USActive 18645207.10 

Community Development 

Capital Initiative 

CDFI Mutual Depository Institutions 

Senior Securities 

Summary of Terms of CDCI Senior Securities 

Issuer: A qualifying financial institution (“QFI”) means any FDIC-insured 

depository institution organized in mutual form under the laws of the 

United States or any State of the United States, the District of Columbia, 

any territory or possession of the United States, Puerto Rico, Northern 

Mariana Islands, Guam, American Samoa, or the Virgin Islands that (i) 

collectively with all of its affiliates satisfies the requirements of 12 C.F.R. 

1805.200(b); (ii) is or, if such QFI itself is not, an affiliate thereof is, a 

regulated community development financial institution (“CDFI”) 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; and (ii) is 

not controlled by a foreign bank or company. UST will determine the 

eligibility and allocation of funds for each QFI after consultation with 

the appropriate federal banking agency. 

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 

QFI. Each debenture representing a CDCI Senior Security shall be in the 

principal amount of $1,000. 

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

amount equal to not more than five percent (5%) of the risk-weighted 

assets (“RWA”) of the QFI less the aggregate capital or, as the case may 

be, principal amount of any outstanding TARP assistance of the QFI. 

Any QFI 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 

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

Securities issued by such QFI under this program shall be sufficient to 

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

Private Capital shall only be eligible to issue CDCI Senior Securities in 
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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 five percent (5%) of RWA of 

the QFI less the aggregate capital or, as the case may be, principal 

amount of any outstanding TARP assistance of the QFI; provided further

that any Private Capital shall be subordinate to the CDCI Senior 

Securities, on terms satisfactory to UST. 

QFIs currently participating in the UST Capital Purchase Program 

(“CPP”) that issued subordinated debentures to UST may apply to 

exchange the entirety of their existing CPP subordinated debentures for 

CDCI Senior Securities as set forth herein.1 Additionally, such QFIs 

may, but shall not be required to, apply to issue CDCI Senior Securities 

to UST in an aggregate principal amount up to the positive difference, if 

any, between (i) five percent (5%) of the RWA of the QFI and (ii) the 

aggregate of any outstanding (x) principal amount of subordinated 

debentures issued under CPP and (y) principal amount of CDCI Senior 

Securities; provided, however, with respect to either an exchange or new 

issuance, (i) the QFI has not breached any representation, warranty or 

covenant set forth in the documents governing the CPP subordinated 

debentures or its sale to UST; and (ii) the QFI has paid to UST all 

accrued and unpaid interest then due on the CPP subordinated 

debentures. 

RWA, for purposes hereunder, shall be as of the most recent fiscal 

quarter ended. 

Ranking: Senior to mutual capital certificates and any other capital instruments 

authorized under state law. CDCI Senior Securities must be expressly 

subordinated to claims of depositors and to the QFI's other debt 

obligations to its general and secured creditors, unless such debt 

obligations are expressly made pari passu or subordinate to the CDCI 

Senior Securities. 

Regulatory Capital 

Status: Tier 2. 

Maturity: Thirteen (13) years from the date of the investment (the “Maturity 

Date”). On the Maturity Date, the QFI shall repay to UST the principal 

amount, together with all accrued and unpaid interest. 

 

1

 Applications for exchanges of CPP subordinated debentures for CDCI Senior Securities shall be made on a 

different application form than applications for new issuances of CDCI Senior Securities. Applications solely to 

exchange CPP subordinated debentures for CDCI Senior Securities shall not be required to be reviewed by the 

primary regulators of the applying QFI. 
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Interest Rate: CDCI Senior Securities will pay cumulative interest at a rate of three and 

one-tenth percent (3.1%) per annum until the eighth (8th) anniversary of 

the closing date of this investment and thereafter at a rate of thirteen and 

eight-tenths percent (13.8%) per annum.2

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: The 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 the QFI’s primary federal bank regulator. 

Restrictions on 

Dividends and 

Redemptions: For as long as any CDCI Senior Securities are outstanding, no special 

dividends may be declared or paid by the QFI on any shares of equity, 

mutual capital certificates or any other capital instruments it is authorized 

to issue under applicable law, nor may the QFI repurchase or redeem any 

shares of equity, mutual capital certificates or other capital instruments 

authorized under applicable law (other than repurchases of common 

shares, mutual capital certificates, or other capital instruments authorized 

under applicable law in connection with any benefit plan in the ordinary 

course of business consistent with past practice or relevant income tax 

laws), unless all accrued and unpaid interest for all past interest periods 

on the CDCI Senior Securities is paid in full. 

