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Bank of Commerce Holdings Announces Results for the Second Quarter of 2019

By GlobeNewswire,  July 19, 2019, 09:00:00 AM EDT


SACRAMENTO, Calif., July 19, 2019 (GLOBE NEWSWIRE) -- Bank of Commerce Holdings (NASDAQ:BOCH) (the "Company"), a $1.442 billion asset bank holding company and parent company of Merchants Bank of Commerce (the "Bank"), today announced financial results for the quarter ended June 30, 2019. Net income for the quarter ended June 30, 2019 was $3.6 million or $0.20 per share - diluted, compared with net income of $3.6 million or $0.22 per share - diluted for the same period of 2018. Net income for the six months ended June 30, 2019 was $6.0 million or $0.33 per share - diluted, compared with net income of $6.9 million or $0.42 per share - diluted for the same period of 2018.

The current year includes the benefits of our January 31, 2019 acquisition of Merchants National Bank of Sacramento ("Merchants"). In May, we successfully converted all of Merchant's computer records onto our core system. As previously announced, the Company's subsidiary bank, which had been operating under multiple names, simultaneously changed the name for all locations to Merchants Bank of Commerce. To date, acquisition related costs have totaled $2.3 million and costs related to the name change have totaled $464 thousand. All significant costs for these two projects have now been absorbed.

Randall S. Eslick, President and CEO commented: "I am very pleased with our second quarter accomplishments which are the result of the hard work of our dedicated and talented employees. The changes made during the second quarter reflect the continued execution of our strategic plan. I am particularly excited that with the successful integration of Merchant's data systems along with our name change, we now operate our bank under one name and one computer system. These changes will lead to greater efficiencies and reinforce a consistent message throughout our company."

Financial highlights for the second quarter of 2019:

  • Net income of $3.6 million was an increase of $26 thousand (1%) from $3.6 million earned during the same period in the prior year. Earnings of $0.20 per share - diluted was a decrease of $0.02 (9%) from $0.22 per share - diluted earned during the same period in the prior year and reflects the impact of 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants.
  • Acquisition costs associated with our acquisition of Merchants totaled $376 thousand. Costs related to the name change of our subsidiary bank totaled $464 thousand.
  • Net interest income increased $1.9 million (17%) to $13.5 million compared to $11.6 million for the same period in the prior year.
  • Return on average assets decreased to 1.01% compared to 1.14% for the same period in the prior year.
  • Return on average equity decreased to 8.93% compared to 11.32% for the same period in the prior year.
  • Average loans totaled $1.028 billion, an increase of $106 million (11%) compared to average loans for the same period in the prior year.
  • Average earning assets totaled $1.353 billion, an increase of $145 million (12%) compared to average earning assets for the same period in the prior year.
  • Average deposits totaled $1.218 billion, an increase of $163 million (15%) compared to average deposits for the same period in the prior year.

    -Average non-maturing deposits totaled $1.054 billion, an increase of $170 million (19%) compared to the same period in the prior year.

    -Average certificates of deposit totaled $164.1 million, a decrease of $6.7 million (4%) compared to same period in the prior year.
  • The Company's efficiency ratio was 65.9% compared to 61.2% during the same period in the prior year.

    -The Company's efficiency ratio of 65.9% for the second quarter of 2019 includes $376 thousand in acquisition costs and $464 thousand in name change costs. The efficiency ratio excluding these non-recurring costs was 60.1%.
  • Nonperforming assets at June 30, 2019 totaled $13.5 million or 0.94% of total assets, an increase of $9.1 million since June 30, 2018. The increase in nonperforming assets results from one $10.3 million commercial real estate loan.
  • Book value per common share was $9.22 at June 30, 2019 compared to $7.97 at June 30, 2018.
  • Tangible book value per common share was $8.29 at June 30, 2019 compared to $7.85 at June 30, 2018.

Financial highlights for the six months ended June 30, 2019:

  • Net income of $6.0 million ($0.33 per share - diluted) was a decrease of $909 thousand (13%) from $6.9 million ($0.42 per share - diluted) earned during the same period in the prior year.
  • Acquisition costs associated with our acquisition of Merchants totaled $2.3 million. Costs related to the name change of our subsidiary bank totaled $464 thousand.
  • Net interest income increased $3.6 million (16%) to $26.5 million compared to $22.9 million for the same period in the prior year.
  • Return on average assets decreased to 0.83% compared to 1.10% for the same period in the prior year.
  • Return on average equity decreased to 7.59% compared to 10.84% for the same period in the prior year.
  • Average loans totaled $1.011 billion, an increase of $107 million (12%) compared to average loans for the same period in the prior year.
  • Average earning assets totaled $1.345 billion, an increase of $150 million (13%) compared the same period in the prior year.
  • Average deposits totaled $1.221 billion, an increase of $158 million (15%) compared the same period in the prior year.

    -Average non-maturing deposits totaled $1.055 billion, an increase of $169 million (19%) compared to the same period in the prior year.

    -Average certificates of deposit totaled $165.8 million, a decrease of $10.6 million (6%) compared to the same period in the prior year.
  • The Company's efficiency ratio was 71.7% compared to 63.1% for the same period in the prior year.

    -The Company's efficiency ratio of 71.7% for the first six months of 2019 includes $2.3 million in acquisition costs and $464 thousand in name change costs. The efficiency ratio excluding these non-recurring costs was 62.0%.
  • Nonperforming assets at June 30, 2019 totaled $13.5 million or 0.94% of total assets, an increase of $9.3 million since December 31, 2018. The increase in nonperforming assets results from one $10.3 million commercial real estate loan.
  • Book value per common share was $9.22 at June 30, 2019 compared to $8.47 at December 31, 2018.
  • Tangible book value per common share was $8.29 at June 30, 2019 compared to $8.36 at December 31, 2018.

Forward-Looking Statements

Bank of Commerce Holdings wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. This news release includes statements by the Company, which describe management's expectations and developments, which may not be based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21B of the Securities Act of 1934, as amended. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company's public filings, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the Company's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new banks and/or branches are lower than expected; (4) our concentration in lending tied to real estate exposes us to the adverse effects of material increases in interest rates, declines in the general economy, tightening credit markets or declines in real estate values; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged; and (7) technological changes could expose us to new risks.

