During the third quarter of 2012, the Company completed the previously announced redemption of approximately $14 million fixed-rate subordinated debt, which will reduce approximately $1.5 million (pre-tax) of interest expense on an annual basis going forward. The Company redeemed its 10.875% fixed-rate subordinated debentures in the amount of $7 million issued to Heritage Capital Trust I (and the related premium cost of $304,500) and the Company’s 10.600% fixed-rate subordinated debentures in the amount of $7 million issued to Heritage Statutory Trust I (and the related premium cost of $296,800) (collectively referred to as the “Fixed-Rate Sub Debt”). The related trust securities issued by Capital Trust I and Statutory Trust I were also redeemed in connection with the subordinated debt redemption. A $15 million distribution from the Bank to the Holding Company provided the cash for the redemption. The Company’s and the Bank’s September 30, 2012 regulatory capital ratios decreased from June 30, 2012, primarily due to these transactions, but all of the capital ratios remain safely above the requirements for a well-capitalized institution. The Company incurred a charge of $601,300 in the third quarter of 2012, for the early payoff premium on the redemption of the subordinated debt. Additionally, the Company paid its regularly scheduled interest payments on the Fixed-Rate Sub Debt totaling approximately $752,000.
Due primarily to the $40 million repurchase of the Series A Preferred Stock during the first quarter of 2012, tangible equity was $166.9 million at September 30, 2012, compared to $194.4 million at September 30, 2011. Tangible equity was $162.4 million at June 30, 2012. Tangible book value per common share was $5.60 at September 30, 2012, compared to $5.17 a year ago, and $5.44 at June 30, 2012. In the per common share data attached, the Company presents the pro forma tangible book value per share, assuming the Company’s outstanding Series C Preferred Stock issued in June 2010 is converted into common stock. There were 21,004 shares of Series C Preferred Stock outstanding at September 30, 2012 and the Series C Preferred Stock is convertible into an aggregate of 5.6 million shares of common stock at a conversion price of $3.75, upon a transfer of the Series C Preferred Stock in a widely dispersed offering.
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