Regulatory Matters

6 Months Ended

Jun. 30, 2013

Banking and Thrift [Abstract]

Regulatory Matters

Regulatory Matters

Bancorp and the Bank are subject to various regulatory capital requirements administered by the federal and state 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. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Bancorp and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Bancorp’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require Bancorp and the Bank to maintain minimum amounts and ratios (set forth in the tables below) of Tier 1 capital to average assets and Tier 1 and total capital to risk-weighted assets (all as defined in the regulations).

Federal banking regulators are required to take prompt corrective action if an insured depository institution fails to satisfy certain minimum capital requirements. Such actions could potentially include a leverage capital limit, a risk-based capital requirement, and any other measure of capital deemed appropriate by the federal banking regulator for measuring the capital adequacy of an insured depository institution. In addition, payment of dividends by Bancorp and the Bank are subject to restriction by state and federal regulators and availability of retained earnings.

On March 7, 2013, the Bank entered into a memorandum of understanding (“MOU”) with the Federal Deposit Insurance Corporation ("FDIC") and the Oregon Division of Finance and Corporate Securities ("DFCS") which terminated the Order that had been in effect between the Bank, the FDIC and the DFCS since August 2009. During the life of the MOU, the Bank may not pay dividends without the written consent of the FDIC and DFCS and the Bank must maintain higher levels of capital than may be required by published capital adequacy requirements.

The MOU requires the Bank to maintain the minimum capital requirements for a “well-capitalized” bank, including a Tier 1 leverage ratio of at least 10.00%. As of June 30, 2013 and December 31, 2012, the requirement relating to increasing the Bank’s Tier 1 leverage ratio was met.

On October 26, 2009, Bancorp entered into a written agreement with the Federal Reserve Bank of San Francisco ("FRB") and DFCS (the “Written Agreement”), which requires Bancorp to take certain measures to improve its safety and soundness. Under the Written Agreement, Bancorp was required to develop and submit for approval, a plan to maintain sufficient capital at Bancorp and the Bank within 60 days of the date of the Written Agreement. The Company submitted a strategic plan on October 28, 2009. As of June 30, 2013 and December 31, 2012, Bancorp met the 10% Tier 1 leverage ratio requirement per the Written Agreement. On July 8, 2013, the Bank entered into a memorandum of understanding (“FRB-MOU”) with the FRB and the DFCS which terminated the Written Agreement. During the life of the FRB-MOU, the Bank may not pay dividends without the written consent of the FDIC and DFCS and must comply with certain other provisions as agreed.

Bancorp’s actual and required capital amounts and ratios as of June 30, 2013 and December 31, 2012 are presented in the following table (dollars in thousands): 

	Actual				Regulatory minimum to be "adequately capitalized"				Regulatory minimum to be "well capitalized" under prompt corrective action provisions
	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
June 30, 2013
Tier 1 leverage (to average assets)	$	138,963	10.9	%	$	51,051	4.0	%	$	127,628	10.0	%	(1)
Tier 1 capital (to risk-weighted assets)	138,963		13.4		41,576		4.0		62,365		6.0
Total capital (to risk-weighted assets)	152,086		14.6		83,153		8.0		103,941		10.0
December 31, 2012
Tier 1 leverage (to average assets)	$	136,960	10.4	%	$	52,470	4.0	%	$	131,174	10.0	%	(1)
Tier 1 capital (to risk-weighted assets)	136,960		14.1		38,811		4.0		58,216		6.0
Total capital (to risk-weighted assets)	149,296		15.4		77,621		8.0		97,027		10.0

 (1) Pursuant to the Written Agreement, in order to be deemed "well capitalized", Bancorp must maintain a Tier 1 leverage ratio of at least 10.00% The Written Agreement was terminated effective July 8, 2013

The Bank’s actual and required capital amounts and ratios are presented in the following table (dollars in thousands):

	Actual				Regulatory minimum to be "adequately capitalized"				Regulatory minimum to be "well capitalized" under prompt corrective action provisions
	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
June 30, 2013
Tier 1 leverage (to average assets)	$	139,363	10.9	%	$	51,125	4.0	%	$	127,813	10.0	%	(2)
Tier 1 capital (to risk-weighted assets)	139,363		13.4		41,759		4.0		62,638		6.0
Total capital (to risk-weighted assets)	152,542		14.6		83,518		8.0		104,397		10.0
December 31, 2012
Tier 1 leverage (to average assets)	$	136,658	10.4	%	$	52,457	4.0	%	$	131,142	10.0	%	(1)
Tier 1 capital (to risk-weighted assets)	136,658		14.1		38,803		4.0		58,205		6.0
Total capital (to risk-weighted assets)	148,991		15.4		77,607		8.0		97,008		10.0

 (1) Pursuant to the MOU, in order to be deemed "well capitalized", the Bank must maintain a Tier 1 leverage ratio of at least 10.00%

 (2) Pursuant to the Order, in order to be deemed "well capitalized", the Bank must maintain a Tier 1 leverage ratio of at least 10.00%. The Order was terminated effective March 7, 2013.