TowneBank to raise up to $30 million in equity offering

TowneBank, the largest bank based in Hampton Roads, said Thursday that it plans to raise as much as $30 million of additional capital via an offering of convertible preferred stock.

Scores of banks around the country have been raising capital this year by means of stock offerings. TowneBank chose to use an offering of convertible preferred stock because it appeared to have the most appeal to investors, said Bob Aston, its chairman and chief executive officer.

The Portsmouth-based bank is seeking the capital to take on relationships with promising businesses in Hampton Roads that are leaving other financial institutions, he said. With $25 million of fresh capital, TowneBank could add $300 million of assets, including about $225 million of new loans, Aston said.

TowneBank ended the second quarter with $2.72 billion of assets and shareholders equity of $264 million.

The bank will issue 250,000 shares of the convertible stock at $100 a share, which would generate $25 million of capital before expenses. The bank said it reserved the right to sell an additional 50,000 shares under the same terms.

The new stock will have an annual dividend of 8 percent, payable quarterly, and will be convertible at the option of the shareholder to 6.667 shares of common stock.

Any of the new shares still outstanding in five years will be converted automatically to common shares. Depending on the price of its common shares at the time, TowneBank also has the option to convert some or all of the new shares to its common stock in three years.

According to investment bankers who advised TowneBank on its offering, Aston said, the 8 percent dividend is "pretty much in the middle of the road" for convertible preferred equity deals that banks have completed during the past six to nine months.

The new shares will be offered to TowneBank's existing shareholders and depositors until Aug. 15. The bank's directors have committed to buy $15 million of the stock offering, Aston said.

Afterward, the shares will be made available to the general public. The offering will close after all 250,000 shares are sold or on Aug. 29, whichever occurs first, the bank said.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com