Bank Analysis School April 2025

Internal Use Only

[Bank] supervision should not attempt to eliminate all business risk. It should not attempt to shield firms from the consequences of individual wrong business decisions. That is the role of ownership capital. “ ” Former FDIC Vice Chairman Thomas Hoenig

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Internal Use Only

Capital Components

Tier 2 ALLL (up to 1.25% RWA)

Additional Tier 1 Preferred stock & related surplus (rare)

Common Equity Tier 1

• Common stock and surplus • Retained earnings

• AOCI (rare – most banks opted out) • Less: Goodwill and other intangibles • Less: Deferred tax assets • Less: Various other threshold deductions (rare)

UBPR Page 11A

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