CAPITAL TRANSACTIONS

12 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE S – CAPITAL TRANSACTIONS

Common Stock

During 2014 the capital of the Company increased primarily due to the acquisition of Legacy Select on July 25, 2014. The Company issued 4,416,500 shares of common stock in connection with the acquisition, based on an exchange ratio of 1.8264 shares for each outstanding share of Legacy Select common stock. Based on 202,842 shares of Legacy Select common stock underlying stock options outstanding on July 25, 2014, the Company reserved an additional 370,278 shares of its common stock for issuance under the converted stock options, which were converted into stock options covering shares of the Company’s common stock using the same exchange ratio.

Preferred Stock

As part of the merger with Legacy Select, the Company amended its Articles of Incorporation to authorize the issuance of 5,000,000 shares of preferred stock, no par value per share. The Company’s amended Articles of Incorporation authorize the Company’s Board from time to time by resolution and without further shareholder action, to provide for the issuance of shares of preferred stock, in one or more series, and to fix the preferences, limitations and relative rights of such shares of preferred stock, subject to certain limitations.

On August 9, 2011, Legacy Select Bancorp issued 7,645 shares of Series A stock for $7.645 million to the U.S. Treasury as a condition to its participation in the U.S. Treasury’s Small Business Lending Fund (SBLF) program. The Select Bancorp Series A stock is non-voting, other than having class voting rights on certain matters. The Select Bancorp Series A stock pays dividends quarterly. During the first nine quarters following the date of the initial investment, the quarterly dividend rate fluctuates between an annualized rate of 1% to 5% based on changes in the level of qualified small business lending of Select Bank. The current annualized dividend rate on the Select Bancorp Series A stock is 1%. The dividend rate on the Series A stock will be fixed at a rate between 1% to 7% for the period covering the 10^th quarter through the date that is 4.5 years following the date of the initial investment. This fixed dividend rate is based on Select Bank’s qualified small business lending. Following the 4.5-year anniversary of the initial investment, the dividend rate on the Series A stock is increased to 9% per annum. The Treasury is the sole holder of the Select Bancorp Series A stock.

 

As a condition of the issuance of the Series A stock under the SBLF program, Select Bancorp may not pay a cash dividend on its common stock if it is delinquent on its payment of the dividends to the U.S.

Treasury. The shares of Series A stock are redeemable at the option of Select Bancorp, upon receipt of any required regulatory approvals.