BOCH Bank of Commerce Holdings

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

Current Report

 

Pursuant to Section 13 or 15(D)

of the Securities Exchange Act Of 1934

 

Date of report (Date of earliest event reported):
January 30, 2015

  

Bank of Commerce Holdings

(Exact name of registrant as specified in its charter)

 

California

(State or other jurisdiction of incorporation)

  

0-25135		94-2823865
(Commission File Number)		IRS Employer Identification No.

 

1901 Churn Creek Road
Redding, California 96002
(Address of principal executive offices) (zip code)

 

Registrant's telephone number, including area code: (530) 722-3939

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2 below):

  

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act of (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act of (17 CFR 240.13e-4(c))

 

  

Item 2.02 – Results of Operations and Financial Condition

 

On January 30, 2015, Bank of Commerce Holdings (the “Company”) issued a press release announcing its financial results for the quarter ended December 31, 2014. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein in its entirety by reference.

 

The information in this Item 2.02 and Exhibit 99.1 attached hereto is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such document or filing.

  

Item 9.01 - Financial Statements and Exhibits

 

(d) Exhibits:

  

99.1 Press Release dated January 30, 2015 announcing financial results for the quarter ended December 31, 2014.

 

 

SIGNATURES

  

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

January 30, 2015
	/s/ James A. Sundquist
	By: James A. Sundquist
	Executive Vice President - Chief Financial Officer

 

Exhibit 99.1

 

(NASDAQ: BOCH)

---

For Immediate Release:

Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2014

---

 

 

REDDING, California, January 30, 2015 / GLOBE NEWSWIRE— Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $997.2 million asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the fourth quarter and year ended December 31, 2014. Net income available to common shareholders for the quarter ended December 31, 2014 was $1.6 million or $0.12 per share – diluted, compared with $2.0 million or $0.14 per share – diluted for the same period of 2013. Net income available to common shareholders for the year ended December 31, 2014 was $5.5 million or $0.14 per share – diluted compared with $7.7 million or $0.52 for the same period of 2013.

 

Financial highlights for the full year 2014:

 

●	Net income available to common shareholders was $5.5 million for the year ended December 31, 2014 compared with $7.7 million for the same period a year ago.

●	Loans increased $62.8 million or 10% compared to the prior year.

●	Nonperforming assets decreased $8.5 million or 28% compared to the prior year.

●	Total deposits increased $42.7 million or 6% compared to the prior year.

●	Book value per share increased to $6.29 compared to $5.86 for the prior year.

 

Financial highlights for the fourth quarter of 2014:

 

●	Net income available to common shareholders was $1.6 million for the three months ended December 31, 2014 compared with $2.0 million for the same period a year ago and $1.2 million for the prior quarter.

●	Nonperforming assets decreased $2.7 million or 11% compared to the prior quarter.

●	Total deposits increased $21.5 million or 3% compared to the prior quarter.

●	Loans increased $11.2 million or 2% compared to the prior quarter.

●	Gain of $406 thousand from the discounted repayment of $5.0 million of junior subordinated debentures.

●	The quarter includes severance costs of $1.0 million associated with the retirement of a former executive.

  

Randall S. Eslick, President and CEO commented: “I am very pleased with our achievements during a challenging 2014. The executive management team is energized and our loan and deposit sales force is focused. On a year over year basis, we were able to increase total deposits 6%, increase loans 10% and make sizeable decreases in our nonperforming assets. We are poised to build on these successes in 2015.”

 

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 the Company’s 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 further reduce the demand for loans or reduce the value of real estate collateral securing most of the Company’s 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 year ended December 31, 2013 and under the heading: “Risk Factors” and subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation and specifically disclaims any obligation, to revise or publicly release the results of any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date the statements were made.

 

  

(NASDAQ: BOCH)

 

TABLE 1

SELECTED FINANCIAL INFORMATION - UNAUDITED

(amounts in thousands except per share data)

 

		At or For the Three Months Ended												At or For the Twelve Months Ended
		December 31,								September 30,				December 31,
		2014				2013				2014				2014				2013
Net income, average assets and average equity
Income available to common shareholders		$	1,633			$	2,037			$	1,223			$	5,527			$	7,735
Average total assets		$	985,771			$	939,732			$	994,373			$	993,925			$	954,302
Average shareholders' equity		$	103,579			$	102,084			$	102,109			$	102,364			$	106,193
Selected performance ratios
Return on average assets			0.68	%			0.89	%			0.51	%			0.58	%			0.83	%
Return on average equity			6.50	%			8.18	%			4.99	%			5.59	%			7.47	%
Efficiency ratio			78.55	%			61.79	%			69.98	%			74.05	%			59.59	%
Share and per share amounts
Common shares outstanding at period end			13,295				13,977				13,294				13,295				13,977
Weighted average shares - basic			13,295				14,143				13,294				13,475				14,940
Weighted average shares - diluted			13,335				14,176				13,339				13,520				14,964
Earnings per share - basic		$	0.12			$	0.14			$	0.09			$	0.41			$	0.52
Earnings per share - diluted		$	0.12			$	0.14			$	0.09			$	0.41			$	0.52
Book value per common share		$	6.29			$	5.86			$	6.17			$	6.29			$	5.86
Capital ratios
Bank of Commerce Holdings
Leverage ratio			11.59	%			12.80	%			11.87	%			11.59	%			12.80	%
Tier 1 risk based capital ratio			13.91	%			15.94	%			14.74	%			13.91	%			15.94	%
Total risk based capital ratio			15.16	%			17.20	%			15.99	%			15.16	%			17.20	%
Redding Bank of Commerce
Leverage ratio			11.57	%			12.49	%			11.84	%			11.57	%			12.49	%
Tier 1 risk based capital ratio			13.89	%			15.56	%			14.68	%			13.89	%			15.56	%
Total risk based capital ratio			15.14	%			16.82	%			15.93	%			15.14	%			16.82	%

