REDDING, Calif., July 21, 2017 (GLOBE NEWSWIRE) -- Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (NASDAQ:BOCH) (the “Company”), a $1.2 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter and the six months ended June 30, 2017. Net income for the quarter ended June 30, 2017 was $2.2 million or $0.15 per share – diluted, compared with net income of $1.6 million or $0.11 per share – diluted for the same period of 2016. Net income for the six months ended June 30, 2017 was $4.5 million or $0.31 per share – diluted compared with $596 thousand or $0.04 per share – diluted for the same period of 2016.
On May 10, 2017, the Company completed the sale of 2,738,096 shares of its common stock at a public offering price of $10.50 per share and received net proceeds of $26.8 million. Randall S. Eslick, President and CEO commented “The proceeds from our successful stock offering in May will support lending and investment activities, support or fund acquisitions of other institutions or branches as and if such transactions become available, or repay certain borrowings. In addition, as a result of the increase in our market capitalization, we are now listed on the Russell 2000 which should increase our corporate profile and generate more interest amongst institutional investors.”
Financial highlights for the second quarter of 2017:
- Net income of $2.2 million or $0.15 per share – diluted for the three months ended June 30, 2017 was an increase of $653 thousand (42%) from $1.6 million or $0.11 per share – diluted earned during the same period in the prior year.
- Return on average assets improved to 0.76% for the second quarter of 2017 compared to 0.59% for the same period in the prior year.
- Return on average equity improved to 7.85% for the second quarter of 2017 compared to 6.85% for the same period in the prior year.
- Net interest income increased $958 thousand (10%) to $10.2 million for the second quarter of 2017 compared to $9.2 million for the same period in the prior year.
- Average deposits for the three months ended June 30, 2017 totaled $1.0 billion, an increase of $3.3 million (1% annualized) compared to average deposits for the prior quarter.
- Average loans for the three months ended June 30, 2017 totaled $821.3 million, an increase of $14.5 million (7% annualized) compared to average loans for the prior quarter.
- Average earning assets for the three months ended June 30, 2017 totaled $1.1 billion, an increase of $22.6 million (8% annualized) compared to average earning assets for the prior quarter.
- Nonperforming assets at June 30, 2017 totaled $10.7 million or 0.88% of total assets, a decrease of $140 thousand (5% annualized) since March 31, 2017.
- Tangible book value per common share was $7.61 at June 30, 2017 compared to $6.97 at March 31, 2017.
Financial highlights for the six months ended June 30, 2017:
- Net income of $4.5 million or $0.31 per share – diluted for the six months ended June 30, 2017 was an increase of $3.9 million (648%) from $596 thousand or $0.04 per share – diluted earned during the same period in the prior year. Net income for 2016 was negatively impacted by $3.0 million of branch acquisition and balance sheet restructuring costs, a $546 thousand other-than-temporary-impairment of an investment security and the write-off of a $363 thousand deferred tax asset.
- Return on average assets improved to 0.78% for the six months ended June 30, 2017 compared to 0.11% for the same period in the prior year.
- Return on average equity improved to 8.66% for the six months ended June 30, 2017 compared to 1.31% for the same period in the prior year.
- Net interest income increased $2.4 million (14%) to $19.9 million for the six months ended June 30, 2017 compared to $17.5 million for the same period in the prior year.
- Average deposits for the six months ended June 30, 2017 totaled $1.0 billion, an increase of $136.2 million (16%) compared to average deposits for the same period in the prior year.
- Average loans for the six months ended June 30, 2017 totaled $814.1 million, an increase of $82.4 million (11%) compared to average loans for the same period in the prior year.
- Average earning assets totaled $1.1 billion for the six months ended June 30, 2017, an increase of $106.6 million (11%) compared to average earning assets for the same period in the prior year.
- Nonperforming assets at June 30, 2017 totaled $10.7 million or 0.88% of total assets, a decrease of $1.5 million (24% annualized) compared to December 31, 2016.
Randall S. Eslick, President and CEO commented: “We are very pleased with the growth during the second quarter. All deposit growth was in core deposits and we continue to reduce our reliance on time deposits. Loan growth, combined with the improving deposit mix is reflected in the enhancement to our net interest margin and the 4.5% growth in net interest income.”
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, 2016 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 Six Months Ended | ||||||||||||||||||
| Net income, average assets and | June 30, | March 31, | June 30, | ||||||||||||||||
| average shareholders' equity | 2017 | 2016 | 2017 | 2017 | 2016 | ||||||||||||||
| Net income | $ | 2,209 | $ | 1,556 | $ | 2,252 | $ | 4,461 | $ | 596 | |||||||||
| Average total assets | $ | 1,170,447 | $ | 1,064,186 | $ | 1,148,305 | $ | 1,159,438 | $ | 1,049,192 | |||||||||
| Average total earning assets | $ | 1,097,644 | $ | 990,132 | $ | 1,075,039 | $ | 1,086,404 | $ | 979,976 | |||||||||
| Average shareholders' equity | $ | 112,855 | $ | 91,317 | $ | 94,820 | $ | 103,888 | $ | 91,312 | |||||||||
| Selected performance ratios | |||||||||||||||||||
| Return on average assets | 0.76 | % | 0.59 | % | 0.80 | % | 0.78 | % | 0.11 | % | |||||||||
| Return on average equity | 7.85 | % | 6.85 | % | 9.63 | % | 8.66 | % | 1.31 | % | |||||||||
| Efficiency ratio | 69.13 | % | 79.43 | % | 71.49 | % | 70.32 | % | 93.45 | % | |||||||||
| Share and per share amounts | |||||||||||||||||||
| Weighted average shares - basic | 15,014 | 13,367 | 13,416 | 14,220 | 13,364 | ||||||||||||||
| Weighted average shares - diluted | 15,113 | 13,425 | 13,521 | 14,321 | 13,408 | ||||||||||||||
| Earnings per share - basic | $ | 0.15 | $ | 0.11 | $ | 0.17 | $ | 0.31 | $ | 0.04 | |||||||||
| Earnings per share - diluted | $ | 0.15 | $ | 0.11 | $ | 0.17 | $ | 0.31 | $ | 0.04 | |||||||||
| At June 30, | At March 31, | ||||||||||||||||||
| Share and per share amounts | 2017 | 2016 | 2017 | ||||||||||||||||
| Common shares outstanding (1) | 16,260 | 13,439 | 13,517 | ||||||||||||||||
| Tangible book value per common share | $ | 7.61 | $ | 6.71 | $ | 6.97 | |||||||||||||
| Capital ratios | |||||||||||||||||||
| Bank of Commerce Holdings (2) | |||||||||||||||||||
| Common equity tier 1 capital ratio (3) | 12.55 | % | 9.69 | % | 9.71 | % | |||||||||||||
| Tier 1 capital ratio (3) | 13.56 | % | 10.77 | % | 10.72 | % | |||||||||||||
| Total capital ratio (3) | 15.83 | % | 13.11 | % | 13.00 | % | |||||||||||||
| Tier 1 leverage ratio (3) | 11.38 | % | 9.34 | % | 9.09 | % | |||||||||||||
| Tangible common equity ratio | 10.23 | % | 8.44 | % | 8.27 | % | |||||||||||||
| Redding Bank of Commerce | |||||||||||||||||||
| Common equity tier 1 capital ratio (3) | 12.66 | % | 12.80 | % | 12.59 | % | |||||||||||||
| Tier 1 capital ratio (3) | 12.66 | % | 12.80 | % | 12.59 | % | |||||||||||||
| Total capital ratio (3) | 13.91 | % | 14.05 | % | 13.84 | % | |||||||||||||
| Tier 1 leverage ratio (3) | 10.64 | % | 11.14 | % | 10.67 | % | |||||||||||||
| (1) Includes unvested restricted shares issued in accordance with the Company's equity incentive plan. | |||||||||||||||||||
| (2) Capital Ratios for the Company include the benefit of $26.8 million net proceeds from the sale of 2,738,096 shares of common stock in the second quarter of 2017. | |||||||||||||||||||
| (3) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. The capital ratios for 2016 were impacted by increased average total assets, the addition of $1.8 million of core deposit intangible and $665 thousand of goodwill recorded in conjunction with the acquisition of five branches in March of 2016. | |||||||||||||||||||
BALANCE SHEET OVERVIEW
As of June 30, 2017, the Company had total consolidated assets of $1.2 billion, gross loans of $815.4 million, allowance for loan and lease losses (“ALLL”) of $11.7 million, total deposits of $1.0 billion, and shareholders’ equity of $126.0 million.
