Heritage Bankshares Inc. said Thursday that it had completed a $7.8 million investment transaction in the Small Business Lending Fund program.
The deal also allows Norfolk, Va.-based Heritage to fully exiting from the Troubled Asset Relief Program.
Under the SBLF, Heritage issued 7.8 million shares of newly created preferred stock to the Treasury Department. As part of the agreement, Heritage pays a dividend rate on its SBLF stock fluctuating between 1% and 5% for the first 2.5 years. The rate is then fixed between 1% and 7% for the next 4.5 years.
The rate fluctuates based on the company's qualified small business lending activity. Heritage said its baseline level of qualified small business lending is less than $70 million which, compared to its initial level, will carry a 5% dividend rate during the third quarter. The company also plans to accelerate the accretion of its Tarp preferred stock discount during the quarter, which will reduce net income available to common shareholders by $153,000.
However, that would get rid of any further accretion helping boost earnings in the fourth quarter. Heritage said it expects the SBLF rate to drop to 1% in the fourth quarter because of more qualified loans at June 30.