Bank of Commerce 8K Announces Results for the First Quarter of 2018 | BOCH 20 Apr 18

Exhibit 99.1

For Immediate Release:

Bank of Commerce Holdings Announces Results for the First Quarter of 2018

SACRAMENTO, California, April 20, 2018 / GLOBE NEWSWIRE—Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.2 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter ended March 31, 2018. Net income for the quarter ended March 31, 2018 was $3.2 million or $0.20 per share – diluted, compared with net income of $2.3 million or $0.17 per share – diluted for the same period of 2017.

Financial highlights for the first quarter of 2018 compared to the same quarter a year ago:

●

Net income of $3.2 million or $0.20 per share – diluted for the three months ended March 31, 2018 was an increase of $989 thousand (44%) from $2.3 million or $0.17 per share – diluted earned during the same period in the prior year. The increase in earnings per share compared to the same quarter a year ago was 18% and reflects the impact of 2,738,096 shares of common stock sold in the second quarter of 2017.

●	Net interest income increased $1.6 million (17%) to $11.3 million for the three months ended March 31, 2018 compared to $9.7 million for the same period in the prior year.

●	Return on average assets improved to 1.05% for the three months ended March 31, 2018 compared to 0.80% for the same period in the prior year.

●	Return on average equity improved to 10.34% for the three months ended March 31, 2018 compared to 9.63% for the same period in the prior year.

●	Average loans for the three months ended March 31, 2018 totaled $883.9 million, an increase of $77.1 million (10%) compared to average loans for the same period in the prior year.

●	Average earning assets totaled $1.2 billion for the three months ended March 31, 2018, an increase of $106.8 million (10%) compared to average earning assets for the same period in the prior year.

●	Average deposits for the three months ended March 31, 2018 totaled $1.1 billion, an increase of $58.3 million (6%) compared to average deposits for the same period in the prior year.

●	The Company’s efficiency ratio was 65.17% for the three months ended March 31, 2018 compared to 71.31% for the same period in the prior year.

●	Nonperforming assets at March 31, 2018 totaled $4.3 million or 0.34% of total assets, a decrease of $6.5 million (60%) compared to March 31, 2017.

●	Book value per common share was $7.83 at March 31, 2018 compared to $7.14 at March 31, 2017.

●	Tangible book value per common share was $7.71 at March 31, 2018 compared to $6.97 at March 31, 2017.

Financial highlights for the first quarter of 2018 compared to the prior quarter:

●	A comparison of current quarter and prior quarter net earnings information is not particularly meaningful and is not provided because the prior period included the impact of the Tax Cuts and Jobs Act of 2017 which reduced net income in that period to $7 thousand.

●	Net interest income increased $476 thousand (18% annualized) to $11.3 million for the first quarter of 2018 compared to $10.9 million for the prior quarter.

●	Average loans for the three months ended March 31, 2018 totaled $883.9 million, an increase of $44.9 million (22% annualized) compared to average loans for the prior quarter.

●	Average earning assets for the three months ended March 31, 2018 totaled $1.2 billion, an increase of $3.8 million (1% annualized) compared to average earning assets for the prior quarter.

●	Average deposits for the three months ended March 31, 2018 totaled $1.1 billion, a decrease of $12.6 million (5% annualized) compared to average deposits for the prior quarter.

●	The Company’s efficiency ratio was 65.17% for the first quarter of 2018 compared to 64.94% during the prior quarter.

●	Nonperforming assets at March 31, 2018 totaled $4.3 million or 0.34% of total assets, a decrease of $1.6 million since December 31, 2017.

●	Book value per common share was $7.83 at March 31, 2018 compared to $7.82 at December 31, 2017.

●	Tangible book value per common share was $7.71 at March 31, 2018 compared to $7.70 at December 31, 2017.

Randall S. Eslick, President and CEO commented: “I am very proud of our talented and dedicated employees. Their commitment to the company has generated noticeably improved financial results for the first quarter as we continue to execute on our vision. Net income totaled $3.2 million ($0.20 per share), ROAA was 1.05%, ROAE was 10.34% and loans increased $20.6 million (9.5% annualized). This is a great start to the year.”

Forward-Looking Statements

This quarterly press release includes forward-looking information, which is subject to the “safe harbor” created by the Securities Act of 1933 and Securities Act of 1934. These forward-looking statements (which involve our plans, beliefs and goals, refer to estimates or use similar terms) involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors:

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

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

●	A decline in the health of the economy nationally or regionally which could reduce the demand for loans or reduce the value of real estate collateral securing most of our loans

●	Credit quality deterioration which could cause an increase in the provision for loan and lease losses

●	Asset/Liability matching risks and liquidity risks

●	Changes in the securities markets

For additional information concerning risks and uncertainties related to the Company and its operations, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under the heading “Risk Factors” and to subsequent reports on Form 10-Q and current reports on Form 8-K. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation and specifically disclaims any obligation to revise or publicly release the results of any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date the statements were made.

