Related party transactions

9 Months Ended

Sep. 30, 2016

Note (14)—Related party transactions:

(A) Loans:

The Bank has made and expects to continue to make loans to the directors and executive officers of the Company and their affiliates in the ordinary course of business. In management’s opinion, these transactions with directors and executive officers were made on substantially the same terms as those prevailing at the time for comparable transactions with other unaffiliated persons and did not involve more than the normal risk.

An analysis of loans to executive officers, the shareholder of the Company, and directors of the Bank and their affiliates follows (in thousands):

Loans outstanding at December 31, 2015	$	29,882
New loans and advances		2,604
Repayments		(9,614	)
Loans outstanding at September 30, 2016	$	22,872

Unfunded commitments to certain executive officers and directors and their associates totaled $4,014 and $7,212 at September 30, 2016 and December 31, 2015, respectively.

(B) Deposits:

The Bank held deposits from related parties totaling $138,140 and $68,612 as of September 30, 2016 and December 31, 2015, respectively.

The Bank leases various office spaces from entities related to the majority shareholder under varying terms. The Company had $164 and $180 in unamortized leasehold improvements related to these leases at September 30, 2016 and December 31, 2015, respectively. These improvements are being amortized over a term not to exceed the length of the lease. Lease expense for these properties totaled $128 and $76 and $392 and $327 for the three months and nine months ended September 30, 2016 and 2015, respectively.

(D) Consulting services:

The Bank paid $230 for the nine months ended September 30, 2015 in management consulting services to an entity owned 100% by the shareholder. The agreement was terminated effective January 1, 2016.

(E) Subordinated debt:

On February 12, 1996, the Company borrowed $775 from the shareholder through a term subordinated note. On August 26, 1999, the Company borrowed $3,300 from the shareholder through a term subordinated note. On June 30, 2006, the Company borrowed $6,000 from the shareholder through a term subordinated note. The total of $10,075 was repaid with cash proceeds from the sale of common stock in the initial public offering, as discussed in Note 1. The Company paid interest payments related to these subordinated debentures to the shareholder amounting to approximately $106 and $48 and $230 and $131 for the three months and nine months ended September 30, 2016 and 2015, respectively.

(F) Investment securities transactions:

The Company holds an investment in a fund that was issued by an entity owned by one of its directors. The balance in the investment was $1,145 and $1,472 as of September 30, 2016 and December 31, 2015, respectively. The Company did not receive any capital distributions during the nine months ended September 30, 2016 and 2015.

(G) Aviation time sharing agreement:

Effective May 24, 2016, the Company entered an aviation time sharing agreement with an entity owned by the majority shareholder. This replaces the previous agreement dated December 21, 2012. During the three months and nine months ended September 30, 2016, the Company made payments of $267 and $299, respectively, under these agreements. The Company made payments of $27 and $48 for the three months and nine months ended September 30, 2015, respectively.