BayFirst Financial Corp S-1, filed May 11, 2021
BayFirst Financial Corp. (BAFN)
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Registration No. 333-[ ]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BAYFIRST FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
| Florida | 6022 | 59-3665079 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
700 Central Avenue
St. Petersburg, Florida 33701
(727) 440-6848
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Anthony N. Leo
Chief Executive Officer
BayFirst Financial Corp.
700 Central Avenue
St. Petersburg, Florida 33701
(727) 440-6848
(Name, address, including zip code, and telephone number, including area code of agent for service)
Copies of all communications, including copies of all communications sent to agent for service, should be sent to:
A. George Igler, Esq. and
Richard Pearlman, Esq.
Igler and Pearlman, P.A.
2457 Care Drive, Suite 203
Tallahassee, Florida 32308
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
|
| ||||||||
| Title of Each Class of Securities to be Registered |
Amount to be Registered |
Proposed Maximum Offering Price Per Share* |
Proposed Maximum Aggregate Offering Price* |
Amount of Registration Fee | ||||
| Common Stock |
3,859,911.735 | $27.00 | $104,217,616.85 | $11,370.14 | ||||
| Warrants to Purchase Common Stock |
43,044 | $9.00 | $387,396 | $42.26 | ||||
| Common Stock Underlying Warrants |
43,044 | $18.00 | $774,792 | $84.53 | ||||
| Total |
$11,496.93 | |||||||
|
| ||||||||
|
| ||||||||
| * | Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) of the Securities Act. The registrant calculates the proposed maximum aggregate offering price in accordance with Rule 457(c), based on the last trading price on the OTC Markets Group Quotation System (OTCQB market tier) on May 4, 2021. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. The securities may not be sold until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated May 11, 2021
[Logo]
BayFirst Financial Corp.
3,859,911.735 Shares of Common Stock
43,044 Warrants to Purchase Common Stock
43,044 Shares of Common Stock Underlying Warrants
This prospectus relates to the registration of the resale of up to 3,859,911.735 shares of our common stock by our stockholders identified in this prospectus (the “Registered Stockholders”), as well as 43,044 warrants to purchase common stock and 43,044 shares of common stock underlying such warrants. The Registered Stockholders may, or may not, elect to sell their shares of common stock or warrants covered by this prospectus. Any such sales will be as and to the extent determined by the Registered Shareholders. Such sales, if any, will be made through brokerage transactions on the OTCQX Best Market (the “OTCQX”), the Nasdaq Capital Market (“Nasdaq”), or through other means. For more information, see the section titled “Plan of Distribution.” If the Registered Stockholders choose to sell their shares of common stock, we will not receive any proceeds from the sale of shares of common stock by the Registered Stockholders.
Our common stock is quoted and traded on the OTCQX under the symbol “FHBI.” We intend to apply to list our common stock on Nasdaq under the symbol “[ ].” We expect to file our application, for it to be approved, and our Nasdaq listing to begin, once we have maintained on the OTCQX an average daily trading volume of 2,000 shares for 30 consecutive trading days. Our warrants are not traded on any exchange or markets and we do not intend to seek a listing for them.
We are an “emerging growth company” as defined under the federal securities laws and, as such, we have elected to comply with reduced reporting requirements for this prospectus and may elect to do so in future filings. See “Implications of Being an Emerging Growth Company.”
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 7.
Neither the Securities and Exchange Commission nor any state securities regulator have approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
, 2021
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ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement on Form S-1 that we filed with the SEC using a continuous offering process. Under this process, the Registered Stockholders may, from time to time, sell the common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled “Plan of Distribution.” You may obtain this information without charge by following the instructions under the section titled “Additional Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our common stock.
The information contained in this prospectus, or any free writing prospectus prepared by us or on our behalf or to which we refer you, is accurate only as of its date, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our assets, business, cash flows, financial condition, liquidity, prospects or results of operations may have changed since that date.
You should not interpret the contents of this prospectus, or any free writing prospectus prepared by us or on our behalf or to which we refer you, to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.
We have not authorized anyone to provide any information to you other than that contained in this prospectus or in any free writing prospectus prepared by us or on our behalf to which we refer you. We take no responsibility for, nor provide any assurance as to the reliability of, any other information that others may give you. Information contained on, or accessible through, our website is not part of this prospectus.
No action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to the offering and the distribution of this prospectus applicable to those jurisdictions. We are not making an offer of these securities in any jurisdiction where such offer is not permitted.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. Words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “is confident that” and similar expressions constitute “forward-looking statements.” Forward-looking statements involve risk and uncertainty and a variety of factors that could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed or implied in these forward-looking statements. We do not have a policy of updating or revising forward-looking statements except as required by law, and silence by management over time should not be construed to mean that actual events are occurring as estimated in such forward-looking statements.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our operations and the operations of our subsidiary, First Home Bank, include, but are not limited to, changes in:
| • | market interest rates and general economic conditions, |
| • | legislative/regulatory changes, |
| • | monetary and fiscal policies of the U.S. Government, |
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| • | the quality and composition of the loan or investment portfolios, |
| • | demand for loan and deposit products, |
| • | competition, |
| • | demand for financial services in our primary trade area, |
| • | litigation, tax and other regulatory matters, |
| • | accounting principles and guidelines, and |
| • | other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing and services. |
INDUSTRY AND MARKET DATA
Industry and market data used in this prospectus has been obtained from independent industry sources and publications available to the public, sometimes with a subscription fee, as well as from research reports prepared for other purposes. We did not commission the preparation of any of the sources or publications referred to in this prospectus. Industry publications and surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. We have not independently verified the data obtained from these sources. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements in this prospectus. Trademarks used in this prospectus are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
The Jumpstart Our Business Startups Act (the “JOBS Act”), was enacted in April 2012 with the intention of encouraging capital formation in the United States and reducing the regulatory burden on newly-public companies that qualify as “emerging growth companies.” We are an “emerging growth company” within the meaning of the JOBS Act. As an emerging growth company, we intend to take advantage of certain exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports and proxy statements, and the requirement that we hold a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an emerging growth company.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of this exemption from new or revised accounting standards. Accordingly, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the listing of our common stock on Nasdaq.
For certain risks related to our status as an emerging growth company, see the ,sections titled “Risk Factors,” “Risks Related to Our Securities,” and “We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.”
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This prospectus should not be considered as our recommendation or advice concerning an investment in BayFirst. No recommendation is being made by BayFirst as to whether you should purchase shares of our common stock.
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider in making your investment decision. You should carefully read the following summary together with the entire prospectus, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes, before deciding to invest in our Common Stock. Some of the statements in this prospectus constitute forward-looking statements. See “Cautionary Note Regarding Forward-Looking Information.”
Throughout this prospectus the terms the “Company,” “we,” “our,” and “us” have been used. Unless otherwise indicated or unless the context requires otherwise, such references are meant to denote BayFirst and our subsidiary, First Home Bank, on a consolidated basis.
BayFirst Financial Corp.
BayFirst was incorporated on June 23, 2000, and commenced operations as a registered bank holding company on September 1, 2000.
On April 22, 2021, we changed our name from First Home Bancorp, Inc. to BayFirst Financial Corp.
Our corporate offices are located at the First Home Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701. Our primary source of income is from our wholly-owned subsidiary, First Home Bank (the “Bank”).
Stock Split
Effective May 10, 2021, BayFirst effected a three-for-two stock split. All share amounts and per share financial data contained in this prospectus have been adjusted for the split.
First Home Bank
The Bank commenced business operations on February 12, 1999, and operates as a Florida state-chartered commercial bank and a member of the Federal Reserve System (“Federal Reserve”). The Bank’s main office is located at the First Home Executive Center. The Bank’s telephone number is (727) 440-6848, and the Bank’s website address is www.firsthomebank.com.
We have structured the Bank into three Divisions: the Community Banking Division, CreditBench, and the Residential Mortgage Division. Together, we expect this structure to result in a high-performing institution, producing balance sheet and revenue growth, funded primarily by a local, growing deposit base.
The Community Banking Division has six full-service banking centers in the Tampa Bay area: four in Pinellas County, one in Hillsborough County, and one in Sarasota County. Additionally, we have purchased properties in Sarasota and Belleair Bluffs and have contracted to purchase sites in Lutz and Bradenton where we intend to open additional full-service banking centers. The Community Banking Division was established to
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generate core deposits and loans from businesses, professionals, and consumers located within our primary service area. This effort has resulted in the Bank increasing its checking and saving account balances by $323 million from December 31, 2018 through December 31, 2020.
We have branded our SBA Lending Division as CreditBench. CreditBench has a nationwide government guaranteed lending platform and operates as a preferred lender under the Small Business Administration’s (“SBA”) 7(a) Loan Program. In addition to SBA guaranteed loan programs, the Bank’s CreditBench lends under the United States Department of Agriculture’s (“USDA”) Business and Industry Loan Program (“B&I”). CreditBench has also been an active lender in the Paycheck Protection Program (“PPP”) and the Bank has used the Federal Reserve’s PPP Lending Facility (“PPPLF”) to fund a material portion of the PPP loans.
CreditBench’s lending efforts are targeted to a broad range of SBA and USDA eligible industries and geographies, with a focus on building holistic banking relationships with borrowers.
As of the SBA’s fiscal year end of September 30, 2020, the Bank is ranked tenth in the number of units funded under the SBA’s 7(a) Loan Program. Over the past four years, the Bank has consistently placed among the top 10 SBA lenders in units and dollars funded. To reach these broad markets, the Bank utilizes a combination of proprietary customer acquisition channels, business development officers, and a national network of financial technology and other referral sources to drive prospective loan applicants to the Bank. Since the third quarter of 2018, the Bank has been gradually transitioning from a reliance on gain on sale of the government guaranteed portions of loans to holding a greater percentage of the government guaranteed loans which is expected to provide a more reliable and higher quality earnings stream through more predictable interest spread income. Notwithstanding, on May 3, 2021, we entered into a contract to sell 3,481 PPP loans for consideration equal to the total unpaid principal of $314.18 million and the related servicing rights. We expect to close this sale during May 2021.
The Residential Mortgage Division operates from our six full-service banking centers and 29 loan production offices in 18 states. The Residential Mortgage Division provides revenue diversification, without requiring significant capital. The Residential Mortgage Division formally began operations at the beginning of 2017 and has since grown significantly, achieving loan production of $1.92 billion in the year ended December 31, 2020.
2020 Highlights
| • | Total assets were $1.54 billion at December 31, 2020, an increase of $1.01 billion or 190.77% since December 31, 2019. |
| • | Total net loans (including those held for sale) were $1.42 billion at December 31, 2020, an increase of $1.04 billion or 272.76% since December 31, 2019, primarily due to the addition of PPP loans during 2020 which totaled $825.80 million, net, at December 31, 2020. |
| • | Deposits totaled $558.78 million at December 31, 2020, an increase of $110.19 million or 24.56% since December 31, 2019. |
| • | Checking, money market, and savings accounts totaled $489.66 million at December 31, 2020, an increase of $182.11 million or 59.21% since December 31, 2019. |
| • | Net income for 2020 was $12.70 million, or $3.45 per basic common share or $3.01 per diluted share. Net income for 2019 was $4.48 million, or $1.27 per basic and diluted common share. |
| • | In 2020, CreditBench originated $101.08 million in SBA or other government guaranteed loans, exclusive of PPP loans. This has resulted in the Bank being nationally ranked tenth in the number of SBA loans made through the SBA’s fiscal year ended September 30, 2020. |
| • | CreditBench originated $876.96 million in PPP loans in 2020. |
| • | The Residential Mortgage Division originated $1.92 billion in loans in 2020. |
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Risk Factor Summary
Prospective investors should consider all of the information discussed under “Risk Factors” beginning on page 7 before making a decision to purchase shares of our common stock. Those Risk Factors relate to:
| • | Our ability to grow the size and geographic scope of our loan generation, loan sale, and deposit gathering business, and the infrastructure needed to support it; |
| • | Possible loan defaults, devaluation of collateral, adverse economic events, and competition; |
| • | Interest rates and available sources of liquidity; |
| • | Our ability to raise capital and the effects of doing so on our stockholders; |
| • | The potential that we are subject to fraud, incorrect judgments, or other bad acts of third parties; |
| • | Laws, regulations, rules, and standards to which we are subject and the government agencies with which we interact; |
| • | Retention and development of our key executives and other employees; |
| • | Dividend and other restrictions placed on us by our outstanding preferred stock, restrictions that may be imposed by future issuances of preferred stock, and our pledging of the stock in the Bank to secure a loan; |
| • | Rapidly developing technology; |
| • | Estimates used in certain valuations, including our allowance for loan losses (“ALLL”); and |
| • | Features of our stock, such as liquidity, dilution, the lack of preemptive rights, and the concentration of ownership among our insiders. |
Our Corporate Information
Our principal executive offices are located at First Home Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701 and our telephone number is (727) 440-6848. The Bank’s website address is www.firsthomebank.com. The information contained on or accessible from our website does not constitute a part of this prospectus and is not incorporated by reference herein.
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| Offering Price |
We will not have any control or influence over the prices at which the Registered Stockholders may sell their shares. The Registered Stockholders may, or may not, elect to sell their shares of common stock covered by this prospectus, as and to the extent they may determine. Such sales, if any, will be made through brokerage transactions on the OTCQX, Nasdaq, or through other means. For more information, see the section titled “Plan of Distribution.” |
| No Proceeds |
To the extent any Registered Stockholder chooses to sell shares of our common stock covered by this prospectus, we will not receive any proceeds from any such sales of our common stock. See the section titled “Principal and Registered Stockholders” on page 65. |
| Dividend Policy |
Since 2016, BayFirst has paid quarterly cash dividends to its common shareholders. Future dividends will be paid to common shareholders at the discretion of our Board of Directors (the “Board”). In determining whether to pay dividends on our common stock, our Board will consider, among other factors, debt service requirements of the Bank and BayFirst, our obligation to pay dividends on our preferred stock, and our earnings, financial condition, and regulatory capital requirements or restrictions. Our ability to pay dividends may also be dependent upon the Bank’s ability to pay dividends to BayFirst. |
| No Board of Directors Recommendation |
Our Board of Directors is making no recommendation regarding participation in this offering. |
| Nasdaq listing |
We intend to apply to list our common stock on the Nasdaq Capital Market under the trading symbol “[ ].” We expect to file our application, for it to be approved, and our Nasdaq listing to begin, once we have maintained on the OTCQX an average daily trading volume of 2,000 shares for 30 consecutive trading days. Until that time, our common stock will continue to trade on the OTCQX. |
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The following tables summarize our financial data. The financial data has been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the following summary consolidated financial data and other data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The summary financial data is not all-inclusive and does not purport to contain all of the financial information that you may desire, or should consider, in determining whether to make an investment in BayFirst. BayFirst’s historical results are not necessarily indicative of results to be expected in future periods (Dollars in thousands, except per share amounts).
| At or For the Years Ending December 31, |
||||||||
| 2020 | 2019 | |||||||
| Balance Sheet Data: |
||||||||
| Total assets |
$ | 1,544,691 | $ | 531,240 | ||||
| Loans held for sale |
208,704 | 76,645 | ||||||
| Total loans, net |
1,207,160 | 303,192 | ||||||
| Total deposits |
558,785 | 448,594 | ||||||
| Total stockholders’ equity |
71,069 | 51,332 | ||||||
| Common stockholders’ equity |
55,914 | 43,437 | ||||||
| Loan to deposit ratio |
253.4 | % | 85.2 | % | ||||
| Income Statement Data: |
||||||||
| Net interest income |
33,452 | 17,434 | ||||||
| Provision for loan losses |
16,900 | 8,869 | ||||||
| Non-interest income |
97,695 | 53,124 | ||||||
| Non-interest expense |
98,469 | 55,392 | ||||||
| Income taxes |
3,075 | 1,813 | ||||||
| Net income Preferred stock dividends |
|
12,703 (863 |
) |
|
4,484 (463 |
) | ||
| Net income available to common stockholders |
11,840 | 4,021 | ||||||
| Common Share Data(*): |
||||||||
| Basic earnings per common share |
3.45 | 1.27 | ||||||
| Diluted earnings per common share |
3.01 | 1.27 | ||||||
| Dividends per common share Book value per common share |
|
0.27 16.04 |
|
|
0.27 12.80 |
| ||
| Tangible book value per common share |
16.02 | 12.77 | ||||||
| Common shares outstanding |
3,485,018 | 3,393,788 | ||||||
| Weighted average common shares outstanding, basic |
3,430,716 | 3,171,061 | ||||||
| Weighted average common shares outstanding, diluted |
4,001,323 | 3,172,186 | ||||||
| Performance Ratios: |
||||||||
| Return on average assets |
1.06 | % | 0.99 | % | ||||
| Return on average common equity |
25.50 | % | 10.55 | % | ||||
| Net interest margin |
2.88 | % | 4.08 | % | ||||
| Efficiency ratio Dividend payout ratio |
|
75.08 7.20 |
% % |
|
78.51 21.05 |
% % | ||
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| At or For the Years Ending December 31, |
||||||||
| 2020 | 2019 | |||||||
| Asset Quality Ratios: |
||||||||
| ALLL to total loans |
1.47 | % | 2.75 | % | ||||
| ALLL to nonperforming loans |
220.76 | % | 127.52 | % | ||||
| ALLL to nonperforming loans (excluding government guaranteed balances) |
636.07 | % | 242.10 | % | ||||
| Nonperforming loans to total loans |
0.67 | % | 2.16 | % | ||||
| Nonperforming loans to total loans (excluding government guaranteed balances) |
0.23 | % | 1.14 | % | ||||
| Nonperforming assets to total assets |
0.62 | % | 1.59 | % | ||||
| Nonperforming assets to total assets (excluding government guaranteed balances) |
0.22 | % | 0.84 | % | ||||
| Net charge-offs to average loans |
0.64 | % | 1.27 | % | ||||
| Capital Ratios: |
||||||||
| Total equity to total assets |
4.60 | % | 9.66 | % | ||||
| Total equity to total assets (excluding PPP loans) |
10.07 | % | 9.66 | % | ||||
| Total risk-based capital ratio (Bank) |
17.02 | % | 17.84 | % | ||||
| Tier 1 risk-based capital ratio (Bank) |
15.72 | % | 16.26 | % | ||||
| Tier 1 leverage capital ratio (Bank) |
11.75 | % | 10.49 | % | ||||
| Common equity Tier 1 capital ratio (Bank) |
15.72 | % | 16.26 | % | ||||
| Total equity to total assets (Bank) |
5.08 | % | 11.31 | % | ||||
| Total equity to total assets (Bank, excluding PPP loans) |
9.79 | % | 11.31 | % | ||||
| Other Data: |
||||||||
| Number of full-time equivalent employees |
596 | 423 | ||||||
| Number of full-service banking centers Number of loan production offices |
|
6 29 |
|
|
5 21 |
| ||
| (*) | Adjusted for the three-for-two stock split, effective on May 10, 2021. |
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Investing in our securities involves significant risks, including the risks described below. You should carefully consider the following information about these risks, together with the other information contained in this prospectus before investing in this offering. The risks that we have highlighted here are not the only ones that we face. Additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair our operations. In addition, there are risks beyond our control. If any of these risks actually occur, our business, financial condition or results of operations could be negatively affected, and you could lose part or all of your investment.
Risk Factors Related to Our Business
We may be unable to continue to produce the volume of loans necessary to support our SBA and other government guaranteed lending business.
Our business strategy places a significant emphasis on SBA and other government guaranteed lending. In order to successfully implement this strategy, we must originate and fund a substantial dollar amount of loans. To do so, we must identify qualified and interested borrowers and have sufficient capital and liquidity to support and fund such loans. If we are not successful in implementing this strategy, our income and results of operations will be adversely affected.
The Bank’s PPP loans carry litigation risk, possible undesirable interest rate impact, and possible credit risk.
Through our online banking platform, we received a significant amount of PPP loan applications. For reasons such as our inability to determine an applicant’s eligibility, our suspicion of fraud, or other negative application characteristics, we declined to make certain PPP loans. Some of those applicants may pursue claims against the Bank based on fair lending, unfair and deceptive trade practices, or other grounds. In addition, due to the recency of the PPP, we do not know how the SBA will manage borrowers’ forgiveness requests or our claims on SBA guarantees of PPP loans. If the SBA declines forgiveness requests or dishonors its guarantees of our PPP loans for any reason, we may suffer loan losses. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.
In addition, PPP loans are fixed, low interest rate loans that are guaranteed by the SBA and subject to numerous other regulatory requirements, and a borrower may apply to have all or a portion of the loan forgiven. If PPP borrowers fail to apply or qualify for loan forgiveness, the Bank faces a heightened risk of holding these loans at unfavorable interest rates for an extended period of time. While the PPP loans are guaranteed by the SBA, various regulatory requirements will apply to the Bank’s ability to seek recourse under the guarantees, and related procedures are currently subject to uncertainty.
The Bank also has credit risk on PPP loans if a loan is not forgiven and the SBA determines that the Bank did not originate, close, or service a loan in accordance with legal standards. In the event the SBA dishonors its guarantee for one of those reasons, the Bank may be forced to hold the loan and may incur a loss if the borrower does not perform as agreed.
We depend on the sale of both the guaranteed and unguaranteed portions of our government guaranteed loans, but also face risks relating to the retained portions of unguaranteed loans.
Our strategy historically has been, and may continue to be, to sell both the guaranteed balances of SBA and other government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans, within legally allowable limits. A material portion of our net income and profitability depended, and may continue to depend, on gains on sales of the guaranteed portions of the government guaranteed loans that we originate. We
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also from time to time pursue the sales of unguaranteed portions of such loans, which provide us with additional liquidity and capital capacity to permit us to make additional loans when needed. Our ability to sell both the guaranteed and unguaranteed portions of these loans is dependent upon our ability to identify purchasers with the demand and capacity to buy them, the attractiveness of the loans, our underwriting quality, and other factors. Our business strategy pertaining to SBA and other government guaranteed loans changed in late 2018, when we started to transition to holding an increased amount of the guaranteed portions of these loans going forward. Our ability to continue to make new loans and hold them in our loan portfolio will be limited by our current capital and liquidity positions, and due to our change in business model, our income and results of operations may be adversely affected in the immediate near term. To the extent we retain the unguaranteed portion of these loans in our portfolio, we may be required to make significant provisions to our ALLL for the unguaranteed potions of loans we keep in our portfolio.
Our loan origination processes present heightened opportunities for borrower or referral fraud.
The loans we originate through our technology partners and referral sources are obtained primarily through an online application process. We do not generally meet with the borrowers in person. Our referral sources also are involved in assisting the borrowers’ with completing their loan applications. Therefore, it is difficult for us to definitively ascertain or confirm a borrower’s identity, structure, creditworthiness, or veracity in completing the loan application process. If a borrower or a referral source intentionally, or unintentionally, provides us with incorrect information that we rely on in underwriting a loan, we will be subject to increased credit risk for that loan. Such increased risk could result in increased loan losses or heightened provisions to our ALLL, either of which would adversely affect our credit quality and net income. We may also become subject to heightened regulatory scrutiny for making loans to such borrowers and may be required to dedicate time and other resources to addressing regulatory concerns.
Our loan referral sources operate independently from us and may take actions for which we may be held responsible.
Our referral sources for SBA and other government guaranteed loans operate independently from us and have the initial interactions with many loan applicants and borrowers. As part of those interactions, our referral sources may take actions which violate laws, regulations, or our policies. These may include, among other things, charging impermissible fees, failing to provide or properly complete required documentation or disclosures, making false or misleading statements, or encouraging an applicant to make misrepresentations in its application. In certain instances, the Bank may be held responsible by an applicant or a government agency for such actions. If that were to happen, the Bank may be required to pay restitution or fines, be subject to regulatory enforcement actions, or lose certain statuses with the SBA or other government agencies.
We heavily rely on technology partners and other referral sources in our SBA loan origination process.
As part of our SBA lending strategy, we use the services of technology partners and other referral sources. These arrangements allow us to originate loans throughout the U.S. via the internet. We do not have an exclusivity arrangement with any referral source. Therefore, we cannot be assured that we will be able to originate and close or maintain any specific level of SBA loans through such sources in the future. In addition, our technology partners are subject to online commerce risks generally, including hacking and use of the site by persons using fraudulent credentials. Should we not continue to generate a substantial volume of loan business through our use of referral sources, or if they experience operational interruptions, or direct loans to other lenders, our SBA lending will be materially reduced, which would reduce our net income and our asset growth.
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Our operations are growing at a rapid pace and our training programs and operational protocols may lag behind our growth.
Our branch network and mortgage and SBA lending operations are expanding at a rapid pace. As a result, we may not be able to provide comprehensive or timely training to new staff or employees who are promoted. We may also not develop appropriate operational protocols as quickly as we expand our products and services. If we fail to do so, our employees may not have a set of standards and expectations pursuant to which they perform their assigned duties. If we are not able to fully and promptly provide training to our employees, or develop appropriate protocols, our employees may be susceptible to making mistakes, failing to recognize fraud or other weaknesses in our operations, or failing to recognize or mitigate other risks.
The COVID-19 pandemic may adversely impact our business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and significantly increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering-in-place requirements in many states and communities. As a result, the demand for our products and services may be significantly impacted, which could adversely affect the implementation of our growth strategy. Furthermore, the pandemic could cause the recognition of credit losses or other impairments in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more clients draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize further impairments on the securities we hold as well as reductions in other comprehensive income. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, because of illness, quarantines, government actions, or other restrictions in connection with the pandemic. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.
The effects of future widespread public health emergencies may negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations.
Widespread health emergencies, such as the recent global COVID-19 pandemic, can disrupt our operations through their impact on our employees, clients and their businesses, and the communities in which we operate. Disruptions to our clients could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans, negatively impact regional economic conditions, result in a decline in local loan demand, loan originations and deposit availability and negatively impact the implementation of our growth strategy. Any one or more of these developments could have a material adverse effect on our business, financial condition and results of operations.
A shutdown of the Federal government would likely result in us being temporarily unable to make SBA and other government guaranteed loans.
If the Federal government experiences a shutdown, as it did in the fourth quarter of 2018 and first quarter of 2019, it is likely that the SBA, and other agencies which guaranty the types of loans we make, will be unable to process those loans. As a result, our ability to make those loans would be delayed. During such a delay, it is possible that prospective borrowers could obtain financing from other sources or elect not to borrow. Any delay in closing these types of loans, or losing the opportunity to make them, could result in decreased fee and interest income and adversely affect our financial performance.
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The continued development of our mortgage lending business will depend on our ability to attract and retain effective loan origination officers and other sources of mortgage loan referrals.
The mortgage lending business is highly dependent on being able to successfully originate a consistent volume of loans. The primary ways we do this is through the personal sales efforts of our mortgage lending officers and our development of loan referral sources, such as real estate brokers. If we are unable to attract and retain a productive team of such officers or develop an effective network of referral sources, we will likely be unable to generate a volume of mortgage loans to produce sufficient revenue for this line of business to be profitable. If we cannot operate this line of business in a profitable manner, we will likely incur significant losses due to expenses associated with attempting to establish the line of business.
Changes in interest rates can impact the value of our mortgage servicing right and can result in revenue volatility, which can reduce earnings.
The Bank began selling residential mortgage loans originated in the Tampa Bay market with servicing retained in April 2021 and thus, has begun to build a portfolio of mortgage servicing rights, which are the right to service a mortgage loan for a fee, by collecting principal, interest, and escrow payments. The Bank initially carries such rights using a fair value measurement of the present value of the estimated future net servicing income, which includes assumptions about the likelihood of prepayment by borrowers. Changes in interest rates can affect prepayment assumptions and thus fair value. When interest rates fall, prepayments tend to increase as borrowers refinance, and the fair value of mortgage servicing rights can decrease, which in turn reduces our earnings.
Changes in the laws or regulations governing our SBA and other government guaranteed lending activities and our mortgage lending business may adversely affect our ability to operate them profitably.
Our SBA and other government lending programs and our mortgage lending activities are subject to laws and regulations administered by government agencies such as the SBA, the United States Department of Housing and Urban Development, and the United States Department of Agriculture. If any of these laws or regulations, or the policies and practices of these agencies change, such changes may impact our ability to offer such products in a profitable manner, or at all. If we are unable to profitably offer these products, our net income will likely decrease and our financial condition and performance will likely deteriorate.
We may not be able to retain or grow our core deposit base, which could adversely impact our funding costs.
We rely on client deposits as our primary source of funding for our lending activities. Our future growth will largely depend on our ability to retain and grow our core deposit base. Our retention and acquisition of customer deposits are subject to potentially dramatic fluctuations in availability or price due to certain factors outside of our control, such as increasing competitive pressures for deposits, changes in interest rates and returns on other investment classes, client perceptions of our financial health and general reputation, or a loss of confidence by clients in us or the banking sector generally. Such factors could result in significant outflows of deposits within short periods of time or significant changes in pricing necessary to maintain current client deposits or attract additional deposits. Additionally, any such loss of funds could result in lower loan originations, which could have a material adverse effect on our business, financial condition and results of operations.
We have expanded into new markets with which we have less familiarity with than our historic markets.
We currently operate 29 residential mortgage loan production offices in a number of states. We intend to continue to expand the geographic scope of our loan origination efforts when we identify attractive opportunities. Our senior management and Board of Directors have less familiarity with these markets than they do with our Florida markets. We are dependent on the expertise and actions of the bankers we have hired in those markets for
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us to be successful there. We are also subject to risks associated with home values and the economic conditions in those markets. If our bankers are not effective at implementing our business strategy, leave the Bank, or are otherwise not successful, or if economic conditions and home values deteriorate, we will likely incur losses as a result of expansion into their markets.
We are dependent on our management team and any of their departure or subsequent employment with a competitor could adversely affect our operations.
Our growth and development are particularly dependent upon the personal efforts and abilities of our executive officers and other qualified personnel. The loss or unavailability of such officers or employees could have a material adverse effect on our operations and prospects. Such adverse effect may be magnified if any such officer or employee were to become employed with a competitor of ours.
We have pledged the outstanding shares of the Bank to secure a loan and if we cannot repay the loan or continue to refinance the loan, the lender may foreclose on the loan and take ownership of the Bank.
We have pledged 100% of the outstanding shares of the Bank’s capital stock to secure a term loan with another financial institution with a balance of $3.75 million as of December 31, 2020. If we do not have cash available at BayFirst or we are unable to fund dividends from the Bank to BayFirst, we will not be able to make principal or interest payments due on the loan. If we cannot repay or refinance the loan on or prior to maturity, the lender may foreclose on the pledged stock and take ownership of the Bank. In which case, we will not have any source of revenue and it would be unlikely that we would continue to operate. The loan will mature on March 12, 2028.
We engage in transactions with our directors and their related interests, which creates the potential for conflicts of interest.
We lease the office and branch space at our headquarters from a corporation of which our director George Apostolou is an officer and director. In addition, directors Mark S. Berset and Derek S. Berset are owners of an insurance agency from which the Bank purchases insurance. From time to time the Bank makes loans to, and accepts deposits from, officers and directors and their affiliates. Further, from time to time, in the ordinary course of business, the Company has entered into transactions with certain members of its Board of Directors for various professional services.
Such insider transactions present reputational and corporate governance risks to BayFirst and the Bank. Insider transactions often draw the scrutiny of regulators and shareholders. If they were to identify terms of the transactions, or aspects of the process through which we entered into them, that they deemed to be inappropriately unfavorable to BayFirst or the Bank, such regulators or shareholders might take enforcement or legal action against us. Similarly, insider transactions may present an opportunity for taking advantage of BayFirst or the Bank. If any such events were to occur, BayFirst and the Bank may incur expenses or become engaged in time consuming enforcement or legal processes that could negatively affect our performance.
We may not be able to collect on the guarantees of our SBA or other government guaranteed loans if borrowers default.
In order to collect on their guarantees, we must strictly comply with the standards set by the SBA or other government agencies. If our government guaranteed loans or our servicing and administration of them do not comply with such standards, we may not be able to collect on their guarantees in the event of default. In such case, our asset quality, earnings, and growth prospects will be adversely affected.
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Our Internet-based systems and online commerce activities are subject to security threats that could adversely affect our business.
Third party, or internal, systems and networks may fail to operate properly or become disabled due to deliberate attacks or unintentional events. Our operations are vulnerable to disruptions from human error, natural disasters, power loss, computer viruses, spam attacks, denial of service attacks, unauthorized access, and other unforeseen events. Undiscovered data corruption could render our customer information inaccurate. These events may obstruct our ability to provide services, underwrite loans, and process transactions. Any such incident could put customer confidential information at risk, which may result in significant liability to us, subject us to additional regulatory scrutiny, damage our reputation, result in a loss of customers, cause us to incur significant expense to remediate any damage and inhibit current and potential customers from using our online banking services, any or all of which could have a material adverse effect on our results of operations and financial condition.
The valuation of our SBA and USDA related servicing rights is based on estimates and subject to fluctuation based on market conditions and other factors that are beyond our control.
The fair value of our SBA and USDA servicing rights is estimated by a third party based upon projections of expected future cash flows generated by the loans we service, historical prepayment rates, future prepayment estimates, portfolio characteristics, interest rates based on interest rate yield curves, volatility, market demand for servicing rights, and other factors. While this evaluation process uses historical and other objective information, the valuation of our servicing rights is ultimately an estimate based on our experience, judgment, and expectations regarding our servicing portfolio and the broader market. This is an inherently uncertain process and the value of our servicing rights may be adversely impacted by factors that are beyond our control, which may in turn cause us to record valuation allowances which could have a material adverse effect on our business, results of operations, and financial condition.
Changes in business and economic conditions, in particular those of the Florida markets in which we operate, could lead to lower asset quality and decreased earnings.
Unlike larger national or regional banks that are more geographically diversified, our business and earnings are closely tied to general business and economic conditions in our market area. The local economy is heavily influenced by tourism, real estate, and other service-based industries. Factors that could affect the local economy include declines in tourism, higher energy costs, reduced consumer or corporate spending, natural disasters or adverse weather and a significant decline in real estate values. A sustained economic downturn could adversely affect the quality of our assets, credit losses, and the demand for our products and services, which could lead to lower revenue and lower earnings.
Our reported credit quality may be less favorable than reported because of certain loan payments being temporarily made by the SBA and loan deferrals.
The majority of our loan portfolio consists of SBA loans, most of which received from the SBA principal and interest payments under Section 1112 of the CARES Act during 2020 and will receive from the SBA at least three months of payments in 2021. In addition, we have granted many borrowers payment deferrals and may continue to do so. Because of these actions, our asset quality trends may appear more favorable than they otherwise would without such payments or deferrals. If our borrowers are unable to make their loan payments after the expiration of the SBA’s payment support or our deferrals, we may experience loan defaults or other deterioration in our credit quality. This may result in higher provisions to our loan loss reserve or loan defaults. Such events could lead to lower earnings or losses.
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Most expansion activities require approval of our regulators, which we may not be able to obtain, or that may impose conditions that we find to be unacceptable.
Branch openings, and other expansion activities, generally require the approval of our regulators. We may not be able to obtain such approvals if our regulators do not believe we are financially or managerially strong enough to integrate or manage such activities. In addition, our regulators consider our capital, liquidity, profitability, regulatory compliance, including with the Community Reinvestment Act and the Bank Secrecy Act, and levels of goodwill and intangibles when considering acquisition and expansion proposals. Our regulators may also impose conditions in approvals that we find to be unacceptable, prohibitive, or otherwise undesirable. In any of those instances, we may be unable or unwilling to consummate a transaction or undertake an expansionary activity.
We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material penalties and have negative effects on our business.
The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and regulations impose obligations and nondiscriminatory lending requirements on financial institutions. The banking regulators and the U.S. Department of Justice are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s performance under the Community Reinvestment Act or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on branch expansion, merger and acquisition activity, and restrictions on entering new business lines. Private parties may also have the ability to challenge our performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
We may be required to make increases in our ALLL and to charge off additional loans and leases in the future, which could adversely affect our results of operations.
The determination of the appropriate level of the ALLL involves a high degree of subjectivity and judgment and requires us to make significant estimates of current credit risks, which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors within and outside of our control, may require an increase in the ALLL. In addition, our regulators periodically review our ALLL and may request an increase in the provision for loan losses or the recognition of loan charge-offs, based on judgments different than those of management. Furthermore, the Financial Accounting Standards Board has issued a current expected credit loss rule, which will change our accounting for credit losses by requiring us to record, at the time of origination, credit losses expected throughout the life of loans, held-to-maturity securities, and certain other assets and off-balance sheet credit exposures as opposed to the current practice of recording losses when it is probable that a loss event has occurred. We expect this new standard to be effective on January 1, 2023, when we will recognize a one-time adjustment to the ALLL. We have not yet determined the magnitude of such adjustment or the overall impact on financial results. Also, if charge-offs in future periods exceed the ALLL, we will need additional provisions to increase the ALLL, which would result in a decrease in net income and capital, and could have a material adverse effect on our financial condition and results of operations.
If real estate values in our markets decline, our loan portfolio may become impaired.
A material portion of our loan portfolio consists of mortgages secured by real estate located in Pinellas, Hillsborough, Manatee, and Sarasota Counties, Florida. Real estate values in our market may decline due to changes in national, regional or local economic conditions; fluctuations in interest rates and the availability of loans to potential purchasers; changes in the tax laws and other governmental statutes, regulations and policies; and acts of nature. If real estate values decline in our market, the value of the real estate collateral securing our
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loans will likely be reduced. Any reduction in the value of the collateral securing our loans could increase the level of our nonperforming assets and reduce the amount of money we could realize on the sale of any collateral and thereby adversely affect our financial performance.
Hurricanes or other adverse weather events, as well as climate change, could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business and results of operations.
Our market areas in Florida are susceptible to hurricanes, tropical storms, and related flooding and wind damage. Such weather events can disrupt operations, result in damage to properties and negatively affect the local economies in the markets where we operate. Such weather events could result in a decline in loan originations, a decline in the value, or destruction of properties securing our loans and an increase in delinquencies, foreclosures, or loan losses. Our business and results of operations may be adversely affected by these and other negative effects of future hurricanes, tropical storms, related flooding and wind damage and other similar weather events. Climate change may be increasing the nature, severity, and frequency of adverse weather conditions, making the impact from these types of natural disasters on us or customers worse.
Further, concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Investors, consumers, and businesses also may change their behavior on their own as a result of these concerns. The State of Florida could be disproportionately impacted by long-term climate changes. We and our customers may face cost increases, asset value reductions changes in demand for products and services resulting from new laws, regulations, and changing consumer and investor preferences regarding responses to climate change.
Our loan portfolio includes a material amount of commercial real estate and commercial and industrial loans.
The credit risk associated with commercial real estate loans and commercial and industrial (“C&I”) loans is a result of several factors, including the concentration of principal in a limited number of loans and to borrowers in similar lines of business, the size of loan balances, the effects of general economic conditions on demand for C&I products and services and income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Repayment of commercial real estate and C&I loans in some cases is dependent upon the successful operation of the related business or the development or sale of the related real estate. If the actual or potential cash flow from a business or property is reduced, the borrower’s ability to repay the loan may be impaired. As a result, repayment of these loans may, to a greater extent than other types of loans, be subject to adverse conditions in the real estate market or economy. In addition, if the Bank forecloses on the collateral securing C&I loans, the potential market for selling such collateral may be limited to persons already engaged in a similar business. That may result in the Bank recovering an amount for such collateral less than the amount of the loan or taking an extended time to liquidate such collateral.
Our use of appraisals in deciding whether to make a loan secured by real property or how to value the loan in the future may not accurately describe the net value of the collateral that we can realize.
In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values may fluctuate over relatively short periods of time, especially in times of heightened economic uncertainty, this estimate might not accurately describe the net value of the real property collateral after the loan has been closed. If the appraisal does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property. In addition, we rely on appraisals and other valuation techniques to establish the value of our foreclosed upon real estate and to determine certain loan impairments. If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our foreclosed upon real estate, and our ALLL may not accurately reflect loan impairments. Inaccurate valuations of the properties securing the loans in our portfolio may negatively impact the continuing value of those loans and could materially adversely affect our business, results of operations and financial condition.
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We operate in a highly competitive industry and market area.
We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources than we do. Such competitors primarily include Internet banks and national, regional and community banks within the various markets we serve. We also face competition from many other types of financial institutions, including, without limitation, savings and loan institutions, credit unions, mortgage companies, other finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes, as well as continued consolidation. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Our success depends on our ability to compete successfully in our market area, and there is no guarantee that we will be able to do so.
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
Liquidity is essential to our business. Actions by the Federal Home Loan Bank of Atlanta or the Board of Governors of the Federal Reserve System may reduce our borrowing capacity. Additionally, we may not be able to attract deposits at competitive rates. Our inability to raise funds through traditional deposits, brokered deposits, borrowings, the sale of securities or loans, and other sources could negatively affect our liquidity or result in increased funding costs. Liquidity may also be adversely impacted by bank supervisory and regulatory authorities mandating changes in the composition of our balance sheet to asset classes that are less liquid.
Changes in interest rates affect our profitability and assets.
Our profitability depends to a large extent on the Bank’s net interest income, which is the difference between income on interest-earning assets, such as loans and investment securities, and expenses on interest-bearing liabilities, such as deposits and borrowings. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control including inflation, economic recession, unemployment, money supply, domestic and international events, and changes in the United States and other financial markets.
At December 31, 2020, our one-year interest rate sensitivity position was asset sensitive, such that a gradual increase in interest rates during the next twelve months would have a positive impact on our net interest income. Our results of operations are affected by changes in interest rates and our ability to manage this risk. The difference between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities may be affected by changes in market interest rates, changes in relationships between interest rate indices, and changes in the relationships between long-term and short-term market interest rates. Our net interest income may be reduced if: (i) more interest-earning assets than interest-bearing liabilities reprice or mature during a time when interest rates are declining; or (ii) more interest-bearing liabilities than interest-earning assets reprice or mature during a time when interest rates are rising. In addition, the mix of assets and liabilities could change as varying levels of market interest rates might present our customer base with more attractive options.
We face additional risks due to our increased mortgage banking activities that could negatively impact our net income and profitability.
We sell a substantial portion of the mortgage loans that we originate. The sale of these loans generates noninterest income and can be a source of liquidity for the Bank. Disruption in the secondary market for residential mortgage loans could result in our inability to sell mortgage loans, which could negatively impact our liquidity position and earnings. In addition, declines in real estate values or increase in interest rates could reduce the potential for robust mortgage originations, which also could negatively impact our earnings. As we do sell mortgage loans, we also face the risk that such loans may have been made in breach of our representations and warranties to the buyers, and we could be forced to repurchase such loans or pay other damages.
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We may face risks with respect to future expansion.
We may consider and enter into new lines of business or offer new products or services. We may acquire all or parts of other institutions and we may engage in additional de novo branch expansion. Expansion involves a number of risks, including the costs associated with identifying and evaluating potential acquisitions and merger partners, inaccurate estimates and judgments regarding credit, operations, management and market risks of the target institution, our ability to finance expansion and possible dilution to our existing shareholders, the diversion of our management’s attention to the negotiation of a transaction, the integration of the operations and personnel of combining businesses, and the possibility of unknown or contingent liabilities.
We may need additional capital in the future, but such capital may not be available when needed or at all.
We may need to obtain additional debt or equity financing in the near future to fund future growth and meet our capital needs. We cannot guarantee that such financing will be available to us on acceptable terms or at all. If our financial performance is unsatisfactory or if negative economic events or disruptions in the capital markets occur, it may not be possible for us to find sources of sufficient capital for our business operations. If we are unable to obtain future financing, we may not have the resources available to fund our planned growth.
We are subject to government regulation and monetary policy that could constrain our growth and profitability.
We are subject to extensive federal government supervision and regulations that impose substantial limitations with respect to lending activities, purchases of investment securities, the payment of dividends, and many other aspects of our business. Many of these regulations are intended to protect depositors, the public, and the FDIC, but not our shareholders. The banking industry is heavily regulated. We are subject to examinations, supervision and comprehensive regulation by various federal and state agencies. Our compliance with these regulations is costly and restricts certain of our activities. Banking regulations are primarily intended to protect the federal deposit insurance fund and depositors, not shareholders. The burden imposed by federal and state regulations puts banks at a competitive disadvantage compared to less regulated competitors such as finance companies, mortgage banking companies, and leasing companies. Federal economic and monetary policy may also affect our ability to attract deposits, make loans, and achieve our planned operating results.
Legislation and regulatory proposals enacted in response to market and economic conditions may materially adversely affect our business and results of operations.
Changes in the laws, regulations, and regulatory practices affecting the banking industry may increase our costs of doing business or otherwise adversely affect us and create competitive advantages for our competitors. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) in particular represented a significant overhaul of many aspects of the regulation of the financial services industry, some of which have yet to be implemented. In addition, because regulation of financial institutions changes regularly and is the subject of constant legislative debate, we cannot forecast how federal or state regulation of financial institutions may change in the future and impact our operations. Recent and forthcoming changes to banking regulations may impact the profitability of our business activities, require changes to some of our business practices, or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. It may also require us to hold higher levels of regulatory capital and/or liquidity and it may cause us to adjust our business strategy and limit our future business opportunities. We cannot predict the effects of future legislation and new or revised regulations on us, our competitors, or on the financial markets and economy, although they may significantly increase costs and impede the efficiency of our internal business processes.
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Technological changes, including online and mobile banking, have the potential of disrupting our business model, and we may have fewer resources than many competitors to invest in technological improvements.
The financial services industry continues to undergo rapid technological changes with frequent introductions of new technology-driven products and services, including mobile and online banking services. Changes in customer behaviors have increased the need to offer these options to our customers. In addition to serving clients better, the effective use of technology may increase efficiency and may enable financial institutions to reduce costs. Our future success will depend, in part, upon our ability to invest in and use technology to provide products and services that provide convenience to customers and to create additional efficiencies in our operations. We may need to make significant additional capital investments in technology in the future, and we may not be able to effectively implement new technology-driven products and services in a timely manner in response to changes in customer behaviors, thus adversely impacting our operations. Many of our competitors have substantially greater resources to invest in technological improvements and banking regulators may permit emerging technology companies to engage in activities previously reserved to traditional commercial banks. Such competition could adversely affect our performance and results of operations.
Changes in accounting standards may affect our reported performance.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, there are changes in the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and statements of operations. Future changes in financial accounting and reporting standards could require us to apply a new or revised standard retroactively, which could result in a material adverse effect on our financial condition or could even require us to restate prior period financial statements.
We face risks related to our operational, technological, and organizational infrastructure.
Our ability to grow and compete is dependent on our ability to build or acquire the necessary operational and technological infrastructure and to manage the cost of that infrastructure while we expand. Similar to other financial institutions, our operational risk can manifest itself in many ways, such as errors related to failed or inadequate processes, faulty or disabled computer systems, fraud by employees or outside persons, and exposure to external events. We are dependent on our operational infrastructure to help manage these risks. In addition, we are heavily dependent on the strength and capability of our technology systems, which we use both to interface with our customers and to manage our internal financial and other systems. Our ability to develop and deliver new products that meet the needs of our existing customers and attract new ones depends on the functionality of our technology systems.
Risks Related to Our Securities
A vibrant public trading market for our common stock has not and may not develop, which will hinder your ability to sell the common stock and may lower the market price of the stock.
Our common stock is quoted and traded on the OTCQX under the symbol “FHBI.” However, such quotation has resulted in minimal trading, which may make it difficult for you to sell your shares and is likely to depress the prices at which you would be able to sell your shares. You may, therefore, be required to bear the risks of this investment for an indefinite period of time. We intend to apply to have our stock listed on Nasdaq. However, we do not expect a substantially liquid market for our common stock to develop for an uncertain period of time, if at all. Accordingly, potential investors should consider the potential illiquid and long-term nature of an investment in our common stock.
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Our application to list our common stock on Nasdaq may not be approved and our stock may continue to be traded only on the OTCQX.
Our application to list our common stock on Nasdaq will only be approved once we have maintained on the OTCQX an average daily trading volume of 2,000 shares for 30 consecutive trading days. We may fail to attain that level of trading volume, fail to meet another listing requirement, or our application may not be approved for another reason. In any such event, our common stock will continue to be traded only on the OTCQX. The OTCQX has less liquidity and is not as efficient as Nasdaq. Therefore, if we fail to list our common stock on Nasdaq, it may be difficult to sell your shares or obtain the best price for them.
Investors may face dilution resulting from the issuance of common stock in the future.
We may issue common stock without shareholder approval, up to the number of authorized shares set forth in our Articles of Incorporation. Our Board may determine, from time to time, a need to obtain additional capital through the issuance of additional shares of common stock or other securities. There can be no assurance that such shares will be issued at prices or on terms better for BayFirst than or equal to the price or terms in this offering. The issuance of any additional shares of common stock by us in the future may result in a reduction of the book value or market price, if any, of the then-outstanding common stock. Issuance of additional shares of common stock will reduce the proportionate ownership and voting power of our existing shareholders.
The price of our common stock could be volatile.
The market price of our common stock may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things: variations in our quarterly results of operations; recommendations by securities analysts; performance of other companies that investors deem comparable to us; economic factors unrelated to our performance; general market conditions; and changes in government regulations. In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition, or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
An investment in our common stock is not an insured deposit.
An investment in our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC. Investment in our common stock is inherently risky for the reasons described herein, and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.
Owning our stock will not give you the right to participate in any future offerings of our capital stock and your ownership could be diluted.
As a shareholder, you are not automatically entitled to purchase additional shares of common stock in future issuances of our common stock; therefore, you may not be able to maintain your current percentage of ownership in BayFirst. If we decide to issue additional shares of common stock or conduct an additional offering of stock, your ownership in BayFirst could be diluted and your potential share of future profits may be reduced.
Management has broad discretion concerning the use of our capital.
We use our capital to maintain liquidity and to continue to support the growth of the Bank. This growth may include the opening of branch offices, increasing the size and volume of loans, or other such activities that may require additional capital. The additional capital may also be used to service our outstanding debt. Our
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management may determine that it is in the best interest of the Company or the Bank to apply our capital in a manner that is inconsistent with a shareholder’s wishes. Failure to use such funds effectively might harm your investment.
If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
The trading market for our common stock could be affected by whether and to what extent equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any research analysts will cover us and our common stock or whether they will publish research and reports on us. If one or more equity analysts cover us and publish research reports about our common stock, the price of our stock could decline if one or more securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us.
If any of the analysts who elect to cover us downgrade their recommendation with respect to our common stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.
Our Board of Directors owns a significant percentage of our shares and will be able to make decisions to which you may be opposed.
As of April 30, 2021, BayFirst’s directors and executive officers as a group own approximately 18.66% of our outstanding common stock. In addition, the directors and executive officers have stock options and warrants to acquire shares of common stock, which, if fully exercised, would result in them owning approximately 20.91% of our outstanding common stock. Our directors and executive officers are expected to exert a significant influence on the election of Board members and on the direction of the Company. This influence could negatively affect the price of our shares or be inconsistent with other shareholders’ desires.
We have outstanding preferred stock and our Board may authorize the issuance of additional series of preferred stock.
We have 1,000,000 shares of authorized preferred stock, no par value. Of those, 10,000 shares have been designated as Series A Preferred Stock, of which 6,395 shares were outstanding as of March 31, 2021, with a $1,000 liquidation preference and a 9% (subject to increase to 11% if we have not redeemed the shares by the tenth anniversary of their issuance) per annum quarterly dividend. We also have 20,000 authorized shares of Series B Convertible Preferred Stock, of which 6,980 shares were outstanding as of March 31, 2021, with a $1,000 liquidation preference and an 8% dividend, which is otherwise on a parity with our Series A Preferred Stock as to priority of dividends and liquidation preference. Additionally, our Articles of Incorporation provide that our Board of Directors may authorize additional series of preferred stock without shareholder approval. Accordingly, the issuance of new shares of preferred stock may adversely affect the rights of the holders of shares of our common stock.
BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt.
BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt. At December 31, 2020, BayFirst had $3.75 million of the term loan outstanding and $5.958 million in subordinated debt. BayFirst’s obligation to make payments on its subordinated debt and other loans, will reduce the amount of cash available to BayFirst to pay dividends on its common stock. Either or both of BayFirst or the Bank may issue additional debt. Payments due on such debt will further reduce the amount of money available to BayFirst to pay dividends on its common stock.
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We are restricted by law and government policy in our ability to pay dividends to our shareholders.
Holders of shares of our capital stock are only entitled to receive such dividends as our Board may declare out of funds legally available for such payments. Although we have recently declared cash dividends on our common stock, we are not required to do so and may reduce or eliminate our common stock dividend in the future. This could adversely affect the market price of our common stock. Furthermore, the terms of our subordinated debt and the preferred stock will prohibit us from declaring or paying any dividends on any junior series of our capital stock, including our common stock, or from repurchasing, redeeming or acquiring such junior stock, unless we have declared and paid full dividends on our outstanding preferred stock for the most recently completed dividend period. The holders of our outstanding Series A Preferred Stock are entitled to receive quarterly cash dividends at 9% per annum (subject to increase to 11% if we have not redeemed the shares by the tenth anniversary of their issuance) and the holders of our Series B Convertible Preferred Stock are entitled to received quarter cash dividends at 8% per annum. Additionally, our Articles of Incorporation provide that our Board of Directors may authorize and issue additional series of preferred stock without shareholder approval. Any preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior stock, including the common stock.
We are also subject to state and federal statutory and regulatory limitations on our ability to pay dividends on our capital stock. For example, it is the policy of the Federal Reserve that bank holding companies should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the organization’s expected future needs, asset quality and financial condition. Moreover, the Federal Reserve will closely scrutinize any dividend payout ratios exceeding 30% of after-tax net income. You should not purchase common stock in the offering if you will need or expect an investment that pays dividends.
We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. These include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until we are no longer an emerging growth company, which could be as long as five full fiscal years following the listing of our common stock on Nasdaq. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
Certain provisions of Florida and federal law may discourage or prevent a takeover of BayFirst and result in a lower market price for our common stock.
Florida and federal law contain anti-takeover provisions that apply to us. These provisions could discourage potential buyers from seeking to acquire us in the future, even if the proposed transaction would allow shareholders to realize a premium for their shares and even if a majority of our shareholders wish to participate in such a transaction. As a result, these provisions could also adversely affect the market price of our common stock.
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The Registered Stockholders may sell their shares of common stock covered hereby pursuant to brokerage transactions on the OTCQX, Nasdaq, or other public exchanges or registered alternative trading venues, at prevailing market prices at any time after the shares of common stock are listed for trading. We are not party to any arrangement with any Registered Stockholder or any broker-dealer with respect to sales of shares of common stock by the Registered Stockholders. As such, we will have no input if and when any Registered Stockholder may, or may not, elect to sell their shares of common stock or the prices at which any such sales may occur, and there can be no assurance that any Registered Stockholders will sell any or all of the shares of common stock covered by this prospectus.
We will not receive any proceeds from the sale of shares of common stock by the Registered Stockholders.
In addition to sales made pursuant to this prospectus, the shares of common stock covered by this prospectus may be sold by the Registered Stockholders in private transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).
Under the securities laws of some states, shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
If any of the Registered Stockholders utilize a broker-dealer in the sale of the shares of common stock being offered by this prospectus, such broker-dealer may receive commissions in the form of discounts, concessions, or commissions from such Registered Stockholder or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions, or commissions as to particular broker-dealers may be in excess of those customary in the types of transactions involved).
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Registered Stockholders may, or may not, elect to sell shares of our common stock covered by this prospectus. To the extent any Registered Stockholder chooses to sell shares of our common stock covered by this prospectus, we will not receive any proceeds from any such sales of our common stock. See the section titled “Principal and Registered Stockholders.”
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As of April 30, 2021, we had approximately 667 record holders of our common stock.
Currently, and until our common stock is listed on Nasdaq, our common stock is quoted and traded on the OTCQX under the symbol “FHBI.” However, such quotation has resulted in a minimal level of trading.
We intend to apply to list our common stock on Nasdaq under the symbol “[ ].” We expect to file our application, for it to be approved, and our Nasdaq listing to begin, once we have maintained on the OTCQX an average daily trading volume of 2,000 shares for 30 consecutive trading days. At that time, the quoting of our stock on the OTCQX will be discontinued.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of December 31, 2020, with respect to shares of common stock that may be issued under our equity compensation plans.
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
Weighted average exercise price of outstanding options, warrants and rights (b) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
||||||||||
| Equity compensation plans approved by security holders |
332,708 | $ | 16.01 | 190,045 | ||||||||
| Equity compensation plans not approved by security holders |
— | — | — | |||||||||
| Total |
332,708 | $ | 16.01 | 190,045 | ||||||||
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Since 2016, we have paid quarterly cash dividends on our common stock. The following table reflects dividends paid in 2019, 2020, and 2021 (as adjusted for the three-for-two stock split effective May 10, 2021).
| Date Dividend Paid |
Dividend Amount per Share |
|||
| March 15, 2019 |
$ | 0.067 | ||
| June 15, 2019 |
$ | 0.067 | ||
| September 15, 2019 |
$ | 0.067 | ||
| December 15, 2019 |
$ | 0.067 | ||
| March 15, 2020 |
$ | 0.067 | ||
| June 15, 2020 |
$ | 0.067 | ||
| September 30, 2020 |
$ | 0.067 | ||
| December 31, 2020 |
$ | 0.067 | ||
| March 15, 2021 |
$ | 0.067 | ||
| June 15, 2021 (declared, not yet paid) |
$ | 0.07 | ||
Prior to paying any dividends on our common stock, we must be current in the payment of dividends due on our Series A and Series B Convertible Preferred Stock.
Holders of our outstanding Series A Preferred Stock are entitled to receive quarterly cash dividends at 9% per annum (unless we have not redeemed the shares by the tenth anniversary of their issuance, in which event the rate is subject to be increased to 11%). Holders of our outstanding Series B Convertible Preferred Stock are entitled to receive quarterly cash dividends at 8% per annum.
Additionally, our Articles of Incorporation provide that our Board of Directors may authorize and issue additional series of preferred stock without shareholder approval. Any preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior stock, including the common stock.
Future dividends may be declared subject to the discretion of the Board. Our Board may consider, among other factors, debt service requirements of our debt both at the Bank and parent company levels, the dividend requirements of our outstanding preferred stock, our projected earnings, financial condition, and regulatory capital requirements, including applicable statutory and regulatory restrictions on the payment of dividends, in determining whether or not to declare a dividend.
BayFirst’s ability to pay dividends may also be dependent upon the Bank’s ability to pay dividends to BayFirst. The Bank is restricted in its ability to pay dividends under Florida law and by the regulations promulgated by the Florida Office of Financial Regulation (“OFR”). In particular, under Section 658.37, Florida Statutes, a Florida state-chartered bank may not pay dividends from its capital, but may only pay dividends from its earnings. The Bank paid to its first dividend of $250,000 to BayFirst in the first quarter of 2021.
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BayFirst Financial Corp.
BayFirst commenced its bank holding company operations on September 1, 2000, by acquiring all of the shares of the Bank. BayFirst’s primary source of income is from its wholly-owned subsidiary, the Bank. BayFirst’s corporate offices are located at the First Home Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701.
First Home Bank
The Bank commenced operations on February 12, 1999, as a Florida state-chartered commercial bank. The Bank currently operates out of its main office, six branch offices, and 29 residential mortgage loan production offices. The Bank’s main office is located at the First Home Executive Center. We have divided our banking operations into three Divisions: the Community Banking Division, the SBA Lending Division, or CreditBench, and the Residential Mortgage Division.
Community Banking Division
We have structured our community banking services and charges for such services in a manner designed to attract consumers, small and medium sized businesses, and professionals located in Pinellas, Hillsborough, Sarasota, Manatee, and Pasco Counties. We focus on customers that are seeking the flexibility and personalized relationships that a community bank can provide. The Bank offers specialized services such as:
| • specialized business and personal checking accounts |
• ACH originations
• cash management | |
| • remote capture and deposit |
• internet banking and on-line bill payment | |
| • wire transfers |
• safety deposit boxes | |
| • courier services |
• retail investment services | |
The Bank also offers traditional commercial banking services such as the acceptance of time, demand and savings deposits, including NOW accounts and money market accounts, savings accounts, and fixed-rate certificates of deposits.
A wide range of loans are also offered, including commercial, consumer installment, and real estate loans. Our commercial lending efforts are directed principally toward businesses and professionals who otherwise do business with us, and include commercial real estate mortgages, construction and development loans, working capital loans, and business expansion loans. We offer personal lines of credit, auto, boat, and recreational vehicle loans, residential mortgages, and home equity lines of credit. We have been particularly successful in penetrating the small business community. We participate in interbank credit arrangements to permit us to take part in corporate or other business entity loans for amounts which are in excess of our lending limits.
The Community Banking Division has six banking offices in the Tampa Bay area: four in Pinellas County, one in Hillsborough County, and one in Sarasota County. Additionally, we have purchased properties in Sarasota and Belleair Bluffs and have contracted to purchase sites in Lutz and Bradenton where we intend to open additional full-service banking centers.
The Bank’s staff maintains personalized customer contacts and relationships, which enable us to provide excellent customer service. While we only offer banking services that we believe to be profitable, we offer competitive rates for such services, thereby, we believe, motivating the businesses in our service area to avail themselves of our credit and non-credit services. On limited occasions, we may offer services that may not be as profitable, but only if the account relationship provides earnings or other benefits sufficient to offset the cost of the services provided.
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CreditBench
In early 2020, the Bank’s SBA Lending Division rebranded as CreditBench. CreditBench originates SBA loans through two distinct channels. One is its team of SBA lenders, known as the Core SBA Team. The other is through financial technology platforms, collectively known as FlashCap. CreditBench’s Core SBA Team make government guaranteed loans throughout the U.S., with a particular emphasis on business acquisition financing. FlashCap employs an internal sales team and also uses national referral partners and financial technology companies to originate SBA loans. CreditBench also originates a significant volume of loans in the SBA 7(a) Small Loan Program. CreditBench’s loans are typically originated through an on-line application process and made throughout the U.S., with a heightened focus on originating loans in First Home’s primary and secondary market areas. Underwriting, quality control, and technology are centralized and scalable for potential increase in loan volume.
This Division’s lending efforts are targeted to a broad range of industries and geographies, with a focus on building relationships with borrowers. This diversification is intended to mitigate the Bank’s credit risk. Borrowers are also targeted for establishing deposit relationships.
Government guaranteed loans are designed to assist small businesses in obtaining financing. Such loans primarily finance working capital for the borrowers. CreditBench also offers USDA Business and Industry (“B&I”) loans to businesses that are located in qualifying areas. The federal government guarantees 75% to 90% of SBA loan balances and up to 80% of USDA B&I loan balances as an incentive for financial institutions to make loans to small businesses. Eligible uses of SBA and USDA B&I loans are for working capital, equipment financing, debt refinancing, purchase of inventory, new construction, building acquisitions, business acquisitions, and startup expenses. The program maximum limit for SBA loans is $5.0 million, and the program limit for USDA loans is $25.0 million. Both can be priced competitively relative to conventional financing.
In 2020, the SBA initiated the PPP. The Bank made the strategic decision to become an active PPP lender, using local marketing efforts and a nationwide, on-line application platform. The Bank used the Federal Reserve’s PPPLF to fund a significant portion of these loans.
The Bank manages its government guaranteed lending program through a staff experienced in business development, loan documentation and monitoring, and accounting. Emphasis is placed on proper loan documentation to ensure full guarantee repurchase in the event of defaults.
CreditBench’s revenues are primarily derived from three sources: interest income, loan servicing, and premiums from the sale of loans. The Bank may elect to hold the government guaranteed portion of a loan on its balance sheet to increase interest income. Alternatively, the Bank may sell that portion to realize a premium on the sale.
When the Bank sells the guaranteed portion of a government guaranteed loan, the premium is typically in excess of 10% of the principal. In addition, the Bank may also sell the unguaranteed portion of certain government guaranteed loans, depending on a loan’s terms, the offer price, the Bank’s liquidity and capital positions, and the perceived credit risk. Beginning in the third quarter of 2018, the Bank has initiated a gradual transition to retaining a larger portion of its government guaranteed loans in an effort to grow its assets and increase long term and more predictable earnings. By retaining a greater amount of such loans, the Bank is expected to become less dependent on gains on sales and more reliant upon interest income. This should permit the Bank to become better able to withstand the effects of a government shutdown and less subject to secondary market fluctuations. These factors result in the Bank having a more predictable income stream from its government guaranteed lending activities. The Bank’s participation in the PPP resulted in significant processing revenue, allowing the Bank to retain the majority of the guaranteed loan production in 2020, advancing our strategy of relying less on gain-on-sale income and becoming more reliant on spread income.
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Residential Mortgage Division
Our Residential Mortgage Division operates from our six banking centers in the Tampa Bay area and our 29 loan production offices in 18 states. It offers fixed and variable rate home mortgages for the purchase and refinance of residential properties. Since the inception of the Residential Mortgage Division in January 2017, the Bank has made significant investments in infrastructure and technology resulting in the efficient and profitable platform currently in place. We expect to continue to expand the geographic scope of the Bank’s residential loan origination efforts when we identify attractive opportunities.
We originate loans primarily for sale into the secondary market. From time to time, we also originate residential mortgage loans for the Bank’s loan portfolio. These are generally high quality, adjustable rate, non-conforming mortgages located in our primary service area where there is a greater opportunity to cross-sell other Bank products and services. The ability to fund such non-conforming loans provides the Bank a competitive advantage compared to non-bank mortgage lenders.
Our residential mortgages are originated, processed, underwritten, and closed to secondary market standards or Bank policy by the staff of the Residential Mortgage Division. The Bank does not currently fund loans originated by outside brokers, but may do so in the future. In connection with the origination of mortgage loans intended for sale, the Bank enters into loan commitments for fixed rate mortgage loans, generally lasting 30 to 45 days and at market rates when initiated. A commitment to fund a mortgage loan (i.e., an interest rate lock) to be sold into the secondary market or for the future delivery of a mortgage loan is accounted for as a free-standing derivative. The fair value of an interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. To deliver loans to the secondary market and to moderate the Bank’s interest rate risk prior to sale, the Bank typically enters into non-exchange traded mandatory delivery forward sales contracts and best efforts forward sales contracts, which are also considered derivative instruments. These contracts are entered into for amounts and terms offsetting the interest rate risk of loan commitment derivatives and loans held for sale, and both are carried at their fair value with changes included in earnings. The Bank considers the best efforts forward sales contracts that meet the net settlement requirement to be derivatives, as there are penalties to the Bank if it does not deliver the loan to the investor once the loan closes with the borrower.
The Bank engages a sub-servicer for residential mortgage loans that is currently servicing certain portfolio residential mortgage loans. The sub-servicer relationship also allows the Bank to retain servicing for loans to be sold in bulk, if we chose to do so. In April 2021, the Bank began selling loans with servicing retained in the Tampa Bay area in order to better take advantage of cross-selling opportunities with those loan customers.
Competition
All phases of our operations are highly competitive. Many of our commercial bank and thrift competitors have assets, capital, lending limits, and name recognition that are materially larger than ours. We compete with other financial service providers for loans and deposits. These competitors include:
| • | large national and super-regional financial institutions that have well-established branches and significant market share in the communities we serve; |
| • | non-bank SBA lenders; |
| • | finance companies, investment banking and brokerage firms, and insurance companies that offer bank-like products; |
| • | credit unions, which can offer highly competitive rates on loans and deposits because they receive tax advantages not available to commercial banks; |
| • | other community banks that compete with us for clients desiring a high level of service; |
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| • | technology-based financial institutions, including large national and super-regional banks offering on-line deposit, bill payment and mortgage loan application services; and |
| • | both local and out-of-state trust companies and trust service offices. |
Some of the non-traditional financial institution competitors are not subject to the same degree of regulatory oversight to which the Bank is subject.
Among the advantages that our larger competitors have over the Bank are their ability to finance wide-ranging advertising campaigns and to allocate their investment assets to products with the highest yields and demands. A number of our competitors offer certain services, such as trust departments that we do not offer. By virtue of their greater total capital, these financial service providers have substantially higher loan-to-one borrower limits than us (loans-to-one borrower limits apply to an individual customer’s total extension of credit as a percentage of a bank’s total capital accounts). These competitors may intensify their advertising and marketing activities to counter any efforts by us to attract new business.
To compete with the financial institutions in our primary service area, we capitalize upon the flexibility that our independent status allows, including making decisions locally. This includes solicitation of business, professional, and personal accounts through the personal efforts of our directors and officers. We believe that a locally-based bank is often perceived by the local business community as possessing a clearer understanding of local commerce and the needs of the community. Consequently, our customers expect that we will be able to make prudent lending decisions quicker and more equitably than larger competitors. We focus on the smaller commercial customer because this segment offers the greatest concentration of potential business and historically has tended to demonstrate a higher degree of loyalty in their banking relationships. We are able to respond quickly to changes in the interest rates paid on time and savings deposits and charged on loans, and to charges imposed on depository accounts, so as to remain competitive in the marketplace. If there are customers whose loan demands exceed our loan limits, we have the ability to arrange for such loans on a participation basis with other financial institutions.
Various legislative actions in recent years have led to increased competition among financial institutions. With the enactment of various laws and regulations affecting interstate banking expansion, it is easier for financial institutions located outside of Florida to enter the Florida market, including our target markets. In addition, recent legislative and regulatory changes and technological advances have enabled customers to conduct banking activities without regard to geographic barriers, through internet and telephone-based banking and similar services. There can be no assurance that the United States Congress, the Florida Legislature, or the applicable bank regulatory agencies will not enact legislation or promulgate laws and regulations that may further increase competitive pressures on the Bank.
Employees
As of December 31, 2020, BayFirst and the Bank had 574 full-time employees and 44 part-time employees. We believe that relations with our employees are good. We do not have a collective bargaining agreement with our employees.
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The following table contains information concerning the current and intended locations of our full-service banking centers. We also operate 29 residential mortgage loan production offices in 18 states.
| Location |
Use |
Own or Lease | Year First Operated | |||
| 700 Central Avenue St. Petersburg, FL 33701 |
Corporate and Bank Headquarters |
Lease | 2017 | |||
| 9190 Seminole Boulevard Seminole, FL 33772 |
Banking Center | Own | 1999 | |||
| 5250 Park Boulevard Pinellas Park, FL 33781 |
Banking Center | Own | 2006 | |||
| 2520 Countryside Boulevard Clearwater, FL 33763 |
Banking Center | Own | 2018 | |||
| 2033 Main Street, Suite 101 Sarasota, FL 34237 |
Banking Center | Lease | 2018 | |||
| 3015 West Columbus Drive Tampa, FL 33607 |
Banking Center | Own | 2020 | |||
In addition, we have acquired, or have contracted to purchase, the following properties to be used as full-service banking centers.
| Location |
Ownership Status | Year Acquired | ||
| 2075 S. Tamiami Trail Sarasota, FL 34239 |
Own | 2019 | ||
| 401 N. Indian Rocks Road Belleair Bluffs, FL 33770 |
Own | 2020 | ||
| 2102 59th Street West Bradenton, FL 34209 |
Under Contract | N/A | ||
| 19140 N. Dale Mabry Highway Lutz, FL 33548 |
Under Contract | N/A | ||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion and analysis presents our financial condition and results of operations on a consolidated basis. However, because we conduct all of our material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level. The following discussion should be read in conjunction with our consolidated financial statements.
As a one bank holding company, we generate most of our revenue from interest on loans and gain-on-sale income derived from the sale of loans into the secondary market. Our primary source of funding for our loans is deposits. Our largest expenses are interest on those deposits and salaries plus related employee benefits. We measure our performance through our net interest margin, return on average assets, and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios.
