Bank of Commerce Holdings

01/17/2020 | Press release | Distributed by Public on 01/17/2020 19:58

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

SACRAMENTO, Calif., Jan. 17, 2020 (GLOBE NEWSWIRE) -- Bank of Commerce Holdings (NASDAQ: BOCH) (the 'Company'), a $1.480 billion asset bank holding company and parent company of Merchants Bank of Commerce (the 'Bank'), today announced financial results for the quarter and the year ended December 31, 2019. Net income for the quarter ended December 31, 2019 was $4.4 million or $0.24 per share - diluted, compared with net income of $4.8 million or $0.30 per share - diluted for the same period of 2018. Net income for the year ended December 31, 2019 was $15.0 million or $0.83 per share - diluted, compared with net income of $15.7 million or $0.96 per share - diluted for the same period of 2018.

The current year includes the benefits of our January 31, 2019 acquisition of Merchants National Bank of Sacramento ('Merchants'). In May, we successfully converted all of Merchant's computer records onto our core system. As previously announced, the Company's subsidiary bank, which had been operating under multiple names, simultaneously changed the name for all locations to Merchants Bank of Commerce. During 2019 acquisition related costs totaled $2.2 million and costs related to the name change totaled $503 thousand. All significant costs for these two projects have now been absorbed.

Randall S. Eslick, President and CEO commented: 'We are pleased to report that 2019 was another solid year for the company. We are proud of our high quality assets, the successful acquisition and integration of Merchants National Bank and the widespread acceptance of our new name, Merchants Bank of Commerce. Thanks to the hard work of our dedicated employees our company remains well positioned for continued success.'

Financial highlights for the year ended December 31, 2019:

  • Net income of $15.0 million was a decrease of $769 thousand (5%) from $15.7 million earned during the same period in the prior year. Earnings of $0.83 per share - diluted was an decrease of $0.13 (14%) from $0.96 per share - diluted earned during the same period in the prior year and reflects the impact of the following:
    • 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants and
    • 90,501 shares of common stock repurchased during the fourth quarter of 2019 as part of our previously announced share repurchase program.
  • Net interest income increased $6.0 million (13%) to $53.5 million compared to $47.5 million for the same period in the prior year.
  • Net interest margin improved to 3.94% compared to 3.90% for the same period in the prior year.
  • Return on average assets decreased to 1.03% compared to 1.22% for the same period in the prior year.
  • Return on average equity decreased to 9.09% compared to 12.08% for the same period in the prior year.
  • Average loans totaled $1.021 billion, an increase of $105 million (12%) compared to average loans for the same period in the prior year.
  • Average earning assets totaled $1.360 billion, an increase of $140 million (11%) compared to average earning assets for the same period in the prior year.
  • Average deposits totaled $1.245 billion, an increase of $146 million (13%) compared to average deposits for the same period in the prior year.
    • Average non-maturing deposits totaled $1.084 billion, an increase of $154 million (17%) compared to the same period in the prior year.
    • Average certificates of deposit totaled $160.6 million, a decrease of $7.6 million (5%) compared to same period in the prior year.
  • The Company's efficiency ratio was 64.5% compared to 62.5% during the same period in the prior year.
    • The Company's efficiency ratio of 64.5% for 2019 includes $2.2 million in acquisition costs and $503 thousand in name change costs. The efficiency ratio excluding these non-recurring costs is 59.9%.
    • The Company's efficiency ratio of 62.5% for 2018 includes $844 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs is 60.8%.
  • Nonperforming assets at December 31, 2019 totaled $5.7 million or 0.38% of total assets, an increase of $1.5 million since December 31, 2018. The increase was primarily caused by loans to one commercial real estate borrower that were moved to nonaccrual and had zero calculated impairment at December 31, 2019.
  • Book value per common share was $9.62 at December 31, 2019 compared to $8.47 at December 31, 2018.
  • Tangible book value per common share was $8.71 at December 31, 2019 compared to $8.36 at December 31, 2018.

Financial highlights for the fourth quarter of 2019:

  • Net income of $4.4 million ($0.24 per share - diluted) was a decrease of $470 thousand (10%) from $4.8 million ($0.30 per share - diluted) earned during the same period in the prior year and reflects the impact of the following:
    • 1,834,142 shares of common stock issued during the first quarter of 2019 as part of our acquisition of Merchants and
    • 90,501 shares of common stock repurchased during the fourth quarter of 2019 as part of our previously announced share repurchase program.
  • Net interest income increased $820 thousand (7%) to $13.3 million compared to $12.5 million for the same period in the prior year.
  • Net interest margin decreased to 3.80% compared to 3.93% for the same period in the prior year.
  • Return on average assets decreased to 1.16% compared to 1.44% for the same period in the prior year.
  • Return on average equity decreased to 10.06% compared to 14.32% for the same period in the prior year.
  • Average loans totaled $1.032 billion, an increase of $108 million (12%) compared to average loans for the same period in the prior year.
  • Average earning assets totaled $1.390 billion, an increase of $131 million (10%) compared the same period in the prior year.
  • Average deposits totaled $1.282 billion, an increase of $124 million (11%) compared the same period in the prior year.
    • Average non-maturing deposits totaled $1.129 billion, an increase of $128 million (13%) compared to the same period in the prior year.
    • Average certificates of deposit totaled $153.2 million, a decrease of $3.8 million (2%) compared to the same period in the prior year.
  • The Company's efficiency ratio was 58.7% compared to 65.1% for the same period in the prior year.
    • The Company's efficiency ratio of 65.1% for the fourth quarter of 2018 includes $802 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs is 59.2%.
  • Nonperforming assets at December 31, 2019 totaled $5.7 million or 0.38% of total assets, a decrease of $7.2 million since September 30, 2019. The decrease was due to a sale of a $9.9 million nonaccrual commercial real estate loan.
  • Book value per common share was $9.62 at December 31, 2019 compared to $9.42 at September 30, 2019.
  • Tangible book value per common share was $8.71 at December 31, 2019 compared to $8.51 at September 30, 2019.

Selected Tax Items:

Financial performance for 2018 includes 'selected tax items' which complicate reporting period comparisons. The 2018 results include a $1.5 million decrease in our income tax provision composed of a $988 thousand reversal of our uncertain tax position and a $484 thousand benefit as a result of our cost segregation study and tangible property review. These items were previously disclosed in our form 10-K filed March 12, 2019. Management believes that our financial results are more comparative excluding the impact of these selected tax items.

