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Capital Requirements
12 Months Ended
Dec. 31, 2022
Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]  
Capital Requirements

Note 15 – Capital Requirements

The Bank is 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 the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for PCA, 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 classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Federal banking regulations also impose regulatory capital requirements on bank holding companies. However, in August 2018, the Federal Reserve Board issued an interim final rule, which was effective August 30, 2018, that expanded its small bank holding company policy statement (the “SBHC Policy Statement”) to bank holding companies with total consolidated assets of less than $3 billion (up from the prior $1 billion threshold). Under the SBHC Policy Statement, qualifying bank holding companies have additional flexibility in the amount of debt they can issue and are also exempt from the Basel III Capital Rules (subsidiary depository institutions of qualifying bank holding companies are still subject to capital requirements). The Company currently has less than $3 billion in total consolidated assets and would likely qualify under the revised SBHC Policy Statement. However, the Company does not currently intend to issue a material amount of debt or take any other action that would cause its capital ratios to fall below the minimum ratios required by the Basel III Capital Rules.

The Basel III Capital Rules require banks and bank holding companies to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7%); (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%); (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%); and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter).

With respect to the Bank, the PCA regulations, to be “well capitalized” under the revised regulations, a bank must have the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of at least 6.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.0%; (iii) a total capital to risk-weighted assets ratio of at least 10.0%; and (iv) a leverage ratio of at least 5.0%.

The Bank’s capital ratios remained well above the levels designated by bank regulators as “well capitalized” at December 31, 2022 and 2021. There are no conditions or events since that management believes have changed the institution’s category.

On September 17, 2019 the FDIC finalized a rule that introduced an optional simplified measure of capital adequacy for qualifying community banking organizations, referred to as, the CBLR framework, as required by the EGRRCPA. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework.

In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9 percent, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework and meets all requirements under the framework will be considered to

have met the well-capitalized ratio requirements under the PCA regulations and will not be required to report or calculate risk-based capital.

The CBLR framework was available for banks to use in their March 31, 2020 Call Report and going forward. The Bank decided not to opt into the CBLR framework.

The Bank calculates its regulatory capital under the Basel III regulatory capital framework. The table below summarizes the Bank’s regulatory capital and related ratios for the periods presented:

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

Minimum

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

To Be Well Capitalized

 

 

 

 

 

 

 

 

 

Minimum Capital

 

 

Under Prompt Corrective

 

 

 

Actual

 

 

Requirement

 

 

Action Provisions

 

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Risk Weighted Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

174,151

 

 

 

17.38

%

 

$

80,148

 

 

 

8.00

%

 

$

100,184

 

 

 

10.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Risk Weighted Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

168,539

 

 

 

16.82

%

 

$

45,083

 

 

 

4.50

%

 

$

65,120

 

 

 

6.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Risk Weighted Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

168,539

 

 

 

16.82

%

 

$

60,111

 

 

 

6.00

%

 

$

80,148

 

 

 

8.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Average Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

168,539

 

 

 

9.62

%

 

$

70,078

 

 

 

4.00

%

 

$

87,598

 

 

 

5.00

%

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

Minimum

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

To Be Well Capitalized

 

 

 

 

 

 

 

 

 

Minimum Capital

 

 

Under Prompt Corrective

 

 

 

Actual

 

 

Requirement

 

 

Action Provisions

 

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Risk Weighted Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

155,092

 

 

 

14.72

%

 

$

84,312

 

 

 

8.00

%

 

$

105,390

 

 

 

10.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Risk Weighted Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

149,078

 

 

 

14.15

%

 

$

47,425

 

 

 

4.50

%

 

$

68,503

 

 

 

6.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Risk Weighted Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

149,078

 

 

 

14.15

%

 

$

63,234

 

 

 

6.00

%

 

$

84,312

 

 

 

8.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To Average Assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

$

149,078

 

 

 

7.69

%

 

$

77,549

 

 

 

4.00

%

 

$

96,936

 

 

 

5.00

%