NOTE 18.STOCKHOLDERS’ EQUITY AND EARNINGS PER COMMON SHARE

Minimum Regulatory Capital Requirements

The Company and Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if imposed, could have a direct material impact on the Company’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 its 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 weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and 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 to average assets (as defined). As of year-end 2014 and 2013, the Bank met the capital adequacy requirements. As required starting in 2014, the Company met the capital adequacy requirements. Regulators may set higher expected capital requirements in some cases based on their examinations.

As of year-end 2014 and 2013, the Bank met the conditions to be classified as “well capitalized” under the regulatory framework for prompt corrective action. As of year-end 2014, the Company met the conditions to be classified 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, and Tier 1 leverage ratios as set forth in the following tables.

The Company and Bank’s actual and required capital amounts were as follows:

									Minimum to be Well
					Minimum				Capitalized Under
					Capital				Prompt Corrective
	Actual				Requirement				Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio

December 31, 2014
Company (Consolidated)
Total capital to risk-weighted assets	$	542,608	11.38		$	381,463	8.00	%	$	476,829	10.00	%
Tier 1 capital to risk-weighted assets	430,374		9.03		190,731		4.00		286,097		6.00
Tier 1 capital to average assets	430,374		7.01		245,558		4.00		306,947		5.00
Bank
Total capital to risk-weighted assets	$	513,368	10.78		$	380,959	8.00		$	476,199	10.00	%
Tier 1 capital to risk-weighted assets	440,420		9.25		190,479		4.00		285,719		6.00
Tier 1 capital to average assets	440,420		7.18		245,494		4.00		306,867		5.00
December 31, 2013
Company (Consolidated)
Total capital to risk-weighted assets	N/A		N/A		N/A		8.00	%	N/A		10.00	%
Tier 1 capital to risk-weighted assets	N/A		N/A		N/A		4.00		N/A		6.00
Tier 1 capital to average assets	N/A		N/A		N/A		4.00		N/A		5.00
Bank
Total capital to risk-weighted assets	$	486,075	11.62	%	$	334,555	8.00	%	$	418,193	10.00	%
Tier 1 capital to risk-weighted assets	416,803		9.97		167,277		4.00		250,916		6.00
Tier 1 capital to average assets	416,803		7.99		208,685		4.00		260,857		5.00

A reconciliation of the Company’s year-end total stockholders’ equity to the Company’s regulatory capital is as follows:

(In thousands)	2014			2013
Total stockholders’ equity per consolidated financial statements	$	709,287		N/A
Adjustments for Bank Tier 1 Capital:
Net unrealized loss (gain) on available for sale securities	(9,916		)	N/A
Net unrealized loss on cash flow hedges	3,338			N/A
Qualifying restricted core capital elements	15,000			N/A
Disallowed goodwill and other intangible assets	(276,270		)	N/A
Disallowed deferred taxes	(11,065		)	N/A
Total Bank Tier 1 Capital	430,374			N/A
Adjustments for total capital:
Qualifying subordinated debt	74,283			N/A
Includible allowances for loan losses	35,722			N/A
Net unrealized loss on available for sale securities includible in Tier 2 capital	2,229			N/A
Total Bank capital per regulatory reporting	$	542,608		N/A

A reconciliation of the Company’s year-end total stockholders’ equity to the Bank’s regulatory capital is as follows:

(In thousands)	2014			2013
Total stockholders’ equity per consolidated financial statements	$	709,287		$	678,062
Adjustments for Bank Tier 1 Capital:
Holding company equity adjustment	1,868			(3,764		)
Net unrealized loss (gain) on available for sale securities	(9,912		)	5,749
Net unrealized loss on cash flow hedges	3,338			3,158
Disallowed goodwill and other intangible assets	(251,748		)	(245,405		)
Disallowed deferred taxes	(12,413		)	(20,997		)
Total Bank Tier 1 Capital	440,420			416,803
Adjustments for total capital:
Qualifying subordinated debt	35,000			35,000
Includible allowances for loan losses	35,722			33,383
Net unrealized loss on available for sale securities includible in Tier 2 capital	2,226			889
Total Bank capital per regulatory reporting	$	513,368		$	486,075

Common stock

The Bank is subject to dividend restrictions imposed by various regulators, including a limitation on the total of all dividends that the Bank may pay to the Company in any calendar year. The total of all dividends shall not exceed the Bank’s net income for the current year (as defined by statute), plus the Bank’s net income retained for the two previous years, without regulatory approval. Dividends from the Bank are an important source of funds to the Company to make dividend payments on its common and preferred stock, to make payments on its borrowings, and for its other cash needs. The ability of the Company and the Bank to pay dividends is dependent on regulatory policies and regulatory capital requirements. The ability to pay such dividends in the future may be adversely affected by new legislation or regulations, or by changes in regulatory policies relating to capital, safety and soundness, and other regulatory concerns.

