GlobeNewswire Inc | Oct 16, 2020 09:00AM EDT

October 16, 2020

SACRAMENTO, Calif., Oct. 16, 2020 (GLOBE NEWSWIRE) -- Bank of Commerce Holdings (NASDAQ: BOCH) (the Company), a $1.740 billion asset bank holding company and parent company of Merchants Bank of Commerce (the Bank), today announced financial results for the quarter and nine months ended September 30, 2020. Net income for the quarter ended September 30, 2020 was $4.3 million or $0.26 per share diluted, compared with net income of $4.6 million or $0.26 per share diluted for the same period of 2019. Net income for the nine months ended September 30, 2020 was $9.1 million or $0.53 per share diluted, compared with net income of $10.6 million or $0.59 per share diluted for the same period of 2019.

Significant Items for the third quarter of 2020

-- $1.1 million provision for loan and lease losses. -- COVID-19 loan deferrals totaled $38.6 million at September 30, 2020. Loans with payment deferrals at June 30, 2020 totaling $82.5 million have resumed making payments.

Randall S. Eslick, President and CEO commented: Throughout this unusual year we have not forgotten that we are responsible to many constituents. The pandemic has prompted us to physically modify our banking offices and many of our employees continue to work remotely. But these changes have not hindered our ability to diligently meet the needs of our depositors, borrowers and communities. We remain committed to protecting the health of our employees and customers and also to protecting the investment our owners have made in us.

Financial highlights for the thirdquarter of 2020

-- Net income of $4.3 million was a decrease of $313 thousand (7%) from $4.6 million earned during the same period in the prior year. Earnings of $0.26 per share diluted was the same compared to the same period in the prior year and reflects the impact of the following: 1.5 million shares of common stock repurchased between October of 2019 and April of 2020.$1.1 million provision for loan and lease losses for the current quarter. -- Net interest income increased $408 thousand (3%) to $14.1 million compared to $13.7 million for the same period in the prior year. -- Net interest margin declined to 3.51% compared to 4.00% for the same period in the prior year. -- Return on average assets decreased to 1.01% compared to 1.26% for the same period in the prior year. -- Return on average equity decreased to 10.05% compared to 10.86% for the same period in the prior year. -- Average loans totaled $1.209 billion, an increase of $180 million (17%) compared to average loans for the same period in the prior year. -- Average earning assets totaled $1.601 billion, an increase of $241 million (18%) compared to average earning assets for the same period in the prior year. -- Average deposits totaled $1.485 billion, an increase of $231 million (18%) compared to average deposits for the same period in the prior year. Average non-maturing deposits totaled $1.345 billion, an increase of $248 million (23%) compared to the same period in the prior year.Average certificates of deposit totaled $139.8 million, a decrease of $17.9 million (11%) compared to same period in the prior year. -- The Companys efficiency ratio was 54.8% compared to 56.4% during the same period in the prior year. -- Nonperforming assets at September 30, 2020 totaled $8.1 million or 0.47% of total assets, a decrease of $4.7 million (37%) since September 30, 2019. The decrease in nonperforming assets results from one $10.9 million commercial real estate loan which was placed in nonaccrual status in the first quarter of 2019 and sold in the fourth quarter of 2019. -- Book value per common share was $10.32 at September 30, 2020 compared to $9.42 at September 30, 2019. -- Tangible book value per common share was $9.38 at September 30, 2020 compared to $8.51 at September 30, 2019.

Financial highlights for thenine months ended September30, 2020

-- Net income of $9.1 million was a decrease of $1.5 million (14%) from $10.6 million earned during the same period in the prior year. Earnings of $0.53 per share diluted was a decrease of $0.06 (10%) per share from $0.59 per share diluted earned during the same period in the prior year and reflects the impact of the following: 1.5 million shares of common stock repurchased between October of 2019 and April of 2020.$5.3 million provision for loan and lease losses for the nine months ended September 30, 2020.$1.1 million in non-recurring costs for the first quarter of 2020 associated with the termination of a technology management services contract and a previously announced severance agreement.$2.7 million in non-recurring costs recorded during the nine months ended September 30, 2019 associated with our January 31, 2019 acquisition of Merchants National Bank of Sacramento and the name change of our subsidiary bank. -- Net interest income increased $678 thousand (2%) to $40.9 million compared to $40.2 million for the same period in the prior year. -- Net interest margin declined to 3.66% compared to 3.98% for the same period in the prior year. -- Return on average assets decreased to 0.76% compared to 0.98% for the same period in the prior year. -- Return on average equity decreased to 7.14% compared to 8.74% for the same period in the prior year. -- Average loans totaled $1.142 billion, an increase of $124 million (12%) compared to average loans for the same period in the prior year. -- Average earning assets totaled $1.493 billion, an increase of $143 million (11%) compared to the same period in the prior year. -- Average deposits totaled $1.379 billion, an increase of $147 million (12%) compared to the same period in the prior year. Average non-maturing deposits totaled $1.236 billion, an increase of $167 million (16%) compared to the same period in the prior year.Average certificates of deposit totaled $143.3 million, a decrease of $19.7 million (12%) compared to the same period in the prior year. -- The Companys efficiency ratio was 60.2% compared to 66.5% for the same period in the prior year. The Companys efficiency ratio of 60.2% for the first nine months of 2020 included $1.1 million in non-recurring costs. The efficiency ratio excluding these costs was 57.7%.The Companys efficiency ratio of 66.5% for the first nine months of 2019 includes $2.7 million in non-recurring costs. The efficiency ratio excluding these non-recurring costs was 60.3%. -- Nonperforming assets at September 30, 2020 totaled $8.1 million or 0.47% of total assets, an increase of $2.5 million (36% annualized) since December 31, 2019. -- Book value per common share was $10.32 at September 30, 2020 compared to $9.62 at December 31, 2019. -- Tangible book value per common share was $9.38 at September 30, 2020 compared to $8.71 at December 31, 2019.

Impact of COVID-19:

-- We have funded 606 loans totaling $163.5 million for the Small Business Administrations Paycheck Protection Program (PPP) through September 30, 2020. The growth in our assets resulting from the PPP has impacted our Tier 1 Leverage capital ratio as we have not utilized the liquidity available to us from the Federal Reserves PPP Liquidity Facility and its associated beneficial capital treatment. Substantially all of the loans were made to existing customers and were funded under the two-year PPP loan program. -- We have experienced significant increased deposit balances as all of the PPP loan funds were deposited into customer accounts at our bank and as a result of customer behavior that is focused on maintaining greater non-maturing deposit balances. -- Organic loan growth continues to be slow as we maintain credit underwriting discipline in light of the current economic environment. -- For the six month period from April through September SBA has made principal and interest payments on all our SBA 7(a) loans. The borrowers will resume responsibility for making their payments in October. -- After considering qualitative factors, management determined that the Companys goodwill was not impaired at September 30, 2020. -- At September 30, 2020, our workforce totaled 211 employees of which 107 are working remotely. -- All of our branch offices remain open, although they are operating under a reduced schedule. Our pandemic response team is continuing to modify and enhance our workforce and customer protection as additional information or requirements are promulgated by the state of California.

