UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-K

(Mark One)

x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

or

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to        

000-50974

(Commission File Number)

Bridge Capital Holdings

(Exact name of registrant as specified in its charter)

55 Almaden Boulevard, San Jose, CA   95113

(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code:  (408) 423-8500

Securities registered pursuant to Section 12 (b) of the Act:

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o   No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o   No  x

Bridge Capital Holdings (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No  o

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No x

The aggregate market value of the voting stock held by non-affiliates of Bridge Capital Holdings was $238,739,725 as of June 30, 2014.

As of February 28, 2015, Bridge Capital Holdings had 15,958,281 shares of common stock outstanding.

Documents incorporated by reference: The Company’s Proxy Statement for its 2015 Annual Meeting of Shareholders is incorporated herein by reference in Part III, Items 10 through 14.

Forward-looking Statements

IN ADDITION TO THE HISTORICAL INFORMATION, THIS ANNUAL REPORT CONTAINS CERTAIN FORWARD-LOOKING INFORMATION WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND WHICH ARE SUBJECT TO THE “SAFE HARBOR” CREATED BY THOSE SECTIONS. THE READER OF THIS ANNUAL REPORT SHOULD UNDERSTAND THAT ALL SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO VARIOUS UNCERTAINTIES AND RISKS THAT COULD AFFECT THEIR OUTCOME.  THE COMPANY’S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SUGGESTED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, (1) COMPETITIVE PRESSURE IN THE BANKING INDUSTRY INCREASES SIGNIFICANTLY; (2) CHANGES IN THE INTEREST RATE ENVIRONMENT; (3) GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, DETERIORATE OR FAIL TO IMPROVE,  RESULTING IN, AMONG OTHER THINGS, DETERIORATION IN CREDIT QUALITY; (4) CHANGES IN THE REGULATORY ENVIRONMENT; (5) CHANGES IN BUSINESS CONDITIONS OR INFLATION; (6) COSTS AND EXPENSES OF COMPLYING WITH THE INTERNAL CONTROL PROVISIONS OF THE SARBANES-OXLEY ACT AND OUR DEGREE OF SUCCESS IN ACHIEVING COMPLIANCE; (7) CHANGES IN SECURITIES MARKETS; (8) FUTURE CREDIT LOSS EXPERIENCE; (9) CIVIL DISTURBANCES OR TERRORIST THREATS OR ACTS, OR APPREHENSION ABOUT POSSIBLE FUTURE OCCURANCES OF ACTS OF THIS TYPE; (10) THE INVOLVEMENT OF THE UNITED STATES IN WAR OR OTHER HOSTILITIES; AND (11) THE MATTERS DISCUSSED IN THIS REPORT UNDER “ITEM 1A — RISK FACTORS” AND “ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CRITICAL ACCOUNTING POLICIES.” THEREFORE, THE INFORMATION IN THIS ANNUAL REPORT SHOULD BE CAREFULLY CONSIDERED AGAINST THESE UNCERTAINTIES AND RISKS WHEN EVALUATING THE BUSINESS PROSPECTS OF THE COMPANY.

FORWARD-LOOKING STATEMENTS ARE GENERALLY IDENTIFIABLE BY THE USE OF TERMS SUCH AS “BELIEVE,” “EXPECT,” “INTEND,” “ANTICIPATE,” “ESTIMATE,” “PROJECT,” “ASSUME,” “PLAN,” “PREDICT,” “FORECAST,” “IN MANAGEMENT’S OPINION,” “MANAGEMENT CONSIDERS” OR SIMILAR EXPRESSIONS.  WHEREVER SUCH PHRASES ARE USED, SUCH STATEMENTS ARE AS OF AND BASED UPON THE KNOWLEDGE OF MANAGEMENT, AT THE TIME MADE AND ARE SUBJECT TO CHANGE BY THE PASSAGE OF TIME AND/OR SUBSEQUENT EVENTS, AND ACCORDINGLY SUCH STATEMENTS ARE SUBJECT TO THE SAME RISKS AND UNCERTAINTIES NOTED ABOVE WITH RESPECT TO FORWARD-LOOKING STATEMENTS.  THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION, TO UPDATE ANY FORWARD-LOOKING STATEMENTS TO REFLECT OCCURRENCES OR UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.

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PART 1

Item 1.  Business

General

Bridge Capital Holdings (the “Company”, “we” or “us”) is a bank holding company. The Company was incorporated in the State of California on April 6, 2004 for the purpose of becoming the holding company for its subsidiary, Bridge Bank, National Association (the “Bank”). As a bank holding company, the Company is supervised by the Board of Governors of the Federal Reserve System (the “FRB”).

The Company acquired 100% of the voting shares of the Bank effective October 1, 2004 following approval of the Bank’s shareholders on May 20, 2004. Prior to becoming a subsidiary of the Company, the common stock of the Bank had been registered with the Comptroller of the Currency (the “Comptroller”) under the Securities and Exchange Act of 1934, as amended. After becoming the Bank’s holding company, the Company’s common stock was registered with the Securities and Exchange Commission. Filings by Bridge Capital Holdings are made with the SEC rather than the Comptroller and are available on the SEC’s website, www.sec.gov as well as on the Company’s website, www.bridgecapitalholdings.com.

The Bank is a national banking association chartered by the Comptroller. The Bank was organized on December 6, 2000 and commenced operations on May 14, 2001. Its headquarters office is located at 55 Almaden Boulevard, San Jose, California, 95113. It maintains one branch office in the Silicon Valley region, and seven loan production offices located throughout the U.S.

The Bank’s lending solutions include working capital lines of credit, structured finance (asset-based lending and factoring), 7(a) and 504 Small Business Administration (SBA) loans, commercial real estate loans, sustainable energy project financing, growth capital loans, equipment financing, letters of credit, and commercial credit cards. The Bank’s depository and corporate banking services include cash and treasury management solutions, interest-bearing term deposit accounts, checking accounts, ACH payment and wire solutions, fraud protection, remote deposit capture, courier services, and online banking. Additionally, the Bank’s international banking services include foreign exchange (FX payments and hedging), letters of credit, and import/export financing. The Bank is a Preferred SBA Lender and a High Plus Delegated Authority Lender for the Export-Import Bank of the United States

The Bank attracts the majority of its loans and deposits from small and middle-market companies, and emerging technology companies, located throughout the San Francisco Bay Area, where it provides banking services to businesses across various industries and sectors. Additionally, an increasingly larger portion of the Bank’s new business acquisition comes from its national network of loan production offices. The Bank reserves the right to change its business plan at any time, and no assurance can be given that, if the Bank’s proposed business plan is followed, it will prove successful.

The Bank does not offer trust services, but it will attempt to make such services available to the Bank’s customers through correspondent institutions. The deposits of the Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable limits, and the Bank is a member of the Federal Reserve System.

Deposits

The Bank offers a wide range of deposit accounts designed to attract small and medium size commercial businesses as well as business professionals and retail customers, including a complete line of checking and savings products, such as passbook savings, “Money Market Deposit” accounts which require minimum balances and frequency of withdrawal limitations, NOW accounts, and bundled accounts.

Additional deposit services include a full complement of convenience-oriented services, including remote deposit capture, direct payroll and social security deposit, post-paid bank-by-mail, and on-line banking, including on-line access to account information.  Currently, the Bank does not open accounts through the Internet.  Any plans to offer online account opening must be approved in advance by the Comptroller.  No assurance can be given that, if applied for, such approval will be obtained.

As the Bank has no automated teller machines, the Bank may refund all or a portion of the transaction charges incurred by its customers for their use of another bank’s ATM.  The majority of the Bank’s deposits are obtained from businesses located in the Bank’s primary service area.

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Lending Activities

The Bank engages in a full range of lending products designed to meet the specialized needs of its customers, including commercial lines of credit and term loans, constructions loans, and equipment loans. Additionally, the Bank extends accounts receivable, factoring and inventory financing to qualified customers.  Loans are also offered through the Small Business Administration guarantee 7(a) and 504 loan programs (described below under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition and Earning Assets—Loan Portfolio”).

The Bank finances real estate construction projects, primarily for the construction of owner occupied and 1 to 4-unit residential developments and commercial buildings.

The Bank directs its commercial lending principally toward businesses whose demands for credit fall within the Bank’s lending limit.  In the event there are customers whose commercial loan demands exceed the Bank’s lending limits, the Bank seeks to arrange for such loans on a participation basis with other financial institutions.

