FEDERAL HOME LOAN BANK OF BOSTON ADVANCES AND OTHER BORROWED FUNDS

12 Months Ended

Dec. 31, 2019

Banking and Thrift, Interest [Abstract]

FEDERAL HOME LOAN BANK OF BOSTON ADVANCES AND OTHER BORROWED FUNDS

NOTE 12 – FEDERAL HOME LOAN BANK OF BOSTON ADVANCES AND OTHER BORROWED FUNDS

Federal Home Loan Bank of Boston (“FHLBB”) advances are as follows:

	December 31, 2019				December 31, 2018
Years ended December 31, (dollars in thousands)		Total (1)	Rate (2)			Total (1)	Rate (2)
Overnight	$	—	—	%	$	9,500	2.72	%
2019		—	—			36,767	3.19
2020		44,899	2.14			14,899	2.18
2021		5,988	2.45			5,988	2.45
Total	$	50,887	2.18	%	$	67,154	2.94	%

(1) Net of modification costs

(2) Weighted average rate based on scheduled maturity dates.

In addition to outstanding FHLBB advances, Salisbury has additional available borrowing capacity, based on current capital stock levels, of $233.7 million including access to an unused FHLBB line of credit of $3.5 million at December 31, 2019. Advances from the FHLBB are secured by a blanket lien on qualified collateral, consisting primarily of loans with first mortgages secured by one-to-four family properties, certain unencumbered investment securities and other qualified assets.

Subordinated Debentures:

In December 2015, Salisbury completed the issuance of $10.0 million in aggregate principal amount of 6.00% Fixed-to-Floating Rate Subordinated Notes Due 2025 (the “Notes”) in a private placement transaction to various accredited investors including $500 thousand to certain of Salisbury's related parties. The Notes have a maturity date of December 15, 2025 and bear interest at an annual rate of 6.00% from and including the original issue date of the Notes to, but excluding, December 15, 2020 or the earlier redemption date payable semi-annually in arrears on June 15 and December 15 of each year. Thereafter, from and including December 15, 2020 to, but excluding, December 15, 2025, the annual interest rate will be reset quarterly and equal to the three-month LIBOR, plus 430 basis points, as described in the Notes, payable quarterly, in arrears, on March 15, June 15, September 15 and December 15 of each year during the time that the Notes remain outstanding through December 15, 2025 or earlier redemption date. The notes are redeemable, without penalty, on or after December 15, 2020 and, in certain limited circumstances, prior to that date. As more completely described in the Notes, the indebtedness evidenced by the Notes, including principal and interest, is unsecured and subordinate and junior in right of Salisbury's payments to general and secured creditors and depositors of the Bank. The Notes also contain provisions with respect to redemption features and other matters pertaining to the Notes. The Notes have been structured to qualify as Tier 2 capital for regulatory capital purposes, subject to applicable limitations.

Subordinated debentures totaled $9.9 million at December 31, 2019 and compared to $9.8 million at December 31, 2018, which includes $141 thousand and $165 thousand, respectively of remaining unamortized debt issuance costs. The debt issuance costs are being amortized to maturity. The effective interest rate of the subordinated debentures is 6.33% compared to 6.34% at December 31, 2018.

LIBOR is due to be phased out as a market reference rate by the end of 2021. In December 2014, a group of market participants, known as the Alternative Reference Rates Committee (AARC) was initially convened by the Board of Governors of the Federal Reserve System and the New York Fed in cooperation with the U.S. Department of the Treasury, the U.S. Commodity Futures Trading Commission, and the U.S. Office of Financial Research to identify an alternative reference rate for use primarily in derivatives contracts. The AARC recommended the Secured Overnight Financing Rate (SOFR) as an alternative to LIBOR and the Federal Reserve began publishing the SOFR in April 2018. Salisbury will continue to monitor the transition from LIBOR to a new reference rate and its impact on Salisbury's subordinated debt, which will reprice on December 15, 2020.

Notes Payable:

In October 2015, Salisbury entered into a private mortgage for $380 thousand to purchase the Sharon branch property. The mortgage, which has an interest rate of 6%, will mature in September 2030. The outstanding mortgage balance at December 31, 2019 and December 31, 2018 was $246 thousand and $280 thousand, respectively.