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| BORROWED FUNDS | NOTE 5. BORROWED FUNDS Borrowed funds at June 30, 2026 and December 31, 2025 are summarized, as follows:
Short-term debt includes FHLB advances with an original term of one year or less. We also maintain a $1.0 million secured line of credit with the FHLB that bears a daily adjustable rate calculated by the FHLB. There was no outstanding balance on the FHLB line of credit for the periods ended June 30, 2026 and December 31, 2025. There are no variable rate short-term FHLB borrowings. We have the capacity to borrow funds on a secured basis utilizing the Borrower in Custody program, and the Discount Window at the Reserve Bank. At June 30, 2026, our available secured line of credit at the Reserve Bank was $105.6 million versus $94.0 million at December 31, 2025. We have pledged certain loans and securities to the Reserve Bank to support this arrangement. We maintain an unused unsecured federal funds line of credit with a correspondent bank that has an aggregate overnight borrowing capacity of $40.0 million as of June 30, 2026 and December 31, 2025. There was no outstanding balance on the line of credit as of June 30, 2026 and December 31, 2025. Long-term FHLB advances consist of advances with an original term of more than one year. The advances outstanding at June 30, 2026 include callable advances of $80.0 million, non-callable advances of $1.0 million and amortizing advances of $997 thousand. There were $80.0 million of callable advances outstanding, non-callable advances of $1.0 million and $1.0 million of amortizing advances at December 31, 2025. All FHLB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally residential first mortgage loans and certain securities. There are no variable rate long-term FHLB borrowings. A summary of maturities of FHLB advances as of June 30, 2026 is, as follows:
Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by $1.0 billion and $740.7 million of loans under a blanket lien arrangement as of June 30, 2026 and December 31, 2025, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company had unused borrowing capacity of $521.9 million at June 30, 2026, compared to $259.1 million at December 31, 2025. At months ended June 30, 2026 and December 31, 2025, subordinated borrowings was as follows:
We executed a Subordinated Note Purchase Agreement with an aggregate of $40.0 million of subordinated notes (the “2029 Notes”) to accredited investors on November 26, 2019. The 2029 Notes have a maturity date of December 1, 2029 and bear a fixed interest rate of 4.63% through December 1, 2024 payable semi-annually in arrears. From December 1, 2024 and thereafter the interest rate shall be reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate (“”) plus 3.27%. We have the option beginning with the interest payment date of December 1, 2024, and on any scheduled payment date thereafter, to redeem the 2029 Notes, in whole or in part upon prior approval of the Board of Governors of the Federal Reserve System (“Federal Reserve”). During 2024, we paid down $20.0 million of the outstanding subordinated notes. As of June 30, 2026, we have an outstanding subordinated note balance under the 2029 Notes of $20.0 million. We also have $20.6 million in floating Junior Subordinated Deferrable Interest Debentures (“Debentures”) issued by NHTB Capital Trust II Variable (“Trust II”) and NHTB Capital Trust III Fixed (“Trust III”), which are both Connecticut statutory trusts. The Debentures issued on March 30, 2004 now carry a variable interest rate of three-month plus 2.79%, and mature in 2034. The Debentures are callable by the Company at the time when any interest payment is made. Trust II and Trust III are considered variable interest entities for which we are not the primary beneficiary. Accordingly, Trust II and Trust III are not consolidated into our financial statements. In connection with the acquisition, the Company assumed $13.0 million in fixed-to-floating rate subordinated notes, that had a fair value of $11.2 million (the “2031 Notes”) issued by Guaranty. The 2031 Notes were originally issued on March 23, 2021 with a maturity date of April 1, 2031. The 2031 Notes bear a fixed-to-floating interest rate of 4.875% through April 1, 2026, payable quarterly in arrears. Beginning April 1, 2026 and thereafter, the interest rate shall be reset quarterly to an interest rate per annum equal to the then current three-month plus 4.82%. We have the option beginning with the interest payment date of April 1, 2026, and on any scheduled payment date thereafter, to redeem the 2031 Notes, in whole or in part upon prior approval of the Federal Reserve. Repurchase Agreements We can raise additional liquidity by entering into repurchase agreements at our discretion. In a security repurchase agreement transaction, we will generally sell a security, agreeing to repurchase either the same or substantially identical security on a specified later date, at a greater price than the original sales price. The difference between the sale price and purchase price is the cost of the proceeds, which is recorded as interest expense on the consolidated statements of income. The securities underlying the agreements are delivered to counterparties as security for the repurchase obligations. Since the securities are treated as collateral and the agreement does not qualify for a full transfer of effective control, the transactions do not meet the criteria to be classified as sales, and are therefore considered secured borrowing transactions for accounting purposes. Payments on such borrowings are interest only until the scheduled repurchase date. In a repurchase agreement, we are subject to the risk that the purchaser may default at maturity and not return the securities underlying the agreements. In order to minimize this potential risk, we either deal with established firms when entering into these transactions or with customers whose agreements stipulate that the securities underlying the agreement are not delivered to the customer and instead are held in segregated safekeeping accounts by our safekeeping agents.
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