                                       
                                       
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   2019     2018     2019   2019   2018  
Net income   $ 3,644     $ 3,618     $ 2,306     $ 5,950   $ 6,859  
Average total assets   $ 1,450,725     $ 1,276,697     $ 1,425,860     $ 1,438,361   $ 1,262,710  
Average total earning assets   $ 1,353,200     $ 1,208,281     $ 1,337,006     $ 1,345,177   $ 1,195,154  
Average shareholders' equity   $ 163,598     $ 128,181     $ 152,705     $ 158,182   $ 127,628  
                                       
Selected performance ratios                                      
Return on average assets     1.01 %     1.14 %     0.66 %     0.83 %   1.10 %
Return on average equity     8.93 %     11.32 %     6.12 %     7.59 %   10.84 %
Efficiency ratio     65.9 %     61.2 %     77.7 %     71.7 %   63.1 %
                                       
Share and per share amounts                                      
Weighted average shares - basic (1)     18,134       16,245       17,489       17,816     16,237  
Weighted average shares - diluted (1)     18,194       16,325       17,552       17,878     16,319  
Earnings per share - basic   $ 0.20     $ 0.22     $ 0.13     $ 0.33   $ 0.42  
Earnings per share - diluted   $ 0.20     $ 0.22     $ 0.13     $ 0.33   $ 0.42  
                                       
    At June 30,     At March 31,      
Share and per share amounts   2019     2018     2019          
Common shares outstanding (2)     18,214       16,318       18,213                
Book value per common share (2)   $ 9.22     $ 7.97     $ 8.90                
Tangible book value per common share (2)(3)   $ 8.29     $ 7.85     $ 7.96                
                                       
Capital ratios (4)                                    
Bank of Commerce Holdings                                    
Common equity tier 1 capital ratio     12.56 %     12.15 %     12.40 %              
Tier 1 capital ratio     13.41 %     13.07 %     13.25 %              
Total capital ratio     15.35 %     15.20 %     15.19 %              
Tier 1 leverage ratio     11.08 %     11.07 %     11.05 %              
Tangible common equity ratio (5)     10.59 %     10.02 %     9.97 %              
                                       
Merchants Bank of Commerce                                      
Common equity tier 1 capital ratio     14.06 %     12.51 %     13.98 %              
Tier 1 capital ratio     14.06 %     12.51 %     13.98 %              
Total capital ratio     15.16 %     13.72 %     15.08 %              
Tier 1 leverage ratio     11.61 %     10.60 %     11.66 %              
                                       
(1) Excludes unvested restricted shares issued in accordance with the Company's equity incentive plan, as they are non participative in dividends or voting rights.
(2) Includes unvested restricted shares issued in accordance with the Company's equity incentive plan.
(3) Book value per share is computed by dividing total shareholders' equity by shares outstanding. Tangible book value per share is computed by dividing total shareholders' equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.
(4) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject.
(5) Management believes the tangible common equity ratio is a useful measure of capital adequacy because it provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the capital of the Company and the ability of the Company to absorb potential losses. The tangible common equity ratio is calculated as total shareholders' equity less goodwill and core deposit intangible, net divided by total assets less goodwill and core deposit intangible, net.



BALANCE SHEET OVERVIEW

As of June 30, 2019, the Company had total consolidated assets of $1.442 billion, gross loans of $1.037 billion, allowance for loan and lease losses ("ALLL") of $12 million, total deposits of $1.236 billion, and shareholders' equity of $168 million.

                                               
                                               
TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
                                               
  At June 30,             At March 31,
      % of       % of   Change       % of
  2019     Total   2018     Total   Amount   %   2019     Total
Commercial $ 152,303     15 %   $ 139,670     15 %   $ 12,633     9   %   $ 149,575     14 %
Real estate - construction and land development   37,685     4       21,292     2       16,393     77   %     30,335     3  
Real estate - commercial non-owner occupied   468,706     45       427,088     46       41,618     10   %     469,048     46  
Real estate - commercial owner occupied   210,711     21       199,412     21       11,299     6   %     209,099     20  
Real estate - residential - ITIN   35,162     3       39,424     4       (4,262 )   (11 ) %     36,145     3  
Real estate - residential - 1-4 family mortgage   67,092     6       33,391     4       33,701     101   %     68,092     7  
Real estate - residential - equity lines   23,656     2       28,879     3       (5,223 )   (18 ) %     26,162     3  
Consumer and other   41,409     4       47,660     5       (6,251 )   (13 ) %     46,150     4  
Gross loans   1,036,724     100 %     936,816     100 %     99,908     11   %     1,034,606     100 %
Deferred fees and costs   2,005             1,763             242             1,992        
Loans, net of deferred fees and costs   1,038,729             938,579             100,150             1,036,598        
Allowance for loan and lease losses   (12,445 )           (12,388 )           (57 )           (12,242 )      
Net loans $ 1,026,284           $ 926,191           $ 100,093           $ 1,024,356        
                                               
Average loans $ 1,028,187           $ 922,687           $ 105,500     11   %   $ 993,261        
Average yield on loans during the quarter   5.01 %           4.85 %           0.16             4.91 %      
Average yield on loans during the year   4.96 %           4.89 %           0.07             4.91 %      

The Company recorded gross loan balances of $1.037 billion at June 30, 2019, compared with $937 million and $1.035 billion at June 30, 2018 and March 31, 2019, respectively, an increase of $100 million and $2 million, respectively. During the first quarter of 2019, Merchants Holding Company acquisition provided an additional $85.3 million of loans. At June 30, 2019, gross loans from the acquisition totaled $83.4 million.

The average yield on loans during the quarter was 5.01% compared to 4.85% and 4.91% for the quarters ended June 30, 2018 and March 31, 2019, respectively. During the first quarter of 2019, a $10.3 million commercial real estate loan was placed on nonaccrual status. The uncollected interest on the loan was reversed which reduced our average yield on loans by 5 basis points. During the second quarter of 2019, we received a loan prepayment penalty that increased the average yield by 5 basis points.

Gross loan balances in the table above include a fair value discount for loans acquired from Merchants during the first quarter of 2019 of $2.0 million and $2.2 million at June 30, 2019 and March 31, 2019, respectively. We recorded $48 thousand and $195 thousand in accretion of the discount for these loans during the first and second quarters of 2019, respectively.

                                                 
                                                 
TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
                                                 
    At June 30,               At March 31,
        % of       % of   Change       % of
    2019     Total   2018     Total   Amount   %   2019     Total
Cash and due from banks   $ 21,306     7 %   $ 23,996     8 %   $ (2,690 )   (11 ) %   $ 32,104     9 %
Interest-bearing deposits in other banks     19,319     6       15,690     5       3,629     23   %     30,425     9  
Total cash and cash equivalents     40,625     13       39,686     13       939     2   %     62,529     18  
                                                 
Investment securities:                                                
U.S. government and agencies     44,837     14       38,994     14       5,843     15   %     46,451     13  
Obligations of state and political subdivisions     45,003     14       58,479     20       (13,476 )   (23 ) %     48,935     14  
Residential mortgage backed securities and

collateralized mortgage obligations
    168,085     50       121,218     43       46,867     39   %     171,814     47  
Corporate securities     2,978     1       3,987     1       (1,009 )   (25 ) %     2,958     1  
Commercial mortgage backed securities     24,868     8       24,742     9       126     1   %     23,864     7  
Other asset backed securities     48           219     0       (171 )   (78 ) %     95      
Total investment securities - AFS     285,819     87       247,639     87       38,180     15   %     294,117     82  
                                                 
Total cash, cash equivalents and

investment securities
  $ 326,444     100 %   $ 287,325     100 %   $ 39,119     14   %   $ 356,646     100 %
Average yield on interest-bearing due

from banks and investment securities

during the quarter - nominal
    2.81 %           2.56 %           0.25             2.83 %      
Average yield on interest-bearing due

from banks and investment securities

during the quarter - tax equivalent
    2.92 %           2.72 %           0.20             2.95 %      

As of June 30, 2019, we maintained noninterest-bearing cash positions of $21.3 million and interest-bearing deposits of $19.3 million at the Federal Reserve Bank and correspondent banks.

