Regions Financial (RF) will participate in the Federal Deposit Insurance Corporation’s (FDIC) Transaction Account Guarantee (TAG) Program. Under this program, through June 30, 2010, all non-interest-bearing transaction accounts will be fully guaranteed by the FDIC for the entire amount in the account. Coverage under the TAG is in addition to and separate from the coverage available under the FDIC’s general deposit insurance rules.

The TAG was established in Oct. 2008 as part of the FDIC’s Temporary Liquidity Program. The program offered insured institutions the ability to receive unlimited deposit insurance coverage for funds held in qualifying non-interest-bearing transaction accounts. The TAG was intended to facilitate liquidity and stability in view of the economic crisis of late 2008 and 2009.

The TAG was scheduled to expire on Dec 31, 2009, but the FDIC has decided to extend the program for an additional six months. While noting evidence that confidence in the banking system has improved recently, the FDIC board believes that an extension is necessary to provide an orderly phase-out of the program.

In addition to extending the expiration date of the TAG program, the FDIC’s final rule (1) increases the assessment fee for participation; and (2) provides an opportunity for participating institutions to opt out of the program as of Jan. 1, 2010.

Regions’ participation in the TAG program will provide support to the bank, which has been affected by the recent financial and economic turmoil. Beginning Jan. 1, 2010, Region will be subject to increased quarterly fees due to its participation in the TAG program.

During the third quarter, Regions Financial reported a loss of $437 million or 37 cents per share, compared with net income of $79.5 million or 11 cents per share in the year-ago period. Regions opened a record 270,000 new retail and business checking accounts, up 29% versus the same quarter last year.

The FDIC’s TAG instills a sense of security among the customers. The bank opened a total of 0.8 million of new accounts for the first nine months of 2009. It appears on track to achieve the goal of adding 1 million new accounts by the end of this program.

Zacks Investment Research
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