EVB plans to soon rid itself of its outstanding TARP shares. Photo by Michael Schwartz.
A local bank has found a way to shed a recession-era burden on the cheap.
EVB and its parent company this week completed a $20 million bond offering that allowed the bank to raise additional capital to buy its way out of its final ties to the now-infamous TARP Capital Purchase Program.
The bank will use $9 million from that offering to redeem the remaining 9,000 shares of TARP stock that it has outstanding. The shares are currently owned by several groups of unidentified investors that bought them at auction from the federal government in 2013.
Joe Shearin, EVB’s chief executive, said going the route of the debt offering will save the bank money on interest in the long run.
Under the provisions of TARP, the bank is currently paying a 9 percent quarterly dividend on the remaining shares. The bonds that it sold call for a 6.5 percent interest rate. And that interest is tax-deductible; TARP interest is not.
“We’ll literally cut our interest expense on TARP in half,” Shearin said.
EVB received $24 million in 2009 from the Capital Purchase Program. It was one of eight local banks that participated in TARP, a program designed to give banks a capital cushion at the height of the recession.
EVB spent $10 million in October to buy back 10,000 of its TARP shares from the investor groups. It spent another $5 million in January for the same purpose. It also paid $4.1 million to buy out the TARP shares of Virginia Company Bank, a Newport News-based institution that EVB acquired in late last year.
The debt notes have a fixed rate for five years and a floating rate after that. The company can pay the debt off any time after the first five years. Investment banking firm Sandler O’Neill + Partners represented EVB in the offering. The bank was advised on the process by law firm Troutman Sanders.
The remaining $11 million from the offering will be used as a “capital cushion,” Shearin said.
“We decided because the market was favorable and we got good terms, we’d go ahead and get a little extra for strategic purposes,” he said.
The $9 million deal for the TARP shares will take place once EVB has the green light from federal regulators.
Shearin said it will be a weight lifted for him and the bank, which has fought its way back to steady ground since the downturn.
“It’s just another positive step in our recovery,” he said.
EVB plans to soon rid itself of its outstanding TARP shares. Photo by Michael Schwartz.
A local bank has found a way to shed a recession-era burden on the cheap.
EVB and its parent company this week completed a $20 million bond offering that allowed the bank to raise additional capital to buy its way out of its final ties to the now-infamous TARP Capital Purchase Program.
The bank will use $9 million from that offering to redeem the remaining 9,000 shares of TARP stock that it has outstanding. The shares are currently owned by several groups of unidentified investors that bought them at auction from the federal government in 2013.
Joe Shearin, EVB’s chief executive, said going the route of the debt offering will save the bank money on interest in the long run.
Under the provisions of TARP, the bank is currently paying a 9 percent quarterly dividend on the remaining shares. The bonds that it sold call for a 6.5 percent interest rate. And that interest is tax-deductible; TARP interest is not.
“We’ll literally cut our interest expense on TARP in half,” Shearin said.
EVB received $24 million in 2009 from the Capital Purchase Program. It was one of eight local banks that participated in TARP, a program designed to give banks a capital cushion at the height of the recession.
EVB spent $10 million in October to buy back 10,000 of its TARP shares from the investor groups. It spent another $5 million in January for the same purpose. It also paid $4.1 million to buy out the TARP shares of Virginia Company Bank, a Newport News-based institution that EVB acquired in late last year.
The debt notes have a fixed rate for five years and a floating rate after that. The company can pay the debt off any time after the first five years. Investment banking firm Sandler O’Neill + Partners represented EVB in the offering. The bank was advised on the process by law firm Troutman Sanders.
The remaining $11 million from the offering will be used as a “capital cushion,” Shearin said.
“We decided because the market was favorable and we got good terms, we’d go ahead and get a little extra for strategic purposes,” he said.
The $9 million deal for the TARP shares will take place once EVB has the green light from federal regulators.
Shearin said it will be a weight lifted for him and the bank, which has fought its way back to steady ground since the downturn.
“It’s just another positive step in our recovery,” he said.