Long-Term Debt

12 Months Ended

Dec. 31, 2020

(In Thousands)

Long-term debt as of December 31, 2020 and 2019 is summarized as follows:


	2020		2019
Federal Home Loan Bank advances	$	152,167	$	152,337

Junior subordinated debentures	110,794		110,215
Subordinated notes	212,009		113,955
Total long-term debt	$	474,970	$	376,507

Federal Home Loan Bank Advances

Long-term advances from the FHLB outstanding at December 31, 2020 had maturities ranging from 2021 to 2030 with a combination of fixed and floating rates ranging from 0.00% to 4.34%. The long-term advance with no interest rate is the result of a floating-to-fixed advance that has a floating rate of three-month LIBOR less 50 basis points with a zero percent floor. This floating-to-fixed advance will convert to a fixed rate of 1.358% in October 2021. Weighted-average interest rates on outstanding advances at December 31, 2020 and 2019 were 0.05% and 1.53%, respectively. These advances are collateralized by a blanket lien on the Bank’s loans. The Company had availability on unused lines of credit with the FHLB of $3,784,520 at December 31, 2020.

In connection with the prepayment of $2,094 in long-term advances from the FHLB during 2019, the Company incurred penalty charges of $54, which is included under the line item “Debt prepayment penalty” in the Consolidated Statements of Income. The Company did not prepay any outstanding long-term advances from the FHLB during 2020 or 2018.

Junior Subordinated Debentures

The Company owns the outstanding common securities of business trusts that issued corporation-obligated mandatorily redeemable preferred capital securities to third-party investors. The trusts used the proceeds from the issuance of their preferred capital securities and common securities (collectively referred to as “capital securities”) to buy floating rate junior subordinated debentures issued by the Company (or by companies that the Company subsequently acquired). The debentures are the trusts’ only assets and interest payments from the debentures finance the distributions paid on the capital securities. Distributions on

the capital securities are payable quarterly at a rate per annum equal to the interest rate being earned by the trusts on the debentures held by the trusts. The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the debentures. The Company has entered into an agreement which fully and unconditionally guarantees the capital securities of each trust subject to the terms of the guarantee.

The following table provides details on the debentures as of December 31, 2020:


	Principal Amount		Interest Rate		Year of Maturity	Amount Included in Tier 1 Capital
PHC Statutory Trust I	$	20,619	3.08	%	2033	$	20,000
PHC Statutory Trust II	31,959		2.09		2035	31,000
Capital Bancorp Capital Trust I	12,372		1.74		2035	12,000
First M&F Statutory Trust I	30,928		1.55		2036	21,646
Brand Group Holdings Statutory Trust I	10,310		2.30		2035	9,172
Brand Group Holdings Statutory Trust II	5,155		3.22		2037	5,055
Brand Group Holdings Statutory Trust III	5,155		3.22		2038	5,055
Brand Group Holdings Statutory Trust IV	3,093		3.97		2038	3,275

During 2003, the Company formed PHC Statutory Trust I to provide funds for the cash portion of the Renasant Bancshares, Inc. acquisition. The interest rate for PHC Statutory Trust I reprices quarterly equal to the three-month LIBOR at the determination date plus 285 basis points. In April 2012, the Company entered into an interest rate swap agreement effective March 17, 2014, pursuant to which the Company receives a variable rate of interest based on the three-month LIBOR plus a spread of 2.85% and pays a fixed rate of interest of 5.49%. The debentures owned by PHC Statutory Trust I are currently redeemable at par.

During 2005, the Company formed PHC Statutory Trust II to provide funds for the cash portion of the Heritage Financial Holding Corporation acquisition. The interest rate for PHC Statutory Trust II reprices quarterly equal to the three-month LIBOR at the determination date plus 187 basis points. The debentures owned by PHC Statutory Trust II are currently redeemable at par.

In connection with the acquisition of Capital Bancorp, Inc. in 2007, the Company assumed the debentures issued to Capital Bancorp Capital Trust I. The discount associated with the Company’s assumption of the debentures issued to Capital Bancorp Capital Trust I was fully amortized during 2010. The interest rate for Capital Bancorp Capital Trust I reprices quarterly equal to the three-month LIBOR plus 150 basis points. In March 2012, the Company entered into an interest rate swap agreement effective March 31, 2014, whereby the Company receives a variable rate of interest based on the three-month LIBOR plus a spread of 1.50% and pays a fixed rate of interest of 4.42%. The debentures owned by Capital Bancorp Capital Trust I are currently redeemable at par.

In connection with the acquisition of First M&F Corporation in 2013, the Company assumed the debentures issued to First M&F Statutory Trust I. The discount associated with the Company’s assumption of the debentures issued to First M&F Statutory Trust I had a carrying value of $8,354 at December 31, 2020 and $8,902 at December 31, 2019. The discount is being amortized through March 2036. The interest rate for First M&F Statutory Trust I reprices quarterly equal to the three-month LIBOR plus a spread of 133 basis points. In April 2018, the Company entered into an interest rate swap agreement effective June 15, 2018, whereby the Company pays a fixed rate of 4.180% and receives a variable rate of three-month LIBOR plus a spread of 133 basis points on a quarterly basis and will mature in June 2028. The debentures owned by First M&F Statutory Trust I are currently redeemable at par.

