Bank of Commerce Holdings - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - Bank of Commerce Holdings	boch20170719_8k.htm

Exhibit 99.1

(NASDAQ: BOCH)

For Immediate Release:

Bank of Commerce Holdings Announces Results for the Second Quarter of 2017

REDDING, California, July 21, 2017- / GLOBE NEWSWIRE— Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.2 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter and the six months ended June 30, 2017. Net income for the quarter ended June 30, 2017 was $2.2 million or $0.15 per share – diluted, compared with net income of $1.6 million or $0.11 per share – diluted for the same period of 2016. Net income for the six months ended June 30, 2017 was $4.5 million or $0.31 per share – diluted compared with $596 thousand or $0.04 per share – diluted for the same period of 2016.

On May 10, 2017, the Company completed the sale of 2,738,096 shares of its common stock at a public offering price of $10.50 per share and received net proceeds of $26.8 million. Randall S. Eslick, President and CEO commented “The proceeds from our successful stock offering in May will support lending and investment activities, support or fund acquisitions of other institutions or branches as and if such transactions become available, or repay certain borrowings. In addition, as a result of the increase in our market capitalization, we are now listed on the Russell 2000 which should increase our corporate profile and generate more interest amongst institutional investors.”

Financial highlights for the second quarter of 2017:

●	Net income of $2.2 million or $0.15 per share – diluted for the three months ended June 30, 2017 was an increase of $653 thousand (42%) from $1.6 million or $0.11 per share – diluted earned during the same period in the prior year.

●	Return on average assets improved to 0.76% for the second quarter of 2017 compared to 0.59% for the same period in the prior year.

●	Return on average equity improved to 7.85% for the second quarter of 2017 compared to 6.85% for the same period in the prior year.

●	Net interest income increased $958 thousand (10%) to $10.2 million for the second quarter of 2017 compared to $9.2 million for the same period in the prior year.

●	Average deposits for the three months ended June 30, 2017 totaled $1.0 billion, an increase of $3.3 million (1% annualized) compared to average deposits for the prior quarter.

●	Average loans for the three months ended June 30, 2017 totaled $821.3 million, an increase of $14.5 million (7% annualized) compared to average loans for the prior quarter.

●	Average earning assets for the three months ended June 30, 2017 totaled $1.1 billion, an increase of $22.6 million (8% annualized) compared to average earning assets for the prior quarter.

●	Nonperforming assets at June 30, 2017 totaled $10.7 million or 0.88% of total assets, a decrease of $140 thousand (5% annualized) since March 31, 2017.

●	Tangible book value per common share was $7.61 at June 30, 2017 compared to $6.97 at March 31, 2017.

Financial highlights for the six months ended June 30, 2017:

●

Net income of $4.5 million or $0.31 per share – diluted for the six months ended June 30, 2017 was an increase of $3.9 million (648%) from $596 thousand or $0.04 per share – diluted earned during the same period in the prior year. Net income for 2016 was negatively impacted by $3.0 million of branch acquisition and balance sheet restructuring costs, a $546 thousand other-than-temporary-impairment of an investment security and the write-off of a $363 thousand deferred tax asset.

●	Return on average assets improved to 0.78% for the six months ended June 30, 2017 compared to 0.11% for the same period in the prior year.

●	Return on average equity improved to 8.66% for the six months ended June 30, 2017 compared to 1.31% for the same period in the prior year.

●	Net interest income increased $2.4 million (14%) to $19.9 million for the six months ended June 30, 2017 compared to $17.5 million for the same period in the prior year.

(NASDAQ: BOCH)

●	Average deposits for the six months ended June 30, 2017 totaled $1.0 billion, an increase of $136.2 million (16%) compared to average deposits for the same period in the prior year.

●	Average loans for the six months ended June 30, 2017 totaled $814.1 million, an increase of $82.4 million (11%) compared to average loans for the same period in the prior year.

●	Average earning assets totaled $1.1 billion for the six months ended June 30, 2017, an increase of $106.6 million (11%) compared to average earning assets for the same period in the prior year.

●	Nonperforming assets at June 30, 2017 totaled $10.7 million or 0.88% of total assets, a decrease of $1.5 million (24% annualized) compared to December 31, 2016.

Randall S. Eslick, President and CEO commented: “We are very pleased with the growth during the second quarter. All deposit growth was in core deposits and we continue to reduce our reliance on time deposits. Loan growth, combined with the improving deposit mix is reflected in the enhancement to our net interest margin and the 4.5% growth in net interest income.”

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, 2016 under the heading “Risk Factors” and to 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.

(NASDAQ: BOCH)

TABLE 1

SELECTED FINANCIAL INFORMATION - UNAUDITED

(amounts in thousands except per share data)

	For The Three Months Ended									For The Six Months Ended
Net income, average assets and	June 30,						March 31,			June 30,
average shareholders' equity	2017			2016			2017			2017			2016
Net income	$	2,209		$	1,556		$	2,252		$	4,461		$	596
Average total assets	$	1,170,447		$	1,064,186		$	1,148,305		$	1,159,438		$	1,049,192
Average total earning assets	$	1,097,644		$	990,132		$	1,075,039		$	1,086,404		$	979,976
Average shareholders' equity	$	112,855		$	91,317		$	94,820		$	103,888		$	91,312

Selected performance ratios
Return on average assets		0.76	%		0.59	%		0.80	%		0.78	%		0.11	%
Return on average equity		7.85	%		6.85	%		9.63	%		8.66	%		1.31	%
Efficiency ratio		69.13	%		79.43	%		71.49	%		70.32	%		93.45	%

Share and per share amounts
Weighted average shares - basic		15,014			13,367			13,416			14,220			13,364
Weighted average shares - diluted		15,113			13,425			13,521			14,321			13,408
Earnings per share - basic	$	0.15		$	0.11		$	0.17		$	0.31		$	0.04
Earnings per share - diluted	$	0.15		$	0.11		$	0.17		$	0.31		$	0.04

