REGULATORY MATTERS

12 Months Ended

Dec. 31, 2017

REGULATORY MATTERS [Abstract]

REGULATORY MATTERS

21.   REGULATORY MATTERS

The Bank is subject to regulation, examination, and supervision by the New York State Department of Financial Services and the FDIC. The Holding Company is subject to regulation, examination, and supervision by the Board of Governors of the Federal Reserve System.

The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III Capital Rules”) became effective for the Holding Company and Bank on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019.  The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios as of January 1, 2015: a) 4.5% based upon common equity tier 1 capital ("CET1"); b) 6.0% based upon tier 1 capital; and c) 8.0% based upon total regulatory capital.  A minimum leverage ratio (tier 1 capital as a percentage of average consolidated assets) of 4.0% is also required under the Basel III Capital Rules.

When fully phased in, the Basel III Capital Rules will additionally require institutions to retain a capital conservation buffer, composed entirely of CET1, of 2.5% above these required minimum capital ratio levels.  Banking organizations that fail to maintain the minimum 2.5% capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers.  Restrictions would begin phasing in where the banking organization’s capital conservation buffer was below 2.5% at the beginning of a quarter, and distributions and discretionary bonus payments would be completely prohibited if no capital conservation buffer exists.  The implementation of the capital conservation buffer began on January 1, 2016 at 0.625% and will increase by 0.625% each subsequent January 1, until it reaches 2.5% on January 1, 2019.  At December 31, 2017, the capital conservation buffer was 1.25%.  When the capital conservation buffer is fully phased in on January 1, 2019, the Holding Company and the Bank will effectively have the following minimum capital to risk-weighted assets ratios: a) 7.0% based upon CET1; b) 8.5% based upon tier 1 capital; and c) 10.5% based upon total regulatory capital. In accordance with the Basel III Capital Rules, the Holding Company and the Bank have elected to exclude all permissible components of accumulated other comprehensive income from computing regulatory capital.  Management believes, as of December 31, 2017 and 2016, the Holding Company and Bank met all capital requirements to which they were subject.

The Bank is also governed by numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991, which established five categories of capital adequacy ranging from well capitalized to critically undercapitalized (although these items are not utilized to represent overall financial condition).  The FDIC utilizes these categories of capital adequacy to determine various matters, including, but not limited to, prompt corrective action and deposit insurance premium assessment levels.  Capital levels and adequacy classifications may also be subject to qualitative judgments by the Bank’s regulators regarding, among other factors, the components of capital and risk weighting. If adequately capitalized, regulatory approval is required to accept brokered deposits.  If undercapitalized, capital distributions and asset growth are limited, and capital restoration plans are required. As of December 31, 2017 and 2016, the Bank satisfied all criteria necessary to be categorized as “well capitalized” under the regulatory framework for prompt corrective action. There have been no conditions or events since December 31, 2017 that management believes have changed the "well capitalized" categorization.

Actual and required capital amounts and ratios as of the dates indicated are presented below:

	Actual					For Capital Adequacy Purposes(1)					To Be Categorized as “Well Capitalized”(1)
As of December 31, 2017	Amount		Ratio			Amount		Minimum Ratio			Amount		Minimum Ratio
Tier 1 Capital / % of average total assets
Bank	$	591,380		9.32	%	$	256,071		4.0	%	$	320,089		5.0	%
Consolidated Company		546,571		8.61			256,029		4.0			N/A		N/A
Common equity Tier 1 capital / % of risk weighted assets
Bank		591,380		12.38			214,984		4.5			310,532		6.5
Consolidated Company		546,571		11.42			215,424		4.5			N/A		N/A
Tier 1 Capital / % of risk weighted assets
Bank		591,380		12.38			286,645		6.0			382,194		8.0
Consolidated Company		546,571		11.42			287,232		6.0			N/A		N/A
Total Capital / % of risk weighted assets
Bank		612,858		12.83			382,194		8.0			477,742		10.0
Consolidated Company		683,049		14.27			382,976		8.0			N/A		N/A

⁽¹⁾ In accordance with the Basel III rules.

	Actual					For Capital Adequacy Purposes(1)					To Be Categorized as “Well Capitalized”(1)
As of December 31, 2016	Amount		Ratio			Amount		Minimum Ratio			Amount		Minimum Ratio
Tier 1 Capital / % of average total assets
Bank	$	521,458		8.95	%	$	235,232		4.0	%	$	294,041		5.0	%
Consolidated Company		516,170		10.03			235,402		4.0			N/A		N/A
Common equity Tier 1 capital / % of risk weighted assets
Bank		521,458		11.60			202,337		4.5			292,265		6.5
Consolidated Company		516,170		11.44			203,104		4.5			N/A		N/A
Tier 1 Capital / % of risk weighted assets
Bank		521,458		11.60			269,783		6.0			359,711		8.0
Consolidated Company		584,684		12.95			270,806		6.0			N/A		N/A
Total Capital / % of risk weighted assets
Bank		542,019		12.05			359,711		8.0			449,639		10.0
Consolidated Company		605,245		13.41			361,074		8.0			N/A		N/A

⁽¹⁾ In accordance with the Basel III rules.