Note 12 - Subordinated Debentures

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Subordinated Borrowings Disclosure [Text Block]

NOTE  1 2 : SUBORDINATED DEBENTURES

During

2005,

the Company formed

two

wholly owned grantor trust subsidiaries, Guaranty Statutory Trust I and Guaranty Statutory Trust II, to issue preferred securities representing undivided beneficial interests in the assets of the trusts and to invest the gross proceeds of the preferred securities in notes of the Company. Trust I issued

$5,000,000

of preferred securities and Trust II issued

$10,000,000

of preferred securities. The sole assets of Trust I were originally

$5,155,000

aggregate principal amount of the Company’s fixed rate subordinated debenture notes due

2036,

which were redeemable beginning in

2011.

The sole assets of Trust II were originally

$10,310,000

aggregate principal amount of the Company’s fixed/variable rate subordinated debenture notes due

2036,

which were redeemable beginning in

2011.

Trust II subordinated debenture notes bear interest at a fixed rate for

five

years and thereafter at a floating rate based on LIBOR. The preferred securities qualify as either Tier I or Tier II capital for regulatory purposes, subject to certain limitations.

As part of the

April 2, 2018

acquisition of Hometown and pursuant to a Second Supplemental Indenture dated

April 2, 2018

by and among the Company, Hometown and Wilmington Trust Company, as Trustee, the Company assumed Hometown’s rights, duties and obligations under the original Indenture of a wholly owned subsidiary, Hometown Bancshares Capital Trust I, a Delaware statutory trust formed on

October 29, 2002.

This Trust was formed for the purposes of issuing

$6.0

million of Trust Preferred Securities. Hometown issued

30

-year junior subordinated deferrable interest debentures to the Trust in the principal amount of

$6,186,000

(“Hometown Trust I Debentures”) pursuant to the terms of Indentures dated

October 29, 2002

by and between the Company and Wilmington Trust Company, as trustee. These debentures bear interest at a floating rate equal to the

three

-month LIBOR plus

5.00%,

payable quarterly, until

May 2019.

The rate from

May 2019

until maturity in

2032

is a floating rate equal to the

three

-month LIBOR plus

6.00%,

payable quarterly, with a maximum interest rate of

12.50%.

Subject to prior approval by the Federal Reserve Board, the Debentures and the Trust Preferred Securities are each callable by the Company or the Trust, respectively and as applicable, at

100%

of principal amount plus any accrued interest. The interest payments by the Company to the Trust will be used to pay the dividends payable by the Trust to the holders of the Trust Preferred Securities.