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Capital Ratios | 6 Months Ended
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Jun. 30, 2020
Capital Ratios [Abstract] |
Capital Ratios | Note 12. Capital Ratios Capital adequacy is currently defined by regulatory agencies through the use of several minimum required ratios. The capital ratios to be considered “well capitalized” are: (1) Common Equity Tier 1 (CET1) of 6.5%, (2) Tier 1 Leverage of 5%, (3) Tier 1 Risk-Based Capital of 8%, and (4) Total Risk-Based Capital of 10%. In addition, a capital conservation buffer of 2.50% is applicable to all of the capital ratios except for the Tier 1 Leverage ratio. The capital conservation buffer is equal to the lowest value of the three applicable capital ratios less the regulatory minimum for each respective capital measurement. The Bank’s capital conservation buffer at June 30, 2020 was 7.64% (total risk-based capital 15.64% less 8.00%) compared to the 2020 regulatory buffer of 2.50%. Compliance with the capital conservation buffer is required in order to avoid limitations to certain capital distributions and is in addition to the minimum required capital requirements. As of June 30, 2020, the Bank was “well capitalized”. In 2019, the Community Bank Leverage Ratio (CBLR) was approved by federal banking agencies as an optional capital measure available to Qualifying Community Banking Organizations (QCBO). If a bank qualifies as a QCBR and maintains a CBLR of 9% or greater, the bank would be considered “well-capitalized” for regulatory capital purposes and exempt from complying with the risk-based capital rule described above. The CBLR rule took effect January 1, 2020 and banks could opt-in through an election in the first quarter 2020 regulatory filing. The Bank met the criteria of a QCBR but did not opt-in to the CBLR. The Bank is participating in the Paycheck Protection Program (PPP) and the Paycheck Protection Program Liquidity Facility (PPPLF) to fund PPP Loans. In accordance with regulatory guidance, PPP loans pledged as collateral for PPPLF, and PPPLF advances, are excluded from leverage capital ratios. PPP loans will also carry a 0% risk-weight for risk-based capital rules. The consolidated asset limit on small bank holding companies is $3 billion and a company with assets under that limit is not subject to the consolidated capital rules but may file reports that include capital amounts and ratios. The Corporation has elected to file those reports. The following table summarizes the regulatory capital requirements and results as of June 30, 2020 and December 31, 2019 for the Corporation and the Bank:
|  |  |  |  |  | Regulatory Ratios
|  |  |  |  |  | Adequately |  | Well
|  | June 30, |  | December 31, |  | Capitalized |  | Capitalized
(Dollars in thousands) |  | 2020 |  | 2019 |  | Minimum |  | Minimum
Common Equity Tier 1 Risk-based Capital Ratio (1) |  |  |  |  |  |  |  |
Franklin Financial Services Corporation |  | 14.66% |  | 14.82% |  | N/A |  | N/A
Farmers & Merchants Trust Company |  | 14.38% |  | 14.62% |  | 4.500% |  | 6.50%
Tier 1 Risk-based Capital Ratio (2) |  |  |  |  |  |  |  |
Franklin Financial Services Corporation |  | 14.66% |  | 14.82% |  | N/A |  | N/A
Farmers & Merchants Trust Company |  | 14.38% |  | 14.62% |  | 6.000% |  | 8.00%
Total Risk-based Capital Ratio (3) |  |  |  |  |  |  |  |
Franklin Financial Services Corporation |  | 15.93% |  | 16.08% |  | N/A |  | N/A
Farmers & Merchants Trust Company |  | 15.64% |  | 15.87% |  | 8.000% |  | 10.00%
Tier 1 Leverage Ratio (4) |  |  |  |  |  |  |  |
Franklin Financial Services Corporation |  | 9.22% |  | 9.72% |  | N/A |  | N/A
Farmers & Merchants Trust Company |  | 9.05% |  | 9.59% |  | 4.000% |  | 5.00%
(1) Common equity Tier 1 capital/ total risk-weighted assets (2) Tier 1 capital / total risk-weighted assets
(3) Total risk-based capital / total risk-weighted assets, (4) Tier 1 capital / average quarterly assets

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1C -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958572-112826 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1D -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958573-112826 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958570-112826 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958569-112826 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1G -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958577-112826 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1F -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958575-112826 Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1E -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958574-112826 Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1H -URI http://asc.fasb.org/extlink&oid=117337116&loc=d3e65071-112826 + Details
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