Bank of Commerce (BOCH) 8-K Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2014

Exhibit 99.1

              (NASDAQ: BOCH) 

For Immediate Release:

Bank of Commerce Holdings Announces Results for the Fourth Quarter of 2014

REDDING, California,January 30, 2015 / GLOBE NEWSWIRE— Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”),a $997.2 million asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the fourth quarter and year ended December 31, 2014. Net income available to common shareholders for the quarter ended December 31, 2014 was $1.6 million or $0.12 per share – diluted, compared with $2.0 million or $0.14 per share – diluted for the same period of 2013. Net income available to common shareholders for the year ended December 31, 2014 was $5.5 million or $0.14 per share – diluted compared with $7.7 million or $0.52 for the same period of 2013.

Financial highlights for the full year 2014:

● Net income available to common shareholders was $5.5 million for the year ended December 31, 2014 compared with $7.7 million for the same period a year ago.

● Loans increased $62.8 million or 10% compared to the prior year.

● Nonperforming assets decreased $8.5 million or 28% compared to the prior year.

● Total deposits increased $42.7 million or 6% compared to the prior year.

● Book value per share increased to $6.29 compared to $5.86 for the prior year.

Financial highlights for the fourth quarter of 2014:

● Net income available to common shareholders was $1.6 million for the three months ended December 31, 2014 compared with $2.0 million for the same period a year ago and $1.2 million for the prior quarter.

● Nonperforming assets decreased $2.7 million or 11% compared to the prior quarter.

● Total deposits increased $21.5 million or 3% compared to the prior quarter.

● Loans increased $11.2 million or 2% compared to the prior quarter.

● Gain of $406 thousand from the discounted repayment of $5.0 million of junior subordinated debentures.

● The quarter includes severance costs of $1.0 million associated with the retirement of a former executive.

Randall S. Eslick, President and CEO commented: “I am very pleased with our achievements during a challenging 2014. The executive management team is energized and our loan and deposit sales force is focused. On a year over year basis, we were able to increase total deposits 6%, increase loans 10% and make sizeable decreases in our nonperforming assets. We are poised to build on these successes in 2015.”

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 the Company’s plans, beliefs and goals, refer to estimates or use similar terms) involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors:

● Competitive pressure in the banking industry and changes in the regulatory environment

● Changes in the interest rate environment and volatility of rate sensitive assets and liabilities

● A decline in the health of the economy nationally or regionally which could further reduce the demand for loans or reduce the value of real estate collateral securing most of the Company’s 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 year ended December 31, 2013 and under the heading: “Risk Factors” and subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements. 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.

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TABLE 1

SELECTED FINANCIAL INFORMATION - UNAUDITED

(amounts in thousands except per share data)

	At or For the Three Months Ended									At or For the Twelve Months Ended
	December 31,						September 30,			December 31,
	2014			2013			2014			2014			2013
Net income, average assets and average equity
Income available to common shareholders	$	1,633		$	2,037		$	1,223		$	5,527		$	7,735
Average total assets	$	985,771		$	939,732		$	994,373		$	993,925		$	954,302
Average shareholders' equity	$	103,579		$	102,084		$	102,109		$	102,364		$	106,193
Selected performance ratios
Return on average assets		0.68	%		0.89	%		0.51	%		0.58	%		0.83	%
Return on average equity		6.50	%		8.18	%		4.99	%		5.59	%		7.47	%
Efficiency ratio		78.55	%		61.79	%		69.98	%		74.05	%		59.59	%
Share and per share amounts
Common shares outstanding at period end		13,295			13,977			13,294			13,295			13,977
Weighted average shares - basic		13,295			14,143			13,294			13,475			14,940
Weighted average shares - diluted		13,335			14,176			13,339			13,520			14,964
Earnings per share - basic	$	0.12		$	0.14		$	0.09		$	0.41		$	0.52
Earnings per share - diluted	$	0.12		$	0.14		$	0.09		$	0.41		$	0.52
Book value per common share	$	6.29		$	5.86		$	6.17		$	6.29		$	5.86
Capital ratios
Bank of Commerce Holdings
Leverage ratio		11.59	%		12.80	%		11.87	%		11.59	%		12.80	%
Tier 1 risk based capital ratio		13.91	%		15.94	%		14.74	%		13.91	%		15.94	%
Total risk based capital ratio		15.16	%		17.20	%		15.99	%		15.16	%		17.20	%
Redding Bank of Commerce
Leverage ratio		11.57	%		12.49	%		11.84	%		11.57	%		12.49	%
Tier 1 risk based capital ratio		13.89	%		15.56	%		14.68	%		13.89	%		15.56	%
Total risk based capital ratio		15.14	%		16.82	%		15.93	%		15.14	%		16.82	%

The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. At December 31, 2014, the Company’s Tier 1 and Total risk based capital ratios were 13.91% and 15.16% respectively, while the leverage ratio was 11.59%. The decrease in capital ratios during the current quarter compared to the same period a year ago and the prior quarter is primarily due to repayment of junior subordinated debentures, repurchase of common stock, and increased average assets.

