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You are here: IndiaNotes >> Author's Corner >> PR Newswire Press Releases

PR Newswire India Press Releases

Bank of Commerce Holdings⢠Announces Third Quarter 2011 Earnings

REDDING, Calif., Oct. 28, 2011 | Source : PR Newswire
 
 
Patrick J. Moty, President and CEO commented: "We are delighted to report a continuing trend of sound financial performance. The Company's third quarter results reflect a sizeable increase in residential mortgage originations from Bank of Commerce Mortgage, and our continuing efforts in maintaining a solid net interest margin and aggressively managing through problematic assets."

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

Table 1

SUMMARY FINANCIAL INFORMATION

 (Shares and dollars in thousands)

Quarter ended

Quarter ended

Quarter ended

September 30, 2011

September 30, 2010

Change

June 30, 2011

Change

Selective quarterly performance ratios

Return on average assets, annualized

0.91%

0.67%

0.24%

0.65%

0.26%

Return on average equity, annualized

7.45%

5.95%

1.50%

5.53%

1.92%

Efficiency ratio for quarter to date

56.32%

50.93%

5.39%

64.68%

-8.36%

Share and Per Share figures - Actual

Common shares outstanding at period end

16,991

16,991

-

16,991

-

Weighted average diluted shares

16,991

16,991

-

16,991

-

Income per diluted share

$                        0.10

$                       0.08

$       0.02

$                      0.07

$              0.03

Book value per common share

$                        5.30

$                       5.05

$       0.25

$                      5.23

$              0.07

Tangible book value per common share

$                        4.95

$                       4.73

$       0.22

$                      4.88

$              0.06

Capital Ratios

September 30, 2011

September 30, 2010

Change

June 30, 2011

Change

Bank of Commerce Holdings

Tier 1 risk based capital ratio

14.80%

14.58%

0.22%

15.75%

-0.95%

Total risk based capital ratio

16.05%

15.84%

0.21%

17.00%

-0.95%

Leverage ratio

13.82%

12.59%

1.23%

12.87%

0.95%

Redding Bank of Commerce

Tier 1 risk based capital ratio

15.20%

14.28%

0.92%

15.76%

-0.56%

Total risk based capital ratio

16.45%

15.54%

0.91%

17.02%

-0.57%

Leverage ratio

13.05%

11.52%

1.53%

12.16%

0.89%

As indicated in Table 1 above, Bank of Commerce Holdings (the "Company") continues to remain well capitalized. At September 30, 2011, the Company's Tier 1 and Total risk based capital ratios measured 14.80% and 16.05% respectively, while the leverage ratio was 13.82%.

Return on average assets (ROA) and return on average equity (ROE) for the three months ended September 30, 2011, was 0.91% and 7.45%, respectively compared with 0.67% and 5.95% for the three months ended September 30, 2010. The increase in ROA and ROE for the three months ended September 30, 2011 compared with the same period a year ago, was primarily driven by lower provision expense, and decreased interest expense on deposits and borrowings, offset by decreased yields in the loan portfolio. In addition, the Company experienced disproportional decreases in total average assets, and average earning assets, while continuing to maintain consistent period over period net interest margins. The Company continues to experience decreased yields in the loan portfolio due to the combination of, downward rate adjustments of variable rate loans, pay offs of higher yielding loans, and the transfer of existing loans to nonaccrual status.

Balance Sheet Overview

As of September 30, 2011, the Company had total consolidated assets of $928.2 million, total net portfolio loans of $579.0 million, Allowance for loan losses of $10.6 million, total deposits of $650.6 million, and stockholders' equity of $112.8 million.

Overall, the net portfolio loan balance decreased modestly for the three months ended September 30, 2011 compared to the same period a year ago. The Company's net loan portfolio was $579.0 million at September 30, 2011, compared with $595.6 million at September 30, 2010, a decrease of $21.5 million, or 3%. The decrease was primarily driven by net payoffs, and specific charge offs of principal balances.

