Note 12 - Senior Debt

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Long-term Debt [Text Block]

N

OTE

1

2

– S

ENIOR

D

EBT

On

June 30, 2017,

the Company entered into a

$10.0

million senior secured loan agreement with a commercial bank. The loan matures on

June 30, 2022.

Interest is payable quarterly at a rate of

three

-month LIBOR plus

250

basis points through

June 30, 2020,

at which time quarterly principal payments of

$250,000

plus interest will commence. As of

December 31, 2019,

the interest rate was

4.60%.

The loan is secured by a

first

priority pledge of

100%

of the issued and outstanding stock of the Bank. The Company

may

prepay any amount due under the promissory note at any time without premium or penalty. Proceeds of

$5.0

million from the subordinated capital notes issued in

2019

were used to reduce the outstanding balance of the senior debt.

The loan agreement contains customary representations, warranties, covenants and events of default, including the following financial covenants: (i) the Company must maintain minimum cash on hand of

not

less than

$2,500,000,

(ii) the Company must maintain a total risk based capital ratio at least equal to

10%

of risk-weighted assets, (iii) the Bank must maintain a total risk based capital ratio at least equal to

11%

of risk-weighted assets, and (iv) non-performing assets of the Bank

may

not

exceed

2.5%

of the Bank’s total assets. Both the Company and Bank were in compliance with the covenants as of

December 31, 2019.