Exhibit 99.1

 

For Immediate Release:
Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2016

REDDING, California, January 20, 2017 / 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 year ended December 31, 2016. Net income available to common shareholders for the quarter ended December 31, 2016 was $2.3 million or $0.17 per share – diluted, compared with $1.7 million or $0.13 per share – diluted for the same period of 2015. Net income available to common shareholders for the year ended December 31, 2016 was $5.3 million or $0.39 per share –diluted compared with $8.3 million or $0.62 per share – diluted for the same period of 2015.

  

Financial highlights for the fourth quarter of 2016:

 

●	Net income available to common shareholders of $2.3 million for the three months ended December 31, 2016 was an increase of $568 thousand (33%) from $1.7 million available to common shareholders earned during the same period in the prior year.
●	Return on average assets improved to 0.81% for the fourth quarter of 2016 compared to 0.68% for the same period in the prior year.
●	Return on average equity improved to 9.69% for the fourth quarter of 2016 compared to 6.51% for the same period in the prior year.
●	Deposits at December 31, 2016 totaled $1.0 billion, an increase of $29.2 million (12% annualized) since September 30, 2016. This growth was centered in core deposits in our Sacramento marketplace.
●	Gross loans at December 31, 2016 totaled $804.2 million, an increase of $25.2 million (13% annualized) since September 30, 2016. Most of this growth occurred in our Sacramento marketplace and is the result of investments in our SBA division and in our expanded Sacramento commercial banking group.
●	Tangible book value per common share was $6.83 at December 31, 2016 compared to $6.84 at September 30, 2016.

 

Financial highlights for the year ended December 31, 2016:

 

●	Net income available to common shareholders of $5.3 million for the year ended December 31, 2016 was a decrease of $3.0 million (37%) from $8.3 million available to common shareholders earned during 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 0.49% for the year ended December 31, 2016 compared to 0.84% for the prior year.
●	Return on average equity declined to 5.68% for the year ended December 31, 2016 compared to 7.83% for the prior year.
●	Deposits at December 31, 2016 totaled $1.0 billion, an increase of $200.9 million (25%) since December 31, 2015
●	Gross loans at December 31, 2016 totaled $804.2 million, an increase of $87.6 million (12%) since December 31, 2015.
●	Nonperforming assets at December 31, 2016 totaled $12.1 million, a decrease of $3.4 million (22%) compared to December 31, 2015.
●	Net loan loss recoveries of $364 thousand combined with continuing improved asset quality resulted in no provision for loan and lease losses.

 

Randall S. Eslick, President and CEO commented: “It has been a very productive year. As a result of the exceptional efforts of our dedicated and talented employees, we are a much improved company from 12 months ago. The acquisition of five new offices, the restructuring of our balance sheet and our significant growth in both loans and core deposits provide a solid foundation for continued success in 2017.” 

 

  

 

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 Twelve Months Ended
Net income, average assets and		December 31,								September 30,				December 31,
average shareholders' equity		2016				2015				2016				2016				2015
Income available to common shareholders		$	2,297			$	1,729			$	2,366			$	5,259			$	8,295
Average total assets		$	1,126,034			$	1,005,870			$	1,093,918			$	1,079,750			$	992,731
Average total earning assets		$	1,051,387			$	940,831			$	1,019,230			$	1,007,793			$	927,536
Average shareholders' equity		$	94,326			$	105,417			$	93,238			$	92,554			$	105,991
Selected performance ratios
Return on average assets			0.81	%			0.68	%			0.86	%			0.49	%			0.84	%
Return on average equity			9.69	%			6.51	%			10.10	%			5.68	%			7.83	%
Efficiency ratio			73.15	%			73.58	%			69.61	%			81.88	%			67.40	%
Share and per share amounts
Weighted average shares - basic			13,370				13,341				13,369				13,367				13,331
Weighted average shares - diluted			13,476				13,395				13,439				13,425				13,365
Earnings per share - basic		$	0.17			$	0.13			$	0.18			$	0.39			$	0.62
Earnings per share - diluted		$	0.17			$	0.13			$	0.18			$	0.39			$	0.62

 

		At December 31,								At September 30,
Share and per share amounts		2016				2015				2016
Common shares outstanding (1)			13,440				13,385				13,439
Tangible book value per common share		$	6.83			$	6.76			$	6.84
Capital ratios
Bank of Commerce Holdings
Common equity tier 1 capital ratio (2)			9.43	%			10.06	%			9.60	%
Tier 1 capital ratio (2)			10.42	%			11.16	%			10.65	%
Total capital ratio (2)			12.68	%			13.52	%			12.96	%
Tier 1 leverage ratio (2)			9.13	%			10.03	%			9.28	%
Tangible common equity ratio			8.07	%			8.91	%			8.30	%
Redding Bank of Commerce
Common equity tier 1 capital ratio			12.31	%			13.31	%			12.62	%
Tier 1 capital ratio			12.31	%			13.31	%			12.62	%
Total capital ratio			13.55	%			14.56	%			13.87	%
Tier 1 leverage ratio			10.80	%			11.98	%			11.03	%

 

⁽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 capital ratios for 2016 were impacted by increased average total assets, 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 December 31, 2016, the Company had total consolidated assets of $1.1 billion, gross loans of $804.2 million, allowance for loan and lease losses (“ALLL”) of $11.5 million, total deposits of $1.0 billion, and shareholders’ equity of $94.3 million.

