Exhibit 99.1

 

For immediate release:

Bank of Commerce Holdings™ announces Fourth Quarter and Full Year 2011 Results

REDDING, California, January 31, 2012/ PR Newswire— Patrick J. Moty, President & CEO of Bank of Commerce Holdings (NASDAQ: BOCH), a $940.7 million bank holding company, and parent company of Redding Bank of Commerce™, Roseville Bank of Commerce™

(a division of Redding Bank of Commerce), and Bank of Commerce Mortgage™ today reported net income available to common shareholders of $1.9 million and diluted earnings per share (“EPS”) of $0.12 for the fourth quarter 2011, and full year income available to common shareholders of $6.3 million and diluted EPS of $0.37.

Key Financial Items for the fourth quarter 2011:

 

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Net Income available to common shareholders of $1.9 million reflects a 39% increase over the $1.4 million reported for the quarter ended December 31, 2010, and a 13% increase over the $1.7 million recorded for the third quarter 2011.

 

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Diluted EPS of $0.12 compares to $0.08 reported for the same period a year ago and $0.10 for prior quarter ended September 30, 2011.

 

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Loan loss provisions for the fourth quarter were $1.8 million compared to $4.6 million for the fourth quarter 2010 and $2.2 million for the prior quarter ended September 30, 2011.

 

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Nonperforming assets represented 2.68% of total assets in the current period versus 2.30% for the quarter ended September 30, 2011.

 

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Mortgage banking revenue for the three months ended December 31, 2011 decreased by 15% compared to the same period a year ago, primarily driven by decreased origination and refinancing activities.

Key Financial Items for the full year 2011:

 

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Net Income available to common shareholders of $6.3 million reflects a 20% increase over the $5.3 million reported for the full year 2010.

 

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Full year 2011 diluted EPS of $0.37 compares to $0.35 diluted EPS for full year 2010.

 

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Provision for loan losses declined 30% year over year to $9.0 million.

 

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Nonperforming assets totaled $25.2 million and represented 2.68% of total assets at year end 2011, compared to $22.8 million and 2.43% at year end 2010, respectively.

 

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Non-maturing core deposits increased $37.3 million or 11% from a year ago December 31, 2010.

 

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Mortgage banking revenue remained steady for the full year 2011 at $14.3 million compared to $14.3 million for the full year 2010.

Patrick J. Moty, President and CEO commented: “2011 was a challenging but exciting year for the bank. Our positive financial performance continues to outpace our peers as we navigate through the lingering effects of the recession.. We look forward to 2012 with great optimism as we enter our thirtieth successful year of operations. We are proud to provide high quality financial services to our local communities.”

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

 

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Competitive pressure in the banking industry and changes in the regulatory environment.

 

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Changes in the interest rate environment and volatility of rate sensitive assets and liabilities.

 

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The health of the economy declines nationally or regionally which could reduce the demand for loans or reduce the value of real estate collateral securing most of the Company’s loans.

 

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•

Credit quality deteriorates which could cause an increase in the provision for loan losses.

 

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Asset/Liability matching risks and liquidity risks.

 

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Changes in the securities markets.

For additional information concerning risks and uncertainties related to the Company and its operations please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and under the heading: “Risk factors that may affect results” and subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

 

 

Table 1 below shows summary financial information for the quarters ended December 31, 2011 and 2010, and September 30, 2011.

Table 1

SUMMARY FINANCIAL INFORMATION

 

(Shares and dollars in thousands)		Quarter ended December 31, 2011				Quarter ended December 31, 2010				Change				Quarter ended September 30, 2011				Change
Selective quarterly performance ratios
Return on average assets, annualized			0.90	%			0.70	%			0.20	%			0.91	%			-0.01	%
Return on average equity, annualized			7.48	%			6.22	%			1.26	%			7.45	%			0.03	%
Efficiency ratio for quarter to date			63.84	%			53.73	%			10.11	%			56.32	%			7.52	%
Share and Per Share figures - Actual
Common shares outstanding at period end			16,991				16,991				—				16,991				—
Weighted average diluted shares			16,991				16,991				—				16,991				—
Income per diluted share		$	0.12			$	0.08			$	0.04			$	0.10			$	0.02
Book value per common share		$	5.33			$	4.97			$	0.36			$	5.30			$	0.03
Tangible book value per common share		$	5.00			$	4.78			$	0.22			$	4.93			$	0.07
Capital Ratios
		December 31, 2011				December 31, 2010				Change				September 30, 2011				Change
Bank of Commerce Holdings
Tier 1 risk based capital ratio			14.45	%			13.74	%			0.71	%			14.80	%			-0.35	%
Total risk based capital ratio			15.70	%			15.00	%			0.70	%			16.05	%			-0.35	%
Leverage ratio			13.52	%			12.48	%			1.04	%			13.82	%			-0.30	%
Redding Bank of Commerce
Tier 1 risk based capital ratio			14.46	%			13.34	%			1.12	%			15.20	%			-0.74	%
Total risk based capital ratio			15.71	%			14.59	%			1.12	%			16.45	%			-0.74	%
Leverage ratio			12.96	%			11.60	%			1.36	%			13.05	%			-0.09	%

As indicated in Table 1 above, Bank of Commerce Holdings (the “Company”) continues to remain well capitalized. At December 31, 2011, the Company’s Tier 1 and Total risk based capital ratios measured 14.45% and 15.70% respectively, while the leverage ratio was 13.52%.

