Regulatory Matters

12 Months Ended

Dec. 31, 2020

Regulatory Capital Requirements [Abstract]

Regulatory Matters

17. Regulatory Matters

Premier and the Bank are subject to minimum capital adequacy guidelines. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators, which could have a material impact on Premier’s financial statements.  Under capital adequacy guidelines, Premier and the Bank must maintain capital amounts in excess of minimum ratios based on quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

In July 2013, the Federal Reserve and the FDIC approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (commonly known as Basel III).  Under the final rules, which began for Premier and the Bank on January 1, 2015, and are subject to a phase-in period through January 1, 2019, minimum requirements will increase for both quantity and quality of capital held by Premier and the Bank.  The rules include a minimum common equity tier 1 capital to risk-weighted assets ratio (“CET1”) of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which effectively results in a minimum CET1 ratio of 7.0%.  Basel III raises the minimum ratio of tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum tier 1 capital ratio of 8.5%), which effectively results in a minimum total capital to risk-weighted assets ratio of 10.5%, and requires a minimum leverage ratio of 4.0%.  Basel III also makes changes to risk weights for certain assets and off-balance sheet exposures.

The federal banking agencies have also established a system of “prompt corrective action” to resolve certain problems of undercapitalized banks.  The regulatory agencies can initiate certain mandatory actions if the Bank fails to meet the minimum capital requirements, which could have a material effect on Premier’s financial statements.

The following schedule presents Premier consolidated and the Bank’s regulatory capital ratios as of December 31, 2020 and 2019 (dollars in thousands):

	December 31, 2020
	Actual					Minimum Required for Adequately Capitalized					Minimum Required to be Well Capitalized for Prompt Corrective Action
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets)
Consolidated	$	624,069		10.40	%	$	270,017		4.5	%	N/A		N/A
Premier Bank	$	629,653		10.52	%	$	269,396		4.5	%	$	389,128		6.5	%
Tier 1 Capital
Consolidated	$	659,069		9.76	%	$	270,072		4.0	%	N/A		N/A
Premier Bank	$	629,653		9.36	%	$	269,189		4.0	%	$	336,487		5.0	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	659,069		10.98	%	$	360,022		6.0	%	N/A		N/A
Premier Bank	$	629,653		10.52	%	$	359,195		6.0	%	$	478,926		8.0	%
Total Capital (to Risk Weighted Assets)
Consolidated	$	784,148		13.07	%	$	480,030		8.0	%	N/A		N/A
Premier Bank	$	704,586		11.77	%	$	478,926		8.0	%	$	598,658		10.0	%

(1) Excludes capital conservation buffer of 2.50% as of December 31, 2020.

	December 31, 2019
	Actual					Minimum Required for Adequately Capitalized					Minimum Required to be Well Capitalized for Prompt Corrective Action
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets)
Consolidated	$	322,813		10.60	%	$	137,001		4.5	%	N/A		N/A
First Federal	$	335,251		11.03	%	$	136,752		4.5	%	$	197,531		6.5	%
Tier 1 Capital
Consolidated	$	357,813		10.78	%	$	132,805		4.0	%	N/A		N/A
First Federal	$	335,251		10.13	%	$	132,435		4.0	%	$	165,544		5.0	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	357,813		11.75	%	$	182,667		6.0	%	N/A		N/A
First Federal	$	335,251		11.03	%	$	182,336		6.0	%	$	243,114		8.0	%
Total Capital (to Risk Weighted Assets)
Consolidated	$	389,056		12.78	%	$	243,556		8.0	%	N/A		N/A
First Federal	$	366,494		12.06	%	$	243,114		8.0	%	$	303,893		10.0	%

(1) Excludes capital conservation buffer of 2.50% as of December 31, 2019.

Dividend Restrictions - Dividends paid by the Bank to Premier are subject to various regulatory restrictions. The Bank paid $24.0 million in dividends to Premier in 2020 and $36.0 million in 2019. The Bank may not pay dividends to Premier in excess of its net profits (as defined by statute) for the last two fiscal years, plus any year to date net profits without the approval of the ODFI.  First Insurance paid $400,000 in dividends to Premier in 2020 and $1.2 million in dividends in 2019.  First Defiance Risk Management paid $1.5 million in dividends to Premier in 2020 and $1.4 million in 2019.