Annual report pursuant to Section 13 and 15(d)

Subordinated Debentures

Subordinated Debentures
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Subordinated Debentures

Note 10 — Subordinated Debentures

The Company issued Fixed-to-Floating Subordinated Notes (“Notes”) of $100.0 million on March 21, 2017, with a final maturity on March 30, 2027. The Notes have an initial fixed interest rate of 5.45 percent per annum, payable semi-annually on March 30 and September 30 of each year. From and including March 30, 2022 and thereafter, the Notes bear interest at a floating rate equal to the then current three-month LIBOR, as calculated on each applicable date of determination, plus 3.315 percent payable quarterly. If the then current three-month LIBOR is less than zero, three-month LIBOR will be deemed to be zero. Debt issuance cost was $2.3 million, which is being amortized through the Note’s maturity date. At December 31, 2019 and December 31, 2018, the balance of Notes included in the Company’s Consolidated Balance Sheet, net of debt issuance cost, was $98.3 million and $98.1 million. The amortization of debt issuance cost was $193,000, $182,000 and $134,000 for the years ended December 31, 2019, 2018 and 2017, respectively.

The Company assumed Junior Subordinated Deferrable Interest Debentures (“Subordinated Debentures”) as a result of an acquisition in 2014 with an unpaid principal balance of $26.8 million and an estimated fair value of $18.5 million. The $8.3 million discount is being amortized to interest expense through the debentures’ maturity date of March 15, 2036. A trust was formed in 2005 by the acquired entity and $26.0 million of Trust Preferred Securities (“TPS”) was issued at a 6.26 percent fixed rate for the first five years and a variable rate at the three-month LIBOR plus 140 basis points thereafter and invested the proceeds in the Subordinated Debentures. The Company may redeem the Subordinated Debentures at an earlier date if certain conditions are met. The TPS will be subject to mandatory redemption if the Subordinated Debentures are repaid by the Company. Interest is payable quarterly, and the Company has the option to defer interest payments on the Subordinated Debentures from time to time for a period not to exceed five consecutive years. At December 31, 2019 and December 31, 2018, the balance of Subordinated Debentures included in the Company’s Consolidated Balance Sheets, net of discount of $6.8 million and $7.1 million, was $20.0 million and $19.7 million. The amortization of discount was $376,000, $356,000 and $329,000 for the years ended December 31, 2019, 2018 and 2017, respectively.