##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 0-25135
 
  California
    
    94-2823865(State or jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)1901 Churn Creek RoadRedding, California
    
    96002(Address of principal executive offices)
    
    (Zip Code)
    Common Stock, No Par Value per share
    
    NASDAQ Global Market
 o þ
 o þ
  þ o
 o o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 o þ
     DOCUMENTS INCORPORATED BY REFERENCE




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##### 



Bank of Commerce Holdings Form 10-K
 Table of Contents
 Part I.Item 1. Business
    
    
    4Item 1A Risk Factors
    
    
    15Item 1B Unresolved Staff Comments
    
    
    26Item 2. Properties
    
    
    26Item 3. Legal Proceedings
    
    
    26Item 4. Not Used
    
    
    26Part II.Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
    
    
    27Item 6. Selected Consolidated Financial Data
    
    
    31Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32Item 7a. Quantitative and Qualitative Disclosures About Market Risk
    
    
    57Item 8. Consolidated Financial Statements and Supplementary Data
    
    
    60Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    115Item 9A(T). Controls and Procedures
    
    
    115Item 9B. Other Information
    
    
    116Part III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    117Item 11. Executive Compensation
    
    
    123Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
    
    
    137Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    139Item 14. Principal Accountant Fees and Services
    
    
    139Part IV.Item 15. Exhibits, Financial Statement Schedules
    
    
    141EX-23.1EX-31.1EX-31.2EX-32.1EX-99.1EX-99.2
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PART I
 Special Note Regarding Forward-Looking Statements
 This report includes forward-looking statements within the meaning of the Securities Exchange Act
of 1934 (Exchange Act) and the Private Securities Litigation Reform Act of 1995. These
statements are based on managements beliefs and assumptions, and on information available to
management as of the date of this document. Forward-looking statements include the information
concerning possible or assumed future results of operations of the Company set forth under the
heading Managements Discussion and Analysis of Financial Condition and Results of Operations.
Forward-looking statements also include statements in which words such as expects, anticipates,
intend, plan, believes, estimate, consider or similar expressions or conditional verbs
such as will, should, would and could are intended to identify such forward looking
statements. Forward-looking statements are not guarantees of future performance. They involve
risks, uncertainties and assumptions. The Companys actual future results and shareholder values
may differ materially from those anticipated and expressed in these forward-looking statements.
Many of the factors that will determine these results and values are beyond the Companys ability
to control or predict. Investors are cautioned not to put undue reliance on any forward-looking
statements. In addition, the Company does not have any intention and assumes no obligation to
update forward-looking statements after the date of the filing of this report, even if new
information, future events or other circumstances have made such statements incorrect or
misleading. Except as specifically noted herein all references to the Company refer to Bank of
Commerce Holdings, a California corporation, and its consolidated subsidiaries.
 The following factors, among others, could cause our actual results to differ materially from those
expressed in such forward-looking statements:
 
    
    The strength of the United States economy in general and the strength of the local
economies in which we conduct operations, the duration of current financial and economic
volatility and decline and actions taken by the United States Congress and governmental
agencies, including the United States Department of the Treasury (the Treasury), to
deal with challenges to the United States financial system;
    
    The effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal Reserve System,
or the Federal Reserve Board;
    
    Inflation, interest rate, market and monetary fluctuations, the risks presented by a
continued economic recession, which could adversely affect credit quality, collateral
values, investment values and liquidity;
    
    Changes in the financial performance and/or condition of our borrowers;
    
    Changes in consumer spending, borrowing and savings habits;
    
    Changes in the level of our nonperforming assets and charge-offs;
    
    Oversupply of inventory and continued deterioration in values of real estate in
California and the United States generally, both residential and commercial;
    
    Changes in securities markets, public debt markets and other capital markets;
    
    Possible other-than-temporary impairments of securities held by us;
    
    The timely development of competitive new products and services and the acceptance of
these products and services by new and existing customers;
    
    The willingness of customers to substitute competitors products and services for our
products and services;
    
    The impact of changes in financial services policies, laws and regulations, including
laws, regulations and policies concerning taxes, banking, securities and insurance, and
the application thereof by regulatory bodies;
    
    Technological changes could expose us to new risks, including potential systems
failures or fraud;
    
    The timing and effect of acquisitions we may make, if any, including, without
limitation, the failure to achieve the expected revenue growth and/or expense savings
from such acquisitions;
    
    Possible impairment of goodwill that has been recorded in connection with acquisitions
which may have a material adverse impact on our earnings;
    
    The effect of changes in accounting policies and practices, as may be adopted from
time-to-time by bank regulatory agencies, the Securities and Exchange Commission (the
SEC), the Public Company Accounting Oversight Board, the Financial Accounting Standards
Board or other accounting standards setters;
    
    The impact of current governmental efforts to restructure the United States financial
regulatory system, including changes in the scope and cost of FDIC insurance and other
coverages and changes in the Treasurys Capital Purchase Program;
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
    
    Ability to attract deposits and other sources of liquidity at acceptable costs;
    
    Changes in the competitive environment among financial and bank holding companies and
other financial service providers;
    
    The loss of critical personnel and the challenge of hiring qualified personnel at
reasonable compensation levels;
    
    Geopolitical conditions, including acts or threats of war or terrorism, actions taken
by the United States or other governments in response to acts or threats of war or
terrorism and/or military conflicts, which could impact business and economic conditions
in the United States and abroad;
    
    Unanticipated regulatory or judicial proceedings; and
    
    Our ability to manage the risks involved in the foregoing.
 If our assumptions regarding one or more of the factors affecting our forward-looking information
and statements proves incorrect, then our actual results, performance or achievements could differ
materially from those expressed in, or implied by, forward-looking information and statements
contained in this prospectus and in the information incorporated by reference in this prospectus.
Therefore, we caution you not to place undue reliance on our forward-looking information and
statements. We will not update the forward-looking statements to reflect actual results or changes
in the factors affecting the forward-looking statements.
 Forward-looking statements should not be viewed as predictions, and should not be the primary basis
upon which investors evaluate us. Any investor in our common stock should consider all risks and
uncertainties discussed in BUSINESS RISK FACTORS and in the MD&A.
 
 ITEM 1.
    
    BUSINESS
 tm tm tm tm
 ï Bank of Choice tm
 tm tm
  4




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Utilize the Strength of Our Management Team.
 Leverage Our Existing Foundation for Additional Growth
 Maintain Local Decision-Making and Accountability.
 Focus on Asset Quality and Strong Underwriting.
 5




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Build a Stable Core Deposit Base.
  General
 Parent Bank Holding Company.
 Subsidiary Bank.
 Nonbank Subsidiary.
 Parent Holding Company Activities
 Financial in Nature Requirement.
   6




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Principal Markets
  
 Principal Products and Services
      7




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Government Supervision and Regulation
 The Holding Company and Bank are subject to extensive federal and state supervision and regulation.
The following discussion describes the elements of the regulatory framework applicable to
financial holding companies and banks and specific information about the Holding Company and its
subsidiaries. Federal regulation of banks, bank holding companies and financial holding companies
is intended primarily for the protection of depositors and the Deposit Insurance Fund rather than
for the protection of shareholders and creditors. The following discussion of laws and regulations
is only a summary. This discussion is qualified in its entirety by reference to such laws and
regulations.
 Dividend Restrictions
   8




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Interstate Banking
  Capital Standards
   9




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December 31, 2009Actual
    
    
    Well Capitalized
    
    
    Minimum CapitalCapital
    
    
    Ratio
    
    
    Requirement
    
    
    RequirementThe CompanyLeverage
    
    $
    79,421,930
    
    
    
    9.89
    %
    
    
    n/a
    
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    79,421,930
    
    
    
    12.06
    %
    
    
    6.0
    %
    
    
    4.0
    %Total Risk-Based
    
    
    87,697,164
    
    
    
    13.31
    %
    
    
    10.0
    %
    
    
    8.0
    %Redding Bank of
CommerceLeverage
    
    $
    76,262,200
    
    
    
    9.37
    %
    
    
    5.0
    %
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    76,262,200
    
    
    
    11.57
    %
    
    
    6.0
    %
    
    
    4.0
    %Total Risk-Based
    
    
    84,542,883
    
    
    
    12.83
    %
    
    
    10.00
    %
    
    
    8.0
    %
     Prompt Corrective Action and Other Enforcement Mechanisms
    10




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Fiscal and Monetary Policies
  Privacy Provisions of the Gramm-Leach-Bliley Act
  Sarbanes-Oxley Act of 2002
  Patriot Act and Anti-Money Laundering
  Economic Emergency Stabilization Act of 2008
  11




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Temporary Liquidity Guarantee Program
    Federal Deposit Insurance Premiums
   12




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Future Legislation
  State Regulation and Supervision
   Safety and Soundness Standards
   Community Reinvestment Act and Fair Lending Developments
  Enforcement Powers
  13




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Competition
    Employees
  Available Information
 www.sec.gov
 14




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ITEM 1A.
    
    RISK FACTORS
 Our business is subject to various economic risks that could adversely impact our results of
operations and financial condition.
   
    
    Loan delinquencies may further increase causing additional increases in our provision
and allowance for loan losses;
    
    Financial sector regulators may adopt more restrictive practices or interpretations of
existing regulations, or adopt new regulations;
    
    Collateral for loans made by the Bank, especially real estate related, may continue to
decline in value, which in turn could reduce a clients borrowing power, and reduce the
value of assets and collateral associated with our loans held for investment;
    
    Consumer confidence levels may decline and cause adverse changes in payment patterns,
resulting in increased delinquencies and default rates on loans and other credit facilities
and decreased demand for our products and services; and
    
    Performance of the underlying loans in the private label mortgage backed securities we
hold may continue to deteriorate as the recession continues, potentially causing
other-than-temporary impairment markdowns to our investment portfolio.
 Nonperforming assets take significant time to resolve and adversely affect our
results of operations and financial condition.
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We have a concentration risk in real estate related loans.
  Monitoring and servicing our Individual Tax Identification Number (ITIN) residential mortgage
loans could prove more costly and time consuming than previously modeled.
  Future loan losses may exceed the allowance for loan losses.
  Defaults may negatively impact us.
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Interest rate fluctuations, which are out of our control, could harm profitability.
  Changes in the fair value of our securities may reduce our shareholders equity and net income.
   Conditions in the financial markets may limit our access to additional funding to meet our
liquidity needs.
  The condition of other financial institutions could negatively affect us.
  17




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Changes in laws, government regulation and monetary policy may have a material effect on our
results of operations.
     Because of our participation in the Troubled Asset Relief Program we are subject to several
restrictions including, without limitation, restrictions on our ability to declare or pay dividends
and repurchase our shares as well as restrictions on compensation paid to our executives.
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Our Series A Preferred Stock diminishes the net income available to our common shareholders and
earnings per common share.
   Our holders of the Series A Preferred Stock have certain voting rights that may adversely
affect our common shareholders, and the holders of the Series A Preferred Stock may have interests
different from our common shareholders.
  
    
    Any authorization or issuance of shares ranking senior to the Series A Preferred Stock;
    
    Any amendments to the rights of the Series A Preferred Stock so as to adversely affect
the rights, preferences, privileges or voting power of the Series A Preferred Stock; or
    
    Consummation of any merger, share exchange or similar transaction unless the shares of
Series A Preferred Stock remain outstanding, or if we are not the surviving entity in such
transaction, are converted into or exchanged for preference securities of the surviving
entity and the shares of Series A Preferred Stock remaining outstanding or such preference
securities have the rights, preferences, privileges and voting power of the Series A
Preferred Stock.
  We rely heavily on our management team and the loss of key officers may adversely affect
operations.
    19




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Internal control systems could fail to detect certain events.
  Our operations could be interrupted if third party service providers experience difficulty,
terminate their services or fail to comply with banking regulations.
  Confidential customer information transmitted through the Banks online banking service is
vulnerable to security breaches and computer viruses, which could expose the Bank to litigation and
adversely affect its reputation and ability to generate deposits.
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Potential acquisitions may disrupt our business and dilute shareholder value.
    
    
    Potential exposure to unknown or contingent liabilities of the target company;
    
    Exposure to potential asset quality issues of the target company;
    
    Difficulty and expense of integrating the operations and personnel of the target
company;
    
    Potential disruption to our business;
    
    The possible loss of key employees and customers of the target company;
    
    Difficulty in estimating the value of the target company; and
    
    Potential changes in banking or tax laws or regulations that may affect the target
company.
 We are subject to extensive regulation which could adversely affect our business.
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Higher FDIC deposit insurance premiums and assessments could adversely affect our financial
condition.
  Shares eligible for future sale could have a dilutive effect.
  Changes in accounting standards may impact how we report our financial condition and results of
operations.
  A natural disaster or recurring energy shortage, especially in California, could harm our business.
  The price of our common stock may fluctuate significantly, and this may make it difficult for you
to resell shares of common stock owned by you at times or at prices you find attractive.
  
    
    Actual or anticipated variations in quarterly results of operations;
    
    Recommendations by securities analysts;
    
    Operating and stock price performance of other companies that investors deem comparable
to us;
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
    
    News reports relating to trends, concerns and other issues in the financial services
industry, including the failures of other financial institutions in the current economic
downturn;
    
    Perceptions in the marketplace regarding us and/or our competitors;
    
    Public sentiments toward the financial services and banking industry generally;
    
    New technology used, or services offered, by competitors;
    
    Significant acquisitions or business combinations, strategic partnerships, joint
ventures or capital commitments by or involving us or our competitors;
    
    Failure to integrate acquisitions or realize anticipated benefits from acquisitions;
    
    Changes in government regulations; and
    
    Geopolitical conditions such as acts or threats of terrorism or military conflicts.
  Our profitability measures could be adversely affected if we are unable to effectively deploy the
capital raised in our latest offering.
   Only a limited trading market exists for our common stock, which could lead to significant price
volatility.
  Anti-takeover provisions in our articles of incorporation could make a third party
acquisition of us difficult.
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There may be future sales or other dilutions of our equity which may adversely affect the market
price of our common stock.
   The holders of our preferred stock and trust preferred securities have rights that are senior to
those of our holders of common stock and that may impact our ability to pay dividends on our common
stock to our common shareholders and reduce net income available to our common shareholders.
   Our future ability to pay dividends and repurchase stock is subject to restrictions.
  24




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Potential Volatility of Deposits
   Negative Publicity could Damage our Reputation
  Mortgage banking interest rate and market risk
     Mortgage banking revenue can be volatile from quarter to quarter
  25




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ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
     
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    NOT USED
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PART II
 
 Item 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Sales Price Per ShareQuarter Ended:
    
    High
    
    
    Low
    
    
    VolumeMarch 31, 2009
    
    $
    5.05
    
    
    $
    3.90
    
    
    
    123,989June 30, 2009
    
    $
    6.52
    
    
    $
    4.08
    
    
    
    74,922September 30, 2009
    
    $
    6.30
    
    
    $
    4.50
    
    
    
    129,689December 31, 2009
    
    $
    5.99
    
    
    $
    5.10
    
    
    
    156,391March 31, 2008
    
    $
    8.59
    
    
    $
    6.00
    
    
    
    211,299June 30, 2008
    
    $
    8.34
    
    
    $
    6.10
    
    
    
    71,390September 30, 2008
    
    $
    6.95
    
    
    $
    5.50
    
    
    
    89,184December 31, 2008
    
    $
    6.60
    
    
    $
    3.92
    
    
    
    135,589
  Dividends
    27




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Securities Authorized for Issuance Under Equity Compensation Plans
  Number of securitiesremaining available forNumber of securities to be
    
    
    Weighted average exercise
    
    
    future issuance underissued upon exercise of
    
    
    price of outstanding
    
    
    equity compensation plansoutstanding options,
    
    
    options, warrants and
    
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    
    rights
    
    
    reflected in column (a))Equity
compensation plans approved by
security holders
    
    
    282,080
    
    
    $
    8.46
    
    
    
    572,500Equity
compensation plans not approved
by security holders
    
    None
    
    
    None
    
    
    NoneTotal
    
    
    282,080
    
    
    $
    8.46
    
    
    
    572,500
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Stock Performance Graph
  Bank of Commerce Holdings
Five  Year Performance Graph
 
 Stock Performance Graph(1)
 SNL Securities LC (C) 2009
    
    (888) 275-2822
 
 (1)
    
    Assumes $100 invested on December 31, 2005, in the Companys Common Stock, the NASDAQ, and the
SNL Securities Index. The model assumes reinvestment of dividends. Source: SNL Securities (share
prices for the Companys Common Stock was furnished to SNL Securities through the NASDAQ). Sales of Unregistered Securities
   29




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Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  (c)
    
    
    (d)Total Number of
    
    
    Maximum NumberShares Purchased As
    
    
    of Shares That May(a)
    
    
    (b)
    
    
    Part of Publicly
    
    
    Yet be PurchasedTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Under the Plans orPeriod
    
    Shares Purchased
    
    
    Per Share
    
    
    Programs
    
    
    ProgramsTotal 2009
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
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Item 6.
    
    SELECTED FINANCIAL DATA
  In Thousands (Except Ratios and Per Share Data)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Statements of IncomeTotal Interest Income
    
    $
    41,329
    
    
    $
    37,690
    
    
    $
    41,128
    
    
    $
    37,610
    
    
    $
    27,864Net Interest Income
    
    
    28,994
    
    
    
    21,348
    
    
    
    22,012
    
    
    
    22,035
    
    
    
    20,238Provision for Loan Losses
    
    
    9,475
    
    
    
    6,520
    
    
    
    3,291
    
    
    
    226
    
    
    
    448Total Noninterest Income
    
    
    10,063
    
    
    
    2,623
    
    
    
    4,535
    
    
    
    1,928
    
    
    
    2,124Total Noninterest Expense
    
    
    20,624
    
    
    
    15,296
    
    
    
    15,744
    
    
    
    13,333
    
    
    
    11,749Total Revenues
    
    
    51,392
    
    
    
    40,313
    
    
    
    45,753
    
    
    
    39,539
    
    
    
    29,988Net Income
    
    $
    6,005
    
    
    $
    2,194
    
    
    $
    6,107
    
    
    $
    6,568
    
    
    $
    6,278Balance SheetsTotal Assets
    
    $
    813,406
    
    
    $
    774,214
    
    
    $
    618,327
    
    
    $
    583,442
    
    
    $
    511,644Total Gross Loans
    
    
    601,439
    
    
    
    527,463
    
    
    
    494,748
    
    
    
    414,191
    
    
    
    368,041Allowance for Loan Losses
    
    
    11,207
    
    
    
    8,429
    
    
    
    8,233
    
    
    
    4,904
    
    
    
    4,316Total Deposits
    
    
    640,464
    
    
    
    555,282
    
    
    
    473,631
    
    
    
    439,407
    
    
    
    372,116Shareholders Equity
    
    $
    68,807
    
    
    $
    62,578
    
    
    $
    46,164
    
    
    $
    43,916
    
    
    $
    39,138Performance Ratios 1Return on Average Assets 2
    
    
    0.75
    %
    
    
    0.33
    %
    
    
    1.04
    %
    
    
    1.20
    %
    
    
    1.34
    %Return on Average Shareholders Equity 3
    
    
    9.01
    %
    
    
    4.99
    %
    
    
    13.39
    %
    
    
    15.59
    %
    
    
    18.35
    %Dividend Payout
    
    
    34.81
    %
    
    
    127.04
    %
    
    
    46.47
    %
    
    
    40.36
    %
    
    
    35.74
    %Average Equity to Average Assets
    
    
    8.28
    %
    
    
    8.91
    %
    
    
    9.43
    %
    
    
    9.49
    %
    
    
    9.43
    %Tier 1 Risk-Based Capital  Holding Company 4
    
    
    12.06
    %
    
    
    11.58
    %
    
    
    9.97
    %
    
    
    11.42
    %
    
    
    12.08
    %Total Risk-Based Capital  Holding Company
    
    
    13.31
    %
    
    
    12.84
    %
    
    
    11.22
    %
    
    
    12.54
    %
    
    
    13.11
    %Net Interest Margin 5
    
    
    3.94
    %
    
    
    3.47
    %
    
    
    3.98
    %
    
    
    4.26
    %
    
    
    4.59
    %Average Earning Assets to Total Average Assets
    
    
    91.42
    %
    
    
    92.86
    %
    
    
    93.74
    %
    
    
    94.20
    %
    
    
    94.04
    %Nonperforming Assets to Total Assets 6
    
    
    2.27
    %
    
    
    2.98
    %
    
    
    2.01
    %
    
    
    0.00
    %
    
    
    0.08
    %Net Charge-offs to Average Loans
    
    
    1.14
    %
    
    
    1.22
    %
    
    
    .00
    %
    
    
    -.09
    %
    
    
    0.00
    %Allowance for Loan Losses to Total Loans
    
    
    1.86
    %
    
    
    1.60
    %
    
    
    1.66
    %
    
    
    1.18
    %
    
    
    1.17
    %Nonperforming Loans to Allowance for Loan Losses
    
    
    94.16
    %
    
    
    239.10
    %
    
    
    150.72
    %
    
    
    0.00
    %
    
    
    9.15
    %Efficiency Ratio 7
    
    
    52.80
    %
    
    
    63.81
    %
    
    
    59.31
    %
    
    
    55.64
    %
    
    
    52.54
    %Share DataAverage Common Shares Outstanding  basic
    
    
    8,711
    
    
    
    8,713
    
    
    
    8,858
    
    
    
    8,760
    
    
    
    8,600Average Common Shares Outstanding  diluted
    
    
    8,711
    
    
    
    8,724
    
    
    
    8,938
    
    
    
    8,932
    
    
    
    8,845Book Value Per Common Share
    
    $
    5.72
    
    
    $
    5.23
    
    
    $
    5.27
    
    
    $
    4.96
    
    
    $
    4.52Basic Earnings Per Common Share
    
    $
    0.58
    
    
    $
    0.25
    
    
    $
    0.69
    
    
    $
    0.75
    
    
    $
    0.73Diluted Earnings Per Common Share
    
    $
    0.58
    
    
    $
    0.25
    
    
    $
    0.68
    
    
    $
    0.74
    
    
    $
    0.71Cash Dividends Per Common Share
    
    $
    0.24
    
    
    $
    0.32
    
    
    $
    0.33
    
    
    $
    0.29
    
    
    $
    0.26
 
 1
    
    Regulatory Capital Ratios and Asset Quality Ratios are end of period ratios. With
the exception of end of period ratios, all ratios are based on average daily balances during the
indicated period.2
    
    Return on average assets is net income divided by average total assets.3
    
    Return on average equity is net income divided by average shareholders equity.4
    
    Regulatory capital ratios are defined in detail in the table on page 545
    
    Net interest margin equals net interest income as a percent of average
interest-earning assets.6
    
    Non-performing assets includes all nonperforming loans (nonaccrual loans, loans 90
days past due and still accruing interest and restructured loans) and real estate acquired by
foreclosure.7
    
    The efficiency ratio is calculated by dividing non-interest expense by the sum of net
interest income and noninterest income. The efficiency ratio measures how the Company spends in
order to generate each dollar of net revenue. 31




---



##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
 The following discussion should be read in conjunction with the Consolidated Financial
Statements of the Company and related notes thereto appearing elsewhere in this report. This report
includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the
Exchange Act) and the Private Securities Litigation Reform Act of 1995. These statements are not
guarantees of future performance and involve certain risks. These statements are based on
managements beliefs and assumptions, and on information available to management as of the date of
this document. Forward-looking statements include the information concerning possible or assumed
future results of operations of the Company set forth under the heading Managements Discussion
and Analysis of Financial Condition and Results of Operations. Forward-looking statements also
include statements in which words such as expects, anticipates, intend, plan, believes,
estimate, consider or similar expressions or conditional verbs such as will should would
and could are intended to identify such forward looking statements. The Companys actual future
results and shareholder values may differ materially from those anticipated and expressed in these
forward-looking statements. Many of the factors that will determine these results and values,
including those discussed under the heading Risk Factors, are beyond the Companys ability to
control or predict. Investors are cautioned not to put undue reliance on any forward-looking
statements. In addition, the Company does not have any intention to and assumes no obligation to
update forward-looking statements after the date of the filing of this report, even if new
information, future events or other circumstances have made such statements incorrect or
misleading. Except as specifically noted herein all referenced to the Company refer to Bank of
Commerce Holdings, a California corporation, and its consolidated subsidiaries.
 The following factors, among others, could cause our actual results to differ materially from those
expressed in such forward-looking statements:
 
    
    The strength of the United States economy in general and the strength of the local
economies in which we conduct operations, the duration of current financial and economic
volatility and decline and actions taken by the United States Congress and governmental
agencies, including the United States Department of the Treasury (the Treasury), to
deal with challenges to the United States financial system;
    
    The effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal Reserve System,
or the Federal Reserve Board;
    
    Inflation, interest rate, market and monetary fluctuations, the risks presented by a
continued economic recession, which could adversely affect credit quality, collateral
values, investment values and liquidity;
    
    Changes in the financial performance and/or condition of our borrowers;
    
    Changes in consumer spending, borrowing and savings habits;
    
    Changes in the level of our nonperforming assets and charge-offs;
    
    Oversupply of inventory and continued deterioration in values of real estate in
California and the United States generally, both residential and commercial;
    
    Changes in securities markets, public debt markets and other capital markets;
    
    Possible other-than-temporary impairments of securities held by us;
    
    The timely development of competitive new products and services and the acceptance of
these products and services by new and existing customers;
    
    The willingness of customers to substitute competitors products and services for our
products and services;
    
    The impact of changes in financial services policies, laws and regulations, including
laws, regulations and policies concerning taxes, banking, securities and insurance, and
the application thereof by regulatory bodies;
    
    Technological changes could expose us to new risks, including potential systems
failures or fraud;
    
    The timing and effect of acquisitions we may make, if any, including, without
limitation, the failure to achieve the expected revenue growth and/or expense savings
from such acquisitions;
    
    Possible impairment of goodwill that has been recorded in connection with acquisitions
which may have a material adverse impact on our earnings;
    
    The effect of changes in accounting policies and practices, as may be adopted from
time-to-time by bank regulatory agencies, the Securities and Exchange Commission (the
SEC), the Public Company Accounting Oversight Board, the Financial Accounting Standards
Board or other accounting standards setters;
    
    The impact of current governmental efforts to restructure the United States financial
regulatory system, including changes in the scope and cost of FDIC insurance and other
coverages and changes in the Treasurys Capital Purchase Program;
 32




---



##### Table of Contents




    
    Ability to attract deposits and other sources of liquidity at acceptable costs;
    
    Changes in the competitive environment among financial and bank holding companies and
other financial service providers;
    
    The loss of critical personnel and the challenge of hiring qualified personnel at
reasonable compensation levels;
    
    Geopolitical conditions, including acts or threats of war or terrorism, actions taken
by the United States or other governments in response to acts or threats of war or
terrorism and/or military conflicts, which could impact business and economic conditions
in the United States and abroad;
    
    Unanticipated regulatory or judicial proceedings; and
    
    Our ability to manage the risks involved in the foregoing.
 If our assumptions regarding one or more of the factors affecting our forward-looking information
and statements proves incorrect, then our actual results, performance or achievements could differ
materially from those expressed in, or implied by, forward-looking information and statements
contained in this prospectus and in the information incorporated by reference in this prospectus.
Therefore, we caution you not to place undue reliance on our forward-looking information and
statements. We will not update the forward-looking statements to reflect actual results or changes
in the factors affecting the forward-looking statements.
 2009 Highlights
  Overview
    33




---



##### Table of Contents



Risk Management
 Overview
  Board Committees
  
    
    TheLoan Committee reviews credit risks and the adequacy of the
allowance for loan and lease losses.
 
