×

Bank of Commerce Holdings Announces Results for the Third Quarter of 2016

REDDING, Calif., Oct. 21, 2016 (GLOBE NEWSWIRE) -- Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (NASDAQ:BOCH) (the “Company”), a $1.1 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter and the nine months ended September 30, 2016. Net income available to common shareholders for the quarter ended September 30, 2016 was $2.4 million or $0.18 per share – diluted, compared with $2.5 million or $0.18 per share – diluted for the same period of 2015. Net income available to common shareholders for the nine months ended September 30, 2016 was $3.0 million or $0.22 per share – diluted compared with $6.6 million or $0.49 per share – diluted for the same period of 2015.

Financial highlights for the third quarter of 2016:

  • Net income available to common shareholders of $2.4 million for the three months ended September 30, 2016 was a decrease of $109 thousand (4%) from $2.5 million available to common shareholders earned during the same period in the prior year
  • Return on average assets declined to 0.86% for the third quarter of 2016 compared to 0.99% for the same period in the prior year
  • Return on average equity improved to 10.10% for the third quarter of 2016 compared to 9.12% for the same period in the prior year
  • Deposits at September 30, 2016 totaled $975.5 million, an increase of $38.0 million (16% annualized) since June 30, 2016. This growth which occurred in both our Sacramento and Redding marketplaces was centered entirely in core deposits
  • Gross loans at September 30, 2016 totaled $779.0 million, an increase of $24.9 million (13% annualized) since June 30, 2016. All of this growth occurred in the our Sacramento marketplace and is the result of investments in our SBA division and in our expanded Sacramento commercial banking group
  • Nonperforming assets at September 30, 2016 totaled $10.9 million or 0.98% of total assets, a decrease of $803 thousand (27% annualized) since June 30, 2016
  • Tangible book value per common share was $6.84 at September 30, 2016 compared to $6.71 at June 30, 2016

Financial highlights for the nine months ended September 30, 2016:

  • Net income available to common shareholders of $3.0 million for the nine months ended September 30, 2016 was a decrease of $3.6 million (55%) from $6.6 million available to common shareholders earned during the same period in the prior year. Net income for 2016 is negatively impacted by $3.0 million of branch acquisition and balance sheet restructuring costs, a $546 thousand impairment of an investment security and the write-off of a $363 thousand deferred tax asset during prior quarters
  • Return on average assets declined to 0.37% for the nine months ended September 30, 2016 compared to 0.89% for the same period in the prior year
  • Return on average equity declined to 4.30% for the nine months ended September 30, 2016 compared to 8.27% for the same period in the prior year
  • Deposits at September 30, 2016 totaled $975.5 million, an increase of $171.8 million (29% annualized) since December 31, 2015
  • Gross loans at September 30, 2016 totaled $779.0 million, an increase of $62.3 million (12% annualized) since December 31, 2015
  • Nonperforming assets at September 30, 2016 totaled $10.9 million or 0.98% of total assets, a decrease of $4.6 million (40% annualized) compared to December 31, 2015
  • Net loan loss recoveries of $669 thousand combined with continuing improved asset quality resulted in no provision for loan and lease losses

Randall S. Eslick, President and CEO commented: “We are pleased with our strong organic growth in both loans and deposits during the third quarter. This growth, and our improved asset quality were possible only because of the hard work of our dedicated employees and the loyalty of our customers. We thank them and will continue to rely on them in the future to help us achieve our growth and earnings goals.”

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 our 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 reduce the demand for loans or reduce the value of real estate collateral securing most of our 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, 2015 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 For The Nine Months Ended
Net income, average assets and September 30, June 30, September 30,
average shareholders' equity 2016 2015 2016 2016 2015
Income available to common shareholders $ 2,366 $ 2,475 $ 1,556 $ 2,962 $ 6,566
Average total assets $ 1,093,918 $ 992,034 $ 1,064,186 $ 1,064,210 $ 988,303
Average shareholders' equity $ 93,238 $ 107,704 $ 91,317 $ 91,959 $ 106,186
Selected performance ratios
Return on average assets 0.86% 0.99% 0.59% 0.37% 0.89%
Return on average equity 10.10% 9.12% 6.85% 4.30% 8.27%
Efficiency ratio 69.61% 60.17% 79.43% 85.08% 65.41%
Share and per share amounts
Weighted average shares - basic 13,369 13,340 13,367 13,366 13,327
Weighted average shares - diluted 13,439 13,377 13,425 13,412 13,358
Earnings per share - basic $ 0.18 $ 0.18 $ 0.11 $ 0.22 $ 0.49
Earnings per share - diluted $ 0.18 $ 0.18 $ 0.11 $ 0.22 $ 0.49
At September 30, At June 30,
Share and per share amounts 2016 2015 2016
Common shares outstanding (1) 13,439 13,374 13,439
Tangible book value per common share $ 6.84 $ 6.64 $ 6.71
Capital ratios
Bank of Commerce Holdings
Common equity tier 1 capital ratio 9.60% 9.96% 9.69%
Tier 1 capital ratio (2) 10.65% 13.25% 10.77%
Total capital ratio (2) 12.96% 14.50% 13.11%
Tier 1 leverage ratio (2) 9.28% 11.98% 9.34%
Tangible common equity ratio 8.30% 8.96% 8.44%
Redding Bank of Commerce
Common equity tier 1 capital ratio 12.62% 13.20% 12.80%
Tier 1 capital ratio 12.62% 13.20% 12.80%
Total capital ratio 13.87% 14.45% 14.05%
Tier 1 leverage ratio 11.03% 11.95% 11.14%
(1) Includes unvested restricted shares issued in accordance with the Bank's equity incentive plan.
(2) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. The decline in the capital ratios of Bank of Commerce Holdings as of September 30, 2016 compared to September 30, 2015 is primarily due to the redemption of $20.0 million of preferred stock (Tier 1 capital) during the fourth quarter of 2015. The $10.0 million of subordinated debt issued during the fourth quarter of 2015 qualifies as Tier 2 capital under applicable capital adequacy rules and regulations promulgated by the Federal Reserve. The capital ratios for 2016 were also impacted by the addition of $1.8 million of core deposit intangibles and $665 thousand of goodwill recorded in conjunction with the acquisition of five branches in March of 2016.