TABLE 1

SELECTED FINANCIAL INFORMATION - UNAUDITED

(amounts in thousands except per share data)

	For The Three Months Ended
Net income, average assets and	March 31,						December 31,
average shareholders' equity	2018			2017			2017
Net income	$	3,241		$	2,252		$	7
Average total assets	$	1,248,563		$	1,148,305		$	1,251,960
Average total earning assets	$	1,181,857		$	1,075,039		$	1,178,037
Average shareholders' equity	$	127,069		$	94,820		$	128,862

Selected performance ratios
Return on average assets		1.05	%		0.80	%		0.00	%
Return on average equity		10.34	%		9.63	%		0.02	%
Efficiency ratio		65.17	%		71.31	%		64.94	%

Share and per share amounts
Weighted average shares - basic ⁽¹⁾		16,225			13,416			16,195
Weighted average shares - diluted		16,310			13,521			16,306
Earnings per share - basic	$	0.20		$	0.17		$	—
Earnings per share - diluted	$	0.20		$	0.17		$	—

	At March 31,						At December 31,
Share and per share amounts	2018			2017			2017
Common shares outstanding ⁽²⁾		16,315			13,517			16,272
Book value per common share	$	7.83		$	7.14		$	7.82
Tangible book value per common share ⁽³⁾	$	7.71		$	6.97		$	7.70

Capital ratios ⁽⁴⁾
Bank of Commerce Holdings
Common equity tier 1 capital ratio		12.35	%		9.71	%		12.26	%
Tier 1 capital ratio		13.31	%		10.72	%		13.23	%
Total capital ratio		15.52	%		13.00	%		15.44	%
Tier 1 leverage ratio		11.11	%		9.09	%		10.86	%
Tangible common equity ratio ⁽⁵⁾		10.11	%		8.27	%		9.88	%

Redding Bank of Commerce
Common equity tier 1 capital ratio		12.62	%		12.59	%		12.58	%
Tier 1 capital ratio		12.62	%		12.59	%		12.58	%
Total capital ratio		13.87	%		13.84	%		13.81	%
Tier 1 leverage ratio		10.51	%		10.67	%		10.33	%

⁽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⁾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. Capital ratios for the Company include the benefit of $26.8 million net proceeds from the sale of 2,738,096 shares of common stock in the second quarter of 2017.

⁽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 March 31, 2018, the Company had total consolidated assets of $1.2 billion, gross loans of $900.4 million, allowance for loan and lease losses (“ALLL”) of $12.3 million, total deposits of $1.0 billion, and shareholders’ equity of $127.7 million.

TABLE 2

LOAN BALANCES BY TYPE - UNAUDITED

(amounts in thousands)

	At March 31,																		At December 31,
				% of						% of			Change									% of
	2018			Total			2017			Total			Amount			%			2017			Total
Commercial	$	137,870			15	%	$	138,674			18	%	$	(804	)		(1	)%	$	142,405			16	%
Real estate - construction and land development		14,723			2			25,241			3			(10,518	)		(42	)%		15,902			2
Real estate - commercial non-owner occupied		405,192			46			311,203			38			93,989			30	%		377,668			43
Real estate - commercial owner occupied		193,286			22			186,713			24			6,573			4	%		192,023			22
Real estate - residential - ITIN		40,425			4			44,211			5			(3,786	)		(9	)%		41,188			5
Real estate - residential - 1-4 family mortgage		30,247			3			19,710			2			10,537			53	%		30,377			3
Real estate - residential - equity lines		30,520			3			33,019			4			(2,499	)		(8	)%		30,347			3
Consumer and other		48,157			5			51,423			6			(3,266	)		(6	)%		49,925			6
Gross loans		900,420			100	%		810,194			100	%		90,226			11	%		879,835			100	%
Deferred fees and costs		1,713						1,446						267						1,710
Loans, net of deferred fees and costs		902,133						811,640						90,493						881,545
Allowance for loan and lease losses		(12,295	)					(11,641	)					(654	)					(11,925	)
Net loans	$	889,838					$	799,999					$	89,839					$	869,620

Average yield on loans during the quarter		4.92	%					4.72	%					0.20						4.77	%

The Company recorded gross loan balances of $900.4 million at March 31, 2018, compared with $810.2 million and $879.8 million at March 31, 2017 and December 31, 2017, respectively, an increase of $90.2 million and $20.6 million, respectively. The increase in gross loans compared to the same period a year ago and the prior period was driven by organic loan originations by our SBA division and by our expanded Sacramento commercial banking group.

Average loan balances were $883.9 million for the quarter ended March 31, 2018, compared with $806.8 million for the quarter ended March 31, 2017 and $839.0 million for the quarter ended December 31, 2017, an increase of $77.1 million or 10% and an increase of $44.9 million or 22% annualized, respectively.

The average yield on loans during the quarter was 4.92% compared to 4.72% and 4.77% for the quarters ended March 31, 2017 and December 31, 2017, respectively. The current quarter income on loans of $10.7 million included $229 thousand from prepayment penalties and interest income from nonaccrual loans that were sold or repaid during the quarter which enhanced the average yield by ten basis points.

TABLE 3

CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED

(amounts in thousands)

	At March 31,																		At December 31,
				% of						% of			Change									% of
	2018			Total			2017			Total			Amount			%			2017			Total

Cash and due from banks	$	16,247			6	%	$	18,315			7	%	$	(2,068	)		(11	)%	$	17,979			5	%
Interest-bearing deposits in other banks		17,376			6			42,744			16			(25,368	)		(59	)%		48,991			15
Total cash and cash equivalents		33,623			12			61,059			23			(27,436	)		(45	)%		66,970			20

Investment securities:
U.S. government and agencies		41,179			14			12,496			5			28,683			230	%		40,369			12
Obligations of state and political subdivisions		59,408			21			55,663			20			3,745			7	%		78,844			24
Residential mortgage backed securities and collateralized mortgage obligations		125,567			43			82,392			30			43,175			52	%		114,592			34
Corporate securities		3,958			1			10,448			4			(6,490	)		(62	)%		4,992			1
Commercial mortgage backed securities		25,520			9			16,522			6			8,998			54	%		26,641			8
Other asset backed securities		285			—			4,013			1			(3,728	)		(93	)%		2,516			1
Total investment securities - AFS		255,917			88			181,534			66			74,383			41	%		267,954			80

Obligations of state and political subdivisions - HTM		—			—			31,257			11			(31,257	)		(100	)%		—			—
Total investment securities - AFS and HTM		255,917			88			212,791			77			43,126			20	%		267,954			80
Total cash, cash equivalents and investment securities	$	289,540			100	%	$	273,850			100	%	$	15,690			6	%	$	334,924			100	%
Average yield on interest-bearing due from banks and investment securities during the quarter - (nominal)		2.45	%					2.17	%					0.28						2.30	%

As of March 31, 2018, we maintained noninterest-bearing cash positions of $16.2 million and interest-bearing deposits of $17.4 million at the Federal Reserve Bank and correspondent banks. The reduction in cash and cash equivalents from December 31, 2017 to March 31, 2018 reflects the seasonal decline in deposits which, in 2018, has been greater than it was in the prior two years.

