CAPITAL

3 Months Ended

Mar. 31, 2025

Capital

CAPITAL

NOTE 4 CAPITAL

Capital Requirements and Ratios

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

To qualify as a "Small Bank Holding Company" under federal regulations, a bank must have consolidated assets of $3.0 billion or less. The primary benefit of being deemed a "Small Bank Holding Company" is the exemption from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level.

The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (BASEL III rules) became fully phased in on January 1, 2019. Under the BASEL III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer required is 2.50%. At March 31, 2025, the Bank had a capital conservation buffer of 7.86%. Amounts recorded to accumulated other comprehensive income (loss) are not included in computing regulatory capital. Management believes as of March 31, 2025, the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2025, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a three-year period the Day 1 adverse regulatory capital effects of the Current Expected Credit Loss (“CECL”) accounting standard. Additionally, in March 2020, the U.S. federal bank regulatory agencies issued an interim final rule that provides banking organizations an option to delay the estimated CECL impact on regulatory capital for an additional two years for a total transition period of up to five years. The final rule was adopted and became effective in September 2020. The Company implemented the CECL model commencing January 1, 2023, and elected not to phase in the effect of CECL on regulatory capital.

The Bank’s actual capital amounts and ratios are presented in the following table as of March 31, 2025 and December 31, 2024, respectively.

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2025:
Total capital to risk weighted assets		101,829		15.86	%	$	51,351		8.00	%	$	64,188		10.00	%
Tier 1 capital to risk weighted assets		93,802		14.61	%		38,513		6.00	%		51,351		8.00	%
Tier 1 capital to average assets		93,802		10.67	%		35,162		4.00	%		43,953		5.00	%
Common equity Tier 1 capital
to risk weighted assets		93,802		14.61	%		28,885		4.50	%		41,722		6.50	%
December 31, 2024:
Total capital to risk weighted assets		101,769		16.19	%	$	50,300		8.00	%		62,875		10.00	%
Tier 1 capital to risk weighted assets		93,907		14.94	%		37,725		6.00	%		50,300		8.00	%
Tier 1 capital to average assets		93,907		10.70	%		35,113		4.00	%		43,892		5.00	%
Common equity Tier 1 capital
to risk weighted assets		93,907		14.94	%		28,294		4.50	%		40,869		6.50	%