Community Development 

Capital Initiative 

CDFI Bank/Thrift 

Senior Preferred Stock 

Summary of CDCI Senior Preferred Terms 

Issuer: A qualifying financial institution (“QFI”) that is (i) any U.S. bank or 

U.S. savings association not controlled by a Bank Holding Company 

(“BHC”) or Savings and Loan Holding Company (“SLHC”); (ii) any 

top-tier U.S. BHC, (iii) any top-tier U.S. SLHC which engages 

solely or predominately in activities that are permitted for financial 

holding companies under relevant law; or (iv) any U.S. bank or U.S. 

savings association controlled by a U.S. SLHC that does not engage 

solely or predominately in activities that are permitted for financial 

holding companies under relevant law, excluding Subchapter S 

corporations and mutual organizations; provided, that, in each case, 

(i) the QFI collectively with all of its affiliates satisfies the 

requirements of 12 C.F.R. 1805.200(b); (ii) the QFI or 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 (the QFI 

or, if the QFI itself is not currently certified by the Fund as a CDFI, 

any affiliate that is currently certified by the Fund as a CDFI, each, a 

“Certified Entity”); and (iii) the QFI shall not be any BHC, SLHC, 

bank or savings association controlled (within the meaning of 12 

U.S.C. 1841(a)(2) and 12 C.F.R. 225(a)(i) in the case of BHCs and 

banks; and 12 U.S.C. 1467a (a)(2) and 12 C.F.R. 583.7 in the case of 

SLHCs and savings associations) by a foreign bank or company. 

For purposes of this program, “U.S. bank”, “U.S. savings 

association,” “U.S. BHC” and “U.S. SLHC” means a bank, savings 

association, BHC or SLHC organized 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. UST will determine the eligibility and allocation of 

funds for each QFI after consultation with the appropriate 

federal banking agency. 

Initial Holder: UST.

Security: Senior preferred stock (the “CDCI Senior Preferred”), liquidation 

preference $1,000 per share. Depending upon each QFI’s available 

authorized preferred shares, UST may agree to purchase CDCI 
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Senior Preferred with a higher liquidation preference per share, in 

which case UST may require the QFI to appoint a depositary to hold 

the CDCI Senior Preferred and issue depositary receipts. 

Size: Each QFI may issue CDCI Senior Preferred having an aggregate 

capital amount (the “Maximum Investment Amount”) equal to not 

more than five percent (5%) of (i), if the QFI is a Certified Entity the 

risk-weighted assets (“RWA”) of the QFI, or (ii), if the QFI is not a 

Certified Entity, the sum of the RWAs of each of the Certified 

Entities, in each case 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 

Preferred by UST, such that the sum of the Private Capital and the 

amount of CDCI Senior Preferred issued to 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 Preferred 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 Preferred issued 

shall not be greater than the Maximum Investment Amount; 

provided further that any Private Capital shall be subordinate to the 

CDCI Senior Preferred, on terms satisfactory to UST. 

QFIs currently participating in the UST Capital Purchase Program 

(“CPP”) that issued preferred stock to UST may apply to exchange 

the entirety of their existing CPP preferred stock for CDCI Senior 

Preferred as set forth herein.1

 Additionally, such QFIs may, but 

shall not be required to, apply to issue CDCI Senior Preferred to 

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

any, between (i) (x), if the QFI is a Certified Entity, five percent 

(5%) of the RWA of the QFI or (y), if the QFI is not a Certified 

Entity, five percent (5%) of the sum of the RWAs of each of the 

Certified Entities and (ii) the aggregate liquidation preference of any 

outstanding (x) preferred stock issued under CPP and (y) CDCI 

Senior Preferred; provided, however, with respect to either an 

 

1 Applications for exchanges of CPP preferred stock for CDCI Senior Preferred shall be made on a different 

application form than applications for new issuances of CDCI Senior Preferred. Applications solely to exchange 

CPP preferred stock for CDCI Senior Preferred shall not be required to be reviewed by the primary regulators of the 

applying QFI. 
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exchange or new issuance, (i) the QFI has not breached any 

representation, warranty or covenant set forth in the documents 

governing the CPP preferred stock or its sale to UST; and (ii)(x) 

with respect to cumulative CPP preferred stock, the QFI has paid, as 

of the closing date of this investment, all accrued and unpaid 

dividends or interest and (y) with respect to non-cumulative CPP 

preferred stock, the QFI has paid, as of the closing date of this 

investment, the amount of any unpaid dividends or interest for the 

fiscal quarter prior to the closing date plus the accrued and unpaid 

dividends or interest as of the closing date for the fiscal quarter in 

which the closing shall occur. 

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

quarter ended. 

Ranking: Senior to common stock and pari passu with existing or future 

authorized or issued preferred shares but senior to preferred shares 

which by their terms rank junior to any existing or future authorized 

or issued preferred shares. 

Regulatory Capital 

Status: Tier 1. 

Term: Perpetual. 

Dividend Rate: Two percent (2%) per annum until the eighth (8th) anniversary of the 

closing date of this investment and thereafter at a rate of nine percent 

(9%) per annum. 

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

15, August 15 and November 15 of each year. Dividends shall be 

computed on the basis of a 360-day year consisting of twelve 30-day 

months. 

Dividend Form: For each QFI that is a BHC or SLHC, the CDCI Senior Preferred 

shall pay cumulative dividends. For each QFI that is not a BHC or 

SLHC, the CDCI Senior Preferred shall pay non-cumulative 

dividends. 

