Bank of Commerce (BOCH) 8-K Bank of Commerce Holdings Announces Results for the Second Quarter of2015

Exhibit 99.1

  (NASDAQ: BOCH)

For Immediate Release:

Bank of Commerce Holdings Announces Results for the Second Quarter of2015

REDDING, California,July 24, 2015 / GLOBE NEWSWIRE— Randall S. Eslick, President and Chief Executive Officer of Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”),a $983.1 million asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter and the six months ended June 30, 2015. Net income available to common shareholders for the quarter ended June 30, 2015 was $2.3 million or $0.18 per share – diluted, compared with $2.2 million or $0.16 per share – diluted for the same period of 2014. Net income available to common shareholders for the six months ended June 30, 2015 was $4.1 million or $0.31 per share – diluted compared with $2.7 million or $0.19 per share – diluted for the same period of 2014.

Financial highlights for the second quarter of 2015:

● Net income available to common shareholders of $2.3 million for the three months ended June 30, 2015 was a an improvement of $184 thousand (8.5%) over $2.2 million net income available to common shareholders earned during the second quarter of 2014, and an improvement of $589 thousand (33.6%) over $1.8 million available to common shareholders earned during the previous quarter.

● Nonperforming assets at June 30, 2015 totaled $18.4 million, a decrease of $9.9 million (35.1%) compared to June 30, 2014, and a decrease of $1.7 million (33.6% annualized) compared to March 31, 2015.

● Average loans for the quarter increased $29.9 million to $703.0 million from $673.1 million for the first quarter of 2015.

● Net loan loss recoveries of $106 thousand combined with continuing improved asset quality resulted in no additional provision for loan and lease losses during the second quarter.

● The Company’s book value per share increased to $6.49 per common share at June 30, 2015 from $6.07 per common share at June 30, 2014 (6.9%) and $6.41 at March 31, 2015 (5.0% annualized).

● The Company’s net interest margin improved to 3.71% for the quarter ended June 30, 2015 from 3.62% for the second quarter of 2014.

Financial highlights for the six months ended June 30, 2015:

● Net income available to common shareholders of $4.1 million for the six months ended June 30, 2015 was an improvement of $1.4 million (53.2%) over $2.7 million net income available to common shareholders earned during the six months ended June 30, 2014.

● Nonperforming assets at June 30, 2015 totaled $18.4 million, a decrease of $3.8 million (34.6% annualized) compared to December 31, 2014.

● Gross loans at June 30, 2015 totaled $699.8 million, an increase of $38.9 million (12% annualized) since December 31, 2014.

● Net loan loss recoveries of $582 thousand combined with continuing improved asset quality resulted in no additional provision for loan and lease losses during the first six months of 2015.

● The Company’s book value per share increased to $6.49 per common share at June 30, 2015 from $6.29 per common share at December 31, 2014 (6.4% annualized).

● The Company’s net interest margin improved to 3.72% for the six months ended June 30, 2015 from 3.57% for the year ended December 31, 2014.

● The Company’s efficiency ratio improved to 68.0% during the first six months of 2015 compared to 71.5% during the same period in 2014.

Randall S. Eslick, President and CEO commented: “We are pleased that the positive trends which began in 2014 have continued into the first six months of 2015. Our average loan totals continue to increase, our asset quality continues to improve and our efficiency ratio reflects the initial benefits of our cost control efforts. I applaud our employees for making these successes a reality.”

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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 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 fiscal year ended December 31, 2014 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)

	For The Three Months Ended									For The Six Months Ended
Net income, average assets and	June 30,						March 31,			June 30,
average shareholders' equity	2015			2014			2015			2015			2014
Income available to common shareholders	$	2,340		$	2,156		$	1,751		$	4,091		$	2,671
Average total assets	$	993,815		$	965,530		$	978,916		$	986,406		$	962,861
Average shareholders' equity	$	106,198		$	101,194		$	104,618		$	105,412		$	102,193
Selected performance ratios
Return on average assets		0.94	%		0.90	%		0.73	%		0.84	%		0.56	%
Return on average equity		8.84	%		8.55	%		6.79	%		7.83	%		5.27	%
Efficiency ratio		64.61	%		56.66	%		71.48	%		68.00	%		71.52	%
Share and per share amounts
Weighted average shares - basic		13,338			13,378			13,303			13,320			13,658
Weighted average shares - diluted		13,370			13,426			13,340			13,353			13,705
Earnings per share - basic	$	0.18		$	0.16		$	0.13		$	0.31		$	0.20
Earnings per share - diluted	$	0.18		$	0.16		$	0.13		$	0.31		$	0.19

