Issuance Date: 8/12/2021

Emergency Capital Investment Program

Credit Union Subordinated Debt Term Sheet

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 or Minority 

Depository Institution; and

2. A Federally Insured Credit Union (“Credit Union”).

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”). 

Financial 

Instrument

Unsecured subordinated debentures (“Subordinated Debt”) that do not 

constitute a class of stock or represent equity ownership in the issuer, 

but, if applicable and with the NCUA’s approval, may represent 

secondary capital (see “Regulatory Capital Treatment” below). The 

Subordinated Debt shall have a minimum denomination of $1,000 and 

authorized denominations of integral multiples of $1,000.

Regulatory Capital 

Treatment

Secondary capital for low-income designated Credit Unions, as 

designated by the National Credit Union Administration (“NCUA”), 

provided such Credit Unions comply with applicable sections of 12 

C.F.R. §701.34 and receive approval from the NCUA. 

None for all other Credit Unions.

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

< $500MM: 22.5% of total assets 
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Issuance Date: 8/12/2021

“Total assets” means the total consolidated assets as reported on the 

most recent NCUA Call Report Form 5300 (“Call Report”).

Ranking For low-income designated Credit Unions:

As secondary capital, subordinate to all other claims, including those 

of shareholders, creditors and the National Credit Union Share 

Insurance Fund. In the event of the involuntary liquidation of the 

issuer, the Subordinated Debt will be subject to the payout priority for 

secondary capital as set forth in 12 CFR 709.5(b)(8) (or any successor 

provision).

For other Credit Unions:

Subordinate to all other claims, including those of shareholders, 

creditors and the National Credit Union Insurance Fund. The holder of 

the Subordinated Debt will agree to be subject to the same payout 

priority as set forth in 12 CFR 709.5(b)(8) (or any successor 

provision) for secondary capital, as though the Subordinated Debt 

were secondary capital, and will expressly waive any right to a higher 

payout priority, including, without limitation, the priority set forth in 

12 CFR 709.5(b)(5) (or any successor provision). 

Target 

Communities 

“Target Communities” include Minority, Rural, and Urban LowIncome and Underserved Communities and to Low- and ModerateIncome borrowers, as defined in Treasury’s Application Instructions 

for ECIP.

Qualified Lending “Qualified Lending” generally includes the following extensions of 

credit (including participations in such extensions of credit) to Target 

Communities: 

As reported to the NCUA in the Loans & Leases section of the Call 

Report:

(i) non-commercial loans and lines of credit; and 

(ii) commercial loans and lines of credit,

and, within these loan categories, excluding:

A. 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 Business 
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Issuance Date: 8/12/2021

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

B. 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 

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

including the increase, is 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 amount of Qualified Lending, including the exclusions listed 

above, shall be calculated and reported on the date of Treasury’s 

Investment (“Investment Date”) by the issuer in a format specified by 

the 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 interest 

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 Supplemental Report 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 

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 
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Issuance Date: 8/12/2021

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 is true:

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

12 CFR 702.102(a)(1) of the NCUA’s regulations (or any 

successor provision).

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

recently completed quarter. 

3. 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, subject to the provisions set forth under “Liquidation” 

below. An issuer may elect to pay deferred interest on any interest 

payment date. Any unpaid deferred interest will be due and payable at 

maturity.
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Issuance Date: 8/12/2021

An issuer may request and Treasury, in its discretion, may provide a 

waiver from the deferral provisions if an issuer would like to pay 

interest that would otherwise be subject to deferral, provided such 

payments are in accordance with the NCUA’s regulations and subject 

to approval by the applicable NCUA Regional Director. 

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

the issuer, subject to the approval of the NCUA (if then required under 

the regulations of the NCUA), and in any case where the Subordinated 

Debt is treated as secondary capital, subject to the requirements set 

forth in 12 CFR 701.34 (or any successor provision). 

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 in full for any 

quarterly interest period:

1. If the issuer will 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 to Treasury, informing 

Treasury and the NCUA the quarterly interest payment will 

not be made and include the reason for the issuer’s not making 

the interest payment; and

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

restrictions on capital distributions as described below will 

apply.
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Issuance Date: 8/12/2021

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. For the 

avoidance of doubt, such an observer will not have any rights granted 

to board members under the Federal Credit Union Act and/or the 

NCUA’s regulations or the Credit Union’s bylaws—the observer may 

attend board meetings, but shall not participate in, or contribute to 

discussions, of the board unless called upon by board members. 