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BALANCE SHEET OVERVIEW

As of December 31, 2014, the Company had total consolidated assets of $997.2 million, net loans of $650.2 million, allowance for loan and lease losses (“ALLL”) of $10.8 million, total deposits of $789.0 million, and shareholders’ equity of $103.6 million.

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(amounts in thousands)

	At December 31,																		At September 30,
				% of						% of			Change									% of
	2014			Total			2013			Total			Amount			%			2014			Total
Commercial	$	153,957			23	%	$	170,429			29	%	$	(16,472	)		-10	%	$	160,024			25	%
Real estate - construction loans		30,099			5	%		18,545			3	%		11,554			62	%		25,579			4	%
Real estate - commercial (investor)		215,114			33	%		205,384			34	%		9,730			5	%		216,204			33	%
Real estate - commercial (owner occupied)		115,389			17	%		83,976			14	%		31,413			37	%		105,889			16	%
Real estate - ITIN loans		52,830			8	%		56,101			9	%		(3,271	)		-6	%		53,805			8	%
Real estate - mortgage		13,156			2	%		14,590			2	%		(1,434	)		-10	%		13,779			2	%
Real estate - equity lines		44,981			7	%		45,462			8	%		(481	)		-1	%		45,050			7	%
Consumer		35,210			5	%		3,472			1	%		31,738			914	%		28,998			4	%
Other		162			0	%		36			0	%		126			350	%		367			1	%
Gross loans		660,898			100	%		597,995			100	%		62,903			11	%		649,695			100	%
Deferred fees and costs		157						303						(146	)					184
Loans, net of deferred fees and costs		661,055						598,298						62,757						649,879
Allowance for loan and lease losses		(10,820	)					(14,172	)					3,352						(10,400	)
Net loans	$	650,235					$	584,126					$	66,109					$	639,479
Average yield on loans		4.77	%					5.00	%					-0.23	%					4.59	%

The Company recorded gross loan balances of $660.9 at December 31, 2014, compared with $598.0 at December 31, 2013, an increase of $62.9 million. The increase in gross loans during the year ended December 31, 2014 was driven by strong organic loan originations and the purchase of wholesale loan pools. During 2014, the Company purchased $42.2 million and $18.5 million in consumer and SBA loan pools, respectively.

The decrease in the ALLL primarily resulted from $5.8 million in charge offs related to three significant borrowing relationships partially offset by $3.2 million in provision to the allowance for loan and lease losses. The loans associated with these three borrowers were collateral dependent, were adequately reserved for at December 31, 2013, and were subsequently charged-off during the second quarter of 2014. See table 7 for additional detail of the ALLL.

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TABLE 3

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(amounts in thousands)

	At December 31,																		At September 30,
				% of						% of			Change									% of
	2014			Total			2013			Total			Amount			%			2014			Total
Cash and due from banks	$	43,949			16	%	$	38,369			12	%	$	5,580			15	%	$	31,151			11	%
Interest bearing due from banks		14,473			5	%		20,146			6	%		(5,673	)		-28	%		15,272			6	%
Total cash and cash equivalents		58,422			21	%		58,515			18	%		(93	)		0	%		46,423			17	%
U.S. government and agencies		6,393			2	%		6,264			2	%		129			2	%		7,825			3	%
Obligations of state and political subdivisions		54,363			20	%		59,209			21	%		(4,846	)		-8	%		57,161			21	%
Residential mortgage backed securities and collateralized mortgage obligations		47,015			17	%		62,991			20	%		(15,976	)		-25	%		46,498			17	%
Corporate securities		37,734			13	%		48,230			15	%		(10,496	)		-22	%		39,717			15	%
Commercial mortgage backed securities		10,389			4	%		10,472			3	%		(83	)		-1	%		11,100			4	%
Other asset backed securities		31,092			11	%		29,474			9	%		1,618			5	%		27,078			10	%
Total investment securities - AFS		186,986			67	%		216,640			70	%	��	(29,654	)		-14	%		189,379			70	%
Obligations of state and political subdivisions - HTM		36,806			12	%		36,696			12	%		110			0	%		36,888			13	%
Total investment securities		223,792			79	%		253,336			82	%		(29,544	)		-14	%		226,267			83	%
Total cash equivalents and investment securities	$	282,214			100	%	$	311,851			100	%	$	(29,637	)		-10	%	$	272,690			100	%
Yield on cash, cash equivalents and investment securities		2.58	%					2.49	%					0.09	%					2.43	%

The Company continued to maintain a strong liquidity position during the reporting period. As of December 31, 2014, the Company maintained cash positions at the Federal Reserve Bank and correspondent banks in the amount of $43.9 million. The Company also held certificates of deposits with other financial institutions in the amount of $14.5 million.

