JUNIOR SUBORDINATED DEBENTURES AND MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES

12 Months Ended

Dec. 31, 2021

Other Liabilities Disclosure [Abstract]

JUNIOR SUBORDINATED DEBENTURES AND MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES

SUBORDINATED DEBT AND MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES

At December 31, 2021, the Company had nine wholly-owned subsidiary grantor trusts (the Trusts), which had issued $135.5 million of TPS to third parties, as well as $4.2 million of common capital securities, carried among other assets, which were issued to the Company.  TPS and common capital securities accrue and pay distributions periodically at specified annual rates as provided in the indentures.  The Trusts used the proceeds from the offerings to purchase a like amount of junior subordinated debentures (the Debentures) of the Company.  The Debentures are the sole assets of the Trusts.  The Company’s obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the Trusts.  The TPS are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures.  The Company has the right to redeem the Debentures in whole on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.  For the year ended December 31, 2021, the Company redeemed $8.0 million in trust preferred securities and $248,000 in related common capital securities resulting in a loss of $2.3 million. There were no redemptions for the year ended December 31, 2020. Subsequent to December 31, 2021, the Company fully redeemed the debentures issued by four of the Trusts, totaling $50.5 million. All of the TPS issued by the Trusts qualified as Tier 1 capital as of December 31, 2021.  At December 31, 2021, the Trusts comprised $135.5 million, or 8.1% of the Company’s total risk-based capital.

The following table is a summary of trust preferred securities at December 31, 2021 (dollars in thousands):

Name of Trust	Aggregate Liquidation Amount of Trust Preferred Securities		Aggregate Liquidation Amount of Common Capital Securities		Aggregate Principal Amount of Junior Subordinated Debentures		Stated    Maturity (1)	Current Interest Rate		Reset Period	Interest Rate Spread
Banner Capital Trust II(3)	$	15,000	$	464	$	15,464	2033	3.47	%	Quarterly	Three-month LIBOR + 3.35%
Banner Capital Trust III(3)	15,000		465		15,465		2033	3.02		Quarterly	Three-month LIBOR + 2.90%
Banner Capital Trust IV(3)	15,000		465		15,465		2034	2.97		Quarterly	Three-month LIBOR + 2.85%
Banner Capital Trust V	25,000		774		25,774		2035	1.73		Quarterly	Three-month LIBOR + 1.57%
Banner Capital Trust VI	25,000		774		25,774		2037	1.79		Quarterly	Three-month LIBOR + 1.62%
Banner Capital Trust VII	25,000		774		25,774		2037	1.51		Quarterly	Three-month LIBOR + 1.38%
Greater Sacramento Bancorp Statutory Trust I(3)	4,000		124		4,124		2033	3.47		Quarterly	Three-month LIBOR + 3.35%
Greater Sacramento Bancorp Statutory Trust II	4,000		124		4,124		2035	1.88		Quarterly	Three-month LIBOR + 1.68%
Mission Oaks Statutory Trust I	7,500		232		7,732		2036	1.85		Quarterly	Three-month LIBOR + 1.65%
Total TPS liability at par	$	135,500	$	4,196	139,696			2.24	%
Fair value adjustment(2)					(19,881)
Total TPS liability at fair value(2)					$	119,815

(1) All of the Company’s trust preferred securities are eligible for redemption.

(2) The Company has elected to use fair value accounting on its TPS.

(3) Fully redeemed subsequent to December 31, 2021.

On June 30, 2020, Banner issued and sold in an underwritten offering $100.0 million aggregate principal amount of 5.000% Fixed-to-Floating Rate Subordinated Notes due 2030 (Notes) at a public offering price equal to 100% of the aggregate principal amount of the Notes, resulting in net proceeds, after underwriting discounts and estimated offering expenses, of approximately $98.1 million. The interest rate on the Notes remains fixed equal to 5.000% for the first 5 years, after 5 years the interest rate changes to a floating interest rate tied to a benchmark rate, which is expected to be Three-Month Term SOFR, plus a spread of 489 basis points. The Notes will mature on June 30, 2030. On or after June 30, 2025, the Company may redeem the Notes, in whole or in part.

The Notes are unsecured obligations and are subordinated in right of payment to all existing and future indebtedness, deposits and other liabilities of the Company’s current and future subsidiaries, including the Bank’s deposits as well as the Company’s subsidiaries’ liabilities to general creditors and liabilities arising during the ordinary course of business. The Notes may be included in Tier 2 capital for the Company under current regulatory guidelines and interpretations.