2004 | Annual Report Bank of Commerce Holdingssm

2004 | annual report Bank of Commerce Holdingssm

�� bank of commerce holdings | annual report 2004 holdings | annual report bank of commerce �� Our Mission �� To be the premier provider of quality ﬁ nancial products and ��

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services to the business and professional communities, while

enhancing shareholder return and providing a rewarding and

challenging work environment. To recognize the special needs

of the business person and professional, to create and deliver

ﬁ nancial products and services which represent exceptional

We are proud to report that ﬁ nancially 2004 was our best year ever. Our assets grew by more than $37 million to over $438 million, a healthy 9.3% increase. bank of commerce holdings | annual report 2004 | 3

Dear Shareholders,

The year 2004, our twenty-second, will be remembered as one in which we achieved many milestones in our grand journey. We are proud to report that financially 2004 was our best year ever. Our assets grew by more than $37 million to over $438 million, a healthy 9.3% increase. Our loan portfolio grew by over $40 million to $318 million, a strong increase of 14%. Our deposits increased by over $25 million to over $352 million. Substantially all of the growth centered in core accounts, the most efficient funding source. Our net income reached $4.978 million or $.60 per share. This represents an increase of over 15% in comparison to $.52 per share last year. The increased profits fueled our growth and allowed for an increase in our cash dividend to $.23 per share.

The key performance indicators, which reflect the financial vitality of the organization all improved in 2004. The return on our average assets improved from 1.10% to 1.22%. The return on our average equity improved from 15.2% to 15.37%. All of the key measurements for asset quality also improved and we are pleased with the overall financial health of our clients. Diligently applied credit underwriting along with an expanding economy has rewarded us with good improvement in the performance of the loan portfolio.

We continue to leverage our investment in technology to help improve our effectiveness in our support services, providing additional capacity to expand our products and services.

The listing of our securities on the National NASDAQ resulted in much improved liquidity, increasing the number of shares traded by 42%.

We look forward to 2005, with the leadership and commitment of our new Chairman of the Board, Harry L. Grashoff, Jr. and the many opportunities to grow and increase the value of your company. As always, thank you for your conﬁdence and support. We welcome any questions or comments you may have.

Sincerely,

Michael C. Mayer Robert C. Anderson President and Chairman of the Board Chief Executive Ofﬁcer The Board of Directors proudly dedicate the company’s overall performance for 2004 to our bank of commerce holdings | annual report 2004 | 4 holdings | annual report bank of commerce Founding Chairman of the Board... Robert C. Anderson

We wish to extend our warmest appreciation to Mr. Anderson. His leadership, vision and endless contributions over the past 22 years have been outstanding. Bob’s guidance through the good times, and dedication and support through difﬁ cult challenges have helped build Bank of Commerce Holdings into the company it is today.

While we are very happy that Bob and his lovely wife Mary will be embarking on a new chapter in their lives, Bob’s presence will be missed around the RBC boardroom table.

A heartfelt thank you, Bob, for all the years of service and dedication! bank of commerce holdings | annual report 2004 | 5

Bob Anderson is a graduate of the University of California Berkeley and served four years in the Air Force. He became a CPA in 1958 and worked for a national ﬁ rm in San Francisco before moving to Redding in 1960. Bob is married to Mary, is the father of three children, Robin, Justin and Judy and the grandfather of seven. Bob owned his own ﬁ rm and worked as a CPA in Redding for twenty years before retiring. Bob was elected to the Redding City Council in 1969, serving a total of seventeen years, including two as Mayor. During his term as President of the Chamber of Commerce Bob had the privilege of meeting President Kennedy at the Whiskeytown dedication service. This was especially meaningful to him. Currently, Bob donates a great deal of time to St. Joseph Church and The Knights of Columbus. Left to right

Robert C. Anderson, Chairman of the Board, Chairman – Executive Committee

Welton L. Carrel, Director bank of commerce holdings | annual report 2004 | 6 holdings | annual report bank of commerce Board of Directors