  

The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. At December 31, 2014, the Company’s Tier 1 and Total risk based capital ratios were 13.91% and 15.16% respectively, while the leverage ratio was 11.59%. The decrease in capital ratios during the current quarter compared to the same period a year ago and the prior quarter is primarily due to repayment of junior subordinated debentures, repurchase of common stock, and increased average assets.

 

 

 

(NASDAQ: BOCH)

 
BALANCE SHEET OVERVIEW

 

As of December 31, 2014, the Company had total consolidated assets of $997.2 million, net loans of $650.2 million, allowance for loan and lease losses (“ALLL”) of $10.8 million, total deposits of $789.0 million, and shareholders’ equity of $103.6 million.

  

 

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(amounts in thousands)

 

		At December 31,																								At September 30,
						% of								% of				Change												% of
		2014				Total				2013				Total				Amount				%				2014				Total
Commercial		$	153,957				23	%		$	170,429				29	%		$	(16,472	)			-10	%		$	160,024				25	%
Real estate - construction loans			30,099				5	%			18,545				3	%			11,554				62	%			25,579				4	%
Real estate - commercial (investor)			215,114				33	%			205,384				34	%			9,730				5	%			216,204				33	%
Real estate - commercial (owner occupied)			115,389				17	%			83,976				14	%			31,413				37	%			105,889				16	%
Real estate - ITIN loans			52,830				8	%			56,101				9	%			(3,271	)			-6	%			53,805				8	%
Real estate - mortgage			13,156				2	%			14,590				2	%			(1,434	)			-10	%			13,779				2	%
Real estate - equity lines			44,981				7	%			45,462				8	%			(481	)			-1	%			45,050				7	%
Consumer			35,210				5	%			3,472				1	%			31,738				914	%			28,998				4	%
Other			162				0	%			36				0	%			126				350	%			367				1	%
Gross loans			660,898				100	%			597,995				100	%			62,903				11	%			649,695				100	%
Deferred fees and costs			157								303								(146	)							184
Loans, net of deferred fees and costs			661,055								598,298								62,757								649,879
Allowance for loan and lease losses			(10,820	)							(14,172	)							3,352								(10,400	)
Net loans		$	650,235							$	584,126							$	66,109							$	639,479
Average yield on loans			4.77	%							5.00	%							-0.23	%							4.59	%

  

The Company recorded gross loan balances of $660.9 at December 31, 2014, compared with $598.0 at December 31, 2013, an increase of $62.9 million. The increase in gross loans during the year ended December 31, 2014 was driven by strong organic loan originations and the purchase of wholesale loan pools. During 2014, the Company purchased $42.2 million and $18.5 million in consumer and SBA loan pools, respectively.

 

The decrease in the ALLL primarily resulted from $5.8 million in charge offs related to three significant borrowing relationships partially offset by $3.2 million in provision to the allowance for loan and lease losses. The loans associated with these three borrowers were collateral dependent, were adequately reserved for at December 31, 2013, and were subsequently charged-off during the second quarter of 2014. See table 7 for additional detail of the ALLL.

 

  

(NASDAQ: BOCH)

 

TABLE 3

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(amounts in thousands)

 

		At December 31,																								At September 30,
						% of								% of				Change												% of
		2014				Total				2013				Total				Amount				%				2014				Total
Cash and due from banks		$	43,949				16	%		$	38,369				12	%		$	5,580				15	%		$	31,151				11	%
Interest bearing due from banks			14,473				5	%			20,146				6	%			(5,673	)			-28	%			15,272				6	%
Total cash and cash equivalents			58,422				21	%			58,515				18	%			(93	)			0	%			46,423				17	%
U.S. government and agencies			6,393				2	%			6,264				2	%			129				2	%			7,825				3	%
Obligations of state and political subdivisions			54,363				20	%			59,209				21	%			(4,846	)			-8	%			57,161				21	%
Residential mortgage backed securities and collateralized mortgage obligations			47,015				17	%			62,991				20	%			(15,976	)			-25	%			46,498				17	%
Corporate securities			37,734				13	%			48,230				15	%			(10,496	)			-22	%			39,717				15	%
Commercial mortgage backed securities			10,389				4	%			10,472				3	%			(83	)			-1	%			11,100				4	%
Other asset backed securities			31,092				11	%			29,474				9	%			1,618				5	%			27,078				10	%
Total investment securities - AFS			186,986				67	%			216,640				70	%			(29,654	)			-14	%			189,379				70	%
Obligations of state and political subdivisions - HTM			36,806				12	%			36,696				12	%			110				0	%			36,888				13	%
Total investment securities			223,792				79	%			253,336				82	%			(29,544	)			-14	%			226,267				83	%
Total cash equivalents and investment securities		$	282,214				100	%		$	311,851				100	%		$	(29,637	)			-10	%		$	272,690				100	%
Yield on cash, cash equivalents and investment securities			2.58	%							2.49	%							0.09	%							2.43	%

 

The Company continued to maintain a strong liquidity position during the reporting period. As of December 31, 2014, the Company maintained cash positions at the Federal Reserve Bank and correspondent banks in the amount of $43.9 million. The Company also held certificates of deposits with other financial institutions in the amount of $14.5 million.

