Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Debt

Debt

FHLB advances

The following is a breakdown of our FHLB advances and other borrowings outstanding as of:

	June 30, 2023			December 31, 2022
	Amount		Rate	Amount		Rate
Variable rate line-of-credit advance	$	570,585	5.23%	$	643,885	4.48%

The advances were collateralized by $1,696,107 and $1,630,939 of loans pledged to the FHLB as of June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023 and December 31, 2022, the Bank had total borrowing capacity with the FHLB that is based on qualified collateral lending values of $1,240,134 and $1,139,356, respectively. Our additional borrowing availability with the FHLB at June 30, 2023 was $525,385. These borrowings can be in the form of additional term advances or a line-of-credit.

FRB advances

We also had a $2,766,895 line-of-credit with the FRB. The agreement bears interest at the Fed Funds target rate plus 0.50% and is secured by $3,420,501 of investment securities and loans pledged to the FRB as collateral. No amounts were drawn on the line-of-credit as of June 30, 2023.

Other borrowings

We have lines-of-credit with certain other financial institutions totaling $280,000 as of June 30, 2023. No amounts were drawn on these lines-of-credit at June 30, 2023.

Convertible Notes Payable

As of June 30, 2023 and December 31, 2022, we have issued a total of $5,456, respectively, of convertible notes with a maturity date of August 31, 2023. The annual interest rate on these convertible notes is 3.29% with quarterly interest payments. With respect to conversion, each $1 (in thousands) principal amount of the convertible notes can be converted to 15.6717 shares of Parent Company common stock at any time until maturity.

As of and for the periods ended June 30, 2023 and December 31, 2022, the debt discount on the convertible notes was $25 and $101, respectively. The related accretion for the three months ended June 30, 2023 and 2022 was $38 and $529, respectively. The related accretion for the six months ended June 30, 2023 and 2022 was $76 and $1,055, respectively.

Subordinated Debt

Subordinated Notes - 2020

In June and August 2020, we issued a total of $40,000 subordinated notes. The notes pay interest at a fixed rate of 6.00% through June 30, 2025 and subsequently, until maturity, pay interest at a floating rate of three month term SOFR plus 5.89%, reset quarterly. Interest is payable on July 1 and January 1 of each year. Such notes are due on July 1, 2030. The notes are not redeemable within the first five years of issuance, except under certain very limited conditions. After five years, we may redeem the notes at our discretion. We incurred and capitalized $933 of costs related to the issuance of the subordinated notes. The amortization associated with the capitalized issuance costs is not significant for the periods presented.

Subordinated Note - 2022

On January 13, 2022, we issued a subordinated note totaling $25,000. The note pays interest at a fixed rate of 3.375% through January 15, 2027 and subsequently, until maturity, pays interest at a floating rate of three month term SOFR plus 2.03%, reset quarterly. Interest is payable on July 15 and January 15 of each year. Such note is due on January 15, 2032. The note is not redeemable within the first five years of issuance, except under certain very limited conditions. After five years, we may redeem the note at our discretion. We incurred and capitalized $534 of costs related to the issuance of the subordinated note. The amortization associated with the capitalized issuance costs is not significant for the periods presented.

Trust preferred securities

We have issued $9,279 in trust preferred securities through a special-purpose trust, New Mexico Banquest Capital Trust I (“NMBCT I”). In addition, we have issued $4,640 in trust preferred securities through a special purpose trust, New Mexico Banquest Capital Trust II (“NMBCT II”, and together with NMBCT I, collectively referred to as “NMBCT Trusts”). Interest is payable quarterly at a rate of three-month LIBOR (which was amended to three-month term SOFR as of June 30, 2023) plus 3.35% (8.51% and 4.35% as of June 30, 2023 and 2022, respectively) for the trust preferred securities issued through NMBCT I and at a rate of three-month LIBOR (which was amended to three-month term SOFR as of June 30, 2023) plus 2.00% (7.39% and 3.50% as of June 30, 2023 and 2022, respectively) for the trust preferred securities issued through NMBCT II.

This subordinated debt of $13,919 was originally recorded at a discount of $4,293. The accretion associated with the fair value discount is not significant for the periods presented.

The Parent Company fully and unconditionally guarantees the obligations of the NMBCT Trusts on a subordinated basis. The trust preferred securities issued through the NMBCT Trusts are mandatorily redeemable upon the maturity of the debentures on December 19, 2032 and November 23, 2034, respectively, and are optionally redeemable, in part or in whole, by the Parent Company at each quarterly interest payment date. The Parent Company owns all of the outstanding common securities of the NMBCT Trusts, which have an aggregate liquidation valuation amount of $419 and is recorded in prepaid expenses and other assets on the consolidated balance sheet. The NMBCT Trusts are considered variable interest entities. Since the Parent Company is not the primary beneficiary of the NMBCT Trusts, the financial statements of the NMBCT Trusts are not included in our consolidated financial statements.