SACRAMENTO, Calif., Jan. 18, 2019 (GLOBE NEWSWIRE) — Bank of Commerce Holdings (NASDAQ: BOCH) (the “Company”), a $1.307 billion asset bank holding company and parent company of Redding Bank of Commerce (the “Bank”), today announced financial results for the quarter and the year ended December 31, 2018. Net income for the quarter ended December 31, 2018 was $4.8 million or $0.30 per share – diluted, compared with net income of $7 thousand or $0.00 per share – diluted for the same period of 2017. Net income for the year ended December 31, 2018 was $15.7 million or $0.96 per share – diluted, compared with net income of $7.3 million or $0.48 per share – diluted for the same period of 2017.

Selected Tax Items:
Financial performance for both 2018 and 2017 includes “selected tax items” which complicate reporting period comparisons. The 2018 results include a $1.5 million decrease in our income tax provision composed of a $988 thousand reversal of our uncertain tax position and a $484 thousand benefit as a result of our cost segregation study and tangible property review. These items were previously disclosed in our form 10-Q filed November 2, 2018. The 2017 results include a $2.5 million increase in our income tax provision as a result of the Tax Cuts and Jobs Act of 2017 disclosed in our 2017 form 10-K filed on March 9, 2018. Management believes that our financial results are more comparative excluding the impact of these selected tax items.

Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. We believe that these non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this document are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

SELECTED NON-GAAP FINANCIAL INFORMATION – UNAUDITED
(amounts in thousands except per share data)
		For The Three Months Ended												For The Twelve Months Ended
Reconciliation of Net Income (GAAP) to Net Income		December 31,								September 30,				December 31,
Excluding Selected Tax Items (non-GAAP):		2018				2017				2018				2018				2017
Net income (GAAP)		$	4,839			$	7			$	4,032			$	15,730			$	7,344
Selected tax items:
Reversal of uncertain tax position (GAAP)			(988	)			—				—				(988	)			—
Benefit from cost segregation study and tangible property review (GAAP)			(484	)			—				—				(484	)			—
Deferred tax asset write-down (GAAP)			—				2,490				—				—				2,490
Total selected tax items			(1,472	)			2,490				—				(1,472	)			2,490
Net income excluding selected tax items (non-GAAP)		$	3,367			$	2,497			$	4,032			$	14,258			$	9,834
Earnings per share – diluted (GAAP)		$	0.30			$	—			$	0.25			$	0.96			$	0.48
Effect of selected tax items			(0.09	)			0.15				—				(0.09	)			0.16
Earnings per share – diluted excluding selected tax items (non-GAAP)		$	0.21			$	0.15			$	0.25			$	0.87			$	0.64
Non-GAAP Ratios:
Return on average assets excluding selected tax items			1.01	%			0.79	%			1.23	%			1.11	%			0.82	%
Return on average equity excluding selected tax items			9.97	%			7.69	%			12.16	%			10.95	%			8.48	%
Effective tax rate excluding selected tax items			29.2	%			34.5	%			25.8	%			26.3	%			31.1	%
GAAP Information:
Return on average assets			1.44	%			0.00	%			1.23	%			1.22	%			0.61	%
Return on average equity			14.32	%			0.02	%			12.16	%			12.08	%			6.34	%
Effective tax rate			(1.7	)%			99.8	%			25.8	%			18.7	%			48.5	%

Financial highlights for the year ended December 31, 2018:

• Net income of $15.7 million was an increase of $8.4 million (114%) from $7.3 million earned during the same period in the prior year. Earnings of $0.96 per share – diluted was an increase of $0.48 (100%) from $0.48 per share – diluted earned during the same period in the prior year and reflects the impact of 2,738,096 shares of common stock sold and issued in the second quarter of 2017.
• Expenses associated with our pending acquisition of Merchants Holding Company totaled $844 thousand.
• Net interest income increased $6.2 million (15%) to $47.5 million compared to $41.4 million for the same period in the prior year.
• Return on average assets improved to 1.22% compared to 0.61% for the same period in the prior year.
• Return on average equity improved to 12.08% compared to 6.34% for the same period in the prior year.
• Average loans totaled $915.4 million, an increase of $97.2 million (12%) compared to average loans for the same period in the prior year.
• Average earning assets totaled $1.220 billion, an increase of $96 million (9%) compared to average earning assets for the same period in the prior year.
• Average deposits totaled $1.098 billion, an increase of $57 million (5%) compared to average deposits for the same period in the prior year.
  • Average non-maturing deposits totaled $930.2 million, an increase of $94.4 million (11%) compared to the same period in the prior year.
  • Average certificates of deposit totaled $168.2 million, a decrease of $37.5 million (18%) compared to same period in the prior year.
• The Company’s efficiency ratio was 62.5% compared to 67.0% during the same period in the prior year.
• Nonperforming assets at December 31, 2018 totaled $4.2 million or 0.32% of total assets, a decrease of $1.7 million (28%) since December 31, 2017.
• Book value per common share was $8.47 at December 31, 2018 compared to $7.82 at December 31, 2017.
• Tangible book value per common share was $8.36 at December 31, 2018 compared to $7.70 at December 31, 2017.

Financial highlights for the fourth quarter of 2018:

• Net income of $4.8 million ($0.30 per share –diluted) was an increase of $4.8 million (100%) from $7 thousand ($0.00 per share – diluted) earned during the same period in the prior year.
• Expenses associated with our pending acquisition of Merchants Holding Company totaled $802 thousand.
• Net interest income increased $1.6 million (15%) to $12.5 million compared to $10.9 million for the same period in the prior year.
• Return on average assets improved to 1.44% compared to 0.00% for the same period in the prior year.
• Return on average equity improved to 14.32% compared to 0.02% for the same period in the prior year.
• Average loans totaled $923.4 million, an increase of $84.4 million (10%) compared to average loans for the same period in the prior year.
• Average earning assets totaled $1.260 billion, an increase of $82 million (7%) compared the same period in the prior year.
• Average deposits totaled $1.158 billion, an increase of $75 million (7%) compared the same period in the prior year.
  • Average non-maturing deposits totaled $1.001 billion, an increase of $113 million (13%) compared to the same period in the prior year.
  • Average certificates of deposit totaled $157.0 million, a decrease of $37.9 million (19%) compared to the same period in the prior year.
• The Company’s efficiency ratio was 65.1% compared to 64.9% for the same period in the prior year.
• Nonperforming assets at December 31, 2018 totaled $4.2 million or 0.32% of total assets, an increase of $324 thousand (33% annualized) compared to September 30, 2018.
• Book value per common share was $8.47 at December 31, 2018 compared to $7.82 at December 31, 2017.
• Tangible book value per common share was $8.36 at December 31, 2018 compared to $7.70 at December 31, 2017.

