REGULATORY MATTERS

12 Months Ended

Dec. 31, 2020

REGULATORY MATTERS [Abstract]

REGULATORY MATTERS

NOTE 20 – 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 December 31, 2020, the Bank had positive undivided profits of $77.8 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 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 December 31, 2020 and 2019, 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 at December 31 follow⁽¹⁾:

	Actual					Minimum for Adequately Capitalized Institutions					Minimum for Well-Capitalized Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
2020
Total capital to risk-weighted assets
Consolidated	$	455,072		15.95	%	$	228,214		8.00	%	NA		NA
Independent Bank		401,005		14.06			228,111		8.00		$	285,139		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	379,395		13.30	%	$	171,161		6.00	%	NA		NA
Independent Bank		365,343		12.81			171,083		6.00		$	228,111		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	341,095		11.96	%	$	128,370		4.50	%	NA		NA
Independent Bank		365,343		12.81			128,312		4.50		$	185,340		6.50	%
Tier 1 capital to average assets
Consolidated	$	379,395		9.15	%	$	165,825		4.00	%	NA		NA
Independent Bank		365,343		8.81			165,828		4.00		$	207,285		5.00	%
2019
Total capital to risk-weighted assets
Consolidated	$	380,454		13.74	%	$	221,562		8.00	%	NA		NA
Independent Bank		358,914		12.96			221,482		8.00		$	276,852		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	352,764		12.74	%	$	166,171		6.00	%	NA		NA
Independent Bank		331,224		11.96			166,111		6.00		$	221,482		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	314,532		11.36	%	$	124,628		4.50	%	NA		NA
Independent Bank		331,224		11.96			124,583		4.50		$	179,954		6.50	%
Tier 1 capital to average assets
Consolidated	$	352,764		10.11	%	$	139,632		4.00	%	NA		NA
Independent Bank		331,224		9.49			139,615		4.00		$	174,519		5.00	%

(1) These ratios do not reflect a capital conservation buffer of 2.50% at December 31, 2020 and 2019.

NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	December 31,						December 31,
	2020			2019			2020			2019
	(In thousands)
Total shareholders’ equity	$	389,522		$	350,169		$	413,770		$	366,861
Add (deduct)
Accumulated other comprehensive loss for regulatory purposes		(15,821	)		(2,011	)		(15,821	)		(2,011	)
Goodwill and other intangibles		(32,606	)		(33,626	)		(32,606	)		(33,626	)
Common equity tier 1 capital		341,095			314,532			365,343			331,224
Qualifying trust preferred securities		38,300			38,232			-			-
Tier 1 capital		379,395			352,764			365,343			331,224
Subordinated debt		40,000			-			-			-
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		35,677			27,690			35,662			27,690
Total risk-based capital	$	455,072		$	380,454		$	401,005		$	358,914