Note 5:

Shareholders’ Equity

On September 5, 2019, the Company adopted a Repurchase Plan (the “RP”). The RP initially authorized the repurchase of up to 500,000 shares of the Company’s common stock. On March 13, 2020, the Company’s Board of Directors approved a 500,000 share expansion to the existing stock repurchase program, for a total of 1,000,000 shares authorized under the program. All shares repurchased under the RP have been retired and not held as treasury stock. The timing, price and amount of stock repurchases under the RP may be determined by management. At June 30, 2020, there were 168,746 shares remaining that could be repurchased under the Company’s Repurchase Program. Stock repurchases under the RP will take place pursuant to a Rule 10b5-1 Plan with pricing and purchasing parameters established by management. A summary of the activity under the RP is as follows:

	Six Months Ended June 30,				Three Months Ended June 30,
	2020		2019		2020		2019
Number of shares repurchased		831,254		-		38,160		-
Average price of shares repurchased	$	8.56	$	-	$	7.90	$	-
Shares remaining to be repurchased		168,746		-		168,746		-

The Company and Bank are subject to risk-based capital guidelines issued 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 Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under GAAP, regulatory reporting requirements and regulatory capital standards. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company’s and the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total, Tier I, and Common Equity capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2020, that the Company and Bank meet all capital adequacy requirements to which it is subject and maintains capital conservation buffers that allow the Company and Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to certain executive officers.

As of June 30, 2020, the most recent notification from the Federal Deposit Insurance Corporation (FDIC) categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

In April 2020, we began originating loans to qualified small businesses under the PPP administered by the SBA. Federal bank regulatory agencies have issued an interim final rule that permits banks to neutralize the regulatory capital effects of participating in the Paycheck Protection Program

Lending Facility (the “PPP Facility”) and clarify that PPP loans have a zero percent risk weight under applicable risk-based capital rules. Specifically, a bank may exclude all PPP loans pledged as collateral to the PPP Facility from its average total consolidated assets for the purposes of calculating its leverage ratio, while PPP loans that are not pledged as collateral to the PPP Facility will be included. The PPP loans we originated in the second quarter of 2020 are included in the calculation of our leverage ratio as of June 30, 2020 as we did not utilize the PPP Facility for funding purposes.

The Company’s and Bank’s actual capital amounts and ratios are presented in the following table (dollars in thousands):

	Actual					Minimum Capital Requirements					With Capital Conservation Buffer					Minimum To Be Well Capitalized Under Prompt Corrective Action
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of June 30, 2020
Total capital to risk-weighted assets
Company	$	109,490		14.33	%	$	61,139		8.00	%	$	80,245		10.50	%		N/A		N/A
Bank	$	109,435		14.34	%	$	61,060		8.00	%	$	80,141		10.50	%	$	76,325		10.00	%
Tier I capital to risk-weighted assets
Company	$	99,933		13.08	%	$	45,854		6.00	%	$	64,960		8.50	%		N/A		N/A
Bank	$	99,891		13.09	%	$	45,795		6.00	%	$	64,876		8.50	%	$	61,060		8.00	%
CET I capital to risk-weighted assets
Company	$	99,933		13.08	%	$	34,391		4.50	%	$	53,497		7.00	%		N/A		N/A
Bank	$	99,891		13.09	%	$	34,346		4.50	%	$	53,427		7.00	%	$	49,611		6.50	%
Tier I capital to average assets
Company	$	99,933		10.31	%	$	38,787		4.00	%		N/A		N/A			N/A		N/A
Bank	$	99,891		10.30	%	$	38,801		4.00	%		N/A		N/A		$	48,502		5.00	%
As of December 31, 2019
Total capital to risk-weighted assets
Company	$	105,137		15.25	%	$	55,157		8.00	%	$	72,393		10.50	%		N/A		N/A
Bank	$	106,148		15.42	%	$	55,076		8.00	%	$	72,287		10.50	%	$	68,845		10.00	%
Tier I capital to risk-weighted assets
Company	$	97,291		14.11	%	$	41,368		6.00	%	$	58,604		8.500	%		N/A		N/A
Bank	$	98,302		14.28	%	$	41,307		6.00	%	$	58,518		8.500	%	$	55,076		8.00	%
CET I capital to risk-weighted assets
Company	$	97,291		14.11	%	$	31,026		4.50	%	$	48,262		7.000	%		N/A		N/A
Bank	$	98,302		14.28	%	$	30,980		4.50	%	$	48,192		7.000	%	$	44,749		6.50	%
Tier I capital to average assets
Company	$	97,291		11.53	%	$	33,833		4.00	%		N/A		N/A			N/A		N/A
Bank	$	98,302		11.65	%	$	33,793		4.00	%		N/A		N/A		$	42,241		5.00	%

In July 2013, the federal regulatory authorities issued a new capital rule based, in part, on revisions developed by the Basel Committee on Banking Supervision to the Basel capital framework (Basel III). The Bank became subject to the new rule effective January 1, 2015. Generally, the new rule implements higher minimum capital requirements, revises the definition of regulatory capital components and related calculations, adds a new common equity tier 1 capital ratio, implements a new capital conservation buffer, increases the risk weighting for past due loans and provides a transition period for several aspects of the new rule. In addition, banks with less than $250 billion in assets were given a one-time opt-out election under Basel III Capital Rules to filter from regulatory capital certain accumulated other comprehensive income (AOCI) components. The Bank made the opt-out election and excludes the AOCI components from the capital ratio computations.

The current (new) capital rule provides that, 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 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.

As fully phased in, a banking organization with a buffer greater than 2.5% would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than 2.5% would be subject to increasingly stringent limitations as the buffer approaches zero. The new rule also prohibits a banking organization from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% as of the beginning of that quarter. Eligible net income is defined as net income for the four calendar quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. A summary of payout restrictions based on the capital conservation buffer is as follows:

Capital Conservation Buffer (as a % of risk-weighted assets)	Maximum Payout (as a % of eligible retained income)
Greater than 2.5%	No payout limitations applies
≤2.5% and >1.875%	60%
≤1.875% and >1.25%	40%
≤1.25% and >0.625%	20%
≤0.625%	0%

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval. At June 30, 2020, approximately $29.5 million of retained earnings was available for dividend declaration from the Bank without prior regulatory approval.