BALANCE SHEET OVERVIEW

As of September 30, 2016, the Company had total consolidated assets of $1.1 billion, gross loans of $779.0 million, allowance for loan and lease losses (“ALLL”) of $11.9 million, total deposits of $975.5 million, and shareholders’ equity of $94.3 million.

TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
At September 30, At June 30,
% of % of Change % of
2016 Total 2015 Total Amount % 2016 Total
Commercial$ 136,235 17% $ 144,749 20% $ (8,514) (6)% $ 150,410 20%
Real estate - construction and land development 48,365 6 29,701 4 18,664 63 % 39,009 5
Real estate - commercial non-owner occupied 281,977 37 237,597 34 44,380 19 % 253,873 35
Real estate - commercial owner occupied 160,474 21 151,762 21 8,712 6 % 154,480 20
Real estate - residential - ITIN 46,458 6 50,162 7 (3,704) (7)% 47,188 6
Real estate - residential - 1-4 family mortgage 10,770 1 12,185 2 (1,415) (12)% 10,862 1
Real estate - residential - equity lines 42,363 5 45,733 6 (3,370) (7)% 43,971 6
Consumer and other 52,377 7 46,644 6 5,733 12 % 54,347 7
Gross loans 779,019 100% 718,533 100% 60,486 8 % 754,140 100%
Deferred fees and costs 1,155 718 437 1,028
Loans, net of deferred fees and costs 780,174 719,251 60,923 755,168
Allowance for loan and lease losses (11,849) (10,891) (958) (11,864)
Net loans$ 768,325 $ 708,360 $ 59,965 $ 743,304
Average yield on loans during the quarter 4.66% 4.70% (0.04) 4.76%

The Company recorded gross loan balances of $779.0 million at September 30, 2016, compared with $718.5 million and $754.1 million at September 30, 2015 and June 30, 2016, respectively, an increase of $60.5 million and $24.9 million, respectively. The increase in gross loans compared to the same period a year ago and the prior period was driven by organic loan originations in our Sacramento marketplace and is the result of investments in our SBA division and in our expanded Sacramento commercial banking group.

The increase in the ALLL at September 30, 2016 compared to the same date a year ago resulted from net loan loss recoveries. As a result of these net recoveries and continued improved asset quality, no provision for loan and lease losses was deemed necessary during the current quarter or during the prior six consecutive quarters. See table 8 for additional details of the ALLL.

TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
At September 30, At June 30,
% of % of Change % of
2016 Total 2015 Total Amount % 2016 Total
Cash and due from banks $ 19,699 7% $ 8,564 4% $ 11,135 130 % $ 14,695 6%
Interest-bearing deposits in other banks 65,431 24 16,745 8 48,686 291 % 51,345 20
Total cash and cash equivalents 85,130 31 25,309 12 59,821 236 % 66,040 25
Investment securities:
U.S. government and agencies 0 3,998 2 (3,998) (100)% 3,262 1
Obligations of state and political subdivisions 59,952 22 57,453 26 2,499 4 % 59,015 23
Residential mortgage backed securities and collateralized mortgage obligations 54,046 20 34,058 16 19,988 59 % 45,015 17
Corporate securities 16,346 6 36,560 17 (20,214) (55)% 22,313 9
Commercial mortgage backed securities 16,254 6 9,266 4 6,988 75 % 14,865 6
Other asset backed securities 9,842 4 15,974 7 (6,132) (38)% 13,436 5
Total investment securities - AFS 156,440 58 157,309 72 (869) (1)% 157,906 61
Obligations of state and political subdivisions - HTM 31,771 11 36,093 16 (4,322) (12)% 35,415 14
Total investment securities - AFS and HTM 188,211 69 193,402 88 (5,191) (3)% 193,321 75
Total cash, cash equivalents and investment securities $ 273,341 100% $ 218,711 100% $ 54,630 25 % $ 259,361 100%
Average yield on interest bearing due from banks and investment securities during the quarter 2.11% 2.46% (0.35) 2.37%

As of September 30, 2016, we maintained noninterest-bearing cash positions at the Federal Reserve Bank and correspondent banks in the amount of $19.7 million. We also held interest-bearing deposits in the amount of $65.4 million. The sizeable increase in cash and cash equivalents compared to the same period a year ago derives from liquidity provided by the recent branch acquisition and strong organic deposit growth. It is anticipated that much of this liquidity will be deployed into new loans over the remainder of the year.