The Bank engages, on limited occasions, in extending banking services and credit to individual borrowers.

Business Hours

In order to attract loan and deposit business, the Bank maintains lobby hours currently between 9:00 a.m. and 5:00 p.m. Monday through Friday.

For additional information concerning the Bank, see Selected Financial Data under Item 6 on page 17.

Competition

The commercial banking business in Santa Clara County, as it is elsewhere in California, is highly competitive, and each of the major branch banking institutions operating in California has one or more offices in the Bank’s service area.  The Bank competes in the marketplace for deposits and loans, principally against these banks, independent community banks, savings and loan associations, thrift and loan companies, credit unions, mortgage banking companies, and non-bank  institutions such as mutual fund companies and investment brokerage firms that claim a portion of the market.

Larger banks may have a competitive advantage because of their higher lending limits and their access to relatively large marketing resources.  They also perform services, such as trust services, discount brokerage and insurance services, which the Bank is not authorized or prepared to offer currently. The Bank has made arrangements with its correspondent banks and with others to provide such services for its customers.  For borrowers requiring loans in excess of the Bank’s legal lending limit, the Bank has offered, and intends to offer in the future, such loans on a participating basis with its correspondent banks and with other independent banks, retaining the portion of such loans which is within its lending limit.  As of December 31, 2014, the Bank’s unsecured legal lending limit to a single borrower and such borrower’s related parties was $29.5 million based on regulatory capital of $194.1 million.

The Bank’s business is concentrated in its service area, which primarily encompasses the general Silicon Valley/Bay Area region including Santa Clara, Alameda, San Mateo, Santa Cruz, Contra Costa and San Francisco counties.  In certain lines of business the Bank has extended beyond its primary service area..

In order to compete with major financial institutions in its primary service area, the Bank uses to the fullest extent possible the flexibility that is accorded by its independent status.  This includes an emphasis on specialized services, local promotional activity, and personal contacts by the Bank’s officers, directors and employees.  The Bank also seeks to provide special services and programs for individuals in its primary service area who are employed in the professional and business fields, such as loans for equipment, furniture, and tools of the trade or expansion of practices or businesses.

Banking is a business that depends on interest rate differentials.  In general, the difference between the interest rate paid by the Bank to obtain its deposits and its other borrowings and the interest rate received by the Bank on loans extended to its customers and on securities held in the Bank’s portfolio comprises the major portion of the Bank’s earnings.

Commercial banks compete with savings and loan associations, credit unions, other financial institutions and other

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entities for funds.  For instance, yields on corporate and government debt securities and other commercial paper affect the ability of commercial banks to attract and hold deposits.  Commercial banks also compete for loans with savings and loan associations, credit unions, consumer finance companies, mortgage companies and other lending institutions.

The interest rate differentials of the Bank, and therefore its earnings, are affected not only by general economic conditions, both domestic and foreign, but also by the monetary and fiscal policies of the United States as set by statutes and as implemented by federal agencies, particularly the Federal Reserve Board.  This agency can and does implement national monetary policy, such as seeking to curb inflation and combat recession, by its open market operations in United States government securities, adjustments in the amount of interest free reserves that banks and other financial institutions are required to maintain, and adjustments to the discount rates applicable to borrowing by banks from the Federal Reserve Board (the “FRB”).  These activities influence the growth of bank loans, investments and deposits and also affect interest rates charged on loans and paid on deposits.

Supervision and Regulation

General

The Company and the Bank are subject to extensive regulation under both federal and state law.  This regulation is intended primarily for the protection of depositors, the Deposit Insurance Fund, and the banking system as a whole rather than the Company’s shareholders.  Set forth below is a summary description of some of the significant laws and regulations applicable to the Company and the Bank.  The description is qualified in its entirety by reference to the applicable laws and regulations.

Bank Holding Company Act

The Company is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”).  As a bank holding company, the Company is subject to examination and supervision by the FRB and is subject to limitations on the kinds of businesses in which it can engage directly or through subsidiaries.  While the Company may manage or control banks, it is generally prohibited from acquiring direct or indirect ownership or control of more than five percent of any class of voting shares of an entity engaged in non-banking activities unless the FRB finds such activities to be “so closely related to banking” as to be deemed “a proper incident thereto” within the meaning of the BHCA.  As a bank holding company, the Company may not acquire more than five percent of the voting shares of any domestic bank without the prior approval of the FRB. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), a bank holding company is required to serve as a source of financial strength for its subsidiary banks.

The BHCA includes minimum capital requirements for bank holding companies.  See the section titled “Regulation and Supervision — Regulatory Capital Requirements”.  The BHCA also authorizes the FRB to regulate aspects of bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt and require prior approval to purchase or redeem securities in certain situations.  Under certain conditions, the FRB may conclude that certain actions of a bank holding company, such as the payment of a cash dividend, would constitute an unsafe and unsound banking practice.

Change in Bank Control

The BHCA and the Change in Bank Control Act of 1978, as amended, together with regulations of the FRB and the Comptroller, require that, depending on the particular circumstances, either FRB approval must be obtained or notice must be furnished to the Comptroller and not disapproved prior to any person or company acquiring “control” of a company that controls a bank, such as the Company, or a national bank, such as the Bank, subject to exemptions for some transactions.  Control is conclusively presumed to exist if an individual or company (i) acquires 25% or more of any class of voting securities of the bank or (ii) has the direct or indirect power to direct or cause the direction of the management and policies of the Bank, whether through ownership of voting securities, by contract or otherwise; provided that no individual will be deemed to control the bank solely on account of being director, officer or employee of the Bank.  Control is presumed to exist if a person acquires 10% or more but less than 25% of any class of voting securities and either the company has registered securities under Section 12 of the Exchange Act or no other person will own a greater percentage of that class of voting securities immediately after the transaction.

Securities Regulation

The Company’s common stock is registered under the Securities Exchange Act of 1934, as amended (“Exchange Act”).  The Exchange Act and the SEC’s rules require the Company to file periodic and current reports as well as proxy

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statements with the SEC.  The Company electronically files the following reports with the SEC: Form 10-K (Annual Report), Form 10-Q (Quarterly Report), Form 8-K (Current Report), and Schedule 14A (Information Required in Proxy Statement).  The Company may prepare additional filings as required.  The SEC maintains an Internet site, http://www.sec.gov, at which all forms filed electronically may be accessed.  The Company’s filings are also available on its website at http://www.bridgecapitalholdings.com, which is not part of this Annual Report.  Because the Company’s common stock is traded on the Nasdaq Global Select Market, it is also subject to Nasdaq’s rules for listed companies.

The Company is also subject to the accounting oversight and corporate governance requirements of the Sarbanes-Oxley Act of 2002, including, among other things, required executive certification of financial presentations, requirements for board audit committees and their members, and disclosure of controls and procedures and internal control over financial reporting.

Regulation of the Bank

The Bank is regulated and supervised by the Comptroller and is subject to periodic examination by the Comptroller.  Deposits of the Bank’s customers are insured by the FDIC up to the maximum limit of $250,000.  As a national bank, the Bank is a member of the Federal Reserve System and is also subject to the regulations of the FRB.  As an FDIC- insured bank, the Bank is subject to certain regulations of the FDIC.

The regulations of the Comptroller, the FDIC and the FRB govern most aspects of the Bank’s business and operations, including but not limited to limiting the nature and amount of investments and loans which may be made, restricting the payment of dividends and regulating bank expansion and bank activities. The Bank also is subject to the requirements and restrictions of various consumer laws and regulations.

The Comptroller can pursue an enforcement action against the Bank for unsafe and unsound practices in conducting its business, or for violations of any law, rule or regulation or provision, any consent order with any agency, any condition imposed in writing by the agency, or any written agreement with the agency.  During periods of economic stress, regulatory oversight can be expected to increase and regulatory agencies become more aggressive in responding to concerns and trends identified in examinations.  Enforcement actions may include the imposition of a conservator or receiver, cease-and-desist orders and written agreements, the termination of insurance of deposits, the imposition of civil money penalties and removal and prohibition orders against institution-affiliated parties.  See “Supervision and Regulation — Potential Enforcement Actions and Supervisory Agreements.”

In addition to this regulation and supervision by bank regulatory agencies, banks must be prepared for judicial scrutiny of their lending and collection practices.  For example, some banks have been found liable for exercising remedies which their loan documents authorized upon the borrower’s default.  This has occurred in cases where the exercise of those remedies was determined to be inconsistent with the previous course of dealing between the bank and the borrower.  As a result, banks must exercise caution, incur expense and face exposure to liability when dealing with delinquent loans.

