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Federal Home Loan Bank Advances and Junior Subordinated Debenture

12 Months Ended

Dec. 31, 2015

Federal Home Loan Bank Advances And Junior Subordinated Debenture

Federal Home Loan Bank Advances and Junior Subordinated Debenture

(7) Federal Home Loan Bank Advances and Junior Subordinated Debenture

The maturities and interest rates on the Federal Home Loan Bank (“FHLB”) advances were as follows (dollars in thousands)


Maturity
Year Ending		Interest			At December 31,
December 31,		Rate			2015			2014

2016			0.53			13,500			12,740
2016			0.59			6,500			10,000

					$	20,000		$	22,740

At December 31, 2015 and 2014, the FHLB advances were collateralized by $8.6 million and $13.2 million, respectively, of securities and by a lien on qualifying residential one-to-four family mortgage loans, commercial and multi-family real estate loans and second mortgage loans.

On September 30, 2004, the Company issued a $5,155,000 junior subordinated debenture to an unconsolidated subsidiary. The debenture has a term of thirty years. The interest rate was fixed at 6.4% for the first five years, and thereafter, the coupon rate floats quarterly at the three-month LIBOR rate plus 2.45% (2.68% at December 31, 2015). The junior subordinated debenture, due in 2034, is redeemable in certain circumstances. The terms of the debenture agreement allow the Company to defer payments of interest on the debenture by extending the interest payment period at any time during the term of the debenture for up to twenty consecutive quarterly periods. During 2014 and 2013, the Company exercised its right to defer payment of interest on the debenture. Interest payments deferred as of December 31, 2015 and 2014 totaled $955,000 and $793,000, respectively. The Company has deferred interest payments with respect to its junior subordinated debenture for the maximum allowable twenty consecutive quarterly payments. As discussed in note 13 the Company is not able to make these interest payments without the prior approval of the Federal Reserve Bank of Atlanta. Regulatory approval to pay said accrued and unpaid interest has been denied. The holder of the Junior Subordinated Debenture can accelerate the $5,155,000 principal balance due at December 31, 2015 as a result of this technical default. A Director of the Company has agreed to purchase the Debenture and has agreed to provide a forbearance of the payment to the Company upon consummation of the purchase. Although the agreed upon purchase price for the Debenture has been tendered, the Trustee has received conflicting direction and therefore on December 11, 2014, the Trustee commenced an Action for Interpleader in the United States District Court for the Southern District of New York.

On August 31, 2015, the court held that the Trustee could not sell the Debenture to the Director because certain conditions and requirements set forth in the indenture for the Trust had not been fulfilled. The Director intends to continue his efforts to acquire the Debenture. Based upon the underlying Debenture documents, Management does not believe the Trustee will call a Default at this time. The Company is continuing to pursue regulatory approval for the interest payment and other mechanisms for paying the accrued interest such as raising additional capital.