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Note 13 - Regulatory Capital
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 13 – REGULATORY CAPITAL

 

The Bank is subject to various regulatory capital requirements administered by the Federal Reserve and the FDIC. 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 Company’s consolidated financial statements. Under capital adequacy guidelines of the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

 

Under the risk-based capital adequacy framework, quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 capital (as defined in the regulations) to total average assets (as defined), and minimum ratios of Tier 1 total capital (as defined) and common equity Tier 1 (“CET 1”) capital to risk-weighted assets (as defined).

 

The Bank must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and CET 1 capital ratios as set forth in the table below to be categorized as well capitalized. At June 30, 2024, the Bank was categorized as well capitalized under applicable regulatory requirements. There are no conditions or events since that notification that management believes have changed the Bank’s category. Management believes, at June 30, 2024, that the Bank met all capital adequacy requirements.

 

The following tables compare the Bank’s actual capital amounts and ratios to their minimum regulatory capital requirements and well capitalized regulatory capital at the dates indicated:

 

                          

To be Well Capitalized

 
                          

Under Prompt

 
          

For Capital

  

For Capital Adequacy

  

Corrective

 
  

Actual

  

Adequacy Purposes

  

with Capital Buffer

  

Action Provisions

 

Bank Only

 

Amount

  

Ratio

  

Amount

  

Ratio

  

Amount

  

Ratio

  

Amount

  

Ratio

 

At June 30, 2024

                                

Total risk-based capital

                                

(to risk-weighted assets)

 $355,165   13.85% $205,122   8.00% $269,223   10.50% $256,403   10.00%

Tier 1 risk-based capital

                                

(to risk-weighted assets)

 $323,105   12.60% $153,842   6.00% $217,943   8.50% $205,122   8.00%

Tier 1 leverage capital

                                

(to average assets)

 $323,105   10.94% $118,153   4.00% $N/A   N/A  $147,691   5.00%

CET 1 capital

                                

(to risk-weighted assets)

 $323,105   12.60% $115,381   4.50% $179,482   7.00% $166,662   6.50%
                                 

At December 31, 2023

                                

Total risk-based capital

                                

(to risk-weighted assets)

 $339,436   13.37% $203,094   8.00% $266,561   10.50% $253,868   10.00%

Tier 1 risk-based capital

                                

(to risk-weighted assets)

 $307,686   12.12% $152,321   6.00% $215,787   8.50% $203,094   8.00%

Tier 1 leverage capital

                                

(to average assets)

 $307,686   10.39% $118,488   4.00% $N/A   N/A  $148,109   5.00%

CET 1 capital

                                

(to risk-weighted assets)

 $307,686   12.12% $114,240   4.50% $177,707   7.00% $165,014   6.50%

 

In addition to the minimum CET 1, Tier 1, total capital and leverage ratios, the Bank is required to maintain a capital conservation buffer consisting of additional CET 1 capital greater than 2.5% of risk-weighted assets above the required minimum capital levels to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. At June 30, 2024, the Bank’s capital exceeded the minimum required capital with the required conservation buffer.

 

The Company is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. Bank holding companies with less than $3.0 billion in assets are generally not subject to compliance with the Federal Reserve’s capital regulations, which are generally the same as the capital regulations applicable to the Bank. The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to the holding company’s subsidiary bank and expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations. If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets at June 30, 2024, it would have exceeded all regulatory capital requirements. For informational purposes, the regulatory capital ratios calculated for the Company at  June 30, 2024 were 9.5% for Tier 1 leverage-based capital, 10.9% for Tier 1 risk-based capital, 14.1% for total risk-based capital, and 10.9% for CET 1 capital ratio. The regulatory capital ratios calculated for the Company at December 31, 2023 were 9.0% for Tier 1 leverage-based capital, 10.5% for Tier 1 risk-based capital, 13.7% for total risk-based capital, and 10.5% for CET 1 capital ratio.