 

Available-for-sale investment securities totaled $187.0 million at December 31, 2014, compared with $216.6 million at December 31, 2013 and $189.4 million at September 30, 2014. The Company’s available-for-sale investment portfolio provides the Company a secondary source of liquidity to fund other higher yielding asset opportunities, such as loan originations and wholesale loan purchases. During the fourth quarter of 2014, the Company purchased twelve securities with a par value of $14.9 million and weighted average yield of 3.29% and sold nine securities with a par value of $11.4 million and weighted average yield of 2.44%. The sales activity resulted in $93 thousand in net realized gains for the three months ended December 31, 2014. Average quarterly securities balances and weighted average tax equivalent yields at December 31, 2014 and 2013 were $226.1 million and 3.40% compared to $252.7 million and 3.30%, respectively.

 

During the year ended December 31, 2014, the Company’s securities purchases were focused on moderate term maturities, taking advantage of the steepness of the yield curve, which moderates the Company’s exposure to rising interest rates, while still providing an acceptable yield. Sales were focused on longer term municipal and corporate bonds, as well as mortgage-backed and asset-backed securities with extended cash flows or with a high probability of cash flows extending as interest rates increase.

 

Overall, management’s investment strategy reflects the continuing expectation of rising rates across the yield curve. Management continues to actively seek out opportunities to reduce the overall duration of the portfolio and accelerate cash flows. This strategy could entail recognizing small losses within the portfolio to meet these longer term objectives.

 

  

(NASDAQ: BOCH)

 
At December 31, 2014, the Company’s net unrealized gains on available-for-sale securities were $2.6 million compared with $3.7 million net unrealized loss at December 31, 2013 and $1.8 million net unrealized gains at September 30, 2014. The favorable change in net unrealized gains resulted primarily from increases in the fair values of the Company’s municipal bond, and US government securities portfolios, caused by declines in long-term interest rates.

  

TABLE 4

DEPOSITS BY TYPE UNAUDITED

(amounts in thousands)

 

		At December 31,																								At September 30,
						% of								% of				Change												% of
		2014				Total				2013				Total				Amount				%				2014				Total
Demand - noninterest bearing		$	157,557				20	%		$	133,984				18	%		$	23,573				18	%		$	151,684				20	%
Demand - interest bearing			298,160				38	%			273,390				37	%			24,770				9	%			265,308				35	%
Total demand			455,717				58	%			407,374				55	%			48,343				12	%			416,992				55	%
Savings			88,569				11	%			90,442				12	%			(1,873	)			-2	%			91,589				12	%
Total non-maturing deposits			544,286				69	%			497,816				67	%			46,470				9	%			508,581				67	%
Certificates of deposit			244,749				31	%			248,477				33	%			(3,728	)			-2	%			258,939				33	%
Total deposits		$	789,035				100	%		$	746,293				100	%		$	42,742				6	%		$	767,520				100	%
Average rate on interest bearing deposits			0.50	%							0.53	%							-0.03	%							0.54	%

  

Total deposits for the year ended December 31, 2014, increased 6% or $42.7 million to $789.0 million compared to the same period a year ago and 3% or $21.5 million compared to the prior quarter. Non-maturing core deposits increased $7.8 million or 2% compared to the same period a year ago and 3% or $11.6 million compared to the prior quarter.

 

Brokered deposits totaled $97.9 million at December 31, 2014 compared with $70.3 million at December 31, 2013, and $80.0 million at September 30, 2014. Brokered deposits included reciprocal deposits of $90.3 million, $55.1 million, and $66.4 million for the same periods respectively.

 

Deposits obtained through the use of a deposit listing service that are not considered brokered deposits totaled $67.5 million at December 31, 2014 compared with $68.0 million at September 30, 2014 and $42.7 million at December 31, 2013,

  

  

(NASDAQ: BOCH)

 
INCOME STATEMENT OVERVIEW

  

TABLE 5

SUMMARY INCOME STATEMENT - UNAUDITED

(amounts in thousands, except per share data)

 

