5. DEBT

As of December 31, 2017 and 2016, outstanding debt balances totaled $4,339,208 and $3,786,950, respectively. The average rate on debt was 3.9% in 2017 compared to 5.0% in 2016.

Long-term debt consists of the following as of the periods referenced below:



	December 31,		December 31,
	2017		2016
Surplus notes	$	—	$	1,850,000
Capital lease obligation		805,013		1,227,541
Debt obligation		3,534,195		525,619
Home office mortgage		—		183,790
Total	$	4,339,208	$	3,786,950

Surplus Notes

ICC’s Plan of Conversion from a mutual to a stock company was approved by ICC policyholders at a special meeting on March 17, 2017. Simultaneously, surplus notes totaling $1.65 million, representing all outstanding surplus notes as of that date were converted into 165,000 shares of the Company’s common stock. The remaining $200,000 balance of surplus notes was paid in March 2017.

Leasehold Obligations

ICC entered into sale leaseback arrangements in 2016 and 2015 that are accounted for as a capital lease. Under the agreement, BofI Federal Bank (BofI) purchased electronic data processing software, vehicles, and other assets which are leased to the Company. These assets remain on the Company’s books due to provisions within the agreement that trigger capital lease accounting. To secure the lowest rate possible of 4.7%, the Company pledged bonds totaling $923,766 and $1,808,523 as of December 31, 2017 and 2016, respectively. There was no gain or loss recognized as part of this transaction. Lease payments totaled $501,976 and $438,593 for the years ended December 31, 2017 and 2016, respectively. The term of the electronic data processing lease is 48 months and the term of the titled vehicles lease is 36 months. The outstanding lease obligation at December 31, 2017, was $805,013 compared to $1,227,541 at Decemeber 31, 2016.

Future minimum lease payments for the three succeeding years as of December 31, 2017 are:



Year	Amount
2018		501,972
2019		361,374
2020		30,190
Total payments		893,536
Less: Interest portion		88,523
Total oustanding lease obligation	$	805,013

Debt Obligation

ICC Holdings, Inc. secured a loan with American Bank & Trust in March 2017 in the amount of $3,500,000 and used the proceeds to repay ICC for the money borrowed by the ESOP. The term of the loan is five years bearing interest at 3.65% and the Company pledged the ESOP shares and $1.5 million of trust assets as collateral for the loan. Additionally, ICC entered into two debt agreements in 2016; one agreement for $500,000 and another debt agreement for $75,000 with BofI. The terms of the loans are 36 months, but the Company had the option to prepay the $500,000 loan after 12 months. The Company paid off the remaining balance of the $500,000 loan in September 2017. The total balance of debt agreements at year end 2017 and 2016 was $3,534,195 and $525,619, respectively. The Bofi loans bear interest at 4.7%.

Home Office Mortgage

The Company paid off the remaining mortgage balance on its home office during the fourth quarter of 2017. Interest was charged at a fixed rate of 2.6% and the loan matured in 2017. The building was used as collateral to secure the loan. The loan balance at year end 2017 and 2016 was $0 and $183,790, respectively. The interest paid on the loan in 2017 was $1,518 and $9,163 in 2016.

Revolving Line of Credit

We maintain a revolving line of credit with American Bank & Trust, which permits borrowing up to an aggregate principal amount of $1.75 million. This facility was entered into during 2013 and is renewed annually with a current expiration of August 1, 2018. The line of credit is priced at 30 day LIBOR plus 2% with a floor of 3.5%. In order to secure the lowest rate possible, the Company pledged marketable securities not to exceed $5.0 million in the event the Company drawls down on the line of credit. There was no interest paid on the line of credit during the year ended December 31, 2017. Interest paid on the line of credit in 2016 was immaterial. There are no financial covenants governing this agreement. For the years ended December 31, 2017 and 2016, no amounts were outstanding on this facility.