In connection with the acquisition of Brand in 2018, the Company assumed the debentures issued to Brand Group Holdings Statutory Trust I, Brand Group Holdings Statutory Trust II, Brand Group Holdings Statutory Trust III and Brand Group Holdings Statutory Trust IV. The discount associated with the Company’s assumption of the debentures issued to the respective Brand trusts had a carrying value of $443 at December 31, 2020 and $474 at December 31, 2019 and is being amortized through September 2038. The interest rate for each trust acquired from Brand reprices quarterly equal to the three-month LIBOR at the determination date plus 205 basis points for Brand Group Holdings Statutory Trust I, plus 300 basis points for Brand Group Holdings Statutory Trust II and III, and plus 375 basis points for Brand Group Holdings Statutory Trust IV. The debentures owned by the respective trusts listed above are all currently redeemable at par.

The Company has classified $107,203 of the debentures described in the above paragraphs as Tier 1 capital. Federal Reserve guidelines limit the amount of securities that, similar to our junior subordinated debentures, are includable in Tier 1 capital, but these guidelines did not impact the amount of debentures we include in Tier 1 capital. Although the Company’s existing junior subordinated debentures are currently unaffected by these Federal Reserve guidelines, on account of changes enacted as part of the Dodd-Frank Act, any new trust preferred securities are not includable in Tier 1 capital. Further, if as a result of an acquisition the Company exceeds $15,000,000 in assets, or if the Company makes any acquisition after exceeding $15,000,000 in assets, the Company will lose Tier 1 treatment of our junior subordinated debentures.

For more information about the Company’s derivative financial instruments, see Note 14, “Derivative Instruments.”

Subordinated notes

On August 22, 2016, the Company issued and sold in an underwritten public offering $60,000 aggregate principal amount of its 5.00% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “2026 Notes”) and $40,000 aggregate principal amount of its 5.50% Fixed-to-Floating Rate Subordinated Notes due 2031 (the “2031 Notes”), at a public offering price equal to 100% of the aggregate principal amounts of the notes. As part of the Metropolitan BancGroup, Inc. acquisition in 2017, the Company assumed $15,000 of 6.50% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “Metropolitan Notes”). On September 3, 2020, the Company issued and sold in an underwritten public offering $100,000 aggregate principal amount of its 4.50% Fixed-to-Floating Rate Subordinated Notes due 2035 (the “2035 Notes”; the 2026 Notes, the 2031 Notes, the 2035 Notes and the Metropolitan Notes are referred to collectively as the “Notes”), at a public offering price equal to 100% of the aggregate principal amounts of the Notes.

During 2019, the Company redeemed the $30,000 of 8.50% Fixed Rate Subordinated Notes assumed in the Brand acquisition and incurred a debt prepayment penalty of $900, which was accounted for in the purchase accounting fair value adjustment.

The Metropolitan Notes, 2026 Notes, 2031 Notes and 2035 Notes mature on July 1, 2026, September 1, 2026, September 1, 2031 and September 15, 2035, respectively. Until but excluding July 1, 2021, the Company pays interest on the Metropolitan Notes semi-annually in arrears on each January 1 and July 1 at a fixed annual interest rate equal to 6.50%. From and including July 1, 2021 to but excluding the maturity date or the date of earlier redemption, the interest rate on the Metropolitan Notes will reset quarterly to an annual interest rate equal to the then-current three-month LIBOR rate plus a spread of 554.5 basis points, payable quarterly in arrears on each January 1, April 1, July 1 and October 1. Until but excluding September 1, 2021 and 2026, respectively, the Company pays interest on the 2026 Notes and 2031 Notes semi-annually in arrears on each March 1 and September 1 at a fixed annual interest rate equal to 5.00% and 5.50%, respectively. From and including September 1, 2021 and 2026, respectively, to but excluding the maturity date or the date of earlier redemption, the interest rate on the 2026 Notes and 2031 Notes will reset quarterly to an annual interest rate equal to the then-current three-month LIBOR rate plus a spread of 384 basis points and 407.1 basis points, respectively, payable quarterly in arrears on each March 1, June 1, September 1 and December 1. Until but excluding September 15, 2030, the Company pays interest on the 2035 Notes semi-annually in arrears on each March 15 and September 15 at a fixed annual interest rate equal to 4.50%. From and including September 15, 2030, to but excluding the maturity date or the date of earlier redemption, the interest rate on the 2035 Notes will reset quarterly to an annual interest rate equal to the then-current three-month SOFR plus a spread of 402.5 basis points, payable quarterly in arrears on each March 15, June 15, September 15 and December 15. Notwithstanding the foregoing, for all of the Notes, in the event that three-month LIBOR or three-month SOFR is less than zero, three-month LIBOR or three-month SOFR, as applicable, shall be deemed to be zero. Beginning with the interest payment date of July 1, 2021 as to the Metropolitan Notes, September 1, 2021 as to the 2026 Notes, September 1, 2026 as to the 2031 Notes, and September 15, 2030 as to the 2035 Notes, and on any interest payment date thereafter, the Company may redeem the applicable Notes in whole or in part at a redemption price equal to 100% of the principal amount of the respective Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption.

The Company may also redeem any series of the Notes at any time, at the Company’s option, in whole or in part, if: (i) a change or prospective change in law occurs that could prevent the Company from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption price is 100% of the principal amount of the Notes being redeemed plus any accrued and unpaid interest to but excluding the redemption date. There is no sinking fund for the benefit of the Notes, and none of the Notes are convertible or exchangeable.

The aggregate stated maturities of long-term debt outstanding at December 31, 2020, are summarized as follows:


2021	$	100
2022	451
2023	—
2024	—
2025	—
Thereafter	474,419
Total	$	474,970