BOCH Bank of Commerce Holdings

Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.472 billion asset bank holding company and parent company of Merchants Bank of Commerce (the “Bank”), today announced financial results for the quarter ended September 30, 2019. Net income for the quarter ended September 30, 2019 was $4.6 million or $0.26 per share – diluted, compared with net income of $4.0 million or $0.25 per share – diluted for the same period of 2018. Net income for the nine months ended September 30, 2019 was $10.6 million or $0.59 per share – diluted, compared with net income of $10.9 million or $0.67 per share – diluted for the same period of 2018.

The current year includes the benefits of our January 31, 2019 acquisition of Merchants National Bank of Sacramento (“Merchants”). In May, we successfully converted all of Merchant’s computer records onto our core system. As previously announced, the Company’s subsidiary bank, which had been operating under multiple names, simultaneously changed the name for all locations to Merchants Bank of Commerce. To date, acquisition related costs have totaled $2.2 million and costs related to the name change have totaled $501 thousand. All significant costs for these two projects have now been absorbed.

Randall S. Eslick, President and CEO commented: “The Company performed solidly during the third quarter which reflects the benefits derived from our acquisition of Merchants National Bank earlier in the year. With the successful integration of Merchants now complete, we are again wholly focused on leveraging our talented business relationship teams to meet customer needs and achieve our organic growth goals.”

Financial highlights for the third quarter of 2019:

• Net income of $4.6 million was an increase of $610 thousand (15%) from $4.0 million earned during the same period in the prior year. Earnings of $0.26 per share – diluted was an increase of $0.01 (4%) from $0.25 per share – diluted earned during the same period in the prior year and reflects the impact of 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants.
• Net interest income increased $1.6 million (13%) to $13.7 million compared to $12.1 million for the same period in the prior year.
• Net interest margin improved to 4.00% compared to 3.91% for the same period in the prior year
• Return on average assets increased to 1.26% compared to 1.23% for the same period in the prior year.
• Return on average equity decreased to 10.86% compared to 12.16% for the same period in the prior year.
• Average loans totaled $1.030 billion, an increase of $99 million (11%) compared to average loans for the same period in the prior year.
• Average earning assets totaled $1.360 billion, an increase of $130 million (11%) compared to average earning assets for the same period in the prior year.
• Average deposits totaled $1.255 billion, an increase of $145 million (13%) compared to average deposits for the same period in the prior year. º  Average non-maturing deposits totaled $1.097 billion, an increase of $151 million (16%) compared to the same period in the prior year.º  Average certificates of deposit totaled $157.6 million, a decrease of $5.7 million (3%) compared to same period in the prior year.
• The Company’s efficiency ratio was 56.4% compared to 58.4% during the same period in the prior year.
• Nonperforming assets at September 30, 2019 totaled $12.8 million or 0.87% of total assets, an increase of $9.0 million since September 30, 2018. The increase in nonperforming assets results from one $10.1 million commercial real estate loan.
• Book value per common share was $9.42 at September 30, 2019 compared to $8.14 at September 30, 2018.
• Tangible book value per common share was $8.51 at September 30, 2019 compared to $8.03 at September 30, 2018.

Financial highlights for the nine months ended September 30, 2019:

• Net income of $10.6 million ($0.59 per share – diluted) was a decrease of $299 thousand (3%) from $10.9 million ($0.67 per share – diluted) earned during the same period in the prior year and reflects the impact of 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants.
• Acquisition costs associated with our acquisition of Merchants totaled $2.2 million. Costs related to the name change of our subsidiary bank totaled $501 thousand.
• Net interest income increased $5.2 million (15%) to $40.2 million compared to $35.1 million for the same period in the prior year.
• Net interest margin improved to 3.98% compared to 3.88% for the same period in the prior year.
• Return on average assets decreased to 0.98% compared to 1.14% for the same period in the prior year.
• Return on average equity decreased to 8.74% compared to 11.29% for the same period in the prior year.
• Average loans totaled $1.017 billion, an increase of $104 million (11%) compared to average loans for the same period in the prior year.
• Average earning assets totaled $1.350 billion, an increase of $143 million (12%) compared the same period in the prior year.
• Average deposits totaled $1.232 billion, an increase of $154 million (14%) compared the same period in the prior year.º  Average non-maturing deposits totaled $1.069 billion, an increase of $163 million (18%) compared to the same period in the prior year. º  Average certificates of deposit totaled $163.0 million, a decrease of $8.9 million (5%) compared to the same period in the prior year.
• The Company’s efficiency ratio was 66.5% compared to 61.5% for the same period in the prior year.º  The Company’s efficiency ratio of 66.5% for the first nine months of 2019 includes $2.2 million in acquisition costs and $501 thousand in name change costs. The efficiency ratio excluding these non-recurring costs was 60.3%.
• Nonperforming assets at September 30, 2019 totaled $12.8 million or 0.87% of total assets, an increase of $8.7 million since December 31, 2018. The increase in nonperforming assets results from one $10.1 million commercial real estate loan.
• Book value per common share was $9.42 at September 30, 2019 compared to $8.47 at December 31, 2018.
• Tangible book value per common share was $8.51 at September 30, 2019 compared to $8.36 at December 31, 2018.

Forward-Looking Statements

Bank of Commerce Holdings wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. This news release includes statements by the Company, which describe management’s expectations and developments, which may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21B of the Securities Act of 1934, as amended. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company's public filings, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the Company's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new banks and/or branches are lower than expected; (4) our concentration in lending tied to real estate exposes us to the adverse effects of material increases in interest rates, declines in the general economy, tightening credit markets or declines in real estate values; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged; and (7) technological changes could expose us to new risks.