Return on average assets (ROA) and return on average equity (ROE) for the three months ended December 31, 2011, was 0.90% and 7.48%, respectively compared with 0.70% and 6.22% for the three months ended December 31, 2010. The increase in ROA and ROE for the three months ended December 31, 2011 compared with the same period a year ago, was primarily driven by lower loan loss provision expense, and decreased interest expense on deposits and borrowings, partially offset by decreased yields in the loan portfolio. The Company continues to experience decreased yields in the loan portfolio due to the combination of, downward rate adjustments of variable rate loans, pay offs of higher yielding loans, and the transfer of existing loans to nonaccrual status.

 

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Table 2

PERIOD END LOANS

 

(Dollars in thousands)		December 31, 2011				% of Total				December 31, 2010				% of Total				Change								September 30, 2011				% of Total
																		Amount				%
Commercial		$	138,411				24	%		$	130,579				22	%		$	7,832				6	%		$	147,495				25	%
Real estate – construction loans			26,064				4	%			41,327				7	%			(15,263	)			-37	%			24,257				4	%
Real estate – commercial (investor)			219,864				38	%			215,697				36	%			4,167				2	%			215,781				37	%
Real estate – commercial (owner occupied)			65,885				11	%			68,055				11	%			(2,170	)			-3	%			64,963				11	%
Real estate – ITIN loans			64,833				11	%			70,585				12	%			(5,752	)			-8	%			66,365				11	%
Real estate – mortgage			19,679				3	%			19,299				3	%			380				2	%			19,653				3	%
Real estate – equity lines			44,445				8	%			48,178				8	%			(3,733	)			-8	%			45,593				8	%
Consumer			5,283				1	%			6,775				1	%			(1,492	)			-22	%			5,400				1	%
Other loans			224				—	%			301				—	%			(77	)			-26	%			101				—	%
Gross portfolio loans			584,688				100	%			600,796				100	%			(16,108	)			-2.68	%			589,608				100	%
Less:
Deferred loan fees, net			(37	)							90								(127	)			-141	%			11
Allowance for loan losses			10,622								12,841								(2,219	)			-17	%			10,590
Net portfolio loans		$	574,103							$	587,865							$	(13,762	)			-2	%		$	579,007
Yield on loans			5.69	%							5.94	%							-0.25	%							5.67	%

Balance Sheet Overview

As of December 31, 2011, the Company had total consolidated assets of $940.7 million, total net portfolio loans of $574.1 million, allowance for loan losses of $10.6 million, total deposits of $667.3 million, and stockholders’ equity of $113.6 million.

Overall, the net portfolio loan balance decreased modestly during full year 2011 compared to 2010. The Company’s net loan portfolio was $574.1 million at December 31, 2011, compared with $587.9 million at December 31, 2010, a decrease of $13.8 million, or 2%. The decrease was primarily driven by net payoffs, and specific charge offs of principal balances.

 

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Table 3

PERIOD END CASH EQUIVALENTS AND INVESTMENT SECURITIES

 

(Dollars in thousands)		December 31, 2011				% of Total				December 31, 2010				% of Total				Change								September 30, 2011				% of Total
																		Amount				%
Cash equivalents:
Cash and due from banks		$	21,442				9	%		$	23,786				9	%		$	(2,344	)			-10	%		$	30,961				14	%
Interest bearing due from banks			26,676				10	%			39,470				16	%			(12,794	)			-32	%			27,476				12	%
			48,118				19	%			63,256				25	%			(15,138	)			-24	%			58,437				26	%
Investment Securities:
U.S. Treasury and agency			—				—	%			26,331				10	%			(26,331	)			-100	%			4,012				2	%
Obligations of state and political subdivisions			77,326				31	%			64,151				25	%			13,175				21	%			60,417				27	%
Mortgage backed securities			60,610				24	%			65,247				26	%			(4,637	)			-7	%			46,169				21	%
Corporate securities			40,820				16	%			28,957				11	%			11,863				100	%			35,521				16	%
Other asset backed securities			24,768				10	%			4,549				3	%			20,219				444	%			19,585				8	%
			203,524				81	%			189,235				75	%			14,289				8	%			165,704				74	%
Total cash equivalents and investment securities		$	251,642				100	%		$	252,491				100	%		$	(849	)			0	%		$	224,141				100	%
Yield on cash equivalents and investment Securities			2.64	%							2.61	%															2.64	%

The Company continued to maintain a strong liquidity position during the reporting period. As of December 31, 2011 the Company maintained cash positions at the Federal Reserve Bank (FRB) and correspondent banks in the amount of $21.4 million. The Company also held certificates of deposits with other financial institutions in the amount of $26.7 million, which the Company considers highly liquid.

