REGULATORY CAPITAL REQUIREMENTS

9 Months Ended

Sep. 30, 2018

Banking And Thrift [Abstract]

REGULATORY CAPITAL REQUIREMENTS

14. REGULATORY CAPITAL REQUIREMENTS

Home Savings and United Community 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 Home Savings and United Community. The regulations require Home Savings to meet specific capital adequacy guidelines in keeping with the regulatory framework for prompt corrective action that involve quantitative measures of Home Savings’ assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. Home Savings’ capital classification is also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors.

The Basel III Capital Rules establish a common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), a minimum Tier 1 capital to risk-based assets requirement (6% of risk-weighted assets) and assigns a risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The rules also require unrealized gains and losses on certain available-for-sale securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised. In connection with the adoption of the Basel III Capital Rules, United Community and Home Savings elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1.  The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital risk-based weighted assets in addition to the amount necessary to meeting its minimum risk-based capital requirements.

The capital conservation buffer requirement will be phased in through January 1, 2019, when the full capital conservation buffer requirement will be effective. The capital conservation buffer for 2018 is 1.875%.  The capital conservation buffer for 2017 was 1.25%.  The final rule also implemented consolidated capital requirements.

Quantitative measures established by regulation for capital adequacy require Home Savings to maintain minimum ratios of Tier 1 (or Core) capital (as defined in the regulations) to average total assets (as defined) and of total risk-based capital (as defined) to risk-weighted assets (as defined).  United Community and Home Savings’ Common Equity Tier 1 capital consists of common stock and related paid-in capital, net of treasury stock, and retained earnings. Common Equity Tier 1 for both United Community and Home Savings is reduced by intangible assets, net of associated deferred tax liabilities and subject to transition provisions. Actual and regulatory required capital ratios for Home Savings, along with the dollar amount of capital implied by such ratios, are presented below.

	September 30, 2018
											To Be Well Capitalized
						Minimum Capital					Under Prompt
						Requirements					Corrective Action
	Actual					Per Regulation***					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	297,367		13.95	%	$	210,458		9.88	%	$	213,123		10.00	%
Tier 1 capital (to risk-weighted assets)		276,103		12.96	%		167,834		7.88	%		170,498		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)		276,103		12.96	%		135,866		6.38	%		138,530		6.50	%
Tier 1 capital (to average assets)**		276,103		10.02	%		110,200		4.00	%		137,750		5.00	%

	December 31, 2017
											To Be Well Capitalized
						Minimum Capital					Under Prompt
						Requirements					Corrective Action
	Actual					Per Regulation***					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	292,928		14.70	%	$	184,235		9.25	%	$	199,173		10.00	%
Tier 1 capital (to risk-weighted assets)		271,777		13.64	%		144,400		7.25	%		159,338		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)		271,777		13.64	%		114,525		5.75	%		129,463		6.50	%
Tier 1 capital (to average assets)**		271,777		10.42	%		104,308		4.00	%		130,385		5.00	%

** Tier 1 Leverage Capital Ratio

*** The capital ratios are reflective of the capital conservation buffer

Management believes that as of September 30, 2018 and December 31, 2017, Home Savings met all capital adequacy requirements to which it was subject.  As of September 30, 2018 and December 31, 2017, Home Savings met the capital requirements to be deemed well capitalized. There are no known conditions that would change this classification subsequent to September 30, 2018.  

The components of Home Savings’ regulatory capital are as follows:

	September 30, 2018			December 31, 2017
Total shareholders' equity	$	271,376		$	276,494
Add (deduct)
Accumulated other comprehensive loss		25,798			18,701
Intangible assets		(21,071	)		(20,903	)
Disallowed deferred tax assets		—			(2,515	)
Disallowed capitalized mortgage loan servicing rights		—			—
Tier 1 Capital		276,103			271,777
Allowance for loan losses and allowance for unfunded lending commitments    limited to 1.25% of total risk-weighted assets		21,264			21,151
Total risk-based capital	$	297,367		$	292,928

Actual and regulatory required consolidated capital ratios for United Community, along with the dollar amount of capital implied by such ratios, are presented below.

	September 30, 2018
						Minimum Capital
						Requirements
	Actual					Per Regulation***
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	328,992		15.37	%	$	211,339		9.88	%
Tier 1 capital (to risk-weighted assets)		307,660		14.38	%		168,536		7.88	%
Common equity Tier 1 capital (to risk-weighted assets)		307,660		14.38	%		136,434		6.38	%
Tier 1 capital (to average assets)**		307,660		11.11	%		110,735		4.00	%
	December 31, 2017
						Minimum Capital
						Requirements
	Actual					Per Regulation***
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	306,946		15.35	%	$	184,881		9.25	%
Tier 1 capital (to risk-weighted assets)		285,744		14.29	%		144,907		7.25	%
Common equity Tier 1 capital (to risk-weighted assets)		285,744		14.29	%		114,926		5.75	%
Tier 1 capital (to average assets)**		285,744		10.93	%		104,588		4.00	%

** Tier 1 Leverage Capital Ratio

*** The capital ratios are reflective of the capital conservation buffer

United Community’s capital also exceeded the “well capitalized” ratios of 6.0% Tier 1 risk-based capital and 10% total risk-based capital required for United Community to engage in activities permissible only for a bank holding company that meets financial holding company requirements.

The components of United Community’s consolidated regulatory capital are as follows:

	September 30, 2018			December 31, 2017
Total shareholders' equity	$	306,043		$	294,265
Add (deduct)
Accumulated other comprehensive loss		25,783			18,701
Intangible assets		(24,166	)		(23,416	)
Disallowed deferred tax assets		—			(3,806	)
Disallowed capitalized mortgage loan servicing rights		—			—
Tier 1 Capital		307,660			285,744
Allowance for loan losses and allowance for unfunded lending commitments    limited to 1.25% of total risk-weighted assets		21,332			21,202
Total risk-based capital	$	328,992		$	306,946