REGULATORY MATTERS

12 Months Ended

Dec. 31, 2017

Banking and Thrift [Abstract]

REGULATORY MATTERS

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 to be fully phased in by 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 December 31, 2017 and December 31, 2016 that the Bank met all capital adequacy requirements to which it was subject.

When fully phased in on January 1, 2019, the Basel III Capital Rules, among other things, will have (i) introduced a new capital measure called “Common Equity Tier I” (“CETI”), (ii) specified that Tier I capital consist of CETI and “Additional Tier I Capital” instruments meeting specified requirements, (iii) defined CETI narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CETI and not to the other components of capital and (iv) expanded the scope of the deductions/adjustments as compared to existing regulations.

Starting in January 2016, the implantation of the capital conservation buffer was effective for the Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reaches 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios.

As of December 31, 2017 and December 31, 2016, 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, CETI, Tier 1 risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since December 31, 2017 that management believes have changed the Company’s category.

The Federal Reserve’s guidelines regarding the capital treatment of trust preferred securities limits restricted core capital elements (including trust preferred securities and qualifying perpetual preferred stock) to 25% of all core capital elements, net of goodwill less any associated deferred tax liability. Because the Company’s aggregate amount of trust preferred securities is less than the limit of 25% of Tier I capital, net of goodwill, the rules permit the inclusion of $10,310 of trust preferred securities in Tier I capital at December 31, 2017 and 2016. Additionally, the rules provide that trust preferred securities would no longer qualify for Tier I capital within five years of their maturity, but would be included as Tier 2 capital. However, the trust preferred securities would be amortized out of Tier 2 capital by one-fifth each year and excluded from Tier 2 capital completely during the year prior to maturity of the subordinated debentures.

A comparison of the Company’s and Bank’s actual capital amounts and ratios to required capital amounts and ratios is presented in the following table:

	Actual				Minimum Required For Capital Adequacy       Purposes				To Be Well Capitalized Under Prompt Corrective     Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2017
Total capital to risk-weighted assets:
Consolidated	$	215,720	14.13	%	$	122,111	8.00	%			n/a
Bank	206,490		13.53	%	122,122		8.00	%	$	152,652	10.00	%
Tier 1 capital to risk-weighted assets:
Consolidated	202,861		13.29	%	91,583		6.00	%			n/a
Bank	193,631		12.68	%	91,591		6.00	%	122,122		8.00	%
Tier 1 capital to average assets:
Consolidated	202,861		10.53	%	77,048		4.00	%			n/a
Bank	193,631		10.05	%	77,054		4.00	%	96,318		5.00	%
Common equity tier 1 risk-based capital:
Consolidated	192,551		12.61	%	68,687		4.50	%			n/a
Bank	193,631		12.68	%	68,694		4.50	%	99,224		6.50	%

	Actual				Minimum Required For Capital Adequacy       Purposes				To Be Well Capitalized Under Prompt Corrective     Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2016
Total capital to risk-weighted assets:
Consolidated	$	149,468	10.86	%	$	110,083	8.00	%			n/a
Bank	173,528		12.63	%	109,947		8.00	%	$	137,434	10.00	%
Tier 1 capital to risk-weighted assets:
Consolidated	137,984		10.03	%	82,562		6.00	%			n/a
Bank	162,044		11.79	%	82,460		6.00	%	109,947		8.00	%
Tier 1 capital to average assets:
Consolidated	137,984		7.71	%	71,560		4.00	%			n/a
Bank	162,044		9.06	%	71,505		4.00	%	89,381		5.00	%
Common equity tier 1 risk-based capital:
Consolidated	127,674		9.28	%	61,922		4.50	%			n/a
Bank	162,044		11.79	%	61,845		4.50	%	89,332		6.50	%

Dividends paid by the Company are mainly provided by dividends from its subsidiaries. However, certain 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 a 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. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period. As of December 31, 2017, the Bank had $10,756 available for payment of dividends.