Forward-Looking Statements

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

TABLE 1 SELECTED FINANCIAL INFORMATION - UNAUDITED (dollars in thousands except per share data) For The Three Months Ended For The Nine Months Ended Net income,average September 30, June 30, September 30, assets andaverageshareholders' 2020 2019 2020 2020 2019 equityNet income $ 4,329 $ 4,642 $ 3,847 $ 9,092 $ 10,592 Average total $ 1,704,116 $ 1,462,444 $ 1,626,827 $ 1,595,386 $ 1,446,476 assetsAverage totalearning $ 1,601,436 $ 1,360,006 $ 1,523,157 $ 1,492,961 $ 1,350,173 assetsAverageshareholders' $ 171,433 $ 169,608 $ 167,036 $ 170,201 $ 162,032 equity Selectedperformance ratiosReturn onaverage 1.01 % 1.26 % 0.95 % 0.76 % 0.98 %assetsReturn onaverage 10.05 % 10.86 % 9.26 % 7.14 % 8.74 %equityEfficiency 54.8 % 56.4 % 56.1 % 60.2 % 66.5 %ratio Share and per share amountsWeightedaverage 16,660 18,130 16,660 17,004 17,918 shares -basic ^(1)Weightedaverage 16,696 18,196 16,689 17,044 17,981 shares -diluted ^(1)Earnings per $ 0.26 $ 0.26 $ 0.23 $ 0.53 $ 0.59 share - basicEarnings pershare - $ 0.26 $ 0.26 $ 0.23 $ 0.53 $ 0.59 diluted At September 30, At June 30, Share and per 2020 2019 2020 share amountsCommon sharesoutstanding ^ 16,792 18,212 16,739 (2)Book valueper common $ 10.32 $ 9.42 $ 10.13 share ^(2)Tangible bookvalue per $ 9.38 $ 8.51 $ 9.17 common share^(2)(3) Capital ratios ^(4)Bank ofCommerce HoldingsCommon equitytier 1 12.61 % 12.85 % 12.34 % capital ratioTier 1 13.44 % 13.69 % 13.18 % capital ratioTotal capital 15.53 % 15.62 % 15.27 % ratioTier 1leverage 9.60 % 11.28 % 9.82 % ratioTangiblecommon equity 9.13 % 10.64 % 9.05 % ratio ^(5) MerchantsBank of CommerceCommon equitytier 1 14.01 % 14.25 % 13.72 % capital ratioTier 1 14.01 % 14.25 % 13.72 % capital ratioTotal capital 15.26 % 15.34 % 14.97 % ratioTier 1leverage 9.99 % 11.74 % 10.21 % ratio ^(1) Excludes unvested restricted shares issued in accordance with theCompany's equity incentive plan, as they are non-participative in dividends orvoting rights.^(2) Includes unvested restricted shares issued in accordance with theCompany's equity incentive plan.^(3) Book value per share is computed by dividing total shareholders? equity byshares outstanding. Tangible book value per share is computed by dividing totalshareholders? equity less goodwill and core deposit intangible, net by sharesoutstanding. Management believes that tangible book value per share ismeaningful because it is a measure that the Company and investors commonly useto assess capital adequacy.^(4) The Company and the Bank continue to meet all capital adequacyrequirements to which they are subject.^(5) Management believes the tangible common equity ratio is a useful measureof capital adequacy because it provides a meaningful base for period-to-periodand company-to-company comparisons, which management believes will assistinvestors in assessing the capital of the Company and the ability of theCompany to absorb potential losses. The tangible common equity ratio iscalculated as total shareholders' equity less goodwill and core depositintangible, net divided by total assets less goodwill and core depositintangible, net.

BALANCE SHEET OVERVIEW

As of September 30, 2020, the Company had total consolidated assets of $1.740 billion, gross loans of $1.206 billion, allowance for loan and lease losses (ALLL) of $17 million, total deposits of $1.518 billion, and shareholders equity of $173 million.

TABLE 2LOAN BALANCES BY TYPE - UNAUDITED(dollars in thousands) At September 30, At June 30, % of % of Change % of 2020 Total 2019 Total Amount % 2020 TotalCommercial $ 121,025 10 % $ 152,195 15 % $ (31,170 ) (20 ) % $ 126,024 10 %Paycheckprotection 163,493 14 ? ? 163,493 100 % 162,189 13 programReal estate-construction 40,289 3 35,606 3 4,683 13 % 41,371 3 and landdevelopmentReal estate- commercial 538,079 45 475,678 47 62,401 13 % 521,004 44 non-owneroccupiedReal estate- commercial 210,455 17 210,767 20 (312 ) ? % 215,799 18 owneroccupiedReal estate- 30,071 2 34,036 3 (3,965 ) (12 ) % 31,083 3 residential- ITINReal estate-residential 57,867 5 64,747 6 (6,880 ) (11 ) % 60,756 5 - 1-4 familymortgageReal estate-residential 20,296 2 22,729 2 (2,433 ) (11 ) % 20,938 2 - equitylinesConsumer and 24,490 2 37,324 4 (12,834 ) (34 ) % 27,176 2 otherGross loans 1,206,065 100 % 1,033,082 100 % 172,983 17 % 1,206,340 100 %Deferredfees and (1,037 ) 1,980 (3,017 ) (1,603 ) costsLoans, netof deferred 1,205,028 1,035,062 169,966 1,204,737 fees andcostsAllowancefor loan and (16,873 ) (12,285 ) (4,588 ) (16,089 ) lease lossesNet loans $ 1,188,155 $ 1,022,777 $ 165,378 $ 1,188,648 Averageloans during $ 1,209,277 $ 1,029,534 $ 179,743 17 % $ 1,180,915 the quarterAverageloans duringthe quarter $ 1,046,187 $ 1,029,534 $ 16,653 2 % $ 1,048,139 (excludingPPP)Averageyield on 4.42 % 5.01 % (0.59 ) (12 ) % 4.50 % loans duringthe quarterAverageyield on allloans during 4.75 % 5.01 % (0.26 ) (5 ) % 4.76 % the quarter(excludingPPP)Averageyield on all 4.56 % 4.98 % (0.42 ) (8 ) % 4.64 % loans yearto dateAverageyield on allloans year 4.77 % 4.98 % (0.21 ) (4 ) % 4.78 % to date(excludingPPP)

The Company recorded gross loan balances of $1.206 billion at September 30, 2020, compared with $1.033 billion and $1.206 billion at September 30, 2019 and June 30, 2020, respectively, an increase of $173 million and a decrease of $275 thousand, respectively.

The average yield on loans during the quarter was 4.42% compared to 5.01% and 4.50% for the quarters ended September 30, 2019 and June 30, 2020, respectively. Yields in the current quarter were negatively impacted by PPP loans, which averaged $163.1 million and yielded 2.31%.

Gross loan balances in the table above include a net fair value discount for loans acquired from Merchants of $1.1 million, $1.3 million and $1.9 million at September 30, 2020, June 30, 2020 and September 30, 2019, respectively. We recorded $233 thousand, $216 thousand and $193 thousand in accretion of the discount for these loans during the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

We have funded 606 PPP loans totaling $163.5 million through September 30, 2020. Substantially all of the loans were made to existing customers and the loan proceeds were initially deposited with our institution. At origination, loan fee income net of loan origination costs totaled $4.3 million and is being earned over the 24-month life of the loans as a part of the loan yield. At September 30, 2020, $3.3 million remains to be earned in future quarters. The following tables provide additional information on the PPP loans by industry and by loan balance at September 30, 2020.

TABLE 3PPP LOANS BY INDUSTRY - UNAUDITED(dollars in thousands) At September 30, 2020 Number BalanceConstruction 98 $ 64,750Healthcare and Social Assistance 96 17,701Professional, Scientific and Tech Services 78 12,155Accommodation and Food Services 51 10,328Admin, Support, Waste Management and Remediation 20 7,383ServicesPrimary Metal Manufacturing 16 6,641Retail Trade 59 8,050Other 188 36,485Total 606 $ 163,493

TABLE 4PPP LOANS BY LOAN SIZE - UNAUDITED(dollars in thousands) At September 30, 2020 Balance Number Average Loan Size$150,000 or less $ 20,604 390 $ 53$150,001 to $350,000 25,406 110 231$350,001 to $1,999,999 73,927 94 786$2,000,000 or greater 43,556 12 3,630Total $ 163,493 606 $ 270

During the third quarter of 2020, the SBA began accepting applications for PPP loan forgiveness. The bank has 60 days to review and approve an application before submitting it to SBA, and then the SBA has 90 days to process it for forgiveness. The following table presents the progress of our loans in the forgiveness process.

TABLE 5PPP LOANS FORGIVENESS APPLICATION STATUS - UNAUDITED(dollars in thousands) At September 30, 2020 Balance Number Average Loan SizeBorrower has not started application $ 78,930 390 $ 202Borrower is working on application 38,624 123 314Borrower has completed application and the 32,400 73 444bank is reviewing itBank has approved application and submitted 13,539 20 677it to the SBASBA has approved the application and the loan ? ? ?has been repaidTotal $ 163,493 606 $ 270

As of October 13, 2020, two of our PPP loans totaling $95 thousand that were outstanding on September 30, 2020 have been forgiven by the SBA.

