such termination date. This payment shall be made within the month following the date on which Mr. Umbergers employment terminates. In addition to this payment,
Mr. Umbergers First Amended Salary Continuation Agreement provides for the Accrued Annual Benefit. Payments on this Accrued Annual Benefit shall begin within 90 days of the date on which Mr. Umbergers employment terminates
following a Change in Control.
TRANSACTIONS WITH RELATED PARTIES
Loans and Extensions of Credit
. Financial maintains written policies and procedures to strictly control all loans to insiders in
accordance with Federal law (Regulation O). Insiders include any executive officer, director, or principal shareholder and entities which such persons control. Some of the directors and officers of Financial and the Bank are at present, as in the
past, customers of the Bank, and the Bank has had, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal shareholders, and their associates, on substantially the same
terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with others. These transactions do not involve more than the normal risk of collectability or present other unfavorable
features. At December 31, 2018 and 2017 the total outstanding loans to directors and officers and their related parties, including loans guaranteed by such persons, aggregated $14,213,000 and $14,592,000, respectively. None of these loans or
other extensions of credit are disclosed as nonaccrual, past due, restructured, or potential problem loans.
Other
Transactions
. The Bank entered into a lease agreement in October 2003 pursuant to which it currently leases approximately 29,623 square feet of office space at 828 Main Street, Lynchburg, Virginia. The property is owned by Jamesview
Investments, LLC, a Virginia limited liability company, which is owned by our director, William C. Bryant III. The initial lease term commenced on August 1, 2004 and expired on July 31, 2014, at which time the Bank exercised its first of
two five year renewal options. The lease payments totaled approximately $302,000 in each of 2018 and 2017. The Bank and Jamesview currently are negotiating an amendment to the lease. The amendment is subject to the approval process for related party
transactions discussed below.
During January of 2017, Financial issued $5,000,000 in unregistered debt securities (the 2017
Notes) to accredited investors in a private placement. The 2017 Notes bear interest at the rate of 4% per year with interest payable quarterly in arrears. One member (including immediate family members) of the board of directors purchased an
aggregate of approximately $1,000,000 of 2017 Notes. During 2018, this director received interest payments totaling approximately $40,000 and during 2019, this director has received interest payments totaling $10,000. The related party above
purchased the 2017 Notes on the same terms as all other purchasers of the 2017 Notes.
Approval Process for Related Party
Transactions
. The disinterested members of the board of directors review all related party transactions for potential conflicts of interest. The board of directors must approve all related party transactions and such transactions must be on
terms not less favorable to Financial or the Bank than those that prevail in arms-length transactions with third parties. Related party transactions are those involving Financial and the Bank which are required to be disclosed pursuant to SEC
Regulation
S-K,
Item 404.
There are no legal proceedings to which any director, officer,
principal shareholder, or associate is a party that would be material and adverse to the Bank.
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