Issuance Date: 8/12/2021

Emergency Capital Investment Program

Subordinated Debt Term Sheet (Mutuals and S Corps)

Summary of Terms

Capitalized terms undefined in the term sheet are defined in the Definitions section of Treasury’s 

Application Instructions and Materials for the Emergency Capital Investment Program found 

here: ECIP Application Instructions and Materials link

Issuer The term “issuer” means a financial institution that, as of the 

date of submitting an application is both:

1. A Community Development Financial Institution (“CDFI”) 

or Minority Depository Institution (“MDI”); and

2. (i) a Bank Holding Company (“BHC”), (ii) a Savings and 

Loan Holding Company (“SLHC”), or (iii) an Insured 

Depository Institution that is either (a) not controlled by a 

BHC or SLHC at all or (b) not controlled by a BHC or 

SLHC that qualifies as a CDFI or MDI. 

For S Corps only – that has made a valid election to be taxed 

under Subchapter S of Chapter 1 of the U.S. Internal Revenue 

Code.

Application An institution must apply to the United States Department of the 

Treasury (“Treasury”) to be considered for investments from the 

Emergency Capital Investment Program (“ECIP”). 

Security Unsecured subordinated debentures (“Subordinated Debt”) that 

do not constitute a class of stock or represent equity ownership 

in the issuer. The Subordinated Debt shall have a minimum 

denomination of $1,000 and authorized denominations of 

integral multiples of $1,000. 

Regulatory 

Capital Treatment

Tier 2

Investment 

Amount

General limit per issuer: $250,000,000

Additional limit for issuers with total assets of an amount:

> $2BN: 7.5% of total assets

≤$2BN and ≥$500MM: 15% of total assets
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Issuance Date: 8/12/2021

< $500MM: 22.5% of total assets 

“Total assets” means (i) for issuers that file reporting Form FR 

Y-9C, the total consolidated assets as reported in Schedule HC 

of the FR Y-9C, (ii) for issuers that file a Consolidated Report of 

Condition and Income (“Call Report”), the total assets as 

reported on Schedule RC of the Call Report, and (iii) for issuers 

that file on reporting Form FR Y-9SP, the higher of the (1) total 

assets reported in Schedule SC of the FR Y-9SP and (2) total 

assets reported in the Call Report of such issuer’s primary 

insured depository institution subsidiary). 

Ranking 

(Mutuals)

In a receivership, bankruptcy, insolvency, liquidation, or similar 

proceeding, the Subordinated Debt will rank senior to mutual 

capital certificates (and any other capital instruments authorized 

under applicable law). The Subordinated Debt shall be expressly 

subordinated to: (i) if issued by a bank or savings association, 

claims of depositors and the issuer’s other debt obligations to its 

general and secured creditors; and (ii) if issued by a holding 

company, the issuer’s debt obligations to its general and secured 

creditors. 

The Subordinated Debt is not secured, not covered by a 

guarantee of the federally-regulated institution or of an affiliate 

of the federally-regulated institution, and not subject to any other 

arrangement that legally or economically enhances the seniority 

of the instrument in relation to more senior claims.

Ranking (S Corps) In a receivership, bankruptcy, insolvency, liquidation, or similar 

proceeding, the Subordinated Debt will rank senior to common 

stock (and any other class of equity, as applicable if a change in 

corporate form, relevant law or tax election permits other classes 

of equity). The Subordinated Debt shall be expressly 

subordinated to: (i) if issued by a bank or savings association, 

claims of depositors and the issuer’s other debt obligations to its 

general and secured creditors; and (ii) if issued by a holding 

company, the issuer’s debt obligations to its general and secured 

creditors. 

The Subordinated Debt is not secured, not covered by a 

guarantee of the federally-regulated institution or of an affiliate 

of the federally-regulated institution, and not subject to any other 

arrangement that legally or economically enhances the seniority 

of the instrument in relation to more senior claims.
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Issuance Date: 8/12/2021

Target 

Communities 

“Target Communities” include Minority, Rural, and Urban LowIncome and Underserved Communities and to Low- and 

Moderate-Income borrowers as defined in Treasury’s 

Application Instructions for ECIP.

