Subordinated Debentures

3 Months Ended

Mar. 31, 2020

As of March 31, 2020, the Company had three issuances of subordinated notes and two issuances of junior subordinated debt securities, with an aggregate carrying value of $215.3 million and a weighted interest rate of 5.43%, compared with an aggregate carrying value of $215.1 million and a weighted interest rate of 5.37% at December 31, 2019.

The following table summarizes our outstanding subordinated debentures as of the dates indicated:



						March 31, 2020		December 31, 2019
	Stated Maturity	Current Interest Rate		Current Principal Balance		Carrying Value
				(Dollars in thousands)
Subordinated notes
Subordinated notes due 2024, 5.75% per annum	September 3, 2024	5.75	%	$	60,000	$	59,462	$	59,432
Subordinated notes due 2029, 4.875% per annum until May 15, 2024, 3-month LIBOR +2.5% thereafter	May 15, 2029	4.875	%	125,000		122,686		122,622
Subordinated notes due 2025, 7.125% per annum	June 26, 2025	7.125	%	25,000		25,127		25,133
Total subordinated notes				210,000		207,275		207,187
Subordinated debt
Heritage Oaks Capital Trust II (junior subordinated debt), 3-month LIBOR+1.72%	January 1, 2037	3.63	%	5,248		4,071		4,054
Santa Lucia Bancorp (CA) Capital Trust (junior subordinated debt), 3-month LIBOR+1.48%	July 7, 2036	3.31	%	5,155		3,923		3,904
Total subordinated debt				10,403		7,994		7,958
Total subordinated debentures				$	220,403	$	215,269	$	215,145

In connection with the various issuances of subordinated notes, the Corporation obtained ratings from Kroll Bond Rating Agency (“KBRA”). KBRA assigned investment grade ratings of BBB+ and BBB for the Corporation’s senior unsecured debt and subordinated debt, respectively, and a deposit rating of A- for the Bank. The Company’s and Bank’s ratings were reaffirmed in February 2020 by KBRA following the announcement of the proposed acquisition of Opus.

As of March 31, 2020, the Corporation has two unconsolidated Delaware statutory trust subsidiaries, Heritage Oaks Capital Trust II and Santa Lucia Bancorp (CA) Capital Trust. Both are used as business trusts for the purpose of issuing junior subordinated debt to third party investors. The junior subordinated debt was issued in connection with the trust preferred securities offerings. The Corporation is not allowed to consolidate any trust preferred securities into the Company’s consolidated financial statements. The resulting effect on the Company’s consolidated financial statements is to report the subordinated debentures as a component of the Company’s liabilities, and its ownership interest in the trusts as a component of other assets.

For additional information on the Company’s subordinated debentures, see “Note 13 — Subordinated Debentures” to the Consolidated Financial Statements of the Company’s 2019 Form 10-K.