Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2018

Date : 01/18/2019 @ 2:00PM
Source : GlobeNewswire Inc.
Stock : Bank of Commerce Holdings (BOCH)
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Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2018

Bank of Commerce (NASDAQ:BOCH)
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1 Year : From Oct 2018 to Oct 2019

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Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.307 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, 2018. Net income for the quarter ended December 31, 2018 was $4.8 million or $0.30 per share – diluted, compared with net income of $7 thousand or $0.00 per share – diluted for the same period of 2017. Net income for the year ended December 31, 2018 was $15.7 million or $0.96 per share – diluted, compared with net income of $7.3 million or $0.48 per share – diluted for the same period of 2017.

Selected Tax Items:Financial performance for both 2018 and 2017 includes “selected tax items” which complicate reporting period comparisons. The 2018 results include a $1.5 million decrease in our income tax provision composed of a $988 thousand reversal of our uncertain tax position and a $484 thousand benefit as a result of our cost segregation study and tangible property review. These items were previously disclosed in our form 10-Q filed November 2, 2018. The 2017 results include a $2.5 million increase in our income tax provision as a result of the Tax Cuts and Jobs Act of 2017 disclosed in our 2017 form 10-K filed on March 9, 2018. Management believes that our financial results are more comparative excluding the impact of these selected tax items.

Non-GAAP Financial MeasuresIn addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. We believe that these non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this document are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

                   
SELECTED NON-GAAP FINANCIAL INFORMATION - UNAUDITED 
(amounts in thousands except per share data) 
                   
  For The Three Months Ended For The Twelve Months Ended 
Reconciliation of Net Income (GAAP) to Net Income December 31,   September 30, December 31,  
Excluding Selected Tax Items (non-GAAP): 2018  2017  2018 2018  2017 
Net income (GAAP) $4,839  $7  $4,032  $15,730  $7,344 
Selected tax items:                  
Reversal of uncertain tax position (GAAP)  (988)        (988)   
Benefit from cost segregation study and tangible property review (GAAP)  (484)        (484)   
Deferred tax asset write-down (GAAP)     2,490         2,490 
Total selected tax items  (1,472)  2,490      (1,472)  2,490 
Net income excluding selected tax items (non-GAAP) $3,367  $2,497  $4,032  $14,258  $9,834 
                   
Earnings per share - diluted (GAAP) $0.30  $  $0.25  $0.96  $0.48 
Effect of selected tax items  (0.09)  0.15      (0.09)  0.16 
Earnings per share - diluted excluding selected tax items (non-GAAP) $0.21  $0.15  $0.25  $0.87  $0.64 
                   
Non-GAAP Ratios:                  
Return on average assets excluding selected tax items  1.01%  0.79%  1.23%  1.11%  0.82%
Return on average equity excluding selected tax items  9.97%  7.69%  12.16%  10.95%  8.48%
Effective tax rate excluding selected tax items  29.2%  34.5%  25.8%  26.3%  31.1%
                   
GAAP Information:                  
Return on average assets  1.44%  0.00%  1.23%  1.22%  0.61%
Return on average equity  14.32%  0.02%  12.16%  12.08%  6.34%
Effective tax rate  (1.7)%  99.8%  25.8%  18.7%  48.5%

Financial highlights for the year ended December 31, 2018:

  • Net income of $15.7 million was an increase of $8.4 million (114%) from $7.3 million earned during the same period in the prior year. Earnings of $0.96 per share – diluted was an increase of $0.48 (100%) from $0.48 per share – diluted earned during the same period in the prior year and reflects the impact of 2,738,096 shares of common stock sold and issued in the second quarter of 2017.
  • Expenses associated with our pending acquisition of Merchants Holding Company totaled $844 thousand.
  • Net interest income increased $6.2 million (15%) to $47.5 million compared to $41.4 million for the same period in the prior year.
  • Return on average assets improved to 1.22% compared to 0.61% for the same period in the prior year.
  • Return on average equity improved to 12.08% compared to 6.34% for the same period in the prior year.
  • Average loans totaled $915.4 million, an increase of $97.2 million (12%) compared to average loans for the same period in the prior year.
  • Average earning assets totaled $1.220 billion, an increase of $96 million (9%) compared to average earning assets for the same period in the prior year.
  • Average deposits totaled $1.098 billion, an increase of $57 million (5%) compared to average deposits for the same period in the prior year.
    • Average non-maturing deposits totaled $930.2 million, an increase of $94.4 million (11%) compared to the same period in the prior year.
    • Average certificates of deposit totaled $168.2 million, a decrease of $37.5 million (18%) compared to same period in the prior year.
  • The Company’s efficiency ratio was 62.5% compared to 67.0% during the same period in the prior year.
  • Nonperforming assets at December 31, 2018 totaled $4.2 million or 0.32% of total assets, a decrease of $1.7 million (28%) since December 31, 2017.
  • Book value per common share was $8.47 at December 31, 2018 compared to $7.82 at December 31, 2017.
  • Tangible book value per common share was $8.36 at December 31, 2018 compared to $7.70 at December 31, 2017.