    
    TheAsset/Liability Management Committee (ALCO) reviews liquidity
and market risks.
 
    
    TheAudit and Qualified Legal Compliance Committee reviews the
scope and coverage of internal and external audit activities; and
 
    
    TheNominating and Corporate Governance Committee evaluates
corporate governance structure, charters, committee performance and acts in best interests of
the corporation and its shareholders with regard to the appointment of director nominees.
  Senior Leadership Committees
  
    
    The Senior Leadership Committee establishes short and long-term strategies and operating
plans. The committee establishes performance measures and reviews performance to plan on a
monthly basis:
 
    
    The Credit Round Table Committee recommends corporate credit administration practices and
limits including industry concentration limits, approval requirements, and exceptions:
 
    
    The Technology Steering Committee establishes technological strategies, makes technology
investment decisions, and manages the implementation process:
 
    
    The ALCO Round Table Committee establishes and monitors liquidity ranges, pricing,
maturities, investment goals, and interest spread on balance sheet accounts: and
 34




---



##### Table of Contents




    
    The SOX 404 Compliance Committee has established the master plan for full documentation of
the Companys internal controls and compliance with Section 404 of the Sarbanes-Oxley Act of
2002.
 Risk Management Controls
  Liquidity Risk Management
 Liquidity Risk
       Other Borrowings
  35




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Securities sold under
agreements to repurchase
with weighted average
interest rates of 0.49%,
0.62% and 2.84% at
December 31, 2009, 2008
and 2007, respectively
    
    $
    9,620,867
    
    
    $
    13,853,255
    
    
    $
    15,513,211Federal Home Loan Bank
borrowings with weighted
average interest rates
of 0.85%, 2.41% and
4.30% at December 31,
2009, 2008 and 2007,
respectively
    
    
    70,000,000
    
    
    
    120,000,000
    
    
    
    60,000,000Total Other Borrowings
    
    $
    79,620,867
    
    
    $
    133,853,255
    
    
    $
    75,513,211
 2009
    
    
    2008
    
    
    2007Securities sold under agreements to repurchase:Maximum outstanding at any month end
    
    $
    12,359,119
    
    
    $
    14,581,881
    
    
    $
    46,417,358Average balance during the year
    
    
    11,006,007
    
    
    
    13,038,870
    
    
    
    32,237,000Weighted average interest rate during year
    
    
    0.46
    %
    
    
    1.32
    %
    
    
    3.65
    %Federal Home Loan Bank borrowings:Maximum outstanding at any month end
    
    $
    130,000,000
    
    
    $
    120,000,000
    
    
    $
    60,000,000Average Balance during the year
    
    
    103,317,808
    
    
    
    83,048,645
    
    
    
    46,630,462Weighted average interest rate during year
    
    
    1.93
    %
    
    
    3.40
    %
    
    
    5.20
    %
 Credit Risk Management
  Commercial portfolio credit risk management
  Real estate portfolio credit risk management
  36




---



##### Table of Contents



Concentrations of credit risk
  Nonperforming assets
  Allowance for loan and lease losses (ALLL)
     37




---



##### Table of Contents



Years Ended December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Beginning Balance:
    
    $
    8,429
    
    
    $
    8,233
    
    
    $
    4,904
    
    
    $
    4,316
    
    
    $
    3,866
    
    
    $
    3,675Provision for loan losses
    
    
    9,475
    
    
    
    6,520
    
    
    
    3,291
    
    
    
    226
    
    
    
    448
    
    
    
    554Charge-offs:Commercial & Financial
    
    
    (2,518
    )
    
    
    (1,007
    )
    
    
    (0
    )
    
    
    (274
    )
    
    
    (83
    )
    
    
    (367
    )Real Estate
    
    
    (4,339
    )
    
    
    (5,322
    )
    
    
    (0
    )
    
    
    (0
    )
    
    
    (0
    )
    
    
    (0
    )Other
    
    
    (16
    )
    
    
    (0
    )
    
    
    (0
    )
    
    
    (25
    )
    
    
    (10
    )
    
    
    (1
    )Total Charge-offs
    
    
    (6,873
    )
    
    
    (6,329
    )
    
    
    (0
    )
    
    
    (299
    )
    
    
    (93
    )
    
    
    (368
    )Recoveries:Commercial & Financial
    
    
    170
    
    
    
    0
    
    
    
    26
    
    
    
    655
    
    
    
    93
    
    
    
    2Real Estate
    
    
    0
    
    
    
    5
    
    
    
    12
    
    
    
    0
    
    
    
    0
    
    
    
    0Other
    
    
    4
    
    
    
    0
    
    
    
    0
    
    
    
    6
    
    
    
    2
    
    
    
    3Total Recoveries
    
    
    174
    
    
    
    5
    
    
    
    38
    
    
    
    661
    
    
    
    95
    
    
    
    5Net (Charge-offs) / Recoveries
    
    
    (6,699
    )
    
    
    (6,324
    )
    
    
    38
    
    
    
    362
    
    
    
    2
    
    
    
    (363
    )Ending Balance
    
    $
    11,207
    
    
    $
    8,429
    
    
    $
    8,233
    
    
    $
    4,904
    
    
    $
    4,316
    
    
    $
    3,866Allowance for loan losses to
total loans
    
    
    1.86
    %
    
    
    1.60
    %
    
    
    1.66
    %
    
    
    1.18
    %
    
    
    1.17
    %
    
    
    1.20
    %Net Charge-offs to average loans
    
    
    1.14
    %
    
    
    1.22
    %
    
    
    .00
    %
    
    
    -.09
    %
    
    
    .00
    %
    
    
    .12
    %
   38




---



##### Table of Contents



Dec. 31, 2009
    
    
    Dec. 31, 2008
    
    
    Dec. 31, 2007
    
    
    Dec. 31, 2006
    
    
    Dec. 31, 2005Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    ofcategory
    
    
    
    
    
    
    category
    
    
    
    
    
    
    category
    
    
    
    
    
    
    category
    
    
    
    
    
    
    categoryAmount
    
    
    to total
    
    
    Amount
    
    
    to total
    
    
    Amount
    
    
    to total
    
    
    Amount
    
    
    to total
    
    
    Amount
    
    
    to total(Dollars in thousands)
    
    ($)
    
    
    loans
    
    
    ($)
    
    
    loans
    
    
    ($)
    
    
    loans
    
    
    ($)
    
    
    loans
    
    
    ($)
    
    
    loansBalance at end of
period applicable to:Commercial and
Financial
    
    $
    5,305
    
    
    
    47.34
    %
    
    $
    3,415
    
    
    
    31.11
    %
    
    $
    1,722
    
    
    
    35.11
    %
    
    $
    2,033
    
    
    
    30.36
    %
    
    $
    1,900
    
    
    
    30.76
    %Commercial Real Estate
    
    $
    2,348
    
    
    
    20.95
    %
    
    $
    2,900
    
    
    
    41.31
    %
    
    $
    1,512
    
    
    
    35.37
    %
    
    $
    1,364
    
    
    
    41.62
    %
    
    $
    1,375
    
    
    
    41.11
    %Construction and
Development
    
    $
    1,188
    
    
    
    10.60
    %
    
    $
    1,913
    
    
    
    15.97
    %
    
    $
    4,594
    
    
    
    21.62
    %
    
    $
    1,244
    
    
    
    26.73
    %
    
    $
    936
    
    
    
    27.57
    %Installment Loans
    
    $
    1,158
    
    
    
    10.33
    %
    
    $
    60
    
    
    
    0.03
    %
    
    $
    44
    
    
    
    0.05
    %
    
    $
    28
    
    
    
    0.23
    %
    
    $
    28
    
    
    
    0.53
    %Other Loans
    
    $
    936
    
    
    
    8.35
    %
    
    $
    116
    
    
    
    0.17
    %
    
    $
    56
    
    
    
    0.25
    %
    
    $
    41
    
    
    
    0.05
    %
    
    $
    0
    
    
    
    0.00
    %Unallocated
    
    $
    272
    
    
    
    2.43
    %
    
    $
    25
    
    
    
    11.41
    %
    
    $
    305
    
    
    
    7.60
    %
    
    $
    194
    
    
    
    1.01
    %
    
    $
    77
    
    
    
    0.03
    %Total Allowance for
loan and lease losses
    
    $
    11,207
    
    
    
    100.00
    %
    
    $
    8,429
    
    
    
    100.00
    %
    
    $
    8,233
    
    
    
    100.00
    %
    
    $
    4,904
    
    
    
    100.00
    %
    
    $
    4,316
    
    
    
    100.00
    %
 Market Risk Management
 General
   Securities Portfolio
 available-for-sale held-to-maturity held-to-maturity available-for-sale
 39




---



##### Table of Contents



Operational Risk Management
  Critical Accounting Policies
 General
  Valuation of Investments and Impairment of Securities
    40




---



##### Table of Contents



Allowance for Loan and Lease Losses (ALLL)
    Stock-Based Compensation
   41




---



##### Table of Contents



Revenue recognition
  Income Taxes
  Mortgages Held for Sale
  Derivative Loan Commitments
  42




---



##### Table of Contents



Financial Highlights  Results of Operations
  Key Financial Ratios
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005ProfitabilityReturn on average assets
    
    
    0.75
    %
    
    
    0.33
    %
    
    
    1.04
    %
    
    
    1.20
    %
    
    
    1.34
    %Return on average equity
    
    
    9.01
    %
    
    
    4.99
    %
    
    
    13.39
    %
    
    
    15.59
    %
    
    
    18.35
    %Average earning assets to total average assets
    
    
    91.42
    %
    
    
    92.86
    %
    
    
    93.74
    %
    
    
    94.20
    %
    
    
    94.04
    %Interest MarginNet interest margin
    
    
    3.94
    %
    
    
    3.47
    %
    
    
    3.98
    %
    
    
    4.26
    %
    
    
    4.59
    %Asset QualityAllowance for loan losses to total loans
    
    
    1.86
    %
    
    
    1.60
    %
    
    
    1.66
    %
    
    
    1.18
    %
    
    
    1.17
    %Nonperforming assets to total assets
    
    
    2.27
    %
    
    
    2.98
    %
    
    
    2.01
    %
    
    
    0.00
    %
    
    
    0.08
    %Net charge-offs to average loans
    
    
    1.14
    %
    
    
    1.22
    %
    
    
    0.00
    %
    
    
    -0.09
    %
    
    
    0.00
    %LiquidityLoans to deposits
    
    
    96.38
    %
    
    
    93.28
    %
    
    
    102.67
    %
    
    
    93.08
    %
    
    
    97.63
    %Liquidity ratio
    
    
    38.84
    %
    
    
    22.56
    %
    
    
    18.49
    %
    
    
    27.96
    %
    
    
    23.57
    %CapitalTier 1 risk-based capital  Bank
    
    
    11.57
    %
    
    
    11.58
    %
    
    
    9.97
    %
    
    
    11.42
    %
    
    
    12.08
    %Total risk-based capital  Bank
    
    
    12.83
    %
    
    
    12.84
    %
    
    
    11.22
    %
    
    
    12.54
    %
    
    
    13.11
    %EfficiencyEfficiency ratio
    
    
    52.80
    %
    
    
    63.81
    %
    
    
    59.31
    %
    
    
    55.64
    %
    
    
    52.54
    %
 www.fdic.gov
 Balance Sheet
  core
  43




---



##### Table of Contents



Sources of Income
    44




---



##### Table of Contents



Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
      45




---



##### Table of Contents



Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
      Net Interest Income and Net Interest Margin
   46




---



##### Table of Contents



Average Balances, Interest Income/Expense and Yields/Rates Paid
Years Ended December 31,
 2009
    
    
    2008
    
    
    2007Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Average(Dollars in thousands)
    
    Balance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/RateInterest Earning AssetsPortfolio loans
    
    $
    589,336
    
    
    $
    35,860
    
    
    
    6.08
    %
    
    $
    518,759
    
    
    $
    33,582
    
    
    
    6.47
    %
    
    $
    437,217
    
    
    $
    36,134
    
    
    
    8.26
    %Tax-exempt securities
    
    
    28,384
    
    
    
    1,164
    
    
    
    4.10
    %
    
    
    24,399
    
    
    
    1,197
    
    
    
    4.91
    %
    
    
    30,727
    
    
    
    1,229
    
    
    
    4.00
    %US government securities
    
    
    8,606
    
    
    
    343
    
    
    
    3.99
    %
    
    
    13,637
    
    
    
    553
    
    
    
    4.06
    %
    
    
    26,782
    
    
    
    1,112
    
    
    
    4.15
    %Mortgage backed securities
    
    
    53,722
    
    
    
    3,107
    
    
    
    5.78
    %
    
    
    37,328
    
    
    
    1,916
    
    
    
    5.13
    %
    
    
    43,122
    
    
    
    1,973
    
    
    
    4.58
    %Federal funds sold
    
    
    13,438
    
    
    
    32
    
    
    
    0.24
    %
    
    
    17,987
    
    
    
    303
    
    
    
    1.68
    %
    
    
    13,099
    
    
    
    681
    
    
    
    5.20
    %Other securities
    
    
    41,305
    
    
    
    823
    
    
    
    1.99
    %
    
    
    2,918
    
    
    
    139
    
    
    
    4.76
    %
    
    
    2,000
    
    
    
    90
    
    
    
    4.50
    %Average Earning Assets
    
    $
    735,241
    
    
    $
    41,329
    
    
    
    5.62
    %
    
    $
    615,028
    
    
    $
    37,690
    
    
    
    6.13
    %
    
    $
    552,947
    
    
    $
    41,219
    
    
    
    7.45
    %Cash & due from banks
    
    
    26,841
    
    
    
    
    
    
    
    
    
    
    
    16,298
    
    
    
    
    
    
    
    
    
    
    
    14,273Bank premises and fixed assets
    
    
    10,322
    
    
    
    
    
    
    
    
    
    
    
    11,097
    
    
    
    
    
    
    
    
    
    
    
    10,155Other assets
    
    
    40,639
    
    
    
    
    
    
    
    
    
    
    
    19,866
    
    
    
    
    
    
    
    
    
    
    
    17,986Average Total Assets
    
    $
    804,211
    
    
    
    
    
    
    
    
    
    
    $
    662,289
    
    
    
    
    
    
    
    
    
    
    $
    595,361Interest Bearing LiabilitiesInterest bearing demand
    
    $
    145,542
    
    
    $
    1,015
    
    
    
    0.70
    %
    
    $
    138,743
    
    
    $
    2,173
    
    
    
    1.57
    %
    
    $
    121,281
    
    
    $
    2,735
    
    
    
    2.26
    %Savings deposits
    
    
    62,846
    
    
    
    963
    
    
    
    1.53
    %
    
    
    56,914
    
    
    
    1,576
    
    
    
    2.77
    %
    
    
    39,565
    
    
    
    1,216
    
    
    
    3.07
    %Certificates of deposit
    
    
    317,417
    
    
    
    7,628
    
    
    
    2.40
    %
    
    
    234,493
    
    
    
    8,552
    
    
    
    3.65
    %
    
    
    215,511
    
    
    
    10,571
    
    
    
    4.91
    %Repurchase Agreements
    
    
    11,006
    
    
    
    51
    
    
    
    0.46
    %
    
    
    13,043
    
    
    
    173
    
    
    
    1.33
    %
    
    
    32,237
    
    
    
    1,177
    
    
    
    3.65
    %Other borrowings
    
    
    122,057
    
    
    
    2,678
    
    
    
    2.19
    %
    
    
    98,518
    
    
    
    3,868
    
    
    
    3.93
    %
    
    
    62,095
    
    
    
    3,507
    
    
    
    5.65
    %Average Interest Liabilities
    
    $
    658,868
    
    
    
    12,335
    
    
    
    1.87
    %
    
    $
    541,711
    
    
    $
    16,342
    
    
    
    3.02
    %
    
    $
    470,689
    
    
    $
    19,206
    
    
    
    4.08
    %Noninterest bearing Demand
    
    
    69,250
    
    
    
    
    
    
    
    
    
    
    
    70,933
    
    
    
    
    
    
    
    
    
    
    
    72,545Other liabilities
    
    
    9,467
    
    
    
    
    
    
    
    
    
    
    
    5,660
    
    
    
    
    
    
    
    
    
    
    
    6,502Shareholders equity
    
    
    66,626
    
    
    
    
    
    
    
    
    
    
    
    43,985
    
    
    
    
    
    
    
    
    
    
    
    45,625Average Liabilities and Shareholders equity
    
    $
    804,211
    
    
    
    
    
    
    
    
    
    
    $
    662,289
    
    
    
    
    
    
    
    
    
    
    $
    595,361Net Interest Income and Net Interest Margin
    
    
    
    
    
    $
    28,994
    
    
    
    3.94
    %
    
    
    
    
    
    $
    21,348
    
    
    
    3.47
    %
    
    
    
    
    
    $
    22,013
    
    
    
    3.98
    %
  47




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##### Table of Contents



Analysis of Changes in Net Interest Income
Years ended December 31,
 2009 over 2008
    
    
    2008 over 2007Variance
    
    
    Variance
    
    
    
    
    
    
    Variance
    
    
    Variancedue to
    
    
    due to
    
    
    
    
    
    
    due to
    
    
    due toAverage
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average(Dollars in thousands)
    
    Volume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    TotalIncrease (Decrease)In Interest Income:Portfolio loans
    
    $
    3,791
    
    
    
    (1,512
    )
    
    $
    2,279
    
    
    $
    5,279
    
    
    
    (7,831
    )
    
    
    ($2,552
    )Tax-exempt securities
    
    
    115
    
    
    
    (147
    )
    
    
    (32
    )
    
    
    (310
    )
    
    
    278
    
    
    
    (32
    )US government securities
    
    
    (203
    )
    
    
    (7
    )
    
    
    (210
    )
    
    
    (533
    )
    
    
    (26
    )
    
    
    (559
    )Mortgage backed securities
    
    
    1,009
    
    
    
    182
    
    
    
    1,191
    
    
    
    (297
    )
    
    
    240
    
    
    
    (57
    )Federal funds sold
    
    
    (8
    )
    
    
    (99
    )
    
    
    (107
    )
    
    
    82
    
    
    
    (460
    )
    
    
    (378
    )Other securities
    
    
    480
    
    
    
    38
    
    
    
    518
    
    
    
    44
    
    
    
    5
    
    
    
    49Total Increase (Decrease)
    
    
    5,184
    
    
    
    (1,545
    )
    
    
    3,639
    
    
    
    4,265
    
    
    
    (7,794
    )
    
    
    (3,529
    )(Decrease) IncreaseIn Interest Expense:Interest bearing demand
    
    
    (254
    )
    
    
    (904
    )
    
    
    (1,158
    )
    
    
    273
    
    
    
    (835
    )
    
    
    (562
    )Savings accounts
    
    
    (85
    )
    
    
    (528
    )
    
    
    (613
    )
    
    
    480
    
    
    
    (120
    )
    
    
    360Certificates of deposit
    
    
    1,263
    
    
    
    (2,188
    )
    
    
    (925
    )
    
    
    692
    
    
    
    (2,711
    )
    
    
    (2,019
    )Repurchase agreements
    
    
    (37
    )
    
    
    (84
    )
    
    
    (121
    )
    
    
    (255
    )
    
    
    (749
    )
    
    
    (1,004
    )Other borrowings
    
    
    5
    
    
    
    (1,195
    )
    
    
    (1,190
    )
    
    
    1,228
    
    
    
    (867
    )
    
    
    361Total Increase (Decrease)
    
    
    892
    
    
    
    (4,899
    )
    
    
    (4,007
    )
    
    
    2,418
    
    
    
    (5,282
    )
    
    
    (2,864
    )Net Increase (Decrease)
    
    $
    4,292
    
    
    $
    3,354
    
    
    $
    7,646
    
    
    $
    1,847
    
    
    $
    (2,512
    )
    
    $
    (665
    )
 48




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##### Table of Contents



Noninterest Income
  Years Ended December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Noninterest income:Service charges on deposit accounts
    
    $
    390
    
    
    $
    311
    
    
    $
    278Payroll and benefit processing fees
    
    
    452
    
    
    
    453
    
    
    
    383Earnings on cash surrender-
Bank owned life insurance
    
    
    418
    
    
    
    340
    
    
    
    331Life Insurance policy benefits
    
    
    0
    
    
    
    0
    
    
    
    2,400Net realized gain on sale of securities
available-for-sale
    
    
    2,438
    
    
    
    628
    
    
    
    46Net loss on sale of derivative swap transaction
    
    
    0
    
    
    
    (225
    )
    
    
    0Net gain on sale of loans
    
    
    341
    
    
    
    0
    
    
    
    0Merchant credit card service income, net
    
    
    297
    
    
    
    364
    
    
    
    388Mortgage brokerage fee income
    
    
    5,327
    
    
    
    21
    
    
    
    50Other income
    
    
    400
    
    
    
    731
    
    
    
    659Total Noninterest income
    
    $
    10,063
    
    
    $
    2,623
    
    
    $
    4.535
  Noninterest Expense
  Years ended December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Salaries & related benefits
    
    $
    10,882
    
    
    $
    7,751
    
    
    $
    8,666Occupancy & equipment expense
    
    
    3,405
    
    
    
    2,501
    
    
    
    2,373OREO expense
    
    
    164
    
    
    
    735
    
    
    
    0FDIC insurance premium
    
    
    1,274
    
    
    
    383
    
    
    
    51Data processing fees
    
    
    282
    
    
    
    276
    
    
    
    395Professional service fees
    
    
    820
    
    
    
    667
    
    
    
    1,027Payroll and benefit fees
    
    
    114
    
    
    
    116
    
    
    
    108Deferred compensation expense
    
    
    478
    
    
    
    461
    
    
    
    411Stationery & supplies
    
    
    185
    
    
    
    262
    
    
    
    257Postage
    
    
    147
    
    
    
    134
    
    
    
    138Directors expenses
    
    
    299
    
    
    
    294
    
    
    
    312Other expenses
    
    
    2,574
    
    
    
    1,716
    
    
    
    2,006Total Noninterest expense
    
    $
    20,624
    
    
    $
    15,296
    
    
    $
    15,744
  49




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##### Table of Contents



Income Taxes
   Years Ended December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Income tax provision (benefit)
    
    $
    2,690
    
    
    
    ($40
    )
    
    $
    1,405Effective tax rate
    
    
    30.02
    %
    
    
    -1.83
    %
    
    
    18.7
    %
  Asset Quality
  As of December 31,(Dollars in thousands)
    
    2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    2005
    
    
    %Commercial & industrial
    
    $
    133,080
    
    
    
    23.13
    %
    
    $
    164,083
    
    
    
    31.11
    %
    
    $
    173,704
    
    
    
    35.11
    %
    
    $
    125,725
    
    
    
    30.36
    %
    
    $
    115,401
    
    
    
