Regulatory Matters

12 Months Ended

Dec. 31, 2022

Note 18 - Regulatory matters

The Bank is subject to various 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 the Bank’s assets,

Note 18 - Regulatory matters (continued)

liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total Common Equity Tier 1 capital and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital to average assets (as defined). Management believes, as of December 31, 2022 that the Bank met all capital adequacy requirements to which it is subject. The Bank’s actual regulatory capital amounts and ratios for December 31, 2022 and 2021 are also presented in the table below.

In addition to the minimum regulatory capital required for capital adequacy purposes the Bank is required to maintain a minimum Capital Conservation Buffer above those minimums in the form of common equity, in order to avoid restrictions on capital distributions and discretionary bonuses. The Capital Conservation Buffer was 2.5% at December 31, 2022 and 2021, and is applicable for the Common Equity Tier 1, Tier 1, and Total Capital Ratios.

As of December 31, 2022, the most recent notification from the Federal Reserve Bank of Richmond categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

To be categorized as well capitalized under the prompt corrective action regulations, the Bank must maintain minimum total risk-based, CET1, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table.

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Note 18 - Regulatory matters (continued)

The capital ratios for the Bank for 2022 and 2021 are set forth in the following table:


		December 31, 2022
								To Be Well
								Capitalized Under
						Minimum Capital		Prompt Corrective
		Actual			Requirement			Action Provisions
		Amount		Ratio	Amount		Ratio (1)	Amount		Ratio
Total capital
	(to risk-weighted assets)	$	90,166	11.98%	$	79,014	>10.50%	$	75,252	> 10.00%
Tier 1 capital
	(to risk-weighted assets)	$	83,907	11.15%	$	63,964	>8.50%	$	60,201	> 8.00%
Common Equity Tier 1 capital
	(to risk-weighted assets)	$	83,907	11.15%	$	52,676	>7.00%	$	48,913	>6.50%
Tier 1 capital (leverage)
	(to average assets)	$	83,907	8.98%	$	37,371	> 4.00%	$	46,714	> 5.00%

(1)Includes capital conservation buffer of 2.50% where applicable.


		December 31, 2021
								To Be Well
								Capitalized Under
						Minimum Capital		Prompt Corrective
		Actual			Requirement			Action Provisions
		Amount		Ratio	Amount		Ratio (1)	Amount		Ratio
Total capital
	(to risk-weighted assets)	$	85,803	12.37%	$	72,807	>10.50%	$	69,340	> 10.00%
Tier 1 capital
	(to risk-weighted assets)	$	78,888	11.38%	$	58,939	>8.50%	$	55,472	> 8.00%
Common Equity Tier 1 capital
	(to risk-weighted assets)	$	78,888	11.38%	$	48,538	>7.00%	$	45,071	>6.50%
Tier 1 capital (leverage)
	(to average assets)	$	78,888	8.22%	$	38,392	> 4.00%	$	47,990	> 5.00%

(1)Includes capital conservation buffer of 2.50% where applicable.

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Note 18 - Regulatory matters (continued)

The above tables set forth the capital position and analysis for the Bank only. Because total assets on a consolidated basis are less than $3 billion, Financial is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act. Consequently, Financial does not calculate its financial ratios on a consolidated basis. If calculated, the capital ratios for the Company on a consolidated basis would no longer be comparable to the capital ratios of the Bank because the proceeds of the private placement do not qualify as equity capital on a consolidated basis.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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