Qualified Lending “Qualified Lending” means the following extensions of credit 

(including participations in such extensions of credit) to Target 

Communities: 

As reported to the issuer’s primary federal regulator or, in the 

case of a holding company that files on Form FR Y-9SP, the 

primary federal regulator for its insured depository institution 

subsidiaries (numerical cross references are to Call Report items 

in Schedule RC-C and FR Y-9C items in Schedule HC-C (Loans 

and Lease Financing Receivables)):

(i) all loans secured by real estate;

a. construction, land development, and other land loans 

(1.a(1)–(2));

b. loans secured by farmland (1.b);

c. loans secured by 1–4 family residential properties 

(1.c(1), 1.c(2)(a)–(b));

d. loans secured by multifamily (5 or more) residential 

properties (1.d);

e. loans secured by nonfarm nonresidential properties 

(1.d)

(ii) loans to finance agricultural production and other loans 

to farmers (3.);

(iii) commercial and industrial loans (4.);

(iv) loans to individuals for households, family, and other 

personal expenditures (6.a-d); and 

(v) lease financing receivables (10.),

and, within these loan categories, excluding:

A. any loans made under the Paycheck Protection Program;

B. the portion of any loans held by the issuer for which the risk 

is assumed by a third party other than the U.S. Small 
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Issuance Date: 8/12/2021

Business Administration, any other U.S. Government 

agency, or a U.S. Government-sponsored enterprise (for 

example, the portion of loans that have been participated); 

and 

C. any loan that is an extension or re-write of any existing loan, 

unless it involves an increase of 20% or more in the principal 

of the loan, in which case the entire loan amount, including 

the increase, would be eligible for inclusion in qualified 

lending.

While, further, adding to the amount determined above the 

cumulative amount of net loan charge-offs with respect to 

Qualified Lending as measured since, and including, the quarter 

ended September 30, 2020.

The total amount of Qualified Lending, including the exclusions 

listed above, shall be calculated and reported 10 business days 

before the date of Treasury’s investment (“Investment Date”) by 

the issuer in a format specified by Treasury (“Initial 

Supplemental Report”) and during each full quarter thereafter 

(“Quarterly Supplemental Report”) for the full lifetime of 

participation in the ECIP. 

The interest rate will be adjusted based on the lending growth 

criteria listed in these terms beginning the first payment date 

after the 24-month, no interest accrual period ends, and reported 

results will determine the interest rate due for the remainder of 

quarterly payments in the remaining thirteen years of 

investment. The first payment due will be a partial, pro-rata 

amount for accrual inclusive of the day beginning on the 24-

month anniversary date.

Calculation of 

Lending Baseline

Not later than 10 business days prior to the Investment Date, the 

issuer shall submit an Initial Investment and Lending Plan 

reporting Qualified Lending for the annual period ending on 

September 30, 2020. In calculating Qualified Lending, if any 

gains in Qualified Lending resulted from mergers and 

acquisitions or purchase of loans during any quarter during such 

four-quarter period, the issuer shall recalculate Qualified 

Lending for the annual period ending on September 30, 2020 

based upon instructions contained in the Initial Supplemental 
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Issuance Date: 8/12/2021

Report. The Qualified Lending reported for the annual period 

ending on September 30, 2020 shall be the baseline against 

which subsequent Qualified Lending is measured (“Baseline”). 

When applicable, at the beginning of each quarter that begins 

after the Investment Date, the Baseline will be increased by the 

amount of any gains in Qualified Lending realized by the issuer 

resulting from mergers and acquisitions, or purchases of loans, 

as measured since, and including, the quarter ending on 

September 30, 2020. 

Maturity The date (“Maturity Date”) that is either fifteen or thirty years 

from the Investment Date, as selected by the issuer, and all 

Subordinated Debt issued to Treasury by the issuer must carry 

the same Maturity Date. On the Maturity Date, the issuer shall 

repay to Treasury the principal amount together with all accrued 

and unpaid interest on the Subordinated Debt. 

Interest Rate The Subordinated Debt shall pay quarterly interest. No interest 

accrues, nor will any interest be due for the first 24 months 

following the Investment Date. Interest will begin to accrue on 

the 2-year anniversary of the Investment Date. The first (partial) 

quarterly payment will be due on the first interest payment date 

after that date. Thereafter, interest payments will reflect the 

issuer’s Qualified Lending compared to the Baseline. See 

interest rate table in Annex A. 

Interest will be payable quarterly in arrears on March 15, June 

15, September 15 and December 15.

Deferral Interest payments shall be deferred in any quarter if any of the 

following are true:

1. The issuer fails to be classified as “well capitalized”, as 

defined in its primary federal regulator’s applicable 

regulations. 

2. The issuer failed to achieve positive net income for the most 

recently completed quarter. 

