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Table Of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

 

Commission file number 0-25135

 

Bank of Commerce Holdings

 

 

   

California

94-2823865

(State or jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

   

1901 Churn Creek Road Redding, California

96002

(Address of principal executive offices)

(Zip Code)

   

 

Registrant’s telephone number, including area code: (530) 722-3952

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

 Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

(Check One)

 

       

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller Reporting Company ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

 

Yes ☐ No ☒

 

Outstanding shares of Common Stock, no par value, as of April 21, 2016: 13,441,606

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Index to Form 10-Q

 

 

 

 

     
     

Part I. FINANCIAL INFORMATION

 
 

Item 1. Financial Statements

3

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

40

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

66

 

Item 4. Controls and Procedures

66

     

Part II. OTHER INFORMATION

 
 

Item 1. Legal Proceedings

67

 

Item 1a. Risk Factors

67

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

67

 

Item 3. Defaults Upon Senior Securities

67

 

Item 4. Mine Safety Disclosures

67

 

Item 5. Other Information

67

 

Item 6. Exhibits

67

     

SIGNATURES

68

 

  

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Consolidated Balance Sheets (Unaudited)

March 31, 2016 and December 31, 2015

 

   

March 31,

   

December 31,

 

(Amounts in thousands, except share information)

 

2016

   

2015

 

Assets:

               

Cash and due from banks

  $ 14,969     $ 9,730  

Interest-bearing deposits in other banks

    70,781       41,462  

Total cash and cash equivalents

    85,750       51,192  
                 

Securities available-for-sale, at fair value

    174,251       159,030  

Securities held-to-maturity, at amortized cost

    35,357       35,899  
                 

Loans, net of deferred fees and costs

    725,228       717,509  

Allowance for loan and lease losses

    (11,495 )     (11,180 )

Net loans

    713,733       706,329  
                 

Premises and equipment, net

    15,494       11,072  

Other real estate owned

    1,011       1,423  

Life insurance

    22,642       22,485  

Deferred tax asset, net

    8,389       9,760  

Goodwill and core deposit intangibles, net

    2,469        

Other assets

    17,987       18,251  

Total assets

  $ 1,077,083     $ 1,015,441  
                 

Liabilities and shareholders' equity:

               

Liabilities:

               

Demand - noninterest bearing

  $ 212,758     $ 169,507  

Demand - interest bearing

    392,325       315,658  

Savings accounts

    105,828       94,503  

Certificates of deposit

    226,756       224,067  

Total deposits

    937,667       803,735  
                 

Term debt:

               

Principal amount

    19,839       94,917  

Less unamortized debt issuance costs

    (213 )     (223 )

Net term debt

    19,626       94,694  
                 

Junior subordinated debentures

    10,310       10,310  

Other liabilities

    18,762       16,180  

Total liabilities

    986,365       924,919  
                 

Commitments and contingencies (Note 12)

               

Shareholders' equity:

               

Common stock, no par value, 50,000,000 shares authorized: 17,161,096 issued; 13,441,606 outstanding as of March 31, 2016 and 13,385,154 outstanding as of December 31, 2015

    24,325       24,214  

Retained earnings

    65,201       66,562  

Accumulated other comprehensive income (loss)

    1,192       (254 )

Total shareholders' equity

    90,718       90,522  

Total liabilities and shareholders' equity

  $ 1,077,083     $ 1,015,441  

 

 

See accompanying notes to consolidated financial statements.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

 

Consolidated Statements of Operations (Unaudited)

For the three months ended March 31, 2016 and 2015

 

   

For the Three Months Ended

 
   

March 31,

 

(Amounts in thousands, except per share information)

 

2016

   

2015

 

Interest income:

               

Interest and fees on loans

  $ 8,451     $ 7,911  

Interest on taxable securities

    784       945  

Interest on tax-exempt securities

    594       599  

Interest on interest-bearing deposits in other banks

    75       71  

Total interest income

    9,904       9,526  

Interest expense:

               

Interest on demand deposits

    122       116  

Interest on savings deposits

    45       54  

Interest on certificates of deposit

    597       591  

Interest on term debt

    782       349  

Interest on junior subordinated debentures

    54       47  

Total interest expense

    1,600       1,157  

Net interest income

    8,304       8,369  

Provision for loan and lease losses

           

