• Should Your Bank Participate in the Treasury Department's Equity Plan?
  • November 4, 2008 | Authors: Mary Neil Price; Elizabeth W. Sims; Adam G. Smith; T. Kennerly Carroll; Michael P. Marshall; W. Scott McGinness; Shelley D. Rucker
  • Law Firms: Miller & Martin PLLC - Nashville Office ; Miller & Martin PLLC - Atlanta Office ; Miller & Martin PLLC - Chattanooga Office
  • Bank regulators are pressuring all non-troubled banks to participate in the Treasury Department's equity plan, but is it right for you? While all of the details of the equity plan are not yet known, here are some key questions community banks should consider before making the decision to participate:

    (1) Does your bank need capital?

    (2) Does your bank have access to additional capital through any less expensive means?

    (3) Can you live with the restrictions on executive compensation?

    (4) Does your charter already authorize "blank check" preferred stock?

    (5) Can you afford to pay from earnings the 5% dividend for the first five years and 9% thereafter?

    (6) If you want to merge or enter into a similar transaction, are you OK with the U.S. government having a vote on the transaction which in some circumstances could result in veto power?

    The deadline for applying to participate in the plan is November 14, 2008.