Regulatory Matters

6 Months Ended

Jun. 30, 2014

Regulatory Matters [Abstract]

Regulatory Matters

11.  Regulatory Matters

Capital guidelines adopted by Federal and State regulatory agencies and restrictions imposed by law limit the amount of cash dividends our Bank can pay to us. Under these guidelines, the amount of dividends that may be paid in any calendar year is limited to the Bank’s current year’s net profits, combined with the retained net profits of the preceding two years. Further, the Bank cannot pay a dividend at any time that it has negative undivided profits.  As of June 30, 2014, the Bank had negative undivided profits of $40.3 million.  We can request regulatory approval for a return of capital from the Bank to the parent company. During the first quarter of 2014, we requested regulatory approval for a $15.0 million return of capital from the Bank to the parent company.  This return of capital request was approved by our banking regulators on March 28, 2014 and the Bank returned $15.0 million of capital to the parent company on April 9, 2014.  It is not our intent to have dividends paid in amounts that would reduce the capital of our Bank to levels below those which we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements. The prompt corrective action regulations establish quantitative measures to ensure capital adequacy and require minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by regulators that could have a material effect on our consolidated financial statements. Under capital adequacy guidelines, we must meet specific capital requirements that involve quantitative measures as well as qualitative judgments by the regulators. The most recent regulatory filings as of June 30, 2014 and December 31, 2013 categorized our Bank as well capitalized. Management is not aware of any conditions or events that would have changed the most recent Federal Deposit Insurance Corporation (“FDIC”) categorization.

Our actual capital amounts and ratios follow:

						Minimum for					Minimum for
						Adequately Capitalized					Well-Capitalized
	Actual					Institutions					Institutions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
June 30, 2014
Total capital to risk-weighted assets
Consolidated	$	259,196		18.00	%	$	115,195		8.00	%	NA		NA
Independent Bank		234,562		16.33			114,910		8.00			143,638		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	240,978		16.74	%	$	57,597		4.00	%	NA		NA
Independent Bank		216,394		15.07			57,455		4.00			86,183		6.00	%
Tier 1 capital to average assets
Consolidated	$	240,978		11.00	%	$	87,643		4.00	%	NA		NA
Independent Bank		216,394		9.91			87,384		4.00			109,230		5.00	%
December 31, 2013
Total capital to risk-weighted assets
Consolidated	$	245,284		17.35	%	$	113,086		8.00	%	NA		NA
Independent Bank		234,078		16.57			113,013		8.00		$	141,267		10.00	%
Tier 1 capital to risk-weighted assets
Consolidated	$	227,338		16.08	%	$	56,543		4.00	%	NA		NA
Independent Bank		216,146		15.30			56,507		4.00			84,760		6.00	%
Tier 1 capital to average assets
Consolidated	$	227,338		10.61	%	$	85,729		4.00	%	NA		NA
Independent Bank		216,146		10.09			85,681		4.00			107,101		5.00	%

NA - Not applicable

The components of our regulatory capital are as follows:

	Consolidated						Independent Bank
	June 30,			December 31,			June 30,			December 31,
	2014			2013			2014			2013
	(In thousands)
Total shareholders' equity	$	242,961		$	231,581		$	247,995		$	250,306
Add (deduct)
Qualifying trust preferred securities		39,500			39,500			-			-
Accumulated other comprehensive loss		6,298			9,245			6,298			9,245
Intangible assets		(2,895	)		(3,163	)		(2,895	)		(3,163	)
Disallowed deferred tax assets		(44,200	)		(49,609	)		(34,318	)		(40,026	)
Disallowed capitalized mortgage loan servicing rights		(686	)		(216	)		(686	)		(216	)
Tier 1 capital		240,978			227,338			216,394			216,146
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		18,218			17,946			18,168			17,932
Total risk-based capital	$	259,196		$	245,284		$	234,562		$	234,078