Investment securities totaled $285.8 million at June 30, 2019, compared with $247.6 million and $294.1 million at June 30, 2018 and March 31, 2019, respectively. During the first quarter of 2019, the Merchants acquisition included securities with a par value of $107.4 million. Management elected to sell securities with a par value of $67.8 million and $18.5 million during the first and second quarters of 2019, respectively. The sales resulted in net realized gains of $92 thousand and $33 thousand for the first and second quarters of 2019, respectively.

Average securities balances and weighted average tax equivalent yields for the quarters ended June 30, 2019 and 2018 were $289.4 million and 2.98% compared to $256.6 million and 2.82%, respectively.

At June 30, 2019, our net unrealized gains on available-for-sale investment securities were $3.4 million compared with net unrealized losses of $4.9 million and $701 thousand at June 30, 2018 and March 31, 2019, respectively. The changes in net unrealized losses on the investment securities portfolio were due to changes in market interest rates.

                                               
                                               
TABLE 4
DEPOSITS BY TYPE - UNAUDITED
(amounts in thousands)
                                               
  At June 30,               At March 31,
      % of       % of     Change       % of
  2019   Total   2018   Total   Amount   %   2019   Total
Demand - noninterest-bearing $ 397,349   32 %   $ 316,347   30 %   $ 81,002     26   %   $ 385,696   31 %
Demand - interest-bearing   238,175   19       217,674   21       20,501     9   %     241,292   19  
Money market   300,847   24       247,413   23       53,434     22   %     311,853   25  
Total demand   936,371   75       781,434   74       154,937     20   %     938,841   75  
                                               
Savings   138,591   11       106,170   10       32,421     31   %     139,237   11  
Total non-maturing deposits   1,074,962   86       887,604   84       187,358     21   %     1,078,078   86  
                                               
Certificates of deposit   160,556   14       166,925   16       (6,369 )   (4 ) %     170,216   14  
Total deposits $ 1,235,518   100 %   $ 1,054,529   100 %   $ 180,989     17   %   $ 1,248,294   100 %
                                               

Total deposits at June 30, 2019, increased $181 million or 17% to $1.236 billion compared to June 30, 2018 and decreased $13 million or 4% annualized compared to March 31, 2019. Total non-maturing deposits increased $187.4 million or 21% compared to the same date a year ago and decreased $3.2 million or less than 1% annualized compared to March 31, 2019. Certificates of deposit decreased $6.4 million or 4% compared to the same date a year ago and decreased $9.7 million or 23% annualized compared to March 31, 2019.

During the first quarter of 2019, Merchants Holding Company acquisition provided an additional $190.2 million of deposits. The decrease in the acquired deposits of $16.5 million at June 30, 2019 is not attributable to the loss of any significant relationships. As illustrated in the following table, legacy deposits have experienced their seasonal decline, while wholesale time deposits have matured and were not renewed.

                             
                             
TABLE 5
YEAR TO DATE CHANGES IN DEPOSITS
(amounts in thousands)
          Change In Acquired   Change In Legacy    
      Acquired   Deposits For The Five   Deposits For The Six    
  Legacy Deposits   Merchants Deposits   Months Ended   Months Ended   Deposits At
  At December 31,   At January 31,   June 30,   June 30,   At June 30,
  2018   2019   2019

  2019

  2019
Demand - noninterest-bearing $ 347,199   $ 51,880   $ (2,777 )   $ 1,047     $ 397,349
Demand - interest-bearing   252,202     28,231     (5,695 )     (36,563 )     238,175
Money market   265,093     43,316     (1,805 )     (5,757 )     300,847
Total demand   864,494     123,427     (10,277 )     (41,273 )     936,371
                             
Savings   114,840     28,786     (1,998 )     (3,037 )     138,591
Total non-maturing deposits   979,334     152,213     (12,275 )     (44,310 )     1,074,962
                             
Certificates of deposit   152,382     38,003     (4,174 )     (25,655 )     160,556
Total deposits $ 1,131,716   $ 190,216   $ (16,449 )   $ (69,965 )   $ 1,235,518



                 
                 
TABLE 6
WHOLESALE AND RECIPROCAL DEPOSITS - UNAUDITED
(amounts in thousands)
                 
  At June 30,   At March 31,
  2019   2018   2019
CDARS / ICS reciprocal deposits $ 60,492   $ 60,538   $ 65,192
Online listing service wholesale time deposits   248     25,491     1,683
Total wholesale and reciprocal deposits $ 60,740   $ 86,029   $ 66,875

For calendar quarters prior to April 1, 2018, CDARS/ ICS reciprocal deposits were considered to be brokered deposits by regulatory authorities and were reported as such on quarterly Call Reports. With passage of The Economic Growth, Regulatory Relief and Consumer Protection Act in May 2018, this is no longer so.

AVERAGE COST OF FUNDS

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

                                                               
                                                               
TABLE 7
AVERAGE COST OF FUNDS - UNAUDITED
For The Three Months Ended
                                                               
  June 30,   March 31,   December 31,   September 30,   June 30,   March 31,   December 31,   September 30,
  2019   2019   2018   2018   2018   2018   2017   2017
Interest-bearing deposits   0.54 %     0.49 %     0.45 %     0.42 %     0.41 %     0.41 %     0.42 %     0.43 %
Interest-bearing deposits and

noninterest-bearing demand
  0.37 %     0.34 %     0.31 %     0.29 %     0.29 %     0.29 %     0.30 %     0.31 %
All interest-bearing liabilities   0.74 %     0.67 %     0.61 %     0.64 %     0.68 %     0.60 %     0.59 %     0.60 %
All interest-bearing liabilities and

noninterest-bearing demand
  0.52 %     0.46 %     0.42 %     0.45 %     0.50 %     0.43 %     0.42 %     0.43 %



INCOME STATEMENT OVERVIEW

                                         
                                         
