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

SACRAMENTO, Calif., April 20, 2018 (GLOBE NEWSWIRE) -- Bank of Commerce Holdings (NASDAQ:BOCH) (the “Company”), a $1.2 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter ended March 31, 2018. Net income for the quarter ended March 31, 2018 was $3.2 million or $0.20 per share – diluted, compared with net income of $2.3 million or $0.17 per share – diluted for the same period of 2017.

Financial highlights for the first quarter of 2018 compared to the same quarter a year ago:

  • Net income of $3.2 million or $0.20 per share – diluted for the three months ended March 31, 2018 was an increase of $989 thousand (44%) from $2.3 million or $0.17 per share – diluted earned during the same period in the prior year. The increase in earnings per share compared to the same quarter a year ago was 18% and reflects the impact of 2,738,096 shares of common stock sold in the second quarter of 2017.
  • Net interest income increased $1.6 million (17%) to $11.3 million for the three months ended March 31, 2018 compared to $9.7 million for the same period in the prior year.
  • Return on average assets improved to 1.05% for the three months ended March 31, 2018 compared to 0.80% for the same period in the prior year.
  • Return on average equity improved to 10.34% for the three months ended March 31, 2018 compared to 9.63% for the same period in the prior year.
  • Average loans for the three months ended March 31, 2018 totaled $883.9 million, an increase of $77.1 million (10%) compared to average loans for the same period in the prior year.
  • Average earning assets totaled $1.2 billion for the three months ended March 31, 2018, an increase of $106.8 million (10%) compared to average earning assets for the same period in the prior year.
  • Average deposits for the three months ended March 31, 2018 totaled $1.1 billion, an increase of $58.3 million (6%) compared to average deposits for the same period in the prior year.
  • The Company’s efficiency ratio was 65.17% for the three months ended March 31, 2018 compared to 71.31% for the same period in the prior year.
  • Nonperforming assets at March 31, 2018 totaled $4.3 million or 0.34% of total assets, a decrease of $6.5 million (60%) compared to March 31, 2017.
  • Book value per common share was $7.83 at March 31, 2018 compared to $7.14 at March 31, 2017.
  • Tangible book value per common share was $7.71 at March 31, 2018 compared to $6.97 at March 31, 2017.

Financial highlights for the first quarter of 2018 compared to the prior quarter:

  • A comparison of current quarter and prior quarter net earnings information is not particularly meaningful and is not provided because the prior period included the impact of the Tax Cuts and Jobs Act of 2017 which reduced net income in that period to $7 thousand.
  • Net interest income increased $476 thousand (18% annualized) to $11.3 million for the first quarter of 2018 compared to $10.9 million for the prior quarter.
  • Average loans for the three months ended March 31, 2018 totaled $883.9 million, an increase of $44.9 million (22% annualized) compared to average loans for the prior quarter.
  • Average earning assets for the three months ended March 31, 2018 totaled $1.2 billion, an increase of $3.8 million (1% annualized) compared to average earning assets for the prior quarter.
  • Average deposits for the three months ended March 31, 2018 totaled $1.1 billion, a decrease of $12.6 million (5% annualized) compared to average deposits for the prior quarter.
  • The Company’s efficiency ratio was 65.17% for the first quarter of 2018 compared to 64.94% during the prior quarter.
  • Nonperforming assets at March 31, 2018 totaled $4.3 million or 0.34% of total assets, a decrease of $1.6 million since December 31, 2017.
  • Book value per common share was $7.83 at March 31, 2018 compared to $7.82 at December 31, 2017.
  • Tangible book value per common share was $7.71 at March 31, 2018 compared to $7.70 at December 31, 2017.

Randall S. Eslick, President and CEO commented: “I am very proud of our talented and dedicated employees. Their commitment to the company has generated noticeably improved financial results for the first quarter as we continue to execute on our vision. Net income totaled $3.2 million ($0.20 per share), ROAA was 1.05%, ROAE was 10.34% and loans increased $20.6 million (9.5% annualized). This is a great start to the year.”

Forward-Looking Statements

This quarterly press release includes forward-looking information, which is subject to the “safe harbor” created by the Securities Act of 1933 and Securities Act of 1934. These forward-looking statements (which involve our plans, beliefs and goals, refer to estimates or use similar terms) involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors:

  • Competitive pressure in the banking industry and changes in the regulatory environment
  • Changes in the interest rate environment and volatility of rate sensitive assets and liabilities
  • A decline in the health of the economy nationally or regionally which could reduce the demand for loans or reduce the value of real estate collateral securing most of our loans
  • Credit quality deterioration which could cause an increase in the provision for loan and lease losses
  • Asset/Liability matching risks and liquidity risks
  • Changes in the securities markets

For additional information concerning risks and uncertainties related to the Company and its operations, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under the heading “Risk Factors” and to subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation and specifically disclaims any obligation to revise or publicly release the results of any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date the statements were made.

                         
                         
TABLE 1
SELECTED FINANCIAL INFORMATION - UNAUDITED
(amounts in thousands except per share data)
    For The Three Months Ended
Net income, average assets and   March 31,   December 31,
average shareholders' equity   2018   2017   2017
Net income   $ 3,241     $ 2,252     $ 7  
Average total assets   $ 1,248,563     $ 1,148,305     $ 1,251,960  
Average total earning assets   $ 1,181,857     $ 1,075,039     $ 1,178,037  
Average shareholders' equity   $ 127,069     $ 94,820     $ 128,862  
                         
Selected performance ratios                        
Return on average assets     1.05  %     0.80  %     0.00  %
Return on average equity     10.34  %     9.63  %     0.02  %
Efficiency ratio     65.17  %     71.31  %     64.94  %
                         
Share and per share amounts                        
Weighted average shares - basic (1)     16,225       13,416       16,195  
Weighted average shares - diluted     16,310       13,521       16,306  
Earnings per share - basic   $ 0.20     $ 0.17     $  
Earnings per share - diluted   $ 0.20     $ 0.17     $  
                         
    At March 31,   At December 31,
Share and per share amounts   2018   2017   2017
Common shares outstanding (2)     16,315       13,517       16,272  
Book value per common share   $ 7.83     $ 7.14     $ 7.82  
Tangible book value per common share (3)   $ 7.71     $ 6.97     $ 7.70  
                         
Capital ratios (4)                      
Bank of Commerce Holdings                      
Common equity tier 1 capital ratio     12.35  %     9.71  %     12.26  %
Tier 1 capital ratio     13.31  %     10.72  %     13.23  %
Total capital ratio     15.52  %     13.00  %     15.44  %
Tier 1 leverage ratio     11.11  %     9.09  %     10.86  %
Tangible common equity ratio (5)     10.11  %     8.27  %     9.88  %
                         
Redding Bank of Commerce                        
Common equity tier 1 capital ratio     12.62  %     12.59  %     12.58  %
Tier 1 capital ratio     12.62  %     12.59  %     12.58  %
Total capital ratio     13.87  %     13.84  %     13.81  %
Tier 1 leverage ratio     10.51  %     10.67  %     10.33  %
                         
(1) Excludes unvested restricted shares issued in accordance with the Company's equity incentive plan, as they are non participative in dividends or voting rights.
(2) Includes unvested restricted shares issued in accordance with the Company's equity incentive plan.
(3) Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.
(4) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. Capital ratios for the Company include the benefit of $26.8 million net proceeds from the sale of 2,738,096 shares of common stock in the second quarter of 2017.
(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 March 31, 2018, the Company had total consolidated assets of $1.2 billion, gross loans of $900.4 million, allowance for loan and lease losses (“ALLL”) of $12.3 million, total deposits of $1.0 billion, and shareholders’ equity of $127.7 million.

                                               
                                               
TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
  At March 31,             At December 31,
      % of       % of   Change       % of
  2018   Total   2017   Total   Amount   %   2017   Total
Commercial $ 137,870     15 %   $ 138,674     18 %   $ (804 )   (1 ) %   $ 142,405     16 %
Real estate - construction and land development   14,723     2       25,241     3       (10,518 )   (42 ) %     15,902     2  
Real estate - commercial non-owner occupied   405,192     46       311,203     38       93,989     30   %     377,668     43  
Real estate - commercial owner occupied   193,286     22       186,713     24       6,573     4   %     192,023     22  
Real estate - residential - ITIN   40,425     4       44,211     5       (3,786 )   (9 ) %     41,188     5  
Real estate - residential - 1-4 family mortgage   30,247     3       19,710     2       10,537     53   %     30,377     3  
Real estate - residential - equity lines   30,520     3       33,019     4       (2,499 )   (8 ) %     30,347     3  
Consumer and other   48,157     5       51,423     6       (3,266 )   (6 ) %     49,925     6  
Gross loans   900,420     100 %     810,194     100 %     90,226     11   %     879,835     100 %
Deferred fees and costs   1,713             1,446             267             1,710        
Loans, net of deferred fees and costs   902,133             811,640             90,493             881,545        
Allowance for loan and lease losses   (12,295 )           (11,641 )           (654 )           (11,925 )      
Net loans $ 889,838           $ 799,999           $ 89,839           $ 869,620        
                                               
Average yield on loans during the quarter   4.92 %           4.72 %           0.20             4.77 %      
                                                       

The Company recorded gross loan balances of $900.4 million at March 31, 2018, compared with $810.2 million and $879.8 million at March 31, 2017 and December 31, 2017, respectively, an increase of $90.2 million and $20.6 million, respectively. The increase in gross loans compared to the same period a year ago and the prior period was driven by organic loan originations by our SBA division and by our expanded Sacramento commercial banking group.

Average loan balances were $883.9 million for the quarter ended March 31, 2018, compared with $806.8 million for the quarter ended March 31, 2017 and $839.0 million for the quarter ended December 31, 2017, an increase of $77.1 million or 10% and an increase of $44.9 million or 22% annualized, respectively.

The average yield on loans during the quarter was 4.92% compared to 4.72% and 4.77% for the quarters ended March 31, 2017 and December 31, 2017, respectively. The current quarter income on loans of $10.7 million included $229 thousand from prepayment penalties and interest income from nonaccrual loans that were sold or repaid during the quarter which enhanced the average yield by ten basis points.

                                                 
                                                 
TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
    At March 31,               At December 31,
        % of       % of   Change       % of
    2018   Total   2017   Total   Amount   %   2017   Total
                                                 
Cash and due from banks   $ 16,247     6 %   $ 18,315     7 %   $ (2,068 )   (11 ) %   $ 17,979     5 %
Interest-bearing deposits in other banks     17,376     6       42,744     16       (25,368 )   (59 ) %     48,991     15  
Total cash and cash equivalents     33,623     12       61,059     23       (27,436 )   (45 ) %     66,970     20  
                                                 
Investment securities:                                                
U.S. government and agencies     41,179     14       12,496     5       28,683     230   %     40,369     12  
Obligations of state and political subdivisions     59,408     21       55,663     20       3,745     7   %     78,844     24  
Residential mortgage backed securities and
collateralized mortgage obligations
    125,567     43       82,392     30       43,175     52   %     114,592     34  
Corporate securities     3,958     1       10,448     4       (6,490 )   (62 ) %     4,992     1  
Commercial mortgage backed securities     25,520     9       16,522     6       8,998     54   %     26,641     8  
Other asset backed securities     285           4,013     1       (3,728 )   (93 ) %     2,516     1  
Total investment securities - AFS     255,917     88       181,534     66       74,383     41   %     267,954     80  
                                                 
