Trust Preferred Debentures

12 Months Ended

Dec. 31, 2020

At December 31, 2020, the Company had two unconsolidated subsidiary trusts (the "Trusts"): Leesport Capital Trust II and Madison Statutory Trust I. The two Trusts were acquired in the acquisition of VIST Financial. The Company owns 100% of the common equity of each Trust. The Trusts were formed for the purpose of issuing Company-obligated mandatorily redeemable capital securities to third-party investors and investing the proceeds from the sale in junior subordinated debt securities (subordinated debt) issued by the Company, which are the sole assets of each Trust. Since third-party investors are the primary beneficiaries, the Trusts are not consolidated in the Company’s financial statements. Distributions on the preferred securities issued by the Trusts are payable quarterly at a rate per annum equal to the interest rate being earned by the Trusts on the debenture held by the Trusts and are recorded as interest expense in the consolidated financial statements.

The preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the subordinated debt. The subordinated debt, net of the Company’s investment in the Trusts, qualifies as Tier 1 capital under the Board of Governors of the Federal Reserve System (FRB) guidelines. The Company has entered into agreements which, when taken collectively, fully and unconditionally guarantee the obligations under the preferred securities subject to the terms of each of the guarantees.

The following table provides information relating to the Trusts as of December 31, 2020:

Description

Issuance Date

Par Amount

Interest Rate

Maturity Date

Leesport Capital Trust II

September 2002

$10.0 million

3-month LIBOR plus 3.45%

September 2032

Madison Statutory Trust I

June 2003

$5.0 million

3-month LIBOR plus 3.10%

June 2033

Leesport Capital Trust II

Leesport Capital Trust II, a Delaware statutory business trust, was formed on September 26, 2002 and issued $10.0 million of mandatory redeemable capital securities carrying a floating interest rate of three month LIBOR plus 3.45%. These debentures are the sole assets of the Trust. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The obligations under the debentures constitute a full and unconditional guarantee by VIST Financial of the obligations of the Trust under the capital securities. These securities must be redeemed in September 2032, but may be redeemed at any time. The Company assumed the rights and obligations of VIST Financial pertaining to the Leesport Capital Trust II through the Company’s acquisition of VIST Financial in August 2012.

Madison Statutory Trust I

Madison Statutory Trust, a Connecticut statutory business trust, was formed on June 2003 and issued $5.0 million of mandatory redeemable capital securities carrying a floating interest rate of three month LIBOR plus 3.10%. These debentures are the sole assets of the Trust. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The obligations under the debentures constitute a full and unconditional guarantee by VIST Financial of the obligations of the Trust under the capital securities. These securities must be redeemed in June 2033, but may be redeemed at any time. The Company assumed the rights and obligations of VIST Financial pertaining to the Madison Statutory Trust I through the Company’s acquisition of VIST Financial in August 2012.

During the fourth quarter of 2020, the Company determined to redeem all of the trust preferred of Sleepy Hollow Capital Trust I, with a par amount of $4.0 million. The Company deposited the redemption amount with the Trustee in December 2020, and the redemption was completed on February 28, 2021. The redemption price was equal to 100% of the principal amount plus accrued and unpaid interest up to February 28, 2021. In December 2020, the Company notified the Trustee and the holders of the securities of the Company's decision to redeem, as permitted by the trust agreement, and the Company deposited the redemption amount with the Trustee. As a result of these aforementioned actions during December 2020 and in accordance with applicable accounting guidance, the Company considered its liability in respect of these securities extinguished and did not show this as a liability as of December 31, 2020.