BORROWINGS

The Company’s borrowings consist of both short-term and long-term borrowings and provide the Bank with one of its primary sources of funding. The borrowings also serve the Bank by providing a contingent source of liquidity. As of December 31, 2012 and 2011, the Bank had $3.0 billion and $2.6 billion, respectively, of assets pledged as collateral against borrowings to provide availability for current operations, and to serve as a contingent liquidity funding source for the Company. These assets are primarily pledged to the FHLB of Boston and the Federal Reserve Bank of Boston. Another primary source of funds for the Company is customer repurchase agreements.

The Company’s short-term borrowings consisted of the following as of the periods indicated:



	December 31
	2012		2011
	(Dollars in thousands)
Federal home loan bank and other borrowings (1)	$	175,245	$	190,091
Customer repurchase agreements	153,359		166,128
Total short-term borrowings	$	328,604	$	356,219


(1)	Includes a $12.0 million Parent Company outstanding line of credit with a variable rate of LIBOR plus 1.60%.

The interest expense on short-term borrowings was $984,000, $2.3 million, and $5.0 million as of December 31, 2012, 2011, and 2010, respectively.

The table below sets forth additional information on short-term borrowings as of and for the periods indicated:



	2012				2011				2010
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
	(Dollars in thousands)
Balance outstanding at end of year	$	328,604	0.30	%	$	356,219	0.58	%	$	316,163	0.84	%
Average daily balance outstanding	334,167		0.35	%	357,168		0.66	%	341,447		1.54	%
Maximum balance outstanding at any month end	358,461		N/A		392,323		N/A		361,060		N/A

The Company’s long-term borrowings consisted of the following as of the periods indicated:



	December 31
	2012		2011
	(Dollars in thousands)
Federal home loan bank borrowings	$	108,324	$	39,610
Wholesale repurchase agreements (1)	50,000		50,000
Junior subordinated debentures
Capital trust V (2)	51,547		51,547
Slades ferry trust I (3)	10,310		10,310
Central trust I (4)	5,258		—
Central trust II (5)	7,012		—
Subordinated debentures (6)	30,000		30,000
Total long-term borrowings	$	262,451	$	181,467


(1)	Assets sold under wholesale repurchase agreements were at a fixed rate of 2.29%.

(2)

The Capital Trust V Trust Preferred Securities were issued in connection with the issuance of variable rate (LIBOR plus 1.48%) capital securities due in 2037, which are callable quarterly until maturity. The interest rate has been locked at a fixed rate of 6.52%, until December 28, 2016, through the use of an interest rate swap. The Company unconditionally guarantees all obligations under these trust preferred securities.


(3)	The Slades Ferry Trust I Preferred Securities were issued in connection with the issuance of variable rate (LIBOR plus 2.79%) capital securities due in 2034, which are callable quarterly until maturity. The Company unconditionally guarantees all obligations under these trust preferred securities.


(4)	Central Bancorp Capital Trust I issued trust preferred securities in connection with the issuance of variable rate (LIBOR plus 2.44%) capital securities due in 2034, which are callable quarterly until maturity. The Company unconditionally guarantees all obligations under these trust preferred securities.

(5)

Central Bancorp Statutory Trust II issued trust preferred securities in connection with the issuance of fixed rate capital securities (7.015% until March 15, 2017). Subsequent to this date, the capital securities will be variable (LIBOR plus 1.65%) and are due in 2037, and will become callable quarterly until maturity. The Company unconditionally guarantees all obligations under these trust preferred securities.

(6)

The subordinated debentures were issued to USB Capital Resources, Inc., a wholly-owned subsidiary of U.S. Bank National Association. The subordinated debt matures on October1, 2019, however with regulatory approval, the Bank may redeem the subordinated debt without penalty at any time on or after October 1, 2014. The interest rate is fixed at 7.02% until August 27, 2013, at which time it will have a floating rate of LIBOR plus 3.00%.

The interest expense on long-term borrowings was $11.7 million, $13.0 million, and $13.5 million as of December 31, 2012, 2011, and 2010, respectively.

The following table sets forth information relating to the Company’s FHLB borrowings as of the periods indicated:



	Years Ended December 31
	2012						2011
	Weighted Average Interest Rate		Amount Outstanding		Amount Callable		Weighted Average Interest Rate		Amount Outstanding		Amount Callable
			(Dollars in thousands)
Due in one year or less	0.34	%	$	163,245	$	2,000	0.84	%	$	190,091	$	30,000
Due in greater than one year to five years	1.53	%	101,948		93,000		4.82	%	8,507		8,000
Due in greater than five years	0.62	%	6,376		5,000		3.94	%	31,103		30,000
Total	0.80	%	$	271,569	$	100,000	1.41	%	$	229,701	$	68,000

The Company has entered into interest rate swaps to manage the interest rate risk of these borrowings, and has effectively hedged $150.0 million of the short-term FHLB advances, which the Company intends to continue roll, to fixed interest rates. These swaps carry a weighted average interest rate of 2.66% and have various maturity dates ranging from December 2013 through December 2018.

Additionally, the Company’s FHLB borrowings are collateralized by a blanket pledge agreement on the Bank’s FHLB stock, certain qualified investment securities, deposits at the Federal Home Loan Bank, residential mortgages held in the Bank’s portfolio, and certain commercial real estate loans. The Bank’s unused remaining available borrowing capacity at the Federal Home Loan Bank was approximately $661.9 million and $526.6 million at December 31, 2012 and 2011, respectively, inclusive of a $5.0 million line of credit. Also, as of December 31, 2012 and 2011 the Bank had an available borrowing capacity at the Federal Reserve Bank of Boston of $766.2 million and $618.8 million, respectively. At December 31, 2012 and 2011, the Bank had no outstanding borrowings with the Federal Reserve Bank of Boston.

The Bank has entered into repurchase agreements with both major brokerage firms (wholesale) and certain customers (retail). Both wholesale and retail repurchase agreements are collateralized by securities issued or guaranteed by government sponsored enterprises, however they are subject to different safekeeping provisions. All related securities, regardless of safekeeping arrangements, are included in the Company’s security portfolio.

The following table sets forth information relating to the Company’s repurchase agreements as of the periods indicated:



	December 31
	2012				2011
	Amount		Investments Pledged		Amount		Investments Pledged
	(Dollars in thousands)
Repurchase agreements with brokers	$	50,000	$	49,693	$	50,000	$	51,574
Customer repurchase agreements	153,356		172,403		166,128		166,323
Total	$	203,356	$	222,096	$	216,128	$	217,897

The following table sets forth the contractual maturities of both short and long-term borrowings over the next 5 years:



	Amounts Maturing		(1)
	(Dollars in thousands)
2013	$	328,493	(2)
2014	$	10,000
2015	$	58,000
2016	$	—
2017	$	75,000


(1)	Amounts maturing represent contractual amounts due and exclude any amortization of fair value marks associated with acquired borrowings.


(2)	The Company has entered into interest rate swaps to effectively hedge $150.0 million of the short-term FHLB advances, which the Company intends to continue to roll, to fix the interest rates. These interest rate swaps have maturity dates ranging from December 2013 through December 2018.