SUBORDINATED NOTE DUE SEPTEMBER 1, 2016 |
9 Months Ended |
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Sep. 30, 2011 | |
SUBORDINATED NOTE DUE SEPTEMBER 1, 2016 |
NOTE 12 - SUBORDINATED NOTE DUE SEPTEMBER 1, 2016
On
June 23, 2009, the Bank issued a $5,000,000 aggregate principal
amount 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
March 1, June 1, September 1 and December 1, commencing 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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