Regulatory Capital Matters

6 Months Ended

Jun. 30, 2013

Regulatory Capital Matters [Abstract]

REGULATORY CAPITAL MATTERS

NOTE 11 – REGULATORY CAPITAL MATTERS

CFBank is subject to regulatory capital requirements administered by federal banking agencies.  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 capital requirements can initiate regulatory action. 

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.

The CFBank Order required CFBank to have by September 30, 2011, and maintain thereafter, 8% Tier 1 (Core) Capital to adjusted total assets and 12% Total Capital to risk weighted assets. CFBank met the capital requirement at June 30, 2013 and December 31, 2012 as a result of a $13,500 capital contribution from the Holding Company using net proceeds of the stock offering. However, CFBank will not be considered “well-capitalized” under applicable regulatory capital standards as long as it is subject to individual minimum capital requirements under the CFBank Order.

Actual and required capital amounts and ratios of CFBank are presented below:

							To Be Well
							Capitalized Under			Required
				For Capital			Applicable Regulatory			By Terms Of
	Actual			Adequacy Purposes			Capital Standards			CFBank Order
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
June 30, 2013
Total Capital to risk
weighted assets	$	24,352	13.17%	$	14,793	8.00%	$	18,491	10.00%	$	22,189	12.00%
Tier 1 (Core) Capital to risk
weighted assets		21,994	11.89%		7,396	4.00%		11,094	6.00%		N/A	N/A
Tier 1 (Core) Capital to
adjusted total assets		21,994	9.19%		9,569	4.00%		11,961	5.00%		18,138	8.00%
Tangible Capital to
adjusted total assets		21,994	9.19%		3,588	1.50%		N/A	N/A		N/A	N/A

							To Be Well
							Capitalized Under			Required
				For Capital			Applicable Regulatory			By Terms Of
	Actual			Adequacy Purposes			Capital Standards			CFBank Order
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31,2012
Total Capital to risk
weighted assets	$	25,002	15.53%	$	12,878	8.00%	$	16,098	10.00%	$	19,317	12.00%
Tier 1 (Core) Capital to risk
weighted assets		22,950	14.26%		6,439	4.00%		9,659	6.00%		N/A	N/A
Tier 1 (Core) Capital to
adjusted total assets		22,950	10.97%		8,372	4.00%		10,465	5.00%		16,744	8.00%
Tangible Capital to
adjusted total assets		22,950	10.97%		3,139	1.50%		N/A	N/A		N/A	N/A

In July 2013, the Office of the Comptroller of the Currency and the other federal bank regulatory agencies issued a final rule that will revise their leverage and risk-based capital requirements and the method of calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirement unless a one-time opt-in or opt-out is exercised. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.

The final rule becomes effective for the Bank on January 1, 2015.  The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective.

The Qualified Thrift Lender test requires at least 65% of assets be maintained in housing‑related finance and other specified areas.  If this test is not met, limits are placed on growth, branching, new investments, FHLB advances and dividends, or CFBank must convert to a commercial bank charter.  Management believes that this test has been met at June 30, 2013 and December 31, 2012.

CFBank converted from a mutual to a stock institution in 1998, and a “liquidation account” was established in the amount of $14,300, which was the net worth reported in the conversion prospectus.  The liquidation account represents a calculated amount for the purposes described below, and it does not represent actual funds included in the consolidated financial statements of the Company.  Eligible depositors who have maintained their accounts, less annual reductions to the extent they have reduced their deposits, would receive a distribution from this account if CFBank liquidated and its assets exceeded its liabilities.  Dividends may not reduce CFBank’s stockholder’s equity below the required liquidation account balance.

Dividend Restrictions

Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year's net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. Currently, CFBank must receive regulatory approval prior to any dividend payments.