Federal Home Loan Bank Borrowings

Advances payable to the Federal Home Loan Bank are summarized as follows:



	2015				2014
			Weighted				Weighted
			Average				Average
	Total		Contractual		Total		Contractual
	Outstanding		Rate		Outstanding		Rate
	(Dollars in thousands)
Stated Maturity
2015	$	—	—	%	$	38,001	0.69	%
2016	52,025		2.26	%	—		—	%
2017	40,154		3.10	%	31,203		4.03	%
2018	7,043		1.75	%	—		—	%
2019	2,011		1.99	%	—		—	%
Subtotal	101,233		2.53	%	69,204		2.20	%
Amortizing advances	847				876
Total Federal Home Loan Bank Advances	$	102,080			$	70,080

To manage the interest rate risk of these advances, the Company has entered into interest rate swaps, effectively converting $25.0 million of the FHLB advances to fixed interest rates at December 31, 2015 and 2014. This swap carried a weighted average interest rate of 2.94% at December 31, 2015 and 2014, and will mature in December 2018. In June 2014, the Company terminated $75.0 million in swaps that matured in 2014 and 2015, resulting in a loss on termination of approximately $1.1 million, which is included in other noninterest expense for 2014.

During 2013 the Company prepaid $60.0 million of these advances assumed as part of the acquisition of Central Bancorp, Inc. ("Central"). The difference between the exit price and the net carrying amount of the debt resulted in a gain on extinguishment of debt of $763,000.

The Company’s FHLB advances are collateralized by a blanket pledge agreement on the Bank’s FHLB stock, certain qualified investment securities, deposits at the Federal Home Loan Bank, and by residential mortgages, and certain commercial real estate loans held in the Bank’s portfolio. The carrying value of the loans pledged as collateral for these borrowings totaled $1.4 billion and $1.3 billion as of December 31, 2015 and 2014. The Bank’s unused remaining available borrowing capacity at the Federal Home Loan Bank was approximately $777.5 million and $755.7 million at December 31, 2015 and 2014, respectively, inclusive of a $5.0 million line of credit. At December 31, 2015 and 2014, the Company had sufficient collateral at the FHLB to support its obligations and was in compliance with the FHLB's collateral pledging program.

Short-Term Debt

The Company’s short-term borrowings consisted of customer repurchase agreements that amounted to $134.0 million and $147.9 million at December 31, 2015 and 2014, respectively.

The interest expense on short-term borrowings was $210,000, $200,000, and $276,000 for the years ended December 31, 2015, 2014, and 2013, respectively.

Customer Repurchase Agreements. The Company can raise additional liquidity by entering into repurchase agreements at it discretion. In a security repurchase agreement transaction, the Company will generally sell a security, agreeing to repurchase either the same or substantially the same security on a specified later date, at a price greater than the original sales price. The difference between the sale price and purchase price is the cost of the proceeds, which is recorded as interest expense. Since the securities are treated as collateral and the agreement does not qualify for a full transfer of effective control, the transactions do not meet the criteria to be classified as a sale, and are therefore considered a secured borrowing transaction for accounting purposes. Payments on such borrowings are interest only until the scheduled repurchase date. In a repurchase agreement the Company is subject to the risk that the purchaser may default at maturity and not return the securities underlying the agreements. In order to minimize this potential risk, the Company's agreement with customers stipulates that the securities underlying the agreement are not delivered to the customer and instead are held in segregated safekeeping accounts by the Company's safekeeping agents.

The table below sets forth information regarding the Company’s repurchase agreements allocated by source of collateral at the date indicated:



	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	(Dollars in thousands)
Sources of Collateral
U.S. government agency securities	$	10,157	$	—	$	—	$	—	$	10,157
Agency mortgage-backed securities	69,142		—		—		—		69,142
Agency collateralized mortgage obligations	54,659		—		—		—		54,659
Total borrowings	$	133,958	$	—	$	—	$	—	$	133,958

Certain counterparties monitor collateral, and may request additional collateral to be posted from time to time. For further information regarding the Company's repurchase agreements see Note 12, Balance Sheet Offsetting.

Line of Credit Borrowings. The revolving line of credit was an obligation of the parent company which accrued interest at an adjusted LIBOR rate. The line of credit provided for borrowings of up to $20.0 million (increased from $10.0 million with a 2014 amendment) and matured on November 18, 2015. There are currently no outstanding line of credits as of December 31, 2015.

