Surrey Bancorp has raised $2 million in capital as a result of its participation in the U.S. Treasury’s capital purchase programme.
The company issued 2,000 shares of Surrey Bancorp preferred stock at a 5% annual dividend rate for the first five years, increasing to 9% in subsequent years if the shares are not redeemed. These shares can be redeemed after three years.
In addition, related warrants will allow the Treasury to obtain additional shares of preferred stock at an annual dividend rate of 9%. Shares purchased with the warrants can also be redeemed after three years.
The company’s tier one capital ratio will increase from 14.83% as of September 30, 2008 to 16.01%as a result of its participation in the programme.
Edward Ashby III, president and CEO of Surrey Bancorp, said Surrey Bancorp has always been extremely well capitalised, but given the uncertain economic climate, we felt it prudent to further strengthen our capital. The additional capital will also extend our lending capability.
The U.S. Treasury recently created the capital purchase programme (CPP) which is part of the troubled assets relief programme to encourage qualifying U.S. financial institutions to increase the flow of financing to businesses and consumers, thereby restoring liquidity and stability to the U.S. financial system. Companies participating in the programme must adopt the Treasury Department’s standards for executive compensation and corporate governance, for the period during which Treasury holds equity issued under this programme. These standards generally apply to the chief executive officer, chief financial officer and the next three most highly compensated executive officers. The approval is subject to certain conditions and the execution of definitive agreements.
