Note 15 - Regulatory Matters

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

15. REGULATORY MATTERS

The Bank is 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 Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, 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. Since the Company (on a consolidated basis) is currently considered a small bank holding company, it is not subject to regulatory capital requirements.

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, 2023 and 2022, the Bank exceeded all capital adequacy requirements to which it was subject.

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 2023 or 2022.

	Actual					Minimum for capital adequacy purposes							Minimum for capital adequacy purposes with capital conservation buffer*					Minimum to be well capitalized under prompt corrective action provisions
(dollars in thousands)	Amount		Ratio			Amount			Ratio				Amount		Ratio			Amount			Ratio
As of December 31, 2023
Total capital (to risk-weighted assets)
Consolidated	$	246,120		14.7	%	≥	$	134,255		8.0	%	≥	$	176,209		10.5	%			N/A		N/A
Bank	$	244,562		14.6	%	≥	$	134,238		8.0	%	≥	$	176,187		10.5	%	≥	$	167,797		10.0	%
Tier 1 common equity (to risk-weighted assets)
Consolidated	$	225,135		13.4	%	≥	$	75,518		4.5	%	≥	$	117,473		7.0	%			N/A		N/A
Bank	$	223,576		13.3	%	≥	$	75,509		4.5	%	≥	$	117,458		7.0	%	≥	$	109,068		6.5	%
Tier I capital (to risk-weighted assets)
Consolidated	$	225,135		13.4	%	≥	$	100,691		6.0	%	≥	$	142,646		8.5	%			N/A		N/A
Bank	$	223,576		13.3	%	≥	$	100,678		6.0	%	≥	$	142,628		8.5	%	≥	$	134,268		8.0	%
Tier I capital (to average assets)
Consolidated	$	225,135		9.2	%	≥	$	98,465		4.0	%	≥	$	98,465		4.0	%			N/A		N/A
Bank	$	223,576		9.1	%	≥	$	98,457		4.0	%	≥	$	98,457		4.0	%	≥	$	123,071		5.0	%

As of December 31, 2022
Total capital (to risk-weighted assets)
Consolidated	$	230,133	14.4	%	≥	$	128,325	8.0	%	≥	$	168,427	10.5	%			N/A	N/A
Bank	$	229,803	14.3	%	≥	$	128,308	8.0	%	≥	$	168,405	10.5	%	≥	$	160,385	10.0	%
Tier 1 common equity (to risk-weighted assets)
Consolidated	$	212,935	13.3	%	≥	$	72,183	4.5	%	≥	$	112,285	7.0	%			N/A	N/A
Bank	$	212,605	13.3	%	≥	$	72,173	4.5	%	≥	$	112,270	7.0	%	≥	$	104,251	6.5	%
Tier I capital (to risk-weighted assets)
Consolidated	$	212,935	13.3	%	≥	$	96,244	6.0	%	≥	$	136,346	8.5	%			N/A	N/A
Bank	$	212,605	13.3	%	≥	$	96,231	6.0	%	≥	$	136,328	8.5	%	≥	$	128,308	8.0	%
Tier I capital (to average assets)
Consolidated	$	212,935	8.7	%	≥	$	97,960	4.0	%	≥	$	97,960	4.0	%			N/A	N/A
Bank	$	212,605	8.7	%	≥	$	97,951	4.0	%	≥	$	97,951	4.0	%	≥	$	122,439	5.0	%

^* The minimums under Basel III increased to 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, 2023, approximately $147.3 million was available for dividend distribution from the Bank to the Company in 2023.