Regulatory Capital

9 Months Ended

Sep. 30, 2018

Note 13 – Regulatory Capital

Horizon and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies and are assigned to a capital category. Failure to meet the minimum regulatory capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators, which if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective actions, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification 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 Bank to maintain minimum amounts and ratios of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined), or leverage ratio. Basel III rules require the Bank to maintain minimum amounts and ratios of common equity Tier I capital (as defined in the regulation) to risk-weighted assets (as defined). Additionally, under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital.

To be categorized as well capitalized, the Bank must maintain minimum Total risk-based, Tier I risk-based, common equity Tier I risk-based and Tier I leverage ratios as set forth in the table below. As of September 30, 2018 and December 31, 2017, the Bank met all capital adequacy requirements to be considered well capitalized. There have been no conditions or events since the end of the third quarter of 2018 that management believes have changed the Bank’s classification as well capitalized. There is no threshold for well-capitalized status for bank holding companies.

Horizon and the Bank’s actual and required capital ratios as of September 30, 2018 and December 31, 2017 were as follows:


	Actual					Required for Capital¹ Adequacy Purposes					Required For Capital¹ Adequacy Purposes with Capital Buffer					Well Capitalized Under Prompt¹ Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2018
Total capital¹(to risk-weighted assets)
Consolidated	$	417,728		13.31	%	$	251,097		8.00	%	$	290,331		9.25	%		N/A		N/A
Bank		397,610		12.66	%		251,262		8.00	%		290,522		9.25	%	$	314,078		10.00	%
Tier 1 capital¹ (to risk-weighted assets)
Consolidated		399,885		12.74	%		188,323		6.00	%		227,557		7.25	%		N/A		N/A
Bank		379,767		12.09	%		188,447		6.00	%		227,706		7.25	%		251,262		8.00	%
Common equity tier 1 capital¹ (to risk-weighted assets)
Consolidated		361,422		11.52	%		141,242		4.50	%		180,476		5.75	%		N/A		N/A
Bank		379,767		12.09	%		141,335		4.50	%		180,595		5.75	%		204,150		6.50	%
Tier 1 capital¹ (to average assets)
Consolidated		399,885		10.05	%		159,098		4.00	%		159,098		4.00	%		N/A		N/A
Bank		379,767		9.53	%		159,405		4.00	%		159,405		4.00	%		199,257		5.00	%
December 31, 2017
Total capital¹(to risk-weighted assets)
Consolidated	$	384,800		12.91	%	$	238,543		8.00	%	$	275,816		9.25	%		N/A		N/A
Bank		382,788		12.85	%		238,386		8.00	%		275,634		9.25	%	$	297,982		10.00	%
Tier 1 capital¹ (to risk-weighted assets)
Consolidated		368,355		12.35	%		178,907		6.00	%		216,180		7.25	%		N/A		N/A
Bank		366,343		12.29	%		178,790		6.00	%		216,038		7.25	%		238,386		8.00	%
Common equity tier 1 capital¹ (to risk-weighted assets)
Consolidated		329,892		11.06	%		134,181		4.50	%		171,454		5.75	%		N/A		N/A
Bank		366,343		12.29	%		134,092		4.50	%		171,340		5.75	%		193,689		6.50	%
Tier 1 capital¹ (to average assets)
Consolidated		368,355		9.92	%		148,503		4.00	%		148,503		4.00	%		N/A		N/A
Bank		366,343		9.89	%		148,116		4.00	%		148,116		4.00	%		185,145		5.00	%

- Definition

The entire disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action provisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.

+ References

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+ Details