Community Development 

Capital Initiative 

CDFI Credit Unions 

Senior Securities 

Summary of Terms of CDCI Senior Securities 

Issuer: A qualifying credit union (“QCU”) that (i) is chartered under the Federal 

Credit Union Act or under the laws of any State, the District of Columbia 

or any territory or possession of the United States; (ii) if not chartered 

under the Federal Credit Union Act, has its deposits insured by the 

National Credit Union Share Insurance Fund; (iii) has a low-income 

designation per 12 C.F.R. 701.34; (iv) is a natural person credit union as 

defined in 12 C.F.R. 725.2(m); (v) is not a corporate credit union as 

defined in 12 C.F.R. 704.2; (vi) collectively with all of its affiliates 

satisfies the requirements of 12 C.F.R. 1805.200(b); and (vii) is a 

regulated community development financial institution currently certified 

by the Community Development Financial Institution Fund (the “Fund”) 

of the United States Department of the Treasury (“UST”) pursuant to 12 

C.F.R. 1805.201(a) as having met the eligibility requirements of the 

Fund’s Community Development Financial Institutions Program 

(“CDFI”). UST will determine the eligibility of each QCU and 

allocation of funds for QCUs after consultation with the National 

Credit Union Administration (“NCUA”) and, in the case of a statechartered QCU, the appropriate State Supervisory Authority 

(“SSA”).

Initial Holder: UST. 

Security: Unsecured subordinated debentures (“CDCI Senior Securities”) that do 

not constitute a class of stock or represent equity ownership in the issuing 

QCU, but constitute secondary capital accounts of the QCU within the 

meaning of 12 U.S.C. 1790d(o)(2)(B). Each debenture representing a 

CDCI Senior Security shall be in the principal amount of $1,000. 

Size of Offering: Each QCU may issue CDCI Senior Securities with an aggregate principal 

amount (the “Principal Amount”) equal to not more than three and a half 

percent (3.5%) of its total assets and not more than fifty percent (50%) of 

the capital and surplus of the QCU. 

Any QCU that, in applying to qualify for this program, is determined by 

its primary regulators to require additional capital in order to be a 

“viable” financial institution, shall be required to receive capital (“Private 

Capital”) from one or more private, non-government investors prior to or 

concurrently with any purchase of CDCI Senior Securities by UST, such 
 -2- 

that the sum of the Private Capital and the amount of CDCI Senior 

Securities issued to such QCU under this program shall be sufficient to 

establish the QCU’s “viability” on a pro-forma basis. Such QCU 

receiving Private Capital shall only be eligible to issue CDCI Senior 

Securities in an aggregate amount equal to, on a dollar-for-dollar basis, 

the amount of Private Capital it received; provided that the amount of 

CDCI Senior Securities issued shall not be greater than three and a half 

percent (3.5%) of the QCU’s total assets and not more than fifty percent 

(50%) of the capital and surplus of the QCU; provided further that any 

Private Capital shall be subordinate to the CDCI Senior Securities, on 

terms satisfactory to UST. 

Ranking: Subordinate to all other claims against the QCU, including the claims of 

creditors, shareholders, and the National Credit Union Share Insurance 

Fund; available to cover operating losses realized by the QCU that 

exceed its net available reserves (exclusive of secondary capital and 

allowance accounts for loan and lease losses); and not subject to 

restoration or replenishment under any circumstances. 

Regulatory Capital 

Status: Qualifies as “net worth” of the issuing QCU per 12 U.S.C. 1790d(o). 

Maturity: Either eight (8) or thirteen (13) years from the date of the investment (the 

“Maturity Date”).1

 On the Maturity Date, the QCU shall repay to UST 

the Principal Amount, together with all accrued and unpaid interest. 

Interest Rate: CDCI Senior Securities maturing eight (8) years from the date of the 

investment shall pay cumulative interest at a rate of two percent (2%) per 

annum until the Maturity Date, and, to the extent not repaid on or prior to 

the Maturity Date, thereafter at a default rate of nine percent (9%) per 

annum. CDCI Senior Securities maturing thirteen (13) years from the 

date of the investment shall pay cumulative interest at a rate of two 

percent (2%) per annum until the eighth (8th) anniversary of the date of 

issuance, and thereafter at a rate of nine percent (9%) per annum. 

