Note 13 - Junior Subordinated Debentures

12 Months Ended

Dec. 31, 2014

Disclosure Text Block [Abstract]

Capital Requirements on Trust Assets [Text Block]

NOTE 13. JUNIOR SUBORDINATED DEBENTURES

As of December 31, 2013, the Company had two wholly-owned trusts (“Trusts”) formed in 2003 and 2005 to issue trust preferred securities and related common securities. During the year ended December 31, 2014, the Company redeemed $5.2 million of junior subordinated debentures from Bank of Commerce Holdings Trust for net cash payment of $4.6 million resulting in a gain on extinguishment of debt recorded in other income of $406 thousand and a reduction of the common stock investment in trusts of $155 thousand. As of December 31, 2014, the Company had one wholly-owned trust.

The following table presents information about the Trust as of December 31, 2014:

(Dollars in thousands)

Issued

Effective

Redemption

Trust Name

Issue Date

Amount

Rate(1)

Rate(2)

Maturity Date

Date

Bank of Commerce Holdings Trust II

July 29, 2005

$

10,310

Floating

(3)

1.81

%

September 15, 2035

(4

)

^{(1) Contractual interest rate of junior subordinated debentures.}

^{(2) Effective rate as of December 31, 2014.}

^{(3) Rate based on three month LIBOR plus 1.58% adjusted quarterly.}

^{(4) Redeemable at the Company’s option on any March 15, June 15, September 15, or December 15.}

The following table presents information about the Trusts as of December 31, 2013:

(Dollars in thousands)
		Issued				Effective				Redemption
Trust Name	Issue Date	Amount		Rate(1)		Rate(2)			Maturity Date	Date
Bank of Commerce Holdings Trust	March 18, 2003	$	5,155	Floating	(3)		3.54	%	April 7, 2033		(5	)
Bank of Commerce Holdings Trust II	July 29, 2005		10,310	Floating	(4)		1.83	%	September 15, 2035		(6	)
		$	15,465

^{(1) Contractual interest rate of junior subordinated debentures.}

^{(2) Effective rate as of December 31, 2013.}

^{(3) Rate based on three month London Interbank Offered Rate (LIBOR) plus 3.30% adjusted quarterly. The rate increase is capped at 2.75% annually and the lifetime cap is 12.5%.}

^{(4) Rate based on three month LIBOR plus 1.58% adjusted quarterly.}

^{(5) Redeemable on quarterly payment dates.}

^{(6) Redeemable at the Company’s option on any March 15, June 15, September 15, or December 15.}

The $10.3 million of junior subordinated debentures issued to Trust II as of December 31, 2014 and $15.5 million issued to the Trusts as of December 31, 2013, are reflected in the Consolidated Balance Sheets.

The common stock issued by the Trusts in the amount of $465 thousand is recorded in other assets in the Consolidated Balance Sheets, at December 31, 2013. The common stock issued by Trust II in the amount of $310 thousand is recorded in other assets in the Consolidated Balance Sheets, at December 31, 2014.

Effective March 31, 2011, the Federal Reserve Board implemented new limits on the inclusion of restricted core capital elements in Tier 1 capital of bank holding companies. The new provisions allow for the aggregate amount of trust preferred securities and certain other restricted core capital elements to be limited to one-third of the sum of unrestricted core capital elements, net of goodwill less any associated deferred tax liability associated with the goodwill.

All of the debentures issued to the Trusts, less the common stock of the Trusts, qualified as Tier 1 capital as of December 31, 2014 and 2013, under guidance issued by the Federal Reserve Board. At December 31, 2014 and 2013 the Company’s restricted core capital elements were 10% and 15% of total core capital, net of goodwill and any associated deferred tax liability, respectively.