SACRAMENTO, Calif., Jan. 19, 2018 (GLOBE NEWSWIRE) — Bank of Commerce Holdings (NASDAQ:BOCH) (the “Company”), a $1.3 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter and the year ended December 31, 2017. Net income for the quarter ended December 31, 2017 was $7 thousand or $0.00 per share – diluted, compared with net income of $2.3 million or $0.17 per share – diluted for the same period of 2016. Net income for the year ended December 31, 2017 was $7.3 million or $0.48 per share – diluted compared with $5.3 million or $0.39 per share – diluted for the year ended December 31, 2016.
Significant Item – Tax Cuts and Jobs Act of 2017
The 2017 results include the $2.5 million negative net impact of the Tax Cuts and Jobs Act of 2017(“Act”) for both the fourth quarter ($0.15 per share – diluted) and for the year ($0.16 per share – diluted). The Act reduced the federal corporate tax rate from 35% to 21% and required the Company to revalue its deferred tax assets and liabilities. Management believes that our financial results are more comparative excluding the impact of these deferred tax asset and liability revaluations.
Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. We believe that these non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this document are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.
| SELECTED NON-GAAP FINANCIAL INFORMATION – UNAUDITED | ||||||||||||||||||||
| (amounts in thousands except per share data) | ||||||||||||||||||||
| For The Three Months Ended | For The Twelve Months Ended | |||||||||||||||||||
| Reconciliation of Net Income (GAAP) to Net Income Excluding | December 31, | September 30, | December 31, | |||||||||||||||||
| Deferred Tax Asset Write-down (non-GAAP): | 2017 | 2016 | 2017 | 2017 |
2016 | |||||||||||||||
| Net income (GAAP) | $ | 7 | $ | 2,297 | $ | 2,876 | $ | 7,344 | $ | 5,259 | ||||||||||
| Deferred tax asset write-down (GAAP) | 2,490 | — | — | 2,490 | 363 | |||||||||||||||
| Net income excluding deferred tax asset write-down (non-GAAP) | $ | 2,497 | $ | 2,297 | $ | 2,876 | $ | 9,834 | $ | 5,622 | ||||||||||
| Earnings per share – diluted (GAAP) | $ | — | $ | 0.17 | $ | 0.18 | $ | 0.48 | $ | 0.39 | ||||||||||
| Effect of deferred tax asset write-down | 0.15 | — | — | 0.16 | 0.03 | |||||||||||||||
| Earnings per share – diluted excluding net deferred tax asset write-down | $ | 0.15 | $ | 0.17 | $ | 0.18 | $ | 0.64 | $ | 0.42 | ||||||||||
| Non-GAAP Ratios: | ||||||||||||||||||||
| Return on average assets excluding net deferred tax asset write-down | 0.79 | % | 0.81 | % | 0.93 | % | 0.82 | % | 0.52 | % | ||||||||||
| Return on average equity excluding net deferred tax asset write-down | 7.69 | % | 9.69 | % | 9.01 | % | 8.48 | % | 6.07 | % | ||||||||||
| Effective tax rate excluding deferred tax asset write-down | 34.46 | % | 19.94 | % | 33.16 | % | 31.10 | % | 22.10 | % | ||||||||||
| GAAP Information: | ||||||||||||||||||||
| Return on average assets | 0.00 | % | 0.81 | % | 0.93 | % | 0.61 | % | 0.49 | % | ||||||||||
| Return on average equity | 0.02 | % | 9.69 | % | 9.01 | % | 6.34 | % | 5.68 | % | ||||||||||
| Effective tax rate | 99.82 | % | 19.94 | % | 33.16 | % | 48.54 | % | 27.13 | % | ||||||||||
Randall S. Eslick, President and CEO commented: “In 2017 we continued executing on our corporate vision and strategic plan to earn our independence. I am especially proud of the hard work and dedication of our employees as they delivered extraordinary growth in loans and deposits and enhanced returns to our shareholders. Our company is well positioned to meet the opportunities and challenges of the coming year and I look forward to our continued growth and success.”
Financial highlights for the year ended December 31, 2017:
- Average deposits for the year ended December 31, 2017 totaled $1.0 billion, an increase of $115.1 million (12%) compared to average deposits for the prior year.
- Average loans for the year ended December 31, 2017 totaled $818.1 million, an increase of $65.2 million (9%) compared to average loans for the prior year.
- Average earning assets totaled $1.1 billion for the year ended December 31, 2017, an increase of $116.8 million (12%) compared to average earning assets for the prior year.
- Net income of $7.3 million or $0.48 per share – diluted for the year ended December 31, 2017 was an increase of $2.1 million (40%) from $5.3 million or $0.39 per share – diluted earned during the same period in the prior year. Net income for 2016 was negatively impacted by $3.0 million of branch acquisition and balance sheet restructuring costs, a $546 thousand other-than-temporary-impairment of an investment security and the write-off of a $363 thousand deferred tax asset.
- Return on average assets improved to 0.61% for the year ended December 31, 2017 compared to 0.49% for the prior year.
- Return on average equity improved to 6.34% for the year ended December 31, 2017 compared to 5.68% for the prior year.
- The Company’s efficiency ratio was 67.0% for the year ended December 31, 2017 compared to 81.9% for the prior year.
- Net interest income increased $5.1 million (14%) to $41.4 million for the year ended December 31, 2017 compared to $36.2 million for the prior year.
- Nonperforming assets at December 31, 2017 totaled $5.8 million or 0.46% of total assets, a decrease of $6.3 million (52%) compared to December 31, 2016.
- Tangible book value per common share was $7.70 at December 31, 2017 compared to $6.83 at December 31, 2016.
Financial highlights for the fourth quarter of 2017:
- Average deposits for the three months ended December 31, 2017 totaled $1.1 billion, an increase of $28.7 million (11% annualized) compared to average deposits for the prior quarter.
- Average loans for the three months ended December 31, 2017 totaled $839.0 million, an increase of $33.9 million (17% annualized) compared to average loans for the prior quarter.
- Average earning assets for the three months ended December 31, 2017 totaled $1.2 billion, an increase of $31.9 million (11% annualized) compared to average earning assets for the prior quarter.
- Net income of $7 thousand or $0.00 per share – diluted for the three months ended December 31, 2017 was a decrease of $2.3 million (100%) from $2.3 million or $0.17 per share – diluted earned during the same period in the prior year.
- Return on average assets declined to 0.00% for the fourth quarter of 2017 compared to 0.81% for the same period in the prior year.
- Return on average equity declined to 0.02% for the fourth quarter of 2017 compared to 9.69% for the same period in the prior year.
- The Company’s efficiency ratio was 64.9% for the fourth quarter of 2017 compared to 73.2% during the same period in 2016.
- Net interest income increased $1.4 million (15%) to $10.9 million for the fourth quarter of 2017 compared to $9.4 million for the same period in the prior year.
- Nonperforming assets at December 31, 2017 totaled $5.8 million or 0.46% of total assets, a decrease of $2.5 million since September 30, 2017.
Forward-Looking Statements
This quarterly press release includes forward-looking information, which is subject to the “safe harbor” created by the Securities Act of 1933 and Securities Act of 1934. These forward-looking statements (which involve our plans, beliefs and goals, refer to estimates or use similar terms) involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors:
- Competitive pressure in the banking industry and changes in the regulatory environment
- Changes in the interest rate environment and volatility of rate sensitive assets and liabilities
- A decline in the health of the economy nationally or regionally which could reduce the demand for loans or reduce the value of real estate collateral securing most of our loans
- Credit quality deterioration which could cause an increase in the provision for loan and lease losses
- Asset/Liability matching risks and liquidity risks
- Changes in the securities markets
For additional information concerning risks and uncertainties related to the Company and its operations, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 under the heading “Risk Factors” and to subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation and specifically disclaims any obligation to revise or publicly release the results of any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date the statements were made.
