Note 10 - Subordinated Debentures

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

(10) Subordinated Debentures

As a result of its acquisition of Commonwealth Bancshares, Inc. on March 7, 2022, Bancorp became the 100% successor owner of the following unconsolidated trust subsidiaries: Commonwealth Statutory Trust III, Commonwealth Statutory Trust IV and Commonwealth Statutory Trust V. The sole assets of the trust subsidiaries represent the proceeds of offerings loaned in exchange for subordinated debentures with similar terms to the TPS. The TPS are treated as part of Tier I Capital. The subordinated notes and related interest expense are included in Bancorp’s consolidated financial statements. The subordinated notes are currently redeemable at Bancorp’s option on a quarterly basis. Bancorp chose not to redeem the subordinated notes on October 1, 2023 and carried the notes at the costs noted below at September 30, 2023:

(dollars in thousands)	Face Value		Carrying Value		Origination Date	Maturity Date	Interest Rate
Commonwealth Statutory Trust III	$	3,093	$	3,074	12/19/2003	1/7/2034	SOFR + 2.85%
Commonwealth Statutory Trust IV		12,372		12,296	12/15/2005	12/30/2035	SOFR + 1.35%
Commonwealth Statutory Trust V		11,341		11,271	6/28/2007	9/15/2037	SOFR + 1.40%
Total	$	26,806	$	26,641

As part of the purchase accounting adjustments associated with the CB acquisition, the carrying values of the subordinated notes were adjusted to fair value at acquisition date. The related discounts on the subordinated notes are amortized and recognized as a component of interest expense in Bancorp’s consolidated financial statements.