Regulatory Capital

12 Months Ended

Dec. 31, 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 regular 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 4.5%, 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 December 31, 2021, and 2020, the Company and Bank were well-capitalized under the regulatory framework for prompt corrective action under the new Basel III Capital Rules. Management believes, as of December 31, 2021 and 2020, that 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 Ratios		The Company						The Bank
(dollars in thousands)		December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020
Common equity		$	208,133		$	198,013		$	236,561		$	217,142
Goodwill		(10,835)			(10,835)			(10,835)			(10,835)
Core deposit intangible (net of deferred tax liability)		(766)			(1,129)			(766)			(1,129)
AOCI (gains) losses		1,952			(4,504)			1,952			(4,504)
Common Equity Tier 1 Capital		198,484			181,545			226,912			200,674
TRUPs		12,000			12,000			—			—
Tier 1 Capital		210,484			193,545			226,912			200,674
Allowable reserve for credit losses and other Tier 2 adjustments		18,468			19,475			18,468			19,475
Subordinated notes		19,510			19,526			—			—
Tier 2 Capital		$	248,462		$	232,546		$	245,380		$	220,149
Risk-Weighted Assets ("RWA")		$	1,665,296		$	1,582,581		$	1,663,831		$	1,580,786
Average Assets ("AA")		$	2,281,210		$	2,025,061		$	2,279,835		$	2,023,325
Regulatory Min. Ratio + CCB (1)
Common Tier 1 Capital to RWA	7.00%	11.92		%	11.47		%	13.64		%	12.69		%
Tier 1 Capital to RWA	8.50	12.64			12.23			13.64			12.69
Tier 2 Capital to RWA	10.50	14.92			14.69			14.75			13.93
Tier 1 Capital to AA (Leverage) (2)	n/a	9.23			9.56			9.95			9.92

(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 prompt corrective action ("PCA") well capitalized is defined as 5.00%.

Dividends paid by the Company are substantially funded by dividends received from the Bank. Federal and holding company regulations, as well as Maryland law, imposes certain restrictions on capital distributions, including dividend payments and share repurchases. These 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.