Regulatory Matters

12 Months Ended

Dec. 31, 2014

REGULATORY MATTERS

REGULATORY MATTERS

17. REGULATORY MATTERS

Capital Requirements — The Company is subject to various regulatory capital requirements administered by federal banking agencies. Any institution that fails to meet its minimum capital requirements is subject to actions by regulators that could have a direct material effect on its financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines based on the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amount and classification under the regulatory framework for prompt corrective action are also subject to qualitative judgments by the regulators.

To meet the capital adequacy requirements, Green Bancorp and the Bank must maintain minimum capital amounts and ratios as defined in the regulations. Management believes, as of December 31, 2014 and 2013, that Green Bancorp and the Bank met all capital adequacy requirements to which they are subject.

The most recent notification from the regulatory banking agencies categorized Green Bank as “well capitalized” under the regulatory capital framework for prompt corrective action and there have been no events since that notification that management believes have changed the Bank’s category.

The Company’s consolidated capital ratios and the Bank’s capital ratios as of the dates set forth are presented in the following table:

		December 31, 2014
	Actual				For Capital Adequacy Purposes				To be Categorized as Well Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
The Company(1):
Total capital (to risk weighted assets)	$	268,770	14.0	%	$	154,052	8.0	%		N/A	N/A
Tier 1 capital (to risk weighted assets)		252,963	13.1			77,026	4.0			N/A	N/A
Tier I capital (to average assets)		252,963	12.1			84,003	4.0			N/A	N/A
The Bank(2):
Total capital (to risk weighted assets)	$	259,313	13.5	%	$	153,867	8.0	%	$	192,334	10.0	%
Tier 1 capital (to risk weighted assets)		243,506	12.7			76,934	4.0			115,400	6.0
Tier I capital (to average assets)		243,506	11.6			83,738	4.0			104,673	5.0

	December 31, 2013
	Actual				For Capital Adequacy Purposes				To be Categorized as Well Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
The Company(1):
Total capital (to risk weighted assets)	$	190,229	12.5	%	$	121,719	8.0	%		N/A	N/A
Tier 1 capital (to risk weighted assets)		173,680	11.4			60,859	4.0			N/A	N/A
Tier I capital (to average assets)		173,680	10.3			67,196	4.0			N/A	N/A
The Bank(2):
Total capital (to risk weighted assets)	$	184,908	12.2	%	$	121,619	8.0	%	$	152,023	10.0	%
Tier 1 capital (to risk weighted assets)		168,359	11.1			60,809	4.0			91,214	6.0
Tier I capital (to average assets)		168,359	10.0			67,021	4.0			83,776	5.0

⁽¹⁾ The Federal Reserve may require the Company to maintain capital ratios above the required minimums.

⁽²⁾ The FDIC or the OCC may require the Bank to maintain capital ratios above the required minimums

Dividend Restrictions — Dividends paid by the Bank are subject to certain restrictions imposed by regulatory agencies.  No dividends were paid for the period ended December 31, 2014 and 2013.

The Company is regarded as a legal entity separate and distinct from the Bank. The principal source of the Company’s revenues is dividends received from the Bank. Federal law currently imposes limitations upon certain capital distributions by national banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash‑out merger and other distributions charged against capital. The Board of Governors of the Federal Reserve System (the “Federal Reserve”) and Office of the Comptroller of the Currency (the “OCC”) regulate all capital distributions by the Bank directly or indirectly to the Company, including dividend payments. For example, under applicable regulations, the Bank must file an application for OCC approval of a capital distribution if the total capital distributions for the applicable calendar year exceed the sum of the Bank’s net income for that year to date plus the Bank’s retained net income for the preceding two years. Additionally, the Bank may not pay dividends to the Company if, after paying those dividends, it would fail to meet the required minimum levels under risk‑based capital guidelines and the minimum leverage and tangible capital ratio requirements, or in the event the OCC notified the Bank that it was in need of more than normal supervision. Under the Federal Deposit Insurance Act, an insured depository institution such as the Bank is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized.” Payment of dividends by the Bank also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice. In addition, the Bank may become subject to supervisory limits on its ability to declare or pay a dividend or reduce its capital unless certain conditions are satisfied.