Borrowings, Line of Credit and Subordinated Debt

9 Months Ended

Sep. 30, 2022

Borrowings, Line of Credit and Subordinated Debt [Abstract]

Borrowings, Line of Credit and Subordinated Debt

Note 7. Borrowings, Line of Credit and Subordinated Debt

Borrowings:

At September 30, 2022, total borrowings were $18.4 million compared to $87.6 million at December 31, 2021.  During the nine month period ending September 30, 2022, the FHLB called two advances totaling $75 million.  Borrowings consist of the following (dollars in thousands):

	September 30,		December 31,
	2022		2021
Securities sold under customer repurchase agreements	$	5,923	$	5,085
FHLB borrowings		—		75,000
Other borrowings		12,500		7,500
Total	$	18,423	$	87,585

Securities Sold Under Agreements to Repurchase:

Securities sold under repurchase agreements, which are secured borrowings, generally mature within one to four days from the transaction date. Securities sold under repurchase agreements are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities. The Company monitors the fair value of the underlying securities on a daily basis.

The Company had securities sold under agreements to repurchase with commercial checking customers which were secured by government agency securities.  The carrying value of investment securities pledged as collateral under repurchase agreements was $9.3 million and $10.1 million at September 30, 2022 and December 31, 2021, respectively. The average balance during the nine month period September 30, 2022, and 2021 was $5.2 million and $5.4 million, respectively.  The maximum month-end outstanding balance for the nine month period ended September 30, 2022, and 2021 was $5.9 million and $7.2 million, respectively.

Other Borrowings:

The Company has a Loan and Security Agreement and revolving line of credit for an aggregate amount of $25 million.  The maturity of the line of credit is March 24, 2023. At September 30, 2022, $12.5 million was outstanding under the line of credit, and $12.5 million of the line of credit remained available to the Company.

Subordinated Debt:

On September 28, 2018, the Company issued $40 million of 5.625% fixed-to-floating rate subordinated notes (the "Notes"), which was outstanding as of September 30, 2022 and December 31, 2021. Unamortized debt issuance cost was $506 thousand and $570 thousand at September 30, 2022 and December 31, 2021, respectively.

The Notes initially bears interest at a rate of 5.625% per annum from and including September 28, 2018, to but excluding October 2, 2023, with interest during this period payable semi-annually in arrears. From and including October 2, 2023, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to three-month LIBOR, or an alternative rate determined in accordance with the terms of the Notes if three-month LIBOR cannot be determined, plus 255 basis points, with interest during this period payable quarterly in arrears. The Notes are redeemable by the Company, in whole or in part, on or after October 2, 2023, and at any time, in whole but not in part, upon the occurrence of certain events. The Notes have been structured to qualify initially as Tier 2 capital for the Company for regulatory capital purposes.

The Notes unamortized debt issuance costs totaled $506 thousand at September 30, 2022, and will be amortized through the Notes’ maturity date. Amortization expense totaled $21 thousand and $63 thousand for the three and nine months ended September 30, 2022, and 2021, respectively.

On September 1, 2021, the Company acquired $2.5 million of subordinated notes (“sub-debt”) from the acquisition of SCB. The sub-debt bears interest at a rate of 6.75% per annum until August 14, 2024, with the interest during this period payable semi-annually in arrears. From and including August 14, 2024, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to three-month LIBOR, or an alternative rate determined in accordance with the terms of the sub-debt if three-month LIBOR cannot be determined, plus 530.25 basis points, with interest during this period payable quarterly in arrears. The sub-debt is redeemable by the Company, in whole or in part, on or after August 14, 2024, and at any time, in whole but not in part, upon the occurrence of certain events. The sub-debt has been structured to qualify initially as Tier 2 capital for the Company for regulatory capital purposes.