Obligations of state and political
subdivisions - HTM
              31,257     11       (31,257 )   (100 ) %          
Total investment securities - AFS
and HTM
    255,917     88       212,791     77       43,126     20   %     267,954     80  
Total cash, cash equivalents and
investment securities
  $ 289,540     100 %   $ 273,850     100 %   $ 15,690     6   %   $ 334,924     100 %
Average yield on interest-bearing due
from banks and investment securities
during the quarter - (nominal)
    2.45 %           2.17 %           0.28             2.30 %      
                                                         

As of March 31, 2018, we maintained noninterest-bearing cash positions of $16.2 million and interest-bearing deposits of $17.4 million at the Federal Reserve Bank and correspondent banks. The reduction in cash and cash equivalents from December 31, 2017 to March 31, 2018 reflects the seasonal decline in deposits which, in 2018, has been greater than it was in the prior two years.

Investment securities totaled $255.9 million at March 31, 2018, compared with $212.8 million and $268.0 million at March 31, 2017 and December 31, 2017, respectively. Our investment securities portfolio provides us with a secondary source of liquidity to fund higher yielding asset opportunities, such as loan originations. During the first quarter of 2018, we purchased 12 securities with a par value of $19.6 million and weighted average yield of 3.11% and sold 29 securities with a par value of $18.7 million and weighted average yield of 2.27%. The sales activity on available-for-sale securities resulted in $36 thousand in net realized gains. During the same period, we received $7.9 million in proceeds from principal payments, calls and maturities within the investment securities portfolio.

Average securities balances and weighted average tax equivalent yields for the quarters ended March 31, 2018 and 2017 were $265.1 million and 2.75% compared to $211.1 million and 3.06%, respectively. The current quarter tax equivalent yields were reduced by 17 basis points as a result of the Tax Cuts and Jobs Act of 2017 which reduced the federal corporate tax rate from a graduated rate of 35% to a flat rate of 21%.

At March 31, 2018, our net unrealized losses on available-for-sale investment securities were $3.9 million compared with net unrealized losses of $891 thousand and $452 thousand at March 31, 2017 and December 31, 2017, respectively. The changes in the net unrealized loss on the investment securities portfolio are due to changes in market interest rates and the reclassification of all HTM securities to AFS during the fourth quarter of 2017.

                                               
                                               
TABLE 4
DEPOSITS BY TYPE - UNAUDITED
(amounts in thousands)
  At March 31,               At December 31,
      % of       % of     Change       % of
  2018
  Total   2017
  Total   Amount   %   2017
  Total
Demand - noninterest-bearing $ 301,981     29 %   $ 270,412     27 %   $ 31,569     12   %   $ 305,650     28 %
Demand - interest-bearing   462,551     44       407,784     41       54,767     13   %     496,990     45  
Total demand   764,532     73       678,196     68       86,336     13   %     802,640     73  
                                               
Savings   107,986     10       112,738     11       (4,752 )   (4 ) %     110,837     10  
Total non-maturing deposits   872,518     83       790,934     79       81,584     10   %     913,477     83  
                                               
Certificates of deposit   176,233     17       213,556     21       (37,323 )   (17 ) %     189,255     17  
Total deposits $ 1,048,751     100 %   $ 1,004,490     100 %   $ 44,261     4   %   $ 1,102,732     100 %
                                               
Average rate on interest-bearing
deposits during the quarter
  0.41 %           0.39 %           0.02             0.42 %      
Average rate on all
deposits during the quarter
  0.29 %           0.29 %           -             0.30 %      
                                                       

Total deposits at March 31, 2018, increased $44.3 million or 4% to $1.0 billion compared to March 31, 2017, and decreased $54.0 million or 20% annualized compared to December 31, 2017. Total non-maturing deposits increased $81.6 million or 10% compared to the same date a year ago and decreased $41.0 million or 18% annualized compared to December 31, 2017. Certificates of deposit decreased $37.3 million or 17% compared to the same date a year ago and decreased $13.0 million or 28% annualized compared to December 31, 2017.

In late December 2017, deposit balances increased more significantly than at prior year-ends and then were withdrawn in early 2018. Average balances more clearly illustrate deposit balance trends. Average non-maturity deposits totaled $888.6 million in the first quarter of 2018 compared to $888.1 million in the prior quarter. Average certificates of deposit totaled $181.9 million in the first quarter of 2018 compared to $194.9 million in the prior quarter.

                 
                 
TABLE 5
WHOLESALE AND BROKERED DEPOSITS - UNAUDITED
(amounts in thousands)
  At March 31,   At December 31,
  2018   2017   2017
CDARS / ICS reciprocal brokered deposits $ 56,732   $ 55,565   $ 66,279
Online listing service wholesale time deposits   29,159     47,429     36,060
Total wholesale and brokered deposits $ 85,891   $ 102,994   $ 102,339
 

In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $56.7 million, $55.6 million and $66.3 million at March 31, 2018, March 31, 2017 and December 31, 2017, respectively.