The Company’s available-for-sale investment portfolio is primarily utilized as a source of liquidity to fund other higher yielding asset opportunities, such as mortgage loan originations when required. Investment securities totaled $203.5 million at December 31, 2011, compared with $165.7 million at September 30, 2011. The $37.8 million, or 22.8% increase reflects net purchase activity relating to the purchases of asset backed securities, municipal bonds, and corporate securities, partially offset by sales of U.S treasuries and called agencies. During the three months ended December 31, 2011, the Company purchased securities with the objective of preserving the net interest margin without extending overall portfolio duration. The Company recognized $105 thousand in gains on sales of securities for the three months ended December 31, 2011.

At December 31, 2011, the Company’s net unrealized gain on available-for-sale securities was $1.5 million, compared with a $2.0 million net unrealized gain as of September 30, 2011. The unfavorable change in net unrealized gains was primarily due to decreases in the fair values of the Company’s corporate bond portfolio, as yield spreads have widened subsequent to the initial purchase of these securities. The unfavorable change was partially offset by increased unrealized gains in the municipal bond portfolio.

 

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Table 4

QUARTERLY AVERAGE DEPOSITS BY CATEGORY

 

(Dollars in thousands)		Q4				% of				Q4				% of				Change								Q3				% of
		2011				Total				2010				Total				Amount				%				2011				Total
Demand deposits		$	112,355				17	%		$	98,158				15	%		$	14,197				14	%		$	99,087				15	%
Interest bearing demand			175,904				27	%			157,092				25	%			18,812				12	%			167,489				26	%
Total checking deposits			288,259				44	%			255,250				40	%			33,009				13	%			266,576				41	%
Savings			91,750				14	%			83,860				13	%			7,890				9	%			94,287				14	%
Total non-time deposits			380,009				58	%			339,110				53	%			40,899				12	%			360,863				55	%
Time deposits			280,525				42	%			296,111				47	%			(15,586	)			-5	%			290,811				45	%
Total deposits		$	660,534				100	%		$	635,221				100	%		$	25,313				4	%		$	651,674				100	%
Weighted average rate on total deposits			1.05	%							1.41	%															1.13	%

Fourth quarter 2011 average total deposits of $660.5 million increased 4% or $25.3 million from the fourth quarter in 2010. Non maturing core deposits increased $37.3 million or 11% year over year, while the Company experienced 4% organic growth in certificates of deposits.

 

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Operating Results for the Fourth Quarter 2011

Through proactive and aggressive management of problem credits, and the maintenance of a relatively healthy net interest margin, the Company has remained profitable during the economic downturn. As such, the Company continues to be well positioned to take advantage of strategic growth opportunities. Net income attributable to Bank of Commerce Holdings was $2.1 million for the three months ended December 31, 2011, compared with $2.0 million for the three months ended September 30, 2011, and $1.6 million for the three months ended December 31, 2010. Net income available to common stockholders was $1.9 million for the three months ended December 31, 2011, compared with $1.7 million for the three months ended September 30, 2011, and $1.4 million for the three months ended December 31, 2010. During the fourth quarter of 2011, diluted earnings per share increased $0.02 per share when compared to the third quarter of 2011, and increased $0.04 per share compared to the fourth quarter of 2010.

The Company continued to pay quarterly cash dividends of $0.03 per share during 2011, consistent with final three quarters of 2010.

Table 5

SUMMARY INCOME STATEMENT

 

(Dollars in thousands)		Q4				Q4				Change								Q3				Change
		2011				2010				Amount				%				2011				Amount				%
Net interest income		$	8,459			$	8,617			$	(158	)			-2	%		$	8,446			$	13				0	%
Provision for loan and lease losses			1,800				4,550				(2,750	)			-60	%			2,211				(411	)			-19	%
Noninterest income			5,392				6,902				(1,510	)			-22	%			5,301				91				2	%
Noninterest expense			8,843				8,339				504				6	%			7,742				1,101				14	%
Income before income taxes			3,208				2,630				578				22	%			3,794				(586	)			-15	%
Provision for income taxes			927				749				178				24	%			1,403				(476	)			-34	%
Net income			2,281				1,881				400				21	%			2,391				(110	)			-5	%
Less: Net income attributable to noncontrolling interest			219				260				(41	)			-16	%			348				(129	)			-37	%
Net income attributable to Bank of Commerce Holdings			2,062				1,621				441				27	%			2,043				19				1	%
Less: preferred dividend and accretion on preferred stock			139				234				(95	)			-41	%			334				(195	)			-58	%
Income available to common shareholders		$	1,923			$	1,387			$	536				39	%		$	1,709			$	214				13	%
Basic earnings per share		$	0.12			$	0.08			$	0.04				50	%		$	0.10			$	0.02				20	%
Diluted earnings per share		$	0.12			$	0.08			$	0.04				50	%		$	0.10			$	0.02				20	%
Cash dividends declared per share		$	0.03			$	0.03			$	—				0	%		$	0.03			$	—				0	%

Table 6

NET INTEREST SPREAD AND MARGIN

 

