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Subordinated Debentures Held by Subsidiary Trusts | 12 Months Ended
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Dec. 31, 2023
Subordinated Borrowings [Abstract] |
Subordinated Debentures Held by Subsidiary Trusts | SUBORDINATED DEBENTURES HELD BY SUBSIDIARY TRUSTS The Company sponsors fourteen wholly owned business trusts, Trust I through Trust XIV (collectively, the “Trusts”). The Trusts were formed for the exclusive purpose of issuing an aggregate of $163.1 million of 30-year floating rate mandatorily redeemable capital trust preferred securities (“Trust Preferred Securities”) to third-party investors. The Trusts also issued, in aggregate, $5.3 million of common equity securities to the Parent Company. Proceeds from the issuance of the Trust Preferred Securities and common equity securities were invested in 30-year junior subordinated deferrable interest debentures (“Subordinated Debentures”) issued by the Parent Company. A summary of Subordinated Debenture issuances follows:
|  |  |  |  | December 31, 2023 |  | December 31, 2022
| Issuance | Interest Rate 1 | Maturity Date |  | Amount | Common Shares 2 |  | Amount | Common Shares 2
Trust I | November 2007 | 8.40% | December 15, 2037 |  | $ | 15.5 |  | $ | 0.5 |  |  | $ | 15.5 |  | $ | 0.5 |
Trust II | October 2007 | 7.91 | January 1, 2038 |  | 10.3 |  | 0.3 |  |  | 10.3 |  | 0.3 |
Trust III | December 2007 | 8.05 | December 15, 2037 |  | 20.6 |  | 0.6 |  |  | 20.6 |  | 0.6 |
Trust IV | December 2007 | 8.36 | April 1, 2038 |  | 15.5 |  | 0.5 |  |  | 15.5 |  | 0.5 |
Trust V | January 2008 | 8.41 | April 1, 2038 |  | 10.3 |  | 0.3 |  |  | 10.3 |  | 0.3 |
Trust VI | January 2008 | 8.41 | April 1, 2038 |  | 10.3 |  | 0.3 |  |  | 10.3 |  | 0.3 |
Trust VII | June 2005 | 7.29 | June 30, 2035 |  | 5.2 |  | 0.2 |  |  | 5.2 |  | 0.2 |
Trust VIII | March 2006 | 7.13 | March 15, 2036 |  | 30.9 |  | 0.9 |  |  | 30.9 |  | 0.9 |
Trust IX | June 2005 | 7.50 | June 15, 2035 |  | 2.1 |  | 0.1 |  |  | 2.1 |  | 0.1 |
Trust X | December 2003 | 8.49 | December 17, 2033 |  | 23.1 |  | 0.7 |  |  | 23.1 |  | 0.7 |
Trust XI | December 2002 | 9.01 | January 7, 2033 |  | 5.2 |  | 0.2 |  |  | 5.2 |  | 0.2 |
Trust XII | September 2003 | 8.76 | October 8, 2033 |  | 7.2 |  | 0.2 |  |  | 7.2 |  | 0.2 |
Trust XIII | December 2006 | 7.47 | March 1, 2037 |  | 5.3 |  | 0.3 |  |  | 5.3 |  | 0.3 |
Trust XIV | July 2007 | 7.31 | October 1, 2037 |  | 2.2 |  | 0.2 |  |  | 2.2 |  | 0.2 |
Total subordinated debentures payable |  | 163.7 |  | $ | 5.3 |  |  | 163.7 |  | $ | 5.3 |
Less: fair value adjustment 3 |  | (0.6) |  |  |  | (0.6) |  |
Total subordinated debentures payable, net of fair value adjustments |  | $ | 163.1 |  |  |  | $ | 163.1 |  |
1 Interest rates as of December 31, 2023
2 Common shares on subordinated debentures are included in other assets on the consolidated balance sheets
3 Adjustment reflects the fair value adjustments related to the subordinated deferrable interest debentures assumed as part of the Northwest and Great Western acquisitions.
