Regulatory Capital Matters

3 Months Ended

Mar. 31, 2015

Banking and Thrift [Abstract]

Regulatory Capital Matters

Note 8 – Regulatory Capital 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 Bank’s operations and 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 Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.

The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to help ensure capital adequacy require the Bank to maintain minimum amounts and ratios of common equity, Tier I, and total capital as defined in the regulations to risk-weighted assets as defined and of Tier I capital to average total assets as defined. To be categorized as well capitalized, the Bank must maintain minimum common equity, Tier I risk-based, total risk-based, and Tier I leverage ratios. In March 2015, the Bank implemented the Basel III capital rules that reformed the regulatory capital framework. As a result, the Bank is subject to a minimum Common equity Tier 1 ratio of 4.5% to be considered “adequately” capitalized or 6.0% to be considered “well capitalized”.

On December 19, 2012, the Bank entered into the Order with the OCC, which, among other things, included a requirement to maintain a total risk-based capital ratio of at least 13% and a minimum Tier 1 leverage capital ratio of at least 9% beginning on March 31, 2014. As a result of entering into the Order to achieve and maintain specific capital levels, the Bank’s capital classification under the Prompt Corrective Action rules was “adequately capitalized” at March 31, 2015 and December 31, 2014. Although the Bank’s capital levels at March 31, 2015 were above the levels required to be considered “well capitalized” under federal bank regulatory agency definitions, the Bank cannot be consider “well capitalized” as long as it remains under the Order. During 2014, the Bank met the risk-based capital requirement but did not meet the Tier 1 capital requirement. With the completion of the conversion and stock offering on January 22, 2015, the Company did meet the capital requirement of the Order at March 31, 2015. The minimum capital ratios set forth in the Order may be increased and other minimum capital requirements may be established to comply with the Basel III requirements now applicable to the Bank.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If undercapitalized, asset growth and expansion are limited and plans for capital restoration are required.

Actual capital levels and minimum required levels for the Bank were:

	Actual					Minimum Required for Capital Adequacy Purposes					Minimum Required By the Current Order (effective March 31, 2013)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2015
Total capital (to risk-weighted assets)	$	9,883		19.2	%	$	4,112		8.0	%	$	6,766		13.0	%
Common equity Tier 1 capital (to risk-weighted assets)		9,234		18.0			2,313		4.5			N/A		N/A
Tier 1 capital (to risk-weighted assets)		9,234		18.0			3,084		6.0			N/A		N/A
Tier 1 capital (to average total assets)		9,234		10.5			2,531		4.0			7,809		9.0
December 31, 2014
Total capital (to risk-weighted assets)	$	8,510		15.5	%	$	4,387		8.0	%	$	7,129		13.0	%
Tier 1 (core) capital (to risk-weighted assets)		7,818		14.3			2,193		4.0			N/A		N/A
Tier 1 (core) capital (to adjusted total assets)		7,818		8.7			3,580		4.0			8,054		9.0

Under Basel III a capital conservation buffer of 2.5%, comprised of Common Equity Tier 1, is established above the regulatory minimum capital requirement. The capital conservation buffer will be phased in between January 1, 2016 and year end 2018 becoming fully effective on January 1, 2019.

The Bank made the one-time AOCI opt-out election on the first Call Report filed after January 1, 2015, which allows community banks under $250 billion with a one-time opt-out election to remove the impact of certain unrealized capital gains and losses from the calculation of capital. There is no opportunity to change methodology in future periods.