| TABLE 1 | |||||||||||||||||||
| SELECTED FINANCIAL INFORMATION – UNAUDITED | |||||||||||||||||||
| (amounts in thousands except per share data) | |||||||||||||||||||
| For The Three Months Ended | For The Twelve Months Ended | ||||||||||||||||||
| December 31, | September 30, | December 31, | |||||||||||||||||
| Net income, average assets and average shareholders’ equity | 2017 | 2016 | 2017 | 2017 | 2016 | ||||||||||||||
| Net income | $ | 7 | $ | 2,297 | $ | 2,876 | $ | 7,344 | $ | 5,259 | |||||||||
| Average total assets | $ | 1,251,960 | $ | 1,126,034 | $ | 1,220,900 | $ | 1,198,251 | $ | 1,079,750 | |||||||||
| Average total earning assets | $ | 1,178,037 | $ | 1,051,387 | $ | 1,146,132 | $ | 1,124,555 | $ | 1,007,793 | |||||||||
| Average shareholders’ equity | $ | 128,862 | $ | 94,326 | $ | 126,574 | $ | 115,901 | $ | 92,554 | |||||||||
| Selected performance ratios | |||||||||||||||||||
| Return on average assets | 0.00 | % | 0.81 | % | 0.93 | % | 0.61 | % | 0.49 | % | |||||||||
| Return on average equity | 0.02 | % | 9.69 | % | 9.01 | % | 6.34 | % | 5.68 | % | |||||||||
| Efficiency ratio | 64.94 | % | 73.17 | % | 63.10 | % | 67.04 | % | 81.83 | % | |||||||||
| Share and per share amounts | |||||||||||||||||||
| Weighted average shares – basic (1) | 16,195 | 13,370 | 16,191 | 15,207 | 13,367 | ||||||||||||||
| Weighted average shares – diluted | 16,306 | 13,476 | 16,288 | 15,310 | 13,425 | ||||||||||||||
| Earnings per share – basic | $ | — | $ | 0.17 | $ | 0.18 | $ | 0.48 | $ | 0.39 | |||||||||
| Earnings per share – diluted | $ | — | $ | 0.17 | $ | 0.18 | $ | 0.48 | $ | 0.39 | |||||||||
| At December 31, | At September 30, | ||||||||||||||||||
| Share and per share amounts | 2017 | 2016 | 2017 | ||||||||||||||||
| Common shares outstanding (2) | 16,272 | 13,440 | 16,265 | ||||||||||||||||
| Tangible book value per common share | $ | 7.82 | $ | 6.83 | $ | 7.77 | |||||||||||||
| Capital ratios | |||||||||||||||||||
| Bank of Commerce Holdings (3) | |||||||||||||||||||
| Common equity tier 1 capital ratio (4) | 12.26 | % | 9.43 | % | 12.66 | % | |||||||||||||
| Tier 1 capital ratio (4) | 13.23 | % | 10.42 | % | 13.65 | % | |||||||||||||
| Total capital ratio (4) | 15.44 | % | 12.68 | % | 15.91 | % | |||||||||||||
| Tier 1 leverage ratio (4) | 10.86 | % | 9.13 | % | 11.12 | % | |||||||||||||
| Tangible common equity ratio (5) | 9.88 | % | 8.07 | % | 10.27 | % | |||||||||||||
| Redding Bank of Commerce | |||||||||||||||||||
| Common equity tier 1 capital ratio (4) | 12.58 | % | 12.31 | % | 12.87 | % | |||||||||||||
| Tier 1 capital ratio (4) | 12.58 | % | 12.31 | % | 12.87 | % | |||||||||||||
| Total capital ratio (4) | 13.81 | % | 13.55 | % | 14.12 | % | |||||||||||||
| Tier 1 leverage ratio (4) | 10.33 | % | 10.80 | % | 10.50 | % | |||||||||||||
| (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) Capital ratios for the Company include the benefit of $26.8 million net proceeds from the sale of 2,738,096 shares of common stock in the second quarter of 2017. | |||||||||||||||||||
| (4) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. The capital ratios for 2016 were impacted by increased average total assets, the addition of $1.8 million of core deposit intangible and $665 thousand of goodwill recorded in conjunction with the acquisition of five branches in March of 2016. | |||||||||||||||||||
| (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 December 31, 2017, the Company had total consolidated assets of $1.3 billion, gross loans of $879.8 million, allowance for loan and lease losses (“ALLL”) of $11.9 million, total deposits of $1.1 billion, and shareholders’ equity of $127.3 million.
| TABLE 2 | ||||||||||||||||||||||||||||
| LOAN BALANCES BY TYPE – UNAUDITED | ||||||||||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||||||||||
| At December 31, | At September 30, | |||||||||||||||||||||||||||
| % of | % of | Change | % of | |||||||||||||||||||||||||
| 2017 | Total | 2016 | Total | Amount | % | 2017 | Total | |||||||||||||||||||||
| Commercial | $ | 149,088 | 17 | % | $ | 153,844 | 19 | % | $ | (4,756 | ) | (3 | ) | % | $ | 147,212 | 18 | % | ||||||||||
| Real estate – construction and land development | 15,902 | 2 | 36,792 | 5 | (20,890 | ) | (57 | ) | % | 14,700 | 2 | |||||||||||||||||
| Real estate – commercial non-owner occupied | 377,668 | 43 | 292,615 | 36 | 85,053 | 29 | % | 333,766 | 40 | |||||||||||||||||||
| Real estate – commercial owner occupied | 185,340 | 21 | 167,335 | 21 | 18,005 | 11 | % | 183,424 | 22 | |||||||||||||||||||
| Real estate – residential – ITIN | 41,188 | 5 | 45,566 | 6 | (4,378 | ) | (10 | ) | % | 42,063 | 5 | |||||||||||||||||
| Real estate – residential – 1-4 family mortgage | 30,377 | 3 | 20,425 | 3 | 9,952 | 49 | % | 21,119 | 3 | |||||||||||||||||||
| Real estate – residential – equity lines | 30,347 | 3 | 35,953 | 4 | (5,606 | ) | (16 | ) | % | 31,158 | 4 | |||||||||||||||||
| Consumer and other | 49,925 | 6 | 51,681 | 6 | (1,756 | ) | (3 | ) | % | 51,432 | 6 | |||||||||||||||||
| Gross loans | 879,835 | 100 | % | 804,211 | 100 | % | 75,624 | 9 | % | 824,874 | 100 | % | ||||||||||||||||
| Deferred fees and costs | 1,710 | 1,324 | 386 | 1,770 | ||||||||||||||||||||||||
| Loans, net of deferred fees and costs | 881,545 | 805,535 | 76,010 | 826,644 | ||||||||||||||||||||||||
| Allowance for loan and lease losses | (11,925 | ) | (11,544 | ) | (381 | ) | (11,692 | ) | ||||||||||||||||||||
| Net loans | $ | 869,620 | $ | 793,991 | $ | 75,629 | $ | 814,952 | ||||||||||||||||||||
| Average yield on loans during the quarter | 4.77 | % | 4.69 | % | 0.08 | 4.87 | % | |||||||||||||||||||||
The Company recorded gross loan balances of $879.8 million at December 31, 2017, compared with $804.2 million and $824.9 million at December 31, 2016 and September 30, 2017, respectively, an increase of $75.6 million and $55.0 million, respectively. The increase in gross loans compared to the same period a year ago and the prior period was driven by organic loan originations and is the result of investments in our SBA division and in our expanded Sacramento commercial banking group.
Average loan balances were $839.0 million for the quarter ended December 31, 2017, compared with $778.5 for the quarter ended December 31, 2016 and $805.1 million for the quarter ended September 30, 2017, an increase of $60.5 million or 8% and an increase of $33.9 million or 17% annualized, respectively.
