Capital |
12 Months Ended |
|---|---|
Dec. 31, 2025 | |
| Capital [Abstract] | |
| Capital |
Note 2 – Capital
Series C, Senior Non-Cumulative Perpetual Preferred Stock
On June 7, 2022, the Company issued 150,000 shares of Series C Preferred Stock with a liquidation preference of $1,000
per share for the capital investment of $150 million from the U.S. Treasury under the Emergency Capital Investment Program
(“ECIP”).
The Series C Preferred Stock accrued no dividend for the first 24 months following the investment date. Thereafter, the dividend rate will be adjusted based on the qualified lending growth criteria listed in
the terms of the ECIP investment with the annual dividend rate up to 2%. After the anniversary of the investment date, the dividend rate will be fixed based on the average annual amount of lending in years 2 through 10. Dividends are payable quarterly in arrears
on March 15, June 15, September 15, and December 15.
Established by the Consolidated Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial
institutions and minority depository institutions to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including persistent poverty
counties, that may be disproportionately impacted by the economic effect of the COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions.
The Series C Preferred Stock may be redeemed at the option of the Company on or after the anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in
accordance with the federal banking agencies’ regulatory capital regulations.
On January 14, 2025, the Company entered into a Securities
Purchase Option Agreement (the “Option Agreement”) with the U.S. Treasury, which grants the Company the conditional option to repurchase the Series C Preferred Stock during the first 15 years following the Company’s issuance of the Preferred Stock. The purchase price for the Series C Preferred Stock under the Option Agreement is based on a formula approximate to the fair value of the Series C Preferred Stock as of the date the Option Agreement is executed,
calculated as set forth in the Option Agreement, together with any accrued and unpaid dividends thereon and could represent a discount from the Preferred Stock’s liquidation amount.
The purchase option may not be exercised during the first
10 years following the Company’s sale of the Series C Preferred Stock (“ECIP Period”) unless and until the Company meets at least
one of the following three conditions (the “Threshold Conditions”): (1) an average of at least 60% of the Company’s loan
originations qualify as “Deep Impact Lending” over any 16 consecutive quarters, (2) an average of at least 85% of the Company’s “total originations qualify as “Qualified Lending” over any 24 quarters or (3) the Series C Preferred Stock has a dividend rate of no more than 0.5%
at each of six consecutive “Reset Dates,” in each case as defined in the Option Agreement and the terms of the Series C Preferred
Stock. In addition to satisfying a Threshold Condition, the Option Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of
the original ECIP purchase agreement and the terms of the Series C Preferred Stock, maintaining qualification as either a certified community development financial institution or a minority depository institution and satisfying other legal
and regulatory criteria. The Company may designate a mission aligned nonprofit affiliate as the purchaser of the Series C Preferred Stock under the terms of the Option
Agreement.
The earliest possible date by which a Threshold Condition may be met is June 30, 2028, which is the end of the consecutive quarter following the Original Closing Date. However, the Company does not currently meet any of the Threshold Conditions to
exercise the purchase option, and there can be no assurance if and when the Threshold Conditions will be met.
In addition to the requirement that a Threshold Condition be met, the Repurchase Agreement requires that the Company meet certain other
eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Preferred Stock, maintaining qualification as either a CDFI or an
MDI, and meeting other legal and regulatory criteria. Although the Company currently meets the general eligibility criteria, other than satisfying one of the Threshold Conditions, there can be no assurance that the Company will meet such
criteria in the future.
The Company was required to begin paying quarterly
dividends on the Series C Preferred Stock in the three month period ended June 30, 2024. Dividends on the Series C Preferred Stock totaled $3.0 million and $1.6 million for
the years ended December 31, 2025 and 2024, respectively, with a dividend rate of 2.0%.
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