Investment securities totaled $255.9 million at March 31, 2018, compared with $212.8 million and $268.0 million at March 31, 2017 and December 31, 2017, respectively. Our investment securities portfolio provides us with a secondary source of liquidity to fund higher yielding asset opportunities, such as loan originations. During the first quarter of 2018, we purchased 12 securities with a par value of $19.6 million and weighted average yield of 3.11% and sold 29 securities with a par value of $18.7 million and weighted average yield of 2.27%. The sales activity on available-for-sale securities resulted in $36 thousand in net realized gains. During the same period, we received $7.9 million in proceeds from principal payments, calls and maturities within the investment securities portfolio.

Average securities balances and weighted average tax equivalent yields for the quarters ended March 31, 2018 and 2017 were $265.1 million and 2.75% compared to $211.1 million and 3.06%, respectively. The current quarter tax equivalent yields were reduced by 17 basis points as a result of the Tax Cuts and Jobs Act of 2017 which reduced the federal corporate tax rate from a graduated rate of 35% to a flat rate of 21%.

At March 31, 2018, our net unrealized losses on available-for-sale investment securities were $3.9 million compared with net unrealized losses of $891 thousand and $452 thousand at March 31, 2017 and December 31, 2017, respectively. The changes in the net unrealized loss on the investment securities portfolio are due to changes in market interest rates and the reclassification of all HTM securities to AFS during the fourth quarter of 2017.

TABLE 4

DEPOSITS BY TYPE - UNAUDITED

(amounts in thousands)

	At March 31,																		At December 31,
				% of						% of			Change									% of
	2018			Total			2017			Total			Amount			%			2017			Total
Demand - noninterest-bearing	$	301,981			29	%	$	270,412			27	%	$	31,569			12	%	$	305,650			28	%
Demand - interest-bearing		462,551			44			407,784			41			54,767			13	%		496,990			45
Total demand		764,532			73			678,196			68			86,336			13	%		802,640			73

Savings		107,986			10			112,738			11			(4,752	)		(4	)%		110,837			10
Total non-maturing deposits		872,518			83			790,934			79			81,584			10	%		913,477			83

Certificates of deposit		176,233			17			213,556			21			(37,323	)		(17	)%		189,255			17
Total deposits	$	1,048,751			100	%	$	1,004,490			100	%	$	44,261			4	%	$	1,102,732			100	%

Average rate on interest-bearing deposits during the quarter		0.41	%					0.39	%					0.02						0.42	%
Average rate on all deposits during the quarter		0.29	%					0.29	%					-						0.30	%

Total deposits at March 31, 2018, increased $44.3 million or 4% to $1.0 billion compared to March 31, 2017, and decreased $54.0 million or 20% annualized compared to December 31, 2017. Total non-maturing deposits increased $81.6 million or 10% compared to the same date a year ago and decreased $41.0 million or 18% annualized compared to December 31, 2017. Certificates of deposit decreased $37.3 million or 17% compared to the same date a year ago and decreased $13.0 million or 28% annualized compared to December 31, 2017.

In late December 2017, deposit balances increased more significantly than at prior year-ends and then were withdrawn in early 2018. Average balances more clearly illustrate deposit balance trends. Average non-maturity deposits totaled $888.6 million in the first quarter of 2018 compared to $888.1 million in the prior quarter. Average certificates of deposit totaled $181.9 million in the first quarter of 2018 compared to $194.9 million in the prior quarter.

TABLE 5
WHOLESALE AND BROKERED DEPOSITS - UNAUDITED
(amounts in thousands)

	At March 31,				At December 31,
	2018		2017		2017
CDARS / ICS reciprocal brokered deposits	$	56,732	$	55,565	$	66,279
Online listing service wholesale time deposits		29,159		47,429		36,060
Total wholesale and brokered deposits	$	85,891	$	102,994	$	102,339

In accordance with regulatory Call Report instructions, the Bank will file (or has filed) quarterly Call Reports which list brokered deposits of $56.7 million, $55.6 million and $66.3 million at March 31, 2018, March 31, 2017 and December 31, 2017, respectively.