The average yield on loans during the quarter was 4.77% compared to 4.69% and 4.87% for the quarters ended December 31, 2016 and September 30, 2017, respectively. The prior quarter included $161 thousand of interest income from a nonaccrual loan that was repaid during the quarter and enhanced the average yield by eight basis points.
| TABLE 3 | |||||||||||||||||||||||||||||
| CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES – UNAUDITED | |||||||||||||||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||||||||
| At December 31, | At September 30, | ||||||||||||||||||||||||||||
| % of | % of | Change | % of | ||||||||||||||||||||||||||
| 2017 | Total | 2016 | Total | Amount | % | 2017 | Total | ||||||||||||||||||||||
| Cash and due from banks | $ | 17,979 | 5 | % | $ | 16,419 | 6 | % | $ | 1,560 | 10 | % | $ | 19,929 | 6 | % | |||||||||||||
| Interest-bearing deposits in other banks | 48,991 | 15 | 51,988 | 19 | (2,997 | ) | (6 | ) | % | 65,702 | 19 | ||||||||||||||||||
| Total cash and cash equivalents | 66,970 | 20 | 68,407 | 25 | (1,437 | ) | (2 | ) | % | 85,631 | 25 | ||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||||||||
| U.S. government and agencies | 40,369 | 12 | 10,354 | 4 | 30,015 | 290 | % | 36,474 | 10 | ||||||||||||||||||||
| Obligations of state and political subdivisions | 78,844 | 24 | 59,428 | 22 | 19,416 | 33 | % | 53,850 | 15 | ||||||||||||||||||||
| Residential mortgage backed securities and collateralized mortgage obligations | 114,592 | 34 | 69,604 | 24 | 44,988 | 65 | % | 105,224 | 31 | ||||||||||||||||||||
| Corporate securities | 4,992 | 1 | 16,116 | 6 | (11,124 | ) | (69 | ) | % | 6,968 | 2 | ||||||||||||||||||
| Commercial mortgage backed securities | 26,641 | 8 | 15,514 | 6 | 11,127 | 72 | % | 26,148 | 7 | ||||||||||||||||||||
| Other asset backed securities | 2,516 | 1 | 4,158 | 2 | (1,642 | ) | (39 | ) | % | 3,830 | 1 | ||||||||||||||||||
| Total investment securities – AFS | 267,954 | 80 | 175,174 | 64 | 92,780 | 53 | % | 232,494 | 66 | ||||||||||||||||||||
| Obligations of state and political subdivisions – HTM | — | 0 | 31,187 | 11 | (31,187 | ) | (100 | ) | % | 30,724 | 9 | ||||||||||||||||||
| Total investment securities – AFS and HTM | 267,954 | 80 | 206,361 | 75 | 61,593 | 30 | % | 263,218 | 75 | ||||||||||||||||||||
| Total cash, cash equivalents and investment securities | $ | 334,924 | 100 | % | $ | 274,768 | 100 | % | $ | 60,156 | 22 | % | $ | 348,849 | 100 | % | |||||||||||||
| Average yield on interest-bearing due from banks and investment securities during the quarter – (nominal) | 2.30 | % | 1.95 | % | 0.35 | 2.19 | % | ||||||||||||||||||||||
As of December 31, 2017, we maintained noninterest-bearing cash positions of $18.0 million and interest-bearing deposits of $49.0 million at the Federal Reserve Bank and correspondent banks. During the fourth quarter of 2017, we deployed liquidity provided by the sale of common stock and strong organic deposit growth into organic loan originations, and AFS securities.
During the fourth quarter, we reclassified the entire HTM securities portfolio to AFS. At the date of the reclassification the HTM securities portfolio was recorded at an amortized cost of $30.3 million. The reclassification of securities between categories was accounted for at fair value. At the date of the reclassification, the securities had a fair value of $31.4 million and unrealized holding gains of $1.2 million which were recorded in other comprehensive income.
Investment securities totaled $268.0 million at December 31, 2017, compared with $206.4 million and $263.2 million at December 31, 2016 and September 30, 2017, respectively. Our investment securities portfolio provides us with a secondary source of liquidity to fund higher yielding asset opportunities, such as loan originations. During the fourth quarter of 2017, we purchased 20 securities with a par value of $29.6 million and weighted average yield of 2.71% and sold 19 securities with a par value of $16.0 million and weighted average yield of 2.33%. The sales activity on available-for-sale securities resulted in $2 thousand in net realized losses. There were no purchases or sales of held-to-maturity securities during the fourth quarter of 2017. During the same period, we received $7.4 million in proceeds from principal payments, calls and maturities within the investment securities portfolio. Average securities balances and weighted average tax equivalent yields for the quarters ended December 31, 2017 and 2016 were $272.0 million and 2.94% compared to $197.2 million and 3.02%, respectively.
At December 31, 2017, our net unrealized losses on available-for-sale investment securities were $452 thousand compared with net unrealized losses of $1.3 million and net unrealized gains of $630 thousand at December 31, 2016 and September 30, 2017, respectively. The changes in the net unrealized gain or loss on the investment securities portfolio are primarily due to changes in market interest rates and the reclassification of all HTM securities to AFS during the fourth quarter of 2017.
| TABLE 4 | ||||||||||||||||||||||||||||
| DEPOSITS BY TYPE – UNAUDITED | ||||||||||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||||||||||
| At December 31, | At September 30, | |||||||||||||||||||||||||||
| % of | % of | Change | % of | |||||||||||||||||||||||||
| 2017 | Total | 2016 | Total | Amount | % | 2017 | Total | |||||||||||||||||||||
| Demand – noninterest-bearing | $ | 305,650 | 28 | % | $ | 270,398 | 27 | % | $ | 35,252 | 13 | % | $ | 316,814 | 30 | % | ||||||||||||
| Demand – interest-bearing | 496,990 | 45 | 405,569 | 40 | 91,421 | 23 | % | 433,466 | 41 | |||||||||||||||||||
| Total demand | 802,640 | 73 | 675,967 | 67 | 126,673 | 19 | % | 750,280 | 71 | |||||||||||||||||||
| Savings | 110,837 | 10 | 113,309 | 11 | (2,472 | ) | (2 | ) | % | 111,962 | 11 | |||||||||||||||||
| Total non-maturing deposits | 913,477 | 83 | 789,276 | 78 | 124,201 | 16 | % | 862,242 | 82 | |||||||||||||||||||
| Certificates of deposit | 189,255 | 17 | 215,390 | 22 | (26,135 | ) | (12 | ) | % | 200,543 | 18 | |||||||||||||||||
| Total deposits | $ | 1,102,732 | 100 | % | $ | 1,004,666 | 100 | % | $ | 98,066 | 10 | % | $ | 1,062,785 | 100 | % | ||||||||||||
| Average rate on interest-bearing deposits during the quarter | 0.42 | % | 0.40 | % | 0.02 | 0.43 | % | |||||||||||||||||||||
| Average rate on all deposits during the quarter | 0.30 | % | 0.29 | % | 0.01 | 0.31 | % | |||||||||||||||||||||
Total deposits at December 31, 2017, increased $98.1 million or 10% to $1.1 billion compared to December 31, 2016, and increased $39.9 million or 15% annualized compared to September 30, 2017. Total non-maturing deposits increased $124.2 million or 16% compared to the same date a year ago and increased $51.2 million or 24% annualized compared to September 30, 2017. Certificates of deposit decreased $26.1 million or 12% compared to the same date a year ago and decreased $11.2 million or 23% annualized compared to September 30, 2017.
| TABLE 5 | ||||||||
| WHOLESALE AND BROKERED DEPOSITS – UNAUDITED | ||||||||
| (amounts in thousands) | ||||||||
| At December 31, | At September 30, | |||||||
| 2017 | 2016 | 2017 | ||||||
| CDARS / ICS reciprocal brokered deposits | $ | 66,279 | $ | 65,212 | $ | 56,203 | ||
| Online listing service wholesale time deposits | 36,060 | 48,900 | 37,293 | |||||
| Total wholesale and brokered deposits | $ | 102,339 | $ | 114,112 | $ | 93,496 | ||
In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $66.3 million, $65.2 million and $56.2 million at December 31, 2017, December 31, 2016 and September 30, 2017, respectively.