Randall S. Eslick, President and CEO commented: “We are pleased to report our financial results for 2018.  Our dedicated and hard-working employees performed at a high level as reflected in our strong core deposit and loan growth and enhanced shareholder returns. Their outstanding efforts have positioned the company well for continued success into the future.”

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												For The Twelve Months Ended
Net income, average assets and		December 31,								September 30,				December 31,
average shareholders’ equity		2018				2017				2018				2018			2017
Net income		$	4,839			$	7			$	4,032			$	15,730		$	7,344
Average total assets		$	1,328,817			$	1,251,960			$	1,300,278			$	1,288,841		$	1,198,251
Average total earning assets		$	1,259,709			$	1,178,037			$	1,229,704			$	1,220,135		$	1,124,555
Average shareholders’ equity		$	134,033			$	128,862			$	131,499			$	130,218		$	115,901
Selected performance ratios
Return on average assets			1.44	%			0.00	%			1.23	%			1.22	%		0.61	%
Return on average equity			14.32	%			0.02	%			12.16	%			12.08	%		6.34	%
Efficiency ratio			65.1	%			64.9	%			58.4	%			62.5	%		67.0	%
Share and per share amounts
Weighted average shares – basic (1)			16,265				16,195				16,252				16,248			15,207
Weighted average shares – diluted (2)			16,345				16,306				16,342				16,332			15,310
Earnings per share – basic		$	0.30			$	—			$	0.25			$	0.97		$	0.48
Earnings per share – diluted		$	0.30			$	—			$	0.25			$	0.96		$	0.48
		At December 31,								At September 30,
Share and per share amounts		2018				2017				2018
Common shares outstanding (2)			16,334				16,272				16,330
Book value per common share (2)		$	8.47			$	7.82			$	8.14
Tangible book value per common share (2)(3)		$	8.36			$	7.70			$	8.03
Capital ratios (4)
Bank of Commerce Holdings
Common equity tier 1 capital ratio			12.79	%			12.26	%			12.65	%
Tier 1 capital ratio			13.71	%			13.23	%			13.59	%
Total capital ratio			15.82	%			15.44	%			15.75	%
Tier 1 leverage ratio			11.21	%			10.86	%			11.14	%
Tangible common equity ratio (5)			10.46	%			9.88	%			9.98	%
Redding Bank of Commerce
Common equity tier 1 capital ratio			13.23	%			12.58	%			13.14	%
Tier 1 capital ratio			13.23	%			12.58	%			13.14	%
Total capital ratio			14.42	%			13.81	%			14.36	%
Tier 1 leverage ratio			10.82	%			10.33	%			10.78	%
(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.
(5) Management believes the tangible common equity ratio is a useful measure of capital adequacy because it provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the capital of the Company and the ability of the Company to absorb potential losses. The tangible common equity ratio is calculated as total shareholders’ equity less goodwill and core deposit intangible, net divided by total assets less goodwill and core deposit intangible, net.

BALANCE SHEET OVERVIEW

As of December 31, 2018, the Company had total consolidated assets of $1.307 billion, gross loans of $946.3 million, allowance for loan and lease losses (“ALLL”) of $12.3 million, total deposits of $1.132 billion, and shareholders’ equity of $138.3 million.

TABLE 2
LOAN BALANCES BY TYPE – UNAUDITED
(amounts in thousands)
	At December 31,																				At September 30,
					% of							% of			Change											% of
	2018				Total			2017				Total			Amount				%			2018				Total
Commercial	$	135,543			14	%		$	142,405			16	%		$	(6,862	)		(5	)%		$	132,091			14	%
Real estate – construction and land development		22,563			2				15,902			2				6,661			42	%			20,496			2
Real estate – commercial non-owner occupied		433,708			46				377,668			43				56,040			15	%			431,246			47
Real estate – commercial owner occupied		204,622			22				192,023			22				12,599			7	%			195,608			21
Real estate – residential – ITIN		37,446			4				41,188			5				(3,742	)		(9	)%			38,353			4
Real estate – residential – 1-4 family mortgage		34,366			4				30,377			3				3,989			13	%			33,473			4
Real estate – residential – equity lines		26,958			3				30,347			3				(3,389	)		(11	)%			28,713			3
Consumer and other		51,045			5				49,925			6				1,120			2	%			47,500			5
Gross loans		946,251			100	%			879,835			100	%			66,416			8	%			927,480			100	%
Deferred fees and costs		1,927							1,710							217							1,757
Loans, net of deferred fees and costs		948,178							881,545							66,633							929,237
Allowance for loan and lease losses		(12,292	)						(11,925	)						(367	)						(12,392	)
Net loans	$	935,886						$	869,620						$	66,266						$	916,845
Average yield on loans during the quarter		4.94	%						4.77	%						0.17							4.93	%
Average yield on loans during the year		4.91	%						4.78	%						0.13

The Company recorded gross loan balances of $946.3 million at December 31, 2018, compared with $879.8 million and $927.5 million at December 31, 2017 and September 30, 2018, respectively, an increase of $66.4 million and $18.8 million, respectively. Loan production during 2018 was organic and did not rely on loan pool purchases.