Interest shall be payable quarterly in arrears on February 15, May 15, 

August 15 and November 15 of each year. Interest on the CDCI Senior 

Securities shall be computed on the basis of a 360-day year consisting of 

twelve 30-day months. 

Redemption: CDCI Senior Securities shall be redeemable at 100% of the issue price, 

plus any accrued and unpaid interest. All redemptions shall be subject to 

the approval of NCUA and, in the case of a state-chartered QCU, the 

appropriate SSA. 

 

1 Each applying QCU shall be required to elect, in its sole discretion, to issue CDCI Senior Securities with either an 

eight (8) year or a thirteen (13) year maturity.
 -3- 

Restrictions on 

Dividends and 

Redemptions: Subject to certain exceptions, for as long as any CDCI Senior Securities 

are outstanding, no special dividends may be declared or paid by the 

QCU on any share accounts or any other capital instruments it is 

authorized to issue under applicable law. Further, the QCU may not 

repurchase or redeem any other capital instruments authorized under 

applicable law (other than other maturing secondary capital accounts), 

unless all accrued and unpaid interest for all past interest periods on the 

CDCI Senior Securities is paid in full. 

Remedies Upon 

Event of Default: Principal and accrued interest may become immediately due and payable 

(i.e., accelerated) upon the occurrence of an Event of Default. 

Voting Rights: CDCI Senior Securities shall carry no voting or membership rights in the 

QCU. 

Closing Conditions: The obligation of UST to purchase any CDCI Senior Securities shall be 

subject to the satisfaction of customary closing conditions, including, 

among other things, (i) the QCU having not breached any representation, 

warranty or covenant set forth in the documents governing any 

obligations of such QCU then outstanding under the Troubled Asset 

Relief Program (“TARP Obligations”), as determined by UST; (ii) all 

amounts then due and payable under any of the QCU’s TARP 

Obligations have been paid in full; and (iii) (x) receipt of approval from 

the NCUA and any applicable SSA for the issuance of such CDCI Senior 

Securities and (y) the satisfaction of any conditions for such issuance 

imposed by the NCUA or any applicable SSA in connection with 

granting such approval. 

CDFI Covenants: Each QCU shall covenant that (i) the Fund has not withdrawn or 

qualified its certification that such QCU meets the requirements of 12 

C.F.R. 1805.200(b) and 12 C.F.R. 1805.201(b)(1)-(6), (ii) it and all of its 

affiliates collectively meet the eligibility requirements of 12 C.F.R. 1805, 

(iii) its primary mission is promoting community development, as may be 

determined by UST from time to time based on the criteria set forth in 12 

C.F.R. 1805.201(b)(1), (iv) its predominant business activity is the 

provision, in arms-length transactions, of “Financial Products”, 

“Development Services” and/or other similar financing, (v) it serves a 

“Target Market” by serving one or more “Investment Areas” and/or 

“Targeted Populations” as may be determined by UST from time to time 

substantially in the manner set forth in 12 C.F.R. 1805.201(b)(3), (vi) it 

directly, through an affiliate, or through a contract with another provider, 

provides “Development Services” in conjunction with its “Financial 

Products”, (vii) it maintains accountability to residents of its “Investment 

Area(s)” or “Targeted Population(s)” through representation on its 
 -4- 

governing board or directors or otherwise and (viii) it is not an agency or 

instrumentality of the United States, or any State or political subdivision 

thereof, as described in 12 C.F.R. 1805.201(b)(6). The terms “Financial 

Products”, “Development Services”, “Target Market”, “Investment 

Areas” and “Targeted Populations” are used herein in the same manner 

as such terms are used in 12 C.F.R. 105.201(b). 

Each QCU shall also deliver to UST (x) on the date that is 180 days after 

the closing date of this investment, and (y) annually at the end of each 

fiscal year of such QCU (i) reports and other documents sufficient to 

evidence such QCU’s status as a CDFI including its compliance with the 

Fund’s requirements for CDFIs and (ii) a certification that such QCU 

remains in compliance with the foregoing covenants.2

 Additionally, each 

QCU shall be required to notify UST immediately of any breach of the 

foregoing covenants. 