INCOME STATEMENT OVERVIEW
| TABLE 6 | ||||||||||||||||||||||||
| SUMMARY INCOME STATEMENT – UNAUDITED | ||||||||||||||||||||||||
| (amounts in thousands, except per share data) | ||||||||||||||||||||||||
| For The Three Months Ended | ||||||||||||||||||||||||
| December 31, | Change | September 30, | Change | |||||||||||||||||||||
| 2017 | 2016 | Amount | % | 2017 | Amount | % | ||||||||||||||||||
| Interest income | $ | 12,047 | $ | 10,518 | $ | 1,529 | 15 | % | $ | 11,765 | $ | 282 | 2 | % | ||||||||||
| Interest expense | 1,178 | 1,084 | 94 | 9 | % | 1,181 | (3 | ) | — | % | ||||||||||||||
| Net interest income | 10,869 | 9,434 | 1,435 | 15 | % | 10,584 | 285 | 3 | % | |||||||||||||||
| Provision for loan and lease losses |
450 | — | 450 | 100 | % | — | 450 | 100 | % | |||||||||||||||
| Noninterest income | 1,282 | 1,260 | 22 | 2 | % | 1,076 | 206 | 19 | % | |||||||||||||||
| Noninterest expense | 7,891 | 7,825 | 66 | 1 | % | 7,357 | 534 | 7 | % | |||||||||||||||
| Income before provision for income taxes |
3,810 | 2,869 | 941 | 33 | % | 4,303 | (493 | ) | (11 | ) | % | |||||||||||||
| Provision for income taxes: | ||||||||||||||||||||||||
| Net deferred tax asset write-down | 2,490 | — | 2,490 | 100 | % | — | 2,490 | 100 | % | |||||||||||||||
| Provision for income taxes from operations | 1,313 | 572 | 741 | 130 | % | 1,427 | (114 | ) | (8 | ) | % | |||||||||||||
| Total provision for income taxes | 3,803 | 572 | 3,231 | 565 | % | 1,427 | 2,376 | 167 | % | |||||||||||||||
| Net income | $ | 7 | $ | 2,297 | $ | (2,290 | ) | (100 | ) | % | $ | 2,876 | $ | (2,869 | ) | (100 | ) | % | ||||||
| Basic earnings per share | $ | — | $ | 0.17 | $ | (0.17 | ) | (100 | ) | % | $ | 0.18 | $ | (0.18 | ) | (100 | ) | % | ||||||
| Average basic shares | 16,195 | 13,370 | 2,825 | 21 | % | 16,191 | 4 | — | % | |||||||||||||||
| Diluted earnings per share | $ | — | $ | 0.17 | $ | (0.17 | ) | (100 | ) | % | $ | 0.18 | $ | (0.18 | ) | (100 | ) | % | ||||||
| Average diluted shares | 16,306 | 13,476 | 2,830 | 21 | % | 16,288 | 18 | — | % | |||||||||||||||
| Dividends declared per common share | $ | 0.03 | $ | 0.03 | $ | — | — | % | $ | 0.03 | $ | — | — | % | ||||||||||
Fourth Quarter of 2017 Compared With Fourth Quarter of 2016
Income before provision for income taxes for the fourth quarter of 2017 increased $941 thousand compared to the fourth quarter of 2016. In the current quarter, net interest income was $1.4 million higher and noninterest income was $22 thousand higher. These positive changes were offset by provision for loan and lease losses that was $450 thousand higher and noninterest expense that was $66 thousand higher.
Net Interest Income
Net interest income increased $1.4 million compared to the same period a year ago.
Interest income for the three months ended December 31, 2017 increased $1.5 million or 15% to $12.0 million. Interest and fees on loans increased $902 thousand due to a $60.5 million increase in average loan balances and an eight basis point increase in the average yield on the loan portfolio. Interest on securities increased $513 thousand due to a $74.8 million increase in average securities balances and a six basis point increase in the average yield on the securities portfolio. Interest on interest-bearing deposits due from banks increased $114 thousand primarily due to a 75 basis point increase in average yield resulting from increased fed funds rates.
Interest expense for the fourth quarter of 2017 increased $94 thousand or 9% to $1.2 million. The increase was primarily caused by a two basis point increase in the average rate paid on interest-bearing deposits and a $60.7 million increase in average interest-bearing demand deposits.
Provision for loan and lease loss
During the three months ended December 31, 2017 the company recorded a provision for loan and lease losses of $450 thousand reflecting growth in the loan portfolio. There was no provision for loan and lease losses during the fourth quarter of 2016.
Noninterest Income
Noninterest income for the three months ended December 31, 2017 increased $22 thousand compared to the fourth quarter for 2016. Net Gains on sale of OREO properties increased $336 thousand while FHLB dividends decreased $272 thousand (a special dividend was recorded during the prior year).
Noninterest Expense
Noninterest expense for the three months ended December 31, 2017 increased $66 thousand compared to the same period a year previous. The increase in noninterest expense was primarily due to the following negative items:
- Compensation costs increased $286 thousand
- Premises and equipment costs increased $51 thousand
These increases were partially offset by the following positive items:
- Professional service fees decreased $202 thousand
- Data processing fees decreased $78 thousand
The Company’s efficiency ratio was 64.9% for the fourth quarter of 2017 compared to 73.2% during the same period in 2016.
Income Tax Provision
For the three months ended December 31, 2017, our income tax provision of $3.8 million on pre-tax income of $3.8 million was an effective tax rate of 99.8%. The income tax provision was composed of a $2.5 million write-down of our deferred tax assets and a $1.3 million tax provision on pre-tax net operating income of $3.8 million (34.5%). The $2.5 million write-down occurred when we revalued our deferred tax assets and liabilities to account for the future impact of lower corporate tax rates resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017.
This compares with a provision for income taxes of $572 thousand (19.9% effective tax rate) for the three months ended December 31, 2016. This effective tax rate benefited from a decrease in the amortization of our investments in affordable housing partnerships.
Fourth Quarter of 2017 Compared With Third Quarter of 2017
Income before provision for income taxes for the fourth quarter of 2017 decreased $493 thousand compared to the third quarter of 2017. In the current quarter, net interest income was $285 thousand higher and noninterest income was $206 thousand higher. These positive changes were offset by a provision for loan and lease losses that was $450 thousand higher and noninterest expenses that were $534 thousand higher.
Net Interest Income
Net interest income increased $285 thousand over the prior quarter.
Interest income for the three months ended December 31, 2017 increased $282 thousand or 2% to $12.0 million. Interest and fees on loans increased $196 thousand due to a $33.9 million increase in average loan balances. Interest on investment securities increased $140 thousand due to a $15.3 million increase in average securities balances and a seven basis point increase in average yield on the securities portfolio. Interest on interest-bearing deposits due from banks decreased $54 thousand due to a $17.3 million decrease in average balances.
Interest expense for the three months ended December 31, 2017 decreased $3 thousand or less than 1% to $1.2 million. The average rate paid on interest-bearing deposits decreased 1 basis point to 42 basis points. Average interest-bearing demand deposit balances increased $24.3 million while average certificate of deposit balances decreased $9.2 million.
Provision for loan and lease loss
During the three months ended December 31, 2017 the company recorded a provision for loan and lease losses of $450 thousand reflecting growth in the loan portfolio. There was no provision for loan and lease losses during the prior quarter.
Noninterest Income
Noninterest income for the three months ended December 31, 2017 increased $206 thousand. During the current quarter gains on sale of OREO increased $265 thousand.
Noninterest Expense
Noninterest expense for the three months ended December 31, 2017 increased $534 thousand compared to the third quarter of 2017. The increase in noninterest expense included the following items:
- Loan origination cost deferrals decreased $110 thousand
- Employee incentive and other compensation-related costs increased $122 thousand
- Postage and supplies increased $80 thousand due to costs associated with the annual deposit account disclosures
- Recruiting costs increased $82 thousand
The Company’s efficiency ratio was 64.9% for the fourth quarter of 2017 compared to 63.1% during the prior quarter.
Income Tax Provision
For the three months ended December 31, 2017, our income tax provision of $3.8 million on pre-tax income of $3.8 million was an effective tax rate of 99.8%. The income tax provision was composed of a $2.5 million write-down of our deferred tax assets and a $1.3 million tax provision on pre-tax net operating income of $3.8 million (34.5%). The $2.5 million write-down occurred when we revalued our deferred tax assets and liabilities to account for the future impact of lower corporate tax rates resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017. This compares with a provision for income taxes of $1.4 million (33.2% effective tax rate) for the prior quarter.
