##### 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 THESECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-25135
 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 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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
March 31, 2009, December 31, 2008 and March 31, 2008
    
    
    4Condensed Consolidated Statements of Income
Three months ended March 31, 2009, December 31, 2008 and March 31, 2008
    
    
    5Consolidated Statement of Stockholders Equity
    
    
    6Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2009 and 2008
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2 Managements Discussion and Analysis
Of Financial Condition and Results of Operations
    
    
    18Company Overview
    
    
    18Risk Factors
    
    
    20Economic Conditions and Geographic Concentration
    
    
    20Current Financial and Credit Market Conditions may persist or worsen
    
    
    21Valuation of Investments and Impairment of Securities
    
    
    21Changes in interest rates could reduce the Companys Net interest Income and Earnings
    
    
    21Lending Risks Associated with Commercial Banking and Construction Activities
    
    
    22Adequacy of Allowance for Loan and Lease Losses (ALLL)
    
    
    22Potential Volatility of Deposits
    
    
    22Dividends
    
    
    22Participation in the Treasury Departments Capital Purchase Program restricts our
ability to raise the common stock dividend and may result in dilution of common
stockholders
    
    
    23Changes in Accounting Policies or Accounting Standards could materially affect how
the Company reports its Financial Results and Condition
    
    
    23Government Regulation and Legislation
    
    
    24Certain Ownership Restrictions under California and Federal Law
    
    
    24Negative Publicity could Damage our Reputation
    
    
    25Environmental Risks
    
    
    25Shares Eligible for Future Sale
    
    
    25Technology and Computer Systems
    
    
    25Company Stock Price may be volatile due to Other Factors
    
    
    26Executive Overview
    
    
    27Sources of Income
    
    
    27Financial Highlights  Results of Operations
    
    
    28Net Interest Income and Net Interest Margin
    
    
    29Liquidity
    
    
    30Capital Management
    
    
    30Short term borrowings
    
    
    31Provision for loan and lease losses
    
    
    31Factors that may affect future results
    
    
    32Critical accounting policies
    
    
    32Average balances, Interest Income/Expense and Yields/Rates paid
    
    
    35Analysis of changes in net interest income and interest expense
    
    
    36Noninterest Income
    
    
    37Noninterest Expense
    
    
    37Income taxes
    
    
    38Asset quality
    
    
    39Allowance for loan and lease losses (ALLL)
    
    
    40Quarterly Income Statement
    
    
    42
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 Index
 Item 3 Quantitative and Qualitative Disclosure about Market Risk
    
    
    43Item 4T Controls and Procedures
    
    
    45PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    45Item 1a Risk Factors
    
    
    45Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3 Defaults Upon Senior Securities
    
    
    45Item 4 Submission of Matters to a Vote of Security Holders
    
    
    45Item 5 Other Information
    
    
    45Item 6 Exhibits
    
    
    45SIGNATURES
    
    
    46EX-31.1EX-31.2EX-32
  3




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
(Unaudited)
 Dollars in thousands
    
    March 31, 2009
    
    

Dec. 31, 2008
    
    
    March 31, 2008ASSETSCash and due from banks
    
    $
    38,965
    
    
    $
    33,716
    
    
    $
    12,737Federal funds sold and securities purchased under agreements to resell
    
    
    56,655
    
    
    
    51,475
    
    
    
    25,995Cash and cash equivalents
    
    
    95,620
    
    
    
    85,191
    
    
    
    38,732Securities available-for-sale at fair value (including pledged
collateral of $66,210 at March 31, 2009, $68,735 at December 31, 2008
and $57,274 at March 31, 2008)
    
    
    105,538
    
    
    
    131,687
    
    
    
    62,090Securities held-to-maturity, at cost (estimated fair value of $0 at
March 31, 2009, $0 at December 31, 2008 and $10,646 at March 31,
2008)
    
    
    
    
    
    
    
    
    
    
    10,421Loans, net of the allowance for loan losses of $7,701 at March 31,
2009, $8,429 at December 31, 2008 and $5,815 at March 31, 2008
    
    
    525,182
    
    
    
    518,946
    
    
    
    506,374Bank premises and equipment, net
    
    
    10,553
    
    
    
    10,672
    
    
    
    11,370Other assets
    
    
    28,443
    
    
    
    27,718
    
    
    
    22,248TOTAL ASSETS
    
    $
    765,336
    
    
    $
    774,214
    
    
    $
    651,235LIABILITIES AND STOCKHOLDERS EQUITYDemand  noninterest bearing
    
    $
    66,351
    
    
    $
    79,988
    
    
    $
    71,722Demand  interest bearing
    
    
    138,231
    
    
    
    143,871
    
    
    
    140,624Savings accounts
    
    
    72,873
    
    
    
    67,136
    
    
    
    42,946Certificates of deposit
    
    
    270,490
    
    
    
    264,287
    
    
    
    229,006Total deposits
    
    
    547,945
    
    
    
    555,282
    
    
    
    484,298Securities sold under agreements to repurchase
    
    
    10,813
    
    
    
    13,853
    
    
    
    12,455Federal Home Loan Bank borrowings
    
    
    120,000
    
    
    
    120,000
    
    
    
    85,000Other liabilities
    
    
    7,716
    
    
    
    7,036
    
    
    
    7,633Junior subordinated debt payable to unconsolidated
subsidiary grantor trust
    
    
    15,465
    
    
    
    15,465
    
    
    
    15,465Total Liabilities
    
    
    701,939
    
    
    
    711,636
    
    
    
    604,851Commitments 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, no outstanding at March 31, 2008
    
    
    16,573
    
    
    
    16,551
    
    
    