| TABLE 2 | ||||||||||||||||||||||||||||
| LOAN BALANCES BY TYPE - UNAUDITED | ||||||||||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||||||||||
| At June 30, | At March 31, | |||||||||||||||||||||||||||
| % of | % of | Change | % of | |||||||||||||||||||||||||
| 2017 | Total | 2016 | Total | Amount | % | 2017 | Total | |||||||||||||||||||||
| Commercial | $ | 152,204 | 19 | % | $ | 150,410 | 20 | % | $ | 1,794 | 1 | % | $ | 145,635 | 19 | % | ||||||||||||
| Real estate - construction and land development | 22,275 | 3 | 31,169 | 4 | (8,894 | ) | (29 | ) | % | 25,241 | 3 | |||||||||||||||||
| Real estate - commercial non-owner occupied | 310,995 | 38 | 246,430 | 33 | 64,565 | 26 | % | 311,203 | 38 | |||||||||||||||||||
| Real estate - commercial owner occupied | 184,868 | 23 | 169,763 | 23 | 15,105 | 9 | % | 179,752 | 23 | |||||||||||||||||||
| Real estate - residential - ITIN | 43,229 | 5 | 47,188 | 6 | (3,959 | ) | (8 | ) | % | 44,211 | 5 | |||||||||||||||||
| Real estate - residential - 1-4 family mortgage | 18,904 | 2 | 16,806 | 2 | 2,098 | 12 | % | 19,710 | 2 | |||||||||||||||||||
| Real estate - residential - equity lines | 32,133 | 4 | 38,027 | 5 | (5,894 | ) | (15 | ) | % | 33,019 | 4 | |||||||||||||||||
| Consumer and other | 50,780 | 6 | 54,347 | 7 | (3,567 | ) | (7 | ) | % | 51,423 | 6 | |||||||||||||||||
| Gross loans | 815,388 | 100 | % | 754,140 | 100 | % | 61,248 | 8 | % | 810,194 | 100 | % | ||||||||||||||||
| Deferred fees and costs | 1,541 | 1,028 | 513 | 1,446 | ||||||||||||||||||||||||
| Loans, net of deferred fees and costs | 816,929 | 755,168 | 61,761 | 811,640 | ||||||||||||||||||||||||
| Allowance for loan and lease losses | (11,688 | ) | (11,864 | ) | 176 | (11,641 | ) | |||||||||||||||||||||
| Net loans | $ | 805,241 | $ | 743,304 | $ | 61,937 | $ | 799,999 | ||||||||||||||||||||
| Average yield on loans during the quarter | 4.77 | % | 4.76 | % | 0.01 | 4.72 | % | |||||||||||||||||||||
The Company recorded gross loan balances of $815.4 million at June 30, 2017, compared with $754.1 million and $810.2 million at June 30, 2016 and March 31, 2017, respectively, an increase of $61.2 million and $5.2 million, respectively. The increase in gross loans compared to the same period a year ago and the prior period was driven by organic loan originations and is the result of investments in our SBA division and in our expanded Sacramento commercial banking group.
Average loan balances were $821.3 million for the quarter ended June 30, 2017, compared with $742.7 million and $806.8 million for the quarters ended June 30, 2016 and March 31, 2017, respectively, an increase of $78.6 million or 11% and $14.5 million or 7% annualized, respectively.
| TABLE 3 | |||||||||||||||||||||||||||||
| CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED | |||||||||||||||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||||||||
| At June 30, | At March 31, | ||||||||||||||||||||||||||||
| % of | % of | Change | % of | ||||||||||||||||||||||||||
| 2017 | Total | 2016 | Total | Amount | % | 2017 | Total | ||||||||||||||||||||||
| Cash and due from banks | $ | 23,420 | 7 | % | $ | 14,695 | 6 | % | $ | 8,725 | 59 | % | $ | 18,315 | 7 | % | |||||||||||||
| Interest-bearing deposits in other banks | 73,434 | 22 | 51,345 | 19 | 22,089 | 43 | % | 42,744 | 16 | ||||||||||||||||||||
| Total cash and cash equivalents | 96,854 | 29 | 66,040 | 25 | 30,814 | 47 | % | 61,059 | 23 | ||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||||||||
| U.S. government and agencies | 24,231 | 7 | 12,209 | 5 | 12,022 | 98 | % | 12,496 | 5 | ||||||||||||||||||||
| Obligations of state and political subdivisions | 58,400 | 17 | 59,015 | 23 | (615 | ) | (1 | ) | % | 55,663 | 20 | ||||||||||||||||||
| Residential mortgage backed securities and collateralized mortgage obligations | 91,375 | 28 | 45,016 | 17 | 46,359 | 103 | % | 82,392 | 30 | ||||||||||||||||||||
| Corporate securities | 8,312 | 2 | 22,313 | 9 | (14,001 | ) | (63 | ) | % | 10,448 | 4 | ||||||||||||||||||
| Commercial mortgage backed securities | 23,421 | 7 | 14,865 | 6 | 8,556 | 58 | % | 16,522 | 6 | ||||||||||||||||||||
| Other asset backed securities | 3,870 | 1 | 4,488 | 1 | (618 | ) | (14 | ) | % | 4,013 | 1 | ||||||||||||||||||
| Total investment securities - AFS | 209,609 | 62 | 157,906 | 61 | 51,703 | 33 | % | 181,534 | 66 | ||||||||||||||||||||
| Obligations of state and political subdivisions - HTM | 31,329 | 9 | 35,415 | 14 | (4,086 | ) | (12 | ) | % | 31,257 | 11 | ||||||||||||||||||
| Total investment securities - AFS and HTM | 240,938 | 71 | 193,321 | 75 | 47,617 | 25 | % | 212,791 | 77 | ||||||||||||||||||||
| Total cash, cash equivalents and investment securities | $ | 337,792 | 100 | % | $ | 259,361 | 100 | % | $ | 78,431 | 30 | % | $ | 273,850 | 100 | % | |||||||||||||
| Average yield on interest-bearing due from banks and investment securities during the quarter | 2.27 | % | 2.37 | % | (0.10 | ) | 2.17 | % | |||||||||||||||||||||
As of June 30, 2017, we maintained noninterest-bearing cash positions of $23.4 million and interest-bearing deposits of $73.4 million at the Federal Reserve Bank and correspondent banks. Cash balances for the second quarter of 2017 included $26.8 million of net proceeds received from the sale of common stock. During the second quarter of 2017, we deployed liquidity provided by the sale of common stock and strong organic deposit growth primarily into available-for-sale securities and interest-bearing deposits at other banks.
Available-for-sale investment securities totaled $209.6 million at June 30, 2017, compared with $157.9 million and $181.5 million at June 30, 2016 and March 31, 2017, respectively. Our available-for-sale investment portfolio provides us with a secondary source of liquidity to fund higher yielding asset opportunities, such as loan originations. During the second quarter of 2017, we purchased 31 securities with a par value of $43.7 million and weighted average yield of 2.50% and sold eight securities with a par value of $12.6 million and weighted average yield of 1.94%. The sales activity on available-for-sale securities resulted in $35 thousand in net realized gains. During the same period, we received $5.5 million in proceeds from principal payments, calls and maturities within the available-for-sale investment securities portfolio. Average securities balances and weighted average tax equivalent yields for the quarters ended June 30, 2017 and 2016 were $217.6 million and 3.10% compared to $201.4 million and 3.39%, respectively.