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 December 31, September 30, December 31,
Excluding Selected Tax Items (non-GAAP): 2019 2018 2019 2019 2018
Net income (GAAP) $ 4,369 $ 4,839 $ 4,642 $ 14,961 $ 15,730
Selected tax items:
Reversal of uncertain tax position (GAAP) - (988 ) - - (988 )
Benefit from cost segregation study and
tangible property review (GAAP)
- (484 ) - - (484 )
Total selected tax items - (1,472 ) - - (1,472 )
Net income excluding selected tax items (non-GAAP) $ 4,369 $ 3,367 $ 4,642 $ 14,961 $ 14,258
Earnings per share - diluted (GAAP) $ 0.24 $ 0.30 $ 0.26 $ 0.83 $ 0.96
Effect of selected tax items - (0.09 ) - - (0.09 )
Earnings per share - diluted excluding
selected tax items (non-GAAP)
$ 0.24 $ 0.21 $ 0.26 $ 0.83 $ 0.87
GAAP Information:
Return on average assets 1.16 % 1.44 % 1.26 % 1.03 % 1.22 %
Return on average equity 10.06 % 14.32 % 10.86 % 9.09 % 12.08 %
Effective tax rate 26.1 % (1.7 ) % 27.8 % 26.9 % 18.7 %
Non-GAAP Ratios:
Return on average assets excluding selected tax items 1.16 % 1.01 % 1.26 % 1.03 % 1.11 %
Return on average equity excluding selected tax items 10.06 % 9.97 % 10.86 % 9.09 % 10.95 %
Effective tax rate excluding selected tax items 26.1 % 29.2 % 27.8 % 26.9 % 26.3 %

Forward-Looking Statements

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

TABLE 1
SELECTED FINANCIAL INFORMATION - UNAUDITED
(amounts in thousands except per share data)
For The Three Months Ended For The Twelve Months Ended
Net income, average assets and December 31, September 30, December 31,
average shareholders' equity 2019 2018 2019 2019 2018
Net income $ 4,369 $ 4,839 $ 4,642 $ 14,961 $ 15,730
Average total assets $ 1,492,643 $ 1,328,817 $ 1,462,444 $ 1,458,112 $ 1,288,841
Average total earning assets $ 1,390,446 $ 1,259,709 $ 1,360,006 $ 1,360,325 $ 1,220,135
Average shareholders' equity $ 172,385 $ 134,033 $ 169,608 $ 164,642 $ 130,218
Selected performance ratios
Return on average assets 1.16 % 1.44 % 1.26 % 1.03 % 1.22 %
Return on average equity 10.06 % 14.32 % 10.86 % 9.09 % 12.08 %
Efficiency ratio 58.7 % 65.1 % 56.4 % 64.5 % 62.5 %
Share and per share amounts
Weighted average shares - basic (1) 18,068 16,265 18,130 17,956 16,248
Weighted average shares - diluted (1) 18,150 16,345 18,196 18,024 16,332
Earnings per share - basic $ 0.24 $ 0.30 $ 0.26 $ 0.83 $ 0.97
Earnings per share - diluted $ 0.24 $ 0.30 $ 0.26 $ 0.83 $ 0.96
At December 31, At September 30,
Share and per share amounts 2019 2018 2019
Common shares outstanding (2) 18,137 16,334 18,212
Book value per common share (2) $ 9.62 $ 8.47 $ 9.42
Tangible book value per common share (2)(3) $ 8.71 $ 8.36 $ 8.51
Capital ratios (4)
Bank of Commerce Holdings
Common equity tier 1 capital ratio 13.19 % 12.79 % 12.85 %
Tier 1 capital ratio 14.04 % 13.71 % 13.69 %
Total capital ratio 15.97 % 15.82 % 15.62 %
Tier 1 leverage ratio 11.30 % 11.21 % 11.28 %
Tangible common equity ratio (5) 10.80 % 10.46 % 10.64 %
Merchants Bank of Commerce
Common equity tier 1 capital ratio 14.39 % 13.23 % 14.25 %
Tier 1 capital ratio 14.39 % 13.23 % 14.25 %
Total capital ratio 15.48 % 14.42 % 15.34 %
Tier 1 leverage ratio 11.58 % 10.81 % 11.74 %
(1) Excludes unvested restricted shares issued in accordance with the Company's equity incentive plan, as they are non-participative in dividends or voting rights.
(2) Includes unvested restricted shares issued in accordance with the Company's equity incentive plan.
(3) Book value per share is computed by dividing total shareholders' equity by shares outstanding. Tangible book value per share is computed by dividing total shareholders' equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.
(4) The Company and the Bank continue to meet all capital adequacy requirements to which they are subject.
(5) Management believes the tangible common equity ratio is a useful measure of capital adequacy because it provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the capital of the Company and the ability of the Company to absorb potential losses. The tangible common equity ratio is calculated as total shareholders' equity less goodwill and core deposit intangible, net divided by total assets less goodwill and core deposit intangible, net.


BALANCE SHEET OVERVIEW

As of December 31, 2019, the Company had total consolidated assets of $1.480 billion, gross loans of $1.033 billion, allowance for loan and lease losses ('ALLL') of $12 million, total deposits of $1.267 billion, and shareholders' equity of $174 million.

TABLE 2
LOAN BALANCES BY TYPE - UNAUDITED
(amounts in thousands)
At December 31, At September 30,
% of % of Change % of
2019 Total 2018 Total Amount % 2019 Total
Commercial $ 141,197 14 % $ 135,543 14 % $ 5,654 4 % $ 152,195 15 %
Real estate - construction and land development 26,830 3 22,563 2 4,267 19 % 35,606 3
Real estate - commercial non-owner occupied 493,920 48 433,708 46 60,212 14 % 475,678 47
Real estate - commercial owner occupied 218,833 21 204,622 22 14,211 7 % 210,767 20
Real estate - residential - ITIN 33,039 3 37,446 4 (4,407 ) (12 ) % 34,036 3
Real estate - residential - 1-4 family mortgage 63,661 6 34,366 4 29,295 85 % 64,747 6
Real estate - residential - equity lines 22,099 2 26,958 3 (4,859 ) (18 ) % 22,729 2
Consumer and other 33,324 3 51,045 5 (17,721 ) (35 ) % 37,324 4
Gross loans 1,032,903 100 % 946,251 100 % 86,652 9 % 1,033,082 100 %
Deferred fees and costs 2,162 1,927 235 1,980
Loans, net of deferred fees and costs 1,035,065 948,178 86,887 1,035,062
Allowance for loan and lease losses (12,231 ) (12,292 ) 61 (12,285 )
Net loans $ 1,022,834 $ 935,886 $ 86,948 $ 1,022,777
Average loans during the quarter $ 1,031,702 $ 923,409 $ 108,293 12 % $ 1,029,534
Average yield on loans during the quarter 4.86 % 4.94 % (0.08 ) 5.01 %
Average yield on loans during the year 4.95 % 4.91 % 0.04 4.98 %

The Company recorded gross loan balances of $1.033 billion at December 31, 2019, compared with $946 million and $1.033 billion at December 31, 2018 and September 30, 2019, respectively, an increase of $87 million and a decrease of $179 thousand, respectively. During the first quarter of 2019, the Merchants acquisition provided an additional $85.3 million of loans.