(Dollars in thousands)		Q4				Q4				Change				Q3				Change
		2011				2010				Amount				2011				Amount
Yield on average interest earning assets			4.87	%			5.04	%			-0.17	%			4.87	%			0.00	%
Rate on average interest bearing liabilities			1.30	%			1.44	%			-0.14	%			1.18	%			0.12	%
Net interest spread			3.57	%			3.60	%			-0.03	%			3.69	%			-0.12	%
Net interest margin on a tax equivalent basis			3.97	%			3.99	%			-0.02	%			4.03	%			-0.06	%
Average earning assets		$	877,051			$	887,957			$	(10,906	)		$	859,919			$	17,132
Average interest bearing liabilities		$	684,181			$	715,689			$	(31,508	)		$	686,422			$	(2,241	)

Net interest income for the three months ended December 31, 2011 was $8.5 million, a decrease of $158 thousand or 2% compared to the same period in 2010, and an increase of $13 thousand compared with three months ended September 30, 2011. Net interest income for the three months ended December 31, 2011 compared to the same period a year ago, was negatively impacted by lower yields in the loan portfolio, partially offset by lower funding costs pertaining to repricing certificates of deposits, and to a lesser extent, demand and savings accounts.

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 3.97% for the three months ended December 31, 2011, a decrease of 2 basis points as compared to the same period in 2010.

 

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Table 7

NONINTEREST INCOME

 

(Dollars in thousands)		Q4				Q4				Change								Q3				Change
		2011				2010				Amount				%				2011				Amount				%
Service charges on deposit accounts		$	40			$	53			$	(13	)			-25	%		$	50			$	(10	)			-20	%
Payroll and benefit processing fees			129				113				16				14	%			99				30				30	%
Earnings on cash surrender value - Bank owned life insurance			118				111				7				6	%			117				1				1	%
Net gain on sale of securities available-for-sale			105				738				(633	)			-86	%			532				(427	)			-80	%
Merchant credit card service income, net			34				53				(19	)			-36	%			39				(5	)			-13	%
Mortgage banking revenue, net			4,826				5,711				(885	)			-15	%			4,346				480				11	%
Other income			140				123				17				14	%			118				22				19	%
Total noninterest income		$	5,392			$	6,902			$	(1,510	)			-22	%		$	5,301			$	91				2	%

For the three months ended December 31, 2011, the Company recorded service charges on deposit accounts of $40 thousand compared to $53 thousand for the same period a year ago. The decrease in service charges was primarily attributable to the discontinuance of the Overdraft Privilege product, and decreased analysis fees charged to customers.

For the three months ended December 31, 2011, the Company recorded earnings on the cash surrender value Bank owned life insurance of $118 thousand compared to $111 thousand for the same period a year ago. The increased income was primarily attributable to the purchase of an additional policy.

For the three months ended December 31, 2011, the Company recorded securities gains of $105 thousand compared to securities gains of $738 thousand for the same period a year ago. The decreased gains during the three months ended December 31, 2011 compared to the same period a year ago, resulted from decreased sales activity.

For the three months ended December 31, 2011, the Company recorded merchant credit card income of $34 thousand compared to $53 thousand for the same period a year ago. During the first quarter of 2011, approximately 50% of the merchant credit card portfolio was sold to an independent third party, resulting in additional revenues of $225 thousand. Accordingly, merchant credit card income for the three months ended December 31, 2011 is down 36% compared to the same period a year ago.

Mortgage banking revenue for the three months ended December 31, 2011 decreased by 15% compared to the same period a year ago, primarily driven by decreased origination and refinancing activity.

 

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Table 8

NONINTEREST EXPENSE

 

(Dollars in thousands)		Q4				Q4				Change								Q3				Change
		2011				2010				Amount				%				2011				Amount				%
Salaries and related benefits		$	5,613			$	4,665			$	948				20	%		$	4,994			$	619				12	%
Occupancy and equipment expense			701				855				(154	)			-18	%			742				(41	)			-6	%
Write down of other real estate owned			—				196				(196	)			-100	%			—				—				0	%
FDIC insurance premium			284				261				23				9	%			300				(16	)			-5	%
Data processing fees			107				65				42				65	%			92				15				16	%
Professional service fees			586				567				19				3	%			513				73				14	%
Deferred compensation expense			139				127				12				9	%			136				3				2	%
Stationery and supplies			67				47				20				43	%			63				4				6	%
Postage			47				53				(6	)			-11	%			47				—				0	%
Directors expense			68				58				10				17	%			67				1				1	%
Other expenses			1,231				1,445				(214	)			-15	%			788				443				56	%
Total noninterest expense		$	8,843			$	8,339			$	504				6	%		$	7,742			$	1,101				14	%

Noninterest expense includes salaries and benefits, occupancy and equipment, write down of other real estate owned (OREO), FDIC insurance assessments, director fees, and other expenses. Other expenses include overhead items such as utilities, telephone, insurance and licensing fees, and business travel. Noninterest expense for the three months ended December 31, 2011 was $8.8 million compared to $8.3 million during the same period in 2010, and $7.7 million for the third quarter 2011.