	At June 30,						At March 31,
Share and per share amounts	2015			2014			2015
Common shares outstanding		13,339			13,294			13,337
Book value per common share	$	6.49		$	6.07		$	6.41
Capital ratios
Bank of Commerce Holdings
Common equity tier 1 capital ratio (1)		9.97	%	n/a				9.73	%
Tier 1 capital ratio		13.35	%		15.14	%		13.10	%
Total capital ratio		14.60	%		16.39	%		14.35	%
Tier 1 leverage ratio		11.76	%		12.12	%		11.74	%
Redding Bank of Commerce
Common equity tier 1 capital ratio(1)		13.28	%	n/a				13.05	%
Tier 1 capital ratio		13.28	%		15.15	%		13.05	%
Total capital ratio		14.53	%		16.40	%		14.30	%
Tier 1 leverage ratio		11.75	%		12.12	%		11.70	%

⁽¹⁾ As of January 1, 2015, common equity tier 1 capital ratio is a new ratio requirement under the Basel III Capital Rules and represents the sum of the common equity tier 1 elements, minus regulatory adjustments and deductions divided by risk weighted assets.

The Company and the Bank continue to meet all capital adequacy requirements to which they are subject. The change in capital ratios during the current quarter compared to the same period a year ago is primarily due to repayment of junior subordinated debentures, repurchase of common stock, and a change in the calculation of the risk-weighted average assets in accordance with Basel III.

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BALANCE SHEET OVERVIEW

As of June 30, 2015, the Company had total consolidated assets of $983.1 million, gross loans of $699.8 million, allowance for loan and lease losses (“ALLL”) of $11.4 million, total deposits of $760.0 million, and shareholders’ equity of $106.6 million.

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(amounts in thousands)

	At June 30,																		At March 31,
				% of						% of			Change									% of
	2015			Total			2014			Total			Amount			%			2015			Total
Commercial	$	143,088			20	%	$	165,222			27	%	$	(22,134	)		(13	)%	$	146,069			21	%
Real estate - construction		27,858			4			20,462			3			7,396			36	%		29,127			4
Real estate - commercial (investor)		237,375			34			209,324			33			28,051			13	%		235,404			34
Real estate - commercial (owner occupied)		136,981			20			91,534			15			45,447			50	%		134,234			19
Real estate - ITIN		51,249			7			54,611			9			(3,362	)		(6	)%		52,043			7
Real estate - mortgage		12,209			2			14,211			2			(2,002	)		(14	)%		12,304			2
Real estate - equity lines		46,463			7			43,809			8			2,654			6	%		45,750			7
Consumer		44,482			6			20,195			3			24,287			120	%		44,283			6
Other		69			0			50			0			19			38	%		15			0
Gross loans		699,774			100	%		619,418			100	%		80,356			13	%		699,229			100	%
Deferred fees and costs		403						204						199						315
Loans, net of deferred fees and costs		700,177						619,622						80,555						699,544
Allowance for loan and lease losses		(11,402	)					(9,882	)					(1,520	)					(11,296	)
Net loans	$	688,775					$	609,740					$	79,035					$	688,248
Average yield on loans during the quarter		4.74	%					4.71	%					0.03						4.77	%

The Company recorded gross loan balances of $699.8 million at June 30, 2015, compared with $619.4 million and $699.2 million at June 30, 2014 and March 31, 2015, respectively, an increase of $80.4 million and $545 thousand, respectively. The increase in gross loans compared to the same period a year ago was driven by strong organic loan originations and the purchase of wholesale loan pools. During the three months ended June 30, 2015, the Company purchased $6.6 million in consumer loan pools. During the twelve-month period ended June 30, 2015, the Company purchased $44.5 million, $6.4 million and $18.5 million in consumer, commercial real estate investor and SBA loan pools, respectively.

The increase in the ALLL in the current quarter compared to the prior quarter resulted from net loan loss recoveries of $106 thousand. As a result of net recoveries and continued improved asset quality, no additional provision for loan and lease losses was deemed necessary during the current quarter. See table 8 for additional detail of the ALLL.

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TABLE 3

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(amounts in thousands)

	At June 30,																		At March 31,
				% of						% of			Change									% of
	2015			Total			2014			Total			Amount			%			2015			Total
Cash and due from banks	$	25,343			11	%	$	50,677			18	%	$	(25,334	)		(50	)%	$	19,309			8	%
Interest bearing due from banks		7,453			3			16,068			5			(8,615	)		(54	)%		10,802			5
Total cash and cash equivalents		32,796			14			66,745			23			(33,949	)		(51	)%		30,111			13
Investment securities:
U.S. government and agencies		5,314			2			7,787			3			(2,473	)		(32	)%		6,422			3
Obligations of state and political subdivisions		51,324			24			55,369			19			(4,045	)		(7	)%		53,491			23
Residential mortgage backed securities and collateralized mortgage obligations		37,776			16			45,798			16			(8,022	)		(18	)%		41,851			18
Corporate securities		33,501			15			42,166			14			(8,665	)		(21	)%		31,660			14
Commercial mortgage backed securities		9,467			4			9,833			3			(366	)		(4	)%		6,799			3
Other asset backed securities		23,381			10			27,733			9			(4,352	)		(16	)%		26,667			11
Total investment securities - AFS		160,763			71			188,686			64			(27,923	)		(15	)%		166,890			72
Obligations of state and political subdivisions - HTM		36,655			15			37,031			13			(376	)		(1	)%		36,609			15
Total investment securities - AFS and HTM		197,418			86			225,717			77			(28,299	)		(16	)%		203,499			87
Total cash, cash equivalents and investment securities	$	230,214			100	%	$	292,462			100	%	$	(62,248	)		(21	)%	$	233,610			100	%
Average yield on interest bearing due from banks and investment securities during the quarter		2.59	%					2.55	%					0.04						2.73	%