The average yield on loans during the quarter was 4.86% compared to 4.94% and 5.01% for the quarters ended December 31, 2018 and September 30, 2019, respectively.

Gross loan balances in the table above include a net fair value discount for loans acquired from Merchants during the first quarter of 2019 of $1.7 million and $1.9 million at December 31, 2019 and September 30, 2019, respectively. We recorded $193 thousand and $188 thousand in accretion of the discount for these loans during the third and fourth quarters of 2019, respectively.

TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED
(amounts in thousands)
At December 31, At September 30,
% of % of Change % of
2019 Total 2018 Total Amount % 2019 Total
Cash and due from banks $ 21,338 6 % $ 23,692 8 % $ (2,354 ) (10 ) % $ 32,505 9 %
Interest-bearing deposits in other banks 59,266 16 23,673 8 35,593 150 % 56,099 16
Total cash and cash equivalents 80,604 22 47,365 16 33,239 70 % 88,604 25
Investment securities:
U.S. government and agencies 38,733 11 40,087 13 (1,354 ) (3 ) % 40,467 11
Obligations of state and political subdivisions 42,098 11 50,530 17 (8,432 ) (17 ) % 39,004 11
Residential mortgage backed securities and
collateralized mortgage obligations
180,835 49 138,503 45 42,332 31 % 165,994 46
Corporate securities 2,966 1 2,922 1 44 2 % 2,992 1
Commercial mortgage backed securities 19,307 5 24,762 8 (5,455 ) (22 ) % 22,822 6
Other asset backed securities 3,011 1 124 - 2,887 2,328 % 1,062 -
Total investment securities - AFS 286,950 78 256,928 84 30,022 12 % 272,341 75
Total cash, cash equivalents and
investment securities
$ 367,554 100 % $ 304,293 100 % $ 63,261 21 % $ 360,945 100 %
Average yield on interest-bearing due
from banks and investment securities
during the quarter - nominal
2.39 % 2.66 % (0.27 ) 2.63 %
Average yield on interest-bearing due
from banks and investment securities
during the quarter - tax equivalent
2.47 % 2.77 % (0.30 ) 2.71 %

As of December 31, 2019, we maintained noninterest-bearing cash positions of $21.3 million and interest-bearing deposits of $59.3 million at the Federal Reserve Bank and correspondent banks.

Investment securities totaled $287.0 million at December 31, 2019, compared with $256.9 million and $272.3 million at December 31, 2018 and September 30, 2019, respectively. During the first quarter of 2019, the Merchants acquisition included securities with a par value of $107.4 million. Management elected to sell securities with a par value of $18.0 million and $118.0 million during the quarter and the year ended December 31, 2019, respectively. The sales resulted in net realized gains of $49 thousand and $186 thousand for the quarter and the year ended December 31, 2019, respectively.

Average securities balances and weighted average tax equivalent yields for the quarters ended December 31, 2019 and 2018 were $277.6 million and 2.71% compared to $261.0 million and 2.91%, respectively.

At December 31, 2019, our net unrealized gains on available-for-sale investment securities were $3.7 million compared with net unrealized losses of $4.3 million and unrealized gains of $3.3 million at December 31, 2018 and September 30, 2019, respectively. The changes in net unrealized losses on the investment securities portfolio were due to changes in market interest rates.

TABLE 4
DEPOSITS BY TYPE - UNAUDITED
(amounts in thousands)
At December 31, At September 30,
% of % of Change % of
2019 Total 2018 Total Amount % 2019 Total
Demand - noninterest-bearing $ 432,680 34 % $ 347,199 31 % $ 85,481 25 % $ 412,410 33 %
Demand - interest-bearing 239,258 19 252,202 22 (12,944 ) (5 ) % 239,547 19
Money market 307,559 24 265,093 23 42,466 16 % 317,120 25
Total demand 979,497 77 864,494 76 115,003 13 % 969,077 77
Savings 135,888 11 114,840 10 21,048 18 % 137,441 11
Total non-maturing deposits 1,115,385 88 979,334 86 136,051 14 % 1,106,518 88
Certificates of deposit 151,786 12 152,382 14 (596 ) 0 % 155,621 12
Total deposits $ 1,267,171 100 % $ 1,131,716 100 % $ 135,455 12 % $ 1,262,139 100 %

Total deposits at December 31, 2019, increased $135 million or 12% to $1.267 billion compared to December 31, 2018 and increased $5 million or 2% annualized compared to September 30, 2019. Total non-maturing deposits increased $136.1 million or 14% compared to the same date a year ago and increased $8.9 million or 3% annualized compared to September 30, 2019. Certificates of deposit decreased $596 thousand or less than 1% compared to the same date a year ago and decreased $3.8 million or 10% annualized compared to September 30, 2019.

TABLE 5
WHOLESALE AND RECIPROCAL DEPOSITS - UNAUDITED
(amounts in thousands)
At December 31, At September 30,
2019 2018 2019
CDARS / ICS reciprocal deposits $ 64,030 $ 83,666 $ 57,897
Online listing service wholesale time deposits 248 22,015 248
Total wholesale and reciprocal deposits $ 64,278 $ 105,681 $ 58,145

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

AVERAGE COST OF FUNDS

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

TABLE 6
AVERAGE COST OF FUNDS - UNAUDITED
For The Three Months Ended
December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
2019 2019 2019 2019 2018 2018 2018 2018
Interest-bearing deposits 0.56 % 0.56 % 0.54 % 0.49 % 0.45 % 0.42 % 0.41 % 0.41 %
Interest-bearing deposits and noninterest-bearing demand 0.38 % 0.38 % 0.37 % 0.34 % 0.31 % 0.29 % 0.29 % 0.29 %
All interest-bearing liabilities 0.68 % 0.68 % 0.74 % 0.67 % 0.61 % 0.64 % 0.68 % 0.60 %
All interest-bearing liabilities and noninterest-bearing demand 0.46 % 0.46 % 0.52 % 0.46 % 0.42 % 0.45 % 0.50 % 0.43 %

