REGULATORY MATTERS

9 Months Ended

Sep. 30, 2022

Banking And Thrifts [Abstract]

REGULATORY MATTERS

NOTE 12 - REGULATORY MATTERS

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

The Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, became effective for the Company and Bank on January 1, 2015, with certain transition provisions that were fully phased in on January 1, 2019. Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1 capital, Tier 1 capital and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and or Tier 1 capital to adjusted quarterly average assets (as defined). Management believes, as of September 30, 2022 and December 31, 2021, that the Bank met all capital adequacy requirements to which it was subject.

The Basel III Capital Rules, among other things, have (i) introduced a new capital measure called “Common Equity Tier 1” (“CET1”), (ii) specified that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting specified requirements, (iii) defined CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, (iv) expanded the scope of the deductions/adjustments as compared to existing regulations, and (v) imposed a "capital conservation buffer" of 2.5% above minimum risk-based capital requirements, below which an institution would be subject to limitations on certain activities including payment of dividends, share repurchases and discretionary bonuses to executive officers.

As of September 30, 2022 and December 31, 2021, the Company’s capital ratios exceeded those levels necessary to be categorized as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized”, the Company must maintain minimum total risk-based, CET1, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since September 30, 2022 that management believes have changed the Company’s category.

A comparison of the Company’s and Bank’s actual capital amounts and ratios to required capital amounts and ratios are presented in the following tables as of:

	Actual			Minimum Required For Capital Adequacy Purposes			Minimum Required Under Basel III (Including Buffer)			To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
September 30, 2022
Total capital to risk-weighted assets:
Consolidated	$	350,305	14.60%	$	191,962	8.00%	$	251,951	10.50%	n/a
Bank		350,271	14.60%		191,901	8.00%		251,870	10.50%	$	239,877	10.00%
Tier 1 capital to risk-weighted assets:
Consolidated		286,668	11.95%		143,972	6.00%		203,960	8.50%	n/a
Bank		321,036	13.38%		143,926	6.00%		203,895	8.50%		191,901	8.00%
Tier 1 capital to average assets:(1)
Consolidated		286,668	8.63%		132,924	4.00%		132,924	4.00%	n/a
Bank		321,036	9.68%		132,709	4.00%		132,709	4.00%		165,886	5.00%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		279,451	11.65%		107,979	4.50%		167,967	7.00%	n/a
Bank		321,036	13.38%		107,944	4.50%		167,914	7.00%		155,920	6.50%
(1) The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve and the FDIC may require the Consolidated Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.

	Actual			Minimum Required For Capital Adequacy Purposes			Minimum Required Under Basel III (Including Buffer)			To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2021
Total capital to risk-weighted assets:
Consolidated	$	297,370	14.51%	$	163,986	8.00%	$	215,232	10.50%	n/a
Bank		311,335	15.19%		163,936	8.00%		215,166	10.50%	$	204,920	10.00%
Tier 1 capital to risk-weighted assets:
Consolidated		271,696	13.25%		122,990	6.00%		174,235	8.50%	n/a
Bank		285,661	13.94%		122,952	6.00%		174,182	8.50%		163,936	8.00%
Tier 1 capital to average assets:(1)
Consolidated		271,696	9.18%		118,369	4.00%		118,369	4.00%	n/a
Bank		285,661	9.66%		118,345	4.00%		118,345	4.00%		147,931	5.00%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		261,386	12.75%		92,242	4.50%		143,488	7.00%	n/a
Bank		285,661	13.94%		92,214	4.50%		143,444	7.00%		133,198	6.50%
(1) The Tier 1 capital ratio (to average assets) is not impacted by the Basel III Capital Rules; however, the Federal Reserve and the FDIC may require the Consolidated Company and the Bank, respectively, to maintain a Tier 1 capital ratio (to average assets) above the required minimum.

Dividends paid by Guaranty are mainly provided by dividends from its subsidiaries. However, certain regulatory restrictions exist regarding the ability of its bank subsidiary to transfer funds to Guaranty in the form of cash dividends, loans or advances. The amount of dividends that a subsidiary bank organized as a national banking association, such as the Bank, may declare in a calendar year is the subsidiary bank’s net profits for that year combined with its retained net profits for the preceding two years.