Bank of Commerce Holdings™ Announces Third Quarter 2010 Operating Results

Oct 29, 2010, 11:00 ET from Bank of Commerce Holdings

REDDING, Calif., Oct. 29 /PRNewswire-FirstCall/ -- Patrick J. Moty, President & CEO of Bank of Commerce Holdings (Nasdaq: BOCH), a $924 million financial services holding company, and parent company of Redding Bank of Commerce™, Roseville Bank of Commerce™, and Bank of Commerce Mortgage™ today announced third quarter 2010 operating results.

Year to Date 2010 Highlights

  • Recorded year-to-date net income of $4.6 million, and net income available to common shareholders of $3.9 million equal to the prior year-to-date earnings as of September 30, 2009
  • Return on Average Assets (ROA) 0.70%
  • Return on Average Equity (ROE) 6.61%
  • $0.27 per diluted share compared to $0.45 for the period ending September 30, 2009
  • Total assets of $924.3 million, an increase of $110.9 million over December 31, 2009
  • Total net loans of $636.6 million, an increase of $19.3 million over December 31, 2009
  • Total deposits of $640.0 million, comparable to deposits of $640.5 million at December 31, 2009
  • $15.5 million in allowance for loan losses, representing 2.53% of total loans held for investment
  • Provision for loan losses of $8.3 million

3rd Quarter 2010 Highlights

  • Recorded quarterly net income of $1.5 million, and quarterly net income available to common shareholders of $1.3 million, a decrease of 10.4% quarter-over-quarter for the third quarter 2009
  • Diluted EPS of $0.08 compared to $0.17 in the third quarter 2009
  • Average portfolio loans up $39.7 million, an increase of 7.5% quarter-over-quarter from the third quarter 2009
  • Non-maturing core deposits up $4.5 million, an increase of 2.10% quarter-over-quarter from the third quarter 2009
  • Provision for loan loss of $4.5 million

Net Interest Margin

A combination of reduced funding costs and an increase in the volume of earning assets significantly improved the Company's net interest margin. The increased volume of earning assets contributed an additional $2.0 million in interest income. The majority of this increase in volume of earning assets resulted from an increase in average portfolio loans. In addition, the continued decline in interest rates on earning assets resulted in a reduction of $1.3 million to interest income. Accordingly, the net effect of changes in rate and volume of earning assets resulted in an increase of $709,000 in interest income for the nine month period ended September 30, 2010, as compared to the same period in the prior year.

The Company's volume in average deposits and borrowings remained relatively unchanged compared to the prior period ending September 30, 2009. However the Company did benefit from the continued decline in interest expense relating to retail and wholesale funding.  As a result of the decline in interest rates, the Company realized a decrease in interest expense of $2.7 million. This increase was slightly offset by a $347,000 increase in interest expense due to volume. Specifically, the reduction in costs for FHLB borrowings, and the Company's time deposits resulted in the majority of the decrease in interest expense. Accordingly, the net effect of changes in rate and volume of interest bearing liabilities resulted in a decrease of $2.3 million in interest expense for the nine month period ended September 30, 2010 as compared to the prior year.

Provisions for loan losses

Management has taken aggressive actions in provisioning for loan losses, charging down impairments, and keeping an attentive eye on expenses. As long as the U.S. economy remains weak, losses in the loan portfolio may increase. Our Company continues to take actions to enable us to navigate through this current economic and credit cycle. Elevated provisions are associated with an assertive and conservative reclassification of loans and management's aggressive stance in recognizing impaired loans. Our Company has provided $8.3 million in provisions for loan and lease losses for the nine months ended September 30, 2010 compared to $6.3 million for the same period a year ago. The allowance for loan losses was 2.53% of total portfolio loans at September 30, 2010 compared to 1.48% of total loans for the same period a year ago.

The real estate development properties and construction related portfolio is showing some signs of stability but generally remains under stress. Our Company's commercial and industrial portfolio has weakened, especially those borrowers tied to real estate.

Our loan portfolio will likely continue to be influenced by weakness in real estate values, the effects of high unemployment levels, and general overall weakness in economic conditions.

Net charge offs were $4.0 million for the nine month period ended at September 30, 2010 compared to net charge offs of $5.9 million for the same period a year ago. The charge-offs were centered in commercial & industrial and consumer residential real estate loans.

Nonperforming Assets

Non-performing assets were 3.03% of total assets as of September 30, 2010; 1.92% at December 31, 2009 and 3.28% at September 30, 2009.

OREO was carried at $2.0 million at September 30, 2010 and $2.9 million at September 30, 2009. We are committed to working with our customers to find potential solutions when our customers experience financial difficulties.