INCOME STATEMENT OVERVIEW

                                         
                                         
TABLE 6
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
For The Three Months Ended
  March 31,   Change   December 31,   Change
  2018   2017   Amount   %   2017   Amount   %
Interest income $ 12,530   $ 10,817   $ 1,713     16   %   $ 12,047   $ 483     4   %
Interest expense   1,185     1,083     102     9   %     1,178     7     1   %
Net interest income   11,345     9,734     1,611     17   %     10,869     476     4   %
Provision for loan
and lease losses
      200     (200 )   (100 ) %     450     (450 )   (100 ) %
Noninterest income   982     1,471     (489 )   (33 ) %     1,282     (300 )   (23 ) %
Noninterest expense   8,033     7,990     43     1   %     7,891     142     2   %
Income before provision
for income taxes
  4,294     3,015     1,279     42   %     3,810     484     13   %
Provision for income taxes:                                        
Net deferred tax asset write-down                 %     2,490     (2,490 )   (100 ) %
Provision for income taxes from operations   1,053     763     290     38   %     1,313     (260 )   (20 ) %
Total provision for income taxes   1,053     763     290     38   %     3,803     (2,750 )   (72 ) %
Net income $ 3,241   $ 2,252   $ 989     44   %   $ 7   $ 3,234     100   %
                                         
Basic earnings per share $ 0.20   $ 0.17   $ 0.03     18   %   $   $ 0.20     100   %
Average basic shares   16,225     13,416     2,809     21   %     16,195     30       %
Diluted earnings per share $ 0.20   $ 0.17   $ 0.03     18   %   $   $ 0.20     100   %
Average diluted shares   16,310     13,521     2,789     21   %     16,306     4       %
Dividends declared per
common share
$ 0.03   $ 0.03   $       %   $ 0.03   $       %
                                                 

First Quarter of 2018 Compared With First Quarter of 2017

Net income for the first quarter of 2018 increased $989 thousand compared to the first quarter of 2017. In the current quarter, net interest income was $1.6 million higher and provision for loan and lease losses was $200 thousand lower. These positive changes were offset by noninterest income that was $489 thousand lower, noninterest expense that was $43 thousand higher and a provision for income tax that was $290 thousand higher.

Net Interest Income

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

Interest income for the three months ended March 31, 2018 increased $1.7 million or 16% to $12.5 million. Interest and fees on loans increased $1.3 million due to a $77.1 million increase in average loan balances and a 20 basis point increase in the average yield on the loan portfolio. Interest on securities increased $353 thousand due to a $54.0 million increase in average securities balances and a two basis point increase in the average yield on the securities portfolio. Interest on interest-bearing deposits due from banks increased $15 thousand primarily due to a 78 basis point increase in average yield resulting from increased fed funds rates.

Interest expense for the first quarter of 2018 increased $102 thousand or 9% to $1.2 million. The net increase was due to the following:

  • Interest expense on interest bearing deposits increased $51 thousand. Average interest-bearing demand and savings deposit balances increased $47.1 million, while average certificate of deposit balances decreased $33.3 million. The average rate paid on interest-bearing deposits increased two basis points.

  • Interest expense on other interest bearing liabilities increased $51 thousand primarily due to increased borrowing from the Federal Home Loan Bank of San Francisco.

Provision for loan and lease loss

As a result of continued improved asset quality and net loan loss recoveries, no provision for loan and lease losses was necessary during the current quarter compared with a provision for loan and lease losses of $200 thousand for the same quarter a year ago.

Noninterest Income

Noninterest income for the three months ended March 31, 2018 decreased $489 thousand compared to the first quarter for 2017. During the first quarter of 2017 we recognized income from life insurance death benefit proceeds of $502 thousand.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2018 increased only $43 thousand compared to the same period a year previous.

The Company’s efficiency ratio was 65.17% for the first quarter of 2018 compared to 71.31% during the same period in 2017.

Income Tax Provision

For the three months ended March 31, 2018, our income tax provision of $1.1 million on pre-tax income of $4.3 million was an effective tax rate of 24.5%. The current quarter effective tax rate reflects the benefits of the Tax Cuts and Jobs Act of 2017 which reduced the federal corporate tax rate from a graduated rate of 35% to a flat rate of 21%. The tax provision for the first quarter of the prior year was $763 thousand on pre-tax income of $3.0 million for an effective tax rate of 25.31%. Life insurance death benefits of $502 thousand recorded during the first quarter of 2017 are not subject to income tax, and if excluded from pretax income, the effective tax rate would have been 30.36%.

First Quarter of 2018 Compared With Fourth Quarter of 2017

Net income for the first quarter of 2018 increased $3.2 million compared to the fourth quarter of 2017. In the current quarter, net interest income was $476 thousand higher, the provision for loan and lease losses was $450 thousand lower and the provision for income taxes was $2.8 million lower. These positive changes were offset by noninterest income that was $300 thousand lower and noninterest expenses that were $142 thousand higher.

Net Interest Income

Net interest income increased $476 thousand over the prior quarter.

Interest income for the three months ended March 31, 2018 increased $483 thousand or 4% to $12.5 million. Interest and fees on loans increased $646 thousand due to a $44.9 million increase in average loan balances and a 15 basis point increase in the average yield on the loan portfolio. Interest on investment securities decreased $68 thousand due to a $6.9 million decrease in average securities balances partially offset by a two basis point increase in average yield. Interest on interest-bearing deposits due from banks decreased $95 thousand due to a $34.1 million decrease in average balances.

Interest expense for the three months ended March 31, 2018 increased $7 thousand or 1% to $1.2 million. Interest expense on deposits declined $42 thousand as average interest-bearing demand and savings deposits increased $10.0 million, average certificates of deposit declined $13.0 million and the average rate paid on these deposits declined one basis point. This was offset by new borrowings from the Federal Home loan Bank of San Francisco which averaged $12.4 million and carried interest expense of $47 thousand. Variances in interest expense on other term debt were immaterial.

Provision for loan and lease loss

As a result of continued improved asset quality and net loan loss recoveries, no provision for loan and lease losses was necessary during the current quarter compared with a provision for loan and lease losses of $450 thousand for the prior quarter.

Noninterest Income

Noninterest income for the three months ended March 31, 2018 decreased $300 thousand. During the current quarter gains on sale of OREO were $16 thousand compared to gains on sale of OREO of $346 thousand in the prior quarter.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2018 increased $142 thousand compared to the fourth quarter of 2017. The increase was primarily related to employee compensation.

