REGULATORY MATTERS

9 Months Ended

Sep. 30, 2022

REGULATORY MATTERS

REGULATORY MATTERS

NOTE 11 – REGULATORY 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 practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III rules”) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. Under the Basel III rules, the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios. The net unrealized gain or loss on available for sale securities, if any, is not included in computing regulatory capital. Management believes as of September 30, 2022, the Company and Bank meets all capital adequacy requirements to which they are subject.

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. At September 30, 2022 and December 31, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

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

								To Be Well Capitalized
					Minimum Capital Required -			Under Prompt Corrective
	Actual				Basel III			Action Provisions:
(Dollars in thousands)	Amount		Ratio		Amount ≥	Ratio ≥		Amount ≥	Ratio ≥
As of September 30, 2022:
Total Capital (to Risk Weighted Assets)
Consolidated	$	335,300	16.94	%	207,839	10.5	%	N/A	N/A
Bank		329,625	16.65	%	207,821	10.5		197,924	10.0	%
Tier I Capital (to Risk Weighted Assets)
Consolidated		320,318	16.18	%	168,251	8.5	%	N/A	N/A
Bank		314,643	15.90	%	168,236	8.5		158,339	8.0	%
Common Tier 1 (CET1)
Consolidated		320,318	16.18	%	138,560	7.0	%	N/A	N/A
Bank		314,643	15.90	%	138,547	7.0		128,651	6.5	%
Tier 1 Capital (to Average Assets)
Consolidated		320,318	9.90	%	129,443	4.0	%	N/A	N/A
Bank		314,643	9.73	%	129,414	4.0		161,768	5.0	%
As of December 31, 2021:
Total Capital (to Risk Weighted Assets)
Consolidated	$	297,108	17.77	%	175,564	10.5	%	N/A	N/A
Bank		287,258	17.18	%	175,525	10.5		167,166	10.0	%
Tier I Capital (to Risk Weighted Assets)
Consolidated		280,156	16.76	%	142,123	8.5	%	N/A	N/A
Bank		270,306	16.17	%	142,091	8.5		133,733	8.0	%
Common Tier 1 (CET1)
Consolidated		280,156	16.76	%	117,043	7.0	%	N/A	N/A
Bank		270,306	16.17	%	117,016	7.0		108,658	6.5	%
Tier 1 Capital (to Average Assets)
Consolidated		280,156	9.44	%	118,682	4.0	%	N/A	N/A
Bank		270,306	9.11	%	118,667	4.0		148,333	5.0	%