Regulatory Matters

3 Months Ended

Mar. 31, 2023

WebBank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on WebBank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, WebBank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. WebBank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

As a result of Basel III becoming fully implemented as of January 1, 2019, WebBank's minimum requirements increased for both the quantity and quality of capital held by WebBank. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio ("CET1 Ratio") of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which as fully phased-in, effectively results in a minimum CET1 Ratio of 7.0%. Basel III raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% as fully phased-in), and effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), and requires a minimum leverage ratio of 4.0%. Basel III also made changes to risk weights for certain assets and off-balance-sheet exposures. WebBank expects that its capital ratios under Basel III will continue to exceed the well capitalized minimum capital requirements, and such amounts are disclosed in the table below:


					Amount of Capital Required
	Actual				For Capital Adequacy Purposes				Minimum Capital Adequacy With Capital Buffer				To Be Well Capitalized Under Prompt Corrective Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2023
Total Capital
(to risk-weighted assets)	$	324,463	15.00	%	$	173,478	8.00	%	$	227,689	10.50	%	$	216,847	10.00	%
Tier 1 Capital
(to risk-weighted assets)	$	297,271	13.70	%	$	130,108	6.00	%	$	184,320	8.50	%	$	173,478	8.00	%
Common Equity Tier 1 Capital
(to risk-weighted assets)	$	297,271	13.70	%	$	97,581	4.50	%	$	151,793	7.00	%	$	140,951	6.50	%
Tier 1 Capital
(to average assets)	$	297,271	14.10	%	$	84,146	4.00	%	$	—	—		$	105,182	5.00	%

As of December 31, 2022
Total Capital
(to risk-weighted assets)	$	306,618	15.00	%	$	163,952	8.00	%	$	215,187	10.50	%	$	204,940	10.00	%
Tier 1 Capital
(to risk-weighted assets)	$	280,951	13.70	%	$	122,964	6.00	%	$	174,199	8.50	%	$	163,952	8.00	%
Common Equity Tier 1 Capital
(to risk-weighted assets)	$	280,951	13.70	%	$	92,223	4.50	%	$	143,458	7.00	%	$	133,211	6.50	%
Tier 1 Capital
(to average assets)	$	280,951	14.70	%	$	76,300	4.00	%	n/a		n/a		$	95,375	5.00	%

The Federal Reserve, Office of the Comptroller of Currency and Federal Deposit Insurance Corporation issued an interim final rule that excludes loans pledged as collateral to the Federal Reserve's PPP Lending Facility from supplementary leverage ratio exposure and average total consolidated assets. Additionally, PPP loans will receive a zero percent risk weight under the risk-based capital rules of the federal banking agencies.

In the first quarter of 2023, WebBank elected to apply a modified transition provision issued by federal banking regulators related to the impact of the current expected credit loss accounting standard (CECL) on regulatory capital. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL using a three-year phase-out period in which the benefit is reduced by 25% in year one, 50% in year two and 75% in year three.