California Bank of Commerce NOTES TO FINANCIAL STATEMENTS 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued) Bank Premises and Equipment Bank premises and equipment are carried at cost. Depreciation is determined using the straight-line  method over the estimated useful lives of the related assets. The useful lives of furniture, fixtures and  equipment are estimated to be 3 to 5 years. Leasehold improvements are amortized over the lesser  of the respective lease term (including renewal periods that are reasonably assured) or their useful  lives, which are generally 7 to 14 years.  Certain operating leases contain scheduled and specified rent increases or incentives in the form  of tenant improvement allowances or credits. The scheduled rent increases are recognized on a  straight-line basis over the lease term as an increase in the amount of rental expense recognized  each period. Lease incentives are capitalized at the inception of the lease and amortized on a  straight-line basis over the lease term as a reduction of rental expense. Amounts accrued in excess  of amounts paid related to the scheduled rent increases and the unamortized deferred credits are  included in accrued interest payable and other liabilities on the balance sheet. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or  amortization are removed from the accounts, and any resulting gain or loss is recognized in income  for the period. The cost of maintenance and repairs is charged to expense as incurred. The Bank  evaluates premises and equipment for financial impairment as events or changes in circumstances  indicate that the carrying amount of such assets may not be fully recoverable. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences  between the reported amount of assets and liabilities and their tax basis. Deferred tax assets and  liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. A valuation allowance is recognized if, based on the weight of available evidence, management  believes it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Bank considers all tax positions recognized in its financial statements for the likelihood of  realization. When tax returns are filed, it is highly certain that some positions taken would be sustained  upon examination by the taxing authorities, while others are subject to uncertainly about the merits  of the position taken or the amount of the position that would be ultimately sustained. The benefit  of a tax position is recognized in the financial statements in the period during which, based on all  available evidence, management believes it is more likely than not that the position will be sustained  upon examination, including the resolution of appeals or litigation processes, if any. Tax positions  taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than- not recognition threshold area measured as the largest amount of the tax benefit that is more than 50  percent likely of being realized upon settlement with the applicable taxing authority. Income Taxes Accounting for Uncertainly in Income Taxes 23