Table 2

PERIOD END LOANS

(Dollars in thousands)

September 30,

% of

September 30,

% of

Change

June 30,

% of

2011

Total

2010

Total

Amount

%

2011

Total

Commercial

$          147,495

25%

$          134,612

22%

$        12,883

10%

$       140,610

24%

Real estate loans

    Construction

24,257

4%

43,942

7%

(19,685)

-45%

26,357

4%

    Commercial (investor)

215,781

37%

215,117

35%

664

-%

218,535

37%

    Commercial (owner occupied)

64,963

11%

72,093

12%

(7,130)

-10%

68,327

11%

    ITIN loan pool

66,365

11%

72,299

12%

(5,934)

-8%

67,675

11%

    Other mortgage

19,653

3%

19,345

3%

308

2%

22,116

4%

    Equity lines

45,593

8%

47,963

8%

(2,370)

-5%

46,850

8%

Consumer

5,400

1%

5,691

1%

(291)

-5%

5,271

1%

Other loans

101

-%

89

-%

12

13%

91

-%

Gross loans

589,608

100%

611,151

100%

(21,543)

-4%

595,832

100%

Less:

    Deferred loan fees, net

11

124

(113)

-91%

51

    Allowance for loan losses

10,590

15,452

(4,862)

-31%

13,363

Net portfolio loans

$          579,007

$          595,575

$     (16,568)

-3%

$       582,418

Yield on loans

5.67%

6.05%

-0.38%

5.74%

Table 3

PERIOD END CASH EQUIVALENTS AND INVESTMENT SECURITIES

(Dollars in thousands)

September 30,

% of

September 30,

% of

Change

June 30,

% of

2011

Total

2010

Total

Amount

%

2011

Total

Cash equivalents:

Cash and due from banks

$          30,961

14%

$            27,763

12%

$            3,198

12%

$     19,091

9%

Interest bearing due from banks

27,476

12%

43,188

18%

(15,712)

-36%

29,225

14%

58,437

26%

70,951

30%

(12,514)

-18%

48,316

23%

Investment Securities:

U.S. Treasury and agency

4,012

2%

31,269

13%

(27,257)

-87%

21,982

10%

Obligations of state and political subdivisions

60,417

27%

65,116

27%

(4,699)

-7%

57,881

27%

Mortgage backed securities

46,169

21%

65,733

28%

(19,564)

-30%

39,309

19%

Corporate securities

35,521

16%

-

-%

35,521

100%

23,432

11%

Other asset backed securities

19,585

8%

4,807

2%

14,778

307%

19,580

10%

165,704

74%

166,925

70%

(1,221)

-1%

162,184

77%

Total cash equivalents and investment securities

$        224,141

100%

$          237,876

100%

$       (13,735)

-6 %

$   210,500

100%

Yield on cash equivalents and investment Securities

2.32%

2.63%

2.68%

The Company continued to maintain a strong liquidity position during the reporting period. As of September 30, 2011 the Company maintained cash positions at the Federal Reserve Bank (FRB) and correspondent banks in the amount of $31.0 million. The Company also held certificates of deposits with other financial institutions in the amount of $27.5 million, which the Company considers highly liquid.

The Company continues to maintain a relatively low-risk, liquid available-for-sale investment portfolio. This resource is utilized as a source of liquidity to fund other higher yielding asset opportunities, such as mortgage loan originations when required. Investment securities totaled $165.7 million at September 30, 2011, compared with $162.2 million at June 30, 2011. The $3.5 million, or 2.17% increase primarily reflected net purchase activity relating to municipal bonds, residential mortgage backed securities, and corporate securities, offset by sales of U.S. treasuries and agencies. During the three months ended September 30, 2011, the Company sold securities with the objective of repositioning the portfolio to shorten duration. The Company recognized $532 thousand in gains on sales of securities for the three months ended September 30, 2011.

At September 30, 2011, the Company's net unrealized gain on available-for-sale securities was $2.0 million, compared with an $809 thousand net unrealized gain at June 30, 2011. The favorable change in net unrealized gains was primarily due to increases in the fair values of the Company's municipal bond portfolio, primarily driven by decreases in long term interest rates.

