Note 9 - FHLB Advances

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Federal Home Loan Bank Advances, Disclosure [Text Block]

(9) FHLB Advances

Bancorp had 36 separate advances totaling $24 million outstanding as of March 31, 2021, as compared with 37 separate advances totaling $32 million as of December 31, 2020. As a result of the KSB acquisition, Bancorp assumed 46 advances totaling $43 million, with maturities extending to 2028. These advances were discounted to fair value as of the acquisition date. As of March 31, 2021, for one non-callable advance totaling $10 million, interest payments are due monthly with principal due at maturity. For the remaining advances, principal and interest payments are due monthly based on an amortization schedule.

Subsequent to the end of the first quarter, Bancorp chose to pay off $14 million of term advances, with a weighted average cost of 2.03% prior to their maturity incurring an early-termination fee of $474,000. Bancorp made this decision due to its excess liquidity driven by the substantial deposit growth it achieved during 2020 and the first quarter of 2021 combined with the near-term outlook for low interest rates. Bancorp believes it will substantially “earn back” the early termination penalty through lower interest expense over the next two years assuming short-term interest rates remain at March 31, 2021 levels.

The following is a summary of the contractual maturities and average effective rates of outstanding advances:

(dollars in thousands)	As of March 31, 2021					As of December 31, 2020
Maturity			Weighted average					Weighted average
Year	Advance		Fixed Rate			Advance		Fixed Rate
2021	$	10,118		0.25		$	12,148		0.68
2022		—		—			—		—
2023		223		1.01			268		1.00
2024		843		2.37			1,389		2.36
2025		1,748		2.44			2,827		2.43
2026		2,956		1.94			5,401		1.96
2027		4,650		1.75			5,323		1.73
2028		3,642		2.27			4,283		2.27
Total	$	24,180		1.29	%	$	31,639		1.52	%

FHLB advances are collateralized by certain CRE and residential real estate mortgage loans under blanket mortgage collateral pledge agreements, as well as a portion Bancorp’s PPP loan portfolio and FHLB stock. Bancorp views these advances as an effective lower-costing alternative to brokered deposits to fund loan growth. At March 31, 2021 and December 31, 2020, the amount of available credit from the FHLB totaled $960 million and $804 million, respectively.

Bancorp also had $80 million in FFP lines available from correspondent banks at both March 31, 2021 and December 31, 2020, respectively.