REGULATORY CAPITAL REQUIREMENTS

12 Months Ended

Dec. 31, 2015

Regulatory Capital Requirements [Abstract]

REGULATORY CAPITAL REQUIREMENTS

18. Regulatory Capital Requirements

The Company and the Bank are subject to various capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken could have a direct material effect on the Company and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors.

Current quantitative measures established by regulation to ensure capital adequacy require that we maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulation) to risk-weighted assets (as defined) and to average assets. We believe that the Company and the Bank meet all capital adequacy requirements to which they are subject and were categorized as “well capitalized” at December 31, 2015 and 2014.

On July 2, 2013, the Federal Reserve Board approved the final rules implementing the Basel Committee on Banking Supervision’s (“BCBS”) capital guidelines for US banks (“Basel III”). Following the actions by the Federal Reserve, the FDIC also approved regulatory capital requirements on July 9, 2013. The FDIC’s rule is identical in substance to the final rules issued by the Federal Reserve Bank.

Basel III became effective on January 1, 2015. The purpose is to improve the quality and increase the quantity of capital for all banking organizations. The minimum requirements for the quantity and quality of capital were increased. The rule includes a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and requires a minimum leverage ratio of 4%. In addition, the rule also implements strict eligibility criteria for regulatory capital instruments and improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. Full compliance with all of the final rule requirements will be phased in over a multi-year schedule. The total risk-based capital ratio at December 31, 2015 for the Bank was 15.42%.

At December 31, 2015, the Company and the Bank were categorized as “well capitalized” under Basel III. To be categorized as “well capitalized” the Company and the Bank must maintain minimum total risk based, Tier 1 risk based, common equity Tier 1 risk based capital and Tier 1 leverage ratios of 10%, 8.0%, 6.5% and 5%, respectively, and to be categorized as “adequately capitalized,” the Company and the Bank must maintain minimum total risk based, Tier 1 risk based, common equity Tier 1 risk based capital, and Tier 1 leverage ratios of 8%, 6%, 4.5%, and 4.0%, respectively.

Prior to January 1, 2015, the capital rules for US Banks were based on Basel I which was designed to highlight differences in risk profiles among financial institutions and to account for off-balance sheet risk. Basel I required a minimum risk-based capital ratio of 8% for bank holding companies and banks. The total risk-based capital ratio at December 31, 2014 for the Bank was 14.88%.

At December 31, 2014, the Company and Bank were categorized as “well capitalized” under Basel I. To be categorized as “well capitalized” the Company and the Bank had to maintain minimum total risk based, Tier 1 risk based and Tier 1 leverage ratios of 10%, 6% and 5%, respectively, and to be categorized as “adequately capitalized,” the Company and the Bank had to maintain minimum total risk based, Tier 1 risk based and Tier 1 leverage ratios of 8%, 4% and 4%, respectively.

The following tables present the actual and required capital amounts and ratios for the Company and Bank at December 31, 2015 and 2014:

December 31, 2015

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Company	$	41,497		15.54	%	$	21,359		8.00	%	$	N/A		N/A
Bank	$	41,169		15.42	%	$	21,357		8.00	%	$	26,696		10.00	%
Tier 1 capital to risk-weighted assets:
Company	$	38,159		14.29	%	$	16,019		6.00	%	$	N/A		N/A
Bank	$	37,831		14.17	%	$	16,018		6.00	%	$	21,357		8.00	%
Tier 1 capital to average assets:
Company	$	38,159		9.63	%	$	15,850		4.00	%	$	N/A		N/A
Bank	$	37,831		9.55	%	$	15,843		4.00	%	$	19,803		5.00	%
Common equity Tier 1 capital
Company	$	38,159		14.29	%	$	12,014		4.50	%	$	N/A		N/A
Bank	$	37,831		14.17	%	$	12,013		4.50	%	$	17,353		6.50	%

December 31, 2014

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Company	$	38,752		14.98	%	$	20,694		8.00	%	$	N/A		N/A
Bank	$	38,459		14.88	%	$	20,676		8.00	%	$	25,845		10.00	%
Tier 1 capital to risk-weighted assets:
Company	$	35,517		13.73	%	$	10,347		4.00	%	$	N/A		N/A
Bank	$	35,227		13.63	%	$	10,338		4.00	%	$	15,507		6.00	%
Tier 1 capital to average assets:
Company	$	35,517		9.44	%	$	15,042		4.00	%	$	N/A		N/A
Bank	$	35,227		9.37	%	$	15,033		4.00	%	$	18,792		5.00	%