Regulatory Capital

12 Months Ended

Mar. 31, 2013

Regulatory Capital

Note 13 – Regulatory Capital

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

Qualitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of tier 1 leverage, tier 1 risk-based and total risk-based capital. As of March 31, 2013, the Bank was adequately capitalized under standard regulatory guidelines. Under these requirements, a bank must have a total risk-based capital ratio of 8% or greater to be considered “adequately capitalized.” The Bank continues to work toward the requirements of the previously issued Cease and Desist Order which requires a total risk-based capital ratio of 12%, which exceeds traditional capital requirements for a bank. The Bank does not currently meet these elevated capital levels. See Note 2.

The following table summarizes the Bank’s capital ratios and the ratios required by its federal regulators to be considered adequately or well capitalized under standard regulatory guidelines and as required by the Cease and Desist Order at March 31, 2013 and 2012:

						Minimum Required
						To be Adequately Capitalized					To be Well Capitalized					Under Order to Cease and Desist
	Actual
	Capital		Ratio			Capital		Ratio			Capital		Ratio			Capital		Ratio
	(Dollars in thousands)
March 31, 2013
Tier 1 leverage (1)	$	107,272		4.53	%	$	94,775		4.00	%	$	118,469		5.00	%	$	189,551		8.00	%
Tier 1 risk-based capital (2)		107,272		7.71			55,655		4.00			83,483		6.00			N/A		N/A
Total risk-based capital (3)		125,459		9.02			111,311		8.00			139,139		10.00			166,966		12.00
March 31, 2012
Tier 1 leverage (1)	$	125,894		4.51	%	$	111,685		4.00	%	$	139,606		5.00	%	$	223,370		8.00	%
Tier 1 risk-based capital (2)		125,894		7.11			70,850		4.00			106,276		6.00			N/A		N/A
Total risk-based capital (3)		149,141		8.42			141,701		8.00			177,126		10.00		$	212,551		12.00

(1) Tier 1 capital divided by adjusted total assets.

(2) Tier 1 capital divided by total risk-weighted assets.

(3) Total risk-based capital divided by total risk-weighted assets.

The following table presents the components of the Bank’s federal regulatory capital at March 31, 2013 and 2012:

	March 31,
	2013			2012
	(In thousands)
Stockholders’ equity of the Bank	$	112,796		$	128,071
Less: Disallowed servicing assets		(1,945	)		(2,045	)
Accumulated other comprehensive income		(3,579	)		(132	)
Tier 1 capital		107,272			125,894
Plus: Allowable general valuation allowances		18,187			23,247
Total risk-based capital	$	125,459		$	149,141

The Bank may not declare or pay a cash dividend if such declaration and payment would violate regulatory requirements. As part of the Cease and Desist Agreement, the Corporation must receive the permission of the Federal Reserve prior to declaring, making or paying any dividends or other capital distributions on its capital stock as further described in Note 2.