CUMULATIVE PERPETUAL PREFERRED STOCK

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note [Abstract]

Cumulative Perpetural Preferred Stock [Text Block]

CUMULATIVE PERPETUAL PREFERRED STOCK

Crescent Financial Preferred Stock

Pursuant to the U.S Treasury’s Troubled Asset Relief Program ("TARP"), the Company issued $24,900 in Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“TARP Preferred Stock”), on January 9, 2009. In addition, the Company provided a warrant to the Treasury to purchase 833,705 shares of the Company’s common stock at an exercise price of $4.48 per share. These warrants were immediately exercisable and expire ten years from the date of issuance. The preferred stock is non-voting, other than having class voting rights on certain matters, and pays cumulative dividends quarterly at a rate of 5 percent per annum for the first five years and 9 percent per annum thereafter. The preferred shares are redeemable at the option of the Company subject to regulatory approval.

The Company assigned an estimated fair value to both the TARP Preferred Stock and common stock warrants in purchase accounting in connection with Piedmont's acquisition of Crescent Financial. These securities represent non-controlling interests that were recorded at estimated fair value. The preferred stock was valued based on forecasting expected cash flows with an assumed repayment date and discounting these cash flows based on current market yields for similar preferred stock. For purposes of the discount rate, we used the market yield on an index of publicly traded preferred stocks adjusted for a liquidity factor. The preferred stock was assigned a non-controlling interest fair value of $24,400 at the acquisition date, and the discount between this value and the $24,900 redemption value is being accreted as a reduction in net income (loss) available for common stockholders over a two-year period.

The common stock warrants were valued at $1.59 per share, or $1,325 in the aggregate, at the acquisition date using a Black-Scholes option pricing model. Assumptions used in the Black-Scholes option pricing model were as follows:

Risk-free interest rate	0.31	%
Expected life of warrants	2 years
Expected dividend yield	—	%
Expected volatility	65.10	%

The risk-free interest rate was based on the market yield for two-year U.S. Treasury securities as of the acquisition date.

As a condition of TARP, the Company must obtain consent from the U.S. Treasury to repurchase its common stock or to pay a cash dividend on its common stock. Furthermore, the Company has agreed to certain restrictions on executive compensation and is subjected to heightened corporate governance requirements.

In the second quarter of 2012, the Company received approval from the Federal Reserve Bank of Richmond to resume payment of preferred dividends on its TARP Preferred Stock. The Company had deferred dividend payments with the payment due February 15, 2011, but it paid all deferred cumulative preferred dividends of approximately $1,600 plus then-current dividends on the quarterly payment date of May 15, 2012. The Company is current on all TARP Preferred Stock dividend payments.

Legacy VantageSouth Preferred Stock

On February 19, 2010, Legacy VantageSouth sold 1,768,794 shares of its newly issued Series A Convertible Perpetual Preferred Stock (the “Legacy VantageSouth Preferred Stock”) to Piedmont for an aggregate price of $7,700, or $4.35 per share. The Legacy VantageSouth Preferred Stock was immediately convertible on a one-for-one basis into shares of Legacy VantageSouth's common stock, which totaled approximately 62 percent of its outstanding common stock at the date of the transaction (as adjusted for the assumed conversion of the Legacy VantageSouth Preferred Stock). An additional 42,632 shares of Legacy VantageSouth Preferred Stock was sold in a rights offering to non-controlling shareholders for an aggregate purchase price of $185, or $4.35 per share. The Legacy VantageSouth Preferred Stock was partially converted into Legacy VantageSouth's common stock in 2010 and 2011, and the remaining conversion occurred immediately following the merger of Rowan into Legacy VantageSouth in February 2012. There was no Legacy VantageSouth Preferred Stock outstanding when the bank was merged into Crescent Financial in November 2012.