Categories : Capital Issues


I was looking through UBT’s Annual Report.  Note 18 mentions that on January 15, the bank, the FDIC and the State of Michigan Department that regulates banks have entered into a Memorandum of Understanding (MOA).  Basically, these two government agencies are beginning to get concerned about the Bank’s capital level, and they have told Bank Management to address it. 

The bank has agreed to:

  • Not pay any Dividend unless approved by these two government agencies and
  • Get its Tier 1 capital ratio up to 9% within 6 months from the date of the MOA and
  • Get its total Capital Ratio up to 12% for the duration of the MOA

The bank doesn’t really say what these ratios are, they just give a few other ratios whose names sound similar, and lead the reader to believe that they’re not far away.  For instance:

  • Tier 1 capital to average assets = 8.6%
  • Tier 1 Capital to Risk Weighted Assets = 11.9%
  • Total Capital to Risk weighted assets = 13.2%

As near as I calculate, right now, the bank’s Tier 1 Capital ratio is 8.6% and its total capital ratio is 8.9%.  I don’t see how the bank will get its total capital ratio up to 12% without getting an additional capital infusion.

I’ve been on the FDIC website, and I’ll write more about what I found later.  But the bank is undergoing additional scrutiny.  It’s got problems that are being recognized by governmental agencies.

 Posted on : March 28, 2010
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