At June 30, 2017, our net unrealized gains on available-for-sale investment securities were $682 thousand compared with net unrealized gains of $2.6 million and net unrealized losses of $891 thousand at June 30, 2016 and March 31, 2017, respectively. The decrease in net unrealized gains from June 30, 2016 and June 30, 2017 is primarily due to significant changes in market interest rates.
| TABLE 4 | ||||||||||||||||||||||||||||
| DEPOSITS BY TYPE - UNAUDITED | ||||||||||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||||||||||
| At June 30, | At March 31, | |||||||||||||||||||||||||||
| % of | % of | Change | % of | |||||||||||||||||||||||||
| 2017 | Total | 2016 | Total | Amount | % | 2017 | Total | |||||||||||||||||||||
| Demand - noninterest-bearing | $ | 303,560 | 29 | % | $ | 224,467 | 24 | % | $ | 79,093 | 35 | % | $ | 270,412 | 27 | % | ||||||||||||
| Demand - interest-bearing | 426,798 | 41 | 385,609 | 41 | 41,189 | 11 | % | 407,784 | 41 | |||||||||||||||||||
| Total demand | 730,358 | 70 | 610,076 | 65 | 120,282 | 20 | % | 678,196 | 68 | |||||||||||||||||||
| Savings | 109,472 | 10 | 105,228 | 11 | 4,244 | 4 | % | 112,738 | 11 | |||||||||||||||||||
| Total non-maturing deposits | 839,830 | 80 | 715,304 | 76 | 124,526 | 17 | % | 790,934 | 79 | |||||||||||||||||||
| Certificates of deposit | 206,395 | 20 | 222,252 | 24 | (15,857 | ) | (7 | ) | % | 213,556 | 21 | |||||||||||||||||
| Total deposits | $ | 1,046,225 | 100 | % | $ | 937,556 | 100 | % | $ | 108,669 | 12 | % | $ | 1,004,490 | 100 | % | ||||||||||||
| Average rate on interest-bearing deposits during the quarter | 0.42 | % | 0.39 | % | 0.03 | 0.39 | % | |||||||||||||||||||||
| Average rate on all deposits during the quarter | 0.31 | % | 0.30 | % | 0.01 | 0.29 | % | |||||||||||||||||||||
Total deposits at June 30, 2017, increased $108.7 million or 12% to $1.0 billion compared to June 30, 2016, and increased $41.7 million or 17% annualized compared to March 31, 2017. Total non-maturing deposits increased $124.5 million or 17% compared to the same date a year ago and increased $48.9 million or 25% annualized compared to March 31, 2017. Certificates of deposit decreased $15.9 million or 7% compared to the same date a year ago and decreased $7.2 million or 13% annualized compared to March 31, 2017.
| TABLE 5 | ||||||||
| WHOLESALE AND BROKERED DEPOSITS - UNAUDITED | ||||||||
| (amounts in thousands) | ||||||||
| At June 30, | At March 31, | |||||||
| 2017 | 2016 | 2017 | ||||||
| CDARS / ICS reciprocal brokered deposits | $ | 56,803 | $ | 54,783 | $ | 55,565 | ||
| Online listing service wholesale time deposits | 42,709 | 54,396 | 47,429 | |||||
| Total wholesale and brokered deposits | $ | 99,512 | $ | 109,179 | $ | 102,994 | ||
In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $56.8 million, $54.8 million and $55.6 million at June 30, 2017, June 30, 2016 and March 31, 2017, respectively.
INCOME STATEMENT OVERVIEW
| TABLE 6 | ||||||||||||||||||||||||
| SUMMARY INCOME STATEMENT - UNAUDITED | ||||||||||||||||||||||||
| (amounts in thousands, except per share data) | ||||||||||||||||||||||||
| For The Three Months Ended | ||||||||||||||||||||||||
| June 30, | Change | March 31, | Change | |||||||||||||||||||||
| 2017 | 2016 | Amount | % | 2017 | Amount | % | ||||||||||||||||||
| Interest income | $ | 11,320 | $ | 10,257 | $ | 1,063 | 10 | % | $ | 10,817 | $ | 503 | 5 | % | ||||||||||
| Interest expense | 1,145 | 1,040 | 105 | 10 | % | 1,083 | 62 | 6 | % | |||||||||||||||
| Net interest income | 10,175 | 9,217 | 958 | 10 | % | 9,734 | 441 | 5 | % | |||||||||||||||
| Provision for loan and lease losses | 300 | — | 300 | 100 | % | 200 | 100 | 100 | % | |||||||||||||||
| Noninterest income | 983 | 437 | 546 | 125 | % | 1,542 | (559 | ) | (36 | ) | % | |||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||
| Branch acquisition and balance sheet reconfiguration costs | — | 168 | (168 | ) | (100 | ) | % | — | — | — | % | |||||||||||||
| Other noninterest expense | 7,714 | 7,500 | 214 | 3 | % | 8,061 | (347 | ) | (4 | ) | % | |||||||||||||
| Income before provision for income taxes | 3,144 | 1,986 | 1,158 | 58 | % | 3,015 | 129 | 4 | % | |||||||||||||||
| Provision for income taxes | 935 | 430 | 505 | 117 | % | 763 | 172 | 23 | % | |||||||||||||||
| Net income | $ | 2,209 | $ | 1,556 | $ | 653 | 42 | % | $ | 2,252 | $ | (43 | ) | (2 | ) | % | ||||||||
| Basic earnings per share | $ | 0.15 | $ | 0.11 | $ | 0.04 | 36 | % | $ | 0.17 | $ | (0.02 | ) | (12 | ) | % | ||||||||
| Average basic shares | 15,014 | 13,367 | 1,647 | 12 | % | 13,416 | 1,598 | 12 | % | |||||||||||||||
| Diluted earnings per share | $ | 0.15 | $ | 0.11 | $ | 0.04 | 36 | % | $ | 0.17 | $ | (0.02 | ) | (12 | ) | % | ||||||||
| Average diluted shares | 15,113 | 13,425 | 1,688 | 13 | % | 13,521 | 1,592 | 12 | % | |||||||||||||||
| Dividends declared per common share | $ | 0.03 | $ | 0.03 | $ | — | — | % | $ | 0.03 | $ | — | — | % | ||||||||||
Second Quarter of 2017 Compared With Second Quarter of 2016
Net income for the second quarter of 2017 increased $653 thousand compared to the second quarter of 2016. In the current quarter, net interest income was $958 thousand higher and noninterest income was $546 thousand higher. These positive changes were offset by an increase in the provision for loan and lease losses of $300 thousand, noninterest expense that was $46 thousand higher and a provision for income taxes that was $505 thousand higher.
Net Interest Income
Net interest income increased $958 thousand compared to the same period a year ago.
Interest income for the three months ended June 30, 2017 increased $1.1 million or 10% to $11.3 million. Interest and fees on loans increased $962 thousand primarily due to increased average loan balances. Interest on securities increased $10 thousand and interest on interest-bearing deposits due from banks increased $91 thousand.
Interest expense for the second quarter of 2017 increased $105 thousand or 10% to $1.1 million. The increase was primarily caused by an increase in the average rate paid on interest-bearing deposits.
Provision for loan and lease loss
During the three months ended June 30, 2017, the Company recorded a provision for loan and lease losses of $300 thousand reflecting growth in the loan portfolio. There was no provision for loan and lease losses during the second quarter of 2016. Average loans for the quarter ended June 30, 2017 totaled $821.3 million, an increase of $78.6 million (11%) compared to the same quarter a year ago.