TABLE 6CASH, CASH EQUIVALENTS, AND INVESTMENT SECURITIES - UNAUDITED(dollars in thousands) At September 30, At June 30, % of % of Change % of 2020 Total 2019 Total Amount % 2020 TotalCash and due $ 22,884 5 % $ 32,505 9 % $ (9,621 ) (30 ) % $ 29,630 7 %from banksInterest-bearingdeposits in 104,999 23 56,099 16 48,900 87 % 126,132 29 other banksTotal cash and 127,883 28 88,604 25 39,279 44 % 155,762 36 cash equivalents Investment securities:U.S. government 31,811 7 40,467 11 (8,656 ) (21 ) % 33,195 8 and agenciesObligations ofstate and 91,863 20 39,004 11 52,859 136 % 76,888 18 politicalsubdivisionsResidentialmortgage backedsecurities and 165,693 35 165,994 46 (301 ) ? % 137,120 30 collateralizedmortgageobligationsCorporate ? ? 2,992 1 (2,992 ) (100 ) % 1,000 ? securitiesCommercialmortgage backed 19,576 4 22,822 6 (3,246 ) (14 ) % 16,329 4 securitiesOther assetbacked 28,089 6 1,062 ? 27,027 2,545 % 15,668 4 securitiesTotal investment 337,032 72 272,341 75 64,691 24 % 280,200 64 securities - AFS Total cash, cashequivalents and $ 464,915 100 % $ 360,945 100 % $ 103,970 29 % $ 435,962 100 %investmentsecuritiesAverage yield oninterest-bearingdue 0.12 % 2.07 % (1.95 ) 0.12 % from banksduring thequarterAverage yield oninvestmentsecurities 2.33 % 2.75 % (0.42 ) 2.61 % during thequarter -nominalAverage yield oninvestmentsecurities 2.50 % 2.85 % (0.35 ) 2.78 % during thequarter - taxequivalent

As of September 30, 2020, we maintained noninterest-bearing cash positions of $22.9 million and interest-bearing deposits of $105.0 million at the Federal Reserve Bank and correspondent banks.

Investment securities totaled $337.0 million at September 30, 2020, compared with $272.3 million and $280.2 million at September 30, 2019 and June 30, 2020, respectively. During the third quarter of 2020, we continued the deployment of excess cash into investment securities as deposits continued to grow. Investment purchases were comprised primarily of longer duration municipal bonds and lower coupon mortgage backed securities. During the third quarter of 2020, we purchased securities with a par value of $84.1 million and weighted average yield of 1.75% (2.09% tax equivalent) and sold securities with a par value of $5.8 million and weighted average yield of 2.67% (3.16% tax equivalent). The sales resulted in net realized gains of $258 thousand and $482 thousand for the quarter and nine months ended September 30, 2020, respectively.

Average securities balances for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019 were $296.8 million, $269.7 million and $271.6 million, respectively. Weighted average yields on securities balances for those same periods were 2.33%, 2.61% and 2.75%, respectively.

At September 30, 2020, our net unrealized gains on available-for-sale investment securities were $10.4 million compared with net unrealized gains of $3.3 million and $10.1 million at September 30, 2019 and June 30, 2020, respectively. The changes in net unrealized gains on the investment securities portfolio were due to changes in market interest rates.

TABLE 7DEPOSITS BY TYPE - UNAUDITED(dollars in thousands) At September 30, At June 30, % of % of Change % of 2020 Total 2019 Total Amount % 2020 TotalDemand - $ 542,060 36 % $ 412,410 33 % $ 129,650 31 % $ 521,751 35 %noninterest-bearingDemand - interest-bearing 280,370 18 239,547 19 40,823 17 % 287,198 19 Money market 403,785 27 317,120 25 86,665 27 % 405,322 27 Total demand 1,226,215 81 969,077 77 257,138 27 % 1,214,271 81 Savings 151,016 10 137,441 11 13,575 10 % 142,389 10 Total non-maturing 1,377,231 91 1,106,518 88 270,713 24 % 1,356,660 91 deposits Certificates of deposit 140,900 9 155,621 12 (14,721 ) (9 ) % 137,647 9 Total deposits $ 1,518,131 100 % $ 1,262,139 100 % $ 255,992 20 % $ 1,494,307 100 %

Total deposits at September 30, 2020, increased $256 million or 20% to $1.518 billion compared to September 30, 2019 and increased $23.8 million or 6% annualized compared to June 30, 2020. Total non-maturing deposits increased $270.7 million or 24% compared to the same date a year ago and increased $20.6 million or 6% annualized compared to June 30, 2020. The increase in non-maturing deposits compared to the same period one year ago was due to PPP loan program disbursements and changes in customer behavior, which is placing greater emphasis on increasing non-maturing deposit balances. Certificates of deposit decreased $14.7 million or 9% compared to the same date a year ago and increased $3.3 million or 9% annualized compared to June 30, 2020. The decrease in certificates of deposits compared to the same period one year ago reflects our decision to reduce reliance on public deposits.

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

TABLE 8AVERAGE COST OF FUNDS - UNAUDITEDFor The Three Months Ended September June 30, March 31, December September June 30, March 31, December 30, 31, 30, 31, 2020 2020 2020 2019 2019 2019 2019 2018Interest-bearing 0.36 % 0.43 % 0.53 % 0.56 % 0.56 % 0.54 % 0.49 % 0.45 %depositsInterest-bearingdeposits and 0.23 % 0.28 % 0.35 % 0.38 % 0.38 % 0.37 % 0.34 % 0.31 %noninterest-bearingdemandAllinterest-bearing 0.44 % 0.52 % 0.65 % 0.68 % 0.68 % 0.74 % 0.67 % 0.61 %liabilitiesAllinterest-bearingliabilities and 0.29 % 0.34 % 0.43 % 0.46 % 0.46 % 0.52 % 0.46 % 0.42 %noninterest-bearingdemand

Stock Repurchase Program

We previously announced a program to repurchase 1.5 million common shares. Between October of 2019 and April of 2020, all 1.5 million shares were repurchased at a total cost of $13.6 million including commissions, or an average of $9.11 per share.

INCOME STATEMENT OVERVIEW

TABLE 9SUMMARY INCOME STATEMENT - UNAUDITED(dollars in thousands, except per share data) For The Three Months Ended September 30, Change June 30, Change 2020 2019 Amount % 2020 Amount %Interest $ 15,218 $ 15,201 $ 17 0 % $ 14,997 $ 221 1 %incomeInterest 1,088 1,479 (391 ) (26 ) % 1,214 (126 ) (10 ) %expenseNet interest 14,130 13,722 408 3 % 13,783 347 3 %incomeProvision forloan 1,100 ? 1,100 100 % 1,300 (200 ) (15 ) %and leaselossesNoninterest 1,189 1,006 183 18 % 955 234 25 %incomeNoninterest 8,390 8,300 90 1 % 8,270 120 1 %expenseIncome beforeprovision 5,829 6,428 (599 ) (9 ) % 5,168 661 13 %for incometaxesProvision for 1,500 1,786 (286 ) (16 ) % 1,321 179 14 %income taxesNet income $ 4,329 $ 4,642 $ (313 ) (7 ) % $ 3,847 $ 482 13 % Earnings per $ 0.26 $ 0.26 $ ? ? % $ 0.23 $ 0.03 13 %share - basicWeightedaverage 16,660 18,130 (1,470 ) (8 ) % 16,660 ? ? %shares -basicEarnings pershare - $ 0.26 $ 0.26 $ ? ? % $ 0.23 $ 0.03 13 %dilutedWeightedaverage 16,696 18,196 (1,500 ) (8 ) % 16,689 7 ? %shares -dilutedDividendsdeclared per $ 0.05 $ 0.05 $ ? ? % $ 0.05 $ ? ? %common share

ThirdQuarter of 2020Compared With TheThirdQuarter of 2019

Net income for the third quarter of 2020 decreased $313 thousand compared to the third quarter of 2019. In the current quarter, net interest income was $408 thousand higher, noninterest income was $183 thousand higher and income taxes were $286 thousand lower. These changes were partially offset by a provision for loan and lease losses that was $1.1 million higher and noninterest expense that was $90 thousand higher.

Net Interest Income

Net interest income increased $408 thousand compared to the same period a year ago.

Interest income for the third quarter of 2020 increased $17 thousand or less than 1% to $15.2 million.

-- Interest and fees on loans increased $435 thousand due to a $179.7 million increase in average loan balances partially offset by a 59 basis point decrease in the average yield. Much of the 59 basis point decrease was caused by PPP loans which yielded only 2.31%. The yield on loans exclusive of PPP loans declined 26 basis points. -- Interest on investment securities decreased $139 thousand due to a 41 basis point decrease in average yield partially offset by a $25.2 million increase in average securities balances. -- Interest on interest-bearing deposits due from banks decreased $279 thousand due to a 195 basis point decrease in average yield that was partially offset by a $36.4 million increase in average interest-bearing deposit balances. During 2020, in response to the economic effects of the COVID-19 pandemic, the Federal Reserve cut its interest rates by 150 to 175 basis points which has resulted in a decrease in our interest income.

