Note 6 - Term Debt

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Long-term Debt [Text Block]

NOTE 6. TERM DEBT

Term debt at June 30, 2021 and December 31, 2020 consisted of the following.

	June 30,		December 31,
(Amounts in thousands)	2021		2020
Term Debt:
FHLB borrowings	$	—	$	5,000
Subordinated Debt		10,000		10,000
Net term debt	$	10,000	$	15,000

Federal Home Loan Bank of San Francisco Borrowings

We have an available line of credit with the FHLB of $456.9 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 FHLB stock, certain real estate secured loans that have been specifically pledged to the FHLB pursuant to collateral requirements, and certain pledged securities held in the Bank’s investment securities portfolio.

There were no borrowings outstanding from the FHLB at June 30, 2021. The Bank had $5.0 million in borrowings from the FHLB at December 31, 2020 that bore no interest and were fully repaid during the first quarter of 2021. The average balance outstanding on FHLB term advances during the six months ended June 30, 2021 and year ended December 31, 2020 was $1.9 million and $8.3 million, respectively. The maximum amount outstanding from the FHLB at any month end during the six months ended June 30, 2021 and year ended December 31, 2020 was $5.0 million and $40.0 million, respectively.

As of June 30, 2021, the Bank was required to hold an investment in FHLB stock of $7.5 million recorded in Other Assets in the Consolidated Balance Sheets. Our investments in FHLB 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.

As of June 30, 2021, we have pledged $568.6 million of our commercial real estate and residential real estate loans and $52.6 million in securities as collateral for the line of credit with the FHLB.

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 bore interest at a fixed rate of 6.88% per annum through December 19, 2020, payable semi-annually. The Subordinated Debt now bears interest 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 were 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 repaid at the Holding Company’s option and with regulatory approval at any time.

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 $75.0 million at June 30, 2021 and had interest rates ranging from 0.17% to 0.35%. 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 June 30, 2021 and December 31, 2020, we had no outstanding advances on any of the Bank’s federal funds lines of credit.

Federal Reserve Bank

We have an available line of credit with the Federal Reserve Bank totaling $26.8 million at June 30, 2021, subject to collateral requirements, namely the amount of certain pledged loans. At June 30, 2021 and December 31, 2020, we had no outstanding advances on our line of credit with the Federal Reserve Bank. As of June 30, 2021, we have pledged $48.2 million of our commercial loans as collateral for the credit line with the Federal Reserve Bank.