Note 11: Trust Preferred Securities and Subordinated Debentures

At December 31, 2016 and 2015, we had the following issues of trust preferred securities outstanding and subordinated debentures owed to the Trusts.


At December 31, 2016
(Dollars in thousands)		Subordinated Debentures Owed to Trusts		Trust Preferred Securities of the Trusts	Rates	Final Maturity Date
OKSB Statutory Trust I	$	20,619	$	20,000	4.10%	June 26, 2033
SBI Capital Trust II		25,774		25,000	3.73%	October 7, 2033
	$	46,393	$	45,000


At December 31, 2015
(Dollars in thousands)		Subordinated Debentures Owed to Trusts		Trust Preferred Securities of the Trusts	Rates	Final Maturity Date
OKSB Statutory Trust I	$	20,619	$	20,000	3.70%	June 26, 2033
SBI Capital Trust II		25,774		25,000	3.17%	October 7, 2033
FCBI Statutory Trust I		5,155		5,000	3.33%	September 4, 2033
	$	51,548	$	50,000

On June 26, 2003, our subsidiary, OKSB Statutory Trust I, sold to investors in a private placement offering $20.0 million of adjustable rate trust preferred securities (the “OKSB Trust Preferred”). The OKSB Trust Preferred bear interest, adjustable quarterly, at 90-day LIBOR plus 3.10%. In addition to these adjustable rate securities, OKSB Statutory Trust I sold $0.6 million of trust common equity to Southwest. The aggregate proceeds of $20.6 million were used to purchase an equal principal amount of adjustable rate subordinated debentures that bear interest, adjustable quarterly, at 90-day LIBOR plus 3.10% (the “OKSB Subordinated Debentures”). After deducting underwriter’s compensation and noninterest expenses of the offering, the net proceeds were available to us to increase capital and for general corporate purposes. Interest payments on the OKSB Subordinated Debentures are deductible for federal income tax purposes.

On October 14, 2003, our subsidiary, SBI Capital Trust II, sold to investors in a private placement offering $25.0 million of adjustable rate trust preferred securities (the “SBI II Trust Preferred”). The SBI II Trust Preferred bear interest, adjustable quarterly, at 90-day LIBOR plus 2.85%. In addition to these adjustable rate securities, SBI Capital Trust II sold $0.8 million of trust common equity to us. The aggregate proceeds of $25.8 million were used to purchase an equal principal amount of our adjustable rate subordinated debentures that bear interest, adjustable quarterly 90-day LIBOR plus 2.85% (the “SBI II Subordinated Debentures”). The proceeds were available to us to increase capital and for general corporate purposes. Interest payments on the SBI II Subordinated Debentures are deductible for federal income tax purposes.

On September 4, 2003, FCBI Statutory Trust I sold to investors in a private placement offering $5.0 million of adjustable rate trust preferred securities (the “FCBI I Trust Preferred”). The FCBI I Trust Preferred bear interest, adjustable quarterly, at 90-day LIBOR plus 3.00%. In addition to these adjustable rate securities, FCBI Statutory Trust I sold $0.2 million of trust common equity. The aggregate proceeds of $5.2 million were used to purchase an equal principal amount of our adjustable rate subordinated debentures that bear interest, adjustable quarterly 90-day LIBOR plus 3.00% (the “FCBI I Subordinated Debentures”). The proceeds were available to us to increase capital and for general corporate purposes. Interest payments on the FCBI I Subordinated Debentures are deductible for federal income tax purposes. These trust preferred security and subordinated debentures were inherited with the acquisition of FCBI and were redeemed on February 8, 2016.

At December 31, 2016, we had an aggregate of $46.4 million of subordinated debentures outstanding and had an asset of $1.4 million representing our total investment in the common equity issued by the Trusts. The sole assets of the Trusts are the subordinated debentures and the liabilities of the Trusts of the OKSB Trust Preferred and SBI II Trust Preferred. We have, through various contractual arrangements, unconditionally guaranteed payment of all obligations of our Trusts with respect to our OKSB Trust Preferred and our SBI II Trust Preferred.

The OKSB Trust Preferred, the OKSB Subordinated Debentures, the SBI II Trust Preferred, and the SBI II Subordinated Debentures, mature at or near the thirtieth anniversary date of their issuance. However, if certain conditions are met, the OKSB Trust Preferred and the OKSB Subordinated Debentures and the SBI II Trust Preferred and the SBI II Subordinated Debentures may be called at our discretion with thirty days’ notice.

We, OKSB Statutory Trust I, and SBI Capital Trust II believe that, taken together, our obligations under the Trust Preferred Guarantee Agreements, the Amended and Restated Trust Agreements, the Subordinated Debentures, the Indentures and the Agreements as to Expenses and Liabilities, entered into in connection with the offering of the Trust Preferred and the Subordinated Debentures, in the aggregate constitute a full and unconditional guarantee by us of the obligations of OKSB Statutory Trust I and SBI Capital Trust II under the Trust Preferred.

OKSB Statutory Trust I is a Connecticut statutory trust created for the purpose of issuing the OKSB Trust Preferred and purchasing the OKSB Subordinated Debentures, which are its sole assets. We own all of the 619 outstanding common securities of OKSB Statutory Trust I; the liquidation value is $1,000 per share.

SBI Capital Trust II is a Delaware statutory trust created for the purpose of issuing the SBI II Trust Preferred and purchasing the SBI II Subordinated Debentures, which are its sole assets. We own all of the 774 outstanding common securities of SBI Capital Trust II; the liquidation value is $1,000 per share.

FCBI Statutory Trust I is a statutory trust created for the purpose of issuing the FCBI I Trust Preferred and purchasing the FCBI I Subordinated Debentures, which are its sole assets. All trust assets were redeemed on February 8, 2016.

Each of the Trust Preferred issuances meets the regulatory criteria for Tier I capital, subject to Federal Reserve guidelines that limit the amount of the Trust Preferred and cumulative perpetual preferred stock to an aggregate of 25% of Tier I capital. At December 31, 2016, $45.0 million of the Trust Preferred was included in Tier I capital.

We de-consolidate our investments in OKSB Statutory Trust I, SBI Capital Trust II, and FCBI Statutory Trust I (the “Trusts”) in this Annual Report. Due to this required de-consolidation, the trust preferred securities are not presented on the Consolidated Statements of Financial Condition and the subordinated debentures are presented on the Consolidated Statements of Financial Condition as a separate liability category.

The terms of the debentures allow us to defer payments of interest for up to 20 consecutive quarterly periods without default or penalty. These terms also allow us to resume payments at the end of any deferral period, or to extend the deferral up to the maximum 20 quarters in total. No deferral can extend past the maturity date of the debenture.