Interest expense for the third quarter of 2020 decreased $391 thousand or 26% to $1.1 million.

-- Interest expense on interest-bearing deposits decreased $336 thousand. Average interest-bearing demand and savings deposit balances increased $122.8 million, while average certificate of deposit balances decreased $17.9 million. The average rate paid on interest-bearing deposits decreased 20 basis points. -- Average FHLB borrowings were $10.0 million in the current quarter. The borrowings bear no interest under a program offered by the FHLB during the second quarter of 2020 in response to COVID-19 liquidity concerns. There were no borrowings during the same period a year ago. -- Interest expense on other term debt increased $1 thousand. The average rate paid on other term debt increased three basis points. -- Interest expense on junior subordinated debentures decreased $56 thousand. The average rate paid on junior subordinated debentures decreased 215 basis points.

Provision for Loan and Lease Losses

Net loan loss charge-offs were $316 thousand for the current quarter compared to net loan loss charge-offs of $160 thousand for the same period a year ago. Net loan charge-offs during the current quarter were primarily related to the unguaranteed portion of two commercial loans that are partially guaranteed under the California Capital Access Program for Small Business.

We recognized deterioration in the credit environment due to the economic effects of COVID-19 and have made changes to our qualitative factors (Q-Factors) in calculating our ALLL. As a result we recorded a provision for loan and lease losses of $1.1 million for the third quarter of 2020. There was no provision for loan and lease losses in the third quarter of 2019. A discussion of our provision is provided following Table 11.

Noninterest Income

Noninterest income for the three months ended September 30, 2020 increased $183 thousand compared to the same period a year previous. The increase was due $246 thousand in net gains on sale of investment securities during the third quarter of 2020.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2020 increased $90 thousand compared to the same period a year previous. Increases in noninterest expense included the following items:

-- $121 thousand increase in salaries and related benefits. -- $205 thousand increase in FDIC insurance premiums.

These increases were partially offset by decreases in travel, sponsorship and other noninterest expenses as a result of the pandemic.

The Companys efficiency ratio was 54.8% for the third quarter of 2020. The ratio during the same period in 2019 was 56.4%.

Income Tax Provision

For the three months ended September 30, 2020, our income tax provision of $1.5 million on pre-tax income of $5.8 million was an effective tax rate of 25.7%. The tax provision for the third quarter of the prior year was $1.8 million on pre-tax income of $6.4 million for an effective rate of 27.8%. The effective tax rate has declined in the current period as a result of increased income from tax-exempt securities.

ThirdQuarter of 2020Compared WithThe SecondQuarter of 2020

Net income for the third quarter of 2020 increased $482 thousand compared to the second quarter of 2020. In the current quarter, net interest income was $347 thousand higher, provision for loan and lease losses was $200 thousand lower, noninterest income was $234 thousand higher. These changes were partially offset by noninterest expense that was $120 thousand higher and a provision for income taxes that was $179 thousand higher.

Net Interest Income

Net interest income increased $347 thousand over the prior quarter.

Interest income for the three months ended September 30, 2020 increased $221 thousand or 1% to $15.2 million.

-- Interest and fees on loans increased $224 thousand due to a $28.4 million increase in average loan balances partially offset by an eight basis point decrease in the average yield. Much of the eight basis point decrease was caused by PPP loans. -- Interest on investment securities decreased $11 thousand due to a 28 basis point decrease in average yield partially offset by a $27.1 million increase in average securities balances. -- Interest on interest-bearing deposits due from banks increased $8 thousand due to a $22.8 million increase in average balances.

Interest expense for the three months ended September 30, 2020 decreased $126 thousand or 10% to $1.1 million.

-- Interest expense on interest-bearing deposits decreased $110 thousand. Average interest-bearing demand and savings deposit balances increased $48.0 million, while average certificates of deposit decreased $3.2 million. The average rate paid on interest-bearing deposits decreased by seven basis points. -- Interest expense on FHLB borrowings decreased $5 thousand. Average FHLB borrowings were $10.0 million in the current quarter compared to $16.0 million in the prior quarter. During the second quarter of 2020, we took an advance under our FHLB line of credit for $10.0 million, which bears no interest under a program offered by the FHLB during the second quarter of 2020 in response to COVID-19 liquidity concerns. -- Interest expense on other term debt was unchanged at $184 thousand for both quarters. -- Interest expense on other junior subordinated debentures decreased $11 thousand due to a 45 basis point decrease in the average rate paid.

Provision for Loan and Lease Losses

Net loan charge-offs were $316 thousand in the current quarter compared to $278 thousand in the prior quarter. As illustrated in Table 11 total nonaccrual loans increased by $1.4 million during the three months ended September 30, 2020 when compared to the previous quarter. Net loan charge-offs during the current quarter were primarily related to the unguaranteed portion of two commercial loans that are partially guaranteed under the California Capital Access Program for Small Business. Both loans were also placed in nonaccrual status during the quarter. We recorded a provision for loan and lease losses of $1.3 million and $1.1 million for the second and third quarters of 2020, respectively. A discussion of our provision is provided following Table 11.

Noninterest Income

Noninterest income for the three months ended September 30, 2020 increased $234 thousand including a $118 thousand increase in gain on sale of investment securities and $73 thousand increase in FHLB dividends.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2020 increased $120 thousand compared to the prior quarter. The increase was primarily due to a deferred PPP loan origination cost benefit of approximately $600 recorded in the prior quarter which did not recur in the current quarter. This was offset during the current quarter by accruals for incentives and unused vacation which were $408 thousand lower.

The Companys efficiency ratio was 54.8% for the third quarter of 2020 compared with 56.1% for the prior quarter.

Income Tax Provision

For the three months ended September 30, 2020, our income tax provision of $1.5 million on pre-tax income of $5.8 million was an effective tax rate of 25.7%. The income tax provision for the prior quarter of $1.3 thousand on pre-tax income of $5.2 million was an effective tax rate of 25.6%.

Earnings Per Share

Diluted earnings per share were $0.26 for the three months ended September 30, 2020 compared with diluted earnings per share of $0.26 for the same period a year ago and diluted earnings per share of $0.23 for the prior period. Net income and weighted average shares used to calculate earnings per share diluted are summarized in Table 9 presented earlier in this press release.

