Emergency Capital Investment Program Disposition Guidelines (November 20, 2024)
Summary
Disposition Guidelines for the Emergency Capital Investment Program (ECIP) issued by the U.S. Department of the Treasury on November 20, 2024. They state that Treasury made approximately $8.57 billion in ECIP investments in CDFIs and MDIs, in the form of preferred stock or subordinated debt, under section 522 of the Consolidated Appropriations Act, 2021. The guidelines describe when Treasury may sell an ECIP investment to the issuer or another entity, including transfers for no or de minimis consideration to a mission-aligned nonprofit affiliate, and define "affiliate" and "control." A footnote states the program has closed to new applicants, and the guidelines close with a pricing formula and tax considerations.
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“Emergency Capital Investment Program Disposition Guidelines (November 20, 2024).”
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EMERGENCY CAPITAL INVESTMENT PROGRAM
Disposition Guidelines
U.S. Department of the Treasury
November 20, 2024
Through the Emergency Capital Investment Program (ECIP), Treasury made approximately
$8.57 billion in investments in community development financial institutions (CDFIs) and
minority depository institutions (MDIs) that are federally insured depository institutions, bank
holding companies, or savings and loan holding companies (referred to as ECIP participants).
The purpose of these investments is to enable participants to provide loans, grants, and
forbearance to small businesses, minority-owned businesses, and consumers, especially in low-
income and underserved communities, including persistent poverty counties, that may have been
disproportionately impacted by the economic effects of the COVID–19 pandemic. ECIP
participants are regulated and supervised by the federal banking regulators and the National
Credit Union Administration (NCUA). ECIP was established under section 522 of the
Consolidated Appropriations Act, 2021 (the ECIP statute), and the ECIP investments are subject
to the terms of the purchase agreement each participant executed with Treasury. Treasury’s
ECIP investments take the form of preferred stock or subordinated debt issued by participating
institutions.
Treasury’s ability to sell, dispose of, or transfer1 the ECIP investments is subject to restrictions in
the ECIP statute and ECIP purchase agreements. These Disposition Guidelines describe certain
circumstances and processes under which Treasury may sell an ECIP investment to the issuer or
any other entity.2 Treasury may amend or supplement these Disposition Guidelines at any time.
ECIP investments are having a substantial impact in communities across the country.3 These
Disposition Guidelines are intended to further support ECIP participants with the strongest track
record of lending in underserved communities.
1. Mission-aligned Nonprofit Affiliate
As provided in the ECIP statute, with the ECIP participant’s permission, Treasury may transfer
or sell ECIP investments for no or de minimis consideration to a “mission aligned nonprofit
1
The ECIP statute refers to selling, disposing of, and transferring ECIP investments. For ease of reading, these
Disposition Guidelines generally use those terms interchangeably. These guidelines implement Treasury’s statutory
authority to “sell, dispose of, transfer, exchange,” or “enter into … other financial transactions in regard to” ECIP
investments acquired by Treasury, “upon terms and conditions and at a price determined by the Secretary” of the
Treasury. See 12 U.S.C. § 4703a(o)(6).
2
The ECIP program has closed to new applicants, so these Disposition Guidelines only apply to existing
participants.
3
Treasury, “ECIP: 2023 Investing for Impact Report” (July 12, 2024), available at
https://home.treasury.gov/system/files/136/ECIP-2023-Report-Final-07.12.24.pdf.
1
affiliate” of an applicant that is an insured CDFI.4 Following are definitions applicable to this
provision. Any such disposition is also subject to the terms of sections 2 and 3 below.
“Affiliate” means any company that controls, is controlled by, or is under common control with
another company. For purposes of this definition, “control” of a company means: (1)
ownership, control, or power to vote 25% or more of the outstanding shares of any class of
voting securities of the company, directly or indirectly or acting through one or more other
persons; (2) control in any manner over the election of a majority of the directors, trustees, or
general partners (or individuals exercising similar functions) of the company; or (3) power to
exercise, directly or indirectly, a controlling influence over the management, credit or investment
decisions, or policies of the company. For the purposes of these Disposition Guidelines,
Treasury will consider indicia that a company exercises a “controlling influence” over another
company, including (1) management and director interlocks between the companies; (2) for
credit unions, whether the affiliate is a sponsoring organization of the credit union; (3) for credit
unions, whether the company was created by the credit union for the express purpose of
providing mission-aligned services to its members; and (4) other indicia noted in the Federal
Reserve’s regulations on control in 12 CFR § 225.32 and 12 CFR § 238.22. For credit unions,
affiliates do not include “credit union service organizations,” as defined by the NCUA. For the
avoidance of doubt, these Disposition Guidelines do not affect any applicable federal or state law
related to the creation of an affiliate or the acquisition by an affiliate of ECIP instruments.