Capital Adequacy Requirements

Federal regulations establish guidelines for calculating minimum “risk-adjusted” capital ratios.  These guidelines, which apply to banks and bank holding companies, establish a systematic approach of assigning risk weights to bank assets and commitments, making capital requirements more sensitive to differences in risk profiles among banking organizations.  For these purposes, “Tier 1” capital consists of common equity, non-cumulative perpetual preferred stock and minority interests in the equity accounts of consolidated subsidiaries and excludes goodwill.  “Tier 2” capital consists of cumulative perpetual preferred stock, limited-life preferred stock, mandatory convertible securities, subordinated debt and (subject to a limit of 1.25% of risk-weighted assets) general loan loss reserves.  In calculating the relevant ratio, a bank’s assets and off-balance sheet commitments are risk-weighted; thus, for example, generally loans are included at 100% of their book value while assets considered less risky are included at a percentage of their book value (20%, for example, for inter-bank obligations and U.S. Government Agency securities, and 0% for vault cash and U.S. Government securities).  Under these regulations, to be considered adequately capitalized, banks and bank holding companies are required to maintain a risk-based capital ratio of 8%, with Tier 1 risk-based capital (primarily shareholders’ equity) constituting at least 50% of total qualifying capital or 4% of risk-weighted assets.

The federal banking agencies, including the Comptroller, have adopted regulations implementing a system of prompt corrective action under the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”).  The regulations establish five capital categories with the following characteristics:  (1) “Well capitalized,” consisting of institutions with a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater and a leverage ratio

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of 5.0% or greater and which are not operating under an order, written agreement, capital directive or prompt corrective action directive; (2) “Adequately capitalized,” consisting of institutions with a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital of 4.0% or greater and a leverage ratio of 4.0% or greater and which do not meet the definition of a “well capitalized” institution; (3) “Undercapitalized,” consisting of institutions with a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0%, or a leverage ratio of less than 4.0%; (4) “Significantly undercapitalized,” consisting of institutions with a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 3.0%, or a leverage ratio of less than 3.0%; and (5) “Critically undercapitalized,” consisting of institutions with a ratio of tangible equity to total assets that is equal to or less than 2.0%.  The prompt correction action standards changed when the new Basel III capital ratios became effective on January 1, 2015.  Under the new standards, in order to be considered well-capitalized, the Bank is required to meet the new common equity Tier 1 ratio of 6.5%, an increased Tier 1 ratio of 8% (increased from 6%), a total capital ratio of 10% (unchanged) and a leverage ratio of 5% (changed from 4%).  See “—Basel Accord and the New Capital Standards.”  Regulators generally expect banks and bank holding companies to maintain risk-based capital ratios above these minimums.

At December 31, 2014, the Company and the Bank have capital ratios that place them in the “well capitalized” category under the standards in effect on that date. See Note 16 to the Consolidated Financial Statements included under Item 8 of this Annual Report.

An institution that is less than well-capitalized cannot accept brokered deposits without the consent of the FDIC.  At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits and prohibitions on payment of dividends.  The appropriate federal banking agency, after notice and an opportunity for a hearing, is authorized to treat a well-capitalized, adequately capitalized or undercapitalized insured depository institution as if it had a lower capital-based classification if it is in an unsafe and unsound condition or engaging in an unsafe and unsound practice.  Thus, an adequately capitalized institution can be subjected to the restrictions (described below) that are imposed on undercapitalized institutions (provided that a capital restoration plan cannot be required of the institution), and an undercapitalized institution can be subjected to the restrictions (also described below) applicable to significantly undercapitalized institutions.

An undercapitalized institution is required to submit an acceptable capital restoration plan to its primary federal bank regulatory agency.  The banking agency may not accept a capital restoration plan unless the agency determines, among other things, that the plan “is based on realistic assumptions, and is likely to succeed in restoring the institution’s capital” and “would not appreciably increase the risk . . . to which the institution is exposed.”  The FDIC is required, by regulation or order, to restrict the activities of critically undercapitalized institutions.

Basel Accord and the New Capital Standards

In 2010 and 2011, the International Basel Committee on Banking Supervision (the “Basel Committee”), a committee of central banks and bank supervisors and regulators from the major industrialized countries, finalized proposed reforms on capital and liquidity, generally referred to as Basel III, in response to the worldwide economic downturn.

In July, 2013, the FRB and other federal banking agencies approved final rules implementing Basel III that apply to both the Company and the Bank.  The final rules increased the minimum requirements for both the levels and quality of capital of banking organizations, made selected changes to the calculation of risk-weighted assets and adjusted prompt corrective action thresholds.  The new standards, which became effective on January 1, 2015, impose more restrictive eligibility requirements for Tier 1 and Tier 2 capital, create a new minimum Tier 1 common equity ratio of 4.5%; increase the minimum Tier 1 capital ratio to 6.0%; retain the minimum total capital to risk-weighted assets ratio requirement of 8% and include a minimum leverage ratio of 4.0% for all banking organizations.  The Company and the Bank would have met the requirements of these new capital rules as of December 31, 2014 if they were in effect on that date.  The final rules also include a new additional capital conservation buffer of 2.5% of risk-weighted assets over each of the required capital ratios, to be phased in from 2016 to 2019, and which must be met to avoid limitations on the ability to pay dividends, repurchase shares or pay discretionary bonuses.  The rules also introduce a countercyclical capital buffer of up to 2.5% during periods of excessive credit growth for larger and more complex institutions.

Deposit Insurance Coverage and Premiums

The FDIC insures the Bank’s deposits through the Deposit Insurance Fund (the “DIF”) up to prescribed statutory limits, currently $250,000 per depositor per institution.  The DIF is funded primarily by FDIC assessments paid by each DIF member institution.  A depository institution’s FDIC insurance premium assessment rate is based on its asset and capital levels and is adjusted for risk, supervisory ratings and other factors.  In addition, FDIC insured institutions are

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required to pay a Financing Corporation assessment, in order to fund the interest on bonds issued to resolve thrift failures in the 1980s.  These assessments, which may be revised based on the level of deposits, will continue until the bonds mature in the years 2017 through 2019.

The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.  It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital.

Potential Enforcement Actions and Supervisory Agreements

Under federal law, national banks, their holding companies and their respective institution-affiliated parties may be the subject of potential enforcement actions by the bank regulatory agencies for unsafe and unsound practices in conducting their businesses, or for violations of any law, rule or regulation or provision, any consent order with any agency, any condition imposed in writing by the agency or any written agreement with the agency.  During periods of economic stress, regulatory oversight can be expected to increase and regulatory agencies may become more aggressive in responding to concerns and trends identified in examinations.  One result of this heightened activity is an increase in the issuance of enforcement actions.  Enforcement actions may include the imposition of a conservator or receiver, cease-and-desist orders and written agreements, the termination of insurance of deposits, the imposition of civil money penalties and removal and prohibition orders against institution-affiliated parties.

Payment of Dividends

The Company. Historically, the Company has not paid dividends but has retained earnings to support growth.  The ability of the Company to make dividend payments is subject to statutory and regulatory restrictions.  Under California law, a California corporation such as the Company may make a distribution to its shareholders if the corporation’s retained earnings equal at least the amount of the proposed distribution.  In the event sufficient retained earnings are not available for the proposed distribution, a California corporation may nevertheless make a distribution to its shareholders if, giving effect to the distribution, the value of the corporation’s assets would equal or exceed the value of its liabilities plus the amount of shareholder preferences, if any. It is the FRB’s policy that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.

The primary source of funds for payment of any dividends by the Company to its shareholders will be the receipt of dividends and management fees from the Bank.

The Bank. The Board of Directors of a national bank may declare the payment of dividends depending upon the earnings, financial condition and cash needs of the bank and general business conditions.  A national bank may not pay dividends from its capital.  All dividends must be paid out of net profits then on hand, after deducting losses and bad debts.  The approval of the Comptroller is required for the payment of dividends if the total of all dividends declared by the bank in any calendar year would exceed the total of its net profits of that year combined with its retained net profits of the two preceding years, less any required transfers to surplus or a fund for the retirement of any preferred stock.

In addition to the above requirements, guidelines adopted by the Comptroller set forth factors which are to be considered by a national bank in determining the payment of dividends.  A national bank, in assessing the payment of dividends, is to evaluate the bank’s capital position, its maintenance of an adequate allowance for loan and lease losses, and the need to revise or develop a comprehensive capital plan.

