NOTE 11. FHLB AND OTHER BORROWINGS

The FHLB allows us to borrow, both short and long-term, on a blanket floating lien status collateralized by certain securities and loans. At December 31, 2021 and 2020, the Company had pledged loans as collateral for FHLB advances of $993.4 million and $927.3 million, respectively. At December 31, 2021, the Company had additional capacity to borrow from the FHLB of $841.9 million.

Short-term borrowings

Short-term FHLB borrowings: As of December 31, 2021, the Company had no short-term FHLB borrowings.   As of December 31, 2020, the Company had $10 million of short-term FHLB borrowings with an average interest rate of 0.70%. All short-term FHLB borrowings outstanding at December 31, 2020 had fixed interest rates.   

Long-term borrowings

Components of long-term borrowings consist of:

Line of Credit: The Company entered into an unsecured line of credit with a third-party lender in May 2017 which allowed it to borrow up to $20.0 million. The interest rate on the facility is LIBOR plus 4.00% per annum, and unpaid principal and interest is due at the stated maturity on May 12, 2022. The line of credit may be prepaid at any time without penalty, so long as such prepayment includes the payment of all interest accrued through the date of the repayments, and, in the case of prepayment of the entire loan, the amount of attorneys’ fees and disbursements of the lender.  During 2019, the line of credit was increased to a total borrowing capacity of $50.0 million.  There were no outstanding advances at December 31, 2021 or 2020. 

Long-term FHLB borrowings:

Long-term borrowings from the FHLB outstanding for the periods presented are as follows:

For the years ended December 31, 2021 and 2020 the Company maintained long-term borrowings with the FHLB averaging $45.1 million and $65.0 million, respectively, with an average cost of approximately 2.44% and 2.29% respectively. Substantially all long-term FHLB borrowings outstanding at December 31, 2020 and 2019 had fixed interest rates. At December 31, 2021 and December 31, 2020, $16 million of FHLB borrowings outstanding were callable.  

The Company maintained five, unsecured Federal Funds lines of credit with commercial banks which provide for extensions of credit with an availability to borrow up to an aggregate $115.0 million as of December 31, 2021. There were no advances under these lines of credit outstanding as of December 31, 2021 and 2020.

PPPLF: In conjunction with the PPP, the Company also participated in the Federal Reserve's PPPLF, which expired on July 30, 2021. There were no borrowings outstanding under the PPPLF at December 31, 2021. The maturity date of a borrowing under the PPPLF was equal the maturity date of the PPP loan pledged to secure the borrowing and would be accelerated (i) if the underlying PPP loan goes into default and is sold to the SBA to realize on the SBA guarantee or (ii) to the extent that any PPP loan forgiveness reimbursement is received from the SBA. Borrowings under the PPPLF were included in long-term liabilities on the Company’s consolidated balance sheet and beared interest at a rate of 0.35%.

Subordinated Notes: On July 24, 2020, the Company issued $37 million aggregate principal amount of 6.00% fixed-to-floating rate subordinated notes due 2030. The Notes will initially bear interest at a fixed annual rate of 6.00%, payable quarterly, in arrears, to, but excluding, July 31, 2025. From and including July 31, 2025, to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be the then-current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York (provided, that in the event the benchmark rate is less than zero, the benchmark rate will be deemed to be zero) plus 592 basis points, payable quarterly, in arrears. The amount outstanding at December 31, 2021 and 2020, was $37.0 million.

Secured borrowings : Due to the rights retained on certain loan participations sold, the Company is deemed to have retained effective control over these loans under ASC Topic 860, “Transfers and Servicing”, and therefore these participations sold must be accounted for as a secured borrowing. At December 31, 2021, the Company had no securing borrowings. At December 31, 2020, total secured borrowings were $4.0 million representing an increase in loans held for investment and matching increase in long-term borrowings.