Regulatory Matters

12 Months Ended

Dec. 31, 2016

Regulated Operations [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.

Effective January 1, 2015, Bancorp and the Bank became subject to new capital guidelines known as the “Basel III Rules.” The Basel III Rules increased minimum capital requirements for both the quantity and quality of capital held by the Bancorp and the Bank. The Basel III Rules include a new common equity Tier 1 capital to risk-weighted assets ratio (“CET1” ratio) of 4.5% and a capital conservation buffer of 2.5% above each of the three minimum risk-based capital requirements, which is being phased-in through January 1, 2019. The Basel III Rules also (i) raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the fully phased-in capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5%), (ii) effectively result in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), and (iii) require a minimum leverage ratio of 4.0%. The Basel III Rules also change the risk weights for certain assets and off-balance-sheet exposures.

Bancorp’s and Bank’s actual capital amounts and ratios and the required capital ratios under the Basel III Rules and the prompt corrective action framework as of December 31, 2016 and 2015 are presented in the following table (dollars in thousands):

	Actual				Regulatory minimum to be “adequately capitalized”				Basel III minimum adequacy with capital conservation buffer		Regulatory minimum to be “well capitalized”
	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount	Ratio	Capital Amount		Ratio
December 31, 2016
Tier 1 leverage (to average assets)
Bancorp	$	259,216	8.6	%	$	120,604	4.0	%	N/A	N/A	$	150,754	5.0	%
Bank	254,270		8.4		120,462		4.0		N/A	N/A	150,578		5.0
CET1 capital (to risk weighted assets)
Bancorp	259,216		10.5		110,738		4.5		125,504	5.1	159,955		6.5
Bank	254,270		10.3		110,933		4.5		125,724	5.1	160,237		6.5
Tier 1 capital (to risk-weighted assets)
Bancorp	259,216		10.5		147,651		6.0		162,416	6.6	196,868		8.0
Bank	254,270		10.3		147,911		6.0		162,702	6.6	197,214		8.0
Total capital (to risk-weighted assets)
Bancorp	284,949		11.6		196,868		8.0		211,633	8.6	246,085		10.0
Bank	280,003		11.4		197,214		8.0		212,005	8.6	246,518		10.0
December 31, 2015
Tier 1 leverage (to average assets)
Bancorp	$	227,542	9.4	%	$	96,817	4.0	%	N/A	N/A	$	121,022	5.0	%
Bank	223,553		9.3		96,662		4.0		N/A	N/A	120,827		5.0
CET1 capital to risk weighted assets
Bancorp	227,542		11.5		88,818		4.5		N/A	N/A	128,292		6.5
Bank	223,533		11.4		88,663		4.5		N/A	N/A	128,069		6.5
Tier 1 capital (to risk-weighted assets)
Bancorp	227,542		11.5		118,424		6.0		N/A	N/A	157,898		8.0
Bank	223,553		11.4		118,218		6.0		N/A	N/A	157,624		8.0
Total capital (to risk-weighted assets)
Bancorp	252,401		12.8		157,898		8.0		N/A	N/A	197,373		10.0
Bank	248,346		12.6		157,624		8.0		N/A	N/A	197,030		10.0