Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2023

Regulatory Assets and Liabilities Disclosure [Abstract]

FDIC regulations require banks to maintain minimum levels of regulatory capital. Under the regulations in effect as of December 31, 2023, the Bank is required to maintain: (1) a Tier 1 capital to total assets leverage ratio of 4.0%; (2) a common equity Tier 1 capital to risk-based assets ratio of 4.5%; (3) a Tier 1 capital to risk-based assets ratio of 6.0%; and (4) a total capital to risk-based assets ratio of 8.0%. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements.

Under its prompt corrective action regulations, the FDIC is required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on an institution’s financial statements. The regulations establish a framework for the classification of savings institutions into five categories: well capitalized; adequately capitalized; undercapitalized, significantly undercapitalized; and critically undercapitalized. Generally, an institution is considered well capitalized if it has: a leverage (Tier 1) capital ratio of at least 5.00%; a common equity Tier 1 risk-based capital ratio of 6.50%; a Tier 1 risk-based capital ratio of at least 8.00%; and a total risk-based capital ratio of at least 10.00%.

In the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule providing banking institutions that adopt CECL during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total). In connection with its adoption of CECL on January 1, 2020, the Company elected to utilize the five-year CECL transition.

The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the FDIC about capital components, risk weightings and other factors.

As of December 31, 2023 and 2022, the Bank exceeded all minimum capital adequacy requirements to which it is subject. Further, the most recent FDIC notification categorized the Bank as a well-capitalized institution under the prompt corrective action regulations. There have been no conditions or events since that notification that management believes have changed the Bank’s capital classification.

The Company is regulated as a bank holding company, and as such, is subject to examination, regulation and periodic reporting under the Bank Holding Company Act, as administered by the Federal Reserve Board (“FRB”). The FRB has adopted capital adequacy guidelines for bank holding companies on a consolidated basis substantially similar to those of the FDIC for the Bank. As of December 31, 2023 and 2022, the Company was “well capitalized” under FRB guidelines. Regulations of the FRB provide that a bank holding company must serve as a source of strength to any of its subsidiary banks and must not conduct its activities in an unsafe or unsound manner. Under the prompt corrective action provisions discussed above, a bank holding company parent of an undercapitalized subsidiary bank would be directed to guarantee, within limitations, the capital restoration plan that is required of such an undercapitalized bank. If the undercapitalized bank fails to file an acceptable capital restoration plan or fails to implement an accepted plan, the FRB may prohibit the bank holding company parent of the undercapitalized bank from paying any dividend or making any other form of capital distribution without the prior approval of the FRB.

The following table shows the Company’s actual capital amounts and ratios as of December 31, 2023 and 2022, compared to the FRB minimum capital adequacy requirements and the FRB requirements for classification as a well-capitalized institution (dollars in thousands).


	Actual capital				FRB minimum capital adequacy requirements				FRB minimum capital adequacy requirements with capital conservation buffer				To be well-capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2023
Tier 1 leverage capital	$	1,396,512	10.22	%	$	546,662	4.00	%	$	546,662	4.00	%	$	683,327	5.00	%
Common equity Tier 1 risk-based capital	1,383,625		11.45		543,720		4.50		845,786		7.00		785,373		6.50
Tier 1 risk-based capital	1,396,512		11.56		724,959		6.00		1,027,026		8.50		966,612		8.00
Total risk-based capital	1,496,545		12.39		966,612		8.00		1,268,679		10.50		1,208,266		10.00


	Actual capital				FRB minimum capital adequacy requirements				FRB minimum capital adequacy requirements with capital conservation buffer				To be well-capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2022
Tier 1 leverage capital	$	1,326,676	10.00	%	$	530,610	4.00	%	$	530,610	4.00	%	$	663,262	5.00	%
Common equity Tier 1 risk-based capital	1,313,789		11.36		520,312		4.50		809,374		7.00		751,562		6.50
Tier 1 risk-based capital	1,326,676		11.47		693,749		6.00		982,812		8.50		924,999		8.00
Total risk-based capital	1,404,466		12.15		924,999		8.00		1,214,061		10.50		1,156,249		10.00

The following table shows the Bank’s actual capital amounts and ratios as of December 31, 2023 and 2022, compared to the FDIC minimum capital adequacy requirements and the FDIC requirements for classification as a well-capitalized institution (dollars in thousands).


	Actual capital				FDIC minimum capital adequacy requirements				FDIC minimum capital adequacy requirements with capital conservation buffer				To be well-capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2023
Tier 1 leverage capital	$	1,343,223	9.84	%	$	546,168	4.00	%	$	546,168	4.00	%	$	682,709	5.00	%
Common equity Tier 1 risk-based capital	1,343,223		11.12		543,465		4.50		845,390		7.00		785,005		6.50
Tier 1 risk-based capital	1,343,223		11.12		724,620		6.00		1,026,545		8.50		966,160		8.00
Total risk-based capital	1,443,256		11.95		966,160		8.00		1,268,085		10.50		1,207,700		10.00


	Actual capital				FDIC minimum capital adequacy requirements				FRB minimum capital adequacy requirements with capital conservation buffer				To be well-capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2022
Tier 1 leverage capital	$	1,260,603	9.51	%	$	530,396	4.00	%	$	530,396	4.00	%	$	662,995	5.00	%
Common equity Tier 1 risk-based capital	1,260,603		10.91		520,070		4.50		808,998		7.00		751,213		6.50
Tier 1 risk-based capital	1,260,603		10.91		693,427		6.00		982,355		8.50		924,569		8.00
Total risk-based capital	1,338,393		11.58		924,569		8.00		1,213,497		10.50		1,155,712		10.00

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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