3. The issuer is subject to distribution limitations under the 

capital rules applicable to it (e.g., 12 CFR 3.11; 12 CFR 

217.11 or 12 CFR 324.11). 
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Issuance Date: 8/12/2021

4. The issuer determines that the payment would be detrimental 

to the financial health of the institution and the CEO and 

CFO of the institution provide written notice, in a form 

reasonably satisfactory to the Secretary, of such 

determination and the basis thereof.

Deferred interest will be capitalized and interest will accrue on 

any deferred interest from the date of deferral to, but excluding, 

the date of payment. An issuer may elect to pay deferred interest 

on any interest payment date. Any unpaid deferred interest will 

be due and payable at maturity. 

An issuer may, in its discretion, provide Treasury notice that it 

waives the deferral provision with respect to any interest 

payment date, and may pay interest that would otherwise be 

subject to deferral. However, notwithstanding any waiver, an 

issuer’s distributions must adhere to the distribution limitations 

of the primary federal regulator.

Redemption The Subordinated Debt may be redeemed at the option of the 

issuer on or after the fifth anniversary of issuance (or earlier in 

the event of loss of regulatory capital treatment—see “Change 

in Law” below), subject to the approval of the issuer’s primary 

federal regulator and in accordance with the federal banking 

agencies’ regulatory capital regulations. 

All redemptions of Subordinated Debt must be made at 100% of 

the issue price, plus any accrued and unpaid interest as of the 

date of redemption (“Redemption Date”). All redemptions must 

be in amounts equal to at least 20% of the principal amount of 

originally issued debentures, or 100% of the principal amount of 

the then outstanding debentures (if less than 20% of the principal 

amount of originally issued debentures).

Redemption procedures will be as set forth in the definitive 

ECIP investment agreement and related documentation.

Provisions upon 

Nonpayment of 

Interest

The following restrictions apply whenever interest payable on 

the Subordinated Debt has not been and will not be paid for any 

quarterly interest period:

1. If the issuer does not pay interest, including because 

interest will be deferred, no later than 3 business days 

prior to the payment date, the Chief Executive Officer or 

Chief Financial Officer of the issuer will be required to 

provide written notice, in a form reasonably satisfactory 
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Issuance Date: 8/12/2021

to Treasury, informing Treasury that the quarterly 

interest payment will not be made and include the reason

for the issuer not making the interest payment; and 

2. Beginning on the payment date for the unpaid interest, 

restrictions on capital distributions as described below.

After five quarterly interest payments not paid in full:

Whenever interest payments on the Subordinated Debt have not 

been paid for five quarterly interest payments or more (whether 

due to deferral or otherwise), and five quarterly interest 

payments, whether or not consecutive, are unpaid, the holder of 

the Subordinated Debt will have the right, but not the obligation, 

to appoint a representative to serve as an observer on the issuer’s 

board of directors. This right will end once all accrued and 

unpaid interest for all past interest periods has been paid in full 

by the issuer and the issuer has timely paid interest, without 

deferral, for four consecutive subsequent quarterly interest 

periods. 

After six quarterly dividends not paid in full: 

Whenever interest payments on the Subordinated Debt have not 

been paid for six quarterly interest payments or more (whether 

due to deferral or otherwise), and six quarterly interest 

payments, whether or not consecutive, are unpaid, the holder of 

the Subordinated Debt will have the right, but not the obligation, 

to elect two directors to the issuer’s board of directors. This 

right will end once all accrued and unpaid interest for all past 

interest periods has been paid in full by the issuer and the issuer 

has timely paid interest, without deferral, for four consecutive 

subsequent quarterly interest periods. 

Restrictions on 

Dividends and 

Share 

Repurchases 

(Mutuals)

The issuer shall agree to comply with the rules and regulations 

of Treasury and the issuer’s primary federal regulator with 

respect to dividends, share buybacks and limits on capital 

distributions.

In general:

For as long as any Subordinated Debt is outstanding, no 

dividends may be declared or paid by the issuer on any mutual 

capital certificates or other capital instruments it is authorized to 

issue under applicable law, nor may any discretionary payments 
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Issuance Date: 8/12/2021

be made on any other securities or instruments that are pari 

passu with, or junior to, the Subordinated Debt with respect to 

distributions or ranking in liquidation, unless all accrued and 

unpaid interest for all past interest periods on the Subordinated 

Debt has been paid in full, and no deferred amounts are unpaid. 

Further, the issuer may not repurchase or redeem any mutual 

capital certificates or other capital instruments, or any securities 

or instruments ranking pari passu with or junior to the 

Subordinated Debt, unless all accrued and unpaid interest for all 

past interest periods on the Subordinated Debt has been paid in 

full, and no deferred amounts are unpaid.

