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Regulatory and Operational Matters
 3 Months Ended
Mar. 31, 2024
Regulatory Capital Requirements under Banking Regulations [Abstract]  
Regulatory and Operational Matters Regulatory and Operational Matters
Federal and state regulatory authorities have adopted standards requiring financial institutions to maintain increased levels of capital. Effective January 1, 2015, federal banking agencies imposed four minimum capital requirements on a community bank’s risk-based capital ratios consisting of Total Capital, Tier 1 Capital, Common Equity Tier 1 (“CET1”) Capital, and a Tier 1 Leverage Capital ratio. The risk-based capital ratios measure the adequacy of a bank's capital against the riskiness of its on- and off-balance sheet assets and activities. Failure to maintain adequate capital is a basis for "prompt corrective action" or other regulatory enforcement action. In assessing a bank's capital adequacy, regulators also consider other factors such as interest rate risk exposure, liquidity, funding and market risks, quality and level of earnings, concentrations of credit, quality of loans and investments, nontraditional activity risk, policy effectiveness, and management's overall ability to monitor and control risk.
In September 2019, the community bank leverage ratio (“CBLR”) framework was jointly issued by the Federal Deposit Insurance Corporation ("FDIC"), the Office of the Comptroller of the Currency (“OCC”) and FRB. The final rule gives qualifying community banks the option to use a simplified measure of capital adequacy instead of risk based capital, beginning with their March 31, 2020 Call Report. Under the final rule a community bank may qualify for the CBLR framework if it has a Tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance sheet exposures and trading assets and liabilities. The CARES Act directed the federal banking agencies to issue an interim rule temporarily lowering the CBLR ratio to 8% which the agencies did with a transition back to 9% beginning January 1, 2022.
Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system. A community bank which meets the leverage ratio requirement and other CBLR framework requirements will not be subject to other capital and leverage requirements and will be considered "well capitalized."
From September 2021 to September 30, 2023, the Company elected to adopt the CBLR framework. In the fourth quarter of 2023, the Company elected to use the instituted regulatory risk-based capital approach.
Under the instituted regulatory framework, to be considered “well capitalized”, a financial institution must generally have a Total Capital ratio of at least 10%, a Tier 1 Capital ratio of at least 8.0%, a CET1 Capital ratio at least 6.5%, and a Tier 1 Leverage Capital ratio of at least 5%. However, regardless of a financial institution’s ratios, the OCC may require increased capital ratios or impose dividend restrictions based on the other factors it considers in assessing a bank’s capital adequacy. Under the final capital rules that became effective on January 1, 2015, there was a requirement for a CET1 capital conservation buffer of 2.5% of risk-weighted assets, which is in addition to the other minimum risk-based capital standards in the rule. Institutions that do not maintain this required capital buffer become subject to progressively more stringent limitations on the percentage of earnings that may be distributed to shareholders or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital conversation buffer of 2.5% has been included in the minimum capital adequacy ratios as of March 31, 2024.
The Company and Bank’s regulatory capital amounts and ratios at March 31, 2024 and December 31, 2023 are summarized as follows:
March 31, 2024December 31, 2023
Patriot National Bancorp, Inc.Patriot Bank, N.A.Patriot National Bancorp, Inc.Patriot Bank, N.A.
(Dollar amounts in thousands)AmountRatioAmountRatioAmountRatioAmountRatio
Total Capital (to risk weighted assets):
Actual$86,996 9.95 %$98,464 11.26 %$89,727 10.00 %$100,683 11.22 %
To be Well Capitalized(1)— — 87,418 10.00 %— — 89,732 10.00 %
For capital adequacy with Capital Buffer(2)— — 91,789 10.50 %— — 94,218 10.50 %
For capital adequacy69,955 8.00 %69,935 8.00 %71,788 8.00 %71,785 8.00 %
Tier 1 Capital (to risk weighted assets):
Actual69,440 7.94 %90,908 10.40 %73,282 8.17 %94,238 10.50 %
To be Well Capitalized(1)— — 69,935 8.00 %— — 71,785 8.00 %
For capital adequacy with Capital Buffer(2)— — 74,306 8.50 %— — 76,272 8.50 %
For capital adequacy52,466 6.00 %52,451 6.00 %53,841 6.00 %53,839 6.00 %
Common Equity Tier 1 Capital
(to risk weighted assets):
Actual61,440 7.03 %90,908 10.40 %65,282 7.27 %94,238 10.50 %
To be Well Capitalized(1)— — 56,822 6.50 %— — 58,325 6.50 %
For capital adequacy with Capital Buffer(2)— — 61,193 7.00 %— — 62,812 7.00 %
For capital adequacy39,350 4.50 %39,338 4.50 %40,381 4.50 %40,379 4.50 %
Tier 1 Leverage Capital (to average assets):
Actual69,440 6.53 %90,908 8.55 %73,282 6.76 %94,238 8.70 %
To be Well Capitalized(1)— — 53,146 5.00 %— — 54,170 5.00 %
For capital adequacy42,524 4.00 %42,517 4.00 %43,339 4.00 %43,336 4.00 %
(1) Designation as "Well Capitalized" does not apply to bank holding companies - the Company. Such categorization of capital adequacy only applies to insured depository institutions - the Bank.
(2) The Capital Conservation Buffer implemented by the FDIC began to be phased in beginning January 1, 2016. It was not applicable to periods prior to that date and does not apply to bank holding companies - the Company.