Borrowings

12 Months Ended

Dec. 31, 2023

Borrowings

Borrowings

Note 9: Borrowings

The following table is a summary of borrowings as of December 31, 2023 and 2022:

	2023		2022
Securities sold under repurchase agreements	$	26,470	$	32,156
Other short-term borrowings		405,000		90,000
Junior subordinated debentures1		25,773		25,773
Subordinated debentures		59,382		59,297
Senior notes		-		44,585
Notes payable and other borrowings		-		9,000
Total borrowings	$	516,625	$	260,811

¹ See Note 10: Junior Subordinated Debentures, below.

The Company enters into deposit sweep transactions where the transaction amounts are secured by pledged securities.  These transactions consistently mature within 1 to 90 days 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, collateralized mortgage obligations, mortgage-backed securities and/or highly-rated issues of State and political subdivisions, and had a carrying amount of $26.5 million and $32.2 million at December 31, 2023 and 2022, respectively.  The fair value of the pledged collateral was $45.7 million and $71.4 million at December 31, 2023 and December 31, 2022, respectively.  At December 31, 2023, 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 December 31, 2023, the Bank had $405.0 million in short-term advances outstanding under the FHLBC. There were $90.0 million in short-term advances as of December 31, 2022. The Bank assumed $23.4 million of long-term FHLBC advances with our ABC Bank acquisition in 2018. The remaining balance of $5.9 million at December 31, 2021 was paid off in full during the second quarter of 2022. FHLBC stock held at December 31, 2023 was valued at $18.5 million, and any potential FHLBC advances were collateralized by loans and securities with a principal balance of $1.46 billion, which carried a FHLBC-calculated combined value of $1.00 billion. As of December 31, 2022, FHLBC stock owned by the Bank was valued at $5.6 million and the principal balance of loans pledged was $969.1 million.  Based on the total amount of loans and securities pledged, the Bank had a total borrowing capacity at the FHLBC of $1.00 billion and a remaining funding availability of $599.9 million on December 31, 2023.

In the second quarter of 2021, we entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers pursuant to which we sold and issued $60.0 million in aggregate principal amount of our 3.50% Fixed-to-Floating Rate Subordinated Notes due April 15, 2031 (the “Notes”).  We sold the Notes to eligible purchasers in a private offering, and the proceeds of this issuance are intended to be used for general corporate purposes, which may include, without limitation, the redemption of existing senior debt, common stock repurchases and strategic acquisitions.  The Notes bear interest at a fixed annual rate of 3.50% through April 14, 2026, payable semi-annually in arrears.  As of April 15, 2026 forward, the interest rate on the Notes will generally reset quarterly to a rate equal to Three-Month Term SOFR (as defined by the Note) plus 273 basis points, payable quarterly in arrears.  The Notes have a stated maturity of April 15, 2031, and are redeemable, in whole are in part, on April 15, 2026, or any interest payment date thereafter, and at any time upon the occurrence of certain events.  The subordinated debentures outstanding, net of deferred issuance costs, totaled $59.4 million and $59.3 million as of December 31, 2023 and 2022, respectively.

The Company issued senior notes in December 2016 with a ten-year maturity, and terms included interest payable semiannually at 5.75% for five years.  Beginning December 31, 2021, the senior debt began to pay interest at a floating rate, with interest payable quarterly at three month LIBOR plus 385 basis points. The notes were 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.  On June 30, 2023, the Company redeemed all of the $45.0 million senior notes. The interest rate at June 30, 2023 and December 31, 2022 was 9.39% and 8.62%, respectively. Upon redemption, the related deferred debt issuance costs of $362,000 was also recorded as interest expense, resulting in an effective cost of this debt issuance of 12.85% for the second quarter of 2023.

On February 24, 2020, the Company originated a $20.0 million three-year term note with a correspondent bank. The term note was issued at one-month LIBOR plus 175 basis points, and required principal payments quarterly and interest payments monthly.  This note was included within Notes payable and other borrowings on the Consolidated Balance Sheets, and the remaining $9.0 million balance of the note was paid off on February 24, 2023.  The note payable carried an interest rate of 6.32% at maturity. The Company also has an undrawn line of credit of $30.0 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.

Scheduled maturities and weighted average rates of borrowings for the years ended December 31, were as follows:

	2023				2022
			Weighted				Weighted
			Average				Average
	Balance		Rate		Balance		Rate
2023	$	-	-	%	$	131,156	2.89	%
2024		431,470	4.98			-	-
2025		-	-			-	-
2026		-	-			44,585	6.02
2027		-	-			-	-
2028		-	-			-	-
Thereafter		85,155	4.10			85,070	3.91
Total borrowings	$	516,625	4.84	%	$	260,811	3.76	%