Quarterly report pursuant to Section 13 or 15(d)

SHAREHOLDERS' EQUITY

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SHAREHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2014
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.

At September 30, 2014 and December 31, 2013, actual capital levels and minimum required levels were (in thousands):
 
                   
To Be Well
  
           
Minimum Required
    
Capitalized Under
  
           
For Capital
    
Prompt Corrective
  
   
Actual
    
Adequacy Purposes
    
Action Regulations
  
   
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
  
September 30, 2014
                        
Total capital (to risk weighted assets)
                        
Consolidated
  
$
186,618
      
16.3
%
  
$
91,659
      
8.0
%
    
N/
A
    
N/
A
Bank
    
183,675
      
16.0
      
91,812
      
8.0
    
$
114,765
      
10.0
%
Tier 1 capital (to risk weighted assets)
                                                
Consolidated
    
172,231
      
15.0
      
45,829
      
4.0
      
N/
A
    
N/
A
Bank
    
169,264
      
14.8
      
45,906
      
4.0
      
68,859
      
6.0
  
Tier 1 capital (to average assets)
                                                
Consolidated
    
172,231
      
11.6
      
59,571
      
4.0
      
N/
A
    
N/
A
Bank
    
169,264
      
11.4
      
59,500
      
4.0
      
74,376
      
5.0
  
                                                 
December 31, 2013
                                                
Total capital (to risk weighted assets)
                                                
Consolidated
  
$
174,433
      
15.7
%
  
$
88,915
      
8.0
%
    
N/
A
    
N/
A
Bank
    
171,811
      
15.4
      
88,968
      
8.0
    
$
111,210
      
10.0
%
Tier 1 capital (to risk weighted assets)
                                                
Consolidated
    
160,455
      
14.4
      
44,457
      
4.0
      
N/
A
    
N/
A
Bank
    
157,825
      
14.2
      
44,484
      
4.0
      
66,726
      
6.0
  
Tier 1 capital (to average assets)
                                                
Consolidated
    
160,455
      
10.6
      
60,482
      
4.0
      
N/
A
    
N/
A
Bank
    
157,825
      
10.5
      
60,407
      
4.0
      
75,509
      
5.0
  

Approximately $40.0 million of trust preferred securities outstanding at September 30, 2014 and December 31, 2013, respectively, qualified as Tier 1 capital. Refer to our 2013 Form 10-K for more information on the trust preferred securities.

The Bank was categorized as "well capitalized" at September 30, 2014 and December 31, 2013.

On July 3, 2013, the FDIC Board of Directors approved the Regulatory Capital Interim Final Rule, implementing Basel III.  This rule redefines Tier 1 capital as two components (Common Equity Tier 1 and Additional Tier 1), creates a new capital ratio (Common Equity Tier 1 Risk-based Capital Ratio) and implements a capital conservation buffer.  It also revises the prompt corrective action thresholds and makes changes to risk weights for certain assets and off-balance-sheet exposures.  Banks are required to transition into the new rule beginning on January 1, 2015.  Based on our capital levels and balance sheet composition at September 30, 2014, we believe implementation of the new rule will have no material impact on our capital needs.