Regulatory Capital Requirements

9 Months Ended

Sep. 30, 2021

Regulatory Capital Requirements

10.        Regulatory Capital Requirements

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 capital requirements can initiate regulatory action. Management believed that as of September 30, 2021, the Company and the Bank met all capital adequacy requirements to which they were subject at that time.

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 Company and the Bank are subject to the Basel III Rule, which is applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companies with consolidated assets of less than $3.0 billion).

The Basel III Rule includes a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, a minimum ratio of Total Capital to risk-weighted assets of 8.0%, and a minimum Tier 1 leverage ratio of 4.0%. A capital conservation buffer, equal to 2.5% of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements for the common equity Tier 1 capital ratio, and Tier 1 capital and total risk based capital ratios.

As of September 30, 2021 and December 31, 2020, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action then in effect. There are no conditions or events since that notification that management believes have changed the institution’s category.

The following is a comparison of the Company’s regulatory capital to minimum capital requirements at September 30, 2021 and December 31, 2020:

(Dollars in thousands)											To be well-capitalized
						For capital					under regulatory
	Actual					adequacy purposes					guidelines
	Amount		Ratio			Amount		Ratio (1)			Amount		Ratio
As of September 30, 2021
Leverage	$	133,511		10.78	%	$	49,523		4.0	%	$	61,904		5.0	%
Common Equity Tier 1 Capital		112,511		14.82	%		53,138		7.0	%		49,342		6.5	%
Tier 1 Capital		133,511		17.59	%		64,525		8.5	%		60,729		8.0	%
Total Risk Based Capital		142,417		18.76	%		79,707		10.5	%		75,912		10.0	%
As of December 31, 2020
Leverage	$	121,068		10.70	%	$	45,262		4.0	%	$	56,577		5.0	%
Common Equity Tier 1 Capital		100,068		13.77	%		50,866		7.0	%		47,233		6.5	%
Tier 1 Capital		121,068		16.66	%		61,766		8.5	%		58,133		8.0	%
Total Risk Based Capital		129,983		17.89	%		76,300		10.5	%		72,666		10.0	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 2.

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements at September 30, 2021 and December 31, 2020:

											To be well-capitalized
											under prompt
(Dollars in thousands)						For capital					corrective
	Actual					adequacy purposes					action provisions
	Amount		Ratio			Amount		Ratio (1)			Amount		Ratio
As of September 30, 2021
Leverage	$	129,962		10.53	%	$	49,375		4.0	%	$	61,718		5.0	%
Common Equity Tier 1 Capital		129,962		17.14	%		53,065		7.0	%		49,275		6.5	%
Tier 1 Capital		129,962		17.14	%		64,436		8.5	%		60,646		8.0	%
Total Risk Based Capital		138,868		18.32	%		79,598		10.5	%		75,807		10.0	%
As of December 31, 2020
Leverage	$	118,174		10.47	%	$	45,139		4.0	%	$	56,423		5.0	%
Common Equity Tier 1 Capital		118,174		16.27	%		50,829		7.0	%		47,199		6.5	%
Tier 1 Capital		118,174		16.27	%		61,721		8.5	%		58,091		8.0	%
Total Risk Based Capital		127,089		17.50	%		76,244		10.5	%		72,613		10.0	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 2.5%.