Note 10 - Borrowed Funds

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

10.         Borrowed Funds

There were no outstanding securities sold or entered into under agreements to repurchase at December 31, 2023,  2022 and 2021. 

Securities sold under agreements to repurchase, if any, are accounted for as collateralized financing transactions and recorded at the amounts at which the securities were sold.  

As of December 31, 2023, there were no over-night borrowings from the FHLB in 2023 and $150.0 million in over-night borrowings from the FHLB at a rate of 4.65% in 2022. As of December 31, 2023, all  advances from the FHLB were $540.0 million at a weighted average rate of 5.64% and $335.0 million at a weighted average rate of 4.54% as of December 31, 2022. As of December 31, 2023, final maturity for the FHLB advances were $525.0 million that will mature in January 2024 and $15.0 million that will mature in September 2024. Our unused borrowing capacity from the Federal Home Loan Bank as of December 31, 2023 was $6.60 billion and unpledged securities at December 31, 2023 was $1.47 billion.

Other Liabilities.  On November 23, 2004, the Company entered into an agreement with Mr. Dunson K. Cheng, pursuant to which he agreed to defer any bonus amounts in excess of $225 thousand for the year ended December 31, 2005, until the later of January 1 of the first year following his separation from service from the Company or the first day of the seventh month following his separation from service from the Company. Accordingly, an amount equal to $610 thousand was deferred in 2004 and was accrued in other liabilities in the Consolidated Balance Sheets.  The Company agreed to accrue interest on the deferred portion of the bonus at 7.0% per annum compounded quarterly.  The deferred amount will be increased each quarter by the amount of interest computed for that quarter.  On November 23, 2014, the interest rate was reset to 5.06% based on 275 basis points above the interest rate on the ten-year Treasury Note on that date. On March 13, 2014, the Compensation Committee of the Company awarded Mr. Cheng a cash bonus in the amount of $300 thousand for the quarter ended December 31, 2013 and provided as part of the award that payment of the bonus would be deferred until the later of January 1 of the first year following his separation from service from the Company or the first day of the seventh month following his separation from service from the Company. The Company accrues interest on the deferred bonus at 5.02% per annum compounded quarterly. On March 28, 2019, the interest rate was reset to 5.72% based on 350 basis points above the interest rate on the five-year Treasury Note on that date.

The balance of deferred bonuses was $2.4 million and $2.3 million at December 31, 2023, and 2022, respectively. Accrued interest of deferred bonuses were $122 thousand during 2023, $116 thousand during 2022, and $110 thousand during 2021.    

We established three special purpose trusts in 2003 and two in 2007 for the purpose of issuing Guaranteed Preferred Beneficial Interests in their Subordinated Debentures to outside investors (“Capital Securities”). The proceeds from the issuance of the Capital Securities as well as our purchase of the common stock of the special purpose trusts were invested in Junior Subordinated Notes of the Company (“Junior Subordinated Notes”). The trusts exist for the purpose of issuing the Capital Securities and investing in Junior Subordinated Notes.  Subject to some limitations, payment of distributions out of the monies held by the trusts and payments on liquidation of the trusts, or the redemption of the Capital Securities, are guaranteed by the Company to the extent the trusts have funds on hand at such time. The obligations of the Company under the guarantees and the Junior Subordinated Notes are subordinate and junior in right of payment to all indebtedness of the Company and will be structurally subordinated to all liabilities and obligations of the Company’s subsidiaries. The Company has the right to defer payments of interest on the Junior Subordinated Notes at any time or from time to time for a period of up to twenty consecutive quarterly periods with respect to each deferral period. Under the terms of the Junior Subordinated Notes, the Company may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock if it has deferred payment of interest on any Junior Subordinated Notes.

As of December 31, 2023 and 2022, Junior Subordinated Notes totaled $119.1 million, with a weighted average interest rate of 7.54% and 4.01%, respectively.  The Junior Subordinated Notes have a stated maturity term of 30 years. Interest expense on the Junior Subordinated Notes was $6.5 million, $5.5 million, and $5.8 million for years ended December 31, 2023, 2022 and 2021, respectively. Included in the 2022 and 2023 interest expense is the amortization of the gain on cash flow interest rate swaps, early terminated in 2022.