Average loan balances were $923.4 million for the quarter ended December 31, 2018, compared with $839.0 million for the quarter ended December 31, 2017 an increase of $84.4 million or 10%. For the year ended December 31, 2018 average loan balances were $915.4 million compared with $818.1 million for the year ended December 31, 2017 an increase of $97.2 million or 12%.

TABLE 3
CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES – UNAUDITED
(amounts in thousands)
		At December 31,																					At September 30,
						% of							% of			Change											% of
		2018				Total			2017				Total			Amount				%			2018				Total
Cash and due from banks		$	23,692			8	%		$	17,979			5	%		$	5,713			32	%		$	21,316			6	%
Interest-bearing deposits in other banks			23,673			8				48,991			15				(25,318	)		(52	)%			69,920			21
Total cash and cash equivalents			47,365			16				66,970			20				(19,605	)		(29	)%			91,236			27
Investment securities:
U.S. government and agencies			40,087			13				40,369			12				(282	)		(1	)%			35,656			11
Obligations of state and political subdivisions			50,530			17				78,844			24				(28,314	)		(36	%			51,562			16
Residential mortgage backed securities and collateralized mortgage obligations			138,503			45				114,592			34				23,911			21	%			124,109			38
Corporate securities			2,922			1				4,992			1				(2,070	)		(41	)%			3,974			1
Commercial mortgage backed securities			24,762			8				26,641			8				(1,879	)		(7	)%			24,167			7
Other asset backed securities			124			—				2,516			1				(2,392	)		(95	%			165			—
Total investment securities – AFS			256,928			84				267,954			80				(11,026	)		(4	)%			239,633			73
Total cash, cash equivalents and investment securities		$	304,293			100	%		$	334,924			100	%		$	(30,631	)		(9	)%		$	330,869			100	%
Average yield on interest-bearing due from banks and investment securities during the quarter – nominal			2.66	%						2.30	%						0.36							2.47	%
Average yield on interest-bearing due from banks and investment securities during the quarter – tax equivalent			2.77	%						2.62	%						0.15							2.61	%

As of December 31, 2018, we maintained noninterest-bearing cash positions of $23.7 million and interest-bearing deposits of $23.7 million at the Federal Reserve Bank and correspondent banks.

Investment securities totaled $256.9 million at December 31, 2018, compared with $268.0 million and $239.6 million at December 31, 2017 and September 30, 2018, respectively. Our investment securities portfolio provides us with a secondary source of liquidity to fund higher yielding asset opportunities, such as loan originations. During the fourth quarter of 2018, we purchased 19 securities with a par value of $26.6 million and weighted average yield of 3.50% and sold five securities with a par value of $2.6 million and weighted average yield of 3.10%. The sales activity on available-for-sale securities resulted in $3 thousand in net realized gains. During the same period, we received $7.6 million in proceeds from principal payments, calls and maturities within the investment securities portfolio.

Average securities balances and weighted average tax equivalent yields for the quarters ended December 31, 2018 and 2017 were $261.0 million and 2.91% compared to $272.0 million and 2.94%, respectively.

At December 31, 2018, our net unrealized losses on available-for-sale investment securities were $4.3 million compared with net unrealized losses of $452 thousand and $5.8 million at December 31, 2017 and September 30, 2018, respectively. The changes in net unrealized losses 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 December 31,																			At September 30,
				% of						% of				Change									% of
	2018			Total			2017			Total			Amount				%			2018			Total
Demand – noninterest-bearing	$	347,199		31	%		$	305,650		28	%		$	41,549			14	%		$	361,516		32	%
Demand – interest-bearing		517,295		46				496,990		45				20,305			4	%			510,553		45
Total demand		864,494		77				802,640		73				61,854			8	%			872,069		77
Savings		114,840		10				110,837		10				4,003			4	%			111,388		10
Total non-maturing deposits		979,334		87				913,477		83				65,857			7	%			983,457		87
Certificates of deposit		152,382		13				189,255		17				(36,873	)		(19	)%			161,304		13
Total deposits	$	1,131,716		100	%		$	1,102,732		100	%		$	28,984			3	%		$	1,144,761		100	%

Total deposits at December 31, 2018, increased $29 million or 3% to $1.132 billion compared to December 31, 2017. Total non-maturing deposits increased $65.9 million or 7% compared to the same date a year ago a while certificates of deposit decreased $36.9 million or 19%.

TABLE 5
WHOLESALE AND RECIPROCAL DEPOSITS – UNAUDITED
(amounts in thousands)
	At December 31,						At September 30,
	2018			2017			2018
CDARS / ICS reciprocal deposits	$	83,666		$	66,279		$	78,772
Online listing service wholesale time deposits		22,015			36,060			24,397
Total wholesale and reciprocal deposits	$	105,681		$	102,339		$	103,169

For calendar quarters prior to June 30, 2018, CDARS/ ICS reciprocal deposits were considered to be brokered deposits by regulatory authorities and were reported as such on quarterly Call Reports. With passage of The Economic Growth, Regulatory Relief and Consumer Protection Act in May 2018, these deposits are no longer classified as brokered.

AVERAGE COST OF FUNDS

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

TABLE 6
AVERAGE COST OF FUNDS – UNAUDITED
For The Three Months Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
	2018				2018				2018				2018				2017				2017				2017				2017
Interest-bearing deposits		0.45	%			0.42	%			0.41	%			0.41	%			0.42	%			0.43	%			0.42	%			0.39	%
Interest-bearing deposits and noninterest-bearing demand		0.31	%			0.29	%			0.29	%			0.29	%			0.30	%			0.31	%			0.31	%			0.29	%
All interest-bearing liabilities		0.61	%			0.64	%			0.68	%			0.60	%			0.59	%			0.60	%			0.60	%			0.56	%
All interest-bearing liabilities and noninterest-bearing demand		0.42	%			0.45	%			0.50	%			0.43	%			0.42	%			0.43	%			0.44	%			0.42	%

