Glen Allen-based Community Bankers Trust Corp., the parent company of Essex Bank, plans to defer its quarterly payment due to the U.S. Treasury Department under its TARP program.
The unpaid November dividend marks the sixth time the banking company has deferred payment owed to the government. The Treasury Department purchased preferred stock in many banks under the TARP program to shore up their capital.
Under the terms of the preferred stock issued to the Treasury Department, the company is required to pay quarterly dividends a rate of 5 percent annually for the first five years. After that, the dividend rate increases to 9 percent per year.
The company said that it may defer dividend payments, but the dividend is cumulative and accrues for future payment. Failure to pay dividends for six dividend periods triggers the preferred stockholder’s rights to appoint two directors to the company’s board. The amount of the November 2011 dividend that will accrue and be unpaid is $221,000.
“One of the limitations that we have with respect to the payment of this dividend is regulatory approval under the written agreement that we have with our federal and state regulators,” Rex L. Smith III, the company’s president and CEO said in a statement. “We have continued to address the concerns that our regulators have had, as reflected in the written agreement, and we believe that the improvements and enhancements that we have implemented over the past year are being reflected in the trends in our financial condition and results of operations. We also continue to remain well capitalized with strong liquidity, and we are taking all steps necessary to recommence our dividend obligations.“
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