Regulatory Capital

6 Months Ended

Jun. 30, 2024

Regulatory Capital

Regulatory Capital

Note 11— Regulatory Capital

The Company is a bank holding company with less than $3 billion in assets and does not (i) have significant off balance sheet exposure, (ii) engage in significant non-banking activities, or (iii) have a material amount of securities registered under the Securities Exchange Act of 1934, as amended (“Exchange Act”). As a result, the Company qualifies as a small bank holding company under the Federal Reserve’s Small Bank Holding Company Policy Statement and is currently not subject to consolidated regulatory capital requirements.

The Bank is subject to capital adequacy standards adopted by the Federal Reserve, including the capital rules that implemented the Basel III regulatory capital reforms developed by the Basel Committee on Banking Supervision. Failure to meet minimum capital requirements can initiate certain mandatory – possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines, 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. Management believes that the Bank met all capital adequacy requirements to which it was subject as of June 30, 2024 and December 31, 2023.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, common equity Tier 1 to risk-weighted assets, and Tier 1 capital to average assets.

In addition to the minimum regulatory capital required for capital adequacy purposes, the Bank is required to maintain a minimum capital conservation buffer above those minimums in the form of common equity. The capital conservation buffer, which was phased in ratably over a four year period beginning January 1, 2016, is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and discretionary compensation paid to certain officers, based on the amount of the shortfall. The capital conservation buffer was 2.5% at June 30, 2024, and is applicable for the common equity Tier 1, Tier 1, and total capital ratios.

As of June 30, 2024, the most recent notification from the Reserve Bank categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the institution must maintain minimum total risk-based, common equity Tier 1, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since the notification that management believes have changed the Bank’s category.

The table below provides a summary of the Bank’s capital ratios as of June 30, 2024 and December 31, 2023.

									Minimum To Be Well Capitalized
	Actual				Minimum Capital Requirement(1)				Under Prompt Corrective Action
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2024
Total capital (to risk weighted assets)	$	290,228	16.4	%	$	185,795	10.5	%	$	176,947	10.0	%
Tier 1 capital (to risk weighted assets)		272,276	15.4	%		150,405	8.5	%		141,558	8.0	%
Common equity tier 1 capital (to risk weighted assets)		272,276	15.4	%		123,863	7.0	%		115,016	6.5	%
Tier 1 capital (to average assets)		272,276	12.2	%		89,479	4.0	%		111,849	5.0	%
As of December 31, 2023
Total capital (to risk weighted assets)	$	282,082	15.7	%	$	188,448	10.5	%	$	179,475	10.0	%
Tier 1 capital (to risk weighted assets)		263,637	14.7	%		152,553	8.5	%		143,580	8.0	%
Common equity tier 1 capital (to risk weighted assets)		263,637	14.7	%		125,632	7.0	%		116,658	6.5	%
Tier 1 capital (to average assets)		263,637	11.6	%		91,163	4.0	%		113,954	5.0	%

(1)Including capital conservation buffer.