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Average Balance Sheet and Analysis of Net Interest Income
The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest and dividend income of BayFirst from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities (dollars in thousands).
| Year Ended December 31, | ||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||
| Average Balance |
Interest | Average Yield/Rate |
Average Balance |
Interest | Average Yield/Rate |
|||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans, excluding PPP loans |
$ | 449,180 | $ | 24,012 | 5.35 | % | $ | 368,615 | $ | 24,431 | 6.63 | % | ||||||||||||
| PPP Loans |
556,232 | 19,077 | 3.43 | % | — | — | — | |||||||||||||||||
| Other |
156,347 | 641 | 0.41 | % | 58,200 | 1,270 | 2.18 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-earning assets |
1,161,759 | 43,730 | 3.76 | % | 426,815 | 25,701 | 6.02 | % | ||||||||||||||||
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|
|
|
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|
|
|
|
|
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| Non-interest-earning assets |
36,264 | 24,694 | ||||||||||||||||||||||
|
|
|
|
|
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| Total assets |
$ | 1,198,023 | $ | 451,509 | ||||||||||||||||||||
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|||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| NOW, MMDA, and savings |
350,000 | 4,321 | 1.23 | % | 165,449 | 3,072 | 1.86 | % | ||||||||||||||||
| Time deposits |
147,169 | 3,169 | 2.15 | % | 160,207 | 4,247 | 2.65 | % | ||||||||||||||||
| PPPLF advances |
546,824 | 1,968 | 0.36 | % | — | — | — | |||||||||||||||||
| Other borrowings |
20,992 | 820 | 3.91 | % | 18,919 | 948 | 5.01 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total interest-bearing liabilities |
1,064,986 | 10,278 | 0.97 | % | 344,574 | 8,267 | 2.40 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Demand deposits |
69,542 | 56,684 | ||||||||||||||||||||||
| Non-interest-bearing liabilities |
7,403 | 7,590 | ||||||||||||||||||||||
| Stockholders’ equity |
56,092 | 42,661 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total liabilities and stockholders’ equity |
$ | 1,198,023 | $ | 451,509 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Net interest income |
$ | 33,452 | $ | 17,434 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Interest-rate spread |
2.80 | % | 3.62 | % | ||||||||||||||||||||
| Net interest margin |
2.88 | % | 4.08 | % | ||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities |
109.09 | % | 123.87 | % | ||||||||||||||||||||
|
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|
|
|
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Rate/Volume Analysis
The following table sets forth certain information regarding changes in interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (i) changes in rate (change in rate multiplied by prior volume); (ii) changes in volume (changes in volume multiplied by prior rate); and (iii) changes in rate-volume (change in rate multiplied by change in volume) (dollars in thousands).
| Rate | Volume | Rate/Volume | Total | |||||||||||||
| Year Ended December 31, 2020 vs. 2019: |
||||||||||||||||
| Interest-earning assets: |
||||||||||||||||
| Loans, excluding PPP |
$ | (5,169 | ) | $ | 6,025 | $ | (1,275 | ) | $ | (419 | ) | |||||
| PPP loans |
— | — | 19,078 | 19,078 | ||||||||||||
| Other interest-earning assets |
(1,032 | ) | 2,142 | (1,740 | ) | (630 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest-earning assets |
(6,201 | ) | 8,167 | 16,063 | 18,029 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Interest-bearing liabilities: |
||||||||||||||||
| NOW, MMDA, and savings |
(1,032 | ) | 3,426 | (1,147 | ) | 1,250 | ||||||||||
| Time deposits |
(798 | ) | (346 | ) | 65 | (1,079 | ) | |||||||||
| PPPLF advances |
— | — | 1,968 | 1,968 | ||||||||||||
| Other borrowings |
(209 | ) | 104 | (23 | ) | (128 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest-bearing liabilities |
(2,036 | ) | 3,184 | 863 | 2,011 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net change in net interest income |
$ | (4,165 | ) | $ | 4,983 | $ | 15,200 | $ | 16,018 | |||||||
|
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|
|
|
|
|
|||||||||
Liquidity and Capital Resources
The Bank generally maintains a liquidity ratio of liquid assets to total assets, excluding PPP loans pledged to the PPPLF, of at least 7.0%. Liquid assets consist of cash-on-hand and demand deposits due from correspondent banks. Our on-balance sheet liquidity ratio at December 31, 2020, was 8.37%.
As of December 31, 2020, the Bank owned only one security, a $41,286 GNMA bond. This bond will mature in August 2039. We have made the strategic decision to primarily manage our liquidity needs with assets other than securities.
Through December 31, 2020, the Bank retained its earnings to support its growth. Therefore, BayFirst’s liquidity has been dependent on funds received from the issuance and sale of debt and equity securities. BayFirst’s liquidity needs are to make interest payments on its debt obligations, dividends on shares of its Series A Preferred Stock, Series B Convertible Preferred Stock, and common stock, and payment of certain operating expenses. As of December 31, 2020, BayFirst held $2.44 million in cash and cash equivalents.
A description of BayFirst’s and the Bank’s debt obligations is set forth below under the heading “Other Borrowings.”
Loan Portfolio Composition
Through the efforts of our management and the loan officers, we have been able to achieve loan growth, by taking advantage of the economic recovery and consolidation in our markets. Senior management and our loan officers have continued to develop new sources of loan referrals, particularly among centers of local influence and real estate professionals, and have also enjoyed repeat business from loyal customers in the markets the Bank serves. The following table sets forth the composition of our loan portfolio, including loans held for sale (“LHFS”), as of the dates indicated (dollars in thousands).
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| As of December 31, | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Amount | % of total loans |
Amount | % of total loans |
|||||||||||||
| Residential real estate, held for sale |
$ | 208,704 | $ | 76,416 | ||||||||||||
| SBA guaranteed loans, held for sale |
— | 229 | ||||||||||||||
| SBA loans held for investment, at fair value |
9,264 | 10,341 | ||||||||||||||
| Loans held for investment, at amortized cost |
||||||||||||||||
| Residential real estate |
64,724 | 5.3 | % | 51,074 | 16.7 | % | ||||||||||
| Commercial real estate |
114,884 | 9.3 | % | 75,550 | 24.8 | % | ||||||||||
| Construction and land |
15,113 | 1.2 | % | 21,603 | 7.1 | % | ||||||||||
| Commercial and industrial |
193,927 | 15.8 | % | 155,744 | 51.0 | % | ||||||||||
| Commercial and industrial – PPP |
838,847 | 68.8 | % | — | 0.0 | % | ||||||||||
| Consumer and other |
2,896 | 0.2 | % | 1,120 | 0.4 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total loans held for investment, at amortized cost |
1,230,391 | 100.0 | % | 305,091 | 100.0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Allowance for loan losses |
(21,162 | ) | (10,742 | ) | ||||||||||||
| Discount on retained balances of loans sold |
(5,417 | ) | (7,288 | ) | ||||||||||||
| Discount on PPP loans purchased |
(97 | ) | — | |||||||||||||
| Deferred loan (fees) costs, net |
(5,819 | ) | 5,791 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Loans held for investment, at amortized cost, net |
$ | 1,197,896 | $ | 292,851 | ||||||||||||
|
|
|
|
|
|||||||||||||
In general, all construction loans are closed as construction-to-permanent loans. Third party take-out financing, where applicable, is typically in the form of permanent first mortgage conforming loans. The increase in residential lending is primarily due to enhancements in the Bank’s personnel.
In 2020, we originated approximately $79.50 million in new loans through the Community Banking Division, $101.08 million in loans through CreditBench, excluding PPP loans, $876.96 million of PPP loans, and $1.92 billion through the Residential Mortgage Division. In 2019, we originated approximately $35.94 million in new loans through the Community Banking Division, $316.16 million through CreditBench, and $762.80 million through the Residential Mortgage Division.
SBA and Other Government Guaranteed Loans
The following table sets forth, for the periods indicated, information regarding our SBA lending activity (dollars in thousands).
| At or for the | ||||||||
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Number of loans originated |
320 | 1,287 | ||||||
| Amount of loans originated |
$ | 101,076 | $ | 316,157 | ||||
| Average loan size originated |
$ | 316 | $ | 246 | ||||
| Guaranteed loan balances sold |
$ | 24,106 | $ | 273,189 | ||||
| Unguaranteed loan balances sold |
— | $ | 2,000 | |||||
| Total SBA loans at period end |
$ | 253,330 | $ | 201,392 | ||||
| SBA guaranteed loan balances at period end |
$ | 110,196 | $ | 58,448 | ||||
| SBA unguaranteed loan balances at period end |
$ | 143,134 | $ | 142,944 | ||||
| SBA loans serviced for others |
$ | 529,910 | $ | 604,572 | ||||
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As a result of the Bank’s strategic decision to become an active local and national PPP lender, the Bank has developed and been using local marketing efforts and a nationwide, on-line application platform. As a result of these efforts the Bank originated $876.96 million in PPP loans in 2020. Of this amount, the Bank used the Federal Reserve’s PPPLF to match fund the vast majority of that total. The following table reflects the Bank’s PPP lending activity during 2020 (dollars in thousands).
| At and for the Year Ended December 31, 2020 |
||||
| Number of loans originated |
8,948 | |||
| Amount of loans originated |
$ | 876,963 | ||
| Average loan size originated |
$ | 98 | ||
| Amount of PPP loans purchased |
$ | 22,404 | ||
| PPP loan balance at period end, net |
$ | 825,802 | ||
| PPP loan origination fees, net, recognized |
$ | 13,419 | ||
| Deferred PPP loan origination fees, net, at period end |
$ | 12,948 | ||
Residential Mortgage Loans
The following table sets forth, for the periods indicated, information regarding our residential mortgage lending activity (dollars in thousands).
| At or for the | ||||||||
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Number of loans originated |
6,727 | 2,617 | ||||||
| Amount of loans originated |
$ | 1,919,862 | $ | 762,794 | ||||
| Average loan size originated |
$ | 285 | $ | 291 | ||||
| Loan balances sold |
$ | 1,787,574 | $ | 710,191 | ||||
Credit Risk
The Bank’s primary business is making commercial, consumer, and real estate loans. This activity inevitably has risks for potential loan losses, the magnitude of which depends on a variety of economic factors affecting borrowers, which are beyond our control. We have developed policies and procedures for evaluating the overall quality of our credit portfolio and the timely identification of potential problem loans. Management’s judgment as to the adequacy of the allowance is based upon a number of assumptions about future events that it believes to be reasonable, but which may or may not prove accurate. Thus, there can be no assurance that charge-offs in future periods will not exceed the ALLL, or that additional increases in the credit loss allowance will not be required.
Allowance for Loan Losses. The Bank must maintain an adequate ALLL based on a comprehensive methodology that assesses the probable losses inherent in our loan portfolio. We maintain an ALLL based on a number of quantitative and qualitative factors, including levels and trends of past due and non-accrual loans, asset classifications, loan grades, change in volume and mix of loans, collateral value, historical loss experience, size and complexity of individual credits and economic conditions. Provisions for loan losses are provided on both a specific and general basis. Specific allowances are provided for impaired credits for which the expected/anticipated loss is measurable. General valuation allowances are determined by a portfolio segmentation based on collateral type with a further evaluation of various quantitative and qualitative factors noted above.
We periodically review the assumptions and formulae by which additions are made to the specific and general valuation allowances for losses in an effort to refine such allowances in light of the current status of the factors described above. The methodology is presented to and approved by the Bank’s Board of Directors. Future additional provisions to the loan loss reserves may be made as appropriate as new loans are identified or as existing loans may deteriorate.
All adversely classified loans are evaluated for impairment. If a loan is deemed impaired, it is evaluated for potential loss exposure. The evaluation occurs at the time the loan is classified and on a regular basis thereafter
36
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(at least quarterly). This evaluation is documented in a status report relating to a specific loan or relationship. Specific allocation of reserves on impaired loans considers the value of the collateral, the financial condition of the borrower, and industry and current economic trends. We review the collateral value, cash flow, and tertiary support on each impaired credit. Any deficiency outlined by a real estate collateral evaluation liquidation analysis, or cash flow shortfall, is accounted for through a specific allocation for the loan.
For performing loans which are evaluated collectively, we perform a portfolio segmentation based on collateral type and additionally, for SBA loans, by loan origination year. The loss factors for each segment are calculated using actual loan loss history for each segment of loans over the most recent one to three years, depending on the segment and vintage year of the loans in the segment of SBA loans. The Bank’s actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of, and trends, in delinquencies and impaired loans; levels of, and trends, in charge-offs and recoveries; migration of loans to the classification of special mention, substandard, or doubtful; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentration.
While management believes our ALLL is adequate as of December 31, 2020, future adjustments to our allowance may be necessary if economic conditions differ substantially from the assumptions used in making the determination.
Nonperforming Assets. At December 31, 2020, we had $3.33 million in nonperforming assets, excluding government guaranteed loan balances, and our ALLL represented 1.47% of total loans, including PPP loans. At December 31, 2019, we had $4.44 million in nonperforming assets, excluding government guaranteed loan balances, and our ALLL represented 2.75% of total loans. Total loans at December 31, 2020 and December 31, 2019, include guaranteed SBA loans which have no reserves allocated to them. ALLL as a percentage of loans, not including residential loans held for sale and SBA guaranteed loan balances, was 7.24% at December 31, 2020, compared to 4.20% at December 31, 2019.
The following table sets forth certain information on nonaccrual loans and foreclosed assets, the ratio of such loans and foreclosed assets to total assets as of the dates indicated, and certain other related information (dollars in thousands).
| At December 31, | ||||||||
| 2020 | 2019 | |||||||
| Nonperforming loans (government guaranteed balances) |
$ | 6,259 | $ | 3,987 | ||||
| Nonperforming loans (unguaranteed balances) |
3,327 | 4,437 | ||||||
|
|
|
|
|
|||||
| Total nonperforming loans |
9,586 | 8,424 | ||||||
| Other real estate owned |
— | — | ||||||
|
|
|
|
|
|||||
| Total nonperforming assets |
9,586 | 8,424 | ||||||
|
|
|
|
|
|||||
| Nonperforming loans to total loans |
0.67 | % | 2.16 | % | ||||
| Nonperforming loans to total loans (excluding government guaranteed balances) |
0.23 | % | 1.14 | % | ||||
| Nonperforming assets to total assets |
0.62 | % | 1.59 | % | ||||
| Nonperforming assets to total assets (excluding government guaranteed balances) |
0.22 | % | 0.84 | % | ||||
| Total loans at end of period, net of discount and deferred costs |
$ | 1,437,026 | $ | 390,580 | ||||
| Total assets |
$ | 1,544,691 | $ | 531,240 | ||||
| ALLL to nonperforming loans |
220.76 | % | 127.52 | % | ||||
| ALLL to nonperforming loans (excluding government guaranteed balances) |
636.07 | % | 242.10 | % | ||||
37
Table of Contents
The following table sets forth information with respect to activity in the ALLL for the periods shown (dollars in thousands):
| For the Year Ended December 31, |
||||||||
| 2020 | 2019 | |||||||
| Allowance at beginning of period |
$ | 10,742 | $ | 6,560 | ||||
| Charge-offs |
||||||||
| Residential real estate |
(7 | ) | ||||||
| Commercial real estate |
(427 | ) | (104 | ) | ||||
| Commercial and industrial |
(6,336 | ) | (4,633 | ) | ||||
| Consumer and other |
(98 | ) | (85 | ) | ||||
|
|
|
|
|
|||||
| Total charge-offs |
(6,869 | ) | (4,822 | ) | ||||
| Recoveries |
|
|||||||
| Residential real estate |
— | 14 | ||||||
| Commercial and industrial |
311 | 116 | ||||||
| Consumer and other |
77 | 5 | ||||||
|
|
|
|
|
|||||
| Total recoveries |
388 | 135 | ||||||
|
|
|
|
|
|||||
| Net charge-offs |
(6,480 | ) | (4,687 | ) | ||||
| Provision for loan losses |
16,900 | 8,869 | ||||||
|
|
|
|
|
|||||
| Allowance at end of period |
$ | 21,162 | $ | 10,742 | ||||
|
|
|
|
|
|||||
| Net charge-offs to average loans outstanding |
0.64 | % | 1.27 | % | ||||
| Allowance as a percent of total loans |
1.47 | % | 2.75 | % | ||||
| Allowance as a percent of loans, not including LHFS and SBA guaranteed loans |
7.24 | % | 4.20 | % | ||||
| Allowance to nonperforming loans |
220.76 | % | 127.52 | % | ||||
| Allowance to nonperforming loans (excluding gov’t gtd balances) |
636.07 | % | 242.10 | % | ||||
| Total loans at end of period, net of discount and deferred costs |
$ | 1,437,026 | $ | 390,580 | ||||
| Average loans outstanding, including LHFS |
$ | 1,005,412 | $ | 368,615 | ||||
| Nonperforming loans |
$ | 9,586 | $ | 8,424 | ||||
| Nonperforming loans (excluding gov’t gtd balances) |
$ | 3,327 | $ | 4,437 | ||||
| Guaranteed balance of all SBA loans |
$ | 935,998 | $ | 58,448 | ||||
| Loans held for sale, residential |
$ | 208,704 | $ | 76,416 | ||||
The Company recorded a provision for loan losses of $16.90 million during 2020, compared to $8.87 million in 2019. During 2020, we increased the qualitative factors in the allowance for loan loss calculation for the economic uncertainties caused by the COVID-19 pandemic resulting in the increased provision expense in 2020. Over the past five years, the Company’s loan losses have been incurred primarily in its SBA unguaranteed loan portfolio, particularly loans originated under the SBA 7(a) Small Loan Program. The Small Loan Program represents loans of $350,000 or less and such loans carry an SBA guaranty of 75% to 85% of the loan, depending on the original principal balance. The default rate on loans originated in the SBA 7(a) Small Loan Program is significantly higher than the Bank’s other SBA 7(a) loans, conventional commercial loans, or residential mortgage loans.
Nonperforming assets to total assets, excluding government guaranteed loan balances, were 0.22% as of December 31, 2020, a significant decrease from 0.84% as of December 31, 2019. Since the majority of the Company’s loan portfolio consists of SBA loans, most of which received principal and interest payments from the SBA under Section 1112 of the CARES Act, asset quality trends may appear more favorable than they otherwise would without the SBA’s support under the CARES Act.
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Table of Contents
As of December 31, 2020, a total of 237 loans with principal balances of $20.00 million were under payment deferrals. Of the deferrals at December 31, 2020, 225 were SBA loans totaling $11.52 million in outstanding unguaranteed balances. As expected, the level of SBA loans on deferral increased with the expiration of the Section 1112 payment support afforded under the CARES Act at which point certain borrowers sought out payment deferrals. With the Economic Aid Act signed into law on December 27, 2020, Section 1112 CARES Act payments were extended, with some stipulations, which will assist the majority of our SBA borrowers for three months and, depending on the type of business, up to eight months of additional principal and interest payments with a cap of $9,000 per month per borrower, beginning in February 2021. Although the Company’s asset quality trends indicate minimal stress on the portfolio, management believes it is prudent to be proactive in increasing the allowance for loan losses using qualitative measures.
Securities
As discussed above under “Liquidity and Capital Resources,” the Bank has made the strategic decision to primarily manage its liquidity needs with assets other than securities. As of December 31, 2020, the Bank owned only one security, a $41,286 GNMA bond.
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39
Table of Contents
Regulatory Capital Requirements
The Bank is subject to regulatory capital requirements imposed by various regulatory banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by banking regulators that, if undertaken, could have a direct material effect on BayFirst’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.
In 2020, the Federal banking regulatory agencies adopted a rule to simplify the methodology for measuring capital adequacy for smaller, uncomplicated banks. This community bank leverage ratio (“CBLR”) is calculated as the ratio of tangible equity capital divided by average total consolidated assets. CBLR tangible equity is defined as total equity capital, prior to including minority interests, and excluding accumulated other comprehensive income, deferred tax assets arising from net operating loss and tax credit carryforwards, goodwill, and other intangible assets (other than mortgage servicing assets). Under the proposal, a qualifying organization may elect to use the CBLR framework if its CBLR is greater than 9%. The Bank has elected not to use the CBLR framework.
As of December 31, 2020, the Bank met all capital adequacy requirements to which it is subject. The Bank’s actual capital amounts and percentages are as shown in the table below (dollars in thousands):
| Actual | Minimum(1) | Well-Capitalized(2) | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
| As of December 31, 2020: |
||||||||||||||||||||||||
| Total Capital (to risk-weighted assets) |
$ | 78,824 | 17.02 | % | $ | 37,056 | 8.00 | % | $ | 48,636 | 10.50 | % | ||||||||||||
| Tier 1 Capital (to risk-weighted assets) |
72,825 | 15.72 | % | 27,792 | 6.00 | % | 37,056 | 8.00 | % | |||||||||||||||
| Common Equity Tier 1 Capital (to risk-weighted assets) |
72,825 | 15.72 | % | 20,844 | 4.50 | % | 30,108 | 6.50 | % | |||||||||||||||
| Tier 1 Capital (to total assets) |
72,825 | 11.75 | % | 24,799 | 4.00 | % | 30,998 | 5.00 | % | |||||||||||||||
| As of December 31, 2019: |
||||||||||||||||||||||||
| Total Capital (to risk-weighted assets) |
57,548 | 17.84 | % | 25,804 | 8.00 | % | 33,868 | 10.50 | % | |||||||||||||||
| Tier 1 Capital (to risk-weighted assets) |
52,446 | 16.26 | % | 19,353 | 6.00 | % | 25,804 | 8.00 | % | |||||||||||||||
| Common Equity Tier 1 Capital (to risk-weighted assets) |
52,446 | 16.26 | % | 14,515 | 4.50 | % | 20,966 | 6.50 | % | |||||||||||||||
| Tier 1 Capital (to total assets) |
52,446 | 10.49 | % | 19,994 | 4.00 | % | 24,992 | 5.00 | % | |||||||||||||||
| (1) | To be considered “adequately capitalized” under the FDIC’s Prompt Corrective Action regulations. |
| (2) | To be considered “well-capitalized” under the FDIC’s Prompt Corrective Action regulations. |
Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest-rate risk inherent in loan and deposit taking activities. To that end, we actively monitor and manage our interest-rate risk exposure. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on and off-balance-sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of financial instruments, which reflect changes in market prices and rates, should also be considered.
Our objective in managing interest-rate risk is to minimize the adverse impact of changes in interest rates on our net interest income and capital, while adjusting our asset-liability structure to obtain the maximum yield-cost spread on that structure. We rely primarily on our asset-liability structure to control interest-rate risk. However, a
40
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sudden or substantial increase in interest rates may adversely impact our earnings, to the extent that the interest rates borne by assets and liabilities do not change at the same rate, to the same extent, or on the same basis.
Asset/Liability Structure
As part of our asset and liability management, we have emphasized establishing and implementing internal asset-liability decision processes, as well as communications and control procedures to manage our earnings. These processes and procedures provide us with better capital planning, asset mix and volume controls, loan-pricing guidelines, and deposit interest-rate guidelines, which should result in tighter controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring our interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest-rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. The gap ratio is computed as rate sensitive assets/rate sensitive liabilities. A gap ratio of one to one represents perfect matching. A gap is considered positive when the amount of interest-rate sensitive assets exceeds interest-rate sensitive liabilities. A gap is considered negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an increase in net interest income. During a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would adversely affect net interest income.
In order to minimize the potential for adverse effects of increases in interest rates on the results of our operations, we monitor asset and liability management policies to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities. Such policies have consisted primarily of: (i) emphasizing the origination of adjustable-rate loans; (ii) maintaining a stable core deposit base; and (iii) maintaining a significant portion of liquid assets (cash and short-term securities).
Deposits and Other Sources of Funds
General. In addition to deposits, sources of funds available for lending and for other purposes include loan repayments and proceeds from the sales of loans. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are influenced significantly by general interest rates and money-market conditions. Borrowings, as well as available lines of credit, may be used on a short-term basis to compensate for reductions in other sources, such as deposits at less than projected levels.
Deposits. Deposits are attracted principally from within our primary service area of Pinellas, Hillsborough, Manatee, Pasco, and Sarasota Counties, Florida. We offer a wide selection of deposit instruments including demand deposit accounts, NOW accounts, money-market accounts, regular savings accounts, certificate of deposit accounts; and retirement savings plan (such as IRA accounts).
Certificate of deposit rates are set to encourage longer maturities as cost and market conditions will allow. Deposit account terms vary, with the primary differences being the minimum balance required, the time period the funds must remain on deposit and the interest rate. We emphasize commercial banking relationships in an effort to increase demand deposits as a percentage of total deposits. Deposit interest rates are set weekly by management, based on a review of loan demand, deposit flows for the previous week and a survey of rates among competitors and other financial institutions in Florida.
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The amounts of each of the following categories of deposits, for the periods indicated, are as follows (dollars in thousands):
| As of December 31, | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Deposit Types | Amount | % of Deposits |
Amount | % of Deposits |
||||||||||||
| Noninterest-bearing deposits |
$ | 62,650 | 11.2 | % | $ | 51,025 | 11.4 | % | ||||||||
| Interest bearing transaction accounts |
140,265 | 25.1 | % | 71,134 | 15.9 | % | ||||||||||
| Money-market accounts |
274,422 | 49.1 | % | 174,517 | 38.9 | % | ||||||||||
| Savings accounts |
12,323 | 2.2 | % | 10,875 | 2.4 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Subtotal |
489,660 | 87.6 | % | 307,551 | 68.6 | % | ||||||||||
|
|
|
|
|
|||||||||||||
| Total time deposits |
69,125 | 12.4 | % | 141,043 | 31.4 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total deposits |
$ | 558,785 | 100.0 | % | $ | 448,594 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following table sets forth the maturities of our time deposits by category for the periods indicated (dollars in thousands).
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Three months or less |
$ | 16,692 | $ | 12,688 | ||||
| Over three months through one year |
11,521 | 98,206 | ||||||
| Over one year through three years |
39,513 | 23,680 | ||||||
| Over three years |
1,399 | 6,469 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 69,125 | $ | 141,043 | ||||
|
|
|
|
|
|||||
Other Borrowings
The Bank had $1.00 million of subordinated debentures outstanding at December 31, 2019, of which $500,000 were issued in December 2014 and $500,000 were issued in September 2015. The subordinated debentures had a final maturity of December 31, 2029 and accrued interest at the greater of 8.75% per annum or LIBOR plus 4.95% per annum as determined two business days prior to each interest payment date. The subordinated debentures are redeemable after the fifth anniversary, in whole or in part, at the option of the Bank, at a redemption price equal to 100% plus the applicable premium (3% within year six) together with accrued interest. The balance of subordinated debentures outstanding at the Bank, net of offering costs, amounted to $0 and $980,912 at December 31, 2020 and 2019. In January 2020, $500,000 of the subordinated debentures were redeemed at the option of the Bank, and in October 2020, the remaining $500,000 of the subordinated debentures were redeemed at the option of the Bank.
In June 2016, the Company issued a total of $550,000 in subordinated debentures. Under these debt agreements, there is a remaining amount of $950,000 in subordinated debentures that may be issued by the Company. The subordinated debentures have final maturities of March 31, 2023 and June 30, 2023 and accrue interest at 7.50% per annum. The debentures are redeemable, in whole or in part, at the option of the Company at a redemption price equal to 100% together with accrued interest. In October 2020, $500,000 of these debentures were converted to Series B Convertible Preferred Stock. As a result, at December 31, 2020, $50,000 was outstanding.
In December 2018, the Company issued a $6.00 million subordinated debenture that matures December 21, 2028 and is redeemable after five years. The debenture carries interest at a fixed rate of 6.875% per annum for the initial five years of term and carries interest at a floating rate for the final five years of term. Under the debt
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agreement, the floating rate is based on a LIBOR benchmark plus 4.045% per annum; however, LIBOR will be replaced by a SOFR benchmark by December 21, 2023 and, therefore, the floating rate will be based on SOFR plus 4.045% per annum. The balance of subordinated debentures outstanding, net of offering costs, amounted to $5.95 million and $6.43 million at December 31, 2020 and 2019.
At December 31, 2019, the Company had a $3.00 million term note with a financial institution maturing March 12, 2028, requiring principal and interest payments based on a ten-year amortization with interest at prime (4.75% at December 31, 2019) with a floor of 4.50%. The Company also had a $2.00 million line of credit with the same financial institution that matured in March 2019 and was subsequently extended pending renegotiation of both the term note and line of credit. The line of credit required quarterly interest payments at Prime with a floor of 4.50%. The combined balance of both the line of credit and note was $4.10 million at December 31, 2019. In March 2020, the Company renegotiated the terms of the debt and combined the line of credit and term note into one amortizing note with quarterly principal and interest payments with interest at Prime (3.25% at December 31, 2020). The new note matures on March 10, 2029 and the balance of the note was $3.754 million at December 31, 2020. The note is secured by 100% of the stock of the Bank and requires the Company to comply with certain loan covenants during the term of the line of credit and note.
In April 2020, the Company entered into the Federal Reserve’s PPPLF. Under the PPPLF, advances must be secured by pledges of loans to small businesses originated by the Company under the PPP. The PPPLF accrues interest at 0.35% per annum and matures at various dates equal to the maturity date of the PPPLF collateral pledged to secure the advance, ranging from April 14, 2022 to November 4, 2025, and will be accelerated on and to the extent of any SBA 7(a) loan forgiveness reimbursement by the SBA for any PPPLF collateral or the date of purchase by the SBA from the borrower of any PPPLF collateral. On the maturity date of each advance, the Company shall repay the advance plus accrued interest. This $881.26 million borrowing was fully advanced at December 31, 2020.
Off-Balance Sheet Arrangements
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments primarily include unfunded loan commitments, undisbursed loans in process, unfunded lines of credit, and standby letters of credit. The Bank uses these financial instruments to meet the financing needs of its customers. These financial instruments involve, to varying degrees, elements of credit, interest rate, and liquidity risk. These do not represent unusual risks and management does not anticipate any accounting losses that would have a material effect on the Bank.
A summary of the amounts of the Bank’s financial instruments, with off-balance sheet risk for the periods indicated, are as follows (in thousands):
| As of December 31, | ||||||||
| 2020 | 2019 | |||||||
| Unfunded loan commitments |
$ | 34,868 | $ | 37,715 | ||||
| Unfunded lines of credit |
34,063 | 12,611 | ||||||
| Standby letters of credit |
68 | 193 | ||||||
|
|
|
|
|
|||||
| Totals |
$ | 68,999 | $ | 50,519 | ||||
|
|
|
|
|
|||||
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Management evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management’s credit evaluation of the counterparty.
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Standby letters-of-credit are conditional lending commitments that we issue to guarantee the performance of a customer to a third party and to support private borrowing arrangements. Essentially, all letters-of-credit issued have expiration dates within one year. The credit risk involved in issuing letters-of-credit is essentially the same as that involved in extending credit. The Bank may hold collateral supporting those commitments. Newly issued or modified guarantees that are not derivative contracts have been recorded on the Bank’s balance sheet at their fair value at inception.
In general, loan commitments and letters of credit are made on the same terms, including with respect to collateral, as outstanding loans. Each customer’s creditworthiness and the collateral required are evaluated on a case-by-case basis.
Results of Operations, Generally
BayFirst’s operating results depend on our net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities, consisting primarily of deposits. Net interest income is determined by the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities (“interest-rate spread”) and the relative amounts of interest-earning assets and interest-bearing liabilities. Our interest-rate spread is affected by regulatory, economic, and competitive factors which influence interest rates, loan demand, and deposit flows. In addition, our operating results are also affected by the level of nonperforming loans and foreclosed real estate, as well as the level of our non-interest income, and our non-interest expenses, such as salaries and employee benefits, occupancy and equipment costs, and income taxes. We are also dependent on non-interest income, which is derived primarily from residential loan fee income and net gain on the sales of the guaranteed portion of SBA loans.
Comparison of Results of Operations for the Years Ended December 31, 2020 and 2019.
Net Income. Net income for the year ended December 31, 2020, was $12.70 million, an increase of $8.22 million or 183.28% over net income for the year-ended December 31, 2019 of $4.48 million. The increase in net income in 2020 over 2019 was primarily due to an increase in residential loan fee income and the addition of PPP loan origination fee and interest income, offset by an increase in noninterest expenses, particularly salaries and commissions expenses, as well as an increase in provision for loan loss expense and a decline in gain on sale of SBA loans as the Company made the decision to hold the majority of guaranteed SBA balances originated in 2020.
Net Interest Income. Net interest income was $33.45 million for the year ended December 31, 2020, an increase of $16.02 million or 91.88% from 2019. The increase was primarily due to net PPP origination fee income of $13.42 million and PPP interest income of $5.68 million recognized in 2020, offset by declines in interest income on loans and interest-bearing deposits in other banks. The net interest margin for the year ended December 31, 2020 was 2.88%, down substantially from 4.08% realized in 2019. The primary reason for the decline is the significant amount of PPP loan balances during the majority of 2020 at a rate of 1.00%. Although the rate on PPP loans brings down the Company’s net interest margin, because these loans are pledged to the Federal Reserve’s PPPLF at a rate of 0.35%, their balance is allowed to be excluded from the Bank’s regulatory capital ratios and thus the net 65 basis points earned brings significant earnings to the Company without having to allocate capital against those assets.
Provision for Loan Losses. The provision for loan losses is charged to operations to increase the total allowance to a level deemed appropriate by management and is based upon the volume and type of lending we conduct, industry standards, the amount of nonperforming loans, general economic conditions, particularly as they relate to our market area, and other factors which may affect our ability to collect on the loans in our portfolio. We recorded a provision for loan losses for the years ended December 31, 2020, and December 31, 2019 of $16.90 million and $8.87 million, respectively. During 2020, we increased the qualitative factors in the allowance for loan loss calculation for the economic uncertainties caused by the COVID-19 pandemic resulting
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in the increased provision expense in 2020. In the year ended December 31, 2020, there were $6.48 million of net charge-offs, as compared to $4.69 million in 2019. The ALLL was $21.16 million at December 31, 2020, compared to $10.74 million at December 31, 2019.
Since the majority of the Company’s loan portfolio consists of SBA loans, most of which received from the SBA principal and interest payments under Section 1112 of the CARES Act during 2020 and will receive from the SBA at least three months of payments in 2021, asset quality trends may appear more favorable than they otherwise would without the CARES Act support. Although the Company’s asset quality trends indicate minimal stress on the portfolio, management believed it was prudent to be proactive in increasing the allowance for loan losses using qualitative measures throughout 2020.
Noninterest Income. Noninterest income for the year ended December 31, 2020 was $97.70 million, an increase of $44.57 million or 83.90% from $53.12 million during 2019. The increase was primarily due to an increase in residential loan fee income of $61.40 million or 196.3%, offset by a decline in gain on sale of SBA loans of $18.85 million or $91.94% to $1.65 million for 2020 as the Company made the decision to hold the majority of guaranteed SBA balances originated in 2020.
Noninterest Expense. Noninterest expense was $98.47 million for the year ended December 31, 2020, an increase of $43.08 million or 77.77% from $55.39 million during 2019. The increase was primarily due to increases in salaries and benefits, commissions, and bonuses and incentives as several loan production offices were added which increased the overall count of full-time employees and also increased commissions. In addition, in order to originate and service almost $900 million of PPP loans originated in 2020, significant overtime was incurred and temporary workers were utilized to handle the volume. Data processing costs also increased by $2.68 million during 2020 to $4.42 million for the year ended December 31, 2020, as software was added to originate and service PPP loans. Additionally, data conversion costs were incurred in the first quarter of 2020 with the conversion of the Company’s core processing system. Per loan costs on the residential lending platform also increased based on volume. Mortgage banking expense also increased proportionately with the increase in residential lending volume from $2.40 million during 2019 to $5.29 million during 2020, an increase of $2.89 million or 120.42%.
Income Taxes. Income tax expense was $3.07 million for the year ended December 31, 2020, an increase of $1.26 million or 69.61% from $1.81 million during 2019. The increase was primarily due to the increase in pre-tax earnings; however, the purchase of Bank Owned Life Insurance in June 2020 did add tax free income, and due to the CARES Act signed in March, the Company was able to carry back net operating losses created in 2018 to prior years where tax rates were higher than they were in 2020, which created a one-time tax benefit of $969,000. The effective income tax rate was 19.49% for 2020 compared to 28.79% for 2019 as a result.
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MANAGEMENT AND BOARD OF DIRECTORS
The Board of BayFirst is comprised of 14 individuals: George Apostolou, Derek S. Berset, Mark S. Berset, Dennis R. DeLoach, Jr., Dennis R. “Rep” DeLoach, III, Alexander Harris, Tarek Helal, Trifon Houvardas, Anthony N. Leo, Christos Politis, M.D., Anthony Saravanos, Bradly W. Spoor, Harold J. Winner, and Barbara Zipperian. Biographical information regarding each director is below.
BayFirst Directors
George Apostolou, age 70, founded the George Apostolou Construction Company in 1983. Since that time, it has built more than 200 commercial buildings, government services buildings, churches, office buildings, and retail centers. In 2009, he founded Global Ground Solutions, a sinkhole mitigation company performing services for several of the major engineering firms in West Central Florida. In addition to contracting, Mr. Apostolou has been involved in the development of many commercial projects and now owns numerous properties in the Tampa Bay area. He also serves on the Board of Directors of HCI Group, Inc., a New York Stock Exchange listed company. Mr. Apostolou joined the Board in 2013. We believe that Mr. Apostolou’s qualifications to serve on our Board include his executive leadership and management experience, public company Board experience, and financial expertise gained from the successful operations of his own businesses.
Derek S. Berset, age 44, is an owner of Comegys Insurance Agency, Inc., a family owned and operated retail insurance agency that has served the west coast of Florida for over 75 years. Mr. Berset is also the President of Franchise Alliance Network LLC, which provides franchises with accounting, insurance, bookkeeping and payroll services, and he serves as Vice President of SAN of Florida Inc., an insurance wholesaler to independent agencies within Florida. He is the Chairman of the Board for Arts Conservatory for Teens (ACT), a nonprofit organization that helps teens excel within the arts. Mr. Berset is a graduate of Florida State University. He joined the Board in 2020 and is the son of BayFirst director Mark S. Berset. We believe that Mr. Berset’s qualifications to serve on our Board include his management and financial experience.
Mark S. Berset, age 74, has served since 1987 as the Chief Executive Officer of Comegys Insurance, a family owned insurance agency located in St. Petersburg, Florida. Mr. Berset is also the founder of Alpha Insurance Management, Satellite Agency Network of Tampa Bay, and Association Insurance Specialists. Mr. Berset also serves as a director of Heritage Insurance Holdings, Inc., a New York Stock Exchange listed company. He is a former director of United Insurance Holdings Corp., former board member of Innovaro, Inc., a past board member of North Star Bank Holding Company, Tampa, Florida, and past President and Board member of Bayfront Hospital Foundation in St. Petersburg, Florida. He received a bachelor’s degree in Business Economics from St. Ambrose University and an MBA from Georgia State University. Mr. Berset joined the Board in 2014 is the father of BayFirst director Derek S. Berset. We believe that Mr. Berset’s qualifications to serve on our Board include his executive leadership and management experience, prior bank and public company Board experience, and financial expertise gained from the successful operations of his own businesses.
Dennis R. DeLoach, Jr., age 82, is a partner in the law firm of DeLoach, Hofstra & Cavonis, P.A., located in Seminole, Florida, which he established in 1976. Mr. DeLoach was an organizing director of the former Seminole Federal Savings Bank and served continuously through the conversion of that institution to a state-chartered commercial bank in 1991 until the sale of that bank to F.N.B. Corp. in 1998. He then became an organizing director of the Bank. He graduated from the University of Georgia in 1960 and Stetson Law School in 1963. Mr. DeLoach joined the Board in 2009 is the father of BayFirst director Dennis R. “Rep” DeLoach, III. We believe that Mr. DeLoach’s qualifications to serve on our Board include his legal experience and prior bank Board experience.
Dennis R. “Rep” DeLoach, III, age 46, is a partner at the law firm of DeLoach, Hofstra & Cavonis, P.A. in Seminole, Florida. Mr. DeLoach graduated from Mercer University in 1996 and Mercer University Law School in 1999. He is Board Certified by the Florida Bar in Elder Law. Mr. DeLoach is a frequent speaker on continuing
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legal education to other Florida attorneys. Mr. DeLoach joined the Board in 2020 and is the son of BayFirst director Dennis R. DeLoach, Jr. We believe that Mr. DeLoach’s qualifications to serve on our Board include his legal experience.
Alexander Harris, age 40, currently serves as Chief Executive Officer of the Arts Conservatory for Teens (“ACT”), a non-profit organization headquartered in St. Petersburg, Florida. He also currently serves as a Senior Executive Consultant and Creative Strategist for Three Oak Doors Enterprises, LLC, and he has previously served as a Lecturer, Creative Strategist, and Consultant for the University of South Florida. Dr. Harris received a Doctor of Education Degree from Nova Southeastern University with an emphasis in organizational leadership and curriculum development. He also received Masters Degrees in both Theological Studies and Social Work from Boston University, and he received a Bachelor of Arts Degree with a triple major in Human Services, Social Work, and Sociology from LaGrange College. Mr. Harris joined the Board in 2021. We believe that Mr. Harris’s qualifications to serve on our Board include his managerial experience as the Chief Executive Officer of ACT and his knowledge of the underserved portions of the communities we serve.
Tarek Helal, age 42, has served as Senior Vice President, Corporate Risk Management – Products at Raymond James Financial in St. Petersburg, Florida, since 2017. From 2015 to 2017, Mr. Helal was the founder, Chief Executive Officer and Chief Investment Officer of Horus Asset Management located in Tampa, Florida. From 2009 to 2014, Mr. Helal was Vice President of Product Development and Research for Raymond James Financial, leading several departments including Mutual Fund Research & Marketing and the Alternative Investment Group. Prior to joining Raymond James in 2007, Mr. Helal was a Senior Associate at Standard & Poor’s Corporate Value Consulting. He received a B.S. in Business Administration summa cum laude from the University of Florida and an MBA with distinction from the J.L. Kellogg School of Management at Northwestern University. Mr. Helal joined the Board in 2011. We believe that Mr. Helal’s qualifications to serve on our Board include his capital markets, investment banking and other financial experience.
Trifon Houvardas, age 54, has been the principal of Foresight Holding, Inc. and Foresight Property Services, Inc. since 2007. He is a Florida Real Estate Broker/Developer with over 25 years of experience in the real estate industry and has extensive experience in the construction and development of large-scale real estate projects and management of single-tenant, multi-family, residential and commercial properties. He has developed and manages a $25 million portfolio of commercial real estate throughout the state of Florida. He is also a member of the Board of Directors of Heritage Insurance Holdings, Inc., a New York Stock Exchange listed company, and AtlasBanc Holdings, Corp. Mr. Houvardas joined the Board in 2013. We believe that Mr. Houvardas’s qualifications to serve on our Board include his real estate experience and prior public company Board experience.
Anthony N. Leo, age 60, has served as the Chief Executive Officer and a director of BayFirst and the Bank since August 2013. Prior to joining the Bank, Mr. Leo provided management consulting and regulatory advisory services to community banks throughout the state of Florida and served as the interim Chief Executive Officer of three troubled banks between 2009 and 2013. Mr. Leo was the Managing Director and Executive Vice President of Community Banks, Inc. in Harrisburg, PA from 1993 to 2007. He previously served as Vice President and Corporate Counsel for FB&T of Hanover, Pennsylvania, and Vice President and Associate Counsel for the National Bank of Washington, D.C. Mr. Leo also serves on the Board of Directors of Presidential Bank, FSB, in Bethesda, Maryland. Mr. Leo received a B.A. in Political Science from George Washington University and a JD from George Washington University Law School. He is a member of the Bar in the District of Columbia and State of Maryland. We believe that Mr. Leo’s qualifications to serve on our Board include his service as our President and Chief Executive Officer and previous banking and public company experience.
Christos Politis, M.D., age 44, is a principal of Xenia Management, Inc., a real estate development and property management company He is a Board Certified Urologist and was President of St. Pete Urology from 2007 to 2020. He also served as the Chief Medical Officer for Largo Medical Center from 2018 to 2020. Dr. Politis received his Bachelor degree from the University of Florida, his medical degree from the University
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of South Florida College of Medicine, and a Master of Business Administration from the University of South Florida. Dr. Politis joined the Board in 2017. We believe that Dr. Politis’s qualifications to serve on our Board include his managerial experience as President of St. Pete Urology and Chief Medical Officer for Largo Medical Center.
Anthony Saravanos, age 50, is the Chairman of the Board of BayFirst. Since 2013, Mr. Saravanos has been the President of Greenleaf Capital, a division of the HCI Group, Inc. From 2005 to 2013, Mr. Saravanos was Vice President of The Boardwalk Company, a full-service commercial real estate company located in Palm Harbor, Florida. A licensed real estate broker, Mr. Saravanos is a Certified Commercial Investment Member (CCIM) and has over 12 years of experience in commercial property sales, leasing, project and property management. He graduated from Ursinus College in Pennsylvania with a double major in Economics and Spanish in 1992 and Villanova University with an MBA in 1997. He is also a member of the Board of Directors of the HCI Group, Inc., a New York Stock Exchange traded company. Mr. Saravanos joined the Board in 2011. We believe that Mr. Saravanos’s qualifications to serve on our Board include his investment banking and real estate experience and his previous public company Board services.
Bradly W. Spoor, age 42, has been the Chief Executive Officer of Spoor Street Investments, LLC since 2018. In addition, he has been the principal of Pelican Bay Capital, LLC since 2010. From 2002 to 2013, he was the owner and operator of P&B Capital Group, LLC, which managed customer service and loan recovery specialists. From 2006 to 2011, Mr. Spoor also owned and operated SKW Capital, LLC, a loan collections business. Mr. Spoor maintains certified memberships with the Debt Buyers Association, Credit & Collections Professions, and ACA International LLC. He joined the Board in 2018. We believe that Mr. Spoor’s qualifications to serve on our Board include his experience in the loan recovery and collection industry and his experience in managing his own businesses.
Harold J. Winner, age 71, is a retired banker and the Chairman of the Board of the Bank. Mr. Winner previously served as the Acting Chief Executive Officer of the Bank from 2011 to 2013. Prior to this and until his retirement in 2007, Mr. Winner served as President and Chief Operating Officer of Synovus Bank of Tampa Bay, formerly United Bank, where he had been employed for 19 years. Mr. Winner began his banking career with First National Bank of Atlanta (now Wells Fargo) in 1972. He received his B.S. in Management in 1971 from Florida State University and his MBA from Georgia State University in 1975. Mr. Winner joined the Board in 2011. We believe that Mr. Winner’s qualifications to serve on our Board include his prior service as our President and Chief Executive Officer and other banking experience.
Barbara J. Zipperian, age 63, is a CPA and retired Chief Financial Officer with 38 years of banking experience. She most recently served as Director, Executive Vice President, and Chief Financial Officer of Tennessee Bank & Trust. She has previously been employed as Chief Financial Officer for Avenue Bank and Regional Financial Officer for Regions Bank. Ms. Zipperian received her Bachelor of Science Degree in Accounting from Ball State University. She joined the Board in 2021. We believe that Ms. Zipperian’s qualifications to serve on our Board include her experience as a CPA and as the Chief Financial Officer of banking institutions.
Director Independence
Under Nasdaq rules, independent directors must comprise a majority of our Board within a specified period of time of our initial rules. Those rules, as well as those of the SEC, impose several other requirements with respect to the independence of our directors. Our Board has evaluated the independence of its members based upon Nasdaq and SEC rules. Applying these standards, our Board has affirmatively determined that a majority of the members of the Board are independent directors under the applicable rules. We have determined that Mr. Apostolou and Dr. Politis are not independent directors under the applicable rules because the Bank rents its main office from a company affiliated with Mr. Apostolou and Dr. Politis’s father. Mr. Leo does not qualify as an independent director because he is an executive officer of both the Company and the Bank.
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Code of Conduct
We have a Code of Business Conduct and Ethics which applies to our directors, offices, and employees. In connection with our application to Nasdaq, the Board will adopt a Code of Ethics which complies with Nasdaq and the Sarbanes-Oxley Act.
Board Committees
The Board of Directors is divided into five committees. The following table discloses the membership of each committee.
| Name |
Audit and Risk |
Compensation |
Environmental, |
Executive |
Nominating | |||||
| George Apostolou | Member | |||||||||
| Derek S. Berset | ||||||||||
| Mark S. Berset | Chair | Chair | ||||||||
| Dennis R. DeLoach, Jr. | Member | Member | Member | |||||||
| Dennis R. DeLoach, III | Member | Chair | Member | |||||||
| Alexander Harris | Member | |||||||||
| Tarek Helal | Member | Member | ||||||||
| Trifon Houvardas | Member | |||||||||
| Anthony N. Leo | Member | Member | ||||||||
| Christos Politis, M.D. | Chair | |||||||||
| Anthony Saravanos | Member | Member | Member | |||||||
| Bradly W. Spoor | Member | |||||||||
| Harold J. Winner | Member | Member | Member | |||||||
| Barbara J. Zipperian | Chair | Member |
Audit and Risk Management Committee. Our Board has evaluated the independence of each of the members of our Audit and Risk Management Committee and has affirmatively determined that: (i) each of the members of our Audit Committee is an independent director under Nasdaq rules; (ii) each of the members satisfies the additional independence standards under applicable SEC rules for audit committee service; and (iii) each of the members has the ability to read and understand fundamental financial statements. In addition, our Board has determined that Ms. Zipperian has the financial sophistication required by Nasdaq rules due to her experience and background, specifically her prior service as a Chief Financial Officer of other banks, and that she qualifies as a “audit committee financial expert” under the rules and regulations of the SEC.
The Audit and Risk Management Committee assists our Board performing the Board’s oversight responsibilities as they relate to the Company’s accounting and financial reporting practices and audits of the financial statements, internal controls, and legal and regulatory compliance, including, among other things:
| • | the quality and integrity of the Company’s financial statements; |
| • | the Company’s compliance with applicable laws and regulations; |
| • | the review of the independent auditors’ qualifications and independence; |
| • | the performance of the Company’s internal audit function and the Company’s independent auditors; and |
| • | the application of the Company’s Code of Business Conduct and Ethics as established by management and the Board. |
Our Audit and Risk Management Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The charter of the Audit and Risk Management Committee is available on our website at www.firsthomebank.com.
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Compensation Committee. Our Board has evaluated the independence of each of the members of our Compensation Committee and has affirmatively determined that each of the members of our Compensation Committee meets the definition of an independent director under Nasdaq rules. Our Board has also determined that each of the members of the Compensation Committee qualifies as a “nonemployee director” within the meaning of Rule 16b-3 under the Exchange Act.
The Compensation Committee assists our Board in its oversight of our overall compensation structure, policies and programs and assessing whether such structure meets our corporate objectives. The Compensation Committee also reviews and oversees the compensation determinations of our named executive officers, as well as the administration of our compensation and benefit plans.
Our Compensation Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities.
Environmental, Social, and Governance Committee. Our Environmental, Social and Governance Committee is responsible for overseeing the Company’s development and implementation of business practices intended to promote the Company’s commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to the Company
Executive Committee. Our Executive Committee meets only on an ad hoc basis to address matters that may require immediate or in depth attention which the full Board is unable to provide at such time.
Nominating Committee. Our Board has evaluated the independence of each of the members of our Nominating Committee and has affirmatively determined that each of the members of our Nominating meets the definition of an independent director under Nasdaq rules.
The Nominating Committee assists our Board in its oversight of identifying and recommending persons to be nominated for election as directors and to fill any vacancies on the board of the Company and the Bank, monitoring the composition and functioning of the standing committees of the Board, and developing, reviewing and monitoring the corporate governance policies and practices of the Company.
In carrying out its functions, the Nominating Committee develops, and recommends to the Board for its approval, qualification criteria for all potential nominees for election, including incumbent directors, Board nominees, and shareholder nominees to be included in the Company’s future proxy statements. The Nominating Committee also evaluates potential nominees for our Board to determine if they have any conflicts of interest that may interfere with their ability to serve as effective Board members and to determine whether they are independent in accordance with applicable SEC and Nasdaq rules (to ensure that, at all times, at least a majority of our directors are independent). Although we do not have a separate diversity policy, the Nominating Committee may consider the diversity of the Company’s directors and nominees in terms of knowledge, experience, skills, expertise and other factors that may contribute to the effectiveness of our Board.
Our Nominating Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities.
Bank Directors
The Board of Directors of the Bank is comprised of 12 individuals: Mr. Alexander, Mr. Apostolou, Mr. Derek S. Berset, Mr. DeLoach, III, Mr. Helal, Mr. Houvardas, Mr. Leo, Mr. Politis, Mr. Saravanos, Mr. Spoor, Mr. Winner, and Ms. Zipperian.
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Non-Director Management
Our executive leadership team is comprised of Mr. Leo, along with the non-director individuals listed below.
Lewis Benner, age 60, has served as BayFirst and the Bank’s Executive Vice President and Chief Credit Officer since January 1, 2020. Prior to that he served as Senior Vice President, Director of Credit Administration for the Bank from August 2018. Mr. Benner’s previous experience includes serving as President and Chief Executive Officer of 1st Manatee Bank, Bradenton, Florida, from 2012 to 2016. Executive Vice President and Chief Lending Officer of Sabal Palm Bank, Sarasota, Florida from 2006 to 2009, and Community Bank President of Gold Bank, Bradenton, Florida from 2001 to 2006. Mr. Benner received his BA in Business Administration from Elizabethtown College.
Brandi N. Jaber, age 47, has been with the Company since 2017. Since October 2020, she has served as Bay First’s Executive Vice President and the Bank’s President of the Residential Mortgage Division. Ms. Jaber has spent longer than 17 years in various management roles in the residential mortgage industry. She has served as an executive team member for the past 8 years, leading numerous cross-functional initiatives. Prior to October 2020, she served as the Bank’s Chief Administrative Officer. Ms. Jaber received her Bachelor in Finance from the University of Florida and an MBA from the University of Tampa.
Matthew M. Luckey, age 47, has been with the Company since 2015. He currently serves as BayFirst and the Bank’s Executive Vice President and Chief Banking Officer. Prior to joining BayFirst, Mr. Luckey served as Vice President, Commercial Lending at The Bank of Tampa from 2012 to 2015. Prior to that he served in various banking roles, including management training, branch management, credit underwriting, and commercial lending beginning with SunTrust Bank, followed by United Bank and Synovus Bank. He received his Bachelor of Business Administration from the University of Georgia.
Robin L. Oliver, age 45, has served as BayFirst and the Bank’s Executive Vice President and Chief Financial Officer since June 2018. From 2014 to 2018, Mrs. Oliver served as Controller for Central Bank & Trust Company, Lexington, Kentucky. For the first 16 years of her career, she served multiple financial institution clients in public accounting as an auditor with Crowe Horwath LLP. Mrs. Oliver is a Certified Public Accountant and received her BA in Accounting from the University of Kentucky.
Thomas G. Zernick, age 58, is BayFirst’s Executive Vice President and the Bank’s President of CreditBench. Prior to joining BayFirst, Mr. Zernick served as Florida Market President for Stearns Bank. Mr. Zernick also served as SBA Product Manager for HomeBanc in Tampa. Mr. Zernick also served as a Community Bank President and SBA President for Republic Bank in Michigan. He received his Bachelor in Business Administration from the University of Notre Dame.
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General
The Compensation Committee determines the level of base salary and any incentive bonus for the Chief Executive Officer and other executive officers of BayFirst and the Bank. To accomplish this, the Compensation Committee has retained Pearl Meyer & Partners, LLC (“PM”) to provide independent compensation consulting services. PM periodically attended Compensation Committee meetings, including executive sessions, and provided information and advice independent of management. PM also performed a peer analysis for the Company. The Compensation Committee discussed these items and concluded that the engagement of PM, and the services it provided did not raise any conflict of interest.
In addition to the peer group analysis, actual salary changes and discretionary bonus awards are based upon the Compensation Committee’s evaluation of an individual’s performance and duties and responsibilities, the performance of BayFirst and the Bank, and other relevant factors, as determined solely by the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors of BayFirst is comprised of Dennis R. DeLoach, III (Chair), Tarek Helal, Trifon Houvardas, Anthony Saravanos and Harold J. Winner. None of the members of the Compensation Committee have engaged in any transactions which would result in them not being considered “independent” under Nasdaq rules.
Summary Compensation Table
The following table sets forth the compensation paid to Mr. Leo, Mr. Zernick, Mr. Luckey, and our former Chief Operating Officer Matthew A. McDonald and Executive Vice President Brandon J. Roth during 2020, 2019, and 2018.
| Name and Principal |
Year | Salary | Bonus(1) | Stock Awards |
Option Awards |
Nonequity Incentive Plan Compensation(1) |
Nonqualified Deferred Compensation Earnings |
All Other Compensation(4) |
Total | |||||||||||||||||||||||||||
| Anthony N. Leo, CEO |
|
2020 2019 2018 |
|
$
|
281,875 263,542 250,000 |
|
|
— — — |
|
$
|
213,438 — 66,888 |
|
$
|
52,874 59,561 98,225 |
|
$
|
426,876 262,665 98,685 |
|
$
|
82,089 56,700 53,952 |
|
$
|
33,268 30,361 32,489 |
|
$
|
1,090,421 672,829 600,248 |
| |||||||||
| Thomas G. Zernick, EVP |
|
2020 2019 2018 |
|
$
|
240,292 153,333 156,060 |
|
$
|
73,013 102,500 75,000 |
|
$
|
24,340 — — |
|
$
|
20,871 23,825 37,887 |
|
|
— — — |
|
|
— — — |
|
$
|
31,345 25,836 25,791 |
|
$
|
389,861 305,494 294,738 |
| |||||||||
| Matthew M. Luckey, EVP |
|
2020 2019 2018 |
|
$
|
191,100 173,750 170,000 |
|
$
|
47,273 55,000 45,000 |
|
$
|
15,760 — — |
|
$
|
20,871 23,825 37,887 |
|
|
— — — |
|
|
— — — |
|
$
|
35,867 32,661 31,465 |
|
$
|
310,871 285,236 284,352 |
| |||||||||
| Matthew A. McDonald, Former COO(2) |
|
2020 2019 2018 |
|
$
|
70,814 215,625 205,000 |
|
|
— — — |
|
$
|
— — 44,592 |
|
$
|
30,611 35,737 56,128 |
|
$
|
— 175,110 65,790 |
|
|
— — — |
|
$
|
549,957 22,713 25,315 |
|
$
|
651,382 449,185 396,825 |
| |||||||||
| Brandon J. Roth, Former EVP(3) |
|
2020 2019 2018 |
|
$
|
137,823 158,125 159,120 |
|
$
|
360,000 150,102 75,000 |
|
|
— — — |
|
$
|
20,871 23,825 37,887 |
|
|
— — — |
|
|
— — — |
|
$
|
27,464 33,124 30,179 |
|
$
|
546,157 365,176 302,186 |
| |||||||||
| (1) | In light of uncertainties associated with the COVID-19 pandemic and ensuing recession, portions of each bonus and cash incentive compensation have been deferred and will be payable on or after July 1, 2021. The deferred portions may be forfeited in whole or in part should First Home experience operating losses in the first two quarters of 2021. |
| (2) | Mr. McDonald’s served as BayFirst’s and the Bank’s Chief Operating Office until April 21, 2020. |
| (3) | Mr. Roth served as BayFirst’s Executive Vice President and President of the Bank’s Residential Lending Division until October 16, 2020. |
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| (4) | All Other Compensation includes: |
| Name and Principal Position |
Year | 401(k) Plan Contributions |
ESOP Contributions |
Medical, Dental, and Vision Benefits |
Life Insurance Premiums |
Severance Related Payments |
||||||||||||||||||
| Anthony N. Leo, CEO | |
2020 2019 2018 |
|
$
|
8,550 8,400 11,375 |
|
$
|
5,700 5,196 5,500 |
|
$
|
16,246 15,034 13,817 |
|
$
|
2,772 1,731 1,806 |
|
|
— — — |
| ||||||
| Thomas G. Zernick, EVP | |
2020 2019 2018 |
|
$
|
8,550 8,034 11,661 |
|
$
|
5,700 5,196 5,500 |
|
$
|
15,620 11,271 7,278 |
|
$
|
1,476 1,335 1,352 |
|
|
— — — |
| ||||||
| Matthew M. Luckey, EVP |
|
2020 2019 2018 |
|
$
|
7,874 6,566 6,900 |
|
$
|
5,237 4,212 4,607 |
|
$
|
22,159 21,344 19,610 |
|
$
|
597 539 348 |
|
|
— — — |
| ||||||
| Matthew A. McDonald, Former COO | |
2020 2019 2018 |
|
$
|
8,550 8,400 11,325 |
|
$
|
— 5,196 5,500 |
|
$
|
6,729 8,191 7,524 |
|
$
|
527 926 966 |
|
$
|
534,152 — — |
| ||||||
| Brandon J. Roth, Former EVP |
|
2020 2019 2018 |
|
$
|
8,550 6,997 7,024 |
|
$
|
— 4,462 4,689 |
|
$
|
18,491 21,344 18,145 |
|
$
|
423 322 321 |
|
|
— — — |
| ||||||
In 2021, Mr. Leo is receiving a $315,000 base salary, Mr. Zernick is receiving a $295,000 base salary, and Mr. Luckey is receiving a $200,000 base salary.
Agreements with Mr. Leo
We are parties to an employment agreement with our Chief Executive Officer Anthony N. Leo. The agreement had an initial term ending on December 31, 2019, and renews annually for an additional year, so that the then-remaining term of the agreement is three years, unless either party provides notice of non-renewal. Under his agreement, Mr. Leo receives a minimum annual salary of $220,000, which may be increased annually by the Board. He is also eligible to participate in any of our incentive, pension, profit sharing, bonus, life insurance, hospitalization, major medical, and other employee benefit plans and programs. Mr. Leo’s employment agreement also provides that during the term of employment and for a period of 18 months following termination, Mr. Leo may not: (a) compete with us by, directly or indirectly, forming, serving as an organizer, director or officer of, employee or agent, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or holding company thereof if such depository institution or holding company has one or more offices or branches within a 50 mile radius of any of our offices; (b) solicit our clients with which he had contact in connection with products and services provided by us for the purpose of providing financial services; (c) solicit our employees; or (d) solicit or divert referrals of SBA loans from SmartBiz. If Mr. Leo terminates his employment for “good reason” or the Company terminates his employment without “cause” prior to, or more than 12 months after, a “change in control”, he will be entitled to severance compensation equal to his then current “annual compensation” for a period of 18 months, plus any accrued bonus, and all outstanding stock options and other incentive awards will vest immediately. However, if such a termination occurs within 12 months following a change in control, Mr. Leo will be entitled to receive severance compensation equal to two-times his then current annual compensation, plus any accrued bonus, and all outstanding equity-based incentive awards will vest immediately.
The Bank has also entered into a salary continuation agreement with Mr. Leo. The salary continuation agreement provides for an annual supplemental retirement benefit to be paid to Mr. Leo in 20 equal annual installments of $25,000 commencing on the first day of the first month immediately after the month in which a “separation from service” occurs and Mr. Leo has attained the “normal retirement age” (as such terms are defined in the salary continuation agreement). Mr. Leo will be entitled to the same benefits if a separation from service occurs after a “change in control” (as defined in the agreement). If Mr. Leo’s employment with the Bank terminates prior to December 31, 2022, he will receive no benefits under the salary continuation agreement. If he
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experiences a “disability” (as defined in the agreement) prior to normal retirement age, he will receive the accrued balance of the supplemental retirement benefit. If Mr. Leo was to die prior to receiving all of the benefit under the salary continuation agreement, his beneficiaries shall be entitled to receive the present value of the salary continuation benefit, calculated in accordance with the agreement. The salary continuation benefit will also be forfeitable if Mr. Leo violates certain non-competition and non-solicitation covenants.
Annual Incentive Plan
First Home has adopted an Annual Incentive Plan (the “AIP”) providing for both short-term cash bonuses and long-term compensation in the form of stock options or restricted stock. The AIP was established by the Compensation Committee in consultation with PM. Annual cash bonuses are determined by a set of objective and subjective criteria established by the Compensation Committee. Under the AIP, if Mr. Leo meets each of the established objectives, he may receive up to 3.90% of First Home’s pre-tax net income in 2020, 3.0% of pre-tax net income in 2021, and 2.75% of pre-tax net income in 2022 and successive years. Mr. Zernick may receive up to 75% of his base salary if he meets each of the established objectives, while Mr. Luckey may receive up to 40% of his base salary. Stock options or restricted stock may be granted at the Compensation Committee’s discretion based upon its assessment of the respective executive’s performance. Any equity component of such a plan will be granted pursuant to the 2017 Equity Incentive Plan.
2017 Equity Incentive Plan
In 2018, the Board amended, and BayFirst’s shareholders approved, the BayFirst Financial Corp. Amended and Restated 2017 Equity Incentive Plan (the “EIP”), which provides for the grant of stock options, restricted stock awards, restricted stock unit awards, and other equity awards to officers, employees, directors, advisors, and consultants. The number of shares reserved and available for issuance under the EIP is 15% of the total number of shares of common stock issued and outstanding from time to time, not to exceed 1,500,000 shares.
Following the effectiveness of the registration statement of which this prospectus is a part of, we intend to register under the Securities Act the shares of stock to be sold under the EIP.
The following is a summary of the material features of the EIP.
Purpose of the EIP
We believe the ability to offer stock-based compensation will allow us to attract additional personnel and to reward exceptional performance. The Board believes that the EIP provides a means whereby those individuals upon whom the responsibilities of the successful administration and management of BayFirst and the Bank rest, and whose present and potential contributions are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of BayFirst. By providing such individuals with additional incentive and reward opportunities, the Board believes that the EIP enhances the profitable growth of BayFirst.
Administration of the EIP
The EIP provides that the Board, its Compensation Committee, or any other committee appointed by the Board has the authority to administer the EIP and to make awards under the EIP. The Board has appointed the Compensation Committee as the administrator of the EIP until further notice.
Awards Under the EIP
The EIP provides for awards of stock options, restricted stock, restricted stock units, and other stock-based awards.
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The EIP requires that stock options can only be issued at or above the fair market value per share on the date of grant. Stock options granted to participants under the EIP may be either incentive stock options under the provisions of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or options that are not subject to the provisions of Section 422 of the Code. Stock options entitle the recipient to purchase shares of common stock at the exercise price specified in the award agreement. The administrator determines the number of option shares, the term of the option, the exercise price, the vesting schedule, performance conditions, and any other terms and conditions. In the case of 10% shareholders who receive incentive stock options, the exercise price may not be less than 110% of the fair market value of the common stock on the date of grant.
No option may be exercisable more than 10 years after the date of grant. Payment of the exercise price of any option may be made in cash or cash equivalent, as determined by the administrator, to the extent permitted by law: (i) by means of any cashless exercise; (ii) by delivering shares of common stock already owned by the option holder; (iii) by such other method as the administrator may determine; or (iv) any combination of the foregoing.
Restricted stock consists of shares of common stock which are granted to the participant, subject to certain restrictions against disposition and certain obligations to forfeit such shares to the Corporation under certain circumstances. The restrictions, which may be different for each award, will be determined by the Compensation Committee.
Restricted stock units are similar to restricted stock awards in that the value of a restricted stock unit is denominated in shares of stock. However, unlike a restricted stock award, restricted stock units are a mere promise by the issuer to grant stock at a specified point in the future, and no shares of stock are transferred to the participant until certain requirements or conditions associated with the award are satisfied.
The administrator, in its discretion, may set restrictions on awards based upon the achievement of performance goals based upon any individual participant or Company criteria or metric, including, but not limited to: stock price, earnings, earnings per share, return on equity, return on assets, asset quality, net interest margin, loan portfolio growth, efficiency ratio, or deposit portfolio growth.
The Company and the participants who are granted awards under the EIP will enter into an award agreement setting forth the terms of any award. The terms and provisions of the award agreements need not be identical, and the administrator may, in its sole discretion, amend an outstanding award agreement at any time in any manner that is not inconsistent with the provisions of the EIP.
Amendment and Termination of the EIP
The Board may amend or terminate the EIP, provided that shareholder approval will be required to: (i) increase the total number of shares reserved for issuance under the EIP; or (ii) change the class of recipients eligible to participate in the EIP. No amendment shall adversely affect any of the rights of any holder of any award without the holder’s consent. The administrator may accept surrender of outstanding equity awards under the EIP and grant new awards in substitution for them; provided that the administrator will not exchange underwater stock options without prior shareholder approval. The EIP will terminate five years after its effective date, but outstanding awards continue until they expire in accordance with their terms.
Authorized Shares
The total number of shares reserved and available for issuance under the EIP is 15% of the total number of shares of BayFirst common stock issued and outstanding from time to time; provided the maximum aggregate number of reserved shares shall not exceed 1,500,000 shares. In the event of a stock dividend, stock split, reorganization, merger, recapitalization, or other change affecting the common stock, the administrator will make proportionate adjustments with respect to: (i) the aggregate number and kind of shares that may be issued under
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the EIP; (ii) the number, kind, and exercise price of shares issuable pursuant to each outstanding award made under the EIP; and (iii) the maximum number shares that may be subject to awards granted to any one individual under the EIP.
If any award lapses, expires, terminates, or is canceled prior to the issuance of shares thereunder or if shares covered by an award are settled in cash, the shares subject to such awards shall again be available for issuance under the EIP. If any shares subject to an award are not delivered to a participant because the award is exercised through a reduction of shares subject to the award, the number of shares that are not delivered to the participant will no longer be available for issuance under the EIP.
Non-Qualified Stock Purchase Plan
The Company adopted an Employee Stock Purchase Plan for all employees in 2015. During 2020, the ESPP was amended and restated in its entirety and was renamed the Non-Qualified Stock Purchase Plan (“NSPP”). All employees and Directors are eligible to participate in the NSPP. All Bank employees are eligible to purchase shares of BayFirst stock through payroll deduction, subject to a maximum of 10% of their pay through the NSPP. In no instance may the per share purchase price ever be less than the greater of its book value, $13.33, or 10% less than the fair market value of the stock as determined by the Board. Directors may purchase available shares of common stock with post-tax dollars as of the grant date at the price of shares offered under the Dividend Reinvestment Plan, with no minimum deduction and a maximum deduction of the Directors’ board fees, but are not eligible for the discount.
Following the effectiveness of the registration statement of which this prospectus is a part of, we intend to register under the Securities Act the shares of stock to be sold under the NSPP.
401(k) Plan
The Bank has a 401(k) plan that provides for a mandatory matching contribution of 3% of each participating employee’s base salary, as well as a discretionary match and profit sharing component.
Employee Stock Ownership Plan
In 2018, the Company also adopted an Employee Stock Ownership Plan, which permits tax deferral of employees’ salaries for the purchase of shares of BayFirst common stock. The plan also provides for discretionary contributions by the Company, those contributions vest over a five year period.
Following the effectiveness of the registration statement of which this prospectus is a part of, we intend to register under the Securities Act the shares of stock to be sold under the Employee Stock Ownership Plan.
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information regarding stock options and unvested restricted stock held by each of our named executive officers as of December 31, 2020 (giving effect to the three-for-two stock split effective on May 10, 2021).
| Name |
Option Awards | Stock Awards | ||||||||||||||||||||||||||
| Date of Grant |
Number of Securities Underlying Unexercised Options Exercisable |
Number of Securities Underlying Unexercised Options Unexercisable |
Option Exercise Price |
Option Expiration Date |
Number of Shares of Stock That Have Not Vested |
Market Value of Shares of Stock That Have Not Vested |
||||||||||||||||||||||
| Anthony N. Leo |
|
4/18/17 1/31/18 6/12/18 3/15/19 1/15/20 |
|
|
8,400 3,000 — |
|
|
12,600 12,000 14,250 |
|
$ $ $ |
17.33 14.67 15.67 |
|
|
6/12/28 3/15/29 1/15/30 |
|
|
1,620 2,510 |
|
$ $ |
22,410 34,722 |
| |||||||
| Matthew M. Luckey |
|
6/12/18 3/15/19 1/15/20 |
|
|
3,240 1,200 — |
|
|
4,860 4,800 5,625 |
|
$ $ $ |
17.33 14.67 15.67 |
|
— | — | — | |||||||||||||
| Thomas G. Zernick |
|
6/12/18 3/15/19 1/15/20 |
|
|
3,240 1,200 — |
|
|
4,860 4,800 5,625 |
|
$ $ $ |
17.33 14.67 15.67 |
|
— | — | — | |||||||||||||
| Matthew A. McDonald |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Brandon J. Roth |
— | — | — | — | — | — | — | |||||||||||||||||||||
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BayFirst directors receive cash fees of $1,500 per Board meeting. Bank directors receive cash fees of $1,250 per Board meeting.
We also pay annual retainers to the Chairs of the: (i) Board and the Bank Board ($22,500 each); (ii) Audit and Risk Management Committee and Nominating Committee ($8,750 each); (iii) Bank Asset Liability Committee ($7,500); and (iv) Compensation Committee ($5,000). We expect to begin paying, in the second quarter of 2021, a $5,000 annual retainer to the Chair of the Environmental, Social, and Governance Committee.
In addition, we pay our directors fees of: (i) $500 per Bank Directors Credit and Loan Committee meeting , Audit and Risk Management Committee meeting, Compensation Committee meeting, and Environmental, Social, and Governance Committee Meeting; and (ii) $250 per Bank Asset Liability Committee meeting. If a director attends any meeting by telephone, the director receives half the standard fee.