TABLE 1
SELECTED FINANCIAL INFORMATION - UNAUDITED
(amounts in thousands except per share data)
		For The Three Months Ended												For The Nine Months Ended
Net income, average assets and		September 30,								June 30,				September 30,
average shareholders' equity		2019				2018				2019				2019			2018
Net income		$	4,642			$	4,032			$	3,644			$	10,592		$	10,891
Average total assets		$	1,462,444			$	1,300,278			$	1,450,725			$	1,446,476		$	1,275,369
Average total earning assets		$	1,360,006			$	1,229,704			$	1,353,200			$	1,350,173		$	1,206,798
Average shareholders' equity		$	169,608			$	131,499			$	163,598			$	162,032		$	128,933
Selected performance ratios
Return on average assets			1.26	%			1.23	%			1.01	%			0.98	%		1.14	%
Return on average equity			10.86	%			12.16	%			8.93	%			8.74	%		11.29	%
Efficiency ratio			56.4	%			58.4	%			65.9	%			66.5	%		61.5	%
Share and per share amounts
Weighted average shares - basic (1)			18,130				16,252				18,134				17,918			16,242
Weighted average shares - diluted (1)			18,196				16,342				18,194				17,981			16,327
Earnings per share - basic		$	0.26			$	0.25			$	0.20			$	0.59		$	0.67
Earnings per share - diluted		$	0.26			$	0.25			$	0.20			$	0.59		$	0.67
		At September 30,								At June 30,
Share and per share amounts		2019				2018				2019
Common shares outstanding (2)			18,212				16,330				18,214
Book value per common share (2)		$	9.42			$	8.14			$	9.22
Tangible book value per common share (2)(3)		$	8.51			$	8.03			$	8.29
Capital ratios (4)
Bank of Commerce Holdings
Common equity tier 1 capital ratio			12.85	%			12.65	%			12.56	%
Tier 1 capital ratio			13.69	%			13.59	%			13.41	%
Total capital ratio			15.62	%			15.75	%			15.35	%
Tier 1 leverage ratio			11.28	%			11.14	%			11.08	%
Tangible common equity ratio (5)			10.64	%			9.98	%			10.59	%
Merchants Bank of Commerce
Common equity tier 1 capital ratio			14.25	%			13.14	%			14.06	%
Tier 1 capital ratio			14.25	%			13.14	%			14.06	%
Total capital ratio			15.34	%			14.36	%			15.16	%
Tier 1 leverage ratio			11.74	%			10.78	%			11.61	%
(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) Book value per share is computed by dividing total shareholders’ equity by shares outstanding. 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 September 30, 2019, the Company had total consolidated assets of $1.472 billion, gross loans of $1.033 billion, allowance for loan and lease losses (“ALLL”) of $12 million, total deposits of $1.262 billion, and shareholders’ equity of $172 million.

TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
	At September 30,																					At June 30,
					% of							% of			Change												% of
	2019				Total			2018				Total			Amount				%				2019				Total
Commercial	$	152,195			15	%		$	132,091			14	%		$	20,104			15		%		$	152,303			15	%
Real estate - construction and land development		35,606			3				20,496			2				15,110			74		%			37,685			4
Real estate - commercial non-owner occupied		475,678			47				431,246			47				44,432			10		%			468,706			45
Real estate - commercial owner occupied		210,767			20				195,608			21				15,159			8		%			210,711			21
Real estate - residential - ITIN		34,036			3				38,353			4				(4,317	)		(11	)	%			35,162			3
Real estate - residential - 1-4 family mortgage		64,747			6				33,473			4				31,274			93		%			67,092			6
Real estate - residential - equity lines		22,729			2				28,713			3				(5,984	)		(21	)	%			23,656			2
Consumer and other		37,324			4				47,500			5				(10,176	)		(21	)	%			41,409			4
Gross loans		1,033,082			100	%			927,480			100	%			105,602			11		%			1,036,724			100	%
Deferred fees and costs		1,980							1,757							223								2,005
Loans, net of deferred fees and costs		1,035,062							929,237							105,825								1,038,729
Allowance for loan and lease losses		(12,285	)						(12,392	)						107								(12,445	)
Net loans	$	1,022,777						$	916,845						$	105,932							$	1,026,284
Average loans during the quarter	$	1,029,534						$	930,863						$	98,671			11		%		$	1,028,187
Average yield on loans during the quarter		5.01		%					4.93		%					0.08								5.01		%
Average yield on loans during the year		4.98		%					4.90		%					0.08								4.96		%

The Company recorded gross loan balances of $1.033 billion at September 30, 2019, compared with $927 million and $1.037 billion at September 30, 2018 and June 30, 2019, respectively, an increase of $106 million and a decrease of $4 million, respectively. During the first quarter of 2019,     the Merchants acquisition provided an additional $85.3 million of loans.

The average yield on loans during the quarter was 5.01% compared to 4.93% and 5.01% for the quarters ended September 30, 2018 and June 30, 2019, respectively.

Gross loan balances in the table above include a net fair value discount for loans acquired from Merchants during the first quarter of 2019 of $1.9 million and $2.1 million at September 30, 2019 and June 30, 2019, respectively. We recorded $190 thousand and $193 thousand in accretion of the discount for these loans during the second and third quarters of 2019, respectively.

TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
		At September 30,																				At June 30,
					% of						% of			Change											% of
		2019			Total			2018			Total			Amount				%				2019			Total
Cash and due from banks		$	32,505		9	%		$	21,316		6	%		$	11,189			52		%		$	21,306		7	%
Interest-bearing deposits in other banks			56,099		16				69,920		21				(13,821	)		(20	)	%			19,319		6
Total cash and cash equivalents			88,604		25				91,236		27				(2,632	)		(3	)	%			40,625		13
Investment securities:
U.S. government and agencies			40,467		11				35,656		11				4,811			13		%			44,837		14
Obligations of state and political subdivisions			39,004		11				51,562		16				(12,558	)		(24	)	%			45,003		14
Residential mortgage backed securities and collateralized mortgage obligations			165,994		46				124,109		38				41,885			34		%			168,085		50
Corporate securities			2,992		1				3,974		1				(982	)		(25	)	%			2,978		1
Commercial mortgage backed securities			22,822		6				24,167		7				(1,345	)		(6	)	%			24,868		8
Other asset backed securities			1,062		—				165		—				897			544		%			48		—
Total investment securities - AFS			272,341		75				239,633		73				32,708			14		%			285,819		87
Total cash, cash equivalents and investment securities		$	360,945		100	%		$	330,869		100	%		$	30,076			9		%		$	326,444		100	%
Average yield on interest-bearing due from banks and investment securities during the quarter - nominal			2.63	%					2.47	%					0.16								2.81	%
Average yield on interest-bearing due from banks and investment securities during the quarter - tax equivalent			2.71	%					2.61	%					0.10								2.92	%

As of September 30, 2019, we maintained noninterest-bearing cash positions of $32.5 million and interest-bearing deposits of $56.1 million at the Federal Reserve Bank and correspondent banks.

