REGULATORY MATTERS

3 Months Ended

Mar. 31, 2023

Regulatory Capital Requirements Under Banking Regulations [Abstract]

REGULATORY MATTERS

REGULATORY MATTERS

The Bank is subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At March 31, 2023, approximately $60,784 of retained earnings was available for dividend declaration without regulatory approval.

The Bank is also subject to various regulatory capital requirements administered by the federal and state 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 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. 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 capital, Tier 1 capital, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. In addition, the Bank is subject to a capital conservation buffer, which requires it to maintain common equity Tier 1 capital of 2.50% above minimum requirements for the common equity Tier 1 ratio, Tier 1 risk-based ratio and total risk-based ratio to avoid limitations on distributions and discretionary bonus payments. The capital conservation buffer is included in the minimum capital requirements in the following tables. Management believes, as of March 31, 2023 and December 31, 2022, that the Bank met all capital adequacy requirements to which it is subject.

As of March 31, 2023, the Company and the Bank believe they are each well capitalized on a consolidated basis for bank regulatory purposes as their respective capital ratios exceed minimum total Tier 1 and CET1 risk-based capital ratios and Tier 1 leverage capital ratios as set forth in the following table. As a bank holding company with less than $3 billion in total consolidated assets, the Company is eligible to be treated as a “small bank holding company” under the Federal Reserve’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement. As a result, the Company’s capital adequacy is evaluated at the bank level and on a parent-only basis, and it is not subject to consolidated capital standards for regulatory purposes. The ratios set forth below as to the Company are for illustrative purposes in the event it were to become subject to consolidated capital standards for regulatory purposes. The column styled “Required for Capital Adequacy Purposes” includes the 2.50% capital conservation buffer.

The Bank is also subject to capital requirements under the FDIC’s prompt corrective action regime. As of March 31, 2023, the Bank was well capitalized under the regulatory framework for prompt corrective action.

Community Bank Leverage Ratio Framework

As part of the directive under the Economic Growth Act, in September 2019, the FDIC and other federal bank regulatory agencies approved the Community Bank Leverage Ratio (“CBLR”) framework. This optional framework became effective January 1, 2020, and is available to the Company and the Bank as an alternative to the Basel III risk-based capital framework. The CBLR framework provides for a simple measure of capital adequacy for certain community banking organizations. Specifically, depository institutions and depository institution holding companies that have less than $10.0 billion in total consolidated assets and meet other qualifying criteria, including a Tier 1 leverage ratio of greater than 9.00%, are considered qualifying community banking organizations and are eligible to opt into the CBLR framework, and replace the applicable Basel III risk-based capital requirements. As of March 31, 2023, the Company and the Bank qualify for the CBLR framework. Management does not intend to utilize the CBLR framework.

	Actual				Required for Capital Adequacy Purposes				Minimums To Be “Well Capitalized” Under Prompt Corrective Action
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(dollars in thousands)
As of March 31, 2023
Tier 1 capital (to average assets)
Company	$	181,503	8.89	%	$	81,668	4.00	%	$	—	—
Bank	$	248,852	12.19	%	$	81,668	4.00	%	$	102,086	5.00	%
CET 1 capital (to risk-weighted assets)
Company	$	181,503	9.00	%	$	141,208	7.00	%	$	—	—
Bank	$	248,852	12.34	%	$	141,208	7.00	%	$	131,122	6.50	%
Tier 1 capital (to risk-weighted assets)
Company	$	181,503	9.00	%	$	171,467	8.50	%	$	—	—
Bank	$	248,852	12.34	%	$	171,467	8.50	%	$	161,381	8.00	%
Total capital (to risk-weighted assets)
Company	$	290,643	14.41	%	$	211,813	10.50	%	$	—	—
Bank	$	269,992	13.38	%	$	211,813	10.50	%	$	201,726	10.00	%

	Actual				Required for Capital Adequacy Purposes				Minimums To Be “Well Capitalized” Under Prompt Corrective Action
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(dollars in thousands)
As of December 31, 2022
Tier 1 capital (to average assets)
Company	$	174,679	8.82	%	$	79,182	4.00	%	$	—	—
Bank	$	240,815	12.17	%	$	79,182	4.00	%	$	98,977	5.00	%
CET 1 capital (to risk-weighted assets)
Company	$	174,679	8.86	%	$	138,018	7.00	%	$	—	—
Bank	$	240,815	12.21	%	$	138,018	7.00	%	$	128,160	6.50	%
Tier 1 capital (to risk-weighted assets)
Company	$	174,679	8.86	%	$	167,593	8.50	%	$	—	—
Bank	$	240,815	12.21	%	$	167,593	8.50	%	$	157,735	8.00	%
Total capital (to risk-weighted assets)
Company	$	282,835	14.34	%	$	207,027	10.50	%	$	—	—
Bank	$	260,971	13.24	%	$	207,027	10.50	%	$	197,169	10.00	%