Earnings Per Share
Diluted earnings per share were $0.00 for the three months ended December 31, 2017. Excluding the $2.5 million negative net impact of the net deferred tax asset revaluation, diluted earnings per share would have been $0.15 for the three months ended December 31, 2017. This compared with diluted earnings per share of $0.17 for the same period a year ago and diluted earnings per share of $0.18 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in table 6 and the table of “Selected Non-GAAP Financial Information” presented earlier in this press release.
| TABLE 7a | |||||||||||||||||||||||||||
| NET INTEREST MARGIN – UNAUDITED | |||||||||||||||||||||||||||
| (amounts in thousands) | |||||||||||||||||||||||||||
| For The Three Months Ended | |||||||||||||||||||||||||||
| December 31, 2017 | December 31, 2016 | September 30, 2017 | |||||||||||||||||||||||||
| Average | Yield / | Average | Yield / | Average | Yield / | ||||||||||||||||||||||
| (Amounts in thousands) | Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | ||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||
| Net loans (2) | $ | 839,004 | $ | 10,083 | 4.77 | % | $ | 778,458 | $ | 9,181 | 4.69 | % | $ | 805,144 | $ | 9,887 | 4.87 | % | |||||||||
| Taxable securities | 199,849 | 1,211 | 2.40 | % | 124,881 | 705 | 2.25 | % | 179,362 | 1,049 | 2.32 | % | |||||||||||||||
| Tax-exempt securities | 72,152 | 529 | 2.91 | % | 72,288 | 522 | 2.87 | % | 77,303 | 551 | 2.83 | % | |||||||||||||||
| Interest-bearing deposits in other banks | 67,032 | 224 | 1.33 | % | 75,760 | 110 | 0.58 | % | 84,323 | 278 | 1.31 | % | |||||||||||||||
| Average interest-earning assets | 1,178,037 | 12,047 | 4.06 | % | 1,051,387 | 10,518 | 3.98 | % | 1,146,132 | 11,765 | 4.07 | % | |||||||||||||||
| Cash and due from banks | 19,783 | 16,953 | 19,143 | ||||||||||||||||||||||||
| Premises and equipment, net | 14,948 | 16,331 | 15,362 | ||||||||||||||||||||||||
| Other assets | 39,192 | 41,363 | 40,263 | ||||||||||||||||||||||||
| Average total assets | $ | 1,251,960 | $ | 1,126,034 | $ | 1,220,900 | |||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||
| Interest-bearing demand | $ | 459,451 | 216 | 0.19 | % | $ | 398,749 | 135 | 0.13 | % | $ | 436,614 | 196 | 0.18 | % | ||||||||||||
| Savings deposits | 111,725 | 54 | 0.19 | % | 111,755 | 45 | 0.16 | % | 110,305 | 52 | 0.19 | % | |||||||||||||||
| Certificates of deposit | 194,886 | 547 | 1.11 | % | 217,463 | 543 | 0.99 | % | 204,044 | 567 | 1.10 | % | |||||||||||||||
| Net term debt | 17,211 | 285 | 6.57 | % | 18,975 | 298 | 6.25 | % | 17,804 | 292 | 6.51 | % | |||||||||||||||
| Junior subordinated debentures | 10,310 | 76 | 2.92 | % | 10,310 | 63 | 2.43 | % | 10,310 | 74 | 2.85 | % | |||||||||||||||
| Average interest-bearing liabilities | 793,583 | 1,178 | 0.59 | % | 757,252 | 1,084 | 0.57 | % | 779,077 | 1,181 | 0.60 | % | |||||||||||||||
| Noninterest-bearing demand | 316,961 | 261,600 | 303,314 | ||||||||||||||||||||||||
| Other liabilities | 12,554 | 12,856 | 11,935 | ||||||||||||||||||||||||
| Shareholders’ equity | 128,862 | 94,326 | 126,574 | ||||||||||||||||||||||||
| Average liabilities and shareholders’ equity | $ | 1,251,960 | $ | 1,126,034 | $ | 1,220,900 | |||||||||||||||||||||
| Net interest income and net interest margin (4) | $ | 10,869 | 3.66 | % | $ | 9,434 | 3.57 | % | $ | 10,584 | 3.66 | % | |||||||||||||||
| Tax equivalent net interest margin (3) | 3.75 | % | 3.67 | % | 3.76 | % | |||||||||||||||||||||
| (1) Interest income on loans is net of deferred fees and costs of approximately $123 thousand, $139 thousand, and $95 thousand for the three months ended December 31, 2017, and 2016 and September 30, 2017, respectively. | |||||||||||||||||||||||||||
| (2) Net loans includes average nonaccrual loans of $6.5 million, $10.0 million and $8.6 million for the three months ended December 31, 2017 and 2016 and September 30, 2017, respectively. | |||||||||||||||||||||||||||
| (3) Tax-exempt income has been adjusted to tax equivalent basis at a 34% tax rate. The amount of such adjustments was an addition to recorded income of approximately $273 thousand, $269 thousand and $284 thousand for the three months ended December 31, 2017 and 2016 and September 30, 2017, respectively. | |||||||||||||||||||||||||||
| (4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. | |||||||||||||||||||||||||||
| (5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result. | |||||||||||||||||||||||||||
| TABLE 7b | ||||||||||||||||||
| NET INTEREST MARGIN – UNAUDITED | ||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||
| For The Twelve Months Ended | ||||||||||||||||||
| December 31, 2017 | December 31, 2016 | |||||||||||||||||
| Average | Yield / | Average | Yield / | |||||||||||||||
| (Amounts in thousands) | Balance | Interest(1) | Rate (5) | Balance | Interest(1) | Rate (5) | ||||||||||||
| Interest-earning assets: | ||||||||||||||||||
| Net loans (2) | $ | 818,119 | $ | 39,112 | 4.78 | % | $ | 752,938 | $ | 35,435 | 4.71 | % | ||||||
| Taxable securities | 165,333 | 3,921 | 2.37 | % | 120,884 | 2,986 | 2.47 | % | ||||||||||
| Tax-exempt securities | 74,231 | 2,144 | 2.89 | % | 75,303 | 2,256 | 3.00 | % | ||||||||||
| Interest-bearing deposits in other banks | 66,872 | 772 | 1.15 | % | 58,668 | 332 | 0.57 | % | ||||||||||
| Average interest-earning assets | 1,124,555 | 45,949 | 4.09 | % | 1,007,793 | 41,009 | 4.07 | % | ||||||||||
| Cash and due from banks | 18,301 | 15,831 | ||||||||||||||||
| Premises and equipment, net | 15,567 | 15,078 | ||||||||||||||||
| Other assets | 39,828 | 41,048 | ||||||||||||||||
| Average total assets | $ | 1,198,251 | $ | 1,079,750 | ||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||
| Interest-bearing demand | $ | 434,705 | 744 | 0.17 | % | $ | 374,170 | 523 | 0.14 | % | ||||||||
| Savings deposits | 111,376 | 200 | 0.18 | % | 104,771 | 174 | 0.17 | % | ||||||||||
| Certificates of deposit | 205,648 | 2,188 | 1.06 | % | 221,074 | 2,179 | 0.99 | % | ||||||||||
| Net term debt | 18,283 | 1,168 | 6.39 | % | 37,286 | 1,667 | 4.47 | % | ||||||||||
| Junior subordinated debentures | 10,310 | 287 | 2.78 | % | 10,310 | 235 | 2.28 | % | ||||||||||
| Average interest-bearing liabilities | 780,322 | 4,587 | 0.59 | % | 747,611 | 4,778 | 0.64 | % | ||||||||||
| Noninterest-bearing demand | 289,735 | 226,368 | ||||||||||||||||
| Other liabilities | 12,293 | 13,217 | ||||||||||||||||
| Shareholders’ equity | 115,901 | 92,554 | ||||||||||||||||
| Average liabilities and shareholders’ equity | $ | 1,198,251 | $ | 1,079,750 | ||||||||||||||
| Net interest income and net interest margin (4) | $ | 41,362 | 3.68 | % | $ | 36,231 | 3.60 | % | ||||||||||
| Tax equivalent net interest margin (3) | 3.78 | % | 3.71 | % | ||||||||||||||
| (1) Interest income on loans is net of deferred fees and costs of approximately $546 thousand and $1.1 million for the year ended December 31, 2017 and 2016, respectively. | ||||||||||||||||||
| (2) Net loans includes average nonaccrual loans of $8.9 million and $10.6 million for the year ended December 31, 2017 and 2016, respectively. | ||||||||||||||||||
| (3) Tax-exempt income has been adjusted to tax equivalent basis at a 34% tax rate. The amount of such adjustments was an addition to recorded income of approximately $1.1 million and $1.2 million for the year ended December 31, 2017 and 2016, respectively. | ||||||||||||||||||