INCOME STATEMENT OVERVIEW

TABLE 6

SUMMARY INCOME STATEMENT - UNAUDITED

(amounts in thousands, except per share data)

For The Three Months Ended

	March 31,				Change						December 31,		Change
	2018		2017		Amount			%			2017		Amount			%
Interest income	$	12,530	$	10,817	$	1,713			16	%	$	12,047	$	483			4	%
Interest expense		1,185		1,083		102			9	%		1,178		7			1	%
Net interest income		11,345		9,734		1,611			17	%		10,869		476			4	%
Provision for loan and lease losses		—		200		(200	)		(100	)%		450		(450	)		(100	)%
Noninterest income		982		1,471		(489	)		(33	)%		1,282		(300	)		(23	)%
Noninterest expense		8,033		7,990		43			1	%		7,891		142			2	%
Income before provision for income taxes		4,294		3,015		1,279			42	%		3,810		484			13	%
Provision for income taxes:
Net deferred tax asset write-down		—		—		—			—	%		2,490		(2,490	)		(100	)%
Provision for income taxes from operations		1,053		763		290			38	%		1,313		(260	)		(20	)%
Total provision for income taxes		1,053		763		290			38	%		3,803		(2,750	)		(72	)%
Net income	$	3,241	$	2,252	$	989			44	%	$	7	$	3,234			100	%

Basic earnings per share	$	0.20	$	0.17	$	0.03			18	%	$	—	$	0.20			100	%
Average basic shares		16,225		13,416		2,809			21	%		16,195		30			—	%
Diluted earnings per share	$	0.20	$	0.17	$	0.03			18	%	$	—	$	0.20			100	%
Average diluted shares		16,310		13,521		2,789			21	%		16,306		4			—	%
Dividends declared per common share	$	0.03	$	0.03	$	—			—	%	$	0.03	$	—			—	%

First Quarter of 2018 Compared With First Quarter of 2017

Net income for the first quarter of 2018 increased $989 thousand compared to the first quarter of 2017. In the current quarter, net interest income was $1.6 million higher and provision for loan and lease losses was $200 thousand lower. These positive changes were offset by noninterest income that was $489 thousand lower, noninterest expense that was $43 thousand higher and a provision for income tax that was $290 thousand higher.

Net Interest Income

Net interest income increased $1.6 million compared to the same period a year ago.

Interest income for the three months ended March 31, 2018 increased $1.7 million or 16% to $12.5 million. Interest and fees on loans increased $1.3 million due to a $77.1 million increase in average loan balances and a 20 basis point increase in the average yield on the loan portfolio. Interest on securities increased $353 thousand due to a $54.0 million increase in average securities balances and a two basis point increase in the average yield on the securities portfolio. Interest on interest-bearing deposits due from banks increased $15 thousand primarily due to a 78 basis point increase in average yield resulting from increased fed funds rates.

Interest expense for the first quarter of 2018 increased $102 thousand or 9% to $1.2 million. The net increase was due to the following:

●

Interest expense on interest bearing deposits increased $51 thousand. Average interest-bearing demand and savings deposit balances increased $47.1 million, while average certificate of deposit balances decreased $33.3 million. The average rate paid on interest-bearing deposits increased two basis points.

●

Interest expense on other interest bearing liabilities increased $51 thousand primarily due to increased borrowing from the Federal Home Loan Bank of San Francisco.

Provision for loan and lease loss

As a result of continued improved asset quality and net loan loss recoveries, no provision for loan and lease losses was necessary during the current quarter compared with a provision for loan and lease losses of $200 thousand for the same quarter a year ago.

Noninterest Income

Noninterest income for the three months ended March 31, 2018 decreased $489 thousand compared to the first quarter for 2017. During the first quarter of 2017 we recognized income from life insurance death benefit proceeds of $502 thousand.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2018 increased only $43 thousand compared to the same period a year previous.

The Company’s efficiency ratio was 65.17% for the first quarter of 2018 compared to 71.31% during the same period in 2017.

Income Tax Provision

For the three months ended March 31, 2018, our income tax provision of $1.1 million on pre-tax income of $4.3 million was an effective tax rate of 24.5%. The current quarter effective tax rate reflects the benefits of the Tax Cuts and Jobs Act of 2017 which reduced the federal corporate tax rate from a graduated rate of 35% to a flat rate of 21%. The tax provision for the first quarter of the prior year was $763 thousand on pre-tax income of $3.0 million for an effective tax rate of 25.31%. Life insurance death benefits of $502 thousand recorded during the first quarter of 2017 are not subject to income tax, and if excluded from pretax income, the effective tax rate would have been 30.36%.

First Quarter of 2018 Compared With Fourth Quarter of 2017

Net income for the first quarter of 2018 increased $3.2 million compared to the fourth quarter of 2017. In the current quarter, net interest income was $476 thousand higher, the provision for loan and lease losses was $450 thousand lower and the provision for income taxes was $2.8 million lower. These positive changes were offset by noninterest income that was $300 thousand lower and noninterest expenses that were $142 thousand higher.

Net Interest Income

Net interest income increased $476 thousand over the prior quarter.

Interest income for the three months ended March 31, 2018 increased $483 thousand or 4% to $12.5 million. Interest and fees on loans increased $646 thousand due to a $44.9 million increase in average loan balances and a 15 basis point increase in the average yield on the loan portfolio. Interest on investment securities decreased $68 thousand due to a $6.9 million decrease in average securities balances partially offset by a two basis point increase in average yield. Interest on interest-bearing deposits due from banks decreased $95 thousand due to a $34.1 million decrease in average balances.

Interest expense for the three months ended March 31, 2018 increased $7 thousand or 1% to $1.2 million. Interest expense on deposits declined $42 thousand as average interest-bearing demand and savings deposits increased $10.0 million, average certificates of deposit declined $13.0 million and the average rate paid on these deposits declined one basis point. This was offset by new borrowings from the Federal Home loan Bank of San Francisco which averaged $12.4 million and carried interest expense of $47 thousand. Variances in interest expense on other term debt were immaterial.

Provision for loan and lease loss

Noninterest Income

Noninterest income for the three months ended March 31, 2018 decreased $300 thousand. During the current quarter gains on sale of OREO were $16 thousand compared to gains on sale of OREO of $346 thousand in the prior quarter.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2018 increased $142 thousand compared to the fourth quarter of 2017. The increase was primarily related to employee compensation.

The Company’s efficiency ratio was 65.17% for the first quarter of 2018 compared to 64.94% during the prior quarter.