Available-for-sale investment securities totaled $156.4 million at September 30, 2016, compared with $157.3 million and $157.9 million at September 30, 2015 and June 30, 2016, respectively. Our available-for-sale investment portfolio provides us with a secondary source of liquidity to fund other higher yielding asset opportunities, such as loan originations and wholesale loan purchases. During the third quarter of 2016 we purchased 16 securities with a par value of $24.5 million and weighted average yield of 1.90% and sold nine securities with a par value of $12.0 million and weighted average yield of 2.09%. The sales activity on available for sale securities and calls on two held-to-maturity securities resulted in $70 thousand in net realized gains. During the same period, we received $14.2 million in proceeds from principal payments, calls and maturities within the available-for-sale investment securities portfolio. Average securities balances and weighted average tax equivalent yields for the quarters ended September 30, 2016 and 2015 were $188.5 million and 3.22% compared to $191.4 million and 3.40%, respectively.

During the second quarter of 2016, we recorded an other-than-temporary impairment of $546 thousand on an investment security. We did not recognize any additional other-than-temporary impairment losses for the nine months ended September 30, 2016, or during the year ended December 31, 2015.

At September 30, 2016, our net unrealized gains on available-for-sale investment securities were $2.3 million compared with $1.6 million and $2.6 million at September 30, 2015 and June 30, 2016, respectively. The decrease in net unrealized gains between June 30, 2016 and September 30, 2016 is primarily due to interest rate changes over the past three months.

TABLE 4
DEPOSITS BY TYPE - UNAUDITED
(amounts in thousands)
At September 30, At June 30,
% of % of Change % of
2016 Total 2015 Total Amount % 2016 Total
Demand - noninterest bearing$ 254,435 26% $ 162,437 21% $ 91,998 57 % $ 224,467 24%
Demand - interest bearing 394,525 40 295,209 38 99,316 34 % 385,609 41
Total demand 648,960 66 457,646 59 191,314 42 % 610,076 65
Savings 110,201 11 93,367 12 16,834 18 % 105,228 11
Total non-maturing deposits 759,161 77 551,013 71 208,148 38 % 715,304 76
Certificates of deposit 216,332 23 228,492 29 (12,160) (5)% 222,252 24
Total deposits$ 975,493 100% $ 779,505 100% $ 195,988 25 % $ 937,556 100%
Average rate on interest bearing deposits during the quarter 0.39% 0.49% (0.10) 0.39%
Average rate on all deposits during the quarter 0.29% 0.39% (0.10) 0.30%

Total deposits at September 30, 2016, increased $196.0 million or 25% to $975.5 million compared to September 30, 2015, and increased $37.9 thousand or 4% compared to June 30, 2016. Total non-maturing deposits increased $208.1 million or 38% compared to the same date a year ago and increased $44.2 million or 6% compared to June 30, 2016. Certificates of deposit decreased $12.2 million or 5% compared to the same date a year ago and decreased $5.9 million or 3% compared to June 30, 2016.

During the first quarter of 2016 the branch acquisition provided an additional $149.0 million of deposits and we called and redeemed $17.5 million of brokered certificates of deposit. At September 30, 2016, the deposits in the acquired branches totaled $140.3 million.

TABLE 5
WHOLESALE AND BROKERED DEPOSITS - UNAUDITED
(amounts in thousands)
At September 30, At June 30,
2016 2015 2016
CDARS / ICS reciprocal deposits$ 59,502 $ 67,825 $ 54,783
Third party brokered time deposits 17,505
Brokered deposits per Call Report 59,502 85,330 54,783
Online listing service time deposits 52,456 61,141 54,396
Total wholesale and brokered deposits$ 111,958 $ 146,471 $ 109,179

In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $59.5 million, $85.3 million and $54.8 million at September 30, 2016, September 30, 2015 and June 30, 2016, respectively.

