Regulatory Matters

6 Months Ended

Jun. 30, 2017

Banking and Thrift [Abstract]

Regulatory Matters

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.

9. Regulatory Matters (continued)

In 2015, the Board of Governors of the Federal Reserve System amended its Small Bank Holding Company Policy Statement by increasing the policy’s consolidated assets threshold from $500 million to $1 billion. The primary benefit of being deemed a "small bank holding company" is the exemption from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level.

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 by 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 is being phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer for 2017 is 1.25% and was 0.625% for 2016. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of June 30, 2017, the Bank meets all capital adequacy requirements to which they are 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, 2017, 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, 2017				December 31, 2016
	Amount		Ratio		Amount		Ratio
Total capital to risk-weighted assets:
Actual	$	60,628	12.47	%	$	58,605	12.69	%
For capital adequacy purposes	38,880		8.00	%	36,945		8.00	%
To be well capitalized	48,600		10.00	%	46,181		10.00	%
Tier 1 capital to risk-weighted assets:
Actual	$	54,855	11.29	%	$	53,050	11.49	%
For capital adequacy purposes	29,160		6.00	%	27,709		6.00	%
To be well capitalized	38,880		8.00	%	36,945		8.00	%
Common Equity Tier 1 capital to risk-weighted assets:
Actual	$	54,855	11.29	%	$	53,050	11.49	%
For capital adequacy purposes	21,870		4.50	%	20,781		4.50	%
To be well capitalized	31,590		6.50	%	30,018		6.50	%
Tier 1 capital to average assets:
Actual	$	54,855	7.78	%	$	53,050	7.84	%
For capital adequacy purposes	28,215		4.00	%	27,081		4.00	%
To be well capitalized	35,269		5.00	%	33,852		5.00	%