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Note 7 - Borrowings and Subordinated Debt
 6 Months Ended
Jun. 30, 2021
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 7 - BORROWINGS AND SUBORDINATED NOTES

 

Borrowings and Subordinated Notes were as follows:

 

  

June 30, 2021

 

December 31, 2020

  

Contractual

     

Contractual

    
  

Rate

 

Amount

 

Rate

 

Amount

Fixed-rate advance from FHLB, due May 9, 2022

 —% $5,000 —% $4,000

Subordinated Notes, due May 15, 2031

 3.75% 19,568 —% —

Line of credit, due March 31, 2022

 2.50% — 2.50% —

 

On April 14, 2021, the Company entered into Subordinated Note Purchase Agreements (collectively, the “Purchase Agreement”) with certain qualified institutional buyers and accredited investors (the “Purchasers”) pursuant to which the Company sold and issued $20.0 million in aggregate principal amount of its 3.75% Fixed-to-Floating Rate Subordinated Notes due May 15, 2031 (the “Notes”). 

 

The Company incurred $441,000 of issuance costs associated with the Subordinated Notes.  These will be amortized over the 10-year life of the Notes.  At June 30, 2021, there were $432,000 in remaining unamortized costs and is presented as a reduction of the principal amount within Subordinated Notes.

 

The Notes bear interest at a fixed annual rate of 3.75%, from and including the date of issuance to but excluding May 15, 2026, payable semi-annually in arrears. From and including May 15, 2026 to, but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an interest rate per annum equal to Three-Month Term SOFR (as defined in the Note) plus 299 basis points, payable quarterly in arrears. As provided in the Notes, under specified conditions the interest rate on the Notes during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR.   The Notes have a stated maturity date of May 15, 2031 and are redeemable, in whole or in part, on May 15, 2026, on any interest payment date thereafter, and at any time upon the occurrence of certain events.

 

Principal and interest on the Notes are subject to acceleration only in limited circumstances in the case of certain bankruptcy and insolvency-related events with respect to the Company. The Notes are unsecured, subordinated obligations of the Company and generally rank junior in right of payment to the Company’s current and future senior indebtedness. The Notes qualify as Tier 2 capital of the Company for regulatory capital purposes.

 

In 2020, the Company established a $5.0 million unsecured line of credit with a correspondent bank.  Interest is payable at a rate of Prime Rate as published in the Wall Street Journal rate minus 0.75%, with a minimum rate of 2.40%.  The line of credit was extended and will mature on March 31, 2022.  The line of credit had no outstanding balance at  June 30, 2021 and December 31, 2020.