Note 11 - Minimum Regulatory Capital Requirement

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 11: Minimum Regulatory Capital Requirement

Under the Federal Reserve’s Small Bank Holding Company Policy Statement, the Company is exempt from reporting consolidated regulatory capital ratios and from minimum regulatory capital requirements.

NBB is 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 NBI’s and NBB’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, NBB must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

The Bank is subject to the Basel III Capital Rules as applied by the Office of the Comptroller of the Currency. The Basel III Capital Rules require the Bank to comply with minimum capital ratios plus a “capital conservation buffer” designed to absorb losses during periods of economic stress. The rules set forth minimum amounts and ratios for CET1 capital, Tier 1 capital and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted quarterly average assets (as defined).

NBB’s CET1 capital includes common stock and related surplus and retained earnings. The Basel III Capital Rules provide an option to exclude components of accumulated other comprehensive loss from CET1 capital. NBB elected to exclude components of accumulated other comprehensive loss from CET1 capital.

Tier 1 Capital includes CET1 capital and additional Tier 1 capital components. As of December 31, 2023 and 2022, NBB did not hold any additional Tier 1 capital beyond CET1 capital. Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital includes the allowance for credit losses. NBB’s risk-weighted assets were $1,082,158 as of December 31, 2023 and $1,092,101 as of December 31, 2022. Management believes, as of December 31, 2023 and 2022, that NBB met all capital adequacy requirements to which it is subject.

As of December 31, 2023, the most recent notifications from the Office of the Comptroller of the Currency categorized NBB as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, CET1 risk-based and Tier 1 leverage ratios, as set forth in the following tables. There are no conditions or events since these notifications that management believes have changed NBB’s category.

NBB’s capital amounts and ratios as of the dates indicated are presented in the following tables.

December 31, 2023	Actual					Minimum Capital Requirement(1)					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets)	$	195,782		18.09	%	$	113,627		10.50	%	$	108,216		10.00	%
Tier 1 Capital (to Risk Weighted Assets)	$	186,429		17.23	%	$	91,983		8.50	%	$	86,573		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	$	186,429		17.23	%	$	75,751		7.00	%	$	70,340		6.50	%
Tier 1 Capital (to Average Assets)	$	186,429		11.05	%	$	67,491		4.00	%	$	84,364		5.00	%

December 31, 2022	Actual					Minimum Capital Requirement(1)					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets)	$	191,883		17.57	%	$	114,671		10.50	%	$	109,210		10.00	%
Tier 1 Capital (to Risk Weighted Assets)	$	183,623		16.81	%	$	92,829		8.50	%	$	87,368		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	$	183,623		16.81	%	$	76,447		7.00	%	$	70,987		6.50	%
Tier 1 Capital (to Average Assets)	$	183,623		10.50	%	$	69,925		4.00	%	$	87,406		5.00	%

(1) Except with regard to NBB’s Tier 1 capital to average assets ratio, the minimum capital requirement includes the Basel III Capital Rules’ capital conservation buffer (2.50%) which is added to the minimum capital requirements for capital adequacy purposes. NBB’s capital conservation buffer consists of additional CET1 above regulatory minimum requirement. Failure to maintain the prescribed levels would result in limitations on capital distributions and discretionary bonuses to executives.