Bank of Commerce Holdings in Redding, Calif., is selling its stake in its namesake mortgage company three years after becoming its co-owner.
The $927 million-asset company (BOCH) announced Friday that it is selling its 51% ownership position in Bank of Commerce Mortgage back to Simonich Corp., which owns the rest of mortgage bank's stock, for an undisclosed price. The deal is expected to close this quarter.
The mortgage bank funds more than $1 billion in first mortgages annually, Bank of Commerce said in its quarterly Securities and Exchange Commission filing in August.
For the first six months of the year, the company reported mortgage revenues of $11.07 million, which accounted for 83% of the company's noninterest income for the same period. That income will go away, but so will all of the expenses of the mortgage bank, Patrick J. Moty, the bank's president and chief executive, said in a brief interview.
Moty said the two companies didn't plan for the partnership to only last three years, but the increasing regulatory burden was stymying the growth of the mortgage bank.
"This is going to allow them to grow their business. These are booming economic times in terms of mortgage banking and the additional regulation that came with being partly owned by a bank was holding them back," Moty said. "We had no specific timeframe, but the timing appeared to be right … that's the world we live in now."
The agreement calls for the two companies to continue working together on the funding side.
"We will continue to be one of their main banks from the funding side," Moty said. "We will probably benefit more from the funding business than we did from being owners."
Moty said the sale would add to the company's healthy capital ratios; its total risk-based capital ratio was 13.64% at June 30. He said the company is looking for acquisitions, but hasn't struck a bank deal because "there is still a disconnect between the price buyers are willing pay and what sellers want."