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Regulatory Capital Requirements
 12 Months Ended
Dec. 31, 2019
Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]  
Regulatory Capital Requirements

(19) Regulatory Capital Requirements

 

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, 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 capital requirements can initiate regulatory action. Management believed as of December 31, 2019, the Company and Bank met all capital adequacy requirements to which they were subject at that time.

 

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, 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. The Company and the Bank are subject to the Basel III Rule, which is applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companies with consolidated assets of less than $3.0 billion).

 

The Basel III Rule includes a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, a minimum ratio of Total Capital to risk-weighted assets of 8.0%, and a minimum Tier 1 leverage ratio of 4.0%. A capital conservation buffer is also established above the regulatory minimum capital requirements. This capital conservation buffer was 1.875% for 2018, and increased to its final level of 2.5% on January 1, 2019. The capital conservation buffer increases the common equity Tier 1 capital ratio, and Tier 1 capital and total risk based capital ratios.

 

As of December 31, 2019 and December 31, 2018, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action then in effect. There are no conditions or events since that notification that management believes have changed the Bank’s category.

 

The following is a comparison of the Company’s regulatory capital to minimum capital requirements in effect at December 31, 2019 and 2018:

 

(Dollars in thousands)         For capital  
    Actual     adequacy purposes  
    Amount     Ratio     Amount     Ratio (1)  
As of December 31, 2019                        
Leverage   $ 106,938       10.94 %   $ 39,109       4.0 %
Common Equity Tier 1 Capital     85,938       13.09 %     45,952       7.0 %
Tier 1 Capital     106,938       16.29 %     55,799       8.5 %
Total Risk Based Capital     113,545       17.30 %     68,928       10.5 %
                                 
As of December 31, 2018                                
Leverage   $ 99,150       10.34 %   $ 38,373       4.0 %
Common Equity Tier 1 Capital     78,150       13.12 %     37,982       6.4 %
Tier 1 Capital     99,150       16.64 %     46,919       7.9 %
Total Risk Based Capital     105,055       17.63 %     58,835       9.9 %

 

  (1) The required percent for capital adequacy purposes includes a capital conservation buffer of 2.5% for December 31, 2019 and 1.875% for December 31, 2018.

  

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements in effect at December 31, 2019 and 2018:

 

                            To be well-capitalized  
                            under prompt  
(Dollars in thousands)               For capital     corrective  
    Actual     adequacy purposes     action provisions  
    Amount     Ratio     Amount     Ratio (1)     Amount     Ratio  
As of December 31, 2019                                                
Leverage   $ 104,510       10.72 %   $ 38,984       4.0 %   $ 48,730       5.0 %
Common Equity Tier 1 Capital     104,510       15.94 %     45,884       7.0 %     42,607       6.5 %
Tier 1 Capital     104,510       15.94 %     55,716       8.5 %     52,439       8.0 %
Total Risk Based Capital     111,117       16.95 %     68,826       10.5 %     65,549       10.0 %
                                                 
As of December 31, 2018                                                
Leverage   $ 97,112       10.15 %   $ 38,254       4.0 %   $ 47,818       5.0 %
Common Equity Tier 1 Capital     97,112       16.33 %     37,922       6.4 %     38,665       6.5 %
Tier 1 Capital     97,112       16.33 %     46,844       7.9 %     47,588       8.0 %
Total Risk Based Capital     103,017       17.32 %     58,741       9.9 %     59,485       10.0 %

 

  (1) The required percent for capital adequacy purposes includes a capital conservation buffer of 2.5% for December 31, 2019 and 1.875% for December 31, 2018.