The Comptroller also has broad authority to prohibit a national bank from engaging in banking practices which it considers to be unsafe or unsound.  It is possible, depending upon the financial condition of the national bank in question and other factors, that the Comptroller may assert that the payment of dividends or other payments by a bank is considered an unsafe or unsound banking practice and therefore implement corrective action to address such a practice.

Accordingly, the future payment of cash dividends by the Company will not only depend upon the Bank’s earnings during any fiscal period but will also depend upon the assessment of its Board of Directors of capital requirements and other factors, including dividend guidelines and the maintenance of an adequate allowance for loan and lease losses.

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Community Reinvestment Act

Under to the Community Reinvestment Act of 1977 (the “CRA”), the federal regulatory agencies that oversee the banking industry are required to use their authority to encourage financial institutions to help meet the credit needs of the local communities in which such institutions are chartered, consistent with safe and sound banking practices.  When conducting an examination of a financial institution such as the Bank, the agencies assess the institution’s record of meeting the credit needs of its entire community, including low- and moderate- income neighborhoods.  This record is taken into account in an agency’s evaluation of an application for creation or relocation of domestic branches or for merger with another institution.  Failure to address the credit needs of a bank’s community may also result in the imposition of certain other regulatory sanctions, including a requirement that corrective action be taken.

Transactions with Affiliates

Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W limit transactions between a bank and its affiliates.  The statute and regulation impose quantitative and qualitative limits on the ability of a bank to extend credit to, or engage in certain other transactions with, an affiliate (and a non-affiliate if an affiliate benefits from the transaction).  However, certain transactions that generally do not expose a bank to undue risk are exempted from coverage under Regulation W.

Directors, officers and principal shareholders of the Bank, and the companies with which they are associated, may have banking transactions with the Bank in the ordinary course of business.  Any loans and commitments to loan included in these transactions must be made in compliance with the requirements of applicable law, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons of similar creditworthiness, and on terms not involving more than the normal risk of collectability or presenting other unfavorable features.

Tying Arrangements

A bank is prohibited from tie-in arrangements in connection with any extension of credit, sale or lease of property or furnishing of services.  For example, with some exceptions, a bank may not condition an extension of credit on a promise by its customer to obtain other services provided by it, its holding company or other subsidiaries (if any), or on a promise by its customer not to obtain other services from a competitor.

Anti-Money Laundering Laws

A series of banking laws and regulations beginning with the bank Secrecy Act in 1970 requires banks to prevent, detect, and report illicit or illegal financial activities to the federal government to prevent money laundering, international drug trafficking, and terrorism. Under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, financial institutions are subject to prohibitions against specified financial transactions and account relationships, requirements regarding the Customer Identification Program, as well as enhanced due diligence and “know your customer” standards in their dealings with high risk customers, foreign financial institutions, and foreign individuals and entities.

Privacy and Data Security.

The Gramm-Leach Bliley Act (“GLBA”) of 1999 imposes requirements on financial institutions with respect to consumer privacy.  The GLBA generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to consumers annually.  The GLBA also directs federal regulators, including the FDIC, to prescribe standards for the security of consumer information. The Bank is subject to such standards, as well as standards for notifying consumers in the event of a security breach. The Bank is required to have an information security program to safeguard the confidentiality and security of customer information and to ensure proper disposal of information that is no longer needed.  Customers must be notified when unauthorized disclosure involves sensitive customer information that may be misused.

Consumer Laws and Regulations

The Bank must also comply with consumer laws and regulations that are designed to protect consumers in transactions with banks.  While the list is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act and the Fair Credit Reporting Act, among others.  These laws and regulations

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mandate disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans.  The Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of its ongoing regulatory compliance and customer relations efforts.

The Dodd-Frank Act created a new, independent federal agency called the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including laws governing residential mortgages.  The CFPB has authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products.   The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets.  Smaller institutions are be subject to rules promulgated by the CFPB but will continue to be examined and supervised by federal banking regulators for consumer compliance purposes.

Exposure to and Management of Risk

The federal banking agencies examine banks and bank holding companies with respect to their exposure to and management of different categories of risk.  Categories of risk identified by the agencies include legal risk, operational risk, market risk, credit risk, interest rate risk, price risk, foreign exchange risk, transaction risk, compliance risk, strategic risk, liquidity risk, and reputation risk.  This examination approach causes bank regulators to focus on risk management procedures, rather than simply examining every asset and transaction.  This approach supplements rather than replaces existing rating systems based on the evaluation of an institution’s capital, assets, management, earnings and liquidity.

Safety and Soundness Standards

Federal banking regulators have adopted guidelines prescribing standards for safety and soundness.  The guidelines create standards for a wide range of operational and managerial matters including (a) internal controls, information systems, and internal audit systems; (b) loan documentation; (c) credit underwriting; (d) interest rate exposure; (e) asset growth; (f) compensation and benefits; and (g) asset quality and earnings.  Although meant to be flexible, an institution that falls short of the guidelines’ standards may be requested to submit a compliance plan or be subjected to regulatory enforcement actions.

Impact of Government Monetary Policy

The earnings of the Bank are and will be affected by the policies of regulatory authorities, including the FRB.  An important function of the FRB is to regulate the national supply of bank credit.  Among the instruments used to implement these objectives are open market operations in U.S. Government securities, changes in reserve requirements against bank deposits, and changes in the discount rate which banks pay on advances from the Federal Reserve System.  These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may also affect interest rates on loans or interest rates paid for deposits.  The monetary policies of the FRB have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.  The effect, if any, of such policies upon the future business earnings of the Bank cannot be predicted.

Legislation and Proposed Changes

From time to time, legislation is enacted which has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial institutions.  Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies and other financial institutions are frequently made in Congress and before various bank regulatory agencies.  Provisions of the Dodd-Frank Act continue to take effect and the regulatory agencies continue to adopted enacting rules and regulations that are likely to significantly impact the Company’s operations and compliance costs.  No prediction can be made as to the likelihood of any major changes or the impact that new laws or regulations might have on the Company or the Bank.

Conclusion

It is impossible to predict with any certainty the competitive impact the laws and regulations described above will have on commercial banking in general and on the business of the Company in particular, or to predict whether or when any of the proposed legislation and regulations described above will be adopted.  It is anticipated that banking will continue to be a highly regulated industry.  Additionally, there has been a continued historical decrease in the distinction between the services offered by depository institutions and other businesses offering financial services, and the trend

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toward nationwide interstate banking is expected to continue.  As a result of these factors, it is anticipated banks will experience increased competition for deposits and loans and, possibly, further increases in their cost of doing business.

Item 1A.  Risk Factors

RISK FACTORS

Readers and prospective investors in our securities should carefully consider the following risk factors as well as the other information contained or incorporated by reference in this report.

The risks and uncertainties described below are not the only ones facing us.  Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations. This report is qualified in its entirety by these risk factors.

If any of the following risks actually occur, the Company’s financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of the Company’s securities could decline significantly, and you could lose all or part of your investment.

General Business Risks

We may suffer losses in our loan portfolio.

In our business as a lender, we face the risk that borrowers may fail to pay their loans when due.  If borrower defaults cause large aggregate losses, it could have a material adverse impact on our business, profitability and financial condition.

We attempt to mitigate the risks inherent in extending credit by adhering to specific underwriting practices, managed by credit professionals.  Although we believe that our underwriting criteria is appropriate for the various kinds of loans we fund, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in the Bank’s allowance for loan losses.  If our underwriting practices prove to be ineffective, we may incur losses in our loan portfolio, which could have a material and adverse effect on our financial condition and results of operations.

Our reserves for loan losses may not be adequate.

In accordance with generally accepted accounting principles in the United States, we maintain an allowance for loan losses to provide for loan defaults and non-performance which we refer to the allowance for loan losses.  Our allowance for loan losses may not be adequate to address our actual loan losses, and future provisions for loan losses could materially and adversely affect our operating results.  We have established an evaluation process designed to determine the adequacy of our allowance for loan losses.  While this process uses historical and other objective information, the classification of loans and the forecasts and establishment of loan losses are dependent to a great extent on our subjective assessment based upon our experience and judgment.  We can provide no assurance that our allowance for loan losses will be adequate to absorb actual losses in the future or that we will not be required to increase this allowance.