Available-for-sale investment securities totaled $187.0 million at December 31, 2014, compared with $216.6 million at December 31, 2013 and $189.4 million at September 30, 2014. The Company’s available-for-sale investment portfolio provides the Company a secondary source of liquidity to fund other higher yielding asset opportunities, such as loan originations and wholesale loan purchases. During the fourth quarter of 2014, the Company purchased twelve securities with a par value of $14.9 million and weighted average yield of 3.29% and sold nine securities with a par value of $11.4 million and weighted average yield of 2.44%. The sales activity resulted in $93 thousand in net realized gains for the three months ended December 31, 2014. Average quarterly securities balances and weighted average tax equivalent yields at December 31, 2014 and 2013 were $226.1 million and 3.40% compared to $252.7 million and 3.30%, respectively.

During the year ended December 31, 2014, the Company’s securities purchases were focused on moderate term maturities, taking advantage of the steepness of the yield curve, which moderates the Company’s exposure to rising interest rates, while still providing an acceptable yield. Sales were focused on longer term municipal and corporate bonds, as well as mortgage-backed and asset-backed securities with extended cash flows or with a high probability of cash flows extending as interest rates increase.

Overall, management’s investment strategy reflects the continuing expectation of rising rates across the yield curve. Management continues to actively seek out opportunities to reduce the overall duration of the portfolio and accelerate cash flows. This strategy could entail recognizing small losses within the portfolio to meet these longer term objectives.

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   (NASDAQ: BOCH)

 
At December 31, 2014, the Company’s net unrealized gains on available-for-sale securities were $2.6 million compared with $3.7 million net unrealized loss at December 31, 2013 and $1.8 million net unrealized gains at September 30, 2014. The favorable change in net unrealized gains resulted primarily from increases in the fair values of the Company’s municipal bond, and US government securities portfolios, caused by declines in long-term interest rates.

TABLE 4

DEPOSITS BY TYPE UNAUDITED

(amounts in thousands)

	At December 31,																		At September 30,
				% of						% of			Change									% of
	2014			Total			2013			Total			Amount			%			2014			Total
Demand - noninterest bearing	$	157,557			20	%	$	133,984			18	%	$	23,573			18	%	$	151,684			20	%
Demand - interest bearing		298,160			38	%		273,390			37	%		24,770			9	%		265,308			35	%
Total demand		455,717			58	%		407,374			55	%		48,343			12	%		416,992			55	%
Savings		88,569			11	%		90,442			12	%		(1,873	)		-2	%		91,589			12	%
Total non-maturing deposits		544,286			69	%		497,816			67	%		46,470			9	%		508,581			67	%
Certificates of deposit		244,749			31	%		248,477			33	%		(3,728	)		-2	%		258,939			33	%
Total deposits	$	789,035			100	%	$	746,293			100	%	$	42,742			6	%	$	767,520			100	%
Average rate on interest bearing deposits		0.50	%					0.53	%					-0.03	%					0.54	%

Total deposits for the year ended December 31, 2014, increased 6% or $42.7 million to $789.0 million compared to the same period a year ago and 3% or $21.5 million compared to the prior quarter. Non-maturing core deposits increased $7.8 million or 2% compared to the same period a year ago and 3% or $11.6 million compared to the prior quarter.

Brokered deposits totaled $97.9 million at December 31, 2014 compared with $70.3 million at December 31, 2013, and $80.0 million at September 30, 2014. Brokered deposits included reciprocal deposits of $90.3 million, $55.1 million, and $66.4 million for the same periods respectively.

Deposits obtained through the use of a deposit listing service that are not considered brokered deposits totaled $67.5 million at December 31, 2014 compared with $68.0 million at September 30, 2014 and $42.7 million at December 31, 2013,

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INCOME STATEMENT OVERVIEW

TABLE 5

SUMMARY INCOME STATEMENT - UNAUDITED

(amounts in thousands, except per share data)

	For The Three Months Ended
	December 31,					Change						September 30,		Change
	2014			2013		Amount			%			2014		Amount			%
Net interest income	$	8,290		$	8,494	$	(204	)		-2	%	$	7,948	$	342			4	%
Provision for loan and lease losses		675			—		675			100	%		1,050		(375	)		-36	%
Noninterest income		1,144			719		425			59	%		671		473			70	%
Noninterest expense		7,410			5,693		1,717			30	%		6,032		1,378			23	%
Income before income taxes		1,349			3,520		(2,171	)		-62	%		1,537		(188	)		-12	%
Provision (benefit) for income taxes		(334	)		1,433		(1,767	)		-123	%		264		(598	)		-227	%
Net income		1,683			2,087		(404	)		-19	%		1,273		410			32	%
Less: Dividend on preferred stock		50			50		—			0	%		50		—			0	%
Income available to common shareholders	$	1,633		$	2,037	$	(404	)		-20	%	$	1,223	$	410			34	%
Basic earnings per share	$	0.12		$	0.14	$	(0.02	)		-14	%	$	0.09	$	0.03			33	%
Average basic shares		13,295			14,143		(848	)		-6	%		13,294		1			0	%
Diluted earnings per share	$	0.12		$	0.14	$	(0.02	)		-14	%	$	0.09	$	0.03			33	%
Average diluted shares		13,335			14,176		(841	)		-6	%		13,339		(4	)		0	%
Dividends declared per common share	$	0.03		$	0.03	$	—			0	%	$	0.03	$	—			0	%

Net income available to common shareholders was $1.6 million for the three months ended December 31, 2014 compared with $2.0 million for the same period a year ago. The decrease in net income available to common shareholders in the current quarter compared to the same period a year ago was primarily driven by increased loan loss provisions and increased noninterest expense partially offset by increased noninterest income and a decreased provision for income taxes.

