Heritage Bankshares, Inc. Completes Capital Purchase Transaction With U.S. Treasury
26 September 2009 - 5:07AM
PR Newswire (US)
NORFOLK, Va., Sept. 25 /PRNewswire-FirstCall/ -- Heritage
Bankshares, Inc. (the "Company") (OTC:HBKS) (BULLETIN BOARD: HBKS)
, the parent of Heritage Bank (the "Bank"), has completed an
investment transaction with the United States Department of the
Treasury ("Treasury") under the TARP Capital Purchase Program
established by the Treasury (the "Program"). Under the Program, the
Company issued 10,103 shares of its Fixed Rate Cumulative Perpetual
Preferred Stock, Series A (the "Series A Stock"), in exchange for
$10.103 million in proceeds. In addition to the issuance of the
Series A Stock, as a part of the transaction the Company issued to
the Treasury a warrant to purchase 303.00303 shares of its Fixed
Rate Cumulative Preferred Stock, Series B (the "Series B Stock);
immediately following the issuance of the Series A stock, the
Treasury exercised its rights and acquired 303 shares of Series B
Stock through a cashless exercise. The newly issued Series A Stock,
generally non-voting stock, pays cumulative dividends at an annual
rate of 5% for five years, and an annual rate of 9%, thereafter.
The newly issued Series B Stock, generally non-voting, pays
cumulative dividends at a rate of 9% per annum. Both the Series A
Stock and the Series B Stock were issued in a private placement
transaction. More details of the transaction may be found in the
Company's Current Report on Form 8K to be filed with the United
States Securities and Exchange Commission regarding the Company's
participation in the Program. President and CEO, Michael S. Ives
commented: "It may appear strange that a company as strong as ours
would take this step now when so many banks are seeking to repay
their obligations to the United States Treasury. Our Board of
Directors carefully considered the pros and cons of accepting TARP
Capital over a period of months and concluded that accepting TARP
Capital was in the best interest of our shareholders and clients.
"First and foremost among the reasons for accepting TARP Capital is
to provide the Company with the amount of capital necessary for
more rapid growth as soon as our local economy improves. Accepting
TARP Capital is by far the least dilutive means of raising capital,
as no additional shares of common stock would be issued. Because we
participate under the TARP 'private company' regime, our TARP
Capital did not involve the issuance of any warrants on our common
stock. Our shareholders have the best of both worlds in that the
Company will be able to take advantage of opportunities for
material growth as soon as they arise but will not face the
substantial permanent dilution that comes from issuing new common
stock in this environment. "Among other reasons for accepting TARP
Capital were (a) capital 'insurance' against any further
deterioration of the local economy or a lengthy period of high
unemployment, (b) immediate compliance with any higher regulatory
capital requirements that might be instituted, and (c) additional
assurance to our clients of the safety and soundness of the Company
in the event of any further deterioration of the banking system.
Adding the TARP Capital to the Company's capital as of June 30,
2009 would have given the Company a powerful tangible capital ratio
of approximately 13%, as of that date. "Given our existing capital
position and our strong asset quality, we made this decision out of
strength and not out of weakness. If we need additional capital in
the years ahead, we have it. If a need does not arise, we can repay
the TARP Capital. In either event, by accepting TARP Capital now we
have served the interests of our existing shareholders as we
prepare for any eventuality that might occur over the next several
years." The following table shows the Company's historical
regulatory capital ratios as of December 31, 2008, as well as
estimated pro forma ratios for an investment of $10.1 million under
the Program as if such investment had been made as of December 31,
2008. Pro Forma as of December 31, 2008 Assuming Sale of $10.1
Million of Senior Preferred Regulatory Capital December 31, 2008
Pursuant to the Ratios Actual Program ------ ------ ------- Tier I
Leverage Ratio 10.11% 13.58% Tier I Risk Based Ratio 12.59% 17.41%
Total Risk Based Ratio 13.41% 18.23% About Heritage Heritage is the
parent company of Heritage Bank (http://www.heritagebankva.com/).
Heritage Bank has four full-service branches in the city of Norfolk
and two full-service branches in the city of Virginia Beach.
Heritage Bank provides a full range of banking services including
business, personal and mortgage loans. Forward Looking Statements
The press release contains statements that constitute
"forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking
statements address future events, developments or results and
typically use words such as believe, anticipate, expect, intend,
plan, forecast, outlook, or estimate. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause Heritage's actual results, performance,
achievements, and business strategy to differ materially from the
anticipated results, performance, achievements or business strategy
expressed or implied by such forward-looking statements. Factors
that could cause such actual results, performance, achievements and
business strategy to differ materially from anticipated results,
performance, achievements and business strategy include: general
and local economic conditions, competition, capital requirements of
the planned expansion, customer demand for Heritage's banking
products and services, and the risks and uncertainties described in
Heritage's most recent Form 10-K filed with the Securities and
Exchange Commission. Heritage disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. DATASOURCE:
Heritage Bankshares, Inc. CONTACT: John O. Guthrie of Heritage
Bankshares, Inc., +1-757-648-1523 Web Site:
http://www.heritagebankva.com/
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