NOTE 21 - STOCKHOLDERS’ EQUITY

The Company’s principal source of funds for dividend payments to shareholders is dividends received from the subsidiary Banks. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, as defined, combined with the retained net profits of the preceding two years, subject to the capital requirements and additional restrictions as discussed below. During 2020 the Banks could, without prior approval, declare dividends to the Company of approximately $11.4 million plus any 2020 net profits retained to the date of the dividend declaration.

The Company and the subsidiary Banks are subject to various regulatory capital requirements administered by the federal banking agencies. 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 the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Banks must meet specific guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

These quantitative measures established by regulation to ensure capital adequacy require the Company and Banks to maintain minimum amounts and ratios (set forth in the following tables). The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. Banks (Basel III rules) became effective for the Company and Banks on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule by January 1, 2019. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes, as of December 31, 2019, that the Company and the Banks meet all quantitative capital adequacy requirements to which they are subject.

The Company’s and the subsidiary Banks’ capital amounts and ratios as of December 31, 2019 are presented in the table below.

											To Be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes Including 2.5% Capital Conservation Buffer					Action Provisions Including 2.5% Capital Conservation Buffer
2019	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to risk-weighted assets):
Consolidated ⁽¹⁾	$	206,275		16.5	%	$	131,615		10.5	%	$	156,684		12.5	%
Premier Bank, Inc.		144,793		15.8			96,248		10.5			114,581		12.5
Citizens Deposit Bank		47,466		14.1			35,387		10.5			42,128		12.5

Tier I Capital (to risk-weighted assets):
Consolidated ⁽¹⁾	$	192,733		15.4	%	$	106,545		8.5	%	$	131,615		10.5	%
Premier Bank, Inc.		133,609		14.6			77,915		8.5			96,248		10.5
Citizens Deposit Bank		45,108		13.4			28,647		8.5			35,387		10.5

Common Equity Tier I Capital (to risk-weighted assets):
Consolidated ⁽¹⁾	$	186,733		14.9	%	$	87,743		7.0	%	$	112,812		9.0	%
Premier Bank, Inc.		133,609		14.6			64,166		7.0			82,499		9.0
Citizens Deposit Bank		45,108		13.4			23,592		7.0			30,322		9.0

Tier I Capital (to average assets):
Consolidated ⁽¹⁾	$	192,733		11.3	%	$	68,422		4	%	$	85,528		5	%
Premier Bank, Inc.		133,609		11.3			47,240		4			59,051		5
Citizens Deposit Bank		45,108		8.5			21,128		4			26,410		5

⁽¹⁾ The consolidated company is not subject to Prompt Corrective Action Provisions.

An additional capital conservation buffer is now part of the minimum regulatory capital ratios under the regulatory framework for prompt corrective action. The capital conservation buffer is measured as a percentage of risk weighted assets and was phased-in over a four-year period from 2016 thru 2019. As of January 1, 2019, the capital conservation buffer requirement is 2.50% of risk weighted assets over and above the regulatory minimum capital ratios for Tier 1 Capital to risk weighted assets, Total Capital to risk weighted assets and Common Equity Tier 1 Capital (CET1) to risk weighted assets. The consequences of not meeting the capital conservation buffer thresholds include restrictions on the payment of dividends, restrictions on the payment of discretionary bonuses, and restrictions on the repurchase of common shares by the Company. The capital ratios of the Affiliate Banks and the Company already exceed the new minimum capital ratios plus the fully phased-in 2.50% capital buffer requiring a CET1 Capital to risk-weighted assets ratio of at least 7.00%, a Tier 1 Capital to risk-weighted assets ratio of at least 8.50% and a Total Capital to risk-weighted assets ratio of at least 10.50%. The Company’s capital conservation buffer was 8.46% at December 31, 2019 and 7.88% at December 31, 2018, well in excess of the fully phased-in 2.50% required in 2019.

The Company’s and the subsidiary Banks’ capital amounts and ratios as of December 31, 2018 are presented in the table below.

											To Be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes ⁽¹⁾					Action Provisions
2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to risk-weighted assets):
Consolidated ⁽²⁾	$	190,770		15.9	%	$	96,110		8	%	$	120,138		10	%
Premier Bank, Inc.		141,302		15.4			73,320		8			91,650		10
Citizens Deposit Bank		42,284		14.8			22,852		8			28,565		10

Tier I Capital (to risk-weighted assets):
Consolidated ⁽²⁾	$	177,032		14.7	%	$	72,083		6	%	$	96,110		8	%
Premier Bank, Inc.		130,428		14.2			54,990		6			73,320		8
Citizens Deposit Bank		39,420		13.8			17,139		6			22,852		8

Common Equity Tier I Capital (to risk-weighted assets):
Consolidated ⁽²⁾	$	171,032		14.2	%	$	54,062		4.5	%	$	78,090		6.5	%
Premier Bank, Inc.		130,428		14.2			41,242		4.5			59,572		6.5
Citizens Deposit Bank		39,420		13.8			12,854		4.5			18,567		6.5

Tier I Capital (to average assets):
Consolidated ⁽²⁾	$	177,032		10.7	%	$	66,040		4	%	$	82,550		5	%
Premier Bank, Inc.		130,428		10.8			48,368		4			60,460		5
Citizens Deposit Bank		39,420		9.0			17,571		4			21,964		5

⁽¹⁾ The ratios for capital adequacy purposes do not include the additional capital conservation buffer.

⁽²⁾ The consolidated company is not subject to Prompt Corrective Action Provisions.

As of December 31, 2019 and 2018, the most recent notification from each of the Banks’ primary Federal regulators categorized the subsidiary Banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Banks must maintain minimum Total risk-based, Tier 1 risk-based, Tier 1 leverage and Common Equity Tier 1 risk-based ratios as set forth in the tables above. There are no conditions or events since that notification that management believes have changed the Banks’ categories.