Note 13 - Regulatory Capital

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

13. Regulatory Capital

Dividend payments by Republic to the Company are subject to the Pennsylvania Banking Code of

1965

(the “Banking Code”) and the Federal Deposit Insurance Act (the “FDIA”). Under the Banking Code, no dividends

may

be paid except from “accumulated net earnings” (generally, undivided profits). Under the FDIA, an insured bank

may

pay no dividends if the bank is in arrears in the payment of any insurance assessment due to the FDIC. Under current banking laws, Republic would be limited to

$23.9

million of dividends plus an additional amount equal to its net profit for

2017,

up to the date of any such dividend declaration. However, dividends would be further limited in order to maintain capital ratios.

State and Federal regulatory authorities have adopted standards for the maintenance of adequate levels of capital by Republic. Federal banking agencies impose

four

minimum capital requirements on the Company’s risk-based capital ratios based on total capital, Tier

1

capital, CET

1

capital, and a leverage capital ratio. The risk-based capital ratios measure the adequacy of a bank’s capital against the riskiness of its assets and off-balance sheet activities. Failure to maintain adequate capital is a basis for “prompt corrective action” or other regulatory enforcement action. In assessing a bank’s capital adequacy, regulators also consider other factors such as interest rate risk exposure; liquidity, funding and market risks; quality and level or earnings; concentrations of credit; quality of loans and investments; risks of any nontraditional activities; effectiveness of bank policies; and management’s overall ability to monitor and control risks.

The following table presents the Company’s and Republic’s capital regulatory ratios at

December

31,

2016

and

2015:

(dollars in thousands)	Actual					Minimum Capital Adequacy					Minimum Capital Adequacy with Capital Buffer					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
At December 31, 2016:
Total risk based capital
Republic	$	179,057		13.93	%	$	102,811		8.00	%	$	110,843		8.625	%	$	128,514		10.00	%
Company		245,043		18.99	%		103,226		8.00	%		111,290		8.625	%		-		-	%
Tier one risk based capital
Republic		169,902		13.22	%		77,108		6.00	%		85,140		6.625	%		102,811		8.00	%
Company		235,888		18.28	%		77,419		6.00	%		85,484		6.625	%		-		-	%
CET 1 risk based capital
Republic		169,902		13.22	%		57,831		4.50	%		65,863		5.125	%		83,534		6.50	%
Company		214,088		16.59	%		58,064		4.50	%		66,129		5.125	%		-		-	%
Tier one leveraged capital
Republic		169,902		9.20	%		73,843		4.00	%		73,843		4.00	%		92,304		5.00	%
Company		235,888		12.74	%		74,073		4.00	%		74,073		4.00	%		-		-	%
At December 31, 2015:
Total risk based capital
Republic	$	138,566		12.65	%	$	87,617		8.00	%	$	-		-	%	$	109,521		10.00	%
Company		145,089		13.19	%		87,976		8.00	%		-		-	%		-		-	%
Tier one risk based capital
Republic		129,863		11.86	%		65,712		6.00	%		-		-	%		87,617		8.00	%
Company		136,386		12.40	%		65,982		6.00	%		-		-	%		-		-	%
CET 1 risk based capital
Republic		129,863		11.86	%		49,284		4.50	%		-		-	%		71,189		6.50	%
Company		114,586		10.42	%		49,487		4.50	%		-		-	%		-		-	%
Tier one leveraged capital
Republic		129,863		9.22	%		56,328		4.00	%		-		-	%		70,410		5.00	%
Company		136,386		9.65	%		56,531		4.00	%		-		-	%		-		-	%

Management believes that Republic met, as of

December

31,

2016,

all capital adequacy requirements to which it is subject. As of

December

31,

2016

and

2015,

the FDIC categorized Republic as well capitalized under the regulatory framework for prompt corrective action provisions of the Federal Deposit Insurance Act.  There are no calculations or events since that notification that management believes have changed Republic’s category.

In

July

2013,

the federal bank regulatory agencies adopted revisions to the agencies’ capital adequacy guidelines and prompt corrective action rules, which were designed to enhance such requirements and implement the revised standards of the Basel Committee on Banking Supervision, commonly referred to as Basel III. The final rules generally implemented higher minimum capital requirements, added a new common equity tier

1

capital requirement, and established criteria that instruments must meet to be considered common equity tier

1

capital, additional tier

1

capital or tier

2

capital. The new minimum capital to risk-adjusted assets requirements were a common equity tier

1

capital ratio of

4.5%

(6.5%

to be considered “well capitalized”) and a tier

1

capital ratio of

6.0%,

increased from

4.0%

(and increased from

6.0%

to

8.0%

to be considered “well capitalized”); the total capital ratio remained at

8.0%

under the new rules

(10.0%

to be considered “well capitalized”).

Under the final capital rules that became effective on

January

1,

2015,

there was a requirement for a common equity Tier

1

capital conservation buffer of

2.5%

of risk-weighted assets which is in addition to the other minimum risk-based capital standards in the rule. Institutions that do not maintain this required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital buffer requirement is being phased in over

three

years beginning in

2016.

We have included the

0.625%

increase for

2016

in our minimum capital adequacy ratios in the table below. The capital buffer requirement effectively raises the minimum required common equity Tier

1

capital ratio to

7.0%,

the Tier

1

capital ratio to

8.5%,

and the total capital ratio to

10.5%

on a fully phased-in basis on

January

1,

2019.

The Company believes that, as of

December

31,

2016,

all capital adequacy requirements are met under the Basel III Capital Rules on a fully phased-in basis as if all such requirements were currently in effect.