	At June 30,						At March 31,
Share and per share amounts	2017			2016			2017
Common shares outstanding ⁽¹⁾		16,260			13,439			13,517
Tangible book value per common share	$	7.61		$	6.71		$	6.97

Capital ratios
Bank of Commerce Holdings ⁽²⁾
Common equity tier 1 capital ratio⁽³⁾		12.55	%		9.69	%		9.71	%
Tier 1 capital ratio ⁽³⁾		13.56	%		10.77	%		10.72	%
Total capital ratio ⁽³⁾		15.83	%		13.11	%		13.00	%
Tier 1 leverage ratio ⁽³⁾		11.38	%		9.34	%		9.09	%
Tangible common equity ratio		10.23	%		8.44	%		8.27	%

Redding Bank of Commerce
Common equity tier 1 capital ratio ⁽³⁾		12.66	%		12.80	%		12.59	%
Tier 1 capital ratio ⁽³⁾		12.66	%		12.80	%		12.59	%
Total capital ratio ⁽³⁾		13.91	%		14.05	%		13.84	%
Tier 1 leverage ratio ⁽³⁾		10.64	%		11.14	%		10.67	%

⁽¹⁾ Includes unvested restricted shares issued in accordance with the Company's equity incentive plan.

⁽²⁾ Capital Ratios for the Company include the benefit of $26.8 million net proceeds from the sale of 2,738,096 shares of common stock in the second quarter of 2017.

⁽³⁾ 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 intangible and $665 thousand of goodwill recorded in conjunction with the acquisition of five branches in March of 2016.

(NASDAQ: BOCH)

BALANCE SHEET OVERVIEW

As of June 30, 2017, the Company had total consolidated assets of $1.2 billion, gross loans of $815.4 million, allowance for loan and lease losses (“ALLL”) of $11.7 million, total deposits of $1.0 billion, and shareholders’ equity of $126.0 million.

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(amounts in thousands)

	At June 30,																		At March 31,
				% of						% of			Change									% of
	2017			Total			2016			Total			Amount			%			2017			Total
Commercial	$	152,204			19	%	$	150,410			20	%	$	1,794			1	%	$	145,635			19	%
Real estate - construction and land development		22,275			3			31,169			4			(8,894	)		(29	)%		25,241			3
Real estate - commercial non-owner occupied		310,995			38			246,430			33			64,565			26	%		311,203			38
Real estate - commercial owner occupied		184,868			23			169,763			23			15,105			9	%		179,752			23
Real estate - residential - ITIN		43,229			5			47,188			6			(3,959	)		(8	)%		44,211			5
Real estate - residential - 1-4 family mortgage		18,904			2			16,806			2			2,098			12	%		19,710			2
Real estate - residential - equity lines		32,133			4			38,027			5			(5,894	)		(15	)%		33,019			4
Consumer and other		50,780			6			54,347			7			(3,567	)		(7	)%		51,423			6
Gross loans		815,388			100	%		754,140			100	%		61,248			8	%		810,194			100	%
Deferred fees and costs		1,541						1,028						513						1,446
Loans, net of deferred fees and costs		816,929						755,168						61,761						811,640
Allowance for loan and lease losses		(11,688	)					(11,864	)					176						(11,641	)
Net loans	$	805,241					$	743,304					$	61,937					$	799,999

Average yield on loans during the quarter		4.77	%					4.76	%					0.01						4.72	%

The Company recorded gross loan balances of $815.4 million at June 30, 2017, compared with $754.1 million and $810.2 million at June 30, 2016 and March 31, 2017, respectively, an increase of $61.2 million and $5.2 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 and is the result of investments in our SBA division and in our expanded Sacramento commercial banking group.

Average loan balances were $821.3 million for the quarter ended June 30, 2017, compared with $742.7 million and $806.8 million for the quarters ended June 30, 2016 and March 31, 2017, respectively, an increase of $78.6 million or 11% and $14.5 million or 7% annualized, respectively.

(NASDAQ: BOCH)

TABLE 3

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(amounts in thousands)

	At June 30,																		At March 31,
				% of						% of			Change									% of
	2017			Total			2016			Total			Amount			%			2017			Total

Cash and due from banks	$	23,420			7	%	$	14,695			6	%	$	8,725			59	%	$	18,315			7	%
Interest-bearing deposits in other banks		73,434			22			51,345			19			22,089			43	%		42,744			16
Total cash and cash equivalents		96,854			29			66,040			25			30,814			47	%		61,059			23

Investment securities:
U.S. government and agencies		24,231			7			12,209			5			12,022			98	%		12,496			5
Obligations of state and political subdivisions		58,400			17			59,015			23			(615	)		(1	)%		55,663			20
Residential mortgage backed securities and collateralized mortgage obligations		91,375			28			45,016			17			46,359			103	%		82,392			30
Corporate securities		8,312			2			22,313			9			(14,001	)		(63	)%		10,448			4
Commercial mortgage backed securities		23,421			7			14,865			6			8,556			58	%		16,522			6
Other asset backed securities		3,870			1			4,488			1			(618	)		(14	)%		4,013			1
Total investment securities - AFS		209,609			62			157,906			61			51,703			33	%		181,534			66

Obligations of state and political subdivisions - HTM		31,329			9			35,415			14			(4,086	)		(12	)%		31,257			11
Total investment securities - AFS and HTM		240,938			71			193,321			75			47,617			25	%		212,791			77
Total cash, cash equivalents and investment securities	$	337,792			100	%	$	259,361			100	%	$	78,431			30	%	$	273,850			100	%
Average yield on interest-bearing due from banks and investment securities during the quarter		2.27	%					2.37	%					(0.10	)					2.17	%

As of June 30, 2017, we maintained noninterest-bearing cash positions of $23.4 million and interest-bearing deposits of $73.4 million at the Federal Reserve Bank and correspondent banks. Cash balances for the second quarter of 2017 included $26.8 million of net proceeds received from the sale of common stock. During the second quarter of 2017, we deployed liquidity provided by the sale of common stock and strong organic deposit growth primarily into available-for-sale securities and interest-bearing deposits at other banks.