    31.36
    %Real Estate-construction
    
    
    59,524
    
    
    
    9.90
    %
    
    
    84,218
    
    
    
    15.97
    %
    
    
    106,977
    
    
    
    21.62
    %
    
    
    110,693
    
    
    
    26.73
    %
    
    
    105,094
    
    
    
    28.56
    %Real Estate-commercial
    
    
    260,024
    
    
    
    42.23
    %
    
    
    217,914
    
    
    
    41.31
    %
    
    
    175,013
    
    
    
    35.37
    %
    
    
    159,370
    
    
    
    38.48
    %
    
    
    129,202
    
    
    
    35.11
    %Real Estate- mortgage
    
    
    98,775
    
    
    
    16.42
    %
    
    
    20,285
    
    
    
    3.85
    %
    
    
    10,787
    
    
    
    2.18
    %
    
    
    4,278
    
    
    
    1.04
    %
    
    
    3,669
    
    
    
    1.00
    %Real Estate  other
    
    
    45,601
    
    
    
    7.58
    %
    
    
    39,915
    
    
    
    7.57
    %
    
    
    26,818
    
    
    
    5.42
    %
    
    
    12,986
    
    
    
    3.14
    %
    
    
    13,790
    
    
    
    3.75
    %Installment
    
    
    2,223
    
    
    
    0.37
    %
    
    
    145
    
    
    
    0.03
    %
    
    
    226
    
    
    
    0.05
    %
    
    
    202
    
    
    
    0.05
    %
    
    
    439
    
    
    
    0.12
    %Other loans
    
    
    2,212
    
    
    
    0.37
    %
    
    
    903
    
    
    
    0.16
    %
    
    
    1,223
    
    
    
    0.25
    %
    
    
    937
    
    
    
    0.20
    %
    
    
    446
    
    
    
    0.10
    %Gross Loans
    
    
    601,439
    
    
    
    100.00
    
    
    
    527,463
    
    
    
    100.00
    %
    
    
    494,748
    
    
    
    100.00
    %
    
    $
    414,191
    
    
    
    100.00
    %
    
    $
    368,041
    
    
    
    100.00
    %Less:Deferred loan fees and
costs
    
    
    209
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    420Allowance for Loan losses
    
    
    11,207
    
    
    
    
    
    
    
    8,429
    
    
    
    
    
    
    
    8,233
    
    
    
    
    
    
    
    4,904
    
    
    
    
    
    
    
    4,316Net Loans
    
    $
    590,023
    
    
    
    
    
    
    $
    518,947
    
    
    
    
    
    
    $
    486,283
    
    
    
    
    
    
    $
    408,989
    
    
    
    
    
    
    $
    363,305
  50




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##### Table of Contents



(Dollars in thousands)
    
    
    
    
    
    % of Total loanLoan Type
    
    Balance
    
    
    portfolioCommercial lots and entitled commercial land
    
    $
    22,100
    
    
    
    3.67
    %Commercial real estate  construction
    
    
    25,897
    
    
    
    4.31
    %1-4 family subdivision loans
    
    
    8,938
    
    
    
    1.49
    %1-4 family individual residential lots
    
    
    1,458
    
    
    
    0.24
    %1-4 family construction speculative
    
    
    1,131
    
    
    
    0.19
    %Total real estate- construction
    
    $
    59,524
    
    
    
    9.90
    %
  Nonperforming Assets
  As of December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Non-accrual loans
    
    $
    7,667
    
    
    $
    20,154
    
    
    $
    12,409
    
    
    $
    0
    
    
    $
    37290 days past due and
still accruing interest
    
    
    5,052
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total nonperforming loans
    
    
    12,719
    
    
    
    20,154
    
    
    
    12,409
    
    
    
    0
    
    
    
    372Other real estate owned
    
    
    2,880
    
    
    
    2,934
    
    
    
    0
    
    
    
    0
    
    
    
    0Total nonperforming assets
    
    $
    15,599
    
    
    $
    23,088
    
    
    $
    12,409
    
    
    $
    0
    
    
    $
    372
   51




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##### Table of Contents



Loan Maturity Schedule
  After One through(Dollars in thousands)
    
    Within One Year
    
    
    Five Years
    
    
    After Five Years
    
    
    TotalCommercial & industrial
    
    $
    58,622
    
    
    $
    43,255
    
    
    $
    31,203
    
    
    $
    133,080Real Estate   construction
    
    
    33,992
    
    
    
    23,788
    
    
    
    1,744
    
    
    
    59,524Real Estate  commercial
    
    
    8,940
    
    
    
    69,012
    
    
    
    182,072
    
    
    
    260,024Real Estate  mortgage
    
    
    0
    
    
    
    5,860
    
    
    
    92,915
    
    
    
    98,775Real Estate  other
    
    
    10,031
    
    
    
    5,252
    
    
    
    30,318
    
    
    
    45,601Installment loans
    
    
    1,000
    
    
    
    1,223
    
    
    
    0
    
    
    
    2,223Other loans
    
    
    1,184
    
    
    
    1,028
    
    
    
    0
    
    
    
    2,212Total gross loans
    
    $
    113,769
    
    
    $
    149,418
    
    
    $
    338,252
    
    
    $
    601,439Loans due after one year
with:Fixed Rates
    
    
    
    
    
    $
    48,979
    
    
    $
    111,842
    
    
    $
    160,821Variable Rates
    
    
    
    
    
    
    100,439
    
    
    
    226,410
    
    
    
    326,849Total
    
    
    
    
    
    $
    149,418
    
    
    $
    338,252
    
    
    $
    487,670
 Available-for-sale securities
  Over One through
    
    
    Over Five throughWithin One Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Over Ten Years
    
    
    Total(Dollars in thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldU.S. government & agencies
    
    
    0
    
    
    
    0.00
    %
    
    $
    1.003
    
    
    
    1.22
    %
    
    $
    14,497
    
    
    
    2.69
    %
    
    $
    3,000
    
    
    
    5.50
    %
    
    $
    18,500
    
    
    
    3.06
    %Obligations of state and
political subdivisions
    
    
    0
    
    
    
    0.00
    %
    
    
    2,218
    
    
    
    4.27
    %
    
    
    4,814
    
    
    
    3.88
    %
    
    
    25,152
    
    
    
    4.24
    %
    
    
    32,184
    
    
    
    4.19
    %Mortgage backed securities
    
    
    0
    
    
    
    0.00
    %
    
    
    0
    
    
    
    0.00
    %
    
    
    0
    
    
    
    0.00
    %
    
    
    28,278
    
    
    
    5.44
    %
    
    
    28,278
    
    
    
    5.44
    %Total
    
    $
    0
    
    
    
    0.00
    %
    
    $
    3,221
    
    
    
    3.32
    %
    
    $
    19,311
    
    
    
    2.98
    %
    
    $
    56,430
    
    
    
    4.91
    %
    
    $
    78,962
    
    
    
    4.37
    %
 Deposit Structure
  Years Ended December 31,2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007(Dollars in thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldNOW accounts
    
    $
    58,437
    
    
    
    0.51
    %
    
    $
    51,215
    
    
    
    0.88
    %
    
    $
    61,391
    
    
    
    1.58
    %Savings
    
    
    62,846
    
    
    
    1.53
    %
    
    
    56,914
    
    
    
    2.77
    %
    
    
    39,518
    
    
    
    3.08
    %Money market accounts
    
    
    87,105
    
    
    
    0.84
    %
    
    
    87,528
    
    
    
    1.97
    %
    
    
    59,814
    
    
    
    2.95
    %Certificates of deposit
    
    
    317,417
    
    
    
    2.40
    %
    
    
    234,493
    
    
    
    3.65
    %
    
    
    215,498
    
    
    
    4.94
    %Interest bearing deposits
    
    
    525,805
    
    
    
    1.83
    %
    
    
    430,150
    
    
    
    2.87
    %
    
    
    376,221
    
    
    
    4.00
    %Noninterest bearing deposits
    
    
    69,250
    
    
    
    
    
    
    
    70,933
    
    
    
    
    
    
    
    72,545Average Total Deposits
    
    $
    595,055
    
    
    
    
    
    
    $
    501,083
    
    
    
    
    
    
    $
    448,766Average Other borrowings
    
    $
    133,063
    
    
    
    2.06
    %
    
    $
    111,561
    
    
    
    3.62
    %
    
    $
    78,852
    
    
    
    4.57
    %
 52




---



##### Table of Contents



Deposit Maturity Schedule
 (Dollars in thousands)
    
    2009Three months or less
    
    $
    63,350Three through six months
    
    
    59,275Six through twelve months
    
    
    72,688Over twelve months
    
    
    55,466Total
    
    $
    250,779
 Capital Management and Adequacy
      53




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##### Table of Contents



Actual
    
    
    Well Capitalized
    
    
    Minimum CapitalDecember 31, 2009
    
    Capital
    
    
    Ratio
    
    
    Requirement
    
    
    RequirementThe CompanyLeverage
    
    $
    79,421,930
    
    
    
    9.89
    %
    
    
    n/a
    
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    79,421,930
    
    
    
    12.06
    %
    
    
    n/a
    
    
    
    4.0
    %Total Risk-Based
    
    
    87,697,164
    
    
    
    13.31
    %
    
    
    n/a
    
    
    
    8.0
    %Redding Bank of
CommerceLeverage
    
    $
    76,262,200
    
    
    
    9.37
    %
    
    
    5.0
    %
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    76,262,200
    
    
    
    11.57
    %
    
    
    6.0
    %
    
    
    4.0
    %Total Risk-Based
    
    
    84,542,883
    
    
    
    12.83
    %
    
    
    10.00
    %
    
    
    8.0
    %
     Lending Transactions with Related Parties
    As of December 31,
    
    
    As of December 31,2009
    
    
    2008Balance at beginning of year
    
    $
    4,174,424
    
    
    $
    3,600,342New loan additions
    
    
    1,200,611
    
    
    
    153,737Advances on existing lines of credit
    
    
    10,861,095
    
    
    
    826,080Principal repayments
    
    
    (11,387,376
    )
    
    
    (405,735
    )Balance at end of year
    
    $
    4,848,754
    
    
    $
    4,174,424
 54




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##### Table of Contents



Impact of Inflation
  Commitments
 Off-Balance Sheet Financial Instruments
  As of December 31,
    
    
    As of December 31,2009
    
    
    2008Off-balance sheet commitments:Commitments to extend credit
    
    $
    122,871,909
    
    
    $
    156,707,887Standby letters of credit
    
    
    4,844,167
    
    
    
    8,556,547Guaranteed commitments outstanding
    
    
    1,324,799
    
    
    
    1,350,399$
    129,040,875
    
    
    $
    166,614,833
      55




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##### Table of Contents



Commitments and Contingent Liabilities
  Contractual Obligations
 Less than
    
    
    
    
    
    
    
    
    
    
    More than 5
    
    
    Indeterminate(Dollars in thousands)
    
    Total
    
    
    One Year
    
    
    1 -3 Years
    
    
    3 - 5 Years
    
    
    years
    
    
    Maturity (1)Preferred Stock and
Warrants
    
    $
    17,000
    
    
    
    
    
    
    
    
    
    
    $
    17,000
    
    
    
    Junior Subordinated
Debentures
    
    $
    15,465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,465
    
    
    
    FHLB Borrowings
    
    $
    70,000
    
    
    $
    55,000
    
    
    $
    15,000
    
    
    
    
    
    
    
    
    
    
    
    Operating lease
obligations
    
    $
    3,681
    
    
    $
    867
    
    
    $
    1,381
    
    
    $
    986
    
    
    $
    447
    
    
    
    Repurchase Agreements
    
    $
    9,621
    
    
    $
    9,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deposits (1)
    
    $
    640,465
    
    
    $
    251,285
    
    
    $
    83,029
    
    
    $
    7,475
    
    
    
    
    
    
    $
    298,676Total
    
    $
    756,232
    
    
    $
    316,773
    
    
    $
    99,410
    
    
    $
    25,461
    
    
    $
    15,912
    
    
    $
    298,676
 
 (1)
    
    Represents interest-bearing and non-interest bearing checking, money market, savings
and time accounts. 56




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##### Table of Contents



ITEM 7-A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      57




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##### Table of Contents



Within 3
    
    
    3 Months to
    
    
    One Year to
    
    
    Over Five(Dollars in thousands)
    
    Months
    
    
    One Year
    
    
    Five Years
    
    
    Years
    
    
    TotalInterest-Earning AssetsAvailable-for-sale securities
    
    $
    6,126
    
    
    $
    8,793
    
    
    $
    30,825
    
    
    $
    34,318
    
    
    $
    80,062Other investments
    
    
    31,338

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,338Loans, gross
    
    
    219,736
    
    
    
    216,227
    
    
    
    135,927
    
    
    
    29,340
    
    
    
    601,230Total Interest-earning Assets
    
    $
    257,200
    
    
    $
    225,020
    
    
    $
    166,752
    
    
    $
    63,658
    
    
    $
    712,630Interest-Bearing LiabilitiesDemand  interest bearing
    
    $
    2,732
    
    
    $
    35,287
    
    
    $
    104,153
    
    
    $
    21,642
    
    
    $
    163,814Savings accounts
    
    
    
    
    
    
    
    
    
    
    50,895
    
    
    
    14,519
    
    
    
    65,414Certificates of deposit
    
    
    76,475
    
    
    
    174,357
    
    
    
    90,957
    
    
    
    
    
    
    
    341,789Other borrowings
    
    
    35,000
    
    
    
    20,000
    
    
    
    15,000

    
    
    
    
    
    
    
    70,000Total Interest-bearing Liabilities
    
    
    114,207
    
    
    $
    229,644
    
    
    
    261,005
    
    
    $
    36,161
    
    
    $
    641,017GAP in dollars
    
    $
    142,993
    
    
    $
    (4,624
    )
    
    $
    (94,253
    )
    
    $
    27,497
    
    
    $
    71,613Cumulative GAP in dollars
    
    $
    142,993
    
    
    $
    138,369
    
    
    $
    44,116
    
    
    $
    71,613
    
    
    $
    71,613As a percentage of earning assets:GAP Ratio
    
    
    2.25
    
    
    
    0.98
    
    
    
    0.64
    
    
    
    1.76
    
    
    
    1.11Cumulative GAP Ratio
    
    
    2.25
    
    
    
    1.40
    
    
    
    1.07
    
    
    
    1.11
    
    
    
    1.11Gap as % of Earning Assets
    
    
    20.07
    %
    
    
    -0.65
    %
    
    
    -13.23
    %
    
    
    3.86
    %
    
    
    10.05
    %Cumulative Gap as % of Earning
Assets
    
    
    20.07
    %
    
    
    19.42
    %
    
    
    6.19
    %
    
    
    10.05
    %
    
    
    10.05
    %
 58




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##### Table of Contents



59




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Consolidated Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    61Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    63Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007
    
    
    64Consolidated Statements of Shareholders Equity for the years ended December 31, 2009, 2008 and 2007
    
    
    65Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007
    
    
    67Notes to Consolidated Financial Statements for the years ended December 31, 2009, 2008 and 2007
    
    
    69
 60




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 61




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 2009
    
    
    2008ASSETSCash and due from banks
    
    $
    36,902,278
    
    
    $
    10,216,062Interest bearing due from banks
    
    
    31,337,615
    
    
    
    23,500,000Federal funds sold and securities purchased under agreements to resell
    
    
    
    
    
    
    51,475,000Cash and cash equivalents
    
    
    68,239,893
    
    
    
    85,191,062Securities available-for-sale (including pledged collateral of
$55,672,267 at December 31, 2009 and $68,735,000 at December 31,
2008)
    
    
    80,062,136
    
    
    
    131,686,600Mortgage loans held for sale
    
    
    27,288,423
    
    
    
    Loans, net of the allowance for loan and lease losses of $11,207,213
at December 31, 2009 and $8,429,383 at December 31, 2008
    
    
    590,022,710
    
    
    
    518,946,461Bank premises and equipment, net
    
    
    9,979,565
    
    
    
    10,672,210Goodwill
    
    
    3,727,052
    
    
    
    Other real estate owned
    
    
    2,879,956
    
    
    
    2,934,151Other assets
    
    
    31,206,411
    
    
    
    24,783,476TOTAL ASSETS
    
    $
    813,406,146
    
    
    $
    774,213,960LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Demand  noninterest bearing
    
    $
    69,447,731
    
    
    $
    79,988,122Demand  interest bearing
    
    
    163,813,660
    
    
    
    143,871,441Savings accounts
    
    
    65,413,991
    
    
    
    67,135,736Certificates of deposit
    
    
    341,788,698
    
    
    
    264,286,604Total Deposits
    
    
    640,464,080
    
    
    
    555,281,903Securities sold under agreements to repurchase
    
    
    9,620,867
    
    
    
    13,853,255Federal Home Loan Bank borrowings
    
    
    70,000,000
    
    
    
    120,000,000Other liabilities
    
    
    9,049,555
    
    
    
    7,036,161Junior subordinated debt payable to unconsolidated subsidiary grantor
trust
    
    
    15,465,000
    
    
    
    15,465,000Total liabilities
    
    
    744,599,502
    
    
    
    711,636,319Commitments and contingencies (Note 21)Shareholders equity:Preferred stock (liquidation preference of $1,000 per share; issued
2008); 2,000,000 shares authorized; 17,000 shares issued and
outstanding in 2009 and 2008
    
    
    16,641,016
    
    
    
    16,551,268Common stock, no par value; 50,000,000 shares authorized; 8,711,495
shares issued and outstanding in 2009 and 2008
    
    
    9,730,284
    
    
    
    9,649,673Common stock warrant
    
    
    448,732
    
    
    
    448,732Retained earnings
    
    
    39,003,734
    
    
    
    36,008,865Accumulated other comprehensive income (loss), net of tax
    
    
    657,662
    
    
    
    (80,897
    )Total Equity  Bank of Commerce Holdings
    
    
    66,481,428
    
    
    
    62,577,641Non controlling interest in subsidiary
    
    
    2,325,216
    
    
    
    Total shareholders equity
    
    
    68,806,644
    
    
    
    62,577,641TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    813,406,146
    
    
    $
    774,213,960
 See accompanying notes to consolidated financial statements
 62




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 2009
    
    
    2008
    
    
    2007Interest income:Interest and fees on loans
    
    $
    35,860,336
    
    
    $
    33,582,112
    
    
    $
    36,134,170Interest on tax-exempt securities
    
    
    1,164,344
    
    
    
    1,196,662
    
    
    
    1,228,944Interest on U.S. government securities
    
    
    3,449,909
    
    
    
    2,468,749
    
    
    
    3,084,672Interest on federal funds sold and securities purchased
under agreement to resell
    
    
    31,737
    
    
    
    303,227
    
    
    
    680,578Interest on other securities
    
    
    822,673
    
    
    
    138,645
    
    
    
    89,686Total interest income
    
    
    41,328,999
    
    
    
    37,689,395
    
    
    
    41,218,050Interest expense:Interest on demand deposits
    
    
    1,014,554
    
    
    
    2,172,704
    
    
    
    2,735,170Interest on savings deposits
    
    
    962,774
    
    
    
    1,576,351
    
    
    
    1,215,920Interest on certificates of deposit
    
    
    7,628,282
    
    
    
    8,552,217
    
    
    
    10,570,776Interest on securities sold under repurchase agreements
    
    
    50,503
    
    
    
    172,743
    
    
    
    1,177,417Interest on FHLB borrowings
    
    
    1,833,181
    
    
    
    2,811,982
    
    
    
    2,421,636Interest on junior subordinated debt payable to
unconsolidated subsidiary grantor trusts
    
    
    846,072
    
    
    
    1,056,284
    
    
    
    1,084,990Total interest expense
    
    
    12,335,366
    
    
    
    16,342,281
    
    
    
    19,205,909Net interest income
    
    
    28,993,633
    
    
    
    21,347,114
    
    
    
    22,012,141Provision for loan and lease losses
    
    
    9,475,000
    
    
    
    6,520,000
    
    
    
    3,291,250Net interest income after provision for loan and lease losses
    
    
    19,518,633
    
    
    
    14,827,114
    
    
    
    18,720,891Noninterest income:Service charges on deposit accounts
    
    
    390,263
    
    
    
    311,266
    
    
    
    277,769Payroll and benefit processing fees
    
    
    452,037
    
    
    
    452,852
    
    
    
    382,738Earnings on cash surrender value -
Bank owned life insurance
    
    
    418,265
    
    
    
    340,220
    
    
    
    331,251Life insurance policy benefits
    
    
    
    
    
    
    
    
    
    
    2,400,000Net gain on sale of securities available-for-sale
    
    
    2,437,575
    
    
    
    627,879
    
    
    
    45,670Net loss on sale of derivative swap transaction
    
    
    
    
    
    
    (225,442
    )
    
    
    Net gain on sale of loans
    
    
    340,621
    
    
    
    
    
    
    
    Merchant credit card service income, net
    
    
    296,551
    
    
    
    364,391
    
    
    
    388,438Mortgage brokerage fee income
    
    
    5,327,256
    
    
    
    21,019
    
    
    
    49,995Other income
    
    
    400,866
    
    
    
    731,233
    
    
    
    658,893Total noninterest income
    
    
    10,063,434
    
    
    
    2,623,418
    
    
    
    4,534,754Noninterest expense:Salaries and related benefits
    
    
    10,881,865
    
    
    
    7,750,980
    
    
    
    8,665,679Occupancy and equipment expense
    
    
    3,405,173
    
    
    
    2,500,557
    
    
    
    2,372,617OREO expense
    
    
    163,724
    
    
    
    735,000
    
    
    
    FDIC insurance premium
    
    
    1,274,416
    
    
    
    382,722
    
    
    
    51,077Data processing fees
    
    
    282,429
    
    
    
    276,165
    
    
    
    395,558Professional service fees
    
    
    819,960
    
    
    
    667,015
    
    
    
    1,027,671Payroll processing fees
    
    
    114,393
    
    
    
    115,932
    
    
    
    107,856Deferred compensation expense
    
    
    478,175
    
    
    
    461,640
    
    
    
    411,191Stationery and supplies
    
    
    185,206
    
    
    
    262,087
    
    
    
    256,799Postage
    
    
    146,719
    
    
    
    133,909
    
    
    
    137,740Directors expenses
    
    
    298,596
    
    
    
    293,918
    
    
    
    311,777Other expenses
    
    
    2,573,008
    
    
    
    1,715,747
    
    
    
    2,005,729Total noninterest expense
    
    
    20,623,664
    
    
    
    15,295,672
    
    
    
    15,743,694Income before provision (benefit) for income taxes
    
    
    8,958,403
    
    
    
    2,154,860
    
    
    
    7,511,951Provision (benefit) for income taxes
    
    
    2,689,698
    
    
    
    (39,526
    )
    
    
    1,405,053Net income
    
    
    6,268,705
    
    
    
    2,194,386
    
    
    
    6,106,898Less: Net income attributable to non-controlling interest
    
    
    263,405
    
    
    
    
    
    
    
    Net income attributable to Bank of Commerce Holdings
    
    $
    6,005,300
    
    
    $
    2,194,386
    
    
    $
    6,106,898Less: preferred dividend and accretion on preferred stock
    
    
    942,109
    
    
    
    
    
    
    
    Income available to common shareholders
    
    
    5,063,191
    
    
    
    2,194,386
    
    
    
    6,106,898Basic earnings per share
    
    $
    0.58
    
    
    $
    0.25
    
    
    $
    0.69Weighted average shares  basic
    
    
    8,711,495
    
    
    
    8,712,873
    
    
    
    8,857,627Diluted earnings per share
    
    $
    0.58
    
    
    $
    0.25
    
    
    $
    0.68Weighted average shares  diluted
    
    
    8,711,495
    
    
    
    8,724,550
    
    
    
    8,937,736Cash dividends declared
    
    $
    0.24
    
    
    $
    0.29
    
    
    $
    0.33
 See accompanying notes to consolidated financial statements.
 63




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Subtotal
    
    
    NonComprehe
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated Other
    
    
    Bank of
    
    
    Controllingnsive
    
    
    Preferred
    
    
    
    
    
    
    Common
    
    
    Stock
    
    
    Retained
    
    
    Comp- Income (Loss),
    
    
    Commerce
    
    
    Interest inDollars in Thousands
    
    Income
    
    
    Amount
    
    
    Warrant
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    net of tax
    
    
    Holdings
    
    
    Subsidiary
    
    
    TotalBalance at
December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,847,042
    
    
    $
    11,517,368
    
    
    $
    33,336,032
    
    
    $
    (937,150
    )
    
    $
    43,916,250
    
    
    $
    0
    
    
    $
    43,916,250Comprehensive Income:Net Income
    
    
    6,106,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,106,898
    
    
    
    
    
    
    
    6,106,898
    
    
    
    0
    
    
    
    6,106,898Other
Comprehensive
Income:Unrealized
gains on
securities and
derivatives
    
    
    527,451Less:  reclassification
adjustment for
gains included
in net income,
net of tax
    
    
    (26,872
    )Total Comprehensive
Income
    
    $
    6,607,477
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,579
    
    
    
    500,579
    
    
    
    0
    
    
    
    500,579Preferred Stock Issued
WarrantsCommon cash dividends
($0.33 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,838,028
    )
    
    
    
    
    
    
    (2,838,028
    )
    
