CAPITAL AND REGULATORY MATTERS

9 Months Ended

Sep. 30, 2019

CAPITAL AND REGULATORY MATTERS [Abstract]

CAPITAL AND REGULATORY MATTERS

8. CAPITAL AND REGULATORY MATTERS

The Company and its bank subsidiary are subject to various regulatory capital requirements administered by its banking regulators.  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 Company’s and its bank subsidiary’s financial statements.  Under capital guidelines and the regulatory framework for prompt corrective action, the Company and its bank subsidiary must meet specific capital guidelines that involve quantitative measures of their 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.  Prompt corrective action provisions are not applicable to bank holding companies.

In July 2013, the Board of Governors of the Federal Reserve System published final rules for the adoption of the Basel III regulatory capital framework (“Basel III”).  Basel III, among other things, (i) introduced a new capital measure called Common Equity Tier 1 (“CET1”), (ii) specified that Tier 1 capital consists of CET1 and Additional Tier 1 Capital instruments meeting specified requirements, (iii) defined Common Equity Tier 1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expanded the scope of the deductions/adjustments as compared to existing regulations.  Basel III became effective for the Company and its bank subsidiary on January 1, 2016 with certain transition provisions fully phased-in on January 1, 2019.

Quantitative measures established by regulation to ensure capital adequacy require the Company and its bank subsidiary to maintain minimum amounts and ratios (set forth in the following table) of total, Tier 1 and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined).  Management believes, as of September 30, 2019 and December 31, 2018, that the Company and its bank subsidiary met all capital adequacy requirements to which they are subject.

As of September 30, 2019, the bank subsidiary 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, CET1 and Tier 1 leverage ratios as set forth in the following tables.  There are no conditions or events since September 30, 2019 that management believes have changed the bank subsidiary’s category.

The Company and its bank subsidiary’s actual capital amounts and ratios follow:

	Actual					Minimum Required Under BASEL III Fully Phased-In					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2019
Total Capital to Risk Weighted Assets:
Consolidated	$	388,748		17.38	%	$	234,854		10.50	%		N/A		N/A
City Bank		308,841		13.81	%		234,803		10.50	%	$	223,622		10.00	%
Tier I Capital to Risk Weighted Assets:
Consolidated		337,920		15.11	%		190,120		8.50	%		N/A		N/A
City Bank		284,485		12.72	%		190,079		8.50	%		178,898		8.00	%
Common Equity Tier 1 to Risk Weighted Assets:
Consolidated		292,920		13.10	%		156,569		7.00	%		N/A		N/A
City Bank		284,485		12.72	%		156,535		7.00	%		145,354		6.50	%
Tier I Capital to Average Assets:
Consolidated		337,920		12.17	%		111,174		4.00	%		N/A		N/A
City Bank		284,485		10.25	%		111,098		4.00	%		138,872		5.00	%
December 31, 2018
Total Capital to Risk Weighted Assets:
Consolidated	$	309,798		14.28	%	$	227,864		10.50	%		N/A		N/A
City Bank		294,572		13.58	%		227,806		10.50	%	$	216,958		10.00	%
Tier I Capital to Risk Weighted Assets:
Consolidated		260,020		11.98	%		184,462		8.50	%		N/A		N/A
City Bank		271,266		12.50	%		184,415		8.50	%		173,567		8.00	%
Common Equity Tier 1 to Risk Weighted Assets:
Consolidated		215,020		9.91	%		151,910		7.00	%		N/A		N/A
City Bank		271,266		12.50	%		151,871		7.00	%		141,023		6.50	%
Tier I Capital to Average Assets:
Consolidated		260,020		9.63	%		108,033		4.00	%		N/A		N/A
City Bank		271,266		10.05	%		107,940		4.00	%		134,925		5.00	%

State banking regulations place certain restrictions on dividends paid by banks to their shareholders.  Dividends paid by the Company’s bank subsidiary would be prohibited if the effect thereof would cause the bank subsidiary’s capital to be reduced below applicable minimum capital requirements.