Salaries and related benefits for the three months ended December 31, 2011 increased by $948 thousand or 20%, compared to the same period a year ago, and increased by $619 thousand compared to the third quarter of 2011. During the second quarter of 2011, the mortgage subsidiary transitioned existing loan officers from a commission based compensation plan to a salary based compensation plan, which resulted in increased salary expense for the three months ended December 31, 2011 compared to the same period a year ago. Prior to the transition, commission expenses were recorded in net mortgage banking revenues. In addition, during the fourth quarter 2011, both the mortgage subsidiary and the Bank increased accrued employee cash rewards during the three months ended December 31, 2011 compared to the same period a year ago, and compared to the three months ended September 30, 2011.

Occupancy and equipment expense for the three months ended December 31, 2011 decreased by $154 thousand or 18%, compared to the same period a year ago, and decreased by $41 thousand compared to the third quarter of 2011. The decrease in occupancy and equipment expense was primarily driven by decreased net rent expense, decreased equipment repairs expenses, and decreased premises maintenance.

Write down of the Company’s OREO decreased by $196 thousand compared to the same period a year ago. The OREO charges during the periods presented were primarily associated with a commercial real estate property where management identified impairment and appropriately reduced the property’s carrying value.

FDIC insurance premium expense for the three months ended December 31, 2011 increased by $23 thousand or 9%, compared to the same period a year ago. The increase is primarily due to the FDIC’s revisions in deposit insurance assessments methodology for determining premiums and the associated prepayment true up adjustments.

Data processing expense for the three months ended December 31, 2011 increased by $42 thousand or 65%, compared to the same period a year ago. The increase is primarily attributable to reclassifications of certain core processing maintenance expenses, and additional maintenance expenses resulting from new software additions.

Professional service fees encompass audit, legal, and consulting fees. Professional service fee expense remained consistent during the fourth quarter 2011 compared to the same period a year ago, as decreased legal costs at the Bank were offset by increased consulting fees at the mortgage subsidiary. The increase in professional service fees in the three months ended December 31, 2011 compared to the three months ended September 30, 2011 was primarily driven by increased consulting fees at the mortgage subsidiary relating to ongoing operational efficiency objectives.

Other expenses for the three months ended December 31, 2011 decreased by $214 thousand or 15%, compared to the same period a year ago. The decrease in other expenses is primarily related to decreased loan losses recognized by the mortgage subsidiary, partially offset by increased losses on sale of OREO at the Bank. Other expenses increased by $443 thousand or 56%, compared to the three months ended September 30, 2011. The increase was primarily driven by increased losses on the sale of OREO at the Bank, and reclassification adjustments at the mortgage subsidiary.

 

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Table 9

ALLOWANCE ROLL FORWARD

 

(Dollars in thousands)		Q4				Q3				Q2				Q1				Q4
		2011				2011				2011				2011				2010
Beginning balance		$	10,590			$	13,363			$	13,610			$	12,841			$	15,452
Provision for loan loss charged to expense			1,800				2,211				2,580				2,400				4,550
Loans charged off			(1,996	)			(5,355	)			(3,166	)			(1,966	)			(7,324	)
Loan loss recoveries			228				371				339				335				163
Ending balance		$	10,622			$	10,590			$	13,363			$	13,610			$	12,841
Gross portfolio loans outstanding at period end		$	584,688			$	589,608			$	595,832			$	602,980			$	600,796
Ratio of allowance for loan losses to total loans			1.82	%			1.80	%			2.24	%			2.26	%			2.14	%
Nonaccrual loans at period end:
Commercial		$	49			$	228			$	901			$	2,848			$	2,302
Construction			106				1,650				1,999				224				342
Commercial real estate			6,104				3,034				3,282				3,706				7,066
Residential real estate			14,806				14,010				12,741				11,705				10,704
Home equity			353				353				—				96				97
Total nonaccrual loans		$	21,418			$	19,275			$	18,923			$	18,579			$	20,511
Accruing troubled debt restructured loans
Commercial		$	—			$	—			$	—			$	—			$	—
Construction			—				—				108				2,328				2,804
Commercial real estate			14,590				16,811				17,304				3,619				3,621
Residential real estate			2,870				3,279				6,569				5,782				6,243
Home equity			423				426				429				396				—
Total accruing restructured loans		$	17,883			$	20,516			$	24,410			$	12,125			$	12,668
All other accruing impaired loans			472				908				539				1,182				737
Total impaired loans		$	39,773			$	40,699			$	43,872			$	31,886			$	33,916
Allowance for loan losses to nonaccrual loans at period end			49.59	%			54.94	%			70.62	%			73.25	%			62.61	%
Nonaccrual loans to total loans			3.66	%			3.27	%			3.18	%			3.08	%			3.41	%
Allowance for loan losses to impaired loans			26.71	%			26.02	%			30.46	%			42.68	%			37.86	%

The Company continued to conservatively manage credit quality during the period, and adjust the ALLL accordingly. As such, the Company provided $1.8 million in provisions for loan losses for the three months ended December 31, 2011, compared with $4.6 million for the same period a year ago. The Company’s ALLL as a percentage of total portfolio loans were 1.82% and 2.14% as of December 31, 2011, and December 31, 2010, respectively.