Noninterest Income
Noninterest income for the three months ended June 30, 2017 increased $546 thousand compared to the second quarter for 2016. Noninterest income for 2016 was negatively impacted by the $546 thousand other-than-temporary-impairment of a bond investment.
Noninterest Expense
Noninterest expense for the three months ended June 30, 2017 increased $46 thousand compared to the same period a year previous. The increase was primarily due to termination and write-off of a $137 thousand software development project and data processing fees that increased $76 thousand. In 2017, branch acquisition and balance sheet reconfiguration costs of $168 thousand recorded in the same period a year previous did not recur.
Income Tax Provision
During the three months ended June 30, 2017, the Company recorded a provision for income taxes of $935 thousand (29.7% effective tax rate) compared with a provision for income taxes of $430 thousand (21.7% effective tax rate) for the same period a year ago. The Company’s effective tax rate has increased as muni income, tax credits and permanent deductions arising from investments in low income housing partnerships comprise a smaller percentage of pre-tax income.
Second Quarter of 2017 Compared With First Quarter of 2017
Net income for the second quarter of 2017 decreased $43 thousand compared to the first quarter of 2017. Net income for the three months ended March 31, 2017 included life insurance death benefit proceeds of $502 thousand that were not subject to income tax. In the current quarter, net interest income was $441 thousand higher and noninterest expenses were $347 thousand lower. These positive changes were offset by an increase in the provision for loan and lease losses of $100 thousand, noninterest income that was $559 thousand lower (a result of the life insurance death benefit proceeds) and a provision for income taxes that was $172 thousand higher.
Net Interest Income
Net interest income increased $441 thousand over the prior quarter.
Interest income for the three months ended June 30, 2017 increased $503 thousand or 5% to $11.3 million compared to the prior quarter. Interest and fees on loans increased $374 thousand due to increased average balances and increased yields. Interest on investment securities increased $87 thousand due to increased average balances and increased yields. Interest on interest-bearing deposits due from banks increased $42 thousand due to increased yields.
Interest expense for the three months ended June 30, 2017 increased $62 thousand or 6% to $1.1 million compared to the prior quarter. Interest paid on deposits increased from 29 basis points to 31 basis points.
Provision for loan and lease loss
During the three months ended June 30, 2017, the Company recorded a provision for loan and lease losses of $300 thousand compared with a provision for loan lease losses of $200 thousand for the prior quarter. Average loans for the quarter ended June 30, 2017 totaled $821.3 million, an increase of $14.5 million (7% annualized) compared to the prior quarter.
Noninterest Income
Noninterest income for the three months ended June 30, 2017 decreased $559 thousand compared to the prior quarter. During the current quarter, dividends on Federal Home Loan Bank of San Francisco stock decreased $49 thousand. During the prior quarter, we recognized income from life insurance death benefit proceeds of $502 thousand.
Noninterest Expense
Noninterest expense for the three months ended June 30, 2017 decreased $347 thousand compared to the prior quarter.
The decrease in noninterest expense was primarily driven by the following positive items:
- Employee incentive payments decreased $190 thousand
- Employee vacation accrual costs decreased $183 thousand
- Other salaries and related benefits costs decreased $118 thousand
- Payroll tax expenses decreased $221 thousand
These positive items were partially offset by the termination and write-off of a $137 thousand software development project and Nasdaq / transfer agent costs which increased $62 thousand.
Income Tax Provision
During the three months ended June 30, 2017, we recorded a provision for income taxes of $935 thousand (29.74% of pretax income) compared with a provision for income taxes of $763 thousand (25.31% of pretax income) for the prior quarter. Life insurance death benefits of $502 thousand recorded during the previous quarter are not subject to income tax, and if excluded from pretax income, the effective tax rate would have been 30.36%.
Earnings Per Share
Diluted earnings per share were $0.15 for the three months ended June 30, 2017 compared with diluted earnings per share of $0.11 for the same period a year ago and diluted earnings per share of $0.17 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in table 6 above.
| TABLE 7a | |||||||||||||||||||||||||||
| NET INTEREST MARGIN - UNAUDITED | |||||||||||||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||||||
| For The Three Months Ended | |||||||||||||||||||||||||||
| June 30, 2017 | June 30, 2016 | March 31, 2017 | |||||||||||||||||||||||||
| Average | Yield / | Average | Yield / | Average | Yield / | ||||||||||||||||||||||
| (Amounts in thousands) | Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | ||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||
| Net loans (2) | $ | 821,321 | $ | 9,758 | 4.77 | % | $ | 742,684 | $ | 8,796 | 4.76 | % | $ | 806,793 | $ | 9,384 | 4.72 | % | |||||||||
| Taxable securities | 143,705 | 872 | 2.43 | % | 124,183 | 808 | 2.62 | % | 137,582 | 789 | 2.33 | % | |||||||||||||||
| Tax-exempt securities | 73,927 | 534 | 2.90 | % | 77,168 | 588 | 3.06 | % | 73,524 | 530 | 2.92 | % | |||||||||||||||
| Interest-bearing deposits in other banks | 58,691 | 156 | 1.07 | % | 46,097 | 65 | 0.57 | % | 57,140 | 114 | 0.81 | % | |||||||||||||||
| Average interest- earning assets | 1,097,644 | 11,320 | 4.14 | % | 990,132 | 10,257 | 4.17 | % | 1,075,039 | 10,817 | 4.08 | % | |||||||||||||||
| Cash and due from banks | 17,364 | 17,028 | 16,873 | ||||||||||||||||||||||||
| Premises and equipment, net | 15,809 | 15,632 | 16,165 | ||||||||||||||||||||||||
| Other assets | 39,630 | 41,394 | 40,228 | ||||||||||||||||||||||||
| Average total assets | $ | 1,170,447 | $ | 1,064,186 | $ | 1,148,305 | |||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||
| Interest-bearing demand | $ | 421,888 | 184 | 0.17 | % | $ | 382,811 | 130 | 0.14 | % | $ | 420,416 | 148 | 0.14 | % | ||||||||||||
| Savings deposits | 109,857 | 47 | 0.17 | % | 103,990 | 41 | 0.16 | % | 113,647 | 47 | 0.17 | % | |||||||||||||||
| Certificates of deposit | 208,703 | 545 | 1.05 | % | 223,958 | 515 | 0.92 | % | 215,202 | 529 | 1.00 | % | |||||||||||||||
| Net term debt | 19,539 | 298 | 6.12 | % | 19,510 | 295 | 6.08 | % | 18,598 | 293 | 6.39 | % | |||||||||||||||
| Junior subordinated debentures | 10,310 | 71 | 2.76 | % | 10,310 | 59 | 2.30 | % | 10,310 | 66 | 2.60 | % | |||||||||||||||
| Average interest- bearing liabilities | 770,297 | 1,145 | 0.60 | % | 740,579 | 1,040 | 0.56 | % | 778,173 | 1,083 | 0.56 | % | |||||||||||||||
| Noninterest-bearing demand | 275,039 | 220,377 | 262,881 | ||||||||||||||||||||||||
| Other liabilities | 12,256 | 11,913 | 12,431 | ||||||||||||||||||||||||
| Shareholders’ equity | 112,855 | 91,317 | 94,820 | ||||||||||||||||||||||||
| Average liabilities and shareholders’ equity | $ | 1,170,447 | $ | 1,064,186 | $ | 1,148,305 | |||||||||||||||||||||
| Net interest income and net interest margin (4) | $ | 10,175 | 3.72 | % | $ | 9,217 | 3.74 | % | $ | 9,734 | 3.67 | % | |||||||||||||||
| Tax equivalent net interest margin (3) | 3.82 | % | 3.87 | % | 3.78 | % | |||||||||||||||||||||
| (1) Interest income on loans is net of deferred fees and costs of approximately $131 thousand, $352 thousand, and $197 thousand for the three months ended June 30, 2017, and 2016 and March 31, 2017, respectively. | |||||||||||||||||||||||||||
| (2) Net loans includes average nonaccrual loans of $9.8 million, $11.4 million and $10.9 million for the three months ended June 30, 2017 and 2016 and March 31, 2017, respectively. | |||||||||||||||||||||||||||
| (3) Tax-exempt income has been adjusted to tax equivalent basis at a 34% tax rate. The amount of such adjustments was an addition to recorded income of approximately $275 thousand, $303 thousand and $273 thousand for the three months ended June 30, 2017 and 2016 and March 31, 2017, respectively. | |||||||||||||||||||||||||||
