Annual report pursuant to Section 13 and 15(d)

SHAREHOLDERS' EQUITY

v3.6.0.2
SHAREHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2016
SHAREHOLDERS' EQUITY [Abstract]  
SHAREHOLDERS' EQUITY
NOTE 17 – 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 minimum 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%. 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), which effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), 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.

Actual capital levels (dollars in thousands) and minimum required levels were as follows at year-end:
 
   
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
  
December 31, 2016
                                                
CET1 capital (to risk weighted assets)
                                                
Consolidated
  
$
163,663
      
11.0
%
  
$
66,743
      
4.5
%
  
$
76,013
      
5.1
%
    
N/A
      
N/A
  
Bank
    
197,972
      
13.4
      
66,737
      
4.5
      
76,006
      
5.1
    
$
96,398
      
6.5
%
Tier 1 capital (to risk weighted assets)
                                                                
Consolidated
    
203,663
      
13.7
      
88,991
      
6.0
      
98,261
      
6.6
      
N/A
      
N/A
  
Bank
    
197,972
      
13.4
      
88,983
      
6.0
      
98,252
      
6.6
      
118,644
      
8.0
  
Total capital (to risk weighted assets)
                                                                
Consolidated
    
220,625
      
14.9
      
118,655
      
8.0
      
127,925
      
8.6
      
N/A
      
N/A
  
Bank
    
214,934
      
14.5
      
118,644
      
8.0
      
127,913
      
8.6
      
148,305
      
10.0
  
Tier 1 capital (to average assets)
                                                                
Consolidated
    
203,663
      
12.0
      
67,810
      
4.0
      
N/A
      
N/A
      
N/A
      
N/A
  
Bank
    
197,972
      
11.7
      
67,742
      
4.0
      
N/A
      
N/A
      
84,677
      
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 December 31, 2016 and 2015, respectively, qualified as Tier 1 capital.

The Bank was categorized as "well capitalized" at December 31, 2016 and 2015.
 
Issuance of Capital

A summary of the capital instruments activity during recent years is as follows:

Warrants

In 2009 the Company issued warrants to purchase a total of 1,478,811 shares of common stock at an exercise price of $9.00 per share. These warrants expired in 2015 (five years after commencement of exercise period), with one warrant to purchase 392 shares having been executed during the exercise period.