Table 4

QUARTERLY AVERAGE DEPOSITS BY CATEGORY

(Dollars in thousands)

Q3

% of

Q3

% of

Change

Q2

% of

2011

Total

2010

Total

Amount

%

2011

Total

Demand deposits

$         99,087

15%

$         94,038

15%

$        5,049

5%

$       91,608

14%

Interest bearing demand

167,489

26%

152,043

23%

15,446

10%

147,802

23%

Total checking deposits

266,576

41%

246,081

38%

20,495

8%

239,410

37%

Savings

94,287

14%

79,272

12%

15,015

19%

93,111

15%

Total non-time deposits

360,863

55%

325,353

50%

35,510

11%

332,521

52%

Time deposits

290,811

45%

319,492

50%

(28,681)

-9%

306,668

48%

Total deposits

$       651,674

100%

$       644,845

100%

$        6,829

1%

$     639,189

100%

Weighted average rate on total deposits

1.13%

1.41%

1.25%

Third quarter 2011 average total deposits of $651.7 million increased 1% or $6.8 million from the third quarter in 2010.

Operating Results for the Third Quarter 2011

Through a proactive and aggressive management of problem credits, and the maintenance of a relatively healthy net interest margin, the Company has remained profitable during the economic downturn. Accordingly, the Company continues to be well positioned to take advantage of growth opportunities in the coming years.  Net income attributable to Bank of Commerce Holdings was $2.0 million for the three months ended September 30, 2011, compared with $1.5 million for the three months ended June 30, 2011, and $1.6 million for the three months ended September 30, 2010. Net income available to common stockholders was $1.7 million for the three months ended September 30, 2011, compared with $1.3 million for the three months ended June 30, 2011, and $1.3 million for the three months ended September 30, 2010. During the third quarter of 2011, diluted earnings per share increased $0.03 per share when compared to the second quarter of 2011, and increased $0.02 per share compared to the third quarter of 2010.

The Company continued to pay cash dividends of $0.03 per share during the third quarter, consistent with the three months ended June 30, 2011 and September 30, 2010.

Table 5

SUMMARY INCOME STATEMENT

(Dollars in thousands)

Q3

Q3

Change

Q2

Change

2011

2010

Amount

%

2011

Amount

%

Net interest income

$    8,446

$      8,678

$    (232)

-3%

$   8,517

$      (71)

-1%

Provision for loan and lease losses

2,211

4,450

(2,239)

-50%

2,580

(369)

-14%

Noninterest income

5,301

5,648

(347)

-6%

3,625

1,676

46%

Noninterest expense

7,742

7,296

446

6%

7,854

(112)

-1%

Income before income taxes

3,794

2,580

1,214

47%

1,708

2,086

122%

Provision for income taxes

1,403

916

487

53%

216

1,187

550%

Net income

2,391

1,664

727

44%

1,492

899

60%

Less: Net income attributable to noncontrolling interest

348

105

243

231%

6

342

+100%

Net income attributable to Bank of Commerce Holdings

2,043

1,559

484

31%

1,486

557

37%

Less: preferred dividend and accretion on preferred stock

334

235

99

42%

235

99

42%

Income available to common shareholders

$    1,709

$      1,324

$       385

29%

$   1,251

$       458

37%

Basic earnings per share

$      0.10

$        0.08

$      0.02

25%

$     0.07

$      0.03

43%

Diluted earnings per share

$      0.10

$        0.08

$      0.02

25%

$     0.07

$      0.03

43%

Cash dividends declared per share

$      0.03

$        0.03

$           -

-%

$     0.03

$           -

-%

Table 6

NET INTEREST SPREAD AND MARGIN

(Dollars in thousands)

Q3

Q3

Change

Q2

Change

2011

2010

Amount

2011

Amount

Yield on average interest earning assets

4.87%

5.10%

-0.23%

4.83%

0.04%

Rate on average interest bearing liabilities

1.18%

1.45%

-0.27%

1.20%

-0.02%

Net interest spread

3.69%

3.65%

0.04%

3.63%

0.06%

Net interest margin on a tax equivalent basis

4.03%

4.02%

0.01%

3.97%

0.06%

Average earning assets

$      859,919

$      884,464

$     (24,545)

$    881,887

$   (21,968)

Average interest bearing liabilities

$      686,422

$      716,942

$     (30,520)

$    711,513

$   (25,091)

Net interest income for the three months ended September 30, 2011 was $8.4 million, an decrease of $232 thousand or 3% compared to the same period in 2010, and a decrease of $71 thousand or 1% compared with three months ended June 30, 2011. Net interest income for the three months ended September 30, 2011 compared to the same period a  year ago, was negatively impacted by lower yields in the loan portfolio, partially offset by lower volume of FHLB advances and certificates of deposits, and lower funding costs relating to the  certificate of deposits and floating rate junior subordinated debentures.