Net interest income after provision for loan and lease losses

    8,304       8,369  

Noninterest income:

               

Service charges on deposit accounts

    72       49  

Fees on payroll and benefit processing

    160       148  

Earnings on cash surrender value - life insurance

    156       165  

Gain on investment securities, net

    94       215  

Other income

    467       277  

Total noninterest income

    949       854  

Noninterest expense:

               

Salaries and related benefits

    4,229       3,910  

Premises and equipment

    789       734  

Write-down of other real estate owned

    55        

Federal Deposit Insurance Corporation insurance premium

    156       207  

Data processing fees

    304       242  

Professional service fees

    436       388  

Branch acquisition costs

    412        

Loss on cancellation of interest rate swap

    2,325        

Other expenses

    1,295       1,112  

Total noninterest expense

    10,001       6,593  

(Loss) income before provision for income taxes

    (748 )     2,630  

Provision for income taxes

    212       829  

Net (loss) income

  $ (960 )   $ 1,801  

Less: Preferred stock dividends

          50  

(Loss) income available to common shareholders

  $ (960 )   $ 1,751  
                 

(Loss) earnings per share - basic

  $ (0.07 )   $ 0.13  

Weighted average shares - basic

    13,360       13,303  

(Loss) earnings per share - diluted

  $ (0.07 )   $ 0.13  

Weighted average shares - diluted

    13,360       13,340  

 

 

See accompanying notes to consolidated financial statements.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES 

Consolidated Statements of Comprehensive Income (Unaudited)

For the three months ended March 31, 2016 and 2015

 

   

For the Three Months Ended

 
   

March 31,

 

(Amounts in thousands)

 

2016

   

2015

 

Net (loss) income

  $ (960 )   $ 1,801  
                 

Available-for-sale securities:

               

Unrealized gains arising during the period

    209       747  

Change in unrealized income tax expense

    (86 )     (307 )

Change in unrealized gains, net of tax

    123       440  
                 

Reclassification adjustment for realized (gains) included in net income

    (94 )     (215 )

Income tax expense

    38       90  

Realized (gains), net of tax

    (56 )     (125 )

Net change in unrealized gains on available-for-sale securities

    67       315  
                 

Held-to-maturity securities:

               

Amortization of held-to-maturity fair value adjustment

    (29 )     (39 )

Income tax expense

    12       16  

Net change in fair value adjustment on securities held-to-maturity, net of tax

    (17 )     (23 )
                 

Derivatives:

               

Unrealized losses arising during the period

    (348 )     (329 )

Change in unrealized tax benefit

    143       134  

Change in unrealized losses, net of tax

    (205 )     (195 )
                 

Reclassification adjustments for losses on derivatives included in net income

    2,721       295  

Income tax benefit

    (1,120 )     (121 )

Reclassification adjustments for net losses included in net income, net of tax

    1,601       174  

Net change in unrealized gains (losses) on derivatives

    1,396       (21 )

Other comprehensive income

    1,446       271  

Comprehensive income – Bank of Commerce Holdings

  $ 486     $ 2,072  

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

 

Consolidated Statements of Shareholders’ Equity

For the twelve months ended December 31, 2015 and three months ended March 31, 2016 (Unaudited)

 

                                   

Accumulated

         
                   

Common

           

Other Comp-

         
   

Preferred

   

Common

   

Stock

   

Retained

   

Income (Loss)

         

(Amounts in thousands except per share information)

 

Amount

   

Shares

   

Amount

   

Earnings

   

Net of Tax

   

Total

 

Balance at January 1, 2015

  $ 19,931       13,294     $ 23,891     $ 59,867     $ (87 )   $ 103,602  

Net Income

                      8,586             8,586  

Other comprehensive loss, net of tax

                            (167 )     (167 )

Comprehensive income

                                  8,419  

Dividend on preferred stock

                      (189 )           (189 )

Dividend on common stock ($0.12 per share)

                      (1,600 )           (1,600 )

Common stock issued under employee plans and related tax benefit

          9       36                   36  

Stock options exercised

          39       156                   156  

Compensation expense associated with stock options

                42                   42  

Compensation expense associated with restricted stock

                89                   89  

Preferred stock redemption

    (20,000 )                 (33 )           (20,033 )

