Regulatory Capital

12 Months Ended

Dec. 31, 2018

Regulatory Capital [Abstract]

Regulatory Capital

Note 21: Regulatory Capital

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 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 also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier I and Common Equity Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined). As of December 31, 2018 and 2017,  the Bank meets all capital adequacy requirements to which it is subject. 

In May 2018 the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”) was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Act.  While the Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion.  Many of these changes could result in meaningful regulatory relief for community banks such as MutualBank. 

The Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” of between 8 and 10 percent to replace the leverage and risk-based regulatory capital ratios.  The Act also expands the category of holding companies that may rely on the “Small Bank Holding Company and Savings and Loan Holding Company Policy statement” by raising the maximum amount of assets a qualifying holding company may have from $1.0 billion to $3.0 billion.  This expansion also excludes such holding companies from the minimum capital requirement of the Dodd-Frank Act.  In addition, the Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans. 

In July 2013, the three federal bank regulatory agencies jointly published final rules (the Basel III Capital Rules) establishing a new comprehensive capital framework for U.S. banking organizations.  The rules implement the Basel Committee’s  December 2010 framework known as “Basel III” for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act.  These rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions, compared to the current U.S. risk-based capital rules.  The Basel III Capital Rules define the components of capital and address other issues affecting the numerator in banking institutions’ regulatory capital ratios.  These rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing risk-weighting approach with a more risk-sensitive approach.  The Basel III Capital Rules were effective for the Company and Bank on January 1, 2015 (subject to a four-year phase-in period).

The Bank’s actual capital amounts and ratios as of December 31, are presented in the tables below.

		December 31, 2018
										Minimum Required To
						Minimum Regulatory				be Considered
		Actual Capital Levels				Capital Levels				Well-Capitalized
		Amount		Ratio		Amount		Ratio		Amount		Ratio
Leverage Capital Level(1):
MutualBank		$	184,803	9.2	%	$	80,309	4.0	%	$	100,386	5.0	%
Common Equity Tier 1 Capital Level (2) :
MutualBank		$	184,803	12.1	%	$	68,476	4.5	%	$	98,910	6.5	%
Tier 1 Risk-Based Capital Level (3) :
MutualBank		$	184,803	12.1	%	$	91,301	6.0	%	$	121,735	8.0	%
Total Risk-Based Capital Level (4) :
MutualBank		$	198,084	13.0	%	$	121,734	8.0	%	$	152,169	10.0	%
(1)	Tier 1 Capital to Total Average Assets for Leverage Ratio of $2.0 billion for the Bank at December 31, 2018.
(2)	Common Equity Tier 1 Capital to Risk-Weighted Assets of $1.5 billion for the Bank at December 31, 2018.
(3)	Tier 1 Capital to Risk-Weighted Assets.
(4)	Total Capital to Risk-Weighted Assets.

		December 31, 2017
										Minimum Required To
						Minimum Regulatory				be Considered
		Actual Capital Levels				Capital Levels				Well-Capitalized
		Amount		Ratio		Amount		Ratio		Amount		Ratio
Leverage Capital Level(1) :
MutualFirst Consolidated		$	148,135	9.4	%	$	63,293	4.0	%		N/A	N/A
MutualBank		$	133,515	8.4	%	$	63,254	4.0	%	$	79,068	5.0	%
Common Equity Tier 1 Capital Level (2) :
MutualFirst Consolidated		$	144,764	12.2	%	$	53,249	4.5	%		N/A	N/A
MutualBank		$	133,515	11.3	%	$	53,407	4.5	%	$	77,143	6.5	%
Tier 1 Risk-Based Capital Level (3) :
MutualFirst Consolidated		$	148,135	12.5	%	$	71,238	6.0	%		N/A	N/A
MutualBank		$	133,515	11.3	%	$	71,209	6.0	%	$	94,946	8.0	%
Total Risk-Based Capital Level (4) :
MutualFirst Consolidated		$	160,522	13.5	%	$	94,984	8.0	%		N/A	N/A
MutualBank		$	145,902	12.3	%	$	94,946	8.0	%	$	118,682	10.0	%
(1)	Tier 1 Capital to Total Average Assets of $1.6 billion for the Leverage Ratio for the Bank and Company at December 31, 2017.
(2)	Common Equity Tier 1 Capital to Risk-Weighted Assets of $1.2 billion for the Bank and Company at December 31, 2017.
(3)	Tier 1 Capital to Risk-Weighted Assets.
(4)	Total Capital to Risk-Weighted Assets.

The minimum capital requirements exclude the capital conservation buffer required to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. The capital conservation buffer is being phased in annually, which started January 1, 2016, at the rate of 0.625% per year until fully phased in during 2019. The capital conservation buffer was 1.875% at December 31, 2018. The unrealized gain or loss on available for sale securities is not included in computing regulatory capital. As of December 31, 2018, the Bank is in excess of the capital conversation buffer requirements.