Available-for-sale investment securities totaled $209.6 million at June 30, 2017, compared with $157.9 million and $181.5 million at June 30, 2016 and March 31, 2017, respectively. Our available-for-sale investment portfolio provides us with a secondary source of liquidity to fund higher yielding asset opportunities, such as loan originations. During the second quarter of 2017, we purchased 31 securities with a par value of $43.7 million and weighted average yield of 2.50% and sold eight securities with a par value of $12.6 million and weighted average yield of 1.94%. The sales activity on available-for-sale securities resulted in $35 thousand in net realized gains. During the same period, we received $5.5 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 June 30, 2017 and 2016 were $217.6 million and 3.10% compared to $201.4 million and 3.39%, respectively.

(NASDAQ: BOCH)

At June 30, 2017, our net unrealized gains on available-for-sale investment securities were $682 thousand compared with net unrealized gains of $2.6 million and net unrealized losses of $891 thousand at June 30, 2016 and March 31, 2017, respectively. The decrease in net unrealized gains from June 30, 2016 and June 30, 2017 is primarily due to significant changes in market interest rates.

TABLE 4

DEPOSITS BY TYPE - UNAUDITED

(amounts in thousands)

	At June 30,																		At March 31,
				% of						% of			Change									% of
	2017			Total			2016			Total			Amount			%			2017			Total
Demand - noninterest-bearing	$	303,560			29	%	$	224,467			24	%	$	79,093			35	%	$	270,412			27	%
Demand - interest-bearing		426,798			41			385,609			41			41,189			11	%		407,784			41
Total demand		730,358			70			610,076			65			120,282			20	%		678,196			68

Savings		109,472			10			105,228			11			4,244			4	%		112,738			11
Total non-maturing deposits		839,830			80			715,304			76			124,526			17	%		790,934			79

Certificates of deposit		206,395			20			222,252			24			(15,857	)		(7	)%		213,556			21
Total deposits	$	1,046,225			100	%	$	937,556			100	%	$	108,669			12	%	$	1,004,490			100	%

Average rate on interest-bearing deposits during the quarter		0.42	%					0.39	%					0.03						0.39	%
Average rate on all deposits during the quarter		0.31	%					0.30	%					0.01						0.29	%

Total deposits at June 30, 2017, increased $108.7 million or 12% to $1.0 billion compared to June 30, 2016, and increased $41.7 million or 17% annualized compared to March 31, 2017. Total non-maturing deposits increased $124.5 million or 17% compared to the same date a year ago and increased $48.9 million or 25% annualized compared to March 31, 2017. Certificates of deposit decreased $15.9 million or 7% compared to the same date a year ago and decreased $7.2 million or 13% annualized compared to March 31, 2017.

TABLE 5
WHOLESALE AND BROKERED DEPOSITS - UNAUDITED
(amounts in thousands)

	At June 30,				At March 31,
	2017		2016		2017
CDARS / ICS reciprocal brokered deposits	$	56,803	$	54,783	$	55,565
Online listing service wholesale time deposits		42,709		54,396		47,429
Total wholesale and brokered deposits	$	99,512	$	109,179	$	102,994

In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $56.8 million, $54.8 million and $55.6 million at June 30, 2017, June 30, 2016 and March 31, 2017, respectively.

(NASDAQ: BOCH)

INCOME STATEMENT OVERVIEW

TABLE 6

SUMMARY INCOME STATEMENT - UNAUDITED

(amounts in thousands, except per share data)

	For The Three Months Ended
	June 30,				Change						March 31,		Change
	2017		2016		Amount			%			2017		Amount			%
Interest income	$	11,320	$	10,257	$	1,063			10	%	$	10,817	$	503			5	%
Interest expense		1,145		1,040		105			10	%		1,083		62			6	%
Net interest income		10,175		9,217		958			10	%		9,734		441			5	%
Provision for loan and lease losses		300		—		300			100	%		200		100			100	%
Noninterest income		983		437		546			125	%		1,542		(559	)		(36	)%
Noninterest expense:
Branch acquisition and balance sheet reconfiguration costs		—		168		(168	)		(100	)%		—		—			—	%
Other noninterest expense		7,714		7,500		214			3	%		8,061		(347	)		(4	)%
Income before provision for income taxes		3,144		1,986		1,158			58	%		3,015		129			4	%
Provision for income taxes		935		430		505			117	%		763		172			23	%
Net income	$	2,209	$	1,556	$	653			42	%	$	2,252	$	(43	)		(2	)%

Basic earnings per share	$	0.15	$	0.11	$	0.04			36	%	$	0.17	$	(0.02	)		(12	)%
Average basic shares		15,014		13,367		1,647			12	%		13,416		1,598			12	%
Diluted earnings per share	$	0.15	$	0.11	$	0.04			36	%	$	0.17	$	(0.02	)		(12	)%
Average diluted shares		15,113		13,425		1,688			13	%		13,521		1,592			12	%
Dividends declared per common share	$	0.03	$	0.03	$	—			—	%	$	0.03	$	—			—	%

Second Quarter of 2017 Compared With Second Quarter of 2016

Net income for the second quarter of 2017 increased $653 thousand compared to the second quarter of 2016. In the current quarter, net interest income was $958 thousand higher and noninterest income was $546 thousand higher. These positive changes were offset by an increase in the provision for loan and lease losses of $300 thousand, noninterest expense that was $46 thousand higher and a provision for income taxes that was $505 thousand higher.

Net Interest Income

Net interest income increased $958 thousand compared to the same period a year ago.

Interest income for the three months ended June 30, 2017 increased $1.1 million or 10% to $11.3 million. Interest and fees on loans increased $962 thousand primarily due to increased average loan balances. Interest on securities increased $10 thousand and interest on interest-bearing deposits due from banks increased $91 thousand.

Interest expense for the second quarter of 2017 increased $105 thousand or 10% to $1.1 million. The increase was primarily caused by an increase in the average rate paid on interest-bearing deposits.

(NASDAQ: BOCH)

Provision for loan and lease loss

During the three months ended June 30, 2017, the Company recorded a provision for loan and lease losses of $300 thousand reflecting growth in the loan portfolio. There was no provision for loan and lease losses during the second quarter of 2016. Average loans for the quarter ended June 30, 2017 totaled $821.3 million, an increase of $78.6 million (11%) compared to the same quarter a year ago.

Noninterest Income

Noninterest income for the three months ended June 30, 2017 increased $546 thousand compared to the second quarter for 2016. Noninterest income for 2016 was negatively impacted by the $546 thousand other-than-temporary-impairment of a bond investment.

Noninterest Expense

Noninterest expense for the three months ended June 30, 2017 increased $46 thousand compared to the same period a year previous. The increase was primarily due to termination and write-off of a $137 thousand software development project and data processing fees that increased $76 thousand. In 2017, branch acquisition and balance sheet reconfiguration costs of $168 thousand recorded in the same period a year previous did not recur.

Income Tax Provision

During the three months ended June 30, 2017, the Company recorded a provision for income taxes of $935 thousand (29.7% effective tax rate) compared with a provision for income taxes of $430 thousand (21.7% effective tax rate) for the same period a year ago. The Company’s effective tax rate has increased as muni income, tax credits and permanent deductions arising from investments in low income housing partnerships comprise a smaller percentage of pre-tax income.

Second Quarter of 2017 Compared With First Quarter of 2017

Net income for the second quarter of 2017 decreased $43 thousand compared to the first quarter of 2017. Net income for the three months ended March 31, 2017 included life insurance death benefit proceeds of $502 thousand that were not subject to income tax. In the current quarter, net interest income was $441 thousand higher and noninterest expenses were $347 thousand lower. These positive changes were offset by an increase in the provision for loan and lease losses of $100 thousand, noninterest income that was $559 thousand lower (a result of the life insurance death benefit proceeds) and a provision for income taxes that was $172 thousand higher.

Net Interest Income

Net interest income increased $441 thousand over the prior quarter.

Interest income for the three months ended June 30, 2017 increased $503 thousand or 5% to $11.3 million compared to the prior quarter. Interest and fees on loans increased $374 thousand due to increased average balances and increased yields. Interest on investment securities increased $87 thousand due to increased average balances and increased yields. Interest on interest-bearing deposits due from banks increased $42 thousand due to increased yields.

Interest expense for the three months ended June 30, 2017 increased $62 thousand or 6% to $1.1 million compared to the prior quarter. Interest paid on deposits increased from 29 basis points to 31 basis points.

Provision for loan and lease loss

During the three months ended June 30, 2017, the Company recorded a provision for loan and lease losses of $300 thousand compared with a provision for loan lease losses of $200 thousand for the prior quarter. Average loans for the quarter ended June 30, 2017 totaled $821.3 million, an increase of $14.5 million (7% annualized) compared to the prior quarter.

Noninterest Income

Noninterest income for the three months ended June 30, 2017 decreased $559 thousand compared to the prior quarter. During the current quarter, dividends on Federal Home Loan Bank of San Francisco stock decreased $49 thousand. During the prior quarter, we recognized income from life insurance death benefit proceeds of $502 thousand.

(NASDAQ: BOCH)

Noninterest Expense

Noninterest expense for the three months ended June 30, 2017 decreased $347 thousand compared to the prior quarter.

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

●	Employee incentive payments decreased $190 thousand

●	Employee vacation accrual costs decreased $183 thousand

●	Other salaries and related benefits costs decreased $118 thousand

●	Payroll tax expenses decreased $221 thousand

These positive items were partially offset by the termination and write-off of a $137 thousand software development project and Nasdaq / transfer agent costs which increased $62 thousand.

Income Tax Provision

During the three months ended June 30, 2017, we recorded a provision for income taxes of $935 thousand (29.74% of pretax income) compared with a provision for income taxes of $763 thousand (25.31% of pretax income) for the prior quarter. Life insurance death benefits of $502 thousand recorded during the previous quarter are not subject to income tax, and if excluded from pretax income, the effective tax rate would have been 30.36%.

Earnings Per Share

Diluted earnings per share were $0.15 for the three months ended June 30, 2017 compared with diluted earnings per share of $0.11 for the same period a year ago and diluted earnings per share of $0.17 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in table 6 above.

(NASDAQ: BOCH)

TABLE 7a

NET INTEREST MARGIN - UNAUDITED

(amounts in thousands)

	For The Three Months Ended
	June 30, 2017							June 30, 2016							March 31, 2017
	Average				Yield /			Average				Yield /			Average				Yield /
(Amounts in thousands)	Balance		Interest⁽¹⁾		Rate ⁽⁵⁾			Balance		Interest⁽¹⁾		Rate ⁽⁵⁾			Balance		Interest⁽¹⁾		Rate ⁽⁵⁾
Interest-earning assets:
Net loans ⁽²⁾	$	821,321	$	9,758		4.77	%	$	742,684	$	8,796		4.76	%	$	806,793	$	9,384		4.72	%
Taxable securities		143,705		872		2.43	%		124,183		808		2.62	%		137,582		789		2.33	%
Tax-exempt securities		73,927		534		2.90	%		77,168		588		3.06	%		73,524		530		2.92	%
Interest-bearing deposits in other banks		58,691		156		1.07	%		46,097		65		0.57	%		57,140		114		0.81	%
Average interest-earning assets		1,097,644		11,320		4.14	%		990,132		10,257		4.17	%		1,075,039		10,817		4.08	%
Cash and due from banks		17,364							17,028							16,873
Premises and equipment, net		15,809							15,632							16,165
Other assets		39,630							41,394							40,228
Average total assets	$	1,170,447						$	1,064,186						$	1,148,305