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 

Redemptions

The issuer shall agree to comply with the rules and regulations of 

Treasury and the NCUA with respect to dividends, share buybacks 

and limits on capital distributions.

In general:

For as long as any Subordinated Debt is outstanding, no extraordinary 

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

share accounts or any other capital instruments it is authorized to issue 

under applicable law, nor may any 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 other capital instruments, or any securities or 

instruments ranking pari passu with or junior to the Subordinated 

Debt (other than in the case of redemptions of membership share 

interests upon the voluntary or involuntary termination of membership 

by the issuer or its members, as applicable), unless all accrued and 

unpaid interest for all past interest periods on the Subordinated Debt 

has been paid in full.
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Issuance Date: 8/12/2021

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 the NCUA.

Restrictions on 

Executive 

Compensation

The issuer and its covered officers and employees shall agree to 

comply with the rules and regulations of Treasury with respect to 

restrictions on executive compensation in addition to complying with 

relevant NCUA’s regulations, including, but not limited to, 12 CFR 

Part 750.

Investment and 

Lending Plan

The issuer shall provide to Treasury, the NCUA, and, if applicable, 

the issuer’s state regulatory agency, an Investment and Lending Plan 

at the time it submits its application for ECIP. 

Voting & Consent 

Rights

The Subordinated Debt will carry no membership rights and be 

nonvoting.

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

to the rights of the Subordinated Debt and (ii) any merger, share 

exchange, dissolution, or similar transaction which would adversely 

affect the rights of the Subordinated Debt (except, (x) in the case of a 

merger or dissolution of a low-income Credit Union, (other than 

merger into another low-income Credit Union) the procedures set 

forth in 12 CFR 701.34(b)(9) (or any successor provision) will apply, 

and (y) with respect to involuntary liquidations pursuant to 12 CFR 

Part 709 or emergency mergers pursuant to Appendix B to 12 CFR 

Part 701).

Liquidation Upon the placement of the issuer into receivership or liquidation, or 

the appointment of a receiver, liquidating agent or other similar 

official (other than a conservator) for the issuer, the (i) accrual of 

interest after commencement of the liquidation or receivership 

proceedings, and (ii) the payment of principal and interest, will be 

determined accordance with 12 U.S.C. 1787 and the NCUA’s 

regulations in 12 CFR Part 709. 

Transferability By Treasury: 

There are no contractual restrictions on transfer of ownership of the 

Subordinated Debt by Treasury (or vehicles established and used by 
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Issuance Date: 8/12/2021

Treasury to purchase, hold, and sell investments) to a third party1, 

provided that:

1. Prior to any sale to a third party, the 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; 

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

of the issuer to a single third party without the issuer’s consent, 

which may not be unreasonably withheld; 

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

Subordinated Debt for no consideration 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 Subordinated Debt 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; provided, however, that in the event of 

the merger or other voluntary dissolution of a low-income Credit 

Union, (other than merger into another low-income Credit Union), the 

secondary capital account will be closed and paid out in accordance 

with 12 CFR 701.34(b)(9) (or any successor provision). 

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 how to account 

for qualified lending when two institutions merge.

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

Access and 

Information 

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

holder’s designees, the Office of 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 that may limit the disclosure of certain information, 

including, but not limited to, 12 CFR Part 792 of the NCUA’s 

regulations.

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, 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 selfregulatory 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 (or Maturity Date, as 

applicable), 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. 

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 
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Issuance Date: 8/12/2021

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 issuer under ECIP, 

there is a final change in law or regulation that modifies the terms of 

the investment or program in a materially adverse respect for the 

eligible institution, the eligible institution may, after approval by the 

NCUA for the eligible institution, 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 rights). In 

addition, Treasury expects to inform the NCUA of an issuer’s 

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

Increase in Qualified Lending 

Compared to Baseline

First 8 Quarters After 8 Quarters 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*

* 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..