Note 6 - Term Debt

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Long-term Debt [Text Block]

NOTE

6.

TERM DEBT

Term debt at

March 31, 2020

and

December 31, 2019

consisted of the following.

(Amounts in thousands)	March 31, 2020			December 31, 2019
Federal Home Loan Bank of San Francisco borrowings	$	10,000		$	—
Subordinated Debt		10,000			10,000
Unamortized debt issuance costs		(31	)		(43	)
Net term debt	$	19,969		$	9,957

Future contractual maturities of term debt at

March 31, 2020

are as follows.

(Amounts in thousands)	2020		2021		2022		2023		2024		Thereafter		Total
Federal Home Loan Bank of San Francisco borrowings	$	10,000	$	—	$	—	$	—	$	—	$	—	$	10,000
Subordinated Debt		—		—		—		—		—		10,000		10,000
Total future maturities	$	10,000	$	—	$	—	$	—	$	—	$	10,000	$	20,000

Federal Home Loan Bank of San Francisco Borrowings

We have an available line of credit with the Federal Home Loan Bank of San Francisco of

$412.4

million subject to certain collateral requirements, namely the amount of pledged loans and investment securities. The line of credit is secured by an investment in Federal Home Loan Bank of San Francisco stock, certain real estate secured loans that have been specifically pledged to the Federal Home Loan Bank of San Francisco pursuant to collateral requirements, and certain pledged securities held in the Bank’s investment securities portfolio.

The Bank had

$10.0

million in borrowings from the Federal Home Loan Bank of San Francisco at

March 31, 2020.

The borrowing had

no

stated maturity and an interest rate that resets daily. There were

no

borrowings outstanding from the Federal Home Loan Bank of San Francisco at

December 31, 2019.

The average balance outstanding on Federal Home Loan Bank of San Francisco term advances during the

three

months ended

March 31, 2020

and year ended

December 31, 2019

was

$220

thousand and

$9.6

million, respectively. The maximum amount outstanding from the Federal Home Loan Bank of San Francisco at any month end during the

three

months ended

March 31, 2020

and year ended

December 31, 2019

was

$10.0

million and

$40.0

million, respectively. The weighted average interest rate on Federal Home Loan Bank of San Francisco borrowings at

March 31, 2020

was

0.21%.

As of

March 31, 2020,

the Bank was required to hold an investment in Federal Home Loan Bank of San Francisco stock of

$7.4

million recorded in

Other Assets

in the

Consolidated Balance Sheets

. Our investments in Federal Home Loan Bank of San Francisco stock are restricted investment securities, carried at cost, evaluated for impairment, and excluded from securities accounted for under ASC Topic

320

and ASC Topic

321.

We have pledged

$529.2

million of our commercial real estate and residential real estate loans as collateral for the line of credit with the Federal Home Loan Bank of San Francisco. As of

March 31, 2020,

we also pledged

$29.4

million in securities to the Federal Home Loan Bank of San Francisco.

Senior Debt

In

December

of

2015,

the Holding Company entered into a senior debt loan agreement to borrow

$10.0

million from another financial institution. During the

second

quarter of

2019,

we completed the early repayment and termination of this variable-rate debt agreement.

Subordinated Debt

In

December

of

2015,

the Holding Company issued

$10.0

million in aggregate principal amount of fixed to floating rate Subordinated Notes due in

2025.

The Subordinated Debt initially bears interest at

6.88%

per annum for a

five

-year term, payable semi-annually. Thereafter, interest on the Subordinated Debt will be paid at a variable rate equal to

three

month LIBOR plus

526

basis points, payable quarterly until the maturity date. In

December

of

2015,

the Holding Company incurred subordinated debt issuance costs of

$210

thousand, which are being amortized over the initial

five

-year-term as additional interest expense.

The Subordinated Debt is subordinate and junior in right of payment to the prior payment in full of all existing and future claims of creditors and depositors of the Holding Company and its subsidiaries, whether now outstanding or subsequently created. The Subordinated Debt ranks equally with all other unsecured subordinated debt, except any which by its terms is expressly stated to be subordinated to the Subordinated Debt. The Subordinated Debt ranks senior to all preferred stock and common stock of the Holding Company and all future junior subordinated debt obligations. The Subordinated Debt is recorded as term debt on the Holding Company’s balance sheet; however, for regulatory purposes, it is treated as Tier

2

capital by the Holding Company.

The Subordinated Debt will mature on

December 10, 2025

but

may

be prepaid at the Holding Company’s option and with regulatory approval at any time on or after

five

years after the Closing Date or at any time upon certain events, such as a change in the regulatory capital treatment of the Subordinated Debt or the interest on the Subordinated Debt is

no

longer deductible by the Holding Company for United States federal income tax purposes.

Federal Funds

We have entered into nonbinding unsecured federal funds line of credit agreements with

three

financial institutions to support short-term liquidity needs. The lines totaled

$35.0

million at

March 31, 2020

and had interest rates ranging from

0.50%

to

1.18%.

Advances under the lines are subject to funds availability, continued borrower eligibility, and

may

have consecutive day usage restrictions. The credit arrangements are reviewed and renewed annually. At

March 31, 2020

and

December 31, 2019,

we had

no

outstanding federal funds purchased balances and

no

outstanding advances on any of the Bank’s lines of credit.

Federal Reserve Bank

We have an available line of credit with the Federal Reserve Bank totaling

$12.7

million subject to collateral requirements, namely the amount of certain pledged loans. At

March 31, 2020

and

December 31, 2019,

we had

no

outstanding advances on our line of credit with the Federal Reserve Bank. As of

March 31, 2020,

we have pledged

$19.8

million of our commercial loans as collateral for the credit line with the Federal Reserve Bank.

In

April

of

2020,

we received approval to participate in the Federal Reserve Bank Paycheck Protection Program Liquidity Facility (‘PPPLF”). The credit facility provides term funding for loans made under the Small Business Administration’s Paycheck Protection Program (“PPP”). Advances under the program will be collateralized with PPP loans, bear a fixed rate of interest at

0.35%

and are to be repaid as the underlying loans are paid down, forgiven, or sold to SBA. Participating institutions will receive preferential capital treatment for the loans that are funded with this borrowing facility.