Balance Sheet

As of September 30, 2010, the Company had total consolidated assets of $924.3 million, total net portfolio loans of $596 million, an allowance for loan and lease losses of $15.5 million, or 2.53% of total portfolio loans, deposits outstanding of $640 million and stockholders' equity of $104.8 million.

Income Statement

We have remained profitable during the recent economic downturn and positioned our Company to take advantage of growth opportunities in the coming years.  For the first three quarters of 2010 we recorded net income attributable to Bank of Commerce Holdings of $4.6 million, and net income available to common stockholders of $3.9 million, or $0.27 per diluted share, after deducting preferred dividend payments made to the Treasury and accretion of preferred shares under the TARP Capital Purchase Program.  Net income attributable to Bank of Commerce Holdings and net income available to common shareholders for the nine months ending September 30, 2010 was relatively unchanged compared to the period ending September 30, 2009. However, earnings per share decreased from $0.45 per diluted share in the prior period to $0.27 per diluted share in the current period. The decrease in earnings per diluted share is due to the increase in common shares outstanding during the period.

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 15.54% at September 30, 2010.

September 30, 2010

Capital  

Actual

Ratio

Well

Capitalized

Requirement

Minimum

Capital

Requirement

The Company

Leverage

$114,723,030

12.59%

n/a

4.0%

Tier 1 Risk-Based

$114,723,030

14.58%

n/a

4.0%

Total Risk-Based

$124,630,793

15.84%

n/a

8.0%

Redding Bank of Commerce

Leverage

$105,470,141

11.52%

5.0%

4.0%

Tier 1 Risk-Based

$105,470,141

14.28%

6.0%

4.0%

Total Risk-Based

$114,786,085

15.54%

10.0%

8.0%

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:

Howe Barnes Hoefer & Arnett Investment Inc. /

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

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, 2009 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.

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Condensed Consolidated Balance Sheets

September 30, 2010 (unaudited), December 31, 2009 and September 30, 2009 (unaudited)

(Dollars in thousands)

ASSETS

September 30,

2010

December 31,

2009

September 30,

2009

Cash and due from banks, noninterest bearing

$        27,763

$         36,902

$ 20,224

Interest bearing due from banks

43,188

31,338

56,208

     Cash and cash equivalents

70,951

68,240

76,432

Securities available-for-sale, at fair value (including pledged collateral of $43,772 at September 30, 2010, $55,672 at December 31, 2009 and $61,345 at September 30, 2009)

166,925

80,062

86,499

Portfolio Loans, net of the allowance for loan losses of $15,452 at September 30, 2010, $11,207 at December 31, 2009 and $8,899 at September 30, 2009

595,575

590,023

590,885

Mortgage loans held for sale

41,025

27,288

16,787

Bank premises and equipment, net

9,842

9,980

10,201

Goodwill

3,695

3,727

3,727

Other real estate owned

2,020

2,880

2,934

Other assets

34,239

31,206

27,215

TOTAL ASSETS

$     924,272

$     813,406

$    814,680

LIABILITIES AND STOCKHOLDERS' EQUITY

Demand - noninterest bearing

$      90,613

$      69,448

$70,491

Demand - interest bearing

161,154

163,814

156,233

Savings accounts

82,761

65,414

59,982

Certificates of deposit

305,503

341,788

312,968

                Total deposits

640,031

640,464

599,674

Securities sold under agreements to repurchase

11,328

9,621

10,038

Federal Home Loan Bank and Federal Reserve Bank borrowings

141,000

70,000

100,000

Mortgage warehouse lines of credit

-

-

12,285

Other liabilities

11,669

9,050

8,967

Junior subordinated debt payable to unconsolidated

         subsidiary grantor trust

15,465

15,465

15,465

                Total Liabilities

819,493

744,600

746,429

Commitments and contingencies

Stockholders' Equity:

Preferred stock (liquidation preference of $1,000 per share; issued 2008) 2,000,000 authorized; 17,000 shares issued and outstanding on September 30, 2010, December 31, 2009, and September 30, 2009

16,708

16,641

16,619

Common stock , no par value, 50,000,000 shares authorized; 16,991,495 shares issued and outstanding  at September 30, 2010, 8,711,495 issued and outstanding on December 31, 2009 and at September 30, 2009

42,741

9,730

9,709

Common stock warrant

449

449

449

Retained earnings

40,845

39,004

38,355

Accumulated other comprehensive income, net of tax

1,717

657

827

Total Equity – Bank of Commerce Holdings

102,460

66,481

65,959

Non controlling interest in subsidiary

2,319

2,325

2,292

           Total stockholders' equity

104,779

68,806

68,251

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$   924,272

$   813,406

$    814,680

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

Three months ended

Nine months ended

(Amounts in thousands, except for per share data)

