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Small Business Lending Fund

Senior Preferred Stock

Summary of Terms

Issuer: The term “Issuer” means:

(i) an insured depository institution with total consolidated assets of less than $10 billion 

that is not controlled by a bank holding company or savings and loan holding company 

and is not directly or indirectly controlled by any company or other entity that has total 

consolidated assets of $10 billion or more; or

(ii) a bank holding company or savings and loan holding company with total consolidated 

assets of less than $10 billion.1

Application: Institutions must apply to the United States Department of the Treasury (“Treasury”) to be 

considered for investments from the Small Business Lending Fund (the “Fund”). 

Financial

Instrument: Senior perpetual noncumulative preferred stock (“Senior Preferred”), liquidation preference 

of $1,000 per share. 

Regulatory

Capital 

Treatment: Tier 1.

Investment 

Amount: Issuers with $1 billion or less in total assets – 5% of risk-weighted assets:

An Issuer that is not controlled by a bank holding company or savings and loan holding 

company and has total assets of $1 billion or less, or that is a bank holding company or savings 

and loan holding company that has total assets of $1 billion or less may issue a total amount of 

Senior Preferred equal to not less than 1% and not more than 5% of its risk-weighted assets 

(“RWA”). 

Issuers with $1 billion to $10 billion in total assets – 3% of RWA:

An Issuer that is not controlled by a bank holding company or savings and loan holding 

company and has total assets of more than $1 billion and less than $10 billion, or that is a 

 

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Issuers that participated in the Community Development Capital Initiative (“CDCI”) or the Capital Purchase Program (“CPP”) 

and redeemed, or applied to redeem, the CDCI or CPP investment after December 16, 2010 may only receive investments from

the Small Business Lending Fund pursuant to the refinancing terms available online at www.treasury.gov/SBLF.
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bank holding company or savings and loan holding company that has total assets of more 

than $1 billion and less than $10 billion may issue a total amount of Senior Preferred equal 

to not less than 1% and not more than 3% of its RWA.

Issuers requiring a matching private investment – 3% RWA:

An Issuer that qualifies for an investment from the Fund in conjunction with a matching 

private investment (“Private Investment”) shall receive from one or more private, nongovernment investors an amount of Private Investment equal to at least the amount to 

be invested by the Fund (or such greater amount as may be specified by Treasury). For 

such Issuers, the Fund’s investment will not exceed 3% of the Issuer’s RWA. Private 

Investment shall be subordinate to the Senior Preferred and carry terms satisfactory to 

Treasury. The source of such capital shall not be any other institution that has received 

or applied to receive an investment from the Fund. Private Investment shall include any 

qualifying capital raised after September 27, 2010, net of subsequent dividends, 

repurchases, and redemptions.

Total assets are measured as reported in the call reports (or in the case of savings 

associations, Thrift Financial Reports) of the Issuer or, for holding companies, the combined 

total assets reported in the call reports of the Issuer’s insured depository institution 

subsidiaries, as of the end of the fourth quarter of calendar year 2009, and RWA are

measured as reported in the most recent call reports as of the date of application.

Ranking: With respect to all distributions, the Senior Preferred will rank senior to common stock and 

pari passu with all existing preferred stock other than preferred shares that rank junior to 

any existing preferred shares.

Calculation of

Qualified Small 

Business Lending: Qualified Small Business Lending, as measured for the purpose of calculating the dividend 

rate for the Senior Preferred, is defined as the sum of all lending by the Issuer of the 

following types, as reported in the Issuer’s most recent quarterly call report:

(i) commercial and industrial loans;

(ii) owner-occupied nonfarm, nonresidential real estate loans;

(iii) loans to finance agricultural production and other loans to farmers; and

(iv) loans secured by farmland;

and, within these loan categories, excluding:

(A) any loan or group of loans to the same borrower and its affiliates with an original 

principal or commitment amount greater than $10 million or that is made to a 

borrower that had (or whose ultimate parent company had) more than $50 million in 

revenues during the most recent fiscal year ended as of the date of origination;

(B) to the extent not included in (A) or (C), the portion of any loans guaranteed by the 

U.S. Small Business Administration, any other U.S. Government agency, or a 

U.S. Government-sponsored enterprise; and
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(C) to the extent not included in (A) or (B), the portion of any loans held by the Issuer for 

which the risk is assumed by a third party (for example, the portion of loans that have 

been participated),

while, further, adding to the amount determined above, the cumulative amount of net loan 

charge-offs with respect to Qualified Small Business Lending as measured since, and 

including, the quarter ending September 30, 2010. 