INCOME STATEMENT OVERVIEW

TABLE 6
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
For The Three Months Ended
September 30, Change June 30, Change
2016 2015 Amount % 2016 Amount %
Interest income $ 10,330 $ 9,732 $ 598 6 % $ 10,257 $ 73 1 %
Interest expense 1,054 1,277 (223) (17)% 1,040 14 1 %
Net interest income 9,276 8,455 821 10 % 9,217 59 1 %
Provision for loan and lease losses % %
Noninterest income 959 808 151 19 % 437 522 119 %
Noninterest expense:
Branch acquisition and balance sheet reconfiguration costs % 168 (168) (100)%
Other noninterest expense 7,125 5,574 1,551 28 % 7,500 (375) (5)%
Income before provision
for income taxes
3,110 3,689 (579) (16)% 1,986 1,124 57 %
Provision for income taxes 744 1,164 (420) (36)% 430 314 73 %
Net income $ 2,366 $ 2,525 $ (159) (6)% $ 1,556 810 52 %
Less: Preferred dividends 50 (50) (100)% %
Income available to common shareholders $ 2,366 $ 2,475 $ (109) (4)% $ 1,556 $ 810 52 %
Basic earnings per share $ 0.18 $ 0.18 $ % $ 0.11 $ 0.07 64 %
Average basic shares 13,369 13,340 29 % 13,367 2 %
Diluted earnings per share $ 0.18 $ 0.18 $ % $ 0.11 $ 0.07 64 %
Average diluted shares 13,439 13,377 62 % 13,425 14 %
Dividends declared per common share $ 0.03 $ 0.03 $ % $ 0.03 $ %

Third Quarter of 2016 Compared With Third Quarter of 2015

Net income available to common shareholders for the third quarter of 2016 decreased $109 thousand compared to the third quarter of 2015. In the current quarter, net interest income was $821 thousand higher, noninterest income was $151 thousand higher and the provision for income tax was $420 thousand lower. These positive changes were offset by an increase in noninterest expense of $1.6 million.

Net Interest Income

Net interest income increased $821 thousand over a year previous.

Interest income for the three months ended September 30, 2016 increased $598 thousand or 6% to $10.3 million. Interest and fees on loans increased $650 thousand primarily due to increased average loan balances. Interest on interest bearing deposits due from banks increased $42 thousand while interest on securities decreased $94 thousand.

Interest expense for the third quarter of 2016 decreased $223 thousand or 17% to $1.1 million. The net decrease was caused by the following.

  • Interest on FHLB term debt decreased $474 thousand. During the first quarter of 2016 all FHLB term debt was repaid and an interest rate hedge associated with $75.0 million of that debt was terminated
  • Interest on $20.0 million of senior and subordinated term debt increased $289 thousand. The senior and subordinated term debt was issued during the fourth quarter of 2015 to redeem $20.0 million of preferred stock
  • Interest on interest bearing deposits decreased $52 thousand. Interest bearing deposits increased $104.0 million compared to the prior year, but the rate paid on all interest bearing deposits decreased by 10 basis points
  • Interest on junior subordinated debentures and other borrowings increased $14 thousand

Noninterest Income

Noninterest income for the three months ended September 30, 2016 increased $151 thousand compared to the same period a year ago. Our branch and offsite ATM acquisition completed in the first quarter, enhanced point of sale and ATM fees by $191 thousand and service charges on deposit accounts by $81 thousand for the quarter ended September 30, 2016 compared to the same period a year ago. These positive changes were partially offset by a decrease in the gain on sale investment securities of $67 thousand compared to same period a year ago.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2016 increased $1.6 million compared to the same period a year ago. The increase was primarily driven by increased costs to operate the five newly acquired branches and three offsite ATM locations. Noninterest expenses that increased during the current quarter compared to the same period a year ago included the following:

  • Salaries and occupancy costs directly related to the newly acquired branch and offsite ATM locations of $617 thousand
  • Salaries and occupancy costs for all other locations increased $403 thousand primarily as a result of investment in our Sacramento marketplace commercial banking group
  • Data processing fees increased $221 thousand
  • ATM processing fees increased $57 thousand as a result of the additional activity at the recently acquired branch and offsite ATM locations
  • Telecommunications expense increased $83 thousand

Income Tax Provision

During the three months ended September 30, 2016, the Company recorded a provision for income taxes of $744 thousand (23.92% of pretax income) compared with a provision for income taxes of $1.2 million (31.55% of pretax income) for the same period a year ago. The Company’s 2016 effective tax rate has declined as a result of increased permanent deductions arising from investments in low income housing partnerships. Tax credits are essentially unchanged between the two quarters.

Third Quarter of 2016 Compared With Second Quarter of 2016

Net income available to common shareholders for the third quarter of 2016 increased $810 thousand over the second quarter of 2016. In the current quarter, net interest income was $59 thousand higher, noninterest income was $522 thousand higher and noninterest expenses were $543 thousand lower. These positive changes were offset by a an increase in the provision for income taxes of $314 thousand.

Net Interest Income

Net interest income increased $59 thousand over the prior quarter.

Interest income for the three months ended September 30, 2016 increased $73 thousand or 1% to $10.3 million compared to the prior quarter. Interest and fees on loans increased $211 thousand due to increased average balances. Interest on interest bearing deposits due from banks increased $17 thousand due to increased average balances. These positive changes were partially offset by decreased interest on securities of $155 thousand due to decreased yields and decreased average balances.

