Borrowings, Line of Credit and Subordinated Debt

6 Months Ended

Jun. 30, 2024

Borrowings, Line of Credit and Subordinated Debt [Abstract]

Borrowings, Line of Credit and Subordinated Debt

Note 6. Borrowings, Line of Credit and Subordinated Debt

Borrowings:

At June 30, 2024, total borrowings were $12.7 million compared to $13.1 million at December 31, 2023.  Borrowings consist of the following (in thousands):

	June 30,		December 31,
	2024		2023
Securities sold under customer repurchase agreements	$	4,732	$	5,078
Other borrowings		8,000		8,000
Total	$	12,732	$	13,078

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 $6.6 million and $7.6 million at June 30, 2024 and December 31, 2023, respectively. The average balance of repurchase agreements during the six-month period ended June 30, 2024, and 2023 was $5.1 million and $4.7 million, respectively.  The maximum month-end outstanding balance for the six-month period ended June 30, 2024, and 2023 was $5.8 million and $5.0 million, respectively.

Other Borrowings:

The Company has a revolving line of credit for an aggregate amount of $35 million.  The maturity of the line of credit is February 1, 2025. At June 30, 2024, $8.0 million was outstanding under the line of credit, and $27.0 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 were outstanding as of June 30, 2024 and December 31, 2023. Unamortized debt issuance cost was $358 thousand and $401 thousand at June 30, 2024 and December 31, 2023, respectively.

The Notes initially bore 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. As of October 2, 2023, to but excluding the maturity date or early redemption date, the interest rate has, with the sunset of LIBOR, reset quarterly to an annual

floating rate equal to three-month CME Term SOFR, plus 281.161 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 $358 thousand at June 30, 2024, and will be amortized through the Notes’ maturity date. Amortization expense totaled $21 thousand and $42 thousand for the three and six months ended June 30, 2024, and 2023, respectively.

On September 1, 2021, the Company acquired $2.5 million of subordinated notes (“sub-debt”) from the acquisition of Sevier County Bancshares, Inc. 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.  In relation to the three-month LIBOR rate being no longer available in the future, the Company anticipates using the three-month term SOFR rate in future repricing.  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. The Company anticipates redeeming the sub-debt in whole on August 14, 2024.