An affiliate is “mission-aligned” if its primary purpose is to provide financial products, financial
services, or other services to, or make investments in, low- and moderate-income, minority,
rural, and underserved communities, including persistent poverty counties, and the activities of
the affiliate are purposefully directed toward improving the social and/or economic conditions of
underserved people and/or residents of economically distressed communities. In determining
whether an affiliate is mission-aligned, Treasury will consider the activities and the governing
documents (such as articles of incorporation, bylaws, and mission statement) of the entity.
Newly formed entities are not categorically excluded from this definition.
“Nonprofit” means an organization or entity that is exempt from taxation and described in
Section 501(c)(3) of the Internal Revenue Code.
Determinations regarding whether an entity is a mission-aligned nonprofit affiliate will be made
by Treasury in its sole discretion.
“Insured CDFI,” for purposes of these Disposition Guidelines, means a CDFI that is (1) an
insured depository institution, as defined in 12 U.S.C. § 1813(c)(2); (2) an insured credit union,
as defined in 12 U.S.C § 1752(7); or (3) a bank holding company or savings and loan holding
company.
CDFI certification requirement. For a mission-aligned nonprofit affiliate to purchase the ECIP
investment at the “de minimis price” (as defined below in Section 3), the ECIP participant must
be an insured CDFI. An ECIP participant that obtains CDFI certification prior to a sale of the
ECIP investment—including an institution that is not a CDFI at the time a sale agreement is
4
12 U.S.C. § 4703a(e)(4)(A)(iii).
2
executed but obtains CDFI certification prior to the closing of the sale—may be eligible for a
sale at the de minimis price if (1) it has maintained CDFI certification for at least three
consecutive years immediately prior to the sale, or (2) it agrees to maintain CDFI certification for
at least three consecutive years, including (to the extent applicable) after the closing of the sale.
A breach of the latter agreement will require the institution immediately to repay Treasury the
difference between the sale price and the “present-value price” (as defined below in Section 3).
Three-year holding period. A mission-aligned nonprofit affiliate that acquires an ECIP
investment from Treasury for a de minimis price will be required to hold the ECIP investment for
at least three years following the acquisition from Treasury. If the affiliate sells the investment
within three years, including to a third party or to the ECIP participant, the affiliate or the ECIP
participant will be required immediately to pay Treasury the difference between the sale price
and the present-value price.
2. Requests for a Sale to a Third Party or Repurchase by the ECIP Participant
An ECIP participant may request that Treasury sell its ECIP investment in that participant to an
affiliate (including a mission-aligned nonprofit affiliate of the participant as described above), to
another third party selected by the ECIP participant, or to the ECIP participant (any such sale,
referred to as a repurchase).
Thresholds for sale or repurchase. An ECIP participant may request that Treasury sell its ECIP
investment in that participant during the first 10 years following the participant’s ECIP closing
(the ECIP period) at the applicable sale price described below if the ECIP participant meets any
of the following thresholds for “deep impact lending” or “qualified lending” (as defined in the
ECIP Rate Reduction Incentive Guidelines and the Instructions for the Quarterly Supplemental
Report) or based on its interest or dividend rate reduction:
• over any four-year period during the ECIP period, at least 60% of the ECIP participant’s
overall lending is deep impact lending (the deep impact threshold);
• over any six-year period during the ECIP period, at least 85% of the ECIP participant’s
overall lending is qualified lending, including deep impact lending5 (the qualified lending
threshold); or
• the ECIP participant achieves a 0.5% interest or dividend rate on its ECIP investment
each year for six consecutive years (the rate-reduction threshold).
