REGULATORY MATTERS

6 Months Ended

Jun. 30, 2017

Banking and Thrift [Abstract]

REGULATORY MATTERS

REGULATORY MATTERS

The Company on a consolidated basis and the Bank are subject to various regulatory capital requirements administered by 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’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

A comparison of the Company’s and Bank’s actual capital amounts and ratios to required capital amounts and ratios are presented in the following tables as of:

	Actual				Minimum Required For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2017
Total capital to risk-weighted assets:
Consolidated	$	210,959	14.54	%	$	116,085	8.00	%			n/a
Bank	197,899		13.64	%	116,102		8.00	%	$	145,127	10.00	%
Tier 1 capital to risk-weighted assets:
Consolidated	198,434		13.68	%	87,063		6.00	%			n/a
Bank	185,374		12.77	%	87,076		6.00	%	116,102		8.00	%
Tier 1 capital to average assets:
Consolidated	198,434		10.68	%	74,355		4.00	%			n/a
Bank	185,374		9.98	%	74,313		4.00	%	92,892		5.00	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated	188,124		12.96	%	65,298		4.50	%			n/a
Bank	185,374		12.77	%	65,307		4.50	%	94,333		6.50	%

	Actual				Minimum Required For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2016
Total capital to risk-weighted assets:
Consolidated	$	149,468	10.86	%	$	110,083	8.00	%			n/a
Bank	173,528		12.63	%	109,947		8.00	%	$	137,434	10.00	%
Tier 1 capital to risk-weighted assets:
Consolidated	137,984		10.03	%	82,562		6.00	%			n/a
Bank	162,044		11.79	%	82,460		6.00	%	109,947		8.00	%
Tier 1 capital to average assets:
Consolidated	137,984		7.71	%	71,560		4.00	%			n/a
Bank	162,044		9.06	%	71,505		4.00	%	89,381		5.00	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated	127,674		9.28	%	61,922		4.50	%			n/a
Bank	162,044		11.79	%	61,845		4.50	%	89,332		6.50	%

In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework (the “Basel III Capital Rules”). The Basel III Capital Rules, among other things, (i) introduce a new capital measure called “Common Equity Tier I” (“CETI”), (ii) specify that Tier I capital consist of Common Equity Tier I and “Additional Tier I Capital” instruments meeting specified requirements, (iii) define Common Equity Tier I narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to Common Equity Tier I and not to the other components of capital and (iv) expand the scope of the deductions/adjustments as compared to existing regulations. The Basel III Capital Rules became effective for the Company on January 1, 2015, with certain transition provisions to be fully phased in by January 1, 2019.

Starting in January 2016, the implementation of the capital conservation buffer will be effective for the Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reaches 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios. Failure to meet the full amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers. 

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total, CETI and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), ad of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2017 and December 31, 2016 that the Company met all capital adequacy requirements to which it was subject.

As of June 30, 2017 and December 31, 2016, the Bank’s capital ratios exceeded those levels necessary to be categorized as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized”, the Bank must maintain minimum total risk-based, CETI, Tier 1 risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since June 30, 2017 that management believes have changed the Bank’s category.

The Federal Reserve’s guidelines regarding the capital treatment of trust preferred securities limits restricted core capital elements (including trust preferred securities and qualifying perpetual preferred stock) to 25% of all core capital elements, net of goodwill less any associated deferred tax liability. Because the Company’s aggregate amount of trust preferred securities is less than the limit of 25% of Tier I capital, net of goodwill, the rules permit the inclusion of $10,310 of trust preferred securities in Tier Icapital at June 30, 2017 and December 31, 2016. Additionally, the rules provide that trust preferred securities would no longer qualify for Tier I capital within five years of their maturity, but would be included as Tier 2 capital. However, the trust preferred securities would be amortized out of Tier 2 capital by one-fifth each year and excluded from Tier 2 capital completely during the year prior to maturity of the subordinated debentures.

Dividends paid by the Company are mainly provided by dividends from its subsidiaries. However, certain regulatory restrictions exist regarding the ability of its bank subsidiary to transfer funds to the Company in the form of cash dividends, loans or advances. The amount of dividends that a subsidiary bank organized as a national banking association, such as the Bank, may declare in a calendar year is the subsidiary bank’s net profits for that year combined with its retained net profits for the preceding two years.