Net income available to common shareholders increased $410 thousand to $1.6 million during the three months ended December 31, 2014 compared to $1.2 million in the prior quarter. Increased operating income, decreased provision for loan and lease losses and decreased provision for tax expense were partially offset by increased noninterest expense.

Return on average assets and return on average equity for the current quarter was 0.68% and 6.50%, respectively, compared with 0.89% and 8.18%, respectively, for the same period a year ago. The 21 basis point decrease in return on average assets between these periods is mostly attributed to decreased earnings. The decrease in return on average equity was primarily driven by decreased net income, partially offset by the decrease in weighted average shares resulting from the Company’s publically announced common stock repurchase plans.

NetinterestIncome

Interest income for the three months ended December 31, 2014 was $9.5 million, an increase of $228 thousand or 2% compared to the same period a year ago and an increase of $427 thousand or 5% compared to the prior quarter. The increase in interest income compared to the same period a year ago was driven by increased volume in the loan portfolio and increased yield in the investment securities portfolio, partially offset by decreased volume in the investment securities portfolio and decreased yield in the loan portfolio. The increase in interest income compared to the prior quarter was primarily due to increased volume and yield in the loan portfolio.

Interest expense for the three months ended December 31, 2014 was $1.2 million, an increase of $432 thousand or 54% compared to the same period a year ago and an increase of $85 thousand or 7% compared to the prior quarter. During the second quarter of 2014 the Company concluded that the remaining hedged forecasted interest costs from FHLB advances associated with the final two legs of a terminated forward starting interest rate swap were no longer probable. Accordingly, the remaining hedge gains recorded in other comprehensive income relating to the interest rate swap were immediately recognized in other noninterest income. Prior to this determination the Company had been reclassifying the hedge gains out of other comprehensive income into earnings as an adjustment to interest expense.

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TABLE 6

NET INTEREST SPREAD AND MARGIN - UNAUDITED

(amounts in thousands)

	For the Three Months Ended
	December 31,						Change			September 30,			Change
	2014			2013			Amount			2014			Amount
Tax equivalent yield on average interest earning assets		4.28	%		4.31	%		-0.03	%		4.06	%		0.22	%
Rate on average interest bearing liabilities		0.70	%		0.47	%		0.23	%		0.64	%		0.06	%
Net interest spread		3.58	%		3.84	%		-0.26	%		3.42	%		0.16	%
Net interest margin		3.60	%		3.80	%		-0.20	%		3.42	%		0.18	%
Net interest margin on a tax equivalent basis		3.74	%		3.95	%		-0.21	%		3.56	%		0.18	%
Average earning assets	$	919,864		$	895,101		$	24,763		$	929,447		$	(9,583	)
Average interest bearing liabilities	$	713,091		$	692,739		$	20,352		$	722,300		$	(9,209	)

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 3.74% for the three months ended December 31, 2014, a decrease of 21 basis points as compared to the same period a year ago. The decrease in net interest margin resulted from a 3 basis point decline in yield on average earning assets and an 18 basis point increase in interest expense to average earning assets. With decreasing elasticity in managing our funding costs and historically low interest rates, maintaining our net interest margin in the foreseeable future will continue to be challenging. Management will continue to pursue organic loan growth, wholesale loan purchases, and actively manage the investment securities portfolio within our accepted risk tolerance to maximize yields on earning assets.

NoninterestIncome

Noninterest income for the three months ended December 31, 2014 was $1.1 million, an increase of $425 thousand and $473 thousand when compared to the same period a year ago and the previous quarter respectively. The increase in noninterest income in the current quarter compared to the same period a year ago and prior quarter is primarily due to a $406 thousand gain on discounted repayment of junior subordinated debentures recognized during the quarter ended December 31, 2014. The debentures were issued to Bank of Commerce Holdings Trust. All of the debentures issued to the Trust, less the common stock of the Trust, qualified as Tier 1 capital, under guidance issued by the Federal Reserve Board.

NoninterestExpense

Noninterest expense for the three months ended December 31, 2014 increased $1.7 million compared to the same period a year ago, and increased $1.4 million compared to the prior quarter. The increase in noninterest expense in the current quarter is primarily due to severance costs associated with the retirement of a former executive, and an overall increase in the number of employees.