Further 

Restrictions on 

Dividend Increases: For so long as any CDCI Senior Securities are outstanding, no increase in 

regularly paid dividends per share, capital certificate, or other capital 

instruments authorized under applicable law, or any extraordinary 

dividends on deposit accounts (dividends in excess of the stated rate or 

that are in excess of the amount resulting from the stated method of 

calculating the rate on such an account) shall be permitted, provided that 

no increase in dividends may be made as a result of any dividend paid in 

common shares, mutual capital certificates, or other capital instruments 

authorized under applicable law, any stock split or similar transaction. 

 

2

 CDCI Senior Securities have 3.1% and 13.8% interest rates which equate to after-tax effective rates (assuming a 

35% tax rate) of 2% and 9%, respectively, the same rates applied to securities issued by other classes of institutions 

participating in the CDCI. 
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Additional 

Restrictions on 

Dividends and 

Repurchases: From and after the eighth (8th) anniversary of the closing date of this 

investment, the QFI shall be prohibited from paying dividends or 

repurchasing any equity, mutual capital certificates, or other capital 

instruments authorized under applicable law without UST’s consent, 

unless the CDCI Senior Securities are (x) redeemed in whole or (y) no 

longer held by UST or its affiliates. These restrictions are in addition to 

the restrictions on repurchases of equity, mutual capital certificates, or 

other capital instruments authorized under applicable law set forth above 

under “Restrictions on Dividends and Redemption.” 

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: The CDCI Senior Securities shall be non-voting, other than class voting 

rights on (i) any authorization or issuance of any equity securities, mutual 

capital certificates, or other capital instruments authorized under state law 

which purport to rank senior to the CDCI Senior Securities, (ii) any 

amendment or waiver to the rights of CDCI Senior Securities, or (iii) any 

merger, exchange or similar transaction which would adversely affect the 

rights of the CDCI Senior Securities, subject to State Restrictions (as 

defined below), if any. 

If interest on the CDCI Senior Securities are not paid in full for eight (8) 

interest periods, whether or not consecutive, the holders of the CDCI 

Senior Securities will have the right to elect two (2) directors, subject to 

State Restrictions, if any. The right to elect directors will end when all 

accrued and unpaid interest has been paid in full for four (4) consecutive 

interest periods. 

“State Restrictions” shall mean, in the case of state-chartered QFIs, any 

state law restrictions on voting rights of holders of CDCI Senior 

Securities that cannot be modified, waived or otherwise removed by the 

appropriate state authorities. 

Closing Conditions: The obligation of UST to purchase or otherwise acquire any CDCI Senior 

Securities shall be subject to the satisfaction of customary closing 

conditions, including, among other things, (i) the QFI having not 

breached any representation, warranty or covenant set forth in the 

documents governing any obligations of such QFI then outstanding under 

the Troubled Asset Relief Program (“TARP Obligations”), including any 

CPP subordinated debentures, as determined by UST; (ii) all amounts 

then due and payable under any of the QFI’s TARP Obligations have 
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been paid in full; and (iii) with respect to any CDCI Senior Securities not 

acquired through the exchange of outstanding CPP subordinated 

debentures, (x) receipt of approval from the QFI’s appropriate federal 

banking agency for the issuance of the CDCI Senior Securities and (y) 

the satisfaction of any conditions for such issuance imposed by such 

appropriate federal banking agency in connection with granting such 

approval. 

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

its certification that the QFI 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) it’s 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 

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 QFI 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 QFI (i) reports and other documents sufficient to 

evidence it’s status as a CDFI including documentation evidencing its 

ongoing compliance with the Fund’s requirements for CDFIs and (ii) a 

certification that such QFI remains in compliance with the foregoing 

covenants.3

 Additionally, each QFI 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 

 

3

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

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

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

affiliate is in compliance with the foregoing covenants. 
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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 QFI shall permit UST and its agents, consultants, 

contractors and advisors (x), acting through the QFI’s appropriate federal 

banking agency, 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 

QFI with the principal officers of such QFI, upon reasonable notice and 

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

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

such QFI to its appropriate federal banking agency. 

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

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

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

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

income, retained earnings and cash flows of such QFI 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 QFI or 

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

assessment on its internal controls from its auditors at any time in the 

ordinary course of its business during any period in which UST or any of 

its affiliates holds CDCI Senior Securities, a copy of such assessment 

shall also be delivered to UST. 

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

affiliates holds CDCI Senior Securities, each QFI 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 QFI. 

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

liquidation by the QFI’s appropriate federal banking agency. 

Transparency, 

Executive 

Compensation and 

Employ American 

Workers Act: Each QFI and its subsidiaries 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 
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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 QFI, the QFI and 

its subsidiaries 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 QFI and its 

subsidiaries than could be obtained from an unaffiliated third party, and 

(ii) has been approved by the board of directors of the QFI but only if the 

board of directors maintains written documentation supporting its 

determination that the transaction meets the requirements of (i) of this 

paragraph. 

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

Economic Stabilization Act, QFIs participating in this program shall not 

be required to issue warrants to UST.