September 30,

2010

September 30,

2009

September 30,

2010

September 30,

2009

Interest income:

  Interest and fees on loans

$ 9,414

$ 9,355

$ 27,767

$ 26,676

  Interest on tax-exempt securities

465

278

1,168

853

  Interest on U.S. government securities

633

628

1,578

2,774

  Interest on federal funds sold and securities purchased

           under agreements to resell

1

1

2

31

  Interest on other securities

471

309

1,085

557

         Total interest income

10,984

10,571

31,600

30,891

Interest expense:

  Interest on demand deposits

251

240

707

786

  Interest on savings deposits

237

223

677

742

  Interest on certificates of deposit

1,453

1,941

4,768

5,722

  Securities sold under agreements to repurchase

13

13

40

38

  Interest on FHLB and other borrowings

186

514

460

1,634

  Interest on junior subordinated debt payable

             to unconsolidated subsidiary grantor trust

204

234

619

665

         Total interest expense

2,344

3,165

7,271

9,587

         Net interest income

8,640

7,406

24,329

21,304

Provision for loan and lease losses

4,450

1,844

8,300

6,325

        Net interest income after provision for loan losses

4,190

5,562

16,029

14,979

Noninterest income:

  Service charges on deposit accounts

63

108

207

296

  Payroll and benefit processing fees

107

109

335

347

  Earnings on cash surrender value –

          Bank owned life insurance

112

108

327

311

  Net gain on sale of securities available-for-sale

179

506

1,243

1,984

  Net gain on transfer of financial assets

-

-

-

340

  Gain on settlement of put reserve

1,750

-

1,750

-

  Mortgage brokerage fee income

3,293

1,913

8,585

3,215

  Other income

179

200

515

511

         Total noninterest income

5,683

2,944

12,962

7,004

Noninterest expense:

  Salaries and related benefits

4,162

2,902

11,238

7,673

  Occupancy and equipment expense

952

1,124

2,805

2,426

  Write down of other real estate owned

129

-

1,374

-

  FDIC insurance premium

250

421

755

995

  Data processing fees

52

52

205

231

  Professional service fees

216

220

1,159

674

  Deferred compensation expense

126

118

366

360

  Stationery and supplies

35

62

211

141

  Postage

58

-

145

111

  Directors' expense

56

75

208

232

  Goodwill impairment

-

-

32

-

  Other expenses

1,257

680

3,490

1,664

         Total noninterest expense

7,293

5,654

21,988

14,507

Income before provision for income taxes

2,580

2,852

7,003

7,476

  Provision for income taxes

916

1,010

2,410

2,647

Net Income

1,664

1,842

4,593

4,829

  Less: Net income (loss) attributable to non-controlling interest

105

129

(6)

230

Net income attributable to Bank of Commerce Holdings

$1,559

$1,713

$4,599

$4,599

Less: preferred dividend and accretion on preferred stock

235

235

706

707

        Income available to common shareholders

$1,324

$1,478

$3,893

$3,892

Basic earnings per share

$0.08

$0.17

$0.27

$0.45

Weighted average shares - basic

16,991

8,711

14,263

8,711

Diluted earnings per share

$0.08

$0.17

$0.27

$0.45

Weighted average shares - diluted

16,991

8,711

14,263

8,712

Cash Dividends declared

$0.03

$0.12

$0.15

$0.18

Average Balances, Interest Income/Expense and Yields/Rates Paid

(Unaudited, Dollars in thousands)

(Dollars in thousands)

Nine Months Ended

September 30, 2010

Nine Months Ended

September 30, 2009

Average

Balance

Interest

Yield/

Rate

Average

Balance

Interest

Yield/

Rate

Earning Assets

Portfolio Loans

$    625,396

$ 27,767

5.92%

$589,802

$26,676

6.03%

Tax-exempt Securities(1)

