 2014. In the current year, net interest income was $79 thousand higher, the provision for loan and lease losses was $675 thousand lower and noninterest expenses were $579 thousand lower. These positive changes were partially offset by noninterest income that was $290 thousand lower and an income tax provision that was higher by $925 thousand.

Net Interest Income

Net interest income increased $79 thousand over a quarter previous. Interest income for the three months ended March 31, 2015 decreased $3 thousand to $9.5 million. The Bank's improved yield on assets offset the negative effect of a quarter that was two days shorter than the fourth quarter of 2014. Interest expense for the three months ended March 31, 2015 decreased $82 thousand or 7% to $1.2 million compared to the prior quarter. This decrease was a combination of reduced interest expense on junior subordinated debentures and the shorter quarter.

Provision for Loan and Lease Losses

During the current quarter net recoveries on charged off loans negated the need for a provision for loan and lease losses compared to the provision for loan and lease loss of $675 thousand in the prior quarter.

Noninterest Income

Noninterest income for the three months ended March 31, 2015 decreased $290 thousand compared to the prior quarter. The Company recognized a net gain on sale of available-for-sale investment securities during the current quarter of $215 thousand compared to a $93 thousand net gain in the prior quarter. During the quarter ended December 31, 2014, the Company also recognized a $406 thousand gain on the discounted repayment of junior subordinated debentures included in other income.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2015 decreased $579 thousand compared to the prior quarter. The Company recognized severance costs associated with the retirement of a former executive during the fourth quarter of 2014.

Income Tax Provision

During the three months ended March 31, 2015, the Company recorded a provision for income tax expense of $829 thousand compared with provision for income tax benefit of $96 thousand for the prior quarter. During the quarter ended December 31, 2014 the Company revised the estimated annual effective tax rate used in the provision for income tax expense.

Diluted earnings per share were $0.13 for the three months ended March 31, 2015 compared with $0.04 for the same period a year ago, and $0.12 for the prior period. Earnings per share increased during the three months ended March 31, 2015 compared to the same period a year ago as a result of increased net income and decreased weighted average shares. The decrease in weighted average shares resulted from the repurchase of 700,000 common shares from a repurchase plan announced and completed during the six months ended June 30, 2014. All repurchased shares were retired subsequent to purchase.

TABLE 7
NET INTEREST SPREAD AND MARGIN - UNAUDITED
(amounts in thousands)
For the Three Months Ended
March 31, Change December 31, Change
2015 2014 Amount 2014 Amount
Tax equivalent yield on average interest earning assets 4.37% 4.14% 0.23 4.35% 0.02
Rate on average interest bearing liabilities 0.65% 0.47% (0.18) 0.70% 0.05
Net interest spread - tax equivalent basis 3.72% 3.67% 0.05 3.65% 0.07
Net interest margin - nominal 3.72% 3.63% 0.09 3.67% 0.05
Net interest margin - tax equivalent basis 3.86% 3.78% 0.08 3.81% 0.05
Average earning assets $ 912,886 $ 912,007 $ 879 $ 917,301 $ (4,415)
Average interest bearing liabilities $ 708,234 $ 710,258 $ (2,024) $ 712,195 $ (3,961)

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 3.86% for the three months ended March 31, 2015, an increase of eight basis points as compared to the same period a year ago. The increase in net interest margin resulted from a 22 basis point increase in tax-equivalent yield on average earning assets offset by a 14 basis point increase in interest expense to fund 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 reallocate the asset mix into higher yielding assets by pursuing organic loan growth, making wholesale loan purchases, and actively managing the investment securities portfolio within our accepted risk tolerance.

