Regulatory Matters

12 Months Ended

Dec. 31, 2015

Regulatory Matters [Abstract]

Regulatory Matters

Note S—Regulatory Matters

It is the policy of the Federal Reserve that financial holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that financial holding companies should not maintain a level of cash dividends that undermines the financial holding company’s ability to serve as a source of strength to its banking subsidiaries.

Various federal and state statutory provisions limit the amount of dividends that subsidiary banks can pay to their holding companies without regulatory approval. Under Delaware banking law, the Bank’s directors may declare dividends on common or preferred stock of so much of its net profits as they judge expedient, but the Bank must, before the declaration of a dividend on common stock from net profits, carry 50% of its net profits from the preceding period for which the dividend is paid to its surplus fund until its surplus fund amounts to 50% of its capital stock and thereafter must carry 25% of its net profits for the preceding period for which the dividend is paid to its surplus fund until its surplus fund amounts to 100% of its capital stock.

In addition to these explicit limitations, federal and state regulatory agencies are authorized to prohibit a banking subsidiary or financial holding company from engaging in an unsafe or unsound practice.  Depending upon the circumstances, the agencies could take the position that paying a dividend would constitute an unsafe or unsound banking practice.  In August, 2015, the Bank entered into an Amendment to the 2014 Consent Order pursuant to which the Bank may not pay dividends without prior FDIC approval.  Previously, the Company had received a Supervisory Letter pursuant to which the Company may not pay dividends without prior Federal Reserve approval.The Federal Reserve approved the payment of the distributions on the Company’s trust preferred securities due December 15, 2015. Future payments are subject to future approval by the Federal Reserve. (See Note I)

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

					To be well
					capitalized under
			For capital		prompt corrective
	Actual		adequacy purposes		action provisions
	Amount	Ratio	Amount	Ratio	Amount	Ratio
	(dollars in thousands)
As of December 31, 2015
Total capital
(to risk-weighted assets)
The Bancorp	$          323,900	14.88%	$            174,197	>=8.00	N/A	N/A
The Bancorp Bank	310,361	14.18%	175,111	8.00	219,067	>= 10.00%
Tier I capital
(to risk-weighted assets)
The Bancorp	319,500	14.67%	87,099	>=6.00	N/A	N/A
The Bancorp Bank	305,961	13.98%	87,556	6.00	175,254	>= 8.00%
Tier I capital
(to average assets)
The Bancorp	319,500	7.17%	178,227	>=4.00	N/A	N/A
The Bancorp Bank	305,961	6.90%	177,292	4.00	221,621	>= 5.00%
Common equity tier 1
(to risk-weighted assets)
The Bancorp	319,500	14.67%	97,986	>=4.00	N/A	N/A
The Bancorp Bank	305,961	13.98%	98,500	4.50	175,254	>= 6.50%
As of December 31, 2014
Total capital
(to risk-weighted assets)
The Bancorp	$          302,458	11.67%	$            216,440	>=8.00	N/A	N/A
The Bancorp Bank	276,003	10.59%	217,778	8.00	272,222	>= 10.00%
Tier I capital
(to risk-weighted assets)
The Bancorp	298,819	11.54%	108,220	>=4.00	N/A	N/A
The Bancorp Bank	272,366	10.46%	108,889	4.00	163,333	>= 6.00%
Tier I capital
(to average assets)
The Bancorp	298,819	7.07%	175,209	>=4.00	N/A	N/A
The Bancorp Bank	272,366	6.46%	175,258	4.00	219,073	>= 5.00%

As of December 31, 2015, the Company and the Bank met all regulatory requirements for classification as well capitalized under the regulatory framework for prompt corrective action.  Effective January 1, 2015, capital rules were modified as part of a multi year phase in period.  The new rules emphasize common equity capital of which the vast majority of the Company and the Bank’s capital is comprised.

In 2015 the Company paid a $3,000,000 civil money penalty as part of an amendment and restatement of the 2012 Consent Order with the FDIC.  The 2015 Consent Order requires additional quarterly reporting on the part of the Bank to the FDIC.  On June 4, 2014, an Order with the FDIC became effective and encompassed Bank Secrecy Act, or BSA, Anti-Money Laundering Act, or AML, and other areas.  As a result of the Order, the Bank incurred significant remediation expenses for third party consultants in 2015 and 2014, which will continue into 2016. The vast majority of the expense is to perform a “lookback” to analyze historical transactions.  Additional permanent expenses have and will result due to a significant increase in the number of employees performing BSA/AML related functions.  The 2014 Consent Order, as amended, restricts the Bank from signing and boarding new independent sales organizations, establishing new non-benefit reloadable prepaid card programs and originating Automated Clearing House transactions for new merchant-related payments.  The removal of these limitations depends upon the Bank’s issuance of a BSA report to the FDIC summarizing the completion of certain corrective action and the FDIC’s approval thereof.