Quarterly report pursuant to Section 13 or 15(d)

SHAREHOLDERS' EQUITY

v2.4.0.6
SHAREHOLDERS' EQUITY
 3 Months Ended
Mar. 31, 2012
SHAREHOLDERS' EQUITY [Abstract]  
SHAREHOLDERS' EQUITY
NOTE 11 - 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 March 31, 2012 and December 31, 2011, actual capital levels and minimum required levels were (in thousands):

 
 
Actual
 
 
Minimum Required
For Capital
Adequacy Purposes
 
 
To Be Well
Capitalized Under
Prompt Corrective
Action Regulations
 
 
Minimum Required
 Under MOU/Consent
Order (1)
 
 
 
Amount
 
 
Ratio
 
 
Amount
 
 
Ratio
 
 
Amount
 
 
Ratio
 
 
Amount
 
 
Ratio
 
March 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total capital (to risk weighted assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
154,263
 
 
 
13.7
%
 
$
90,363
 
 
 
8.0
%
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
Bank
 
 
147,010
 
 
 
13.0
 
 
 
90,354
 
 
 
8.0
 
 
$
112,942
 
 
 
10.0
%
 
  
N/A
 
 
 
N/A
  
Tier 1 capital (to risk weighted assets)
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
131,046
 
 
 
11.6
 
 
 
45,182
 
 
 
4.0
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
Bank
 
 
132,684
 
 
 
11.8
 
 
 
45,177
 
 
 
4.0
 
 
 
67,765
 
 
 
6.0
 
 
 
N/A
 
 
 
N/A
 
Tier 1 capital (to average assets)
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
131,046
 
 
 
8.8
 
 
 
59,885
 
 
 
4.0
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
Bank
 
 
132,684
 
 
 
8.9
 
 
 
59,815
 
 
 
4.0
 
 
 
74,769
 
 
 
5.0
 
 
 $
119,630
 
 
 
8.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total capital (to risk weighted assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
149,905
 
 
 
13.2
%
 
$
91,201
 
 
 
8.0
%
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
Bank
 
 
142,059
 
 
 
12.5
 
 
 
91,193
 
 
 
8.0
 
 
$
113,991
 
 
 
10.0
%
 
$
125,390
 
 
 
11.0
%
Tier 1 capital (to risk weighted assets)
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
125,028
 
 
 
11.0
 
 
 
45,601
 
 
 
4.0
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
Bank
 
 
127,576
 
 
 
11.2
 
 
 
45,596
 
 
 
4.0
 
 
 
68,394
 
 
 
6.0
 
 
 
N/A
 
 
 
N/A
 
Tier 1 capital (to average assets)
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
125,028
 
 
 
8.3
 
 
 
60,598
 
 
 
4.0
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
 
 
N/A
 
Bank
 
 
127,576
 
 
 
8.4
 
 
 
60,528
 
 
 
4.0
 
 
 
75,660
 
 
 
5.0
 
 
 
121,056
 
 
 
8.0
 
 
(1)
The MOU is applicable to the March 31, 2012 information presented in these columns, and the Consent Order is applicable to the December 31, 2011 information presented in these columns.

Approximately $32.8 million and $31.3 million of trust preferred securities outstanding at March 31, 2012 and December 31, 2011, respectively, qualified as Tier 1 capital. Refer to our 2011 Form 10-K for more information on the trust preferred securities.
 
The Bank was categorized as "well capitalized" at March 31, 2012 and "adequately capitalized" at December 31, 2011. The Bank's regulatory capital ratios exceeded the levels ordinarily required to be categorized as "well capitalized" at December 31, 2011. However, because the Bank was subject to the Consent Order, the Bank could not be categorized as "well capitalized" regardless of actual capital levels.  With the termination of the Consent Order on March 2, 2012, the Bank's capital category improved to "well capitalized".

The MOU prohibits the Bank from declaring or paying any cash dividend without the prior written consent of its regulators. The payment of future cash dividends by the Company is largely dependent upon dividends received from the Bank out of its earnings. Under Michigan law, the Bank is also restricted from paying dividends to the Company until its deficit retained earnings has been restored. The Bank had a retained deficit of approximately $26.7 million at March 31, 2012.
 
Additional information about the Consent Order and the MOU may be found in Note 1 under the heading "Regulatory Developments".