In addition, bank regulatory agencies, as an integral part of their examination process, review our loans and allowance for loan losses.  While we believe that our allowance for loan losses is currently adequate to cover potential losses, we cannot guarantee that future increases to the allowance for loan losses may not be required by regulators or other third party loan review or financial audits.

Poor economic conditions in the Northern California real estate market may cause us to suffer higher default rates on our loans and decreased value of the assets we hold as collateral.

The majority of our assets and deposits were generated in Northern California.  At December 31, 2014, approximately 30% of our loan portfolio was secured by real property in Northern California. During 2014, the real estate market in Northern California continued to stabilize and improve as evidenced by increasing prices, increased transaction volume and decreased foreclosure rates.  These improvements follow an extended period of deterioration and there is no certainty that improvements will continue, or that the region’s real estate market will not deteriorate in the future.  A deterioration may result in an increase in the level of our nonperforming loans, particularly commercial real estate loans. When real estate prices decline, the value of real estate collateral securing our loans is reduced. As a result, we may experience greater charge-offs and, similarly, our ability to recover on defaulted loans by foreclosing and selling

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the real estate collateral may be diminished and, as a result, we are more likely to suffer losses on defaulted loans. Therefore, if there is a downturn in the Northern California real estate market or the region’s economy generally, we could experience reduced income, increased expenses and less cash available for lending and other activities, which could have a material and adverse effect on our financial condition and results of operations.

We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects.

Competition for qualified employees in the banking industry is intense, and there are limited numbers of qualified persons with knowledge of, and experience in, the California community banking industry. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing and business development and technical personnel, and upon the continued contributions of our management and personnel.  If we fail to attract and retain the necessary personnel, our financial condition and results of operations may be materially and adversely affected.

We face limits on our ability to lend and the limitation may increase.

Our legal lending limit to a single borrower and such borrower’s related parties as of December 31, 2014 was approximately $29.5 million. Accordingly, the size of the loans which we can offer to potential customers is less than the size of loans which many of our competitors with larger lending limits can offer.  Our lending limit may affect our ability to seek relationships with larger and more established businesses.  We cannot be assured of any success in attracting or retaining customers seeking larger loans or that we can engage in participations of those loans on terms favorable to us. Moreover, to the extent that we incur losses and do not obtain additional capital, our lending limit, which depends upon the amount of our capital, will decrease, which could have a material and adverse effect on our financial condition and results of operations.

Market and Interest Rate Risks

Changes in interest rates could reduce income and cash flow.

Our income and cash flow depend to a great extent on the difference between the interest earned on loans and investment securities, and the interest paid on deposits and other borrowings (the “interest rate spread”). We cannot control or prevent changes in the level of interest rates.  Interest rates fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the FRB.  Changes in monetary policy, including changes in interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits and the rates received on loans and investment securities and paid on deposits and other liabilities.  See “Item 7a Quantitative and Qualitative Disclosures About Market Risk.”  Historically low market interest rates have caused our interest rate spread to decline significantly, which reduces potential revenue and net income.  Sustained low levels of market interest rates will likely continue to put pressure on our profitability.

An unanticipated rapid decrease or increase in interest rates could have an adverse effect on our interest rate spread and therefore on the level of net interest income.  For example, a rapid increase in interest rates in the future could result in our interest expense increasing faster than our interest income because of fixed rate loans or loans with interest rate caps and longer-term investment securities  Although we take measures to limit interest rate risk, a material change in our interest rate spread could have a material adverse effect on our business, profitability and financial position.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business.  An inability to raise funds through deposits, borrowings, capital offerings and other sources could have a substantial negative effect on our liquidity.  Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that impact us specifically or the financial services industry in general.  Factors that could detrimentally impact our access to liquidity sources include a reduction in the level of business activity due to a market downturn or adverse regulatory action against us, or a decrease in depositor or investor confidence in us.  Further, as a business bank, a significant portion of our deposits are raised from companies in amounts that exceed levels covered by FDIC insurance.  In addition, our ability to borrow could also be impaired by factors that are not specific to us, such as the severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole as the recent turmoil faced by banking in the domestic and worldwide credit markets deteriorates.

Because a substantial portion of our customers are small and middle-market technology companies, our earnings will be particularly sensitive to market conditions in the technology sector, particularly in the Silicon Valley region of Northern California.

A substantial portion of our customers are technology companies, including life sciences companies. Technology loans represented approximately 28% of our loan portfolio at December 31, 2014. The strength of technology sector has historically fluctuated significantly and is subject to a variety of factors that we do not control, such as the markets for initial public offerings, mergers and acquisitions and venture capital funding. A weakening in the technology sector could lead to higher loan default rates, a reduced demand for loans or both. In addition, we hold a portfolio of warrants from non-public technology and life science companies obtained when we originate loans to these companies. We record these warrants at fair value on a recurring basis. The values of the warrants and the potential to realize income from the warrants depends on the health of the technology sector, in particular the market for initial public offerings and mergers and acquisition. For all of these reasons, unfavorable market conditions in the technology sector could have a negative impact on our earnings and could cause us to incur losses.

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Risks Related to the Nature and Geographical Location of our Business

Our operations are concentrated geographically in California, and poor economic conditions in California may cause us to incur losses.

A majority of  our business is located in California.  Our financial condition and operating results will be subject to changes in economic conditions in California.  A significant and prolonged downturn in the California economy could adversely affect financial institutions doing business in California, such as the Company. Economic conditions in California are subject to various uncertainties at this time, including the California state government’s budgetary difficulties and the continuing drought.  The Company will be subject to changes in economic conditions. We can provide no assurance that conditions in the California economy will not deteriorate in the future and that such deterioration will not adversely affect us.

The markets in which we operate are subject to the risk of earthquakes and other natural disasters.

Most of our properties are located in California.  Also, most of the real and personal properties securing our loans are located in California.  California is a state which is experiencing a record drought and its prone to earthquakes, brush fires, flooding and other natural disasters. In addition to possibly sustaining damage to its own properties, if there is a major earthquake, flood or other natural disaster, we face the risk that many of our borrowers may experience uninsured property losses, or sustained job interruption and/or loss which may materially impair their ability to meet the terms of their loan obligations.  Although we do not engage in agricultural lending, the drought in California could have an impact on the State’s economy and our customers.  Therefore, the continuing drought or a  major earthquake, flood or other natural disaster in California could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Substantial competition in the California banking market could adversely affect us.

Banking is a highly competitive business. We compete actively for loan, deposit, and other financial services business primarily in California.  Our competitors include a large number of state and national banks, thrift institutions and credit unions, as well as many financial and non-financial firms that offer services similar to those offered by us. Other competitors include large financial institutions that have substantial capital, technology and marketing resources. Such large financial institutions may have greater access to capital at a lower cost than us, which may adversely affect our ability to compete effectively.

Regulatory Risks

Restrictions on dividends and other distributions could limit amounts that the Bank is able to pay to the Company.

Various statutory provisions restrict the amount of dividends that the Bank can pay the Company without regulatory approval. In addition, if the Bank or any other subsidiary of ours were to liquidate, its creditors will be entitled to receive distributions from the assets of that subsidiary to satisfy their claims against it before the Company, as a holder of an equity interest in the subsidiary, will be entitled to receive any of the assets of the subsidiary.

Adverse effects or changes in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.

We are subject to significant federal and state regulation and supervision, which is primarily for the benefit and protection of our customers and not for the benefit of investors. In the past, our business has been increasingly materially affected by these regulations. This trend is likely to continue in the future. Laws, regulations or policies, including accounting standards and interpretations currently affecting us and our subsidiaries, may change at any time. Regulatory authorities may also change their interpretation of these statutes and regulations.  During periods of economic stress, regulatory oversight can be expected to increase and regulatory agencies become more aggressive in responding to concerns and trends identified in examinations.  Such a regulatory response may effect, among other things, growth rates, business mix,  capital levels and payment of dividends  Therefore, our business may be adversely affected by any future changes in laws, regulations, policies or interpretations or regulatory approaches to compliance and enforcement, including legislative and regulatory reactions to the recent credit crisis, acts of terrorism, and major U.S. corporate bankruptcies and reports of accounting irregularities at U.S. public companies.

As noted above, the Dodd-Frank Act was enacted in July of 2010.  The Dodd-Frank Act mandates significantly increased supervisory activities and many new studies and regulations.  We cannot predict what form additional regulations required by the Dodd-Frank Act might take or whether and when they could become effective.