The amount of Qualified Small Business Lending, including the exclusions listed above, shall 

be calculated and reported on the date of Treasury’s investment (the “Investment Date”) by 

the Issuer in a format specified by Treasury (the “Initial Supplemental Report”) and during 

the first nine calendar quarters thereafter (each, a “Quarterly Supplemental Report”), 

concurrent with the Issuer’s publication of its call report. 

Calculation of 

Lending Baseline: Not later than five business days prior to the Investment Date, the Issuer shall submit an 

Initial Supplemental Report reporting Qualified Small Business Lending as of the Investment 

Date and for the each of the four full quarters ending on June 30, 2010. In calculating such 

Qualified Small Business Lending, if any gains in Qualified Small Business Lending resulted 

from mergers and acquisitions, or purchases of loans during any quarter during such four 

quarter period, the Issuer shall recalculate Qualified Small Business Lending for all earlier 

quarters in such four quarter period to include such gains on a pro forma combined basis. 

The average of Qualified Small Business Lending reported for these four quarters shall be the 

baseline against which subsequent lending is measured (the “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 realized by the Issuer resulting from 

mergers and acquisitions, or purchases of loans, as measured since, and including, the 

quarter ending on September 30, 2010.

Dividend Rate: The Senior Preferred will pay noncumulative dividends. The dividend rate will be adjusted to 

reflect the amount of an Issuer’s change in Qualified Small Business Lending from the 

Baseline, based on the following schedule:

Increase in Qualified Small Business 

Lending from the Baseline

First 9 

Quarters

Quarter 10 

to Year 4.5

After Year 

4.5

0% or less 5 % 7 % 9 %

more than 0%, but less than 2.5% 5 % 5 % 9 %

2.5% or more, but less than 5% 4 % 4 % 9 %

5% or more, but less than 7.5% 3 % 3 % 9 %

7.5% or more, but less than 10% 2 % 2 % 9 %

10% or more 1 % 1 % 9 %

*For the first nine quarters, the dividend rate will be adjusted quarterly

Dividend Rate Following Investment Date
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Initial rate and adjustments in the first ten quarters:

On the Investment Date, and at the beginning of each of the next ten calendar quarters 

thereafter, the amount of Qualified Small Business Lending reported by the Issuer in the 

most recent Supplemental Report will be compared to the Baseline amount of Qualified 

Small Business Lending. The dividend rate will be adjusted to reflect the amount of an 

Issuer’s change in Qualified Small Business Lending from the Baseline, as reflected in the 

table above.

Rate adjustments following the first ten quarters:

The rate in effect at the beginning of the tenth full calendar quarter after the Investment 

Date will be payable until the expiration of the four-and-one-half-year period beginning on 

the Investment Date.

If, at the beginning of the tenth full calendar quarter after the Investment Date, the 

Issuer’s most recent Quarterly Supplemental Report shows that the amount of Qualified 

Small Business Lending has not increased relative to the Baseline, the dividend rate will 

increase to 7% per annum until the four-and-one-half-year period that started on the 

Investment Date expires.

Limitation on rate reductions:

The reduction in the dividend rate will not apply to a dollar amount of the investment that is 

greater than the dollar amount of the increase in Qualified Small Business Lending since the 

Baseline. Dividends on any amount that is in excess of the increase in the amount of 

Qualified Small Business Lending will be payable at a rate of 5% per annum until the 

expiration of the four-and-one-half-year period that begins on the Investment Date, and 9% 

per annum thereafter.

Rate adjustment 4.5 years after the Investment Date:

At the expiration of the four-and-one-half-year period that begins on the Investment Date, 

the dividend rate will increase to 9% per annum.

Timing:

Dividends will be payable quarterly on January 1, April 1, July 1, and October 1 of each year. 