Income Tax Provision

For the three months ended March 31, 2018, our income tax provision of $1.1 million on pre-tax income of $4.3 million was an effective tax rate of 24.5%. This compares with a provision for income taxes of $3.8 million on pretax income of $3.8 million (99.8% effective tax rate) for the prior quarter. The income tax provision in the prior quarter included a $2.5 million write-down of our net deferred tax assets and if excluded from the calculation, the effective tax rate would have been 34.5%

Earnings Per Share

Diluted earnings per share were $0.20 for the three months ended March 31, 2018. This compared with diluted earnings per share of $0.17 for the same period a year ago and diluted earnings per share of $0.00 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in table 6 presented earlier in this press release.

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

TABLE 7

AVERAGE COST OF FUNDS

	For The Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2017			2017			2017			2017			2016			2016			2016
Interest-bearing deposits		0.41	%		0.42	%		0.43	%		0.42	%		0.39	%		0.40	%		0.39	%		0.39	%
Interest-bearing deposits and noninterest-bearing demand		0.29	%		0.30	%		0.31	%		0.31	%		0.29	%		0.29	%		0.29	%		0.30	%
All interest-bearing liabilities		0.60	%		0.59	%		0.60	%		0.60	%		0.56	%		0.57	%		0.56	%		0.56	%
All interest-bearing liabilities and noninterest-bearing demand		0.43	%		0.42	%		0.43	%		0.44	%		0.42	%		0.42	%		0.42	%		0.44	%

TABLE 8a

NET INTEREST MARGIN - UNAUDITED

(amounts in thousands)

	For The Three Months Ended
	March 31, 2018							March 31, 2017							December 31, 2017
	Average				Yield /			Average				Yield /			Average				Yield /
(Amounts in thousands)	Balance		Interest⁽¹⁾		Rate ⁽⁵⁾			Balance		Interest⁽¹⁾		Rate ⁽⁵⁾			Balance		Interest⁽¹⁾		Rate ⁽⁵⁾
Interest-earning assets:
Net loans ⁽²⁾	$	883,876	$	10,729		4.92	%	$	806,793	$	9,384		4.72	%	$	839,004	$	10,083		4.77	%
Taxable securities		205,302		1,209		2.39	%		137,582		789		2.33	%		199,849		1,211		2.40	%
Tax-exempt securities		59,789		463		3.14	%		73,524		530		2.92	%		72,152		529		2.91	%
Interest-bearing deposits in other banks		32,890		129		1.59	%		57,140		114		0.81	%		67,032		224		1.33	%
Average interest-earning assets		1,181,857		12,530		4.30	%		1,075,039		10,817		4.08	%		1,178,037		12,047		4.06	%
Cash and due from banks		17,666							16,873							19,783
Premises and equipment, net		14,557							16,165							14,948
Other assets		34,483							40,228							39,192
Average total assets	$	1,248,563						$	1,148,305						$	1,251,960

Interest-bearing liabilities:
Interest-bearing demand	$	470,440		221		0.19	%	$	420,416		148		0.14	%	$	459,451		216		0.19	%
Savings deposits		110,725		59		0.22	%		113,647		47		0.17	%		111,725		54		0.19	%
Certificates of deposit		181,901		495		1.10	%		215,202		529		1.00	%		194,886		547		1.11	%
Federal Home Loan Bank of San Francisco borrowings		12,444		47		1.53	%		—		—		—	%		—		—		—	%
Other borrowings net of unamortized debt issuance costs		16,528		281		6.90	%		18,598		293		6.39	%		17,211		285		6.57	%
Junior subordinated debentures		10,310		82		3.23	%		10,310		66		2.60	%		10,310		76		2.92	%
Average interest-bearing liabilities		802,348		1,185		0.60	%		778,173		1,083		0.56	%		793,583		1,178		0.59	%
Noninterest-bearing demand		307,397							262,881							316,961
Other liabilities		11,749							12,431							12,554
Shareholders’ equity		127,069							94,820							128,862
Average liabilities and shareholders’ equity	$	1,248,563						$	1,148,305						$	1,251,960
Net interest income and net interest margin⁽⁴⁾			$	11,345		3.89	%			$	9,734		3.67	%			$	10,869		3.66	%
Tax equivalent net interest margin ⁽³⁾						3.94	%						3.78	%						3.75	%

⁽¹⁾ Interest income on loans is net of deferred fees and costs of approximately $137 thousand, $197 thousand, and $123 thousand for the three months ended March 31, 2018, and 2017 and December 31, 2017, respectively.

⁽²⁾ Net loans includes average nonaccrual loans of $4.8 million, $10.9 million and $6.5 million for the three months ended March 31, 2018 and 2017 and December 31, 2017, respectively.

⁽³⁾ Tax-exempt income has been adjusted to tax equivalent basis at a 21% for 2018 and at a 34% tax rate for 2017. The amount of such adjustments was an addition to recorded income of approximately $123 thousand, $273 thousand and $273 thousand for the three months ended March 31, 2018 and 2017 and December 31, 2017, respectively.

⁽⁴⁾ Net interest margin is net interest income expressed as a percentage of average interest-earning assets.

⁽⁵⁾ Yields and rates are calculated by dividing the income or expense by the average balance of the assets or liabilities, respectively, and annualizing the result.

