REGULATORY CAPITAL

12 Months Ended

Dec. 31, 2022

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

REGULATORY CAPITAL

13. REGULATORY CAPITAL

The Company 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 possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our consolidated 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 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 savings and loan holding companies.

Federal banking regulations require the Company and the Bank to maintain minimum amounts and ratios of total, common equity Tier 1, Tier 1 and total capital to risk-weighted assets and Tier 1 capital to average assets, as set forth in the table below. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonuses.

At December 31, 2022, we exceeded each of the applicable regulatory capital requirements including the capital conservation buffer. As of December 31, 2022, the most recent notification from the Office of Comptroller of the Currency categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized,” the Bank must maintain minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes would change our category.

Our actual capital ratios of December 31, 2022 and December 31, 2021 are also presented in the following table.

	Actual					Minimum For Capital Adequacy Purpose					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
December 31, 2022
Total Capital (to Risk Weighted Assets):
Consolidated	$	278,729		14.20	%	$	157,042		8.00	%		N/A		N/A
Bank		264,795		13.50			156,904		8.00		$	196,131		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		239,125		12.18			117,781		6.00			N/A		N/A
Bank		244,864		12.48			117,678		6.00			156,904		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated		239,125		12.18			88,336		4.50			N/A		N/A
Bank		244,864		12.48			88,259		4.50			127,485		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		239,125		9.27			103,229		4.00			N/A		N/A
Bank		244,864		9.49			103,166		4.00			128,957		5.00

	Actual					Minimum For Capital Adequacy Purpose					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
December 31, 2021
Total Capital (to Risk Weighted Assets):
Consolidated	$	261,093		14.27	%	$	146,347		8.00	%		N/A		N/A
Bank		243,788		13.35			146,135		8.00		$	182,669		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		221,673		12.12			109,761		6.00			N/A		N/A
Bank		224,001		12.26			109,601		6.00			146,135		8.00
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Consolidated		221,673		12.12			82,320		4.50			N/A		N/A
Bank		224,001		12.26			82,201		4.50			118,735		6.50
Tier 1 Leverage Ratio (to Adjusted Average Assets):
Consolidated		221,673		8.75			101,320		4.00			N/A		N/A
Bank		224,001		8.86			101,101		4.00			126,377		5.00

The following is a reconciliation of our GAAP capital to regulatory Tier 1, Common Equity Tier 1 and total capital:

	December 31,
	2022			2021
	(In thousands)
Consolidated GAAP capital	$	228,143		$	223,688
Net unrealized losses on available-for-sale securities, net of tax		23,962			3,525
Unrealized loss on defined benefit pension plan, net of tax		1,080			8,789
Goodwill		(12,487	)		(12,487	)
Intangible assets, net of associated deferred tax liabilities		(1,573	)		(1,842	)
Tier 1 and Common Equity Tier 1 capital		239,125			221,673
Allowance for loan losses for regulatory capital		19,931			19,787
Subordinated debt		19,673			19,633
Total regulatory capital	$	278,729		$	261,093

On October 13, 2022, the Company announced the completion of its previously authorized stock repurchase plan (the “2021 Plan”) pursuant to which the Company was authorized to repurchase up to 2.4 million shares, or 10% of its outstanding common stock, as of the date the 2021 Plan was adopted. On July 26, 2022, the Board of Directors authorized a new stock repurchase plan (the “2022 Plan”), pursuant to which the Company is authorized to repurchase up to 1.1 million shares, which is approximately 5.0% of the Company’s outstanding common stock as of the date the 2022 Plan was adopted. During the three months ended December 31, 2022, the Company repurchased 78,826 shares of common stock under the 2022 Plan and during the twelve months ended December 31, 2022, the Company repurchased 720,975 shares of common stock under both the 2021 and 2022 Plans. As of December 31, 2022, there were 1,056,344 shares of common stock available for repurchase under the 2022 Plan.

We are subject to dividend restrictions imposed by various regulators, including a limitation on the total of all dividends that the Bank may pay to the Company in any calendar year, to an amount that shall not exceed the Bank’s net income for the current year, plus its net income retained for the two previous years, without regulatory approval. At December 31, 2022, the Bank had $33.6 million in retained earnings available for payment of dividends without prior regulatory approval. In addition, the Bank may not declare or pay dividends on, and we may not repurchase, any of our shares of common stock if the effect thereof would cause shareholders’ equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration, payment or repurchase would otherwise violate regulatory requirements. The Bank will be prohibited from paying cash dividends to the Company to the extent that any such payment would reduce the Bank’s capital below required capital levels. Accordingly, $156.9 million and $146.1 million of our equity in the net assets of the Bank was restricted at December 31, 2022 and 2021, respectively.