BAS Case Study - March 2023

From: Schmoe, Jo@FBD Date: Wednesday, February 15, 2019 To: File Re:

Capital Adequacy Memo – DRAFT (In Process)

• When looking at the Uniform Bank Performance Report for the capital trends over the last several years, examiner noticed declining earnings trends, even negative earnings. However, Tier 1 Capital improved slightly. • Based on comments from the prior examinations and assessing 2018, it appeared the bank’s capital levels were only being augmented by retained earnings. However, based on discussions with management and review of the Board minutes, it does not appear that the bank is actively managing their capital position. • The prior examination resulted in a Memorandum of Understanding that required the bank to maintain the Tier 1 Leverage Ratio at 8%. Consequently, the bank revised their Capital Plan. Examiner is still in the process of reviewing the adequacy of this plan. Preliminarily, examiner notes improvements are needed. • The Board plans to issue a stock offering with a $1.50 million target beginning May 2019 at $28/share. Proceeds are planned to be down streamed to the bank to increase capital. The projected capital ratios after the raise are a Tier 1 Leverage Ratio of 9.95% and a Total Capital Ratio of 17.28%

12/31/2018 12/31/2017

Common Stock Plus Related Surplus

$2,557 $4,355

$2,557 $ 4,324 $ 262 $(304) $6,559

Retained Earnings

Less: DTA

$327

AOCI Adjustment

$(678) $6,585

Tier 1 Capital

Average Assets

$80,548

$85,293

Tier 1 Leverage Ratio

8.17%

7.69%