Regulatory Capital

12 Months Ended

Dec. 31, 2019

Banking and Thrift [Abstract]

Regulatory Capital

Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the FDIC and UDFI. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operations and financial condition. Under the FDIC’s regulations implementing the Basel III capital framework (“U.S. Basel III”) and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

U.S. Basel III is aimed at increasing both the quantity and quality of regulatory capital. Certain aspects of U.S. Basel III, including new deductions from and adjustments to regulatory capital and a capital conservation buffer, have been phased in over several years.

The Bank is subject to the following minimum capital ratios under U.S. Basel III: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, as of January 1, 2019, the Bank is subject to a fully phased-in Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. (As of December 31, 2018, the Bank was subject to a Common Equity Tier 1 capital conservation buffer of greater than 1.875 percent.) Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. Including the buffer, as of January 1, 2019, the Bank is required to maintain the following capital ratios under U.S. Basel III in order to avoid such restrictions: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent and a Total risk-based capital ratio of greater than 10.5 percent.

To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent.

The following capital amounts and ratios are based upon the Bank’s average assets and risk-weighted assets, as indicated.

	Actual				U.S. Basel III Minimum Requirements Plus Buffer(1)(2)
	Amount		Ratio		Amount			Ratio
As of December 31, 2019:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	3,264,309	12.2	%	$	1,876,050	>	7.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	3,264,309	12.2	%	$	2,278,060	>	8.5	%
Total Capital (to Risk-Weighted Assets)	$	3,600,668	13.4	%	$	2,814,074	>	10.5	%
Tier 1 Capital (to Average Assets)	$	3,264,309	10.2	%	$	1,282,642	>	4.0	%
As of December 31, 2018:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	2,896,091	12.1	%	$	1,528,209	>	6.375	%
Tier 1 Capital (to Risk-Weighted Assets)	$	2,896,091	12.1	%	$	1,887,787	>	7.875	%
Total Capital (to Risk-Weighted Assets)	$	3,196,279	13.3	%	$	2,367,226	>	9.875	%
Tier 1 Capital (to Average Assets)	$	2,896,091	11.1	%	$	1,039,226	>	4.0	%

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⁽¹⁾   Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer.

⁽²⁾  The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework.

Bank Dividends

The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank declared $254 million in dividends to the Company for the year ended December 31, 2019, with the proceeds primarily used to fund the 2019 Share Repurchase Program and stock dividends. The Bank paid no dividends on its common stock for the years ended December 31, 2018 and 2017, respectively. In the future, we expect that the Bank will pay dividends to the Company as may be necessary to pay any declared dividends on its Series B Preferred Stock and common stock and to consummate any common share repurchases by the Company under its repurchase programs.