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Subordinated Debt | 6 Months Ended
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Jun. 30, 2020
Subordinated Debt |
Subordinated Debt | 12) Subordinated Debt On May 26, 2017, the Company completed an underwritten public offering of $40,000,000 aggregate principal amount of its fixed-to-floating rate subordinated notes (“Subordinated Debt”) due June 1, 2027. The Subordinated Debt initially bears a fixed interest rate of 5.25% per year. Commencing on June 1, 2022, the interest rate on the Subordinated Debt resets quarterly to the three-month LIBOR rate plus a spread of 336.5 basis points, payable quarterly in arrears. Interest on the Subordinated Debt is payable semi-annually on June 1st and December 1st of each year through June 1, 2022 and quarterly thereafter on March 1st, June 1st, September 1st and December 1st of each year through the maturity date or early redemption date. The Company, at its option, may redeem the Subordinated Debt, in whole or in part, on any interest payment date on or after June 1, 2022 without a premium. Unamortized debt issuance cost totaled $354,000 at June 30, 2020. It is understood that after December 31, 2021, the administrator in the United Kingdom with authority over the agency that currently publishes LIBOR (commonly known as the Intercontinental Exchange “ICE”), will no longer support that published index as a generally representative rate. Due to this, suggested contract language addressing the replacement of LIBOR has been published by the Alternative Rate Reference Committee (commonly known as “ARRC”) convened by, among others, the Federal Reserve Board. ARRC, since its inception, has supported the Secured Overnight Financing Rate (“SOFR”) as a replacement index. ARRC’s April 2019 version of its suggested contract includes both an “amendment approach” (i.e., inserting a mechanism for the parties to agree to a replacement index after the occurrence of certain events regarding LIBOR); and a “hardwired approach” (i.e., inserting a mechanism to automatically implement a replacement index after the occurrence of certain events regarding LIBOR). As of June 30, 2020, ARRC has released an update recommending lenders start using the “hardwired approach” by the end of the third quarter of 2020 for new financings. With respect to such new financings, implementation of the ARRC’s proposed language (with variations as appropriate) into the documentation is contemplated. However, the events necessitating the replacement of LIBOR are not scheduled to occur until the end of 2021, and SOFR continues to be assessed from both financial and operational perspectives on an on-going basis, so it is expected that the “amendment approach” remains optimal for such documentation in the short term. With respect to existing financings tied to LIBOR, the existing terms of the documentation thereof will be the primary driver of how all issues related to LIBOR are dealt with, which necessarily means each will be evaluated and responded to on a case-by-case basis as necessary. Efforts are underway to coordinate with the counter-parties under such financings to address the issues, subject to the terms of the existing documentation and any mutually agreeable amendments thereto. The Company acquired $10,000,000 of subordinated debt from the Presidio transaction with an interest rate of 8%, which was redeemed on December 19, 2019. As a result of the redemption of the Presidio subordinated debt, the Company paid a pre-payment penalty of $300,000 during the fourth quarter of 2019.

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- Definition The entire disclosure for borrowings under subordinated debt agreements that qualify as available in computing net capital under SEC's uniform net capital rule, including restrictive covenants, collateral, interest rates and due dates, amounts due by date and amount owed in total. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 470 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6479118&loc=d3e64650-112822 + Details
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