Trust I Subordinated Debentures issued by the Company bore interest at a fixed rate of 7.50% for five years after issuance until December 15, 2012, and thereafter at a variable rate equal to three-month SOFR plus tenor spread plus 2.75% per annum. Interest payment dates are December 15, March 15, June 15, and September 15 of each year, beginning December 15, 2007, and are payable in arrears. Trust II Subordinated Debentures issued by the Company bear a cumulative floating interest rate equal to SOFR plus tenor spread plus 2.25% per annum. Interest payment dates are January 1, April 1, July 1 and October 1 of each year, beginning January 1, 2008, and are payable in arrears. Trust III Subordinated Debentures issued by the Company bore interest at a fixed rate of 6.88% for five years after issuance until December 15, 2012, and thereafter at a variable rate equal to three-month SOFR plus tenor spread plus 2.40% per annum. Interest payment dates are December 15, March 15, June 15, and September 15 of each year, beginning March 15, 2008, and are payable in arrears. Trust IV Subordinated Debentures issued by the Company bear a cumulative floating interest rate equal to three-month SOFR plus tenor spread plus 2.70% per annum. Interest payment dates are January 1, April 1, July 1 and October 1 of each year, beginning April 1, 2008, and are payable in arrears. Trust V Subordinated Debentures issued by the Company bore interest at a fixed rate of 6.78% for five years after issuance until April 1, 2013, and thereafter at a variable rate equal to three-month SOFR plus tenor spread plus 2.75% per annum. Interest payment dates are January 1, April 1, July 1 and October 1 of each year, beginning April 1, 2008, and are payable in arrears. Trust VI Subordinated Debentures issued by the Company bear a cumulative floating interest rate equal to three-month SOFR plus tenor spread plus 2.75% per annum. Interest payment dates are January 1, April 1, July 1 and October 1 of each year, beginning April 1, 2008, and are payable in arrears. The Subordinated Debentures are unsecured with interest distributions payable quarterly. The Company may defer the payment of interest at any time provided that the deferral period does not extend past the stated maturity. During any such deferral period, distributions on the Trust Preferred Securities will also be deferred and the Company’s ability to pay dividends on its common and preferred shares is restricted. The Subordinated Debentures may be redeemed, subject to approval by the FRB, at the Company’s option on or after five years from the date of issue, or at any time in the event of unfavorable changes in laws or regulations. Debt issuance costs consisting primarily of underwriting discounts and professional fees were capitalized and are being amortized through maturity to interest expense using the straight-line method, which approximates level yield. The terms of the Trust Preferred Securities are identical to those of the Subordinated Debentures. The Trust Preferred Securities are subject to mandatory redemption upon repayment of the Subordinated Debentures at their stated maturity dates or earlier redemption in an amount equal to their liquidation amount plus accumulated and unpaid distributions to the date of redemption. The Company guarantees the payment of distributions and payments for redemption or liquidation of the Trust Preferred Securities to the extent of funds held by the Trusts. In conjunction with the acquisition of Northwest in August 2018, the Company acquired Northwest Bancorporation Capital Trust I (“Trust VII”). The Northwest Trust was formed for the exclusive purpose of issuing an aggregate of $5.0 million of 30-year floating rate mandatorily redeemable capital trust preferred securities (“Northwest Trust Preferred Securities”) to third-party investors. The Trusts also issued, in aggregate, $0.2 million of common equity securities to Northwest. Proceeds from the issuance of the Trust Preferred Securities and common equity securities were invested in 30-year junior subordinated deferrable interest debentures (“Northwest Subordinated Debentures”) issued by Northwest. The Subordinated Debentures bore interest at a fixed rate of 5.95% for five years after issuance until June 30, 2010, and thereafter at a variable rate equal to SOFR plus tenor spread plus 1.70% per annum. Interest payment dates are December 30, March 30, June 30, and September 30 of each year, beginning September 30, 2005, and are payable in arrears. The Company acquired the GWB Capital Trust VI (“Trust VIII”) with the acquisition of Great Western in February 2022. Great Western caused to be issued 30,000 shares, $1,000 par value, or $30.0 million of preferred securities of Trust VIII on March 10, 2006, through a private placement. Trust VIII also issued, in aggregate, $0.9 million of common equity securities to Great Western. The distribution rate is set quarterly at three-month SOFR plus tenor spread plus 1.48%. Interest payment dates are December 15, March 15, June 15, and September 15 of each year, beginning June 15, 2006, and are payable in arrears. Proceeds from the issue were used for general corporate purposes including redemption of Great Western’s Preferred Securities of GWB Capital Trust II. The Company acquired the Sunstate Banchares Trust II (Trust IX”) with the acquisition of Great Western in February 2022. Sunstate Bancshares caused to be issued 