Regulatory Capital Matters

3 Months Ended

Mar. 31, 2019

Regulatory Capital Matters

Regulatory Capital Matters

Note 7 - Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies.  Capital adequacy guidelines and, additionally for banks, 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.  Management believes as of March 31, 2019 and December 31, 2018, the Company and Citizens First Bank, Inc. met all capital adequacy requirements to which they are subject.

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.  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 institution’s category.

Under quantitative measures established by regulation to ensure capital adequacy, we are required to maintain minimum amounts and ratios of total Tier 1 capital to risk-weighted assets and to total assets. Interim Final Basel III rules require the Bank to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets. Under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in computing regulatory capital. The rules also established a "capital conservation buffer" of 2.5%, to be phased in through January 1, 2019, above the new regulatory minimum risk-based capital ratios. The buffer is 2.5% as of March 31, 2019 and was 1.87% for 2018.  The buffer could limit the payment of dividends and discretionary bonuses to officers if a bank fails to maintain required capital levels.

Citizens First Bank, Inc.’s actual capital amounts and ratios (excluding capital conservation buffer) are presented in the following tables at the date indicated.

	(Dollars in Thousands)
									To Be Well Capitalized
					For CapitalAdequacy				Under Prompt Corrective
	Actual				Purposes (1)				Action Provisions
March 31, 2019	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to risk-weighted assets)		56,359	14.21	%		31,731	8.00	%	$	39,664	10.00	%
Tier I Capital (to risk-weighted assets)		51,960	13.10	%		23,798	6.00	%		31,731	8.00	%
Common Equity Tier I Capital (to risk-weighted assets)		51,960	13.10	%		17,849	4.50	%		25,781	6.50	%
Tier I Leverage Capital (to average assets)		51,960	11.17	%		18,606	4.00	%		23,257	5.0	%

	(Dollars in Thousands)
									To Be Well Capitalized
					For Capital Adequacy				Under Prompt Corrective
	Actual				Purposes (1)				Action Provisions
December 31, 2018	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to risk-weighted assets)		55,115	14.03	%		31,424	8.00	%	$	39,280	10.00	%
Tier I Capital (to risk-weighted assets)		50,742	12.92	%		23,568	6.00	%		31,424	8.00	%
Common Equity Tier I Capital (to risk-weighted assets)		50,742	12.92	%		17,676	4.50	%		25,532	6.50	%
Tier I Leverage Capital (to average assets)		50,742	10.82	%		18,764	4.00	%		23,455	5.0	%

(1) With the capital conservation rules fully phased-in as of January 1, 2019, Basel III Capital Rules require banking organizations to maintain: a minimum ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer”; a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer; a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer; and a minimum ratio of Tier 1 capital to adjusted average consolidated assets of at least 4.0%.