Note 19 - Regulatory Matters

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

(19) Regulatory Matters

Bancorp and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators.  Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Bancorp’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of Bancorp’s 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 the regulators regarding components, risk weightings and other factors.

Banking regulators have categorized the Bank as well-capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an 8.0% Tier 1 Risk-Based Capital ratio, a 10.0% Total Risk-Based Capital ratio and a 5.0% Tier 1 Leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, Bancorp and Bank must hold a capital conservation buffer composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements. The capital conservation buffer phased in from 2016 to 2019 on the following schedule: a capital conservation buffer of 0.625% effective January 1, 2016; 1.25% effective January 1, 2017; 1.875% effective January 1, 2018; and a fully phased in capital conservation buffer of 2.5% on January 1, 2019.

Bancorp continues to exceed the regulatory requirements for Total Risk Based Capital, Common Equity Tier I Risk Based, Tier I Risk Based Capital and Tier I Leverage Capital. Bancorp and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the Capital Conservation Buffer.

The following table sets forth consolidated Bancorp’s and the Bank’s risk based capital amounts and ratios:

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
June 30, 2019	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	400,314		12.67	%	$	252,821		8.00	%	NA		NA
Bank		392,705		12.45			252,265		8.00		$	315,331		10.00	%
Common equity tier 1 risk-based capital
Consolidated		373,548		11.82			142,212		4.50		NA		NA
Bank		365,939		11.60			141,899		4.50			204,965		6.50
Tier 1 risk-based capital (1)
Consolidated		373,548		11.82			189,616		6.00		NA		NA
Bank		365,939		11.60			189,198		6.00			252,265		8.00
Leverage (2)
Consolidated		373,548		10.91			136,955		4.00		NA		NA
Bank		365,939		10.70			136,784		4.00			170,980		5.00

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	396,019		13.91	%	$	227,714		8.00	%	NA		NA
Bank		385,637		13.56			227,462		8.00		$	284,327		10.00	%
Common equity tier 1 risk-based capital
Consolidated		370,135		13.00			128,089		4.50		NA		NA
Bank		359,753		12.65			127,947		4.50			184,813		6.50
Tier 1 risk-based capital (1)
Consolidated		370,135		13.00			170,785		6.00		NA		NA
Bank		359,753		12.65			170,596		6.00			227,462		8.00
Leverage (2)
Consolidated		370,135		11.33			130,698		4.00		NA		NA
Bank		359,753		11.02			130,569		4.00			163,211		5.00

(1) Ratio is computed in relation to risk-weighted assets.

(2) Ratio is computed in relation to average assets.

NA Not applicable. Regulatory framework does not define well capitalized for holding companies.