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

SACRAMENTO, Calif., Jan. 18, 2019 (GLOBE NEWSWIRE) — Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.307 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter and the year ended December 31, 2018. Net income for the quarter ended December 31, 2018 was $4.8 million or $0.30 per share – diluted, compared with net income of $7 thousand or $0.00 per share – diluted for the same period of 2017. Net income for the year ended December 31, 2018 was $15.7 million or $0.96 per share – diluted, compared with net income of $7.3 million or $0.48 per share – diluted for the same period of 2017.

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

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

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

Financial highlights for the year ended December 31, 2018:

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

Financial highlights for the fourth quarter of 2018:

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

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

Forward-Looking Statements

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

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

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

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

BALANCE SHEET OVERVIEW

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

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

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

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

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

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

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

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

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

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

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

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

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

AVERAGE COST OF FUNDS

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

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

INCOME STATEMENT OVERVIEW

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


Fourth Quarter of 2018 Compared With Fourth Quarter of 2017

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

Net Interest Income

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

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

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

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

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

Provision for loan and lease loss

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

Noninterest Income

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

Noninterest Expense

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

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

Income Tax Provision

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

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

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

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

Fourth Quarter of 2018 Compared With Third Quarter of 2018

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

Net Interest Income

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

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

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

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

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

Provision for loan and lease loss

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

Noninterest Income

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

Noninterest Expense

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

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

Income Tax Provision

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

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

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

Earnings Per Share

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

                                                       
TABLE 8a
NET INTEREST MARGIN – UNAUDITED
(amounts in thousands)
                                                       
    For The Three Months Ended
    December 31, 2018   December 31, 2017   September 30, 2018
    Average         Yield /   Average         Yield /   Average         Yield /
(Amounts in thousands)   Balance   Interest(1)   Rate (5)   Balance   Interest(1)   Rate (5)   Balance   Interest(1)   Rate (5)
Interest-earning assets:                                                      
Net loans (2)   $ 923,409   $ 11,494   4.94 %   $ 839,004   $ 10,083   4.77 %   $ 930,863   $ 11,568   4.93 %
Taxable securities     218,137     1,469   2.67 %     199,849     1,211   2.40 %     199,883     1,209   2.40 %
Tax-exempt securities     42,868     353   3.27 %     72,152     529   2.91 %     48,561     400   3.27 %
Interest-bearing deposits
in other banks
    75,295     434   2.29 %     67,032     224   1.33 %     50,397     254   2.00 %
Average interest-
earning assets
    1,259,709     13,750   4.33 %     1,178,037     12,047   4.06 %     1,229,704     13,431   4.33 %
Cash and due from banks     22,447                 19,783                 21,834            
Premises and equipment, net     13,331                 14,948                 13,768            
Goodwill and core deposit intangible, net     1,842                 2,054                 1,888            
Other assets     31,488                 37,138                 33,084            
Average total assets   $ 1,328,817               $ 1,251,960               $ 1,300,278            
                                                       
Interest-bearing liabilities:                                                      
Interest-bearing demand   $ 522,417     348   0.26 %   $ 459,451     216   0.19 %   $ 494,906     276   0.22 %
Savings deposits     110,934     92   0.33 %     111,725     54   0.19 %     107,349     73   0.27 %
Certificates of deposit     157,035     462   1.17 %     194,886     547   1.11 %     163,302     465   1.13 %
Federal Home Loan Bank of San Francisco borrowings           %           %     22,283     121   2.15 %
Other borrowings net of unamortized debt issuance costs     13,785     252   7.25 %     17,211     285   6.57 %     14,681     265   7.16 %
Junior subordinated
debentures
    10,310     102   3.93 %     10,310     76   2.92 %     10,310     104   4.00 %
Average interest-
bearing liabilities
    814,481     1,256   0.61 %     793,583     1,178   0.59 %     812,831     1,304   0.64 %
Noninterest-bearing demand     367,457                 316,961                 343,948            
Other liabilities     12,846                 12,554                 12,000            
Shareholders’ equity     134,033                 128,862                 131,499            
Average liabilities and
shareholders’ equity
  $ 1,328,817               $ 1,251,960               $ 1,300,278            
Net interest income and
net interest margin (4)
        $ 12,494   3.93 %         $ 10,869   3.66 %         $ 12,127   3.91 %
Tax equivalent net
  interest margin (3)
              3.96 %               3.75 %               3.95 %
                                                       
