13. SUBORDINATED DEBENTURES

At March 31, 2016, the Company had outstanding $13.3 million in subordinated debentures net of $8.9 million purchase discount. On October 1. 2015, the Company acquired Patriot Bancshares, Inc., and assumed the obligations related to the subordinated debentures issued to Capital Trust I and Capital Trust II.

A summary of pertinent information related to the Company’s two issues of subordinated debentures outstanding at March 31, 2016 is set forth in the table below:

Description

Issuance Date

Trust Preferred Securities Outstanding

Interest Rate(1)

Subordinated Debt Owed to Trusts

Maturity Date(2)

(Dollars in thousands)

Patriot Bancshares Capital Trust I

March 31, 2006

5,000

3 month LIBOR +1.85%, not to exceed 11.90%

5,155

April 7, 2036

Patriot Bancshares Capital Trust II

August 8, 2007

16,500

3 month LIBOR +1.80%, not to exceed 11.90%

17,011

September 15, 2037

⁽¹⁾

The 3-month LIBOR in effect as of March 31, 2016 was 0.629%.

⁽²⁾

All debentures are callable five years from issuance date.

Each of the trusts is a capital trust organized for the sole purpose of issuing trust securities and investing the proceeds in the Company’s junior subordinated debentures. The trust preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the junior subordinated debentures held by the trust. The common securities of each trust are 100% owned by the Company. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related subordinated debentures. The debentures, which are the only assets of each trust, are subordinate and junior in right of payment to all of the Company’s present and future senior indebtedness. The Company has fully and unconditionally guaranteed each trust’s obligations under the trust securities issued by such trust to the extent not paid or made by each trust, provided such trust has funds available for such obligations.

Under the provisions of each issue of the debentures, the Company has the right to defer payment of interest on the debentures at any time, or from time to time, for periods not exceeding five years. If interest payments on either issue of the debentures are deferred, the distributions on the applicable trust preferred securities and common securities will also be deferred.