 

 

 

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(amounts in thousands) 

 

		At December 31,																								At September 30,
						% of								% of				Change												% of
		2016				Total				2015				Total				Amount				%				2016				Total
Commercial		$	153,844				19	%		$	132,805				19	%		$	21,039				16	%		$	136,235				17	%
Real estate - construction and land development			57,771				7				28,319				4				29,452				104	%			48,365				6
Real estate - commercial non-owner occupied			287,455				36				243,374				33				44,081				18	%			281,977				36
Real estate - commercial owner occupied			151,516				19				156,299				22				(4,783	)			(3	)%			160,474				21
Real estate - residential - ITIN			45,566				6				49,106				7				(3,540	)			(7	)%			46,458				6
Real estate - residential - 1-4 family mortgage			12,866				2				13,640				2				(774	)			(6	)%			12,994				2
Real estate - residential - equity lines			43,512				5				43,223				6				289				1	%			40,139				5
Consumer and other			51,681				6				49,873				7				1,808				4	%			52,377				7
Gross loans			804,211				100	%			716,639				100	%			87,572				12	%			779,019				100	%
Deferred fees and costs			1,324								870								454								1,155
Loans, net of deferred fees and costs			805,535								717,509								88,026								780,174
Allowance for loan and lease losses			(11,544	)							(11,180	)							(364	)							(11,849	)
Net loans		$	793,991							$	706,329							$	87,662							$	768,325
Average yield on loans during the quarter			4.69	%							4.61	%							0.08								4.66	%

 

 

The Company recorded gross loan balances of $804.2 million at December 31, 2016, compared with $716.6 million and $779.0 million at December 31, 2015 and September 30, 2016, respectively, an increase of $87.6 million and $25.2 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 December 31, 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 seven consecutive quarters. See table 8 for additional details of the ALLL.

 

 

  

TABLE 3

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(amounts in thousands) 

 

		At December 31,																								At September 30,
						% of								% of				Change												% of
		2016				Total				2015				Total				Amount				%				2016				Total
Cash and due from banks		$	16,419				6	%		$	9,730				4	%		$	6,689				69	%		$	19,699				7	%
Interest-bearing deposits in other banks			51,988				19				41,462				17				10,526				25	%			65,431				24
Total cash and cash equivalents			68,407				25				51,192				21				17,215				34	%			85,130				31
Investment securities:
U.S. government and agencies			—				0				3,943				2				(3,943	)			(100	)%			—				0
Obligations of state and political subdivisions			59,428				22				61,104				25				(1,676	)			(3	)%			59,952				22
Residential mortgage backed securities and collateralized mortgage obligations			69,604				25				32,137				13				37,467				117	%			54,046				20
Corporate securities			16,116				6				33,778				14				(17,662	)			(52	)%			16,346				6
Commercial mortgage backed securities			15,514				6				12,769				5				2,745				21	%			16,254				6
Other asset backed securities			14,512				5				15,299				6				(787	)			(5	)%			9,842				4
Total investment securities - AFS			175,174				64				159,030				65				16,144				10	%			156,440				58
Obligations of state and political subdivisions - HTM			31,187				11				35,899				14				(4,712	)			(13	)%			31,771				11
Total investment securities - AFS and HTM			206,361				75				194,929				79				11,432				6	%			188,211				69
Total cash, cash equivalents and investment securities		$	274,768				100	%		$	246,121				100	%		$	28,647				12	%		$	273,341				100	%
Average yield on interest bearing due from banks and investment securities during the quarter			1.95	%							2.51	%							(0.56	)							2.11	%

 

 

As of December 31, 2016, we maintained noninterest-bearing cash positions of $16.4 million and interest-bearing deposits in the amount of $52.0 million at the Federal Reserve Bank and correspondent banks. During the fourth quarter of 2016, we deployed liquidity provided by the March 2016 branch acquisition and strong organic deposit growth into loan originations and available for sale securities. For the quarter ended December 31, 2016 compared to the prior quarter a $16.7 million decrease in total cash and cash equivalents and $29.2 million from increased total deposits was used to fund a $25.2 million increase in gross loan balances and an $18.7 million increase in available for sale securities.