Investment securities totaled $272.3 million at September 30, 2019, compared with $239.6 million and $285.8 million at September 30, 2018 and June 30, 2019, respectively. During the first quarter of 2019, the Merchants acquisition included securities with a par value of $107.4 million. Management elected to sell securities with a par value of $13.8 million and $100.1 million during the three and nine months ended September 30, 2019, respectively. The sales resulted in net realized gains of $12 thousand and $137 thousand for the three and nine months ended September 30, 2019, respectively.

Average securities balances and weighted average tax equivalent yields for the quarters ended September 30, 2019 and 2018 were $271.6 million and 2.85% compared to $248.4 million and 2.74%, respectively.

At September 30, 2019, our net unrealized gains on available-for-sale investment securities were $3.3 million compared with net unrealized losses of $5.8 million and unrealized gains of $3.4 million at September 30, 2018 and June 30, 2019, respectively. The changes in net unrealized losses on the investment securities portfolio were due to changes in market interest rates.

TABLE 4
DEPOSITS BY TYPE - UNAUDITED
(amounts in thousands)
	At September 30,																				At June 30,
				% of						% of				Change										% of
	2019			Total			2018			Total			Amount				%				2019			Total
Demand - noninterest-bearing	$	412,410		33	%		$	361,516		32	%		$	50,894			14		%		$	397,349		32	%
Demand - interest-bearing		239,547		19				251,323		22				(11,776	)		(5	)	%			238,175		19
Money market		317,120		25				259,230		23				57,890			22		%			300,847		24
Total demand		969,077		77				872,069		77				97,008			11		%			936,371		75
Savings		137,441		11				111,388		10				26,053			23		%			138,591		11
Total non-maturing deposits		1,106,518		88				983,457		87				123,061			13		%			1,074,962		86
Certificates of deposit		155,621		12				161,304		13				(5,683	)		(4	)	%			160,556		14
Total deposits	$	1,262,139		100	%		$	1,144,761		100	%		$	117,378			10		%		$	1,235,518		100	%

Total deposits at September 30, 2019, increased $117 million or 10% to $1.262 billion compared to September 30, 2018 and increased $27 million or 9% annualized compared to June 30, 2019. Total non-maturing deposits increased $123.1 million or 13% compared to the same date a year ago and increased $31.6 million or 12% annualized compared to June 30, 2019. Certificates of deposit decreased $5.7 million or 4% compared to the same date a year ago and decreased $4.9 million or 12% annualized compared to June 30, 2019.

During the first quarter of 2019, the Merchants acquisition provided an additional $190.2 million of deposits. The decrease in the acquired deposits of $23.2 million at September 30, 2019 is not attributable to the loss of any significant relationships. As illustrated in the following table, legacy deposits have experienced their seasonal decline, while wholesale time deposits have matured and were not renewed.

TABLE 5
YEAR TO DATE CHANGES IN DEPOSITS
(amounts in thousands)
	Legacy Deposits			Acquired Merchants Deposits			Change In Acquired Deposits For The Eight Months Ended				Change In Legacy Deposits For The Nine Months Ended				Deposits At
	At December 31,			At January 31,			September 30,				September 30,				At September 30,
	2018			2019			2019				2019				2019
Demand - noninterest-bearing	$	347,199		$	51,880		$	(5,233	)		$	18,564			$	412,410
Demand - interest-bearing		252,202			28,231			(5,031	)			(35,855	)			239,547
Money market		265,093			43,316			(2,314	)			11,025				317,120
Total demand		864,494			123,427			(12,578	)			(6,266	)			969,077
Savings		114,840			28,786			(3,530	)			(2,655	)			137,441
Total non-maturing deposits		979,334			152,213			(16,108	)			(8,921	)			1,106,518
Certificates of deposit		152,382			38,003			(7,047	)			(27,717	)			155,621
Total deposits	$	1,131,716		$	190,216		$	(23,155	)		$	(36,638	)		$	1,262,139

TABLE 6
WHOLESALE AND RECIPROCAL DEPOSITS - UNAUDITED
(amounts in thousands)
	At September 30,						At June 30,
	2019			2018			2019
CDARS / ICS reciprocal deposits	$	57,897		$	78,772		$	60,492
Online listing service wholesale time deposits		248			24,397			248
Total wholesale and reciprocal deposits	$	58,145		$	103,169		$	60,740

For calendar quarters prior to April 1, 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, this is no longer so.

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 7
AVERAGE COST OF FUNDS - UNAUDITED
For The Three Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,			December 31,
	2019			2019			2019			2018			2018			2018			2018			2017
Interest-bearing deposits	0.56	%		0.54	%		0.49	%		0.45	%		0.42	%		0.41	%		0.41	%		0.42	%
Interest-bearing deposits and noninterest-bearing demand	0.38	%		0.37	%		0.34	%		0.31	%		0.29	%		0.29	%		0.29	%		0.30	%
All interest-bearing liabilities	0.68	%		0.74	%		0.67	%		0.61	%		0.64	%		0.68	%		0.60	%		0.59	%
All interest-bearing liabilities and noninterest-bearing demand	0.46	%		0.52	%		0.46	%		0.42	%		0.45	%		0.50	%		0.43	%		0.42	%

INCOME STATEMENT OVERVIEW

TABLE 8
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
	For The Three Months Ended
	September 30,						Change						June 30,			Change
	2019			2018			Amount			%			2019			Amount				%
Interest income	$	15,201		$	13,431		$	1,770		13	%		$	15,127		$	74			0		%
Interest expense		1,479			1,304			175		13	%			1,632			(153	)		(9	)	%
Net interest income		13,722			12,127			1,595		13	%			13,495			227			2		%
Provision for loan and lease losses		—			—			—		—	%			—			—			—		%
Noninterest income		1,006			943			63		7	%			1,100			(94	)		(9	)	%
Noninterest expense		8,300			7,634			666		9	%			9,611			(1,311	)		(14	)	%
Income before provision for income taxes		6,428			5,436			992		18	%			4,984			1,444			29		%
Provision for income taxes		1,786			1,404			382		27	%			1,340			446			33		%
Net income	$	4,642		$	4,032		$	610		15	%		$	3,644		$	998			27		%
Basic earnings per share	$	0.26		$	0.25		$	0.01		4	%		$	0.20		$	0.06			30		%
Average basic shares		18,130			16,252			1,878		12	%			18,134			(4	)		—		%
Diluted earnings per share	$	0.26		$	0.25		$	0.01		4	%		$	0.20		$	0.06			30		%
Average diluted shares		18,196			16,342			1,854		11	%			18,194			2			—		%
Dividends declared per common share	$	0.05		$	0.04		$	0.01		25	%		$	0.05		$	—			—		%

