General Description Of Assets In Each Of The Four Risk Categories

1. General Description Of Assets In Each Of The Four Risk Categories

2. Regional National Bank (RNB), Risk-based Capital (Millions Of Dollars): Category 1 & 2

3. Regional National Bank (RNB), Risk-based Capital (Millions Of Dollars): Category 3 & 4

4. Regional National Bank (RNB), Risk-based Capital (Millions Of Dollars): Off Balance Sheet

5. Regional National Bank (RNB), Off-balance Sheet Conversion Worksheet

6. Leverage Capital Ratio • Leverage Capital Ratio • Equals: • Tier 1 capital divided by total assets net of goodwill and disallowed intangible assets and deferred tax assets • Regulators are concerned that a bank could acquire practically all low-risk assets such that risk-based capital requirements would be virtually zero • To prevent this, regulators have also imposed a 3 percent leverage capital ratio

7. Minimum Capital Requirements across Capital Categories

8. Provisions for Prompt Corrective Action

9. How Much Capital is Adequate? • Regulators prefer more capital • Reduces the likelihood of bank failures and increases bank liquidity • Bankers prefer less capital • Lower capital increases ROE, all other things the same • Riskier banks should hold more capital while low-risk banks should be allowed to increase financial leverage