Bank of Commerce Holdings™ Announces First Quarter 2011 Earnings

REDDING, Calif., April 29, 2011 /PRNewswire/ -- Patrick J. Moty, President & CEO of Bank of Commerce Holdings (NASDAQ: BOCH), a $915.5 million bank holding company, and parent company of Redding Bank of Commerce™, Roseville Bank of Commerce™, and Bank of Commerce Mortgage™ today reported net income available to common shareholders for the first quarter 2011 of $1.4 million and diluted earnings per share ("EPS") of $0.08.

"We are pleased to start 2011 with solid first-quarter financial performance, especially given the continuing economic challenges. Results for the first quarter were positively affected by increased earnings on the investment portfolio, a reduction in our cost of funding and a significant reduction in our provision for loan losses compared to the prior quarter. These results were partially offset by a decrease in revenue, net of costs, from our mortgage banking activities, the decrease of which is directly related to lower origination volume which can be tied to higher long term mortgage interest rates and continued price deterioration in local and national real estate markets," said Patrick J. Moty, President and CEO.

1st Quarter 2011 Highlights

• Net Income available to common shareholders of $1.4 million, an increase of 3.1% over the $1.4 million for the quarter ended December 31, 2010 and an increase of 9.9% over $1.3 million for the quarter ended March 31, 2010
• Diluted EPS of $0.08 compared $0.08  and $0.15 for the quarters ended December 31, 2010, and March 31, 2010, respectively
• Portfolio loans increased $1.4 million over December 31, 2010, and decreased $7.5 million quarter-over-quarter from March 31, 2010
• Mortgage loans held for sale decreased $24.0 million over December 31, 2010, and increased $2.4 million quarter-over-quarter from March 31, 2010
• Non-maturing core deposits up $37.5 million, an increase of 13% quarter-over-quarter from March 31, 2010
• Provision for loan losses of $2.4 million compared to $4.6 million for the quarter ended December 31, 2010 and $2.3 million for the quarter ended March 31, 2010
• 2011 1st quarter common stock cash dividends declared of $509,745, or $0.03 per share

Financial Performance

For the first quarter 2011 we recorded net income of $1.7 million, and net income available to common shareholders of $1.4 million, or $0.08 per diluted share, after deducting preferred dividend payments made to the Treasury and accretion of preferred shares under the TARP Capital Purchase Program.  This was an increase from $1.3 million of net income available to common shareholders, or $0.15 per diluted share, reported in the first quarter 2010 (Note: the average number of shares outstanding increased at March 31, 2011 by 8.1 million compared to March 31, 2010). As of March 31, 2011, we had total assets of $915.5 million, total loans of $608.2 million, an allowance for loan and lease losses of $13.6 million, or 2.24% of total loans, deposits outstanding of $628.1 million and stockholders' equity of $106.1 million.   Return on average assets (ROA) and return on average equity (ROE) for the first quarter of 2011 were 0.72% and 6.35%, respectively, compared with 0.75% and 8.76%, respectively, for the first quarter of 2010.

Net Interest Margin

Net interest income increased $1.1 million to $8.6 million in the first quarter of 2011 compared to $7.5 million during the same period in the prior year, representing a 14.67% increase. Average earning assets increased to $854.9 million during the first quarter of 2011 compared to $730.0 million during the same period in the prior year, which reflects a 17.11% increase. The significant increase in average earning assets is a result of the Company leveraging the proceeds received from the common stock offering completed in March 2010. The Company leveraged the net proceeds from the Offering by purchasing approximately $100.0 million in agencies and highly credit rated available-for-sale securities.

The yield on average earning assets was 4.98% for the three months ended March 31, 2011, compared to 5.52% for the same period in the prior year, representing a decrease of 0.54%.  Pursuant to the purchase and sale activity in the investment portfolio, certain portfolio securities with higher stated yields were sold, while the securities purchased carried relatively lower stated yields. As a result, the weighted average yield on the available-for-sale investment portfolio decreased by ninety nine basis points compared to March 31, 2010. Accordingly, the decrease in the weighted average yield of the investment portfolio was the main driver contributing the overall decrease in yield on average earning assets. Funding costs decreased $496,000 or 19.3% over March 31, 2010.

Net interest margin for the quarter ended March 31, 2011 was 4.01% compared to 4.06% and 4.12% for the quarters ended December 31, 2010 and March 31, 2010, respectively.

Provision for loan and lease losses

The allowance for loan and lease losses (ALLL) totaled $13.6 million at March 31, 2011. Provisions for loan and lease losses totaled $2.4 million for the quarter ended March 31, 2011, significantly reduced from $4.6 million for the quarter ended December 31, 2010 and comparable to $2.3 million for the quarter ended March 31, 2010. The allowance for loan losses was 2.24% of total portfolio loans at March 31, 2011 compared to 2.00% of total portfolio loans as of March 31, 2010.