INCOME STATEMENT OVERVIEW

TABLE 7
SUMMARY INCOME STATEMENT – UNAUDITED
(amounts in thousands, except per share data)
For The Three Months Ended
	December 31,							Change							September 30,			Change
	2018				2017			Amount				%			2018			Amount				%
Interest income	$	13,750			$	12,047		$	1,703			14	%		$	13,431		$	319			2	%
Interest expense		1,256				1,178			78			7	%			1,304			(48	)		(4	)%
Net interest income		12,494				10,869			1,625			15	%			12,127			367			3	%
Provision for loan and lease losses		—				450			(450	)		100	%			—			—			—	%
Noninterest income		1,132				1,282			(150	)		(12	)%			943			189			20	%
Noninterest expense		8,868				7,891			977			12	%			7,634			1,234			16	%
Income before provision for income taxes		4,758				3,810			948			25	%			5,436			(678	)		(12	)%
Provision for income taxes:
Reversal of uncertain tax position		(988	)			—			(988	)		100	%			—			(988	)		(100	)%
Benefit from cost segregation study and tangible property review		(484	)			—			(484	)		100	%			—			(484	)		(100	)%
Net deferred tax asset write-down		—				2,490			(2,490	)		(100	)%			—			—			—	%
Provision for income taxes from operations		1,391				1,313			78			6	%			1,404			(13	)		(1	)%
Total provision for income taxes		(81	)			3,803			(3,884	)		(102	)%			1,404			(1,485	)		(106	)%
Net income	$	4,839			$	7		$	4,832			100	%		$	4,032		$	807			20	%
Basic earnings per share	$	0.30			$	—		$	0.30			100	%		$	0.25		$	0.05			20	%
Average basic shares		16,265				16,195			70			—	%			16,252			13			—	%
Diluted earnings per share	$	0.30			$	—		$	0.30			100	%		$	0.25		$	0.05			20	%
Average diluted shares		16,345				16,306			39			—	%			16,342			3			—	%
Dividends declared per common share	$	0.04			$	0.03		$	0.01			33	%		$	0.04		$	—			—	%

Fourth Quarter of 2018 Compared With Fourth Quarter of 2017

Income before provision for income taxes for the fourth quarter of 2018 increased $948 thousand compared to the fourth quarter of 2017. In the current quarter, net interest income was $1.6 million higher and the provision for loan and lease loss was $450 thousand lower. These changes were offset by noninterest income that was $150 thousand lower, and noninterest expenses that were $977 thousand higher.

Net Interest Income

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

Interest income for the fourth quarter of 2018 increased $1.7 million or 14% to $13.8 million:

• Interest and fees on loans increased $1.4 million due to an $84.4 million increase in average loan balances and a 17 basis point increase in the average yield on the loan portfolio.
• Interest on securities increased $82 thousand due to a 23 basis point increase in average yield on the securities portfolio partially offset by an $11.0 million decrease in average securities balances.
• Interest on interest-bearing deposits due from banks increased $210 thousand due to an $8.3 million increase in average interest-bearing deposit balances, and a 96 basis point increase in average yield.

Interest expense for the fourth quarter of 2018 increased $78 thousand or 7% to $1.3 million:

• Interest expense on interest bearing deposits increased $85 thousand. Average interest-bearing demand and savings deposit balances increased $62.2 million, while average certificate of deposit balances decreased $37.9 million. The average rate paid on interest-bearing deposits increased three basis points.
• Interest expense on other interest bearing liabilities decreased $7 thousand due to decreased average term debt balances.

Provision for loan and lease loss

As a result of continued improved asset quality, no provision for loan and lease losses was necessary during the current quarter. A provision for loan and lease losses of $450 thousand was recorded during the same quarter a year ago.

Noninterest Income

Noninterest income for the three months ended December 31, 2018 decreased $150 thousand compared to the fourth quarter for 2017. The decrease was due to gains on sale of investment securities and OREO properties in the prior year totaling $282 thousand that did not recur in the current year. The decrease was offset by a $96 thousand special dividend on Federal Home Loan Bank of San Francisco stock.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2018 increased $977 thousand compared to the same period a year previous primarily due to $802 thousand in acquisition costs.

The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 was inflated by acquisition costs. The ratio during the same period in 2017 was 64.9%.

Income Tax Provision

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

• $(988) thousand benefit due to the reversal of our uncertain tax position.
• $(484) thousand benefit as a result of our cost segregation study and tangible property review.
• $1.4 million tax provision on pre-tax net operating income of $4.8 million (29.2%).
  • The current quarter includes $765 thousand of acquisition costs which are not tax deductible.

This compares with a provision for income taxes for the fourth quarter of the prior year of $3.8 million on pre-tax income of $3.8 million which included:

• $2.5 million write-down of our deferred tax assets resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017
• $1.3 million tax provision on pre-tax net operating income of $3.8 million (34.5%).

Fourth Quarter of 2018 Compared With Third Quarter of 2018

Income before provision for income taxes for the fourth quarter of 2018 decreased $678 thousand compared to the third quarter of 2018. In the current quarter, net interest income was $367 thousand higher and noninterest income was $189 thousand higher. These positive changes were offset by noninterest expense that was $1.2 million higher.

Net Interest Income

Net interest income increased $367 thousand over the prior quarter.

Interest income for the three months ended December 31, 2018 increased $319 thousand or 2% to $13.8 million.

• Interest and fees on loans decreased $74 thousand due to a $7.5 million decrease in average loan balances.
• Interest on investment securities increased $213 thousand due to a $12.6 million increase in average securities balances and a 20 basis point increase in average yield on the investment portfolio.
• Interest on interest-bearing deposits due from banks increased $180 thousand due to a $24.9 million increase in average balances and a 29 basis point increase in average yield.

Interest expense for the three months ended December 31, 2018 decreased $48 thousand or 4% to $1.3 million.

• Interest expense on deposits increased $88 thousand as average interest-bearing demand and savings deposits increased $31.1 million, average certificates of deposit decreased $6.3 million and the average rate paid on these deposits increased by one basis point.
• Interest expense on borrowings from the Federal Home Loan Bank of San Francisco decreased $121 thousand. There were no Federal Home Loan Bank of San Francisco borrowings outstanding in the current quarter compared to an average balance of $22.3 million for the prior quarter.
• Interest expense on other term debt decreased $15 thousand.

