REGULATORY CAPITAL REQUIREMENTS

12 Months Ended

Dec. 31, 2018

Regulatory Capital Requirements [Abstract]

REGULATORY CAPITAL REQUIREMENTS

18. Regulatory Capital Requirements

The Company and the Bank are subject to various capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company 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 assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors.

Current quantitative measures established by regulation to ensure capital adequacy require that we maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulation) to risk-weighted assets (as defined) and to average assets. We believe that the Company and the Bank meet all capital adequacy requirements to which they were subject at December 31, 2018 and 2017.

On July 2, 2013, the Federal Reserve Board approved the final rules implementing the Basel Committee on Banking Supervision’s (“BCBS”) capital guidelines for U.S. banks (“Basel III”). Following the actions by the Federal Reserve, the FDIC also approved regulatory capital requirements on July 9, 2013. The FDIC’s rule is identical in substance to the final rules issued by the Federal Reserve Bank.

Basel III became effective on January 1, 2015. The purpose is to improve the quality and increase the quantity of capital for all banking organizations. The minimum requirements for the quantity and quality of capital were increased. The rule includes a new common equity Tier 1 capital to risk-weighted assets ratio of 4.50% and a common equity Tier 1 capital conservation buffer of 2.50% of risk-weighted assets. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.00% to 6.00% and requires a minimum leverage ratio of 4.00%. In addition, the rule also implements strict eligibility criteria for regulatory capital instruments and improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. All final rule requirements will be phased in over a multi-year schedule. The capital conservation buffer in effect for the year ended December 31, 2018 was 8.39%.

At December 31, 2018, the Bank was categorized as “well capitalized” under Basel III. To be categorized as “well capitalized” the Bank must maintain minimum total risk based, Tier 1 risk based, common equity Tier 1 risk based capital and Tier 1 leverage ratios of 10.00%, 8.00%, 6.50%, and 5.00%, respectively, and to be categorized as “adequately capitalized,” the Bank must maintain minimum total risk based, Tier 1 risk based, common equity Tier 1 risk based capital, and Tier 1 leverage ratios of 8.00%, 6.00%, 4.50%, and 4.00%, respectively.

The following tables present the actual and required capital amounts and ratios for the Company and Bank at December 31, 2018 and 2017: 

	December 31, 2018
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Company	$	50,657		16.69	%	$	24,280		8.00	%		N/A		N/A
Bank	$	49,695		16.39	%	$	24,262		8.00	%	$	30,328		10.00	%
Tier 1 capital to risk-weighted assets:
Company	$	46,864		15.44	%	$	18,210		6.00	%		N/A		N/A
Bank	$	45,898		15.13	%	$	18,197		6.00	%	$	24,262		8.00	%
Tier 1 capital to average assets:
Company	$	46,864		10.76	%	$	17,428		4.00	%		N/A		N/A
Bank	$	45,898		10.54	%	$	17,419		4.00	%	$	21,773		5.00	%
Common equity Tier 1 capital:
Company	$	46,864		15.44	%	$	13,658		4.50	%		N/A		N/A
Bank	$	45,898		15.13	%	$	13,647		4.50	%	$	13,647		4.50	%

	December 31, 2017
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Company	$	47,986		15.97	%	$	23,213		8.00	%		N/A		N/A
Bank	$	47,100		15.69	%	$	24,020		8.00	%	$	30,025		10.00	%
Tier 1 capital to risk-weighted assets:
Company	$	44,253		14.73	%	$	17,410		6.00	%		N/A		N/A
Bank	$	43,344		14.44	%	$	18,015		6.00	%	$	24,020		8.00	%
Tier 1 capital to average assets:
Company	$	44,253		10.01	%	$	16,738		4.00	%		N/A		N/A
Bank	$	43,344		9.82	%	$	17,661		4.00	%	$	22,077		5.00	%
Common equity Tier 1 capital:
Company	$	44,253		14.73	%	$	13,058		4.50	%		N/A		N/A
Bank	$	43,344		14.44	%	$	13,511		4.50	%	$	19,516		6.50	%