Left to right

Russell L. Duclos, Chairman – Asset/Liability Committee

John C. Fitzpatrick, Director

Left to right

Kenneth R. Gifford, Jr., Director Harry L. Grashoff, Jr., Chairman – Loan Committee

Left to right

Michael C. Mayer, Director, President and Chief Executive Officer

Eugene L. Nichols, Director

Left to right

David H. Scott, Chairman – Audit Committee Lyle L. Tullis, Chairman – Nominating and Corporate Governance bank of commerce holdings | annual report 2004 | 7

Left to right Michael C. Mayer, President and CEO Linda J. Miles, Executive Vice President & Chief Financial Officer Caryn A. Blais, Senior Vice President & Chief Information Officer

Senior Leadership

Left to right Theodore M. Cumming, Senior Vice President & Lending Group Manager Randy S. Eslick, Senior Vice President & Regional Manager Robert A. Matranga, Senior Vice President & Lending Group Manager

Left to right Patrick J. Moty, Senior Vice President & Chief Credit Officer Robert O’Neil, Senior Vice President Commercial Banking Debra A. Sylvester, Senior Vice President & Administrative Operations

Left to right Larry D. Watson, Senior Vice President Administrative Operations Roger D. Janis, Vice President Special Projects Samuel D. Jimenez, Vice President & Director of Risk Management Bank of Commerce Holdings™ announces a 19% increase in 2004 operating results. We are very proud to report that the fourth quarter of 2004 was a record for the Company in terms of ﬁnancial results, a 31% increase over the same quarter in 2003. bank of commerce holdings | annual report 2004 | 8 holdings | annual report bank of commerce

• Company name change to Bank of Commerce Holdings™

• NASDAQ National Market approved

• BOCH trading symbol

• Trademark of all Company names: Bank of Commerce

Holdings™, Redding Bank of Commerce™, Roseville Bank of

Commerce™ and Bank of Commerce Mortgage™

• July 1, 2004 Bank of Commerce Mortgage moves to new

location at 1024 Mistletoe Drive Redding, California

• July 21, 2004 Three-for-one stock split

• October 2004 cash dividend of $0.23 per share

• December 2004 inclusion in the prestigious America’s

Community Bankers NASDAQ Index – ACBQ trading symbol bank of commerce holdings | annual report 2004 | 9

Five Year Financial Summary

In Thousands (Except Ratios and Per Share Data) As of and for the years ended December 31, 2004 2003 2002 2001 2000 Statements of Income Total Interest Income $20,996 $19,279 $18,565 $20,216 $20,177 Net Interest Income $16,887 $14,694 $12,517 $11,190 $11,455 Provision for Loan Losses $ 593 $ 515 $ 620 $ 255 $ 142 Total Noninterest Income $ 2,196 $ 2,150 $ 2,091 $ 2,823 $ 2,807 Total Noninterest Expense $10,581 $ 9,660 $ 8,267 $ 7,143 $ 6,458 Total Revenues $23,192 $21,429 $20,656 $23,039 $22,984 Net Income $ 4,978 $ 4,183 $ 3,696 $ 4,274 $ 4,812

Balance Sheets Total Assets $438,545 $401,158 $367,434 $318,686 $255,107 Total Net Loans $318,801 $278,204 $280,351 $216,960 $191,586 Allowance for Loan Losses $ 3,866 $ 3,675 $ 3,529 $ 2,916 $ 2,710 Total Deposits $352,879 $327,539 $314,447 $281,436 $218,036 Stockholders’ Equity $ 35,283 $ 30,511 $ 27,667 $ 27,240 $ 28,754

