Regulatory Capital

3 Months Ended

Mar. 31, 2020

Regulatory Capital

Regulatory Capital

Note 11: Regulatory Capital

Effective January 1, 2015, the capital requirements of the Company and the Bank were changed to implement the regulatory requirements of the Basel III capital reforms. The Basel III requirements, among other things, (i) apply a strengthened set of capital requirements to the Company and Bank, including requirements related to common equity as a component of core capital, (ii) implement a “capital conservation buffer” against risk and higher minimum tier 1 capital requirement, and (iii) revise the rules for calculating risk-weighted assets for purposes of such requirements. The rules made corresponding revisions to the prompt corrective action framework and include the new capital ratios and buffer requirements which were phased in incrementally, with full implementation on January 1, 2019. 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 financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve qualitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications 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 Company and Bank to maintain minimum amounts and ratios (set forth in the tables below and defined in the regulations) of Total Capital to Risk Weighted Assets, Tier 1 Capital to Risk Weighted Assets, Common Equity Tier 1 Capital to Risk Weighted Assets, and Tier 1 Capital to Average Assets.

The following tables present the Company and the Bank’s capital amounts and ratios as of March 31, 2020 and December 31, 2019:

					Minimum Required				For Capital Adequacy				To be Well Capitalized
					For Capital Adequacy				Purposes Plus Capital				Under Prompt Corrective
	Actual				Purposes				Conservation Buffer				Action Regulations
March 31, 2020	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(dollars in thousands)
Company (Consolidated):
Total Risk-Based Capital	$	292,080	13.38	%	$	174,641	8.00	%	$	229,216	10.50	%		N/A	N/A
Tier 1 Risk-Based Capital		242,376	11.10			130,980	6.00			185,556	8.50			N/A	N/A
Common Equity Tier 1 Capital		242,376	11.10			98,235	4.50			152,810	7.00			N/A	N/A
Tier 1 Leverage Ratio		242,376	10.51			92,259	4.00			92,259	4.00			N/A	N/A
Bank:
Total Risk-Based Capital	$	276,487	12.67	%	$	174,523	8.00	%	$	229,062	10.50	%	$	218,154	10.00	%
Tier 1 Risk-Based Capital		251,542	11.53			130,893	6.00			185,431	8.50			174,523	8.00
Common Equity Tier 1 Capital		251,542	11.53			98,169	4.50			152,708	7.00			141,800	6.50
Tier 1 Leverage Ratio		251,542	10.93			92,088	4.00			92,088	4.00			115,110	5.00

					Minimum Required				For Capital Adequacy				To be Well Capitalized
					For Capital Adequacy				Purposes Plus Capital				Under Prompt Corrective
	Actual				Purposes				Conservation Buffer				Action Regulations
December 31, 2019	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(dollars in thousands)
Company (Consolidated):
Total Risk-Based Capital	$	269,613	12.98	%	$	166,163	8.00	%	$	218,089	10.50	%		N/A	N/A
Tier 1 Risk-Based Capital		236,533	11.39			124,623	6.00			176,549	8.50			N/A	N/A
Common Equity Tier 1 Capital		236,533	11.39			93,467	4.50			145,393	7.00			N/A	N/A
Tier 1 Leverage Ratio		236,533	10.69			88,498	4.00			88,498	4.00			N/A	N/A
Bank:
Total Risk-Based Capital	$	252,501	12.16	%	$	166,137	8.00	%	$	218,055	10.50	%	$	207,671	10.00	%
Tier 1 Risk-Based Capital		243,461	11.72			124,603	6.00			176,521	8.50			166,137	8.00
Common Equity Tier 1 Capital		243,461	11.72			93,452	4.50			145,370	7.00			134,986	6.50
Tier 1 Leverage Ratio		243,461	11.01			88,455	4.00			88,455	4.00			110,569	5.00

The Company and the Bank must maintain a capital conservation buffer, as defined by Basel III regulatory capital guidelines, in order to avoid limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers.