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Note 9 - Borrowings
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Debt Disclosure [Text Block]

NOTE 9 — BORROWINGS

 

  

December 31,

 
  

2021

  

2020

 
  Contractual Rate  

Amount

  Contractual Rate  

Amount

 

Fixed-rate advance from FHLB, due May 9, 2022

  —% $5,000   —% $4,000 

Subordinated Notes, due May 15, 2031

  3.75%  19,590   —%  — 

Line of credit, due March 31, 2022

  2.50%  —   2.50%  — 

 

The Company maintains a collateral pledge agreement covering secured advances whereby the Company has agreed to keep on hand, free of all other pledges, liens, and encumbrances, specifically identified whole first mortgages on improved residential property not more than 90-days delinquent to secure advances from the FHLB. All of the Bank’s FHLB common stock is pledged as additional collateral for these advances. At December 31, 2021, $17.4 million and $296.8 million of first mortgage and multi-family mortgage loans, respectively, collateralized potential advances. At December 31, 2021, we had the ability to borrow an additional $274.8 million under our credit facilities with the FHLB. We also have the ability to pledge U.S. Treasury Notes of $75.0 million for FHLB advances.  The Company also had available pre-approved overnight federal funds borrowing. At December 31, 2021 and 2020, there was no outstanding balance on these lines.

 

On April 14, 2021, the Company entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers and accredited investors pursuant to which the Company sold and issued $20.0 million in aggregate principal amount of its 3.75% Fixed-to-Floating Rate Subordinated Notes due May 15, 2031 (the “Notes”). 

The Company incurred $441,000 of issuance costs associated with the Notes.  These issuance costs are being amortized over the 10-year life of the Notes.  At December 31, 2021, there were $410,000 in remaining unamortized issuance costs and they are presented in the Company's financial statements as a reduction of the principal amount of the Notes.

The Notes bear interest at a fixed annual rate of 3.75%, from and including the date of issuance to May 14, 2026, payable semi-annually in arrears. From and including May 15, 2026 but excluding the maturity date or early redemption date, as applicable, the interest rate will reset quarterly to an interest rate per annum equal to Three-Month Term SOFR (as defined in the Notes) plus 299 basis points, payable quarterly in arrears. Under the conditions specified in the Notes, the interest rate accruing during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR.   The Notes have a stated maturity date of May 15, 2031 and are redeemable, in whole or in part, on May 15, 2026, on any interest payment date thereafter, and at any time upon the occurrence of certain events.

 

Principal and interest payments due on the Notes are subject to acceleration only in limited circumstances in the case of certain bankruptcy and insolvency-related events with respect to the Company. The Notes are unsecured, subordinated obligations of the Company and generally rank junior in right of payment to the Company’s current and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory capital purposes.

 

In 2020, the Company established a $5.0 million unsecured line of credit with a correspondent bank.  Interest is payable at a rate of Prime Rate as published in the Wall Street Journal minus 0.75%, with a minimum rate of 2.40%.  The line of credit has been extended since its original maturity date and the current maturity date is March 31, 2022.  The line of credit had no outstanding balance at  December 31, 2021 and 2020.