The Company’s efficiency ratio was 65.17% for the first quarter of 2018 compared to 64.94% during the prior quarter.

Income Tax Provision

For the three months ended March 31, 2018, our income tax provision of $1.1 million on pre-tax income of $4.3 million was an effective tax rate of 24.5%. This compares with a provision for income taxes of $3.8 million on pretax income of $3.8 million (99.8% effective tax rate) for the prior quarter. The income tax provision in the prior quarter included a $2.5 million write-down of our net deferred tax assets and if excluded from the calculation, the effective tax rate would have been 34.5%

Earnings Per Share

Diluted earnings per share were $0.20 for the three months ended March 31, 2018. This compared with diluted earnings per share of $0.17 for the same period a year ago and diluted earnings per share of $0.00 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in table 6 presented earlier in this press release.

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
  For The Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,   December 31,   September 30,   June 30,
  2018   2017   2017   2017   2017   2016   2016   2016
Interest-bearing deposits   0.41 %     0.42 %     0.43 %     0.42 %     0.39 %     0.40 %     0.39 %     0.39 %
Interest-bearing deposits and noninterest-bearing demand   0.29 %     0.30 %     0.31 %     0.31 %     0.29 %     0.29 %     0.29 %     0.30 %
All interest-bearing liabilities   0.60 %     0.59 %     0.60 %     0.60 %     0.56 %     0.57 %     0.56 %     0.56 %
All interest-bearing liabilities and noninterest-bearing demand   0.43 %     0.42 %     0.43 %     0.44 %     0.42 %     0.42 %     0.42 %     0.44 %
                                                               


                                                       
                                                       
TABLE 8a
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
    For The Three Months Ended
    March 31, 2018   March 31, 2017   December 31, 2017
    Average         Yield /   Average         Yield /   Average         Yield /
(Amounts in thousands)   Balance   Interest(1)   Rate (5)   Balance   Interest(1)   Rate (5)   Balance   Interest(1)   Rate (5)
Interest-earning assets:                                                      
Net loans (2)   $ 883,876   $ 10,729   4.92  %   $ 806,793   $ 9,384   4.72  %   $ 839,004   $ 10,083   4.77  %
Taxable securities     205,302     1,209   2.39  %     137,582     789   2.33  %     199,849     1,211   2.40  %
Tax-exempt securities     59,789     463   3.14  %     73,524     530   2.92  %     72,152     529   2.91  %
Interest-bearing deposits
in other banks
    32,890     129   1.59  %     57,140     114   0.81  %     67,032     224   1.33  %
Average interest-
earning assets
    1,181,857     12,530   4.30  %     1,075,039     10,817   4.08  %     1,178,037     12,047   4.06  %
Cash and due from banks     17,666                 16,873                 19,783            
Premises and equipment, net     14,557                 16,165                 14,948            
Other assets     34,483                 40,228                 39,192            
Average total assets   $ 1,248,563               $ 1,148,305               $ 1,251,960            
                                                       
Interest-bearing liabilities:                                                      
Interest-bearing demand   $ 470,440     221   0.19  %   $ 420,416     148   0.14  %   $ 459,451     216   0.19  %
Savings deposits     110,725     59   0.22  %     113,647     47   0.17  %     111,725     54   0.19  %
Certificates of deposit     181,901     495   1.10  %     215,202     529   1.00  %     194,886     547   1.11  %
Federal Home Loan Bank of San
Francisco borrowings
    12,444     47   1.53  %            %            %
Other borrowings net of unamortized
debt issuance costs
    16,528     281   6.90  %     18,598     293   6.39  %     17,211     285   6.57  %
Junior subordinated
debentures
    10,310     82   3.23  %     10,310     66   2.60  %     10,310     76   2.92  %
Average interest-
bearing liabilities
    802,348     1,185   0.60  %     778,173     1,083   0.56  %     793,583     1,178   0.59  %
Noninterest-bearing demand     307,397                 262,881                 316,961            
Other liabilities     11,749                 12,431                 12,554            
Shareholders’ equity     127,069                 94,820                 128,862            
Average liabilities and
shareholders’ equity
  $ 1,248,563               $ 1,148,305               $ 1,251,960            
Net interest income and
net interest margin (4)
        $ 11,345   3.89  %         $ 9,734   3.67  %         $ 10,869   3.66  %
Tax equivalent net
  interest margin (3)
              3.94  %               3.78  %               3.75  %
                                                       
(1) Interest income on loans is net of deferred fees and costs of approximately $137 thousand, $197 thousand, and $123 thousand for the three months ended
March 31, 2018, and 2017 and December 31, 2017, respectively.
(2) Net loans includes average nonaccrual loans of $4.8 million, $10.9 million and $6.5 million for the three months ended March 31, 2018 and 2017 and
December 31, 2017, respectively.
(3) Tax-exempt income has been adjusted to tax equivalent basis at a 21% for 2018 and at a 34% tax rate for 2017. The amount of such adjustments was an addition to recorded income of approximately $123 thousand, $273 thousand and $273 thousand for the three months ended March 31, 2018 and 2017 and December 31, 2017, respectively.
(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets.
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.
 


