MidAtlantic Farm Credit, ACA The following sets forth the regulatory capital ratios which were effective January 1, 2017:
Ratio Risk-adjusted ratios: CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio Permanent Capital Ratio Non-risk-adjusted: Tier 1 Leverage Ratio UREE Leverage Ratio
Minimum Requirement with Capital Capital Ratios as of Conservation Buffer December 31, 2017
Minimum Requirement
Capital Conservation Buffer*
4.5% 6.0% 8.0% 7.0%
0.625% 0.625% 0.625% 0.0%
5.125% 6.625% 8.625% 7.0%
18.55% 18.55% 20.44% 19.67%
4.0% 1.5%
1.0% 0.0%
5.0% 1.5%
19.64% 17.89%
* The capital conservation buffers have a 3 year phase-in period and will become fully effective January 1, 2020. Riskadjusted ratio minimums will increase 0.625% each year until fully phased in. There is no phase-in period for the tier 1 leverage ratio.
The Association maintains an allocated retained earnings account consisting of earnings held and allocated to borrowers on a patronage basis. In the event of a net loss for any fiscal year, such allocated retained earnings account will be subject to full impairment in the order specified in the bylaws beginning with the most recent allocation.
If the capital ratios fall below the minimum regulatory requirements, including the buffer amounts, capital distributions (equity redemptions, dividends, and patronage) and discretionary senior executive bonuses are restricted or prohibited without prior FCA approval. C. Description of Equities: The Association is authorized to issue or have outstanding Classes A, C, D and E Common Stock, Class C Participation Certificates and such other classes of equity as may be provided for in amendments to the bylaws in such amounts as may be necessary to conduct the Association’s business. All stock and participation certificates have a par or face value of five dollars ($5.00) per share.
The Association has a first lien and security interest on all surplus account allocations owned by any borrowers, and all distributions thereof, as additional collateral for their indebtedness to the Association. When the debt of a borrower is in default or is in the process of final liquidation by payment or otherwise, the Association, upon approval of the Board of Directors, may order any and all surplus account allocations owned by such borrower to be applied against the indebtedness.
The Association had the following shares outstanding at December 31, 2017:
Class C Common/Voting C Participation Certificates/Nonvoting Total Capital Stock and Participation Certificates
Protected No No
Allocated equities shall be retired solely at the discretion of the Board of Directors, provided that minimum capital standards established by the FCA and the Board are met. Nonqualified retained equity is considered to be permanently invested in the Association and there is no plan to revolve or retire this surplus. All nonqualified distributions are tax deductible only when redeemed.
Shares Outstanding Aggregate Number Par Value 1,957,295 $ 9,786 152,799 764 2,110,094
$ 10,550
At December 31, 2017, allocated members’ equity consisted of $57,824 of nonqualified allocated surplus and $307,779 of nonqualified retained surplus.
At-risk common stock and participation certificates are retired at the sole discretion of the Association’s Board of Directors at book value not to exceed par or face amounts, provided the minimum capital adequacy standards established by the Board are met.
Dividends The Association may declare noncumulative dividends on its capital stock and participation certificates provided the dividend rate does not exceed eight percent (8%) of the par value of the respective capital stock and participation certificates.
Retained Earnings The Association maintains unallocated and allocated retained earnings accounts. The minimum aggregate amount of these two accounts is determined by the Association’s Board of Directors. At the end of any fiscal year, if the retained earnings accounts would be less than the minimum amount deemed necessary to maintain adequate capital reserves to meet the commitments of the Association, earnings for the year shall be applied to the unallocated retained earnings account in such amounts deemed necessary by the Association’s Board of Directors. Unallocated retained earnings are maintained for each borrower to permit liquidation on a patronage basis.
The rate of dividends paid on Classes A, C, D and E Common Stock and Class C Participation Certificates shall be at the same rate per share. Dividends may not be declared if, after recording the liability, the Association would not meet its capital adequacy standards.
51 2017 Annual Report
MidAtlantic Farm Credit, ACA 53