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REGULATORY CAPITAL
 9 Months Ended
Sep. 30, 2021
Regulatory Assets and Liabilities Disclosure [Abstract]  
Regulatory Capital REGULATORY CAPITAL
The Bank’s primary regulator is the Federal Deposit Insurance Corporation (“FDIC”). The Bank is subject to regulation, supervision and examination by the Maryland Commissioner of Financial Regulation (the “Commissioner”) and the FDIC. The Company is subject to regulation, examination, and supervision by the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended (the “BHCA”).
The Company and Bank are subject to the Basel III Capital Rules which establish a comprehensive capital framework for U.S. banking organizations. The rules implement the Basel Committee’s “Basel III” framework for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The Basel III Capital Rules define the components of capital and address other issues affecting banking institutions’ regulatory capital ratios.

The rules include a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.50%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, require a minimum ratio (“Min. Ratio”) of Total Capital to risk-weighted assets of 8.0%, and require a minimum Tier 1 leverage ratio of 4.0%. A capital conservation buffer (“CCB”) is also established above the regulatory minimum capital requirements. The rules revised the definition and calculation of Tier 1 capital, Total Capital, and risk-weighted assets.
As of September 30, 2021 and December 31, 2020, the Company and Bank were well-capitalized under the regulatory framework for prompt corrective action ("PCA") under the new Basel III Capital Rule and Management believes the Company and the Bank met all capital adequacy requirements. The Company’s and the Bank’s actual regulatory capital amounts and ratios are presented in the following table.
Regulatory Capital and RatiosThe CompanyThe Bank
(dollars in thousands)September 30, 2021December 31, 2020September 30, 2021December 31, 2020
Common equity$204,128 $198,013 $231,839 $217,142 
Goodwill(10,835)(10,835)(10,835)(10,835)
Core deposit intangible (net of deferred tax liability)(851)(1,129)(851)(1,129)
AOCI (gains) losses9 (4,504)9 (4,504)
Common Equity Tier 1 Capital192,451 181,545 220,162 200,674 
TRUPs12,000 12,000 — — 
Tier 1 Capital204,451 193,545 220,162 200,674 
Allowable reserve for credit losses and other Tier 2 adjustments18,630 19,475 18,630 19,475 
Subordinated notes19,496 19,526 — — 
Tier 2 Capital$242,577 $232,546 $238,792 $220,149 
Risk-Weighted Assets ("RWA")$1,618,114 $1,582,581 $1,616,802 $1,580,786 
Average Assets ("AA")$2,172,192 $2,025,061 $2,170,563 $2,023,325 
Regulatory Min. Ratio + CCB (1)
Common Tier 1 Capital to RWA7.00 %11.89 %11.47 %13.62 %12.69 %
Tier 1 Capital to RWA8.50 12.64 12.23 13.62 12.69 
Tier 2 Capital to RWA10.50 14.99 14.69 14.77 13.93 
Tier 1 Capital to AA (Leverage) (2)
n/a9.41 9.56 10.14 9.92 
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(1)The regulatory minimum capital ratio ("Min. Ratio") + the capital conservation buffer ("CCB").
(2)Tier 1 Capital to AA (Leverage) has no capital conservation buffer defined. The PCA well capitalized is defined as 5.00%.
Dividends paid by the Company are substantially funded from dividends received from the Bank. Federal and holding company regulations, as well as Maryland law, impose restrictions on capital distributions, including dividend payments and share repurchases. Some of the restrictions generally require advance approval from the Bank's regulator for payment of dividends in excess of the sum of net income for the current calendar year and the retained net income of the prior two calendar years.