 

Available-for-sale investment securities totaled $175.2 million at December 31, 2016, compared with $159.0 million and $156.4 million at December 31, 2015 and September 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 fourth quarter of 2016 we purchased 24 securities with a par value of $31.3 million and weighted average yield of 2.16% and sold four securities with a par value of $4.1 million and weighted average yield of 2.64%. The sales activity on available for sale securities resulted in $52.0 thousand in net realized gains. During the same period, we received $6.0 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 December 31, 2016 and 2015 were $197.2 million and 3.02% compared to $189.2 million and 3.57%, 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 year ended December 31, 2016, or the year ended December 31, 2015.

 

  

  

At December 31, 2016, our net unrealized losses on available-for-sale investment securities were $1.3 million compared with net unrealized gains of $1.6 million and $2.3 million at December 31, 2015 and September 30, 2016, respectively. The decrease in net unrealized gains between September 30, 2016 and December 31, 2016 is primarily due to significant changes in market interest rates over the past three months. 

 

 

TABLE 4

DEPOSITS BY TYPE - UNAUDITED

(amounts in thousands) 

 

		At December 31,																								At September 30,
						% of								% of				Change												% of
		2016				Total				2015				Total				Amount				%				2016				Total
Demand - noninterest bearing		$	270,398				27	%		$	169,507				21	%		$	100,891				60	%		$	254,435				26	%
Demand - interest bearing			405,569				40				315,658				39				89,911				28	%			394,525				40
Total demand			675,967				67				485,165				60				190,802				39	%			648,960				66
Savings			113,309				11				94,503				12				18,806				20	%			110,201				11
Total non-maturing deposits			789,276				78				579,668				72				209,608				36	%			759,161				77
Certificates of deposit			215,390				22				224,067				28				(8,677	)			(4	)%			216,332				23
Total deposits		$	1,004,666				100	%		$	803,735				100	%		$	200,931				25	%		$	975,493				100	%
Average rate on interest bearing deposits during the quarter			0.40	%							0.48	%							(0.08	)							0.39	%
Average rate on all deposits during the quarter			0.29	%							0.38	%							(0.09	)							0.29	%

 

 

Total deposits at December 31, 2016, increased $200.9 million or 25% to $1.0 billion compared to December 31, 2015, and increased $29.2 thousand or 3% compared to September 30, 2016. Total non-maturing deposits increased $209.6 million or 36% compared to the same date a year ago and increased $30.1 million or 4% compared to September 30, 2016. Certificates of deposit decreased $8.7 million or 4% compared to the same date a year ago and decreased $942 thousand or 0.4% compared to September 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 December 31, 2016, the deposits in the acquired branches totaled $145.6 million.

 

TABLE 5

WHOLESALE AND BROKERED DEPOSITS - UNAUDITED

(amounts in thousands) 

 

		At December 31,								At September 30,
		2016				2015				2016
CDARS / ICS reciprocal deposits		$	65,212			$	76,919			$	59,502
Third party brokered time deposits			—				17,509				—
Brokered deposits per Call Report			65,212				94,428				59,502
Online listing service time deposits			48,900				58,462				52,456
Total wholesale and brokered deposits		$	114,112			$	152,890			$	111,958

 

 

In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $65.2 million, $94.4 million and $59.5 million at December 31, 2016, December 31, 2015 and September 30, 2016, respectively.  

 

 

 

INCOME STATEMENT OVERVIEW 

 

 

TABLE 6

SUMMARY INCOME STATEMENT - UNAUDITED

(amounts in thousands, except per share data) 

 

		For The Three Months Ended
		December 31,								Change								September 30,				Change
		2016				2015				Amount				%				2016				Amount				%
Interest income		$	10,518			$	9,732			$	786				8	%		$	10,330			$	188				2	%
Interest expense			1,084				1,381				(297	)			(22	)%			1,054				30				3	%
Net interest income			9,434				8,351				1,083				13	%			9,276				158				2	%
Provision for loan and lease losses			—				—				—				—	%			—				—				—	%
Noninterest income			1,250				640				610				95	%			959				291				30	%
Noninterest expense:
Branch acquisition and balance sheet reconfiguration costs			—				347				(347	)			(100	)%			—				—				—	%
Other noninterest expense			7,815				6,269				1,546				25	%			7,125				690				10	%
Income before provision for income taxes			2,869				2,375				494				21	%			3,110				(241	)			(8	)%
Provision for income taxes			572				505				67				13	%			744				(172	)			(23	)%
Net income		$	2,297			$	1,870			$	427				23	%		$	2,366				(69	)			(3	)%
Less: Preferred stock extinguishment costs			—				102				(102	)			(100	)%			—				—				—	%
Less: Preferred dividends			—				39				(39	)			(100	)%			—				—				—	%
Income available to common shareholders		$	2,297			$	1,729			$	568				33	%		$	2,366			$	(69	)			(3	)%
Basic earnings per share		$	0.17			$	0.13			$	0.04				31	%		$	0.18			$	(0.01	)			(6	)%
Average basic shares			13,370				13,341				29				—	%			13,369				1				—	%
Diluted earnings per share		$	0.17			$	0.13			$	0.04				31	%		$	0.18			$	(0.01	)			(6	)%
Average diluted shares			13,476				13,395				81				1	%			13,439				37				—	%
Dividends declared per common share		$	0.03			$	0.03			$	—				—	%		$	0.03			$	—				—	%