Performance Ratios Return on Average Assets 1.22% 1.10% 1.09% 1.49% 1.98% Return on Average Stockholders’ Equity 15.37% 15.20% 13.92% 15.43% 17.95% Dividend Payout 39.29% 42.09% 46.57% 41.94% 35.32% Average Equity to Average Assets 8.16% 7.21% 7.83% 9.67% 11.02% Tier 1 Risk-Based Capital-Bank 10.80% 10.77% 9.14% 10.93% 12.86% Total Risk-Based Capital-Bank 11.88% 12.02% 10.19% 12.18% 14.11% Net Interest Margin 4.45% 4.22% 4.06% 4.24% 5.16% Average Earning Assets to Total Average Assets 92.62% 91.26% 90.90% 92.15% 91.30% Nonperforming Assets to Total Assets 0.54% 1.16% .10% .11% .31% Net Charge-offs to Average Loans .12% .13% .01% .02% .09% Allowance for Loan Losses to Total Loans 1.20% 1.30% 1.26% 1.35% 1.42% Nonperforming Loans to Allowance for Loan Losses 61.64% 126.34% 0.20% 11.97% 29.56% Efﬁ ciency Ratio 57.23% 59.15% 56.59% 50.97% 45.28% Share Data Average Common Shares Outstanding - basic 8,283 8,033 8,013 8,109 8,652 Average Common Shares Outstanding - diluted 8,703 8,327 8,604 8,568 9,105 Book Value Per Common Share $4.27 $3.80 $3.45 $3.36 $3.32 Basic Earnings Per Common Share $0.60 $0.52 $0.46 $0.51 $0.56 Diluted Earnings Per Common Share $0.57 $0.50 $0.43 $0.48 $0.53 Cash Dividends Per Common Share $0.23 $0.22 $0.22 $0.22 $0.20 bank of commerce holdings | annual report 2004 | 10 )sue $0 ivse o Dcme 3, 99 i te opn’ Cmo Sok te ADQ te & 50 n te N Scrte Index. Securities SNL the and the NASDAQ). 500 S&P the through Securities SNL to NASDAQ, furnished was Stock the Company’sCommon the for prices Stock, (share Securities SNL Common Source: Company’sdividends. of reinvestment the Assumes in 1999, 31, December on invested $100 1)Assumes SNL SecuritiesLC©2005 |(804)977-1600 Index Value �� Index includes 520 community banks with a total market capitalization of $180 billion. It is listed under the ticker symbol “ACBQ”. the under listed is It billion. $180 of capitalization market total a with banks community 520 includes Index sector.The banking community strong the of performance the tracking for tool a as 2003 December in index this launched Market Stock NASDAQ the and banks, community for association trade national the Bankers, Community broadlymost the is Index representativeNASDAQ Bankers Community America’sbanks. community for index stock America’sthe in inclusion earlier announced also Company The America’sThe Index. NASDAQ Bankers Community closed atDecember31,2004$12.35compared with$8.42atDecember31,2003.” price Stock BOCH. symbol trading the under Market National NASDAQ the by approval announced Company the “Bank of Commerce Holdings (BOCH) has achieved a 46.7% increase in stock price during 2004. On June 15, 2004 �� bank of commerce holdings | annual report 2004 | 11

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�� Outstanding staff make it happen... We opened our doors on October 22, 1982 with ten employees. Over the past 22 years RBC has achieved goals and dreams that were not even a glimmer of thought in those early years. Through all the challenges, growth and changes, one thing has remained constant: our exceptional employees. Numbering over 110 today, we are very proud of our experienced, educated and professional bankers.

We would like to take this opportunity to honor our valuable employees that have spent twenty years or more with RBC, and thank them whole-heartedly for contributing so much to our success! bank of commerce holdings | annual report 2004 | 12 holdings | annual report bank of commerce

“I truly appreciate working for such a wonderful company. Over the years, I have enjoyed the warm, caring people and the opportunities I have had to learn and grow with the bank.” Gloria Breedlove, Assistant Vice President, Loan Administrator

“Over the past 20 years the Redding area has experienced tremendous growth in its population and economics. Redding Bank of Commerce has provided me the opportunity to be a part of that growth by assisting my customers in achieving their ﬁ nancial goals.” John Rainey, Vice President & Senior Loan Ofﬁ cer bank of commerce holdings | annual report 2004 | 13 Outstanding staff make it happen...