INCOME STATEMENT OVERVIEW

TABLE 7
SUMMARY INCOME STATEMENT - UNAUDITED
(amounts in thousands, except per share data)
For The Three Months Ended
December 31, Change September 30, Change
2019 2018 Amount % 2019 Amount %
Interest income $ 14,808 $ 13,750 $ 1,058 8 % $ 15,201 $ (393 ) (3 ) %
Interest expense 1,494 1,256 238 19 % 1,479 15 1 %
Net interest income 13,314 12,494 820 7 % 13,722 (408 ) (3 ) %
Provision for loan
and lease losses
- - - - % - - - %
Noninterest income 1,021 1,132 (111 ) (10 ) % 1,006 15 1 %
Noninterest expense 8,421 8,868 (447 ) (5 ) % 8,300 121 1 %
Income before provision
for income taxes
5,914 4,758 1,156 24 % 6,428 (514 ) (8 ) %
Provision for income taxes:
Reversal of uncertain tax position - (988 ) 988 (100 ) % - - - %
Benefit from cost segregation study and
tangible property review
- (484 ) 484 (100 ) % - - - %
Provision for income taxes 1,545 1,391 154 11 % 1,786 (241 ) (13 ) %
Total provision for income taxes 1,545 (81 ) 1,626 (2,007 ) % 1,786 (241 ) (13 ) %
Net income $ 4,369 $ 4,839 $ (470 ) (10 ) % $ 4,642 $ (273 ) (6 ) %
Basic earnings per share $ 0.24 $ 0.30 $ (0.06 ) (20 ) % $ 0.26 $ (0.02 ) (8 ) %
Average basic shares 18,068 16,265 1,803 11 % 18,130 (62 ) - %
Diluted earnings per share $ 0.24 $ 0.30 $ (0.06 ) (20 ) % $ 0.26 $ (0.02 ) (8 ) %
Average diluted shares 18,150 16,345 1,805 11 % 18,196 (46 ) - %
Dividends declared per
common share
$ 0.05 $ 0.04 $ 0.01 25 % $ 0.05 $ - - %

Fourth Quarter of 2019 Compared With Fourth Quarter of 2018

Income before provision for income taxes for the fourth quarter of 2019 increased $1.2 million compared to the fourth quarter of 2018. In the current quarter, net interest income was $820 thousand higher and noninterest expenses were $447 thousand lower. These positive changes were partially offset by noninterest income that was $111 thousand lower.

Net Interest Income

Net interest income increased $820 thousand compared to the same period a year ago.

Interest income for the fourth quarter of 2019 increased $1.1 million or 8% to $14.8 million.

  • Interest and fees on loans increased $1.1 million due to a $108.3 million increase in average loan balances partially offset by an 8 basis point decrease in the average yield on the loan portfolio.
  • Interest on investment securities increased $4 thousand due to a $16.6 million increase in average securities balances partially offset by a 16 basis point decrease in average yield on the securities portfolio.
  • Interest on interest-bearing deposits due from banks decreased $95 thousand due to a 63 basis point decrease in average yield that was partially offset by a $5.8 million increase in average interest-bearing deposit balances.

Interest expense for the fourth quarter of 2019 increased $238 thousand or 19% to $1.5 million.

  • Interest expense on interest-bearing deposits increased $312 thousand. Average interest-bearing demand and savings deposit balances increased $67.2 million, while average certificate of deposit balances decreased $3.8 million. The average rate paid on interest-bearing deposits increased 11 basis points.
  • Interest expense on other term debt and junior subordinated debentures decreased $74 thousand. During the second quarter of 2019, we completed the early repayment of our variable rate senior debt.

Provision for loan and lease losses

Net loan loss charge-offs were only $54 thousand for the current quarter and no provision for loan and lease losses was necessary. There was no provision for loan and lease losses in the fourth quarter of 2018.

Noninterest Income

Noninterest income for the three months ended December 31, 2019 decreased $111 thousand compared to the fourth quarter for 2018. Noninterest income for the fourth quarter of 2018 included a $96 thousand special dividend on Federal Home Loan Bank of San Francisco stock.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2019 decreased $447 thousand compared to the same period a year previous. The decrease was primarily due to $802 of acquisition and merger costs recorded during the same period a year ago that did not recur and $93 thousand in Small Bank Assessment Credits from the FDIC in the current quarter. These decreases were partially offset by $136 thousand in amortization of the core deposit intangible for the deposits acquired from Merchants and $112 thousand in increased salaries and related benefit costs.

The Company's efficiency ratio was 58.7% for the fourth quarter of 2019; the ratio during the same period in 2018 was 65.1%. The Company's efficiency ratio of 65.1% for the fourth quarter of 2018 includes $802 thousand in acquisition costs. The efficiency ratio excluding these non-recurring costs was 59.2%.

Income Tax Provision

For the three months ended December 31, 2019, our income tax provision of $1.5 million on pre-tax income of $5.9 million was an effective tax rate of 26.1%.

For the three months ended December 31, 2018, our negative income tax provision of $81 thousand on pre-tax income of $4.8 million included:

  • $(988) thousand benefit due to the reversal of our uncertain tax position.
  • $(484) thousand benefit as a result of our cost segregation study and tangible property review.
  • $1.4 million tax provision on pre-tax net operating income of $4.8 million (29.2%).
    • $765 thousand in acquisition costs were not tax deductible for the three months ended December 31, 2018.

Fourth Quarter of 2019 Compared With Third Quarter of 2019

Net income for the fourth quarter of 2019 decreased $273 thousand compared to the third quarter of 2019. In the current quarter, net interest income was $408 thousand lower and noninterest expense was $121 thousand higher. These changes were partially offset by noninterest income that was $15 thousand higher and a provision for income taxes that was $241 thousand lower.

Net Interest Income

Net interest income decreased $408 thousand over the prior quarter.

Interest income for the three months ended December 31, 2019 decreased $393 thousand or 3% to $14.8 million.

  • Interest and fees on loans decreased $370 thousand due to a 15 basis point decrease in the average yield on the loan portfolio partially offset by a $2.2 million increase in average loan balances.
  • Interest on investment securities decreased $54 thousand due to a 14 basis point decrease in average yield on the investment portfolio partially offset by a $6.1 million increase in average securities balances partially.
  • Interest on interest-bearing deposits due from banks increased $31 thousand due to a $22.2 million increase in average balances partially offset by a 42 basis point decrease in the average yield on interest-bearing deposits due from banks.