The following table sets forth the cash compensation and stock option compensation earned during 2020 by each of our directors other than Mr. Leo, whose compensation is described in the “Summary Compensation Table” on page 54.
| Name |
Cash Fees Earned | Option Awards | Total | |||||||||
| George Apostolou |
$ | 19,500 | $ | 14,471 | $ | 33,971 | ||||||
| Derek S. Berset |
19,750 | 14,471 | 34,221 | |||||||||
| Mark S. Berset |
17,000 | 14,471 | 31,471 | |||||||||
| Dennis R. DeLoach, Jr. |
18,250 | 14,471 | 32,721 | |||||||||
| Dennis R. DeLoach, III |
17,750 | 14,471 | 32,221 | |||||||||
| Alexander Harris |
1,500 | — | 1,500 | |||||||||
| Tarek Helal |
20,250 | 14,471 | 34,721 | |||||||||
| Trifon Houvardas |
23,750 | 14,471 | 38,221 | |||||||||
| Christos Politis, M.D. |
12,000 | 14,471 | 26,471 | |||||||||
| Anthony Saravanos |
49,500 | 19,480 | 68,980 | |||||||||
| Bradly W. Spoor |
23,500 | 14,471 | 37,971 | |||||||||
| Harold J. Winner |
48,000 | 19,480 | 67,480 | |||||||||
| Barbara J. Zipperian |
1,500 | — | 1,500 | |||||||||
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BENEFICIAL OWNERSHIP OF SECURITIES
The percentage and amount of shares beneficially owned by BayFirst’s directors and named executive officers, as well as all directors and executive officers as a group, as of April 30, 2021 (as adjusted for the three-for-two split effective May 10, 2021) is shown in the table below. The mailing address of each director and executive officer is care of First Home Bank, First Home Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701. Other than Mark S. Berset, we are aware of no shareholder who owns 5% or more of our total shares outstanding.
| Directors |
Number of Shares(1) |
Right to Acquire(2) |
Percent of Beneficial Ownership(3) |
|||||||||
| George Apostolou |
86,243.19 | 6,198.00 | 2.41 | % | ||||||||
| Derek S. Berset |
52,478.01 | 6,198.00 | 1.53 | % | ||||||||
| Mark S. Berset |
270,749.10 | 14,013.00 | 7.41 | % | ||||||||
| Dennis R. DeLoach, Jr. |
33,503.55 | 6,198.00 | 1.04 | % | ||||||||
| Dennis R. DeLoach, III |
27,298.89 | 2,598.00 | 0.78 | % | ||||||||
| Alexander Harris |
— | — | — | |||||||||
| Tarek Helal |
20,548.91 | 6,198.00 | 0.70 | % | ||||||||
| Trifon Houvardas |
30,985.83 | 6,198.00 | 0.97 | % | ||||||||
| Anthony N. Leo |
24,323.82 | 14,250.00 | 1.00 | % | ||||||||
| Christos Politis, M.D. |
40,590.00 | 6,198.00 | 1.22 | % | ||||||||
| Anthony Saravanos |
47,111.93 | 8,898.00 | 1.46 | % | ||||||||
| Bradly W. Spoor |
21,166.35 | 6,198.00 | 0.71 | % | ||||||||
| Harold J. Winner |
48,075.24 | 9,273.00 | 1.49 | % | ||||||||
| Barbara J. Zipperian |
1,500.00 | — | 0.04 | % | ||||||||
| Named Executive Officers |
||||||||||||
| Thomas G. Zernick |
5,722.11 | 4,440.00 | 0.37 | % | ||||||||
| Matthew M. Luckey |
4,186.23 | 4,440.00 | 0.33 | % | ||||||||
|
|
|
|
|
|||||||||
| All Directors and Named Executive Officers as a Group (16 people) |
714,483.15 | 109,113.00 | 20.91 | % | ||||||||
|
|
|
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| (1) | Includes shares for which the named person: |
| • | has sole voting and investment power; |
| • | has shared voting and investment power with a spouse, or |
| • | holds in an IRA or other retirement plan program, unless otherwise indicated in these footnotes. |
| (2) | Shares covered by stock options or warrants that are exercisable within sixty (60) days of April 30, 2021. |
| (3) | Based on 3,829,367.24 shares outstanding and, for each individual, shares that such individual has the right to acquire within sixty (60) days of April 30, 2021. |
The following shareholders have been designated as a part of a “Group” for purposes of the Change in Bank Control Act and received approval on March 29, 2013 from the Federal Reserve Bank of Atlanta to aggregately own 49.32% of BayFirst’s common stock: George and Calliope Apostolou, Panagiotis Apostolou, Mark S. and Linda C. Berset, Derek S. Berset, Gary N. and Eileen L. Berset, Kristin M. Berset, Larry C. and Mary S. Cunningham, Dennis R. DeLoach, Jr. as Trustee, Dennis R. DeLoach, Jr. and Faye DeLoach, Dennis R. DeLoach, III, Jeffory H. Forbes Revocable Living Trust, Sherry B. Forbes Revocable Living Trust, Mohamed and Amira Helal, Nadine Helal, Tarek Helal, K&M Insurance Investors, LLC, Trifon Houvardas, Managing Member, The Houvardas Family Revocable Trust U/T/A dated November 12, 2012 by Paul Houvardas and Simone Houvardas, As Trustees, Bruce Lucas, Universal Finance & Investments LC, Sanjay Madhu, Manager,
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Alex Madhu, Andrew Madhu, Felix Kamal Nematbakhsh Trust U/A 12/17/2008 Mansoor Nematbakhsh Trustee, Fiona Ann Nematbakhsh Trust U/A 12/17/2008 Mansoor Nematbakhsh Trustee, Harish and Khyati Patel, Pareshbhai and Neha Patel, Gregory Politis, Christos and Effice Politis, Peter Politis, Anthony and Maria Z. Saravanos, Shane R. and Nicole F. Stowell, Shaju and Miriam Vattamattam, Harold J. Winner, and Harold J. Winner and Jacquelyn M. Winner.
We do not believe these individuals are a “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We reached this conclusion because those individuals have not agreed to act together for the purpose of acquiring, holding, voting, or disposing of our securities. The Federal Reserve reached the conclusion that they were a “Group” for purposes of the Change in Bank Control Act because they each had an affiliation with a different company, HCI Group, Inc.
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DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
In 2016, we established a Dividend Reinvestment and Stock Purchase Plan (the “DRIP”). Participation in the DRIP is limited to BayFirst shareholders who reside in the State of Florida. Through the DRIP, we offer holders of our common stock the opportunity to purchase additional shares by having their cash dividends automatically reinvested in BayFirst common stock and by making optional additional purchases. The maximum optional additional purchase a shareholder may make in any one calendar quarter is $75,000. The minimum additional purchase a participant may make in any one calendar quarter is $250.
Shares purchased under the DRIP are newly issued shares of previously authorized but unissued shares of our common stock. Shareholders who do not participate in the DRIP receive cash dividends, when and as declared by the Board, in the usual manner. The per share purchase price is established by the Board as of each record date for a dividend payment. No commissions, service charges, or brokerage fees are charged to participants in connection with the purchase of shares under the Plan.
Following the effectiveness of the registration statement of which this prospectus is a part of, we intend to register under the Securities Act the shares of stock to be sold under the DRIP.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of our directors, executive officers, and their immediate family members are also customers of the Bank. We anticipate that these individuals will continue to be customers in the future. All transactions between us and our directors, executive officers, and their immediate family members, and any principal shareholders, have been made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-affiliated persons. In the opinion of management, these transactions did not involve more than the normal risk of collectability or present other unfavorable features.
Loans made to directors, executive officers, and their immediate families require the approval of a majority of the disinterested directors reviewing the loan. As of December 31, 2020, loans to directors, executive officers, and their immediate family members represented approximately $10.03 million, or 0.70% of the total loan portfolio, all of which are current and performing.
BayFirst’s corporate offices and the Bank’s main office are located at the First Home Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701. We lease the office and branch space at this location from The Arc Group, Inc. of which our director George Apostolou and his son are officers, directors, and/or equity owners and of which director Christos Politis’ father and siblings are also officers, directors, and/or equity owners. In 2020, we paid this company $408,961, of which Mr. Apostolou’s beneficial interest is $110,419 and Mr. Politis’ family members’ beneficial interest is $237,197.
Mark S. Berset and Derek S. Berset, directors of BayFirst, and members of their immediate family, are also the only equity owners of Comegys Insurance Agency. In 2020, the Company made payments to Comegys Insurance Agency in the amount of $426,666 for the purchase of insurance policies for the Company, of which their and their immediate family’s beneficial interest is $424,106. Such amounts are less than 5% of the gross revenues of Comegys Insurance Agency in each of those years.
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PRINCIPAL AND REGISTERED STOCKHOLDERS
The following table sets forth:
| • | certain information with respect to the beneficial ownership of our common stock as of April 30, 2021, for: (i) each of our named executive officers; (ii) each of our directors; (iii) all of our directors and executive officers as a group; and (iii) all other Registered Shareholders as a group. |
| • | the number of shares of common stock held by and registered for resale by means of this prospectus for the Registered Stockholders. |
The Registered Stockholders may, or may not, elect to sell their shares of common stock covered by this prospectus, as and to the extent they may determine. Such sales, if any, will be made through brokerage transactions on the OTCQX, on Nasdaq, if and when our listing application is approved and our stock is listed on Nasdaq, or through other means at prevailing market prices. As such, we will have no input if and when any Registered Stockholder may, or may not, elect to sell their shares of common stock or the prices at which any such sales may occur. See the section titled “Plan of Distribution.”
Information concerning the Registered Stockholders may change from time to time and any changed information will be set forth in supplements to this prospectus, if and when necessary. Because the Registered Stockholders may sell all, some, or none of the shares of common stock covered by this prospectus, we cannot determine the number of such shares of common stock that will be sold by the Registered Stockholders, or the amount or percentage of shares of common stock that will be held by the Registered Stockholders upon consummation of any particular sale. In addition, the Registered Stockholders listed in the table below may have sold, transferred, or otherwise disposed of, or may sell, transfer, or otherwise dispose of, at any time and from time to time, shares of common stock in transactions exempt from the registration requirements of the Securities Act, after the date on which they provided the information set forth in the table below.
We currently intend to use our reasonable efforts to keep the Registration Statement effective for a period of 90 days after the effectiveness of the Registration Statement.
We are not party to any arrangement with any Registered Stockholder or any broker-dealer with respect to sales of the shares of common stock by the Registered Stockholders.
We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our common stock subject to options that are exercisable within 60 days of April 30, 2021 to be outstanding and to be beneficially owned by the person holding the option for the purpose of computing the percentage ownership of that person. However, we did not deem these shares subject to stock options outstanding for the purpose of computing the percentage ownership of any other person.
We have based percentage ownership of our common stock in the table below on 3,829,367.24 shares of our outstanding as of April 30, 2021 (as adjusted for the three-for-two stock split effective May 10, 2021).
The address of each beneficial owner listed in the table below is care of First Home Bank, First Home Bank Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701. Other than Mark S. Berset, we are aware of no shareholder who owns 5% or more of our total shares outstanding.
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| Directors and Named Executive Officers |
Number of Shares(1) |
Right to Acquire(2) |
Percent | |||||||||
| George Apostolou |
86,243.19 | 6,198.00 | 2.41 | % | ||||||||
| Derek S. Berset |
52,478.01 | 6,198.00 | 1.53 | % | ||||||||
| Mark S. Berset |
270,749.10 | 14,013.00 | 7.41 | % | ||||||||
| Dennis R. DeLoach, Jr. |
33,503.55 | 6,198.00 | 1.04 | % | ||||||||
| Dennis R. DeLoach, III |
27,298.89 | 2,598.00 | 0.78 | % | ||||||||
| Alexander Harris |
— | — | — | |||||||||
| Tarek Helal |
20,548.91 | 6,198.00 | 0.70 | % | ||||||||
| Trifon Houvardas |
30,985.83 | 6,198.00 | 0.97 | % | ||||||||
| Anthony N. Leo |
24,323.82 | 14,250.00 | 2.41 | % | ||||||||
| Matthew M. Luckey |
4,186.23 | 4,440.00 | 0.33 | % | ||||||||
| Christos Politis, M.D. |
40,590.00 | 6,198.00 | 1.22 | % | ||||||||
| Anthony Saravanos |
47,111.93 | 8,898.00 | 1.46 | % | ||||||||
| Bradly W. Spoor |
21,166.35 | 6,198.00 | 0.71 | % | ||||||||
| Harold J. Winner |
48,075.24 | 9,273.00 | 1.49 | % | ||||||||
| Thomas G. Zernick |
5,722.11 | 4,440.00 | 0.37 | % | ||||||||
| Barbara J. Zipperian |
1,500.00 | — | 0.04 | % | ||||||||
| All Directors and Named Executive Officers as a Group (16 people) |
714,483.15 | 109,113.00 | 20.91 | % | ||||||||
| Other Registered Stockholders |
3,114,884.09 | 117,495.00 | 81.90 | % | ||||||||
| (1) | Includes shares for which the named person: |
| • | has sole voting and investment power; |
| • | has shared voting and investment power with a spouse, or |
| • | holds in an IRA or other retirement plan program, unless otherwise indicated in these footnotes. |
| (2) | Shares covered by stock options or warrants that are exercisable within sixty (60) days of April 30, 2021. |
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SHARES ELIGIBLE FOR FUTURE RESALE
General
Until our common stock is listed on Nasdaq, our common stock is quoted and available to be traded on the OTCQX under the symbol “FHBI.” However, such quotation has not resulted in a large volume of trading activity. Therefore, we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock in the public market on the OTCQX or following our listing on Nasdaq, or the perception that such sales could occur, could adversely affect the public price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. We will have no input if and when any Registered Stockholder may, or may not, elect to sell its shares of common stock or the prices at which any such sales may occur. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time.
Shares of our common stock will be deemed “restricted securities” (as defined in Rule 144 under the Securities Act). Restricted securities may be sold in the public market only if they are registered or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which rules are summarized below. Following the effectiveness of our registration statement, shares of our common stock may be sold either by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 of the Securities Act.
As further described below, until we have been a reporting company for at least 90 days, only non-affiliates who have beneficially owned their shares of common stock for a period of at least one year will be able to sell their shares of common stock under Rule 144.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144 as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:
| • | 1% of the number of shares of our common stock then outstanding; or |
| • | the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. |
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
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Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.
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Common Stock
We have 15,000,000 shares of authorized common stock, no par value. As of December 31, 2020, there were 3,485,018 shares of the common stock issued and outstanding. Each share of common stock has the same relative rights and is identical in all respects with every other share of common stock. The holders of common stock are entitled to elect the members of the Board and are entitled to vote as a class on all matters required or permitted to be submitted to the shareholders. Holders of common stock have one vote for each share of common stock owned, and do not have the right to cumulative votes in the election of directors.
Subject to the rights of the holders of our preferred shares, the holders of our common stock are entitled to dividends and other distributions if, as, and when, declared by our Board out of assets legally available for that purpose. Upon the liquidation, dissolution or winding up of BayFirst, the holder of each share of common stock is entitled, subject to the rights of the holders of our preferred shares, to share ratably, based on the number of shares held, in BayFirst’s assets remaining after payment of all of our debts and liabilities. All shares of our common stock currently outstanding are fully paid and non-assessable. Holders of our common stock do not have preemptive or other rights to subscribe for or purchase any additional shares of common stock that we may issue in the future. If additional shares of our common stock are issued, such new shares would have the same voting and other rights and privileges as the currently issued and outstanding shares of common stock, including the right to cast one vote per share on all matters and to participate in dividends when and to the extent declared and paid. There are no redemptive or sinking fund provisions applicable to the common stock.
The terms our Series A Preferred Stock and Series B Convertible Preferred Stock, described below, prohibit us from declaring or paying any dividends on our common stock, or from repurchasing, redeeming or acquiring our common stock, unless we have declared and paid full dividends on our outstanding preferred stock for the most recently completed dividend period.
Preferred Stock Generally
We have 1,000,000 shares of authorized preferred stock, no par value. Our Articles of Incorporation provide that our Board of Directors may authorize and issue series of preferred stock without shareholder approval. Any preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior stock, including the common stock.
Series A Preferred Stock
Of the 1,000,000 shares of authorized preferred stock, 10,000 shares have been designated as Series A Preferred Stock. As of December 31, 2020, there were 6,395 shares of Series A Preferred Stock issued and outstanding. Each share of Series A Preferred Stock has the same relative rights and is identical in in all respects with every other share of Series A Preferred Stock. The holders of Series A Preferred Stock have no voting rights, except as required by the Florida Business Corporation Act.
Holders of shares of Series A Preferred Stock are entitled to receive quarterly cash dividends at 9% per annum (unless we have not redeemed the shares by the tenth anniversary of their issuance, in which event the rate is subject to be increased to 11%). The terms our Series A Preferred Stock prohibit us from declaring or paying any dividends on any junior series of our capital stock, including our common stock, or from repurchasing, redeeming or acquiring such junior stock, unless we have declared and paid full dividends on our outstanding preferred stock for the most recently completed dividend period.
Upon the dissolution, liquidation or winding up of the affairs of BayFirst, whether voluntary or involuntary, the holders of Series A Preferred Stock then outstanding, together with holders of shares of any preferred shares
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then outstanding ranking on a parity with the Series A Preferred Stock upon dissolution, liquidation or winding up, shall be entitled to receive and to be paid out of the assets of BayFirst (or the proceeds thereof) available for distribution to the holders of Series A Preferred Stock after satisfaction of claims of creditors of BayFirst and any distribution or payments due to holders of preferred shares higher in priority to the Series A Preferred Stock, but before any distribution or payment shall be made in respect of the common shares or with respect to preferred shares lower in priority to the Series A Preferred Stock, an amount equal to the liquidation preference with respect to such shares. The liquidation preference for Series A Preferred Stock is $1,000 per share plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution is made in full.
Series A Preferred Stock and Series B Convertible Preferred Stock are parri passu with respect to dividend and liquidation preferences.
On the tenth anniversary of the issuance of any Series A Preferred Stock, BayFirst must redeem such shares; provided, however, that BayFirst will not be so obligated if it does not have adequate funds to pay the redemption price or is prohibited by law or otherwise from redeeming the shares. BayFirst may redeem any portion of the outstanding Series A Preferred Stock at any time after the third anniversary of their issuance. The redemption price in either instance will be $1,000 per share plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution.
Series B Convertible Preferred Stock
In addition, 20,000 shares of preferred stock have been designated as Series B Convertible Preferred Stock. As of December 31, 2020, there were 8,760 shares of Series B Convertible Preferred Stock issued and outstanding. Each share of Series B Convertible Preferred Stock has the same relative rights and is identical in in all respects with every other share of Series B Convertible Preferred Stock. The holders of Series B Convertible Preferred Stock have no voting rights, except as required by the Florida Business Corporation Act.
The holders of shares of Series B Convertible Preferred Stock are entitled to receive quarterly cash dividends at 8% per annum. The terms our Series B Convertible Preferred Stock prohibit us from declaring or paying any dividends on any junior series of our capital stock, including our common stock, or from repurchasing, redeeming or acquiring such junior stock, unless we have declared and paid full dividends on our outstanding preferred stock for the most recently completed dividend period.
Upon the dissolution, liquidation or winding up of the affairs of BayFirst, whether voluntary or involuntary, the holders of Series B Convertible Preferred Stock then outstanding, together with holders of shares of any preferred shares then outstanding ranking on a parity with the Series A Preferred Stock upon dissolution, liquidation or winding up, shall be entitled to receive and to be paid out of the assets of BayFirst (or the proceeds thereof) available for distribution to the holders of Series B Convertible Preferred Stock after satisfaction of claims of creditors of BayFirst and any distribution or payments due to holders of preferred shares higher in priority to the Series B Convertible Preferred Stock, but before any distribution or payment shall be made in respect of the common shares or with respect to preferred shares lower in priority to the Series B Convertible Preferred Stock, an amount equal to the liquidation preference with respect to such shares. The liquidation preference for Series B Convertible Preferred Stock is $1,000 per share plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution is made in full.
Series A Preferred Stock and Series B Convertible Preferred Stock are parri passu with respect to dividend and liquidation preferences.
The holders of shares of Series B Convertible Preferred Stock have the right to convert such shares into shares of common stock at a conversion ratio equal to the quotient of: (i) the $1,000 liquidation preference; divided by
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(ii) the tangible book value per share of common stock, calculated on the basis of BayFirst’s financial statements, as of the last day of the calendar quarter occurring prior to the date on which a holder exercises the conversion right; provided, however, that tangible book value shall be adjusted to reflect a subsequent quarter end only on the last day of the month succeeding such quarter end.
On the tenth anniversary of the issuance of any Series B Convertible Preferred Stock, BayFirst must redeem such shares; provided, however, that BayFirst will not be so obligated if it does not have adequate funds to pay the redemption price or is prohibited by law or otherwise from redeeming the shares. BayFirst may redeem any portion of the outstanding shares of Series B Convertible Preferred Stock at any time after the earlier of: (i) the third anniversary of their issuance; or (ii) the consummation of the first sale of shares of common stock in a bona fide underwritten public offering that results in aggregate net proceeds of not less than $30.0 million. The redemption price in either instance will be $1,000 per share plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution.
Warrants
As of December 31, 2020, we have outstanding warrants to purchase 43,044 shares of our common stock. Each warrant permits its holder to purchase one share of common stock at a purchase price of $18.00. The warrants have a three-year term and expire between October 31, 2022 and December 31, 2022.
In the event of a stock dividend, stock split, reverse stock split, or similar transaction, the number of shares subject to a warrant and the exercise price of the warrant will be adjusted proportionally with the effect of the transaction. Similarly, upon any reclassification or reorganization of the shares of common stock or certain business combination transactions, the warrant holders shall have the right to purchase and receive, in lieu of shares of common stock, the kind and amount of shares of stock or other property receivable upon such a transaction, that the warrant holder would have received had the holder exercised the warrant immediately prior to such transaction.
Transfer Agent and Warrant Agent
Continental Stock Transfer & Trust Company serves our as stock transfer agent and registrar. It also serves as our warrant agent. Its address is 1 State Street, 30th Floor, New York, New York 10004 and its telephone number is (212) 509-4000.
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Under Florida law, a corporation may indemnify its directors and officers against liability if the director or officer acted in good faith and with a reasonable belief that his actions were in the best interests of the corporation, or at least not adverse to the corporation’s best interests, and, in a criminal proceeding, if the individual had no reasonable cause to believe that the conduct in question was unlawful. Under Florida law, a corporation may not indemnify an officer or director against liability in connection with a claim by, or in the right of, the corporation in which such officer or director was adjudged liable to the corporation or in connection with any other proceeding in which the officer or director was adjudged liable for receiving an improper personal benefit. However, a corporation may indemnify against the reasonable expenses associated with such proceeding. A corporation may not indemnify against breaches of the duty of loyalty. Florida law provides for mandatory indemnification against all reasonable expenses incurred in the successful defense of any claim made or threatened, regardless of whether such claim was by or in the right of the corporation, unless limited by the corporation’s Articles of Incorporation. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, regardless of whether the director or officer met the good faith and reasonable belief standards of conduct set out in the statute. Unless otherwise stated in the Articles of Incorporation, officers of a corporation are also entitled to the benefit of the above statutory provisions.
Consistent with Florida law, both BayFirst’s and the Bank’s Bylaws provide for the indemnification of our directors or officers to the fullest extent permitted by applicable law.
Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers, or persons controlling the Company pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in that Act and is therefore unenforceable.
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General
As a bank holding company, we are subject to an extensive body of state and federal banking laws and regulations that impose specific requirements and restrictions on virtually all aspects of our operations. We are affected by government monetary policy and by regulatory measures affecting the banking industry in general.
The following is a brief summary of some of the statutes, rules, and regulations that affect our operations. This summary is qualified in its entirety by reference to the particular statutory and regulatory provision referred to below, and is not intended to be an exhaustive description of the statutes or regulations applicable to our proposed business. Any change in applicable laws or regulations may have a material adverse effect on our business.
BayFirst Financial Corp.
BayFirst is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (“BHCA”). As such, we are required to file annual reports and other information with the Federal Reserve regarding our business operations and those of our subsidiary. We are also subject to the supervision of, and to periodic inspections by, the Federal Reserve.
The BHCA generally requires every bank holding company to obtain the prior approval of the Federal Reserve before:
| • | acquiring all or substantially all of the assets of a bank; |
| • | acquiring direct or indirect ownership or control of 5% or more of the voting shares of any bank or bank holding company; or |
| • | merging or consolidating with another bank holding company. |
The BHCA and the Change in Bank Control Act, together with regulations promulgated by the Federal Reserve, require that, depending on the particular circumstances, either the Federal Reserve’s approval must be obtained or notice must be furnished to the Federal Reserve and not disapproved prior to any person or company, not a bank holding company, acquiring control of a bank holding company, subject to certain exemptions. Control is conclusively presumed to exist when an individual or company acquires 25% or more of any class of voting securities of a bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities and either the bank holding company has registered securities under Section 12 of the Exchange Act or no other person owns a greater percentage of that class of voting securities immediately after the transaction.
Additionally, the BHCA provides that the Federal Reserve may not approve any of these transactions if it would result in or tend to create a monopoly or substantially lessen competition or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the community to be served. The Federal Reserve’s consideration of financial resources generally focuses on capital adequacy, which is discussed below. As a result of the USA PATRIOT Act, which is discussed below, the Federal Reserve is also required to consider the record of a bank holding company and its subsidiary bank(s) in combating money laundering activities in its evaluation of bank holding company merger or acquisition transactions.
Except as authorized by the BHCA and Federal Reserve regulations or order, a bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of 5% or more of the voting shares of any company engaged in any business other than the business of banking or managing and controlling banks.
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The primary exception allows the ownership of shares by a bank holding company in any company the activities of which the Federal Reserve has determined to be so closely related to banking or to managing or controlling banks that ownership of shares of that company is appropriate. Activities the Federal Reserve has determined by regulation to be proper incidents to the business of banking, and thus permissible for bank holding companies, include:
| • | making or servicing loans and certain types of leases; |
| • | engaging in certain insurance and discount brokerage activities; |
| • | performing certain data processing services; |
| • | acting in certain circumstances as a fiduciary or investment or financial advisor; |
| • | providing management consulting services; |
| • | owning savings associations; and |
| • | making investments in corporations or projects designed primarily to promote community welfare. |
In accordance with Federal Reserve policy, a bank holding company is expected to act as a source of financial strength to its subsidiary banks. In adhering to the Federal Reserve’s policy, we may be required to provide financial support to our bank at a time when, absent such Federal Reserve policy, it might not be deemed advisable to provide such assistance. Under the BHCA, the Federal Reserve may also require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that the activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition. The Dodd-Frank Act codified the Federal Reserve’s policy on serving as a source of financial strength. Such support may be required at times when, absent this Federal Reserve policy, a holding company may not be inclined to provide it. A bank holding company, in certain circumstances, could be required to guarantee the capital plan of an undercapitalized banking subsidiary.
The Federal Reserve also has authority to prohibit activities of bank holding companies and their nonbanking subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws or regulations. The Federal Reserve may impose civil money penalties for activities conducted by a bank holding company, its nonbanking subsidiaries, and officials of either on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the activity continues.
Florida-State Chartered Banks
Florida state-chartered banks are subject to the supervision and regulation of the OFR and, as a member of the Federal Reserve System, the Federal Reserve. Deposits are insured by the FDIC for a maximum of $250,000 per account title. For this protection, banks must pay a semi-annual statutory assessment and comply with the rules and regulations of the FDIC. The assessment levied on a bank for deposit insurance varies, depending on the capital position of each bank, and other supervisory factors.
The Federal Deposit Insurance Act provides that, in the event of the “liquidation or other resolution” of a bank, the claims of depositors of the bank, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the bank. If a bank fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors.
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Areas regulated and monitored by the bank regulatory authorities include:
| • | security devices and procedures; |
| • | adequacy of capitalization and loss reserves; |
| • | loans; |
| • | investments; |
| • | borrowings; |
| • | deposits; |
| • | mergers; |
| • | issuances of securities; |
| • | payment of dividends; |
| • | establishment of branches; |
| • | corporate reorganizations; |
| • | transactions with affiliates; |
| • | maintenance of books and records; and |
| • | adequacy of staff training to carry out safe lending and deposit gathering practices. |
Restrictions on Transactions with Affiliates and Loans to Insiders
Sections 23A and 23B of the Federal Reserve Act restrict transactions by banks with their affiliates. An affiliate of a bank is any company or entity which controls, is controlled by or is under common control with the bank. Generally, Sections 23A and 23B: (1) limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of that bank’s capital stock and surplus (i.e., tangible capital); and (2) require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and other similar types of transactions.
Section 23A also covers investment funds managed by an institution as an affiliate, as well as other procedural and substantive matters. In addition, Sections 23A and 23B include coverage of transactions with insiders relative to credit exposure arising from derivative transactions. An insured depository institution is also prohibited from purchasing or selling an asset to an executive officer, director, or principal shareholder (or any related interest of such a person) unless the transaction is on market terms, and, if the transaction exceeds 10% of the institution’s capital, it is approved in advance by a majority of the disinterested directors.
A bank’s authority to extend credit to executive officers, directors and greater than 10% shareholders, as well as entities controlled by such persons, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the Federal Reserve. Among other things, these loans must be made on terms substantially the same as those offered to unaffiliated individuals, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.
Anti-tying Restrictions
Bank holding companies and affiliates are prohibited from tying the provision of services, such as extensions of credit, to other services offered by a holding company or its affiliates.
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Capital Adequacy Requirements
Banks are subject to regulatory capital requirements imposed by the Federal Reserve and the FDIC. Until a bank holding company’s assets reach $3 billion, the risk-based capital and leverage guidelines issued by the Federal Reserve are applied to bank holding companies on a nonconsolidated basis, unless the bank holding company is engaged in nonbank activities involving significant leverage, or it has a significant amount of outstanding debt held by the general public. Instead, a bank holding company with less than $3 billion generally applies the risk-based capital and leverage capital guidelines on a bank only basis and must only meet a debt-to-equity ratio at the holding company level. The Federal Reserve risk-based capital guidelines apply directly to insured state banks, regardless of whether they are subsidiaries of a bank holding company. Both agencies’ requirements, which are substantially similar, establish minimum capital ratios in relation to assets, both on an aggregate basis as adjusted for credit risks and off-balance sheet exposures. The risk weights assigned to assets are based primarily on credit risks. Depending upon the riskiness of a particular asset, it is assigned to a risk category. Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, risk weights from 0% to 150% are applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Capital is then classified into three categories, Common Equity Tier 1, Additional Tier 1, and Tier 2. Common Equity Tier 1 Capital (“CET1”) is the sum of common stock instruments and related surplus net of treasury stock, retained earnings, Accumulated Other Comprehensive Income (“AOCI”), and qualifying minority interests, less applicable regulatory adjustments and deductions that include AOCI (if an irrevocable option to neutralize AOCI is exercised). Mortgage-servicing assets, deferred tax assets, and investments in financial institutions are limited to an aggregate of 15% of CET1 and 10% of CET1 individually. Additional Tier 1 Capital includes noncumulative perpetual preferred stock, Tier 1 minority interests, grandfathered trust preferred securities, and Troubled Asset Relief Program instruments, less applicable regulatory adjustments and deductions. Tier 2 Capital includes subordinated debt and preferred stock, total capital minority interests not included in Tier 1, ALLL not exceeding 1.25% percent of risk-weighted assets, less applicable regulatory adjustments and deductions.
Smaller banks are subject to the following capital level threshold requirements:
| PCA Capital Category |
Threshold Ratios | |||||||||||||||
| Total Risk-Based Capital Ratio |
Tier 1 Risk-Based Capital Ratio |
CET1 Risk-Based Capital Ratio |
Tier 1 Leverage Capital Ratio |
|||||||||||||
| Well capitalized |
10.50 | % | 8 | % | 6.5 | % | 5 | % | ||||||||
| Adequately Capitalized |
8 | % | 6 | % | 4.5 | % | 4 | % | ||||||||
| Undercapitalized |
< 8 | % | < 6 | % | < 4.5 | % | < 4 | % | ||||||||
| Significantly Undercapitalized |
< 6 | % | < 4 | % | < 3 | % | < 3 | % | ||||||||
| Critically Undercapitalized |
Tangible Equity/Total Assets £ 2% | |||||||||||||||
Community banks are subject to the following minimum capital requirements.
| Minimum CET1 ratio |
4.5 | % | ||
| Capital conversion buffer |
2.50 | % | ||
| Phase-in of deductions from CET1* |
100.0 | % | ||
| Minimum tier 1 capital |
6.0 | % | ||
| Minimum total capital |
8.0 | % |
| * | Including certain threshold deduction items that are over the limits. |
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Federal banking regulators have adopted regulations revising the risk-based capital guidelines to further ensure that the guidelines take adequate account of interest rate risk. Interest rate risk is the adverse effect that changes in market interest rates may have on a bank’s financial condition and is inherent to the business of banking. Under the regulations, when evaluating a bank’s capital adequacy, the revised capital standards now explicitly include a bank’s exposure to declines in the economic value of its capital due to changes in interest rates. The exposure of a bank’s economic value generally represents the change in the present value of its assets, less the change in the value of its liabilities, plus the change in the value of its interest rate off-balance sheet contracts.
Federal bank regulatory agencies possess broad powers to take prompt corrective action as deemed appropriate for an insured depository institution and its holding company, based on the institution’s capital levels. The extent of these powers depends upon whether the institution in question is considered “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly under-capitalized,” or “critically undercapitalized.” Generally, as an institution is deemed to be less well-capitalized, the scope and severity of the agencies’ powers increase, ultimately permitting the agency to appoint a receiver for the institution. Business activities may also be influenced by an institution’s capital classification. For instance, only a “well-capitalized” depository institution may accept brokered deposits without prior regulatory approval and can engage in various expansion activities with prior notice, rather than prior regulatory approval. However, rapid growth, poor loan portfolio performance or poor earnings performance, or a combination of these factors, could change the capital position of the bank in a relatively short period of time. Failure to meet these capital requirements could subject the bank to prompt corrective action provisions of the FDIA, which may include filing with the appropriate bank regulatory authorities a plan describing the means and a schedule for achieving the minimum capital requirements. In addition, we would not be able to receive regulatory approval of any application that required consideration of capital adequacy, such as a branch or merger application, unless we could demonstrate a reasonable plan to meet the capital requirement within an acceptable period of time.
In 2019, the Federal banking regulatory agencies adopted a rule to simplify the methodology for measuring capital adequacy for smaller, uncomplicated banks. The CBLR is calculated as the ratio of tangible equity capital divided by average total consolidated assets. CBLR tangible equity is defined as total equity capital, prior to including minority interests, and excluding accumulated other comprehensive income, deferred tax assets arising from net operating loss and tax credit carryforwards, goodwill, and other intangible assets (other than mortgage servicing assets. Under the proposal, a qualifying organization may elect to use the CBLR framework if its CBLR is greater than 9%.
Branching
National banks and state banks are able to establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state. Florida law permits a state bank to establish a branch of the bank anywhere in the state. Accordingly, A bank with its headquarters outside the State of Florida may establish branches anywhere within Florida.
Deposit Insurance Assessments
The deposits of a bank are insured by the FDIC up to the limits under applicable law, which currently is set at $250,000 for accounts under the same name and title. Banks are subject to deposit insurance premium assessments. The FDIC imposes a risk-based deposit premium assessment system. Under this system, the assessment rates for an insured depository institution vary according to the level of risk incurred in its activities. To arrive at an assessment rate for a banking institution, the FDIC places it in one of four risk categories determined by reference to its capital levels and supervisory ratings. In the case of those institutions in the lowest risk category, the FDIC further determines its assessment rate based on certain specified financial ratios or, if applicable, long-term debt ratings. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits. Under the current system, premiums are assessed quarterly. The FDIC has
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published guidelines on the adjustment of assessment rates for certain institutions. The assessment base on which a bank’s deposit insurance premiums is paid to the FDIC is now calculated based on its average consolidated total assets less its average equity.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency. Deposits and certain claims for administrative expenses and employee compensation against insured depository institutions are afforded a priority over other general unsecured claims against the institution, including federal funds and letters of credit, in the liquidation or other resolution of that institution by any receiver appointed by federal authorities. These priority creditors include the FDIC.
Dividends
BayFirst’s ability to pay cash dividends may depend almost entirely upon the aggregate amount of dividends that the Bank is able to pay and that the Bank is permitted to pay, by statutes or regulations, to us. Additionally, the FBCA provides that we may only pay dividends if the dividend payment would not render BayFirst insolvent, or unable to meet our obligations as they come due. These provisions could have the effect of limiting our ability to pay dividends on the shares issued in this offering.
A Florida state-chartered bank is subject to regulatory restrictions on the payment of dividends, including a prohibition of payment of dividends from the Bank’s capital under certain circumstances without the prior approval of the OFR and the Federal Reserve. Except with the prior approval of the OFR, dividends of any Florida bank may only be paid out of retained net profits from the current period and the previous two years, after deducting expenses, including losses and bad debts. In addition, a Florida state-chartered bank is required to transfer at least 20% of its net income to surplus until their surplus equals the amount of paid-in capital.
Banks are also required to hold a capital conservation buffer of CET1 in excess of their minimum risk-based capital ratios to avoid limits on dividend payments and certain other bonus payments. Those requirements are reflected in the following table.
| Capital Conservation Buffer (as a percentage of risk weighted assets) |
Maximum Payout Ratio (as a % of the Previous Four Quarters of Net Income) | |
| Greater than 2.5% |
No payout limitation | |
| Less than or equal to 2.5% and greater than 1.875% |
60% | |
| Less than or equal to 1.875% and greater than 1.25% |
40% | |
| Less than or equal to 1.25% and greater than 0.625% |
20% | |
| Less than or equal to 0.625% |
0% |
The Federal Reserve expects bank holding companies to serve as a source of strength to their subsidiary bank(s), which may require them to retain capital for investment in their subsidiary bank(s), rather than pay dividends to shareholders. As stated previously, the Bank may not pay dividends to BayFirst, if, after paying those dividends, the bank would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements. Payment of dividends by the Bank may be restricted at any time at the discretion of its applicable regulatory authorities, if they deem such dividends to constitute an unsafe and/or unsound banking practice.
Fiscal and Monetary Policies
The business and earnings of a bank may be significantly affected by the fiscal and monetary policies of the federal government and its agencies. Banks are particularly affected by the policies of the Federal Reserve, which
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regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the Federal Reserve are: (i) conducting open market operations in United States government securities; (ii) changing the discount rates of borrowings of depository institutions; (iii) imposing or changing reserve requirements against depository institutions’ deposits; and (iv) imposing or changing reserve requirements against certain borrowing by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve have a material effect on the earnings of banks.
Other Laws
State usury and credit laws limit the amount of interest and other charges collected or contracted by a bank on loans. Bank loans are subject to federal laws applicable to credit transactions, such as the:
| • | Federal Truth-In-Lending Act, which governs disclosures of credit terms to consumer borrowers; |
| • | Community Reinvestment Act, which requires financial institutions to meet their obligations to provide for the total credit needs of the communities they serve, including investing their assets in loans to low and moderate-income borrowers; |
| • | Home Mortgage Disclosure Act requiring financial institutions to provide information to enable public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves; |
| • | Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed, or other prohibitive factors in extending credit; |
| • | Real Estate Settlement Procedures Act, which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions; |
| • | Fair Credit Reporting Act governing the manner in which consumer debts may be collected by collection agencies; and |
| • | The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws. |
Bank operations are also subject to the:
| • | Gramm-Leach-Bliley Act of 1999, which contains privacy provisions that requires us to maintain privacy policies intended to safeguard consumer financial information, to disclose these policies to our customers, and allow customers to “opt out” of having their financial service providers disclose their confidential financial information to nonaffiliated third parties, subject to certain exceptions; |
| • | Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and |
| • | Electronic Funds Transfer Act and Regulation E, which govern automatic deposits to, and withdrawals from, deposit accounts and customers’ rights and liabilities arising from the use of debit cards, automated teller machines, and other electronic banking services. |
Anti-Money Laundering
Banks are subject to significant regulation and supervision relative to anti-money laundering:
| • | such regulation is broad and includes the extraterritorial jurisdiction of the United States; |
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| • | compliance and due diligence obligations are significant and may be costly; |
| • | banks may be compelled to produce documents located both inside and outside the United States, including those of foreign institutions that have a correspondent relationship in the United States; and |
| • | banks enjoy a safe harbor from civil liability to customers for banks’ activities under anti-money laundering laws and regulation. |
Treasury, in cooperation with the federal banking agencies, the SEC, the Commodity Futures Trading Commission, and the Department of Justice:
| • | requires customer identification and verification; |
| • | imposes the money-laundering program requirement to the major financial services sectors, including insurance and unregistered investment companies, such as hedge funds; and |
| • | facilitates and permits the sharing of information between law enforcement and financial institutions, as well as among financial institutions themselves. |
Enforcement of the anti-money laundering laws and regulations is significant, on the part of both state and federal regulators.
Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Act has had a broad impact on the financial services industry, imposing significant regulatory and compliance changes, including the designation of certain financial companies as systemically significant, the imposition of increased capital, leverage, and liquidity requirements, and numerous other provisions designed to improve supervision and oversight of, and strengthen safety and soundness within, the financial services sector. Additionally, the Dodd-Frank Act established a new framework of authority to conduct systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve, the OCC, and the FDIC. The following items provide a brief description of certain key provisions of the Dodd-Frank Act that affect banks:
| • | Limitation on debit card transaction fees. The amount a provider can charge for debit card transaction fees, commonly referred to as interchange fees, is now limited to $0.21 plus 0.05% of the price of the transaction (plus $0.01, if the provider has certain fraud prevention standards in place). |
| • | Mortgage loan origination and risk retention. Additional regulatory requirements have been put in place that may affect our operations and result in increased compliance costs. For example, new standards have been created for mortgage loan originations on all lenders, including banks and thrifts, in an effort to require steps to verify a borrower’s ability to repay. In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells or mortgage and other asset-backed securities that the securitizer issues. These applicable rules generally require a sponsor of this type of transaction to retain an economic interest equal to at least 5% percent of the aggregate credit risk of the assets collateralizing an issuance. |
| • | Expanded FDIC resolution authority. While insured depository institutions have long been subject to the FDIC’s resolution process, the Dodd-Frank Act created a new mechanism for the FDIC to conduct the orderly liquidation of certain “covered financial companies,” including bank and thrift holding companies and systemically significant nonbank financial companies. |
| • | Consumer Financial Protection Bureau (“CFPB”). A new independent CFPB was created within the Federal Reserve. The CFPB is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The CFPB has rulemaking authority over many of the statutes governing products and services offered to bank and thrift consumers. |
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| • | Transactions with affiliates and insiders. The Dodd-Frank Act generally enhanced the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions.” |
| • | Enhanced lending limits. The Dodd-Frank Act strengthened the limits on a depository institution’s credit exposure to one borrower. |
Future Legislation
Various other legislative and regulatory initiatives, including proposals to overhaul the banking regulatory system are from time to time introduced in Congress and state legislatures, as well as regulatory agencies. The latest example was the passing of the Dodd-Frank Act. Future legislation regarding financial institutions may change banking statutes and the operating environment of the Company in substantial and unpredictable ways, and could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance depending upon whether any of this potential legislation will be enacted, and if enacted, the effect that it or any implementing regulations, would have on the financial condition or results of operations of the Company. The nature and extent of future legislative and regulatory changes affecting financial institutions is very unpredictable at this time.
Certain legal matters, including, among other things, the validity of the shares of common stock offered hereby, have been passed upon by Igler and Pearlman, P.A., Tallahassee, Florida, legal counsel to BayFirst.
The audited financial statements of BayFirst as of December 31, 2020, and December 31, 2019, and for each of the two years ended December 31, 2020, are included herein in reliance upon the report of Dixon Hughes Goodman LLP, independent auditors, upon the authority of that firm as experts in accounting and auditing.
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares common stock covered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract, or any other document, are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
Immediately upon the effectiveness of the registration statement of which this prospectus forms a part, we became subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements, and other information with the SEC. These periodic reports, proxy statements, and other information will be available for inspection and copying at the website of the SEC referred to above.
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We also maintain a website at www.firsthomebank.com. Upon the effectiveness of the registration statement of which this prospectus forms a part, you may access those materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
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ST. PETERSBURG, FLORIDA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
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Report of Independent Registered Public Accounting Firm
Stockholders and the Board of Directors
BayFirst Financial Corp. (formerly First Home Bancorp, Inc.)
St. Petersburg, Florida
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of First Home Bancorp, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Report on Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Consolidating Statement of Financial Condition as of December 31, 2020 and the Consolidating Statement of Income for the year ended December 31, 2020 (collectively the “Consolidating Statements”) are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing
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standards generally accepted in the United States of America. In our opinion, the Consolidating Statements are fairly stated in all material respects in relation to the financial statements as a whole.
| DIXON HUGHES GOODMAN LLP |
| /s/ DIXON HUGHES GOODMAN LLP |
| We have served as the Company’s auditor since 2018. |
| Tampa, Florida |
| May 10, 2021 |
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FIRST HOME BANCORP, INC.
AS OF DECEMBER 31, 2020 AND 2019
| ASSETS | ||||||||
| 2020 | 2019 | |||||||
| Cash and due from banks |
$ | 2,789,933 | $ | 3,080,132 | ||||
| Interest-bearing deposits in banks |
52,588,765 | 107,499,915 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents |
55,378,698 | 110,580,047 | ||||||
| Time deposits in banks |
2,381,000 | 2,381,000 | ||||||
| Securities held to maturity |
41,286 | 43,422 | ||||||
| Restricted equity securities, at cost |
2,361,900 | 2,499,200 | ||||||
| Residential loans held for sale |
208,704,152 | 76,415,993 | ||||||
| SBA loans held for sale |
— | 229,500 | ||||||
| SBA loans held for investment, at fair value |
9,263,750 | 10,341,039 | ||||||
| Loans held for investment, at amortized cost |
1,197,896,168 | 292,851,040 | ||||||
| Accrued interest receivable |
7,299,759 | 2,122,505 | ||||||
| Premises and equipment, net |
18,114,600 | 16,478,919 | ||||||
| SBA loan servicing rights |
8,159,501 | 11,279,960 | ||||||
| Deferred income taxes |
3,807,979 | 101,693 | ||||||
| Right-of-use operating lease assets |
3,737,265 | 2,847,218 | ||||||
| Bank owned life insurance |
12,183,448 | — | ||||||
| Other assets |
15,361,270 | 3,068,101 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 1,544,690,776 | $ | 531,239,637 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities: |
||||||||
| Noninterest-bearing deposits |
$ | 62,650,336 | $ | 51,025,076 | ||||
| Interest-bearing transaction accounts |
140,265,079 | 71,134,209 | ||||||
| Savings and money market deposits |
286,743,776 | 185,391,517 | ||||||
| Time deposits |
69,125,349 | 141,043,368 | ||||||
|
|
|
|
|
|||||
| Total deposits |
558,784,540 | 448,594,170 | ||||||
| Federal Home Loan Bank advances |
— | 10,000,000 | ||||||
| Subordinated debentures |
5,947,900 | 7,415,750 | ||||||
| Notes payable |
3,754,465 | 4,095,696 | ||||||
| PPP Liquidity Facility |
881,261,659 | — | ||||||
| Accrued interest payable |
1,998,657 | 220,172 | ||||||
| Operating lease liabilities |
3,925,115 | 2,948,949 | ||||||
| Accrued expenses and other liabilities |
17,949,539 | 6,633,237 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
1,473,621,875 | 479,907,974 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies (Note 1) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, Series A; 10,000 shares authorized, 6,395 and 7,895 shares issued and outstanding; aggregate liquidation preference of $6,395,000 and $7,895,000 |
6,161,000 | 7,661,000 | ||||||
| Preferred stock, Series B; 20,000 shares authorized, 8,760 and 0 shares issued and outstanding; aggregate liquidation preference of $8,760,000 and $0 |
8,516,114 | — | ||||||
| Common stock and additional paid-in capital; 15,000,000 shares authorized, 3,485,018 and 3,393,788 shares issued and outstanding |
43,043,215 | 41,362,038 | ||||||
| Unearned compensation |
(40,958 | ) | (156,116 | ) | ||||
| Retained earnings |
13,389,530 | 2,464,741 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
71,068,901 | 51,331,663 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 1,544,690,776 | $ | 531,239,637 | ||||
|
|
|
|
|
|||||
See accompanying notes.
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FIRST HOME BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2020 AND 2019
| 2020 | 2019 | |||||||
| Interest income: |
||||||||
| Loans, including fees |
$ | 43,089,770 | $ | 24,430,763 | ||||
| Interest-bearing deposits in banks and other |
640,715 | 1,270,296 | ||||||
|
|
|
|
|
|||||
| Total interest income |
43,730,485 | 25,701,059 | ||||||
|
|
|
|
|
|||||
| Interest expense: |
||||||||
| Deposits |
7,490,180 | 7,319,102 | ||||||
| Borrowings |
2,788,128 | 947,741 | ||||||
|
|
|
|
|
|||||
| Total interest expense |
10,278,308 | 8,266,843 | ||||||
|
|
|
|
|
|||||
| Net interest income |
33,452,177 | 17,434,216 | ||||||
| Provision for loan losses |
16,900,000 | 8,869,230 | ||||||
|
|
|
|
|
|||||
| Net interest income after provision for loan losses |
16,552,177 | 8,564,986 | ||||||
|
|
|
|
|
|||||
| Non-interest income: |
||||||||
| Residential loan fee income |
92,677,889 | 31,275,897 | ||||||
| SBA loan servicing income, net |
2,023,771 | 1,401,107 | ||||||
| Gain on sale of SBA loans, net |
1,652,114 | 20,278,299 | ||||||
| Service charges and fees |
932,729 | 993,604 | ||||||
| SBA loan fair value gain (loss) |
1,351 | (994,448 | ) | |||||
| Write-down of other real estate owned |
— | (54,976 | ) | |||||
| Other non-interest income |
407,414 | 224,850 | ||||||
|
|
|
|
|
|||||
| Total non-interest income |
97,695,268 | 53,124,333 | ||||||
|
|
|
|
|
|||||
| Non-interest expense: |
||||||||
| Salaries and benefits |
36,402,899 | 24,391,699 | ||||||
| Bonus, commissions, and incentives |
34,071,608 | 12,334,665 | ||||||
| Mortgage banking |
5,292,614 | 2,401,841 | ||||||
| Occupancy and equipment |
4,453,112 | 3,355,638 | ||||||
| Data processing |
4,418,398 | 1,738,622 | ||||||
| Marketing and business development |
3,553,311 | 3,118,113 | ||||||
| Professional services |
3,532,645 | 2,195,228 | ||||||
| Loan origination and collection |
2,039,506 | 1,539,359 | ||||||
| Employee recruiting and development |
1,768,698 | 1,698,211 | ||||||
| Regulatory assessments |
443,927 | 420,068 | ||||||
| Other non-interest expense |
2,492,764 | 2,198,609 | ||||||
|
|
|
|
|
|||||
| Total non-interest expense |
98,469,482 | 55,392,053 | ||||||
|
|
|
|
|
|||||
| Income before income taxes |
15,777,963 | 6,297,266 | ||||||
| Income tax expense |
3,074,881 | 1,813,052 | ||||||
|
|
|
|
|
|||||
| Net income |
12,703,082 | 4,484,214 | ||||||
| Preferred stock dividends |
(863,282 | ) | (462,903 | ) | ||||
|
|
|
|
|
|||||
| Net income available to common shareholders |
$ | 11,839,800 | $ | 4,021,311 | ||||
|
|
|
|
|
|||||
| Basic earnings per share |
$ | 3.45 | $ | 1.27 | ||||
| Diluted earnings per share |
$ | 3.01 | $ | 1.27 | ||||
See accompanying notes.
F-5
Table of Contents
FIRST HOME BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2020 AND 2019
| Preferred Shares, Series A |
Preferred Shares, Series B |
Common Shares |
Preferred Stock, Series A |
Preferred Stock, Series B |
Common Stock and Additional Paid-in Capital |
Unearned Compensation |
Retained Earnings (Accumulated Deficit) |
Total | ||||||||||||||||||||||||||||
| Balance at January 1, 2019 |
3,135 | — | 3,023,217 | $ | 3,066,000 | $ | — | $ | 35,661,646 | $ | (232,685 | ) | $ | (708,818 | ) | $ | 37,786,143 | |||||||||||||||||||
| Net income |
— | — | — | — | — | — | — | 4,484,214 | 4,484,214 | |||||||||||||||||||||||||||
| Issuance of common stock under: |
||||||||||||||||||||||||||||||||||||
| Non-qualified stock purchase plan |
— | — | 22,001 | — | — | 351,329 | — | — | 351,329 | |||||||||||||||||||||||||||
| Dividend reinvestment plan |
— | — | 39,977 | — | — | 604,726 | — | — | 604,726 | |||||||||||||||||||||||||||
| Employee stock ownership plan |
— | — | 15,148 | — | — | 222,175 | — | — | 222,175 | |||||||||||||||||||||||||||
| Issuance of preferred stock, net |
4,760 | — | — | 4,595,000 | — | — | — | — | 4,595,000 | |||||||||||||||||||||||||||
| Issuance of common stock, net |
— | — | 293,445 | — | — | 4,247,344 | — | — | 4,247,344 | |||||||||||||||||||||||||||
| Stock-based awards - common stock: |
||||||||||||||||||||||||||||||||||||
| Restricted stock |
— | — | — | — | — | — | 76,569 | — | 76,569 | |||||||||||||||||||||||||||
| Stock options |
— | — | — | — | — | 274,818 | — | — | 274,818 | |||||||||||||||||||||||||||
| Dividends declared on: |
||||||||||||||||||||||||||||||||||||
| Preferred stock |
— | — | — | — | — | — | — | (462,903 | ) | (462,903 | ) | |||||||||||||||||||||||||
| Common stock |
— | — | — | — | — | — | — | (847,752 | ) | (847,752 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at December 31, 2019 |
7,895 | — | 3,393,788 | $ | 7,661,000 | $ | — | $ | 41,362,038 | $ | (156,116 | ) | $ | 2,464,741 | $ | 51,331,663 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net income |
— | — | — | — | — | — | — | 12,703,082 | 12,703,082 | |||||||||||||||||||||||||||
| Issuance of common stock under: |
||||||||||||||||||||||||||||||||||||
| Non-qualified stock purchase plan |
— | — | 35,795 | — | — | 434,052 | — | — | 434,052 | |||||||||||||||||||||||||||
| Dividend reinvestment plan |
— | — | 34,737 | — | — | 501,068 | — | — | 501,068 | |||||||||||||||||||||||||||
| Employee stock ownership plan |
— | — | 17,552 | — | — | 259,767 | — | — | 259,767 | |||||||||||||||||||||||||||
| Issuance of preferred stock, net |
— | 6,760 | — | — | 6,516,114 | — | — | — | 6,516,114 | |||||||||||||||||||||||||||
| Conversion of subordinated debt to preferred stock, Series B |
— | 500 | — | — | 500,000 | — | — | — | 500,000 | |||||||||||||||||||||||||||
| Conversion of Series A to Series B preferred stock |
(1,500 | ) | 1,500 | — | (1,500,000 | ) | 1,500,000 | — | — | — | — | |||||||||||||||||||||||||
| Stock-based awards - common stock: |
||||||||||||||||||||||||||||||||||||
| Restricted stock, net of forfeitures |
— | — | (9,055 | ) | — | — | (114,119 | ) | 115,158 | — | 1,039 | |||||||||||||||||||||||||
| Stock options |
— | — | — | — | — | 371,811 | — | — | 371,811 | |||||||||||||||||||||||||||
| Stock grants |
— | — | 12,201 | — | — | 228,598 | — | — | 228,598 | |||||||||||||||||||||||||||
| Dividends declared on: |
||||||||||||||||||||||||||||||||||||
| Preferred stock |
— | — | — | — | — | — | — | (863,282 | ) | (863,282 | ) | |||||||||||||||||||||||||
| Common stock |
— | — | — | — | — | — | — | (915,011 | ) | (915,011 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance at December 31, 2020(1) |
6,395 | 8,760 | 3,485,018 | $ | 6,161,000 | $ | 8,516,114 | $ | 43,043,215 | $ | (40,958 | ) | $ | 13,389,530 | $ | 71,068,901 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) | Common shares for all periods shown herein reflect the three-for-two stock split, effective on May 10, 2021. |
Computations of basic and diluted earnings per share at December 31, 2020 and 2019 reflect this stock split.
See accompanying notes.
F-6
Table of Contents
FIRST HOME BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2020 AND 2019
| 2020 | 2019 | |||||||
| Cash flows From operating activities: |
||||||||
| Net income |
$ | 12,703,082 | $ | 4,484,214 | ||||
| Adjustments to reconcile net income to net cash from operating activities - |
||||||||
| Depreciation and amortization |
1,443,878 | 1,490,035 | ||||||
| Provision for loan losses |
16,900,000 | 8,869,230 | ||||||
| Accretion of discount on unguaranteed loans |
(2,396,547 | ) | (1,607,373 | ) | ||||
| Deferred tax expense (benefit) |
(3,706,286 | ) | 595,110 | |||||
| Origination of SBA loans held for sale |
(23,876,548 | ) | (273,618,222 | ) | ||||
| Proceeds from sales of SBA loans held for sale |
25,228,162 | 293,891,871 | ||||||
| Net gains on sales of SBA loans |
(1,652,114 | ) | (27,163,787 | ) | ||||
| Origination of residential loans held for sale |
(1,919,861,676 | ) | (722,666,767 | ) | ||||
| Proceeds from sales of residential loans held for sale |
1,881,958,585 | 700,282,662 | ||||||
| Net gains on sales of residential loans held for sale |
(88,335,647 | ) | (28,527,955 | ) | ||||
| Change in fair value of residential loans held for sale |
(6,049,421 | ) | (1,690,632 | ) | ||||
| Change in fair value of SBA loans held for investment, at fair value |
(1,351 | ) | 994,448 | |||||
| Amortization of SBA loan servicing rights |
3,650,459 | 3,578,082 | ||||||
| Net loss on sale of other real estate owned |
— | 54,976 | ||||||
| Employee stock purchase plan expense |
43,405 | 34,745 | ||||||
| Stock based compensation expense |
396,717 | 351,387 | ||||||
| Executive stock grants |
228,598 | — | ||||||
| Income from bank owned life insurance |
(183,448 | ) | — | |||||
| Changes in: |
||||||||
| Accrued interest receivable |
(5,177,254 | ) | (375,660 | ) | ||||
| Other assets |
(13,183,216 | ) | (932,323 | ) | ||||
| Accrued interest payable |
1,778,485 | 72,746 | ||||||
| Other liabilities |
12,292,468 | 3,356,683 | ||||||
|
|
|
|
|
|||||
| Net cash from operating activities |
(107,799,669 | ) | (38,526,530 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Principal payments on securities held to maturity |
1,985 | 1,495 | ||||||
| Purchases of time deposits in banks |
— | (250,000 | ) | |||||
| Maturities of time deposits in banks |
— | 1,495,000 | ||||||
| Redemption (Purchase) of restricted equity securities |
137,300 | (847,400 | ) | |||||
| Purchases of PPP loans |
(22,403,641 | ) | — | |||||
| Loan originations and payments, net |
(896,066,300 | ) | (31,359,899 | ) | ||||
| Purchases of premises and equipment |
(3,047,033 | ) | (7,311,492 | ) | ||||
| Purchase of bank owned life insurance |
(12,000,000 | ) | — | |||||
| Proceeds from sale of other real estate owned |
— | 537,224 | ||||||
|
|
|
|
|
|||||
| Net cash from investing activities |
(933,377,689 | ) | (37,735,072 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Net change in deposits |
110,190,370 | 142,009,945 | ||||||
| Net decrease in short-term FHLB advances |
— | (3,000,000 | ) | |||||
| Proceeds from (Payment of) issuance in long-term FHLB advances |
(10,000,000 | ) | 10,000,000 | |||||
| Proceeds from issuance of notes payble |
— | 1,210,000 | ||||||
| Payments on notes payable |
(341,456 | ) | (938,342 | ) | ||||
| Proceeds from PPP Liquidity Facility borrowings |
881,261,659 | — | ||||||
| Proceeds from issuance of preferred stock, net |
6,516,114 | 4,595,000 | ||||||
| Redemption of subordinated debt |
(1,000,000 | ) | — | |||||
| Proceeds from sale of common stock, net |
867,848 | 5,168,654 | ||||||
| ESOP contribution |
259,767 | 222,175 | ||||||
| Dividends paid on common stock |
(915,011 | ) | (847,752 | ) | ||||
| Dividends paid on preferred stock |
(863,282 | ) | (462,903 | ) | ||||
|
|
|
|
|
|||||
| Net cash from financing activities |
985,976,009 | 157,956,777 | ||||||
|
|
|
|
|
|||||
| Net change in cash and cash equivalents |
(55,201,349 | ) | 81,695,175 | |||||
| Cash and cash equivalents, beginning of year |
110,580,047 | 28,884,872 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, end of year |
$ | 55,378,698 | $ | 110,580,047 | ||||
|
|
|
|
|
|||||
| Supplemental cash flow information |
||||||||
| Interest paid |
$ | 8,499,823 | $ | 8,194,097 | ||||
| Income taxes paid |
9,748,459 | 93,401 | ||||||
| Supplemental noncash disclosures |
||||||||
| Transfer of loans to other real estate owned |
$ | — | $ | 592,200 | ||||
| Recognition of right of use asset and operating lease liability |
1,955,592 | 3,461,099 | ||||||
| Conversion of subordinated debt to preferred stock, Series B |
500,000 | — | ||||||
| Conversion of Series A to Series B preferred stock |
1,500,000 | — | ||||||
See accompanying notes.
F-7
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation: The consolidated financial statements include First Home Bancorp, Inc. and its wholly owned subsidiary, First Home Bank, together referred to as “the Company”. Intercompany transactions and balances are eliminated in consolidation.
First Home Bancorp, Inc. is a registered bank holding company, incorporated under the laws of the State of Florida. The Company owns all outstanding stock of First Home Bank (the “Bank”), a Florida chartered commercial bank. A significant portion of the Company’s assets and revenues are derived from the operations of the Bank.
The Company provides a variety of traditional community banking services through its full-service banking centers located in St. Petersburg, Seminole, Pinellas Park, Clearwater, Sarasota, and Tampa, Florida. The Bank’s primary deposit products are demand deposits, NOW accounts, money market accounts, savings deposits, and time deposits and its primary lending products are residential mortgage, commercial, and installment loans. In addition, the Company provides lending services nationwide to small business customers, and as such, a significant portion of the loans originated by the Bank are guaranteed by the Small Business Administration (“SBA”). The guaranteed portion of the SBA loan can be sold in the secondary market, and the Bank routinely engages in the sale of participating interests of the non-guaranteed portion. The Company also engages in mortgage banking activities with offices located in Arizona, Colorado, Delaware, Florida, Georgia, Indiana, Idaho, Kansas, Maryland, New Jersey, New York, North Carolina, Ohio, Rhode Island, Tennessee, Texas, Utah, and Washington and as such, originates and sells one-to-four family residential mortgage loans in the secondary market.
Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholders’ equity.
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The most significant estimates relate to the allowance for loan losses, SBA loan servicing rights, and the SBA loans held for investment measured at fair value.
Cash Flows: Cash and cash equivalents include cash, deposits with other financial institutions with original maturities less than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds purchased.
Time Deposits in Banks: Time deposits with other banks have maturities ranging from August 2023 through December 2025 and bear interest at rates ranging from 2.15% to 3.50%. None of the certificates of deposit had maturities of 12 months or less at the time of origination. All investments in certificates of deposit are with FDIC insured financial institutions and none exceed the maximum insurable amount of $250,000.
Securities: Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments.
F-8
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis.
Restricted Equity Securities: Restricted equity securities consist of Federal Home Loan Bank (“FHLB”) Stock, Federal Reserve Bank (“FRB”) Stock, and stock in a correspondent bank, all of which are considered equity securities without readily determinable fair values. The Bank is a member of the FHLB system, and members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts. The Bank is also a member of its regional FRB.
Loans Held for Sale: The Company designates SBA loans as held for sale based on its intent to sell guaranteed or non-guaranteed portions of these loans in the SBA secondary market. The Company makes the determination of which loans to sell during each quarter, and these loans are typically sold and settled prior to quarter-end. SBA loans held for sale are accounted for at lower of cost or fair value. Gains or losses on the sale these loans are recorded in non-interest income on the Consolidated Statements of Income.
The Company also originates residential loans intended for sale in the secondary market which are carried at fair value with gains and losses recorded in non-interest income. All residential loans are sold servicing released, so there is no servicing income recognized on those loans or an associated servicing asset recorded on the Consolidated Balance Sheets. Interest income is recognized on those loans held for sale until the loan sale is fully completed and the loan is transferred. Interest income on loans held for sale is reflected along with portfolio loans in interest and fees on loans in the Consolidated Statements of Income.
Loans: Except for certain loans for which the fair value option was elected during 2018, as discussed in Note 4, all other loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balances. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.
Interest income is discontinued, and the loan is placed on non-accrual status, at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Mortgage and commercial loans are evaluated on a loan-by-loan basis and are charged off to the extent principal or interest is deemed uncollectible. Other consumer and personal loans continue to accrue interest and are typically charged off no later than 120 days past due. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful. Non-accrual loans and loans past due more than 89 days and still on accrual include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans.
All interest accrued but not collected for loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to
accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
F-9
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit: The Company grants residential and commercial real estate, construction and land, commercial and industrial, and consumer loans in the State of Florida with primary concentration being the Tampa Bay region. The Company also grants residential real estate and SBA commercial real estate, construction and land, and commercial and industrial loans nationwide. Although the Company’s loan portfolio is diversified, a significant portion of its loans are secured by real estate. The following loan segments have been identified:
Residential Real Estate – The Bank originates residential real estate loans for the purchase or refinancing of a mortgage in the Tampa Bay region. These loans are primarily collateralized by owner and non-owner occupied properties located in Tampa Bay and are held at amortized cost in the Company’s loan portfolio. The Bank also originates residential real estate loans nationwide for the purchase or refinancing of a mortgage. These loans are primarily collateralized by owner and non-owner occupied properties located in the area in which they were originated, and these loans are sold into the secondary market.
Commercial Real Estate – Commercial real estate loans consist of loans to finance real estate purchases, refinancings, and expansions and improvements to commercial properties. These loans are secured primarily by first liens and may include office buildings, apartments, retail and mixed-use properties, churches, warehouses, and restaurants. Commercial real estate loans are larger than residential real estate loans and involve greater credit risk. The repayment of these loans largely depends on the results of operations and management of these properties.
Construction and Land – Construction and land loans consist of loans to individuals for the construction of a primary or secondary residence and, in some cases, to real estate investors to acquire and develop land. To the extent construction loans are not made to owner-occupants of single-family homes, they are more vulnerable to changes in economic conditions. Further, the nature of these loans is such that they are more difficult to evaluate and monitor. The risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value upon completion of the project and the estimated cost, including interest, of the project.
Commercial and Industrial – Commercial and industrial loans consist of business loans to small and medium sized business in the Tampa Bay region and nationwide SBA loans. Commercial and industrial loans are generally used for working capital purposes or for acquiring equipment, inventory, or furniture. These loans are generally secured by accounts receivable, inventory, and equipment. Commercial and industrial loans are typically made based on the borrower’s ability to make repayment from the cash flow of the borrower’s business, which makes them of higher risk than residential real estate loans, and the collateral securing loans may be difficult to appraise and may fluctuate in value based on the success of the business.
Commercial and Industrial - PPP – Commercial and industrial PPP loans consist of all loans originated under the SBA 7(a) loan Paycheck Protection Program (“PPP”) pursuant to the Coronavirus Aid, Relief, and Economic Security Act’s (“CARES Act”) economic relief program and carry a 100% government guarantee. This is a new loan segment for the Company in 2020.
Consumer and Other – Consumer and other loans mainly consist of automobile, revolving credit plans, and other loans. The Bank’s consumer loans may be uncollateralized and rely on the borrower’s income for repayment.
Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan
F-10
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.
The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the borrower is experiencing financial difficulty and the Company has granted an economic concession to the borrower that it would not otherwise consider are considered troubled debt restructurings (“TDRs”). In these instances, as part of a work-out alternative, the Company will make concessions including the extension of the loan term, a payment moratorium, a reduction in the interest rate, a period of interest-only payments, or a combination thereof. The impact of the TDR modifications and defaults are factored into the allowance for loan losses on a loan-by-loan basis as all TDRs are classified, by definition, as impaired loans.
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
Impaired commercial real estate and commercial and industrial loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the rate implicit in the original loan agreement or at the fair value of collateral if repayment is expected solely from the collateral.
Troubled debt restructurings are individually evaluated for impairment and included in the separately identified impairment disclosures. TDRs are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the lesser of the cost basis or the fair value of the collateral. For TDRs that subsequently default, the Company determines the amount of the allowance on that loan in accordance with the accounting policy for the allowance for loan losses on loans individually identified as impaired. A TDR classification can be removed if the borrower’s financial condition improves such that the borrower is no longer in financial difficulty, the loan has not had any forgiveness of principal or interest, and the loan is subsequently refinanced or restructured at market terms and qualifies as a new loan.
Performing loans receiving COVID-19 modifications are not classified as TDRs. For additional discussion regarding loans modified due to COVID-19, see Note 3.
The general component covers performing loans that are collectively evaluated for impairment. Large groups of smaller balance homogenous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not included in the separately identified impairment disclosures. The
F-11
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
general allowance component also includes loans that are not individually identified for impairment evaluation, such as commercial loans that are evaluated but are not considered impaired. The general component is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent one to three years, depending on the segment. The actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment.
These economic factors include consideration of the following: levels of, and trends in, delinquencies and impaired loans; levels of, and trends in, charge-offs and recoveries; migration of loans to the classification of special mention, substandard, or doubtful; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentration.
Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 15 to 40 years. Leasehold improvements are amortized using the straight-line method with useful lives ranging from 3 to 10 years based on the lesser of the useful life of the asset or the remaining expected term of the lease. Furniture, fixtures, and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 10 years.
SBA Loan Servicing Rights: When the Company sells the guaranteed portion of an SBA loan or a portion of the non-guaranteed portion of an SBA loan, the Company retains the servicing, and a servicing right asset is created. Servicing rights are initially recorded at fair value in gain (loss) on sales of loans. Fair value is based on market prices for comparable servicing contracts, when available or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.
Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. Impairment is determined based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported through gain (loss) on sales of loans on the Consolidated Statements of Income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. There was no valuation allowance recorded on SBA loan servicing rights at December 31, 2020 and 2019.
Loan servicing income, which is reported on the Consolidated Statement of Income in non-interest income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal. The amortization of servicing rights is netted against loan servicing fee income.
F-12
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Leases: The Company enters into leases in the normal course of business primarily for branch, corporate office, and loan production office locations. The Company’s leases have remaining terms ranging from month-to-month up to 10 years, some of which include renewal or termination options to extend the lease for up to 10 years. The Company’s leases do not include residual value guarantees or covenants.
The Company includes lease extension and termination options in the lease terms if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (i.e., short-term leases) on the Consolidated Balance Sheets.
Leases are classified as operating or finance leases at the lease commencement date; however, the Company has not entered into any finance leases. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for the lease term and other factors.
Bank Owned Life Insurance (“BOLI”): The Company, through the Bank, has purchased life insurance policies on certain key officers. BOLI is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Other Real Estate Owned (“OREO”): OREO is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated
costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are also expensed.
Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
F-13
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mortgage Banking Derivatives: In connection with the origination of mortgage loans intended for sale, the Bank enters into loan commitments for fixed rate mortgage loans, generally lasting 30 to 45 days and at market rates when initiated. Commitments to fund mortgage loans (i.e., interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free-standing derivatives. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded.
To deliver loans to the secondary market and to moderate its interest rate risk prior to sale, the Bank typically enters into non-exchange traded mandatory delivery forward sales contracts and best efforts forward sales contracts, which are also considered derivative instruments. These contracts are entered into for amounts and terms offsetting the interest rate risk of loan commitment derivatives and loans held for sale, and both are carried at their fair value with changes included in earnings. The Bank considers the best efforts forward sales contracts that meet the net settlement requirement to be derivatives, as there are penalties to the Bank if it does not deliver the loan to the investor once the loan closes with the borrower.
Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is used to estimate the fair value of stock options, while market price of the Company’s common stock at the date of grant is used for restricted stock awards.
Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company’s accounting policy is to recognize forfeitures as a reversal of compensation cost expenses in the period that they occur.
Advertising: Advertising costs are expensed as incurred. These costs are included in marketing and business development expense in the Consolidated Statements of Income.
Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. There was no valuation allowance recognized at December 31, 2020 or 2019.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
Employee 401(k) Plan: The Company has a 401(k) plan that covers substantially all employees subject to certain age and service requirements. The Company contributes 3% of eligible employees’ salary each pay period as a
safe harbor contribution. The Company may also match employee contributions each year at the discretion of the Board of Directors. Employee 401(k) expense is the amount of safe harbor and employee matching contributions to the 401(k) plan.
F-14
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Non-Qualified Stock Purchase Plan: During 2020, the Employee Stock Purchase Plan (the “ESPP”) was amended and restated in its entirety and was renamed the Non-Qualified Stock Purchase Plan (the “NSPP”). All employees and Directors are eligible to participate in the NSPP. Employees may purchase available shares of common stock with post-tax dollars as of the grant date at a 10% discount to the price of shares offered under the stock dividend reinvestment and other stock purchase plan (the “DRIP”), as determined by the Board of Directors, with a minimum deduction of $20 and a maximum deduction of 10% of employees’ income. Directors may purchase available shares of common stock with post-tax dollars as of the grant date at the price of shares offered under the DRIP, with no minimum deduction and a maximum deduction of the Directors’ board fees. NSPP compensation expense is recorded based on the 10% discount offered to employees and the number of shares purchased by employees.
Employee Stock Ownership Plan: The Company has an employee stock ownership plan (the “ESOP”) for eligible employees. The amount of profit-sharing contributions to the ESOP is approved by the Board of Directors, and the Company purchases shares of the Company’s common stock based on the amount of approved contributions. Profit-sharing expense is the amount of contributions to the ESOP.