“RBC provides a work environment that is both challenging and rewarding. I am very proud to be a part of this reputable, successful business. My favorite part of the bank has always been the people ~ leaders, mentors and friends, they have become family. RBC offers a positive, supportive and fulﬁ lling atmosphere in which to work.” Debbie Sylvester, Senior Vice President & Administrative Operations

“My 20 year tenure at RBC has been an enjoyable and fulfi lling experience. I’ve had the opportunity to participate and contribute to the success that has made Redding Bank of Commerce the premier business bank in Shasta County. Assisting our customers in achieving their fi nancial goals and aspirations has always been the most exciting part of the job.” Pat Moty, Senior Vice President and Chief Credit Offi cer

“I believe being an employee of RBC for 22+ years speaks for itself. Being the last original bank employee, I have seen a lot of growth and changes. I have truly worked with some great people through the years, and really appreciate my RBC family.” Judy Reiser, Loan Administrative Services bank of commerce holdings | annual report 2004 | 14 holdings | annual report bank of commerce Our valued clients areare not only businessmen and women,women, but civic and community leaders, employers, volunteers ~ excellent examples of people that contribute to their communities in so many ways. We are most proud of our association with them, and to be their business bankers. The relationships built go far beyond that of “just a banker”. We build friendships and liaisons that create a stronger, healthier community overall. The following illustrate just a few of the successful relationships we have established over the years.

Understanding it is our customers who

make it all happen and we continue to

be grateful to serve them. bank of commerce holdings | annual report 2004 | 15

Scott Boras, CEO • Scott Boras, Inc.

Scott Boras is considered professional sports most accomplished negotiator and baseball’s top attorney. The Sporting News labeled him professional sports top agent, and among the most powerful people in the sporting world. Scott was recently ranked 7th on Baseball America’s Top Power Brokers. His clients include the superstars of major league baseball, including Alex Rodriquez, for whom Scott negotiated the largest contract in professional sports history. Scott began his career in baseball. After graduating from the University of Paciﬁ c, he played in the St. Louis Cardinals and Chicago Cubs organizations, and eventually earned his law degree from the Paciﬁ c/McGeorge School of Law.

As a community business bank, Roseville Bank of Commerce is able to customize bank products in order to provide for the special banking needs that Scott and his staff require. As professional bankers, we are committed to providing the special attention that Scott and his professional clients expect.

Photo: Jon Soohoo/Wire Image

Mike Davis, CEO • MD Imaging Incorporated

Mike Davis moved to Redding in 1973 and joined the staffstaff at MercyMercy Medical Center as an x-ray technologist. Just four years later he started his ﬁ rst company, Redding Portable X-Ray.X-Ray. Mike is a true entrepreneurentrepreneur at heart and is incapable of sitting still for long. In 1979, he started Davis X-Ray followed by Davis Records in 1991, Davis Courier Services and Dataline Medical T Transcriptionranscription in 1993, and North State Records in 1994. He purpurchasedchased Shasta Diagnostics Imaging, Inc. in 1994 and mermergedged with Redding Radiological Associates, Inc. to form MD Imaging, Inc.

In addition to these many accomplishments, and with the ﬁ nancial assistance of Redding Bank of Commerce,Commerce, Mike has developed over 250 lots and numerousnumerous homes in the Redding areaarea to help meet the ever growing need for new homes in our area. He has reliedrelied on Redding Bank of CommerceCommerce to meet his very diverse ﬁ nancial needs for many years and continues to do so. Mike’sMike’s corecore business values include being straightforwardstraightforward and honest, and being committed to seeing thethe job done. Mike believes he shares these values with Redding Bank of Commerce.

Henry Cuenca, CEO/Ryan Cuenca/Business Development LifeHelp Insurance Administrative Service

Henry Cuenca, Chairman and CEO of LifeHelp Insurance Administrative Services has been a Redding area resident for over 10 years. LifeHelp was created in 1972 and has evolved into a nationwide, full-service third party administrator for life and health insurance products. LifeHelp serves the credit union marketplace and supports over 300 ﬁ nancial institutions throughout the country while servicing well over 500,000 individual insured clients. LifeHelp has always been and, continues to be a family business, with son Ryan Cuenca joining the corporate management while continuing his education by pursuing a Graduate Business Degree, MBA, at Santa Clara University.

