Equity and Regulatory Matters

12 Months Ended

Dec. 31, 2018

Banking and Thrift [Abstract]

Equity and Regulatory Matters

NOTE 15 — Equity and Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by 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 assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Federal Reserve Board and the FDIC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes. The rules revise minimum capital requirements and adjust prompt corrective action thresholds. The final rules revised the regulatory capital elements, added a new common equity Tier 1 ratio, increased the minimum Tier 1 capital ratio requirements and implemented a new capital conservation buffer. The rules also permitted certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income. The Bank made the election to retain the existing treatment for accumulated other comprehensive income. The final rules took effect for the Bank on January 1, 2015, subject to a transition period for certain parts of the rules.

The table below includes the new regulatory capital ratio requirements that became effective on January 1, 2015. Beginning in 2016, an additional capital conservation buffer was added to the minimum requirements for capital adequacy purposes, subject to a three-year phase-in period. The capital conservation buffer will be fully phased-in on January 1, 2019 at 2.5 percent. A banking organization with a conservation buffer of less than 2.5 percent (or the required phase-in amount in years prior to 2019) will be subject to limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. At the present time, the ratios for the Bank are sufficient to meet the fully phased-in conservation buffer.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1, and Total capital to risk-weighted assets and of Tier 1 capital to average assets. It is management’s opinion, as of December 31, 2018, that the Bank met all applicable capital adequacy requirements.

As of December 31, 2018, the Bank is categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum regulatory capital ratios as set forth in the table. There are no conditions or events since December 31, 2018 that management believes have changed the category.

The Bank’s actual capital amounts and ratios are presented in the following tables:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2018
Leverage (Tier 1)	$	35,955		7.5	%	$	19,110		4.0	%	$	23,887		5.0	%
Risk-based:
Common Tier 1		35,955		10.0	%		16,153		4.5	%		23,333		6.5	%
Tier 1		35,955		10.0	%		21,538		6.0	%		28,717		8.0	%
Total		39,217		10.9	%		28,717		8.0	%		35,897		10.0	%
December 31, 2017
Leverage (Tier 1)	$	34,868		7.4	%	$	18,975		4.0	%	$	23,719		5.0	%
Risk-based:
Common Tier 1		34,868		11.1	%		14,174		4.5	%		20,473		6.5	%
Tier 1		34,868		11.1	%		18,898		6.0	%		25,197		8.0	%
Total		37,961		12.1	%		25,197		8.0	%		31,497		10.0	%