Regulatory Matters

12 Months Ended

Dec. 31, 2024

Banking And Thrift Disclosure [Abstract]

17. REGULATORY MATTERS

Bancshares and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Any institution that fails to meet its minimum capital requirements is subject to actions by regulators that could have a direct material effect on its financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines based on the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Bancshares’ and the Bank’s capital amounts and the Bank’s classification under the regulatory framework for prompt corrective action are also subject to qualitative judgments by the regulators about the components, risk weightings and other factors.

The Basel III Capital Rules require Bancshares and the Bank to maintain a capital conservation buffer, composed entirely of common equity tier 1 capital (“CET1”), of 2.5%, effectively resulting in minimum ratios of (1) CET1 to risk-weighted assets of 7.0%, (2) Tier 1 capital to risk-weighted assets of 8.5%, (3) total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of 10.5% and (4) Tier 1 capital to average quarterly assets as reported on consolidated financial statements (known as the “leverage ratio”) of 4.0%.

The CET1, Tier 1 and total capital ratios are calculated by dividing the respective capital amounts by risk weighted assets. Risk weighted assets include total assets, excluding goodwill and other intangible assets, allocated by risk weight category, and certain off-balance-sheet items. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, excluding goodwill and other intangible assets.

In response to the COVID-19 pandemic, in March 2020 the joint federal bank regulatory agencies issued an interim final rule that allowed banking organizations that implemented CECL in 2020 to mitigate the effects of the CECL accounting standard in their regulatory capital for two years. This two-year delay is in addition to the three-year transition period that the agencies had already made available. The Company adopted the option provided by the interim final rule, which delayed the effects of CECL on its regulatory capital through 2021, after which the effects were phased in over a three-year period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period include both the initial impact of the Company’s adoption of CECL on January 1, 2020 and 25% of subsequent changes in the Company’s allowance for credit losses during each quarter of the two-year period ended December 31, 2021. The cumulative amount of the transition adjustments was phased in over a three-year transition period that began on January 1, 2022, with 75% recognized in 2022, 50% recognized in 2023, and 25% recognized in 2024.

To meet the capital adequacy requirements, Bancshares and the Bank must maintain minimum capital amounts and ratios of CET1, Tier 1 and Total capital to risk weighted assets, and of Tier 1 capital to adjusted quarterly average assets as defined in the regulations. As of December 31, 2024, Bancshares and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2024, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. There have been no conditions or events since that notification which management believes have changed the Bank’s category. To be categorized as well capitalized the Bank must maintain minimum CET1 risk-based, Tier 1 risk-based, total risk-based and Tier 1 leverage ratios as set forth in the table below.

The following is a summary of Bancshares’ and the Bank’s capital ratios at December 31, 2024 and 2023:


	Actual					Minimum Required For Capital Adequacy Purposes					Minimum Required Plus Capital Conservation Buffer					To Be Categorized As Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
CONSOLIDATED:
As of December 31, 2024
CET1 Capital (to Risk Weighted Assets)	$	3,908,497		16.42	%	$	1,071,015		4.50	%	$	1,666,024		7.00	%	N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		3,908,497		16.42			1,428,021		6.00			2,023,029		8.50		N/A		N/A
Total Capital (to Risk Weighted Assets)		4,206,669		17.67			1,904,028		8.00			2,499,036		10.50		N/A		N/A
Tier 1 Capital (to Average Tangible Assets)		3,908,497		10.82			1,445,504		4.00			1,445,504		4.00		N/A		N/A
As of December 31, 2023
CET1 Capital (to Risk Weighted Assets)	$	3,681,430		15.54	%	$	1,065,744		4.50	%	$	1,657,824		7.00	%	N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		3,681,430		15.54			1,420,992		6.00			2,013,072		8.50		N/A		N/A
Total Capital (to Risk Weighted Assets)		3,923,052		16.56			1,894,656		8.00			2,486,736		10.50		N/A		N/A
Tier 1 Capital (to Average Tangible Assets)		3,681,430		10.39			1,417,440		4.00			1,417,440		4.00		N/A		N/A
BANK ONLY:
As of December 31, 2024
CET1 Capital (to Risk Weighted Assets)	$	3,893,275		16.36	%	$	1,070,586		4.50	%	$	1,665,356		7.00	%	$	1,546,402		6.50	%
Tier 1 Capital (to Risk Weighted Assets)		3,893,275		16.36			1,427,448		6.00			2,022,219		8.50			1,903,264		8.00
Total Capital (to Risk Weighted Assets)		4,191,332		17.62			1,903,264		8.00			2,498,035		10.50			2,379,081		10.00
Tier 1 Capital (to Average Tangible Assets)		3,893,275		10.78			1,445,188		4.00			1,445,188		4.00			1,806,485		5.00
As of December 31, 2023
CET1 Capital (to Risk Weighted Assets)	$	3,665,750		15.48	%	$	1,065,417		4.50	%	$	1,657,315		7.00	%	$	1,538,935		6.50	%
Tier 1 Capital (to Risk Weighted Assets)		3,665,750		15.48			1,420,556		6.00			2,012,454		8.50			1,894,074		8.00
Total Capital (to Risk Weighted Assets)		3,907,375		16.50			1,894,074		8.00			2,485,972		10.50			2,367,593		10.00
Tier 1 Capital (to Average Tangible Assets)		3,665,750		10.35			1,417,269		4.00			1,417,269		4.00			1,771,586		5.00

Dividends paid by Bancshares and the Bank are subject to restrictions by certain regulatory agencies. Dividends declared to be paid by Bancshares during the years ended December 31, 2024, 2023 and 2022 were $214.4 million, $205.7 million and $193.1 million, respectively. Dividends paid by the Bank to Bancshares during the years ended December 31, 2024, 2023 and 2022 were $352.8 million, $373.2 million and $256.7 million, respectively.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details