##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 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
 Bank of Commerce Holdings
 California
    
    94-2823865(State or jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)1901 Churn Creek Road Redding, California
    
    96002(Address of principal executive offices)
    
    (Zip Code)
     þ o
 
 o þ
 
 Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller Reporting Company o
  o þ




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 Index to Form 10-Q
  
 PAGE NUMBERPART I
    
    FINANCIAL INFORMATIONItem 1
    
    Financial StatementsCondensed Consolidated Balance Sheets
June 30, 2009, December 31, 2008 and June 30, 2008
    
    
    4Condensed Consolidated Statements of Income
Three and Six Months Ended June 30, 2009 and 2008
    
    
    5Condensed Consolidated Statement of Stockholders Equity
    
    
    6Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2009 and 2008
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2
    
    Managements Discussion and Analysis
Of Financial Condition and Results of Operations
    
    
    25Company Overview
    
    
    25Risk Factors
    
    
    27Economic Conditions and Geographic Concentration
    
    
    27Current Financial and Credit Market Conditions May Persist or Worsen
    
    
    28Valuation of Investments and Impairment of Securities
    
    
    28Changes in Interest Rates Could Reduce the Companys Net Interest Income
and Earnings
    
    
    28Lending Risks Associated with Commercial Banking and Construction Activities
    
    
    29Adequacy of Allowance for Loan and Lease Losses (ALLL)
    
    
    29Potential Volatility of Deposits
    
    
    29Dividends
    
    
    30Participation in the Treasury Departments Capital Purchase Program
Restricts Our Ability to Raise the Common Stock Dividend and May Result in
Dilution of Common Stockholders
    
    
    30Changes in Accounting Policies or Accounting Standards Could Materially
Affect How the Company Reports its Financial Results and Condition
    
    
    30Government Regulation and Legislation
    
    
    31Certain Ownership Restrictions under California and Federal Law
    
    
    32Negative Publicity could Damage our Reputation
    
    
    32Environmental Risks
    
    
    32Shares Eligible for Future Sale
    
    
    32Technology and Computer Systems
    
    
    33Company Stock Price May Be Volatile Due to Other Factors
    
    
    33Executive Overview
    
    
    34Sources of Income
    
    
    34Financial Highlights  Results of Operations
    
    
    35Net Interest Income and Net Interest Margin
    
    
    37Liquidity
    
    
    37Capital Management
    
    
    37Short and Long Term Borrowings
    
    
    38Provision for Loan and Lease Losses
    
    
    38Factors That May Affect Future Results
    
    
    39Critical Accounting Policies
    
    
    40Average Balances, Interest Income/Expense and Yields/Rates Paid
    
    
    43Analysis of Changes in Net Interest Income and Interest Expense
    
    
    44Noninterest Income
    
    
    45Noninterest Expense
    
    
    45Income Taxes
    
    
    46Asset Quality
    
    
    47Allowance for Loan and Lease Losses (ALLL)
    
    
    48Quarterly Income Statement
    
    
    50
 2




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 Index
 PAGE NUMBERItem 3
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    51Item 4T
    
    Controls and Procedures
    
    
    53PART II.
    
    OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    53Item 1a
    
    Risk Factors
    
    
    53Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    54Item 3
    
    Defaults Upon Senior Securities
    
    
    54Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    54Item 5
    
    Other Information
    
    
    54Item 6
    
    Exhibits
    
    
    54SIGNATURES
    
    
    55EX-31.1EX-31.2EX-32
  3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
(Unaudited)
 Dollars in thousands
    
    June 30, 2009
    
    
    Dec. 31,2008
    
    
    June 30, 2008ASSETSCash and due from banks, non interest bearing
    
    $
    36,352
    
    
    $
    10,216
    
    
    $
    16,660Interest bearing due from banks
    
    
    27,512
    
    
    
    23,500
    
    
    
    0Federal funds sold and securities purchased under
agreements to resell
    
    
    15,140
    
    
    
    51,475
    
    
    
    11,585Cash and cash equivalents
    
    
    79,004
    
    
    
    85,191
    
    
    
    28,245Securities available-for-sale, at fair value (including
pledged collateral of $60,678 at June 30, 2009, $68,735
at December 31, 2008 and $68,165 at June 30, 2008)
    
    
    75,480
    
    
    
    131,687
    
    
    
    66,728Securities held-to-maturity, at cost (estimated fair
value of $0 at June 30, 2009, $0 at December 31, 2008 and
$10,285 at June 30, 2008)
    
    
    
    
    
    
    
    
    
    
    10,385Portfolio Loans, net of the allowance for loan losses of
$8,496 at June 30, 2009, $8,429 at December 31, 2008 and
$5,017 at June 30, 2008 (includes estimated fair value of
ITIN loans of $80,671 at June 30, 2009, $0 at December
31, 2008 and $0 at June 30, 2008)
    
    
    587,637
    
    
    
    518,946
    
    
    
    507,651Mortgages held for sale, at fair value
    
    
    20,225
    
    
    
    
    
    
    
    Bank premises and equipment, net
    
    
    10,586
    
    
    
    10,672
    
    
    
    11,068Goodwill
    
    
    2,927
    
    
    
    
    
    
    
    Other real estate owned
    
    
    3,229
    
    
    
    2,934
    
    
    
    Other assets
    
    
    28,031
    
    
    
    24,784
    
    
    
    22,531TOTAL ASSETS
    
    $
    807,119
    
    
    $
    774,214
    
    
    $
    646,608LIABILITIES AND STOCKHOLDERS EQUITYDemand  noninterest bearing
    
    
    69,957
    
    
    $
    79,988
    
    
    $
    68,625Demand  interest bearing
    
    
    142,210
    
    
    
    143,871
    
    
    
    128,994Savings accounts
    
    
    59,432
    
    
    
    67,136
    
    
    
    52,453Certificates of deposit
    
    
    295,508
    
    
    
    264,287
    
    
    
    218,303Total deposits
    
    
    567,107
    
    
    
    555,282
    
    
    
    468,375Securities sold under agreements to repurchase
    
    
    10,843
    
    
    
    13,853
    
    
    
    14,343Federal Home Loan Bank and Federal Reserve Bank borrowings
    
    
    120,000
    
    
    
    120,000
    
    
    
    95,000Mortgage warehouse lines of credit
    
    
    17,512
    
    
    
    
    
    
    
    Other liabilities
    
    
    9,344
    
    
    
    7,036
    
    
    
    7,396Junior subordinated debt payable to unconsolidated
subsidiary grantor trust
    
    
    15,465
    
    
    
    15,465
    
    
    
    15,465Total Liabilities
    
    
    740,271
    
    
    
    711,636
    
    
    
    600,579Commitments and contingencies
Stockholders 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 June 30, 2008
    
    
    16,596
    
    
    
    16,551
    
    
    
    Common stock , no par value, 50,000,000 shares
authorized; 8,711,495 shares
issued and outstanding at June 30, 2009, December 31,
2008 and at June 30, 2008
    
    
    9,688
    
    
    
    9,650
    
    
    
    9,590Common Stock Warrant
    
    
    449
    
    
    
    449
    
    
    
    Retained earnings
    
    
    37,922
    
    
    
    36,009
    
    
    
    37,344Accumulated other comprehensive income (loss), net of tax
    
    
    30
    
    
    
    (81
    )
    
    
    (905
    )Total Equity  Bank of Commerce Holdings
    
    
    64,685
    
    
    
    62,578
    
    
    
    46,029Non controlling interest in subsidiary
    
    
    2,163
    
    
    
    
    
    
    
    Total stockholders equity
    
    
    66,848
    
    
    
    62,578
    
    
    
    46,029TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    807,119
    
    
    $
    774,214
    
    
    $
    646,608
 See accompanying notes to condensed consolidated financial statements.
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Condensed Consolidated Statements of Income (Unaudited)  Three and Six Months Ended June 30, 2009 and June 30, 2008
 For Three Months Ended:
    
    
    For Six Months Ended:Amounts in thousands, except for per share data
    
    June 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Interest income:Interest and fees on loans
    
    $
    9,272
    
    
    $
    8,171
    
    
    $
    17,321
    
    
    $
    17,302Interest on tax-exempt securities
    
    
    279
    
    
    
    302
    
    
    
    575
    
    
    
    576Interest on U.S. government securities
    
    
    954
    
    
    
    533
    
    
    
    2,146
    
    
    
    1,014Interest on federal funds sold and
securities purchased under agreements to resell
    
    
    5
    
    
    
    90
    
    
    
    30
    
    
    
    148Interest on other securities
    
    
    131
    
    
    
    23
    
    
    
    248
    
    
    
    45Total interest income
    
    
    10,641
    
    
    
    9,119
    
    
    
    20,320
    
    
    
    19,085Interest expense:Interest on demand deposits
    
    
    239
    
    
    
    498
    
    
    
    546
    
    
    
    1,248Interest on savings deposits
    
    
    238
    
    
    
    360
    
    
    
    519
    
    
    
    650Interest on certificates of deposit
    
    
    1,900
    
    
    
    2,238
    
    
    
    3,781
    
    
    
    4,614Securities sold under agreements to repurchase
    
    
    11
    
    
    
    35
    
    
    
    25
    
    
    
    119Interest on FHLB and other borrowings
    
    
    539
    
    
    
    781
    
    
    
    1,120
    
    
    
    1,512Interest on junior subordinated debt payable to
unconsolidated subsidiary grantor trust
    
    
    216
    
    
    
    161
    
    
    
    431
    
    
    
