Note 13 - Regulatory Matters

12 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE

13

—

REGULATORY MATTERS

Banks and bank holding companies are 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.

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

2021

and

2020,

the Corporation met the definition of a Small Bank Holding Company and, therefore, was exempt from maintaining consolidated regulatory capital ratios. Instead, regulatory capital ratios only apply at the subsidiary bank level. The Basel III Capital Rules became effective for the Bank on

January 

1,

2015

and certain provisions were subject to a phase-in period. The implementation of the capital conservation buffer was phased in from

0.625%

on

January 

1,

2016

to 

2.5%

 on

January 

1,

2019.

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. Management believes as of

June 30, 2021,

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

The following table presents actual and required capital ratios as of 

June 

30,

2021

 and

June 30, 2020

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, 2021
Common equity Tier 1 to risk-weighted assets	$	64.7		11.87	%	$	24.5		4.50	%	$	35.4		6.50	%
Tier 1 capital to risk weighted assets		64.7		11.87			32.7		6.00			43.6		8.00
Total capital to risk weighted assets		71.2		13.06			43.6		8.00			54.5		10.00
Tier 1 capital to average assets		64.7		7.83			33.1		4.00			41.3		5.00

	Actual					Minimum Capital Required - Basel III (1)					Minimum Required To Be Considered Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2020
Common equity Tier 1 to risk-weighted assets	$	57.6		11.55	%	$	22.4		4.50	%	$	32.4		6.50	%
Tier 1 capital to risk weighted assets		57.6		11.55			29.9		6.00			39.9		8.00
Total capital to risk weighted assets		63.2		12.69			39.9		8.00			49.8		10.00
Tier 1 capital to average assets		57.6		8.04			28.7		4.00			35.8		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,

2021

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

$8,741.