| (4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. | ||||||||||||||||||
| (5) Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result. | ||||||||||||||||||
| TABLE 8 | ||||||||||||||||||||||||
| ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS – UNAUDITED | ||||||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||||||
| For The Three Months Ended | ||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||||||||||||
| Beginning balance ALLL | $ | 11,692 | $ | 11,688 | $ | 11,641 | $ | 11,544 | $ | 11,849 | ||||||||||||||
| Provision for loan and lease losses | 450 | — | 300 | 200 | — | |||||||||||||||||||
| Loans charged-off | (451 | ) | (245 | ) | (359 | ) | (447 | ) | (386 | ) | ||||||||||||||
| Loan loss recoveries | 234 | 249 | 106 | 344 | 81 | |||||||||||||||||||
| Ending balance ALLL | $ | 11,925 | $ | 11,692 | $ | 11,688 | $ | 11,641 | $ | 11,544 | ||||||||||||||
| At December 31, | At September 30, | At June 30, | At March 31, | At December 31, | ||||||||||||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||||||||||||
| Nonaccrual loans: | ||||||||||||||||||||||||
| Commercial | $ | 1,603 | $ | 2,309 | $ | 2,410 | $ | 2,534 | $ | 2,749 | ||||||||||||||
| Real estate – commercial non-owner occupied | — | — | 1,196 | 1,196 | 1,196 | |||||||||||||||||||
| Real estate – commercial owner occupied | 600 | 617 | 639 | 654 | 784 | |||||||||||||||||||
| Real estate – residential – ITIN | 2,909 | 3,201 | 3,346 | 3,331 | 3,576 | |||||||||||||||||||
| Real estate – residential – 1-4 family mortgage | 606 | 626 | 653 | 1,337 | 1,914 | |||||||||||||||||||
| Real estate – residential – equity lines | 45 | 815 | 872 | 906 | 917 | |||||||||||||||||||
| Consumer and other | 36 | 37 | 38 | 39 | 250 | |||||||||||||||||||
| Total nonaccrual loans | 5,799 | 7,605 | 9,154 | 9,997 | 11,386 | |||||||||||||||||||
| Accruing troubled debt restructured loans: | ||||||||||||||||||||||||
| Commercial | 1,551 | 671 | 703 | 741 | 776 | |||||||||||||||||||
| Real estate – commercial non-owner occupied | 803 | 805 | 806 | 808 | 808 | |||||||||||||||||||
| Real estate – residential – ITIN | 4,614 | 4,655 | 4,712 | 4,761 | 5,033 | |||||||||||||||||||
| Real estate – residential – equity lines | 380 | 441 | 445 | 450 | 454 | |||||||||||||||||||
| Total accruing troubled debt restructured loans | 7,348 | 6,572 | 6,666 | 6,760 | 7,071 | |||||||||||||||||||
| All other accruing impaired loans | — | — | — | — | 337 | |||||||||||||||||||
| Total impaired loans | $ | 13,147 | $ | 14,177 | $ | 15,820 | $ | 16,757 | $ | 18,794 | ||||||||||||||
| Gross loans outstanding at period end | $ | 879,835 | $ | 824,874 | $ | 815,388 | $ | 810,194 | $ | 804,211 | ||||||||||||||
| Impaired loans to gross loans | 1.49 | % | 1.72 | % | 1.94 | % | 2.07 | % | 2.34 | % | ||||||||||||||
| Nonaccrual loans to gross loans | 0.66 | % | 0.92 | % | 1.12 | % | 1.23 | % | 1.42 | % | ||||||||||||||
| Allowance for loan and lease losses as a percent of: | ||||||||||||||||||||||||
| Gross loans | 1.36 | % | 1.42 | % | 1.43 | % | 1.44 | % | 1.44 | % | ||||||||||||||
| Nonaccrual loans | 205.64 | % | 153.74 | % | 127.68 | % | 116.44 | % | 101.39 | % | ||||||||||||||
| Impaired loans | 90.71 | % | 82.47 | % | 73.88 | % | 69.47 | % | 61.42 | % | ||||||||||||||
We continue to monitor credit quality and adjust the ALLL to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. A combination of net loan losses and loan portfolio growth supported management’s decision to record a provision of $450 thousand for the three months ended December 31, 2017. There were no provisions for loan and lease losses during the quarter ended September 30, 2017 or the quarter ended December 31, 2016. Our ALLL as a percentage of gross loans was 1.36% as of December 31, 2017 compared to 1.44% as of December 31, 2016 and 1.42% as of September 30, 2017. 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 December 31, 2017. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in future charges to the provision for loan and lease losses.
At December 31, 2017, the recorded investment in loans classified as impaired totaled $13.1 million, with a corresponding specific reserve of $1.2 million compared to impaired loans of $18.8 million with a corresponding specific reserve of $1.5 million at December 31, 2016 and impaired loans of $14.2 million, with a corresponding specific reserve of $918 thousand at September 30, 2017. The decrease in loans classified as impaired compared to the prior quarter is primarily due to one residential real estate equity loan that was paid off during the quarter. The increase in the specific reserve on impaired loans compared to the prior quarter was primarily due to one commercial loan.
| TABLE 9 | ||||||||||||||||||||
| TROUBLED DEBT RESTRUCTURINGS – UNAUDITED | ||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||
| At December 31, | At September 30, | At June 30, | At March 31, | At December 31, | ||||||||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||||||||
| Nonaccrual | $ | 3,581 | $ | 4,403 | $ | 4,630 | $ | 4,570 | $ | 4,995 | ||||||||||
| Accruing | 7,348 | 6,572 | 6,666 | 6,760 | 7,071 | |||||||||||||||
| Total troubled debt restructurings | $ | 10,929 | $ | 10,975 | $ | 11,296 | $ | 11,330 | $ | 12,066 | ||||||||||
| Troubled debt restructurings as a percentage of total gross loans | 1.24 | % | 1.33 | % | 1.39 | % | 1.40 | % | 1.50 | % | ||||||||||
There were no new troubled debt restructurings during the three months ended December 31, 2017. As of December 31, 2017, we had 116 restructured loans that qualified as troubled debt restructurings, of which 110 were performing according to their restructured terms.
| TABLE 10 | ||||||||||||||||||||
| NONPERFORMING ASSETS – UNAUDITED | ||||||||||||||||||||
| (amounts in thousands) | ||||||||||||||||||||
| At December 31, | At September 30, | At June 30, | At March 31, | At December 31, | ||||||||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||||||||
| Total nonaccrual loans | $ | 5,799 | $ | 7,605 | $ | 9,154 | $ | 9,997 | $ | 11,386 | ||||||||||
| 90 days past due and still accruing | — | — | — | — | — | |||||||||||||||
| Total nonperforming loans | 5,799 | 7,605 | 9,154 | 9,997 | 11,386 | |||||||||||||||
| Other real estate owned | 35 | 699 | 1,517 | 814 | 759 | |||||||||||||||
| Total nonperforming assets | $ | 5,834 | $ | 8,304 | $ | 10,671 | $ | 10,811 | $ | 12,145 | ||||||||||
| Nonperforming loans to gross loans | 0.66 | % | 0.92 | % | 1.12 | % | 1.23 | % | 1.42 | % | ||||||||||
| Nonperforming assets to total assets | 0.46 | % | 0.67 | % | 0.88 | % | 0.95 | % | 1.06 | % | ||||||||||
The December 31, 2017 OREO balance consists of one 1-4 family residential real estate property in the amount of $35 thousand. The decrease in the OREO balance compared to the prior quarter is due to the disposition of one nonfarm nonresidential property, one undeveloped commercial property and one 1-4 family residential property. Net gains on sale of OREO in the current quarter were $346 thousand compared to net gains of $10 thousand and $81 thousand in the same quarter a year ago and in the prior quarter, respectively. Net gains on sale of OREO property in the current quarter were primarily due to one nonfarm nonresidential property that had a carrying value of $565 thousand and sold for $923 thousand resulting in a gain of $358 thousand.