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 4.03% for the three months ended September 30, 2011, a decrease of 1basis point as compared to the same period in 2010.

Table 7

NONINTEREST INCOME

(Dollars in thousands)

Q3

Q3

Change

Q2

Change

2011

2010

Amount

%

2011

Amount

%

Service charges on deposit accounts

$       50

$       63

$      (13)

-21%

$       52

$        (2)

-4%

Payroll and benefit processing fees

99

107

(8)

-7%

102

(3)

-3%

Earnings on cash surrender value - bank owned life insurance

117

112

5

4%

119

(2)

-2%

Net gain on sale of securities available-for-sale

532

179

353

197%

655

(123)

-19%

Gain on settlement of put reserve

-

1,750

(1,750)

-100%

-

-

-%

Merchant credit card service income, net

39

65

(26)

-40%

33

6

18%

Mortgage banking revenue, net

4,346

3,281

1,065

32%

2,550

1,796

70%

Other income

118

91

27

30%

114

4

4%

Total noninterest income

$  5,301

$  5,648

$    (347)

-6%

$  3,625

$   1,676

46%

For the three months ended September 30, 2011, the Company recorded service charges on deposit accounts of $50 thousand compared to $63 thousand for the same period a year ago. The decrease in service charges was primarily attributable to the discontinuance of the Overdraft Privilege product, and decreased analysis fees charged to customers.

For the three months ended September 30, 2011, Company recorded earnings on cash surrender value Bank owned life insurance of $117 thousand compared to $112 thousand for the same period a year ago. The increased income was primarily attributable to one time accrual adjustments, and the purchase of an additional policy.

For the three months ended September 30, 2011, the Company recorded securities gains of $532 thousand compared to securities gains of $179 thousand for the same period a year ago. The increased gains during the three months ended September 30, 2011 compared to the same period a year ago, resulted from increased sales activity pursuant to repositioning of the available-for-sale investment portfolio to shorten duration.

For the three months ended September 30, 2011, the Company recorded merchant credit card income of $39 thousand compared to $65 thousand for the same period a year ago. During the first quarter of 2011, approximately 50% of the merchant credit card portfolio was sold to an independent third party, resulting in additional revenues of $225 thousand. Accordingly, merchant credit card income for the three months ended September 30, 2011 is down 40% compared to the same period a year ago.  

Mortgage banking revenue for the three months ended September 30, 2011 increased by 32% compared to the same period a year ago, primarily driven by increased origination and refinancing activity due to lower market interest rates.

For the three months ended September 30, 2011, the Company recorded other noninterest income of $118 thousand compared to $91 thousand for the same period a year ago. The increase in other noninterest income was primarily related to immaterial reclassification adjustments.

Table 8

NONINTEREST EXPENSE

(Dollars in thousands)

Q3

Q3

Change

Q2

Change

2011

2010

Amount

%

2011

Amount

%

Salaries and related benefits

$  4,994

$  4,162

$     832

20%

$  4,068

$       926

23%

Occupancy and equipment expense

742

952

(210)

-22%

800

(58)

-7%

Write down of other real estate owned

-

129

(129)

-100%

370

(370)

-100%

FDIC insurance premium

300

250

50

20%

363

(63)

-17%

Data processing fees

92

52

40

77%

91

1

1%

Professional service fees

513

216

297

138%

595

(82)

-14%

Deferred compensation expense

136

126

10

8%

131

5

4%

Stationery and supplies

63

35

28

80%

88

(25)

-28%

Postage

47

58

(11)

-19%

44

3

7%

Directors expense

67

56

11

20%

67

-

-%

Other expenses

788

1,260

(472)

-37%

1,237

(449)

-36%

Total noninterest expense

$  7,742

$  7,296

$     446

6%

$  7,854

$    (112)

-1%

Noninterest expense includes salaries and benefits, occupancy and equipment, write down of other real estate owned (OREO), FDIC insurance assessments, director fees, and other expenses. Other expenses include overhead items such as utilities, telephone, insurance and licensing fees, and business travel. Noninterest expense for the three months ended September 30, 2011 was $7.7 million compared to $7.3 million during the same period in 2010, and $7.9 million for the second quarter 2011.

