Other Borrowings

12 Months Ended

Dec. 31, 2020

Junior Subordinated DebenturesAs part of the acquisition of Washington Banking Company on May 1, 2014, the Company assumed trust preferred securities and junior subordinated debentures with a total fair value of $18.9 million at the merger date. At December 31, 2020 and December 31, 2019, the balance of the junior subordinated debentures, net of unaccreted discount, was $20.9 million and $20.6 million, respectively.

Washington Banking Master Trust, a Delaware statutory business trust, was a wholly owned subsidiary of the Washington Banking Company created for the exclusive purposes of issuing and selling capital securities and utilizing sale proceeds to acquire junior subordinated debentures issued by the Washington Banking Company. During 2007, the Trust issued $25.0 million of trust preferred securities with a 30-year maturity, callable after the fifth year. The trust preferred securities have a quarterly adjustable rate based upon the three-month LIBOR plus 1.56%. On the merger date, the Company acquired the Trust, which retained the Washington Banking Master Trust name, and assumed the performance and observance of the covenants under the indenture related to the trust preferred securities.

The adjustable rate of the trust preferred securities at December 31, 2020 and December 31, 2019 was 1.80% and 3.47%, respectively. The weighted average rate of the junior subordinated debentures for the years ended December 31, 2020, 2019 and 2018 was 4.29%, 6.55% and 6.27%, respectively. The weighted average rate includes the accretion of the discount established at the merger date which is amortized over the life of the trust preferred securities.

The junior subordinated debentures are the sole assets of the Trust and payments under the junior subordinated debentures are the sole revenues of the Trust. All of the common securities of the Trust are owned by the Company. Heritage has fully and unconditionally guaranteed the capital securities along with all obligations of the Trust under the trust agreements. For financial reporting purposes, the Company's investment in the Master Trust is accounted for under the equity method and is included in Prepaid expenses and other assets on the Consolidated Statements of Financial Condition. The junior subordinated debentures issued and guaranteed by the Company and held by the Master Trust are reflected as liabilities on the Consolidated Statements of Financial Condition.

Other Borrowings

(a) FHLB

The FHLB functions as a member-owned cooperative providing credit for member financial institutions. Advances are made pursuant to several different programs. Each credit program has its own interest rate and range of maturities. Limitations on the amount of advances are based on a percentage of the Bank's assets or on the FHLB’s assessment of the institution’s creditworthiness. At December 31, 2020, the Bank maintained a credit facility with the FHLB with available borrowing capacity of $991.7 million. At December 31, 2020 and December 31, 2019 the Bank had no FHLB advances outstanding.

The following table sets forth the details of FHLB advances during and as of the years ended December 31, 2020 and 2019:


	As of or For the Year Ended
	December 31, 2020			December 31, 2019
	(In thousands)
Average balance during the year	$	1,466		$	11,899
Maximum month-end balance during the year	$	—		$	90,700
Weighted average rate during the year	0.55		%	2.57		%
Weighted average rate at the end of year	n/a			n/a

Advances from the FHLB are collateralized by a blanket pledge on FHLB stock owned by the Bank, deposits at the FHLB, certain commercial and residential real estate loans, investment securities which are obligations of or guaranteed by the United States, or other assets. In accordance with the pledge agreement, the Company must maintain unencumbered collateral in an amount equal to varying percentages ranging from 100% to 160% of outstanding advances depending on the type of collateral.

(b) Federal Funds Purchased

The Bank maintains advance lines with Wells Fargo Bank, US Bank, The Independent Bankers Bank, Pacific Coast Bankers’ Bank, and JP Morgan Chase to purchase federal funds of up to $215.0 million as of December 31, 2020. The lines generally mature annually or are reviewed annually. As of December 31, 2020 and December 31, 2019, there were no federal funds purchased.

The Bank maintains a credit facility with the Federal Reserve Bank with available borrowing capacity of $54.3 million as of December 31, 2020. There were no borrowings outstanding as of December 31, 2020 and December 31, 2019. Any advances on the credit facility would be secured by certain types of the Bank's loans receivable.

(d) PPPLF Facility

The Federal Reserve established the PPPLF under Section 13(3) of the Federal Reserve Act to bolster the effectiveness of the SBA's PPP. Under the PPPLF, the Bank had the option to pledge its SBA PPP loans as collateral at face value to obtain Federal Reserve Bank non-recourse loans. PPPLF advances were available to be obtained until December 31, 2020. As of and for the year ended December 31, 2020, although the Bank was approved to utilize the PPPLF, the Bank had not participated in it. See Note (25) Subsequent Events regarding the renewal of this facility subsequent to December 31, 2020.