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Shore Bancshares closes sale of preferred stock under Treasury’s CPP

In addition, the US Treasury received a warrant to purchase up to 172,970 shares of Shore Bancshares common stock

Shore Bancshares has completed the sale of 25,000 shares of series A preferred stock under the U.S. Department of the Treasury’s troubled assets relief program, capital purchase plan for $25 million. The investment represents 22.3% of total risk-based capital as of September 30, 2008.

The preferred stock carries a 5% annual dividend yield for five years and 9% thereafter. In addition, the US Treasury received a warrant to purchase up to 172,970 shares of Shore Bancshares common stock at an exercise price of $21.68 per share.

As of September 30, 2008, Shore Bancshares’ capital position was well-capitalised by all regulatory standards. With the Treasury’s investment through capital purchase plan (CPP), the company’s leverage capital ratio would increase to approximately 12.42% and the total risk-based capital ratio would increase to approximately 15.41%.

The U.S. Treasury recently created the capital purchase programme (CPP) which is part of the troubled assets relief programme to encourage qualifying U.S. financial institutions to increase the flow of financing to businesses and consumers, thereby restoring liquidity and stability to the U.S. financial system. Companies participating in the programme must adopt the Treasury Department’s standards for executive compensation and corporate governance, for the period during which Treasury holds equity issued under this programme. These standards generally apply to the chief executive officer, chief financial officer and the next three most highly compensated executive officers. The approval is subject to certain conditions and the execution of definitive agreements.