    476Total interest expense
    
    
    3,143
    
    
    
    4,073
    
    
    
    6,422
    
    
    
    8,619Net interest income
    
    
    7,498
    
    
    
    5,046
    
    
    
    13,898
    
    
    
    10,466Provision for loan and lease losses
    
    
    3,056
    
    
    
    1,000
    
    
    
    4,481
    
    
    
    1,600Net interest income after provision for loan losses
    
    
    4,442
    
    
    
    4,046
    
    
    
    9,417
    
    
    
    8,866Noninterest income:Service charges on deposit accounts
    
    
    96
    
    
    
    50
    
    
    
    188
    
    
    
    112Payroll and benefit processing fees
    
    
    104
    
    
    
    99
    
    
    
    238
    
    
    
    228Earnings on cash surrender value -
Bank owned life insurance
    
    
    117
    
    
    
    85
    
    
    
    203
    
    
    
    168Net gain on sale of securities available-for-sale
    
    
    1,074
    
    
    
    194
    
    
    
    1,478
    
    
    
    436Net gain on transfer of financial assets
    
    
    340
    
    
    
    
    
    
    
    340
    
    
    
    Net loss on sale of derivative swap transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225
    )Merchant credit card service income, net
    
    
    75
    
    
    
    97
    
    
    
    149
    
    
    
    180Mortgage brokerage fee income
    
    
    1,302
    
    
    
    5
    
    
    
    1,302
    
    
    
    15Other income
    
    
    87
    
    
    
    187
    
    
    
    162
    
    
    
    368Total noninterest income
    
    
    3,195
    
    
    
    717
    
    
    
    4,060
    
    
    
    1,282Noninterest expense:Salaries and related benefits
    
    
    2,644
    
    
    
    1,892
    
    
    
    4,771
    
    
    
    3,841Occupancy and equipment expense
    
    
    730
    
    
    
    640
    
    
    
    1,302
    
    
    
    1,284FDIC insurance premium
    
    
    301
    
    
    
    113
    
    
    
    574
    
    
    
    171Data processing fees
    
    
    68
    
    
    
    65
    
    
    
    179
    
    
    
    143Professional service fees
    
    
    295
    
    
    
    133
    
    
    
    454
    
    
    
    251Payroll and benefit fees
    
    
    27
    
    
    
    27
    
    
    
    61
    
    
    
    60Deferred compensation expense
    
    
    123
    
    
    
    113
    
    
    
    242
    
    
    
    224Stationery and supplies
    
    
    26
    
    
    
    80
    
    
    
    79
    
    
    
    142Postage
    
    
    76
    
    
    
    38
    
    
    
    157
    
    
    
    72Directors expense
    
    
    120
    
    
    
    94
    
    
    
    157
    
    
    
    142Other expenses
    
    
    483
    
    
    
    418
    
    
    
    877
    
    
    
    847Total noninterest expense
    
    
    4,893
    
    
    
    3,613
    
    
    
    8,853
    
    
    
    7,177Income before provision for income taxes
    
    
    2,744
    
    
    
    1,150
    
    
    
    4,624
    
    
    
    2,971Provision for income taxes
    
    
    1,027
    
    
    
    244
    
    
    
    1,637
    
    
    
    835Net Income
    
    
    1,717
    
    
    
    906
    
    
    
    2,987
    
    
    
    2,136Less: Net income attributable to non-controlling interest
    
    
    101
    
    
    
    
    
    
    
    101
    
    
    
    Net Income attributable to Bank of Commerce Holdings
    
    $
    1,616
    
    
    $
    906
    
    
    $
    2,886
    
    
    $
    2,136Less: preferred dividend and accretion on preferred stock
    
    
    235
    
    
    
    
    
    
    
    472
    
    
    
    Income available to common shareholders
    
    $
    1,381
    
    
    $
    906
    
    
    $
    2,414
    
    
    $
    2,136Basic earnings per share
    
    $
    0.16
    
    
    $
    0.10
    
    
    $
    0.28
    
    
    $
    0.25Weighted average shares  basic
    
    
    8,711
    
    
    
    8,748
    
    
    
    8,711
    
    
    
    8,714Diluted earnings per share
    
    $
    0.16
    
    
    $
    0.10
    
    
    $
    0.28
    
    
    $
    0.24Weighted average shares  diluted
    
    
    8,712
    
    
    
    8,751
    
    
    
    8,712
    
    
    
    8,732Cash Dividends declared
    
    $
    0.00
    
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.16
 See accompanying notes to condensed consolidated financial statements.
 5




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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Condensed Consolidated Statements of Stockholders Equity  Three and Six Months Ended June 30, 2009
 Accumulated
    
    
    Subtotal
    
    
    NonOther Comp-
    
    
    Bank of
    
    
    ControllingComprehensive
    
    
    Preferred
    
    
    
    
    
    
    Common
    
    
    Stock
    
    
    Retained
    
    
    Income (Loss),
    
    
    Commerce
    
    
    Interest inDollars in Thousands
    
    Income
    
    
    Amount
    
    
    Warrant
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    net of tax
    
    
    Holdings
    
    
    Subsidiary
    
    
    TotalBalance at December 31, 2008
    
    
    
    
    
    $
    16,551,268
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,649,672
    
    
    $
    36,008,866
    
    
    
    ($80,897
    )
    
    $
    62,577,641
    
    
    $
    0
    
    
    $
    62,577,641Comprehensive Income:Net Income
    
    
    1,270,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,270,015
    
    
    
    
    
    
    
    1,270,015
    
    
    
    
    
    
    
    1,270,015Other Comprehensive Income:Unrealized gains on
securities, net of
reclassification
adjustment
    
    
    473,885Less: reclassification
adjustment for gains
included in net income,
net of tax
    
    
    (237,796
    )Other Comprehensive Income
    
    
    Total Comprehensive Income
    
    
    1,506,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236,089
    
    
    
    236,089
    
    
    
    
    
    
    
    236,089Accretion on Preferred Stock
    
    
    
    
    
    
    22,437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,437
    
    
    
    
    
    
    
    22,437Common cash dividends
($0.06 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (522,690
    )
    
    
    
    
    
    
    (522,690
    )
    
    
    
    
    
    
    (522,690
    )Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214,861
    )
    
    
    
    
    
    
    (214,861
    )
    
    
    
    
    
    
    (214,861
    )Compensation expense associated
with stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,902
    
    
    
    
    
    
    
    
    
    
    
    28,902
    
    
    
    
    
    
    
    28,902Balance at March 31, 2009
    
    
    
    
    
    $
    16,573,705
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,678,574
    
    
    $
    36,541,330
    
    
    $
    155,192
    
    
    $
    63,397,533
    
    
    $
    0
    
    
    $
    63,397,533Net Income
    
    
    1,717,020
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,615,771
    
    
    
    
    
    
    
    1,615,771
    
    
    
    101,249
    
    
    
    1,717,020Comprehensive Income:Other Comprehensive Income:Unrealized gains on
securities, net of
reclassification
adjustment
    
    
    506,451Less: reclassification
adjustment for gains
included in net income,
net of tax
    
    
    (631,627
    )Total Other Comprehensive Income
    
    
    1,591,844Less: Other Comprehensive Income
non-controlling interest
    
    
    (101,249
    )Total Comprehensive Income  BOCH
    
    
    1,490,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125,176
    )
    
    
    (125,176
    )
    
    
    
    
    
    
    (125,176
    )Accretion on Preferred Stock
    
    
    
    
    
    
    22,437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,437
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (212,500
    )
    
    
    
    
    
    
    (212,500
    )
    
    
    
    
    
    
    (212,500
    )Compensation expense associated
with stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,434
    
    
    
    
    
    
    
    
    
    
    
    9,434
    
    
    
    
    
    
    
    9,434Cash distribution to non
controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,061,812
    
    
    
    2,061,812Balance at June 30, 2009
    
    
    
    
    
    $
    16,596,142
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,688,008
    
    
    $
    37,922,164
    
    
    $
    30,016
    
    
    $
    64,685,062
    
    
    $
    2,163,061
    
    
    $
    66,848,123
  6




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2009 and 2008
 Dollars in thousands
    
    June 30, 2009
    
    
    June 30, 2008Cash flows from operating activities:Net income
    
    $
    2,886
    
    
    $
    2,136Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan and lease losses
    
    
    4,481
    
    
    
    1,600Provision for depreciation and amortization
    
    
    592
    
    
    
    598Compensation expense associated with stock options
    
    
    38
    
    
    
    57Gain on transfer of financial assets
    
    
    (340
    )
    
    
    0Gain on sale of securities available-for-sale
    
    
    (1,478
    )
    
    
    (436
    )Amortization of investment premiums and accretion of discounts, net
    
    
    (61
    )
    
    
    18Loss on sale of derivative swap transaction
    
    
    0
    
    
    
    225Loss (Gain) on sale of fixed assets
    
    
    1
    
    
    
    (5
    )Deferred income taxes
    
    
    (809
    )
    
    
    (707
    )Increase in cash surrender value of bank owned life policies
    
    
    (1,379
    )
    
    
    (141
    )Effect of changes in:Other assets
    
    
    (1,578
    )
    
    
    (860
    )Deferred compensation
    
    
    216
    
    
    
    219Deferred loan fees
    
    
    167
    
    
    
    (31
    )Other liabilities
    
    
    (1,546
    )
    
    
    (378
    )Net cash from operating activities
    
    
    1,190
    
    
    
    2,295Cash flows from investing activities:Proceeds from maturities and payments of available-for-sale securities
    
