Borrowings and Subordinated Debentures

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Borrowings and Subordinated Debentures

6.BORROWINGS AND SUBORDINATED DEBENTURES

Borrowings and subordinated debt were as follows:

(in Thousands)	September 30, 2023		December 31, 2022
Subordinated Debt	$	40,354	$	40,484
Short-term borrowings		15,000		20,938
Total	$	55,354	$	61,422

Subordinated Notes Sale - 2022

On April 8, 2022, LINKBANCORP entered into Subordinated Note Purchase Agreements (the “Agreements”) with certain institutional accredited investors (the “Purchasers”) and, pursuant to the Agreements, issued to the Purchasers $20,000 in aggregate principal amount of its 4.50% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “Notes”). The investors included a related party entity that is controlled by a member of the Board of Directors of the Company, which purchased $7,000 in principal amount of the note. During the year ended December 31, 2022, the Company contributed $15,000 of the subordinated note proceeds to the Bank as equity capital, the impact of which can be seen within Note 9 Regulatory Capital Requirements later in this document.

The Notes are intended to qualify at the holding company level as Tier 2 capital under the capital guidelines of the Federal Reserve Board.

The Notes, which mature on April 15, 2032, bear interest at a fixed annual rate of 4.50% for the period up to but excluding April 15, 2027 (the “Fixed Interest Rate Period”). From April 15, 2027 until maturity or redemption (the “Floating Interest Rate Period”), the interest rate will adjust to a floating rate equal to a benchmark rate, which is expected to be the then-current three-month Secured Overnight Financing Rate (SOFR), plus 203 basis points. The Company will pay interest in arrears semi-annually during the Fixed Interest Rate Period and quarterly during the Floating Interest Rate Period. The Notes constitute unsecured and subordinated obligations of the Company and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. Subject to limited exceptions, the Company cannot redeem the Notes before the fifth anniversary of the issuance date.

The Agreements and Notes contain customary subordination provisions, representations and warranties, covenants, and events of default.

Short-term Borrowings - FHLB Advances

The Company had $15,000 and $20,938 in short-term FHLB Advances outstanding at September 30, 2023 and December 31, 2022, respectively. These advances have scheduled maturities less than a year. Our balance as of September 30, 2023 represents a single FHLB advance with a one-month maturity, however, as part of our interest rate swap transaction, the Company has committed to maintain either one-month advances from the FHLB or brokered deposits with a duration of one month through May of 2028. See Note 12 for more detail on an interest rate swap transaction regarding FHLB advances.

Available Lines of Credit

The Bank has available unsecured lines of credit, with interest based on the daily Federal Funds rate, with four correspondent banks totaling $51,000 at September 30, 2023. There were no borrowings under these lines of credit at September 30, 2023 and December 31, 2022.