    Common stock , no par value, 50,000,000 shares authorized; 8,711,495
shares issued and outstanding at March 31, 2009, 8,711,495 at
December 31, 2008 and 8,707,745 at March 31, 2008
    
    
    9,679
    
    
    
    9,650
    
    
    
    9,550Common Stock Warrant
    
    
    449
    
    
    
    449
    
    
    
    Retained earnings
    
    
    36,541
    
    
    
    36,009
    
    
    
    37,135Accumulated other comprehensive income (loss), net of tax
    
    
    155
    
    
    
    (81
    )
    
    
    (301
    )Total stockholders equity
    
    
    63,397
    
    
    
    62,578
    
    
    
    46,384TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    765,336
    
    
    $
    774,214
    
    
    $
    651,235
 See accompanying notes to condensed consolidated financial statements.
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 
 Condensed Consolidated Statements of Income (Unaudited)
Three months ended March 31, 2009, December 31, 2008 and March 31, 2008
 For the Quarter Ended:March 31,
    
    
    December 31,
    
    
    March 31,Dollars in thousands, except for per share data
    
    2009
    
    
    2008
    
    
    2008Interest income:Interest and fees on loans
    
    $
    8,049
    
    
    $
    8,028
    
    
    $
    9,131Interest on tax-exempt securities
    
    
    296
    
    
    
    313
    
    
    
    274Interest on U.S. government securities
    
    
    1,192
    
    
    
    873
    
    
    
    481Interest on federal funds sold and securities purchased
under agreements to resell
    
    
    25
    
    
    
    39
    
    
    
    58Interest on other securities
    
    
    117
    
    
    
    81
    
    
    
    22Total interest income
    
    
    9,679
    
    
    
    9,334
    
    
    
    9,966Interest expense:Interest on demand deposits
    
    
    307
    
    
    
    411
    
    
    
    750Interest on savings deposits
    
    
    281
    
    
    
    383
    
    
    
    290Interest on certificates of deposit
    
    
    1,881
    
    
    
    1,975
    
    
    
    2,376Securities sold under repurchase agreements
    
    
    14
    
    
    
    22
    
    
    
    84Interest on FHLB and other borrowings
    
    
    581
    
    
    
    638
    
    
    
    731Interest on junior subordinated debt payable to
unconsolidated subsidiary grantor trust
    
    
    215
    
    
    
    263
    
    
    
    315Total interest expense
    
    
    3,279
    
    
    
    3,692
    
    
    
    4,546Net interest income
    
    
    6,400
    
    
    
    5,642
    
    
    
    5,420Provision for loan and lease losses
    
    
    1,425
    
    
    
    3,620
    
    
    
    600Net interest income after provision for loan and lease losses
    
    
    4,975
    
    
    
    2,022
    
    
    
    4,820Noninterest income:Service charges on deposit accounts
    
    
    92
    
    
    
    108
    
    
    
    62Payroll and benefit processing fees
    
    
    134
    
    
    
    118
    
    
    
    129Earnings on cash surrender value  Bank owned life insurance
    
    
    86
    
    
    
    86
    
    
    
    83Net gain on sale of securities available-for-sale
    
    
    404
    
    
    
    33
    
    
    
    242Net loss on sale of derivative swap transaction
    
    
    
    
    
    
    
    
    
    
    (225
    )Merchant credit card service income, net
    
    
    74
    
    
    
    85
    
    
    
    83Mortgage brokerage fee income
    
    
    
    
    
    
    4
    
    
    
    10Other income
    
    
    75
    
    
    
    156
    
    
    
    181Total noninterest income
    
    
    865
    
    
    
    590
    
    
    
    565Noninterest expense:Salaries and related benefits
    
    
    2,127
    
    
    
    2,001
    
    
    
    1,949Occupancy and equipment expense
    
    
    572
    
    
    
    1,339
    
    
    
    644FDIC insurance premium
    
    
    273
    
    
    
    99
    
    
    
    58Data processing fees
    
    
    111
    
    
    
    52
    
    
    
    78Professional service fees
    
    
    159
    
    
    
    270
    
    
    
    118Payroll processing fees
    
    
    34
    
    
    
    30
    
    
    
    33Deferred compensation expense
    
    
    119
    
    
    
    120
    
    
    
    111Stationery and supplies
    
    
    53
    
    
    
    70
    
    
    
    62Postage
    
    
    81
    
    
    
    30
    
    
    
    34Directors expense
    
    
    37
    
    
    
    71
    
    
    
    48Other expenses
    
    
    394
    
    
    
    425
    
    
    
    430Total noninterest expense
    
    
    3,960
    
    
    
    4,507
    
    
    
    3,565Income (loss) before provision (benefit) for income taxes
    
    
    1,880
    
    
    
    (1,895
    )
    
    
    1,820Provision (benefit) for income taxes
    
    
    610
    
    
    
    (1,237
    )
    
    
    591Net income (loss)
    
    $
    1,270
    
    
    $
    (658
    )
    
    $
    1,229Less preferred dividend and accretion on preferred stock
    
    $
    (237
    )
    
    $
    (0
    )
    
    $
    (0
    )Income available to common shareholders
    
    $
    1,033
    
    
    $
    (658
    )
    
    $
    1,229Basic earnings (loss) per share
    
    $
    0.12
    
    
    $
    (0.07
    )
    
    $
    0.14Weighted average shares  basic
    
    
    8,711
    
    
    
    8,755
    
    
    
    8,719Diluted earnings (loss) per share
    
    $
    0.12
    
    
    $
    (0.07
    )
    
    $
    0.14Weighted average shares  diluted
    
    
    8,711
    
    
    
    8,802
    
    
    