    
    19,734
    
    
    
    4,071Proceeds from sales of available-for-sale securities
    
    
    54,427
    
    
    
    26,616(Purchases) of available-for-sale securities
    
    
    (16,004
    )
    
    
    0Purchases of ITIN loan portfolio
    
    
    (66,696
    )
    
    
    0Investment in bank owned life policies
    
    
    0
    
    
    
    (30,052
    )Loan origination, net of principal repayments
    
    
    (18,292
    )
    
    
    (22,938
    )Purchases of Bank premises and equipment, net
    
    
    (326
    )
    
    
    (697
    )Cash acquired in merger, net of cash consideration paid
    
    
    4,825
    
    
    
    0Net cash used from investing activities
    
    
    (22,332
    )
    
    
    (23,000
    )Cash flows from financing activities:Net (decrease) increase in deposits
    
    
    11,802
    
    
    
    (5,255
    )Net (decrease) in securities sold under agreement to repurchase
    
    
    (3,009
    )
    
    
    (1,170
    )Net change in FHLB advances
    
    
    (20,000
    )
    
    
    35,000Net change in other short term borrowings
    
    
    27,809
    
    
    
    0Cash dividends paid on common stock
    
    
    (1,220
    )
    
    
    (1,396
    )Cash dividends paid on preferred stock
    
    
    (427
    )
    
    
    0Proceeds from stock options exercised
    
    
    0
    
    
    
    41Common stock repurchased
    
    
    0
    
    
    
    (504
    )Net cash from financing activities
    
    
    14,955
    
    
    
    26,716Net (decrease) increase in cash and cash equivalents
    
    
    (6,187
    )
    
    
    6,011Cash and cash equivalents, beginning of period
    
    
    85,191
    
    
    
    22,234Cash and cash equivalents, end of period
    
    
    79,004
    
    
    $
    28,245Supplemental disclosures:Cash paid during the period for:Income taxes
    
    $
    1,132
    
    
    $
    Interest
    
    $
    6,474
    
    
    
    8,970Transfer of loans to other real estate owned
    
    $
    3,229
    
    
    
    
 See accompanying notes to condensed consolidated financial statements.
 7




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
 1. Consolidation and Basis of Presentation
    2. Business Combinations
    8




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
  Purchase Price and Goodwill
  (In thousands)Cash paid  at fair value
    
    $
    1,500Earn out payable  at fair value
    
    
    965Fair value of non-controlling interest
    
    
    2,062Total Consideration at fair value
    
    $
    4,527Net acquisition date fair value of assets acquired
    
    
    ($1,600
    )Goodwill
    
    $
    2,927
   Cash and Cash Equivalents
    
    $
    1,764,691Restricted Cash
    
    
    800,000Accounts Receivable
    
    
    10,447Other Receivables
    
    
    436,533Loans held for sale, net of deferred income
    
    
    12,005,417Prepaid Expenses
    
    
    57,430Notes Receivable
    
    
    414,294Total Current Assets:
    
    
    15,488,812Fixed Assets
    
    
    155,148Other Assets
    
    
    13,310TOTAL ASSETS
    
    
    15,657,270Accounts Payable
    
    
    98,697Accrued Expenses
    
    
    232,378Branch Payables
    
    
    191,117Total Payables:
    
    
    522,192Current portion Capital Lease
    
    
    39,276Impounds payable
    
    
    66,644Mortgage warehouse lines of credit
    
    
    11,810,238Total Other Current Liabilities:
    
    
    11,916,158Total Current Liabilities:
    
    
    12,438,350Long Term Capital Lease Payable
    
    
    14,888Due to stockholder
    
    
    224,032Notes Payable
    
    
    1,380,000Total Long Term Liabilities:
    
    
    1,618,920TOTAL LIABILITIES
    
    
    14,057,270Net Assets
    
    $
    1,600,000
 9




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
  Six Months Ended June 30, 2009Pro-Forma Income Statement
    
    Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedInterest income:Total interest income
    
    
    20,165
    
    
    
    
    
    
    
    182
    
    
    
    (27
    )
    
    
    20,320Interest expense:Total interest expense
    
    
    6,015
    
    
    
    3
    
    
    
    431
    
    
    
    (27
    )
    
    
    6,422Net interest income
    
    
    14,150
    
    
    
    (3
    )
    
    
    (249
    )
    
    
    
    
    
    
    13,898Provision for loan and lease losses
    
    
    4,475
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    4,481Net interest income after provision for
loan losses
    
    
    9,675
    
    
    
    (9
    )
    
    
    (249
    )
    
    
    
    
    
    
    9,417Noninterest income:Mortgage brokerage fee income
    
    
    8
    
    
    
    3,939
    
    
    
    
    
    
    
    
    
    
    
    3,947Other noninterest income
    
    
    2,758
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,758Total noninterest income
    
    
    2,766
    
    
    
    3,930
    
    
    
    (249
    )
    
    
    (27
    )
    
    
    6,705Noninterest expense:Salaries and related benefits
    
    
    4,148
    
    
    
    1,959
    
    
    
    65
    
    
    
    
    
    
    
    6,172Occupancy and equipment expense
    
    
    1,215
    
    
    
    449
    
    
    
    
    
    
    
    
    
    
    
    1,664Other noninterest expense
    
    
    2,420
    
    
    
    699
    
    
    
    98
    
    
    
    
    
    
    
    3,217Total noninterest expense
    
    
    7,783
    
    
    
    3,107
    
    
    
    163
    
    
    
    
    
    
    
    11,053Income before provision for income taxes
    
    
    4,658
    
    
    
    823
    
    
    
    (412
    )
    
    
    
    
    
    
    5,069Provision for income taxes
    
    
    1,466
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    1,639Net Income
    
    
    3,192
    
    
    
    650
    
    
    
    (412
    )
    
    
    
    
    
    
    3,430Less: Net income attributable to non-controlling interest
    
    
    
    
    
    
    (319
    )
    
    
    
    
    
    
    
    
    
    
    (319
    )Net Income attributable to Bank of Commerce Holdings
    
    $
    3,192
    
    
    $
    331
    
    
    $
    (412
    )
    
    
    
    
    
    $
    3,111Less: Preferred dividend and accretion on preferred stock
    
    
    
    
    
    
    
    
    
    
    (472
    )
    
    
    
    
    
    
    (472
    )Income available to common shareholders
    
    $
    3,192
    
    
    $
    331
    
    
    $
    (884
    )
    
    
    =
    
    
    $
    2,639Basic earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.30Diluted earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.30
 Six Months Ended June 30, 2008Pro-Forma Income Statement
    
    Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedInterest income:Total interest income
    
    
    18,959
    
    
    
    
    
    
    
    146
    
    
    
    (20
    )
    
    
    19,085Interest expense:Total interest expense
    
    
    8,173
    
    
    
    
    
    
    
    466
    
    
    
    (20
    )
    
    
    8,619Net interest income
    
    
    10,786
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    10,466Provision for loan and lease losses
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,600Net interest income after provision for
loan losses
    
    
    9,186
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    8,866Noninterest income:Mortgage brokerage fee income
    
    
    15
    
    
    
    2,861
    
    
    
    
    
    
    
    
    
    
    
    2,876Other noninterest income
    
    
    1,267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,267Total noninterest income
    
    
    1,282
    
    
    
    2,861
    
    
    
    
    
    
    
    
    
    
    
    4,149Noninterest expense:Salaries and related benefits
    
    
    3,776
    
    
    
    1,401
    
    
    
    65
    
    
    
    
    
    
    
    5,242Occupancy and equipment expense
    
    
    1,284
    
    
    
    587
    
    
    
    
    
    
    
    
    
    
    
    1,871Other noninterest expense
    
    
    1,942
    
    
    
    1,062
    
    
    
    110
    
    
    
    
    
    
    
    3,114Total noninterest expense
    
    
    7,002
    
    
    
    3,050
    
    
    
    175
    
    
    
    
    
    
    
    10,227Income before provision for income taxes
    
    
    3,466
    
    
    
    (189
    )
    
    
    (495
    )
    
    
    
    
    
    
    2,782Provision for income taxes
    
    
    835
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    835Net Income
    
    
    2,631
    
    
    
    (189
    )
    
    
    (495
    )
    
    
    
    
    
    
    1,947Less: Net income attributable to non-controlling interest
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    (92
    )Net Income attributable to Bank of Commerce Holdings$
    2,631
    
    
    $
    (97
    )
    
    $
    (495
    )
    
    
    
    
    
    $
    2,039Less: Preferred dividend and accretion on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income available to common shareholders
    
    $
    2,631
    
    
    $
    (97
    )
    
    $
    (495
    )
    
    
    =
    
    
    $
    2,039Basic earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.23Diluted earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.23
 10




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
 3. Recent Accounting pronouncements
 In June 2009, SFAS No. 168
 On May 28, 2009, the FASB issued FAS 165, Subsequent Events .
 On October 10, 2008, the FASB issued FAS 157-3, Determining the Fair Value of a Financial Asset
When the Market for That Asset is Not Active Fair Value Measurements,
 SFAS No. 160
  In April 2009, the FASB issued the following three FSPs
 FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,
 FSP FAS 107-1 and APB 28-1 Interim Disclosures about Fair Value of Financial Instruments,
 FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments,
 11




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
 4. Earnings per Share
   Three Months Ended
    
    
    Six Months EndedEarnings Per Share
    
    June 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Basic EPS Calculation:Net Income
attributable to Bank of Commerce Holdings
    