As of June 30, 2015, the Company maintained cash positions at the Federal Reserve Bank and correspondent banks in the amount of $25.3 million. The Company also held interest bearing deposits with other financial institutions in the amount of $7.5 million.

Available-for-sale investment securities totaled $160.8 million at June 30, 2015, compared with $188.7 million and $166.9 million at June 30, 2014 and March 31, 2015, respectively. 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 second quarter of 2015, the Company purchased six securities with a par value of $11.1 million and weighted average yield of 2.27% and sold eleven securities with a par value of $10.0 million and weighted average yield of 2.14%. The sales activity resulted in $61 thousand in net realized gains for the three months ended June 30, 2015. During the three months ended June 30, 2015, the Company received $4.7 million in proceeds from principal payments, calls and maturities within the available-for-sale investment securities portfolio. Average quarterly securities balances and weighted average tax equivalent yields at June 30, 2015 and 2014 were $197.9 million and 3.47% compared to $235.7 million and 3.53%, respectively.

During the current quarter, the Company’s securities transactions were focused on improving credit quality and continuing to shorten the effective duration of the portfolio in anticipation of rising interest rates. Management will continue to actively seek out opportunities to reduce the overall duration of the portfolio and accelerate cash flows, while also improving credit quality and liquidity. This strategy could entail absorbing small losses within the portfolio to meet longer term objectives.

At June 30, 2015, the Company’s net unrealized gains on available-for-sale investment securities were $1.5 million compared with $1.3 million and $3.1 million at June 30, 2014 and March 31, 2015, respectively. The decrease in net unrealized gains during the current quarter resulted primarily from decreases in the fair value of the Company’s municipal bond and corporate securities portfolios, as a result of increases in interest rates.

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TABLE 4

DEPOSITS BY TYPE - UNAUDITED

(amounts in thousands)

	At June 30,																		At March 31,
				% of						% of			Change									% of
	2015			Total			2014			Total			Amount			%			2015			Total
Demand - noninterest bearing	$	151,640			20	%	$	135,416			18	%	$	16,224			12	%	$	150,056			20	%
Demand - interest bearing		276,103			36			269,055			36			7,048			3	%		266,552			35
Total demand		427,743			56			404,471			54			23,272			6	%		416,608			55
Savings		93,500			12			90,416			12			3,084			3	%		92,088			12
Total non-maturing deposits		521,243			68			494,887			66			26,356			5	%		508,696			67
Certificates of deposit		238,796			32			260,129			34			(21,333	)		(8	)%		253,280			33
Total deposits	$	760,039			100	%	$	755,016			100	%	$	5,023			1	%	$	761,976			100	%
Average rate on interest bearing deposits during the quarter		0.50	%					0.54	%					(0.04	)					0.50	%

Total deposits at June 30, 2015, increased $5.0 million or 0.67% to $760.0 million compared to June 30, 2014, and decreased $1.9 million or 0.25% compared to March 31, 2015. Non-maturing core deposits increased $10.2 million or 2% compared to the same date a year ago and increased $7.3 million or 2% compared to March 31, 2015. Management intends to continue to reduce reliance on certificates of deposit as a funding source.

TABLE 5

WHOLESALE AND BROKERED DEPOSITS - UNAUDITED

(amounts in thousands)

	At June 30,				At March 31,
	2015		2014		2015
CDARS / ICS reciprocal deposits	$	58,628	$	48,234	$	52,767
Third party brokered time deposits		17,502		13,694		17,498
Brokered deposits per Call Report		76,130		61,928		70,265
Online listing service time deposits		63,328		68,095		67,453
Total wholesale and brokered deposits	$	139,458	$	130,023	$	137,718

In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $76.1 million, $61.9 million and $70.3 million at June 30, 2015, June 30, 2014 and March 31, 2015, respectively. These amounts include reciprocal deposits obtained through the CDARS and ICS programs, which management does not consider to be brokered.

