NORFOLK, Va., Aug. 11, 2011 /PRNewswire/ -- Heritage Bankshares, Inc. (the "Company") (OTCBB: HBKS), the parent of Heritage Bank (the "Bank"), has completed a $7.8 million investment transaction under the Small Business Lending Fund program (the "SBLF Program"). The SBLF Program is a voluntary program authorized under the Small Business Jobs Act of 2010 which established a $30 billion fund from which the Treasury can make capital investments in eligible institutions; the capital investments, in turn, are designed to increase the availability of credit for small businesses and promote economic growth by providing capital to qualified community banks at favorable rates.
Simultaneously with its closing of the SBLF Program transaction, the Company used the SBLF investment proceeds to redeem the full remaining balance of $7.8 million of shares of preferred stock held by the Treasury pursuant to the Company's participation in the TARP Capital Purchase Program, thereby satisfying its remaining financial obligations under and otherwise ending its participation in the TARP program. The Company had previously redeemed approximately $2.6 million shares of TARP preferred stock in March 2011.
In the SBLF Program transaction, the Company issued to the Secretary of the Treasury a total of 7.8 million shares of a newlycreated series of preferred stock. For the initial 2.5 years after the SBLF investment, the dividend rate payable on the SBLF preferred stock will fluctuate between 1% and 5% per year to reflect changes in the Bank's level of "qualified small business lending" as compared to an initial baseline level. Following this initial period and continuing through 4.5 years after the SBLF investment, the dividend rate will be fixed at between 1% and 7% based on the Bank's qualified small business lending at that time, as compared to the initial baseline; however, the dividend rate would increase to 7% only if the Bank's rate of small business lending stays the same or decreases relative to the baseline.