BORROWINGS

6 Months Ended

Jun. 30, 2023

BORROWINGS

BORROWINGS

NOTE 9: BORROWINGS

At June 30, 2023, our borrowings consisted of $610 million in overnight and $100 million in term FHLB advances at the Bank, $174 million in subordinated notes at FFI, $72 million in repurchase agreements at the Bank, and $20 million of borrowings under a holding company line of credit.  The $100 million in term FHLB advances bears an interest rate of 4.21% and matures on June 28, 2028.  At December 31, 2022 our borrowings consisted of $805 million in overnight FHLB advances at the Bank, $200 million in federal funds purchased at the Bank, $174 million in subordinated notes at FFI, $171 million in repurchase agreements at the Bank, and $20 million of borrowings under a holding company line of credit.

The overnight FHLB advance outstanding at June 30, 2023 was paid in full in early July and bore an interest rate of 5.35%.  FHLB advances are collateralized primarily by loans secured by single family, multifamily, and commercial real estate properties with a carrying value of $5.6 billion as of June 30, 2023. The Bank’s total unused borrowing capacity from the FHLB as of June 30, 2023 was $2.3 billion. The Bank had in place $315 million of letters of credit from the FHLB as of June 30, 2023, which are used to meet collateral requirements for deposits from the State of California and local agencies.

The $174 million in subordinated notes consist of $150 million of fixed-to-floating rate notes that mature in February 2032.  The notes initially bear a rate of 3.50% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2022, until February 1, 2027.  From and including February 1, 2027 to,

but excluding February 1, 2032, or the date of earlier redemption, the notes will bear interest at a floating rate per annum equal to the Benchmark rate (which is the Three-Month Term Secured Overnight Financing Rate, or “SOFR”), each as defined in and subject to the provisions of the indenture under which the notes were issued, plus 204 basis points (2.04%), payable quarterly in arrears on February 1, May 1, August 1, and November 1 of each year, commencing on May 1, 2027. The remaining $24 million in subordinated notes mature in June 2030 and bear a fixed interest rate of 6.0%, until June 30, 2025, at which time they will convert to a floating rate based on three-month SOFR, plus 590 basis points (5.90%), until maturity.

During 2017, FFI entered into a loan agreement with an unaffiliated lender that provides for a revolving line of credit for up to $20 million maturing in February 2024. The loan bears an interest rate of Prime rate, plus 50 basis points (0.50%). FFI’s obligations under the loan agreement are secured by, among other things, a pledge of all of its equity in the Bank. We are required to meet certain financial covenants during the term of the loan, including minimum capital levels and limits on classified assets. As of June 30, 2023 and December 31, 2022, FFI was in compliance with the covenants contained in the loan agreement.  As of June 30, 2023 and December 31, 2022, the balance outstanding under this line of credit agreement was $20 million.  The weighted average interest rate paid on borrowings during the six months ended June 30, 2023 and December 31, 2022 was 8.3% and 8.0% respectively.  

The Bank has a secured line of credit with the Federal Reserve Bank of San Francisco under which the Bank pledges collateral in the form of qualifying loans and securities.  As of June 30, 2023, the Bank had secured unused borrowing capacity of $900.6 million under this agreement.  As of June 30, 2023 and December 31, 2022, there were no balances outstanding.

The Bank has a total of $145.4 million in borrowing capacity through unsecured federal funds lines, ranging in size from $400 thousand to $100 million, with four other financial institutions.  At June 30, 2023, there were no balances outstanding under these arrangements.  At December 31, 2022, the Bank had outstanding borrowings with one of the five institutions under these arrangements totaling $100 million and an additional $100 million outstanding separate from these agreements with the same financial institution.  The total $200 million outstanding at December 31, 2022 were in the form of federal funds purchased and were paid in full in early March, 2023.  

The repurchase agreements are treated as overnight borrowings with the obligations to repurchase securities sold reflected as a liability.  The investment securities underlying these agreements remain in the Company’s securities AFS portfolio.  As of June 30, 2023 and December 31, 2022, the repurchase agreements are collateralized by investment securities with a fair value of approximately $59.6 million and $186.3 million, respectively.