Salaries and related benefits for the three months ended September 30, 2011 increased by $832 thousand or 20%, compared to the same period a year ago, and increased by $926 thousand compared to the second quarter of 2011. During the second quarter of 2011, the mortgage subsidiary transitioned existing loan officers from a commission based compensation plan to a salary based compensation plan, which resulted in increased salary expense. Prior to the transition, commission expenses were recorded in net mortgage banking revenues. Furthermore, during late second quarter of 2011, the mortgage subsidiary added several new branches resulting in increased salary expense during the three months ended September 30, 2011.

Occupancy and equipment expense for the three months ended September 30, 2011 decreased by $210 thousand or 22%, compared to the same period a year ago, and decreased by $58 thousand compared to the second quarter of 2011. The decrease in occupancy and equipment expense was primarily driven by decreased rent expense, and decreased equipment repairs expenses.

Write down of the Company's OREO decreased by $129 thousand compared to the same period a year ago, and decreased $370 thousand when compared to the second quarter of 2011. The OREO charges during the periods presented were primarily associated with a commercial real estate property where management identified impairment and appropriately reduced the property's carrying value.

FDIC insurance premium expense for the three months ended September 30, 2011 increased by $50 thousand or 20%, compared to the same period a year ago. The increase is primarily due to the FDIC's revisions in deposit insurance assessments methodology for determining premiums, and prepayment true up adjustments.

Data processing expense for the three months ended September 30, 2011 increased by $40 thousand or 77%, compared to the same period a year ago. The increase is primarily attributable to new software additions and their associated licensing.

Professional service fees encompass audit, legal and consulting fees. The increase in the three months ended September 30, 2011 professional service fee expense compared to the same period a year ago was primarily driven by increased consulting fees related to network infrastructure, and increased legal fees related to mortgage loan officer compensation reform, both of which were recognized by the mortgage subsidiary.

Other expenses for the three months ended September 30, 2011 decreased by $472 thousand or 37.46%, compared to the same period a year ago, and decreased by $449 thousand compared to the three months ended June 30, 2011. The decrease in other expenses is primarily related to decreased loan losses recognized by the mortgage subsidiary, partially offset by increased losses on sale of OREO.

Table 9

ALLOWANCE ROLL FORWARD

(Dollars in thousands)

Q3

Q2

Q1

Q4

Q3

2011

2011

2011

2010

2010

Beginning balance

$      13,363

$      13,610

$      12,841

$      15,452

$      12,767

Provision for loan loss charged to expense

2,211

2,580

2,400

4,550

4,450

Loans charged off

(5,355)

(3,166)

(1,966)

(7,324)

(1,883)

Loan loss recoveries

371

339

335

163

118

Ending balance

$      10,590

$      13,363

$      13,610

$      12,841

$      15,452

Gross portfolio loans outstanding at period end

$    589,608

$    595,832

$    602,980

$    600,796

$    611,151

Ratio of allowance for loan losses to total loans

1.80%

2.24%

2.26%

2.14%

2.53%

Nonaccrual loans at period end:

    Commercial  

$           228

$           901

$        2,848

$        2,302

$        4,952

    Construction

1,650

1,999

224

342

2,512

    Commercial real estate

3,034

3,282

3,706

7,066

9,617

    Residential real estate

14,010

12,741

11,705

10,704

7,997

    Home equity

353

-

96

97

194

       Total nonaccrual loans

$      19,275

$      18,923

$      18,579

$      20,511

$      25,272

Accruing troubled debt restructured loans

    Commercial

$               -

$               -

$               -

$               -

$               -

    Construction

-

108

2,328

2,804

2,327

    Commercial real estate

16,811

17,304

3,619

3,621

2,929

    Residential real estate

3,279

6,569

5,782

6,243

6,906

    Home equity

426

429

396

-

-

       Total accruing restructured loans

$      20,516

$      24,410

$      12,125

$      12,668

$      12,162

All other accruing impaired loans

908

539

1,182

737

740

Total impaired loans

$      40,699

$      43,872

$      31,886

$      33,916

$      38,174

Allowance for loan losses to nonaccrual loans at period end

54.94%

70.62%

73.25%

62.61%

61.14%

Nonaccrual loans to total loans

3.27%

3.18%

3.08%

3.41%

4.14%

Allowance for loan losses to impaired loans

26.02%

30.46%

42.68%

37.86%

40.48%

The Company continued to conservatively monitor credit quality during the period, and adjust the ALL accordingly. As such, the Company provided $2.2 million in provisions for loan losses for the three months ended September 30, 2011, compared with $4.5 million for the same period a year ago. The Company's ALL as a percentage of total portfolio loans were 1.80% and 2.53% as of September 30, 2011, and September 30, 2010, respectively.