Interest expense for the three months ended December 31, 2019 increased $15 thousand or 1% to $1.5 million.

  • Interest expense on interest-bearing deposits increased $24 thousand. Average interest-bearing demand and savings deposit balances increased $9.5 million, while average certificates of deposit decreased $4.4 million. The average rate paid on interest-bearing deposits increased by less than one basis point.
  • Interest expense on other term debt and junior subordinated debentures decreased $9 thousand.

Provision for loan and lease losses

As illustrated in Table 9, the sale during the fourth quarter of a $9.9 million nonaccrual commercial real estate loan has resulted in an improvement in our asset quality metrics. As a result of these improved metrics and loan loss charge-offs totaling only $54 thousand for the current quarter, no provision for loan and lease losses was necessary during current quarter. There was no provision for loan and lease losses in the prior quarter.

Noninterest Income

Noninterest income for the three months ended December 31, 2019 increased $15 thousand, which was not concentrated in any one item.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2019 increased $121 thousand, which was not concentrated in any one item.

The Company's efficiency ratio was 58.7% for the fourth quarter of 2019 compared with 56.4% for the prior quarter.

Income Tax Provision

For the three months ended December 31, 2019, our income tax provision of $1.5 million on pre-tax income of $5.9 million was an effective tax rate of 26.1%. The income tax provision for the prior quarter of $1.8 million on pre-tax income of $6.4 million was an effective tax rate of 27.8%. The effective tax rate for the prior quarter was increased by the write-off of a $41 thousand deferred tax asset.

Earnings Per Share

Diluted earnings per share were $0.24 for the three months ended December 31, 2019 compared with diluted earnings per share of $0.30 for the same period a year ago and diluted earnings per share of $0.26 for the prior period. Net income and weighted average shares used to calculate earnings per share - diluted are summarized in Table 7 presented earlier in this press release.

TABLE 8a
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
For The Three Months Ended
December 31, 2019 December 31, 2018 September 30, 2019
Average Yield / Average Yield / Average Yield /
Balance Interest(1) Rate (5) Balance Interest(1) Rate (5) Balance Interest(1) Rate (5)
Interest-earning assets:
Net loans (2) $ 1,031,702 $ 12,643 4.86 % $ 923,409 $ 11,494 4.94 % $ 1,029,534 $ 13,013 5.01 %
Taxable securities 245,487 1,567 2.53 % 218,137 1,469 2.67 % 238,601 1,609 2.68 %
Tax-exempt securities (3) 32,158 258 3.18 % 42,868 353 3.27 % 32,974 271 3.26 %
Interest-bearing deposits
in other banks
81,099 340 1.66 % 75,295 434 2.29 % 58,897 308 2.07 %
Average interest-
earning assets
1,390,446 14,808 4.23 % 1,259,709 13,750 4.33 % 1,360,006 15,201 4.43 %
Cash and due from banks 24,083 22,447 23,822
Premises and equipment, net 16,049 13,331 15,922
Goodwill and core deposit intangible, net 16,561 1,842 16,769
Other assets 45,504 31,488 45,925
Average total assets $ 1,492,643 $ 1,328,817 $ 1,462,444
Interest-bearing liabilities:
Interest-bearing demand $ 244,276 108 0.18 % $ 257,227 141 0.22 % $ 243,553 117 0.19 %
Money market 318,127 479 0.60 % 265,190 207 0.31 % 309,188 451 0.58 %
Savings 138,155 128 0.37 % 110,934 92 0.33 % 138,296 131 0.38 %
Certificates of deposit 153,223 499 1.29 % 157,035 462 1.17 % 157,620 491 1.24 %
Other borrowings net of unamortized debt issuance costs 9,952 183 7.30 % 13,785 252 7.25 % 9,942 183 7.30 %
Junior subordinated
debentures
10,310 97 3.73 % 10,310 102 3.93 % 10,310 106 4.08 %
Average interest-
bearing liabilities
874,043 1,494 0.68 % 814,481 1,256 0.61 % 868,909 1,479 0.68 %
Noninterest-bearing demand 428,420 367,457 405,853
Other liabilities 17,795 12,846 18,074
Shareholders' equity 172,385 134,033 169,608
Average liabilities and
shareholders' equity
$ 1,492,643 $ 1,328,817 $ 1,462,444
Net interest income and
net interest margin (4)
$ 13,314 3.80 % $ 12,494 3.93 % $ 13,722 4.00 %
(1) Interest income on loans includes deferred fees and costs of approximately $224 thousand, $109 thousand, and $161 thousand for the three months ended December 31, 2019 and 2018 and September 30, 2019, respectively.
(2) Net loans includes average nonaccrual loans of $11.4 million, $4.1 million and $13.2 million for the three months ended December 31, 2019 and 2018 and September 30, 2019, respectively.
(3) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis.
(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the three months ended December 31, 2019 included $188 thousand in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 7 basis points.
(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 8b
NET INTEREST MARGIN - UNAUDITED
(amounts in thousands)
For The Twelve Months Ended
December 31, 2019 December 31, 2018
Average Yield / Average Yield /
Balance Interest(1) Rate (5) Balance Interest(1) Rate (5)
Interest-earning assets:
Net loans (2) $ 1,020,801 $ 50,534 4.95 % $ 915,360 $ 44,955 4.91 %
Taxable securities 246,723 6,673 2.70 % 207,407 5,165 2.49 %
Tax-exempt securities (3) 38,706 1,244 3.21 % 50,330 1,629 3.24 %
Interest-bearing deposits
in other banks
54,095 1,112 2.06 % 47,038 952 2.02 %
Average interest-
earning assets
1,360,325 59,563 4.38 % 1,220,135 52,701 4.32 %
Cash and due from banks 22,806 20,468
Premises and equipment, net 15,598 13,952
Goodwill and core deposit intangible, net 15,565 1,917
Other assets 43,818 32,369
Average total assets $ 1,458,112 $ 1,288,841
Interest-bearing liabilities:
Interest-bearing demand $ 242,516 480 0.20 % $ 238,328 414 0.17 %
Money market 304,340 1,599 0.53 % 250,685 646 0.26 %
Savings 136,733 493 0.36 % 109,025 288 0.26 %
Certificates of deposit 160,550 1,977 1.23 % 168,183 1,910 1.14 %
Federal Home Loan Bank of San Francisco borrowings 9,644 247 2.56 % 22,466 435 1.94 %
Other borrowings net of unamortized debt issuance costs 10,895 806 7.40 % 15,143 1,077 7.11 %
Junior subordinated
debentures
10,310 426 4.13 % 10,310 385 3.73 %
Average interest-
bearing liabilities
874,988 6,028 0.69 % 814,140 5,155 0.63 %
Noninterest-bearing demand 400,588 332,197
Other liabilities 17,894 12,286
Shareholders' equity 164,642 130,218
Average liabilities and shareholders' equity $ 1,458,112 $ 1,288,841
Net interest income and
net interest margin (4)
$ 53,535 3.94 % $ 47,546 3.90 %
(1) Interest income on loans includes deferred fees and costs of approximately $657 thousand and $465 thousand for the years ended December 31, 2019 and 2018, respectively.
(2) Net loans includes average nonaccrual loans of $11.7 million and $4.2 million for the years ended December 31, 2019 and 2018, respectively.
(3) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis.
(4) Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income for the year ended December 31, 2019 included $620 thousand in accretion of the discount on the loans acquired from Merchants Holding Company, which improved the net interest margin by 6 basis points.
(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 9
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,
2019 2019 2019 2019 2018
Beginning balance ALLL $ 12,285 $ 12,445 $ 12,242 $ 12,292 $ 12,392
Provision for loan and lease losses - - - - -
Loans charged-off (174 ) (319 ) (659 ) (348 ) (279 )
Loan loss recoveries 120 159 862 298 179
Ending balance ALLL $ 12,231 $ 12,285 $ 12,445 $ 12,242 $ 12,292
At December 31, At September 30, At June 30, At March 31, At December 31,
2019 2019 2019 2019 2018
Nonaccrual loans:
Commercial $ 61 $ 139 $ 194 $ 1,018 $ 959
Real estate - commercial non-owner occupied - 10,099 10,690 10,878 -
Real estate - commercial owner occupied 3,103 - - - 548
Real estate - residential - ITIN 2,221 2,339 2,389 2,392 2,388
Real estate - residential - 1-4 family mortgage 191 198 217 182 185
Real estate - residential - equity lines - - - 42 43
Consumer and other 40 21 22 23 23
Total nonaccrual loans 5,616 12,796 13,512 14,535 4,146
Accruing troubled debt restructured loans:
Commercial 595 629 1,092 1,187 1,224
Real estate - commercial non-owner occupied - - 791 793 795
Real estate - residential - ITIN 3,957 4,072 4,300 4,342 4,484
Real estate - residential - equity lines 231 236 242 358 363
Total accruing troubled debt restructured loans 4,783 4,937 6,425 6,680 6,866
All other accruing impaired loans - - - - -
Total impaired loans $ 10,399 $ 17,733 $ 19,937 $ 21,215 $ 11,012
Gross loans outstanding at period end $ 1,032,903 $ 1,033,082 $ 1,036,724 $ 1,034,606 $ 946,251
Impaired loans to gross loans 1.01 % 1.72 % 1.92 % 2.05 % 1.16 %
Nonaccrual loans to gross loans 0.54 % 1.24 % 1.30 % 1.40 % 0.44 %
Allowance for loan and lease losses as a percent of:
Gross loans 1.18 % 1.19 % 1.20 % 1.18 % 1.30 %
Nonaccrual loans 217.79 % 96.01 % 92.10 % 84.22 % 296.48 %
Impaired loans 117.62 % 69.28 % 62.42 % 57.70 % 111.62 %