    
    0
    
    
    
    (2,838,028
    )Compensation expense
associated with stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,880
    
    
    
    
    
    
    
    
    
    
    
    116,880
    
    
    
    0
    
    
    
    116,880Share Repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200,000
    )
    
    
    (2,270,242
    )
    
    
    
    
    
    
    
    
    
    
    (2,270,242
    )
    
    
    0
    
    
    
    (2,270,242
    )Stock option Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,403
    
    
    
    486,881
    
    
    
    
    
    
    
    
    
    
    
    486,881
    
    
    
    0
    
    
    
    486,881Tax benefit on stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,630
    
    
    
    
    
    
    
    
    
    
    
    144,630
    
    
    
    0
    
    
    
    144,630Balance at
December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,757,445
    
    
    $
    9,995,517
    
    
    $
    36,604,902
    
    
    $
    (436,571
    )
    
    $
    46,163,848
    
    
    $
    0
    
    
    $
    46,163,848Balance at January 1,
2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,755,455
    
    
    $
    9,995,517
    
    
    $
    36,004,902
    
    
    $
    (436,571
    )
    
    $
    46,163,848
    
    
    $
    0
    
    
    $
    46,163,848Comprehensive Income:Net Income
    
    
    2,194,386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,194,386
    
    
    
    
    
    
    
    2,194,386
    
    
    
    0
    
    
    
    2,194,386Other
Comprehensive
Income:Unrealized
gains on
securities and
derivatives
    
    
    711,481Less:  reclassification
adjustment for
gains included
in net income,
net of tax
    
    
    (355,806
    )Total Comprehensive
Income
    
    
    2,550,061
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    355,674
    
    
    
    355,674
    
    
    
    0
    
    
    
    355,674Preferred Stock Issued
    
    
    
    
    
    
    16,551,268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,551,268
    
    
    
    0
    
    
    
    16,551,268Warrants
    
    
    
    
    
    
    
    
    
    
    448,732
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    448,732
    
    
    
    0
    
    
    
    448,732
 64




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##### Table of Contents



Subtotal
    
    
    NonAccumulated Other
    
    
    Bank of
    
    
    ControllingPreferred
    
    
    
    
    
    
    Common
    
    
    Stock
    
    
    Retained
    
    
    Comp- Income (Loss),
    
    
    Commerce
    
    
    Interest inDollars in Thousands
    
    Amount
    
    
    Warrant
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    net of tax
    
    
    Holdings
    
    
    Subsidiary
    
    
    TotalCommon cash dividends
($0.29 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,790,423
    )
    
    
    
    
    
    
    (2,790,423
    )
    
    
    0
    
    
    
    (2,790,423
    )Compensation expense
associated with stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,446
    
    
    
    
    
    
    
    
    
    
    
    116,446
    
    
    
    0
    
    
    
    116,446Share Repurchase
    
    
    
    
    
    
    
    
    
    
    (58,800
    )
    
    
    (503,796
    )
    
    
    
    
    
    
    
    
    
    
    (503,796
    )
    
    
    0
    
    
    
    (503,796
    )Stock option exercised
    
    
    
    
    
    
    
    
    
    
    12,850
    
    
    
    41,506
    
    
    
    
    
    
    
    
    
    
    
    41,506
    
    
    
    0
    
    
    
    41,506Balance at
December 31, 2008
    
    $
    16,551,268
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,649,673
    
    
    $
    36,008,865
    
    
    $
    (80,897
    )
    
    $
    62,577,641
    
    
    $
    0
    
    
    $
    62,577,641
 Accumulated
    
    
    SubtotalOther Comp-
    
    
    Bank of
    
    
    Non ControllingDollars in
    
    Comprehensive
    
    
    Preferred
    
    
    
    
    
    
    Common
    
    
    Stock
    
    
    Retained
    
    
    Income (Loss),
    
    
    Commerce
    
    
    Interest inThousands
    
    Income
    
    
    Amount
    
    
    Warrant
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    net of tax
    
    
    Holdings
    
    
    Subsidiary
    
    
    TotalBalance at January 1,
2009
    
    
    
    
    
    $
    16,551,268
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,649,673
    
    
    $
    36,008,865
    
    
    $
    (80,897
    )
    
    $
    62,577,641
    
    
    $
    0
    
    
    $
    62,577,641Comprehensive Income:Net Income
    
    $
    6,268,705
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,005,300
    
    
    
    
    
    
    
    6,005,300
    
    
    
    263,405
    
    
    
    6,268,705Other
Comprehensive
Income:Unrealized gains
on securities
and derivatives
    
    
    2,172,613Less:  reclassification
adjustment for
gains included
in net income,
net of tax
    
    
    (1,434,054
    )Total Other
Comprehensive Income
    
    
    7,007,264Less: Other
Comprehensive Income
non-controlling
interest
    
    
    (263,405
    )Total Comprehensive
Income  BOCH
    
    $
    6,743,859
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    738,559
    
    
    
    738,559
    
    
    
    0
    
    
    
    738,559Accretion on Preferred
Stock
    
    
    
    
    
    
    89,748
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,311
    )
    
    
    
    
    
    
    22,437
    
    
    
    0
    
    
    
    22,437Common cash dividends
($0.24 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,090,760
    )
    
    
    
    
    
    
    (2,090,760
    )
    
    
    0
    
    
    
    (2,090,760
    )Preferred Stock
Dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (852,361
    )
    
    
    
    
    
    
    (852,361
    )
    
    
    0
    
    
    
    (852,361
    )Compensation expense
associated with stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,611
    
    
    
    
    
    
    
    
    
    
    
    80,611
    
    
    
    0
    
    
    
    80,611Fair value of
non-controlling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,061,811
    
    
    
    2,061,811Balance at
December 31, 2009
    
    
    
    
    
    $
    16,641,016
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,730,284
    
    
    $
    39,003,734
    
    
    $
    657,662
    
    
    $
    66,481,428
    
    
    $
    2,325,216
    
    
    $
    68,806,644
 See accompanying notes to consolidated financial statements.
 65




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CONSOLIDATED STATEMENTS OF CASH FLOWS
 2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    6,268,705
    
    
    $
    2,194,386
    
    
    $
    6,106,898Adjustments to reconcile net income to net cash provided
by operating activities:Provision for loan and lease losses
    
    
    9,475,000
    
    
    
    6,520,000
    
    
    
    3,291,250Provision for depreciation and amortization
    
    
    1,221,545
    
    
    
    1,145,000
    
    
    
    1,035,660Compensation expense associated with stock options
    
    
    80,611
    
    
    
    116,446
    
    
    
    116,880Write down of Other Real Estate Owned
    
    
    161,153
    
    
    
    735,000
    
    
    
    Tax benefits from the exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (144,630
    )Gross Proceeds from sales of loans held for sale
    
    
    449,279,623
    
    
    
    
    
    
    
    Gross originations of loans held for sale
    
    
    (445,269,382
    )
    
    
    
    
    
    
    Gain on sale of securities available-for-sale
    
    
    (2,437,575
    )
    
    
    (627,879
    )
    
    
    (45,670
    )Gain on sale of other real estate owned
    
    
    (20,251
    )
    
    
    
    
    
    
    Amortization of securities premiums and accretion of
discounts, net
    
    
    (227,206
    )
    
    
    97,783
    
    
    
    (3,687
    )Loss (gain) on sale of derivative
    
    
    
    
    
    
    225,442
    
    
    
    (41,000
    )Gain on sale of loans
    
    
    (340,621
    )
    
    
    
    
    
    
    Loss (gain) on sale of fixed assets
    
    
    1,009
    
    
    
    3,125
    
    
    
    (48,398
    )(Increase) decrease in deferred income taxes
    
    
    (1,159,007
    )
    
    
    29,120
    
    
    
    (1,646,563
    )(Increase) in cash surrender value of bank owned life
policies
    
    
    (1,563,523
    )
    
    
    (285,786
    )
    
    
    (1,256,708
    )Increase in other assets
    
    
    (4,249,840
    )
    
    
    (9,606,976
    )
    
    
    (514,427
    )Increase in deferred compensation
    
    
    448,972
    
    
    
    391,707
    
    
    
    505,386Increase (decrease) in deferred loan fees
    
    
    122,168
    
    
    
    (127,999
    )
    
    
    (65,385
    )Decrease in other liabilities
    
    
    (486,397
    )
    
    
    (1,064,976
    )
    
    
    (138,198
    )Net cash provided by operating activities
    
    
    11,305,023
    
    
    
    (255,607
    )
    
    
    7,151,408Cash flows from investing activities:Proceeds from maturities of available-for-sale securities
    
    
    32,699,034
    
    
    
    9,125,749
    
    
    
    6,313,987Proceeds from sale of available-for-sale securities
    
    
    78,773,342
    
    
    
    44,828,323
    
    
    
    47,072,143Purchases of available-for-sale securities
    
    
    (55,927,954
    )
    
    
    (105,861,274
    )
    
    
    (24,486,679
    )Purchases of ITIN loan portfolio
    
    
    (66,693,801
    )
    
    
    
    
    
    
    Loan originations, net of principal repayments
    
    
    (33,334,280
    )
    
    
    (39,055,891
    )
    
    
    (80,519,208
    )Maturities of held-to-maturity securities
    
    
    
    
    
    
    97,786
    
    
    
    248,569Key life benefit proceeds
    
    
    
    
    
    
    
    
    
    
    2,400,000Purchase of Bank premises and equipment
    
    
    (375,110
    )
    
    
    (865,084
    )
    
    
    (3,439,403
    )Proceeds from the sale of other real estate owned
    
    
    315,332
    
    
    
    1,200,000
    
    
    
    Cash acquired in acquisition, net of cash consideration
paid
    
    
    264,691
    
    
    
    
    
    
    
    Proceeds on sale of fixed assets
    
    
    350
    
    
    
    5,000
    
    
    
    83,210Net cash used in investing activities
    
    
    (44,278,396
    )
    
    
    (90,525,391
    )
    
    
    (52,327,381
    )Cash flows from financing activities:Net increase in demand deposits and savings accounts
    
    
    7,680,083
    
    
    
    31,080,488
    
    
    
    32,949,640Net increase in certificates of deposit
    
    
    77,502,094
    
    
    
    50,570,118
    
    
    
    1,274,228Net decrease in securities sold under agreements to
repurchase
    
    
    (4,232,388
    )
    
    
    (1,659,956
    )
    
    
    (21,603,399
    )Net change in FHLB advances
    
    
    (50,000,000
    )
    
    
    60,000,000
    
    
    
    20,000,000Net change in other short term borrowings
    
    
    (11,810,238
    )
    
    
    
    
    
    
    Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    17,000,000
    
    
    
    Cash dividends paid on common stock
    
    
    (2,264,986
    )
    
    
    (2,790,423
    )
    
    
    (2,838,028
    )Cash dividends paid on preferred stock
    
    
    (852,361
    )
    
    
    
    
    
    
    Proceeds from stock options exercised
    
    
    
    
    
    
    41,506
    
    
    
    486,881Common Stock Repurchased
    
    
    
    
    
    
    (503,796
    )
    
    
    (2,270,242
    )Excess tax benefits from the exercise of stock options
    
    
    
    
    
    
    
    
    
    
    144,630Net cash provided by financing activities
    
    
    16,022,204
    
    
    
    153,737,937
    
    
    
    28,143,710Net (decrease) increase in cash and cash equivalents
    
    
    (16,951,169
    )
    
    
    62,956,939
    
    
    
    (17,032,263
    )Cash and cash equivalents at beginning of year
    
    
    85,191,062
    
    
    
    22,234,123
    
    
    
    39,266,386Cash and cash equivalents at end of year
    
    $
    68,239,893
    
    
    $
    85,191,062
    
    
    $
    22,234,123
 See accompanying notes to financial statements
 66




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 2009
    
    2008
    
    2007Supplemental disclosures:Cash paid during the period for:Income taxes
    
    $
    3,496,131
    
    
    $
    316,000
    
    
    $
    2,752,860Interest
    
    $
    12,414,822
    
    
    $
    16,510,235
    
    
    $
    19,279,879Transfer of loans to OREO
    
    $
    402,038
    
    
    $
    4,869,151
    
    
    
    Reclassification of
held-to-maturity securities to
available-for-sale
    
    
    
    
    
    $
    8,804,998
    
    
    
    Acquisition at fair valueAssets Acquired
    
    $
    14,857,000
    
    
    
    
    
    
    
    Liabilities Assumed
    
    $
    14,057,000
    
    
    
    
    
    
    
    
 See accompanying notes to consolidated financial statements.
 67




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. THE BUSINESS OF THE COMPANY
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Financial Statement Presentation
  68




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Principles of Consolidation
 Cash and Cash Equivalents
 Securities purchased under agreements to resell 
 Securities
  69




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Loans 
   Allowance for Loan and Lease Losses 
 70




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Bank Premises and Equipment 
 Securities Sold under Agreements to Repurchase 
 Federal Home Loan Bank Borrowings 
 Goodwill and Other Intangibles
 Earnings Per Share 
 71




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts in thousands, except per share data)
 2009
    
    
    2008
    
    
    2007Earnings Per ShareBasic EPS Calculation:Net Income attributable to Bank of Commerce Holdings
    
    $
    6,005,300
    
    
    $
    2,194,386
    
    
    $
    6,106,898Less: preferred dividend
    
    
    942,109
    
    
    
    
    
    
    
    Numerator: Earnings available to common shareholders
    
    $
    5,063,191
    
    
    $
    2,194,386
    
    
    $
    6,106,898Denominator (average common shares outstanding)
    
    
    8,711,495
    
    
    
    8,712,873
    
    
    
    8,857,627Basic earnings per Share
    
    $
    0.58
    
    
    $
    0.25
    
    
    $
    0.69Diluted EPS Calculation:Net Income
    
    $
    6,005,300
    
    
    $
    2,194,386
    
    
    $
    6,106,898Less: preferred dividend
    
    
    942,109
    
    
    
    
    
    
    
    Numerator: Earnings available to common shareholders
    
    $
    5,063,191
    
    
    $
    2,194,386
    
    
    $
    6,106,898Denominator:Average common shares outstanding
    
    
    8,711,495
    
    
    
    8,712,873
    
    
    
    8,857,627Plus incremental shares from assumed conversionsStock Options
    
    
    
    
    
    
    11,677
    
    
    
    80,109Warrants
    
    
    
    
    
    
    
    
    
    
    8,711,495
    
    
    
    8,724,550
    
    
    
    8,937,736Diluted earnings per Share
    
    $
    0.58
    
    
    $
    0.25
    
    
    $
    0.68Anti-dilutive options not included in EPS Calculation
    
    
    282,080
    
    
    
    185,666
    
    
    
    120,884Anti-dilutive warrants not included in EPS Calculation
    
    
    405,405
    
    
    
    405,405
    
    
    
    
 Other Real Estate Owned 
  Segment Reporting
 Income Taxes 
 72




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Stock Option Plan Stock Compensation,
 Description of stock-based compensation plan
     Comprehensive Income (Loss)
 73




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Transfer of Financial Assets 
     Preferred Stock 
 74




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Warrants 
 Mortgages Loans Held for Sale
 Derivative Loan Commitments 
 Advertising Costs 
 Recent Accounting Pronouncements
 Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements.
 75




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fair Value Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements. FASB Accounting Standards
Codification
  Equity (Topic 505): Accounting for Distributions to
Shareholders with Components of Stock and Cash
   76




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Transfers and Servicing.
     77




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   78




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    BUSINESS COMBINATIONSA business combination occurs when an entity acquires net assets that constitute a business,
or acquires equity interests in one or more other entities that are businesses and obtains
control over those entities. Business combinations may be effected through the transfer of
consideration such as cash, other financial or non-financial assets, debt, or common or
preferred shares. The assets
and liabilities of an acquired entity or business are recorded at their respective fair values as
of the closing date of the transaction.The results of operations of an acquired entity are included in our consolidated results
from the closing date of the transaction, and prior periods are not restated. All business
combinations are accounted for using the acquisition method.The Company will regularly explore opportunities to acquire financial services companies and
businesses. Public announcements about an acquisition opportunity are not made until a
definitive agreement has been signed. In the second quarter 2009, the Company entered into a
stock purchase agreement with Simonich Corporation d.b.a. BWC Mortgage Services to acquire
51% of the capital stock of Simonich Corporation. Simonich Corporation d.b.a. BWC Mortgage
Services is a successful state of the art mortgage broker of residential real estate loans
with ten offices in three different states and licenses in California, Oregon, Idaho and
Nevada. The business was formed in 1993 and the corporate offices are located in San Ramon,
California. The Corporate offices are located in San Ramon, California.The agreement was dated May 15, 2009. The total consideration paid by the Company was
$2.5 million, with $1.5 million paid at closing and the additional $1.0 million to be
earned-out over a period of three years. The earn-out is based upon the mortgage companys
profits and will be paid in annual installments over the three year period. The measurement
date for the earn out payments is December 31. The Company has accounted for the business
combination using the acquisition method. The Companys acquisition of 51% majority
ownership interest was measured at fair value based on the total consideration transferred.The market and income approaches were used to value the business. The total estimated fair
value of the non controlling interest was estimated to be $2.06 million and was based on the
following multiples: 13.27 times trailing twelve months earnings, 29.21% price to trailing
twelve months gross revenues and 436.70% of total shareholders equity.The agreement allows the Company to penetrate into the Mortgage Brokerage Services market
through our retail outlets and to share in the income on transactions produced from other
locations. Effective July 1, 2009 the Company changed its name to Bank of Commerce
Mortgage.
 79




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Purchase Price and Goodwill
  (In Thousands)Cash paid  at fair value
    
    $
    1,500Earn out payable  at fair value
    
    
    965Total consideration at fair value
    
    
    2,465Fair value of non-controlling interest
    
    
    2,062$
    4,527Net acquisition date fair value of assets acquired
    
    $
    (800
    )Goodwill
    
    $
    3,727
   (In Thousands)Cash and Cash Equivalents
    
    $
    1,765Accounts Receivable
    
    
    10Other Receivables
    
    
    437Loans held for sale
    
    
    12,006Prepaid Expenses
    
    
    57Notes Receivable
    
    
    414Total Current Assets:
    
    
    14,689Fixed Assets
    
    
    155Other Assets
    
    
    13TOTAL ASSETS
    
    $
    14,857Accounts Payable
    
    
    99Accrued Expenses
    
    
    232Branch Payables
    
    
    191Total Payables:
    
    
    522Current portion Capital Lease
    
    
    39Impounds payable
    
    
    67Mortgage warehouse lines of credit
    
    
    11,810Total Other Current Liabilities:
    
    
    11,916Total Current Liabilities:
    
    $
    12,438Long Term Capital Lease Payable
    
    
    15Due to shareholder
    
    
    224Notes Payable
    
    
    1,380Total Long Term Liabilities:
    
    
    1,619TOTAL LIABILITIES
    
    
    14,057Net Assets
    
    $
    800
 80




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Year EndedDecember 31,2009
    
    
    2008Net interest income
    
    $
    28,965
    
    
    $
    21,283Provision for loan and lease losses
    
    
    9,475
    
    
    
    6,520Noninterest income
    
    
    12,776
    
    
    
    7,523Noninterest expense
    
    
    22,863
    
    
    
    20,030Income before income tax
    
    
    9,403
    
    
    
    2,256Provision (benefit) for income tax
    
    
    2,691
    
    
    
    (60
    )Net Income
    
    
    6,712
    
    
    
    2,196Less: income attributable to non-controlling interest
    
    
    (481
    )
    
    
    (58
    )Net Income attributable to Bank of Commerce Holdings
    
    $
    6,231
    
    
    $
    2,254Net income per common share  Basic
    
    $
    0.60
    
    
    $
    0.26Net income per common share  Diluted
    
    $
    0.60
    
    
    $
    0.25
 4.
    
    RESTRICTIONS ON CASH AND DUE FROM BANKSThe Bank maintains compensating balances with its primary correspondent, which totaled $0 at
December 31, 2009 and $2,000,000 at December 31, 2008 respectively.
 5.
    
    SECURITIESThe amortized cost and estimated fair value of securities available-for-sale are
summarized as follows:
 December 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury securities
and obligations of U.S.
agencies
    
    $
    18,499,710
    
    
    $
    101,015
    
    
    
    ($102
    )
    
    $
    18,600,623Obligations of state and
political subdivisions
    
    
    32,184,322
    
    
    
    547,480
    
    
    
    (85,544
    )
    
    
    32,646,258Mortgage-backed securities
    
    
    28,277,791
    
    
    
    868,744
    
    
    
    (331,280
    )
    
    
    28,815,255$
    78,961,823
    
    
    $
    1,517,239
    
    
    
    ($416,926
    )
    
    $
    80,062,136
 81




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury securities
and obligations of U.S.
agencies
    
    $
    16,006,571
    
    
    $
    69,080
    
    
    $
    0
    
    
    $
    16,075,651Obligations of state and
political subdivisions
    
    
    32,177,891
    
    
    
    145,647
    
    
    
    (1,302,628
    )
    
    
    31,020,910Mortgage-backed securities
    
    
    83,657,023
    
    
    
    1,278,263
    
    
    
    (345,247
    )
    
    
    84,590,039$
    131,841,485
    
    
    $
    1,492,990
    
    
    $
    (1,647,875
    )
    
    $
    131,686,600
  Available-for-SaleAmortized
    
    
    EstimatedCost
    
    
    Fair ValueDue in one year or less
    
    $
    0
    
    
    $
    0Due after one year through five years
    
    
    3,221,435
    
    
    
    3,304,584Due after five years through ten years
    
    
    19,310,157
    
    
    
    19,450,372Due after ten years
    
    
    56,430,231
    
    
    
    57,307,180$
    78,961,823
    
    
    $
    80,062,136
 The following tables present the current fair value and associated unrealized losses on
investments with unrealized losses at December 31, 2009 and December 31, 2008. The tables
also illustrate whether these securities have had unrealized losses for less than 12 months
or for 12 months or longer.
 December 31, 2009Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Treasury
securities and
Obligations of U.
S. Agencies
    
    $
    3,993,500
    
    
    $
    (102
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    3,993,500
    
    
    $
    (102
    )Obligations of
state and political
subdivisions
    
    
    8,516,376
    
    
    
    (84,460
    )
    
    
    500,255
    
    
    
    (1,084
    )
    
    
    9,016,631
    
    
    
    (85,544
    )Mortgage-backed
securities
    
    
    7,516,495
    
    
    
    (331,280
    )
    
    
    0
    
    
    
    0
    
    
    
    7,516,495
    
    
    
    (331,280
    )Total temporarily
impaired securities
    
    $
    20,026,371
    
    
    $
    (415,842
    )
    
    $
    500,255
    
    
    $
    (1,084
    )
    
    $
    20,526,626
    
    
    $
    (416,926
    )
 82




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2008Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. Treasury
securities and
Obligations of U.
S. Agencies
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Obligations of
state and political
subdivisions
    
    
    21,125,047
    
    
    
    (1,140,217
    )
    
    
    843,658
    
    
    
    (162,412
    )
    
    
    21,968,705
    
    
    
    (1,302,628
    )Mortgage-backed
securities
    
    
    16,666,493
    
    
    
    (105,783
    )
    
    
    5,375,203
    
    
    
    (239,463
    )
    
    
    22,041,696
    
    
    
    (345,247
    )Total temporarily
impaired securities
    
    $
    37,791,540
    
    
    $
    (1,246,000
    )
    
    $
    6,218,861
    
    
    $
    (401,875
    )
    
    $
    44,010,401
    
    
    $
    (1,647,875
    )
    83




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 At December 31, 2009 nineteen securities were in a loss position. Management has
evaluated each security in an unrealized loss position to determine if the impairment is
other-than-temporary. We do not have the intent to sell the investments that are temporarily
impaired, and it is more likely than not that we will not have to sell those investments
before recovery of the amortized cost basis. Additionally, we have evaluated the credit
ratings of our investment securities and their issuers and or insurers, if applicable. Based
upon our evaluation, management has determined that no investment security in our portfolio
is other than temporarily impaired.At December 31, 2009, the Company has pledged book values of $1,003,057 in securities for
treasury, tax and loan accounts, $18,029,596 for deposits of public funds, $9,620,867 for
collateralized repurchase agreements, and $27,018,747 for Federal Home Loan borrowings.At December 31, 2008, the Company has pledged book values of $1,000,000 in securities for
treasury, tax and loan accounts, $17,218,434 for deposits of public funds, $12,453,000 for
collateralized repurchase agreements, and $38,063,566 for Federal Home Loan borrowings.Gross realized gains and gross realized losses, respectively, on available-for-sale
securities were $2,697,177 and $259,602 in 2009, $632,639 and $4,760 in 2008, and $268,078
and $222,408 in 2007.
 6.
    
    LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSESOutstanding loan balances consist of the following at:
 December 31,2009
    
    
    2008Commercial and industrial loans
    
    $
    133,078,497
    
    
    $
    164,082,996Real estate  construction loans
    
    
    59,524,479
    
    
    
    84,217,532Real estate  commercial (investor)
    
    
    197,023,000
    
    
    
    147,068,475Real estate  commercial (owner occupied)
    
    
    63,001,474
    
    
    
    70,046,475Real estate  ITIN loans
    
    
    78,250,000
    
    
    
    Real estate  mortgage
    
    
    20,525,647
    
    
    
    20,285,225Real estate  equity lines
    
    
    45,601,366
    
    
    
    39,915,224Installment loans
    
    
    2,222,766
    
    
    
    144,634Other
    
    
    2,211,688
    
    
    
    902,584601,438,917
    
    
    
    527,462,670Less:Deferred loan fees, net
    
    
    208,994
    
    
    
    86,826Allowance for loan and lease losses
    
    
    11,207,213
    
    
    
    8,429,383$
    590,022,710
    
    
    $
    518,946,461
 Included in total loans are nonaccrual loans of $7,666,909 and $20,153,737 at December 31,
2009 and 2008, respectively. A loan is impaired when, based on current information and
events, management believes it is probable that the Bank will not be able to collect all
amounts due according to the contractual terms of the loan agreement. If interest on
nonaccrual loans at December 31, 2009 and 2008 had been accrued, such interest income would
have approximated $319,485 and $147,100, respectively. At December 31, 2009 and 2008 there
were $5,052,164 and $0 in loans ninety days past due and still accruing respectively.
 84




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The average outstanding balances of impaired loans were $10,948,485, $23,078,874 and
$13,001,847, for the years ended December 31, 2009, 2008 and 2007 respectively. There was
interest of $162,510, $627,000, and $0 recognized on impaired loans during the year ended
December 31, 2009, 2008 and 2007, respectively. The recorded investment in impaired loans at December 31, 2009, and 2008 was $12,546,628
and, $12,192,187 respectively. The recorded investment in impaired loans for which there is
a specific reserve at December 31, 2009 and 2008 was $3,162,275 and $7,459,295 respectively.
Impairment allowances held against impaired loans at December 31, 2009 and 2008 were
$245,000 and $1,522,829 respectively. The recorded investment in impaired loans for which
there is no specific reserve was $9,384,353 and $4,732,892 at December 2009, and 2008
respectively.The Company concentrates its lending activities primarily within Shasta, El Dorado, Placer,
Sacramento and Tehama counties, in California, and the location of the four full service
offices of the Bank. Although the Company has a diversified loan portfolio, a significant
portion of its customers ability to repay the loans is dependent upon the professional
services and investor commercial real estate sectors. Generally, the loans are secured by
real estate or other assets and are expected to be repaid from cash flows of the borrowers
business or cash flows from real estate investments. In the event the borrowers cash flows
are insufficient to repay the loans and the loans are considered collateral dependent,
repayment is expected to come from the liquidation of collateral.The Companys exposure to credit loss, if any, is the difference between the fair value of
the collateral, and the outstanding balance of the loan.At December 31, 2009 and 2008, the Company had pledged $101,271,858 and $96,721,113,
respectively, in loans as available collateral for Federal Home Loan Bank borrowings.In the ordinary course of business, the Company enters various types of transactions,
which involve financial instruments with off-balance sheet risk. These instruments include
commitments to extend credit and stand-by letters of credit, which are not reflected in the
consolidated balance sheets. These transactions may involve, to varying degrees, credit and interest rate risk more than
the amount, if any recognized in the consolidated balance sheets. Commitments to extend
credit and standby letters of credit bear similar credit risk characteristics as outstanding
loans. An allowance for unfunded loan commitments and letters of credit is determined using
estimates of the probability of funding. This reserve is carried as a liability on the
consolidated balance sheet.Changes in the allowance for loan losses consist of the following:
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Balance at beginning of year
    
    $
    8,429,383
    
    
    $
    8,232,970
    
    
    $
    4,904,266Provision for loan losses
    
    
    9,475,000
    
    
    
    6,520,000
    
    
    
    3,291,250Loans charged off
    
    
    (6,871,316
    )
    
    
    (6,329,176
    )
    
    
    0Recoveries of loans
previously charged off
    
    
    174,146
    
    
    
    5,589
    
    
    
    37,454Balance at end of year
    
    $
    11,207,213
    
    
    $
    8,429,383
    
    
    $
    8,232,970
 85




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    OTHER REAL ESTATE OWNEDThe following table presents the changes in other real estate owned (OREO), net of
valuation allowance, for the years ended December 31, 2009, 2008 and 2007:
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Balance at beginning of year
    
    $
    2,934,151
    
    
    $
    0
    
    
    $
    0Additions to OREO
    
    
    402,038
    
    
    
    4,869,151
    
    
    
    0Dispositions of OREO
    
    
    (295,080
    )
    
    
    (1,200,000
    )
    
    
    0Valuation adjustments in the period
    
    
    (161,153
    )
    
    
    (735,000
    )
    
    
    0Balance at end of year
    
    $
    2,879,956
    
    
    $
    2,934,151
    
    
    $
    0
 OREO properties are recorded at the lower of the recorded investment in the loan (prior to
foreclosure) or the fair value of the property less selling costs. The Company recognized
valuation allowances of $161,153 and $1,935,000 as of December 31, 2009 and 2008. No OREO
was outstanding at December 31, 2007. Valuation allowances on OREO balances are based on
updated appraisals of the underlying properties as received during a period or managements
authorization to reduce a selling price of a property during a period.
 8.
    
    BANK PREMISES AND EQUIPMENTBank premises and equipment consist of the following:
 Estimated
    
    
    December 31,Lives
    
    
    2009
    
    
    2008Land
    
    
    
    
    
    $
    1,507,628
    
    
    $
    1,507,628Land Improvements
    
    
    
    
    
    
    188,845
    
    
    
    188,845Bank buildings
    
    39.0 years
    
    
    8,317,583
    
    
    
    8,138,044Furniture, fixtures and
equipment
    
    3 - 7 years
    
    
    6,767,540
    
    
    
    6,703,86516,781,596
    
    
    
    16,538,382Less accumulated depreciation
    
    
    
    
    
    
    (6,805,073
    )
    
    
    (5,933,372
    )9,976,523
    
    
    
    10,605,010Construction in progress
    
    
    
    
    
    
    3,042
    
    
    
    67,200$
    9,979,565
    
    
    $
    10,672,210
 Depreciation expense, included in net occupancy and equipment expense, is $1,221,545,
$1,145,000, and $1,035,660 for the years ended December 31, 2009, 2008 and 2007,
respectively.
 86




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    OTHER ASSETSOther assets consist of the following:
 December 31,2009
    
    
    2008Cash surrender value of bank owned life insurance policies
    
    $
    8,978,926
    
    
    $
    7,415,413Deferred tax asset, net
    
    
    5,574,418
    
    
    
    4,932,051Accrued interest on loans
    
    
    2,428,172
    
    
    
    2,051,386Accrued interest on investment securities
    
    
    623,533
    
    
    
    1,079,110California Affordable Housing Credits
    
    
    2,288,828
    
    
    
    2,414,517Prepaid FDIC Deposit Insurance Assessments
    
    
    3,331,057
    
    
    
    0Taxes receivable
    
    
    489,746
    
    
    
    447,865Federal Home Loan Bank Stock
    
    
    6,110,000
    
    
    
    5,640,000Investment in junior subordinated debt payable to
subsidiary grantor trust
    
    
    465,000
    
    
    
    465,000Other
    
    
    916,731
    
    
    
    338,134$
    31,206,411
    
    
    $
    24,783,476
 10.
    
    DEPOSITSTime certificates of deposit equal to or greater than $100,000 totaled $250,779,452 and
$168,810,092 at December 31, 2009 and 2008, respectively. Interest expense on such deposits
was $5,166,385, $5,785,386 and $6,062,259 during 2009, 2008 and 2007, respectively.At December 31, 2009, the scheduled maturities for all time deposits are as follows:
 Time Deposit Maturity ScheduleOne year or less
    
    $
    251,284,710One to three years
    
    
    83,029,052Three to five years
    
    
    7,474,936Over five years
    
    
    Total
    
    $
    341,788,698
 87




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    OTHER LIABILITIESOther liabilities consist of the following:
 December 31,2009
    
    
    2008Deferred compensation  retired officers
    
    $
    817,616
    
    
    $
    931,777Deferred compensation  directors fees
    
    
    2,803,310
    
    
    
    2,600,231Deferred compensation  salary continuation
    
    
    1,595,661
    
    
    
    1,235,605Employee incentive payable
    
    
    188,000
    
    
    
    0FHLB accrued interest payable
    
    
    2,389
    
    
    
    154,396Accrued 401(k) match payable
    
    
    72,859
    
    
    
    66,365Accrued interest payable
    
    
    458,347
    
    
    
    618,890Reserve for off-balance sheet commitments
    
    
    421,877
    
    
    
    421,877Interest payable Junior Subordinated Debentures
    
    
    102,722
    
    
    
    158,621Dividend payable
    
    
    522,690
    
    
    
    696,920Note payable  fair value of earn-out agreement
    
    
    965,240
    
    
    
    0Other
    
    
    1,098,844
    
    
    
    151,479$
    9,049,555
    
    
    $
    7,036,161
 12.
    
    WHOLESALE ADVANCESFHLB Advances- Included in other borrowings are advances from the Federal Home Loan Bank of
San Francisco (FHLB) totaling $70,000,000 as of December 31, 2009 and $120,000,000 as of
December 31, 2008. The FHLB advances bear fixed rates of interest ranging from 0.13% to
3.41%.
 Amount
    
    Interest Rate
    
    Maturity$15,000,000
    
    
    0.13
    %
    
    
    01/19/2010$40,000,000
    
    
    0.16
    %
    
    
    01/25/2010$15,000,000
    
    
    3.41
    %
    
    
    04/29/2011$70,000,000
 These borrowings are secured by an investment in FHLB stock and certain real estate
mortgage loans which have been specifically pledged to the FHLB pursuant to their collateral
requirements. Based upon the level of FHLB advances, the Company was required to hold a
minimum investment in FHLB stock of $6,110,000 at December 31, 2009 and has pledged
$101,271,858 and $96,721,113 of its real estate mortgage loans to the FHLB as collateral as
of December 31, 2009 and 2008, respectively. At December 31, 2009 the Bank had available
borrowing lines at the FHLB of $55,641,301 and additional federal fund borrowing lines at a
correspondent banks totaling $10,000,000.FRB Term Auction Facility Advances The Company periodically obtains secured
borrowings from the Federal Reserve Bank of San Francisco (FRB). FRB borrowings outstanding
were $0 as of December 31, 2009 and $0 as of December 31, 2008. The FRBs TAF credit facility
is an auction based borrowing with terms limited to a 28 day maturity. The Company has
pledged $97,003,004 in commercial and industrial loans as collateral as of December 31, 2009,
and had available borrowing lines at the FRB of $55,320,283.
 88




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13.
    
    PREFERRED STOCK AND WARRANTSPursuant to a Letter Agreement dated November 14, 2008, and the Securities Purchase
Agreement  Standard Terms the Company issued to the United States Department of the
Treasury (Treasury Department) 17,000 shares of Bank of Commerce Holdings Series A Fixed
Rate Perpetual Preferred Stock, without par value (the Series A Preferred Stock), having a
liquidation amount per share equal to $1,000 for a total price of $17 million. The Series A
Preferred Stock pays cumulative dividends at a rate of 5% per year for the first five years
and thereafter at a rate of 9% per year. The Company may not redeem the Series A Preferred
Stock during the first three years except with the proceeds from a qualified equity
offering. After three years, the Company may, at our option, redeem the Series A Preferred
Stock at par value plus accrued and unpaid dividends. The Series A Preferred Stock is
generally non-voting. Prior to November 14, 2011, unless the Company has redeemed the Series
A Preferred Stock or the Treasury Department has transferred the Series A Preferred Stock to
a third party, the consent of the Treasury Department will be required for the Company to
increase our common stock dividend or repurchase our common stock or other equity or capital
securities, other than in connection with benefit plans consistent with past practice and
certain other circumstances specified in the Securities Purchase Agreement. A consequence of
the Series A Preferred Stock purchase includes certain restrictions on executive
compensation that could limit the tax deductibility of compensation we pay to executive
management.As part of its purchase of the Series A Preferred Stock, the Treasury Department
received a warrant (the Warrant) to purchase 405,405 shares of the Companys common stock
at an initial per share exercise price of $6.29. The Warrant provides for the adjustment of
the exercise price and the number of shares of our common stock issuable upon exercise
pursuant to customary anti-dilution provisions, such as upon stock splits or distributions
of securities or other assets to holders of our common stock, and upon certain issuances of
our common stock at or below a specified price relative to the initial exercise price. The
Warrant expires ten years from the issuance date. If, on or prior to December 31, 2009, the
Company receives aggregate gross cash proceeds of not less than $17 million from qualified
equity offerings announced after November 14, 2008, the number of shares of common stock
issuable pursuant to the Treasury Departments exercise of the Warrant will be reduced by
one-half of the original number of shares, taking into account all adjustments, underlying
the Warrant. Pursuant to the Securities Purchase Agreement, the Treasury Department has
agreed not to exercise voting power with respect to any shares of common stock issued upon
exercise of the Warrant.The preferred stock proceeds from the Treasury Department was allocated based upon the
relative fair value of the warrant as compared with the fair value of the preferred stock.
The fair value of the warrant was determined using a Black-Sholes pricing model
incorporating assumptions including our common stock price, dividend yield, stock price
volatility and risk-free interest rate. We determined the fair value of the preferred stock
based on assumptions regarding the discount rate (market rate) on the preferred stock which
was estimated to be approximately 9.0% at the date of issuance. The discount on the
preferred stock is being accreted to par value over a five-year term which is the expected
life of the preferred stock. The proceeds of $17.0 million were allocated between the
preferred stock and warrant with $16.6 million allocated to preferred stock and $449,000
allocated to the warrant based on their relative fair value at the time of issuance.
 89




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Both the Series A Preferred Stock and Warrant will be accounted for as components of
Tier 1 capital. The Series A Preferred Stock and the Warrant were issued in a private
placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended. Upon the request of the Treasury Department at any time, we have agreed to
promptly enter into a deposit arrangement pursuant to which the Series A Preferred Stock may
be deposited and depositary shares (Depositary Shares) may be issued. Neither the Series A
Preferred Stock nor the Warrant will be subject to any contractual restrictions on transfer,
except that the Treasury Department may only transfer or exercise an aggregate of one-half
of the Warrant Shares prior to the earlier of the redemption of 100% of the shares of
Series A Preferred Stock and December 31, 2009.In the Securities Purchase Agreement, the Company agreed that, until such time as the
Treasury Department ceases to own any securities acquired from us pursuant to the Securities
Purchase Agreement, the Company will take all necessary action to ensure that our benefit
plans with respect to our senior executive officers comply with Section 111(b) of the
Emergency Economic Stabilization Act of 2008 (EESA) as implemented by any guidance or
regulation under Section 111(b) of EESA that has been issued and is in effect as of the date
of issuance of the Series A Preferred Stock and the Warrant and not adopt any benefit plans
with respect to, or which cover, our senior executive officers that do not comply with EESA.
The applicable executives have consented to the foregoing.Prior to November 14, 2011, unless the Company has redeemed the Series A Preferred Stock or
the Treasury Department has transferred the Series A Preferred Stock to a third party, the
consent of the Treasury Department will be required for us to (1) declare or pay any
dividend or make any distribution on our common stock (other than regular quarterly cash
dividends of not more than $0.08 per share of common stock) or (2) redeem, purchase or
acquire any shares of the Companys common stock or other equity or capital securities,
other than in connection with benefit plans consistent with past practice and certain other
circumstances specified in the Securities Purchase Agreement.The Company may opt out by repaying the capital without raising additional capital subject
to consultation with the appropriate Federal regulator.
 14.
    
    JUNIOR SUBORDINATED DEBT PAYABLE TO UNCONSOLIDATED SUBSIDIARY GRANTOR TRUSTSDuring the first quarter 2003, Bank of Commerce Holdings formed a wholly-owned Delaware
statutory business trust, Bank of Commerce Holdings Trust (the grantor trust), which issued
$5.0 million of guaranteed preferred beneficial interests in Bank of Commerce Holdings
junior subordinated debentures (the trust notes) to the public and $155,000 common
securities to the Company. These debentures qualify as Tier 1 capital under Federal Reserve
Board guidelines. The proceeds from the issuance of the trust notes were transferred from the
grantor trust to the Holding Company and from the Holding Company to the Bank as surplus
capital. The trust notes accrue and pay distributions on a quarterly basis at three month
London Interbank Offered Rate (LIBOR) plus 3.30%. The rate at December 31, 2009 was 3.58%.
The rate increase is capped at 2.75% annually and the lifetime cap is 12.5%. The final
maturity on the trust notes is March 18, 2033, and the debt allows for prepayment after five
years on the quarterly payment date.
 90




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      15.
    
    SEGMENT REPORTING
  91




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Mortgage brokerage services are performed by Bank of Commerce Mortgage subsidiary.
Mortgage brokerage services offers residential real estate loans with ten offices in three
different states and licenses in California, Oregon, Washington, Idaho and Colorado.
Mortgages that are originated are sold, servicing included, in the secondary market or
directly to correspondent financial institutions.For the years ended December 31, 2008 and 2007, the Company maintained only one operating
segment, commercial banking.
  Bank
    
    
    Mortgage
    
    
    Parent
    
    
    ConsolidatedNet interest income
    
    $
    29,552
    
    
    $
    (13
    )
    
    $
    (545
    )
    
    $
    28,994Provision for loan and lease losses
    
    
    9,475
    
    
    
    
    
    
    
    
    
    
    
    9,475Total noninterest income
    
    
    4,770
    
    
    
    5,293
    
    
    
    
    
    
    
    10,063Total noninterest expense
    
    
    15,908
    
    
    
    4,415
    
    
    
    301
    
    
    
    20,624Income before provision for income taxes
    
    
    8,939
    
    
    
    865
    
    
    
    (846
    )
    
    
    8,958Provision for income taxes
    
    
    2,363
    
    
    
    326
    
    
    
    1
    
    
    
    2,690Net Income
    
    
    6,576
    
    
    
    539
    
    
    
    (847
    )
    
    
    6,268Less: Net income attributable to
non-controlling interest
    
    
    
    
    
    
    263
    
    
    
    
    
    
    
    263Net Income attributable to Bank of
Commerce Holdings
    
    $
    6,576
    
    
    $
    276
    
    
    $
    (847
    )
    
    $
    6,005
 92




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  ASSETS
 Dollars in thousands
    
    Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedCash and due from banks, non interest bearing
    
    $
    36,531
    
    
    $
    2,512
    
    
    $
    977
    
    
    $
    (3,118
    )
    
    $
    36,902Interest bearing due from banks
    
    
    31,338
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,338Federal funds sold and securities purchased
under agreements to resell
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Cash and cash equivalents
    
    
    67,869
    
    
    
    2,512
    
    
    
    977
    
    
    
    (3,118
    )
    
    
    68,240Securities available-for-sale at fair value
(including pledged collateral of $61,345 at
September 30, 2009)
    
    
    80,062
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,062Portfolio loans
    
    
    606,472
    
    
    
    
    
    
    
    2,470
    
    
    
    (7,712
    )
    
    
    601,230Allowance for loan and lease losses
    
    
    (11,168
    )
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (11,207
    )Portfolio loans net of allowance
    
    
    595,304
    
    
    
    
    
    
    
    2,431
    
    
    
    (7,712
    )
    
    
    590,023Mortgage loans held for sale
    
    
    19,229
    
    
    
    8,059
    
    
    
    
    
    
    
    
    
    
    
    27,288Premises and equipment, net
    
    
    9,868
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    9,980Investment in Bank of Commerce Mortgage
    
    
    
    
    
    
    
    
    
    
    2,739
    
    
    
    (2,739
    )
    
    
    Investment in Trust
    
    
    
    
    
    
    
    
    
    
    465
    
    
    
    
    
    
    
    465Investment in Bank
    
    
    
    
    
    
    
    
    
    
    76,920
    
    
    
    (76,920
    )
    
    
    Goodwill
    
    
    
    
    
    
    3,727
    
    
    
    
    
    
    
    
    
    
    
    3,727Other real estate owned
    
    
    2,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,880Other assets
    
    
    32,004
    
    
    
    591
    
    
    
    
    
    
    
    (1,854
    )
    
    
    30,741TOTAL ASSETS
    
    $
    807,216
    
    
    $
    15,001
    
    
    $
    83,532
    
    
    $
    (92,343
    )
    
    $
    813,406
 LIABILITIES AND SHAREHOLDERS EQUITY
 Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedDemand  noninterest bearing
    
    $
    72,565
    
    
    
    
    
    
    
    
    
    
    $
    (3,118
    )
    
    $
    69,447Demand  interest bearing
    
    
    163,814
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,814Savings accounts
    
    
    65,414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,414Certificates of deposit
    
    
    341,789
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    341,789Total deposits
    
    
    643,582
    
    
    
    
    
    
    
    
    
    
    
    (3,118
    )
    
    
    640,464Securities sold under agreements to repurchase
    
    
    9,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,621Federal Home Loan Bank borrowings
    
    
    70,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,000Mortgage warehouse lines of credit
    
    
    
    
    
    
    7,712
    
    
    
    
    
    
    
    (7,712
    )
    
    
    0Other liabilities
    
    
    7,093
    
    
    
    2,225
    
    
    
    1,585
    
    
    
    (1,854
    )
    
    
    9,049Junior subordinated debt payable to unconsolidated
    
    
    
    
    
    
    
    
    
    
    15,465subsidiary grantor trust
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,465Total Liabilities
    
    
    730,296
    
    
    
    9,937
    
    
    
    17,050
    
    
    
    (12,684
    )
    
    
    744,599Commitments and contingencies
Shareholders Equity:Preferred stock (liquidation preference of $1,000 per share; issued 2008)
2,000,000 authorized; 17,000 shares issued and outstanding in 2009, and
December 31, 2008, none outstanding at September 30, 2008
    
    
    13,000
    
    
    
    
    
    
    
    16,641
    
    
    $
    (13,000
    )
    
    
    16,641Common stock , no par value, 50,000,000 shares authorized; 8,711,495 shares
issued and outstanding at September 30, 2009
    
    
    2,341
    
    
    
    1
    
    
    
    9,730
    
    
    
    (2,342
    )
    
    
    9,730Common Stock Warrant
    
    
    
    
    
    
    
    
    
    
    449
    
    
    
    
    
    
    
    449Additional Paid in Capital
    
    
    28,096
    
    
    
    2,738
    
    
    
    
    
    
    
    (30,834
    )
    
    
    Retained Earnings
    
    
    32,825
    
    
    
    
    
    
    
    39,004
    
    
    
    (32,825
    )
    
    
    39,004Accumulated other comprehensive income, net of tax
    
    
    658
    
    
    
    
    
    
    
    658
    
    
    
    (658
    )
    
    
    658Total Equity  Bank of Commerce Holdings
    
    
    76,920
    
    
    
    2,739
    
    
    
    66,482
    
    
    
    (79,659
    )
    
    
    66,482Non controlling interest in subsidiary
    
    
    
    
    
    
    2,325
    
    
    
    
    
    
    
    
    
    
    
    2,325Total shareholders equity
    
    
    76,920
    
    
    
    5,064
    
    
    
    66,482
    
    
    
    (79,659
    )
    
    
    68,807TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    807,216
    
    
    $
    15,001
    
    
    $
    83,532
    
    
    $
    (92,343
    )
    
    $
    813,406
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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16.
    
