Shareholders' Equity

9 Months Ended

Sep. 30, 2022

Note 7:

Shareholders’ Equity

On September 5, 2019, the Company adopted a Repurchase Plan (the “RP”). The RP initially authorized the repurchase of up to 500,000 shares of the Company’s common stock. On March 13, 2020, the Company’s Board of Directors approved a 500,000 share expansion, and on November 2, 2020, approved a 750,000 share expansion to the RP, for a total of 1,750,000 shares authorized under the RP. All shares repurchased under the RP have been retired and not held as treasury stock. The RP expired on September 5, 2021. On October 28, 2021, the Company adopted a new Repurchase Plan (the “New RP”) that authorizes the repurchase of up to 750,000 shares of the Company’s stock. Stock repurchases under the New RP will take place pursuant to a Rule 10b5-1 Plan with pricing and purchasing parameters established by management.

A summary of the activity under the RP is as follows:

	Nine Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021
Number of shares repurchased		-		-		-		-
Average price of shares repurchased	$	-	$	-	$	-	$	-
Shares remaining to be repurchased		750,000		-		750,000		-

The Company and Bank are subject to risk-based capital guidelines issued 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 Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under GAAP, regulatory reporting requirements and regulatory capital standards. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company’s and the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total, Tier I, and Common Equity capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of September 30, 2022, that the Company and Bank meet all capital adequacy requirements to which it is subject and maintains capital conservation buffers that allow the Company and Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to certain executive officers.

As of September 30, 2022, the most recent notification from the Federal Deposit Insurance Corporation (FDIC) categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain capital ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Company’s and Bank’s actual capital amounts and ratios are presented in the following table (dollars in thousands):

	Actual					Minimum Capital Requirements					With Capital Conservation Buffer					Minimum To Be Well Capitalized Under Prompt Corrective Action
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio

As of September 30, 2022
Total capital to risk-weighted assets
Company	$	149,939		12.09	%	$	99,195		8.00	%	$	130,193		10.50	%		N/A		N/A
Bank		149,899		12.10	%		99,114		8.00	%		130,087		10.50	%		123,892		10.00	%
Tier I capital to risk-weighted assets
Company		136,786		11.03	%		74,396		6.00	%		105,394		8.50	%		N/A		N/A
Bank		136,746		11.04	%		74,335		6.00	%		105,308		8.50	%		99,114		8.00	%
CET I capital to risk-weighted assets
Company		136,786		11.03	%		55,797		4.50	%		86,795		7.00	%		N/A		N/A
Bank		136,746		11.04	%		55,751		4.50	%		86,724		7.00	%		80,530		6.50	%
Tier I capital to average assets
Company		136,786		9.01	%		60,721		4.00	%		N/A		N/A			N/A		N/A
Bank		136,746		9.01	%		60,695		4.00	%		N/A		N/A			75,868		5.00	%

As of December 31, 2021
Total capital to risk-weighted assets
Company	$	127,946		12.54	%	$	81,620		8.00	%	$	107,126		10.50	%		N/A		N/A
Bank		127,844		12.54	%		81,539		8.00	%		107,020		10.50	%	$	101,924		10.00	%
Tier I capital to risk-weighted assets
Company		117,631		11.53	%		61,215		6.00	%		86,721		8.50	%		N/A		N/A
Bank		117,528		11.53	%		61,154		6.00	%		86,635		8.50	%		81,539		8.00	%
CET I capital to risk-weighted assets
Company		117,631		11.53	%		45,911		4.50	%		71,417		7.00	%		N/A		N/A
Bank		117,528		11.53	%		45,866		4.50	%		71,347		7.00	%		66,250		6.50	%
Tier I capital to average assets
Company		117,631		10.56	%		44,571		4.00	%		N/A		N/A			N/A		N/A
Bank		117,528		10.55	%		44,571		4.00	%		N/A		N/A			55,714		5.00	%

The federal banking agencies require that banking organizations meet several risk-based capital adequacy requirements. The current risk-based capital standards applicable to the Company and the Bank are based on the Basel III Capital Rules established by the Basel Committee on Banking Supervision (the “Basel Committee”). The Basel Committee is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines for use by each country’s supervisors in determining the supervisory policies they apply. The requirements are intended to ensure that banking organizations have adequate capital given the risk levels of assets and off-balance sheet financial instruments.

The Basel III Capital Rules require the Bank and the Company to comply with four minimum capital standards: a Tier 1 leverage ratio of at least 4.0%; a CET1 to risk-weighted assets of 4.5%; a Tier 1 capital to risk-weighted assets of at least 6.0%; and a total capital to risk-weighted assets of at least 8.0%. The calculation of all types of regulatory capital is subject to definitions, deductions and adjustments specified in the regulations.

The Basel III Capital Rules also require a “capital conservation buffer” of 2.5% above the regulatory minimum risk-based capital requirements. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios. Banking institutions with a ratio of CET1 to risk-weighted assets below the effective minimum (4.5% plus the capital conservation buffer) are subject to limitations on certain activities, including payment of dividends, share repurchases and discretionary bonuses to executive officers based on the amount of the shortfall.

As of September 30, 2022, the Company’s and the Bank’s capital ratios exceeded the minimum capital adequacy guideline percentage requirements under the Basel III Capital Rules on a fully phased-in basis.

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval. At September 30, 2022, approximately $54.3 million of retained earnings was available for dividend declaration from the Bank without prior regulatory approval.