Minimum Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2019

Minimum Regulatory Capital Requirements [Abstract]

Minimum Regulatory Capital Requirements

Note 19. Minimum Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the 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 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.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total, tier 1 and common equity tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of tier 1 capital (as defined) to adjusted average total assets (as defined). Management believes, as of December 31, 2019 and 2018, that the Bank met all capital adequacy requirements to which it is subject.

As of December 31, 2019, based on regulatory guidelines, the Bank is well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, tier 1 risk-based, common equity tier 1, and tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that date that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios are presented in the following table (dollars in thousands).

									Required in Order to be
					Required for Capital				Well Capitalized Under Prompt
	Actual				Adequacy Purposes				Corrective Action
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2019:
Total Capital to risk weighted assets	$	164,783	13.86	%	$	95,137	8.00	%	$	118,922	10.00
Tier 1 Capital to risk weighted assets		156,541	13.16	%		71,353	6.00	%		95,137	8.00	%
Common Equity Tier 1 Capital to risk weighted assets		156,541	13.16	%		53,515	4.50	%		77,299	6.50	%
Tier 1 Capital to adjusted average total assets		156,541	11.03	%		56,750	4.00	%		70,937	5.00	%
As of December 31, 2018:
Total Capital to risk weighted assets	$	149,085	13.34	%	$	89,409	8.00	%	$	111,762	10.00	%
Tier 1 Capital to risk weighted assets		140,289	12.55	%		67,057	6.00	%		89,409	8.00	%
Common Equity Tier 1 Capital to risk weighted assets		140,289	12.55	%		50,292	4.50	%		72,645	6.50	%
Tier 1 Capital to adjusted average total assets		140,289	10.22	%		54,882	4.00	%		68,603	5.00	%

Under the Basel III regulatory capital framework, a capital conservation buffer of 2.5% above the minimum risk-based capital thresholds was established. Dividend and executive compensation restrictions begin if the Bank does not maintain the full amount of the buffer. The capital conservation buffer was phased in between January 1, 2016 and January 1, 2019. The Bank had a capital conservation buffer of 5.86% and 5.34% at December 31, 2019 and 2018, respectively, above the required buffer of 2.5% and 1.875% for 2019 and 2018, respectively.