Regulatory Matters

12 Months Ended

Dec. 31, 2017

Regulatory Capital Requirements [Abstract]

Regulatory Matters

NOTE 13 - REGULATORY MATTERS

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and 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 about components, risk weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

The prompt corrective action regulations provide five categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a bank is only adequately capitalized, regulatory approval is required to, among other things, accept, renew or roll-over brokered deposits. If a bank is undercapitalized, capital distributions and growth and expansion are limited, and plans for capital restoration are required.

In July 2013, the Board of Governors of the Federal Reserve Board and the FDIC approved the final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks and their holding companies (commonly known as Basel III). Under the final rules, which began for the Company and the Bank on January 1, 2015 and are subject to a phase-in period through January 1, 2019, minimum requirements will increase for both the quantity and quality of capital held by the Company and the Bank. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio (CET1 ratio) of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which when fully phased-in, effectively results in a minimum CET1 ratio of 7.0%. Basel III raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% when fully phased-in), effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), and requires a minimum leverage ratio of 4.0%. Basel III also makes changes to risk weights for certain assets and off-balance-sheet exposures. Management expects that the capital ratios for the Company and the Bank under Basel III will continue to exceed the well capitalized minimum capital requirements, as they currently exceed the fully phased in 2019 requirements.

In addition to the capital requirements for bank holding companies generally, financial holding companies are also required to meet “well-capitalized” requirements of the Federal Reserve Board. A bank holding company or financial holding company that is covered by the Federal Reserve’s Small Bank Holding Company Policy is not required to comply with the consolidated capital requirements, although its bank subsidiaries still must comply with the applicable capital requirements. As a bank holding company with assets of less than $1 billion and meeting certain other requirements, the Company is covered by the Small Bank Holding Company Policy.

At December 31, 2017 and December 31, 2016, actual capital levels and minimum required levels for the Company, if it were not covered by the Small Bank Holding Company Policy, were:

	(Amounts in thousands)
	Actual					Minimum required for capital adequacy purposes
December 31, 2017	Amount		Ratio			Amount		Ratio
CET1 capital (to risk-weighted assets)	$	63,455		12.37	%	$	23,082		4.5	%
Tier 1 capital (to risk-weighted assets)		68,455		13.35	%		30,776		6.0	%
Total capital (to risk-weighted assets)		73,116		14.26	%		41,033		8.0	%
Tier 1 capital (to average assets)		68,455		10.77	%		25,416		4.0	%

	(Amounts in thousands)
	Actual					Minimum required for capital adequacy purposes
December 31, 2016	Amount		Ratio			Amount		Ratio
CET1 capital (to risk-weighted assets)	$	60,631		12.97	%	$	21,033		4.5	%
Tier 1 capital (to risk-weighted assets)		65,631		14.04	%		28,044		6.0	%
Total capital (to risk-weighted assets)		70,583		15.10	%		37,392		8.0	%
Tier 1 capital (to average assets)		65,631		10.46	%		25,086		4.0	%

Approximately $5.0 million of trust preferred securities outstanding at December 31, 2017 and December 31, 2016, respectively, qualified as Tier 1 capital. Refer to Note 7, “Subordinated Debt.”

The Bank met all capital requirements to be categorized as "well capitalized" at December 31, 2017 and December 31, 2016.