Remedies for breaches of the foregoing covenants shall be set forth in the 

definitive documentation for the CDCI Senior Securities. 

Access and 

Information: So long as UST or any of its affiliates holds CDCI Senior Securities 

having a face amount of at least ten percent (10%) of its initial 

investment, each QCU shall permit UST and its agents, consultants, 

contractors and advisors (x), acting through the NCUA and any 

applicable SSA, or otherwise to the extent necessary to manage, evaluate 

or transfer UST’s investment, to examine its corporate books and make 

copies thereof and to discuss the affairs, finances and accounts of such 

QCU with the principal officers of such QCU, upon reasonable notice 

and at such reasonable times and as often as UST may reasonably request 

and (y) review any information material to UST’s investment provided 

by such QCU to its regulators. 

At any time that any CDCI Senior Securities are outstanding, each QCU 

shall deliver to UST (i) annually at the end of each fiscal year of such 

QCU, an audited (to the extent available) consolidated balance sheet of 

such QCU as of such fiscal year, and audited consolidated statements of 

income, retained earnings and cash flows of such QCU for such year, 

prepared in accordance with GAAP and setting forth in each case in 

comparative form the figures for the previous fiscal year; and (ii) copies 

of any quarterly reports provided to other equity holders of such QCU or 

the QCU’s management. Additionally, to the extent a QCU receives an 

assessment on its internal controls from its auditors at any time during 

 

2

 To the extent that the QCU changes its form of organization at any time such that the QCU itself is no 

longer certified as a CDFI by the Fund but one or more affiliate of such QCU is certified as a CDFI by the 

Fund, among other things, the QCU shall be required to certify on an annual basis that each certified 

affiliate is in compliance with the foregoing covenants. 
 -5- 

any period in which UST or any of its affiliates holds CDCI Senior 

Securities, a copy of such assessment shall also be provided to UST. 

On an annual basis during any period in which UST or any of its 

affiliates holds CDCI Senior Securities, each QCU shall be required to 

complete and deliver to UST a survey, in a form specified by UST, 

describing, among other things, how it has utilized the capital it received 

in connection with the issuance of the CDCI Senior Securities and the 

effects of such capital on the operations and status of the QCU. 

Events of Default: Placement of the issuing QCU into receivership, conservatorship or 

liquidation by NCUA or, in the case of a state-chartered QCU, the 

appropriate SSA. 

Transparency, 

Executive 

Compensation and 

Employ American 

Workers Act: Each QCU shall take all necessary action to ensure that it and its 

executive officers, respectively, are in compliance with (i) all UST 

guidelines regarding transparency, reporting and monitoring; (ii) Section 

111 of the EESA, as implemented by the TARP Standards for 

Compensation and Corporate Governance set forth in 31 C.F.R. Part 30, 

all rules, regulations and guidance issued thereunder; (iii) the provisions 

of the Employ American Workers Act (Section 1611 of Division A, Title 

XVI of the American Recovery and Reinvestment Act of 2009), Public 

Law No. 111-5, effective as of February 17, 2009; and (iv) in the case of 

(ii) and (iii), all rules, regulations and guidance issued thereunder. 

Affiliate 

Transactions: For as long as UST or any of its affiliates holds any debt or equity 

securities (including the CDCI Senior Securities) of the QCU, the QCU 

will not enter into a transaction with related persons (within the meaning 

of Item 404 under the SEC’s Regulation S-K) unless such transaction is 

(i) on terms no less favorable to the QCU and its subsidiaries than could 

be obtained from an unaffiliated third party, and (ii) has been approved 

by the board of directors of the QCU but only if the board of directors 

maintains written documentation supporting its determination that the 

transaction complies with subparagraph (i) of this paragraph. 

Warrant: Subject to the requirements of Section 113(d)(3)(A) of the Emergency 

Economic Stabilization Act, QCUs participating in this program shall not 

be required to issue warrants to UST.