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Regulatory Requirements and Restrictions

12 Months Ended

Dec. 31, 2020

Regulatory Requirements and Restrictions

Regulatory Requirements and Restrictions

NOTE 18: Regulatory Requirements and Restrictions

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. 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 Corporation’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital 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 amounts and classification are subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Federal banking regulations also impose regulatory capital requirements on bank holding companies. Under the small bank holding company policy statement of

the FRB, which applies to certain bank holding companies with consolidated total assets of less than $3 billion, the Corporation is not subject to regulatory capital requirements.

As of December 31, 2020, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized under regulations applicable at December 31, 2020, the Bank was required to maintain minimum total risk-based, Tier 1 risk-based, CET1 risk-based and Tier 1 leverage ratios as set forth in the table below.

The Corporation’s and the Bank’s actual capital amounts and ratios as of December 31, 2020 and 2019 are presented in the following table along with regulatory requirements for the Bank and requirements that apply to bank holding companies that are subject to regulatory capital requirements for bank holding companies. The Corporation’s consolidated capital is determined under regulations that apply to bank holding companies that are not small bank holding companies. Total risk-weighted assets at December 31, 2020 for the Corporation were $1.57 billion and for the Bank were $1.55 billion. Total risk-weighted assets at December 31, 2019 for the Corporation were $1.32 billion and for the Bank were $1.29 billion. Management believes that, as of December 31, 2020, the Bank met all capital adequacy requirements to which it is subject.

Minimum To Be

Well Capitalized

Under Prompt

Minimum Capital

Corrective Action

Actual

Requirements

Provisions

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of December 31, 2020:

Total Capital (to Risk-Weighted Assets)

Corporation

$

240,060

15.2

%

$

125,947

8.0

%

N/A

C&F Bank

214,151

13.8

124,291

8.0

$

155,364

10.0

%

Tier 1 Capital (to Risk-Weighted Assets)

Corporation

196,140

12.5

94,460

6.0

N/A

C&F Bank

194,487

12.5

93,219

6.0

124,291

8.0

Common Equity Tier 1 Capital (to Risk-Weighted Assets)

Corporation

171,140

10.9

70,845

4.5

N/A

C&F Bank

194,487

12.5

69,914

4.5

100,987

6.5

Tier 1 Capital (to Average Tangible Assets)

Corporation

196,140

9.6

81,414

4.0

N/A

C&F Bank

194,487

9.6

80,640

4.0

100,800

5.0

As of December 31, 2019:

Total Capital (to Risk-Weighted Assets)

Corporation

$

195,927

14.9

%

$

105,544

8.0

%

N/A

C&F Bank

181,369

14.0

103,307

8.0

$

129,134

10.0

%

Tier 1 Capital (to Risk-Weighted Assets)

Corporation

179,233

13.6

79,158

6.0

N/A

C&F Bank

165,021

12.8

77,480

6.0

103,307

8.0

Common Equity Tier 1 Capital (to Risk-Weighted Assets)

Corporation

154,233

11.7

59,369

4.5

N/A

C&F Bank

165,021

12.8

58,110

4.5

83,937

6.5

Tier 1 Capital (to Average Tangible Assets)

Corporation

179,233

11.1

64,863

4.0

N/A

C&F Bank

165,021

10.3

64,201

4.0

80,251

5.0

In addition to the regulatory risk-based capital amounts presented above, the Bank must maintain a capital conservation buffer of additional capital of 2.5 percent of risk-weighted assets as required by the Basel III Final Rule. At December 31, 2020, the Bank exceeded the total capital conservation buffer and the tier 1 capital conservation buffer by 328 and 402 basis points, respectively. At December 31, 2019, the Bank exceeded the total capital conservation buffer and the tier 1 capital conservation buffer by 355 and 428 basis points, respectively.

Between 2003 and 2007, the Corporation’s statutory business trusts issued $25.00 million of aggregate trust preferred securities. Based on the Corporation’s Tier 1 capital levels, the entire $25.00 million of trust preferred securities was included in the Corporation’s Tier 1 capital as of December 31, 2020 and 2019. The Corporation’s 2028 Subordinated Notes, assumed upon the acquisition of Peoples in 2020, and the Corporation’s 2030 Subordinated Notes, issued in 2020, each qualify for inclusion in Tier 2 capital of the Corporation. In each case, the amount included in regulatory capital with respect to trust preferred securities or subordinated notes may be reduced as those instruments near maturity.

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by C&F Bank to the Corporation. The total amount of dividends that may be paid at any date by C&F Bank is generally limited to the retained earnings of C&F Bank, while other measures of capital adequacy may also restrict the Bank’s ability to declare dividends.

- 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.

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