4. CAPITAL

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

4. CAPITAL

NOTE 4 CAPITAL:

Capital Requirements and Ratios

The Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, 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 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.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets (as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). As of September 30, 2016, the Bank meets all capital adequacy requirements to which it is subject.

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies. The Bank’s actual capital amounts and ratios are presented in the following table as of September 30, 2016 and December 31, 2015, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015.

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		68,259		16.98	%	$	32,168		8.0	%		40,209		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		24,126		6.0	%		32,168		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		63,216		10.00	%		25,287		4.0	%		31,609		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		63,216		15.72	%		18,094		4.5	%		26,136		6.5	%
December 31, 2015:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		65,713		17.55	%	$	29,954		8.0	%		37,443		10.0	%
Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		22,466		6.0	%		29,954		8.0	%
Tier 1 Capital to Average Assets:
New Peoples Bank, Inc.		60,998		9.67	%		25,239		4.0	%		31,549		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
New Peoples Bank, Inc.		60,998		16.29	%		16,849		4.5	%		24,338		6.5	%

As of September 30, 2016, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and Common Equity Tier 1 ratios as set forth in the above tables. There are no conditions or events since the notification that management believes have changed the Bank’s category.

Beginning January 1, 2016, a capital conservation buffer of 0.625% became effective. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.5%. Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make distributions, such as dividends, or discretionary bonus payments.