    $
    1,616
    
    
    $
    906
    
    
    $
    2,886
    
    
    $
    2,136Less: dividend on Preferred Stock
    
    
    213
    
    
    
    
    
    
    
    427
    
    
    
    Less: accretion on Preferred Stock
    
    
    22
    
    
    
    
    
    
    
    45
    
    
    
    Numerator: Earnings available to common
stockholders
    
    $
    1,381
    
    
    $
    906
    
    
    $
    2,414
    
    
    $
    2,136Denominator (average common shares outstanding)8,711
    
    
    
    8,748
    
    
    
    8,711
    
    
    
    8,714Basic earnings per Share
    
    $
    0.16
    
    
    $
    0.10
    
    
    $
    0.28
    
    
    $
    0.25Diluted EPS Calculation:Net Income
attributable to Bank of Commerce Holdings
    
    $
    1,616
    
    
    $
    906
    
    
    $
    2,886
    
    
    $
    2,136Less: dividend on Preferred Stock
    
    
    213
    
    
    
    
    
    
    
    427
    
    
    
    Less: accretion on Preferred Stock
    
    
    22
    
    
    
    
    
    
    
    45
    
    
    
    Numerator: Earnings available to common
stockholders
    
    $
    1,381
    
    
    $
    906
    
    
    $
    2,414
    
    
    $
    2,136Denominator:Average common shares outstanding
    
    
    8,711
    
    
    
    8,748
    
    
    
    8711
    
    
    
    8,714Plus incremental shares from assumed conversionsStock Options
    
    
    1
    
    
    
    3
    
    
    
    1
    
    
    
    18Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,712
    
    
    
    8,751
    
    
    
    8,712
    
    
    
    8,732Diluted earnings per Share
    
    $
    0.16
    
    
    $
    0.10
    
    
    $
    0.28
    
    
    $
    0.24Anti-dilutive options not included in EPS Calculation
    
    
    188,400
    
    
    
    146,167
    
    
    
    188,400
    
    
    
    146,167Anti-dilutive warrants not included in EPS Calculation
    
    
    405,405
    
    
    
    
    
    
    
    405,405
    
    
    
    
  5. Stock Option Plans
   12




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
 6. Securities Portfolio
     (Dollars in thousands)
    
    
    
    
    
    As of June 30, 2009Gross
    
    
    Gross
    
    
    EstimatedAvailable for sale securities
    
    Amortized Costs
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    Fair ValueU.S. government & agencies
    
    $
    25,269
    
    
    $
    657
    
    
    
    ($45
    )
    
    $
    25,881Obligations of state and political subdivisions
    
    
    28,381
    
    
    
    113
    
    
    
    (836
    )
    
    
    27,658Mortgage backed securities
    
    
    19,332
    
    
    
    286
    
    
    
    (31
    )
    
    
    19,587Asset backed securities
    
    
    2,463
    
    
    
    
    
    
    
    (109
    )
    
    
    2,354Total
    
    $
    75,445
    
    
    $
    1,056
    
    
    $
    (1,021
    )
    
    $
    75,480
 (Dollars in thousands)
    
    
    
    
    
    As of December 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAvailable for sale securities
    
    Amortized Costs
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    Fair ValueU.S. government & agencies
    
    $
    16,006
    
    
    $
    70
    
    
    $
    
    
    
    $
    16,076Obligations of state and political subdivisions
    
    
    32,178
    
    
    
    146
    
    
    
    (1,303
    )
    
    
    31,021Mortgage backed securities
    
    
    83,657
    
    
    
    1,278
    
    
    
    (345
    )
    
    
    84,590Asset backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    131,841
    
    
    $
    1,493
    
    
    $
    (1,648
    )
    
    $
    131,687
  Amortized Cost
    
    
    Estimated Fair ValueDue in one year or less
    
    $
    1,005
    
    
    $
    1,015Due after one year through five years
    
    
    1,806
    
    
    
    1,813Due after five years through ten years
    
    
    6,388
    
    
    
    6,308Due after ten years
    
    
    66,246
    
    
    
    66,344Total
    
    
    75,445
    
    
    
    75,480
  13




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
    As of June 30, 2009Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. government &
agencies
    
    $
    2,954,365
    
    
    
    ($45,635
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,954,365
    
    
    
    ($45,635
    )Obligations of state
and
political subdivisions
    
    
    12,359,048
    
    
    
    (488,747
    )
    
    
    4,688,605
    
    
    
    (346,733
    )
    
    
    17,047,653
    
    
    
    (835,480
    )Mortgage backed
securities
    
    
    2,748,884
    
    
    
    (3,133
    )
    
    
    2,142,523
    
    
    
    (27,953
    )
    
    
    4,891,407
    
    
    
    (31,086
    )Asset backed
securities
    
    
    2,354,076
    
    
    
    (109,283
    )
    
    
    
    
    
    
    
    
    
    
    2,354,076
    
    
    
    (109,283
    )Total temporarily
impaired securities
    
    $
    20,416,373
    
    
    
    ($646,798
    )
    
    $
    6,831,128
    
    
    
    ($374,686
    )
    
    $
    27,247,501
    
    
    
    ($1,021,484
    )
 As of 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
    )
 7. Mortgages held for sale
  14




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
 8. Goodwill
   9. Junior Subordinated Debt Payable to Unconsolidated Subsidiary Grantor Trust
          15




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
 10. Preferred Stock and Warrants
       16




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
 11. Commitments and contingent liabilities
 Lease Commitments 
 (Dollars in thousands)Operating Leases2009
    
    $
    2662010
    
    
    5242011
    
    
    4542012
    
    
    2792013
    
    
    155Thereafter
    
    
    606Total
    
    $
    2,284
 Legal Proceedings 
 FHLB Advances 
 Advance Amount
    
    Interest Rate
    
    Maturity$50,000,000
    
    0.32%
    
    08/31/2009$15,000,000
    
    3.41%
    
    04/29/2011$35,000,000
    
    3.97%
    
    11/23/2009$100,000,000
  FRB TAF Advances
 Off-Balance
Sheet Financial Instruments
  17




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
   Credit Commitments
    
    June 30, 2009
    
    
    June 30, 2008Unfunded loan commitments
    
    $
    144,214,872
    
    
    $
    150,784,540Standby letters of credit
    
    
    5,732,853
    
    
    
    6,074,834Guaranteed commitments outstanding
    
    
    1,324,799
    
    
    
    1,357,724$
    151,272,524
    
    
    $
    158,217,098
 12. Accounting for Income Tax Uncertainties (FIN 48)
   13. Fair Value Measurement
      18




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
  Recurring Basis
    
    
    
    
    
    Fair Value MeasurementsAt June 30, 2009Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    June 30, 2009
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)Available-for-sale securities
    
    $
    75,480
    
    
    $
    0
    
    
    $
    75,480
    
    
    $
    0Mortgages held for sale
    
    $
    20,225
    
    
    $
    20,225
    
    
    $
    0
    
    
    $
    0Total assets measured at fair value
    
    $
    95,705
    
    
    $
    20,225
    
    
    $
    75,480
    
    
    $
    0Total liabilities measured at fair
value
    
    $
    
    
    
    
    
    
    
    $
    
  Securities
available-for-sale
 Mortgages held for sale 
 Assets and Liabilities Recorded at Fair Value on a Non Recurring Basis
   Non Recurring Basis
    
    
    
    
    
    Fair Value MeasurementsAt June 30, 2009Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    Unobservable
    
    
    GainsFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    (Losses)Description
    
    June 30, 2009
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    During periodImpaired Loans
    
    $
    7,680
    
    
    $
    0
    
    
    $
    0
    
    
    $
    7,680
    
    
    
    ($1,715
    )Total assets measured at fair value
    
    $
    7,680
    
    
    $
    0
    
    
    $
    0
    
    
    $
    7,680
    
    
    
    ($1,715
    )Liabilities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Total liabilities measured at fair
value
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 19




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
 Impaired loans  Accounting by Creditors for Impairment of a Loan, (
   Method for determining fair values
  Cash
and cash equivalents
 Securities
 Portfolio loans
 Mortgages held for sale 
 Commitments to extend credit and standby letters of credit
 Federal
Home Loan Bank borrowings 
 Junior subordinated debt payable to unconsolidated subsidiary grantor trust 
 Deposit liabilities
 Securities sold under agreements to repurchase 
 Limitations
 20




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
     June 30, 2009Contract
    
    CarryingAmount
    
    Amount
    
    Fair ValueFinancial Assets:Cash and cash equivalents
    
    
    
    
    
    $
    79,004
    
    
    $
    79,004Securities
    
    
    
    
    
    
    75,480
    
    
    
    75,480Portfolio Loans, net
    
    
    
    
    
    
    587,637
    
    
    
    595,454Mortgages held for sale, at fair value
    
    
    
    
    
    
    20,225
    
    
    
    20,225Accrued interest on loans
    
    
    
    
    
    
    2,527
    
    
    
    2,527Accrued interest on securities
    
    
    
    
    
    
    603
    
    
    
    603Financial Liabilities:Demand and savings
    
    
    
    
    
    $
    271,599
    
    
    $
    271,599Fixed rate certificates
    
    
    
    
    
    
    292,144
    
    
    
    294,179Variable certificates
    
    
    
    
    
    
    3,364
    
    
    
    3,364Accrued interest payable
    
    
    
    
    
    
    491
    
    
    
    491Securities sold under agreements to repurchase
    
    
    
    
    
    
    10,843
    
    
    
