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Regulatory & Capital Matters
 12 Months Ended
Dec. 31, 2019
Regulatory & Capital Matters  
Regulatory & Capital Matters

Note 16: Regulatory & Capital Matters

 

The Bank is subject to the risk-based capital regulatory guidelines, which include the methodology for calculating the risk-weighted Bank assets, developed by the Office of the Comptroller of the Currency (the “OCC”) and the other bank regulatory agencies.  In connection with the current economic environment, the Bank’s current level of nonperforming assets and the risk-based capital guidelines, the Bank’s board of directors’ guidelines are for the Bank to maintain a Tier 1 leverage capital ratio at or above eight percent (8%) and a total risk-based capital ratio at or above twelve percent (12%).  The Bank currently exceeds those thresholds.

 

Bank holding companies are required to maintain minimum levels of capital in accordance with capital guidelines implemented by the Board of Governors of the Federal Reserve System.  The general bank and holding company capital adequacy guidelines in force as of the periods reported are shown in the accompanying table, as are the capital ratios of the Company and the Bank, as of December 31, 2019, and December 31, 2018.

 

In July 2013, the U.S. federal banking authorities issued final rules (the “Basel III Rules”) establishing more stringent regulatory capital requirements for U.S. banking institutions, which went into effect on January 1, 2015.  A detailed discussion of the Basel III Rules is included in Part I, Item 1 of the under the heading “Supervision and Regulation.”

 

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies.  The capital ratios below are calculated pursuant to the capital requirements in effect for the periods reported below.

 

Capital levels and industry defined regulatory minimum required levels at December 31, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minimum Capital

 

Well Capitalized

 

 

 

 

 

 

 

 

 

Adequacy with Capital

 

Under Prompt Corrective

 

 

 

Actual

 

Conservation Buffer, if applicable1

 

Action Provisions2

 

 

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

251,477

 

11.14

%

 

$

158,020

 

7.000

%

 

 

N/A

 

N/A

 

Old Second Bank

 

 

322,496

 

14.35

 

 

 

157,315

 

7.000

 

 

$

146,078

 

6.50

%

Total capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

327,886

 

14.53

 

 

 

236,944

 

10.500

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

342,280

 

15.23

 

 

 

235,978

 

10.500

 

 

 

224,741

 

10.00

 

Tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

308,102

 

13.65

 

 

 

191,858

 

8.500

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

322,496

 

14.35

 

 

 

191,026

 

8.500

 

 

 

179,789

 

8.00

 

Tier 1 capital to average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

308,102

 

11.93

 

 

 

103,303

 

4.00

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

322,496

 

12.50

 

 

 

103,199

 

4.00

 

 

 

128,998

 

5.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

207,597

 

9.29

%

 

$

142,458

 

6.375

%

 

 

N/A

 

N/A

 

Old Second Bank

 

 

295,599

 

13.29

 

 

 

141,794

 

6.375

 

 

$

144,574

 

6.50

%

Total capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

282,126

 

12.63

 

 

 

220,585

 

9.875

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

314,600

 

14.14

 

 

 

219,708

 

9.875

 

 

 

222,489

 

10.00

 

Tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

263,125

 

11.78

 

 

 

175,901

 

7.875

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

295,599

 

13.29

 

 

 

175,157

 

7.875

 

 

 

177,938

 

8.00

 

Tier 1 capital to average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

263,125

 

10.08

 

 

 

104,415

 

4.00

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

295,599

 

11.36

 

 

 

104,084

 

4.00

 

 

 

130,105

 

5.00

 

 

1  As of December 31, 2019, amounts are shown inclusive of a capital conservation buffer of 2.50%; as compared to 1.875% at December 31, 2018. Under the Federal Reserve’s Small Bank Holding Company Policy Statement, the Company is not subject to the minimum capital adequacy and capital conservation buffer capital requirements at the holding company level, unless otherwise advised by the Federal Reserve (such capital requirements are applicable only at the Bank level). Although the minimum regulatory capital requirements are not applicable to the Company, we calculate these ratios for our own planning and monitoring purposes.

2 The prompt corrective action provisions are only applicable at the Bank level. The Bank exceeded the general minimum regulatory requirements to be considered “well capitalized.”

 

Dividend Restrictions

 

In addition to the above requirements, banking regulations and capital guidelines generally limit the amount of dividends that may be paid by a Bank without prior regulatory approval.  Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s profits, combined with the retained profit of the previous two years, subject to the capital requirements described above.  Pursuant to the Basel III rules that were fully phased-in at January 1, 2019, the Bank must keep a capital conservation buffer of 2.5% on all risk-based capital requirements in order to avoid additional limitations on capital distributions.