    8,748Cash dividends per share
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.08
 See accompanying notes to condensed consolidated financial statements.
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 
 Condensed Consolidated Statements of Stockholders Equity
Three months ended March 31, 2009
 AccumulatedOther Comp-IncomeComprehensive
    
    
    Preferred
    
    
    Preferred
    
    
    
    
    
    
    Common
    
    
    Stock
    
    
    Retained
    
    
    (Loss),Dollars in Thousands
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Warrant
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    net of tax
    
    
    TotalBalance at December 31, 2008
    
    
    
    
    
    
    17,000
    
    
    $
    16,551,268
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,649,672
    
    
    $
    36,008,866
    
    
    $
    (80,897
    )
    
    $
    62,577,641Comprehensive Income:Net Income
    
    
    1,270,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,270,015
    
    
    
    
    
    
    
    1,270,015Other Comprehensive
Income:Unrealized (loss)
gain arising during
the period on
derivative
transactions, net
    
    
    Net holding loss on
derivatives
    
    
    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
    
    
    
    236,089Accretion on Preferred Stock
    
    
    
    
    
    
    
    
    
    
    22,437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,437Common cash dividends
$ (0.06 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (522,690
    )
    
    
    
    
    
    
    (522,690
    )Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214,861
    )
    
    
    
    
    
    
    (214,861
    )Compensation expense
associated with stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,902
    
    
    
    
    
    
    
    
    
    
    
    28,902Balance at March 31, 2009
    
    
    
    
    
    
    17,000
    
    
    $
    16,573,705
    
    
    $
    448,732
    
    
    
    8,711,495
    
    
    $
    9,678,574
    
    
    $
    36,541,330
    
    
    $
    155,192
    
    
    $
    63,397,533
 See accompanying notes to condensed consolidated financial statements.
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 2009 and 2008
 Dollars in thousands
    
    March 31, 2009
    
    
    March 31, 2008Cash flows from operating activities:Net income
    
    $
    1,272
    
    
    $
    1,229Adjustments to reconcile net income to net cash provided by operating
activities:Provision for loan and lease losses
    
    
    1,425
    
    
    
    600Provision for depreciation and amortization
    
    
    260
    
    
    
    302Compensation expense associated with stock options
    
    
    29
    
    
    
    28Tax benefits from the exercise of stock options
    
    
    
    
    
    
    Gain on sale of securities available-for-sale
    
    
    (404
    )
    
    
    (242
    )Amortization of investment premiums and accretion of discounts, net
    
    
    51
    
    
    
    7Loss on sale of derivative swap transaction
    
    
    
    
    
    
    225Gain on sale of fixed assets
    
    
    
    
    
    
    (6
    )Deferred income taxes
    
    
    193
    
    
    
    (698
    )(Increase) in cash surrender value of bank owned life policies
    
    
    (86
    )
    
    
    (83
    )Effect of changes in:Other assets
    
    
    548
    
    
    
    (1,308
    )Deferred compensation
    
    
    82
    
    
    
    111Deferred loan fees
    
    
    11
    
    
    
    (53
    )Other liabilities
    
    
    598
    
    
    
    92Net cash from operating activities
    
    
    3,979
    
    
    
    204Cash flows from investing activities:Proceeds from maturities of available-for-sale securities
    
    
    11,820
    
    
    
    765Proceeds from sales of available-for-sale securities
    
    
    20,379
    
    
    
    16,682Proceeds from maturities of held-to-maturity securities
    
    
    
    
    
    
    138Purchases of available-for-sale securities
    
    
    (5,631
    )
    
    
    (11,383
    )Investment in bank owned life policies
    
    
    (1,191
    )
    
    
    Loan origination, net of principal repayments
    
    
    (7,672
    )
    
    
    (20,638
    )Purchases of Bank premises and equipment, net
    
    
    (140
    )
    
    
    (831
    )Proceeds on sale of fixed assets
    
    
    
    
    
    
    127Net cash from investing activities
    
    
    17,565
    
    
    
    (15,140
    )Cash flows from financing activities:Net decrease in demand and savings accounts
    
    
    (13,541
    )
    
    
    (4,623
    )Net increase in certificates of deposit
    
    
    6,204
    
    
    
    15,290Net decrease in securities sold under agreement to repurchase
    
    
    (3,040
    )
    
    
    (3,058
    )Proceeds from Federal Home Loan Bank advances
    
    
    210,000
    
    
    
    80,000Repayments of Federal Home Loan Bank advances
    
    
    (210,000
    )
    
    
    (55,000
    )Cash dividends paid on common stock
    
    
    (523
    )
    
    
    (700
    )Cash dividends paid on preferred stock
    
    
    (215
    )
    
    
    Proceeds from stock options exercised
    
    
    
    
    
    
    29Common Stock repurchase
    
    
    
    
    
    
    (504
    )Tax benefits from the exercise of stock options
    
    
    
    
    
    
    Net cash (used) from financing activities
    
    
    (11,115
    )
    
    
    31,434Net increase in cash and cash equivalents
    
    
    10,429
    
    
    
    16,498Cash and cash equivalents, beginning of period
    
    
    85,191
    
    
    
    22,234Cash and cash equivalents, end of period
    
    $
    95,620
    
    
    $
    38,732Supplemental disclosures:Cash paid during the period for:Income taxes
    
    $
    
    
    
    $
    250Interest
    
    
    3,318
    
    
    
    4,445
 See accompanying notes to condensed consolidated financial statements.
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 
 Notes to Unaudited Condensed Consolidated Financial Statements
 1. Consolidation and Basis of Presentation
    2. Recent Accounting pronouncements
 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,
 On March 19, 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB No. 133 (SFAS 161). Disclosures about Fair Value of Financial Instruments.
 On December 4, 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations
 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,
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
 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,
 3. Earnings per Share
   Earnings Per Share
    
