BKGM BankGuam Holding Company (CE)

On June 29, 2021, BankGuam Holding Company (the “Company”) entered into a Subordinated Note Purchase Agreement (the “Purchase Agreement”) with certain purchasers (the “Purchasers”) pursuant to which the Company sold and issued $20 million in aggregate principal amount of its 4.75% Fixed-to-Floating Rate Subordinated Notes due July 1, 2031 (the “Notes”).

The Notes have a stated maturity of July 1, 2031, and, from and including the date of issuance to but excluding July 1, 2026, will bear interest at a fixed annual rate of 4.75%, payable semi-annually in arrears. From and including July 1, 2026 to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an interest rate per annum equal to the then-current three-month average Secured Overnight Financing Rate (“SOFR”) plus 413 basis points, payable quarterly in arrears. The Notes are redeemable, in whole or in part, on or after July 1, 2026, and at any time upon the occurrence of certain events. Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the Notes being redeemed, together with any accrued and unpaid interest on the Notes being redeemed to but excluding the date of redemption.

The Purchase Agreement contains certain customary representations, warranties and covenants made by the Company, on the one hand, and the Purchasers, severally and not jointly, on the other hand. The Notes were offered and sold by the Company to “accredited investors” within the meaning of Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) and to “qualified institutional buyers,” as defined in Rule 144A under the Securities Act in a private offering in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D thereunder.

The Company intends to use a portion of the net proceeds from the offering to fund the purchase of an additional 25% of ASC Trust LLC on July 6, 2021, pursuant to the Stock Purchase Agreement dated May 27, 2016, which agreement was amended on July 1, 2021 to extend the closing date to July 6, 2021, under which the Company has already purchased 45% of ASC Trust LLC to date. The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes.

The Notes are not subject to any sinking fund and are not convertible into or exchangeable for any other securities or assets of the Company or any of its subsidiaries. The Notes are not subject to redemption at the option of the holder. Principal and interest on the Notes are subject to acceleration only in limited circumstances. The Notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Notes rank junior in right to payment to the Company’s current and future senior indebtedness. The Notes are intended to qualify as Tier 2 capital for regulatory capital purposes for the Company.

The form of Purchase Agreement and the form of Note are attached as Exhibits 10.1 and 4.1, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The foregoing descriptions of the Purchase Agreement and the Notes are summaries and are qualified in their entirety by reference to the Exhibits to this Current Report on Form 8-K.