Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures
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Mar. 31, 2013
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Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures | 6.
Fixed/Floating Rate
Junior Subordinated Deferrable Interest
Debentures
On
July 18, 2006, the Corporation sponsored the creation of Provident
Community Bancshares Capital Trust I (“Capital Trust
I”). The Corporation is the owner of all of the common
securities of Capital Trust I. On July 21, 2006, Capital
Trust I issued $4,000,000 in the form of floating/fixed rate
capital securities through a pooled trust preferred securities
offering. The proceeds from this issuance, along with
the Corporation’s $124,000 capital contribution for Capital
Trust I’s common securities, were used to acquire $4,124,000
aggregate principal amount of the Corporation’s floating rate
junior subordinated deferrable interest debentures due October 1,
2036 (the “Debentures”), which constitute the sole
asset of Capital Trust I. The interest rate on the Debentures and
the capital securities is variable and adjustable quarterly at
1.74% over the three-month LIBOR. The Corporation has, through the
Trust Agreement establishing Capital Trust I, the Guarantee
Agreement, the notes and the related Debenture, taken together,
fully irrevocably and unconditionally guaranteed all of the Capital
Trust I obligations under the capital securities.
On
November 28, 2006, the Corporation sponsored the creation of
Provident Community Bancshares Capital Trust II (“Capital
Trust II”). The Corporation is the owner of all of the common
securities of Capital Trust II. On December 15, 2006, Capital Trust
II issued $8,000,000 in the form of floating rate capital
securities through a pooled trust preferred securities offering.
The proceeds of Capital Trust II were utilized for the redemption
of Union Financial Bancshares Statutory Trust (the
“Trust”) issued on December 18, 2001. The proceeds from
this issuance, along with the Corporation’s $247,000 capital
contribution for Capital Trust’s II common securities, were
used to acquire $8,247,000 aggregate principal amount of the
Corporation’s floating rate junior subordinated deferrable
interest debentures due March 1, 2037 (the
“Debentures”), which constitute the sole asset
of Capital Trust II. The interest rate on the
Debentures and the capital securities is variable and adjustable
quarterly at 1.74% over the three-month LIBOR. The Corporation has,
through the Trust agreement establishing Capital Trust II, the
Guarantee Agreement, the notes and the related Debenture, taken
together, fully irrevocably and unconditionally guaranteed all of
Capital Trust II obligations under the capital
securities.
The
Corporation exercised its right on July 22, 2010 to defer the
payment of interest on its outstanding subordinated debentures for
an indefinite period (which can be no longer than 20 consecutive
quarterly periods). Further, pursuant to a written agreement
between the Corporation and the Federal Reserve, the Corporation
cannot pay any dividends on its subordinated debentures without the
prior written consent of the Federal Reserve Bank. This and any
future deferred distributions will continue to accrue interest at a
current rate of LIBOR+1.74% for the $4.0 million of
trust preferred securities issued in July 2006 and at a current
rate of LIBOR+1.74% for the $8.0 million of trust preferred
securities issued in December 2006. Distributions on the trust
preferred securities are cumulative. Therefore, in accordance with
generally accepted accounting principles, the Corporation will
continue to accrue the monthly cost of the trust preferred
securities as it has since issuance.
A
summary of the Subordinated Deferrable Interest Debentures issued
and outstanding follows:
The
above debentures are subject to redemption at par at the option of
the Corporation, subject to prior regulatory approval, in whole or
in part on any interest payment date.
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