Regulatory Capital

9 Months Ended

Sep. 30, 2023

Regulatory Capital Requirements under Banking Regulations [Abstract]

Regulatory Capital

Regulatory Capital

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. 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 effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks’ assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (leverage ratio). As of September 30, 2023 and December 31, 2022, management believes that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2022, the most recent notification from our primary regulator categorized the Bank, as well capitalized under the regulatory framework for prompt corrective action. At September 30, 2023, there were no conditions or events since that notification that management believes would change the Bank’s classification. To be categorized as well capitalized, the Bank must maintain minimum common equity Tier 1, Tier 1 risk-based and total risk-based capital ratios, and Tier 1 leverage ratios, which are described below.

The minimum ratios for capital adequacy purposes are 7.00%, 8.50%, 10.50% and 4.00% for the common equity Tier 1, Tier 1 risk-based capital, total risk-based capital and leverage ratios, respectively which include a capital conservation buffer of 2.50% respectively. To be categorized as well capitalized, a bank must maintain minimum ratios of 6.50%, 8.00%, 10.00% and 5.00% for its common equity Tier 1, Tier 1 risk-based capital, total risk-based capital and leverage ratios, respectively.

Regulatory Capital and Ratios	Regulatory Minimum Ratio + CCB ( 1)	The Company						The Bank
(dollars in thousands)		September 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
		(As Restated)						(As Restated)
Common equity		$	501,578		$	364,285		$	562,788		$	395,594
Goodwill		(63,266)			(63,266)			(63,266)			(63,266)
Core deposit intangible (3)		(37,507)			(5,547)			(37,507)			(5,547)
DTAs that arise from net operating loss and tax credit carry forwards		(11,959)			—			(9,566)			—
AOCI (gains) losses		10,109			9,021			10,109			9,021
Common Equity Tier 1 Capital		398,955			304,493			462,558			335,802
TRUPs		29,079			18,398			—			—
Tier 1 Capital		428,034			322,891			462,558			335,802
Allowable reserve for credit losses and other Tier 2 adjustments		58,190			16,855			58,190			16,855
Subordinated notes		42,956			24,674			—			—
Total Capital		$	529,180		$	364,420		$	520,748		$	352,657
Risk-Weighted Assets ("RWA")		$	4,701,443		$	2,619,400		$	4,697,220		$	2,618,939
Average Assets ("AA")		$	5,671,496		$	3,390,516		$	5,658,990		$	3,386,771
Common Tier 1 Capital to RWA	7.00%	8.49		%	11.62		%	9.85		%	12.82		%
Tier 1 Capital to RWA	8.50%	9.10		%	12.33		%	9.85		%	12.82		%
Total Capital to RWA	10.50%	11.26		%	13.91		%	11.09		%	13.47		%
Tier 1 Capital to AA (Leverage) (2)	n/a	7.55		%	9.52		%	8.17		%	9.92		%

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(1)The regulatory minimum capital ratio ("Min. Ratio") + the capital conservation buffer ("CCB").

(2)Tier 1 Capital to AA (Leverage) has no capital conservation buffer defined. The PCA well capitalized is defined as 5.00%.

(3)Core deposit intangible at September 30, 2023 is net of deferred tax liability.

Bank and holding company regulations impose certain restrictions on dividend payments by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company.

At September 30, 2023, the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained required capital ratios.