REGULATORY CAPITAL MATTERS

12 Months Ended

Dec. 31, 2021

REGULATORY CAPITAL MATTERS

REGULATORY CAPITAL MATTERS

25. REGULATORY CAPITAL MATTERS

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, 2021 and 2020.

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, 2021, 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, 2021 and 2020:

					For Capital				To Be Categorized
(Dollars in thousands)	Actual				Adequacy Purposes(1)				as “Well Capitalized”(1)
							Minimum				Minimum
December 31, 2021	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 capital / % of average total assets
Bank	$	1,215,586	10.0	%	$	488,506	4.0	%	$	610,633	5.0	%
Consolidated Company		1,037,235	8.5			490,420	4.0			N/A	N/A
Common equity Tier 1 capital / % of risk-weighted assets
Bank		1,215,586	12.5			436,539	4.5			630,557	6.5
Consolidated Company		920,666	9.5			436,700	4.5			N/A	N/A
Tier 1 capital / % of risk-weighted assets
Bank		1,215,586	12.5			582,052	6.0			776,070	8.0
Consolidated Company		1,037,235	10.7			582,267	6.0			N/A	N/A
Total capital / % of risk-weighted assets
Bank		1,304,242	13.4			776,070	8.0			970,087	10.0
Consolidated Company		1,304,891	13.4			776,356	8.0			N/A	N/A

(1) In accordance with the Basel III rules.

					For Capital				To Be Categorized
(Dollars in thousands)	Actual				Adequacy Purposes(1)				as “Well Capitalized”(1)
							Minimum				Minimum
December 31, 2020	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 capital / % of average total assets
Bank	$	653,393	10.2	%	$	257,143	4.0	%	$	321,428	5.0	%
Consolidated Company		651,382	10.0			261,949	4.0			N/A	N/A
Common equity Tier 1 capital / % of risk-weighted assets
Bank		653,393	12.5			235,243	4.5			339,796	6.5
Consolidated Company		534,813	10.2			235,499	4.5			N/A	N/A
Tier 1 capital / % of risk-weighted assets
Bank		653,393	12.5			313,658	6.0			418,210	8.0
Consolidated Company		651,382	12.4			313,999	6.0			N/A	N/A
Total capital / % of risk-weighted assets
Bank		695,300	13.3			418,210	8.0			522,763	10.0
Consolidated Company		808,289	15.4			418,666	8.0			N/A	N/A

(1) In accordance with the Basel III rules.