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Note 12 - Term Debt

12 Months Ended

Dec. 31, 2015

NOTE 12. TERM DEBT

Term debt at December 31, 2015 and 2014 consisted of the following.

(Amounts in thousands)	2015			2014
Federal Home Loan Bank of San Francisco borrowings	$	75,000		$	75,000
Senior debt		9,917			—
Unamortized discount and debt issuance costs		(15	)		—
Subordinated debt		10,000			—
Unamortized discount and debt issuance costs		(208	)		—
Net term debt	$	94,694		$	75,000

Future contractual maturities of term debt at December 31, 2015 are as follows.

(Amounts in thousands)	2016		2017		2018		2019		2020		Thereafter		Total
Federal Home Loan Bank of San Francisco borrowings	$	75,000	$	—	$	—	$	—	$	—	$	—	$	75,000
Senior debt		917		1,000		1,000		1,000		1,000		5,000		9,917
Subordinated debt		—		—		—		—		—		10,000		10,000
Total future maturities	$	75,917	$	1,000	$	1,000	$	1,000	$	1,000	$	15,000	$	94,917

Federal Home Loan Bank of San Francisco borrowings

The maximum amount outstanding from the Federal Home Loan Bank of San Francisco under term advances at any month end during 2015 and 2014 was $120.0 million and $75.0 million, respectively. The average balance outstanding on Federal Home Loan Bank of San Francisco term advances during 2015 and 2014 was $87.6 million and $77.5 million, respectively. The weighted average interest rates on the borrowings at December 31, 2015 and 2014, was 0.33% and 0.24%, respectively.

The Federal Home Loan Bank of San Francisco borrowings are secured by an investment in Federal Home Loan Bank of San Francisco stock, certain real estate mortgage loans which have been specifically pledged to the Federal Home Loan Bank of San Francisco pursuant to their collateral requirements, and securities held in the Bank’s investment securities portfolio. As of December 31, 2015, based upon the level of Federal Home Loan Bank of San Francisco advances, the Bank was required to hold an investment in Federal Home Loan Bank of San Francisco stock of $4.5 million. Furthermore, we have pledged $359.8 million of our commercial and real estate mortgage loans, and have borrowed $75.0 million against the pledged loans. As of December 31, 2015 we held $14.9 million in securities with the Federal Home Loan Bank of San Francisco for pledging purposes. All of the securities pledged to the Federal Home Loan Bank of San Francisco were unused as collateral as of December 31, 2015.

Senior Debt

In December of 2015, the Holding Company, entered into a senior debt loan agreement to borrow $10.0 million. The loan is payable in monthly installments of $83 thousand principal, plus accrued and unpaid interest, commencing on January 1, 2016 and continuing to and including December 10, 2020. The loan may be prepaid in whole or in part at any time without any prepayment premium or penalty. The principal amount of the loan bears interest at a variable rate, resetting monthly that is equal to the sum of the current three month LIBOR plus 400 basis points. The Holding Company incurred senior debt issuance costs of $15 thousand which are being amortized over the life of the loan as additional interest expense. The loan is secured by a pledge from the Holding Company of all of the outstanding stock of Redding Bank of Commerce

Subordinated Debt

In December of 2015, the Holding Company issued $10.0 million in aggregate principal amount of fixed to floating rate subordinated notes due 2025. The subordinated debt initially bears interest at 6.88% per annum for a five-year term, payable semi-annually. Thereafter, interest on the subordinated debt will be paid at a variable rate equal to three month LIBOR plus 526 basis points, payable quarterly until the maturity date. The Holding Company incurred subordinated debt issuance costs of $210 thousand which are being amortized over the initial five year term as additional interest expense.

The subordinated debt is subordinate and junior in right of payment to the prior payment in full of all existing and future claims of creditors and depositors of the Holding Company and its subsidiaries, whether now outstanding or subsequently created. The subordinated debt ranks equally with all other unsecured subordinated debt, except any which by its terms is expressly stated to be subordinated to the subordinated debt. The subordinated debt ranks senior to all future junior subordinated debt obligations, preferred stock and common stock of the Holding Company. The subordinated debt is recorded as term debt on the Holding Company’s balance sheet; however, for regulatory purposes, it is treated as Tier 2 capital by the Holding Company.

The subordinated debt will mature on December 10, 2025 but may be prepaid at the Holding Company’s option and with regulatory approval at any time on or after five years after the Closing Date or at any time upon certain events, such as a change in the regulatory capital treatment of the subordinated debt or the interest on the subordinated debt is no longer deductible by the Holding Company for United States federal income tax purposes.