Important Notices

DFI Issues Guidance for SBLF Participation

No Approval Needed for Direct Exchange of Preferred Shares from TARP to SBLF

It has come to our attention that the U.S. Treasury would like to invest funds in bank stock under the Small Business Lending Fund (SBLF) in the most expeditious manner possible. In the case of banks which have outstanding preferred stock previously issued under the Troubled Asset Relief Program (TARP), Treasury proposes to accept new preferred shares issued under the SBLF in exchange for the outstanding TARP shares of the bank.

In reviewing the Order of Exemption issued by Commissioner Haraf on May 31, 2011, we believe that the Order is broad enough to cover the direct exchange of shares proposed by Treasury. Accordingly, no other approval from the Department is needed to effect that exchange. Furthermore, if the amount of SBLF money exceeds the value of the TARP shares cancelled in the exchange, the Order allows for the sale of additional SBLF shares for cash.

On the other hand, if the amount of funds received under the SBLF stock sale is insufficient to provide for the retirement of all of the outstanding TARP shares, any bank wishing to retire the remaining outstanding TARP shares through the payment of cash may do so only with the approval of the Department. Such a request must be made in writing pursuant to the requirements of Financial Code Section 644(a).

Finally, this is to remind bankers and their attorneys that the Certificates of Determination that sets forth the rights, preferences and privileges of preferred stock sold to Treasury through the SBLF must be approved by the Department prior to filing the document with the Secretary of State.

If you have any questions regarding this announcement, please contact Kenneth Sayre-Peterson, Counsel for the Department, at 916-322-1570 or by email at ksayre-peterson@dfi.ca.gov .