REGULATORY MATTERS

WebBank

WebBank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on WebBank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, WebBank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. WebBank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

In July 2013, the FDIC approved the final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks ("Basel III"). Under the final rules, which began for WebBank on January 1, 2015 and are subject to a phase-in period through January 1, 2019, minimum requirements will increase for both the quantity and quality of capital held by WebBank. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio ("CET1 Ratio") of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which when fully phased-in, effectively results in a minimum CET1 Ratio of 7.0%. Basel III raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% when fully phased-in), effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), and requires a minimum leverage ratio of 4.0%. Basel III also makes changes to risk weights for certain assets and off-balance-sheet exposures. WebBank expects that its capital ratios under Basel III will continue to exceed the well capitalized minimum capital requirements and such amounts are disclosed in the table below:



					Amount of Capital Required
					For capital				To be well capitalized under
	Actual				adequacy purposes				prompt corrective provisions
As of June 30, 2015	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital
(to risk-weighted assets)	$	48,509	21.87	%	$	17,748	8	%	$	22,186	10	%
Tier 1 Capital
(to risk-weighted assets)	$	47,697	21.5	%	$	13,311	6	%	$	17,748	8	%
Common Equity Tier 1 Capital
(to risk-weighted assets)	$	47,697	21.5	%	$	9,983	4.5	%	$	14,421	6.5	%
Tier 1 Capital
(to average assets)	$	47,697	19.43	%	$	9,819	4	%	$	12,274	5	%

As of December 31, 2014
Total Capital
(to risk-weighted assets)	$	42,861	24.99	%	$	13,720	8	%	$	17,150	10	%
Tier 1 Capital
(to risk-weighted assets)	$	42,116	24.56	%	$	6,860	4	%	$	10,290	6	%
Tier 1 Capital
(to average assets)	$	42,116	19.53	%	$	8,627	4	%	$	10,784	5	%

SPLP

The Company historically has conducted its business, and continues to conduct its business and operations, in such a manner so as not to be deemed an investment company under the Investment Company Act of 1940, as amended (the “Act”).

Under the Act, the Company is required to meet certain qualitative tests related to the Company’s assets and/or income, and to refrain from trading for short-term speculative purposes. The Company has taken actions, including liquidating certain of our assets and acquiring additional interests in existing or new subsidiaries or controlled companies, to comply with these tests, or a relevant exception. Also, since the Company operates as a diversified holding company engaged in a variety of operating businesses, we do not believe we are primarily engaged in an investment company type business, nor do we propose to primarily engage in such a business.

If we were deemed to be an investment company under the Investment Company Act, we may need to further adjust our business strategy and assets, including divesting certain desirable assets immediately to fall outside of the definition or within an exemption, to register as an investment company or to cease operations.