NORFOLK, Va., March 15, 2011 /PRNewswire/ -- Heritage Bankshares, Inc. ("Heritage"; the "Company") (OTC Bulletin Board: HBKS), parent of Heritage Bank (the "Bank"), announced today that it has received approval from the U.S. Treasury to redeem approximately 25% of the preferred shares the Company originally issued to the Treasury under the TARP Capital Purchase Program. Heritage expects to pay the Treasury approximately $2.617 million, which includes accrued dividends of approximately $11,000, on March 16, 2011 to complete the partial redemption. As a result of the redemption, quarterly preferred stock dividends will be reduced by $32,575 per quarter, commencing in the second quarter of 2011. In addition, the Company will accelerate the accretion of a portion of its preferred stock discount, which was $234,700 as of December 31, 2010, thereby reducing net income available to common stockholders by approximately $57,000 in the first quarter of 2011 but eliminating any future accretion of that amount. The Company's redemption of these shares is not subject to additional conditions or stipulations from the Treasury.
Michael S. Ives, President and CEO of the Company and the Bank, commented:
"We are pleased to commence the redemption of the preferred stock the Company issued to the United States Treasury under the TARP Capital Purchase Program. The funds for this initial redemption came from the existing financial resources of the Company. There is no dilution to our common shareholders from this redemption. Instead, our common shareholders will benefit from a decrease in our dividend payments on our outstanding preferred stock in the future.
"We participated in the TARP Capital Purchase Program for the dual purposes of strengthening our balance sheet in a difficult economy and increasing our lending capabilities. In effect, this preferred stock has served as an advance of capital in anticipation of future growth in our capital from earnings. We plan to continue to retire our outstanding preferred stock over time from our internal resources to have the ongoing benefit of high levels of capital without dilution to our existing common shareholders."