NOTE

16.

SHAREHOLDERS’ EQUITY AND STOCK PLANS

January 31, 2019

we issued

1,834,142

shares of common stock, and paid

$15.3

million in cash as part of our acquisition of Merchants Holding Company (“Merchants”) at which point Merchants shareholders held, in the aggregate, approximately

10%

of our outstanding common stock. The acquisition added

$190.2

million in deposits,

$85.3

million in loans and

$107.4

million in investment securities on

January 31, 2019.

See Note

Acquisition

in these

Notes to Consolidated Financial Statements

for additional information on the acquisition.

May 10, 2017,

we completed the sale of

2,738,096

shares of our common stock at a public offering price of

$10.50

and received net proceeds of

$26.8

million. These proceeds were used to fund our acquisition of Merchants Holding Company and to repay certain borrowings.

During the

fourth

quarter of

2019

we paid

$1.0

million to repurchase

90,501

shares of common stock as part of our previously announced share repurchase program.

Stock Plans –

The Bank of Commerce Holdings

2019

Equity Incentive Plan (the “Plan”), was approved by the Holding Company’s shareholders on

May 21, 2019

and replaced the Amended and Restated

2010

Equity Incentive Plan. The Plan provides for equity awards including options, stock appreciation rights, and restricted awards to employees and non-employee directors of the Company. Vesting

may

be accelerated in case of a participant’s death or disability, or in case of a change in control. At

December 31, 2019,

486,900

common shares were available for future grants under the Plan.

We recognized

thousand in tax benefits from vesting of restricted stock during the year ended

December 31, 2019.

Proceeds from exercise of stock options exercised were

$52

thousand and

$216

thousand for the years ended

December 31, 2019

and

2018,

respectively.

Stock Option Activity

The following tables summarize information about stock option activity for the years ended

December 31, 2019,

and

2018.

						Aggregate		Weighted Average
	Number			Weighted Average		Intrinsic Value		Remaining
	of Shares			Exercise Price		At Time Of Grant		Contractual Term
Options outstanding December 31, 2017		134,500		$	5.24	$	704,350		4.76
Exercised		(37,100	)	$	5.82	$	215,685		n/a
Options outstanding December 31, 2018		97,400		$	5.02	$	488,665		4.11
Exercised		(11,000	)	$	4.70	$	51,670		n/a
Options outstanding December 31, 2019		86,400		$	5.06	$	436,995		3.09

Exercisable at December 31, 2018		93,400		$	5.02	$	488,665		4.11
Exercisable at December 31, 2019		86,400		$	5.06	$	436,995		3.09

There were

new stock options awarded during the

two

years ended

December 31, 2019

and there are

unrecognized compensation costs for stock options. There was

stock option expense for the current year compared to

thousand for the year ended

December 31, 2018.

Stock options vested at

20%

per year from the date of grant and, at

December 31, 2019,

all options are fully vested.

Restricted Stock Activity

The following tables summarize information about unvested restricted shares and restricted shares granted for the years ended

December 31, 2019

and

2018.

								Weighted Average
	Number			Weighted Average		Aggregate		Remaining
	of Shares			Grant Price		Intrinsic Value		Contractual Term
Unvested restricted shares December 31, 2017		74,489		$	8.60	$	640,255		1.03
Granted		29,913		$	11.50	$	344,000		1.07
Vested		(37,634	)	$	7.53	$	283,433		n/a
Unvested restricted shares December 31, 2018		66,768		$	10.50	$	700,820		0.97
Granted		57,292		$	11.02	$	631,336		1.32
Vested		(27,243	)	$	11.14	$	303,593		n/a
Forfeited		(5,096	)	$	11.12	$	56,659		n/a
Unvested restricted shares December 31, 2019		91,721		$	10.91	$	1,000,954		1.12

	For the Years Ended December 31,
(Amounts in thousands, except per share information)	2019		2018
Restricted stock compensation expense	$	414	$	288
Restricted stock awards weighted average grant date fair value per share	$	11.02	$	11.50

	At December 31,
	2019		2018
Unrecognized compensation costs related to non-vested restricted stock payments	$	642	$	470

Restricted shares vest over a

three

five

year service period. Unvested restricted shares have

dividend or voting rights. The unrecognized compensation costs for unvested restricted shares are expected to be recognized over a weighted average period of

one

year.

Stock Grant Activity

The following tables summarize information about shares granted as employee compensation for the years ended

December 31, 2019

and

2018.

Stock grants are fully vested and expensed in the period awarded

					Stock Grant
	Number		Weighted Average		Compensation
	of Shares		Grant Price		Expense
Shares granted during the year ended December 31, 2019		6,169	$	11.04	$	68,106
Shares granted during the year ended December 31, 2018		4,653	$	11.50	$	53,510

Dividends

Presented below is a summary of cash dividends paid to common shareholders, recorded as a reduction of retained earnings. The holders of unvested restricted stock awards are

not

entitled to dividends on unvested shares. On

December 18, 2019,

we declared a cash dividend of

$0.05

per share, payable on

January 10, 2020

to shareholders of record at the close of business on

December 31, 2019

	For the Years Ended December 31,
(Amounts in thousands, except per share information)	2019		2018
Cash dividends paid to common shareholders	$	3,189	$	2,274
Cash dividends paid per common share	$	0.19	$	0.15

Our principal source of cash for the Holding Company is dividends received from the Bank, which are subject to government regulation and limitations on the Bank’s ability to pay dividends. We also have trust preferred securities and subordinated debt agreements with provisions that

may

impact our ability to pay dividends on our common stock to our common shareholders.