Bancroft State Bank is participating in the FDIC's Transaction Account Guarantee Program

Under this program, through December 31, 2009, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under the Transaction Account Guarantee Program is in addition to and separate from the coverage available under the FDIC's general deposit insurance rules.

The insurance coverage on noninterest-bearing transaction deposit accounts is over and above the $250,000 in coverage provided to a customer already. For example, if a customer has $500,000 in a noninterest-bearing transaction deposit account and $250,000 in a certificate of deposit, the FDIC would fully insure the entire $750,000. The full deposit insurance coverage for non-interest bearing deposit transaction accounts cover all such accounts in the bank regardless of ownership. For example, it does include municipal or government deposits.

The bank offers a NOW account product that does not qualify as a noninterest-bearing transaction account under the Transaction Account Guarantee Program, because our interest rates are too high. See below.

All funds in noninterest-bearing transaction deposit accounts held in domestic offices and insured branches in Puerto Rico and U.S. territories and possessions of participating FDIC-insured institutions will be fully guaranteed under the transaction account guarantee component of the Temporary Liquidity Guarantee Program. A "noninterest-bearing transaction account" is defined as a transaction account with respect to which interest is neither accrued nor paid and on which the insured depository institution does not reserve the right to require advance notice of an intended withdrawal. This definition encompasses traditional demand deposit checking accounts that allow for an unlimited number of deposits and withdrawals at any time. This definition does not encompass interest-bearing money market deposit accounts (MMDAs). However, for purposes of the transaction account guarantee program, the FDIC is including in the definition of a noninterest-bearing transaction account:

* Accounts commonly known as Interest on Lawyers Trust Accounts (IOLTAs) and functionally equivalent accounts; and
* Negotiable order of withdrawal accounts (NOW accounts) with interest rates no higher than 0.50 percent for which the insured depository institution at which the account is held has committed to maintain the interest rate at or below 0.50 percent.

NOW accounts are not guaranteed under the transaction account guarantee program unless the interest rate is no higher than 0.50 percent. Further, NOW accounts are not guaranteed unless the insured depository institution "commits" to maintaining the rate at or below 0.50 percent through December 31, 2009. These requirements might not be satisfied in the case of a NOW account with a tiered-rate structure or a NOW account with a fluctuating interest rate. For example, the deposit contract might provide that 0.30 percent shall be paid on funds up to a designated dollar amount while 0.60 percent shall be paid on funds above that amount. If the account is structured in this manner, the NOW account will not be covered under the transaction account guarantee program even if the balance of the account is less than the designated dollar amount. The account will be excluded because the possibility exists that the balance will rise above the designated dollar amount, with the result that the interest rate will rise above 0.50 percent. In summary, these types of NOW accounts will be covered under the transaction account guarantee program only if the provisions of the contract are such that the interest rate cannot exceed 0.50 percent through December 31, 2009.