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Additionally, our business is affected significantly by the fiscal and monetary policies of the federal government and its agencies. We are particularly affected by the policies of the FRB, which regulates the supply of money and credit in the U.S.  Among the instruments of monetary policy available to the FRB are (a) conducting open market operations in U.S. government securities, (b) changing the discount rates of borrowings by depository institutions, and (c) imposing or changing reserve requirements against certain borrowings by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the FRB may have a material effect on our business, results of operations and financial condition.

See “Supervision and Regulation — Legislation and Proposed Changes” for additional discussion regarding adverse effects of, or changes in, banking or other laws and regulations and governmental fiscal or monetary policies.

Systems, Accounting and Internal Control Risks

The accuracy of our judgments and estimates about financial and accounting matters will impact operating results and financial condition.

We make certain estimates and judgments in preparing the financial statements.  The quality and accuracy of those estimates and judgments will impact our operating results and financial condition.  See “Critical Accounting Policies and Estimates” in this report and the information referred to in that discussion.

Our information systems may experience an interruption or breach in security.

We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management and systems.  We cannot assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately corrected.  The occurrence of any such failures, interruptions or security breaches could damage our reputation, result in a loss of customer business, subject us to heightened regulatory scrutiny, or expose us to litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Our controls and procedures may fail or be circumvented.

Our management regularly reviews and updates our internal control over financial reporting, disclosure controls and procedures, and corporate governance policies and procedures.  Any system of controls and procedures, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.  Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

The Company’s principal executive office and a full service banking office are located at 55 Almaden Boulevard in San Jose, California.  The office consists of approximately four floors of an eight-story office building.   In September of 2013, the Company terminated two existing leases with its landlord for these premises and executed a new lease which commenced on January 1, 2014, for 120 months ending on December 31, 2023. The lease provides for an additional 20,000 square feet on an additional floor, for a total of 69,550 square feet.  The initial base rent is $163,442, increasing 3% each anniversary date thereafter.  The foregoing description is qualified by reference to the lease agreement dated September 10, 2013 and filed as Exhibit 10.1 to this Report.

In addition, the Company operates loan production offices in San Francisco, Palo Alto, Pleasanton and Newport Beach, California, Dallas, Texas, Reston, Virginia and Boston, Massachusetts.

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Item 3.  Legal Proceedings

The Company is not a defendant in any material pending legal proceedings and no such proceedings are known to be contemplated.  No director, officer, affiliate, more than 5.0% shareholder of the Company or any associate of these persons is a party adverse to the Company or has a material interest adverse to the Company in any material legal proceeding.

Item 4.  Mine Safety Disclosures

Not applicable.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Stock trades on the Nasdaq Capital Market under the symbol “BBNK”.    The following table summarizes those trades of which the Company has knowledge, setting forth the high and low sales prices for the periods indicated.

(1) Prices represent the actual trading history on the Nasdaq Capital Market.  Additionally, since trading in the Company’s common stock is limited, the range of prices stated is not necessarily representative of prices which would result from a more active market.

The Company had 1,532 common shareholders of record as of December 31, 2014.

The Company’s shareholders are entitled to receive dividends, when and as declared by its Board of Directors, out of funds legally available, subject to statutory, regulatory, and contractual restrictions.  See “Supervision and Regulation — Payment of Dividends” for additional discussion regarding dividends.  A California corporation such as Bridge Capital Holdings generally may make a distribution to its shareholders if the corporation’s retained earnings equal at least the amount of the proposed distribution, or, alternatively, to the extent that its assets exceed its liabilities plus shareholder preferences, if any.

In a policy statement, the FRB has advised bank holding companies that it believes that payment of cash dividends in excess of current earnings from operations is inappropriate and may be cause for supervisory action.   Additionally, the Dodd-Frank Act’s requirement that holding companies are expected to provide a source of managerial and financial strength to their subsidiary banks potentially restricts a bank holding company’s ability to pay dividends.

The Company has not declared dividends on its common stock since inception of the Bank’s existence.  In the future, the Company may consider cash and stock dividends, subject to the restrictions on the payment of cash dividends as described above, depending upon the level of earnings, management’s assessment of future capital needs and other factors considered by the Board of Directors.

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The following chart reflects the total return performance of the Company’s common stock for the years ended December 31, 2014, 2013, 2012, 2011, and 2010.

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Item 6.  Selected Financial Data

The following table presents certain consolidated financial information concerning the business of the Company. This information should be read in conjunction with the Financial Statements and the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere herein.

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Item  7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition to the historical information, this annual report contains certain forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and which are subject to the “Safe Harbor” created by those sections.   The reader of this annual report should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome.  The Company’s actual results could differ materially from those suggested by such forward-looking statements.  Such risks and uncertainties include, among others, (1) competitive pressure in the banking industry increases significantly; (2) changes in interest rate environment; (3) general economic conditions; either nationally or regionally are less favorable than expected, resulting in, among other things, a deterioration in credit quality; (4) changes in the regulatory environment; (5) changes in business conditions and inflation; (6) costs and expenses of complying with the internal control provisions of the Sarbanes-Oxley Act and our degree of success in achieving compliance; (7) changes in securities markets; (8) future credit loss experience; (9) civil disturbances of terrorist threats or acts, or apprehension about possible future occurrences of acts of this type; (10) the involvement of the United States in war or other hostilities; and (11) the matters discussed in the report under “Item 1A — Risk Factors”.  Therefore, the information in this annual report should be carefully considered when evaluating the business prospects of the Company.

Critical Accounting Policies

Our accounting policies are integral to understanding the results reported. Accounting policies are described in detail in Note 1 to the Consolidated Financial Statements. Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of our current accounting policies involving significant management valuation judgments.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general reserves.  Specific reserves primarily relate to loans that are individually classified as impaired, but may also relate to loans that in management’s opinion exhibit negative credit characteristics or trends suggesting potential future loss exposure greater than historical loss experience would suggest. It is currently the Company’s practice to immediately charge-off any identified financial loss pertaining to impaired loans when management believes the uncollectibility of the loan is confirmed, therefore specific reserves are uncommon.  A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Loans, for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are generally considered troubled debt restructurings and classified as impaired.

Generally Accepted Accounting Principles specify that if a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.  Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.  However, it is currently the Company’s practice to immediately charge-off any identified financial loss pertaining to impaired loans when management believes the uncollectibility of the loans has been confirmed.  See Note 4 to the financial statements for additional information on impaired loans.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using an appropriate discount rate at inception.  If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral.  For troubled

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debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.  See Note 4 to the financial statements for additional information on troubled debt restructurings.

General reserves cover non-impaired loans and are based on historical loss rates for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; concentrations of credit and the effect of other external factors such as competition and legal and regulatory requirements.

Portfolio segments identified by the Company include commercial, real estate construction, land, real estate other, factoring and asset-based lending, SBA, and consumer loans.  Relevant risk characteristics for these portfolio segments generally include debt service coverage, loan-to-value ratios and financial performance on non-consumer loans and credit scores, debt-to income, collateral type and loan-to-value ratios for consumer loans.

Sale of SBA Loans

The Company has the ability and the intent to sell all or a portion of certain SBA loans in the loan portfolio and, as such, carries the saleable portion of these loans at the lower of aggregate cost or fair value.  At December 31, 2014 and December 31, 2013, the fair value of SBA loans exceeded aggregate cost and therefore SBA loans were carried at aggregate cost.

In calculating gain on the sale of SBA loans, the Bank performs an allocation based on the relative fair values of the sold portion and retained portions of the loan.  The Company assumptions are validated by reference to external market information.

Investment Securities

Our securities are classified as either available-for-sale, held-to-maturity or trading securities. The fair value of most securities classified as available-for-sale or trading securities, are based on quoted market prices. If quoted market prices are not available, fair values are extrapolated from the quoted prices of similar instruments. Held-to maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts.

Supplemental Employee Retirement Plan

The Company has entered into supplemental employee retirement agreements with certain executive and senior officers.  The measurement of the liability under these agreements includes estimates involving life expectancy, length of time before retirement, and expected benefit levels.  Should these estimates prove materially wrong, we could incur additional or reduced expense to provide the benefits.

Deferred Tax Assets

Our deferred tax assets are explained in Note 8 to the Consolidated Financial Statements. The Company has sufficient taxable income from current and prior periods to support our position that the benefit of our deferred tax assets will be realized.  As such, we have provided no valuation allowance against our deferred tax assets.