Financial highlights for the fourth quarter of 2018:

  • Net income of $4.8 million ($0.30 per share –diluted) was an increase of $4.8 million (100%) from $7 thousand ($0.00 per share – diluted) earned during the same period in the prior year.
  • Expenses associated with our pending acquisition of Merchants Holding Company totaled $802 thousand.
  • Net interest income increased $1.6 million (15%) to $12.5 million compared to $10.9 million for the same period in the prior year.
  • Return on average assets improved to 1.44% compared to 0.00% for the same period in the prior year.
  • Return on average equity improved to 14.32% compared to 0.02% for the same period in the prior year.
  • Average loans totaled $923.4 million, an increase of $84.4 million (10%) compared to average loans for the same period in the prior year.
  • Average earning assets totaled $1.260 billion, an increase of $82 million (7%) compared the same period in the prior year.
  • Average deposits totaled $1.158 billion, an increase of $75 million (7%) compared the same period in the prior year.
    • Average non-maturing deposits totaled $1.001 billion, an increase of $113 million (13%) compared to the same period in the prior year.
    • Average certificates of deposit totaled $157.0 million, a decrease of $37.9 million (19%) compared to the same period in the prior year.
  • The Company’s efficiency ratio was 65.1% compared to 64.9% for the same period in the prior year.
  • Nonperforming assets at December 31, 2018 totaled $4.2 million or 0.32% of total assets, an increase of $324 thousand (33% annualized) compared to September 30, 2018.
  • Book value per common share was $8.47 at December 31, 2018 compared to $7.82 at December 31, 2017.
  • Tangible book value per common share was $8.36 at December 31, 2018 compared to $7.70 at December 31, 2017.

Randall S. Eslick, President and CEO commented: “We are pleased to report our financial results for 2018.  Our dedicated and hard-working employees performed at a high level as reflected in our strong core deposit and loan growth and enhanced shareholder returns. Their outstanding efforts have positioned the company well for continued success into the future.”

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, 2017 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.

                    
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 2018  2017  2018 2018 2017 
Net income $4,839  $7  $4,032  $15,730 $7,344 
Average total assets $1,328,817  $1,251,960  $1,300,278  $1,288,841 $1,198,251 
Average total earning assets $1,259,709  $1,178,037  $1,229,704  $1,220,135 $1,124,555 
Average shareholders' equity $134,033  $128,862  $131,499  $130,218 $115,901 
                    
Selected performance ratios                   
Return on average assets  1.44%  0.00%  1.23%  1.22% 0.61%
Return on average equity  14.32%  0.02%  12.16%  12.08% 6.34%
Efficiency ratio  65.1%  64.9%  58.4%  62.5% 67.0%
                    
Share and per share amounts                   
Weighted average shares - basic (1)  16,265   16,195   16,252   16,248  15,207 
Weighted average shares - diluted (2)  16,345   16,306   16,342   16,332  15,310 
Earnings per share - basic $0.30  $  $0.25  $0.97 $0.48 
Earnings per share - diluted $0.30  $  $0.25  $0.96 $0.48 
                    
  At December 31,   At September 30,   
Share and per share amounts 2018  2017  2018     
Common shares outstanding (2)  16,334   16,272   16,330        
Book value per common share (2) $8.47  $7.82  $8.14        
Tangible book value per common share (2)(3) $8.36  $7.70  $8.03        
                    
Capital ratios (4)                  
Bank of Commerce Holdings                  
Common equity tier 1 capital ratio  12.79%  12.26%  12.65%       
Tier 1 capital ratio  13.71%  13.23%  13.59%       
Total capital ratio  15.82%  15.44%  15.75%       
Tier 1 leverage ratio  11.21%  10.86%  11.14%       
Tangible common equity ratio (5)  10.46%  9.88%  9.98%       
                    
Redding Bank of Commerce                   
Common equity tier 1 capital ratio  13.23%  12.58%  13.14%       
Tier 1 capital ratio  13.23%  12.58%  13.14%       
Total capital ratio  14.42%  13.81%  14.36%       
Tier 1 leverage ratio  10.82%  10.33%  10.78%       
                    
(1) Excludes unvested restricted shares issued in accordance with the Company's equity incentive plan, as they are non participative in dividends or voting rights.
(2) Includes unvested restricted shares issued in accordance with the Company's equity incentive plan.
(3) Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.
(4) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject.
(5) Management believes the tangible common equity ratio is a useful measure of capital adequacy because it provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the capital of the Company and the ability of the Company to absorb potential losses. The tangible common equity ratio is calculated as total shareholders' equity less goodwill and core deposit intangible, net divided by total assets less goodwill and core deposit intangible, net.

BALANCE SHEET OVERVIEW

As of December 31, 2018, the Company had total consolidated assets of $1.307 billion, gross loans of $946.3 million, allowance for loan and lease losses (“ALLL”) of $12.3 million, total deposits of $1.132 billion, and shareholders’ equity of $138.3 million.

                        
TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
                        
 At December 31,       At September 30,
   % of    % of  Change   % of
 2018  Total 2017  Total Amount % 2018  Total
Commercial$135,543  14% $142,405  16% $(6,862)  (5)% $132,091  14%
Real estate - construction and land development 22,563  2   15,902  2   6,661  42%  20,496  2 
Real estate - commercial non-owner occupied 433,708  46   377,668  43   56,040  15%  431,246  47 
Real estate - commercial owner occupied 204,622  22   192,023  22   12,599  7%  195,608  21 
Real estate - residential - ITIN 37,446  4   41,188  5   (3,742) (9)%  38,353  4 
Real estate - residential - 1-4 family mortgage 34,366  4   30,377  3   3,989  13%  33,473  4 
Real estate - residential - equity lines 26,958  3   30,347  3   (3,389) (11)%  28,713  3 
Consumer and other 51,045  5   49,925  6   1,120  2%  47,500  5 
Gross loans 946,251  100%  879,835  100%  66,416  8%  927,480  100%
Deferred fees and costs 1,927      1,710      217      1,757    
Loans, net of deferred fees and costs 948,178      881,545      66,633      929,237    
Allowance for loan and lease losses (12,292)     (11,925)     (367)     (12,392)   
Net loans$935,886     $869,620     $66,266     $916,845    
                        
Average yield on loans during the quarter 4.94%     4.77%     0.17      4.93%   
Average yield on loans during the year 4.91%     4.78%     0.13          

The Company recorded gross loan balances of $946.3 million at December 31, 2018, compared with $879.8 million and $927.5 million at December 31, 2017 and September 30, 2018, respectively, an increase of $66.4 million and $18.8 million, respectively. Loan production during 2018 was organic and did not rely on loan pool purchases.

