Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2018

Regulatory Capital Requirements [Abstract]

Regulatory Capital Requirements

Regulatory Capital Requirements

The Company is a bank holding company under the supervision of the Federal Reserve Bank. Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. Heritage Bank is a federally insured institution and thereby is subject to the capital requirements established by the FDIC. The Federal Reserve capital requirements generally parallel the FDIC requirements. 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 Company’s consolidated financial statements and operations. Management believes as of December 31, 2018, the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2018 and December 31, 2017, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank's categories.

	Minimum Requirements				Well- Capitalized Requirements		Actual
	$		%		$	%	$		%
	(Dollars in thousands)
As of December 31, 2018:
The Company consolidated
Common equity Tier 1 capital to risk-weighted assets	$	197,189	4.5	%	N/A	N/A	$	510,618	11.7	%
Tier 1 leverage capital to average assets	201,920		4.0		N/A	N/A	530,920		10.5
Tier 1 capital to risk-weighted assets	262,918		6.0		N/A	N/A	530,920		12.1
Total capital to risk-weighted assets	350,558		8.0		N/A	N/A	566,268		12.9
Heritage Bank
Common equity Tier 1 capital to risk-weighted assets	197,004		4.5		284,561	6.5	513,993		11.7
Tier 1 leverage capital to average assets	203,339		4.0		254,174	5.0	513,993		10.1
Tier 1 capital to risk-weighted assets	262,671		6.0		350,229	8.0	513,993		11.7
Total capital to risk-weighted assets	350,229		8.0		437,786	10.0	549,341		12.5
As of December 31, 2017:
The Company consolidated
Common equity Tier 1 capital to risk-weighted assets	$	154,522	4.5	%	N/A	N/A	$	386,689	11.3	%
Tier 1 leverage capital to average assets	159,494		4.0		N/A	N/A	406,687		10.2
Tier 1 capital to risk-weighted assets	206,029		6.0		N/A	N/A	406,687		11.8
Total capital to risk-weighted assets	274,706		8.0		N/A	N/A	439,044		12.8
Heritage Bank
Common equity Tier 1 capital to risk-weighted assets	154,400		4.5		223,023	6.5	391,092		11.4
Tier 1 leverage capital to average assets	159,300		4.0		199,125	5.0	391,092		9.8
Tier 1 capital to risk-weighted assets	205,867		6.0		274,490	8.0	391,092		11.4
Total capital to risk-weighted assets	274,490		8.0		343,112	10.0	423,348		12.3

The Company is subject to capital adequacy requirements of the Basel Committee on Banking Supervision, commonly called Basel III. Under the capital requirements both the Company and the Bank are required to have a common equity Tier 1 capital ratio of 4.5%. In addition, both the Company and the Bank are required to have a Tier 1 leverage ratio of 4.0%, a Tier 1 risk-based ratio of 6.0% and a total risk-based ratio of 8.0%. Both the Company and the Bank are required to establish a “conservation buffer”, consisting of common equity Tier 1 capital of more than 2.5% above the minimum risk-based capital ratios. The capital conservation buffer is designed to ensure that banks build up capital buffers outside periods of stress which can be drawn down as losses are incurred. An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers. The capital conservation buffer requirement began to be phased-in on January 1, 2016 when more than 0.625% of risk-weighted assets was required, and increases by 0.625% on each subsequent January 1, until it is fully phased-in on January 1, 2019. Certain calculations under the rules will also have phase-in periods. At December 31, 2018, the capital conservation buffer was 4.92% and 4.55% for the Company and the Bank, respectively.