TABLE 8
ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD - UNAUDITED
(amounts in thousands)
For The Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2015 2014 2014 2014 2014
Beginning balance $ 10,820 $ 10,400 $ 9,882 $ 9,748 $ 14,172
Provision for loan and lease losses charged to expense 675 1,050 1,450
Loans charged off (179) (375) (585) (1,457) (4,902)
Loan loss recoveries 655 120 53 141 478
Ending balance $ 11,296 $ 10,820 $ 10,400 $ 9,882 $ 9,748
At March 31, At December 31, At September 30, At June 30, At March 31,
2015 2014 2014 2014 2014
Nonaccrual loans:
Commercial $ 3,908 $ 5,112 $ 7,065 $ 4,375 $ 4,303
Commercial real estate 8,182 9,696 9,896 15,598 12,560
Residential real estate 1-4 family 6,365 6,782 7,438 6,939 7,360
Home equity 24 24 89 479 484
Consumer 34 35 87
Total nonaccrual loans 18,513 21,649 24,488 27,478 24,707
Accruing troubled debt restructured loans:
Commercial 1,004 1,485 1,585 13 62
Commercial real estate 1,690 1,698 1,707 1,716 3,853
Residential real estate 1-4 family 5,421 5,462 5,222 5,074 4,894
Home equity 574 579 584 589 593
Total accruing troubled debt restructured loans 8,689 9,224 9,098 7,392 9,402
All other accruing impaired loans 533 535 757 585 2,564
Total impaired loans $ 27,735 $ 31,408 $ 34,343 $ 35,455 $ 36,673
Gross loans outstanding at period end $ 699,229 $ 660,898 $ 649,695 $ 619,418 $ 607,049
Allowance for loan and lease losses as a percent of:
Gross loans 1.62% 1.64% 1.60% 1.59% 1.61%
Nonaccrual loans 61.02% 49.98% 42.47% 35.96% 39.45%
Impaired loans 40.73% 34.45% 30.28% 27.87% 26.58%
Nonaccrual loans to gross loans 2.65% 3.28% 3.77% 4.43% 4.07%

The Company realized net loan loss recoveries of $476 thousand in the current quarter compared with net loan charge offs of $255 thousand in the prior quarter and net loan charge offs of $4.4 million for the same period a year ago.

The Company continues to monitor credit quality, and adjust the ALLL to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. The Company made no provision for loan and lease losses during the first quarters of 2015 and 2014, compared to a provision of $675 thousand for the prior quarter. The Company's ALLL as a percentage of gross loans was 1.62% as of March 31, 2015 compared to 1.61% as of March 31, 2014 and 1.64% as of December 31, 2014. At March 31, 2015, given the banks ALLL methodology which uses criteria such as risk weighting and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company's ALLL is adequate. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in additional charges to the provision for loan and lease losses.

At March 31, 2015, the recorded investment in loans classified as impaired totaled $27.7 million, with a corresponding valuation allowance of $1.5 million compared to impaired loans of $36.7 million with a corresponding valuation allowance of $1.8 million at March 31, 2014 and impaired loans of $31.4 million, with a corresponding valuation allowance of $1.6 million at December 31, 2014. The valuation allowance on impaired loans represents the impairment reserves on performing restructured loans, other accruing loans, and nonaccrual loans. The $3.7 million decrease in impaired loans during the three months ended March 31, 2015 is centered in a $1.2 million principal payment on one commercial loan relationship, the acceptance of 6 deeds in lieu of foreclosure on a $1.3 million commercial loan relationship and a $486 thousand payoff of an impaired purchased mortgage.

TABLE 9
PERIOD END TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
At March 31, At December 31, At September 30, At June 30, At March 31,
2015 2014 2014 2014 2014
Nonaccrual $ 12,695 $ 14,230 $ 16,556 $ 20,504 $ 19,779
Accruing 8,689 9,224 9,098 7,392 9,402
Total troubled debt restructurings $ 21,384 $ 23,454 $ 25,654 $ 27,896 $ 29,181
Percentage of total gross loans 3.06% 3.55% 3.95% 4.50% 4.81%

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, either principal or interest, in accordance with the terms of the original loan agreement. Impairment reserves on non-collateral dependent restructured loans are measured by calculating 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 of the ALLL.

