Quarterly report pursuant to Section 13 or 15(d)

Borrowings and Subordinated Debentures

v3.24.3
Borrowings and Subordinated Debentures
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Borrowings and Subordinated Debentures

Note 8 — Borrowings and Subordinated Debentures

At September 30, 2024, the Bank had $200.0 million of open advances and $100.0 million of term advances at the FHLB with a weighted average interest rate of 5.21% and 4.02%, respectively. At December 31, 2023, the Bank had $212.5 million of open advances and $112.5 million of term advances at the FHLB with a weighted average rate of 5.70% and 2.77%, respectively. Interest expense on borrowings for the nine months ended September 30, 2024 and 2023 was $5.1 million and $4.8 million, respectively.

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Outstanding
Balance

 

 

Weighted
Average Rate

 

 

Outstanding
Balance

 

 

Weighted
Average Rate

 

 

 

(dollars in thousands)

 

Open advances

 

$

200,000

 

 

 

5.21

%

 

$

212,500

 

 

 

5.70

%

Advances due within 12 months

 

 

12,500

 

 

 

1.90

 

 

 

37,500

 

 

 

0.40

 

Advances due over 12 months through 24 months

 

 

87,500

 

 

 

4.32

 

 

 

12,500

 

 

 

1.90

 

Advances due over 24 months through 36 months

 

 

—

 

 

 

—

 

 

 

62,500

 

 

 

4.37

 

Outstanding advances

 

$

300,000

 

 

 

4.81

%

 

$

325,000

 

 

 

4.69

%

 

The following is financial data pertaining to FHLB advances:

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

(dollars in thousands)

 

Weighted-average interest rate at end of period

 

 

4.81

%

 

 

4.69

%

Weighted-average interest rate during the period

 

 

4.31

%

 

 

3.48

%

Average balance of FHLB advances

 

$

158,312

 

 

$

197,390

 

Maximum amount outstanding at any month-end

 

$

350,000

 

 

$

450,000

 

 

The Bank maintains a secured credit facility with the FHLB, allowing the Bank to borrow on an overnight, open (no maturity) and a term basis. The Bank had pledged $2.44 billion and $2.36 billion of loans at carrying values as collateral with the FHLB as of

September 30, 2024 and December 31, 2023, respectively. The remaining available borrowing capacity was $1.24 billion and $1.09 billion at September 30, 2024 and December 31, 2023, respectively.

The Bank also had securities pledged with the FRB with market values of $31.5 million and $24.8 million at September 30, 2024 and December 31, 2023, respectively. The pledged securities provided $29.5 million, and $23.2 million in available borrowing capacity through the Fed Discount Window as of September 30, 2024 and December 31, 2023, respectively.

On August 20, 2021, the Company issued $110.0 million of Fixed-to-Floating Subordinated Notes (“2031 Notes”) with a maturity date of September 1, 2031. The 2031 Notes have an initial fixed interest rate of 3.75% per annum, payable semiannually in arrears on March 1 and September 1 of each year, up to but excluding September 1, 2026. From and including September 1, 2026 and thereafter, the 2031 Notes will bear interest at a floating rate per annum equal to the Three-Month Term SOFR plus 310 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year. If the then current three-month term SOFR rate is less than zero, the three-month SOFR will be deemed to be zero. Debt issuance cost was $2.1 million, which is being amortized through the 2031 Notes’ maturity date. At September 30, 2024 and December 31, 2023, the balance of the 2031 Notes included in the Company’s Consolidated Balance Sheet, net of issuance cost, was $108.5 million and $108.3 million, 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% fixed rate for the first five years and a variable rate of three-month LIBOR plus 140 basis points thereafter and invested the proceeds in the Subordinated Debentures. Beginning September 15, 2023, the variable rate on the TPS changed to three-month SOFR plus 166 basis points, representing the credit spread of 140 basis points and a 26 basis point adjustment to convert three-month LIBOR to three-month SOFR. The rate on the TPS at September 30, 2024 was 6.61%. 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 September 30, 2024 and December 31, 2023, the balance of Subordinated Debentures included in the Company’s Consolidated Balance Sheets, net of discount of $4.8 million and $5.1 million, was $22.0 million and $21.7 million, respectively. The amortization of discount was $112,000 and $106,000 for the three months ended September 30, 2024 and 2023, respectively and $324,000 and $314,000 for the nine months ended September 30, 2024 and 2023, respectively.