Any ECIP participant may request that Treasury enter into an agreement to give the ECIP
participant—or third party selected by the ECIP participant—the right to purchase the ECIP
investment in that institution contingent on the ECIP participant meeting any of the three
thresholds above in the future. Under such an agreement, the sale of the ECIP investment will
only occur after the participant has met one of those three thresholds. Treasury will prioritize
entering into agreements with participants as follows: first, institutions that have met the deep
impact threshold for at least two consecutive years; second, institutions that have met the
qualified lending threshold for at least two consecutive years; third, institutions that have
5
For the purposes of the qualified lending threshold, deep impact lending and qualified lending will count equally;
deep impact lending will not receive 200% credit towards the threshold.
3
achieved a 0.5% interest or dividend rate at any annual reset date; and fourth, all other
institutions.
Treasury will consider data on Schedule A of the Quarterly Supplemental Reports submitted by
an ECIP participant for the relevant quarters in determining whether the deep impact threshold or
qualified lending threshold has been met. For participants that have completed a merger,
acquisition, or other business combination since the original issuance of the ECIP investment to
Treasury, Treasury will use the Quarterly Supplemental Reports that include the lending of the
acquired or acquiring institution, as applicable, consistent with the Instructions for the Quarterly
Supplemental Report.6 For the avoidance of doubt, the deep impact threshold and qualified
lending threshold will be calculated as an average over the four- or six-year period, as applicable.
Determinations regarding whether an ECIP participant meets any of the three thresholds
specified above will be made by Treasury in its sole discretion.
After the ECIP period, any ECIP participant, including a participant that has not met any of the
thresholds specified above during the ECIP period, may request that Treasury sell the ECIP
investment in that institution to a third party, including a mission-aligned nonprofit affiliate of
the participant, or the ECIP participant itself. An ECIP participant that does not meet any of the
thresholds during the ECIP period will not be eligible for a sale at the de minimis price; the
purchase price for any sale of the ECIP investment in such a participant, including a sale to a
mission-aligned nonprofit affiliate of the participant, will be the present-value price.
At any time, an ECIP participant, including a participant that does not meet any of the three
thresholds described above, may redeem its ECIP instruments at par value (100% of the principal
amount of the subordinated debt or 100% of the liquidation preference of the preferred stock, as
applicable), subject to regulatory or other legal requirements and the terms of the ECIP
transaction agreements.
Narratives. In determining whether to sell an ECIP investment to a mission-aligned nonprofit
affiliate at the de minimis price described in section 3 below, Treasury will also consider
information regarding how the proposed sale would help accomplish the goals of the ECIP
statute and mission of the participant. An ideal narrative may include the following:
• A narrative description, approved by the board of directors (or similar governing body) of
the ECIP participant, explaining how the sale will strengthen the ability of the ECIP
participant to expand or maintain significant lending or investment activity in low- or
moderate-income, minority, rural, and underserved communities, and to borrowers that
have significant unmet capital or financial services needs; and
• A plan to provide community outreach and engagement regarding the products and
services that will be offered by the participant, updated from the plan included in the
ECIP participant’s Emergency Investment Lending Plan submitted to Treasury in
connection with the participant’s ECIP application.
6
Instructions for the Quarterly Supplemental Report, available at https://home.treasury.gov/system/files/136/QSR-
Instructions-BHC-2.0.pdf.
4
Treasury may request additional information or documentation from the participant before
determining whether to approve a request for a sale or repurchase. An ECIP participant
requesting a sale of Treasury’s investment should take into account, for planning purposes, the
need for Treasury to review the ECIP participant, the proposed transaction, and other
information prior to approval.
Ineligibility. An ECIP participant may be ineligible for a sale of the ECIP investment in that
participant under these Disposition Guidelines if Treasury determines that:
1. The participant is not in compliance with the terms of the ECIP transaction agreements or
the ECIP Interim Final Rule at 31 CFR Part 35, Subpart B;
2. The participant is no longer certified as a CDFI or designated as an MDI;
3. During the preceding three years, the participant has been determined by a federal agency
or court to have violated the requirements of a federal grant or financial assistance
program, including any program administered by the CDFI Fund;
4. During the preceding three years, the participant has been determined by a court to have
violated, or is subject to a formal enforcement action with a federal agency regarding, any
consumer financial protection law, including fair lending laws;
5. The participant does not have at least a “satisfactory” rating under the Community
Reinvestment Act;
6. The participant is designated in Troubled Condition by its primary federal regulator, or is
subject to a formal enforcement action with its primary federal regulator that addresses
unsafe or unsound lending practices;
7. The participant is not well-capitalized under the applicable Prompt Corrective Action
Rules;7
8. The participant has not paid in full all dividends or interest payments that were payable at
any time to Treasury under the ECIP instruments; or
9. Treasury determines that the sale poses risks to ECIP or would not further the goals of the
program.