Preferred Stock: The Company has issued cumulative nonconvertible Series A shares of preferred stock, on which it pays cash dividends at a rate of 9%. The Company has also issued cumulative convertible Series B shares of preferred stock, on which it pays cash dividends at a rate of 8%. The Series B shares are convertible at a ratio of liquidation value to tangible book value at the option of the shareholder. All preferred stock has liquidation preference relative to the Company’s common stock. There are $1,000,000 preferred shares authorized in total, and a specific designation of authorized shares are made to each class as they are created.
Earnings per Common Share: Basic earnings per common share is net income less preferred stock dividends (i.e., net income available to common shareholders) divided by the weighted average number of common shares outstanding during the year. Diluted earnings per common share includes the dilutive effect of vested stock options that are considered in-the-money and the dilutive effect of the potential conversion of Series B preferred stock to common stock.
Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount of range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.
Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements. The required reserve amount at December 31, 2020 and 2019 was $0 and $654,000. Cash was also required to be pledged as collateral with a broker-dealer for trading mortgage banking derivatives. The balance of cash pledged for trading at December 31, 2020 and 2019 was $477,156 and $500,053.
Operating Segments: Operating segments as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting, are components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The accounting policies of operating segments are the same as those described elsewhere in this footnote. Revenue for all segments is derived from external sources. See Note 20 for further discussion of the Company’s operating segments.
F-15
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition: Revenue earned on interest-earning assets is recognized based on the effective yield of the financial instrument. Revenue recognized from contracts with customers, which is accounted for under ASC 606, Revenue from Contracts with Customers, is primarily included in the Company’s non-interest income. Interest income and certain other types of non-interest income are accounted for under other applicable accounting standards.
A description of the Company’s revenue streams accounted for under ASC 606 are as follows:
Service Charges on Deposit Accounts – The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include but are not limited to services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.
Debit Card Interchange Fees – The Company earns interchange fees from debit cardholder transactions through the MasterCard payment network. Interchange fees form cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
Gains/Losses on Sales of OREO – The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.
Adoption of New Accounting Standards:
In March 2020, the FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments” (“ASU 2020-03”). The amendments represent clarification and improvements to the codification and correct unintended application. This standard was effective immediately upon issuance and its adoption did not have a material effect on the Company’s consolidated financial statements.
New Accounting Standards Not Yet Adopted:
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This new guidance was issued to replace the incurred loss model for loans and other financial assets with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (i.e., loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in certain leases recognized by a lessor. In addition, the amendments in ASU 2016-13 require credit losses on available-for-sale securities to be presented as a valuation allowance rather than as a direct write-down thereon. The amendments in this ASU are effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted; however, the Company does not intend to early adopt this ASU. Management is in the process of evaluating the impact of adoption of this ASU on its Consolidated Financial Statements, processes, and controls and is not currently able to reasonably estimate the
F-16
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
impact of adoption on the Company’s consolidated financial position, results of operations, or cash flows; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the allowance for loan losses. It is possible that the impact will be material to the Company’s consolidated financial position and results of operations. To date, the Company has established a CECL steering committee, is developing an implementation plan, and is implementing software that will ultimately house and maintain the CECL model.
NOTE 2 – SECURITIES
The Company held one security held-to-maturity at December 31, 2020 and 2019 which matures in August 2039. The security is a debt security to a government sponsored entity and its amortized cost was $41,286 and $43,422, the unrecognized loss was $(1,652) and $(1,831), and the fair value was $39,634 and $41,591 at December 31, 2020 and 2019.
The security was not pledged during the years ended December 31, 2020 or 2019, and there were no sales of securities during the years ended December 31, 2020 and 2019. The security has been in an unrealized loss position for over 12 months at December 31, 2020 and 2019. The unrealized loss has not been recognized into income because the issuer is of high credit quality as a government sponsored entity, management does not intend to sell and it is likely that management will not be required to sell the security prior to its anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuer continues to make timely principal and interest payments and the fair value is expected to recover as the bond approaches maturity.
NOTE 3 – LOANS
As described in Note 1, the Company has a new loan segment in 2020, Commercial and industrial – PPP which consists of all loans originated under the CARES Act’s economic relief program and carry a 100% government guarantee.
Loans held for investment, at amortized cost, at December 31, 2020 and 2019 were as follows:
| 2020 | 2019 | |||||||
| Real estate - |
||||||||
| Residential |
$ | 64,724,177 | $ | 51,073,775 | ||||
| Commercial |
114,883,676 | 75,549,609 | ||||||
| Construction and land |
15,113,689 | 21,602,775 | ||||||
| Commercial and industrial |
193,926,762 | 155,744,406 | ||||||
| Commercial and industrial - PPP |
838,846,881 | — | ||||||
| Consumer and other |
2,895,869 | 1,119,999 | ||||||
|
|
|
|
|
|||||
| 1,230,391,054 | 305,090,564 | |||||||
| Deferred loan (fees) costs, net |
(5,818,399 | ) | 5,790,871 | |||||
| Discount on SBA 7(a) loans sold1 |
(5,417,492 | ) | (7,288,445 | ) | ||||
| Discount on PPP loans purchased |
(96,656 | ) | — | |||||
| Allowance for loan losses |
(21,162,339 | ) | (10,741,950 | ) | ||||
|
|
|
|
|
|||||
| Loans held for investment, at amortized cost |
$ | 1,197,896,168 | $ | 292,851,040 | ||||
|
|
|
|
|
|||||
| 1 | The Company allocates the retained portion of loans sold based on relative fair value of the retained portion and the sold portion, which results in a discount on the retained portion. |
F-17
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 3 – LOANS (Continued)
The following schedule presents the activity in the allowance for loan losses by loan segment for the years ended December 31, 2020 and 2019:
| 2020 | 2019 | |||||||
| Balance, beginning of year |
$ | 10,741,950 | $ | 6,560,189 | ||||
|
|
|
|
|
|||||
| Charge-offs: |
||||||||
| Real estate - residential |
(7,255 | ) | — | |||||
| Real estate - commercial |
(427,174 | ) | (104,231 | ) | ||||
| Commercial and industrial |
(6,335,860 | ) | (4,633,217 | ) | ||||
| Consumer and other |
(98,049 | ) | 84,690 | |||||
|
|
|
|
|
|||||
| Total charge-offs |
(6,868,338 | ) | (4,822,138 | ) | ||||
|
|
|
|
|
|||||
| Recoveries: |
||||||||
| Real estate - residential |
— | 13,502 | ||||||
| Commercial and industrial |
311,136 | 116,354 | ||||||
| Consumer and other |
77,591 | 4,813 | ||||||
|
|
|
|
|
|||||
| Total recoveries |
388,727 | 134,669 | ||||||
|
|
|
|
|
|||||
| Net (charge-offs) recoveries |
(6,479,611 | ) | (4,687,469 | ) | ||||
|
|
|
|
|
|||||
| Provision for loan losses |
16,900,000 | 8,869,230 | ||||||
|
|
|
|
|
|||||
| Balance, end of year |
$ | 21,162,339 | $ | 10,741,950 | ||||
|
|
|
|
|
|||||
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by loan segment and based on impairment method at December 31, 2020:
| Real Estate - Residential |
Real Estate - Commercial |
Real Estate - Construction and Land |
Commercial and Industrial |
Commercial and Industrial - PPP |
Consumer and Other |
Unallocated | Total | |||||||||||||||||||||||||
| Allowance for loan losses: |
||||||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ | — | $ | 161,926 | $ | — | $ | 947,735 | $ | — | $ | — | $ | — | $ | 1,109,661 | ||||||||||||||||
| Collectively evaluated for impairment |
2,087,950 | 2,737,440 | 310,104 | 14,470,359 | — | 251,965 | 194,860 | 20,052,678 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 2,087,950 | $ | 2,899,366 | $ | 310,104 | $ | 15,418,094 | $ | — | $ | 251,965 | $ | 194,860 | $ | 21,162,339 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Loans: |
||||||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ | — | $ | 2,348,339 | $ | — | $ | 947,735 | $ | — | $ | — | $ | — | $ | 3,296,074 | ||||||||||||||||
| Collectively evaluated for impairment |
64,724,177 | 112,535,337 | 15,113,689 | 192,979,027 | 838,846,881 | 2,895,869 | — | 1,227,094,980 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 64,724,177 | $ | 114,883,676 | $ | 15,113,689 | $ | 193,926,762 | $ | 838,846,881 | $ | 2,895,869 | $ | — | $ | 1,230,391,054 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
F-18
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 3 – LOANS (Continued)
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by loan segment and based on impairment method at December 31, 2019:
| Real Estate - Residential |
Real Estate - Commercial |
Real Estate - Construction and Land |
Commercial and Industrial |
Consumer and Other |
Unallocated | Total | ||||||||||||||||||||||
| Allowance for loan losses: |
||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ | — | $ | 264,669 | $ | — | $ | 2,767,495 | $ | — | $ | — | $ | 3,032,164 | ||||||||||||||
| Collectively evaluated for impairment |
507,561 | 595,553 | 145,459 | 6,004,606 | 117,492 | 339,115 | 7,709,786 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | 507,561 | $ | 860,222 | $ | 145,459 | $ | 8,772,101 | $ | 117,492 | $ | 339,115 | $ | 10,741,950 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Loans: |
||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ | 46,358 | $ | 1,713,274 | $ | — | $ | 3,160,206 | $ | — | $ | — | $ | 4,919,838 | ||||||||||||||
| Collectively evaluated for impairment |
51,027,417 | 73,836,335 | 21,602,775 | 152,584,200 | 1,119,999 | — | 300,170,726 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | 51,073,775 | $ | 75,549,609 | $ | 21,602,775 | $ | 155,744,406 | $ | 1,119,999 | $ | — | $ | 305,090,564 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The following table presents information related to impaired loans by loan segment at and for the year ended December 31, 2020:
| Unpaid Principal Balance |
Recorded Investment |
Allowance for Loan Losses Allocated |
Average Recorded Investment |
Interest Income Recognized |
Cash Basis Interest Recognized |
|||||||||||||||||||
| With no related allowance recorded: |
||||||||||||||||||||||||
| Real estate - residential |
$ | — | $ | — | $ | — | $ | 23,179 | $ | — | $ | — | ||||||||||||
| Real estate - commercial |
1,699,083 | 1,271,909 | — | 945,851 | 48,283 | 36,312 | ||||||||||||||||||
| Real estate - construction and land |
— | — | — | — | — | — | ||||||||||||||||||
| Commercial and industrial |
— | — | — | 46,463 | — | — | ||||||||||||||||||
| Consumer and other |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Subtotal |
$ | 1,699,084 | $ | 1,271,909 | $ | — | $ | 1,015,493 | $ | 48,283 | $ | 36,312 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| With an allowance recorded: |
||||||||||||||||||||||||
| Real estate - residential |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Real estate - commercial |
1,076,430 | 1,076,430 | 161,926 | 1,084,956 | — | — | ||||||||||||||||||
| Real estate - construction and land |
— | — | — | — | — | — | ||||||||||||||||||
| Commercial and industrial |
947,735 | 947,735 | 947,735 | 2,007,508 | — | — | ||||||||||||||||||
| Consumer and other |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Subtotal |
$ | 2,024,165 | $ | 2,024,165 | $ | 1,109,661 | $ | 3,092,464 | $ | — | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 3,723,249 | $ | 3,296,074 | $ | 1,109,661 | $ | 4,107,957 | $ | 48,283 | $ | 36,312 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
F-19
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 3 – LOANS (Continued)
The following table presents information related to impaired loans by loan segment at and for the year ended December 31, 2019:
| Unpaid Principal Balance |
Recorded Investment |
Allowance for Loan Losses Allocated |
Average Recorded Investment |
Interest Income Recognized |
Cash Basis Interest Recognized |
|||||||||||||||||||
| With no related allowance recorded: |
||||||||||||||||||||||||
| Real estate - residential |
$ | 46,358 | $ | 46,358 | $ | — | $ | 85,039 | $ | 2,481 | $ | 2,481 | ||||||||||||
| Real estate - commercial |
619,793 | 619,793 | — | 361,350 | 11,554 | 11,554 | ||||||||||||||||||
| Real estate - construction and land |
— | — | — | — | — | — | ||||||||||||||||||
| Commercial and industrial |
92,925 | 92,925 | — | 46,463 | 1,681 | 1,681 | ||||||||||||||||||
| Consumer and other |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Subtotal |
$ | 759,076 | $ | 759,076 | $ | — | $ | 492,852 | $ | 15,716 | $ | 15,716 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| With an allowance recorded: |
||||||||||||||||||||||||
| Real estate - residential |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Real estate - commercial |
1,093,481 | 1,093,481 | 264,669 | 1,046,359 | — | — | ||||||||||||||||||
| Real estate - construction and land |
— | — | — | — | — | — | ||||||||||||||||||
| Commercial and industrial |
3,067,281 | 3,067,281 | 2,767,495 | 2,626,092 | — | — | ||||||||||||||||||
| Consumer and other |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Subtotal |
$ | 4,160,762 | $ | 4,160,762 | $ | 3,032,164 | $ | 3,672,451 | $ | — | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 4,919,838 | $ | 4,919,838 | $ | 3,032,164 | $ | 4,165,303 | $ | 15,716 | $ | 15,716 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure the unpaid principal balance does not include the unsold guaranteed balance and is not reduced for partial charge-offs.
Non-accrual loans and loans past due over 89 days still on accrual include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans. Impaired loans include commercial loans that are individually evaluated for impairment and deemed impaired as well as TDRs for all loan portfolio segments. The sum of non-accrual loans and loans past due over 89 days still on accrual will differ from the total impaired loan amount.
The following tables present the recorded investment in non-accrual and loans past due over 89 days still on accrual by loan segment at December 31, 2020 and 2019:
| Non-accrual | Loans Past Due Over 89 Days Still Accruing |
|||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Real estate - residential |
$ | — | $ | 2,422 | $ | 573,325 | $ | 134,998 | ||||||||
| Real estate - commercial |
1,805,999 | 1,165,268 | — | — | ||||||||||||
| Commercial and industrial |
947,735 | 3,110,209 | — | — | ||||||||||||
| Consumer and other |
— | 23,775 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 2,753,734 | $ | 4,301,674 | $ | 573,325 | $ | 134,998 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
F-20
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 3 – LOANS (Continued)
The following table presents the aging of the recorded investment in past due loans at December 31, 2020 by loan segment:
| 30-89 Days Past Due |
Greater Than 89 Days Past Due |
Total Past Due |
Loans Not Past Due |
Total Loans |
||||||||||||||||
| Real estate - residential |
$ | 653,697 | $ | 573,325 | $ | 1,227,022 | $ | 63,497,155 | $ | 64,724,177 | ||||||||||
| Real estate - commercial |
954,352 | 1,742,737 | 2,697,089 | 112,186,587 | 114,883,676 | |||||||||||||||
| Real estate - construction and land |
— | — | — | 15,113,689 | 15,113,689 | |||||||||||||||
| Commercial and industrial |
1,612,553 | — | 1,612,553 | 192,314,209 | 193,926,762 | |||||||||||||||
| Commercial and industrial - PPP |
— | — | — | 838,846,881 | 838,846,881 | |||||||||||||||
| Consumer and other |
3,891 | — | 3,891 | 2,891,978 | 2,895,869 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Loans held for investment, at amortized cost |
$ | 3,224,493 | $ | 2,316,062 | $ | 5,540,555 | $ | 1,224,850,499 | $ | 1,230,391,054 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The following table presents the aging of the recorded investment in past due loans at December 31, 2019 by loan segment:
| 30-89 Days Past Due |
Greater Than 89 Days Past Due |
Total Past Due |
Loans Not Past Due |
Total Loans |
||||||||||||||||
| Real estate - residential |
$ | 255,052 | $ | 134,998 | $ | 390,050 | $ | 50,683,725 | $ | 51,073,775 | ||||||||||
| Real estate - commercial |
1,242,797 | 1,093,481 | 2,336,278 | 73,213,331 | 75,549,609 | |||||||||||||||
| Real estate - construction and land |
— | — | — | 21,602,775 | 21,602,775 | |||||||||||||||
| Commercial and industrial |
1,841,333 | 1,772,835 | 3,614,168 | 152,130,238 | 155,744,406 | |||||||||||||||
| Consumer and other |
23,775 | — | 23,775 | 1,096,224 | 1,119,999 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Loans held for investment, at amortized cost |
$ | 3,362,957 | $ | 3,001,314 | $ | 6,364,271 | $ | 298,726,293 | $ | 305,090,564 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Credit Quality Indicators
Internal risk-rating grades are assigned to loans by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the portfolio balances. This analysis is performed at least annually. The Bank uses the following definitions for its risk ratings:
Pass – Loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
Special Mention – These credits constitute an undue and unwarranted credit risk, but not to a point of justifying a classification of “Substandard”. They have weaknesses that, if not checked or corrected, weaken the asset or inadequately protect the Bank.
F-21
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 3 – LOANS (Continued)
Substandard – These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – These loans have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
The table below sets forth credit exposure for the loan portfolio disaggregated by loan segment based on internally assigned risk ratings at December 31, 2020:
| Pass | Special Mention |
Substandard | Doubtful | Total Loans |
||||||||||||||||
| Real estate - residential |
$ | 64,593,114 | $ | — | $ | 131,063 | $ | — | $ | 64,724,177 | ||||||||||
| Real estate - commercial |
112,260,358 | 430,814 | 2,192,504 | — | 114,883,676 | |||||||||||||||
| Real estate - construction and land |
15,113,689 | — | — | — | 15,113,689 | |||||||||||||||
| Commercial and industrial |
186,780,980 | 5,176,943 | 1,895,569 | 73,270 | 193,926,762 | |||||||||||||||
| Commercial and industrial - PPP |
838,846,881 | — | — | — | 838,846,881 | |||||||||||||||
| Consumer and other |
2,895,869 | — | — | — | 2,895,869 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Loans held for investment, at amortized cost |
$ | 1,220,490,891 | $ | 5,607,757 | $ | 4,219,136 | $ | 73,270 | $ | 1,230,391,054 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The table below sets forth credit exposure for the loan portfolio disaggregated by loan segment based on internally assigned risk ratings at December 31, 2019:
| Pass | Special Mention |
Substandard | Doubtful | Total Loans |
||||||||||||||||
| Real estate - residential |
$ | 50,422,444 | $ | 102,654 | $ | 548,677 | $ | — | $ | 51,073,775 | ||||||||||
| Real estate - commercial |
72,431,857 | 1,502,717 | 1,615,035 | — | 75,549,609 | |||||||||||||||
| Real estate - construction and land |
21,602,775 | — | — | — | 21,602,775 | |||||||||||||||
| Commercial and industrial |
148,765,623 | 3,835,972 | 2,474,225 | 668,586 | 155,744,406 | |||||||||||||||
| Consumer and other |
1,096,224 | — | 23,775 | — | 1,119,999 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Loans held for investment, at amortized cost |
$ | 294,318,923 | $ | 5,441,343 | $ | 4,661,712 | $ | 668,586 | $ | 305,090,564 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
F-22
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 3 – LOANS (Continued)
Troubled Debt Restructurings
The following table presents loans classified as TDRs at December 31, 2020 and 2019:
| 2020 | 2019 | |||||||||||||||
| Accruing | Nonaccruing | Accruing | Nonaccruing | |||||||||||||
| Real estate - residential |
$ | — | $ | — | $ | 43,936 | $ | — | ||||||||
| Real estate - commercial |
542,340 | 666,307 | 529,867 | 1,093,481 | ||||||||||||
| Commercial and industrial |
— | — | 82,095 | 70,381 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 542,340 | $ | 666,307 | $ | 655,898 | $ | 1,163,862 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The Company has not committed to lend any additional amounts to the loans classified as TDRs at December 31, 2020 and 2019. The Company estimated $0 and $308,349 of impaired loan loss reserves for these loans at December 31, 2020 and 2019.
There were no new loans classified as TDRs during the year ended December 31, 2020. Loans classified as TDRs as of and during the year ended December 31, 2019, including how these loans were modified, are presented in the table below. The financial impact of these modifications was not material.
| Number of Loans |
Type of Modification |
Pre-Modification Outstanding Recorded Investment |
Post-Modification Outstanding Recorded Investment |
|||||||||||||
| Real estate - commercial |
2 | Payment moratorium | $ | 1,525,109 | $ | 1,525,109 | ||||||||||
| Commercial and industrial |
1 | Extended term | 82,095 | 82,095 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total TDRs |
3 | $ | 1,607,204 | $ | 1,607,204 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
During the year ended December 31, 2019, there was one commercial real estate loan of $1,093,481 classified as a TDR for which there was a payment default and the loan had been modified within the twelve months prior to default. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.
F-23
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 3 – LOANS (Continued)
The CARES Act provided several forms of economic relief designed to defray the impact of COVID-19. In April 2020, the Company began offering loan modifications to include principal and interest deferrals under the CARES Act. These deferrals are generally provided for a period of three months. After this three-month period, borrowers may apply for an additional three-month deferral period. In accordance with Section 4013 of the CARES Act or interagency guidance issued in March 2020, in the absence of intervening factors, these short-term loan modifications made on a good faith basis are not categorized as a TDR, nor are these loans placed on non-accrual (provided the loans were not past due or on non-accrual status prior to the deferral). Loan modifications related to COVID-19 as of December 31, 2020 are presented in the table below:
| Number of Loans |
Outstanding Recorded Investment |
|||||||
| Real estate - residential |
11 | $ | 7,106,263 | |||||
| Real estate - commercial |
4 | 1,848,917 | ||||||
| Real estate - construction and land |
2 | 1,423,641 | ||||||
| Commercial and industrial |
220 | 9,623,838 | ||||||
|
|
|
|
|
|||||
| Total Loan Modifications related to COVID-19 |
237 | $ | 20,002,659 | |||||
|
|
|
|
|
|||||
NOTE 4 – FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Residential Loans Held for Sale: The Company has elected to account for residential loans held for sale at fair value. The fair value of loans held for sale is determined using either actual quoted prices for the assets (Level 1) whenever possible or quoted prices for similar assets, adjusted for specific attributes of that loan (Level 2). The gain (loss) of loans held for sale is included in mortgage banking income in the Consolidated Statements of Income.
F-24
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 4 – FAIR VALUE (Continued)
SBA Loans Held for Investment, at Fair Value: The Company has elected to account for certain SBA loans held for investment at fair value. Fair value is calculated based on the present value of estimated future payments (Level 3). The valuation model uses interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future payments. Whenever available, the present value is validated against available market data.
Mortgage Banking Derivatives: Mortgage banking derivatives used in the ordinary course of business primarily consist of mandatory forward sales contracts, best efforts forward sales contracts, and interest rate lock commitments. The fair value of mandatory forward sales contracts is measured using quoted market prices (Level 1), or in some cases when quoted market prices are not available, the pricing is derived from market observable inputs that can generally be verified and do not typically involve significant judgment by the Company (Level 2). Interest rate lock commitments involve pricing derived from market observable inputs that are adjusted based on pull-through rates. Pull-through rates, which typically range between 80-85%, are an unobservable input which are the Company’s estimate of the percentage of interest rate lock commitments expected to result in closed loans (Level 3). The fair value of best efforts forward sales contracts is measured using market observable inputs that are adjusted using unobservable inputs including duration, spread, and pull-through rates (Level 3).
Impaired Loans: A loan is considered to be impaired when it is probable the Bank will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. In most cases, the Bank measures fair value based on the value of the collateral securing the loan. Collateral may be in the form of real estate and/or business or personal assets, including but not limited to equipment, inventory, and accounts receivable. The fair value of real estate collateral is determined based on third party appraisals by qualified licensed appraisers as well as internal estimates. The fair value of other business or personal assets is generally based on amounts reported on the financial statements of the customer or customer’s business. Appraised and reported values may be adjusted based on management’s historical knowledge, changes in market conditions from the time of valuation and management’s knowledge of the customer and the customer’s business. Since not all valuation inputs are observable, these nonrecurring fair value determinations are classified as Level 3. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors previously identified.
SBA Loan Servicing Rights: On a quarterly basis, SBA loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. If the carrying amount exceeds fair value, impairment is recorded so that the servicing asset is carried at fair value. The fair value of SBA servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. There were no SBA servicing rights carried at fair value at December 31, 2020 and 2019.
F-25
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 4 – FAIR VALUE (Continued)
Assets and liabilities measured at fair value on a recurring basis at December 31, 2020 and 2019 are summarized below:
| Fair Value Measurements at December 31, 2020 Using: |
||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total | |||||||||||||
| Financial assets |
||||||||||||||||
| Residential loans held for sale |
$ | 21,888,440 | $ | 186,815,712 | $ | — | $ | 208,704,152 | ||||||||
| SBA loans held for investment, at fair value |
— | — | 9,263,750 | 9,263,750 | ||||||||||||
| Interest rate lock commitments |
— | — | 7,565,806 | 7,565,806 | ||||||||||||
| Mandatory forward contracts |
— | — | — | — | ||||||||||||
| Best efforts forward contracts |
— | — | 55,183 | 55,183 | ||||||||||||
| Financial liabilities |
||||||||||||||||
| Interest rate lock commitments |
$ | — | $ | — | $ | 12,321 | $ | 12,321 | ||||||||
| Mandatory forward contracts |
4,454,766 | — | — | 4,454,766 | ||||||||||||
F-26
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 4 – FAIR VALUE (Continued)
| Fair Value Measurements at December 31, 2019 Using: |
||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total | |||||||||||||
| Financial assets |
||||||||||||||||
| Residential loans held for sale |
$ | 6,442,443 | $ | 69,973,550 | $ | — | $ | 76,415,993 | ||||||||
| SBA loans held for investment, at fair value |
— | — | 10,341,039 | 10,341,039 | ||||||||||||
| Interest rate lock commitments |
— | — | 1,080,496 | 1,080,496 | ||||||||||||
| Mandatory forward contracts |
9,141 | — | — | 9,141 | ||||||||||||
| Best efforts forward contracts |
— | — | 17,972 | 17,972 | ||||||||||||
| Financial liabilities |
||||||||||||||||
| Interest rate lock commitments |
$ | — | $ | — | $ | 8,148 | $ | 8,148 | ||||||||
| Mandatory forward contracts |
274,102 | — | — | 274,102 | ||||||||||||
There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis during the years ended December 31, 2020 or 2019.
Financial Instruments Recorded Using Fair Value Option
The Company has elected the fair value option for residential loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual term of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due or on non-accrual at December 31, 2020 and 2019.
At December 31, 2020 and 2019, the aggregate fair value, contractual balance, and gain for residential loans held for sale were as follows:
| 2020 | 2019 | |||||||
| Aggregate fair value |
$ | 208,704,152 | $ | 76,415,993 | ||||
| Contractual balance |
199,974,568 | 73,735,830 | ||||||
|
|
|
|
|
|||||
| Gain |
$ | 8,729,584 | $ | 2,680,163 | ||||
|
|
|
|
|
|||||
F-27
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 4 – FAIR VALUE (Continued)
The total amount of gains and losses from changes in fair value included in earnings for the years ended December 31, 2020 and 2019 for residential loans held for sale were as follows:
| 2020 | 2019 | |||||||
| Interest income |
$ | 2,684,237 | $ | 1,758,439 | ||||
| Change in fair value |
6,049,421 | 1,690,632 | ||||||
|
|
|
|
|
|||||
| Total change in fair value |
$ | 8,733,658 | $ | 3,449,071 | ||||
|
|
|
|
|
|||||
The Company also elected the fair value option for certain of its SBA loans originated and fully funded during the year ended December 31, 2018 as the Company believed that fair value was the best indicator of the resolution of those loans at that time. Depending on market conditions and liquidity needs of the Company, management determines whether it is advantageous to hold or sell SBA loans on a loan-by-loan basis. The portion of these loans guaranteed by the SBA are generally readily marketable in the secondary market and the portion of the loans that are not guaranteed are sold periodically to other third-party financial institutions. Interest income on these loans is recorded based on the contractual term of the loan and in accordance with the Company’s policy on other loans held for investment.
The aggregate fair value, contractual balance, and loss at December 31, 2020 and 2019 for SBA loans held for investment, at fair value, were as follows:
| 2020 | 2019 | |||||||
| Aggregate fair value |
$ | 9,263,750 | $ | 10,341,039 | ||||
| Contractual balance |
9,265,984 | 10,344,625 | ||||||
|
|
|
|
|
|||||
| Loss |
(2,234 | ) | (3,586 | ) | ||||
| Loan costs recognized |
— | — | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (2,234 | ) | $ | (3,586 | ) | ||
|
|
|
|
|
|||||
The total amount of gains and losses from changes in fair value included in earnings for the years ended December 31, 2020 and 2019 for SBA loans held for investment, at fair value, were as follows:
| 2020 | 2019 | |||||||
| Interest income |
$ | 724,599 | $ | 1,050,726 | ||||
| Change in fair value |
1,351 | (994,448 | ) | |||||
|
|
|
|
|
|||||
| Total change in fair value |
$ | 725,950 | $ | 56,278 | ||||
|
|
|
|
|
|||||
Changes in fair value for SBA loans held for investment, at fair value, were included in SBA fair value gain (loss) on the Consolidated Statements of Income.
F-28
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 4 – FAIR VALUE (Continued)
The table below presents a reconciliation of SBA loans held for investment, at fair value, which were valued on a recurring basis and used significant unobservable inputs (Level 3) for the years ended December 31, 2020 and 2019:
| SBA loans held for investment, at fair value |
||||
| Balance of recurring Level 3 assets at January 1, 2019 |
$ | 21,587,436 | ||
|
|
|
|||
| Pay-offs |
(1,331,873 | ) | ||
| Sale of guaranteed balances |
(8,905,749 | ) | ||
| Charge-offs |
(14,327 | ) | ||
| Total gains or losses during 2019 |
(994,448 | ) | ||
|
|
|
|||
| Balance of recurring Level 3 assets at December 31, 2019 |
$ | 10,341,039 | ||
|
|
|
|||
| Pay-offs |
(741,064 | ) | ||
| Charge-offs |
(96,839 | ) | ||
| SBA repurchase of guaranteed balances |
(240,737 | ) | ||
| Total gains or losses during 2020 |
1,351 | |||
|
|
|
|||
| Balance of recurring Level 3 assets at December 31, 2020 |
$ | 9,263,750 | ||
|
|
|
|||
The Company’s valuation of SBA loans held for investment, at fair value, was supported by an analysis prepared by an independent third party and approved by management. The approach to determine fair value involved several steps: 1) Identifying each loan’s unique characteristics, including balance, payment type, term, coupon,
age, and principal and interest payment; 2) Projecting these loan level characteristics for the life of each loan; and 3) Performing discounted cash flow modeling.
The following table provides information about the valuation techniques and unobservable inputs used in the valuation of SBA loans held for investment, at fair value, falling within Level 3 of the fair value hierarchy at December 31, 2020 and 2019:
| Fair Value | Valuation Technique |
Unobservable Inputs | Range (Weighted Average) | |||||||||||||
| December 31, 2020 |
||||||||||||||||
| SBA loans held for investment, at fair value |
$ | 9,263,750 | |
Discounted cash flow |
|
|
Discount Rate Conditional Prepayment Rate |
|
|
3.24%-6.74% (4.37%) 10.53%-10.56% (10.55%) |
| |||||
| December 31, 2019 |
||||||||||||||||
| SBA loans held for investment, at fair value |
$ | 10,341,039 | |
Discounted cash flow |
|
|
Discount Rate Conditional Prepayment Rate |
|
|
4.93%-8.43% (6.05%) 9.24%-9.99% (9.79%) |
| |||||
F-29
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 4 – FAIR VALUE (Continued)
The significant unobservable inputs impacting the fair value measurement of SBA loans held for investment, at fair value, include discount rates and conditional prepayment rates. Increases in discount rates or prepayment rates would result in a lower fair value measurement. Although the prepayment rate and discount rate are not directly interrelated, they generally move in opposite directions. The discount rates and conditional prepayment rates were weighted by the relative principal balance outstanding of these loans.
Assets measured at fair value on a nonrecurring basis at December 31, 2020 and 2019 are summarized below:
| Fair Value Measurements at December 31, 2020 Using: |
||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total | |||||||||||||
| Impaired loans: |
||||||||||||||||
| Real estate - commercial |
— | — | 1,582,612 | 1,582,612 | ||||||||||||
| Fair Value Measurements at December 31, 2019 Using: |
||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total | |||||||||||||
| Impaired loans: |
||||||||||||||||
| Real estate - residential |
$ | — | $ | — | $ | 2,422 | $ | 2,422 | ||||||||
| Real estate - commercial |
— | — | 828,812 | 828,812 | ||||||||||||
| Commercial and industrial |
— | — | 283,916 | 283,916 | ||||||||||||
There were two collateral-dependent commercial real estate impaired loans with fair values of $916,305 and $666,307, respectively, at December 31, 2020.
The collateral backing the loan with a fair value of $916,305 included a real estate property, comprising a cold storage building and excess land, and machinery and equipment. The market values of the building and excess land were derived using the sales comparison approach. In determining the market value of the building, comparable building sales were obtained, and various adjustments were made to these comparable sales including for location, property size, year built, and condition to derive an adjusted sale price per square foot of $145. In determining the market value of the excess land, comparable excess land sales were obtained, and various adjustments were made to these comparable sales including for location, net site size, frontage/access/visibility, and utilities/infrastructure to derive an adjusted sales price per acre of $29,827. The market value of the machinery and equipment was based on the concept of orderly liquidation value, which assumes that the machinery and equipment is sold under the constraints of an orderly liquidation sale held over a six-month period. The value of individual machinery and equipment was determined based on its age and condition, appearance, size or capacity, design, function, utility, and overall market appeal compared to market comparable data. Further, a primary factor that impacted orderly liquidation value was the cost required to disassemble, remove, and relocate the machinery and equipment, all of which was assumed to be incurred by the buyer.
F-30
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 4 – FAIR VALUE (Continued)
The collateral backing the loan with a fair value of $666,307 included two hotel properties. The market values of these properties were derived using the following income capitalization approaches: discounted cash flow analysis and room revenue multiplier. The key assumptions used in the discounted cash flow analysis for both properties were a discount rate of 13%, a terminal capitalization rate of 10.25%, and sales costs of 1%. The room revenue multipliers used were 2.25 and 3.25.
The majority of impaired loans carried at fair value at December 31, 2019 were commercial and industrial loans with little to no collateral value, with items such as vehicles or equipment as the primary collateral. As such, the unobservable inputs were largely management’s judgments that the collateral values, if any, should be discounted heavily and none were typically individually material in nature. There was one collateral-dependent commercial real estate impaired loan at December 31, 2019, the market value for which was based on the adjusted liquidation value of the loan’s real estate collateral and related furniture, fixtures, and equipment. To determine the adjusted liquidation value, the sales comparison and income capitalization approaches were used to derive an initial market value, which was then discounted by 30% based on an assumed three-month marketing period, 15% to account for uncertain market conditions, potential collateral deterioration due to neglect, and an uncertain pool of potential buyers, and 10% to account for selling costs, including auction fees and commissions.
Fair Value of Financial Instruments
The carrying values and estimated fair values of financial instruments not carried at fair value, at December 31, 2020 and 2019 are as follows:
| 2020 | 2019 | |||||||||||||||||||
| Level | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||
| Assets: |
||||||||||||||||||||
| Cash and cash equivalents |
1 | $ | 55,378,698 | $ | 55,378,698 | $ | 110,580,047 | $ | 110,580,047 | |||||||||||
| Time deposits in banks |
2 | 2,381,000 | 2,520,908 | 2,381,000 | 2,440,632 | |||||||||||||||
| Securities held to maturity |
2 | 41,286 | 39,634 | 43,422 | 41,490 | |||||||||||||||
| Restricted equity securities, at cost |
2 | 2,361,900 | 2,361,900 | 2,499,200 | 2,499,200 | |||||||||||||||
| SBA loans held for sale |
1 | — | — | 229,500 | 254,112 | |||||||||||||||
| Loans held for investment, at amortized cost |
3 | 1,197,896,168 | 1,213,967,323 | 292,851,040 | 295,300,060 | |||||||||||||||
| Accrued interest receivable |
3 | 7,299,759 | 7,299,759 | 2,122,505 | 2,122,505 | |||||||||||||||
| SBA loan servicing rights |
3 | 8,159,501 | 9,709,230 | 11,279,960 | 12,081,894 | |||||||||||||||
| Liabilities: |
||||||||||||||||||||
| Noninterest-bearing deposits |
2 | $ | 62,650,336 | $ | 62,650,336 | $ | 51,025,076 | $ | 51,025,076 | |||||||||||
| Interest-bearing transaction accounts |
2 | 140,265,079 | 140,265,079 | 71,134,209 | 71,134,209 | |||||||||||||||
| Savings and money market deposits |
2 | 286,743,776 | 286,743,776 | 185,391,517 | 185,391,517 | |||||||||||||||
| Time deposits |
2 | 69,125,349 | 69,743,143 | 141,043,368 | 142,946,826 | |||||||||||||||
| FHLB advances |
2 | — | — | 10,000,000 | 9,963,698 | |||||||||||||||
| Subordinated debentures |
2 | 5,947,900 | 6,515,681 | 7,415,750 | 8,089,590 | |||||||||||||||
| Notes payable |
2 | 3,754,465 | 3,754,465 | 4,095,696 | 4,095,696 | |||||||||||||||
| PPP Liquidity Facility |
3 | 881,261,659 | 881,261,659 | — | — | |||||||||||||||
| Accrued interest payable |
3 | 1,998,657 | 1,998,657 | 220,172 | 220,172 | |||||||||||||||
F-31
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 5 – SBA LOAN SERVICING ACTIVITIES
At December 31, 2020 and 2019, the principal balance of SBA loans, excluding PPP loans, retained by the Company was $253,330,391 and $201,392,274, of which $110,196,139 and $58,447,940 represented the guaranteed portion of the loans. Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The unpaid principal balances of SBA loans serviced for others requiring recognition of a servicing asset were $524,910,042 and $604,572,106 at December 31, 2020 and 2019.
Activity for SBA loan servicing rights for the years ended December 31, 2020 and 2019 follows:
| 2020 | 2019 | |||||||
| Beginning of year |
$ | 11,279,960 | $ | 8,197,404 | ||||
| Additions |
530,000 | 6,660,638 | ||||||
| Amortization |
(3,650,459 | ) | (3,578,082 | ) | ||||
|
|
|
|
|
|||||
| End of year |
$ | 8,159,501 | $ | 11,279,960 | ||||
|
|
|
|
|
|||||
The fair value of servicing rights was $9,709,230 and $12,081,894 at December 31, 2020 and 2019. Fair value was determined using a weighted average discount rate of 11.75% and a weighted average prepayment speed of 10.34% at December 31, 2020. Fair value was determined using a weighted average discount rate of 12.75% and a weighted average prepayment speed of 9.83% at December 31, 2019. The SBA loan servicing rights are amortized over the life of a loan on a loan-by-loan basis.
The following table presents the components of net gain on sale of SBA loans for the years ended December 31, 2020 and 2019:
| 2020 | 2019 | |||||||
| Gain on sale of guaranteed SBA loans |
$ | 2,087,061 | $ | 22,802,060 | ||||
| Loss on sale of non-guaranteed SBA loans |
(70,000 | ) | (159,853 | ) | ||||
| Costs recognized on sale of SBA loans |
(894,947 | ) | (8,799,696 | ) | ||||
| Fair value of servicing rights created |
530,000 | 6,660,638 | ||||||
|
|
|
|
|
|||||
| Gain on sale of SBA loans, net |
$ | 1,652,114 | $ | 20,503,149 | ||||
|
|
|
|
|
|||||
NOTE 6 – PREMISES AND EQUIPMENT
Premises and equipment at December 31, 2020 and 2019 were as follows:
| 2020 | 2019 | |||||||
| Land and improvements |
$ | 3,543,007 | $ | 2,672,650 | ||||
| Building and improvements |
6,852,963 | 4,486,666 | ||||||
| Leasehold improvements |
1,971,938 | 1,930,102 | ||||||
| Furniture, fixtures, and equipment |
6,048,485 | 4,711,507 | ||||||
| Fixed assets in process |
4,416,931 | 6,159,430 | ||||||
|
|
|
|
|
|||||
| 22,833,324 | 19,960,355 | |||||||
| Accumulated depreciation and amortization |
(4,718,724 | ) | (3,481,436 | ) | ||||
|
|
|
|
|
|||||
| $ | 18,114,600 | $ | 16,478,919 | |||||
|
|
|
|
|
|||||
F-32
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 6 – PREMISES AND EQUIPMENT (Continued)
Depreciation and amortization expense was $1,411,352 and $1,480,357 for the years ended December 31, 2020 and 2019.
NOTE 7 – LEASES
Lease Expense
For the years ended December 31, 2020 and 2019, the components of total lease cost and supplemental information related to operating leases were as follows:
| 2020 | 2019 | |||||||
| Operating lease cost |
1,209,925 | 837,654 | ||||||
| Short-term lease cost |
669,924 | 315,535 | ||||||
|
|
|
|
|
|||||
| Total lease cost, net |
$ | 1,879,849 | $ | 1,153,189 | ||||
|
|
|
|
|
|||||
| 2020 | 2019 | |||||||
| Operating lease weighted average remaining lease term (years) |
5.01 | 5.64 | ||||||
| Operating lease weighted average discount rate (%) |
2.07 | 2.76 | ||||||
| Operating cash flows related to operating leases |
$ | 1,123,331 | $ | 794,394 | ||||
| Right-of-use assets obtained in exchange for new operating lease liabilities |
$ | 2,000,468 | $ | 3,679,937 | ||||
Lease Obligations
At December 31, 2020, future undiscounted lease payments for operating leases with initial terms of one year or more are as follows:
| 2021 |
$ | 1,245,272 | ||
| 2022 |
755,897 | |||
| 2023 |
605,414 | |||
| 2024 |
599,298 | |||
| 2025 |
505,392 | |||
| Thereafter |
682,979 | |||
|
|
|
|||
| Total undiscounted lease payments |
4,394,252 | |||
| Less: imputed interest |
(469,137 | ) | ||
|
|
|
|||
| Net lease liabilities |
$ | 3,925,115 | ||
|
|
|
F-33
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 8 – DEPOSITS
Time deposits that met or exceeded the FDIC Insurance limit of $250,000 at December 31, 2020 and 2019 were $20,464,135 and $26,559,845.
Scheduled maturities of time deposits for the next five years, at December 31, 2020, were as follows:
| 2021 |
$ | 28,213,186 | ||
| 2022 |
33,748,047 | |||
| 2023 |
5,764,717 | |||
| 2024 |
800,385 | |||
| 2025 |
599,014 | |||
|
|
|
|||
| $ | 69,125,349 | |||
|
|
|
NOTE 9 – FEDERAL HOME LOAN BANK ADVANCES
The following table presents the outstanding FHLB advances at December 31, 2020 and 2019, including the balances of these advances, the maturity dates, and the interest rates, which were fixed rates. The FHLB advances outstanding at December 31, 2019 were payable at their maturity dates with a penalty upon prepayment. These advances were prepaid early in December 2020, and the prepayment penalty was $234,287. As such, there were no outstanding FHLB advances at December 31, 2020.
| Maturity |
Interest Rate | 2020 | 2019 | |||||||||
| 9/10/2021 |
1.76 | % | — | 5,000,000 | ||||||||
| 9/11/2024 |
1.77 | % | — | 5,000,000 | ||||||||
|
|
|
|
|
|||||||||
| $ | — | $ | 10,000,000 | |||||||||
|
|
|
|
|
|||||||||
FHLB advances are collateralized by residential, multifamily, and commercial real estate loans and home equity lines of credit under a blanket lien arrangement. Based on this collateral, the Company is eligible to borrow up to a total of $212,839,690 at December 31, 2020.
NOTE 10 – OTHER BORROWINGS
The Bank had $1,000,000 of Subordinated Debentures outstanding at December 31, 2019, of which $500,000 were issued in December 2014 and $500,000 were issued in September 2015. The Subordinated Debentures had a final maturity of December 31, 2029 and accrued interest at the greater of 8.75% per annum or LIBOR plus 4.95% per annum as determined two business days prior to each interest payment date. The Subordinated Debentures were redeemable after the fifth anniversary, in whole or in part, at the option of the Bank at a redemption price equal to 100% plus the applicable premium (3% within year six) together with accrued interest. The balance of Subordinated Debentures outstanding at the Bank, net of offering costs, amounted to $0 and $980,912 at December 31, 2020 and 2019. In January 2020, $500,000 of the Subordinated Debentures were redeemed at the option of the Bank, and in October 2020, the remaining $500,000 of the Subordinated Debentures were redeemed at the option of the Bank.
F-34
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 10 – OTHER BORROWINGS (Continued)
In June 2016, the Company issued a total of $550,000 in Subordinated Debentures. Under these debt agreements, there is a remaining amount of $950,000 in Subordinated Debentures that may be issued by the Company. The Subordinated Debentures have final maturities of March 31, 2023 and June 30, 2023 and accrue interest at 7.50% per annum. The Debentures are redeemable, in whole or in part, at the option of the Company at a redemption price equal to 100% together with accrued interest. In October 2020, $500,000 of these Debentures were converted to Series B Preferred Stock.
In December 2018, the Company issued a $6,000,000 Subordinated Debenture that matures December 21, 2028 and is redeemable after 5 years. The Debenture carries interest at a fixed rate of 6.875% per annum for the initial 5 years of term and carries interest at a floating rate for the final 5 years of term. Under the debt agreement, the floating rate is based on a LIBOR benchmark plus 4.045% per annum; however, LIBOR will be replaced by a SOFR benchmark by December 21, 2023 and, therefore, the floating rate will be based on SOFR plus 4.045% per annum.
The balance of Subordinated Debentures outstanding at First Home Bancorp, Inc., net of offering costs, amounted to $5,947,900 and $6,434,838 at December 31, 2020 and 2019.
At December 31, 2019, the Company had a $3,000,000 term note with a financial institution maturing March 12, 2028 requiring principal and interest payments based on a ten-year amortization with interest at prime (4.75% at December 31, 2019) with a floor of 4.50%. The Company also had a $2,000,000 line of credit with the same financial institution that matured in March 2019 and was subsequently on agreed upon extensions of the maturity date pending renegotiation of both the term note and line of credit. The line of credit required quarterly interest payments at Prime with a floor of 4.50%. The combined balance of both the line of credit and note was $4,095,696 at December 31, 2019. In March 2020, the Company renegotiated the terms of the debt and combined the line of credit and term note into one amortizing note with quarterly principal and interest payments with interest at Prime (3.25% at December 31, 2020). The new note matures on March 10, 2029 and the balance of the note was $3,754,465 at December 31, 2020. The note is secured by 100% of the stock of the Bank and requires the Company to comply with certain loan covenants during the term of the line of credit and note.
In April 2020, the Company entered into the Federal Reserve Bank’s Paycheck Protection Program Liquidity Facility (“PPPLF”). Under the PPPLF, advances must be secured by pledges of loans to small businesses originated by the Company under the PPP. The PPPLF accrues interest at 0.35% per annum and matures at various dates equal to the maturity date of the PPPLF collateral pledged to secure the advance, ranging from April 14, 2022 to November 4, 2025, and will be accelerated on and to the extent of any PPP loan forgiveness reimbursement by the SBA for any PPPLF collateral or the date of purchase by the SBA from the borrower of any PPPLF collateral. On the maturity date of each advance, the Company shall repay the advance plus accrued interest. This $881,261,659 borrowing was fully advanced at December 31, 2020.
F-35
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 11 – INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 2020 and 2019 was as follows:
| 2020 | 2019 | |||||||
| Current tax provision: |
$ | 5,087,896 | $ | 954,171 | ||||
| Federal |
1,693,271 | 263,771 | ||||||
|
|
|
|
|
|||||
| State |
6,781,167 | 1,217,942 | ||||||
|
|
|
|
|
|||||
| Deferred expense (benefit): |
||||||||
| Federal |
(2,902,002 | ) | 473,732 | |||||
| State |
(804,284 | ) | 121,378 | |||||
|
|
|
|
|
|||||
| (3,706,286 | ) | 595,110 | ||||||
|
|
|
|
|
|||||
| $ | 3,074,881 | $ | 1,813,052 | |||||
|
|
|
|
|
|||||
The effective tax rate differed from the federal statutory rate of 21% in 2020 and 2019 as follows:
| 2020 | 2019 | |||||||
| Tax based on statutory rate |
$ | 3,313,372 | $ | 1,322,426 | ||||
| State tax, net of federal effect |
702,300 | 304,268 | ||||||
| CARES Act tax benefit |
(968,710 | ) | — | |||||
| Other, net |
27,919 | 186,358 | ||||||
|
|
|
|
|
|||||
| $ | 3,074,881 | $ | 1,813,052 | |||||
|
|
|
|
|
|||||
Deferred tax assets and liabilities at December 31, 2020 and 2019 were due to the following:
| 2020 | 2019 | |||||||
| Deferred tax assets: |
||||||||
| Allowance for loan losses |
$ | 5,363,593 | $ | 2,723,547 | ||||
| Deferred loan fees |
3,358,449 | 111,557 | ||||||
| Discount on loans sold |
1,396,040 | 1,847,256 | ||||||
| Operating lease liabilities |
994,820 | 747,411 | ||||||
| Accrued bonuses |
453,999 | 284,371 | ||||||
| Other |
597,880 | 323,192 | ||||||
|
|
|
|
|
|||||
| 12,164,781 | 6,037,334 | |||||||
|
|
|
|
|
|||||
| Deferred tax liabilities: |
||||||||
| Mortgage banking fair value adjustments |
(2,860,520 | ) | (811,591 | ) | ||||
| SBA loan servicing rights |
(2,068,026 | ) | (2,858,906 | ) | ||||
| Deferred loan costs |
(1,883,777 | ) | (1,543,517 | ) | ||||
| Right-of-use operating lease assets |
(947,210 | ) | (721,627 | ) | ||||
| Depreciation |
(597,269 | ) | — | |||||
|
|
|
|
|
|||||
| (8,356,802 | ) | (5,935,641 | ) | |||||
|
|
|
|
|
|||||
| Net deferred tax asset |
$ | 3,807,979 | $ | 101,693 | ||||
|
|
|
|
|
F-36
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 11 – INCOME TAXES (Continued)
At December 31, 2020 and 2019, the Company did not have any federal net operating loss carryforwards. In March 2020, the Company recognized a one-time tax benefit of $968,710 as a result of the CARES Act, which allowed for carryback of 2018 net operating loss to tax years with higher corporate tax rates.
The Company and its subsidiary file a consolidated U.S. Corporation federal income tax return which is subject to examination by taxing authorities for years 2017 and later.
NOTE 12 – STOCK-BASED COMPENSATION
The Amended and Restated 2017 Equity Inventive Plan (the “Equity Plan”) governs the Company’s restricted stock and stock options. Total compensation cost that was charged against income related to the Equity Plan was $396,717 and $351,387 for the years ended December 31, 2020 and 2019.
Restricted Stock
During the year ended December 31, 2020, the Company awarded 18,707 shares of restricted stock to Executive Officers representing a portion of their bonus which vested immediately. Of those shares awarded, 6,506 shares were used to cover the taxes on the shares vested, thus a net of 12,201 shares were issued. There was no restricted stock granted during the year ended December 31, 2019. Prior to 2019, the Company awarded shares of restricted common stock to certain officers for which compensation expense is recognized ratably over the five-year vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined by the Board of Directors.
A summary of changes in the Company’s nonvested restricted shares for the year ended December 31, 2020 follows:
| Shares | Weighted-Average Grant-Date Fair Value |
|||||||
| Nonvested at January 1, 2020 |
17,627 | $ | 13.61 | |||||
| Granted |
18,707 | $ | 13.33 | |||||
| Vested |
(25,451 | ) | $ | 13.31 | ||||
| Forfeited |
(6,753 | ) | $ | 13.37 | ||||
|
|
|
|
|
|||||
| Nonvested at December 31, 2020 |
4,130 | $ | 14.63 | |||||
|
|
|
|
|
|||||
At December 31, 2020, there was $40,958 of total unrecognized compensation cost related to nonvested restricted shares granted under the Equity Plan. The cost is expected to be recognized over a weighted average period of 1.8 years. The total fair value of shares vested during the years ended December 31, 2020 and 2019 was $320,691 and $98,868.
Stock Options
The Equity Plan permits the grant of stock options to its employees and non-employee directors for up to 15% of the total number of shares of Company common stock issued and outstanding, up to 1,500,000 shares. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at
F-37
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 12 – STOCK-BASED COMPENSATION (Continued)
the date of grant. The market price of the Company’s common stock is the price offered under the DRIP, as determined by the Board of Directors. Those option awards generally have a vesting period of 5 years for employees and 3 years for non-employee directors and have 10-year contractual terms.
The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on an average of historical volatilities of peer financial institutions. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The fair value of options granted during the years ended December 31, 2020 and 2019 were determined using the following weighted-average assumptions as of grant date:
| 2020 | 2019 | |||||||
| Risk-free interest rate (%) |
1.70 | 2.50 | ||||||
| Expected term (years) |
7.50 | 7.50 | ||||||
| Expected stock price volatility (%) |
23.72 | 25.21 | ||||||
| Dividend yield (%) |
1.40 | 1.40 | ||||||
A summary of the activity in the Equity Plan for the year ended December 31, 2020 follows:
| Shares | Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (in years) |
Aggregate Intrinsic Value |
|||||||||||||
| Outstanding at January 1, 2020 |
257,220 | $ | 16.17 | |||||||||||||
| Granted |
121,418 | 15.67 | ||||||||||||||
| Exercised |
— | — | ||||||||||||||
| Forfeited |
(41,535 | ) | 15.93 | |||||||||||||
| Expired |
(4,395 | ) | 16.24 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Outstanding at December 31, 2020 |
332,708 | $ | 16.01 | 8.08 | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Vested and exercisable at December 31, 2020 |
94,865 | $ | 16.55 | 7.69 | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The weighted average fair value of options granted was $3.71 and $3.97 for 2020 and 2019. Total unrecognized compensation cost related to nonvested stock options granted under the Equity Plan was $646,626 at December 31, 2020. This cost is expected to be recognized over a weighted-average period of 2.70 years.
NOTE 13 – OTHER BENEFIT PLANS
The Company has established a stock dividend reinvestment and other stock purchase plan. Under the DRIP, eligible shareholders can voluntarily purchase stock with their dividend or can make additional stock purchases with a minimum purchase of $250 and a maximum purchase of $75,000 per quarter per shareholder. During the year ended December 31, 2020, 37,737 shares were purchased at an average price of $14.67 per share. During the year ended December 31, 2019, 39,977 shares were purchased at an average price of $16.03 per share.
F-38
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 13 – OTHER BENEFIT PLANS (Continued)
The Company adopted an Employee Stock Purchase Plan for all employees in 2015. During 2020, the ESPP was amended and restated in its entirety and was renamed the Non-Qualified Stock Purchase Plan. All employees and Directors are eligible to participate in the NSPP. Employees may purchase available shares of common stock with post-tax dollars as of the grant date at a 10% discount to the price of shares offered under the DRIP, as determined by the Board of Directors, with a minimum deduction of $20 and a maximum deduction of 10% of employees’ income. Directors may purchase available shares of common stock with post-tax dollars as of the grant date at the price of shares offered under the DRIP, with no minimum deduction and a maximum deduction of the Directors’ board fees. Expense recognized in relation to the NSPP was $43,405 and $34,745 for the years ended December 31, 2019 and 2020.
The Company has a Salary Continuation Agreement, (the “Agreement”), with an executive officer. In accordance with the Agreement, the executive will receive an annual benefit of $25,000 for twenty years following separation of service. If early termination occurs before December 31, 2022, the executive will not receive any benefit under the Agreement. The liability recorded for the Agreement was $241,422 and $159,333 at December 31, 2020 and 2019, and the related expense was $82,089 and $56,700 for the years ended December 31, 2020 and 2019.
The Company has a 401(k) plan that covers substantially all employees subject to certain age and service requirements. The Company contributes 3% of each employee’s salary each pay period as a safe harbor contribution. The Company may also match employee contributions each year at the discretion of the Board of Directors. Expense recognized in relation to the 401(k) plan was $1,978,488 and $1,045,835 for the years ended December 31, 2020 and 2019.
In December 2018, the Company approved an Employee Stock Ownership Plan for eligible employees as of January 1, 2018. Each year, the Company’s Board of Directors approves a discretionary percentage of employees’ salaries to be contributed to the ESOP for eligible employees. For 2020 and 2019, 2% of salaries for eligible employees was approved for contribution. Expense related to the ESOP was $395,161 and $273,214 for the years ended December 31, 2020 and 2019. During the years ended December 31, 2020 and 2019, $259,767 and $222,175 was contributed to the ESOP. The amount expected to be contributed to the ESOP during the year ended December 31, 2021 is $395,161. The Company has contributed 32,700 common shares to the ESOP since its approval in December 2018.
NOTE 14 – RELATED PARTY TRANSACTIONS
Loans to principal officers, directors, and their affiliates during 2020 were as follows:
| 2020 | ||||
| Balance at December 31, 2019 |
$ | 6,703,846 | ||
| New Loans |
3,693,047 | |||
| Repayments |
(369,266 | ) | ||
|
|
|
|||
| Balance at December 31, 2020 |
$ | 10,027,627 | ||
|
|
|
|||
Deposits from principal officers, directors, and their affiliates at December 31, 2020 and 2019 were $5,773,839 and $8,989,794.
F-39
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 14 – RELATED PARTY TRANSACTIONS (Continued)
The Company leases two floors of an office building from a related party of the Company. Rent payments related to these leases amounted to $408,961 and $394,394 for the years ended December 31, 2020 and 2019.
The Company entered into transactions during the normal course of business with an insurance agency that is a related party of the Company. Payments to the insurance agency amounted to $426,666 and $136,054 for the years ended December 31, 2020 and 2019.
NOTE 15 – REGULATORY MATTERS
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by
regulators. Failure to meet capital requirements can initiate regulatory action. Management believes that the Bank met all capital adequacy requirements to which it was subject at December 31, 2020.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2020 and 2019, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.
F-40
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 15 – REGULATORY MATTERS (Continued)
Actual and required capital amounts (dollars in thousands) and ratios for the Bank are presented below at December 31, 2020 and 2019:
| Actual | Required
for Capital |
To be Well Capitalized Under Prompt Corrective Action Regulations |
||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| At December 31, 2020 |
||||||||||||||||||||||||
| Total Capital |
||||||||||||||||||||||||
| (to Risk Weighted Assets) |
$ | 78,824 | 17.02 | % | 37,056 | 8.00 | % | 48,636 | 10.50 | % | ||||||||||||||
| Tier I Capital |
||||||||||||||||||||||||
| (to Risk Weighted Assets) |
$ | 72,825 | 15.72 | % | 27,792 | 6.00 | % | 37,056 | 8.00 | % | ||||||||||||||
| Common Equity Tier I Capital |
||||||||||||||||||||||||
| (to Risk Weighted Assets) |
$ | 72,825 | 15.72 | % | 20,844 | 4.50 | % | 30,108 | 6.50 | % | ||||||||||||||
| Tier I Capital |
||||||||||||||||||||||||
| (to Average Assets) |
$ | 72,825 | 11.75 | % | 24,799 | 4.00 | % | 30,998 | 5.00 | % | ||||||||||||||
| At December 31, 2019: |
||||||||||||||||||||||||
| Total Capital |
||||||||||||||||||||||||
| (to Risk Weighted Assets) |
$ | 57,548 | 17.84 | % | $ | 25,804 | 8.00 | % | $ | 33,868 | 10.50 | % | ||||||||||||
| Tier I Capital |
||||||||||||||||||||||||
| (to Risk Weighted Assets) |
$ | 52,446 | 16.26 | % | $ | 19,353 | 6.00 | % | $ | 25,804 | 8.00 | % | ||||||||||||
| Common Equity Tier I Capital |
||||||||||||||||||||||||
| (to Risk Weighted Assets) |
$ | 52,446 | 16.26 | % | $ | 14,515 | 4.50 | % | $ | 20,966 | 6.50 | % | ||||||||||||
| Tier I Capital |
||||||||||||||||||||||||
| (to Average Assets) |
$ | 52,446 | 10.49 | % | $ | 19,994 | 4.00 | % | $ | 24,992 | 5.00 | % | ||||||||||||
Dividend Restrictions
Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits of the Bank for that year combined with the retained net profits for the preceding two years. In 2020, the Bank may declare dividends without regulatory approval of $18,035,398 plus an additional amount equal to net profits of the Bank for 2021 up to the date of any such dividend declaration.
F-41
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 16 – MORTGAGE BANKING ACTIVITIES
The following table presents the components of residential loan fee income for the years ended December 31, 2020 and 2019:
| 2020 | 2019 | |||||||
| Net gain realized on sale of residential loans held for sale |
$ | 88,335,647 | $ | 28,527,955 | ||||
| Net change in fair value recognized on residential loans held for sale |
6,049,421 | 1,690,632 | ||||||
| Net change in fair value recognized on interest rate lock commitments |
6,536,025 | 440,925 | ||||||
| Net change in fair value recognized on mandatory forward contracts |
(16,939,784 | ) | (2,432,984 | ) | ||||
| Mortgage banking fees |
8,696,580 | 3,049,369 | ||||||
|
|
|
|
|
|||||
| Residential loan fee income |
$ | 92,677,889 | $ | 31,275,897 | ||||
|
|
|
|
|
|||||
As part of its mortgage banking activities, the Company enters into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the clients have locked into that interest rate. The Company then locks in the loan and interest rate with an investor and commits to deliver the loan if settlement occurs (“best efforts”) or commits to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. Interest rate lock commitments and mandatory commitments to deliver loans to investors are considered derivatives.
At December 31, 2020 and 2019, the Company had $398,722,221 and $71,623,059 of interest rate lock commitments, $514,000,000 and $121,000,000 of mandatory forward sales contracts, and $19,802,998 and $3,995,295 of best efforts forward sales contracts. The fair value of these mortgage banking derivatives was reflected by a total derivative asset of $7,620,989 and $1,107,609 and a total derivative liability of $4,467,087 and $282,250 at December 31, 2020 and 2019, respectively. Fair values were estimated based on changes in mortgage interest rates from the date of the commitments. Changes in the fair values of these mortgage banking derivatives are included in mortgage banking income in the Consolidated Statements of Income.
The net gains (losses) relating to free-standing derivative instruments used for risk management at December 31, 2020 and 2019 are summarized below:
| 2020 | 2019 | |||||||
| Mandatory forward contracts |
$ | (4,454,766 | ) | $ | (264,961 | ) | ||
| Best efforts forward contracts |
55,183 | 17,972 | ||||||
| Interest rate lock commitments |
7,553,485 | 1,072,348 | ||||||
F-42
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 16 – MORTGAGE BANKING ACTIVITIES (Continued)
The following table reflects the amount and fair value of mortgage banking derivatives included in the Consolidated Balance Sheets at December 31, 2020 and 2019:
| 2020 | 2019 | |||||||||||||||
| Notional Amount | Fair Value | Notional Amount | Fair Value | |||||||||||||
| Included in other assets: |
||||||||||||||||
| Interest rate lock commitments |
$ | 390,676,072 | $ | 7,565,806 | $ | 68,611,844 | $ | 1,080,496 | ||||||||
| Mandatory forward contracts |
— | — | 12,000,000 | 9,141 | ||||||||||||
| Best efforts forward contracts |
19,802,998 | 55,183 | 3,995,295 | 17,972 | ||||||||||||
| Included in other liabilities: |
||||||||||||||||
| Interest rate lock commitments |
8,046,149 | 12,321 | 3,011,215 | 8,148 | ||||||||||||
| Mandatory forward contracts |
514,000,000 | 4,454,766 | 109,000,000 | 274,102 | ||||||||||||
NOTE 17 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies that are used for loans are used to make such commitments, including obtaining collateral at exercise of the commitment.
The contractual amounts of financial instruments with off-balance sheet risk at December 31, 2020 and 2019 were as follows:
| 2020 | 2019 | |||||||
| Unfunded loan commitments |
$ | 34,867,300 | $ | 37,714,839 | ||||
| Unused lines of credit |
34,063,309 | 12,610,810 | ||||||
| Standby letters of credit |
68,040 | 193,108 | ||||||
All unused lines of credit at December 31, 2020 and 2019 were variable rate lines of credit and the majority of unfunded loan commitments at December 31, 2020 and 2019 were commitments to fund variable rate loans. Unfunded loan commitments are generally entered into for periods of 90 days or less.
F-43
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 18 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed financial information of First Home Bancorp, Inc. follows:
CONDENSED BALANCE SHEETS
| At December 31, | ||||||||
| 2020 | 2019 | |||||||
| Assets: |
||||||||
| Cash on deposit with subsidiary |
$ | 2,437,527 | $ | 1,776,139 | ||||
| Loans held for investment, at amortized cost |
63,262 | 71,787 | ||||||
| Investment in subsidiary |
78,409,941 | 60,095,411 | ||||||
| Other assets |
53,318 | 44,725 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 80,964,048 | $ | 61,988,062 | ||||
|
|
|
|
|
|||||
| Liabilities: |
||||||||
| Subordinated debentures |
$ | 5,947,900 | $ | 6,434,838 | ||||
| Notes payable |
3,754,465 | 4,095,696 | ||||||
| Accrued interest payable |
8,296 | 24,850 | ||||||
| Accrued expenses and other liabilities |
184,486 | 101,015 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
9,895,147 | 10,656,399 | ||||||
|
|
|
|
|
|||||
| Stockholders’ equity: |
||||||||
| Preferred stock, Series A; 10,000 shares authorized 6,395 and 7,895 shares issued and outstanding; aggregate liquidation preference of $6,395,000 and $7,895,000 |
6,161,000 | 7,661,000 | ||||||
| Preferred stock, Series B; 20,000 shares authorized, 8,760 and 0 shares issued and outstanding; aggregate liquidation preference of $8,760,000 and $0 |
8,516,114 | — | ||||||
| Common stock and additional paid-in capital; 15,000,000 shares authorized, 3,485,018 and 3,393,788 shares issued and outstanding |
43,043,215 | 41,362,038 | ||||||
| Unearned compensation |
(40,958 | ) | (156,116 | ) | ||||
| Retained earnings |
13,389,530 | 2,464,741 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
71,068,901 | 51,331,663 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 80,964,048 | $ | 61,988,062 | ||||
|
|
|
|
|
|||||
F-44
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 18 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF INCOME
| Years ended December 31 | ||||||||
| 2020 | 2019 | |||||||
| Expense: |
||||||||
| Interest expense |
$ | 596,384 | $ | 700,687 | ||||
| Provision for loan losses |
— | 19,230 | ||||||
| Write-down of Other Real Estate Owned |
— | 54,976 | ||||||
| Other expenses |
397,393 | 526,694 | ||||||
|
|
|
|
|
|||||
| Total expense |
993,777 | 1,301,587 | ||||||
| Loss before taxes and equity in earnings of subsidiary |
(993,777 | ) | (1,301,587 | ) | ||||
| Income tax benefits |
(298,449 | ) | (319,173 | ) | ||||
|
|
|
|
|
|||||
| Loss before equity in earnings of subsidiary |
(695,328 | ) | (982,414 | ) | ||||
| Equity in undistributed earnings of subsidiary |
13,398,410 | 5,466,628 | ||||||
|
|
|
|
|
|||||
| Net income |
$ | 12,703,082 | $ | 4,484,214 | ||||
|
|
|
|
|
|||||
F-45
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 18 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
| Years ended December 31 | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 12,703,082 | $ | 4,484,214 | ||||
| Adjustments to reconcile net income to net cash from operating activities - |
||||||||
| Equity in earnings from subsidiary |
(13,398,410 | ) | (5,466,628 | ) | ||||
| Amortization of debt issuance costs |
13,289 | 7,786 | ||||||
| Provision for loan losses |
— | 19,230 | ||||||
| Stock based compensation expense |
24,000 | 140,681 | ||||||
| Write-down of Other Real Estate Owned |
— | 54,976 | ||||||
| Change in other assets |
(8,593 | ) | (3,585 | ) | ||||
| Change in other liabilities |
66,917 | 1,833 | ||||||
|
|
|
|
|
|||||
| Net cash from operating activities |
(599,715 | ) | (761,493 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Contributions to subsidiary |
(4,500,000 | ) | (8,650,000 | ) | ||||
| Proceeds from sale of Other Real Estate Owned |
— | 537,224 | ||||||
| Loan origination and payments, net |
8,525 | 236,325 | ||||||
|
|
|
|
|
|||||
| Net cash from investing activities |
(4,491,475 | ) | (7,876,451 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of notes payble |
— | 1,210,000 | ||||||
| Payments on notes payable |
(341,456 | ) | (938,342 | ) | ||||
| Proceeds from issuance of preferred stock, net |
6,516,114 | 4,595,000 | ||||||
| Proceeds from sale of common stock, net |
1,096,446 | 5,168,654 | ||||||
| ESOP contribution |
259,767 | 222,175 | ||||||
| Dividends paid on common stock |
(915,011 | ) | (847,752 | ) | ||||
| Dividends paid on preferred stock |
(863,282 | ) | (462,903 | ) | ||||
|
|
|
|
|
|||||
| Net cash from financing activities |
5,752,578 | 8,946,832 | ||||||
|
|
|
|
|
|||||
| Net change in cash |
661,388 | 308,888 | ||||||
| Cash at beginning of year |
1,776,139 | 1,467,251 | ||||||
|
|
|
|
|
|||||
| Cash at end of year |
$ | 2,437,527 | $ | 1,776,139 | ||||
|
|
|
|
|
|||||
| Supplemental noncash disclosure |
||||||||
| Conversion of subordinated debt to preferred stock, Series B |
$ | 500,000 | $ | — | ||||
F-46
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 19 – EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2020 and 2019:
| 2020 | 2019 | |||||||
| Basic |
||||||||
| Net income |
$ | 12,703,082 | $ | 4,484,214 | ||||
| Less: Preferred stock dividends |
(863,282 | ) | (462,903 | ) | ||||
|
|
|
|
|
|||||
| Net income available to common shareholders |
$ | 11,839,800 | $ | 4,021,311 | ||||
|
|
|
|
|
|||||
| Weighted average common shares outstanding |
3,430,716 | 3,171,061 | ||||||
|
|
|
|
|
|||||
| Basic earnings per common share |
$ | 3.45 | $ | 1.27 | ||||
|
|
|
|
|
|||||
| Diluted: |
||||||||
| Net income |
$ | 12,703,082 | $ | 4,484,214 | ||||
| Less: Preferred stock dividends |
(863,282 | ) | (462,903 | ) | ||||
| Add: Series B preferred stock dividends |
186,480 | — | ||||||
|
|
|
|
|
|||||
| Net income available to common shareholders |
12,026,280 | 4,021,311 | ||||||
|
|
|
|
|
|||||
| Weighted average common shares outstanding for basic earnings per common share |
3,430,716 | 3,171,061 | ||||||
| Add: Dilutive effects of conversion of Series B preferred stock to common stock |
570,607 | — | ||||||
| Add: Dilutive effects of assumed exercises of stock options |
— | 1,125 | ||||||
|
|
|
|
|
|||||
| Average shares and dilutive potential common shares |
4,001,323 | 3,172,186 | ||||||
|
|
|
|
|
|||||
| Diluted earnings per common share |
$ | 3.01 | $ | 1.27 | ||||
|
|
|
|
|
|||||
Stock options for 94,865 and 43,230 shares of common stock were not considered in computing diluted earnings per common share for the years ended December 31, 2020 and 2019 because they were antidilutive.
NOTE 20 – OPERATING SEGMENTS
The Company has two reportable segments: Banking and Residential Mortgage Lending. The Banking segment provides a variety of traditional community banking services through its full-service banking centers located in St. Petersburg, Seminole, Pinellas Park, Clearwater, Sarasota, and Tampa, Florida, as well as SBA lending services throughout the nation. The Residential Mortgage Lending segment originates residential mortgage loans primarily for sale in the secondary market with offices throughout the nation. Loans and deposits provide the revenues in the Banking segment and loan sales provide the revenues in the Residential Lending segment.
F-47
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 20 – OPERATING SEGMENTS (Continued)
Segment profit and loss is measured by net income after income tax. Inter-segment transactions are recorded at cost and eliminated as part of the consolidation process. Due to the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.
