Regulatory Matters

12 Months Ended

Dec. 31, 2020

Regulatory Matters

Regulatory Matters

NOTE 20: REGULATORY MATTERS

FFI 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 possible additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on FFI and the Bank’s financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of FFI and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Under a new comprehensive capital framework for U.S. banking organizations, which became effective on January 1, 2015, with certain of their provisions phased-in over a several years through January 1, 2019, the Company (on a consolidated basis) and FFB (on a stand-alone basis) are required to meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. FFI’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by the regulators to ensure capital adequacy require FFI and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to assets (as defined). Management believes, as of December 31, 2020 and December 31, 2019 that FFI and the Bank met all capital adequacy requirements.

The following table sets forth the capital and capital ratios of FFI (on a consolidated basis) and FFB (on a stand-alone basis) as of the respective dates and as compared to the respective regulatory requirements applicable to them:

									To Be Well-Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
FFI
December 31, 2020
CET1 capital ratio	$	589,276	11.55	%	$	229,490	4.50	%
Tier 1 leverage ratio		589,276	8.93	%		263,986	4.00	%
Tier 1 risk-based capital ratio		589,276	11.55	%		305,987	6.00	%
Total risk-based capital ratio		620,700	12.17	%		407,982	8.00	%
December 31, 2019
CET1 capital ratio	$	513,083	10.65	%	$	216,782	4.50	%
Tier 1 leverage ratio		513,083	8.25	%		248,798	4.00	%
Tier 1 risk-based capital ratio		513,083	10.65	%		289,043	6.00	%
Total risk-based capital ratio		537,048	11.15	%		385,390	8.00	%
BANK
December 31, 2020
CET1 capital ratio	$	591,171	11.63	%	$	228,703	4.50	%	$	330,349	6.50	%
Tier 1 leverage ratio		591,171	8.98	%		263,330	4.00	%		329,162	5.00	%
Tier 1 risk-based capital ratio		591,171	11.63	%		304,938	6.00	%		406,583	8.00	%
Total risk-based capital ratio		622,595	12.25	%		406,583	8.00	%		508,229	10.00	%
December 31, 2019
CET1 capital ratio	$	510,142	10.62	%	$	216,063	4.50	%	$	312,091	6.50	%
Tier 1 leverage ratio		510,142	8.22	%		248,119	4.00	%		310,148	5.00	%
Tier 1 risk-based capital ratio		510,142	10.62	%		288,084	6.00	%		384,112	8.00	%
Total risk-based capital ratio		534,107	11.12	%		384,112	8.00	%		480,140	10.00	%

As of each of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and FFB’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. The required ratios for capital adequacy set forth in the above table do not include the additional capital conservation buffer, though each of the Company and FFB maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated.

As of December 31, 2020, the amount of capital at FFB in excess of amounts required to be Well Capitalized was $261 million for the CET-1 capital ratio, $262 million for the Tier 1 leverage ratio, $185 million for the Tier 1 risk-based capital ratio and $114 million for the Total risk-based capital ratio. No conditions or events have occurred since December 31, 2020 that we believe have changed FFI’s or FFB’s capital adequacy classifications from those set forth in the above table.

If a banking organization does not hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements, it will face constraints on dividends, equity repurchases and executive compensation based on the amount of the shortfall. The capital buffer, which is 2.5%, is measured against risk weighted assets and is therefore not applicable to the tier 1 leverage ratio. The following table sets forth the minimum capital ratios plus the applicable increment of the capital conservation buffer that took effect on January 1, 2019:

CET-1 to risk-weighted assets	7.00	%
Tier 1 capital (i.e., CET-1 plus Additional Tier 1) to risk-weighted assets	8.50	%
Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets	10.50	%