The U.S. government has given preliminary approval to invest $16 million in Valley Financial Corp., the Roanoke-based parent of Valley Bank, bank officials announced this afternoon.

Officials said the U.S. Treasury Department has given preliminary approval of the investment and of Valley Bank’s participation in the Capital Purchase Program, which was part of the $250 billion Emergency Economic Stabilization Act approved by Congress in October. Under the program, also known as the TARP, or “troubled asset relief program,” the Treasury will invest about $16 million in the company through the purchase of newly issued preferred stock from the company.

The program, part of the federal government’s rescue plan for the economy, was designed to attract participation by financial institutions in an effort to stabilize the financial system and increase lending.

For the first five years, the preferred stock will pay cumulative dividends of 5 percent, and 9 percent thereafter, unless the shares are redeemed by Valley Bank. Additionally, the Treasury will receive warrants, with a term of 10 years, on 340,347 shares of Valley Financial stock, with an exercise price of $7.06.

“As the Roanoke Valley’s premier community bank, it is incumbent on us to take a leadership role in embracing the Treasury’s program in support of improving our local economy,” said Ellis L. Gutshall, the company’s president and CEO.

“The Treasury’s investment will enhance our already strong capital position.”
The U.S. Treasury introduced in October the program, under which the Treasury will make up to $250 billion in equity capital available to qualifying institutions.

— The Roanoke Times