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BORROWED FUNDS
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
BORROWED FUNDS
Note 7 – Borrowed Funds

The Bank is a member of the FHLB of Pittsburgh, Pennsylvania. The Bank had no borrowed amounts outstanding as of December 31, 2021 and December 31, 2020. As of December 31, 2021, the Bank's maximum borrowing capacity with the FHLB was $447.1 million and the remaining borrowing capacity was $432.9 million, with the difference being deposit letters of credit.

Short-term borrowings

Along with traditional deposits, the Bank has access to short-term borrowings from FHLB to fund its operations and investments.

Information related to short-term borrowings is summarized as follows:
(Dollars in thousands)20212020
Balance at end of year$— $— 
Average balance during the year25,275 68,407 
Maximum month-end balance130,047 154,248 
Weighted-average rate during the year0.05 %0.58 %
Weighted-average rate at December 31— %— %

Long-term borrowings

As of December 31, 2021 and December 31, 2020, the Bank had no long-term borrowings with the FHLB.

Repurchase agreements

Along with traditional deposits, the Bank has access to securities sold under agreements to repurchase. Repurchase agreements with customers represent funds deposited by customers, on an overnight basis, that are collateralized by investment securities owned by us. Repurchase agreements with customers are presented as an individual line item on the consolidated balance sheets. All repurchase agreements are subject to terms and conditions of repurchase/security agreements between us and the client and are accounted for as secured borrowings. Our repurchase agreements reflected in liabilities consist of customer accounts and securities which are pledged on an individual security basis.

We monitor the fair value of the underlying securities on a monthly basis. Repurchase agreements are reflected at the amount of
cash received in connection with the transaction and included in securities sold under agreements to repurchase on the consolidated balance sheets. The primary risk with our repurchase agreements is market risk associated with the investments securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents.

All of our repurchase agreements were overnight agreements at December 31, 2021 and December 31, 2020. These borrowings were collateralized with investment securities with a carrying value of $15.8 million and $10.7 million at December 31, 2021 and December 31, 2020, respectively, and were comprised of United States Government Agencies and Mortgage backed securities. Declines in the value of the collateral would require us to increase the amounts of securities pledged.

Information related to repurchase agreements is summarized as follows:
(Dollars in thousands)20212020
Balance at end of year$11,385 $10,266 
Average balance during the year10,821 9,856 
Maximum month-end balance11,398 10,505 
Weighted-average rate during the year0.12 %0.23 %
Weighted-average rate at December 310.05 %0.14 %

Subordinated Debt

Information related to subordinated debt is summarized as follows:
(Dollars in thousands)20212020
Balance at end of year$73,030 $43,407 
Average balance during the year51,149 7,568 
Maximum month-end balance73,030 43,524 
Weighted-average rate during the year4.28 %3.45 %
Weighted-average rate at December 313.71 %4.02 %

In September 2021, we completed the private placement of $30 million fixed-to-floating rate subordinated notes to certain qualified institutional investors. These notes are unsecured and have a ten-year term, maturing October 1, 2031, and will bear interest at a fixed rate of 3.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR, plus 254 basis points, payable quarterly in arrears. These notes have been structured to qualify as Tier 2 capital for regulatory capital purposes.

In November 2020, we completed the private placement of $40 million fixed-to-floating rate subordinated notes to certain qualified institutional investors. These notes are unsecured and have a ten-year term, maturing December 1, 2030, and will bear interest at a fixed rate of 4.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR, plus 401 basis points, payable quarterly in arrears. These notes have been structured to qualify as Tier 2 capital for regulatory capital purposes.

In March 2007, we completed the private placement of $4.0 million Floating Rate, Trust Preferred Securities through our MVB Financial Statutory Trust I subsidiary (the “Trust”). We established the Trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust. The Trust Preferred Securities and the Debentures mature in 2037 and have been redeemable by us since 2012. Interest payments are due in March, June, September and December and are adjusted at the interest due dates at a rate of 1.62% over the three-month LIBOR Rate. The obligations we provide with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by us of the Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantees. The securities issued by the Trust are includable for regulatory purposes as a component of our Tier 1 capital.

In June 2014, we issued our Convertible Subordinated Promissory Notes to various investors in the aggregate principal amount of $29.4 million. The notes were issued in $0.1 million increments per note, subject to a minimum investment of $1 million. The Notes were to expire 10 years after the initial issuance date of the Notes. In July 2019, the Federal Reserve Board provided approval for us to redeem all of the outstanding Notes. On or about August 1, 2019, we provided notice to the holders of the
outstanding notes that we would redeem the outstanding notes on September 30, 2019.

In 2019, $1.0 million of subordinated debt was converted into common stock, which resulted in the issuance of 62,500 new shares and $12.4 million of subordinated debt was redeemed. These transactions provided an annual interest expense savings of $1.0 million.
We recognized interest expense on our subordinated debt of $2.2 million, $0.3 million and $0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.