Average loan balances were $923.4 million for the quarter ended December 31, 2018, compared with $839.0 million for the quarter ended December 31, 2017 an increase of $84.4 million or 10%. For the year ended December 31, 2018 average loan balances were $915.4 million compared with $818.1 million for the year ended December 31, 2017 an increase of $97.2 million or 12%.

                         
TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
                         
  At December 31,        At September 30,
    % of    % of  Change   % of
  2018  Total 2017  Total Amount % 2018  Total
Cash and due from banks $23,692  8% $17,979  5% $5,713  32% $21,316  6%
Interest-bearing deposits in other banks  23,673  8   48,991  15   (25,318) (52)%  69,920  21 
Total cash and cash equivalents  47,365  16   66,970  20   (19,605) (29)%  91,236  27 
                         
Investment securities:                        
U.S. government and agencies  40,087  13   40,369  12   (282) (1)%  35,656  11 
Obligations of state and political subdivisions  50,530  17   78,844  24   (28,314) (36%  51,562  16 
Residential mortgage backed securities and collateralized mortgage obligations  138,503  45   114,592  34   23,911  21%  124,109  38 
Corporate securities  2,922  1   4,992  1   (2,070) (41)%  3,974  1 
Commercial mortgage backed securities  24,762  8   26,641  8   (1,879) (7)%  24,167  7 
Other asset backed securities  124     2,516  1   (2,392) (95%  165   
Total investment securities - AFS  256,928  84   267,954  80   (11,026) (4)%  239,633  73 
                         
Total cash, cash equivalents and investment securities $304,293  100% $334,924  100% $(30,631) (9)% $330,869  100%
Average yield on interest-bearing due from banks and investment securities during the quarter - nominal  2.66%     2.30%     0.36      2.47%   
Average yield on interest-bearing due from banks and investment securities during the quarter - tax equivalent  2.77%     2.62%     0.15      2.61%   

As of December 31, 2018, we maintained noninterest-bearing cash positions of $23.7 million and interest-bearing deposits of $23.7 million at the Federal Reserve Bank and correspondent banks.

Investment securities totaled $256.9 million at December 31, 2018, compared with $268.0 million and $239.6 million at December 31, 2017 and September 30, 2018, respectively. Our investment securities portfolio provides us with a secondary source of liquidity to fund higher yielding asset opportunities, such as loan originations. During the fourth quarter of 2018, we purchased 19 securities with a par value of $26.6 million and weighted average yield of 3.50% and sold five securities with a par value of $2.6 million and weighted average yield of 3.10%. The sales activity on available-for-sale securities resulted in $3 thousand in net realized gains. During the same period, we received $7.6 million in proceeds from principal payments, calls and maturities within the investment securities portfolio.

Average securities balances and weighted average tax equivalent yields for the quarters ended December 31, 2018 and 2017 were $261.0 million and 2.91% compared to $272.0 million and 2.94%, respectively.

At December 31, 2018, our net unrealized losses on available-for-sale investment securities were $4.3 million compared with net unrealized losses of $452 thousand and $5.8 million at December 31, 2017 and September 30, 2018, respectively. The changes in net unrealized losses on the investment securities portfolio are due to changes in market interest rates and the reclassification of all HTM securities to AFS during the fourth quarter of 2017.

                        
TABLE 4
DEPOSITS BY TYPE - UNAUDITED
(amounts in thousands)
                        
 At December 31,        At September 30,
   % of    % of   Change   % of
 2018 Total 2017 Total Amount % 2018 Total
Demand - noninterest-bearing$347,199 31% $305,650 28% $41,549  14% $361,516 32%
Demand - interest-bearing 517,295 46   496,990 45   20,305  4%  510,553 45 
Total demand 864,494 77   802,640 73   61,854  8%  872,069 77 
                        
Savings 114,840 10   110,837 10   4,003  4%  111,388 10 
Total non-maturing deposits 979,334 87   913,477 83   65,857  7%  983,457 87 
                        
Certificates of deposit 152,382 13   189,255 17   (36,873) (19)%  161,304 13 
Total deposits$1,131,716 100% $1,102,732 100% $28,984  3% $1,144,761 100%
                        

Total deposits at December 31, 2018, increased $29 million or 3% to $1.132 billion compared to December 31, 2017. Total non-maturing deposits increased $65.9 million or 7% compared to the same date a year ago a while certificates of deposit decreased $36.9 million or 19%.

         
TABLE 5
WHOLESALE AND RECIPROCAL DEPOSITS - UNAUDITED
(amounts in thousands)
         
 At December 31,  At September 30,
 2018 2017 2018
CDARS / ICS reciprocal deposits$83,666 $66,279 $78,772
Online listing service wholesale time deposits 22,015  36,060  24,397
Total wholesale and reciprocal deposits$105,681 $102,339 $103,169

For calendar quarters prior to June 30, 2018, CDARS/ ICS reciprocal deposits were considered to be brokered deposits by regulatory authorities and were reported as such on quarterly Call Reports. With passage of The Economic Growth, Regulatory Relief and Consumer Protection Act in May 2018, these deposits are no longer classified as brokered.

AVERAGE COST OF FUNDS

The following table presents the average cost of interest-bearing deposits, all deposits and all interest-bearing liabilities for the periods indicated.

