v3.25.2
Credit Arrangements
 6 Months Ended
Jun. 30, 2025
Credit Arrangements [Abstract]  
Credit Arrangements
Note 8.
Credit Arrangements

Bank Debt

On May 12, 2021, the Company entered into a Revolving Credit Agreement with Truist Bank as the lender (the “Lender”). The Revolving Credit Agreement provides for an unsecured $10,000 revolving credit facility that originally matured on April 12, 2024. On March 22, 2024, the Company entered into a First Amendment (the “Amendment”) to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender. The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted Term SOFR rate (as defined in the Credit Agreement), plus 2.00%, (b) extends the maturity date of the revolving credit facility to March 22, 2027, (c) requires the monthly payment of an unused commitment fee of 0.2% of the unused facility amount, and (d) requires that the Company maintain a consolidated net worth of not less than $64,200. Except as modified by the Amendment, the existing terms of the original Credit Agreement remain in effect.

The Credit Agreement requires the Company to comply with certain covenants, including a debt-to-capital ratio that restricts the Company from incurring consolidated indebtedness that exceeds 35% of the Company’s consolidated capitalization at any time and maintaining a minimum consolidated net worth, as previously mentioned. The Credit Agreement also contains customary representations and warranties and events of default. Events of default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of June 30, 2025, and December 31, 2024, the Company had outstanding borrowings including accrued interest of $4,021 and $4,023, respectively, under the Credit Agreement.

For the three months ended June 30, 2025 and 2024, the Company incurred $65 and $76 in interest expense, respectively, on the revolving credit facility borrowing. For the six months ended June 30, 2025 and 2024, the Company incurred $129 and $137, respectively, in interest expense. During the three month and six month periods ended June 30, 2025, the Company paid $3 and $6, respectively, in fees on the available unused amount of the revolving credit facility of $6,000. At June 30, 2025 and December 31, 2024, the effective interest rate was 6.43% and 6.67%, respectively.

Junior Subordinated Debentures

The Company has two unconsolidated Connecticut statutory business trusts, which exist for the exclusive purposes of: (i) issuing trust preferred securities (“Trust Preferred Securities”) representing undivided beneficial interests in the assets of the trusts; (ii) investing the gross proceeds of the Trust Preferred Securities in junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) of the Company; and (iii) engaging in those activities necessary or incidental thereto.

The outstanding $18,042 and $15,696 of Junior Subordinated Debentures mature on December 4, 2032 and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company. Prior to July 1, 2023, the interest rate was based on 3-month LIBOR plus an applicable margin. Effective July 1, 2023, the interest rate is determined based on a reference rate of the 3-month SOFR plus applicable tenor spread of 0.26161% plus an applicable margin, ranging from 4.00% to 4.10%. At June 30, 2025 and December 31, 2024, the effective interest rate was 8.64% and 8.82%, respectively.

The financial structure of each of Atlantic American Statutory Trust I and II as of June 30, 2025 was as follows:

   
Atlantic American
Statutory Trust I
    
Atlantic American
Statutory Trust II
  
JUNIOR SUBORDINATED DEBENTURES (1) (2)
            
Principal amount owed June 30, 2025
  
$
18,042
    
$
23,196
  
Less: Treasury debt (3)
    
—
      
(7,500
)
Net balance June 30, 2025
  
$
18,042
    
$
15,696
  
Net balance December 31, 2024
  
$
18,042
    
$
15,696
  
Coupon rate
  
3-Month SOFR + 0.26161% spread adj + 4.00%
    
3-Month SOFR + 0.26161% spread adj + 4.10%
  
Interest payable
  
Quarterly
    
Quarterly
  
Maturity date
  
December 4, 2032
    
May 15, 2033
  
Redeemable by issuer
  
Yes
    
Yes
  
TRUST PREFERRED SECURITIES
                
Issuance date
  
December 4, 2002
    
May 15, 2003
  
Securities issued
    
17,500
      
22,500
  
Liquidation preference per security
  
$
1
    
$
1
  
Liquidation value
  
$
17,500
    
$
22,500
  
Coupon rate
  
3-Month SOFR + 0.26161% spread adj + 4.00%
    
3-Month SOFR + 0.26161% spread adj + 4.10%
  
Distribution payable
  
Quarterly
    
Quarterly
  
Distribution guaranteed by (4)
  
Atlantic American Corporation
    
Atlantic American Corporation
  
(1)
For each of the respective debentures, the Company has the right at any time, and from time to time, to defer payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the debentures’ respective maturity dates. During any such period, interest will continue to accrue and the Company may not declare or pay any cash dividends or distributions on, or purchase, the Company’s common stock nor make any principal, interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures. The Company has the right at any time to dissolve each of the trusts and cause the Junior Subordinated Debentures to be distributed to the holders of the Trust Preferred Securities.

(2)
The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all senior debt of the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries.

(3)
On August 4, 2014, the Company acquired $7,500 of the Junior Subordinated Debentures.

(4)
The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities, including payment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation.