Note 8 - Regulatory Matters

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

8. Regulatory Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (BASEL III rules) became effective for the Bank on

January 1, 2015

with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in on 

January 1, 2019.

Under the BASEL III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from

0.0%

for

2015

to

2.50%

in 

2019.

The capital conservation buffer for

2019

and subsequent periods is

2.50%

and for

2018

was 

1.875%.

Amounts recorded to accumulated other comprehensive income are 

not

included in computing regulatory capital. Management believes as of

June 30, 2020

, the Bank met all capital adequacy requirements to which it was subject.

Prompt corrective action regulations provide

five

classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are

not

used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At

June 30, 2020

, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are

no

conditions or events since that notification that management believes have changed the institution's category.

The following table sets forth certain information concerning the Bank's regulatory capital as of the dates presented. The capital adequacy ratios disclosed below are exclusive of the capital conservation buffer. 

(Dollar amounts in thousands)	June 30, 2020					December 31, 2019
	Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Actual	$	81,312		12.77	%	$	80,418		13.74	%
For capital adequacy purposes		50,924		8.00	%		46,836		8.00	%
To be well capitalized		63,655		10.00	%		58,544		10.00	%
Tier 1 capital to risk-weighted assets:
Actual	$	73,353		11.52	%	$	73,862		12.62	%
For capital adequacy purposes		38,193		6.00	%		35,127		6.00	%
To be well capitalized		50,924		8.00	%		46,836		8.00	%
Common Equity Tier 1 capital to risk-weighted assets:
Actual	$	73,353		11.52	%	$	73,862		12.62	%
For capital adequacy purposes		28,645		4.50	%		26,345		4.50	%
To be well capitalized		41,376		6.50	%		38,054		6.50	%
Tier 1 capital to average assets:
Actual	$	73,353		7.47	%	$	73,862		8.17	%
For capital adequacy purposes		39,292		4.00	%		36,146		4.00	%
To be well capitalized		49,116		5.00	%		45,182		5.00	%