Net charge offs were $5.0 million for the three months ended September 30, 2011 compared with net charge offs of $1.8 million for the same period a year ago. The charge offs were centered in commercial real estate, commercial, and construction loans, where ongoing credit quality issues continue to surface. During the three months ended September 30, 2011, the Company recognized a significant charge off of $1.2 million due to a short pay-off settlement relating to a large commercial real estate loan. The continued weaknesses in the commercial loan portfolio are specifically centered on loans where the borrower's business is tied to real estate. For the foreseeable future, the commercial real estate loan portfolio, and commercial loan portfolio will continue to be influenced by weakness in real estate values, the effects of high unemployment levels, and general overall weakness in economic conditions.

As of September 30, 2011, impaired loans totaled $41.0 million, of which $19.3 million were in nonaccrual status. Of the total impaired loans, $12.6 million or one hundred and forty-four were ITIN loans with an approximate average balance of $87 thousand. The ITIN loan pool represents residential mortgage loans made to legal United States residents without a social security number, and are geographically dispersed throughout the United States. The remaining impaired loans consist of two commercial loans, four construction loans, two commercial real estate loans, eleven non-ITIN residential mortgages, and sixteen home equity loans.

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

TDRs are considered impaired loans, but are not necessarily placed on nonaccrual status at inception of TDR status.  Rather, if the borrower is current to original loan terms at the time of the restructuring, and continues to pay as agreed to modified terms, the loan is reported as current. As of September 30, 2011, there were $6.9 million of impaired ITINs which were classified as TDRs with $4.1 million on nonaccrual.

As of September 30, 2011 the Company had $29.7 million in TDR's compared to $32.4 million as of June 30, 2011. As of September 30, 2011, the Company had one hundred and one restructured loans that qualified as TDRs, of which forty-three loans were performing according to their restructured terms. TDRs represented 5.03% of gross portfolio loans, compared with 5.43% of gross portfolio loans at June 30, 2011.

Table 10

TROUBLED DEBT RESTRUCTURINGS

(Dollars in thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2011

2011

2011

2010

2010

Nonaccrual

$            9,155

$            7,959

$            9,752

$          11,977

$          12,587

Accruing

20,516

24,410

12,125

12,668

12,162

Total troubled debt restructurings

$          29,671

$          32,369

$          21,877

$          24,645

$          24,749

Percentage of total gross portfolio loans

5.03%

5.43%

3.63%

4.10%

4.05%

Table 11

NONPERFORMING ASSETS

 (Dollars in thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2011

2011

2011

2010

2010

Commercial

$                228

$                901

$             2,849

$             2,302

$             4,952

Real estate construction

    Commercial real estate construction

1,543

1,973

99

100

2,251

    Residential real estate construction

107

26

125

242

261

Total real estate construction

1,650

1,999

224

342

2,512

Real estate mortgage

    1-4 family, closed end 1st lien

4,205

3,002

1,634

1,166

1,204

    1-4 family revolving

353

-

96

97

194

    ITIN 1-4 family loan pool

9,805

9,739

10,071

9,538

6,751

    Home equity loan pool

-

-

-

-

42

Total real estate mortgage

14,363

12,741

11,801

10,801

8,191

Commercial real estate

3,034

3,282

3,706

7,066

9,617

Total nonaccrual loans

19,275

18,923

18,580

20,511

25,272

90 days past due not on nonaccrual

373

953

743

-

682

    Total nonperforming loans

19,648

19,876

19,323

20,511

25,954

Other real estate owned

1,665

1,793

3,868

2,288

2,020

Total nonperforming assets

$           21,313

$           21,669

$           23,191

$           22,799

$           27,974

Nonperforming loans to total loans

3.33%

3.34%

3.20%

3.41%

4.25%

Nonperforming assets to total assets

2.30%

2.49%

2.53%

2.43%

3.03%

Table 12

OTHER REAL ESTATE OWNED ACTIVITY

(Dollars in thousands)

