Note 13 - Regulatory Capital

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

13. Regulatory Capital

Dividend payments by Republic to the Company are subject to the Pennsylvania Banking Code of

1965

(the “Banking Code”) and the Federal Deposit Insurance Act (the “FDIA”). Under the Banking Code,

no

dividends

may

be paid except from “accumulated net earnings” (generally, undivided profits). Under the FDIA, an insured bank

may

pay

no

dividends if the bank is in arrears in the payment of any insurance assessment due to the FDIC. Under current banking laws, Republic would be limited to

$48.2

million of dividends plus an additional amount equal to its net profit for

2020,

up to the date of any such dividend declaration. However, dividends would be further limited in order to maintain capital ratios.

State and Federal regulatory authorities have adopted standards for the maintenance of adequate levels of capital by Republic. Federal banking agencies impose

four

minimum capital requirements on the Company’s risk-based capital ratios based on total capital, Tier

1

capital, CET

1

capital, and a leverage capital ratio. The risk-based capital ratios measure the adequacy of a bank’s capital against the riskiness of its assets and off-balance sheet activities. Failure to maintain adequate capital is a basis for “prompt corrective action” or other regulatory enforcement action. In assessing a bank’s capital adequacy, regulators also consider other factors such as interest rate risk exposure; liquidity, funding and market risks; quality and level or earnings; concentrations of credit; quality of loans and investments; risks of any nontraditional activities; effectiveness of bank policies; and management’s overall ability to monitor and control risks.

The following table presents the Company’s and Republic’s capital regulatory ratios calculated based on Basel III guidelines at

December 31, 2019

and

2018:

(dollars in thousands)	Actual					Minimum Capital Adequacy					Minimum Capital Adequacy with Capital Buffer					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
At December 31, 201 9 :
Total risk based capital
Republic	$	252,307		11.94	%	$	169,016		8.00	%	$	221,833		10.50	%	$	211,270		10.00	%
Company		261,759		12.37	%		169,251		8.00	%		222,141		10.50	%		-		-	%
Tier one risk based capital
Republic		243,041		11.50	%		126,762		6.00	%		179,579		8.50	%		169,016		8.00	%
Company		252,493		11.93	%		126,938		6.00	%		179,829		8.50	%		-		-	%
CET 1 risk based capital
Republic		243,041		11.50	%		95,071		4.50	%		147,889		7.00	%		137,325		6.50	%
Company		241,493		11.41	%		95,203		4.50	%		148,094		7.00	%		-		-	%
Tier one leveraged capital
Republic		245,158		7.54	%		128,935		4.00	%		128,935		4.00	%		161,169		5.00	%
Company		249,168		7.83	%		129,058		4.00	%		129,058		4.00	%		-		-	%
At December 31, 201 8 :
Total risk based capital
Republic	$	231,610		13.26	%	$	139,722		8.00	%	$	172,489		9.875	%	$	174,652		10.00	%
Company		262,964		15.03	%		140,009		8.00	%		172,824		9.875	%		-		-	%
Tier one risk based capital
Republic		222,995		12.77	%		104,791		6.00	%		137,539		7.875	%		139,722		8.00	%
Company		254,349		14.53	%		105,007		6.00	%		137,821		7.875	%		-		-	%
CET 1 risk based capital
Republic		222,995		12.77	%		78,594		4.50	%		111,341		6.375	%		113,524		6.50	%
Company		243,349		13.90	%		78,755		4.50	%		111,570		6.375	%		-		-	%
Tier one leveraged capital
Republic		222,995		8.21	%		108,685		4.00	%		108,685		4.00	%		135,857		5.00	%
Company		254,349		9.35	%		108,800		4.00	%		108,800		4.00	%		-		-	%

Management believes that Republic met, as of

December 31, 2019,

all capital adequacy requirements to which it is subject. As of

December 31, 2019

and

2018,

the FDIC categorized Republic as well capitalized under the regulatory framework for prompt corrective action provisions of the Federal Deposit Insurance Act.  There are

no

calculations or events since that notification that management believes have changed Republic’s category.

Under the capital rules, risk-based capital ratios are calculated by dividing common equity Tier

1,

Tier

1,

and total risk-based capital, respectively, by risk-weighted assets. Assets and off-balance sheet credit equivalents are assigned to

one

of several categories of risk-weights, based primarily on relative risk. Under applicable capital rules, Republic is required to maintain a minimum common equity Tier

1

capital ratio requirement of

4.5%,

a minimum Tier

1

capital ratio requirement of

6%,

a minimum total capital requirement of

8%

and a minimum leverage ratio requirement of

4%.

Under the rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier

1

capital above its minimum risk-based capital requirements in an amount greater than

2.5%

of total risk-weighted assets. The capital conservation buffer, which is composed of common equity Tier

1

capital, began on

January 1, 2016

at the

0.625%

level and was phased in over a

three

year period (increasing by that amount on each

January 1,

until it reached

2.5%

on

January 1, 2019).

Implementation of the deductions and other adjustments to common equity Tier

1

capital began on

January 1, 2015

and were phased-in over a

three

-year period.

The following table shows the required capital ratios with the conversation buffer over the phase-in period.

	Basel III Community Banks Minimum Capital Ratio Requirements
	2016			2017			2018			2019
Common equity tier 1 capital (CET1)		5.125	%		5.750	%		6.375	%		7.000	%
Tier 1 capital (to risk weighted assets)		6.625	%		7.250	%		7.875	%		8.500	%
Total capital (to risk-weighted assets)		8.625	%		9.250	%		9.875	%		10.500	%

The Company believes that, as of

December 31, 2019,

all capital adequacy requirements are met under the Basel III Capital Rules on a fully phased-in basis.