TABLE 10aNET INTEREST MARGIN - UNAUDITED(dollars in thousands) For The Three Months Ended September 30, 2020 September 30, 2019 June 30, 2020 Average Yield Average Yield Average Yield / / / Balance Interest Rate ^ Balance Interest Rate ^ Balance Interest Rate ^ ^(^1) (5) ^(^1) (5) ^(^1) (5)Interest-earning assets: Loans net of PPP ^(2) $ 1,046,187 $ 12,499 4.75 % $ 1,029,534 $ 13,013 5.01 % $ 1,048,139 $ 12,411 4.76 %PPP loans 163,090 949 2.31 % ? ? ? % 132,776 813 2.46 %Taxable securities 228,045 1,284 2.24 % 238,601 1,609 2.68 % 211,195 1,329 2.53 %Tax-exempt securities ^(3) 68,766 457 2.64 % 32,974 271 3.26 % 58,540 423 2.91 %Interest-bearing deposits 95,348 29 0.12 % 58,897 308 2.07 % 72,507 21 0.12 %in other banksAverage interest- 1,601,436 15,218 3.78 % 1,360,006 15,201 4.43 % 1,523,157 14,997 3.96 %earning assetsCash and due from banks 23,381 23,822 21,564 Premises and equipment, net 15,365 15,922 15,428 Goodwill 11,671 11,686 11,671 Other intangible assets, net 4,318 5,083 4,508 Other assets 47,945 45,925 50,499 Average total assets $ 1,704,116 $ 1,462,444 $ 1,626,827 Interest-bearing liabilities: Interest-bearing demand $ 279,744 71 0.10 % $ 243,553 117 0.19 % $ 261,907 85 0.13 %Money market 387,995 289 0.30 % 309,188 451 0.58 % 365,368 317 0.35 %Savings 146,074 74 0.20 % 138,296 131 0.38 % 138,500 95 0.28 %Certificates of deposit 139,757 420 1.20 % 157,620 491 1.24 % 142,955 467 1.31 %Federal Home Loan Bank of San 10,000 ? ? % ? ? ? % 16,044 5 0.13 %Francisco borrowingsOther borrowings net ofunamortized debt issuance 9,988 184 7.33 % 9,942 183 7.30 % 9,976 184 7.42 %costsJunior subordinated 10,310 50 1.93 % 10,310 106 4.08 % 10,310 61 2.38 %debenturesAverage interest- 983,868 1,088 0.44 % 868,909 1,479 0.68 % 945,060 1,214 0.52 %bearing liabilitiesNoninterest-bearing demand 531,459 405,853 497,636 Other liabilities 17,356 18,074 17,095 Shareholders? equity 171,433 169,608 167,036 Average liabilities and $ 1,704,116 $ 1,462,444 $ 1,626,827 shareholders? equityNet interest income and $ 14,130 3.51 % $ 13,722 4.00 % $ 13,783 3.64 %net interest margin^ (4) ^(1) Interest income on loans includes deferred fees and costs of approximately$240 thousand, $161 thousand, and $138 thousand for the three months endedSeptember 30, 2020 and 2019 and June 30, 2020, respectively. Interest income onPPP loans includes $538 thousand and $476 thousand of fee income for the threemonths ended September 30, 2020 and June 30, 2020, respectively.^(2) Loans net of PPP includes average nonaccrual loans of $6.6 million, $13.2million and $5.6 million for the three months ended September 30, 2020 and 2019and June 30, 2020, respectively.^(3) Interest income and yields on tax-exempt securities are not presented on ataxable equivalent basis.^(4) Net interest margin is net interest income expressed as a percentage ofaverage interest-earning assets. Net interest income for the three months endedSeptember 30, 2020 and 2019 and June 30, 2020 included $233 thousand, $193thousand and $216 thousand in accretion of the discount on the loans acquiredfrom Merchants Holding Company, which improved the net interest margin by 7basis points. Net interest income for the three months ended September 30, 2020included $949 thousand in interest and fee income from PPP loans with anaverage balance of $163.1 million for the quarter, which decreased the netinterest margin by 14 basis points.^(5) Yields and rates are calculated by dividing the income or expense by theaverage balance of the assets or liabilities, respectively, and annualizing theresult.

TABLE 10bNET INTEREST MARGIN - UNAUDITED(dollars in thousands) For The Nine Months Ended September 30, 2020 September 30, 2019 Average Yield Average Yield / / Balance Interest Rate ^ Balance Interest Rate ^ ^(^1) (5) ^(^1) (5)Interest-earning assets:Loans net of PPP ^ $ 1,042,685 $ 37,248 4.77 % $ 1,017,127 $ 37,891 4.98 %(2)PPP loans 98,857 1,762 2.38 % ? ? ? %Taxable securities 225,558 4,195 2.48 % 247,139 5,106 2.76 %Tax-exempt 54,112 1,151 2.84 % 40,912 986 3.22 %securities ^(3)Interest-bearingdeposits 71,749 204 0.38 % 44,995 772 2.29 %in other banksAverage interest- 1,492,961 44,560 3.99 % 1,350,173 44,755 4.43 %earning assetsCash and due from 22,314 22,375 banksPremises and 15,514 15,445 equipment, netGoodwill 11,671 10,450 Other intangible 4,508 4,780 assets, netOther assets 48,418 43,253 Average total $ 1,595,386 $ 1,446,476 assets Interest-bearing liabilities:Interest-bearing $ 258,420 256 0.13 % $ 241,924 372 0.21 %demandMoney market 353,775 1,009 0.38 % 299,694 1,120 0.50 %Savings 140,048 287 0.27 % 136,254 365 0.36 %Certificates of 143,305 1,351 1.26 % 163,020 1,478 1.21 %depositFederal Home LoanBank of San 8,759 5 0.08 % 12,894 247 2.56 %FranciscoborrowingsOther borrowingsnet of unamortized 9,976 552 7.39 % 11,213 623 7.43 %debt issuance costsJunior subordinated 10,310 201 2.60 % 10,310 329 4.27 %debenturesAverage interest- 924,593 3,661 0.53 % 875,309 4,534 0.69 %bearing liabilitiesNoninterest-bearing 483,490 391,208 demandOther liabilities 17,102 17,927 Shareholders? 170,201 162,032 equityAverage liabilitiesand shareholders? $ 1,595,386 $ 1,446,476 equityNet interest incomeand $ 40,899 3.66 % $ 40,221 3.98 %net interest margin^ (4) ^(1) Interest income on loans includes deferred fees and costs of approximately$636 thousand and $433 thousand for the nine months ended September 30, 2020and 2019, respectively. Interest income on PPP loans includes $1.0 million offee income for the nine months ended September 30, 2020.^(2) Loans net of PPP includes average nonaccrual loans of $5.8 million and$11.8 million for the nine months ended September 30, 2020 and 2019,respectively.^(3) Interest income and yields on tax-exempt securities are not presented on ataxable equivalent basis.^(4) Net interest margin is net interest income expressed as a percentage ofaverage interest-earning assets. Net interest income for the nine months endedSeptember 30, 2020 and 2019 included $612 thousand and $431 thousand inaccretion of the discount on the loans acquired from Merchants Holding Company,which improved the net interest margin by 7 and 6 basis points, respectively.Net interest income for the nine months ended September 30, 2020 included $1.8million in interest and fee income from PPP loans with an average balance of$98.9 million for the nine months ended September 30, 2020, which decreased thenet interest margin by 9 basis points.^(5) Yields and rates are calculated by dividing the income or expense by theaverage balance of the assets or liabilities, respectively, and annualizing theresult.

TABLE 11 ALLOWANCE FOR LOAN AND LEASE LOSSES ROLL FORWARD AND IMPAIRED LOAN TOTALS - UNAUDITED(dollars in thousands) For The Three Months Ended September 30, June 30, March 31, December 31, September 30, 2020 2020 2020 2019 2019Beginning $ 16,089 $ 15,067 $ 12,231 $ 12,285 $ 12,445 balance ALLLProvisionfor loan and 1,100 1,300 2,850 ? ? lease lossesLoans (502 ) (356 ) (169 ) (174 ) (319 ) charged-offLoan loss 186 78 155 120 159 recoveriesEnding $ 16,873 $ 16,089 $ 15,067 $ 12,231 $ 12,285 balance ALLL At September At June 30, At March 31, At December 31, At September 30, 30, 2020 2020 2020 2019 2019Nonaccrual loans:Commercial $ 1,549 $ 7 $ 39 $ 61 $ 139 Real estate- commercial 1,062 1,062 ? ? 10,099 non-owneroccupiedReal estate- commercial 3,750 3,647 3,103 3,103 ? owneroccupiedReal estate- 1,574 1,738 1,878 2,221 2,339 residential- ITINReal estate-residential 145 180 184 191 198 - 1-4 familymortgageConsumer and 18 37 39 40 21 otherTotalnonaccrual 8,098 6,671 5,243 5,616 12,796 loansAccruingtroubleddebt restructuredloans:Commercial 531 592 592 595 629 Real estate- 3,597 3,642 3,891 3,957 4,072 residential- ITINReal estate-residential 131 221 226 231 236 - equitylinesTotalaccruingtroubled 4,259 4,455 4,709 4,783 4,937 debtrestructuredloans All otheraccruing ? ? ? ? ? impairedloans Totalimpaired $ 12,357 $ 11,126 $ 9,952 $ 10,399 $ 17,733 loans Gross loansoutstanding $ 1,206,065 $ 1,206,340 $ 1,052,245 $ 1,032,903 $ 1,033,082 at periodend Impairedloans to 1.02 % 0.92 % 0.95 % 1.01 % 1.72 %gross loansNonaccrualloans to 0.67 % 0.55 % 0.50 % 0.54 % 1.24 %gross loans Allowance for loan and lease losses as a percent of:Gross loans 1.40 % 1.33 % 1.43 % 1.18 % 1.19 %Nonaccrual 208.36 % 241.18 % 287.37 % 217.79 % 96.01 %loansImpaired 136.55 % 144.61 % 151.40 % 117.62 % 69.28 %loans

TABLE 12 ALLOWANCE, RESERVE AND DISCOUNT - UNAUDITED (dollars in thousands) At September At June 30, At March 31, At December At September 30, 31, 30, 2020 2020 2020 2019 2019ALLL $ 16,873 $ 16,089 $ 15,067 $ 12,231 $ 12,285 Reserve forunfunded 800 800 695 695 695 commitmentsDiscount onacquired 1,060 1,293 1,509 1,672 1,860 loans ^(1)Totalallowance, $ 18,733 $ 18,182 $ 17,271 $ 14,598 $ 14,840 reserve anddiscount Gross loans $ 1,206,065 $ 1,206,340 $ 1,052,245 $ 1,032,903 $ 1,033,082 PPP loans 163,493 162,189 ? ? ? Total grossloans net $ 1,042,572 $ 1,044,151 $ 1,052,245 $ 1,032,903 $ 1,033,082 of PPPloans Totalallowance,reserve anddiscount asapercentage 1.80 % 1.74 % 1.64 % 1.41 % 1.44 %oftotal grossloans netof PPPloans^(1) Discount on acquired loans includes fair value discount for loans acquiredfrom Merchants in January of 2019.

COVID19 Loan Analysis

During the third quarter of 2020, we continued to proactively monitor our loan portfolio by maintaining close contact with our borrowers to update our understanding of the impact of the pandemic on them, their businesses and the underlying collateral for our loans. For borrowers who continue to have been granted a loan payment deferral, we have evaluated their credit quality position and the potential for loss of principal.

We have segmented our commercial loan and commercial real estate loan portfolios (86% of gross loans excluding PPP loans) to identify those loans in industries that are most at risk or where other information indicates the borrower may be significantly impacted by the effects of COVID-19. The following table presents loans by industry that are most at risk or where other information indicates the loan or borrower may be highly impacted by COVID-19 and the related loan modifications. The table below includes $10.0 million and $21.3 million of SBA 7(a) (generally 75% guaranteed) loans in the high risk and low to moderate risk categories, respectively.

TABLE 13COVID-19 LOAN ANALYSIS - UNAUDITED(dollars in thousands) At September 30, 2020 Individually Analyzed Loans With a Loan Modifications COVID-19 Risk Of Low and Low and High Moderate PPP Total High Moderate # Amount Amount Amount Amount # Amount # AmountCRE and C&I Industries highlyimpacted by COVID-19:Retail trade 12 $ 15,896 $ 24,641 $ 8,050 $ 48,587 ? $ ? ? $ ? Health care and 46 14,148 12,847 17,701 44,696 6 3,608 1 954 social assistanceHotels, motelsand 17 34,635 ? 1,402 36,037 3 9,986 ? ? bed-and-breakfastinnsOther services 7 6,014 18,318 2,967 27,299 1 2,032 1 231 Restaurants, bars 20 11,103 ? 6,370 17,473 2 1,606 ? ? and caterersEducational 3 7,348 303 2,693 10,344 ? ? ? ? servicesArts,entertainment and 20 4,200 60 4,579 8,839 5 1,698 ? ? recreationOther industries 22 17,255 739,069 119,731 876,055 3 4,032 10 10,757 Residential,Consumer and AllOther not ? ? 136,735 ? 136,735 ? ? 116 3,714 individuallyanalyzedTotal 147 $ 110,599 $ 931,973 $ 163,493 $ 1,206,065 20 $ 22,962 128 $ 15,656 % to gross loans 9.17 % 77.27 % 13.56 % 1.90 % 1.30 %

Provision for Loan and Lease Losses

We monitor credit quality and the general economic environment to ensure that the ALLL is maintained at a level that is adequate to cover estimated credit losses in the loan and lease portfolio. Our review of ALLL adequacy utilizes both quantitative and qualitative factors. The quantitative analysis relies on historical loss rates which, unfortunately, are not indicative of potential losses related to a pandemic such as we are currently experiencing with COVID-19. In response to quantitative data deficiencies, we have placed greater reliance on qualitative factors (Q-Factors).

At September 30, 2020, our review of the adequacy of our allowance for loan and lease losses (ALLL) focused on our Q-Factor for changes in the volume and severity of past due loans and other similar conditions. We considered concentrations of credit in industries that are more likely to be significantly impacted by the effects of COVID-19. We evaluated our C&I portfolio by NAICS code and our CRE portfolio for concentrations of tenants and businesses in higher risk industries or for loans with higher LTVs. We also completed analyses on individual borrowers who may be higher risk. After updating this work, during the third quarter we significantly increased our Q-Factor for changes in the volume and severity of past due loans and other similar conditions. Our ALLL methodology, adjusted for the revised Q-Factor discussed above necessitated an ALLL of $16.9 million at September 30, 2020, an increase of 38% compared to our ALLL of $12.2 million at December 31, 2019. A provision for loan and lease losses of $1.1 million was recorded during the current quarter compared to $1.3 million in the prior quarter. There was no provision for loan and lease loss during the same quarter a year ago. Our ALLL as a percentage of gross loans was 1.40% as of September 30, 2020 compared to 1.19% as of September 30, 2019 and 1.33% as of June 30, 2020. Excluding SBA guaranteed PPP loans our ALLL as a percentage of gross loans was 1.62% as of September 30, 2020 compared to 1.54% as of June 30, 2020.

Management believes the Companys ALLL is adequate at September 30, 2020. 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 September 30, 2020, the recorded investment in loans classified as impaired totaled $12.4 million, with a corresponding specific reserve of $204 thousand compared to impaired loans of $17.7 million with a corresponding specific reserve of $335 thousand at September 30, 2019 and impaired loans of $11.1 million, with a corresponding specific reserve of $270 thousand at June 30, 2020. The increase in impaired loans during the current quarter was due to two commercial loans totaling $1.4 million that were placed on nonaccrual status during the third quarter of 2020.

TABLE 14TROUBLED DEBT RESTRUCTURINGS - UNAUDITED(dollars in thousands) At At March At December At September At June 30, 31, 31, September 30, 30, 2020 2020 2020 2019 2019Nonaccrual $ 2,063 $ 2,194 $ 1,611 $ 1,680 $ 1,746 Accruing 4,259 4,455 4,709 4,783 4,937 Total troubleddebt $ 6,322 $ 6,649 $ 6,320 $ 6,463 $ 6,683 restructurings Troubled debtrestructuringsas a 0.52 % 0.55 % 0.60 % 0.63 % 0.65 %percentage oftotal grossloans

There were no new troubled debt restructurings during the three months ended September 30, 2020. As of September 30, 2020, we had 92 restructured loans that qualified as troubled debt restructurings, of which 91 were performing according to their restructured terms.

Troubled Debt Restructuring Guidance

Financial institution regulators and the CARES Act have changed the treatment of short term loan modifications for borrowers impacted by COVID-19. The change provides that modifications made in response to COVID-19, to borrowers under certain circumstances, should not be considered a troubled debt restructuring.

We have responded to the needs of our borrowers in accordance with the CARES Act and regulatory guidance to grant short-term COVID-19 related loan modifications. These modified loans are not troubled debt restructurings and are not considered to be past due or non-performing. We have granted deferrals ranging from one to six months determined on a case-by-case basis considering the nature of the business and the impact of COVID-19. For some borrowers that where initially granted a deferral of less than 6 months, we have granted an additional deferral period on a case-by-case basis. Since March of 2020, we have granted 261 payment deferrals totaling $125.3 million. As of September 30, 2020 loans totaling $82.5 million have resumed making payments.

The following tables present approved loan deferrals that are still in effect at September 30, 2020. For the loans with payment deferrals at September 30, 2020, nine borrowers also received a PPP loan through our U.S. Small Business Administration (SBA) department.

TABLE 15aCOVID-19 LOAN DEFERRALS - UNAUDITED(dollars in thousands) Payments Scheduled to Resume In The Three Months Ended December 31, March 31, 2020 2021 # Amount # Amount # TotalLength of 1st deferral granted: 3 months 2 $ 1,748 ? $ ? 2 $ 1,7485 months 2 935 ? ? 2 9356 months 18 19,986 3 484 21 20,470Length of 2nd deferral granted: 2 months 1 2,873 ? ? 1 2,8733 months 7 6,865 1 2,033 8 8,898Total loan deferrals 30 32,407 4 2,517 34 34,924 Loans serviced by others ^(1) ? ? ? ? 114 3,694Total 60 $ 64,814 8 $ 5,034 182 $ 73,542^(1) Loans serviced by others are small residential mortgages and consumer homeimprovement loans, which are deferred on a short-term basis up to a maximum ofsix months.

TABLE 15bCOVID-19 LOAN DEFERRALS BY INDUSTRY - UNAUDITED(dollars in thousands) Payments Scheduled to Resume In The Three Months Ended December 31, March 31, 2020 2021Industry: # Amount # Amount # TotalHealth care and social assistance 6 $ 4,550 1 $ 12 7 $ 4,562Hotels, motels and bed-and-breakfast 3 9,986 ? ? 3 9,986innsOther services 1 231 1 2,033 2 2,264Restaurants, bars and caterers 2 1,605 ? ? 2 1,605Arts, entertainment and recreation 5 1,698 ? ? 5 1,698Other industries 13 14,337 2 472 15 14,809Total loan deferrals 30 32,407 4 2,517 34 34,924 Loans serviced by others ^(1) ? ? ? ? 114 3,694Total 60 $ 64,814 8 $ 5,034 182 $ 73,542^(1) Loans serviced by others are small residential mortgages and consumer homeimprovement loans, which are deferred on a short-term basis up to a maximum ofsix months.

The following table presents nonperforming assets at the dates indicated.

TABLE 16NONPERFORMING ASSETS - UNAUDITED(dollars in thousands) At At June At March At At September 30, 31, December September 30, 31, 30, 2020 2020 2020 2019 2019Total nonaccrual $ 8,098 $ 6,671 $ 5,243 $ 5,616 $ 12,796 loans90 days past due and ? ? 2 ? ? still accruingTotal nonperforming 8,098 6,671 5,245 5,616 12,796 loans Other real estate 8 8 8 35 58 owned ("OREO")Total nonperforming $ 8,106 $ 6,679 $ 5,253 $ 5,651 $ 12,854 assets Nonperforming loans 0.67 % 0.55 % 0.50 % 0.54 % 1.24 %to gross loansNonperforming assets 0.47 % 0.39 % 0.36 % 0.38 % 0.87 %to total assets

The following table summarizes when loans are projected to reprice by year and rate index as of September 30, 2020.

TABLE 17LOANS BY RATE INDEX AND PROJECTED REPRICING - UNAUDITED(dollars in thousands) At September 30, 2020 Years 6 Through Beyond Rate Index: Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 10 TotalFixed $ 151,140 $ 112,246 $ 80,366 $ 31,253 $ 28,809 $ 163,536 $ 22,862 $ 590,212Variable: Prime 84,620 4,712 7,187 6,788 7,724 1,412 ? 112,4435 Year 46,749 60,366 87,327 66,646 105,976 48,013 ? 415,077Treasury7 Year 3,252 609 4,764 5,631 368 13,560 ? 28,184Treasury1 Year LIBOR 21,748 ? ? ? ? ? ? 21,748Other Indexes 5,627 1,668 2,030 1,443 7,314 10,278 906 29,266Total variable 161,996 67,355 101,308 80,508 121,382 73,263 906 606,718 Nonaccrual 2,109 1,026 994 695 498 2,015 761 8,098Total $ 315,245 $ 180,627 $ 182,668 $ 112,456 $ 150,689 $ 238,814 $ 24,529 $ 1,205,028

For variable rate loans, the following table summarizes those that are at or above their floor rate, and those that do not possess a contractual floor rate.

TABLE 18LOAN FLOORS - UNAUDITED(dollars in thousands) At September 30, 2020 Loans At Loans Above Floor Rate Floor Rate TotalVariable rate loans with floors: Prime $ 58,674 $ 4,977 $ 63,6515 year Treasury 339,407 47,132 386,5397 Year Treasury 28,184 ? 28,1841 Year LIBOR ? 726 726Other Indexes 15,141 1,260 16,401 $ 441,406 $ 54,095 495,501 Variable rate loans without floors: Prime 48,7925 year Treasury 28,5381 Year LIBOR 21,022Other Indexes 12,865 111,217 Total accruing variable rate loans $ 606,718 Nonaccrual 8,098Total variable rate loans $ 614,816

TABLE 19UNAUDITED CONSOLIDATEDBALANCE SHEET(dollars in thousands, except per share data) At September 30, Change At June 30, 2020 2019 $ % 2020 Assets: Cash and due from $ 22,884 $ 32,505 $ (9,621 ) (30 ) % $ 29,630 banksInterest-bearingdeposits in other 104,999 56,099 48,900 87 % 126,132 banksTotal cash and cash 127,883 88,604 39,279 44 % 155,762 equivalents Securitiesavailable-for-sale, 337,032 272,341 64,691 24 % 280,200 at fair valueLoans, net ofdeferred fees and 1,205,028 1,035,062 169,966 16 % 1,204,737 costsAllowance for loan (16,873 ) (12,285 ) (4,588 ) (37 ) % (16,089 )and lease lossesNet loans 1,188,155 1,022,777 165,378 16 % 1,188,648 Premises and 15,210 16,084 (874 ) (5 ) % 15,466 equipment, netOther real estate 8 58 (50 ) (86 ) % 8 ownedLife insurance 24,086 23,576 510 2 % 23,968 Deferred tax asset, 2,571 4,818 (2,247 ) (47 ) % 2,645 netGoodwill 11,671 11,671 ? ? % 11,671 Other intangible 4,235 5,001 (766 ) (15 ) % 4,426 assets, netOther assets 29,037 27,497 1,540 6 % 29,102 Total assets $ 1,739,888 $ 1,472,427 $ 267,461 18 % $ 1,711,896 Liabilities andshareholders' equity:Demand - $ 542,060 $ 412,410 $ 129,650 31 % $ 521,751 noninterest-bearingDemand - 280,370 239,547 40,823 17 % 287,198 interest-bearingMoney market 403,785 317,120 86,665 27 % 405,322 Savings 151,016 137,441 13,575 10 % 142,389 Certificates of 140,900 155,621 (14,721 ) (9 ) % 137,647 depositTotal deposits 1,518,131 1,262,139 255,992 20 % 1,494,307 Term debt: Federal Home LoanBank of San 10,000 ? 10,000 100 % 10,000 FranciscoborrowingsOther borrowings 10,000 10,000 ? ? % 10,000 Unamortized debt (7 ) (55 ) 48 87 % (19 )issuance costsNet term debt 19,993 9,945 10,048 101 % 19,981 Junior subordinated 10,310 10,310 ? ? % 10,310 debenturesOther liabilities 18,104 18,396 (292 ) (2 ) % 17,743 Total liabilities 1,566,538 1,300,790 265,748 20 % 1,542,341 Shareholders' equity:Common stock 58,872 72,200 (13,328 ) (18 ) % 58,749 Retained earnings 107,154 97,100 10,054 10 % 103,658 Accumulated othercomprehensive 7,324 2,337 4,987 213 % 7,148 income, net of taxTotal shareholders' 173,350 171,637 1,713 1 % 169,555 equity Total liabilitiesand shareholders' $ 1,739,888 $ 1,472,427 $ 267,461 18 % $ 1,711,896 equity Totalinterest-earning $ 1,636,661 $ 1,360,184 $ 276,477 20 % $ 1,600,922 assetsShares outstanding 16,792 18,212 (1,420 ) (8 ) % 16,739 Book value per $ 10.32 $ 9.42 $ 0.90 10 % $ 10.13 share ^(1)Tangible book value $ 9.38 $ 8.51 $ 0.87 10 % $ 9.17 per share ^(1) ^(1) Book value per share is computed by dividing total shareholders? equity byshares outstanding. Tangible book value per share is computed by dividing totalshareholders? equity less goodwill and core deposit intangible, net by sharesoutstanding. Management believes that tangible book value per share ismeaningful because it is a measure that the Company and investors commonly useto assess capital adequacy.

TABLE 20UNAUDITEDINCOME STATEMENT(dollars in thousands, except per share data) For The Three Months Ended For The Nine Months Ended September 30, Change June 30, September 30, 2020 2019 $ % 2020 2020 2019Interest income: Interest and fees on $ 13,448 $ 13,013 $ 435 3 % $ 13,224 $ 39,010 $ 37,891loansInterest on taxable 1,284 1,609 (325 ) (20 ) % 1,329 4,195 5,106securitiesInterest on tax-exempt 457 271 186 69 % 423 1,151 986securitiesInterest oninterest-bearing 29 308 (279 ) (91 ) % 21 204 772deposits in other banksTotal interest income 15,218 15,201 17 ? % 14,997 44,560 44,755Interest expense: Interest on demand 71 117 (46 ) (39 ) % 85 256 372depositsInterest on money 289 451 (162 ) (36 ) % 317 1,009 1,120marketInterest on savings 74 131 (57 ) (44 ) % 95 287 365Interest on 420 491 (71 ) (14 ) % 467 1,351 1,478certificates of depositInterest on FederalHome Loan Bank of ? ? ? ? % 5 5 247San FranciscoborrowingsInterest on other 184 183 1 1 % 184 552 623borrowingsInterest on junior 50 106 (56 ) (53 ) % 61 201 329subordinated debenturesTotal interest expense 1,088 1,479 (391 ) (26 ) % 1,214 3,661 4,534Net interest income 14,130 13,722 408 3 % 13,783 40,899 40,221Provision for loan and 1,100 ? 1,100 100 % 1,300 5,250 ?lease lossesNet interest incomeafter provision 13,030 13,722 (692 ) (5 ) % 12,483 35,649 40,221for loan and leaselossesNoninterest income: Service charges on 142 177 (35 ) (20 ) % 152 463 532deposit accountsATM and point of sale 297 293 4 1 % 263 828 876feesPayroll and benefit 152 158 (6 ) (4 ) % 143 465 486processing feesLife insurance 125 126 (1 ) (1 ) % 148 396 410Gain on investment 258 12 246 2,050 % 140 482 137securities, netFederal Home Loan Bankof 109 131 (22 ) (17 ) % 36 275 376San Francisco dividends(Loss) gain on sale of ? ? ? ? % ? (23 ) 41OREOOther income 106 109 (3 ) (3 ) % 73 150 305Total noninterest 1,189 1,006 183 18 % 955 3,036 3,163income

TABLE 20 - CONTINUEDUNAUDITEDINCOME STATEMENT(dollars in thousands, except per share data) For The Three Months Ended For The Nine Months Ended September 30, Change June 30, September 30, 2020 2019 $ % 2020 2020 2019Noninterest expense: Salaries and related 5,126 5,005 121 2 % 4,965 15,978 15,880benefitsPremises and equipment 951 933 18 2 % 826 2,631 2,836Federal Deposit InsuranceCorporation 101 (104 ) 205 197 % 90 227 91insurance premiumData processing 581 582 (1 ) ? % 585 1,697 1,796Professional services 342 392 (50 ) (13 ) % 469 1,145 1,230Telecommunications 157 194 (37 ) (19 ) % 156 484 547Acquisition and merger ? (113 ) 113 100 % ? ? 2,193Other expenses 1,132 1,411 (279 ) (20 ) % 1,179 4,281 4,261Total noninterest expense 8,390 8,300 90 1 % 8,270 26,443 28,834Income before provision 5,829 6,428 (599 ) (9 ) % 5,168 12,242 14,550for income taxesProvision for income 1,500 1,786 (286 ) (16 ) % 1,321 3,150 3,958taxesNet income $ 4,329 $ 4,642 $ (313 ) (7 ) % $ 3,847 $ 9,092 $ 10,592 Earnings per share - $ 0.26 $ 0.26 $ ? ? % $ 0.23 $ 0.53 $ 0.59basicWeighted average shares - 16,660 18,130 (1,470 ) (8 ) % 16,660 17,004 17,918basicEarnings per share - $ 0.26 $ 0.26 $ ? ? % $ 0.23 $ 0.53 $ 0.59dilutedWeighted average shares - 16,696 18,196 (1,500 ) (8 ) % 16,689 17,044 17,981diluted

TABLE 21UNAUDITED CONDENSED CONSOLIDATEDQUARTERLY AVERAGE BALANCE SHEETS(dollars in thousands) For The Three Months Ended September June 30, March 31, December September 30, 31, 30, 2020 2020 2020 2019 2019Earning assets: Loans $ 1,209,277 $ 1,180,915 $ 1,033,689 $ 1,031,702 $ 1,029,534Taxable securities 228,045 211,195 237,405 245,487 238,601Tax-exempt 68,766 58,540 34,869 32,158 32,974securitiesInterest-bearingdeposits in other 95,348 72,507 47,135 81,099 58,897banksTotal earning 1,601,436 1,523,157 1,353,098 1,390,446 1,360,006assets Cash and due from 23,381 21,564 21,987 24,083 23,822banksPremises and 15,365 15,428 15,753 16,049 15,922equipment, netGoodwill 11,671 11,671 11,671 11,671 11,686Other intangible 4,318 4,508 4,701 4,890 5,083assets, netOther assets 47,945 50,499 46,809 45,504 45,925Total assets $ 1,704,116 $ 1,626,827 $ 1,454,019 $ 1,492,643 $ 1,462,444 Liabilities andshareholders' equity:Demand - $ 531,459 $ 497,636 $ 420,847 $ 428,420 $ 405,853noninterest-bearingDemand - 279,744 261,907 233,375 244,276 243,553interest-bearingMoney market 387,995 365,368 307,587 318,127 309,188Savings 146,074 138,500 135,504 138,155 138,296Certificates of 139,757 142,955 147,241 153,223 157,620depositTotal deposits 1,485,029 1,406,366 1,244,554 1,282,201 1,254,510 Federal Home LoanBank of San 10,000 16,044 220 ? ?FranciscoborrowingsOther borrowingsnet of unamortized 9,988 9,976 9,963 9,952 9,942debt issuance costsJunior subordinated 10,310 10,310 10,310 10,310 10,310debenturesOther liabilities 17,356 17,095 16,852 17,795 18,074Total liabilities 1,532,683 1,459,791 1,281,899 1,320,258 1,292,836 Shareholders' 171,433 167,036 172,120 172,385 169,608equityLiabilities &shareholders' $ 1,704,116 $ 1,626,827 $ 1,454,019 $ 1,492,643 $ 1,462,444equity

TABLE 22UNAUDITED CONDENSED CONSOLIDATEDYEAR TO DATE AVERAGE BALANCE SHEETS(dollars in thousands) For the Nine Months Ended For the Twelve Months Ended September September December 31, December 31, December 31, 30, 30, 2020 2019 2019 2018 2017Earning assets: Loans $ 1,141,542 $ 1,017,127 $ 1,020,801 $ 915,360 $ 818,119Taxable securities 225,558 247,139 246,723 207,407 165,333Tax-exempt 54,112 40,912 38,706 50,330 74,231securitiesInterest-bearingdeposits in other 71,749 44,995 54,095 47,038 66,872banksTotal earning 1,492,961 1,350,173 1,360,325 1,220,135 1,124,555assets Cash and due from 22,314 22,375 22,806 20,468 18,301banksPremises and 15,514 15,445 15,598 13,952 15,567equipment, netGoodwill 11,671 10,450 10,758 665 665Other intangible 4,508 4,780 4,807 1,252 1,471assets, netOther assets 48,418 43,253 43,818 32,369 37,692Total assets $ 1,595,386 $ 1,446,476 $ 1,458,112 $ 1,288,841 $ 1,198,251 Liabilities andshareholders' equity:Demand - $ 483,490 $ 391,208 $ 400,588 $ 332,197 $ 289,735noninterest-bearingDemand - 258,420 241,924 242,516 238,328 209,792interest-bearingMoney market 353,775 299,694 304,340 250,685 224,913Savings 140,048 136,254 136,733 109,025 111,376Certificates of 143,305 163,020 160,550 168,183 205,648depositTotal deposits 1,379,038 1,232,100 1,244,727 1,098,418 1,041,464 Federal Home LoanBank of San 8,759 12,894 9,644 22,466 302FranciscoborrowingsOther borrowingsnet of unamortized 9,976 11,213 10,895 15,143 17,981debt issuance costsJunior subordinated 10,310 10,310 10,310 10,310 10,310debenturesOther liabilities 17,102 17,927 17,894 12,286 12,293Total liabilities 1,425,185 1,284,444 1,293,470 1,158,623 1,082,350 Shareholders' 170,201 162,032 164,642 130,218 115,901equityLiabilities &shareholders' $ 1,595,386 $ 1,446,476 $ 1,458,112 $ 1,288,841 $ 1,198,251equity

About Bank of Commerce Holdings

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

Contact Information:

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

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

Andrea M. Newburn, Vice President and Senior Administrative Officer / Corporate SecretaryTelephone Direct (530) 722-395