    INCOME TAXESProvision (benefit) for income taxes consists of the following:
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    3,069,967
    
    
    $
    158,421
    
    
    $
    2,448,140State
    
    
    778,738
    
    
    
    (227,067
    )
    
    
    603,476Total current provision (benefit)
    
    
    3,848,205
    
    
    
    (68,646
    )
    
    
    3,051,616Deferred:Federal
    
    
    (783,750
    )
    
    
    102,507
    
    
    
    (1,167,545
    )State
    
    
    (375,257
    )
    
    
    (73,387
    )
    
    
    (479,018
    )Total deferred (benefit) provision
    
    
    (1,159,007
    )
    
    
    29,120
    
    
    
    (1,646,563
    )Total provision (benefit) for
income taxes
    
    $
    2,689,698
    
    
    $
    (39,526
    )
    
    $
    1,405,053
 In October 2006, the Company invested in the California Affordable Housing Fund -2006 I,
LLC. The investment provides funding for low income housing projects in our local markets
in return for federal and state tax credits. As of December 31, 2009 the original
commitment of $2.5 million should be fully disbursed during 2010. The tax benefit summary
provided by the California Affordable Housing Fund  2006 I, LLC was $158,054 for federal
and $158,214 for state as of December 31, 2009.Income tax expense attributable to income before income taxes differed from the amounts
computed by applying the U.S. federal income tax rate of 34 percent to income before
income taxes because of the following:
 % of Pretax Income2009
    
    
    2008
    
    
    2007Income tax at the Federal statutory rate
    
    
    34.00
    %
    
    
    34.00
    %
    
    
    34.00
    %State franchise tax, net of Federal tax benefit
    
    
    2.98
    
    
    
    (12.16
    )
    
    
    1.09Tax-exempt interest
    
    
    (4.07
    )
    
    
    (15.79
    )
    
    
    (4.48
    )Key life benefit proceeds
    
    
    0.00
    
    
    
    0.00
    
    
    
    (8.84
    )Officer life insurance
    
    
    (1.53
    )
    
    
    (4.51
    )
    
    
    (1.54
    )Affordable housing credits
    
    
    (1.95
    )
    
    
    (7.39
    )
    
    
    (2.51
    )Other
    
    
    0.59
    
    
    
    4.02
    
    
    
    .98Effective Tax Rate
    
    
    30.02
    %
    
    
    (1.83
    %)
    
    
    18.70
    %
 94




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities consist of the following as of December
31:
 2009
    
    
    2008Deferred tax assets:State franchise taxes
    
    $
    79,055
    
    
    
    Deferred compensation
    
    
    2,339,118
    
    
    
    2,137,799Loan loss reserves
    
    
    5,130,478
    
    
    
    3,779,735Net
unrealized losses on securities available-for-sale
    
    
    (460,050
    )
    
    
    56,590Other
    
    
    270,239
    
    
    
    24,767Total deferred tax assets
    
    
    7,358,840
    
    
    
    5,998,891Deferred tax liabilities:State franchise taxes
    
    
    
    
    
    
    ($72,046
    )Depreciation
    
    
    (591,235
    )
    
    
    (68,095
    )Deferred loan origination costs
    
    
    (466,094
    )
    
    
    (426,715
    )Deferred state taxes
    
    
    (571,579
    )
    
    
    (443,992
    )Other  California Affordable Housing
    
    
    (155,514
    )
    
    
    (55,992
    )Total deferred tax liabilities
    
    
    (1,784,422
    )
    
    
    (1,066,840
    )Net deferred tax asset
    
    $
    5,574,418
    
    
    $
    4,932,051
 The Company had no unrecognized tax benefits which would have required an adjustment to
the January 1, 2007 beginning balance of retained earnings. Additionally, the Company has
no unrecognized tax benefits at December 31, 2009 and 2008. The Company recognizes
interest accrued and penalties related to unrecognized tax benefits in tax expense. The
Company does not anticipate providing a reserve for uncertain tax positions in the next
twelve months. During the years ended December 31, 2009, 2008 and 2007 the Company
recognized no interest and penalties associated with uncertain tax positions.The Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, and the State of California. With few exceptions, the Company is no longer
subject to U.S. federal or State and local income tax examinations by tax authorities for
the years before 2006.
 17.
    
    STOCK OPTION PLANOn May 1, 2008 the 1998 Stock Option Plan which was approved by the Companys shareholders
on April 21, 1998 expired and was replaced by the 2008 Stock Option Plan (the Plan) which
was approved by the Companys shareholders on May 15, 2007. The Plan provides for awards
in the form of options, which may constitute incentive stock options (Incentive Options)
under Section 422(a) of the Internal Revenue Code of 1986, as amended (the Code), or
non-statutory stock options (NSOs) to key personnel of the Company, including directors.
The Plan provides that Incentive Options under the Plan may not be granted at less than
100% of fair market value of the Companys common stock on the date of the grant. NSOs may
not be granted at less than 85% of the fair market value of the common stock on the date of
the grant.
 95




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Activity in stock-based compensation plan
  WeightedAverage
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    IntrinsicShares
    
    
    Price
    
    
    ValueOptions outstanding December 31, 2007
    
    
    279,430
    
    
    $
    8.65
    
    
    $
    27,943Granted
    
    
    31,500
    
    
    $
    6.50
    
    
    
    Exercised
    
    
    (12,850
    )
    
    $
    3.23
    
    
    $
    40,863Forfeited
    
    
    
    
    
    
    
    
    
    
    Options outstanding December 31, 2008
    
    
    298,080
    
    
    $
    8.64
    
    
    
    Granted
    
    
    4,000
    
    
    $
    5.00
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (20,000
    )
    
    $
    10.40
    
    
    
    Options outstanding December 31, 2009
    
    
    282,080
    
    
    $
    8.46
    
    
    
    Exercisable at December 31, 2009
    
    
    221,960
    
    
    $
    7.06
   96




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18.
    
    CAPITAL STOCKThe Company paid a quarterly cash dividend of $0.08, $0.06, $0.06 and $0.06 on January
9, 2009, April 10, 2009, July 31, 2009 and October 9, 2009, respectively, to shareholders
of record as of December 31, 2008, March 31, 2009, July 24, 2009 and September 30, 2009,
respectively. On April 20, 1999, the Board of Directors authorized 2,000,000 shares of
preferred stock. As of December 31, 2008, Pursuant to a Letter Agreement dated November 14,
2008, and the Securities Purchase Agreement  Standard Terms the Company issued to the
United States Department of the Treasury (Treasury Department) 17,000 shares of Bank of
Commerce Holdings Series A Fixed Rate Perpetual Preferred Stock, without par value (the
Series A Preferred Stock), having a liquidation amount per share equal to $1,000 for a
total price of $17 million. The Company paid preferred cash dividends of $852,361 during
2009.
 19.
    
    RETIREMENT BENEFITSProfit Sharing Plan In 1985, the Company adopted a profit sharing 401(k) plan for
eligible employees to be funded out of the earnings of the Company. The employees
contributions are limited to the maximum amount allowable under IRS Section 402(G). The
Companys contributions include a matching contribution of 100% of the first 3% of salary
deferred and 50% of the next 2% of salary deferred. Discretionary contributions are also
permitted. The Company made matching contributions aggregating $240,000, $233,922 and
$247,500 for the years ended December 31, 2009, 2008 and 2007, respectively. No
discretionary contributions were made in 2009, 2008 or 2007.Salary Continuation Plan In April 2001, the Board of Directors approved the
implementation of the Supplemental Executive Retirement Plan (SERP), which is a
non-qualified executive benefit plan in which the Bank agrees to pay the executives covered
by the SERP plan additional benefits in the future in return for continued satisfactory
performance by the executives. Benefits under the salary continuation plan include a
benefit generally payable commencing upon a designated retirement date for a fixed period
of ten to twenty years; disability or termination of employment, and a death benefit for
the participants designated beneficiaries. Key-man life insurance policies were purchased
as an investment to provide for the Banks contractual obligation to pay pre-retirement
death benefits and to recover the Banks cost of providing benefits. The executive is the
insured under the policy, while the Bank is the owner and beneficiary. The assets of the
SERP, under Internal Revenue Service Regulations, are the property of the Company and are
available to the Companys general creditors. The insured executive has no claim on the
insurance policy, its cash value or the proceeds thereof.The retirement benefit is derived from accruals to a benefit account during the
participants employment. Accrued compensation expense under the salary continuation plan
totaled $324,148, $179,063 and $240,745 for 2009, 2008 and 2007, respectively. As of
December 31, 2009, 2008 and 2007, the vested benefit payable was $1,595,661, $1,235,605,
and $1,030,020 respectively.
 97




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Retired employees deferred compensation Effective April 1, 1990, the Board of
Directors approved an Employee Deferred Compensation plan for two executives, which is a
non-qualified plan in which the selected employees may elect to defer all or any part of
their compensation to be payable to the employee upon retirement over a period not to
exceed fifteen years. Interest on Retired Employees deferred compensation is fixed at ten
percent (10%) per the plan. Participants in this plan have since retired and funds are
being disbursed. As of December 31, 2009, 2008 and 2007, the vested benefit payable was
$817,615, $931,777 and $1,035,064, respectively.Directors deferred fee compensation Effective January 1, 1993, the Board of Directors
approved the implementation of the Directors Deferred Fee Compensation Plan, which is a
non-qualified plan in which a Director may elect to defer the payment of all or any part of
the fee compensation to which such director would otherwise be entitled to as directors
fees or committee fees to be payable upon retirement of the director in a lump sum
distribution or over a period not to exceed fifteen years. Interest on Directors deferred
compensation is floating at prime plus 2%. Deferred compensation expense totaled $478,175,
$461,640 and $411,191 at December 31, 2009, 2008, and 2007 respectively. As of December 31,
2009, 2008 and 2007, the vested benefit payable was $2,803,310, $2,600,231 and $2,310,824,
respectively.
 20.
    
    RELATED PARTY TRANSACTIONSSome of the directors, officers and principal shareholders of the Company and their
associates were customers of and had banking transactions with the Bank in the ordinary
course of the Banks business during 2009 and the Bank expects to have such transactions in
the future. All deposits, loans and commitments to loans included in such transactions
were made in compliance with the applicable laws on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable transactions
with other persons of similar creditworthiness, and in the opinion of the Company, did not
involve more than a normal risk of collectability or present other unfavorable features.An analysis of the activity in related party loans consists of the following:
 December 31,2009
    
    
    2008Balance at beginning of year
    
    $
    4,174,424
    
    
    $
    3,600,342New loan additions
    
    
    1,200,611
    
    
    
    153,737Advances on existing lines of credit
    
    
    10,861,095
    
    
    
    826,080Principal repayments
    
    
    (11,252,462
    )
    
    
    (405,735
    )Reclassifications (1)
    
    
    (134,914
    )
    
    
    Balance at end of year
    
    $
    4,848,754
    
    
    $
    4,174,424
 
 (1)
    
    Represents loans that were once considered related party but are no longer
considered related party. At December 31, 2009 and 2008, deposits of related parties amounted to $16.2 million and
$12.5 million, respectively.
 98




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 As of December 31, 2009 and 2008 there were no related party loans, which were past due
or classified. At December 31, 2009 there was $3,171,260 available in commitments to related
party loans.
 21.
    
    COMMITMENTS AND CONTINGENCIESLease Commitments The Company leases certain facilities where it conducts its operations.
Future minimum lease commitments under all non-cancelable operating leases as of December
31, 2009 are below:
 (Dollars in thousands)2010
    
    $
    8672011
    
    
    7752012
    
    
    6062013
    
    
    4882014
    
    
    498Thereafter
    
    
    447Total
    
    $
    3,681
 Rental expense for the years ended December 31, 2009, 2008 and 2007 was $529,700,
$588,866 and $482,994, respectively.Off-Balance Sheet Financial Instruments In the ordinary course of business, the Company
enters various types of transactions, which involve financial instruments with off-balance
sheet risk. These instruments include commitments to extend credit and standby letter of
credits, which are not reflected in the accompanying consolidated balance sheets. These
transactions may involve, to varying degrees, credit and interest rate risk more than the
amount, if any recognized in the consolidated balance sheets.The off-balance sheet credit risk exposure of the Company is the contractual amount of
commitments to extend credit and stand-by letters of credit. The Company applies the same
credit standards to these contracts as it uses for loans recorded on the balance sheet.
 December 31,2009
    
    
    2008Off-balance sheet commitments:Commitments to extend credit
    
    $
    122,871,909
    
    
    $
    156,707,887Standby letters of credit
    
    
    4,844,167
    
    
    
    8,556,547Guaranteed commitments outstanding
    
    
    1,324,799
    
    
    
    1,350,399$
    129,040,875
    
    
    $
    166,614,833
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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Commitments to extend credit are agreements to lend to customers. These commitments
have specified interest rates and generally have fixed expiration dates but may be
terminated by the Company if certain conditions of the contract are violated. Although
currently subject to draw down, many of the commitments do not necessarily represent future
cash requirements. Collateral held relating to these commitments varies, but generally
includes real estate, securities and cash.Standby letters of credit are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Credit risk arises in these transactions from
the possibility that a customer may not be able to repay the Bank upon default of
performance. Collateral held for standby letters of credit is based on an individual
evaluation of each customers creditworthiness, but may include cash and securities.Commitments to extend credit and standby letters of credit bear similar credit risk
characteristics as outstanding loans.The Company has mortgage loan purchase agreements with various mortgage bankers. The
Company is obligated to perform certain procedures in accordance with these agreements. The
agreements provide for conditions whereby the Company may be required to repurchase
mortgage loans for various reasons among which are either (1) a mortgage loan is originated
in violation of the mortgage bankers requirement, (2) the Company breaches any term of the
agreement and (3) an early payment default occurs from a mortgage originated by the
Company. The mortgage loan repurchase agreements are consistent with the standard
representations and warranties of the loan sales agreements and the impact is considered
immaterial to the consolidated financial statements.The Company entered into a mandatory forward loan volume commitment agreement with a
purchaser of mortgage loans. Under the agreement, the Company is committed to deliver
$270,000,000 loan volume over the period from March 1, 2009 through May 31, 2010. Upon
failure to deliver minimum loan volume quarterly, the Company is responsible to pay a
non-delivery fee to the purchaser. As of December 31, 2009, the Company met the volume
commitments. The Company is currently in the process of renegotiating and amending this
agreement. Although the basic term would remain the same, the new agreement would extend
the term until January 31, 2011 and require the Company to commit to deliver a loan volume
of $264,000,000 over a new period.Litigation The Company is subject to various pending and threatened legal actions arising
in the ordinary course of business. The Company maintains reserves for losses from legal
actions that are both probable and estimable. In the opinion of management the disposition
of claims currently pending will not have a material effect on the Companys consolidated
financial position or results of operations.
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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 22.
    
    REGULATORY MATTERSThe Company and the Bank are subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions
by regulators that if undertaken, could have a direct material effect on the Companys and
Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of their assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices.The capital amounts and the Banks prompt corrective action classifications are also
subject to qualitative judgments by the regulators about components, risk weightings and
other factors.Prompt corrective action provisions are not applicable to Bank Holding Companies.
Quantitative measures established by regulation to ensure capital adequacy require the
Company and the Bank to maintain minimum amounts and ratios (set forth in the following
table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets
and of Tier 1 capital to average assets. Management believes as of December 31, 2009 that
the Company and the Bank met all capital adequacy requirements to which they are subject.As of December 31, 2009, the most recent notification from the FDIC categorized the Bank as
well capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, an institution must maintain minimum total risk-based,
Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There
are no conditions or events since that notification that management believes have changed
the Banks category. The Companys and the Banks actual capital amounts and ratios as of
December 31, 2009 and 2008 are also presented in the table.
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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 To BeCategorized asWell CapitalizedFor Capital
    
    Under PromptActual
    
    Adequacy Purposes
    
    Corrective ActionAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAt December 31, 2009:CompanyLeverage capital (to average assets)
    
    $
    79,421,930
    
    
    
    9.89
    %
    
    $
    32,168,421
    
    
    
    4.00
    %
    
    
    n/a
    
    
    
    n/aTier 1 capital (to risk-weighted assets)
    
    
    79,421,930
    
    
    
    12.06
    %
    
    
    26,346,630
    
    
    
    4.00
    %
    
    
    n/a
    
    
    
    n/aTotal capital (to risk-weighted assets)
    
    
    87,697,164
    
    
    
    13.31
    %
    
    
    52,693,261
    
    
    
    8.00
    %
    
    
    n/a
    
    
    
    n/aBankLeverage capital (to average assets)
    
    $
    76,262,200
    
    
    
    9.37
    %
    
    $
    32,602,946
    
    
    
    4.00
    %
    
    $
    40,753,682
    
    
    
    5.00
    %Tier 1 capital (to risk-weighted assets)
    
    
    76,262,200
    
    
    
    11.57
    %
    
    
    26,365,839
    
    
    
    4.00
    %
    
    
    39,548,758
    
    
    
    6.00
    %Total capital (to risk-weighted assets)
    
    
    84,542,883
    
    
    
    12.83
    %
    
    
    52,731,677
    
    
    
    8.00
    %
    
    
    65,914,959
    
    
    
    10.00
    %At December 31, 2008:CompanyLeverage capital (to average assets)
    
    $
    73,983,019
    
    
    
    10.66
    %
    
    $
    19,800,000
    
    
    
    4.00
    %
    
    
    n/a
    
    
    
    n/aTier 1 capital (to risk-weighted assets)
    
    
    73,983,019
    
    
    
    11.87
    %
    
    
    16,734,380
    
    
    
    4.00
    %
    
    
    n/a
    
    
    
    n/aTotal capital (to risk-weighted assets)
    
    
    81,787,582
    
    
    
    13.12
    %
    
    
    33,468,760
    
    
    
    8.00
    %
    
    
    n/a
    
    
    
    n/aBankLeverage capital (to average assets)
    
    $
    72,204,835
    
    
    
    10.45
    %
    
    $
    19,783,694
    
    
    
    4.00
    %
    
    $
    24,729,617
    
    
    
    5.00
    %Tier 1 capital (to risk-weighted assets)
    
    
    72,204,835
    
    
    
    11.58
    %
    
    
    16,734,380
    
    
    
    4.00
    %
    
    
    25,101,570
    
    
    
    6.00
    %Total capital (to risk-weighted assets)
    
    
    80,009,398
    
    
    
    12.84
    %
    
    
    33,468,760
    
    
    
    8.00
    %
    
    
    41,835,950
    
    
    
    10.00
    %
 The principal sources of cash for the Holding Company are dividends from the Bank.
Dividends from the Bank to the Holding Company are restricted under California law to the
lesser of the Banks retained earnings or the Banks net income for the latest three fiscal
years, less dividends previously declared during that period, or, with the approval of
California Superintendent of Banks, to the greater of the retained earnings of the Bank,
the net income of the Bank for its last fiscal year, or the net income of the Bank for its
current fiscal year. As of December 31, 2009, the maximum amount available for dividend
distribution under this restriction was approximately $10,723,366.The Bank is subject to certain restrictions under the Federal Reserve Act, including
restrictions on the extension of credit to affiliates. In particular, it is prohibited from
lending to an affiliated company unless the loans are secured by specific types of
collateral. Such secured loans and other advances from the subsidiaries are limited to 10
percent of the subsidiarys equity. No such loans or advances were outstanding during 2009
or 2008.
 102




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 23.
    
    FAIR VALUES OF FINANCIAL INSTRUMENTSIn general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in
active markets for identical assets or liabilities that the Company has the ability to
access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices
included in Level 1 that are observable for the asset or liability, either directly or
indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in
active markets, and inputs other than quoted prices that are observable for the asset or
liability, such as interest rates and yield curves that are observable at commonly quoted
intervals. Level 3
inputs are unobservable inputs for the asset or liability, and include situations where
there is little, if any, market activity for the asset or liability.In certain cases, the inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, the level in the fair value hierarchy within which
the fair value measurement in its entirety falls has been determined based on the lowest
level input that is significant to the fair value measurement in its entirety.The Companys assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to the asset
or liability. The following table presents information about the Companys assets and
liabilities measured at fair value on a recurring basis as of December 31, 2009, and
indicate the fair value hierarchy of the valuation techniques utilized by the Company to
determine such fair value.
 103




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Dollars in thousands)
 Recurring Basis
 Fair Value MeasurementsAt December 31, 2009Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    December 31, 2009
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale securities
    
    $
    80,062,136
    
    
    $
    
    
    
    $
    80,062,136
    
    
    $
    Total Assets Measured at fair value
    
    $
    80,062,136
    
    
    $
    
    
    
    $
    80,062,136
    
    
    $
    Total Liabilities Measured at fair value
    
    $
    
    
    
    
    
    
    
    $
    
 Recurring Basis
 Fair Value MeasurementsAt December 31, 2008Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    December 31, 2008
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale securities
    
    $
    131,686,600
    
    
    $
    
    
    
    $
    131,686,600
    
    
    $
    Total Assets Measured at fair value
    
    $
    131,686,600
    
    
    $
    
    
    
    $
    131,686,600
    
    
    $
    Total Liabilities Measured at fair value
    
    $
    
    
    
    
    
    
    
    $
    
 The following methods were used to estimate the fair value of each class of financial
instrument above:Securities available-for-sale Securities classified as available-for-sale are reported at
fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value
measurements from an independent pricing service. The fair value measurements consider
observable data that may include dealer quotes, market spreads, cash flows, the U.S.
Treasury yield curve, live trading levels, trade execution data, market consensus
prepayment speeds, credit information and the bonds terms and conditions among other
things.
 
 104




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Assets and Liabilities Recorded at Fair Value on a Nonrecurring BasisThe Company may be required, from time to time, to measure certain assets at fair value on
a nonrecurring basis in accordance with U.S. generally accepted accounting principles.
These include assets that are measured at the lower of cost or market that were recognized
at fair value below cost at the end of the period. Assets measured at fair value on a
nonrecurring basis are included in the table below.
 Dollars in thousands)
 Non Recurring Basis
 Fair Value MeasurementsAt December 31, 2009Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    December 31, 2009
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired Loans
    
    $
    5,278,493
    
    
    $
    
    
    
    $
    
    
    
    $
    5,278,493Other real estate owned
    
    
    2,879,956
    
    
    
    
    
    
    
    
    
    
    
    2,879,956Total Assets Measured
at fair value
    
    $
    8,158,449
    
    
    $
    
    
    
    $
    
    
    
    $
    8,158,449Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Total Liabilities
Measured at fair value
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Non Recurring Basis
 Fair Value MeasurementsAt December 31, 2008Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    December 31, 2008
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired Loans
    
    $
    23,078,874
    
    
    $
    
    
    
    $
    
    
    
    $
    23,078,874Total Assets Measured at fair value
    
    $
    23,078,874
    
    
    $
    
    
    
    $
    
    
    
    $
    23,078,874Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Total Liabilities Measured at fair
value
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 105




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Impaired loans When available, we use observable market data including pricing on
recent closed market transactions, to value loans. The Company does not record loans at
fair value on a recurring basis. However, from time to time, a loan is considered impaired
and an allowance for loan losses is established. Loans for which it is probable that
payment of interest and principal will not be made in accordance with the contractual terms
of the loan agreement are considered impaired.The fair value of impaired loans is estimated using one of several methods, including
collateral value, market value of similar debt, enterprise value, liquidation value, and
discounted cash flows. Those impaired loans not requiring an allowance represent loans for
which the fair value of the expected repayments or collateral exceed the recorded
investments in such loans. At December 31, 2009, substantially all of the total impaired
loans were evaluated based on the fair value of the collateral. Impaired loans where an
allowance is established based on the fair value of collateral require classification in
the fair value hierarchy. When the fair value of the collateral is based on a current
appraised value, or management determines the fair value of the collateral is further
impaired below the appraised value and there is no observable market price, the Company
records the impaired loan as nonrecurring Level 3.The Company had outstanding balances of $12.5 million and $12.2 million in impaired loans
as of December 31, 2009 and December 31, 2008, respectively. Impairment allowances totaled
$245,000 and $1.1 million at December 31, 2009 and December 31, 2008, respectively.Other Real Estate Owned The fair value of other real estate owned is estimated using one
of several methods, including collateral value, market value of similar debt, enterprise
value, liquidation value, and discounted cash flows. At December 31, 2009, the estimated
fair value was based on the fair value of the other real estate owned, supported by current
appraisals. The Company records other real estate owned as a nonrecurring, level 3.Method for determining fair valuesThe following methods and assumptions were used by the Company in estimating its fair value
disclosures for financial instruments:Cash and cash equivalents The carrying amounts reported in the consolidated balance
sheets for cash and cash equivalents are a reasonable estimate of fair value.Securities Securities classified as available-for-sale are reported at fair value
utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements
from an independent pricing service. The fair value measurements consider observable data
that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve,
live trading levels, trade execution data, market consensus prepayment speeds, credit
information and the bonds terms and conditions among other things.
 106




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Loans receivable For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values. The fair
values for fixed rate loans are estimated using discounted cash flow analysis, using
interest rates currently being offered for loans with similar terms to borrowers of similar
credit quality. The carrying amount of accrued interest approximates its fair value.Mortgage Loans held for sale Mortgage loans held for sale are carried at the lower of cost
or fair value. Cost generally approximates fair value, given the short duration of these
assets.Commitments to extend credit and standby letters of credit The fair value of commitments
is the off-balance sheet amount of loan commitments and outstanding letters of credit.Federal Home Loan Bank borrowings-The fair value of borrowed funds is based on carrying
amounts due to the short term nature of the borrowing.Junior subordinated debt payable to unconsolidated subsidiary grantor trust The fair
value of variable rate junior subordinated debt payable to subsidiary grantor trust is
based on carrying amounts.Deposit liabilities The fair values disclosed for demand deposits (e.g., interest and
noninterest checking, passbook savings, and money market accounts) are, by definition,
equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).
The fair values for fixed-rate certificates of deposit are estimated using a discounted
cash flow calculation that applies interest rates currently being offered on certificates
to a schedule of aggregated expected monthly maturities on time deposits. The carrying
amount of accrued interest approximates its fair value.Securities purchased under agreements to resell The fair value of securities purchased
under agreements to resell is estimated by discounting the contractual cash flows under
outstanding borrowings at rates prevailing in the marketplace today for similar borrowings,
rates and collateral.Earn out payable The fair value of the earn out payable is estimated by discounting the
contractual cash flows expected to be paid out, under the assumption the mortgage
subsidiary meets the targeted results.Limitations Fair value estimates are made at a specific point in time, based on relevant
market information and other information about the financial instrument. These estimates
do not reflect any premium or discount that could result from offering for sale at one time
the Companys entire holdings of a particular financial instrument.Because no market exists for a significant portion of the Companys financial instruments,
fair value estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial instruments, and
other factors.
 
 107




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 These estimates are subjective in nature, involve uncertainties and matters of
significant judgment, and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.Fair value estimates are based on current on and off-balance sheet financial instruments
without attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments. Other significant
assets and liabilities that are not considered financial assets or liabilities include
deferred tax assets and liabilities, and property, plant and equipment. In addition, the
tax ramifications related to the realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in any of the
estimates.
 
