REGULATORY CAPITAL

12 Months Ended

Dec. 31, 2017

REGULATORY CAPITAL [Abstract]

REGULATORY CAPITAL

14. REGULATORY CAPITAL

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, 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.  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 and the Bank’s financial statements and results of operations.  The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The Company has chosen to exclude net unrealized gain or loss on available for sale securities in computing regulatory capital.  Management believes that as of December 31, 2017, the Company and Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2017 and 2016, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, common equity Tier 1 and Tier I leverage ratios as set forth in the table.

The Bank’s actual capital amounts and ratios are presented in the following table:

						To Be Well											For Capital
						Capitalized Under					For Capital						Adequacy Purposes
						Prompt Corrective					Adequacy						Including Capital
	Actual					Action Provisions					Purposes						Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio				Amount		Ratio
As of December 31, 2017:
Total capital
(to risk-weighted assets)	$	485,252		14.34	%	$	338,327		10.00	%	$	270,662		8.00	%	$		312,953		9.25	%
Tier I capital
(to risk-weighted assets)		448,812		13.27			270,662		8.00			202,996		6.00				245,287		7.25
Common equity tier I
(to risk-weighted assets)		448,810		13.27			219,913		6.50			152,247		4.50				194,538		5.75
Tier I capital
(to average assets)		448,812		10.61			211,523		5.00			169,219		4.00				169,219		4.00
As of December 31, 2016:
Total capital
(to risk-weighted assets)	$	392,305		12.87	%	$	304,758		10.00	%	$	243,806		8.00	%			262,854		8.625
Tier I capital
(to risk-weighted assets)		360,097		11.82			243,806		8.00			182,855		6.00				201,902		6.625
Common equity tier I
(to risk-weighted assets)		360,094		11.82			198,093		6.50			137,141		4.50				156,188		5.125
Tier I capital
(to average assets)		360,097		9.31			193,430		5.00			154,744		4.00				154,744		4.00

The Company’s actual capital amounts and ratios are presented in the following table:

						To Be Well								For Capital
						Capitalized Under			For Capital					Adequacy Purposes
						Prompt Corrective			Adequacy					Including Capital
	Actual					Action Provisions			Purposes					Conservation Buffer (A)
(Dollars in thousands)	Amount		Ratio			Amount	Ratio		Amount		Ratio			Amount		Ratio
As of December 31, 2017:
Total capital
(to risk-weighted assets)	$	502,334		14.84	%	N/A		N/A	$	270,866		8.00	%	$	313,189		9.25	%
Tier I capital
(to risk-weighted assets)		382,870		11.31		N/A		N/A		203,149		6.00			245,472		7.25
Common equity tier I
(to risk-weighted assets)		382,868		11.31		N/A		N/A		152,362		4.50			194,685		5.75
Tier I capital
(to average assets)		382,870		9.04		N/A		N/A		169,318		4.00			169,318		4.00
As of December 31, 2016:
Total capital
(to risk-weighted assets)	$	404,017		13.25	%	N/A		N/A	$	243,910		8.00	%		262,966		8.625
Tier I capital
(to risk-weighted assets)		323,045		10.60		N/A		N/A		182,933		6.00			201,988		6.625
Common equity tier I
(to risk-weighted assets)		323,042		10.60		N/A		N/A		137,200		4.50			156,255		5.125
Tier I capital
(to average assets)		323,045		8.35		N/A		N/A		154,788		4.00			154,788		4.00

(A) When fully phased in on January 1, 2019, the Basel Rules will require the Company and the Bank to maintain a 2.5% “capital conservation buffer” on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) Common Equity Tier 1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.