JUNIOR SUBORDINATED DEBENTURES ISSUED TO CAPITAL TRUSTS

12 Months Ended

Dec. 31, 2023

Junior Subordinated Debenture Owed to Unconsolidated Subsidiary Trust [Abstract]

JUNIOR SUBORDINATED DEBENTURES ISSUED TO CAPITAL TRUSTS

Eight subsidiary business trusts of the Company have issued floating rate capital securities (“capital securities”) which are guaranteed by the Company. Three of these (Town and Country Statutory Trust II, Town and Country Statutory Trust III, and West Plains Investors Statutory Trust I) were acquired by the Company as part of its acquisition of Town and Country.

The Company owns all of the outstanding stock of the subsidiary business trusts. The trusts used the proceeds from the issuance of their capital securities to buy floating rate junior subordinated deferrable interest debentures (“junior subordinated debentures”) issued by the Company. These junior subordinated debentures are the only assets of the trusts and the interest payments from the junior subordinated debentures finance the distributions paid on the capital securities. The junior subordinated debentures are unsecured, rank junior and subordinate in the right of payment to all senior debt of the Company, and have an optional redemption in whole or in part on any interest payment date.

In accordance with GAAP, the trusts are not consolidated in the Company’s financial statements.

The face values and carrying values of the junior subordinated debentures are summarized as follows:


			Carrying Value
(dollars in thousands)	Face Value		December 31, 2023		December 31, 2022

Heartland Bancorp, Inc. Capital Trust B	$	10,310	$	10,310	$	10,310
Heartland Bancorp, Inc. Capital Trust C	10,310		10,310		10,310
Heartland Bancorp, Inc. Capital Trust D	5,155		5,155		5,155
FFBI Capital Trust I	7,217		7,217		7,217
National Bancorp Statutory Trust I	5,773		4,853		4,788
Town and Country Statutory Trust II	4,124		4,401		—
Town and Country Statutory Trust III	7,732		7,578		—
West Plains Investors Statutory Trust I	3,093		2,965		—
Total	$	53,714	$	52,789	$	37,780

The interest rates on the junior subordinated debentures are variable, reset quarterly, and are equal to the three-month LIBOR, as determined on the LIBOR Determination Date immediately preceding the Distribution Payment Date specific to each junior subordinated debenture, plus a fixed percentage. Beginning in July 2023, the three-month LIBOR index was replaced by the three-month term SOFR index plus a spread adjustment.

The interest rates and maturities of the junior subordinated debentures are summarized as follows:


			Interest Rate at
	Variable Interest Rate		December 31, 2023		December 31, 2022		Maturity Date
Heartland Bancorp, Inc. Capital Trust B	SOFR plus	3.01%	8.41	%	6.83	%	April 6, 2034
Heartland Bancorp, Inc. Capital Trust C	SOFR plus	1.79	7.18		6.30		June 15, 2037
Heartland Bancorp, Inc. Capital Trust D	SOFR plus	1.61	7.00		6.12		September 15, 2037
FFBI Capital Trust I	SOFR plus	3.06	8.46		6.88		April 6, 2034
National Bancorp Statutory Trust I	SOFR plus	3.16	8.55		7.67		December 15, 2037
Town and Country Statutory Trust II	SOFR plus	3.05	8.43		N/A		March 17, 2034
Town and Country Statutory Trust III	SOFR plus	1.94	7.33		N/A		March 22, 2037
West Plains Investors Statutory Trust I	SOFR plus	1.71	7.10		N/A		June 15, 2037

The distribution rate payable on the debentures is cumulative and payable quarterly in arrears. The Company has the right, subject to events of default, to defer payments of interest on the junior subordinated debentures at any time by extending the interest payment period for a period not exceeding 20 quarterly periods with respect to each deferral period, provided that no extension period may extend beyond the redemption or maturity date of the junior subordinated debentures. The capital securities are subject to mandatory redemption upon payment of the junior subordinated debentures and carry an interest rate identical to that of the related debenture. The junior subordinated debentures maturity dates may be shortened if certain conditions are met, or at any time within 90 days following the occurrence and continuation of certain changes in either tax treatment or the capital treatment of the junior subordinated debentures or the capital securities. If the junior subordinated debentures are redeemed before they mature, the redemption price will be the principal amount plus any accrued but unpaid interest. The Company has the right to terminate each Capital Trust and cause the junior subordinated debentures to be distributed to the holders of the capital securities in liquidation of such trusts.

Under current banking regulations, bank holding companies are allowed to include qualifying trust preferred securities in their Tier 1 Capital for regulatory capital purposes, subject to a 25% limitation to all core (Tier 1) capital elements, net of goodwill and other intangible assets less any associated deferred tax liability. As of December 31, 2023 and 2022, 100% of the trust preferred securities qualified as Tier 1 capital under the final rule adopted in March 2005.