Redemption: The CDCI Senior Preferred may be redeemed, in whole or in part, at 

any time and from time to time, at the option of the QFI, subject to 

the approval of the QFI’s primary federal bank regulator. All 

redemptions of the CDCI Senior Preferred shall be at 100% of its 

liquidation preference, plus (i) in the case of cumulative CDCI 

Senior Preferred, any accrued and unpaid dividends and (ii) in the 

case of non-cumulative CDCI Senior Preferred, accrued and unpaid 

dividends for the then current dividend period (regardless of whether 

any dividends are actually declared for such dividend period). 
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Restrictions on 

Dividends and 

Repurchases: For as long as any CDCI Senior Preferred is outstanding, no 

dividends may be declared or paid on junior preferred shares, 

preferred shares ranking pari passu with the CDCI Senior Preferred 

(other than in the case of pari passu preferred shares, dividends 

payable on a pro rata basis with the CDCI Senior Preferred), or 

common shares, nor may the QFI repurchase or redeem any junior 

preferred shares, preferred shares ranking pari passu with the CDCI 

Senior Preferred or common shares (other than (i) repurchases of the 

CDCI Senior Preferred and (ii) repurchases of junior preferred 

shares or common shares in connection with any benefit plan in the 

ordinary course of business consistent with past practice), unless (i) 

in the case of cumulative CDCI Senior Preferred, all accrued and 

unpaid dividends on the CDCI Senior Preferred are paid in full or 

(ii) in the case of non-cumulative CDCI Senior Preferred, the full 

dividend for the latest completed dividend period shall have been 

declared and paid in full. 

Further Restrictions on 

Dividend Increases: For so long as any CDCI Senior Preferred is outstanding, no increase 

in dividends per share or distributions on common stock, preferred 

stock ranking junior or pari passu to the CDCI Senior Preferred or 

other equity securities of the QFI or its subsidiaries shall be 

permitted; provided that no increase in dividends may be made as a 

result of any dividend paid in common shares, any stock split or 

similar transaction. 

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 

making distributions on or repurchasing any equity securities or trust 

preferred securities issued by the QFI or any affiliate (other than (i) 

redemptions or repurchases of the CDCI Preferred Shares, (ii) 

regular dividends on shares of preferred stock in accordance with the 

terms thereof and which are permitted under the terms of the CDCI 

Senior Preferred or (iii) dividends or distributions by any whollyowned subsidiary of the QFI) without UST’s consent, unless the 

CDCI Senior Preferred are (x) redeemed in whole or (y) no longer 

held by UST or any of its affiliates. These restrictions are in 

addition to the restrictions on share repurchases of junior preferred 

shares, preferred shares ranking pari passu with the CDCI Senior 

Preferred, or common shares set forth above under “Restrictions on 

Dividends and Repurchases.” 

Voting rights: The CDCI Senior Preferred shall be non-voting, other than class 

voting rights on (i) any authorization or issuance of capital shares 
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ranking senior to the CDCI Senior Preferred, (ii) any amendment to 

the rights of CDCI Senior Preferred, or (iii) any merger, exchange, 

dissolution or similar transaction which would adversely affect the 

rights of the CDCI Senior Preferred. If dividends payable on the 

CDCI Senior Preferred are not paid in full for eight (8) dividend 

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

Preferred will have the right to elect two (2) directors. The right to 

elect directors will end when dividends have been paid in full for 

four (4) consecutive dividend periods. 

Transferability: The CDCI Senior Preferred shall not be subject to any contractual 

restrictions on transfer. 

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

Senior Preferred 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 preferred stock, as determined by 

UST; (ii) all amounts then due and payable under any of the QFI’s 

TARP Obligations have been paid in full; and (iii), with respect to 

any CDCI Senior Preferred not acquired through the exchange of 

outstanding CPP preferred stock, (x) receipt of approval from the 

QFI’s appropriate federal banking agency for the issuance of the 

CDCI Senior Preferred and (y) the satisfaction of any conditions for 

such issuance imposed by such appropriate federal banking agency 

in connection with granting such approval. 

Transfer of Proceeds to 

Certified Entities: Each QFI that is not a Certified Entity shall be required to 

immediately transfer any proceeds it receives in connection with the 

sale of the CDCI Senior Preferred to its related Certified Entities as 

capital contributions.2

 

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

qualified its certification that the Certified Entities meet the 

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

and all of its affiliates collectively meet the eligibility requirements 

of 12 C.F.R. 1805, (iii) each Certified Entity’s primary mission is 

 

2

 QFIs shall not be required to transfer any funds to any Certified Entity in connection with an exchange 

of CPP preferred stock for CDCI Senior Preferred. 
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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) each Certified Entity’s predominant business 

activity is the provision, in arms-length transactions, of “Financial 

Products”, “Development Services” and/or other similar financing, 

(v) each Certified Entity 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) each Certified Entity directly, 

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

provides “Development Services” in conjunction with its “Financial 

Products”, (vii) each Certified Entity 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) each Certified Entity 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 each Certified Entity’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 and each Certified Entity remains in compliance with the 

foregoing covenants. 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 definitive documentation for the CDCI Senior Preferred. 

Access and 

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

having a liquidation preference 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. 
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At any time that any CDCI Senior Preferred is 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 during any period in which UST or any of its 

affiliates holds CDCI Senior Preferred, 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 Preferred, 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 

Preferred and the effects of such capital on the operations and status 

of the QFI. 

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 Compensation and 

Corporate Governance set forth in 31 C.F.R. Part 30; (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 Preferred) 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 audit 

committee or a comparable body of independent directors of the 

QFI, or if there are no “independent directors,” the board of directors 
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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.