BORROWING ARRANGEMENTS

12 Months Ended

Dec. 31, 2023

BORROWING ARRANGEMENTS [Abstract]

BORROWING ARRANGEMENTS

10. BORROWING ARRANGEMENTS

Short-term borrowings

There were no balances as of December 31, 2023 and 2022 related to federal funds purchased or FHLB short-term advances. 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 $3.0 million and $2.8 million at December 31, 2023 and 2022. The available capacity of the line was $1.1 billion and $920.2 million with no outstanding borrowings at December 31, 2023 and 2022, 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 $595.4 million and $648.3 million at December 31, 2023 and 2022, respectively. This line was not used at December 31, 2023 or 2022.

In addition, the bank subsidiary also has access to the Bank Term Funding Program (“BTFP”) established by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). As of December 31, 2023, the Company has not pledged any securities for the BTFP but has approximately $134 million of available securities that can be used as collateral for additional borrowings through the program.

The bank subsidiary also has uncollateralized lines of credit with multiple banks. The total amount of the lines was $140.0 million and $160.0 million as of December 31, 2023 and 2022, respectively. These lines were not used at December 31, 2023 or 2022.

Notes payable and other borrowings

The bank had no FHLB advances outstanding at December 31, 2023 or 2022.

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 consolidated financial statements.

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 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 consolidated financial statements, 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, 2023 (dollars in thousands):

	Issue Date	Amount of TPS		Amount of Debentures		Stated Maturity Date of TPS and Debentures(1)		Interest Rate of TPS and Debentures(2)(3)
SPFCT III	2004	$	10,000	$	10,310		2034	3-mo. CME Term SOFR + 291bps; 8.32%
SPFCT IV	2005		20,000		20,619		2035	3-mo. CME Term SOFR + 165bps; 7.04%
SPFCT V	2007		15,000		15,464		2037	3-mo. CME Term SOFR + 176bps; 7.15%
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

In December 2018, the Company issued $26.5 million in subordinated notes. Notes totaling $12.4 million (the “2028 Notes”) 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 notes 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 notes will float at the Wall Street Journal prime rate, with a floor of 4.0% and a ceiling of 7.5%. These notes 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 notes qualify for Tier 2 capital treatment, subject to regulatory limitations.

On November 8, 2023, the Company notified holders of its 2028 Notes that it had elected to redeem all the outstanding 2028 Notes effective on December 15, 2023 (the “Redemption Date”). Each of the 2028 Notes were redeemed pursuant to the terms of the Indenture, dated as of December 14, 2018, between the Company and Argent Trust Company, N.A., as trustee for the 2028 Notes (the “Trustee”), at the redemption price totaling approximately $12.4 million in aggregate principal amount, plus accrued and unpaid interest. As provided in the redemption notice, on the Redemption Date, the Trustee paid the relevant Redemption Price to the holders of 2028 Notes appearing on the books and records of the Trustee on the Redemption Date. The 2028 Notes ceased to represent the right to payment of principal and interest upon the payment to the holders of 2028 Notes by the Trustee representing the Redemption Price. The Company received all necessary regulatory approvals for the redemption of the 2028 Notes.

On September 29, 2020, the Company issued $50.0 million in subordinated notes. Proceeds were reduced by approximately $926 thousand in debt issuance costs. The notes 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 notes will reset quarterly at a variable rate equal to the then current three-month Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 438 basis points. These notes 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 notes qualify for Tier 2 capital treatment, subject to regulatory limitations.

As of December 31, 2023, the total amount of subordinated notes outstanding was $64.1 million less approximately $325 thousand  of remaining debt issuance costs for a total balance of $63.8 million. As of December 31, 2022, the total amount of subordinated notes outstanding was $76.5 million less approximately $511 thousand of remaining debt issuance costs for a total balance of $76 million.