InfoBytes Special Alert, October 20, 2008
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TREASURY, FEDERAL BANK AND THRIFT REGULATORY AGENCIES ISSUE APPLICATION AND GUIDELINES FOR THE TREASURY CAPITAL PURCHASE PROGRAM
On October 20, the U.S. Department of the Treasury (Treasury) and the primary federal banking and thrift regulatory agencies issued an application form with additional guidelines for United States financial institutions to use when applying for the Treasury’s Capital Purchase Program. The guidelines and application form can be found at http://www.treas.gov/press/releases/reports/applicationguidelines.pdf. Applicants must apply to their primary federal regulator to be considered. If an institution is controlled by a bank holding company, the application should be submitted to both the supervisor of the holding company and the supervisor of the largest insured depository institution controlled by the applicant financial institution.
Under this program, eligible institutions will be able to sell equity interests to the Treasury in amounts equal to a minimum of one percent (1%) of the total risk-weighted assets and to a maximum of the lesser of an amount equal to three percent (3%) of the institution’s total risk-weighted assets or $25 billion, as calculated from the latest quarterly supervisory report filed by the institution. The shares purchased will have a dividend rate of five percent (5%) per year for the first 5 years and nine percent (9%) thereafter.
If an institution is controlled by a holding company, the capital purchase will occur at the “highest-tier” of the holding company, with the eligible capital being “cumulative perpetual preferred stock.” If an institution is not controlled by a holding company, the eligible capital will be “non-cumulative perpetual preferred stock.” In addition to obtaining preferred stock, the Treasury also must obtain warrants to common stock of the applicant that must be convertible into an amount of common stock equal to fifteen percent (15%) of the amount of capital purchased under the program.
To be eligible to participate, an applicant must comply with (i) terms and conditions, currently available at http://www.treas.gov/press/releases/reports/document5hp1207.pdf, (ii) an agreement of detailed investment terms, representations and warranties to be contained in an “Investment Agreement,” and (iii) associated documents to be published on the Treasury website.
The application must be submitted by November 14, 2008.
Additional information can be obtained from the websites of the federal banking and thrift regulatory agencies, the Treasury, or through discussions with Bob Serino of Buckley Kolar at 202-349-8053, or via email at .