Junior Subordinated Debt Securities and Other Borrowings

6 Months Ended

Jun. 30, 2011

Junior Subordinated Debt Securities and Other Borrowings

Junior Subordinated Debt Securities and Other Borrowings

6.             Junior Subordinated Debt Securities and Other Borrowings

Junior Subordinated Debt Securities

On December 21, 2004, the Company issued $12,372,000 of junior subordinated debt securities (the “debt securities”) to Bridge Capital Trust I, a statutory trust created under the laws of the State of California.  These debt securities are subordinated to effectively all borrowings of the Company and are due and payable in June 2035.  Interest is payable quarterly on these debt securities at a fixed rate of 5.90% for the first five years, and thereafter interest accrues at LIBOR plus 1.98%.  The debt securities can be redeemed at par at the Company’s option beginning in June 2010; they can also be redeemed at par if certain events occur that impact the tax treatment or the capital treatment of the issuance.

The Company also purchased a 3% minority interest in the Trust.  The balance of the equity of the Trust is comprised of mandatorily redeemable preferred securities.

On June 30, 2006 the Company issued $5,155,000 of junior subordinated debt securities (the “debt securities”) to Bridge Capital Trust II, a statutory trust created under the laws of the State of Delaware.  These debt securities are subordinated to effectively all borrowings of the Company and are due and payable in June 2037.  Interest is payable quarterly on these debt securities at a fixed rate of 6.60% for the first five years, and thereafter interest accrues at LIBOR plus 1.38%.  The debt securities can be redeemed at par at the Company’s option beginning in April 2011; they can also be redeemed at par if certain events occur that impact the tax treatment or the capital treatment of the issuance.

The Company also purchased a 3% minority interest in the Trust.  The balance of the equity of the Trust is comprised of mandatorily redeemable preferred securities.

Based upon accounting guidance, these Trusts are not consolidated into the company’s financial statements.  The Federal Reserve Board has ruled that subordinated notes payable to unconsolidated special purpose entities (“SPE’s”) such as these Trusts, net of the bank holding company’s investment in the SPE, qualify as Tier 1 Capital, subject to certain limits.

Other Borrowings

There were no other borrowings at June 30, 2011 while at December 31, 2010, other borrowings consisted of $7.7 million of SBA loans sold in the fourth quarter 2010. Certain recourse provisions in SBA sales agreements as of December 31, 2010 caused a delay in the recognition of the sale.  Proceeds from SBA loan sales were recognized as a secured borrowing until the recourse provisions expired, which was typically three months after the settlement date.  Upon expiration of the recourse provisions, in the first quarter of 2011, the Bank recognized a gain on the sale and derecognized the loan receivable and the related secured borrowing.  As of June 30, 2011, the recourse provisions in SBA loan sales agreements, industry-wide, have been amended to comply with current accounting standards which provide for the immediate recognition of a gain on sale and derecognition of the related loan receivable.

As of June 30, 2011, the Company had a total borrowing capacity with the Federal Home Loan Bank of San Francisco of approximately $246.0 million for which the Company had collateral in place to borrow $93.0 million.  As of June 30, 2011, $12.0 million of this borrowing capacity was pledged to secure a letter of credit.

The Bank also has unsecured borrowing lines with correspondent banks totaling $25.0 million.  At June 30, 2011, there were no balances outstanding on these lines.