Provision for loan and lease loss

As a result of continued improved asset quality, no provision for loan and lease losses was necessary during the current or previous quarter.

Noninterest Income

Noninterest income for the three months ended December 31, 2018 increased $189 thousand, the increase was due to an increase in gains on sale of OREO properties $71 thousand and a $96 thousand special dividend on Federal Home Loan Bank of San Francisco stock.

Noninterest Expense

Noninterest expense for the three months ended December 31, 2018 increased $1.2 million. The increase was due to $802 thousand in acquisition costs and $293 thousand of expense incurred for our cost segregation study and tangible property review.

The Company’s efficiency ratio of 65.1% for the fourth quarter of 2018 was inflated by acquisition costs. The ratio during the prior quarter was 58.4%.

Income Tax Provision

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

• $(988) thousand benefit due to the reversal of our uncertain tax position.
• $(484) thousand benefit as a result to our cost segregation study and tangible property review.
• $1.4 million tax provision on pre-tax net operating income of $4.8 million (29.2%).
  • The current quarter includes $765 thousand of acquisition costs which are not tax deductible.

This compares with a provision for income taxes for the prior quarter of $1.4 million on pre-tax income of $5.4 million (25.8%).

Earnings Per Share

Diluted earnings per share were $0.30 for the three months ended December 31, 2018 compared with diluted earnings per share of $0.00 for the same period a year ago and diluted earnings per share of $0.25 for the prior period. Net income and weighted average shares used to calculate earnings per share – diluted are summarized in table 7 presented earlier in this press release.

TABLE 8a
NET INTEREST MARGIN – UNAUDITED
(amounts in thousands)
		For The Three Months Ended
		December 31, 2018									December 31, 2017									September 30, 2018
		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)		$	923,409		$	11,494		4.94	%		$	839,004		$	10,083		4.77	%		$	930,863		$	11,568		4.93	%
Taxable securities			218,137			1,469		2.67	%			199,849			1,211		2.40	%			199,883			1,209		2.40	%
Tax-exempt securities			42,868			353		3.27	%			72,152			529		2.91	%			48,561			400		3.27	%
Interest-bearing deposits in other banks			75,295			434		2.29	%			67,032			224		1.33	%			50,397			254		2.00	%
Average interest- earning assets			1,259,709			13,750		4.33	%			1,178,037			12,047		4.06	%			1,229,704			13,431		4.33	%
Cash and due from banks			22,447									19,783									21,834
Premises and equipment, net			13,331									14,948									13,768
Goodwill and core deposit intangible, net			1,842									2,054									1,888
Other assets			31,488									37,138									33,084
Average total assets		$	1,328,817								$	1,251,960								$	1,300,278
Interest-bearing liabilities:
Interest-bearing demand		$	522,417			348		0.26	%		$	459,451			216		0.19	%		$	494,906			276		0.22	%
Savings deposits			110,934			92		0.33	%			111,725			54		0.19	%			107,349			73		0.27	%
Certificates of deposit			157,035			462		1.17	%			194,886			547		1.11	%			163,302			465		1.13	%
Federal Home Loan Bank of San Francisco borrowings			—			—		—	%			—			—		—	%			22,283			121		2.15	%
Other borrowings net of unamortized debt issuance costs			13,785			252		7.25	%			17,211			285		6.57	%			14,681			265		7.16	%
Junior subordinated debentures			10,310			102		3.93	%			10,310			76		2.92	%			10,310			104		4.00	%
Average interest- bearing liabilities			814,481			1,256		0.61	%			793,583			1,178		0.59	%			812,831			1,304		0.64	%
Noninterest-bearing demand			367,457									316,961									343,948
Other liabilities			12,846									12,554									12,000
Shareholders’ equity			134,033									128,862									131,499
Average liabilities and shareholders’ equity		$	1,328,817								$	1,251,960								$	1,300,278
Net interest income and net interest margin (4)					$	12,494		3.93	%					$	10,869		3.66	%					$	12,127		3.91	%
Tax equivalent net   interest margin (3)								3.96	%								3.75	%								3.95	%
(1) Interest income on loans includes deferred fees and costs of approximately $109 thousand, $123 thousand, and $75 thousand for the three months ended December 31, 2018, and 2017 and September 30, 2018, respectively.
(2) Net loans includes average nonaccrual loans of $4.1 million, $6.5 million and $3.8 million for the three months ended December 31, 2018 and 2017 and September 30, 2018, 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 $94 thousand, $273 thousand and $106 thousand for the three months ended December 31, 2018 and 2017 and September 30, 2018, respectively.
(4) Net interest margin is annualized 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 8b
NET INTEREST MARGIN – UNAUDITED
(amounts in thousands)
		For The Twelve Months Ended
		December 31, 2018									December 31, 2017
		Average						Yield /			Average						Yield /
(Amounts in thousands)		Balance			Interest(1)			Rate (5)			Balance			Interest(1)			Rate (5)
Interest-earning assets:
Net loans (2)		$	915,360		$	44,955		4.91	%		$	818,119		$	39,112		4.78	%
Taxable securities			207,407			5,165		2.49	%			165,333			3,921		2.37	%
Tax-exempt securities			50,330			1,629		3.24	%			74,231			2,144		2.89	%
Interest-bearing deposits in other banks			47,038			952		2.02	%			66,872			772		1.15	%
Average interest- earning assets			1,220,135			52,701		4.32	%			1,124,555			45,949		4.09	%
Cash and due from banks			20,468									18,301
Premises and equipment, net			13,952									15,567
Goodwill and core deposit intangible, net			1,917									2,136
Other assets			32,369									37,692
Average total assets		$	1,288,841								$	1,198,251
Interest-bearing liabilities:
Interest-bearing demand		$	489,013			1,060		0.22	%		$	434,705			744		0.17	%
Savings deposits			109,025			288		0.26	%			111,376			200		0.18	%
Certificates of deposit			168,183			1,910		1.14	%			205,648			2,188		1.06	%
Federal Home Loan Bank of San Francisco borrowings			22,466			435		1.94	%			302			3		0.99	%
Other borrowings net of unamortized debt issuance costs			15,143			1,077		7.11	%			17,981			1,165		6.48	%
Junior subordinated debentures			10,310			385		3.73	%			10,310			287		2.78	%
Average interest- bearing liabilities			814,140			5,155		0.63	%			780,322			4,587		0.59	%
Noninterest-bearing demand			332,197									289,735
Other liabilities			12,286									12,293
Shareholders’ equity			130,218									115,901
Average liabilities and shareholders’ equity		$	1,288,841								$	1,198,251
Net interest income and net interest margin (4)					$	47,546		3.90	%					$	41,362		3.68	%
Tax equivalent net   interest margin (3)								3.93	%								3.78	%
(1) Interest income on loans includes deferred fees and costs of approximately $465 thousand and $546 thousand for the years December 31, 2018 and 2017, respectively.
(2) Net loans includes average nonaccrual loans of $4.2 million and $8.9 million for the years December 31, 2018 and 2017, respectively.
(3) Tax-exempt income has been adjusted to tax equivalent basis at a 21% tax rate for 2018 and at a 34% tax rate for 2017. The amount of such adjustments was an addition to recorded income of approximately $433 thousand and $1.1 million for the years December 31, 2018 and 2017, respectively.
(4) Net interest margin is annualized 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
	December 31,					September 30,					June 30,					March 31,					December 31,
	2018					2018					2018					2018					2017
Beginning balance ALLL	$	12,392				$	12,388				$	12,295				$	11,925				$	11,692
Provision for loan and lease losses		—					—					—					—					450
Loans charged-off		(279	)				(198	)				(382	)				(390	)				(451	)
Loan loss recoveries		179					202					475					760					234
Ending balance ALLL	$	12,292				$	12,392				$	12,388				$	12,295				$	11,925
	At December 31,					At September 30,					At June 30,					At March 31,					At December 31,
	2018					2018					2018					2018					2017
Nonaccrual loans:
Commercial	$	959				$	899				$	1,358				$	1,109				$	1,603
Real estate – commercial owner occupied		548					—					—					—					600
Real estate – residential – ITIN		2,388					2,571					2,613					2,839					2,909
Real estate – residential – 1-4 family mortgage		185					179					184					188					606
Real estate – residential – equity lines		43					44					44					45					45
Consumer and other		23					24					33					35					36
Total nonaccrual loans		4,146					3,717					4,232					4,216					5,799
Accruing troubled debt restructured loans:
Commercial		1,224					1,291					1,420					1,516					1,551
Real estate – commercial non-owner occupied		795					797					799					800					803
Real estate – residential – ITIN		4,484					4,535					4,592					4,554					4,614
Real estate – residential – equity lines		363					367					372					376					380
Total accruing troubled debt restructured loans		6,866					6,990					7,183					7,246					7,348
All other accruing impaired loans		—					—					—					—					—
Total impaired loans	$	11,012				$	10,707				$	11,415				$	11,462				$	13,147
Gross loans outstanding at period end	$	946,251				$	927,480				$	936,816				$	900,420				$	879,835
Impaired loans to gross loans		1.16	%				1.15	%				1.22	%				1.27	%				1.49	%
Nonaccrual loans to gross loans		0.44	%				0.40	%				0.45	%				0.47	%				0.66	%
Allowance for loan and lease losses as a percent of:
Gross loans		1.30	%				1.34	%				1.32	%				1.37	%				1.36	%
Nonaccrual loans		296.48	%				333.39	%				292.72	%				291.63	%				205.64	%
Impaired loans		111.62	%				115.74	%				108.52	%				107.27	%				90.71	%

