Note 6 - Term Debt

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Long-term Debt [Text Block]

NOTE

6.

TERM DEBT

Term debt at

June 30, 2019

and

December 31, 2018

consisted of the following.

(Amounts in thousands)	June 30, 2019			December 31, 2018
Senior debt	$	—		$	3,496
Unamortized debt issuance costs		—			(2	)
Subordinated Debt		10,000			10,000
Unamortized debt issuance costs		(67	)		(89	)
Net term debt	$	9,933		$	13,405

Future contractual maturities of term debt at

June 30, 2019

are as follows.

(Amounts in thousands)	2019		2020		2021		2022		2023		Thereafter		Total
Subordinated Debt	$	—	$	—	$	—	$	—	$	—	$	10,000		10,000
Total future maturities	$	—	$	—	$	—	$	—	$	—	$	10,000	$	10,000

Federal Home Loan Bank of San Francisco Borrowings

We have an available line of credit with the Federal Home Loan Bank of San Francisco of

$426.3

million subject to certain collateral requirements, namely the amount of pledged loans and investment securities. The line of credit is secured by an investment in Federal Home Loan Bank of San Francisco stock, certain real estate secured loans that have been specifically pledged to the Federal Home Loan Bank of San Francisco pursuant to collateral requirements, and certain pledged securities held in the Bank’s investment securities portfolio.

The Bank had

no

outstanding borrowings from the Federal Home Loan Bank of San Francisco at

June 30, 2019

or 

December 31, 2018.

The average balance outstanding on Federal Home Loan Bank of San Francisco term advances during the

six

months ended

June 30, 2019

and year ended

December 31, 2018

was

$19.4

million and

$22.5

million, respectively. The maximum amount outstanding from the Federal Home Loan Bank of San Francisco at any month end during the

six

months ended

June 30, 2019

and year ended

December 31, 2018

was

$40.0

million and

$70.0

million, respectively. As of

June 30, 2019,

the Bank was required to hold an investment in Federal Home Loan Bank of San Francisco stock of

$7.4

million recorded in

Other Assets

in the

Consolidated Balance Sheets

. Our investments in Federal Home Loan Bank of San Francisco stock are restricted investment securities, carried at cost, evaluated for impairment, and excluded from securities accounted for under ASC Topic

320

and ASC Topic

321.

We have pledged

$488.3

million of our commercial real estate and residential real estate loans and

$30.0

million in securities as collateral for the line of credit with the Federal Home Loan Bank of San Francisco as of

June 30, 2019.

Senior Debt

In

December

of

2015,

the Holding Company entered into a senior debt loan agreement to borrow

$10.0

million from another financial institution. During the

second

quarter of

2019,

we completed the early repayment and termination of this debt agreement. The original loan terms required monthly principal installments of

$83

thousand, plus accrued and unpaid interest, commencing on

January 1, 2016,

continuing to, and including

December 10, 2020

and a final scheduled payment of

$5.0

million due on the maturity date of

December 10, 2020.

The loan terms allowed for prepayment in whole or in part at any time without any prepayment penalty and for interest at a variable rate, resetting monthly that was equal to the sum of the current

three

-month LIBOR plus

400

basis points. In

December

of

2015,

the Holding Company incurred senior debt issuance costs of

$15

thousand, which were being amortized over the initial term of the loan as additional interest expense. The loan was secured by a pledge from the Holding Company of all of the outstanding stock of Merchants 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 in

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. In

December

of

2015,

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 preferred stock and common stock of the Holding Company and all future junior subordinated debt obligations. 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.

Federal Funds

We have entered into nonbinding unsecured federal funds line of credit agreements with

three

financial institutions to support short-term liquidity needs. The lines totaled

$35.0

million at

June 30, 2019

and had interest rates ranging from

2.64%

to

3.38%.

Advances under the lines are subject to funds availability, continued borrower eligibility, and

may

have consecutive day usage restrictions. The credit arrangements are reviewed and renewed annually. At

June 30, 2019

and

December 31, 2018,

we had

no

outstanding advances on any of the Bank’s federal funds lines of credit.

Federal Reserve Bank

We have an available line of credit with the Federal Reserve Bank totaling

$20.4

million subject to collateral requirements, namely the amount of certain pledged loans. At

June 30, 2019

and

December 31, 2018,

we had

no

outstanding advances on our line of credit with the Federal Reserve Bank. We have pledged

$29.3

million of our commercial loans as collateral for the line of credit with the Federal Reserve Bank as of

June 30, 2019.