    March 31, 2009
    
    
    March 31, 2008Basic EPS Calculation:Net Income
    
    $
    1,270
    
    
    $
    1,229Less: preferred dividend
    
    
    (215
    )
    
    
    Less: accretion on Preferred Stock
    
    
    (22
    )
    
    
    Numerator: Earnings available to common
stockholders
    
    $
    1,033
    
    
    $
    1,229Denominator (average common shares outstanding)
    
    
    8,711
    
    
    
    8,719Basic earnings per Share
    
    $
    0.12
    
    
    $
    0.14Diluted EPS Calculation:Net Income
    
    $
    1,270
    
    
    $
    1,229Less: preferred dividend
    
    
    (215
    )
    
    
    Less: accretion on Preferred Stock
    
    
    (22
    )
    
    
    Numerator: Earnings available to common
stockholders
    
    $
    1,033
    
    
    $
    1,229Denominator:Average common shares outstanding
    
    
    8,711
    
    
    
    8,719Plus incremental shares from assumed
conversionsStock Options
    
    
    
    
    
    
    29Warrants
    
    
    
    
    
    
    8,711
    
    
    
    8,748Diluted earnings per Share
    
    $
    0.12
    
    
    $
    0.14Anti-dilutive options not included in EPS Calculation
    
    
    615
    
    
    
    145Anti-dilutive warrants not included in EPS
Calculation
    
    
    405
    
    
    
    
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BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
 4. Stock Option Plans
   5. Securities Portfolio
     As of March 31, 2009(Dollars in thousands)
    
    
    
    
    
    
    
    
    
    
    
    
    
    EstimatedAvailable for sale securities
    
    Amortized Costs
    
    
    Unrealized Gains
    
    
    Unrealized Losses
    
    
    Fair ValueU.S. government & agencies
    
    $
    8,006
    
    
    $
    31
    
    
    $
    
    
    
    $
    8,037Obligations of state and political subdivisions
    
    
    27,003
    
    
    
    65
    
    
    
    (1,424
    )
    
    
    25,644Mortgage backed securities
    
    
    70,282
    
    
    
    1,840
    
    
    
    (265
    )
    
    
    71,857Other securities
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    105,291
    
    
    $
    1,936
    
    
    $
    (1,689
    )
    
    $
    105,538
 10




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES  Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
 As of December 31, 2008(Dollars in thousands)
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    
    84,590Total
    
    $
    131,841
    
    
    $
    1,493
    
    
    $
    (1,648
    )
    
    $
    131,687
  March 31, 2009Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU.S. government &
agencies
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Obligations of
state and political
subdivisions
    
    $
    20,906,886
    
    
    $
    (1,365,418
    )
    
    $
    360,654
    
    
    $
    (59,346
    )
    
    $
    21,267,540
    
    
    $
    (1,424,764
    )Mortgage backed
securities
    
    $
    5,251,431
    
    
    $
    (25,921
    )
    
    $
    2,130,969
    
    
    $
    (238,751
    )
    
    $
    7,382,400
    
    
    $
    (264,672
    )Total temporarily
impaired securities
    
    $
    26,158,317
    
    
    $
    (1,391,339
    )
    
    $
    2,491,623
    
    
    $
    (298,097
    )
    
    $
    28,649,940
    
    
    $
    (1,689,436
    )
 6. Junior Subordinated Debt Payable to Unconsolidated Subsidiary Grantor Trust
    11




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
       7. Preferred Stock and Warrants
    12




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
     8. Commitments and contingent liabilities
 Lease Commitments 
 (Dollars in thousands)Operating Leases2009
    
    $
    3892010
    
    
    5242011
    
    
    4542012
    
    
    2792013
    
    
    155Thereafter
    
    
    606Total
    
    $
    2,407Minimum rental due in the future
Under non-cancelable subleases
    
    $
    8
 Legal Proceedings 
 13




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
 FHLB Advances 
 Advance Amount
    
    Interest Rate
    
    Maturity$70,000,000
    
    0.29%
    
    05/26/2009$15,000,000
    
    3.41%
    
    04/29/2011$35,000,000
    
    3.97%
    
    11/23/2009$120,000,000
  Off-Balance Sheet Financial Instruments
    Credit Commitments
    
    March 31, 2009
    
    
    March 31, 2008Unfunded loan commitments
    
    $
    151,329,729
    
    
    $
    184,065,127Standby letters of credit
    
    
    6,785,969
    
    
    
    6,600,143Guaranteed commitments outstanding
    
    
    1,350,399
    
    
    
    1,375,998$
    159,466,097
    
    
    $
    192,041,268
 14




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
 9. Accounting for Income Tax Uncertainties (FIN 48)
    10. Fair Value Measurement
     15




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
 Recurring Basis
 Fair Value MeasurementsAt March 31, 2009Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    UnobservableFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    March 31, 2009
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale securities
    
    $
    105,538
    
    
    $
    0
    
    
    $
    105,538
    
    
    $
    0Total assets measured at fair value
    
    $
    105,538
    
    
    $
    0
    
    
    $
    105,538
    
    
    $
    0Total liabilities measured at fair
value
    
    $
    
    
    
    
    
    
    
    $
    
  Securities available-for-sale
 Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
  16




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
 Non Recurring Basis
 Fair Value MeasurementsAt March 31, 2009Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets For
    
    
    Observable
    
    
    Unobservable
    
    
    GainsFair Value
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    (Losses)Description
    
    March 31, 2009
    
    
    Level (1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    During periodImpaired Loans
    
