NOTE 16 – OTHER BORROWINGS

The following table summarizes Old National’s other borrowings at June 30, 2018 and December 31, 2017:


	June 30,			December 31,
(dollars in thousands)	2018			2017
Old National Bancorp:
Senior unsecured notes (fixed rate 4.125%) maturing August 2024	$	175,000		$	175,000
Unamortized debt issuance costs related to senior unsecured notes		(949	)		(1,026	)
Junior subordinated debentures (variable rates of 3.68% to 6.22%) maturing April 2032 to September 2037		60,310			60,310
Other basis adjustments		(3,318	)		(3,585	)
Old National Bank:
Capital lease obligations		5,326			5,389
Subordinated debentures (fixed rate 5.75%)		12,000			12,000
Other		1,872			694

Total other borrowings	$	250,241		$	248,782

Contractual maturities of other borrowings at June 30, 2018 were as follows:


(dollars in thousands)
Due in 2018	$	1,286
Due in 2019		137
Due in 2020		147
Due in 2021		160
Due in 2022		172
Thereafter		251,956
Unamortized debt issuance costs and other basis adjustments		(3,617	)

Total	$	250,241

Senior Notes

In August 2014, Old National issued $175.0 million of senior unsecured notes with a 4.125% interest rate. These notes pay interest on February 15 and August 15. The notes mature on August 15, 2024.

Junior Subordinated Debentures

Junior subordinated debentures related to trust preferred securities are classified in “other borrowings.” With the addition of Anchor (MN) assets, these securities now qualify as Tier 2 capital for regulatory purposes, subject to certain limitations. Prior to the fourth quarter of 2017, these securities qualified as Tier 1 capital for regulatory purposes.

Through various acquisitions, Old National assumed junior subordinated debenture obligations related to various trusts that issued trust preferred securities. Old National guarantees the payment of distributions on the trust preferred securities issued by the trusts. Proceeds from the issuance of each of these securities were used to purchase junior subordinated debentures with the same financial terms as the securities issued by the trusts.

Old National, at any time, may redeem the junior subordinated debentures at par and, thereby cause a redemption of the trust preferred securities in whole or in part.

The following table summarizes the terms of our outstanding junior subordinated debentures at June 30, 2018:

(dollars in thousands)

Rate at

Issuance

June 30,

Name of Trust

Issuance Date

Amount

Rate

2018

Maturity Date

VFSC Capital Trust I

April 2002

3,093

3-month LIBOR plus 3.70%

6.22

April 22, 2032

VFSC Capital Trust II

October 2002

4,124

3-month LIBOR plus 3.45%

5.79

November 7, 2032

VFSC Capital Trust III

April 2004

3,093

3-month LIBOR plus 2.80%

5.12

September 8, 2034

St. Joseph Capital Trust II

March 2005

5,000

3-month LIBOR plus 1.75%

4.08

March 20, 2035

Anchor Capital Trust III

August 2005

5,000

3-month LIBOR plus 1.55%

3.89

September 30, 2035

Tower Capital Trust 2

December 2005

8,000

3-month LIBOR plus 1.34%

3.68

December 4, 2035

Home Federal Statutory Trust I

September 2006

15,000

3-month LIBOR plus 1.65%

3.99

September 15, 2036

Monroe Bancorp Capital Trust I

July 2006

3,000

3-month LIBOR plus 1.60%

3.95

October 7, 2036

Monroe Bancorp Statutory Trust II

March 2007

5,000

3-month LIBOR plus 1.60%

3.94

June 15, 2037

Tower Capital Trust 3

December 2006

9,000

3-month LIBOR plus 1.69%

3.99

September 15, 2037

Total

60,310

Subordinated Debentures

On November 1, 2017, Old National assumed $12.0 million of subordinated fixed-to-floating notes related to the acquisition of Anchor (MN). The subordinated debentures have a 5.75% fixed rate of interest through October 29, 2020. From October 30, 2020 to the October 30, 2025 maturity date, the debentures have a floating rate of interest equal to the three-month LIBOR rate plus 4.356%.

Capital Lease Obligations

On January 1, 2004, Old National entered into a long-term capital lease obligation for a branch office building in Owensboro, Kentucky, which extends for 25 years with one renewal option for 10 years. The economic substance of this lease is that Old National is financing the acquisition of the building through the lease and accordingly, the building is recorded as an asset and the lease is recorded as a liability. The fair value of the capital lease obligation was estimated using a discounted cash flow analysis based on Old National’s current incremental borrowing rate for similar types of borrowing arrangements.

On May 1, 2016, Old National acquired Anchor (WI), assuming a five-year capital lease obligation for equipment.

On November 1, 2017, Old National assumed a capital lease obligation for a banking center in Arden Hills, Minnesota related to the acquisition of Anchor (MN). The remaining base term of the lease is five years with one renewal option of ten years. For purposes of measuring the lease obligation, we determined that we would be “reasonably assured” to exercise the renewal option. The fair value of the capital lease obligation was estimated using a discounted cash flow analysis based on a market rate for similar types of borrowing arrangements. Based on the above assumptions, Old National measured the capital lease obligation at $1.5 million as of the date of acquisition.

At June 30, 2018, the future minimum lease payments under the capital lease arrangements were as follows:


(dollars in thousands)
2018	$	284
2019		589
2020		589
2021		589
2022		589
Thereafter		9,275

Total minimum lease payments		11,915
Less amounts representing interest		(6,589	)

Present value of net minimum lease payments	$	5,326