Regulatory Matters

12 Months Ended

Dec. 31, 2019

Regulatory Matters [Abstract]

Regulatory Matters

15.REGULATORY MATTERS

The Company (on a consolidated basis) and the Bank are subject to various regulatory 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’s and the Bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.  The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.  Prompt corrective action provisions are not applicable to bank holding companies.

Under these guidelines, assets and certain off-balance sheet items are assigned to broad risk categories, each with appropriate weights.  The resulting capital ratios represent capital as a percentage of total risk-weighted assets.  The guidelines require all banks and bank holding companies to maintain a minimum ratio of total risk-based capital to total risk-weighted assets (Total Risk Adjusted Capital) of 8%, including Tier I common equity to total risk-weighted assets (Tier I Common Equity) of 4.5%, Tier I capital to total risk-weighted assets (Tier I Capital) of 6% and Tier I capital to average total assets (Leverage Ratio) of at least 4%.  A capital conservation buffer, comprised of common equity Tier I capital, is also established above the regulatory minimum capital requirements rising up to 2.50% by 2019.  As of December 31, 2019 and 2018, the Company and the Bank exceeded all capital adequacy requirements to which it was subject.

The following table reflects the actual and required capital and the related capital ratios as of the periods indicated.  No amounts were deducted from capital for interest-rate risk in either 2019 or 2018.

										For capital adequacy				To be well capitalized
				For capital						purposes with capital				under prompt corrective
	Actual			adequacy purposes						conservation buffer*				action provisions
(dollars in thousands)	Amount		Ratio	Amount			Ratio			Amount		Ratio		Amount			Ratio
As of December 31, 2019:
Total capital (to risk-weighted assets)
Consolidated	$	111,910	15.8%	≥	$	56,796		8.0%	≥	$	74,545		10.5%			N/A		N/A
Bank	$	112,188	15.8%	≥	$	56,791		8.0%	≥	$	74,538		10.5%	≥	$	70,989		10.0%
Tier 1 common equity (to risk-weighted assets)
Consolidated	$	103,024	14.5%	≥	$	31,948		4.5%	≥	$	49,696		7.0%			N/A		N/A
Bank	$	103,303	14.6%	≥	$	31,945		4.5%	≥	$	49,692		7.0%	≥	$	46,143		6.5%
Tier I capital (to risk-weighted assets)
Consolidated	$	103,024	14.5%	≥	$	42,597		6.0%	≥	$	60,346		8.5%			N/A		N/A
Bank	$	103,303	14.6%	≥	$	42,593		6.0%	≥	$	60,340		8.5%	≥	$	56,791		8.0%
Tier I capital (to average assets)
Consolidated	$	103,024	10.4%	≥	$	39,650		4.0%	≥	$	39,650		4.0%			N/A		N/A
Bank	$	103,303	10.3%	≥	$	40,265		4.0%	≥	$	40,265		4.0%	≥	$	50,331		5.0%

As of December 31, 2018:
Total capital (to risk-weighted assets)
Consolidated	$	103,201	14.8%	≥	$	55,975	8.0%	≥	$	69,094	9.9%			N/A	N/A
Bank	$	103,313	14.8%	≥	$	55,970	8.0%	≥	$	69,088	9.9%	≥	$	69,962	10.0%
Tier 1 common equity (to risk-weighted assets)
Consolidated	$	94,442	13.5%	≥	$	31,486	4.5%	≥	$	44,605	6.4%			N/A	N/A
Bank	$	94,554	13.5%	≥	$	31,483	4.5%	≥	$	44,601	6.4%	≥	$	45,475	6.5%
Tier I capital (to risk-weighted assets)
Consolidated	$	94,442	13.5%	≥	$	41,981	6.0%	≥	$	55,100	7.9%			N/A	N/A
Bank	$	94,554	13.5%	≥	$	41,977	6.0%	≥	$	55,095	7.9%	≥	$	55,970	8.0%
Tier I capital (to average assets)
Consolidated	$	94,442	9.8%	≥	$	38,593	4.0%	≥	$	38,593	4.0%			N/A	N/A
Bank	$	94,554	9.8%	≥	$	38,591	4.0%	≥	$	38,591	4.0%	≥	$	48,238	5.0%

* The minimums under Basel III increased by 0.625% (the capital conservation buffer) annually until 2019.

The Company’s principal source of funds for dividend payments is dividends received from the Bank.  Banking regulations and Pennsylvania law limit the amount of dividends that may be paid from the Bank to the Company without prior approval of regulatory agencies.  Accordingly, at December 31, 2019, approximately $94.7 million was available for dividend distribution from the Bank to the Company in 2019.