Long-Term Debt

The following table summarizes long-term debt as of the periods indicated:



	December 31
	2015		2014
	(Dollars in thousands)
Wholesale repurchase agreements	$	—	$	50,000
Junior subordinated debentures
Capital Trust V	51,547		51,547
Slades Ferry Trust I	10,310		10,310
Central Trust I	5,258		5,258
Central Trust II	6,349		6,570
Subordinated debentures	35,000		65,000
Total long-term debt	$	108,464	$	188,685

The interest expense on long-term debt was $6.6 million, $6.4 million, and $7.0 million for the years ended December 31, 2015, 2014, and 2013, respectively.

Wholesale Repurchase Agreements: In a wholesale security repurchase agreement with established firms, the Bank will generally sell a security, agreeing to repurchase either the same or substantially the same security on a specified later date, at a price greater than the original sales price. The securities underlying these agreements are primarily U.S. Government agency mortgage-backed securities, which are delivered to broker/dealers. The were no investments pledged against wholesale repurchase agreements at December 31, 2015 and $52.9 million at December 31, 2014. The one outstanding wholesale repurchase agreement, which had a fixed interest rate of 2.32%, matured on August 23, 2015.

Junior Subordinated Debentures: The junior subordinated debentures are issued to various trust subsidiaries of the Company. These trusts are considered to be variable interest entities for which the Company is not the primary beneficiary, and therefore the accounts of the trusts are not included in the Company’s consolidated financial statements. These trusts were formed for the purpose of issuing trust preferred securities, which were then sold in a private placement offering. The proceeds from the sale of the securities and the issuance of common stock by these trusts were invested in these Junior Subordinated Debentures issued by the Company.

For regulatory purposes, bank holding companies are allowed to include trust preferred securities in Tier 1 capital up to a certain limit. Provisions in the Dodd-Frank Act generally exclude trust preferred securities from Tier 1 capital, however, holding companies with consolidated assets of less than $15 billion, such as the Company, are able to continue to include these instruments in Tier 1 capital, but no such securities issued in the future will count as Tier 1 capital.

Information relating to these trust preferred securities are as follows:



Trust		Description of Capital Securities
Capital Trust V		$50.0 million due in 2037, interest at a variable rate (LIBOR plus 1.48%), which has been effectively converted to a fixed rate of 6.52% until December 28, 2016, through the use of an interest rate swap. These securities are callable quarterly, until maturity.

Slades Ferry Trust I		$10.0 million due in 2034, bearing interest at a variable rate (LIBOR plus 2.79%). These securities are callable quarterly, until maturity.

Central Trust I		$5.1 million due in 2034, bearing interest at a variable rate (LIBOR plus 2.44%). These securities are callable quarterly, until maturity.

Central Trust II		$5.9 million due in 2037, bearing a fixed interest rate of 7.015% until March 15, 2017. Subsequent to this date, the interest will be variable (LIBOR plus 1.65%) and the securities will become callable quarterly, until maturity.

All obligations under these trust preferred securities are unconditionally guaranteed by the Company.

Subordinated Debentures: In the first quarter of 2015, the Bank redeemed $30.0 million of subordinated debt that had an original maturity of October 1, 2019, without penalty. The interest rate at the time of redemption was floating rate of LIBOR plus 3.00%. The subordinated debentures were issued to USB Capital Resources, Inc., a wholly-owned subsidiary of U.S. Bank National Association.

At December 31, 2015 and 2014 there was $35.0 million of outstanding subordinated debentures at the bank holding company. The subordinated debentures were issued to several investors via private placement on November 17, 2014. The subordinated debt matures on November 15, 2024, however with regulatory approval, the Bank may redeem the subordinated debt without penalty at any scheduled payment date on or after November 15, 2019 with 30 days notice. The interest rate is fixed at 4.75% through November 15, 2019, after which it converts to LIBOR plus 2.98%.

The following table sets forth the contractual maturities of long-term debt over the next five years:



	2016		2017		2018		2019		2020		Thereafter		Total
	(Dollars in thousands)
Junior subordinated debentures
Capital trust V	$	—	$	—	$	—	$	—	$	—	$	51,547	$	51,547
Slades ferry trust I	$	—	$	—	$	—	$	—	$	—	$	10,310	$	10,310
Central trust I	$	—	$	—	$	—	$	—	$	—	$	5,258	$	5,258
Central trust II	$	—	$	—	$	—	$	—	$	—	$	6,349	$	6,349
Subordinated debentures	$	—	$	—	$	—	$	—	$	—	$	35,000	$	35,000