Regulatory treatment and requirements. Treasury will consult with the federal banking
regulators or the NCUA, as applicable, regarding the structure of potential dispositions and will
generally attempt, to the extent feasible, to structure transactions in a manner intended to
maintain or improve the regulatory capital treatment of the ECIP investments. For ECIP
participants or proposed transferees that are insured depository institutions (IDIs), bank holding
companies, or savings and loan holding companies, the transaction must comply with applicable
requirements of Sections 23A and 23B of the Federal Reserve Act and Regulation W. In the
interest of preserving the regulatory capital treatment of the ECIP investments and minimizing
regulatory complexity, the following entities are ineligible to purchase ECIP investments: (1) an
IDI subsidiary of an ECIP participant that is a holding company, or a subsidiary of such IDI the
financial statements of which are required to be consolidated with the financial statements of
such IDI; and (2) a credit union service organization, as defined by the NCUA. For the
avoidance of doubt, the regulatory capital treatment of ECIP investments following a sale to an
7
12 CFR § 324.403 (Federal Deposit Insurance Corporation); 12 CFR § 6.4 (Office of the Comptroller of the
Currency); 12 CFR § 208.43 (Board of Governors of the Federal Reserve System); 12 CFR § 702.102 (National
Credit Union Administration).
5
affiliate of the issuer will be subject to generally applicable regulatory capital requirements;
these Disposition Guidelines do not constitute a commitment regarding the regulatory capital
treatment after such a sale.
Interest and dividends. Interest or dividends on ECIP investments will continue to accrue and be
due and payable consistent with the terms of the instruments notwithstanding any pending
disposition by Treasury of the investments.
Transaction documentation. To minimize administrative burdens, Treasury generally expects to
develop and use standard forms of transaction documents for dispositions.
Reporting requirements and other obligations. ECIP participants will be required to continue to
comply with the reporting obligations set forth in the ECIP Securities Purchase Agreement and
with the ECIP Interim Final Rule at 31 CFR Part 35, Subpart B, for the entirety of the 10-year
ECIP period, even if the ECIP instruments are repurchased and redeemed. Any violation of
these obligations may be reported to the CDFI Fund or to an ECIP participant’s federal
regulators.
3. Determination of Sale Price
In the case of an ECIP participant that is an insured CDFI whose investment will be sold to a
mission-aligned nonprofit affiliate as described above, the purchase price will be payable in cash
in an amount equal to 0.5% of the outstanding principal amount of the subordinated debt or of
the aggregate liquidation preference of the preferred stock, as applicable, as of the date of the
closing of the sale by Treasury (the de minimis price).
For any other sale, including a repurchase by the issuer, the purchase price will be payable in
cash in an amount equal to the present value of the expected payments on the investment, as
determined by Treasury, as of the date of the closing of the sale by Treasury (the present-value
price).
For ECIP preferred stock, the present-value price equals (D ÷ (KE - G)) * ALV, the standard
dividend discount model formula. This price will be calculated using the zero-growth form of
the dividend discount model, with the parameters in Table 1 below. The “Closing Date” refers to
the date of the closing of the sale. The price will be adjusted as necessary to account for accrued
and unpaid dividends for any closings that occur between dividend payment dates.
