Note 12 - Subordinated Notes

12 Months Ended

Dec. 31, 2022

Subordinated Notes

Subordinated Notes

Note 12. Subordinated Notes

Subordinated notes as of December 31, 2022 and 2021 are summarized as follows:

		Amount Outstanding	Interest Rate			Amount Outstanding	Interest Rate
		as of December 31, 2022	as of December 31, 2022			as of December 31, 2021	as of December 31, 2021		Maturity Date
		(dollars in thousands)
Subordinated debenture dated 9/14/20	$	50,000	5.125	%	$	50,000	5.125	%	9/15/2030
Subordinated debenture dated 2/1/19		65,000	5.375	%		65,000	5.375	%	2/15/2029
Subordinated debenture dated 7/29/20*		20,000	5.250	%		N/A	N/A		9/30/2030
Subordinated debenture dated 8/18/22		55,000	5.950	%		N/A	N/A		9/1/2037
Subordinated debenture dated 8/18/22		45,000	5.500	%		N/A	N/A		9/1/2032
Debt issuance costs		(2,338)				(1,150)
Total Subordinated Debentures	$	232,662			$	113,850
*Assumed in acquisition of GFED

On April 1, 2022, the Company acquired through the GFED acquisition $20.0 million in aggregate principal amount of fixed-to-floating subordinated notes that mature on September 30, 2030.  The subordinated notes, which qualify as Tier 2 capital for the Company, will bear interest at a fixed rate of 5.25% per year, from and including July 29, 2020 to, but excluding September 30, 2025 or earlier redemption.  From and including September 30, 2025 to, but excluding the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate, which is expected to be the then three-month Term SOFR, plus 519 basis points.  Interest on the subordinated notes is payable semi-annually, commencing on September 30, 2020 through September 30, 2025.  The subordinated notes may be redeemed at the Company’s option, in whole or in part, on any interest payment date on or after September 30, 2025. At a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of redemption.  The subordinated notes are subordinate in the right of payment to the Company’s senior indebtedness and the indebtedness and other liabilities of the subsidiary banks.

On August 18, 2022, the Company completed a private offering of $55.0 million in aggregate principal amount of fixed-to-floating subordinated notes that mature on September 1, 2037.  The subordinated notes, which qualify as Tier 2 capital for the Company, will bear interest at a fixed rate of 5.95% per year, from and including September 1, 2022 to, but excluding September 1, 2032 or earlier redemption.  From and including September 1, 2032 to, but excluding the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate, which is expected to be the then three-month Term SOFR, plus 300 basis points.  Interest on the subordinated notes is payable quarterly, commencing on December 1, 2022.  The notes are redeemable, in whole or in part, at any time upon the occurrence

Note 12. Subordinated Notes (continued)

of certain events.  The subordinated notes may be redeemed at the Company’s option, in whole or in part, on any interest payment date on or after September 1, 2032, at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of redemption.  The subordinated notes are subordinate in the right of payment to the Company’s senior indebtedness and the indebtedness and other liabilities of the subsidiary banks.

On August 18, 2022, the Company also completed a private offering of $45.0 million in aggregate principal amount of fixed-to-floating subordinated notes that mature on September 1, 2032, of which $43.25 million have been exchanged for subordinated notes registered under the Securities Act of 1933.  The subordinated notes, which qualify as Tier 2 capital for the Company, will bear interest at a fixed rate of 5.50% per year, from and including September 1, 2022 to, but excluding September 1, 2027 or earlier redemption.  From and including September 1, 2027 to, but excluding the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate, which is expected to be the then three-month Term SOFR, plus 279 basis points.  Interest on the subordinated notes is payable semi-annually, commencing on March 1, 2023 through September 1, 2027 and quarterly thereafter.  The notes are redeemable, in whole or in part, at any time upon the occurrence of certain events.  The subordinated notes may be redeemed at the Company’s option, in whole or in part, on any interest payment date on or after September 1, 2027, at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of redemption.  The subordinated notes are subordinate in the right of payment to the Company’s senior indebtedness and the indebtedness and other liabilities of the subsidiary banks.