REDDING, Calif., Jan. 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

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.