(1) Interest income on loans includes deferred fees and costs of approximately $109 thousand, $123 thousand, and $75 thousand for the three months ended December 31, 2018, and 2017 and September 30, 2018, respectively.
(2) Net loans includes average nonaccrual loans of $4.1 million, $6.5 million and $3.8 million for the three months ended December 31, 2018 and 2017 and September 30, 2018, respectively.
(3) Tax-exempt income has been adjusted to tax equivalent basis at a 21% for 2018 and at a 34% tax rate for 2017. The amount of such adjustments was an addition to recorded income of approximately $94 thousand, $273 thousand and $106 thousand for the three months ended December 31, 2018 and 2017 and September 30, 2018, respectively.
(4) Net interest margin is annualized net interest income expressed as a percentage of average interest-earning assets.
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.

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

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

We continue to monitor credit quality and adjust the ALLL to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. As a result of continued improved asset quality, no provision for loan and lease losses was necessary during the current quarter and the prior quarter. A provision for loan and lease losses of $450 thousand was recorded during the same quarter a year ago. Our ALLL as a percentage of gross loans was 1.30% as of December 31, 2018 compared to 1.36% as of December 31, 2017 and 1.34% as of September 30, 2018. Based on the Bank’s ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate at December 31, 2018. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in future charges to the provision for loan and lease losses.

At December 31, 2018, the recorded investment in loans classified as impaired totaled $11.0 million, with a corresponding specific reserve of $1.2 million compared to impaired loans of $13.1 million with a corresponding specific reserve of $1.2 million at December 31, 2017 and impaired loans of $10.7 million, with a corresponding specific reserve of $1.1 million at September 30, 2018.

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

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

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

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

                                           
TABLE 13
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
 
    For The Three Months Ended   For The Twelve Months Ended
    December 31,   Change   September 30,   December 31,
    2018   2017     $   %   2018
  2018   2017
Interest income:                                          
Interest and fees on loans   $ 11,494   $ 10,083     $ 1,411     14 %   $ 11,568     $ 44,955   $ 39,112
Interest on taxable securities     1,469     1,211       258     21 %     1,209       5,165     3,921
Interest on tax-exempt securities     353     529       (176 )   (33 )%     400       1,629     2,144
Interest on interest-bearing deposits in other banks     434     224       210     94 %     254       952     772
Total interest income     13,750     12,047       1,703     14 %     13,431       52,701     45,949
Interest expense:                                          
Interest on demand deposits     348     216       132     61 %     276       1,060     744
Interest on savings deposits     92     54       38     70 %     73       288     200
Interest on certificates of deposit     462     547       (85 )   (16 )%     465       1,910     2,188
Interest on Federal Home Loan Bank of
San Francisco borrowings
                  %     121       435     3
Interest on other borrowings     252     285       (33 )   (12 )%     265       1,077     1,165
Interest on junior subordinated debentures     102     76       26     34 %     104       385     287
Total interest expense     1,256     1,178       78     7 %     1,304       5,155     4,587
Net interest income     12,494     10,869       1,625     15 %     12,127       47,546     41,362
Provision for loan and lease losses         450       (450 )   (100 )%               950
Net interest income after provision
for loan and lease losses
    12,494     10,419       2,075     20 %     12,127       47,546     40,412
Noninterest income:                                          
Service charges on deposit accounts     161     141       20     14 %     170       682     542
ATM and point of sale fees     283     266       17     6 %     282       1,131     1,093
Fees on payroll and benefit processing     178     173       5     3 %     159       652     658
Life insurance     128     135       (7 )   (5 )%     128       512     1,050
Gain (loss) on investment securities, net     3     (2 )     5     250 %     1       44     137
Federal Home Loan Bank of
San Francisco dividends
    201     81       120     148 %     104       480     318
Gain (loss) on sale of OREO     64     346       (282 )   (82 )%     (7 )     73     368
Insured cash sweep fees         4       (4 )   (100 )%               197
Other income     114     138       (24 )   (17 )%     106       445     461
Total noninterest income     1,132     1,282       (150 )   (12 )%     943       4,019     4,824