| (4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. | |||||||||||||||||||||||||||
| (5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result. | |||||||||||||||||||||||||||
| TABLE 7b | |||||||||||||||||||
| NET INTEREST MARGIN - UNAUDITED | |||||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||
| For The Six Months Ended | |||||||||||||||||||
| June 30, 2017 | June 30, 2016 | ||||||||||||||||||
| Average | Yield / | Average | Yield / | ||||||||||||||||
| (Amounts in thousands) | Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | |||||||||||||
| Interest-earning assets: | |||||||||||||||||||
| Net loans (2) | $ | 814,098 | $ | 19,142 | 4.74 | % | $ | 731,740 | $ | 17,247 | 4.74 | % | |||||||
| Taxable securities | 140,660 | 1,661 | 2.38 | % | 122,050 | 1,592 | 2.62 | % | |||||||||||
| Tax-exempt securities | 73,726 | 1,064 | 2.91 | % | 77,510 | 1,182 | 3.07 | % | |||||||||||
| Interest-bearing deposits in other banks | 57,920 | 270 | 0.94 | % | 48,676 | 140 | 0.58 | % | |||||||||||
| Average interest- earning assets | 1,086,404 | 22,137 | 4.11 | % | 979,976 | 20,161 | 4.14 | % | |||||||||||
| Cash and due from banks | 17,120 | 14,665 | |||||||||||||||||
| Premises and equipment, net | 15,986 | 14,008 | |||||||||||||||||
| Other assets | 39,928 | 40,543 | |||||||||||||||||
| Average total assets | $ | 1,159,438 | $ | 1,049,192 | |||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||
| Interest-bearing demand | $ | 421,156 | 332 | 0.16 | % | $ | 353,291 | 252 | 0.14 | % | |||||||||
| Savings deposits | 111,742 | 94 | 0.17 | % | 100,008 | 86 | 0.17 | % | |||||||||||
| Certificates of deposit | 211,934 | 1,074 | 1.02 | % | 222,897 | 1,112 | 1.00 | % | |||||||||||
| Net term debt | 19,071 | 591 | 6.25 | % | 55,478 | 1,077 | 3.90 | % | |||||||||||
| Junior subordinated debentures | 10,310 | 137 | 2.68 | % | 10,310 | 113 | 2.20 | % | |||||||||||
| Average interest- bearing liabilities | 774,213 | 2,228 | 0.58 | % | 741,984 | 2,640 | 0.72 | % | |||||||||||
| Noninterest-bearing demand | 268,994 | 201,457 | |||||||||||||||||
| Other liabilities | 12,343 | 14,439 | |||||||||||||||||
| Shareholders’ equity | 103,888 | 91,312 | |||||||||||||||||
| Average liabilities and shareholders’ equity | $ | 1,159,438 | $ | 1,049,192 | |||||||||||||||
| Net interest income and net interest margin (4) | $ | 19,909 | 3.70 | % | $ | 17,521 | 3.60 | % | |||||||||||
| Tax equivalent net interest margin (3) | 3.80 | % | 3.72 | % | |||||||||||||||
| (1) Interest income on loans is net of deferred fees and costs of approximately $328 thousand and $667 thousand for the six months ended June 30, 2017 and 2016, respectively. | |||||||||||||||||||
| (2) Net loans includes average nonaccrual loans of $10.3 million and $10.9 million for the six months ended June 30, 2017 and 2016, respectively. | |||||||||||||||||||
| (3) Tax-exempt income has been adjusted to tax equivalent basis at a 34% tax rate. The amount of such adjustments was an addition to recorded income of approximately $548 thousand and $609 thousand for the six months ended June 30, 2017 and 2016, respectively. | |||||||||||||||||||
| (4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. | |||||||||||||||||||
| (5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result. | |||||||||||||||||||
The current quarter net interest margin increased five basis points to 3.72% as compared to the prior quarter due to increased yields on average interest-earning assets. Increases in the average balances of interest-earning assets were funded by increased average balances in low cost demand deposits and increased average equity as a result of the sale of common stock during the quarter.
The net interest margin was 3.72% for the current quarter compared to 3.74% for the same period a year ago. The decrease was due to decreased yield on the securities portfolio and increased cost of interest-bearing liabilities. The decrease was partially offset by increased yield on loans and interest-bearing deposits at other institutions. The increase in interest income compared to the same quarter in the prior year is due to increased volume in the loan and investment portfolios. The increase in interest expense resulted primarily from an increase in the average rate paid on interest-bearing deposits.
Average deposit balances for the current quarter increased $3.3 million and $84.4 million compared to the prior quarter and the same period a year ago, respectively. The increase in average deposit balances compared to the prior quarter and the same quarter in the prior year was due to organic growth in core deposits. Our overall cost of total deposits increased to 0.31% for the quarter ended June 30, 2017 from 0.30% for the same period a year ago and from 0.29% for the prior quarter.
| TABLE 8 | ||||||||||||||||||||||||
| ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED | ||||||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||||||
| For The Three Months Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||||||||||||
| Beginning balance ALLL | $ | 11,641 | $ | 11,544 | $ | 11,849 | $ | 11,864 | $ | 11,495 | ||||||||||||||
| Provision for loan and lease losses | 300 | 200 | — | — | — | |||||||||||||||||||
| Loans charged-off | (359 | ) | (447 | ) | (386 | ) | (357 | ) | (1,734 | ) | ||||||||||||||
| Loan loss recoveries | 106 | 344 | 81 | 342 | 2,103 | |||||||||||||||||||
| Ending balance ALLL | $ | 11,688 | $ | 11,641 | $ | 11,544 | $ | 11,849 | $ | 11,864 | ||||||||||||||
| At June 30, | At March 31, | At December 31, | At September 30, | At June 30, | ||||||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||||||||||||
| Nonaccrual loans: | ||||||||||||||||||||||||
| Commercial | $ | 2,410 | $ | 2,534 | $ | 2,749 | $ | 1,710 | $ | 2,149 | ||||||||||||||
| Real estate - commercial non-owner occupied | 1,196 | 1,196 | 1,196 | 1,196 | 1,197 | |||||||||||||||||||
| Real estate - commercial owner occupied | 639 | 654 | 784 | 800 | 816 | |||||||||||||||||||
| Real estate - residential - ITIN | 3,346 | 3,331 | 3,576 | 3,392 | 3,664 | |||||||||||||||||||
| Real estate - residential - 1-4 family mortgage | 653 | 1,337 | 1,914 | 1,798 | 1,824 | |||||||||||||||||||
| Real estate - residential - equity lines | 872 | 906 | 917 | 942 | 995 | |||||||||||||||||||
| Consumer and other | 38 | 39 | 250 | 252 | 266 | |||||||||||||||||||
| Total nonaccrual loans | 9,154 | 9,997 | 11,386 | 10,090 | 10,911 | |||||||||||||||||||
| Accruing troubled debt restructured loans: | ||||||||||||||||||||||||
| Commercial | 703 | 741 | 776 | 726 | 760 | |||||||||||||||||||
| Real estate - commercial non-owner occupied | 806 | 808 | 808 | 811 | 816 | |||||||||||||||||||
| Real estate - residential - ITIN | 4,712 | 4,761 | 5,033 | 5,280 | 5,336 | |||||||||||||||||||
| Real estate - residential - equity lines | 445 | 450 | 454 | 543 | 548 | |||||||||||||||||||
| Total accruing troubled debt restructured loans | 6,666 | 6,760 | 7,071 | 7,360 | 7,460 | |||||||||||||||||||
| All other accruing impaired loans | — | — | 337 | 483 | 550 | |||||||||||||||||||
| Total impaired loans | $ | 15,820 | $ | 16,757 | $ | 18,794 | $ | 17,933 | $ | 18,921 | ||||||||||||||
| Gross loans outstanding at period end | $ | 815,388 | $ | 810,194 | $ | 804,211 | $ | 779,019 | $ | 754,140 | ||||||||||||||
| Nonaccrual loans to gross loans | 1.12 | % | 1.23 | % | 1.42 | % | 1.30 | % | 1.45 | % | ||||||||||||||
| Allowance for loan and lease losses as a percent of: | ||||||||||||||||||||||||
| Gross loans | 1.43 | % | 1.44 | % | 1.44 | % | 1.52 | % | 1.57 | % | ||||||||||||||
| Nonaccrual loans | 127.68 | % | 116.44 | % | 101.39 | % | 117.43 | % | 108.73 | % | ||||||||||||||
| Impaired loans | 73.88 | % | 69.47 | % | 61.42 | % | 66.07 | % | 62.70 | % | ||||||||||||||
We realized net loan loss charge-offs of $253 thousand in the current quarter compared with net loan loss charge-offs of $103 thousand in the prior quarter and net loan recoveries of $369 thousand for the same period a year ago. Charge-offs during the second quarter of 2017 of $359 thousand were primarily associated with purchased consumer loans and residential real estate loans.
