REGULATORY MATTERS

3 Months Ended

Mar. 31, 2024

Regulatory Matters

REGULATORY MATTERS

NOTE 11 – REGULATORY MATTERS

Southwest Heritage 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 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.

Quantitative measures established by regulation to ensure 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 March 31, 2024, and December 31, 2023, the Bank meets all capital adequacy requirements to which it is subject.

Banks are also subject to certain restrictions on the dollar amount of dividends that they may declare without prior regulatory approval.

As of March 31, 2024, 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 has not opted into the Community Bank Leverage Ratio (“CBLR”) and therefore is required to continue calculating and reporting risk-based capital ratios.

The Bank’s actual and required capital amounts and ratios are as follows (dollars in thousands):

	Actual					Minimum Required For Capital Adequacy Purposes					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2024
Total Capital to risk-weighted assets:	$	96,253		11.66	%	$	66,040		8	%	$	82,550		10	%
Tier 1 (Core) Capital to risk weighted assets:	$	85,913		10.40	%	$	49,565		6	%	$	66,087		8	%
Common Tier 1 Capital to risk weighted assets (CET1):	$	85,913		10.40	%	$	37,174		4.50	%	$	53,696		6.50	%
Tier 1 (Core) Capital to average assets:	$	85,913		8.78	%	$	39,140		4	%	$	48,295		5	%
	Actual					Minimum Required For Capital Adequacy Purposes					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2023
Total Capital to risk-weighted assets:	$	74,142		14.79	%	$	40,114		8	%	$	50,143		10	%
Tier 1 (Core) Capital to risk weighted assets:	$	68,032		13.57	%	$	30,086		6	%	$	40,114		8	%
Common Tier 1 Capital to risk weighted assets (CET1):	$	68,032		13.57	%	$	22,564		4.50	%	$	32,593		6.50	%
Tier 1 (Core) Capital to average assets:	$	68,032		11.66	%	$	23,347		4	%	$	29,184		5	%