Quarterly report pursuant to Section 13 or 15(d)

SHAREHOLDERS' EQUITY

v3.5.0.2
SHAREHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2016
SHAREHOLDERS' EQUITY [Abstract]  
SHAREHOLDERS' EQUITY
NOTE 12 – SHAREHOLDERS' EQUITY

Regulatory Capital

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures 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 weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

The prompt corrective action regulations provide five categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a bank is only adequately capitalized, regulatory approval is required to, among other things, accept, renew or roll-over brokered deposits. If a bank is undercapitalized, capital distributions and growth and expansion are limited, and plans for capital restoration are required.

In July 2013, the Board of Governors of the Federal Reserve Board and the FDIC approved the final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (commonly known as Basel III). Under the final rules, which began for the Company and the Bank on January 1, 2015 and are subject to a phase-in period through January 1, 2019, minimum requirements will increase for both the quantity and quality of capital held by the Company and the Bank. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio (CET1 ratio) of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which when fully phased-in, effectively results in a minimum CET1 ratio of 7.0%. The capital conservation buffer requirement is 0.625% for 2016, increasing to 1.25% for 2017, 1.875% for 2018 and 2.50% for 2019 and thereafter.  Institutions that do not maintain this required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management.  Basel III raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% when fully phased-in).  It raises the minimum total capital to risk-weighted assets ratio from 6.0% to 8.0% (which with the capital conservation buffer fully phased-in effectively results in a 10.5% ratio), and requires a minimum leverage ratio of 4.0%. Basel III also makes changes to risk weights for certain assets and off-balance-sheet exposures. Management expects that the capital ratios for the Company and the Bank under Basel III will continue to exceed the well capitalized minimum capital requirements.
 
At September 30, 2016 and December 31, 2015, actual capital levels and minimum required levels were (dollars in thousands):

   
Actual
    
Minimum
Capital
Adequacy
    
Minimum Capital
Adequacy With
Capital Buffer
    
To Be Well
Capitalized Under
Prompt Corrective
Action Regulations
  
   
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
  
September 30, 2016
                                                
CET1 capital (to risk weighted assets)
                                                
Consolidated
  
$
160,809
      
11.3
%
  
$
64,314
      
4.5
%
  
$
73,246
      
5.1
%
    
N/A
      
N/A
  
Bank
    
195,037
      
13.7
      
64,002
      
4.5
      
72,892
      
5.1
    
$
92,448
      
6.5
%
Tier 1 capital (to risk weighted assets)
                                                                
Consolidated
    
200,809
      
14.1
      
85,752
      
6.0
      
94,684
      
6.6
      
N/A
      
N/A
  
Bank
    
195,037
      
13.7
      
85,336
      
6.0
      
94,226
      
6.6
      
113,782
      
8.0
  
Total capital (to risk weighted assets)
                                                                
Consolidated
    
217,664
      
15.2
      
114,336
      
8.0
      
123,268
      
8.6
      
N/A
      
N/A
  
Bank
    
211,892
      
14.9
      
113,782
      
8.0
      
122,671
      
8.6
      
142,227
      
10.0
  
Tier 1 capital (to average assets)
                                                                
Consolidated
    
200,809
      
12.0
      
67,112
      
4.0
      
N/A
      
N/A
      
N/A
      
N/A
  
Bank
    
195,037
      
11.6
      
67,004
      
4.0
      
N/A
      
N/A
      
83,805
      
5.0
  
                                                                 
December 31, 2015
                                                                
CET1 capital (to risk weighted assets)
                                                                
Consolidated
  
$
151,630
      
10.8
%
  
$
63,479
      
4.5
%
    
N/A
      
N/A
      
N/A
      
N/A
  
Bank
    
186,930
      
13.2
      
63,463
      
4.5
      
N/A
      
N/A
    
$
91,668
      
6.5
%
Tier 1 capital (to risk weighted assets)
                                                                
Consolidated
    
191,630
      
13.6
      
84,638
      
6.0
      
N/A
      
N/A
      
N/A
      
N/A
  
Bank
    
186,930
      
13.2
      
84,617
      
6.0
      
N/A
      
N/A
      
112,822
      
8.0
  
Total capital (to risk weighted assets)
                                                                
Consolidated
    
208,711
      
14.8
      
112,851
      
8.0
      
N/A
      
N/A
      
N/A
      
N/A
  
Bank
    
203,471
      
14.4
      
112,822
      
8.0
      
N/A
      
N/A
      
141,028
      
10.0
  
Tier 1 capital (to average assets)
                                                                
Consolidated
    
191,630
      
11.5
      
66,400
      
4.0
      
N/A
      
N/A
      
N/A
      
N/A
  
Bank
    
186,930
      
11.2
      
66,332
      
4.0
      
N/A
      
N/A
      
82,915
      
5.0
  

Approximately $40.0 million of trust preferred securities outstanding at September 30, 2016 and December 31, 2015 qualified as Tier 1 capital. Refer to our 2015 Form 10-K for more information on the trust preferred securities.

The Bank was categorized as "well capitalized" at September 30, 2016 and December 31, 2015.