Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

9. Subsequent Events

On July 14, 2011, the Company entered into and consummated a Securities Purchase Agreement (the “Purchase Agreement”) with the Secretary of the Treasury of the United States (the “Secretary”), pursuant to which the Company issued 56,600 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), having a liquidation amount per share equal to $1,000, for a total purchase price of $56,600,000.

The Series B Preferred Stock is entitled to receive non-cumulative dividends, beginning October 1, 2011. The dividend rate, as a percentage of the liquidation amount, can fluctuate on a quarterly basis during the first 10 quarters during which the Series B Preferred Stock is outstanding, based upon changes in the level of “Qualified Small Business Lending” or “QBSL” (as defined in the Purchase Agreement) by the Bank. The dividend rate for the initial dividend period has been set at one percent (1%). For the second through ninth calendar quarters, the dividend rate may be adjusted to between one percent (1%) and five percent (5%) per annum, to reflect the amount of change in the Bank’s level of QBSL. If the level of the Bank’s qualified small business loans declines so that the percentage increase in QBSL as compared to the baseline level is less than 10%, then the dividend rate payable on the Series B Preferred Stock would increase. For the tenth calendar quarter through four and one half years after issuance, the dividend rate will be fixed at between one percent (1%) and seven percent (7%) based upon the increase in QBSL as compared to the baseline. After four and one half years from issuance, the dividend rate will increase to 9%.

The Series B Preferred Stock may be redeemed at any time at the Company’s option, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends to the date of redemption for the current period, subject to the approval of its federal banking regulator.

On July 14, 2011, the Company entered into and consummated a letter agreement (the “Repurchase Letter”) with the Treasury, pursuant to which the Company redeemed, out of the proceeds of the issuance of the Series B Preferred Stock, all 23,325 outstanding shares of the Series A Preferred Stock, for a redemption price of $23,425,398, including accrued but unpaid dividends to the date of redemption.

On July 27, 2011, the Company entered into a definitive merger agreement (the “Agreement”), pursuant to which Alliance Bankshares Corporation (“Alliance”) will be merged into the Company.

The merger is structured as a stock-for-stock transaction, under which Alliance shareholders will receive 0.4317 shares (the “Conversion Ratio”) of the Company’s common stock for each share of Alliance common stock, subject to adjustment based upon certain factors set forth in the Agreement.

The merger is expected to close in the fourth quarter of 2011.  It has been approved by the boards of directors of both companies and is subject to the approval by Alliance shareholders, regulatory approvals, and the satisfaction or waiver of the conditions to closing and covenants of each of the parties contained in the Agreement.