Regulatory Capital

6 Months Ended

Jun. 30, 2020

Regulatory Capital [Abstract]

Regulatory Capital

Note 8 – Regulatory Capital

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements, or overall financial performance deemed by the regulators to be inadequate, 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 quantitative measures of the Company's and Bank’s assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Company's and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As required by applicable legislation, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion.  A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes.  The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement.

The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%. Beginning in the second quarter 2020 and until the end of the year, a banking organization that has a leverage ratio of 8% or greater and meets certain other criteria may elect to use the Community Bank Leverage Ratio framework; and qualified community banks will have until January 1, 2022, before the Community Bank Leverage Ratio requirement is re-established at greater than 9%. Pursuant to Section 4012 of the CARES Act and related interim final rules, the Community Bank Leverage Ratio will be 8% beginning in the second quarter and for the remainder of calendar year 2020, 8.5% for calendar year 2021, and 9%  thereafter.  A financial institution can elect to be subject to this new definition, and opt-out of this new definition, at any time. As a qualified community bank, we elected to opt-out of this definition during the second quarter of 2020.

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 only 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.

The minimum capital ratios set forth in the Regulatory Capital Plans will be increased and other minimum capital requirements will be established if and as necessary. In accordance with the Regulatory Capital Plans, the Bank will not pursue any acquisition or growth opportunity, declare any dividend or conduct any stock repurchase that would cause the Bank's total risk-based capital ratio and/or its Tier 1 leverage ratio to fall below the established minimum capital levels or the capital levels required for capital adequacy plus the captial conservation buffer. The minimum captial conservation buffer is 2.5%.

As of June 30, 2020, the Bank was well-capitalized, with all capital ratios exceeding the well-capitalized requirement. There are no conditions or events that management believes have changed the Bank’s prompt corrective action capitalization category.

The Bank is subject to regulatory restrictions on the amount of dividends it may declare and pay to the Company without prior regulatory approval, and to regulatory notification requirements for dividends that do not require prior regulatory approval.

The actual and required capital amounts and ratios for the Bank as of June 30, 2020 and December 31, 2019 are presented in the table below:

	June 30, 2020
	Actual					For Capital Adequacy Purposes					Minimum Capital Adequacy with Capital Buffer					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
Total Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.	$	402,690		23.64	%	$	136,268		8.00	%	$	178,851		10.50	%	$	N/A		N/A
WaterStone Bank		386,104		22.68	%		136,165		8.00	%		178,717		10.50	%		170,207		10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.		384,956		22.60	%		102,201		6.00	%		144,784		8.50	%		N/A		N/A
WaterStone Bank		368,370		21.64	%		102,124		6.00	%		144,676		8.50	%		136,165		8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.		384,956		22.60	%		76,651		4.50	%		119,234		7.00	%		N/A		N/A
WaterStone Bank		368,370		21.64	%		76,593		4.50	%		119,145		7.00	%		110,634		6.50	%
Tier 1 Capital (to average assets)
Consolidated Waterstone Financial, Inc.		384,956		17.80	%		86,495		4.00	%		N/A		N/A			N/A		N/A
WaterStone Bank		368,370		17.04	%		86,495		4.00	%		N/A		N/A			108,119		5.00	%
State of Wisconsin (to total assets)
WaterStone Bank		368,370		16.62	%		133,021		6.00	%		N/A		N/A			N/A		N/A

	December 31, 2019
	Actual					For Capital Adequacy Purposes					Minimum Capital Adequacy with Capital Buffer					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
Total Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.	$	404,748		26.17	%	$	123,731		8.00	%	$	162,398		10.50	%	$	N/A		N/A
WaterStone Bank		353,357		22.85	%		123,716		8.00	%		162,378		10.50	%		154,646		10.00	%
Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.		392,361		25.37	%		92,799		6.00	%		131,465		8.50	%		N/A		N/A
WaterStone Bank		340,970		22.05	%		92,787		6.00	%		131,449		8.50	%		123,716		8.00	%
Common Equity Tier 1 Capital (to risk-weighted assets)
Consolidated Waterstone Financial, Inc.		392,361		25.37	%		69,599		4.50	%		108,265		7.00	%		N/A		N/A
WaterStone Bank		340,970		22.05	%		69,590		4.50	%		108,252		7.00	%		100,520		6.50	%
Tier 1 Capital (to average assets)
Consolidated Waterstone Financial, Inc.		392,361		19.69	%		79,691		4.00	%		N/A		N/A			N/A		N/A
WaterStone Bank		340,970		17.11	%		79,691		4.00	%		N/A		N/A			99,614		5.00	%
State of Wisconsin (to total assets)
WaterStone Bank		340,970		17.11	%		119,590		6.00	%		N/A		N/A			N/A		N/A