First National holders OK slashing coupon to 4.5% on notes due 2019

By Susanna Moon

Chicago, June 30 – First National Community Bancorp, Inc. said holders approved amending its $25 million of outstanding 9% fixed-rate subordinated notes due 2019 to cut the coupon to 4.5%, effective Wednesday.

The amendment also accelerates a partial repayment of principal amount due under the notes, according to a company press release attached to an 8-K filing with the Securities and Exchange Commission.

The amendments were conditioned on approval by the Federal Reserve Bank of Philadelphia, the company’s regulator, and receipt of consents from holders of the entire principal amount of notes outstanding.

The company said it secured regulatory approval on May 27 and received consents from each of the holders on June 26.

Under the approved proposal, the company repaid 44% of the original principal amount, or $11 million, of the notes outstanding to the holders on June 30, with the remaining $14 million principal to be repaid as follows: 16% of the original par amount, or $4 million, payable on Sept. 1, 2017; 20% of the original par amount, or $5 million, payable on Sept. 1, 2018; and the final 20% of the original par amount, or $5 million, payable on Sept. 1, 2019, the maturity date of the notes.

The company said it has been deferring interest on the notes since September 2010 because of regulatory restrictions, including provisions imposed by a written agreement with the Federal Reserve Bank of Philadelphia dated Nov. 24, 2010.

As of June 30, the accrued interest was $11,022,250.

The company said it plans to request regulatory approval to resume the regularly scheduled quarterly interest payments on a going forward basis but that there can be no guarantee that the requests will be granted.

Also, the company said it has no plans to request approval to pay accrued interest associated with the notes.

“We believe accelerating the repayment of principal, combined with reducing the interest rate, on the subordinated notes will significantly enhance our profitability, strengthen our capital position, and create long-term value for our shareholders,” Steven R. Tokach, president and chief executive officer, said in the press release.

First National is the bank holding company of First National Community Bank and is based in Dunmore, Pa.

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