Heritage Commerce (HTBK) Repays $40M of TARP Funds
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Heritage Commerce Corp (Nasdaq: HTBK), has fully repaid the $40 million of Series A preferred stock issued to the U.S. Treasury Department under the TARP Capital Purchase Program.
The Company’s strong capital levels, balance sheet, and profitability allowed the Company to exit TARP without raising any additional capital or debt. The Company used available cash (including a $30 million cash distribution from HBC) to fund the repurchase of the preferred stock of $40 million and payment of the final dividend of approximately $122,000.
The Company’s and HBC’s December 31, 2011 regulatory capital ratios and pro forma capital ratios, excluding the repurchased $40 million preferred stock and the $30 million cash contribution from HBC, are detailed in the tables below. The Company’s and HBC’s pro forma December 31, 2011 regulatory capital ratios all significantly exceed the well-capitalized requirements.
The preferred stock was issued at a discount and the repurchase will accelerate the accretion of the discount on the preferred stock. While the accelerated accretion will not impact net income, it will result in a one-time non-cash reduction in net income available to common shareholders of approximately $765,000 in the first quarter of 2012. Total dividends and discount accretion on preferred stock, including the accelerated accretion, will reduce net income available to common shareholders by approximately $1.2 million in the first quarter of 2012. While participating in the TARP Capital Purchase Program, the Company paid $6.6 million in cash dividends to the U.S. Treasury. The repayment of the TARP funds will save the Company $2.0 million in preferred dividend payments on an annual basis, beginning in the second quarter of 2012.
In conjunction with the issuance of the Series A Preferred Stock, the Company issued a warrant to the U.S. Treasury to purchase 462,963 shares of the Company’s common at an exercise price of $12.96 per share in November 2008. The Company will review the opportunity to repurchase the warrant issued to the U.S. Treasury.
The Company’s strong capital levels, balance sheet, and profitability allowed the Company to exit TARP without raising any additional capital or debt. The Company used available cash (including a $30 million cash distribution from HBC) to fund the repurchase of the preferred stock of $40 million and payment of the final dividend of approximately $122,000.
The Company’s and HBC’s December 31, 2011 regulatory capital ratios and pro forma capital ratios, excluding the repurchased $40 million preferred stock and the $30 million cash contribution from HBC, are detailed in the tables below. The Company’s and HBC’s pro forma December 31, 2011 regulatory capital ratios all significantly exceed the well-capitalized requirements.
The preferred stock was issued at a discount and the repurchase will accelerate the accretion of the discount on the preferred stock. While the accelerated accretion will not impact net income, it will result in a one-time non-cash reduction in net income available to common shareholders of approximately $765,000 in the first quarter of 2012. Total dividends and discount accretion on preferred stock, including the accelerated accretion, will reduce net income available to common shareholders by approximately $1.2 million in the first quarter of 2012. While participating in the TARP Capital Purchase Program, the Company paid $6.6 million in cash dividends to the U.S. Treasury. The repayment of the TARP funds will save the Company $2.0 million in preferred dividend payments on an annual basis, beginning in the second quarter of 2012.
In conjunction with the issuance of the Series A Preferred Stock, the Company issued a warrant to the U.S. Treasury to purchase 462,963 shares of the Company’s common at an exercise price of $12.96 per share in November 2008. The Company will review the opportunity to repurchase the warrant issued to the U.S. Treasury.
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