PARTICIPATION IN THE SMALL BUSINESS LENDING FUND OF THE U.S. TREASURY DEPARTMENT |
9 Months Ended |
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Sep. 30, 2011 | |
| PARTICIPATION IN THE SMALL BUSINESS LENDING FUND OF THE U.S. TREASURY DEPARTMENT |
NOTE 13 – PARTICIPATION IN THE SMALL BUSINESS LENDING FUND OF
THE U.S. TREASURY DEPARTMENT
On June 21, 2011, the Company entered into a
Securities Purchase Agreement with the Secretary of the Treasury,
pursuant to which the Company issued and sold to the Treasury
40,000 shares of its Senior Non-Cumulative Perpetual Preferred
Stock, Series A, having a liquidation preference of $1,000 per
share (the “Series A Preferred Stock”), for aggregate
proceeds of $40,000,000. The issuance was pursuant to
the Treasury’s Small Business Lending Fund program, a $30
billion fund established under the Small Business Jobs Act of 2010,
which encourages lending to small businesses by providing capital
to qualified community banks with assets of less than $10
billion. The Series A Preferred Stock is entitled to
receive non-cumulative dividends payable quarterly on each January
1, April 1, July 1 and October 1, commencing October 1,
2011. The dividend rate, which is calculated on the
aggregate Liquidation Amount, has been initially set at 1% per
annum based upon the current level of “Qualified Small
Business Lending” (“QSBL”) by the
Bank. The dividend rate for future dividend periods will
be set based upon the percentage change in qualified lending
between each dividend period and the baseline QSBL level
established at the time the Agreement was entered
into. Such dividend rate may vary from 1% per annum to
5% per annum for the second through tenth dividend periods, and
from 1% per annum to 7% per annum for the eleventh through the
first half of the nineteenth dividend periods. If the
Series A Preferred Stock remains outstanding for more than
four-and-one-half years, the dividend rate will be fixed at
9%. Prior to that time, in general, the dividend rate
decreases as the level of the Bank’s QSBL
increases. Such dividends are not cumulative, but the
Company may only declare and pay dividends on its common stock (or
any other equity securities junior to the Series A Preferred Stock)
if it has declared and paid dividends for the current dividend
period on the Series A Preferred Stock, and will be subject to
other restrictions on its ability to repurchase or redeem other
securities. In addition, if (i) the Company has not
timely declared and paid dividends on the Series A Preferred Stock
for six dividend periods or more, whether or not consecutive, and
(ii) shares of Series A Preferred Stock with an aggregate
liquidation preference of at least $25,000,000 are still
outstanding, the Treasury (or any successor holder of Series A
Preferred Stock) may designate two additional directors to be
elected to the Company’s Board of Directors.
As
is more completely described in the Certificate of Designation,
holders of the Series A Preferred Stock have the right to vote as a
separate class on certain matters relating to the rights of holders
of Series A Preferred Stock and on certain corporate
transactions. Except with respect to such matters and,
if applicable, the election of the additional directors described
above, the Series A Preferred Stock does not have voting
rights.
The
Company may redeem the shares of Series A Preferred Stock, in whole
or in part, at any time at a redemption price equal to the sum of
the Liquidation Amount per share and the per-share amount of any
unpaid dividends for the then-current period, subject to any
required prior approval by the Company’s primary federal
banking regulator.
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