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The Greensboro bank said it got preliminary approval from the U.S. Treasury Department for the maximum $52 million from the capital-purchase program. The capital is based on a bank's risk-weighted assets, with a capital-infusion limit of 3 percent.
The federal government is prodding a second tier of healthy banks, both regional and community, to participate in a $125 billion capital package aimed at providing industry stability and promoting consolidation. The government will get ownership stakes in the financial institutions, with management having to accept limitations on executive compensation.
The preliminary approval was welcome news for the bank, which has struggled with nonperforming assets in recent quarters.
NewBridge reported on Oct. 31 having a loss of $1.6 million in the third quarter compared with net income of $1.4 million in the third quarter of 2007. The bank also, at that time, suspended its quarterly cash dividend. The decision followed the trimming of its second-quarter dividend from 17 cents to 5 cents in August.
"The Treasury Department has indicated they intend to direct these funds to institutions they believe will survive," Pressley Ridgill, the president and chief executive of NewBridge, said in a statement.
"That vote of confidence is a particularly positive message given the extent of the recent economic weakness. The additional capital will better enable us to maintain well-capitalized status from a regulatory standpoint, while allowing us to continue our growth strategy."
With the capital infusion, NewBridge's Tier 1 capital ratio, a measure of financial strength and soundness, will rise to 11.9 percent from 8.9 percent -- significantly higher than the government's safety threshold of 6 percent.
Most banks conducted significant due diligence on the Treasury program.
That's because they knew that whatever decision they made -- taking the capital, turning down the offer, or worse, being rejected by the Treasury Department -- could send a wanted or unwanted message to customers about their financial stability.
NewBridge announced the preliminary approval after the stock market closed yesterday. Its share price rose 17 cents to close at $2.40. Its 52-week high is $12.05 on Dec. 24.
Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
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