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, no provision for loan and lease losses was necessary during the current quarter and the prior quarter. A provision for loan and lease losses of $450 thousand was recorded during the same quarter a year ago. Our ALLL as a percentage of gross loans was 1.30% as of December 31, 2018 compared to 1.36% as of December 31, 2017 and 1.34% as of September 30, 2018. Based on the Bank’s ALLL methodology, which uses criteria such as risk factors and historical loss rates, and given the ongoing improvements in asset quality, management believes the Company’s ALLL is adequate at December 31, 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 December 31, 2018, the recorded investment in loans classified as impaired totaled $11.0 million, with a corresponding specific reserve of $1.2 million compared to impaired loans of $13.1 million with a corresponding specific reserve of $1.2 million at December 31, 2017 and impaired loans of $10.7 million, with a corresponding specific reserve of $1.1 million at September 30, 2018.

TABLE 10
TROUBLED DEBT RESTRUCTURINGS – UNAUDITED
(amounts in thousands)
		At December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2018				2018				2018				2018				2017
Nonaccrual		$	2,693			$	2,720			$	3,218			$	3,237			$	3,581
Accruing			6,866				6,990				7,183				7,246				7,348
Total troubled debt restructurings		$	9,559			$	9,710			$	10,401			$	10,483			$	10,929
Troubled debt restructurings as a percentage of total gross loans			1.01	%			1.05	%			1.11	%			1.16	%			1.24	%

There were no new troubled debt restructurings during the three months ended December 31, 2018. As of December 31, 2018, we had 106 restructured loans that qualified as troubled debt restructurings, of which all were performing according to their restructured terms.