    10,843Federal Home Loan Borrowings
    
    
    
    
    
    
    120,000
    
    
    
    120,000Junior subordinated debt payable to
unconsolidated subsidiary grantor trust
    
    
    
    
    
    
    15,465
    
    
    
    15,465Off balance sheet financial instruments:Commitments to extend credit
    
    $
    144,215
    
    
    
    
    
    
    $
    Standby letters of credit
    
    
    5,733
    
    
    
    
    
    
    
    57Guaranteed commitments outstanding
    
    
    1,325
    
    
    
    
    
    
    
    13
 14. Transfer of Financial Assets
   21




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
   15. Segment Reporting
    Income Statement
    
    Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedInterest income:Interest and fees on loans
    
    $
    17,166
    
    
    
    
    
    
    $
    155
    
    
    
    
    
    
    $
    17,321Interest on tax-exempt securities
    
    
    576
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    576Interest on U.S. government securities
    
    
    2,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,146Interest on federal funds sold and
securities purchased under
agreements to resale
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30Interest on other securities
    
    
    248
    
    
    
    
    
    
    
    27
    
    
    
    (27
    )
    
    
    248Total interest income
    
    
    20,165
    
    
    
    
    
    
    
    182
    
    
    
    (27
    )
    
    
    20,320Interest expense:Interest on demand deposits
    
    
    546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    546Interest on savings deposits
    
    
    519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    519Interest on certificates of deposit
    
    
    3,808
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    3,781Securities sold under agreements to
repurchase
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Interest on FHLB and other borrowings
    
    
    1,117
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    1,120Interest on junior subordinated debt payable
to unconsolidated subsidiary
grantor trust
    
    
    
    
    
    
    
    
    
    
    431
    
    
    
    
    
    
    
    431Total interest expense
    
    
    6,015
    
    
    
    3
    
    
    
    431
    
    
    
    (27
    )
    
    
    6,422Net interest income
    
    
    14,150
    
    
    
    (3
    )
    
    
    (249
    )
    
    
    
    
    
    
    13,898Provision for loan and lease losses
    
    
    4,475
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    4,481Net interest income after provision for
loan losses
    
    
    9,675
    
    
    
    (9
    )
    
    
    (249
    )
    
    
    
    
    
    
    9,417Noninterest income:Service charges on deposit accounts
    
    
    188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188Payroll and benefit processing fees
    
    
    238
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238Earnings on
cash surrender value 
Bank owned life insurance
    
    
    203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203
 22




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
 Income Statement (continued)
    
    Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedNet gain on sale of loans
    
    
    340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    340Merchant credit card service income, net
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149Mortgage brokerage fee income
    
    
    8
    
    
    
    1,294
    
    
    
    
    
    
    
    
    
    
    
    1,302Other income
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    162Total noninterest income
    
    
    2,766
    
    
    
    1,294
    
    
    
    
    
    
    
    
    
    
    
    4,060Noninterest expense:Salaries and related benefits
    
    
    4,148
    
    
    
    558
    
    
    
    65
    
    
    
    
    
    
    
    4,771Occupancy and equipment expense
    
    
    1,215
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    1,302FDIC insurance premium
    
    
    574
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    574Data processing fees
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179Professional service fees
    
    
    347
    
    
    
    43
    
    
    
    64
    
    
    
    
    
    
    
    454Payroll and benefit fees
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Deferred compensation expense
    
    
    242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    242Stationery and supplies
    
    
    75
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    79Postage
    
    
    67
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    72Directors expense
    
    
    140
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    157Other expenses
    
    
    735
    
    
    
    210
    
    
    
    17
    
    
    
    
    
    
    
    664Total noninterest expense
    
    
    7,783
    
    
    
    907
    
    
    
    163
    
    
    
    
    
    
    
    8,853Income before provision for income taxes
    
    
    4,658
    
    
    
    378
    
    
    
    (412
    )
    
    
    
    
    
    
    4,624Provision for income taxes
    
    
    1,466
    
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    1,637Net Income
    
    
    3,192
    
    
    
    207
    
    
    
    (412
    )
    
    
    
    
    
    
    2,987Less: Net income attributable to non-controlling interest
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    
    
    
    
    (101
    )Net Income attributable to Bank of Commerce Holdings
    
    $
    3,192
    
    
    $
    106
    
    
    $
    (412
    )
    
    
    
    
    
    $
    2,886
 Dollars in thousands
    
    Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedASSETSCash and due from banks, non interest bearing
    
    $
    34,514
    
    
    $
    1,819
    
    
    $
    372
    
    
    
    ($353
    )
    
    $
    36,352Interest bearing due from banks
    
    
    27,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,512Federal funds sold and securities purchased
under agreements to resell
    
    
    15,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,140Cash and cash equivalents
    
    
    77,166
    
    
    
    1,819
    
    
    
    372
    
    
    
    (353
    )
    
    
    79,004Securities available-for-sale at fair value
(including pledged collateral of $60,678 at
June 30, 2009)
    
    
    75,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,480Portfolio loans
    
    
    596,530
    
    
    
    
    
    
    
    2,903
    
    
    
    (3,300
    )
    
    
    596,133Allowance for loan and lease losses
    
    
    (8,451
    )
    
    
    (6
    )
    
    
    (39
    )
    
    
    
    
    
    
    (8,496
    )Portfolio loans net of allowance
    
    
    588,079
    
    
    
    (6
    )
    
    
    2,864
    
    
    
    (3,300
    )
    
    
    587,637Mortgages held for sale, at fair value, net
of deferred income
    
    
    
    
    
    
    20,225
    
    
    
    
    
    
    
    
    
    
    
    20,225Bank premises and equipment, net
    
    
    10,357
    
    
    
    229
    
    
    
    
    
    
    
    
    
    
    
    10,586Investment in Bank of Commerce Mortgage
    
    
    
    
    
    
    
    
    
    
    2,572
    
    
    
    (2,572
    )
    
    
    Investment in Trust
    
    
    
    
    
    
    
    
    
    
    465
    
    
    
    (465
    )
    
    
    Investment in Bank
    
    
    
    
    
    
    
    
    
    
    74,862
    
    
    
    (74,862
    )
    
    
    Goodwill
    
    
    
    
    
    
    2,927
    
    
    
    
    
    
    
    
    
    
    
    2,927Other real estate owned
    
    
    3,229
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,229Other assets
    
    
    27,399
    
    
    
    968
    
    
    
    86
    
    
    
    (423
    )
    
    
    28,031TOTAL ASSETS
    
    $
    781,710
    
    
    $
    26,161
    
    
    $
    81,221
    
    
    
    (81,973
    )
    
    $
    807,119
 23




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements
 Bank
    
    
    Mortgage
    
    
    Parent
    
    
    Intercompany
    
    
    ConsolidatedLIABILITIES AND STOCKHOLDERS EQUITYDemand  noninterest bearing
    
    
    71,111
    
    
    
    
    
    
    
    
    
    
    
    (1,154
    )
    
    
    69,957Demand  interest bearing
    
    
    142,210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,210Savings accounts
    
    
    59,432
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,432Certificates of deposit
    
    
    295,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    295,508Total deposits
    
    
    568,261
    
    
    
    
    
    
    
    
    
    
    
    (1,154
    )
    
    
    567,107Securities sold under agreements to repurchase
    
    
    10,843
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,843Federal Home Loan Bank and Federal Reserve Bank
borrowings
    
    
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,000Mortgage warehouse lines of credit
    
    
    
    
    
    
    20,812
    
    
    
    
    
    
    
    
    
    
    
    20,812Other liabilities
    
    
    7,744
    
    
    
    615
    
    
    
    1,048
    
    
    
    (3,386
    )
    
    
    6,021Junior subordinated debt payable to unconsolidated
subsidiary grantor trust
    
    
    
    
    
    
    
    
    
    
    15,465
    
    
    
    
    
    
    
    15,465Total Liabilities
    
    
    706,848
    
    
    
    21,427
    
    
    
    16,513
    
    
    
    (4,540
    )
    
    
    740,248Commitments and contingenciesStockholders 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 June 30,
2008
    
    
    13,000
    
    
    
    
    
    
    
    16,596
    
    
    
    (13,000
    )
    
    
    16,596Common stock , no par value, 50,000,000 shares
authorized; 8,711,495 shares issued and
outstanding at June 30, 2009
    
    
    2,341
    
    
    
    
    
    
    
    9,688
    
    
    
    (2,341
    )
    
    
    9,688Common Stock Warrant
    
    
    
    
    
    
    
    
    
    
    449
    
    
    
    
    
    
    
    449Retained earnings
    
    
    59,491
    
    
    
    2,571
    
    
    
    37,945
    
    
    
    (62,062
    )
    
    
    37,945Accumulated other comprehensive income, net of tax
    
    
    30
    
    
    
    
    
    
    
    30
    
    
    
    (30
    )
    
    
    30Total Equity  Bank of Commerce Holdings
    
    
    74,862
    
    
    
    2,571
    
    
    
    64,708
    
    
    
    (77,433
    )
    
    
    64,708Non controlling interest in subsidiary
    
    
    
    
    
    
    2,163
    
    
    
    
    
    
    
    
    
    
    
    2,163Total stockholders equity
    
    
    74,862
    
    
    
    4,734
    
    
    
    64,708
    
    
    
    (77,433
    )
    
    
    66,871TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    781,710
    
    
    $
    26,161
    
    
    $
    81,221
    
    
    
    ($81,973
    )
    