                                           
TABLE 13 – CONTINUED
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
                                           
    For The Three Months Ended   For The Twelve Months Ended
    December 31,   Change   September 30,   December 31,
    2018     2017   $   %   2018   2018     2017
Noninterest expense:                                          
Salaries and related benefits     4,812       4,523     289     6 %     4,529     18,709       17,819
Premises and equipment     943       1,073     (130 )   (12 )%     1,017     4,047       4,242
Federal Deposit Insurance Corporation
insurance premium
    93       88     5     6 %     94     376       318
Data processing fees     512       455     57     13 %     518     1,933       1,749
Professional service fees     436       279     157     56 %     336     1,431       1,398
Telecommunications     145       226     (81 )   (36 )%     55     594       879
Acquisition     802           802     100 %     42     844      
Other expenses     1,125       1,247     (122 )   (10 )%     1,043     4,272       4,559
Total noninterest expense     8,868       7,891     977     12 %     7,634     32,206       30,964
Income before provision for income taxes     4,758       3,810     948     25 %     5,436     19,359       14,272
Provision for income taxes:                                          
Reversal of uncertain tax position     (988 )         (988 )   100 %         (988 )    
Benefit from cost segregation study and
tangible property review
    (484 )         (484 )   100 %         (484 )    
Net deferred tax asset write-down           2,490     (2,490 )   (100 )%               2,490
Provision for income taxes from operations     1,391       1,313     78     6 %     1,404     5,101       4,438
Total provision for income taxes     (81 )     3,803     (3,884 )   (102 )%     1,404     3,629       6,928
Net income   $ 4,839     $ 7   $ 4,832     100 %   $ 4,032   $ 15,730     $ 7,344
                                           
Basic earnings per share   $ 0.30     $   $ 0.30     100 %   $ 0.25   $ 0.97     $ 0.48
Average basic shares     16,265       16,195     70     %     16,252     16,248       15,207
Diluted earnings per share   $ 0.30     $   $ 0.30     100 %   $ 0.25   $ 0.96     $ 0.48
Average diluted shares     16,345       16,306     39     %     16,342     16,332       15,310

                               
TABLE 14
UNAUDITED CONDENSED CONSOLIDATED
QUARTERLY AVERAGE BALANCE SHEETS
(amounts in thousands)
                               
    For The Three Months Ended
    December 31,   September 30,   June 30,   March 31,   December 31,
    2018   2018   2018   2018   2017
Earning assets:                              
Loans   $ 923,409   $ 930,863   $ 922,687   $ 883,876   $ 839,004
Taxable securities     218,137     199,883     206,247     205,302     199,849
Tax exempt securities     42,868     48,561     50,306     59,789     72,152
Interest-bearing deposits in other banks     75,295     50,397     29,041     32,915     67,032
Total earning assets     1,259,709     1,229,704     1,208,281     1,181,882     1,178,037
                               
Cash and due from banks     22,447     21,834     19,880     17,641     19,783
Premises and equipment, net     13,331     13,768     14,167     14,557     14,948
Goodwill and core deposit intangible, net     1,842     1,888     1,943     1,998     2,054
Other assets     31,488     33,084     32,426     32,485     37,138
Total assets   $ 1,328,817   $ 1,300,278   $ 1,276,697   $ 1,248,563   $ 1,251,960
                               
Liabilities and shareholders’ equity:                              
Demand – noninterest-bearing   $ 367,457   $ 343,948   $ 309,199   $ 307,397   $ 316,961
Demand – interest-bearing     522,417     494,906     467,651     470,440     459,451
Savings     110,934     107,349     107,108     110,725     111,725
Certificates of deposit     157,035     163,302     170,824     181,901     194,886
Total deposits     1,157,843     1,109,505     1,054,782     1,070,463     1,083,023
                               
Federal Home Loan Bank of San Francisco borrowings         22,283     55,275     12,444    
Other borrowings net of unamortized debt issuance costs     13,785     14,681     15,614     16,528     17,211
Junior subordinated debentures     10,310     10,310     10,310     10,310     10,310
Other liabilities     12,846     12,000     12,535     11,749     12,554
Total liabilities     1,194,784     1,168,779     1,148,516     1,121,494     1,123,098
                               
Shareholders’ equity     134,033     131,499     128,181     127,069     128,862
Liabilities & shareholders’ equity   $ 1,328,817   $ 1,300,278   $ 1,276,697   $ 1,248,563   $ 1,251,960

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

About Bank of Commerce Holdings

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

Contact Information:

Randall S. Eslick, President and Chief Executive Officer
Telephone Direct (916) 677-5800

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

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

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