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Bauer Financial

Explanation of Criteria Used to Determine BauerFinancial Star RatingTM

Financial data is compiled for U.S. banks and thrifts from call report data as reported to federal regulators. Although the financial data obtained from these sources is consistently reliable, the accuracy and completeness of the data cannot be guaranteed by BauerFinancial,Inc.

All banks are subject to federal regulatory capital requirements, but those requirements vary among institutions and are dependent on many factors. In general, institutions are required to maintain a tangible capital ratio of at least 4%, a tier 1 risk-based capital ratio of at least 4% and a total risk-based capital ratio of at least 8%.

In addition to the capital ratio, other criteria are used to determine BauerFinancial's Star Rating. Some of these include but are not limited to: profitability/loss trend, evaluating the level of delinquent loans and repossessed assets, the market versus book value of the investment portfolio, regulatory supervisory agreements, the community reinvestment rating (CRA), and liquidity. Potential losses on available-for-sale securities, delinquent loans and repossessed assets are forecasted in assigning our star rating. De Novo banks generally can not qualify for a 5-star rating for at least two years.

Recommended Banks, Savings Banks & Thrifts

Each of the institutions on the Recommended Bank Report is financially sound and is operating well above its regulatory capital requirements. Each had a tangible capital ratio greater than 6% and a total risk-based capital ratio greater than 10%. Five-star institutions generally have twice the capital required by regulators. The institutions on our recommended report are either profitable or had only an insignificant loss for the reporting quarter, and have positive results in the areas denoted above.

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