                                
TABLE 6
AVERAGE COST OF FUNDS - UNAUDITED
For The Three Months Ended
                                
 December 31,  September 30, June 30,  March 31, December 31, September 30, June 30,  March 31,
 2018 2018 2018 2018 2017 2017 2017 2017
Interest-bearing deposits 0.45%  0.42%  0.41%  0.41%  0.42%  0.43%  0.42%  0.39%
Interest-bearing deposits andnoninterest-bearing demand 0.31%  0.29%  0.29%  0.29%  0.30%  0.31%  0.31%  0.29%
All interest-bearing liabilities 0.61%  0.64%  0.68%  0.60%  0.59%  0.60%  0.60%  0.56%
All interest-bearing liabilitiesand noninterest-bearingdemand 0.42%  0.45%  0.50%  0.43%  0.42%  0.43%  0.44%  0.42%

INCOME STATEMENT OVERVIEW

                     
TABLE 7
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
                     
For The Three Months Ended
 December 31,  Change September 30, Change
 2018  2017 Amount % 2018 Amount %
Interest income$13,750  $12,047 $1,703  14% $13,431 $319  2%
Interest expense 1,256   1,178  78  7%  1,304  (48) (4)%
Net interest income 12,494   10,869  1,625  15%  12,127  367  3%
Provision for loan and lease losses    450  (450) 100%      %
Noninterest income 1,132   1,282  (150) (12)%  943  189  20%
Noninterest expense 8,868   7,891  977  12%  7,634  1,234  16%
Income before provision for income taxes 4,758   3,810  948  25%  5,436  (678) (12)%
Provision for income taxes:                    
Reversal of uncertain tax position (988)    (988) 100%    (988) (100)%
Benefit from cost segregation study and tangible property review (484)    (484) 100%    (484) (100)%
Net deferred tax asset write-down    2,490  (2,490) (100)%      %
Provision for income taxes from operations 1,391   1,313  78  6%  1,404  (13) (1)%
Total provision for income taxes (81)  3,803  (3,884) (102)%  1,404  (1,485) (106)%
Net income$4,839  $7 $4,832  100% $4,032 $807  20%
                     
Basic earnings per share$0.30  $ $0.30  100% $0.25 $0.05  20%
Average basic shares 16,265   16,195  70  %  16,252  13  %
Diluted earnings per share$0.30  $ $0.30  100% $0.25 $0.05  20%
Average diluted shares 16,345   16,306  39  %  16,342  3  %
Dividends declared per common share$0.04  $0.03 $0.01  33% $0.04 $  %

Fourth Quarter of 2018 Compared With Fourth Quarter of 2017

Income before provision for income taxes for the fourth quarter of 2018 increased $948 thousand compared to the fourth quarter of 2017. In the current quarter, net interest income was $1.6 million higher and the provision for loan and lease loss was $450 thousand lower. These changes were offset by noninterest income that was $150 thousand lower, and noninterest expenses that were $977 thousand higher.

Net Interest Income

Net interest income increased $1.6 million compared to the same period a year ago.

Interest income for the fourth quarter of 2018 increased $1.7 million or 14% to $13.8 million:

  • Interest and fees on loans increased $1.4 million due to an $84.4 million increase in average loan balances and a 17 basis point increase in the average yield on the loan portfolio.
  • Interest on securities increased $82 thousand due to a 23 basis point increase in average yield on the securities portfolio partially offset by an $11.0 million decrease in average securities balances.
  • Interest on interest-bearing deposits due from banks increased $210 thousand due to an $8.3 million increase in average interest-bearing deposit balances, and a 96 basis point increase in average yield.

Interest expense for the fourth quarter of 2018 increased $78 thousand or 7% to $1.3 million:

  • Interest expense on interest bearing deposits increased $85 thousand. Average interest-bearing demand and savings deposit balances increased $62.2 million, while average certificate of deposit balances decreased $37.9 million. The average rate paid on interest-bearing deposits increased three basis points.
  • Interest expense on other interest bearing liabilities decreased $7 thousand due to decreased average term debt balances.

Provision for loan and lease loss

As a result of continued improved asset quality, no provision for loan and lease losses was necessary during the current quarter. A provision for loan and lease losses of $450 thousand was recorded during the same quarter a year ago.

Noninterest Income

Noninterest income for the three months ended December 31, 2018 decreased $150 thousand compared to the fourth quarter for 2017. The decrease was due to gains on sale of investment securities and OREO properties in the prior year totaling $282 thousand that did not recur in the current year. The decrease was offset by a $96 thousand special dividend on Federal Home Loan Bank of San Francisco stock.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2018 increased $977 thousand compared to the same period a year previous primarily due to $802 thousand in acquisition costs.

The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 was inflated by acquisition costs. The ratio during the same period in 2017 was 64.9%.

Income Tax Provision

For the three months ended December 31, 2018, our negative income tax provision of $81 thousand on pre-tax income of $4.8 million included:

  • $(988) thousand benefit due to the reversal of our uncertain tax position.
  • $(484) thousand benefit as a result of our cost segregation study and tangible property review.
  • $1.4 million tax provision on pre-tax net operating income of $4.8 million (29.2%).
    • The current quarter includes $765 thousand of acquisition costs which are not tax deductible.

This compares with a provision for income taxes for the fourth quarter of the prior year of $3.8 million on pre-tax income of $3.8 million which included:

  • $2.5 million write-down of our deferred tax assets resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017
  • $1.3 million tax provision on pre-tax net operating income of $3.8 million (34.5%).

Fourth Quarter of 2018 Compared With Third Quarter of 2018

Income before provision for income taxes for the fourth quarter of 2018 decreased $678 thousand compared to the third quarter of 2018. In the current quarter, net interest income was $367 thousand higher and noninterest income was $189 thousand higher. These positive changes were offset by noninterest expense that was $1.2 million higher.

Net Interest Income

Net interest income increased $367 thousand over the prior quarter.

Interest income for the three months ended December 31, 2018 increased $319 thousand or 2% to $13.8 million.

  • Interest and fees on loans decreased $74 thousand due to a $7.5 million decrease in average loan balances.
  • Interest on investment securities increased $213 thousand due to a $12.6 million increase in average securities balances and a 20 basis point increase in average yield on the investment portfolio.
  • Interest on interest-bearing deposits due from banks increased $180 thousand due to a $24.9 million increase in average balances and a 29 basis point increase in average yield.