TABLE 8
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
                                         
For The Three Months Ended
  June 30,   Change   March 31,   Change
  2019   2018   Amount   %   2019   Amount   %
Interest income $ 15,127   $ 12,990   $ 2,137     16   %   $ 14,427   $ 700     5   %
Interest expense   1,632     1,410     222     16   %     1,423     209     15   %
Net interest income   13,495     11,580     1,915     17   %     13,004     491     4   %
Provision for loan

and lease losses
                %               %
Noninterest income   1,100     962     138     14   %     1,057     43     4   %
Noninterest expense   9,611     7,671     1,940     25   %     10,923     (1,312 )   (12 ) %
Income before provision

for income taxes
  4,984     4,871     113     2   %     3,138     1,846     59   %
Provision for income taxes   1,340     1,253     87     7   %     832     508     61   %
Net income $ 3,644   $ 3,618   $ 26     1   %   $ 2,306   $ 1,338     58   %
                                         
Basic earnings per share $ 0.20   $ 0.22   $ (0.02 )   (9 ) %   $ 0.13   $ 0.07     54   %
Average basic shares   18,134     16,245     1,889     12   %     17,489     645     4   %
Diluted earnings per share $ 0.20   $ 0.22   $ (0.02 )   (9 ) %   $ 0.13   $ 0.07     54   %
Average diluted shares   18,194     16,325     1,869     11   %     17,552     642     4   %
Dividends declared per

common share
$ 0.05   $ 0.04   $ 0.01     25   %   $ 0.04   $ 0.01     25   %

Second Quarter of 2019 Compared With Second Quarter of 2018

Net income for the second quarter of 2019 increased $26 thousand compared to the second quarter of 2018. In the current quarter, net interest income was $1.9 million higher and noninterest income was $138 thousand higher. These positive changes were offset by noninterest expenses that were $1.9 million higher and the provision for income taxes was $87 thousand higher.

Net Interest Income

Net interest income increased $1.9 million compared to the same period a year ago.

Interest income for the second quarter of 2019 increased $2.1 million or 16% to $15.1 million.

  • Interest and fees on loans increased $1.7 million due to a $105.5 million increase in average loan balances and a 16 basis point increase in the average yield on the loan portfolio.
  • Interest on securities increased $370 thousand due to a $32.9 million increase in average securities balances and a 21 basis point increase in average yield on the securities portfolio.
  • Interest on interest-bearing deposits due from banks increased $84 thousand due to a $6.6 million increase in average interest-bearing deposit balances, and a 60 basis point increase in average yield.

Interest expense for the second quarter of 2019 increased $222 thousand or 16% to $1.6 million.

  • Interest expense on interest bearing deposits increased $362 thousand. Average interest-bearing demand and savings deposit balances increased $99.7 million, while average certificate of deposit balances decreased $6.7 million. The average rate paid on interest-bearing deposits increased 13 basis points.
  • Interest expense on borrowings from the Federal Home Loan Bank of San Francisco decreased $75 thousand. Average Federal Home Loan Bank of San Francisco borrowings outstanding in the current quarter were $30.0 million compared to $55.3 million in the same quarter a year ago.
  • Interest expense on other term debt and junior subordinated debentures decreased $65 thousand. During the current quarter, we completed the early repayment of our variable rate senior debt.

Provision for loan and lease losses

As illustrated in Table 10, the nonaccrual status of a $10.3 million commercial real estate loan has resulted in a deterioration in our asset quality metrics. However, net loan loss recoveries totaled $203 thousand for the current quarter and no provision for loan and lease losses was necessary. There was no provision for loan and lease losses in the second quarter of 2018.

Noninterest Income

Noninterest income for the three months ended June 30, 2019 increased $138 thousand compared to the second quarter for 2018. Gains on sale of investment securities increased $29 thousand and dividends on Federal Home Loan Bank of San Francisco stock increased $29 thousand.

Noninterest Expense

Noninterest expense for the three months ended June 30, 2019 increased $1.9 million compared to the same period a year previous, which included:

  • $464 thousand in costs related to the name change.
  • $376 thousand in acquisition costs.
  • $739 thousand increase in operating expenses from the Merchants acquisition.

The Company's efficiency ratio was 65.9% for the second quarter of 2019 (60.1% (non-GAAP) exclusive of non-recurring acquisition and name change costs). The ratio during the same period in 2018 was 61.2%. Management believes the efficiency ratio exclusive of non-recurring acquisition and name change cost is a useful measure because it provides more meaningful period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the Company's performance.

Income Tax Provision

For the three months ended June 30, 2019, our income tax provision of $1.3 million on pre-tax income of $5.0 million was an effective tax rate of 26.9%. The tax provision for the second quarter of the prior year was $1.3 million on pre-tax income of $4.9 million for an effective tax rate of 25.7%. The current quarter includes $28 thousand, of acquisition costs which are not tax deductible.

Second Quarter of 2019 Compared With First Quarter of 2019

Net income for the second quarter of 2019 increased $1.3 million compared to the first quarter of 2019. In the current quarter, net interest income was $491 thousand higher, noninterest income was $43 thousand higher and noninterest expense was $1.3 million lower. These positive changes were offset by the provision for income taxes that was $508 thousand higher.

Net Interest Income

Net interest income increased $491 thousand over the prior quarter. The second quarter includes three months of income and expense associated with the January 31, 2019 acquisition of Merchants. The first quarter includes two months.

Interest income for the three months ended June 30, 2019 increased $700 thousand or 5% to $15.1 million.

  • Interest and fees on loans increased $816 thousand due to a $34.9 million increase in average loan balances and a ten basis point increase in the average yield on the loan portfolio.
  • Interest on investment securities decreased $90 thousand due to a $14.1 million decrease in average securities balances partially offset by a 27 basis point increase in average yield on the investment portfolio.
  • Interest on interest-bearing deposits due from banks decreased $26 thousand due to a $4.6 million decrease in average balances.

Interest expense for the three months ended June 30, 2019 increased $209 thousand or 15% to $1.6 million.

  • Interest expense on deposits increased $113 thousand as average interest-bearing demand and savings deposits increased $6.6 million, average certificates of deposit decreased $3.4 million and the average rate paid on these deposits increased by five basis points.
  • Interest expense on borrowings from the Federal Home Loan Bank of San Francisco increased $137 thousand. Average Federal Home Loan Bank of San Francisco borrowings outstanding in the current quarter were $30.0 million, compared to $8.8 million in the prior quarter
  • Interest expense on other term debt and junior subordinated debentures decreased $41 thousand. During the second quarter of 2019 we completed the early repayment and termination of our senior debt agreement.

Provision for loan and lease losses

As illustrated in Table 10, the nonaccrual status of a $10.3 million commercial real estate loan has resulted in a deterioration in our asset quality metrics. However, net loan loss recoveries totaled $203 thousand for the current quarter and no provision for loan and lease losses was necessary. There was no provision for loan and lease losses in the first quarter of 2019.