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INCOME STATEMENT OVERVIEW

TABLE 6

SUMMARY INCOME STATEMENT - UNAUDITED

(amounts in thousands, except per share data)

	For The Three Months Ended
	June 30,				Change						March 31,		Change
	2015		2014		Amount			%			2015		Amount			%
Interest income	$	9,763	$	9,062	$	701			8	%	$	9,526	$	237			2	%
Interest expense		1,168		872		296			34	%		1,157		11			1	%
Net interest income		8,595		8,190		405			5	%		8,369		226			3	%
Provision for loan and lease losses		—		1,450		(1,450	)		(100	)%		—		—			0	%
Noninterest income		881		2,136		(1,255	)		(59	)%		854		27			3	%
Noninterest expense		6,122		5,851		271			5	%		6,593		(471	)		(7	)%
Income before provision for income taxes		3,354		3,025		329			11	%		2,630		724			28	%
Provision for income taxes		964		819		145			18	%		829		135			16	%
Net income		2,390		2,206		184			8	%		1,801		589			33	%
Less: Preferred dividends		50		50		—			0	%		50		—			0	%
Income available to common shareholders	$	2,340	$	2,156	$	184			9	%	$	1,751	$	589			34	%
							��
Basic earnings per share	$	0.18	$	0.16	$	0.02			13	%	$	0.13	$	5			38	%
Average basic shares		13,338		13,378		(40	)		0	%		13,303		35			0	%
Diluted earnings per share	$	0.18	$	0.16	$	0.02			13	%	$	0.13	$	5			38	%
Average diluted shares		13,370		13,426		(56	)		0	%		13,340		30			0	%
Dividends declared per common share	$	0.03	$	0.03	$	—			0	%	$	0.03	$	—			0	%

Second Quarter of 2015 Compared With Second Quarter of 2014

Net income available to common shareholders for the second quarter of 2015 increased $184 thousand over the second quarter of 2014. In the current quarter, net interest income was $405 thousand higher and the provision for loan and lease losses was $1.5 million lower. These positive changes were partially offset by a decrease in noninterest income of $1.3 million, an increase in noninterest expense of $271 thousand and an increase in income tax expense of $145 thousand.

Net Interest Income

Net interest income increased $405 thousand over a year previous. Interest income for the three months ended June 30, 2015 increased $701 thousand or 8% to $9.8 million which reflects the increase in average earning assets and the reallocation of lower yielding assets into higher yielding loans. Interest expense for the three months ended June 30, 2015 increased $296 thousand or 34% to $1.2 million. Interest expense on deposits declined $92 thousand and interest expense on other borrowings decreased $44 thousand, but interest on the Bank’s Federal Home Loan Bank of San Francisco borrowings increased $432 thousand due to the net settlement expense associated with the Bank’s active interest rate swap.

In 2011, to mitigate interest rate and market risks, the Bank entered into four forward starting interest rate swaps to hedge interest rate risk associated with variable rate Federal Home Loan Bank Of San Francisco borrowings. The hedges converted the LIBOR based floating rate of interest on the $75.0 million Federal Home Loan Bank of San Francisco borrowings to fixed interest rates. The fixed rates adjust each August and were/are 0.94% at August 2013, 1.84% at August 2014, 2.64% at August 2015 and 3.22% at August 2016. During the second quarter of 2014, the net cost of the Bank’s Federal Home Loan Bank of San Francisco borrowings was also reduced when hedge gains from a previous set of interest rate swaps were reclassified out of other comprehensive income into earnings as a reduction of interest expense. As a result, interest expense on Federal Home Loan Bank of San Francisco borrowings for the second quarter of 2014 was a negative $69 thousand.

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Interest expense on other borrowings, primarily junior subordinated debentures was $49 thousand and $93 thousand for the second quarter of 2015 and 2014, respectively. During December of 2014, the Company repaid $5.0 million of junior subordinated debentures resulting in a decrease in interest on other borrowings in 2015.

Noninterest Income

Noninterest income for the three months ended June 30, 2015 decreased $1.3 million compared to the same period a year ago. During the quarter ended June 30, 2014 the Company recorded $1.6 million in hedge gains in noninterest income. This decrease in noninterest income was partially offset by net gains on sale of available-for-sale investment securities during the current quarter of $61 thousand compared to a net loss of $39 thousand for the same period a year ago. There was also a $205 thousand special dividend on Federal Home Loan Bank of San Francisco stock included in other noninterest income during the three months ended June 30, 2015.

Noninterest Expense

Noninterest expense for the three months ended June 30, 2015 increased $271 thousand compared to the same period a year ago. During the quarter ended June 30, 2015 the Company transferred land with a carrying value of $261 thousand previously held for construction of a new branch to OREO for disposition. The property was transferred to OREO at its fair value less expected selling costs resulting in a write down of $91 thousand. In the current period, professional services fees are $138 thousand higher than a year earlier.

Income Tax Provision

During the three months ended June 30, 2015, the Company recorded a provision for income tax expense of $964 thousand compared with $819 thousand for the same period a year ago. The increase in the current year is due to increased taxable income.

Second Quarter of 2015 Compared With First Quarter of 2015

Net income available to common shareholders for the second quarter of 2015 increased $589 thousand over the first quarter of 2015. In the current quarter, net interest income was higher by $226 thousand, noninterest income increased by $27 thousand and noninterest expense decreased $471 thousand. These positive changes were partially offset by an income tax provision that was higher by $135 thousand.

