PACW » Topics » Subordinated Debentures.

This excerpt taken from the PACW 10-Q filed Nov 8, 2007.

Subordinated Debentures.

        The Company had an aggregate of $138.6 million of subordinated debentures outstanding at September 30, 2007. The subordinated debentures were issued in eight separate series. Each issuance has a maturity of thirty years from its date of issue. The subordinated debentures were issued to trusts established by us or entities we have acquired, which in turn issued trust preferred securities, which totaled $131.0 million at September 30, 2007. These trust preferred securities are presently considered Tier 1 capital for regulatory purposes. With the exception of Trust I and Trust CI, the subordinated debentures are callable at par, only by the issuer, five years from the date of issuance, subject to certain

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exceptions. We are permitted to call the debentures in the first five years if the prepayment election relates to one of the following three events: (i) a change in the tax treatment of the debentures stemming from a change in the IRS laws; (ii) a change in the regulatory treatment of the underlying trust preferred securities as Tier 1 capital; and (iii) a requirement to register the underlying trust as a registered investment company. Trust I and Trust CI may not be called for 10 years from the date of issuance unless one of the three events described above has occurred and then a prepayment penalty applies. In addition, there is a prepayment penalty if either of these debentures is called 10 to 20 years from the date of their issuance and they may be called at par after 20 years. The proceeds of the subordinated debentures were used primarily to fund several of our acquisitions and to augment regulatory capital. The following table summarizes the terms of each issuance of the subordinated debentures outstanding September 30, 2007:

Series

  Date issued
  Amount
  Maturity
  Earliest
Call Date
without
Penalty(1)

  Fixed or
Variable
Rate

  Rate Index
  Current
Rate(2)

  Next Reset
Date

 
   
   
   
  (Dollars in thousands)

   
   
   
Trust CI(4)   3/23/2000   $ 10,310   3/8/2030   3/8/2020   Fixed   N/A   11.00 % N/A
Trust I   9/7/2000     8,248   9/7/2030   9/7/2020   Fixed   N/A   10.60 % N/A
Trust F(3)   12/19/2002     8,248   12/26/2032   12/19/2007   Variable   3-month LIBOR +3.25   8.45 % 12/21/2007
Trust V   8/15/2003     10,310   9/17/2033   9/17/2008   Variable   3-month LIBOR +3.10   8.79 % 12/13/2007
Trust VI   9/3/2003     10,310   9/15/2033   9/15/2008   Variable   3-month LIBOR +3.05   8.74 % 12/13/2007
Trust CII(4)   9/17/2003     5,155   9/17/2033   9/17/2009   Variable   3-month LIBOR +2.95   8.64 % 12/13/2007
Trust VII   2/5/2004     61,856   4/23/2034   4/23/2009   Variable   3-month LIBOR +2.75   7.73 % 1/28/2008
Trust CIII(4)   8/15/2005     20,619   9/15/2035   9/15/2010   Fixed(5)   N/A   5.85 % 9/15/2010
Unamortized premium(6)         3,532                        
       
                       
Total       $ 138,588                        
       
                       

(1)
As described above, certain issuances may be called earlier without penalty upon the occurrence of certain events.

(2)
As of October 26, 2007; excludes debt issuance costs.

(3)
Acquired in the Foothill acquisition.

(4)
Acquired in the Community Bancorp acquisition.

(5)
Interest rate is fixed until 9/15/2010 and then is variable at a rate of 3-month LIBOR + 1.69%.

(6)
Amount represents the fair value adjustment to the four trusts acquired during 2006.

        As previously mentioned, the subordinated debentures were issued to trusts established by us, or entities we acquired, which in turn issued $131.0 million of trust preferred securities. These securities are currently included in our Tier I capital for purposes of determining the Company's Tier I and total risk-based capital ratios. The Board of Governors of the Federal Reserve System, which is the holding company's banking regulator, has promulgated a modification of the capital regulations affecting trust preferred securities. Under this modification, beginning March 31, 2009, the Company will be required to use a more restrictive formula to determine the amount of trust preferred securities that can be included in regulatory Tier I capital. At that time, the Company will be allowed to include in Tier I capital an amount of trust preferred securities equal to no more than 25% of the sum of all core capital elements, which is generally defined as shareholders' equity less certain intangibles, including goodwill, core deposit intangibles and customer relationship intangibles, net of any related deferred income tax liability. The regulations currently in effect through December 31, 2008, limit the amount of trust preferred securities that can be included in Tier I capital to 25% of the sum of core capital

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elements without a deduction for permitted intangibles. We have determined that our Tier I capital ratios would remain above the well-capitalized level had the modification of the capital regulations been in effect at September 30, 2007. We expect that our Tier I capital ratios will be at or above the existing well-capitalized levels on March 31, 2009, the first date on which the modified capital regulations must be applied.

This excerpt taken from the PACW 10-K filed Feb 27, 2007.

(h) Subordinated Debentures

The fair value of the subordinated debentures is based on the discounted value of contractual cash flows for fixed rate securities. The discount rate is estimated using the rates currently offered for similar securities of similar maturity. The fair value of subordinated debentures with variable rates is deemed to be the carrying value.

This excerpt taken from the PACW 10-K filed Mar 13, 2006.

(g) Subordinated Debentures

The fair value of the subordinated debentures is based on the discounted value of contractual cash flows for fixed rate securities. The discount rate is estimated using the rates currently offered for similar securities of similar maturity. The fair value of subordinated debentures with variable rates is deemed to be the carrying value.

This excerpt taken from the PACW 10-Q filed May 5, 2005.

Subordinated Debentures.

The Company had an aggregate of $121.7 million of subordinated debentures outstanding with a weighted average cost of 6.19% at March 31, 2005. The subordinated debentures were issued in seven separate series. Each issuance has a maturity of thirty years from its date of issue. The subordinated debentures were issued to trusts established by us, which in turn issued trust preferred securities. The proceeds from the issuance of the securities were used primarily to fund several of our acquisitions. Generally and with certain limitations, we are permitted to call the debentures in the first five years if the prepayment election relates to one of the following three events: (i) a change in the tax treatment of the debentures stemming from a change in the IRS laws; (ii) a change in the regulatory treatment of the underlying trust preferred securities as Tier 1 capital; and (iii) a requirement to register the underlying trust as a registered investment company. Under certain of our series of issuances, redemption in the first five years may be subject to a prepayment penalty. Trust I may not be called for 10 years from the date of issuance unless one of the three events described above has occurred and then a prepayment penalty applies. In addition, there is a prepayment penalty if the Trust I debentures are called 10 to 20 years from the date of its issuance, although they may be called at par after 20 years.

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(g) Subordinated Debentures

The fair value of the subordinated debentures is based on the discounted value of contractual cash flows for fixed rate securities. The discount rate is estimated using the rates currently offered for similar securities of similar maturity. The fair value of subordinated debentures with variable rates is deemed to be the carrying value.

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FIRST COMMUNITY BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
December 31, 2004 and 2003

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