		For The Three Months Ended
		December 31,								Change								September 30,				Change
		2014				2013				Amount				%				2014				Amount				%
Net interest income		$	8,290			$	8,494			$	(204	)			-2	%		$	7,948			$	342				4	%
Provision for loan and lease losses			675				—				675				100	%			1,050				(375	)			-36	%
Noninterest income			1,144				719				425				59	%			671				473				70	%
Noninterest expense			7,410				5,693				1,717				30	%			6,032				1,378				23	%
Income before income taxes			1,349				3,520				(2,171	)			-62	%			1,537				(188	)			-12	%
Provision (benefit) for income taxes			(334	)			1,433				(1,767	)			-123	%			264				(598	)			-227	%
Net income			1,683				2,087				(404	)			-19	%			1,273				410				32	%
Less: Dividend on preferred stock			50				50				—				0	%			50				—				0	%
Income available to common shareholders		$	1,633			$	2,037			$	(404	)			-20	%		$	1,223			$	410				34	%
Basic earnings per share		$	0.12			$	0.14			$	(0.02	)			-14	%		$	0.09			$	0.03				33	%
Average basic shares			13,295				14,143				(848	)			-6	%			13,294				1				0	%
Diluted earnings per share		$	0.12			$	0.14			$	(0.02	)			-14	%		$	0.09			$	0.03				33	%
Average diluted shares			13,335				14,176				(841	)			-6	%			13,339				(4	)			0	%
Dividends declared per common share		$	0.03			$	0.03			$	—				0	%		$	0.03			$	—				0	%

  

Net income available to common shareholders was $1.6 million for the three months ended December 31, 2014 compared with $2.0 million for the same period a year ago. The decrease in net income available to common shareholders in the current quarter compared to the same period a year ago was primarily driven by increased loan loss provisions and increased noninterest expense partially offset by increased noninterest income and a decreased provision for income taxes.

 

Net income available to common shareholders increased $410 thousand to $1.6 million during the three months ended December 31, 2014 compared to $1.2 million in the prior quarter. Increased operating income, decreased provision for loan and lease losses and decreased provision for tax expense were partially offset by increased noninterest expense.

 

Return on average assets and return on average equity for the current quarter was 0.68% and 6.50%, respectively, compared with 0.89% and 8.18%, respectively, for the same period a year ago. The 21 basis point decrease in return on average assets between these periods is mostly attributed to decreased earnings. The decrease in return on average equity was primarily driven by decreased net income, partially offset by the decrease in weighted average shares resulting from the Company’s publically announced common stock repurchase plans.

 

Net interest Income

 

Interest income for the three months ended December 31, 2014 was $9.5 million, an increase of $228 thousand or 2% compared to the same period a year ago and an increase of $427 thousand or 5% compared to the prior quarter. The increase in interest income compared to the same period a year ago was driven by increased volume in the loan portfolio and increased yield in the investment securities portfolio, partially offset by decreased volume in the investment securities portfolio and decreased yield in the loan portfolio. The increase in interest income compared to the prior quarter was primarily due to increased volume and yield in the loan portfolio.

 

Interest expense for the three months ended December 31, 2014 was $1.2 million, an increase of $432 thousand or 54% compared to the same period a year ago and an increase of $85 thousand or 7% compared to the prior quarter. During the second quarter of 2014 the Company concluded that the remaining hedged forecasted interest costs from FHLB advances associated with the final two legs of a terminated forward starting interest rate swap were no longer probable. Accordingly, the remaining hedge gains recorded in other comprehensive income relating to the interest rate swap were immediately recognized in other noninterest income. Prior to this determination the Company had been reclassifying the hedge gains out of other comprehensive income into earnings as an adjustment to interest expense.

 

  

(NASDAQ: BOCH)

 

TABLE 6

NET INTEREST SPREAD AND MARGIN - UNAUDITED

(amounts in thousands)

 

		For the Three Months Ended
		December 31,								Change				September 30,				Change
		2014				2013				Amount				2014				Amount
Tax equivalent yield on average interest earning assets			4.28	%			4.31	%			-0.03	%			4.06	%			0.22	%
Rate on average interest bearing liabilities			0.70	%			0.47	%			0.23	%			0.64	%			0.06	%
Net interest spread			3.58	%			3.84	%			-0.26	%			3.42	%			0.16	%
Net interest margin			3.60	%			3.80	%			-0.20	%			3.42	%			0.18	%
Net interest margin on a tax equivalent basis			3.74	%			3.95	%			-0.21	%			3.56	%			0.18	%
Average earning assets		$	919,864			$	895,101			$	24,763			$	929,447			$	(9,583	)
Average interest bearing liabilities		$	713,091			$	692,739			$	20,352			$	722,300			$	(9,209	)

  

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 3.74% for the three months ended December 31, 2014, a decrease of 21 basis points as compared to the same period a year ago. The decrease in net interest margin resulted from a 3 basis point decline in yield on average earning assets and an 18 basis point increase in interest expense to average earning assets. With decreasing elasticity in managing our funding costs and historically low interest rates, maintaining our net interest margin in the foreseeable future will continue to be challenging. Management will continue to pursue organic loan growth, wholesale loan purchases, and actively manage the investment securities portfolio within our accepted risk tolerance to maximize yields on earning assets.

 

Noninterest Income

 

Noninterest income for the three months ended December 31, 2014 was $1.1 million, an increase of $425 thousand and $473 thousand when compared to the same period a year ago and the previous quarter respectively. The increase in noninterest income in the current quarter compared to the same period a year ago and prior quarter is primarily due to a $406 thousand gain on discounted repayment of junior subordinated debentures recognized during the quarter ended December 31, 2014. The debentures were issued to Bank of Commerce Holdings Trust. All of the debentures issued to the Trust, less the common stock of the Trust, qualified as Tier 1 capital, under guidance issued by the Federal Reserve Board.