2,000 shares, $1,000 par value, or $2.0 million of preferred securities of Trust IX on June 1, 2005, through a private placement. Trust IX also issued, in aggregate, $0.1 million of common equity securities to Sunstate Banchsares. The distribution rate is set quarterly at three-month SOFR plus tenor spread plus 1.85%. Interest payment dates are March 15, June 15, September 15, and December 15 of each year, beginning September 15, 2005, and are payable in arrears. The Company acquired the Great Western Statutory Trust IV (“Trust X”) with the acquisition of Great Western in February 2022. Great Western caused to be issued 22,400 shares, $1,000 par value, or $22.4 million of preferred securities of Trust X on December 17, 2003, through a private placement. Trust X also issued, in aggregate, $0.7 million of common equity securities to Great Western. The distribution rate is set quarterly at three-month SOFR plus tenor spread plus 2.85% basis points. Interest payment dates are March 17, June 17, September 17 and December 17 of each year, beginning March 17, 2004 and are payable in arrears. Proceeds from the issue were used for general corporate purposes. The Company acquired the HF Financial Capital Trust III (“Trust XI”) in the acquisition of Great Western in February 2022. HF Financial Corp. caused to be issued 5,000 shares, $1,000 par value, or $5.0 million of preferred securities of Trust XI on December 19, 2002, through a private placement. Trust XI also issued, in aggregate, $0.2 million of common equity securities to HF Financial Corp. The distribution rate is set quarterly at three-month SOFR plus tenor spread plus 3.35%. Interest payment dates are January 7, April 7, July 7, and October 7 of each year, beginning April 7, 2003, and are payable in arrears. The Company acquired the HF Trust IV (“Trust XII”) in the acquisition of Great Western in February 2022. HF Financial Corp. caused to be issued 7,000 shares, $1,000 par value, or $7.0 million of preferred securities of Trust XII on September 25, 2003, through a private placement. Trust XII also issued, in aggregate, $0.2 million of common equity securities to HF Financial Corp. The distribution rate is set quarterly at three-month SOFR plus tenor spread plus 3.10%. Interest payment dates are January 8, April 8, July 8, and October 8 of each year, beginning January 8, 2004, and are payable in arrears. The Company acquired the HF Trust V (“Trust XIII”) in the acquisition of Great Western in February 2022. HF Financial Corp. caused to be issued 5,000 shares, $1,000 par value, or $5.0 million of preferred securities of Trust XIII on December 7, 2006, through a private placement. Trust XIII also issued, in aggregate, $0.3 million of common equity securities to HF Financial Corp. The distribution rate is set quarterly at three-month SOFR plus tenor spread plus 1.83%. Interest payment dates are March 1, June 1, September 1, and December 1 of each year, beginning March 1, 2007, and are payable in arrears. In the first quarter of Great Western’s fiscal year 2017, Great Western redeemed 5,000 shares of Trust XIII debentures under the First Supplemental Indenture dated May 13, 2016. The Company acquired the HF Trust VI (“Trust XIV”) in the acquisition of Great Western in February 2022. HF Financial Corp. caused to be issued 2,000 shares, $1,000 par value, or $2.0 million of preferred securities of Trust XIV on July 5, 2007, through a private placement. Trust XIV also issued, in aggregate, $0.2 million of common equity securities to HF Financial Corp. The distribution rate is set quarterly at three-month SOFR plus tenor spread plus 1.65%. Interest payment dates are January 1, April 1, July 1, and October 1 of each year, beginning October 1, 2007, and are payable in arrears. For the seven Subordinated Debentures acquired from Great Western, the Company may, at one or more times, defer interest payments on the related debentures for up to 20 consecutive quarters following suspension of dividends on all capital stock. At the end of any deferral period, all accumulated and unpaid interest must be paid. Subject to the Company receiving prior approval of the Federal Reserve, if required, the Company has the right to redeem the debentures at the redemption price, in whole or in part, on an interest payment date. The redemption price is $1,000 per preferred security plus any accrued and unpaid interest to the date of redemption. Holders of the preferred securities have no voting rights. The preferred securities are unsecured and rank junior in priority of payment to all of the Company’s senior indebtedness and senior to the Company’s common and preferred stock. As of December 31, 2023, the Trust Preferred Securities qualified as tier 2 capital of the Parent Company under the Federal Reserve Board’s capital adequacy guidelines.

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- Definition The entire disclosure for borrowings under subordinated debt agreements that qualify as available in computing net capital under SEC's uniform net capital rule, including restrictive covenants, collateral, interest rates and due dates, amounts due by date and amount owed in total. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 942 -SubTopic 470 -Name Accounting Standards Codification -Section 45 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480876/942-470-45-1 + Details
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