Interest-bearing liabilities:
Interest-bearing demand	$	421,888		184		0.17	%	$	382,811		130		0.14	%	$	420,416		148		0.14	%
Savings deposits		109,857		47		0.17	%		103,990		41		0.16	%		113,647		47		0.17	%
Certificates of deposit		208,703		545		1.05	%		223,958		515		0.92	%		215,202		529		1.00	%
Net term debt		19,539		298		6.12	%		19,510		295		6.08	%		18,598		293		6.39	%
Junior subordinated debentures		10,310		71		2.76	%		10,310		59		2.30	%		10,310		66		2.60	%
Average interest-bearing liabilities		770,297		1,145		0.60	%		740,579		1,040		0.56	%		778,173		1,083		0.56	%
Noninterest-bearing demand		275,039							220,377							262,881
Other liabilities		12,256							11,913							12,431
Shareholders’ equity		112,855							91,317							94,820
Average liabilities and shareholders’ equity	$	1,170,447						$	1,064,186						$	1,148,305
Net interest income and net interest margin⁽⁴⁾			$	10,175		3.72	%			$	9,217		3.74	%			$	9,734		3.67	%
Tax equivalent net interest margin ⁽³⁾						3.82	%						3.87	%						3.78	%

⁽¹⁾ Interest income on loans is net of deferred fees and costs of approximately $131 thousand, $352 thousand, and $197 thousand for the three months ended June 30, 2017, and 2016 and March 31, 2017, respectively.

⁽²⁾ Net loans includes average nonaccrual loans of $9.8 million, $11.4 million and $10.9 million for the three months ended June 30, 2017 and 2016 and March 31, 2017, respectively.

⁽³⁾ Tax-exempt income has been adjusted to tax equivalent basis at a 34% tax rate. The amount of such adjustments was an addition to recorded income of approximately $275 thousand, $303 thousand and $273 thousand for the three months ended June 30, 2017 and 2016 and March 31, 2017, respectively.

⁽⁴⁾ Net interest margin is net interest income expressed as a percentage of average interest-earning assets.

⁽⁵⁾ Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.

(NASDAQ: BOCH)

TABLE 7b

NET INTEREST MARGIN - UNAUDITED

(amounts in thousands)

	For The Six Months Ended
	June 30, 2017							June 30, 2016
	Average				Yield /			Average				Yield /
(Amounts in thousands)	Balance		Interest⁽¹⁾		Rate ⁽⁵⁾			Balance		Interest⁽¹⁾		Rate ⁽⁵⁾
Interest-earning assets:
Net loans ⁽²⁾	$	814,098	$	19,142		4.74	%	$	731,740	$	17,247		4.74	%
Taxable securities		140,660		1,661		2.38	%		122,050		1,592		2.62	%
Tax-exempt securities		73,726		1,064		2.91	%		77,510		1,182		3.07	%
Interest-bearing deposits in other banks		57,920		270		0.94	%		48,676		140		0.58	%
Average interest-earning assets		1,086,404		22,137		4.11	%		979,976		20,161		4.14	%
Cash and due from banks		17,120							14,665
Premises and equipment, net		15,986							14,008
Other assets		39,928							40,543
Average total assets	$	1,159,438						$	1,049,192

Interest-bearing liabilities:
Interest-bearing demand	$	421,156		332		0.16	%	$	353,291		252		0.14	%
Savings deposits		111,742		94		0.17	%		100,008		86		0.17	%
Certificates of deposit		211,934		1,074		1.02	%		222,897		1,112		1.00	%
Net term debt		19,071		591		6.25	%		55,478		1,077		3.90	%
Junior subordinated debentures		10,310		137		2.68	%		10,310		113		2.20	%
Average interest-bearing liabilities		774,213		2,228		0.58	%		741,984		2,640		0.72	%
Noninterest-bearing demand		268,994							201,457
Other liabilities		12,343							14,439
Shareholders’ equity		103,888							91,312
Average liabilities and shareholders’ equity	$	1,159,438						$	1,049,192
Net interest income and net interest margin⁽⁴⁾			$	19,909		3.70	%			$	17,521		3.60	%
Tax equivalent net interest margin ⁽³⁾						3.80	%						3.72	%

⁽¹⁾ Interest income on loans is net of deferred fees and costs of approximately $328 thousand and $667 thousand for the six months ended June 30, 2017 and 2016, respectively.

⁽²⁾ Net loans includes average nonaccrual loans of $10.3 million and $10.9 million for the six months ended June 30, 2017 and 2016, respectively.

⁽³⁾ Tax-exempt income has been adjusted to tax equivalent basis at a 34% tax rate. The amount of such adjustments was an addition to recorded income of approximately $548 thousand and $609 thousand for the six months ended June 30, 2017 and 2016, respectively.

⁽⁴⁾ Net interest margin is net interest income expressed as a percentage of average interest-earning assets.

⁽⁵⁾ Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.

(NASDAQ: BOCH)

The current quarter net interest margin increased five basis points to 3.72% as compared to the prior quarter due to increased yields on average interest-earning assets. Increases in the average balances of interest-earning assets were funded by increased average balances in low cost demand deposits and increased average equity as a result of the sale of common stock during the quarter.