Interest expense for the three months ended December 31, 2018 decreased $48 thousand or 4% to $1.3 million.

  • Interest expense on deposits increased $88 thousand as average interest-bearing demand and savings deposits increased $31.1 million, average certificates of deposit decreased $6.3 million and the average rate paid on these deposits increased by one basis point.
  • Interest expense on borrowings from the Federal Home Loan Bank of San Francisco decreased $121 thousand. There were no Federal Home Loan Bank of San Francisco borrowings outstanding in the current quarter compared to an average balance of $22.3 million for the prior quarter.
  • Interest expense on other term debt decreased $15 thousand.

Provision for loan and lease loss

As a result of continued improved asset quality, no provision for loan and lease losses was necessary during the current or previous quarter.

Noninterest Income

Noninterest income for the three months ended December 31, 2018 increased $189 thousand, the increase was due to an increase in gains on sale of OREO properties $71 thousand and a $96 thousand special dividend on Federal Home Loan Bank of San Francisco stock.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2018 increased $1.2 million. The increase was due to $802 thousand in acquisition costs and $293 thousand of expense incurred for our cost segregation study and tangible property review.

The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 was inflated by acquisition costs. The ratio during the prior quarter was 58.4%.

Income Tax Provision

For the three months ended December 31, 2018, our negative income tax provision of $81 thousand on pre-tax income of $4.8 million included:

  • $(988) thousand benefit due to the reversal of our uncertain tax position.
  • $(484) thousand benefit as a result to our cost segregation study and tangible property review.
  • $1.4 million tax provision on pre-tax net operating income of $4.8 million (29.2%).
    • The current quarter includes $765 thousand of acquisition costs which are not tax deductible.

This compares with a provision for income taxes for the prior quarter of $1.4 million on pre-tax income of $5.4 million (25.8%).

Earnings Per Share

Diluted earnings per share were $0.30 for the three months ended December 31, 2018 compared with diluted earnings per share of $0.00 for the same period a year ago and diluted earnings per share of $0.25 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in table 7 presented earlier in this press release.

                            
TABLE 8a
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
                            
  For The Three Months Ended
  December 31, 2018 December 31, 2017 September 30, 2018
  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) $923,409 $11,494 4.94% $839,004 $10,083 4.77% $930,863 $11,568 4.93%
Taxable securities  218,137  1,469 2.67%  199,849  1,211 2.40%  199,883  1,209 2.40%
Tax-exempt securities  42,868  353 3.27%  72,152  529 2.91%  48,561  400 3.27%
Interest-bearing deposits in other banks  75,295  434 2.29%  67,032  224 1.33%  50,397  254 2.00%
Average interest- earning assets  1,259,709  13,750 4.33%  1,178,037  12,047 4.06%  1,229,704  13,431 4.33%
Cash and due from banks  22,447        19,783        21,834      
Premises and equipment, net  13,331        14,948        13,768      
Goodwill and core deposit intangible, net  1,842        2,054        1,888      
Other assets  31,488        37,138        33,084      
Average total assets $1,328,817       $1,251,960       $1,300,278      
                            
Interest-bearing liabilities:                           
Interest-bearing demand $522,417  348 0.26% $459,451  216 0.19% $494,906  276 0.22%
Savings deposits  110,934  92 0.33%  111,725  54 0.19%  107,349  73 0.27%
Certificates of deposit  157,035  462 1.17%  194,886  547 1.11%  163,302  465 1.13%
Federal Home Loan Bank of San Francisco borrowings     %     %  22,283  121 2.15%
Other borrowings net of unamortized debt issuance costs  13,785  252 7.25%  17,211  285 6.57%  14,681  265 7.16%
Junior subordinated debentures  10,310  102 3.93%  10,310  76 2.92%  10,310  104 4.00%
Average interest- bearing liabilities  814,481  1,256 0.61%  793,583  1,178 0.59%  812,831  1,304 0.64%
Noninterest-bearing demand  367,457        316,961        343,948      
Other liabilities  12,846        12,554        12,000      
Shareholders’ equity  134,033        128,862        131,499      
Average liabilities and shareholders’ equity $1,328,817       $1,251,960       $1,300,278      
Net interest income and net interest margin (4)    $12,494 3.93%    $10,869 3.66%    $12,127 3.91%
Tax equivalent net   interest margin (3)       3.96%       3.75%       3.95%
                            
(1) Interest income on loans includes deferred fees and costs of approximately $109 thousand, $123 thousand, and $75 thousand for the three months ended December 31, 2018, and 2017 and September 30, 2018, respectively.
(2) Net loans includes average nonaccrual loans of $4.1 million, $6.5 million and $3.8 million for the three months ended December 31, 2018 and 2017 and September 30, 2018, respectively.
(3) Tax-exempt income has been adjusted to tax equivalent basis at a 21% for 2018 and at a 34% tax rate for 2017. The amount of such adjustments was an addition to recorded income of approximately $94 thousand, $273 thousand and $106 thousand for the three months ended December 31, 2018 and 2017 and September 30, 2018, respectively.
(4) Net interest margin is annualized 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.

