Any one using Trust Preferred Securities to increase capital levels?

Need info on how they work.

It's basically borrowings at the holding company level that you can push down to the bank and treat as capital (it also counts as capital at the holding company level, subject to limits, if you need to meet requirements there). What kind of spreads are you seeing?

I have been told the pool of investors now want at least 250 to 350 BP over prime. We are trying to decide what to do. The paper work (legal/acct) is expensive also.

I am not certain on how to "push down" the TPS from the holding company to the bank. What would the journal entry look like?

HOLDING COMPANY:
CASH 10M
TRUST PREFERRED STK 10M
issue 10M of TPS to investors

then pay this cash to the bank?

INVESTMENT IN BANK 10M
CASH 10M


BANK:
CASH 10M
TRUST PERFERRED STK 10M

Is this the entry?

I believe at the bank level it would just be PIC.

What is all of this data about the TPS only being taken into account for 25% of the capital Tier 1 calculation?

Once it gets into the Bank's PIC account, how do you know, ongoing, how to make the calcuation? Do you set up a separate PIC account just for this specific dollar amount?

In all the articles I have read, there is very little data on how to handle it on the Bank's side.

I believe the 25% limitation is at the holding company level. I don't think there is anything to calculate or handle at the bank level. The trust preferred securities provide proceeds for the holding company to do with whatever it wants - it can push the funds down to the bank for an investment in that subsidiary, or it can do other things with them. But that liability/capital can only count for up to 25% of the tier 1 capital requirement at the holding company level. If those funds are pushed down to the bank, then it's simply capital at that level.