Regulatory Matters

3 Months Ended

Mar. 31, 2012

Deposits, Federal Home Loan Bank Advances/ Regulatory Matters [Abstract]

REGULATORY MATTERS

12. REGULATORY MATTERS

We are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on our financial statements.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If an institution is not well capitalized, regulatory approval is required to accept brokered deposits. Subject to limited exceptions, no institution may make a capital distribution if, after making the distribution, it would be undercapitalized. If an institution is undercapitalized, it is subject to close monitoring by its principal federal regulator, its asset growth and expansion are restricted, and plans for capital restoration are required. In addition, further specific types of restrictions may be imposed on the institution at the discretion of the federal regulator. At March 31, 2012 and December 31, 2011, our bank was in the well capitalized category under the regulatory framework for prompt corrective action. There are no conditions or events since March 31, 2012 that we believe have changed our bank’s categorization.

Our actual capital levels (dollars in thousands) and the minimum levels required to be categorized as adequately and well capitalized were:

	Actual					Minimum Required for Capital Adequacy Purposes					Minimum Required to be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2012
Total capital (to risk weighted assets)
Consolidated	$	190,929		16.1	%	$	94,642		8.0	%	$	NA		NA
Bank		190,523		16.1			94,575		8.0			118,219		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		175,942		14.9			47,321		4.0			NA		NA
Bank		175,546		14.9			47,288		4.0			70,931		6.0
Tier 1 capital (to average assets)
Consolidated		175,942		12.7			55,581		4.0			NA		NA
Bank		175,546		12.6			55,567		4.0			69,459		5.0
December 31, 2011
Total capital (to risk weighted assets)
Consolidated	$	187,940		15.5	%	$	97,237		8.0	%	$	NA		NA
Bank		188,378		15.5			97,203		8.0			121,504		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		172,469		14.2			48,619		4.0			NA		NA
Bank		172,910		14.2			48,602		4.0			72,902		6.0
Tier 1 capital (to average assets)
Consolidated		172,469		12.1			57,072		4.0			NA		NA
Bank		172,910		12.1			57,199		4.0			71,499		5.0

Our consolidated capital levels as of March 31, 2012 and December 31, 2011 include $32.0 million of trust preferred securities issued by the trust in September 2004 and December 2004 subject to certain limitations. Under applicable Federal Reserve guidelines, the trust preferred securities constitute a restricted core capital element. The guidelines provide that the aggregate amount of restricted core elements that may be included in our Tier 1 capital must not exceed 25% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability. Our ability to include the trust preferred securities in Tier 1 capital in accordance with the guidelines is not affected by the provision of the Dodd-Frank Act generally restricting such treatment, because (i) the trust preferred securities were issued before May 19, 2010, and (ii) our total consolidated assets as of December 31, 2009 were less than $15.0 billion. As of March 31, 2012 and December 31, 2011, all $32.0 million of the trust preferred securities were included in our consolidated Tier 1 capital.

Our and our bank’s ability to pay cash and stock dividends is subject to limitations under various laws and regulations and to prudent and sound banking practices. In April 2010, we suspended payments of cash dividends on our common stock.

On April 4, 2012, we announced via a Form 8-K filed with the SEC that we repurchased 50 percent of the $21.0 million in non-voting preferred stock issued in May 2009 to the U.S. Department of the Treasury under the Treasury’s Capital Purchase Program, as part of the Troubled Asset Relief Program. We consummated the repurchase of the preferred stock following approval from the Federal Reserve and consultation with the Federal Deposit Insurance Corporation. To fund the repurchase, our bank paid us a cash dividend of approximately $10.5 million on April 3, 2012. As part of the repurchase, we recorded a reduction of retained earnings of $0.3 million on April 4, 2012 for the accelerated discount on the preferred stock which was being amortized over an original period of five years from the issuance date of May 15, 2009. On a pro-forma basis, whereby we assume the repurchase and cash dividend transactions had been consummated on March 31, 2012, our and our bank’s regulatory capital ratios disclosed on the previous page would have declined by about 75 to 90 basis points.