REGULATORY CAPITAL REQUIREMENTS

12 Months Ended

Dec. 31, 2020

REGULATORY CAPITAL REQUIREMENTS

REGULATORY CAPITAL REQUIREMENTS

18. REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital requirements that involve quantitative measures of the Company’s and Bank’s assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classifications also are subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total, tier 1, and common equity tier 1 capital to risk-weighted assets and of tier 1 capital to average assets. Tier 1 capital, risk-weighted assets and average assets are as defined by regulation. The required minimums for the Company and Bank are set forth in the tables that follow. The Company and the Bank met all capital adequacy requirements at December 31, 2020 and 2019.

Under the Basel III Capital Rules the Company and the Bank are subject to the following minimum capital to risk-weighted assets ratios: a) 4.5% based on common equity tier 1 capital ("CET1"); b) 6.0% based on tier 1 capital; and c) 8.0% based on total regulatory capital. A minimum leverage ratio (tier 1 capital as a percentage of total average assets) of 4.0% is also required under the Basel III Capital Rules. The Basel III Capital Rules additionally require institutions to retain a capital conservation buffer, composed of CET1, of 2.5% above these required minimum capital ratio levels. Including the capital conservation buffer, the Company and the Bank effectively have the following minimum capital to risk-weighted assets ratios: a) 7.0% based on CET1; b) 8.5% based on tier 1 capital; and c) 10.5% based on total regulatory capital.

The Company and the Bank made the one-time, permanent election to continue to exclude the effects of accumulated other comprehensive income or loss items included in stockholders’ equity for the purposes of determining the regulatory capital ratios.

As of December 31, 2020, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” the Bank must maintain minimum total risk-based, tier 1 risk-based, common equity tier 1 risk-based, and tier 1 leverage ratios as set forth in the tables below. Since that notification, there are no conditions or events that management believes have changed the institution’s category.

The following tables present actual capital levels and minimum required levels for the Company and the Bank under Basel III rules at December 31, 2020 and 2019:

	December 31, 2020
									Minimum Capital				Minimum To Be Well
					Minimum Capital				Adequacy Requirement with				Capitalized Under Prompt
	Actual Capital				Adequacy Requirement				Capital Conservation Buffer				Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity tier 1 capital to risk-weighted assets:
Consolidated	$	424,652	10.3	%	$	185,479	4.5	%	$	288,523	7.0	%		n/a	n/a
Bank		503,524	12.2			185,465	4.5			288,502	7.0		$	267,895	6.5	%
Total capital to risk-weighted assets:
Consolidated		537,664	13.0			329,740	8.0			432,784	10.5			n/a	n/a
Bank		544,536	13.2			329,716	8.0			432,753	10.5			412,145	10.0
Tier 1 capital to risk-weighted assets:
Consolidated		424,652	10.3			247,305	6.0			350,349	8.5			n/a	n/a
Bank		503,524	12.2			247,287	6.0			350,324	8.5			329,716	8.0
Tier 1 capital to average assets:
Consolidated		424,652	6.8			249,502	4.0			n/a	n/a			n/a	n/a
Bank		503,524	8.1			249,389	4.0			n/a	n/a			311,737	5.0

	December 31, 2019
									Minimum Capital				Minimum To Be Well
					Minimum Capital				Adequacy Requirement with				Capitalized Under Prompt
	Actual Capital				Adequacy Requirement				Capital Conservation Buffer				Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity tier 1 capital to risk-weighted assets:
Consolidated	$	397,800	10.2	%	$	176,121	4.5	%	$	273,967	7.0	%		n/a	n/a
Bank		474,056	12.1			176,114	4.5			273,954	7.0		$	254,386	6.5	%
Total capital to risk-weighted assets:
Consolidated		510,862	13.1			313,105	8.0			410,950	10.5			n/a	n/a
Bank		507,118	13.0			313,091	8.0			410,932	10.5			391,363	10.0
Tier 1 capital to risk-weighted assets:
Consolidated		397,800	10.2			234,828	6.0			332,674	8.5			n/a	n/a
Bank		474,056	12.1			234,818	6.0			332,659	8.5			313,091	8.0
Tier 1 capital to average assets:
Consolidated		397,800	8.5			187,386	4.0			n/a	n/a			n/a	n/a
Bank		474,056	10.1			187,377	4.0			n/a	n/a			234,222	5.0