Bank Of The Carolinas Corporation Defers Dividend On TARP Preferred Stock
MOCKSVILLE, N.C., Feb. 18, 2011 /PRNewswire/ -- Bank of the Carolinas Corporation (the "Company" -- Nasdaq: BCAR), the holding company for Bank of the Carolinas, announced today that it has notified the United States Department of Treasury (the "Treasury") of its intent to defer the February 2011 payment of its regular quarterly cash dividend on its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, which the Company issued to the Treasury in connection with the Company's participation in the Treasury's TARP Capital Purchase Program. Under the terms of the TARP Preferred Stock, the Company is required to pay quarterly dividends at a rate of 5% per year for the first five years following the Treasury investment, after which the dividend rate automatically increases to 9% per year. The Company may defer dividend payments for up to six consecutive quarters without default or penalty, but the dividend is a cumulative dividend that accrues for payment in the future and will be reported as preferred dividends for financial statement purposes.
Additionally, the Company has also elected to defer its regularly scheduled March 2011 interest payment on its junior subordinated debentures related to outstanding trust preferred securities (TRUPs). Under the terms of the indenture governing the junior subordinated debentures, the Company may defer payments of interest for up 20 consecutive quarterly periods without default or penalty. The regularly scheduled interest payments will continue to accrue for payment in the future and be reported as an expense for financial statement purposes.
While the Company and the Bank remain well capitalized these actions were taken to support and preserve the capital position of the Company and the Bank in light of challenging economic conditions. The deferral of these payments will be re-evaluated periodically and payment will be re-instated when appropriate.
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