A number of applications to acquire depository institutions were filed with federal bank regulators last Friday by public, nonbanking companies seeking to satisfy the TARP requirements to participate in the Capital Purchase Program (“CPP”). Insurance companies filed at least four applications.  

Under TARP, a Qualifying Financial Institution (“QFI”), which includes a bank or savings and loan holding company that is a public company or is owned by a public company, was required to file for eligibility under the CPP by November 14, 2008. Such an entity did not need to be a bank or savings and loan holding company by that date, but its acquisition applications (the holding company formation and bank acquisition applications) and the CPP application must have been filed by that date. In addition, the holding company and acquisition applications must be approved and the CPP application recommended for approval by the appropriate federal bank regulator by December 31, 2008.  

QFIs that complete this process are eligible to access the CPP based on the total risk-weighted assets of the top tier holding company level. Thus, a large holding company acquiring even a small bank can apply under the CPP for an equity investment in an amount equal to 1% to 3% of the risk-weighted assets of the holding company.  

A CPP term sheet was issued yesterday for non-public and thinly traded companies seeking to become QFIs (e.g., private companies other than mutuals and Subchapter S corporations). The filing deadline for these companies under the CPP is December 8, 2008, and the deadline to be approved and to close is January 15, 2009. The term sheet includes a number of differences from those applicable to public companies, such as the need for Treasury’s consent to increase dividends and repurchase securities, restrictions on related person transactions and the nature of the warrants that Treasury will acquire.  

Terms of potential CPP assistance for mutuals and Subchapter S corporations, and other remaining companies, have yet to be announced by Treasury.