Preferred stock accretion

    69                   (69 )            

Balance at December 31, 2015 (1)

  $       13,342     $ 24,214     $ 66,562     $ (254 )   $ 90,522  

 (1) Excludes 43 unvested restricted shares

 

 

 

                           

Accumulated

         
           

Common

           

Other Comp-

         
   

Common

   

Stock

   

Retained

   

Income (Loss)

         

(Amounts in thousands except per share information)

 

Shares

   

Amount

   

Earnings

   

Net of Tax

   

Total

 

Balance at January 1, 2016

    13,342     $ 24,214     $ 66,562     $ (254 )   $ 90,522  

Net loss

                (960 )           (960 )

Other comprehensive income, net of tax

                      1,446       1,446  

Comprehensive income

                            486  

Dividend on common stock ($0.03 per share)

                (401 )           (401 )

Common stock issued under employee plans and related tax benefit

    25       84                   84  

Compensation expense associated with stock options

          6                   6  

Compensation expense associated with restricted stock

          21                   21  

Balance at March 31, 2016 (1)

    13,367     $ 24,325     $ 65,201     $ 1,192     $ 90,718  

 (1) Excludes 75 unvested restricted shares

 

 

See accompanying notes to consolidated financial statements.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES 

Consolidated Statements of Cash Flows (Unaudited)

For the three months ended March 31, 2016 and March 31, 2015

 

   

For the Three Months Ended

 
   

March 31,

 

(Amounts in thousands)

 

2016

   

2015

 

Cash flows from operating activities:

               

Net (loss) income

  $ (960 )   $ 1,801  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

               

Provision for depreciation and amortization

    432       370  

Amortization of core deposit intangibles

    20        

Amortization of debt issuance costs

    10        

Compensation expense associated with stock options

    6       12  

Compensation expense associated with restricted stock

    21       20  

Net gain on sale of securities available-for-sale

    (94 )     (215 )

Amortization of investment premiums and accretion of discounts, net

    431       471  

Amortization of held-to-maturity fair value adjustments

    (29 )     (39 )

Loss on cancellation of interest rate swap

    2,325        

(Gain) loss on disposal of fixed assets

    (5 )     2  

Write-down of fixed assets

          147  

Write-down of other real estate owned

    55        

Loss (gain) on sale of other real estate owned

    125       (15 )

Decrease in deferred income taxes

    363        

Increase in cash surrender value of life insurance

    (156 )     (165 )

(Decrease) increase in deferred compensation and salary continuation plans

    (18 )     213  

Increase in deferred loan fees and costs

    (114 )     (158 )

Decrease in other assets

    359       560  

Increase (decrease) in other liabilities

    5,353       (1,790 )

Net cash provided by operating activities

    8,123       1,214  
                 

Cash flows from investing activities:

               

Proceeds from maturities and payments of available-for-sale securities

    5,496       7,443  

Proceeds from sale of available-for-sale securities

    19,934       25,215  

Purchases of available-for-sale securities

    (40,930 )     (12,330 )

Proceeds from maturities and payments of held-to-maturity securities

    600       240  

Investment in qualified affordable housing partnerships

    (178 )     (462 )

Net redemption of Federal Home Loan Bank of San Francisco stock

          1,263  

Loan originations, net of principal repayments

    (8,025 )     (27,457 )

Purchase of loan pools

    (11,815 )     (20,587 )

Repayments on loan pools

    12,679       7,503  

Purchase of premises and equipment

    (659 )     (127 )

Proceeds from the sale of other real estate owned

    232       1,701  

Payments to derivative counterparties for the termination of interest rate swaps

    (2,578 )      

Acquisition of branches, net of cash paid

    142,359        

Net cash provided by (used in) investing activities

    117,115       (17,598 )

 

 

See accompanying notes to consolidated financial statements.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES 

Consolidated Statements of Cash Flows (Unaudited) (Continued)

 

   

For the Three Months Ended

 
   

March 31,

 

(Amounts in thousands)

 

2016

   

2015

 

Cash flows from financing activities:

               

Net increase (decrease) in demand deposits and savings accounts

  $ 6,359     $ (35,590 )

Net (decrease) increase in certificates of deposit

    (21,472 )     8,531  

Advances on term debt

    30,000       65,000  

Repayment of term debt

    (105,250 )     (50,000 )

