CAPITAL

9 Months Ended

Sep. 30, 2020

Banking Regulation, Total Capital [Abstract]

CAPITAL

NOTE 4 CAPITAL 

Capital Requirements and Ratios

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement issued in February 2015 and, therefore, is not obligated to report consolidated regulatory capital.

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 to risk-weighted assets, Tier 1 capital to average assets, and Common Equity Tier 1 capital to risk-weighted assets. As of September 30, 2020, the Bank meets all capital adequacy requirements to which it is subject.

The Bank’s actual capital amounts and ratios are presented in the following table as of September 30, 2020 and December 31, 2019, respectively.

	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, 2020:
Total Capital to Risk Weighted Assets		74,191		15.73	%	$	37,725		8.0	%	$	47,156		10.0	%
Tier 1 Capital to Risk Weighted Assets		68,283		14.48	%		28,294		6.0	%		37,725		8.0	%
Tier 1 Capital to Average Assets		68,283		9.11	%		29,979		4.0	%		37,473		5.0	%
Common Equity Tier 1 Capital
to Risk Weighted Assets		68,283		14.48	%		21,220		4.5	%		30,652		6.5	%
December 31, 2019:
Total Capital to Risk Weighted Assets		72,109		14.83	%	$	38,910		8.0	%	$	48,637		10.0	%
Tier 1 Capital to Risk Weighted Assets		66,741		13.72	%		29,182		6.0	%		38,910		8.0	%
Tier 1 Capital to Average Assets		66,741		9.43	%		28,313		4.0	%		35,391		5.0	%
Common Equity Tier 1 Capital
to Risk Weighted Assets		66,741		13.72	%		21,887		4.5	%		31,614		6.5	%

Accordingly, as of September 30, 2020 and December 31, 2019, the Bank was well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since such dates that management believes have changed the Bank’s category.

The Bank is also subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The final rules require the Bank to comply with the following minimum capital ratios: (i) a Common Equity Tier 1 capital to risk-weighted assets ratio of at least 4.5%, plus a 2.5% capital conservation buffer (effectively resulting in a minimum Common Equity Tier 1 capital to risk-weighted assets ratio of 7.0%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets. The phase-in of the capital conservation buffer requirement began on January 1, 2016, at 0.625% of risk-weighted assets, increasing by the same amount each year until it was fully implemented at 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a Common Equity Tier 1 capital to risk-weighted assets ratio above the minimum but below the conservation buffer face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. All ratios shown in the table above exceed the minimum requirements. The Bank’s capital conservation buffer as of September 30, 2020 was 7.73%.