Noninterest Income

Noninterest income for the three months ended June 30, 2019 increased $43 thousand, the increase was not concentrated in any one item.

Noninterest Expense

Noninterest expense for the three months ended June 30, 2019 decreased $1.3 million. The decrease was due to a $1.6 million decrease in acquisition costs partially offset by $464 thousand increase in name change costs.

The Company's efficiency ratio was 65.9% for the second quarter of 2019 (60.1% (non-GAAP) exclusive of non-recurring acquisition and name change costs). The ratio during the prior quarter was 77.7% (64.0% exclusive of acquisition costs). Management believes the efficiency ratio exclusive of non-recurring acquisition and name change cost is a useful measure because it provides more meaningful period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the Company's performance.

Income Tax Provision

For the three months ended June 30, 2019, our income tax provision of $1.3 million on pre-tax income of $5.0 million was an effective tax rate of 26.9%. The income tax provision for the prior quarter of $832 thousand on pre-tax income of $3.1 million was an effective tax rate of 26.5%. The current and prior quarter include $28 thousand and $150 thousand, respectively, of acquisition costs which are not tax deductible.

Earnings Per Share

Diluted earnings per share were $0.20 for the three months ended June 30, 2019 compared with diluted earnings per share of $0.22 for the same period a year ago and diluted earnings per share of $0.13 for the prior period. Net income and weighted average shares used to calculate earnings per share - diluted are summarized in Table 8 presented earlier in this press release.

                                                       
                                                       
TABLE 9a
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
                                                       
    For The Three Months Ended
    June 30, 2019   June 30, 2018   March 31, 2019
    Average         Yield /   Average         Yield /   Average         Yield /
    Balance   Interest(1)   Rate (5)   Balance   Interest(1)   Rate (5)   Balance   Interest(1)   Rate (5)
Interest-earning assets:                                                      
Net loans (2)   $ 1,028,187   $ 12,847   5.01 %   $ 922,687   $ 11,164   4.85 %   $ 993,261   $ 12,031   4.91 %
Taxable securities     249,907     1,733   2.78 %     206,247     1,278   2.49 %     253,068     1,764   2.83 %
Tax-exempt securities     39,501     328   3.33 %     50,306     413   3.29 %     50,454     387   3.11 %
Interest-bearing deposits

in other banks
    35,605     219   2.47 %     29,041     135   1.86 %     40,223     245   2.47 %
Average interest-

earning assets
    1,353,200     15,127   4.48 %     1,208,281     12,990   4.31 %     1,337,006     14,427   4.38 %
Cash and due from banks     21,942                 19,880                 21,392            
Premises and equipment, net     15,819                 14,167                 14,581            
Goodwill and core deposit intangible, net     16,995                 1,943                 11,872            
Other assets     42,769                 32,426                 41,009            
Average total assets   $ 1,450,725               $ 1,276,697               $ 1,425,860            
                                                       
Interest-bearing liabilities:                                                      
Interest-bearing demand   $ 238,840     129   0.22 %   $ 225,927     80   0.14 %   $ 243,376     126   0.21 %
Money market     296,326     380   0.51 %     241,724     135   0.22 %     293,396     289   0.40 %
Savings     139,307     123   0.35 %     107,108     64   0.24 %     131,081     111   0.34 %
Certificates of deposit     164,084     497   1.21 %     170,824     488   1.15 %     167,463     490   1.19 %
Federal Home Loan Bank of San Francisco borrowings     30,000     192   2.57 %     55,275     267   1.94 %     8,778     55   2.54 %
Other borrowings net of unamortized debt issuance costs     10,841     201   7.44 %     15,614     279   7.17 %     12,889     239   7.52 %
Junior subordinated

debentures
    10,310     110   4.28 %     10,310     97   3.77 %     10,310     113   4.44 %
Average interest-

bearing liabilities
    889,708     1,632   0.74 %     826,782     1,410   0.68 %     867,293     1,423   0.67 %
Noninterest-bearing demand     379,173                 309,199                 388,410            
Other liabilities     18,246                 12,535                 17,452            
Shareholders' equity     163,598                 128,181                 152,705            
Average liabilities and

shareholders' equity
  $ 1,450,725               $ 1,276,697               $ 1,425,860            
Net interest income and

net interest margin (4)
        $ 13,495   4.00 %         $ 11,580   3.84 %         $ 13,004   3.94 %
Tax equivalent net

  interest margin (3)
              4.03 %               3.88 %               3.98 %
                                                       
(1) Interest income on loans includes deferred fees and costs of approximately $91 thousand, $145 thousand and $181 thousand for the three months ended June 30, 2019 and 2018 and March 31, 2019, respectively.
(2) Net loans includes average nonaccrual loans of $13.7 million, $4.2 million and $8.5 million for the three months ended June 30, 2019 and 2018 and March 31, 2019, respectively.
(3) Tax-exempt income has been adjusted to tax equivalent basis at a 21% tax rate for 2019 and 2018. The amount of such adjustments was an addition to recorded income of approximately $87 thousand, $110 thousand and $103 thousand for the three months ended June 30, 2019 and 2018 and March 31, 2019, respectively.
(4) Net interest margin is annualized net interest income expressed as a percentage of average interest-earning assets.
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.



                                       
                                       
TABLE 9b  
NET INTEREST MARGIN - UNAUDITED  
(amounts in thousands)  
                                       
    For The Six Months Ended  
    June 30, 2019   June 30, 2018  
    Average         Yield /   Average         Yield /  
    Balance   Interest(1)   Rate (5)   Balance   Interest(1)   Rate (5)  
Interest-earning assets:                                      
Net loans (2)   $ 1,010,821   $ 24,878   4.96 %   $ 903,389   $ 21,893   4.89 %  
Taxable securities     251,479     3,497   2.80 %     205,777     2,487   2.44 %  
Tax-exempt securities     44,947     715   3.21 %     55,021     876   3.21 %  
Interest-bearing deposits

in other banks
    37,930     464   2.47 %     30,967     264   1.72 %  
Average interest-

earning assets
    1,345,177     29,554   4.43 %     1,195,154     25,520   4.31 %  
Cash and due from banks     21,640                 18,767              
Premises and equipment, net     15,203                 14,361              
Goodwill and core deposit intangible, net     14,447                 1,971              
Other assets     41,894                 32,457              
Average total assets   $ 1,438,361               $ 1,262,710              
                                       