During the three months ended December 31, 2014, the Company recorded a provision for income tax benefit of $334 thousand compared with a provision for income tax expense of $1.4 million for the same period a year ago and a provision for income tax expense of $264 thousand for the prior quarter. The tax benefit recorded in the current quarter was driven by a change in the Company’s estimated annual effective tax rate. In addition, tax return to accrual adjustments were recognized as a result of an adjustment to 2013 permanent book tax differences. During the current quarter, the recorded tax benefit of $334 thousand was comprised of $164 thousand in tax expense derived from applying the adjusted estimated effective tax rate, a tax benefit of $390 thousand, resulting from a change in the estimated effective tax rate, and a tax benefit of $108 thousand resulting from tax return to accrual adjustments.

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  (NASDAQ: BOCH)

Diluted earnings per share was $0.12 for the three months ended December 31, 2014 compared with $0.14 for the same period a year ago, and $0.09 for the prior period. Earnings per share decreased during the three months ended December 31, 2014 compared to the same period a year ago primarily due to a decrease in net income partially offset by a decrease in weighted average shares. The decrease in weighted average shares resulted from the repurchase of 2.0 million common shares through two separate repurchase plans announced and completed in 2013 and the repurchase of 700,000 common shares from another repurchase plan announced and completed during the six months ended June 30, 2014. All repurchased shares were retired subsequent to purchase. The weighted average number of dilutive common shares outstanding decreased by 502 thousand shares during the year ended December 31, 2014.

TABLE 7

ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD - UNAUDITED

(amounts in thousands)

	For The Three Months Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
	2014			2014			2014			2014			2013
Beginning balance	$	10,400		$	9,882		$	9,748		$	14,172		$	13,542
Provision for loan loss charged to expense		675			1,050			1,450			—			—
Loans charged off		(374	)		(585	)		(1,456	)		(4,903	)		(815	)
Loan loss recoveries		119			53			140			479			1,445
Ending balance	$	10,820		$	10,400		$	9,882		$	9,748		$	14,172

	At December 31,			At September 30,			At June 30,			At March 31,			At December 31,
	2014			2014			2014			2014			2013
Nonaccrual loans:
Commercial	$	5,112			7,065		$	4,375		$	4,303		$	6,527
Commercial real estate		9,696			9,896			15,598			12,560			14,539
Residential real estate 1-4 family		6,782			7,438			6,939			7,360			8,217
Home equity		24			89			479			484			513
Consumer		35			—			87			—			—
Total nonaccrual loans		21,649			24,488			27,478			24,707			29,796
Accruing troubled debt restructured loans:
Commercial		1,485			1,585			13			62			63
Commercial real estate		1,698			1,707			1,716			3,853			3,864
Residential real estate 1-4 family		5,462			5,222			5,074			4,894			4,303
Home equity		579			584			589			593			598
Total accruing troubled debt restructured loans		9,224			9,098			7,392			9,402			8,828
All other accruing impaired loans		536			757			585			2,564			3,517
Total impaired loans	$	31,409			34,343		$	35,455		$	36,673		$	42,141
Gross loans outstanding at period end	$	660,898		$	649,695		$	619,418		$	607,049		$	597,995
Allowance for loan and lease losses as a percent of:
Gross loans		1.64	%		1.60	%		1.60	%		1.61	%		2.37	%
Nonaccrual loans		49.98	%		42.47	%		35.96	%		39.45	%		47.56	%
Impaired loans		34.45	%		30.28	%		27.87	%		26.58	%		33.63	%
Nonaccrual loans to gross loans		3.28	%		3.77	%		4.44	%		4.07	%		4.98	%

8

   (NASDAQ: BOCH)

The Company realized net charge offs of $255 thousand in the current quarter compared with net charge offs of $532 thousand in the prior quarter and net recoveries of $630 thousand for the same period a year ago. Charge offs in the current quarter are primarily related to one commercial loan relationship.

The Company continues to monitor credit quality, and adjust the ALLL accordingly to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. As such, the Company recognized $675 thousand in provisions for loan and lease losses during the fourth quarter of 2014, compared to $1.1 million for the prior quarter. The Company’s ALLL as a percentage of gross loans was 1.64% at December 31, 2014 compared to 1.60% as of September 30, 2014. At December 31, 2014, management believes the Company’s ALLL is adequately funded given the current level of credit risk.

At December 31, 2014, the recorded investment in loans classified as impaired totaled $31.4 million, with a corresponding valuation allowance of $1.6 million compared to impaired loans of $34.3 million, with a corresponding valuation allowance of $1.2 million at September 30, 2014. The valuation allowance on impaired loans represents the impairment reserves on performing restructured loans, other accruing loans, and nonaccrual loans. The decrease in impaired loans during the three months ended December 31, 2014 compared to the prior quarter is primarily due to principal payments on two commercial loan relationships.