During the three months ended March 31, 2015, the Company restructured four loans to grant payment deferrals. The loans were classified as a troubled debt restructurings and three of the loans were placed on nonaccrual status. As of March 31, 2015, the Company had $21.4 million in troubled debt restructurings compared to $23.5 million as of December 31, 2014. As of March 31, 2015, the Company had 121 restructured loans that qualified as troubled debt restructurings, of which 99 were performing according to their restructured terms. Troubled debt restructurings represented 3.06% of gross loans as of March 31, 2015 compared with 3.55% at December 31, 2014.

TABLE 10
NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
At March 31, At December 31, At September 30, At June 30, At March 31,
2015 2014 2014 2014 2014
Total nonaccrual loans $ 18,513 $ 21,649 $ 24,488 $ 27,478 $ 24,707
90 days past due not on nonaccrual 23
Total nonperforming loans 18,513 21,672 24,488 27,478 24,707
Other real estate owned 1,502 502 393 826 623
Total nonperforming assets $ 20,015 $ 22,174 $ 24,881 $ 28,304 $ 25,330
Nonperforming loans to gross loans 2.65% 3.28% 3.77% 4.43% 4.07%
Nonperforming assets to total assets 2.03% 2.22% 2.54% 2.94% 2.61%

Nonperforming loans, which include nonaccrual loans and accruing loans past due more than 90 days, totaled $18.5 million or 2.65% of gross loans as of March 31, 2015, compared to $21.7 million, or 3.28% of gross loans at December 31, 2014. The decrease in nonperforming loans in the current quarter compared to the prior quarter was primarily due to a $1.2 million principal payment on one commercial loan relationship; $1.3 million for a commercial loan relationship attributed to moving six properties into OREO and a $486 thousand payoff of a nonperforming purchased mortgage. Nonperforming assets, which include nonperforming loans and OREO, totaled $20.0 million, or 2.03% of total assets as of March 31, 2015, compared with $22.2 million, or 2.22% of total assets as of December 31, 2014.

At March 31, 2015, March 31, 2014 and December 31, 2014, the recorded investment in OREO was $1.5 million, $623 thousand and $502 thousand, respectively. The March 31, 2015 OREO balance consists of twelve properties, of which five are secured by 1-4 family residential real estate in the amount of $370 thousand and seven are secured by nonfarm nonresidential properties in the amount of $1.1 million.