    $
    6,473
    
    
    $
    0
    
    
    $
    0
    
    
    $
    6,473
    
    
    $
    (555
    )Total assets measured at fair value
    
    $
    6,473
    
    
    $
    0
    
    
    $
    0
    
    
    $
    6,473
    
    
    $
    (555
    )Liabilities
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Total liabilities measured at fair
value
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 Impaired loans  Accounting by Creditors for Impairment of a Loan, (
     
 17




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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 March 31, 2009. Also discussed are
significant trends and changes in the Companys results of operations for the three months ended
March 31, 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
  18




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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
       19




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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
   20




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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
    21




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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
   
 Dividends
  22




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
   
 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).
  23




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Government Regulation and Legislation
        
 Certain Ownership Restrictions under California and Federal Law
  24




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
   
 Negative Publicity could Damage our Reputation
  
 Environmental Risks
  
 Shares Eligible for Future Sale
  
 Technology and Computer Systems
  25




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 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.
 26




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Executive Overview
 high-quality
     
 Sources of Income
  27




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 March 31, 2009
    
    
    March 31, 2008Profitability RatiosNet Interest Income to Average Assets
    
    
    3.33
    %
    
    
    3.49
    %Net Income to Average Equity
    
    
    8.05
    %
    
    
    10.54
    %Efficiency Ratio1
    
    
    54.48
    %
    
    
    59.57
    %Capital RatiosLeverage Ratio
    
    
    9.53
    %
    
    
    9.15
    %Risk Based Capital
    
    $
    81,193,549
    
    
    $
    63,081,047Tier 1 Capital
    
    
    11.44
    %
    
    
    9.90
    %Total Capital
    
    
    12.69
    %
    
    
    10.98
    %Per Common Share DataDividend Payout Ratio
    
    
    41.09
    %
    
    
    56.92
    %Book Value
    
    $
    7.28
    
    
    $
    5.33Market Price
    
    $
    5.04
    
    
    $
    8.00High
    
    $
    5.05
    
    
    $
    8.59Low
    
    $
    3.90
    
    
    $
    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. 28




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
   Income Statement
  
 Net Interest Income and Net Interest Margin
      
 1
    
    The efficiency ratio is noninterest expense divided by total revenue (net interest income and
noninterest income) 29




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Liquidity
    
 Capital Management
      Well
    
    
    MinimumActual
    
    
    Capitalized
    
    
    CapitalMarch 31, 2009
    
    Capital
    
    
    Ratio
    
    
    Requirement
    
    
    RequirementThe CompanyLeverage
    
    $
    73,242,341
    
    
    
    9.50
    %
    
    
    n/a
    
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    73,242,341
    
    
    
    11.45
    %
    
    
    n/a
    
    
    
    4.0
    %Total Risk-Based
    
    
    81,238,930
    
    
    
    12.70
    %
    
    
    n/a
    
    
    
    8.0
    %Redding Bank of CommerceLeverage
    
    $
    73,196,960
    
    
    
    9.53
    %
    
    
    5.0
    %
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    73,196,960
    
    
    
    11.44
    %
    
    
    6.0
    %
    
    
    4.0
    %Total Risk-Based
    
    
    81,193,549
    
    
    
    12.69
    %
    
    
    10.00
    %
    
    
    8.0
    %
 30




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Short and Long Term Borrowings
   
 Provision for Loan and Lease Losses
    most significant
   31




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 
 Factors that may affect future results
       
 Critical Accounting Policies
  
 32




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
 Preparation of financial statements
  Use of estimates
  Accounting Principles Generally Accepted in the United States of America
   Valuation of Investments and Impairment of Securities
       33




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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
    Revenue recognition
  Income Taxes
  34




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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)
 Three Months Ended
    
    
    
    
    Three Months EndedMarch 31, 2009
    
    
    
    
    March 31, 2008Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateEarning AssetsPortfolio Loans2
    
    $
    524,367
    
    
    $
    8,049
    
    
    
    6.14
    %
    
    $
    504,091
    
    
    $
    9,131
    
    
    
    7.25
    %Tax-exempt Securities3
    
    
    29,304
    
    
    
    296
    
    
    
    4.04
    %
    
    
    27,901
    
    
    
    274
    
    
    
    3.93
    %US Government Securities
    
    
    11,316
    
    
    
    127
    
    
    
    4.49
    %
    
    
    15,272
    
    
    
    142
    
    
    
    3.72
    %Mortgage backed Securities
    
    
    80,263
    
    
    
    1,065
    
    
    
    5.31
    %
    
    
    29,055
    
    
    
    339
    
    
    
    4.67
    %Federal Funds Sold
    
    
    38,222
    
    
    
    25
    
    
    
    0.26
    %
    
    
    8,014
    
    
    
    58
    
    
    
    2.89
    %Other Securities
    
    
    37,557
    
    
    
    117
    
    
    
    1.25
    %
    
    
    2,000
    
    
    
    22
    
    
    
    4.40
    %Average Earning Assets
    
    $
    721,029
    
    
    $
    9,679
    
    
    
    5.37
    %
    
    $
    586,333
    
    
    $
    9,966
    
    
    
    6.80
    %Cash & Due From Banks
    
    $
    17,614
    
    
    
    
    
    
    
    
    
    
    $
    12,708Bank Premises
    
    
    10,623
    
    
    
    
    
    
    
    
    
    
    
    11,303Allowance for Loan Losses
    
    
    ( 8,402
    )
    
    
    
    
    
    
    
    
    
    
    (8,441
    )Other Assets
    
    
    27,814
    
    
    
    
    
    
    
    
    
    
    
    20,116Average Total Assets
    
    $
    768,678
    
    
    