The net interest margin was 3.72% for the current quarter compared to 3.74% for the same period a year ago. The decrease was due to decreased yield on the securities portfolio and increased cost of interest-bearing liabilities. The decrease was partially offset by increased yield on loans and interest-bearing deposits at other institutions. The increase in interest income compared to the same quarter in the prior year is due to increased volume in the loan and investment portfolios. The increase in interest expense resulted primarily from an increase in the average rate paid on interest-bearing deposits.

Average deposit balances for the current quarter increased $3.3 million and $84.4 million compared to the prior quarter and the same period a year ago, respectively. The increase in average deposit balances compared to the prior quarter and the same quarter in the prior year was due to organic growth in core deposits. Our overall cost of total deposits increased to 0.31% for the quarter ended June 30, 2017 from 0.30% for the same period a year ago and from 0.29% for the prior quarter.

(NASDAQ: BOCH)

TABLE 8

ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED

(amounts in thousands)

	For The Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016			2016			2016
Beginning balance ALLL	$	11,641		$	11,544		$	11,849		$	11,864		$	11,495
Provision for loan and lease losses		300			200			—			—			—
Loans charged-off		(359	)		(447	)		(386	)		(357	)		(1,734	)
Loan loss recoveries		106			344			81			342			2,103
Ending balance ALLL	$	11,688		$	11,641		$	11,544		$	11,849		$	11,864

	At June 30,			At March 31,			At December 31,			At September 30,			At June 30,
	2017			2017			2016			2016			2016
Nonaccrual loans:
Commercial	$	2,410		$	2,534		$	2,749		$	1,710		$	2,149
Real estate - commercial non-owner occupied		1,196			1,196			1,196			1,196			1,197
Real estate - commercial owner occupied		639			654			784			800			816
Real estate - residential - ITIN		3,346			3,331			3,576			3,392			3,664
Real estate - residential - 1-4 family mortgage		653			1,337			1,914			1,798			1,824
Real estate - residential - equity lines		872			906			917			942			995
Consumer and other		38			39			250			252			266
Total nonaccrual loans		9,154			9,997			11,386			10,090			10,911
Accruing troubled debt restructured loans:
Commercial		703			741			776			726			760
Real estate - commercial non-owner occupied		806			808			808			811			816
Real estate - residential - ITIN		4,712			4,761			5,033			5,280			5,336
Real estate - residential - equity lines		445			450			454			543			548
Total accruing troubled debt restructured loans		6,666			6,760			7,071			7,360			7,460

All other accruing impaired loans		—			—			337			483			550

Total impaired loans	$	15,820		$	16,757		$	18,794		$	17,933		$	18,921

Gross loans outstanding at period end	$	815,388		$	810,194		$	804,211		$	779,019		$	754,140

Nonaccrual loans to gross loans		1.12	%		1.23	%		1.42	%		1.30	%		1.45	%

Allowance for loan and lease losses as a percent of:
Gross loans		1.43	%		1.44	%		1.44	%		1.52	%		1.57	%
Nonaccrual loans		127.68	%		116.44	%		101.39	%		117.43	%		108.73	%
Impaired loans		73.88	%		69.47	%		61.42	%		66.07	%		62.70	%

We realized net loan loss charge-offs of $253 thousand in the current quarter compared with net loan loss charge-offs of $103 thousand in the prior quarter and net loan recoveries of $369 thousand for the same period a year ago. Charge-offs during the second quarter of 2017 of $359 thousand were primarily associated with purchased consumer loans and residential real estate loans.

(NASDAQ: BOCH)

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. A combination of net loan losses and loan portfolio growth supported management’s decision to record a $300 thousand provision for loan and lease losses during the quarter ended June 30, 2017 and a $200 thousand provision for loan and lease losses during the quarter ended March 31, 2017. There were no provisions for loan and lease losses during the years ended December 31, 2016 or 2015. Our ALLL as a percentage of gross loans was 1.43% as of June 30, 2017 compared to 1.57% as of June 30, 2016 and 1.44% as of March 31, 2017. 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 June 30, 2017. 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 June 30, 2017, the recorded investment in loans classified as impaired totaled $15.8 million, with a corresponding specific reserve of $1.1 million compared to impaired loans of $18.9 million with a corresponding specific reserve of $903 thousand at June 30, 2016 and impaired loans of $16.8 million, with a corresponding specific reserve of $1.3 million at March 31, 2017. The decrease in loans classified as impaired and the decrease in the corresponding specific reserve compared to the prior quarter is primarily due to one nonaccrual residential real estate loan that was transferred to OREO during the quarter.

TABLE 9

TROUBLED DEBT RESTRUCTURINGS - UNAUDITED

(amounts in thousands)

	At June 30,			At March 31,			At December 31,			At September 30,			At June 30,
	2017			2017			2016			2016			2016
Nonaccrual	$	4,630		$	4,570		$	4,995		$	3,795		$	3,905
Accruing		6,666			6,760			7,071			7,360			7,460
Total troubled debt restructurings	$	11,296		$	11,330		$	12,066		$	11,155		$	11,365

Percentage of total gross loans		1.39	%		1.40	%		1.50	%		1.43	%		1.51	%

There was one new troubled debt restructuring to grant a rate and payment deferral modification for a loan that was placed on nonaccrual status during the three months ended June 30, 2017. As of June 30, 2017, we had 118 restructured loans that qualified as troubled debt restructurings, of which 111 were performing according to their restructured terms.