Proceeds from stock options exercised

          146  

Stock issued under employee and director stock purchase plan

    84       36  

Cash dividends paid on preferred stock

          (50 )

Cash dividends paid on common stock

    (401 )      

Net cash used in financing activities

    (90,680 )     (11,927 )

Net increase (decrease) in cash and cash equivalents

    34,558       (28,311 )

Cash and cash equivalents at beginning of year

    51,192       58,422  

Cash and cash equivalents at end of period

  $ 85,750     $ 30,111  

 

 

See accompanying notes to consolidated financial statements.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES 

Consolidated Statements of Cash Flows (Unaudited) (Continued)

For the three months ended March 31, 2016 and March 31, 2015

 

   

For the Three Months Ended

 
   

March 31,

 

(Amounts in thousands)

 

2016

   

2015

 

Supplemental disclosures of cash flow activity:

               

Cash paid during the period for:

               

Income taxes

  $ 300     $ 1,400  

Interest

  $ 1,298     $ 1,160  

Supplemental disclosures of non cash investing activities:

               

Transfer of loans to other real estate owned

  $     $ 2,686  
                 

Changes in unrealized gain on investment securities available-for-sale

  $ 115     $ 535  

Changes in net deferred tax asset related to changes in unrealized gain on investment securities available-for-sale

    (48 )     (220 )

Changes in accumulated other comprehensive income due to changes in unrealized gain on investment securities available-for-sale

  $ 67     $ 315  
                 

Accretion of held-to-maturity from other comprehensive income to interest income

  $ (29 )   $ (39 )

Changes in deferred tax related to accretion of held-to-maturity investment securities

    12       16  

Changes in accumulated other comprehensive income due to accretion of held-to-maturity investment securities

  $ (17 )   $ (23 )
                 

Changes in unrealized gains on derivatives

  $ (348 )   $ (329 )

Changes in net deferred tax asset related to changes in unrealized loss on derivatives

    143       134  

Changes in accumulated other comprehensive income due to changes in unrealized loss on derivatives

  $ (205 )   $ (195 )
                 

Reclassification of earnings from loss on derivatives

  $ 2,721     $ 295  

Changes in net deferred tax asset related to reclassification of earnings from (loss) on derivatives

    (1,120 )     (121 )

Changes in accumulated other comprehensive income due to reclassification of earnings from loss on derivatives

  $ 1,601     $ 174  
                 

Supplemental disclosures of non cash financing activities:

               

Cash dividend declared on common shares and payable after period-end

  $ 401     $ 401  

Cash dividend declared on preferred shares and payable after period-end

  $     $ 50  

Transactions Related to Acquisition:

               

Assets acquired - fair value

  $ 155,228     $  
Goodwill   $ 717     $  

Liabilities assumed - fair value

  $ 149,238      

 

 

See accompanying notes to consolidated financial statements.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Bank of Commerce Holdings (“Company,” “Holding Company,” “we,” or “us”), is a bank holding company (“BHC”) with its principal offices in Redding, California. The Holding Company’s principal business is to serve as a holding company for Redding Bank of Commerce (the “Bank” and together with the Holding Company, the “Company”) which operates under two separate names (Redding Bank of Commerce and Sacramento Bank of Commerce, a division of Redding Bank of Commerce). The Company has an unconsolidated subsidiary in Bank of Commerce Holdings Trust II. The consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, which have been derived from the unaudited interim consolidated financial statements and audited consolidated financial statements, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included and the disclosures made are adequate to make the information not misleading.

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with prevailing practices within the banking and securities industries. In preparing such consolidated financial statements, management is required to make certain estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the Balance Sheets and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan and lease losses (“ALLL”), the valuation of goodwill and Other Real Estate Owned (“OREO”), and fair value measurements. Certain amounts for prior periods have been reclassified to conform to the current financial statement presentation. The results of reclassifications are not considered material and have no effect on previously reported net income or shareholders' equity. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in Bank of Commerce Holdings 2015 Annual Report on Form 10-K. The consolidated results of operations and cash flows for the 2016 interim periods shown in this report are not necessarily indicative of the results for any future interim period or the entire fiscal year.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Holding Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. As of March 31, 2016 and December 31, 2015, the Company had one wholly-owned trust (“Trust”) formed in 2005 to issue trust preferred securities and related common securities. The Company has not consolidated the accounts of the Trust in its Consolidated Financial Statements in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB”) ASC 810, Consolidation (“ASC 810”). As a result, the junior subordinated debentures issued by the Company to the Trust are reflected in our Consolidated Balance Sheets.