Information about reportable segments and reconciliation of such information to the Consolidated Financial Statements follows (dollars in thousands):
| 2020 | ||||||||||||
| Residential Mortgage |
Banking | Consolidated | ||||||||||
| Interest income |
$ | 2,684 | $ | 41,046 | $ | 43,730 | ||||||
| Interest expense |
1,914 | 8,364 | 10,278 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net interest income |
770 | 32,682 | 33,452 | |||||||||
| Provision for loan losses |
— | 16,900 | 16,900 | |||||||||
| Residential loan fee income |
92,678 | — | 92,678 | |||||||||
| Internal transfer for portfolio loans originated |
35 | (35 | ) | — | ||||||||
| Other non-interest income |
64 | 4,953 | 5,017 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total non-interest income |
92,777 | 4,918 | 97,695 | |||||||||
| Total non-interest expense |
65,229 | 33,240 | 98,469 | |||||||||
|
|
|
|
|
|
|
|||||||
| Income before income tax expense |
28,318 | (12,540 | ) | 15,778 | ||||||||
| Income tax expense |
7,929 | (4,854 | ) | 3,075 | ||||||||
|
|
|
|
|
|
|
|||||||
| Net income |
$ | 20,389 | $ | (7,686 | ) | $ | 12,703 | |||||
|
|
|
|
|
|
|
|||||||
| Period-end assets |
217,422 | 1,327,269 | 1,544,691 | |||||||||
F-48
Table of Contents
FIRST HOME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 20 – OPERATING SEGMENTS (Continued)
| 2019 | ||||||||||||
| Residential Mortgage |
Banking | Consolidated | ||||||||||
| Interest income |
$ | 1,758 | $ | 23,943 | $ | 25,701 | ||||||
| Interest expense |
1,231 | 7,036 | 8,267 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net interest income |
527 | 16,907 | 17,434 | |||||||||
| Provision for loan losses |
— | 8,869 | 8,869 | |||||||||
| Residential loan fee income |
31,276 | — | 31,276 | |||||||||
| Internal transfer for portfolio loans originated |
172 | (172 | ) | — | ||||||||
| Other non-interest income |
8 | 21,840 | 21,848 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total non-interest income |
31,456 | 21,668 | 53,124 | |||||||||
| Total non-interest expense |
30,468 | 24,924 | 55,392 | |||||||||
|
|
|
|
|
|
|
|||||||
| Income before income tax expense |
1,515 | 4,782 | 6,297 | |||||||||
| Income tax expense |
437 | 1,376 | 1,813 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net income |
$ | 1,078 | $ | 3,406 | $ | 4,484 | ||||||
|
|
|
|
|
|
|
|||||||
| Period-end assets |
$ | 78,823 | $ | 452,417 | $ | 531,240 | ||||||
NOTE 21 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through May 10, 2021, which is the date the financial statements were available to be issued.
The shareholders of First Home Bancorp, Inc., by written consent to action, approved the change of the Company’s name to BayFirst Financial Corp. effective April 28, 2021. The name of the Company’s banking subsidiary will remain as First Home Bank.
During 2021, through April 30, 2021, 4,420 shares of Series B preferred stock were converted to 276,020 shares of common stock.
Effective May 10, 2021, the Company effected a three-for-two stock split. All share amounts and per share financial data contained in these financial statements have been adjusted to reflect this split.
F-49
Table of Contents
Table of Contents
FIRST HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 31, 2020
ASSETS
| Bank | Holding Company |
Eliminations | Consolidated | |||||||||||||
| Assets: |
||||||||||||||||
| Cash and due from banks |
$ | 2,789,933 | $ | 2,437,527 | $ | (2,437,527 | ) | $ | 2,789,933 | |||||||
| Interest-bearing deposits in banks |
52,588,765 | 52,588,765 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cash and cash equivalents |
55,378,698 | 2,437,527 | (2,437,527 | ) | 55,378,698 | |||||||||||
| Time deposits in banks |
2,381,000 | 2,381,000 | ||||||||||||||
| Securities held to maturity |
41,286 | 41,286 | ||||||||||||||
| Restricted equity securities, at cost |
2,361,900 | 2,361,900 | ||||||||||||||
| Residential loans held for sale |
208,704,152 | 208,704,152 | ||||||||||||||
| SBA loans held for sale |
— | — | ||||||||||||||
| SBA loans held for investment, at fair value |
9,263,750 | 9,263,750 | ||||||||||||||
| PPP loans |
825,802,040 | 825,802,040 | ||||||||||||||
| Loans held for investment, at amortized cost |
393,193,205 | 63,262 | 393,256,467 | |||||||||||||
| Allowance for loan losses |
(21,162,339 | ) | — | — | (21,162,339 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loans, net |
1,197,832,906 | 63,262 | — | 1,197,896,168 | ||||||||||||
| Accrued interest receivable |
7,299,759 | 7,299,759 | ||||||||||||||
| Premises and equipment, net |
18,114,600 | 18,114,600 | ||||||||||||||
| SBA loan servicing rights |
8,159,501 | 8,159,501 | ||||||||||||||
| Investment in subsidiary |
— | 78,409,941 | (78,409,941 | ) | — | |||||||||||
| Deferred income taxes |
3,807,979 | 3,807,979 | ||||||||||||||
| Right-of-use operating lease assets |
3,737,265 | 3,737,265 | ||||||||||||||
| Bank Owned Life Insurance |
12,183,448 | 12,183,448 | ||||||||||||||
| Other assets |
15,307,952 | 53,318 | 15,361,270 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Assets |
$ | 1,544,574,196 | $ | 80,964,048 | $ | (80,847,468 | ) | $ | 1,544,690,776 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
| Liabilities: |
||||||||||||||||
| Noninterest-bearing transaction accounts |
$ | 65,087,863 | $ | — | $ | (2,437,527 | ) | $ | 62,650,336 | |||||||
| Interest-bearing transaction accounts |
140,265,079 | 140,265,079 | ||||||||||||||
| Savings and money market deposits |
286,743,776 | 286,743,776 | ||||||||||||||
| Time deposits |
69,125,349 | 69,125,349 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total deposits |
561,222,067 | — | (2,437,527 | ) | 558,784,540 | |||||||||||
| Federal Home Loan Bank advances |
— | — | ||||||||||||||
| Subordinated debentures |
— | 5,947,900 | 5,947,900 | |||||||||||||
| Notes payable |
— | 3,754,465 | 3,754,465 | |||||||||||||
| PPP Liquidity Facility |
881,261,659 | 881,261,659 | ||||||||||||||
| Accrued interest payable |
1,990,361 | 8,296 | 1,998,657 | |||||||||||||
| Lease liability |
3,925,115 | 3,925,115 | ||||||||||||||
| Accrued expenses and other liabilities |
17,765,053 | 184,486 | 17,949,539 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
1,466,164,255 | 9,895,147 | (2,437,527 | ) | 1,473,621,875 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Stockholders’ Equity: |
||||||||||||||||
| Preferred stock, Series A; 1,000,000 shares authorized, 6,395 and 7,895 shares issued and outstanding; aggregate liquidation preference of $6,395,000 and $7,895,000 |
— | 6,161,000 | — | 6,161,000 | ||||||||||||
| Preferred stock, Series B; 1,000,000 shares authorized, 8,760 and 0 shares issued and outstanding; aggregate liquidation preference of $8,760,000 and $0 |
— | 8,516,114 | — | 8,516,114 | ||||||||||||
| Common stock and additional paid-in capital; 15,000,000 shares authorized, 3,485,018 and 3,393,788 shares issued and outstanding |
57,497,426 | 43,043,215 | (57,497,426 | ) | 43,043,215 | |||||||||||
| Unearned compensation |
— | (40,958 | ) | — | (40,958 | ) | ||||||||||
| Retained earnings |
20,912,515 | 13,389,530 | (20,912,515 | ) | 13,389,530 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total stockholders’ equity |
78,409,941 | 71,068,901 | (78,409,941 | ) | 71,068,901 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,544,574,196 | $ | 80,964,048 | $ | (80,847,468 | ) | $ | 1,544,690,776 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See independent auditors’ report on supplementary information.
F-51
Table of Contents
FIRST HOME BANCORP, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2020
| Bank | Holding Company |
Eliminations | Consolidated | |||||||||||||
| Interest Income: |
||||||||||||||||
| Loans, other than PPP |
$ | 23,985,726 | $ | — | $ | — | $ | 23,985,726 | ||||||||
| PPP loan interest income |
5,684,938 | — | — | 5,684,938 | ||||||||||||
| PPP origination fee income |
13,419,106 | — | — | 13,419,106 | ||||||||||||
| Interest-bearing deposits in banks and other |
640,715 | — | — | 640,715 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest income |
43,730,485 | — | — | 43,730,485 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Interest Expense: |
||||||||||||||||
| Deposits |
7,490,180 | — | — | 7,490,180 | ||||||||||||
| PPPLF borrowings |
1,968,407 | — | — | 1,968,407 | ||||||||||||
| Other |
223,337 | 596,384 | — | 819,721 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest expense |
9,681,924 | 596,384 | — | 10,278,308 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net interest income |
34,048,561 | (596,384 | ) | — | 33,452,177 | |||||||||||
| Provision for Loan Losses |
16,900,000 | — | — | 16,900,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net interest income after provision for loan losses |
17,148,561 | (596,384 | ) | — | 16,552,177 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Non-interest Income: |
||||||||||||||||
| Equity in earnings of subsidiary |
— | 13,398,410 | (13,398,410 | ) | — | |||||||||||
| Service charges and fees |
932,729 | — | — | 932,729 | ||||||||||||
| Bank Owned Life Insurance income |
183,448 | — | — | 183,448 | ||||||||||||
| Residential loan fee income |
92,677,889 | — | — | 92,677,889 | ||||||||||||
| Gain on sale of SBA loans |
1,192,114 | — | — | 1,192,114 | ||||||||||||
| SBA loan servicing right gain |
530,000 | — | — | 530,000 | ||||||||||||
| Loss on sale of unguaranteed loan amounts |
(70,000 | ) | — | — | (70,000 | ) | ||||||||||
| SBA servicing income, net |
2,023,771 | — | — | 2,023,771 | ||||||||||||
| Other SBA non-interest income |
225,317 | — | — | 225,317 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total non-interest income |
97,695,268 | 13,398,410 | (13,398,410 | ) | 97,695,268 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Non-interest Expense: |
||||||||||||||||
| Salaries and benefits |
36,204,899 | 198,000 | — | 36,402,899 | ||||||||||||
| Bonus, commissions, and incentives |
34,071,608 | — | — | 34,071,608 | ||||||||||||
| Occupancy and equipment |
4,453,112 | — | — | 4,453,112 | ||||||||||||
| Data processing |
4,418,398 | — | — | 4,418,398 | ||||||||||||
| Professional services |
3,430,301 | 102,344 | — | 3,532,645 | ||||||||||||
| Marketing and business development |
3,543,251 | 10,060 | — | 3,553,311 | ||||||||||||
| Mortgage banking expense |
5,292,614 | — | — | 5,292,614 | ||||||||||||
| Regulatory assessments |
443,927 | — | — | 443,927 | ||||||||||||
| Employee recruiting and development |
1,768,698 | — | — | 1,768,698 | ||||||||||||
| Loan origination and collection |
2,039,406 | 100 | — | 2,039,506 | ||||||||||||
| Other expenses |
2,405,875 | 86,889 | — | 2,492,764 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total non-interest expense |
98,072,089 | 397,393 | — | 98,469,482 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income Before Taxes |
16,771,740 | 12,404,633 | (13,398,410 | ) | 15,777,963 | |||||||||||
| Income tax expense (benefit) |
3,373,330 | (298,449 | ) | — | 3,074,881 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Income |
$ | 13,398,410 | $ | 12,703,082 | $ | (13,398,410 | ) | $ | 12,703,082 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See independent auditors’ report on supplementary information.
F-52
Table of Contents
[ ], 2021
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| ITEM 13. OTHER | EXPENSES OF ISSUANCE AND DISTRIBUTION. |
The following table sets forth all expenses to be paid by us in connection with this registration statement and the listing of our common stock. All amounts shown are estimates except for the SEC registration fee and the listing fee.
| SEC registration fee ($109.10 per million) |
$ | 11,497 | ||
| Nasdaq listing fee |
50,000 | |||
| Printing fees and expenses |
60,000 | |||
| Legal fees and expenses |
150,000 | |||
| Accounting fees and expenses |
40,000 | |||
| Custodian, transfer agent, and registrar fees |
10,000 | |||
| Other advisors’ fees |
20,000 | |||
| Miscellaneous |
25,000 | |||
|
|
|
|||
| Total |
$ | 366,497 | ||
|
|
|
| ITEM 14. INDEMNIFICATION | OF DIRECTORS AND OFFICERS. |
Under Florida law, a corporation may indemnify its directors and officers against liability if the director or officer acted in good faith and with a reasonable belief that his actions were in the best interests of the corporation, or at least not adverse to the corporation’s best interests, and, in a criminal proceeding, if the individual had no reasonable cause to believe that the conduct in question was unlawful. Under Florida law, a corporation may not indemnify an officer or director against liability in connection with a claim by or in the right of the corporation in which such officer or director was adjudged liable to the corporation or in connection with any other proceeding in which the officer or director was adjudged liable for receiving an improper personal benefit. However, a corporation may indemnify against the reasonable expenses associated with such proceeding. A corporation may not indemnify against breaches of the duty of loyalty. Florida law provides for mandatory indemnification against all reasonable expenses incurred in the successful defense of any claim made or threatened, regardless of whether such claim was by or in the right of the corporation, unless limited by the corporation’s Articles of Incorporation. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, regardless of whether the director or officer met the good faith and reasonable belief standards of conduct set out in the statute. Unless otherwise stated in the articles of incorporation, officers of a corporation are also entitled to the benefit of the above statutory provisions.
Consistent with Florida law, both the Company’s and the Bank’s Bylaws provide for the indemnification of our directors or officers to the fullest extent permitted by applicable law.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors and officers, or to persons controlling us, pursuant to our Bylaws or Florida law, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
II-1
Table of Contents
| ITEM 15. RECENT | SALES OF UNREGISTERED SECURITIES. |
Since January 1, 2019, we sold the following unregistered securities:
Common Stock
| Date |
Number of Shares |
Proceeds | Sales |
Commissions | Class of |
Exemption Claimed | ||||||||||
| 2019 | 172,784 | * | $ | 4,533,428 | Skyway Capital Markets, LLC | $133,482 | Accredited investors and QIBs | Rule 506(b) and Section 4(a)(2) | ||||||||
| 2021 | 34,365 | 702,228 | — | — | Accredited investors and QIBs | Rule 506(b) and Section 4(a)(2) | ||||||||||
| 2019- 2021 |
39,977 | 604,276 | None | — | DRIP Participants | Section 3(a)(11) | ||||||||||
| 2019- 2021 |
34,737 | 501,068 | None | — | ESPP Participants | Rule 701 | ||||||||||
| 2019- 2021 |
6,339 | 106,698 | None | — | ESOP Participants |
Rule 701 | ||||||||||
| (*) | Warrants to purchase 43,044 shares of common stock were issued with certain shares for no additional consideration. |
Series A Preferred Stock
| Date |
Number of Shares |
Proceeds | Sales |
Commissions | Class of |
Exemption Claimed | ||||||||||
| 2019 | 4,760 | $ | 4,760.000 | Skyway Capital Markets, LLC | $167,750 | Accredited Investors and QIBs | Rule 506(b) and Section 4(a)2 | |||||||||
Series B Convertible Preferred Stock
| Date |
Number of Shares |
Proceeds | Sales |
Commissions | Class of |
Exemption Claimed | ||||||||||
| 2020 | 6,760 | $ | 6,760,000 | Skyway Capital Markets, LLC | $130,350 | Accredited Investors and QIBs | Rule 506(b) and Section 4(a)2 | |||||||||
| 2021 | 740 | 740,000 | Skyway Capital Markets, LLC | 12,000 | Accredited Investors and QIBs | Rule 506(b) and Section 4(a)2 | ||||||||||
II-2
Table of Contents
| ITEM 16. EXHIBITS | AND FINANCIAL STATEMENT SCHEDULES. |
| (a) | Exhibits. |
| (b) | Financial Statement Schedules. |
All schedules are omitted because the required information is either not present, not present in material amounts, or is presented within the consolidated financial statements included in the prospectus that is part of this registration statement.
II-3
Table of Contents
| ITEM 17. UNDERTAKINGS. | |
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act, as amended, or the Securities Act. |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
Table of Contents
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida, on May 11, 2021.
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Anthony N. Leo and Robin L. Oliver, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the registration statement on Form S-1 of First Home Bancorp, Inc., and any or all amendments (including post-effective amendments) thereto and any new registration statement with respect to the offering contemplated thereby filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature |
Title |
Date | ||
| /s/ George Apostolou George Apostolou |
Director | May 11, 2021 | ||
| /s/ Derek S. Berset Derek S. Berset |
Director | May 11, 2021 | ||
| /s/ Mark S. Berset Mark S. Berset |
Director | May 11, 2021 | ||
| /s/ Dennis R. DeLoach, Jr. Dennis R. DeLoach, Jr. |
Director | May 11, 2021 | ||
| /s/ Dennis R. DeLoach, III Dennis R. DeLoach, III |
Director | May 11, 2021 | ||
|
Alexander Harris |
Director | May 11, 2021 | ||
| /s/ Tarek Helal Tarek Helal |
Director | May 11, 2021 | ||
| /s/ Trifon Houvardas Trifon Houvardas |
Director | May 11, 2021 | ||
| /s/ Anthony N. Leo Anthony N. Leo |
Chief Executive Officer and Director (Principal Executive Officer) |
May 11, 2021 | ||
| /s/ Robin L. Oliver Robin L. Oliver |
Chief Financial Officer (Principal Financial and Accounting Officer) |
May 11, 2021 | ||
II-5
Table of Contents
| Signature |
Title |
Date | ||
| /s/ Christos Politis, M.D. Christos Politis, M.D. |
Director | May 11, 2021 | ||
| /s/ Anthony Saravanos Anthony Saravanos |
Director | May 11, 2021 | ||
| /s/ Bradly W. Spoor Bradly W. Spoor |
Director | May 11, 2021 | ||
| /s/ Harold J. Winner Harold J. Winner |
Director | May 11, 2021 | ||
| /s/ Barbara Zipperian Barbara Zipperian |
Director | May 11, 2021 | ||
II-6
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
BAYFIRST FINANCIAL CORP.
Pursuant to Sections 607.1002, 607.1006, and 607.1007, Florida Statutes, BayFirst Financial Corp. (f/k/a First Home Bancorp, Inc.) has adopted these Amended and Restated Articles of Incorporation. The amendments contained in these Amended and Restated Articles of Incorporation did not require approval of the shareholders and were approved only by the Board of Directors on April 27, 2021. The Preferred Stock Designations of Series A Preferred Stock and Series B Convertible Preferred Stock remained unchanged.
ARTICLE I
The name of the corporation shall be BayFirst Financial Corp.
ARTICLE II
The total number of shares authorized to be issued by the corporation shall be 16,000,000. Such shares shall be divided into classes and shall have the following designations, preferences, limitations, and relative rights:
A. Common Stock. One class shall consist of 15,000,000 shares of common stock, no par value.
B. Preferred Stock. One class shall consist of 1,000,000 shares of preferred stock, no par value. The Board of Directors of the corporation shall be empowered to divide any and all shares of the preferred stock into series and to fix and determine the relative rights and preferences of the shares of any series so established in accordance with Sections 607.0602, Florida Statutes, including:
(i) the distinctive designation of such series, and the number of shares which shall constitute such series;
(ii) the rate of dividends payable on shares of such series, whether dividends shall be cumulative or non-cumulative, and conditions upon which and the date when such dividends shall be accumulated on all shares of such series issued prior to the record date for the first dividend of such series;
(iii) the time or times when and the price or prices at which shares of such series shall be redeemable at the option of the holder or of the corporation and the sinking fund provision, if any, for the purchase of redemption of such shares;
(iv) the amount payable on shares of such series in the event of any liquidation, dissolution, or winding up of the affairs of the corporation, whether all or a portion is paid before any amount is paid on the common stock;
(v) the rights, if any, of the holders of shares of such series to convert such shares into, or exchange such shares for, shares of common stock or shares of any other series of preferred stock and the terms and conditions of such conversion or exchange; and
(vi) whether the shares of such series have voting rights and the extent of such voting rights, if any.
The Board of Directors shall have the power to reclassify any unissued shares of any series of preferred stock from time to time by setting or changing the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption, including but not limited to, but subject to the limitations described in, the above provisions.
IN WITNESS WHEREOF, the undersigned duly authorized officer of BayFirst Financial Corp. executed these Amended and Restated Articles of Incorporation as of this 22nd day of April, 2021.
| BAYFIRST FINANCIAL CORP. |
| /s/ Anthony N. Leo |
| Anthony N. Leo |
| Chief Executive Officer |
CERTIFICATE OF THE DESIGNATION,
PREFERENCES, RIGHTS, AND LIMITATIONS OF
SERIES A PREFERRED STOCK
The undersigned Chief Executive Officer of First Home Bancorp, Inc., a corporation organized and in active status under the laws of the State of Florida, does hereby certify that the Board of Directors of the Corporation, in accordance with the Articles of Incorporation and Bylaws of the Corporation and Section 607.0602, Florida Statutes, adopted a resolution on October 1, 2018, creating a series of ten thousand (10,000) shares of preferred stock of the Corporation designated as “Series A Preferred Stock,” with the following relative preferences, rights, and limitations. These Articles of Amendment were adopted by the Board of Directors of the Corporation and shareholder approval was not required.
As used herein, capitalized terms not otherwise defined herein shall have the meanings provided in Section 9 hereof.
SECTION 1. NUMBER OF SHARES; RANKING.
(a) The number of authorized Series A Preferred Shares is ten thousand (10,000) shares. No fractional Series A Preferred Shares shall be issued.
(b) Any Series A Preferred Shares which at any time have been redeemed or purchased by the Corporation shall, after redemption or purchase, be returned to the status of authorized but undesignated and unissued Preferred Shares, until reclassified by the Board of Directors.
(c) The Series A Preferred Shares shall rank on a parity with shares of any other series of Preferred Shares as to the payment of dividends to which the shares are entitled and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation, unless the terms of such other Preferred Shares provide otherwise.
(d) No holder of Series A Preferred Shares shall have, solely by reason of being a holder, any preemptive right, or, unless otherwise determined by the Board of Directors, other right to acquire, purchase or subscribe for any Preferred Shares, Common Stock or other securities of the Corporation which it may hereafter issue or sell.
SECTION 2. DIVIDENDS.
(a) The holders of Series A Preferred Shares shall be entitled to receive quarterly cumulative cash dividends, when, as and if authorized by the Board of Directors and declared by the Corporation, out of funds legally available therefor, at the rate per annum equal to the Applicable Rate (or the Default Rate), and no more, payable on the respective dates determined as set forth in paragraph (b) of this Section 2. Dividends on Outstanding Series A Preferred Shares shall accumulate from the Original Issue Date.
(b) (i) Dividends on the Series A Preferred Shares shall be payable quarterly when, as and if authorized by the Board of Directors and declared by the Corporation beginning on the first Dividend Payment Date following the Original Issue Date and with respect to any Dividend Period thereafter on the Dividend Payment Date.
(ii) Each dividend on Series A Preferred Shares shall be paid on the Dividend Payment Date therefor to the holders as their names appear on the share ledger or share records of the Corporation at the close of business on the fifteenth (15th) day of the Dividend Period relating to such Dividend Payment Date (or if such day is not a Business Day, the next preceding Business Day). Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the holders as their names appear on the share ledger or share records of the Corporation on a date, not exceeding fifteen (15) days preceding the payment date thereof, as may be fixed by the Board of Directors. No interest will be payable in respect of any dividend payment or payments which may be in arrears.
(c) (i) A “Default Period” will commence on the day following the Term Redemption Date, if the full amount of any redemption price payable with respect to any redemption required hereunder shall not have been paid to the holders. A Default Period shall end on the Business Day on which, by 12:00 noon, New York City time, any unpaid redemption price shall have been paid to the holder. For each day during the Default Period, Applicable Rate shall be increased to the Default Rate.
(ii) The amount of dividends per share payable on each Dividend Payment Date of each Dividend Period shall be computed by multiplying the Applicable Rate (or the Default Rate) for such Dividend Period by a fraction, the numerator of which shall be ninety (90) and the denominator of which shall be three hundred sixty (360), multiplying the amount so obtained by the Series A Preferred Shares Liquidation Preference Amount, and rounding the amount so obtained to the nearest cent. Dividends payable on any Series A Preferred Shares for any period of less than a full quarterly Dividend Period, including in connection with the first Dividend Period or upon any redemption of such shares on any date other than on a Dividend Payment Date, shall be computed by multiplying the Applicable Rate (or the Default Rate) for such period by a fraction, the numerator of which shall be the actual number of days in such period and the denominator of which shall be three hundred sixty (360), multiplying the amount so obtained by the Series A Preferred Shares Liquidation Preference Amount, and rounding the amount so obtained to the nearest cent.
(d) Any dividend payment made on Series A Preferred Shares shall first be credited against the earliest accumulated but unpaid dividends due with respect to such Series A Preferred Shares.
(e) For so long as the Series A Preferred Shares are Outstanding, except as contemplated herein, the Corporation will not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, Common Shares or other shares of capital stock, if any, ranking junior to the Series A Preferred Shares as to dividends or upon liquidation) with respect to Common Shares or any other shares of the Corporation ranking junior to or on a parity with the Series A Preferred Shares as to dividends or upon liquidation, or call for redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other such junior shares (except by conversion into or exchange for shares of the Corporation ranking junior to the Series A Preferred Shares as to dividends and upon liquidation) or any such parity shares (except by conversion into or exchange for shares of the Corporation ranking junior to or on a parity with the Series A Preferred Shares as to dividends and upon liquidation) unless (1) full cumulative dividends on the Series A Preferred Shares due on or prior to the date of the transaction have been declared and paid, and (2) the Corporation has redeemed the full number of Series A Preferred Shares required to be redeemed by any provision for mandatory redemption contained in Section 3(a) (without regard to the provisions of the Special Proviso).
SECTION 3. REDEMPTION.
(a) The Corporation shall redeem all Outstanding Series A Preferred Shares on the Term Redemption Date (subject to the Special Proviso). At any time after the third anniversary of the Original Issue Date, the Corporation shall have the right, but not the obligation to redeem any portion of the Outstanding Series A Preferred Shares (“Optional Redemption”).
(b) In determining the Series A Preferred Shares to be redeemed in accordance with this Section 3, the Corporation shall allocate the number of shares to be redeemed pursuant to this Section 3 pro rata among the holders of Series A Preferred Shares in proportion to the number of shares they hold or by such other method as the Corporation shall deem fair and equitable. The Corporation shall not effect any redemption if the Corporation (1) does not have funds legally available for the redemption of, or (2) is not legally permitted to redeem or is otherwise prohibited from redeeming pursuant to any other agreement or instrument relating to or evidencing indebtedness of the Corporation, the number of Series A Preferred Shares which would be required to be redeemed by the Corporation under this Section 3 if sufficient funds were available (the foregoing provisions of clauses (1) and (2) being referred to as the “Special Proviso”), the Corporation shall redeem those Series A Preferred Shares on the earliest practicable date on which the Corporation will have such funds available and is otherwise not prohibited from redeeming pursuant to any other agreement or instrument relating to or evidencing indebtedness of the Corporation or other applicable laws, upon notice pursuant to Section 3(d) to record owners of the Series A Preferred Shares to be redeemed and the Corporation will pay to the holders funds sufficient to redeem the specified number of Series A Preferred Shares with respect to a redemption contemplated by Section 3(a), by 3:00 p.m., New York City time, on or prior to the Term Redemption Date or the Optional Redemption Date.
(c) On the Term Redemption Date or the Optional Redemption date, the Corporation shall redeem the Outstanding Series A Preferred Shares to be redeemed at the Series A Preferred Shares Liquidation Preference Amount plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution is made in full accumulated but unpaid dividends and distributions thereon (whether or not earned or declared by the Corporation, but excluding interest thereon).
(d) In the event of a redemption pursuant to Section 3(a), the Corporation shall deliver a Notice of Redemption containing the information set forth below to the holders of Series A Preferred Shares to be redeemed not more than 40 days prior to the Term Redemption Date or the Optional Redemption Date, as applicable. The Notice of Redemption will be addressed to the holders of Series A Preferred Shares at their addresses appearing on the share ledger or share records of the Corporation. Such Notice of Redemption will set forth (1) the date fixed for redemption, (2) the number and identity of Series A Preferred Shares to be redeemed, (3) the redemption price (specifying the amount of accumulated dividends to be included therein and the amount of the redemption premium, if any), (4) that dividends on the shares to be redeemed will cease to accumulate on the date of redemption, and (5) the provision of these terms of the Series A Preferred Shares under which redemption shall be made. No defect in the Notice of Redemption or in the transmittal or mailing thereof will affect the validity of the redemption proceedings, except as required by applicable law.
(e) Notwithstanding the provisions of Section 3(a), but subject to Section 5(b), no Series A Preferred Shares may be redeemed unless all dividends in arrears on the Outstanding Series A Preferred Shares and all shares of capital stock of the Corporation ranking on or above a parity with the Series A Preferred Shares with respect to payment of dividends or upon liquidation have been or are being contemporaneously paid or set aside for payment; provided, however, that the foregoing shall not prevent the purchase or acquisition of all Outstanding Series A Preferred Shares pursuant to the successful completion of an otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, holders of all Outstanding Series A Preferred Shares.
(f) Upon payment to the holder of funds sufficient to redeem the number of Series A Preferred Shares to be redeemed on or prior to the date fixed for redemption, dividends on such shares shall cease to accumulate and such shares shall no longer be deemed to be Outstanding for any purpose and all rights of the holders of the shares called for redemption shall terminate.
(g) To the extent that any redemption for which a Notice of Redemption has been given is not made by reason of the Special Proviso, such redemption shall be made as soon as practicable to the extent such funds become legally available or such redemption is no longer otherwise prohibited. Failure to redeem Series A Preferred Shares shall be deemed to exist when the Corporation shall have failed, for any reason whatsoever, to pay to the holders on or prior to the date fixed for redemption the redemption price with respect to any shares for which such Notice of Redemption has been given in accordance with Sections 3(a) and 3(b) hereof. Notwithstanding the fact that the Corporation may not have redeemed Series A Preferred Shares for which a Notice of Redemption has been given, dividends may be declared and paid on Series A Preferred Shares and shall include those Series A Preferred Shares for which Notice of Redemption has been given.
(h) Except for the provisions described above, nothing contained in these terms of the Series A Preferred Shares limits any right of the Corporation to purchase or otherwise acquire any Series A Preferred Shares at any price, whether higher or lower than the price that would be paid in connection with an optional or mandatory redemption, so long as, at the time of any such purchase, there is no arrearage in the payment of dividends on, or the mandatory or optional redemption price with respect to, any Series A Preferred Shares for which Notice of Redemption has been given.
(i) In the case of any redemption pursuant to this Section 3, only whole Series A Preferred Shares shall be redeemed, and in the event that any provision of the Articles of Incorporation would require redemption of a fractional share, the Corporation shall be authorized to round up so that only whole shares are redeemed.
(j) Notwithstanding anything herein to the contrary, the Board of Directors may authorize, create or issue any class or series of shares of capital stock, including other series of mandatory redeemable preferred shares, ranking on, above, or below a parity with the Series A Preferred Shares with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation.
SECTION 4. VOTING RIGHTS.
(a) Holders of Series A Preferred Shares shall have no voting rights, except as required by the FBCA. On such matters each holder of Series A Preferred Shares shall be entitled to one vote for each Series A Preferred Share held on each matter submitted to a vote of stockholders of the Corporation, and the holders of Outstanding Series A Preferred Shares shall vote as a separate class on all matters on which they are entitled to a vote.
(b) The foregoing voting provisions will not apply with respect to the Series A Preferred Shares if, at or prior to the time when a vote is required, such shares have been redeemed.
SECTION 5. LIQUIDATION RIGHTS.
(a) Upon the dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Series A Preferred Shares then Outstanding, together with holders of shares of any Preferred Shares then outstanding ranking on a parity with the Series A Preferred Shares upon dissolution, liquidation or winding up, shall be entitled to receive and to be paid out of the assets of the Corporation (or the proceeds thereof) available for distribution to the holders of Series A Preferred Shares after satisfaction of claims of creditors of the Corporation and any distribution or payments due to holders of Preferred Shares higher in priority to the Series A Preferred Shares, but before any distribution or payment shall be made in respect of the Common Shares or with respect to Preferred Shares lower in priority to the Series A Preferred Shares, an amount equal to the liquidation preference with respect to such shares. The liquidation preference for Series A Preferred Shares shall be the Series A Preferred Shares Liquidation Preference Amount, plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution is made in full. In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption or otherwise, is permitted under the FBCA, amounts that would be needed, if the Corporation were to be dissolved at the time of distribution, to satisfy the Series A Preferred Shares Liquidation Preference shall not be added to the Corporation’s total liabilities.
(b) If, upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the assets of the Corporation available for distribution among the holders of all outstanding Preferred Shares on parity with the Series A Preferred Shares shall be insufficient to permit the payment in full to holders the amounts to which they are entitled, then the available assets shall be distributed among the holders of all such outstanding Preferred Shares ratably in any distribution of assets according to the respective amounts which would be payable on all the shares if all amounts thereon were paid in full.
(c) Upon the dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, until payment in full is made to the holders of Series A Preferred Shares of the liquidation distribution to which they are entitled, (1) no dividend or other distribution shall be made to the holders of Common Shares or any other class of shares of capital stock of the Corporation ranking junior to Series A Preferred Shares upon dissolution, liquidation or winding up and (2) no purchase, redemption or other acquisition for any consideration by the Corporation shall be made in respect of the Common Shares or any other class of shares of capital stock of the Corporation ranking junior to Series A Preferred Shares upon dissolution, liquidation or winding up.
(d) A consolidation, reorganization or merger of the Corporation with or into any corporation or other legal entity, or a sale or exchange of all or substantially all of the assets of the Corporation in consideration for the issuance of equity securities of another Corporation, trust or other legal entity shall not be deemed to be a liquidation, dissolution or winding up, whether voluntary or involuntary, for the purposes of this Section 5.
(e) After the payment to the holders of Series A Preferred Shares of the full preferential amounts provided for in this Section 5, the holders of Series A Preferred Shares as such shall have no right or claim to any of the remaining assets of the Corporation.
(f) Subject to the rights of the holders of shares of any series or class or classes of stock ranking on a parity with Series A Preferred Shares with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation, after payment shall have been made in full to the holders of the Series A Preferred Shares as provided in this Section 5, but not prior thereto, any other series or class or classes of stock ranking junior to Series A Preferred Shares with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation shall, subject to any respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Preferred Shares shall not be entitled to share therein.
SECTION 6. NOTICE.
All notices and communications provided for hereunder shall be in accordance with these terms of the Series A Preferred Shares or by the FBCA for notices of stockholders’ meetings.
SECTION 7. WAIVER.
To the extent permitted by Florida law, holders of a majority of the Outstanding Series A Preferred Shares, acting collectively or voting separately from any other series, may by affirmative vote waive any provision hereof intended for their respective benefit in accordance with such procedures as may from time to time be established by the Board of Directors.
SECTION 8. TERMINATION.
If no Series A Preferred Shares are Outstanding, all rights and preferences of such shares established and designated hereunder shall cease and terminate, and all obligations of the Corporation under these terms of the Series A Preferred Shares, shall terminate as the Series A Preferred Shares.
SECTION 9. DEFINITIONS.
As used herein, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires:
“Affiliate” means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person. As used in this definition, unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Corporation.
“Applicable Rate” means nine percent (9.00%) per annum.
“Board of Directors” or “Board” means the Board of Directors of the Corporation or any duly authorized committee thereof as permitted by applicable law.
“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York, or St. Petersburg, Florida are required or authorized to be closed.
“Common Shares” means the shares of Common Stock, no par value, of the Corporation.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Corporation” means First Home Bancorp, Inc., a Florida corporation.
“Default Period” has the meaning set forth in Section 2(c)(i) hereof.
“Default Rate” means, with respect to the Series A Preferred Shares, for any calendar day, the Applicable Rate in effect on such day plus two percent (2.00%) per annum.
“Dividend Payment Date” with respect to the Series A Preferred Shares means the first Business Day of the month next following each Dividend Period.
“Dividend Period” means the period commencing on the Original Issue Date, and ending on the first to occur of the last day of March, June, September, or December, and thereafter, each subsequent period from but excluding a Dividend Payment Date and ending on and including the next following Dividend Payment Date.
“FBCA” means the Florida Business Corporation Act.
“Notice of Redemption” means any notice with respect to the redemption of Class A Preferred Shares pursuant to Section 3.
“Optional Redemption” has the meaning set forth in Section 3(a) hereof.
“Optional Redemption Date” means the date set for an Optional Redemption as stated in a Notice of Redemption.
“Original Issue Date” means the date on which the Corporation issues to any Holder Series A Preferred Shares with respect to such Series A Preferred Shares.
“Outstanding” or “outstanding” means, with respect to any Common Shares or any series of Preferred Shares, as of any date, the shares of such series theretofore issued by the Corporation except, without duplication, any shares of such series theretofore canceled, redeemed or repurchased by the Corporation, or with respect to which the Corporation has given notice of redemption. Notwithstanding the foregoing, (A) for purposes of voting rights (including the determination of the number of shares required to constitute a quorum), any of the Class A Preferred Shares of which the Corporation or any Affiliate of the Corporation shall be the holder shall be disregarded and not deemed outstanding, and (B) for purposes of determining the Series A Preferred Shares held by the Corporation shall be disregarded and not deemed outstanding but shares held by any Affiliate of the Corporation shall be deemed outstanding.
“Person” or “person” means and includes an individual, a corporation, a partnership, a trust, a Corporation, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof.
“Preferred Shares” means any shares of Corporation preferred stock, no par value.
“Series A Preferred Shares” means any shares of Series A Preferred Stock of the Corporation.
“Series A Preferred Shares Liquidation Preference Amount” means one thousand dollars ($1,000.00) per Series A Preferred Share.
“Special Proviso” shall have the meaning set forth in Section 3(b).
“Term Redemption Date” means the tenth anniversary of the Original Issue Date with respect to any Series A Preferred Shares issued on such Original Issue Date.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, First Home Bancorp, Inc. has caused this Certificate of the Designation, Preferences, Rights, and Limitations to be signed by Anthony N. Leo, its Chief Executive Officer, this 19th day of December, 2018.
| FIRST HOME BANCORP, INC. | ||
| By: | /s/ Anthony N. Leo | |
| Anthony N. Leo | ||
| Chief Executive Officer | ||
CERTIFICATE OF THE DESIGNATION,
PREFERENCES, RIGHTS, AND LIMITATIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
The undersigned Chief Executive Officer of First Home Bancorp, Inc., a corporation organized and in active status under the laws of the State of Florida, does hereby certify that the Board of Directors of the Corporation, in accordance with the Articles of Incorporation and Bylaws of the Corporation and Section 607.0602, Florida Statutes, adopted a resolution on July 28, 2020, creating a series of twenty thousand (20,000) shares of preferred stock of the Corporation designated as “Series B Convertible Preferred Stock,” with the following relative preferences, rights, and limitations. These Articles of Amendment were adopted by the Board of Directors of the Corporation and shareholder approval was not required.
As used herein, capitalized terms not otherwise defined herein shall have the meanings provided in Section 10.
SECTION 1. NUMBER OF SHARES; RANKING.
(a) The number of authorized Series B Preferred Shares is twenty thousand (20,000) shares. No fractional Series B Preferred Shares shall be issued.
(b) Any Series B Preferred Shares which at any time have been converted, redeemed, or purchased by the Corporation shall, after conversion, redemption, or purchase, be returned to the status of authorized but undesignated and unissued Preferred Shares, until reclassified by the Board of Directors.
(c) The Series B Preferred Shares shall rank on a parity with shares of any other series of Preferred Shares as to the payment of dividends to which the shares are entitled and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation, unless the terms of such other Preferred Shares provide otherwise.
(d) The Series B Preferred Shares shall rank on a parity with shares of the Corporation’s Series A Preferred Stock with respect to the payment of dividends to which the shares are entitled and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Corporation.
(e) No holder of Series B Preferred Shares shall have, solely by reason of being a holder, any preemptive right; nor shall any holder have any other right to acquire, purchase, or subscribe for any Preferred Shares, Common Stock, or other securities of the Corporation which it may hereafter issue or sell solely by reason of being a holder, unless otherwise determined by the Board of Directors.
SECTION 2. DIVIDENDS.
(a) The holders of Series B Preferred Shares shall be entitled to receive quarterly cumulative cash dividends, when, as, and if authorized by the Board of Directors and declared by the Corporation. Dividends on the Series B Preferred Shares shall be paid out of funds legally available therefor, at the rate per annum equal to the Applicable Rate (or the Term Extension Rate), and no more, and shall be payable on the respective dates determined as set forth in Section 2(b). Dividends on Outstanding Series B Preferred Shares shall accumulate from the Original Issue Date.
(b) Dividends on the Series B Preferred Shares shall be payable quarterly when, as, and if authorized by the Board of Directors and declared by the Corporation beginning on the first Dividend Payment Date following the Original Issue Date and with respect to any Dividend Period thereafter on the Dividend Payment Date. Each dividend on Series B Preferred Shares shall be paid on the Dividend Payment Date therefor; and shall be paid to the holders as their names appear on the share ledger or share records of the Corporation at the close of business on the fifteenth (15th) day of the Dividend Period relating to such Dividend Payment Date (or if such day is not a Business Day, the next preceding Business Day). Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the holders as their names appear on the share ledger or share records of the Corporation on a date, not exceeding fifteen (15) days preceding the payment date thereof, as may be fixed by the Board of Directors. No interest will be payable in respect of any dividend payment or payments which may be in arrears.
(c) A “Term Extension” will commence on the day following the Term Redemption Date, if the full amount of any redemption price payable with respect to any redemption required hereunder shall not have been paid to the holders. A Term Extension shall end on the Business Day on which, by 12:00 noon, New York City time, any unpaid redemption price shall have been paid to the holder. For each day during the Term Extension, the Applicable Rate shall be increased to the Term Extension Rate.
(d) The amount of dividends per share payable on each Dividend Payment Date of each Dividend Period shall be computed by multiplying the Applicable Rate (or the Term Extension Rate) for such Dividend Period by a fraction, the numerator of which shall be ninety (90) and the denominator of which shall be three hundred sixty (360), multiplying the amount so obtained by the Liquidation Preference Amount, and rounding the amount so obtained to the nearest cent. Dividends payable on any Series B Preferred Shares for any period of less than a full quarterly Dividend Period, including in connection with the first Dividend Period or upon any conversion or redemption of such shares on any date other than on a Dividend Payment Date, shall be computed by multiplying the Applicable Rate (or the Term Extension Rate) for that period by a fraction, the numerator of which shall be the actual number of days in such period and the denominator of which shall be three hundred sixty (360), multiplying the amount so obtained by the Liquidation Preference Amount, and rounding the amount so obtained to the nearest cent.
(e) Any dividend payment made on Series B Preferred Shares shall first be credited against the earliest accumulated but unpaid dividends due with respect to such Series B Preferred Shares.
(f) For so long as the Series B Preferred Shares are Outstanding, except as contemplated herein, the Corporation will not declare, pay, or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants, or rights to subscribe for or purchase, Common Shares or other shares of capital stock, if any, ranking junior to the Series B Preferred Shares as to dividends or upon liquidation) with respect to Common Shares or any other shares of the Corporation ranking junior to, or on parity with, the Series B Preferred Shares as to dividends or upon liquidation. The Corporation will not call for
redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other such junior shares (except by conversion into, or exchange for, shares of the Corporation ranking junior to the Series B Preferred Shares as to dividends and upon liquidation) or any such parity shares (except by conversion into or exchange for shares of the Corporation ranking junior to or on a parity with the Series B Preferred Shares as to dividends and upon liquidation) unless: (1) full cumulative dividends on the Series B Preferred Shares due on or prior to the date of the transaction have been declared and paid; and (2) the Corporation has redeemed the full number of Series B Preferred Shares required to be redeemed by any provision for mandatory redemption contained in Section 3(a) (without regard to the provisions of the Special Proviso).
SECTION 3. REDEMPTION.
(a) The Corporation shall redeem all Outstanding Series B Preferred Shares on the Term Redemption Date (subject to the Special Proviso). At any time after the earlier of: (1) the third anniversary of the Original Issue Date; or (2) the consummation of the first sale of shares of Common Stock by the Corporation pursuant to a bona fide underwritten public offering that results in aggregate net proceeds to the Company of not less than thirty million dollars ($30,000,000), pursuant to an effective registration statement under the Securities Act of 1933, as amended, the Corporation shall have the right, but not the obligation, to redeem any portion of the Outstanding Series B Preferred Shares (“Optional Redemption”).
(b) In determining the Series B Preferred Shares to be redeemed in accordance with this Section 3, the Corporation shall allocate the number of shares to be redeemed pro rata among the holders of Series B Preferred Shares in proportion to the number of shares they hold or by such other method as the Corporation shall deem fair and equitable. The Corporation shall not effect any redemption, if the Corporation: (1) does not have funds legally available for the redemption of; or (2) is not legally permitted to redeem or is otherwise prohibited from redeeming pursuant to any other agreement or instrument relating to or evidencing indebtedness of the Corporation, the number of Series B Preferred Shares which would be required to be redeemed by the Corporation under this Section 3 if sufficient funds were available (the foregoing provisions of clauses (1) and (2) being referred to as the “Special Proviso”), the Corporation shall redeem those Series B Preferred Shares on the earliest practicable date on which the Corporation will have such funds available and is otherwise not prohibited from redeeming pursuant to any other agreement or instrument relating to or evidencing indebtedness of the Corporation or other applicable laws. Upon notice pursuant to Section 3(d) to record owners of the Series B Preferred Shares to be redeemed and the Corporation will pay to the holders funds sufficient to redeem the specified number of Series B Preferred Shares with respect to a redemption contemplated by Section 3(a), by 3:00 p.m., New York City time, on or prior to the Term Redemption Date or the Optional Redemption Date.
(c) On the Term Redemption Date or the Optional Redemption Date, the Corporation shall redeem the Outstanding Series B Preferred Shares to be redeemed at the Liquidation Preference Amount plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution is made in full accumulated but unpaid dividends and distributions thereon (whether or not earned or declared by the Corporation, but excluding interest thereon).
(d) In the event of a redemption pursuant to Section 3(a), the Corporation shall deliver a Notice of Redemption, containing the information set forth below, to the holders of Series B Preferred Shares to be redeemed not more than 40 days prior to the Term Redemption Date or an Optional Redemption Date, as applicable. The Notice of Redemption will be addressed to the holders of Series B Preferred Shares at their addresses appearing on the share ledger or share records of the Corporation. Such Notice of Redemption will set forth: (1) the date fixed for redemption; (2) the number and identity of Series B Preferred Shares to be redeemed; (3) the redemption price, specifying the amount of accumulated dividends to be included therein; (4) that dividends on the shares to be redeemed will cease to accumulate on the Term Redemption Date or an Optional Redemption Date, as applicable; and (5) the provision of these terms of the Series B Preferred Shares under which redemption shall be made. No defect in the Notice of Redemption, or in the transmittal or mailing thereof, will affect the validity of the redemption proceedings, except as required by applicable law.
(e) Notwithstanding the provisions of Section 3(a), but subject to Section 6(b), no Series B Preferred Shares may be redeemed unless all dividends in arrears on the Outstanding Series B Preferred Shares and all shares of capital stock of the Corporation ranking on or above a parity with the Series B Preferred Shares with respect to payment of dividends or upon liquidation have been or are being contemporaneously paid or set aside for payment; provided, however, that the foregoing shall not prevent the purchase or acquisition of all Outstanding Series B Preferred Shares pursuant to the successful completion of an otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, holders of all Outstanding Series B Preferred Shares.
(f) Upon payment to the holder of funds sufficient to redeem the number of Series B Preferred Shares designated for redemption on or prior to the Term Redemption Date or the Optional Redemption date, as applicable, dividends on such shares shall cease to accumulate and such shares shall no longer be deemed to be Outstanding for any purpose and all rights of the holders of the shares called for redemption shall terminate.
(g) To the extent that any redemption for which a Notice of Redemption has been given is not made by reason of the Special Proviso, such redemption shall be made as soon as practicable to the extent such funds become legally available or such redemption is no longer otherwise prohibited. Failure to redeem Series B Preferred Shares shall be deemed to exist when the Corporation shall have failed, for any reason whatsoever, to pay to the holders on or prior to the date fixed for redemption the redemption price with respect to any shares for which such Notice of Redemption has been given in accordance with Sections 3(a) and 3(b) hereof. Notwithstanding the fact that the Corporation may not have redeemed Series B Preferred Shares for which a Notice of Redemption has been given, dividends may be declared and paid on Series B Preferred Shares and shall include those Series B Preferred Shares for which Notice of Redemption has been given.
(h) Except for the provisions described above, nothing contained in these terms of the Series B Preferred Shares limits any right of the Corporation to purchase or otherwise acquire any Series B Preferred Shares at any price, whether higher or lower than the price that would be paid in connection with a mandatory or optional redemption, so long as, at the time of any such purchase, there is no arrearage in the payment of dividends on, or the mandatory or option redemption price with respect to, any Series B Preferred Shares for which Notice of Redemption has been given.
(i) In the case of any redemption pursuant to this Section 3, only whole Series B Preferred Shares shall be redeemed, and in the event that any provision of the Articles of Incorporation would require redemption of a fractional share, the Corporation shall be authorized to round up so that only whole shares are redeemed.
(j) Notwithstanding anything herein to the contrary, the Board of Directors may authorize, create, or issue any class or series of shares of capital stock, including other series of mandatory redeemable preferred shares, ranking on, above, or below a parity with the Series B Preferred Shares with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation, or winding up of the affairs of the Corporation.
SECTION 4. CONVERSION.
(a) From and after the Original Issue Date, a holder of Series B Preferred Shares shall have the right, but not the obligation, to convert into fully paid and non assessable Common Shares any portion of the holder’s Outstanding Series B Preferred Shares (the “Conversion Right”), at a conversion ratio (the “Conversion Ratio”) equal to the quotient of: (i) the Liquidation Value; divided by (ii) the tangible book value per share of the Common Stock, calculated on the basis of the Corporation’s financial statements (“Tangible Book Value”), as of the last day of the calendar quarter occurring prior to the date on which the holder exercises its Conversion Right; provided, however, that Tangible Book Value shall be adjusted to reflect a subsequent quarter end only on the last day of the month succeeding such quarter end.
(b) The holder of any Series B Preferred Shares may exercise its Conversion Right by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the Series B Preferred Shares to be converted, duly endorsed to the Corporation in blank accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such Series B Preferred Shares in accordance with the provisions of this Section 4(b). As promptly as practicable, and in any event within ten (10) Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered: (i) certificates registered in the name of such holder representing the number of validly issued, fully paid, and nonassessable shares of Common Stock to which the holder of Series B Preferred Shares so converted shall be entitled; and (ii) if less than the full number of Series B Preferred Shares evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversion shall be deemed to have been made at the close of business on the date of the later of receipt of such notice (or such later date as may be specified by the holder in such notice) and of such surrender of the certificate or certificates representing the Series B Preferred Shares to be converted so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock and any declared but unpaid dividends in accordance herewith, and the Person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time.
(c) In case any Series B Preferred Shares are to be redeemed pursuant to Section 3, the Conversion Right shall cease and terminate as to such shares at the close of business on the second (2nd) Business Day preceding the date fixed for redemption, unless the Corporation shall default in the payment of the applicable redemption price, in which case such Conversion Right shall not cease as to any such Series B Preferred Shares unless and until the redemption price with respect to such share has been paid in full.
(d) Should the Corporation, at any time or from time to time after the Original Issue Date issue by reclassification of the shares of Common Stock any shares of capital stock of the Corporation, then the Conversion Ratio shall be adjusted. Such adjustment shall provide that the holder of any Series B Preferred Shares thereafter surrendered for conversion shall be entitled to receive the number of other securities of the Corporation which such holder would have owned or have been entitled to receive after the occurrence of the event described above had such Series B Preferred Shares been surrendered for conversion immediately prior to the occurrence of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this Section 4(d) shall become applicable at the close of business on the date upon which such corporate action becomes effective. Any such adjustments shall be made successively. Whenever is the Corporation makes such an adjustment, the Corporation shall promptly mail to the holders of record of the Outstanding Series B Preferred Shares at their respective addresses as the same shall appear in the Corporation’s stock records a notice. Such a notice shall describe the new securities into which each Series B Preferred Share is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment, the computation thereof, and when such adjustment became effective.
(e) The Corporation shall at all times reserve and keep available, free from liens, charges and security interests and not subject to any preemptive rights, for issuance upon conversion of Series B Preferred Shares, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all Outstanding Series B Preferred Shares, and shall take all action required to increase the authorized number of shares of Common Stock if necessary to permit the conversion of all Outstanding Series B Preferred Shares.
SECTION 5. VOTING RIGHTS.
(a) Holders of Series B Preferred Shares shall have no voting rights, except as required by the FBCA. On such matters, each holder of Series B Preferred Shares shall be entitled to one vote for each Series B Preferred Share held on each such matter submitted to a vote of stockholders of the Corporation, and the holders of Outstanding Series B Preferred Shares shall vote as a separate class on all matters on which they are entitled to a vote.
(b) The foregoing voting provisions will not apply with respect to the Series B Preferred Shares if, at or prior to the time when a vote is required, such shares have been redeemed or converted.
SECTION 6. LIQUIDATION RIGHTS.
(a) Upon the dissolution, liquidation, or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Series B Preferred Shares then Outstanding, together with holders of shares of any Preferred Shares then Outstanding ranking on parity with the Series B Preferred Shares upon dissolution, liquidation, or winding up, shall be entitled to receive and to be paid out of the assets of the Corporation (or the proceeds thereof) available for
distribution to the holders of Series B Preferred Shares after satisfaction of claims of creditors of the Corporation and any distribution or payments due to holders of Preferred Shares higher in priority to the Series B Preferred Shares, but before any distribution or payment shall be made in respect of the Common Shares or with respect to Preferred Shares lower in priority to the Series B Preferred Shares, an amount equal to the liquidation preference with respect to such shares.
(b) The liquidation preference for Series B Preferred Shares shall be the Liquidation Preference Amount, plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution is made in full. In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption, or otherwise, is permitted under the FBCA, amounts that would be needed, if the Corporation were to be dissolved at the time of distribution, to satisfy payment of the Liquidation Preference Amount shall not be added to the Corporation’s total liabilities.
(c) If, upon any liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary, the assets of the Corporation available for distribution among the holders of all Outstanding Preferred Shares on parity with the Series B Preferred Shares shall be insufficient to permit the payment in full to holders the amounts to which they are entitled, then the available assets shall be distributed among the holders of all such Outstanding Preferred Shares ratably in any distribution of assets according to the respective amounts which would be payable on all the shares if all amounts thereon were paid in full.
(d) Upon the dissolution, liquidation, or winding up of the affairs of the Corporation, whether voluntary or involuntary, until payment in full is made to the holders of Series B Preferred Shares of the liquidation distribution to which they are entitled: (1) no dividend or other distribution shall be made to the holders of Common Shares or any other class of shares of capital stock of the Corporation ranking junior to Series B Preferred Shares upon dissolution, liquidation or winding up; and (2) no purchase, redemption, or other acquisition for any consideration by the Corporation shall be made in respect of the Common Shares or any other class of shares of capital stock of the Corporation ranking junior to Series B Preferred Shares upon dissolution, liquidation, or winding up.
(e) A consolidation, reorganization, or merger of the Corporation with or into any other legal entity, or a sale or exchange of all or substantially all of the assets of the Corporation in consideration for the issuance of equity securities of another Corporation, trust or other legal entity shall not be deemed to be a liquidation, dissolution, or winding up, whether voluntary or involuntary, for the purposes of this Section 6.
(f) After the payment to the holders of Series B Preferred Shares of the full preferential amounts provided for in this Section 6, the holders of Series B Preferred Shares as such shall have no right or claim to any of the remaining assets of the Corporation.
(g) After the payment to the holders of the Series B Preferred Shares as provided for in this Section 6 shall have been made in full, and subject to the rights of the holders of shares of any series or class of stock ranking on a parity with Series B Preferred Shares with respect to the distribution of assets upon dissolution, liquidation, or winding up of the affairs of the Corporation, any series or class or classes of stock ranking junior to Series B Preferred Shares with respect to the distribution of assets upon dissolution, liquidation, or winding up of the affairs of the Corporation shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series B Preferred Shares shall not be entitled to share therein, subject to any respective terms and provisions (if any) applying thereto.
SECTION 7. NOTICE.
All notices and communications provided for hereunder shall be in accordance with these terms of the Series B Preferred Shares or by the FBCA for notices of stockholders’ meetings.
SECTION 8. WAIVER.
To the extent permitted by Florida law, holders of a majority of the Outstanding Series B Preferred Shares, acting collectively or voting separately from any other series, may by affirmative vote waive any provision hereof intended for their respective benefit in accordance with such procedures as may from time to time be established by the Board of Directors.
SECTION 9. TERMINATION.
If no Series B Preferred Shares are Outstanding, all rights and preferences of such shares established and designated hereunder shall cease and terminate, and all obligations of the Corporation under these terms of the Series B Preferred Shares, shall terminate.
SECTION 10. DEFINITIONS.
As used herein, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires:
“Affiliate” means with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Corporation.
“Applicable Rate” means eight percent (8.00%) per annum.
“Board of Directors” or “Board” means the Board of Directors of the Corporation or any duly authorized committee thereof as permitted by applicable law.
“Business Day” means any day other than a Saturday, a Sunday, or any day on which commercial banks in New York, New York, or St. Petersburg, Florida are required or authorized to be closed.
“Common Shares” means the shares of Common Stock, no par value, of the Corporation.
“Control” means the direct or indirect possession of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
“Conversion Ratio” has the meaning set forth in Section 4(a).
“Corporation” means First Home Bancorp, Inc., a Florida corporation.
“Dividend Payment Date” with respect to the Series B Preferred Shares means the first Business Day of the month next following each Dividend Period.
“Dividend Period” means the period commencing on the Original Issue Date and ending on the first to occur of the last day of March, June, September, or December, and thereafter, each subsequent period from but excluding a Dividend Payment Date and ending on and including the next following Dividend Payment Date.
“FBCA” means the Florida Business Corporation Act.
“Liquidation Preference Amount” means one thousand dollars ($1,000.00) per Series B Preferred Share.
“Optional Redemption” has the meaning set forth in Section 3(a) hereof.
“Optional Redemption Date” means the date set for an Optional Redemption as stated in a Notice of Redemption.
“Notice of Redemption” means any notice with respect to the redemption of Class B Preferred Shares pursuant to Section 3.
“Original Issue Date” means the date on which the Corporation issues to any Holder Series B Preferred Shares with respect to such Series B Preferred Shares.
“Outstanding” means as of any date, the shares of such series issued by the Corporation except, without duplication, any shares of such series canceled, converted, redeemed, or repurchased by the Corporation, or with respect to which the Corporation has given notice of redemption. Notwithstanding the foregoing: (A) for purposes of voting rights (including the determination of the number of shares required to constitute a quorum), any of the Class B Preferred Shares of which the Corporation or any Affiliate of the Corporation shall be the holder shall be disregarded and not deemed outstanding, and (B) for purposes of determining the Series B Preferred Shares outstanding, shares held by the Corporation shall be disregarded and not deemed outstanding, but shares held by any Affiliate of the Corporation shall be deemed outstanding.
“Person” means and includes an individual, a corporation, a partnership, a trust, a Corporation, an unincorporated association, a joint venture, or other entity, or any government, agency, or political subdivision thereof.
“Preferred Shares” means any shares of Corporation preferred stock, no par value.
“Series A Preferred Shares” means any shares of Series A Preferred Stock of the Corporation.
“Series B Preferred Shares” means any shares of Series B Convertible Preferred Stock of the Corporation.
“Special Proviso” shall have the meaning set forth in Section 3(b).
“Tangible Book Value” has the meaning set forth in Section 4(a).
“Term Extension” has the meaning set forth in Section 2(c)(i) hereof.
“Term Extension Rate” means, with respect to the Series B Preferred Shares, for any calendar day, the Applicable Rate in effect on such day plus one percent (1.00%) per annum.
“Term Redemption Date” means the tenth (10th) anniversary of the Original Issue Date with respect to any Series B Preferred Shares issued on such Original Issue Date.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, First Home Bancorp, Inc. has caused this Certificate of the Designation, Preferences, Rights, and Limitations to be signed by Anthony N. Leo, its Chief Executive Officer, this 28th day of July, 2020.
| FIRST HOME BANCORP, INC. | ||
| By: | /s/ Anthony N. Leo | |
| Anthony N. Leo | ||
| Chief Executive Officer | ||
Exhibit 3.2
BYLAWS OF FIRST HOME BANCORP, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the Shareholders of this corporation shall be held at the time and place designated by the Board of Directors of the corporation. The annual meeting shall be held within four months after the close of the corporation’s fiscal year. The annual meeting of Shareholders for any year shall be held no later than thirteen months after the last preceding annual meeting of Shareholders. Business transacted at the annual meeting shall include the election of Directors of the corporation.
Section 2. Special Meetings. Special meetings of the Shareholders shall be held when directed by the Board of Directors, or when requested in writing by the holders of not less than ten percent of all the shares entitled to vote at the meeting. A meeting requested by Shareholders shall be called for a date not less than ten nor more than sixty days after the request is made, unless the Shareholders requesting the meeting designate a later date. The call for the meeting shall be issued by the Secretary, unless the Board of Directors, or the Shareholders requesting the meeting shall designate another person to do so.
Section 3. Place. Meetings of Shareholders may be held within or without the State of Florida.
Section 4. Notice. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten nor more than sixty days before the meeting, either personally or by first class mail, by or at the direction of the Secretary, or persons calling the meeting to each Shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the Shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. if, however, after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in this section to each Shareholder of record on the new record date entitled to vote at such meeting.
Section 6. Fixing Record Date. For the purpose of determining Shareholders entitled to notice of or to vote at any meeting of Shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of Shareholders for any other purpose, the Board of Directors shall fix in advance a date as the record date for any determination of Shareholders, such date in any case to be not more than sixty days prior to the date on which the particular action requiring such determination of Shareholders is to be taken. When a determination of Shareholders entitled to vote at any meeting of Shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting.
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Section 7. Voting Record. The Secretary or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before each meeting of Shareholders, a complete list of the Shareholders entitled to vote at such meeting or any adjournment thereof, with the address of and the number and class and series, if any, of shares held by each. The list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the corporation, at the principal place of business of the corporation or at the office of the transfer agent or registrar of the corporation and any Shareholder shall be entitled to inspect the list at any time during the usual business hours. The list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any Shareholder at any time during the meeting.
If the requirements of this section have not been substantially complied with, the meeting on demand of any Shareholder in person or by proxy, shall be adjourned until the requirements are complied with. If no such demand is made, failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting.
Section 8. Shareholder Quorum and Voting. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of Shareholders. When a specified item of business is required to be voted on by a class or series of stock, a majority of the shares of such class or series shall constitute a quorum for the transaction of such item of business by that class or series.
If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the Shareholders unless otherwise provided by law.
After a quorum has been established at a Shareholders’ meeting, the subsequent withdrawal of Shareholders, so as to reduce the number of Shareholders entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof.
Section 9. Voting of Shares. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of Shareholders.
Treasury shares shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time.
A Shareholder may vote either in person or by proxy executed in writing by the Shareholder or his duly authorized attorney-in-fact. At each election for Directors, every Shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are Directors to be elected at that time and for whose election he has a right to vote.
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Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.
On and after the date on which a written notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares.
The Chairman of the Board shall preside at all shareholder meetings; provided however, the Chairman may appoint an interim chairman to conduct the business of the meeting.
Section 10. Proxies. Every Shareholder entitled to vote at a meeting of Shareholders or to express consent or dissent without a meeting or any Shareholder’s duly authorized attorney-in-fact may authorize another person or persons to act for him by proxy.
Every proxy must be signed by the Shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the Shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of Shareholders.
If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of them present at the meeting, or if only one is present then that one, may exercise all the powers conferred by the proxy; but if the proxy holders present at the meeting are equally divided as to the right and manner of voting in any particular case, the voting of such shares shall be prorated.
If a proxy expressly provides, any proxy holder may appoint in writing a substitute to act in his place.
Section 11. Voting Trusts. Any number of Shareholders of this corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, as provided by law. Where the counterpart of a voting trust agreement and the copy of the record of the holders of voting trust certificates has been deposited with the
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corporation as provided by law, such documents shall be subject to the same right of examination by a Shareholder of the corporation, in person or by agent or attorney, as are the Board books and records of the corporation, and such counterpart and such copy of such record shall be subject to examination by any holder of record of voting trust certificates either in person or by agent or attorney, at any reasonable time for any proper purpose.
Section 12. Shareholders’ Agreements. Two or more Shareholders of this corporation may enter into an agreement or agreements providing for the exercise of voting rights in the manner provided in the agreement(s) or relating to any phase of the affairs of the corporation as provided by law. Nothing therein shall impair the right of this corporation to treat the Shareholders of record as entitled to vote the shares standing in their names.
Section 13. Action Without a Meeting. Any action required to be taken at any annual or special meeting of Shareholders of the corporation or any action which may be taken at any annual or special meeting of Shareholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. If any class of shares is entitled to vote thereon as a class, such written consent shall be required of the holders of a majority of the shares of each class entitled to vote as a class thereon and of the total shares entitled to vote thereon.
Within 10 days after first obtaining such authorization by written consent, notice must be given to those Shareholders who have not consented in writing. The notice shall fairly summarize the material features of the authorized action and, if the action be a merger, consolidation, or sale or exchange of assets for which dissenters rights are provided, the notice shall contain a clear statement of the right of Shareholders dissenting therefrom to be paid the fair value of their shares upon compliance with the Florida Statutes provision concerning dissenters rights of Shareholders.
ARTICLE II. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under the authority of, and the business and affairs of a corporation shall be managed under the direction of, the Board of Directors.
Section 2. Qualification. Directors need not be residents of this state or Shareholders of this corporation.
Section 3. Compensation. The Board of Directors shall have authority to fix the compensation of Directors.
Section 4. Duties of Directors. A Director shall perform his duties as a Director, including his duties as a member of any committee of the Board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances.
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In performing his duties, a Director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by:
(a) one or more Officers or employees of the corporation whom the Director reasonably believes to be reliable and competent in the matters presented,
(b) counsel, public accountants or other persons as to matters which the Director reasonably believes to be within such person’s professional or expert competence, or
(c) a committee of the Board upon which he does not serve, duly designated in accordance with a provision of the Articles of Incorporation or the Bylaws, as to matters within its designated authority, which committee the Director reasonably believes to merit confidence.
A Director shall not be considered to be acting in good faith if he has actual knowledge concerning the matter in question that would cause such reliance described above to be unwarranted.
A person who performs his duties in compliance with this section shall have no liability by reason of being or having been a Director of the corporation.
Section 5. Presumption of Assent. A Director of the corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest.
Section 6. Number. This corporation shall have from six (6) to twelve (12) Directors. The number of Directors shall be determined by Board of Directors and may be increased or decreased from time to time by amendment to these Bylaws, but no decrease shall have the effect of shortening the terms of any incumbent Director.
Section 7. Election and Term. Each person named in the Articles of Incorporation as a member of the initial Board of Directors shall hold office until the first annual meeting of Shareholders, and until his successor shall have been elected and qualified or until his earlier resignation, removal from office or death.
At the first annual meeting of Shareholders and at each annual meeting thereafter the Shareholders shall elect Directors to hold office until the next succeeding annual meeting. Each Director shall hold office for the term for which he is elected and until his successor shall have been elected and qualified or until his earlier resignation, removal from office or death.
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Section 8. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of Directors, may be filled by the affirmative vote of a majority of the remaining Directors though less than a quorum of the Board of Directors. A Director elected to fill a vacancy shall hold office only until the next election of Directors by the Shareholders.
Section 9. Removal of Directors. At a meeting of Shareholders called expressly for that purpose, any Director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of Directors.
Section 10. Quorum and Voting. A majority of the number of Directors determined by the Board of Directors shall constitute a quorum for the transaction of business. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
Section 11. Director Conflicts of Interest. No contract or other transaction between this corporation and one or more of its Directors or any other corporation, firm, association or entity in which one or more of the Directors are Directors or Officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such Director or Directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction or because his or their votes are counted for such purpose, if:
(a) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested Directors; or
(b) the fact of such relationship or interest is disclosed or known to the Shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent; or
(c) the contract or transaction is fair and reasonable as to the corporation at the time it is authorized by the Board, a committee or the Shareholders.
Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction.
Section 12. Executive and Other Committees. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an executive committee and one or more other committees each of which, to the extent provided in such resolution shall have and may exercise all the authority of the Board of Directors, except that no committee shall have the authority to:
(a) approve or recommend to Shareholders actions or proposals required by law to be approved by Shareholders;
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(b) designate candidates for the office of Director, for purposes of proxy solicitation or otherwise;
(c) fill vacancies on the Board of Directors or any committee thereof;
(d) amend the Bylaws;
(e) authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or
(f) authorize or approve the issuance or sale of, or any contract to issue or sell, shares or designate the terms of a series of a class of shares, except that the Board of Directors” having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may, pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking fund, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all the terms thereof and to authorize the statement of the terms of a series for filing with the Department of State.
The Board of Directors, by resolution adopted in accordance with this section, may designate one or more Directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee.
Section 13. Place of Meetings. Regular and special meetings by the Board of Directors may be held within or without the State of Florida.
Section 14. Time, Notice and Call of Meetings. Regular periodic meetings of the Board of Directors shall be held without notice at the date, time and place specified in a resolution adopted for that purpose by the Board of Directors, and an annual organizational meeting of the Board shall be held immediately following each annual meeting of Shareholders. Written notice of the time and place of special meetings of the Board of Directors shall be given to each Director by either personal delivery, or email at least two days before the meeting or by notice mailed to the Director at least five days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any Director who signs a waiver of notice either before or after the meeting. Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a Director states, at the beginning of the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened.
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Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
A majority of the Directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the Directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other Directors.
Meetings of the Board of Directors may be called by the Chairman of the Board or by any two Directors. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the Chairman’s absence, the Chief Executive Officer shall preside.
Members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
Section 15. Action Without a Meeting. Any action required to be taken at a meeting of the Directors of a corporation, or any action which may be taken at a meeting of the Directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so to be taken, signed by all of the Directors, or all the members of the committee, as the case may be, is filed in the minutes of the proceedings of the Board or of the committee. Such consent shall have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
Section 1. Officers. The Officers of this corporation shall consist of a Chief Executive Officer and/or President, and a Secretary, each of whom shall be elected by the Board of Directors. The Chairman of the Board may be an Officer of the corporation. Such other Officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors or the Chief Executive Officer from time to time. Any two or more offices may be held by the same person.
Section 2. Duties. The Officers of this corporation shall have the following duties:
The chief executive officer of the corporation shall have general authority over and responsibility for the management of the business and affairs of the corporation, subject to the direction of the Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate records except the financial records; shall record the minutes of all meetings of the Shareholders and Board of Directors, send all notices of meetings out, and perform such other duties as may be prescribed by the Board of Directors, the Chairman or the President.
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Section 3. Removal of Officers. Any Officer or agent may be removed by the Board or the Chief Executive Officer, with or without cause, whenever in its judgment the best interests of the corporation will be served thereby.
Removal of any Officer shall be without prejudice to the contract rights, if any, of the person so removed; however, election or appointment of an Officer or agent shall not of itself create contract rights.
ARTICLE IV. STOCK CERTIFICATES
Section 1. Issuance. Every holder of shares in this corporation shall be entitled to have a certificate, representing all shares to which he is entitled. No certificate shall be issued for any share until such share is fully paid.
Section 2. Form. Certificates representing shares in this corporation shall be signed by the Chairman or the Chief Executive Officer, President or any Vice President and the Secretary or any Assistant Secretary and may be sealed with the seal of this corporation or a facsimile thereof. In case any Officer who signed such certificate shall have ceased to be such Officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such Officer at the date of its issuance.
Every certificate representing shares which are restricted as to the sale, disposition or other transfer of such shares shall state that such shares are restricted as to transfer and shall set forth or fairly summarize upon the certificate, or shall state that the corporation will furnish to any Shareholder upon request and without charge a full statement of, such restrictions.
Each certificate representing shares shall state upon the face thereof: the name of the corporation; that the corporation is organized under the laws of this state; the name of the person or persons to whom issued; the number and class of shares, and the designation of the series, if any, which such certificate represents; and the par value of each share represented by such certificate.
Section 3. Transfer of Stock. The corporation shall register a stock certificate presented to it for transfer if the certificate is properly endorsed by the holder of record or by his duly authorized attorney.
Section 4. Lost, Stolen, or Destroyed Certificates. The corporation shall issue a new stock certificate in the place of any certificate previously issued if the holder of record of the certificate (a) makes proof in affidavit form that it has been lost, destroyed or wrongfully taken; (b) requests the issue of a new certificate before the corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; and (c) satisfies any other reasonable requirements imposed by the corporation, including bond in such form as the corporation may direct, to indemnify the corporation, the transfer agent, and registrar against any claim that may be made on account of the alleged loss, destruction or theft of a certificate.
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ARTICLE V. BOOKS AND RECORDS
Section 1. Books and Records. This corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its Shareholders, Board of Directors and committees of Directors.
This corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its Shareholders, giving the names and addresses of all Shareholders, and the number, class and series, if any, of the shares held by each. Any books, records and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time.
Section 2. Shareholders’ Inspection Rights. Any person who shall have been a holder of record of one percent (1.0%) or more of the outstanding shares or of voting trust certificates therefor at least six months immediately preceding his demand or shall be the holder of record of, or the holder of record of voting trust certificates for, at least five percent of the outstanding shares of any class or series of the corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose its relevant books and records of accounts, minutes and records of Shareholders and to make extracts therefrom.
