XML 80 R16.htm IDEA: XBRL DOCUMENT v3.19.3
Note 7 - Capital Requirements
 9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Regulatory Capital Requirements under Banking Regulations [Text Block]
Note
7.
Capital Requirements
 
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 has been 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
September 30, 2019
and
December 31, 2018
, that the Bank met all capital adequacy requirements to which it is subject.
 
As of
September 30, 2019
, 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
September 30, 2019
and
December 31, 2018
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
  
September 30, 2019
      
 
      
 
      
 
      
 
      
 
      
 
Total Capital (to Risk-Weighted Assets)   $
83,591
      
14.57
 %   $
45,903
      
8.00
 %   $
57,379
      
10.00
 %
Tier 1 Capital (to Risk-Weighted Assets)   $
78,679
      
13.71
 %   $
34,428
      
6.00
 %   $
45,903
      
8.00
 %
Common Equity Tier 1 Capital (to Risk-Weighted Assets)   $
78,679
      
13.71
 %   $
25,821
      
4.50
 %   $
37,296
      
6.50
 %
Tier 1 Capital (to Average Assets)   $
78,679
      
10.09
 %   $
31,205
      
4.00
 %   $
39,006
      
5.00
 %
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
 %
 
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
2.50%
and
1.875%
at
September 30, 2019
and
December 31, 2018
, 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
September 30, 2019
and
December 31, 2018
, the capital conservation buffer of the Bank was
6.57%
and
5.62%,
respectively.