Note 11 - Minimum Regulatory Capital Requirement

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note

1

1:

 Minimum Regulatory Capital Requirement

Prior to

2018,

the Company was subject to regulatory capital requirements on a consolidated basis.  When the Federal Reserve updated the Small Bank Holding Company Policy Statement, in compliance with The Economic Growth, Regulatory Relief and Consumer Protection Act of

2018

in

August

of

2018,

the Company became exempt from reporting consolidated regulatory capital ratios and from minimum regulatory capital requirements. 

NBB continues to be subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on NBI’s and NBB’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, NBB must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

The Bank is subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Act (the “Basel III Capital Rules”) as applied by the Office of the Comptroller of the Currency.  The Basel III Capital Rules require the Bank to comply with minimum capital ratios plus a “capital conservation buffer” designed to absorb losses during periods of economic stress.  The implementation period for the capital conservation buffer began in

2016

and it was fully phased in on

January 

1,

2019.

  The rules set forth minimum amounts and ratios for

CET1

capital, Tier

1

capital and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier

1

capital to adjusted quarterly average assets (as defined).

NBB’s

CET1

capital includes common stock and related surplus and retained earnings.  The Basel III Capital Rules provide an option to exclude components of accumulated other comprehensive income (loss) from

CET1

capital.  Once made, the election is final and cannot be changed. NBB elected to exclude components of accumulated other comprehensive income from

CET1

capital.

Tier

1

Capital includes

CET1

capital and additional Tier

1

capital components. At

December 31, 2019

and

2018,

NBB did

not

hold any additional Tier

1

capital beyond

CET1

capital.

Total capital includes Tier

1

capital and Tier

2

capital. Tier

2

capital includes the allowance for loan losses.

NBB’s risk-weighted assets were

$816,962

at

December 31, 2019

and

$816,660

as of

December 31, 2018. 

Management believes, as of

December 31, 2019

and

2018,

that NBB met all capital adequacy requirements to which it is subject.

As of

December 31, 2019,

the most recent notifications from the Office of the Comptroller of the Currency categorized NBB as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier

1

risk-based,

CET1

risk-based and Tier

1

leverage ratios, as set forth in the following tables. There are

no

conditions or events since these notifications that management believes have changed NBB’s category.

NBB’s capital amounts and ratios as of

December 31, 2019

and

2018

are presented in the following tables.

	Actual					Minimum Capital Requirement (1)					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 201 9
Total capital (to risk weighted assets)	$	188,946		23.128	%	$	85,781		10.500	%	$	81,696		10.000	%
Tier 1 capital (to risk weighted assets)	$	182,044		22.283	%	$	69,442		8.500	%	$	65,357		8.000	%
Common Equity Tier 1 capital (to risk weighted assets)	$	182,044		22.283	%	$	57,187		7.000	%	$	53,103		6.500	%
Tier 1 capital (to average assets)	$	182,044		14.175	%	$	51,371		4.000	%	$	64,213		5.000	%

	Actual					Minimum Capital Requirement (1)					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2018
Total capital (to risk weighted assets)	$	202,238		24.764	%	$	80,645		9.875	%	$	81,666		10.000	%
Tier 1 capital (to risk weighted assets)	$	194,823		23.856	%	$	64,312		7.875	%	$	65,333		8.000	%
Common Equity Tier 1 capital (to risk weighted assets)	$	194,823		23.856	%	$	52,062		6.375	%	$	53,083		6.500	%
Tier 1 capital (to average assets)	$	194,823		15.788	%	$	49,359		4.000	%	$	61,699		5.000	%

( 1 ) Except with regard to NBB’s Tier 1 capital to average assets ratio, the minimum capital requirement includes the current phased-in portion of the Basel III Capital Rules, capital conservation buffer ( 2.50% for 2019 and 1.875% in 2018 ) which is added to the minimum capital requirements for capital adequacy purposes. The capital conservation buffer was phased in through four equal annual installments of .0625% from 2016 to 2019, with full implementation in January 2019. NBB’s capital conservation buffer consists of additional CET1 above regulatory minimum requirement. Failure to maintain the prescribed levels would result in limitations on capital distributions and discretionary bonuses to executives.