Monday, Capital Bank Corp. (CBKN) said it received preliminary approval of its $42.9 million application to participate in the U.S. Department of the Treasury's Capital Purchase Program or TCPP. The program is designed to attract broad participation by healthy banking institutions to help stabilize the financial system and increase lending for the benefit of the U.S. economy.
Under the TCPP, the U.S. Treasury Department will purchase 42,900 shares of senior preferred stock which will pay a dividend of 5% for the first five years and 9% thereafter. The Treasury will also receive warrants to purchase Capital Bank common stock with an aggregate market value of $6.4 million or approximately 15% of the senior preferred stock investment. Capital Bank will have the right to redeem the preferred shares at any time after three years.
Capital Bank said it intends to use the capital injection to expand lending in the communities that it serves. The Bank expects that the injection of capital under the program will allow it to expand its loan portfolio by approximately $400 million or 33% above the current level.
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