    
    
    
    
    
    
    
    $
    622,019Interest Bearing LiabilitiesDemand Interest Bearing
    
    $
    137,608
    
    
    $
    307
    
    
    
    0.89
    %
    
    $
    141,709
    
    
    $
    750
    
    
    
    2.12
    %Savings Deposits
    
    
    65,803
    
    
    
    281
    
    
    
    1.71
    %
    
    
    41,195
    
    
    
    290
    
    
    
    2.82
    %Certificates of Deposit
    
    
    265,296
    
    
    
    1,881
    
    
    
    2.84
    %
    
    
    216,051
    
    
    
    2,376
    
    
    
    4.40
    %Repurchase Agreements
    
    
    11,940
    
    
    
    14
    
    
    
    0.47
    %
    
    
    13,052
    
    
    
    84
    
    
    
    2.57
    %FHLB Borrowings
    
    
    120,000
    
    
    
    581
    
    
    
    1.94
    %
    
    
    80,569
    
    
    
    731
    
    
    
    3.63
    %Trust Preferred Borrowings
    
    
    15,000
    
    
    
    215
    
    
    
    5.73
    %
    
    
    15,000
    
    
    
    315
    
    
    
    8.40
    %615,647
    
    
    $
    3,279
    
    
    
    2.13
    %
    
    
    507,576
    
    
    $
    4,546
    
    
    
    3.58
    %Noninterest bearing demand
    
    
    74,637
    
    
    
    
    
    
    
    
    
    
    
    66,825Other Liabilities
    
    
    5,219
    
    
    
    
    
    
    
    
    
    
    
    995Stockholders Equity
    
    
    73,175
    
    
    
    
    
    
    
    
    
    
    
    46,623Average Liabilities and Stockholders Equity
    
    $
    768,678
    
    
    
    
    
    
    
    
    
    
    $
    622,019Net Interest Income and Net Interest Margin
    
    
    
    
    
    $
    6,400
    
    
    
    3.55
    %
    
    
    
    
    
    $
    5,420
    
    
    
    3.70
    %
  
 2
    
    Average non-performing loans of $19.8 million are
included3
    
    The yield on tax-exempt securities has not been
adjusted to a tax-equivalent yield basis. 35




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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)
 March 31, 2009
    
    
    Over
    
    
    March 31, 2008(Dollars in thousands)
    
    Volume
    
    
    Rate
    
    
    TotalIncrease(Decrease) In Interest IncomePortfolio Loans
    
    $
    311
    
    
    $
    (1,393
    )
    
    
    (1,082
    )Tax-exempt Securities
    
    
    14
    
    
    
    8
    
    
    
    22US Government Securities
    
    
    (44
    )
    
    
    29
    
    
    
    (15
    )Mortgage Back Securities
    
    
    679
    
    
    
    47
    
    
    
    726Federal Funds Sold
    
    
    20
    
    
    
    (53
    )
    
    
    (33
    )Other Securities
    
    
    111
    
    
    
    (16
    )
    
    
    95Total Increase (Decrease)
    
    $
    1,091
    
    
    $
    (1,378
    )
    
    $
    (287
    )Increase(Decrease) In Interest ExpenseInterest Bearing Demand
    
    $
    (9
    )
    
    $
    (434
    )
    
    $
    (443
    )Savings Deposits
    
    
    105
    
    
    
    (114
    )
    
    
    (9
    )Certificates of Deposit
    
    
    349
    
    
    
    (844
    )
    
    
    (495
    )Repurchase Agreements
    
    
    (1
    )
    
    
    (69
    )
    
    
    (70
    )FHLB Borrowings
    
    
    191
    
    
    
    (341
    )
    
    
    (150
    )Trust Preferred Borrowings
    
    
    0
    
    
    
    (100
    )
    
    
    (100
    )Total Increase (Decrease)
    
    $
    635
    
    
    $
    (1902
    )
    
    $
    ( 1,267
    )Net Increase
    
    $
    456
    
    
    $
    524
    
    
    $
    980
     36




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
  
 Noninterest Income
 Three Months Ended(Dollars in thousands)
    
    March 31, 2009
    
    
    March 31, 2008Noninterest incomeService charges on deposit accounts
    
    $
    92
    
    
    $
    62Payroll and benefit processing fees
    
    
    134
    
    
    
    129Earnings on cash surrender value  Bank owned
life insurance
    
    
    86
    
    
    
    83Net gain on sale of securities available-for-sale
    
    
    404
    
    
    
    242Net loss on sale of derivative swap
    
    
    
    
    
    
    (225
    )Merchant credit card service income, net
    
    
    74
    
    
    
    83Mortgage brokerage fee income
    
    
    
    
    
    
    10Other income
    
    
    75
    
    
    
    181Total noninterest income
    
    $
    865
    
    
    $
    565
  
 Noninterest Expense
 Three Months Ended(Dollars in thousands)
    
    March 31, 2009
    
    
    March 31, 2008Noninterest expenseSalaries and related benefits
    
    $
    2,127
    
    
    $
    1,949Occupancy and equipment expense
    
    
    572
    
    
    
    644FDIC insurance premium
    
    
    273
    
    
    
    58Data processing fees
    
    
    111
    
    
    
    78Professional service fees
    
    
    159
    
    
    
    118Payroll processing fees
    
    
    34
    
    
    
    33Deferred compensation expense
    
    
    119
    
    
    
    111Stationery and supplies
    
    
    53
    
    
    
    62Postage
    
    
    81
    
    
    
    34Directors expense
    
    
    37
    
    
    
    48Other expenses
    
    
    394
    
    
    