Loans are reported as a troubled debt restructuring when the Bank grants a concession(s) to a borrower experiencing financial difficulties that it would not otherwise consider. Examples of such concessions include a reduction in the note rate, forgiveness of principal or accrued interest, extending the maturity date(s) significantly, or providing a lower interest rate than would be normally available for a transaction of similar risk. As a result of these concessions, restructured loans are impaired as the Bank will not collect all amounts due, both principal and interest, in accordance with the terms of the original loan agreement. Impairment reserves on non-collateral dependent restructured loans are measured by measuring the present value of expected future cash flows of the restructured loans, discounted at the effective interest rate of the original loan agreement. These impairment reserves are recognized as a specific component to be provided for in the ALLL.

During the three months ended December 31, 2014, the Company restructured one loan to grant a rate and maturity concession. The loan was classified as a troubled debt restructuring and placed on nonaccrual status. As of December 31, 2014, the Company had $23.5 million in troubled debt restructurings compared to $25.7 million as of September 30, 2014. As of December 31, 2014, the Company had one hundred eighteen restructured loans that qualified as troubled debt restructurings, of which ninety-seven were performing according to their restructured terms. Troubled debt restructurings represented 3.55% of gross loans as of December 31, 2014 compared with 3.95% at September 30, 2014.

TABLE 8

PERIOD END TROUBLED DEBT RESTRUCTURINGS - UNAUDITED

(amounts in thousands)

	At December 31,			At September 30,			At June 30,			At March 31,			At December 31,
	2014			2014			2014			2014			2013
Nonaccrual	$	14,230		$	16,556		$	20,504		$	19,779		$	24,596
Accruing		9,224			9,098			7,392			9,402			8,828
Total troubled debt restructurings	$	23,454		$	25,654		$	27,896		$	29,181		$	33,424
Percentage of total gross loans		3.55	%		3.95	%		4.50	%		4.81	%		5.59	%

Nonperforming loans, which include nonaccrual loans and accruing loans past due more than 90 days, totaled $21.7 million or 3.28% of gross loans as of December 31, 2014, compared to $24.9 million, or 3.77% of gross loans at September 30, 2014. The decrease in nonperforming loans in the current quarter compared to the prior quarter primarily resulted from $1.7 million in payments received from a commercial loan relationship. Nonperforming assets, which include nonperforming loans and other real estate owned (“OREO”), totaled $22.2 million, or 2.22% of total assets as of December 31, 2014, compared with $24.9 million, or 2.54% of total assets as of September 30, 2014.

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   (NASDAQ: BOCH)

TABLE 9

PERIOD END NONPERFORMING ASSETS - UNAUDITED

(amounts in thousands)

	At December 31,			At September 30,			At June 30,			At March 31,			At December 31,
	2014			2014			2014			2014			2013
Total nonaccrual loans	$	21,649		$	24,488		$	27,478		$	24,707		$	29,796
90 days past due not on nonaccrual		23			—			—			—			—
Total nonperforming loans		21,672			24,488			27,478			24,707			29,796
Other real estate owned		502			393			826			623			913
Total nonperforming assets	$	22,174			24,881		$	28,304		$	25,330		$	30,709
Nonperforming loans to gross loans		3.28	%		3.77	%		4.44	%		4.07	%		4.98	%
Nonperforming assets to total assets		2.22	%		2.54	%		2.89	%		2.63	%		3.23	%

At December 31, 2014, and September 30, 2014, the recorded investment in OREO was $502 thousand and $393 thousand, respectively. The December 31, 2014 OREO balance consists of six properties, of which five are secured by 1-4 family residential real estate in the amount of $341 thousand and one commercial nonfarm residential property in the amount of $161 thousand.

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  (NASDAQ: BOCH)

TABLE 10

UNAUDITED CONDENSED CONSOLIDATED

BALANCE SHEET

(amounts in thousands)

	AT December 31,			At December 31,			Change						At September 30,
	2014			2013			$			%			2014
Assets:
Cash and due from banks	$	43,949		$	38,369		$	5,580			15	%	$	31,151
Interest bearing due from banks		14,473			20,146			(5,673	)		-28	%		15,272
Total cash and cash equivalents		58,422			58,515			(93	)		0	%		46,423
Securities available-for-sale, at fair value		186,986			216,640			(29,654	)		-14	%		189,379
Securities held-to-maturity, at amortized cost		36,806			36,696			110			0	%		36,888
Loans, net of deferred fees and costs		661,055			598,298			62,757			10	%		649,879
Allowance for loan and lease losses		(10,820	)		(14,172	)		3,352			-24	%		10,400
Net loans		650,235			584,126			66,109			11	%		660,279
Total interest earning assets		943,269			910,149			33,120			4	%		922,569
Premises and equipment, net		12,295			10,893			1,402			13	%		12,510
Other real estate owned		502			913			(411	)		-45	%		393
Life insurance		21,844			16,216			5,628			35	%		21,675
Deferred taxes		10,231			11,653			(1,422	)		-12	%		10,314
Other assets		19,871			20,690			(819	)		-4	%		20,696
Total Assets	$	997,192		$	956,342		$	40,850			4	%	$	998,557
Liabilities and shareholders' equity:
Demand - noninterest bearing	$	157,557		$	133,984		$	23,573			18	%	$	151,684
Demand - interest bearing		298,160			273,390			24,770			9	%		265,308
Savings		88,569			90,442			(1,873	)		-2	%		91,589
Certificates of deposit		244,749			248,477			(3,728	)		-2	%		258,939
Total deposits		789,035			746,293			42,742			6	%		767,520
Federal Home Loan Bank borrowings		75,000			75,000			—			0	%		75,000
Junior subordinated debentures		10,310			15,465			(5,155	)		-33	%		15,465
Other liabilities		19,245			17,797			1,448			8	%		17,812
Total Liabilities		893,590			854,555			39,035			5	%		875,797
Shareholders' equity:
Preferred stock		19,931			19,931			—			0	%		19,931
Common Stock		23,891			28,304			(4,413	)		-16	%		23,874
Retained earnings		59,867			55,944			3,923			7	%		58,633
Accumulated other comprehensive (loss) income, net of tax		(87	)		(2,392	)		2,305			-96	%		(478	)
Total shareholders' equity		103,602			101,787			1,815			2	%		101,960
Total liabilities and shareholders' equity	$	997,192		$	956,342		$	40,850			4	%	$	977,757
Shares outstanding		13,295			13,977									13,294
Book value per share	$	6.29		$	5.86								$	6.17