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. The decrease in nonaccrual loans during the current quarter resulted from the sale of a $9.9 million nonaccrual commercial real estate loan. Net loan loss charge-offs totaled only $54 thousand for the quarter ended December 31, 2019 and no provision for loan and lease losses was necessary for the quarter. There was no provision for loan and lease loss during the prior quarter or during the same quarter a year ago.

The loans acquired from Merchants were recorded at fair value which included a discount for credit risk which is not a part of the ALLL. As a result, our ALLL as a percentage of gross loans declined to 1.18% as of December 31, 2019 compared to 1.30% as of December 31, 2018 and compared to 1.19% as of September 30, 2019.

Based on the Bank's ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company's ALLL is adequate at December 31, 2019. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in future charges to the provision for loan and lease losses.

At December 31, 2019, the recorded investment in loans classified as impaired totaled $10.4 million, with a corresponding specific reserve of $324 thousand compared to impaired loans of $11.0 million with a corresponding specific reserve of $1.2 million at December 31, 2018 and impaired loans of $17.7 million, with a corresponding specific reserve of $335 thousand at September 30, 2019. The decrease in loans classified as impaired compared to the prior quarter results from the sale of one $9.9 million commercial real estate loan.

TABLE 10
TROUBLED DEBT RESTRUCTURINGS - UNAUDITED
(amounts in thousands)
At December 31, At September 30, At June 30, At March 31, At December 31,
2019 2019 2019 2019 2018
Nonaccrual $ 1,680 $ 1,746 $ 1,828 $ 2,725 $ 2,693
Accruing 4,783 4,937 6,425 6,680 6,866
Total troubled debt restructurings $ 6,463 $ 6,683 $ 8,253 $ 9,405 $ 9,559
Troubled debt restructurings as a percentage of total gross loans 0.63 % 0.65 % 0.80 % 0.91 % 1.01 %

There was one new troubled debt restructuring to grant a rate and maturity modification during the three months ended December 31, 2019. As of December 31, 2019, we had 98 restructured loans that qualified as troubled debt restructurings, of which 94 were performing according to their restructured terms.

TABLE 11
NONPERFORMING ASSETS - UNAUDITED
(amounts in thousands)
At December 31, At September 30, At June 30, At March 31, At December 31,
2019 2019 2019 2019 2018
Total nonaccrual loans $ 5,616 $ 12,796 $ 13,512 $ 14,535 $ 4,146
90 days past due and still accruing - - - - -
Total nonperforming loans 5,616 12,796 13,512 14,535 4,146
Other real estate owned ('OREO') 35 58 34 31 31
Total nonperforming assets $ 5,651 $ 12,854 $ 13,546 $ 14,566 $ 4,177
Nonperforming loans to gross loans 0.54 % 1.24 % 1.30 % 1.40 % 0.44 %
Nonperforming assets to total assets 0.38 % 0.87 % 0.94 % 0.99 % 0.32 %

The following table summarizes when loans are projected to reprice by year and rate index as of December 31, 2019.