 108




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##### Table of Contents



BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The estimated fair values of the Companys financial instruments are approximately as
follows:
 December 31, 2009Contract
    
    CarryingAmount
    
    Amount
    
    Fair ValueFinancial Assets:Cash and cash equivalents
    
    
    
    
    
    $
    68,240
    
    
    $
    68,240Securities
    
    
    
    
    
    
    80,062
    
    
    
    80,062Loans, net
    
    
    
    
    
    
    590,023
    
    
    
    611,099Mortgages held for sale
    
    
    
    
    
    
    27,288
    
    
    
    27,288Accrued interest on loans
    
    
    
    
    
    
    2,463
    
    
    
    2,463Accrued interest on securities
    
    
    
    
    
    
    624
    
    
    
    624Financial Liabilities:Demand and savings
    
    
    
    
    
    
    298,676
    
    
    
    298,676Fixed rate certificates
    
    
    
    
    
    
    330,920
    
    
    
    333,372Variable certificates
    
    
    
    
    
    
    10,869
    
    
    
    10,869Accrued interest payable
    
    
    
    
    
    
    495
    
    
    
    495Securities sold under agreements to
repurchase
    
    
    
    
    
    
    9,621
    
    
    
    9,621Federal Home Loan Borrowings
    
    
    
    
    
    
    70,000
    
    
    
    70,000Junior subordinated debt payable to
unconsolidated subsidiary grantor trust
    
    
    
    
    
    
    15,465
    
    
    
    15,465Earn out payable
    
    
    
    
    
    
    965,240
    
    
    
    965,240Off balance sheet financial instruments:Commitments to extend credit
    
    $
    122,871,909
    
    
    
    
    
    
    $
    122,871,909Standby letters of credit
    
    
    4,844,167
    
    
    
    
    
    
    
    4,844,167Guaranteed commitments outstanding
    
    
    1,324,799
    
    
    
    
    
    
    
    1,324,799
 109




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2008Contract
    
    CarryingAmount
    
    Amount
    
    Fair ValueFinancial Assets:Cash and cash equivalents
    
    
    
    
    
    $
    85,191,062
    
    
    $
    85,191,062Securities
    
    
    
    
    
    
    131,686,600
    
    
    
    131,686,600Loans, net
    
    
    
    
    
    
    518,946,461
    
    
    
    522,674,555Accrued interest on loans
    
    
    
    
    
    
    2,051,386
    
    
    
    2,051,386Accrued interest on securities
    
    
    
    
    
    
    1,079,110
    
    
    
    1,079,110Financial Liabilities:Demand and savings
    
    
    
    
    
    $
    290,995,299
    
    
    $
    290,995,299Fixed rate certificates
    
    
    
    
    
    
    256,084,780
    
    
    
    258,684,915Variable certificates
    
    
    
    
    
    
    8,201,824
    
    
    
    8,201,824Accrued interest payable
    
    
    
    
    
    
    618,890
    
    
    
    618,890Securities sold under agreements to repurchase
    
    
    
    
    
    
    13,853,255
    
    
    
    13,853,255Federal Home Loan Borrowings
    
    
    
    
    
    
    120,000,000
    
    
    
    120,000,000Junior subordinated debt payable to
unconsolidated subsidiary grantor trust
    
    
    
    
    
    
    15,465,000
    
    
    
    15,465,000Off balance sheet financial instruments:Commitments to extend credit
    
    $
    156,707,887
    
    
    
    
    
    
    $
    156,707,887Standby letters of credit
    
    
    8,556,547
    
    
    
    
    
    
    
    8,556,547Guaranteed commitments outstanding
    
    
    1,350,399
    
    
    
    
    
    
    
    1,350,399
 110




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 24.
    
    BANK OF COMMERCE HOLDINGS (PARENT COMPANY ONLY) FINANCIAL INFORMATION
 December 31,2009
    
    
    2008Condensed Balance SheetsAssets:Cash
    
    $
    976,974
    
    
    $
    1,663,934Participation loans, net of allowance for loan and lease losses of $38,850 in 2009 and 2008
    
    
    2,430,575
    
    
    
    4,640,017Investment in subsidiaries
    
    
    80,124,258
    
    
    
    72,519,180Other assets
    
    
    0
    
    
    
    86,000Total assets
    
    $
    83,531,807
    
    
    $
    78,909,131Junior subordinated debt payable to unconsolidated subsidiary grantor trust
    
    $
    15,465,000
    
    
    $
    15,465,000Other liabilities
    
    
    1,585,379
    
    
    
    866,490Shareholders equity
    
    
    66,481,428
    
    
    
    62,577,641Total liabilities and shareholders equity
    
    $
    83,531,807
    
    
    $
    78,909,131
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Condensed Statements of IncomeIncome:Interest income
    
    $
    300,157
    
    
    $
    1,097,452
    
    
    $
    53,488Dividends from subsidiaries
    
    
    2,503,259
    
    
    
    1,496,583
    
    
    
    6,738,0292,803,416
    
    
    
    2,594,035
    
    
    
    6,791,517Expenses:
    
    
    1,145,910
    
    
    
    1,010,641
    
    
    
    1,809,492Income before income taxes and equity in undistributed net income of subsidiaries
    
    
    1,657,506
    
    
    
    1,583,394
    
    
    
    4,982,025Provision for income taxes
    
    
    800
    
    
    
    800
    
    
    
    800Income before equity in undistributed net income of subsidiaries
    
    
    1,656,706
    
    
    
    1,582,594
    
    
    
    4,981,225Equity in undistributed net income of subsidiaries
    
    
    4,611,999
    
    
    
    611,792
    
    
    
    1,125,673Net Income
    
    $
    6,268,705
    
    
    
    
    
    
    
    Less: Net income attributable to non-controlling interest
    
    
    263,405
    
    
    
    
    
    
    
    Net income attributable to Bank of Commerce Holdings
    
    $
    6,005,300
    
    
    $
    2,194,386
    
    
    $
    6,106,898
 111




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Statements of Cash FlowsCash flows from operating activities:Net income
    
    $
    6,268,705
    
    
    $
    2,194,386
    
    
    $
    6,106,898Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    0
    
    
    
    0
    
    
    
    19,950Compensation associated with stock options
    
    
    34,140
    
    
    
    33,116
    
    
    
    32,637Effect of changes in:Other Assets
    
    
    79,787
    
    
    
    78,500
    
    
    
    30,000Other Liabilities
    
    
    (72,126
    )
    
    
    45,249
    
    
    
    (97,439
    )Equity in undistributed net income of subsidiaries
    
    
    (4,611,999
    )
    
    
    (611,793
    )
    
    
    (1,125,673
    )Net cash provided by operating activities
    
    
    1,698,507
    
    
    
    1,739,458
    
    
    
    4,966,373Cash flows from investing activities:Investment in subsidiary trust
    
    
    0
    
    
    
    0
    
    
    
    0Capital contribution to Bank
    
    
    0
    
    
    
    (14,200,000
    )
    
    
    0Participation loan payments
    
    
    631,661
    
    
    
    2,934,519
    
    
    
    272,058Participation loan purchased
    
    
    1,577,781
    
    
    
    (2,400,000
    )
    
    
    (1,861,603
    )Cash paid in acquisition of mortgage subsidiary
    
    
    (1,500,000
    )
    
    
    0
    
    
    
    0Net cash (used) provided by investing activities
    
    
    709,442
    
    
    
    (13,665,481
    )
    
    
    (1,589,545
    )Cash flows from financing activities:Equity transactions, net
    
    
    22,438
    
    
    
    15,183,459
    
    
    
    (1,758,656
    )Cash dividends paid on common stock
    
    
    (2,264,986
    )
    
    
    (2,790,423
    )
    
    
    (2,838,029
    )Cash dividends paid on preferred stock
    
    
    (852,361
    )Net cash provided (used) by financing activities
    
    
    (3,094,909
    )
    
    
    12,393,036
    
    
    
    (4,596,685
    )(Decrease) Increase in cash and cash equivalents
    
    
    (686,960
    )
    
    
    467,013
    
    
    
    (1,219,857
    )Cash and cash equivalents at beginning of year
    
    
    1,663,934
    
    
    
    1,196,921
    
    
    
    2,416,778Cash and cash equivalents at end of year
    
    $
    976,974
    
    
    $
    1,663,934
    
    
    $
    1,196,921
 112




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 25.
    
    UNAUDITED QUARTERLY RESULTS
 UNAUDITED QUARTERLY STATEMENTS OF INCOME DATA
 For the Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(Dollars in thousands, except per share data)
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Net interest income
    
    $
    6,400
    
    
    $
    7,498
    
    
    $
    7,406
    
    
    $
    7,690Provision for loan losses
    
    
    (1,425
    )
    
    
    (3,056
    )
    
    
    (1,844
    )
    
    
    (3,150
    )Noninterest income
    
    
    865
    
    
    
    3,195
    
    
    
    2,944
    
    
    
    3,059Noninterest expense
    
    
    (3,960
    )
    
    
    (4,893
    )
    
    
    (5,654
    )
    
    
    (6,117
    )Income before taxes
    
    
    1,880
    
    
    
    2,744
    
    
    
    2,852
    
    
    
    1,482Provision for income tax
    
    
    (610
    )
    
    
    (1,027
    )
    
    
    (1,010
    )
    
    
    (43
    )(Less) Income non-controlling interest
    
    
    
    
    
    
    (101
    )
    
    
    (129
    )
    
    
    (33
    )Net Income
    
    
    1,270
    
    
    
    1,616
    
    
    
    1,713
    
    
    
    1,406(Less) Preferred dividend and accretion on preferred stock
    
    
    237
    
    
    
    235
    
    
    
    235
    
    
    
    235Income available to common shareholders
    
    $
    1,033
    
    
    $
    1,381
    
    
    $
    1,478
    
    
    $
    1,171Per common share:Basic earnings per share
    
    $
    0.12
    
    
    $
    0.16
    
    
    $
    0.17
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.12
    
    
    $
    0.16
    
    
    $
    0.17
    
    
    $
    0.13Dividends paid per share
    
    $
    0.08
    
    
    $
    0.00
    
    
    $
    0.12
    
    
    $
    0.06
 For the Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(Dollars in thousands, except per share data)
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008Net interest income
    
    $
    5,420
    
    
    $
    5,046
    
    
    $
    5,240
    
    
    $
    5,642Provision for loan losses
    
    
    (600
    )
    
    
    (1,000
    )
    
    
    (1,300
    )
    
    
    (3,620
    )Noninterest income
    
    
    565
    
    
    
    717
    
    
    
    751
    
    
    
    590Noninterest expense
    
    
    (3,565
    )
    
    
    (3,613
    )
    
    
    (3,612
    )
    
    
    (4,507
    )Income before taxes
    
    
    1,820
    
    
    
    1,150
    
    
    
    1,079
    
    
    
    1,895Provision for income tax
    
    
    (591
    )
    
    
    (244
    )
    
    
    (362
    )
    
    
    1,237Net Income
    
    $
    1,229
    
    
    $
    906
    
    
    $
    717
    
    
    
    ($658
    )Per common share:Basic earnings per share
    
    $
    0.14
    
    
    $
    0.10
    
    
    $
    0.08
    
    
    
    ($0.07
    )Diluted earnings per share
    
    $
    0.14
    
    
    $
    0.10
    
    
    $
    0.08
    
    
    
    ($0.07
    )Dividends paid per share
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.08
 113




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BANK OF COMMERCE HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 26.
    
    SUBSEQUENT EVENTS
   114




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A(T). CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Report on Internal Control over Financial Reporting
    115




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Changes in Internal Control over Financial Reporting
    
 ITEM 9B. OTHER INFORMATION
   116




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PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Executive Officers of the Company
  Name
    
    Age
    
    Position(s)| |Patrick J. Moty
    
    
    52
    
    
    President, Chief Executive Officer and Director
Bank of Commerce Holdings
and Redding Bank of CommerceSamuel D. Jimenez
    
    
    45
    
    
    Senior Vice President and Chief Financial
OfficerLinda J. Miles
    
    
    56
    
    
    Executive Vice President and Chief Operating
OfficerTheodore Cumming
    
    
    52
    
    
    Senior Vice President & Chief Credit OfficerRandall S. Eslick
    
    
    52
    
    
    Regional President  Roseville Division
 Patrick J. Moty
 Samuel D. Jimenez
 Linda J. Miles
 Theodore Cumming
 117




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##### Table of Contents



Randall S. Eslick
 Directors of the Company
 Name
    
    Age
    
    Positions Held
    
    Term
    
    Served SinceOrin N. Bennett
    
    
    61
    
    
    Director
    
    1 year
    
    
    2005Dave Bonuccelli
    
    
    55
    
    
    Director
    
    1 year
    
    
    2008Gary Burks
    
    
    55
    
    
    Director
    
    1 year
    
    
    2007Russell L. Duclos
    
    
    70
    
    
    Director
    
    1 year
    
    
    1997Joseph Gibson
    
    
    62
    
    
    Director
    
    1 year
    
    
    2009Kenneth Gifford, Jr.
    
    
    64
    
    
    Chairman, Director
    
    1 year
    
    
    1998Jon Halfhide
    
    
    52
    
    
    Director
    
    1 year
    
    
    2005Patrick J. Moty
    
    
    52
    
    
    Director
    
    1 year
    
    
    2007David H. Scott, CPA
    
    
    65
    
    
    Director
    
    1 year
    
    
    1997Lyle L. Tullis
    
    
    59
    
    
    Director
    
    1 year
    
    
    2003
 Orin N. Bennett
 Business Experience:
 Other Public Company Directorships:
 Committees:
 Dave Bonuccelli
 Business Experience:
 Other Public Company Directorships:
 118




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##### Table of Contents



Committees:
 Gary Burks
 Business Experience:
 Other Public Company Directorships:
 Committees:
 Russell L. Duclos
 Business Experience:
 Other Public Company Directorships:
 Committees:
 Joseph Gibson
 Business Experience:
 Other Public Company Directorships:
 Kenneth R. Gifford, Jr.
 Business Experience:
 Other Public Company Directorships:
 Committees:
 119




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##### Table of Contents



Jon Halfhide, CPA
 Business Experience:
 Other Public Company Directorships:
 Committees:
 Patrick J. Moty
 Business Experience:
 Other Public Company Directorships:
 Committees:
 David H. Scott , CPA
 Business Experience:
 Other Public Company Directorships:
 Committees:
 120




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##### Table of Contents



Lyle L. Tullis
 Business Experience:
 Other Public Company Directorships:
 Committees:
 Family Relationships
  Involvement in Certain Legal Proceedings
  121




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Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics and Business Conduct
   Audit Committee Information
  122




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
  1.
    
    Patrick J. Moty,President and Chief Executive Officer (our Principal Executive Officer)2.
    
    Samuel D. Jimenez,Senior Vice President and Chief Financial Officer (our Principal Financial
and Accounting Officer)3.
    
    Linda J. Miles,Executive Vice President and Chief Operating Officer4.
    
    Randall S. Eslick,Regional President Roseville Bank of Commerce5.
    
    Theodore Cumming,Senior Vice President and Chief Credit Officer
 Strategic Role of Executive Compensation
   
    
    The Company cannot pay or accrue cash bonuses to the Chief Executive Officer;
    
    The Company cannot give the Chief Executive Officer equity except in the form of
long-term restricted stock;
    
    There are restrictions on severance pay for the named executive officers plus the next
five highest ranking officers;
    
    There are claw-back restrictions on bonuses paid to the named executive officers plus
the next twenty highest ranking officers;
    
    The Company has adopted a Luxury Expenditures Policy limiting certain expenditures;
    
    The Company cannot gross up salaries to compensate for taxes paid to the named
executive officers plus the next twenty highest ranking officers.
 Executive Compensation Objectives
  123




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##### Table of Contents



1.
    
    To compete favorably with our peers in attracting and retaining qualified
individuals as named executives by offering competitive pay;2.
    
    To pay for performance by compensating our named executives based upon:
 a)
    
    The Companys performance compared to peer group performance,b)
    
    The Division performance for those named executives who
manage divisions, and
 3.
    
    To align our named executives interest with our shareholders interest in
increased share value by generally using stock options for long-term compensation, so
our executives benefit only if our stock price rises and our shareholders are
similarly rewarded.
 Executive Compensation Components
  
    
    Base salary;
    
    Long-term compensation (generally in the form of stock options);
    
    Participation in the same benefit plans provided to all employees, including
qualified defined contribution (401(k)), health, life insurance, and other benefit
plans;
    
    Supplemental executive retirement plans (SERP) and elective participation in a
non-qualified Deferred Compensation Plan (funded by the executive); and
    
    Limited perquisites.
 Overview of Compensation and Process
   
 124




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##### Table of Contents



st
 Compensation Objectives
   Company and Division Performance
  
    
    EPS Growth;
    
    Return on Average Assets;
    
    Return on Average Equity;
    
    Revenue Growth;
    
    Core Deposit Growth;
    
    Deposit Market Share Growth;
    
    Loan Growth;
    
    Loan loss reserves as a percentage of total loans;
    
    Efficiency Ratio; and
    
    Investment Portfolio.
 Individual Objectives
  125




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##### Table of Contents



Named Executive Officer Compensation
  Base Salary
  th th
 Cash Incentive Compensation
   Use of Long-Term Compensation to align the interest of our Named Executives and Shareholders
   126




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##### Table of Contents



Perquisites
  Post-Retirement Arrangements
   1.
    
    Normal Retirement Benefits.The normal retirement benefit is calculated to provide a
target benefit of up to seventy-five percent (75%) of the executives compensation at the
time of retirement (age 65) or a lesser amount as determined by the Chief Executive
Officer and the Board of Directors;2.
    
    Early TerminationBenefit.The early termination benefit is the vested portion of the
target retirement benefit;3.
    
    Disability Benefit. The disability benefit is a Disability Lump Sum Benefit specified
in the agreement for the plan year immediately preceding the disability, payable only upon
total disability as defined in the agreement;4.
    
    Death Benefit.The death benefit is an amount determined by a formula that takes into
account the number of years of service and the anticipated compensation level at the age
of retirement; and5.
    
    Change of Control Benefit.The change of control benefit is an amount determined as
follows: Executive officers Fully Vested Present Value Benefit of the Supplemental
Executive Retirement Plan payable at age 65 for the current plan year plus one times the
executive officers current Plan Year Compensation (except with respect to the Chief
Executive Officer and Chief Operating Officer, which is two times plan year compensation).
This benefit is payable only in the event of a change in control as defined in the Salary
Continuation Agreement and is limited by the provisions of Internal Revenue Code section
280(g).
  127




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##### Table of Contents



Commitment to Quality Governance
  
    
    Only independent members of the Board of Directors may serve on the Compensation
Committee;
    
    The Compensation Committee meets on a regular basis as needed throughout the year.
Generally the Compensation Committee will review year-to-date financial performance
versus budget; year-to-date and multi year performance versus competitor group
performance (Uniform Bank Performance Report); executive officer stock ownership
levels; each executive officers target total compensation for the year; and other
topics as appropriate;
    
    At least once a year, the Compensation Committee reviews each executive officers
total compensation package, including base salary, cash and stock incentive awards,
qualified and non-qualified retirement and deferred compensation benefit packages and
compares to the Peer Group;
    
    The committee utilizes independent compensation reports to assist in the analysis
of compensation packages;
    
    At least once a year, the Compensation Committee reviews and reassesses its charter
and recommends any proposed changes to the Board of Directors for approval. The
Compensation Committee also conducts an annual review of its own performance; and
    
    The Compensation Committee reports on its meetings to the full Board of Directors.
The independent members of the Board of Directors, after a review of the Companys
performance, ratify each year the total compensation awards for the named executive
officers.
 Limitations on Executive Compensation
  Summary Compensation Table
  Non-QualifiedNon-Equity
    
    
    
    
    
    
    DeferredIncentive Plan
    
    
    Option
    
    
    Compensation
    
    
    All Other
    
    
    TotalName and Principal
    
    
    
    
    
    Salary
    
    
    Compensation
    
    
    Awards
    
    
    Earnings
    
    
    Compensation
    
    
    CompensationPosition
    
    Year
    
    
    (1) ($)
    
    
    (2) ($)
    
    
    (3) ($)
    
    
    (4) ($)
    
    
    (5) ($)
    
    
    ($)Patrick J. Moty
    
    
    2009
    
    
    $
    250,865
    
    
    $
    0
    
    
    $
    0
    
    
    $
    21,967
    
    
    $
    92,616
    
    
    $
    365,448President & Chief
    
    
    2008
    
    
    $
    229,327
    
    
    $
    0
    
    
    $
    0
    
    
    $
    12,592
    
    
    $
    85,597
    
    
    $
    327,516Executive Officer
    
    
    2007
    
    
    $
    192,788
    
    
    $
    66,098
    
    
    $
    56,400
    
    
    $
    2,282
    
    
    $
    83,591
    
    
    $
    401,159(Principal Executive
Officer)Samuel D. Jimenez
    
    
    2009
    
    
    $
    160,970
    
    
    $
    59,356
    
    
    $
    0
    
    
    $
    686
    
    
    $
    27,225
    
    
    $
    248,237Senior VP & Chief
    
    
    2008
    
    
    $
    152,884
    
    
    $
    2,378
    
    
    $
    4,830
    
    
    $
    0
    
    
    $
    3,660
    
    
    $
    163,752Financial Officer
    
    
    2007
    
    
    $
    138,808
    
    
    $
    29,250
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3,040
    
    
    $
    171,098(Principal Accounting
and Financial
Officer)
 128




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##### Table of Contents



Non-QualifiedNon-Equity
    
    
    
    
    
    
    DeferredIncentive Plan
    
    
    Option
    
    
    Compensation
    
    
    All Other
    
    
    TotalName and Principal
    
    
    
    
    
    Salary
    
    
    Compensation
    
    
    Awards
    
    
    Earnings
    
    
    Compensation
    
    
    CompensationPosition
    
    Year
    
    
    (1) ($)
    
    
    (2) ($)
    
    
    (3) ($)
    
    
    (4) ($)
    
    
    (5) ($)
    
    
    ($)Linda J. Miles
    
    
    2009
    
    
    $
    200,000
    
    
    $
    70,000
    
    
    $
    0
    
    
    $
    62,189
    
    
    $
    24,843
    
    
    $
    357,032EVP & Chief
    
    
    2008
    
    
    $
    203,846
    
    
    $
    8,000
    
    
    $
    0
    
    
    $
    50,395
    
    
    $
    45,264
    
    
    $
    307,505Operating Officer
    
    
    2007
    
    
    $
    200,000
    
    
    $
    60,780
    
    
    $
    28,200
    
    
    $
    41,514
    
    
    $
    24,843
    
    
    $
    355,337Randall S. Eslick
    
    
    2009
    
    
    $
    175,020
    
    
    $
    35,000
    
    
    $
    0
    
    
    $
    6,658
    
    
    $
    46,373
    
    
    $
    263,051Regional President
    
    
    2008
    
    
    $
    177,039
    
    
    $
    0
    
    
    $
    2,760
    
    
    $
    3,694
    
    
    $
    14,150
    
    
    $
    197,643Roseville Bank of
    
    
    2007
    
    
    $
    160,005
    
    
    $
    44,110
    
    
    $
    0
    
    
    $
    1,304
    
    
    $
    9,720
    
    
    $
    215,139CommerceTed Cumming
    
    
    2009
    
    
    $
    152,038
    
    
    $
    37,380
    
    
    $
    0
    
    
    $
    900
    
    
    $
    22,372
    
    
    $
    212,690Senior VP &
    
    
    2008
    
    
    $
    142,692
    
    
    $
    0
    
    
    $
    4,140
    
    
    $
    0
    
    
    $
    3,660
    
    
    $
    150,492Chief Credit Officer
    
    
    2007
    
    
    $
    125,400
    
    
    $
    43,984
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3,660
    
    
    $
    173,044
 
 1)
    
    Base salaries include 401(K) contributions made by the named executive officers
of approximately $53,776 during 2009. Patrick J. Motys base salary was increased to
$305,000 effective October 1, 2009.2)
    
    The Companys Annual Cash Incentive Plan (the Annual Cash Incentive
Plan) provides cash incentives to executive officers based on the Companys overall
financial performance, and, in some cases, individual performance and personal
goals. This income item includes bonus amounts in the year earned rather than in the
year paid. Cash incentive awards are accrued in a range of 10-40% of the
individuals salary. The maximum value payable under each performance award assuming
the highest level of performance is as follows: Patrick J. Moty, $123,750, Samuel D.
Jimenez, $49,800, Linda J. Miles, $66,000, Randall S. Eslick, $43,750 and Ted
Cumming, $44,240.3)
    
    The value of the stock option award is computed based upon the grant date
fair value, consistent with FASB ASC Topic 718. No options were granted during 2009.
Four options were granted in 2008. Two options were granted during 2007.4)
    
    The Company pays interest on segregated accounts for the benefit of SERP
beneficiaries.5)
    
