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Subordinated Debt | 9 Months Ended
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Sep. 30, 2024
Subordinated Debt [Abstract] |
Subordinated Debt | Note 12 – Subordinated debt On July 30, 2018, the Company issued $33.5 million of fixed-to-floating rate subordinated debentures (the “Old Notes”) in a private placement. The Notes have a 10-year term and bore an interest at a fixed annual rate of 5.625% for the first five years of the term (the "Fixed Interest Rate Period"). On August 1, 2023, the interest rate was scheduled to adjust to a floating rate based on the three-month LIBOR plus 2.72% until redemption or maturity (the "Floating Interest Rate Period"). However, LIBOR was replaced as the benchmark rate per the discussion below. The Old Notes are scheduled to mature on August 1, 2028. The Company will pay interest in arrears quarterly during the remaining term of the Old Notes. The Old Notes constitute an unsecured and subordinated obligation of the Company and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. The Old Notes qualify as Tier 2 capital for the Company for regulatory purposes, when applicable, and the portion that the Company contributed to the Bank qualifies as Tier 1 capital for the Bank. Subordinated debt included associated deferred costs of $116,000 which were fully amortized during the year ended December 31, 2023. The Tier 2 capital credit related to the Old Notes started to amortize as the Old Notes reached their five-year anniversary on August 1, 2023. On August 29, 2024, the Company issued $40 million of fixed-to-floating subordinated debentures (the “New Notes”) in a private placement to certain qualified institutional investors. The New Notes have a 10-year term and bear interest at a fixed rate of 9.250% for the first five years of the term. The fixed interest rate is payable semiannually for the first five years and will be reset quarterly thereafter to the then-current three-month SOFR (defined below) plus 582 basis points. The Company plans to use the net proceeds from the offering to refinance the Old Notes and for general corporate purposes. The New Notes are intended to qualify as Tier 2 capital for the Company for regulatory purposes and the portion that the Company contributes to the Bank will qualify as Tier 1 capital for the Bank. The New Notes constitute an unsecured and subordinated obligation of the Company and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. During the third quarter, the Company was able to repurchase $9.4 million of the Old Notes and plans on calling the remaining $24.1 million of the Old Notes on the next callable date of November 1, 2024. The Company also has $4.1 million of mandatory redeemable trust preferred securities. The interest rate on these floating rate junior subordinated debentures adjusts quarterly and had been equal to the three-month LIBOR plus 2.65%. They mature on June 17, 2034. In accordance with the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) and the regulation issued by the Board of Governors of the Federal Reserve System implementing the LIBOR Act, the Company has selected the three-month CME Term Secured Overnight Financing Rate (“SOFR”) as the applicable successor rate for both the Old Notes and the trust preferred securities. The calculation of the amount of interest payable, based on the three-month CME Term SOFR, will also include the applicable tenor spread adjustment of 0.26161% per annum as specified in the LIBOR Act. At September 30, 2024, the interest rate for the Old Notes and trust preferred securities was 8.22929% and 7.85279%, respectively.

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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//1943274/2147480876/942-470-45-1 + Details
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