Interest expense for the three months September 30, 2016 increased $14 thousand or 1% to $1.1 million compared to the prior quarter. Average total deposits for the third quarter of 2016 increased $28.5 million from the second quarter of 2016. The growth was in low cost core deposits with a resulting one basis point decline in the cost of total deposits.

Noninterest Income

Noninterest income for the three months ended September 30, 2016 increased $522 thousand compared to the prior quarter. During the prior quarter we recorded a $546 thousand other-than-temporary impairment on an investment security as described in Note 4 to our June 30, 2016 Form 10-Q. Net gains recognized on the sales and calls of investment securities during the current quarter increased by $42 thousand to $70 thousand compared to a $28 thousand net gain in the prior quarter.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2016 decreased $543 thousand compared to the prior quarter.

The decrease in noninterest expense was primarily driven by following positive items:

  • Branch acquisition and balance sheet reconfiguration costs decreased $168 thousand
  • Professional service fees decreased $167 thousand
  • Salaries and related benefits costs decreased $118 thousand
  • Deferred loan origination costs increased $95 thousand
  • Other real estate owned holding costs decreased $56 thousand

These positive items were partially offset by increased data processing fees of $90 thousand and increased premise and equipment costs of $84 thousand.

Income Tax Provision

During the three months ended September 30, 2016, we recorded a provision for income taxes of $744 thousand (23.92% of pretax income) compared with a provision for income taxes of $430 thousand (21.65% of pretax income) for the prior quarter.

Earnings Per Share

Diluted earnings per share available to common shareholders were $0.18 for the three months ended September 30, 2016 compared with diluted earnings per share available to common shareholders of $0.18 for the same period a year ago, and $0.11 for the prior period. The number of shares outstanding during these periods has not changed significantly. Changes in earnings per share are the result of changes in net income.

TABLE 7
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
For The Three Months Ended
September 30, Change June 30, Change
2016 2015 Amount 2016 Amount
Yield on average interest earning assets 4.03% 4.17% (0.14) 4.16% (0.13)
Interest expense to fund average earning assets 0.41% 0.55% (0.14) 0.42% (0.01)
Net interest margin - nominal 3.62% 3.62% 0.00 3.74% (0.12)
Yield on average interest earning
assets - tax equivalent basis
4.14% 4.30% (0.16) 4.29% (0.15)
Interest expense to fund average earning assets 0.41% 0.55% (0.14) 0.42% (0.01)
Net interest margin - tax equivalent basis 3.73% 3.75% (0.02) 3.87% (0.14)
Average earning assets$ 1,019,230 $ 927,547 $ 91,683 $ 990,132 $ 29,098
Average interest bearing liabilities$ 749,103 $ 709,958 $ 39,145 $ 740,579 $ 8,524

The current quarter net interest margin decreased 12 basis points to 3.62% as compared to the prior quarter due to decreased yields in both the loan and investment portfolios. In the current interest rate environment, cash flows from maturities and repayments are being reinvested at interest rates lower than the maturing instruments.

The net interest margin was 3.62% for the current quarter and the same period a year ago. The 14 basis point decrease in yield on average earning assets has been offset by a 14 basis point decrease in interest expense to fund average earning assets. The decrease in interest expense resulted from our acquisition of low cost core deposits and our ability to restructure our balance sheet.

Deposit balances increased $37.9 million and $196.0 million compared to the prior quarter and the same period a year ago respectively. The increase in deposit balances compared to the prior quarter was centered entirely in core deposits. The increase in deposit balances compared to the same period a year ago results from both the recent branch acquisition and strong organic growth. Our overall cost of total deposits decreased to 0.29% for the quarter ended September 30, 2016 from 0.39% for the same period a year ago and from 0.30% for the prior quarter.

TABLE 8
ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED
(amounts in thousands)
For The Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Beginning balance$ 11,864 $ 11,495 $ 11,180 $ 10,891 $ 11,402
Provision for loan and lease losses charged to expense
Loans charged off (357) (1,734) (307) (707) (779)
Loan loss recoveries 342 2,103 622 996 268
Ending balance$ 11,849 $ 11,864 $ 11,495 $ 11,180 $ 10,891
At September 30, At June 30, At March 31, At December 31, At September 30,
2016 2016 2016 2015 2015
Nonaccrual loans:
Commercial$ 1,710 $ 2,149 $ 2,563 $ 1,994 $ 2,506
Real estate - commercial non-owner occupied 1,196 1,197 1,197 5,488 5,154
Real estate - commercial owner occupied 800 816 1,190 1,071 1,928
Real estate - residential - ITIN 3,392 3,664 3,705 3,649 4,228
Real estate - residential - 1-4 family mortgage 1,798 1,824 1,742 1,775 1,669
Real estate - residential - equity lines 942 995 1,270 23
Consumer and other 252 266 31 32 33
Total nonaccrual loans 10,090 10,911 11,698 14,009 15,541
Accruing troubled debt restructured loans:
Commercial 726 760 40 49 56
Real estate - commercial non-owner occupied 811 816 821 824 828
Real estate - residential - ITIN 5,280 5,336 5,502 5,458 5,423
Real estate - residential - equity lines 543 548 553 558 563
Total accruing troubled debt restructured loans 7,360 7,460 6,916 6,889 6,870
All other accruing impaired loans 483 550 488 492 494
Total impaired loans$ 17,933 $ 18,921 $ 19,102 $ 21,390 $ 22,905
Gross loans outstanding at period end$ 779,019 $ 754,140 $ 724,243 $ 716,639 $ 718,533
Allowance for loan and lease losses as a percent of:
Gross loans 1.52 % 1.57 % 1.59 % 1.56 % 1.52 %
Nonaccrual loans 117.43 % 108.73 % 98.26 % 79.81 % 70.08 %
Impaired loans 66.07 % 62.70 % 60.18 % 52.27 % 47.55 %
Nonaccrual loans to gross loans 1.30 % 1.45 % 1.62 % 1.95 % 2.16 %

