Regulatory Matters

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Regulatory Matters

(11) REGULATORY MATTERS

The new minimum capital level requirements applicable to Bank holding companies and Banks subject to the rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total risk-based capital ratio of 8% (unchanged from current rules); (iv) a Tier 1 leverage ratio of 4% for all institutions. The rules also establish a “capital conservation buffer” of 2.5% (to be phased in over three years) above the new regulatory minimum risk-based capital ratios, and result in the following minimum ratios once the capital conservation buffer is fully phased in: (i) a common equity Tier 1 risk-based capital ratio of 7%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%.

The capital conservation buffer requirement was phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. For 2017, the capital conservation buffer is 1.25%. An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Under these new rules, Tier 1 capital generally consists of common stock (plus related surplus) and retained earnings, limited amounts of minority interest in the form of additional Tier 1 capital instruments, and non-cumulative preferred stock and related surplus, subject to certain eligibility standards, less goodwill and other specified intangible assets and other regulatory deductions. Cumulative preferred stock and trust preferred securities issued after May 19, 2010 no longer qualify as Tier 1 capital, but such securities issued prior to May 19, 2010, including in the case of bank holding companies with less than $15.0 billion in total assets, trust preferred securities issued prior to that date, continue to count as Tier 1 capital subject to certain limitations. The definition of Tier 2 capital is generally unchanged for most banking organizations, subject to certain new eligibility criteria.

The final rules allow banks and their holding companies with less than $250 billion in assets a one-time opportunity to opt-out of a requirement to include unrealized gains and losses in accumulated other comprehensive income in their capital calculation. The Company has made the decision to opt-out of this requirement.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of tangible and core capital (as defined in the regulations) to adjusted total assets (as defined), and of total capital (as defined) and Tier 1 to risk weighted assets (as defined). The minimum required capital amounts presented include the minimum required capital levels as of September 30, 2017 and December 31, 2016 based on the phase-in provisions of Basel III Capital Rules. Management believes, as of September 30, 2017 and December 31, 2016, that the Bank meets all capital adequacy requirements to which it is subject.

The Company’s consolidated capital ratios and the Bank’s actual capital amounts and ratios as of September 30, 2017 and December 31, 2016 are presented below:

	Actual					Minimum Capital Required – Basel III Phase-In Schedule					To be Well Capitalized for Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in Thousands, Except Percentages)
As of September 30, 2017
Tier 1 leverage capital to adjusted total assets
Company	$	96,428		10.9	%	$	36,273		4.0	%	$	45,341		5.0	%
Bank	$	94,196		10.6	%	$	35,461		4.0	%	$	44,326		5.0	%
Total capital to risk weighted assets
Company	$	101,228		16.3	%	$	57,354		9.25	%	$	62,005		10.0	%
Bank	$	98,995		16.0	%	$	57,225		9.25	%	$	61,865		10.0	%
Tier 1 capital to risk weighted assets
Company	$	96,428		15.6	%	$	44,953		7.25	%	$	49,604		8.0	%
Bank	$	94,196		15.2	%	$	44,852		7.25	%	$	49,492		8.0	%
Common equity tier 1 capital to risk weighted assets
Company	$	96,428		15.6	%	$	35,653		5.75	%		n/a		n/a
Bank	$	94,196		15.2	%	$	35,573		5.75	%	$	40,213		6.5	%
As of December 31, 2016
Tier 1 leverage capital to adjusted total assets
Company	$	92,803		10.8	%	$	34,392		4.0	%	$	42,990		5.0	%
Bank	$	91,617		10.7	%	$	34,315		4.0	%	$	42,894		5.0	%
Total capital to risk weighted assets
Company	$	98,915		16.2	%	$	52,682		8.625	%	$	61,080		10.0	%
Bank	$	97,729		16.0	%	$	52,561		8.625	%	$	60,941		10.0	%
Tier 1 capital to risk weighted assets
Company	$	92,803		15.2	%	$	40,466		6.625	%	$	48,864		8.0	%
Bank	$	91,617		15.0	%	$	40,373		6.625	%	$	48,753		8.0	%
Common equity tier 1 capital to risk weighted assets
Company	$	92,803		15.2	%	$	31,304		5.125	%		n/a		n/a
Bank	$	91,617		15.0	%	$	31,232		5.125	%	$	39,611		6.5	%