Borrowings and Notes Payable

9 Months Ended

Sep. 30, 2022

Borrowings and Notes Payable

Borrowings and Notes Payable

Note 4. Borrowings and Notes Payable

The Company owns capital stock of the FHLB as a condition for a $422.0 million convertible advance credit facility from the FHLB. As of September 30, 2022, the Company had remaining credit availability of $396.1 million under this facility.

The following tables detail the advances the Company had outstanding with the FHLB at September 30, 2022 and December 31, 2021:

		September 30, 2022
Dollars in Thousands		Outstanding Balance	Interest Rate		Maturity Date	Interest Payment
Fixed rate hybrid	$	5,000	3.15	%	October 2022	Fixed, paid monthly
Principal reducing credit		214	1.62	%	March 2023	Fixed, paid quarterly
Fixed rate hybrid		9,900	1.29	%	March 2024	Fixed, paid quarterly
Fixed rate hybrid		9,900	1.29	%	March 2024	Fixed, paid quarterly
Principal reducing credit		805	1.99	%	March 2026	Fixed, paid quarterly
Total advances	$	25,819

		December 31, 2021
Dollars in Thousands		Outstanding Balance	Interest Rate		Maturity Date	Interest Payment
Fixed rate hybrid	$	5,000	3.15	%	October 2022	Fixed, paid monthly
Principal reducing credit		536	1.62	%	March 2023	Fixed, paid quarterly
Fixed rate hybrid		9,900	1.29	%	March 2024	Fixed, paid quarterly
Fixed rate hybrid		9,900	1.29	%	March 2024	Fixed, paid quarterly
Principal reducing credit		977	1.99	%	March 2026	Fixed, paid quarterly
Total advances	$	26,313

The Company did not have any short-term borrowings from the FHLB for the three and nine month periods ended September 30, 2022 and 2021. Borrowings from the FHLB are considered short-term if they have an original maturity of less than a year.

The Company has pledged a portion of its residential and commercial mortgage loan portfolio as collateral for these credit facilities. The lendable collateral value outstanding on these pledged loans totaled approximately $189.1 million and $181.8 million at September 30, 2022 and December 31, 2021, respectively.

In addition to the FHLB credit facility, in October 2015, the Company entered into a subordinated loan agreement for an aggregate principal amount of $2.0 million, net of issuance costs. Interest-only payments were due quarterly at 6.710% per annum, and the outstanding principal balance would have matured in October 2025. During July 2021, the prepayment provisions in the subordinated debt agreement were exercised, and the principal balance and any remaining accrued interest of this subordinated debt were paid in full. In January 2018, the Company entered into a subordinated loan agreement for an aggregate principal amount of $4.5 million, net of issuance costs, to fund the acquisition of Liberty. Interest-only payments are due quarterly at 6.875% per annum, and the outstanding principal balance matures in April 2028. In June 2020, the Company entered into a subordinated loan agreement for an aggregate principal amount of $18.1 million, net of issuance costs, to provide capital to support organic growth or growth through strategic acquisitions and capital expenditures. The subordinated notes will initially bear interest at 6.000% per annum, beginning June 25, 2020 to but excluding July 1, 2025, payable semi-annually in arrears. From and including July 1, 2025 to but excluding July 1, 2030, or an earlier redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month SOFR plus 590 basis points, payable quarterly in arrears. Beginning on July 1, 2025 through maturity, the subordinated notes may be redeemed, at the Company’s option, on any scheduled interest payment date. The subordinated notes will mature on July 1, 2030. The subordinated notes are subject to customary representations, warranties and covenants made by the Company and the purchasers.

Partners owns a one-half undivided interest in 410 William Street, Fredericksburg, Virginia. Partners purchased a one-half interest in the land for cash, plus additional settlement costs, and assumption of one-half of the remaining deed of trust loan on December 14, 2012. Partners indemnified the indemnities, who are the personal guarantors of the deed of trust loan in the amount of $886 thousand, which was one-half of the outstanding balance of the loan as of the purchase date. Partners has a remaining obligation under the note payable of $636 thousand as of September 30, 2022, which was carried on the balance sheet net of a discount of $17 thousand. The loan was refinanced on April 30, 2015 with a twenty-five year amortization. The interest rate is fixed at 3.60% for the first 10 years, and then becomes a variable rate of 3.0% plus the 10 year Treasury rate until maturity.

The Company provides JMC a warehouse line of credit, which is eliminated in consolidation. In addition, JMC has a warehouse line of credit with another financial institution in the amount of $3.0 million. The interest rate is the weekly average of the one month LIBOR plus 2.250%, rounded to the nearest 0.125% (6.000% at September 30, 2022). The rate is subject to change the first of every month. Amounts borrowed are collateralized by a security interest in the mortgage loans financed under the line and are payable upon demand. The warehouse line of credit is set to renew or mature on November 30, 2022. The balance outstanding at September 30, 2022 and December 31, 2021 was $192 thousand and $120 thousand, respectively. Interest expense on the warehouse lines of credit was $18 thousand and $42 thousand, respectively, during the three and nine months ended September 30, 2022 and $21 thousand and $77 thousand, respectively, during the three and nine month periods ended September 30, 2021.

During the second quarter of 2020, in connection with the loans originated as part of the PPP, the Company borrowed under the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”).  Under the terms of the PPPLF, the Company can borrow funds which are secured by the Company’s PPP loans.  During the first quarter of 2021, the Company used a portion of its excess cash and cash equivalents to repay all borrowings that were previously outstanding under the PPPLF. As of September 30, 2022, the Company did not have any outstanding advances under the PPPLF.

The proceeds of these long-term borrowings were generally used to purchase higher yielding investment securities, fund additional loans, redeem preferred stock, or fund acquisitions. Additionally, the Company has secured credit availability of $5.0 million and unsecured credit availability of $117.0 million with various correspondent banks for short-term liquidity needs, if necessary. The secured facility must be collateralized by specific securities at the time of any usage. At September 30, 2022, there were no borrowings outstanding under these credit agreements, and securities pledged under this secured credit facility had an amortized cost and fair value of $3 thousand. At December 31, 2021, there were no borrowings outstanding under these credit agreements, and securities pledged under this secured credit facility had an amortized cost and fair value of $4 thousand and $5 thousand, respectively.

The Company has pledged investment securities available for sale with an amortized cost and fair value of $3.4 million and $2.8 million, respectively, with the FRB to secure Discount Window borrowings at September 30, 2022. The combined amortized cost and fair value of these pledged investment securities available for sale were $3.7 million at December 31, 2021. At September 30, 2022 and December 31, 2021, there were no outstanding borrowings under these facilities.

Maturities of debt are as follows (dollars in thousands):

2022	$	5,350
2023		314
2024		20,008
2025		210
2026		39
Thereafter		22,912
	$	48,833