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Georgia DBF Waives Approval for Blank Check Preferred Articles Amendment

October 28, 2008

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On October 24, 2008, the Georgia Department of Banking and Finance issued a press release waiving approval of a state financial institution seeking to amend its articles to facilitate the issuance of preferred stock to the U.S. government as part of its participation in the Treasury program.  Shareholder approval is still required, but this news provides some regulatory relief for Georgia banks without holding companies that must amend their articles to provide for blank check preferred stock.

De novo Georgia banks would still be required to submit changes to their business plan for Department review and approval, although such review related to participation in the Treasury program will be expedited.

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Audio Presentation of Troubled Assets Conference

October 27, 2008

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Due to popular demand, we are going to be offering the Economic Stabilization Presentation via conference call for clients, contacts, and PoGo attorneys outside of the Atlanta office.  Please note below whether the link is for the the audio or in-person presentation.  If one registers for the audio version of the presentation, then you will NOT be reserving a space at the in-person presentation.

The conference is scheduled to begin promptly at 8:00 am, Eastern Time, on Friday, October 31, 2008.

Register for Audio Presentation

Register for In-Person Presentation [We are currently at capacity for in-person attendance.  Please consider registering for the Audio Presentation instead.]

Speakers:

  • Walt Moeling – Dealing with Community Bank Distressed Assets – What Is Needed to Grease the Skids
  • Jerry Blanchard – The Shifting Boundaries of the Asset Relief Program (“TARP”)
  • David Minkin – What Happened to the Golden Rule? And What Do We Do Now?
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Summary of TARP Capital Terms

October 27, 2008

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Summary of TARP Capital Terms

October 27, 2008

Authored by: Robert Klingler

We’ve published a Summary of the TARP Capital Public Term Sheet for a quick summary of the terms of the preferred stock and warrants currently being considered by the Treasury Department. For comparison, you can also review this Silverton presentation.

The full TARP Capital Public Term Sheet is also available.

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New FDIC Guidance on Application Timing

October 27, 2008

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The Field Office Manager for the FDIC’s Atlanta Office recently encouraged a client to go ahead and file the application.  The Manager specifically inquired about whether the client had a “corrective plan” in place to address declining asset quality.  The FDIC plans to follow-up after receiving the application with any questions.

The Field Office Manager said that the goal of the TARP Capital plan was to stabilize banks that have taken action to correct their situation with regard to real estate problems, had a viable plan and could show how the capital would assist them in achieving that plan. He said they were looking for “added value” above and beyond the just waiting for the government to act.  He also confirmed that they were injecting capital in healthy banks to provide liquidity into the market, and that they did not plan to inject capital into banks where the capital would not help.

He asked that the application be emailed to the bank’s Case Manager with a copy to the Field Office Manager.

In light of this guidance from the FDIC, we are slightly revising our advice.  For banks with no issues, we would still recommend waiting.  However, now that the local offices appear to be getting their arms around the TARP Capital program, banks with issues may want to make contact and file.  We are meeting directly with the Atlanta office of the FDIC tomorrow, and will follow up.

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Jim Wheeler Quoted on TARP Capital

October 27, 2008

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Jim Wheeler Quoted on TARP Capital

October 27, 2008

Authored by: Robert Klingler

Jim Wheeler was quoted extensively in today’s Fulton Daily Report story titled, “Lawyers help banks jump through Treasury hoops.”  The full story is available online (subscription required).

After Treasury Secretary Henry Paulson announced more details of the plan Oct. 20, Wheeler said his bank clients were still divided about whether to take the money. “One said he was not going to go public. One said he didn’t want to, but he needs the money,” he said.

But Wheeler and other lawyers said the department appears to be retailoring the plan so that banks that don’t have preferred shares of stock can participate. If that requirement is adjusted, said Wheeler, “It opens the floodgates.”

“Going public has been the biggest sticking point so far. Now, everybody is cautiously optimistic that they won’t have to,” he added.

“The plan wasn’t designed for the community banks, but for the big nine banks,” said Wheeler, referring to gargantuan commercial banks such as Bank of America and Goldman Sachs that have already sold $125 billion in equity to the government in a separate deal.

Powell Goldstein will continue to monitor Treasury’s actions regarding TARP Capital as it relates to community banks, and will provide updates on this website.

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Additional Guidance on Troubled Bank Eligibility

October 24, 2008

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FDIC Chairman Sheila Bair has informed the Florida Bankers Association that higher CAMELS rated banks can apply for the Treasury Capital Program, but it will subject those banks to further regulatory scrutiny.

Another regulator with a federal banking agency informed the Florida Bankers Association as follows:

CAMELS ratings are not the sole determinant and each situation will be looked at individually. Based on what we know thus far, we think many 3-rated banks will meet the standards as long as there are no mounting deficiencies that suggest future prospects are poor or that additional downgrades are likely. Further, it is possible that certain 4-rated banks will qualify, as long as conditions are stable or improving. We also think that a larger number of troubled banks might warrant TARP approval if there is an accompanying injection of private capital.

In addition to the above, banks with less than satisfactory CRA ratings are not likely to be approved. Further, banks with certain risk factors such as high concentrations of construction and development loans will be subject to closer scrutiny, although that will not necessarily disqualify them.

Although ultimate approval for troubled banks remains unlikely, it is very clear that regulators want troubled banks to present proposals for consideration under the TARP Capital plan, and that no regulator wants to be blamed for erroneously pushing a struggling bank out of the program.

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FDIC Issues Interim Rule to Implement the Temporary Liquidity Guarantee Program

October 23, 2008

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The rule is immediately effective, although comments will be taken for a 15-day period.

The FDIC strongly encourages banks to remain in the program.

Opt Out Information. Any institution desiring to opt out must do so by 11:59 p.m. on November 12, 2008.  An institution may opt out of the FDIC’s guarantee of either or both the newly-issued senior unsecured debt or noninterest-bearing transaction deposit accounts.  The FDIC will post on its website a list of those entities that have opted out of either component, and each eligible entity must make clear to relevant parties whether it has chosen to participate in the program.

All insured depository institutions must post a prominent notice in the lobby of its main office, and each branch must clearly indicate whether the institution is participating in the transaction account guarantee program.  If it is, the notice must state that funds held in noninterest-bearing transaction accounts are insured in full by the FDIC.  If the institution uses sweep arrangements, the institution must disclose those actions to the affected customers and clearly advise them, in writing, that such actions will void the FDIC’s guarantee.  (However, note the exception below for sweeps to noninterest-bearing savings accounts.)

Newly Issued Senior Unsecured Debt Guarantee Information. Senior unsecured debt generally includes federal funds purchased, promissory notes, commercial paper, and unsubordinated unsecured notes.  Senior unsecured debt does not include, among other instruments, obligations from guarantees or other contingent liabilities, derivatives, derivative-linked products, debt paired with any other security, convertible debt, capital notes, the unsecured portion of otherwise secured debt, or negotiable certificates of deposit.

The FDIC will guarantee newly issued unsubordinated debt in a total amount up to 125 percent of the par or face value of the senior unsecured debt outstanding, excluding debt extended to affiliates, as of September 30, 2008, that was scheduled to mature before June 30, 2009.  The maximum amount guaranteed is calculated for each individual participating entity in a holding company structure and cannot be transferred between a bank and its holding company or between banks in a multi-bank holding company structure.  All entities will be required to provide the amount of outstanding senior unsecured debt as of September 30, 2008 to the FDIC via FDIConnect.

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