California Bank of Commerce NOTES TO FINANCIAL STATEMENTS 10.  COMMITMENTS AND CONTINGENCIES  (Continued) Financial Instruments with Off-Balance-Sheet Risk (Continued) Significant Concentrations of Credit Risk Deposit Concentrations Standby letters of credit are conditional commitments issued to guarantee the performance of a client  to a third party. The credit risk involved in issuing standby letters of credit is essentially the same  as that involved in extending loans to clients. The fair value of the liability related to these standby  letters of credit, which represents the fees received for issuing the guarantees, was not significant  at December 31, 2011 and 2010. The Bank recognizes these fees as revenue over the term of the  commitment or when the commitment is used. Commercial loan commitments represent approximately 93% of total commitments and are generally  unsecured or secured by collateral other than real estate and have variable interest rates. Real estate  loan commitments represent approximately 3% of total commitments and are generally secured by  property with a loan-to-value ratio not to exceed 75%. The majority of real estate commitments also  have variable interest rates. Home equity and personal lines of credit represent the remaining 4% of  total commitments and are generally secured by residential real estate and have both variable and  fixed interest rates. The Bank grants real estate mortgage, real estate construction, commercial and installment loans to  customers in the Bank’s geographic service area. In management’s judgment, with a nearly even  balance between Commercial & Industrial Loans and Real Estate Loans at 46% and 53% of total  loans, respectively, no specific concentration existed in the Bank’s loan portfolio at December 31,  2011. At December 31, 2010, Real Estate loans were approximately 58% of total loans, representing  a modest concentration. Although management believes such concentrations to have no more  than the normal risk of collectability, a substantial decline in the economy in general, or a decline  in real estate values in the Bank’s primary market area in particular, could have an adverse impact  on collectability of these loans. Personal and business income represents the primary source of  repayment for a majority of these loans. At December 31, 2011, only two deposit relationships, a time deposit in the amount of $15,000,000,  or 6.2% of total deposits and, a checking account in the amount of $19,776,627, or 8.4% of total  deposits, exceeded 5% of total deposits. If the time deposit, which is collateralized, were not renewed, the underlying investment securities  providing the collateral would become available to pledge as collateral elsewhere. The majority of the  funds in the checking account are expected to be disbursed during the first quarter of 2012. At December 31, 2010, only one deposit relationship, a time deposit in the amount of $15,000,000, or  8.2% of total deposits, exceeded 5% of total deposits. If this time deposit, which is collateralized, were  not renewed, the underlying investment securities providing the collateral would become available to  pledge as collateral elsewhere. 41