Note

10:

Regulatory Capital Ratios

Banks and bank holding companies are subject to various regulatory capital requirements administered by state and 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 about components, risk weighting and other factors.

The Basel III Capital Rules became effective for Hamilton Bank on

January 1, 2015 (

subject to a phase-in period for certain provisions). Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier

capital, Tier

capital and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier

capital to adjusted quarterly average assets (as defined).

In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include accumulated other comprehensive income in Common Equity Tier

Common Equity Tier

for Hamilton Bank is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions.

Under the revised prompt corrective action requirements, as of

January 1, 2015,

insured depository institutions are required to meet the following in order to qualify as “well capitalized:” (

) a common equity Tier

risk-based capital ratio of

6.5%;

(

) a Tier

risk-based capital ratio of

8%;

(

) a total risk-based capital ratio of

10%

and (

) a Tier

leverage ratio of

5%.

As of

September 30, 2018,

the Bank met all capital adequacy requirements under the Basel III Capital Rules to be considered “well capitalized” under prompt corrective action rules.

The implementation of the capital conservation buffer began on

January 1, 2016

at the

0.625%

level and is being phased in over a

four

-year period (increasing by that amount on each subsequent

January 1,

until it reaches

2.5%

January 1, 2019).

The Basel III Capital Rules also provide for a “countercyclical capital buffer” that is applicable to only certain covered institutions and does

not

have any current applicability to Hamilton Bank.

The aforementioned capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier

capital to risk-weighted assets above the minimum but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.

As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), banking regulatory agencies must adopt a revised definition of “well capitalized” for financial institutions and holding companies with assets of less than

$10

billion and that are

not

determined to be ineligible by their primary federal regulator due to their risk profile (a “qualifying community bank”). The new definition will expand the ways that a qualifying community bank

may

meet its capital requirements and be deemed “well qualified.” The new rule will establish a “community bank leverage ratio” equal to the tangible equity capital divided by the average total consolidated assets. A qualifying community bank that exceeds a to-be-determined threshold for this new leverage ratio, which regulators must set at between

and

10%,

will be considered to be well capitalized and to have met generally applicable leverage capital requirements, generally applicable risk-based capital requirements, and any other capital or leverage requirements to which such financial institution or holding company is subject.

In addition, as a result of the Act, the Federal Reserve Board amended its small bank holding company and savings and loan holding company policy statement to provide that holding companies with consolidated assets of less than

billion that are (i)

not

engaged in significant nonbanking activities, (ii) do

not

conduct significant off-balance sheet activities, and (iii) do

not

have a material amount of SEC-registered debt or equity securities, other than trust preferred securities, that contribute to an organization’s complexity, are

longer subject to regulatory capital requirements.

The following table presents actual and required capital ratios as of

September 30, 2018

and

March 31, 2018

for Hamilton Bank and the Company under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of

January 1, 2015

based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of

January 1, 2019

when the Basel III Capital Rules are fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

				Minimum Capital			Minimum Capital			To be well
	Actual			Required - Basel III			Required - Basel III			capitalized (1)
				Phase-In Schedule			Fully Phased-In
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(dollars in thousands)
September 30, 2018

Common equity tier 1 capital (to risk-weighted assets)
Hamilton Bank	$	42,984	12.20%	$	22,469	6.375%	$	24,672	7.00%	$	22,910	6.50%
Hamilton Bancorp		49,116	13.89%		22,537	6.375%		24,747	7.00%		22,979	6.50%
Total risk-based capital (to risk-weighted assets)
Hamilton Bank		46,067	13.07%		34,805	9.875%		37,008	10.50%		35,245	10.00%
Hamilton Bancorp		52,199	14.77%		34,910	9.875%		37,120	10.50%		35,352	10.00%
Tier 1 capital (to risk-weighted assets)
Hamilton Bank		42,984	12.20%		27,756	7.875%		29,959	8.50%		28,196	8.00%
Hamilton Bancorp		49,116	13.89%		27,840	7.875%		30,049	8.50%		28,282	8.00%
Tier 1 capital (to adjusted total assets)
Hamilton Bank		42,984	8.61%		19,962	4.000%		19,962	4.00%		24,952	5.00%
Hamilton Bancorp		49,116	9.62%		20,415	4.000%		20,415	4.00%		25,519	5.00%

March 31, 2018

Common equity tier 1 capital (to risk-weighted assets)
Hamilton Bank	$	39,126	10.61%	$	23,498	6.375%	$	25,802	7.00%	$	23,959	6.50%
Hamilton Bancorp		47,308	12.79%		23,582	6.375%		25,894	7.00%		24,044	6.50%
Total risk-based capital (to risk-weighted assets)
Hamilton Bank		41,998	11.39%		36,399	9.875%		38,703	10.50%		36,860	10.00%
Hamilton Bancorp		50,180	13.57%		36,529	9.875%		38,841	10.50%		36,992	10.00%
Tier 1 capital (to risk-weighted assets)
Hamilton Bank		39,126	10.61%		29,027	7.875%		31,331	8.50%		29,488	8.00%
Hamilton Bancorp		47,308	12.79%		29,131	7.875%		31,443	8.50%		29,593	8.00%
Tier 1 capital (to adjusted total assets)
Hamilton Bank		39,126	7.64%		20,497	4.000%		20,497	4.00%		25,621	5.00%
Hamilton Bancorp		47,308	9.15%		20,674	4.000%		20,674	4.00%		25,843	5.00%

(

) - Under prompt corrective action

Tier

capital consists of total shareholders’ equity less goodwill, intangible assets, and deferred tax net operating loss carryforwards. Total capital includes a limited amount of the allowance for loan losses and a portion of any unrealized gain on equity securities. In calculating risk-weighted assets, specified risk percentages are applied to each category of asset and off-balance-sheet items.

In its regulatory report filed as of

September 30, 2018,

the Bank exceeded all regulatory capital requirements and was considered “well capitalized” under regulatory guidelines. Management is

not

aware of any events that would have caused this classification to change. Failure to meet the capital requirements could affect, among other things, the Bank's ability to accept brokered deposits and

may

significantly affect the operations of the Bank. Management has

plans that should change the classification of the capital adequacy.