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REGULATORY MATTERS | 12 Months Ended
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Dec. 31, 2022
REGULATORY MATTERS [Abstract] |
REGULATORY MATTERS | 15. REGULATORY MATTERS Dividend Restrictions: The approval of the Federal Reserve Board (FRB) is required for the Bank to pay dividends to the Company if the total of all dividends declared in any calendar year exceeds the Bank’s net income (as defined) for that year combined with its retained net income for the preceding two calendar years. Under this formula, the Bank can declare dividends in 2023 without approval of the FRB or Pennsylvania Department of Banking of approximately $42,879,000, plus the Bank’s 2023 year-to-date net income at the time of the dividend declaration. Loans: The Bank is subject to regulatory restrictions which limit its ability to loan funds to the Company. At December 31, 2022, the Bank’s regulatory lending limit amounted to approximately $33,407,000. Regulatory Capital Requirements: Federal regulations require the Bank to maintain minimum amounts of capital. Specifically, the Bank is required to maintain certain minimum dollar amounts and ratios of Total, Tier I and Common Equity Tier I capital to risk-weighted assets and of Tier I capital to average total assets. In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (FDICIA) established five capital categories ranging from “well capitalized” to “critically under-capitalized.” Should any institution fail to meet the requirements to be considered “adequately capitalized”, it would become subject to a series of increasingly restrictive regulatory actions. As permitted by applicable federal regulation, the Bank has opted to use the community bank leverage ratio (the “CBLR”) framework for determining its capital adequacy. Under the CBLR framework a qualifying community bank is considered well-capitalized if its leverage ratio (Tier 1 capital divided by average total consolidated assets) exceeds 9%. Following the passage of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in response to the COVID-19 pandemic, the federal banking regulators revised the CBLR framework as follows: (i) beginning in the second quarter of 2020, a qualifying community bank need only have a leverage ratio of at least 8%, subject to the other qualifying requirements, and (ii) if a qualifying community bank’s leverage ratio falls below 8%, then it will have two calendar quarters to maintain a leverage ratio of 7% or greater. These revisions under the CARES Act are effective April 23, 2020 and will terminate upon the earlier of the termination of the national emergency related to COVID-19 or December 31, 2020. Following such termination there is a grace period for returning to the 9% CBLR threshold. The CBLR will be set at 8% for the remainder of 2020, 8.5% for 2021, and 9% thereafter. The grace period is also adjusted to account for the graduating increase. As a result, in 2020 and 2021, a qualifying community bank utilizing the grace period must maintain a CBLR of at least 7% and 7.5%, respectively. Thereafter, a qualifying community bank utilizing the grace period must maintain a CBLR of at least 8%. If a qualifying community bank fails to maintain the applicable minimum CBLR during the grace period, or if it is unable to restore compliance with the CBLR within the grace period, then it will revert to the Basel III capital framework and the normal Prompt Corrective Action capital categories will apply. At December 31, 2021, the Bank was considered “well-capitalized” under the CBLR framework, with a leverage ratio of 8.94%. At December 31, 2022, the Bank leverage ratio under the CBLR framework was 8.77%, which is less than 9.0% requirement to be considered “well-capitalized” under the CBLR. As such, as of December 31, 2022, and going forward, the Bank reverted to the prompt corrective action framework and will no longer utilize the CBLR framework. The following table provides the Bank’s computed risk‑based capital ratios as of December 31, 2022, which reflects the Bank being well capitalized on that date (dollars in thousands):
|  | Actual |  |  | For Capital Adequacy Purposes |  |  | To Be Well Capitalized Under Prompt Corrective Action Provisions |
2022 |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
Total Capital (to Risk Weighted Assets): |
Company |  | $ | 238,966 |  |  |  | 12.87 | % |  | $ | 148,567 |  |  |  | 8.00 | % |  | $ | 185,709 |  |  |  | 10.00 | %
Bank |  | $ | 222,714 |  |  |  | 12.01 | % |  | $ | 148,348 |  |  |  | 8.00 | % |  | $ | 185,435 |  |  |  | 10.00 | %
Tier 1 Capital (to Risk Weighted Assets): |
Company |  | $ | 210,250 |  |  |  | 11.32 | % |  | $ | 111,425 |  |  |  | 6.00 | % |  | $ | 148,567 |  |  |  | 8.00 | %
Bank |  | $ | 203,998 |  |  |  | 11.00 | % |  | $ | 111,261 |  |  |  | 6.00 | % |  | $ | 148,348 |  |  |  | 8.00 | %
Common Equity Tier 1 Capital (to Risk Weighted Assets): |
Company |  | $ | 202,750 |  |  |  | 10.92 | % |  | $ | 83,569 |  |  |  | 4.50 | % |  | $ | 120,711 |  |  |  | 6.50 | %
Bank |  | $ | 203,998 |  |  |  | 11.00 | % |  | $ | 83,446 |  |  |  | 4.50 | % |  | $ | 120,533 |  |  |  | 6.50 | %
Tier 1 Capital (to Average Assets): |
Company |  | $ | 210,250 |  |  |  | 9.03 | % |  | $ | 93,161 |  |  |  | 4.00 | % |  | $ | 116,451 |  |  |  | 5.00 | %
Bank |  | $ | 203,998 |  |  |  | 8.77 | % |  | $ | 93,075 |  |  |  | 4.00 | % |  | $ | 116,344 |  |  |  | 5.00 | %

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- Definition The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1F -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958575-112826 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -Subparagraph (c)(2) -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1A -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958569-112826 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -Subparagraph (a)(2) -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -Subparagraph (a)(1) -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1D -URI https://asc.fasb.org/extlink&oid=117337116&loc=SL5958573-112826 + Details
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