NOTE 9: Borrowings

The table below presents selected information on short-term borrowings:


	December 31,
(Dollars in thousands)	2018			2017
Balance outstanding at year end1	$	14,917		$	20,621
Maximum balance at any month end during the year	$	22,912		$	21,032
Average balance for the year	$	18,883		$	18,416
Weighted average rate for the year		1.12	%		1.32	%
Weighted average rate on borrowings at year end		0.71	%		1.29	%
Estimated fair value at year end	$	14,917		$	20,621

Consists of (1) repurchase transactions with customers, which generally mature the day following the day sold and (2) at December 31, 2017 a repurchase agreement with a third-party correspondent bank, both types of which are secured by investment securities.

Long-term borrowings at December 31, 2018 consist of advances under a non-recourse revolving bank line of credit secured by loans at C&F Finance and advances from the FHLB, which are secured by a blanket floating lien on all qualifying closed-end and revolving, open-end loans secured by 1-4 family residential properties. The interest rate on the revolving bank line of credit, which matures in 2020, floats at the one-month LIBOR rate plus a range of 200 to 225 basis points, depending upon the average balance outstanding on the line. The outstanding balance on this line was $75.03 million as of December 31, 2018. C&F Finance’s revolving bank line of credit agreement contains covenants regarding C&F Finance’s capital adequacy, collateral performance, adequacy of the allowance for loan losses and interest expense coverage. C&F Finance satisfied all such covenants during 2018. Long-term advances from the FHLB at December 31, 2018 consist of $30.00 million of convertible advances and $14.50 million of fixed rate hybrid advances. The convertible advances have fixed rates of interest unless the FHLB exercises its option to convert the interest on these advances from fixed rate to variable rate. The fixed rate hybrid advances provide fixed-rate funding until the stated maturity date. C&F Bank may add interest rate caps or floors at a future date, at which time the cost of the caps or floors will be added to the advance rate. The table below presents selected information for the FHLB advances at December 31, 2018:


						Next
						Conversion
(Dollars in thousands)			Interest Rate		Maturity Date	Option Date
Fixed Rate Hybrid Advances
	$	7,000	1.95	%	12/04/19
	$	7,500	1.78		08/21/20

Convertible Advances
	$	7,500	1.48		09/19/22	09/20/21
	$	7,500	1.96		09/29/23	09/29/22
	$	5,000	2.32		10/25/24	10/25/23
	$	5,000	2.53		11/28/25	11/29/24
	$	5,000	2.83		12/29/26	12/29/25

The contractual maturities of long-term borrowings at December 31, 2018 are as follows:


(Dollars in thousands)	Fixed Rate		Floating Rate		Total
2019	$	7,000	$	—	$	7,000
2020		7,500		75,029		82,529
2021		—		—		—
2022		7,500		—		7,500
2023		7,500		—		7,500
Thereafter		15,000		—		15,000
	$	44,500	$	75,029	$	119,529

The Corporation’s unused lines of credit for future borrowings total approximately $292.72 million at December 31, 2018, which consists of $107.85 million available from the FHLB, $44.97 million on C&F Finance’s revolving bank line of credit, $19.90 million available from the FRB, $70.00 million under unsecured federal funds agreements with third party financial institutions, $50.00 million in repurchase lines of credit with third party financial institutions. Additional loans and securities are available that can be pledged as collateral for future borrowings from the FRB or the FHLB above the current lendable collateral value.

In December 2007, C&F Financial Statutory Trust II (Trust II), a wholly-owned non-operating subsidiary of the Corporation, was formed for the purpose of issuing trust preferred capital securities for general corporate purposes including the refinancing of existing debt. On December 14, 2007, Trust II issued $10.00 million of trust preferred capital securities in a private placement to an institutional investor and $310,000 in common equity to the Corporation in exchange for cash. The securities mature in December 2037, are redeemable at the Corporation’s option, and require quarterly distributions by Trust II to the holder of the securities at a rate equal to the three-month LIBOR rate plus 3.15 percent. During 2014, in order to mitigate the potential effects of rising interest rates, the Corporation entered into an interest rate swap agreement whereby the effective fixed interest rate on all $10.00 million of the securities became 4.82 percent. The interest rate swap matures in December 2019. The principal asset of Trust II is $10.31 million of the Corporation’s trust preferred capital notes with like maturities and like interest rates to the trust preferred capital securities. The interest payments by the Corporation on the debt securities will be used by Trust II to pay the quarterly distributions payable by Trust II to the holders of the trust preferred capital securities.

In July 2005, C&F Financial Statutory Trust I (Trust I), a wholly-owned non-operating subsidiary of the Corporation, was formed for the purpose of issuing trust preferred capital securities to partially fund the Corporation’s purchase of 427,186 shares of its common stock. On July 21, 2005, Trust I issued $10.00 million of trust preferred capital securities in a private placement to an institutional investor and $310,000 in common equity to the Corporation in exchange for cash. The securities mature in September 2035, are redeemable at the Corporation’s option, and require quarterly distributions by Trust I to the holder of the securities at a rate equal to the three-month LIBOR rate plus 1.57 percent. During 2015, in order to mitigate the potential effects of rising interest rates, the Corporation entered into an interest rate swap agreement whereby the effective fixed interest rate on all $10.00 million of the securities became 3.44 percent. The interest rate swap matures in September 2020. The principal asset of Trust I is $10.31 million of the Corporation’s trust preferred capital notes with like maturities and like interest rates to the trust preferred capital securities. The interest payments by the Corporation on the debt securities will be used by Trust I to pay the quarterly distributions payable by Trust I to the holders of the trust preferred capital securities.

In December 2003, Central Virginia Bankshares Statutory Trust I (CVBK Trust I) was formed as a wholly-owned non-operating subsidiary of CVBK for the purpose of issuing trust preferred capital securities for general corporate purposes. On December 17, 2003, CVBK Trust I issued $5.00 million of trust preferred capital securities in a private placement to an institutional investor and $155,000 in common equity to CVBK in exchange for cash. CVBK Trust I became a wholly-owned non-consolidated non-operating subsidiary of the Corporation pursuant to the merger of CVBK with and into the Corporation in March 2014, and the Corporation assumed CVBK’s obligations on the underlying trust preferred capital notes. The securities mature in December 2033, are redeemable at the Corporation's option, and require quarterly distributions by CVBK Trust I to the holder of the securities at a rate equal to the three-month LIBOR plus 2.85 percent. During 2014, in order to mitigate the potential effects of rising interest rates, the Corporation entered into an interest rate swap agreement whereby the effective fixed interest rate on all $5.00 million of the securities became 4.54 percent. The interest rate swap matures in December 2019. The principal asset of CVBK Trust I is $5.16 million of trust preferred capital notes originally issued by CVBK and assumed by the Corporation with like maturities and like interest rates to the trust preferred capital securities. The interest payments by the Corporation on the debt securities will be used by CVBK Trust I to pay the quarterly distributions payable by CVBK Trust I to the holders of the trust preferred capital securities. The trust preferred capital securities issued by CVBK Trust I were adjusted to fair value on the date of acquisition of CVBK. The resulting fair value adjustment was a discount of $716,000, which is being amortized over 20 years on a straight-line basis, and the balance of which was $530,000 as of December 31, 2018.

Subject to certain exceptions and limitations, the Corporation may elect from time to time to defer interest payments on the junior subordinated debt securities, which would result in a deferral of distribution payments on the related capital securities.