TABLE 9

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

(amounts in thousands)

	For The Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
Beginning balance ALLL	$	11,925		$	11,692		$	11,688		$	11,641		$	11,544
Provision for loan and lease losses		—			450			—			300			200
Loans charged-off		(390	)		(451	)		(245	)		(359	)		(447	)
Loan loss recoveries		760			234			249			106			344
Ending balance ALLL	$	12,295		$	11,925		$	11,692		$	11,688		$	11,641

	At March 31,			At December 31,			At September 30,			At June 30,			At March 31,
	2018			2017			2017			2017			2017
Nonaccrual loans:
Commercial	$	1,109		$	1,603		$	2,309		$	2,410		$	2,534
Real estate - commercial non-owner occupied		—			—			—			1,196			1,196
Real estate - commercial owner occupied		—			600			617			639			654
Real estate - residential - ITIN		2,839			2,909			3,201			3,346			3,331
Real estate - residential - 1-4 family mortgage		188			606			626			653			1,337
Real estate - residential - equity lines		45			45			815			872			906
Consumer and other		35			36			37			38			39
Total nonaccrual loans		4,216			5,799			7,605			9,154			9,997
Accruing troubled debt restructured loans:
Commercial		1,516			1,551			671			703			741
Real estate - commercial non-owner occupied		800			803			805			806			808
Real estate - residential - ITIN		4,554			4,614			4,655			4,712			4,761
Real estate - residential - equity lines		376			380			441			445			450
Total accruing troubled debt restructured loans		7,246			7,348			6,572			6,666			6,760

All other accruing impaired loans		—			—			—			—			—

Total impaired loans	$	11,462		$	13,147		$	14,177		$	15,820		$	16,757

Gross loans outstanding at period end	$	900,420		$	879,835		$	824,874		$	815,388		$	810,194

Impaired loans to gross loans		1.27	%		1.49	%		1.72	%		1.94	%		2.07	%
Nonaccrual loans to gross loans		0.47	%		0.66	%		0.92	%		1.12	%		1.23	%

Allowance for loan and lease losses as a percent of:
Gross loans		1.37	%		1.36	%		1.42	%		1.43	%		1.44	%
Nonaccrual loans		291.63	%		205.64	%		153.74	%		127.68	%		116.44	%
Impaired loans		107.27	%		90.71	%		82.47	%		73.88	%		69.47	%

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. As a result of continued improved asset quality and net loan loss recoveries, no provision for loan and lease losses was necessary during the current quarter. This compared with a provision of $200 thousand for the three months ended March 31, 2017 and a $450 thousand provision for loan and lease losses during the three months ended December 31, 2017. Our ALLL as a percentage of gross loans was 1.37% as of March 31, 2018 compared to 1.44% as of March 31, 2017 and 1.36% as of December 31, 2017. Based on the Bank’s ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate at March 31, 2018. 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 March 31, 2018, the recorded investment in loans classified as impaired totaled $11.5 million, with a corresponding specific reserve of $1.1 million compared to impaired loans of $16.8 million with a corresponding specific reserve of $1.3 million at March 31, 2017 and impaired loans of $13.1 million, with a corresponding specific reserve of $1.2 million at December 31, 2017. The decrease in loans classified as impaired and nonaccrual loans compared to the prior quarter is primarily due to one commercial loan relationship and one commercial real estate loan that were paid off during the quarter. The decrease in the specific reserve on impaired loans compared to the prior quarter was primarily due to one commercial loan.

TABLE 10

TROUBLED DEBT RESTRUCTURINGS - UNAUDITED

(amounts in thousands)

	At March 31,			At December 31,			At September 30,			At June 30,			At March 31,
	2018			2017			2017			2017			2017
Nonaccrual	$	3,237		$	3,581		$	4,403		$	4,630		$	4,570
Accruing		7,246			7,348			6,572			6,666			6,760
Total troubled debt restructurings	$	10,483		$	10,929		$	10,975		$	11,296		$	11,330

Troubled debt restructurings as a percentage of total gross loans		1.16	%		1.24	%		1.33	%		1.39	%		1.40	%

There were no new troubled debt restructurings during the three months ended March 31, 2018. As of March 31, 2018, we had 113 restructured loans that qualified as troubled debt restructurings, of which 108 were performing according to their restructured terms.

TABLE 11

NONPERFORMING ASSETS - UNAUDITED

(amounts in thousands)

	At March 31,			At December 31,			At September 30,			At June 30,			At March 31,
	2018			2017			2017			2017			2017
Total nonaccrual loans	$	4,216		$	5,799		$	7,605		$	9,154		$	9,997
90 days past due and still accruing		—			—			—			—			—
Total nonperforming loans		4,216			5,799			7,605			9,154			9,997

Other real estate owned		60			35			699			1,517			814
Total nonperforming assets	$	4,276		$	5,834		$	8,304		$	10,671		$	10,811

Nonperforming loans to gross loans		0.47	%		0.66	%		0.92	%		1.12	%		1.23	%
Nonperforming assets to total assets		0.34	%		0.46	%		0.67	%		0.88	%		0.95	%

The March 31, 2018 OREO balance consists of three 1-4 family residential real estate property in the amount of $60 thousand. The increase in the OREO balance compared to the prior quarter is due to the transfer of three 1-4 family residential properties to OREO totaling $60 thousand offset by the disposition of one 1-4 family residential property for $35 thousand. Net gains on sale of OREO in the current quarter were $16 thousand compared to net losses of $71 thousand and net gains of $346 thousand in the same quarter a year ago and in the prior quarter, respectively.

