Subordinated Notes

12 Months Ended

Dec. 31, 2012

Subordinated Borrowings [Abstract]

Subordinated Notes

Subordinated Notes

A summary of the subordinated notes at December 31, 2012 and 2011 is as follows:

(Dollars in thousands)	2012		2011
Subordinated note, due October 29, 2012	$	—	$	5,000
Subordinated note, due May 1, 2013	—		10,000
Subordinated note, due May 29, 2015	15,000		20,000
Total subordinated notes	$	15,000	$	35,000

The original principal balance of each subordinated note was $25.0 million. Each subordinated note requires annual principal payments of $5.0 million beginning in the sixth year of the note. The interest rate on each subordinated note is calculated at a rate equal to LIBOR plus 130 basis points.

At December 31, 2012, the Company had an obligation for one subordinated note with a remaining balance of $15.0 million. This subordinated note was issued in October 2005 (funded in May 2006). During 2012, two subordinated notes issued in October 2002 and April 2003 with remaining balances of $5.0 million and $10.0 million, respectively, were paid-off prior to maturity. The remaining subordinated note as of December 31, 2012 requires annual principal payments of $5.0 million on May 29, 2013, 2014, and 2015. The Company may redeem the subordinated note without payment of premium or penalty at any time prior to maturity.

At December 31, 2012 and 2011, the weighted average contractual interest rate on the subordinated notes was 1.61% and 1.83%, respectively. In connection with the issuances of subordinated notes, the Company incurred costs totaling $1.0 million. These costs are included in other assets and are being amortized to interest expense using a method that approximates the effective interest method. At December 31, 2012 and 2011, the unamortized balances of these costs were approximately $3,000 and $27,000, respectively. The subordinated notes qualify as Tier II capital under the regulatory capital requirements, subject to restrictions.