BORROWING ARRANGEMENTS

12 Months Ended

Dec. 31, 2021

BORROWING ARRANGEMENTS [Abstract]

BORROWING ARRANGEMENTS

9. BORROWING ARRANGEMENTS

Short-term borrowings

The following table summarizes our short-term borrowings at year-end:

	2021		2020
Federal funds purchased	$	—	$	26,550
FHLB advances - short-term		—		—
Total	$	—	$	26,550

Federal funds purchased are short-term borrowings that generally have one-day maturities.

Lines of credit

The bank subsidiary has a line of credit with FHLB. The amount of the line is determined by FHLB on a quarterly basis. The line is primarily used to purchase Federal funds or to secure letters of credit to pledge as collateral against certain public deposits. The line is collateralized by a blanket floating lien on all first mortgage loans and commercial real estate loans as well as all FHLB stock, which has a carrying amount of $2.8 million at December 31, 2021. The available capacity of the line was $903.9 million and $512.5 million at December 31, 2021 and 2020, respectively.

The bank subsidiary also has a line of credit with the Federal Reserve Bank of Dallas (“FRB”). The amount of the line is determined on a monthly basis by FRB. The line is collateralized by a blanket floating lien on all agriculture, commercial, and consumer loans. The amount of the line was $593.6 million and $700.8 million at December 31, 2021 and 2020, respectively. This line was not used at December 31, 2021 or 2020.

The bank subsidiary also has uncollateralized lines of credit with multiple banks. The total amount of the lines was $160.0 million and $165.0 million as of December 31, 2021 and 2020, respectively. These lines were not used at December 31, 2021 or 2020.

Notes payable and other borrowings

The bank subsidiary has multiple advances from FHLB. The advances are collateralized through the line of credit with FHLB with interest payable monthly and principal due at maturity. The following table is a detail of the advances as of December 31:

Issue Date	Original Amount of Advance		2021 Balance		2020 Balance		Maturity Date		Interest Rate at December 31, 2020
2013	$	20,000	$	—	$	—		2020	Fixed; 1.50%
2015		25,000		—		25,000		2025	Variable; 0.19%
2015		25,000		—		25,000		2025	Variable; 0.19%
2015		25,000		—		25,000		2025	Variable; 0.23%
	$	95,000	$	—	$	75,000

At December 31, 2020, City Bank had three advances from the FHLB totaling $75.0 million. Advances are collateralized through the line of credit with FHLB with interest payable monthly and principal due at maturity. In March 2021, City Bank repaid two of the advances for a total of $50 million and then repaid the remaining advance of $25 million in April 2021. As of December 31, 2021, City Bank had no outstanding advances from the FHLB.

In April 2020, City Bank borrowed $75 million from FHLB, on a term of three months, for liquidity needs. The three month advance matured in July 2020 and was repaid.

Junior subordinated deferrable interest debentures and trust preferred securities

The Company established grantor trusts (“trusts”) that issued obligated mandatorily redeemable preferred securities (“TPS”); the Company issued junior subordinated deferrable interest debentures (debentures) to the trusts. The trusts are not consolidated and the debentures issued by the Company to the trusts are reflected in the Company’s consolidated balance sheets. The Company records interest expense on the debentures in its CFS.

The common capital securities issued by the trusts ($1.4 million) are included in other assets in the Company’s consolidated balance sheets under the equity method of accounting. The amount of the capital securities represents the Company’s maximum exposure to loss.

The Company is required by the Board of Governors of the Federal Reserve System (“Federal Reserve”) to maintain certain levels of capital for bank regulatory purposes. The debentures issued by the trusts to the Company, less the common capital securities of the trusts, continue to qualify as Tier 1 capital, subject to limitation to 25% of Tier 1 capital, under guidance issued by the Federal Reserve.

Although the trusts are not consolidated in these CFS, the TPS remain outstanding with terms substantially the same as the debentures. The Company’s interest payments on its debentures are the sole source of repayment for the TPS. Additionally, the Company guarantees payment of interest and principal on the TPS.

The terms of the debentures and TPS allow for interest to be deferred for up to five years consecutively. During this time, shareholder dividends are not allowed to be paid.

The following table is a detail of the debentures and TPS at December 31, 2021:

	Issue Date	Amount of TPS		Amount of Debentures		Stated Maturity Date of TPS and Debentures(1)		Interest Rate of TPS and Debentures(2)(3)
South Plains Financial Capital Trust III	2004	$	10,000	$	10,310		2034	3-mo. LIBOR + 265bps; 2.77%
South Plains Financial Capital Trust IV	2005		20,000		20,619		2035	3-mo. LIBOR + 139bps; 1.59%
South Plains Financial Capital Trust V	2007		15,000		15,464		2037	3-mo. LIBOR + 150bps; 1.70%
Total		$	45,000	$	46,393

(1) May be redeemed five years from the issue date, the Company has no current plans to redeem; (2) Interest payable quarterly with principal due at maturity; (3) Rate as of last reset date.

Subordinated debt securities

In December 2018, the Company issued $26.5 million in subordinated debt securities. $12.4 million of the securities have a maturity date of December 2028 and a weighted average fixed rate of 5.74% for the first five years. The remaining $14.1 million of securities have a maturity date of December 2030 and a weighted average fixed rate of 6.41% for the first seven years. After the fixed rate periods, all securities will float at the Wall Street Journal prime rate, with a floor of 4.5% and a ceiling of 7.5%. These securities pay interest quarterly, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these securities qualify for Tier 2 capital treatment, subject to regulatory limitations.

On September 29, 2020, the Company issued $50.0 million in subordinated debt securities. Proceeds were reduced by approximately $926 thousand in debt issuance costs. The securities have a maturity date of September 2030 with a fixed rate of 4.50% for the first five years. After the expiration of the fixed rate period, the securities will reset quarterly at a variable rate equal to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 438 basis points. These securities pay interest semi-annually, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these securities qualify for Tier 2 capital treatment, subject to regulatory limitations.

As of December 31, 2021, the total amount of subordinated debt securities outstanding was $76.5 million less approximately $697,000 of remaining debt issuance costs for a total balance of $75.8 million.