 

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

 

In March of 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impacts of this ASU on our consolidated financial statements.

 

In May of 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which creates Topic 606 and supersedes Topic 605, Revenue Recognition. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard is effective for public entities for interim and annual periods beginning after December 15, 2017 as deferred by ASU No. 2015-14; early adoption is not permitted. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. We are currently evaluating the provisions of the ASU to determine the potential impact the new standard will have on our consolidated financial statements.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

NOTE 3. EARNINGS PER SHARE

  

Basic earnings per share excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period, excluding unvested restricted stock awards which do not have voting rights or share in dividends. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that subsequently shared in the earnings of the Holding Company. The computation of diluted earnings per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share.

 

The following is a computation of basic and diluted earnings per share for the three months ended March 31, 2016 and 2015.

 

 

 

   

For the Three Months Ended

 

(Amounts in thousands, except per share information)

 

March 31,

 

Earnings Per Share

 

2016

   

2015

 

Numerators:

               

Net (loss) income

  $ (960 )   $ 1,801  

Less:

               

Preferred stock dividends

          50  

Net (loss) income available to common shareholders

  $ (960 )   $ 1,751  

Denominators:

               

Weighted average number of common shares outstanding - basic

    13,360       13,303  

Effect of potentially dilutive common shares (1)

    0       37  

Weighted average number of common shares outstanding - diluted

    13,360       13,340  

Earnings per common share:

               

Basic

  $ (0.07 )   $ 0.13  

Diluted

  $ (0.07 )   $ 0.13  

Anti-dilutive options not included in diluted earnings per share calculation

    120,700       124,200  
Anti-dilutive restricted shares not included in diluted earnings per share calculation     54,181       22,312  

(1) Represents the effects of the assumed exercise of stock options and vesting of non-participating restricted shares. For periods in which a net loss is reported, there is no effect on the calculation of diluted loss per share because the coversion is anti-dilutive.

  

 

 

 

 

NOTE 4. SECURITIES

 

The following table presents the amortized costs, unrealized gains, unrealized losses and approximate fair values of investment securities as of March 31, 2016, and December 31, 2015.

 

   

As of March 31, 2016

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Estimated

 

(Amounts in thousands)

 

Cost

   

Gain

   

Loss

   

Fair Value

 

Available-for-sale securities:

                               

U.S. government & agencies

  $ 3,841     $ 74     $     $ 3,915  

Obligations of state and political subdivisions

    59,315       1,998       (25 )     61,288  

Residential mortgage backed securities and collateralized mortgage obligations

    51,830       229       (338 )     51,721  

Corporate securities

    23,841       210       (287 )     23,764  

Commercial mortgage backed securities

    14,690       11       (130 )     14,571  

Other asset backed securities

    19,021       94       (123 )     18,992  

Total

  $ 172,538     $ 2,616     $ (903 )   $ 174,251  

Held-to-maturity securities:

                               

Obligations of state and political subdivisions

  $ 35,357     $ 1,206     $ (109 )   $ 36,454  

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

   

As of December 31, 2015

 
           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Estimated

 

(Amounts in thousands)

 

Cost

   

Gain

   

Loss

   

Fair Value

 

Available-for-sale securities:

                               

U.S. government & agencies

  $ 3,886     $ 57     $     $ 3,943  

Obligations of state and political subdivisions

    59,332       1,811       (39 )     61,104  

Residential mortgage backed securities and collateralized mortgage obligations

    32,215       192       (270 )     32,137  

Corporate securities

    33,775       194       (191 )     33,778  

Commercial mortgage backed securities

    12,893       10       (134 )     12,769  

Other asset backed securities

    15,331       82       (114 )     15,299  

Total

  $ 157,432     $ 2,346     $ (748 )   $ 159,030  

Held-to-maturity securities:

                               

Obligations of state and political subdivisions

  $ 35,899     $ 966     $ (220 )   $ 36,645  

 

 

 

The following table presents the maturities of investment securities at March 31, 2016.

