The FDIC extended its deadline to Friday, December 5, 2008, for financial institutions to opt out of the Temporary Liquidity Guarantee Program (TLGP). The TLGP deadline was pushed back to allow eligible institutions a sufficient amount of time to consider the FDIC’s final rule on the program, which will supersede the interim rule released on Thursday, October 23, 2008.

Community banks that do not exercise their opt out option by December 5 will continue to receive the guarantee on noninterest-bearing transaction accounts through December 31, 2009, for an extra 10 basis point assessment on amounts above $250,000. This program also guarantees senior unsecured debt issued through June 30, 2009, for a 75 basis point annualized fee. Eligible entities that opt out of the TLGP on or before December 5, 2008, will not pay any assessment under the Program. Any eligible entity that does not opt out on or before December 5, 2008, will be required to pay the related fees.

Also, the FDIC announced that the election form that entities must use to opt out of the program will be available beginning Wednesday, November 12, 2008. For additional information click the following link.

TARP Capital Purchase Program

Treasury announced a voluntary Capital Purchase Program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers for support to the economy.

This will allow the Treasury to purchase up to $250 billion of senior preferred shares on standardized terms. The program is available to qualifying U.S. controlled banks, savings associations and certain bank and savings and loan holding companies engaged in only financial activities that elect to participate before
4 p.m. (CT), on November 14, 2008. Treasury will decide the eligibility and allocation.

Minimum subscription amount to participating institutions is 1% of riskweighted assets. Maximum subscription is lesser of $25 billion or 3% of riskweighted assets. Treasury will fund the senior preferred shares purchased under the program by 2008 year end.

Private companies, including S corporations and presumable mutuals have been told to expect “comparable terms.” A redemption fee for Sub S banks in lieu of warrants and book value as a substitute for market price determining strike price of warrants and for exercise are options which have been discussed.

For additional information, click here or contact your BKD advisor.