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   (NASDAQ: BOCH)

TABLE 11

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended
	December 31,					Change						September 30,		Twelve Months Ended December 31,
	2014		2013			$			%			2014		2014			2013
Interest income:
Interest and fees on loans	$	7,832	$	7,432		$	400			5	%	$	7,350	$	29,464		$	29,918
Interest on securities		980		658			322			49	%		998		4,203			4,198
Interest on tax-exempt securities		620		492			128			26	%		629		2,536			2,610
Interest on deposits		97		719			(622	)		-87	%		125		490			535
Total interest income		9,529		9,301			228			2	%		9,102		36,693			37,261
Interest expense:
Interest on demand deposits		109		121			(12	)		-10	%		123		471			485
Interest on savings deposits		55		60			(5	)		-8	%		59		228			254
Interest on certificates of deposit		623		635			(12	)		-2	%		650		2,608			2,625
Interest on securities sold under repurchase agreements		—		—			—			0	%		—		—			6
Interest on FHLB borrowings		370		(104	)		474			-456	%		126		422			(267	)
Interest on other borrowings		82		95			(13	)		-14	%		196		363			375
Total interest expense		1,239		807			432			54	%		1,154		4,092			3,478
Net interest income		8,290		8,494			(204	)		-2	%		7,948		32,601			33,783
Provision for loan and lease losses		675		—			675			100	%		1,050		3,175			2,750
Net interest income after provision for loan and lease losses		7,615		8,494			(879	)		-10	%		6,898		29,426			31,033
Noninterest income:
Service charges on deposit accounts		51		45			6			13	%		50		186			191
Payroll and benefit processing fees		137		129			8			6	%		127		508			484
Increase in cash surrender value of life insurance		169		133			36			27	%		171		628			534
Gain (loss) on investment securities, net		93		64			29			45	%		32		(159	)		995
Merchant credit card service income, net		24		31			(7	)		-23	%		25		104			129
Other income		670		317			353			111	%		266		3,048			1,209
Total noninterest income		1,144		719			425			59	%		671		4,315			3,542

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   (NASDAQ: BOCH)

TABLE 11 - CONTINUED

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended
	December 31,					Change						September 30,		Twelve Months Ended December 31,
	2014			2013		$			%			2014		2014		2013
Noninterest expense:
Salaries and related benefits		4,257			3,172		1,085			34	%		3,474		14,770		12,035
Occupancy and equipment expense		715			554		161			29	%		749		2,784		2,205
Write down of other real estate owned		—			—		—			0	%		—		290		—
FDIC insurance premium		214			190		24			13	%		204		798		725
Data processing fees		260			150		110			73	%		217		889		547
Professional service fees		616			315		301			96	%		309		1,527		1,241
Deferred compensation expense		113			121		(8	)		-7	%		115		458		179
Other expenses		1,235			1,191		44			4	%		964		5,821		5,309
Total noninterest expense		7,410			5,693		1,717			30	%		6,032		27,337		22,241
Income before provision (benefit) for income taxes		1,349			3,520		(2,171	)		-62	%		1,537		6,404		12,334
Provision (benefit) for income taxes		(334	)		1,433		(1,767	)		-123	%		264		677		4,399
Net income	$	1,683		$	2,087	$	(404	)		-19	%	$	1,273	$	5,727	$	7,935
Less: preferred dividend and accretion on preferred stock		50			50		—			0	%		50		200		200
Income available to common shareholders	$	1,633		$	2,037	$	(404	)		-20	%	$	1,223	$	5,527	$	7,735
Basic earnings per share	$	0.12		$	0.14	$	(0.02	)		-14	%	$	0.09	$	0.41	$	0.52
Average basic shares		13,295			14,143		(848	)		-6	%		13,294		13,475		14,940
Diluted earnings per share	$	0.12		$	0.14	$	(0.02	)		-14	%	$	0.09	$	0.41	$	0.52
Average diluted shares		13,335			14,176		(841	)		-6	%		13,339		13,520		14,964