“LifeHelp strives to be highly regarded, operationally excellent, and personal in its relationships. Through effective execution we create proﬁ table growth and opportunity, positively impacting the lives of our employees and their families, our vendors and partners, and the well-being of our community.”

“All RBC personnel are quality individuals. They go out of their way to maintain collaborative spirit and friendly demeanor. Strategically, they are excellent listeners that promote and strengthen on-going partnership relationships.” We are proud of our contributions and our communities... bank of commerce holdings | annual report 2004 | 16 holdings | annual report bank of commerce

Bank of Commerce Holdings contributes time, finances and emotional energy into several worthwhile causes in the areas in which we live and do business. Listed here is a small part of the financial contributions made throughout our communities in 2004. In addition, the staff at Redding Bank of Commerce and Roseville Bank of Commerce have donated more than 1,900 hours of service to various advisory committees, community events and service clubs.

We are proud of our communities. Our contributions, both in dollars and time, truly come from our hearts.

A Family for Every Child Redding Breakfast Lions Club

American Heart Association River Oak Center for Children

Big League Dreams Sports Park Rocky Mountain Elk Foundation

Bishop Quinn High School Rotary Club - Redding and Roseville

Chamber of Commerce Secret Witness (Redding, Roseville, Sacramento and Citrus Heights) Shasta County Sober Grad Disabled Adventure Outﬁtters Shasta County Women’s Refuge Economic Development Corporation Shasta Family YMCA Exchange Club Shasta Regional Community Foundation Good News Rescue Mission Shriners Hospital for Children of Northern California Haven Humane Society Soroptimist International Leadership Redding Sutter-Roseville Medical Center Foundation New Library NOW! Turtle Bay Nor Cal Think Pink United Way North State Symphony

North State Cancer League

Northern Valley Catholic Social Services bank of commerce holdings | annual report 2004 | 17

Big League Dreams builds and operates world-class family recreational facilities through public-private partnerships.

Big League Dreams is the premier developer and operator of amateur recreational sports facilities in the country. The parks have been recognized as the “Best Sports Complex in America” by the Sports Complex Owners and Developers Association, the “Best Public/ Private Partnership” by the League of California Cities.

The parks bring many beneﬁ ts to the regions in which they operate. Big League Dreams brings a top-quality playing experience for local families through world-class facilities in a variety of sports. The Redding Big League Dreams facility offers baseball, softball, soccer, indoor soccer, in-line hockey, basketball, ﬂ ag football and sand volleyball for all ages.

Big League Dreams is best known for baseball/softball ﬁ elds that are designed and built as replicas of famous, historic major league stadiums. Youth and adults can play on a replica of:

• Chicago’s Wrigley Field • New York’s Yankee Stadium • Boston’s Fenway Park

Redding Bank of Commerce proudly sponsors the ﬁ eld inspired by Chicago’s Wrigley Field. Purchases and Sales – RBC Ofﬁcers Bank of Commerce Holdings (NASDAQ Symbol BOCH)

Redding Bank of Commerce Hill, Thompson, Magid & Co. Inc. | R. J. Dragani 15 Exchange Place, Suite 800 Jersey City, New Jersey 07030 Michael C. Mayer - President & Chief Executive Officer (201) 369-2908 Linda J. Miles - Executive Vice President & Chief Financial Officer Hoefer & Arnett | Dave Bonaccorso Caryn A. Blais - Senior Vice President & Chief Information Officer 555 Market Street, 18th Floor Theodore M. Cumming - Senior Vice President & Lending Group Manager San Francisco, CA 94105 Robert A. Matranga - Senior Vice President & Lending Group Manager (800) 346-5544

bank of commerce holdings | annual report 2004 | 18 holdings | annual report bank of commerce Patrick J. Moty - Senior Vice President & Chief Credit Officer Morgan Stanley Dean Witter | Joe Tallerico Debra A. Sylvester - Senior Vice President & Administrative Operations Officer 310 Hemstead Drive, Suite 100 Larry D. Watson - Senior Vice President & Administrative Operations Officer Redding, CA 96001 Jeff Collins - Vice President Information Systems (800) 733-6126