 

   

Available-For-Sale

   

Held-To-Maturity

 

(Amounts in thousands)

 

Amortized Cost

   

Fair Value

   

Amortized Cost

   

Fair Value

 

Amounts maturing in:

                               

One year or less

  $ 4,455     $ 4,464     $     $  

One year through five years

    64,660       64,920       1,530       1,574  

Five years through ten years

    46,566       47,647       16,465       17,080  

After ten years

    56,857       57,220       17,362       17,800  

Total

  $ 172,538     $ 174,251     $ 35,357     $ 36,454  

 

The amortized cost and fair value of residential mortgage backed, collateralized mortgage obligations and commercial mortgage securities are presented by their expected average life, rather than contractual maturity, because the underlying loans may be repaid without prepayment penalties.

 

The following table presents the fair value of the securities held for pledging, segregated by purpose, as of March 31, 2016.

 

(Amounts in thousands)

 

Pledged

   

Available To Be Pledged

   

Total Held For Pledging Purposes

 

Public funds collateral

  $ 18,286     $ 10,523     $ 28,809  

Federal Home Loan Bank of San Francisco borrowings

          19,026       19,026  

Total

  $ 18,286     $ 29,549     $ 47,835  

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

The following table presents the cash proceeds from sales of securities and the associated gross realized gains and gross realized losses that have been included in earnings for the three months ended March 31, 2016 and 2015.

 

   

Three Months Ended March 31,

 

(Amounts in thousands)

 

2016

   

2015

 

Proceeds from sales of securities

  $ 19,934     $ 25,215  
                 

Gross realized gains on sales of securities:

               

Obligations of state and political subdivisions

  $ 72     $ 32  

Residential mortgage backed securities and collateralized mortgage obligations

          13  

Corporate securities

    42       82  

Commercial mortgage backed securities

    4       4  

Other asset backed securities

    1       93  

Total gross realized gains on sales of securities

    119       224  
                 

Gross realized losses on sales of securities:

               

Residential mortgage backed securities and collateralized mortgage obligations

          (9 )

Corporate securities

    (25 )      

Total gross realized losses on sales of securities

    (25 )     (9 )

Gain on investment securities, net

  $ 94     $ 215  

 

 

 

Investment securities that were in an unrealized loss position as of March 31, 2016 and December 31, 2015 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position. In the opinion of management, these securities are considered only temporarily impaired due to changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or underlying collateral.

 

   

As of March 31, 2016

 
   

Less Than 12 Months

   

12 Months or More

   

Total

 
   

Fair

   

Unrealized

   

Fair

   

Unrealized

   

Fair

   

Unrealized

 

(Amounts in thousands)

 

Value

   

Losses

   

Value

   

Losses

   

Value

   

Losses

 

Available-for-sale securities:

                                               

Obligations of states and political subdivisions

  $ 5,620     $ (25 )   $     $     $ 5,620     $ (25 )

Residential mortgage backed securities and collateralized mortgage obligations

    21,511       (173 )     7,593       (165 )     29,104       (338 )

Corporate securities

    10,330       (287 )                 10,330       (287 )

Commercial mortgage backed securities

    9,880       (88 )     1,543       (42 )     11,423       (130 )

Other asset backed securities

    9,594       (23 )     2,043       (100 )     11,637       (123 )

Total temporarily impaired securities

  $ 56,935     $ (596 )   $ 11,179     $ (307 )   $ 68,114     $ (903 )

Held-to-maturity securities:

                                               

Obligations of states and political subdivisions

  $ 2,205     $ (8 )   $ 3,024     $ (101 )   $ 5,229     $ (109 )

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

   

As of December 31, 2015

 
   

Less Than 12 Months

   

12 Months or More

   

Total

 
   

Fair

   

Unrealized

   

Fair

   

Unrealized

   

Fair

   

Unrealized

 

(Amounts in thousands)

 

Value

   

Loss

   

Value

   

Loss

   

Value

   

Loss

 

Available-for-sale securities:

                                               

Obligations of states and political subdivisions

  $ 7,682     $ (39 )   $     $     $ 7,682     $ (39 )

Residential mortgage backed securities and collateralized mortgage obligations

    16,279       (210 )     4,931       (60 )     21,210       (270 )

Corporate securities

    18,707       (191 )                 18,707       (191 )