Net charge offs were $1.8 million for the three months ended December 31, 2011 compared with net charge offs of $7.2 million for the same period a year ago. The charge offs were centered in commercial real estate, 1-4 family residential real estate, and home equity loans, where ongoing credit quality issues continue to linger. The continued weaknesses in the commercial loan portfolio are specifically centered on loans where the borrower’s business revenue sources are tied to real estate. The commercial real estate loan portfolio and commercial loan portfolio will continue to be negatively influenced by weakness in real estate values, the effects of high unemployment levels, and general overall weakness in economic conditions.

As of December 31, 2011, impaired loans totaled $39.8 million, of which $21.4 million were in nonaccrual status. Of the total impaired loans, $13.2 million or one hundred and fifty-one were ITIN loans with an approximate average balance of $87 thousand. The ITIN loan pool represents residential mortgage loans made to legal United States residents without a social security number, and are geographically dispersed throughout the United States. The remaining impaired loans consist of one commercial loan, three construction loans, thirteen commercial real estate loans, thirteen 1-4 family residential mortgages, and eight home equity loans.

Loans are reported as Troubled Debt Restructurings (TDRs) when the Bank grants a concession(s) to borrowers experiencing financial difficulties that it would not otherwise consider. Examples of such concessions include a reduction in the loan rate, forgiveness of principal or accrued interest, extending the maturity date(s) significantly, or providing a lower interest rate than would be normally available for a transaction of similar risk.

TDRs are considered impaired loans, but are not necessarily placed on nonaccrual status at inception of TDR status. Rather, if the borrower is current to original loan terms at the time of the restructuring, and continues to pay as agreed to modified terms, the loan is reported as current. As of December 31, 2011, there were $7.6 million of impaired ITINs which were classified as TDRs with $4.7 million on nonaccrual.

 

11

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As of December 31, 2011 the Company had $31.3 million in TDR’s compared to $29.7 million as of September 30, 2011. As of December 31, 2011, the Company had one hundred and six restructured loans that qualified as TDRs, of which eighty-one loans were performing according to their restructured terms. TDRs represented 5.35% of gross portfolio loans, compared with 5.03% of gross portfolio loans at September 30, 2011.

Table 10

TROUBLED DEBT RESTRUCTURINGS

 

(Dollars in thousands)		December 31, 2011				September 30, 2011				June 30, 2011				March 31, 2011				December 31, 2010
Nonaccrual		$	13,418			$	9,155			$	7,959			$	9,752			$	11,977
Accruing			17,883				20,516				24,410				12,125				12,668
Total troubled debt restructurings		$	31,301			$	29,671			$	32,369			$	21,877			$	24,645
Percentage of total gross portfolio loans			5.35	%			5.03	%			5.43	%			3.63	%			4.10	%

Table 11

NONPERFORMING ASSETS

 

(Dollars in thousands)		December 31, 2011				September 30, 2011				June 30, 2011				March 31, 2011				December 31, 2010
Commercial		$	49			$	228			$	901			$	2,849			$	2,302
Real estate construction
Commercial real estate construction			—				1,543				1,973				99				100
Residential real estate construction			106				107				26				125				242
Total real estate construction			106				1,650				1,999				224				342
Real estate mortgage
1-4 family, closed end 1st lien			4,474				4,205				3,002				1,634				1,166
1-4 family revolving			353				353				—				96				97
ITIN 1-4 family loan pool			10,332				9,805				9,739				10,071				9,538
Home equity loan pool			—				—				—				—				—
Total real estate mortgage			15,159				14,363				12,741				11,801				10,801
Commercial real estate			6,104				3,034				3,282				3,706				7,066
Total nonaccrual loans			21,418				19,275				18,923				18,580				20,511
90 days past due and still accruing			95				373				953				743				—
Total nonperforming loans			21,513				19,648				19,876				19,323				20,511
Other real estate owned			3,731				1,665				1,793				3,868				2,288
Total nonperforming assets		$	25,244			$	21,313			$	21,669			$	23,191			$	22,799
Nonperforming loans to total loans			3.68	%			3.33	%			3.34	%			3.20	%			3.41	%
Nonperforming assets to total assets			2.68	%			2.30	%			2.49	%			2.53	%			2.43	%

 

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Table 12

OTHER REAL ESTATE OWNED ACTIVITY

 

(Dollars in thousands)		Q4 2011				Q3 2011				Q2 2011				Q1 2011				Q4 2010
Beginning balance		$	1,665			$	1,793			$	3,868			$	2,288			$	2,020
Additions to OREO			2,399				129				407				2,099				3,680
Dispositions of OREO			(333	)			(257	)			(2,112	)			(332	)			(3,215	)
OREO valuation adjustment			—				—				(370	)			(187	)			(197	)
Ending balance		$	3,731			$	1,665			$	1,793			$	3,868			$	2,288

At December 31, 2011 the Company’s recorded investment in OREO was $3.7 million. During the fourth quarter of 2011, the Company transferred eleven foreclosed properties aggregating $2.4 million to OREO, with an associated charge to the allowance for loan losses of $38.3 thousand for these foreclosed assets. During the fourth quarter 2011, the Company sold four properties aggregating $333 thousand for a net loss of $178 thousand, and did not record any additional write downs of existing OREO in other noninterest expense. The December 31, 2011 OREO balance consists of fourteen properties, of which twelve are secured with 1-4 family residential real estate in the amount of $889 thousand. The remaining two properties consist of a commercial real estate building and improved commercial land in the amount of $2.8 million.

