PBKS » Topics » Troubled Asset Relief Program

This excerpt taken from the PBKS 10-Q filed May 11, 2009.

Troubled Asset Relief Program

In November 2008, as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program, the Corporation entered into a Purchase Agreement with the United States Department of the Treasury, pursuant to which Provident sold 151,500 shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B and a warrant to purchase 2,374,608 shares of the Corporation’s common stock, par value $1.00 per share, for an aggregate purchase price of $151.5 million in cash. This capital is considered Tier 1 capital.

The senior preferred stock pays a dividend of 5% per year for the first five years and resets to 9% per year thereafter. In accordance with the recently enacted American Recovery and Reinvestment Act of 2009 and related guidance from the United States Department of the Treasury, the senior preferred stock may be redeemed at any time at the option of the Corporation,

 

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subject to consultation with the Corporation’s primary federal banking regulator, provided that any partial redemption must be for at least 25% of the issue price of the senior preferred stock. Any redemption of the senior preferred stock would be at one hundred percent (100%) of its issue price, plus any accrued and unpaid dividends. The senior preferred stock may be redeemed without regard to whether the Corporation has replaced such funds from any other source or to any waiting period. Upon redemption of the senior preferred stock the United States Department of the Treasury will liquidate any warrants issued in connection with the senior preferred stock at the current market price. Dividends paid on the senior shares are cumulative. The stock warrant was issued with an initial exercise price of $9.57. The warrant has a ten year term and is exercisable immediately, in whole or in part, over the term of 10 years. Any common shares issued under the exercise of the warrant are non-voting shares. If the Corporation raises common or perpetual preferred equity equal to or at least 100% of the senior preferred shares issued under TARP by December 31, 2009, the number of convertible shares relating to the warrant shall be reduced by 50%. The terms of TARP also include certain limitations on executive compensation.

In conjunction with the issuance of the senior preferred shares and the stock warrant, the stock warrant was allocated a portion of the $151.5 million issuance proceeds as required by current accounting standards. The allocation of this value was based on the relative fair value of the senior preferred shares and the stock warrants to the combined fair value. Accordingly, the value of the stock warrant was determined to be $13.2 million which was allocated from the proceeds and recorded in additional paid-in capital in the Condensed Consolidated Statements of Condition. This non-cash amount is considered a discount to the preferred stock and is amortized over a five year period using the interest method and accreted as a dividend recorded on the senior preferred shares. For the quarter ended March 31, 2009, the Corporation recorded $562 thousand in amortization of the preferred stock discount. The warrant is included in the diluted average common shares outstanding, if dilutive.

These excerpts taken from the PBKS 10-K filed Mar 13, 2009.

Troubled Asset Relief Program

In November 2008, as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program, the Corporation entered into a Purchase Agreement with the United States Department of the Treasury, pursuant to which Provident sold 151,500 shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B and a warrant to purchase 2,374,608 shares of the Corporation’s common stock, par value $1.00 per share for an aggregate purchase price of $151.5 million in cash. This capital is considered Tier 1 capital.

The senior preferred stock pays a dividend of 5% per year for the first five years and resets to 9% per year thereafter. The senior preferred shares are callable at par after three years and can be redeemed prior to then at 100% of the issue price, subject to the approval of the Corporation’s federal regulator. Redemption of the preferred shares can occur only if the shares

 

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are replaced with a similar class of capital. Dividends paid on the senior shares are cumulative. The stock warrant was issued with an initial exercise price of $9.57. The warrant has a ten year term and is exercisable immediately, in whole or in part, over the term of 10 years. Any common shares issued under the exercise of the warrant are non-voting shares. If the Corporation raises common or perpetual preferred equity equal to or at least 100% of the senior preferred shares issued under TARP by December 31, 2009, the number of convertible shares relating to the warrant shall be reduced by 50%. The terms of TARP also include certain limitation on executive compensation.

In conjunction with the issuance of the senior preferred shares and the stock warrant, the stock warrant was allocated a portion of the $151.5 million issuance proceeds as required by current accounting standards. The allocation of this value was based on the relative fair value of the senior preferred shares and the stock warrants to the combined fair value. Accordingly, the value of the stock warrant was determined to be $13.2 million which was allocated from the proceeds and recorded in additional paid-in capital in the Consolidated Statements of Condition. This non-cash amount is considered a discount to the preferred stock and will be amortized over a five year period using the interest method and accreted as a dividend recorded on the senior preferred shares. For the year ended December 31, 2008 the Corporation recorded $290 thousand in amortization of the preferred stock discount. The warrant is included in the diluted average common shares outstanding.

Troubled Asset Relief Program

FACE="Times New Roman" SIZE="2">In November 2008, as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program, the Corporation entered into a Purchase Agreement with the United States Department of the Treasury, pursuant
to which Provident sold 151,500 shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B and a warrant to purchase 2,374,608 shares of the Corporation’s common stock, par value $1.00 per share for an aggregate
purchase price of $151.5 million in cash. This capital is considered Tier 1 capital.

The senior preferred stock pays a dividend of 5% per year for
the first five years and resets to 9% per year thereafter. The senior preferred shares are callable at par after three years and can be redeemed prior to then at 100% of the issue price, subject to the approval of the Corporation’s federal
regulator. Redemption of the preferred shares can occur only if the shares

 


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are replaced with a similar class of capital. Dividends paid on the senior shares are cumulative. The stock warrant was issued with an initial exercise price
of $9.57. The warrant has a ten year term and is exercisable immediately, in whole or in part, over the term of 10 years. Any common shares issued under the exercise of the warrant are non-voting shares. If the Corporation raises common or perpetual
preferred equity equal to or at least 100% of the senior preferred shares issued under TARP by December 31, 2009, the number of convertible shares relating to the warrant shall be reduced by 50%. The terms of TARP also include certain
limitation on executive compensation.

In conjunction with the issuance of the senior preferred shares and the stock warrant, the stock warrant was
allocated a portion of the $151.5 million issuance proceeds as required by current accounting standards. The allocation of this value was based on the relative fair value of the senior preferred shares and the stock warrants to the combined fair
value. Accordingly, the value of the stock warrant was determined to be $13.2 million which was allocated from the proceeds and recorded in additional paid-in capital in the Consolidated Statements of Condition. This non-cash amount is considered a
discount to the preferred stock and will be amortized over a five year period using the interest method and accreted as a dividend recorded on the senior preferred shares. For the year ended December 31, 2008 the Corporation recorded $290
thousand in amortization of the preferred stock discount. The warrant is included in the diluted average common shares outstanding.

"Troubled Asset Relief Program" elsewhere:

United Community Banks (UCBI)
WesBanco (WSBC)
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