Capital Requirements and Restrictions on Retained Earnings

12 Months Ended

Dec. 31, 2019

Banking and Thrift [Abstract]

Capital Requirements and Restrictions on Retained Earnings

Capital Requirements and Restrictions on Retained Earnings

Banks and financial holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, for the Bank, prompt corrective action ("PCA") regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory enforcement actions. Under the Basel III rules, the Corporation and the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer for 2019 was 2.500% and for 2018 was 1.875%. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Corporation 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. The net unrealized gain or loss on available for sale securities are excluded from computing regulatory capital. Management believes as of December 31, 2019 the Corporation and the Bank meet all capital adequacy requirements to which they are subject.

The PCA regulations provide five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms alone do not 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; brokered deposits may not be accepted, renewed or rolled over; and capital restoration plans are required. As of December 31, 2019 and 2018, the most recent regulatory notifications categorized the Bank as well capitalized under the PCA regulatory framework. There are no events or conditions since this notification that management believes have changed the Bank’s capital category.

Actual and required capital amounts and ratios are presented below as of December 31, 2019 and 2018. The capital adequacy ratio includes the capital conservation buffer.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2019
Total Capital to Risk Weighted Assets
Consolidated	$	350,806	12.51	%	$	294,407	10.500	%	N/A
Bank	$	330,321	11.87	%	$	292,271	10.500	%	$	292,271	10.50	%
Tier 1 (Core) Capital to Risk Weighted Assets
Consolidated	$	281,333	10.03	%	$	238,330	8.500	%	N/A
Bank	$	312,795	11.24	%	$	236,600	8.500	%	$	236,600	8.50	%
Common equity Tier 1 to Risk Weighted Assets
Consolidated	$	261,333	9.32	%	$	196,272	7.000	%	N/A
Bank	$	305,416	10.97	%	$	194,847	7.000	%	$	194,847	7.00	%
Tier 1 (Core) Capital to Average Assets
Consolidated	$	281,333	7.86	%	$	143,189	4.00	%	N/A
Bank	$	312,795	8.79	%	$	142,301	4.00	%	$	177,876	5.00	%
December 31, 2018
Total Capital to Risk Weighted Assets
Consolidated	$	319,340	13.21	%	$	238,719	9.875	%	N/A
Bank	$	302,627	12.59	%	$	237,325	9.875	%	$	240,329	10.00	%
Tier 1 (Core) Capital to Risk Weighted Assets
Consolidated	$	249,636	10.33	%	$	190,371	7.875	%	N/A
Bank	$	284,722	11.85	%	$	189,259	7.875	%	$	192,263	8.00	%
Common equity Tier 1 to Risk Weighted Assets
Consolidated	$	229,636	9.50	%	$	154,110	6.375	%	N/A
Bank	$	277,343	11.54	%	$	153,210	6.375	%	$	156,214	6.50	%
Tier 1 (Core) Capital to Average Assets
Consolidated	$	249,636	7.87	%	$	126,882	4.000	%	N/A
Bank	$	284,722	9.12	%	$	124,903	4.000	%	$	156,128	5.00	%

Certain restrictions exist regarding the ability of the Bank to transfer funds to the Corporation in the form of cash dividends, loans or advances. During 2019, $51,612 of accumulated net earnings of the Bank included in consolidated stockholders’ equity, plus any 2020 net profits retained to the date of the dividend declared, is available for distribution to the Corporation as dividends without prior regulatory approval, subject to regulatory capital requirements described above.