 

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Table 13

INCOME STATEMENT

 

(Amounts in thousands, except for per share data)		Q4 2011				Q4 2010				Change								Q3 2011				Full Year 2011				Full Year 2010
										$				%
Interest income:
Interest and fees on loans		$	9,134			$	9,635			$	(501	)			-5	%		$	9,013			$	36,138			$	38,034
Interest on tax-exempt securities			534				524				10				2	%			470				2,014				1,692
Interest on U.S. government securities			375				505				(130	)			-26	%			437				2,123				2,083
Interest on other securities			634				529				105				20	%			548				2,410				1,616
Total interest income			10,677				11,193				(516	)			-5	%			10,468				42,685				43,425
Interest expense:
Interest on demand deposits			166				261				(95	)			-36	%			191				787				968
Interest on savings deposits			145				244				(99	)			-41	%			172				792				921
Interest on certificates of deposit			1,123				1,383				(260	)			-19	%			1,204				4,912				6,151
Interest on securities sold under repurchase agreements			7				12				(5	)			-42	%			9				43				52
Interest on FHLB borrowings			132				181				(49	)			-27	%			135				579				626
Interest on other borrowings			645				495				150				30	%			311				1,485				1,684
Total interest expense			2,218				2,576				(358	)			-14	%			2,022				8,598				10,402
Net interest income			8,459				8,617				(158	)			-2	%			8,446				34,087				33,023
Provision for loan and lease losses			1,800				4,550				(2,750	)			-60	%			2,211				8,991				12,850
Net interest income after provision for loan and lease losses			6,659				4,067				2,592				64	%			6,235				25,096				20,173
Noninterest income:
Service charges on deposit accounts			40				53				(13	)			-25	%			50				192				260
Payroll and benefit processing fees			129				113				16				14	%			99				458				448
Earnings on cash surrender value – Bank owned life insurance			118				111				7				6	%			117				465				438
Net gain on sale of securities available-for-sale			105				738				(633	)			-86	%			532				1,550				1,981
Gain on settlement of put reserve			—				—				—				0	%			—				—				1,750
Merchant credit card service income, net			34				53				(19	)			-36	%			39				376				235
Mortgage banking revenue, net			4,826				5,711				(885	)			-15	%			4,346				14,255				14,328
Other income			140				123				17				14	%			118				474				351
Total noninterest income			5,392				6,902				(1,510	)			-22	%			5,301				17,770				19,791
Noninterest expense:
Salaries and related benefits			5,613				4,665				948				20	%			4,994				18,789				15,700
Occupancy and equipment expense			701				855				(154	)			-18	%			742				2,971				3,660
Write down of other real estate owned			—				196				(196	)			-100	%			—				557				1,571
FDIC insurance premium			284				261				23				9	%			300				1,319				1,016
Data processing fees			107				65				42				65	%			92				389				270
Professional service fees			586				567				19				3	%			513				2,268				1,726
Deferred compensation expense			139				127				12				9	%			136				533				493
Stationery and supplies			67				47				20				43	%			63				269				258
Postage			47				53				(6	)			-11	%			47				184				198
Directors’ expense			68				58				10				17	%			67				276				266
Goodwill impairment			—				—				—				—	%			—				—				32
Other expenses			1,231				1,445				(214	)			-15	%			788				4,530				5,141
Total noninterest expense			8,843				8,339				504				6	%			7,742				32,085				30,331
Income before provision (benefit) for income taxes			3,208				2,630				578				22	%			3,794				10,781				9,633
Provision (benefit) for income taxes			927				749				178				24	%			1,403				2,977				3,159
Net Income			2,281				1,881				400				21	%			2,391				7,804				6,474
Less: Net income attributable to noncontrolling interest			219				260				(41	)			-16	%			348				549				254
Net income attributable to Bank of Commerce Holdings		$	2,062			$	1,621			$	441				27	%		$	2,043			$	7,255			$	6,220
Less: Preferred dividend and accretion on preferred stock			139				234				(95	)			-41	%			334				943				940
Income available to common shareholders		$	1,923			$	1,387			$	536				39	%		$	1,709			$	6,312			$	5,280
Basic earnings per share		$	0.12			$	0.08			$	0.04							$	0.10			$	0.37			$	0.35
Weighted average shares - basic			16,991				16,991				0								16,991				16,991				14,951
Diluted earnings per share		$	0.12			$	0.08			$	0.04							$	0.10			$	0.37			$	0.35
Weighted average shares - diluted			16,991				16,991				0								16,991				16,991				14,951
Cash dividends declared		$	0.03			$	0.03			$	—							$	0.03			$	0.12			$	0.18

 

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Table 14

BALANCE SHEET

 