    $
    807,119
 16. Subsequent Events
  24




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements and Risk Factors
 An investment in the Company has risk. The discussion below and elsewhere in this Report and in
other documents the Company files with the SEC incorporates various risk factors that could cause
the Companys financial results and condition to vary significantly from period to period.
Information in the accompanying financial statements contains certain forward-looking statements,
which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. We caution the investor that such statements are subject to risks and uncertainties
that could cause actual results to differ materially from those stated. These risks and
uncertainties include the Companys ability to maintain or expand its market share and net interest
margins, or to implement its marketing and growth strategies. Further, actual results may be
affected by the Companys ability to compete on price and other factors with other financial
institutions; customer acceptance of new products and services; and general trends in the banking
and the regulatory environment, as they relate to the Companys cost of funds and return on assets.
The reader is advised that this list of risks is not exhaustive and should not be construed as any
prediction by the Company as to which risks would cause actual results to differ materially from
those indicated by the forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements.
 For additional information concerning risks and uncertainties related to the Company and its
operations please refer to the Companys Annual Report on Form 10-K for the year ended December 31,
2008 under the heading Risk factors that may affect results. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to revise or publicly release the results of any revision to these
forward-looking statements to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
 The following sections discuss significant changes and trends in the financial condition, capital
resources and liquidity of the Company from December 31, 2008 to June 30, 2009. Also discussed are
significant trends and changes in the Companys results of operations for the three and six months
ended June 30, 2009, compared to the same period in 2008. The consolidated financial statements and
related notes appearing elsewhere in this report are condensed and unaudited. The following
discussion and analysis is intended to provide greater detail of the Companys financial condition
and results.
 
 Company Overview
  Bank of Choice bank of choice
   25




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 www.bankofcommerceholdings.com www.reddingbankofcommerce.com www.rosevillebankofcommerce.com, www.bankofcommercemortgage.com www.sec.gov
        26




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
        
 Risk Factors
 
 Economic Conditions and Geographic Concentration
  27




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  
 Current financial and credit market conditions may persist or worsen, making it more difficult to
access capital markets on favorable terms
  
 Valuation of Investments and Impairment of Securities
      
 Changes in Interest Rates could reduce the Companys Net Interest Income and Earnings
  28




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
     
 Lending Risks Associated with Commercial Banking and Construction Activities
  
 Adequacy of Allowance for Loan and Lease Losses (ALLL)
   
 Potential Volatility of Deposits
  29




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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  
 Dividends
    
 Participation in the Treasury Departments Capital Purchase Program restricts our ability to raise
the common stock dividend and may result in dilution of common stockholders
    
 Changes in Accounting Policies or Accounting Standards, and Changes in How Accounting Standards are
interpreted or applied, Could Materially Affect How the Company Reports its Financial Results and
Condition
 Critical
Accounting Policies).
 30




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  
 Government Regulation and Legislation
        31




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Certain Ownership Restrictions under California and Federal Law
    
 Negative Publicity could Damage our Reputation
  
 Environmental Risks
  
 Shares Eligible for Future Sale
  32




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Technology and Computer Systems
  
 Company Stock Price may be volatile due to Other Factors
  
    
    General business and economic conditions;
    
    Recommendations by securities analysts;
    
    New technologies introduced or services offered by our competitors;
    
    News reports relating to trends, concerns and other issues in the financial services industry;
    
    Natural disasters; and
    
    Geopolitical conditions, such as acts or threats of terrorism or military conflicts.
 Mortgage banking interest rate and market risk
     Mortgage banking revenue can be volatile from quarter to quarter
  33




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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Executive Overview
 high-quality
     
 Sources of Income
    34




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 Key Performance Ratios
    
    June 30, 2009
    
    June 30, 2008Profitability RatiosNet Interest Income to Average Assets
    
    
    3.53
    %
    
    
    3.22
    %Net Income to Average Equity
    
    
    8.85
    %
    
    
    9.05
    %Efficiency Ratio1
    
    
    49.30
    %
    
    
    61.09
    %Capital RatiosLeverage Ratio
    
    
    9.71
    %
    
    
    8.81
    %Risk Based Capital
    
    $
    82,943,177
    
    
    $
    62,725,450Tier 1 Capital
    
    
    11.57
    %
    
    
    9.75
    %Total Capital
    
    
    12.82
    %
    
    
    10.67
    %Per Common Share DataDividend Payout Ratio
    
    
    16.33
    %
    
    
    65.40
    %Book Value
    
    $
    7.67
    
    
    $
    5.28Market Price
    
    $
    5.70
    
    
    $
    6.96High
    
    $
    6.00
    
    
    $
    11.64Low
    
    $
    5.53
    
    
    $
    6.00
 
 Financial Highlights  Results of Operations
 Balance Sheet
     
 1
    
    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. 35




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
         Income Statement
    36




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Net Interest Income and Net Interest Margin
     
 Liquidity
    
 Capital Management
     37




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  Well
    
    
    MinimumActual
    
    
    Capitalized
    
    
    CapitalJune 30, 2009
    
    Capital
    
    
    Ratio
    
    
    Requirement
    
    
    RequirementThe CompanyLeverage
    
    $
    81,807,014
    
    
    
    10.55
    %
    
    
    n/a
    
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    81,807,014
    
    
    
    12.65
    %
    
    
    n/a
    
    
    
    4.0
    %Total Risk-Based
    
    
    85,873,434
    
    
    
    13.27
    %
    
    
    n/a
    
    
    
    8.0
    %Redding Bank of CommerceLeverage
    
    $
    74,831,883
    
    
    
    9.71
    %
    
    
    5.0
    %
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    74,831,883
    
    
    
    11.57
    %
    
    
    6.0
    %
    
    
    4.0
    %Total Risk-Based
    
    
    82,943,177
    
    
    
    12.82
    %
    
    
    10.00
    %
    
    
    8.0
    %
 
 Short and Long Term Borrowings
    
 Provision for Loan and Lease Losses
     38




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  most significant
    
 Factors that may affect future results
     39




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
   
 Critical Accounting Policies
   Preparation of financial statements
  Use of estimates
  Accounting Principles Generally Accepted in the United States of America
   Valuation of Investments and Impairment of Securities
   40




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
    Allowance for Loan and Lease Losses (ALLL)
 most significant
 Accounting for Contingencies Accounting by Creditors for
Impairment of a Loan
    41




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 Revenue recognition
  Income Taxes
  42




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  
 Table 1. Average Balances, Interest Income/Expense and
Yields/Rates Paid
 (Unaudited, Dollars in thousands)
 Six Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    

June 30, 2008Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateEarning AssetsPortfolio Loans2
    
    $
    574,206
    
    
    $
    17,321
    
    
    
    6.04
    %
    
    $
    516,938
    
    
    $
    17,302
    
    
    
    6.69
    %Tax-exempt Securities3
    
    
    28,245
    
    
    
    575
    
    
    
    4.07
    %
    
    
    30,402
    
    
    
    576
    
    
    
    3.79
    %US Government Securities
    
    
    8,624
    
    
    
    192
    
    
    
    4.45
    %
    
    
    14,601
    
    
    
    264
    
    
    
    3.62
    %Mortgage backed Securities
    
    
    69,253
    
    
    
    1,954
    
    
    
    5.64
    %
    
    
    30,960
    
    
    
    750
    
    
    
    4.84
    %Federal Funds Sold
    
    
    25,771
    
    
    
    30
    
    
    
    0.23
    %
    
    
    17,561
    
    
    
    148
    
    
    
    1.69
    %Other Securities
    
    
    31,905
    
    
    
    248
    
    
    
    1.55
    %
    
    
    2,000
    
    
    
    45
    
    
    
    4.50
    %Average Earning Assets
    
    $
    738,004
    
    
    $
    20,320
    
    
    
    5.51
    %
    
    $
    612,462
    
    
    $
    19,085
    
    
    
    6.23
    %Cash & Due From Banks
    
    $
    19,388
    
    
    
    
    
    
    
    
    
    
    $
    13,252Bank Premises
    
    
    13,480
    
    
    
    
    
    
    
    
    
    
    
    11,264Allowance for Loan Losses
    
    
    ( 8,638
    )
    
    
    
    
    
    
    
    
    
    
    ( 5,946
    )Other Assets
    
    
    25,971
    
    
    
    
    
    
    
    
    
    
    
    17,745Average Total Assets
    
    $
    788,205
    
    
    
    
    
    
    
    
    
    
    $
    648,777Interest Bearing LiabilitiesDemand Interest Bearing
    
    $
    137,938
    
    
    $
    546
    
    
    
    0.79
    %
    
    $
    132,543
    
    
    $
    1,248
    
    
    
    1.88
    %Savings Deposits
    
    
    63,499
    
    
    
    519
    
    
    
    1.63
    %
    
    
    48,987
    
    
    
    650
    
    
    
    2.65
    %Certificates of Deposit
    
    
    289,925
    
    
    
    3,781
    
    
    
    2.61
    %
    
    
    229,245
    
    
    
    4,614
    
    
    
    4.03
    %Repurchase Agreements
    
    
    11,523
    
    
    
    25
    
    
    
    0.43
    %
    
    
    12,925
    
    
    
    119
    
    
    
    1.84
    %FHLB Borrowings
    
    
    124,393
    
    
    
    1,120
    
    
    
    1.80
    %
    
    
    91,869
    
    
    
    1,512
    
    
    
    3.29
    %Trust Preferred Borrowings
    
    
    15,000
    
    
    
    431
    
    
    
    5.75
    %
    
    
    15,000
    
    
    
