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Regulatory Restrictions and Capital Ratios
 12 Months Ended
Dec. 31, 2018
Regulatory Capital Requirements [Abstract]  
Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 18: REGULATORY RESTRICTIONS AND CAPITAL RATIOS

As required by the Economic Growth, Regulatory Relief, and Consumer Protection Act in August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company policy statement. The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that: (1) is not engaged in significant nonbanking activities; (2) does not conduct significant off-balance sheet activities; and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding. The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase. Management believes the Company meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at December 31, 2018.

 

The Bank remains subject to regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

As of December 31, 2018, the Bank is “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” the Bank must maintain minimum common equity Tier 1, total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. Management has not received any notification from the Bank's regulators that changes the Bank’s regulatory capital status.

The actual capital amounts and ratios and the aforementioned minimums as of December 31, 2018 and 2017 are presented below.

Minimum for capitalMinimum to be
Actualadequacy purposeswell capitalized
(Dollars in thousands)AmountRatioAmountRatioAmountRatio
At December 31, 2018:
Tier 1 Leverage Capital
AuburnBank$91,71911.33%$32,3684.00%$40,4615.00%
Common Equity Tier 1 Capital
AuburnBank$91,71916.49%$25,0314.50%$36,1566.50%
Tier 1 Risk-Based Capital
AuburnBank$91,71916.49%$33,3756.00%$44,5008.00%
Total Risk-Based Capital
AuburnBank$96,66117.38%$44,5008.00%$55,62510.00%
At December 31, 2017:
Tier 1 Leverage Capital
Auburn National Bancorporation$90,38210.95%$33,0124.00%N/AN/A
AuburnBank89,21710.8232,9784.00$41,2225.00%
Common Equity Tier 1 Capital
Auburn National Bancorporation$87,38216.42%$23,9494.50%N/AN/A
AuburnBank89,21716.7423,9874.50$34,6486.50%
Tier 1 Risk-Based Capital
Auburn National Bancorporation$90,38216.98%$31,9326.00%N/AN/A
AuburnBank89,21716.7431,9836.00$42,6448.00%
Total Risk-Based Capital
Auburn National Bancorporation$95,30017.91%$42,5768.00%N/AN/A
AuburnBank94,13517.6642,6448.00$53,30510.00%

Dividends paid by the Bank are a principal source of funds available to the Company for payment of dividends to its stockholders and for other needs. Applicable federal and state statutes and regulations impose restrictions on the amounts of dividends that may be declared by the subsidiary bank. State law and Federal Reserve policy restrict the Bank from declaring dividends in excess of the sum of the current year’s earnings plus the retained net earnings from the preceding two years without prior approval. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits, and other such items. Capital adequacy considerations could further limit the availability of dividends from the Bank. At December 31, 2018, the Bank could have declared additional dividends of approximately $8.0 million without prior approval of regulatory authorities. As a result of this limitation, approximately $79.9 million of the Company’s investment in the Bank was restricted from transfer in the form of dividends.