We realized net loan charge offs of $15 thousand in the current quarter compared with net loan loss recoveries of $369 thousand in the prior quarter and net loan charge offs of $511 thousand for the same period a year ago. Charge offs during the third quarter of 2016 of $219 thousand were primarily associated with purchased consumer loans, offset by recoveries of $277 thousand primarily associated with one commercial relationship.

We continue 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. We made no provision for loan and lease losses during this quarter or the previous five consecutive quarters. Our ALLL as a percentage of gross loans was 1.52% as of September 30, 2016 compared to 1.52% as of September 30, 2015 and 1.57% as of June 30, 2016. Based on the Bank’s 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 at September 30, 2016. 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 future charges to the provision for loan and lease losses.

At September 30, 2016, the recorded investment in loans classified as impaired totaled $17.9 million, with a corresponding valuation allowance of $925 thousand compared to impaired loans of $22.9 million with a corresponding valuation allowance of $789 thousand at September 30, 2015 and impaired loans of $18.9 million, with a corresponding valuation allowance of $903 thousand at June 30, 2016. The valuation allowance on impaired loans represents the impairment reserves on performing restructured loans, other accruing loans, and nonaccrual loans.

TABLE 9
PERIOD END TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
At September 30, At June 30, At March 31, At December 31, At September 30,
2016 2016 2016 2015 2015
Nonaccrual $ 3,795 $ 3,785 $ 4,516 $ 9,015 $ 11,149
Accruing 7,360 7,460 6,916 6,889 6,870
Total troubled debt restructurings $ 11,155 $ 11,245 $ 11,432 $ 15,904 $ 18,019
Percentage of total gross loans 1.43% 1.49% 1.58% 2.22% 2.51%

Loans are reported as a troubled debt restructuring when we grant a concession(s) to a borrower experiencing financial difficulties that it would not otherwise consider. Examples of such concessions include a reduction in the loan 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 we 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 to be provided for in the ALLL.

During the three months ended September 30, 2016, the Company restructured two loans; one to grant a maturity modification and the other to grant a principal reduction modification. The loans were classified as troubled debt restructurings and placed on nonaccrual status. As of September 30, 2016, we had 119 restructured loans that qualified as troubled debt restructurings, of which 110 were performing according to their restructured terms.

TABLE 10
NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
At September 30, At June 30, At March 31, At December 31, At September 30,
2016 2016 2016 2015 2015
Total nonaccrual loans $ 10,090 $ 10,911 $ 11,698 $ 14,009 $ 15,541
90 days past due and still accruing 10 88 52
Total nonperforming loans 10,090 10,921 11,698 14,097 15,593
Other real estate owned 793 765 1,011 1,423 1,525
Total nonperforming assets $ 10,883 $ 11,686 $ 12,709 $ 15,520 $ 17,118
Nonperforming loans to gross loans 1.30% 1.45% 1.62% 1.97% 2.17%
Nonperforming assets to total assets 0.98% 1.09% 1.18% 1.53% 1.73%

At September 30, 2016, September 30, 2015 and June 30, 2016, the recorded investment in OREO was $793 thousand, $1.5 million and $765 thousand, respectively. The September 30, 2016 OREO balance consists of five properties, of which two are 1-4 family residential real estate properties in the amount of $109 thousand, two are nonfarm nonresidential properties in the amount of $558 thousand and one is an undeveloped commercial property in the amount of $126 thousand.

