CAPITAL MATTERS

12 Months Ended

Dec. 31, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

CAPITAL MATTERS

CAPITAL MATTERS

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.

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. As of December 31, 2020 and 2019, the most recent notifications from our regulatory agency categorized the Bank as “Well Capitalized” under the regulatory framework for Prompt Corrective Action. There are no conditions or events since these notifications that management believes have changed the Bank’s category.

The Bank’s Tier 1 (leverage) and risk-based capital ratios at December 31, 2020 and 2019, respectively, are presented below

(actual amount rounded to the nearest thousand)

	Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action  Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio
As of December 31, 2020
Total capital (to risk weighted assets)	$	171,702,000	14.7	%	$	93,381,000	> =	8.0	%	$	116,726,000	> =	10.0	%
Tier 1 capital (to risk weighted assets)	157,081,000		13.5	%	70,035,000		> =	6.0	%	93,381,000		> =	8.0	%
Common equity tier 1 capital (to risk weighted assets)	157,081,000		13.5	%	52,527,000		> =	4.5	%	75,872,000		> =	6.5	%
Tier 1 leverage ratio (to adjusted total assets)	157,081,000		9.9	%	63,718,000		> =	4.0	%	79,647,000		> =	5.0	%
As of December 31, 2019
Total capital (to risk weighted assets)	$	160,302,000	13.1	%	$	98,174,000	> =	8.0	%	$	122,718,000	> =	10.0	%
Tier 1 capital (to risk weighted assets)	149,982,000		12.2	%	73,631,000		> =	6.0	%	98,174,000		> =	8.0	%
Common equity tier 1 capital (to risk weighted assets)	149,982,000		12.2	%	55,223,000		> =	4.5	%	79,767,000		> =	6.5	%
Tier 1 leverage ratio (to adjusted total assets)	149,982,000		10.4	%	57,834,000		> =	4.0	%	72,293,000		> =	5.0	%

The Company’s Tier 1 (leverage) and risk-based capital ratios at December 31, 2020 and 2019, respectively, are presented below:

(actual amount rounded to the nearest thousand)

	Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action  Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio
As of December 31, 2020
Total capital (to risk weighted assets)	$	166,703,000	14.3	%	$	93,381,000	> =	8.0	%	N/A			N/A
Tier 1 capital (to risk weighted assets)	122,082,000		10.5	%	70,035,000		> =	6.0	%	N/A			N/A
Common equity tier 1 capital (to risk weighted assets)	122,082,000		10.5	%	52,527,000		> =	4.5	%	N/A			N/A
Tier 1 leverage ratio (to adjusted total assets)	122,082,000		7.7	%	63,718,000		> =	4.0	%	N/A			N/A
As of December 31, 2019
Total capital (to risk weighted assets)	$	137,259,000	11.2	%	$	98,174,000	> =	8.0	%	$	122,718,000	> =	10.0	%
Tier 1 capital (to risk weighted assets)	111,939,000		9.1	%	73,631,000		> =	6.0	%	98,174,000		> =	8.0	%
Common equity tier 1 capital (to risk weighted assets)	111,939,000		9.1	%	55,223,000		> =	4.5	%	79,767,000		> =	6.5	%
Tier 1 leverage ratio (to adjusted total assets)	111,939,000		7.7	%	57,834,000		> =	4.0	%	72,293,000		> =	5.0	%

The Company is a legal entity separate and distinct from its banking subsidiary. As a bank holding company, the Company is subject to certain restrictions on its ability to pay dividends under applicable banking laws and regulations. Federal bank regulators are authorized to determine, under certain circumstances relating to the financial condition of a

bank holding company or a bank, that the payment of dividends would be an unsafe or unsound practice, and to prohibit payment thereof. In particular, federal bank regulators have stated that paying dividends that deplete a banking organization’s capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings. In addition, in the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.

The Company’s ability to pay dividends is also subject to the terms of its Subordinated Note Purchase Agreement dated August 27, 2020 and Business Note Agreement dated August 1, 2018, which prohibits the Company from making dividend payments while an event of default has occurred and is continuing under the loan agreement or from allowing payment of a dividend which would create an event of default.

The following table reflects the annual cash dividend paid in the years ended December 31, 2020 and 2019, respectively.

	December 31, 2020		December 31, 2019
Cash dividends per share	$	0.21	$	0.20
Stockholder record date	02/05/2020		02/08/2019
Dividend payment date	02/19/2020		03/08/2019