(NASDAQ: BOCH)

TABLE 10

NONPERFORMING ASSETS - UNAUDITED

(amounts in thousands)

	At June 30,			At March 31,			At December 31,			At September 30,			At June 30,
	2017			2017			2016			2016			2016
Total nonaccrual loans	$	9,154		$	9,997		$	11,386		$	10,090		$	10,911
90 days past due and still accruing		—			—			—			—			10
Total nonperforming loans		9,154			9,997			11,386			10,090			10,921

Other real estate owned		1,517			814			759			793			765
Total nonperforming assets	$	10,671		$	10,811		$	12,145		$	10,883		$	11,686

Nonperforming loans to gross loans		1.12	%		1.23	%		1.42	%		1.30	%		1.45	%
Nonperforming assets to total assets		0.88	%		0.95	%		1.06	%		0.98	%		1.09	%

The June 30, 2017 OREO balance consists of six properties, of which three are 1-4 family residential real estate properties in the amount of $876 thousand, two are nonfarm nonresidential properties in the amount of $530 thousand and one is an undeveloped commercial property in the amount of $112 thousand. The increase the OREO balance compared to the prior quarter is due to one residential real estate loan that was transferred to OREO during the quarter.

(NASDAQ: BOCH)

TABLE 11

UNAUDITED CONSOLIDATED

BALANCE SHEET

(amounts in thousands, except per share data)

	At June 30,			At June 30,			Change						At March 31,
	2017			2016			$			%			2017
Assets:
Cash and due from banks	$	23,420		$	14,695		$	8,725			59	%	$	18,315
Interest-bearing deposits in other banks		73,434			51,345			22,089			43	%		42,744
Total cash and cash equivalents		96,854			66,040			30,814			47	%		61,059

Securities available-for-sale, at fair value		209,609			157,906			51,703			33	%		181,534
Securities held-to-maturity, at amortized cost		31,329			35,415			(4,086	)		(12	)%		31,257

Loans, net of deferred fees and costs		816,929			755,168			61,761			8	%		811,640
Allowance for loan and lease losses		(11,688	)		(11,864	)		176			(1	)%		(11,641	)
Net loans		805,241			743,304			61,937			8	%		799,999

Premises and equipment, net		15,417			15,660			(243	)		(2	)%		15,903
Other real estate owned		1,517			765			752			98	%		814
Life insurance		21,629			22,794			(1,165	)		(5	)%		21,494
Deferred taxes		8,723			8,026			697			9	%		9,363
Goodwill and core deposit intangible, net		2,141			2,362			(221	)		(9	)%		2,196
Other assets		19,634			17,920			1,714			10	%		19,132
Total assets	$	1,212,094		$	1,070,192		$	141,902			13	%	$	1,142,751

Liabilities and shareholders' equity:
Demand - noninterest-bearing	$	303,560		$	224,467		$	79,093			35	%	$	270,412
Demand - interest-bearing		426,798			385,609			41,189			11	%		407,784
Savings		109,472			105,228			4,244			4	%		112,738
Certificates of deposit		206,395			222,252			(15,857	)		(7	)%		213,556
Total deposits		1,046,225			937,556			108,669			12	%		1,004,490

Term debt		18,300			19,577			(1,277	)		(7	)%		18,667
Unamortized debt issuance costs		(161	)		(201	)		40			(20	)%		(173	)
Net term debt		18,139			19,376			(1,237	)		(6	)%		18,494

Junior subordinated debentures		10,310			10,310			—			0	%		10,310
Other liabilities		11,468			10,462			1,006			10	%		12,994
Total liabilities		1,086,142			977,704			108,438			11	%		1,046,288

Shareholders' equity:
Common stock		51,651			24,421			27,230			112	%		24,800
Retained earnings		73,789			66,356			7,433			11	%		72,066
Accumulated other comprehensive income (loss), net of tax		512			1,711			(1,199	)		(70	)%		(403	)
Total shareholders' equity		125,952			92,488			33,464			36	%		96,463

Total liabilities and shareholders' equity	$	1,212,094		$	1,070,192		$	141,902			13	%	$	1,142,751

Total interest-earning assets	$	1,130,619		$	997,211		$	133,408			13	%	$	1,068,066
Shares outstanding		16,260			13,439									13,517
Tangible book value per share	$	7.61		$	6.71								$	6.97

(NASDAQ: BOCH)

TABLE 12

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended													For The Six Months Ended
	June 30,					Change						March 31,		June 30,
	2017		2016			$			%			2017		2017		2016
Interest income:
Interest and fees on loans	$	9,758	$	8,796		$	962			11	%	$	9,384	$	19,142	$	17,247
Interest on securities		872		808			64			8	%		789		1,661		1,592
Interest on tax-exempt securities		534		588			(54	)		(9	)%		530		1,064		1,182
Interest on deposits in other banks		156		65			91			140	%		114		270		140
Total interest income		11,320		10,257			1,063			10	%		10,817		22,137		20,161
Interest expense:
Interest on demand deposits		184		130			54			42	%		148		332		252
Interest on savings deposits		47		41			6			15	%		47		94		86
Interest on certificates of deposit		545		515			30			6	%		529		1,074		1,112
Interest on term debt		298		295			3			1	%		293		591		1,077
Interest on other borrowings		71		59			12			20	%		66		137		113
Total interest expense		1,145		1,040			105			10	%		1,083		2,228		2,640
Net interest income		10,175		9,217			958			10	%		9,734		19,909		17,521
Provision for loan and lease losses		300		—			300			100	%		200		500		—
Net interest income after provision for loan and lease losses		9,875		9,217			658			7	%		9,534		19,409		17,521
Noninterest income:
Service charges on deposit accounts		142		88			54			61	%		127		269		160
ATM and point of sale		288		335			(47	)		(14	)%		266		554		427
Payroll and benefit processing fees		147		139			8			6	%		191		338		299
Life insurance		135		153			(18	)		(12	)%		646		781		309
Gain on investment securities, net		35		28			7			25	%		66		101		122
Impairment losses on investment securities		—		(546	)		546			100	%		—		—		(546	)
Federal Home Loan Bank of San Francisco dividends		54		99			(45	)		(45	)%		103		157		189
Other income		182		141			41			29	%		143		325		426
Total noninterest income		983		437			546			125	%		1,542		2,525		1,386

