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SUBORDINATED NOTE DUE SEPTEMBER 1, 2016
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6 Months Ended |
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Jun. 30, 2011
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| SUBORDINATED NOTE DUE SEPTEMBER 1, 2016 |
NOTE 12 - SUBORDINATED NOTE DUE SEPTEMBER 1, 2016
On
June 23, 2009, the Bank issued $5,000,000 aggregate principal
amount of its 8.25% Subordinated Note due June 1, 2016 to an
accredited investor at 100% of par. The note is
subordinate and junior in right of payment upon any liquidation of
the Bank as to principal, interest and premium to obligations to
the Bank’s depositors and other obligations to its general
and secured creditors. Interest payments are due and
payable on each September 1, December 1, March 1 and June 1,
commencing on September 1, 2009. Interest accrues at an
annual rate of 8.25%. The proceeds from the note payable
are included in Tier 2 capital of the Bank and the
Company.
In
addition, the Company issued to the investor a total of 15,000
warrants, each representing the right to purchase one share of the
Company’s common stock for a purchase price of $25.00. Each
warrant is exercisable for a period beginning upon its date of
issuance and ending on June 1, 2016. The Company
estimated the fair value of each warrant using a
Black-Scholes-Merton valuation model and determined the fair value
per warrant to be $5.41. This total value of $86,000 was recorded
as a discount and reduced the net book value of the debentures to
$4,914,000 with an offsetting increase to the Company’s
additional paid-in capital. The discount will be amortized over a
five-year period.
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