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   (NASDAQ: BOCH)

TABLE 12

UNAUDITED CONDENSED CONSOLIDATED

ANNUAL AVERAGE BALANCE SHEET

(amounts in thousands)

	For the Twelve Months Ended
	December 31,		December 31,		December 31,		December 31,
	2014		2013		2012		2011
Earning assets:
Loans	$	644,029	$	612,819	$	642,200	$	626,275
Tax exempt securities		83,973		92,854		81,714		52,467
Taxable securities		148,606		157,486		135,615		130,898
Interest bearing due from banks		56,466		43,397		48,712		64,399
Average earning assets		933,074		906,556		908,241		874,039
Cash and due from banks		11,249		10,570		10,125		2,251
Premises and equipment, net		12,105		10,338		9,567		9,489
Other assets		37,497		26,838		24,249		21,421
Average total assets	$	993,925	$	954,302	$	952,182	$	907,200
Interest bearing liabilities:
Demand - interest bearing	$	272,383	$	244,125	$	203,342	$	157,696
Savings		91,108		92,502		89,789		91,876
Certificates of deposit		259,462		249,500		285,574		296,381
Repurchase agreements		—		5,780		14,246		14,805
Other borrowings		15,533		15,584		15,465		8,398
FHLB borrowings		77,466		109,560		110,374		122,535
Average interest bearing liabilities		715,952		717,051		718,790		691,691
Demand - noninterest bearing		140,520		126,017		115,091		100,722
Other liabilities		35,089		5,041		7,033		6,679
Shareholders' equity		102,364		106,193		111,268		108,108
Average liabilities & equity	$	993,925	$	954,302	$	952,182	$	907,200

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   (NASDAQ: BOCH)

TABLE 13

UNAUDITED CONDENSED CONSOLIDATED

QUARTERLY AVERAGE BALANCE SHEET

(amounts in thousands)

	For the Three Months Ended
	December 31,		September 30,		June 30,		March 31,		December 31,
	2014		2014		2014		2014		2013
Earning assets:
Loans	$	656,834	$	640,990	$	612,847	$	605,682	$	594,324
Tax exempt securities		82,231		83,503		83,530		86,681		91,269
Taxable securities		143,829		140,128		152,780		157,936		161,473
Interest bearing due from banks		36,970		64,826		59,040		65,179		48,035
Average earning assets		919,864		929,447		908,197		915,478		895,101
Cash and due from banks		12,264		12,322		10,163		10,212		11,506
Premises and equipment, net		12,464		12,551		12,190		11,197		10,823
Other assets		41,179		40,053		36,297		30,426		22,302
Average total assets	$	985,771	$	994,373	$	966,847	$	967,313	$	939,732
Interest bearing liabilities:
Demand - interest bearing	$	277,692	$	269,633	$	272,073	$	267,428	$	261,949
Savings		89,992		91,556		91,488		91,406		92,949
Certificates of deposit		254,942		260,592		262,809		259,523		247,376
Other borrowings		15,465		15,737		15,465		15,465		15,465
FHLB borrowings		75,000		84,782		75,000		75,000		75,000
Average interest bearing liabilities		713,091		722,300		716,835		708,822		692,739
Demand - noninterest bearing		154,471		142,796		132,842		132,495		134,439
Other liabilities		14,630		27,168		16,040		23,013		10,470
Shareholders' equity		103,579		102,109		101,130		102,983		102,084
Average liabilities & equity	$	985,771	$	994,373	$	966,847	$	967,313	$	939,732

15

   (NASDAQ: BOCH)

About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Redding, 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 commercial banking and financial services through four 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”.

Investment firms making a market in BOCH stock are:

Raymond James Financial John T. Cavender 555 Market Street San Francisco, CA 94105 (800) 346-5544   Sandler O’Neill + Partners, L.P. Brian Sullivan 1251 Avenue of the Americas, 6^th Floor New York, NY 10022 (212) 466-8022 McAdams Wright Ragen, Inc. Joey Warmenhoven 1211 SW Fifth Avenue, Suite 1400 Portland, OR 97204 (866) 662-0351   Stifel Nicolaus Perry Wright 1255 East Street, Suite 100 Redding, CA 96001 (530) 244-7199

Contact Information:

Randall S. Eslick, President and Chief Executive Officer

Telephone Direct (530) 722-3900

Samuel D. Jimenez, Executive Vice President and Chief Operating Officer

Telephone Direct (530) 722-3952

James A. Sundquist, Executive Vice President and Chief Financial Officer

Telephone Direct (530) 722-3908

Andrea Schneck, Vice President and Senior Administrative Officer

Telephone Direct (530) 722-3959

16