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SUBORDINATED DEBT | 9 Months Ended
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Sep. 30, 2024
Debt Disclosure [Abstract] |
SUBORDINATED DEBT | NOTE 5 - SUBORDINATED DEBT Subordinated debt was made up of the following as of:
|  | September 30, 2024 |  |  | December 31, 2023 |
Trust III Debentures |  | $ | 2,062 |  |  | $ | 2,062 |
DCB Trust I Debentures |  |  | 5,155 |  |  |  | 5,155 |
Subordinated note |  |  | 34,668 |  |  |  | 34,568 |
Other debentures |  |  | 2,000 |  |  |  | 4,000 |
|  | $ | 43,885 |  |  | $ | 45,785 |
As of September 30, 2024, the Company has two active trusts, Guaranty (TX) Capital Trust III (“Trust III”) and DCB Financial Trust I (“DCB Trust I” and together with Trust III, the "Trusts"). Upon formation, the Trusts issued trust preferred securities (“TruPS”) with a liquidation value of $1,000 per share to third parties in private placements. Concurrently with the issuance of the TruPS, the Trusts issued common securities to the Company. The Trusts invested the proceeds of the sales of their securities in junior subordinated debentures issued by the Company (“Debentures”). The Debentures mature approximately 30 years after the issuance date, which may be shortened if certain conditions are met (including the Company having received prior approval of the Board of Governors of the Federal Reserve System (the "Federal Reserve") and any other required regulatory approvals).
|  | Trust III |  |  | DCB Trust I |
Issuance date |  | July 25, 2006 |  |  | March 29, 2007 |
Capital trust pass-through securities |  |  |  |  |  |
Number of shares |  |  | 2,000 |  |  |  | 5,000 |
Original liquidation value |  | $ | 2,000 |  |  | $ | 5,000 |
Common securities liquidation value |  |  | 62 |  |  |  | 155 |
The securities held by the Trusts qualify as Tier 1 capital for the Company under Federal Reserve Board guidelines. The Federal Reserve’s guidelines restrict core capital elements (including trust preferred securities and qualifying perpetual preferred stock) to 25% of all core capital elements, net of goodwill less any associated deferred tax liability. Because the Company’s aggregate amount of trust preferred securities is less than the limit of 25% of Tier 1 capital, net of goodwill, the full amount is includable in Tier 1 capital at September 30, 2024 and December 31, 2023. Additionally, the terms provide that trust preferred securities would no longer qualify for Tier 1 capital within five years of their maturity, but would be included as Tier 2 capital. However, the trust preferred securities would be amortized out of Tier 2 capital by one-fifth each year and excluded from Tier 2 capital completely during the year prior to maturity of the Debentures. With certain exceptions, the amount of the principal and any accrued and unpaid interest on the Debentures are subordinated in right of payment to the prior payment in full of all senior indebtedness of the Company. Interest on the Debentures is payable quarterly. The interest is deferrable on a cumulative basis for up to five consecutive years following a suspension of dividend payments on all other capital stock. No principal payments are due until maturity for each of the Debentures.
|  | Trust III Debentures |  |  | DCB Trust I Debentures |
Original amount |  | $ | 2,062 |  |  | $ | 5,155 |
Maturity date |  | October 1, 2036 |  |  | June 15, 2037 |
Interest due |  | Quarterly |  |  | Quarterly |
In accordance with ASC 810, "Consolidation," the Debentures issued by the Company to the Trusts are shown as liabilities in the consolidated balance sheets and interest expense associated with the Debentures is shown in the consolidated statements of earnings. Trust III Debentures Interest is payable at a variable rate per annum, reset quarterly, equal to 3-month Secured Overnight Financing Rate ("SOFR") plus 1.93%. On any interest payment date on or after October 1, 2016 and prior to maturity date, the Debentures are redeemable for cash at the option of the Company, on at least 30, but not more than 60 days’ notice, in whole or in part, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date of redemption. DCB Trust I Debentures Interest is payable at a variable rate per annum, reset quarterly, equal to 3-month SOFR plus 2.06%. On any interest payment date on or after June 15, 2012 and prior to maturity date, the Debentures are redeemable for cash at the option of the Company, on at least 30, but not more than 60 days’ notice, in whole or in part, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date of redemption. Subordinated Note In March 2022, the Company completed a private placement of $35,000 aggregate principal amount of its fixed-to-floating rate subordinated note due April 1, 2032. The subordinated note initially bears a fixed interest rate of 3.625% per year, due semi-annually in arrears on April 1 and October 1. Commencing on April 1, 2027, the interest rate on the subordinated note will reset each quarter at a floating interest rate equal to the then-current three-month term SOFR plus 192 basis points. The Company may at its option redeem in whole or in part the subordinated note on or after March 4, 2027 without a premium. The subordinated note is treated as Tier 2 capital for regulatory purposes (subject to reductions in the amount includable as Tier 2 capital in the final five years prior to maturity), and is presented net of related unamortized issuance costs on the consolidated balance sheets. Other Debentures In May 2020, the Company issued $10,000 in debentures to directors and other related parties. The debentures were issued at a par value of $500 each with fixed annual rates between 1.00% and 4.00% and maturity dates between November 1, 2020 and November 1, 2024. Various of these debentures have matured since issuance and $2,000 remains outstanding as of September 30, 2024. At the Company’s option, and with 30 days advanced notice to the holder, the entire principal amount and all accrued interest may be paid to the holder on or before the maturity date of any debenture. The redemption price is equal to 100% of the face amount of the debenture redeemed, plus all accrued interest. The scheduled principal payments and weighted average rates of the Debentures, the subordinated note and other debentures are as follows:
Year |  | Current Weighted Average Rate |  |  | Principal Due |
2024 |  |  | 4.00 | % |  | $ | 2,000 |
Thereafter |  |  | 4.26 | % |  |  | 42,217 |
Total scheduled principal payments |  |  |  |  |  | 44,217 |
Unamortized debt issuance costs |  |  |  |  |  | (332 | )
|  |  |  |  | $ | 43,885 |

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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 -Topic 942 -SubTopic 470 -Name Accounting Standards Codification -Section 45 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org/1943274/2147478878/942-470-45-1 + Details
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