Note 5 - Regulatory Matters

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE

5

– REGULATORY MATTERS

Bank

34

is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving 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.

The Basel III regulatory capital framework (the "Basel III Capital Rules") adopted by U.S. federal regulatory authorities, among other things, (i) establish the capital measure called "Common Equity Tier

1"

(

"CET1"

), (ii) specify that Tier

1

capital consist of

CET1

and "Additional Tier

1

Capital" instruments meeting stated requirements, (iii) define

CET1

narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to

CET1

and

not

to the other components of capital and (iv) set forth the acceptable scope of deductions/adjustments to the specified capital measures. The Basel III Capital Rules became effective for us on

January 1, 2015

with certain transition provisions fully phased in on

January 1, 2019.

Additionally, the Basel III Capital Rules require that we maintain a capital conservation buffer with respect to each of the

CET1,

Tier

1

and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. The capital conservation buffer is subject to a

three

-year phase-in period that began on

January 1, 2016

and will be fully phased in on

January 1, 2019

at

2.5%.

The required phase-in capital conservation buffer during

2017

is

1.25%

and was

0.625%

during

2016.

A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.

Quantitative measures established by regulation to en

sure capital adequacy require the Bank to maintain minimum amounts and ratios of total risk-based capital and Tier

1

capital to risk-weighted assets, and Tier

1

capital to adjusted total assets. Management believes, as of

September 30, 2017

and

December 31, 2016,

the Bank meets all capital adequacy requirements to which it is subject.

Banks are also subject to certain restrictions on the amount of dividends that they

may

declare without prior regulatory approval.

As of

September 30, 2017,

the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank has to maintain minimum total risk-based, Tier

1

risk-based, and Tier

1

leverage ratios as disclosed in the table below. There are

no

conditions or events that management believes have changed the Bank’s prompt corrective action category.

The Bank

’s actual and required capital amounts and ratios are as follows:

											To be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of September 30, 2017:
Total Capital (to Risk-Weighted Assets)	$	44,587		16.93	%	$	21,069		> 8.00	%	$	26,336		> 10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	41,360		15.70	%	$	15,806		> 6.00	%	$	21,075		> 8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	41,360		15.70	%	$	11,855		> 4.50	%	$	17,124		> 6.50	%
Tier I Capital (to Average Assets)	$	41,360		11.95	%	$	13,844		> 4.00	%	$	17,305		> 5.00	%
As of December 31, 2016:
Total Capital (to Risk-Weighted Assets)	$	42,265		18.14	%	$	18,644		> 8.00	%	$	23,305		> 10.00	%
Tier I Capital (to Risk-Weighted Assets)	$	39,681		17.03	%	$	13,983		> 6.00	%	$	18,644		> 8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	39,681		17.03	%	$	10,487		> 4.50	%	$	15,148		> 6.50	%
Tier I Capital (to Average Assets)	$	39,681		11.91	%	$	13,331		> 4.00	%	$	16,664		> 5.00	%