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. A combination of net loan losses and loan portfolio growth supported management’s decision to record a $300 thousand provision for loan and lease losses during the quarter ended June 30, 2017 and a $200 thousand provision for loan and lease losses during the quarter ended March 31, 2017. There were no provisions for loan and lease losses during the years ended December 31, 2016 or 2015. Our ALLL as a percentage of gross loans was 1.43% as of June 30, 2017 compared to 1.57% as of June 30, 2016 and 1.44% as of March 31, 2017. Based on the Bank’s ALLL methodology, which uses criteria such as risk weighting and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate at June 30, 2017. 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 June 30, 2017, the recorded investment in loans classified as impaired totaled $15.8 million, with a corresponding specific reserve of $1.1 million compared to impaired loans of $18.9 million with a corresponding specific reserve of $903 thousand at June 30, 2016 and impaired loans of $16.8 million, with a corresponding specific reserve of $1.3 million at March 31, 2017. The decrease in loans classified as impaired and the decrease in the corresponding specific reserve compared to the prior quarter is primarily due to one nonaccrual residential real estate loan that was transferred to OREO during the quarter.
| TABLE 9 | ||||||||||||||||||||
| TROUBLED DEBT RESTRUCTURINGS - UNAUDITED | ||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||
| At June 30, | At March 31, | At December 31, | At September 30, | At June 30, | ||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||||||||
| Nonaccrual | $ | 4,630 | $ | 4,570 | $ | 4,995 | $ | 3,795 | $ | 3,905 | ||||||||||
| Accruing | 6,666 | 6,760 | 7,071 | 7,360 | 7,460 | |||||||||||||||
| Total troubled debt restructurings | $ | 11,296 | $ | 11,330 | $ | 12,066 | $ | 11,155 | $ | 11,365 | ||||||||||
| Percentage of total gross loans | 1.39 | % | 1.40 | % | 1.50 | % | 1.43 | % | 1.51 | % | ||||||||||
There was one new troubled debt restructuring to grant a rate and payment deferral modification for a loan that was placed on nonaccrual status during the three months ended June 30, 2017. As of June 30, 2017, we had 118 restructured loans that qualified as troubled debt restructurings, of which 111 were performing according to their restructured terms.
| TABLE 10 | ||||||||||||||||||||
| NONPERFORMING ASSETS - UNAUDITED | ||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||
| At June 30, | At March 31, | At December 31, | At September 30, | At June 30, | ||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||||||||
| Total nonaccrual loans | $ | 9,154 | $ | 9,997 | $ | 11,386 | $ | 10,090 | $ | 10,911 | ||||||||||
| 90 days past due and still accruing | — | — | — | — | 10 | |||||||||||||||
| Total nonperforming loans | 9,154 | 9,997 | 11,386 | 10,090 | 10,921 | |||||||||||||||
| Other real estate owned | 1,517 | 814 | 759 | 793 | 765 | |||||||||||||||
| Total nonperforming assets | $ | 10,671 | $ | 10,811 | $ | 12,145 | $ | 10,883 | $ | 11,686 | ||||||||||
| Nonperforming loans to gross loans | 1.12 | % | 1.23 | % | 1.42 | % | 1.30 | % | 1.45 | % | ||||||||||
| Nonperforming assets to total assets | 0.88 | % | 0.95 | % | 1.06 | % | 0.98 | % | 1.09 | % | ||||||||||
The June 30, 2017 OREO balance consists of six properties, of which three are 1-4 family residential real estate properties in the amount of $876 thousand, two are nonfarm nonresidential properties in the amount of $530 thousand and one is an undeveloped commercial property in the amount of $112 thousand. The increase the OREO balance compared to the prior quarter is due to one residential real estate loan that was transferred to OREO during the quarter.