 

Noninterest Expense

 

Noninterest expense for the three months ended December 31, 2014 increased $1.7 million compared to the same period a year ago, and increased $1.4 million compared to the prior quarter. The increase in noninterest expense in the current quarter is primarily due to severance costs associated with the retirement of a former executive, and an overall increase in the number of employees.

 

During the three months ended December 31, 2014, the Company recorded a provision for income tax benefit of $334 thousand compared with a provision for income tax expense of $1.4 million for the same period a year ago and a provision for income tax expense of $264 thousand for the prior quarter. The tax benefit recorded in the current quarter was driven by a change in the Company’s estimated annual effective tax rate. In addition, tax return to accrual adjustments were recognized as a result of an adjustment to 2013 permanent book tax differences. During the current quarter, the recorded tax benefit of $334 thousand was comprised of $164 thousand in tax expense derived from applying the adjusted estimated effective tax rate, a tax benefit of $390 thousand, resulting from a change in the estimated effective tax rate, and a tax benefit of $108 thousand resulting from tax return to accrual adjustments.

 

  

(NASDAQ: BOCH)

Diluted earnings per share was $0.12 for the three months ended December 31, 2014 compared with $0.14 for the same period a year ago, and $0.09 for the prior period. Earnings per share decreased during the three months ended December 31, 2014 compared to the same period a year ago primarily due to a decrease in net income partially offset by a decrease in weighted average shares. The decrease in weighted average shares resulted from the repurchase of 2.0 million common shares through two separate repurchase plans announced and completed in 2013 and the repurchase of 700,000 common shares from another repurchase plan announced and completed during the six months ended June 30, 2014. All repurchased shares were retired subsequent to purchase. The weighted average number of dilutive common shares outstanding decreased by 502 thousand shares during the year ended December 31, 2014.

 

 

 

 

TABLE 7

ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD - UNAUDITED

(amounts in thousands)

 

		For The Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2014				2014				2014				2014				2013
Beginning balance		$	10,400			$	9,882			$	9,748			$	14,172			$	13,542
Provision for loan loss charged to expense			675				1,050				1,450				—				—
Loans charged off			(374	)			(585	)			(1,456	)			(4,903	)			(815	)
Loan loss recoveries			119				53				140				479				1,445
Ending balance		$	10,820			$	10,400			$	9,882			$	9,748			$	14,172

 

		At December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2014				2014				2014				2014				2013
Nonaccrual loans:
Commercial		$	5,112				7,065			$	4,375			$	4,303			$	6,527
Commercial real estate			9,696				9,896				15,598				12,560				14,539
Residential real estate 1-4 family			6,782				7,438				6,939				7,360				8,217
Home equity			24				89				479				484				513
Consumer			35				—				87				—				—
Total nonaccrual loans			21,649				24,488				27,478				24,707				29,796
Accruing troubled debt restructured loans:
Commercial			1,485				1,585				13				62				63
Commercial real estate			1,698				1,707				1,716				3,853				3,864
Residential real estate 1-4 family			5,462				5,222				5,074				4,894				4,303
Home equity			579				584				589				593				598
Total accruing troubled debt restructured loans			9,224				9,098				7,392				9,402				8,828
All other accruing impaired loans			536				757				585				2,564				3,517
Total impaired loans		$	31,409				34,343			$	35,455			$	36,673			$	42,141
Gross loans outstanding at period end		$	660,898			$	649,695			$	619,418			$	607,049			$	597,995
Allowance for loan and lease losses as a percent of:
Gross loans			1.64	%			1.60	%			1.60	%			1.61	%			2.37	%
Nonaccrual loans			49.98	%			42.47	%			35.96	%			39.45	%			47.56	%
Impaired loans			34.45	%			30.28	%			27.87	%			26.58	%			33.63	%
Nonaccrual loans to gross loans			3.28	%			3.77	%			4.44	%			4.07	%			4.98	%

  

 

 

(NASDAQ: BOCH)

 

The Company realized net charge offs of $255 thousand in the current quarter compared with net charge offs of $532 thousand in the prior quarter and net recoveries of $630 thousand for the same period a year ago. Charge offs in the current quarter are primarily related to one commercial loan relationship.

 

The Company continues to monitor credit quality, and adjust the ALLL accordingly 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 such, the Company recognized $675 thousand in provisions for loan and lease losses during the fourth quarter of 2014, compared to $1.1 million for the prior quarter. The Company’s ALLL as a percentage of gross loans was 1.64% at December 31, 2014 compared to 1.60% as of September 30, 2014. At December 31, 2014, management believes the Company’s ALLL is adequately funded given the current level of credit risk.

 

At December 31, 2014, the recorded investment in loans classified as impaired totaled $31.4 million, with a corresponding valuation allowance of $1.6 million compared to impaired loans of $34.3 million, with a corresponding valuation allowance of $1.2 million at September 30, 2014. The valuation allowance on impaired loans represents the impairment reserves on performing restructured loans, other accruing loans, and nonaccrual loans. The decrease in impaired loans during the three months ended December 31, 2014 compared to the prior quarter is primarily due to principal payments on two commercial loan relationships.

