v3.25.2
Note 6 - Borrowings and Subordinated Notes
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 6 - BORROWINGS AND SUBORDINATED NOTES

 

Borrowings and subordinated notes were as follows:

 

  

June 30, 2025

  

December 31, 2024

 
  

Contractual

      

Contractual

     
  

Rate

  

Amount

  

Rate

  

Amount

 

Fixed-rate advance from FHLB, due March 17, 2025

  —% $—   4.27% $5,000 

Fixed-rate advance from FHLB, due September 17, 2025

  4.20%  5,000   4.20%  5,000 

Fixed-rate advance from FHLB, due March 17, 2026

  4.15%  5,000   4.15%  5,000 

Fixed-rate advance from FHLB, due September 17, 2026

  4.06%  5,000   4.06%  5,000 

Subordinated notes, due May 15, 2031

  3.75%  18,263   3.75%  18,736 

Line of credit, due March 28, 2025

  —%  —   7.00%  — 

 

In 2021, the Company entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers and accredited investors 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 Notes.  These issuance costs are being amortized over the 10-year life of the Notes.  At June 30, 2025 and  December 31, 2024, there were $237,000 and $264,000, respectively, in remaining unamortized issuance costs and they are presented in the Company's financial statements as a reduction of the principal amount of the Notes.

 

The Notes bear interest at a fixed annual rate of 3.75%, from and including the date of issuance to May 14, 2026, payable semi-annually in arrears. From and including May 15, 2026, but excluding the maturity date or early redemption date, as applicable, the interest rate will reset quarterly to an interest rate per annum equal to Three-Month Term SOFR (as defined in the Notes) plus 299 basis points, payable quarterly in arrears. Under the conditions specified in the Notes, the interest rate accruing 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 payments due 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 for regulatory capital purposes.

 

In March 2025, we repurchased $500,000 of the Notes and recorded a $42,000 gain on repurchase. In March 2024, we repurchased $1.0 million of the Notes and recorded a $107,000 gain on repurchase.

 

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 minus 0.50%, with a minimum rate of 2.40%.  The line of credit has not been renewed.  The line of credit had no outstanding balance at  December 31, 2024.