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Regulatory Matters
 12 Months Ended
Dec. 31, 2018
Regulatory Capital Requirements [Abstract]  
Regulatory Matters
Regulatory Matters
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 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 their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.
The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective January 1, 2015, with full compliance of all the requirements phased in over a multi-year schedule, and became fully phased in January 1, 2019. As part of the new requirements, the common equity Tier 1 capital ratio is calculated and utilized in the assessment of capital for all institutions. The final rules also established a “capital conservation buffer” above the new regulatory minimum capital requirements. The capital conservation buffer is being phased-in over four years, which began on January 1, 2016 and was fully implemented on January 1, 2019.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total (as defined in the regulations), Tier 1 (as defined), and common equity Tier 1 capital (as defined) to risk-weighted assets (as defined), and of Tier 1 capital to average assets. Management believes, as of December 31, 2018 and December 31, 2017, that the Bank met all capital adequacy requirements to which it is subject.
As of December 31, 2018, the most recent notification from the Federal Reserve Bank categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum risk-based capital and leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank’s category.
A comparison of the capital of the Bank at December 31, 2018 and December 31, 2017 with the minimum regulatory guidelines were as follows (dollars in thousands):
 
 
Actual
 
Minimum Capital
Requirement
 
Minimum
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
 
Amount
 
Ratio
 
Amount
 
Ratio
 
Amount
 
Ratio
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
Total Capital (to Risk-Weighted Assets)
$
74,697

 
13.62
%
 
$
43,859

 
8.00
%
 
$
54,824

 
10.00
%
Tier 1 Capital (to Risk-Weighted Assets)
$
69,688

 
12.71
%
 
$
32,894

 
6.00
%
 
$
43,859

 
8.00
%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
$
69,688

 
12.71
%
 
$
24,671

 
4.50
%
 
$
35,635

 
6.50
%
Tier 1 Capital (to Average Assets)
$
69,688

 
9.26
%
 
$
30,100

 
4.00
%
 
$
37,625

 
5.00
%
December 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
Total Capital (to Risk-Weighted Assets)
$
67,624

 
13.12
%
 
$
41,239

 
8.00
%
 
$
51,548

 
10.00
%
Tier 1 Capital (to Risk-Weighted Assets)
$
62,298

 
12.09
%
 
$
30,929

 
6.00
%
 
$
41,239

 
8.00
%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
$
62,298

 
12.09
%
 
$
23,197

 
4.50
%
 
$
33,506

 
6.50
%
Tier 1 Capital (to Average Assets)
$
62,298

 
8.46
%
 
$
29,457

 
4.00
%
 
$
36,821

 
5.00
%


In addition to the regulatory minimum risk-based capital amounts presented above, the Bank must maintain a capital conservation buffer as required by the Basel III final rules. The buffer began applying to the Bank on January 1, 2016, and is subject to phase-in from 2016 to 2019 in equal annual installments of 0.625%. Accordingly, the Bank was required to maintain a capital conservation buffer of 1.875% and 1.250% at December 31, 2018 and December 31, 2017, respectively. Under the final rules, an institution is subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. As of December 31, 2018 and December 31, 2017, the capital conservation buffer of the Bank was 5.62% and 5.12%, respectively.