                    
TABLE 8b 
NET INTEREST MARGIN - UNAUDITED 
(amounts in thousands) 
                    
  For The Twelve Months Ended 
  December 31, 2018 December 31, 2017 
  Average    Yield / Average    Yield / 
(Amounts in thousands) Balance Interest(1) Rate (5) Balance Interest(1) Rate (5) 
Interest-earning assets:                   
Net loans (2) $915,360 $44,955 4.91% $818,119 $39,112 4.78% 
Taxable securities  207,407  5,165 2.49%  165,333  3,921 2.37% 
Tax-exempt securities  50,330  1,629 3.24%  74,231  2,144 2.89% 
Interest-bearing deposits in other banks  47,038  952 2.02%  66,872  772 1.15% 
Average interest- earning assets  1,220,135  52,701 4.32%  1,124,555  45,949 4.09% 
Cash and due from banks  20,468        18,301       
Premises and equipment, net  13,952        15,567       
Goodwill and core deposit intangible, net  1,917        2,136       
Other assets  32,369        37,692       
Average total assets $1,288,841       $1,198,251       
                    
Interest-bearing liabilities:                   
Interest-bearing demand $489,013  1,060 0.22% $434,705  744 0.17% 
Savings deposits  109,025  288 0.26%  111,376  200 0.18% 
Certificates of deposit  168,183  1,910 1.14%  205,648  2,188 1.06% 
Federal Home Loan Bank of San Francisco borrowings  22,466  435 1.94%  302  3 0.99% 
Other borrowings net of unamortized debt issuance costs  15,143  1,077 7.11%  17,981  1,165 6.48% 
Junior subordinated debentures  10,310  385 3.73%  10,310  287 2.78% 
Average interest- bearing liabilities  814,140  5,155 0.63%  780,322  4,587 0.59% 
Noninterest-bearing demand  332,197        289,735       
Other liabilities  12,286        12,293       
Shareholders’ equity  130,218        115,901       
Average liabilities and shareholders’ equity $1,288,841       $1,198,251       
Net interest income and net interest margin (4)    $47,546 3.90%    $41,362 3.68% 
Tax equivalent net   interest margin (3)       3.93%       3.78% 
                    
(1) Interest income on loans includes deferred fees and costs of approximately $465 thousand and $546 thousand for the years December 31, 2018 and 2017, respectively.
(2) Net loans includes average nonaccrual loans of $4.2 million and $8.9 million for the years December 31, 2018 and 2017, respectively.
(3) Tax-exempt income has been adjusted to tax equivalent basis at a 21% tax rate for 2018 and at a 34% tax rate for 2017. The amount of such adjustments was an addition to recorded income of approximately $433 thousand and $1.1 million for the years December 31, 2018 and 2017, respectively.
(4) Net interest margin is annualized 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.

                    
TABLE 9 
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,
 2018 2018 2018 2018 2017
Beginning balance ALLL$12,392   $12,388   $12,295   $11,925   $11,692  
Provision for loan and lease losses                 450  
Loans charged-off (279)   (198)   (382)   (390)   (451) 
Loan loss recoveries 179    202    475    760    234  
Ending balance ALLL$12,292   $12,392   $12,388   $12,295   $11,925  
                    
 At December 31,  At September 30, At June 30,  At March 31, At December 31,
 2018 2018 2018 2018 2017
Nonaccrual loans:                   
Commercial$959   $899   $1,358   $1,109   $1,603  
Real estate - commercial owner occupied 548                600  
Real estate - residential - ITIN 2,388    2,571    2,613    2,839    2,909  
Real estate - residential - 1-4 family mortgage 185    179    184    188    606  
Real estate - residential - equity lines 43    44    44    45    45  
Consumer and other 23    24    33    35    36  
Total nonaccrual loans 4,146    3,717    4,232    4,216    5,799  
Accruing troubled debt restructured loans:                   
Commercial 1,224    1,291    1,420    1,516    1,551  
Real estate - commercial non-owner occupied 795    797    799    800    803  
Real estate - residential - ITIN 4,484    4,535    4,592    4,554    4,614  
Real estate - residential - equity lines 363    367    372    376    380  
Total accruing troubled debt restructured loans 6,866    6,990    7,183    7,246    7,348  
                    
All other accruing impaired loans                   
                    
Total impaired loans$11,012   $10,707   $11,415   $11,462   $13,147  
                    
Gross loans outstanding at period end$946,251   $927,480   $936,816   $900,420   $879,835  
                    
Impaired loans to gross loans 1.16%   1.15%   1.22%   1.27%   1.49% 
Nonaccrual loans to gross loans 0.44%   0.40%   0.45%   0.47%   0.66% 
                    
Allowance for loan and lease losses as a percent of:             
Gross loans 1.30%   1.34%   1.32%   1.37%   1.36% 
Nonaccrual loans 296.48%   333.39%   292.72%   291.63%   205.64% 
Impaired loans 111.62%   115.74%   108.52%   107.27%   90.71% 

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. As a result of continued improved asset quality, no provision for loan and lease losses was necessary during the current quarter and the prior quarter. A provision for loan and lease losses of $450 thousand was recorded during the same quarter a year ago. Our ALLL as a percentage of gross loans was 1.30% as of December 31, 2018 compared to 1.36% as of December 31, 2017 and 1.34% as of September 30, 2018. Based on the Bank’s ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate at December 31, 2018. 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, 2018, the recorded investment in loans classified as impaired totaled $11.0 million, with a corresponding specific reserve of $1.2 million compared to impaired loans of $13.1 million with a corresponding specific reserve of $1.2 million at December 31, 2017 and impaired loans of $10.7 million, with a corresponding specific reserve of $1.1 million at September 30, 2018.

                     
TABLE 10
TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
                     
  At December 31,  At September 30, At June 30,  At March 31, At December 31,
  2018 2018 2018 2018 2017
Nonaccrual $2,693  $2,720  $3,218  $3,237  $3,581 
Accruing  6,866   6,990   7,183   7,246   7,348 
Total troubled debt restructurings $9,559  $9,710  $10,401  $10,483  $10,929 
                     
Troubled debt restructurings as a percentage of total gross loans  1.01%  1.05%  1.11%  1.16%  1.24%

There were no new troubled debt restructurings during the three months ended December 31, 2018. As of December 31, 2018, we had 106 restructured loans that qualified as troubled debt restructurings, of which all were performing according to their restructured terms.

