Regulatory Capital Requirements

9 Months Ended

Mar. 31, 2020

Regulatory Capital Requirements

Regulatory Capital Requirements

NOTE 13 – Regulatory Capital Requirements

The Bank is 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 consolidated 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. The 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 (set forth in the table that follows) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), Tier 1 Common Equity (as defined), and Tier 1 capital (as defined) to average assets (as defined).

As of March 31, 2020 and June 30, 2019, the Bank was categorized as well capitalized.  To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier I risk-based, Tier I common equity, and Tier 1 leverage ratios as set forth in the following table.

The Bank completed a reorganization and capital raise as of April 30, 2019. The Bank’s capital levels after the capital raise met all capital adequacy requirements to which they were subject under the Consent Order and the Consent Order was subsequently terminated on June 19, 2019.

Listed below is a comparison of the Bank's actual capital amounts with the minimum requirements for adequately capitalized banks, as defined by the federal regulatory agencies' Prompt Corrective Action Rules as of March 31, 2020 and June 30, 2019.  Under Basel III rules, the Bank must hold a capital conservation buffer 2.5% above the adequately capitalized risk-based capital ratios. Failure to maintain the full amount of the buffer will result in restrictions on the Bank’s ability to make discretionary payments.

					For Capital Adequacy				To be Considered
	Actual				Purposes				Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2020 (unaudited)
Total capital (to risk weighted assets)	$	28,764,083	15.11	%	$	15,233,243	8.00	%	$	19,041,554	10.00	%
Tier 1 capital (to risk weighted assets)		27,460,649	14.42	%		11,424,932	6.00	%		15,233,243	8.00	%
Common Equity Tier 1 (to risk weighted assets)		27,460,649	14.42	%		8,568,699	4.50	%		12,377,010	6.50	%
Tier 1 capital (to average assets)		27,460,649	9.34	%		11,762,089	4.00	%		14,702,611	5.00	%
As of June 30, 2019
Total capital (to risk weighted assets)	$	27,643,843	14.01	%	$	15,780,941	8.00	%	$	19,726,176	10.00	%
Tier 1 capital (to risk weighted assets)		26,349,878	13.36	%		11,835,706	6.00	%		15,780,941	8.00	%
Common Equity Tier 1 (to risk weighted assets)		26,349,878	13.36	%		8,876,779	4.50	%		12,822,015	6.50	%
Tier 1 capital (to average assets)		26,349,878	8.55	%		12,327,357	4.00	%		15,409,197	5.00	%

A Wisconsin state-chartered savings bank is required by state law to maintain minimum net worth in an amount equal to at least 6.0% of its total assets. At March 31, 2020 and June 30, 2019, the Bank’s net worth was $24,716,999 with general loan loss reserve of $1,102,641 and $23,501,513 with general loan loss reserve of $1,190,650, totaling 8.7% and 7.9% of total assets, respectively, which meets the state of Wisconsin’s minimum net worth requirements.