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Regulatory Capital Requirements
 3 Months Ended
Mar. 31, 2024
Regulatory Capital Requirements

11. 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 that as of March 31, 2024, the Company and the 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, equal to 2.5% of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements for the common equity Tier 1 capital ratio, and Tier 1 capital and total risk based capital ratios.

 

As of 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 then in effect. There are no conditions or events since that notification that management believes have changed the institution’s category.

 

 

The following is a comparison of the Company’s regulatory capital to minimum capital requirements at March 31, 2024 and December 31, 2023.

 

(Dollars in thousands)                
           For capital 
   Actual   adequacy purposes 
   Amount   Ratio   Amount   Ratio (1) 
As of March 31, 2024                
Leverage  $132,131    8.58%  $61,593    4.0%
Common Equity Tier 1 Capital   111,131    10.47%   74,288    7.0%
Tier 1 Capital   132,131    12.45%   90,207    8.5%
Total Risk Based Capital   142,771    13.45%   111,432    10.5%
                     
As of December 31, 2023                    
Leverage  $130,625    8.14%  $62,116    4.0%
Common Equity Tier 1 Capital   109,625    10.39%   73,854    7.0%
Tier 1 Capital   130,625    12.38%   89,680    8.5%
Total Risk Based Capital   140,671    13.33%   110,781    10.5%

 

  (1) The required ratios for capital adequacy purposes include a capital conservation buffer of 2.5%.

 

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements at March 31, 2024 and December 31, 2023:

 

(Dollars in thousands)          For capital   To be well-capitalized under prompt corrective 
   Actual   adequacy purposes   action provisions 
   Amount   Ratio   Amount   Ratio (1)   Amount   Ratio 
As of March 31, 2024                        
Leverage  $135,255    8.81%  $61,421    4.0%  $76,776    5.0%
Common Equity Tier 1 Capital   135,225    12.75%   74,252    7.0%   68,948    6.5%
Tier 1 Capital   135,225    12.75%   90,163    8.5%   84,859    8.0%
Total Risk Based Capital   145,865    13.75%   111,377    10.5%   106,074    10.0%

 

As of December 31, 2023                              
Leverage  $134,422    8.68%  $61,951    4.0%  $77,439    5.0%
Common Equity Tier 1 Capital   134,422    12.74%   73,833    7.0%   68,560    6.5%
Tier 1 Capital   134,422    12.74%   89,655    8.5%   84,381    8.0%
Total Risk Based Capital   144,468    13.70%   110,750    10.5%   105,476    10.0%

 

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 2.5%.