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Regulatory Capital Matters
 12 Months Ended
Dec. 31, 2013
Regulatory Capital Matters [Abstract]  
REGULATORY CAPITAL MATTERS

 

 

 

NOTE 19 – REGULATORY CAPITAL MATTERS

 

CFBank is subject to regulatory capital requirements administered by federal banking agencies.  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. 

 

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. 

 

Actual and required capital amounts and ratios are presented below at year end.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To Be Well

 

 

 

 

 

 

 

 

 

 

Capitalized Under

Required

 

 

 

 

For Capital

Applicable Regulatory

By Terms Of

 

Actual

Adequacy Purposes

Capital Standards

CFBank Order

 

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

 

 

 

 

 

 

 

 

 

December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital to risk

 

 

 

 

 

 

 

 

 

 

 

 

weighted assets

$
26,246 
12.08% 

$
17,385 
8.00% 

$
21,731 
10.00% 

$
26,078 
12.00% 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 (Core) Capital to risk

 

 

 

 

 

 

 

 

 

 

 

 

weighted assets

 
23,492 
10.81% 

 
8,693 
4.00% 

 
13,039 
6.00% 

 

N/A

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 (Core) Capital to

 

 

 

 

 

 

 

 

 

 

 

 

adjusted total assets

 
23,492 
9.34% 

 
10,061 
4.00% 

 
12,576 
5.00% 

 
20,121 
8.00% 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Capital to

 

 

 

 

 

 

 

 

 

 

 

 

adjusted total assets

 
23,492 
9.34% 

 
3,773 
1.50% 

 

N/A

N/A

 

N/A

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To Be Well

 

 

 

 

 

 

 

 

 

 

Capitalized Under

Required

 

 

 

 

For Capital

Applicable Regulatory

By Terms Of

 

Actual

Adequacy Purposes

Capital Standards

CFBank Order

 

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,2012

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital to risk

 

 

 

 

 

 

 

 

 

 

 

 

weighted assets

$
25,002 
15.53% 

$
12,878 
8.00% 

$
16,098 
10.00% 

$
19,317 
12.00% 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 (Core) Capital to risk

 

 

 

 

 

 

 

 

 

 

 

 

weighted assets

 
22,950 
14.26% 

 
6,439 
4.00% 

 
9,659 
6.00% 

 

N/A

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 (Core) Capital to

 

 

 

 

 

 

 

 

 

 

 

 

adjusted total assets

 
22,950 
10.97% 

 
8,372 
4.00% 

 
10,465 
5.00% 

 
16,744 
8.00% 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Capital to

 

 

 

 

 

 

 

 

 

 

 

 

adjusted total assets

 
22,950 
10.97% 

 
3,139 
1.50% 

 

N/A

N/A

 

N/A

N/A

 

 

The CFBank Order required CFBank to have by September 30, 2011, and maintain thereafter, 8% Tier 1 (Core) Capital to adjusted total assets and 12% Total Capital to risk weighted assets, which it did not meet at September 30, 2011 or December 31, 2011. CFBank met the capital requirement at September 30, 2012 and December 31, 2012 as a result of a $13,500 capital contribution from the Holding Company using from the net proceeds of the stock offering. However, CFBank will not be considered “well-capitalized” under applicable regulatory capital standards as long as it is subject to individual minimum capital requirements imposed by the OCC.  CFBank was not considered “well capitalized” under the aforementioned applicable regulatory capital standards at December 31, 2013 or December 31, 2012.  Although the CFBank Order was terminated by the OCC effective January 23, 2014, CFBank remains subject to the heightened capital requirements imposed by the OCC and is required to maintain an 8% Tier 1 (core) Capital ratio to adjusted total assets and 12% Total Capital to risk weighted assets.  See Note 2.-Regulatory Order Considerations for additional information

 

 As a result of the sale of the Company’s Fairlawn office building during the fourth quarter of 2013 for approximately $3.2 million, which generated a gain of approximately $1.1 million (see Note 8 – Premises and Equipment for additional information on the transaction), the Holding Company downstreamed $1.5 million of capital to CFBank as of October 29, 2013.  The Company sought and obtained all required regulatory “non-objection” letters from both the FED and OCC in order to consummate the transaction.

 

The Qualified Thrift Lender test requires at least 65% of assets be maintained in housing-related finance and other specified areas. If this test is not met, limits are placed on growth, branching, new investments, FHLB advances and dividends, or CFBank must convert to a commercial bank charter. Management believes that this test is met at December 31, 2013.

 

CFBank converted from a mutual to a stock institution in 1998, and a “liquidation account” was established with an initial balance of $14,300, which was the net worth reported in the conversion prospectus. The liquidation account represents a calculated amount for the purposes described below, and it does not represent actual funds included in the consolidated financial statements of the Company. Eligible depositors who have maintained their accounts, less annual reductions to the extent they have reduced their deposits, would be entitled to a priority distribution from this account if CFBank liquidated and its assets exceeded its liabilities. Dividends may not reduce CFBank’s stockholder’s equity below the required liquidation account balance.  

 

Dividend Restrictions: The Holding Company’s principal source of funds for dividend payments is dividends received from CFBank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. CFBank must receive regulatory approval prior to any dividend payments.  Additionally CFBank does not intend to make distributions to the Holding Company, or the Holding Company to stockholders that would result in a recapture of any portion of its thrift bad debt reserve as discussed in Note 14-Income taxes.  

 

As of December 31, 2013, CFBank could pay no dividends to the Holding Company under these regulations without receiving the prior written approval of the OCC.  In addition, pursuant to the CFBank Order, CFBank was also prohibited from declaring or paying dividends or making any other capital distributions without receiving prior written approval of the OCC.  Future dividend payments by CFBank to the Holding Company would be based on future earnings and regulatory approval. The payment of dividends from CFBank to the Holding Company is not likely to be approved by the OCC while CFBank is suffering losses.