    430Total noninterest expense
    
    $
    3,960
    
    
    $
    3,565
  37




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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)Income Taxes
    
    March 31, 2009
    
    
    March 31, 2008Tax provision
    
    $
    610
    
    
    $
    591Effective tax rate
    
    
    32.41
    %
    
    
    32.5
    %
     Deferred Tax Assets
    
    March 31, 2009
    
    
    March 31, 2008State Franchise taxes
    
    $
    (72,047
    )
    
    $
    186,193Deferred compensation
    
    
    2,174,628
    
    
    
    1,962,157Loan loss reserves
    
    
    3,848,649
    
    
    
    3,585,204Other Comprehensive Income
    
    
    (108,560
    )
    
    
    124,016Other
    
    
    24,768
    
    
    
    398,793Total Deferred Tax Assets
    
    $
    5,867,438
    
    
    $
    6,256,363Deferred Tax LiabilitiesDepreciation
    
    
    (1,128,350
    )
    
    
    (180,882
    )Deferred loan origination costs
    
    
    
    
    
    
    (452,281
    )Deferred state taxes
    
    
    
    
    
    
    (413,227
    )Other
    
    
    
    
    
    
    Total Deferred Tax Liabilities
    
    
    (1,128,350
    )
    
    
    (1,046,390
    )Total Net Deferred Tax Asset
    
    $
    4,739,088
    
    
    $
    5,209,973
 38




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 
 Asset Quality
 Redding Bank of
Commerce does not originate or hold sub-prime loans, nor do we hold collateralized debt obligations
or asset backed securities backed by sub-prime loans in our securities portfolio
  (Dollars in thousands)Portfolio Loans
    
    March 31, 2009
    
    
    December 31, 2008Commercial and financial loans
    
    $
    167,162
    
    
    $
    164,083Real estate-construction loans
    
    
    73,155
    
    
    
    84,218Real estate-commercial
    
    
    229,361
    
    
    
    217,914Real estate-mortgage
    
    
    20,929
    
    
    
    20,285Real estate-other
    
    
    41,363
    
    
    
    39,915Installment
    
    
    155
    
    
    
    145Other loans
    
    
    856
    
    
    
    902Less:Net deferred loan costs (fees)
    
    
    (98
    )
    
    
    (87
    )Allowance for loan losses
    
    
    (7,701
    )
    
    
    (8,429
    )Total net loans
    
    $
    525,182
    
    
    $
    518,946
   nd nd nd
 39




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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
    
    March 31, 2009
    
    
    December 31, 2008Nonaccrual loans
    
    $
    19,599
    
    
    $
    20,15490 days past due and still accruing interest
    
    
    0
    
    
    
    0Total nonaccrual loans
    
    
    19,599
    
    
    
    20,154Other Real Estate Owned
    
    
    2,934
    
    
    
    2,934Total non performing assets
    
    $
    22,533
    
    
    $
    23,088
    
 Allowance for Loan and Lease Losses (ALLL)
    Accounting for Contingencies Accounting by Creditors for Impairment of a Loan. Accounting for Contingencies
 40




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
     (Dollars in thousands)Allowance for Loan and LeaseLosses
    
    March 31, 2009
    
    
    March 31, 2008Beginning balance for Loan Losses
    
    $
    8,429
    
    
    $
    8,233Provision for Loan Losses
    
    
    1,425
    
    
    
    600Charge offs:Commercial
    
    
    (1,658
    )
    
    
    (0
    )Real Estate
    
    
    (497
    )
    
    
    (3,020
    )Other
    
    
    (0
    )
    
    
    (0
    )Total Charge offs
    
    
    (2,155
    )
    
    
    (3,020
    )Recoveries:Commercial
    
    
    1
    
    
    
    0Real Estate
    
    
    0
    
    
    
    0Other
    
    
    1
    
    
    
    2Total Recoveries
    
    
    2
    
    
    
    2Ending Balance
    
    $
    7,701
    
    
    $
    5,815ALLL to total loans
    
    
    1.45
    %
    
    
    1.14
    %Net Charge offs to average loans
    
    
    0.04
    %
    
    
    0.60
    %
    41




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##### Table of Contents



BANK OF COMMERCE HOLDINGS & SUBSIDIARIES
 
 QUARTERLY INCOME STATEMENT
 March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,Dollars in thousands, except for per share data
    
    2009
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008Interest income:Interest and fees on loans
    
    $
    8,049
    
    
    $
    8,028
    
    
    $
    8,252
    
    
    $
    8,171
    
    
    $
    9,131Interest on tax-exempt securities
    
    
    296
    
    
    
    313
    
    
    
    308
    
    
    
    302
    
    
    
    274Interest on U.S. government securities
    
    
    1,192
    
    
    
    873
    
    
    
    582
    
    
    
    533
    
    
    
    481Interest on federal funds sold and
securities purchased under agreements to
resell
    
    
    25
    
    
    
    39
    
    
    
    116
    
    
    
    90
    
    
    
    58Interest on other securities
    
    
    117
    
    
    
    81
    
    
    
    13
    
    
    
    23
    
    
    
    22Total interest income
    
    
    9,679
    
    
    
    9,334
    
    
    
    9,271
    
    
    
    9,119
    
    
    
    9,966Interest expense:Interest on demand deposits
    
    
    307
    
    
    
    411
    
    
    
    514
    
    
    
    498
    
    
    
    750Interest on savings deposits
    
    
    281
    
    
    
    383
    
    
    
    543
    
    
    
    360
    
    
    
    290Interest on certificates of deposit
    
    
    1,881
    
    
    
    1,975
    
    
    
    1,963
    
    
    
    2,238
    
    
    
    2,376Securities sold under repurchase agreements
    
    
    14
    
    
    