                                       
                                       
TABLE 9  
ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED  
(amounts in thousands)  
  For The Three Months Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2018   2017   2017   2017   2017
Beginning balance ALLL $ 11,925       $ 11,692       $ 11,688       $ 11,641       $ 11,544    
Provision for loan and lease losses           450                 300         200    
Loans charged-off   (390 )       (451 )       (245 )       (359 )       (447 )  
Loan loss recoveries   760         234         249         106         344    
Ending balance ALLL $ 12,295       $ 11,925       $ 11,692       $ 11,688       $ 11,641    
                                       
  At March 31,   At December 31,   At September 30,   At June 30,   At March 31,
  2018   2017   2017   2017   2017
Nonaccrual loans:                                      
Commercial $ 1,109       $ 1,603       $ 2,309       $ 2,410       $ 2,534    
Real estate - commercial non-owner occupied                           1,196         1,196    
Real estate - commercial owner occupied           600         617         639         654    
Real estate - residential - ITIN   2,839         2,909         3,201         3,346         3,331    
Real estate - residential - 1-4 family mortgage   188         606         626         653         1,337    
Real estate - residential - equity lines   45         45         815         872         906    
Consumer and other   35         36         37         38         39    
Total nonaccrual loans   4,216         5,799         7,605         9,154         9,997    
Accruing troubled debt restructured loans:                                      
Commercial   1,516         1,551         671         703         741    
Real estate - commercial non-owner occupied   800         803         805         806         808    
Real estate - residential - ITIN   4,554         4,614         4,655         4,712         4,761    
Real estate - residential - equity lines   376         380         441         445         450    
Total accruing troubled debt restructured loans   7,246         7,348         6,572         6,666         6,760    
                                       
All other accruing impaired loans                                      
                                       
Total impaired loans $ 11,462       $ 13,147       $ 14,177       $ 15,820       $ 16,757    
                                       
Gross loans outstanding at period end $ 900,420       $ 879,835       $ 824,874       $ 815,388       $ 810,194    
                                       
Impaired loans to gross loans   1.27   %     1.49   %     1.72   %     1.94   %     2.07   %
Nonaccrual loans to gross loans   0.47   %     0.66   %     0.92   %     1.12   %     1.23   %
                                       
Allowance for loan and lease losses as a percent of:                          
Gross loans   1.37   %     1.36   %     1.42   %     1.43   %     1.44   %
Nonaccrual loans   291.63   %     205.64   %     153.74   %     127.68   %     116.44   %
Impaired loans   107.27   %     90.71   %     82.47   %     73.88   %     69.47   %
                                                 

We continue to monitor credit quality and adjust the ALLL to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. As a result of continued improved asset quality and net loan loss recoveries, no provision for loan and lease losses was necessary during the current quarter. This compared with a provision of $200 thousand for the three months ended March 31, 2017 and a $450 thousand provision for loan and lease losses during the three months ended December 31, 2017. Our ALLL as a percentage of gross loans was 1.37% as of March 31, 2018 compared to 1.44% as of March 31, 2017 and 1.36% as of December 31, 2017. 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 March 31, 2018. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in future charges to the provision for loan and lease losses.

At March 31, 2018, the recorded investment in loans classified as impaired totaled $11.5 million, with a corresponding specific reserve of $1.1 million compared to impaired loans of $16.8 million with a corresponding specific reserve of $1.3 million at March 31, 2017 and impaired loans of $13.1 million, with a corresponding specific reserve of $1.2 million at December 31, 2017. The decrease in loans classified as impaired and nonaccrual loans compared to the prior quarter is primarily due to one commercial loan relationship and one commercial real estate loan that were paid off during the quarter. The decrease in the specific reserve on impaired loans compared to the prior quarter was primarily due to one commercial loan.

                                         
                                         
TABLE 10
TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
    At March 31,   At December 31,   At September 30,   At June 30,   At March 31,
    2018   2017   2017   2017   2017
Nonaccrual   $ 3,237     $ 3,581     $ 4,403     $ 4,630     $ 4,570  
Accruing     7,246       7,348       6,572       6,666       6,760  
Total troubled debt restructurings   $ 10,483     $ 10,929     $ 10,975     $ 11,296     $ 11,330  
                                         
Troubled debt restructurings as a percentage of total gross loans     1.16 %     1.24 %     1.33 %     1.39 %     1.40 %
 

There were no new troubled debt restructurings during the three months ended March 31, 2018. As of March 31, 2018, we had 113 restructured loans that qualified as troubled debt restructurings, of which 108 were performing according to their restructured terms.

                                         
                                         
TABLE 11
NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
    At March 31,   At December 31,   At September 30,   At June 30,   At March 31,
    2018   2017   2017   2017   2017
Total nonaccrual loans   $ 4,216     $ 5,799     $ 7,605     $ 9,154     $ 9,997  
90 days past due and still accruing                              
Total nonperforming loans     4,216       5,799       7,605       9,154       9,997  
                                         
Other real estate owned     60       35       699       1,517       814  
Total nonperforming assets   $ 4,276     $ 5,834     $ 8,304     $ 10,671     $ 10,811  
                                         
Nonperforming loans to gross loans     0.47  %     0.66  %     0.92  %     1.12  %     1.23  %
Nonperforming assets to total assets     0.34  %     0.46  %     0.67  %     0.88  %     0.95  %
                                         

The March 31, 2018 OREO balance consists of three 1-4 family residential real estate property in the amount of $60 thousand. The increase in the OREO balance compared to the prior quarter is due to the transfer of three 1-4 family residential properties to OREO totaling $60 thousand offset by the disposition of one 1-4 family residential property for $35 thousand. Net gains on sale of OREO in the current quarter were $16 thousand compared to net losses of $71 thousand and net gains of $346 thousand in the same quarter a year ago and in the prior quarter, respectively.