Section 3. Financial Information. Not later than four months after the close of each fiscal year, this corporation shall prepare a balance sheet showing in reasonable detail the financial condition of the corporation as of the close of its fiscal year, and a profit and loss statement showing the results of the operations of the corporation during its fiscal year. This requirement may be modified by a resolution of the Shareholders not later than four months after the close of each fiscal year.
Upon written request of any Shareholder or holder of voting trust certificates for shares of the corporation, the corporation shall mail to such Shareholder or holder of voting trust certificates a copy of the most recent such balance sheet and profit and loss statement.
The balance sheets and profit and loss statements shall be filed in the registered office of the corporation in this state, shall be kept for at least five years, and shall be subject to inspection during business hours by any Shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI. DIVIDENDS
The Board of Directors of this corporation may, from time to time, declare and the corporation may pay dividends on its shares in cash, property or its own shares, except when the corporation is insolvent or when the payment thereof would render the corporation insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in the Articles of Incorporation, subject to the following provisions:
(a) Dividends in cash or property may be declared and paid, except as otherwise provided in this section, only out of the unreserved and unrestricted earned surplus of the corporation or out of capital surplus, howsoever arising, but each dividend paid out of capital surplus shall be identified as a distribution of capital surplus, and the amount per share paid from such surplus shall be disclosed to the Shareholders receiving the same concurrently with the distribution.
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(b) Dividends may be declared and paid in the corporation’s own treasury shares.
(c) Dividends may be declared and paid in the corporation’s own authorized but unissued shares out of any unreserved and unrestricted surplus of the corporation; provided that such shares shall be issued at not less than the par value thereof and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate par value of the shares to be issued as a dividend.
(d) No dividend payable in shares of any class shall be paid to the holders of shares of any other class unless the Articles of Incorporation so provide or such payment is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class in which the payment is to be made.
(e) A split-up or division of the issued shares of any class into a greater number of shares of the same class without increasing the stated capital of the corporation shall not be construed to be a share dividend within the meaning of this section.
ARTICLE VII. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the following:
FIRST HOME BANCORP, INC.
2000
Florida
ARTICLE VIII. INDEMNIFICATION
Section 1. Certain Definitions. For the purposes of this Section, certain terms and phrases used herein shall have the meanings set forth below:
(a) The term “enterprise” shall include, but not be limited to, any employee benefit plan.
(b) An “executive” shall mean any person, including a volunteer, who is or was a director or officer of the corporation or who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise.
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(c) The term “expenses” shall include, but not be limited to, all costs and expenses (including attorneys’ fees and paralegal expenses) paid or incurred by an executive, in, for or related to a proceeding or in connection with investigating, preparing to defend, defending, being a witness in or participating in a proceeding, including such costs and expenses incurred on appeal. Such attorneys’ fees shall include, but not be limited to (a) attorneys’ fees incurred by an executive in any and all judicial or administrative proceedings, including appellate proceedings, arising out of or related to a proceeding; (b) attorneys’ fees incurred in order to interpret, analyze or evaluate that person’s rights and remedies in a proceeding or under any contracts or obligations which are the subject of such proceeding; and (c) attorneys’ fees to negotiate with counsel with any claimants, regardless of whether formal legal action is taken against him.
(d) The term “liability” shall include, but not be limited to, the obligation to pay a judgment, settlement, penalty or fine (including an excise tax assessed with respect to any employee benefit plan), and expenses actually and reasonably incurred with respect to a proceeding.
(e) The term “proceeding” shall include, but not be limited to, any threatened, pending or completed action, suit or other type of proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, including, but not limited to, an action by or in the right of any corporation of any type or kind, domestic or foreign, or of any partnership, joint venture, trust, employee benefit plan or other enterprise, whether predicated on foreign, federal, state or local law, to which an executive is a party by reason of the fact that he is or was or has agreed to become a director or officer of the corporation or is now or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise.
(f) The phrase “serving at the request of the corporation” shall include, but not be limited to, any service as a director or officer of the corporation that imposes duties on such person, including duties related to an employee benefit plan and its participants or beneficiaries.
(g) The phrase “not opposed to the best interests of the corporation” describes the actions of a person who acts in good faith and in a manner which he reasonably believes to be in the best interests of the corporation or the participants and beneficiaries of an employee benefit plan.
Section 2. Primary Indemnification. The corporation shall indemnify to the fullest extent permitted by law, and shall advance expenses therefor, to any executive who was or is a party to a proceeding against any liability incurred in such proceeding, including any appeal thereof, unless a court of competent jurisdiction establishes by judgment or other final adjudication that his actions, or omissions to act, were material to the cause of action so adjudicated and constitute: (a) a violation of the criminal law, unless the executive had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful; (b) a transaction from which the executive derived an improper personal benefit; (c) in a case of director, a circumstance under which the liability provisions of Section 607.0834; Florida Statutes, or any successor provision, are applicable; or (d) willful misconduct or conscious disregard for the best interests of the corporation in a proceeding by or in the right of the
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corporation to procure a judgment in its favor or in a proceeding by or in the right of a shareholder. Notwithstanding the failure to satisfy conditions (a) through (d) of this Section, the corporation shall nevertheless indemnify an executive pursuant to Sections 4 or 5 hereof unless a determination is reasonably and promptly made pursuant to Section 3 hereof that the executive did not meet the applicable standard of conduct set forth in Sections 4 or 5.
Section 3. Determination of Right of Indemnification in Certain Cases. Any indemnification under Sections 4 or 5 hereof (unless ordered by a court) shall be made by the corporation unless a determination is reasonably and promptly made that the executive did not meet the applicable standard of conduct set forth in Sections 4 or 5. Such determination shall be made by: (a) the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding; (b) if such a quorum is not obtainable or, even if obtainable, by majority vote of a committee duly designated by the Board of Directors (in which directors who are parties may participate) consisting solely of two or more directors not at the time parties to the proceeding; (c) by independent counsel (i) selected by the Board of Directors prescribed in subparagraph (a) or the committee prescribed in subparagraph (b), or (ii) if a quorum of the directors cannot be obtained under subparagraph (a), and the committee cannot be designated under subparagraph (b), selected by majority vote of the full Board of Directors (in which directors who are parties may participate); or (d) by the shareholders by a majority vote of a quorum consisting of shareholders who are not parties to such proceeding, or if no such quorum is attainable, by a majority vote of the shareholders who were not parties to such proceeding. If the determination of the permissibility of indemnification is made by independent legal counsel as set forth in subparagraph (c) above, the other persons specified in this Section 3 shall evaluate the reasonableness of expenses.
Section 4. Proceeding Other Than By Or In The Right of The Corporation. The corporation shall indemnify any executive who was or is a party to any proceeding (other than an action by, or in the right of, the corporation) against liability in connection with such proceeding, including any appeal thereof, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the corporation or, with respect to any criminal proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 5. Proceeding By Or In The Right Of The Corporation. The corporation shall indemnify any executive who was or is’ a party to any proceeding by or in the right of the corporation to procure a judgment in its favor against expenses and amounts paid in settlement not exceeding, in the judgment of the Board of Directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal thereof, if such person acted in good faith and in manner which he reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be made under this Section 5 in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
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Section 6. Indemnification Against Expenses of Successful Party. Notwithstanding the other provisions of this Section, to the extent that an executive is successful on the merits or otherwise, including the dismissal of an action without prejudice or the settlement of an action without admission of liability, in defense of any proceeding or in defense of any claim, issue or matter therein, the corporation shall indemnify such executive against all expenses incurred in connection with such defense.
Section 7. Advancement of Expenses. Notwithstanding anything in the corporation’s articles of incorporation, these bylaws or any agreement to the contrary, if so requested by an executive, the corporation shall advance (within two business days of such request) any and all expenses relating to a proceeding (an “expense advance”), upon the receipt of a written undertaking by or on behalf of such person to repay such expense advance if a judgment or other final adjudication adverse to such person (as to which all rights of appeal have been exhausted or lapsed) establishes that he, with respect to such proceeding, is not eligible for indemnification under the provisions of this Section. Expenses incurred by other employees or agents of the corporation may be paid in advance upon such terms and conditions as the Board of Directors deems appropriate.
Section 8. Right of Executive to Indemnification Upon Application; Procedures Upon Application. Any indemnification or advancement of expenses under this Section shall be made promptly upon the written request of the executive, unless, with respect to a request under Section 4 or 5, a determination is reasonably and promptly made under Section 3 that such executive did not meet the applicable standard of conduct set forth in Section 4 or 5. The right to indemnification or advances as granted by this Section shall be enforceable by the executive in any court of competent jurisdiction, if the claim is improperly denied, in whole or in part, or if no disposition of such claim is made promptly. The executive’s expenses incurred in connection with successfully establishing his right to indemnification or advancement of expenses, in whole or in part, under this Section shall also be indemnified by the corporation.
Section 9. Court Ordered Indemnification. Notwithstanding the failure of the corporation to provide indemnification due to a failure to satisfy the conditions of Section 2, and despite any contrary determination by the corporation in the specific case under Sections 4 or 5, an executive of the corporation who is or was a party to a proceeding may apply for indemnification or advancement of expenses, or both, to the court conducting the proceeding, to the circuit court, or to another court of competent jurisdiction, and such court may order indemnification and advancement of expenses, including expenses incurred in seeking court ordered indemnification or advancement of expenses, if the court determines that:
(a) The executive is entitled to indemnification or advancement of expenses, or both, under this Section; or
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(b) The executive is fairly and reasonably entitled to indemnification or advancement of expenses, or both, in view of all the relevant circumstances, regardless of whether such person met any applicable standards of conduct set forth in this Section.
Section 10. Partial Indemnity, etc. If an executive is entitled under any provisions of this Bylaw to indemnification by the corporation for some or a portion of the expenses, judgments, fines, penalties, excise taxes and amounts paid or to be paid in settlement of a proceeding, but not, however, for all of the total amount therefor, the corporation shall nevertheless indemnify such person for the portion thereof to which he is entitled. In connection with any determination by the Board of Directors or arbitration that an executive is not entitled to be indemnified hereunder, the burden shall be on the corporation to establish that he is not so entitled.
Section 11. Other Rights and Remedies. Indemnification and advancement of expenses provided by this Section: (a) shall not be deemed exclusive of any other rights to which an executive seeking indemnification may be entitled under any statute, Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding such office; (b) shall continue as to a person who has ceased to be an executive; and (c) shall inure to the benefit of the heirs, executors and administrators of such a person. It is the intent of this Bylaw to provide the maximum indemnification possible under applicable law. To the extent applicable law or the articles of incorporation of the corporation, as in effect on the date hereof or at any time in the future, permit greater indemnification than is provided for in this Bylaw, the executive shall enjoy by this Bylaw the greater benefits so afforded by such law or provision of the articles of incorporation, and this bylaw and the exceptions to indemnification set forth herein, to the extent applicable, shall be deemed amended without any further action by the corporation to grant such greater benefits. All rights to indemnification under this Section shall be deemed to be provided by a contract between the corporation and the executive who serves in such capacity at any time while these Bylaws and other relevant provisions of the Florida Business Corporation Act and other applicable law, if any, are in effect. Any repeal or modification thereof shall not affect any rights or obligations then existing.
Section 12. Insurance. By resolution passed by the Board of Directors, the corporation may purchase and maintain insurance on behalf of any person who is or was an executive against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this Section.
Section 13. Certain Reductions in Indemnity. The corporation’s indemnification of any executive shall be reduced by any amounts which such person may collect as indemnification: (a) under any policy of insurance purchased and maintained on his behalf by the corporation, or (b) from any other corporation, partnership, joint venture, trust or other enterprise for whom the executive has served at the request of the corporation.
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Section 14. Notification to Shareholders. If any expenses or other amounts are paid by way of indemnification other than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the corporation, the corporation shall, not later than the time of delivery to the shareholders of written notice of the next annual meeting of shareholders, unless such meeting is held within 3 months from the date of such payment, and, in any event, within 15 months from the date of such payment, deliver either personally or by mail to each shareholder of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation.
Section 15. Constituent Corporations. For the purposes of this Section, references to the “corporation” shall include, in addition to any resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger, so that any executive of such a constituent corporation shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he would if its separate existence had contained.
Section 16. Savings Clause. If this Section or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each executive as to liability with respect to any proceeding, whether internal or external, including a grand jury proceeding or an action or suit brought by or in the right of the corporation, to the full extent permitted by any applicable portion of this Section that shall not have been invalidated, or by any applicable provision of Florida law.
Section 17. Effective Date. The provisions of this Section shall be applicable to all proceedings commenced after the adoption hereof, whether arising from acts or omissions occurring before or after its adoption.
ARTICLE IX. AMENDMENT
These Bylaws may be repealed or amended, and new Bylaws may be adopted, by either the Board of Directors or the Shareholders, but the Board of Directors may not amend or repeal any Bylaw adopted by Shareholders if the Shareholders specifically provide such Bylaw not subject to amendment or repeal by the Directors.
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Exhibit 3.3
AMENDMENT TO THE
BYLAWS
OF
FIRST HOME BANCORP, INC.
Effective August 22, 2019, Article IV of First Home Bancorp, Inc.’s Bylaws is amended and restated to read in its entirety as follows:
ARTICLE IV. STOCK CERTIFICATES AND REGISTRATION
Section 1. Certificates. The shares of this corporation’s capital stock may be represented by certificates or be uncertificated. Certificates of stock shall be issued in numerical order, and shall be signed by any two officers of this corporation as may be designated from time to time by the Board of Directors, and may be sealed with the seal of this corporation or a facsimile thereof. The signatures of such officers may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than this corporation itself or an employee of this corporation. If an officer who has signed or whose facsimile signature has been placed upon such certificate ceases to be an officer of this corporation before the certificate is issued, it may be issued by this corporation with the same effect as if the person were an officer on the date of issue. The certificates for such shares, if used, shall be of such tenor and design as the Board of Directors from time to time may adopt. Each such certificate of stock shall state:
| (a) | That the corporation is incorporated under the laws of the State of Florida; |
| (b) | The name of the person to whom issued; |
| (c) | The number and class of shares and the designation of the class or series, if any, which such certificate represents; and |
| (d) | The par value of each share represented by such certificate, or a statement that such shares are without par value. |
Section 2. Uncertificated Shares. The Board of Directors may authorize the issuance of uncertificated shares by this corporation, and may prescribe procedures for the issuance and registration of transfer thereof, and with respect to such other matters relating to uncertificated shares as the Board of Directors may deem appropriate. No such authorization shall affect previously issued and outstanding shares represented by certificates until such certificates shall have been surrendered to this corporation. Within a reasonable time after the issuance or transfer of any uncertificated shares, this corporation shall issue or cause to be issued to the holder of such shares a written statement of the information required to be included on stock certificates under the laws of the State of Florida and these Bylaws. Notwithstanding the adoption of any resolution providing for uncertificated shares, each registered holder of stock represented by uncertificated shares shall be entitled, upon request to the custodian of the stock transfer books of this corporation, or other person designated as the custodian of the records of uncertificated shares, to have physical certificates representing such shares registered in such holder’s name.
Section 3. Transfers. (a) Transfers of stock shall be made only upon the stock transfer books of this corporation, kept at the registered office of this corporation or at its principal place of business, or at the office of its transfer agent or registrar and, in the case of certificated shares, before a new certificate is issued, the previous certificate shall be surrendered for cancellation.
(b) Certificated shares of stock shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate or an assignment separate from the certificate, or by a written power of attorney to sell, assign, and transfer the same, signed by the holder of said certificate. No certificated shares of stock shall be transferred on the books of this corporation until the outstanding certificates therefor have been surrendered to this corporation.
(c) The Board of Directors may, from time to time, by resolution, open a share register in any state of the United States, and may employ such transfer agent or agents or registrars of shares as it may deem advisable to keep such register, and to record transfers of shares therein. The Board of Directors may also by resolution further define the powers and duties of such agents or registrars.
(d) All endorsements, assignments, transfers, share powers or other instruments or indicia of transfer of securities standing in the name of this corporation shall be executed for and in the name of this corporation by any two officers of this corporation as may be designated from time to time by the Board of Directors.
Section 4. Lost Certificates. The Board of Directors may authorize a new certificate or certificates to be issued in place of any certificate or certificates issued by this corporation and which are alleged to have been stolen, lost, or destroyed, only upon the making of an affidavit of that fact by the person claiming the certificate of stock to be stolen, lost, or destroyed. When authorizing the issuance of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such stolen, lost, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give this corporation a bond in such sum as it may direct as indemnity against any claim that may be made against this corporation with respect to the certificate alleged to have been stolen, lost, or destroyed.
Exhibit 4.1
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM – as tenants in common UNIF GIFT MIN ACT Custodian
TEN ENT – as tenants by the entireties (Cust) (Minor)
IT TEN – as joint tenants with right of under Uniform Gifts to Minors
Survivorship and not as tenants Act
In common (State)
TTEE – trustee under Agreement dated
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
| PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE |
||
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
Shares of the common stock represented by this certificate and do hereby irrevocably constitute and appoint ,
attorney, to transfer the said stock on the books of the within-named corporation with full power of substitution in the premises.
DATED
| NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatsoever. |
SIGNATURE GUARANTEED:
| THE SIGNATURE(S) SHOULD BE GUARANTEED BY A ELIGIBLE GUARANTOR INSTITUION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERHSIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. |
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY OTHER STATE OR JURISDICTION (THE “STATE ACTS”). ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, EXCHANGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND THE STATE ACTS, EXCEPT UPON DELIVERY TO THE COMPANY OF (A) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER, OR (B) EVIDENCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT, THE STATE ACTS, OR ANY RULE OR REGULATION PROMULGATED TIIEREUNDER.
Exhibit 4.2
SEE REVERSE FOR IMPORTANT NOTICE REGARDING OWNERSHIP AND TRANSFER RESTRICTIONS AND CERTAIN OTHER INFORMATION INCORPORATED UNDER THE LAWS OF THE STATE OF FLORDIA CUSIP 32050L 50 1 COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF First Home Bancorp Inc. transferable on the books of the Company in Person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Certificate of Incorporation, as amended, and the Bylaws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. Corporate Secretary Chief Executive Officer
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM – as tenants in common UNIF GIFT MIN ACT Custodian
TEN ENT – as tenants by the entireties (Cust) (Minor)
IT TEN – as joint tenants with right of under Uniform Gifts to Minors
Survivorship and not as tenants Act
In common (State)
TTEE – trustee under Agreement dated
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
| PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE |
||||
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
Shares of the preferred stock represented by this certificate and do hereby irrevocably constitute and appoint
, attorney, to transfer the said stock on the books of the within-named corporation with full power of substitution in the premises.
DATED
| NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatsoever. |
SIGNATURE GUARANTEED:
| THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERHSIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. |
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY OTHER STATE OR JURISDICTION (THE “STATE ACTS”). ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, EXCHANGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND THE STATE ACTS, EXCEPT UPON DELIVERY TO THE COMPANY OF (A) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER, OR (B) EVIDENCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT, THE STATE ACTS, OR ANY RULE OR REGULATION PROMULGATED TIIEREUNDER.
Exhibit 4.3
| NUMBER | WARRANT | |
| __ | ______ Shares |
FIRST HOME BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
WARRANT TO PURCHASE SHARES OF COMMON STOCK
is the owner of:
A Warrant to Purchase ________________
FULLY PAID AND NON-ASSESSABLE SHARES OF
COMMON STOCK OF FIRST HOME BANCORP, INC.
NO PAR VALUE
The Warrant represented by this Certificate is exercisable pursuant to, and governed by, the Warrant Agreement of First Home Bancorp, Inc. and Continental Stock Transfer & Trust Company, to all of which provisions the Warrant Holder by acceptance hereof, assents. A copy of the Warrant Agreement may be obtained from First Home Bancorp, Inc..
IN WITNESS WHEREOF, First Home Bancorp, Inc. has caused this certificate to be executed by the signature of its duly authorized officers.
Dated: ______________, 2019
Form of Election to Exercise
All capitalized terms used herein shall have the meaning ascribed to them in the Warrant Agreement of First Home Bancorp, Inc. (“Frist Home”) and Continental Stock Transfer & Trust Company (the “Agreement”).
To exercise the Warrant evidenced by the Warrant Certificate, the Warrant Holder must, by the expiration date, deliver to the Bank, cash or a cashiers’ or certified check payable to the Bank, in an amount equal to $27.00 per share, due at the time the Warrant Holder exercises his or her Warrant(s) for the purchase of Common Stock (subject to adjustment as provided in the Agreement. In addition, the Warrant Holder must provide the information required below and deliver this Warrant Certificate along with such payment.
The undersigned hereby irrevocably elects to exercise, on the date set forth below, this Warrant and acquire ___________ shares of First Home’s Common Stock and represents that on or before such date the holder has tendered payment for such shares. The undersigned requests that said number of shares be in fully registered form, registered in such names and delivered, all as specified in accordance with the instructions set forth below.
If said number of shares of Common Stock is less than all of the shares purchasable hereunder, the undersigned requests that a new Warrant Certificate evidencing the remaining balance of the Warrant evidenced hereby be issued and delivered to the Warrant Holder, unless otherwise specified in the instructions below.
Dated: __________________________________
| ________________________________________________ (Insert Social Security Number of Holder) |
Name ____________________________________________ (Please Print) | |||
| Signature _________________________________________ | Address _________________________________________ | |||
This Warrant may only be exercised by presentation to Continental Stock Transfer & Trust Company, 1 State Street, 30 FL, New York, New York 10004.
The method of delivery of this Warrant Certificate is at the option and risk of the exercising Warrant Holder and the delivery of this Warrant Certificate will be deemed to be made only when actually received. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to assure timely delivery.
(Instructions as to form and delivery of certificates for shares of Common Stock and/or Warrant Certificates)
Name in which a certificate for shares of Common Stock is to be registered if other than in the name of the registered holder of this Warrant Certificate:
________________________________________________________________
Address to which such certificate for shares of Common Stock is to be mailed if other than to the address of the registered holder of this Warrant Certificate:
(Street Address) ___________________________________________________
(City and State) ______________________________ (Zip Code) _____________
Address to which a Warrant Certificate representing unexercised Warrants, if any, is to be mailed if other than to the address of the registered Warrant Holder of this Warrant Certificate as shown on the books of First Home:
(Street Address) ____________________________________________________
(City and State) ______________________________ (Zip Code)______________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY OTHER STATE OR JURISDICTION (THE “STATE ACTS”). ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, EXCHANGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND THE STATE ACTS, EXCEPT UPON DELIVERY TO THE COMPANY OF (A) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER, OR (B) EVIDENCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT, THE STATE ACTS, OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
Exhibit 4.4
FORM OF
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this “Agreement”), dated as of November 14, 2019, is entered into by and between First Home Bancorp, Inc., a Florida corporation (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation (the “Warrant Agent”).
WHEREAS, the Company has agreed to issue Warrants (the “Warrants”) to purchase shares of its common stock, no par value (the “Common Stock”), to certain Company investors;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants;
WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.
2. Warrants.
2.1 Form of Warrant. Each Warrant shall be issued in registered, book entry form only.
2.2 Registration.
2.2.1 Warrant Register. The Warrant Agent shall maintain books (the “Warrant Register”) for the registration of the original issuance and transfers of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.
2.2.2 Registered Holder. Prior to request for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant shall be registered upon the Warrant Register (the “registered holder”), as the absolute owner of such Warrant, for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.
3. Terms and Exercise of Warrants.
3.1 Warrant Price. Each Warrant shall entitle the registered holder thereof, subject to the provisions this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $27.00 per whole share, subject to the adjustments provided in Section 4 hereof and in the last sentence of this Section 3.1. The term “Warrant Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a Warrant is exercised.
3.2 Duration of Warrants. A Warrant may be exercised only during the period (“Exercise Period”) commencing on the date the Warrant is issued and terminating at 5:00 p.m., New York City time on the third anniversary of the date the Warrant is issued (the “Expiration Date”). Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at the close of business on the Expiration Date.
3.3 Exercise of Warrants.
3.3.1 Payment. Subject to the provisions of the Warrant and this Warrant Agreement, a Warrant may be exercised by the registered holder thereof by delivering to the office of the Warrant Agent, or at the office of its successor as Warrant Agent, in the Borough of Manhattan, City and State of New York, with the subscription form, as required by the Warrant Agent, duly executed, and by paying in full the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant by certified check payable to the order of the Warrant Agen.t
3.3.2 Issuance of Shares. As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment of the Warrant Price or upon delivery of the subscription form as set forth in Section 3.3.1, the Company shall issue to the registered holder of such Warrant the number of full shares of Common Stock to which he, she or it is entitled, registered in such name or names as may be directed by him, her or it, and, if such Warrant shall not have been exercised in full, a book entry receipt for the number of shares as to which such Warrant shall not have been exercised. Notwithstanding the foregoing, the Company shall not be obligated to deliver any securities pursuant to the exercise of a Warrant unless (a) a registration statement under the Securities Act of 1933, as amended (the “Act”) with respect to the Common Stock issuable upon exercise of such Warrants is effective and a current prospectus relating to the shares of Common Stock issuable upon exercise of the Warrants is available for delivery to the Warrant holders or (b) in the opinion of counsel to the Company, the exercise of the Warrants is exempt from the registration requirements of the Act and such securities are qualified for sale or exempt from qualification under applicable securities laws of the states or other jurisdictions in which the registered holder resides. Warrants may not be exercised by, or securities issued to, any registered holder in any state in which such exercise or issuance would be unlawful. In the
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event that a registration statement under the Act with respect to the Common Stock underlying the Warrants is not effective or a current prospectus is not available, or an exemption from registration is not available, or because such exercise would be unlawful with respect to a registered holder in any state, the registered holder shall not be entitled to exercise such Warrants and such Warrants may have no value and expire worthless. In no event will the Company be required to “net cash settle” the warrant exercise.
3.3.3 Valid Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and nonassessable.
3.3.4 Date of Issuance. Each person in whose name any such shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was exercised and payment of the Warrant Price was made, irrespective of the date of delivery of such shares of Common Stock, except that, if the date of such exercise and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.
4. Adjustments.
4.1 Stock Dividends—Split-Ups. If, after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock, or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock.
4.2 Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 4.6, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.
4.3 Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in Sections 4.1 and 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.
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4.4 Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than a change covered by Section 4.1 or 4.2 hereof or one that solely affects the par value of such shares of Common Stock), or, in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or, in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety, in connection with which the Company is dissolved, the Warrant holders shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the Warrant holder would have received if such Warrant holder had exercised his, her or its Warrant(s) immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 4.1 or 4.2, then such adjustment shall be made pursuant to Sections 4.1, 4.2, 4.3 and this Section 4.4. The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.
4.5 Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1, 4.2, 4.3 or 4.4, then, in any such event, the Company shall give written notice to each Warrant holder, at the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.
4.6 No Fractional Shares. Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up or down to the nearest whole number the number of shares of Common Stock to be issued to the Warrant holder.
5. Transfer and Exchange of Warrants.
5.1 Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant in the Warrant Register, upon receipt of appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent.
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5.2 Procedure for Transfer or Exchange of Warrants. A registered holder of a Warrant deliver to the Warrant Agent a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder of the Warrants, an equal aggregate number of Warrants; provided, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer is exempt from registration under the Federal Securities Act of 1933, as amended and indicating whether the new Warrants must also bear a restrictive legend.
5.3 Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a Warrant for a fraction of a Warrant.
5.4 Service Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.
6. Other Provisions Relating to Rights of Holders of Warrants.
6.1 No Rights as Stockholder. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.
6.2 Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.
6.3
7. Concerning the Warrant Agent and Other Matters.
7.1 Payment of Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.
7.2 Resignation, Consolidation, or Merger of Warrant Agent.
7.2.1 Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice, submit his, her or its Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such
5
court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.
7.2.2 Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.
7.2.3 Merger or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Agreement without any further act.
7.3 Fees and Expenses of Warrant Agent.
7.3.1 Remuneration. The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.
7.3.2 Further Assurances. The Company agrees to perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement.
7.4 Liability of Warrant Agent.
7.4.1 Reliance on Company Statement. Whenever in the performance of its duties under this Warrant Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the Chief Executive Officer or any Executive Vice President or Senior Vice President of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.
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7.4.2 Indemnity. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except as a result of the Warrant Agent’s gross negligence, willful misconduct or bad faith.
7.4.3 Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.
7.5 Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and, among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.
8. Miscellaneous Provisions.
8.1 Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.
8.2 Notices. Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be delivered by hand or sent by registered or certified mail or overnight courier service, addressed (until another address is filed in writing by the Company with the Warrant Agent) as follows:
First Home Bancorp, Inc.
Attention: Jeffrey M. Hunt
SVP and Chief Strategy Officer
700 Central Avenue, Suite 102
St. Petersburg, Florida 33701
Email: jhunt@firsthomebank.com
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Any notice, statement or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be delivered by hand or sent by registered or certified mail or overnight courier service, addressed (until another address is filed in writing by the Warrant Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
1 State Street, 30 FL
New York, New York 10004
Attn: Compliance Department
Any notice, sent pursuant to this Warrant Agreement shall be effective, if delivered by hand, upon receipt thereof by the party to whom it is addressed, if sent by overnight courier, on the next business day of the delivery to the courier, and if sent by registered or certified mail on the third day after registration or certification thereof.
8.3 Applicable Law. The validity, interpretation and performance of this Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8.2 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.
8.4 Persons Having Rights under this Agreement. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the registered holders of the Warrants.
8.5 Examination of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the registered holder of any Warrant. The Warrant Agent may require any such holder to submit his, her or its Warrant for inspection by it.
8.6 Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
8.7 Effect of Headings. The section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.
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8.8 Amendments. This Agreement may be amended by the parties hereto without the consent of any registered holder for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the registered holders. All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the registered holders of a majority of the then outstanding Warrants.
8.9 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
[Signature page follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year first above written.
| FIRST HOME BANCORP, INC. | ||
| By: | /s/ Anthony N. Leo | |
| Name: | Anthony N. Leo | |
| Title: | Chief Executive Officer |
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY | ||
| By: | /s/ Steven Vacante | |
| Name: | Steven Vacante | |
| Title: | Vice President |
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Exhibit 4.5
SEE REVERSE FOR IMPORTANT NOTICE REGARDING OWNERSHIP AND TRANSFER RESTRICTIONS AND CERTAIN OTHER INFORMATION CACIN INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA CUSIP 32050L 60 1 SERIES B CONVERTIBLE PREFERRED STOCK SEE REVERSE FOR CERTAIN DEFINITIONS FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK $1,000 LIQUIDATION PREFERENCE PER SHARE First Home Bancorp Inc. The shares represented by this Certificate are transferable only on the stock transfer books of First Home Bancorp, Inc. by the holder of record hereof, or by his duly authorized attorney or legal representative, upon the surrender of this Certificate properly endorsed. This Certificate, and the shares represented hereby, are issued and shall be held subject to all the provisions of the Articles of Incorporation of First Home Bancorp, Inc., and any amendments thereto (copies of which are on file with the Corporate Secretary of First Home Bancorp, Inc. and the Secretary of State of the State of Florida), to all of which provisions the holder by acceptance hereof assents. First Home Bancorp, Inc. will furnish the holder hereof a full statement of such information on request and without charge. The shares evidenced by this Certificate are not of an insurable type and are not insured by the Federal Deposit Insurance Corporation. IN WITNESS WHEREOF, First Home Bancorp, Inc. has caused this Certificate to be executed by the signature of its duly authorized officers and has caused its corporate seal to be hereunto affixed 0000001 Corporate Secretary Chief Executive Officer
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM – as tenants in common UNIF GIFT MIN ACT Custodian
TEN ENT – as tenants by the entireties (Cust) (Minor)
IT TEN – as joint tenants with right of under Uniform Gifts to Minors
Survivorship and not as tenants Act
In common (State)
TTEE – trustee under Agreement dated
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
| PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE |
||||
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
Shares of the preferred stock represented by this certificate and do hereby irrevocably constitute and appoint
, attorney, to transfer the said stock on the books of the within-named corporation with full power of substitution in the premises.
DATED
| NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatsoever. |
SIGNATURE GUARANTEED:
| THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERHSIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. |
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY OTHER STATE OR JURISDICTION (THE “STATE ACTS”). ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, EXCHANGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND THE STATE ACTS, EXCEPT UPON DELIVERY TO THE COMPANY OF (A) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER, OR (B) EVIDENCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT, THE STATE ACTS, OR ANY RULE OR REGULATION PROMULGATED TIIEREUNDER.
Exhibit 5.1
IGLER AND PEARLMAN, P.A.
May 11, 2021
Board of Directors
BayFirst Financial Corp.
700 Central Avenue
St Petersburg, Florida 33701
Re: Registration Statement on Form S-1
Members of the Board:
We have acted as counsel to BayFirst Financial Corp., a Florida corporation (the “Company”), in connection with the registration under the Securities Act of 1933, as amended (the “Act”), of 3,859,911.735 shares of common stock, no par value, (the “Shares”), 43,044 warrants to purchase shares of Company common stock (the “Warrants”), and 43,044 shares of Company common stock underlying the Warrants (the “Warrant Shares”) pursuant to a registration statement on Form S-1 (Registration No. 333- ) (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission on May 11, 2021. The Registration Statement relates resale of the Shares, the Warrants, and the Warrant Shares.
For purposes of providing the opinions contained herein, we have reviewed the Registration Statement and the corporate proceedings of the Company with respect to the authorization of the issuance of the Shares and the Warrants. We have also examined originals or copies of such documents, corporate records, certificates of public officials, and other instruments and have conducted such other investigations of law and fact as we have deemed necessary or advisable for purposes of our opinion. In our examination, we have assumed, without verification, the genuineness of all signatures, the authenticity of all documents and instruments submitted to us as originals, and the conformity to the originals of all documents and instruments submitted to us as certified or conformed copies.
This opinion letter is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act.
Based on and subject to the foregoing, and subject to the qualifications, assumptions and limitations stated herein, it is our opinion that: (i) the Shares and the Warrants have been validly issued, are fully paid, and are nonassessable; and (ii) when the Company receives payment for the Warrant Shares in accordance with the terms of the Warrants, the Warrant Shares will be validly issued, fully paid, and nonassessable.
The opinions which we render herein are limited to those matters governed by the laws of the State of Florida, including all Florida statutes and all Florida court decisions that affect the interpretation of such laws, in each case as of the date hereof. Our opinions expressed herein are as of the date hereof, and we assume no obligation to revise or supplement the opinions rendered herein should such laws be changed by legislative or regulatory action, judicial decision, or otherwise. We express no opinion as to compliance with the “blue sky” laws of any jurisdiction and the opinions set forth herein are qualified in that respect.
This opinion letter is provided for use solely in connection with the transactions contemplated by the Registration Statement and may not be used, circulated, quoted, or otherwise relied on for any other purpose without our express written consent. No opinion may be implied or inferred beyond the opinion expressly stated in the numbered clauses above.
We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the references to us under the heading “Legal Matters” in the prospectus forming part of the Registration Statement, as such may be amended or supplemented. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations promulgated thereunder.
Sincerely,
/s/ Igler and Pearlman, P.A.
Igler and Pearlman, P.A.
Exhibit 10.1
Execution Version
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of April 18, 2017, is made by and among First Home Bancorp, Inc., a corporation organized under the laws of the State of Florida (the “Company”), First Home Bank, a banking corporation organized under the laws of the State of Florida and wholly-owned subsidiary of the Company (the “Bank” and collectively, with the Company, the “Employer”), and Anthony N. Leo, an individual resident of Florida (the “Executive”).
The Employer presently employs the Executive as its Chief Executive Officer. The Employer recognizes that the Executive’s leadership and contribution to the well-being of the Bank and the Company is substantial. The Employer desires to provide for the continued employment of the Executive as its Chief Executive Officer which the Employer has determined will reinforce and encourage the continued dedication of the Executive to the Employer and will promote the best interests of the Bank, the Company, and the Company’s shareholders. The Executive is willing to continue to serve the Employer on the terms and conditions herein provided. Certain terms used in this Agreement are defined in Section 20 hereof.
In consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Employment; Title; Duties. The Employer shall continue to employ the Executive, and the Executive shall continue to serve the Employer, as the Chief Executive Officer of the Company and the Bank upon the terms and conditions set forth herein. The Executive shall have such authority and responsibilities consistent with his positions as are set forth in the Company’s and Bank’s Bylaws or assigned by the Company’s and Bank’s Board of Directors (the “Board”) from time to time. The Executive shall report to the Board and shall devote his full business time, attention, skill and efforts to the performance of his duties hereunder, except during periods of illness or periods of vacation and leaves of absence consistent with Employer policy. Further, the Executive’s service on the boards of directors (or similar body) of other business or charitable entities is subject to the prior approval of the Board. The Employer shall have the right to require the Executive to resign from any board or similar body on which the Executive may then serve if the Board determines that such activity (i) interferes with the effective discharge of the Executive’s duties and responsibilities to the Employer or that any business related to such service is then in competition with any business of the Company or the Bank, their successors or assigns or (ii) could adversely affect the reputation of the Company or the Bank.
The Company shall nominate the Executive for election as a director at such times as necessary so that the Executive will, if elected by shareholders, remain a director of the Company throughout the Term of this Agreement. The Board shall undertake every lawful effort to ensure that the Executive continues throughout the term of employment to be elected or reelected as a director of the Bank.
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2. Term. Unless earlier terminated as provided herein, the Executive’s employment under this Agreement shall be for the period commencing on the date hereof and ending on December 31, 2019 (the “Term”). On December 31, 2017 and each December 31st during the Term of this Agreement thereafter, the Term hereof shall automatically be extended for an additional one-year period beyond the then-effective expiration date unless a written Notice of Termination from the Employer or the Executive is received 90 days prior to such anniversary advising the other that this Agreement shall not be further extended. If either party provides timely notice of non-renewal of the Agreement, but the Executive continues to provide services to the Employer as an employee, such post-expiration employment shall be deemed to be performed on an “at-will” basis and either party may thereafter terminate such employment with or without notice and for any or no reason and without any obligations determined by reference to this Agreement, including Section 9.
3. Compensation and Benefits.
(a) As of the date of this Agreement, the Employer shall pay the Executive an annual base salary rate of $220,000, which shall be paid in accordance with the Employer’s standard payroll procedures as in effect from time to time. The Board (or an appropriate committee of the Board) shall evaluate the Executive’s performance at least annually. While also taking into account any annual cost of living increases, the Board intends increase his compensation in an amount as determined by the Board upon favorable annual evaluations of the Employer’s and Executive’s performance.
(b) The Executive will be eligible to participate in the Bank’s Annual Incentive Plan and any of the Bank’s long-term or short-term incentive plans on the same terms and conditions and in relative magnitude to other senior executive officers of the Bank subject to the terms and conditions of such plans and, if applicable, the discretion of the Board in determining the frequency and magnitude of discretionary bonuses under such plans.
(c) The Executive shall be entitled to defined benefit retirement plan which provides that beginning upon his attaining age 62, subject to his satisfying the vesting requirements, the Executive shall receive for the next 20 years annual compensation of $25,000. Vesting of these benefits shall occur on December 31, 2022, but such vesting shall be accelerated by a Change of Control. The Employer shall determine the method for funding such deferred compensation benefits.
(d) The Executive shall be eligible to participate in the Company’s long-term equity incentive program or under any similar or successor plan adopted by the Company under which eligible participants may be granted stock options, restricted stock, and other awards as determined by the Board. Any options or similar awards shall be issued to the Executive at an exercise price of not less than the stock’s current fair market value (as determined in compliance with Treasury Regulation § 1.409A-1(b)(5)(iv)) as of the date of grant, and the number of shares subject to such grant shall be fixed on the date of grant.
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(e) In addition to the benefits specifically described in this Agreement, the Executive shall be eligible to participate in all retirement, disability, welfare, health, dental or other benefits plans or programs of the Employer now or hereafter applicable generally to employees of the Employer. The parties agree that the benefits stated in this Section 3(d) shall be subject to the terms of such plans or programs applicable generally to employees of the Employer.
(f) The Employer shall reimburse the Executive for reasonable and necessary travel, and other business expenses related to the Executive’s duties in accordance with the Employer’s business expense reimbursement policy; provided however that the Executive shall, as a condition of any such reimbursement, submit verification of the nature and amount of such expenses in accordance with such reimbursement policies and in sufficient detail to comply with rules and regulations promulgated by the United States Treasury Department. In addition, the Employer shall reimburse the Executive for educational expenses related to the Executive’s professional development and for membership in professional and civic organizations to the extent such activities are consistent with the Employer’s strategic objectives.
All expenses eligible for reimbursements described in this Agreement must be incurred by the Executive during the Term of this Agreement to be eligible for reimbursement. All in-kind benefits described in this Section 3 must be provided by the Employer during the Term of this Agreement. The amount of reimbursable expenses incurred, and the amount of in-kind benefits provided, in one taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits provided, in any other taxable year. Each category of reimbursement shall be paid as soon as administratively practicable, but in no event shall any such reimbursement be paid after the last day of the calendar year following the calendar year in which the expense was incurred. Neither rights to reimbursement nor in-kind benefits is subject to liquidation or exchanges for other benefits.
(g) The Executive shall be entitled to paid time off during each calendar year in accordance with (i) any banking rules or regulations governing vacation and (ii) the paid time off policy of the Employer for senior executive officers, to be taken at such time or times as the Executive and the Employer shall mutually determine. Earned but unused paid time off shall be accrued in accordance with the Employer’s paid time off policy. Any payments made by the Employer to the Executive as compensation in lieu of paid time off shall be paid in accordance with the Employer’s standard payroll procedures.
(h) The Bank and the Company shall apportion any payments or benefits paid to the Executive pursuant to this Agreement among themselves as they may agree from time to time in proportion to services actually rendered by the Executive for such entity; provided, however, that they must satisfy in full all such obligations in a timely manner as set forth in this Agreement regardless of any agreed-upon apportionment. Executive’s receipt of satisfaction in full of any such obligation from the Company or the Bank shall extinguish the obligations of the other with respect to such obligation.
(i) The Executive agrees to repay any compensation previously paid or otherwise made available to the Executive under this Agreement that is subject to recovery under any applicable law (including any rule of any exchange or service through which the securities of the Company are then traded), including, but not limited to, the following circumstances:
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(i) where such compensation was in excess of what should have been paid or made available because the determination of the amount due was based, in whole or in part, on materially inaccurate financial information of the Company or the Bank, including but not limited to, when the Company shall have a restatement of financial results attributable to the Executive’s actions, whether intentional or negligent;
(ii) where such compensation constitutes “excessive compensation” within the meaning of 12 C.F.R. Section 263;
(iii) where the Executive has committed, is substantially responsible for, or has violated, the respective acts, omissions, conditions, or offenses outlined under 12 C.F.R. Section 359.4(a)(4); and
(iv) if, while the Executive is also a senior executive officer of the Bank, the Bank becomes, and for so long as the Bank remains, subject to the provisions of 12 U.S.C. Section 1831o(f), where such compensation exceeds the restrictions imposed on the senior executive officers of such an institution.
The Executive agrees to return promptly any such compensation identified by the Employer by written notice provided pursuant to Section 11. If the Executive fails to return such compensation promptly, the Executive agrees that the amount of such compensation may be deducted from any and all other compensation owed to the Executive by the Employer. If the Executive is then employed by the Employer, the Executive acknowledges that the Employer may take appropriate disciplinary action (up to, and including, Termination of Employment) if the Executive fails to return such compensation. The Executive acknowledges the Employer’s rights to engage in any legal or equitable action or proceeding in order to enforce the provisions of this Section 3(i). The provisions of this Section 3(i) shall be modified to the extent, and remain in effect for the period, required by applicable law.
4. Termination.
(a) The Executive’s employment under this Agreement may be terminated prior to the end of the Term of this Agreement, if applicable, only as follows (each a “Terminating Event”):
(i) upon the death of the Executive. If the Executive’s employment is terminated because of the Executive’s death, the Employer shall pay the Executive’s estate any sums due his as base salary or reimbursement of expenses through the end of the month during which death occurred in accordance with the Employer’s standard payroll procedures. The Employer shall also pay the Executive’s estate any bonus earned through the date of death. Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(b) of this Agreement. Any bonus that is earned in the year of death will be paid on the earlier of (i) 70 days after the end of the year in which the Executive died or (ii) the first pay period following the Company’s press release announcing its financial performance for the year in which the Executive died. To the extent that the bonus is performance-based, the amount of the bonus will be calculated by taking into account the performance of the Company for the entire year and prorated through the date of the Executive’s death.
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(ii) if the Executive is Disabled and has been paid under the Employer’s accident and health plan for a period of 90 days. During the period of any Disability leading up to the termination of the Executive’s employment under this provision, the Employer shall continue to pay the Executive his full base salary at the rate then in effect and all perquisites and other benefits (other than any bonus) in accordance with the Employer’s standard payroll procedures until the Executive becomes eligible for benefits under any long-term disability plan or insurance program maintained by the Employer; provided, however that, the amount of any such payments to the Executive shall be reduced by the sum of the amounts, if any, payable to the Executive for the same period under any other accident and health plan disability benefit covering the Executive. Furthermore, the Employer shall pay the Executive any bonus earned through the date of onset of the physical or mental impairment that led to the Disability. Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(b) of this Agreement. Any bonus that is earned in the year which includes the date of onset of the physical or mental impairment that led to the Disability will be paid on the earlier of (i) 70 days after the end of the year in which the Executive became Disabled or (ii) the first pay period following the Company’s press release announcing its financial performance for the year in which the Executive became Disabled.
(iii) by the Employer for Cause upon delivery of a Notice of Termination to the Executive. If the Executive’s employment is terminated for Cause under this provision, the Executive shall receive only any sums due his as base salary and reimbursement of expenses through the date of such termination, which shall be paid in accordance with the Employer’s standard payroll procedures.
(iv) by the Employer without Cause or by the Executive for Good Reason prior to a Change in Control or more than 12 months following a Change in Control upon delivery of a Notice of Termination. If the Executive’s employment is terminated without Cause or for Good Reason under this provision, subject to the possibility of a six-month delay described below in Section 17 and receipt of the release described below in Section 4(b), the Executive shall be entitled to the following:
(1) beginning on the first day of the month following date of the Executive’s termination, and continuing on the first day of the month for the next 17 months, the Employer shall pay to the Executive severance compensation in an amount equal to 1/12th of his annual compensation. For this purpose annual compensation means (x) the Executive’s rate of base salary when the termination occurs plus (y) the average of any cash bonuses or cash incentive compensation awarded for the last two calendar years ended immediately before the year in which the termination occurred, regardless of when the bonuses or incentive compensation earned for the preceding calendar years were paid and regardless of whether all or part of the bonuses or incentive compensation were subject to elective deferral or vesting. The Employer shall also pay the Executive any bonus
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Execution Version
earned or accrued through the date of termination (including any amounts awarded for previous years but which were not yet vested). Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(b) of this Agreement. Any bonus that is earned in the year of the Executive’s termination will be paid on the earlier of (i) 70 days after the end of the year in which the Executive’s employment was terminated or (ii) the first pay period following the Company’s press release announcing its financial performance for the year in which the Executive’s employment was terminated. To the extent that the bonus is performance-based, the amount of the bonus will be calculated by taking into account the performance of the Bank for the entire year and prorated through the date of the Executive’s termination of employment; and
(2) the Executive may continue participation, in accordance with the terms of the applicable benefits plans, in the Employer’s group health plan pursuant to plan continuation rules under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). In accordance with COBRA, assuming the Executive is covered under the Employer’s group health plan as of his date of termination, the Executive will be entitled to elect COBRA continuation coverage for the legally required COBRA period (the “Continuation Period”). If the Executive elects COBRA coverage for group health coverage, he will be obligated to pay the portion of the full COBRA cost of the coverage equal to an active employee’s share of premiums for coverage for the respective plan year and the Employer’s share of such premiums shall be treated as taxable income to the Executive. In addition, if the terms of the applicable plan documents do not allow the Employer to continue to provide COBRA coverage to the Executive and his covered dependents (if applicable), beyond the expiration of the statutorily-proscribed COBRA period, the Employer shall make monthly cash payments to the Executive in an amount equal to the Employer’s share of the monthly COBRA premiums for coverage for the Executive for the last month of COBRA coverage, such amounts to be paid for the duration of the period described in Section 9 hereof. Notwithstanding the above, the Employer’s obligations hereunder with respect to the foregoing benefits provided in this subsection (2) shall be limited to the extent that if the Executive obtains any coverage pursuant to a subsequent employer’s benefit plans which duplicates the Employer’s coverage, the duplicative coverage may be terminated by the Employer. This subsection (2) shall not be interpreted so as to limit any benefits to which the Executive, the Executive’s spouse, dependents or beneficiaries may be entitled under any of the Employer’s employee benefit plans, programs, or practices following the Executive’s termination of employment, including, without limitation, retiree medical and life insurance benefits, provided that there shall be no duplication of benefits; and
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(3) Notwithstanding anything in this Agreement to the contrary, if the Executive breaches Section 9 of this Agreement, he will not thereafter be entitled to receive any further compensation or benefits pursuant to Section 4(a)(iv) other than the right to participate in COBRA.
(v) by the Executive effective upon the 30th day after delivery of a Notice of Termination. If the Executive resigns or retires under this provision, the Executive shall receive any sums due his as base salary or reimbursement of expenses through the date of such termination, which shall be paid in accordance with the Employer’s standard payroll procedures.
(vi) by the Employer without Cause within 12 months following a Change in Control upon delivery of a Notice of Termination to the Executive or by the Executive for Good Reason within 12 months following a Change in Control. If the Executive desires to terminate this Agreement for Good Reason, he must deliver a Notice of Termination within a 90-day period beginning on the Good Reason event and the Employer shall have not less than 30 days to remedy this condition. If the Employer does not remedy this condition, the Executive’s employment shall be terminated on the 30th day following the Executive’s delivery of his Notice of Termination. If the Executive’s employment is terminated pursuant to this provision, in addition to other rights and remedies available in law or equity, subject to the possibility of a six-month delay described below in Section 17 and receipt of the release described below in Section 4(b), the Executive shall be entitled to the following:
(1) the Employer shall pay the Executive in a single lump sum cash payment within 60 days of the date of termination severance compensation in an amount equal to his then current annual compensation multiplied by 2, plus any bonus earned or accrued through the date of termination (including any amounts awarded for previous years but which were not yet vested). For this purpose annual compensation means (x) the Executive’s rate of base salary when the Change in Control occurs plus (y) the average of any cash bonuses or cash incentive compensation awarded for the last two calendar years ended immediately before the year in which the Change in Control occurred, regardless of when the bonuses or incentive compensation earned for the preceding calendar years were paid and regardless of whether all or part of the bonuses or incentive compensation were subject to elective deferral or vesting;
(2) the Executive may continue participation, in accordance with the terms of the applicable benefits plans, in the Employer’s group health plan pursuant to plan continuation rules under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). In accordance with COBRA, assuming the Executive is covered under the Employer’s group health plan as of his date of termination, the Executive will be entitled to elect COBRA continuation coverage for the legally required COBRA period (the “Continuation Period”). If the Executive elects COBRA coverage for group health coverage, he will be obligated to pay the portion of the full COBRA cost of the coverage equal to an active employee’s share of premiums for coverage for the respective plan year and the Employer’s share of such premiums shall be treated as taxable income to
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the Executive. In addition, if the terms of the applicable plan documents do not allow the Employer to continue to provide COBRA coverage to the Executive and his covered dependents (if applicable), beyond the expiration of the statutorily-proscribed COBRA period, the Employer shall make monthly cash payments to the Executive in an amount equal to the Employer’s share of the monthly COBRA premiums for coverage for the Executive for the last month of COBRA coverage, such amounts to be paid for the duration of the period described in Section 9 hereof. Notwithstanding the above, the Employer’s obligations hereunder with respect to the foregoing benefits provided in this subsection (2) shall be limited to the extent that if the Executive obtains any coverage pursuant to a subsequent employer’s benefit plans which duplicates the Employer’s coverage, the duplicative coverage may be terminated by the Employer. This subsection (2) shall not be interpreted so as to limit any benefits to which the Executive, the Executive’s spouse, dependents or beneficiaries may be entitled under any of the Employer’s employee benefit plans, programs, or practices following the Executive’s termination of employment, including, without limitation, retiree medical and life insurance benefits, provided that there shall be no duplication of benefits;
(3) the restrictions on any outstanding incentive awards (including restricted stock) granted to the Executive under the Bank’s long-term equity incentive program or any other incentive plan or arrangement shall lapse and such awards shall become 100% vested and all stock options granted to the Executive shall become immediately exercisable and shall become 100% vested; and
(4) Notwithstanding anything in this Agreement to the contrary, if the Executive breaches Section 9 of this Agreement, he will not thereafter be entitled to receive any further compensation or benefits pursuant to Section 4(a)(vi) other than the right to participate in COBRA.
(b) With the exceptions of the provisions of this Section 4, and the express terms of any benefit plan under which the Executive is a participant, it is agreed that, upon termination of the Executive’s employment, the Employer shall have no obligation to the Executive for, and the Executive waives and relinquishes, any further compensation or benefits (exclusive of COBRA benefits). Unless otherwise stated in this Section 4, the effect of termination on any outstanding incentive awards, stock options, stock appreciation rights, performance units, or other incentives shall be governed by the terms of the applicable benefit or incentive plan and/or the agreements governing such incentives. Within 60 days of termination of the Executive’s employment, and as a condition to the Employer’s obligation to pay any severance hereunder, the Employer and the Executive shall enter into a release in the form provided by the Employer, and Executive may not revoke such release within the revocation period stated in such release, which shall acknowledge such remaining obligations and discharge the Employer and its officers, directors and employees with respect to their actions for or on behalf of the Employer, from any other claims or obligations arising out of or in connection with the Executive’s employment by the Employer, including the circumstances of such termination. In addition, if such severance payment is made by the Employer, and if the 60-day period spans two calendar years, regardless of when such release is executed by the Executive, such severance payment must be made in the subsequent calendar year, regardless of when the release is executed by the Executive.
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(c) As a condition to the Employer’s obligation to pay any amounts hereunder, regardless of the reason for the termination of the Executive’s employment, the Executive shall resign as a director of the Company and any of its subsidiaries, if the Executive is then serving in any such position.
(d) The parties intend that the severance payments and other compensation provided for herein are reasonable compensation for Executive’s services to the Employer and shall not constitute “excess parachute payments” within the meaning of Section 280G of the Code. If the Employer’s independent accounting firm or independent tax counsel appointed by the Employer (“Tax Counsel”) determine that any or the aggregate value (as determined pursuant to Section 280G of the Code) of all payments, distributions, accelerations of vesting, awards and provisions of benefits by the Employer to or for the benefit of Executive (whether paid or payable, distributed or distributable, accelerated, awarded or provided pursuant to the terms of this Agreement or otherwise), (a “Payment”) would constitute an excess parachute payment and be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), such Payment shall be reduced to the least extent necessary so that no portion of the Payment shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit received by the Executive as a result of such reduction will exceed the net after-tax benefit that would have been received by the Executive if no such reduction were made. The Payment shall be reduced by the Employer pursuant to the foregoing sentence in a manner that Tax Counsel determines maximizes the Executive’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where Tax Counsel determines that two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. If, however, such Payment is not reduced as described above, then such Payment shall be paid in full to the Executive and the Executive shall be responsible for payment of any Excise Taxes relating to the Payment.
All calculations and determinations under this Section 4 shall be made by Tax Counsel whose determinations shall be conclusive and binding on the Employer and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 4, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Employer and the Executive shall furnish Tax Counsel with such information and documents as Tax Counsel may reasonable request in order to make its determinations under this Section. The Employer shall bear all costs the Tax Counsel may reasonably incur in connection with its services. In connection with making determinations under this Section, the Tax Counsel shall take into account the value of any reasonable compensation for services to be rendered by the Executive before or after the Change in Control, including without limitation, the Executive’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenant, and the Employer shall cooperate in good faith in connection with any such valuations and reasonable compensation positions.
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(e) Notwithstanding anything contained in this Agreement to the contrary,
(i) if the Executive is suspended or temporarily prohibited from participating, in any way or to any degree, in the conduct of the Company’s or the Bank’s affairs by (1) a notice served under Section 8(e) or (g) of Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. Section 1818 (e) or (g)) or (2) as a result of any other regulatory or legal action directed at the Executive by any regulatory or law enforcement agency having jurisdiction over the Executive (each of the foregoing referred to herein as a “Suspension Action”), and if this Agreement is not terminated, the Employer’s obligations under this Agreement shall be suspended as of the earlier of the effective date of such Suspension Action or the date on which the Executive was provided notice of the Suspension Action, unless stayed by appropriate proceedings. If the charges underlying the Suspension Action are dismissed, the Employer shall (1) pay on the first day of the first month following such dismissal of charges (or as provided elsewhere in this Agreement) the Executive all of the compensation withheld while the obligations under this Agreement were suspended; and (2) reinstate any such obligations which were suspended.
(ii) if the Executive is removed or permanently prohibited from participating, in any way or to any degree, in the conduct of the Company’s or the Bank’s affairs by (1) an order issued under Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. Section 1818 (e)(4) or (g)(1)) or (2) any other legal or law enforcement action (each of the foregoing referred to herein as a “Removal Action”), all obligations of the Executive under this Agreement shall terminate as of the effective date of the Removal Action, but any vested rights of the parties hereto shall not be affected.
(iii) if the Company or the Bank is in default (as defined in Section 3(x)(1) of the FDIA, 12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but this Section (4)(e) shall not affect any vested rights of the parties hereto.
(iv) if the FDIC is appointed receiver or conservator under Section 11(c) of the FDIA (12 U.S.C. Section 1821(c)) of any depository institution controlled by the Company, the Company shall have the right to terminate all obligations of the Company under this Agreement as of the date of such receivership or conservatorship, other than any rights of the Executive that vested prior to such appointment. Any vested rights of the Executive may be subject to such modifications that are consistent with the authority of the FDIC.
(f) If the FDIC provides open bank assistance under Section 13(c) of the FDIA (12 U.S.C. 1823(c)) to the Company or any depository institution controlled by the Company, but excluding any such assistance provided to the industry generally, the Company shall have the right to terminate all obligations of the Company under this Agreement as of the date of such assistance, other than any rights of the Executive that vested prior to the FDIC action. Any vested rights of the Executive may be subject to such modifications that are consistent with the authority of the FDIC.
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(g) If the FDIC requires a transaction under Section 13(f) or 13(k) of the FDIA (12 U.S.C. 1823(f) and (k)) by the Company or any depository institution controlled by the Company, the Company shall have the right to terminate all obligations of the Company under this Agreement as of the date of such transaction, other than any rights of the Executive that vested prior to the transaction. Any vested rights of the Executive may be subject to such modifications that are consistent with the authority of the FDIC.
(h) Notwithstanding anything contained in this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder. In addition, all obligations under this Agreement are further subject to such conditions, restrictions, limitations and forfeiture provisions as may separately apply pursuant to any applicable state banking laws.
(i) In the event that the Company or the Bank is subject to Part 359 of the FDIC Rules and Regulations (12 C.F.R. Section 359, et seq.), then notwithstanding the timing for the payment of any severance amounts described in this Section 4, no such payments shall be made or commence, as applicable, that require the concurrence or consent of the appropriate federal banking agency of the Company or the Bank pursuant to Part 359 prior to the receipt of such concurrence or consent. Any payments suspended by operation of this Section 4(i) shall be paid as a lump sum within 30 days following receipt of the concurrence or consent of the appropriate federal banking agency of the Company or the Bank or as otherwise directed by such federal banking agency.
5. Ownership of Work Product. The Employer shall own all Work Product arising during the course of the Executive’s employment (prior, present or future). For purposes hereof, “Work Product” shall mean all intellectual property rights, including all Trade Secrets, U.S. and international copyrights, patentable inventions, and other intellectual property rights in any programming, documentation, technology or other work product that relates to the Company or any Affiliates, their business or customers and that the Executive conceives, develops, or delivers to the Employer at any time during his employment, during or outside normal working hours, in or away from the facilities of the Employer, and whether or not requested by the Employer. If the Work Product contains any materials, programming or intellectual property rights that the Executive conceived or developed prior to, and independent of, the Executive’s work for the Employer, the Executive agrees to point out the pre-existing items to the Employer and the Executive grants the Employer a worldwide, unrestricted, royalty-free right, including the right to sublicense such items. The Executive agrees to take such actions and execute such further acknowledgments and assignments as the Employer may reasonably request to give effect to this provision.
6. Protection of Trade Secrets. The Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, the Executive agrees not to use or disclose any Trade Secrets of the Company or any Affiliates during or after his employment. “Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list, that (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
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7. Protection of Other Confidential Information. In addition, the Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, not to use or disclose any Confidential Business Information of the Company or any Affiliates during his employment and for a period of 36 months following termination of the Executive’s employment. “Confidential Business Information” shall mean any internal, non-public information (other than Trade Secrets already addressed above) concerning the Company’s or its Affiliate’s financial position and results of operations (including revenues, assets, net income, etc.); annual and long-range business plans, product or service plans; marketing plans and methods; training, education and administrative manuals; customer and supplier information and purchase histories; and employee lists. The provisions of Sections 6 and 7 shall also apply to protect Trade Secrets and Confidential Business Information of third parties provided to the Employer under an obligation of secrecy.
8. Return of Materials. The Executive shall surrender to the Employer, promptly upon its request and in any event upon termination of the Executive’s employment, all media, documents, notebooks, computer programs, handbooks, data files, models, samples, price lists, drawings, customer lists, prospect data, or other material of any nature whatsoever (in tangible or electronic form) in the Executive’s possession or control, including all copies thereof, relating to the Company or its Affiliates, their businesses or customers. Upon the request of the Employer, the Executive shall certify in writing compliance with the foregoing requirement.
9. Restrictive Covenants.
(a) No Solicitation of Customers. During the Executive’s employment with the Employer and for a period of 18 months thereafter, the Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (i) solicit, divert, or appropriate to or for a Competing Business, or (ii) attempt to solicit, divert, or appropriate to or for a Competing Business any person or entity that is or was a customer of the Company or any of its Affiliates on the date of termination and with whom the Executive has had material contact.
(b) No Recruitment of Personnel. During the Executive’s employment with the Employer and for a period of 18 months thereafter, the Executive shall not, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (i) solicit, divert or hire away; or (ii) attempt to solicit, divert, or hire away to any Competing Business, any employee of or consultant to the Company or any of its Affiliates engaged or experienced in the Business, regardless of whether the employee or consultant is full-time or temporary, the employment or engagement is pursuant to written agreement, or the employment is for a determined period or is at will.
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Execution Version
(c) Non-Competition Agreement. During the Executive’s employment with the Employer and for a period of 18 months thereafter, the Executive shall not (without the prior written consent of the Employer) compete with the Company or any of its Affiliates by, directly or indirectly, forming, serving as an organizer, director or officer of, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or holding company therefor if such depository institution or holding company has one or more offices or branches located in the Territory. Notwithstanding the foregoing, the Executive may serve as an officer of or consultant to a depository institution or holding company therefor even though such institution operates one or more offices or branches in the Territory, if the Executive’s employment does not directly involve, in whole or in part, the depository financial institution’s or holding company’s operations in the Territory.
(d) No Solicitation of Referrals from SmartBiz Loans. During the Executive’s employment with the Employer and for a period of 18 months thereafter, the Executive shall not (without the prior written consent of the Employer) attempt to solicit or divert referrals of SBA 7(a) loans from Better Finance, Inc. d/b/a SmartBiz Loans (and its successors or assigns that provide an online marketplace for SBA 7(a) loans) to any Competing Business.
10. Independent Provisions. The provisions in each of the above Sections 9(a), 9(b), 9(c), and 9(d) are independent, and the unenforceability of any one provision shall not affect the enforceability of any other provision.
11. Withholding. The Employer may deduct from each payment of compensation hereunder all amounts required to be deducted and withheld in accordance with applicable federal and state income, FICA and other withholding requirements.
12. Successors; Binding Agreement. The rights and obligations of this Agreement shall bind and inure to the benefit of the surviving entity in any merger or consolidation in which the Company or the Bank is a party, or any assignee of all or substantially all of the Company’s or the Bank’s business and properties. The Executive’s rights and obligations under this Agreement may not be assigned by him, except that his right to receive accrued but unpaid compensation, unreimbursed expenses and other rights, if any, provided under this Agreement, which survive termination of this Agreement shall pass after death to the personal representatives of his estate.
13. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when (i) delivered by hand, (ii) otherwise delivered against receipt therefore, or (iii) sent by overnight courier, signature required. In addition, transmission by facsimile, email or other form of electronic transmission, each against receipt therefore, shall be deemed to constitute due and sufficient delivery. All notices to the Employer shall be directed to the attention of the Employer at 700 Central Avenue, Suite 102, St. Petersburg, FL 33701, Attention: Compensation Committee Chairman, with a copy to the Secretary(ies) of the Company and the Bank. All notices to the Executive shall be directed to his personal residence address noted in the Employer’s human resources records. All notices and communications shall be deemed to have been received on the date of delivery thereof.
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Execution Version
14. Governing Law; Jury Trial Waiver. This Agreement and all rights hereunder shall be governed by the laws of the State of Florida, except to the extent governed by the laws of the United States of America in which case federal laws shall govern. The parties agree that the appropriate state or federal court located in Pinellas County, Florida shall be the exclusive jurisdiction and venue of any case or controversy arising out of or relating to this Agreement or the Executive’s employment with Employer. In addition, the Employer and the Executive agree that in any litigation action or proceeding arising out of or relating to this Agreement or the Executive’s employment with the Employer, trial shall be in a court of competent jurisdiction without a jury. The Employer and the Executive irrevocably waive any right each may have to a jury trial and a copy of this Agreement may be introduced as written evidence of the waiver of the right to trial by jury. The Employer has not made and the Executive has not relied on, any oral representation regarding the enforceability of this provision. The Employer and the Executive have read and understand the effect of this jury waiver provision.
15. Non-Waiver. Failure of the Employer to enforce any of the provisions of this Agreement or any rights with respect thereto shall in no way be considered to be a waiver of such provisions or rights, or in any way affect the validity of this Agreement.
16. Saving Clause. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision or clause of this Agreement, or portion thereof, shall be held by any court or other tribunal of competent jurisdiction to be illegal, void, or unenforceable in such jurisdiction, the remainder of such provision shall not be thereby affected and shall be given full effect, without regard to the invalid portion. It is the intention of the parties that, if any court construes any provision or clause of this Agreement, or any portion thereof, to be illegal, void, or unenforceable because of the duration of such provision or the area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced. The Executive and the Employer hereby agree that they will negotiate in good faith to amend this Agreement from time to time to modify the terms of Sections 9(a), 9(b), 9(c) or 9(d), the definition of the term “Territory,” and the definition of the term “Business,” to reflect changes in the Employer’s business and affairs so that the scope of the limitations placed on the Executive’s activities by Section 9 accomplishes the parties’ intent in relation to the then current facts and circumstances. Any such amendment shall be effective only when completed in writing and signed by the Executive and the Employer.
17. Compliance with Internal Revenue Code Section 409A. All payments that may be made and benefits that may be provided pursuant to this Agreement are intended to qualify for an exclusion from Section 409A of the Code and any related regulations or other pronouncements thereunder and, to the extent not excluded, to meet the requirements of Section 409A of the Code. Any payments made under Sections 3 and 4 of this Agreement which are paid on or before the last day of the applicable period for the short-term deferral exclusion under Treasury Regulation § 1.409A-1(b)(4) are intended to be excluded under such short-term deferral exclusion. Any remaining payments under Sections 3 and 4 are intended to qualify for the exclusion for separation pay plans under Treasury Regulation § 1.409A-1(b)(9). Each payment made under Sections 3 and 4 shall be treated as a “separate payment”, as defined in Treasury Regulation § 1.409A-2(b)(2), for purposes of Code Section 409A. Further, notwithstanding anything to the contrary, all severance payments payable under the provisions of Section 4 shall
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Execution Version
be paid to the Executive no later than the last day of the second calendar year following the calendar year in which occurs the date of Executive’s termination of employment. None of the payments under this Agreement are intended to result in the inclusion in Executive’s federal gross income on account of a failure under Section 409A(a)(1) of the Code. The parties intend to administer and interpret this Agreement to carry out such intentions. However, the Employer does not represent, warrant or guarantee that any payments that may be made pursuant to this Agreement will not result in inclusion in the Executive’s gross income, or any penalty, pursuant to Section 409A(a)(1) of the Code or any similar state statute or regulation. Notwithstanding any other provision of this Agreement, to the extent that the right to any payment (including the provision of benefits) hereunder provides for the “deferral of compensation” within the meaning of Section 409A(d)(1) of the Code, and if the Executive is a “Specified Employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date of the Executive’s termination (the “Separation Date”), and if an exemption from the six month delay requirement of Code Section 409A(a)(2)(B)(i) is not available, then no such payment that is payable on account of the Executive’s termination shall be made or commence during the period beginning on the Separation Date and ending on the date that is six months following the Separation Date or, if earlier, on the date of the Executive’s death. The amount of any payment that would otherwise be paid to the Executive during this period shall instead be paid to the Executive on the first day of the first calendar month following the end of the period.
18. Compliance with the Dodd–Frank Wall Street Reform and Consumer Protection Act. Notwithstanding anything to the contrary herein, any incentive payments to the Executive shall be limited to the extent required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), including, but not limited to, clawbacks for such incentive payments as required by the Dodd-Frank Act and Section 10D of the Securities Exchange Act of 1934. The Executive agrees to such amendments, agreements, or waivers that are required by the Dodd-Frank Act or requested by the Employer to comply with the terms of the Dodd-Frank Act.
19. Compliance with Regulatory Restrictions. Notwithstanding anything to the contrary herein, and in addition to any restrictions stated above, any compensation or other benefits paid to the Executive shall be limited to the extent required by any federal or state regulatory agency having authority over the Company or, if applicable, the Bank. The Executive agrees that compliance by the Company or the Bank with such regulatory restrictions, even to the extent that compensation or other benefits paid to the Executive are limited, shall not be a breach of this Agreement by the Company or the Bank.
20. Certain Definitions.
(a) “Affiliate” shall mean any business entity controlled by, controlling or under common control with the Company, including but not limited to the Bank.
(b) “Business” shall mean the operation of a depository financial institution, including, without limitation, the solicitation and acceptance of deposits of money and commercial paper, the solicitation and funding of loans (including SBA 7(a) loans) and the provision of other banking services, and any other related business engaged in by the Bank or any of its Affiliates as of the date of termination.
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(c) “Cause” shall consist of any of (i) the commission by the Executive of a willful act (including, without limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly negligent omission to act by the Executive, which is intended to cause, does cause or is reasonably likely to cause material harm to the Company or any Affiliate (including harm to its business reputation); (ii) the indictment of the Executive for the commission or perpetration by the Executive of any felony or any crime involving dishonesty, moral turpitude or fraud; (iii) the material breach by the Executive of this Agreement that, if susceptible of cure, remains uncured 10 days following written notice to the Executive of such breach; (iv) the receipt of any formal written notice that any regulatory agency having jurisdiction over the Company or the Bank intends to institute any form of formal regulatory action against the Executive, the Company or the Bank (provided that the Board determines in good faith, with the Executive abstaining from participating in the consideration of and vote on the matter, that the subject matter of such action involves acts or omissions by the Executive and further provided that, the parties acknowledge that any regulatory action currently issued to the Company or the Bank shall not constitute the basis for a determination of cause by the Board); (v) the exhibition by the Executive of a standard of behavior within the scope of his employment that is materially disruptive to the orderly conduct of the Employer’s business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board’s good faith and reasonable judgment, with the Executive abstaining from participating in the consideration of and vote on the matter, is materially detrimental to the Employer’s best interest, that, if susceptible of cure remains uncured 10 days following written notice to the Executive of such specific inappropriate behavior; or (vi) the failure of the Executive to devote his full business time and attention to his employment as provided under this Agreement that, if susceptible of cure, remains uncured 30 days following written notice to the Executive of such failure. In order for the Board of Directors to make a determination that termination shall be for Cause, the Board must provide the Executive with notice of the grounds providing the purported basis for termination and provide the Executive an opportunity to meet with the Board in person to address the proposed grounds. The Board reserves the right to suspend the Executive with pay pending the determination of Cause under this Section 20(c), as appropriate.
(d) “Change in Control” shall mean as defined by Treasury Regulation § 1.409A-3(i)(5), of either the Bank or the Company.
(e) “Code” shall mean the Internal Revenue Code of 1986.
(f) “Competing Business” shall mean any business that, in whole or in part, is the same or substantially the same as the Business.
(g) “Disability” or “Disabled” shall mean as defined by Treasury Regulation § 1.409A-3(i)(4); provided however that, for purposes of this definition, the accident and health plan covering the Executive shall only be the long term disability plan and not any other the accident and health plan.
(h) “Good Reason” shall mean as defined by Treasury Regulation § 1.409A-1(n)(2)(ii).
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Execution Version
(i) “Notice of Termination” shall mean a written notice of termination from the Employer or the Executive which specifies an effective date of termination (not less than 30 days from the date of the notice), indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.
(j) “Standard payroll procedures” shall mean payment no less frequently than monthly.
