Note 9 - Borrowed Funds

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 9.  BORROWED FUNDS

Short-term borrowings:  A summary of short-term borrowings agreements are presented below.  

	Three Months Ended March 31,
	2024						2023
Dollars in thousands		Short-term FHLB Advances			Federal Funds Purchased and Short-term Repurchase Agreements			Short-term FHLB Advances			Federal Funds Purchased and Short-term Repurchase Agreements
Balance at March 31	$	262,200		$	159		$	140,000		$	150
Average balance outstanding for the period		298,167			158			166,215			150
Maximum balance outstanding at any month end during period		325,700			159			140,000			150
Weighted average interest rate for the period (1)		5.73	%		5.47	%		4.88	%		4.62	%
Weighted average interest rate for balances outstanding at March 31 (1)		5.67	%		5.50	%		5.20	%		5.00	%
(1) Excludes effect of any hedging activity

	Year Ended December 31, 2023
Dollars in thousands	Short-term FHLB Advances			Federal Funds Purchased and Short-term Repurchase Agreements
Balance at December 31	$	302,800		$	157
Average balance outstanding for the period		229,850			8,502
Maximum balance outstanding at any month end during period		355,100			20,533
Weighted average interest rate for the period (1)		5.53	%		2.37	%
Weighted average interest rate for balances outstanding at December 31 (1)		5.64	%		5.50	%
(1) Excludes effect of any hedging activity

Federal funds purchased and short-term repurchase agreements mature the next business day.  The securities underlying the repurchase agreements are under our control and secure the total outstanding daily balances.  We generally account for securities sold under agreements to repurchase as collateralized financing transactions and record them at the amounts at which the securities were sold, plus accrued interest.  Securities, generally U.S. government and Federal agency securities, pledged as collateral under these financing arrangements cannot be sold or repledged by the secured party.  The fair value of collateral provided is continually monitored and additional collateral is provided as needed.

Long-term borrowings:  Our long-term borrowings of $630,000 and $637,000 at  March 31, 2024 and  December 31, 2023, respectively, consisted of a 5.34% fixed rate advance from the Federal Home Loan Bank (“FHLB”), maturing in 2026. This FHLB advance is collateralized by a blanket lien of $2.3 billion of residential mortgage loans, certain commercial loans, mortgage backed securities and securities of U.S. Government agencies and corporations.

Subordinated debentures: We issued $75 million of subordinated debentures, net of $1.74 million debt issuance costs, during fourth quarter 2021 in a private placement transaction, which had a net balance of $74.1 million at  March 31, 2024 and $74.0 million at   December 31, 2023. The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its maturity; thereafter the amount qualifying as Tier 2 capital is reduced by 20 percent each year until maturity. This subordinated debt bears interest at a fixed rate of 3.25% per year, from and including November 16, 2021 to, but excluding, December 1, 2026, payable semi-annually in arrears. From and including December 1, 2026 to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 230 basis points, payable quarterly in arrears. This debt has a 10 year term and generally, is not prepayable by us within the first five years.

We issued $30 million of subordinated debentures, net of $681,000 debt issuance costs, during third quarter 2020 in a private placement transaction, which had a net balance of $29.8 million at March 31, 2024 and   December 31, 2023. The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its maturity; thereafter the amount qualifying as Tier 2 capital is reduced by 20 percent each year until maturity. This subordinated debt bears interest at a fixed rate of 5.00% per year, from and including September 22, 2020 to, but excluding, September 30, 2025, payable quarterly in arrears. From and including September 30, 2025 to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 487 basis points, payable quarterly in arrears. This debt has a 10 year term and generally, is not prepayable by us within the first five years.

Subordinated debentures owed to unconsolidated subsidiary trusts:  We have three statutory business trusts that were formed for the purpose of issuing mandatorily redeemable securities (the “capital securities”) for which we are obligated to third party investors and investing the proceeds from the sale of the capital securities in our junior subordinated debentures (the “debentures”).  The debentures held by the trusts are their sole assets.  These subordinated debentures totaled $19.6 million at  March 31, 2024 and  December 31, 2023.

The capital securities held by SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III qualify as Tier 1 capital under Federal Reserve Board guidelines.  In accordance with these Guidelines, trust preferred securities generally are limited to 25% of Tier 1 capital elements, net of goodwill.  The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital.

A summary of the maturities of all long-term borrowings and subordinated debentures for the next five years and thereafter is as follows:

						Subordinated
						debentures owed
		Long-term		Subordinated		to unconsolidated
Dollars in thousands		borrowings		debentures		subsidiary trusts
Year Ending December 31,	2024	$	17	$	—	$	—
	2025		24		—		—
	2026		589		—		—
	2027		—		—		—
	2028		—		—		—
	Thereafter		—		105,000		19,589
		$	630	$	105,000	$	19,589