Regulatory Matters

12 Months Ended

Dec. 31, 2019

Regulatory Matters

Regulatory Matters

Note 11: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered 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 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 the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, 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 Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier I capital (as defined) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined). Management believes that, as of December 31, 2019 and 2018, the Bank met all capital adequacy requirements to which it was subject at such dates.

Effective January 1, 2015, new regulatory capital requirements commonly referred to as ‘Basel III” were implemented and are reflected below. Management opted out of the accumulated comprehensive income treatment under the new requirements, and as such unrealized gains and losses from available-for-sale securities will continue to be excluded from regulatory capital.

The below minimum capital requirements exclude the capital conservation buffer required to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. The capital conservation buffer was phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer was 2.50% at December 31, 2019.

As of December 31, 2019, the most recent notification from the Office of the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage 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.

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

									Minimum to Be Well
									Capitalized Under
					Minimum Capital				Prompt Corrective Action
	Actual				Requirement				Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of December 31, 2019
Total risk-based capital (to risk-weighted assets)	$	24,898	16.3	%	$	12,204	8.0	%	$	15,255	10.0	%
Tier I capital (to risk-weighted assets)		23,490	15.4	%		9,153	6.0	%		12,204	8.0	%
Common Equity Tier I capital (to risk-weighted assets)		23,490	15.4	%		6,865	4.5	%		9,916	6.5	%
Tier I capital (to adjusted total assets)		23,490	10.2	%		9,183	4.0	%		11,478	5.0	%
As of December 31, 2018
Total risk-based capital (to risk-weighted assets)	$	24,480	17.5	%	$	11,176	8.0	%	$	13,970	10.0	%
Tier I capital (to risk-weighted assets)		23,075	16.5	%		8,382	6.0	%		11,176	8.0	%
Common Equity Tier I capital (to risk-weighted assets)		23,075	16.5	%		6,287	4.5	%		9,081	6.5	%
Tier I capital (to adjusted total assets)		23,075	11.5	%		8,014	4.0	%		10,017	5.0	%