TABLE 11
NONPERFORMING ASSETS – UNAUDITED
(amounts in thousands)
		At December 31,				At September 30,				At June 30,				At March 31,				At December 31,
		2018				2018				2018				2018				2017
Total nonaccrual loans		$	4,146			$	3,717			$	4,232			$	4,216			$	5,799
90 days past due and still accruing			—				—				—				—				—
Total nonperforming loans			4,146				3,717				4,232				4,216				5,799
Other real estate owned (“OREO”)			31				136				140				60				35
Total nonperforming assets		$	4,177			$	3,853			$	4,372			$	4,276			$	5,834
Nonperforming loans to gross loans			0.44	%			0.40	%			0.45	%			0.47	%			0.66	%
Nonperforming assets to total assets			0.32	%			0.29	%			0.34	%			0.34	%			0.46	%

TABLE 12
UNAUDITED CONSOLIDATED
BALANCE SHEET
(amounts in thousands, except per share data)
	At December 31,									Change							At September 30,
		2018				2017				$				%			2018
Assets:
Cash and due from banks		$	23,692			$	17,979			$	5,713			32	%		$	21,316
Interest-bearing deposits in other banks			23,673				48,991				(25,318	)		(52	)%			69,920
Total cash and cash equivalents			47,365				66,970				(19,605	)		(29	)%			91,236
Securities available-for-sale, at fair value			256,928				267,954				(11,026	)		(4	)%			239,633
Loans, net of deferred fees and costs			948,178				881,545				66,633			8	%			929,237
Allowance for loan and lease losses			(12,292	)			(11,925	)			(367	)		3	%			(12,392	)
Net loans			935,886				869,620				66,266			8	%			916,845
Premises and equipment, net			13,119				14,748				(1,629	)		(11	)%			13,495
Other real estate owned			31				35				(4	)		(11	)%			136
Life insurance			22,410				21,898				512			2	%			22,282
Deferred tax asset, net			7,039				6,505				534			8	%			8,084
Goodwill and core deposit intangible, net			1,841				2,030				(189	)		(9	)%			1,864
Other assets			22,485				19,661				2,824			14	%			21,894
Total assets		$	1,307,104			$	1,269,421			$	37,683			3	%		$	1,315,469
Liabilities and shareholders’ equity:
Demand – noninterest-bearing		$	347,199			$	305,650			$	41,549			14	%		$	361,516
Demand – interest-bearing			517,295				496,990				20,305			4	%			510,553
Savings			114,840				110,837				4,003			4	%			111,388
Certificates of deposit			152,382				189,255				(36,873	)		(19	)%			161,304
Total deposits			1,131,716				1,102,732				28,984			3	%			1,144,761
Term debt:
Other borrowings			13,496				17,096				(3,600	)		(21	)%			14,396
Unamortized debt issuance costs			(91	)			(138	)			47			(34	)%			(103	)
Net term debt			13,405				16,958				(3,553	)		(21	)%			14,293
Junior subordinated debentures			10,310				10,310				—			—	%			10,310
Other liabilities			13,352				12,157				1,195			10	%			13,136
Total liabilities			1,168,783				1,142,157				26,626			2	%			1,182,500
Shareholders’ equity:
Common stock			52,284				51,830				454			1	%			52,191
Retained earnings			89,045				75,700				13,345			18	%			84,857
Accumulated other comprehensive loss, net of tax			(3,008	)			(266	)			(2,742	)		1,031	%			(4,079	)
Total shareholders’ equity			138,321				127,264				11,057			9	%			132,969
Total liabilities and shareholders’ equity		$	1,307,104			$	1,269,421			$	37,683			3	%		$	1,315,469
Total interest-earning assets		$	1,233,049			$	1,198,942			$	34,107			3	%		$	1,244,581
Shares outstanding			16,334				16,272				62			—	%			16,330
Book value per share		$	8.47			$	7.82			$	0.65			8	%		$	8.14
Tangible book value per share (1)		$	8.36			$	7.70			$	0.66			9	%		$	8.03
(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																		For The Twelve Months Ended
		December 31,							Change							September 30,				December 31,
		2018			2017				$				%			2018				2018			2017
Interest income:
Interest and fees on loans		$	11,494		$	10,083			$	1,411			14	%		$	11,568			$	44,955		$	39,112
Interest on taxable securities			1,469			1,211				258			21	%			1,209				5,165			3,921
Interest on tax-exempt securities			353			529				(176	)		(33	)%			400				1,629			2,144
Interest on interest-bearing deposits in other banks			434			224				210			94	%			254				952			772
Total interest income			13,750			12,047				1,703			14	%			13,431				52,701			45,949
Interest expense:
Interest on demand deposits			348			216				132			61	%			276				1,060			744
Interest on savings deposits			92			54				38			70	%			73				288			200
Interest on certificates of deposit			462			547				(85	)		(16	)%			465				1,910			2,188
Interest on Federal Home Loan Bank of San Francisco borrowings			—			—				—			—	%			121				435			3
Interest on other borrowings			252			285				(33	)		(12	)%			265				1,077			1,165
Interest on junior subordinated debentures			102			76				26			34	%			104				385			287
Total interest expense			1,256			1,178				78			7	%			1,304				5,155			4,587
Net interest income			12,494			10,869				1,625			15	%			12,127				47,546			41,362
Provision for loan and lease losses			—			450				(450	)		(100	)%			—				—			950
Net interest income after provision for loan and lease losses			12,494			10,419				2,075			20	%			12,127				47,546			40,412
Noninterest income:
Service charges on deposit accounts			161			141				20			14	%			170				682			542
ATM and point of sale fees			283			266				17			6	%			282				1,131			1,093
Fees on payroll and benefit processing			178			173				5			3	%			159				652			658
Life insurance			128			135				(7	)		(5	)%			128				512			1,050
Gain (loss) on investment securities, net			3			(2	)			5			250	%			1				44			137
Federal Home Loan Bank of San Francisco dividends			201			81				120			148	%			104				480			318
Gain (loss) on sale of OREO			64			346				(282	)		(82	)%			(7	)			73			368
Insured cash sweep fees			—			4				(4	)		(100	)%			—				—			197
Other income			114			138				(24	)		(17	)%			106				445			461
Total noninterest income			1,132			1,282				(150	)		(12	)%			943				4,019			4,824