Q3

Q2

Q1

Q4

Q3

2011

2011

2011

2010

2010

Beginning balance

$               1,793

$                3,868

$               2,288

$                2,020

$               2,039

    Additions to OREO

129

407

2,099

3,680

215

    Dispositions of OREO

(257)

(2,112)

(332)

(3,215)

(105)

    OREO valuation adjustment

-

(370)

(187)

(197)

(129)

Ending balance

$               1,665

$                1,793

$               3,868

$                2,288

$               2,020

At September 30, 2011 the Company's recorded investment in OREO was $1.7 million. During the third quarter of 2011, the Company transferred two foreclosed properties aggregating $129 thousand to OREO with no associated charges to the allowance for loan losses for these foreclosed assets. During the third quarter 2011, the Company sold four properties aggregating $257 thousand for a net loss of $72 thousand, and did not record any additional write downs of existing OREO in other noninterest expense.  The September 30, 2011 OREO balance consists of seven properties, of which six are secured with 1-4 family residential real estate in the amount of $490 thousand. The remaining property consists of improved commercial land in the amount of $1.2 million.

Table 13

INCOME STATEMENT

(Dollars in thousands, except for per share data)

Q3

Q3

Change

Q2

Full Year

Full Year

2011

2010

$

%

2011

2010

2009

Interest income:

  Interest and fees on loans

$    9,013

$    9,710

$    (697)

-7%

$    8,958

$  38,034

$  35,860

  Interest on tax-exempt securities

470

465

5

1%

478

1,692

1,164

  Interest on U.S. government securities

437

633

(196)

-31%

633

2,083

3,450

  Interest on other securities

548

472

76

16%

577

1,616

855

         Total interest income

10,468

11,280

(812)

-7%

10,646

43,425

41,329

Interest expense:

  Interest on demand deposits

191

251

(60)

-24%

204

968

1,015

  Interest on savings deposits

172

237

(65)

-27%

229

921

963

  Interest on certificates of deposit

1,204

1,453

(249)

-17%

1,272

6,151

7,628

  Securities sold under agreements to repurchase

9

13

(4)

-31%

13

52

51

  Interest on FHLB and other borrowings

135

178

(43)

-24%

148

1,630

1,833

  Interest on other borrowings

311

470

(159)

-34%

263

680

845

         Total interest expense

2,022

2,602

(580)

-22%

2,129

10,402

12,335

         Net interest income

8,446

8,678

(232)

-3%

8,517

33,023

28,994

Provision for loan and lease losses

2,211

4,450

(2,239)

-50%

2,580

12,850

9,475

 Net interest income after provision for loan losses

6,235

4,228

2,007

47%

5,937

20,173

19,519

Noninterest income:

  Service charges on deposit accounts

50

63

(13)

-21%

52

260

390

  Payroll and benefit processing fees

99

107

(8)

-7%

102

448

452

  Earnings on cash surrender value – Bank owned life insurance

117

112

5

4%

119

438

418

  Net gain on sale of securities available-for-sale

532

179

353

197%

655

1,981

2,438

  Gain on settlement of put reserve

-

1,750

(1,750)

-%

-

1,750

-

  Merchant credit card service income, net

39

65

(26)

-40%

33

235

-

  Mortgage banking revenue, net

4,346

3,281

1,065

32%

2,550

14,328

5,327

  Other income

118

91

27

30%

114

351

1,038

         Total noninterest income

5,301

5,648

(347)

-6%

3,625

19,791

10,063

Noninterest expense:

  Salaries and related benefits

4,994

4,162

832

20%

4,068

15,903

10,882

  Occupancy and equipment expense

742

952

(210)

-22%

800

3,660

3,405

  Write down of other real estate owned

-

129

(129)

-100%

370

1,571

161

  FDIC insurance premium

300

250

50

20%

363

1,016

1,274

  Data processing fees

92

52

40

77%

91

270

282

  Professional service fees

513

216

297

138%

595

1,726

820

  Deferred compensation expense

136

126

10

8%

131

493

478

  Stationery and supplies

63

35

28

80%

88

258

185

  Postage

47

58

(11)

