Fairfax, Va.-based Freedom Financial Holdings Inc. completed a private placement of $20 million of 3.5% fixed- to floating-rate subordinated notes due Dec. 1, 2031, to certain qualified institutional buyers and institutional accredited investors.

The notes have been structured to qualify as Tier 2 capital for regulatory capital purposes. Freedom Financial, the parent of The Freedom Bank of Virginia, intends to use the net proceeds from the private placement for general corporate purposes, including continued growth and maintenance of bank-level regulatory capital ratios.

For the first five years of the term, the notes will bear interest at a fixed annual rate of 3.5%, a spread of 194 basis points over the 10-year Treasury as of Nov. 10, according to a news release. The interest will be paid semiannually in arrears.

Thereafter, the interest rate will reset quarterly to an interest rate per year equal to the then-current three-month secured overnight financing rate plus 244 basis points, payable quarterly in arrears. The three-month Sofr will be deemed to be zero in the event it is less than zero.

The company may redeem the notes in whole or in part on or after Dec. 1, 2026. It may also redeem the notes at any time in whole upon certain other specified events.

Janney Montgomery Scott LLC was the sole placement agent for the offering. Troutman Pepper Hamilton Sanders LLP acted as legal counsel to Freedom Financial, and Alston & Bird LLP was legal counsel to the placement agent.