| TABLE 11 | ||||||||||||||||||||
| UNAUDITED CONSOLIDATED | ||||||||||||||||||||
| BALANCE SHEET | ||||||||||||||||||||
| (amounts in thousands, except per share data) | ||||||||||||||||||||
| At June 30, | At June 30, | Change | At March 31, | |||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and due from banks | $ | 23,420 | $ | 14,695 | $ | 8,725 | 59 | % | $ | 18,315 | ||||||||||
| Interest-bearing deposits in other banks | 73,434 | 51,345 | 22,089 | 43 | % | 42,744 | ||||||||||||||
| Total cash and cash equivalents | 96,854 | 66,040 | 30,814 | 47 | % | 61,059 | ||||||||||||||
| Securities available-for-sale, at fair value | 209,609 | 157,906 | 51,703 | 33 | % | 181,534 | ||||||||||||||
| Securities held-to-maturity, at amortized cost | 31,329 | 35,415 | (4,086 | ) | (12 | ) | % | 31,257 | ||||||||||||
| Loans, net of deferred fees and costs | 816,929 | 755,168 | 61,761 | 8 | % | 811,640 | ||||||||||||||
| Allowance for loan and lease losses | (11,688 | ) | (11,864 | ) | 176 | (1 | ) | % | (11,641 | ) | ||||||||||
| Net loans | 805,241 | 743,304 | 61,937 | 8 | % | 799,999 | ||||||||||||||
| Premises and equipment, net | 15,417 | 15,660 | (243 | ) | (2 | ) | % | 15,903 | ||||||||||||
| Other real estate owned | 1,517 | 765 | 752 | 98 | % | 814 | ||||||||||||||
| Life insurance | 21,629 | 22,794 | (1,165 | ) | (5 | ) | % | 21,494 | ||||||||||||
| Deferred taxes | 8,723 | 8,026 | 697 | 9 | % | 9,363 | ||||||||||||||
| Goodwill and core deposit intangible, net | 2,141 | 2,362 | (221 | ) | (9 | ) | % | 2,196 | ||||||||||||
| Other assets | 19,634 | 17,920 | 1,714 | 10 | % | 19,132 | ||||||||||||||
| Total assets | $ | 1,212,094 | $ | 1,070,192 | $ | 141,902 | 13 | % | $ | 1,142,751 | ||||||||||
| Liabilities and shareholders' equity: | ||||||||||||||||||||
| Demand - noninterest-bearing | $ | 303,560 | $ | 224,467 | $ | 79,093 | 35 | % | $ | 270,412 | ||||||||||
| Demand - interest-bearing | 426,798 | 385,609 | 41,189 | 11 | % | 407,784 | ||||||||||||||
| Savings | 109,472 | 105,228 | 4,244 | 4 | % | 112,738 | ||||||||||||||
| Certificates of deposit | 206,395 | 222,252 | (15,857 | ) | (7 | ) | % | 213,556 | ||||||||||||
| Total deposits | 1,046,225 | 937,556 | 108,669 | 12 | % | 1,004,490 | ||||||||||||||
| Term debt | 18,300 | 19,577 | (1,277 | ) | (7 | ) | % | 18,667 | ||||||||||||
| Unamortized debt issuance costs | (161 | ) | (201 | ) | 40 | (20 | ) | % | (173 | ) | ||||||||||
| Net term debt | 18,139 | 19,376 | (1,237 | ) | (6 | ) | % | 18,494 | ||||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | — | 0 | % | 10,310 | ||||||||||||||
| Other liabilities | 11,468 | 10,462 | 1,006 | 10 | % | 12,994 | ||||||||||||||
| Total liabilities | 1,086,142 | 977,704 | 108,438 | 11 | % | 1,046,288 | ||||||||||||||
| Shareholders' equity: | ||||||||||||||||||||
| Common stock | 51,651 | 24,421 | 27,230 | 112 | % | 24,800 | ||||||||||||||
| Retained earnings | 73,789 | 66,356 | 7,433 | 11 | % | 72,066 | ||||||||||||||
| Accumulated other comprehensive income (loss), net of tax | 512 | 1,711 | (1,199 | ) | (70 | ) | % | (403 | ) | |||||||||||
| Total shareholders' equity | 125,952 | 92,488 | 33,464 | 36 | % | 96,463 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,212,094 | $ | 1,070,192 | $ | 141,902 | 13 | % | $ | 1,142,751 | ||||||||||
| Total interest-earning assets | $ | 1,130,619 | $ | 997,211 | $ | 133,408 | 13 | % | $ | 1,068,066 | ||||||||||
| Shares outstanding | 16,260 | 13,439 | 13,517 | |||||||||||||||||
| Tangible book value per share | $ | 7.61 | $ | 6.71 | $ | 6.97 | ||||||||||||||
| TABLE 12 | |||||||||||||||||||||||||
| UNAUDITED | |||||||||||||||||||||||||
| INCOME STATEMENT | |||||||||||||||||||||||||
| (amounts in thousands, except per share data) | |||||||||||||||||||||||||
| For The Three Months Ended | For The Six Months Ended | ||||||||||||||||||||||||
| June 30, | Change | March 31, | June 30, | ||||||||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | 2017 | 2016 | |||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||
| Interest and fees on loans | $ | 9,758 | $ | 8,796 | $ | 962 | 11 | % | $ | 9,384 | $ | 19,142 | $ | 17,247 | |||||||||||
| Interest on securities | 872 | 808 | 64 | 8 | % | 789 | 1,661 | 1,592 | |||||||||||||||||
| Interest on tax-exempt securities | 534 | 588 | (54 | ) | (9 | ) | % | 530 | 1,064 | 1,182 | |||||||||||||||
| Interest on deposits in other banks | 156 | 65 | 91 | 140 | % | 114 | 270 | 140 | |||||||||||||||||
| Total interest income | 11,320 | 10,257 | 1,063 | 10 | % | 10,817 | 22,137 | 20,161 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||
| Interest on demand deposits | 184 | 130 | 54 | 42 | % | 148 | 332 | 252 | |||||||||||||||||
| Interest on savings deposits | 47 | 41 | 6 | 15 | % | 47 | 94 | 86 | |||||||||||||||||
| Interest on certificates of deposit | 545 | 515 | 30 | 6 | % | 529 | 1,074 | 1,112 | |||||||||||||||||
| Interest on term debt | 298 | 295 | 3 | 1 | % | 293 | 591 | 1,077 | |||||||||||||||||
| Interest on other borrowings | 71 | 59 | 12 | 20 | % | 66 | 137 | 113 | |||||||||||||||||
| Total interest expense | 1,145 | 1,040 | 105 | 10 | % | 1,083 | 2,228 | 2,640 | |||||||||||||||||
| Net interest income | 10,175 | 9,217 | 958 | 10 | % | 9,734 | 19,909 | 17,521 | |||||||||||||||||
| Provision for loan and lease losses | 300 | — | 300 | 100 | % | 200 | 500 | — | |||||||||||||||||
| Net interest income after provision for loan and lease losses | 9,875 | 9,217 | 658 | 7 | % | 9,534 | 19,409 | 17,521 | |||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||
| Service charges on deposit accounts | 142 | 88 | 54 | 61 | % | 127 | 269 | 160 | |||||||||||||||||
| ATM and point of sale | 288 | 335 | (47 | ) | (14 | ) | % | 266 | 554 | 427 | |||||||||||||||
| Payroll and benefit processing fees | 147 | 139 | 8 | 6 | % | 191 | 338 | 299 | |||||||||||||||||
| Life insurance | 135 | 153 | (18 | ) | (12 | ) | % | 646 | 781 | 309 | |||||||||||||||
| Gain on investment securities, net | 35 | 28 | 7 | 25 | % | 66 | 101 | 122 | |||||||||||||||||
| Impairment losses on investment securities | — | (546 | ) | 546 | 100 | % | — | — | (546 | ) | |||||||||||||||
| Federal Home Loan Bank of San Francisco dividends | 54 | 99 | (45 | ) | (45 | ) | % | 103 | 157 | 189 | |||||||||||||||
| Other income | 182 | 141 | 41 | 29 | % | 143 | 325 | 426 | |||||||||||||||||
| Total noninterest income | 983 | 437 | 546 | 125 | % | 1,542 | 2,525 | 1,386 | |||||||||||||||||
| TABLE 12 - CONTINUED | |||||||||||||||||||||||
| UNAUDITED | |||||||||||||||||||||||
| INCOME STATEMENT | |||||||||||||||||||||||
| (amounts in thousands, except per share data) | |||||||||||||||||||||||
| For The Three Months Ended | For The Six Months Ended | ||||||||||||||||||||||
