Regulatory Matters

3 Months Ended

Mar. 31, 2022

Regulatory Matters [Abstract]

Regulatory Matters

10. 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, 2022, the Bank had positive undivided profits of $110.6 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, 2022 and December 31, 2021, 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, 2022
Total capital to risk-weighted assets
Consolidated	$	499,363		14.18	%	$	281,788		8.00	%	NA		NA
Independent Bank		447,698		12.71			281,707		8.00		$	352,133		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	416,199		11.82	%	$	211,341		6.00	%	NA		NA
Independent Bank		404,534		11.49			211,280		6.00		$	281,707		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	377,814		10.73	%	$	158,506		4.50	%	NA		NA
Independent Bank		404,534		11.49			158,460		4.50		$	228,887		6.50	%
Tier 1 capital to average assets
Consolidated	$	416,199		8.81	%	$	188,867		4.00	%	NA		NA
Independent Bank		404,534		8.56			188,953		4.00		$	236,191		5.00	%
December 31, 2021
Total capital to risk-weighted assets
Consolidated	$	488,495		14.53	%	$	268,991		8.00	%	NA		NA
Independent Bank		438,352		13.05			268,808		8.00		$	336,011		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	406,645		12.09	%	$	201,743		6.00	%	NA		NA
Independent Bank		396,351		11.80			201,606		6.00		$	268,808		8.00	%
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	368,277		10.95	%	$	151,307		4.50	%	NA		NA
Independent Bank		396,351		11.80			151,205		4.50		$	218,407		6.50	%
Tier 1 capital to average assets
Consolidated	$	406,645		8.79	%	$	185,034		4.00	%	NA		NA
Independent Bank		396,351		8.57			185,077		4.00		$	231,347		5.00	%

(1) These ratios do not reflect a capital conservation buffer of 2.50% at March 31, 2022 and December 31, 2021.

NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	March 31, 2022			December 31, 2021			March 31, 2022			December 31, 2021
	(In thousands)
Total shareholders' equity	$	355,449		$	398,484		$	382,169		$	426,558
Add (deduct)
Accumulated other comprehensive income for regulatory purposes		48,617			(6,298	)		48,617			(6,298	)
Goodwill and other intangibles		(31,404	)		(31,636	)		(31,404	)		(31,636	)
CECL (1)		5,152			7,727			5,152			7,727
Common equity tier 1 capital		377,814			368,277			404,534			396,351
Qualifying trust preferred securities		38,385			38,368			-			-
Tier 1 capital		416,199			406,645			404,534			396,351
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		43,164			41,850			43,164			42,001
Total risk-based capital	$	499,363		$	488,495		$	447,698		$	438,352

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