Note 11 - Regulatory Matters

12 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE

1

1

—REGULATORY MATTERS

The Bank is subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective-action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. Management believes as of

June 30, 2018,

the Bank has met all capital adequacy requirements to which it is subject.  

The prompt corrective action regulations provide

five

classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are

not

used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

As of fiscal year-end

2018

and

2017,

the Corporation met the definition of a small bank holding company and, therefore, was exempt from consolidated risk-based and leverage capital adequacy guidelines for bank holding companies. The Basel III Capital Rules became effective for the Bank on

January 

1,

2015

and certain provisions are subject to a phase-in period. The implementation of the capital conservation buffer began on

January 

1,

2016

at the 

0.625%

 level and will be phased in over a 

four

-year period (increasing by that amount on each subsequent

January 

1,

until it reaches 

2.5%

 on

January 

1,

2019

). The capital conservation buffer for

2018

is

1.875%.

The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 

1

capital to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The net unrealized gain or loss on available for sale securities is

not

included in computing regulatory capital.

The following table presents actual and required capital ratios as of 

June 

30,

2018

 and

June 30, 2017

for the Bank:

	Actual					Minimum Capital Required – Basel III (1)					Minimum Required To Be Considered Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 201 8
Common equity Tier 1 to risk-weighted assets	$	43.7		12.20	%	$	16.1		4.50	%	$	23.3		6.50	%
Tier 1 capital to risk weighted assets		43.7		12.20			21.5		6.00			28.7		8.00
Total Capital to risk weighted assets		47.1		13.15			28.7		8.00			35.8		10.00
Tier 1 capital to average assets		43.7		8.74			20.0		4.00			25.0		5.00

	Actual					Minimum Capital Required -  Basel III (1)					Minimum Required To Be Considered Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 201 7
Common equity Tier 1 to risk-weighted assets Bank	$	41.4		13.21	%	$	18.0		4.50	%	$	20.4		6.50	%
Tier 1 capital to risk weighted assets		41.4		13.21			22.7		6.00			25.1		8.00
Total Capital to risk weighted assets		44.5		14.20			29.0		8.00			31.4		10.00
Tier 1 capital to average assets		41.4		9.06			18.3		4.00			22.9		5.00

( 1 ) These amounts exclude the capital conservation buffer.

As of the latest regulatory examination, the Bank was categorized as well capitalized. There are

no

conditions or events since that examination that management believes

may

have changed the Bank’s category.

The Corporation’s principal source of funds for dividend payment is dividends received from the Bank. Banking regulations limit the amount of dividends that

may

be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that

may

be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding

two

years, subject to the capital requirements described above. As of

June 

30,

2018

the Bank could, without prior approval, declare a dividend of approximately

$4,448.