TABLE 11
UNAUDITED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
At September 30, At September 30, Change At June 30,
2016 2015 $ % 2016
Assets:
Cash and due from banks $ 19,699 $ 8,564 $ 11,135 130 % $ 14,695
Interest-bearing deposits in other banks 65,431 16,745 48,686 291 % 51,345
Total cash and cash equivalents 85,130 25,309 59,821 236 % 66,040
Securities available-for-sale, at fair value 156,440 157,309 (869) (1)% 157,906
Securities held-to-maturity, at amortized cost 31,771 36,093 (4,322) (12)% 35,415
Loans, net of deferred fees and costs 780,174 719,251 60,923 8 % 755,168
Allowance for loan and lease losses (11,849) (10,891) (958) 9 % (11,864)
Net loans 768,325 708,360 59,965 8 % 743,304
Premises and equipment, net 15,930 11,112 4,818 43 % 15,660
Other real estate owned 793 1,525 (732) (48)% 765
Life insurance 22,946 22,326 620 3 % 22,794
Deferred taxes 8,171 10,638 (2,467) (23)% 8,026
Goodwill and core deposit intangibles, net 2,307 2,307 100 % 2,362
Other assets 19,205 18,057 1,148 6 % 17,920
Total assets $ 1,111,018 $ 990,729 $ 120,289 12 % $ 1,070,192
Liabilities and shareholders' equity:
Demand - noninterest bearing $ 254,435 $ 162,437 $ 91,998 57 % $ 224,467
Demand - interest bearing 394,525 295,209 99,316 34 % 385,609
Savings 110,201 93,367 16,834 18 % 105,228
Certificates of deposit 216,332 228,492 (12,160) (5)% 222,252
Total deposits 975,493 779,505 195,988 25 % 937,556
Term debt 19,317 75,000 (55,683) (74)% 19,577
Unamortized debt issuance costs (193) (193) 100 % (201)
Net term debt 19,124 75,000 (55,876) (75)% 19,376
Junior subordinated debentures 10,310 10,310 0 % 10,310
Other liabilities 11,798 17,239 (5,441) (32)% 10,462
Total liabilities 1,016,725 882,054 134,671 15 % 977,704
Shareholders' equity:
Preferred stock 19,931 (19,931) (100)%
Common stock 24,483 24,180 303 1 % 24,421
Retained earnings 68,321 65,232 3,089 5 % 66,356
Accumulated other comprehensive income (loss), net of tax 1,489 (668) 2,157 (323)% 1,711
Total shareholders' equity 94,293 108,675 (14,382) (13)% 92,488
Total liabilities and shareholders' equity $ 1,111,018 $ 990,729 $ 120,289 12 % $ 1,070,192
Total interest earning assets $ 1,031,527 $ 927,773 $ 103,754 11 % $ 997,211
Shares outstanding 13,439 13,374 13,439
Tangible book value per share $ 6.84 $ 6.64 $ 6.71


TABLE 12
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
For The Three Months Ended For The Nine Months Ended
September 30, Change June 30, September 30,
2016 2015 $ % 2016 2016 2015
Interest income:
Interest and fees on loans $ 9,007 $ 8,357 $ 650 8 % $ 8,796 $ 26,254 $ 24,572
Interest on securities 689 743 (54) (7)% 808 2,281 2,489
Interest on tax-exempt securities 552 592 (40) (7)% 588 1,734 1,793
Interest on deposits in other banks 82 40 42 105 % 65 222 167
Total interest income 10,330 9,732 598 6 % 10,257 30,491 29,021
Interest expense:
Interest on demand deposits 136 116 20 17 % 130 388 339
Interest on savings deposits 43 53 (10) (19)% 41 129 162
Interest on certificates of deposit 524 586 (62) (11)% 515 1,636 1,771
Interest on term debt 292 475 (183) (39)% 295 1,369 1,187
Interest on other borrowings 59 47 12 26 % 59 172 143
Total interest expense 1,054 1,277 (223) (17)% 1,040 3,694 3,602
Net interest income 9,276 8,455 821 10 % 9,217 26,797 25,419
Provision for loan and lease losses %
Net interest income after provision for loan and lease losses 9,276 8,455 821 10 % 9,217 26,797 25,419
Noninterest income:
Service charges on deposit accounts 133 52 81 156 % 88 293 153
Payroll and benefit processing fees 133 138 (5) (4)% 139 432 416
Earnings on cash surrender value - life insurance 152 158 (6) (4)% 153 461 482
Gain on investment securities, net 70 137 (67) (49)% 28 192 413
Impairment losses on investment securities % (546) (546)
ATM and point of sale 287 96 191 199 % 335 714 279
Other income 184 227 (43) (19)% 240 799 800
Total noninterest income 959 808 151 19 % 437 2,345 2,543


