Funds Borrowed

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Funds Borrowed

(5) FUNDS BORROWED

The outstanding balances of funds borrowed were as follows:

	Payments Due for the Twelve Months Ending September 30,
(Dollars in thousands)	2023		2024		2025		2026		2027		Thereafter		September 30, 2022(1)		December 31, 2021(1)		Interest Rate (2)
Deposits (3)	$	479,761	$	375,974	$	389,223	$	157,890	$	155,854	$	—	$	1,558,702	$	1,253,288		1.63	%
Privately placed notes		—		36,000		—		31,250		—		53,750		121,000		121,000		7.66
SBA debentures and borrowings		5,000		12,763		14,000		14,000		2,000		21,000		68,763		69,963		2.94
Preferred securities		—		—		—		—		—		33,000		33,000		33,000		5.27
Total	$	484,761	$	424,737	$	403,223	$	203,140	$	157,854	$	107,750	$	1,781,465	$	1,477,251		2.16	%

(1)Excludes deferred financing costs of $7.2 million and $7.1 million as of September 30, 2022 and December 31, 2021.

(2)Weighted average contractual rate as of September 30, 2022.

(3)Balance excludes $1.0 million and $0.8 million of strategic partner reserve deposits as of September 30, 2022 and December 31, 2021.

(A) DEPOSITS

Substantially all deposits are raised through the use of investment brokerage firms that package time deposits in denominations of less than $250,000 qualifying for FDIC insurance into larger pools that are sold to the Bank. The rates paid on the deposits are highly competitive with market rates paid by other financial institutions. Additionally, a brokerage fee is paid, depending on the maturity of the deposits, which averages less than 0.15%. Interest on the deposits is accrued daily and paid monthly, quarterly, semiannually, or at maturity. The Bank did not have any uninsured deposits as of September 30, 2022 and December 31, 2021. In October 2020, the Bank began to originate time deposits through an internet listing service. These deposits are from other financial institutions and, as of September 30, 2022 and December 31, 2021, the Bank had $9.2 million and $8.7 million in listing service deposit balances. The following table presents the maturity of the deposit pools, which excludes strategic partner reserve deposits, as of September 30, 2022.

(Dollars in thousands)	September 30, 2022
Three months or less	$	110,763
Over three months through six months		128,094
Over six months through one year		240,904
Over one year		1,078,941
Total deposits	$	1,558,702

(B) PRIVATELY PLACED NOTES

In February 2021, the Company completed a private placement to certain institutional investors of $25.0 million aggregate principal amount of 7.25% unsecured senior notes due February 2026, with interest payable semiannually. In March 2021, an additional $3.3 million principal amount of such notes was issued to certain institutional investors. Subsequently in April 2021, an additional $3.0 million principal amount of such notes was issued to certain institutional investors. The Company used the net proceeds from the offering for general corporate purposes, including repayment of outstanding debt.

In December 2020, the Company completed a private placement to certain institutional investors of $33.6 million aggregate principal amount of 7.50% unsecured senior notes due December 2027, with interest payable semiannually. In February and March 2021, an additional $8.5 million principal amount of such notes was issued to certain institutional investors. Subsequently in April 2021, an additional $11.7 million principal amount of such notes was issued to certain institutional investors. The Company used the net proceeds from the offering for general corporate purposes, including repayment of outstanding debt.

In March 2019, the Company completed a private placement to certain institutional investors of $30.0 million aggregate principal amount of 8.25% unsecured senior notes due 2024, with interest payable semiannually. The Company used the net proceeds from the offering for general corporate purposes, including repaying certain borrowings under its notes payable to banks at a discount which led to a gain of $4.1 million in 2019. In August 2019, an additional $6.0 million principal amount of such notes was issued to certain institutional investors.

(C) SBA DEBENTURES AND BORROWINGS

Over the years, the SBA has approved commitments for MCI and FSVC, typically for a four and half year term and a 1% fee, which fee was paid. During 2017, the SBA restructured FSVC’s debentures with SBA totaling $33.5 million in principal into a new loan by the SBA to FSVC in the principal amount of $34.0 million, or the SBA Loan. In connection with the SBA Loan, FSVC executed a Note, or the SBA Note, with an effective date of March 1, 2017, in favor of SBA, in the principal amount of $34.0 million. The SBA Loan bears interest at a rate of 3.25% and all remaining unpaid principal and interest are due on April 30, 2024, the maturity date. As of September 30, 2022, there were $9.5 million commitments available, and $68.8 million was outstanding, including $7.8 million under the SBA Note.

On July 31, 2020, MCI accepted a commitment from the SBA for $25.0 million in debenture financing. As part of the acceptance, MCI paid the SBA a 1% commitment fee. The commitment expires September 24, 2024. As of September 30, 2022, $15.5 million of the commitment had been drawn, including $8.5 million to replace debentures which matured in 2021.

(D) PREFERRED SECURITIES

In June 2007, the Company issued and sold $36.1 million aggregate principal amount of unsecured junior subordinated notes to Fin Trust which, in turn, sold $35.0 million of preferred securities to Merrill Lynch International and issued 1,083 shares of common stock to the Company. The notes bear a variable rate of interest of 90 day LIBOR (3.75% at September 30, 2022) plus 2.13%. The notes mature in September 2037 and are prepayable at par. Interest is payable quarterly in arrears. The terms of the preferred securities and the notes are substantially identical. In December 2007, $2.0 million of the preferred securities were repurchased from a third-party investor. As of September 30, 2022, $33.0 million was outstanding on the preferred securities.

(E) COVENANT COMPLIANCE

From time to time the Company may enter into debt agreements which may contain restrictions that require the Company and its subsidiaries to maintain certain financial ratios, including minimum net worth. As of September 30, 2022, the Company did not have any borrowing agreements that contained any such restrictions.