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REGULATORY CAPITAL REQUIREMENTS | 12 Months Ended
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Dec. 31, 2019
REGULATORY CAPITAL REQUIREMENTS |
REGULATORY CAPITAL REQUIREMENTS | 19. REGULATORY CAPITAL REQUIREMENTS 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, 2019 and 2018. On January 1, 2015, the Basel III Capital Rules became effective and include transition provisions through January 1, 2020. These rules provide for the following minimum capital to risk-weighted assets ratios as of January 1, 2015: 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. The capital conservation buffer requirement was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increased by 0.625% each subsequent January 1, until fully implemented at 2.5% on January 1, 2020. 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, 2019, 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. In accordance with the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have adopted, effective January 1, 2020, a final rule whereby financial institutions and financial institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9 percent, will be eligible to opt into a community bank leverage ratio framework (“qualifying community banking organizations”). Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than 9 percent will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules and will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action statutes. The agencies reserved the authority to disallow the use of the community bank leverage ratio framework by a financial institution or holding company, based on the risk profile of the organization. The following tables present actual capital levels and minimum required levels for the Company and the Bank under Basel III rules at December 31, 2019 and 2018:
|  | December 31, 2019 |
|  |  |  |  |  |  |  |  |  |  |  | Minimum Capital |  | Minimum To Be Well |
|  |  |  |  |  |  | Minimum Capital |  | Adequacy Requirement with |  | Capitalized Under Prompt |
|  | Actual Capital |  | Adequacy Requirement |  | Capital Conservation Buffer |  | Corrective Action Provisions |
(Dollars in thousands) |  | Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio |
Common equity tier 1 capital to risk-weighted assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 397,800 |  | 10.2 | % | $ | 176,121 |  | 4.5 | % | $ | 273,967 |  | 7.0 | % |  | n/a |  | n/a |
Bank |  |  | 474,056 |  | 12.1 |  |  | 176,114 |  | 4.5 |  |  | 273,954 |  | 7.0 |  | $ | 254,386 |  | 6.5 | %
Total capital to risk-weighted assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 510,862 |  | 13.1 |  |  | 313,105 |  | 8.0 |  |  | 410,950 |  | 10.5 |  |  | n/a |  | n/a |
Bank |  |  | 507,118 |  | 13.0 |  |  | 313,091 |  | 8.0 |  |  | 410,932 |  | 10.5 |  |  | 391,363 |  | 10.0 |
Tier 1 capital to risk-weighted assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 397,800 |  | 10.2 |  |  | 234,828 |  | 6.0 |  |  | 332,674 |  | 8.5 |  |  | n/a |  | n/a |
Bank |  |  | 474,056 |  | 12.1 |  |  | 234,818 |  | 6.0 |  |  | 332,659 |  | 8.5 |  |  | 313,091 |  | 8.0 |
Tier 1 capital to average assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 397,800 |  | 8.5 |  |  | 187,386 |  | 4.0 |  |  | n/a |  | n/a |  |  | n/a |  | n/a |
Bank |  |  | 474,056 |  | 10.1 |  |  | 187,377 |  | 4.0 |  |  | n/a |  | n/a |  |  | 234,222 |  | 5.0 |
|  | December 31, 2018 |
|  |  |  |  |  |  |  |  |  |  |  | Minimum Capital |  | Minimum To Be Well |
|  |  |  |  |  |  | Minimum Capital |  | Adequacy Requirement with |  | Capitalized Under Prompt |
|  | Actual Capital |  | Adequacy Requirement |  | Capital Conservation Buffer |  | Corrective Action Provisions |
(Dollars in thousands) |  | Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio |
Common equity tier 1 capital to risk-weighted assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 360,688 |  | 10.4 | % | $ | 155,836 |  | 4.5 | % | $ | 220,767 |  | 6.375 | % |  | n/a |  | n/a |
Bank |  |  | 438,963 |  | 12.7 |  |  | 155,831 |  | 4.5 |  |  | 220,761 |  | 6.375 |  | $ | 225,089 |  | 6.5 | %
Total capital to risk-weighted assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 472,382 |  | 13.6 |  |  | 277,041 |  | 8.0 |  |  | 341,973 |  | 9.875 |  |  | n/a |  | n/a |
Bank |  |  | 470,657 |  | 13.6 |  |  | 277,033 |  | 8.0 |  |  | 341,963 |  | 9.875 |  |  | 346,291 |  | 10.0 |
Tier 1 capital to risk-weighted assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 360,688 |  | 10.4 |  |  | 207,781 |  | 6.0 |  |  | 272,712 |  | 7.875 |  |  | n/a |  | n/a |
Bank |  |  | 438,963 |  | 12.7 |  |  | 207,775 |  | 6.0 |  |  | 272,704 |  | 7.875 |  |  | 277,033 |  | 8.0 |
Tier 1 capital to average assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 360,688 |  | 8.1 |  |  | 177,782 |  | 4.0 |  |  | n/a |  | n/a |  |  | n/a |  | n/a |
Bank |  |  | 438,963 |  | 9.9 |  |  | 177,776 |  | 4.0 |  |  | n/a |  | n/a |  |  | 222,220 |  | 5.0 |

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- 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 Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1C -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958572-112826 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1D -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958573-112826 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958570-112826 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958569-112826 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1G -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958577-112826 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1F -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958575-112826 Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1E -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958574-112826 Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1H -URI http://asc.fasb.org/extlink&oid=117337116&loc=d3e65071-112826 + Details
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