Bank of Commerce earnings hit by preferred stock repricing

Charlotte-based Bank of Commerce's net income to shareholders fell in the first quarter despite loan and deposit growth as preferred stock originally stemming from the federal Troubled Asset Relief Program became more expensive.

The bank's net income to shareholders fell to $62,000, down 10 percent from the year before. Before the impact of Bank of Commerce's preferred stock payments, however, net income rose 15 percent to $135,000.

The preferred stock became more expensive as a function of how the U.S. Treasury structured the federal bank bailout program in 2008 and 2009. The government required an annual interest payment that would jump from 5 percent to 9 percent after five years. That time period has now arrived for most of the community banks who still have the investments on their books.

The price change remains in effect even if the bank's preferred stock has been sold to private investors. Bank of Commerce's TARP investment was auctioned off in 2012.

Last month, Bank of Commerce agreed to be sold to Asheville's HomeTrust Bancshares. CEO Wes Sturges cited regulatory pressure and the impending repricing of the preferred stock as factors.