TABLE 11
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
At March 31, At March 31, Change At December 31,
2015 2014 $ % 2014
Assets:
Cash and due from banks $ 19,309 $ 54,422 $ (35,113) (65)% $ 43,949
Interest bearing due from banks 10,802 20,146 (9,344) (46)% 14,473
Total cash and cash equivalents 30,111 74,568 (44,457) (60)% 58,422
Securities available-for-sale, at fair value 166,890 204,010 (37,120) (18)% 186,986
Securities held-to-maturity, at amortized cost 36,609 36,985 (376) (1)% 36,806
Loans, net of deferred fees and costs 699,544 607,369 92,175 15% 661,055
Allowance for loan and lease losses (11,296) (9,748) (1,548) 16% (10,820)
Net loans 688,248 597,621 90,627 15% 650,235
Premises and equipment, net 11,903 11,763 140 1% 12,295
Other real estate owned 1,502 623 879 141% 502
Life insurance 22,009 16,342 5,667 35% 21,844
Deferred taxes 10,041 10,487 (446) (4)% 10,231
Other assets 18,089 17,598 491 3% 19,871
Total Assets $ 985,402 $ 969,997 $ 15,405 2% $ 997,192
Liabilities and shareholders' equity:
Demand - noninterest bearing $ 150,056 $ 131,290 $ 18,766 14% 157,557
Demand - interest bearing 266,552 269,634 (3,082) (1)% 298,160
Savings 92,088 93,279 (1,191) (1)% 88,569
Certificates of deposit 253,280 267,508 (14,228) (5)% 244,749
Total deposits 761,976 761,711 265 0% 789,035
Federal Home Loan Bank of San Francisco borrowings 90,000 75,000 15,000 20% 75,000
Junior subordinated debentures 10,310 15,465 (5,155) (33)% 10,310
Other liabilities 17,679 17,034 645 4% 19,245
Total liabilities 879,965 869,210 10,755 1% 893,590
Shareholders' equity:
Preferred stock 19,931 19,931 0% 19,931
Common Stock 24,105 25,531 (1,426) (6)% 23,891
Retained earnings 61,217 56,051 5,166 9% 59,867
Accumulated other comprehensive income (loss), net of tax 184 (726) 910 (125)% (87)
Total shareholders' equity 105,437 100,787 4,650 5% 103,602
Total liabilities and shareholders' equity $ 985,402 $ 969,997 $ 15,405 2% $ 997,192
Total interest earning assets $ 919,227 $ 903,428 $ 15,799 2% $ 926,233
Shares outstanding 13,337 13,552 13,295
Book value per share $ 6.41 $ 5.97 $ 6.29
TABLE 12
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
For The Three Months Ended
March 31, Change December 31,
2015 2014 $ % 2014
Interest income:
Interest and fees on loans $ 7,911 $ 7,094 $ 817 12% 7,832
Interest on securities 944 1,114 (170) (15)% 980
Interest on tax-exempt securities 599 652 (53) (8)% 620
Interest on deposits 72 140 (68) (49)% 97
Total interest income 9,526 9,000 526 6% 9,529
Interest expense:
Interest on demand deposits 116 121 (5) (4)% 109
Interest on savings deposits 54 57 (3) (5)% 55
Interest on certificates of deposit 591 662 (71) (11)% 623
Interest on FHLB borrowings 349 (107) 456 (426)% 370
Interest on other borrowings 47 94 (47) (50)% 82
Total interest expense 1,157 827 330 40% 1,239
Net interest income 8,369 8,173 196 2% 8,290
Provision for loan and lease losses 0% 675
Net interest income after provision for loan and lease losses 8,369 8,173 196 2% 7,615
Noninterest income:
Service charges on deposit accounts 49 44 5 11% 51
Payroll and benefit processing fees 148 135 13 10% 137
Increase in cash surrender value of life insurance 165 126 39 31% 169
Gain (loss) on investment securities, net 215 (245) 460 (188)% 93
Merchant credit card service income, net 23 26 (3) (12)% 24
Other income 254 278 (24) (9)% 670
Total noninterest income 854 364 490 135% 1,144
TABLE 12 - CONTINUED
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
For The Three Months Ended
March 31, Change December 31,
2015 2014 $ % 2014
Noninterest expense:
Salaries and related benefits 3,910 3,622 288 8% 4,257
Occupancy and equipment expense 734 642 92 14% 715
Write down of other real estate owned 290 (290) (100)%
FDIC insurance premium 207 191 16 8% 214
