FOR STANWRITTER ONLY

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1. Divest or Hold onto these bank investments?

2. If hold, what are the options?

a. Attract more bank deposits

b. Raise debt

c. Seasoned offering

3. How viable (in terms of the banks ability as well as success in fixing the capital ratio issue) are these options?

a. Attract more bank deposits?

b. Raise debt?

c. Seasoned offering?

4. What are the impacts (both direct and indirect) of the alternative financing options?

a. Liquidity

b. Growth (incl. attracting more depositers)

c. Short-term/Long-term

5. What is (the most) suitable on how to raise funds – taking into consideration the valuation results?

GOAL: Increase Tier One Capital Ratio

= Core equity capital [RE + common stock] / risk-weighted assets

1. Increase Numerator

a. Increase retained earnings

i. Sell PPE

· That is, if they own it. And this would only raise retained earnings IF it produces an accounting gain on sale. Unable to know for certainty success.

ii.

b. Increase common stock

2. Decrease Denominator

a. Decrease risk-weighted assets

Things that would not work, and why:

1. Issue preferred shares

a. This does not increase core equity capital, therefore it does not affect the tier one capital ratio

Dividing work: 1. Question 1 2. Question 5 3. Increase Numerator -- retained earnings 4. Increase Numerator -- common stock 5. Decrease Denominator -- decrease risk-weighted-assets 6. Concatenate all the things :)

divided work #3, 4, & 5 will be required to answer Q#2, 3, & 4 in document