Note 19 - Regulatory Matters

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

(19) Regulatory Matters

Bancorp and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators. Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Bancorp’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of Bancorp’s 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 the regulators regarding components, risk weightings and other factors.

Banking regulators have categorized the Bank as well-capitalized. To meet the definition of well-capitalized, a bank must have a minimum 6.5% Common Equity Tier 1 Risk-Based Capital ratio, 8.0% Tier 1 Risk-Based Capital ratio, 10.0% Total Risk-Based Capital ratio and 5.0% Tier 1 Leverage ratio.

Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, Bancorp and the Bank must hold a 2.5% capital conservation buffer composed of Common Equity Tier 1 Risk-Based Capital above the minimum risk-based capital requirements for the Common Equity Tier 1 Risk-Based Capital ratio, Tier 1 Risk-Based Capital ratio and Total Risk-Based Capital ratio necessary to be considered adequately-capitalized. At September 30, 2020, the adequately-capitalized minimums, including the capital conservation buffer, were a 6.0% Common Equity Tier 1 Risk-Based Capital ratio, 8.5% Tier 1 Risk-Based Capital ratio and 10.5% Total Risk-Based Capital ratio. The capital conservation buffer was phased in starting in 2016 at 0.625% and was fully implemented at 2.5% effective January 1, 2019.

Bancorp continues to exceed the regulatory requirements for all calculations. Bancorp and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the capital conservation buffer.

The following table sets forth consolidated Bancorp’s and the Bank’s risk based capital amounts and ratios:

(dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
September 30, 2021	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	581,998		12.61	%	$	369,314		8.00	%		NA		NA
Bank		564,054		12.26			368,132		8.00		$	460,166		10.00	%
Common equity tier 1 risk-based capital (1)
Consolidated		539,601		11.69			207,739		4.50			NA		NA
Bank		564,051		11.34			207,074		4.50			299,108		6.50
Tier 1 risk-based capital (1)
Consolidated		539,601		11.69			276,985		6.00			NA		NA
Bank		564,051		11.34			276,099		6.00			368,132		8.00
Leverage (2)
Consolidated		539,601		8.98			240,340		4.00			NA		NA
Bank		564,051		8.69			240,011		4.00			300,014		5.00

(dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2020	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	470,648		13.36	%	$	281,887		8.00	%		NA		NA
Bank		456,302		12.99			281,106		8.00		$	351,383		10.00	%
Common equity tier 1 risk-based capital (1)
Consolidated		430,886		12.23			158,556		4.50			NA		NA
Bank		416,540		11.85			158,122		4.50			228,399		6.50
Tier 1 risk-based capital (1)
Consolidated		430,886		12.23			211,407		6.00			NA		NA
Bank		416,540		11.85			210,830		6.00			281,106		8.00
Leverage (2)
Consolidated		430,886		9.57			180,123		4.00			NA		NA
Bank		416,540		9.26			179,845		4.00			224,807		5.00

(1)    Ratio is computed in relation to risk-weighted assets.

(2)    Ratio is computed in relation to average assets.

NA – Not Applicable