Executive Summary

The Company reported net operating income of $17.6 million for the year ended December 31, 2014 representing an increase of $2.9 million, compared to net income of $14.7 million for the same period one year ago.  For the year ended December 31, 2014, the Company reported earnings per diluted share of $1.13 compared to $0.97 for the year ended December 31, 2013. For the year ended December 31, 2012, the Company reported net operating income of $13.8 million and earnings per diluted share of $0.92.

For the year ended December 31, 2014, the Company’s return on average assets and return on average equity were

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1.07% and 10.06%, respectively, and compared to 1.03% and 9.47%, respectively, for the same period in 2013, and 1.14% and 9.98%, respectively, for the same period in 2012.

The increase in earnings during 2014 compared to 2013 resulted primarily from an increase in interest income related to loans, a decrease in provision for loan losses as a result of improved credit quality, offset in part by an increase in overall non-interest expense reflecting the Company’s investment in new initiatives and personnel to support future growth.  The increase in earnings during 2013 compared to 2012 resulted primarily from an increase in interest income related to loans, gains on sale of SBA loans and securities and depositor service charges, offset in part by a decrease in the gain on sale of other real estate owned and decreases in warrant income.

Additionally, an overview of the financial results for 2014 discussed in the MD&A include the following:

·                  Total assets grew to $1.81 billion at the end of 2014, with loans comprising 73.0% of the average earning asset mix, compared to 70.8% at prior year end.  Total deposits were $1.55 billion at December 31, 2014, which included demand deposits of $1.07 billion.  At December 31, 2013, total assets and total deposits were $1.60 billion and $1.41 billion, respectively.

·                  Gross loans were $1.31 billion at December 31, 2014, representing an increase of $233.7 million, or 21.7%, compared to gross loans of $1.08 billion at December 31, 2013.  Average loan balances increased by $186.2 million, or 19.2%, to $1.16 billion for the year ended December 31, 2014, compared to $971.1 million for the year ended December 31, 2013.

·                  Net interest income and non-interest income comprised total revenue of $90.8 million in 2014 compared to $82.6 million for 2013, representing an increase of $8.2 million, or 9.9%.

·                  Net interest margin decreased to 4.83% in 2014 compared to 4.98% in 2013.

·                  Provision for credit losses for 2014 decreased to $3.0 million from $6.1 million in 2013.  Net charge-offs were $2.6 million for the current year compared to $4.1 million in 2013.

·                  Allowance for credit losses represented 1.70% of total gross loans and 284.03% of nonperforming loans at December 31, 2014, compared to 2.04% of total gross loans and 145.18% of nonperforming loans at December 31, 2013.

·                  As of December 31, 2014, nonperforming assets decreased by $7.3 million to $7.9 million, or 0.43% of total assets, compared to $15.1 million or 0.94% of total assets at December 31, 2013.

·                 Capital ratios remained significantly above the minimum required for the Company to be considered “well-capitalized” under the current Basel regulatory framework, and continued to support the Company’s growth.  Total Risk-Based Capital Ratio was 13.91%, Tier I Capital Ratio was 12.66%, and Tier I Leverage Ratio was 11.24% at December 31, 2014.

Results of Operations

Net Interest Income and Margin

Net interest income, the difference between interest earned on loans and investments and interest paid on deposits is the principal source of the Company’s operating earnings.  Net interest income is affected by changes in the nature and volume of earning assets held during the year, the rates earned on such assets and the rates paid on interest-bearing liabilities.  The following table shows the composition of average earning assets and average funding sources, average yields and rates, and the net interest margin for the three years ended December 31, 2014, 2013 and 2012.

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Interest differential is affected by changes in volume, changes in rates and a combination of changes in volume and rates. Volume changes are caused by changes in the levels of average earning assets and average interest bearing deposits and borrowings.  Rate changes result from changes in yields earned on assets and rates paid on liabilities.  Changes not solely attributable to volume or rates have been allocated to the rate component.

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The following table shows the effect on the interest differential of volume and rate changes for the years ended December 31, 2014, 2013 and 2012:

Net interest income was $76.6 million in 2014, comprised of $78.9 million in interest income and $2.2 million in interest expense.  Net interest income was $68.3 million in 2013, comprised of $70.8 million in interest income and $2.5 million in interest expense.  The increase of $8.4 million in net interest income in 2014, comprised of an increase in interest income of $8.0 million combined with a decrease of $306,000 in interest expense, was primarily attributable to an increase in average earning assets as a result of loan growth, combined with a decrease in non-performing loans and a slightly higher level of loan related fees.

Net interest income was $60.6 million in 2012, comprised of $62.8 million in interest income and $2.2 million in interest expense.  The increase of $7.7 million in net interest income in 2013, comprised of an increase in interest income of $8.0 million offset slightly by an increase of $323,000 in interest expense, was primarily attributable to an increase in average earning assets as a result of loan growth and excess liquidity generated from deposit growth.

The net interest margin (net interest income divided by average earning assets) was 4.83% for the year ended December 31, 2014, as compared to 4.98% for the year ended December 31, 2013 and 5.27% for 2012. The decrease in net interest margin in 2014 was primarily due to a lower yield on interest earning assets, including a decrease in loan yields from 6.66% to 6.24%.  Loan fees comprised 1.05% of total loan yields in 2014 compared to 1.23% in 2013. The Company’s loan-to-deposit ratio, a measure of leverage, averaged 80.7% during the twelve months ended December 31, 2014, which represented an increase compared to an average of 78.3% for the same period in 2013.

The decrease in net interest margin in 2013 was primarily due to a less favorable mix in average earning assets, decreased leverage and increased nonperforming loans. The positive impact on the net interest margin from increased loan fees for the twelve months ended December 31, 2013 compared to the same period in 2012 was 5 basis points. The Company’s loan-to-deposit ratio, a measure of leverage, averaged 78.3% during the twelve months ended December 31, 2013, which represented a decrease compared to an average of 80.9% for the same period in 2012.

Interest Income

For the year ended December 31, 2014, the Company reported interest income of $78.9 million, an increase of $8.0 million or 11.4% over $70.8 million reported in 2013.  The increase in interest income primarily reflects an increase in average earning assets as a result of loan growth which was funded by liquidity generated by deposit growth, combined with a decrease in non-performing loans and a slightly higher level of loan related fees.  Average earning assets were $1.58 billion for the year ended December 31, 2014, an increase of $213.6 million, or 15.6%, over $1.37 billion for the year ended December 31, 2013.  The increase in average earning assets reflects an increase in the

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average loan portfolio of $186.2 million over $971.1 million in 2013, and an increase in the average securities portfolio of $28.1 million from $278.2 million in 2013.  The average yield on earning assets was 4.97% for the year ended December 31, 2014 compared to 5.16% for the year ended December 31, 2013 primarily due to a lower rate of interest earned on loans and investment securities during 2014.

For the year ended December 31, 2013, the Company reported interest income of $70.8 million, an increase of $8.0 million or 12.8% over $62.8 million reported in 2012.  The increase in interest income primarily reflects an increase in average earning assets.  Average earning assets were $1.37 billion for the year ended December 31, 2013 an increase of $221.0 million, or 19.2%, over $1.15 billion for the year ended December 31, 2012.  The increase in average earning assets reflects an increase in the average loan portfolio of $143.4 million over $827.7 million in 2012, and an increase in the average securities portfolio of $42.3 million from $235.9 million in 2012.  The average yield on earning assets was 5.16% for the year ended December 31, 2013 compared to 5.46% for the year ended December 31, 2012 due to a lower rate of interest earned on loans and investments during 2013.

Interest Expense

Interest expense was $2.2 million for the year ended December 31, 2014, which represented a decrease of $306,000 or 12.2% compared to $2.5 million for the year ended December 31, 2013.  The decrease in interest expense primarily reflects a lower yield on money market and savings accounts in 2014 compared to 2013.  The average yield on interest-bearing liabilities was 0.46% for the period ended December 31, 2014 compared to 0.52% for the period ended December 31, 2013. Average interest-bearing liabilities were $479.7 million for the year ended December 31, 2014, a decrease of $1.7 million or 0.3% from $481.4 million for the year ended December 31, 2013.

Average interest bearing deposits were $458.0 million for the year ended December 31, 2014, which represented 32.0% of total average deposits and was a decrease of $4.2  million, or 0.9%, from $462.3 million at December 31, 2013, representing 37.3% of total average deposits for the year.

