REGULATORY CAPITAL

12 Months Ended

Dec. 31, 2023

Regulatory Capital [Abstract]

REGULATORY CAPITAL

16. REGULATORY CAPITAL

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 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 financial statements and results of operations. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015, with full compliance of all the requirements being fully phased in on January 1, 2019. The Company has chosen to exclude net unrealized gain or loss on available for sale securities in computing regulatory capital. Management believes that as of December 31, 2023, the Company and the Bank meet all capital adequacy requirements to which they were subject at that date.

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 December 31, 2023 and 2022, 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.

To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, common equity Tier 1 and Tier I leverage ratios as set forth in the table.

The Bank’s regulatory capital amounts and ratios are presented in the following table:

						To Be Well										For Capital
						Capitalized Under					For Capital					Adequacy Purposes
						Prompt Corrective					Adequacy					Including Capital
	Actual					Action Provisions					Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2023:
Total capital
(to risk-weighted assets)	$	773,083		14.73	%	$	525,001		10.00	%	$	420,001		8.00	%	$	551,251		10.50	%
Tier I capital
(to risk-weighted assets)		707,446		13.48			420,001		8.00			315,000		6.00			446,251		8.50
Common equity tier I
(to risk-weighted assets)		707,434		13.47			341,250		6.50			236,250		4.50			367,500		7.00
Tier I capital
(to average assets)		707,446		10.83			326,507		5.00			261,205		4.00			261,205		4.00
As of December 31, 2022:
Total capital
(to risk-weighted assets)	$	741,719		14.67	%	$	505,760		10.00	%	$	404,608		8.00	%	$	531,048		10.50	%
Tier I capital
(to risk-weighted assets)		680,137		13.45			404,608		8.00			303,456		6.00			429,896		8.50
Common equity tier I
(to risk-weighted assets)		680,119		13.45			328,744		6.50			227,592		4.50			354,032		7.00
Tier I capital
(to average assets)		680,137		10.85			313,328		5.00			250,662		4.00			250,662		4.00

(A) See footnote on following table.

The Company’s regulatory capital amounts and ratios are presented in the following table:

						To Be Well							For Capital
						Capitalized Under		For Capital					Adequacy Purposes
						Prompt Corrective		Adequacy					Including Capital
	Actual					Action Provisions		Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount	Ratio	Amount		Ratio			Amount		Ratio
As of December 31, 2023:
Total capital
(to risk-weighted assets)	$	785,413		14.95	%	N/A	N/A	$	420,377		8.00	%	$	551,745		10.50	%
Tier I capital
(to risk-weighted assets)		600,444		11.43		N/A	N/A		315,283		6.00			446,651		8.50
Common equity tier I
(to risk-weighted assets)		600,432		11.43		N/A	N/A		236,462		4.50			367,830		7.00
Tier I capital
(to average assets)		600,444		9.19		N/A	N/A		261,358		4.00			261,358		4.00
As of December 31, 2022:
Total capital
(to risk-weighted assets)	$	745,197		14.73	%	N/A	N/A	$	404,830		8.00	%	$	531,340		10.50	%
Tier I capital
(to risk-weighted assets)		557,627		11.02		N/A	N/A		303,623		6.00			430,132		8.50
Common equity tier I
(to risk-weighted assets)		557,609		11.02		N/A	N/A		227,717		4.50			354,227		7.00
Tier I capital
(to average assets)		557,627		8.90		N/A	N/A		250,746		4.00			250,746		4.00

(A)The Basel Rules require the Company and the Bank to maintain a 2.5 percent “capital conservation buffer” on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) CET1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall.