Press Release BANK OF COMMERCE HOLDINGS (NASDAQ - BOCH)

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

Company Release - 1/18/2019 9:00 AM ET

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