Net Interest Income

Net interest income increased $226 thousand over a quarter previous. Interest income for the three months ended June 30, 2015 increased $237 thousand to $9.8 million. The increase in interest income was due to increased average loan balances and the effect of a quarter that was one day longer than the first quarter of 2015 partially offset by decreased interest on securities due to decreased average securities balances. Interest expense for the three months ended June 30, 2015 increased $11 thousand or 1% to $1.2 million compared to the prior quarter. This increase was primarily due to increased interest expense on Federal Home Loan Bank of San Francisco borrowings.

Noninterest Income

Noninterest income for the three months ended June 30, 2015 increased $27 thousand compared to the prior quarter. The Company recognized a $205 thousand special dividend on Federal Home Loan Bank of San Francisco stock included in other income during the three months ended June 30, 2015. Net gains recognized on the sale of available-for-sale investment securities during the current quarter decreased by $154 thousand to $61 thousand compared to a $215 thousand net gain in the prior quarter.

Noninterest Expense

Noninterest expense for the three months ended June 30, 2015 decreased $471 thousand compared to the prior quarter. The decrease is driven by decreased salary costs and a decrease in the cost of the Bank’s supplemental executive retirement plans.

Income Tax Provision

During the three months ended June 30, 2015, the Company recorded a provision for income tax expense of $964 thousand compared with provision for income tax expense of $829 thousand for the prior quarter. The increase in the current quarter is due to increased taxable income.

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Earnings Per Share

Diluted earnings per share were $0.18 for the three months ended June 30, 2015 compared with $0.16 for the same period a year ago, and $0.13 for the prior period. Earnings per share increased during the three months ended June 30, 2015 compared to the same period a year ago as a result of increased net income and decreased weighted average shares. The decrease in weighted average shares resulted from the repurchase of 700,000 common shares from a repurchase plan announced and completed during the six months ended June 30, 2014. All repurchased shares were retired subsequent to purchase.

TABLE 7

NET INTEREST SPREAD AND MARGIN - UNAUDITED

(amounts in thousands)

	For the Three Months Ended
	June 30,						Change			March 31,			Change
	2015			2014			Amount			2015			Amount
Tax equivalent yield on average interest earning assets		4.35	%		4.16	%		0.19			4.37	%		(0.02	)
Rate on average interest bearing liabilities		0.65	%		0.49	%		(0.16	)		0.66	%		0.01
Net interest spread - tax equivalent basis		3.70	%		3.67	%		0.03			3.71	%		(0.01	)
Net interest margin - nominal		3.71	%		3.62	%		0.09			3.72	%		(0.01	)
Net interest margin - tax equivalent basis		3.85	%		3.77	%		0.08			3.86	%		(0.01	)
Average earning assets	$	928,578		$	906,298		$	22,280		$	912,886		$	15,692
Average interest bearing liabilities	$	723,288		$	717,219		$	6,069		$	708,234		$	15,054

The net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 3.85% for the three months ended June 30, 2015, an increase of eight basis points as compared to the same period a year ago. The increase in net interest margin resulted from a 19 basis point increase in tax-equivalent yield on average earning assets offset by an 11 basis point increase in interest expense to fund average earning assets. Maintaining our net interest margin in a historically low interest rate environment and while confronted with known increased Federal Home Loan Bank of San Francisco borrowing costs will be challenging in the foreseeable future. Management will continue to reallocate the asset mix into higher yielding assets by pursuing organic loan growth, and actively managing the investment securities portfolio within our accepted risk tolerance.

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TABLE 8

ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED

(amounts in thousands)

	For The Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2015			2015			2014			2014			2014
Beginning balance	$	11,296		$	10,820		$	10,400		$	9,882		$	9,748
Provision for loan and lease losses charged to expense		—			—			675			1,050			1,450
Loans charged off		(711	)		(179	)		(374	)		(585	)		(1,457	)
Loan loss recoveries		817			655			119			53			141
Ending balance	$	11,402		$	11,296		$	10,820		$	10,400		$	9,882

	At June 30,			At March 31,			At December 31,			At September 30,			At June 30,
	2015			2015			2014			2014			2014
Nonaccrual loans:
Commercial	$	3,170		$	3,908		$	5,112		$	7,065		$	4,375
Commercial real estate		7,611			8,182			9,696			9,896			15,598
Residential real estate 1-4 family		6,068			6,365			6,782			7,438			6,939
Home equity		24			24			24			89			479
Consumer		34			34			35			—			87
Total nonaccrual loans		16,907			18,513			21,649			24,488			27,478
Accruing troubled debt restructured loans:
Commercial		10			1,004			1,485			1,585			13
Commercial real estate		1,681			1,690			1,698			1,707			1,716
Residential real estate 1-4 family		5,303			5,421			5,462			5,222			5,074
Home equity		569			574			579			584			589
Total accruing troubled debt restructured loans		7,563			8,689			9,224			9,098			7,392
All other accruing impaired loans		530			533			535			757			585
Total impaired loans	$	25,000		$	27,735		$	31,408		$	34,343		$	35,455
Gross loans outstanding at period end	$	699,774		$	699,229		$	660,898		$	649,695		$	619,418
Allowance for loan and lease losses as a percent of:
Gross loans		1.63	%		1.62	%		1.64	%		1.60	%		1.59	%
Nonaccrual loans		67.44	%		61.02	%		49.98	%		42.47	%		35.96	%
Impaired loans		45.61	%		40.73	%		34.45	%		30.28	%		27.87	%
Nonaccrual loans to gross loans		2.42	%		2.65	%		3.28	%		3.77	%		4.43	%

