Regulatory Capital

9 Months Ended

Sep. 30, 2020

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

Regulatory Capital

Regulatory Capital

Under federal banking regulations that apply to all United States-based bank holding companies over $3 billion in total assets and all federally insured banks, the Bank (on a stand-alone basis) must meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. The Company (on a consolidated basis) is below the reporting threshold of $3 billion in total assets and therefore is not subject to the same capital adequacy requirements. Under those regulations, each federally insured bank is determined by its primary federal bank regulatory agency to come within one of the following capital adequacy categories on the basis of its capital ratios:

•well-capitalized

•adequately capitalized

•undercapitalized

•significantly undercapitalized; or

•critically undercapitalized

Certain qualitative assessments also are made by a banking institution’s primary federal regulatory agency that could lead the agency to determine that the banking institution should be assigned to a lower capital category than the one indicated by the quantitative measures used to assess the institution’s capital adequacy. At each successive lower capital category, a banking institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.

The following table sets forth the capital and capital ratios of the Bank (on a stand-alone basis) at September 30, 2020, as compared to the regulatory requirements applicable to it.

					Applicable Federal Regulatory Requirement
					For Capital Adequacy Purposes			To be Categorized As Well-Capitalized
	Amount		Ratio		Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
Total Capital to Risk Weighted Assets	$	178,100	16.0	%	$	149,643	At least 8.625	$	111,425	At least 10.0
Common Equity Tier 1 Capital to Risk Weighted Assets	$	164,124	14.7	%	$	57,105	At least 5.125	$	72,426	At least 6.5
Tier 1 Capital to Risk Weighted Assets	$	164,124	14.7	%	$	73,819	At least 6.625	$	89,140	At least 8.0
Tier 1 Capital to Average Assets	$	164,124	9.5	%	$	69,400	At least 4.0	$	86,750	At least 5.0

In early July 2013, the Federal Reserve Board and the FDIC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes. The rules revise minimum capital requirements and adjust prompt correct action thresholds.  The final rules revise the regulatory capital elements, add a new common equity Tier 1 capital ratio, increase the minimum Tier 1 capital ratio requirement, and implement a new capital conservation buffer. The rules also permit certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income. The final rules took effect for community banks on January 1, 2015, subject to a transition period for certain parts of the rules. At September 30, 2020, the Bank (on a stand-alone basis) continued to qualify as a well-capitalized institution under the capital adequacy guidelines described above.

On September 17, 2019, the FDIC finalized a rule that introduces an optional simplified measure of capital adequacy for qualifying community banking organizations (i.e., the community bank leverage ratio (CBLR) framework), as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9.0%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework and meets all requirements under the framework will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. The Company has determined it will not opt into the CBLR framework for the Bank.