Commercial mortgage backed securities

    7,557       (62 )     1,516       (72 )     9,073       (134 )

Other asset backed securities

    4,734       (13 )     3,430       (101 )     8,164       (114 )

Total temporarily impaired securities

  $ 54,959     $ (515 )   $ 9,877     $ (233 )   $ 64,836     $ (748 )

Held-to-maturity securities:

                                               

Obligations of states and political subdivisions

  $ 1,513     $ (63 )   $ 4,831     $ (157 )   $ 6,344     $ (220 )

 

 

At March 31, 2016, 63 securities were in unrealized loss positions and at December 31, 2015, 59 securities were in unrealized loss positions. For the three months ended March 31, 2016, and year ended December 31, 2015 we did not recognize any other-than-temporary impairment losses.

 

Subsequent Event

 

On April 28, 2016 AgriBank announced that, on July 15, 2016 it will redeem all of the outstanding principal amount of its $500 million 9.125 percent subordinated notes due July 2019. The subordinated notes will be redeemed at 100% of the principal amount together with all accrued and unpaid interest. AgriBank states that the early redemption of the notes is allowable under the terms of the notes, which is disputed by the note holders. At March 31, 2016 we held $3.2 million par value of these notes at a cost basis of $3.8 million. If the redemption takes place as scheduled our loss will be equal to our unamortized premium at the date of the redemption which is expected to be approximately $539 thousand.

 

 

NOTE 5. LOANS

 

Outstanding loan balances consist of the following at March 31, 2016, and December 31, 2015.

 

(Amounts in thousands)

 

March 31,

   

December 31,

 

Loan Portfolio

 

2016

   

2015

 

Commercial

  $ 136,721     $ 132,805  

Commercial real estate:

               

Real estate - construction and land development

    27,554       28,319  

Real estate - commercial non-owner occupied

    247,840       243,374  

Real estate - commercial owner occupied

    154,484       156,299  

Residential real estate:

               

Real estate - residential - Individual Tax Identification Number (“ITIN”)

    48,384       49,106  

Real estate - residential - 1-4 family mortgage

    10,947       11,390  

Real estate - residential - equity lines

    44,327       45,473  

Consumer and other

    53,986       49,873  

Gross loans

    724,243       716,639  

Deferred fees and costs

    985       870  

Loans, net of deferred fees and costs

    725,228       717,509  

Allowance for loan and lease losses

    (11,495 )     (11,180 )

Net loans

  $ 713,733     $ 706,329  

 

 

Gross loan balances in the table above include net purchase discounts of $2.7 million and $2.3 million as of March 31, 2016, and December 31, 2015, respectively.

 

Loans are reported as past due when any portion of the principal and interest are not received by the due date. The days past due will continue to increase for each day until full principal and interest are received (i.e. if payment is not received within 30 days of the due date, the loan will be considered 30 days past due; if payment is not received within 60 days of the due date, the loan will be considered 60 days past due, etc.). Loans that become 90 days past due will be placed in nonaccrual status unless well secured and in the process of collection.

 

 

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

Age analysis of gross loan balances for past due loans, segregated by class of loans, as of March 31, 2016, and December 31, 2015, was as follows.

 

                   

Greater

                           

Recorded

 

(Amounts in thousands)

  30-59     60-89    

Than 90

                           

Investment >

 

Past Due Loans at

 

Days Past

   

Days Past

   

Days Past

   

Total Past

                   

90 Days and

 

March 31, 2016

 

Due

   

Due

   

Due

   

Due

   

Current

   

Total

   

Accruing

 

Commercial

  $ 605     $ 244     $ 623     $ 1,472     $ 135,249     $ 136,721     $  

Commercial real estate:

                                                       

Real estate - construction and land development

                            27,554       27,554        

Real estate - commercial non-owner occupied

                1,197       1,197       246,643       247,840        

Real estate - commercial owner occupied

    368                   368       154,116       154,484        

Residential real estate:

                                                       

Real estate - residential - ITIN

    728       238       881       1,847       46,537       48,384        

Real estate - residential - 1-4 family mortgage

          372       665       1,037       9,910       10,947        

Real estate - residential - equity lines

    291       453             744       43,583       44,327        

Consumer and other

    148       65             213       53,773       53,986        

Total