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Note 12 - Regulatory Capital
 9 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 12 – 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 capital adequacy guidelines of the regulatory framework for prompt corrective action, 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 September 30, 2025, 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 September 30, 2025, 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

 
                  

For Capital

  

Under Prompt

 
          

For Capital

  

Adequacy With

  

Corrective

 
  

Actual

  

Adequacy Purposes

  

Capital Buffer

  

Action Provisions

 

Bank Only

 

Amount

  

Ratio

  

Amount

  

Ratio

  

Amount

  

Ratio

  

Amount

  

Ratio

 

At September 30, 2025

                                

Total risk-based capital (to risk-weighted assets)

 $382,049   13.81% $221,372   8.00% $290,551   10.50% $276,715   10.00%

Tier 1 risk-based capital (to risk-weighted assets)

 $349,690   12.64% $166,029   6.00% $235,208   8.50% $221,372   8.00%

Tier 1 leverage capital (to average assets)

 $349,690   10.96% $127,647   4.00% $N/A   N/A  $159,558   5.00%

CET 1 capital (to risk-weighted assets)

 $349,690   12.64% $124,522   4.50% $193,701   7.00% $179,865   6.50%
                                 

At December 31, 2024

                                

Total risk-based capital (to risk-weighted assets)

 $368,953   14.18% $208,174   8.00% $273,228   10.50% $260,218   10.00%

Tier 1 risk-based capital (to risk-weighted assets)

 $336,416   12.93% $156,131   6.00% $221,185   8.50% $208,174   8.00%

Tier 1 leverage capital (to average assets)

 $336,416   11.24% $119,741   4.00% $N/A   N/A  $149,676   5.00%

CET 1 capital (to risk-weighted assets)

 $336,416   12.93% $117,098   4.50% $182,152   7.00% $169,141   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.  Failure to maintain the required buffer could result in limitations on the Bank's ability to pay dividends, repurchase shares, and pay discretionary bonuses, based on specified percentages of eligible retained income.  At September 30, 2025, the Bank’s capital exceeded the conservation buffer.

 

As a bank holding company registered with the Federal Reserve, the Company is subject to the capital adequacy requirements of the Federal Reserve. Bank holding companies with $3.0 billion or more in assets are 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 the Federal Reserve expects the holding company’s subsidiary bank to be well capitalized under the prompt corrective action regulations. 

 

Under Federal Reserve regulations, a bank holding company is considered a small bank holding company if its total consolidated assets are below $3.0 billion as of June 30 of a given year.  The Company's total consolidated assets were below $3.0 billion as of June 30, 2024, and therefore, the Company qualified as a small bank holding company for regulatory purposes for the 2024 calendar year.  As of June 30, 2025, the Company's total consolidated assets exceeded $3.0 billion, and accordingly, the Company ceased to qualify as a small bank holding company as of that reporting period.  As a result, the Company is subject to all regulatory requirements applicable to larger bank holding companies, including enhanced reporting, capital, and governance standards.

 

The following table presents the Company's regulatory capital ratios at the dates indicated:

 

  At September 30, At December 31,

Company Only

 

2025

 

2024

Total risk-based capital (to risk-weighted assets)

 

13.93%

 

14.53%

Tier 1 risk-based capital (to risk-weighted assets)

 

10.95%

 

11.36%

Tier 1 leverage capital (to average assets)

 

9.49%

 

9.87%

CET 1 capital (to risk-weighted assets)

 

10.95%

 

11.36%