Page 43 - Annual Report 2017

TEXAS GULF BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements
December 31, 2016 and 2015

NOTE P REGULATORY MATTERS

Regulatory Capital

The Company and the Bank are subject to various regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and, additionally for
banks, prompt corrective action regulations, involve quantitative measures and risk weighting
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 about components, risk weighting, and other factors.

Failure to meet the minimum regulatory capital requirements can initiate certain mandatory
and possible additional discretionary actions by regulators that if undertaken, could have a
direct material effect on the Company’s financial statements. Management believes, as of
December 31, 2016, that the Company and the Bank meet all the capital adequacy
requirements to which they are subject.

As of September 30, 2015, the most recent notification date from the regulators, the Bank
was categorized as well capitalized under the regulatory framework for prompt corrective
action. To remain categorized as well capitalized, the Bank will have to maintain minimum
total risk-based, Tier I risk-based, Common Equity Tier 1, and Tier I leverage and capital
ratios as disclosed in the table below. There are no conditions or events since the most
recent notification that management believes have changed the Bank’s prompt corrective
action category.

To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
2016
Total Capital to Risk-Weighted Assets $ 63,646,000 14.4% $ 35,300,000 8.0% $ 44,125,000 10.0%

Tier I Capital to Risk-Weighted Assets $ 59,621,000 13.5% $ 26,475,000 6.0% $ 35,300,000 8.0%
Common Equity Tier 1 Capital Ratio $ 59,621,000 13.5% $ 19,856,000 4.5% $ 28,681,000 6.5%

Leverage Ratio $ 59,621,000 10.7% $ 22,350,000 4.0% $ 27,937,000 5.0%

2015
Total Capital to Risk-Weighted Assets $ 58,905,000 15.2% $ 31,045,000 8.0% $ 38,806,000 10.0%

Tier I Capital to Risk-Weighted Assets $ 55,453,000 14.3% $ 23,284,000 6.0% $ 31,045,000 8.0%

Common Equity Tier 1 Capital Ratio $ 55,453,000 14.3% $ 17,463,000 4.5% $ 25,224,000 6.5%
Leverage Ratio $ 55,453,000 10.3% $ 21,557,000 4.0% $ 26,947,000 5.0%

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