| TABLE 11 | ||||||||||||||||||||
| UNAUDITED CONSOLIDATED | ||||||||||||||||||||
| BALANCE SHEET | ||||||||||||||||||||
| (amounts in thousands, except per share data) | ||||||||||||||||||||
| At December 31, | At December 31, | Change | At September 30, | |||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and due from banks | $ | 17,979 | $ | 16,419 | $ | 1,560 | 10 | % | $ | 19,929 | ||||||||||
| Interest-bearing deposits in other banks | 48,991 | 51,988 | (2,997 | ) | (6 | ) | % | 65,702 | ||||||||||||
| Total cash and cash equivalents | 66,970 | 68,407 | (1,437 | ) | (2 | ) | % | 85,631 | ||||||||||||
| Securities available-for-sale, at fair value | 267,954 | 175,174 | 92,780 | 53 | % | 232,494 | ||||||||||||||
| Securities held-to-maturity, at amortized cost | — | 31,187 | (31,187 | ) | (100 | ) | % | 30,724 | ||||||||||||
| Loans, net of deferred fees and costs | 881,545 | 805,535 | 76,010 | 9 | % | 826,644 | ||||||||||||||
| Allowance for loan and lease losses | (11,925 | ) | (11,544 | ) | (381 | ) | 3 | % | (11,692 | ) | ||||||||||
| Net loans | 869,620 | 793,991 | 75,629 | 10 | % | 814,952 | ||||||||||||||
| Premises and equipment, net | 14,748 | 16,226 | (1,478 | ) | (9 | ) | % | 15,039 | ||||||||||||
| Other real estate owned | 35 | 759 | (724 | ) | (95 | ) | % | 699 | ||||||||||||
| Life insurance | 21,898 | 23,098 | (1,200 | ) | (5 | ) | % | 21,764 | ||||||||||||
| Deferred taxes | 6,505 | 9,542 | (3,037 | ) | (32 | ) | % | 8,751 | ||||||||||||
| Goodwill and core deposit intangible, net | 2,030 | 2,252 | (222 | ) | (10 | ) | % | 2,086 | ||||||||||||
| Other assets | 19,661 | 20,356 | (695 | ) | (3 | ) | % | 19,741 | ||||||||||||
| Total assets | $ | 1,269,421 | $ | 1,140,992 | $ | 128,429 | 11 | % | $ | 1,231,881 | ||||||||||
| Liabilities and shareholders’ equity: | ||||||||||||||||||||
| Demand – noninterest-bearing | $ | 305,650 | $ | 270,398 | $ | 35,252 | 13 | % | $ | 316,814 | ||||||||||
| Demand – interest-bearing | 496,990 | 405,569 | 91,421 | 23 | % | 433,466 | ||||||||||||||
| Savings | 110,837 | 113,309 | (2,472 | ) | (2 | ) | % | 111,962 | ||||||||||||
| Certificates of deposit | 189,255 | 215,390 | (26,135 | ) | (12 | ) | % | 200,543 | ||||||||||||
| Total deposits | 1,102,732 | 1,004,666 | 98,066 | 10 | % | 1,062,785 | ||||||||||||||
| Term debt | 17,096 | 18,917 | (1,821 | ) | (10 | ) | % | 17,700 | ||||||||||||
| Unamortized debt issuance costs | (138 | ) | (184 | ) | 46 | (25 | ) | % | (150 | ) | ||||||||||
| Net term debt | 16,958 | 18,733 | (1,775 | ) | (9 | ) | % | 17,550 | ||||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | — | — | % | 10,310 | ||||||||||||||
| Other liabilities | 12,157 | 13,177 | (1,020 | ) | (8 | ) | % | 12,831 | ||||||||||||
| Total liabilities | 1,142,157 | 1,046,886 | 95,271 | 9 | % | 1,103,476 | ||||||||||||||
| Shareholders’ equity: | ||||||||||||||||||||
| Common stock | 51,830 | 24,547 | 27,283 | 111 | % | 51,755 | ||||||||||||||
| Retained earnings | 75,700 | 70,218 | 5,482 | 8 | % | 76,179 | ||||||||||||||
| Accumulated other comprehensive (loss) income, net of tax | (266 | ) | (659 | ) | 393 | (60 | ) | % | 471 | |||||||||||
| Total shareholders’ equity | 127,264 | 94,106 | 33,158 | 35 | % | 128,405 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,269,421 | $ | 1,140,992 | $ | 128,429 | 11 | % | $ | 1,231,881 | ||||||||||
| Total interest-earning assets | $ | 1,198,942 | $ | 1,065,228 | $ | 133,714 | 13 | % | $ | 1,154,934 | ||||||||||
| Shares outstanding | 16,272 | 13,440 | 16,265 | |||||||||||||||||
| Book value per share | $ | 7.82 | $ | 7.00 | $ | 7.89 | ||||||||||||||
| Tangible book value per share (1) | $ | 7.70 | $ | 6.83 | $ | 7.77 | ||||||||||||||
| (1) 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 12 | |||||||||||||||||||||||||
| UNAUDITED | |||||||||||||||||||||||||
| INCOME STATEMENT | |||||||||||||||||||||||||
| (amounts in thousands, except per share data) | |||||||||||||||||||||||||
| For The Three Months Ended | For The Twelve Months Ended | ||||||||||||||||||||||||
| December 31, | Change | September 30, | December 31, | ||||||||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | 2017 | 2016 | |||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||
| Interest and fees on loans | $ | 10,083 | $ | 9,181 | $ | 902 | 10 | % | $ | 9,887 | $ | 39,112 | $ | 35,435 | |||||||||||
| Interest on securities | 1,211 | 705 | 506 | 72 | % | 1,049 | 3,921 | 2,986 | |||||||||||||||||
| Interest on tax-exempt securities | 529 | 522 | 7 | 1 | % | 551 | 2,144 | 2,256 | |||||||||||||||||
| Interest on deposits in other banks | 224 | 110 | 114 | 104 | % | 278 | 772 | 332 | |||||||||||||||||
| Total interest income | 12,047 | 10,518 | 1,529 | 15 | % | 11,765 | 45,949 | 41,009 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||
| Interest on demand deposits | 216 | 135 | 81 | 60 | % | 196 | 744 | 523 | |||||||||||||||||
| Interest on savings deposits | 54 | 45 | 9 | 20 | % | 52 | 200 | 174 | |||||||||||||||||
| Interest on certificates of deposit | 547 | 543 | 4 | 1 | % | 567 | 2,188 | 2,179 | |||||||||||||||||
| Interest on term debt | 285 | 298 | (13 | ) | (4 | ) | % | 292 | 1,168 | 1,667 | |||||||||||||||
| Interest on other borrowings | 76 | 63 | 13 | 21 | % | 74 | 287 | 235 | |||||||||||||||||
| Total interest expense | 1,178 | 1,084 | 94 | 9 | % | 1,181 | 4,587 | 4,778 | |||||||||||||||||
| Net interest income | 10,869 | 9,434 | 1,435 | 15 | % | 10,584 | 41,362 | 36,231 | |||||||||||||||||
| Provision for loan and lease losses | 450 | — | 450 | 100 | % | — | 950 | — | |||||||||||||||||
| Net interest income after provision for loan and lease losses | 10,419 | 9,434 | 985 | 10 | % | 10,584 | 40,412 | 36,231 | |||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||
| Service charges on deposit accounts | 141 | 120 | 21 | 18 | % | 132 | 542 | 413 | |||||||||||||||||
| ATM and point of sale | 266 | 281 | (15 | ) | (5 | ) | % | 273 | 1,093 | 995 | |||||||||||||||
| Payroll and benefit processing fees | 173 | 161 | 12 | 7 | % | 147 | 658 | 593 | |||||||||||||||||
| Life insurance | 135 | 152 | (17 | ) | (11 | ) | % | 134 | 1,050 | 613 | |||||||||||||||
| (Loss) gain on investment securities, net | (2 | ) | 52 | (54 | ) | (104 | ) | % | 38 | 137 | 244 | ||||||||||||||
| Impairment losses on investment securities | — | — | — | — | % | — | — | (546 | ) | ||||||||||||||||
| Federal Home Loan Bank of San Francisco dividends | 81 | 353 | (272 | ) | (77 | ) | % | 80 | 318 | 644 | |||||||||||||||
| Gain on sale of OREO | 346 | 10 | 336 | 3,360 | % | 81 | 368 | (109 | ) | ||||||||||||||||
| Other income | 142 | 131 | 11 | 8 | % | 191 | 658 | 639 | |||||||||||||||||
| Total noninterest income | 1,282 | 1,260 | 22 | 2 | % | 1,076 | 4,824 | 3,486 | |||||||||||||||||
| TABLE 12 – CONTINUED | |||||||||||||||||||||||
| UNAUDITED | |||||||||||||||||||||||
| INCOME STATEMENT | |||||||||||||||||||||||
| (amounts in thousands, except per share data) | |||||||||||||||||||||||
| For The Three Months Ended | For The Twelve Months Ended | ||||||||||||||||||||||