Net charge offs were $1.6 million for the quarter ended March 31, 2011 compared with $1.3 million for the quarter ended at March 31, 2010.

Nonperforming Assets

Nonperforming assets totaled $23.2 million and were 2.53% of total assets at March 31, 2011 compared to $22.8 million or 2.43% of total assets at December 31, 2010 and $16.7 million or 2.02% of total assets as of March 31, 2010

At March 31, 2011 and December 31, 2010, the recorded investment in other real estate owned ("OREO") was $3.9 million and $2.3 million, respectively. For the three months ended March 31, 2011 the Company transferred foreclosed property from five loans in the amount of $2.1 million to OREO and adjusted the balances through charges to the allowance for loan and lease losses in the amount of $723.3 thousand related to the transferred foreclosed property, sold seven properties with balances of $357.1 thousand for a net loss of $162.4 thousand, recorded $187 thousand in write downs of existing OREO in other noninterest expense.  The March 31, 2011 OREO balance of $3.9 million consists of thirteen properties, of which eleven are secured with 1-4 family residential real estate in the amount of $721.8 thousand. The remaining two properties consist of vacant commercial land and a vacant commercial building in the amount of $1.4 million and $1.7 million respectively. On April 15, 2011, the Company sold the vacant commercial building for $1.6 million, equal to the properties cost basis.

Balance Sheet

As of March 31, 2011 the Company maintained cash positions at the Federal Reserve Bank and correspondent banks in the amount of $31.3 million. The Company also held certificates of deposits with other financial institutions in the amount of $37.0 million, which the bank 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 as opportunities to reposition the balance sheet present themselves. When taken as a whole, the available for sale investment portfolio balances did not change significantly during the quarter ended March 31, 2011. However, during the period the Company continued to reposition the portfolio to mitigate potential interest rate risk and liquidity risk. As a direct result of the investment portfolio repositioning, the Company recorded approximately $258 thousand in realized gains on sales of securities. Proceeds from the sales were generally used to reinvest in available for sale securities.

Total assets are up $84.8 million or 10.2% over March 31, 2010, with the most significant increases housed in the investment portfolio. Overall, the net portfolio loan balance did not change significantly during the quarter ended March 31, 2011. The Company continued to conservatively monitor credit quality during the period, and adjust the allowance for loan losses accordingly. As such, the Company provided $2.4 million in provision for loan and lease losses for the quarter ended March 31, 2011 compared to $2.3 million for the quarter ended March 31, 2010. The Company's allowance for loan and lease losses as a percentage of total portfolio loans was 2.3% and 2.0% for the quarter ended March 31, 2011 and March 31, 2010 respectively.

Core deposits (checking, savings and money market accounts) increased $37.5 million or 13.0% over March 31, 2010. Total certificates of deposit decreased by $28.4 million or 8.6% over March 31, 2010, primarily due to repayment of brokered deposits.

Capital

The capital ratios of Redding Bank of Commerce continue to be above the well-capitalized guidelines established by bank regulatory agencies. Total risk-based capital to risk-weighted assets was 16.05% at March 31, 2011 compared to 16.16% at March 31, 2010.

Bank of Commerce Holdings, with administrative offices in Redding, California is a financial service holding company that owns Redding Bank of Commerce™, Roseville Bank of Commerce™, and Bank of Commerce Mortgage™.

Our Company is a federally insured California banking corporation and opened on October 22, 1982.

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

Raymond James Financial / Howe Barnes
John T. Cavender
555 Market Street
San Francisco, CA (800) 346-5544

Hill, Thompson, Magid & Co. Inc / R.J. Dragani
15 Exchange Place, Suite 800
Jersey City, New Jersey 07030 (201) 369-2908

Keefe, Bruyette & Woods, Inc. /
Dave Bonaccorso
101 California Street, 37th Floor
San Francisco, CA 94105 (415) 591-5063

Sandler & O'Neil /Bryan Sullivan
919 Third Avenue, 6th Floor
New York, NY 10022 (888) 383-3112

McAdams Wright Ragen, Inc. /Joey Warmenhoven
1121 SW Fifth Avenue
Suite 1400
Portland, Oregon 97204 (866) 662-0351

Stiffel Nicolaus
Perry Wright
1255 East Street #100
Redding, CA 96001 (530) 244-7199

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

• Competitive pressure in the banking industry and changes in the regulatory environment.
• Changes in the interest rate environment and volatility of rate sensitive assets and liabilities.
• The health of the economy declines nationally or regionally which could reduce the demand for loans or reduce the value of real estate collateral securing most of the Company's loans.
• Credit quality deteriorates which could cause an increase in the provision for loan losses.
• Losses in the Company's merchant credit card processing business.
• Asset/Liability matching risks and liquidity risks.
• Changes in the securities markets.

For additional information concerning risks and uncertainties related to the Company and its operations please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2010 and under the heading:

"Risk factors that may affect results" and subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

SOURCE Bank of Commerce Holdings