-19%

44

198

147

  Directors' expense

67

56

11

20%

67

266

299

  Other expenses

788

1,260

(472)

-37%

1,237

4,970

2,691

         Total noninterest expense

7,742

7,296

446

6%

7,854

30,331

20,624

Income before provision for income taxes

3,794

2,580

1,214

47%

1,708

9,633

8,958

  Provision for income taxes

1,403

916

487

53%

216

3,159

2,690

Net Income

2,391

1,664

727

44%

1,492

6,474

6,268

  Less: Net income (loss) attributable to noncontrolling interest

348

105

243

231%

6

254

263

Net income attributable to Bank of Commerce Holdings

$    2,043

$    1,559

$      484

31%

$    1,486

$    6,220

$    6,005

Less: Preferred dividend and accretion on preferred stock

334

235

99

42%

235

940

942

        Income available to common stockholders

$    1,709

$    1,324

$      385

29%

$    1,251

$    5,280

$    5,063

Basic earnings per share

$      0.10

$      0.08

$     0.02

$      0.07

$      0.35

$      0.58

Weighted average shares - basic

16,991

16,991

-

16,991

14,951

8,711

Diluted earnings per share

$      0.10

$      0.08

$     0.02

$      0.07

$      0.35

$      0.58

Weighted average shares - diluted

16,991

16,991

-

16,991

14,951

8,711

Cash dividends declared

$      0.03

$      0.03

$           -

$      0.03

$      0.18

$      0.24

Table 14

BALANCE SHEET

(Dollars in thousands)

September 30,

September 30,

Change

June 30,

ASSETS

2011

2010

$

%

2011

Cash and due from banks

$          30,961

$          27,763

$        3,198

12%

$          19,091

Interest bearing deposits in other banks

27,476

43,188

(15,712)

-36%

29,225

     Cash and cash equivalents

58,437

70,951

(12,514)

-18%

48,316

Investment securities

165,704

166,925

(1,221)

-1%

162,184

Total portfolio loans

589,597

611,027

(21,430)

-4%

595,781

Allowance for loan losses

10,590

15,452

(4,862)

-31%

13,363

Loans, net

579,007

595,575

(16,568)

-3%

582,418

Mortgage loans held for sale

75,805

41,025

34,780

85%

26,067

Total interest earning assets

889,543

889,928

(385)

-%

832,348

Bank premises and equipment, net

9,664

9,842

(178)

-2%

9,691

Goodwill

3,695

3,695

-

-%

3,695

OREO, net

1,665

2,020

(355)

-18%

1,793

Other assets

34,194

34,239

(45)

-%

34,358

TOTAL ASSETS

$        928,171

$        924,272

$        3,899

-%

$        868,522

LIABILITIES AND STOCKHOLDERS' EQUITY

Demand - noninterest bearing

$          99,431

$          90,613

$        8,818

10%

$          87,643

Demand - interest bearing

175,745

161,154

14,591

9%

149,917

Savings accounts

94,519

82,761

11,758

14%

93,698

Certificates of deposit

280,887

305,503

(24,616)

-8%

294,173

                Total deposits

650,582

640,031

10,551

2%

625,431

Securities sold under agreements to repurchase

15,701

11,328

4,373

39%

15,353

Federal Home Loan Bank borrowings

111,000

141,000

(30,000)

-21%

91,000

Mortgage warehouse line of credit

11,290

-

11,290

100%

4,236

Junior subordinated debentures

15,465

15,465

-

-%

15,465

Other liabilities

11,377

11,669

(292)

-3%

8,843

                Total Liabilities

$        815,415

$        819,493

$     (4,078)

-%

$        760,328

Total Equity – Bank of Commerce Holdings

109,847

102,460

7,387

7%

105,633

Noncontrolling interest in subsidiary

2,909

2,319

590

25%

2,561

           Total Stockholders' Equity

112,756

104,779

7,977

8%

108,194

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$        928,171

$        924,272

$        3,899

-%

$        868,522

Table 15

AVERAGE BALANCE SHEET (Year to Date)

(Dollars in thousands)

September 30,

September 30,

June 30,

December 31,
 

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