TABLE 12 - CONTINUED
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
For The Three Months Ended For The Nine Months Ended
September 30, Change June 30, September 30,
2016 2015 $ % 2016 2016 2015
Noninterest expense:
Salaries and related benefits 3,873 3,208 665 21 % 4,086 12,188 10,693
Occupancy and equipment 1,071 714 357 50 % 987 2,847 2,157
Federal Deposit Insurance Corporation insurance premium 176 159 17 11 % 181 513 544
Data processing fees 464 243 221 91 % 374 1,142 736
Professional service fees 303 337 (34) (10)% 470 1,209 1,167
Telecommunications 199 116 83 72 % 199 545 335
Branch acquisition costs % 168 580
Loss on cancellation of interest rate swap % 2,325
Other expenses 1,039 797 242 30 % 1,203 3,445 2,657
Total noninterest expense 7,125 5,574 1,551 28 % 7,668 24,794 18,289
Income before provision for income taxes 3,110 3,689 (579) (16)% 1,986 4,348 9,673
Deferred tax asset write-off % 363
Provision for income taxes 744 1,164 (420) (36)% 430 1,023 2,957
Net income $ 2,366 $ 2,525 $ (159) (6)% $ 1,556 $ 2,962 $ 6,716
Less: Preferred dividends 50 (50) (100)% 150
Income available to common shareholders $ 2,366 $ 2,475 $ (109) (4)% $ 1,556 $ 2,962 $ 6,566
Basic earnings per share $ 0.18 $ 0.18 $ % $ 0.11 $ 0.22 $ 0.49
Average basic shares 13,369 13,340 29 % 13,367 13,366 13,327
Diluted earnings per share $ 0.18 $ 0.18 $ % $ 0.11 $ 0.22 $ 0.49
Average diluted shares 13,439 13,377 62 % 13,425 13,412 13,358


TABLE 13
UNAUDITED CONDENSED CONSOLIDATED
YEAR TO DATE AVERAGE BALANCE SHEETS
(amounts in thousands)
For the Nine Months Ended For the Twelve Months Ended
September 30, September 30, December 31, December 31, December 31,
2016 2015 2015 2014 2013
Earning assets:
Loans $ 744,370 $ 694,082 $ 699,227 $ 625,166 $ 612,780
Taxable securities 119,541 124,199 120,897 147,916 157,486
Tax exempt securities 76,315 76,755 77,089 83,973 92,854
Interest-bearing deposits in other banks 52,930 28,021 30,323 56,465 43,342
Average earning assets 993,156 923,057 927,536 913,520 906,462
Cash and due from banks 15,455 10,832 11,220 11,246 10,624
Premises and equipment, net 14,657 11,738 11,552 12,105 10,337
Other assets 40,942 42,676 42,423 36,936 26,431
Average total assets $ 1,064,210 $ 988,303 $ 992,731 $ 973,807 $ 953,854
Liabilities and shareholders' equity:
Demand - noninterest bearing $ 214,540 $ 151,567 $ 156,578 $ 139,792 $ 122,011
Demand - interest bearing 365,917 276,446 283,105 272,383 244,125
Savings 102,427 92,565 92,659 91,108 92,502
Certificates of deposit 222,286 242,569 238,626 259,445 248,350
Total deposits 905,170 763,147 770,968 762,728 706,988
Repurchase agreements 5,780
Term debt 43,435 91,941 88,874 77,534 107,603
Junior subordinated debentures 10,310 10,310 10,310 15,239 15,465
Other liabilities 13,336 16,719 16,588 15,934 11,825
Average total liabilities 972,251 882,117 886,740 871,435 847,661
Shareholders' equity 91,959 106,186 105,991 102,372 106,193
Average liabilities & shareholders' equity $ 1,064,210 $ 988,303 $ 992,731 $ 973,807 $ 953,854


TABLE 14
UNAUDITED CONDENSED CONSOLIDATED
QUARTERLY AVERAGE BALANCE SHEETS
(amounts in thousands)
For The Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Earning assets:
Loans $ 769,354 $ 742,684 $ 720,795 $ 714,494 $ 705,762
Taxable securities 114,578 124,183 119,917 111,098 115,165
Tax exempt securities 73,952 77,168 77,852 78,081 76,190
Interest-bearing deposits in other banks 61,346 46,097 51,254 37,158 30,430
Average earning assets 1,019,230 990,132 969,818 940,831 927,547
Cash and due from banks 17,018 17,028 12,301 12,372 11,355
Premises and equipment, net 15,941 15,632 12,384 11,001 11,265
Other assets 41,729 41,394 39,700 41,666 41,867
Average total assets $ 1,093,918 $ 1,064,186 $ 1,034,203 $ 1,005,870 $ 992,034
Liabilities and shareholders' equity:
Demand - noninterest bearing $ 240,418 $ 220,377 $ 182,539 $ 171,449 $ 158,232
Demand - interest bearing 390,895 382,811 323,771 302,862 284,508
Savings 107,210 103,990 96,027 92,939 93,230
Certificates of deposit 221,078 223,958 221,836 226,924 235,551
Total deposits 959,601 931,136 824,173 794,174 771,521
Term debt 19,610 19,510 91,444 79,772 86,359
Junior subordinated debentures 10,310 10,310 10,310 10,310 10,310
Other liabilities 11,159 11,913 16,969 16,197 16,140
Average total liabilities 1,000,680 972,869 942,896 900,453 884,330
Shareholders' equity 93,238 91,317 91,307 105,417 107,704
Average liabilities & shareholders' equity $ 1,093,918 $ 1,064,186 $ 1,034,203 $ 1,005,870 $ 992,034

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 banking and financial services through nine 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
John T. Cavender
555 Market Street
San Francisco, CA 94105
(800) 346-5544

Stifel Nicolaus
Perry Wright
1255 East Street, Suite 100
Redding, CA 96001
(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

More From Press Releases