| June 30, | Change | March 31, | June 30, | ||||||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | 2017 | 2016 | |||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| Salaries and related benefits | 4,147 | 4,086 | 61 | 1 | % | 4,858 | 9,005 | 8,315 | |||||||||||||||
| Occupancy and equipment | 1,054 | 987 | 67 | 7 | % | 1,048 | 2,102 | 1,776 | |||||||||||||||
| Federal Deposit Insurance Corporation insurance premium | 104 | 181 | (77 | ) | (43 | ) | % | 48 | 152 | 337 | |||||||||||||
| Data processing fees | 450 | 374 | 76 | 20 | % | 407 | 857 | 678 | |||||||||||||||
| Professional service fees | 501 | 470 | 31 | 7 | % | 393 | 894 | 906 | |||||||||||||||
| Telecommunications | 223 | 199 | 24 | 12 | % | 211 | 434 | 346 | |||||||||||||||
| Branch acquisition costs | — | 168 | (168 | ) | (100 | ) | % | — | — | 580 | |||||||||||||
| Loss on cancellation of interest rate swap | — | — | — | — | % | — | — | 2,325 | |||||||||||||||
| Other expenses | 1,235 | 1,203 | 32 | 3 | % | 1,096 | 2,331 | 2,406 | |||||||||||||||
| Total noninterest expense | 7,714 | 7,668 | 46 | 1 | % | 8,061 | 15,775 | 17,669 | |||||||||||||||
| Income before provision for income taxes | 3,144 | 1,986 | 1,158 | 58 | % | 3,015 | 6,159 | 1,238 | |||||||||||||||
| Deferred tax asset write-off | — | — | — | — | % | — | — | 363 | |||||||||||||||
| Provision for income taxes | 935 | 430 | 505 | 117 | % | 763 | 1,698 | 279 | |||||||||||||||
| Net income | $ | 2,209 | $ | 1,556 | $ | 653 | 42 | % | $ | 2,252 | $ | 4,461 | $ | 596 | |||||||||
| Basic earnings per share | $ | 0.15 | $ | 0.11 | $ | 0.04 | 36 | % | $ | 0.17 | $ | 0.31 | $ | 0.04 | |||||||||
| Average basic shares | 15,014 | 13,367 | 1,647 | 12 | % | 13,416 | 14,220 | 13,364 | |||||||||||||||
| Diluted earnings per share | $ | 0.15 | $ | 0.11 | $ | 0.04 | 36 | % | $ | 0.17 | $ | 0.31 | $ | 0.04 | |||||||||
| Average diluted shares | 15,113 | 13,425 | 1,688 | 13 | % | 13,521 | 14,321 | 13,408 | |||||||||||||||
| TABLE 13 | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED | |||||||||||||||
| YEAR TO DATE AVERAGE BALANCE SHEETS | |||||||||||||||
| (amounts in thousands) | |||||||||||||||
| For the Six Months Ended | For the Twelve Months Ended | ||||||||||||||
| June 30, | June 30, | December 31, | December 31, | December 31, | |||||||||||
| 2017 | 2016 | 2016 | 2015 | 2014 | |||||||||||
| Earning assets: | |||||||||||||||
| Loans | $ | 814,098 | $ | 731,740 | $ | 752,938 | $ | 699,227 | $ | 625,166 | |||||
| Taxable securities | 140,660 | 122,050 | 120,884 | 120,897 | 147,916 | ||||||||||
| Tax exempt securities | 73,726 | 77,510 | 75,303 | 77,089 | 83,973 | ||||||||||
| Interest-bearing deposits in other banks | 57,920 | 48,676 | 58,668 | 30,323 | 56,465 | ||||||||||
| Total earning assets | 1,086,404 | 979,976 | 1,007,793 | 927,536 | 913,520 | ||||||||||
| Cash and due from banks | 17,120 | 14,665 | 15,831 | 11,220 | 11,246 | ||||||||||
| Premises and equipment, net | 15,986 | 14,008 | 15,078 | 11,552 | 12,105 | ||||||||||
| Other assets | 39,928 | 40,543 | 41,048 | 42,423 | 36,936 | ||||||||||
| Total assets | $ | 1,159,438 | $ | 1,049,192 | $ | 1,079,750 | $ | 992,731 | $ | 973,807 | |||||
| Liabilities and shareholders' equity: | |||||||||||||||
| Demand - noninterest-bearing | $ | 268,994 | $ | 201,457 | $ | 226,368 | $ | 156,578 | $ | 139,792 | |||||
| Demand - interest-bearing | 421,156 | 353,291 | 374,170 | 283,105 | 272,383 | ||||||||||
| Savings | 111,742 | 100,008 | 104,771 | 92,659 | 91,108 | ||||||||||
| Certificates of deposit | 211,934 | 222,897 | 221,074 | 238,626 | 259,445 | ||||||||||
| Total deposits | 1,013,826 | 877,653 | 926,383 | 770,968 | 762,728 | ||||||||||
| Term debt | 19,071 | 55,478 | 37,286 | 88,874 | 77,534 | ||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | 10,310 | 10,310 | 15,239 | ||||||||||
| Other liabilities | 12,343 | 14,439 | 13,217 | 16,588 | 15,934 | ||||||||||
| Total liabilities | 1,055,550 | 957,880 | 987,196 | 886,740 | 871,435 | ||||||||||
| Shareholders' equity | 103,888 | 91,312 | 92,554 | 105,991 | 102,372 | ||||||||||
| Liabilities & shareholders' equity | $ | 1,159,438 | $ | 1,049,192 | $ | 1,079,750 | $ | 992,731 | $ | 973,807 | |||||
| TABLE 14 | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED | |||||||||||||||
| QUARTERLY AVERAGE BALANCE SHEETS | |||||||||||||||
| (amounts in thousands) | |||||||||||||||
| For The Three Months Ended | |||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
| 2017 | 2017 | 2016 | 2016 | 2016 | |||||||||||
| Earning assets: | |||||||||||||||
| Loans | $ | 821,321 | $ | 806,793 | $ | 778,458 | $ | 769,354 | $ | 742,684 | |||||
| Taxable securities | 143,705 | 137,582 | 124,881 | 114,578 | 124,183 | ||||||||||
| Tax exempt securities | 73,927 | 73,524 | 72,288 | 73,952 | 77,168 | ||||||||||
| Interest-bearing deposits in other banks | 58,691 | 57,140 | 75,760 | 61,346 | 46,097 | ||||||||||
| Total earning assets | 1,097,644 | 1,075,039 | 1,051,387 | 1,019,230 | 990,132 | ||||||||||
| Cash and due from banks | 17,364 | 16,873 | 16,953 | 17,018 | 17,028 | ||||||||||
| Premises and equipment, net | 15,809 | 16,165 | 16,331 | 15,941 | 15,632 | ||||||||||
| Other assets | 39,630 | 40,228 | 41,363 | 41,729 | 41,394 | ||||||||||
| Total assets | $ | 1,170,447 | $ | 1,148,305 | $ | 1,126,034 | $ | 1,093,918 | $ | 1,064,186 | |||||
| Liabilities and shareholders' equity: | |||||||||||||||
| Demand - noninterest-bearing | $ | 275,039 | $ | 262,881 | $ | 261,600 | $ | 240,418 | $ | 220,377 | |||||
| Demand - interest-bearing | 421,888 | 420,416 | 398,749 | 390,895 | 382,811 | ||||||||||
| Savings | 109,857 | 113,647 | 111,755 | 107,210 | 103,990 | ||||||||||
| Certificates of deposit | 208,703 | 215,202 | 217,463 | 221,078 | 223,958 | ||||||||||
| Total deposits | 1,015,487 | 1,012,146 | 989,567 | 959,601 | 931,136 | ||||||||||
| Term debt | 19,539 | 18,598 | 18,975 | 19,610 | 19,510 | ||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | 10,310 | 10,310 | 10,310 | ||||||||||
| Other liabilities | 12,256 | 12,431 | 12,856 | 11,159 | 11,913 | ||||||||||
| Total liabilities | 1,057,592 | 1,053,485 | 1,031,708 | 1,000,680 | 972,869 | ||||||||||
| Shareholders' equity | 112,855 | 94,820 | 94,326 | 93,238 | 91,317 | ||||||||||
| Liabilities & shareholders' equity | $ | 1,170,447 | $ | 1,148,305 | $ | 1,126,034 | $ | 1,093,918 | $ | 1,064,186 | |||||
About Bank of Commerce Holdings
Bank of Commerce Holdings is a bank holding company headquartered in Redding, California and is the parent company for Redding Bank of Commerce which operates under two separate names (Redding Bank of Commerce and Sacramento Bank of Commerce, a division of Redding Bank of Commerce). The Bank is an FDIC-insured California banking corporation providing community banking and financial services through nine offices located in northern California. The Bank opened on October 22, 1982. The Company’s common stock is listed on the NASDAQ Global Market and trades under the symbol “BOCH”.