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Regulatory Matters
 12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Regulatory Matters Regulatory Matters
Banks and bank holding companies are subject to various regulatory capital requirements administered by 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 financial statements of the Bank and the Company.
Historically, the Company had been operating under the Small Bank Holding Company Policy Statement, which exempts bank holding companies that have total consolidated assets of less than $3.0 billion and meet other criteria from the Federal Reserve’s risk-based- and leverage capital rules.
Because the Company’s consolidated assets exceeded $3.0 billion as of September 30, 2022, the Company is no longer eligible for the Federal Reserve’s Small Bank Holding Company Policy Statement and will also be evaluated relative to the capital adequacy standards established by the Federal Reserve going forward. A bank holding company that crosses the $3.0 billion total consolidated assets threshold as of June 30 of a particular year is no longer permitted to file reports as a small holding company beginning the following March. The Company was not in excess of $3.0 billion as of June 30, 2022, and accordingly prepared and filed financial reports with the Federal Reserve as a small bank holding company. Currently, the Federal Reserve assesses the capital position of the Company based on these reports by reviewing its debt-to-equity ratio and its capacity to serve as a source of strength to the Bank. If the Company’s total consolidated assets remain in excess of $3.0 billion as of June 30, 2023, starting in March 2024 the Company will cease filing financial reports with the Federal Reserve as though it were a small bank holding company.
Under the regulatory capital adequacy guidelines, the Company and Bank must meet specific capital adequacy guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital ratios and the Bank’s classification under the prompt corrective action guidelines are also 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 Bank to maintain minimum amounts and ratios of total risk-based capital, Tier 1 capital and common equity Tier 1 capital to risk- weighted assets (as defined in the regulations), and Tier 1 capital to average adjusted total consolidated assets (as defined). According to regulatory guidelines, only the amount of deferred tax assets that can be realized within the next 12 months based on projected taxable income is allowed in the computation. There were no disallowed deferred tax assets at December 31, 2022 and 2021.
Under the capital adequacy guidelines on the regulatory framework for prompt corrective action (as set forth in the table on the next page), the Bank met the criteria to be considered well capitalized as of December 31, 2022 and 2021. Such determination has been made based on the Bank’s total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 risk-based capital ratio, and leverage ratio. There have been no conditions or events since December 31, 2022, that management believes would change the Bank’s category.
Under capital adequacy regulations, the Company and the Bank must maintain a capital conservation buffer of common equity Tier 1 capital of more than 2.5% above the minimum risk-based capital ratios to avoid restrictions on the payment of capital distributions and discretionary bonus payments.
Management believes the Company and the Bank exceed all capital adequacy requirements to which they are subject, including the ratios described below and the capital conservation buffer, as of December 31, 2022.
The Company and Bank’s actual and required capital amounts and ratios are as follows:
Actual
Minimum Required
for Capital
Adequacy Purposes (1)
Required to be Well
Capitalized
Under the Prompt
Corrective Action
Provisions
AmountRatio AmountRatio AmountRatio
(dollars in thousands)
December 31, 2022
Leverage Capital (to average assets)
Consolidated$249,250 7.97 %$125,141 4.00 %N/AN/A
Bank Only267,699 8.56 %125,025 4.00 %156,281 5.00 %
Common Equity Tier 1 risk-based capital ratio (to risk-weighted assets)
Consolidated245,750 8.92 %124,027 4.50 %N/AN/A
Bank Only267,699 9.73 %123,822 4.50 %178,854 6.50 %
Tier 1 Capital (to risk-weighted assets)
Consolidated249,250 9.04 %165,370 6.00 %N/AN/A
Bank Only267,699 9.73 %165,096 6.00 %220,128 8.00 %
Total Capital (to risk-weighted assets)
Consolidated329,203 11.94 %220,493 8.00 %N/AN/A
Bank Only302,595 11.00 %220,128 8.00 %275,160 10.00 %
December 31, 2021
Leverage Capital (to average assets)
Consolidated$204,585 8.07 %$101,460 4.00 %N/AN/A
Bank Only201,783 7.96 %101,350 4.00 %126,687 5.00 %
Common Equity Tier 1 risk-based capital ratio (to risk-weighted assets)
Consolidated201,085 11.06 %81,834 4.50 %N/AN/A
Bank Only201,783 11.12 %81,623 4.50 %117,900 6.50 %
Tier 1 Capital (to risk-weighted assets)
Consolidated204,585 11.25 %109,112 6.00 %N/AN/A
Bank Only201,783 11.12 %108,830 6.00 %145,107 8.00 %
Total Capital (to risk-weighted assets)
Consolidated252,405 13.88 %145,483 8.00 %N/AN/A
Bank Only224,545 12.38 %145,107 8.00 %181,384 10.00 %
(1)Presents the minimum capital adequacy requirements that apply to the Bank (excluding the capital conservation buffer) and the Company. Prior to September 30, 2022, the Company operated under the Small Bank Holding Company Policy Statement and therefore was not subject to Basel III capital adequacy requirements.