Regulatory Matters

12 Months Ended

Dec. 31, 2020

Regulatory Matters [Abstract]

Regulatory Matters

15.REGULATORY MATTERS

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Under these guidelines, assets and certain off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets. The guidelines require all banks and bank holding companies to maintain a minimum ratio of total risk-based capital to total risk-weighted assets (Total Risk Adjusted Capital) of 8%, including Tier I common equity to total risk-weighted assets (Tier I Common Equity) of 4.5%, Tier I capital to total risk-weighted assets (Tier I Capital) of 6% and Tier I capital to average total assets (Leverage Ratio) of at least 4%. A capital conservation buffer, comprised of common equity Tier I capital, is also established above the regulatory minimum capital requirements of 2.50%. As of December 31, 2020 and 2019, the Company and the Bank exceeded all capital adequacy requirements to which it was subject.

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The following table reflects the actual and required capital and the related capital ratios as of the periods indicated. No amounts were deducted from capital for interest-rate risk in either 2020 or 2019.

										For capital adequacy				To be well capitalized
				For capital						purposes with capital				under prompt corrective
	Actual			adequacy purposes						conservation buffer*				action provisions
(dollars in thousands)	Amount		Ratio	Amount			Ratio			Amount		Ratio		Amount			Ratio
As of December 31, 2020:
Total capital (to risk-weighted assets)
Consolidated	$	161,199	16.5%	≥	$	78,356		8.0%	≥	$	102,842		10.5%			N/A		N/A
Bank	$	161,145	16.5%	≥	$	78,342		8.0%	≥	$	102,823		10.5%	≥	$	97,927		10.0%
Tier 1 common equity (to risk-weighted assets)
Consolidated	$	148,931	15.2%	≥	$	44,075		4.5%	≥	$	68,562		7.0%			N/A		N/A
Bank	$	148,879	15.2%	≥	$	44,067		4.5%	≥	$	68,549		7.0%	≥	$	63,653		6.5%
Tier I capital (to risk-weighted assets)
Consolidated	$	148,931	15.2%	≥	$	58,767		6.0%	≥	$	83,253		8.5%			N/A		N/A
Bank	$	148,879	15.2%	≥	$	58,756		6.0%	≥	$	83,238		8.5%	≥	$	78,342		8.0%
Tier I capital (to average assets)
Consolidated	$	148,931	8.8%	≥	$	67,584		4.0%	≥	$	67,584		4.0%			N/A		N/A
Bank	$	148,879	8.8%	≥	$	67,584		4.0%	≥	$	67,584		4.0%	≥	$	84,479		5.0%

As of December 31, 2019:
Total capital (to risk-weighted assets)
Consolidated	$	111,910	15.8%	≥	$	56,796	8.0%	≥	$	74,545	10.5%			N/A	N/A
Bank	$	112,188	15.8%	≥	$	56,791	8.0%	≥	$	74,538	10.5%	≥	$	70,989	10.0%
Tier 1 common equity (to risk-weighted assets)
Consolidated	$	103,024	14.5%	≥	$	31,948	4.5%	≥	$	49,696	7.0%			N/A	N/A
Bank	$	103,303	14.6%	≥	$	31,945	4.5%	≥	$	49,692	7.0%	≥	$	46,143	6.5%
Tier I capital (to risk-weighted assets)
Consolidated	$	103,024	14.5%	≥	$	42,597	6.0%	≥	$	60,346	8.5%			N/A	N/A
Bank	$	103,303	14.6%	≥	$	42,593	6.0%	≥	$	60,340	8.5%	≥	$	56,791	8.0%
Tier I capital (to average assets)
Consolidated	$	103,024	10.4%	≥	$	39,650	4.0%	≥	$	39,650	4.0%			N/A	N/A
Bank	$	103,303	10.3%	≥	$	40,265	4.0%	≥	$	40,265	4.0%	≥	$	50,331	5.0%

^* The minimums under Basel III increased include the capital conservation buffer of 2.50%.

The Company’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations and Pennsylvania law limit the amount of dividends that may be paid from the Bank to the Company without prior approval of regulatory agencies. Accordingly, at December 31, 2020, approximately $103.5 million was available for dividend distribution from the Bank to the Company in 2020.

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