Interest-bearing liabilities:                                      
Interest-bearing demand   $ 241,095     255   0.21 %   $ 230,075     169   0.15 %  
Money market     294,869     669   0.46 %     238,963     267   0.23 %  
Savings     135,217     234   0.35 %     108,907     123   0.23 %  
Certificates of deposit     165,764     987   1.20 %     176,332     983   1.12 %  
Federal Home Loan Bank of San Francisco borrowings     19,448     247   2.56 %     33,978     314   1.86 %  
Other borrowings net of unamortized debt issuance costs     11,859     440   7.48 %     16,069     560   7.03 %  
Junior subordinated

debentures
    10,310     223   4.36 %     10,310     179   3.50 %  
Average interest-

bearing liabilities
    878,562     3,055   0.70 %     814,634     2,595   0.64 %  
Noninterest-bearing demand     383,766                 308,304              
Other liabilities     17,851                 12,144              
Shareholders' equity     158,182                 127,628              
Average liabilities and shareholders' equity   $ 1,438,361               $ 1,262,710              
Net interest income and

net interest margin (4)
        $ 26,499   3.97 %         $ 22,925   3.87 %  
Tax equivalent net

  interest margin (3)
              4.00 %               3.91 %  
                                       
(1) Interest income on loans includes deferred fees and costs of approximately $272 thousand and $282 thousand for the six months ended June 30, 2019 and 2018, respectively.
(2) Net loans includes average nonaccrual loans of $11.1 million and $4.5 million for the six months ended June 30, 2019 and 2018, respectively.
(3) Tax-exempt income has been adjusted to tax equivalent basis at a 21% tax rate for 2019 and 2018. The amount of such adjustments was an addition to recorded income of approximately $190 thousand and $233 thousand for the six months ended June 30, 2019 and 2018, respectively.
(4) Net interest margin is annualized net interest income expressed as a percentage of average interest-earning assets.
(5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.



                             
                             
TABLE 10
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,
  2019   2019   2018   2018   2018
Beginning balance ALLL $ 12,242     $ 12,292     $ 12,392     $ 12,388     $ 12,295  
Provision for loan and lease losses                            
Loans charged-off   (659 )     (348 )     (279 )     (198 )     (382 )
Loan loss recoveries   862       298       179       202       475  
Ending balance ALLL $ 12,445     $ 12,242     $ 12,292     $ 12,392     $ 12,388  
                             
  At June 30,   At March 31,   At December 31,   At September 30,   At June 30,
  2019   2019   2018   2018   2018
Nonaccrual loans:                            
Commercial $ 194     $ 1,018     $ 959     $ 899     $ 1,358  
Real estate - construction and land development                            
Real estate - commercial non-owner occupied   10,690       10,878                    
Real estate - commercial owner occupied               548              
Real estate - residential - ITIN   2,389       2,392       2,388       2,571       2,613  
Real estate - residential - 1-4 family mortgage   217       182       185       179       184  
Real estate - residential - equity lines         42       43       44       44  
Consumer and other   22       23       23       24       33  
Total nonaccrual loans   13,512       14,535       4,146       3,717       4,232  
Accruing troubled debt restructured loans:                            
Commercial   1,092       1,187       1,224       1,291       1,420  
Real estate - commercial non-owner occupied   791       793       795       797       799  
Real estate - residential - ITIN   4,300       4,342       4,484       4,535       4,592  
Real estate - residential - equity lines   242       358       363       367       372  
Total accruing troubled debt restructured loans   6,425       6,680       6,866       6,990       7,183  
                             
All other accruing impaired loans                            
                             
Total impaired loans $ 19,937     $ 21,215     $ 11,012     $ 10,707     $ 11,415  
                             
Gross loans outstanding at period end $ 1,036,724     $ 1,034,606     $ 946,251     $ 927,480     $ 936,816  
                             
Impaired loans to gross loans   1.92 %     2.05 %     1.16 %     1.15 %     1.22 %
Nonaccrual loans to gross loans   1.30 %     1.40 %     0.44 %     0.40 %     0.45 %
                             
Allowance for loan and lease losses as a percent of:                  
Gross loans   1.20 %     1.18 %     1.30 %     1.34 %     1.32 %
Nonaccrual loans   92.10 %     84.22 %     296.48 %     333.39 %     292.72 %
Impaired loans   62.42 %     57.70 %     111.62 %     115.74 %     108.52 %

We continue to monitor credit quality and adjust the ALLL to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. As illustrated in Table 10, the nonaccrual status of a $10.3 million commercial real estate loan has resulted in a deterioration in our asset quality metrics for the first two quarters of 2019. Net loan loss recoveries totaled $203 thousand for the quarter ended June 30, 2019 and no provision for loan and lease losses was necessary for the quarter. There was no provision for loan and lease loss during the prior quarter or during the same quarter a year ago.

The loans acquired from Merchants were recorded at fair value which included a discount for credit risk which is not a part of the ALLL. As a result, our ALLL as a percentage of gross loans declined to 1.20% as of June 30, 2019 compared to 1.32% as of June 30, 2018 and increased compared to 1.18% as of March 31, 2019.

Based on the Bank's ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company's ALLL is adequate at June 30, 2019. 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, 2019, the recorded investment in loans classified as impaired totaled $19.9 million, with a corresponding specific reserve of $727 thousand compared to impaired loans of $11.4 million with a corresponding specific reserve of $1.2 million at June 30, 2018 and impaired loans of $21.2 million, with a corresponding specific reserve of $1.4 million at March 31, 2019. The increase in loans classified as impaired compared to the same period a year ago results from one $10.3 million commercial real estate loan.

                                         
                                         
TABLE 11
TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
                                         
    At June 30,   At March 31,   At December 31,   At September 30,   At June 30,
    2019   2019   2018   2018   2018
Nonaccrual   $ 1,828     $ 2,725     $ 2,693     $ 2,720     $ 3,218  
Accruing     6,425       6,680       6,866       6,990       7,183  
Total troubled debt restructurings   $ 8,253     $ 9,405     $ 9,559     $ 9,710     $ 10,401  
                                         
Troubled debt restructurings as a percentage of total gross loans     0.80 %     0.91 %     1.01 %     1.05 %     1.11 %

There were two new troubled debt restructurings to grant a payment deferral modification and a maturity modification during the three months ended June 30, 2019. As of June 30, 2019, we had 103 restructured loans that qualified as troubled debt restructurings, of which 101 were performing according to their restructured terms.

                                         
                                         
TABLE 12
NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
                                         
    At June 30,   At March 31,   At December 31,   At September 30,   At June 30,
    2019   2019   2018   2018   2018
Total nonaccrual loans   $ 13,512     $ 14,535     $ 4,146     $ 3,717     $ 4,232  
90 days past due and still accruing                              
Total nonperforming loans     13,512       14,535       4,146       3,717       4,232  
                                         
Other real estate owned ("OREO")           34       31       136       140  
Total nonperforming assets   $ 13,512     $ 14,569     $ 4,177     $ 3,853     $ 4,372  
                                         
Nonperforming loans to gross loans     1.30 %     1.40 %     0.44 %     0.40 %     0.45 %
Nonperforming assets to total assets     0.94 %     0.99 %     0.32 %     0.29 %     0.34 %





The following table summarizes as of June 30, 2019 when loans are projected to reprice by year and rate index.