 

Loans are reported as a troubled debt restructuring when the Bank grants a concession(s) to a borrower experiencing financial difficulties that it would not otherwise consider. Examples of such concessions include a reduction in the note rate, forgiveness of principal or accrued interest, extending the maturity date(s) significantly, or providing a lower interest rate than would be normally available for a transaction of similar risk. As a result of these concessions, restructured loans are impaired as the Bank will not collect all amounts due, both principal and interest, in accordance with the terms of the original loan agreement. Impairment reserves on non-collateral dependent restructured loans are measured by measuring the present value of expected future cash flows of the restructured loans, discounted at the effective interest rate of the original loan agreement. These impairment reserves are recognized as a specific component to be provided for in the ALLL.

 

During the three months ended December 31, 2014, the Company restructured one loan to grant a rate and maturity concession. The loan was classified as a troubled debt restructuring and placed on nonaccrual status. As of December 31, 2014, the Company had $23.5 million in troubled debt restructurings compared to $25.7 million as of September 30, 2014. As of December 31, 2014, the Company had one hundred eighteen restructured loans that qualified as troubled debt restructurings, of which ninety-seven were performing according to their restructured terms. Troubled debt restructurings represented 3.55% of gross loans as of December 31, 2014 compared with 3.95% at September 30, 2014.

  

 

TABLE 8

PERIOD END TROUBLED DEBT RESTRUCTURINGS - UNAUDITED

(amounts in thousands)

 

		At December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2014				2014				2014				2014				2013
Nonaccrual		$	14,230			$	16,556			$	20,504			$	19,779			$	24,596
Accruing			9,224				9,098				7,392				9,402				8,828
Total troubled debt restructurings		$	23,454			$	25,654			$	27,896			$	29,181			$	33,424
Percentage of total gross loans			3.55	%			3.95	%			4.50	%			4.81	%			5.59	%

  

Nonperforming loans, which include nonaccrual loans and accruing loans past due more than 90 days, totaled $21.7 million or 3.28% of gross loans as of December 31, 2014, compared to $24.9 million, or 3.77% of gross loans at September 30, 2014. The decrease in nonperforming loans in the current quarter compared to the prior quarter primarily resulted from $1.7 million in payments received from a commercial loan relationship. Nonperforming assets, which include nonperforming loans and other real estate owned (“OREO”), totaled $22.2 million, or 2.22% of total assets as of December 31, 2014, compared with $24.9 million, or 2.54% of total assets as of September 30, 2014.

 

 

(NASDAQ: BOCH)

 

 

TABLE 9

PERIOD END NONPERFORMING ASSETS - UNAUDITED

(amounts in thousands)

 

		At December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2014				2014				2014				2014				2013
Total nonaccrual loans		$	21,649			$	24,488			$	27,478			$	24,707			$	29,796
90 days past due not on nonaccrual			23				—				—				—				—
Total nonperforming loans			21,672				24,488				27,478				24,707				29,796
Other real estate owned			502				393				826				623				913
Total nonperforming assets		$	22,174				24,881			$	28,304			$	25,330			$	30,709
Nonperforming loans to gross loans			3.28	%			3.77	%			4.44	%			4.07	%			4.98	%
Nonperforming assets to total assets			2.22	%			2.54	%			2.89	%			2.63	%			3.23	%

  

At December 31, 2014, and September 30, 2014, the recorded investment in OREO was $502 thousand and $393 thousand, respectively. The December 31, 2014 OREO balance consists of six properties, of which five are secured by 1-4 family residential real estate in the amount of $341 thousand and one commercial nonfarm residential property in the amount of $161 thousand.

 

 

(NASDAQ: BOCH)

  

TABLE 10

UNAUDITED CONDENSED CONSOLIDATED

BALANCE SHEET

(amounts in thousands)

 

		AT December 31,				At December 31,				Change								At September 30,
		2014				2013				$				%				2014
Assets:
Cash and due from banks		$	43,949			$	38,369			$	5,580				15	%		$	31,151
Interest bearing due from banks			14,473				20,146				(5,673	)			-28	%			15,272
Total cash and cash equivalents			58,422				58,515				(93	)			0	%			46,423
Securities available-for-sale, at fair value			186,986				216,640				(29,654	)			-14	%			189,379
Securities held-to-maturity, at amortized cost			36,806				36,696				110				0	%			36,888
Loans, net of deferred fees and costs			661,055				598,298				62,757				10	%			649,879
Allowance for loan and lease losses			(10,820	)			(14,172	)			3,352				-24	%			10,400
Net loans			650,235				584,126				66,109				11	%			660,279
Total interest earning assets			943,269				910,149				33,120				4	%			922,569
Premises and equipment, net			12,295				10,893				1,402				13	%			12,510
Other real estate owned			502				913				(411	)			-45	%			393
Life insurance			21,844				16,216				5,628				35	%			21,675
Deferred taxes			10,231				11,653				(1,422	)			-12	%			10,314
Other assets			19,871				20,690				(819	)			-4	%			20,696
Total Assets		$	997,192			$	956,342			$	40,850				4	%		$	998,557
Liabilities and shareholders' equity:
Demand - noninterest bearing		$	157,557			$	133,984			$	23,573				18	%		$	151,684
Demand - interest bearing			298,160				273,390				24,770				9	%			265,308
Savings			88,569				90,442				(1,873	)			-2	%			91,589
Certificates of deposit			244,749				248,477				(3,728	)			-2	%			258,939
Total deposits			789,035				746,293				42,742				6	%			767,520
Federal Home Loan Bank borrowings			75,000				75,000				—				0	%			75,000
Junior subordinated debentures			10,310				15,465				(5,155	)			-33	%			15,465
Other liabilities			19,245				17,797				1,448				8	%			17,812
Total Liabilities			893,590				854,555				39,035				5	%			875,797
Shareholders' equity:
Preferred stock			19,931				19,931				—				0	%			19,931
Common Stock			23,891				28,304				(4,413	)			-16	%			23,874
Retained earnings			59,867				55,944				3,923				7	%			58,633
Accumulated other comprehensive (loss) income, net of tax			(87	)			(2,392	)			2,305				-96	%			(478	)
Total shareholders' equity			103,602				101,787				1,815				2	%			101,960
Total liabilities and shareholders' equity		$	997,192			$	956,342			$	40,850				4	%		$	977,757
Shares outstanding			13,295				13,977												13,294
Book value per share		$	6.29			$	5.86											$	6.17