TABLE 12

UNAUDITED CONSOLIDATED

BALANCE SHEET

(amounts in thousands, except per share data)

	At March 31,			At March 31,			Change						At December 31,
	2018			2017			$			%			2017
Assets:
Cash and due from banks	$	16,247		$	18,315		$	(2,068	)		(11	)%	$	17,979
Interest-bearing deposits in other banks		17,376			42,744			(25,368	)		(59	)%		48,991
Total cash and cash equivalents		33,623			61,059			(27,436	)		(45	)%		66,970

Securities available-for-sale, at fair value		255,917			181,534			74,383			41	%		267,954
Securities held-to-maturity, at amortized cost		—			31,257			(31,257	)		(100	)%		—
Loans, net of deferred fees and costs		902,133			811,640			90,493			11	%		881,545
Allowance for loan and lease losses		(12,295	)		(11,641	)		(654	)		6	%		(11,925	)
Net loans		889,838			799,999			89,839			11	%		869,620

Premises and equipment, net		14,214			15,903			(1,689	)		(11	)%		14,748
Other real estate owned		60			814			(754	)		(93	)%		35
Life insurance		22,027			21,494			533			2	%		21,898
Deferred tax asset, net		7,523			9,363			(1,840	)		(20	)%		6,505
Goodwill and core deposit intangible, net		1,975			2,196			(221	)		(10	)%		2,030
Other assets		20,398			19,132			1,266			7	%		19,661
Total assets	$	1,245,575		$	1,142,751		$	102,824			9	%	$	1,269,421

Liabilities and shareholders' equity:
Demand - noninterest-bearing	$	301,981		$	270,412		$	31,569			12	%	$	305,650
Demand - interest-bearing		462,551			407,784			54,767			13	%		496,990
Savings		107,986			112,738			(4,752	)		(4	)%		110,837
Certificates of deposit		176,233			213,556			(37,323	)		(17	)%		189,255
Total deposits		1,048,751			1,004,490			44,261			4	%		1,102,732

Term debt:
Federal Home Loan Bank of San Francisco borrowings		30,000			—			30,000			100	%		—
Other borrowings		16,196			18,667			(2,471	)		(13	)%		17,096
Unamortized debt issuance costs		(127	)		(173	)		46			(27	)%		(138	)
Net term debt		46,069			18,494			27,575			149	%		16,958

Junior subordinated debentures		10,310			10,310			—			—	%		10,310
Other liabilities		12,723			12,994			(271	)		(2	)%		12,157
Total liabilities		1,117,853			1,046,288			71,565			7	%		1,142,157

Shareholders' equity:
Common stock		51,959			24,800			27,159			110	%		51,830
Retained earnings		78,507			72,066			6,441			9	%		75,700
Accumulated other comprehensive loss, net of tax		(2,744	)		(403	)		(2,341	)		581	%		(266	)
Total shareholders' equity		127,722			96,463			31,259			32	%		127,264
Total liabilities and shareholders' equity	$	1,245,575		$	1,142,751		$	102,824			9	%	$	1,269,421
Total interest-earning assets	$	1,179,321		$	1,068,066		$	111,255			10	%	$	1,198,942
Shares outstanding		16,315			13,517			2,798			21	%		16,272
Book value per share	$	7.83		$	7.14		$	0.69			10	%	$	7.82
Tangible book value per share ⁽¹⁾	$	7.71		$	6.97		$	0.74			11	%	$	7.70

⁽¹⁾Tangible book value per share is computed by dividing total shareholders’ equity less goodwill and core deposit intangible, net by shares outstanding. Management believes that tangible book value per share is meaningful because it is a measure that the Company and investors commonly use to assess capital adequacy.

TABLE 13

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended
	March 31,					Change						December 31,
	2018		2017			$			%			2017
Interest income:
Interest and fees on loans	$	10,729	$	9,384		$	1,345			14	%	$	10,083
Interest on taxable securities		1,209		789			420			53	%		1,211
Interest on tax-exempt securities		463		530			(67	)		(13	)%		529
Interest on interest-bearing deposits in other banks		129		114			15			13	%		224
Total interest income		12,530		10,817			1,713			16	%		12,047
Interest expense:
Interest on demand deposits		221		148			73			49	%		216
Interest on savings deposits		59		47			12			26	%		54
Interest on certificates of deposit		495		529			(34	)		(6	)%		547
Interest on Federal Home Loan Bank of San Francisco borrowings		47		—			47			100	%		—
Interest on other borrowings		281		293			(12	)		(4	)%		285
Interest on junior subordinated debentures		82		66			16			24	%		76
Total interest expense		1,185		1,083			102			9	%		1,178
Net interest income		11,345		9,734			1,611			17	%		10,869
Provision for loan and lease losses		—		200			(200	)		(100	)%		450
Net interest income after provision for loan and lease losses		11,345		9,534			1,811			19	%		10,419
Noninterest income:
Service charges on deposit accounts		176		127			49			39	%		141
ATM and point of sale fees		266		266			—			—	%		266
Fees on payroll and benefit processing		169		191			(22	)		(12	)%		173
Life insurance		129		646			(517	)		(80	)%		135
Gain (loss) on investment securities, net		36		66			(30	)		(45	)%		(2	)
Federal Home Loan Bank of San Francisco dividends		80		103			(23	)		(22	)%		81
Gain (loss) on sale of OREO		16		(71	)		87			(123	)%		346
Insured cash sweep fees		—		32			(32	)		(100	)%		5
Other income		110		111			(1	)		(1	)%		137
Total noninterest income		982		1,471			(489	)		(33	)%		1,282

TABLE 13 - CONTINUED

UNAUDITED

INCOME STATEMENT

(amounts in thousands, except per share data)

