Note 18 - Regulatory Matters

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

18 . Regulatory Matters

The Company and its subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements will initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and its bank subsidiaries must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and its subsidiary banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

U.S. banking regulators adopted final rules related to standards on bank capital adequacy and liquidity (commonly referred to “Basel III”) that were effective for the Company beginning on

January

1,

2015,

subject to a phase-in period for certain provisions extending through

January

1,

2019.

To ensure capital adequacy

,

the Company and its subsidiary banks are required to maintain minimum capital amounts and risk-based capital ratios (set forth in the tables below) as well as a capital conservation buffer in excess of the required minimum. The capital conservation buffer is being phased in from

0.0%

in

2015

to

2.50%

by

2019.

For

2016,

the capital conservation buffer is

0.625%.

The Company and each of its bank subsidiaries met the minimum capital ratios and a fully phased-in capital conservation buffer under the new rules at year-end

2016

.

As of

December

31,

2016,

the most recent notification from the FDIC categorized the banks as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the banks must maintain minimum Common Equity Tier

1

Risk-based, Tier

1

Risk-based, Total Risk-based, and Tier

1

Leverage ratios as set forth in the tables below. There are no conditions or events since that notification that management believes have changed the institutions’ category.

The regulatory capital amounts and ratios of the consolidated Company and its subsidiary banks are presented in the following tables for the dates indicated. The minimums presented below are before the capital conservation buffer which was

.0625%

and

0%

at

December

31,

2016

and

2015,

respectively.

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well-Capitalized Under Prompt Corrective Action Provisions
December 31, 201 6	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Risk-based Capital 1
Consolidated	$	187,474		16.43	%	$	51,349		4.50	%		N/A		N/A
Farmers Bank		64,016		16.53			17,425		4.50		$	25,170		6.50	%
United Bank		58,180		15.54			16,848		4.50			24,337		6.50
First Citizens		28,324		13.56			9,401		4.50			13,580		6.50
Citizens Northern		24,661		15.24			7,280		4.50			10,516		6.50
Tier 1 Risk-based Capital 1
Consolidated	$	219,974		19.28	%	$	68,466		6.00	%		N/A		N/A
Farmers Bank		64,016		16.53			23,234		6.00		$	30,978		8.00	%
United Bank		58,180		15.54			22,465		6.00			29,953		8.00
First Citizens		28,324		13.56			12,535		6.00			16,714		8.00
Citizens Northern		24,661		15.24			9,707		6.00			12,942		8.00
Total Risk-based Capital 1
Consolidated	$	229,318		20.10	%	$	91,288		8.00	%		N/A		N/A
Farmers Bank		66,720		17.23			30,978		8.00		$	38,723		10.00	%
United Bank		61,680		16.47			29,953		8.00			37,441		10.00
First Citizens		29,590		14.16			16,714		8.00			20,892		10.00
Citizens Northern		26,534		16.40			12,942		8.00			16,178		10.00
Tier 1 Leverage Capital 2
Consolidated	$	219,974		13.20	%	$	66,656		4.00	%		N/A		N/A
Farmers Bank		64,016		9.80			26,121		4.00		$	32,651		5.00	%
United Bank		58,180		12.38			18,798		4.00			23,497		5.00
First Citizens		28,324		9.76			11,606		4.00			14,507		5.00
Citizens Northern		24,661		10.68			9,234		4.00			11,543		5.00

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well-Capitalized Under Prompt Corrective Action Provisions
December 31, 201 5	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Risk-based Capital 1
Consolidated	$	172,871		14.91	%	$	52,184		4.50	%		N/A		N/A
Farmers Bank		63,552		15.57			18,366		4.50		$	26,529		6.50	%
United Bank		65,862		18.67			15,879		4.50			22,936		6.50
First Citizens		28,743		13.55			9,543		4.50			13,784		6.50
Citizens Northern		25,770		14.42			8,044		4.50			11,619		6.50
Tier 1 Risk-based Capital 1
Consolidated	$	220,371		19.00	%	$	69,579		6.00	%		N/A		N/A
Farmers Bank		63,552		15.57			24,488		6.00		$	32,651		8.00	%
United Bank		65,862		18.67			21,171		6.00			28,228		8.00
First Citizens		28,743		13.55			12,724		6.00			16,965		8.00
Citizens Northern		25,770		14.42			10,725		6.00			14,300		8.00
Total Risk-based Capital 1
Consolidated	$	230,686		19.89	%	$	92,772		8.00	%		N/A		N/A
Farmers Bank		66,728		16.35			32,651		8.00		$	40,814		10.00	%
United Bank		69,456		19.68			28,228		8.00			35,286		10.00
First Citizens		30,048		14.17			16,965		8.00			21,207		10.00
Citizens Northern		28,004		15.67			14,300		8.00			17,875		10.00
Tier 1 Leverage Capital 2
Consolidated	$	220,371		12.46	%	$	70,746		4.00	%		N/A		N/A
Farmers Bank		63,552		9.20			27,629		4.00		$	34,537		5.00	%
United Bank		65,862		12.89			20,442		4.00			25,553		5.00
First Citizens		28,743		9.20			12,493		4.00			15,617		5.00
Citizens Northern		25,770		10.79			9,555		4.00			11,943		5.00

1

Common Equity Tier

1

Risk-based, Tier

1

Risk-based, and Total Risk-based Capital ratios are computed by dividing a bank’s Common Equity Tier

1,

Tier

1,

or Total Capital, as defined by regulation, by a risk-weighted sum of the bank’s assets, with the risk weighting determined by general standards established by regulation.

2

Tier

1

Leverage ratio is computed by dividing a bank’s Tier

1

Capital by its total quarterly average assets, as defined by regulation.

Payment of dividends by the Company’s subsidiary banks is subject to certain regulatory restrictions as set forth in national and state banking laws and regulations. Generally, capital distributions are limited to undistributed net income for the current and prior

two

years, subject to the capital requirements as summarized above

.