TABLE 13 – CONTINUED
UNAUDITED
INCOME STATEMENT
(amounts in thousands, except per share data)
		For The Three Months Ended																	For The Twelve Months Ended
		December 31,							Change							September 30,			December 31,
		2018				2017			$				%			2018			2018				2017
Noninterest expense:
Salaries and related benefits			4,812				4,523			289			6	%			4,529			18,709				17,819
Premises and equipment			943				1,073			(130	)		(12	)%			1,017			4,047				4,242
Federal Deposit Insurance Corporation insurance premium			93				88			5			6	%			94			376				318
Data processing fees			512				455			57			13	%			518			1,933				1,749
Professional service fees			436				279			157			56	%			336			1,431				1,398
Telecommunications			145				226			(81	)		(36	)%			55			594				879
Acquisition			802				—			802			100	%			42			844				—
Other expenses			1,125				1,247			(122	)		(10	)%			1,043			4,272				4,559
Total noninterest expense			8,868				7,891			977			12	%			7,634			32,206				30,964
Income before provision for income taxes			4,758				3,810			948			25	%			5,436			19,359				14,272
Provision for income taxes:
Reversal of uncertain tax position			(988	)			—			(988	)		100	%			—			(988	)			—
Benefit from cost segregation study and tangible property review			(484	)			—			(484	)		100	%			—			(484	)			—
Net deferred tax asset write-down			—				2,490			(2,490	)		(100	)%			—			—				2,490
Provision for income taxes from operations			1,391				1,313			78			6	%			1,404			5,101				4,438
Total provision for income taxes			(81	)			3,803			(3,884	)		(102	)%			1,404			3,629				6,928
Net income		$	4,839			$	7		$	4,832			100	%		$	4,032		$	15,730			$	7,344
Basic earnings per share		$	0.30			$	—		$	0.30			100	%		$	0.25		$	0.97			$	0.48
Average basic shares			16,265				16,195			70			—	%			16,252			16,248				15,207
Diluted earnings per share		$	0.30			$	—		$	0.30			100	%		$	0.25		$	0.96			$	0.48
Average diluted shares			16,345				16,306			39			—	%			16,342			16,332				15,310

TABLE 14
UNAUDITED CONDENSED CONSOLIDATED
QUARTERLY AVERAGE BALANCE SHEETS
(amounts in thousands)
		For The Three Months Ended
		December 31,			September 30,			June 30,			March 31,			December 31,
		2018			2018			2018			2018			2017
Earning assets:
Loans		$	923,409		$	930,863		$	922,687		$	883,876		$	839,004
Taxable securities			218,137			199,883			206,247			205,302			199,849
Tax exempt securities			42,868			48,561			50,306			59,789			72,152
Interest-bearing deposits in other banks			75,295			50,397			29,041			32,915			67,032
Total earning assets			1,259,709			1,229,704			1,208,281			1,181,882			1,178,037
Cash and due from banks			22,447			21,834			19,880			17,641			19,783
Premises and equipment, net			13,331			13,768			14,167			14,557			14,948
Goodwill and core deposit intangible, net			1,842			1,888			1,943			1,998			2,054
Other assets			31,488			33,084			32,426			32,485			37,138
Total assets		$	1,328,817		$	1,300,278		$	1,276,697		$	1,248,563		$	1,251,960
Liabilities and shareholders’ equity:
Demand – noninterest-bearing		$	367,457		$	343,948		$	309,199		$	307,397		$	316,961
Demand – interest-bearing			522,417			494,906			467,651			470,440			459,451
Savings			110,934			107,349			107,108			110,725			111,725
Certificates of deposit			157,035			163,302			170,824			181,901			194,886
Total deposits			1,157,843			1,109,505			1,054,782			1,070,463			1,083,023
Federal Home Loan Bank of San Francisco borrowings			—			22,283			55,275			12,444			—
Other borrowings net of unamortized debt issuance costs			13,785			14,681			15,614			16,528			17,211
Junior subordinated debentures			10,310			10,310			10,310			10,310			10,310
Other liabilities			12,846			12,000			12,535			11,749			12,554
Total liabilities			1,194,784			1,168,779			1,148,516			1,121,494			1,123,098
Shareholders’ equity			134,033			131,499			128,181			127,069			128,862
Liabilities & shareholders’ equity		$	1,328,817		$	1,300,278		$	1,276,697		$	1,248,563		$	1,251,960

TABLE 15
UNAUDITED CONDENSED CONSOLIDATED
ANNUAL AVERAGE BALANCE SHEETS
(amounts in thousands)
		For The Twelve Months Ended
		December 31,			December 31,			December 31,			December 31,
		2018			2017			2016			2015
Earning assets:
Loans		$	915,360		$	818,119		$	752,938		$	699,227
Taxable securities			207,407			165,333			120,884			120,897
Tax exempt securities			50,330			74,231			75,303			77,089
Interest-bearing deposits in other banks			47,038			66,872			58,668			30,323
Total earning assets			1,220,135			1,124,555			1,007,793			927,536
Cash and due from banks			20,468			18,301			15,831			11,220
Premises and equipment, net			13,952			15,567			15,078			11,552
Goodwill and core deposit intangible, net			1,917			2,136			1,888			—
Other assets			32,369			37,692			39,160			42,423
Total assets		$	1,288,841		$	1,198,251		$	1,079,750		$	992,731
Liabilities and shareholders’ equity:
Demand – noninterest-bearing		$	332,197		$	289,735		$	226,368		$	156,578
Demand – interest-bearing			489,013			434,705			374,170			283,105
Savings			109,025			111,376			104,771			92,659
Certificates of deposit			168,183			205,648			221,074			238,626
Total deposits			1,098,418			1,041,464			926,383			770,968
Federal Home Loan Bank of San Francisco borrowings			22,466			302			17,856			87,548
Other borrowings net of unamortized debt issuance costs			15,143			17,981			19,430			1,326
Junior subordinated debentures			10,310			10,310			10,310			10,310
Other liabilities			12,286			12,293			13,217			16,588
Total liabilities			1,158,623			1,082,350			987,196			886,740
Shareholders’ equity			130,218			115,901			92,554			105,991
Liabilities & shareholders’ equity		$	1,288,841		$	1,198,251		$	1,079,750		$	992,731

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