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Minimum Regulatory Capital Requirements
 12 Months Ended
Dec. 31, 2019
Banking And Thrift [Abstract]  
Minimum Regulatory Capital Requirements

Note 18. Minimum Regulatory Capital Requirements

 

In August 2018, the Federal Reserve updated the Small Bank Holding Company Policy Statement (the "Statement"), in compliance with the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 ("EGRRCPA"). The Statement, among other things, exempts bank holding companies that have below a specified asset threshold from the consolidated regulatory capital requirements. The interim final rule expands the exemption to bank holding companies with consolidated total assets of less than $3 billion. Prior to August 2018, the Statement exempted bank holding companies with consolidated total assets of less than $1 billion. As a result of the interim final rule, the Company qualifies as of August 2018 as a small bank holding company and is no longer subject to regulatory capital requirements on a consolidated basis.

 

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that, 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 action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III rules”) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. As a part of the new requirements, the Common Equity Tier 1 Capital ratio is calculated and utilized in the assessment of capital for all institutions. The Company has made an election to not have the net unrealized gain or loss on available-for-sale securities included in computing regulatory capital. Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from 0.625% for 2016 to 2.50% by 2019. The capital conservation buffer for 2019 and beyond is 2.50%. Management believes as of December 31, 2019 and 2018, the Bank meets all capital adequacy requirement to which it is subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2019 and 2018, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

Federal and state banking regulations place certain restrictions on dividends paid by the Company. The total amount of dividends which may be paid at any date is generally limited to retained earnings of the Company. Pursuant to the EGRRCPA, regulators have provided for an optional, simplified measure of capital adequacy, the community bank leverage ratio ("CBLR") framework, for qualifying community bank organizations. Banks that qualify may opt in to the CBLR framework beginning January 1, 2020 or any time thereafter. The CBLR framework eliminates the four required capital ratios disclosed below and requires the disclosure of a single leverage ratio, with a minimum requirement of 9%.

In response to the novel coronavirus (“COVID-19”) pandemic, President Trump signed into law Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020.  Among other things, the CARES Act directs federal banking agencies to adopt interim final rules to lower the threshold under the CBLR from 9% to 8% and to provide a reasonable grace period for a community bank that falls below the threshold to regain compliance, in each case until the earlier of the termination date of the national emergency or December 31, 2020.  In April 2020, the federal banking agencies issued two interim final rules implementing this directive.  One interim final rule provides that, as of the second quarter 2020, banking organizations with leverage ratios of 8% or greater (and that meet the other existing qualifying criteria) may elect to use the CBLR framework.  It also establishes a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall below the 8% CBLR requirement, so long as the banking organization maintains a leverage ratio of 7% or greater.  The second interim final rule provides a transition from the temporary 8% CBLR requirement to a 9% CBLR requirement.  It establishes a minimum CBLR of 8% for the second through fourth quarters of 2020, 8.5% for 2021, and 9% thereafter, and maintains a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below the applicable CBLR requirement.  The Company is evaluating whether to opt in to the CBLR framework.

The Bank continues to be subject to various capital requirements administered by banking agencies. Risk based capital ratios for the Bank as of December 31, 2019 and 2018 are shown in the following table:

 

 

Actual

 

For Capital

Adequacy Purposes (1)

 

To Be Well Capitalized

Under the Prompt Corrective

Action Provisions

(Dollars in thousands)

Amount

$000s

 

 

 

Ratio

 

Amount

$000s

 

 

 

Ratio

 

Amount

$000s

 

 

 

Ratio

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To risk rated assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

79,911

 

 

 

11.82%

 

$

 

71,007

 

 

 

10.50%

 

$

 

67,626

 

 

 

10.00%

Tier I capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To risk rated assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

75,339

 

 

 

11.14%

 

$

 

57,482

 

 

 

8.50%

 

$

 

54,101

 

 

 

8.00%

Common equity tier 1 capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To risk rated assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

75,339

 

 

 

11.14%

 

$

 

47,338

 

 

 

7.00%

 

$

 

43,957

 

 

 

6.50%

Tier I capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To average assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

75,339

 

 

 

8.00%

 

$

 

61,216

 

 

 

6.50%

 

$

 

47,090

 

 

 

5.00%

 

Actual

 

For Capital

Adequacy Purposes (1)

 

To Be Well Capitalized

Under the Prompt Corrective

Action Provisions

(Dollars in thousands)

Amount

$000s

 

 

 

Ratio

 

Amount

$000s

 

 

 

Ratio

 

Amount

$000s

 

 

 

Ratio

As of December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To risk rated assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

48,811

 

 

 

12.11%

 

$

 

39,790

 

 

 

9.875%

 

$

 

40,294

 

 

 

10.00%

Tier I capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To risk rated assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

45,231

 

 

 

11.23%

 

$

 

31,731

 

 

 

7.875%

 

$

 

32,235

 

 

 

8.00%

Common equity tier 1 capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To risk rated assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

45,231

 

 

 

11.23%

 

$

 

25,687

 

 

 

6.375%

 

$

 

26,191

 

 

 

6.50%

Tier I capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(To average assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Blue Ridge Bank, N.A.

$

 

45,231

 

 

 

8.89%

 

$

 

20,342

 

 

 

4.000%

 

$

 

25,428

 

 

 

5.00%

 

 

(1)

Except with regard to the Bank’s Tier 1 to average assets ratio, the minimum capital requirement includes the phased-in portion of the Basel III Capital Rules capital conservation buffer as of the applicable date.

 

Dividend Restrictions—The Company's principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amounts of dividends that may be paid without approval of regulatory agencies. As of December 31, 2019, $13.6 million of retained earnings is available to pay dividends.