Regulatory Matters

3 Months Ended

Mar. 31, 2023

Regulatory Matters [Abstract]

Regulatory Matters

Regulatory Matters

Capital guidelines adopted by federal and state regulatory agencies and restrictions imposed by law limit the amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid in any calendar year is limited to the Bank’s current year net profits, combined with the retained net profits of the preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits. As of March 31, 2023, the Bank had positive undivided profits of $145.3 million. It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent or that would not be in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can result in certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our interim condensed consolidated financial statements. In addition, capital adequacy rules include a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. To avoid limits on capital distributions and certain discretionary bonus payments we must meet the minimum ratio for adequately capitalized institutions plus the buffer. Under capital adequacy guidelines, we must meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the regulators. The most recent regulatory filings as of March 31, 2023 and December 31, 2022, categorized our Bank as well capitalized. Management is not aware of any conditions or events that would have changed the most recent Federal Deposit Insurance Corporation (“FDIC”) categorization.

Our actual capital amounts and ratios follow (1):

	Actual				Minimum for Adequately Capitalized Institutions				Minimum for Well-Capitalized Institutions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
March 31, 2023
Total capital to risk-weighted assets
Consolidated	$	542,176	13.80	%	$	314,237	8.00	%	NA		NA
Independent Bank	486,461		12.40		313,901		8.00		$	392,377	10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	453,041	11.53	%	$	235,678	6.00	%	NA		NA
Independent Bank	437,377		11.15		235,426		6.00		$	313,901	8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	414,588	10.55	%	$	176,758	4.50	%	NA		NA
Independent Bank	437,377		11.15		176,569		4.50		$	255,045	6.50	%
Tier 1 capital to average assets
Consolidated	$	453,041	8.92	%	$	203,233	4.00	%	NA		NA
Independent Bank	437,377		8.61		203,239		4.00		$	254,048	5.00	%
December 31, 2022
Total capital to risk-weighted assets
Consolidated	$	536,549	13.62	%	$	315,059	8.00	%	NA		NA
Independent Bank	480,886		12.22		314,733		8.00		$	393,416	10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	447,299	11.36	%	$	236,294	6.00	%	NA		NA
Independent Bank	431,685		10.97		236,049		6.00		$	314,733	8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	408,863	10.38	%	$	177,221	4.50	%	NA		NA
Independent Bank	431,685		10.97		177,037		4.50		$	255,720	6.50	%
Tier 1 capital to average assets
Consolidated	$	447,299	8.86	%	$	201,875	4.00	%	NA		NA
Independent Bank	431,685		8.56		201,820		4.00		$	252,275	5.00	%

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(1) These ratios do not reflect a capital conservation buffer of 2.50% at March 31, 2023 and December 31, 2022.

NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated				Independent Bank
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
	(In thousands)
Total shareholders' equity	$	367,714	$	347,596	$	390,503	$	370,418
Add (deduct)
Accumulated other comprehensive income (loss) for regulatory purposes	75,013		86,966		75,013		86,966
Goodwill and other intangibles	(30,715)		(30,851)		(30,715)		(30,851)
CECL (1)	2,576		5,152		2,576		5,152
Common equity tier 1 capital	414,588		408,863		437,377		431,685
Qualifying trust preferred securities	38,453		38,436		—		—
Tier 1 capital	453,041		447,299		437,377		431,685
Subordinated debt	40,000		40,000		—		—
Allowance for credit losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets	49,135		49,250		49,084		49,201
Total risk-based capital	$	542,176	$	536,549	$	486,461	$	480,886

(1) We elected the three year CECL transition method for regulatory purposes.