                               
                               
TABLE 12
UNAUDITED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
    At March 31,   At March 31,   Change   At December 31,
    2018   2017   $   %   2017
Assets:                              
Cash and due from banks   $ 16,247     $ 18,315     $ (2,068 )   (11 ) %   $ 17,979  
Interest-bearing deposits in other banks     17,376       42,744       (25,368 )   (59 ) %     48,991  
Total cash and cash equivalents     33,623       61,059       (27,436 )   (45 ) %     66,970  
                               
Securities available-for-sale, at fair value     255,917       181,534       74,383     41   %     267,954  
Securities held-to-maturity, at amortized cost           31,257       (31,257 )   (100 ) %      
Loans, net of deferred fees and costs     902,133       811,640       90,493     11   %     881,545  
Allowance for loan and lease losses     (12,295 )     (11,641 )     (654 )   6   %     (11,925 )
Net loans     889,838       799,999       89,839     11   %     869,620  
                               
Premises and equipment, net     14,214       15,903       (1,689 )   (11 ) %     14,748  
Other real estate owned     60       814       (754 )   (93 ) %     35  
Life insurance     22,027       21,494       533     2   %     21,898  
Deferred tax asset, net     7,523       9,363       (1,840 )   (20 ) %     6,505  
Goodwill and core deposit intangible, net     1,975       2,196       (221 )   (10 ) %     2,030  
Other assets     20,398       19,132       1,266     7   %     19,661  
Total assets   $ 1,245,575     $ 1,142,751     $ 102,824     9   %   $ 1,269,421  
                               
Liabilities and shareholders' equity:                              
Demand - noninterest-bearing   $ 301,981     $ 270,412     $ 31,569     12   %   $ 305,650  
Demand - interest-bearing     462,551       407,784       54,767     13   %     496,990  
Savings     107,986       112,738       (4,752 )   (4 ) %     110,837  
Certificates of deposit     176,233       213,556       (37,323 )   (17 ) %     189,255  
Total deposits     1,048,751       1,004,490       44,261     4   %     1,102,732  
                               
Term debt:                              
Federal Home Loan Bank of San Francisco borrowings     30,000             30,000     100   %      
Other borrowings     16,196       18,667       (2,471 )   (13 ) %     17,096  
Unamortized debt issuance costs     (127 )     (173 )     46     (27 ) %     (138 )
Net term debt     46,069       18,494       27,575     149   %     16,958  
                               
Junior subordinated debentures     10,310       10,310             %     10,310  
Other liabilities     12,723       12,994       (271 )   (2 ) %     12,157  
Total liabilities     1,117,853       1,046,288       71,565     7   %     1,142,157  
                               
Shareholders' equity:                              
Common stock     51,959       24,800       27,159     110   %     51,830  
Retained earnings     78,507       72,066       6,441     9   %     75,700  
Accumulated other comprehensive loss, net of tax     (2,744 )     (403 )     (2,341 )   581   %     (266 )
Total shareholders' equity     127,722       96,463       31,259     32   %     127,264  
                               
Total liabilities and shareholders' equity   $ 1,245,575     $ 1,142,751     $ 102,824     9   %   $ 1,269,421  
                               
Total interest-earning assets   $ 1,179,321     $ 1,068,066     $ 111,255     10   %   $ 1,198,942  
Shares outstanding     16,315       13,517       2,798     21   %     16,272  
Book value per share   $ 7.83     $ 7.14     $ 0.69     10   %   $ 7.82  
Tangible book value per share (1)   $ 7.71     $ 6.97     $ 0.74     11   %   $ 7.70  
                               
(1) Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.
 


                                 
                                 
TABLE 13
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
    For The Three Months Ended  
    March 31,   Change   December 31,  
    2018   2017   $   %   2017  
Interest income:                                
Interest and fees on loans   $ 10,729   $ 9,384     $ 1,345     14   %   $ 10,083    
Interest on taxable securities     1,209     789       420     53   %     1,211    
Interest on tax-exempt securities     463     530       (67 )   (13 ) %     529    
Interest on interest-bearing deposits in other banks     129     114       15     13   %     224    
Total interest income     12,530     10,817       1,713     16   %     12,047    
Interest expense:                                
Interest on demand deposits     221     148       73     49   %     216    
Interest on savings deposits     59     47       12     26   %     54    
Interest on certificates of deposit     495     529       (34 )   (6 ) %     547    
Interest on Federal Home Loan Bank of
San Francisco borrowings
    47           47     100   %        
Interest on other borrowings     281     293       (12 )   (4 ) %     285    
Interest on junior subordinated debentures     82     66       16     24   %     76    
Total interest expense     1,185     1,083       102     9   %     1,178    
Net interest income     11,345     9,734       1,611     17   %     10,869    
Provision for loan and lease losses         200       (200 )   (100 ) %     450    
Net interest income after provision
for loan and lease losses
    11,345     9,534       1,811     19   %     10,419    
Noninterest income:                                
Service charges on deposit accounts     176     127       49     39   %     141    
ATM and point of sale fees     266     266             %     266    
Fees on payroll and benefit processing     169     191       (22 )   (12 ) %     173    
Life insurance     129     646       (517 )   (80 ) %     135    
Gain (loss) on investment securities, net     36     66       (30 )   (45 ) %     (2 )  
Federal Home Loan Bank of
San Francisco dividends
    80     103       (23 )   (22 ) %     81    
Gain (loss) on sale of OREO     16     (71 )     87     (123 ) %     346    
Insured cash sweep fees         32       (32 )   (100 ) %     5    
Other income     110     111       (1 )   (1 ) %     137    
Total noninterest income     982     1,471       (489 )   (33 ) %     1,282    
                                         


                                 
                                 
TABLE 13 - CONTINUED
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
    For The Three Months Ended  
    March 31,   Change   December 31,  
    2018   2017   $   %   2017  
Noninterest expense:                                
Salaries and related benefits     4,855     4,858     (3 )     %     4,523  
Premises and equipment     1,071     1,048     23     2   %     1,073  
Federal Deposit Insurance Corporation
insurance premium
    96     48     48     100   %     88  
Data processing fees     432     406     26     6   %     455  
Professional service fees     345     384     (39 )   (10 ) %     279  
Telecommunications     216     211     5     2   %     226  
Other expenses     1,018     1,035     (17 )   (2 ) %     1,247  
Total noninterest expense     8,033     7,990     43     1   %     7,891  
Income before provision for income taxes     4,294     3,015     1,279     42   %     3,810  
Provision for income taxes:                                
Net deferred tax asset write-down                   %     2,490  
Provision for income taxes from operations     1,053     763     290     38   %     1,313  
Total provision for income taxes     1,053     763     290     38   %     3,803  
Net income   $ 3,241   $ 2,252   $ 989     44   %   $ 7  
                                 
