Borrowings and Subordinated Debentures
|3 Months Ended|
Mar. 31, 2021
|Debt Disclosure [Abstract]|
|Borrowings and Subordinated Debentures||
Note 8 — Borrowings and Subordinated Debentures
At March 31, 2021, the Bank had no overnight advances and $150.0 million in term advances outstanding with the FHLB with a weighted average interest rate of 1.20 percent. At December 31, 2020, the Bank had no overnight advances and $150.0 million of term advances with the FHLB with a weighted average rate of 1.40 percent. The Bank had no outstanding borrowings with the Federal Reserve Bank (“FRB”) under the Paycheck Protection Program Lending Facility (“PPPLF”) as of March 31, 2021 or December 31, 2020. Interest expense on borrowings for the three months ended March 31, 2021 and 2020 was $478,000 and $496,000, respectively.
The following is financial data pertaining to FHLB advances:
The Bank maintains a secured credit facility with the FHLB, allowing the Bank to borrow on an overnight and term basis. The Bank had $2.34 billion and $2.17 billion of loans pledged as collateral with the FHLB as of March 31, 2021 and December 31, 2020, respectively. Remaining available borrowing capacity was $1.39 billion, subject to the FHLB statutory lending limit of $1.57 billion, and $1.44 billion at March 31, 2021 and December 31, 2020, respectively.
The Bank also had securities with market values of $32.6 million and $27.3 million at March 31, 2021 and December 31, 2020, respectively, pledged with the FRB, which provided $31.1 million and $26.3 million in available borrowing capacity through the Fed Discount Window as of March 31, 2021 and December 31, 2020, respectively.
The Company issued Fixed-to-Floating Subordinated Notes (“Notes”) of $100.0 million on March 21, 2017, with a final maturity on March 30, 2027. The Notes have an initial fixed interest rate of 5.45 percent per annum, payable semiannually on March 30 and September 30 of each year. From and including March 30, 2022 and thereafter, the Notes bear interest at a floating rate equal to the then current three-month LIBOR, as calculated on each applicable date of determination, plus 3.315 percent payable quarterly. If the then current three-month LIBOR is less than zero, three-month LIBOR will be deemed to be zero. Debt issuance cost was $2.3 million, which is being amortized through the Note’s maturity date. At March 31, 2021 and December 31, 2020, the balance of Notes included in the Company’s Consolidated Balance Sheet, net of debt issuance cost, was $98.6 million and $98.5 million, respectively. The amortization of debt issuance cost was $53,000 and $50,000 for the three months ended March 31, 2021 and 2020, respectively.
The Company assumed Junior Subordinated Deferrable Interest Debentures (“Subordinated Debentures”) as a result of an acquisition in 2014 with an unpaid principal balance of $26.8 million and an estimated fair value of $18.5 million. The $8.3 million discount is being amortized to interest expense through the debentures’ maturity date of March 15, 2036. A trust was formed in 2005 which issued $26.0 million of Trust Preferred Securities (“TPS”) at a 6.26 percent fixed rate for the first five years and a variable rate at the three-month LIBOR plus 140 basis points thereafter and invested the proceeds in the Subordinated Debentures. The Company may redeem the Subordinated Debentures at an earlier date if certain conditions are met. The TPS will be subject to mandatory redemption if the Subordinated Debentures are repaid by the Company. Interest is payable quarterly, and the Company has the option to defer interest payments on the Subordinated Debentures from time to time for a period not to exceed five consecutive years. At March 31, 2021 and December 31, 2020, the balance of Subordinated Debentures included in the Company’s Consolidated Balance Sheets, net of discount of $6.3 million and $6.4 million, was $20.5 million and $20.4 million, respectively. The amortization of discount was $99,000 and $96,000 for the three months ended March 31, 2021 and 2020, respectively.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef