Quarterly report pursuant to Section 13 or 15(d)

BORROWINGS

v3.20.1
BORROWINGS
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
BORROWINGS

7. BORROWINGS

Short-term Borrowings

The Company classifies all borrowings that will mature within a year from the date on which the Company enters into them as short-term borrowings. Total short-term borrowings consist primarily of advances from the FHLB, federal funds purchased (which are secured overnight borrowings from other financial institutions), and other lines of credit. Also included in total short-term borrowings are securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold.

Total short-term borrowings consist of the following as of March 31, 2020 and December 31, 2019 (dollars in thousands):

    

March 31, 

December 31, 

 

2020

2019

 

Securities sold under agreements to repurchase

$

56,781

$

66,053

Federal Funds Purchased

25,000

FHLB advances

 

355,000

 

370,200

Total short-term borrowings

$

436,781

$

436,253

Average outstanding balance during the period

$

364,931

$

673,116

Average interest rate (during the period)

 

1.48

%  

 

2.30

%

Average interest rate at end of period

 

1.30

%  

 

1.52

%

The Bank maintains federal funds lines with several correspondent banks, the remaining available balance of which was $787.0 million and $682.0 million at March 31, 2020 and December 31, 2019, respectively. The Company maintains an alternate line of credit at a correspondent bank, the available balance was $25.0 million at both March 31, 2020 and December 31, 2019. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with these lines and is considered to be in compliance with such covenants as of March 31, 2020. Additionally, the Company had a collateral dependent line of credit with the FHLB of up to $5.3 billion and $5.2 billion at March 31, 2020 and December 31, 2019, respectively.

Long-term Borrowings

In connection with several previous bank acquisitions, the Company issued and acquired trust preferred capital notes of $58.5 million and $87.0 million, respectively. Most recently, in connection with the acquisition of Access on February 1, 2019, the Company acquired additional trust preferred capital notes totaling $5.0 million. The remaining fair value discount on all acquired trust preferred capital notes was $14.7 million at March 31, 2020.

The trust preferred capital notes currently qualify for Tier 2 capital of the Company for regulatory purposes. The Company’s trust preferred capital notes consist of the following as of March 31, 2020:

    

Trust

    

    

    

    

Preferred

Capital

Spread to

Securities (1)

Investment (1)

3-Month LIBOR

Rate (2)

Maturity

Trust Preferred Capital Note - Statutory Trust I

$

22,500,000

$

696,000

 

2.75

%  

4.20

%  

6/17/2034

Trust Preferred Capital Note - Statutory Trust II

 

36,000,000

 

1,114,000

 

1.40

%  

2.85

%  

6/15/2036

VFG Limited Liability Trust I Indenture

 

20,000,000

 

619,000

 

2.73

%  

4.18

%  

3/18/2034

FNB Statutory Trust II Indenture

 

12,000,000

 

372,000

 

3.10

%  

4.55

%  

6/26/2033

Gateway Capital Statutory Trust I

 

8,000,000

 

248,000

 

3.10

%  

4.55

%  

9/17/2033

Gateway Capital Statutory Trust II

 

7,000,000

 

217,000

 

2.65

%  

4.10

%  

6/17/2034

Gateway Capital Statutory Trust III

 

15,000,000

 

464,000

 

1.50

%  

2.95

%  

5/30/2036

Gateway Capital Statutory Trust IV

 

25,000,000

 

774,000

 

1.55

%  

3.00

%  

7/30/2037

MFC Capital Trust II

 

5,000,000

 

155,000

 

2.85

%  

4.30

%  

1/23/2034

Total

$

150,500,000

$

4,659,000

 

  

 

  

 

  

(1) The total of the trust preferred capital securities and investments in the respective trusts represents the principal asset of the Company’s junior subordinated debt securities with like maturities and like interest rates to the capital securities. The Company’s investment in the trusts is reported in "Other Assets" on the Company’s Consolidated Balance Sheets.
(2) Rate as of March 31, 2020.

