Regulatory Requirements and Restrictions

12 Months Ended

Dec. 31, 2018

Regulatory Requirements and Restrictions

Regulatory Requirements and Restrictions

NOTE 15: Regulatory Requirements and Restrictions

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 Corporation’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Federal banking regulations also impose regulatory capital requirements on bank holding companies. However, in August 2018, the Federal Reserve Board issued an interim final rule, which was effective August 30, 2018, that expanded its small bank holding company policy statement to apply to certain bank holding companies with consolidated total assets of between $1 billion and $3 billion.  As a result of this interim final rule, the Corporation is no longer subject to the minimum regulatory capital requirements that apply to bank holding companies.

As of December 31, 2018, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized under regulations applicable at December 31, 2018, the Bank was required to maintain minimum total risk-based, Tier 1 risk-based, CET1 risk-based and Tier 1 leverage ratios as set forth in the table below.

The Corporation’s and the Bank’s actual capital amounts and ratios as of December 31, 2018 and 2017 are presented in the following table along with regulatory requirements for the Bank and requirements that apply to bank holding companies that are subject to regulatory capital requirements for bank holding companies. Total risk-weighted assets at December 31, 2018 for both the Corporation and the Bank was $1.20 billion, and at December 31, 2017 for both the Corporation and the Bank was $1.18 billion. Management believes that, as of December 31, 2018, the Bank met all capital adequacy requirements to which it is subject.

									Minimum To Be
									Well Capitalized
									Under Prompt
					Minimum Capital				Corrective Action
	Actual				Requirements				Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2018:
Total Capital (to Risk-Weighted Assets)
Corporation	$	183,781	15.3	%	$	96,274	8.0	%		N/A	N/A
C&F Bank		181,685	15.1			96,088	8.0		$	120,110	10.0	%
Tier 1 Capital (to Risk-Weighted Assets)
Corporation		168,504	14.0			72,205	6.0			N/A	N/A
C&F Bank		166,437	13.9			72,066	6.0			96,088	8.0
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Corporation		143,590	11.9			54,154	4.5			N/A	N/A
C&F Bank		166,437	13.9			54,050	4.5			78,072	6.5
Tier 1 Capital (to Average Assets)
Corporation		168,504	11.3			59,759	4.0			N/A	N/A
C&F Bank		166,437	11.2			59,666	4.0			74,582	5.0
As of December 31, 2017:
Total Capital (to Risk-Weighted Assets)
Corporation	$	170,376	14.4	%	$	94,383	8.0	%		N/A	N/A
C&F Bank		167,657	14.2			94,163	8.0		$	117,704	10.0	%
Tier 1 Capital (to Risk-Weighted Assets)
Corporation		155,370	13.2			70,787	6.0			N/A	N/A
C&F Bank		152,684	13.0			70,622	6.0			94,163	8.0
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Corporation		130,445	11.1			53,091	4.5			N/A	N/A
C&F Bank		152,684	13.0			52,967	4.5			76,507	6.5
Tier 1 Capital (to Average Tangible Assets)
Corporation		155,370	10.5			59,083	4.0			N/A	N/A
C&F Bank		152,684	10.4			58,934	4.0			73,667	5.0

In addition to the regulatory risk-based capital amounts presented above, the Bank must maintain a capital conservation buffer of additional total capital and CET1 as required by the Basel III Final Rule.  The capital conservation buffer requirement was first in effect on January 1, 2016, and was subject to phase-in from 2016 to 2019 in equal annual installments of 0.625 percent. Accordingly, at December 31, 2018 and 2017, the Bank was required to maintain a capital conservation buffer of 1.875 percent and 1.250 percent, respectively. At December 31, 2018, the Bank exceeded the total capital conservation buffer and the CET1 capital conservation buffer by 525 and 748 basis points, respectively.  At December 31, 2017, the Bank exceeded the total capital conservation buffer and the CET1 capital conservation buffer by 499 and 722 basis points, respectively.

On December 14, 2007, the Corporation issued $10.00 million of trust preferred securities through a statutory business trust for general corporate purposes including the refinancing of existing debt. On July 21, 2005, the Corporation issued $10.00 million of trust preferred securities through a statutory business trust to partially fund the purchase of 427,186 shares of the Corporation’s common stock at $41 per share on July 27, 2005. On December 17, 2003, CVBK issued $5.00 million of trust preferred securities through a statutory business trust for general corporate purposes, which was assumed by the Corporation when CVBK was merged into the Corporation on March 22, 2014. Based on the Corporation’s Tier 1 capital levels, the entire $25.00 million of trust preferred securities was eligible for inclusion in the Corporation’s Tier 1 capital as of December 31, 2018 and 2017.  

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by C&F Bank to the Corporation. The total amount of dividends that may be paid at any date by C&F Bank is generally limited to the retained earnings of C&F Bank, while other measures of capital adequacy may also restrict the Bank’s ability to declare dividends.  Loans or advances are limited to 10 percent of C&F Bank’s capital stock and surplus on a secured basis.