Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2023

Regulatory Capital Requirements [Abstract]

Regulatory Capital Requirements

3. Regulatory Capital Requirements

Banks and holding companies are subject to regulatory capital requirements administered by federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by regulators.  Failure to meet capital requirements can initiate regulatory action.  The net unrealized gain or loss on available for sale securities is included in computing regulatory capital.  Management believes that, as of December 31, 2023, the Corporation and Bank met all capital adequacy requirements to which they are subject.  

Prompt corrective action regulations provide five classifications:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.  As of December 31, 2023, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  There are no conditions or events since that notification that management believes have changed the Bank’s category.

The following table presents First United Bank & Trust’s capital ratios for years ended December 31, 2023 and 2022:

	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2023
Total Capital (to risk-weighted assets)		207,767	14.05%		118,292	8.00%		147,865	10.00%
Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		88,719	6.00%		118,292	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		189,370	12.81%		66,540	4.50%		96,112	6.50%
Tier 1 Capital (to average assets)		189,370	9.92%		76,233	4.00%		95,291	5.00%
	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2022
Total Capital (to risk-weighted assets)		196,442	14.37%		109,396	8.00%		136,745	10.00%
Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		82,047	6.00%		109,396	8.00%
Common Equity Tier 1 Capital (to risk-weighted assets)		181,673	13.29%		61,535	4.50%		88,884	6.50%
Tier 1 Capital (to average assets)		181,673	10.01%		72,354	4.00%		90,443	5.00%

Federal and state banking regulations place certain restrictions on the amount of dividends paid and loans or advances made by the Bank to First United Corporation. The total amount of dividends that may be paid at any date is generally limited to the retained earnings of the Bank, and loans or advances are limited to 10% of the Bank’s capital stock and surplus on a secured basis. In addition, dividends paid by the Bank to First United Corporation would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

We adopted CECL effective January 1, 2023 and elected not to implement the regulatory agencies’ capital transition and opted to record the impact to our capital ratios immediately upon implementation.  Effective with the implementation of CECL, a $2.2 million adjustment, net of tax, was made to retained earnings.  The adjustment did not have a material impact to our capital ratios.