During the fourth quarter of 2016, the Company issued $150.0 million of fixed-to-floating rate subordinated notes with an initial fixed interest rate of 5.00% through December 15, 2021. The interest rate then changes to a floating rate of LIBOR plus 3.175% through its maturity date on December 15, 2026. In connection with the acquisition of Xenith on January 1, 2018, the Company acquired $8.5 million of subordinated notes with a fair value premium of $259,000, which was $25,000 at March 31, 2020. The acquired subordinated notes have a fixed interest rate of 6.75% and a maturity date of June 30, 2025. At March 31, 2020 and December 31, 2019, the contractual principal reported for subordinated notes was $158.5 million; remaining issuance discount as of March 31, 2020 and December 31, 2019 is $1.3 million and $1.4 million, respectively. The subordinated notes qualify as Tier 2 capital for the Company for regulatory purposes. The Company has certain restrictive covenants related to certain asset quality, capital, and profitability metrics associated with the acquired subordinated notes and was considered to be in compliance with these covenants as of March 31, 2020.

On August 23, 2012, the Company modified its fixed rate FHLB advances to floating rate advances, which resulted in reducing the Company’s FHLB borrowing costs. In connection with this modification, the Company incurred a prepayment penalty of $19.6 million on the original advances which was deferred and to be amortized over the term of the modified advances using the effective rate method. The amortization expense is included as a component of interest expense on long-term borrowings on the Company’s Consolidated Statements of Income and was $493,000 for the three months ended March 31, 2019. On August 29, 2019, the Company repaid the floating rate FHLB advances.

As of March 31, 2020, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):

    

Spread to

    

    

    

3-Month

Interest

Long-term Type

LIBOR

Rate (1)

Maturity Date

Advance Amount

Convertible Flipper

 

(0.75)

%  

0.70

%  

8/17/2029

$

50,000

Convertible Flipper

 

(0.50)

%  

0.95

%  

5/15/2024

 

200,000

Convertible Flipper

 

(0.75)

%  

0.70

%  

5/22/2029

 

150,000

Convertible Flipper

 

(0.75)

%  

0.70

%  

5/30/2029

 

50,000

Convertible Flipper

(0.75)

%  

0.70

%  

6/21/2029

100,000

Fixed Rate Convertible

-

1.78

%  

10/26/2028

200,000

Fixed Rate Hybrid

-

1.58

%  

5/18/2020

20,000

Fixed Rate Credit

-

1.54

%  

10/2/2020

10,000

$

780,000

(1) Interest rates calculated using non-rounded numbers.

As of December 31, 2019, the Company had long-term advances from the FHLB consisting of the following (dollars in thousands):

    

Spread to

    

    

    

3-Month

Interest

Long-term Type

LIBOR

Rate (1)

Maturity Date

Advance Amount

Convertible Flipper

 

(0.75)

%  

1.16

%  

8/17/2029

$

50,000

Convertible Flipper

 

(0.50)

%  

1.41

%  

5/15/2024

 

200,000

Convertible Flipper

 

(0.75)

%  

1.16

%  

5/22/2029

 

150,000

Convertible Flipper

 

(0.75)

%  

1.16

%  

5/30/2029

 

50,000

Convertible Flipper

 

(0.75)

%  

1.16

%  

6/21/2029

 

100,000

Fixed Rate Convertible

 

-

1.78

%  

10/26/2028

 

200,000

Fixed Rate Hybrid

 

-

1.58

%  

5/18/2020

 

20,000

Fixed Rate Credit

-

1.54

%  

10/2/2020

10,000

$

780,000

(1) Interest rates calculated using non-rounded numbers.

For information on the carrying value of loans and securities pledged as collateral on FHLB advances as of March 31, 2020 and December 31, 2019, refer to Note 8 "Commitments and Contingencies."

As of March 31, 2020, the contractual maturities of long-term debt are as follows for the years ending (dollars in thousands):

    

Trust

    

    

    

    

Preferred

Fair Value

Capital

Subordinated

FHLB

Premium

Total Long-term

Notes

Debt

Advances

(Discount) (1)

Borrowings

For the remaining nine months of 2020

$

$

$

30,000

$

(646)

$

29,354

2021

 

 

 

 

(1,008)

 

(1,008)

2022

 

 

 

 

(1,030)

 

(1,030)

2023

 

 

 

 

(1,053)

 

(1,053)

2024

 

 

 

200,000

 

(1,078)

 

198,922

Thereafter

 

155,159

 

158,500

 

550,000

 

(11,161)

 

852,498

Total long-term borrowings

$

155,159

$

158,500

$

780,000

$

(15,976)

$

1,077,683

(1) Includes discount on issued subordinated notes.