Regulatory Capital Matters

9 Months Ended

Sep. 30, 2020

Regulated Operations [Abstract]

Regulatory Capital Matters

REGULATORY CAPITAL MATTERS

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. Management believed that as of September 30, 2020, the Company and Bank met all capital adequacy requirements to which they were subject.

The Basel III rules require the Company to maintain a capital conservation buffer of common equity capital of greater than 2.5% above the minimum risk-weighted assets ratios, which is the fully phased-in amount of the capital conservation buffer.

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 September 30, 2020 and December 31, 2019, the Bank's capital ratios were in excess of the requirement to be "well capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the Bank's category.

Actual and required capital amounts and ratios are presented below:

	Actual				For Capital Adequacy Purposes				For Capital Adequacy Purposes + Capital Conservation Buffer(1)				Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2020
Common equity tier 1 to risk-weighted assets:
Consolidated	$	139,067	8.83	%	$	70,875	4.50	%	$	110,250	7.00	%
Bank	176,593		11.23	%	70,760		4.50	%	110,070		7.00	%	$	102,208	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated	$	162,437	10.31	%	$	94,500	6.00	%	$	133,875	8.50	%
Bank	176,593		11.23	%	94,346		6.00	%	133,657		8.50	%	$	125,795	8.00	%
Total capital to risk-weighted assets:
Consolidated	$	226,679	14.39	%	$	126,000	8.00	%	$	165,375	10.50	%
Bank	196,274		12.48	%	125,795		8.00	%	165,106		10.50	%	$	157,244	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated	$	162,437	7.17	%	$	90,664	4.00	%	$	90,664	4.00	%
Bank	176,593		7.83	%	90,220		4.00	%	90,220		4.00	%	$	112,776	5.00	%
December 31, 2019
Common equity tier 1 to risk-weighted assets:
Consolidated	$	157,659	11.72	%	$	60,533	4.50	%	$	94,163	7.00	%
Bank	165,199		12.27	%	60,568		4.50	%	94,217		7.00	%	$	87,487	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated	$	157,659	11.72	%	$	80,711	6.00	%	$	114,341	8.50	%
Bank	165,199		12.27	%	80,757		6.00	%	114,406		8.50	%	$	107,676	8.00	%
Total capital to risk-weighted assets:
Consolidated	$	215,091	15.99	%	$	107,615	8.00	%	$	141,244	10.50	%
Bank	178,191		13.24	%	107,676		8.00	%	141,325		10.50	%	$	134,595	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated	$	157,659	10.41	%	$	60,580	4.00	%	$	60,580	4.00	%
Bank	165,199		10.96	%	60,276		4.00	%	60,276		4.00	%	$	75,345	5.00	%

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(1) Reflects the capital conservation buffer of 2.5%.

Dividend Restrictions - The Company’s primary source of cash is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of September 30, 2020, the Bank had the capacity to pay the Company a dividend of up to $42.9 million without the need to obtain prior regulatory approval.