Redemption: The Senior Preferred may be redeemed at any time at the option of the Issuer, subject to the 

approval of the appropriate federal banking agency. All redemptions of Senior Preferred 

must be made at a per share redemption price equal to 100% of the liquidation preference, 

plus accrued and unpaid dividends as of the date of redemption (“Redemption Date”) for the 

quarter that includes the Redemption Date, and a pro rata portion of any lending incentive 

fee. All redemptions must be in amounts equal to at least 25% of the number of originally 

issued shares, or 100% of the then-outstanding shares (if less than 25% of the number of 

originally issued shares). 

Right to Pay

Dividends and 

Repurchase Shares: Unless otherwise restricted by the appropriate federal or state banking agency, the Issuer 

may pay dividends on preferred shares ranking pari passu with the Senior Preferred, junior 

preferred shares, or other junior securities (including common stock), or redeem or 

repurchase equity securities, subject to the limitations listed under “Provisions upon 

Nonpayment of Dividends,” if after giving effect to the dividend payment or share 
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repurchase, the dollar amount of the Issuer’s Tier 1 capital would be at least 90% of the 

amount existing at the time immediately following the Investment Date (the “Tier 1 Dividend 

Threshold”), excluding any subsequent net charge-offs and redemptions of the Senior 

Preferred since the Investment Date, subject to (i) and (ii) below:

(i) During the period beginning on the second anniversary of the Investment Date and 

ending on the day before the tenth anniversary of the Investment Date, for every 1% 

increase in Qualified Small Business Lending the Issuer has achieved above the Baseline, 

the Tier 1 Dividend Threshold will be decreased by a dollar amount equal to 10% of the 

amount of the Senior Preferred investment; and

(ii) For Issuers that are not publicly traded,2during the period beginning on the tenth 

anniversary of the Investment Date and ending on the Redemption Date, the Issuer may 

not effect any repurchases or declare or pay any dividends on preferred shares ranking 

pari passu with the Senior Preferred, junior preferred shares, or other junior securities 

(including common stock).

Provisions upon

Nonpayment of

Dividends: For any missed payment:

The following restrictions will apply whenever dividends payable on the Senior Preferred 

have not been declared and paid for any quarterly dividend period:

(i) The Chief Executive Officer and Chief Financial Officer of the Issuer will be required to 

provide written notice, in a form reasonably satisfactory to Treasury, which is to include 

the rationale of the Issuer’s board of directors for not declaring dividends; and

(ii) No repurchases may be effected and no dividends may be declared or paid on preferred 

shares ranking pari passu with the Senior Preferred, junior preferred shares, or other 

junior securities (including common stock) during the current quarter and for the next 

three quarters following the failure to declare and pay dividends on the Senior Preferred

(provided, however, that, in any such quarter in which Treasury’s dividend is paid, 

dividend payments on shares ranking pari passu may be paid to the extent necessary to 

avoid any resulting material covenant breach).

After four missed payments:

Whenever dividends on the Senior Preferred have not been declared and paid for four 

quarterly dividends or more, whether or not consecutive, and during such time the Issuer 

was not subject to a regulatory determination that prohibits the declaration and payment of 

dividends, the board of directors of the Issuer must certify, in writing, that the Issuer used 

 

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 For the purposes of this term sheet “publicly traded” means a company (1) whose securities are traded on a national 

securities exchange and (2) required to file, under the federal securities laws, periodic reports such as the annual (Form 10-K) 

and quarterly (Form 10-Q) reports with either the Securities and Exchange Commission or its primary federal bank regulator. 

A company may be required to do so by virtue of having securities registered under Section 12 of the Securities Exchange Act 

of 1934, as amended (the “Exchange Act”), which applies to all companies that are traded on an exchange or that have 

$10 million in assets and 500 shareholders of record or Section 15(d) of the Exchange Act which requires companies that 

have filed a registration statement under the Securities Act of 1933, as amended, and have 300 or more securityholders of 

record of the registered class to file reports required under Section 13 of the Exchange Act, e.g., periodic reports.
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best efforts to declare and pay such quarterly dividends in a manner consistent with safe 

and sound banking practices and the directors’ fiduciary obligation. 

After five missed payments:

Whenever dividends on the Senior Preferred have not been declared and paid for five 

quarterly dividends or more, whether or not consecutive, Treasury 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 when full dividends have been paid for four consecutive 

subsequent dividend periods.

After six missed payments: 

Whenever dividends on the Senior Preferred have not been declared and paid for six quarterly 

dividend periods or more, whether or not consecutive, if the liquidation preference of the 

Senior Preferred is $25 million or more, the holder of the Senior Preferred will have the right to 

elect two directors to the Issuer’s board of directors. The right to elect directors will end when 

full dividends have been paid for four consecutive subsequent dividend periods.

Small Business

Lending Plan: The Issuer shall provide to the appropriate federal banking agency, and, if applicable, state 

banking agency, a small business lending plan at the time it submits its application for this 

program. The plan will be confidential supervisory information. 

Downstreaming 

of Investment: The Issuer, if it is a holding company, shall contribute not less than 90% of the amount of 

Treasury’s investment to its insured depository institution subsidiaries; provided, that no 

insured depository institution may receive more than 5% of its RWA (if the Issuer has total 

assets of $1 billion or less), or 3% of its RWA (if the Issuer has total assets of more than 

$1 billion and less than $10 billion).

Voting Rights: The Senior Preferred will be nonvoting, other than for consent rights granted to Treasury 

with respect to (i) any authorization or issuance of shares ranking senior to the Senior 

Preferred, (ii) any amendment to the rights of the Senior Preferred, and (iii) any merger, 

exchange, dissolution, or similar transaction which would affect the rights of the Senior 

Preferred. 

Transferability: The Senior Preferred will not be subject to any restrictions on transfer. The Issuer may 

merge or sell all, or substantially all, of its assets (as well as, in the case of an Issuer that is a 

bank holding company, any insured depository institution subsidiary), provided that the 

rights of the Senior Preferred and the obligations of the Issuer relating thereto are assumed 

and an equivalent Senior Preferred is issued by the successor entity.

Access and

Information: The Issuer will permit the holder of the Senior Preferred, 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, after being provided with reasonable notice.
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Certifications: The Issuer will provide the following certifications to Treasury:

(i) 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. 

(ii) Following the Investment Date, within 90 days of the end of each fiscal year of the 

Issuer during which a Supplemental Report is submitted, the Issuer will receive and 

submit to Treasury a certification from its auditors that the processes and controls used 

to generate the Supplemental Reports are satisfactory.

(iii) Annually, until the Redemption Date, the Issuer will certify to Treasury that (A) businesses 

that received loans from the Issuer following the Investment Date have certified to the 

Issuer that their principals have not been convicted of, or pleaded nolo contendre to a sex 

offense against a minor, as required by Section 4107(d)(2) of the Small Business Jobs Act 

of 2010, and (B) these certifications will be retained in accordance with standard 

recordkeeping practices established by the appropriate federal banking agency.

(iv) 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 C.F.R. § 103.121. 

Issuers must submit valid and timely certifications to be eligible for any dividend rate 

adjustment on the Senior Preferred. Issuers must also complete a short annual lending 

survey.

No Relationship 

to TARP: The Fund was established by Congress as a separate and distinct Treasury program and is 

not related to the Troubled Asset Relief Program (“TARP”). An institution will not be 

considered a TARP recipient by virtue of receiving a capital investment from the Fund.

Change in Law: If, after a capital investment has been made in an eligible institution under the Program, 

there is a change in law that modifies the terms of the investment or program in a materially 

adverse respect for the eligible institution, the eligible institution may, after consultation 

with the appropriate federal banking agency for the eligible institution, redeem the 

investment without impediment.

Additional

Information and

Considerations: 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.

Institutions that participated in the Capital Purchase Program (“CPP”) or Community 

Development Capital Initiative (“CDCI”), and redeemed Treasury’s investment, but missed 

more than one dividend payment due to Treasury while participating in CPP or CDCI, are 

ineligible to participate in the program. A missed payment is defined as a payment 

submitted more than 60 days after the due date.
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Institutions on the Federal Deposit Insurance Corporation (“FDIC”) problem bank list, or that 

have been on the FDIC problem bank list within the last 90 days (the FDIC problem bank list 

means the list of institutions that have a current rating of 4 or 5 under the Uniform Financial 

Institutions Rating System, or similar list designated by the FDIC) are ineligible to receive 

investments from the Fund.