Table 1: Parameters for Preferred Stock Present-Value Price
Parameter Value Description
D (dividend D = the issuer’s N/A
rate) dividend rate as of the
annual reset date
immediately preceding
the Closing Date
KE (cost of KE = RFR + β(ERP) The standard capital asset pricing model formula
equity)
6
RFR (risk- RFR = the higher of (1) The Kroll-recommended U.S. normalized RFR can
free rate) the prevailing Kroll- currently be found at
recommended U.S. https://www.kroll.com/en/insights/publications/cost-
normalized RFR; or (2) of-capital/recommended-us-equity-risk-premium-
the spot yield on 20- and-corresponding-risk-free-rates.
year U.S. Treasury The spot yield on 20-year U.S. Treasury bonds can
bonds as of three be obtained by referencing the Daily Treasury Par
business days before the Yield Curve Rates published on the Treasury
Closing Date website.8
β (beta) β = 0.5 This is an estimate of the beta for the average ECIP
participant, derived from the median five-year
historical beta of publicly traded ECIP participants’
stock price volatility in relation to the S&P 500
index
ERP (equity ERP = the Kroll- The Kroll-recommended U.S. Equity Risk Premium
risk recommended U.S. can currently be found at
premium) equity risk premium as https://www.kroll.com/en/insights/publications/cost-
of three business days of-capital/recommended-us-equity-risk-premium-
before the Closing Date and-corresponding-risk-free-rates.
G (dividend G = 0 (zero) G equals zero because dividends on ECIP
growth rate) instruments are not expected to increase over time
ALV ALV = aggregate N/A
(aggregate liquidation value of the
liquidation ECIP preferred stock as
value) of the Closing Date
𝐶 𝐹
For ECIP subordinated debt, the present-value price equals ∑ + , the standard bond
(1+𝑟)𝑡 (1+𝑟)𝑇
pricing model calculating the present value of the expected cash flows, with the parameters in
Table 2 below. The price will be adjusted as necessary to account for accrued and unpaid
interest for any closings that occur between interest payment dates. To promote consistency, for
ECIP participants that issued subordinated debt with a 15-year maturity, the present-value price
will be calculated as if the participant issued subordinated debt with a 30-year maturity.
Table 2: Parameters for Subordinated Debt Present-Value Price
Parameter Value Description
C (coupon) C = (the issuer’s interest rate as of the The quarterly interest
annual reset date immediately preceding payment on the outstanding
the Closing Date) ÷ 4 * outstanding subordinated debt as of the
principal amount of the subordinated debt most recent annual reset date
r (discount rate) r = (KE from Table 1 above + 300 basis The additional 300 basis
points (i.e., 3.0 percentage points)) ÷ 4 points reflects the current
relationship between the KE
8
https://home.treasury.gov/resource-center/data-chart-center/interest-
rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024.
7
(calculated in accordance
with Table 1 above) and the
yield to maturity on
subordinated long-term bonds
issued by community banks,
and accounts for the
possibility that the issuer may
not redeem 100% of the
principal at maturity
t (time periods) For issuers of 30-year subordinated debt: t N/A
= number of quarterly interest payments
remaining until the maturity of the note as
of the Closing Date.
For issuers of 15-year subordinated debt: t
= number of quarterly interest payments
remaining until the maturity of the note as
of the Closing Date + 60.
F (face value) F = outstanding principal amount of the N/A
subordinated debt as of the Closing Date
T (time to For issuers of 30-year subordinated debt: N/A
maturity) T = number of quarterly periods
remaining until the maturity of the note as
of the Closing Date.
For issuers of 15-year subordinated debt:
T = number of quarterly periods
remaining until the maturity of the note as
of the Closing Date + 60.
Tax, accounting, etc. ECIP participants are strongly encouraged to consult with legal, tax,
accounting, financial, and other relevant advisors regarding the terms of potential sales of
Treasury’s ECIP investments. Among other considerations, for ECIP participants that issued
subordinated debt and that are not tax-exempt (that is, mutual institutions and S corporations), if
Treasury sells the instrument to an affiliate of the issuer or the instrument is repurchased by the
issuer at a discount, the ECIP participant may need to record any difference between the sale
price and the principal amount of the subordinated debt as taxable income. If the affiliate that
purchases the subordinated debt is not itself tax-exempt, it may also need to record this
difference as taxable income. In the case of a nonprofit affiliate that purchases the ECIP
investment, the difference between the present-value price and the de minimis price would
generally be considered a gift from a governmental unit for the purpose of the public support test
for public charities under the Internal Revenue Code and implementing regulations; however,
ECIP participants and any nonprofit affiliates should consult their own tax advisors. These
Disposition Guidelines do not constitute tax advice.
8
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