(k) “Terminate,” “terminated,” “termination,” or “termination of the Executive’s employment” shall mean separation from service as defined by Treasury Regulation § 1.409A-1(h).
(l) “Territory” shall mean a radius of 50 miles from (i) the main office of the Bank or (ii) any branch or loan production office of the Bank.
21. Indemnification. Notwithstanding anything in the articles of incorporation or bylaws of the Company or the Bank to the contrary, the Executive shall at all times during the Executive’s employment by the Company or the Bank, and after such employment, be indemnified by such entities to the fullest extent applicable law permits for any matter in any way relating to the Executive’s affiliation with the Company or the Bank; provided, however, that if the Company or the Bank shall have terminated the Executive’s employment for Cause, then neither the Company or the Bank shall have any obligation whatsoever to indemnify the Executive for any claim arising out of the matter for which the Executive’s employment shall have been terminated for Cause or for any conduct of the Executive not within the scope of the Executive’s duties under this Agreement.
22. Entire Agreement; Waiver and Release. This Agreement supersedes and replaces in their entirety any and all previous agreements between the Executive and the Employer regarding compensation or terms of employment of the Executive, and any other agreements regarding change in control payments or severance payments and benefits.
23. Survival. The obligations of the parties pursuant to Sections 3(i), 5 through 9, and 12, as applicable, shall survive the Executive’s Termination of Employment hereunder for the period designated under each of those respective sections.
24. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
[signatures appear on following page]
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IN WITNESS WHEREOF, the Company and the Bank each have caused this Agreement to be executed and its seal to be affixed hereunto by its respective officers thereunto duly authorized and the Executive has signed and sealed this Agreement, effective as of the date described above.
| FIRST HOME BANCORP, INC. | ||||||||
| ATTEST: | ||||||||
| By: | /s/ Matthew A. McDonald |
By: | /s/ Anthony Saravanos | |||||
| Name: | Matthew A. McDonald | Name: | Anthony Saravanos | |||||
| Title: | Chairman | |||||||
| FIRST HOME BANK | ||||||||
| ATTEST: | ||||||||
| By: | /s/ Matthew A. McDonald |
By: | /s/ Anthony Saravanos | |||||
| Name: | Matthew A. McDonald | Name: | Anthony Saravanos | |||||
| Title: | Director | |||||||
| EXECUTIVE | ||||||||
| /s/ Anthony N. Leo | ||||||||
| Anthony N. Leo | ||||||||
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Exhibit 10.2
Execution Version
FIRST HOME BANK
SALARY CONTINUATION AGREEMENT
This Salary Continuation Agreement (this “Agreement”) is entered into this 18th day of April, 2017, by and between First Home Bank, a banking corporation organized under the laws of the State of Florida (the “Bank”), and Anthony N. Leo (the “Executive”).
The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time.
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
| 1.1 | “Accrual Balance” means the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Executive under this Agreement, calculated by applying Accounting Standards Codification 710-10 and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. |
| 1.2 | “Beneficiary” means each designated person or entity, or the estate of the deceased Executive entitled to benefits, if any, upon the death of the Executive. |
| 1.3 | “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries. |
| 1.4 | “Board” means the Board of Directors of the Bank as from time to time constituted. |
| 1.5 | “Change in Control” means a change in the ownership or effective control of the Bank or the Company, or in the ownership of a substantial portion of the assets of the Bank or the Company, as such change is defined in Code Section 409A and regulations thereunder. |
| 1.6 | “Company” means the Bank’s parent corporation, First Home Bancorp, Inc. |
| 1.7 | “Code” means the Internal Revenue Code of 1986, as amended, and all regulations and guidance thereunder, including such regulations and guidance as may be promulgated after the Effective Date. |
Execution Version
| 1.8 | “Disability” means the Executive: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees or directors of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of disability insurance covering employees or directors of the Bank provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination. |
| 1.9 | “Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is four and one half percent (4.5%). However, the Plan Administrator, in its discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP and/or applicable bank regulatory guidance. |
| 1.10 | “Early Termination” means Separation from Service before attainment of Normal Retirement Age except when such Separation from Service occurs following a Change in Control or due to death, Disability or Termination for Cause. |
| 1.11 | “Effective Date” means April 1, 2017. |
| 1.12 | “Normal Retirement Age” means the Executive’s age sixty-two (62). |
| 1.13 | “Plan Administrator” means the Board or such committee or person as the Board shall appoint. |
| 1.14 | “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year. The first Plan Year shall be from April 1, 2017 to December 31, 2017. |
| 1.15 | “Separation from Service” means termination of the Executive’s employment with the Bank for reasons other than death. Whether a Separation from Service has occurred is determined in accordance with the requirements of Code Section 409A based on whether the facts and circumstances indicate that the Bank and Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Bank if the Executive has been providing services to the Bank less than thirty-six (36) months). |
Execution Version
| 1.16 | “Specified Employee” means an employee who at the time of Separation from Service is a key employee, if any stock of the Bank or the Company is publicly traded on an established securities market or otherwise. For purposes of this Agreement, an employee is a key employee if the employee meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the twelve (12) month period ending on December 31 (the “identification period”). If the employee is a key employee during an identification period, the employee is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of April following the close of the identification period. |
| 1.17 | “Termination for Cause” means Separation from Service for: |
| (a) | Gross negligence or gross neglect of duties to the Bank; |
| (b) | Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Bank; or |
| (c) | Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Bank. |
Provided however that, if the Executive is party to an effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank containing a definition for termination for cause, then Termination for Cause shall have the meaning specified in such agreement.
Article 2
Distributions During Lifetime
| 2.1 | Normal Retirement Benefit. Upon Separation from Service after attaining Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article. |
| 2.1.1 | Amount of Benefit. The annual benefit under this Section 2.1 is Twenty-Five Thousand Dollars ($25,000). |
| 2.1.2 | Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twenty (20) equal annual installments commencing on the first day of the first month following Separation from Service. The annual benefit shall be distributed to the Executive for twenty (20) years. |
| 2.2 | No Early Termination Benefit. If Early Termination occurs before December 31, 2022, the Executive will not receive any benefit under this Agreement. |
Execution Version
| 2.3 | Disability Benefit. If the Executive experiences a Disability before Normal Retirement Age, the Bank shall pay to the Executive the benefit described in this section 2.3 instead of any other benefit under this Agreement. |
| 2.3.1 | Amount of Benefit. The benefit under this Section 2.3 is one hundred percent (100%) of the Accrual Balance determined as of the end of the month preceding such Disability. |
| 2.3.2 | Distribution of Benefit. The Bank shall distribute the benefit to the Executive in twenty (20) equal annual installments commencing on the first day of the first month following Disability. Interest shall be credited on the Accrual Balance during the installment period at a rate equal to the Discount Rate in effect at the time of Disability. |
| 2.4 | Change in Control Benefit. If a Change in Control occurs prior to Normal Retirement Age, followed by Separation from Service, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article. |
| 2.4.1 | Amount of Benefit. The annual benefit under this Section 2.4 is the annual benefit described in Section 2.1.1, above. |
| 2.4.2 | Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive as described in Section 2.1.1, above. |
| 2.5 | Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee, the provisions of this Section 2.5 shall govern all distributions hereunder. If benefit distributions which would otherwise be made to the Executive due to Separation from Service are limited because the Executive is a Specified Employee, then such distributions shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service. All subsequent distributions shall be paid in the manner specified. |
| 2.6 | Distributions Upon Taxation of Amounts Deferred. If, pursuant to Code Section 409A, the Federal Insurance Contributions Act or other state, local or foreign tax, the Executive becomes subject to tax on the amounts deferred hereunder, then the Bank may make a limited distribution to the Executive in a manner that conforms to the requirements of Code section 409A. Any such distribution will decrease the Executive’s benefits distributable under this Agreement. |
Execution Version
| 2.7 | Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Section 8.1, amend this Agreement to delay the timing or change the form of distributions. Any such amendment: |
| (a) | may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A; |
| (b) | must, for benefits distributable under Sections 2.3 and 2.4, be made at least twelve (12) months prior to the first scheduled distribution; |
| (c) | must, for benefits distributable under Sections 2.1, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and |
| (d) | must take effect not less than twelve (12) months after the amendment is made. |
Article 3
Distribution at Death
| 3.1 | Death During Active Service. If the Executive dies prior to Separation from Service, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of any benefit under Article 2. The Beneficiary shall be required to provide to the Bank the Executive’s death certificate prior to receiving any payment under this Section 3. |
| 3.1.1 | Amount of Benefit. The benefit under this Section 3.1 is present value, using the Discount Rate in effect at death, of the benefit described in Section 2.3.1, above; provided however, that if at the time of the Executive’s death the Bank receives death benefits under a life insurance policy it purchased on the Executive’s life in the amount of at least the present value of the Normal Retirement Benefit described in Section 2.1, then the amount of the benefit under this Section 3.1.1 shall be the present value of the Normal Retirement Benefit described in Section 2.1, payable in accordance with Section 3.1.2 below. |
| 3.1.2 | Distribution of Benefit. The Bank shall distribute the benefit to the Beneficiary in a lump sum within sixty (60) days following the Executive’s death. |
| 3.2 | Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the present value, using the Discount Rate in effect at death, of the remaining benefits in a lump sum within sixty (60) days following the Executive’s death. |
| 3.3 | Death Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement but dies prior to the date that commencement of such benefit distributions are scheduled to be made under this Agreement, the Bank shall distribute to the Beneficiary the present value at Normal Retirement Age, using the Discount Rate in effect at death, of the same benefits which the Executive was entitled prior to death, except that the benefit distribution shall be paid in a lump sum within sixty (60) days following the Executive’s death. |
Execution Version
Article 4
Beneficiaries
| 4.1 | In General. The Executive shall have the right, at any time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designated under any other plan of the Bank in which the Executive participates. |
| 4.2 | Designation. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Plan Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Plan Administrator, executed by the Executive’s spouse and returned to the Plan Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death. |
| 4.3 | Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent. |
| 4.4 | No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, any benefit shall be paid to the Executive’s estate. |
| 4.5 | Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Beneficiary, as the case may be, and shall completely discharge any liability under this Agreement for such distribution amount. |
Execution Version
Article 5
General Limitations
| 5.1 | Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive’s employment with the Bank is terminated by the Bank or an applicable regulator due to a Termination for Cause. |
| 5.2 | Suicide or Misstatement. No benefit shall be distributed if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason. |
| 5.3 | Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act. |
| 5.4 | Regulatory Restrictions. Notwithstanding anything herein to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, shall be subject upon compliance with 12 U.S.C. 1828 and FDIC Regulation 12 CFR Part 359, Golden Parachute Indemnification Payments and any other regulations or guidance promulgated thereunder. |
| 5.5 | Forfeiture Provision. Notwithstanding anything herein to the contrary, the Executive shall forfeit any non-distributed benefits under this Agreement if he violates a noncompetion restrictive covenant under any effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank containing such a covenant. If the Executive is not party to an effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank containing a noncompetion restrictive covenant, then the Executive shall forfeit any non-distributed benefits under this Agreement if within twelve (12) months following a Separation from Service, he, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company): |
(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within fifty (50) miles of any office maintained by the Bank as of the date of the termination of the Executive’s employment;
Execution Version
(ii) participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Bank as of the date of termination of the Executive’s employment;
(iii) assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Bank or the Company or transaction involving the Bank or the Company;
(iv) sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Bank, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the two (2) year period immediately prior to the termination of the Executive’s employment;
(v) divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Bank or the Company, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Bank, earnings or other information concerning the Bank. The restrictions contained in this subparagraph (v) apply to all information regarding the Bank or the Company, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
| 5.6 | Change in Control. The forfeiture provision detailed in Section 5.5 hereof shall not be enforceable following a Change in Control. |
Article 6
Administration of Agreement
| 6.1 | Plan Administrator Duties. The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with this Agreement to the extent the exercise of such discretion and authority does not conflict with Code Section 409A. |
Execution Version
| 6.2 | Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as the Plan Administrator sees fit, including acting through a duly appointed representative, and may from time to time consult with counsel who may be counsel to the Bank. |
| 6.3 | Binding Effect of Decisions. Any decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Agreement. |
| 6.4 | Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator. |
| 6.5 | Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the Executive’s death, Disability or Separation from Service, and such other pertinent information as the Plan Administrator may reasonably require. |
| 6.6 | Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement. |
Article 7
Claims And Review Procedures
| 7.1 | Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows: |
| 7.1.1 | Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant. |
| 7.1.2 | Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within ninety (90) days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an |
Execution Version
| additional ninety (90) days by notifying the claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision. |
| 7.1.3 | Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: |
| (a) | The specific reasons for the denial; |
| (b) | A reference to the specific provisions of this Agreement on which the denial is based; |
| (c) | A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed; |
| (d) | An explanation of this Agreement’s review procedures and the time limits applicable to such procedures; and |
| (e) | A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. |
| 7.2 | Review Procedure. If the Plan Administrator denies part or the entire claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial as follows: |
| 7.2.1 | Initiation – Written Request. To initiate the review, the claimant, within sixty (60) days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review. |
| 7.2.2 | Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits. |
| 7.2.3 | Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. |
| 7.2.4 | Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within sixty (60) days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional sixty (60) days by notifying the claimant in writing, prior to the end of the initial sixty (60) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision. |
Execution Version
| 7.2.5 | Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: |
| (a) | The specific reasons for the denial; |
| (b) | A reference to the specific provisions of this Agreement on which the denial is based; |
| (c) | A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and |
| (d) | A statement of the claimant’s right to bring a civil action under ERISA Section 502(a). |
Article 8
Amendments and Termination
| 8.1 | Amendments. The Bank may unilaterally amend this Agreement at any time prior to Termination of Employment by providing written notice of such amendment to the Executive. Notwithstanding anything herein to the contrary, the Executive’s written consent shall be required with respect to any amendment provision which would lower the amount of the Executive’s benefit under 2.1.1, 2.3.1, or 2.4.1 below the Accrual Balance determined as of the end of the month prior to such amendment unless such amendment is required to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative changes or tax law, including without limitation Code Section 409A. |
| 8.2 | Termination or Modification of Agreement Because of Changes in Law, Rules or Regulations. The Bank is entering into this Agreement on the assumption that certain existing tax laws, rules, and regulations will continue in effect in their current form. If that assumption materially changes and the change has a material detrimental effect on this Agreement, then the Bank reserves the right to terminate or modify this Agreement accordingly, subject to the written consent of the Executive, which shall not be unreasonably withheld. This Section 8.2 shall become null and void effective immediately upon a Change in Control. |
Execution Version
| 8.3 | Plan Terminations Under Code Section 409A. Notwithstanding anything to the contrary in Section 8.2, if the Bank terminates this Agreement in the following circumstances: |
| (a) | Within thirty (30) days before or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of this Agreement and further provided that all the Bank’s arrangements which are substantially similar to this Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of such termination; |
| (b) | Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under this Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or |
| (c) | Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Executive participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement; |
the Bank may distribute the Accrual Balance, determined as of the date of the termination of this Agreement, to the Executive in a lump sum subject to the above terms.
Article 9
Miscellaneous
| 9.1 | Binding Effect. This Agreement shall bind the Executive and the Bank and their beneficiaries, survivors, executors, administrators and transferees. |
| 9.2 | No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank nor interfere with the Bank’s right to discharge the Executive. It does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time. |
| 9.3 | Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner. |
| 9.4 | Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Code Section 409A from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authorities. The Bank shall satisfy all applicable reporting requirements, including those under Code Section 409A. |
Execution Version
| 9.5 | Applicable Law. This Agreement and all rights hereunder shall be governed by the laws of the State of Florida except to the extent preempted by the laws of the United States of America. |
| 9.6 | Unfunded Arrangement. The Executive and the Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim. |
| 9.7 | Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm or person unless such succeeding or continuing bank, firm or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such an event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor entity. |
| 9.8 | Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. |
| 9.9 | Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural. |
| 9.10 | Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Bank or Plan Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank, provided that such alternative act does not violate Code Section 409A. |
| 9.11 | Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any provision herein. |
| 9.12 | Validity. If any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein. |
| 9.13 | Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the address below: |
| 700 Central Avenue, Suite 102 | ||||
| St. Petersburg, FL 33701 | ||||
| Attn: Compensation Committee Chairman |
Execution Version
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive.
| 9.14 | Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Code Section 409A. Each payment made under Articles 2 and 3 shall be treated as a “separate payment”, as defined in Treasury Regulation § 1.409A-2(b)(2), for purposes of Code Section 409A. If any provision of this Agreement would subject the Executive to additional tax or interest under Code Section 409A, the Bank shall reform the provision. However, the Bank shall maintain to the maximum extent practicable the original intent of the applicable provision without subjecting the Executive to additional tax or interest, and the Bank shall not be required to incur any additional compensation expense as a result of the reformed provision. |
Execution Version
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
| EXECUTIVE: | BANK: | |||
| First Home Bank | ||||
| /s/ Anthony N. Leo | /s/ Anthony Saravanos | |||
| Anthony N. Leo | By: Anthony Saravanos | |||
| Title: Director | ||||
First Home Bank
Salary Continuation Agreement
Beneficiary Designation Form
{ } New Designation
{ } Change in Designation
I, Anthony N. Leo, designate the following as Beneficiary under this Agreement:
| Primary: _______________________________________________________________________________________
_______________________________________________________________________________________
|
|
_____%
_____% |
| |
| Contingent: _______________________________________________________________________________________
_______________________________________________________________________________________ |
|
_____%
_____% |
|
Notes:
| • | Please PRINT CLEARLY or TYPE the names of the beneficiaries. |
| • | To name a trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. |
| • | To name your estate as Beneficiary, please write “Estate of [your name]”. |
| • | Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you. |
I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that the designations will be automatically revoked if the Beneficiary predeceases me, or, if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.
| Name: Anthony N. Leo |
| Signature: __________________________ Date ______ |
| Received by the Plan Administrator this ______________ day of ____________, 200__ |
| By: _________________________________ |
| Title: _________________________________ |
Exhibit 10.3
FIRST HOME BANCORP, INC.
AMENDED AND RESTATED
2017 EQUITY INCENTIVE PLAN
Section 1. General Purpose of Plan; Definitions.
The name of this plan is the First Home Bancorp, Inc. Amended and Restated 2017 Equity Incentive Plan (the “Plan”). The Plan was approved by the Board of Directors on February 20, 2018 (the “Effective Date”) and subsequently adopted by the shareholders of the Company on April 11, 2018. The purpose of the Plan is to enable the Company to attract and retain highly qualified personnel who will contribute to the Company’s success and to provide incentives to Participants to increase shareholder value and therefore further align the interests of the Participants with those of the shareholders to benefit all shareholders of the Company.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) “Administrator” means the Committee, under the terms as set forth in more detail in Section 2 below and except as limited by the express provisions of the Plan or by resolutions adopted by the Board.
(b) “Award” means any award granted under the Plan as further described in Sections 6 and 7 below.
(c) “Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions applicable to the Award.
(d) “Board” means the Board of Directors of the Company.
(e) “Cause” means as set forth in the Participant’s written employment, consulting or similar agreement with the Company or, if “Cause” is not defined therein, or if there is no such agreement, “Cause” shall mean termination by the Company on account of acts or omissions of fraud, dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations, regulations that do not adversely affect the Company or its employees, or similar offenses) or final cease-and-desist order, or material breach of any provision of an agreement with the Company. In determining incompetence, the acts or omissions shall be measured against standards generally prevailing in the community banking industry. No act or failure to act shall be considered “willful” unless done, or omitted to be done, not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company. The determination of “Cause” may be made by the Administrator solely for purposes of this Plan and without regard to any other purpose of the Company.
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(f) “Change in Control” means the first to occur of any one of the events:
(i) the date any Person (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) or more than one Person acting as a group (as determined under Treasury Regulation §1.409A-3(i)(5)(v)(B), acquires ownership of the stock of the Company that, together with stock held by such Person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company. This section applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction;
(ii) the date any one Person, or more than one Person acting as a group (as defined under Treasury Regulation §1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company;
(iii) the date individuals who, as of the Effective Date, constituted the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual were a member-of the Incumbent Board, but excluding or this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iv) the date that any Person or more than one Person acting as a group (as defined under Treasury Regulation §1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all assets of the Company immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
Notwithstanding the foregoing, a Change in Control shall only be deemed to have occurred if the Change in Control otherwise constitutes a change in the ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code and the regulations and rulings thereunder (“Section 409A”).
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In addition, a Change in Control will not include (1) a transaction in which the holders of the outstanding voting securities of the Company immediately prior to the transaction hold at least 50% of the outstanding voting securities of the successor company immediately after the transaction; (2) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor company or indebtedness of the Company is cancelled or converted or a combination thereof, (3) a sale, lease, exchange or other transfer of all or substantially all of the Company’s assets to a majority-owned subsidiary of the Company; or (4) a transaction undertaken for the principal purpose of restructuring the capital of the Company, including, but not limited to, reincorporating the Company in a different jurisdiction. Also, when a Change in Control occurs due to a series of related transaction, the Change in Control is deemed to have occurred upon consummation of the last of the related transactions.
(g) “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(h) “Committee” means the Compensation Committee of the Board or, if applicable, any other committee the Board may appoint to administer the Plan. If at any time or to any extent the Committee shall not administer the Plan, then the functions of the Administrator specified in the Plan may be exercised by the Board. The Committee shall be comprised of three or more “non-employee directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934 and “independent directors” as defined by NASDAQ Listing Rule 5605(a)(2).
(i) “Common Stock” or “Stock” means the common stock, par value $1.00 per share, of the Company.
(j) “Company” means First Home Bancorp, Inc., a Florida corporation (or any successor corporation that assumes this Plan, either contractually or by operation of law).
(k) “Eligible Recipient” means an officer, director, employee, consultant, or advisor (including a member of an advisory board) of the Company or any subsidiary of the Company.
(l) “Exercise Price” means the per share price at which a Participant holding an Award of Options may purchase Shares issuable with respect to such Award of Options, if any.
(m) “Fair Market Value” on any date shall mean:
(i) if the Common Stock is readily tradable on an established securities market (as defined in Treasury Regulation §1.897-1(m)) (other than if the Common Stock is quoted on an over-the-counter market), the closing sales price of the Common Stock on such date on the securities exchange having the greatest volume of trading in the Common Stock during the 30-day period preceding the day the value is to be determined or, if there is no reported closing sales price on such date, the next preceding date on which there was a reported closing price; or
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(ii) if the Common Stock also is not readily tradable on an established securities market (as defined in Treasury Regulation §1.897-1(m)), the fair market value as determined in good faith by the Board or the Committee by application of a reasonable valuation method consistently applied and taking into consideration all available information material to the value of the Company; factors to be considered may include, as applicable, independent third party valuations of the Common Stock, trading activity of the Common Stock known by the Board or the Committee, whether on the over-the-counter market or through private transactions, the value of the tangible and intangible assets of the Company, the present value of future cash-flows of the Company, the market value of stock or equity interests in similar corporations which can be readily determined through objective means (such as through trading prices on an established securities market or an amount paid in an arm’s length private transaction), and other relevant factors such as control premiums or discounts for lack of marketability. For purposes of the foregoing, a valuation prepared in accordance with any of the methods set forth in Treasury Regulation § 1.409A-1(b)(5)(iv)(B)(2) consistently used, shall be rebuttably presumed to result in a reasonable valuation. This paragraph is intended to comply with the definition of “fair market value” contained in Treasury Regulation § 1.409A-1(b)(5)(iv) and should be interpreted consistently therewith.
(n) “Grant Date” means the date on which the Administrator completes the corporate action authorizing the grant of an Award. Corporate action constituting a grant by the Administrator of an Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Administrator, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant.
(o) “Incentive Stock Option” or “ISO” means any Option intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
(p) “Nonqualified Stock Option” or “NQSO” means any Option that is not an Incentive Stock Option, including any Option that provides (as of the time such Option is granted) that it will not be treated as an Incentive Stock Option.
(q) “Option” means an option to purchase Shares granted pursuant to Section 6 of the Plan.
(r) “Other Stock-Based Award” means a right granted pursuant to Section 8 of the Plan that relates to or is valued by reference to Shares or other Awards relating to Shares.
(s) “Participant” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority in Section 2 of the Plan, to receive an Award.
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(t) “Participating Employer” means any member of the following group, which includes the Company, if such member agrees, in writing, to be bound by the terms of the Plan:
(i) a controlled group of corporations, within the meaning of Code Section 414(b),
(ii) a group of trades or businesses under common control, within the meaning of Code Section 414(c),
(iii) an affiliated service group, within the meaning of Code Section 414(m), or
(iv) a trade or business required to be aggregated pursuant to Code Section 414(o).
Each Participating Employer is identified in Appendix A. The Company shall amend Appendix A as needed to reflect a Participating Employer’s adoption of the Plan or withdrawal from the Plan, without any need to otherwise amend the Plan. Amendment of Appendix A may be made by any authorized officer or designated representative of the Company and shall not require approval of the Board.
(u) “Performance Goals” means the performance goals established by the Administrator in connection with the grant of Awards. Performance Goals may be based upon any individual Participant or Company criteria or metric that the Administrator may determine, including, but not limited to, the attainment of specified levels of one or more of the following measures: stock price, earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization), prescribed rating, earnings per share, operating earnings per share, return on equity, return on assets or operating assets, percentage of non-performing assets, asset quality, level of classified assets, net interest margin, loan portfolio growth, efficiency ratio, deposit portfolio growth, liquidity, market share, objective customer service measures or indices, economic value added, shareholder value added, embedded value added, combined ratio, pre- or after-tax income, net income, cash flow (before or after dividends), cash flow per share (before or after dividends), gross margin, risk-based capital, revenues, revenue growth, return on capital (including return on total capital or return on invested capital), cash flow return on investment, cost control, gross profit, operating profit, cash generation, unit volume, sales, asset quality, cost saving levels, market-spending efficiency, core non-interest income or change in working capital, in each case with respect to the Company or any one or more subsidiaries, divisions, business units or business segments thereof, either in absolute terms or relative to the performance of one or more other companies (including an index covering multiple companies). Performance for any goal can be measured on an absolute basis (i.e., versus the Company’s budget or prior year result) or relative to a peer group or industry index, as well as over a one-year or multi-year period. In any event, the Administrator shall have the authority to adjust any Performance Goal for unusual or non-recurring events
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(v) “Performance Period” is a period not less than one calendar year, beginning not earlier than the year in which such Performance Award is granted, which may be referred to herein and by the Administrator by use of the calendar year in which a particular Performance Period commences; provided, however, that the Administrator shall have the authority to adjust a Performance Period for unusual or non-recurring events to a period of not less than six months.
(w) “Permanent and Total Disability” shall have the same meaning as given to that term by Treasury Regulation Section 1.409A-3(i)(4) and any regulations or rulings promulgated thereunder.
(x) “Restricted Stock” means Shares subject to certain restrictions granted pursuant to Section 7 of the Plan.
(y) “Restricted Stock Unit” means a right granted pursuant to Section 7 of the Plan and denominated in Shares that will be settled, subject to the terms and conditions of the Restricted Stock Units, in cash, Shares, or a combination of both, based upon the Fair Market Value of a specified number of Shares.
(z) “Shares” means shares of Common Stock reserved for issuance under the Plan, as adjusted pursuant to Sections 3 or 4 of the Plan, and any successor security.
(aa) “Substitute Awards” means Awards granted or shares of Common Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity.
(bb) “Treasury Regulations” means regulations promulgated by the United States Department of Treasury pursuant to the Code, including proposed or temporary regulations as applicable.
Section 2. Administration.
The Plan shall be administered by the Administrator. Pursuant to the terms of the Plan, the Committee shall serve as the Administrator and shall have the power and authority:
(a) to select those Eligible Recipients who shall be Participants;
(b) to determine whether and the extent to which Awards are to be granted to Participants under the Plan;
(c) to determine the number of Shares to be covered by or subject to each Award granted under the Plan;
(d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted under the Plan; and
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(e) to determine the terms and conditions, not inconsistent with the terms of the Plan, that shall govern all written instruments evidencing Awards granted under the Plan, including Award Agreements.
The Administrator shall have the authority, in its sole discretion, to: adopt, alter, and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; correct any defect, supply any omission, reconcile any inconsistency, and resolve any ambiguity in, and otherwise interpret, the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto); and otherwise supervise the administration of the Plan. All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants. Except to the extent prohibited by applicable law, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time.
Notwithstanding the above, and subject to Sections 3, 4, 6, 9, 10 and 13, outstanding Options granted under the Plan shall not be repriced without approval by the Company’s shareholders. In particular, neither the Board nor the Administrator may take any action: (1) to amend the terms of an outstanding Option to reduce the Exercise Price thereof, cancel an Option and replace it with a new Option with a lower Exercise Price, or that has an economic effect that is the same as any such reduction or cancellation or (2) to cancel an outstanding Option having an Exercise Price above the then-current Fair Market Value of the Stock in exchange for the grant of another type of Award, without, in each such case, first obtaining approval of the shareholders of the Company of such action.
Section 3. Shares Subject to the Plan.
Subject to Section 4 of the Plan, the total number of Shares reserved and available for issuance under the Plan shall be 15% of the total number of shares of Company common stock issued and outstanding from time to time; provided the maximum aggregate number of reserved shares shall not exceed 1,000,000 shares. Such Shares may consist in whole or in part, of authorized and unissued shares or treasury shares. At all times the Company shall reserve and keep available a sufficient number of shares as shall be required to satisfy the requirements of all outstanding Options under the Plan. No fractional Shares shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional Shares or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
(a) Reissuance of Shares. Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock covered by an Award are settled in cash in a manner that some or all of the shares covered by the Award are not issued, the shares subject to such Awards and the unissued shares resulting from the cash settlement shall again be available for issuance under the Plan. If any shares of Common Stock subject to an Award are not delivered to a Participant because the Award is exercised through a reduction of shares subject to the Award
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(i.e., “net exercised”), including if the tax withholding obligations relating to any Award are satisfied by delivering Shares of Common Stock (either actually or through attestation) or withholding Shares of Common Stock relating to such Award, the number of shares of Common Stock that are not delivered to the Participant shall no longer be available for issuance under the Plan. For the sake of clarification, any shares of Common Stock reacquired by the Company pursuant to Section 6 upon the exercise of an Option or as consideration for the exercise of an Option shall no longer be available for issuance under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends that are reinvested into additional shares of Common Stock or credited as additional shares of Common stock subject to or paid with respect to an Award.
(b) Performance Goals. The Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Administrator also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the performance criteria specified for such Award. In the event that applicable tax and/or securities laws change to permit the Administrator discretion to alter the governing performance criteria without obtaining shareholder approval of such changes, the Administrator shall have sole discretion to make such changes without obtaining shareholder approval. (c) Substitute Awards. Notwithstanding any other provision of the Plan to the contrary, the Administrator may grant Substitute Awards under the Plan. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed and approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Administrator without any further action by the Administrator, and the persons holding such awards shall be deemed to be Participants with respect to the Substitute Awards.
(d) Administrator’s Discretion to Accelerate Vesting of Awards. Except upon the occurrence of a Change in Control (which is governed by the provisions of Section 10 hereof), the Administrator may, in its discretion and as of a date determined by the Administrator, fully vest any or all Awards awarded to a Participant pursuant to an Award and, upon such vesting, all vesting restrictions applicable to such Award shall terminate as of such date. Any action by the Administrator pursuant to this section may vary among individual Participants and may vary among the Awards held by any individual Participant.
(e) Forfeiture of Awards; Clawback of Shares. If the Company’s or any of its financial institution subsidiaries’ capital falls below the minimum requirements contained in 12 CFR Section 3 or below a higher requirement as determined by the Company’s or such subsidiary’s primary bank regulatory agency, such agency may direct the Company to require Participants to exercise or forfeit some or all of their Awards. All Awards granted under this Plan are subject to the terms of any such directive. In addition, Awards granted under this Plan within the prior two years of the event described in subsections (i)-(iii) below shall be forfeited and the Participant shall be obligated to repay the value realized, if any, from the conversion of Awards into shares of Stock under the following circumstances:
(i) Termination of employment or service for Cause;
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(ii) A restatement of financial results attributable to the Participant’s actions, whether intentional or negligent; and
(iii) The Administrator determines that Award vesting was based on incorrect performance measurement calculations. In such event, vesting (and recoupment, if applicable) will be adjusted consistent with the actual, corrected results.
Notwithstanding the forgoing sentence, the Administrator shall have the authority, in its sole discretion, to not enforce the foregoing clawback of Shares if it determines that such clawback would not be in the best interest of the Company and its shareholders.
Section 4. Corporate Transactions.
Subject to the provisions of Section 10 hereof relating to a Change in Control, in the event of any merger, consolidation, combination, reorganization, recapitalization, reclassification, extraordinary cash dividend, stock dividend, stock split, reverse stock split, or other change in corporate structure, the Administrator shall make an equitable substitution or proportionate adjustment in (i) the aggregate number of Shares reserved for issuance under the Plan, and (ii) the kind, number, and Exercise Price of Shares (or other cash or property) issuable with respect to outstanding Options granted under the Plan (which may become, without limitation, shares of an acquiring entity or other successor corporation that assumes this Plan), and (iii) the kind and number of Shares subject to any outstanding Awards of Restricted Stock and Restricted Stock Units granted under the Plan (which may become, without limitation, shares of an acquiring entity or other successor corporation that assumes this Plan), in each case as may be determined by the Administrator, in its sole discretion; provided, that with respect to ISOs, any adjustment shall be made in accordance with the provisions of Section 424(h) of the Code and any regulations or guidance promulgated thereunder; and provided, further, that no such adjustment shall cause any Award hereunder which is or becomes subject to Section 409A of the Code to fail to comply with the requirements of Section 409A of the Code.
Section 5. Eligibility.
The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Recipients. Participation in the Plan through receipt of an Award in any year does not guarantee a Participant participation in future years or participation at the same level. The Administrator shall have the authority to grant Awards under the Plan to the Eligible Recipients; provided, however, that only current employees of the Company and any Participating Employer may be granted ISOs.
Section 6. Options.
Options may be granted alone or in addition to other Awards granted under the Plan. Any Option granted under the Plan shall be substantially in the form as the Administrator may from time to time approve, and the provisions of each Option need not be the same with respect to each Participant. Participants who are granted Options shall enter into an Award Agreement with the Company in such form as the Administrator shall determine, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option granted in connection with such Award Agreement.
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Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. If and to the extent any Option granted under the Plan intended to qualify as an ISO does not qualify as an ISO, such Option shall constitute a separate NQSO. A grant of an ISO can only be made to an Eligible Recipient who is also an employee within the meaning of Section 422(a)(2) of the Code.
Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:
(a) Option Exercise Price. The Exercise Price of Shares issuable with respect to an Option shall be determined by the Administrator in its sole discretion, provided, however, that such Exercise Price shall not be less than 100% of the Fair Market Value on the Grant Date, except in the case of Substitute Awards. If a Participant owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any subsidiary and an ISO is granted to such Participant, the Exercise Price of such ISO shall be no less than 110% of the Fair Market Value on the Grant Date of such Option.
(b) Option Term. The term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than 10 years after the Grant Date of such Option; provided, however, that if an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any subsidiary and an ISO is granted to such employee, the term of such ISO (to the extent required by the Code at the time of grant) shall be no more than five years from the Grant Date.
(c) Exercisability. Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at the time of grant. Specifically, such terms and conditions may include (i) the attainment of one or more Performance Goals established by the Administrator, (ii) the Participant’s continued employment with the Company or any subsidiary, or continued service as a director, consultant or advisor of the Company or any subsidiary, for a specified period of time, (iii) the occurrence of any other event or the satisfaction of any other condition specified by the Administrator in its sole discretion, or (iv) a combination of any of the foregoing. The Administrator may provide that any Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine, all in its sole discretion. An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (1) more than three months after the date of a Participant’s termination of employment if termination was for reasons other than death or disability, (2) more than one year after the date of a Participant’s termination of employment if termination was by reason of death or disability, or (3) more than six months following the first day of a Participant’s leave of absence that exceeds three months, unless the Participant’s reemployment rights are guaranteed by statute or contract.
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(d) Method of Exercise. Subject to Sections 6(c) and 9 of the Plan, vested Options may be exercised in whole or in part at any time during the Option term, by giving notice as described in the applicable Award Agreement. As determined by the Administrator in its sole discretion, payment in whole or in part may also be made: (i) to the extent permitted by applicable law, by means of any cashless exercise procedure approved by the Administrator, including by means of a net exercise whereby the Company issues Shares reduced by the number of Shares needed to satisfy the Exercise Price and/or the Participant’s tax withholding obligations; (ii) in the form of unrestricted shares of Common Stock already owned by the Participant (based on the Fair Market Value on the date the Option is exercised); provided, however, that in the case of an ISO, the right to make payment in the form of already owned shares of Common Stock may be authorized only at the time of grant; (iii) any other form of consideration approved by the Administrator and permitted by applicable law; or (iv) any combination of the foregoing. A Participant shall generally have the rights to dividends and any other rights of a shareholder with respect to the Shares subject to the Option only after the Participant has given written notice of exercise, has paid in full for such Shares, and, if requested, has given the representation described in paragraph (b) of Section 13 of the Plan.
(e) Non-Transferability of Options. Except as otherwise provided in the Award Agreement and subject to Section 9 of the Plan, Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will, or by the laws of descent and distribution, except that NQSOs may be transferred if and to the extent set forth in an Award Agreement.
(f) Annual Limit on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the Grant Date of the ISO) of Shares with respect to which ISOs granted to a Participant under this Plan and all other equity compensation plans of the Company or any subsidiary become exercisable for the first time by the Participant during any calendar year exceeds $100,000 (as determined in accordance with Section 422(d) of the Code), the number of Shares attributable to the amount of such Fair Market Value exceeding $100,000 shall be treated as issuable with respect to NQSOs. The maximum aggregate number of shares of Stock that may be subject to ISOs that may be granted under the Plan shall be 30,000 shares.
(g) Taxation of Incentive Stock Options.
(i) In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise.
(ii) A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Participant shall give the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods described in (i) above.
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(h) Certain Successor Options. To the extent not inconsistent with the terms, limitations and conditions of Section 422 of the Code and any regulations promulgated with respect thereto, an Option issued in respect of an option held by an employee to acquire stock of any entity acquired, by merger or otherwise, by the Company (or any subsidiary of the Company) may contain terms that differ from those stated in this Section 6, but solely to the extent necessary to preserve for any such employee the rights and benefits contained in such predecessor option, or to satisfy the requirements of Section 424(a) of the Code.
(i) Code Definitions. For purposes of this Section 6, “disability,” “parent corporation” and “subsidiary corporation” shall have the meanings attributed to those terms for purposes of Section 422 of the Code.
(j) Non-Exempt Employees. No Option, whether or not vested, granted to an Participant who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or Disability, (ii) upon a corporate transaction as described in Section 4 in which such Option is not assumed, continued, or substituted, or (iii) upon a Change in Control, any such vested Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.
Section 7. Restricted Stock; Restricted Stock Units.
(a) General. Awards of Restricted Stock and Restricted Stock Units may be granted either alone or in addition to other Awards granted under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, awards of Restricted Stock or Restricted Stock Units shall be made; the number of Shares to be awarded with respect to an Award of Restricted Stock or Restricted Stock Units; and the Restricted Period (as defined in Section 7(c) of this Plan) applicable to an Award of Restricted Stock or Restricted Stock Units. Award Agreements with respect to Restricted Stock or Restricted Stock Units shall be in such form as the Administrator may from time to time approve, and the provisions of Awards of Restricted Stock or Restricted Stock Units need not be the same with respect to each Participant. An Award of Restricted Stock or Restricted Stock Units shall be subject to such terms and conditions not inconsistent with the Plan as the Administrator shall impose and shall be evidenced by an Award Agreement.
(b) Stock Certificates. Subject to Section 7(c) below, with respect to each Participant who is granted an Award of Restricted Stock, the Company shall either (i) issue a stock certificate in respect of such Award of Restricted Stock, which certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award of Restricted Stock; or (ii) enter such Award of Restricted Stock in book entry form (with appropriate restrictions noted with respect thereto), such method to be determined by the Administrator in its sole discretion. The Company may require that any stock certificates evidencing Restricted Stock granted under the Plan be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Shares covered by such Award of Restricted Stock.
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(c) Restrictions and Conditions Applicable to Restricted Stock. An Award of Restricted Stock granted pursuant to this Section 7 shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Award Agreement governing any such Award of Restricted Stock, during such period as may be set by the Administrator commencing on the date of grant of the Award, the Participant shall not be permitted to sell, transfer, pledge, or assign such Shares of Restricted Stock (such period, the “Restricted Period”); provided, however, that the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion. Notwithstanding the preceding provision of this section, the Administrator may not take any action described in this section if such action shall cause any Award hereunder which is or becomes subject to Section 409A of the Code to fail to comply with the requirements of Section 409A of the Code. Such restrictions shall be determined by the Administrator in its sole discretion, and the Administrator may provide that such restrictions lapse upon (1) the attainment of one or more Performance Goals established by the Administrator, (2) the Participant’s continued employment with the Company or any subsidiary, or continued service as a director, consultant or advisor of the Company or any subsidiary, for a specified period of time, (3) the occurrence of any other event or the satisfaction of any other condition specified by the Administrator in its sole discretion, or (4) a combination of any of the foregoing.
(ii) Subject to paragraph (b) of Section 12 of the Plan and/or unless otherwise provided in an Award Agreement, a Participant awarded Restricted Stock under the Plan generally shall have the rights of a shareholder of the Company with respect to such Restricted Stock during the Restricted Period (including, without limitation, the right to vote the Restricted Stock and to receive dividends thereon).
(iii) If a Participant makes an election pursuant to Section 83(b) of the Code, the Participant shall be required to file promptly a copy of such election form with the Company.
(d) Terms and Conditions for Restricted Stock Units. The Administrator shall, prior to or at the time of grant, condition the vesting of Restricted Stock Units upon the (i) continued service of the applicable Participant, (ii) the attainment of Performance Goals, or (iii) the attainment of Performance Goals and the continued service of the applicable Participant. The conditions for grant or vesting and the other provisions of Restricted Stock Units (including without limitation any applicable Performance Goals) need not be the same with respect to each Participant. An Award of Restricted Stock Units shall be settled as and when the Restricted Stock Units vest, or, after consultation with Company legal counsel, at a later time specified by
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the Administrator in the applicable Agreement. In addition, subject to the provisions of this Plan and the applicable Agreement, during the restriction period, if any, set by the Administrator, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Restricted Stock Units. A Participant shall have no voting or dividend rights with respect to any Restricted Stock Units granted hereunder.
Section 8. Stock or Other Stock-Based Awards. The Administrator is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares, as deemed by the Administrator to be consistent with the purposes of the Plan, including without limitation Shares awarded purely as a “bonus” and not subject to any restrictions or conditions, stock appreciation rights, performance awards, performance units, phantom stock, dividend equivalents or similar rights to purchase or acquire Shares, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, and Awards valued by reference to book value of Shares or the value of securities of or the performance of specified Parents or Subsidiaries. The Administrator shall determine the terms and conditions of such Awards. The maximum value of cash-settled awards that may be paid or payable in any calendar year to any one Participant shall be $50,000.
Section 9. Termination of Employment or Service.
Unless otherwise set forth in Section 13 of the Plan and subject to Section 10 below, or as may otherwise be set forth in an Award Agreement, if a Participant’s employment with or service as an officer, director, employee, consultant, or advisor of the Company or of any subsidiary: (a) terminates for any reason and on the date of termination of employment or service the Participant is not vested as to his or her entire Award, the Shares issuable with respect to the unvested portion of such Award shall be forfeited; and (b) terminates for the reasons described below and on the date of termination of employment or service the Participant is vested as to any Options, then if such termination is (i) by reason of his or her death or Permanent and Total Disability, any vested Option may thereafter be exercised for a period of twelve months following termination of employment or service; (ii) for Cause, then any vested Option shall cease to be exercisable and shall terminate; or (iii) for any other reason than listed in subsections (b)(i) and (b)(ii) above, then any vested Option may thereafter be exercised for a period of three months following termination of employment or service. If, and to the extent that, after termination of employment or service, the Participant does not exercise his or her Option within the applicable time stated above, the unexercised Option shall terminate.
Section 10. Change in Control.
Unless otherwise determined in an Award Agreement, in the event of a Change in Control:
(a) Effective immediately prior to the occurrence of the Change in Control, (i) each outstanding Award shall become fully vested and, if applicable, exercisable, (ii) the restrictions and forfeiture conditions applicable to any such Award granted shall lapse, and (iii) any performance conditions imposed with respect to Awards shall be deemed to be fully achieved.
14
(b) The Administrator may notify all Participants that all outstanding Awards shall be assumed by the acquiring entity or substituted on an equitable basis with awards issued by the acquiring entity. For purposes of this Section 10, an Award shall be considered assumed or substituted for if, following the Change in Control, the Award remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change in Control except that, if the Award related to Shares, the Award instead confers the right to receive common stock or other securities of the acquiring entity.
(c) Notwithstanding any other provision of the Plan, in the event of a Change in Control, except as would otherwise result in adverse tax consequences under Section 409A of the Code, the Board may, in its sole discretion, provide that each Award shall, immediately upon the occurrence of a Change in Control, be cancelled in exchange for a payment in cash or securities in an amount equal to (i) the excess (if any) of the consideration paid per Share in the Change in Control (as determined by the Administrator in its sole discretion) over the exercise or purchase price (if any) per Share subject to the Award multiplied by (ii) the number of Shares subject to the Award (if the consideration paid per share in the Change in Control is deemed by the Administrator to be less than the Exercise Price or purchase price (if any) per Share subject to an Award, then such Awards may be deemed to have been paid in full and canceled by the Administrator).
Section 11. Amendment and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment, alteration, or discontinuation that would materially impair the rights of a Participant under any Award granted or Award Agreement in effect under the Plan shall be made without such Participant’s consent. The Administrator may accept surrender of outstanding Awards and grant new Awards in substitution for them; provided, that the Administrator will not, without prior shareholder approval, exchange underwater Options or otherwise modify the exercise price or purchase price of any Option or Award that has the effect of being a repricing. To the extent necessary and desirable, approval of the Company’s shareholders shall be obtained for any amendment that would:
(a) increase the total number of Shares reserved for issuance under the Plan; or
(b) change the class of officers, directors, employees, consultants, and advisors eligible to participate in the Plan.
The Administrator may amend the terms of any Award granted under the Plan, prospectively or retroactively, but, subject to Section 4 of the Plan, no such amendment shall impair the rights of any Participant without his or her consent. Notwithstanding the previous sentence, the Administrator reserves the right to amend the terms of any Award or Award Agreement as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code, to comply with any requirements under the forfeiture provisions set forth in Section 3(j) of the Plan, to comply with the requirements in the Company’s “clawback” policy regarding incentive compensation, or to comply with such “clawback” requirements under the Sarbanes-Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended from time to time, or to maintain the qualified status of any ISO.
15
Section 12. Unfunded Status of Plan.
The Plan is intended to constitute an “unfunded” plan. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company.
Section 13. General Provisions.
(a) Shares shall not be issued pursuant to the exercise or settlement of any Award granted under the Plan unless the exercise or settlement of such Award and the issuance and delivery of such Shares pursuant to such Award shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, the Securities Exchange Act of 1934, withholding tax requirements and the requirements of any stock exchange upon which the Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company may rely on an opinion of its counsel as to such compliance. Any share certificate issued to evidence Common Stock for which an Award is exercised or issued may bear such legends and statements as the Administrator may deem advisable to assure compliance with Federal and state laws and regulations.
(b) The Administrator may require each person acquiring Shares granted under the Plan to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof. All certificates for Shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any applicable Federal or state securities law. The certificates for such Shares may include the legend set forth below, or any other legend that the Administrator deems appropriate to reflect any restrictions on transfer for such Shares.
“THE ISSUANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.”
(c) Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements. The adoption of the Plan or granting of an Award shall not confer upon any Eligible Recipient any right to continued employment with or service to the Company or any subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any subsidiary to terminate the employment or service of any Eligible Recipient at any time.
16
(d) Unless otherwise set forth in an applicable Award Agreement, a Participant may elect, no later than the date as of which the value of an Award becomes includible in the gross income of the Participant for Federal income tax purposes (the “withholding date”), to have the Company withhold vested whole shares of Common Stock deliverable upon the exercise of an Option or the vesting of the Restricted Stock or Restricted Stock Units to satisfy (in whole or in part) the amount, if any, that the Company or any subsidiary is required to withhold for taxes; provided, however, that the amount of shares of Common Stock so withheld shall have a Fair Market Value (as of the withholding date) that is not in excess of the amount determined by the Company to be equal to the applicable minimum statutorily required withholding tax payments. Any such election shall be irrevocable.
To the extent that a Participant does not make such an election, or such election does not fully satisfy such minimum statutorily required withholding tax payments, then (x) the Company may require that the Participant pay to the Company, or make arrangements satisfactory to the Company regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such Award, as a condition of the exercise of any Option, (y) the Company may withhold vested whole shares of Common Stock deliverable upon exercise of an Option or vesting of the Restricted Stock or Restricted Stock Units to satisfy (in whole or in part) the amount, if any, that the Company or any subsidiary is required to withhold for taxes; provided, however, that the amount of shares of Common Stock so withheld shall have a Fair Market Value (as of the withholding date) that is not in excess of the amount determined by the Company to be equal to the applicable minimum statutorily required withholding tax payments, and (z) the Company shall have the right to deduct from any payment of any kind otherwise due to a Participant up to an amount equal to any federal, state or local taxes of any kind required by law to be withheld in connection with the granting, vesting or exercise of an Award (not to exceed the amount determined by the Company to be the applicable minimum statutorily required withholding tax payments). Upon request, the Participant shall reimburse the Company for any taxes that the Company withholds that are not otherwise reimbursed as contemplated above in this Section 13(d).
(e) No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the Board or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.
(f) If a Participant is an officer or director of the Company within the meaning of Section 16, Awards granted hereunder shall be subject to all conditions required under Rule 16b-3, or any successor rule(s) promulgated under the Securities Exchange Act of 1934, to qualify the Award for any exemption from the provisions of Section 16 available under such Rule. Such conditions are hereby incorporated herein by reference and shall be set forth in the agreement with the Participant, which describes the Award.
17
(g) The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933 of any shares of Stock to be issued hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be issued or delivered any shares of Stock pursuant to the Plan unless and until the Company is advised by its counsel that the issuance and delivery of such shares is in compliance with all applicable laws, regulations or governmental authority and the requirements of any securities exchange on which shares of Stock are traded or any over-the-counter market on which the Stock is quoted. The Administrator may require, as a condition of the issuance and delivery of shares of Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that such shares, if certificated, bear such legends, and if dematerialized, be so restricted, in each case, as the Administrator, in its sole discretion, deems necessary or desirable.
Section 14. Section 409A of the Code.
Notwithstanding any provision in the Plan to the contrary, no payment or distribution under this Plan that constitutes an item of deferred compensation under Section 409A of the Code and becomes payable by reason of a Participant’s termination of employment or service with the Company will be made to such Participant unless such Participant’s termination of employment or service constitutes a “separation from service” (as defined in Section 409A of the Code). For purposes of this Plan, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A of the Code. If a participant is a “specified employee” (as defined in Section 409A of the Code), then to the extent necessary to avoid the imposition of taxes under Section 409A of the Code, such Participant shall not be entitled to any payments which are deferred compensation under Section 409A of the Code upon a termination of his or her employment or service until the earlier of: (i) the expiration of the six-month period measured from the date of such Participant’s “separation from service” or (ii) the date of such Participant’s death. Upon the expiration of the applicable waiting period set forth in the preceding sentence, all payments and benefits deferred pursuant to this Section 14 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such deferral) shall be paid to such Participant in a lump sum as soon as practicable, but in no event later than 60 calendar days, following such expired period, and any remaining payments due under this Plan will be paid in accordance with the normal payment dates specified for them herein.
Section 15. Notice.
All notices, requests, waivers, and other communications required or permitted hereunder shall in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, or by email or other form of electronic transmission, each against receipt therefore, to the recipient at the address below:
First Home Bancorp, Inc.
700 Central Avenue, Suite 102
St. Petersburg, FL 33701
Attention: Compensation Committee Chairman
18
or such other address or the attention of such other person as the recipient party shall have specified by prior written notice to the sending party, or sent by other electronic means. All such notices, requests, waivers and other communications shall be deemed to have been effectively given: (a) when personally delivered to the party to be notified; (b) when sent by confirmed facsimile, email or other form of electronic transmission to the party to be notified; (c) five (5) business days after deposit in the United States Mail postage prepared by certified or registered mail with return receipt requested at any time other than during a general discontinuance of postal service due to strike, lockout, or otherwise (in which case such notice, request, waiver or other communication shall be effectively given upon receipt) and addressed to the party to be notified as set forth above; or (d) two (2) business days after deposit with a national overnight delivery service, postage prepaid, addressed to the party to be notified as set forth above with next-business-day delivery guaranteed. A party may change its or his notice address given above by giving the other party ten (10) days’ written notice of the new address in the manner set forth above.
Section 16. Governing Law and Interpretation.
The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Florida, without reference to principles of conflict of laws.
Section 17. Severability.
If, for any reason, any provision of this Plan is held invalid, such invalidity shall not affect any other provision of this Plan not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Plan shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Plan, shall to the full extent consistent with law continue in full force and effect.
Section 18. Term of Plan.
The Plan shall be effective as of the Effective Date. No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but Awards granted under the Plan prior to the tenth anniversary of the Effective Date may extend beyond the tenth anniversary of the Effective Date pursuant to the terms of the Award as provided for under the Plan and the terms of the applicable Award Agreement.
* * * * *
IN WITNESS WHEREOF, the Board of Directors of the Company has adopted this Plan, to be executed on behalf of the Company by a duly designated officer of the Company, as of the day and year first above written as the Effective Date.
19
| FIRST HOME BANCORP, INC. | ||
| By: | /s/ Anthony N. Leo | |
| Name: | Anthony N. Leo | |
| Title: | Chief Executive Officer | |
20
Appendix A
Participating Employers
First Home Bancorp, Inc.
First Home Bank
21
Exhibit 10.4
As approved on 2.9.17
FIRST HOME BANCORP, INC.
2017 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this “Agreement”) is entered into as of this day of _________, between First Home Bancorp, Inc., a Florida corporation (the “Company”), and _________ (the “Optionee”).
WHEREAS, on February 2, 2017, the Board of Directors of the Company adopted the “First Home Bancorp, Inc. 2017 Equity Incentive Plan” (the “Plan”), and recommended that the Plan be approved by the Company’s shareholders; and
WHEREAS, on _________, the Company’s shareholders approved the Plan at an annual meeting held on _________; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase the number of shares of the Company’s common stock as set forth below, and in consideration of the granting of that stock option the Optionee intends to remain in the employ of the Company; and
WHEREAS, the Company considers it desirable and in its best interest that the Optionee be provided an inducement to acquire an ownership interest in the Company and an additional incentive to advance the interest of the Company through the grant of an option to purchase shares of common stock of the Company pursuant to the Plan; and
WHEREAS, the Company and the Optionee desire to enter into a written agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and also in consideration of the mutual covenants contained herein, the Company and the Optionee agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the provisions of the Plan and the terms and definitions of the Plan are incorporated herein by reference and made a part hereof. A copy of the Plan has been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the provisions stated in this Agreement, the Company hereby evidences its grant to the Optionee, not in lieu of salary or other compensation, of the right and option (the “Option”) to purchase the number of shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”), set forth below, exercisable in the amounts and at the time specified below. This Option is intended to be an .
Date of Grant: _________
Number of Shares: _________
Exercise Price: _________
1
As approved on 2.9.17
| Option Vesting Schedule: |
Options are exercisable with respect the shares of Common Stock as follows, subject in each case to continued employment by the Company or a subsidiary of the Company through such date, and subject to the provisions of Section 7 of this Agreement: |
| No. of Shares |
Vesting Date | |
In addition, the Options granted will not vest until [insert performance vesting condition, if applicable].
[Include, if applicable: In addition, all unvested Options will automatically vest in full immediately upon your attainment of Normal Retirement Age. Normal Retirement Age shall be [ ].]
Option Exercise Period: All options expire and are void unless exercised on or before _________.
3. Exercise Terms. The Optionee must exercise the Option for at least the lesser of 100 shares or the number of shares of Stock as to which the Option remains unexercised but exercisable. If this Option is not exercised with respect to all or any part of the shares subject to this Option prior to its expiration, the shares with respect to which this Option was not exercised shall no longer be subject to this Option.
4. Restrictions on Transferability. No Option shall be transferable by an Optionee other than by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order. During the lifetime of an Optionee, Options shall be exercisable only by such Optionee (or by such Optionee’s guardian or legal representative, should one be appointed). If the shares purchased pursuant to the exercise of an Incentive Stock Option are transferred by the Optionee, except pursuant to the Optionee’s will or the laws of descent and distribution, prior to such date which is the later of two years after the grant of such Incentive Stock Option or one year after the transfer of the shares to the Optionee pursuant to the exercise of such Incentive Stock Option, the transfer is a “disqualifying disposition” for tax purposes and the Optionee shall report such transfer to the Company.
5. Notice of Exercise of Option. This Option may be exercised by the Optionee, or by the Optionee’s administrators, executors or personal representatives, by a written notice (in substantially the form of a Notice of Exercise approved by the Company) signed by the Optionee, or by such administrators, executors or personal representatives, and delivered or
2
As approved on 2.9.17
mailed to the Company as specified in this Agreement to the attention of the _____________ or such other officer as the Company may designate. Any such notice shall (a) specify the number of shares of Common Stock which the Optionee or the Optionee’s administrators, executors or personal representatives, as the case may be, then elects to purchase hereunder, (b) contain such information as may be reasonably required by the Company pursuant to this Agreement, and (c) be accompanied by (i) consideration in the form of any cashless exercise (such consideration having been approved by the Administrator upon the granting of this Option), including by means of a net exercise whereby the Company issues net Shares and the remaining balance of the Shares to satisfy the Participant’s tax withholding obligations; (ii) unrestricted shares of Common Stock already owned by the Participant (based on the Fair Market Value on the date the Option is exercised); (iii) any other form of consideration subsequently approved by the Administrator and permitted by applicable law; or (iv) a combination of a certified or cashier’s check accompanied by a number of shares of stock which equal under (i), (ii) or (iii) the total Exercise Price applicable to such shares purchased hereunder. Upon receipt of any such notice and accompanying payment, and subject to the terms hereof, the Company agrees to issue to the Optionee or the Optionee’s administrators, executors or personal representatives, as the case may be, stock certificates for the number of shares specified in such notice registered in the name of the person exercising this Option.
6. Adjustment in Option. The number of Shares subject to this Option, the Exercise Price, and other matters are subject to adjustment during the term of this Option in accordance with Sections 4, 6, 9, 10, 11 and 14 of the Plan. In the event of a Change of Control, (i) this Option will automatically vest in full and (ii) any performance conditions imposed with respect to this Option shall be deemed to be fully achieved immediately prior to the consummation of the Change of Control.
7. Termination of Employment.
(a) In the event of the termination of the Optionee’s employment [Include, if applicable: (including due to retirement)] with the Company or any of its Subsidiaries, other than a termination that is either (i) for Cause, or (ii) for reasons of death or Permanent and Total Disability, all vesting of the Option shall cease and the Optionee may exercise the vested portion of the Option at any time within a period ending on the earlier of (a) the last day of the period ending 90 days after such termination of employment or (b) the expiration date of this Option, to the extent of the number of shares which were vested but not exercised or otherwise forfeited as of the date of such termination (and thereafter this Option shall be deemed terminated and shall not be or become exercisable).
(b) In the event of a termination of the Optionee’s employment for Cause, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable.
(c) In the event of termination of employment because of the Optionee’s Permanent and Total Disability, all vesting of the Option shall cease and the Optionee (or his or her personal representative) may exercise the vested portion of the Option, within a period ending on the earlier of (a) the last day of the one-year period following the Optionee’s Permanent and Total Disability or (b) the expiration date of this Option, to the extent of the number of shares which were vested but not exercised or otherwise forfeited as of the date of such termination.
3
As approved on 2.9.17
(d) In the event of the Optionee’s death while employed by the Company or any of its Subsidiaries or within 90 days after a termination of such employment (if such termination was not for Cause), the appropriate persons described in Section 5 hereof or persons to whom all or a portion of this Option is transferred in accordance with Section 4 hereof may exercise this Option, to the extent vested, at any time within a period ending on the earlier of (a) the last day of the twelve month period following the Optionee’s death or (b) the expiration date of this Option. If the Optionee was an employee of the Company at the time of death, all vesting of the Option shall cease as of the date of death, and this Option may be so exercised to the extent of the number of shares that were vested but not exercised or otherwise forfeited as of the date of death. If the Optionee’s employment terminated prior to his or her death, all vesting of the Option shall have ceased as of the date of termination, and this Option may be exercised only to the extent of the number of shares covered by this Option which were vested but not exercised or otherwise forfeited as of the date of such termination.
This Option does not confer upon the Optionee any right with respect to continuance of employment by the Company or by any of its Subsidiaries. This Option shall not be affected by any change of employment so long as the Optionee continues to be an employee of the Company or one of its Subsidiaries.
8. Compliance with Regulatory Matters. The Optionee acknowledges that the issuance of capital stock of the Company is subject to limitations imposed by federal and state law and the Optionee hereby agrees that the Company shall not be obligated to issue any shares of Stock upon exercise of this Option that would cause the Company to violate law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission) having jurisdiction over the affairs of the Company. The Optionee agrees that he or she will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Stock complies with the provisions described by this Section 8.
9. Miscellaneous.
(a) This Agreement shall be binding upon the parties hereto and their representatives, successors and assigns.
(b) Unless the context clearly indicates to the contrary, all capitalized terms used herein shall have the meanings as set forth in this Agreement, or in the event a capitalized term is not clearly described in this Agreement, the meanings as set forth in the Plan.
(c) This Agreement is executed and delivered in, and shall be governed by the laws of, the State of Florida.
4
As approved on 2.9.17
(d) Income realized by the Optionee pursuant to this Agreement shall not be included in the Grantee’s earnings for the purpose of any benefit plan of the entity in which the Optionee may be enrolled or for which the Optionee may become eligible unless otherwise specifically provided for in such plan.
(e) Any requests or notices to be given hereunder shall be deemed given, and any elections or exercises to be made or accomplished shall be deemed made or accomplished, (i) upon actual delivery thereof to the designated recipient, (ii) when sent by confirmed facsimile or by email or other form of electronic transmission, each against receipt therefore, to the party to be notified, or (iii) three days after deposit thereof in the United States mail, registered, return receipt requested and postage prepaid, addressed, if to the Optionee, at the address set forth below and, if to the Company, to the executive offices of the Company at 700 Central Avenue, Suite 102, St. Petersburg, FL 33701, Attn: Chairperson of the Compensation Committee.
(f) This Agreement may not be modified except in writing executed by each of the parties hereto. Notwithstanding the previous sentence, the Administrator reserves the right to amend the terms of this Agreement as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code or to comply with any requirements under the Company’s “clawback” policy regarding incentive compensation, or such “clawback” requirements under the Sarbanes–Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act.
[Signatures appear on the following page.]
5
As approved on 2.9.17
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Stock Option Agreement to be executed on behalf of the Company and the Company’s seal to be affixed hereto and attested by the Secretary or an Assistant Secretary of the Company, and the Optionee has executed this Stock Option Agreement under seal, all as of the day and year first above written.
| FIRST HOME BANCORP, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| OPTIONEE | ||
| By: | ||
| Name: | ||
| Address: | ||
Attachments:
| 1. | 2017 Equity Incentive Plan |
6
Exhibit 10.5
As approved on 2.9.17
FIRST HOME BANCORP, INC.
2017 EQUITY INCENTIVE PLAN
RESTRICTED STOCK AWARD GRANT NOTICE
| Participant Name: | __________________ | |||
| Company: | First Home Bancorp, Inc. | |||
| Notice: | A summary of the terms of your grant of Restricted Shares is set out in this notice (the “Grant Notice”) but subject always to the terms of the First Home Bancorp, Inc. 2017 Equity Incentive Plan (the “Plan”) and the Restricted Stock Award Agreement (the “Award Agreement”). In the event of any inconsistency between the terms of this Grant Notice, the terms of the Plan and the Award Agreement, the terms of the Plan and the Award Agreement shall prevail. | |||
| Type of Award: | Restricted Stock Award | |||
| Stock: | Shares of common stock, par value $1.00 per share, of the Company | |||
| Number of Shares of Stock Subject to Grant: |
_________ shares | |||
| Grant Date: | _________ | |||
| Vesting Schedule: | Restricted Shares granted will vest (i.e., restrictions shall lapse) in accordance with the following schedule, provided that you have provided continuous employment to the Company or any Participating Employer through each such vesting date: | |||
| Date | No. of Shares | |||
| _________ | _________ | |||
| _________ | _________ | |||
| _________ | _________ | |||
| _________ | _________ | |||
| _________ | _________ | |||
| In the event of a Change of Control, all unvested Restricted Shares will automatically vest in full immediately prior to the consummation of the Change of Control. | ||||
| [Include, if applicable: In addition, all unvested Restricted Shares will automatically vest in full immediately upon your attainment of Normal Retirement Age. Normal Retirement Age shall be [ ].] | ||
| Performance Goal: | In addition, the Restricted Shares granted will not vest until [insert performance vesting condition, if applicable]. | |
| Acceptance: | You acknowledge receipt of, and understand and agree to, this Grant Notice, the Award Agreement and the Plan. You further acknowledge that as of the Grant Date, this Grant Notice, the Award Agreement and the Plan set forth the entire understanding between you and the Company or any Participating Employer regarding the Restricted Shares and supersede all prior oral and written Award Agreements on the subject. | |
[Signatures appear on the following page.]
2
IN WITNESS WHEREOF, the Company and the Participant have duly executed and delivered this Grant Notice as of the Grant Date.
| FIRST HOME BANCORP, INC. | PARTICIPANT | |
| By: ________________________________ |
___________________________________ | |
| Print Name: _________________________ |
[Name] | |
| Title: ______________________________ |
Address: ___________________________________ | |
| ___________________________________ | ||
| ___________________________________ | ||
Attachments:
| 1. | Restricted Stock Award Agreement |
| 2. | 2017 Equity Incentive Plan |
3
FIRST HOME BANCORP, INC.
Restricted Stock Award Agreement
Pursuant to the Restricted Stock Grant Notice (the “Grant Notice”) and this Restricted Stock Award Agreement (this “Award Agreement”), First Home Bancorp, Inc. (the “Company”) has granted the Participant, as identified in the Grant Notice, the number of restricted shares of the Company’s Common Stock under the Company’s 2017 Equity Incentive Plan (the “Plan”) indicated in the Grant Notice (the “Restricted Shares”). Capitalized terms not defined in this Award Agreement but defined in the Plan or the Grant Notice will have the same definitions as in the Plan or the Grant Notice, respectively.
1. Restrictions and Vesting Schedule. The Restricted Shares are being awarded to Participant subject to the transfer and forfeiture conditions set forth in this Award Agreement and the Plan (the “Restrictions”). Subject to the provisions of Section 2 below, the Restricted Shares will vest, and Restrictions shall lapse, as provided in the Participant’s Grant Notice. The period from the Date of Grant through the last Vesting Date set forth in the Grant Notice is referred to as the “Restriction Period.” Except to the extent vesting accelerates pursuant to the terms of the Grant Notice or Section 2 below, any unvested Restricted Shares shall be automatically forfeited upon Participant’s Termination from Service.
2. Acceleration of Vesting upon a Change in Control. In the event of a Change of Control, all unvested Restricted Shares will automatically vest in full immediately prior to the consummation of the Change of Control.
3. Assignment or Transfer of Shares. Unless otherwise provided by the Board, prior to the vesting of the Restricted Shares, Participant may not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any of the Restricted Shares still subject to Restrictions. The Restricted Shares shall be forfeited if Participant violates or attempts to violate these transfer Restrictions. After any Stock has been released from the Restrictions, Participant shall not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any interest in the Stock except in compliance with the provisions herein and the provisions of applicable securities laws.
4. Delivery of Shares. The Company shall enter such Award of Restricted Stock in book entry form with appropriate restrictions noted with respect thereto.
5. Rights of Participant. Subject to the provisions of this Award Agreement, Participant shall exercise all rights and privileges of a shareholder of the Company with respect to the Restricted Shares deposited pursuant to Section 4. Participant shall be deemed to be the holder for purposes of receiving any dividends that may be paid with respect to such shares of Stock and for the purpose of exercising any voting rights relating to such shares of Stock, even if some or all of such shares of Stock have not yet vested and been released from the Restrictions.
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6. Restrictive Legends. The Company’s book entry notations representing the Stock shall have been noted with a legend in substantially the following form:
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH RESTRICTED STOCK AWARD IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.”
The Company shall remove or cause the removal of the foregoing legend as and to the extent of the lapse of the applicable Restrictions.
7. Section 83(b) Election. Participant understands that Section 83(a) of the Code taxes as ordinary income the difference between the amounts paid for the Stock and the fair market value of the Stock as of the date any Restrictions on the Stock lapse. Participant understands that Participant may elect to be taxed at the time the Restricted Shares are granted rather than when and as the Restrictions lapse, by filing an election under Section 83(b) (“83(b) Election”) of the Code with the Internal Revenue Service within 30 days from the Date of Grant. Even if the fair market value of the Restricted Shares at the time of the Grant equals the amount paid for the Stock, if any, the 83(b) Election must be made to avoid income under Section 83(a) in the future. Participant understands that failure to file such an 83(b) Election in a timely manner may result in adverse tax consequences for Participant. Participant further understands that an additional copy of such 83(b) Election is required to be filed with his or her federal income tax return for the calendar year in which the Grant Date in connection with this Award Agreement falls. Participant further acknowledges and understands that it is Participant’s decision as to whether to file such 83(b) Election, and neither the Company nor the Company’s legal or financial advisors shall have any obligation or responsibility with respect to such filing. Participant acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to purchase of the Stock hereunder, and does not purport to be complete. Participant further acknowledges that the Company has directed Participant to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Participant may reside, and the tax consequences of Participant’s death. Participant assumes all responsibility for filing an 83(b) Election and paying all taxes resulting from such election or the lapse of the Restrictions on the Stock.
8. Refusal to Transfer. The Company shall not be required to transfer on its books any shares of Stock of the Company which shall have been transferred in violation of any of the provisions set forth in this Award Agreement.
9. No Employment Rights. This Award Agreement is not an employment contract and nothing in this Award Agreement shall confer upon the Participant any right to continued employment with or service to the Company or any Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment or service of the Participant at any time.
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10. Governing Plan Document. The Restricted Shares granted hereunder are subject to all the provisions of the Plan, the provisions of which are hereby incorporated by reference herein, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Capitalized terms used herein and not defined shall have the meanings assigned in the Plan. In the event of any conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.
11. Adjustments. The Restricted Shares shall be subject to adjustments as provided in Sections 4, 9, 10, 11 and 14 of the Plan.
12. Acknowledgements. No waiver of any breach of any provision of this Award Agreement by the Company shall be construed to be a waiver of any succeeding breach or as a modification of such provision.
13. Miscellaneous.
(a) Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) when personally delivered to the party to be notified; (b) when sent by confirmed facsimile or by email or other form of electronic transmission, each against receipt therefore, to the party to be notified; (c) five business days after deposit in the United States Mail postage prepared by certified or registered mail with return receipt requested at any time other than during a general discontinuance of postal service due to strike, lockout, or otherwise (in which case notice, request, waiver or other communication shall be effectively given upon receipt) and address to the party to be notified as set forth above; or (d) two business days after deposit with a national recognized overnight delivery service, postage prepaid, addressed to the party to be notified as set forth above with next-business-day delivery guaranteed. A party may change its notice address by giving the other party ten days’ written of the new address in the manner set forth above.
(b) Successors and Assigns. This Award Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Participant, Participant’s successors, and assigns.
(c) Governing Law. This Award Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without reference to principles of conflict of laws.
(d) Entire Award Agreement; Amendment. This Award Agreement, along with the Grant Notice and the Plan constitute the entire Award Agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral. This Award Agreement may only be amended as described in Section 11 of the Plan.
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ATTACHMENT A
ELECTION UNDER SECTION 83(B)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to §83(b) of the Internal Revenue Code, to include in taxpayer’s gross income or alternative minimum tax income, as applicable, for the current taxable year, the amount of any income that may be taxable to taxpayer in connection with taxpayer’s receipt of the property described below:
| 1. | The taxpayer’s name, address and taxpayer identification number are as follows: |
Name:
Address:
SS#
| 2. | Description of property with respect to which the election is being made: |
_________ shares of Common Stock of First Home Bancorp, Inc., a Florida corporation (the “Company”), granted pursuant to a Restricted Stock Award under the Company’s 2017 Equity Incentive Plan.
| 3. | The date on which the property was transferred is. |
The taxable year for which the election is made is calendar year .
| 4. | The property is subject to the following restrictions: |
The Restricted Shares are subject to a vesting schedule pursuant to which restrictions on transfer will lapse.
| 5. | The fair market value at time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) of such property is $_________. |
| 6. | Furnishing statement to employer: |
A copy of this statement has been furnished to the Company.
| Dated: |
| |||
Taxpayer:
|
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Exhibit 10.6
As approved on 2.9.17
FIRST HOME BANCORP, INC.
