total risk-based capital ratio that is less than eight percent, a Tier 1 risk-based capital ratio less than four percent or a
Tier 1 leverage ratio less than four percent (or a leverage ratio less than three percent if the institution is rated
composite 1 in its most recent report of examination, subject to appropriate federal banking agency guidelines). For
an institution to be “significantly undercapitalized,” it will have a total risk-based capital ratio less than six percent,
a Tier 1 risk-based capital ratio less than three percent, or a Tier 1 leverage ratio less than three percent. For an
institution to be “critically undercapitalized,” it will have a ratio of tangible equity to total assets equal to or less than
two percent. FDICIA requires federal banking agencies to take “prompt corrective action” against depository
institutions that do not meet minimum capital requirements. Under current regulations, we were “well capitalized”
as of December 31, 2002.
FDICIA generally prohibits a depository institution from making any capital distribution (including payment of
a dividend) or paying any management fee to its holding company if the depository institution would thereafter be
“undercapitalized.” An “undercapitalized” institution must develop a capital restoration plan and its parent holding
company must guarantee that institution’s compliance with such plan. The liability of the parent holding company
under any such guarantee is limited to the lesser of five percent of the institution’s assets at the time it became
“undercapitalized” or the amount needed to bring the institution into compliance with all capital standards.
Furthermore, in the event of the bankruptcy of the parent holding company, such guarantee would take priority over