9. Long-Term Debt

Outstanding subordinated debentures and notes payable at December 31, 2016 and 2015, are summarized as follows:


	At December 31,
(in thousands)	2016		2015		Interest rate	Maturity date	Earliest call date
Junior subordinated debentures:
CoBiz Statutory Trust I	$	20,619	$	20,619	3-month LIBOR + 2.95%	September 17, 2033	March 17, 2017
CoBiz Capital Trust II		30,928		30,928	3-month LIBOR + 2.60%	July 23, 2034	January 23, 2017
CoBiz Capital Trust III		20,619		20,619	3-month LIBOR + 1.45%	September 30, 2035	March 30, 2017
Total junior subordinated debentures	$	72,166	$	72,166


Other long-term debt:
Subordinated notes payable ($60,000 face amount)	$	59,111	$	59,031	Fixed 5.625%	June 25, 2030	June 25, 2025

Effective for interest payments beginning in February 2010, the Company fixed the interest rate on its junior subordinated debentures through a series of interest rate swaps. For further discussion of the interest rate swaps and the corresponding terms, see Note 10 - Derivatives.

In September 2003, the Company created a wholly owned trust, CoBiz Statutory Trust I, formed under the laws of the State of Connecticut (the Statutory Trust). The Statutory Trust issued $20.0 million of trust preferred securities bearing an interest rate based on a spread above three-month LIBOR. Simultaneously with the issuance, the Company purchased a minority interest in the Statutory Trust for $0.6 million. The Statutory Trust invested the proceeds thereof in $20.6 million of junior subordinated debentures of CoBiz that also bear an interest rate based on a spread above three‑month LIBOR. The securities and junior subordinated debentures provide cumulative distributions at a floating rate that is reset each quarter on March 17, June 17, September 17 and December 17. The junior subordinated debentures will mature and the capital securities must be redeemed on September 17, 2033, which may be shortened to any quarterly distribution date, if certain conditions are met (including the Company having received prior approval from the Federal Reserve and any other required regulatory approvals) and notice is given at least 30 and not more than 60 days prior to the redemption date.

In May 2004, the Company created a wholly owned trust, CoBiz Capital Trust II, formed under the laws of the State of Delaware (the Capital Trust II). The Capital Trust II issued $30.0 million of trust preferred securities bearing an interest rate based on a spread above three-month LIBOR. Simultaneously with the issuance, the Company purchased a minority interest in the Capital Trust II for $0.9 million. The Capital Trust II invested the proceeds thereof in $30.9 million of junior subordinated debentures of CoBiz that also bear an interest rate based on a spread above three-month LIBOR. The securities and junior subordinated debentures provide cumulative distributions at a floating rate that is reset each quarter on January 23, April 23, July 23 and October 23. The junior subordinated debentures will mature and the capital securities must be redeemed no later than July 23, 2034, if certain conditions are met (including the Company having received prior approval from the Federal Reserve and any other required regulatory approvals).

In August 2005, the Company created a wholly owned trust, CoBiz Capital Trust III, formed under the laws of the State of Delaware (the Capital Trust III). The Capital Trust III issued $20.0 million of trust preferred securities bearing an interest rate based on a spread above three-month LIBOR. Simultaneously with the issuance, the Company purchased a minority interest in the Capital Trust III for $0.6 million. The Capital Trust III invested the proceeds thereof in $20.6 million of junior subordinated debentures of CoBiz that also bear an interest rate based on a spread above three‑month LIBOR. The securities and junior subordinated debentures provide cumulative distributions at a floating rate that is reset each quarter on March 30, June 30, September 30 and December 30. The junior subordinated debentures will mature and the capital securities must be redeemed no later than September 30, 2035, if certain conditions are met (including the Company having received prior approval from the Federal Reserve and any other required regulatory approvals).

The Company records the distributions of the junior subordinated debentures in interest expense on the consolidated statements of income. All of the outstanding junior subordinated debentures may be prepaid if certain events occur, including a change in tax status or regulatory capital treatment of trust preferred securities. In each case, redemption will be made at par, plus the accrued and unpaid distributions thereon through the redemption date.

The Basel III capital rules contain a provision that preserves the current capital treatment of trust preferred securities issued by bank holding companies with less than $15 billion in total assets. Although the accounts of the Statutory Trust, Capital Trust II and Capital Trust III are not included in the Company’s consolidated financial statements, $70.0 million in trust preferred securities issued by the trusts are included in Common equity Tier 1 capital for regulatory purposes as grandfathered under Basel III. See Note 17 – Regulatory Matters.

In June 2015, the Company completed an offering of $60.0 million of unsecured 5.625% Fixed-to-Floating Rate Subordinated Notes (Notes) due on June 25, 2030. The Notes bear a 5.625% annual fixed-rate through June 25, 2025 and thereafter an annual floating rate equal to three-month LIBOR plus 317 basis points (3.17%). The Notes contain a call option that allows the Company to repay the Notes prior to their contractual maturity. The call option is available on June 25, 2025 and quarterly thereafter at 100% of the principal amount. Proceeds, net of an original discount and debt issuance costs of $1.1 million, were $58.9 million. Debt issuance costs incurred in conjunction with the offering were $0.3 million. The Notes have an effective interest rate of 5.85%. The Company has adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), that requires debt issuance costs to be reported as a direct deduction from the face of the note and not as a deferred charge. The discount and related debt issuance costs will be amortized into interest expense using the interest method over a 10-year term to the first call date.