The payment of dividends by the Company is subject to Delaware law, which generally limits dividends to an amount equal to an excess of the net assets of a company (the amount by which total assets exceed total liabilities) over statutory capital, or if there is no excess, to the Company’s net profits for the current and/or immediately preceding fiscal year.

Accumulated other comprehensive loss

Year-end components of accumulated other comprehensive income/(loss) are as follows:

(In thousands)	2014			2013
Other accumulated comprehensive income/(loss), before tax:
Net unrealized holding gain (loss) on AFS securities	$	15,993		$	(9,294	)
Net loss on effective cash flow hedging derivatives	(3,299		)	(2,289		)
Net loss on terminated swap	—			(3,237		)
Net unrealized holding (loss) gain on pension plans	(2,291		)	17

Income taxes related to items of accumulated other comprehensive income/(loss):
Net unrealized holding (loss) gain on AFS securities	(6,077		)	3,518
Net loss on effective cash flow hedging derivatives	1,330			923
Net loss on terminated swap	—			1,312
Net unrealized holding gain (loss) on pension plans	923			(7		)
Accumulated other comprehensive income/(loss)	$	6,579		$	(9,057	)

The following table presents the components of other comprehensive income (loss) for the years ended December 31, 2014, 2013, and 2012:

(In thousands)	Before Tax			Tax Effect			Net of Tax
Year Ended December 31, 2014
Net unrealized holding gain on AFS securities:
Net unrealized gain arising during the period	$	25,769		$	(9,791	)	$	15,978
Less: reclassification adjustment for (gains) realized in net income	(482		)	196			(286		)
Net unrealized holding gain on AFS securities	25,287			(9,595		)	15,692

Net loss on cash flow hedging derivatives:
Net unrealized (loss) arising during the period	(6,403		)	2,608			(3,795		)
Less: reclassification adjustment for losses realized in net income	5,393			(2,201		)	3,192
Net loss on cash flow hedging derivatives	(1,010		)	407			(603		)

Net loss on terminated swap:
Net unrealized loss arising during the period	—			—			—
Less: reclassification adjustment for losses realized in net income	3,237			(1,312		)	1,925
Net loss on terminated swap	3,237			(1,312		)	1,925

Net unrealized holding loss on pension plans
Net unrealized loss arising during the period	(2,308		)	930			(1,378		)
Less: reclassification adjustment for (gains) losses realized in net income	—			—			—
Net unrealized holding loss on pension plans	(2,308		)	930			(1,378		)
Other Comprehensive Income	$	25,206		$	(9,570	)	$	15,636

(In thousands)	Before Tax			Tax Effect			Net of Tax
Year Ended December 31, 2013
Net unrealized holding loss on AFS securities:
Net unrealized (loss) arising during the period	$	(15,254	)	$	5,604		$	(9,650	)
Less: reclassification adjustment for (gains) realized in net income	(4,758		)	1,920			(2,838		)
Net unrealized holding loss on AFS securities	(20,012		)	7,524			(12,488		)

Net gain on cash flow hedging derivatives:
Net unrealized gain arising during the period	5,046			(2,014		)	3,032
Less: reclassification adjustment for losses realized in net income	3,620			(1,460		)	2,160
Net gain on cash flow hedging derivatives	8,666			(3,474		)	5,192

Net loss on terminated swap:
Net unrealized loss arising during the period	—			—			—
Less: reclassification adjustment for losses realized in net income	942			(489		)	453
Net loss on terminated swap	942			(489		)	453

Net unrealized holding gain on pension plans
Net unrealized gain arising during the period	1,282			(517		)	765
Less: reclassification adjustment for (gains) losses realized in net income	—			—			—
Net unrealized holding gain on pension plans	1,282			(517		)	765
Other Comprehensive Income	$	(9,122	)	$	3,044		$	(6,078	)

(In thousands)	Before Tax			Tax Effect			Net of Tax
Year Ended December 31, 2012
Net unrealized holding gain on AFS securities:
Net unrealized gain arising during the period	$	5,861		$	(2,246	)	$	3,615
Less: reclassification adjustment for (gains) realized in net income	(1,442		)	579			(863		)
Net unrealized holding gain on AFS securities	4,419			(1,667		)	2,752

Net gain on cash flow hedging derivatives:
Net unrealized gain arising during the period	(5,653		)	2,129			(3,524		)
Less: reclassification adjustment for losses realized in net income	3,581			(1,441		)	2,140
Net loss on cash flow hedging derivatives	(2,072		)	688			(1,384		)

Net loss on terminated swap:
Net unrealized loss arising during the period	—			—			—
Less: reclassification adjustment for losses realized in net income	942			(324		)	618
Net loss on terminated swap	942			(324		)	618