TABLE 12
LOANS BY RATE INDEX AND PROJECTED REPAYMENT - UNAUDITED
(amounts in thousands)
At December 31, 2019
Years 6
Through Beyond
Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 10 Total
Rate Index:
Fixed $ 49,959 $ 52,191 $ 33,501 $ 72,871 $ 32,308 $ 166,641 $ 32,514 $ 439,985
Variable:
Prime 92,508 5,534 9,682 4,616 6,759 4,752 - 123,851
5 Year Treasury 24,733 66,548 83,684 66,329 77,812 54,490 - 373,596
7 Year Treasury 858 7,024 9,292 480 5,597 13,828 - 37,079
1 Year LIBOR 20,988 - - - - - - 20,988
Other Indexes 4,146 2,946 2,062 1,733 5,716 16,730 617 33,950
Nonaccrual 625 551 529 513 492 1,988 918 5,616
Total $ 193,817 $ 134,794 $ 138,750 $ 146,542 $ 128,684 $ 258,429 $ 34,049 $ 1,035,065
TABLE 13
UNAUDITED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
At December 31, Change At September 30,
2019 2018 $ % 2019
Assets:
Cash and due from banks $ 21,338 $ 23,692 $ (2,354 ) (10 ) % $ 32,505
Interest-bearing deposits in other banks 59,266 23,673 35,593 150 % 56,099
Total cash and cash equivalents 80,604 47,365 33,239 70 % 88,604
Securities available-for-sale, at fair value 286,950 256,928 30,022 12 % 272,341
Loans, net of deferred fees and costs 1,035,065 948,178 86,887 9 % 1,035,062
Allowance for loan and lease losses (12,231 ) (12,292 ) 61 - % (12,285 )
Net loans 1,022,834 935,886 86,948 9 % 1,022,777
Premises and equipment, net 15,906 13,119 2,787 21 % 16,084
Other real estate owned 35 31 4 13 % 58
Life insurance 23,701 22,410 1,291 6 % 23,576
Deferred tax asset, net 4,553 7,039 (2,486 ) (35 ) % 4,818
Goodwill and core deposit intangible, net 16,480 1,841 14,639 795 % 16,672
Other assets 28,553 22,485 6,068 27 % 27,497
Total assets $ 1,479,616 $ 1,307,104 $ 172,512 13 % $ 1,472,427
Liabilities and shareholders' equity:
Demand - noninterest-bearing $ 432,680 $ 347,199 $ 85,481 25 % $ 412,410
Demand - interest-bearing 239,258 252,202 (12,944 ) (5 ) % 239,547
Money market 307,559 265,093 42,466 16 % 317,120
Savings 135,888 114,840 21,048 18 % 137,441
Certificates of deposit 151,786 152,382 (596 ) - % 155,621
Total deposits 1,267,171 1,131,716 135,455 12 % 1,262,139
Term debt:
Other borrowings 10,000 13,496 (3,496 ) (26 ) % 10,000
Unamortized debt issuance costs (43 ) (91 ) 48 (53 ) % (55 )
Net term debt 9,957 13,405 (3,448 ) (26 ) % 9,945
Junior subordinated debentures 10,310 10,310 - - % 10,310
Other liabilities 17,700 13,352 4,348 33 % 18,396
Total liabilities 1,305,138 1,168,783 136,355 12 % 1,300,790
Shareholders' equity:
Common stock 71,311 52,284 19,027 36 % 72,200
Retained earnings 100,566 89,045 11,521 13 % 97,100
Accumulated other comprehensive income (loss), net of tax 2,601 (3,008 ) 5,609 (186 ) % 2,337
Total shareholders' equity 174,478 138,321 36,157 26 % 171,637
Total liabilities and shareholders' equity $ 1,479,616 $ 1,307,104 $ 172,512 13 % $ 1,472,427
Total interest-earning assets $ 1,377,588 $ 1,233,049 $ 144,539 12 % $ 1,360,184
Shares outstanding 18,137 16,334 1,803 11 % 18,212
Book value per share (1) $ 9.62 $ 8.47 $ 1.15 14 % $ 9.42
Tangible book value per share (1) $ 8.71 $ 8.36 $ 0.35 4 % $ 8.51
(1) Book value per share is computed by dividing total shareholders' equity by shares outstanding. Tangible book value per share is computed by dividing total shareholders' equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.
TABLE 14
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,
2019 2018 $ % 2019 2019 2018
Interest income:
Interest and fees on loans $ 12,643 $ 11,494 $ 1,149 10 % $ 13,013 $ 50,534 $ 44,955
Interest on taxable securities 1,567 1,469 98 7 % 1,609 6,673 5,165
Interest on tax-exempt securities 258 353 (95 ) (27 ) % 271 1,244 1,629
Interest on interest-bearing deposits in other banks 340 434 (94 ) (22 ) % 308 1,112 952
Total interest income 14,808 13,750 1,058 8 % 15,201 59,563 52,701
Interest expense:
Interest on demand deposits 108 141 (33 ) (23 ) % 117 480 414
Interest on money market 479 207 272 131 % 451 1,599 646
Interest on savings 128 92 36 39 % 131 493 288
Interest on certificates of deposit 499 462 37 8 % 491 1,977 1,910
Interest on Federal Home Loan Bank of
San Francisco borrowings
- - - - % - 247 435
Interest on other borrowings 183 252 (69 ) (27 ) % 183 806 1,077
Interest on junior subordinated debentures 97 102 (5 ) (5 ) % 106 426 385
Total interest expense 1,494 1,256 238 19 % 1,479 6,028 5,155
Net interest income 13,314 12,494 820 7 % 13,722 53,535 47,546
Provision for loan and lease losses - - - - % - - -
Net interest income after provision
for loan and lease losses
13,314 12,494 820 7 % 13,722 53,535 47,546
Noninterest income:
Service charges on deposit accounts 198 161 37 23 % 177 730 682
ATM and point of sale fees 282 283 (1 ) - % 293 1,158 1,131
Payroll and benefit processing fees 183 178 5 3 % 158 669 652
Life insurance 126 128 (2 ) (2 ) % 126 536 512
Gain on investment securities, net 49 3 46 1,533 % 12 186 44
Federal Home Loan Bank of
San Francisco dividends
131 201 (70 ) (35 ) % 131 507 480
Gain(Loss) on sale of OREO 21 64 (43 ) (67 ) % - 62 73
Other income 31 114 (83 ) (73 ) % 109 336 445
Total noninterest income 1,021 1,132 (111 ) (10 ) % 1,006 4,184 4,019
TABLE 14 - 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,
2019 2018 $ % 2019 2019 2018
Noninterest expense:
Salaries and related benefits 4,924 4,812 112 2 % 5,005 20,804 18,709
Premises and equipment 916 927 (11 ) (1 ) % 933 3,752 3,983
Federal Deposit Insurance Corporation
insurance premium