                                                 
                                                 
TABLE 13
LOANS BY RATE INDEX AND PROJECTED REPAYMENT - UNAUDITED
(amounts in thousands)
At June 30, 2019
                                                 
                                  Years 6            
                                  Through   Beyond      
    Year 1   Year 2   Year 3   Year 4   Year 5   Year 10   Year 10   Total
Rate Index:                                                
Fixed   $ 48,588   $ 56,475   $ 47,676   $ 62,631   $ 41,420   $ 160,327   $ 35,466   $ 452,583
Variable:                                                
Prime     107,931     2,634     6,032     7,495     9,420     1,737         135,249
5 Year Treasury     29,766     29,299     81,885     89,985     67,317     38,093         336,345
7 Year Treasury     892     943     11,370     4,855     5,671     14,005         37,736
1 Year LIBOR     23,347                             23,347
Other Indexes     8,328     1,943     4,503     2,082     1,496     19,682     1,923     39,957
Nonaccrual     1,515     10,019     292     277     256     826     327     13,512
Total   $ 220,367   $ 101,313   $ 151,758   $ 167,325   $ 125,580   $ 234,670   $ 37,716   $ 1,038,729



                               
                               
TABLE 14
UNAUDITED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
                               
  At June 30,   Change   At March 31,
    2019     2018     $   %   2019  
Assets:                              
Cash and due from banks   $ 21,306     $ 23,996     $ (2,690 )   (11 ) %   $ 32,104  
Interest-bearing deposits in other banks     19,319       15,690       3,629     23   %     30,425  
Total cash and cash equivalents     40,625       39,686       939     2   %     62,529  
                               
Securities available-for-sale, at fair value     285,819       247,639       38,180     15   %     294,117  
Loans, net of deferred fees and costs     1,038,729       938,579       100,150     11   %     1,036,598  
Allowance for loan and lease losses     (12,445 )     (12,388 )     (57 )     %     (12,242 )
Net loans     1,026,284       926,191       100,093     11   %     1,024,356  
                               
Premises and equipment, net     15,836       13,908       1,928     14   %     15,391  
Other real estate owned           140       (140 )   (100 ) %     34  
Life insurance     23,449       22,155       1,294     6   %     23,294  
Deferred tax asset, net     4,791       7,815       (3,024 )   (39 ) %     6,072  
Goodwill and core deposit intangible, net     16,900       1,920       14,980     780   %     17,094  
Other assets     28,282       22,050       6,232     28   %     28,604  
Total assets   $ 1,441,986     $ 1,281,504     $ 160,482     13   %   $ 1,471,491  
                               
Liabilities and shareholders' equity:                              
Demand - noninterest-bearing   $ 397,349     $ 316,347     $ 81,002     26   %   $ 385,696  
Demand - interest-bearing     238,175       217,674       20,501     9   %     241,292  
Money market     300,847       247,413       53,434     22   %     311,853  
Savings     138,591       106,170       32,421     31   %     139,237  
Certificates of deposit     160,556       166,925       (6,369 )   (4 ) %     170,216  
Total deposits     1,235,518       1,054,529       180,989     17   %     1,248,294  
                               
Term debt:                              
Federal Home Loan Bank of San Francisco borrowings           60,000       (60,000 )   (100 ) %     20,000  
Other borrowings     10,000       15,296       (5,296 )   (35 ) %     12,596  
Unamortized debt issuance costs     (67 )     (115 )     48     (42 ) %     (79 )
Net term debt     9,933       75,181       (65,248 )   (87 ) %     32,517  
                               
Junior subordinated debentures     10,310       10,310             %     10,310  
Other liabilities     18,372       11,406       6,966     61   %     18,272  
Total liabilities     1,274,133       1,151,426       122,707     11   %     1,309,393  
                               
Shareholders' equity:                              
Common stock     72,087       52,043       20,044     39   %     71,966  
Retained earnings     93,363       81,475       11,888     15   %     90,626  
Accumulated other comprehensive income (loss), net of tax     2,403       (3,440 )     5,843     (170 ) %     (494 )
Total shareholders' equity     167,853       130,078       37,775     29   %     162,098  
                               
Total liabilities and shareholders' equity   $ 1,441,986     $ 1,281,504     $ 160,482     13   %   $ 1,471,491  
                               
Total interest-earning assets   $ 1,340,456     $ 1,206,791     $ 133,665     11   %   $ 1,361,841  
Shares outstanding     18,214       16,318       1,896     12   %     18,213  
Book value per share   $ 9.22     $ 7.97     $ 1.25     16   %   $ 8.90  
Tangible book value per share (1)   $ 8.29     $ 7.85     $ 0.44     6   %   $ 7.96  
                               
(1)  Book value per share is computed by dividing total shareholders' equity by shares outstanding. Tangible book value per share is computed by dividing total shareholders' equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.



                                           
                                           
TABLE 15
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,
    2019   2018   $   %   2019   2019   2018
Interest income:                                          
Interest and fees on loans   $ 12,847   $ 11,164   $ 1,683     15   %   $ 12,031   $ 24,878   $ 21,893
Interest on taxable securities     1,733     1,278     455     36   %     1,764     3,497     2,487
Interest on tax-exempt securities     328     413     (85 )   (21 ) %     387     715     876
Interest on interest-bearing deposits in other banks     219     135     84     62   %     245     464     264
Total interest income     15,127     12,990     2,137     16   %     14,427     29,554     25,520
Interest expense:                                          
Interest on demand deposits     129     80     49     61   %     126     255     169
Interest on money market     380     135     245     181   %     289     669     267
Interest on savings     123     64     59     92   %     111     234     123
Interest on certificates of deposit     497     488     9     2   %     490     987     983
Interest on Federal Home Loan Bank of San Francisco borrowings     192     267     (75 )   (28 ) %     55     247     314
Interest on other borrowings     201     279     (78 )   (28 ) %     239     440     560
Interest on junior subordinated debentures     110     97     13     13   %     113     223     179
Total interest expense     1,632     1,410     222     16   %     1,423     3,055     2,595
Net interest income     13,495     11,580     1,915     17   %     13,004     26,499     22,925
Provision for loan and lease losses                   %            
Net interest income after provision for loan and lease losses     13,495     11,580     1,915     17   %     13,004     26,499     22,925
Noninterest income:                                          
Service charges on deposit accounts     187     175     12     7   %     168     355     351
ATM and point of sale fees     318     300     18     6   %     265     583     566
Fees on payroll and benefit processing     157     146     11     8   %     171     328     315
Life insurance     155     127     28     22   %     129     284     256
Gain on investment securities, net     33     4     29     725   %     92     125     40
Federal Home Loan Bank of San Francisco dividends     124     95     29     31   %     121     245     175
Gain on sale of OREO     18         18     100   %     23     41     16
Other income     108     115     (7 )   (6 ) %     88     196     225
Total noninterest income     1,100     962     138     14   %     1,057     2,157     1,944