    22
    
    
    
    32
    
    
    
    35
    
    
    
    84Interest on FHLB and other borrowings
    
    
    581
    
    
    
    638
    
    
    
    662
    
    
    
    781
    
    
    
    731Interest on junior subordinated debt
payable to unconsolidated subsidiary
grantor trust
    
    
    215
    
    
    
    263
    
    
    
    317
    
    
    
    161
    
    
    
    315Total interest expense
    
    
    3,279
    
    
    
    3,692
    
    
    
    4,031
    
    
    
    4,073
    
    
    
    4,546Net interest income
    
    
    6,400
    
    
    
    5,642
    
    
    
    5,240
    
    
    
    5,046
    
    
    
    5,420Provision for loan and lease losses
    
    
    1,425
    
    
    
    3,620
    
    
    
    1,300
    
    
    
    1,000
    
    
    
    600Net interest income after provision for
loan and lease losses
    
    
    4,975
    
    
    
    2,022
    
    
    
    3,940
    
    
    
    4,046
    
    
    
    4,820Noninterest income:Service charges on deposit accounts
    
    
    92
    
    
    
    108
    
    
    
    91
    
    
    
    50
    
    
    
    62Payroll and benefit processing fees
    
    
    134
    
    
    
    118
    
    
    
    107
    
    
    
    99
    
    
    
    129Earnings on cash surrender value  bank
owned life insurance
    
    
    86
    
    
    
    86
    
    
    
    86
    
    
    
    85
    
    
    
    83Net gain on sale of securities
available-for-sale
    
    
    404
    
    
    
    33
    
    
    
    159
    
    
    
    194
    
    
    
    242Net loss on sale of derivative swap
transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225
    )Merchant credit card service income, net
    
    
    74
    
    
    
    85
    
    
    
    99
    
    
    
    97
    
    
    
    83Mortgage brokerage fee income
    
    
    
    
    
    
    4
    
    
    
    2
    
    
    
    5
    
    
    
    10Other income
    
    
    75
    
    
    
    156
    
    
    
    207
    
    
    
    187
    
    
    
    181Total noninterest income
    
    
    865
    
    
    
    590
    
    
    
    751
    
    
    
    717
    
    
    
    565Noninterest expense:Salaries and related benefits
    
    
    2,127
    
    
    
    2,001
    
    
    
    1,909
    
    
    
    1,892
    
    
    
    1,949Occupancy and equipment expense
    
    
    572
    
    
    
    1,339
    
    
    
    613
    
    
    
    640
    
    
    
    644FDIC insurance premium
    
    
    273
    
    
    
    99
    
    
    
    113
    
    
    
    113
    
    
    
    58Data processing fees
    
    
    111
    
    
    
    52
    
    
    
    81
    
    
    
    65
    
    
    
    78Professional service fees
    
    
    159
    
    
    
    270
    
    
    
    146
    
    
    
    133
    
    
    
    118Payroll processing fees
    
    
    34
    
    
    
    30
    
    
    
    26
    
    
    
    27
    
    
    
    33Deferred compensation expense
    
    
    119
    
    
    
    120
    
    
    
    118
    
    
    
    113
    
    
    
    111Stationery and supplies
    
    
    53
    
    
    
    70
    
    
    
    50
    
    
    
    80
    
    
    
    62Postage
    
    
    81
    
    
    
    30
    
    
    
    32
    
    
    
    38
    
    
    
    34Directors expense
    
    
    37
    
    
    
    71
    
    
    
    81
    
    
    
    94
    
    
    
    48Other expenses
    
    
    394
    
    
    
    425
    
    
    
    443
    
    
    
    418
    
    
    
    430Total noninterest expense
    
    
    3,960
    
    
    
    4,507
    
    
    
    3,612
    
    
    
    3,613
    
    
    
    3,565Income (loss) before provision for income taxes
    
    
    1,882
    
    
    
    (1,895
    )
    
    
    1,079
    
    
    
    1,150
    
    
    
    1,820Provision (benefit) for income taxes
    
    
    610
    
    
    
    (1,237
    )
    
    
    362
    
    
    
    244
    
    
    
    591Net income (loss)
    
    $
    1,270
    
    
    $
    (658
    )
    
    $
    717
    
    
    $
    906
    
    
    $
    1,229Less preferred dividend and accretion on
preferred stock
    
    $
    (237
    )
    
    $
    (0
    )
    
    $
    (0
    )
    
    $
    (0
    )
    
    $
    (0
    )Income available to common shareholders
    
    $
    1,033
    
    
    $
    (658
    )
    
    $
    717
    
    
    $
    906
    
    
    $
    1,229Basic earnings (loss) per share
    
    $
    0.12
    
    
    $
    (0.07
    )
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.14Weighted average shares  basic
    
    
    8,711
    
    
    
    8,755
    
    
    
    8,711
    
    
    
    8,748
    
    
    
    8,719Diluted earnings (loss) per share
    
    $
    0.12
    
    
    $
    (0.07
    )
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.14Weighted average shares  diluted
    
    
    8,711
    
    
    
    8,802
    
    
    
    8,713
    
    
    
    8,751
    
    
    
    8,748Cash dividends per share
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.08
 42




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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.)
    43




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##### Table of Contents



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
       44




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
   
 PART II. Other Information
 
 Item 1. Legal proceedings
  
 Item 1a. Risk Factors
  
 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
 45




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##### Table of Contents



SIGNATURES
  BANK OF COMMERCE HOLDINGS
                     (Registrant)Date: May 1, 2009
    /s/ Samuel D. JimenezSamuel D. JimenezSenior Vice President and
Chief Financial Officer 46