	For The Three Months Ended
	March 31,				Change						December 31,
	2018		2017		$			%			2017
Noninterest expense:
Salaries and related benefits		4,855		4,858		(3	)		—	%		4,523
Premises and equipment		1,071		1,048		23			2	%		1,073
Federal Deposit Insurance Corporation insurance premium		96		48		48			100	%		88
Data processing fees		432		406		26			6	%		455
Professional service fees		345		384		(39	)		(10	)%		279
Telecommunications		216		211		5			2	%		226
Other expenses		1,018		1,035		(17	)		(2	)%		1,247
Total noninterest expense		8,033		7,990		43			1	%		7,891
Income before provision for income taxes		4,294		3,015		1,279			42	%		3,810
Provision for income taxes:
Net deferred tax asset write-down		—		—		—			—	%		2,490
Provision for income taxes from operations		1,053		763		290			38	%		1,313
Total provision for income taxes		1,053		763		290			38	%		3,803
Net income	$	3,241	$	2,252	$	989			44	%	$	7

Basic earnings per share	$	0.20	$	0.17	$	0.03			18	%	$	—
Average basic shares		16,225		13,416		2,809			21	%		16,195
Diluted earnings per share	$	0.20	$	0.17	$	0.03			18	%	$	—
Average diluted shares		16,310		13,521		2,789			21	%		16,306

TABLE 14

UNAUDITED CONDENSED CONSOLIDATED

YEAR TO DATE AVERAGE BALANCE SHEETS

(amounts in thousands)

	For the Three Months Ended				For the Twelve Months Ended
	March 31,		March 31,		December 31,		December 31,		December 31,
	2018		2017		2017		2016		2015
Earning assets:
Loans	$	883,876	$	806,793	$	818,119	$	752,938	$	699,227
Taxable securities		205,302		137,582		165,333		120,884		120,897
Tax exempt securities		59,789		73,524		74,231		75,303		77,089
Interest-bearing deposits in other banks		32,890		57,140		66,872		58,668		30,323
Total earning assets		1,181,857		1,075,039		1,124,555		1,007,793		927,536

Cash and due from banks		17,666		16,873		18,301		15,831		11,220
Premises and equipment, net		14,557		16,165		15,567		15,078		11,552
Other assets		34,483		40,228		39,828		41,048		42,423
Total assets	$	1,248,563	$	1,148,305	$	1,198,251	$	1,079,750	$	992,731

Liabilities and shareholders' equity:
Demand - noninterest-bearing	$	307,397	$	262,881	$	289,735	$	226,368	$	156,578
Demand - interest-bearing		470,440		420,416		434,705		374,170		283,105
Savings		110,725		113,647		111,376		104,771		92,659
Certificates of deposit		181,901		215,202		205,648		221,074		238,626
Total deposits		1,070,463		1,012,146		1,041,464		926,383		770,968

Federal Home Loan Bank of San Francisco borrowings		12,444		—		—		—		—
Other borrowings net of unamortized debt issuance costs		16,528		18,598		18,283		37,286		88,874
Junior subordinated debentures		10,310		10,310		10,310		10,310		10,310
Other liabilities		11,749		12,431		12,293		13,217		16,588
Total liabilities		1,121,494		1,053,485		1,082,350		987,196		886,740

Shareholders' equity		127,069		94,820		115,901		92,554		105,991
Liabilities & shareholders' equity	$	1,248,563	$	1,148,305	$	1,198,251	$	1,079,750	$	992,731

TABLE 15

UNAUDITED CONDENSED CONSOLIDATED

QUARTERLY AVERAGE BALANCE SHEETS

(amounts in thousands)

	For The Three Months Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2018		2017		2017		2017		2017
Earning assets:
Loans	$	883,876	$	839,004	$	805,144	$	821,321	$	806,793
Taxable securities		205,302		199,849		179,362		143,705		137,582
Tax exempt securities		59,789		72,152		77,303		73,927		73,524
Interest-bearing deposits in other banks		32,890		67,032		84,323		58,691		57,140
Total earning assets		1,181,857		1,178,037		1,146,132		1,097,644		1,075,039

Cash and due from banks		17,666		19,783		19,143		17,364		16,873
Premises and equipment, net		14,557		14,948		15,362		15,809		16,165
Other assets		34,483		39,192		40,263		39,630		40,228
Total assets	$	1,248,563	$	1,251,960	$	1,220,900	$	1,170,447	$	1,148,305

Liabilities and shareholders' equity:
Demand - noninterest-bearing	$	307,397	$	316,961	$	303,314	$	275,039	$	262,881
Demand - interest-bearing		470,440		459,451		436,614		421,888		420,416
Savings		110,725		111,725		110,305		109,857		113,647
Certificates of deposit		181,901		194,886		204,044		208,703		215,202
Total deposits		1,070,463		1,083,023		1,054,277		1,015,487		1,012,146

Federal Home Loan Bank of San Francisco borrowings		12,444		—		—		—		—
Other borrowings net of unamortized debt issuance costs		16,528		17,211		17,804		19,539		18,598
Junior subordinated debentures		10,310		10,310		10,310		10,310		10,310
Other liabilities		11,749		12,554		11,935		12,256		12,431
Total liabilities		1,121,494		1,123,098		1,094,326		1,057,592		1,053,485

Shareholders' equity		127,069		128,862		126,574		112,855		94,820
Liabilities & shareholders' equity	$	1,248,563	$	1,251,960	$	1,220,900	$	1,170,447	$	1,148,305

About Bank of Commerce Holdings

Bank of Commerce Holdings is a bank holding company headquartered in Sacramento, California and is the parent company for Redding Bank of Commerce which operates under two separate names (Redding Bank of Commerce and Sacramento Bank of Commerce, a division of Redding Bank of Commerce). The Bank is an FDIC-insured California banking corporation providing community banking and financial services through nine offices located in northern California. The Bank 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 Schneck, Vice President and Senior Administrative Officer

Telephone Direct (530) 722-3959

Bank of Commerce (BOCH) 8-KBank of Commerce Holdings Announces Results for the First Quarter of 2018