(NASDAQ: BOCH)

TABLE 12 - CONTINUED

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended												For The Six Months Ended
	June 30,				Change						March 31,		June 30,
	2017		2016		$			%			2017		2017		2016
Noninterest expense:
Salaries and related benefits		4,147		4,086		61			1	%		4,858		9,005		8,315
Occupancy and equipment		1,054		987		67			7	%		1,048		2,102		1,776
Federal Deposit Insurance Corporation insurance premium		104		181		(77	)		(43	)%		48		152		337
Data processing fees		450		374		76			20	%		407		857		678
Professional service fees		501		470		31			7	%		393		894		906
Telecommunications		223		199		24			12	%		211		434		346
Branch acquisition costs		—		168		(168	)		(100	)%		—		—		580
Loss on cancellation of interest rate swap		—		—		—			—	%		—		—		2,325
Other expenses		1,235		1,203		32			3	%		1,096		2,331		2,406
Total noninterest expense		7,714		7,668		46			1	%		8,061		15,775		17,669
Income before provision for income taxes		3,144		1,986		1,158			58	%		3,015		6,159		1,238
Deferred tax asset write-off		—		—		—			—	%		—		—		363
Provision for income taxes		935		430		505			117	%		763		1,698		279
Net income	$	2,209	$	1,556	$	653			42	%	$	2,252	$	4,461	$	596

Basic earnings per share	$	0.15	$	0.11	$	0.04			36	%	$	0.17	$	0.31	$	0.04
Average basic shares		15,014		13,367		1,647			12	%		13,416		14,220		13,364
Diluted earnings per share	$	0.15	$	0.11	$	0.04			36	%	$	0.17	$	0.31	$	0.04
Average diluted shares		15,113		13,425		1,688			13	%		13,521		14,321		13,408

(NASDAQ: BOCH)

TABLE 13

UNAUDITED CONDENSED CONSOLIDATED

YEAR TO DATE AVERAGE BALANCE SHEETS

(amounts in thousands)

	For the Six Months Ended				For the Twelve Months Ended
	June 30,		June 30,		December 31,		December 31,		December 31,
	2017		2016		2016		2015		2014
Earning assets:
Loans	$	814,098	$	731,740	$	752,938	$	699,227	$	625,166
Taxable securities		140,660		122,050		120,884		120,897		147,916
Tax exempt securities		73,726		77,510		75,303		77,089		83,973
Interest-bearing deposits in other banks		57,920		48,676		58,668		30,323		56,465
Total earning assets		1,086,404		979,976		1,007,793		927,536		913,520

Cash and due from banks		17,120		14,665		15,831		11,220		11,246
Premises and equipment, net		15,986		14,008		15,078		11,552		12,105
Other assets		39,928		40,543		41,048		42,423		36,936
Total assets	$	1,159,438	$	1,049,192	$	1,079,750	$	992,731	$	973,807

Liabilities and shareholders' equity:
Demand - noninterest-bearing	$	268,994	$	201,457	$	226,368	$	156,578	$	139,792
Demand - interest-bearing		421,156		353,291		374,170		283,105		272,383
Savings		111,742		100,008		104,771		92,659		91,108
Certificates of deposit		211,934		222,897		221,074		238,626		259,445
Total deposits		1,013,826		877,653		926,383		770,968		762,728

Term debt		19,071		55,478		37,286		88,874		77,534
Junior subordinated debentures		10,310		10,310		10,310		10,310		15,239
Other liabilities		12,343		14,439		13,217		16,588		15,934
Total liabilities		1,055,550		957,880		987,196		886,740		871,435

Shareholders' equity		103,888		91,312		92,554		105,991		102,372
Liabilities & shareholders' equity	$	1,159,438	$	1,049,192	$	1,079,750	$	992,731	$	973,807

(NASDAQ: BOCH)

TABLE 14

UNAUDITED CONDENSED CONSOLIDATED

QUARTERLY AVERAGE BALANCE SHEETS

(amounts in thousands)

	For The Three Months Ended
	June 30,		March 31,		December 31,		September 30,		June 30,
	2017		2017		2016		2016		2016
Earning assets:
Loans	$	821,321	$	806,793	$	778,458	$	769,354	$	742,684
Taxable securities		143,705		137,582		124,881		114,578		124,183
Tax exempt securities		73,927		73,524		72,288		73,952		77,168
Interest-bearing deposits in other banks		58,691		57,140		75,760		61,346		46,097
Total earning assets		1,097,644		1,075,039		1,051,387		1,019,230		990,132

Cash and due from banks		17,364		16,873		16,953		17,018		17,028
Premises and equipment, net		15,809		16,165		16,331		15,941		15,632
Other assets		39,630		40,228		41,363		41,729		41,394
Total assets	$	1,170,447	$	1,148,305	$	1,126,034	$	1,093,918	$	1,064,186

Liabilities and shareholders' equity:
Demand - noninterest-bearing	$	275,039	$	262,881	$	261,600	$	240,418	$	220,377
Demand - interest-bearing		421,888		420,416		398,749		390,895		382,811
Savings		109,857		113,647		111,755		107,210		103,990
Certificates of deposit		208,703		215,202		217,463		221,078		223,958
Total deposits		1,015,487		1,012,146		989,567		959,601		931,136

Term debt		19,539		18,598		18,975		19,610		19,510
Junior subordinated debentures		10,310		10,310		10,310		10,310		10,310
Other liabilities		12,256		12,431		12,856		11,159		11,913
Total liabilities		1,057,592		1,053,485		1,031,708		1,000,680		972,869

Shareholders' equity		112,855		94,820		94,326		93,238		91,317
Liabilities & shareholders' equity	$	1,170,447	$	1,148,305	$	1,126,034	$	1,093,918	$	1,064,186

(NASDAQ: BOCH)

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 community 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”.

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

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