FHLB Advances, Other Borrowings and Junior Subordinated Notes

12 Months Ended

Dec. 31, 2020

FHLB Advances, Other Borrowings and Junior Subordinated Notes

The composition of borrowed funds is shown below.


	December 31, 2020						December 31, 2019
	Balance		Weighted Average Balance		Weighted Average Rate		Balance		Weighted Average Balance		Weighted Average Rate
	(Dollars in Thousands)
Federal funds purchased	$	—	$	71	0.69	%	$	—	$	59	2.45	%
Federal Reserve PPPLF	—		15,207		0.35		—		—		—
FHLB advances	394,500		379,891		1.45		295,000		286,464		2.17

Other borrowings	920		676		12.60		675		675		8.11

Subordinated notes payable(1)	23,747		23,725		5.95		23,707		24,502		7.45
Junior subordinated notes	10,062		10,054		11.09		10,047		10,040		11.08
	$	429,229	$	429,624	1.91		$	329,429	$	321,740	2.87

(1)Weighted average rate of subordinated notes payable reflects the accelerated amortization of subordinated debt issuance costs as a result of the early redemption of a subordinated note during the third quarter of 2019.

A summary of annual maturities of borrowings at December 31, 2020 is as follows:


(In Thousands)
Maturities during the year ended December 31,
2021	$	210,000
2022	29,000
2023	7,000
2024	25,500
2025	13,000
Thereafter	$	144,729
	$	429,229

The Corporation has a $644.6 million FHLB line of credit available for advances which is collateralized as noted below. At December 31, 2020, $250.1 million of this line remained unused. There were $394.5 million of term FHLB advances outstanding at December 31, 2020 with stated fixed interest rates ranging from 0.00% to 2.75% compared to $295.0 million of term FHLB advances outstanding at December 31, 2019 with stated fixed interest rates ranging from 0.92% to 2.75%. The term FHLB advances outstanding at December 31, 2020 are due at various dates through February 2030.

During the three months ended June 30, 2020, the Corporation prepaid $59.5 million of short-term FHLB advances that had a weighted average interest rate of 2.34%. The transaction was accounted for as an early debt extinguishment resulting in a pre-tax loss of $744,000 during the three months ended June 30, 2020.

The Corporation is required to maintain as collateral mortgage-related securities, unencumbered first mortgage loans and secured small business loans in its portfolio aggregating at least the amount of outstanding advances from the FHLB. Loans totaling approximately $644.6 million and $507.6 million were pledged as collateral at December 31, 2020 and 2019, respectively.

The Corporation has a senior line of credit with a third-party financial institution of $10.5 million. As of December 31, 2020, the line of credit carried an interest rate of LIBOR + 2.75% with an interest rate floor of 3.125% that matured on February 19, 2021 and had certain performance debt covenants of which the Corporation was in compliance. The Corporation pays a commitment fee on this senior line of credit. For the years ended December 31, 2020 and 2019 the Corporation incurred $13,000 additional interest expense due to this fee. There was no outstanding balance on the line of credit as of December 31, 2020. On February 12, 2021, the credit line was renewed for one additional year with pricing terms of LIBOR + 2.75% and a maturity date of February 19, 2022.

The Corporation has subordinated notes payable. At December 31, 2020, the aggregate principal amount of subordinated notes payable outstanding was $23.7 million, which qualified for Tier 2 capital. At December 31, 2020, $15.0 million bore a fixed interest rate of 5.50% with a maturity date of August 15, 2029 and $9.1 million bore a fixed interest rate of 6.00% with a maturity date of April 15, 2027. The $15.0 million subordinated note payable has certain performance debt covenants of which

the Corporation was in compliance. The Corporation may, at its option, redeem the notes, in whole or part, at any time after August 15, 2024. As of December 31, 2020, $343,000 of debt issuance costs remain in the subordinated notes payable balance.

In September 2008, Trust II completed the sale of $10.0 million of 10.50% fixed rate trust preferred securities (“Preferred Securities”). Trust II also issued common securities of $315,000. Trust II used the proceeds from the offering to purchase $10.3 million of 10.50% junior subordinated notes (“Notes”) of the Corporation. The Preferred Securities are mandatorily redeemable upon the maturity of the Notes on September 26, 2038. The Preferred Securities qualify under the risk-based capital guidelines as Tier 1 capital for regulatory purposes. Per the provisions of the Dodd-Frank Act, bank holding companies with total assets of less than $15 billion are not required to phase out trust preferred securities as an element of Tier 1 capital as other, larger institutions must. The Corporation used the proceeds from the sale of the Notes for general corporate purposes including providing additional capital to its subsidiaries. As of December 31, 2020, $253,000 of debt issuance costs remain reflected in junior subordinated notes on the Consolidated Balance Sheets.

The Corporation has the right to redeem the Notes at each interest payment date on or after September 26, 2013. The Corporation also has the right to redeem the Notes, in whole but not in part, after the occurrence of certain special events. Special events are limited to: (1) a change in capital treatment resulting in the inability of the Corporation to include the Notes in Tier 1 capital, (2) a change in laws or regulations that could require Trust II to register as an investment company under the Investment Company Act of 1940, as amended; and (3) a change in laws or regulations that would require Trust II to pay income tax with respect to interest received on the Notes or, prohibit the Corporation from deducting the interest payable by the Corporation on the Notes or result in greater than a de minimis amount of taxes for Trust II.

During the second quarter of 2020, the Corporation tested its ability to borrow from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”) in the event funding was required to support the Bank’s PPP lending efforts. On April 28, 2020, the Corporation borrowed $29.6 million from the PPPLF at a rate of 0.35%. The borrowing was fully collateralized by a tranche of PPP loans originated by the Bank on April 15, 2020 and maturing on April 15, 2022, or when the tranche of PPP loans utilized to collateralize the PPPLF borrowing are forgiven, whichever comes first. As of November 2, 2020, the borrowing was paid in full.