| December 31, | Change | September 30, | December 31, | ||||||||||||||||||||
| 2017 | 2016 | $ | % | 2017 | 2017 | 2016 | |||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| Salaries and related benefits | 4,523 | 4,237 | 286 | 7 | % | 4,291 | 17,819 | 16,425 | |||||||||||||||
| Occupancy and equipment | 1,073 | 1,022 | 51 | 5 | % | 1,067 | 4,242 | 3,869 | |||||||||||||||
| Federal Deposit Insurance Corporation insurance premium | 88 | 102 | (14 | ) | (14 | ) | % | 78 | 318 | 615 | |||||||||||||
| Data processing fees | 455 | 533 | (78 | ) | (15 | ) | % | 437 | 1,749 | 1,675 | |||||||||||||
| Professional service fees | 279 | 481 | (202 | ) | (42 | ) | % | 276 | 1,398 | 1,690 | |||||||||||||
| Telecommunications | 226 | 206 | 20 | 10 | % | 219 | 879 | 751 | |||||||||||||||
| Branch acquisition costs | — | — | — | — | % | — | — | 580 | |||||||||||||||
| Loss on cancellation of interest rate swap | — | — | — | — | % | — | — | 2,325 | |||||||||||||||
| Other expenses | 1,247 | 1,244 | 3 | — | % | 989 | 4,559 | 4,570 | |||||||||||||||
| Total noninterest expense | 7,891 | 7,825 | 66 | 1 | % | 7,357 | 30,964 | 32,500 | |||||||||||||||
| Income before provision for income taxes | 3,810 | 2,869 | 941 | 33 | % | 4,303 | 14,272 | 7,217 | |||||||||||||||
| Provision for income taxes: | |||||||||||||||||||||||
| Net deferred tax asset write-down | 2,490 | — | 2,490 | 100 | % | — | 2,490 | 363 | |||||||||||||||
| Provision for income taxes from operations | 1,313 | 572 | 741 | 130 | % | 1,427 | 4,438 | 1,595 | |||||||||||||||
| Total provision for income taxes | 3,803 | 572 | 3,231 | 565 | % | 1,427 | 6,928 | 1,958 | |||||||||||||||
| Net income | $ | 7 | $ | 2,297 | $ | (2,290 | ) | (100 | ) | % | $ | 2,876 | $ | 7,344 | $ | 5,259 | |||||||
| Basic earnings per share | $ | — | $ | 0.17 | $ | (0.17 | ) | (100 | ) | % | $ | 0.18 | $ | 0.48 | $ | 0.39 | |||||||
| Average basic shares | 16,195 | 13,370 | 2,825 | 21 | % | 16,191 | 15,207 | 13,367 | |||||||||||||||
| Diluted earnings per share | $ | — | $ | 0.17 | $ | (0.17 | ) | (100 | ) | % | $ | 0.18 | $ | 0.48 | $ | 0.39 | |||||||
| Average diluted shares | 16,306 | 13,476 | 2,830 | 21 | % | 16,288 | 15,310 | 13,425 | |||||||||||||||
| TABLE 13 | ||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED | ||||||||||||
| ANNUAL AVERAGE BALANCE SHEETS | ||||||||||||
| (amounts in thousands) | ||||||||||||
| For The Twelve Months Ended | ||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||
| 2017 | 2016 | 2015 | 2014 | |||||||||
| Earning assets: | ||||||||||||
| Loans | $ | 818,119 | $ | 752,938 | $ | 699,227 | $ | 625,166 | ||||
| Taxable securities | 165,333 | 120,884 | 120,897 | 147,916 | ||||||||
| Tax exempt securities | 74,231 | 75,303 | 77,089 | 83,973 | ||||||||
| Interest-bearing deposits in other banks | 66,872 | 58,668 | 30,323 | 56,465 | ||||||||
| Total earning assets | 1,124,555 | 1,007,793 | 927,536 | 913,520 | ||||||||
| Cash and due from banks | 18,301 | 15,831 | 11,220 | 11,246 | ||||||||
| Premises and equipment, net | 15,567 | 15,078 | 11,552 | 12,105 | ||||||||
| Other assets | 39,828 | 41,048 | 42,423 | 36,936 | ||||||||
| Total assets | $ | 1,198,251 | $ | 1,079,750 | $ | 992,731 | $ | 973,807 | ||||
| Liabilities and shareholders’ equity: | ||||||||||||
| Demand – noninterest-bearing | $ | 289,735 | $ | 226,368 | $ | 156,578 | $ | 139,792 | ||||
| Demand – interest-bearing | 434,705 | 374,170 | 283,105 | 272,383 | ||||||||
| Savings | 111,376 | 104,771 | 92,659 | 91,108 | ||||||||
| Certificates of deposit | 205,648 | 221,074 | 238,626 | 259,445 | ||||||||
| Total deposits | 1,041,464 | 926,383 | 770,968 | 762,728 | ||||||||
| Net term debt | 18,283 | 37,286 | 88,874 | 77,534 | ||||||||
| Junior subordinated debentures | 10,310 | 10,310 | 10,310 | 15,239 | ||||||||
| Other liabilities | 12,293 | 13,217 | 16,588 | 15,934 | ||||||||
| Total liabilities | 1,082,350 | 987,196 | 886,740 | 871,435 | ||||||||
| Shareholders’ equity | 115,901 | 92,554 | 105,991 | 102,372 | ||||||||
| Liabilities & shareholders’ equity | $ | 1,198,251 | $ | 1,079,750 | $ | 992,731 | $ | 973,807 | ||||
| TABLE 14 | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED | |||||||||||||||
| QUARTERLY AVERAGE BALANCE SHEETS | |||||||||||||||
| (amounts in thousands) | |||||||||||||||
| For The Three Months Ended | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||
| Earning assets: | |||||||||||||||
| Loans | $ | 839,004 | $ | 805,144 | $ | 821,321 | $ | 806,793 | $ | 778,458 | |||||
| Taxable securities | 199,849 | 179,362 | 143,705 | 137,582 | 124,881 | ||||||||||
| Tax exempt securities | 72,152 | 77,303 | 73,927 | 73,524 | 72,288 | ||||||||||
| Interest-bearing deposits in other banks | 67,032 | 84,323 | 58,691 | 57,140 | 75,760 | ||||||||||
| Total earning assets | 1,178,037 | 1,146,132 | 1,097,644 | 1,075,039 | 1,051,387 | ||||||||||
| Cash and due from banks | 19,783 | 19,143 | 17,364 | 16,873 | 16,953 | ||||||||||
| Premises and equipment, net | 14,948 | 15,362 | 15,809 | 16,165 | 16,331 | ||||||||||
| Other assets | 39,192 | 40,263 | 39,630 | 40,228 | 41,363 | ||||||||||
| Total assets | $ | 1,251,960 | $ | 1,220,900 | $ | 1,170,447 | $ | 1,148,305 | $ | 1,126,034 | |||||
| Liabilities and shareholders’ equity: | |||||||||||||||
| Demand – noninterest-bearing | $ | 316,961 | $ | 303,314 | $ | 275,039 | $ | 262,881 | $ | 261,600 | |||||
| Demand – interest-bearing | 459,451 | 436,614 | 421,888 | 420,416 | 398,749 | ||||||||||
| Savings | 111,725 | 110,305 | 109,857 | 113,647 | 111,755 | ||||||||||
| Certificates of deposit | 194,886 | 204,044 | 208,703 | 215,202 | 217,463 | ||||||||||
| Total deposits | 1,083,023 | 1,054,277 | 1,015,487 | 1,012,146 | 989,567 | ||||||||||
| Term debt | 17,211 | 17,804 | 19,539 | 18,598 | 18,975 | ||||||||||
| Junior subordinated debentures | 10,310 | 10,310 | 10,310 | 10,310 | 10,310 | ||||||||||
| Other liabilities | 12,554 | 11,935 | 12,256 | 12,431 | 12,856 | ||||||||||
| Total liabilities | 1,123,098 | 1,094,326 | 1,057,592 | 1,053,485 | 1,031,708 | ||||||||||
| Shareholders’ equity | 128,862 | 126,574 | 112,855 | 94,820 | 94,326 | ||||||||||
| Liabilities & shareholders’ equity | $ | 1,251,960 | $ | 1,220,900 | $ | 1,170,447 | $ | 1,148,305 | $ | 1,126,034 | |||||
About Bank of Commerce Holdings
Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, California and is the parent company for Redding Bank of Commerce which operates under two separate names (Redding Bank of Commerce and Sacramento Bank of Commerce, a division of Redding Bank of Commerce). The Bank is an FDIC-insured California banking corporation providing community banking and financial services through nine offices located in northern California. The Bank opened on October 22, 1982. The Company’s common stock is listed on the NASDAQ Global Market and trades under the symbol “BOCH”.
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 Schneck, Vice President and Senior Administrative Officer
Telephone Direct (530) 722-3959