These restrictions would not prevent an issuer from making 

required, non-discretionary payments, such as payments at stated 

maturity in accordance with an instrument’s terms or payments 

of interest that may not be deferred. This exemption does not 

supersede otherwise applicable limitations or determinations 

with respect to distributions established by an issuer’s primary 

federal regulator.

Restrictions on 

Dividends and 

Share 

Repurchases (S 

Corps)

The issuer shall agree to comply with the rules and regulations 

of Treasury and the issuer’s primary federal regulator with 

respect to dividends, share buybacks and other capital 

distributions.

In general:

For as long as any Subordinated Debt is outstanding, no 

dividends may be declared or paid by the issuer on any securities 

or other instruments it is authorized to issue under applicable 

law, nor may the issuer make discretionary payments be made 

on any other securities or instruments, that are pari passu with, 

or junior to, the Subordinated Debt with respect to distributions 

or ranking in liquidation unless all accrued and unpaid interest 

for all past interest periods on the Subordinated Debt has been 

paid in full, and no deferred amounts are unpaid.

Further, the issuer may not repurchase or redeem any securities 

or instruments ranking pari passu with or junior to the 

Subordinated Debt, including common stock or an equivalent 

equity interest, unless all accrued and unpaid interest for all past 
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Issuance Date: 8/12/2021

interest periods on the Subordinated Debt has been paid in full, 

and no deferred amounts are unpaid.

These restrictions would not prevent an issuer from making 

required, non-discretionary payments, such as payments at stated 

maturity in accordance with an instrument’s terms or payments 

of interest that may not be deferred. This exemption does not 

supersede otherwise applicable limitations or determinations 

with respect to distributions established by an issuer’s primary 

federal regulator.

Notwithstanding anything to the contrary above, any issuer that 

is an S corporation may make capital distributions, or purchase 

or redeem non-senior securities, to the extent reasonably 

required to cover its owners’ tax obligations in respect of the 

entity’s earnings. Such distributions shall be subject to an 

annual reconciliation, with any surplus or deficiency to be 

deducted or added to distributions, as applicable, in the 

following year. This exemption for tax-related distributions 

does not supersede otherwise applicable limitations or 

determinations with respect to distributions established by an 

issuer’s primary federal regulator.

Restrictions on 

Executive 

Compensation

The issuer and its covered officers and employees shall agree to 

comply with the rules and regulations and of Treasury with 

respect to restrictions on executive compensation.

Investment and 

Lending Plan

Issuer shall provide to Treasury, the primary federal regulator, 

and, if applicable, the issuer’s state banking agency, an 

Investment and Lending Plan at the time it submits its 

application for ECIP. 

Voting & Consent 

Rights

The Subordinated Debt will be nonvoting.

Treasury shall have consent rights with respect to (i) any 

amendments to the rights of the Subordinated Debt and (ii) any 

merger, exchange, dissolution, or similar transaction which 

would affect the rights of the Subordinated Debt. 

Acceleration Upon placement of the issuer or, in the case of a holding 

company, a significant insured depository institution subsidiary, 

into receivership or liquidation or the appointment of a receiver, 

liquidating agent or other similar official (other than a 

conservator in respect of an insured depository institution), 
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Issuance Date: 8/12/2021

principal and accrued interest will become immediately due and 

payable (i.e., accelerated).

Transferability By Treasury: 

No contractual restrictions on transfer by the Treasury (or 

vehicles established and used by Treasury to purchase, hold, and 

sell investments), provided that:

1. Prior to any sale to a third party1, issuer shall have a right of 

first refusal to buy back the Subordinated Debt under terms 

that do not exceed a value as determined by an independent 

third party, conditional upon prior approval by the issuer’s 

primary federal regulator, as applicable; 

2. Treasury shall not sell more than 25% of the outstanding 

Subordinated Debt to a single third party without the issuer’s 

consent, which may not be unreasonably withheld; 

3. With the permission of the issuer, the Treasury may transfer 

or sell the Subordinated Debt for no considerations or for a 

de minimis amount to a mission aligned nonprofit affiliate of 

an applicant that is an insured community development 

financial institution (“Eligible Nonprofit”); and

4. Treasury will not sell the investment (other than to an

Eligible Nonprofit) before the tenth anniversary of the 

Investment Date without issuer’s consent, which is not to be 

unreasonably withheld. In addition, Treasury would commit 

to an 18-month advance notice of intent to transfer the 

investment other than to an Eligible Nonprofit.