Basic earnings per share   $ 0.20   $ 0.17   $ 0.03     18   %   $  
Average basic shares     16,225     13,416     2,809     21   %     16,195  
Diluted earnings per share   $ 0.20   $ 0.17   $ 0.03     18   %   $  
Average diluted shares     16,310     13,521     2,789     21   %     16,306  
                                     


                               
                               
TABLE 14
UNAUDITED CONDENSED CONSOLIDATED
YEAR TO DATE AVERAGE BALANCE SHEETS
(amounts in thousands)
  For the Three Months Ended   For the Twelve Months Ended
    March 31,   March 31,   December 31,   December 31,   December 31,
    2018   2017   2017   2016   2015
Earning assets:                            
Loans   $ 883,876   $ 806,793   $ 818,119   $ 752,938   $ 699,227
Taxable securities     205,302     137,582     165,333     120,884     120,897
Tax exempt securities     59,789     73,524     74,231     75,303     77,089
Interest-bearing deposits in other banks     32,890     57,140     66,872     58,668     30,323
Total earning assets     1,181,857     1,075,039     1,124,555     1,007,793     927,536
                               
Cash and due from banks     17,666     16,873     18,301     15,831     11,220
Premises and equipment, net     14,557     16,165     15,567     15,078     11,552
Other assets     34,483     40,228     39,828     41,048     42,423
Total assets   $ 1,248,563   $ 1,148,305   $ 1,198,251   $ 1,079,750   $ 992,731
                               
Liabilities and shareholders' equity:                              
Demand - noninterest-bearing   $ 307,397   $ 262,881   $ 289,735   $ 226,368   $ 156,578
Demand - interest-bearing     470,440     420,416     434,705     374,170     283,105
Savings     110,725     113,647     111,376     104,771     92,659
Certificates of deposit     181,901     215,202     205,648     221,074     238,626
Total deposits     1,070,463     1,012,146     1,041,464     926,383     770,968
                               
Federal Home Loan Bank of San Francisco borrowings     12,444                
Other borrowings net of unamortized debt issuance costs     16,528     18,598     18,283     37,286     88,874
Junior subordinated debentures     10,310     10,310     10,310     10,310     10,310
Other liabilities     11,749     12,431     12,293     13,217     16,588
Total liabilities     1,121,494     1,053,485     1,082,350     987,196     886,740
                               
Shareholders' equity     127,069     94,820     115,901     92,554     105,991
Liabilities & shareholders' equity   $ 1,248,563   $ 1,148,305   $ 1,198,251   $ 1,079,750   $ 992,731
 


                               
                               
TABLE 15
UNAUDITED CONDENSED CONSOLIDATED
QUARTERLY AVERAGE BALANCE SHEETS
(amounts in thousands)
    For The Three Months Ended
    March 31,   December 31,   September 30,   June 30,   March 31,
    2018   2017   2017   2017   2017
Earning assets:                              
Loans   $ 883,876   $ 839,004   $ 805,144   $ 821,321   $ 806,793
Taxable securities     205,302     199,849     179,362     143,705     137,582
Tax exempt securities     59,789     72,152     77,303     73,927     73,524
Interest-bearing deposits in other banks     32,890     67,032     84,323     58,691     57,140
Total earning assets     1,181,857     1,178,037     1,146,132     1,097,644     1,075,039
                               
Cash and due from banks     17,666     19,783     19,143     17,364     16,873
Premises and equipment, net     14,557     14,948     15,362     15,809     16,165
Other assets     34,483     39,192     40,263     39,630     40,228
Total assets   $ 1,248,563   $ 1,251,960   $ 1,220,900   $ 1,170,447   $ 1,148,305
                               
Liabilities and shareholders' equity:                              
Demand - noninterest-bearing   $ 307,397   $ 316,961   $ 303,314   $ 275,039   $ 262,881
Demand - interest-bearing     470,440     459,451     436,614     421,888     420,416
Savings     110,725     111,725     110,305     109,857     113,647
Certificates of deposit     181,901     194,886     204,044     208,703     215,202
Total deposits     1,070,463     1,083,023     1,054,277     1,015,487     1,012,146
                               
Federal Home Loan Bank of San Francisco borrowings     12,444                
Other borrowings net of unamortized debt issuance costs     16,528     17,211     17,804     19,539     18,598
Junior subordinated debentures     10,310     10,310     10,310     10,310     10,310
Other liabilities     11,749     12,554     11,935     12,256     12,431
Total liabilities     1,121,494     1,123,098     1,094,326     1,057,592     1,053,485
                               
Shareholders' equity     127,069     128,862     126,574     112,855     94,820
Liabilities & shareholders' equity   $ 1,248,563   $ 1,251,960   $ 1,220,900   $ 1,170,447   $ 1,148,305
 


About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, California and is the parent company for Redding Bank of Commerce which operates under two separate names (Redding Bank of Commerce and Sacramento Bank of Commerce, a division of Redding Bank of Commerce). The Bank is an FDIC-insured California banking corporation providing community banking and financial services through nine offices located in northern California. The Bank was incorporated as a California banking corporation on November 25, 1981 and opened for business on October 22, 1982. The Company’s common stock is listed on the NASDAQ Global Market and trades under the symbol “BOCH”.

Contact Information:

Randall S. Eslick, President and Chief Executive 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 Schneck, Vice President and Senior Administrative Officer

Telephone Direct (530) 722-3959

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