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

12 Months Ended

Dec. 31, 2021

NOTE 12 – 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, 2021				December 31, 2020
Years ended December 31, (dollars in thousands)		Total (1)	Rate (2)			Total (1)	Rate (2)
Overnight	$	—	—	%	$	—	—	%
2021		—	—			4,984	1.13
2022		7,656	1.39			7,655	1.38
Total	$	7,656	1.39	%	$	12,639	1.29	%

(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 $250.9 million including access to an unused FHLBB line of credit of $3.5 million at December 31, 2021. 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. At December 31, 2021 and December 31, 2020, the available borrowing capacity was reduced by $20.0 million of letters of credit provided to the Company by the FHLBB.

Subordinated Debentures:

In March 2021, Salisbury completed the issuance of $25.0 million in aggregate principal amount of 3.25% Fixed to Floating Rate Subordinated Notes Due 2031 (the “Notes”) in a private placement transaction to various accredited investors. The Notes have a maturity date of March 31, 2031 and bear interest at an annual rate of 3.50% per annum, from and including the Closing Date to, but excluding March 31, 2026 or the earlier redemption date, payable quarterly in arrears. From and including March 31, 2026 to, but excluding the maturity date or earlier redemption date, a floating per annum rate expected to be equal to the then current three-month SOFR plus 280 basis points, provided, however, that in the event three-month SOFR is less than zero, three-month term SOFR shall be deemed to be zero, payable quarterly in arrears. Interest on the Subordinated Notes will be payable on March 31, June 30, September 30 and December 31 of each year to, but excluding, March 31, 2026 or the earlier redemption date, at the rate of 3.50%, and quarterly thereafter on March 31, June 30, September 30 and December 31 of each year to, but excluding, the maturity date or earlier redemption date at the floating rate. The first interest payment was made on June 30, 2021. The notes are redeemable, without penalty, on or after March 31, 2026 and, in certain limited circumstances, prior to that date. As more completely described in the Notes, the indebtedness as evidenced by the Notes, including principal and interest, is unsecured and subordinate and junior in right of the Company’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. As a result of the Notes being within five (5) years of their maturity date, Tier 2 capital at the parent company only will decrease in an amount equal to 20.0% of the outstanding Notes per year until the Notes mature in 2031 or are earlier redeemed.

Subordinated debentures totaled $24.5 million at December 31, 2021, which includes $526 thousand of remaining unamortized debt issuance costs. The debt issuance costs are being amortized to maturity. The effective interest rate of the subordinated debentures is 3.73%. In May 2021, Salisbury fully redeemed the $10 million of subordinated debt issued in 2015.

Notes Payable:

In October 2015, Salisbury entered into a private mortgage for $380 thousand to purchase the Sharon, Connecticut branch property. The mortgage, which has an interest rate of 6%, will mature in September 2030. The outstanding mortgage balance at December 31, 2021 and December 31, 2020 was $170 thousand and $208 thousand, respectively.