 

 

Fourth Quarter of 2016 Compared With Fourth Quarter of 2015

 

Net income available to common shareholders for the fourth quarter of 2016 increased $568 thousand compared to the fourth quarter of 2015. In the current quarter, net interest income was $1.1 million higher and noninterest income was $610 thousand higher. These positive changes were offset by an increase in noninterest expense of $1.2 million and a provision for income tax that was $67 thousand higher.

 

Net Interest Income

 

Net interest income increased $1.1 million over a year previous.

 

Interest income for the three months ended December 31, 2016 increased $786 thousand or 8% to $10.5 million. Interest and fees on loans increased $882 thousand primarily due to increased average loan balances. Interest on interest bearing deposits due from banks increased $71 thousand while interest on securities decreased $167 thousand.

 

 

 

Interest expense for the fourth quarter of 2016 decreased $297 thousand or 22% to $1.1 million. The net decrease was caused by the following.

 

●

Interest on FHLB term debt decreased $499 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 $223 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 $34 thousand. Interest bearing deposits increased $100.0 million compared to the prior year, but the rate paid on all interest bearing deposits decreased by 9 basis points

 

●

Interest on junior subordinated debentures and other borrowings increased $13 thousand

  

 

Noninterest Income

 

Noninterest income for the three months ended December 31, 2016 increased $610 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 $177 thousand and service charges on deposit accounts by $69 thousand for the quarter ended December 31, 2016 compared to the same period a year ago. Federal Home Loan Bank of San Francisco stock dividends increased $254 thousand compared to the same period a year ago primarily due to a special dividend recorded during the three months ended December 31, 2016.

 

Noninterest Expense

 

Noninterest expense for the three months ended increased $1.2 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. The net increase in noninterest expenses 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 $574 thousand
●	Salaries and occupancy costs for all other locations increased $338 thousand primarily as a result of investment in our Sacramento marketplace commercial banking group
●	Data processing fees increased $253 thousand
●	Telecommunications expense increased $92 thousand
●	ATM processing fees increased $53 thousand as a result of the additional activity at the recently acquired branch and offsite ATM locations
●	Branch acquisition costs decreased $347 thousand

 

Income Tax Provision

 

During the three months ended December 31, 2016, the Company recorded a provision for income taxes of $572 thousand (19.94% of pretax income) compared with a provision for income taxes of $505 million (21.26% of pretax income) for the same period a year ago.  

 

 

Fourth Quarter of 2016 Compared With Third Quarter of 2016

 

Net income available to common shareholders for the fourth quarter of 2016 decreased $69 thousand over the third quarter of 2016. In the current quarter, net interest income was $158 thousand higher, noninterest income was $291 thousand higher and the provision for income taxes decreased $172 thousand. These positive changes were offset by noninterest expenses that were $690 thousand higher.

 

Net Interest Income

 

Net interest income increased $158 thousand over the prior quarter.

 

Interest income for the three months ended December 31, 2016 increased $188 thousand or 2% to $10.5 million compared to the prior quarter. Interest and fees on loans increased $174 thousand due to increased average balances and increased yields. Interest on interest bearing deposits due from banks increased $28 thousand due to increased average balances and increased yields. These positive changes were partially offset by decreased interest on investment securities of $14 thousand.

 

Interest expense for the three months December 31, 2016 increased $30 thousand or 3% to $1.1 million compared to the prior quarter. Average total deposits for the fourth quarter of 2016 increased $30.0 million from the third quarter of 2016. The growth was in low cost core deposits.

 

 

 

Noninterest Income

 

Noninterest income for the three months ended December 31, 2016 increased $291 thousand compared to the prior quarter. During the current quarter Federal Home Loan Bank of San Francisco stock dividends increased $251 thousand primarily due to a special dividend recorded during the three months ended December 31, 2016.

 

Noninterest Expense

 

Noninterest expense for the three months ended December 31, 2016 increased $690 thousand compared to the prior quarter.

