Regulatory Matters

6 Months Ended

Jun. 30, 2015

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.

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 1" ("CET1"), (ii) specify that Tier 1 capital consist of Common Equity Tier 1 and "Additional Tier 1 Capital" instruments meeting specified requirements, (iii) define Common Equity Tier 1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to Common Equity Tier 1 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 us on January1, 2015 with certain transition provisions fully phased in on January 1, 2019.  Prior to January 1, 2015 the Basel I Capital Rules applied to us.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios CET1, Tier 1 and Total capital to risk-weighted assets, and of Tier 1 capital to average assets, each as defined in the regulations. Management believes, as of June30, 2015, that the Company and the Bank met all capital adequacy requirements to which they are subject.

Financial institutions are categorized as well capitalized or adequately capitalized, based on minimum total risk-based, Tier 1 risk-based, CET1 and Tier 1 leverage ratios. As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of June30, 2015, and December 31, 2014. Based upon the information in its most recently filed call report, the Bank met the capital ratios necessary to be well capitalized. The regulatory authorities can apply changes in classification of assets and such changes may retroactively subject the Company to changes in capital ratios. Any such changes could result in reducing one or more capital ratios below well-capitalized status. In addition, a change may result in imposition of additional assessments by the FDIC or could result in regulatory actions that could have a material effect on condition and results of operations.

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:

	June 30, 2015
	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)	$	284,167	13.4	%	$	170,083	8.0	%		N/A	N/A
Tier 1 capital (to risk weighted assets)		265,681	12.5			127,563	6.0			N/A	N/A
Common equity tier 1 capital(3)		265,681	12.5			95,672	4.5			N/A	N/A
Tier I capital (to average assets)		265,681	11.9			89,660	4.0			N/A	N/A
The Bank(2):
Total capital (to risk weighted assets)	$	275,055	13.0	%	$	169,863	8.0	%	$	212,328	10.0	%
Tier 1 capital (to risk weighted assets)		256,568	12.1			127,397	6.0			169,863	8.0
Common equity tier 1 capital(3)		256,568	12.1			95,548	4.5			138,013	6.5
Tier I capital (to average assets)		256,568	11.5			89,337	4.0			111,672	5.0

	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

⁽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.

⁽³⁾ Common equity tier 1 capital is a new ratio required under Basel III Capital Rules effective January 1 2015.

Dividend Restrictions — Dividends paid by the Bank are subject to certain restrictions imposed by regulatory agencies.  The Basel III Capital Rules further limit the amount of dividends that may be paid by our bank.  No dividends were paid for the periods ended June 30, 2015 and December 31, 2014.