Regulatory Capital Requirements

12 Months Ended

Jun. 30, 2021

Regulatory Capital Requirements

Regulatory Capital Requirements

NOTE 19 – 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.

On November 13, 2019, the federal regulators finalized and adopted a regulatory capital rule establishing a new community bank leverage ratio (“CBLR”), which became effective on January 1, 2020. The intent of the CBLR is to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions as directed under the Economic Growth, Regulatory Relief, and Consumer Protection Act. Under the CBLR, if a qualifying depository institution elects to use such measure, such institutions will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e. leverage ratio) exceeds a 9% threshold, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios.

In April 2020, under the CARES Act, the 9% leverage ratio threshold was temporarily reduced to 8% in response to the COVID-19 pandemic. The threshold increased to 8.5% in 2021 and will return to 9% in 2022. The Bank elected to begin using the CBLR for the quarter ended March 31, 2020 and intends to utilize this measure for the foreseeable future. Eligibility criteria to utilize the CBLR includes the following:

· Total assets of less than $10 billion,

· Total trading assets plus liabilities of 5% or less of consolidated assets,

· Total off-balance sheet exposures of 25% or less of consolidated assets,

· Cannot be an advanced approaches banking organization, and

· Leverage ratio greater than 9%, or temporarily prescribed threshold established in response to COVID-19.

As of June 30, 2021 and 2020, the Bank was categorized as well capitalized. Listed in the table below is a comparison of the Bank’s actual capital amounts with the minimum requirements for well capitalized banks, as defined above.

	June 30, 2021
					To be Considered
	Actual				Well Capitalized
	Amount		Ratio		Amount		Ratio
As of June 30, 2021
CBLR Framework
Tier 1 capital (to average assets) (i.e., leverage ratio)	$	34,108,270	11.26	%		25,744,847	8.50	%

	June 30, 2020
					To be Considered
	Actual				Well Capitalized
	Amount		Ratio		Amount		Ratio
As of June 30, 2020
CBLR Framework
Tier 1 capital (to average assets) (i.e., leverage ratio)		27,574,753	9.30	%		23,715,029	8.00	%

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 June 30, 2020, the Bank’s net worth was $22,472,487 and general loan loss reserve was $1,147,504, totaling 7.7% of total assets, which meets the state of Wisconsin’s minimum net worth requirements. At June 30, 2021, the Bank’s net worth was $32,504,792 and general loan loss reserve was $1,323,730, totaling 10.7% of total assets, which meets the state of Wisconsin’s minimum net worth requirements.