                     
TABLE 11
NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
                     
  At December 31,  At September 30, At June 30,  At March 31, At December 31,
  2018 2018 2018 2018 2017
Total nonaccrual loans $4,146  $3,717  $4,232  $4,216  $5,799 
90 days past due and still accruing               
Total nonperforming loans  4,146   3,717   4,232   4,216   5,799 
                     
Other real estate owned ("OREO")  31   136   140   60   35 
Total nonperforming assets $4,177  $3,853  $4,372  $4,276  $5,834 
                     
Nonperforming loans to gross loans  0.44%  0.40%  0.45%  0.47%  0.66%
Nonperforming assets to total assets  0.32%  0.29%  0.34%  0.34%  0.46%

                
TABLE 12
UNAUDITED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
                
 At December 31,  Change At September 30,
  2018  2017  $ % 2018
Assets:               
Cash and due from banks $23,692  $17,979  $5,713  32% $21,316 
Interest-bearing deposits in other banks  23,673   48,991   (25,318) (52)%  69,920 
 Total cash and cash equivalents  47,365   66,970   (19,605) (29)%  91,236 
                
Securities available-for-sale, at fair value  256,928   267,954   (11,026) (4)%  239,633 
Loans, net of deferred fees and costs  948,178   881,545   66,633  8%  929,237 
Allowance for loan and lease losses  (12,292)  (11,925)  (367) 3%  (12,392)
 Net loans  935,886   869,620   66,266  8%  916,845 
                
Premises and equipment, net  13,119   14,748   (1,629) (11)%  13,495 
Other real estate owned  31   35   (4) (11)%  136 
Life insurance  22,410   21,898   512  2%  22,282 
Deferred tax asset, net  7,039   6,505   534  8%  8,084 
Goodwill and core deposit intangible, net  1,841   2,030   (189) (9)%  1,864 
Other assets  22,485   19,661   2,824  14%  21,894 
Total assets $1,307,104  $1,269,421  $37,683  3% $1,315,469 
                
Liabilities and shareholders' equity:               
Demand - noninterest-bearing $347,199  $305,650  $41,549  14% $361,516 
Demand - interest-bearing  517,295   496,990   20,305  4%  510,553 
Savings  114,840   110,837   4,003  4%  111,388 
Certificates of deposit  152,382   189,255   (36,873) (19)%  161,304 
 Total deposits  1,131,716   1,102,732   28,984  3%  1,144,761 
                
Term debt:               
Other borrowings  13,496   17,096   (3,600) (21)%  14,396 
Unamortized debt issuance costs  (91)  (138)  47  (34)%  (103)
 Net term debt  13,405   16,958   (3,553) (21)%  14,293 
                
Junior subordinated debentures  10,310   10,310     %  10,310 
Other liabilities  13,352   12,157   1,195  10%  13,136 
 Total liabilities  1,168,783   1,142,157   26,626  2%  1,182,500 
                
Shareholders' equity:               
Common stock  52,284   51,830   454  1%  52,191 
Retained earnings  89,045   75,700   13,345  18%  84,857 
Accumulated other comprehensive loss, net of tax  (3,008)  (266)  (2,742) 1,031%  (4,079)
 Total shareholders' equity  138,321   127,264   11,057  9%  132,969 
                
Total liabilities and shareholders' equity $1,307,104  $1,269,421  $37,683  3% $1,315,469 
                
Total interest-earning assets $1,233,049  $1,198,942  $34,107  3% $1,244,581 
Shares outstanding  16,334   16,272   62  %  16,330 
Book value per share $8.47  $7.82  $0.65  8% $8.14 
Tangible book value per share (1) $8.36  $7.70  $0.66  9% $8.03 
                
(1) Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.

                      
TABLE 13
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,
  2018 2017  $ % 2018 2018 2017
Interest income:                     
Interest and fees on loans $11,494 $10,083  $1,411  14% $11,568  $44,955 $39,112
Interest on taxable securities  1,469  1,211   258  21%  1,209   5,165  3,921
Interest on tax-exempt securities  353  529   (176) (33)%  400   1,629  2,144
Interest on interest-bearing deposits in other banks  434  224   210  94%  254   952  772
Total interest income  13,750  12,047   1,703  14%  13,431   52,701  45,949
Interest expense:                     
Interest on demand deposits  348  216   132  61%  276   1,060  744
Interest on savings deposits  92  54   38  70%  73   288  200
Interest on certificates of deposit  462  547   (85) (16)%  465   1,910  2,188
Interest on Federal Home Loan Bank of San Francisco borrowings         %  121   435  3
Interest on other borrowings  252  285   (33) (12)%  265   1,077  1,165
Interest on junior subordinated debentures  102  76   26  34%  104   385  287
Total interest expense  1,256  1,178   78  7%  1,304   5,155  4,587
Net interest income  12,494  10,869   1,625  15%  12,127   47,546  41,362
Provision for loan and lease losses    450   (450) (100)%       950
Net interest income after provision for loan and lease losses  12,494  10,419   2,075  20%  12,127   47,546  40,412
Noninterest income:                     
Service charges on deposit accounts  161  141   20  14%  170   682  542
ATM and point of sale fees  283  266   17  6%  282   1,131  1,093
Fees on payroll and benefit processing  178  173   5  3%  159   652  658
Life insurance  128  135   (7) (5)%  128   512  1,050
Gain (loss) on investment securities, net  3  (2)  5  250%  1   44  137
Federal Home Loan Bank of San Francisco dividends  201  81   120  148%  104   480  318
Gain (loss) on sale of OREO  64  346   (282) (82)%  (7)  73  368
Insured cash sweep fees    4   (4) (100)%       197
Other income  114  138   (24) (17)%  106   445  461
Total noninterest income  1,132  1,282   (150) (12)%  943   4,019  4,824