 

The increase in noninterest expense was primarily driven by following items:

 

●	Salaries and related benefits costs increased $251 thousand
●	Professional service fees increased $178 thousand
●	Deferred loan origination costs decreased $113 thousand
●	Data processing fees increased $69 thousand
●	Advertising costs increased $73 thousand

 

Income Tax Provision

 

During the three months ended December 31, 2016, we recorded a provision for income taxes of $572 thousand (19.94% of pretax income) compared with a provision for income taxes of $744 thousand (23.92% of pretax income) for the prior quarter. Our income tax provision is composed of two main components: 1) federal and state income taxes based on our income and 2) amortization of our investments in affordable housing partnerships. The decrease in the effective tax rate during the three months ended December 31, 2016 when compared to the prior quarter is due to a decrease in the amortization of our investments in affordable housing partnerships. 

 

 

Earnings Per Share

 

Diluted earnings per share available to common shareholders were $0.17 for the three months ended December 31, 2016 compared with diluted earnings per share available to common shareholders of $0.13 for the same period a year ago, and $0.18 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
		December 31,								Change			September 30,				Change
		2016				2015				Amount			2016				Amount
Yield on average interest earning assets		3.98	%			4.10	%			(0.12)			4.03	%			(0.05)
Interest expense to fund average earning assets		0.41	%			0.58	%			(0.17)			0.41	%			0.00
Net interest margin - nominal		3.57	%			3.52	%			0.05			3.62	%			(0.05)
Yield on average interest earning assets - tax equivalent basis		4.08	%			4.23	%			(0.15)			4.14	%			(0.06)
Interest expense to fund average earning assets		0.41	%			0.58	%			(0.17)			0.41	%			0.00
Net interest margin - tax equivalent basis		3.67	%			3.65	%			0.02			3.73	%			(0.06)
Average earning assets	$	1,051,387			$	940,831			$	110,556		$	1,019,230			$	32,157
Average interest bearing liabilities	$	757,252			$	712,807			$	44,445		$	749,103			$	8,149

 

 

The current quarter net interest margin decreased five basis points to 3.57% as compared to the prior quarter due to decreased yields in the investment portfolio. 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 3.57% for the current quarter compared to 3.52% for the same period a year ago. The 12 basis point decrease in yield on average earning assets has been offset by a 17 basis point decrease in interest expense to fund average earning assets. The decrease in interest income compared to the same quarter in the prior year is due to decreased yields in the investment portfolio and partially offset by increased yields on loans. 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 $29.2 million and $200.9 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 March 2016 branch acquisition and strong organic growth. Our overall cost of total deposits decreased to 0.29% for the quarter ended December 31, 2016 from 0.38% for the same period a year ago and were unchanged from 0.29% 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
		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015
Beginning balance		$	11,849			$	11,864			$	11,495			$	11,180			$	10,891
Provision for loan and lease losses charged to expense			—				—				—				—				—
Loans charged off			(386	)			(357	)			(1,734	)			(307	)			(707	)
Loan loss recoveries			81				342				2,103				622				996
Ending balance		$	11,544			$	11,849			$	11,864			$	11,495			$	11,180

 

		At December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2016				2016				2016				2016				2015
Nonaccrual loans:
Commercial		$	2,749			$	1,710			$	2,149			$	2,563			$	1,994
Real estate - commercial non-owner occupied			1,196				1,196				1,197				1,197				5,488
Real estate - commercial owner occupied			784				800				816				1,190				1,071
Real estate - residential - ITIN			3,576				3,392				3,664				3,705				3,649
Real estate - residential - 1-4 family mortgage			1,914				1,798				1,824				1,742				1,775
Real estate - residential - equity lines			917				942				995				1,270				—
Consumer and other			250				252				266				31				32
Total nonaccrual loans			11,386				10,090				10,911				11,698				14,009
Accruing troubled debt restructured loans:
Commercial			776				726				760				40				49
Real estate - commercial non-owner occupied			808				811				816				821				824
Real estate - residential - ITIN			5,033				5,280				5,336				5,502				5,458
Real estate - residential - equity lines			454				543				548				553				558
Total accruing troubled debt restructured loans			7,071				7,360				7,460				6,916				6,889
All other accruing impaired loans			337				483				550				488				492
Total impaired loans		$	18,794			$	17,933			$	18,921			$	19,102			$	21,390
Gross loans outstanding at period end		$	804,211			$	779,019			$	754,140			$	724,243			$	716,639
Allowance for loan and lease losses as a percent of:
Gross loans			1.44	%			1.52	%			1.57	%			1.59	%			1.56	%
Nonaccrual loans			101.39	%			117.43	%			108.73	%			98.26	%			79.81	%
Impaired loans			61.42	%			66.07	%			62.70	%			60.18	%			52.27	%
Nonaccrual loans to gross loans			1.42	%			1.30	%			1.45	%			1.62	%			1.95	%

 

 

We realized net loan charge offs of $305 thousand in the current quarter compared with net loan loss charge offs of $15 thousand in the prior quarter and net loan recoveries of $289 thousand for the same period a year ago. Charge offs during the fourth quarter of 2016 of $386 thousand were primarily associated with purchased consumer loans, offset by recoveries totaling $81 thousand. 

