Regulatory Capital Matters

6 Months Ended

Jun. 30, 2014

Regulatory Capital Matters [Abstract]

Regulatory Capital Matters

NOTE 10 – REGULATORY CAPITAL MATTERS

CFBank is subject to regulatory capital requirements administered by federal banking agencies.  Prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. 

Prompt corrective action regulations provide five classifications:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

Actual and required capital amounts and ratios of CFBank are presented below:

								To Be Well
								Capitalized Under
					For Capital			Applicable Regulatory			Required By
		Actual			Adequacy Purposes			Action Regulations			OCC
		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount	Ratio
June 30, 2014
Total Capital to risk
weighted assets	$	33,756	13.01%	$	20,750	8.00%	$	25,938	10.00%	$	31,126	12.00%
Tier 1 (Core) Capital to risk
weighted assets		30,481	11.75%		10,375	4.00%		15,563	6.00%		N/A	N/A
Tier 1 (Core) Capital to
adjusted total assets		30,481	10.45%		11,664	4.00%		14,580	5.00%		23,327	8.00%
Tangible Capital to
adjusted total assets		30,481	10.45%		4,374	1.50%		N/A	N/A		N/A	N/A

								To Be Well
								Capitalized Under
					For Capital			Applicable Regulatory			Required By
		Actual			Adequacy Purposes			Capital Standards			OCC
		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount	Ratio
December 31,2013
Total Capital to risk
weighted assets	$	26,246	12.08%	$	17,385	8.00%	$	21,731	10.00%	$	26,078	12.00%
Tier 1 (Core) Capital to risk
weighted assets		23,492	10.81%		8,693	4.00%		13,039	6.00%		N/A	N/A
Tier 1 (Core) Capital to
adjusted total assets		23,492	9.34%		10,061	4.00%		12,576	5.00%		20,121	8.00%
Tangible Capital to
adjusted total assets		23,492	9.34%		3,773	1.50%		N/A	N/A		N/A	N/A

The CFBank Order required CFBank to have an 8% Tier 1 (Core) Capital to adjusted total assets and 12% Total Capital to risk weighted assets.  CFBank met the heightened capital requirements imposed by the OCC at June 30, 2014, as discussed below, and met the capital requirement at December 31, 2013 as required by the CFBank Order.  However, CFBank was not considered “well capitalized” under the aforementioned applicable regulatory capital standards at December 31, 2013 because of the existence of the CFBank Order as of such date.  Although the CFBank Order was terminated by the OCC effective January 23, 2014, CFBank remains subject to the heightened capital requirements imposed by the OCC and is required to maintain an 8% Tier 1 (core) Capital ratio to adjusted total assets and 12% Total Capital to risk weighted assets.  See Note 2.-Regulatory Order Considerations for additional information.

The Qualified Thrift Lender test requires CFBank to maintain at least 65% of assets in housing‑related finance and other specified areas.  If this test is not met, limits are placed on growth, branching, new investments, FHLB advances and dividends.  Management believes that this test was met at June 30, 2014 and December 31, 2013.

CFBank converted from a mutual to a stock institution in 1998, and a “liquidation account” was established in the amount of $14,300, which was the net worth reported in the conversion prospectus.  The liquidation account represents a calculated amount for the purposes described below, and it does not represent actual funds included in the consolidated financial statements of the Company.  Eligible depositors who have maintained their accounts, less annual reductions to the extent they have reduced their deposits, would receive a distribution from this account if CFBank liquidated and its assets exceeded its liabilities.  Dividends may not reduce CFBank’s stockholder’s equity below the required liquidation account balance.

Dividend Restrictions

The Holding Company’s principal source of funds for dividend payments is dividends received from CFBank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. CFBank must receive regulatory approval prior to any dividend payments.  Additionally, CFBank does not intend to make distributions to the Holding Company that would result in a recapture of any portion of its thrift bad debt reserve as discussed in Note 12-Income taxes.

As of June 30, 2014, CFBank could pay no dividends to the Holding Company under the regulations described above without receiving the prior written approval of the OCC.  Future dividend payments by CFBank to the Holding Company would be based on future earnings and regulatory approval. The payment of dividends from CFBank to the Holding Company is not likely to be approved by the OCC until CFBank is able to generate consistent earnings.