                      
TABLE 13 - 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,
  2018  2017 $ % 2018 2018  2017
Noninterest expense:                     
Salaries and related benefits  4,812   4,523  289  6%  4,529  18,709   17,819
Premises and equipment  943   1,073  (130) (12)%  1,017  4,047   4,242
Federal Deposit Insurance Corporation insurance premium  93   88  5  6%  94  376   318
Data processing fees  512   455  57  13%  518  1,933   1,749
Professional service fees  436   279  157  56%  336  1,431   1,398
Telecommunications  145   226  (81) (36)%  55  594   879
Acquisition  802     802  100%  42  844   
Other expenses  1,125   1,247  (122) (10)%  1,043  4,272   4,559
Total noninterest expense  8,868   7,891  977  12%  7,634  32,206   30,964
Income before provision for income taxes  4,758   3,810  948  25%  5,436  19,359   14,272
Provision for income taxes:                     
Reversal of uncertain tax position  (988)    (988) 100%    (988)  
Benefit from cost segregation study and tangible property review  (484)    (484) 100%    (484)  
Net deferred tax asset write-down     2,490  (2,490) (100)%       2,490
Provision for income taxes from operations  1,391   1,313  78  6%  1,404  5,101   4,438
Total provision for income taxes  (81)  3,803  (3,884) (102)%  1,404  3,629   6,928
Net income $4,839  $7 $4,832  100% $4,032 $15,730  $7,344
                      
Basic earnings per share $0.30  $ $0.30  100% $0.25 $0.97  $0.48
Average basic shares  16,265   16,195  70  %  16,252  16,248   15,207
Diluted earnings per share $0.30  $ $0.30  100% $0.25 $0.96  $0.48
Average diluted shares  16,345   16,306  39  %  16,342  16,332   15,310

                
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,
  2018 2018 2018 2018 2017
Earning assets:               
Loans $923,409 $930,863 $922,687 $883,876 $839,004
Taxable securities  218,137  199,883  206,247  205,302  199,849
Tax exempt securities  42,868  48,561  50,306  59,789  72,152
Interest-bearing deposits in other banks  75,295  50,397  29,041  32,915  67,032
Total earning assets  1,259,709  1,229,704  1,208,281  1,181,882  1,178,037
                
Cash and due from banks  22,447  21,834  19,880  17,641  19,783
Premises and equipment, net  13,331  13,768  14,167  14,557  14,948
Goodwill and core deposit intangible, net  1,842  1,888  1,943  1,998  2,054
Other assets  31,488  33,084  32,426  32,485  37,138
Total assets $1,328,817 $1,300,278 $1,276,697 $1,248,563 $1,251,960
                
Liabilities and shareholders' equity:               
Demand - noninterest-bearing $367,457 $343,948 $309,199 $307,397 $316,961
Demand - interest-bearing  522,417  494,906  467,651  470,440  459,451
Savings  110,934  107,349  107,108  110,725  111,725
Certificates of deposit  157,035  163,302  170,824  181,901  194,886
Total deposits  1,157,843  1,109,505  1,054,782  1,070,463  1,083,023
                
Federal Home Loan Bank of San Francisco borrowings    22,283  55,275  12,444  
Other borrowings net of unamortized debt issuance costs  13,785  14,681  15,614  16,528  17,211
Junior subordinated debentures  10,310  10,310  10,310  10,310  10,310
Other liabilities  12,846  12,000  12,535  11,749  12,554
Total liabilities  1,194,784  1,168,779  1,148,516  1,121,494  1,123,098
                
Shareholders' equity  134,033  131,499  128,181  127,069  128,862
Liabilities & shareholders' equity $1,328,817 $1,300,278 $1,276,697 $1,248,563 $1,251,960

             
TABLE 15
UNAUDITED CONDENSED CONSOLIDATED
ANNUAL AVERAGE BALANCE SHEETS
(amounts in thousands)
             
  For The Twelve Months Ended
  December 31,  December 31, December 31, December 31,
  2018 2017 2016 2015
Earning assets:            
Loans $915,360 $818,119 $752,938 $699,227
Taxable securities  207,407  165,333  120,884  120,897
Tax exempt securities  50,330  74,231  75,303  77,089
Interest-bearing deposits in other banks  47,038  66,872  58,668  30,323
Total earning assets  1,220,135  1,124,555  1,007,793  927,536
             
Cash and due from banks  20,468  18,301  15,831  11,220
Premises and equipment, net  13,952  15,567  15,078  11,552
Goodwill and core deposit intangible, net  1,917  2,136  1,888  
Other assets  32,369  37,692  39,160  42,423
Total assets $1,288,841 $1,198,251 $1,079,750 $992,731
             
Liabilities and shareholders' equity:            
Demand - noninterest-bearing $332,197 $289,735 $226,368 $156,578
Demand - interest-bearing  489,013  434,705  374,170  283,105
Savings  109,025  111,376  104,771  92,659
Certificates of deposit  168,183  205,648  221,074  238,626
Total deposits  1,098,418  1,041,464  926,383  770,968
             
Federal Home Loan Bank of San Francisco borrowings  22,466  302  17,856  87,548
Other borrowings net of unamortized debt issuance costs  15,143  17,981  19,430  1,326
Junior subordinated debentures  10,310  10,310  10,310  10,310
Other liabilities  12,286  12,293  13,217  16,588
Total liabilities  1,158,623  1,082,350  987,196  886,740
             
Shareholders' equity  130,218  115,901  92,554  105,991
Liabilities & shareholders' equity $1,288,841 $1,198,251 $1,079,750 $992,731

About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, 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 was incorporated as a California banking corporation on November 25, 1981 and opened for business 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 OfficerTelephone Direct (916) 677-5800

James A. Sundquist, Executive Vice President and Chief Financial OfficerTelephone Direct (916) 677-5825

Samuel D. Jimenez, Executive Vice President and Chief Operating OfficerTelephone Direct (530) 722-3952

Andrea M. Newburn, Vice President and Senior Administrative Officer / Corporate SecretaryTelephone Direct (530) 722-3959

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