Third Quarter of 2019 Compared With Third Quarter of 2018

Net income for the third quarter of 2019 increased $610 thousand compared to the third quarter of 2018. In the current quarter, net interest income was $1.6 million higher and noninterest income was $63 thousand higher. These positive changes were offset by noninterest expenses that were $666 thousand higher and the provision for income taxes was $382 thousand higher.

Net Interest Income

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

Interest income for the third quarter of 2019 increased $1.8 million or 13% to $15.2 million.

• Interest and fees on loans increased $1.4 million due to an $11.6 million increase in average loan balances and an 8 basis point increase in the average yield on the loan portfolio.
• Interest on investment securities increased $271 thousand due to a $23.1 million increase in average securities balances and an 18 basis point increase in average yield on the securities portfolio.
• Interest on interest-bearing deposits due from banks increased $54 thousand due to an $8.5 million increase in average interest-bearing deposit balances, and an 8 basis point increase in average yield.

Interest expense for the third quarter of 2019 increased $175 thousand or 13% to $1.5 million.

• Interest expense on interest-bearing deposits increased $350 thousand. Average interest-bearing demand and savings deposit balances increased $88.8 million, while average certificate of deposit balances decreased $5.7 million. The average rate paid on interest-bearing deposits increased 14 basis points.
• 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 in the current quarter compared to average borrowings of $22.3 million in the same quarter a year ago.
• Interest expense on other term debt and junior subordinated debentures decreased $80 thousand. During the second quarter of 2019, we completed the early repayment of our variable rate senior debt.

Provision for loan and lease losses

As illustrated in Table 10, the nonaccrual status of a $10.1 million commercial real estate loan has resulted in a deterioration in our asset quality metrics. The loan is current and management believes it is adequately collateralized. Net loan loss charge-offs were only $160 thousand for the current quarter and no provision for loan and lease losses was necessary. There was no provision for loan and lease losses in the third quarter of 2018.

Noninterest Income

Noninterest income for the three months ended September 30, 2019 increased $63 thousand compared to the third quarter for 2018. The change was not concentrated in any one item.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2019 increased $666 thousand compared to the same period a year previous. The increase was primarily due to increased operating costs from our Merchants acquisition and $191 thousand in amortization of the core deposit intangible for the deposits acquired from Merchants. The increases were partially offset by $193 thousand in Small Bank Assessment Credits from the FDIC.

The Company’s efficiency ratio was 56.4% for the third quarter of 2019; the ratio during the same period in 2018 was 58.4%.

Income Tax Provision

For the three months ended September 30, 2019, our income tax provision of $1.8 million on pre-tax income of $6.4 million was an effective tax rate of 27.8%. The tax provision for the third quarter of the prior year was $1.4 million on pre-tax income of $5.4 million for an effective tax rate of 25.8%. The Company’s effective tax rate has increased as muni income, tax credits and permanent deductions arising from investments in low income housing partnerships comprise a smaller percentage of pre-tax income. The increase during the current quarter was also due to the write-off of a $41 thousand deferred tax asset resulting from expiration of a capital loss carryforward.

Third Quarter of 2019 Compared With Second Quarter of 2019

Net income for the third quarter of 2019 increased $998 thousand compared to the second quarter of 2019. In the current quarter net interest income was $227 thousand higher and noninterest expense was $1.3 million lower. These positive changes were partially offset by noninterest income that was $94 thousand lower and the provision for income taxes that was $446 thousand higher.

Net Interest Income

Net interest income increased $227 thousand over the prior quarter.

Interest income for the three months ended September 30, 2019 increased $74 thousand or less than one percent to $15.2 million.

• Interest and fees on loans increased $166 thousand due to a $1.3 million increase in average loan balances and a ten basis point increase in the average yield on the loan portfolio.
• Interest on investment securities decreased $181 thousand due to a $17.8 million decrease in average securities balances partially offset by an 11 basis point increase in average yield on the investment portfolio.
• Interest on interest-bearing deposits due from banks increased $89 thousand due to a $23.3 million increase in average balances.
• The third quarter of 2019 was one day longer than the second quarter of 2019.

Interest expense for the three months ended September 30, 2019 decreased $153 thousand or 9% to $1.5 million.

• Interest expense on interest-bearing deposits increased $61 thousand. Average interest-bearing demand and savings deposit balances increased $16.6 million, while average certificates of deposit decreased $6.5 million. The average rate paid on interest-bearing deposits increased by two basis points.
• Interest expense on borrowings from the Federal Home Loan Bank of San Francisco decreased $192 thousand. There were no Federal Home Loan Bank of San Francisco borrowings outstanding in the current quarter, compared to average borrowings of $30.0 million in the prior quarter
• Interest expense on other term debt and junior subordinated debentures decreased $22 thousand. During the second quarter of 2019, we completed the early repayment and termination of our senior debt agreement.

Provision for loan and lease losses

As a result of improvements in our asset quality metrics and loan loss charge-offs totaling only $160 thousand for the current quarter, no provision for loan and lease losses was necessary during current quarter. There was no provision for loan and lease losses in the prior quarter.

Noninterest Income

Noninterest income for the three months ended September 30, 2019 decreased $94 thousand, the decrease was not concentrated in any one item.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2019 decreased $1.3 million. The decrease was due to:

• $803 thousand in costs related to the acquisition and name change in the prior quarter that did not recur.
• $263 thousand in decreased salaries and benefit cost.
• $193 thousand in Small Bank Assessment Credits from the FDIC.

The Company’s efficiency ratio was 56.4% for the third quarter of 2019; the ratio during the prior quarter was 65.9%.