 

 

  

(NASDAQ: BOCH)

 

 

TABLE 11

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

 

		For The Three Months Ended
		December 31,								Change								September 30,				Twelve Months Ended December 31,
		2014				2013				$				%				2014				2014				2013
Interest income:
Interest and fees on loans		$	7,832			$	7,432			$	400				5	%		$	7,350			$	29,464			$	29,918
Interest on securities			980				658				322				49	%			998				4,203				4,198
Interest on tax-exempt securities			620				492				128				26	%			629				2,536				2,610
Interest on deposits			97				719				(622	)			-87	%			125				490				535
Total interest income			9,529				9,301				228				2	%			9,102				36,693				37,261
Interest expense:
Interest on demand deposits			109				121				(12	)			-10	%			123				471				485
Interest on savings deposits			55				60				(5	)			-8	%			59				228				254
Interest on certificates of deposit			623				635				(12	)			-2	%			650				2,608				2,625
Interest on securities sold under repurchase agreements			—				—				—				0	%			—				—				6
Interest on FHLB borrowings			370				(104	)			474				-456	%			126				422				(267	)
Interest on other borrowings			82				95				(13	)			-14	%			196				363				375
Total interest expense			1,239				807				432				54	%			1,154				4,092				3,478
Net interest income			8,290				8,494				(204	)			-2	%			7,948				32,601				33,783
Provision for loan and lease losses			675				—				675				100	%			1,050				3,175				2,750
Net interest income after provision for loan and lease losses			7,615				8,494				(879	)			-10	%			6,898				29,426				31,033
Noninterest income:
Service charges on deposit accounts			51				45				6				13	%			50				186				191
Payroll and benefit processing fees			137				129				8				6	%			127				508				484
Increase in cash surrender value of life insurance			169				133				36				27	%			171				628				534
Gain (loss) on investment securities, net			93				64				29				45	%			32				(159	)			995
Merchant credit card service income, net			24				31				(7	)			-23	%			25				104				129
Other income			670				317				353				111	%			266				3,048				1,209
Total noninterest income			1,144				719				425				59	%			671				4,315				3,542

 

 

 

(NASDAQ: BOCH)

 

TABLE 11 - CONTINUED

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

 

		For The Three Months Ended
		December 31,								Change								September 30,				Twelve Months Ended December 31,
		2014				2013				$				%				2014				2014				2013
Noninterest expense:
Salaries and related benefits			4,257				3,172				1,085				34	%			3,474				14,770				12,035
Occupancy and equipment expense			715				554				161				29	%			749				2,784				2,205
Write down of other real estate owned			—				—				—				0	%			—				290				—
FDIC insurance premium			214				190				24				13	%			204				798				725
Data processing fees			260				150				110				73	%			217				889				547
Professional service fees			616				315				301				96	%			309				1,527				1,241
Deferred compensation expense			113				121				(8	)			-7	%			115				458				179
Other expenses			1,235				1,191				44				4	%			964				5,821				5,309
Total noninterest expense			7,410				5,693				1,717				30	%			6,032				27,337				22,241
Income before provision (benefit) for income taxes			1,349				3,520				(2,171	)			-62	%			1,537				6,404				12,334
Provision (benefit) for income taxes			(334	)			1,433				(1,767	)			-123	%			264				677				4,399
Net income		$	1,683			$	2,087			$	(404	)			-19	%		$	1,273			$	5,727			$	7,935
Less: preferred dividend and accretion on preferred stock			50				50				—				0	%			50				200				200
Income available to common shareholders		$	1,633			$	2,037			$	(404	)			-20	%		$	1,223			$	5,527			$	7,735
Basic earnings per share		$	0.12			$	0.14			$	(0.02	)			-14	%		$	0.09			$	0.41			$	0.52
Average basic shares			13,295				14,143				(848	)			-6	%			13,294				13,475				14,940
Diluted earnings per share		$	0.12			$	0.14			$	(0.02	)			-14	%		$	0.09			$	0.41			$	0.52
Average diluted shares			13,335				14,176				(841	)			-6	%			13,339				13,520				14,964

