Note 8. Warehouse Lines of Credit

Encompass Lending Group (“Encompass”), a wholly owned subsidiary of the Company, utilizes line of credit facilities as a means of temporarily financing mortgage loans pending their sale. The underlying warehouse lines of credit agreements, as described below, contain financial and other debt covenants.

Encompass maintains a master loan warehouse agreement with a bank whereby Encompass borrows funds to finance the origination or purchase of eligible loans. Interest on funds borrowed is equal to the greater of the 30-Day Secured Overnight Financing Rate (SOFR) rate plus 2.625% or 5.00%. The agreement expires in September 2023. The maximum funding available under these loans at June 30, 2023 was $7.5 million and December 31, 2022 was $15.0 million. At June 30, 2023 and December 31, 2022, the outstanding balance on this warehouse line was approximately $2.6 million and $1.7 million, respectively. As of June 30, 2023, Encompass was in compliance with the debt covenants under this facility.

Encompass maintains a mortgage participation purchase agreement with a bank whereby Encompass borrows funds to finance the origination or purchase of eligible loans. Interest on funds borrowed is equal to the greater of the 1 month Term SOFR Reference Rate (SOFR) Rate plus 2.11% or 3.61%. The agreement expires in December 2023.The maximum funding available under these loans at June 30, 2023 was $7.5 million and December 31, 2022 was $25.0 million. At June 30, 2023 and December 31, 2022, the outstanding balance on this warehouse line was approximately $2.4 million and $0.8 million, respectively. As of June 30, 2023, Encompass was in compliance with the debt covenants under this facility.

Encompass maintains a warehousing credit and security agreement with a bank whereby Encompass borrows funds to finance the origination of eligible mortgage loans. Interest on funds borrowed is equal to the greater of the daily adjusting Bloomberg Short-Term Bank Yield (BSBY) rate plus 2.00% or 3.5% per annum. The agreement expires in September 2023. The daily adjusting BSBY rate plus 2.00% as of June 30, 2023 was 7.22% and as of December 31, 2022 was 6.36%. The maximum funding available under these loans at June 30, 2023 was $7.5 million and December 31, 2022 was $15.0 million. At June 30, 2023 and December 31, 2022, the outstanding balance on this warehouse line was approximately $2.5 million and $1.0 million, respectively. As of June 30, 2023, Encompass was not in compliance with the debt covenant under this facility related to earnings, but the lender has waived the non-compliance.