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Note 7 - Capital Requirements
 3 Months Ended
Mar. 31, 2022
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.

 

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), 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 March 31, 2022 and December 31, 2021, that the Bank met all capital adequacy requirements to which it is subject.

 

As of March 31, 2022, 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 March 31, 2022 and December 31, 2021 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

 

March 31, 2022

                        

Total Capital (to Risk-Weighted Assets)

 $128,567   14.44% $71,210   8.00% $89,013   10.00%

Tier 1 Capital (to Risk-Weighted Assets)

 $122,739   13.79% $53,408   6.00% $71,210   8.00%

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

 $122,739   13.79% $40,056   4.50% $57,858   6.50%

Tier 1 Capital (to Average Assets)

 $122,739   8.61% $57,031   4.00% $71,289   5.00%

December 31, 2021

                        

Total Capital (to Risk-Weighted Assets)

 $125,934   14.76% $68,237   8.00% $85,296   10.00%

Tier 1 Capital (to Risk-Weighted Assets)

 $120,224   14.09% $51,178   6.00% $68,237   8.00%

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

 $120,224   14.09% $38,383   4.50% $55,442   6.50%

Tier 1 Capital (to Average Assets)

 $120,224   8.82% $54,497   4.00% $68,121   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. Accordingly, the Bank was required to maintain a capital conservation buffer of 2.50% at March 31, 2022 and December 31, 2021. 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 March 31, 2022 and December 31, 2021, the capital conservation buffer of the Bank was 6.44% and 6.76%, respectively.