2017 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD GRANT NOTICE
| Participant Name: | ||
| Company: | First Home Bancorp, Inc. | |
| Notice: | A summary of the terms of your grant of Restricted Stock Unit (RSU) Award is set out in this notice (the “Grant Notice”) but subject always to the terms of the First Home Bancorp, Inc. 2017 Equity Incentive Plan (the “Plan”) and the Restricted Stock Unit Award Agreement (the “Award Agreement”). In the event of any inconsistency between the terms of this Grant Notice, the terms of the Plan and the Award Agreement, the terms of the Plan and the Award Agreement shall prevail. | |
| Type of Award: | Restricted Stock Unit Award (as defined in the Plan and meaning the right granted to the Participant to receive one share of Stock for each RSU at the end of the specified Vesting Period) | |
| Stock: | Shares of voting common stock, par value $1.00 per share, of the Company. | |
| Number of RSU Units Subject to Grant: |
||
| Grant Date: | ||
| Vesting Schedule: | Restricted Stock Units (RSUs) granted will vest (i.e., shares will be delivered) in accordance with the following schedule, provided that you have provided continuous employment to the Company or any Participating Employer through each such vesting date, except as otherwise forth below: | |
| In the event of a Change of Control after the Date of Grant and prior to the end of the Performance Period, all unvested RSUs will automatically vest in full immediately prior to the consummation of the Change of Control. | ||
| [Include, if applicable: In addition, all unvested Restricted Shares will automatically vest in full immediately upon your attainment of Normal Retirement Age. Normal Retirement Age shall be [ ].] | ||
| [Vesting is accelerated to 100% upon the Participant’s death or Permanent and Total Disability while a Participant during the Performance Period.] | ||
| Performance Goal: | In addition, the RSUs granted will not vest until [insert performance vesting condition, if applicable]. | |
| Delivery of Shares: | Upon vesting, the applicable shares of Stock, subject to required tax withholding, shall be transferred by the Company to the Participant’s estate within thirty (30) days of the vesting date. | |
| Withholding: | The Company and the Participant will comply with all federal and state laws and regulations respecting the required withholding, deposit and payment of any income, employment or other taxes relating to the Grant. A portion of the Stock subject to each RSU may be withheld to cover required taxes, and the net number of shares of Stock will be paid to the Participant. | |
| Acceptance: | You acknowledge receipt of, and understand and agree to, this Grant Notice, the Award Agreement and the Plan. You further acknowledge that as of the Grant Date, this Grant Notice, the Award Agreement and the Plan set forth the entire understanding between you and the Company or any Participating Employer regarding the RSUs and supersede all prior oral and written Award Agreements on the subject. | |
[Signatures appear on the following page.]
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IN WITNESS WHEREOF, the Company and the Participant have duly executed and delivered this Grant Notice as of the Grant Date.
| FIRST HOME BANCORP, INC. | PARTICIPANT | |||
| By: | ||||
| Print Name: | [Name] | |||
| Title: | Address: | |||
Attachments:
| 1. | Restricted Stock Unit Award Agreement |
| 2. | 2017 Equity Incentive Plan |
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First Home Bancorp, Inc.
Restricted Stock Unit Award Agreement
Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) and this Restricted Stock Unit Award Agreement (this “Award Agreement”), First Home Bancorp, Inc. (the “Company”) has granted the Participant, as identified in the Grant Notice, the number of restricted stock units under the Company’s 2017 Equity Incentive Plan (the “Plan”) indicated in the Grant Notice (the “RSUs”). Capitalized terms not defined in this Award Agreement but defined in the Plan or the Grant Notice will have the same definitions as in the Plan or the Grant Notice, respectively.
1. Restrictions and Vesting Schedule. The RSUs are being awarded to Participant subject to the conditions set forth in this Award Agreement and the Plan (the “Restrictions”). Subject to the provisions of Section 2 below, the RSUs will vest as provided in the Participant’s Grant Notice. Upon vesting, Participant shall have the right to a number of shares of Common Stock of the Company equal to the number of vested RSUs. Except to the extent vesting accelerates pursuant to the terms of the Grant Notice or Section 2 below, any unvested RSUs shall be automatically forfeited upon Participant’s Termination from Service, or if earlier, at the end of the Performance Period.
2. Acceleration of Vesting upon a Change in Control. In the event of a Change of Control prior to _________, all unvested RSUs will automatically vest in full immediately prior to the consummation of the Change of Control.
3. Assignment or Transfer of Shares. Unless otherwise provided by the Board, prior to the vesting of the RSUs, Participant may not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any of the RSUs. The RSUs shall be forfeited if Participant violates or attempts to violate these transfer restrictions. After any Stock has been delivered, Participant shall not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any interest in the Stock except in compliance with the provisions herein and the provisions of applicable securities laws.
4. Delivery of Shares. Upon vesting of an RSU, the Participant is entitled to one share of Company Stock for each vested RSU. Such Stock, subject to applicable withholding, shall be transferred by the Company to the Participant within thirty (30) days of the vesting date and not later than March 15 of the year following the year in which the RSU vests.
5. Payment and Tax Withholding. Each payment of the RSUs shall be made in shares of Stock, determined by the Administrator. The payment of a RSU in the form of a share of Stock shall be based on the Fair Market Value of a share of Stock on the applicable date of vesting to which such tax withholding relates. Upon receipt of any entitlement to shares of Stock under this Agreement, the Participant shall make appropriate arrangements with the Company to provide for the amount of minimum tax withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Code and applicable state and local income and other tax laws. The Company may permit the Participant to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a
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combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Stock from the shares of Stock otherwise issuable or deliverable to the Participant as a result of the vesting of the RSUs (provided, however, that no shares of Stock shall be withheld with a value exceeding the minimum amount of tax required to be withheld by law); or (c) delivering to the Company previously owned and unencumbered shares of Stock.
6. No Ownership Rights Prior to Issuance of Stock. Neither the Participant nor any other person shall become the beneficial owner of the Stock underlying the RSU, nor have any rights of a shareholder (including, without limitation, dividend and voting rights) with respect to any such Stock, unless and until and after such Stock has been actually issued to the Participant and transferred on the books and records of the Company or its agent in accordance with the terms of the Plan and this Agreement.
7. Refusal to Transfer. The Company shall not be required to transfer on its books any shares of Stock of the Company which shall have been transferred in violation of any of the provisions set forth in this Award Agreement.
8. No Employment Rights. This Award Agreement is not an employment contract and nothing in this Award Agreement shall confer upon the Participant any right to continued employment with or service to the Company or any Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment or service of the Participant at any time.
9. Governing Plan Document. The RSUs granted hereunder are subject to all the provisions of the Plan, the provisions of which are hereby incorporated by reference herein, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Capitalized terms used herein and not defined shall have the meanings assigned in the Plan. In the event of any conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.
10. Adjustments. The RSUs shall be subject to adjustments as provided in Sections 4, 7, 9, 10, 11 and 14 of the Plan.
11. Acknowledgements. No waiver of any breach of any provision of this Award Agreement by the Company shall be construed to be a waiver of any succeeding breach or as a modification of such provision.
12. Miscellaneous.
(a) Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) when personally delivered to the party to be notified; (b) when sent by confirmed facsimile or by email or other form of electronic transmission, each against receipt therefore, to the party to be notified; (c) five business days after deposit in the United States Mail postage prepared by certified or registered mail with return receipt requested at any time other than during a general discontinuance of postal service due to strike, lockout, or otherwise (in which case notice, request, waiver or other communication shall be effectively given upon receipt) and address to the party to be notified as set forth above; or (d) two business days after deposit with a national recognized overnight delivery service, postage prepaid, addressed to the party to be notified as set forth above with next-business-day delivery guaranteed. A party may change its notice address by giving the other party ten days’ written of the new address in the manner set forth above.
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(b) Registration of Stock. It is intended that any Stock received in respect of the RSUs shall have been registered under the Securities Act of 1933 (“Securities Act”). If the Participant is an “affiliate” of the Company, as that term is defined in Rule 144 under the Securities Act (“Rule 144”), the Participant may not sell the Stock received except in compliance with Rule 144. Certificates representing Stock issued to an “affiliate” of the Company may bear a legend setting forth such restrictions on the disposition or transfer of the Stock as the Company deems appropriate to comply with Federal and state securities laws. If, at any time, the Stock is not registered under the Securities Act, and/or there is no current prospectus in effect under the Securities Act with respect to the Stock, the Participant shall execute, prior to the delivery of any Stock to the Participant by the Company pursuant to this Agreement, an agreement (in such form as the Company may specify) in which the Participant represents and warrants that the Participant is purchasing or acquiring the Stock acquired under this Agreement for the Participant’s own account, for investment only and not with a view to the resale or distribution thereof, and represents and agrees that any subsequent offer for sale or distribution of any kind of such Stock shall be made only pursuant to either (i) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with regard to the Stock being offered or sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer for sale of such Stock, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved by the Company, as to the applicability of such exemption thereto.
(c) Data Protection. By accepting this Agreement (whether by electronic means or otherwise), the Participant hereby consents to the holding and processing of personal data provided by him/her to the Company for all purposes necessary for the operation of the Plan. These include, but are not limited to, administering and maintaining Participant records, providing information to any registrars, brokers or their party administrators of the Plan, or providing information to future purchasers of the Company or the business in which the Participant works.
(d) Successors and Assigns. This Award Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Participant, Participant’s successors, and assigns.
(e) Governing Law. This Award Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without reference to principles of conflict of laws.
(f) Entire Award Agreement; Amendment. This Award Agreement, along with the Grant Notice and the Plan constitute the entire Award Agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral. This Award Agreement may only be amended as described in Section 11 of the Plan.
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Exhibit 10.7
FIRST HOME BANCORP, INC.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The securities offered under the First Home Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan have not been and will not be registered under the Securities Act, and may not be offered or sold except in certain transactions exempt from the registration requirements of the Securities Act. Participation in the Plan is limited to Company shareholders who are residents of the State of Florida. This Plan does not constitute an offer for sale of securities in any jurisdiction other than the State of Florida or to any person who is not a shareholder of the Company. Shares acquired pursuant to the Plan may only be resold by the Participant within the State of Florida during the nine (9) month period following the Dividend Payment Date on which the Shares are acquired.
General Terms
Introduction
This Plan is being offered to Eligible Holders. The Plan is administered by the Agent.
Purpose
The Plan has been established for the purposes of offering Eligible Holders: (i) a convenient method to reinvest cash dividends on Shares declared and payable to them; and (ii) to optionally purchase additional Shares, both as described below. All such Shares are purchased directly from the Company by the Agent, which acts as agent for the Eligible Holders under the Plan.
Defined Terms
Where used in the Plan, the following terms shall have the following meanings, respectively:
“Agent” means Transfer Online, Inc., or such other stock transfer agent as may be appointed by the Board of Directors of the Company from time to time.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day on which the Agent’s principal offices in Portland, Oregon are generally open for the transaction of commercial business but does not, in any event, include a Saturday, Sunday, or any day that is a statutory or municipal holiday in Portland, Oregon.
“Close of Business” means 5:00 p.m. (Oregon time) on a Business Day.
“Company” means First Home Bancorp, Inc.
“Dividend Payment Date” means the date determined by the Board of Directors on which a cash dividend is to be paid to Shareholders as of the Dividend Record Date.
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“Dividend Record Date” means the record date determined by the Board of Directors in respect of which holders of Shares will be entitled to receive a cash dividend.
“Eligible Holder” means a Shareholder who: (i) is a resident of the State of Florida; and (ii) owns Shares.
“Eligible Shares” means Shares held by Eligible Holders.
“Optional Additional Purchases” means a Participant’s purchase for cash of Shares pursuant to the Plan.
“Participant” means an Eligible Holder who has elected, in accordance with the terms hereof, to participate in the Plan.
“Plan” means the First Home Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan.
“Plan Enrollment Form” means the authorization form required to participate in this Plan to be made available to each Eligible Holder by the Agent.
“Purchase Price” means the per Share price at which Shares shall be sold and issued pursuant to the Plan.
“Securities Act” means the Securities Act of 1933, as amended.
“Share” means a share of Company common stock.
“Shareholder” means a holder of a Share.
Features
Under the Plan, a Participant may purchase Shares with the cash dividends paid on the Eligible Shares which are registered in the name of the Participant or held in a Participant’s account maintained pursuant to the Plan.
A Participant may also make Optional Additional Purchases on each Dividend Payment Date. The maximum purchase price of Optional Additional Purchases a Participant may make in any one calendar quarter is $10,000. The minimum purchase price of Optional Additional Purchases a Participant may make in any one calendar quarter is $250.
Shares shall be issued from the Company’s authorized but unissued Shares. The Purchase Price shall be established by the Board of Directors as of each Dividend Record Date. No commissions, service charges, or brokerage fees are payable by Participants in connection with the purchase of Shares under the Plan.
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Dividends in respect of whole and fractional Shares (up to two decimal places) purchased under the Plan will be credited to a Participant’s account and will be automatically invested as instructed by such Participant under the Plan until such time as the Participant’s participation in the Plan is terminated.
Participation
Participation and Enrollment in the Plan
In order to be eligible to participate in the Plan, a Shareholder must be an Eligible Holder. An Eligible Holder who is a registered holder of Shares of record may enroll in the Plan at any time by completing a Plan Enrollment Form and returning it to the Agent.
A completed Plan Enrollment Form must be received by the Agent no later than five (5) Business Days prior to a Dividend Record Date, in order for that cash dividend to be invested under the Plan on the relevant Dividend Payment Date or for an Optional Additional Purchase to be made on that Dividend Payment Date. If the Agent receives the Enrollment Form after such date, the cash dividend will be paid to the Shareholder in the usual manner and participation in this Plan will be initiated for subsequent cash dividends and any funds remitted for an Optional Additional Purchase shall be retained until the next Dividend Payment Date, at which time the Agent shall apply such funds to an Optional Additional Purchase on behalf of such Participant.
Once a Participant is enrolled, the Company will forward to the Agent all of the Participant’s cash dividends on Shares (less any applicable withholdings) and direct the Agent to invest such amounts in Shares for the benefit of the Participant. The Agent will apply such funds received under the Plan to the purchase of additional Shares under the Plan.
A Participant may make Optional Additional Purchases by remitting funds to the Agent no later than five (5) Business Days prior to a Dividend Record Date, in order for such funds to be invested under the Plan on the relevant Dividend Payment Date.
The minimum amount of an Optional Additional Purchase for any Participant in any calendar quarter is $250 of Shares, determined by dividing such amount by the Purchase Price. The maximum amount of an Optional Additional Purchase for any Participant in any calendar quarter is $10,000 of Shares, as determined by dividing such amount by the Purchase Price.
No interest will be paid to Participants on any funds held for investment under the Plan.
Eligible Holders who are beneficial holders (owners of Shares that are not registered in their own names) may participate in this Plan by either: (a) having their Shares transferred into their own name; or (b) by contacting their broker to request information on how to participate in this Plan on their behalf while maintaining the Shares in such nominee’s account.
Once a Participant has enrolled in the Plan, participation continues automatically unless terminated in accordance with the terms of the Plan.
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If any Shares are held by a non-Eligible Holder, such Shareholder is not eligible to participate in the Plan. Upon ceasing to be an Eligible Holder, a Participant shall promptly notify the Agent or his or her broker of same and shall automatically be deemed to cease to be a Participant as of the date the Participant ceased to be an Eligible Holder.
Purchase of Shares
On each Dividend Payment Date, the Company shall promptly pay over to the Agent, on behalf of Participants, all cash dividends paid on their Shares (net of applicable withholdings), which shall in turn be remitted to the Company to purchase additional Shares from the Company at the Purchase Price.
On each Dividend Payment Date, the Agent shall remit to the Company funds received by Participants to make Optional Additional Purchases at the Purchase Price.
After receiving such funds from the Agent, the Company shall issue the appropriate number of Shares to each appropriate Participant and the Agent shall hold such Shares in each such Participant’s account with Agent.
Transfer of Participation Rights
The right to participate in the Plan may not be transferred by a Participant or by an Eligible Holder.
Termination of Participation
Participation in the Plan may be terminated by a Participant at any time by sending written notification of withdrawal to the Agent. Upon termination of participation in the Plan, the Agent shall deliver to the Participant a certificate for whole shares credited to his or her account. In addition, any fraction of a Share held for the account of such Participant will be cancelled in exchange for such cash payment prorated to the last Purchase Price established prior to the date of termination.
If the notice of termination is received by the Close of Business at least five (5) Business Days prior to a Dividend Record Date, termination of the Participant’s Participation in the Plan will be effective in respect of that Dividend Record Date. Otherwise, the termination will be effective in respect of the next succeeding Dividend Record Date. A termination by a Participant will not prevent such Shareholder from Participating in the Plan at a later date.
After termination of participation in the Plan, all subsequent dividends will be paid to the former Participant in cash in the usual manner.
Participation in the Plan will be terminated upon receipt by the Agent of evidence satisfactory to the Agent of the death of a Participant; thereafter all dividends paid in respect of the Shares of the deceased Participant will be paid in cash.
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Amendment, Suspension or Termination of the Plan
The Company reserves the right to amend, suspend, or terminate the Plan at any time, but such action shall have no retroactive effect that would prejudice the interest of the Participants.
In the event of suspension or termination of the Plan by the Company, no investment will be made by the Agent on the Dividend Payment Date immediately following the effective date of such suspension or termination. Any dividend subject to the Plan and paid after the effective date of any such suspension or termination will be remitted by the Company to the Participants in cash only, in the usual manner.
The Company may remove the Agent at any time on not less than ninety (90) days prior notice to the Agent, and appoint another person as the Agent.
Similarly, the Agent may resign at any time on not less than ninety (90) days prior notice to the Company and upon delivery to the Company of all property and records held in connection with the Plan.
Rules and Regulations
The Company, in conjunction with the Agent, may from time to time adopt rules and regulations to facilitate the administration of the Plan. The Company also reserves the right to regulate and interpret the Plan as it deems necessary or desirable to ensure the efficient and equitable operation of the Plan.
Costs
There shall not be any commissions, service charges, or brokerage fees payable by Participants in connection with the issuance of Shares under the Plan. All administrative costs of the Plan shall be borne by the Company.
Recording & Certificates
Reports to Participants
An account will be maintained by the Agent for each Participant with respect to purchases of Shares under the Plan for the account of such Participant. An unaudited statement of account regarding purchases under the Plan will be mailed on a quarterly basis to each Participant who is a registered holder of Shares. These statements of account are a Participant’s continuing record of purchases of Shares made on behalf of such Participant pursuant to the Plan and should be retained for income tax purposes. Participants are responsible for calculating and monitoring their own adjusted cost basis in Shares for income tax purposes, as certain averaging rules may apply and such calculations may depend on the cost of other Shares held by a Shareholder. Beneficial owners of Shares who are enrolled in the Plan through a nominee may or may not be provided with such reports or forms from their nominee.
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Withdrawals
Shares purchased under the Plan will be held by the Agent for Participants. Certificates for such Shares will not be issued to Participants unless specifically requested by a Participant.
Shares held by the Agent for a Participant may not be pledged, sold or otherwise disposed of by the Participant while so held. A Participant who wishes to effect any such transaction must request that the certificates for such Shares be issued in the Participant’s name.
Responsibilities of the Company and the Agent
The Company and the Agent shall not be liable for any act, or any omission to act, in connection with the operation of the Plan including, without limitation, any claims for liability:
| • | relating to the determination from time to time of the Purchase Price and the times purchases of Shares are made; |
| • | arising from a decision to participate in the Plan; |
| • | arising in connection with income taxes (together with any applicable interest and/or penalties) payable by Participants in connection with their participation in the Plan; or |
| • | arising out of actions taken as a result of inaccurate or incomplete information or instructions. |
Participants should recognize that neither the Company nor the Agent can assure a profit or protection against a loss on the Shares purchased under the Plan.
Compliance with Laws
The operation and implementation of the Plan is subject to compliance with all applicable legal requirements, including obtaining all appropriate regulatory approvals and exemptions from registration and prospectus requirements, and the requirements of any stock exchange on which the Shares are listed. The Company may limit the Shares issuable under the Plan in connection with discretionary exemptive relief relating to the Plan granted by any securities regulatory authority.
Notices
All notices required to be given under the Plan shall be mailed to a Participant at the address shown on the records of the Agent’s or the Participant’s broker, as the case may be.
Notices to the Agent shall be sent to:
Transfer Online, Inc.
512 SE Salmon Street
Portland, Oregon 97214
Page 6
Notices to the Company shall be sent to:
First Home Bancorp, Inc.
700 Central Avenue, Suite 102
St. Petersburg, Florida 33701
Effective Date of the Plan
The effective date of the Plan is August 31, 2016.
Page 7
Exhibit 10.8
FIRST HOME BANCORP, INC.
2015 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
First Home Bancorp, Inc. (the “Company”) believes that it is in the best interest of the Company, its wholly-owned subsidiary, First Home Bank (the “Bank”), and the Company’s shareholders to permit employees of the Company and/or the Bank to apply a portion of their compensation to the purchase of shares of Company common stock (the “Shares”). Accordingly, the Company hereby adopts this 2015 Non-Qualified Employee Stock Purchase Plan (the “Plan”).
Section 1. Eligible Employees. Each employee of the Company or the Bank shall be an “Eligible Employee,” entitled to participate in the Plan. Each Eligible Employee who participates in the Plan is referred to herein as a “Participant”.
Section 2. Administration. The Plan shall be administered by the Board of Directors of the Company (the “Board”), which shall have the complete and express authority, subject to the terms of the Plan, to: (i) amend, modify, or discontinue the Plan; (ii) determine and establish the acceptable methods of payment for Shares purchased under the Plan, provided that Shares may be purchased only for cash; (iii) interpret, implement, and administer any and all terms and provisions of the Plan, with advice of counsel or other professionals as may be deemed appropriate, advisable, or otherwise in the best interests of the Company; (iv) adopt, amend, and rescind general and special rules and regulations deemed appropriate, advisable, or otherwise in the best interests of the Company for the administration of the Plan; and (v) take any and all such other actions as may be deemed appropriate, advisable, or otherwise in the best interests of the Company in the creation, modification, amendment, administration, and/or discontinuance of the Plan.
Section 3. Participation in the Plan.
Section 3.1. Initial Enrollment Period. Each Eligible Employee shall be entitled to enroll and participate in the Plan during the initial enrollment period, beginning on the date the Board adopts the Plan and extending through July 31, 2015 (the “Initial Enrollment Period”). An Eligible Employee who wishes to participate in the Plan must provide the Board written Notice of Participation setting forth the payroll deduction requested for each pay period. After the Initial Enrollment Period, an Eligible Employee may enroll and participate in the Plan only during a Quarterly Enrollment Period pursuant to the provisions of Section 3.2.
Section 3.2. Quarterly Enrollment Period. After the Initial Enrollment Period, an Eligible Employee may enroll and participate in the Plan only during a “Quarterly Enrollment Period,” which shall run for the first thirty (30) days of each calendar quarter. An Eligible Employee who wishes to participate in the Plan must provide the Board written Notice of Participation setting forth the payroll deduction requested for each pay period. A Participant may terminate his or her participation at any time by providing the Board written Notice of Termination of Participation; however, such a Participant may not re-enroll and participate in the Plan again until the next Quarterly Enrollment Period.
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Section 4. Participation. Each Participant may participate in the Plan by authorizing the Company or the Bank, as applicable, to make specified regular post-withholding payroll deductions from the Participant’s regular post-withholding payroll. Such regular payroll deductions must be no less than $20.00 per pay period nor greater than 10% of the gross amount of such periodic payroll. The Bank shall transmit all of its deductions to the Company and the Company shall retain all deductions for the benefit of each Participant pending the purchase of Shares in accordance with Section 5.
Section 5. Source and Purchase of Shares. (a) The Company shall retain each Participant’s payroll deductions in accordance with Section 4, and before the dividend record date for the following calendar quarter, purchase and issue for the account of each Participant, a number of Shares equal to the amount deducted for such Participant in the preceding fiscal quarter divided by the “Per Share Price.” The “Per Share Price” shall be determined as of two business days preceding the date on which a Share purchase and issuance is to occur and shall equal:
(i) the closing price of a Share, as quoted by the Nasdaq Stock Market (or other nationally recognized quotation service);
(ii) if the Shares are not traded on the Nasdaq Stock Market but are registered on a national securities exchange, the closing sales price of a Share on such national securities exchange;
(iii) if the Shares are not traded on a national securities exchange or through any other nationally recognized quotation service, then the fair market value of a Share as determined by the Board of Directors or the Compensation Committee of the Company, acting in good faith; provided, however, that;
(iv) in no instance shall the Per Share Price ever be less than the greater of its book value or $20.
(b) Notwithstanding anything in paragraph (a) of this Section, each calendar year, the Board of Directors or the Compensation Committee of the Company may authorize a discount up to 10% from the calculation set forth in paragraph (a) for shares purchased during that year.
(c) The Company shall issue Shares from the Company’s authorized but unissued shares. To provide for such issuances the Company shall establish a reserve of 40,000 Shares. The number of Shares to be issued under the Plan shall be limited to those 40,000 reserved Shares.
Section 6. No Fractional Shares. No fractional Shares may be purchased or will be issued pursuant to the Plan. In the event that at of the end of any fiscal quarter’s Share purchase and issuance, there remains a balance in any Participant’s payroll deduction account which has not been applied to the purchase of Shares because such purchase, if applied, would result in the issuance of a fractional Share, then such balance will be carried over and applied to purchases of Shares in the following fiscal quarter. If, at the time of any Participant’s termination of
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participation in the Plan, there remains a balance in that Participant’s payroll deduction account because application of such balance to the purchase of Shares would result in the issuance of a fractional Share, then the balance in such account will be returned to such Participant promptly after the effective date of such termination.
Section 7. Book Entry and Certificates. The Company shall maintain records of each Participant’s Share ownership in book entry form. Upon the request of any Participant, the Company shall issue a Company stock certificate representing such Participant’s Shares; provided, however, the Company shall not be obligated to issue a certificate for less than 100 Shares and any stock certificate issued for Shares shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION THAT IS NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS SET FORTH IN THE SECURITIES ACT OF 1933, AS AMENDED, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
Section 8. Shareholder Rights. No Participant shall have any rights as a shareholder of the Company as a result of any compensation payable under the Plan until the actual delivery of the Shares by the Company to the Participant, either in book entry form or as represented by a stock certificate.
Section 9. No Employment Rights. No provision of the Plan shall confer upon any Participant any right to continue in the employ of the Company or the Bank or to interfere with the right of the Company or the Bank to terminate such Participant’s employment at any time, nor shall the Plan be construed as evidence of any agreement or understanding, expressed or implied, that the Company or the Bank will employ any Participant in any particular position or at any particular rate of remuneration or for any particular period of time. Furthermore, no provision of the Plan shall, be construed so as to limit the right of the Company or the Bank to: (i) terminate any employee at will without cause or reason; (ii) make changes, in its sole and absolute discretion, in its accounting principles or the methods of applying such principles; or (iii) enter into significant transactions with affiliates, or in the Board’s sole and absolute discretion, to modify or terminate the Plan.
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Section 10. Limitation of Liability. The Plan shall not be construed as creating any right of any employee of the Company or the Bank to receive any benefit hereunder, or as affecting the rights of the Company or the Bank with respect to its employees, but instead, only as establishing the procedures governing participation in the Plan. No Participant shall have any rights or claim against the Company, the Bank, the Board, or any member of the Board by virtue of such Participant’s participation in the Plan, except with respect to the enforcement of the terms of the Plan. No provision herein shall be deemed to create any trust or fiduciary relationship between the Company or the Bank (or the Board or any member thereof) and any Participant or any other person whatsoever, including without limitation, any employee, officer, or any Eligible Employee hereunder other than the general fiduciary duty owed by officers of the Company and members of the Board to all shareholders of the Company. Furthermore, in the event that any court of competent jurisdiction determines that any person has any enforceable right, claim or remedy hereunder vis-à-vis the Company, the status of such person shall be that of a general unsecured creditor of the Company. As a condition precedent to participation in the Plan, the Board may require any Participant or his/her beneficiary to execute a release and/or an indemnity in such form as the Board shall deem appropriate.
Section 11. Employment of Agents. The Board may employ, upon such terms as it deems appropriate in its sole and absolute discretion, such employees, agents, clerical help, custodians, servants, contractors, professional and other persons as it may deem appropriate, advisable or otherwise in the best interests of the Company to render advice with regard to any responsibility or obligation it may have under the Plan or to perform other services for the effective operation and administration of the Plan, including, without limitation, legal counsel, accountants, trustees and/or certified financial planners.
Section 12. Liability and Indemnification. The Company may purchase insurance to cover potential liability of those persons who shall serve on the Board in administering the Plan, and the Company shall indemnify such persons to the maximum extent permitted by applicable law against any and all liabilities and expenses incurred in connection with any actions or proceedings to which such persons may be made a party by reason of their being or having been a member of the Board and having any responsibility or obligation for the administration of the Plan, provided, however, that no such person shall be entitled to indemnification from the Company for any act determined by a court of competent jurisdiction to be fraudulent or without good faith. Furthermore, no Board member shall be liable to any Participant or officer or employee of the Company or the Bank for any action taken or determination made in good faith or at the advice of counsel.
Section 13. Plan Amendment and Discontinuance. The Company reserves the right to discontinue the Plan at any time. Discontinuance of the Plan will not affect existing ownership of Shares by Participants, but no new purchases shall be permitted through payroll deductions. The Company also reserves the right to amend the terms of the Plan at any time and from time to time.
Section 14. Other Documents. The Company has provided to each Participant and each Participant represents that he or she has reviewed the Company’s Disclosure Memorandum, as updated from time to time.
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Section 15. Technical Information Regarding the Plan. Neither the Company nor the Bank will be liable for any act performed in good faith or for any good faith omission to act or failure to act, including, without limitation, any claim of liability: (i) arising out of a failure to terminate a Participant’s participation in the Plan; or (ii) with respect to the prices or times at which Shares are purchased for a Participant’s account. All stock dividends and stock splits will be added directly to Participants’ book entry accounts. Transaction processing may either be curtailed or suspended until the completion of any stock dividend, stock split, or other corporate action.
Section 16. Disclaimers. Neither the Company nor the Bank has or will provide any advice, make recommendations, or offer any opinion with respect to whether or not an employee of the Company or the Bank should purchase Shares or otherwise participate in the Plan. Each Participant must make independent investment decisions based upon his or her own judgment and research. The Plan is not insured and is not subject to the Employee Retirement Income Security Act. The Plan is not qualified under Section 401 of the Internal Revenue Code of 1986, as amended.
Section 17. Gender. Pronouns used within the Plan shall be deemed to include both the masculine and feminine gender and words used in the singular shall be deemed to include both the singular and the plural, unless the context indicates otherwise.
Section 18. Headings. The headings of Sections of the Plan are included only for convenience and shall not be construed as a part of the Plan or in any respect affecting or modifying its provisions.
Section 19. Construction. The Plan shall be construed under the laws of the State of Florida (excluding its choice-of-law rules) to the extent not superseded by federal law. Venue for the enforcement of any provision of the Plan shall be in Pinellas County, Florida. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
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Exhibit 10.9
FIRST AMENDMENT TO
2015 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of First Home Bancorp, Inc. (the “Company”) hereby adopts this First Amendment (this “Amendment”) to 2015 Non-Qualified Employee Stock Purchase Plan (the “Plan”). Except as stated below, the remainder of the Plan remains unchanged by this Amendment.
Section 3 of the Plan is hereby amended and restated in its entirety as follows:
Section 3. Participation in the Plan.
Each Eligible Employee shall be entitled to enroll and participate in the Plan by providing the Company written Notice of Participation setting forth the payroll deduction requested for each pay period. A Participant may terminate his or her participation at any time by providing the Company written Notice of Termination of Participation.
The foregoing Amendment was adopted by the Board of Directors of the Company on October 29, 2019.
| /s/ Anthony N. Leo |
| Anthony N. Leo |
| Chief Executive Officer |
Exhibit 10.10
| Loan No: 15410 | BUSINESS LOAN AGREEMENT (Continued) |
Page 1 |
BUSINESS LOAN AGREEMENT
| Principal $4,097,717.59 |
Loan Date 03-10-2020 |
Maturity 03-10-2029 |
Loan No 15410 |
Call/Coll
|
Account
|
Officer 03 |
Initials
| |||||||
| References in the boxes are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations. | ||||||||||||||
| Borrower: | First Home Bancorp, Inc. | Lender: | FIRST NATIONAL BANKERS BANK | |||
| 700 Central Avenue, Suite 102 | 605 Crescent Executive Court | |||||
| St. Petersburg, FL 33701 | Suite 224 | |||||
| Lake Mary, FL 32746 |
THIS BUSINESS LOAN AGREEMENT dated March 10, 2020, is made and executed between First Home Bancorp, Inc. (“Borrower”) and FIRST NATIONAL BANKERS BANK (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibitor schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, lender is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and condition of this Agreement.
TERM. This Agreement shall be effective as of March 10, 2020, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorney’s fees, and other fees and charges, or until March 10, 2029.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4) evidence of insurance as required below; (5) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.
Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.
| Loan No: 15410 | BUSINESS LOAN AGREEMENT (Continued) |
Page 2 |
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:
Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the state of Florida. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposed to engage. Borrower maintains an office at 700 Central Avenue, Suite 102, St. Petersburg, FL 33701. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of he Borrower’s state of organizational or any change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower’s business activities.
Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.
Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of incorporation or organization, bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.
Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of he most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender, and as except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties fee and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.
Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represent and warrants that: (1) During the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws: (B) any use,
| Loan No: 15410 | BUSINESS LOAN AGREEMENT (Continued) |
Page 3 |
generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance, on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this actions of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence I n investigating the Collateral for hazardous waste and hazardous Substances. Borrower hereby: (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generating, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance eon the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation. Promptly inform Lender in writing of: (1) all material adverse changes in Borrower’s financial condition and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books and record at all reasonable times.
| Loan No: 15410 | BUSINESS LOAN AGREEMENT (Continued) |
Page 4 |
Financial Statements. Furnish Lender with the following:
Annual Statements. As soon as available, but in no event later than ninety (90) days after the end of each fiscal year, Borrower’s balance sheet and income statement for the year ended, reviewed by a certified public accountant satisfactory to Lender.
Tax Returns. As soon as available, but in no event later than ninety (90) days after the applicable filing date for the tax reporting period ended, Borrower’s Federal and other governmental tax returns, prepared by a tax professional satisfactory to Lender.
All financial reports required to be provided under this Agreement shall be prepare din accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements, as Lender may request form time to time.
Additional Requirements.
#1 – Maintain a minimum of Tier 1 Leverage Ratio of 8.00% at all times
#2 – Maximum Texas Ratio not to exceed 30.00% at all times
#3 – Maximum Non-Performing Loans to Total Loans not to exceed 5.00% at all times
#4 – Incur no adverse regulatory action at holding company or bank level at any time during the life of the loan
#5 – Incur no additional debt without prior written consent of Lender.
Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect o borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender form time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverage will not be cancelled or diminished without at least the (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable or other endorsements as lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those valued; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing.
| Loan No: 15410 | BUSINESS LOAN AGREEMENT (Continued) |
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Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessments, tax, charge, levy, lien or claim so long as: (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on borrower’s books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.
Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.
Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.
Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations studies, samplings and testings as may be requested by Lender or any governmental authority relative to ay substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.
Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interest in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.
Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s book, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated record and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable items and to provide Lender with copies of any records it may request, all at Borrower’s expense.
Compliance Certificates. Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Even t of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of any intentional or unintentional action or omission on Borrowers part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is
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pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local government authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statement, instruments, documents and other agreements as lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security interests.
LENDER’S EXPENDITURES. If any action or proceeding is commenced hat would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be obligated to ) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or place don ay Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable eon demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the terms of any applicable insurance policy or (2) the remaining term of the Note; or (C) b treated as a balloon payment which will be due and payable at the Note’s maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:
Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower’s accounts, except to Lender.
Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged; (2) cease operations, liquidate, merge or restructure as a legal entity (whether by division or otherwise), consolidate with or acquire any other entity, change its name, convert to another type of entity or redomesticate, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrower’s tock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result form the payment of dividends, if Borrower is a “Subchapter S Corporation”(as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of Borrower’s stock, or purchase or retire any of Borrower’s outstanding shares or alter or amend Borrower’s capital structure.
Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity or (3) incur any obligation as surety or guarantor other than in the ordinary course of business.
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Agreements. Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations under this Agreement or in connection herewith.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor __________ Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts.
DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:
Payment Default. Borrower fails to make any payment when due under the Loan.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver fro any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceedings, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or fond for the dispute.
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Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent (25% or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.
Insecurity. Lender in good faith believes itself insecure.
Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, ha snot been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lender’s sole discretion o be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to product compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and , at Lender’s option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of borrower or of any grantor shall not affect lender’s right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees and Lender’s legal expenses, incurred I n connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the cost sand expenses of such enforcement. Costs and expenses include Lender’s reasonable attorneys’ fees and legal expense whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court cost and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.
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Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related ore unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of ah holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interest irrespective of any personal claims or defenses that Borrower may have against Lender.
Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Florida without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Florida.
Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Seminole County, State of Florida.
No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any of the provisions of this Agreement. NO prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligation as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any part may change its address for notices under this Agreement by giving written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.
Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, valid, or unenforceable as to any other circumstance. IF feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.
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Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word “Borrower” as used in this agreement shall include all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.
Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower’s indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.
Time is of the Essence. Time is of the essence in the performance of this Agreement.
Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meaning assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:
Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.
Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.
Borrower. The word “Borrower” means First Home Bancorp, Inc. and includes all co-signers and co-makers signing the Note and all their successors and assigns.
Collateral. The word “Collateral” means all property and assets granted as collateral security for a Loan,, whether real or personal property whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended a s a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.
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Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.
GAAP. The word “GAAP” means generally accepted accounting principles.
Grantor. The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.
Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.
Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.
Hazardous Substances. The words “Hazardous Substance” mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.
Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.
Lender. The word “Lender” means FIRST NATIONAL BANKERS BANK, its successors and assigns.
Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.
Note. The word “Note” means the Note dated March 10, 2020 and executed by First Home Bancorp, Inc. in the principal amount of $4,097,717,59, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.
Permitted Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course
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of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower’s assets.
Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgage, deeds of trust, security deeds, collateral mortgages, and all other instruments agreements an documents, whether now or hereafter existing, executed in connection with the Loan.
Security Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing or creating a Security Interest.
Security Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED MARCH 10, 2020.
BORROWER:
| FIRST HOME BANCORP, INC. | ||
| By: | /s/ Jeffrey M. Hunt | |
| Jeffrey M. Hunt, Chief Strategy Officer | ||
| First Home Bancorp, Inc. | ||
| LENDER | ||
| By: | /s/ | |
| Authorized Signer | ||
Exhibit 10.11
FIRST HOME BANCORP, INC.
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS UNSECURED.
THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SUCH NOTES IN A DENOMINATION OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED NOTE.
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SUBORDINATED NOTE ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (1), (2), (3) OR (7) OF RULE 501(a) UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SUBORDINATED NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “ACCREDITED INVESTOR,” FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT TO CONFIRM THE AVAILABILITY OF SUCH EXEMPTION. THE HOLDER OF THIS SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT OR AN APPLICABLE EXEMPTION THEREFROM.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SUBORDINATED NOTE WILL DELIVER TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE COMPANY TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
CERTAIN ERISA CONSIDERATIONS:
EACH PURCHASER AND HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT EITHER (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH PLAN, OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, OR (II) THAT SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE. ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN.
FIRST HOME BANCORP, INC.
6.875% FIXED-TO-FLOATING SUBORDINATED NOTE DUE 2028
| Certificate No.: 1 |
CUSIP: 32050L AA3 | |
| U.S. $6,000,000.00 |
Dated: December 21, 2018 | |
FOR VALUE RECEIVED, the undersigned, First Home Bancorp, Inc., a Florida corporation (the “Company”), promises to pay to the order of U.S. Bank, N.A. FBO BUCKHEAD ONE, LTD. or its registered assigns (collectively, the “Holder”), the principal amount of $6,000,000.00 (SIX MILLION DOLLARS), in the lawful currency of the United States of America, or such lesser or greater amount as shall then remain outstanding under this Subordinated Note, at the times and in the manner provided herein, but no later than December 21, 2028 (the “Maturity Date”), or such other date upon which this Subordinated Note shall become due and payable, whether by reason of extension, acceleration or otherwise.
Interest on this Subordinated Note will be payable in arrears on March 31, June 20, September 30 and December 31 of each year, commencing on March 31, 2019, to the Holder of record on March 15, June 15, September 15 and December 15 and at maturity.
Reference is hereby made to the further provisions of this Subordinated Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
| FIRST HOME BANCORP, INC. | ||
| By: | /s/ Anthony N. Leo | |
| Anthony N. Leo | ||
| Chief Executive Officer | ||
| ATTEST: |
| /s/ Jaleisce Williams Aidoo |
| Jaleisce Williams Aidoo |
| Assistant Corporate Secretary |
[REVERSE SIDE OF NOTE]
FIRST HOME BANCORP, INC.
6.875% FIXED-TO-FLOATING SUBORDINATED NOTE DUE 2028
The Company promises to pay interest on the principal amount of this Subordinated Note, commencing on the original issue date of this Subordinated Note, until December 21, 2028 (the “Maturity Date”), or such earlier date as this Subordinated Note is paid in full, at the rate provided herein. The unpaid principal balance of this Subordinated Note plus all accrued but unpaid interest thereon shall be due and payable on the Maturity Date, or such earlier date on which such amount shall become due and payable. This Subordinated Note is one of the “Notes” referred to in that certain Subordinated Note Purchase Agreement, dated December 21, 2018 (the “Purchase Agreement”), by and among the Company, the Holder (referred to therein as the “Purchaser”) and the other Purchasers (as defined therein) of the Notes, and the Subordinated Note is entitled to the benefits thereof. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.
1. Computation and Payment of Interest. This Subordinated Note will bear interest (a) from and including the original issue date of this Subordinated Note to but excluding December 21, 2023 (the “Fixed-Rate Period End Date”) (or the earlier Redemption Date contemplated by Section 4(a) herein), payable quarterly in arrears at simple interest of Six and Seven-Eighths percent (6.875%) per annum (the “Fixed Interest Rate”) on each Interest Payment Date through and including the Fixed-Rate Period End Date; and (b) from and including the Fixed-Rate Period End Date to but excluding the Maturity Date (the “Floating-Rate Period”), at the rate per annum, reset quarterly, equal to the Benchmark plus 404.5 basis points (the “Floating Interest Rate”), payable quarterly in arrears on each Interest Payment Date during the Floating-Rate Period. “Interest Payment Date” means March 31, June 30, September 30 and December 31 of each year through the Maturity Date. The payments of interest and principal, if any, due on any Interest Payment Date shall be paid to the holders of record on the fifteenth (15th) of the month of each Interest Payment Date. Interest, whether based on the Fixed Interest Rate or the Floating Interest Rate, shall be computed on the basis of thirty (30)-day months and a year of three hundred sixty (360) days.
If a Benchmark Replacement Date shall have occurred prior to the Reference Time for any determination of the Benchmark, the Replacement Benchmark shall be selected and such determination and all subsequent determinations will be made using the Replacement Benchmark as of the Reference Time for such Replacement Benchmark.
“Benchmark” means LIBOR; provided that if a Benchmark Replacement Date shall have occurred with respect to LIBOR, then the term “Benchmark” shall mean the applicable Replacement Benchmark, in either case as observed two (2) New York banking days prior to the first day of the applicable floating rate interest period.
“Benchmark Discontinuance Event” means the occurrence of one or more of the following events with respect to a Benchmark:
| (1) | a public statement or publication of information by or on behalf of the administrator of such Benchmark announcing that such administrator has ceased or will cease to provide such Benchmark, permanently or indefinitely, provided that, at the time of the statement or publication, there is no successor administrator that will continue to provide such Benchmark; |
| (2) | a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark, the central bank for the currency of such Benchmark, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, which states that the administrator of such Benchmark has ceased or will cease to provide such Benchmark permanently or indefinitely, provided that, at the time of the statement or publication, there is no successor administrator that will continue to provide such Benchmark; |
| (3) | a Benchmark rate is not published by the administrator of such Benchmark for five consecutive business days and such failure is not the result of a temporary moratorium, embargo or disruption declared by the administrator of such Benchmark or by the regulatory supervisor for the administrator of such Benchmark and the Benchmark cannot be determined by reference to an Interpolated Period; |
| (4) | a public statement or publication of information by the administrator of such Benchmark that it has invoked or will invoke, permanently or indefinitely, its insufficient submissions policy; or |
| (5) | a public statement by the regulatory supervisor for the administrator of such Benchmark announcing that such Benchmark is no longer representative or may no longer be used. |
“Benchmark Replacement Date” means:
| (1) | for purposes of clauses (1) and (2) of the definition of “Benchmark Discontinuance Event,” the later of (a) the date of such public statement or publication of information and (b) the date on which the administrator of the relevant Benchmark permanently or indefinitely ceases to provide such Benchmark, |
| (2) | for purposes of clause (3) of the definition of “Benchmark Discontinuance Event,” the first business day following such five (5) consecutive business days, |
| (3) | for purposes of clause (4) of the definition of “Benchmark Discontinuance Event,” the later of (a) the date of such public statement or publication of information and (b) the date such insufficient submissions policy is invoked, and |
| (4) | for purposes of clause (5) of the definition of “Benchmark Discontinuance Event,” the later of (a) the date of such public statement and (b) the date as of which the Benchmark may no longer be used (or, if applicable, is no longer representative). |
If a Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time for any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and such determination will be made using the applicable Replacement Benchmark.
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“Compounded SOFR” means a compounded average of daily SOFR calculated over a Corresponding Period or Interpolated Period, as applicable, that ends on the second New York business day preceding the first day of the applicable interest period, compounded according to the provisions describing the methodology for compounding set forth under “USD-SOFR-COMPOUND” of the ISDA Definitions.
“Corresponding Period” with respect to a Replacement Benchmark means a period or maturity (including overnight) having approximately the same length (disregarding business day adjustments) as the term period for LIBOR.
“Federal Reserve Bank of New York’s Website” means the website of the Board of Governors of the Federal Reserve System at http://www.newyorkfed.org, or any successor source.
“Interpolated Period” with respect to a Benchmark means the period determined by interpolating on a linear basis between: (1) such Benchmark for the longest period (for which such Benchmark is available) that is shorter than the Corresponding Period and (2) such Benchmark for the shortest period (for which such Benchmark is available) that is longer than the Corresponding Period.
“ISDA” means the International Swaps and Derivatives Association, Inc. or any successor thereto.
“ISDA Fallback Rate” means the rate to be effective upon the occurrence of an Index Cessation Event with respect to the Benchmark according to (and as defined in) the ISDA Definitions, where such rate may have been adjusted for a tenor equal to the Corresponding Period or Interpolated Period, but without giving effect to any additional spread adjustment to be applied according to such ISDA Definitions.
“ISDA Definitions” means the 2006 ISDA Definitions published by ISDA, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published by ISDA from time to time.
“LIBOR” means, the offered rate for deposits in U.S. dollars having a maturity of three (3) months, as published by ICE Benchmark Administration Limited, a company incorporated in England, or a comparable or successor regulated quoting service, as of the Reference Time (or, if LIBOR has not been published as of the Reference Time, as of the first preceding day for which LIBOR was published); provided that if LIBOR having the maturity of three (3) months shall not be available at the Reference Time, then LIBOR shall mean LIBOR for the Interpolated Period.
“Reference Time” with respect to any determination of a Benchmark means (1) in the case of LIBOR, 11:00 a.m. (London time) on the day that is two (2) London banking days preceding the date of such determination, (2) in the case of a forward-looking term SOFR, as published at approximately 8 a.m. (New York time) on the day that is two (2) New York business days preceding the date of such determination, and (3) in the case of any other Benchmark, as of approximately 8 a.m. (New York time) on the day that is two (2) New York business days preceding the date of such determination.
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“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.
“Replacement Benchmark” means:
| (1) | the forward-looking term SOFR rate for a Corresponding Period (or, if there is no Corresponding Period, such rate for the Interpolated Period) that shall have been selected, endorsed or recommended as the forward-looking term SOFR by the Relevant Governmental Body, plus the applicable Replacement Benchmark Spread; provided that: |
| (2) | if the Unadjusted Replacement Benchmark cannot be determined as of the Benchmark Replacement Date in accordance with clause (1) above, then the Replacement Benchmark shall be Compounded SOFR, plus the applicable Replacement Benchmark Spread; provided, further, that: |
| (3) | if the Unadjusted Replacement Benchmark cannot be determined as of the Benchmark Replacement Date in accordance with clause (1) or (2) above, then the Replacement Benchmark shall be SOFR determined as of the Reference Time and remaining in effect for the duration of the Corresponding Period, plus the applicable Replacement Benchmark Spread; provided, further, that: |
| (4) | if the Unadjusted Replacement Benchmark cannot be determined as of the Benchmark Replacement Date in accordance with clause (1), (2) or (3) above, then the Replacement Benchmark shall be such other alternate, substitute or successor rate as shall have been selected, endorsed or recommended by the Relevant Governmental Body as the replacement for such Replacement Benchmark, plus the applicable Replacement Benchmark Spread; provided, further, that: |
| (5) | if the Unadjusted Replacement Benchmark cannot be determined as of the Benchmark Replacement Date in accordance with clause (1), (2), (3) or (4) above, then the Replacement Benchmark shall be the fallback rate that is applicable under “USD-SOFR-COMPOUND” following the occurrence of a SOFR Index Cessation Event (as such terms are defined in the ISDA Definitions), plus the applicable Replacement Benchmark Spread; provided, further, that: |
| (6) | if the Unadjusted Replacement Benchmark cannot be determined in accordance with clause (1), (2), (3) or (4) above as of the Benchmark Replacement Date and the Company, or its designee, (a) shall have determined, in its sole discretion, that the Unadjusted Replacement Benchmark determined in accordance with clause (5) above, if any, is not an industry-accepted successor rate for determining the rate of interest as a replacement to the Benchmark for floating rate note |
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issuances at such time and (b) shall have selected, in its sole discretion, as of the Benchmark Replacement Date an alternate rate of interest to replace the Benchmark that is an industry-accepted successor rate for determining a rate of interest as a replacement to the Benchmark for floating rate notes at such time, then the Replacement Benchmark shall be the rate so determined in clause (b), plus the applicable Replacement Benchmark Spread.
“Replacement Benchmark Spread” with respect to any Replacement Benchmark, means:
| (1) | the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that shall have been selected, endorsed or recommended by the Relevant Governmental Body for the applicable Unadjusted Replacement Benchmark, provided that: |
| (2) | if the Replacement Benchmark Spread cannot be determined as of the Benchmark Replacement Date in accordance with clause (1) above and the applicable Unadjusted Replacement Benchmark is equivalent to the ISDA Fallback Rate, then the Replacement Benchmark Spread shall be the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) (“ISDA Spread Adjustment”) that shall have been selected by ISDA as the spread adjustment that would apply to such ISDA Fallback Rate, provided, further, that: |
| (3) | if (a) the Replacement Benchmark Spread cannot be determined as of the Benchmark Replacement Date in accordance with clause (1) or (2) above or (b) the Company, or its designee, shall have determined, in its sole discretion as of the Benchmark Replacement Date, that the ISDA Spread Adjustment determined in accordance with clause (2) above does not produce a Replacement Benchmark that is an industry-accepted successor rate for floating rate notes at such time, then the Replacement Benchmark Spread shall be the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) determined by the Company, or its designee, in its sole discretion (that modifies the ISDA Spread Adjustment, if available) to produce a Replacement Benchmark that is an industry-accepted successor rate for floating rate notes at such time. |
“SOFR” means the daily Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.
2. Non-Business Days. Whenever any payment to be made by the Company hereunder shall be stated to be due on a day that is not a business day, such payment shall be made on the next succeeding business day without change in any computation of interest with respect to such payment (or any succeeding payment). “Business day” means any day other than a Saturday, Sunday or any other day on which banking institutions in New York are permitted or required by any applicable Law or executive order to close.
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3. Transfer. The Company or its agent (the “Registrar”) shall maintain a register of each holder of the Subordinated Note. The Company shall be entitled to treat each Person in its register as the beneficial owner of this Subordinated Note. The Subordinated Note will initially be issued in certificated form. This Subordinated Note may be transferred in whole or in part at the principal offices of the Company or Registrar, accompanied by due endorsement or written instrument of transfer. Upon such surrender and presentment, the Company or the Registrar shall issue one or more Subordinated Notes with an aggregate principal amount equal to the aggregate principal amount of this Subordinated Note and registered in such name or names requested by the holder of record, and shall update its register accordingly. Such transferee shall be solely responsible for delivering to the Company or the Registrar a mailing address or other information necessary for the Company or the Registrar to deliver notices and payments to such transferee.
4. Affirmative Covenants of the Company. During the time that any portion of the principal balance of this Subordinated Note is unpaid and outstanding, the Company shall take or cause to be taken the actions set forth below.
(a) Notice of Certain Events. The Company shall provide written notice to the Holder of the occurrence following the date of this Subordinated Note of the following events as soon as practicable but in no event later than ten (10) business days following the Company’s becoming aware of the occurrence of such event:
(i) the total risk-based capital ratio, Tier 1 risk-based capital ratio, Common Equity Tier 1 capital ratio or leverage ratio of the Company (but only to the extent the Company is required to measure and report such ratios on a consolidated basis under applicable Law) or any of the Company’s banking subsidiaries (each, a “Bank”) becomes less than ten percent (10.0%), eight percent (8.0%), six-and-one-half percent (6.5%) or five percent (5.0%), respectively;
(ii) the Company, the Bank, or any executive officer of the Company or the Bank becomes subject to any formal, written regulatory enforcement action;
(iii) the ratio of non-performing assets to total assets of the Bank, as calculated by the Company in the ordinary course of business and consistent with past practices, becomes greater than three percent (3.0%);
(iv) the appointment, resignation, removal or termination of the chief executive officer, president, chief operating officer, chief financial officer, chief credit officer, chief lending officer or any director of the Company or the Bank; or
(v) there occurs a change in ownership of twenty-five percent (25.0%) or more of the voting securities of the Company, except as a result of the issuance of Company common stock.
(b) Compliance with Laws. The Company and each Subsidiary of the Company shall comply with the requirements of all Laws, regulations, orders, and decrees applicable to it or its properties, except for such noncompliance that would not reasonably be expected to have a Material Adverse Effect.
(c) Taxes and Assessments. The Company and each of its Subsidiaries shall punctually pay and discharge all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other governmental charges need be paid if they are being contested in good faith by the Company.
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(d) Compliance Certificate. Not later than forty-five (45) days following the end of each fiscal quarter, the Company shall provide the Holder with a certificate (the “Compliance Certificate”), executed by the principal executive officer and principal financial officer of the Company in their capacities as such, stating whether as of the end of such immediately preceding fiscal quarter, (i) the Company has complied with all notice provisions and covenants contained in this Subordinated Note; (ii) an Event of Default has occurred; (iii) an event of default has occurred under any other indebtedness of the Company; or (iv) an event or events have occurred that in the reasonable judgment of the management of the Company would have a material adverse effect on the ability of the Company to perform its obligations under this Subordinated Note.
(e) Financial Statements; Access to Records.
(i) In the event that the Company has not submitted a Consolidated Financial Statements for Holding Companies Reporting Form FR Y-9C to the Board of Governors of the Federal Reserve System (the “Federal Reserve”) within forty-five (45) days following the end of any fiscal quarter, the Company shall provide the Holder with copies of the Company’s unaudited consolidated balance sheet and statement of income (loss) for and as of the end of such immediately preceding fiscal quarter, prepared in accordance with past practice and in a form substantially similar to the form provided to the Holders prior to the date hereof. Quarterly financial statements, if required herein, shall be unaudited and, except for the balance sheet and statement of income (loss) for the Bank, need not comply with GAAP.
(ii) Not later than the earlier of one hundred twenty (120) days from the end of each fiscal year or ten (10) business days after receipt thereof, the Company shall provide the Holder with copies of the Company’s audited financial statements consisting of the consolidated balance sheet of the Company as of date of the fiscal year end and the related statements of income (loss) and retained earnings, stockholders’ equity and cash flows for the fiscal year then ended. Such financial statements shall be prepared in accordance with GAAP applied on a consistent basis throughout the period involved.
(iii) In addition to the foregoing Sections 4(e)(i) and (ii), the Company shall furnish Holder with such financial, business and legal information of the Company and the Bank, and afford Holder with access to inspect Company records, in each case as Holder may reasonably request, upon reasonable notice, as may be reasonably necessary or advisable to allow Holder to confirm compliance by the Company with this Subordinated Note.
(f) Business Continuation. The Company and each of its subsidiaries shall use reasonable best efforts to maintain and preserve intact the current organization, business and franchise of the Company and the Bank, including but not limited to (i) maintaining the corporate existence of the Company and the Bank, and (ii) conducting the business of the Company and the Bank in the ordinary course of business consistent with past practice.
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5. Negative Covenants.
(a) The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company, except for dividends payable solely in shares of common stock, if either of the Company (but only to the extent the Company is required to measure and report such ratios on a consolidated basis under applicable Law) or the Bank are not “well capitalized” for regulatory capital purposes, both immediately prior to the declaration of such dividend or distribution and after giving effect to the payment of such dividend or distribution.
(b) The Company shall not take any action, omit to take any action or enter into any other transaction that would have the effect of (i) the Company ceasing to be a bank holding company or financial holding company under the Bank Holding Company Act of 1956, as amended, (ii) the liquidation or dissolution of the Company or the Bank, (iii) the Bank ceasing to be an “insured depository institution” under Section 3(c)(2) of the Federal Deposit Insurance Act, as amended, or (iv) the Company owning less than one hundred percent (100%) of the capital stock of the Bank.
6. Subordination.
(a) The obligations of the Company evidenced by this Subordinated Note, including the principal and interest, shall be subordinate and junior in right of payment to its obligations to its general and secured creditors, whether now outstanding or hereafter incurred, except such other creditors holding obligations of the Company ranking by their terms on a parity with or junior to this Subordinated Note. No provision of this Subordinated Note shall be construed to prohibit or restrict the Company’s ability to issue, renew or extend any senior indebtedness or obligations that rank on a parity with or junior to this Subordinated Note. In the event of any insolvency, receivership, conservatorship, reorganization, readjustment of debt, marshaling of assets and liabilities or similar proceedings or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, all such obligations shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on this Subordinated Note. In the event of any such proceedings, after payment in full of all sums owing on such prior obligations, the Holder, together with holders of any obligations of the Company ranking on a parity with this Subordinated Note (including but not limited to the holders of the other Subordinated Notes), shall be entitled to be paid from the remaining assets of the Company the unpaid principal thereof and any interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Company ranking junior to this Subordinated Note. Nothing herein shall impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Subordinated Note according to its terms.
(b) Notwithstanding the provisions of Section 6(a) above, the obligations of the Company evidenced by this Subordinated Note, including the principal and interest, shall be senior in right and interest of payment to the indebtedness of the Company in connection with any future indebtedness of the Company that is expressly made junior to this Subordinated Note by the terms of such indebtedness. Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Notes or which may be junior or senior in rank to the Subordinated Notes.
(c) The Holder, if a depository institution, waives any applicable right of offset by it as a lender.
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7. Events of Default and Remedies.
(a) Notwithstanding any cure periods described below, the Company shall promptly notify Holder in writing when the Company obtains knowledge of the occurrence of any default specified below. Regardless of whether the Company has given the required notice, the occurrence of one or more of the following will constitute an “Event of Default” under this Subordinated Note:
(i) the Company fails to pay any principal of or installment of interest on this Subordinated Note when due (or, in the case of interest, after a fifteen (15)-day grace period);
(ii) the Company fails to keep or perform any of its agreements, undertakings, obligations, covenants or conditions under the Purchase Agreement or this Subordinated Note not expressly referred to in another clause of this Section 7 and such failure continues for a period of thirty (30) days;
(iii) any certification made pursuant to the Purchase Agreement or this Subordinated Note by the Company or otherwise made in writing in connection with or as contemplated by the Purchase Agreement or this Subordinated Note by the Company shall be materially incorrect or false as of the delivery date of such certification, or any representation to Holder by the Company as to the financial condition or credit standing of the Company is or proves to be false or misleading in any material respect;
(iv) the Company or the Bank (A) becomes insolvent or unable to pay its debts as they mature, (B) makes an assignment for the benefit of creditors, or (C) admits in writing its inability to pay its debts as they mature; or
(v) the Company or the Bank becomes subject to a receivership, insolvency, liquidation, or similar proceeding.
(b) Remedies of Holders. Upon the occurrence of any Event of Default, Holder shall have the right, if such Event of Default shall then be continuing, in addition to all the remedies conferred upon Holder by the terms of the Purchase Agreement or this Subordinated Note, to do any or all of the following, concurrently or successively, without notice to the Company:
(i) solely pursuant to a default under Section 7(a)(v), declare this Subordinated Note to be, and it shall thereupon become, immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or in this Subordinated Note to the contrary; or
(ii) exercise all of its rights and remedies at law or in equity, excluding the right, if any, to declare this Subordinated Note to be immediately due and payable (such right to acceleration being governed solely by Section 7(b)(i).
(c) Distribution Limitations Upon Event of Default. Upon the occurrence of any Event of Default and until such Event of Default is cured by the Company, the Company shall not (i) declare, pay, or make any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock, (ii) make any payment of principal or interest or premium, if any on or repay, repurchase or redeem any debt securities of the Company that rank equal with or junior to the Subordinated Notes, or (iii) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes. The limitations imposed by the provisions of this Section 7(c) shall apply whether or not notice of an Event of Default has been given.
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(d) Reimbursement of Expenses. Upon the occurrence of any Event of Default, in addition to all the remedies conferred upon Holder by the terms of the Purchase Agreement or this Subordinated Note and subject to any applicable Law, the Company shall pay Holder’s reasonable fees and expenses including attorneys’ fees and expenses, in connection with the enforcement of this Agreement or other related documents.
(e) Other Remedies. Nothing in this Section 7 is intended to restrict Holder’s rights under this Subordinated Note, other related documents, or at law or in equity, and Holder may exercise such rights and remedies as and when they are available to the extent permitted by Section 7(b).
8. Successors to the Company.
(a) Conditions Applicable to Successors. The Company shall not merge with or into, nor sell all or substantially all of its assets to, nor effect a Change in Bank Ownership to, any Person unless:
(i) except in a case in which the Company is the surviving entity in a merger, such Person (the “Successor”) executes, and delivers to the Holder, a copy of an instrument pursuant to which such Person assumes the due and punctual payment of the principal of and interest on this Subordinated Note and the performance and observance of all the obligations of the Company under this Subordinated Note, and
(ii) immediately after giving effect to the transaction, no Event of Default and no event which after notice or lapse of time or both would become an Event of Default shall have occurred.
“Change in Bank Ownership” means the sale, transfer, lease or conveyance by the Company, or an issuance of stock by the Bank, in either case resulting in ownership by the Company of less than 80% of the Bank.
(b) Successor as Company. Upon compliance with this Section 8, the Successor shall succeed to and be substituted for the Company under this Subordinated Note with the same effect as if the Successor had been named as the Company herein, and the Company shall be released from the obligation to pay the principal of and interest accrued on the Subordinated Notes.
9. Amendments and Waivers.
(a) Amendment of Subordinated Notes. Except as otherwise provided in this Section 9, and subject to any necessary regulatory approval, the Subordinated Notes may, with the consent of the Company and the Holders of more than fifty percent (50.0%) of the aggregate outstanding principal amount of the Subordinated Notes then outstanding, be amended or any provision, past or existing default, or non-compliance thereof waived (or modify any previously granted waiver); provided, however, that, without the consent of each Holder of an affected Subordinated Note, no such amendment or waiver may:
(i) reduce the principal amount of the Subordinated Note;
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(ii) reduce the rate of or change the time for payment of interest on any Subordinated Note;
(iii) extend the maturity of any Subordinated Note;
(iv) make any change in Sections 6 through 9 hereof;
(v) make any change in Section 11 hereof that adversely affects the rights of any holder of a Subordinated Note; or
(vi) disproportionately affect any of the Holders of the then outstanding Subordinated Notes.
(b) Effectiveness of Amendments. An amendment or waiver becomes effective in accordance with its terms and thereafter binds every holder of the Subordinated Notes, unless otherwise provided by Section 9(a) above. After an amendment or waiver becomes effective, the Company shall mail to the Holder a copy of such amendment or waiver. The Company may require the Holder to surrender this Subordinated Note so that an appropriate notation concerning the amendment or waiver may be placed thereon or a new Subordinated Note, reflecting the amendment or waiver, exchanged therefor. Even if such a notation is not made or such a new Subordinated Note is not issued, such amendment or waiver and any consent given thereto by a Holder of this Subordinated Note shall be binding according to its terms on any subsequent Holder of this Subordinated Note.
(c) Amendments Without Consent of Holders. Notwithstanding Section 9(a) hereof but subject to the provisos contained in subsections (i) through (vi) therein, the Company may amend or supplement this Subordinated Note without the consent of the holders of the Subordinated Notes to: (i) cure any ambiguity, defect or inconsistency therein; (ii) provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes; or (iii) make any other change, in each case, that does not adversely affect the rights of any holder of any Subordinated Note.
10. Order of Payments; Pari Passu. Any payments made hereunder shall be applied first against interest due hereunder; and then against principal due hereunder. Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated Notes and subordinated debt issued by the Company in the future which by its terms are pari passu with the Subordinated Notes. In the event Holder receives payments in excess of its pro rata share of the Company’s payments to the holders of all of the Subordinated Notes, then Holder shall hold in trust all such excess payments for the benefit of the holders of the other Subordinated Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.
11. Optional Redemption.
(a) Redemption Prior to Fifth Anniversary. This Subordinated Note shall not be redeemable by the Company prior to the fifth anniversary of the effective date of this Subordinated Note, except that in the event (i) the Company is subject to the consolidated capital requirements under applicable regulations of the Board of Governors of the Federal Reserve System (“Federal Reserve”) and after such time this Subordinated Note no longer qualifies as “Tier 2” capital (as defined by the Federal Reserve) as a result of any amendment or change in interpretation or application of Law or regulation by any judicial, legislative or regulatory authority that becomes effective after the date of issuance of this Subordinated Note, (ii) of a Tax Event (as defined below), or (iii) of an Investment Company Act Event
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(as defined below), the Company may redeem this Subordinated Note, in whole and not in part, at any time upon giving not less than ten (10) days’ notice to the Holder of this Subordinated Note at an amount equal to one hundred percent (100.0%) of the principal amount outstanding plus accrued but unpaid interest to but excluding the date fixed for redemption (the “Redemption Date”). “Tax Event” means the receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the Laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such Laws or regulations, there exists a material risk that interest payable by the Company on the Subordinated Notes is not, or within one hundred twenty (120) days after the receipt of such opinion will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes. “Investment Company Act Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that the Company is, or within one hundred twenty (120) days of the date of such opinion will be, considered an “investment company” that is required to register under the Investment Company Act of 1940, as amended.
(b) Redemption on or After Fifth Anniversary. On or after the fifth anniversary of the effective date of this Subordinated Note, this Subordinated Note shall be redeemable by the Company, in whole or in part, upon giving the notice required in Section 11(c), for a redemption price equal to one hundred percent (100.0%) of the principal amount of this Subordinated Note, or portion thereof, to be redeemed, plus accrued but unpaid interest, if any, thereon to, but excluding, the Redemption Date.
(c) Notice of Redemption. Notice of redemption of this Subordinated Note shall be given by first class mail, postage prepaid, addressed to the Holder at its last address appearing on the books of the Company. Such mailing shall be at least thirty (30) days and not more than sixty (60) days before the Redemption Date. Any notice mailed as provided in this Subordinated Note shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to the Holder shall not affect the validity of the proceedings for the redemption of any other holders of the Subordinated Notes. Each notice of redemption given to the Holder shall state: (i) the Redemption Date; (ii) the principal amount of this Subordinated Note to be redeemed; (iii) the redemption price; and (iv) the place or places where this Subordinated Note is to be surrendered for payment of the redemption price.
(d) Partial Redemption. If less than the then outstanding principal amount of this Subordinated Note is redeemed, (i) a new Subordinated Note shall be issued representing the unredeemed portion without charge to the Holder thereof and (ii) such redemption shall be effected on a pro rata basis as to the Holders of the Subordinated Notes. For purposes of clarity, upon a partial redemption, a like percentage of the principal amount of every Subordinated Note held by every Holder shall be redeemed.
(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the Redemption Date all funds necessary for the redemption have been deposited by the Company, in trust for the pro rata benefit of the Holders of the Subordinated Notes called for redemption, so as to be and continue to be available solely therefor, then, notwithstanding that any Subordinated Notes so called for redemption have not been surrendered for cancellation, on and after the Redemption Date interest shall cease to accrue on all Subordinated Notes so called for redemption, all Subordinated Notes so called for redemption shall no longer be deemed outstanding and all rights with respect to such Subordinated Notes shall forthwith on such Redemption Date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption held in trust, without interest. Any funds unclaimed at the end of three (3) years from the Redemption Date shall, to the extent permitted by Law, be released to the Company, after which time the Holders of the Subordinated Notes so called for redemption shall look only to the Company for payment of the redemption price of such Subordinated Notes.
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(f) Federal Reserve Approval. If necessary, any redemption or prepayment of this Subordinated Note shall be subject to receipt of prior written approval by the Federal Reserve (or any successor bank regulatory agency having supervisory authority over the Company) and any and all other required federal and state regulatory approvals.
(g) No Sinking Fund. The Subordinated Notes are not entitled to any sinking fund.
12. Notices. All notices and other communications hereunder shall be in writing and, for purposes of this Subordinated Note, shall be delivered in accordance with, and effective as provided in, the Purchase Agreement.
13. Conflicts; Governing Law; Interpretation. In the case of any conflict between the provisions of this Subordinated Note and the Purchase Agreement, the provisions of this Subordinated Note shall control. This Subordinated Note will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the state courts located in the City of New York, New York and the federal courts located in the City of New York, Borough of Manhattan, New York for any actions, suits or proceedings arising out of or relating to this Subordinated Note, the transactions contemplated by this Subordinated Note and/or the relationship of the parties. The parties hereby irrevocably and unconditionally consent to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waive, to the fullest extent permitted by law, any objection that they may now or hereafter have to the laying of the venue of any such action, suit or proceeding in any such court or that any such action, suit or proceeding which is brought in any such court has been brought in an inconvenient forum.. This Subordinated Note is intended to meet the criteria for qualification of the outstanding principal as Tier 2 capital under the regulatory guidelines of the Federal Reserve. If at any time the Company is subject to consolidated capital requirements under applicable regulations of the Federal Reserve and after such time all or any portion of this Subordinated Note ceases to be deemed to be Tier 2 capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five years immediately preceding the maturity date of this Subordinated Note, the Company will promptly notify the Holder, and thereafter, subject to the Company’s right to redeem this Subordinated Note under such circumstances pursuant to the terms of this Subordinated Note, if requested by the Company, the Company and the Holder will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by this Subordinated Note to qualify as Tier 2 capital.
14. Successors and Assigns. This Subordinated Note shall be binding upon the Company and inure to the benefit of the Holder and its respective successors and permitted assigns. The Holder may assign all, or any part of, or any interest in, the Holder’s rights and benefits hereunder at any time without notice to or consent of the Company, and the failure of Holder to comply with the requirements of Section 3 shall have no effect of the effectiveness of such assignment. To the extent of any such assignment, such assignee shall have the same rights and benefits against the Company and shall agree to be bound by and to comply with the terms and conditions of the Purchase Agreement as it would have had if it were the Holder hereunder. The Company may not assign this Subordinated Note or its obligations hereunder except as provided in Section 8 hereto or with the prior written consent of the Holder.
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15. Notes Solely Corporate Obligations. The Holder shall not have any recourse for the payment of principal or interest, on any Subordinated Note, for any claim based thereon or otherwise with respect thereto, under any obligation, covenant or agreement of the Company in this Subordinated Note, or because of the creation of any indebtedness represented hereby, against any incorporator, stockholder, employee, agent, officer, director or subsidiary, as such, past, present or future, of the Company or of any successor Person, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of law, or by enforcement of any assessment or penalty or otherwise. The Holder agrees that all such liability is hereby expressly waived and released as a condition of, and consideration for, the execution and issuance of this Subordinated Note.
16. Waivers. Neither any failure nor any delay on the part of the Holder in exercising any right, power or privilege under this Subordinated Note shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege.
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Exhibit 21.1 Subsidiaries of BayFirst Financial Corp.
First Home Bank (Florida)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
BayFirst Financial Corp. (formerly First Home Bancorp, Inc.)
St. Petersburg, Florida
We consent to the inclusion in this Registration Statement on Form S-1 of our report dated May 10, 2021, with respect to the consolidated financial statements of First Home Bancorp, Inc. as of December 31, 2020 and 2019 and for each of the two years in the period ended December 31, 2020, and to the reference to our firm under the heading “Experts” in such Registration Statement.
/s/ Dixon Hughes Goodman LLP
Tampa, Florida
May 11, 2021