Capital Markets School - Case Study

POLICY GUIDELINES AND TRENDED RATIOS Capital adequacy is an important prerequisite for liquidity adequacy and is considered as part of the Bank’s liquidity plan. Capital policy ratios are listed below, along with compliance thereto.

Policy

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Exception

Common Equity Tier 1 Ratio (%) Tier 1 Risk Based Ratio (%) Risk Based Capital Ratio (%) Tier 1 Leverage Ratio (%)

7.0% Min 8.5% Min

14.92%

14.41%

14.70%

16.59%

15.98%

No

14.92%

14.41%

14.70%

16.59%

15.98%

No

10.5% Min 5.0% Min

16.17%

15.66%

15.95%

17.84%

17.24%

No

9.00%

9.00%

8.51%

9.26%

9.26%

No

Per regulatory definitions, as illustrated below, the Bank is currently considered to be well capitalized. Capital Conservation Buffer Well Capitalized Adequately Capitalized Significantly Undercapitalized

Tier 1 Common Equity Risk Based Ratio Tier 1 Risk Based Ratio Risk Based Capital Ratio Tier 1 Leverage Ratio

7.0% or higher

6.5% or higher

4.5% or higher

Less than 3%

8.5% or higher 10.5% or higher

8.0% or higher 10.0% or higher

6.0% or higher 8.0% or higher

Less than 4% Less than 6%

NA

5.0% or higher

4.0% or higher

Less than 3%

Senate Bill 2155 became law on May 24, 2018, and specifically mandated the establishment of a Community Bank Leverage Ratio (“CBLR”). Assuming a bank meets the 9% minimum, that bank will be considered to have met the requirements for “well capitalized” minimums per PCA rules. The Bank qualified with a CBLR of 9.26% as of September 30, 2021. The Bank may opt out of the framework at any time, for any reason, and revert to the standard RC-R regulatory schedules.

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