(Dollars in thousands)		December 31, 2011				December 31, 2010				Change								September 30, 2011
										$				%
ASSETS
Cash and due from banks		$	21,442			$	23,786			$	(2,344	)			-10	%		$	30,961
Interest bearing due from banks			26,676				39,470				(12,794	)			-32	%			27,476
Total cash and cash equivalents			48,118				63,256				(15,138	)			-24	%			58,437
Securities available-for-sale, at fair value			203,524				189,235				14,289				8	%			165,704
Portfolio loans			584,725				600,706				(15,981	)			-3	%			589,597
Allowance for loan losses			(10,622	)			(12,841	)			2,219				-17	%			(10,590	)
Net loans			574,103				587,865				(13,762	)			-2	%			579,007
Mortgage loans held for sale			62,875				42,995				19,880				46	%			75,805
Total interest earning assets			899,242				896,192				3,050				0	%			889,543
Bank premises and equipment, net			9,752				9,697				55				1	%			9,664
Goodwill and other intangibles			3,833				3,695				138				4	%			3,695
Other real estate owned			3,731				2,288				1,443				63	%			1,665
Other assets			34,755				40,102				(5,347	)			-13	%			34,194
TOTAL ASSETS		$	940,691			$	939,133			$	1,558				0	%		$	928,171
LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand – noninterest bearing		$	116,193			$	91,025			$	25,168				28	%		$	99,431
Demand – interest bearing			179,597				162,258				17,339				11	%			175,745
Savings accounts			89,012				83,652				5,360				6	%			94,519
Certificates of deposit			282,471				311,767				(29,296	)			-9	%			280,887
Total deposits			667,273				648,702				18,571				3	%			650,582
Securities sold under agreements to repurchase			13,779				13,548				231				2	%			15,701
Federal Home Loan Bank borrowings			109,000				141,000				(32,000	)			-23	%			111,000
Mortgage warehouse line of credit			7,600				4,983				2,617				53	%			11,290
Junior subordinated debentures			15,465				15,465				—				0	%			15,465
Other liabilities			13,984				11,708				2,276				19	%			11,377
Total Liabilities		$	827,101			$	835,406			$	(8,305	)			-1	%		$	815,415
Total Equity – Bank of Commerce Holdings			110,462				101,148				9,314				9	%			109,847
Noncontrolling interest in subsidiary			3,128				2,579				549				21	%			2,909
Total Stockholders’ Equity			113,590				103,727				9,863				10	%			112,756
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	940,691			$	939,133			$	1,558				0	%		$	928,171

 

15

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Table 15

AVERAGE BALANCE SHEET (Year to Date)

 

(Dollars in thousands)		December 31, 2011				December 31, 2010				December 31, 2009
Earning assets:
Loans		$	634,949			$	640,213			$	589,336
Tax exempt securities			52,467				42,172				28,384
US government securities			19,182				27,423				8,606
Mortgage backed securities			67,052				48,972				53,722
Other securities			44,664				15,702				17,313
Interest bearing due from banks			64,399				70,911				50,790
Fed funds sold			—				995				13,438
Average earning assets			882,713				846,388				761,589
Cash and DFB			2,251				1,781				3,638
Bank premises			9,489				9,814				10,322
Other assets			25,116				48,116				28,662
Average total assets		$	919,569			$	906,099			$	804,211
Interest bearing liabilities:
Demand - interest bearing		$	157,696			$	141,983			$	145,542
Savings deposits			91,876				76,718				62,846
CDs			296,034				321,051				317,417
Repurchase agreements			14,805				12,274				11,006
Other borrowings			139,331				134,255				122,057
			699,742				686,281				658,868
Demand - noninterest bearing			100,722				92,433				69,250
Other liabilities			10,997				31,748				9,467
Shareholders' equity			108,108				95,637				66,626
Average liabilities & equity		$	919,569			$	906,099			$	804,211

 

16

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BOCH is a NASDAQ National Market listed stock. Please contact your local investment advisor for purchases and sales. Investment firms making a market in BOCH stock are:

Raymond James Financial / Howe Barnes

John T. Cavender

555 Market Street

San Francisco, CA (800) 346-5544

Hill, Thompson, Magid & Co. Inc / R.J. Dragani

15 Exchange Place, Suite 800

Jersey City, New Jersey 07030 (201) 369-2908

Keefe, Bruyette & Woods, Inc. /

Dave Bonaccorso

101 California Street, 37^th Floor

San Francisco, CA 94105 (415) 591-5063

Sandler & O’Neil /Bryan Sullivan

919 Third Avenue, 6^th Floor

New York, NY 10022 (888) 383-3112

McAdams Wright Ragen, Inc. /Joey Warmenhoven

1121 SW Fifth Avenue

Suite 1400

Portland, Oregon 97204 (866) 662-0351

Stifel Nicolaus

Perry Wright

1255 East Street #100

Redding, CA 96001 (530) 244-7199

Contact Information:

 

Patrick J. Moty, President and Chief Executive Officer		Telephone Direct		(530) 722-3953
Linda J. Miles, Executive Vice President and Chief Operating Officer		Telephone Direct		(530) 722-3955
Samuel D. Jimenez, Executive Vice President and Chief Financial Officer		Telephone Direct		(530) 722-3952

 

17