Regulatory Capital

9 Months Ended

Sep. 30, 2019

Regulatory Capital

Regulatory Capital

Note 12: Regulatory Capital

The Company and the subsidiary banks are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. The capital amounts and classification also are subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Banking regulations identify five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. As of September 30, 2019 and December 31, 2018, all capital ratios of the Company and the subsidiary banks exceeded the well capitalized levels under the applicable regulatory capital adequacy guidelines. Management believes that no events or changes have occurred subsequent to September 30, 2019 that would change this designation.

The following tables summarize the applicable holding company and bank regulatory capital requirements (dollars in thousands):

									Minimum
					Minimum				To Be Well
	Actual				Capital Requirement				Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2019:
Total Capital (to Risk Weighted Assets)
Consolidated	$	1,020,195	13.71	%	$	595,295	8.00	%	$	744,118	10.00	%
Busey Bank	$	883,146	13.93	%	$	507,070	8.00	%	$	633,837	10.00	%
TheBANK	$	198,244	18.08	%	$	87,743	8.00	%	$	109,678	10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	907,230	12.19	%	$	446,471	6.00	%	$	595,295	8.00	%
Busey Bank	$	830,995	13.11	%	$	380,303	6.00	%	$	507,070	8.00	%
TheBANK	$	197,430	18.00	%	$	65,807	6.00	%	$	87,743	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	833,230	11.20	%	$	334,854	4.50	%	$	483,677	6.50	%
Busey Bank	$	830,995	13.11	%	$	285,227	4.50	%	$	411,994	6.50	%
TheBANK	$	197,430	18.00	%	$	49,356	4.50	%	$	71,291	6.50	%
Tier 1 Capital (to Average Assets)
Consolidated	$	907,230	9.78	%	$	371,129	4.00	%		N/A	N/A
Busey Bank	$	830,995	11.12	%	$	298,943	4.00	%	$	373,679	5.00	%
TheBANK	$	197,430	10.55	%	$	74,851	4.00	%	$	93,563	5.00	%
									Minimum
					Minimum				To Be Well
	Actual				Capital Requirement				Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2018:
Total Capital (to Risk Weighted Assets)
Consolidated	$	894,572	14.83	%	$	482,638	8.00	%	$	603,297	10.00	%
Busey Bank	$	854,351	14.19	%	$	481,701	8.00	%	$	602,126	10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	783,924	12.99	%	$	361,978	6.00	%	$	482,638	8.00	%
Busey Bank	$	803,703	13.35	%	$	361,276	6.00	%	$	481,701	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	709,924	11.77	%	$	271,484	4.50	%	$	392,143	6.50	%
Busey Bank	$	803,703	13.35	%	$	270,957	4.50	%	$	391,382	6.50	%
Tier 1 Capital (to Average Assets)
Consolidated	$	783,924	10.36	%	$	302,704	4.00	%		N/A	N/A
Busey Bank	$	803,703	10.64	%	$	302,232	4.00	%	$	377,789	5.00	%

In July 2013, the U.S. federal banking authorities approved the Basel III Rule for strengthening international capital standards. The Basel III Rule introduced a capital conservation buffer, composed entirely of Common Equity Tier 1 Capital (“CET1”), which is added to the minimum risk-weighted asset ratios. The capital conservation buffer is not a minimum capital requirement; however, banking institutions with a ratio of CET1 to risk-weighted assets below the capital conservation buffer will face constraints on dividends, equity repurchases and discretionary bonus payments based on the amount of the shortfall. In order to refrain from restrictions on dividends, equity repurchases and discretionary bonus payments, banking institutions must maintain minimum ratios of (i) CET1 to risk-weighted assets of at least 7.00%, (ii) Tier 1 capital to risk-weighted assets of at least 8.50%, and (iii) Total capital to risk-weighted assets of at least 10.50%.

The ability of the Company to pay cash dividends to its stockholders and to service its debt is dependent on the receipt of cash dividends from its subsidiaries. Under applicable regulatory requirements, an Illinois state-chartered bank such as Busey Bank may not pay dividends in excess of its net profits. Because Busey Bank had been in an accumulated deficit position from 2009 thru 2018, it was not able to pay dividends in prior years. With prior approval from its regulators, however, an Illinois state-chartered bank in that situation was able to reduce its capital stock by amending its charter to decrease the authorized number of shares, and then make a subsequent distribution to its holding company. Using this approach, and with the approval of its regulators, Busey Bank has distributed funds to the Company, most recently in the amount of $40.0 million on October 12, 2018. Busey Bank returned to a positive retained earnings position in the second quarter of 2018 and, in 2019, returned to paying dividends.