Shareholders' Equity, Dividends Restrictions and Other Regulatory Matters

12 Months Ended

Dec. 31, 2014

Regulatory Capital Requirements [Abstract]

Shareholders' Equity, Dividend Restrictions and Other Regulatory Matters

SHAREHOLDERS' EQUITY, DIVIDEND RESTRICTIONS AND OTHER REGULATORY MATTERS

Various regulatory agencies have established guidelines that evaluate capital adequacy based on risk-weighted adjusted assets. An additional capital computation evaluates tangible capital based on tangible assets. Minimum capital requirements currently set forth by the regulatory agencies require a tier 1 capital ratio of no less than 4 percent of risk-weighted assets, a total capital ratio of no less than 8 percent of risk-weighted assets and a leverage capital ratio of no less than 3 percent of tangible assets. To meet the FDIC’s well-capitalized standards, the tier 1 and total capital ratios must be at least 6 percent and 10 percent, respectively, while the leverage ratio must equal 5 percent. Failure to meet minimum capital requirements may result in certain actions by regulators that could have a direct material effect on the consolidated financial statements.

Based on the most recent notifications from its regulators, FCB and FCB-SC are well-capitalized under the regulatory framework for prompt corrective action. Management believes that as of December 31, 2014, BancShares, FCB, and FCB-SC met all capital adequacy requirements to which they are subject and was not aware of any conditions or events that would affect each entity's well-capitalized status.

Following is an analysis of capital ratios for BancShares, FCB, and FCB-SC as of December 31, 2014 and 2013:

	December 31, 2014						December 31, 2013
(Dollars in thousands)	Amount		Ratio		Requirements to be well-capitalized		Amount		Ratio		Requirements to be well-capitalized
BancShares
Tier 1 capital (1)	$	2,690,324	13.61	%	6.00	%	$	2,103,926	14.89	%	6.00	%
Total capital (1)	2,904,123		14.69	%	10.00	%	2,315,579		16.39	%	10.00	%
Leverage capital (1)	2,690,324		8.91	%	5.00	%	2,103,926		9.80	%	5.00	%
FCB
Tier 1 capital (1)	2,019,595		13.12	%	6.00	%	1,978,136		14.10	%	6.00	%
Total capital (1)	2,212,163		14.37	%	10.00	%	2,179,248		15.54	%	10.00	%
Leverage capital (1)	2,019,595		9.30	%	5.00	%	1,978,136		9.34	%	5.00	%
FCB-SC
Tier 1 capital	653,515		15.11	%	6.00	%	734,218		17.09	%	6.00	%
Total capital	657,475		15.20	%	10.00	%	787,962		18.34	%	10.00	%
Leverage capital	653,515		7.89	%	5.00	%	734,218		9.12	%	5.00	%

⁽¹⁾ Amounts for 2013 have been updated to reflect the fourth quarter 2014 adoption of Accounting Standard Update (ASU) 2014-01 related to qualified affordable housing projects.

As of December 31, 2014, BancShares had $128.5 million of trust preferred capital securities included in tier 1 capital. Beginning January 1, 2015, 75 percent of BancShares' trust preferred capital securities will be excluded from tier 1 capital, with the remaining 25 percent phased out January 1, 2016.

At December 31, 2014, tier 2 capital of BancShares included $9.0 million of qualifying subordinated debt acquired in the Bancorporation merger with a scheduled maturity date of June 1, 2018. At December 31, 2013, tier 2 capital of BancShares included $25.0 million of qualifying subordinated debt with a scheduled maturity date of June 1, 2015. Under current regulatory guidelines, when subordinated debt is within five years of its scheduled maturity date, issuers must discount the amount included in tier 2 capital by 20 percent for each year until the debt matures. The qualifying subordinated debt with a scheduled maturity date of June 1, 2015 was completely removed from tier 2 capital during the second quarter of 2014, one year prior to the scheduled maturity of the subordinated debt.

In July 2013, Bank regulatory agencies approved new global regulatory capital guidelines (Basel III) aimed at strengthening existing capital requirements for bank holding companies through a combination of higher minimum capital requirements, new capital conservation buffers and more conservative definitions of capital and balance sheet exposure. When fully implemented in January 2019, the rule includes a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent and a common equity tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets, totaling 7 percent. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets from 4 percent to 6 percent and includes a minimum leverage ratio of 4 percent.

Additionally, trust preferred securities and cumulative preferred securities are required to be phased out of tier 1 capital by 2016. The inclusion of accumulated other comprehensive income in tier 1 common equity, as described in the proposed rules, is only applicable for institutions larger than $50 billion in assets. Management continues to monitor

developments and remains committed to managing capital levels in a prudent manner.

BancShares has two classes of common stock—Class A common and Class B common. Shares of Class A common have one vote per share, while shares of Class B common have 16 votes per share.

During the second quarter of 2013, BancShares' board granted authority to purchase up to 100,000 and 25,000 shares of Class A and Class B common stock, respectively, beginning on July 1, 2013, and continuing through June 30, 2014. As of December 31, 2014, no purchases had occurred pursuant to that authorization. This authorization terminated on June 30, 2014 and was not extended.

The Board of Directors of FCB may declare a dividend on a portion of its undivided profits as it deems appropriate, subject to the requirements of the FDIC and the General Statutes of North Carolina, without prior regulatory approval. As of December 31, 2014, the amount was $1.48 billion. However, to preserve its well-capitalized status, the maximum amount of the dividend was limited to $672.4 million. Dividends declared by FCB amounted to $30.0 million in 2014, $131.0 million in 2013 and $179.6 million in 2012. Dividends declared by FCB-SC amounted to $52.4 million in 2014.

BancShares, FCB, and FCB-SC are subject to various requirements imposed by state and federal banking statutes and regulations, including regulations requiring the maintenance of noninterest-bearing reserve balances at the Federal Reserve Bank. Banks are allowed to reduce the required balances by the amount of vault cash. For 2014, the requirements averaged $382.7 million.