Regulatory Capital

9 Months Ended

Sep. 30, 2011

Deposits and Regulatory Capital [Abstract]

Regulatory Capital

Note 11 — Regulatory Capital

The Corporation and the Banks are subject to various regulatory capital requirements administered by Federal and State of Wisconsin banking agencies. Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions on the part of regulators, that if undertaken, could have a direct material effect on the Banks’ assets, liabilities and certain off-balance sheet items as calculated under regulatory practices. The Corporation’s and the Banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The Corporation has updated its Capital and Liquidity Action Plan (the “Plan”), which is designed to help ensure appropriate capital adequacy, to plan for future capital needs and to ensure that the Corporation serves as a source of financial strength to the Banks. The Corporation’s and the Banks’ Board of Directors and management work in concert with the appropriate regulatory bodies on decisions which affect their capital position, including but not limited to, decisions relating to the payment of dividends and increasing indebtedness.

As a bank holding company, the Corporation’s ability to pay dividends is affected by the policies and enforcement powers of the Federal Reserve. Federal Reserve guidance urges companies to strongly consider eliminating, deferring or significantly reducing dividends if: (i) net income available to common shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividend; (ii) the prospective rate of earnings retention is not consistent with the bank holding company’s capital needs and overall current prospective financial condition; or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital ratios. Management intends to consult with the Federal Reserve Bank of Chicago and provide them with information on the Corporation’s then-current and prospective earnings and capital position, on a quarterly basis, in advance of declaring any cash dividends.

The Banks are also subject to certain legal, regulatory and other restrictions on their ability to pay dividends to the Corporation. As a bank holding company, the payment of dividends by the Banks to the Corporation is one of the sources of funds the Corporation could use to pay dividends, if any, in the future and to make other payments. Future dividend decisions by the Banks and the Corporation will continue to be subject to compliance with various legal, regulatory and other restrictions as defined from time to time.

Qualitative measures established by regulation to ensure capital adequacy require the Corporation and the Banks to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Tier 1 capital generally consists of stockholders’ equity plus certain qualifying debentures and other specified items less intangible assets such as goodwill. Risk-based capital requirements presently address credit risk related to both recorded and off-balance sheet commitments and obligations. Management believes, as of September 30, 2011, that the Corporation and the Banks met all applicable capital adequacy requirements.

As of September 30, 2011, the most recent notification from the Federal Deposit Insurance Corporation and the State of Wisconsin Department of Financial Institutions categorized the Banks as well capitalized under the regulatory framework for prompt corrective action. In addition, the Banks exceeded the minimum net worth requirement of 6.0% required by the State of Wisconsin at December 31, 2010, the latest evaluation date.

The following table summarizes the Corporation’s and Banks’ capital ratios and the ratios required by their federal regulators at September 30, 2011 and December 31, 2010, respectively:

											Minimum Required to be Well
											Capitalized Under Prompt
						Minimum Required for Capital					Corrective Action
	Actual					Adequacy Purposes					Requirements
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
As of September 30, 2011
Total capital
(to risk-weighted assets)
Consolidated	$	115,548		12.66	%	$	73,043		8.00	%		N/A		N/A
First Business Bank		105,911		12.94			65,455		8.00		$	81,819		10.00	%
First Business Bank — Milwaukee		15,100		15.90			7,599		8.00			9,498		10.00
Tier 1 capital
(to risk-weighted assets)
Consolidated	$	69,401		7.60	%	$	36,521		4.00	%		N/A		N/A
First Business Bank		95,656		11.69			32,728		4.00		$	49,091		6.00	%
First Business Bank — Milwaukee		13,907		14.64			3,799		4.00			5,699		6.00
Tier 1 capital
(to average assets)
Consolidated	$	69,401		6.21	%	$	44,717		4.00	%		N/A		N/A
First Business Bank		95,656		9.88			38,732		4.00		$	48,415		5.00	%
First Business Bank — Milwaukee		13,907		9.29			5,989		4.00			7,487		5.00

											Minimum Required to be Well
											Capitalized Under Prompt
						Minimum Required for Capital					Corrective Action
	Actual					Adequacy Purposes					Requirements
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
As of December 31, 2010
Total capital
(to risk-weighted assets)
Consolidated	$	107,263		11.23	%	$	76,438		8.00	%		N/A		N/A
First Business Bank		100,203		11.72			68,390		8.00		$	85,488		10.00	%
First Business Bank — Milwaukee		14,496		14.62			7,930		8.00			9,913		10.00
Tier 1 capital
(to risk-weighted assets)
Consolidated	$	63,511		6.65		$	38,219		4.00	%		N/A		N/A
First Business Bank		89,478		10.47			34,195		4.00		$	51,293		6.00	%
First Business Bank — Milwaukee		13,243		13.36			3,965		4.00			5,948		6.00
Tier 1 capital
(to average assets)
Consolidated	$	63,511		5.68		$	44,732		4.00	%		N/A		N/A
First Business Bank		89,478		9.34			38,335		4.00		$	47,918		5.00	%
First Business Bank — Milwaukee		13,243		8.30			6,381		4.00			7,976		5.00