Income Tax Provision

For the three months ended September 30, 2019, our income tax provision of $1.8 million on pre-tax income of $6.4 million was an effective tax rate of 27.8%. The income tax provision for the prior quarter of $1.3 million on pre-tax income of $5.0 million was an effective tax rate of 26.9%. The Company’s effective tax rate has increased as credits and deductions comprised a smaller percentage of pre-tax income. The increase during the current quarter was also due to the write-off of a $41 thousand deferred tax asset resulting from expiration of a capital loss carryforward.

Earnings Per Share

Diluted earnings per share were $0.26 for the three months ended September 30, 2019 compared with diluted earnings per share of $0.25 for the same period a year ago and diluted earnings per share of $0.20 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in Table 8 presented earlier in this press release. During the third quarter of 2019, we adopted a share repurchase program that authorizes the Company to purchase up to one million shares of its common stock over a period ending March 31, 2020. As of October 18, 2019 no shares have been repurchased under the program.

TABLE 9a
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
		For The Three Months Ended
		September 30, 2019									September 30, 2018									June 30, 2019
		Average						Yield /			Average						Yield /			Average						Yield /
		Balance			Interest(1)			Rate (5)			Balance			Interest(1)			Rate (5)			Balance			Interest(1)			Rate (5)
Interest-earning assets:
Net loans (2)		$	1,029,534		$	13,013		5.01	%		$	930,863		$	11,568		4.93	%		$	1,028,187		$	12,847		5.01	%
Taxable securities			238,601			1,609		2.68	%			199,883			1,209		2.40	%			249,907			1,733		2.78	%
Tax-exempt securities (3)			32,974			271		3.26	%			48,561			400		3.27	%			39,501			328		3.33	%
Interest-bearing deposits in other banks			58,897			308		2.07	%			50,397			254		2.00	%			35,605			219		2.47	%
Average interest- earning assets			1,360,006			15,201		4.43	%			1,229,704			13,431		4.33	%			1,353,200			15,127		4.48	%
Cash and due from banks			23,822									21,834									21,942
Premises and equipment, net			15,922									13,768									15,819
Goodwill and core deposit intangible, net			16,769									1,888									16,995
Other assets			45,925									33,084									42,769
Average total assets		$	1,462,444								$	1,300,278								$	1,450,725
Interest-bearing liabilities:
Interest-bearing demand		$	243,553			117		0.19	%		$	235,664			104		0.18	%		$	238,840			129		0.22	%
Money market			309,188			451		0.58	%			259,242			172		0.26	%			296,326			380		0.51	%
Savings			138,296			131		0.38	%			107,349			73		0.27	%			139,307			123		0.35	%
Certificates of deposit			157,620			491		1.24	%			163,302			465		1.13	%			164,084			497		1.21	%
Federal Home Loan Bank of San Francisco borrowings			—			—		—	%			22,283			121		2.15	%			30,000			192		2.57	%
Other borrowings net of unamortized debt issuance costs			9,942			183		7.30	%			14,681			265		7.16	%			10,841			201		7.44	%
Junior subordinated debentures			10,310			106		4.08	%			10,310			104		4.00	%			10,310			110		4.28	%
Average interest- bearing liabilities			868,909			1,479		0.68	%			812,831			1,304		0.64	%			889,708			1,632		0.74	%
Noninterest-bearing demand			405,853									343,948									379,173
Other liabilities			18,074									12,000									18,246
Shareholders’ equity			169,608									131,499									163,598
Average liabilities and shareholders’ equity		$	1,462,444								$	1,300,278								$	1,450,725
Net interest income and net interest margin (4)					$	13,722		4.00	%					$	12,127		3.91	%					$	13,495		4.00	%
(1) Interest income on loans includes deferred fees and costs of approximately $161 thousand, $74 thousand, and $91 thousand for the three months ended September 30, 2019, and 2018 and June 30, 2019, respectively.
(2) Net loans includes average nonaccrual loans of $13.2 million, $3.8 million and $13.7 million for the three months ended September 30, 2019 and 2018 and June 30, 2019, respectively.
(3) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis.
(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets.
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.

TABLE 9b
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
		For The Nine Months Ended
		September 30, 2019									September 30, 2018
		Average						Yield /			Average						Yield /
		Balance			Interest(1)			Rate (5)			Balance			Interest(1)			Rate (5)
Interest-earning assets:
Net loans (2)		$	1,017,127		$	37,891		4.98	%		$	912,648		$	33,461		4.90	%
Taxable securities			247,139			5,106		2.76	%			203,791			3,696		2.42	%
Tax-exempt securities (3)			40,912			986		3.22	%			52,844			1,276		3.23	%
Interest-bearing deposits in other banks			44,995			772		2.29	%			37,515			518		1.85	%
Average interest- earning assets			1,350,173			44,755		4.43	%			1,206,798			38,951		4.32	%
Cash and due from banks			22,375									19,801
Premises and equipment, net			15,445									14,161
Goodwill and core deposit intangible, net			15,230									1,943
Other assets			43,253									32,666
Average total assets		$	1,446,476								$	1,275,369
Interest-bearing liabilities:
Interest-bearing demand		$	241,924			372		0.21	%		$	231,958			273		0.16	%
Money market			299,694			1,120		0.50	%			245,797			439		0.24	%
Savings			136,254			365		0.36	%			108,382			196		0.24	%
Certificates of deposit			163,020			1,478		1.21	%			171,941			1,448		1.13	%
Federal Home Loan Bank of San Francisco borrowings			12,894			247		2.56	%			30,037			435		1.94	%
Other borrowings net of unamortized debt issuance costs			11,213			623		7.43	%			15,601			825		7.07	%
Junior subordinated debentures			10,310			329		4.27	%			10,310			283		3.67	%
Average interest- bearing liabilities			875,309			4,534		0.69	%			814,026			3,899		0.64	%
Noninterest-bearing demand			391,208									320,316
Other liabilities			17,927									12,094
Shareholders’ equity			162,032									128,933
Average liabilities and shareholders’ equity		$	1,446,476								$	1,275,369
Net interest income and net interest margin (4)					$	40,221		3.98	%					$	35,052		3.88	%
(1) Interest income on loans includes deferred fees and costs of approximately $433 thousand and $356 thousand for the nine months ended September 30, 2019 and 2018, respectively.
(2) Net loans includes average nonaccrual loans of $11.8 million and $4.3 million for the nine months ended September 30, 2019 and 2018, respectively.
(3) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis.
(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets.
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.

