1) In the 2010 10-K Frontiers management wrote, If the interest we pay on deposits and other borrowings increases at a faster rate than the interest we receive on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest we receive on loans and other investments fall more quickly than the interest we pay on deposits and other borrowings.

This indicates that Frontier is worried about its cost of capital rising faster than its return on assets.

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2)Dividends would generally flow from Frontier Bank to Frontier Financial Corporation but Frontier Bank was constrained from paying dividends by the FDIC. If the FDIC prohibits a bank from paying dividends to its bank holding company this would lead to an increased cost of capital to the BHC.

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3)Regulations governing The Dime Bank limit how much the bank can lend to a single borrower. The amount of this limit depends on how much capital the bank has.

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4) Being adequately capitalized means that a there are sufficient liquid assets on the banks balance sheet to meet all expected and unexpected withdrawals of deposits within a time frame of one week.

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5One of the FDICs responsibilities as a receiver of a failed bank is to raise new capital for the bank by issuing FDIC bonds. These bonds help pay depositors of the failed institution.

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6As a bank's capital is eroded from losses on the asset side of the balance sheet the cost of funds raised by equity and debt will increase.

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7)A bank that funds a portfolio of assets with higher credit risk than another bank has to have more equity capital if creditors are to be indifferent between lending to either bank.

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8) Banks that fund only FNMA guaranteed MBS must hold more capital than banks that fund loans to unrated corporations.

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9)In its 2014 Comprehensive Capital Analysis Review (released March 2014) theBoard of Governors of theFederal Reserve objected to the capital plan of Zions Bancorporation because the firm lacked liquid assets.

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10)In its 2014Comprehensive Capital Analysis Review (released March 2014)the Board of Governors objected to the capital plans of Citigroup Inc.; HSBC North America Holdings Inc.; RBS Citizens Financial Group, Inc.; and Santander Holdings USA, Inc. based on a failure of each banks capital position to be adequate after the stress tests were run.

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This indicates that Frontier is worried about its cost of capital rising faster than its return on assets.