Regulatory Capital Matters

9 Months Ended

Sep. 30, 2017

Regulatory Capital Requirements [Abstract]

Regulatory Capital Matters

Regulatory Capital Matters

Banks and bank holding companies are subject to various regulatory capital requirements administered by the 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 accounting practices.  The new minimum capital requirements associated with the Basel Committee on capital and liquidity regulation (Basel III) are being phased in and began on January 1, 2015 and will continue through January 1, 2019.  Capital amounts and classifications are also subject to qualitative judgments by regulators.  Failure to meet capital requirements can initiate regulatory action by regulators that, if undertaken, could have a direct material effect on the financial statements.  Management believes that as of September 30, 2017, the Company and the Bank meet all capital adequacy requirements to which they are subject.

The FDIC and other federal banking regulators revised the risk-based capital requirements applicable to financial holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”).

The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets.  The leverage ratio is calculated by dividing tier 1 capital by adjusted average total assets.

Basel III limits 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, tier 1 capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements.  The capital conservation buffer phase in began January 1, 2016 and will increase each year until fully implemented at 2.5% on January 1, 2019.  The additional capital conservation buffer is 1.25% for the year of 2017 and was 0.625% during 2016.  Excluding the additional buffer, Basel III requires the Company and the Bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, (ii) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0% and (iv) a minimum leverage ratio of at least 4.0%.

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 only 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, 2017 and December 31, 2016, 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.

Actual and required capital amounts and ratios are presented below at September 30, 2017 and December 31, 2016:

	Actual					Requirement For Capital Adequacy Purposes:					To be Well Capitalized Under Prompt Corrective Action Provisions:
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017
Common equity tier 1 capital ratio
Consolidated	$	199,491		12.00	%	$	74,823		4.5	%	N/A		N/A
Bank		189,227		11.41	%		74,622		4.5	%	$	107,788		6.5	%
Total risk based capital ratio
Consolidated		213,792		12.86	%		133,018		8.0	%	N/A		N/A
Bank		201,331		12.14	%		132,662		8.0	%		165,827		10.0	%
Tier I risk based capital ratio
Consolidated		201,688		12.13	%		99,763		6.0	%	N/A		N/A
Bank		189,227		11.41	%		99,496		6.0	%		132,662		8.0	%
Tier I leverage ratio
Consolidated		201,688		9.70	%		83,153		4.0	%	N/A		N/A
Bank		189,227		9.16	%		82,612		4.0	%		103,265		5.0	%
December 31, 2016
Common equity tier 1 capital ratio
Consolidated	$	180,475		11.69	%	$	69,474		4.5	%	N/A		N/A
Bank		171,064		11.12	%		69,244		4.5	%	$	100,020		6.5	%
Total risk based capital ratio
Consolidated		193,487		12.53	%		123,509		8.0	%	N/A		N/A
Bank		181,916		11.82	%		123,101		8.0	%		153,877		10.0	%
Tier I risk based capital ratio
Consolidated		182,635		11.83	%		92,632		6.0	%	N/A		N/A
Bank		171,064		11.12	%		92,326		6.0	%		123,101		8.0	%
Tier I leverage ratio
Consolidated		182,635		9.41	%		77,596		4.0	%	N/A		N/A
Bank		171,064		8.91	%		76,792		4.0	%		95,990		5.0	%