Regulatory Matters

12 Months Ended

Dec. 31, 2019

Regulatory Matters

Regulatory Matters

NOTE 25 Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. 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 the Company’s and the Bank’s consolidated financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of common equity tier 1, tier 1, and total capital (as defined in the regulations) to risk weighted assets (as defined) and of tier 1 capital (as defined) to average assets (as defined). Management believes at December 31, 2019 and 2018, the Bank met all of the capital adequacy requirements to which it is subject.

On August 28, 2018, the Federal Reserve Board, or the Board, issued an interim final rule expanding the applicability of the Board’s Small Bank Holding Company Policy Statement, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. The interim final rule raised the Small Bank Holding Company Policy Statement’s asset threshold from $1 billion to $3 billion in total consolidated assets, and as a result, before the initial public offering, the holding company was exempted from all regulatory guidelines, to which it previously had been subject, as long as it does not engage in significant nonbanking activities, conduct off-balance sheet activities, or have a material amount of debt or equity registered with the SEC. Now that the Company is a public reporting company with its common stock registered with the SEC, the Company does not meet the qualifications of the Small Bank Holding Company Policy Statement. As of December 31, 2019, the most recent notification from the Federal Deposit Insurance Corporation, categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the notification that management believe have changed in the Bank’s category.

Actual capital amounts and ratios for the Bank and the Company (consolidated) at December 31, 2019 and 2018 are presented in the following table:

	December 31, 2019
								Minimum to be
					Requirements			Well Capitalized
					for Capital			Under Prompt
	Actual				Adequacy Purposes			Corrective Action
(dollars in thousands)	Amount		Ratio		Amount	Ratio		Amount	Ratio
Common equity tier 1 capital to risk weighted assets
Consolidated	$	239,672	12.48	%	86,452	4.50	%	N/A	N/A
Bank		228,512	11.91	%	86,362	4.50	%	124,745	6.50	%
Tier 1 capital to risk weighted assets								.
Consolidated		247,866	12.90	%	115,270	6.00	%	N/A	N/A
Bank		228,512	11.91	%	115,149	6.00	%	153,532	8.00	%
Total capital to risk weighted assets
Consolidated		321,415	16.73	%	153,693	8.00	%	N/A	N/A
Bank		252,436	13.15	%	153,532	8.00	%	191,915	10.00	%
Tier 1 capital to average assets
Consolidated		247,866	11.05	%	91,504	4.00	%	N/A	N/A
Bank		228,512	10.20	%	89,615	4.00	%	112,018	5.00	%

	December 31, 2018
								Minimum to be
					Requirements			Well Capitalized
					for Capital			Under Prompt
	Actual				Adequacy Purposes			Corrective Action
(dollars in thousands)	Amount		Ratio		Amount	Ratio		Amount	Ratio
Common equity tier 1 capital to risk weighted assets
Consolidated	$	151,745	8.43	%	N/A	N/A		N/A	N/A
Bank		204,680	11.39	%	80,866	4.50	%	116,806	6.50	%
Tier 1 capital to risk weighted assets
Consolidated		159,774	8.87	%	N/A	N/A		N/A	N/A
Bank		204,680	11.39	%	107,821	6.00	%	143,761	8.00	%
Total capital to risk weighted assets
Consolidated		231,510	12.86	%	N/A	N/A		N/A	N/A
Bank		226,854	12.62	%	143,806	8.00	%	179,758	10.00	%
Tier 1 capital to average assets
Consolidated		159,774	7.51	%	N/A	N/A		N/A	N/A
Bank		204,680	9.63	%	85,018	4.00	%	106,272	5.00	%

The Bank is subject to certain restrictions on the amount of dividends that it may pay without prior regulatory approval. The Bank normally restricts dividends to a lesser amount. In addition, the Company must adhere to various U.S. Department of Housing and Urban Development, or HUD, regulatory guidelines including required minimum capital and liquidity to maintain their Federal Housing Administration approval status. Failure to comply with the HUD guidelines could result in withdrawal of this certification. As of December 31, 2019 and 2018 the Company was in compliance with HUD guidelines.