Risk Management Manual of Examination Policies - FDIC

ADEQUACY OF THE CAPITAL STRUCTURE
Generally, initial capital should be sufficient to provide for the maintenance of an 8 percent Tier 1 capital to assets leverage ratio (as
defined in the appropriate capital regulation of the institution’s primary Federal regulator) throughout the first three years of operation.
The institution must also maintain an adequate allowance for loan and lease losses. Determine if the institution is being established as
a wholly owned subsidiary of an eligible holding company (as defined in Part 303, subpart B). Assess the adequacy of proposed
capital in light of projected deposits and growth, business plan risk tolerance, and the ability of proponents or parent company to
provide additional capital. Special focus depository institutions (such as Internet or credit card banks) should provide projections
based on the type of business to be conducted and the potential for growth of that business. All stock of a particular class in the initial
offering should be sold at the same price, and have the same voting rights. Proposals which allow insiders to acquire a separate class
of stock with greater voting rights or at a price more favorable than the price for other subscribers are not acceptable. Discuss
financing arrangements for directors, officers, and 10 percent or more shareholders. Financing arrangements by insiders of more than
75% of the purchase price of the stock subscribed to by one individual or more than 50% of the purchase price of the aggregate stock
subscribed by the insiders as a group should be supported to be considered acceptable. Insiders should demonstrate the ability to
service the debt without reliance on dividends or other forms of compensation from the applicant.
PROPOSED CAPITAL STRUCTURE
COMMON STOCK
THIRDYEAR CAPITAL
RETAINED
AVERAGE ASSET
ITEM
Minimum Statutory
SHARES PV AMOUNT SURPLUS EARNINGS TOTAL ASSETS RATIO
Requirements
Amount Indicated
0 0 %
on Application 1,000 1.00 1,000 26,899,000 (9,109,000) 17,791,000 201,602,000 8.82%
Revised Proposal
Recommendation
0 0 %
of Examiner 1,000 1.00 1,000 26,899,000 (9,109,000) 17,791,000 201,602,000 8.82%
SALE PRICE PER SHARE OF CAPITAL (original proposal) (revised proposal)
FEES OR COMMISSIONS IN
IPO: 2p (£ .02 or 3¢)
CONNECTION WITH SALE OF STOCK
Secondary IPO: 20p or 30¢
Assumes exchange rate @ £1.00 : $1.50
0.00
Summary and Findings
Initial Capitalization
The top-tier holding company (see ownership structure) has successfully executed two capital offerings totaling £22 million or
approximately $35.2 million. The proposal calls for a direct infusion from said holding company.
The organizer’s general consensus is that the level of proposed capital will suffice. In the event that additional capital is required, the
Applicant has stated that the feasibility of a third public offering (see ownership structure) will be largely contingent upon favorable
conditions within the European equity markets. Proposed CEO Hamm suggested a possible listing application to a US stock
exchange may be pursued to enhance the likelihood of additional capital sources and share liquidity.
Founding directors are listed as follows: Lance Price (HC Director), Casey Grant (former director/officer), Nigel Newbury (proposed
CFO), Stephen Helm (former director/officer), John Wise, Hamilton Trustees Limited.
FDIC 6510/10 (02-2002) 11