Note 9 - Borrowings

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Long-term Debt [Text Block]

Note

9

–

Borrowings

Junior Subordinated Debentures

– The junior subordinated debentures are redeemable at par prior to maturity at the option of the Company as defined within the trust indenture. The Company has the option to defer interest payments on the junior subordinated debentures from time to time for a period

not

to exceed

20

consecutive quarters. A deferral period

may

begin at the Company’s discretion so long as interest payments are current. The Company is prohibited from paying dividends on preferred and common shares when interest payments are in deferral. At

March 31, 2020,

the Company is current on all interest payments.

Subordinated

Capital Note

– The Company’s

$17.0

million subordinated note matures on

July 31, 2029.

The note carries interest at a fixed rate of

5.75%

until

July 30, 2024

and then converts to variable at

three

-month LIBOR plus

395

basis points until maturity. The subordinated capital note qualifies as Tier

2

regulatory capital.

Senior Debt

- The Company’s

$5.0

million senior secured 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. 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.

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

March 31, 2020.