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Borrowings

9 Months Ended

Sep. 30, 2020

Note 7 – Borrowings

The following table is a summary of borrowings as of September 30, 2020, and December 31, 2019. Junior subordinated debentures are discussed in more detail in Note 8:


		September 30, 2020			December 31, 2019
Securities sold under repurchase agreements		$	59,268		$	48,693
Other short-term borrowings ¹			6,125			48,500
Junior subordinated debentures			25,773			57,734
Senior notes			44,349			44,270
Notes payable and other borrowings			24,469			6,673
Total borrowings		$	159,984		$	205,870

¹ Includes short-term FHLBC advances for both periods presented.

The Company enters into deposit sweep transactions where the transaction amounts are secured by pledged securities. These transactions consistently mature overnight from the transaction date and are governed by sweep repurchase agreements. All sweep repurchase agreements are treated as financings secured by U.S. government agencies and collateralized mortgage-backed securities and had a carrying amount of $59.3 million at September 30, 2020, and $48.7 million at December 31, 2019. The fair value of the pledged collateral was $79.3 million at September 30, 2020, and $70.7 million at December 31, 2019. At September 30, 2020, there were no customers with secured balances exceeding 10% of stockholders’ equity.

The Company’s borrowings at the FHLBC require the Bank to be a member and invest in the stock of the FHLBC. Total borrowings are generally limited to the lower of 35% of total assets or 60% of the book value of certain mortgage loans. As of September 30, 2020, the Bank had $6.1 million in short-term advances outstanding under the FHLBC compared to $48.5 million outstanding as of December 31, 2019; the remaining $6.1 million was issued at a rate of 2.19%. The Bank also assumed $23.4 million of long-term FHLBC advances with the ABC Bank acquisition in 2018. At September 30, 2020, one advance remains in long-term status, with a total outstanding balance of $6.5 million, at a 2.83% interest rate, and is scheduled to mature on February 2, 2026. FHLBC stock as of September 30, 2020 was valued at $3.7 million, and any potential FHLBC advances were collateralized by securities with a fair value of $53.1 million and loans with a principal balance of $569.7 million, which carried a FHLBC-calculated combined collateral value of $428.4 million. The Company had excess collateral of $289.6 million available to secure borrowings at September 30, 2020.

The Company also has $44.3 million of senior notes outstanding, net of deferred issuance costs, as of September 30, 2020 and December 31, 2019. The senior notes were issued in December 2016 with a ten year maturity, and terms include interest payable semiannually at 5.75% for five years. Beginning December 2021, the senior debt will pay interest at a floating rate, with interest payable quarterly at three month LIBOR plus 385 basis points. The notes are redeemable, in whole or in part, at the option of the Company, beginning with the interest payment date on December 31, 2021, and on any floating rate interest payment date thereafter, at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest. As of September 30, 2020, and December 31,

2019, unamortized debt issuance costs related to the senior notes were $651,000 and $730,000, respectively, and are included as a reduction of the balance of the senior notes on the Consolidated Balance Sheet. These deferred issuance costs will be amortized to interest expense over the ten year term of the notes and are included in the Consolidated Statements of Income.

On February 24, 2020, the Company originated a $20.0 million term note, of which $18.0 million is outstanding as of September 30, 2020, with a correspondent bank related to the Company’s redemption of the 7.80% cumulative trust preferred securities issued by Old Second Capital Trust I and related junior subordinated debentures. See the discussion in Note 8 – Junior Subordinated Debentures. The term note was issued for a three year term at one-month Libor plus 175 basis points, requires principal and interest payments quarterly, and the balance of this note is included within Notes Payable and Other Borrowings on the Consolidated Balance Sheet. The Company also has an undrawn line of credit of $20.0 million with a correspondent bank to be used for short-term funding needs; advances under this line can be outstanding up to 360 days from the date of issuance. This line of credit has not been utilized since early 2019.