The Company realized net loan loss recoveries of $106 thousand in the current quarter compared with net loan loss recoveries of $476 thousand in the prior quarter and net loan charge offs of $1.3 million for the same period a year ago.

10

(NASDAQ: BOCH)

The Company continues 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 Company made no provision for loan and lease losses during the first two quarters of 2015 compared to a provision of $1.5 million during quarter ended June 30, 2014. The Company’s ALLL as a percentage of gross loans was 1.63% as of June 30, 2015 compared to 1.59% as of June 30, 2014 and 1.62% as of March 31, 2015. At June 30, 2015, the Bank’s ALLL methodology, which uses criteria such as risk weighting and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate. 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 additional charges to the provision for loan and lease losses.

At June 30, 2015, the recorded investment in loans classified as impaired totaled $25.0 million, with a corresponding valuation allowance of $1.3 million compared to impaired loans of $35.5 million with a corresponding valuation allowance of $1.0 million at June 30, 2014 and impaired loans of $27.7 million, with a corresponding valuation allowance of $1.5 million at March 31, 2015. The valuation allowance on impaired loans represents the impairment reserves on performing restructured loans, other accruing loans, and nonaccrual loans.

TABLE 9

PERIOD END TROUBLED DEBT RESTRUCTURINGS - UNAUDITED

(amounts in thousands)

	At June 30,			At March 31,			At December 31,			At September 30,			At June 30,
	2015			2015			2014			2014			2014
Nonaccrual	$	12,354		$	12,695		$	14,230		$	16,556		$	20,504
Accruing		7,563			8,689			9,224			9,098			7,392
Total troubled debt restructurings	$	19,917		$	21,384		$	23,454		$	25,654		$	27,896
Percentage of total gross loans		2.85	%		3.06	%		3.55	%		3.95	%		4.50	%

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, either principal or interest, in accordance with the terms of the original loan agreement. Impairment reserves on non-collateral dependent restructured loans are measured by calculating 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 of the ALLL.

During the three months ended June 30, 2015, the Company restructured three loans to grant rate and payment deferrals. The loans were classified as troubled debt restructurings and placed on nonaccrual status. As of June 30, 2015, the Company had 121 restructured loans that qualified as troubled debt restructurings, of which 103 were performing according to their restructured terms.

11

(NASDAQ: BOCH)

TABLE 10

NONPERFORMING ASSETS - UNAUDITED

(amounts in thousands)

	At June 30,			At March 31,			At December 31,			At September 30,			At June 30,
	2015			2015			2014			2014			2014
Total nonaccrual loans	$	16,907		$	18,513		$	21,649		$	24,488		$	27,478
90 days past due and still accruing		54			30			23			—			—
Total nonperforming loans		16,961			18,543			21,672			24,488			27,478
Other real estate owned		1,405			1,502			502			393			826
Total nonperforming assets	$	18,366		$	20,045		$	22,174		$	24,881		$	28,304
Nonperforming loans to gross loans		2.42	%		2.65	%		3.28	%		3.77	%		4.43	%
Nonperforming assets to total assets		1.87	%		2.03	%		2.22	%		2.54	%		2.94	%

At June 30, 2015, June 30, 2014 and March 31, 2015, the recorded investment in OREO was $1.4 million, $826 thousand and $1.5 million, respectively. The June 30, 2015 OREO balance consists of eight properties, of which four are 1-4 family residential real estate in the amount of $283 thousand, three are nonfarm nonresidential properties in the amount of $953 thousand and one is an undeveloped commercial property in the amount of $170 thousand.