Dawna Eldred - Vice President & Operations Officer Raymond James Financial Services, Inc. | Geoff Ball, Advisor Allen K. Felsenthal - Vice President & Loan Officer 1805 Hilltop Drive, Suite 106 Roger Janis - Vice President Special Projects Redding, CA 96002 (800) 926-5040 Samuel D. Jimenez - Vice President & Director of Risk Management Dennis E. Lee - Vice President & Senior Loan Officer Sandler & O’Neill | Bryan Sullivan Valerie Lee - Vice President & Loan Officer 919 Third Avenue, 6th Floor New York, NY 10022 Donna Moore - Vice President & Operations Officer (800) 635-6851 Tammy Parker - Vice President Business Development & Marketing Karen Perry - Vice President Information Services Officer Wachovia Securities | Ken Meyers, Rick Hansen 10466 Brunswick Road John C. Rainey - Vice President & Senior Loan Officer Grass Valley, CA 95945 Larry E. Sterk - Vice President & Loan Review Officer (888) 383-3112 Cheryl Whitmer - Vice President Business Development For questions regarding your share holding, contact: Jacquie Arends - Assistant Vice President Administrative Operations Mellon Investor Services | Kerri S. Jones Gloria Breedlove - Assistant Vice President & Loan Administrator 235 Montgomery Street, 23rd floor Geoff Dey - Assistant Vice President & Loan Officer San Francisco, CA 94104 www.mellon-investor.com Linda Jancik - Assistant Vice President Payroll & Benefit Services (800) 356-2017 Deni Jauch - Assistant Vice President Loan Services Administration Manager Leona McCoach - Assistant Vice President & Credit Analyst Contact Us Redding Bank of Commerce Daniel Taylor - Assistant Vice President & Controller 1951 Churn Creek Road Brenda Truett - Assistant Vice President & Information Systems Supervisor Redding, CA 96002 Janelle Hopps - Loan Officer (530) 224-3333 (530) 224-2220 fax

Redding Bank of Commerce Roseville Bank of Commerce 1177 Placer Street Redding, CA 96001 Randy S. Eslick - Senior Vice President & Regional Manager (530) 241-2265 (530) 241-6965 fax

Richard Chackel - Senior Vice President Commercial Banking Bank of Commerce Mortgage Robert O’Neil -Senior Vice President Commercial Banking 1024 Mistletoe Lane Allan Bernhard, Vice President Commercial Banking Redding, CA 96002 (530) 223-9550 (530) 223-9545 fax Gina Garbolino - Vice President Client Relations Pamela Halperin - Vice President Regional Operations Manager Roseville Bank of Commerce Debra L. Llata - Vice President Products and Services 1504 Eureka Road, Suite 100 Roseville, CA 95661 Linda Bedford - Assistant Vice President & Operations Ofﬁcer (916) 772-0131 (916) 772-0181 fax Jenine Gedeon - Assistant Vice President Products & Services Robert Lim - Assistant Vice President Commercial Banking Roseville Bank of Commerce 6950 Sunrise Boulevard Marlo Swett - Assistant Vice President Operations Ofﬁcer Citrus Heights, CA 95610 Ruth Ann Yurong - Assistant Vice President Senior Loan Administrator (916) 722-7566 (916) 722-7567 fax

www.reddingbankofcommerce.com www.rosevillebankofcommerce.com www.bankofcommercemortgage.com e-mail: [email protected]

Bank of Commerce Holdings and Subsidiaries will provide a copy of our code of ethics to any person, without charge, upon request. 2004 | annual report Bank of Commerce Holdingssm

�� bank of commerce holdings | annual report 2004 holdings | annual report bank of commerce �� Our Mission �� To be the premier provider of quality ﬁ nancial products and ��

��

services to the business and professional communities, while

enhancing shareholder return and providing a rewarding and

challenging work environment. To recognize the special needs

of the business person and professional, to create and deliver

ﬁ nancial products and services which represent exceptional

value to our clients creating loyalty, and to service our successful customers | new beginnings | long-time employees community involvement | outstanding results community with integrity and pride.