Other (non-deposit) interest bearing liabilities are primarily comprised of junior subordinated debt securities issued by the Company and other borrowings.  The junior subordinated debt is intended to supplement capital requirements of the Company at a rate of interest that is fixed for five years.  Other borrowings during the year were comprised of short term borrowings. Other interest bearing liabilities averaged $21.7 million and $19.1 million in the years ended December 31, 2014 and 2013, respectively.

Interest expense was $2.5 million for the year ended December 31, 2013, which represented an increase of $323,000 or 14.7% compared to $2.2 million for the year ended December 31, 2012.  The increase in interest expense primarily reflects a higher level of interest bearing liabilities in 2013 compared to 2012.  The average yield on interest-bearing liabilities was 0.52% for the period ended December 31, 2013 compared to 0.57% for the period ended December 31, 2012. Average interest-bearing liabilities were $481.4 million for the year ended December 31, 2013, an increase of $95.8 million or 24.9% from $385.5 million for the year ended December 31, 2012.

Average interest bearing deposits were $462.3 million for the year ended December 31, 2013, which represented 37.3% of total average deposits and was an increase of $105.8 million, or 29.7%, from $356.5 million at December 31, 2012, representing 34.8% of total average deposits for the year.

Other (non-deposit) interest bearing liabilities are primarily comprised of junior subordinated debt securities issued by the Company and other borrowings.  The junior subordinated debt is intended to supplement capital requirements of the Company at a rate of interest that is fixed for five years.  Other borrowings during the year were comprised of short term borrowings. Other interest bearing liabilities averaged $19.1 million and $29.1 million in the years ended December 31, 2013 and 2012, respectively.

Credit Risk and Provision for Loan losses

The Company maintains an allowance for loan losses which is based, in part, on the Company’s loss experience, the impact of economic conditions within the Company’s market area and, as applicable, the State of California and/or national macroeconomic conditions, the value of underlying collateral, loan performance, and inherent risks in the loan portfolio. The allowance is reduced by charge-offs and increased by provisions for loan losses charged to operating expense and recoveries of previously charged-off loans.  Based on management’s evaluation of such risks, the Company provided $3.0 million, $6.1 million, and $4.0 million to the allowance for loan losses in 2014, 2013 and 2012, respectively. During 2014, the Bank had $4.2 million in charge offs, and had recoveries of $1.5 million as compared to $8.3 million in charge offs and recoveries of $4.2 million in 2013.  During 2012, the Bank had $3.1 million in charge offs and $0.6 million in recoveries.  The allowance for loan losses was $22.3 million representing 1.70% of total loans at December 31, 2014, as compared to $21.9 million representing 2.04% of total loans at December 31, 2013, and $19.9

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million representing 2.20% of total loans at December 31, 2012.

Management is of the opinion that the allowance for loan losses is maintained at a level adequate for known and unidentified losses inherent in the portfolio.  Additionally, the Company is seeing a consistent reduction of carrying values through continued payments by borrowers on loans that have been placed on non-accrual. Should circumstances change and management determines that the collectibility of any of these credits becomes unlikely, there could be an adverse effect on the level of the allowance for loan losses and the Company’s future profitability.

See “Allowance for Loan Losses” for additional discussion regarding the allowance for loan losses and nonperforming assets.

Non-interest Income

The following table sets forth the components of other income and the percentage distribution of such income for the years ended December 31, 2014, 2013 and 2012:

Non-interest income totaled $14.1 million in 2014, a decrease of $163,000 or 1.1% from $14.3 million in 2013.  Non-interest income of $14.3 million in 2013 represented an increase of $1.3 million or 10.0% over $13.0 million in 2012.  Non-interest income generally consists primarily of service charge income on deposit accounts, international fee income, gains recognized on sales of SBA loans, Visa fee income, warrant income and gains on sales of other real estate owned (OREO) and securities.  The decrease in non-interest income during the year ending December 31, 2014 was primarily attributable to a decrease in gains on sales of securities and gains from the sale of OREO, partially offset by increases in Visa fee income and international fee income.

The increase in non-interest income during the year ending December 31, 2013 was primarily attributable to an increase in gains on sale of SBA loans, gains on sale of securities and service charges of deposit accounts, partially offset by decreases in gains from the sale of OREO.

For the year ended December 31, 2014 service charge income on deposit accounts was $3.8 million, representing an increase of $173,000, or 4.7%, compared to $3.7 million for the same period one year ago.  The service charge income on deposit accounts for 2013 compared to $3.4 million in 2012, represents an increase of $320,000 or 9.5%. The increase in 2014 and 2013 was attributable to an increase in the deposit portfolio and deposit related analysis charges.

The Company generates international fee income on spot contracts (binding agreements for the purchase or sale of currency for immediate delivery and settlement) and forward contracts (a contractual commitment for a fixed amount of foreign currency on a future date at an agreed upon exchange rate) in connection with client’s cross-border activities. The transactions incurred are during the ordinary course of business and are not speculative in nature.  The Company recognizes income on a cash basis at the time of contract settlement in an amount equal to the spread created by the exchange rate charged to the client versus the actual exchange rate negotiated by the Company in the open market.  During 2014, the Company recognized $3.1 million in international fee income, representing an increase of $364,000,

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or 13.5%, compared to $2.7 million for the same period one year ago.  During 2013, the Company recognized $2.7 million in international fee income, representing an increase of $57,000, or 2.2%, compared to $2.6 million in 2012.  The increase in international fee income in both 2014 and 2013 was primarily caused by an increase in client demand for international services.

Revenue from sales of SBA loans is dependent on consistent origination and funding of new loan volumes, the timing of which may be impacted, from time to time, by (1) increased competition from other lenders; (2) the relative attractiveness of SBA borrowing to other financing options; (3) adjustments to programs by the SBA; (4) changes in activities of secondary market participants and; (5) other factors.   During 2014, the Company recognized $2.6 million in gains on sale of SBA loans, representing a decrease of $110,000 or 4.1% from the prior year.  The Company recognized $2.7 million in gains on sales of SBA loans in 2013 compared to $1.9 million in 2012, representing an increase of $832,000 or 45.0%. The decrease in gains on sale of SBA loans in 2014 is a direct result of a decrease in SBA loans sold in the current period versus the same period last year.  During 2014, the Company’s SBA group funded $55.4 million in new loans and sold $42.0 million, which included $11.2 million in loans funded in the previous year.  This compares to $65.0 million funded and $46.3 million sold in the year ended December 31, 2013, which included $13.5 million in loans funded in the previous year. For the year ended December 31, 2012, the Company’s SBA group funded $54.5 million in new loans and sold $37.3 million, which included $12.0 million in loans funded in the previous year.

Income from warrants is inherently event-driven and the contributions from warrants largely reflect the economic environment of IPOs and M&A activity. During 2014 and 2013, the Company recognized $1.3 million in warrant income which represented a decrease of $78,000 and $161,000, respectively, compared to $1.4 million in 2012.

The Company recognized modest gains on the sale of securities of $5,000 during the twelve months ended December 31, 2014 which represents a decrease of $799,000 or 99.4% compared to $804,000 during 2013.  During 2012 the Company recognized $323,000 in gain on the sale of securities. Compared to 2012, the increase in gains on the sale of securities in 2013 represented $481,000 or 148.9%.

The Company earns a servicing fee on all SBA loans sold.  During 2014, $653,000 in SBA loan servicing income was recognized compared to $488,000 for the prior year, reflecting an increase of $165,000 or 33.8%. The $488,000 recognized in 2013 represents a decrease of $26,000 or 5.1% from $514,000 in 2012.

For the year ended December 31, 2014,  there were no gains on sale of OREO during 2014. This reflects the decreased balance of the OREO portfolio as a result of the Company’s successful resolution efforts.   During 2013 and 2012, the Company recognized $470,000, and $1.1 million, respectively, in gains on the sale of OREO properties.

In 2013, the Company fully implemented a Visa card program which contributed $1.4 million in non-interest income in 2014, $914,000 in 2013, and a modest $112,000 in 2012.

Net interest income and non-interest income comprised total revenue of $90.8 million for the year ended December 31, 2014, compared to $82.6 million for the same period one year earlier, and $73.6 million in 2012.  This represented an increase of $8.2 million, or 9.9% in 2014, and an increase of $9.0 million, or 12.2% in 2013.

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Non-interest Expenses

The components of other expense as a percentage of average assets are set forth in the following table for the years ended December 31, 2014, 2013 and 2012: