Regulatory Capital Requirements

6 Months Ended

Jun. 30, 2024

Regulatory Capital Requirements

11. 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 June 30, 2024, 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 June 30, 2024 and December 31, 2023, 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 as of June 30, 2024 and December 31, 2023.

(Dollars in thousands)
						For capital
	Actual					adequacy purposes
	Amount		Ratio			Amount		Ratio (1)
As of June 30, 2024
Leverage	$	134,212		8.75	%	$	61,332		4.0	%
Common Equity Tier 1 Capital		113,212		10.56	%		75,013		7.0	%
Tier 1 Capital		134,212		12.52	%		91,087		8.5	%
Total Risk Based Capital		144,904		13.52	%		112,519		10.5	%
As of December 31, 2023
Leverage	$	130,625		8.14	%	$	62,116		4.0	%
Common Equity Tier 1 Capital		109,625		10.39	%		73,854		7.0	%
Tier 1 Capital		130,625		12.38	%		89,680		8.5	%
Total Risk Based Capital		140,671		13.33	%		110,781		10.5	%

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

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements as of June 30, 2024 and December 31, 2023:

											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 June 30, 2024
Leverage	$	136,263		8.91	%	$	61,153		4.0	%	$	76,442		5.0	%
Common Equity Tier 1 Capital		136,263		12.72	%		74,964		7.0	%		69,609		6.5	%
Tier 1 Capital		136,263		12.72	%		91,027		8.5	%		85,673		8.0	%
Total Risk Based Capital		146,955		13.72	%		112,446		10.5	%		107,091		10.0	%
As of December 31, 2023
Leverage	$	134,422		8.68	%	$	61,951		4.0	%	$	77,439		5.0	%
Common Equity Tier 1 Capital		134,422		12.74	%		73,833		7.0	%		68,560		6.5	%
Tier 1 Capital		134,422		12.74	%		89,655		8.5	%		84,381		8.0	%
Total Risk Based Capital		144,468		13.70	%		110,750		10.5	%		105,476		10.0	%

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