Regulatory Matters

12 Months Ended

Dec. 31, 2012

Regulatory Matters [Abstract]

Regulatory Matters

Note 19. Regulatory Matters

The Corporation 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 Corporation’s and Bank’s financial statements. Capital adequacy guidelines, and additionally for the Bank 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 weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined).

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well- Capitalized Under Prompt Corrective Action  Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At December 31, 2012:
Total Capital (to Risk-Weighted Assets):
Corporation	$	274,504		15.62	%	$	140,631		8.00	%	$	175,788		10.00	%
Bank		246,861		14.22			138,841		8.00			173,552		10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation		252,240		14.35			70,315		4.00			105,473		6.00
Bank		225,126		12.97			69,421		4.00			104,131		6.00
Tier 1 Capital (to Average Assets):
Corporation		252,240		11.47			87,934		4.00			109,918		5.00
Bank		225,126		10.31			87,310		4.00			109,137		5.00
At December 31, 2011:
Total Capital (to Risk-Weighted Assets):
Corporation	$	265,105		15.56	%	$	136,343		8.00	%	$	170,429		10.00	%
Bank		249,694		14.89			134,158		8.00			167,697		10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation		243,474		14.29			68,172		4.00			102,257		6.00
Bank		228,619		13.63			67,079		4.00			100,618		6.00
Tier 1 Capital (to Average Assets):
Corporation		243,474		11.53			84,501		4.00			105,627		5.00
Bank		228,619		10.91			83,840		4.00			104,800		5.00

At December 31, 2012 and December 31, 2011, management believes that the Corporation and the Bank met all capital adequacy requirements to which they were subject. The Corporation, like other bank holding companies, currently is required to maintain Tier 1 Capital and Total Capital (the sum of Tier 1, Tier 2 and Tier 3 capital) equal to at least 4.0% and 8.0%, respectively, of its total risk-weighted assets (including various off-balance-sheet items, such as standby letters of credit). The Bank, like other depository institutions, is required to maintain similar capital levels under capital adequacy guidelines. For a depository institution to be considered “well capitalized” under the regulatory framework for prompt corrective action, its Tier 1 and Total Capital ratios must be at least 6.0% and 10.0% on a risk-adjusted basis, respectively. At December 31, 2012, the Bank is categorized as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Dividend and Other Restrictions

The primary source of the Corporation’s dividends paid to its shareholders is from the earnings of its subsidiaries paid to the Corporation in the form of dividends.

The approval of the Federal Reserve Board of Governors is required for a state bank member in the Federal Reserve system to pay dividends if the total of all dividends declared in any calendar year exceeds the Bank’s net profits (as defined) for that year combined with its retained net profits for the preceding two calendar years. Under this formula, the Bank can declare dividends in 2013 without approval of the Federal Reserve Board of Governors of approximately $6.4 million plus an additional amount equal to the Bank’s net profits for 2013 up to the date of any such dividend declaration.

Federal Reserve Board policy applicable to the holding company also provides that, as a general matter, a bank holding company should inform the Federal Reserve and should eliminate, defer or significantly reduce the holding company’s dividends if the holding company’s net income for the preceding four quarters, net of dividends paid during the period, is not sufficient to fully fund the dividends, the holding company’s prospective rate of earnings retention is inconsistent with capital needs and overall current and prospective financial condition, or the holding company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. Federal Reserve Board policy also provides that a bank holding company should inform the Federal Reserve reasonably in advance of declaring or paying a dividend that exceeds earnings for the period or that could result in a material adverse change to the organization’s capital structure.

The Federal Reserve Act requires that extension of credit by the Bank to certain affiliates, including the Corporation (parent), be secured by readily marketable securities, that extension of credit to any one affiliate be limited to 10% of the Bank’s capital and surplus (as defined), and that extensions of credit to all such affiliates be limited to 20% of the Bank’s capital and surplus.