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REGULATORY MATTERS

3 Months Ended

Mar. 31, 2024

6. REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate regulatory

action. The effects of accumulated other comprehensive income or loss is not included in computing regulatory capital. Management believes as of March 31, 2024, the Bank meets all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized or worse, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2024 and December 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

Under a policy of the Federal Reserve applicable to bank holding companies with less than $3.0 billion in consolidated assets, the Company is not subject to consolidated regulatory capital requirements.

The following table sets forth the Bank’s actual and required capital amounts (in thousands) and ratios under current regulations:


									Minimum Capital				Minimum to Be Well
									Adequacy Requirement				Capitalized Under
					Minimum Capital				with Capital				Prompt Corrective
	Actual Capital				Adequacy Requirement				Conservation Buffer				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2024
Total capital to risk-weighted assets	$	214,002	14.19	%	$	120,676	8.00	%	$	158,387	10.50	%	$	150,844	10.00	%
Tier 1 capital to risk-weighted assets		195,889	12.99	%		90,507	6.00	%		128,218	8.50	%		120,676	8.00	%
Common equity tier 1 capital to risk-weighted assets		195,889	12.99	%		67,880	4.50	%		105,591	7.00	%		98,049	6.50	%
Tier 1 capital to average total assets		195,889	8.90	%		88,022	4.00	%		N/A	N/A			110,027	5.00	%

December 31, 2023
Total capital to risk-weighted assets	$	210,071	14.31	%	$	117,472	8.00	%	$	154,182	10.50	%	$	146,840	10.00	%
Tier 1 capital to risk-weighted assets		193,324	13.17	%		88,104	6.00	%		124,814	8.50	%		117,472	8.00	%
Common equity tier 1 capital to risk-weighted assets		193,324	13.17	%		66,078	4.50	%		102,788	7.00	%		95,446	6.50	%
Tier 1 capital to average total assets		193,324	9.08	%		85,131	4.00	%		N/A	N/A			106,414	5.00	%

Dividend restrictions - The Company’s principal source of funds for dividend and debt service payments is dividends received from the Bank. During the three months ended March 31, 2024 the Bank paid $1.2 million in cash dividends to the Holding Company. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of March 31, 2024, the Bank had $24.8 million of retained net income available for dividends to the Company, without obtaining regulatory approval, provided that the Bank satisfies the regulatory capital requirements, including the capital conservation buffer, disclosed above.

- 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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