38,452

1,168

4.05%

27,859

853

4.08%

US Government Securities

26,631

478

2.39%

7,721

252

4.33%

Mortgage backed Securities

45,368

1,100

3.23%

59,892

2,522

5.61%

Other Securities

47,644

1,085

3.04%

17,499

557

1.77%

Federal Funds Sold

995

2

0.27%

41,996

31

0.23%

Average Earning Assets

$784,486

$31,600

5.37%

$744,769

$30,891

5.53%

Cash & Due From Banks

$37,178

$21,890

Bank Premises

9,875

10,435

Other Assets

41,518

23,755

Average Total Assets

$873,057

$800,849

Interest Bearing Liabilities

Demand Interest Bearing

$133,494

$707

0.71%

$141,493

$786

0.74%

Savings Deposits

74,310

677

1.21%

62,554

742

1.58%

Certificates of Deposit

329,456

4,768

1.93%

305,237

5,722

2.50%

Repurchase Agreements

11,971

40

0.45%

11,202

38

0.45%

FHLB Borrowings

102,271

460

0.60%

122,601

1,634

1.81%

Trust Preferred Borrowings

15,000

619

5.50%

15,000

665

5.67%

666,502

$ 7,271

1.45%

658,087

$9,587

1.94%

Noninterest bearing demand

92,204

71,718

Other Liabilities

21,621

5,800

Stockholders' Equity

92,730

65,244

Average Liabilities and Stockholders' Equity

$873,057

$800,849

Net Interest Income and Net Interest Margin

$24,329

4.14%

$21,304

3.81%

(1) The yield on tax-exempt securities has not been adjusted to a tax-equivalent yield basis.

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Quarterly Financial Condition Data (Unaudited) For the Quarter Ended

(Dollars in thousands, except for per share data)

September 30,

2010

June 30,

2010

March 31,

2010

December 31,

2009

September 30,

2009

Interest income:

Interest and fees on loans

$ 9,414

$  9,302

$9,051

$9,184

$9,355

Interest on tax-exempt securities

465

381

322

311

278

Interest on U.S. government securities

633

507

439

676

628

Interest on federal funds sold and securities repurchased under agreements to resell

1

-

1

1

1

Interest on other securities

471

343

270

266

309

Total interest income

10,984

10,533

10,083

10,438

10,571

Interest expense:

Interest on demand deposits

251

226

230

229

240

Interest on savings deposits

237

221

219

221

223

Interest on certificates of deposit

1,453

1,554

1,761

1,906

1,941

Securities sold under repurchase agreements

13

15

12

13

13

Interest on FHLB and other borrowings

186

138

136

172

514

Interest on junior subordinated debt

204

207

208

208

234

Total interest expense

2,344

2,361

2,566

2,749

3,165

Net interest income

8,640

8,172

7,517

7,689

7,406

Provision for loan and lease losses

4,450

1,600

2,250

3,150

1,844

Net interest income after provision for loan and lease losses

4,190

6,572

5,267

4,539

5,562

Noninterest income:

Service charges on deposit accounts

63

62

82

94

108

Payroll and benefit processing fees

107

100

128

105

109

Earnings on cash surrender value - bank owned life insurance

112

107

108

107

108

Net gain on sale of securities available-for-sale

179

133

931

454

506

Net gain on transfer of financial assets

-

-

1

-

Gain on settlement of put reserve

1,750

64

54

68

80

Mortgage brokerage fee income

3,293

2,753

2,539

2,112

1,913

Other income

179

118

100

119

120

Total noninterest income

5,683

3,337

3,942

3,060

2,944

Noninterest expense:

Salaries and related benefits

4,162

3,365

3,711

3,209

2,902

Occupancy and equipment expense

952

924

929

1,178

1,124

Write down of other real estate owned

129

1,064

181

161

-

FDIC insurance premium

250

254

251

279

421

Data processing fees

52

64

89

51

52

Professional service fees

216

543

400

146

220

Deferred compensation expense

126

122

118

118

118

Stationery and supplies

35

96

80

44

62

Postage

58

45

42

36

-

Directors' expense

56

68

84

67

75

Other expenses

1,257

965

1,300

828

680

Total noninterest expense

7,293

7,510

7,185

6,117

5,654

Income before provision for income taxes

2,580

2,399

2,024

1,482

2,852

Provision for income taxes

916

750

744

43

1,010

Net Income

1,664

1,649

1,280

1,439

1,842

Less: Net income (loss) attributable to non-controlling interest

105

144

(255)

33

129

Net income attributable to Bank of Commerce Holdings

$1,559

$ 1,505

$ 1,535

$ 1,406

$ 1,713

Less: Preferred dividend and accretion on preferred stock

$   235

$    236

$    235

$    235

$    235

Income available to common stockholders

$1,324

$ 1,269

$ 1,300

$ 1,171

$ 1,478

Basic earnings per share

$0.08

$0.08

$0.15

$0.13

$0.17

Weighted average shares - basic

16,991

16,837

8,871

8,711

8,711

Diluted earnings per share

$0.08

$0.08

$0.15

$0.13

$0.17

Weighted average shares - diluted

16,991

16,837

8,871

8,711

8,711

Cash dividends per share

$0.03

$0.06

$0.06

$0.06

$0.12

SOURCE Bank of Commerce Holdings



RELATED LINKS

http://reddingbankofcommerce.com