    Other Compensation consists of perquisites and contributions to the SERP. Perquisite expenses represent an automobile for business use or car allowance, and
membership expenses in connection with the use of a private club for business purposes,
particularly for the purpose of entertaining the Banks customers. The officers may have
derived some personal benefit from the use of such automobiles and membership.
 The Company, after reasonable inquiry, believes that the value of any personal benefit
not directly related to job performance which is derived from the personal use of such
automobile and country club membership does not exceed $10,000 per year in the aggregate
for any single executive officer. Perquisite (automobile and country club membership)
amounts were $11,400, $11,400 and $4,750 for Patrick J. Moty in 2009, 2008 and 2007,
respectively; $8,460 for Samuel D. Jimenez in 2009; $3,468 for Linda Miles in each of
2009, 2008 and 2007; $9,720 for Randall Eslick in each of 2009, 2008 and 2007; and $3,660
for Ted Cumming in 2009. The remaining balance represents contributions made in each year
in connection with the SERP.Grants of Plan-Based Awards
  Potential
    
    
    PotentialRealizable
    
    
    RealizableValue at
    
    
    Value atNumber of
    
    
    Percentage of
    
    
    
    
    
    
    
    
    
    
    Assumed
    
    
    AssumedSecurities
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    Annual Rates of
    
    
    Annual Rates ofUnderlying
    
    
    Options
    
    
    
    
    
    
    
    
    
    
    Stock Price
    
    
    Stock PriceOptions
    
    
    Granted to
    
    
    
    
    
    
    
    
    
    
    Appreciation for
    
    
    Appreciation forGranted (#)
    
    
    Employees in
    
    
    Exercise Price
    
    
    Expiration
    
    
    Option Term 5
    
    
    Option Term 10Name
    
    (1)
    
    
    Fiscal Year
    
    
    ($/Share)(2)
    
    
    Date (3)
    
    
    %($)
    
    
    %($)Patrick J. Moty
    
    
    0
    
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Samuel D. Jimenez
    
    
    0
    
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Linda J. Miles
    
    
    0
    
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Randall Eslick
    
    
    0
    
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Ted Cumming
    
    
    0
    
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 
 1)
    
    The right to exercise these stock options vests on an annual basis over a
five-year period from the date of the grant. Under the terms of the Companys stock
plans, the committee designated by the Board of Directors to administer such plans
retains the discretion, subject to certain limitations, to modify, extend or renew
outstanding options and to reprice outstanding options. 129




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##### Table of Contents



Options may be re-priced by canceling outstanding options and reissuing new options
with an exercise price equal to the fair market value on the date of reissue, which may be
lower than the original exercise price of such canceled options. Repricing options result
in a compensation penalty.
 2)
    
    The exercise price is equal to 100% of the fair market value on the date of
grant as determined by the NASDAQ Global Market close the date of the grant.3)
    
    The options have a term of ten years, subject to earlier termination in
certain events related to termination of employment.4)
    
    The five percent and ten percent assumed rates of appreciation are suggested
by the rules of the Securities and Exchange Commission and do not represent the
Companys estimate or projection of the future price of the Common Stock. No assurance
can be given that any of the values reflected in the table will be achieved.
 Outstanding Equity Awards at Fiscal Year End
  EquityIncentivePlanNumber of
    
    
    Awards:Number of
    
    
    Securities
    
    
    Number ofSecurities
    
    
    Underlying
    
    
    SecuritiesUnderlying
    
    
    Unexercised
    
    
    UnderlyingUnexercised
    
    
    Options (#)
    
    
    Unexercised
    
    
    Option
    
    
    OptionOptions (#)
    
    
    Un-
    
    
    Unearned
    
    
    Exercise
    
    
    ExpirationName
    
    Exercisable
    
    
    exercisable
    
    
    Options (#)
    
    
    Price ($)
    
    
    DatePatrick J. Moty
    
    
    15,600
    
    
    
    0
    
    
    
    0
    
    
    $
    6.67
    
    
    
    8/1/2011Patrick J. Moty
    
    
    1,800
    
    
    
    0
    
    
    
    0
    
    
    $
    7.30
    
    
    
    7/16/2012Patrick J. Moty
    
    
    3,900
    
    
    
    0
    
    
    
    0
    
    
    $
    10.60
    
    
    
    6/15/2014Patrick J. Moty
    
    
    8,000
    
    
    
    12,000
    
    
    
    0
    
    
    $
    10.49
    
    
    
    10/16/2017Samuel Jimenez
    
    
    7,500
    
    
    
    0
    
    
    
    0
    
    
    $
    10.72
    
    
    
    1/1/2013Samuel Jimenez
    
    
    700
    
    
    
    2,800
    
    
    
    0
    
    
    $
    6.50
    
    
    
    10/14/2018Linda J. Miles
    
    
    6,000
    
    
    
    0
    
    
    
    0
    
    
    $
    6.75
    
    
    
    1/1/2013Linda J. Miles
    
    
    6,000
    
    
    
    0
    
    
    
    0
    
    
    $
    10.60
    
    
    
    6/15/2014Linda J. Miles
    
    
    4,000
    
    
    
    6,000
    
    
    
    0
    
    
    $
    10.49
    
    
    
    10/16/2017Randy Eslick
    
    
    13,500
    
    
    
    0
    
    
    
    0
    
    
    $
    5.42
    
    
    
    6/1/2011Randy Eslick
    
    
    2,250
    
    
    
    0
    
    
    
    0
    
    
    $
    7.30
    
    
    
    7/16/2012Randy Eslick
    
    
    4,500
    
    
    
    0
    
    
    
    0
    
    
    $
    10.60
    
    
    
    6/15/2014Randy Eslick
    
    
    400
    
    
    
    1,600
    
    
    
    0
    
    
    $
    6.50
    
    
    
    10/14/2018Ted Cumming
    
    
    8,100
    
    
    
    0
    
    
    
    0
    
    
    $
    6.67
    
    
    
    8/1/2011Ted Cumming
    
    
    1,350
    
    
    
    0
    
    
    
    0
    
    
    $
    7.30
    
    
    
    7/16/2012Ted Cumming
    
    
    4,500
    
    
    
    0
    
    
    
    0
    
    
    $
    10.60
    
    
    
    6/15/2014Ted Cumming
    
    
    600
    
    
    
    2,400
    
    
    
    0
    
    
    $
    6.50
    
    
    
    10/14/2018
 130




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##### Table of Contents



Option Exercises and Stock Vested
  Options Vested
    
    
    Options Exercised
    
    
    Value RealizedName
    
    during 2009
    
    
    during 2009
    
    
    ($)(1)(2)Patrick J. Moty
    
    
    4,000
    
    
    
    0
    
    
    
    0Samuel D. Jimenez
    
    
    700
    
    
    
    0
    
    
    
    0Linda J. Miles
    
    
    2,000
    
    
    
    0
    
    
    
    0Randall S. Eslick
    
    
    400
    
    
    
    0
    
    
    
    0Ted Cumming
    
    
    600
    
    
    
    0
    
    
    
    0
 
 1)
    
    Based on the fair market value of the Companys Common Stock at December 31, 2009 of
$5.28 per share less the applicable exercise price per share. The fair market value
of the Companys Common Stock at December 31, 2009 was determined based on the last
reported sale of the Companys common stock in 2009 as reported on the NASDAQ Global
Market.2)
    
    The realized value represents the market value at exercise less the exercise
price. Nonqualified Deferred Compensation- Supplemental Executive Retirement Plan
     131




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##### Table of Contents



Number of
    
    Present Value of
    
    Payments
    
    Annual
    
    Vested BalanceYears Credited
    
    Accumulated
    
    During Last
    
    Retirement
    
    at Last FiscalName
    
    Service (#)
    
    Benefit ($)
    
    Fiscal Year ($)
    
    Benefit
    
    YearPatrick J. Moty
    
    
    4
    
    
    $
    275,765
    
    
    $
    0
    
    
    $
    150,000
    
    
    $
    275,865Samuel D. Jimenez
    
    
    1
    
    
    $
    19,450
    
    
    $
    0
    
    
    $
    100,000
    
    
    $
    19,450Linda J. Miles
    
    
    9
    
    
    $
    698,554
    
    
    $
    0
    
    
    $
    125,000
    
    
    $
    698,554Randall S. Eslick
    
    
    4
    
    
    $
    89,996
    
    
    $
    0
    
    
    $
    100,000
    
    
    $
    89,966Ted Cumming
    
    
    1
    
    
    $
    19,609
    
    
    $
    0
    
    
    $
    50,000
    
    
    $
    19,609
 RegistrantContributions in
    
    Aggregate
    
    Aggregate
    
    Aggregate
    
    Vested BalanceLast Fiscal Year
    
    Earnings in Last
    
    Withdrawals/
    
    Balance at Last
    
    at Last FiscalName
    
    ($)
    
    Fiscal Year ($)
    
    Distributions ($)
    
    Fiscal Year ($)
    
    YearPatrick J. Moty
    
    $
    81,217
    
    
    $
    21,967
    
    
    $
    0
    
    
    $
    275,865
    
    
    $
    275,865Samuel D. Jimenez
    
    $
    18,765
    
    
    $
    686
    
    
    $
    0
    
    
    $
    19,450
    
    
    $
    19,450Linda J. Miles
    
    $
    78,032
    
    
    $
    62,189
    
    
    $
    0
    
    
    $
    698,554
    
    
    $
    698,554Randall S. Eslick
    
    $
    35,223
    
    
    $
    6,658
    
    
    $
    0
    
    
    $
    89,966
    
    
    $
    89,966Ted Cumming
    
    $
    18,712
    
    
    $
    900
    
    
    $
    0
    
    
    $
    19,609
    
    
    $
    19,609
  Potential Payments Upon Termination or Change in Control
  Payments Upon a
    
    Termination Other ThanChange in Control
    
    Change in ControlPayments underPayments under
    
    Salary
    
    employment
    
    Salaryemployment
    
    Continuation Plan
    
    agreements
    
    Continuation PlanName
    
    agreements ($)(1)
    
    Payments ($)(2)
    
    ($)(3)
    
    Payments ($)(4)Patrick J. Moty
    
    $
    730,896
    
    
    $
    1,094,123
    
    
    $
    365,448
    
    
    $
    275,865Samuel D. Jimenez
    
    $
    248,237
    
    
    $
    583,087
    
    
    $
    248,237
    
    
    $
    19,450Linda J. Miles
    
    $
    714,604
    
    
    $
    1,019,874
    
    
    $
    357,032
    
    
    $
    698,554Randall S. Eslick
    
    $
    263,051
    
    
    $
    675,833
    
    
    $
    263,051
    
    
    $
    89,996Ted Cumming
    
    $
    212,690
    
    
    $
    536,226
    
    
    $
    212,690
    
    
    $
    19,609
 
 1)
    
    Under employment agreements at a change of control, severance pay for the Chief
Executive Officer and Executive Vice President is equal to two years of most recent
total compensation package as of the date of such executives termination. Change of
control, severance pay is equal to one year of most recent total compensation package
as of the date of such executives termination.2)
    
    SERP payments are limited under IRS Section 280-G to three times the average
total compensation package.3)
    
    In the event employment is terminated determined for cause, the executive
shall only be paid any accrued salary calculated as of the date of the executives
termination. In the event employment is terminated for any other reason, the executive
shall be entitled to twelve months of such executives then total compensation package
to be paid in a lump sum.4)
    
    Vested portion of salary continuation plan. 132




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Director Compensation
  Change inPension Valueand Non-QualifiedStock
    
    
    Non-Equity
    
    
    Deferred
    
    
    All OtherFees earned
    
    
    Stock
    
    
    Option
    
    
    Incentive
    
    
    Compensation
    
    
    Compensationor paid in
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    (Deferred)
    
    
    TotalDirector
    
    cash ($)
    
    
    ($)
    
    
    ($)(1)
    
    
    ($)
    
    
    ($)(2)
    
    
    ($)
    
    
    ($)Gary Burks
    
    
    $18,900
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    0
    
    
    
    $0
    
    
    
    $18,900Orin N. Bennett
    
    
    $26,153
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    5,562
    
    
    
    $0
    
    
    
    $31,695Dave Bonuccelli
    
    
    $17,050
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    1,815
    
    
    
    $0
    
    
    
    $18,865Welton Carrel (3)
    
    
    $11,050
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    31,570
    
    
    
    $0
    
    
    
    $42,620Russell L. Duclos
    
    
    $31,350
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    26,479
    
    
    
    $0
    
    
    
    $57,829Kenneth R. Gifford, Jr.
    
    
    $38,750
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    35,335
    
    
    
    $0
    
    
    
    $74,085Jon Halfhide
    
    
    $18,850
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    3,840
    
    
    
    $0
    
    
    
    $22,690David H. Scott
    
    
    $35,150
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    17,634
    
    
    
    $0
    
    
    
    $52,784Lyle L. Tullis
    
    
    $20,650
    
    
    
    $0
    
    
    
    $0
    
    
    
    $0
    
    
    $
    12,613
    
    
    
    $0
    
    
    
    $33,263
 
 1)
    
    The value of the stock option award is computed based upon the grant date fair
value, consistent with FASB ASC Topic 718.2)
    
    Long term directors have had the opportunity to defer fee income as of
January 1, 1993. Item (2) represents the interest paid on such balances. Differences
in earnings are based upon the balances in the deferred accounts.3)
    
    Mr. Carrel retired from the Companys Board of Directors effective May 31,
2009. Annual Compensation
 ® rd
  Monthly Retainer and Meeting Fees
  133




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Equity Compensation
  Compensation Committee Interlocks and Insider Participation
  Family Relationships
  Lending and Other Ordinary Business Transactions
  Policy and Procedures on Related Person Transactions
   134




---



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Compensation Committee Report
     135




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136




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
 Security Ownership of Certain Beneficial Owners
  
    
    each person who is known by the Company to beneficially own more than five percent of
the Companys Common Stock,
    
    each of the Companys directors and nominees,
    
    each of the named executive officers, and
    
    all directors and executive officers of the Company as a group.
   Number of Shares of Common
    
    PercentageName and Address of Beneficial Owner
    
    Stock Beneficially Owned
    
    of ClassRobert C. Anderson (1)
    
    
    537,210
    
    
    
    6.17
    %Harry L. Grashoff, Jr. (2)
    
    
    497,395
    
    
    
    5.71
    %Kenneth R. Gifford, Jr. (3)
    
    
    256,560
    
    
    
    2.95
    %Patrick J. Moty (4)
    
    
    164,924
    
    
    
    1.89
    %Russell L. Duclos (5)
    
    
    150,000
    
    
    
    1.72
    %Lyle L. Tullis (6)
    
    
    133,620
    
    
    
    1.53
    %David H. Scott (7)
    
    
    99,211
    
    
    
    1.14
    %Orin Bennett (8)
    
    
    47,600
    
    
    
    0.55
    %Linda J. Miles (9)
    
    
    35,750
    
    
    
    0.41
    %Randall S. Eslick (10)
    
    
    25,109
    
    
    
    0.29
    %Jon Halfhide (11)
    
    
    18,880
    
    
    
    0.22
    %Ted Cumming (12)
    
    
    14,550
    
    
    
    0.17
    %Joe Gibson (13)
    
    
    9,500
    
    
    
    0.11
    %Sam Jimenez (14)
    
    
    8,200
    
    
    
    0.09
    %Dave Bonuccelli (15)
    
    
    7,495
    
    
    
    0.09
    %Gary Burks (16)
    
    
    1,760
    
    
    
    0.02
    %All directors, executive officers and
beneficial owners as a group (16
persons)
    
    
    2,007,764
    
    
    
    23.05
    %
 137




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##### Table of Contents



1)
    
    The address of Mr. Anderson is 1960 Bechelli Lane, Redding, California 96002.
Includes 537,210 shares held by the Anderson Family Revocable Living Trust, of which
Mr. Anderson is a co-trustee and shares voting and investment power with respect to
such shares. Mr. Anderson is retired as Founding Chairman of the Board of the Company.2)
    
    The address of Mr. Grashoff is 3162 Pinot Path, Redding, California 96001.
Includes 456,145 shares held by the Grashoff Family Revocable Trust of which Mr.
Grashoff and his spouse are co-trustees, 18,612 shares held separately in his spouses
IRA account, 22,638 held individually in an IRA account. Mr. Grashoff is the Founding
President & CEO and Retired Chairman of the Company.3)
    
    Includes 236,760 shares held jointly with Mr. Giffords spouse and 19,800
shares held by Gifford Construction, Inc.4)
    
    Includes 50,100 shares jointly with Mr. Motys spouse, 85,524 shares in the
Bank of Commerce 401(k) Plan to which Mr. Moty has voting powers as Trustee and 29,300
shares issuable to Mr. Moty upon the exercise of options exercisable within 60 days of
March 31, 2010.5)
    
    Includes 150,000 shares held by the Duclos Family Trust of whom Mr. Duclos
and his spouse are co-trustees.6)
    
    Includes 125,583 shares held jointly with Mr. Tullis spouse and 7,000 shares
held separately in his spouses name and 1,037 shares issuable to Mr. Tullis upon the
exercise of options exercisable within 60 days of March 31, 2010.7)
    
    Includes 75,991 shares held jointly with Mr. Scotts spouse, 204 shares held
individually by his spouse, 6,991 shares in 401(k) retirement plan, 16,025 shares in
his spouses individual retirement account.8)
    
    Includes 2,000 shares held jointly with Mr. Bennetts spouse, 36,000 shares
held by the Bennett Family Revocable Trust and 9,600 shares issuable to Mr. Bennett
upon the exercise of options exercisable within 60 days of March 31, 2010.9)
    
    Includes 19,750 shares held by the Miles Family Trust of whom Mrs. Miles and
her spouse are co-trustees, and 16,000 shares issuable to Ms. Miles upon the exercise
of options exercisable within 60 days of March 31, 2010.10)
    
    Includes 5,109 shares held individually in an IRA account and 18,000 shares
issuable to Mr. Eslick upon the exercise of options exercisable within 60 days of
March 31, 2010.11)
    
    Includes 10,700 shares held by the Halfhide Family Trust of which Mr.
Halfhide is co-trustee with his spouse Teresa, 500 shares held jointly with his
spouse, and 7,680 shares issuable to Mr. Halfhide upon the exercise of options
exercisable within 60 days of March 31, 2010.12)
    
    Includes 14,550 shares issuable to Mr. Cumming upon the exercise of options
exercisable within 60 days of March 31, 2010.13)
    
    Includes 9,500 shares held individually by Mr. Gibson.14)
    
    Includes 8,200 shares issuable to Mr. Jimenez upon the exercise of options
exercisable within 60 days of March 31, 2010.15)
    
    Includes 7,495 shares held in two retirement plan trusts of which Mr.
Bonuccelli is trustee.16)
    
    Includes 1,760 shares held jointly by Mr. Burks and his spouse Ramona.
 138




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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
   
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees
 ,
 Audit-Related Fees
  Tax Fees
  All Other Fees
   139




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140




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PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    The following documents are filed as a part of this Form 10-K:
 (1)
    
    Financial Statements:Reference is made to the Index to Consolidated Financial Statements under Item 8 in Part II of this Form 10-K.(2)
    
    Financial Statement Schedules:All schedules are omitted because they are not applicable or the required information
is shown in the financial statements or notes thereto.(3)
    
    Exhibits:
 ExhibitNumber
    
    Description of Document3.1
    
    Articles of Incorporation, as amended, incorporated by reference to EX-3.1 of the Form 10-12G
filed 12/4/1998.3.2
    
    Bylaws, as amended, incorporated by reference to EX-3.1 of the Form 8-K filed 05/15/2007.4.1
    
    Specimen Common Stock Certificate, incorporated by reference to EX-4.1 of the Form 10-12G filed 12/4/1998.4.2
    
    Certificate of determination for the Series A Preferred Stock, incorporated by reference to EX-4.1 of the
Form 8-K filed 11/19/2008.4.3
    
    Form of Certificate for the Series A Preferred Stock, incorporated by reference to EX-4.2 of the Form 8-K
filed 11/19/2008.4.4
    
    Warrant for purchase of shares of Common stock, incorporated by reference to EX-4.3 of the Form 8-K filed
11/19/2008.10.1
    
    Letter Agreement, dated November 14, 2008, between Bank of Commerce Holdings and the United States
Department of the Treasury, which includes the Securities Purchase Agreement Standard terms attached
thereto, with respect to the issuance of the Series A Preferred Stock and Warrant, incorporated by
reference to EX-10.1 of the Form 8-K filed 11/19/2008.10.2
    
    Office Building Lease between Gairn Partnership/First Avenue Square and Redding Bank of Commerce dated
July 16, 1998, incorporated by reference to EX-10.2 of the Form 10-12G filed 12/4/1998.10.3
    
    1998 Stock Option Plan, incorporated by reference to EX-10.3 of the Form 10-12G filed 12/4/1998.10.4
    
    Form of Incentive Stock Option Agreement used in connection with 1998 Stock Option Plan, incorporated by
reference to EX-10.4 of the Form 10-12G filed 12/4/1998.10.5
    
    Form of Non-statutory Stock Option Agreement used in connection with 1998 Stock Option Plan, incorporated
by reference to EX-10.5 of the Form 10-12G filed 12/4/1998.10.7
    
    Directors Deferred Compensation Plan, incorporated by reference to EX-10.7 of the Form 10-12G filed
12/4/1998.10.8
    
    Form of Deferred Compensation Agreement Used In Connection With Directors Deferred Compensation Plan,
incorporated by reference to EX-10.8 of the Form 10-12G filed 12/4/1998.10.10
    
    Employment contracts dated April 2001, incorporated by reference to EX-10.10 of the Form 8-K filed
9/27/2001.10.11
    
    Affiliated Business Arrangement Agreement, incorporated by reference to EX-10.11 of the Form 8-K filed
8/20/2004.10.12
    
    Office building lease by and between Waybright #3 Partners and Redding Bank of Commerce dated
9/23/2005 incorporated by reference to EX-99.1 of the Form 8-K filed 9/26/2005.10.13
    
    Amendment to Employment contracts dated April 2001, incorporated by reference to EX-99.1 &99.2 of the
Form 8-K filed 12/21/2005.10.14
    
    Change in Control Agreements, incorporated by reference to EX-99.1-99.4 of the Form 8-K filed 12/21/2005.10.15
    
    Salary Continuation Blais, incorporated by reference to EX-10.15 of the Form 8-K filed 12/19/2006.10.16
    
    Salary Continuation Moty, incorporated by reference to EX-10.16 of the Form 8-K filed 12/19/2006.10.17
    
    Salary Continuation Eslick, incorporated by reference to EX-10.17 of the Form 8-K filed 12/19/2006.
 141




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.19
    
    Employment Agreement Miles, incorporated by reference to EX-10.19 of the Form 8-K filed 1/03/2007.10.21
    
    Salary Continuation Miles, incorporated by reference to EX-10.21 of the Form 8-K filed 1/03/2007.10.22
    
    Employment Agreement Moty, incorporated by reference to EX-10.22 of the Form 8-K filed 9/27/2007.10.23
    
    Salary Continuation Moty, incorporated by reference to EX-10.23 of the Form 8-K filed 9/28/2007.10.24
    
    Employment contracts dated October 14, 2008, incorporated by reference to EX-10.22 of the Form 8-K filed
10/17/2008.10.25
    
    Employment Agreement Matranga, incorporated by reference to EX-10.22 of the Form 8-K filed 11/26/2008.14.0
    
    Bank of Commerce Code of Ethics, incorporated by reference to EX-10.12 of the Form 8-K filed 2/26/2003.21.1
    
    Subsidiaries of the Company, incorporated by reference to EX-21.1 of the Form 10-12G filed 12/4/1998.23.1
    
    Consent of Moss Adams LLP24.1
    
    Power of Attorney see page 144.31.1
    
    Certification of Patrick J. Moty pursuant to Exchange Act Rule 13a-14(a) or 15d  14(a) as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Samuel D. Jimenez pursuant to Exchange Act Rule 13a-14(a) or 15d  14(a) as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to Section 1350.99.1
    
    Certification of Chief Executive Officer Pursuant to Section 111(b)(4) of the Emergency Economic
Stabilization Act of 200899.2
    
    Certification of Chief Financial Officer Pursuant to Section 111(b)(4) of the Emergency Economic
Stabilization Act of 2008
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##### Table of Contents



SIGNATURES
  BANK OF COMMERCE HOLDINGSBy
    /s/  Patrick J.  MotyPatrick J. MotyPresident, Chief Executive
Officer and Director of Redding Bank of 
Commerce 143




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##### Table of Contents



POWER OF ATTORNEY
   Name
    
    Title
    
    Date/s/ Patrick J. Moty
    
    President, Chief Executive Officer and
    
    March 05, 2010/s/ Samuel D. Jimenez
    
    Senior Vice President and Chief 

Financial Officer (Principal
Financial 
and Accounting Officer)
    
    March 05, 2010/s/ Kenneth R. Gifford, Jr.
    
    Chairman of the Board
    
    March 05, 2010/s/ Russell L. Duclos
    
    Director
    
    March 05, 2010/s/ David H. Scott
    
    Director
    
    March 05, 2010/s/ Lyle L. Tullis
    
    Director
    
    March 05, 2010/s/ Jon Halfhide
    
    Director
    
    March 05, 2010/s/ Orin Bennett
    
    Director
    
    March 05, 2010/s/ Gary Burks
    
    Director
    
    March 05, 2010/s/ Dave Bonuccelli
    
    Director
    
    March 05, 2010/s/ Joseph Gibson
    
    Director
    
    March 05, 2010
 144