Junior Subordinated Debentures and Other Borrowings	9 Months Ended
Sep. 30, 2013
Junior Subordinated Debentures and Other Borrowings
Junior Subordinated Debentures and Other Borrowings	NOTE (7) – Junior Subordinated Debentures and Other Borrowings On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures in a private placement. The Debentures mature on March 17, 2014 and interest is payable quarterly at a rate per annum equal to the 3-month LIBOR plus 2.54%. The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.79% at September 30, 2013. The Company stopped paying interest on the Debentures in September 2010 and the accrued interest on the Debentures was $609 thousand as of September 30, 2013. Under the Order applicable to the Company discussed in Note 2, the Company is not permitted to make payments on its debt without prior notice to and receipt of written notice of non-objection from the FRB. In addition, under the terms of the Debentures, the Company is not allowed to make payments on the Debentures if the Company is in default on any of its senior indebtedness, which term includes the senior line of credit described below. On February 28, 2010, the Company borrowed an aggregate of $5.0 million under its $5.0 million line of credit with another financial institution, and invested all of the proceeds in the equity capital of the Bank. Pursuant to a directive from the FRB and subsequently the Order applicable to the Company discussed in Note 2, the Company has not been permitted to make principal or interest payments on this senior debt since June 2010. The line of credit matured at the end of July 2010, but was not repaid and remains in default. As part of the recapitalization that closed in August 2013, the Company exchanged 2,575 shares of Common Stock Equivalents with an agreed upon value of $2.6 million for $2.6 million principal amount of this line of credit. In addition, the lender forgave all of the accrued interest, totaling $1.8 million, on the entire amount of the line of credit as of the date of the exchange and modified the terms of the remaining principal amount of $2.4 million. The modified terms for the remaining loan include, among others items, an extension of the maturity of the line of credit to February 22, 2019 and a repayment schedule that specifies six quarterly payments of interest only beginning three months following the closing of the recapitalization, followed by 48 fully amortizing equal monthly payments of principal and interest on the loan beginning 19 months after the closing of the recapitalization; provided, that each payment on the loan must receive prior approval from the FRB. Failure to make such any payment due to an inability to obtain such approval despite the exercise by the Company of required efforts to obtain such approval will not constitute an event of default under the revised loan terms. In addition the interest rate on the remaining loan has been increased to the Wall Street Journal Prime Rate plus 2%, with a floor (minimum) rate of 6%, from the original loan interest rate of the Wall Street Journal Prime Rate plus 1%, with a floor rate of 6%. As part of the modification, the Default Rate Margin of 5% has been forgiven. Borrowings under this line of credit continue to be secured by 100% of the Company’s investment in the Bank. In accordance with Accounting Standards Codification (“ASC”) 470-60 - Troubled Debt Restructurings by Debtors, $1.2 million of the forgiven interest has been recorded as a gain on restructuring in the income statement for the third quarter, and the balance of the forgiven interest ($535 thousand) has been added to the principal balance of the line of credit that remains outstanding after consummation of the recapitalization. Furthermore, any future payments made on the remaining loan amount pursuant to the modified terms shall be applied to the carrying amount of the loan payable, and no interest expense will be recorded on the modified loan between the date that it was restructured (i.e., the closing of the recapitalization) and the new maturity of the modified loan provided that the floating rate on the remaining modified loan does not exceed the floor of 6%.

NOTE (7) – Junior Subordinated Debentures and Other Borrowings

On March 17, 2004, the Company issued $6.0 million of Floating Rate Junior Subordinated Debentures in a private placement. The Debentures mature on March 17, 2014 and interest is payable quarterly at a rate per annum equal to the 3-month LIBOR plus 2.54%. The interest rate is determined as of each March 17, June 17, September 17, and December 17, and was 2.79% at September 30, 2013. The Company stopped paying interest on the Debentures in September 2010 and the accrued interest on the Debentures was $609 thousand as of September 30, 2013. Under the Order applicable to the Company discussed in Note 2, the Company is not permitted to make payments on its debt without prior notice to and receipt of written notice of non-objection from the FRB. In addition, under the terms of the Debentures, the Company is not allowed to make payments on the Debentures if the Company is in default on any of its senior indebtedness, which term includes the senior line of credit described below.

On February 28, 2010, the Company borrowed an aggregate of $5.0 million under its $5.0 million line of credit with another financial institution, and invested all of the proceeds in the equity capital of the Bank. Pursuant to a directive from the FRB and subsequently the Order applicable to the Company discussed in Note 2, the Company has not been permitted to make principal or interest payments on this senior debt since June 2010. The line of credit matured at the end of July 2010, but was not repaid and remains in default.

As part of the recapitalization that closed in August 2013, the Company exchanged 2,575 shares of Common Stock Equivalents with an agreed upon value of $2.6 million for $2.6 million principal amount of this line of credit. In addition, the lender forgave all of the accrued interest, totaling $1.8 million, on the entire amount of the line of credit as of the date of the exchange and modified the terms of the remaining principal amount of $2.4 million. The modified terms for the remaining loan include, among others items, an extension of the maturity of the line of credit to February 22, 2019 and a repayment schedule that specifies six quarterly payments of interest only beginning three months following the closing of the recapitalization, followed by 48 fully amortizing equal monthly payments of principal and interest on the loan beginning 19 months after the closing of the recapitalization; provided, that each payment on the loan must receive prior approval from the FRB. Failure to make such any payment due to an inability to obtain such approval despite the exercise by the Company of required efforts to obtain such approval will not constitute an event of default under the revised loan terms. In addition the interest rate on the remaining loan has been increased to the Wall Street Journal Prime Rate plus 2%, with a floor (minimum) rate of 6%, from the original loan interest rate of the Wall Street Journal Prime Rate plus 1%, with a floor rate of 6%. As part of the modification, the Default Rate Margin of 5% has been forgiven. Borrowings under this line of credit continue to be secured by 100% of the Company’s investment in the Bank.

In accordance with Accounting Standards Codification (“ASC”) 470-60 - Troubled Debt Restructurings by Debtors, $1.2 million of the forgiven interest has been recorded as a gain on restructuring in the income statement for the third quarter, and the balance of the forgiven interest ($535 thousand) has been added to the principal balance of the line of credit that remains outstanding after consummation of the recapitalization. Furthermore, any future payments made on the remaining loan amount pursuant to the modified terms shall be applied to the carrying amount of the loan payable, and no interest expense will be recorded on the modified loan between the date that it was restructured (i.e., the closing of the recapitalization) and the new maturity of the modified loan provided that the floating rate on the remaining modified loan does not exceed the floor of 6%.