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(NASDAQ: BOCH)

 

TABLE 11

UNAUDITED CONSOLIDATED

BALANCE SHEET

(amounts in thousands, except per share data)

		At June 30,			At June 30,			Change					At March 31,
		2015			2014			$		%			2015
Assets:
Cash and due from banks	$	25,343		$	50,677		$	(25,334	)	(50	)%	$	19,309
Interest bearing due from banks		7,453			16,068			(8,615	)	(54	)%		10,802
Total cash and cash equivalents		32,796			66,745			(33,949	)	(51	)%		30,111
Securities available-for-sale, at fair value		160,763			188,686			(27,923	)	(15	)%		166,890
Securities held-to-maturity, at amortized cost		36,655			37,031			(376	)	(1	)%		36,609
Loans, net of deferred fees and costs		700,177			619,622			80,555		13	%		699,544
Allowance for loan and lease losses		(11,402	)		(9,882	)		(1,520	)	15	%		(11,296	)
Net loans		688,775			609,740			79,035		13	%		688,248
Premises and equipment, net		11,342			12,415			(1,073	)	(9	)%		11,903
Other real estate owned		1,405			826			579		70	%		1,502
Life insurance		22,168			21,504			664		3	%		22,009
Deferred taxes		10,648			10,613			35		0	%		10,041
Other assets		18,503			16,156			2,347		15	%		18,089
Total assets	$	983,055		$	963,716		$	19,339		2	%	$	985,402
Liabilities and shareholders' equity:
Demand - noninterest bearing	$	151,640		$	135,416		$	16,224		12	%	$	150,056
Demand - interest bearing		276,103			269,055			7,048		3	%		266,552
Savings		93,500			90,416			3,084		3	%		92,088
Certificates of deposit		238,796			260,129			(21,333	)	(8	)%		253,280
Total deposits		760,039			755,016			5,023		1	%		761,976
Federal Home Loan Bank of San Francisco borrowings		90,000			75,000			15,000		20	%		90,000
Junior subordinated debentures		10,310			15,465			(5,155	)	(33	)%		10,310
Other liabilities		16,156			17,545			(1,389	)	(8	)%		17,679
Total liabilities		876,505			863,026			13,479		2	%		879,965
Shareholders' equity:
Preferred stock		19,931			19,931			—		0	%		19,931
Common stock		24,144			23,858			286		1	%		24,105
Retained earnings		63,158			57,808			5,350		9	%		61,217
Accumulated other comprehensive (loss) income, net of tax		(683	)		(907	)		224		(25	)%		184
Total shareholders' equity		106,550			100,690			5,860		6	%		105,437
Total liabilities and shareholders' equity	$	983,055		$	963,716		$	19,339		2	%	$	985,402
Total interest earning assets	$	921,418		$	894,724		$	26,694		3	%	$	919,227
Shares outstanding		13,339			13,294								13,337
Book value per share	$	6.49		$	6.07							$	6.41

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(NASDAQ: BOCH)

TABLE 12

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended													For The Six Months Ended
	June 30,					Change						March 31,		June 30,
	2015		2014			$			%			2015		2015		2014
Interest income:
Interest and fees on loans	$	8,304	$	7,188		$	1,116			16	%	$	7,911	$	16,215	$	14,282
Interest on securities		801		1,112			(311	)		(28	)%		945		1,746		2,229
Interest on tax-exempt securities		602		635			(33	)		(5	)%		599		1,201		1,287
Interest on deposits		56		127			(71	)		(56	)%		71		127		264
Total interest income		9,763		9,062			701			8	%		9,526		19,289		18,062
Interest expense:
Interest on demand deposits		107		118			(11	)		(9	)%		116		223		239
Interest on savings deposits		55		57			(2	)		(4	)%		54		109		114
Interest on certificates of deposit		594		673			(79	)		(12	)%		591		1,185		1,335
Interest on Federal Home Loan Bank of San Francisco borrowings		363		(69	)		432			626	%		349		712		(176	)
Interest on other borrowings		49		93			(44	)		(47	)%		47		96		187
Total interest expense		1,168		872			296			34	%		1,157		2,325		1,699
Net interest income		8,595		8,190			405			5	%		8,369		16,964		16,363
Provision for loan and lease losses		—		1,450			(1,450	)		(100	)%		—		—		1,450
Net interest income after provision for loan and lease losses		8,595		6,740			1,855			28	%		8,369		16,964		14,913
Noninterest income:
Service charges on deposit accounts		52		41			11			27	%		49		101		85
Payroll and benefit processing fees		130		109			21			19	%		148		278		244
Earnings on cash surrender value - life insurance		159		162			(3	)		(2	)%		165		324		288
Gain (loss) on investment securities, net		61		(39	)		100			256	%		215		276		(284	)
Other income		479		1,863			(1,384	)		(74	)%		277		756		2,167
Total noninterest income		881		2,136			(1,255	)		(59	)%		854		1,735		2,500

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(NASDAQ: BOCH)

TABLE 12 - CONTINUED

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended												For The Six Months Ended
	June 30,				Change						March 31,		June 30,
	2015		2014		$			%			2015		2015		2014
Noninterest expense:
Salaries and related benefits		3,575		3,464		111			3	%		3,910		7,485		7,144
Occupancy and equipment		709		678		31			5	%		734		1,443		1,320
Write down of other real estate owned		—		—		—			0	%		—		—		290
Federal Deposit Insurance Corporation insurance premium		178		189		(11	)		(6	)%		207		385		380
Data processing fees		251		227		24			11	%		242		493		430
Professional service fees		442		304		138			45	%		388		830		534
Deferred compensation		71		68		3			4	%		71		142		125
Other expenses		896		921		(25	)		(3	)%		1,041		1,937		3,268
Total noninterest expense		6,122		5,851		271			5	%		6,593		12,715		13,491
Income before provision for income taxes		3,354		3,025		329			11	%		2,630		5,984		3,922
Provision for income taxes		964		819		145			18	%		829		1,793		1,151
Net income	$	2,390	$	2,206	$	184			8	%	$	1,801	$	4,191	$	2,771
Less: Preferred dividends		50		50		—			0	%		50		100		100
Income available to common shareholders	$	2,340	$	2,156	$	184			9	%	$	1,751	$	4,091	$	2,671
Basic earnings per share	$	0.18	$	0.16	$	0.02			13	%	$	0.13	$	0.31	$	0.20
Average basic shares		13,338		13,378		(40	)		0	%		13,303		13,320		13,658
Diluted earnings per share	$	0.18	$	0.16	$	0.02			13	%	$	0.13	$	0.31	$	0.19
Average diluted shares		13,370		13,426		(56	)		0	%		13,340		13,353		13,705

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(NASDAQ: BOCH)

TABLE 13

UNAUDITED CONDENSED CONSOLIDATED

YEAR TO DATE AVERAGE BALANCE SHEETS

(amounts in thousands)

	For the Six Months Ended				For the Twelve Months Ended
	June 30,		June 30,		December 31,		December 31,		December 31,
	2015		2014		2014		2013		2012
Earning assets:
Loans	$	688,146	$	605,761	$	625,166	$	612,780	$	642,200
Taxable securities		128,791		156,156		147,916		157,486		135,615
Tax exempt securities		77,043		85,097		83,973		92,854		81,714
Interest bearing due from banks		26,795		62,123		56,465		43,342		48,712
Average earning assets		920,775		909,137		913,520		906,462		908,241
Cash and due from banks		10,566		10,183		11,246		10,624		10,125
Premises and equipment, net		11,980		11,696		12,105		10,338		9,567
Other assets		43,085		31,845		36,936		26,430		24,249
Average total assets	$	986,406	$	962,861	$	973,807	$	953,854	$	952,182
Interest bearing liabilities:
Demand - interest bearing	$	272,349	$	270,695	$	272,383	$	244,125	$	203,342
Savings		92,227		91,447		91,108		92,502		89,789
Certificates of deposit		246,137		261,151		259,445		248,350		285,574
Repurchase agreements		—		—		—		5,780		14,246
Federal Home Loan Bank of San Francisco borrowings		94,724		75,000		77,534		107,484		110,374
Other borrowings		10,365		15,465		15,239		15,584		15,465
Average interest bearing liabilities		715,802		713,758		715,709		713,825		718,790
Demand - noninterest bearing		148,179		131,736		139,792		122,011		115,091
Other liabilities		17,013		15,174		15,934		11,825		7,033
Shareholders' equity		105,412		102,193		102,372		106,193		111,268
Average liabilities & shareholders' equity	$	986,406	$	962,861	$	973,807	$	953,854	$	952,182

16

(NASDAQ: BOCH)

 

TABLE 14

UNAUDITED CONDENSED CONSOLIDATED

QUARTERLY AVERAGE BALANCE SHEETS

(amounts in thousands)

	For the Three Months Ended
	June 30,		March 31,		December 31,		September 30,		June 30,
	2015		2015		2014		2014		2014
Earning assets:
Loans	$	703,008	$	673,120	$	656,834	$	631,674	$	611,494
Taxable securities		121,110		136,557		141,265		138,355		152,175
Tax exempt securities		76,772		77,316		82,231		83,503		83,530
Interest bearing due from banks		27,688		25,893		36,971		64,829		59,099
Average earning assets		928,578		912,886		917,301		918,361		906,298
Cash and due from banks		10,833		10,295		12,263		12,320		10,155
Premises and equipment, net		11,767		12,195		12,464		12,551		12,190
Other assets		42,637		43,540		43,072		40,815		36,887
Average total assets	$	993,815	$	978,916	$	985,100	$	984,047	$	965,530
Interest bearing liabilities:
Demand - interest bearing	$	268,784	$	275,954	$	277,692	$	270,395	$	272,457
Savings		93,291		91,152		89,992		91,556		91,488
Certificates of deposit		245,573		246,707		254,943		260,592		262,809
Federal Home Loan Bank of San Francisco borrowings		105,330		84,000		75,000		85,054		75,000
Other borrowings		10,310		10,421		14,568		15,465		15,465
Average interest bearing liabilities		723,288		708,234		712,195		723,062		717,219
Demand - noninterest bearing		147,442		148,923		153,007		142,426		131,901
Other liabilities		16,887		17,141		16,751		16,612		15,216
Shareholders' equity		106,198		104,618		103,147		101,947		101,194
Average liabilities & shareholders' equity	$	993,815	$	978,916	$	985,100	$	984,047	$	965,530

17

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

18