 

 

 

(NASDAQ: BOCH)

 

TABLE 12

UNAUDITED CONDENSED CONSOLIDATED

ANNUAL AVERAGE BALANCE SHEET

(amounts in thousands)

 

		For the Twelve Months Ended
		December 31,				December 31,				December 31,				December 31,
		2014				2013				2012				2011
Earning assets:
Loans		$	644,029			$	612,819			$	642,200			$	626,275
Tax exempt securities			83,973				92,854				81,714				52,467
Taxable securities			148,606				157,486				135,615				130,898
Interest bearing due from banks			56,466				43,397				48,712				64,399
Average earning assets			933,074				906,556				908,241				874,039
Cash and due from banks			11,249				10,570				10,125				2,251
Premises and equipment, net			12,105				10,338				9,567				9,489
Other assets			37,497				26,838				24,249				21,421
Average total assets		$	993,925			$	954,302			$	952,182			$	907,200
Interest bearing liabilities:
Demand - interest bearing		$	272,383			$	244,125			$	203,342			$	157,696
Savings			91,108				92,502				89,789				91,876
Certificates of deposit			259,462				249,500				285,574				296,381
Repurchase agreements			—				5,780				14,246				14,805
Other borrowings			15,533				15,584				15,465				8,398
FHLB borrowings			77,466				109,560				110,374				122,535
Average interest bearing liabilities			715,952				717,051				718,790				691,691
Demand - noninterest bearing			140,520				126,017				115,091				100,722
Other liabilities			35,089				5,041				7,033				6,679
Shareholders' equity			102,364				106,193				111,268				108,108
Average liabilities & equity		$	993,925			$	954,302			$	952,182			$	907,200

  

 

 

(NASDAQ: BOCH)

 

TABLE 13

UNAUDITED CONDENSED CONSOLIDATED

QUARTERLY AVERAGE BALANCE SHEET

(amounts in thousands)

 

		For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2014				2014				2014				2014				2013
Earning assets:
Loans		$	656,834			$	640,990			$	612,847			$	605,682			$	594,324
Tax exempt securities			82,231				83,503				83,530				86,681				91,269
Taxable securities			143,829				140,128				152,780				157,936				161,473
Interest bearing due from banks			36,970				64,826				59,040				65,179				48,035
Average earning assets			919,864				929,447				908,197				915,478				895,101
Cash and due from banks			12,264				12,322				10,163				10,212				11,506
Premises and equipment, net			12,464				12,551				12,190				11,197				10,823
Other assets			41,179				40,053				36,297				30,426				22,302
Average total assets		$	985,771			$	994,373			$	966,847			$	967,313			$	939,732
Interest bearing liabilities:
Demand - interest bearing		$	277,692			$	269,633			$	272,073			$	267,428			$	261,949
Savings			89,992				91,556				91,488				91,406				92,949
Certificates of deposit			254,942				260,592				262,809				259,523				247,376
Other borrowings			15,465				15,737				15,465				15,465				15,465
FHLB borrowings			75,000				84,782				75,000				75,000				75,000
Average interest bearing liabilities			713,091				722,300				716,835				708,822				692,739
Demand - noninterest bearing			154,471				142,796				132,842				132,495				134,439
Other liabilities			14,630				27,168				16,040				23,013				10,470
Shareholders' equity			103,579				102,109				101,130				102,983				102,084
Average liabilities & equity		$	985,771			$	994,373			$	966,847			$	967,313			$	939,732

 

 

 

(NASDAQ: BOCH)

 

About Bank of Commerce Holdings

 

Bank of Commerce Holdings is a bank holding company headquartered in Redding, California and is the parent company for Redding Bank of Commerce which operates under two separate names: Redding Bank of Commerce and Sacramento Bank of Commerce, a division of Redding Bank of Commerce. The Bank is an FDIC insured California banking corporation providing commercial banking and financial services through four offices located in Northern California. The Bank opened on October 22, 1982. The Company’s common stock is listed on the NASDAQ Global Market and trades under the symbol “BOCH”.

 

Investment firms making a market in BOCH stock are:

 

Raymond James Financial John T. Cavender 555 Market Street San Francisco, CA 94105 (800) 346-5544   Sandler O’Neill + Partners, L.P. Brian Sullivan 1251 Avenue of the Americas, 6th Floor New York, NY 10022 (212) 466-8022

McAdams Wright Ragen, Inc. Joey Warmenhoven 1211 SW Fifth Avenue, Suite 1400 Portland, OR 97204 (866) 662-0351   Stifel Nicolaus Perry Wright 1255 East Street, Suite 100 Redding, CA 96001 (530) 244-7199

 

Contact Information:

 

Randall S. Eslick, President and Chief Executive Officer

Telephone Direct (530) 722-3900

 

Samuel D. Jimenez, Executive Vice President and Chief Operating Officer

Telephone Direct (530) 722-3952

 

James A. Sundquist, Executive Vice President and Chief Financial Officer

Telephone Direct (530) 722-3908

 

Andrea Schneck, Vice President and Senior Administrative Officer

Telephone Direct (530) 722-3959

 

16