Note 13 - Regulatory Matters

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note

1

3

.  Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet the minimum regulatory 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 and the consolidated financial statements. Under the regulatory 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 under the prompt corrective action guidelines 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 (set forth in the tables below). In

July 2013,

the federal banking agencies issued a final rule revising the regulatory capital rules applicable to most national banks and federal savings associations as well as their holding companies generally beginning on

January 1, 2015.

The rule implements the Basel Committee’s

December 2010

framework known as “Basel III” for strengthening the international capital standards as well as certain provisions of the Dodd-Frank Act. The final rule implements a revised definition of regulatory capital, a new common equity Tier

1

minimum capital requirement of

4.50%,

and a higher minimum Tier

1

capital requirement of

6.00%

(which is an increase from

4.00%

). Under the final rule, the total capital ratio remains at

8.00%

and the minimum leverage ratio is

4.00%.

Management believes as of

December 31, 2019

and

2018,

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

Additionally, under the final rule, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a

2.5%

capital conservation buffer composed of common equity Tier

1

capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. The final rule also enhances risk sensitivity and addresses weaknesses identified by the regulators over recent years with the measure of risk-weighted assets.

The new minimum capital requirements were effective for the Company on

January 1, 2015,

whereas the capital conservation buffer and the deductions from common equity Tier

1

capital phase in over time. Beginning on

January 1, 2016,

the Bank must begin holding

0.625%

of risk-weighted assets and would increase by that amount annually, until fully implemented in

January 2019,

as a capital conservation buffer composed of common equity Tier

1

capital above its minimum risk-based capital requirements, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments. As a savings and loan holding company with less than

$3.0

billion in assets, the Company is

not

subject to separate capital requirements.

As of

December 31, 2019,

the most recent examination conducted by the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier

1

risk-based, Common equity Tier

1

risk-based, and Tier

1

leverage ratios as disclosed in the following table. There are

no

conditions or events that management believes have occurred that would change the Bank’s capitalization classification.

The Bank’s actual capital amounts and ratios as of

December 31, 2019

and

2018,

are presented below:

																To Be Well
						For Capital					Minimum Capital					Capitalized Under
						Adequacy					Adequacy With					Prompt Corrective
	Actual					Purposes:					Capital Buffer:					Action Provisions:
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2019:	(Dollars in thousands)
Total Risk-Based Capital (to risk-weighted assets)	$	48,411		22.210	%	$	17,438		8.000	%	$	21,906		10.500	%	$	21,797		10.000	%
Tier I Capital (to risk-weighted assets)	$	45,684		20.959	%	$	13,078		6.000	%	$	18,527		8.500	%	$	17,438		8.000	%
Common Equity Tier I (to risk-weighted assets)	$	45,684		20.959	%	$	9,809		4.500	%	$	15,258		7.000	%	$	14,168		6.500	%
Tier I Leverage (to adjusted total assets)	$	45,684		14.997	%	$	12,185		4.000	%	$	12,185		4.000	%	$	15,231		5.000	%
December 31, 2018:
Total Risk-Based Capital (to risk-weighted assets)	$	45,968		21.081	%	$	17,445		8.000	%	$	21,533		9.875	%	$	21,806		10.000	%
Tier I Capital (to risk-weighted assets)	$	43,340		19.875	%	$	13,083		6.000	%	$	17,172		7.875	%	$	17,445		8.000	%
Common Equity Tier I (to risk-weighted assets)	$	43,340		19.875	%	$	9,813		4.500	%	$	13,901		6.375	%	$	14,174		6.500	%
Tier I Leverage (to adjusted total assets)	$	43,340		15.158	%	$	11,437		4.000	%	$	11,437		4.000	%	$	14,296		5.000	%