    476
    
    
    
    6.35
    %642,278
    
    
    $
    6,422
    
    
    
    2.00
    %
    
    
    530,569
    
    
    $
    8,619
    
    
    
    3.25
    %Noninterest bearing demand
    
    
    72,009
    
    
    
    
    
    
    
    
    
    
    
    66,606Other Liabilities
    
    
    8,674
    
    
    
    
    
    
    
    
    
    
    
    4,391Stockholders Equity
    
    
    65,244
    
    
    
    
    
    
    
    
    
    
    
    47,211Average
Liabilities and Stockholders Equity
    
    $
    788,205
    
    
    
    
    
    
    
    
    
    
    $
    648,777Net Interest Income and
Net Interest Margin
    
    
    
    
    
    $
    13,898
    
    
    
    3.77
    %
    
    
    
    
    
    $
    10,466
    
    
    
    3.42
    %
  
 2
    
    Average non-performing loans of $14.2 million are
included3
    
    The yield on tax-exempt securities has not been
adjusted to a tax-equivalent yield basis. 43




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
  
 Table 2 Analysis of Changes in Net Interest Income and Interest
Expense (Unaudited)
 June 30, 2009
    
    
    Over
    
    
    June 30, 2008(Dollars in thousands)
    
    Volume
    
    
    Rate
    
    
    TotalIncrease(Decrease) In Interest IncomePortfolio Loans
    
    $
    1,727
    
    
    
    ($1,708
    )
    
    
    19Tax-exempt Securities
    
    
    (44
    )
    
    
    43
    
    
    
    (1
    )US Government Securities
    
    
    (133
    )
    
    
    61
    
    
    
    (72
    )Mortgage Back Securities
    
    
    1,080
    
    
    
    124
    
    
    
    1,204Federal Funds Sold
    
    
    10
    
    
    
    (128
    )
    
    
    (118
    )Other Securities
    
    
    232
    
    
    
    (29
    )
    
    
    203Total Increase (Decrease)
    
    $
    2,872
    
    
    
    ($1,637
    )
    
    $
    1,235Increase(Decrease) In Interest ExpenseInterest Bearing Demand
    
    $
    21
    
    
    
    ($723
    )
    
    
    ($702
    )Savings Deposits
    
    
    119
    
    
    
    (250
    )
    
    
    (131
    )Certificates of Deposit
    
    
    791
    
    
    
    (1,624
    )
    
    
    (833
    )Repurchase Agreements
    
    
    (3
    )
    
    
    (91
    )
    
    
    (94
    )FHLB Borrowings
    
    
    293
    
    
    
    (685
    )
    
    
    (392
    )Trust Preferred Borrowings
    
    
    0
    
    
    
    (45
    )
    
    
    (45
    )Total Increase (Decrease)
    
    $
    1,221
    
    
    
    ($3,418
    )
    
    
    ($2,197
    )Net Increase
    
    $
    1,651
    
    
    $
    1,781
    
    
    $
    3,432
     44




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
  
 Noninterest income
 (Dollars in thousands)
    
    Three Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Service charges on deposit accounts
    
    $
    96
    
    
    $
    50
    
    
    $
    188
    
    
    $
    112Payroll and benefit processing fees
    
    
    104
    
    
    
    99
    
    
    
    238
    
    
    
    228Earnings on
cash surrender value 
Bank owned insurance
    
    
    117
    
    
    
    85
    
    
    
    203
    
    
    
    168Net gain on sale of securities available-for-sale
    
    
    1,074
    
    
    
    194
    
    
    
    1,478
    
    
    
    436Net loss on sale of derivative swap transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225
    )Net gain on sale of loans
    
    
    340
    
    
    
    
    
    
    
    340
    
    
    
    Merchant credit card service income, net
    
    
    75
    
    
    
    97
    
    
    
    149
    
    
    
    180Mortgage brokerage fee income
    
    
    1,302
    
    
    
    5
    
    
    
    1,302
    
    
    
    15Other Income
    
    
    87
    
    
    
    187
    
    
    
    162
    
    
    
    368Total Noninterest income
    
    $
    3,195
    
    
    $
    717
    
    
    $
    4,060
    
    
    $
    1,282
   
 Noninterest Expense
 (Dollars in Thousands)
    
    Three Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2008
    
    
    June 30, 2008Salaries and related benefits
    
    $
    2,644
    
    
    $
    1,892
    
    
    $
    4,771
    
    
    $
    3,841Occupancy and equipment expense
    
    
    730
    
    
    
    640
    
    
    
    1,302
    
    
    
    1,284FDIC insurance premium
    
    
    301
    
    
    
    113
    
    
    
    574
    
    
    
    171Data processing fees
    
    
    68
    
    
    
    65
    
    
    
    179
    
    
    
    143Professional service fees
    
    
    295
    
    
    
    133
    
    
    
    454
    
    
    
    251Payroll and Benefit fees
    
    
    27
    
    
    
    27
    
    
    
    61
    
    
    
    60Deferred compensation expense
    
    
    123
    
    
    
    113
    
    
    
    242
    
    
    
    224Stationery and Supplies
    
    
    26
    
    
    
    80
    
    
    
    79
    
    
    
    142Postage
    
    
    76
    
    
    
    38
    
    
    
    157
    
    
    
    72Directors expense
    
    
    120
    
    
    
    94
    
    
    
    157
    
    
    
    142Other expenses
    
    
    483
    
    
    
    418
    
    
    
    877
    
    
    
    847Total Noninterest expense
    
    $
    4,893
    
    
    $
    3,613
    
    
    $
    8,853
    
    
    $
    7,177
   45




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 
 Income Taxes
    (Dollars in thousands)
    
    Three Months Ended
    
    
    Six Months EndedIncome Taxes
    
    June 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Tax provision
    
    $
    1,027
    
    
    $
    244
    
    
    $
    1,637
    
    
    $
    835Effective tax rate
    
    
    37.43
    %
    
    
    21.20
    %
    
    
    35.40
    %
    
    
    28.11
    %
     Deferred Tax Assets
    
    June 30, 2009
    
    

June 30, 2008Deferred compensation
    
    $
    2,249,218
    
    
    $
    2,078,634Loan loss reserves
    
    
    4,577,887
    
    
    
    2,284,938Other Comprehensive Income
    
    
    (20,997
    )
    
    
    633,449Other
    
    
    24,768
    
    
    
    (37,979
    )Total Deferred Tax Assets
    
    
    6,830,876
    
    
    
    4,959,042State Franchise taxes
    
    
    ($83,382
    )
    
    
    ($87,095
    )Depreciation
    
    
    (84,559
    )
    
    
    (132,760
    )Deferred loan origination costs
    
    
    (426,715
    )
    
    
    (466,348
    )Deferred state taxes
    
    
    (516,580
    )
    
    
    (316,661
    )Other
    
    
    (55,992
    )
    
    
    Total Deferred Tax Liabilities
    
    
    (1,167,228
    )
    
    
    (1,002,864
    )Total Net Deferred Tax Asset
    
    $
    5,663,648
    
    
    $
    3,956,178
 46




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 
 Asset Quality
    (Dollars in thousands)Portfolio Loans
    
    June 30, 2009
    
    
    December 31, 2008Commercial and financial loans
    
    $
    148,081
    
    
    $
    164,083Real estate-construction loans
    
    
    73,379
    
    
    
    84,218Real estate-commercial
    
    
    232,479
    
    
    
    217,914Real estate  ITIN loan pool
    
    
    80,671
    
    
    
    Real estate-mortgage
    
    
    21,912
    
    
    
    20,285Real estate-other
    
    
    38,238
    
    
    
    39,915Installment
    
    
    140
    
    
    
    145Other loans
    
    
    1,490
    
    
    
    902Less:Net deferred loan fees
    
    
    (257
    )
    
    
    (87
    )Allowance for loan losses
    
    
    (8,496
    )
    
    
    (8,429
    )Total net portfolio loans
    
    $
    587,637
    
    
    $
    518,946
   Mortgages held for sale
   47




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
  (Dollars in thousands)Non performing assets
    
    June 30, 2009
    
    
    December 31, 2008Nonaccrual loans
    
    $
    5,697
    
    
    $
    20,154Total nonaccrual loans
    
    
    5,697
    
    
    
    20,15490 days past due and still accruing interest
    
    
    760
    
    
    
    0Other Real Estate Owned
    
    
    3,229
    
    
    
    2,934Total non performing assets
    
    $
    9,686
    
    
    $
    23,088
    
 Allowance for Loan and Lease Losses (ALLL)
    Accounting for Contingencies Accounting by Creditors for Impairment of a Loan. Accounting for Contingencies
 48




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
     (Dollars in thousands)
    
    Three Months Ended
    
    
    Six Months EndedAllowance for Loan Losses
    
    June 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Beginning
balance for Loan Losses
    
    $
    7,701
    
    
    $
    5,815
    
    
    $
    8,429
    
    
    $
    8,233Provision for Loan Losses
    
    
    3,056
    
    
    
    1,000
    
    
    
    4,481
    
    
    
    1,600Charge offs:Commercial
    
    
    (774
    )
    
    
    (733
    )
    
    
    (2,432
    )
    
    
    (733
    )Real Estate
    
    
    (1,603
    )
    
    
    (1,067
    )
    
    
    (2,100
    )
    
    
    (4,087
    )Other
    
    
    (12
    )
    
    
    (0
    )
    
    
    (12
    )
    
    
    (0
    )Total Charge offs
    
    
    (2,389
    )
    
