REGULATORY MATTERS

6 Months Ended

Jun. 30, 2021

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 June 30, 2021 and December 31, 2020, 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 June 30, 2021 and December 31, 2020, 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 June 30, 2021 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 1 capital, net of goodwill, the rules permit the inclusion of $10,310 of trust preferred securities in Tier 1 capital as of June 30, 2021 and December 31, 2020. Additionally, the rules provide that trust preferred securities would no longer qualify for Tier 1 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 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
June 30, 2021
Total capital to risk-weighted assets:
Consolidated	$	280,300		14.52	%	$	154,445		8.00	%	$	202,709		10.50	%				n/a
Bank		289,779		15.01	%		154,442		8.00	%		202,705		10.50	%	$	193,052		10.00	%
Tier 1 capital to risk-weighted assets:
Consolidated		256,077		13.26	%		115,834		6.00	%		164,098		8.50	%				n/a
Bank		265,556		13.76	%		115,831		6.00	%		164,094		8.50	%		154,442		8.00	%
Tier 1 capital to average assets:(1)
Consolidated		256,077		8.86	%		115,560		4.00	%		115,560		4.00	%				n/a
Bank		265,556		9.19	%		115,560		4.00	%		115,560		4.00	%		144,450		5.00	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		245,767		12.73	%		86,875		4.50	%		135,139		7.00	%				n/a
Bank		265,556		13.76	%		86,874		4.50	%		135,137		7.00	%		125,484		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, 2020
Total capital to risk-weighted assets:
Consolidated	$	263,144		13.20	%	$	159,496		8.00	%	$	209,338		10.50	%				n/a
Bank		285,490		14.32	%		159,514		8.00	%		209,362		10.50	%	$	199,392		10.00	%
Tier 1 capital to risk-weighted assets:
Consolidated		238,115		11.94	%		119,622		6.00	%		169,464		8.50	%				n/a
Bank		260,459		13.06	%		119,635		6.00	%		169,483		8.50	%		159,514		8.00	%
Tier 1 capital to average assets:(1)
Consolidated		238,115		9.13	%		104,293		4.00	%		104,293		4.00	%				n/a
Bank		260,459		9.99	%		104,293		4.00	%		104,293		4.00	%		130,366		5.00	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		227,805		11.43	%		89,716		4.50	%		139,559		7.00	%				n/a
Bank		260,459		13.06	%		89,726		4.50	%		139,574		7.00	%		129,605		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.