By Issuer: 

The issuer, subject to the receipt of any required regulatory 

approvals, may merge or sell all, or substantially all, of its assets, 

provided that the right of the Subordinated Debt and the 

obligations of the issuer relating thereto are assumed and an 

equivalent Subordinated Debt issued by the successor entity.

The successor must also meet either the certified CDFI or MDI 

criteria to continue to participate in the ECIP unless prior 

Treasury approval is obtained. Treasury will issue guidance for 

1 The definition of 3rd party does not include a vehicle or entity controlled by the U.S. Department of the Treasury. 
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Issuance Date: 8/12/2021

how to account for qualified lending when two institutions 

merge.

Access and 

Information 

The issuer will permit the holder of the Subordinated Debt, the 

holder’s designees, the Inspector General of the Department of 

the Treasury, and the Comptroller General of the United States 

to examine the issuer’s corporate books and discuss matters 

relevant to the investment with principal officers, in each case 

after being provided with reasonable notice, subject to applicable 

laws and regulations limiting the disclosure of information. 

Certifications The issuer will provide the following certifications to Treasury:

1. The issuer’s Chief Executive Officer and Chief Financial 

Officer, as well as the directors (trustees) of the issuer 

who attest to the issuer’s Call Report (or those of its 

insured depositories, in the case of a holding company), 

will certify to Treasury that information provided on 

each Supplemental Report is accurate.

2. Following the Investment Date, within 120 days of the 

end of each fiscal year of the issuer during which a 

Supplemental Report is submitted, the issuer will submit 

to Treasury a certification that the processes and controls 

used to generate the Supplemental Reports are 

satisfactory. If the issuer is required to include an 

attestation as to the issuer’s internal control over 

financial reporting in connection with the filing of 

audited financial statements with any governmental or 

self-regulatory agency, the issuer shall provide an 

attestation with respect to the processes and controls 

used to generate the Supplemental Reports from its 

independent auditor in addition to the certification 

referred to in the preceding sentence.

3. Annually, until the Redemption Date, the issuer will 

certify to Treasury that it is in compliance with the 

Customer Identification Program requirements set forth 

in 31 CFR 103.121 (or any successor provision). Issuers 

must submit valid and timely certifications to be eligible 

for any interest rate adjustment on the Subordinated 

Debt. 
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Issuance Date: 8/12/2021

4. Annually, for the period required by Treasury’s rules 

and regulations, a certification by the issuer, executed by 

two of its senior executive officers (one of which must 

be the issuer’s Chief Executive Officer or Chief 

Financial Officer), that the issuer is in compliance with 

each of the excessive compensation, severance pay and 

excessive or luxury expenditures requirements and 

limitations on capital distributions set forth in Treasury’s 

rules and regulations related thereto, as published and in 

effect at the time of the certification.

Change in Law If, after a capital investment has been made in an eligible 

institution under ECIP, there is a final change in law or 

regulation that results in loss of regulatory capital treatment for 

the investment or a tax event, the issuer may, with the approval 

of its primary federal regulator, redeem the investment.

Noncompliance An issuer’s noncompliance with the requirements of Treasury’s 

rules and regulations related to ECIP and the related ECIP 

investment agreement would result in (i) restrictions on capital 

distributions and (ii) certain governance-related remedies (e.g., 

observer and director rights) In addition, Treasury expects to 

inform the issuer’s primary federal regulator of the issuer’s 

apparent noncompliance.

Additional 

Information and 

Considerations

These terms and conditions are preliminary and subject to 

change. Final terms and conditions will be found in the 

definitive closing documents.

This document does not create a binding legal obligation. A 

binding obligation shall only arise pursuant to duly executed 

definitive documentation, subject to the satisfaction of closing 

conditions, including the absence of any material adverse change 

in the condition (financial or otherwise) of the issuer.
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Issuance Date: 8/12/2021

Annex A: Interest Rate Table for Subordinated Debt Issued by a Subchapter S Corp

* Fixed rate after year 10. After Year 10, the interest rate on Subordinated Debt is fixed until 

maturity based on the average annual increase in Qualified Lending in years 2 through 10 

compared to the Baseline.. 

Increase in Qualified 

Lending Compared to 

Baseline

First 8 Quarters Quarter 9 to 10 Years After 10 Years

Increase less than 

200% of 

Capital Investment

0% < 2.0% per annum < 2.0% fixed*

Increase between 

200% and 400% of 

Capital Investment

0% < 1.25% per annum < 1.25% fixed*

Increase greater than 

400% of Capital 

Investment

0% < 0.5% per annum < 0.5% fixed*