Data processing fees 233 194 39 20% 260
Professional service fees 422 264 158 60% 616
Deferred compensation expense 71 115 (44) (38)% 113
Other expenses 1,016 2,322 (1,306) (56)% 997
Total noninterest expense 6,593 7,640 (1,047) (14)% 7,172
Income before provision (benefit) for income taxes 2,630 897 1,733 193% 1,587
Provision (benefit) for income taxes 829 332 497 150% (96)
Net income $ 1,801 $ 565 $ 1,236 219% $ 1,683
Less: preferred dividends 50 50 0% 50
Income available to common shareholders $ 1,751 $ 515 $ 1,236 240% $ 1,633
Basic earnings per share $ 0.13 $ 0.04 $ 0.09 225% $ 0.12
Average basic shares 13,303 13,942 (639) (5)% 13,295
Diluted earnings per share $ 0.13 $ 0.04 $ 0.09 225% $ 0.12
Average diluted shares 13,340 13,987 (647) (5)% 13,335
TABLE 13
UNAUDITED CONDENSED CONSOLIDATED
YEAR TO DATE AVERAGE BALANCE SHEETS
(amounts in thousands)
For the Three Months Ended For the Twelve Months Ended
March 31, March 31, December 31, December 31, December 31,
2015 2014 2014 2013 2012
Earning assets:
Loans $ 673,120 $ 599,964 $ 625,166 $ 612,819 $ 642,200
Tax exempt securities 77,316 86,681 83,973 92,854 81,714
Taxable securities 136,557 160,182 147,916 157,486 135,615
Interest bearing due from banks 25,893 65,180 56,465 43,397 48,712
Average earning assets 912,886 912,007 913,520 906,556 908,241
Cash and due from banks 10,295 10,212 11,246 10,570 10,125
Premises and equipment, net 12,195 11,197 12,105 10,338 9,567
Other assets 43,540 26,747 36,936 26,838 24,249
Average total assets $ 978,916 $ 960,163 $ 973,807 $ 954,302 $ 952,182
Interest bearing liabilities:
Demand - interest bearing $ 275,954 $ 268,913 $ 272,383 $ 244,125 $ 203,342
Savings 91,152 91,406 91,108 92,502 89,789
Certificates of deposit 246,707 259,474 259,445 249,500 285,574
Repurchase agreements 5,780 14,246
Other borrowings 10,421 15,465 15,239 15,584 15,465
FHLB borrowings 84,000 75,000 77,534 109,560 110,374
Average interest bearing liabilities 708,234 710,258 715,709 717,051 718,790
Demand - noninterest bearing 148,923 131,569 139,792 126,017 115,091
Other liabilities 17,141 15,130 15,934 5,041 7,033
Shareholders' equity 104,618 103,206 102,372 106,193 111,268
Average liabilities & shareholders' equity $ 978,916 $ 960,163 $ 973,807 $ 954,302 $ 952,182
TABLE 14
UNAUDITED CONDENSED CONSOLIDATED
QUARTERLY AVERAGE BALANCE SHEETS
(amounts in thousands)
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2015 2014 2014 2014 2014
Earning assets:
Loans $ 673,120 $ 656,834 $ 631,674 $ 611,494 $ 599,964
Tax exempt securities 77,316 82,231 83,503 83,530 86,681
Taxable securities 136,557 141,265 138,355 152,175 160,182
Interest bearing due from banks 25,893 36,971 64,829 59,099 65,180
Average earning assets 912,886 917,301 918,361 906,298 912,007
Cash and due from banks 10,295 12,263 12,320 10,155 10,212
Premises and equipment, net 12,195 12,464 12,551 12,190 11,197
Other assets 43,540 43,072 40,815 36,887 26,747
Average total assets $ 978,916 $ 985,100 $ 984,047 $ 965,530 $ 960,163
Interest bearing liabilities:
Demand - interest bearing $ 275,954 $ 277,692 $ 270,395 $ 272,457 $ 268,913
Savings 91,152 89,992 91,556 91,488 91,406
Certificates of deposit 246,707 254,943 260,592 262,809 259,474
Other borrowings 10,421 14,568 15,465 15,465 15,465
FHLB borrowings 84,000 75,000 85,054 75,000 75,000
Average interest bearing liabilities 708,234 712,195 723,062 717,219 710,258
Demand - noninterest bearing 148,923 153,007 142,426 131,901 131,569
Other liabilities 17,141 16,751 16,612 15,216 15,130
Shareholders' equity 104,618 103,147 101,947 101,194 103,206
Average liabilities & shareholders' equity $ 978,916 $ 985,100 $ 984,047 $ 965,530 $ 960,163

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: 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) 722-3959Source:Bank of Commerce Holdings