                                           
                                           
TABLE 15 - 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,
    2019   2018   $   %   2019   2019   2018
Noninterest expense:                                          
Salaries and related benefits     5,146     4,513     633     14   %     5,729     10,875     9,368
Premises and equipment     945     1,016     (71 )   (7 ) %     992     1,937     2,087
Federal Deposit Insurance Corporation

insurance premium
    95     93     2     2   %     100     195     189
Data processing fees     621     471     150     32   %     559     1,180     903
Professional service fees     535     314     221     70   %     303     838     659
Telecommunications     180     178     2     1   %     173     353     394
Acquisition     376         376     100   %     1,930     2,306    
Other expenses     1,713     1,086     627     58   %     1,137     2,850     2,104
Total noninterest expense     9,611     7,671     1,940     25   %     10,923     20,534     15,704
Income before provision for income taxes     4,984     4,871     113     2   %     3,138     8,122     9,165
Provision for income taxes     1,340     1,253     87     7   %     832     2,172     2,306
Net income   $ 3,644   $ 3,618   $ 26     1   %   $ 2,306   $ 5,950   $ 6,859
                                           
Basic earnings per share   $ 0.20   $ 0.22   $ (0.02 )   (9 ) %   $ 0.13   $ 0.33   $ 0.42
Average basic shares     18,134     16,245     1,889     12   %     17,489     17,816     16,237
Diluted earnings per share   $ 0.20   $ 0.22   $ (0.02 )   (9 ) %   $ 0.13   $ 0.33   $ 0.42
Average diluted shares     18,194     16,325     1,869     11   %     17,552     17,878     16,319







                               
                               
TABLE 16
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,
    2019   2019   2018   2018   2018
Earning assets:                              
Loans   $ 1,028,187   $ 993,261   $ 923,409   $ 930,863   $ 922,687
Taxable securities     249,907     253,068     218,137     199,883     206,247
Tax-exempt securities     39,501     50,454     42,868     48,561     50,306
Interest-bearing deposits in other banks     35,605     40,223     75,295     50,397     29,041
Total earning assets     1,353,200     1,337,006     1,259,709     1,229,704     1,208,281
                               
Cash and due from banks     21,942     21,392     22,447     21,834     19,880
Premises and equipment, net     15,819     14,581     13,331     13,768     14,167
Goodwill and core deposit intangible, net     16,995     11,872     1,842     1,888     1,943
Other assets     42,769     41,009     31,488     33,084     32,426
Total assets   $ 1,450,725   $ 1,425,860   $ 1,328,817   $ 1,300,278   $ 1,276,697
                               
Liabilities and shareholders' equity:                              
Demand - noninterest-bearing   $ 379,173   $ 388,410   $ 367,457   $ 343,948   $ 309,199
Demand - interest-bearing     238,840     243,376     257,227     235,664     225,927
Money market     296,326     293,396     265,190     259,242     241,724
Savings     139,307     131,081     110,934     107,349     107,108
Certificates of deposit     164,084     167,463     157,035     163,302     170,824
Total deposits     1,217,730     1,223,726     1,157,843     1,109,505     1,054,782
                               
Federal Home Loan Bank of San Francisco borrowings     30,000     8,778         22,283     55,275
Other borrowings net of unamortized debt issuance costs     10,841     12,889     13,785     14,681     15,614
Junior subordinated debentures     10,310     10,310     10,310     10,310     10,310
Other liabilities     18,246     17,452     12,846     12,000     12,535
Total liabilities     1,287,127     1,273,155     1,194,784     1,168,779     1,148,516
                               
Shareholders' equity     163,598     152,705     134,033     131,499     128,181
Liabilities & shareholders' equity   $ 1,450,725   $ 1,425,860   $ 1,328,817   $ 1,300,278   $ 1,276,697



                               
                               
TABLE 17
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,
    2019   2018   2018   2017   2016
Earning assets:                            
Loans   $ 1,010,821   $ 903,389   $ 915,360   $ 818,119   $ 752,938
Taxable securities     251,479     205,777     207,407     165,333     120,884
Tax-exempt securities     44,947     55,021     50,330     74,231     75,303
Interest-bearing deposits in other banks     37,930     30,967     47,038     66,872     58,668
Total earning assets     1,345,177     1,195,154     1,220,135     1,124,555     1,007,793
                               
Cash and due from banks     21,640     18,767     20,468     18,301     15,831
Premises and equipment, net     15,203     14,361     13,952     15,567     15,078
Goodwill and core deposit intangible, net     14,447     1,971     1,917     2,136     1,888
Other assets     41,894     32,457     32,369     37,692     39,160
Total assets   $ 1,438,361   $ 1,262,710   $ 1,288,841   $ 1,198,251   $ 1,079,750
                               
Liabilities and shareholders' equity:                              
Demand - noninterest-bearing   $ 383,766   $ 308,304   $ 332,197   $ 289,735   $ 226,368
Demand - interest-bearing     241,095     230,075     238,328     209,792     172,011
Money market     294,869     238,963     250,685     224,913     202,159
Savings     135,217     108,907     109,025     111,376     104,771
Certificates of deposit     165,764     176,332     168,183     205,648     221,074
Total deposits     1,220,711     1,062,581     1,098,418     1,041,464     926,383
                               
Federal Home Loan Bank of San Francisco borrowings     19,448     33,978     22,466     302     17,856
Other borrowings net of unamortized debt issuance costs     11,859     16,069     15,143     17,981     19,430
Junior subordinated debentures     10,310     10,310     10,310     10,310     10,310
Other liabilities     17,851     12,144     12,286     12,293     13,217
Total liabilities     1,280,179     1,135,082     1,158,623     1,082,350     987,196
                               
Shareholders' equity     158,182     127,628     130,218     115,901     92,554
Liabilities & shareholders' equity   $ 1,438,361   $ 1,262,710   $ 1,288,841   $ 1,198,251   $ 1,079,750



About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, California and is the parent company for Merchants Bank of Commerce. The Bank is an FDIC-insured California banking corporation providing community banking and financial services through twelve locations in northern California. The Bank was incorporated as a California banking corporation on November 25, 1981 and opened for business on October 22, 1982. The Company's common stock is listed on the NASDAQ Global Market and trades under the symbol "BOCH".

Contact Information:

Randall S. Eslick, President and Chief Executive Officer

Telephone Direct (916) 677-5800

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

Telephone Direct (916) 677-5825

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

Telephone Direct (530) 722-3952

Andrea M. Newburn, Vice President and Senior Administrative Officer / Corporate Secretary

Telephone Direct (530) 722-3959

Source: Bank of Commerce Holdings

This article appears in: News Headlines

Referenced Stocks: BOCH










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