TABLE 10
ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED
(amounts in thousands)
	For The Three Months Ended
	September 30,					June 30,					March 31,					December 31,					September 30,
	2019					2019					2019					2018					2018
Beginning balance ALLL	$	12,445				$	12,242				$	12,292				$	12,392				$	12,388
Provision for loan and lease losses		—					—					—					—					—
Loans charged-off		(319	)				(659	)				(348	)				(279	)				(198	)
Loan loss recoveries		159					862					298					179					202
Ending balance ALLL	$	12,285				$	12,445				$	12,242				$	12,292				$	12,392
	At September 30,					At June 30,					At March 31,					At December 31,					At September 30,
	2019					2019					2019					2018					2018
Nonaccrual loans:
Commercial	$	139				$	194				$	1,018				$	959				$	899
Real estate - commercial non-owner occupied		10,099					10,690					10,878					—					—
Real estate - commercial owner occupied		—					—					—					548					—
Real estate - residential - ITIN		2,339					2,389					2,392					2,388					2,571
Real estate - residential - 1-4 family mortgage		198					217					182					185					179
Real estate - residential - equity lines		—					—					42					43					44
Consumer and other		21					22					23					23					24
Total nonaccrual loans		12,796					13,512					14,535					4,146					3,717
Accruing troubled debt restructured loans:
Commercial		629					1,092					1,187					1,224					1,291
Real estate - commercial non-owner occupied		—					791					793					795					797
Real estate - residential - ITIN		4,072					4,300					4,342					4,484					4,535
Real estate - residential - equity lines		236					242					358					363					367
Total accruing troubled debt restructured loans		4,937					6,425					6,680					6,866					6,990
All other accruing impaired loans		—					—					—					—					—
Total impaired loans	$	17,733				$	19,937				$	21,215				$	11,012				$	10,707
Gross loans outstanding at period end	$	1,033,082				$	1,036,724				$	1,034,606				$	946,251				$	927,480
Impaired loans to gross loans		1.72		%			1.92		%			2.05		%			1.16		%			1.15		%
Nonaccrual loans to gross loans		1.24		%			1.30		%			1.40		%			0.44		%			0.40		%
Allowance for loan and lease losses as a percent of:
Gross loans		1.19		%			1.20		%			1.18		%			1.30		%			1.34		%
Nonaccrual loans		96.01		%			92.10		%			84.22		%			296.48		%			333.39		%
Impaired loans		69.28		%			62.42		%			57.70		%			111.62		%			115.74		%

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 illustrated in Table 10, the nonaccrual status of a $10.1 million commercial real estate loan has resulted in a deterioration in our asset quality metrics for the first three quarters of 2019 however, the loan is current and management believes it is adequately collateralized. Net loan loss charge-offs totaled only $160 thousand for the quarter ended September 30, 2019 and no provision for loan and lease losses was necessary for the quarter. There was no provision for loan and lease loss during the prior quarter or during the same quarter a year ago.

The loans acquired from Merchants were recorded at fair value which included a discount for credit risk which is not a part of the ALLL. As a result, our ALLL as a percentage of gross loans declined to 1.19% as of September 30, 2019 compared to 1.34% as of September 30, 2018 and decreased compared to 1.20% as of June 30, 2019.

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 September 30, 2019. 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 September 30, 2019, the recorded investment in loans classified as impaired totaled $17.7 million, with a corresponding specific reserve of $335 thousand compared to impaired loans of $10.7 million with a corresponding specific reserve of $1.1 million at September 30, 2018 and impaired loans of $19.9 million, with a corresponding specific reserve of $727 thousand at June 30, 2019. The increase in loans classified as impaired compared to the same period a year ago results from one $10.1 million commercial real estate loan.

TABLE 11
TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
		At September 30,				At June 30,				At March 31,				At December 31,				At September 30,
		2019				2019				2019				2018				2018
Nonaccrual		$	1,746			$	1,828			$	2,725			$	2,693			$	2,720
Accruing			4,937				6,425				6,680				6,866				6,990
Total troubled debt restructurings		$	6,683			$	8,253			$	9,405			$	9,559			$	9,710
Troubled debt restructurings as a percentage of total gross loans			0.65	%			0.80	%			0.91	%			1.01	%			1.05	%

There were no new troubled debt restructurings during the three months ended September 30, 2019. As of September 30, 2019, we had 99 restructured loans that qualified as troubled debt restructurings, of which 97 were performing according to their restructured terms.

TABLE 12
NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
		At September 30,				At June 30,				At March 31,				At December 31,				At September 30,
		2019				2019				2019				2018				2018
Total nonaccrual loans		$	12,796			$	13,512			$	14,535			$	4,146			$	3,717
90 days past due and still accruing			—				—				—				—				—
Total nonperforming loans			12,796				13,512				14,535				4,146				3,717
Other real estate owned ("OREO")			58				—				34				31				136
Total nonperforming assets		$	12,854			$	13,512			$	14,569			$	4,177			$	3,853
Nonperforming loans to gross loans			1.24	%			1.30	%			1.40	%			0.44	%			0.40	%
Nonperforming assets to total assets			0.87	%			0.94	%			0.99	%			0.32	%			0.29	%

The following table summarizes when loans are projected to reprice by year and rate index as of September 30, 2019.

