Regulatory Matters

12 Months Ended

Dec. 31, 2021

Regulatory Capital Requirements [Abstract]

Regulatory Matters

NOTE 20: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. 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 consolidated 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 its 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 Bank to maintain amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined).

As of December 31, 2021, the Bank’s most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as “well-capitalized”, under the regulatory framework for prompt corrective action.  To be categorized as “well-capitalized”, the Bank must maintain total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the tables below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

As noted above, the regulations also impose a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.  The buffer is separate from the capital ratios required under the Prompt Corrective Action (“PCA”) standards and imposes restrictions on dividend distributions and discretionary bonuses. In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum levels of the following capital to risk-weighted assets ratios: (1) Core Capital, (2) Total Capital and (3) Common Equity.  The capital conservation buffer requirement is now fully implemented at 2.5% of risk-weighted assets. At December 31, 2021, the Bank exceeded all regulatory required minimum capital ratios, including the capital buffer requirements.

The Bank’s actual capital amounts and ratios as of December 31, 2021 and 2020 are presented in the following table.

	Actual					Minimum For Capital Adequacy Purposes					Minimum To Be "Well-Capitalized" Under Prompt Corrective Provisions					Minimum for Capital Adequacy With Buffer
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2021:
Total Core Capital (to Risk-Weighted Assets)	$	129,166		15.19	%	$	68,013		8.00	%	$	85,016		10.00	%	$	89,266		10.50	%
Tier 1 Capital (to Risk-Weighted Assets)	$	118,511		13.94	%	$	51,009		6.00	%	$	68,013		8.00	%	$	72,263		8.50	%
Tier 1 Common Equity (to Risk-Weighted Assets)	$	118,511		13.94	%	$	38,257		4.50	%	$	55,260		6.50	%	$	59,511		7.00	%
Tier 1 Capital (to Assets)	$	118,511		9.52	%	$	49,804		4.00	%	$	62,255		5.00	%	$	62,255		5.00	%
As of December 31, 2020:
Total Core Capital (to Risk-Weighted Assets)	$	115,289		13.13	%	$	70,270		8.00	%	$	87,838		10.00	%	$	92,230		10.50	%
Tier 1 Capital (to Risk-Weighted Assets)	$	104,287		11.87	%	$	52,703		6.00	%	$	70,270		8.00	%	$	74,662		8.50	%
Tier 1 Common Equity (to Risk-Weighted Assets)	$	104,287		11.87	%	$	39,527		4.50	%	$	57,095		6.50	%	$	61,487		7.00	%
Tier 1 Capital (to Assets)	$	104,287		8.63	%	$	48,314		4.00	%	$	60,392		5.00	%	$	60,392		5.00	%

The Company’s goal is to maintain a strong capital position, consistent with the risk profile of its subsidiary bank that supports growth and expansion activities while at the same time exceeding regulatory standards.  At December 31, 2021, the Bank exceeded all regulatory required minimum capital ratios and met the regulatory definition of a “well-capitalized” institution, i.e. a leverage capital ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 6% and a total risk-based capital ratio exceeding 10%.

The Federal Reserve Board regulations require banks to maintain non-interest-earning reserves on deposit at the Federal Reserve Bank (“FRB”), against their transaction accounts (primarily negotiable order of withdrawal (“NOW”) and regular checking accounts).  In March 2020, due to a change in in its approach to monetary policy due to the COVID-19 pandemic, the Federal Reserve Board announced an interim rule to amend Regulation D requirements and reduce reserve requirement ratios to zero.  The Federal Reserve Board has indicated that it has no plans to re-impose reserve requirements, but may do so in the future.