Preferred Stock and Warrant under the TARP Capital Purchase Program

6 Months Ended

Jun. 30, 2011

Preferred Stock and Warrant under the TARP Capital Purchase Program

Preferred Stock and Warrant under the TARP Capital Purchase Program

10. Preferred Stock and Warrant under the TARP Capital Purchase Program

On December 23, 2008, the Company issued 23,864 shares of Series C Preferred Stock (Preferred Stock) and a 10-year Warrant to purchase up to 396,412 shares of the Company’s common stock at an exercise price of $9.03 per share.  The Company sold the Preferred Stock and Warrant to the U.S. Treasury under the TARP Capital Purchase Program for an aggregate amount of $23.9 million.  The Company has paid a cash dividend on the Preferred Stock of 5% per annum since the issuance.

The Company recorded the issuance of the Preferred Stock and Warrant as an increase in shareholders’ equity.  The net proceeds from the transaction were allocated between Preferred Stock and the Warrant based on their respective fair values at the date of the issuance.  Utilizing the results of a Black-Sholes model, the Company allocated approximately $70,000 to the Warrant (i.e. the discount on the Preferred Stock) to be amortized over a five year period.

On March 16, 2011, the Company fully redeemed all of its Preferred Stock under the TARP Capital Purchase Program for $23.9 million.  The redemption was funded by the net proceeds from a $30.0 million private placement of the Company’s common stock completed in the fourth quarter of 2010.  As a result of the early repayment, the Company recorded a $30,000 charge in the first quarter of 2011 to reflect the accelerated accretion of the remaining discount on the preferred stock.

On April 20, 2011, the Company negotiated and repurchased the Warrant held by the U.S. Treasury for $1.4 million, which was recorded as a reduction to shareholders’ equity.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources” for additional preferred and common stock discussion.