TABLE 13
LOANS BY RATE INDEX AND PROJECTED REPAYMENT - UNAUDITED
(amounts in thousands)
At September 30, 2019
																	Years 6
																	Through			Beyond
		Year 1			Year 2			Year 3			Year 4			Year 5			Year 10			Year 10			Total
Rate Index:
Fixed		$	46,963		$	51,876		$	43,148		$	76,813		$	33,417		$	154,808		$	35,385		$	442,410
Variable:
Prime			99,652			4,827			5,729			8,198			7,667			1,644			—			127,717
5 Year Treasury			20,669			53,077			70,058			88,475			73,234			53,514			—			359,027
7 Year Treasury			904			3,556			8,698			4,762			5,629			13,919			—			37,468
1 Year LIBOR			21,615			—			—			—			—			—			—			21,615
Other Indexes			4,518			2,655			1,676			2,121			1,451			21,370			238			34,029
Nonaccrual			1,080			9,800			292			275			257			814			278			12,796
Total		$	195,401		$	125,791		$	129,601		$	180,644		$	121,655		$	246,069		$	35,901		$	1,035,062

TABLE 14
UNAUDITED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
	At September 30,									Change								At June 30,
		2019				2018				$				%				2019
Assets:
Cash and due from banks		$	32,505			$	21,316			$	11,189			52		%		$	21,306
Interest-bearing deposits in other banks			56,099				69,920				(13,821	)		(20	)	%			19,319
Total cash and cash equivalents			88,604				91,236				(2,632	)		(3	)	%			40,625
Securities available-for-sale, at fair value			272,341				239,633				32,708			14		%			285,819
Loans, net of deferred fees and costs			1,035,062				929,237				105,825			11		%			1,038,729
Allowance for loan and lease losses			(12,285	)			(12,392	)			107			(1	)	%			(12,445	)
Net loans			1,022,777				916,845				105,932			12		%			1,026,284
Premises and equipment, net			16,084				13,495				2,589			19		%			15,836
Other real estate owned			58				136				(78	)		(57	)	%			—
Life insurance			23,576				22,282				1,294			6		%			23,449
Deferred tax asset, net			4,818				8,084				(3,266	)		(40	)	%			4,791
Goodwill and core deposit intangible, net			16,672				1,864				14,808			794		%			16,900
Other assets			27,497				21,894				5,603			26		%			28,282
Total assets		$	1,472,427			$	1,315,469			$	156,958			12		%		$	1,441,986
Liabilities and shareholders' equity:
Demand - noninterest-bearing		$	412,410			$	361,516			$	50,894			14		%		$	397,349
Demand - interest-bearing			239,547				251,323				(11,776	)		(5	)	%			238,175
Money market			317,120				259,230				57,890			22		%			300,847
Savings			137,441				111,388				26,053			23		%			138,591
Certificates of deposit			155,621				161,304				(5,683	)		(4	)	%			160,556
Total deposits			1,262,139				1,144,761				117,378			10		%			1,235,518
Term debt:
Other borrowings			10,000				14,396				(4,396	)		(31	)	%			10,000
Unamortized debt issuance costs			(55	)			(103	)			48			(47	)	%			(67	)
Net term debt			9,945				14,293				(4,348	)		(30	)	%			9,933
Junior subordinated debentures			10,310				10,310				—			—		%			10,310
Other liabilities			18,396				13,136				5,260			40		%			18,372
Total liabilities			1,300,790				1,182,500				118,290			10		%			1,274,133
Shareholders' equity:
Common stock			72,200				52,191				20,009			38		%			72,087
Retained earnings			97,100				84,857				12,243			14		%			93,363
Accumulated other comprehensive income (loss), net of tax			2,337				(4,079	)			6,416			(157	)	%			2,403
Total shareholders' equity			171,637				132,969				38,668			29		%			167,853
Total liabilities and shareholders' equity		$	1,472,427			$	1,315,469			$	156,958			12		%		$	1,441,986
Total interest-earning assets		$	1,360,184			$	1,244,581			$	115,603			9		%		$	1,340,456
Shares outstanding			18,212				16,330				1,882			12		%			18,214
Book value per share		$	9.42			$	8.14			$	1.28			16		%		$	9.22
Tangible book value per share (1)		$	8.51			$	8.03			$	0.48			6		%		$	8.29
(1)  Book value per share is computed by dividing total shareholders’ equity by shares outstanding. 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 15
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
		For The Three Months Ended																		For The Nine Months Ended
		September 30,							Change								June 30,			September 30,
		2019			2018				$				%				2019			2019			2018
Interest income:
Interest and fees on loans		$	13,013		$	11,568			$	1,445			12		%		$	12,847		$	37,891		$	33,461
Interest on taxable securities			1,609			1,209				400			33		%			1,733			5,106			3,696
Interest on tax-exempt securities			271			400				(129	)		(32	)	%			328			986			1,276
Interest on interest-bearing deposits in other banks			308			254				54			21		%			219			772			518
Total interest income			15,201			13,431				1,770			13		%			15,127			44,755			38,951
Interest expense:
Interest on demand deposits			117			104				13			13		%			129			372			273
Interest on money market			451			172				279			162		%			380			1,120			439
Interest on savings			131			73				58			79		%			123			365			196
Interest on certificates of deposit			491			465				26			6		%			497			1,478			1,448
Interest on Federal Home Loan Bank of San Francisco borrowings			—			121				(121	)		(100	)	%			192			247			435
Interest on other borrowings			183			265				(82	)		(31	)	%			201			623			825
Interest on junior subordinated debentures			106			104				2			2		%			110			329			283
Total interest expense			1,479			1,304				175			13		%			1,632			4,534			3,899
Net interest income			13,722			12,127				1,595			13		%			13,495			40,221			35,052
Provision for loan and lease losses			—			—				—			—		%			—			—			—
Net interest income after provision for loan and lease losses			13,722			12,127				1,595			13		%			13,495			40,221			35,052
Noninterest income:
Service charges on deposit accounts			177			170				7			4		%			187			532			521
ATM and point of sale fees			293			282				11			4		%			318			876			848
Fees on payroll and benefit processing			158			159				(1	)		(1	)	%			157			486			474
Life insurance			126			128				(2	)		(2	)	%			155			410			384
Gain on investment securities, net			12			1				11			1,100		%			33			137			41
Federal Home Loan Bank of San Francisco dividends			131			104				27			26		%			124			376			279
Gain (Loss) on sale of OREO			—			(7	)			7			100		%			18			41			9
Other income			109			106				3			3		%			108			305			331
Total noninterest income			1,006			943				63			7		%			1,100			3,163			2,887