 

  

 

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 seven consecutive quarters. Our ALLL as a percentage of gross loans was 1.44% as of December 31, 2016 compared to 1.56% as of December 31, 2015 and 1.52% as of September 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 December 31, 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 December 31, 2016, the recorded investment in loans classified as impaired totaled $18.8 million, with a corresponding valuation allowance of $1.5 million compared to impaired loans of $21.4 million with a corresponding valuation allowance of $832 thousand at December 31, 2015 and impaired loans of $17.9 million, with a corresponding valuation allowance of $925 thousand at September 30, 2016. The increase in loans classified as impaired and the corresponding valuation allowance compared to the prior quarter is due to two restructured loans for one commercial relationship. 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 December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2016				2016				2016				2016				2015
Nonaccrual		$	4,995			$	3,795			$	3,785			$	4,516			$	9,015
Accruing			7,071				7,360				7,460				6,916				6,889
Total troubled debt restructurings		$	12,066			$	11,155			$	11,245			$	11,432			$	15,904
Percentage of total gross loans			1.50	%			1.43	%			1.49	%			1.58	%			2.22	%

 

 

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 December 31, 2016, the Company restructured three loans; two to grant a maturity modification and the other to grant a maturity and rate modification. The loans were classified as troubled debt restructurings and two were placed on nonaccrual status. As of December 31, 2016, we had 121 restructured loans that qualified as troubled debt restructurings, of which 112 were performing according to their restructured terms. 

 

 

  

TABLE 10

NONPERFORMING ASSETS - UNAUDITED

(amounts in thousands) 

 

		At December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2016				2016				2016				2016				2015
Total nonaccrual loans		$	11,386			$	10,090			$	10,911			$	11,698			$	14,009
90 days past due and still accruing			—				—				10				—				88
Total nonperforming loans			11,386				10,090				10,921				11,698				14,097
Other real estate owned			759				793				765				1,011				1,423
Total nonperforming assets		$	12,145			$	10,883			$	11,686			$	12,709			$	15,520
Nonperforming loans to gross loans			1.42	%			1.30	%			1.45	%			1.62	%			1.97	%
Nonperforming assets to total assets			1.06	%			0.98	%			1.09	%			1.18	%			1.53	%

 

 

The increase in nonaccrual loans during the fourth quarter of 2016 was associated with one commercial relationship.

 

At December 31, 2016, December 31, 2015 and September 30, 2016, the recorded investment in OREO was $759 thousand, $1.4 million and $793 thousand, respectively. The December 31, 2016 OREO balance consists of five properties, of which two are 1-4 family residential real estate properties in the amount of $66 thousand, two are nonfarm nonresidential properties in the amount of $581 thousand and one is an undeveloped commercial property in the amount of $112 thousand.

 

  

 

TABLE 11

UNAUDITED CONSOLIDATED

BALANCE SHEET

(amounts in thousands, except per share data)

 

			At December 31,				At December 31,				Change								At September 30,
			2016				2015				$				%				2016
Assets:
Cash and due from banks		$	16,419			$	9,730			$	6,689				69	%		$	19,699
Interest-bearing deposits in other banks			51,988				41,462				10,526				25	%			65,431
Total cash and cash equivalents			68,407				51,192				17,215				34	%			85,130
Securities available-for-sale, at fair value			175,174				159,030				16,144				10	%			156,440
Securities held-to-maturity, at amortized cost			31,187				35,899				(4,712	)			(13	)%			31,771
Loans, net of deferred fees and costs			805,535				717,509				88,026				12	%			780,174
Allowance for loan and lease losses			(11,544	)			(11,180	)			(364	)			3	%			(11,849	)
Net loans			793,991				706,329				87,662				12	%			768,325
Premises and equipment, net			16,226				11,072				5,154				47	%			15,930
Other real estate owned			759				1,423				(664	)			(47	)%			793
Life insurance			23,098				22,485				613				3	%			22,946
Deferred taxes			9,542				9,760				(218	)			(2	)%			8,171
Goodwill and core deposit intangibles, net			2,252				—				2,252				100	%			2,307
Other assets			20,356				18,251				2,105				12	%			19,205
Total assets		$	1,140,992			$	1,015,441			$	125,551				12	%		$	1,111,018
Liabilities and shareholders' equity:
Demand - noninterest bearing		$	270,398			$	169,507			$	100,891				60	%		$	254,435
Demand - interest bearing			405,569				315,658				89,911				28	%			394,525
Savings			113,309				94,503				18,806				20	%			110,201
Certificates of deposit			215,390				224,067				(8,677	)			(4	)%			216,332
Total deposits			1,004,666				803,735				200,931				25	%			975,493
Term debt			18,917				94,917				(76,000	)			(80	)%			19,317
Unamortized debt issuance costs			(184	)			(223	)			39				(17	)%			(193	)
Net term debt			18,733				94,694				(75,961	)			(80	)%			19,124
Junior subordinated debentures			10,310				10,310				—				0	%			10,310
Other liabilities			13,177				16,180				(3,003	)			(19	)%			11,798
Total liabilities			1,046,886				924,919				121,967				13	%			1,016,725
Shareholders' equity:
Common stock			24,547				24,214				333				1	%			24,483
Retained earnings			70,218				66,562				3,656				5	%			68,321
Accumulated other comprehensive (loss) income, net of tax			(659	)			(254	)			(405	)			159	%			1,489
Total shareholders' equity			94,106				90,522				3,584				4	%			94,293
Total liabilities and shareholders' equity		$	1,140,992			$	1,015,441			$	125,551				12	%		$	1,111,018
Total interest earning assets		$	1,065,228			$	952,302			$	112,926				12	%		$	1,031,527
Shares outstanding			13,440				13,385												13,439
Tangible book value per share		$	6.83			$	6.76											$	6.84