- 93 (93 ) (100 ) % (104 ) 91 376
Data processing 739 528 211 40 % 582 2,535 1,997
Professional services 309 436 (127 ) (29 ) % 392 1,539 1,431
Telecommunications 190 145 45 31 % 194 737 594
Acquisition and merger - 802 (802 ) (100 ) % (113 ) 2,193 844
Other expenses 1,343 1,125 218 19 % 1,411 5,604 4,272
Total noninterest expense 8,421 8,868 (447 ) (5 ) % 8,300 37,255 32,206
Income before provision for income taxes 5,914 4,758 1,156 24 % 6,428 20,464 19,359
Provision for income taxes:
Reversal of uncertain tax position - (988 ) 988 (100 ) % - - (988 )
Benefit from cost segregation study and
tangible property review
- (484 ) 484 (100 ) % - - (484 )
Provision for income taxes 1,545 1,391 154 11 % 1,786 5,503 5,101
Total provision for income taxes 1,545 (81 ) 1,626 (2,007 ) % 1,786 5,503 3,629
Net income $ 4,369 $ 4,839 $ (470 ) (10 ) % $ 4,642 $ 14,961 $ 15,730
Basic earnings per share $ 0.24 $ 0.30 $ (0.06 ) (20 ) % $ 0.26 $ 0.83 $ 0.97
Average basic shares 18,068 16,265 1,803 11 % 18,130 17,956 16,248
Diluted earnings per share $ 0.24 $ 0.30 $ (0.06 ) (20 ) % $ 0.26 $ 0.83 $ 0.96
Average diluted shares 18,150 16,345 1,805 11 % 18,196 18,024 16,332
TABLE 15
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,
2019 2019 2019 2019 2018
Earning assets:
Loans $ 1,031,702 $ 1,029,534 $ 1,028,187 $ 993,261 $ 923,409
Taxable securities 245,487 238,601 249,907 253,068 218,137
Tax-exempt securities 32,158 32,974 39,501 50,454 42,868
Interest-bearing deposits in other banks 81,099 58,897 35,605 40,223 75,295
Total earning assets 1,390,446 1,360,006 1,353,200 1,337,006 1,259,709
Cash and due from banks 24,083 23,822 21,942 21,392 22,447
Premises and equipment, net 16,049 15,922 15,819 14,581 13,331
Goodwill and core deposit intangible, net 16,561 16,769 16,995 11,872 1,842
Other assets 45,504 45,925 42,769 41,009 31,488
Total assets $ 1,492,643 $ 1,462,444 $ 1,450,725 $ 1,425,860 $ 1,328,817
Liabilities and shareholders' equity:
Demand - noninterest-bearing $ 428,420 $ 405,853 $ 379,173 $ 388,410 $ 367,457
Demand - interest-bearing 244,276 243,553 238,840 243,376 257,227
Money market 318,127 309,188 296,326 293,396 265,190
Savings 138,155 138,296 139,307 131,081 110,934
Certificates of deposit 153,223 157,620 164,084 167,463 157,035
Total deposits 1,282,201 1,254,510 1,217,730 1,223,726 1,157,843
Federal Home Loan Bank of San Francisco borrowings - - 30,000 8,778 -
Other borrowings net of unamortized debt issuance costs 9,952 9,942 10,841 12,889 13,785
Junior subordinated debentures 10,310 10,310 10,310 10,310 10,310
Other liabilities 17,795 18,074 18,246 17,452 12,846
Total liabilities 1,320,258 1,292,836 1,287,127 1,273,155 1,194,784
Shareholders' equity 172,385 169,608 163,598 152,705 134,033
Liabilities & shareholders' equity $ 1,492,643 $ 1,462,444 $ 1,450,725 $ 1,425,860 $ 1,328,817
TABLE 16
UNAUDITED CONDENSED CONSOLIDATED
ANNUAL AVERAGE BALANCE SHEETS
(amounts in thousands)
For The Year Ended
December 31, December 31, December 31, December 31,
2019 2018 2017 2016
Earning assets:
Loans $ 1,020,801 $ 915,360 $ 818,119 $ 752,938
Taxable securities 246,723 207,407 165,333 120,884
Tax-exempt securities 38,706 50,330 74,231 75,303
Interest-bearing deposits in other banks 54,095 47,038 66,872 58,668
Total earning assets 1,360,325 1,220,135 1,124,555 1,007,793
Cash and due from banks 22,806 20,468 18,301 15,831
Premises and equipment, net 15,598 13,952 15,567 15,078
Goodwill and core deposit intangible, net 15,565 1,917 2,136 1,888
Other assets 43,818 32,369 37,692 39,160
Total assets $ 1,458,112 $ 1,288,841 $ 1,198,251 $ 1,079,750
Liabilities and shareholders' equity:
Demand - noninterest-bearing $ 400,588 $ 332,197 $ 289,735 $ 226,368
Demand - interest-bearing 242,516 238,328 209,792 172,011
Money market 304,340 250,685 224,913 202,159
Savings 136,733 109,025 111,376 104,771
Certificates of deposit 160,550 168,183 205,648 221,074
Total deposits 1,244,727 1,098,418 1,041,464 926,383
Federal Home Loan Bank of San Francisco borrowings 9,644 22,466 302 17,856
Other borrowings net of unamortized debt issuance costs 10,895 15,143 17,981 19,430
Junior subordinated debentures 10,310 10,310 10,310 10,310
Other liabilities 17,894 12,286 12,293 13,217
Total liabilities 1,293,470 1,158,623 1,082,350 987,196
Shareholders' equity 164,642 130,218 115,901 92,554
Liabilities & shareholders' equity $ 1,458,112 $ 1,288,841 $ 1,198,251 $ 1,079,750


About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, California and is the parent company for Merchants Bank of Commerce. The Bank is an FDIC-insured California banking corporation providing community banking and financial services in northern California from Sacramento to Yreka along the Interstate 5 corridor. The Bank was incorporated as a California banking corporation on November 25, 1981 and opened for business on October 22, 1982. The Company's common stock is listed on the NASDAQ Global Market and trades under the symbol 'BOCH'.

Contact Information:

Randall S. Eslick, President and Chief Executive Officer
Telephone Direct (916) 677-5800

James A. Sundquist, Executive Vice President and Chief Financial Officer
Telephone Direct (916) 677-5825

Samuel D. Jimenez, Executive Vice President and Chief Operating Officer
Telephone Direct (530) 722-3952

Andrea M. Newburn, Vice President and Senior Administrative Officer / Corporate Secretary
Telephone Direct (530) 722-3959

Source: Bank of Commerce Holdings