REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS OF DIVIDENDS
 12 Months Ended
Dec. 31, 2016
Banking and Thrift [Abstract]  
REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS OF DIVIDENDS
NOTE 19. REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS OF DIVIDENDS

 

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and Bank’s financial statements.

 

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies. 

 

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios of Total, Tier 1 and common equity Tier 1 (“CET1”) capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2016 and 2015, that the Company and the Bank met all capital adequacy requirements to which they are subject.

 

As of December 31, 2016 and 2015, the most recent notifications from the regulatory agencies categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, an institution must maintain minimum Total risk-based, Tier 1 risk-based, CET1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since these notifications that management believes have changed the Bank’s category.

 

The Company’s and the Bank’s actual regulatory capital amounts and ratios as of December 31, 2016 and 2015 are presented in the following table.

 

    Actual     For Capital Adequacy
Purposes		     To Be Well Capitalized
Under Prompt Corrective
Action Provisions (2)		  
(dollars in thousands)   Amount     Ratio (1)     Amount     Ratio (1)     Amount     Ratio (1)  
As of December 31, 2016:                                    
Company                                    
Total risk-based capital   $ 249,723       13.9 %   $ 144,195       8.0 %                
Tier 1 risk-based capital     226,018       12.5       108,146       6.0                  
Common equity Tier 1 capital     202,313       11.2       81,110       4.5                  
Leverage     226,018       10.3       87,566       4.0                  
                                                 
Bank                                                
Total risk-based capital   $ 217,682       12.1 %   $ 144,322       8.0 %   $ 180,403       10.0 %
Tier 1 risk-based capital     205,862       11.4       108,242       6.0       144,322       8.0  
Common equity Tier 1 capital     205,862       11.4       81,181       4.5       117,262       6.5  
Leverage     205,862       9.4       87,329       4.0       109,161       5.0  
                                                 
As of December 31, 2015:                                                
Company                                                
Total risk-based capital   $ 140,691       14.8 %   $ 75,972       8.0 %                
Tier 1 risk-based capital     118,535       12.5       56,979       6.0                  
Common equity Tier 1 capital     94,346       9.9       42,697       4.5                  
Leverage     118,535       10.0       47,627       4.0                  
                                                 
Bank                                                
Total risk-based capital   $ 122,206       13.1 %   $ 74,903       8.0 %   $ 93,629       10.0 %
Tier 1 risk-based capital     111,899       12.0       56,178       6.0       74,903       8.0  
Common equity Tier 1 capital     111,899       12.0       42,133       4.5       60,859       6.5  
Leverage     111,899       9.5       47,036       4.0       58,794       5.0  

 

(1) The Total risk-based capital ratio is defined as Tier 1 capital plus tier 2 capital divided by total risk-weighted assets. The Tier 1 risk-based capital ratio is defined as Tier 1 capital divided by total risk-weighted assets. CET1 risk-based capital ratio is defined as Tier 1 capital, with deductions for goodwill and other intangible assets (other than mortgage servicing assets), net of associated deferred tax liabilities, and limitations on the inclusion of deferred tax assets, mortgage servicing assets and investments in other financial institutions, in each case as provided further in the rules, divided by total risk-weighted assets. The Leverage ratio is defined as Tier 1 capital divided by the most recent quarter’s average total assets as adjusted.

 

(2) Prompt corrective action provisions are not applicable at the bank holding company level.
 
A source of income and funds for the Company are dividends from the Bank. Dividends declared by the Bank that exceed the retained net income for the most current year plus retained net income for the preceding two years must be approved by Federal regulatory agencies. During the third quarter of 2016, the Bank requested approval from the regulatory agencies to pay a $15 million special dividend from Bank surplus and it was approved. At December 31, 2016, the Bank could pay dividends of approximately $1.1 million without seeking regulatory approval.