  

 

 

 

TABLE 12

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data) 

 

			For The Three Months Ended																				For The Twelve Months Ended
			December 31,								Change								September 30,				December 31,
			2016				2015				$				%				2016				2016				2015
Interest income:
Interest and fees on loans		$	9,181			$	8,299			$	882				11	%		$	9,007			$	35,435			$	32,871
Interest on securities			705				795				(90	)			(11	)%			689				2,986				3,284
Interest on tax-exempt securities			522				599				(77	)			(13	)%			552				2,256				2,392
Interest on deposits in other banks			110				39				71				182	%			82				332				206
Total interest income			10,518				9,732				786				8	%			10,330				41,009				38,753
Interest expense:
Interest on demand deposits			135				121				14				12	%			136				523				460
Interest on savings deposits			45				51				(6	)			(12	)%			43				174				213
Interest on certificates of deposit			543				585				(42	)			(7	)%			524				2,179				2,356
Interest on term debt			298				572				(274	)			(48	)%			292				1,667				1,759
Interest on other borrowings			63				52				11				21	%			59				235				195
Total interest expense			1,084				1,381				(297	)			(22	)%			1,054				4,778				4,983
Net interest income			9,434				8,351				1,083				13	%			9,276				36,231				33,770
Provision for loan and lease losses			—				—				—				—	%			—				—				—
Net interest income after provision for loan and lease losses			9,434				8,351				1,083				13	%			9,276				36,231				33,770
Noninterest income:
Service charges on deposit accounts			120				51				69				135	%			133				413				204
Payroll and benefit processing fees			161				139				22				16	%			133				593				555
Earnings on cash surrender value - life insurance			152				159				(7	)			(4	)%			152				613				641
Gain on investment securities, net			52				30				22				73	%			70				244				443
Impairment losses on investment securities			—				—				—				—	%			—				(546	)			—
ATM and point of sale			281				104				177				170	%			287				995				383
Federal Home Loan Bank of San Francisco dividends			353				99				254				257	%			102				644				630
Other income			131				58				73				126	%			82				639				327
Total noninterest income			1,250				640				610				95	%			959				3,595				3,183

  

  

 

TABLE 12 - CONTINUED

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data) 

 

		For The Three Months Ended																				For The Twelve Months Ended
		December 31,								Change								September 30,				December 31,
		2016				2015				$				%				2016				2016				2015
Noninterest expense:
Salaries and related benefits			4,237				3,610				627				17	%			3,873				16,425				14,303
Occupancy and equipment			1,022				737				285				39	%			1,071				3,869				2,894
Federal Deposit Insurance Corporation insurance premium			102				173				(71	)			(41	)%			176				615				717
Data processing fees			533				280				253				90	%			464				1,675				1,016
Professional service fees			481				461				20				4	%			303				1,690				1,628
Telecommunications			206				114				92				81	%			199				751				449
Branch acquisition costs			—				347				(347	)			(100	)%			—				580				347
Loss on cancellation of interest rate swap			—				—				—				—	%			—				2,325				—
Other expenses			1,234				894				340				38	%			1,039				4,679				3,551
Total noninterest expense			7,815				6,616				1,199				18	%			7,125				32,609				24,905
Income before provision for income taxes			2,869				2,375				494				21	%			3,110				7,217				12,048
Deferred tax asset write-off			—				—				—				—	%			—				363				—
Provision for income taxes			572				505				67				13	%			744				1,595				3,462
Net income		$	2,297			$	1,870			$	427				23	%		$	2,366			$	5,259			$	8,586
Less: Preferred stock extinguishment costs			—				102				(102	)			(100	)%			—				—				102
Less: Preferred dividends			—				39				(39	)			(100	)%			—				—				189
Income available to common shareholders		$	2,297			$	1,729			$	568				33	%		$	2,366			$	5,259			$	8,295
Basic earnings per share		$	0.17			$	0.13			$	0.04				31	%		$	0.18			$	0.39			$	0.62
Average basic shares			13,370				13,341				29				—	%			13,369				13,367				13,331
Diluted earnings per share		$	0.17			$	0.13			$	0.04				31	%		$	0.18			$	0.39			$	0.62
Average diluted shares			13,476				13,395				81				1	%			13,439				13,425				13,365

