BAS Case Study - March 2023

Sunny State Bank

CAPITAL RATIOS - LEVEL

Tier One Leverage Ratio

Total Capital Ratio

Quarter

2018Q4

Quarter

17.54% 2018Q4

16.17%

16.00%

14.42%

10.90%

10.77%

2.00% 6.00% 10.00%

8.17%

10.00%

4.00%

Bank

State

All Banks

Bank

State

All Banks

Tier One Capital Ratio

Common Equity Tier One Ratio

Quarter

2018Q4

Quarter

2018Q4

18.00%

18.00%

16.43%

16.43%

15.08%

15.06%

13.62%

13.62%

14.00%

14.00%

10.00%

10.00%

6.00%

6.00%

2.00%

2.00%

Bank

State

All Banks

Bank

State

All Banks

Capital Ratios Qtr

Tier One Leverage Ratio = Tier One Capital / Average Total Assets Total Capital Ratio = Total Capital / Risk Weighted Assets Tier One Capital Ratio = Tier One Capital / Risk Weighted Assets Common Equity Tier One Ratio = Common Equity Tier One Capital / Risk Weighted Assets

2018Q4

Using risk-weighted assets as a denominator requires banks with riskier assets to have a higher amount of capital. Low risk assets (e.g. cash, interest bearing bank balances, U.S. Treasury and Agency bonds, Municipal general obligation bonds) carry low risk weightings such as 0% or 20%. Higher risk assets (e.g. several loan categories and corporate bonds) carry higher risk weightings such as 100%. Banks can opt into the Community Bank Leverage Ratio framework to avoid the burden of reporting risk-weighted assets. The risk-weighted capital ratios will not populate for these banks. To be eligible for this framework, a bank must be less than $10 billion in assets, maintain a Tier One Leverage above 9%, and off-balance sheet exposures cannot exceed 25% of assets. The horizontal dotted lines in the charts reflect Prompt Corrective Action well capitalized thresholds. The consequences of falling below well capitalized are severe and include limitations on the use of brokered and high-rate deposits. Keep in mind the level of minimum capital plus the full conservation buffer is 50 basis points higher than well capitalized for the three risk-based capital ratios. Falling below the conservation buffer affects the ability to pay dividends and discretionary payments to executive officers.

*NOTE*

Banks that opt in to the CBLR framework will not have certain Capital ratios reported