REGULATORY MATTERS

12 Months Ended

Dec. 31, 2021

REGULATORY MATTERS

NOTE 21. REGULATORY MATTERS

In July 2013, the Board of Governors of the Federal Reserve System and the FDIC issued final rules to revise their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The Basel III rules became effective on January 1, 2015 and were fully phased in as of January 1, 2019.

The Basel III rules apply to all national and state banks and savings associations regardless of size and bank holding companies and savings and loan holding companies other than “small bank holding companies,” generally holding companies with consolidated assets of less than $3 billion (such as the Company). In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity Tier 1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital conservation buffer consists of an additional amount of common equity Tier 1 equal to 2.5% of risk-weighted assets.

The Bank is also subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based guidelines and framework under prompt corrective action provisions include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories.

The tables below summarize the capital amounts and ratios of the Bank and the minimum regulatory requirements in accordance with Basel III and the prompt corrective action provisions at the dates indicated (in thousands):

	Actual				For Capital Adequacy Purposes (1)				To Be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2021:
Tier 1 Leverage Capital	$	123,344		10.21%	$	48,317		>4.00%	$	60,396		>5.00%
Common Equity Tier 1 Capital	$	123,344		12.24%	$	70,517		>7.00%	$	65,480		>6.50%
Tier 1 Risk-based Capital	$	123,344		12.24%	$	85,628		>8.50%	$	80,591		>8.00%
Total Risk-based Capital	$	135,951		13.50%	$	105,776		>10.50%	$	100,739		>10.00%
As of December 31, 2020:
Tier 1 Leverage Capital	$	105,820		10.05%	$	36,100		>4.00%	$	45,125		>5.00%
Common Equity Tier 1 Capital	$	105,820		11.73%	$	63,174		>7.00%	$	58,662		>6.50%
Tier 1 Risk-based Capital	$	105,820		11.73%	$	76,712		>8.50%	$	72,199		>8.00%
Total Risk-based Capital	$	117,117		12.98%	$	94,761		>10.50%	$	90,249		>10.00%

(1) Includes capital conservation buffer of 2.50%.

Under the Federal Reserve’s Small Bank Holding Company Policy Statement, the Company is not subject to the minimum capital adequacy and capital conservation buffer capital requirements at the holding company level, unless otherwise advised by the Federal Reserve (such capital requirements are applicable only at the Bank level). Although the minimum regulatory capital requirements are not applicable to the Company, we calculate these ratios for our own planning and monitoring purposes. The Company is not subject to the prompt corrective action provisions applicable to the Bank. The tables below summarize the capital amounts and ratios of the Company and the minimum regulatory requirements in accordance with Basel III at the dates indicated (in thousands):

	Actual				For Capital Adequacy Purposes (1)
As of December 31, 2021:	Amount		Ratio		Amount		Ratio
Tier I Leverage Capital	$	103,730		8.59%	$	48,327		>4.00%
Common Equity Tier 1 Capital	$	95,482		9.47%	$	70,574		>7.00%
Tier I Risk-based Capital	$	103,730		10.29%	$	85,696		>8.50%
Total Risk Based Capital	$	143,963		14.28%	$	105,860		>10.50%
As of December 31, 2020:
Tier I Leverage Capital	$	91,876		8.72%	$	42,189		>4.00%
Common Equity Tier 1 Capital	$	83,629		9.26%	$	63,248		>7.00%
Tier I Risk-based Capital	$	91,876		10.17%	$	76,801		>8.50%
Total Risk Based Capital	$	130,683		14.46%	$	94,871		>10.50%

(1) Includes capital conservation buffer of 2.50%.