    
    (1,800
    )
    
    
    (4,544
    )
    
    
    (4,820
    )Recoveries:Commercial
    
    
    127
    
    
    
    0
    
    
    
    128
    
    
    
    0Real Estate
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Other
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    4Total Recoveries
    
    
    128
    
    
    
    2
    
    
    
    130
    
    
    
    4Ending Balance
    
    $
    8,496
    
    
    $
    5,017
    
    
    $
    8,496
    
    
    $
    5,017ALLL to total loans
    
    
    1.43
    %
    
    
    0.98
    %
    
    
    1.43
    %
    
    
    0.98
    %Net Charge offs to average loans
    
    
    0.39
    %
    
    
    0.35
    %
    
    
    0.77
    %
    
    
    0.93
    %
    49




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  QUARTERLY INCOME STATEMENT
 June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,Dollars in thousands, except for per share data
    
    2009
    
    
    2009
    
    
    2008
    
    
    2008
    
    
    2008Interest income:Interest and fees on loans
    
    $
    9,272
    
    
    $
    8,049
    
    
    $
    8,028
    
    
    $
    8,252
    
    
    $
    8,171Interest on tax-exempt securities
    
    
    279
    
    
    
    296
    
    
    
    313
    
    
    
    308
    
    
    
    302Interest on U.S. government securities
    
    
    954
    
    
    
    1,192
    
    
    
    873
    
    
    
    582
    
    
    
    533Interest on federal funds sold and
securities repurchased under agreements to
resell
    
    
    5
    
    
    
    25
    
    
    
    39
    
    
    
    116
    
    
    
    90Interest on other securities
    
    
    131
    
    
    
    117
    
    
    
    81
    
    
    
    13
    
    
    
    23Total interest income
    
    
    10,641
    
    
    
    9,679
    
    
    
    9,334
    
    
    
    9,271
    
    
    
    9,119Interest expense:Interest on demand deposits
    
    
    239
    
    
    
    307
    
    
    
    411
    
    
    
    514
    
    
    
    498Interest on savings deposits
    
    
    238
    
    
    
    281
    
    
    
    383
    
    
    
    543
    
    
    
    360Interest on certificates of deposit
    
    
    1,900
    
    
    
    1,881
    
    
    
    1,975
    
    
    
    1,963
    
    
    
    2,238Securities sold under repurchase agreements
    
    
    11
    
    
    
    14
    
    
    
    22
    
    
    
    32
    
    
    
    35Interest on FHLB and other borrowings
    
    
    539
    
    
    
    581
    
    
    
    638
    
    
    
    662
    
    
    
    781Interest on junior subordinated debt
payable to unconsolidated subsidiary
grantor trust
    
    
    216
    
    
    
    215
    
    
    
    263
    
    
    
    317
    
    
    
    161Total interest expense
    
    
    3,143
    
    
    
    3,279
    
    
    
    3,692
    
    
    
    4,031
    
    
    
    4,073Net interest income
    
    
    7,498
    
    
    
    6,400
    
    
    
    5,642
    
    
    
    5,240
    
    
    
    5,046Provision for loan and lease losses
    
    
    3,056
    
    
    
    1,425
    
    
    
    3,620
    
    
    
    1,300
    
    
    
    1,000Net interest income after provision for
loan and lease losses
    
    
    4,442
    
    
    
    4,975
    
    
    
    2,022
    
    
    
    3,940
    
    
    
    4,046Noninterest income:Service charges on deposit accounts
    
    
    96
    
    
    
    92
    
    
    
    108
    
    
    
    91
    
    
    
    50Payroll and benefit processing fees
    
    
    104
    
    
    
    134
    
    
    
    118
    
    
    
    107
    
    
    
    99Earnings on cash surrender value  bank
owned life insurance
    
    
    117
    
    
    
    86
    
    
    
    86
    
    
    
    86
    
    
    
    85Net gain on sale of securities
available-for-sale
    
    
    1,074
    
    
    
    404
    
    
    
    33
    
    
    
    159
    
    
    
    194Net gain on sale of loans
    
    
    340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Merchant credit card service income, net
    
    
    75
    
    
    
    74
    
    
    
    85
    
    
    
    99
    
    
    
    97Mortgage brokerage fee income
    
    
    1,302
    
    
    
    
    
    
    
    4
    
    
    
    2
    
    
    
    5Other income
    
    
    87
    
    
    
    75
    
    
    
    156
    
    
    
    207
    
    
    
    187Total noninterest income
    
    
    3,195
    
    
    
    865
    
    
    
    590
    
    
    
    751
    
    
    
    717Noninterest expense:Salaries and related benefits
    
    
    2,644
    
    
    
    2,127
    
    
    
    2,001
    
    
    
    1,909
    
    
    
    1,892Occupancy and equipment expense
    
    
    730
    
    
    
    572
    
    
    
    1,339
    
    
    
    613
    
    
    
    640FDIC insurance premium
    
    
    301
    
    
    
    273
    
    
    
    99
    
    
    
    113
    
    
    
    113Data processing fees
    
    
    68
    
    
    
    111
    
    
    
    52
    
    
    
    81
    
    
    
    65Professional service fees
    
    
    295
    
    
    
    159
    
    
    
    270
    
    
    
    146
    
    
    
    133Payroll processing fees
    
    
    27
    
    
    
    34
    
    
    
    30
    
    
    
    26
    
    
    
    27Deferred compensation expense
    
    
    123
    
    
    
    119
    
    
    
    120
    
    
    
    118
    
    
    
    113Stationery and supplies
    
    
    26
    
    
    
    53
    
    
    
    70
    
    
    
    50
    
    
    
    80Postage
    
    
    76
    
    
    
    81
    
    
    
    30
    
    
    
    32
    
    
    
    38Directors expense
    
    
    120
    
    
    
    37
    
    
    
    71
    
    
    
    81
    
    
    
    94Other expenses
    
    
    483
    
    
    
    394
    
    
    
    425
    
    
    
    443
    
    
    
    418Total noninterest expense
    
    
    4,893
    
    
    
    3,960
    
    
    
    4,507
    
    
    
    3,612
    
    
    
    3,613Income (loss) before provision for income taxes
    
    
    2,744
    
    
    
    1,882
    
    
    
    (1,895
    )
    
    
    1,079
    
    
    
    1,150Provision (benefit) for income taxes
    
    
    1,027
    
    
    
    610
    
    
    
    (1,237
    )
    
    
    362
    
    
    
    244Less: Income non-controlling interest
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    1,616
    
    
    $
    1,270
    
    
    $
    (658
    )
    
    $
    717
    
    
    $
    906Less preferred dividend and accretion on
preferred stock
    
    
    ($235
    )
    
    
    ($237
    )
    
    
    ($0
    )
    
    
    ($0
    )
    
    
    ($0
    )Income available to common shareholders
    
    $
    1,381
    
    
    $
    1,033
    
    
    $
    (658
    )
    
    $
    717
    
    
    $
    906Basic earnings (loss) per share
    
    $
    0.16
    
    
    $
    0.12
    
    
    
    ($0.07
    )
    
    $
    0.08
    
    
    $
    0.10Weighted average shares  basic
    
    
    8,711
    
    
    
    8,711
    
    
    
    8,755
    
    
    
    8,711
    
    
    
    8,748Diluted earnings (loss) per share
    
    $
    0.16
    
    
    $
    0.12
    
    
    
    ($0.07
    )
    
    $
    0.08
    
    
    $
    0.10Weighted average shares  diluted
    
    
    8,712
    
    
    
    8,711
    
    
    
    8,802
    
    
    
    8,713
    
    
    
    8,751Cash dividends per share
    
    $
    0.00
    
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.08
 50




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
   
    
    Assets and liabilities may mature or reprice at different times (for example, if
assets reprice faster than liabilities and interest rates fall, earnings will
initially decline);
    
    Assets and liabilities may reprice at the same time but by different amounts (for
example, the level of interest rates in the market is falling and the Company may
reduce rates paid on checking and savings deposit accounts by an amount that is less
than the general decline in market rates);
    
    Short-term and long-term market interest rates may change by different amounts (for
example, the shape of the yield curve may affect new loan yields and funding costs
differently); or
    
    The remaining maturities of various assets and liabilities may shorten or
lengthen as interest rates change (for example, if long-term mortgage rates decline
sharply, mortgage-backed securities held in the securities available-for-sale may
prepay significantly earlier than anticipated, which could reduce portfolio income.)
    51




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##### Table of Contents



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
       52




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
   
 PART II. Other Information
 
 Item 1. Legal proceedings
  
 Item 1a. Risk Factors
  Mortgage banking interest rate and market risk
     Mortgage banking revenue can be volatile from quarter to quarter
  53




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##### Table of Contents



Recent legislative and regulatory initiatives to support the financial services industry have been
coupled with numerous restrictions and requirements that could detrimentally affect the Companys
business and require us to raise additional capital
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a vote of Security Holders
  
 Item 5. Other Information
 
 Item 6. Exhibits
 (31.1) Certification of Chief
Executive Officer pursuant to Sarbanes-Oxley Act of 2002
(31.2) Certification of Chief Financial Officer pursuant to
Sarbanes-Oxley Act of 2002
(32.0) Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Sarbanes-Oxley Act of 2002
 54




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##### Table of Contents



SIGNATURES
  BANK OF COMMERCE HOLDINGS
(Registrant)Date: August 14, 2009
    /s/ Samuel D. JimenezSamuel D. JimenezSenior Vice President and
Chief Financial Officer 55