On April 7, 2009, the Treasury published three term sheets for participation in the TARP Capital Purchase Program by mutual organizations with various holding company structures, and, on April 14, 2009, the Treasury published a separate term sheet for mutual depository institutions that do not have a holding company.  The term sheets generally are as follows:

The deadline for mutual holding companies to apply is 5:00 p.m., Eastern Time, May 7, 2009.  The deadline for mutual banks without holding companies to apply is 5:00 p.m., Eastern Time, May 14, 2009.  The application forms and process are unchanged from those previously provided, and no new application needs to be submitted if the entities applied before the term sheets were available.

The provided term sheets are generally comparable to the terms sheets previously provided to non mutual organizations, with one striking variation.  The Treasury has not provided an opportunity for private or Sub S institutions to reduce the number of shares covered by the warrant in half by completing a qualified equity offering during 2009.  Only publicly traded companies have the opportunity to cut the number of shares of common stock covered by the TARP warrant in half by completing a qualified equity offering during 2009.  (This reduction is separate and distinct from the previous requirement to complete a qualified equity offering in order to redeem the TARP investment within three years.  That requirement was eliminated by Congress when it passed the American Recovery and Reinvestment Act of 2009, and participants can now seek to redeem the TARP investment at any time.)  The corresponding mutual term sheets, however, include a 50% reduction in warrants for private mutual organization.  This variation may, however, merely be an oversight by Treasury, as it is not clear how the warrant would be reduced after it had already been exercised at the time of closing.

The terms for the publicly traded subsidiary holding companies are virtually identical to the original TARP Capital Purchase Program terms offered to publicly traded institutions; the investment will take the form of preferred stock initially paying a 5% dividend which increases to 9% after five years.  In addition, participating publicly traded subsidiary holding companies will issue a warrant for common stock with an aggregate value equal to 15% of the Treasury’s investment.

Except as noted above, the terms for the non-publicly traded subsidiary holding companies are virtually identical to the original TARP Capital Purchase Program terms offered to private institutions; the investment will take the form of preferred stock initially paying a 5% dividend which increases to 9% after five years.  In addition, participating non-publicly traded subsidiary holding companies will issue (through an immediately exercised warrant) additional preferred stock equal to 5% of the Treasury’s investment, with a 9% dividend rate.

Except as noted above, the terms for top-tier mutual holding companies without subsidiary holding companies and mutual banks without holding companies are virtually identical to the original TARP Capital Purchase Program terms offered to Subchapter S institutions; the investment will take the form of subordinated debt intitially paying  interest at 7.7% per annum which increases to 13.8% per annum after five years.  In addition, participants will issue (through an immediately exercised warrant) additional subordinated debt equal to 5% of the Treasury’s investment, paying interest at 13.8% per annum.