  

  

 

 

 

TABLE 13

UNAUDITED CONDENSED CONSOLIDATED

ANNUAL AVERAGE BALANCE SHEETS

(amounts in thousands)

 

		For The Twelve Months Ended
		December 31,				December 31,				December 31,				December 31,
		2016				2015				2014				2013
Earning assets:
Loans		$	752,938			$	699,227			$	625,166			$	612,780
Taxable securities			120,884				120,897				147,916				157,486
Tax exempt securities			75,303				77,089				83,973				92,854
Interest-bearing deposits in other banks			58,668				30,323				56,465				43,342
Average earning assets			1,007,793				927,536				913,520				906,462
Cash and due from banks			15,831				11,220				11,246				10,624
Premises and equipment, net			15,078				11,552				12,105				10,337
Other assets			41,048				42,423				36,936				26,431
Average total assets		$	1,079,750			$	992,731			$	973,807			$	953,854
Liabilities and shareholders' equity:
Demand - noninterest bearing		$	226,368			$	156,578			$	139,792			$	122,011
Demand - interest bearing			374,170				283,105				272,383				244,125
Savings			104,771				92,659				91,108				92,502
Certificates of deposit			221,074				238,626				259,445				248,350
Total deposits			926,383				770,968				762,728				706,988
Repurchase agreements			—				—				—				5,780
Term debt, net			37,286				88,874				77,534				107,603
Junior subordinated debentures			10,310				10,310				15,239				15,465
Other liabilities			13,217				16,588				15,934				11,825
Average total liabilities			987,196				886,740				871,435				847,661
Shareholders' equity			92,554				105,991				102,372				106,193
Average liabilities & shareholders' equity		$	1,079,750			$	992,731			$	973,807			$	953,854

  

 

 

TABLE 14

UNAUDITED CONDENSED CONSOLIDATED

QUARTERLY AVERAGE BALANCE SHEETS

(amounts in thousands)

 

		For The Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2016				2016				2016				2016				2015
Earning assets:
Loans		$	778,458			$	769,354			$	742,684			$	720,795			$	714,494
Taxable securities			124,881				114,578				124,183				119,917				111,098
Tax exempt securities			72,288				73,952				77,168				77,852				78,081
Interest-bearing deposits in other banks			75,760				61,346				46,097				51,254				37,158
Average earning assets			1,051,387				1,019,230				990,132				969,818				940,831
Cash and due from banks			16,953				17,018				17,028				12,301				12,372
Premises and equipment, net			16,331				15,941				15,632				12,384				11,001
Other assets			41,363				41,729				41,394				39,700				41,666
Average total assets		$	1,126,034			$	1,093,918			$	1,064,186			$	1,034,203			$	1,005,870
Liabilities and shareholders' equity:
Demand - noninterest bearing		$	261,600			$	240,418			$	220,377			$	182,539			$	171,449
Demand - interest bearing			398,749				390,895				382,811				323,771				302,862
Savings			111,755				107,210				103,990				96,027				92,939
Certificates of deposit			217,463				221,078				223,958				221,836				226,924
Total deposits			989,567				959,601				931,136				824,173				794,174
Term debt			18,975				19,610				19,510				91,444				79,772
Junior subordinated debentures			10,310				10,310				10,310				10,310				10,310
Other liabilities			12,856				11,159				11,913				16,969				16,197
Average total liabilities			1,031,708				1,000,680				972,869				942,896				900,453
Shareholders' equity			94,326				93,238				91,317				91,307				105,417
Average liabilities & shareholders' equity		$	1,126,034			$	1,093,918			$	1,064,186			$	1,034,203			$	1,005,870

  

 

  

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	Stifel Nicolaus
One Embarcadero Center	Perry Wright
Suite 650	1255 East Street, Suite 100
San Francisco, California 94111	Redding, CA 96001
(415) 616-8935	(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

 

 

19