WHITTIER, Calif., Dec. 23 /PRNewswire-FirstCall/ -- Friendly Hills Bank (OTC Bulletin Board: FHLB) has received preliminary approval from the United States Treasury to participate in the Capital Purchase Program. With this approval the Bank is now eligible to receive up to $1,600,000 of additional capital in the form of Preferred Stock. However, based on a number of factors, the Bank's Board of Directors has decided not to participate in the program. These factors include the Bank's current Total Risk-based Capital Ratio of 27 percent (which is well above the 'well-capitalized' standard of 10 percent), confidence that the Bank's capital position is sufficient for the bank to sustain itself through the current economic environment and achieve profitability, the strength of the bank's asset base which has no past due or non-accrual loans and the potentially dilutive impact of the additional capital for current shareholders.
Separately, the Bank did elect to participate in the Federal Deposit Insurance Corporation's ('FDIC') Transaction Account Guarantee Program. This program is part of the FDIC's Temporary Liquidity Guarantee Program and provides unlimited FDIC insurance of 100 percent of funds deposited in non-interest bearing transaction accounts. This would include both personal and business checking accounts, as well as NOW accounts which bear an interest rate of less than 0.50 percent and certain types of attorney trust accounts. This coverage is currently effective through December 31, 2009, and is separate from the coverage which is available under the FDIC's general deposit insurance rules which currently insure accounts up to $250,000.
'We are appreciative of the U.S. Treasury's approval of Friendly Hills Bank to participate in the Capital Purchase Program,' commented Jeffrey K. Ball, Chief Executive Officer. 'We recognize the stringent standards they are employing for determining the appropriate use of the government investments. However, in assessing the bank's current position and the potentially dilutive impact of this additional capital to our existing shareholders, we have decided not to accept the proposed investment. Our initial public offering provided an ample amount of capital from the investment community - most of which came from private investors based in our primary market area. We have a responsibility to continue working towards an effective return for these investors and feel that the proposed terms of the preferred stock investment - at a full tax-effective cost of 9.4 percent in the first five years - could potentially have a dilutive effect on our existing shareholders in light of the current and projected rate environment.