TABLE 15 - CONTINUED
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
		For The Three Months Ended																		For The Nine Months Ended
		September 30,							Change								June 30,			September 30,
		2019				2018			$				%				2019			2019			2018
Noninterest expense:
Salaries and related benefits			5,005				4,529			476			11		%			5,146			15,880			13,897
Premises and equipment			950				1,017			(67	)		(7	)	%			945			2,887			3,104
Federal Deposit Insurance Corporation insurance premium			(104	)			94			(198	)		(211	)	%			95			91			283
Data processing fees			565				518			47			9		%			621			1,745			1,421
Professional service fees			392				336			56			17		%			535			1,230			995
Telecommunications			194				55			139			253		%			180			547			449
Acquisition			(113	)			42			(155	)		(369	)	%			376			2,193			42
Other expenses			1,411				1,043			368			35		%			1,713			4,261			3,147
Total noninterest expense			8,300				7,634			666			9		%			9,611			28,834			23,338
Income before provision for income taxes			6,428				5,436			992			18		%			4,984			14,550			14,601
Provision for income taxes			1,786				1,404			382			27		%			1,340			3,958			3,710
Net income		$	4,642			$	4,032		$	610			15		%		$	3,644		$	10,592		$	10,891
Basic earnings per share		$	0.26			$	0.25		$	0.01			4		%		$	0.20		$	0.59		$	0.67
Average basic shares			18,130				16,252			1,878			12		%			18,134			17,918			16,242
Diluted earnings per share		$	0.26			$	0.25		$	0.01			4		%		$	0.20		$	0.59		$	0.67
Average diluted shares			18,196				16,342			1,854			11		%			18,194			17,981			16,327

TABLE 16
UNAUDITED CONDENSED CONSOLIDATED
QUARTERLY AVERAGE BALANCE SHEETS
(amounts in thousands)
		For The Three Months Ended
		September 30,			June 30,			March 31,			December 31,			September 30,
		2019			2019			2019			2018			2018
Earning assets:
Loans		$	1,029,534		$	1,028,187		$	993,261		$	923,409		$	930,863
Taxable securities			238,601			249,907			253,068			218,137			199,883
Tax-exempt securities			32,974			39,501			50,454			42,868			48,561
Interest-bearing deposits in other banks			58,897			35,605			40,223			75,295			50,397
Total earning assets			1,360,006			1,353,200			1,337,006			1,259,709			1,229,704
Cash and due from banks			23,822			21,942			21,392			22,447			21,834
Premises and equipment, net			15,922			15,819			14,581			13,331			13,768
Goodwill and core deposit intangible, net			16,769			16,995			11,872			1,842			1,888
Other assets			45,925			42,769			41,009			31,488			33,084
Total assets		$	1,462,444		$	1,450,725		$	1,425,860		$	1,328,817		$	1,300,278
Liabilities and shareholders' equity:
Demand - noninterest-bearing		$	405,853		$	379,173		$	388,410		$	367,457		$	343,948
Demand - interest-bearing			243,553			238,840			243,376			257,227			235,664
Money market			309,188			296,326			293,396			265,190			259,242
Savings			138,296			139,307			131,081			110,934			107,349
Certificates of deposit			157,620			164,084			167,463			157,035			163,302
Total deposits			1,254,510			1,217,730			1,223,726			1,157,843			1,109,505
Federal Home Loan Bank of San Francisco borrowings			—			30,000			8,778			—			22,283
Other borrowings net of unamortized debt issuance costs			9,942			10,841			12,889			13,785			14,681
Junior subordinated debentures			10,310			10,310			10,310			10,310			10,310
Other liabilities			18,074			18,246			17,452			12,846			12,000
Total liabilities			1,292,836			1,287,127			1,273,155			1,194,784			1,168,779
Shareholders' equity			169,608			163,598			152,705			134,033			131,499
Liabilities & shareholders' equity		$	1,462,444		$	1,450,725		$	1,425,860		$	1,328,817		$	1,300,278

TABLE 17
UNAUDITED CONDENSED CONSOLIDATED
YEAR TO DATE AVERAGE BALANCE SHEETS
(amounts in thousands)
	For the Nine Months Ended							For the Twelve Months Ended
		September 30,			September 30,			December 31,			December 31,			December 31,
		2019			2018			2018			2017			2016
Earning assets:
Loans		$	1,017,127		$	912,648		$	915,360		$	818,119		$	752,938
Taxable securities			247,139			203,791			207,407			165,333			120,884
Tax-exempt securities			40,912			52,844			50,330			74,231			75,303
Interest-bearing deposits in other banks			44,995			37,515			47,038			66,872			58,668
Total earning assets			1,350,173			1,206,798			1,220,135			1,124,555			1,007,793
Cash and due from banks			22,375			19,801			20,468			18,301			15,831
Premises and equipment, net			15,445			14,161			13,952			15,567			15,078
Goodwill and core deposit intangible, net			15,230			1,943			1,917			2,136			1,888
Other assets			43,253			32,666			32,369			37,692			39,160
Total assets		$	1,446,476		$	1,275,369		$	1,288,841		$	1,198,251		$	1,079,750
Liabilities and shareholders' equity:
Demand - noninterest-bearing		$	391,208		$	320,316		$	332,197		$	289,735		$	226,368
Demand - interest-bearing			241,924			231,958			238,328			209,792			172,011
Money market			299,694			245,797			250,685			224,913			202,159
Savings			136,254			108,382			109,025			111,376			104,771
Certificates of deposit			163,020			171,941			168,183			205,648			221,074
Total deposits			1,232,100			1,078,394			1,098,418			1,041,464			926,383
Federal Home Loan Bank of San Francisco borrowings			12,894			30,037			22,466			302			17,856
Other borrowings net of unamortized debt issuance costs			11,213			15,601			15,143			17,981			19,430
Junior subordinated debentures			10,310			10,310			10,310			10,310			10,310
Other liabilities			17,927			12,094			12,286			12,293			13,217
Total liabilities			1,284,444			1,146,436			1,158,623			1,082,350			987,196
Shareholders' equity			162,032			128,933			130,218			115,901			92,554
Liabilities & shareholders' equity		$	1,446,476		$	1,275,369		$	1,288,841		$	1,198,251		$	1,079,750

About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, California and is the parent company for Merchants Bank of Commerce. The Bank is an FDIC-insured California banking corporation providing community banking and financial services in northern California from Sacramento to Yreka along the Interstate 5 corridor. 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 Officer Telephone Direct (916) 677-5800

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

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

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