FEDERAL HOME LOAN BANK ADVANCES

12 Months Ended

Dec. 31, 2015

FEDERAL HOME LOAN BANK ADVANCES

FEDERAL HOME LOAN BANK ADVANCES

NOTE 12 — FEDERAL HOME LOAN BANK ADVANCES

FHLB advances at year end were as follows:

	2015		2014
Maturities from June 2016 through September 2025, primarily fixed rates from 0.58% to 4.80%, averaging 1.53%	$	269,488
Maturities from June 2015 through May 2022, primarily fixed rates from 0.43% to 4.76%, averaging 1.90%			$	214,413
	$	269,488	$	214,413

The majority of the FHLB advances are secured by real estate backed loans totaling approximately 221% of the advance under a blanket security agreement. The advances are subject to restrictions or penalties in the event of prepayment. Of the $269,488 in advances at December 31, 2015,  $25,000 of the advances contained options whereby the FHLB may convert the fixed rate advance to an adjustable rate advance, at which time the Company may prepay the advance without a penalty. Of the $214,413 in advances at December 31, 2014,  $0 of the advances contained such options.

In 2013, the Company prepaid a $25,000 fixed rate FHLB advance with a contractual interest rate of 4.55% and a remaining maturity of 18 months. The prepaid FHLB advance was replaced with a $25,000 fixed rate FHLB advance. In accordance with the restructure, the Company was required to pay a prepayment penalty of $1,609 in 2013 to the FHLB. The present value of the cash flows under the terms of the new FHLB advance (including the prepayment penalties) was not more than 10% different from the present value of the cash flows under the terms of the prepaid FHLB advance and therefore the new advance was not considered to be substantially different from the original advance in accordance with ASC 470-50, Debt – Modifications and Exchanges. As a result, the prepayment penalty has been treated as a discount on the new debt and is being amortized over the life of the new advances as an adjustment to yield. The prepayment penalty effectively increases the interest rate on the new advance over the life of the new advance at the time of the transaction. The benefit of prepaying this advance was an immediate decrease in interest expense.

Required payments over the next five years are:

2016	$	85,066
2017		20,034
2018		45,020
2019		60,014
2020		35,010
Thereafter		25,009
	$	270,153
Restructuring prepayment penalty		(665)
	$	269,488