Net unrealized holding loss on pension plans
Net unrealized loss arising during the period	(136		)	56			(80		)
Less: reclassification adjustment for (gains) losses realized in net income	—			—			—
Net unrealized holding loss on pension plans	(136		)	56			(80		)
Other Comprehensive Income	$	3,153		$	(1,247	)	$	1,906

The following table presents the changes in each component of accumulated other comprehensive income (loss), for the years ended December 31, 2014, 2013, and 2012:

	Net unrealized			Net loss on			Net loss			Net unrealized
	holding gain (loss)			effective cash			on			holding gain (loss)
	on AFS			flow hedging			terminated			on
(in thousands)	Securities			derivatives			swap			pension plans			Total
Year Ended December 31, 2014
Balance at Beginning of Year	$	(5,776	)	$	(1,366	)	$	(1,925	)	$	10		$	(9,057	)
Other Comprehensive Gain (Loss) before reclassifications	15,978			(3,795		)	—			(1,378		)	10,805
Amounts Reclassified from Accumulated other comprehensive income	(286		)	3,192			1,925			—			4,831
Total Other Comprehensive Income	15,692			(603		)	1,925			(1,378		)	15,636
Balance at End of Period	$	9,916		$	(1,969	)	$	0		$	(1,368	)	$	6,579

Year Ended December 31, 2013
Balance at Beginning of Year	$	6,712		$	(6,558	)	$	(2,378	)	$	(755	)	$	(2,979	)
Other Comprehensive (Loss) Gain before reclassifications	(9,650		)	3,032			—			765			(5,853		)
Amounts Reclassified from Accumulated other comprehensive income	(2,838		)	2,160			453			—			(225		)
Total Other Comprehensive Loss	(12,488		)	5,192			453			765			(6,078		)
Balance at End of Period	$	(5,776	)	$	(1,366	)	$	(1,925	)	$	10		$	(9,057	)

Year Ended December 31, 2012
Balance at Beginning of Year	$	3,960		$	(5,174	)	$	(2,996	)	$	(675	)	$	(4,885	)
Other Comprehensive Gain (Loss) Before reclassifications	3,615			(3,524		)	—			(80		)	11
Amounts Reclassified from Accumulated other comprehensive income	(863		)	2,140			618			—			1,895
Total Other Comprehensive Income	2,752			(1,384		)	618			(80		)	1,906
Balance at End of Period	$	6,712		$	(6,558	)	$	(2,378	)	$	(755	)	$	(2,979	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the years ended December 31, 2014, 2013, and 2012:

										Affected Line Item in the
	Years Ended Decemeber 31,									Statement Where Net Income
(in thousands)	2014			2013			2012			Is Presented
Realized (gains) on AFS securities:
	$	(482	)	$	(4,758	)	$	(1,442	)	Non-interest income
	196			1,920			579			Tax expense
	(286		)	(2,838		)	(863		)

Realized losses on cash flow hedging derivatives:
	5,393			3,620			3,581			Interest income
	(2,201		)	(1,460		)	(1,441		)	Tax expense
	3,192			2,160			2,140

Amortization of realized losses on terminated swap:
	3,237			942			942			Interest income
	(1,312		)	(489		)	(324		)	Tax expense
	1,925			453			618
Total reclassifications for the period	$	4,831		$	(225	)	$	1,895

Earnings Per Common Share

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.

Earnings per common share has been computed based on the following (average diluted shares outstanding is calculated using the treasury stock method):

	Years Ended December 31,
(In thousands, except per share data)	2014		2013		2012

Net income from continuing operations	$	33,744	$	41,143	$	33,825
Loss from discontinued operations before income taxes (including gain on disposal of $63 in 2012)	—		—		(261		)
Income tax benefit	—		—		376
Net loss from discontinued operations	—		—		(637		)
Net income	$	33,744	$	41,143	$	33,188

Average number of common shares issued	26,525		26,525		24,081
Less: average number of treasury shares	1,386		1,424		1,626
Less: average number of unvested stock award shares	409		299		254
Average number of basic common shares outstanding	24,730		24,802		22,201
Plus: dilutive effect of unvested stock award shares	67		60		41
Plus: dilutive effect of stock options outstanding	57		103		87
Average number of diluted common shares outstanding	24,854		24,965		22,329

Basic earnings per share:
Continuing Operations	$	1.36	$	1.66	$	1.52
Discontinued operations	—		—		(0.03		)
Total basic earning per share	$	1.36	$	1.66	$	1.49

Diluted earnings per share:
Continuing Operations	$	1.36	$	1.65	$	1.52
Discontinued operations	—		—		(0.03		)
Total diluted earnings per share	$	1.36	$	1.65	$	1.49

For the year ended 2014, 225 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended 2013, 338 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended 2012, 600 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.